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Appellate Quarterly 01/18/2024 – Key Takeaways

Appellate Quarterly 01/18/2024 – Key Takeaways

On January 18, 2024, McCarthy Tétrault’s National Appellate Litigation Group hosted our Appellate Quarterly webinar, featuring five recent appeals that may impact the Canadian business community. Partners Kosta Kalogiros, Isabelle Vendette, Patrick Williams, Richard Lizius, and Brandon Kain discussed these recent appellate developments, as well as future developments to watch in their respective jurisdictions.

Here are some of the key takeaways:

  1. The oppression remedy and analysis of reasonable expectations

In Pereira v. TYLT Technologies Inc. (TYLTGO), 2023 ONCA 682, a founder of a small company entered an agreement for further investment funding which stipulated that should he be terminated, his company had the right, should it wish, to buy his unvested shares for cents on the dollar. The founder claimed he was orally assured these terms were just to instill confidence in prospective investors, and that roles or corporate structure would not change. However, he was terminated, and his unvested shares were bought, so he applied for oppression remedies. The application judge held that the founder’s expectations were not reasonable. The Court of Appeal overturned that decision, converted the application to a trial, and remitted the matter. Without addressing the merits, the Court of Appeal held that it was an error to decide the issue without due regard for the context: a founder of a small company might reasonably expect to remain an officer/director/shareholder at least until his shares vested, unless his continued role was not in the company’s best interests. The application judge ought to have considered the fairness of the situation and whether the termination was, on the facts, justified. The Court did not decide whether the expectations were reasonable, or if their breach was unfair, but did emphasize the need to not focus single-mindedly on the written terms at the expense of fairness when applying equitable relief.

  1. The threshold for authorization of a class action in Québec

The Quebec Court of Appeal has arguably further lowered the standard for authorizing class actions in Homsy c. Google, 2023 QCCA 1220. The plaintiffs in a proposed class action alleged Google improperly used Google Photos to extract facial biometric identifier data without consent, notice, or necessary data retention policies. They filed no evidence in support of the allegations, or explaining how the relevant algorithm works, so the Superior Court refused to authorize the class action. However, the Court of Appeal overturned this decision and remitted the matter back to the authorization judge. Authorization did not require proof of how the Google Photos algorithm works. At the authorization stage in Quebec, plaintiffs only need to provide some evidence if the allegation amounts to a mere opinion, or if the facts alleged are vague, general, or imprecise. Otherwise, if the facts alleged are sufficiently clear and detailed, then no evidence would be required.    

  1. BC Court of Appeal addresses previously unsettled questions about the role of a company in oppression claims and other shareholder disputes

In Yen v. Ghahramani, 2023 BCCA 403, two co-owners (~45% each) of a closely held private company had a falling out. One owner, Yen, was removed as director. He sued for oppression remedies and liquidation and dissolution of the company. The other owner responded and counterclaimed alleging misconduct by Yen. The company then provided a similar response and counterclaim against Yen. Yen tried to amend his pleadings to allege the company’s conduct in the litigation was itself oppressive, and that the other owner had misappropriated company resources. The British Columbia Court of Appeal held that in the context of a closely held private company: (1) corporate litigation conduct can be independently actionable if there is a potential conflict of interest (e.g., if the company’s lawyers are instructed by another opposing party to the litigation); and (2) the jurisprudence has evolved to allow allegations of misappropriation of corporate resources to proceed via the oppression remedy rather than only as a derivative action. The Court of Appeal allowed the amendments, and allowed the oppression remedy claim to proceed.

  1. Whether PIPEDA applies to news articles identified through search engine results

Google LLC v. Canada (Privacy Commissioner), 2023 FCA 200, was a reference concerning whether the Personal Information Protection and Electronic Documents Act (PIPEDA) applies to Google search results. Specifically it concerned a the complainant’s sensitive personal information as contained in news articles linked through Google search. Google argued that (1) PIPEDA does not apply because it does not provide search results for a commercial purpose, and (2) that news article results fall under a journalism exception. The Commissioner sought a reference to the Federal Court, which held PIPEDA does apply to Google. A majority of the Federal Court of Appeal reached the same conclusion. Key holdings include: (A) The Commissioner was entitled to omit Charter issues from its reference (despite Google’s objections), and in light of that, they did not need to be considered when interpreting the legislation. (B) Google has a commercial purpose in providing search results. (C) Though the Federal Court of Appeal declined to define journalism, Google did not fall in the journalism exception, because it provides news articles the same way it provides any results, and that activity is therefore journalism.

  1. Good faith in contracts and the duty to inform

The Supreme Court of Canada in Ponce v. Société d’investissements Rhéaume ltée, 2023 SCC 25 provides further guidance on the evolving area good faith disclosure in contract. The presidents of a group of companies entered a “Presidents’ Agreement” with the major shareholders giving the presidents a right of first refusal should the shareholders wish to sell their shares. The presidents later learned that a large third party was interested in acquiring the shares. The presidents bought the shareholders’ shares in order to resell them to this third party, but did not tell the shareholders, as this likely would have prompted higher prices from the shareholders. The presidents also entered a confidentiality agreement with the third party preventing it from dealing directly with the shareholders, and denied third party’s interest when asked by the shareholders. The shareholders alleged a breach of the duty of good faith, and prevailed at every level of court, though for varying reasons. The Supreme Court of Canada held that the presidents breached the duty of good faith not during the formation of the contracts by which the shareholders sold their shares to the presidents, but rather in the performance of the pre-existing Presidents’ Agreement, which imposed obligations upon the presidents during the negotiation of the share sale contracts. In Quebec, the civil law duty of good faith includes a duty of disclosure even in the absence of a fiduciary duty, and in this respect differs from the common law, though the Court drew on common and civil law sources. Unlike the common law, it appears the civil law duty of honesty goes beyond a duty not to mislead or deceive, and includes a proactive duty to inform counterparties of material facts, at least in the context of a long term trusting relationship. While damages for this breach were compensatory, because the breach prevented the shareholders from proving their loss, there was a rebuttable presumption that the loss was equivalent to the profits made by the defendants, akin to disgorgement of profits.  


This Appellate Quarterly webinar is eligible for CPD credit and was recorded. For a copy of the recording, please contact [email protected].

The next Appellate Quarterly session will take place on May 15, 2024. To receive an invitation, please e-mail [email protected].




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