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The BLG Monthly Update is a digest of recent developments in the law which

Neil Guthrie, our National Director of Research, thinks you will find interesting

or relevant – or both.

IN THIS MONTH’S EDITION:

• Arbitration: Clause restricting appointment of arbitrator to member of Ismaili Muslim community upheld

• Civil Procedure: Letters rogatory not enforced against Crown corporation

• Class Actions: Defendants’ request for particulars granted, but they have to deliver pre-certification statement of defence

• Conflict of laws/Intellectual Property: The Star Wars action figures battle is now over

• Contracts: Lucid judgment from the 7th Circuit affirming that a contract says what it says

• Damages: Québec CA says punitive damages not to be awarded solidarily

• Employment Law: Employer can’t deny severance payment on basis of snarky e-mail sent on last day at work

• Employment Law: Look at substance of employment agreement not form, says UKSC

• Estate Planning/Unjust Enrichment: Gift with strings attached is valid but can’t preclude imposition of constructive trust

• Insolvency: Lehman derivatives transaction did not run afoul of fraudulent conveyance rules, says UKSC

• Intellectual Property: Single colour probably not subject to trademark protection, says NY court

• Partnership: Useful review of indicia

• Personal Property: Be careful what you take to the Antiques Roadshow

• Personal Property/Conflict of Laws: Domain name is personal property and a ‘real and substantial connection’ to jurisdiction, says Ontario CA

• Securities: DC Circuit Court nixes proxy rule requiring inclusion of shareholder nominees

• Securities: Sophisticated investor’s reliance on alleged misrepresentations of adviser not reasonable

• Torts: New South Wales CA weighs in on material contribution

• Unjust Enrichment/Corporate Law: Can the unjustly enriched shelter behind the corporate veil?

• Wills/Estates: ABQB prepared to rewrite will disinheriting adult son

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ARBITRATION

Clause requiring arbitrator to beIsmaili Muslim upheld

The English Court of Appeal declined to uphold an

arbitration clause in a joint venture agreement

which required the arbitrator to be ‘a respected

member of the Ismaili community’: Jivraj v Hashwani, [2010] EWCA Civ 712 [Link available

here]. The court found that this clause violated

UK and EU human rights legislation preventing

discrimination in ‘employment’.

The UKSC has unanimously reversed the Court

of Appeal: Jivraj v Hashwani, [2011] UKSC 40

[Link available here]. The Supreme Court held

that arbitrators are independent providers of

services, not employees; they are not in a

relationship of subordination but instead act as

quasi-judicial adjudicators of disputes referred to

them under contract. The CA took too legalistic a

view and was incorrect not to recognise that being

of a particular religion or belief can be a relevant

criterion for appointment. As a result, the

particular clause limiting potential arbitrators to

members of the Ismaili Muslim community

did not offend employment equity laws.

The arbitration community can breathe a sigh of

relief, having feared that the CA’s ruling would also

preclude clauses restricting appointment on the

basis of nationality. Such clauses are frequently

used to promote neutrality where there is a sole

arbitrator or a panel of three in an arbitration

involving multi-state parties.

CIVIL PROCEDURE

Letters rogatory not enforced against Crown corporation

In connection with an insurance coverage dispute

in New York, Lantheus Medical Imaging (LMI)

sought production of documents from Atomic

Energy of Canada Ltd (AECL) and the attendance

of one its employees at an examination under

oath. LMI obtained letters of request from the

US District Court which it sought to enforce

in Ontario.

Problem: AECL is a Crown corporation. Under the

US Foreign Sovereign Immunity Act, the District

Court was not competent to issue letters rogatory

if it had failed to consider whether sovereign

immunity applied to the subject of the request

(if immunity applied, the court could not subpoena

a foreign sovereign or its agent). LMI contended

that AECL’s status would have been obvious to the

court from the materials that had been filed,

including a copy of an access-to-information

request LMI had sent to AECL.

Pollak J of the Ontario SCJ disagreed: Lantheus Medical Imaging Inc. v AECL, court file

CV-11-00427161 (Ont SCJ, 27 July 2011).

There was nothing in the US court order to

indicate that it was aware of the jurisdiction and

immunity issue. Occasional references in written

submissions to AECL as a ‘Crown agency’

were not enough. It was not proper for the

Ontario court to undertake the immunity analysis.

