7 ANNUAL In-House Counsel Summit · 2017-03-01 · Vincent De Rose, Borden Ladner Gervais LLP. ... Go Ahead and Ask Us (Question and Answer Session) ... • Simon Sinek How great

chairs

Andrea Kokonis Associate General Counsel

SOCAN

Giuliana Marinelli Senior Counsel

Royal Bank of Canada

February 27, 2017

7TH ANNUAL In-House Counsel Summit

*CLE17-0020601-a-puB*

DISCLAIMER: This work appears as part of The Law Society of Upper Canada’s initiatives in Continuing Professional Development (CPD). It provides information and various opinions to help legal professionals maintain and enhance their competence. It does not, however, represent or embody any official position of, or statement by, the Society, except where specifically indicated; nor does it attempt to set forth definitive practice standards or to provide legal advice. Precedents and other material contained herein should be used prudently, as nothing in the work relieves readers of their responsibility to assess the material in light of their own professional experience. No warranty is made with regards to this work. The Society can accept no responsibility for any errors or omissions, and expressly disclaims any such responsibility.

© 2017 All Rights Reserved

This compilation of collective works is copyrighted by The Law Society of Upper Canada. The individual documents remain the property of the original authors or their assignees.

The Law Society of Upper Canada 130 Queen Street West, Toronto, ON M5H 2N6Phone: 416-947-3315 or 1-800-668-7380 Ext. 3315Fax: 416-947-3991 E-mail: [email protected] www.lsuc.on.ca

Library and Archives Canada Cataloguing in Publication

7th Annual In-House Counsel Summit

ISBN 978-1-77094-404-6 (Hardcopy)ISBN 978-1-77094-405-3 (PDF)

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January 17, 2017

Chairs: Andrea Kokonis, Associate General Counsel, SOCAN

Giuliana Marinelli, Senior Counsel, Royal Bank of Canada

February 27, 2017 9:00 a.m. to 4:00 p.m.

Total CPD Hours = 5 h Substantive + 1 h Professionalism

The Law Society of Upper Canada 130 Queen Street West

Toronto, ON

SKU CLE17-00206

Agenda 9:00 a.m. – 9:10 a.m. Welcome and Opening Remarks

Andrea Kokonis, Associate General Counsel, SOCAN

Giuliana Marinelli, Senior Counsel, Royal Bank of Canada 9:10 a.m. – 9:40 a.m. Lawyers as Business and People Leaders

(30 minutes )

Kelly Brown, Chief Legal and Corporate Affairs Officer Molson Coors Canada

7TH ANNUAL IN-HOUSE COUNSEL SUMMIT

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9:40 a.m. – 10:10 a.m. Brexit Implications for In-House Counsel Vincent De Rose, Borden Ladner Gervais LLP Jennifer Radford, Borden Ladner Gervais LLP

10:10 a.m. – 10:45 a.m. Marketing and Advertising: Best Practices and Potential

Pitfalls May Cheng, C.S., Osler, Hoskin & Harcourt LLP Angela Giancaterini, Legal Counsel, Kellogg Canada Inc. 10:45 a.m. – 11:00 a.m. Coffee and Networking Break 11:00 a.m. – 11:30 a.m. Social Media Possibilities and Pitfalls: Key Considerations

for In-House Counsel Dan Ciraco, Senior Legal Counsel, CBC Giuliana Marinelli, Senior Counsel, Royal Bank of Canada Warren Sheffer, Hebb & Sheffer

11:30 a.m. – 12:00 p.m. Solicitor-Client Privilege: A Guide for In-House Counsel

(30 minutes )

Anthony Alexander, Davies Ward Phillips & Vineberg LLP

12:00 p.m. – 12:20 p.m. A Day in the Life of a Government Relations Professional

Jason Kee, Public Policy and Government Relations Counsel, Google Inc.

12:20 p.m. – 12:30 p.m. Go Ahead and Ask Us (Question and Answer Session) 12:30 p.m. – 1:30 p.m. Lunch on your own

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1:30 p.m. – 1:35 p.m. Registrants Move to Concurrent Breakout Session A or B All Breakout Sessions will be Webcast Live 1:35 p.m. – 2:15 p.m.

SESSION A: Canada, Adequacy, and the European Union’s General Data Protection Regulation

Robin Cassel, Senior Counsel, Royal Bank of Canada

Dean Dolan, Baker & McKenzie LLP -OR-

SESSION B: Managing External Counsel Fees Andrea Kokonis, Associate General Counsel, SOCAN

Jeffery Van Damme, Vice President, General Counsel, Legal & Regulatory Affairs, Samsung Electronics Canada Inc.

René Zanin, Chief Legal Officer and Chief Compliance

Officer, Foresters Financial 2:15 p.m. – 2:20 p.m. Registrants Move to Concurrent Breakout Session C or D 2:20 p.m. – 3:00 p.m.

SESSION C: Managing/Dealing with Regulators

Sonali GuptaBhaya, Director, Market Regulation Policy, IIROC

Shelly Feld, Manager, Litigation, Mutual Fund Dealers Association of Canada

-OR-

SESSION D: Restrictive Covenants and Departing Employees Afshan Ali, CIBC Lisa Talbot, Torys LLP

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3:00 p.m. – 3:15 p.m. Coffee and Networking Break 3:15 p.m. – 3:20 p.m. Registrants Move to Concurrent Breakout Session E or F 3:20 p.m. – 4:00 p.m.

SESSION E: Litigation Issues for In-House Counsel

Laura Cooper, Fasken Martineau DuMoulin LLP -OR-

SESSION F: Recent Developments in Commercial Leasing: The Top Five Things You Need to Know

Lisa Borsook, WeirFoulds LLP 4:00 p.m. Program Ends

February 27, 2017

SKU CLE17-00206

Table of Contents TAB 1 Lawyers as Business and People Leaders ............................... 1 - 1 to 1 - 1

Kelly Brown, Chief Legal and Corporate Affairs Officer Molson Coors Canada

TAB 2 BREXIT: Implications for Corporate Canada and Considerations for In-House Counsel ..................................... 2 - 1 to 2 - 3 Vincent De Rose

Jennifer Radford Borden Ladner Gervais LLP

TAB 3 Marketing and Advertising: Best Practices and Potential Pitfalls .................................... 3 - 1 to 3 - 12

May Cheng, C.S., Osler, Hoskin & Harcourt LLP Angela Giancaterini, Legal Counsel, Kellogg Canada Inc.

7TH ANNUAL IN-HOUSE COUNSEL SUMMIT

TAB 4 Social Media Possibilities and Pitfalls: Key Considerations for In-House Counsel ............................. 4 - 1 to 4 - 5

Dan Ciraco, Senior Legal Counsel, CBC Giuliana Marinelli, Senior Counsel, Royal Bank of Canada Warren Sheffer, Hebb & Sheffer

TAB 5 Solicitor-Client Privilege: A Guide for In-House Counsel ....... 5 - 1 to 5 - 31

Anthony Alexander, Davies Ward Phillips & Vineberg LLP

TAB 6 Canada, Adequacy, and the European Union’s General Data Protection Regulation EU General Data Protection Regulation in 13 Game Changers ........................................... 6 - 1 to 6 - 5

Dean Dolan, Baker & McKenzie LLP

Additional GDPR Resources ............................................................. 6 - 6

Robin Cassel, Senior Counsel, Royal Bank of Canada TAB 7 Managing External Counsel Fees ........................................... 7 - 1 to 7 - 3

Andrea Kokonis, Associate General Counsel, SOCAN Jeffery Van Damme, Vice President, General Counsel, Legal & Regulatory Affairs, Samsung Electronics Canada Inc. René Zanin, Chief Legal Officer and Chief Compliance Officer Foresters Financial

TAB 8 Dealing with Regulators ........................................................ 8 - 1 to 8 - 4

Shelly Feld, Manager, Litigation Mutual Fund Dealers Association of Canada Sonali GuptaBhaya, Director, Market Regulation Policy, IIROC

TAB 9 Restrictive Covenants and Departing Employees ................... 9 - 1 to 9 - 3

Afshan Ali, CIBC Lisa Talbot, Torys LLP

TAB 10 Recent Developments in Commercial Leasing: The Top Five Things You Need to Know ........................... 10 - 1 to 10 - 12

Lisa Borsook, WeirFoulds LLP

TAB 1

Lawyers as Business and People Leaders

Kelly Brown

Chief Legal and Corporate Affairs Officer

Molson Coors Canada

February 27, 2017

7th ANNUAL

IN-HOUSE COUNSEL SUMMIT

Lawyers as Business and People Leaders Kelly L Brown, Chief Legal & Corporate Affairs Officer, Molson Coors Canada 7th Annual In-House Counsel Summit Law Society of Upper Canada February 27, 2017 Resources: Personal and Team Assessment tools/models:

• www.insights.com • www.emergenetics.com • www.discprofile.com • www.myersbriggs.org • www.totalsdi.com

Feedback tools:

• Insights D4 Data Based Feedback Model • 360 degree surveys (HRIS, or 3rd parties like Kenexa)

Books:

• Carol Dweck “Mindset: the new Psychology of Success” • Stephen Covey “The 7 Habits of Highly Effective People” • Stephen M.R. Covey “The Speed of Trust” • Brene Brown “Daring Greatly” • Ellen Langer “Mindfulness” • Bill George “True North”

Ted Talks:

• Simon Sinek “How great leaders inspire action” • Roselinde Torres “What it takes to be a great leader” • Drew Dudley “Everyday leadership”

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http://www.insights.com/

http://www.emergenetics.com/

http://www.discprofile.com/

http://www.myersbriggs.org/

http://www.totalsdi.com/

TAB 2

BREXIT: Implications for Corporate Canada and

Considerations for In-House Counsel

Vincent De Rose

Jennifer Radford

Borden Ladner Gervais LLP

February 27, 2017

7th ANNUAL


LSUC 7th Annual In-House Counsel Summit February 27, 2017

BREXIT: Implications for Corporate Canada and Considerations for In-House Counsel

Jennifer Radford Vincent DeRose

Borden Ladner Gervais LLP

June 23, 2016: “Sorry, What Just Happened?”

Canadians wake up to United Kingdom (UK) referendum result on vote to leave or remain in European Union (EU)

Leave side won (margin of 52% to 48%) Referendum turnout was 71.8%, with more than 30 million people voting Highest turnout in a UK-wide vote since the 1992 general election

BREXIT: So What Exactly are the UK’s Intentions?

Immediately post-vote, uncertainty rampant International stock exchanges and currency markets took huge dives immediately

post referendum One certainty: 43 years of legal integration is unlikely to be undone quickly or simply Some insight comes late January of 2017 Prime Minister of the United Kingdom delivered speech on objectives and strategy

for leaving the European Union (EU) Points stressed:

o UK will leave European Single Market; BUT will seek “comprehensive, bold and ambitious Free Trade Agreement”

o UK will leave the EU customs union; BUT will seek a new Customs Agreement to ensure tariff free trade with EU

o UK will seek a time-limited “phased process of implementation” to avoid the “cliff edge”

o Replace principle of free movement of people with UK controlled immigration policy; the new immigration system is to be “managed properly so that it serves the national interest”, and allows the UK to “get control” of the number of people entering the UK

Prime Minister of UK confirmed that the UK was not seeking: 'partial membership of the European Union, associate membership of the European Union, or anything that leaves us half-in, half-out, [nor adopting] a model already enjoyed by other countries.'

In short: the UK plans to negotiate in its own interests

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What’s Next?

Will take years to negotiate (Greenland's 1985 EU exit took three years to settle) The UK economy: inflation and slowed growth (due to a weakened currency) Scotland (pro-EU): could seek a second referendum on independence Northern Ireland (pro-EU): political battle with Seinn Féin pushing for a post-Brexit

political union with Ireland Wales (pro-Brexit): no more structural funding investment from EU London (pro-EU): losses likely coming to financial services sector as operations

relocate UK must concurrently negotiate comprehensive or bilateral trade agreements with

EU, European countries and non-European countries (including Canada) June 2017 – French Parliamentary Election September 2017 – German Federal Election

The Canadian Perspective

UK leaving EU similar to Canada leaving the North American Free Trade Agreement (NAFTA)

78% of Canadian exports are sent to the US and 77% of its imports come from the US

44% of British exports are sent to other EU countries with 53%

Implications of Canadian Trade with UK

Immediate opportunities may be missed if Canadian companies take passive view of the UK market until the Article 50 Brexit negotiations are complete

Remember: large parts of the CETA will apply to UK immediately on European Parliament consenting to CETA (expected in 2017)

Immediate Opportunities for Consideration

Think about: lowering supply chain costs or increasing revenues as a result of tariff reductions; shifting personnel to the UK under more liberal labour movement provisions; understanding new procurement and tendering opportunities with British government

and industry.

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Longer Term Considerations

The benefits of CETA may no longer be available for trade between Canada and the UK

New free trade agreement might be negotiated between Canada and UK or EU and Canada might agree to equivalency' treatment for UK under CETA

UK is the most important European trading partner for Canada: UK currently Canada's third-largest export destination and Canada's sixth-largest source of imports

CETA will likely be template for new trade agreement between Canada (Under CETA, UK has agreed to open up services market, limit restrictions on investment, and increase access to bidding on procurement contracts)

Act Now to Secure Competitive Advantage

If your business has international operations in the UK and EU at large, familiarity with CETA and the timing of its implementation is a must

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TAB 3

Marketing and Advertising:

Best Practices and Potential Pitfalls

May Cheng, C.S.

Osler, Hoskin & Harcourt LLP

Angela Giancaterini

Legal Counsel

Kellogg Canada Inc.

February 27, 2017

7th ANNUAL


Marketing & Advertising Best Practices & Potential Pitfalls

Presentation by May Cheng, C.S., Osler Hoskin & Harcourt LLP and Angela Giancaterini, Legal Counsel, Kellogg Canada Inc.

February 27, 2017

LSUC 7th Annual In-House Counsel Summit, February 27, 2017

Trade-marks

TRADE-MARKS – FUNDAMENTAL CONCEPTS

A trade-mark can consist of a word, design, logo, sound, color or shape, used to distinguish the wares and services of one company from others

A trade-mark must identify a single source of goods & services – they cannot be jointly owned

The monopoly grant is a form of consumer protection, to enable safe and high quality products to thrive through repeat business

“Common Law” Rights o Arise from use of an unregistered trade-mark or trade name in the marketplace o More limited than statutory rights, limited geographically

Statutory Rights o Arise from registering a trade-mark with the Canadian Intellectual Property Office

TRADE-MARKS – TRADE DRESS PROTECTION

Trade dress or “get-up” can also be registered as a trade-mark if it has acquired a secondary meaning, i.e.. it has come to identify a single source for the particular product/service

Famous examples of trade dress are: o the shape of the COCA-COLA bottle o Volkswagen BEETLE

The distinctive colour of FIBERGLASS PINK INSULATION is registered in Canada

CHOOSING TRADE-MARKS

Fanciful or coined words that are made up and have no underlying meaning are the best marks. i.e. NIKE, AUDI, TOSHIBA

Arbitrary marks, such as words that have no connection or are not descriptive of the goods or services, i.e. APPLE for computers

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These make the best trade-marks because they develop a secondary meaning – the association is created through advertising and repeat sales as there is no ordinary meaning to the words

All of the goodwill in such brands arises from the reputation developed over time as a result of customer experiences and word of mouth

These marks develop strong brand equity

WEAK TRADE-MARKS

Descriptive marks describe goods or services or characteristics of them. Purely descriptive marks are not registrable

Suggestive marks suggest some attribute of the goods or services, and are weak brand identifiers. ROLLERBLADE is a relatively weak mark.

Many traders have lost their marks to generic use, for example, ESCALATOR used to be a mark. The term became generic of the devices

Some have had to rehabilitate their marks, KLEENEX, XEROX, YELLOW PAGES, THERMOS – brand owners sent out demand letters to third parties and directions to their teams not to use descriptively

When coming up with new brands, the less descriptive the better, which is counterintuitive TRADE-MARKS – REGISTRATION

Benefits of Registration

A 15 year monopoly (soon to be 10), renewable indefinitely, over the use of a trade-mark in association with specified goods and/or services

A registered trade-mark is presumed valid and distinctive of the owner

Goodwill and reputation are also presumed for the entire country. Under common law rights you must demonstrate goodwill and reputation within a geographic area

Damages for trade-mark infringement can be sought in addition to damages for passing-off (at common law)

Soon the “use” requirement will be eliminated, making it more important to have registered rights when asserting claims. It will also become more important to conduct searches to ensure registered marks not in use are not asserted against you

TRADE-MARKS – SEARCHING & MONITORING

Selection of a trade-mark is one of the most critical decisions for a business launching a product/service

Clearance searches are highly recommended before a new product launch introducing a new brand name

Regular routine searches should also be performed to avoid misuse of trade-marks by third parties in scams and on the Internet.

Demand letters should be sent out as soon as an infringement is uncovered

Monitoring of grey market and replacement part sales should also occur to avoid counterfeits being introduced

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DOMAIN NAMES

Domain names act as identifiers for businesses on the Internet. Although not specifically protected by statute, domain names can be confusingly similar to trade-marks and owners of trade-marks can assert their rights against domain name owners. The one difference – not restricted by country

Domain name dispute resolution online is available through WIPO and other service providers. There is a high cost (at least $3000 US disbursement for sole arbitrator panel), so the best course is to buy up domains all possible that may be useful, since this is much cheaper than recovering a single domain through dispute resolution.

“First come, First Served” is the rule for the Internet o Top level generic domain names creates further opportunities for registration of

brands

Search engines may sell “links” associated with a keyword o ADWORDS service offered by Google

BEST PRACTICES – TRADE-MARK ADOPTION

DO:

Choose fanciful or coined words.

Conduct searches before you launch a product or service with a new brand.

Apply to register marks on proposed use basis to protect rights before adoption and use.

Register all domain names that could be of use or interest before filing for a trade-mark application, because it is a public record.

DON’T:

Choose descriptive terms as a trade-mark or brand.

Forget to conduct searches to determine if the mark is available.

Forget to register domain names before someone else does.

Pay invoices from third parties for trade-mark “services”.

TRADE-MARKS – LICENSING CONSIDERATIONS

Although formal licensing between closely held companies is not mandatory for Canada, since an oral license can be recognized, intercompany licensing is recommended to avoid unlicensed use

A style guide should be followed closely and marketing staff should be trained in avoiding dilution of a brand by creating variations

Any distribution arrangements, co-branding or cross-branding activities must be in writing to be subject to clear terms to avoid “rogue” use of marks post termination or unauthorized uses

Return of any associated materials and domain names also needs to be addressed

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BEST PRACTICES – TRADE-MARK MONITORING

DO:

Adopt Style Guides and regularly monitor licensed uses.

Enter into formal licensing agreements with related entities and third parties alike, that include rights of inspection and solid termination provisions.

Regularly monitor Adwords, Google and other search engines for misuse of brands and other source identifiers.

Send cease and desist letters promptly when infringements are detected. DON’T:

Allow related entities and co-branding partners to develop their own advertising without input and supervision to ensure consistent messaging.

Allow trade-marks to be used as verbs and modify for marketing holidays.

Copyright

COPYRIGHT – KEY PRINCIPLES AND TERM

Copyright law protects the original expression of literary, dramatic, artistic and musical works

o Art, books, photos & movies, music, video and advertising copy, etc.

Copyright ownership grants the sole right to reproduce or copy for the term of protection.

