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FIND YOUR FIT See pp. 6-7
INSIDE THIS ISSUE: Featured Cases: P2
Creditors; Priority; Interpretation of General Security Agreement; Definition of “Property” ~ With Counsel Comments
P8
Family Law; Division of Property; Matrimonial Home; Family Relations Act
P14
Employment; Human Rights Complaint; Duty to Accommodate; Quantum of Damages
P16
Labour Law; Arbitration; Grievances; Standard of Review
P18
Legal Profession Act; Interpreting Retainers; Interim or Final Accounts; Limitation Period
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Integris Credit Union v. Mercedes-Benz Financial Services Canada Corporation, 2016 BCCA 231 Areas of Law: Creditors; Priority; Interpretation of General Security Agreement; Definition of “Property” ~Except where clear exceptions are met, the rules of the Personal Property and Security Act should not be circumvented by the appointment of a receiver~ CLICK HERE TO ACCESS THE JUDGMENT
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ll-Wood Fibre Ltd. financed trucks from the Appellants Mercedes-Benz Financial Services Canada Corporation and BHL Capital. The Appellants had duly registered purchase money security interests (PMSI) in the trucks and serial number registrations. The Respondent Integris Credit Union, a lender, had a general security agreement with All-Wood. Integris sought and obtained a receivership order, and KPMG Inc. became the receiver in respect of all the assets, undertakings and properties of All-Wood, including all proceeds thereof. Integris’s notice of civil claim sought an order giving it conduct of sale over All-Wood’s assets or alternatively empowering the receiver to sell the assets. All-Wood had ceased to carry on business, and the draft form of the receivership order did not empower the receiver to carry on All-Wood’s business. After the receivership appointment, the Appellants filed notices of application seeking the return of their trucks. The chambers judge dismissed these applications. He interpreted the word “property” broadly, and found that the agreements between the Appellants and All-Wood were financing agreements. As a result, the trucks fell within the scope of the receivership order.
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Integris Credit Union v. Mercedes-Benz Financial Services Canada Corporation, (cont.) APPELLATE DECISION
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he appeal was allowed. The Appellants said that their security over the trucks ranked ahead of the general security agreement, that the receivership order should not cover their trucks, and that the trucks should have been excluded upon application in the court below. The Court of Appeal noted that the general security agreement’s security was subordinate to that of the PMSIs. Accordingly, Integris was in a subordinate position to the Appellants in respect of the trucks. The nature of the receivership was to liquidate assets over which Integris held priority for their security. The focus of the receivership order was the realization of Integris’s interests, rather than the operation of All-Wood. The Court of Appeal found that the issue before the court did not properly turn on the interpretation of “property” in the receivership order, nor was the true lease/financing lease dichotomy helpful. The question was whether the trucks should be excluded from the receivership and delivered to the Appellants. To allow the trucks to remain under the receivership would grant the receiver, and indirectly Integris, priority over the Appellants. All-Wood only had possessory interests in the trucks. The Appellants retained their proprietary rights, and the receiver could not acquire a greater interest than All-Wood had. The chambers judge erred in failing to consider whether, pursuant to the terms of the receivership order, the trucks should be excluded despite being “property”. Even if the trucks fell within the definition of “property” in the receivership order, the question of whether the Appellants had superior entitlement under the priority rules of the Personal Property and Security Act needed to be addressed.
July 2016
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COUNSEL COMMENTS Integris Credit Union v. Mercedes-Benz Financial Services Canada Corporation, 2016 BCCA 231 Counsel Comments provided by Gordon Plottel , Counsel for the Appellant, Mercedes-Benz Financial Services Canada
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his case addressed a long-standing tension between receivers and creditors who are unwilling participants in a receivership.
its fees, disbursements and borrowings. These powers are set out in the form of a model order.
