Category: Doing Business In Canada

Categories
Enforcement Of Foreign Judgments Litigation

Service of Court Documents to Foreign Company Deemed Invalid

We have previously written about what courts consider when determining whether to enforce a foreign judgment in Canada. Another issue that arises in disputes with foreign entities is the service of court documents abroad.

In the recent case of Salguiero et al. v. Instant Brands et al., the plaintiff in a product liability action attempted to serve court documents on the defendant, a company in China. The question before the Ontario Superior Court of Justice was whether the plaintiff had effectively served the defendant according to the Ontario Rules of Civil Procedure and international law.

The plaintiff purchased a defective from Amazon.ca

The plaintiff purchased a product from Amazon.ca and received it in December 2016. It became defective in February 2017. The Statement of Claim was not issued until days before the limitation period would run up, in February 2019. The defendants to the plaintiff’s lawsuit were Amazon.com Inc., Instant Brands Inc., and GD Midea Consumer Electric Manufacturing Co. Ltd.

The third company, GD Midea, is headquartered in China, while Amazon and Instant Brands have head offices in Seattle, Washington and Ottawa, Ontario, respectively. Service of the Statement of Claim was successfully made on both Amazon and Instant Brands, but there was a problem with service to GD Midea.

Service in the foreign country was stalled by investigation

Canada and China are contracting states under the Hague Convention of 15 November 1965 on the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters. Under the Ontario Rules of Civil Procedure, there are specific rules on service to individuals outside of Ontario located in a contracting state:

Manner of Service in Convention States

(3) An originating process or other document to be served outside Ontario in a contracting state shall be served,

(a)  through the central authority in the contracting state; or

(b)  in a manner that is permitted by the Convention and that would be permitted by these rules if the document were being served in Ontario.

The plaintiff’s counsel knew about this rule and inquired about translating the documents for service to the central authority. However, the plaintiff’s lawyer did not follow through with this request. Despite this, in March 2019, GD Midea’s insurer contacted the plaintiff’s counsel to advise that an investigation into the matter was underway. It was also requested that no further steps be taken, such as noting the defendant in default. The plaintiff agreed to hold off until all defendants had the opportunity to investigate.

Foreign company raises issue with service of Statement of Claim after serving Statement of Defence

By April 2020, after GD Midea’s request to not be noted in default had been renewed multiple times, the plaintiff provided a 45-day time limit to receive statements from all defendants. GD Midea “served what purported to be a defence and crossclaim” in June 2020. Amazon and Instant Brands served their own statements of defence a month later.

After serving its statement of defence, counsel for GD Midea realized its client might not have been served in accordance with the Hague Convention or the Rules of Civil Procedure. Counsel notified the plaintiff mid-June 2020 and requested a copy of the affidavit of service. In July 2020, a day after Amazon and Instant Brands filed their statements of defence, counsel for the plaintiff relented that service had never been formally effected in China. In response, GD Midea said it would dispute the jurisdiction and forum for the claim. In other words, the company would dispute the authority of the Ontario court to hear the case. At trial, the company did not bring any arguments forward on this point because it was premature.

GD Midea could not have been noted in default if service had not been completed. However, the company’s conduct demonstrated its awareness of its involvement in the pending legal proceedings.

Did the service rules apply if the defendant was already aware of the case?

The question before the Ontario Superior Court of Justice was “whether the formalities of service under the [Hague Convention] are required when it is quite clear that the defendant knows the particulars of the claim, has insurance which would respond to the claim and where the insurer has instructed counsel in Ontario.” The Court also mentioned the related issue of counsel for GD Midea serving a statement of defence on behalf of the company after mistakenly assuming that service had been effected.

In the event that formal service was still required, the Court considered the plaintiff’s argument that the time for service should be extended as the limitation period expired in 2019.

The purpose of the Hague Convention for service in foreign jurisdictions

The purpose of the Hague Convention pertaining to service in foreign jurisdictions is to ensure uniform procedure across contracting states. Service must occur in accordance with the Hague Convention. If the situation were reversed, it is not likely that a foreign state would enforce judgment of claims served in breach of that state’s law. Those documents must also be translated for service to be validated.

There are remedies under the Hague Convention for those who cannot effectively service defendants to their claims, but this was not the case here. Counsel made no attempt to serve in accordance with the Hague Convention and the Rules of Civil Procedure.

The defendant can waive the formalities of service if they choose

Although the purpose of the law for contracting states was clear, the Court determined that the formalities of service are not always necessary. A foreign defendant can waive the requirement of service in compliance with those rules. However, the Court did not find this applied to the present case. There was an error in assuming service had been made but not an acceptance of service once the error was discovered. So while the formalities of service on contracting parties of the Hague Convention need not be followed every time, this case was not an exception.

Concerning the applicable notice period, the Court did not find it unjust that the plaintiff now had to service the defendant in accordance with the Hague Convention. It would have been a more significant prejudice to the defendant to have proceeded without service being effected. As service through the appropriate rules could take up to 18 months to complete, the Court agreed to extend the time for completing service to 24 months so long as the plaintiff commenced the process within six months of the Court’s decision.