LMI’s application was dismissed although LMI

was free to try again in New York with the

proper question.

CLASS ACTIONS

Defendants’ request for particulars granted, but they have to deliver pre-certification statement of defence

The defendants in the Timminco securities class

action requested particulars of the plaintiff, which

he (like his predecessor plaintiff) resisted. Perell J

granted the request in large measure but in his

order required the defendants to deliver their

statement of defence, in advance of certification:

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Pennyfeather v Timminco Ltd, 2011 ONSC 4257

[Link available here].

In the judge’s view, it is time to revisit the

convention that the delivery of the defence

comes after certification; as a matter of case

management it would be preferable to have the

pleadings closed before that. Doing so would have

the advantage of resolving at an early stage any

controversies about whether the five criteria for

certification are, in fact, satisfied and of

foreclosing subsequent challenges to the

statement of claim. The statement of defence will

threfore be directed to the pleadings of the class

representative(s). The goal will be to show the

uniqueness of the representative plaintiff’s claim.

CONFLICT OF LAWS/INTELLECTUAL PROPERTY

The Star Wars action figures battle is now over

Lucasfilm Ltd v Ainsworth, [2011] UKSC 39

[Link available here], is about intellectual

property rights in the Star Wars action figures

which Ainsworth helped to design for Lucasfilm,

many decades ago. Ainsworth more recently sold

toys (including life-sized stormtrooper helmets)

based on the designs over the internet for his

own profit. A US court held that this infringed

Lucasfilm’s copyright.

Lucasfilm sought to enforce copyright claims

under UK law and to enforce its US claims in

England. The trial judge rejected the former but

upheld the latter. The Court of Appeal agreed there

was no copyright in the toys in the UK because

they were not works of art (sculptures,

specifically), but held that Lucasfilm’s IP rights

were not justiciable in England (absent a treaty on

the subject) because they were a purely local

matter. The CA also refused to enforce the US

damages award (which it clearly found excessive);

enforcement is predicated on the principle that the

judgment debtor must be present in the foreign

jurisdiction when proceedings were instituted.

Selling into the US, whether over the internet or

by more traditional means, did not constitute

presence in the US for this purpose.

By the time the case wended its way to the UK

Supreme Court, Lucasfilm claimed rights only in

the life-sized helmets. The UKSC upheld the

finding that, like the action figures, they were not

sculptures and therefore not subject to UK

copyright protection. While there was an

imaginative element to them, the film for which

they were commissioned was the work of art and

the helmets were ultimately just utilitarian props

for it; ditto the copies being sold by Ainsworth.

The UKSC disagreed, however, about justiciability

of the US claims in England: as long as the English

court has in personam jurisdiction over the

defendant, it may determine copyright claims

against him or her which arise in a foreign

jurisdiction (although there would be no

jurisdiction on a question principally concerned

with title to or possession of foreign property and

perhaps not where the IP rights depend on the

grant of a foreign state).

Net result: Ainsworth is free to sell his wares in

the UK but not in the US (but presumably faces

enforcement of the US damages award in England)

[Link available here].

CONTRACTS

The contract says what its says: lucid

judgment from the 7th Circuit

Cemusa Inc., the Delaware subsidiary of a Spanish

company, wanted to break into the US market

for ‘street furniture’ (bus shelters, garbage cans

and the like). It signed a letter agreement with

White Pearl, a Uruguayan sociedad anónima,

which agreed to provide strategic advice on RFPs

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from municipalities and to make introductions,

in exchange for $240K deductible from any

payments owed by Cemusa under a subsequent

long-term agreement. The parties later signed a

master agreement which gave WP a 3.75% share

in revenues from any contract it helped Cemusa to

win. That agreement was terminable on 30 days’

notice by either party. Both parties hoped for the

issuance of a big RFP from the city of New York.

A month before the New York RFP was issued,

Cemusa terminated the master agreement. It went

on to win the New York contract. WP, which alleged

it had spent $440K on Cemusa’s behalf, wanted

3.75% of the value of the contract, alleging a

whole range of claims including breach of contract

and duty of good faith, estoppel, quantum meruit,

unjust enrichment and fraud.