However, equipment lessors are often unhappy about being included in A receiver’s role is to enforce receiverships, especially where security by taking control and Gordon Plottel the receiver isn’t going to keep possession of all of a debtors’ the business operating, since the lessors property and ultimately selling the typically have PMSI priority over other property for the benefit of the body of creditors to the equipment they have creditors. As in this case, the receiver leased, and expertise in re-marketing is usually appointed at the request of a their leased equipment. From their general creditor, such as a bank or credit perspective, they don’t need the receiver union which holds general security over to take control over their equipment all of the debtor’s assets. Sometimes and sell it. In particular, they don’t wish the receiver is given the authority to to have their equipment subject to the carry on the business of the debtor so as receiver’s charges for fees, disbursements to maximize the creditors’ recovery— and borrowings relating to services they perhaps to allow for the conclusion of didn’t request or require. some of the debtor’s sales commitments, or to facilitate the sale of the debtor’s business as a going concern. The receiver In this case, two equipment lessors made it known to the receiver early in the is usually given a priority charge over receivership that they wished no part of the property under its control to secure
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COUNSEL COMMENTS Integris Credit Union v. Mercedes-Benz Financial Services Canada Corporation, (cont.) the receivership. They wanted their equipment released by the receiver. The receiver undertook a typical analysis of their leases and decided that their leases were “security leases” rather than “true leases”—i.e. they were really financing agreements rather than merely agreements to use the equipment. On that basis the receiver kept their equipment in the receivership, which made it subject to the receiver’s priority charges. The Court of Appeal noted that this “security lease/true lease” analysis was not useful. It also recognized that the receiver’s assumption of control over the leased equipment amounted to an unjustified change in priority positions, since the equipment lessors’ PMSI priority became attenuated. Since there were insufficient assets in the receivership to satisfy the claims of the various secured creditors, the equipment lessors would have had some portion of the sale proceeds of their equipment involuntarily contributed to the cost of the receivership created at the behest of the Credit Union. The court held that would unjustifiably alter the PMSI priority claims to which they were entitled. Receivers, and the banks that typically request their appointments and indemnify their costs, will need to act with more caution as a result of this case. When they review the property available to secure the cost of the receivership process, they will need to consider whether any of that property is the subject of equipment leases, assess the priorities and determine the willingness of the lessor to participate in the receivership. Where receivers previously conducted their own “security lease/true lease” analysis in determining whether the leased equipment should be kept or released to the lessors, receivers will now need to consider the interests of the lessors and the priority consequences of including their equipment in the property under their control, and subject to their charges. More broadly, any creditor unwillingly part of a receivership may find in this case a basis to be excluded from the process-- and especially its costs.”
July 2016
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Xie v. Yuan, 2016 BCCA 238 Areas of Law: Family Law; Division of Property; Matrimonial Home; Family Relations Act ~Where a trial management conference order limits trial to the issue of which agreement between the parties is binding, it is not open to the trial judge to, on his or her own initiative, assess the fairness of the binding agreement~ CLICK HERE TO ACCESS THE JUDGMENT
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had paid all the property taxes and utilities since the home was purchased. In his response and counterclaim, the Appellant disagreed with the Respondent’s claim. The parties had entered into several agreements regarding their marital property. On the day of their divorce, May 19, 2011, they executed an agreement which allocated the real properties
he Appellant, Jun Yuan, and the Respondent, Shuang Xie, were married in 2009 and divorced two years later. The Respondent commenced the proceedings by notice of family claim. She sought reapportionment of the former matrimonial home in her favour, alleging that she had paid the deposit, down payment and closing costs, and
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Xie v. Yuan, (cont.) owned by the parties in accordance with the ownership of title on each property. The matrimonial home was to pass to the Appellant, as it was registered in his name. This agreement was registered in China as a prerequisite to obtaining a divorce there. Under Chinese law an immediate consent divorce may be granted if the parties have resolved all issues between them including property matters. In the alternative, the Appellant pleaded that there should be an equal division of all family assets under the Family Relations Act (FRA). In her defence to counterclaim, the Respondent did not specifically challenge the enforceability of the May 19 agreement or seek an order under s. 65 of the FRA to reapportion the assets on the basis that the agreement was unfair. Around the same time, the Respondent’s father and brother brought a civil claim against the Appellant, alleging that he owed them over a million dollars. In advance of the trial, the Appellant brought an application to have the civil action tried together with the family one. An order was made at a trial management conference (TMC order), directing that the trial would be limited to determining which of several
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Xie v. Yuan, (cont.) agreements was binding on the parties. The trial judge considered credibility at length. He said that he found the Respondent’s version of events generally more credible. He considered the particulars of the parties’ business dealings in China to be largely unrelated to the enforceability of the divorce agreement. The trial judge found that the divorce agreement was binding, but that it was unfair pursuant to s. 65(1) of the FRA, because it gave the matrimonial home to the Appellant when he had put little or no money into it and had done nothing else to earn the property. He ordered that the matrimonial home be conveyed to the Respondent contingent upon her paying off the mortgage.
