Business Law - Risk Management and Sources of Law

Risk Management and Sources of Law

Why Study Law?

• A business can analyze and assess risks, implement risk management strategies, and utilize legal techniques to address these risks.
• Law affects how we live and society functions, including business operations.
• Business decisions have legal consequences, both negative (e.g., environmental pollution) and positive (e.g., binding contracts).
• Legal consequences impact profits and losses; some decisions lead to liability, while others create opportunities.

Risk Management Process

• Businesses must manage legal risks through a three-step process:
  • Identification: Recognizing legal risks by asking, "Can we be held liable for this?"
  • Evaluation: Assessing legal risks by asking, "What are the chances of something going wrong?"
  • Response: Reacting to legal risks by asking, "What are we going to do about it?"

Forms of Risk Management

• Nearly every business decision creates some risk, and different risks require different treatments:
  • Risk Avoidance: Eliminating the risk entirely (e.g., withdrawing a dangerous product from the market).
  • Risk Reduction: Minimizing the risk (e.g., modifying a product to reduce danger).
  • Risk Shifting: Transferring the risk to another party (e.g., buying liability insurance).
  • Risk Acceptance: Accepting the risk and doing nothing about it.

Risk Management Examples

• Insurance:
  • Liability insurance.
  • Property insurance.
• Exclusion and Limitation Clauses:
  • Contractual terms that exclude liability for certain acts or losses or limit available compensation.
• Incorporation:
  • Limited liability, where shareholders are not usually liable for company debts.

Car Insurance Discussion

• Risks Covered:
  • Property damage.
  • Personal injury.
• Limitation of Coverage:
  • Coverage may be less than the actual risk.
• Exclusion of Coverage:
  • Impaired driving.
  • Driving on ice-covered lakes.
• Deductible.

Nature of Law

• Rules and laws:
  • All laws are rules, but not all rules are laws.
• Morality and law:
  • Moral wrongs: informally sanctioned (e.g., damaged friendships or reputation).
  • Legal wrongs: formally sanctioned (e.g., fines or imprisonment).
• Laws are rules that can be enforced by courts.

Legal Jurisdictions

• Jurisdiction:
  • A geographical area that applies and enforces a certain set of laws (e.g., British Columbia) or uses the same legal system (e.g., Common Law).
• Two main types of legal systems:
  • Civil law jurisdictions.
  • Common law jurisdictions.

Civil Law and Common Law

• Civil Law Jurisdictions:
  • Originated in ancient Rome (Augustus Code).
  • Examples: France, most of Europe, Louisiana, and Quebec.
• Common Law Jurisdictions:
  • Originated in England.
  • Examples: England, Australia, New Zealand, and most of Canada.
• Some laws are the same across Canada (e.g., criminal, federal tax, and constitutional laws).

Categories of Law (Figure 1.1)

• Map of the Law.

Public Law

• Matters of public concern, such as:
  • Constitutional Law: Rules governing the basic operation of law and politics.
  • Administrative Law: Rules governing the creation and operation of agencies, boards, tribunals, and commissions that exercise delegated authority.
  • Tax Law: Rules regarding the collection of money for public spending.
  • Regulatory Law: Rules governing the operation of societal activities like food, pharmaceuticals, trade, environment, transportation modes, telecommunications, and broadcasting.
    *Criminal Law
    *Rules governing wrongs against society such as punching a person.
    *Crimes in the business world:
    *White collar crimes (committed by "people in suits").
    *Corporate crimes (committed by a company itself).
    *A company can be convicted under the criminal code for acts of directors, officers, employees and others.

Private Law

• Matters of private concern, such as:
  • Tort Law: Involuntary rules governing wrongs against persons.
  • Contract Law: Voluntary rules governing the creation and enforcement of agreements.
  • Property Law: Involuntary rules governing voluntary acquisition, use, and disposition of property.

Sources of Canada’s Laws

• Laws can be established in a variety of ways, not all laws are created equally, and do not carry the same influence.
• All laws in Canada fall into one of three categories:
  • Constitutional Law: Outlines the structure and powers of government.
  • Statute Law: Laws or acts passed by the government, also known as “legislation”.
  • Common Law: Decisions made by judges in previous cases.