Baker & Company Assists With Disputes With Foreign Entities

It is important to consult with legal counsel as soon as possible when a claim arises, especially when it involves entities headquartered in foreign jurisdictions. The skilled litigation lawyers at Baker & Company help clients in international disputes and assist with the enforcement of foreign judgments in Ontario or elsewhere in Canada. We also represent clients in various other matters, including corporate & commercial law, real estate law, employment law, estate law, and hotel law. We rely on more than 30 years of litigation experience to ensure that our clients’ rights are protected. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Enforcement Of Foreign Judgments

Understanding The Rules Behind Enforcing Foreign Judgments

One would think that, when a case is decided, the decision must carry forward no matter where the parties to that matter may reside. But not a lot of people know that there is a body of laws dedicated to determining whether a foreign judgment is enforced in Canada. In some instances, decisions made in foreign jurisdictions have no application or weight in Canada.

What is private international law?

The rules surrounding the enforcement of foreign judgements in Canada are called private international law. Private international law is a branch of public law that concerns the regulation of relations between private parties across national boundaries. It is distinct from public international law, which instead concerns relations between states and other entities. Because private international law regulates relations between individuals or organizations and not countries themselves, it is sometimes called a “conflict of laws.”

Private international law determines the application of decisions across family law, corporate and commercial law, real estate law, employment law, wills and estates law, and more. The purpose of this law is to ensure consistency in how foreign judgments are dealt with in Canada.

How to determine whether a foreign judgment should be enforced

As is common in any branch of law, a procedure exists to help courts determine whether a foreign judgment should be enforced in Canada. It is as follows:

  1. First, there must be a conflict between foreign judgment and Canadian law. For example, in Cariello v Perella, at issue was whether a retired priest could appoint a power of attorney to friends in Canada when an interim guardian had already been appointed by an Italian court.
  2. Second, the problem must be distinguished as one of the following:
    1. Conflict of Jurisdiction – The conflict concerns whether Canadian courts are competent to make a decision on the matter.
    2. Conflict of Laws – The conflict concerns which law should apply to an international situation.
    3. Conflict of Authority – The conflict concerns the recognition of laws or decisions made by foreign bodies.
  3. What are the factors that are connecting the matter to either Canada or the foreign decision, law, or authority? Connecting factors include each party’s domicile, the residence of the parties, the location of the property in issue, the location an offence or infraction was committed, the nationality of the parties, and what the parties chose themselves in the contract.

Key terminology in private international law

In private international law, two connecting factors can prove to be crucial. Those are the domicile of the parties and the residence of the parties. Although there are similarities between the two concepts, they are different in distinct ways.

Domicile. A domicile is a place where a person permanently lives or where a corporation was incorporated. In Quebec, a corporation’s domicile is wherever the corporation’s head office is located. In the case of a person, their domicile is wherever they intend to be permanently situated. In layman’s terms, a domicile is one’s “place of origin” or “home base.” Everyone starts with their place of birth as their domicile. This is retained until a person chooses to make another place their domicile by moving to another country with plans to remain there indefinitely. Even if a person leaves their domicile country or province for long periods of time, it cannot be lost.

Residence. Contrasted to the domicile, the residence is the place where a person habitually resides. There is no need to prove intention to reside in one place indefinitely. Indicia of residence include provincial health insurance, where someone declares taxes, and in which province a person works. If a person resides across multiple properties, such as a cottage, the residence is where they reside stably and constantly compared to the others.

Exceptions to the Application of Private International Law

Although there are many areas of law to which private international law applies, other areas of law involve different procedures. A reason for a lot of this conflict is the need to respect the decisions of other nations, which are best situated to determine what is in their own best interests when they are parties to the matter. For certain areas of law where the state is a party, it is not possible to enforce those decisions within Canada. Consider the following:

Criminal Law

These laws involve a sanction, for a violation of a duty to the state. Generally, private international law will not apply except in two circumstances: extradition treaties and specific provisions of the Criminal Code of Canada.

Fiscal Law

A fiscal law is any law that imposes a non-contractual pecuniary obligation in favour of the state. This includes federal or provincial income tax, provincial or federal inheritance tax, provincial retail sales taxes, municipal taxes, and indirect taxes (such as customs duties, stamp duties, etc.).

Public Law

Public law tends to be concerned with the nature of a transaction between the state and an individual.

Are there instances where Canada might not enforce a foreign judgment?

It is sometimes the case that there are other reasons, outside the aforementioned exceptions, for which a Canadian court may not want to enforce a foreign judgment. One of those reasons is public policy.

Public policy plays an important role in private international law. On the basis of public policy, a Canadian court is able to set aside a foreign decision that is manifestly incompatible with the fundamental concepts underpinning the Canadian legal system.

