Summaries Sunday: Supreme Advocacy

One Sunday each month we bring you a summary from Supreme Advocacy LLP of recent decisions at the Supreme Court of Canada. Supreme Advocacy LLP offers a weekly electronic newsletter, Supreme Advocacy Letter, to which you may subscribe. It’s a summary of all Appeals, Oral Judgments and Leaves to Appeal granted from August 21 – October 17, 2024 inclusive.

Appeals

Bankruptcy & Insolvency: Corporate Attribution; Fraud & No Benefit Exceptions
Aquino v. Bondfield Construction Co., 2022 ONCA 202; 2024 SCC 31 (40166)

The S.C.C. already established that the corporate attribution doctrine is not a “standalone” principle; there is no one-size-fits-all approach. The corporate attribution doctrine must be applied purposively, contextually, and pragmatically to give effect to the policy goals of the law under which a party seeks to attribute to a corporation the actions, knowledge, state of mind, or intent of its directing mind. Rules of attribution that may be appropriate in one context for one purpose may be inappropriate in another context for another purpose. When the rules of attribution undermine the purpose of the law under which attribution is sought, the court should adapt the attribution rules to promote the purpose of the relevant law. The fraud and no benefit exceptions to corporate attribution do not apply in the context of a transfer at undervalue under s. 96 of the BIA. These exceptions would undermine rather than promote the purpose of this statutory provision. The purpose of s. 96 is to protect creditors from harmful actions by a debtor that would diminish the assets available for recovery. That purpose is served by attributing the actions, knowledge, state of mind, or intent of the corporation’s directing mind to the corporation, even if the directing mind acted in fraud of the corporation, and even if the corporation did not benefit from the actions of the directing mind. Badges of fraud are suspicious circumstances from which a court may infer the debtor’s intent to defraud, defeat, or delay a creditor. Case law has recognized the following non-exhaustive examples of badges of fraud: (a) the debtor had few remaining assets after the transfer; (b) the transfer was made to a non-arm’s length party; (c) the debtor was facing actual or potential liabilities, was insolvent, or was about to enter a risky undertaking; (d) the consideration for the transaction was grossly inadequate; (e) the debtor remained in possession of the property for their own use after the transfer; (f) the deed of transfer had a self-serving and unusual provision; (g) the transfer was secret; (h) the transfer was made with unusual haste; and (i) the transaction was made despite an outstanding judgment against the debtor.

Bankruptcy & Insolvency: Corporate Attribution; One-Person Corporations
Scott v. Golden Oaks Enterprises Inc., 2022 ONCA 509; 2024 SCC 32 (40399)

The main question raised by this appeal is how the common law doctrine of corporate attribution should be applied to a “one-person” corporation controlled by its sole officer, shareholder, and directing mind. This question arises in the context of determining whether actions commenced by a trustee in bankruptcy to recover funds that a corporation paid out under a Ponzi scheme are statute-barred under the Limitations Act, 2002. This appeal also raises questions as to whether: (i) the appellants can rely on the principles of equitable set-off under s. 97(3) of the Bankruptcy and Insolvency Act to set off the interest payments they owe the estate against the loan principal owed to them; (ii) the referral agreements are illegal contracts at common law; and (iii) one appellant, Lorne Scott, was dealing at arm’s length from Golden Oaks under s. 95(1)(b) of the BIA. The S.C.C. dismissed the appeal. The S.C.C. noted in Aquino at para. 1, the corporate attribution doctrine “provides guiding principles for when the actions, knowledge, state of mind, or intent of the directing mind of a corporation may be attributed or imputed to the corporation”. The attribution doctrine must be applied purposively, contextually, and pragmatically to give effect to the policy of the law under which attribution is sought. The same principles apply to one-person corporations. In this case, the Court of Appeal properly exercised its discretion to decline to attribute Mr. Lacasse’s knowledge to Golden Oaks because attribution of that knowledge would undermine the purposes of the limitations and bankruptcy provisions at issue. Attribution would create an injustice by precluding the trustee’s claims to recover the unlawful payments before the trustee was even able to assert them. It would also allow the appellants to retain the proceeds of their wrongful conduct of entering into illegal agreements and reduce the value of the debtor’s assets available to the other creditors in bankruptcy. The remaining grounds of appeal were dismissed.