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Xie v. Yuan, (cont.) APPELLATE DECISION
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he appeal was allowed. The Appellant took the position that the trial, pursuant to the TMC order, was to be limited in scope to determining which of the various agreements, if any, was binding on the parties. The potential distribution of the home would be dealt with in a subsequent proceeding. The Appellant further submitted that the judge made several errors in determining that the agreement was unfair and in reapportioning the home entirely to the Respondent. He argued that the process the judge adopted was fundamentally unfair. The Court of Appeal held that the TMC order precluded the judge from proceeding with the fairness analysis under s. 65. That issue only arose at the initiative of the judge, and neither counsel was prepared to argue that question or brought any of the governing authorities to the attention of the judge. While the TMC order was made “subject to any direction of the trial judge”, the trial judge did not purport to vary or modify the TMC order during the proceedings.
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Xie v. Yuan, (cont.)
assets. The trial judge also erred in failing to recognise the Appellant’s contribution to the purchase of the home, which was only possible because he took out a $1 million loan secured by a mortgage. Furthermore, if the allegations in the civil action were accurate, the Respondent’s contribution to the purchase of the residence was minimal, because the money used for it came by way of a loan from the Respondent’s father to the Appellant.
It was unfair and contrary to natural justice for the judge to embark on the s. 65 analysis and decide the case on an issue that was not before him. In any event, the judge’s s. 65 analysis was flawed. In determining that the agreement operated unfairly, the judge limited his consideration to the home. This was a clear error, as a court must look at an agreement in its totality. The judge could not consider whether the agreement operated unfairly in the absence of findings concerning the parties’ other
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University of British Columbia v. Kelly, 2016 BCCA 271 Areas of Law: Employment; Human Rights Complaint; Duty to Accommodate; Quantum of Damages ~In determining the quantum of a Human Rights Tribunal award for damages for injury to dignity, feelings and self-respect, ranges established by other cases play a diminished role and it may not be unreasonable for the Tribunal to make an award more than double that in previous cases~
CLICK HERE TO ACCESS THE JUDGMENT
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he Appellant University of British Columbia dismissed the Respondent, Dr. Carl Kelly, as a resident in its post-graduate training program in family medicine. The Respondent has attention deficit hyperactivity disorder (ADHD) and a non-verbal learning disorder (NVLD). The Respondent was successful in his complaint in the Human Rights Tribunal, which found that his disabilities were a factor in his adverse treatment. Although the Appellant made some accommodations for the Respondent, the Tribunal held that it had not provided reasonable accommodation to the point of undue hardship. The Tribunal assessed damages after a separate hearing. It awarded the Respondent lost earnings as a resident, and future earnings as a family doctor on account of the approximate six years’ delay of his entry into practice, discounted for contingencies. They awarded additional damages under the head of injury to dignity, feelings and self-respect. The Appellant applied for judicial review of the Tribunal’s merits and remedy decisions, and asked for an order that both decisions be quashed. The judge found that the Tribunal was correct in holding that modifications made for the Respondent’s benefit were properly considered under the bona fide occupational requirement (BFOR) / bona fide reasonable justification (BFRJ) analysis, and not under the prima facie discrimination analysis. The judge also found that the Tribunal was correct in holding that the process leading to the Respondent’s dismissal was to be addressed in the context of whether the Appellant reasonably accommodated him, and in considering a procedural component to the duty to accommodate. The judge held that the Tribunal’s decisions with respect to wage loss were not patently unreasonable, but that the decision to award $75,000 for injury to dignity, feelings and self-respect was. The award was more than double the previous high of $35,000 for similar discrimination. The judge said the Tribunal’s decision was not based on principle and could not be supported by the evidence. July 2016
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University of British Columbia v. Kelly, (cont.)