Canada’s Top Law: The Constitution

• The Constitution is at the top of the law hierarchy.
• Canada’s Constitution is made up of two key documents:

Constitution Act, 1867

• Formally known as the British North America Act, 1867.
• The Constitution Act is important for two reasons:
  • (1) Section 52(1): Establishes that the constitution rules over other laws.
  • (2) Divides powers between Provinces and Federal Government. If a government passes a law outside of its jurisdiction, it is ultra vires.

Federalism

• Two constitutionally recognized levels of government:
  • Federal Government: Represents the entire country.
    • Parliament, made up of the Senate (appointed) and House of Commons (elected).
    • Led by the Prime Minister.
  • Provincial (Territorial) Government: Represents the province (territory), called the Legislature (elected).
    • Led by the Premier.

Division of Powers

• The Constitution divides legislative authority:
  • Federal Government: Examples include crime, bankruptcy, and copyright (section 91).
  • Provincial Government: Examples include property and civil rights (section 92).
  • The Federal Government holds residual power.
  • The Doctrine of Federal Paramountcy determines which law trumps when federal and provincial statutes conflict.
    • When a government legislates outside its authority, the law is ultra vires and has no force or effect (s. 52).
    • Ultra vires means “beyond the power”; created by a government acting outside its area of authority.

Division of Powers, s. 91 & 92

• Concept Summary 1.2
  • Federal:
    • Criminal law.
    • Any mode or system of taxation.
    • Employment insurance.
    • Banks.
    • Bankruptcy and insolvency.
    • Money.
    • Negotiable instruments (e.g. cheques).
    • International and interprovincial trade and commerce.
    • Navigation and shipping.
    • Copyright.
    • Any matter that is not exclusively given to the provinces.
  • Provincial or Territorial:
    • Property and civil rights (e.g. contracts, torts).
    • Direct taxation within the province to raise revenue for provincial purposes.
    • Creation of municipalities.
    • Matters of a local or private nature within a province.

Charter of Rights and Freedoms

• The second part of the Constitution is the Charter of Rights and Freedoms.
• Sets out basic freedoms and liberties owned by every Canadian.
• The Charter is fundamental, and is the backdrop against which all our interactions with government are played out.

Charter of Rights and Freedoms

• Part of the Constitution since 1982.
• Rights and freedoms commonly affecting business:
  • Freedom of religion.
  • Freedom of expression.
  • Freedom of mobility.
  • Right to equality: Prohibited grounds of discrimination include race, sex, and religion, but not poverty.
• Some interests not protected:
  • Economic and property rights.

The Charter of Rights and Freedoms

• Key questions to answer when dealing with the Charter:
  • (1) Who is protected by the Charter?
  • (2) Does the Charter even apply?
  • (3) What right(s) were infringed/violated?
  • (4) Is that infringement saved by section 1?

Who is Protected by the Charter?

• Given that the Charter protects core individual rights, who is protected?
• Non-Citizens can invoke the following Charter Rights:
  • Fundamental freedoms - religion and expression.
  • Legal Rights - the right to life, liberty, and security of the person; the right to be free from unreasonable search and seizure; the right to be presumed innocent.
  • The right to equal protection and benefit of the law without discrimination.
• Non-Citizens cannot invoke the following Charter rights:
  • the right to vote in elections or run for office;
  • the right to enter, leave and remain in Canada;
  • the right to move to and gain a livelihood in any province.

Does the Charter Apply? Section 32

• According to section 32 of the Charter, for the Charter to apply the case must involve:
  • (1) A government law; or
  • (2) Actions of a government actor; or
  • (3) Organizations controlled by the government program…

Organizations Controlled by Government

• When is an organization “controlled” by the government?
• Must examine the role of the government in the institution.
  • Effective control test: A government actor consists of institutions for which the government has statutory authority to exercise:
    • (a) substantial control over the day-to-day operations,
    • (b) control over policy-making, and
    • (c) provide substantial funding for the institution.

Organizations Controlled by Government

• UNIVERSITY ACT [RSBC 1996] CHAPTER 468
• Minister not to interfere
• 48 (1)The minister must not interfere in the exercise of powers conferred on a university, its board, senate and other constituent bodies by this Act respecting any of the following:
  • (a)the formulation and adoption of academic policies and standards;
  • (b)the establishment of standards for admission and graduation;
  • (c)the selection and appointment of staff.
• (2)Despite subsection (1), a university must not establish a new degree program without the approval of the minister.

