2004
  SUPER MODELS, HAIR TRANSPLANTS AND RECENT LEGISLATION: LIABILITY OF B.C. BUSINESSES FOR BREACH OF PRIVACY 
As a result of recent legislative enactments, businesses in British Columbia now face three major sources of liability for violating individuals’ rights to privacy. The original common law tort of breach of confidence was the subject of a high profile appeal in England earlier this year. That case involved newspaper articles about an international supermodel, and her ostensible drug use. But we begin this article by considering the statutory causes of action created by the provincial Personal Information Protection Act (PIPA) and the Privacy Act. The bottom line is that businesses must keep all three sources of liability for violating privacy rights or misusing confidential information in mind when assessing their privacy policies and procedures. That is, unless they want to court the risk of expensive, and embarrassing litigation. Personal Information Protection Act PIPA and the federal Personal Information Protection and Electronic Documents Act (PIPEDA) both impose obligations on organizations that collect, use and disclose personal information about identifiable individuals. An organization must have the consent of an individual to collect, use or disclose personal information, and the organization may not require an individual to provide personal information beyond that required to provide a product or service. PIPA and PIPEDA both create a cause of action for an individual whose personal information has been improperly collected, used or disclosed by an organization. An individual may complain to the provincial Privacy Commissioner, and if the Privacy Commissioner finds that personal information has been mishandled, the individuals affected by the order may pursue a claim for damages in court. For example, in this age of identity theft, an organization must ensure that it maintains appropriate security to protect the personal information it collects from unauthorized disclosure. If the system is invaded by computer hackers and personal information is disclosed, the organization is potentially liable for the damages suffered by the individual whose personal information has been improperly disclosed. As we will see, PIPA and PIPEDA only apply to organizations. They do not regulate the collection, use or disclosure of personal information by individuals. Further, PIPA and PIPEDA both provide an exemption for collection, use and disclosure of personal information for such things as journalistic purposes. Privacy Act The Privacy Act creates a tort of invasion of privacy where a person "wilfully and without claim of right" violates the privacy of another. The statute provides that the tort is actionable without proof of damage. The Privacy Act has some overlap with PIPA, but it also applies where PIPA does not. For instance, the Privacy Act applies to individuals as well as organizations. However, the Privacy Act does still provide an exemption for journalists if they can show that the publication was of public interest or was fair comment on a matter in the public interest. Privacy, in the context of the Privacy Act, is much broader than under PIPA. It is not restricted to protection of personal information, but is expanded to include eavesdropping and surveillance. A person who makes a claim under the Privacy Act must show an intention to act in a manner which would violate the privacy of another, without an honest belief that there was a legal justification or excuse for the invasion of privacy. Common Law: The Tort of Breach of Confidence The common law also has its methods for protecting private information. The tort of breach of confidence provides a cause of action against a person who misuses information obtained in confidence. The tort of breach of confidence applies equally to all individuals and entities in British Columbia, and will have a continued role in filling the gaps left by PIPA and the Privacy Act. The English House of Lords recently had an opportunity to consider the impact of the tort of breach of confidence on journalists when a celebrity, Naomi Campbell, sued the paparazzi for publishing her medical information, a drug addiction, on the front cover of a London newspaper. Traditionally, a relationship of confidence triggered the tort of breach of confidence, and not merely the confidentiality of the information itself. However, in recent years the House of Lords’ jurisprudence on the tort of breach of confidence has developed to include ‘relationships’ where the recipient, though not acquainted with the confident, knew or ought to have known that the information was confidential. For example, a person who finds a diary or a document marked confidential knows or ought to know that the information is confidential. The test of "reasonably known or ought to have known the information was confidential" permitted the House of Lords to find that there was a legal relationship of confidence between Ms. Campbell and