BLG Monthly Update — December 2011

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:

Administrative law/contracts: contract to make judicial appointment void and not made out on facts anyway Civil procedure: law-firm error with possibly fatal consequences Civil procedure/health law/torts: personal injury claim not inherently unassignable, but this assignment was champertous Class actions: Ontario CA reverses judgment on merits in environmental class action Commercial law: series of sell-offs not sufficiently related to be sale of 'all or substantially all' assets Consumer protection: EU adopts new rules Contracts: contract badly drafted and somewhat counterintuitive, but enforced Contracts: the US view on third-party beneficiaries Contracts: useful reminder that direct damages can include lost profits Corporations: directors who rubber-stamped financial statements liable for breach of duty Defamation: hyperlink to defamatory statement is not itself defamatory Employment: be careful what you do with the results of that employee satisfaction survey Evidence: limited waiver of privilege in dispute amongst oligarchs Insolvency: no more three-ways (in terms of set-off, that is) Intellectual property: 'where women glow and men plunder' Mergers & acquisitions/torts: rescission of share sale awarded for fraudulent misrepresentation in forecasts Not-for-profits: director of unincorporated association personally liable for association's breach of contract Property/matrimonial law: if your intended breaks off the engagement, can you get the ring back? Real estate/electronic commerce: sale of land by e-mail possible in England? Securities/derivatives: OSC grants exemptive relief in response to 'regulatory uncertainty' about OTC derivatives Securities regulation: New York court slams SEC's 'bureaucratic proclivity ... to avoid responsibility' Torts: trial judge so wrong in negligence case Torts/occupational health and safety: the problem of successive wrongdoers – material contribution yet again Torts/occupier's liability: sliding down the banister like Mary Poppins not a good idea ADMINISTRATIVE LAW/CONTRACTS

Contract to make judicial appointment void and not made out on facts anyway

Donald Angevine, a Crown attorney, received a call in 1992 from Howard Hampton, the Attorney General of Ontario. What they discussed is disputed: Angevine says that Hampton congratulated him on his forthcoming appointment as a provincial court judge; Hampton says he congratulated Angevine on being recommended to the provincial judicial appointments advisory committee. In any event, Hampton lost office some months later without any appointment having been made. Angevine sued in 2007 for breach of contract: Angevine v Ontario, 2011 ONSC 4523. [Link available here].

Case dismissed, said Parayeski J of the Ontario SCJ. A judicial appointment is a matter of executive discretion; a contract to make one would be a fettering of discretion and would undermine public confidence in the justice system. Any purported contract to make a judicial appointment would be void as against public policy. Even if this were not the case, the nature of the judicial appointments process would make it impossible for the AG to have entered into a binding contract with Angevine, and these two parties were not ad idem in any event. Angevine's claim would also be statute-barred if viable.

CIVIL PROCEDURE

Law-firm error with possibly fatal consequences

When the topic of professional negligence comes up at big firms, someone will often pipe up with the comment that 'well, at least nobody died'. Unfortunately for Sullivan & Cromwell (S&C), that might not turn out to be true.

Two of its associates took on a criminal appeal as a pro bono matter, but left the firm before it was concluded. The client, Cory Maples, had been sentenced to death in 2000 after an Alabama jury found that he killed two people. The court declined Maples's petition for an appeal, starting a 42-day limitation period for the filing of a further appeal. The court clerk sent the required notice to Maples c/o S&C in New York; the S&C mailroom sent it back, unopened and stamped 'Return to sender – left firm'. The clerk didn't open the letter. S&C has presented arguments before the US Supreme Court that the Alabama court should have done more to ensure that a death-row inmate received notice of his right to appeal. Counsel for the state of Alabama contend that the clerk did everything required and that there was no obligation to go beyond that. [Link available here].

CIVIL PROCEDURE/HEALTH LAW/TORTS

Personal injury claim not inherently unassignable, but this assignment was champertous

Alan Catchpole, a patient at the Norfolk & Norwich University Hospital, contracted an infection caused by methicillin-resistant staphylococcus aureus (MRSA), allegedly as a result of the hospital's negligence. He initiated proceedings against the hospital. John Simpson also contracted MRSA at the hospital and later died of an unrelated condition. His widow Jennifer felt strongly that MRSA made his last days more difficult. She also sued the hospital. Nothing terribly controversial so far. Catchpole and Mrs Simpson then entered into a contract under which he assigned his claim against the hospital to her for a payment of £1.

The hospital moved successfully to have the purportedly assigned claim struck on the grounds that Mrs Simpson had no legitimate interest in it.

On appeal, the English Court of Appeal took a different tack. A claim for damages for personal injury is a chose in action and as such not inherently unassignable. The law does regard a chose in action that is 'essentially personal in nature' as unassignable, but Moore-Bick LJ didn't think that the judge below was correct to assume Catchpole's claim was necessarily one of these. While a right to recover damages for personal injury is personal in nature, the obligation to pay compensation (which arises by operation of law) is not: Catchpole's claim being a hybrid, the claim should not have been struck.

So far, so good for Mrs Simpson. Her interest in the claim was, however, found to be champertous because she was not ensuring that Catchpole received compensation (which could have been achieved through litigation in his own name) but instead pursuing her own campaign against the hospital. This was 'officious intermeddling' in litigation and thus champertous. Moore-Bick LJ declined to say definitively what a legitimate interest in someone else's personal injury claim might be, but left the door open to the possibility.[Link available here].

CLASS ACTIONS

ONCA reverses judgment on merits in environmental class action

The claimants in Smith v Inco Ltd argued successfully at trial that they suffered damages as a result of the discharge of nickel from Inco's refinery in Port Colborne, Ont. – not because their health suffered but because the value of their residential properties diminished owing to the presence of discharged nickel in the soil.[Link available here]

At trial Henderson J found that Inco was liable in private nuisance and under the principle of strict liability in Rylands v Fletcher (1866) LR 1 Ex 265, aff'd (1868) LR 3 HL 330. He was wrong on both counts, said the Court of Appeal: 2011 ONCA 628.

There was no liability in private nuisance because the plaintiffs could not establish that the presence of nickel in the soil caused any actual damage to the properties or rights associated with it. Concerns about potential health risks were insufficient. On Rylands, the Court of Appeal observed that strict liability is predicated on 'non-natural' use of the alleged tortfeasor's property. This doesn't mean that anything not found naturally on the property (like nickel brought to a refinery) will automatically give rise to strict liability if it escapes, nor does the characterisation of an activity as 'ultra-hazardous'. The plaintiffs failed to show that Inco's use of the refinery was 'non-natural', 'exceptionally dangerous' or 'extraordinary or unusual' (for a nickel refinery). The trial judge's award of $36 million in damages was therefore set aside.

Given that the plaintiffs' claims failed on both counts, it wasn't necessary to reconsider the trial judge's findings on causation or limitation periods. On the latter point the court did note that where it isn't established that all class members were or ought to have been aware of the claim, then...