Organizations Controlled by Government

• COLLEGE AND INSTITUTE ACT [RSBC 1996] CHAPTER 52
• Institution is an agent of the government
• 50 (1)An institution is for all its purposes an agent of the government and its powers may be exercised only as an agent of the government.
• (2)An institution may, in its own name, carry out its powers and duties under this Act and, with the consent of the minister, acquire and dispose of land or buildings.
• (3)Despite subsection (2), an institution may lease, or enter into an agreement to lease, land or buildings for a term that ends on or before the end of the fiscal year in which the institution entered into the lease or agreement.
• (4)If an institution disposes of land or buildings, it must not spend the proceeds of the disposition without the consent of the minister.

Charter Rights Summary

Charter Sections - Section 2

• Fundamental freedoms:
  • Everyone has the following fundamental freedoms:
    • (a) freedom of conscience and religion;
    • (b) freedom of thought, belief, opinion and expression, including freedom of the press and other media of communication;
    • (c) freedom of peaceful assembly; and
    • (d) freedom of association.
• HATE SPEECH is not FREE SPEECH

Charter Sections – Section 7

• The Charter protects individual’s right to life, liberty and security of the person.
• Rights are not absolute -- can be deprived if “in accordance with the principles of fundamental justice”.

Charter Rights – Section 8

• Protects individual's right of privacy and regulates the degree to which government authorities (i.e. police) can conduct searches where there is a reasonable expectation of privacy.

Charter Rights – Section 15

• Ensures every Canadian is equal before and under the law.
• Protected from discrimination on the basis of the listed grounds.

Section 1 – Reasonable Limits Clause

• Means that no individual right or freedom can be absolute. There must be limits on individual rights.
• Government can defend infringing rights by showing it is reasonable and justified. Section 1 is used to prevent a law from being struck down even when that law infringes a Charter right.

Charter Limitations

• Limitations of the Charter
  • Section 32: Does the Charter even apply? The organization has to be “effectively controlled” by the government.
  • Section 1: Charter rights are subject to “such reasonable limits prescribed by law as can be demonstrably justified in a free and democratic society”.
  • Section 33: “Notwithstanding clause”. Permits governments to declare any statute valid notwithstanding that it may violate a Charter right. However, the law will automatically expire after 5 years.

Limitations on Charter Rights

• The Charter only applies to government action and is not directly applicable against private businesses.
• The Charter may apply in favor of private businesses and some provisions are limited to “individuals”.
• Charter rights are subject to “reasonable limitations” to balance individual rights and community interests.
• The Charter is subject to a “notwithstanding clause,” allowing the government to override some rights and freedoms.

Charter Remedies

• Section 52: The Constitution is the supreme law and any law inconsistent with the charter is “of no force or effect”.
• Section 24: Enforcement of rights and freedoms, where a judge may award any appropriate remedy, including a declaration, injunction, striking down legislation, severance, reading down, reading in, and damages.

Charter Dialogue

• Parliamentary Supremacy: Democracy.
  • Ultimate authority rests with governments (elected and accountable), not judges (appointed in Canada).
• Charter Dialogue:
  • The government creates laws through legislation.
  • Courts identify Charter violations.
  • The government may respond by amending or enacting laws to conform with the Charter.

Indigenous Rights

• Section 35: Indigenous Rights
  • Provides the basis for recognition and enforcement of Indigenous and treaty rights.
    • Treaty Rights: Rights contained in treaty documents created between Indigenous Peoples and the Crown.
    • Indigenous Rights: Collective rights held by Indigenous Peoples that reflect their original use and occupation of land.
    • The Crown: Refers to King or Queen, the House of Commons, the Senate, and the provincial and territorial legislatures.

Indigenous Rights: The Duty to Consult

• Duty to consult requires the Crown to consult with Indigenous Peoples whenever it intends to act in a way that may adversely affect Indigenous rights.
• Figure 1.4 Elements for the Duty to Consult.

Indigenous Rights: The Duty to Consult

• Figure 1.5 Duty to Consult Spectrum.