Contact the Litigation Lawyers at Baker & Company in Toronto For Assistance with Enforcing a Foreign Judgment in Ontario 

If you are involved in a cross-border or international dispute and have received a judgment in a foreign jurisdiction that you wish to have enforced in Ontario or elsewhere in Canada, contact the highly skilled litigation lawyers at Baker & Company. We rely on more than 30 years of litigation experience to ensure that our clients’ rights are protected. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Enforcement Of Foreign Judgments

Supreme Court of Canada Issues Ruling on the Reciprocal Enforcement of Foreign Judgments

Last week, the Supreme Court of Canada issued a decision on the reciprocal enforcement of foreign judgments in Canada, clarifying the meaning of “carrying on business” under the relevant legislation.

Company Obtains Enforcement of Foreign Judgment in British Columbia

In 2007, Antigua, a country comprised of several islands in the Caribbean, expropriated property owned by a private company incorporated in Antigua pursuant to the country’s Land Acquisition Act. Litigation ensued, and in May 2014, the Judicial Committee of the Privy Council ordered Antigua to compensate the company for the expropriation.

Over two years later, in October 2016, the company brought a common law action in British Columbia to enforce the Privy Council Judgment in that province. Antigua did not defend the action.

As a result, in April 2017, the company obtained a default judgment for the enforcement of the Privy Council Judgment against Antigua in the British Columbia Supreme Court.

Company Seeks Reciprocal Enforcement of Judgment in Ontario

One year later, in May 2018, the company commenced an application in Ontario to enforce the British Columbia Judgment by having it registered under Ontario’s Reciprocal Enforcement of Judgments Act (“REJA”).

Antigua opposed the application. It submitted that while it had contracts with four “Authorized Representatives” with businesses, premises and employees in British Columbia for the purposes of its Citizenship by Investment Program (“CIP”), it did not have a physical presence in the province and it was therefore not “carrying on business” for the purposes of REJA.

Judge Rules Registration of Judgment Precluded Because Antigua was not Carrying on Business in British Columbia

When the company sought to enforce the British Columbia Judgment in Ontario pursuant to the REJA, Antigua resisted the application on the basis of both ss. 3(b) and 3(g) of the legislation. Those sections read:

Conditions of registration

3.  No judgment shall be ordered to be registered under this Act if it is shown to the registering court that…

(b) the judgment debtor, being a person who was neither carrying on business nor ordinarily resident within the jurisdiction of the original court, did not voluntarily appear or otherwise submit during the proceedings to the jurisdiction of that court; or…

(g) the judgment debtor would have a good defence if an action were brought on the original judgment. 

The application judge accepted Antigua’s arguments and dismissed the company’s application, finding that s. 3(b) of the REJA precluded the registration of the British Columbia judgment because Antigua was not “carrying on business” in British Columbia, which requires a physical presence in the jurisdiction and the CIP did not qualify did not constitute a business activity.

The application judge also held that the registration of the British Columbia judgment was precluded by s. 3(g) of the REJA, which bars registration if “the judgment debtor would have a good defence if an action were brought on the original judgment”. The application judge concluded that “original judgment” referred to the first-instance Privy Council Judgment on the merits, not the British Columbia Judgment, which was a derivative of a judgment of a non-reciprocating jurisdiction.

The company appealed to the Ontario Court of Appeal.

Court of Appeal affirms Analysis of the Application Judge, Appeal Dismissed

On appeal, the company challenged the application judge’s approach to both ss. 3(b) and 3(g).

However, a majority of the Court of Appeal for Ontario affirmed the application judge’s analysis of “carrying on business” under s. 3(b) of the REJA and dismissed the appeal on that basis. It found that the application judge had not erred in summarizing or applying the legal test for what constitutes carrying on a business and that his factual finding that Antigua was not carrying on business in British Columbia was entitled to deference. Because the court had disposed of the appeal under s. 3(b), it did not address the issue of s. 3(g).

The company appealed to the Supreme Court of Canada.

Supreme Court of Canada Finds Application Judge Correctly Applied the Reciprocal Enforcement of Judgments Act

The majority of the Supreme Court of Canada dismissed the appeal, finding that the application judge had correctly interpreted and applied the relevant provisions of the REJA. It explained that the “carrying on business” set out in s. 3(b) has been given a generous and liberal interpretation by the courts below consistent with the Court’s jurisprudence. It, therefore, held that there had been no error in the conclusion that Antigua was not carrying on business in British Columbia.

Carrying on Business in a Jurisdiction Requires Direct or Indirect Presence in the Jurisdiction, Supreme Court States

While the court noted that the REJA does not define “carrying on business” for the purposes of s. 3(b), it explained that the concept has a long history in common law. The court stated that to determine whether a defendant is carrying on business in a jurisdiction, the court must inquire into whether it has some direct or indirect presence in the jurisdiction, accompanied by a degree of business activity that is sustained for a period of time. Whether or not a corporation is carrying on business is a question of fact assessed in reference to a number of indicia. Some kind of actual presence, whether direct or indirect, is required. The court found that physical presence in the form of maintenance of physical premises will be compelling, but a virtual presence that falls short of an actual presence will not suffice.

