BLG Monthly Update - January 2012

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:

Business corporations/not-for-profits: a new hybrid in California – the flexible purpose corporation Civil procedure/arbitration: stopping the tail from wagging the elderly elephant – an end to vexatious proceedings in Alberta Civil procedure/professional ethics: don't be an ostrich and bury your head (or an unhelpful case) in the sand Contracts: beware the boilerplate – unused definition leads to unintended consequences Contracts: will common sense prevail in interpreting an ambiguous commercial contract? Contracts/restitution: if you pay a non-refundable deposit but the underlying contract is void, can you get the deposit back? Defamation: credible reasons for not pursuing libel claim with dispatch; not an abuse of process Employment law/torts: employer not vicariously liable for reprisals by whistleblower's colleagues Evidence/class actions: your expert really does need some qualifications and has to present more than unverifiable Google results – oh, and your claim needs a factual basis Evidence: limited initial review of opposing party's privileged documents not grounds for injunction Evidence: test for assertion of joint privilege by corporate director or officer Health law: hospital can require problem patient to seek critical treatment elsewhere Intellectual property: 'keep calm and carry on' – and brace yourselves for the trade-mark fight Privacy: don't sign the petition if you want to remain anonymous Torts: English court extends boundaries of vicarious liability, following Supreme Court of Canada's lead Torts: rugby club failed to inspect pitch; not liable for injury because reasonable inspection would not have revealed risk Torts/sports law: crying 'fore!' may not shield you from liability BUSINESS CORPORATIONS/ NOT-FOR-PROFIT CORPORATIONS

A new hybrid in California: the flexible purpose corporation

California has enacted legislation providing for 'flexible purpose corporations' (FPCs), essentially a hybrid of a business corporation and a not-for-profit (NFP), which will allow both charitable/public and business activities to be carried on by the same entity.

The articles of a FPC might, for example, require its business objectives to be achieved in accordance with environmental principles. The fiduciary duties of the FPC's directors would not be defined solely in terms of maximising shareholder value (in a monetary sense), although they would not require favouring the non-business purpose.

The legislation provides for merger or conversion of business entities into a FPC and for the conversion of FPCs into NFPs. [Link available here].

CIVIL PROCEDURE/ARBITRATION

Stopping the tail from wagging the elderly elephant: an end to a vexatious proceeding in Alberta

An 'endless repetition of failed litigation' appears to have come to an end in Karaha Bodas Company LLC v Perusahaan Pertambangan Minyak Dan Gas Bumi Negara, 2011 ABCA 291. The case arose from an arbitral dispute in 2000 between Kraha Bodas Company (KBC), a Caymans LLC owned by US power companies and investors, and two Indonesian government energy companies, Pertamina and PLN (P and P, for short), over a geothermal project. KBC was awarded US$260 million and sought to enforce the award in the US, Hong Kong, Singapore and Alberta. An Alberta master obliged in 2004. P and P appealed but did not pursue things, preferring to try to have the arbitral award overturned in Switzerland on the basis of fraud. They were unsuccessful and the award was enforced in full in the US. [Link available here].

KBC applied to have the Alberta appeal dismissed as moot, but P and P posted for security for costs in 2007. Although the issue of enforcement of the award was moot, the issue of costs remained live – until KBC abandoned its claim for them. P and P persisted, apparently hoping that they could have the underlying award overturned in Alberta with a view to influencing courts elsewhere. [Link available here].

The Alberta Court of Appeal appears to have put an end to this, observing that 'the word "relitigation" is quite inadequate to describe what has gone on for over 11 years.' P and P were essentially using enforcement proceedings in Alberta to reopen the fraud issue that had been decided conclusively elsewhere; not only was this vexatious but also 'an attempt to have the tail wag an elderly elephant'. Significant costs were awarded against P and P, compounded by their counsel's 'obvious subterfuge' in exceeding the factum page-limit. [Link available here].

CIVIL PROCEDURE/PROFESSIONAL ETHICS

Don't be an ostrich and bury your head (or an unhelpful case) in the sand

Posner J of the Seventh Circuit is a very fine judge. He's also funny – but not someone you want to mess around with when it comes to your brief of authorities. This is, however, just what counsel for the appellants did in Gonzalez-Servin v Ford Motor Co. (7th Cir 23 November 2011): they deep-sixed a case unhelpful to their client's case that was decided on 'nearly identical' facts (or so Justice Posner assumed from their seeming attempt to pretend it didn't exist).

In the judge's words: 'The ostrich is a noble animal, but not a proper model for an appellate advocate. [...] The ostrich-like tactic of pretending that potentially dispositive authority against a litigant's contention does not exist is as unprofessional as it is pointless'. To drive the point home, the judgment includes a photograph of an ostrich burying its head in the sand and another of man in a suit (presumably a lawyer) doing the same.

CONTRACTS

Beware the boilerplate: unused definition leads to unintended consequences

Rayford Homes granted security to two lenders, its trustee shareholder and the Bank of Scotland (BoS). The parties entered into an intercreditor agreement (ICA) using the BoS standard form. In a schedule to that agreement was a definition of the term 'BoS Priority' over 'BoS Debt' up to a monetary limit. The amount was not filled in, nor was the term 'BoS priority' actually used in the ICA. BoS advanced a further £4 million to Rayford and suggested that that amount should be entered manually in the clause; the trustee shareholder agreed to this, presumably not thinking it mattered given the fact that the...