Term of copyright for literary and artistic works is the life of the author plus 50 years in Canada (70 years in the U.S., and 70 for music in Canada)

An employer is deemed to be the first owner of copyright in situation where employee was hired and paid to create specific works, such as creating marketing materials or other advertising copy. There is no such presumption when hiring a consultant or advertising agency.

COPYRIGHT – MORAL RIGHTS

In Canada, we grant to the author of original works rights in the work that are separate from copyright ownership, called moral rights

Moral rights of the author include: o The right to the integrity of the work; o The right to be associated with the work or to remain anonymous (right of

attribution); and o The right to prevent the work from being associated with a commercial enterprise,

political cause or other endeavour

The right to the integrity includes the right to prevent the work from being modified in a manner that affects the author’s reputation

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COPYRIGHT – ASSIGNMENTS & WAIVERS

A copyright assignment must be in writing, or is otherwise invalid. This is especially important when retaining photographers or graphic designers to create marketing campaigns or when hiring agency to create TV commercial.

Employees/authors retain moral rights in works even where the employer is recognized as the first owner of copyright, which means a moral rights waiver is required from employees and contractors in order to modify the work in future or remove attribution, etc.

Employment contracts and consulting agreements need to contain not only a copyright assignment but acknowledgement that each employee of contractor will waive moral rights. This needs to be addressed if you hire an agency to do an advertising campaign or TV commercial that you want to modify or update in future.

COPYRIGHT – INTL RIGHTS AND INTERPLAY

The Berne Convention recognizes copyright in all original artistic, literary and other works from date of creation, without registration, in all signatory states.

There is a registration system in Canada with the CIPO as well, but without requiring the filing of a copy of the original work. Consequently, it only creates a rebuttable presumption of validity.

Interplay is also possible with trade-mark rights in designs, and asserted in counterfeiting cases.

You must address copyright in musical works used as part of an advertising campaign. Large companies and politicians have run afoul of copyright laws (moral rights) when using a musical score for commercial purposes. The artist retains the moral right to prevent use with a commercial or political cause that the artist does not want to be associated with.

COPYRIGHT – BEST PRACTICES FOR ADVERTISING

DO:

Ensure that you get full copyright assignments and moral rights waivers when hiring an agency to prepare advertising copy or marketing campaigns, if your intention is to modify or reuse any aspect in future.

Ensure you have the right to use the marketing campaign materials in other possible applications, if that is your intention.

Ensure your third party agency has obtained consent to use of any musical score or other copyright protected work that may appear in your commercial or advertising.

Ensure your employees or any consultants retained provide copyright assignments and moral rights waivers to artistic works created for company.

DON’T:

Forget that agencies, consultants and photographers are not employees and the company will not own copyright in their work product without a written assignment.

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Comparative Advertising

COMPARATIVE ADVERTISING – WHAT IS IT?

Comparative advertising involves the direct or indirect comparison of a sponsored brand to a competitive brand in an advertisement.

Some companies name the competitor, while others use vague phrases like “the leading competitor” or “brand X”.

COMPARATIVE ADVERTISING – LEGAL FRAMEWORK

Comparative advertising is permissible in Canada.

A common and effective marketing strategy.

BUT has a number of legal pitfalls; advertisers need to understand the legal rules of the road for comparative claims.

Use of competitor’s name, product, slogan or other intellectual property in advertising (even if fair and accurate), raises risk for the advertiser under:

o Competition Act o Trade-marks Act o Copyright Act

COMPARATIVE ADVERTISING – COMPETITION ACT

Main requirements under Competition Act for comparative advertising: o claims must not be deceptive, and o must be substantiated.

Misleading Advertising - Sections 74.01(1)(a) and 52(1) of the Act.

Prohibits claims which are false or misleading in a “material respect”

o if it is likely to influence a consumer’s behaviour or a purchasing decision

COMPARATIVE ADVERTISING – COMPETITION ACT

Also requires advertisers to have “adequate and proper testing” to substantiate claims on performance, efficacy and length of life of products.

Competition Act does not provide any specific direction as to how “adequate and proper testing” can be achieved.

Determination is made on a case-by-case basis considering factors such as: o Scope and nature of claim o Any relevant industry guidance on testing particular products

Act makes two things clear: o Testing must be completed before representation is made; and o Advertiser bears burden of proving substantiation is adequate and proper

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COMPARATIVE ADVERTISING – THREE TYPES

Three types of comparative advertising: 1. Generalized Superiority Claims and Performance Tests

Require “adequate and proper” tests, or an adequate qualifying statement stating the conditions under which the statement is true.

2. Demonstrations

Where products are compared by way of demonstration, the tests must be performed under equivalent conditions

Tests must be suitable to product being tested.

e.g., a demonstration of the different effects of two types of paint on a wall should be displayed under equal lighting conditions.

3. Consumer Preference Claims

Claims must be based on valid questions pertinent to market, and reliable statistical reporting.

COMPARATIVE ADVERTISING – COMPETITORS

Your competitors will be scrutinizing these claims closely.

Competitors don’t need to be named, to perceive (and complain) that they are implied. COMPARATIVE ADVERTISING – COMPETITION ACT

Comparative representations subject to enforcement by Competition Bureau.

Can take form of: o Civil proceedings (court or Tribunal considers “reviewable conduct”), or o Criminal prosecution (knowingly or recklessly makes false or misleading representation)

Both processes are initiated by a complaint to, or an investigation by the Bureau, which chooses the enforcement track.

Criminal track – directors or officers face fines or imprisonment.

Civil track – AMP’s up to $15 million, corrective notice, etc.

Also private cause of action – Section 36 of the Act.

COMPARATIVE ADVERTISING – ASC GUIDELINES

Advertising Standards Canada (ASC) - self-regulatory body for advertising industry

See “Guidelines for the Use of Comparative Advertising” https://www.adstandards.com/en/ASCLibrary/guidelinesCompAdvertising-en.pdf

ASC Requirements checklist: o Fair and factual comparison o No unfair disparagement o General impression governs o Individual benefits can’t support a claim of overall superiority o Testimonials are individual opinions o Research guidelines are encouraged o Support must be available upon request

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COMPARATIVE ADVERTISING – TRADE COMPLAINTS

Competitors can file trade dispute with ASC to challenge an advertiser’s comparative claim under the Advertising Dispute Procedure

o Initiated by written complaint to ASC and filing fee (approx. $20,000 for members) o Review of complaint by ASC, if violation of Code, will forward to responsible advertiser o Dispute resolution meeting, informal settlement o If no settlement, ASC convenes 5 person panel - Advertising Dispute Panel o Hearing (written argument, evidence, oral argument) o Decision in 5 days o Efficient and confidential o Right of appeal with Appeal Panel – final and binding

COMPARATIVE ADVERTISING – TRADE-MARKS

Limitations on use of the intellectual property of competitors in the context of comparative advertising

Where a competitor has used a third party’s trade-mark in its advertisement, claims may arise under the Trade-marks Act.

COMPARATIVE ADVERTISING – INFRINGEMENT

Trade-marks Act prohibits advertisers from using a registered trade-mark (includes company and product names and logos of competitors) without permission or licence.

Unauthorized use puts advertiser at risk for trade-mark infringement - Section 19

COMPARATIVE ADVERTISING – DEPRECIATION OF GOODWILL

Trade-marks Act provides protection to registered trade-mark owners against depreciation of goodwill.

Section 22 states that “no person shall use a trade-mark registered by another person in a manner that is likely to have the effect of depreciating the value of the goodwill attaching thereto”

COMPARATIVE ADVERTISING – DEPRECIATION OF GOODWILL

Clairol v. Thomas Supply & Equipment Co.

Plaintiff owned several registered trade-marks in association with wares (hair colouring preparations)

Defendant used these marks on a hair colour comparison chart on packaging and brochure inside packaging

Court held -“use” on packaging violated Section 22 o Use on brochure not prohibited because (Section 4(1)), mark only used in association

with wares if visible to consumers at time of purchase

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COMPARATIVE ADVERTISING – FALSE/MISLEADING

Trade-marks Act also applies to false or misleading statements in context of competitor trade-mark use.

Section 7(a) provides “no person shall make a false or misleading statement tending to discredit the business, wares or services of a competitor”

Applies to both registered and non-registered owners

3 essential elements to satisfy this provision: 1. A false or misleading statement; 2. Tending to discredit the business,

wares or services of a competitor; and 3. Resulting damage

COMPARATIVE ADVERTISING – COPYRIGHT

Claims may also arise under the Copyright Act.

Copyright is infringed when a work (such as a logo or advertising copy) or any substantial part of the work, is copied.

“Copying” for copyright purposes, only amounts to infringement when the form of the work, and not the underlying idea(s), is copied.

COMPARATIVE ADVERTISING – COPYRIGHT

Reproducing a competitor’s label, logo or packaging in a comparative advertisement may amount to copyright infringement even if TM law not violated.

Section 34 – private cause of action.

Sections 35-39 – accounting of profits, statutory damages and injunction.

Need to obtain release or license for every use of a copyrighted work in an ad. COMPARATIVE ADVERTISING – BEST PRACTICES

DO:

All claims in ad – about both you’re and your competitor’s products and/or services – must be truthful and not misleading.

DON’T:

Unfairly disparage a competitor’s products, services or business or exaggerate differences between products.

Engage in cherry-picking citing your product as superior to a competitor’s product without stating similarities or even superiorities of the competitor.

Compare apples to oranges; must be apples to apples.

Use a competitor’s packaging, logos or mascots could amount to trademark or copyright infringement.

Do not use a competitor’s trade-mark (registered or otherwise).

Do not forget about copyright law.

Time your comparative ad to disrupt a competitor’s product launch.

Do not confuse opinions with facts.

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Contests

CONTESTS – LEGAL FRAMEWORK

Highly effective marketing tool for companies.

Highly regulated in Canada so need to be aware of the basic rules that apply to the design and operation of contests.

o Governed by o Criminal Code o Competition Act o Quebec specific legislation o Other (e.g. CASL, privacy laws, contract law, intellectual property laws, social media

restrictions etc.)

Improper operation of a contest can lead to civil or criminal liability. CONTESTS – CRIMINAL CODE Criminal offence to operate “illegal lotteries”

Section 206 - Criminal Code prohibits contests that have: o Prizes o Consideration; and o Chance

Generally, to be legal: o In most cases, remove consideration (e.g. no purchase necessary). o Remove pure chance by adding element of skill (e.g. skill-testing question – 4 step).

Limited circumstances where a purchase may be required and legal: o Prizes consist exclusively of cash and/ or other intangibles like vacations or tickets to a

concert. o “Closed universe” contests (e.g. open to Air Miles members only). o Where contestants have made their purchase before the fact (e.g. current Chrysler

owners).

CONTESTS – COMPETITION ACT

Section 74.06 requires adequate and fair disclosure: o Number and approximate value of prizes o Area(s) to which prizes relate; and o Any fact that may materially affect the odds of winning.

Provide “mini rules” on all point-of-purchase materials regardless of media: o Number and ARV of prizes o Regional or other allocation of prizes o Chances of winning o No purchase necessary o Skill testing question required o Facts that materially affects chances of winning o Contest’s closing date

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o Where and how the full rules may be obtained

Full rules available on request or on sponsor’s website.

Also requires prize distribution not be “unduly delayed”. CONTESTS – QUEBEC LEGISLATION

Contests governed by Act respecting lotteries, alcohol, publicity contests and amusement machines.

Régie des alcools, des courses et des jeux oversees contests in Quebec.

All materials for Quebec residents must be in French.

Notice of the contest, together with applicable duties, copy of rules and ad text used in contest must be filed with Régie.

Duties based on prize values available to Quebec residents must be paid in advance.

Contest rules must contain prescribed information e.g. dispute resolution process for Quebec residents, approval of the Régie.

In certain cases, security bond with Régie may be required.

CONTESTS – PRIVACY LAWS

Canadian privacy legislation also applies to contests: o Federal – Personal Information Protection and Electronic Documents Act (PIPEDA) o Various Provincial Acts - Freedom of Information and Protection of Privacy Act (Ontario)

Advertisers should take appropriate privacy steps in contest rules to ensure they contain the following provisions:

o Informed consent e.g. clear statement whereby entrants consent to the collection, use, storage and disclosure of their personal information.

o Clear on purpose(s) e.g. information only being collected for contest.

Need appropriate safeguards for protection of personal information.

CONTESTS – ANTI-SPAM LEGISLATION (CASL)

Need to consider application and compliance with CASL.

May apply where: o Entrants are invited by email or CEM to participate in the contest. o In follow up with entrants by email or subsequent email marketing (e.g. where contest

includes right of sponsor to engage in subsequent marketing to entrants).

Consider:

Do you have consent to send the CEM? o Does your CEM comply with the prescribed form?

Opt-out language and required disclosure o Do you have a co-sponsor? Are they CASL compliant? o Does the marketing team know about CASL and do they follow a CASL compliance

policy?

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CONTESTS – LAW OF CONTRACTS

Every contest is a contract between the sponsor and entrants.

Contests are governed by common law of contract in Canada; if breached or unfulfilled can lead to liability for breach of contract.

Rules must be comprehensive and clearly communicated to consumers.

To reduce potential contractual liability, ensure carefully and precisely drafted.

Review all contest documents includes long and short rules, advertising, winner releases.

Cover potential technical problems, including prize unavailability, any change in circumstances, and other unforeseen events.

CONTESTS – INTELLECTUAL PROPERTY LAWS

Potential intellectual property issues can arise (i.e. trade-mark, copyright, etc.), include language for:

o Consents for 3rd party marks, logos, photographs, etc. to be used for contest. o Copyright statements for sponsor. o Right of sponsor to use materials submitted by entrants (e.g. entry forms, photos,

essays). o Sponsor’s ownership in contest materials. o Representations and Indemnifications to protect sponsor where entrants may not have

rights to materials submitted.

Some companies (such as Apple) have specific and/or quite restrictive policies regarding use of products for prizing, use of images, marks or logos, etc.

CONTESTS – SOCIAL MEDIA RULES

Most social media platforms have their own detailed guidelines for promotions/contests: o Facebook, Instagram, Twitter, YouTube, Pinterest, etc.

Must ensure compliance with the applicable social media policy as well as broader contest requirements.

Challenge for advertisers: o social media platforms frequently revise these guidelines and do not provide notice of

when they change so extremely important to check for updates.

CONTESTS – BEST PRACTICES DO:

Avoid Criminal Code provisions governing illegal lotteries – provide “no purchase necessary” entry option and skill element.

Ensure “short rules” include all required disclosure for point-of-purchase materials.

Ensure “long rules” prepared to anticipate potential contingencies.

Ensure none of advertising materials are generally false or misleading.

Ensure key contest elements clear and precise (e.g. eligibility, how to enter, odds).

Ensure Quebec legal requirements are met (or not include Quebec).

Consider whether consents are needed to reproduce third party intellectual property.

Comply with social media sites’ terms of use if using social media to promote/host.

Consider whether CASL applies and tailor contest accordingly.

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TAB 4

Social Media Possibilities and Pitfalls:

Key Considerations for In-House Counsel

Dan Ciraco Senior Legal Counsel

CBC

Giuliana Marinelli Senior Counsel


Warren Sheffer Hebb & Sheffer

February 27, 2017

7th ANNUAL


1

7TH ANNUAL IN-HOUSE COUNSEL SUMMIT (FEBRUARY 27, 2017)

SOCIAL MEDIA POSSIBILITIES AND PITFALLS: KEY CONSIDERATIONS FOR IN-HOUSE COUNSEL

Key Legal Issues and Social Media Risk Management Giuliana Marinelli, Senior Counsel, Royal Bank of Canada

What are the key legal risks and issues to consider when advising your company on corporate,

business and employee use of social media?

Confidentiality

Privacy

Defamation

Employment Laws

Litigation

Securities Laws

Trademark and Copyright

Advertising Laws

Record Retention

Monitoring

Escalation Procedures and Crisis Management

Reputational Risks

It is imperative for in-house counsel to be part of the risk assessment process, corporate social

media strategy development and response protocols, so that you can you help your corporation

manage social media risk. You can provide advice on the legal, regulatory and reputational risks

of your corporation’s social media campaigns, approval of new social media tools, platforms

and employee usage. The following are some of the ways in-house counsel can help manage

and mitigate social media risk:

1. Legal and Regulatory Requirements: Review and analyze the laws and regulations

applicable to your business, products and services to determine how they may apply to

your corporation’s social media activities.

2. Terms and Conditions: Review the legal terms and conditions and privacy policies of the

social media platform your company is using. Ensure such terms are compatible with

your internal policies and protocols. Draft social networking terms of use for your

corporate sponsored sites to set out the rights and responsibilities of the users and the

corporation; and to deal with potential issues around breach of the terms, privacy,

copyright and liability.

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3. Contracts: Consider what sort of contractual arrangements need to be entered into with

the social platform, app developer and third party service provider to deal with personal

information, IP, data protection, analytics etc.

4. Escalation Procedures and Crisis Management: Does your corporation have an

escalation protocol to deal with issues and crises that erupt in social media? Help your

business and brand partners prepare for issues before they arise. Legal may not need to

be engaged each time an issue comes up, but by working through potential escalations

in advance and working with your business and brand partners to develop a set of

defined protocols and procedures will help your corporation manage social media risk.

5. Monitoring and Record Retention: Monitoring corporate social media accounts and

maintaining records of social media communications, content and activities are integral

to social media risk management and governance. Social media records are forming

part of litigation, eDiscovery and may be a regulatory requirement in certain industries.

Ownership of Social Media Accounts -- Best Practices Dan Ciraco, Senior Legal Counsel, CBC

Does your company use social media? Does your company have employees who are

responsible for posting on your company’s social media accounts? In light of the increased use

of social media, it’s important that employer’s protect the company’s social media accounts.

In order to mitigate the risk of misappropriation of your company’s social media accounts,

consider the following best practices and tips:

1. Have a social media policy: The employer’s social media policy should address the

ownership of, and access to, the employer’s social media accounts, as well as all

information and communications associated with those accounts. The policy should

prohibit employees from conducting official business through social media using

personal accounts held in their own name. General employment policies should also

clarify that whatever the employee creates on company time or with company

resources belongs to the employer.

2. Have clear employment agreements: Particularly for employees who are asked to use

social media to market and promote your company’s products or services, have

employment agreements that make it clear that the company owns the social media

accounts, including friends and followers, and that the employee waives any rights to

those accounts.

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3. Register and administer the social media accounts in the name of the company:

Register and use social media accounts in the company name (e.g. “ABC Inc.” is better

than “ABC Inc. – Employee Name” or “Employee Name of ABC Inc.”). If the social media

platform requires the name of an individual prior to registration, use the name of a

senior marketing person. Keep the account information and passwords stored in a

central database, accessible by the employer, in order to avoid orphaned accounts. Also,

limit administrative control over the accounts.

4. When purchasing another business, consider the social media accounts during Due

Diligence: If acquiring another business, consider the ownership of the social media

accounts in the due diligence process. Ensure that the other business will be able to

transfer the relevant social media accounts.

Point Form Primer on Copyright in Social Media Warren Sheffer, Hebb & Sheffer

What Does Copyright Protect?

- ‘Original’ literary, dramatic, musical, and artistic works in their entirety or substantial

part

- Unsubstantial parts of an original work are not protected

- The form of expression of the ideas in the work are protected not the ideas per se

- Copyright owner has the sole right to copy the work (among other rights prescribed in

the Copyright Act)

What makes a work original?