In the result, the court, therefore, dismissed the appeal.

For Assistance Enforcing Foreign Judgments, Contact Baker & Company in Toronto

Where legal disputes cross borders, individuals or businesses may need to enforce a foreign judgment in an Ontario court or a court in another Canadian province or territory. This can occur across a wide range of legal disputes including those involving corporate & commercial law, expropriation law,  real estate law, employment law, wills & estates law, and hotel law. If you are involved in a cross-border or international dispute and have received a judgment in a foreign jurisdiction that you wish to have enforced in Ontario or elsewhere in Canada, contact the highly skilled corporate commercial lawyers at Baker & Company. We rely on more than 30 years of business law experience to ensure our clients’ rights are protected. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Doing Business In Canada

Canadian Courts Continue to Refuse Challenges to COVID-19 Measures

This week, the Quebec Court of Appeal refused to hear the appeal of a February 8, 2021 Quebec Superior Court case challenging the current COVID-19-related curfew. 

The court had rejected a lawyer’s request for a temporary and partial stay of the application of the curfew which was imposed on January 9, 2021 by the Quebec government to fight against the spread of COVID-19. The measure prohibits non-essential travel between 8 p.m. and 5 a.m. in Quebec “red zones”. The lower court rejected the application, explaining that despite the existence of a serious question to be judged, the applicant had not shown serious or irreparable damage. In addition, the court stated that the public interest tipped the balance of convenience in favour of the Attorney General. 

We have also previously written about an Ontario decision, in which a court refused to allow a retailer to remain open, after it was forced to shut down by the government due to the COVID-19 pandemic.

HBC Loses Case Against COVID-19 Rules

Additionally, in mid-December 2020, the Hudson’s Bay Company (“HBC”) applied to court asking it to review the province’s decision to temporarily close non-essential retailers in Toronto and Peel Region.

In that case, HBC challenged s. 2(1)3, Schedule 2, of O. Reg. 82/20 under the Reopening Ontario (A Flexible Response to COVID-19) Act, 2020 (the “ROA”), which provides that “discount and big box retailers selling groceries” are permitted to open. HBC argued that the provision drew an irrational distinction between its stores and stores such as Walmart because, other than selling groceries, the types of merchandise both stores sell is essentially the same. HBC claimed that this allowed big box stores to sell all lines of merchandise while HBC, which sold the same type of merchandise, except for groceries, had to stay closed. It submitted that this was causing economic hardship to HBC and its employees. HBC argued that the distinction was impermissible, and that the court should grant a remedy that would allow HBC’s sixteen stores in Stage 1 regions to re-open. HBC argued that O. Reg. 82/20 was ultra vires the ROA.

In response, the Attorney General of Ontario argued that the closure of big box stores that did not sell groceries was permitted by the wording and purpose of the ROA. It argued that the ROA was meant to provide a flexible approach to opening and closing businesses during the pandemic, and the closure of department stores that did not sell groceries in areas with a higher incidence of COVID-19 was a policy choice permitted by the ROA and it was not up to the court to assess whether the policy choice was effective or wise.

The court dismissed HBC’s application, stating:

“Absent a Charter challenge, the focus of judicial review of a regulation is narrow. It is not the role of the Court to decide whether s. 2(1)3, Schedule 2, of O. Reg. 82/20 is effective, overly broad or unduly restrictive. These are policy choices made by the Ontario government during extraordinary times. The Court’s role is limited to determining whether the provision at issue is authorized by the ROA, which it clearly is. The purpose of the ROA is to balance public health and safety measures with economic concerns during the current pandemic. 

O. Reg. 82/20 sets out the restrictions imposed on the parts of Ontario with the highest rates of COVID-19. In those areas, Ontario’s objective is to significantly limit contacts between people for the purpose of reducing the spread of COVID-19 while giving Ontarians access to essential goods such as groceries. Requiring HBC to keep its stores closed to the public while allowing discount and big box stores that sell groceries to open is consistent with these purposes. 

We see no basis to grant the application.”

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Categories
Doing Business In Canada

Court Rejects Retailer’s Application to Challenge Store Closures Under Ontario’s COVID-19 Legislation

We had previously written about an Ontario case, in which a court refused to allow a retailer to remain open pending a full hearing, after it was forced to shut down by the government due to the COVID-19 pandemic.

While awaiting the hearing on the main application, the retailer had sought temporary relief to keep its showrooms open, but the court refused the request.

The retailer is a large home appliance retailer, with 29 showroom/retail stores in six provinces; it mainly sells refrigerators, freezers, ranges, cooktops, ovens, microwaves, kitchen ventilation appliances, dishwashers, washing machines, dryers, air conditioners, barbeque grills and other household appliances. 

Walk-in sales at the retailer’s showrooms account for approximately 80% of its sales. Its projected sales for the month of December were approximately $18 million in Ontario and $27 million Canada-wide. Several of its Ontario showrooms had been shutdown by government officials due to the COVID-19 pandemic.