‘So what?’, said Easterbrook CJ. ‘No rule of law

entitles every business to a profit on every deal’.

The fact that WP performed services after the

termination of the master agreement was

effectively its own problem and didn’t give rise to

a quantum meruit claim: WP, ‘like the real estate

agent fired before a house is listed for sale, is not

entitled to more.’

There is also interesting discussion of the status

of foreign corporate entitles; don’t assume even

a UK limited company (much less a Uruguayan

sociedad anónima) is the equivalent of a

US corporation.

White Pearl Inversiones SA v Cemusa, Inc

(7th Cir. 26 July 2011). Link available here.

DAMAGES

Québec CA says punitive damages not to be

awarded solidarily

In France Animation SA c Robinson, 2011 QCCA

1361 [Link available here]. the creator of a

concept for an animated production based on the

novel Robinson Crusoe successfully sued Cinar,

its principal Ronald Weinberg, the estate of its

deceased principal Micheline Charest,

Ravensburger Film, France Animation, and

Christophe Izard, the creator and executive

producer of a joint Cinar-France Animation series

that infringed the plaintiff’s rights.

An important aspect of the case is its treatment of

the punitive damages that were awarded against

Cinar, Weinberg, the Charest estate and Izard: can

punitive damages be awarded solidarily (roughly

equivalent to the common law’s jointly and

severally)? Previous Québec authority on point

goes in different directions. In Solomon c Québec

(Procureur général), 2008 QCCA 1832,

[Link available here], it was held that an award of

punitive damages cannot be made solidairement

by virtue of articles 1480 and 1526 of the

Civil Code, which limit solidary awards to

circumstances where damages serve the function

of ‘reparation’. The court in Solomon concluded

that punitives serve as punishment, deterrence

and denunciation, not reparation. In another

decision, Genex Communications Inc. v

Association québécoise de l’industrie du disque,

du spectacle et du vidéo, 2009 QCCA 2201

[Link available here], the Court had refused to

follow Solomon and awarded punitive damages

against the co-authors of an intentional act on a

solidary basis. Faced with a choice between

Solomon and Genex, the Court of Appeal opted

for Solomon: it is preferable to individualise

punitive damages so as not to even out the

liability of the defendants (who may be of differing

means) and so as to punish each for the act he or

she has committed, in an amount appropriate to

the individual.

The Court also ruled that the cap on non-

pecuniary damages resulting from a physical

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injury established by the SCC in its trilogy

(Andrews, Thornton and Arnold ) applied to the

psychological damages suffered by Robinson,

which appears to be the first time (at least in

Québec) that the cap has been imposed in a case

not involving physical injury.

Guy Pratte, Daniel Urbas and Marc-André Grou of

the Montreal office of BLG acted in the appeal

for Christian Davin, the former CEO of France

Animation, who had been held personally liable by

the trial judge. The Court of Appeal overturned this:

the judge’s inference that Davin had known of the

infringement was not supported by the evidence.

EMPLOYMENT LAW

Employer can’t deny severance payment on

basis of snarky e-mail sent on last day at work

Clive Anderson had worked for Culligan of

Canada in one capacity or another for 19 years.

In December 2007, Culligan informed him that he

was being terminated without cause as a result of

the economic downturn but offered a lump sum

severance payment of $25,000. Anderson

accepted the offer. Towards the end of his last day

on the job, Anderson sent an e-mail to all or most

of Culligan’s franchise dealers and the managers

of its company-owned outlets, thanking them for

their support, and saying that while he bore the

company no ill will he regretted the lack of

support it offered to dealers and managers.

Culligan found out and denied Anderson the

severance pay, alleging that he had breached his

duty of good faith, defamed the company and

repudiated the severance agreement.

Dufour J of the Saskatchewan Court of Queen’s

Bench held that Anderson’s e-mail was ‘nothing

more than a snarky, parting shot from a mid-level

employee who had been pushed out the door’.

Because this would not have been grounds for

dismissal for cause, Anderson’s conduct did not

constitute repudiation of the severance agreement

and Culligan had to pay up the $25,000 plus an

amount for loss of his bonus.

Anderson v Culligan of Canada Ltd, 2011 SKQB

188 [Link available here].