- “For a work to be ‘original’ within the meaning of the Copyright Act it must be more

than a mere copy of another work… What is required to attract copyright protection in

the expression of an idea is an exercise of skill and judgment.”

CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, at para.

16

What constitutes copyright infringement?

-“Infringement consists of the unauthorized taking of that [work’s] originality.”

Cinar Corporation v. Robinson, [2013] 3 S.C.R. 1168, at para. 24

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Exceptions to Copyright: Fair Dealing a.k.a “Users’ Rights”

-“[F]air dealing allows users to engage in some activities that might otherwise amount

to copyright infringement.”

Alberta (Education) v. Canadian Copyright Licensing Agency (Access Copyright),

[2012] 2 S.C.R 345, at para 12

-Courts determine fair dealing by applying a two-step test:

Step #1: Is the dealing for an allowable purpose or exception? (e.g. research,

private study etc.)

Step #2: Considered contextually, is the dealing fair?

-non-exhaustive list of contextual considerations a Court will make may

include the market impact of the dealing and the amount of dealing

-The Supreme Court of Canada has characterized copyright exceptions as “users’ rights”:

“The exceptions to copyright infringement [are] perhaps more properly understood as

users’ rights.”

CCH Canadian Ltd. v. Law Society of Upper Canada, [2004] 1 S.C.R. 339, at para.

12

Relatively New Untested Exceptions to Copyright Introduced in 2012 and their Potential

Impact in Social Media

-New copyright exceptions for education, parody and satire as well as the exception for

Non-commercial User-generated Content were introduced by the Copyright

Modernization Act 2012. These new exceptions have received little or no judicial

consideration.

-Vancouver Aquarium Marine Science Centre v. Charbonneau 2016 BCSC 625 may lead

to the first judicial test of users’ rights in social media.

Key considerations if Users’ Rights are Asserted Against your Corporate Client’s Copyrights in

Social Media

-When considering whether to pursue a copyright infringment claim, be aware generally

that users have more latitude to use copyright-protected works now than they did five

years ago.

-If it is clear that the corporate client owns copyright, it may make use of Notice-and-

Notice (Canada) https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02920.html and Notice-

and-Takedown (U.S.) procedures designed to deter online copyright infringement. A

discussion of the differences between the regimes may be found in the Berkeley

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https://www.ic.gc.ca/eic/site/oca-bc.nsf/eng/ca02920.html

5

Technology Law Journal : http://btlj.org/2014/03/canadas-approach-to-intermediary-

liability-for-copyright-infringement-the-notice-and-notice-procedure/

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http://btlj.org/2014/03/canadas-approach-to-intermediary-liability-for-copyright-infringement-the-notice-and-notice-procedure/

http://btlj.org/2014/03/canadas-approach-to-intermediary-liability-for-copyright-infringement-the-notice-and-notice-procedure/

TAB 5

Solicitor-Client Privilege:

A Guide for In-House Counsel

Anthony Alexander

Davies Ward Phillips & Vineberg LLP

February 27, 2017

7th ANNUAL


THE LAW SOCIETY OF UPPER CANADA 7TH ANNUAL IN-HOUSE COUNSEL SUMMIT

February 27, 2017

Solicitor-Client Privilege: A Guide for In-House Counsel

Anthony Alexander, Partner

Davies Ward Phillips & Vineberg LLP

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Table of Contents page

OVERVIEW: FOUNDATIONAL CONCEPTS AND CATEGORIES OF LEGAL PRIVILEGE 3

(1) Key Categories of Legal Privilege and Related Doctrines 3

(2) Legal Privilege and the Risk of Waiver 3

(3) Privilege and In-House Counsel 4

(a) Privileged Materials Produced by, or in the hands of, In-House Counsel 4

Best Practice Suggestions to Maximize the Protection of (Genuine) Privilege 5

(b) Not All In-House Counsel are Created Equal 7

Best Practice Suggestions for Dealings with "Privilege-Unfriendly" Jurisdictions 8

(c) In-House Counsel Advising and Assisting Multiple Clients 8

Best Practice Suggestions for In-House Counsel representing Multiple Clients 10

SOLICITOR-CLIENT (OR LEGAL ADVICE) PRIVILEGE 10

(1) The Core Attributes of Legal Advice Privilege 10

(2) The Creation and Preservation of Legal Advice Privilege 11

(a) Confidentiality is Mandatory 11

(b) Beware the Involvement of "Third Parties" 12

(c) Limited Exceptions Permitting Third-Party Involvement 13

(3) The Role of In-House Counsel in Protecting Legal Advice Privilege 14

(a) Internal Circulation of Privileged Materials 14

Best Practice Suggestions for In-House Counsel Circulating Privileged Materials 15

(b) External Disclosure of Privileged Materials: Statutory Demands & the Limited Waiver Exception 16

LITIGATION (OR SOLICITOR'S BRIEF) PRIVILEGE 17

(1) The Purpose of Litigation Privilege 17

(2) The Scope of, and Test for, Litigation Privilege 17

JOINT RETAINER (OR JOINT CLIENT) PRIVILEGE 19

(1) At the Heart of the Doctrine is a Joint Solicitor-Client Relationship 19

(a) The (Technical) Difference between "Joint Retainer" Privilege and "Joint Client" Privilege 19

(b) Despite its Name, "Joint Retainer Privilege" is not a Species of Privilege 19

(2) The Role of Joint Retainer Privilege when the Interests of the Joint Clients Diverge 20

(3) Joint Retainers versus Parallel Retainers 21

COMMON INTEREST (OR "JOINT INTEREST") PRIVILEGE 22

(1) The Basic Elements of Common Interest Privilege 22

(a) Despite its Name, "Common Interest Privilege" is not a Species of Privilege 22

(b) The Doctrine Requires a Common Interest in Litigation or in a Transaction 23

(2) Common Interest Privilege in the Litigation Context 24

(3) Common Interest Privilege in the Transactional Context (and the recent Iggillis Ruling) 25

(a) Prior to December 2016, Transactional Common Interest Privilege was Well Established 25

(b) The Iggillis Ruling, and the Purported "Death" of Transactional Common Interest Privilege 26

Best Practice Suggestions for In-House Counsel Asserting Common Interest Privilege 27

(4) Common Interest Privilege and Joint Interest Privilege 29

(a) The Difference between "Common Interest" and "Joint Interest" Privilege 29

(b) Common/Joint Privilege and Related Corporations 29

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OVERVIEW: FOUNDATIONAL CONCEPTS AND CATEGORIES OF LEGAL PRIVILEGE

(1) KEY CATEGORIES OF LEGAL PRIVILEGE AND RELATED DOCTRINES

Although various categories of legal privilege are recognized by Canadian law, the current

discussion will focus on the two forms of privilege most likely to be encountered on a frequent

basis by in-house counsel:1

• Solicitor-Client Privilege (more accurately described as "Legal Advice Privilege"); and

• Litigation Privilege (also known as "Work Product Privilege" or "Solicitor's Brief Privilege").

In the following discussion, I will review the key principles governing the creation, content and

preservation of these categories of privilege.

I will also address two important privilege-related doctrines, which -- despite their names -- are

not themselves forms or categories of privilege:

• Joint Retainer Privilege (and the closely related doctrine of "Joint Client Privilege"); and

• Common Interest Privilege (and the parallel doctrine of "Joint Interest Privilege").

As is discussed below, both joint retainer privilege and common interest privilege are important

judge-made "anti-waiver" doctrines, created to prevent the loss of existing solicitor-client or

litigation privilege in specified circumstances.

(2) LEGAL PRIVILEGE AND THE RISK OF WAIVER

Although historically viewed as a rule of evidence, the Supreme Court has conclusively ruled

that privilege (particularly, solicitor-client privilege) is a substantive rule of law, protecting

1 Equally important to corporate counsel, but beyond the scope of the current discussion, is Settlement Privilege (also known as "Without Prejudice" Privilege.).

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rights which play a fundamental role in the administration of justice.2 Consequently,

documents and other evidence that is found to be privileged cannot be used by parties who are

strangers to the privilege, either in the context of contentious proceedings or otherwise.

Because of the importance which the law places on solicitor-client privilege, the courts will

endeavour to protect it, and it will only be disregarded where absolutely necessary. Once the

benefits of privilege have been waived or otherwise lost, however, those benefits are gone

forever.

The benefits of privilege belong to the client, rather than to the solicitor, and, as such, privilege

can only be waived by the client.3 Such waiver can occur through conscious and intentional

public disclosure of the privileged materials by the client or the client's agent (i.e., through

"voluntary waiver" or "express waiver"). It can also be lost inadvertently, through the direct or

indirect revealing of privileged communications in circumstances where the client had intended

to preserve the benefits of privilege (i.e., through "inadvertent waiver," "implied waiver" or

"waiver by implication"). In the latter circumstances, the law will treat such inadvertent

disclosure as a waiver only if this result is required by the interests of fairness and consistency.4

(3) PRIVILEGE AND IN-HOUSE COUNSEL

(a) Privileged Materials Produced by, or in the hands of, In-House Counsel

Under Canadian law, communications to and from solicitors acting as in-house counsel are

subject to the same rules of privilege as apply in other solicitor-client relationships. A wide

variety of communications and related documents which pass through the hands of in-house

2 See, inter alia, Alberta v. University of Calgary, 2016 SCC 53 at paras. 20, 26 & 34-45; Canada v. Thompson, 2016 SCC 21 at para. 17; Pritchard v. Ontario, 2004 SCC 31 at paras. 17-18; Solosky v. Canada, [1980] 1 S.C.R. 821 at 836; Descoteux v. Mierzwinski, [1982] 1 S.C.R. 860 at 875; and R. v. Gruenke, [1991] 3 S.C.R. 263 at 289.

3 See R. v. McClure, [2001] 1 S.C.R. 445 at para. 37; and Smith v. Jones, [1999] 1 S.C.R. 455 at para. 46.

4 See R. v. Youvarajah (2011), 107 O.R. (3d) 401 (C.A.) at paras. 146-148, reversed without reference to this issue, 2013 SCC 41; S.& K. Processors Ltd. v. Campbell Ave. Herring Processors Ltd. (1983), 45 B.C.L.R. 218 (S.C.) at 220-221; United States of America v. Friedland (1996), 30 O.R. (3d) 568 (Gen. Div.) at 572-573; and Langret Investments S.A. v. McDonnell (1995), 13 B.C.L.R. (3d) 333 (C.A.) at 336-337.

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counsel are presumptively subject to solicitor-client privilege.5 A crucially important

qualification in this regard is that the communications in question must have been prepared or

received by in-house counsel in his or her capacity as a solicitor, and (outside the litigation

context) must involve a request for, the receipt of, or the provision of, professional legal advice.

If counsel acts in a non-legal capacity -- e.g., as an executive or business advisor -- or if the

purpose of the communications involves anything other than the clear provision of legal advice

-- no privilege will attach.6

Best Practice Suggestions to Maximize the Protection of (Genuine) Privilege:

Confidentiality: The communications must occur, and the materials must be shared, in a

confidential setting ‒ i.e., outside the litigation context (where broader disclosure is

permissible),7 the participants and recipients should be limited to clients and counsel

5 In Mutual Life Assurance Co. v. Canada (Deputy A.G.) (1988), 28 C.P.C. (2d) 101 (Ont. H.C.) at 105-106 -- addressing documents in the hands of in-house counsel -- the court provided the following (non-exhaustive) list of documents potentially protected by privilege:

(a) Communication from client to lawyer, directly or indirectly, (i) requesting advice, commenting thereon and providing information with respect thereto; (ii) instructing on legal matters; and (iii) providing information and commenting on actual or contemplated litigation;

(b) Communication from lawyer to client, including advice and opinion; request for instruction; submissions of draft documents for instruction and comment; follow-up and general supervision on confidential legal matters;

(c) Communications between lawyers for client, for the purpose of formulating legal advice....; [and]

(d) Working papers found in lawyers' file, including copies of non-privileged documents with lawyers' notes thereon, and lawyers' notes of discussion with client and others relating to advice given to client or actual or contemplated litigation.

In the foregoing list, in-house counsel will sometime play the role of "lawyer" (when dealing with his or her own internal clients) and sometimes pay the role of "client" (when dealing with external counsel).

6 See Imperial Tobacco Canada Ltd. v. Canada, 2013 TCC 144 at paras. 55-58 & 97-99; Alfred Crompton Amusements Machines Ltd. v. Custom & Excise Commrs. (No. 2), [1972] 2 Q.B. 102 (C.A.), aff'd without express reference to this issue, [1974] A.C. 405 (H.L.), at 129; Toronto-Dominion Bank v. Leigh Instruments Ltd. (1997), 32 O.R. (3d) 575 (Gen. Div.) esp. at 582-583; and Pritchard v. Ontario, 2004 SCC 31 at paras. 19-20.

7 As discussed below, for litigation privilege to attach, the dominant purpose of the communication or materials must be the preparation for existing or anticipated legal proceeding. Otherwise, privilege may not attach.

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only, and any additional circulation should be carefully restricted. Otherwise, privilege

may not attach or may be lost.

Create Appropriate Systems and Protocols: Both at a personal level and at an

organizational level, corporate counsel should consider adopting protocols to maximize

the likelihood that privilege will be recognized to attach to their communications:

o Expressly state the capacity in which you are acting: Emphasize both your official

title and the capacity in which you are writing or receiving materials, and have

your internal clients (and external counsel) do the same. This will underscore the

fact – if applicable – that you are seeking or providing legal advice or legal

services in your capacity as counsel to the corporation.

o Use appropriate labels: For genuinely privileged communications and materials,

always apply a label of "Privileged," "Solicitor's Advice," "Privileged and

Confidential -- Not to be circulated," etc. The adoption of this practice will assist

if a privilege challenge arises in the future.

o However, do not attempt to "overreach" when claiming privilege: Be cautious

about thoughtlessly labelling non-legal advice or non-litigation-related materials

as "privileged." Do not attempt to use your title to support an unwarranted

privilege claim. Such a strategy may backfire if a court reviews such documents

and finds misuse.

o Identify the subject matter: Apply titles or "re lines" to documents and emails

that make clear the subject matter of the substantive legal advice or other

privileged information that is contained within.

o Segregate different categories of communication: Where possible, consider

separating materials that provide business advice from those that provide legal

advice, and label the latter accordingly:

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If possible, use separate emails, letters, documents for (i) business advice

and for (ii) legal advice;

If that is too unwieldy a practice, at least segregate (i) business advice

and (ii) legal advice (within the same document) under different

headings.

o Scope and form of circulation: Limit internal circulation as narrowly as possible

(and add label: "Do not circulate more broadly"). When distributing privileged

information, incorporate it in a formal legal memorandum, rather than using a

less-formal circular or information bulletin.

o Document organization and storage: Within your legal department, segregate

both hard and electronic documents by transaction or by file, and emphasize

privileged status where applicable. Restrict access to legal personnel.

(b) Not All In-House Counsel are Created Equal

Although both Canadian and U.K. law has long recognized that the legal activities of in-house

counsel are protected by legal privilege,8 this approach has been famously rejected by the

European Court of Justice.9 A number of Asian legal systems (most notably in China) also apply

a less-deferential approach to privilege, particularly vis-à-vis communications from, and

documents in the hands of, in-house counsel.

Canadian in-house counsel will need to be conscious of this development when communicating

with colleagues and counterparts in Europe and Asia.

8 See, inter alia, Pritchard v. Ontario, 2004 SCC 31 at paras. 19-21 & 28; R. v. Campbell, [1999] 1 S.C.R. 565 at paras. 50-51; Alfred Crompton Amusements Machines Ltd. v. Custom & Excise Commrs. (No. 2), [1972] 2 Q.B. 102 (C.A.), aff'd without express reference to this issue, [1974] A.C. 405 (H.L.), at 129; and Toronto-Dominion Bank v. Leigh Instruments Ltd. (1997), 32 O.R. (3d) 575 (Gen. Div.) esp. at 582-583.

9 See Akzo Nobel Chemicals Limited and Ackros Chemicals Limited v. Commission of the European Communities, Case C-550/07P, Court of Justice of the European Union, 14 September 2010. See http://www.acc.com/advocacy/upload/Akzo-decision-ECJ-14Sept2010.pdf.

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Best Practice Suggestions for Dealings with Colleagues and Counterparts in "Privilege-Unfriendly" Jurisdictions:

Avoid using written communications and emails when seeking or conveying otherwise-

privileged legal information. Use telephone conferences, videoconferencing, or in-person

discussions.

If written advice is required, consider retaining external counsel to provide it.

Store privileged opinions and related documents in a jurisdiction that recognizes privilege

for in-house counsel.

When selecting the governing law for documents, consider selecting a jurisdiction that

recognizes in-house privilege.

(c) In-House Counsel Advising and Assisting Multiple Clients

When in-house counsel provides legal advice to multiple affiliated entities or individuals, such

communications will presumptively enjoy the protections of solicitor-client privilege.10

The mere fact that the in-house lawyer is formally employed (and exclusively paid) by one

corporation does not preclude the existence of a direct solicitor-client relationship with an

affiliated entity or an individual officer or director. This is because the existence of such a

relationship, and the privilege that attaches to it, does not always require an explicit retainer by

each client corporation:11

10 See, inter alia, Mutual Life Assurance Co. v. Canada (Deputy A.G.) (1988), 28 C.P.C. (2d) 101 (Ont. H.C.), esp. at 103; and Morrison-Knudsen Company Inc. v. British Columbia Hydro and Power Authority, [1971] 3 W.W.R. 71 (B.C.S.C.) esp. at 76.

11 It is well-established that a solicitor-client relationship (bringing with it the protections of privilege) can arise even if the lawyer is never formally retained by the client. See, inter alia, Descoteaux v. Mierzwinski, [1982] 1 S.C.R. 860 at 873, 876-877 & 893; Pritchard v. Ontario, 2004 SCC 31 at para.16; and Courtright v.

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Courts have justified the attachment of privilege to such "inter-corporate" or "multi-

corporate" legal communications by citing the close relationship between or among the

affiliated entities;12

It has also been suggested that privilege attaches because the relevant in-house lawyer

can be seen to have had an independent solicitor-client relationship with each

corporation.13

There will also be situations in which counsel will be characterized as having been jointly

retained by both corporations (or in which both corporations will be found to share a

sufficient "common interest" to preserve privilege as between themselves).14

While arguments clearly exist which support the existence and preservation of privilege in such

circumstances, the best course -- for in-house counsel advising multiple affiliated entities -- is to

specifically document the nature of the relationship between the advisor and each corporate

"client." (For external legal advisors, the careful documenting of such "joint retainers" will be --

or should be -- an invariable practice.)15 On a related note, a number of commentators have

Canadian Pacific Ltd. (1983), 45 O.R. (2d) 52 (H.C.J.) at 62-64, affirmed on different grounds (1985), 50 O.R. (2d) 560 (C.A.). This is true for both private lawyers and in-house counsel.

12 In such circumstances, the multiple corporations may be seen as a single client. See Mutual Life Assurance Co. v. Canada (Deputy A.G.) (1988), 28 C.P.C. (2d) 101 (Ont. H.C.) at 103; and Copthorne Holdings Ltd. v. Canada, 2005 D.T.C. 1133 (T.C.C.) at paras. 45 & 13-15. See also In re Teleglobe Communications Corp., 493 F.3d 345, (3rd Cir. 2007) at 369-371.