When the main application was heard five days after the retailer’s motion for interlocutory relief was denied, at issue was Ontario Regulation 82/20 (the “Regulation”) which, subject to certain exceptions, prohibited retail stores from allowing customers into their showrooms in Toronto and Peel beginning on November 23, 2020. 

The application before the court was a matter of statutory interpretation and of statutory application. While the retailer did not challenge the legislation itself, it sought: 

  1. A final declaration that it may open for business during the lockdown stage of the COVID-19 pandemic because it was a “hardware store” for the purposes of the Regulation; 
  2. In the alternative, a final declaration that it may open for business because it was part of the supply chain for construction as set out in the Regulation; 
  3. In the further alternative, a final declaration that it may open for business on the basis that it supplied business and services that had been declared essential outside of Ontario with support, products supplies, systems or services necessary to operate.

In response, the Ontario government argued that the retailer was not within the category of businesses that were permitted to be open for retail sales to the public under legislation.

Court Rules Against Retailer

In conducting its analysis, the court first explained that, pursuant to the Legislation Act, legislation must be interpreted as being remedial and must be given such fair, large and liberal interpretation as best ensures the attainment of its objects.

Rejecting the retailers main argument, the court stated:

“In the immediate case, applying the principles of statutory interpretation, there is no ambiguity about what the Legislature meant or intended to mean when it specified that a “hardware store” in a lockdown zone may remain open for retail sales to the public. The Legislature intended the words “hardware store” to be read, which is to say be understood, in their ordinary sense. The Legislature did not prescribe a special meaning to the words “hardware store” and just used those words in their conventional everyday sense.

In just referring to a hardware store without defining it, the Legislature meant a retail store that a person through common experience and observation would recognize as a retail hardware store. If you asked a child to go to a hardware store, he or she would not go to [the retailer’s] store. A person would not identify, label, or name [the retailer] a hardware store, and, truth be told, [the retailer] has not and would not describe itself as a hardware store, if it was not compelled by its urge to provide retail sales of appliances to the public, notwithstanding that its showrooms are in a lockdown area.

[The retailer] argues that a hardware store sells appliances and that appliances are hardware and, therefore, it is a hardware store. The fallacy in that argument is that a retail store that sells hardware is classified as much by what it does not sell as much as by what it does sell. It is the overall mix of goods that identifies a store as a hardware store. [The retailer] may sell appliances, which may fairly be called a type of hardware, but it does not sell building materials (lumber, masonry), construction hardware (nails, screws, etc.), fasteners, hand tools, power tools, plumbing supplies, electrical supplies, cleaning products, small housewares, utensils, and sanitation supplies, all of which will be found in a conventional hardware store.”

As a result, the court rejected the retailer’s first ground of relief.

The court further rejected the retailer’s second and third grounds of relief for substantially the main reasons.

As a result, the application was dismissed.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Categories
Doing Business In Canada

HBC Goes to Court Over Ontario’s COVID-19 Measures

HBC Writes Letter Challenging Government Measures

On December 1, 2020, Hudson’s Bay Company (“HBC”) led a charge to challenge the Ontario government’s order that all non-essential businesses in Toronto and neighbouring Peel Region close in an effort to contain surging COVID-19 infections.

In an open letter to Premier Doug Ford, HBC and almost 50 other retailers stated:

“We ask that you move immediately to open all retail in Ontario, and impose a 25% capacity limit on ‘non-essential’ retail in lockdown regions, just as several other provinces have done, all with guidance and support from public health officials. This will put fewer people in more stores, increasing safety for all. The current policy does the opposite. 

Together with mandatory mask policies, social distancing, hand sanitization and the numerous other safety measures already in place, capacity limits can further reduce the potential for community spread while enabling more businesses to stay open across all regions during a make-or-break season for retail businesses.

Large and small retailers need each other to create a vibrant retail ecosystem. Collectively, we are asking that you join with us in common cause and a shared commitment to keeping Ontario families safe and secure through this extraordinarily challenging period.”

The letter noted that Ontario’s policy of segregating “non-essential” retailers from those deemed essential might actually be making things worse, arguing that closing down the Toronto and Peel regions had not reduced the number of shoppers, but instead had funnelled those shoppers and the corresponding health risk into fewer, increasingly crowded stores, as well as adjacent communities. The letter also noted that “Canadian retail businesses are being destroyed and tens of thousands of jobs are being lost.”

HBC Goes to Court Over COVID-19 Measures

Additionally, in mid-December 2020, HBC applied to court asking it to review the province’s decision to temporarily close non-essential retailers in Toronto and Peel Region.

As reported by the CBC, HBC filed a judicial review in which it called the province’s approach “unreasonable” and “unfair” and asked it to recognize that there was a need for a solution that prioritizes health and safety without jeopardizing the livelihood of thousands of retail workers and the future of many businesses.

HBC’s court filing stated that “[a]lthough purportedly designed to maintain the public’s access to essential goods and keep non-essential retailers closed, the regulations do not do that.” It also claimed that the current regulations were incoherent and devoid of logic and consistency. Finally, HBC claimed that the government had changed its regulations to force department stores to close without notice.