EMPLOYMENT LAW

Look at substance of employment agreement

not form, says UKSC

The claimants in Autoclenz Ltd v Belcher, [2011]

UKSC 41 [Link available here], entered into

contracts with Autoclenz, which provided

car-cleaning services to vehicle retailers and

auctioneers. The agreements with Autoclenz went

to some lengths to describe each individual

claimant as being self-employed. The claimants

disagreed, saying they were employees of

Autoclenz and thus ‘workers’ eligible for minimum

wages and other statutory benefits.

The Employment Tribunal, the English Court of

Appeal and the UK Supreme Court all agreed with

the claimants. However they were described in

their contracts with Autoclenz, they had no control

over what work they would perform, their hours or

pay, and were subject to the direction and control

of Autoclenz or its customer. Protestations about

self-employment simply bore ‘no practical relation

to the reality of the relationship’.

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ESTATE PLANNING/UNJUST ENRICHMENT

Gift with strings attached: valid as gift but

can’t preclude imposition of constructive trust

John McNamee founded a successful trucking

business. In 1988, he implemented an estate

freeze to ensure that future capital gains from the

business would accrue to his two sons, to whom

he transferred shares in the business. All the usual

stuff. What was unusual was that Mr. McNamee

kept control of the business by retaining voting

preference shares (non-voting prefs would be

usual) and had a right to unlimited dividends at

any time (thereby allowing him to strip the

company of all value if he wanted to). Having been

through a divorce, he also wanted to ensure that

the shares and any income from them would

remain each son’s separate property and would

not form part of net family property under the

Family Law Act (FLA) if a son’s marriage broke

down. These terms were set out in a declaration of

gift, but neither this nor the details of the estate

freeze were made known to McNamee’s son

Clayton, who thought he had an equal 1/3 interest

in the business with his brother and father.

Clayton’s marriage broke down – by all accounts

relatively amicably – in 2007, after nearly 20 years

characterised by equal financial partnership.

Clayton’s wife Connie claimed a constructive trust

over the shares, based on her contribution to her

husband’s success in the business. The central

issue was whether there had been a valid gift at

all; if there had, then it would fall outside Clayton’s

net family property under the FLA. The trial judge

thought not: the transfer was one made for

consideration, and Connie was therefore entitled

to half the value of the shares; it was not

necessary to consider the unjust enrichment

claim. Clayton appealed.

The Court of Appeal reviewed the indicia of a

gift and found there had been one; the strings

attached to the gift did not invalidate the gift itself,

even though Clayton was unaware of the

conditions: McNamee v McNamee, 2011 ONCA

533 [Link available here]. The court went on to

say that the trial judge was also wrong not to

have assessed the unjust enrichment claim

before dealing with equalisation under the FLA;

it is necessary to determine who owns the

property (including under a constructive trust)

before the division can be made. The court then

returned to the strings attached to the father’s

gift, finding them of no force or effect because

they had not been disclosed to the son.

As a result, the conditions could neither invalidate

the gift nor prevent the imposition of a

constructive trust over the subject of the gift.

Whether a constructive trust arose was unclear

on the evidence; a new trial on that question

was ordered.

INSOLVENCY

Lehman derivatives transaction did not run

afoul of fraudulent conveyance rules, says UKSC

In 2002 a European subsidiary of Lehman Brothers

created a complicated synthetic debt structure

called Dante, which was intended to provide credit

insurance for another subsidiary, LBSF, against

credit events affecting certain reference entities,

the obligations of which formed the reference

portfolio. A special purpose vehicle issued notes

to investors, the proceeds of which were used to

purchase collateral which vested in a trust.

The issuer entered into a swap with LBSF under

which LBSF received the income on the collateral

and paid the issuer the amount of interest due to

noteholders. The trustee was to apply all proceeds

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from the collateral first towards meeting the

issuer’s obligations to LBSF and only after that in

meeting the issuer’s obligations to noteholders.

All well and good. The catch was that if LBSF

defaulted under the swap, priority shifted to

the noteholders.

As you may recall, things went badly for Lehman

Brothers in 2008 (infernally, in fact) and as a result

LBSF defaulted on the Dante swap. The claims of

noteholders exceeded the value of the collateral,

meaning LBSF was deprived of its costs to unwind

the transaction and its rights in the collateral.