13 See the somewhat opaque statement in Morrison-Knudsen Company Inc. v. British Columbia Hydro and Power Authority, [1971] 3 W.W.R. 71 (B.C.S.C.) at 76.

14 Both joint retainer privilege and common interest privilege are discussed separately below. An interesting recent ruling on point is Imperial Tobacco Canada Ltd. v. Canada, 2013 TCC 144 at paras. 62-68, where the court cited common interest privilege as its basis for preserving privilege. A useful U.S. law ruling (addressing all of the foregoing theories) is In re Teleglobe Communications Corp., 493 F.3d 345, (3rd Cir., 2007). The court's focus was on the joint retainer/joint client approach.

15 Naturally, in addition to common law concerns regarding the existence and assertion of privilege (as between joint clients, and as against a third party), consideration must also be given to the Law Society's detailed regime governing the propriety of, and restrictions on, joint retainers. See, inter alia, Rules 2.03(1) and 2.04(6)(b) of the LSUC Rules of Professional Conduct.

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pointed out that in-house counsel -- when purporting to advise two affiliated entities -- face

potentially difficult ethical dilemmas where the interests of the two corporations diverge.16

Best Practice Suggestions for In-House Counsel representing Multiple Clients:

Document relationships: While such steps admittedly feel "artificial" in the context of

advising (jointly or separately) a corporation and its affiliates (or a corporation and its

officers/directors), consider formally memorializing the nature and the consequences of

such relationships. This may be particularly true where the relationship is a true joint

retainer of a single legal adviser by two affiliated corporations (or by a corporation and

an individual).17

Consider the use of separate counsel: If there is a foreseeable risk that, in the future,

the interests of the various "clients" may diverge, serious consideration should be given

at the outset to retaining separate legal counsel.

SOLICITOR-CLIENT (OR LEGAL ADVICE) PRIVILEGE

(1) THE CORE ATTRIBUTES OF LEGAL ADVICE PRIVILEGE

As its name suggests, legal advice privilege (also described more generically as solicitor-client

privilege) will attach in circumstances where legal advice is sought by a client and given by a

solicitor.

16 This was, of course, the scenario underlying In re Teleglobe Communications Corp., 493 F.3d 345 (3rd Cir., 2007). Interesting discussions of the ethical complexities of an in-house counsel for Corporation "A" simultaneously providing legal advice to Corporation "B" (a subsidiary or affiliate of Corporation "A") are found in MacKenzie, Lawyers and Ethics (Toronto: Thomson, 2004+) esp. at pp. 20-9 to 20-10; Hutchinson, Legal Ethics and Professional Responsibility (Toronto: Irwin, 1999) esp. at pp. 168 & 172-176; and MacNair, Conflicts of Interest. Principles for the Legal Profession (Aurora: Canada Law Book, 2005+) esp. at para. 9:50.

17 Recall that under the Law Society's rules (notably, Rules 2.03(1) and 2.04(6)(b)), lawyers are required to fully document the existence and terms of a "joint retainer" to ensure the informed consent of all parties.

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For purposes of establishing legal advice privilege, the Supreme Court has stated that three

necessary prerequisites must be present. Such privilege can be claimed document-by-

document, where each document is shown to satisfy the following criteria:

"(i) a communication between a solicitor and a client;

(ii) which entails the seeking or giving of legal advice; and

(iii) which is intended to be confidential by the parties…"18

Provided these criteria are met, a very broad array of documents and communications can be

protected by this privilege.19

For legal advice privilege to attach, there is no need for a formal retainer to exist between

counsel and client; the advice can relate to either contentious or non-contentious legal matters;

the communications can pass directly between client and solicitor, or can be relayed via the

solicitor's employees; and, provided the communications genuinely arise in the context of the

provision of legal advice, privilege will attach even to administrative matters.20 Indeed, recent

rulings of the Supreme Court have confirmed that even a lawyer's accounting records are

presumptively privileged, as they contain confidential information regarding the lawyer's

client(s).21

18 See, inter alia, Solosky v. Canada, [1980] 1 S.C.R. 821 at 837, and Pritchard v. Ontario, 2004 SCC 31 at para. 15.

19 As explained in Susan Hosiery Limited v. M.N.R., [1969] Exch. C.R. 27 at 33, this category of privilege attaches to "(a) all communications, verbal or written, of a confidential character, between a client and a legal adviser directly related to the seeking, formulating or giving of legal advice or legal assistance (including the legal adviser's working papers, directly related thereto)."

20 See Pritchard v. Ontario, 2004 SCC 31 at paras. 15-16; and Descoteaux v. Mierzwinski, [1982] 1 S.C.R. 860 at 892-893

21 See, inter alia, Canada v. Thomson, 2016 SCC 21 esp. at paras. 19-21; and Canada v. Chambre des Notaires du Québec, 2016 SCC 20 at paras. 72-76.

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Provided it has not been waived, legal advice privilege lasts forever.22 It does not terminate

with the completion of a particular transaction, nor (in contrast with litigation privilege) does it

end with the completion of a specific proceeding.23

(2) THE CREATION AND PRESERVATION OF LEGAL ADVICE PRIVILEGE

(a) Confidentiality is Mandatory

It will be recalled that the third mandatory prerequisite for the recognition of legal advice

privilege is an intention -- shared by both the client and the solicitor -- that their

communications are to be, and are to remain, confidential. If this test cannot be satisfied, then

privilege cannot be said to have ever attached.24

Thus, where the client communicates with the solicitor in circumstances where the client knows

and expects that the solicitor will pass the communication on to a third party, privilege never

attaches because the requisite expectation of confidentiality is not present.25 Likewise, if the

client intends from the outset to share the solicitor's advice with outsiders, such

communications will not enjoy the benefits of privilege.

(b) Beware the Involvement of "Third Parties"

As a basic proposition, "third parties" (i.e., any individual who is neither the relevant lawyer nor

that lawyer's client) 26 should not be involved in the seeking, formulating, or delivering of legal

advice. This is particularly difficult and problematic when the lawyer (external or in-house) is

22 See, inter alia, Geffen v. Goodman Estate, [1991] 2 S.C.R. 353 at 384.

23 Blank v. Canada, [2006] 2 S.C.R. 319 at paras. 8 & 37

24 See Solosky v. The Queen, [1980] 1 S.C.R. 821 at 835 ("[W]here the communication is not intended to be confidential, privilege will not attach..."); and Pritchard v. Ontario, 2004 SCC 31 at para. 16 ("The scope of the privilege does not extend to communications... where [the communication] is not intended to be confidential").

25 See R. v. Bencardino and DeCarlo (1974), 2 O.R. (2d) 351 (C.A.) at 358; Nova Scotia Pharmaceutical Society v. R. (1988), 225 A.P.R. 70 (N.S.T.D.) at 74-75; Ioannidis v. Ioannidis (1981), 27 B.C.L.R. 397 (C.A.) at 398-400; and Marlborough Hotel v. Parkmaster (1959), 17 D.L.R. (2d) 720 (Man. C.A.) at 729.

26 This assumes the absence of either a joint retainer or a common interest between the client and the third party (as discussed below).

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required to provide "business law advice" (broadly defined). When constructing or

implementing a transaction, when putting in place a tax-planning structure, when dealing with

regulatory bodies, and in many other contexts, clients will naturally want to involve their non-

legal external advisors.

Unfortunately -- at least as a general rule -- the beneficial protection flowing from privilege is

put at very significant risk every time accountants, investment bankers, consultants, etc., are

included in meetings or conference calls, and every time otherwise-privileged communications

or other documents are shared with such "third parties."

In the eyes of the law, the involvement of such "strangers" to the solicitor-client relationship

will undermine the requisite element of confidentiality. Depending on the timing of the

involvement of these third parties, this absence of confidentiality may:

(1) preclude solicitor-client privilege from coming into existence, or

(2) cause the loss of such privilege.27

In either case, the potential ramifications can be catastrophic.

(c) Limited Exceptions Permitting Third-Party Involvement

Fortunately, this rule is not absolute. Various (somewhat amorphous) exceptions will -- in

certain circumstances -- permit third parties to participate in the legal advice process without

causing a loss of privilege:

For example, privilege may be protected in cases where counsel and client communicate

through an intermediary, provided that the third party's involvement is genuinely

necessary to permit the legal advice to be communicated to, or to be understood by,

27 See, inter alia, St. Elizabeth Society v. Hamilton-Wentworth (2004), 50 C.P.C. (5th) 199 (Ont. S.C.J.) at paras. 15-17.

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the client.28 Unfortunately, the precise scope and content of this historical exception

remains less-than-clear.

A more recent variation of this principle has suggested that privilege may survive a third

party's involvement, provided that that involvement is genuinely necessary to facilitate a

function which is "essential" to the solicitor-client relationship.29 Unfortunately, the

precise scope and content of this reiteration of the historical exception continues to

evolve, and thus remains less-than-clear.30

Even more recent (and, as yet, of uncertain authority) is the concept of the "deal team",

consisting of both legal and non-legal advisors working collectively. It has been

suggested by one Ontario judge that -- in exceptional cases -- access to privileged

documents or communications by all members of such a "mixed" team will not

necessarily lead to privilege being waived.31 Caveat #1: Unfortunately, given the very

limited judicial support for this exception, its existence and availability remain open to

doubt. Caveat #2: It is also very important to bear in mind that -- even if "deal team

privilege" does exist under Canadian law -- it is not a doctrine that creates a privilege,

and is not itself a form or species of privilege. It is a judge-made "anti-waiver doctrine",

which allows documents/communications (already otherwise subject to either legal

28 This exception applies, inter alia, to situations in which the third party is a linguistic translator or technical interpreter, or is a friend or family member of the client (whose presence is required to assist the client), or (in some cases) is a non-legal advisor hired by the client to facilitate the client's ability to seek and understand legal advice. See, inter alia, Hannis v. Tompkins, [2001] O.J. No. 5583 (S.C.J.) at paras. 42-47; St. Elizabeth Society v. Hamilton-Wentworth (2004), 50 C.P.C. (5th) 199 (Ont. S.C.J.) at para. 16; and Zesta Engineering Ltd. v. Cloutier, [2008] O.J. No. 304 (Master) at paras. 72-73. There is also a broader approach to this exception, suggesting that the involvement of any "agent" of the client -- used by the client to seek or receive legal advice -- will not place privilege at risk.

29 See, inter alia, General Accident Assurance Co. v. Chrusz (1999), 45 O.R. (3d) 321 (C.A.) at 351-359.

30 See, inter alia, Ontario v. Lifford Wine Agencies, [2005] O.J. No. 3042 (C.A.) at paras. 69-71; XCG Consultants Inc. v. ABB Inc., 2014 ONSC 1111 at paras. 38-49; Trillium Motor World Ltd. v. General Motors of Canada Ltd., 2014 ONSC 4894 at paras. 10-12; Weinmann Electric Ltd. v. Niagara Falls Bridge Commission, 2013 ONSC 2805 at paras. 21-25; Imperial Tobacco Canada Ltd. v. Canada, 2013 TCC 144 at paras. 69-82; and Canada v. Welton Parent Inc., 2006 FC 67 at paras. 40-81.

31 See Barrick Gold Corp. v. Goldcorp. Inc., 2011 ONSC 1325 at paras. 2-9 & 16-19.

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advice or litigation privilege) to be shared with non-legal advisors (and other third

parties) without the benefit of those existing forms of privilege being lost.32

(3) THE ROLE OF IN-HOUSE COUNSEL IN PROTECTING LEGAL ADVICE PRIVILEGE

(a) Internal Circulation of Privileged Materials

In-house counsel routinely deal with materials protected by legal advice privilege. Whether the

privileged materials are produced internally or are received from external counsel, it will often

be necessary for in-house counsel to circulate such materials within the company -- i.e., to

members of the board and to interested officers and employees -- in order to communicate the

relevant advice and to obtain feedback.33

Unfortunately, an overly broad internal circulation of privileged materials may cause the

materials to lose the benefits of privilege, despite the fact that the distribution was limited to

members of counsel's own organization.34

Different risks arise when counsel (internal or external) appear at board meetings to provide

legal advice, or when privileged materials are distributed to the corporation's directors.

Directors may owe independent duties to a shareholder, to an affiliated entity, or even to an

unrelated third party. If the interests of that shareholder, affiliate or third party are affected by

the substance of the privileged materials shared with the director, the relevant privilege is

potentially placed at risk.35

Best Practice Suggestions for In-House Counsel Circulating Privileged Materials:

Any internal dissemination of privileged materials must be limited to the narrowest

possible group of recipients, and should be accompanied by a clear warning to those

32 In this way, "deal team privilege" (if it exists) resembles both joint retainer privilege and common interest privilege (both discussed below).

33 See Mutual Life Assurance Co. v. Canada (Deputy A.G.) (1988), 28 C.P.C. (2d) 101 (Ont. H.C.) at 102-104; Canadian Pacific Ltd. v. Canada, [1995] O.J. No. 1867 (Gen. Div.) at para. 20; and Royal Bank of Canada v. Société Génerale (Canada), [2005] O.J. No. 4383 (S.C.J.) at para. 5.

34 See Toronto-Dominion Bank v. Leigh Instruments Ltd. (1997), 32 O.R. (3d) 575 (Gen. Div.) esp. at 584-585.

35 See Lloyds Bank Canada v. Canada Life Assurance Co., [1991] O.J. No. 1765 (Gen. Div.) at 3-6

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recipients not to further disseminate the materials and to otherwise maintain strict

confidentiality.

Be aware of potentially conflicting duties owed by independent or cross-appointed

members of the board. If absolutely necessary, ask them to recuse themselves and

ensure that any materials circulated to them are redacted appropriately.

(b) External Disclosure of Privileged Materials: Statutory Demands and the Limited Waiver Exception

Naturally, any external distribution of privileged materials is even more dangerous than internal

circulation, and (in the absence of a protected "common interest")36 will presumptively lead to

the loss of such privilege. Helpfully, two (relatively recent) developments provide in-house

counsel with useful tools in such circumstances.

The first development arises principally from several Supreme Court rulings which have

confirmed that -- when a regulator or government authority purports to exercise a statutory

power to demand the disclosure of privileged materials -- counsel may have the legal right to

refuse to comply. The Court has confirmed that, where the materials subject to the disclosure

order are protected by either legal advice privilege or litigation privilege, the requisite statutory

provision must explicitly create an obligation to disclose legally privileged materials. If the

statutory language is insufficiently clear, explicit and applicable, the party holding the privileged

materials may validly refuse to comply.37

The second development arises in circumstances where privileged materials have been

disclosed to a regulator, governmental authority, or other third party (such as a corporation's

36 See the discussion below.

37 See, inter alia, Alberta v. University of Calgary, 2016 SCC 53 at paras. 42-66; Lizotte v. Aviva Insurance Co. of Canada, 2016 SCC 52 at paras. 55-67; Canada v. Thompson, 2016 SCC 21 at para. 25; and Canada v. Blood Tribe Dept. of Health, 2008 SCC 44 esp. at paras. 11 and 33.

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auditor) pursuant to a statutory duty, power or compulsion. Where such disclosure occurs, the

law characterizes the resulting waiver of privilege as "limited." More specifically, while privilege

will be treated as waived vis-à-vis the specific party to whom the information was compulsorily

disclosed, the privilege remains in place, and can still be asserted, as against the rest of the

world.38

LITIGATION (OR SOLICITOR'S BRIEF) PRIVILEGE

A substantively different form of privilege ("litigation privilege") arises in circumstances where a

lawyer (including in-house counsel) is assisting in preparing for anticipated or existing

litigation.39

(1) THE PURPOSE OF LITIGATION PRIVILEGE

Litigation privilege serves as an adjunct to legal advice privilege, with which it may overlap. It

plays an important, but less fundamental, role in the administration of justice. Unlike legal

advice privilege, its object is not to protect the solicitor-client relationship itself, but rather to

facilitate the smooth working of the adversary system. Its role is to create a "zone of privacy"

within which counsel can prepare to prosecute or defend contested proceedings.40

38 See, inter alia, Interprovincial Pipe Line Inc. v. Minister of National Revenue, [1995] F.C.J. No. 1360 (T.D.) esp. at paras. 18 & 21; Philip Services Corp. (Receiver of) v. Ontario Securities Commission, [2005] O.J. No. 4418 (Div. Ct.) at paras. 30-58 & 92, esp. at paras. 47, 52 & 92; and Minister of National Revenue v. Grant Thornton, 2012 FC 1313, esp. at paras. 45 & 47.

39 See Susan Hosiery Limited v. M.N.R., [1969] Exch. C.R. 27 at 33, where this category of privileged communications is said to include "(b) all papers and materials created or obtained specially for the lawyer's 'brief for litigation, whether existing or contemplated."

40 See, inter alia, Lizotte v. Aviva Insurance Co. of Canada, 2016 SCC 52 at paras. 19-24 & 32-37; General Accident Assurance Co. v. Chrusz (1999), 45 O.R. (3d) 321 (C.A.) at 330-331; and Blank v. Canada (Minister of Justice), [2006] 2 S.C.R. 319 at paras. 27 & 49-50

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As a general rule, in the absence of waiver, litigation privilege lasts only until the final resolution

of the specific proceeding in question, or any subsequent related proceeding.41 In other words,

unlike legal advice privilege, litigation privilege does not last "forever."

(2) THE SCOPE OF AND TEST FOR LITIGATION PRIVILEGE

Litigation privilege covers a broader array of documents than does legal advice privilege.

Litigation privilege encompasses all materials created for the "dominant purpose" of preparing

for litigation. The "dominant purpose" prerequisite means that litigation need not be the sole

purpose -- but must be more than merely a substantial purpose -- motivating the creation of

the document. Such future litigation must be reasonably apprehended, and cannot be merely a

hypothetical possibility.42

The requirement of confidentiality -- which is so central to the creation and preservation of

legal advice privilege -- is considerably relaxed in the context of litigation privilege. As such, the

scope of this privilege is not limited to communications exchanged between counsel and client,

but encompasses communications between and among clients, counsel, advisors, witnesses

and other third parties. It is also not limited to communications per se, but includes all

documents created or obtained as part of the litigation preparation process.43

Third parties (e.g., witnesses) are almost invariably involved in the process of preparing for

litigation. Consequently, litigation privilege does not share the overarching concern (which lies

at the heart of legal advice privilege) that third parties not become privy to privileged materials.

Confidentiality remains important, however: In order to avoid the inadvertent loss of litigation

privilege, care should still be taken when involving third parties.44

41 See Blank v. Canada (Minister of Justice), [2006] 2 S.C.R. 319 at paras. 34-39.

42 See, inter alia, Lizotte v. Aviva Insurance Co. of Canada, 2016 SCC 52 at paras. 19-24 & 32-37; Blank v. Canada (Minister of Justice), [2006] 2 S.C.R. 319 at paras. 27-28, 35, 38, 53 & 59-60; and General Accident Assurance Co. v. Chrusz (1999), 45 O.R. (3d) 321 (C.A.) at 332-336

43 See Blank v. Canada (Minister of Justice), [2006] 2 S.C.R. 319 at paras. 27-29, 32 & 60-65.

44 See Lizotte v. Aviva Insurance Co. of Canada, 2016 SCC 52 at paras. 46-54.

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As noted, the foregoing principles apply equally to in-house and external lawyers, provided the

lawyer has had involvement in instructing external litigation counsel, or in creating or gathering

materials for the dominant purpose of preparing for pending or existing litigation. Such

materials may be internally (or externally) distributed as part of the litigation-preparation

process, but -- in order to safeguard privilege -- counsel should emphasize to all recipients the

importance of preserving confidentiality.45

JOINT RETAINER (OR JOINT CLIENT) PRIVILEGE

(1) AT THE HEART OF THIS DOCTRINE IS A JOINT SOLICITOR-CLIENT RELATIONSHIP INVOLVING TWO OR MORE CLIENTS AND ONE LAWYER

It is not uncommon for lawyers -- both in-house counsel and those in private practice46 -- to be

"jointly retained" by more than one client on a particular matter. For in-house lawyers, as

noted above, this may involve the simultaneous provision of legal advice on the same matter to

two affiliated entities, or to both a corporation and one or more of its officers and directors in

their personal capacities.