Court Refuses Other Retailer’s Request for Interim Relief

We had previously written about an Ontario case, in which a court refused to allow a retailer to remain open pending a full hearing, after it was forced to shut down by the government due to the COVID-19 pandemic.

The retailer had commenced proceedings challenging shutdowns of several of its showrooms due to COVID-19 government measures. It challenged the measures by claiming that its hardware stores were exempt from mandatory closure under the express terms of the applicable regulation. The retailer argued that under the federal government’s definition of essential services retail workers engaged in the chain of commerce of home appliances were classified as providing essential services.

While awaiting the hearing on the main issue, the retailer sought temporary relief to keep its showrooms open, but the court refused the request.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Categories
Doing Business In Canada

Ontario Court Refuses Store’s Request to Remain Open Despite Government Shutdown Under COVID-19 Measures

In a recent Ontario case, a court refused to allow a retailer to remain open pending a full hearing, after it was forced to shut down by the government due to the COVID-19 pandemic.

Retailer Shut Down Due to COVID-19

The applicant is one of Canada’s largest home appliance retailers, which operates 29 showroom/retail stores in six provinces. It also sells its appliance products online.

On November 27, 2020, a Peel bylaw officer ordered the retailer to close its Mississauga showroom under the COVID-19 regulatory regime in place.

On November 28, 2020, a Brampton bylaw officer ordered the retailer to close its Brampton showroom for the same reason.

On December 1, 2020, a Toronto bylaw officer ordered the retailer to close its Etobicoke showroom and advised that its North York showroom was under investigation.

In response, the retailer applied to the court on December 2, 2020 to claim an injunction requiring the governments to allow it to open. It claimed that it operated “hardware stores” that were exempt from mandatory closure under the express terms of the applicable regulation. The retailer argued that under the federal government’s definition of essential services retail workers engaged in the chain of commerce of home appliances were classified as providing essential services.

Additionally, the retailer delivered evidence concerning its efforts to ensure that customers and employees in its showrooms were well protected from the COVID-19 virus. It had installed physical separations, required masks at all times, had hand sanitizer available, and practiced social distancing.

As part of its claim, it explained that December was retail’s high season and it projected over $27 million of revenue in Ontario over the course of the month but for the government measures. 

Because the hearing was scheduled for one week after the original application was filed to allow the government time to formulate its response, the court had to consider whether to grant the retailer interim relief during that time. The retailer had asked the court for an order allowing it to open its stores between the time of the application and the subsequent hearing. It submitted that it would suffer loss of revenue in the order of $500,000 if its stores were not open prior to the hearing.

Court Refuses to Grant Interim Relief

The court set out the three-part test used for interim relief and interlocutory relief as:

  • Is there a serious issue to be tried?
  • Will the retailer suffer “irreparable harm” if it is not allowed to open?
  • What is the “balance of convenience”?

First, the court found that there was a serious issue to be tried, because the issue of interpretation of provincial regulations and municipal bylaws was being raised. The court stated:

“The issue for interpretation is whether a retailer of appliances is a “hardware store” within the meaning of the current regulations. That is not a frivolous issue.”

Second, the court found that, although the retailer’s alleged losses were monetary, in the absence of a mechanism for it to seek compensation, its losses could well amount to irreparable harm, stating:

“The [retailer] notes that if it suffers losses as a result of being wrongly shut down by the government, its losses will not be easily recoverable. No government counsel before me today pointed to a ready mechanism for a business to obtain compensation for being wrongfully shut down under the Covid-19 regime. One may exist in the legislation being relied upon by the government or at common law. But I am not aware of any at this moment.”

Finally, the court assessed the “balance of convenience”, which compares the potential harm to the applicant if no injunction is granted with the potential harm to the respondents if an injunction is granted. In essence, the court had to determine which side would suffer the worse harm and where the equities lay as between the parties. The court observed:

“The [retailer] argues that without an injunction it will suffer very significant and potentially non-compensable losses. However, if it is allowed to open, the risk of Covid-19 transmission to employees and customers who attend its showrooms between now and Tuesday will be minimal. [The retailer] submits that the gulf between the near certainty of significant economic loss and the very low risk of transmission of the virus, tips the balance of convenience in the [its] favour.

However, this case involves the public interest and not just the private concerns of the [retailer] and its customers in its showrooms. The governments are seeking to enforce a regulatory regime to protect public health. The public interest is a proper consideration when a party seeks exemption from existing legislation.” 

Ultimately, the court found that, despite the retailer’s potential losses, the public interest and the risks posed by the COVID virus were paramount. 

As a result, the court declined to grant interim relief to the retailer. 

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Categories
Doing Business In Canada

Canada Announces COVID-19 Loan Program For Larger Businesses with the Large Employer Emergency Financing Facility

Due to the COVID-19 pandemic, the Canadian Government has announced several aid programs intended to help small business, such as the wage subsidy program and the Canada Emergency Commercial Rent Assistance.