the newspaper, even though there was no direct relationship between them. The twist to this case is that Ms. Campbell had publicly declared herself to be, unlike other fashion models, drug-free. Her public statements regarding her lack of a drug habit gave the tabloid the right, in the words of the Court, "to set the record straight". Further, in presenting this exposé, the newspaper was obligated to disclose the fact that she was attempting to rehabilitate herself. Therefore, the act of exposing Ms. Campbell’s addiction was not in breach of confidence. However, Ms. Campbell pursued her claim on the basis that details provided in the story were a breach of confidence. In particular, she objected to information regarding her attendance at Narcotics Anonymous, the nature, length and frequency of her treatment and the time of day when she attended meetings. She also objected to the publication of photographs showing her leaving the place of treatment. Ms. Campbell was successful on that ground, and was awarded £3,500. The tort of breach of confidence was also considered by the British Columbia Court of Appeal when a hair transplant doctor released a videotape of a patient receiving the surgery to BCTV. The doctor had been more than willing, indeed eager, to provide a copy of the tape. The tape was played on the 6:00 p.m. news, showing in plain view the plaintiff’s face as he received the transplants. He sued the news agency for breach of confidence and breach of privacy. The Court found that there were no grounds showing that the news agency knew or ought to have known the videotape was confidential, and therefore a breach of confidence was not established. As in the Naomi Campbell case, the court was not concerned about the lack of relationship between the plaintiff and the news agency. Instead, the court focused on whether the news agency should have known the videotape was confidential, especially since the doctor had been so eager to provide a copy of the videotape. Conclusion The three sources of liability for breach of privacy in British Columbia all have different objectives and different tests. Businesses must consider the potential for each cause of action when developing their policies, procedures and systems for complying with privacy law in British Columbia. For further information on this, or other privacy law or business litigation issues, please contact Larry Munn (lm@cwilson.com, 604.643.3160), or any of the other Clark Wilson LLP lawyers listed on this page. Mr. Munn wishes to acknowledge and thank his associate, Andrea East, for assisting in the preparation of this article.
DIRTY REAL ESTATE IN B.C.: A PRIMER ON ENVIRONMENTAL CONTAMINATION AND LIABILITY INSURANCE COVERAGE (PART I)
Q: What do environmental contamination, business in British Columbia and liability insurance have in common? A: Perhaps millions of dollars more than you might have thought before you received this newsletter. The purpose of this two-part article is to describe (in as much detail as possible in the limited space available) why that is, how it can effect you or your clients, and what you and they can do. Specifically, we will highlight some of the legal issues regarding:
Environmental Contamination and Claims to Recover Clean Up CostsOur starting point is the Waste Management Act (which is currently being amended and combined with the Environmental Management Act), the single most important piece of environmental legislation in this Province. Under the Act, all past or present "owners" and "operators" of a "contaminated site" are "absolutely, jointly and severally and retroactively responsible" for reasonably incurred costs of cleaning up the contamination, whether that is done pursuant to a government remediation order or voluntarily, followed by a court award of damages. What makes the Act different from environmental legislation elsewhere in Canada - or the United States - is that it permits a party which has cleaned up a contaminated site to sue other 'responsible persons' to recover such costs. Who are defined as "owners" and "operators" of contaminated sites, and therefore 'responsible persons' and subject to 'cost recovery' actions under the Act? Well, "owner" means "a person who is in possession of, has the right of control of, occupies or controls the use of real property". Cases have interpreted these words to include tenants who rent land or buildings, as well as commercial landlords or homeowners who are registered in the land title office. Directors or officers of holding companies are also caught by the definition of "owners". So the 'corporate veil', or limited liability, of a company does not protect directors or officers from personal responsibility. Similarly, an "operator" is a company, director, officer or other person who "is or was responsible for any operation located at a contaminated site". Examples of such 'operations' include gas stations, dry cleaning stores or farms, as well as a mines, petro-chemical plants or light industrial facilities, among others. What is a "contaminated site"? It is a property where the soil or groundwater contains one or more of a long list of proscribed substances, in higher amounts than permitted under the Contaminated Sites Regulation. And what is meant by the phrase "absolutely, jointly and severally and retroactively responsible"? Breaking it down word by word, and using as an example the Britannia mine case in which the author was counsel:
