Peggy Moss: And I’m Peggy Moss, and welcome to the Blakes... Hey, Mathieu? You okay? You don’t sound right.
Mathieu: I don’t know, Peggy. I’ve been doing way too much binge-watching, and I’m having awkward dreams, all related to work, and I’m left with tiring legal questions.
Peggy: Like what?
Mathieu: Well, let’s say I have a zoo in Quebec…
Peggy: Oh boy, here we go.
Mathieu: You know, with big exotic animals, but no one comes because of COVID. Can I invoke force majeure, maybe defamation? I mean, Joe Exotic must have a case, right?
Peggy: Tiger King? Seriously? I think it’s time to launch episode 4 of the Blakes Continuity Podcast, in which we talk about litigation.
Mathieu: We reach Matthew Liben in Montréal, where he practises commercial litigation. Matt, bonjour, hello! Let’s talk about force majeure first. Are businesses successfully invoking that in response to the impact of COVID-19?
Matthew: Yes, they certainly are. I mean, I guess it depends, you know, on the definition of successful because probably the outcome is not certain yet. We’ll likely see litigation flowing from it, but we’re seeing a lot of instances where it is being invoked. That said, most force majeure clauses are not actually crafted to provide relief from a crisis like this one. Notably, most of the clauses that we’ve looked at exclude monetary obligations and are, therefore, not really of any assistance to parties that are looking for help to suspend contractual payments. So, what we’ve had to do with respect to debtors that are seeking help to weather the storm is to look into the agreement as a whole and consider whether there are other clauses that might be of assistance or looking at legal doctrines that might help them. And, in other cases, the adverse party may have actually already invoked a force majeure clause, in which case the task for us is really to take a look and see whether the clause has been properly applied and whether there’s anything in the clause that could provide help to our client with respect to the performance of its own obligations. And, notably, we take a look at whether the force majeure clause actually really suspends performance or whether it actually only postpones the parties’ respective obligations.
Mathieu: Right. What’s distinctive about Quebec’s force majeure regime?
Matthew: Well, here in Quebec, unlike anywhere else in Canada, even in the absence of a force majeure clause in the contract, the parties are in a position to avail themselves of a force majeure defence by virtue of the provisions of the Civil Code. And, indeed, the Civil Code provision actually is only enforceable or applicable when the contract is silent. So, the parties can contract out of the Quebec force majeure regime, but if the contract is silent, the force majeure regime under the Civil Code is available to them. And what’s interesting about the Quebec Civil Code regime is that it does not exclude monetary obligations. So, in many cases, it’s actually more favourable for a debtor than the typical contractual clause.
Peggy: Matt, you’re in the unusual position of representing both landlords and tenants in the commercial real estate arena, and I’m wondering what kinds of issues you’re seeing on both sides in light of the pandemic.
Matthew: Well, that’s true, and I would say that this crisis is really going to have a significant and lasting impact on both landlords and tenants, and both sides have come to us and sought out our help to try to resolve issues under their commercial leases. I’m pleased to report that in essentially all of the cases where we’ve been approached, both parties had, indeed, already tried to resolve the matters voluntarily and had not been able to do so. So, at that point, when there’s a log jam, we get involved, we take a look at the lease, and we give advice as to how the party can best position itself, either in anticipation of a litigation or to try to perhaps break the log jam and get negotiations going again. In terms of what we’re looking at? Well, certainly we’re looking at the force majeure clauses, but we’re also thinking about whether the defence of non-performance can be invoked. We’re looking at whether the landlord is in default of its obligation to provide quiet enjoyment of premises, and if so, what are the consequences of that. We’re looking at whether the landlord is in default of its obligation to guarantee that the premises may be used for the intended purpose. We’re looking at whether the contract limits or removes these obligations entirely. So, there’s a variety of different issues that we look at, obviously, depending on whether we are acting for a landlord or a tenant.
Peggy: The federal government recently weighed in on this. What are the key takeaways of that pretty striking announcement?
Matthew: Well, I think probably the key takeaways are, firstly, that it gave great hope, particularly at first when the precise details of the program had not yet been set out. It gave great hope to tenants who viewed it as an opportunity to obtain up to 75 per cent reduction in their commercial rent payments for the months of April, May and June. When the details actually emerged, I think the key thing is to consider (1) whether the landlord is prepared to actually opt in, because it does turn out to be a purely optional program, and [(2)] if so, how eligibility for the program is to be determined, because not everyone is eligible. The program is really oriented to small and medium-sized businesses, and the criteria for determining that seemingly is based on a lease-by-lease basis and the amount of rent that’s payable under the lease with respect to a given lease.
Mathieu: Matthew Liben, thank you very much. Robin Reinertson, this is a good time to bring you into the conversation. You are a Partner in the Litigation & Dispute Resolution group based in Vancouver. In your practice, you deal mostly with class-action defence. We know plaintiffs’ lawyers can become quite creative when it comes to filing a class-action case. Has the current pandemic given them new reasons to be proactive whether it’s in B.C. or elsewhere in Canada?