This week, the Federal Government announced a new aid program aimed at larger businesses, called the Large Employer Emergency Financing Facility (“LEEFF”).

What is LEEFF?

LEEFF is a program which provides short-term liquidity assistance for large Canadian employers who have been affected by the COVID-19 pandemic in the form of interest-bearing term loans.

These loans are intended to help large Canadian employers preserve their employment, operations and investment activities until they can access more traditional market financing.

As part of the announcement, Canadian Minister of Finance Bill Morneau, stated:

“We know that times have been tough, and Canadians are concerned about their jobs. We continue to make sure government action responds to the significant needs of Canadians and businesses during the COVID-19 pandemic. LEEFF will help protect jobs, safeguard workers’ benefits, and protect our economy. It will help businesses keep workers on the payroll, and put more Canadians in a position to recover quickly once we make it through these uncertain times.”

Loans of $60 million and above will be awarded based on the applicant’s cash flow needs for the next 12 months. The loan size for each applicant will be assessed on a case-by-case basis.

No deadline has been announced. Rather, the Government has stated that the application process will remain open while the current economic situation persists.

Who is Eligible?

LEEFF will be open to large Canadian employers who: 

(1) Have a significant impact on Canada’s economy, as demonstrated by having significant operations in Canada or supporting a significant workforce in Canada; 

(2) Can generally demonstrate approximately $300 million or more in annual revenues; and 

(3) Require a minimum loan size of $60 million. 

Large for-profit enterprises in all sectors, except for those in the financial sector, can apply for funding under LEEFF. Additionally, certain not-for-profit enterprises, such as airports, could also be eligible. 

Companies seeking support must commit to minimizing the loss of employment and sustaining their domestic business activities, and must demonstrate that funding under LEEFF forms part of their overall plan to return to financial stability. 

The Government has stated that companies that have been found guilty of tax evasion will not be eligible under the program.

Application Process

Applicants must submit their request to LEEFF-CUGE@cdev.gc.ca. 

The applicant will then receive a non-disclosure agreement, application form and instructions. The application form will request important information relating to the applicant and its financial condition.

Applicants will be then be contacted to begin the process.

Terms and Conditions of the Loan

The terms and conditions of the loans have been set out as follows:

  • Size/Principal Amount – The loan will be provided by way of two loan facilities: an unsecured facility equal to 80% of the aggregate loan and a secured facility equal to 20% of the aggregate loan amount. The minimum aggregate loan will be $60 million. The loan will be advanced in tranches over 12 months.
  • Interest Rate – With respect to the unsecured facility, cumulative at 5% per annum payable quarterly in arrears. The interest rate will increase to 8% per annum on the one-year anniversary and will increase by a further 2% per annum each year thereafter. To reduce cash pressures, interest may be paid in-kind for the first two years of the loan. For the secured facility, the interest rate will be based on the interest rate of the borrower’s existing secured debt.
  • Term – The duration of the unsecured facility will be five years. The duration of the secured loan facility will match that of the borrower’s existing secured debt. The borrower may prepay the loan at any time without penalty.
  • Restrictions – The borrower will be subject to certain operating requirements while the loan is outstanding including (i) prohibitions on dividends, capital distributions and share repurchases, and (ii) certain executive compensation restrictions.
  • Covenants – The borrower will be subject to certain affirmative covenants while the loan is outstanding including (i) performance of obligations under existing pension plans; (ii) performance of material obligations under applicable collective bargaining agreements; and (iii) publishing an annual climate‑related financial disclosure report, highlighting how corporate governance, strategies, policies and practices will help manage climate-related risks and opportunities; and contribute to achieving Canada’s commitments under the Paris Agreement and goal of net zero by 2050.
  • Governance – The Government will reserve the right to appoint an observer to the board of the borrower.
  • Conditions – Certain conditions will need to be satisfied before the initial advance of funds, which will include certain waivers from existing lenders or bondholders of the borrower.

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continue to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Categories
Doing Business In Canada

Applications for the COVID-19 Federal Wage Subsidy Program to Open on April 27, 2020: Update

As previously noted, the Canadian Government has established a wage subsidy plan that will allow Canadian employers whose business has been affected by COVID-19, to apply for a subsidy of 75% of employee wages for up to 12 weeks, retroactive from March 15, 2020 to June 6, 2020. It will provide up to $847 a week per employee.

The wage subsidy is intended to enable eligible businesses to re-hire workers previously laid off as a result of COVID-19, to help prevent further job losses and to resume normal operations following the crisis.

This week, Prime Minister Trudeau announced that a new calculator has been launched to help eligible businesses determine the amount they will be able to claim through the program.

The calculator will allow employers to input the number their of employees as well their gross payroll in order to determine the specific line amounts they should use when they make their application.

Employers will be able to apply as of this coming Monday, April 27th. It is expected that a large majority of applications will be processed by May 5th and direct payments will be made to employers soon after.

