Tag Archive for: British Columbia

Characterization of Unfunded Pension Liability Claims

/in /by

In Re Walter Energy Canada Holdings, Inc, 2017 BCSC 709 (available here) the British Columbia Supreme Court had to consider the validity of a large claim (over $1 billion) filed in restructuring proceedings underway in the province under federal legislation.  The claim was for unfunded pension liabilities and was based on an American statute, the Employee Retirement and Income Security Act of 1974, 29 U.S.C. § 1001.  So the court had to consider whether that statute could apply to a claim in British Columbia against entities organized in Canada (mostly in British Columbia).

Starting at para. 93 the court considered whether the claim against the entities being restructured was governed by Canadian or American law (in each case the relevant law was either federal rather than provincial or state or did not vary as between provinces).  This is a choice of law question which raises the issue of the characterization of the claim.  Canadian courts do not often analyze characterization in detail, but the court did so in this case, making the decision notable.  The claimant argued that the claim was one in the law of obligations and sought to identify the proper law of the obligation.  The entities being restructured in contrast argued the claim went to a point of corporate law, namely their separate existence from other entities in an international corporate group.  The court referred to several of the main general authorities about the characterization process but considered the specific issue before it to be one of first instance.  It sided with the entities being restructured – the claim went to the issue of separation of corporate personality and status.  The American statute was imposing liability by “lifting the corporate veil” (paras. 137-38) between international corporate entities.

Having characterized the issue, the court then had to identify the connecting factor for the choice of law rule.  It held:

[160] The issue as to whether the Walter Canada Group’s separate legal personalities can be ignored is subject to the Canadian choice of law rule that the status and legal personality of a corporation is governed by the law of the place in which it was incorporated, namely British Columbia and Alberta. Here, as with the corporations within the Walter Canada Group, both with limited liability and unlimited liability, it is admitted that all of the partnerships were organized under British Columbia law. Accordingly, the choice of law analysis leads to the same result in relation to the partnerships, namely British Columbia law, including under the Partnership Act, R.S.B.C. 1996, c. 348.

[161] The place of incorporation or organization is a matter of public record and all persons who would do business with or otherwise deal with the Walter Canada Group entities would or should be well aware of that fact.

[162] I agree that, under Canadian choice of law rules, the place of incorporation or organization of the Walter Canada Group entities is the appropriate “connecting factor” in relation to the issue arising from the 1974 Plan’s claim.  As a result, British Columbia and Alberta law determine whether the separate legal personalities of the Walter Canada Group entities can be ignored.

Given that the American statute is not part of British Columbia or Alberta law, the court concluded that the claim failed (paras. 177-78).

 I want to reflect more on the decision, but at this point I am not certain I agree with the characterization analysis.  It is true that the only way the American statute makes the Canadian entities liable is by imposing liability on others within a larger corporate group.  But to me it does not follow that the statute is a matter of corporate status and not of obligation.  The statute imposes an obligation and extends that obligation to various entities.  I think there is room to debate that the primary element of the statute is the obligation it imposes.

However, support for the decision could lie in Macmillan Inc v Bishopsgate Investment Trust (No 3), [1996] 1 WLR 387 (CA), which the court does mention (see for example para. 126), which stresses the possibility of characterizing a specific legal issue within the context of a broader claim.  The analysis could be that there is a nested issue – that of corporate separation or status – within the broader question of liability for an unfunded pension.

Supreme Court of Canada Allows Courts to Sit Extraterritorially

/in /by

In Endean v British Columbia, 2016 SCC 42 (available here) the Supreme Court of Canada has held that “In pan-national class action proceedings over which the superior court has subject-matter and personal jurisdiction, a judge of that court has the discretion to hold a hearing outside his or her territory in conjunction with other judges managing related class actions, provided that the judge will not have to resort to the court’s coercive powers in order to convene or conduct the hearing and the hearing is not contrary to the law of the place in which it will be held” (quotation from the court’s summary/headnote).

The qualifications on the holding are important, since some of the earlier lower court decisions had been more expansive in asserting the inherent power of the superior court to sit outside the province (for example beyond the class proceedings context).  I am concerned about any extraterritorial hearings that are not expressly authorized by specific statutory provisions, but I do appreciate the utility (from an efficiency perspective) of the court’s conclusion in the particular context of this dispute.  It remains to be seen if attempts will be made to broaden this holding to other contexts.

The court has also held that “A video link between the out-of-province courtroom where the hearing takes place and a courtroom in the judge’s home province is not a condition for a judge to be able to sit outside his or her home province. Neither the [class proceeding statutes] nor the inherent jurisdiction of the court imposes such a requirement. The open court principle is not violated when a superior court judge exercises his or her discretion to sit outside his or her home province without a video link to the home jurisdiction” (quotation from the court’s summary/headnote).

This aspect of the decision concerns me, since my view is that the open court principle requires that members of the Ontario public and the media can see the proceedings of an Ontario court in an Ontario courtroom.  It is a hollow claim that they can fly to another province to watch them there.  The separate concurring decision appreciates this aspect of the case more than the majority decision, though it too stops short of requiring a video link.  In its view, “While the court should not presumptively order that a video link back to the home provinces be set up where the court sits extraprovincially, members of the public, the media, or counsel can request that a video link or other means be used to enhance the accessibility of the hearing. If such a request is made, or the judge considers it appropriate, a video link or other means to enhance accessibility should be ordered, subject to any countervailing considerations” (quotation from the court’s summary/headnote).

New Book on Court Jurisdiction and Proceedings Transfer Act

/in /by
Thomson Reuters Carswell has just published Statutory Jurisdiction: An Analysis of the Court Jurisdiction and Proceedings Transfer Act by Vaughan Black, Stephen G.A. Pitel and Michael Sobkin.  More information is available here.
 
The Court Jurisdiction and Proceedings Transfer Act puts the important topic of the jurisdiction of Canadian provincial courts in civil and commercial cases on a clearer statutory footing.  It is in force in British Columbia, Saskatchewan and Nova Scotia.  The approach to jurisdiction adopted under the CJPTA is different in several respects from the common law approach, and so provinces that have adopted it are undergoing a period of transition.  One of the key issues for courts in applying the CJPTA is interpreting its provisions and explaining how they operate.  Statutory Jurisdiction: An Analysis of the Court Jurisdiction and Proceedings Transfer Act examines the growing body of cases and provides a comprehensive account of how the CJPTA is being interpreted and applied by the courts. 
 
The Supreme Court of Canada has, in its April 2012 decisions on jurisdiction, indicated a willingness to develop the common law in a way that is highly mindful of the approach taken under the CJPTA.  As a result, the analysis of the CJPTA will also be of use to those in Canadian common law provinces and territories that have not enacted the CJPTA. 
 
The book may also appeal as a comparative law resource on conflict of laws, especially to those interested in how traditional rules can be affected, directly and indirectly, by statutory reform.