LBSF tried to argue that the unwinding costs

and its priority in the collateral formed part of

its insolvent estate, and that the swap contract

therefore violated the statutory and common-law

‘anti-deprivation’ rules in insolvency –

the equivalent of Canadian fraudulent

conveyance rules.

Nice try, but all three levels of court said no

chance. The contractual arrangements were bona

fide commercial agreements that did not involve

a deliberate intention to defeat insolvency laws.

In the UKSC, Lord Mance advanced the additional

theory that LBSF wasn’t really deprived of

anything anyway: it didn’t lose its priority but

merely the opportunity to acquire that right; the

switch in priorities simply amounted to termination

of future reciprocal rights – also no evasion of

insolvency laws.

Belmont Park Investments Pty Ltd v BNY

Corporate Trustee Services Ltd, [2011] UKSC 38

[Link available here].

INTELLECTUAL PROPERTY LAW

Use of single colour probably not subject to

trademark protection, says NY court

Christian Louboutin has been designing expensive

women’s shoes with a distinctive red sole since

1992. In 2008, Louboutin obtained a US trademark

registration for what was called in the register the

‘Red Sole Mark’. The 2011 cruisewear collection

from the design house founded by Yves Saint

Laurent (YSL) featured a number of shoes

entirely in a similar colour, including their soles.

Louboutin sued.

Marrero USDJ was asked to enjoin YSL from

selling the red shoes but refused to do so:

Christian Louboutin SA v Yves Saint Laurent

America Inc. (SDNY, 10 August 2011)

[Link available here]. He had ‘serious doubts’

that Louboutin’s mark was genuinely protectable.

Colour alone may sometimes be protectable,

but not typically, and not where protection would

significantly hinder competition. Giving Louboutin

a monopoly over the colour red would be like

saying that Monet couldn’t use blue because

Picasso cornered the market on it in his Blue

Period. Even if valid, the Red Sole Mark only

extended to a particular Pantone number;

acceding to Louboutin’s request for protection

of a zone of related shades was unworkable.

The judge clearly had fun in considering ‘the broad

spectrum of absurdities that would follow’

granting the injunction: among the authorities

cited is a 2009 song in which Jennifer Lopez

extols her Louboutins.

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PARTNERSHIP

Useful review of indicia of partnership

Partners in Psychiatry (PP) and the Canadian

Psychiatric Association (CPA) got together in order

to develop continuing professional development

programmes for CPA members under the name

CPA CPD Institute. The relationship fell apart in

2009. PP sought a declaration that it had been a

partnership and its share of the Institute’s

remaining assets.

The application judge correctly identified a

partnership as a business carried on in common

with a view to profit, and concluded the Institute

was definitely a business. He then looked at the

agreement between PP and CPA but failed to

analyse its provisions in terms of the legal

definition of partnership. Instead, he focused on

elements of that relationship that were missing.

Wrong, said the Ontario Court of Appeal.

The agreement included most, if not all of the

classic indicia: both parties contributed money,

knowledge and skill to the venture, and they

shared responsibility for business operations and

profits. The Institute was a partnership and PP was

entitled to a share in its remaining assets.

Partners in Psychiatry v Canadian Psychiatric

Association, 2011 ONCA 109 [Link available here].

PERSONAL PROPERTY

Be careful what you take to the

Antiques Roadshow

Margaret Smith turned up in 2006 to a taping of

the Antiques Roadshow with an interesting

document, the marriage licence issued in 1805 to

Davy Crockett (the frontiersman and Alamo hero

with the silly hat) but never executed (apparently

because Crockett’s intended later eloped with

someone else).

Mrs. Smith claimed that the document had been

obtained by her father in the 1930s or 40s,

when the courthouse in Jefferson County, Tenn.

was being ‘cleared out’. The County was more

interested than most to see the broadcast,

having unsuccessfully negotiated with Mrs. Smith

for the document’s return in the 1990s. Seeing as

negotiation hadn’t worked, the county government

went to court this time, obtaining a declaration

that the licence was county property. The trial

judge’s assessment of Mrs. Smith’s story of the

document’s acquisition is memorable (read it

aloud in a fake Southern accent): ‘that dog just

won’t hunt ... it just don’t make sense’

(especially given that documents immediately

preceding and following the licence were still in

the county archive).