Robin: Yeah. The short answer is yes. We’ve seen a significant number of class actions cases filed that are related to the COVID-19 pandemic in recent weeks, particularly in the U.S. which tends to lead in terms of class-action activity, and then we’ll see copycat claims filed in Canada. There has been just an astronomical number of cases filed. But we’ve also seen a significant number of new cases across Canada.
Mathieu: What kind of class-action cases have you seen filed or do you expect to see in relation to COVID?
Robin: Well, the claims are being filed against a wide range of businesses in a number of different industries. It’s not just travel or health care, although those certainly are hotbeds of activity. We’re seeing a lot of consumer claims. So, people who had travel reservations, there have been claims commenced for issuing credits instead of giving refunds to people who had to cancel their travel. Tickets for concerts and events, ski passes, amusement parks as well as gym memberships ― anything where you had to pay a monthly fee and you’re not getting that service, but you’re still paying the monthly fee ― that’s ripe for a class action. As I said, there’s health-care claims, so there have been claims filed in Quebec and in British Columbia, and most recently, in Ontario as well, related to outbreaks of COVID-19 at long-term-care homes. We’ve seen claims regarding outbreaks at federal prisons. I think anywhere there is a significant clump or cluster of cases, we will see class-action cases filed. And then, you know, we’re seeing insurance claims. Some of these cases have been filed already, some of these cases have been filed in the U.S., and we expect to see them in Canada. We expect to see employment-based class actions in relation to layoffs or for hazard pay or for dangerous working conditions. We may see an increase in privacy cases or cybersecurity class actions. There’s already been an action filed in California regarding Zoom. In the U.S., they’ve also filed a claim against universities for cancelled classes. So, because the stakes are so high in this pandemic, we expect to see almost an unlimited scope for creativity and potential claims.
Peggy: Robin, there have been suggestions that the legal and political context in B.C., in particular, is creating a kind of perfect storm for lawyers who prosecute class actions, when people say that, what do they mean?
Robin: Well, the coronavirus pandemic has coincided with unrelated factors that have made B.C. a real hotspot for class actions within Canada right now. There’s two primary reasons for that. The first is the structure of B.C.’s Class Proceedings Act and recent amendments to that legislation, and the second, oddly enough, is the changes to ICBC, the Insurance Corporation of British Columbia, which is the mandatory motor vehicle insurer in the province. So, first, with respect to B.C.’s Class Proceedings Act, B.C. recently became a jurisdiction that allows national class actions. We’re also a no-cost jurisdiction, unlike Ontario or most other provinces. So, the cost and the risk to plaintiffs’ counsel of bringing a class action in B.C. is lower than in Ontario or other places. Simultaneously, we’re seeing Ontario considering amendments to its Class Proceedings Act that would actually make it less attractive to file there. And then in relation to ICBC, we’ve always had entrepreneurial creative class-action counsel in B.C., but we’re seeing new people come on to the scene. There have been dramatic changes to the tort scheme in B.C. as it relates to motor vehicle claims and our attorney general has recently announced an intention to move fully to a no-fault scheme. And essentially, what that will mean is a number of plaintiffs’ lawyers who have made motor vehicle litigation their primary business will need to look for new cases and new types of claims. And so, we expect to see many more people bringing cases in B.C. in the near future.
Peggy: I can imagine it would be desirable to make yourself class-action proof in that environment and that that would be hard to do, but are there things that businesses and clients can do to mitigate risks of class actions in the current situation?
Robin: Unfortunately, you’re quite right. It’s not possible to become class-action proof. There’s always the risk that somebody will file a claim against you even if there’s no merit to that claim. People often talk about filing a criminal case against a ham sandwich, and sometimes I feel like you could certify a ham sandwich in British Columbia. So, there’s always a potential risk, but you can do things to minimize your risk, and businesses really need to think carefully in this pandemic and, ideally, obtain legal advice before they communicate with their customers, their employees, their investors and others. There may be a temptation, I think, after this initial phase has passed to let the guard down, but we’re entering a new stage of longer-term measures, and we will start reducing some of the restrictions that have been in place or attempting phased return to work, and I think it will be very important for businesses to really pause and seek legal advice about the best way to go about engaging in those activities and communicating those activities. The other thing I would urge our clients is that, if they are faced with a class action, it’s really important to get creative experienced counsel who can identify and exploit potential early exit strategies. These cases are just monsters of complexity, and the costs of defending them over many years can be significant. So, we really try to look for ways to end the case as soon as possible.
Mathieu: Thank you, Robin and Matt. I know you and others on the litigation team are quite busy right now. Thank you for taking the time to bring us up to speed on the latest developments.
Peggy: Listeners, if you’d like more information, please check out the Blakes COVID-19 Resource Centre on our website. Until next time, stay home and stay well.
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