CANADA Trends and Developments Contributed by: Craig Ferris, Laura Bevan, Anna Paczkowski and Codie Chisholm, Lawson Lundell LLP
However, the SCC confirmed that attribution will gen- erally be inappropriate when: • the directing mind acted totally in fraud of the cor- poration (the fraud exception); or • the directing mind’s actions were not by design or result partly for the benefit of the corporation (the no-benefit exception). The SCC noted that courts also have the discretion to refrain from applying the corporate attribution doctrine when it would promote the purpose of the law under which attribution is sought. The SCC reiterated that in all cases, the courts must apply the common law cor- porate attribution doctrine purposively, contextually and pragmatically because it is rooted in public policy. Aquino arose from an application by the trustee in bankruptcy of two family-owned construction compa- nies to recover millions of dollars transferred out of the companies by their directing mind in a false invoicing scheme. The trustee attempted to recover the pay- ments as undervalue transfers intended to defraud, defeat of delay creditors under Section 96 of the BIA. In Aquino , the SCC declined to recognise the fraud and no-benefit exceptions, as those exceptions would undermine rather than promote the purpose of this statutory provision. The Court confirmed that Section 96 of the BIA is a tool to remedy asset stripping by a debtor by clawing back assets that were improperly transferred to others before bankruptcy, to protect the pool of assets available for creditors. The SCC held that applying the fraud and no-benefit excep- tions to corporate attribution would render the transfer at undervalue remedy meaningless and would deny third‑party creditors their statutory remedy. The SCC found that the remedial purpose of Section 96 of the BIA is served by attributing the actions, knowledge, state of mind or intent of the directing mind to the corporation, even if the directing mind acted in fraud of the corporation, and even if the corporation did not benefit from the actions of the directing mind. In Aquino , the directing mind was stealing from the corporations. The SCC attributed the directing mind’s fraudulent intent to the corporations, enabling credi- tors to claw back millions in transfers at undervalue.
In contrast, in Golden Oaks , the SCC applied the same purposive, contextual and pragmatic approach to refuse to attribute the fraudulent intent of the direct- ing mind of a Ponzi scheme to the insolvent corporate vehicle used to perpetrate the scheme. In this case, the trustee in bankruptcy made claims against early investors in a Ponzi scheme to recover interest and commissions paid to them as part of the fraud. The investors argued that the knowledge of the directing mind about the scheme was attributed to the corpora- tion at the time that the payments were made; there- fore, the claims were out of time under the limitation statute. Relying on Aquino , the SCC declined to attribute the knowledge of the directing mind to the corporation, as it would undermine the purpose of the discoverability rules of the limitation statute by making the claims statute-barred before the insolvency professional was even able to assert them, creating an injustice. Additionally, attributing the directing mind’s knowl- edge would undermine the purposes of the BIA, and would allow the investors to retain the proceeds of their wrongful conduct and thereby reduce the value of the debtor’s assets available for distribution to other creditors. In the SCC’s view, this would not be in the public interest. In short, in the insolvency context, the doctrine of cor- porate attribution will be applied flexibly, pragmatically and with a mind to the legislative context and purpose at play. Aquino and Golden Oaks provide strong guid- ance about corporate attribution and when it will (and will not) apply, emphasising that there is no one-size- fits-all approach. Significant Concerns With the Drafting of Privacy Terms and the Consent Process The FCA’s decision in Facebook arose from an inves - tigation by the federal Privacy Commissioner into the scraping of Facebook user data by the app “thisisy- ourdigitallife” (TYDL), and the subsequent selling of the data to Cambridge Analytica, for psychographic mod- elling purposes between November 2013 and Decem- ber 2015. The FCA found that Facebook breached the Personal Information Protection and Electronic Documents Act, S.C. 2000, Chapter 5 (PIPEDA) – the federal privacy legislation that required it to obtain
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