Indigenous Rights: The Duty to Consult

• The content of the duty to consult is determined by the nature of the claim proposed.
  • If a project involves a weak claim with minor impact, the duty may be fulfilled by notification.
  • Conversely, if a proposed project involves a strong claim with serious impact, the duty may require deep consultation.
• Accommodations:
  • Occur when a proposed project is adjusted or modified in response to Indigenous concerns.

Sources of Canada’s Laws Statute Law or Legislation

• Constitutional Law: Outlines the structure and powers of government.
• Statute Law: Laws or acts passed by the government, also known as “legislation”.
• Common Law: Decisions made by judges in previous cases.

Legislation

• Laws created by parliament or legislature.
  • Two categories: statutes and subordinate legislation.
• Statutes: Legislative process.
  • Introduced as “bill”.
  • Majority support through a series of “readings”.
  • Sometimes public consultation follows.
  • Finalized by “royal assent”.

Subordinate Legislation

• Subordinate legislation (e.g., regulations, by-laws) is created under parliament’s or legislature’s authority.
• Regulations address the details of the act.
  • Food and Drug Act regulations address the details of irradiation.
  • Aviation Act regulations address the details of airplane maintenance.
• Example of municipality:
  • The province creates a municipality.
  • The province gives the municipality the power to pass by-laws.

Sources of Canada’s Laws Statute Law or Legislation

• Constitutional Law: Outlines the structure and powers of government.
• Statute Law: Laws or acts passed by the government, also known as “legislation”.
• Common Law: Decisions made by judges in previous cases.

Courts

• Function of courts:
  • Interpret and apply the constitution.
  • Interpret and apply legislation.
  • Create and apply “common law” (judge-made law).

Definitions of “Common Law”

• The term “common law” has different meanings depending on the context:
• Figure 1.6 The Common Law.

Definitions of “Civil Law”

• The term “civil law” has different meanings depending on context:
  • Legal system:
    • Civil law (e.g., Quebec/France).
    • Common law (e.g., England).
  • Within a Legal System:
    • Civil Law, private (e.g., divorce, contract suit).
    • Criminal Law, public.

Common Law and Equity

• Historical developments
• Phase I: Courts of Law
  *Only one set of courts in England
  *Rules often rigid and harsh
  *People sought other relief from the King or his representative then known as the Chancellor.
• Historical developments (continued)
• II: Phase Law and equity
  • Courts of law supplemented by courts of equity (or Chancery)
  • Two separate but parallel courts, judges, and rules
• III: Phase Fusion
  • Law and equity combined into a single court
  • Ongoing rationalization of legal and equitable rules
  • In the event of an inconsistency, the equitable rules apply or “equity prevails over law”

Nature of Equity

• Occasional differences remain between law and equity (e.g., damages at law — specific performance injunction at equity).
• Law has formal limitation periods, typically 1-2 years.
• Equity requires speed, i.e., injunctions must be sought as soon as practicable.

Law and Equity in Play

• Lawful strike at a hospital.
• Employees are lawfully picketing.
• Employees are lawfully blocking hospital access.
• A hospital will seek an injunction to preclude the blocking of access to the hospital by the employees, notwithstanding the legality of employees’ actions.
• A hospital must seek the injunction promptly, and damages are not a viable alternate remedy.
• “Equity prevails over law”.

Common Equitable Remedies

• Injunction
• Specific Performance
• Accounting for Profits
• Disgorgement
• Rescission
• Rectification
• Estoppel
• Trusts

Trusts

• Considered the greatest creation of common law
• Express trust: settlor transfers property to the trustee to hold for the beneficiary
• Common law creates the split title:
  • Trustee holds legal title to property
  • The beneficiary enjoys equitable title to property

Managing the Law: The Legal Aspects of Doing Business

• Chapter 2 Litigation and Alternative Dispute Resolution

Chapter 2 Overview

• The Litigation Process
• The Court System
• Administrative Tribunals
• Alternate Dispute Resolution

Litigation

• Litigation: dispute resolution in court.
  • Litigation is rare.
  • Slow, expensive, unpredictable, adversarial, and public.
• Quite a few “persons” have the capacity to bring a claim:
  • Human beings, Corporations/Organizations, Governments.
• Anyone can file a lawsuit for any reason.