Eligibility Criteria

Eligible employers include:

  • individuals (including trusts)
  • taxable corporations
  • persons that are exempt from corporate tax (Part I of the Income Tax Act), other than public institutions:
    • non-profit organizations
    • agricultural organizations
    • boards of trade
    • chambers of commerce
    • non-profit corporations for scientific research and experimental development
    • labour organizations or societies
    • benevolent or fraternal benefit societies or orders
  • registered charities
  • partnerships consisting of eligible employers

Additionally, employers must have experienced an eligible reduction in revenue and have had a CRA payroll account on March 15, 2020.

Eligible employees are individuals employed in Canada by the employer during the claim period, except if there was a period of 14 or more consecutive days in that period where they did not receive any pay from the employer.

Additionally, employees who have been laid off or furloughed can become eligible retroactively, as long as they have been rehired and their retroactive pay and status meet the eligibility criteria for the claim period. Employers must rehire and pay such employees before including them in the calculation for the subsidy.

Penalties and Fines for Misusing the Wage Subsidy Program

Tough penalties have been built into the legislation enacting the wage subsidy program. Among them, employers and business owners who are found to have misused the funds could face up to five years in prison and heavy fines, which may include having to pay 225% of what they received. 

Get Advice

Baker & Company has adopted all of the COVID-19 safety precautions and vulnerable employees have been invited to work from home. We are fully operational and continuing to work on client assignments. Where possible, meetings are being held via video link or by telephone conference.

At Baker & Company, we provide responsive, strategic, and pragmatic business and legal solutions to our clients. Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. To hear more about how we can help, call us at 416-777-0100 or contact us online.

Categories
Corporate & Commercial Law Doing Business In Canada

Financial Aid for Canadian Businesses Facing COVID-19 Challenges

Businesses across the country have been facing unprecedented financial strain since the World Health Organization declared COVID-19 to be a global pandemic on March 11th. The resulting measures put into place to slow the spread of the virus have had a dramatic impact on every individual and industry in the country, with most companies facing reductions in business or even closures. Several companies have already begun to take action, asking employees to reduce their hours or turning to layoffs, as cash on hand becomes a major concern.

In an effort to help businesses maintain payroll expenses and keep people employed throughout the health crisis, the federal government announced last week that it would be enacting several initiatives to provide businesses with assistance and tax deferrals to increase spending on pressing matters, like payroll and other operating costs. Today, the Prime Minister announced a major increase in assistance.

Federal Wage Subsidies

When the plan was originally announced last week, the proposed subsidy was set at 10%, to a maximum of $1,375 per employee and $25,000 per employer. Eligible small and medium-sized businesses could take advantage of the subsidy from March 18th through to June 20th, in an effort to avoid layoffs where possible.

However, as of today, March 27, Prime Minister Trudeau has announced a dramatic increase to the wage subsidy plan, as 10% was evidently deemed insufficient to keep many businesses going until the threat of the pandemic begins to wain in Canada. The Prime Minister announced this morning that the subsidy is going to be increased from 10% of payroll to 75%, a significant jump that will hopefully mean good things for many employees across the country who would otherwise be facing unemployment.

Eligible small and medium businesses can take advantage of the subsidy retroactive to March 15, meaning employees will be paid even if their workplace has been forced to slow down or close completely. As these changes were just announced, more details will follow, likely early next week. For example, there was no mention of per employee or per business caps, so this remains to be seen.

Canada Emergency Business Account

In this morning’s press conference, Prime Minister Trudeau also announced the Canada Emergency Business Account, which will be used to provide loans of up to $40,000 for eligible small and medium-sized businesses. The loans will be guaranteed by the federal government and will be interest-free for the first year. Certain qualifying businesses will also be granted loan forgiveness of 10% of the total amount.

In addition, businesses will be able to defer GST/HST payments as well as taxes on imports until June of this year. This will allow businesses to keep more cash on hand to assist with immediate expenses.

Provincial Aid for Businesses

In addition to the federal aid, the Ontario government will also be working to provide businesses with needed assistance throughout the next few months.

The province will be providing $6 billion in provincial business tax interest and penalty relief to corporations over a five months period. For smaller companies that pay less than $1 million in payroll, the province will temporarily increase in the Employer Health Tax exemption. The province will also allow a deferral of WSIB premiums for up to six months. Municipalities throughout Ontario are also being encouraged to extend deferrals of property tax as well.

While these are significant steps towards helping businesses face this unprecedented time, it remains to be seen what the long-term effects the pandemic will have on the Canadian economy overall. Cases of COVID-19 continue to rise in Ontario and across the country, but with any luck we will begin to see evidence of a reduction soon, owing to the extensive protocols put in place to slow down the spread.

At Baker & Company, we are both everyday trusted advisors and problem solvers. Our team of skilled and experienced litigation lawyers are cherry-picked for their ability to analyze cases, counsel clients, and examine and present evidence at trial.  Our corporate and commercial law team has dealt with all kinds of issues in courts across Ontario and has significant experience at both the trial and appellate levels. Call us at 416-777-0100 or contact us online for a consultation.