Criminal Law: Out-of-Court Statements; Hearsay
R. v. Charles, 2022 QCCA 1013; 2024 SCC 29 (40319)

The trial judge here erred in admitting a witness statement in writing into evidence at trial. The results of the search subsequently conducted at the witness’s residence do not meet the Bradshaw criteria for corroborative evidence. Because the Crown sought to use the statement to establish the appellant’s role in the events, it was required to show that the search results confirmed that aspect of the statement. As for the circumstances surrounding the statement, they do not support a finding that threshold reliability is established. Moreover, the majority of the Court of Appeal should not have relied on the complainant’s testimony, tendered outside of the voir dire, to establish threshold reliability. On appeal, the appropriate mechanism for considering the complainant’s testimony is the curative proviso in s. 686(1)(b)(iii). However, that provision cannot be applied in this case. It is therefore unnecessary to decide the discrete question of the self-contained nature of the voir dire at the trial stage, especially since the trial judge expressly declined to consider evidence not tendered in the voir dire, by agreement of the parties. The admissibility of hearsay evidence is a question of law. However, an appellate court must accord deference to the findings of fact underlying an admissibility ruling. It must also be borne in mind that “a trial judge is well placed to assess the hearsay dangers in a particular case and the effectiveness of any safeguards to assist in overcoming them” (R. v. Youvarajah, 2013 SCC 41, [2013] 2 S.C.R. 720, at para. 31). Thus, “absent an error in principle, the trial judge’s determination of threshold reliability is entitled to deference” (para. 31). In the criminal context, “the threshold reliability analysis has a constitutional dimension because the difficulties of testing hearsay evidence can threaten the accused’s right to a fair trial” (Bradshaw, at para. 24). By ensuring that only hearsay that is necessary and reliable is admitted, “the trial judge acts as an evidentiary gatekeeper. She protects trial fairness and the integrity of the truth seeking process” (para. 24). Care must be taken to preserve the balance struck by Bradshaw between the flexibility required by the principled exception and protection against the risks posed by corroborative evidence.

Transportation: Air; Passenger Compensation; Standard of Review
International Air Transport Association v. Canada (Transportation Agency), 2022 FCA 211; 2024 SCC 30 (40614)

Section 41(1) of the CTA provides for a statutory appeal from the Agency to the Federal Court of Appeal, with leave of that court, on questions of law or a question of jurisdiction. A statutory right of appeal indicates Parliament’s intention for appellate standards of review to apply. As the challenge to the Regulations is on a question of law, the correctness standard applies. That said, findings of fact by the Court of Appeal, including those related to questions of foreign law, are reviewable on the standard of palpable and overriding error. The disposition of this appeal turns on the vires question, which is answered in the negative. Because the Regulations do not provide for an “action for damages”, they do not fall within the scope of the Montreal Convention exclusivity principle. Instead, the Regulations are better understood as creating a consumer protection scheme that operates in parallel with the Montreal Convention, without trenching on its liability limitation provisions. Because the Regulations do not conflict with the Montreal Convention as implemented by the CAA, there is no basis to conclude that they are ultra vires the CTA. For that reason, it is not necessary to consider the alternative arguments by the Attorney General and the Agency regarding: first, whether denial of boarding and cancellation qualify as “delays” for the purposes of Article 19; and, second, whether Parliament has directed the Agency to regulate in a manner that is inconsistent with Canada’s obligations under the Montreal Convention. Because the Regulations fall outside the scope of Article 29, no conflict exists between the Regulations and the Montreal Convention (as implemented by the CAA). As a result the Regulations are not ultra vires the CTA.

ORAL JUDGMENT

Criminal Law: Possession of Stolen Property
R. v. Sabiston, 2023 SKCA 105, 2024 SCC 33 (40937)

Côté J.: “A majority of the Court is of the view to allow the appeal, substantially for the reasons of Tholl J.A. of the Court of Appeal for Saskatchewan. As a result, the conviction is restored and the file is remanded to the Court of Appeal to address the sentence appeal. Justice Moreau is dissenting.” Moreau J.: “I am in substantial agreement with the reasons of the majority of the Court of Appeal. As this Court stated in R. v. Mann, 2004 SCC 52, [2004] 3 S.C.R. 59:

The detention must be viewed as reasonably necessary on an objective view of the totality of the circumstances, informing the officer’s suspicion that there is a clear nexus between the individual to be detained and a recent or on-going criminal offence [para. 34]. There was no clear nexus between the respondent and the particular crime, namely possession of stolen property (see C.A. reasons, at para. 39). The majority of the Court of Appeal did not err in excluding the firearm from evidence under s. 24(2) of the Canadian Charter of Rights and Freedoms. In the absence of a reasonable suspicion, the firearm would not have been discoverable. I would dismiss the appeal.”

Leaves to Appeal Granted

Patents: Obviousness; Patentable Subject Matter
Pharmascience Inc. v. Janssen Inc., et al., 2024 FCA 23 (41209)

Issues of obviousness and patentable subject matter in alleged infringement.

Criminal Law: Prison Reclassification
Dorsey and Salah v. Canada (Attorney General), 2023 ONCA 843 (41132)

Habeas corpus in prison reclassification context.

Immigration/Charter: Non-Refugee Status; Constitutionality
Attorney General of Québec v. Kanyinda, et al., 2024 QCCA 144 (41210)

Constitutionality of non-refugee benefits.

Criminal Law: Arrest
R. v. D.C., 2024 QCCA 86 (41186)

There is a publication ban in this case, in the context of a police officer’s right to arrest.