The Tennessee appeals court agreed: the balance

of the evidence showed that the licence had been

wrongfully removed rather than abandoned;

it defied credibility that the county would keep a

whole raft of relatively uninteresting stuff from the

relevant period but not a unique piece of

demonstrable historical interest. The transcript of

Mrs. Smith’s Roadshow appearance was not

admissible as an exception to the hearsay rule for

recorded recollections [Link available here].

PERSONAL PROPERTY/CONFLICT OF LAWS

Domain name is personal property and a ‘real

and substantial connection’ to jurisdiction:

Ontario CA

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Tucows.com, a Nova Scotia tech company with a

principal office in Ontario, bought over 30,000

domain names from an operation called Mailbank

Inc. in 2006, including renner.com. Lojas Renner

SA, a Brazilian retailer and the owner of the

trade-mark ‘Renner’ in Brazil and other countries,

filed an objection to Tucows.com’s use of renner.

com under the World Intellectual Property

Organisation (WIPO) rules. Tucows.com did not

respond to the WIPO complaint but commenced

an action in Ontario seeking a declaration that it

had legitimate rights in the domain name. Tucows

also asked WIPO to discontinue the complaint

before it on the grounds that it duplicated the

Ontario proceedings; WIPO agreed to this.

Renner objected to service on it in Brazil for the

purposes of the Ontario action. Chapnik J found

for Renner on the basis that service ex juris

without a court order is permitted where there is a

real and substantial connection to Ontario, which

would in this case need to be predicated on real or

personal property in Ontario. The domain name

was not personal property and, being intangible,

was not located in the province.

The Court of Appeal sided with Tucows.

The legal status of domain names had not

previously been determined, but Weiler JA was

prepared to accept the emerging (and hardly

surprising) view that they are intangible personal

property. For the purposes of jurisdiction,

the registrant and registrar of the domain name

were located in Ontario, as were Tucows’s servers.

Service on Renner outside Ontario was valid.

[Link available here].

SECURITIES

DC Circuit Court nixes SEC proxy rule requiring

inclusion of shareholder nominees

The US Court of Appeals for the District of

Columbia Circuit has vacated a SEC rule which

would have required companies and investment

companies to include, under certain

circumstances, the names of shareholder

nominees for board positions in their proxy

materials: Business Roundtable v Securities and

Exchange Commission (DC Cir. 22 July 2011)

[Link available here].

The Business Roundtable and the Chamber of

Commerce of the United States argued that the

SEC had adopted the rule (already once proposed

and revised after comment) without adequately

considering its effect on efficiency, competition

and capital formation, as required under the

Securities and Exchange Act and the Investment

Company Act of 1940. The court agreed.

The proposed rule violated the Administrative

Procedure Act as an ‘arbitrary and capricious’

measure that did not consider the economic

consequences and costs of companies of its

imposition. There were also insufficient data to

establish the SEC’s contention that the rule

would have improved board performance and

increased shareholder value through the election

of dissident nominees. The rule was vacated.

The SEC has since indicated that it will not

appeal the ruling.

SECURITIES

Sophisticated investor’s reliance on alleged

misrepresentations of adviser not reasonable

Ashland Inc., a large chemical company, made

investments in auction-rate securities (ARSs) on

the advice of Byrne, its long-time investment

adviser at Morgan Stanley (MS). Ashland alleged

that it had made repeated enquiries about the

liquidity risk associated with ARSs and received

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Byrne’s assurances that all was fine with these

investments, even in the light of failures of other

auctions. Information about ARSs was not publicly

available. In February 2008, Ashland placed sell

orders but found that the market for ARSs was

illiquid because MS was ‘no longer stepping in to

ensure auction success’. Ashland alleged that MS

had known as early as the previous August that

the ARS market was collapsing.

Caveat emptor, said both the New York

District Court and, on appeal, the 2d Circuit.

A sophisticated investor like Ashland could

not plead reasonable reliance on alleged

misrepresentations by the adviser, especially in

light of MS’s disclosure in SEC filings of the

liquidity risks associated with ARSs.