(a) The (Technical) Difference between "Joint Retainer" and "Joint Client" Privilege

In order for "joint retainer privilege" to apply, a formal joint retainer is not required, provided

that a solicitor-client relationship (focused on a matter of mutual interest or concern to both

clients) can be demonstrated to exist between counsel and each client.47 As a matter of

45 See, inter alia, Mutual Life Assurance Co. v. Canada (Deputy A.G.) (1988), 28 C.P.C. (2d) 101 (Ont. H.C.), esp. at 102-104; Alberta v. Ghermezian, 1999 ABQB 336 at paras. 34-37; and Bank Leu Ag v. Gaming Lottery Corp, (1999), 43 C.P.C. (4th) 73 (Ont. S.C.J.) at para. 4, aff'd (2000), 132 O.A.C. 127 (Div. Ct.).

46 While beyond the scope of the current discussion, any such joint retainer must strictly comply with the applicable Law Society regime. See, inter alia, Rules 2.03(1) and 2.04(6)(b) of the LSUC Rules of Professional Conduct.

47 See, for example, Sutherland v. D.A. Townley & Assoc. Ltd., [1997] B.C.J. No. 471 (S.C.) at paras. 14-21.

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nomenclature, where no formal retainer is present, the broader rubric of "joint client privilege"

is more apt than "joint retainer privilege."

(b) Despite its Name, "Joint Retainer Privilege" is NOT a Species of Privilege

It is regrettable that the phrases "joint retainer privilege" and "joint client privilege" have

become common, as neither doctrine creates a privilege or represents a distinct category or

species of privilege. Rather, these doctrines are vehicles for avoiding the loss or waiver of pre-

existing legal advice or litigation privilege.

Assuming that the advice or related legal services provided by the lawyer to her/his joint clients

is otherwise privileged -- i.e., provided that the criteria for finding (i) legal advice privilege or (ii)

litigation privilege (both discussed above) are present -- the involvement of multiple

simultaneous clients will not place such privilege in jeopardy:

The authorities are clear that where two or more persons, each having an interest in some matter, jointly consult a solicitor, their confidential communications with the solicitor, although known to each other, are privileged against the outside world. However, as between themselves, each party is expected to share in and be privy to all communications passing between each of them and their solicitor. Consequently, should any controversy or dispute arise between them, the privilege is inapplicable, and either party may demand disclosure of the communication... .48

In such circumstances, neither of the clients is a "third party" to the solicitor-client relationship,

and there is therefore no concern of waiver when the solicitor shares legal advice with one or

both clients, nor when the two clients discuss matters between themselves.49 All such

communications are and remain privileged.

(2) THE ROLE OF JOINT RETAINER PRIVILEGE WHEN THE INTERESTS OF THE JOINT CLIENTS DIVERGE

48 See Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31 at para. 23, quoting with approval from R. v. Dunbar (1982), 138 D.L.R. (3d) 221 (Ont. C.A.) at 245. See also Caputo v. Novak, 2016 ONSC 4176 at para. 84.

49 See UPM-Kymmene Corp. v. Repap Enterprises Inc., [2001] O.J. No. 4220 (S.C.J.) at paras. 10 & 12-14; and R. v. Dunbar (1982), 138 D.L.R. (3d) 221 (Ont. C.A.) at 245.

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In the context of a joint retainer, no privilege exists as between the joint clients themselves,

although all privileged materials retain that beneficial status as against the rest of the world.50

In these circumstances, matters become more complex when the interests of the clients

diverge:

Because of the absence of privilege as between the joint clients, an otherwise-privileged

document can be freely used by one joint client against the other (e.g., if one sues the

other or if both are sued by a third party and their interests diverge).51

In an alternative scenario -- if only one of the two joint clients is sued by a third party --

the privilege (jointly shared by the two clients) continues to exist as against the rest of

the world. As such, the third party cannot compel disclosure of the privileged materials

in the hands of either joint client.52

Moreover, because the privilege is joint, it cannot be unilaterally waived by only one of

the two joint clients (other than to use directly against the other client), even where

disclosure would be in the waiving party's best interest. For example, one joint client

cannot unilaterally waive such privilege in order to assist a third party suing the second

joint client.53

50 See R. v. Dunbar (1982), 138 D.L.R. (3d) 221 (Ont. C.A.) at 245; and Milicevic v. T. Smith Engineering Inc., 2016 ONSC 2166 at paras. 145-147.

51 See R v. Dunbar (1982), 138 D.L.R. (3d) 221 (Ont. C.A.) at pp. 245-246 & 247; Re Chiang, 2013 ONSC 6753 at paras. 16 & 19; Milicevic v. T. Smith Engineering Inc., 2016 ONSC 2166 at paras. 145-147; and Manthorne v. Canadian Breast Cancer Network, 2015 ONSC 3799 at para. 23.

52 See Re Chiang, 2013 ONSC 6753 at para. 16; Amherst v. Canadian Broadcasting Corp. (1994), 111 D.L.R. (4th) 301 (N.S.S.C.), affirmed without reference to this issue (1994), 133 N.S.R. (2d) 277 (C.A.), at pp. 310-311; Giorno v. Pappas, [1997] O.J. No. 4748 (S.C.J.) at paras. 13 &15; and In re Konigsberg, [1989] 3 All. E.R. 289 (Ch. Div.) at 293-294

53 See Ashburton Oil Ltd. v. Sharp. (1992), 67 B.C.L.R. (2d) 64 (S.C.) at pp. 68 & 69-70.

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There is considerable misunderstanding regarding these issues,54 but the better view is that -- if

any waiver of the privilege is to occur -- there must be joint concurrence by both joint clients.55

(3) JOINT RETAINERS VERSUS PARALLEL RETAINERS

A further complication may arise in circumstances where the same counsel is retained jointly by

two clients, while (simultaneously) being retained individually by only one of those two clients

in a related matter. For example:

On a given matter ("Matter A"), in-house counsel may be asked to provide legal advice

or representation jointly to the corporation that employees the counsel ("Client #1")

and to an affiliated entity or officer of the corporation ("Client #2); and

The same in-house counsel may be simultaneously asked to provide advice or

representation only to the corporation (Client #1) on separate-but-related matter

("Matter B").

Whether Client #1 will be able to assert privilege against Client #2 with regard to

communications allegedly created during the course of the second, individual retainer (i.e.,

Matter B) will depend ultimately on the facts of the case.56

COMMON INTEREST (OR "JOINT INTEREST") PRIVILEGE

As noted above, the general rule is that sharing otherwise-privileged materials with third

parties will constitute a waiver of the privilege, thus leading to the permanent loss of its

54 See the apparently inconsistent (and arguably incorrect) ruling in Gulutzen v. Wilford, [2005] O.J. No. 2423 (S.C.J) at paras. 12-17.

55 See Caputo v. Novak, 2016 ONSC 4176 at para. 84; In re Konigsberg, [1989] 3 All. E.R. 289 (Ch. Div.) at 293-294; and Hellenic Mutual War Risks Association (Bermuda) Ltd. v. Harrison (The "Sagheera"), [1997] 1 Lloyd's Rep. 160 (Q.B.D., Comm. Ct.) esp. at 165-166.

56 See Chersinoff v. Allstate Insurance Co. of Canada (1969), 3 D.L.R. (3d) 560 (B.C.C.A.) at 564, affirming but varying on this point (1968), 69 D.L.R. (2d) 653 (B.C.S.C.) at 656-663; Abick v. Continental Insurance Co. (2002), 157 O.A.C. 334 (Div. Ct.) at paras. 1417; and Pax Management Ltd. v. C.I.B.C. (1987), 14 B.C.L.R. (2d) 257 (C.A.) at 266.

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protections. An important exception to this principle is the doctrine of "common interest

privilege."57

(1) THE BASIC ELEMENTS OF COMMON INTEREST PRIVILEGE

(a) Despite its Name, "Common Interest Privilege" is NOT a Species of Privilege

It is regrettable that the phrase "common interest privilege" has developed, as the doctrine

does not create a new privilege, nor does it represent a separate form or category of privilege.

(This has led to considerable confusion and misunderstanding, most notably in a recent ruling

of the Federal Court which has unnecessarily cast doubt on a key element of the doctrine.)58

It is crucial to bear in mind that common interest privilege is a judge-made instrument for

preventing the waiver of pre-existing legal advice privilege or litigation privilege in specified

circumstances. The doctrine represents an exception to the rule (noted above) that the sharing

of already-privileged materials with a third party may cause of the loss of that privilege.

For this reason, a better and more accurate name for the doctrine would be "the common

interest waiver exception."

(b) The Doctrine Requires a Common Interest in Litigation or in a Transaction

Thus, common interest privilege applies in circumstances where an already-privileged

document or communication is shared with, or directed to, a third party -- i.e., a party who is

neither the client nor the client's solicitor -- in circumstances in which that third party shares a

so-called "common interest" in a legal process that is relevant to the shared, privileged

material.

57 A concept which is closely related to "Common Interest Privilege" (and which is often conflated with, confused with, or incorporated within, such privilege) is so-called "Joint Interest Privilege." This doctrine is discussed below.

58 See Iggillis Holdings Inc. v. Canada (National Revenue), 2016 FC 1352, discussed in more detail below.

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This mutual interest -- which exists between (i) the transmitter of the privileged material and (ii)

the recipient of that material -- can relate either to pending or extant litigation, or to a

proposed transaction.

Because of this mutual interest in the outcome of the relevant legal process, the law recognizes

a "common interest privilege" shared between the two parties. Because of this "common

interest", following receipt of the privileged material, the two parties will share the benefits of

the relevant privilege (whether legal advice privilege or litigation privilege) as against the rest of

the world.59

While the law on point cannot be described as conclusively settled, it appears that the key date

for assessing the existence of the necessary common interest is the date on which the

privileged document is passed between the parties sharing the common interest. The privilege

is not lost merely because the parties' interests subsequently diverge.60 At the same time,

because there exists no privilege as between the two beneficiaries of the common interest

privilege, either is permitted to use the privileged information against the other.61

Because the common interest privilege thus attaching to the documents is shared by the two

parties, it cannot be unilaterally waived by one party (e.g., through disclosure to a third party or

through use in an unrelated proceeding).62 Instead, like joint retainer privilege (discussed

above), both parties must agree to waive a common interest privilege.63

(2) COMMON INTEREST PRIVILEGE IN THE LITIGATION CONTEXT

59 See Ziegler Estate v. Green Acres (Pine Lake) Ltd., 2008 ABQB 552 at paras. 53-64; and Milicevic v. T. Smith Engineering Inc., 2016 ONSC 2166 at paras. 136-137.

60 See, inter alia, Re YBM Magnex International, 1999 ABQB 793 at para. 14, citing Western Canadian Place Ltd. v. Con-Force Products Ltd. (1997), 202 A.R. 19 (Q.B.).

61 See Milicevic v. T. Smith Engineering Inc., 2016 ONSC 2166 at para. 145.

62 See Almecon Industries Ltd. v. Anchortek, [1999] 1 F.C. 507 (T.D.) at paras. 11-14; Maximum Ventures Inc. v. De Graaf, 2007 BCCA 510 at para. 19; and 3557537 Canada Inc. v. Howard (2008), 97 Alta. L.R. (4th) 316 (Q.B.) at paras. 47-54.

63 See Milicevic v. T. Smith Engineering Inc., 2016 ONSC 2166 at para. 144.

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As traditionally understood, "common interest privilege" applies to situations where two

parties -- each of whom is separately represented by his or her own counsel, or one of whom is

represented by counsel and the other is unrepresented -- share a common interest in the

outcome of existing or contemplated litigation.

This may occur, inter alia, where both parties face the prospect of being named in the same

litigation, or where one party has been named and the second party faces the possibility of

being joined subsequently, or perhaps where one party has been named but the outcome of

the litigation would affect both parties in the same manner.

In such circumstances, if either the parties themselves, or their respective solicitors, share

documents -- which are otherwise protected by either legal advice or litigation privilege -- with

one another, the relevant privilege will not be treated as having been waived.64

(3) COMMON INTEREST PRIVILEGE IN THE TRANSACTIONAL CONTEXT (AND THE REGRETTABLE RECENT IGGILLIS RULING)

(a) Prior to December 2016, Transactional Common Interest Privilege was Well Established and Broadly Recognized

More recently, a growing body of Canadian cases has found common interest privilege to exist

in the absence of any existing or contemplated litigation. These cases have found that, where

two parties (each independently represented by separate counsel) are negotiating towards a

mutually beneficial transaction, the parties may (in appropriate circumstances) be found to

share a "common interest" in the transaction being successfully completed.

64 See, inter alia, Buttes Gas & Oil v. Hammer (No. 3), [1981 ] Q.B. 223 (C.A.) at 243-244, 251 -252 & 267-268; General Accident Assurance Co. v. Chrusz (1999), 45 O.R. (3d) 321 (C.A.) at 336-338 & 340; Milicevic v. T. Smith Engineering Inc., 2016 ONSC 2166 at paras. 134-138; Pitney Bowes of Canada Ltd. v. Canada (2003), 225 D.L.R. (4th) 747 (F.C.T.D.) at 750-751; Canadian Pacific Ltd. v. Canada, [1995] O.J. No. 4148 (Gen. Div.) at paras. 19-29; Maximum Ventures Inc. v. De Graaf, 2007 BCCA 510 at para. 10; and Re YBM Magnex International, 2000 ABCA 284 at para. 18.

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Particularly, if the completion of the transaction requires one party to share with the second

party an otherwise-privileged document (e.g., a legal opinion relevant to the transaction

prepared by counsel for the first party), the document will not thereby lose its privileged

status.65

While domestic law on point continues to evolve, it appears clear that the Canadian version of

transactional common interest privilege is considerably more flexible (and thus more useful)

than is the equivalent doctrine in the United States.66

(b) The December 2016 Iggillis Ruling, and the Purported "Death" of Transactional Common Interest Privilege

In a lengthy decision released on December 12, 2016 -- Iggillis Holdings Inc. v. Canada (National

Revenue), 2016 FC 1352 ("Iggillis") -- a single judge of the Federal Court purported to reject, for

the first time, the existence of transactional common interest privilege as an aspect of Canadian

common law. According to this lengthy (interlocutory) ruling, the doctrine of common interest

privilege should be recognized only where two parties share a common interest in pending or

ongoing litigation.

Many criticisms could be levelled at this ruling. Most notably, the court inexplicably relied

almost exclusively on U.S. jurisprudence and secondary authority (without addressing the

65 See, inter alia. Maximum Ventures Inc. v. De Graaf, 2007 BCCA 510 at para. 14; 578115 Ontario Inc. v. Sears Canada Inc., 2013 ONSC 4135 at paras. 36-38; Barclays Bank plc v. Devonshire Trust, 2010 ONSC 5519 at paras. 11-12 & 23-31; Imperial Tobacco Canada Ltd. v. Canada, 2013 TCC 144 at paras. 62-68; Pitney Bowes of Canada Ltd. v. Canada (2003), 225 D.L.R. (4th) 747 (F.C.T.D.) at 751-754; Archean Energy Ltd. v. Canada (1997), 98 D.T.C. 6456 (Alta. Q.B.) esp. at para. 30; Anderson Exploration Ltd. v. Pan-Alberta Gas Ltd. (1998), 61 Alta. L.R. (3d) 38 (Q.B.) at 44-47; Fraser Milner Casgrain LLP v. Canada, 2003 D.T.C. 5048 (B.C.S.C.) esp. at para. 12; and St. Joseph Corp. v. Canada (2002), 17 C.P.R. (4th) 523 (F.CT.D.) at paras. 72-81.

66 Many U.S. jurisdictions appear to accept a narrower form of transactional common interest privilege -- i.e., parties will be permitted to share privileged information without jeopardizing privilege only in circumstances where they are negotiating towards some form of de facto "joint venture" relationship. See, inter alia, 3Com Corp. v. Diamond II Holdings, Inc., 2010 Del Ch LEXIS 126. The law in New York is even more restrictive, with the majority of the Court of Appeals recently rejecting the availability of common interest privilege in any non-litigation context. See Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 NY Slip Op 04439 (June 9, 2016), reversing, 124 AD3d 129 (2014).

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substantive difference between Canadian and U.S. privilege principles), while failing to

acknowledge the numerous Canadian cases that have endorsed the existence of transactional

common interest privilege. Moreover, with respect, the court appeared to misapprehend the

true nature of common interest privilege. Justice Annis appeared to conclude that the doctrine

constitutes a discrete form of privilege (which is clearly not the case), while rejecting the

doctrine's true role as an anti-waiver mechanism designed to guard against the loss of legal

advice privilege or litigation privilege. This apparent misunderstanding led the court to accept

and apply an unwarranted "flood gates" analysis -- i.e., the court appeared to believe that the

doctrine, if endorsed, had the potential to protect all transactional communications of every

sort (regardless of whether litigation or legal advice privilege otherwise attached) under the

supposedly all-encompassing cloak of "common interest privilege."

The Iggillis case is currently under appeal, and one hopes that the Federal Court of Appeal will

reverse it and reject its misguided analysis. One further hopes that, pending that appeal, other

Canadian judges (in the Federal Court and elsewhere) will refuse to follow this dangerous and

doctrinally suspect ruling.

Best Practice Suggestions for In-House Counsel seeking to Assert Common Interest Privilege (assuming that Iggillis) is not now the law of Canada:

Be aware that common interest privilege is not a panacea: There appears to be a

misplaced view that common interest privilege (and particularly transactional common

interest privilege) conclusively "solves" concerns with waiver. While this new doctrine is

unquestionably welcome, its significant limitations must be kept in mind.

Shared materials must already be privileged: Remember that common interest privilege

protects from waiver-by-sharing only those materials that are already subject to

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litigation privilege or legal advice privilege. So-called common interest privilege extends

no protection to otherwise-unprivileged materials.

Share materials in confidence, and document this obligation: Remember that the

privileged materials must be shared in strict and ongoing confidence, which must be

maintained thereafter by both the transferor and the recipient of the materials. The

parties should expressly agree – at the time of sharing the documents – to maintain

confidence and to assert privilege against the rest of the world.

Avoid third-party involvement: Remember that the involvement of third parties – i.e., all

parties who are not (i) the transferor, (ii) the transferor's counsel, (iii) the recipient, or

(iv) the recipient's counsel – will place at risk both the common interest privilege and

the underlying privilege on which it depends. At least when the underlying privilege is

legal advice privilege (as opposed to litigation privilege), such materials must not be

shared with external non-legal advisers (e.g., accountants, consultants, investment

bankers).

