Top 5 Civil Appeals From The Court Of Appeal (February 2014)

Benedict v. Ohwistha Capital Corporation, 2014 ONCA 80 (Feldman, MacFarland and Strathy JJ.A.), January 29, 2014 Bombardier Inc. v. AS Estonian Air,2014 ONCA 41 (Weiler, Rouleau and Strathy JJ.A.), January 17, 2014 Ontario (Labour) v. Flex-N-Gate Canada Company, 2014 ONCA 53 (Laskin, Tulloch and Strathy JJ.A.), January 23, 2014 Shoppers Drug Mart Inc. v. 6470360 Canada Inc. (Energyshop Consulting Inc./Powerhouse Energy Management Inc.),2014 ONCA 85 (Goudge, Watt and Pepall JJ.A.), January 31, 2014 TMS Lighting Ltd. v. KJS Transport Inc., 2014 ONCA 1 (Cronk, Blair and Strathy JJ.A.), January 2, 2014 1. Benedict v. Ohwistha Capital Corporation, 2014 ONCA 80 (Feldman, MacFarland and Strathy JJ.A.), January 29, 2014

In this appeal, the Court considered the difficult issue of using personal property on a reserve as security for a loan for an aboriginal business. Section 89(1) of the Indian Act prohibits an "Indian," as defined in that statute, from granting security on real or personal property on reserve, except to another Indian. Section 89(2) allows a person who has sold personal property to an Indian, but retained the right to possession, to exercise rights against the chattel even if it is located on the reserve. In Benedict, the Court of Appeal considered the intersection of these provisions.

The appellant, Ohwistha Capital Corporation ("OCC"), is an Aboriginal Capital Corporation, which provides development loans to aboriginal-owned businesses. Although its head office is located on the Akwesasne Reserve, the corporation is not an "Indian" as defined in the Indian Act. The respondent Benedict, an Indian living on Akwesasne Reserve, received funding from OCC of $125,000 for the purpose of his fish hatchery business.

In order to circumvent the restriction in s. 89(1), the parties structured the transaction as a conditional sale of chattels, whereby Benedict sold used farm equipment to OCC through Oakes, an Indian living on the reserve and an employee of OCC, who then sold them back to Benedict by conditional sale. Under the guise of paying for the equipment, OCC loaned Benedict the $125,000.

Benedict went bankrupt and OCC seized the chattels. Benedict claimed that OCC had no right to do so, pursuant to s. 89(1) of the Act. The trial judge agreed, finding OCC liable for conversion.

Writing for the Court, Feldman J.A. identified two issues:

Is it a violation of s. 89(1) of the Indian Act to structure a transaction which effectively grants security over existing chattels that are on the reserve, so that the transaction complies with s. 89(2)? If not, does this transaction comply with s. 89(2)? Feldman J.A. noted the purpose of these provisions: to protect aboriginals from losing their land or their chattels on the reserve to non-aboriginals. In McDiarmid Lumber v. God's Lake First Nation, 2006 SCC 58, Chief Justice McLachlin discussed these provisions as well as their consequences. McLachlin C.J. held that they should be interpreted narrowly, referring to the 1996 Royal Commission on Aboriginal Peoples, which noted the difficulty for aboriginal persons to obtain credit because lenders were unable to secure loans using reserve lands or chattels located on reserve lands. This created "a significant deterrent to financing business activity on-reserve."

Feldman J.A. recognized that these provisions are both paternalistic and "potentially beneficial." In this context, she presented two options: the Court could apply the God's Lake approach, interpreting s. 89(2) in such a way that would allow loans to be made using on-reserve chattels as security by way of a conditional sale, or it could ensure that the purpose of s. 89(1) - to protect aboriginals from being exploited by non-aboriginals and losing their on-reserve property - is not undermined.

Feldman J.A. noted that Benedict received a notional payment for his equipment, and then notionally bought it back. Because the payments were notional, the transaction must be as well. She concluded that the trial judge correctly described the sales as "pure fiction."

Feldman J.A. suggested that while it might be appropriate to interpret s. 89(2) so as to minimize its restrictive effect, the Court could not do so when the transaction was nothing more than a sham. To do so would undermine the purpose of the statute.

2. Bombardier Inc. v. AS Estonian Air, 2014 ONCA 41 (Weiler, Rouleau and Strathy JJ.A.), January 17, 2014

   In this brief endorsement, the Court of Appeal addressed the "commercial activity" exception in the State Immunity Act.

   The State Immunity Act, R.S.C. 1985, c. S-18, affords a foreign state immunity from the jurisdiction of Canadian courts. Section 5 of the statute, however, provides an exception to that rule, submitting a foreign state to Canadian jurisdiction "in any proceedings that relate to any commercial activity of the foreign state." "Commercial activity" is defined in the Act as "any particular transaction, act or conduct or any regular course of conduct that by reason of its nature is of a commercial character."

   The appellant, Bombardier Inc., alleged that the Republic of Estonia induced AS Estonian Air to...