Ashland Inc v Morgan Stanley & Co Inc

(2d Cir. 28 July 2011). Link available here.

TORTS

Material contribution: New South Wales CA

weighs in

Keith Evans smoked a pack or two of cigarettes a

day for 40 years, until 1991. He was also exposed

to asbestos dust in the course of his work for

Queanbeyan city council from 1975 to 1990.

He was diagnosed with lung cancer in 2006

and died. His widow sued the council, but lost.

The trial judge was not satisfied, on a balance

of probabilities, that exposure to asbestos caused

the disease that killed Evans.

The NSW court of appeal upheld this in Evans v

Queanbeyan City Council, [2011] NSWCA 230

[Link available here]. It was open to the trial judge

to reach the conclusions he did on the level of

Evans’s asbestos exposure, the combined effect

of tobacco and asbestos and the resulting risks.

The trial judge did not improperly limit analysis of

causation to a ‘but for’ test, to the exclusion of

material contribution by multiple factors.

The value of the judgment for us is the summary

provided by Allsop P of material contribution in

Australia, the UK and (to some extent) Canada.

Allsop P declined to adopt the UK’s modifications

of the common law in Fairchild v Glenhaven

Funeral Services Ltd [2002] [Link available here]

UKHL 22 to permit proof of causation on the basis

of a material increase in risk: this kind of change

should be left to Australia’s highest court. His

account of the law of material contribution will

nevertheless be required reading for the Supreme

Court of Canada when it tackles causation in the

upcoming appeal in Clements v Clements,

2010 BCCA 581[Link available here].

UNJUST ENRICHMENT/CORPORATE LAW

Can the unjustly enriched shelter behind the

corporate veil?

Yes, in a word. In Costello v MacDonald, [2011]

EWCA Civ 930 [Link available here], Mr. and Mrs.

Costello had engaged a firm of builders to develop

a property they owned. The Costellos indicated

that for tax reasons they would be using a

company called Oakwood Residential Ltd, of which

they were the sole shareholders and directors.

Oakwood was a shell with no assets. The builders

helped the Costellos to obtain bank financing,

which was channelled through Oakwood for the

project. Later, there were disputes about whether

the work had been completed and fully paid for.

11

The builders obtained judgment against Oakwood

for breach of contract and against the Costellos

personally under a restitution claim.

The Costellos appealed the latter. Etherton LJ

observed that in one sense the Costellos had

clearly been wrongfully enriched at the builders’

expense; they received the benefit of services for

which they did not pay (and had been assisted by

the claimants in getting the initial funding for the

project). On the law, however, the restitution claim

against them had to fail; the parties had defined

and, more to the point, restricted their obligations

to each other, and the court was bound to uphold

their allocation of risk. It is sound legal policy to

refuse restitutionary relief for unjust enrichment

against a defendant who has benefited from

services performed by the claimant under a

contract to which the defendant was not a party.

The builders went into the contract with Oakwood

with their eyes open to the possibility of getting

stiffed, essentially.

WILLS/ESTATES

ABQB prepared to rewrite will disinheriting

adult son

Elsie Johansen left her entire estate ($116,000)

to the Calgary Humane Society, disinheriting her

51-year-old son Kim Soule. Soule was unemployed,

lived from hand to mouth and suffered from

hepatitis C, probably contracted from drug use or

unprotected sex. Mrs Johansen’s lawyer testified

that she had deliberately cut her son out of her will

because she did not want to fund his drinking and

drug use (although Soule testified that he had cut

back on the booze and had not used drugs in 3 years).

Martin J granted Soule’s application under the

Dependants Relief Act, which allows a court to

exercise its discretion to override the wishes of

the deceased where inadequate provision has

been made for a dependant, based on the

perspective of that dependant. Soule was a

dependant on the basis of his disability and

(on balance) inability to earn a livelihood;

provision in the will for his needs was

inadequate; and if the will was not varied,

he would have to be supported by the

public purse.

Soule got all but $10,000 of the estate, which

went to the Humane Society. Soule v Johansen

Estate, 2011 ABQB 403 [Link available here].

AUTHOR

Neil Guthrie

Partner, National Director of Research

Toronto

416.367.6052

nguthrie@blg.com

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