Document the fact that the sharing is necessary or mandatory: Remember that at least

some transactional common interest privilege cases limit the doctrine to circumstances

in which sharing the otherwise-privileged materials is mandated by the parties'

agreement or is otherwise necessary for the deal to come to fruition:

o Consider documenting such a requirement for disclosure (during the due

diligence process) as part of the parties' original agreement; or

o At a minimum – when sharing privileged documents under the rubric of common

interest privilege – ensure that the documents are accompanied by a cover letter

that explains the rationale for the privileged materials being disclosed to the

other negotiating party.

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Use carefully drafted JDAs, etc.: Likewise, when relying on litigation common interest

privilege, always prepare and comply with carefully drafted joint defence agreements or

joint representation agreements.

Multijurisdictional concerns: Be aware that transactional common interest privilege is

not universally recognized:

o It is recognized in Canada (although appellate authority is sparse and a recent

Federal Court ruling has cast doubt on the existence of this aspect of common

interest privilege);67

o It is recognized in a number of U.S. states and federal circuits (although in an

arguably more constrained form than applies in Canada); but it is not recognized

in other U.S. jurisdictions (including New York), where only litigation common

interest privilege can be asserted.68

o Consider this issue when choosing the governing law of your transaction.

(4) COMMON INTEREST PRIVILEGE AND JOINT INTEREST PRIVILEGE

(a) The Difference between "Common Interest" and "Joint Interest " Privilege

Whereas common interest privilege (as discussed above) focuses on the common interest in

the outcome of a transaction or litigation proceeding between two independently represented

parties, a closely connected doctrine -- "joint interest privilege" -- focuses on a common right

67 See Iggillis Holdings Inc. v. Canada (National Revenue), 2016 FC 1352, discussed in more detail below.

68 Compare 3Com Corp. v. Diamond II Holdings, Inc., 2010 Del Ch LEXIS 126 with Ambac Assurance Corp. v. Countrywide Home Loans, Inc., 2016 NY Slip Op 04439 (June 9, 2016), reversing, 124 AD3d 129 (2014).

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(generally of a proprietary nature) which both parties assert over privileged documents or over

the subject matter of the privileged documents.69

For example, various cases have suggested that, inter alia, partners, trustees/beneficiaries and

corporations/shareholders possess such a "joint interest" in otherwise privileged materials,

owing to the putative existence of a joint proprietary right shared by such parties. The third of

these relationships (corporations and shareholders) is of particular interest to in-house counsel,

and is discussed immediately below.

(b) Joint Privilege and Related Corporations

An interesting issue is whether an automatic "joint interest privilege" -- based on proprietary

principles -- exists between a corporation and any or all of its shareholders (including a

corporate parent).70 An affirmative answer may have both defensive and offensive

ramifications -- i.e., a corporation would be able to share privileged documents with a

shareholder (including a corporate parent) without any risk of waiving the privilege; and,

conversely, a shareholder could demand access to all privileged documents in the corporation's

possession (at least in the absence of a direct dispute between shareholder and corporation).

In both the U.S. and the U.K., it has generally been accepted that, for both of the foregoing

purposes, a prima facie joint interest does exist between corporation and shareholder.71

In Canada, however, the better view is that -- owing to the separate personality of a

corporation vis-a-vis its shareholders, as well as the shareholders' lack of any proprietary right

69 An excellent discussion is found in Ziegler Estate v. Green Acres (Pine Lake) Ltd. 2008 ABQB 552 at paras. 27-52.

70 On a non-automatic basis, it is clear that a "common interest privilege" -- in either litigation or transactional form -- will exist between a corporation and a shareholder/parent corporation provided that the criteria for the recognition of such a common interest privilege (set out above) is present.

71 In the U.K., see, inter alia, Woodhouse v. Woodhouse (1914), 30 T.L.R. 559 (C.A.) at 560; CAS v. Nottingham Forest plc, [2001] 1 All E.R. 954 (Ch.D.); Re Hydrosan Ltd., [1991] B.C.L.C. 418 (Ch.D.); VJ. Dennis & Sons v. West. Norfolk Farmers' Co-Operative, [1943] 1 Ch. 220; and Gouraud v. Edison GowerBell (1888), 57 L.J. Ch. (N.S.) 498 at 499-500. In the U.S., the seminal authority is Garner v. Wolfinbarger, 430 F.2d 1093 (5th Cir., 1970) at 1102.

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to the corporation's assets -- no such prima facie common interest exists.72 As such, a

shareholder will not have an automatic right to demand production of privileged documents in

the corporation's possession.

Where voluntary inter-corporate sharing of privileged materials is under consideration, in order

for privilege to be protected, corporate counsel must consider whether some other theory

(e.g., a joint retainer of counsel by both corporations, or a contextually established common

interest shared by both corporations) can be used to ensure that privilege is not lost.

72 See, inter alia, FCMI Financial Corp. v. Curtis International Ltd., [2003] O.J. No. 4713 (S.C.J.) esp. at paras. 23 & 30-31; Discovery Enterprises Inc. v. Ebco Industries Ltd. (1998), 41 B.L.R. (2d) 207 (B.C.C.A.) at 217-218, leave to appeal refused, [1999] S.C.C.A. No. 24; McPherson v. Institute of Chartered Accountants of B.C. (1988), 32 B.C.L.R. (2d) 328 (C.A.) at 332; McKinlay Transport Ltd. v. Motor Transport Industrial Relations Bureau of Ontario (Inc.), [1991] O.J. No. 1410; and Ziegler Estate v. Green Acres (Pine Lake) Ltd. 2008 ABQB 552 at paras. 33-52.

Tor #3495026

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TAB 6

Canada, Adequacy, and the European Union’s

General Data Protection Regulation

Dean Dolan

Baker & McKenzie LLP

Robin Cassel

Senior Counsel


February 27, 2017

7th ANNUAL


EU General Data Protection Regulation in 13 Game Changers

Dean Dolan Counsel, International Commercial Baker & McKenzie LLP 181 Bay Street, Suite 2100 Toronto, ON M5J 2T3 Canada Tel: +1 416 863 1221 Direct: 1 416 865-3856 Fax: +1 416 863 6275 [email protected]

6-1

mailto:[email protected]

© 2017 Baker & McKenzie LLP

Baker & McKenzie's GDPR Game Plan

EU General Data Protection Regulation in 13 Game Changers

What businesses need to know and do to prepare

The EU General Data Protection Regulation ("GDPR") will replace the current Data Protection Directive 95/46/EC ("Directive") and will be directly applicable from 25 May 2018 in all EU Member States without need for implementing national laws. Businesses should already start adapting their data protection compliance programs, processes and infrastructure to prepare for the following Game Changers.

1. Expanded Scope and One-Stop-Shop: The GDPR applies to the processing of personal data by data

controllers and processors established in the EU, as well as by controllers and processors outside the EU where their processing activities relate to the offering of goods or services (even for free) to data subjects within the EU, or to the monitoring of their behaviour. The supervisory authority in the jurisdiction of the main or single establishment of the controller/ processor will be the lead authority for cross-border processing (subject to derogations).

To do: Assess whether, as non-EU controller or processor, you will fall within the scope of the GDPR. Determine where your main establishment might be located based on your data processing activities.

2. Enhanced Rights of Data Subjects: The GDPR includes a wide range of existing and new rights for data subjects. Amongst these are the right to data portability (right to obtain a copy of one's personal data from the controller and have them transferred to another controller), right to erasure (or 'right to be forgotten'), right to restriction of processing, right to object to certain processing activities (profiling) and to automated processing decisions. Controllers will also be required to provide significantly more information to data subjects about their processing activities.

To do: Implement appropriate processes and infrastructure to be able to address data subjects' rights and requests and update your privacy notices.

3. Profiling Restrictions: Data subjects shall have the right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning them or similarly significantly affects them. Individuals will also have an express right to 'opt out' of profiling and automated processing in a wide range of situations.

To do: If you are engaging in profiling activities, consider how best to implement appropriate mechanisms.

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4. Consent: Consent is retained as a processing condition but the GDPR is more prescriptive than the Directive when it comes to the conditions for obtaining valid consent. The key change is that consent will require a statement or clear affirmative action of the data subject. Silence, pre-ticked boxes and inactivity will not be sufficient. The GDPR clarifies cases where consent will not be freely given (e.g., no genuine choice to refuse, clear imbalance between the data subject and controller). Data subjects must be informed of their right to withdraw consent.

To do: Identify your processing activities that are legitimised through consent. Consider whether other (potentially safer) processing conditions or legal justifications could be relied on. If and when relying on consent, ensure to adapt the way you collect consent in light of the new requirements.

5. Data Processors: The GDPR imposes compliance obligations directly on processors, such as implementing security measures, notifying the data controller of data breaches, appointing a DPO (if applicable), maintaining records of processing activities, etc. Processors will be directly liable in case of non-compliance and may be subject to direct enforcement action. Controllers and processors will be required to enter into detailed processing agreements or renegotiate existing ones.

To do: As controller, carefully review the processor selection process und update your processor agreements. As processor, identify whether you fall within the scope of the GDPR, understand your new obligations and assess operational impact.

6. Data Mapping: Controllers and processors will have to maintain record of processing activities. Detailed information must be kept and provided to supervisory authorities upon request.

To do: Ensure you understand and document what personal data you actually hold, process and transfer and how such data "flows" around your organisation.

7. Data Protection by Design and by Default: These concepts are codified in the GDPR and require controllers to ensure that individuals' privacy is considered from the outset of each new processing, product, service or application, and that, by default, only minimum amounts of personal data as necessary for specific purposes are collected and processed.

To do: Implement measures, such as pseudonymisation or data minimisation designed to implement data protection principles from the outset of any project.

8. Data Protection Impact Assessments ("DPIAs"): Controllers will be required to perform a DPIA where the processing of personal data (particularly when using new technologies) is likely to result in a high risk to the rights and freedoms of the individuals. DPIAs will particularly be required in cases of (i) an evaluation of personal aspects based on automated data processing including profiling, (ii) processing on a large scale of special categories of data, or (iii) systematic monitoring of a publicly accessible area.

To do: Make DPIAs part of the standard procedure for all processing operations so that they are easier to implement as an everyday task. Train staff on DPIAs and document them appropriately.

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9. Accountability: Businesses will have to ensure through appropriate technical and organisational measures compliance with the requirements of the GDPR and be able to objectively demonstrate such compliance.

To do: Build a framework and internal compliance structure (ideally in the form of a comprehensive privacy compliance program) to ensure compliance with the GDPR requirements. Put appropriate policies and procedures in place to demonstrate compliance.

10. Data Protection Officers ("DPO"): Certain private and most public sector organisations will be required to appoint a DPO to oversee their data processing operations. A DPO will be required where (i) the processing is carried out by a public authority or body, (ii) the core activities of the controller or processor consist of processing which requires regular and systematic monitoring of data subjects on a large scale, (iii) the core activities consist of processing special categories of data on a large scale, or (iv) required by Member State law.

To do: Consider who to hire or appoint as a DPO, taking into account that DPOs are required to have expert knowledge of data protection law and practices. A group of undertakings may appoint a single DPO provided the latter is easily accessible from each entity.

11. Overhauled Data Transfers Rules: The GDPR retains the cross-border data transfer rules of the Directive, but adds new ones such as certification mechanisms and codes of conduct, as well as a new very limited derogation for occasional transfers based on legitimate interest. Country-specific authorisation processes will no longer be needed (with some exceptions). BCRs are formally recognised in the GDPR.

To do: Establish a comprehensive inventory of your cross-border data flows and review/ update your cross-border transfer strategy in light of the new rules stemming from the GDPR, jurisprudence (i.e., Schrems) and the incoming EU - U.S. Privacy Shield.

12. Data Breach Notification: Controllers will have to report data breaches to the relevant supervisory authority without undue delay and, where feasible, within 72 hours of becoming aware of the breach (unless the breach is unlikely to result in a risk for data subjects' rights and freedoms). A proper justification shall accompany the notification if it is not made within 72 hours. Affected data subjects must be notified of a breach without undue delay if the breach is likely to result in a "high risk" for their rights or freedoms.

To do: Prepare for security breaches now with internal guidelines and policies on how to react and who to notify. Implement employee training to prevent and handle breaches.

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13. Enforcement & Sanctions: The GDPR will harmonise the tasks and powers of supervisory authorities and significantly increase fines. For major infringements (such as failure to comply with cross-border transfer rules or to obtain adequate consents) fines can be up to 20 million EUR or, in the case of an undertaking, up to 4% of the total worldwide annual turnover of the preceding financial year (whichever is higher).

To do: Implement appropriate structures, processes and policies (including auditing and staff training) to be able to ensure and demonstrate compliance with all obligations under the GDPR.

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Additional GDPR Resources Information Commissioner’s Office

UK Information Commissioner’s Office website

https://ico.org.uk/

Preparing for the General Data Protection Regulations (GDPR) 12 steps to take now

https://ico.org.uk/media/1624219/preparing-for-the-gdpr-12-steps.pdf

Article 29 Data Protection Working Party

Guidelines on Data Protection Officers (‘DPOs’)

http://ec.europa.eu/information_society/newsroom/image/document/2016-51/wp243_en_40855.pdf

-Frequently Asked Questions http://ec.europa.eu/information_society/newsroom/image/document/2016-51/wp243_annex_en_40856.pdf

Guidelines on the right to data portability


-Frequently Asked Questions http://ec.europa.eu/information_society/newsroom/image/document/2016-51/wp242_annex_en_40854.pdf

Guidelines for identifying a controller or processor’s lead supervisory authority


-Frequently Asked Questions

http://ec.europa.eu/information_society/newsroom/image/document/2016-51/wp244_annexii_en_40858.pdf

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https://ico.org.uk/






http://ec.europa.eu/information_society/newsroom/image/document/2016-51/wp243_annex_en_40856.pdf















TAB 7

Managing External Counsel Fees

Andrea Kokonis Associate General Counsel

SOCAN

Jeffery Van Damme Vice President, General Counsel, Legal & Regulatory Affairs

Samsung Electronics Canada Inc.

René Zanin Chief Legal Officer and Chief Compliance Officer

Foresters Financial

February 27, 2017

7th ANNUAL


Managing External Counsel Fees

Andrea E. Kokonis, SOCAN

Jeffery Van Damme, Samsung Electronics Canada Inc. René Zanin, Foresters Financial

February 27, 2017

Fees Types of Fees Traditional Fees Fee Arrangements Hybrids

Traditional fees Hourly rates Discounts (straight, volume, phases) Blended rates Capped fees Fee Arrangements Flat fees Task billing Contingencies (straight, reverse, multiple criteria-based)

Hybrids Any combination of fee arrangements, traditional and/or alternative. Examples:

Fee collars Holdback or success fees Flat fee plus hourly combination Credits towards new business

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Billing Guidelines If you don’t ask, you don’t get.

Most firms will not voluntarily offer discounts Most firms will seek to impose their retainer terms and conditions

Law firms more amenable to agreeing to outside counsel policy or billing guidelines if:

Long standing client Significant matter New client

What items should be covered in an Outside Counsel Policy? 1. General Provisions

Conflicts Ownership of files and records Engagement letters for each matter

2. Fees, Disbursements, Budgets and Billings

I. Billing Rates

Schedule sets out hourly rate and discount Confirmation of duration of the fees, e.g. 12 months or until end of the

matter “Most Favoured Nation” provision

II. Acceptable and Unacceptable Charges

Examples we don’t pay for: Conflict reviews Preparing invoices or responding to building inquiries Secretarial or clerical work Reporting letters Ramp up time Travel time Attendance by more than one lawyer at any external meeting or

Examination for Discovery

III. Disbursements Avoid paying for mark-ups Ensure disbursements are itemized Avoid online research charges Avoid building maintenance charges

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IV. Budgeting Consider insisting on budgets for any matter over a certain limit, e.g.

$25,000.00 Hold firms to their budget

V. Invoices

Insist on regular invoices regardless of amounts owing Insist on itemized invoices

o Total hours worked by each timekeeper in 6 minute increments o Itemized expenses and disbursements

Request For Proposals Selecting the right firms to participate Providing adequate bid instructions What needs to be included How to ensure a proper comparison Planning for the possibilities Negotiating

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TAB 8

Dealing with Regulators

Shelly Feld

Manager, Litigation

Mutual Fund Dealers Association of Canada

Sonali GuptaBhaya

Director, Market Regulation Policy

IIROC

February 27, 2017

7th ANNUAL


Dealing with Regulators

Shelly Feld, MFDA Sonali GuptaBhaya, IIROC

We have used our own experiences to inform the discussion today. The views we express are our own and do not necessarily represent the views of

IIROC, the MFDA or other regulators.

Situations in Which We Deal with In-House Counsel

Policy Making & Exemption Requests

Discussions on Issues Facing Industry Discussions on Regulator’s Concerns Reviews Enforcement & Compliance

Regulatory Reporting Obligations Regulatory Investigations Regulatory / Disciplinary Proceedings Compliance Examinations

Policy Making – Tips 1. Keep Regulator’s Mandate in Mind

eg. Securities Regulators have 2 primary mandates: investor protection maintain healthy capital markets

Regulators must focus on how the issue/proposal/solution affects all stakeholders and all elements of their mandate.

2. Provide Complete Information Include all required information Rationale is a common missing element in exemption requests

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3. Provide Data Driven Analysis When Possible Policy stances are often data driven Providing data analysis helps remove appearance of bias or self-interest

4. Be Balanced in Approach Discussing both pros and cons helps argument appear balanced Be open about issues you have identified with proposal/solution

5. Maintain On-going Relationships On-going discussions help strengthen relationships and understanding between parties Can do this by:

scheduling regular meetings participating in industry working groups

Enforcement – Doing Your Homework

Familiarize yourself with the Statute, Regulations, By-laws, Rules, Policies, Hearing Procedures and possibly case law – Are there bulletins or newsletters that you can subscribe to? Where can you obtain access to decisions of the regulator?

Consider whether the circumstances call for input from external counsel – either to represent you or for purposes of consultation

What is the source of the regulator’s authority? What rights and protections are applicable to your client(s)? SPPA, Charter, Evidence Act, Administrative Law Principles, other

Enforcement – Regulatory Reporting

Learn the Rules concerning the circumstances when reports are required o Complaints o Financial events o Events that give rise to risk to clients, employees or the public o Terminations of staff o Lawsuits o Misconduct that has been discovered

If in doubt, report it – transparency builds trust & reliability

Don’t leave it to the regulators o Reports are the beginning not the end of the process – Continue to take

proactive action to investigate and address the issues that have arisen

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Enforcement – Doing Your Homework

Who do you represent? (Organization? Individuals? Conflicts?)

Who needs to know? When? Who do you take instructions from?

What are the stakes?

o Reputation / Career / Penalties / Lawsuits / Criminal Charges

What are the facts? o Who has knowledge? Are there relevant documents or other sources of relevant

information? o What steps can be taken to ensure that relevant evidence is preserved

Enforcement processes are stressful – Preparation is critical

Would a phone call assist you to understand the process, the timing or the issues?

What will your opportunities be to explain your position? o Inquiries in writing? o Interviews in person? o Wells process?

What are the possible outcomes? What penalties could be imposed? o File closure o Administrative (non-public) resolution o No Contest Settlement / Settlement / Contested Hearing / Appeals

Enforcement – The Investigation Be prepared to explain your side of the story & back it up

Don’t assume you are not a subject

Are you entitled to disclosure? If so, what and when?

Are you entitled to counsel? Is E&O insurance applicable?

Consider the regulator’s perspective & public interest focus o Defensive / Combative / Secretive Approaches Are Rarely Helpful

Remember that it is likely a long term relationship o Credibility is Critical – if you make a mistake, correct it

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Enforcement – Hearings What is the process?

o What are the timelines? o Is it public or private? o Written or oral? o Are you entitled to & responsible for disclosure? When? o Can you appeal?