APPELLATE DECISION
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he appeal was dismissed and the cross-appeal allowed. The Court of Appeal framed the appeal issues as being whether the trial judge erred in concluding that the Tribunal correctly declined to consider evidence of modifications to the Appellant’s program as part of the prima facie discrimination analysis; reasonably found a nexus between the Respondent’s adverse treatment and his disabilities; correctly considered both procedural and substantive elements in assessing whether the Appellant met its duty to accommodate; and reasonably found that the Appellant had not met the duty to accommodate. On the first ground, the Appellant argued that it should have been allowed to prove that it did not discriminate against the Respondent on any group characteristic or stereotypical thinking, but based its decision on the Respondent’s individual abilities. The Appellant argued that the discrimination at which human rights legislation is aimed involves the attribution of stereotypical or arbitrary characteristics. The Court of Appeal noted that discrimination is not contrary to the Human Rights Code unless a distinction that has been found prima facie discriminatory is not justified. However, it held that the proposition that the Appellant should have been allowed to argue its accommodation at the prima facie stage works an unfairness on complainants and duplicates the adjudication of an issue. The Court dismissed this ground of the appeal. The Court also dismissed the appeal on the grounds of the nexus between adverse treatment and the Respondent’s disabilities, the consideration of procedural and substantive elements, and whether the Appellant met its duty to accommodate. The Respondent crossappealed the reduction of his award for injury to dignity, feelings and selfrespect. The Court of Appeal stated that judicial review is not to be treated as though it were a quantum appeal in a personal injury case. Ranges established by previous cases play a diminished role in the Tribunal’s determination of an award for injury to dignity. It was not patently unreasonable to exceed the “range”, and the judge was incorrect in so finding.
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British Columbia Teachers’ Federation v. British Columbia Public School Employers’ Association (No. 2), 2016 BCCA 273 Areas of Law: Labour Law; Arbitration; Grievances; Standard of Review ~A reviewing panel’s failure to consider a question that was fundamental to the arbitrator’s decision may result in a finding of patent unreasonableness~ CLICK HERE TO ACCESS THE JUDGMENT
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he Appellant British Columbia Teachers’ Federation filed a grievance pursuant to the terms of the collective agreement between the Appellant and the Board of Education of School District No. 61 (Greater Victoria) (the Employer), which was represented by the Respondent British Columbia Public School Employers’ Association. The grievance claimed that the Employer was required by s. 56 of the Employment Standards Act (ESA) to give experience credit in respect of the time teachers were on pregnancy and parental leave for the purpose of determining salary. The matter went to arbitration, and in the arbitrator’s first award he dismissed the grievance on the basis of his interpretation of s. 56. He did not deal with other issues raised by the
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British Columbia Teachers’ Federation v. British Columbia Public School Employers’ Association (No. 2), (cont.) Employer. The Appellant appealed, and the Court of Appeal remitted the matter back to the arbitrator to deal with these other issues. In a supplementary award, the arbitrator ruled that teachers who took pregnancy and parental leave after s. 56(3) came into effect were entitled to
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experience credit. The arbitrator held that the Employer was not required to pay retroactive wages resulting from this award. The Employer appealed the supplementary award. The Court of Appeal held that it did not have jurisdiction, and stated that the decision should be reviewed by
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British Columbia Teachers’ Federation v. British Columbia Public School Employers’ Association (No. 2), (cont.) the Labour Relations Board pursuant to s. 99 of the Labour Relations Code. A one-person panel of the Board found that the Employer had not established grounds for review under s. 99. Then the Employer applied under s. 141 of the Code for leave and reconsideration of the Board’s decision. The majority of a three-person panel allowed the application and held that the Employer did not have to give experience credits in respect of parental and pregnancy leaves taken more than 30 days before the grievance was filed. The Appellant then petitioned the Supreme Court of British Columbia for judicial review of the reconsideration decision. The chambers judge rejected the Appellant’s argument that the reconsideration panel exceeded its jurisdiction, and said that the real issue was whether, in applying the criteria set out in the Code, the reconsideration decision was patently unreasonable. He also rejected the arguments based on the proposition that the Court of Appeal had already ruled that the provisions of the ESA mandated the crediting back of experience increments to 1995. The chambers judge dismissed the petition, finding that the reconsideration decision was not patently unreasonable.