The WMA/EMA did not come into force until 1987, and it was not until 1999 that the Ministry of Environment began to pursue and threaten to issue a remediation order against former owners and operators of the Britannia Mine. A group of former owners and operators, including two American multi-nationals, subsequently negotiated a $35 Million settlement with the provincial government, which was announced in early 2001. In another case, the author represents an alleged owner of a former Koppers wood preservation plant that syndicated the property to investors after it had been redeveloped into a warehouse facility. In 1999, the Province issued a remediation order to the American company, Beazer East, which operated the plant from 1969 until it closed in 1982, as well as the CNR, which had owned the property since 1929. Beazer and CNR then sued other alleged owners and operators in a 'cost recovery action', to recover tens of millions in clean-up costs to date. That case is still before the courts. So the words "absolutely", "jointly and severally" and "retroactively" can have very far reaching implications for thousands of companies and individuals in this province. Take a moment and think about your or your client's business, its historical operations and owned or rented properties. Then look beyond the present corporate structure, to predecessor companies it may have merged or amalgamated with. Where and when did any of those companies 'operate' facilities, or 'own' what may now be contaminated sites? And who might they have indemnified, over the past years and decades? Why should you do that? Because, pursuant to the WMA/EMA, and established principles of corporate law, a merged or amalgamated company is liable for the environmental 'sins' of its predecessors. Talk about 'retroactive' liability! Liability Insurance and the 'Not So Absolute' Pollution Exclusion [to be continued in Part II, this Fall] For further information on this, or other environmental law or business litigation issues, please contact Neo Tuytel (njt@cwilson.com, 604.643.3180), or any of the other Clark Wilson lawyers listed on this page. COMMERCIAL TENANT BANKRUPTCIES: WHAT'S A LANDLORD TO DO?
In tough economic times, a commercial landlord may be faced with the bankruptcy of a tenant. When this happens, the Landlord appears to suffer twice. First, rental payments cease. To add insult to injury, the Landlord runs head-on into the sometimes complicated area of bankruptcy law. For example, you might think that upon being faced with a bankruptcy, a Landlord could simply find a new tenant. That is not the case. While a Landlord might be able to terminate a lease prior to a bankruptcy, many of the usual remedies to deal with a defaulting tenant are lost when a bankruptcy occurs. Read on for a short primer concerning a Landlord’s position when a tenant goes bankrupt. A tenant’s bankruptcy involves both federal legislation, the Bankruptcy and Insolvency Act, and provincial legislation, the Commercial Tenancy Act. Under the Bankruptcy and Insolvency Act, a stay of proceedings is automatically imposed to prevent creditors from taking any action against an insolvent person once a bankruptcy has occurred. As a result, no creditor, including a Landlord, has a remedy against the insolvent person or their property. This means that a commercial Landlord’s usual remedies such as distraint, termination of the Lease, re-entry of the premises, or the commencement of a court action, are lost. What’s worse, the Landlord may be forced to stand by while the bankruptcy trustee determines what is to happen with the leased premises. Under the Commercial Tenancy Act, the trustee has the right to occupy the leased premises where the lease does not create a monthly tenancy or has not been terminated prior to the date of the bankruptcy. Generally speaking, the trustee receives the benefit of the tenant’s lease and is entitled to retain this benefit for up to three months. During this "look-see" period, the trustee has three options with respect to the bankrupt tenant’s leased premises. These are:
The trustee may choose any of these options regardless of whether the lease terms prohibit them. That said, a Landlord should keep in mind that the trustee is obligated to pay occupation rent for the time in which it actually occupies the leased premises less, of course, any rent paid in advance by the former tenant and any monies paid as accelerated rent. Unfortunately for a Landlord, it will have little say in the type of tenant to which the trustee may assign the lease. The only safeguard here is the requirement for the trustee to obtain the Court’s approval as to the assignment to the replacement tenant. The Courts have held that when an application to approve an assignment is made by a trustee, the Court must satisfy itself that the new tenant will be responsible and respectable, personally and financially. The onus is on the trustee to prove that this is the case. As a small measure of comfort, a Landlord can insist that any replacement tenant proposed by a trustee must obey the terms of the lease in question. For example, a restrictive covenant in the lease would apply to the replacement tenant in the same fashion as it did to the former tenant. There are some small silver linings in the bankruptcy cloud for the Landlord. First, the Bankruptcy and Insolvency Act provides that a Landlord is granted a preferred claim for:
Landlords should ensure that their lease forms provide for a claim of accelerated rent in the face of a bankruptcy. The arrears of rent which may be claimed are calculated for a three-month period ending on the day immediately prior to the bankruptcy while occupation rent runs from the date of the bankruptcy. There is one catch in order for the Landlord to obtain any amounts for accelerated rent – the bankrupt must have property on the leased premises upon which the trustee can realize. The Bankruptcy and Insolvency Act restricts the Landlord’s preferred claim to the amount which can be realized from the bankrupt’s property on the premises. A Landlord continues to rank as an unsecured creditor for the balance of accelerated rent not payable on a preferred basis up to, of course, the three-month limit. The Courts have also recently held that a Landlord may take action against a guarantor under the lease even when a tenant has gone bankrupt (Crystalline Investment.Ltd. [2004] S.C.J. No. 3). In this case, the Supreme Court of Canada took the opportunity to construe the Bankruptcy and Insolvency Act narrowly by deciding that the termination of a lease in a bankruptcy would relieve only the bankrupt tenant from its obligations to the Landlord. Guarantors or assignors of the lease remained liable. A Landlord may also encounter a tenant’s proposal under the Bankruptcy and Insolvency Act rather than a bankruptcy itself. A proposal is an effort on the part of the tenant to avoid bankruptcy by presenting a plan to its creditors, including the Landlord, to permit the tenant to get "back on its feet". The tenant’s creditors vote on the proposal which must pass according to a formula set out in the Act. The tenant will become bankrupt if the proposal is not approved. In general, a Landlord will be required to permit a tenant to remain in the leased premises while the proposal process is taking place. This is the case even when there are arrears although rent is to be paid while the occupation continues. A Landlord can seek permission from the Court to terminate the lease if ongoing rent is not paid. There is no set way in which Landlords must be treated under a proposal. It is really just a proposed agreement between a debtor and its creditors upon which the creditors vote. A tenant’s proposal may range from payment of arrears over time to an outright disclaimer of its lease. Of course, the general goal of the tenant is to make the proposal attractive enough to its creditors to cause them to vote "yes" and permit the tenant to avoid bankruptcy. The law, as it applies to a tenant’s bankruptcy, involves rather technical legislation and lease interpretation issues. Although a Landlord’s remedies may be curtailed by a bankruptcy, experienced counsel can help a Landlord navigate the various bankruptcy issues which might be raised and, in the long-run, ensure that the Landlord comes out of the process in the best position possible. For further information on landlord/tenant or other creditor/debtor issues, please contact Bill Holder ( wdh@cwilson.com, 604.643.3169), or any of the other Clark Wilson LLP lawyers listed on this page. CLARK WILSON LLP WEBSITES WIN TOP HONOURS
Clark Wilson LLP was recently honored with two significant website awards, following an independent survey conducted by marketing attorney Micah Buchdahl of InternetMarketingAttorney.Com. Clark Wilson LLP's website (www.cwilson.com) received top honors in the International Law Firm category, which included hundreds of prominent firms from around the world. Says Buchdahl, "It is rare that a site can still blow me away, but this one was one of the most enjoyable surfing experiences of the year. This 65-attorney Vancouver firm has taken the Internet to all new levels." The firm's commercial real estate resource page, BCRELinks.com, was also recognized in a separate listing of 'Nifty Fifty' sites. Buchdahl comments, "Developed by the firm's commercial real estate group, the 'deal maker's toolbox' is one of the most clever and creative 'links' sites you'll find." THE FULL COURT PRESS VIA EMAIL
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