Who is the decision maker? o Is it a single individual? o Is it a panel? o Who is eligible? (Legal Training, Industry Experience, Technical Expertise?)

Are you entitled to an oral hearing? o Do rules of evidence apply? How formal is the process? o Can you call or cross-examine witnesses? o Would an expert help? Would it be cost effective? o What is the standard of proof? Strict liability? Balance of probabilities?

Can you & should you retain external counsel to represent you?

Would there be benefits to settling the case? Do settlements require approval? If so, what happens if approval is denied?

Penalties & Costs

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TAB 9

Restrictive Covenants and

Departing Employees

Afshan Ali

CIBC

Lisa Talbot

Torys LLP

February 27, 2017

7th ANNUAL


Restrictive Covenants and Departing Employees Lisa Talbot, Torys LLP

Afshan Ali, CIBC February 27, 2017

The Basics Duties of departing employees

Common law duties o duties of good faith and fidelity while employed

cannot solicit before departure Cannot disclose or misuse confidential information Contractual obligations

o enforceable non-solicitation covenant Fiduciary obligations Enforceability

unambiguous (no blue penciling) reasonable as between the parties

o duration o geographic coverage o nature of prohibited activity

Court proceedings to enforce non-solicit

Action for damages Injunction

o Strong “prima facie” case higher threshold for restrictive covenants in employment contracts

o irreparable harm o balance of convenience

Minimizing Exposure Strategies to minimize exposure:

culture of compliance draft enforceable non-solicitation covenants Code of Conduct BYOD and privacy policies targeted employee monitoring resignation protocols inventory of what is returned post-departure monitoring

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Additional Arrangements Garden leave Clawback/forfeiture of Deferred Compensation Consulting Arrangements

Garden Leave What is a Garden Leave?

During the notice period, employee o continues to receive full salary and benefits o may be required not to provide active services and may be cut off from

access to information Employment relationship continues

o Employee can’t work for another employer Reasons to Consider Garden Leave Clause

Allows for orderly transition Ensures that there is a buffer period before an employee commences employment

at competitor o During this time, any sensitive, proprietary information may become stale-

dated or have lost some of its value Enforceability of Garden Leaves

Very little guidance on enforceability Blackberry v. Marineau-Mes

o Ontario Superior Court (March 2014) o 6 month garden leave provision held enforceable

Clause provided that executive would provide active service during that period unless waived by Blackberry

Court did not go into the public policy analysis that is applied to enforcement of non-compete

Garden Leave – Drafting Considerations

Consider which employees should be subject to leave Consider length of leave – should be reasonable Include:

o employer has authority to place employee on garden leave o employer reserves right to exclude employee from workplace o employee prohibited from contacting clients or accessing confidential

information during leave o terms indicating what the employee is required to do while on garden leave o employee not permitted to engage in employment for another employer while

on garden leave

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Clawback of Deferred Compensation Terms of long-term incentive awards may require employee to pay back amounts

received (including gain on exercise of stock options) if employee works for competitor during specified period

Forfeiture of Deferred Compensation Terms of long-term incentive awards typically require employee to serve until vesting

date to be eligible for payment Forfeiture of unvested deferred compensation on resignation is not an unreasonable

restraint on trade (Levinsky v. The Toronto-Dominion Bank) Employee may be permitted to vest pro-rata on retirement provided executive

doesn’t work for a competitor prior to end of performance period o Award forfeited if executive competes during such period

Consulting Arrangements Key employee may be retained on a part-time or consultancy basis at the end of

their employment agreement o These types of arrangements may serve to keep key employees exclusively

engaged by a company while transitioning out of the business Responding to Suspected Solicitation Do you care? Is there proof? Monitoring Reminder letter

o obligations and impact on deferred compensation Consider practical solutions Litigate When Does LinkedIn Activity Violate a Non-Solicit? Updating work history = solicitation? Client lists on LinkedIn = confidential information? Judicial guidance

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TAB 10

Recent Developments in Commercial Leasing:

The Top Five Things You Need to Know

Lisa Borsook

WeirFoulds LLP

February 27, 2017

7th ANNUAL


Recent Developments in Commercial Leasing Page 1 of 12The Top 5 Things You Need to Know

Recent Developments in Commercial LeasingThe Top 5 Things You Need to Know Now

by: Lisa A. Borsook, Executive Partner, WeirFoulds LLP*

These are challenging times in commercial leasing. Let us say at the outset, that commercial leasing in

the context of retail is different from commercial leasing in the context of industrial, or office, or multi use,

or ground leases. Each of these sectors has experienced different challenges from what you may have

read about in the paper – while the price of land continues to grow by leaps and bounds in the Greater

Toronto Metropolitan area, it is fair to say that the number of credit worthy tenants has not kept pace, and

particularly in the retail sector, a number of tenants are struggling. The development of office buildings in

the downtown core continues apace, but the suburban market is sluggish. Industrial development is good

so long as the buildings are constructed to accommodate the specific needs of that tenant community.

The impact of e-commerce and changes in working environments has been significant in all sectors.

Suffice to say, the tenant community is cautious.

On the other hand, the landlord community is inventive. There are a number of ambitious developments

on the drawing board, including every component – retail, office and residential – and existing properties

are being slated for further development and redevelopment as well.

As a leasing lawyer what do you need to know? As always, it’s about location, location, location. And if

you are a tenant with a solid covenant – you can currently expect to most likely have the upper hand in

lease negotiations for the foreseeable future, but the business cycle is changing all the time, and none of

us can predict the impact that changes in the American political landscape will have on all aspects of our

businesses. As in all things legal, the time period within which deals need to be accomplished is shrinking

more quickly than ever and straight to lease deals are not uncommon any longer. The challenge for any

lawyer is getting the deal correct – non binding letters of intent more often than not barely contain the

essentials of the arrangement and everything else needs to get filled in and finalized quickly – don’t forget

– leases currently run up to 60 pages in length, not including the schedules. The Landlord and Tenant

Work schedule alone can be as long as 20 pages. Completing a lease on behalf of a tenant that is

expecting a well negotiated document can become an expensive proposition! My recommendation is that

you not leave these matters to dilettantes. You need an experienced, pragmatic, creative lawyer in your

corner who understands the interrelationship between all of the lease provisions and what matters most

to you!

In the lease, there are some provisions that you need to understand well – exclusive provisions,

co-tenancy provisions and risk allocation provisions, for instance. These provisions are complicated and

should be negotiated carefully. In addition, any provision that grants a special right – whether it is a right

to extend, a right to terminate for demolition or redevelopment, a right of first refusal or a right of first offer,

an early termination right, etc. etc. – these rights must not suffer from any kind of ambiguity. The

preconditions and time frames must be clear and comprehensive and well drafted.

What follows is a description of those five recent developments that in my view have affected lease

negotiations more than any other in recent years:

* Portions of this paper are extracted from “Update on Good Faith in Commercial Leasing”, prepared by Lisa Borsook and Aaron Kempf for the Six Minute Commercial Leasing Lawyer series, 2016.

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A. LANDLORD’S RIGHTS IN THE EVENT OF A TENANT’S BANKRUPTCY– LESSONS LEARNED FROM THE TARGET CASE

Since 2002, when Crystalline Investments Ltd. v. Domgroup Ltd. (2002), 210 D.L.R. (4th) 659 (Ont.

C.A.); aff’d [2004] 1 S.C.R. 60, was decided, it has been a principle of commercial leasing that the

repudiation of the lease did not affect the original tenant’s obligations under the lease. In this decision the

Supreme Court also overruled Cummer-Yonge Investments Ltd. v. Fagot [1965] 2 O.R. 152 (H.C.);

aff’d [1965] 2 O.R. 157 (C.A.)], such that post-disclaimer, assignors and guarantors would be treated the

same with respect to liability.

For many years, landlords were forced to draft their leases carefully and creatively in order to circumvent

the ruling in Cummer-Yonge and continue to hold guarantors liable in situations where the tenant went

into bankruptcy. Landlords classified guarantors as “indemnifiers” and had the indemnifier enter into an

indemnity agreement that specifically provided that the indemnity would survive a disclaimer of the lease

by a bankrupt or insolvent tenant. The guarantor was deemed to be a principal and not a surety (this way

the guarantor’s obligation was not a secondary obligation) and landlords’ standard form leases would also

compel guarantors/indemnifiers to covenant that they would dutifully perform and observe all covenants

and obligations in the lease. The guarantor/indemnifier would be obliged to enter into a lease directly with

the landlord in the event that the lease was disclaimed due to a bankruptcy or insolvency of a tenant for

the remainder of the term. Landlords also inserted clauses in the lease that stated that the

guarantor/indemnifier was jointly and severally bound with the tenant for the fulfilment of all covenants

and obligations of the tenant under the lease and that the liability of the guarantor would not be released,

discharged, extinguished or diminished by a bankruptcy of the tenant. After Crystalline, the language of

indemnities, drafted to avoid the application of Cummer-Yonge, did not change. And for that reason,

although likely not only for that reason, the Target bankruptcy stands out in the minds of commercial

leasing lawyers – because in exercising its jurisdiction under the Companies’ Creditors Arrangement Act

(the “CCAA”), the court nearly took away the Landlord’s rights in the event of a tenant company’s

bankruptcy to look to its guarantors/indemnifiers for compensation.

So what happened in the Target bankruptcy? Zellers was purchased by Target for 1.8 billion dollars in

2011 and the Zellers leases were assigned to Target, with changes that, generally speaking, landlords

were happy to make. Target Canada was formed to take the assigned Zellers leases. Target went into

business, but Canadian consumers were not impressed. Then in January of 2015 it filed for CCAA

protection in respect of its 133 stores and by April of that year, all of the stores had been closed. It had

invested about $7 billion in total in the failed expansion. It liquidated its inventory, terminated its 17,600

employees (for which it set aside about $70 million or $4000 per employee) and embarked on a process

to sell its real estate portfolio. At that time, it had an intercompany debt of $1.9 billion to its American

parent. Target Canada used the CCAA, a statute originally introduced so that debtors would be given an

opportunity to arrange their business with a view to continuing operations. In this case Target had no

intention of continuing its operations. Ordinarily, bankrupts turned to the Bankruptcy and Insolvency Act

(the “BIA”). Nonetheless, the court decided it had jurisdiction to grant the CCAA order, including a broad

stay of proceedings (including a stay of guarantee rights), the appointment of a Monitor, the granting of

certain restricting powers and certain provisions specific to landlords. Significantly, the original order was

amended to add what is now considered the pivotal paragraph 19A, which provided that the claims of any

landlord against Target US (the guarantor/indemnifier of many of the leases) would not be determined in

the CCAA proceeding or affected in any way by any plan filed. In return for the inclusion of this

paragraph, the landlords agreed not to oppose the CCAA process and to refrain from pursuing

proceedings in bankruptcy under the BIA.

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Target then decided to run a real property portfolio sales process rather than a sale of investment

solicitation process. At the outset, Ivanhoe Cambridge and Oxford, which were landlords of 11 locations,

made a substantial one time only offer of $134 million for the surrender of the 11 leases. Of Target’s 133

leases in Canada, 74 were disclaimed, 20 were surrendered, 12 were assigned to Lowes, 1 was assigned

to Rona, 12 were assigned to Canadian Tire and 12 were assigned to Walmart. Approximately 55 retail

and 19 warehouse and office space leases, failed to attract any interest.

For those landlords with guarantees from the US Parent, which was clearly solvent, it was lucky that the

language of the original order protected their rights in respect of those guarantees, regardless of how the

process of liquidating the tenant and protecting the other creditors proceeded. In December of 2015

Target put forward a proposal which might have resulted in the guarantees being released in exchange

for Target US releasing its intercompany debt. Had Target’s request been granted, Target would have

been, effectively, reneging on its deal under section 19A of the original order and the court would have

been ordering the release of all of the indemnifier’s obligations to the landlords. This proposal was

rejected by the court. Ultimately, the terms of the court’s final order gave protection to the landlords as a

result of the existence of those guarantees. This got especially tricky because the US Parent was Target

Canada’s largest creditor, and whatever amounts it had to pay out to the landlords were likely to become

part of their subrogated claim against the assets of Target Canada.

The Target bankruptcy also highlighted the significance of co-tenancy rights. A co-tenancy clause is a

clause which gives relief to a tenant in the event of a closure of an anchor tenant or a fixed percentage of

other tenants. There are a variety of types of co-tenancy clauses – opening co-tenancies – where the

tenant doesn’t have to open until another anchor or percentage of tenants open and ongoing co-tenancy

clauses where it is usually the case that some percentage of tenants must be operating. Co-tenancies are

tricky and from a business perspective, fraught with peril. It is extremely difficult to replace one anchor

with another in this retail market. Each of the tenant and the landlord has to consider its investment in the

location and what will be lost or retrieved by the application of a co-tenancy provision. The negotiation

and drafting of these clauses must be carefully considered from the outset. The trick with co-tenancy

clauses is identifying the remedies that a tenant will have in the event of the failure of the co-tenancy

requirement. The remedies usually fall into a few principal categories – a rent reduction, a right to “go

dark” and/or a termination right and related issues, involving the timing of replacement of a lost anchor.

In the case of the Target CCAA application, the co-tenancy rights of tenants were stayed, which means

that they weren’t allowed to exercise them so long as the stay was in effect. The problem is, once the

stays were lifted, what was the impact on landlords and tenants? Were the tenants entitled to recover

overpayments of rent from landlords that were paid during the period of the stay? Did they have to wait

any time periods prescribed in their leases to exercise their rights? If they had a termination right, which

perhaps was exercisable only within a certain period of the anchor’s closure, did they still have that right?

If they did still have the right, what of their claims for the costs associated with staying open during the

period of time that they would otherwise have been entitled to terminate their leases? We do not have

answers to these questions. To my knowledge, the co-tenancy issues were settled directly between the

affected tenants and their landlords and were not the subject of a judicial decision.

So what did we learn from the Target experience – that no tenant is insolvency proof, that the CCAA

gives the court a far broader reach to affect the parties’ rights under their lease than was ever anticipated,

and arguably far broader than that under the BIA, protection in the way of a guarantee/indemnity can

prove to be pivotal in protecting your interests (and in that regard the decision in York Realty Inc. v.

Alignvest Private Debt Ltd. [2015 ABCA 355] relating to the characterization of amounts as security

deposits rather than prepaid rent, effectively requiring the landlord to return the security deposit to the

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tenant’s monitor, is of interest], and that the far reaching implications of co-tenancy clauses are not to be

underestimated.

B. THE BHASIN CASE AND THE DOCTRINE OF GOOD FAITH

The Highway Properties case [Highway Properties Ltd. v. Kelly, Douglas & Co., [1971] S.C.R. 562]

stands for the proposition that “It is no longer sensible to pretend that a commercial lease is simply a

conveyance and not also a contract.” The notion that a lease is a commercial contract, and subject to the

same principles of construction as any other contract, is now a fundamental part of how we treat all of the

provisions of a lease. The Court’s decision in the Bhasin case [Bhasin v. Hrynew [2014]3 SCR 494]

reminds us of this.

The doctrine of good faith in the context of commercial leasing is an interesting one. Generally speaking,

there is no duty of good faith during contract negotiations. There is no duty to bargain in good faith and

hard bargaining still reigns. However, there is a duty to perform a contract in good faith. This duty has so

far been limited to the four corners of a contract; it has yet to create unbargained-for rights and

obligations nor has it deviated from the express terms found within the contract. The duty of good faith

compels the parties to act fairly and reasonably in fulfilling their obligations under the lease.

In the past, the Courts generally preferred to discuss good faith in the context of other already existing

doctrines such as equity, misrepresentation, collateral promises, mistake, duress, warranties and

conditions, fundamental breach, waiver and estoppel, unjust enrichment, restitution, fiduciary duty,

unconscionability, contract interpretation, implied terms, undue influence, and derogation from grant. But

in Bhasin, the Court clarified the role of good faith in contractual relations under Canadian common law.

In its unanimous decision, Cromwell J., writing on behalf of the court, recognized good faith contractual

performance as an “organizing principle” of the common law of contract, which “underpins and informs

the various rules in which the common law, in various situations and types of relationships, recognizes

obligations of good faith contractual performance.”1

The Court clarified that good faith as an organizing

principle signifies “that parties generally must perform their contractual duties honestly and reasonably

and not capriciously and arbitrarily.”2

Courts may use the organizing principle to develop the law, provided

that doing so is consistent with the fundamentals of contract law and in particular, a party’s ability to

pursue its own self-interest.3

More specifically, the duty to act honestly in the performance of contractual

obligations requires that parties “not lie or otherwise knowingly mislead each other about matters directly

linked to the performance of the contract.”4

In light of the Court’s decision in Bhasin, it appears that while parties are still entitled to pursue their own

self-interest throughout the performance of a contract, they must also ensure that they conduct

themselves in an honest manner, while having regard to the legitimate interests of their co-contracting

party. Although the concept of good faith does not necessarily trump the established doctrines of

contractual interpretation, it is an important organizing principle that informs the application of such

doctrines in particular fact situations.

Looking at Bhasin in the context of commercial leasing, I would provide the following general comments:

1 [2014] 3 SCR 494 at para 33.2 Ibid at para 63.3 Ibid at paras 66, 70.4 Ibid at para 73.

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1. In the area of contract formation and contract negotiations, the issue of whether there is

a duty of good faith continues to be litigated. Bhasin established a duty of good faith in

the performance of a contract, but did not create a duty of good faith in the pre-

contractual stage. While it has long been recognized that there is an obligation to

perform the obligations of a contract in good faith, absent special circumstances such

as employer/employee and franchisor/franchisee relationships, no court has suggested

that there is a general duty to negotiate in good faith. Courts are cautious about

creating rights for which the parties have not bargained. Nonetheless, recent case law

suggests that a duty to negotiate in good faith may exist in certain circumstances. For

instance, in SCM Insurance Services Inc. v. Medisys Corporate Health LP,5

one party,

Cira agreed to waive a restrictive covenant it held against Medisys on the condition that

Cira would have the first opportunity to negotiate for the purchase of a business that

Medisys was buying. The parties were unable to reach an agreement and Medisys

subsequently sold the business to Cira’s competitor. The court held that although there

was no express covenant between the parties to negotiate in good faith, such an

obligation was implied as “a necessary corollary” of Cira’s waiver of the restrictive

covenant.6

In the court’s view, “the parties must have intended that the Medisys

obligation to offer the Business to [Cira] would constitute an enforceable obligation”.7

However, the court held that no breach had occurred on the basis that Medisys’ position

with respect to the terms of the sale was not unreasonable and that there was no

evidence to suggest that Medisys did not honestly believe their approach to be credible.