Restrictions on Litigation

• In some cases, the right to sue can be lost:
  • (1) Litigation is subject to a limitation period.
  • (2) Exclusion Clauses may prohibit a lawsuit.

Restrictions on Litigation -- Limitation Periods

• Claims that are beyond the “limitation period” are considered unenforceable.
• In BC, the limitation period is determined by statute.
• “Discovery”: when the claim is discovered or should have been discovered.

Legal Representation

• Individual Self-Representation:
  • A party may represent themselves
• Representation by Lawyers:
• Representation by Paralegals:
  • Paralegal: not a lawyer but provides legal advice and services.

Bill 21–2024 The Legal Professions Act

• Received Royal Assent on May 16, 2024
  • Legal professions
  • 3 The following professions are designated as legal professions for the purposes of this Act:
    • (a) the profession of lawyer;
    • (b) the profession of notary public;
    • (c) the profession of regulated paralegal;
    • (d) a profession designated by regulation.

Summary of Litigation Process

• Pleadings
• Discovery of Documents
• Examination for Discovery
• Trial
• Judgment
• Enforcement of Judgment

Pleadings

• Plaintiff/Claimant: Person who is making the complaint/claim.
• Defendant: Person about whom the complaint/claim is being made.
• Pleadings: Documents used to clarify the nature of a dispute.
• Types of Pleadings:
  • Notice of Civil Claim / Notice of Claim (some Provinces use “writ and statement of claim”)
    • Used by the plaintiff to start a claim
  • Response/Reply (some provinces use “statement of defence”)
    • Used by the defendant to deny facts or liability
  • Counterclaim
    • Used if the defendant wants to claim against the plaintiff in the same proceedings
  • Response to counterclaim (some provinces call it a “statement of defence to counterclaim”)
    • Denial of facts or liability in counterclaim
  • Reply
    • Used by the plaintiff to dispute contents of the Response

Pre-Trial Activity

• Discovery of Documents: Right to inspect documents in possession of the other party that may be evidence.
• Examinations for discovery: A process in which the parties ask each other questions to obtain information about their case.
• Pre-trial conference: A meeting that occurs between the parties and a judge, where parties outline their position in front of an independent judge.
• Mandatory mediation program
  • Mediation: A process in which a neutral person (mediator) helps the parties reach an agreement.
• Settlement: Occurs when the parties agree to resolve their dispute outside of court.

Trial

• Possibility of Judge or Jury
  • Usually a judge alone for civil matters
• The trier of fact has to be convinced that the evidence meets the burden of proof
  • Criminal: “Beyond a reasonable doubt”
  • Civil: “Balance of probabilities”
• The balance of probabilities means that something has to be more than 50% likely.
• Costs
  • Costs: expenses that a party incurred during litigation (also have to pay the judgment award).
  • General rule: the loser at trial pays the winner’s costs

Class Actions

• Most Canadian provinces allow class actions
• Allows a single person or small group to sue on behalf of a larger group of claimants
• Benefits:
  • Allows small individuals to take on large organizations
  • A cost-effective way to sue for small but wide-spread claims
  • The threat of a class action may curtail big business behavior

Enforcement in Litigation

• Winning a judgment does not guarantee the judgment debtor will pay
• The winning party must “enforce” their judgment
• Enforcement techniques include:
  • Garnishee income
  • Seize and sell judgment debtor’s assets
  • Court officials and others such as a sheriff can help
• Only applies within the province of the court that issued the judgment

Appeals

• A party may appeal a decision to a higher court
  • Appellant: Party disputing the lower court decision, appealing
  • Respondent: Party supporting the lower court decision
• No new witnesses or evidence since the appeal operates from the court record at trial
• Focus on law rather than fact
  • Overrule any errors of law, but only palpable and overriding errors of fact

Appeals

• Normally a panel of three or more judges
  • The majority decision prevails
  • Disagreement is expressed through a judge’s dissent
• Effect of appeal judgments
  • Affirm the decision below
  • Reverse the decision below
  • Vary the decision below
  • Send back to the lower court for retrial