APPELLATE DECISION
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he appeal was allowed. The Appellant took the position that the standard of review was correctness with respect to the interpretation of the ESA, and patent unreasonableness regarding matters within the Board’s exclusive jurisdiction and expertise. The Board and Employer argued that the standard of review was patent unreasonableness in all respects. The Court of Appeal reviewed s. 58 of the Administrative Tribunals Act (ATA), and noted that the Code contains a privative clause. The Court found that the Appellant’s submission ignored the fact that this was a judicial review proceeding of a reconsideration decision of the Board, which is governed by ss. 58(1) and (2) of the ATA. The correct standard of review was patent unreasonableness. The majority of the reconsideration panel focused on part of the supplementary award, which they interpreted to mean
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British Columbia Teachers’ Federation v. British Columbia Public School Employers’ Association (No. 2), (cont.)
that the arbitrator was of the view that the collective agreement’s time limitation of 30 days prior to the filing of the grievance did not apply because the crediting of experience increments was mandated by the ESA. The Court of Appeal considered this a misinterpretation. The arbitrator held that the 30-day limit was not applicable because the violation of the collective agreement was continuous in nature and occurred each time a teacher was paid an incorrect amount for his or her salary on the basis of being placed on the wrong scale in the salary grid. The majority failed to consider the effect of the grievance being of a continuing nature. In so doing, they failed to consider an aspect of the arbitrator’s reasoning that was fundamental to his decision. A failure to consider the correct question can lead to a decision being found to be patently unreasonable.
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Grewal v. Singleton Urquhart LLP, 2016 BCCA 289 Areas of Law: Legal Profession Act; Interpreting Retainers; Interim or Final Accounts; Limitation Period ~Lawyers may not invoke terms of retainer agreements they draft to detrimentally affect their clients’ rights unless the client is fully and fairly informed of those rights at the outset of the agreement~
CLICK HERE TO ACCESS THE JUDGMENT
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he Appellant, Mr. Harbans Singh Grewal, had a solicitor-client relationship with the Respondent law firm of Singleton Urquhart (Singleton) and with the Respondent law firm of Stewart & Company (Stewart). The Respondent David Perry was a lawyer at Singleton and later at Stewart. He was counsel for the Appellant in a family property dispute while working at both firms. Between 2008 and 2013, Singleton sent the Appellant monthly accounts. The Appellant made his last payment on account to Stewart in late August 2012. Stewart rendered its last bill on May 22, 2013, and wrote off all outstanding accounts on August 22, 2013. The Appellant sought to have all of the accounts rendered by the two firms reviewed by a registrar
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in accordance with s. 70 of the Legal Profession Act. An appointment to review the accounts was taken on October 17, 2014, but the registrar adjourned the appointment and sought clarification of the accounts. The matter did not return to the registrar, and the Appellant applied to the Supreme Court for an order that the bills be reviewed by the registrar. The chambers judge granted a review only with respect to the last bill issued by Singleton, finding that the review of the other bills was out of time and there were no special circumstances to permit the review. The chambers judge found that each periodic account was a final bill, and that the Appellant knew that when a periodic account was rendered it was due and payable.
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Grewal v. Singleton Urquhart LLP, (cont.) APPELLATE DECISION
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he appeal was allowed in part. The Appellant, who was selfrepresented, argued that the chambers judge erred in finding that the reviews were time-barred under s. 70(1) of the Legal Profession Act, and in declining to exercise her discretion to allow the reviews under s. 70(11) of the Act. He said that all of Singleton’s periodic accounts were interim and should be treated as one bill delivered in December 2013. The Court of Appeal noted that whether the lawyers’ accounts were interim or final is determinative of whether the client was time-barred from reviewing all the accounts. Interim accounts are merely requests for money to be applied to a final bill submitted later, and payments made on interim accounts have no effect on limitation periods. If they were final, the accounts would be regarded as a series of discrete bills within the meaning of the Act, and time limits would begin to run upon delivery or payment of each. Singleton’s retainer agreement stated that where accounts were not paid from retainer funds, payment was due promptly upon receipt of the
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statement of account, and interest would be charged on overdue dates. The Court of Appeal reviewed the case law and found that lawyers may not invoke terms of retainer agreements they draft to detrimentally affect their clients’ rights unless the client is fully and fairly informed of those rights at the outset of the agreement. Absent unusual circumstances, courts should avoid constructing periodic accounts as final bills. Singleton failed to advise the Appellant of his rights to review and sent an email to him referring to the accounts as interim. Furthermore, the retainer contained a bonus clause, which allows the lawyer to make the results achieved for the client a factor in determining the fee charged. Cumulatively, these factors led the Court of Appeal to conclude that Singleton’s periodic accounts were interim accounts. Accordingly, the Appellant’s application for review of the Singleton accounts was timely. The Court agreed with the chambers judge that a review of Stewart’s bills was out of time, and found she did not err in finding no special circumstances that would allow a review under s. 70(11).
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