2. In the area of lease performance, Bhasin established a duty of good faith in the

performance of a party’s contractual obligations, which arguably was already supported

by the case law. With respect to the duty of good faith and entire agreement clauses,

Bhasin held that the concept of good faith operates regardless of the existence of an

entire agreement clause. The Court recognized the existence of a new duty of honest

contractual performance as a general doctrine of contract law that operates

independently, irrespective of the intentions of the parties. As such, the parties cannot

exclude the duty of good faith by an entire agreement clause.8

Since the release of

Bhasin, there have been very few leasing cases that discuss the duty of good faith in

the performance stage of a contract. Bhasin certainly imposes an independent duty of

good faith in the performance of a party’s obligations under a lease, but the scope and

specific parameters of that duty have yet to be fully determined. However, subsequent

non-leasing cases have given further meaning to the duty of honesty and good faith in

the context of contractual performance. For instance, despite the fact that the Court in

Bhasin defined good faith as a general organizing principle, the jurisprudence post-

Bhasin appears to be conflicting with regard to whether the duty of good faith

constitutes an implied contractual obligation. How significant the difference between

these two interpretations is remains to be seen, but it certainly indicates that there may

be some inconsistencies in how Bhasin is applied going forward. There has also been

some elaboration on what is meant by “appropriate regard” to legitimate interests of the

other contracting party. And in the recent case of Data & Scientific Inc. v. Oracle Corp,9

Belobaba J. of the Ontario Superior Court of Justice held that the decision in Bhasin did

5 2014 ONSC 2632 [SCM].6 Ibid at para. 35.7 Ibid.8 Ibid at para 74.9 2015 ONSC 4178 [Data & Scientific].

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not eliminate the “pre-existing situational and relational aspects or pockets of implied

good faith (such as the obligation to exercise discretionary contractual powers

reasonably)”, but simply realigned these aspects under a broad organizing principle of

good faith.10

The court further held that the Supreme Court’s concern and focus in

Bhasin was dishonesty, and not unreasonableness, and that the decision in Bhasin

“does not stand for the (extreme) proposition that under no circumstances does a “sole

discretion” contract renewal power have to be exercised reasonably.”11

This case

suggests that parties must distinguish between a duty of honest contractual dealings

and a duty of reasonable exercise of contractual obligations and powers. This could be

significant in affirming the continuing ability of a landlord or a tenant to refuse to consent

to a particular request (such as an assignment or interference with visibility or site lines)

where the lease provides that doing so is at the party’s sole discretion or that consent

can be unreasonably withheld.

However, other aspects of the application of Bhasin are less clear. In the commercial

leasing context, there has only been a handful of cases even mentioning Bhasin and in

our view none of these cases have ushered in sweeping changes to leasing law.

However, that is not to imply that the future application of the principle of good faith

could not alter the current practice of leasing law. For example, it is unclear what impact

Bhasin may have on certain special rights that are found in a lease such as demolition

clauses, damage and destruction clauses, relocation rights, termination rights, site plan

controls and obligations relating to the measurement of space. If these are all now

subject to an obligation of good faith, what will that look like in practice? To take one

example, suppose an option to extend the term of a lease states that the rent will be

agreed upon by the parties, but does not provide for recourse to arbitration should an

agreement fail to materialize. This is an example of a classic “agreement to agree”,

which courts have historically held are unenforceable. To be enforceable, an extension

or renewal option in a lease must indicate, among other things, the amount of rent

payable throughout the extension or renewal term. This is typically addressed by either

fixing the rent at the outset of the lease, or by providing that the parties will come to an

agreement on the rent once the tenant exercises the option to renew or extend. If the

latter option is used, the lease must also provide a formula (such as fair market rent)

and a mechanism (such as arbitration) for determining the rent. Where such a formula

or mechanism is not specified, courts have typically held that the option is merely an

agreement to agree, rather than an enforceable contract. Nevertheless, could an

arbitration provision be implied into a lease on the basis of good faith?

Even in the wake of Bhasin, to date, no court has suggested that good faith mandates

implying substantive rights into a contract. Indeed, in one of the few leasing cases citing

Bhasin, the court commented that Bhasin does not disentitle a party to a lease from

relying on an express term negotiated by the parties.12

This flows from the idea, noted

in Bhasin, that a party pursuing its own self-interest is not necessarily acting contrary to

good faith and that such behaviour may in fact be encouraged on the basis of economic

10 Ibid at para 11.11 Ibid at paras 14, 17.12 In this instance, it was the Landlord’s ability to arbitrarily withhold consent to an assignment of the lease. See Hudson’s Bay Co. v. OMERS Realty Corp., 2015 ONSC 4671 at para 32, where the court states that it is “not persuaded that Bhasin disentitles [the landlord] from relying on an express term of a contract negotiated by sophisticated parties.” It is not clear what the court would consider unsophisticated parties and how critical this characterization was to the ability of the parties to rely on the contract.

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efficiency.13

Thus, if an option is drafted as an agreement to agree, the parties should

be permitted to rely on that structure, assuming that one of the parties did not mislead

or deceive the other into agreeing to it. However, suppose that an option is drafted as

an agreement to agree and the landlord insists on rent of $60 per square foot, while the

tenant honestly believes that fair market rent is $30 per square foot. If the tenant can

support its position with evidence, could it argue that the landlord is not acting in good

faith and have a court impose either a duty to negotiate in good faith or a mechanism to

determine the rent? As noted previously, while no court has suggested that there is a

general duty to negotiate in good faith, courts have implied such a duty in certain

situations. For example, where an option requires the parties to negotiate the rent, it

has been held that this requires the landlord to negotiate in good faith and not to

withhold agreement unreasonably.14

That being said, even where a duty to negotiate in

good faith has been found to exist, it has not resulted in the implication of new

substantive rights, such as a right to match an offer being read into a contract.15

Implying an arbitration mechanism into a lease agreement, along with the various

obligations necessitated by it, would certainly constitute a new substantive right. Given

the direction provided by the Court with respect to the scope of good faith, and the

Court’s concern with respecting the terms of a contract, it is unlikely (but not

inconceivable) that a court would take such an action on the basis of good faith.

However, a recent Ontario Court of Appeal decision indicates that courts may get there

through other means. In Mapleview-Veterans Drive Investments Inc. v. Papa

Kerollus VI Inc. (Mr. Sub)16

the court held that even though a renewal clause in a lease

did not provide for arbitration, if the parties were unable to agree on the “current rates”

for the renewal rent, this did not render the option unenforceable as the parties could

resort to “judicial or other binding means” as the lease did not explicitly preclude this

option.17

Thus, it may no longer be necessary to express both a formula and a

mechanism for determining rent for a renewal or extension term. A formula alone may

be sufficient.

In the result, in a situation where an extension or renewal option takes the form of an

agreement to agree, the organizing principle of good faith and the duty of honest

contractual performance likely require the parties to take positions that are honestly

held and supported by credible evidence. In some circumstances, depending on the

wording of the lease and the conduct of the parties, a court may even find there is a

duty to negotiate in good faith. However, it seems unlikely that a court would use good

faith as a means of imposing a rent determination mechanism, such as an arbitration

clause, into an option where the parties expressly chose to draft it as an agreement to

agree. However, based on Mapleview, at least in the context of a rent determination

mechanism in a renewal or extension term, parties may not need to rely on good faith to

achieve such a right. It remains to be seen whether good faith arguments will be relied

upon to try to obtain other substantive rights going forward.

13 Bhasin, supra note 1 at para 70.14 Calmed Professional Centre Inc. v. Barbara Chipeur Professional Corp., 2005 AWLD 2520 (Alta Q.B.).15 SCM supra note 5.16 2016 ONCA 93 [Mapleview].17 Ibid. at para 26.

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In conclusion, although the decision in Bhasin represents a significant development in

the role of good faith in contractual dealings under Canadian common law in general, it

does not appear to have ushered in a new era in leasing law. This is perhaps not

surprising, as the Court in Bhasin itself noted that “the development of the principle of

good faith must be clear not to veer into a form of ad hoc judicial moralism or ‘palm tree’

justice” and “should not be used as a pretext for scrutinizing the motives of contracting

parties.”18

However, this does not necessarily mean changes are not coming as courts

are still defining the scope and breadth of the duty of good faith. In the context of

commercial lease agreements, there are still many unanswered questions with regard

to the organizing principle of good faith and its interaction with various rights and

obligations that are unique to a commercial lease.

C. MIXED USE DEVELOPMENTS – THEY’RE COMPLICATED

Mixed use developments are becoming increasingly common, particularly in urban areas, where you

often see a mix of office, retail and residential uses in a single development, using condominiums to effect

the format. In so doing, the developer can maximize the use of a smaller piece of land (and

correspondingly, its return on investment) and also may create more flexibility in terms of attracting equity

and financing. Each component of the mixed use development – be it office, retail, residential, or some

other use (i.e. a hotel use) – carries with it different levels of risk and will attract a different group of

potential purchasers. In addition, the combination of different types of uses may heighten the overall

attractiveness of each of the uses – by way of example, a residential development may be more attractive

with a retail grocery use as part of the retail component, and vice versa. And while condominiums are still

rarely used in Canada for shopping centre developments, they are commonly used for mixed use

developments on account of the flexibility created by the condominium structure in terms of marketing,

financing, sale, and other factors. In summary, while mixed use developments are more complex than

standard single purpose developments, the increased rates of return make them attractive options,

particularly in an urban setting. It is important to understand that the creation of a condominium

corporation for a mixed use development will affect standard commercial leasing, both from the landlord’s

and the tenant’s point of view. And generally speaking, the mixed use development creates other

challenges for a commercial leasing lawyer; balancing the interests of office, retail, residential, parking

and other elements can be a much more complex exercise. For instance, if you are representing a tenant,

one of the most important things to consider is your client’s particular use, vis-à-vis the other uses of the

development. How those other uses will affect your client’s use, what mix of uses is most beneficial to the

development as a whole and to your client in particular, the particular challenges associated with

particular types of uses, how a variety of uses may affect the costs payable by your client, or the

allocation of those costs to your client – these are all issues which must be considered when negotiating

a lease for a mixed use development.

Amongst the important issues to consider in a multi-use development (condo or not), special attention

needs to be paid to definitions and timing, control (and who has it), other agreements and documents to

which the mixed use development is subject (in addition to the condominium documents if a portion of the

mixed-use development is condominiumized), use, exclusive and other restrictions, payment of common

expenses, shared building systems, approval requirements, information disclosure obligations, whether

tenants have any rights to remedy the Landlord’s default, representations and warranties, and damage

and destruction provisions (which may be affected by the relevant condominium legislation as well.)

18 Bhasin, supra note 1 at para 70.

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D. OPERATING COSTS – THIS ISSUE IS NEVER GOING AWAY!

Most all of the commercial leases that we encounter today are net leases; sometimes “triple net”,

“net/net”, “absolutely net” or “completely triple net and carefree”. What a net lease basically anticipates is

that the tenant will be responsible for paying most, if not all, of the operating and other costs associated

with the operation of the particular building, shopping centre, or development in which the premises are

located. Additionally, landlords charge administration or management fees on top of operating costs and

tenants are often expected to reimburse landlords not only for day-to-day management and operational

costs, but also for other long term costs such as capital taxes, depreciation and amortization of capital

costs, and interest on the undepreciated portion of capital costs. In the ordinary course, capital

expenditures, such as roof, parking lot, structural, and HVAC equipment replacement expenses of a

capital nature, are also to be reimbursed by tenants.

Though a landlord may intend to recover all of the costs of a project, its success in doing so depends on

the negotiated language of the offer and then the lease. Regardless of the reference to carefree triple net,

triple net or other character of the lease, what really matters is the actual intention of the parties as

reflected by the language of the lease How the language of the lease is negotiated depends largely on

two key factors: (a) the relative bargaining position of the landlord as compared to that of the tenant; and

(b) the overall economic conditions that prevail at the time the offer or the lease is entered into. Generally,

a large landlord with a successful development will be able to insist on having the tenant pay for virtually

all of the costs of the project, particularly if the tenant is relatively weaker. However, there are also cases

where it is the tenant who wields more power and is able to bargain for reductions or exclusions from

operating costs payable; this is usually the case when the tenant brings other benefits to the project, such

as heavy foot traffic, a large reduction in vacant space, or a strong desirable covenant.

Generally speaking, those operating cost items that attract the most attention during negotiations include

management and administration costs, including internal management costs, imputed rent charges and

administrative costs of off-site personnel, taxes (realty, vacancy rebates, business taxes and capital taxes

in particular), capital costs vs. current expenditures (the recent case of RioCan Holdings Inc. v. Metro

Ontario Real Estate Limited 2012 ONSC 1819, is an example of the consequences of not classifying

the nature of an expense as either current or capital), reimbursable costs (whether through insurance

(often less deductibles) or recoveries on guarantees or warranties, and costs which are specifically

attributable (and chargeable) to another tenant), proportionate share allocations and exclusions

therefrom, disproportionate use, “gross-up” clauses, insurance recoveries, legal, accounting and other

consultants’ fees and structural fees and expenses.

What is clear is that relying only on the “net clause” clause in a lease in order to be able to claim all of the

operating costs associated with a development may be imprudent. Most landlords attempt, in principle, to

keep operating costs down; this is a wise business decision, needed to attract all types of tenants to their

projects. But when all is said and done, the issue of whether certain operating costs will end up being

included in the lease will generally depend on the relative bargaining positions of the parties and may

depend less on the substantive reasons for including or excluding them. One final note: the right of the

tenant to review and contest a landlord’s statement of operating costs and/or taxes is an issue that is

often a hotly negotiated one and subject to limitations considerations as well.

E. OTHER RECENT TRENDS IN COMMERCIAL LEASE NEGOTIATION

There are certain trends in commercial leasing that are always present, amongst them: (i) the greening of

leases to ensure that landlords can pass along to tenants costs associated with various green initiatives,

and from the perspective of tenants, to ensure that landlords fulfill their promises with respect to green

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initiatives; (ii) the inroads into the typical carefree triple net lease standard that have been made by

tenants with bargaining power, including standard exclusions from operating costs, mutual release and

indemnity provisions and the like and to some extent, the insistence by large powerful tenants that their

form of lease be used in preference to that of the landlord, particularly for ground and anchor leases. The

single most prevailing trend in commercial leasing – the concentration of property in the hands of REITs,

pension funds, and other institutional landlords, and the corresponding use of standard forms by those

landlords, particularly in the context of tenants without significant bargaining power – is one that affects all

lease negotiations. When portfolios of properties are being assessed to determine rental structures, both

for basic rent and additional rent, it is inevitable that the trend towards standardization of the commercial

leasing process is going to continue to escalate, particularly in circumstances in which Canadian property

values have continued to escalate.

Having said that, there are a couple of areas in respect of which lease negotiation has been particularly

focussed as of late:

1. Additional Rights – Tenants are endeavouring to anticipate changes in their future, by

requesting additional rights in their leases. These additional rights can take a variety of

forms: expansion, termination, downsizing, assignment, subletting, relocation,

telecommunication, parking, co-tenancy, change of use, no-build and other provisions.

Granting to any tenant any one of these rights has implications for the entire centre, and

careful wording is fundamental, to ensure that landlords don’t affect the existing rights

of other tenants in the centre, and that the rights granted are not so broad as to make

them difficult to deal with in the future. When drafting provisions to deal with these

rights, consideration must always be given to the other provisions of the lease, and the

implications of a tenant default, change in use and other changes that affect the

tenancy.

2. Site Plan Issues – Landlords want to attract tenants to their prospective new

developments. But those developments may not be strictly shopping centres – they

may have multiple uses – office, residential and retail, which are routinely accompanied

by a host of site plan and other issues. Historically, landlords’ attitudes have been –

“This is my centre, and I will do what I want.” But that attitude doesn’t complement its

office or residential objectives. And as such, a host of new issues arises in connection

with leasing documentation relative to site plan development, construction and

redevelopment issues, exclusive and use restrictions, parking rights, and the like. Site

plan issues, in particular, with the prevalence of pad sites and anchor tenancies with

significant restrictive covenants affecting the entire centre, have become increasingly

complex.

3. Financing – Financing may not be as difficult to get but the requirements associated

with it are more rigid than ever. Landlords and tenants are experiencing a host of issues

relative to financing. Whether the issues arise on account of the strength of the

covenant of the parties, securing payment of their obligations in some way, restrictions

on changes in the covenant, non-disturbance agreements, offset rights, insurance

proceeds or risk allocation, there are legal implications in all leasing documents that

must be considered whenever mortgage financing or equipment financing issues arise.

These financing arrangements impact a broad cross section of legal documents – not

just mortgage documents, but also leases, non-disturbance agreements, estoppel

certificates, intercreditor arrangements, landlords’ waivers re distress and other like

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documents. Suffice to say, you are not just dealing with a lease or a mortgage any

more.

4. The Ever-Evolving Grocery Store – It has become harder and harder to figure out

what is a grocery store and what is not. Grocery stores look like department stores,

pharmacies look like grocery stores, and specialty stores that primarily stock groceries

are popping up all over. Everyone wants to be protected from competition, and all in all,

food uses are becoming a morass of legal complications.

5. New Legal Trends – A couple of other trends are worth mentioning:

i. Equitable Remedies – The courts will strain to use equitable remedies in

circumstances where strict contractual interpretation leads to absurd commercial

results or where there has been unfair conduct between the parties. The results

have been, in some cases, peculiar. The important overriding principles would

seem to be that while leasing agreements have gotten longer and longer, with a

view to elaborating on all of the various foreseeable and unforeseeable

circumstances that might arise over the period of a long term relationship, the

courts are endeavouring to discern from the document, viewed as a whole, some

more general principles in order to effect what they perceive to be a more

equitable result. It is also becoming clearer that, in the absence of language that

protects a party’s specific interests, the courts may use equitable remedies,

sometimes to effect a result that may not have been intended by the parties.

Special notice of recent cases relating to the use of injunctions as a judicial

remedy and relief from forfeiture applications should be made, as well as a spate

of cases dealing with waiver.

ii. Fundamental Breach and Exclusion Clauses – Pursuant to the doctrine of

fundamental breach, an innocent party can stop performing its obligations under a

contract if the other party had committed a breach that was so “fundamental” that it

denied the innocent party of “substantially the whole” of the contract’s benefit.

Even if the contract contained a clear and express “exclusion clause” limiting

liability, fundamental breach allows a court to refuse to enforce this clause and

allow the innocent part to sue for damages that would have otherwise been

excluded. However, the Supreme Court’s decision in Tercon Contractors Ltd. v.

British Columbia (Transportation and Highways)19

has, it’s been argued, laid to rest

the doctrine of fundamental breach in Canadian contract law relating to

construction procurement cases. It is uncertain what impact this will have on

commercial leasing contracts.

iii. Transfers – Important developments have also transpired in the context of

assignments. Most notably, courts are loath to permit landlords to terminate the

lease when a request for a transfer is made without providing an opportunity for

the tenant to withdraw its request. Having said that, there is also case law to the

effect that the Landlord’s right to terminate stands apart from the right to withhold

consent, such that while the latter may be required to be exercised reasonably, the

former need not. The issue of change of control took prominence in the Hudson’s

Bay Co. v. OMERS Realty Corp. [2016 ONCA 113], which should be reviewed

19 [2010] S.C.J. No. 4.

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carefully and will likely result in some landlords redrafting their change of control

provisions.

iv. Allocation of Risk – There have been a number of recent cases dealing with

allocation of risk, some in the context of damage and destruction and negligence,

and others relating specifically to indemnification provisions and waiver. One

interesting case, Deslaurier Custom Cabinets Inc. v. 1728106 Ontario Inc [2016

ONCA 246], should be reviewed in the context of indemnification and obligations to

insure.

In conclusion, of all of the things you need to think about when entering into a commercial leasing

relationship, perhaps the most important of all is that it’s complicated, and if you have the bargaining

power to effect change and you want to exercise it, make sure you are getting what you asked for!

Commercial leases are long; the tenure for which you are bargaining may also be long. In the result, the

implications of your bargain may be significant to your business for a long period of time and should not

be treated cavalierly!!

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