Contingency Fees

• The client pays the lawyer only if the lawsuit is successful
• The lawyer is paid from judgment proceeds
• Not allowed for certain types of lawsuits
• Often covers legal fees but not disbursements
• Not unusual for fee to be 25 – 40% of winnings
• Effect of contingency fees
  • Benefit: poor parties are able to afford litigation
  • Detriment: legal fees are often higher than normal

Court Hierarchy and Vertical Precedent

• Understanding the court hierarchy is key because stare decisis also works vertically.
• Courts must follow the decisions of courts above it (but not necessarily below it or beside it).
• However, these decisions may be persuasive but not binding

Supreme Court of Canada (“SCC”)

• The highest court in Canada and the final court of appeal.
• Hears appeals from provincial courts of appeal.
• Generally, there is no right of appeal to this court.
• The appellant must first obtain “leave to appeal;” the court must agree to hear the case.
• Last year the SCC heard a total of 49 cases.
• Sample citation: Rogers Communications Inc. v. Voltage Pictures, 2018 SCC 38

BC Court of Appeal

• Highest courts in the province/territory.
• Reviews decisions from the Superior/Supreme courts;
  *Therefore, functions as a review court rather than a trial court.
• Judges are appointed by the Federal government
• Normally, three judges hear an appeal.
  *Sample citation: Gehlen v. Rana, 2011 BCCA 219

BC Supreme Court

• Sometimes referred to as the Superior Courts or the Supreme Court.
• Can hear any type of case, civil or criminal.
  • Hears serious criminal trials in the province.
  • Hears serious civil cases (above 35,000).
• Hears most appeals from the Provincial Court in civil.
• Hears Judicial Review applications.
• Sample citation: Niemela v. Malamas, 2015 BCSC 1024

BC Provincial Courts

• Multiple Divisions:

Small Claims Division

• Small Claims Court: deals with disputes between 5,000 and 35,000.
• Appeals are to the Superior court
• Advantages:
  • Ideally suited for small business disputes
  • Quicker, less expensive, informal
• Disadvantages:
  • Limitations on types of claims and remedies
• Sample citation: Hunky Dory Sawmills v. Hassell, 2018 BCPC 68

BC Civil Resolution Tribunal (“BCCRT”)

*Tribunal has jurisdiction to deal with non-consensual sharing of intimate images, small claims disputes under 5,000, and many disputes about vehicle accidents, stratas, societies, and cooperative associations.

• Focus is on online resources, communication, and dispute resolution.
• Lawyers have a very limited ability to appear before the Tribunal.
• The tribunal does not apply strict rules of evidence, and is very flexible.
• Four stages:
  • 1) Self-Help Dispute Resolution
  • 2) Party to Party Negotiation
  • 3) Direct Intervention
  • 4) Tribunal Hearing
• Can apply to BC Supreme Court to have the CRT decision judicially reviewed.
  *Sample citation: Mundi v. Park Avenue Enterprises Ltd., 2018 BCCRT 534

Federal Courts

• Three specialized courts:
  • Tax Court: Disputes regarding the payment of taxes.
  • Federal Court, Trial Division:
    • Trials concerning federal division of powers areas.
  • Federal Court, Appeal Division:
    • Appeals arising from Trial Division and Tax Court.
  • Court Martial Trial and Appeal Courts
    • Military Justice under military code of conduct
• Judges are appointed by the Government of Canada.

Administrative Tribunals

• A body that resolves issues and disputes.
• Somewhere between the government and a court.
  • Examples: Human Rights Tribunals, Labour Relations Board, and Competition Tribunal.
• Exercise a “quasi-judicial” function.
• Some are informal, and some operate like courts.
• Decision-makers are generally experts in the field, seldom judges.

Judicial Review

• Administrative tribunal decisions are highly respected and not easily overturned.
• Can sometimes seek judicial review by a court on substantive or procedural questions.
  • Standards of judicial review for substantive decisions:
    • Reasonableness standard: The court defers to the tribunal’s expertise and only overturns unreasonable decisions.
    • Correctness standard: The court may overturn any error.
      *Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65 (CanLII), [2019] 4 SCR 653

Alternate Dispute Resolution (A D R)

• A D R is dispute resolution outside of court
• Litigation:
  • Slow, expensive, unpredictable, and adversarial.
  • Limited remedies; sometimes a plaintiff just wants an apology or explanation (but see some provinces Apology Acts).
  • Public,