Commercial Law Strategy Activities Report 2002

II. REVIEW OF ON-GOING AND NEW PROJECTS

The goal of the Commercial Law Strategy is the adoption in Canada of uniform acts in areas of commercial law most commonly used in Canada where harmonization and modernization are both desirable and practicable.

The projects currently underway within the Strategy relate to subjects chosen by the Conference and the Steering Committee of the Commercial Law Strategy for their significance to commercial relations and to the Canadian legal infrastructure. Efforts have been made to include broad representation on the relevant working groups (e.g., civil/common law expertise, geographic diversity, private practitioners and academics, etc.). Furthermore, attention has been directed to soliciting input at a relatively early stage from those groups which have been identified as having a particular interest in a specific subject. As the number of volunteers at times has exceeded our needs for the constitution of working groups, we will ensure that individuals who have expressed an interest in participating in the projects or in providing informal feedback on early drafts are given the opportunity to submit their comments at various stages. By following these guidelines, we hope to develop uniform acts which represent a consensus arrived at following due consideration of a broad spectrum of concerns and, more importantly for implementation purposes, which benefit from extensive stakeholder support.

Further to the decision of the Steering Committee, I continue to be a nominal member of the working groups. This enables project leaders to keep me regularly informed of relevant progress.

ON-GOING PROJECTS

(A) Personal Property Security Legislation ("PPSA")

Canadian law dealing with secured transactions in personal (movable) property lacks harmony and has not kept up with developments in business practices and case law. For this reason, the PPSA working group was established by the Conference to develop recommendations for harmonizing and modernizing the relevant laws in the provinces and territories.

The working group, co-chaired by Professors Ron Cuming, Q.C. and Catherine Walsh, has had several productive meetings during the past year. The discussions have focussed on developing recommendations which relate to six specific areas:

  • the interrelationship of security interests under provincial personal property legislation and the Bank Act;

  • harmonization of conflicts rules;

  • purchase money security interests;

  • security interests in licences;

  • anti-assignment clauses affecting accounts and chattel paper; and

  • consequential modifications to provincial secured financing law required by the draft Uniform Securities Transfer Act being recommended by a different working group.

In keeping with our desire to ensure broad consultation in the development of recommendations made by this and other committees of the Commercial Law Strategy, a number of consultation papers have been prepared. These will be circulated for comment to the Strategy's endorsers, to those parties identified as having a particular interest in the work of this committee and to the members of the Strategy's mailing list which now includes more than 1200 names. In some cases, specific questions will be asked of the readers of the papers. To this end, we are looking at the possibility of collecting the feedback through some form of survey on the internet. A number of software packages are being evaluated for this purpose.

In addition to these more abbreviated consultation papers, background papers setting out the current legal environment and discussing the reasons underlying various recommendations being made by the working group will eventually be posted on the Conference's web site for the benefit of those interested in more information on the various subjects. These will describe the various options, including their respective advantages and disadvantages, which were considered by the working group in arriving at their recommendations.

Rod Wood will be reporting on the work of this group in greater detail on Monday.

The members of the working group, in addition to Professors Cuming and Walsh, are Professor Tamara Buckwold (U of Saskatchewan), John Cameron (Torys - Toronto), Arthur Close, Q.C. (BC Law Institute), Michel Deschamps (McCarthy Tétrault - Montreal), Ken Morlock (Fasken Martineau DuMoulin LLP - Toronto), Professor Rod Wood (University of Alberta), Professor Jacob Ziegel (University of Toronto) and Hélène Yaremko-Jarvis (ULCC Commercial Law Strategy).

(B) Enforcement of Civil Judgments

In a number of Canadian jurisdictions, civil enforcement procedures are antiquated and are dispersed throughout a number of statutes and in the common law. In addition, significant differences in civil enforcement procedures exist from province to province. These differences touch upon a variety of issues such as pre-judgment measures to "secure" property pending trial, post-judgment enforcement measures (including exemptions) and method of registration of judgments. The greater mobility of Canadians and their assets has made the need for harmonization in this area of the law more pressing.

At their August 2000 annual meeting, the members of the Conference decided that this subject should be reviewed as part of the Commercial Law Strategy. The working group has since met regularly to develop recommendations for a uniform act for the enforcement of monetary civil judgments.

As the government of British Columbia commissioned the British Columbia Law Institute (BCLI) to conduct research on this topic, the Conference working group is cooperating closely with the BCLI. Both groups are under the direction of Professor Lyman Robinson, Q.C. who is an acknowledged expert in this area of law.

The objectives of the project and the work undertaken by the working group during the past year will be described in detail in the report being made to the Conference by Professor Robinson on Tuesday morning.

The members of the working group, in addition to Professor Robinson, are: Mounia Allouch (Justice Canada), Professor Tamara Buckwold (University of Saskatchewan), Caroline Carter (British Columbia Law Institute as Reporter), Arthur L. Close, Q.C.(British Columbia Law Institute), Professor Ron Cuming, Q.C. (University os Saskatchewan), Chris Curran (Government of Newfoundland), Hélène Fortin (Government of Québec), Geoff Ho, Q.C. (Government of Alberta), Marie José Longtin (Government of Québec), Darcy McGovern (Government of Saskatchewan), Keith Pritchard ( Government of ), Tim Rattenbury (Government of New Brunswick), John Twohig (Government of Ontario) and Professor John Williamson (University of New Brunswick)..

(C) Transfer of Indirectly Held Securities (tiered holdings)

Pleas for uniformity/harmonization of Canadian securities law have received considerable coverage in the Canadian media during the past year. The Uniform Law Conference of Canada has long understood the importance of harmonization in this area. Indeed, in 1993 the Conference undertook a project to develop uniform provincial legislation governing transfers and secured transactions involving investment securities to be harmonized with the then-pending revisions to Article 8 of the Uniform Commercial Code [ ultimately completed in 1994].

The need to also modernize securities legislation was rendered particularly urgent in light of the development of business practices (e.g. indirectly held securities or tiered holdings) not contemplated in relevant Canadian legislation and the greatly enhanced speed of transfer of securities using modern technology. Also, as both the United States and the European Union had addressed these issues by adopting new laws, Canada was becoming uncompetitive internationally.

The goal of the project is to create a final product which is implementable in each province without amendment. This assumes uniformity in the common law provinces, and as close to uniformity as possible in Québec having regard to the requirements of the Civil Code of Québec.

A group consisting of representatives of the Canadian Securities Administrators and legislative counsel from British Columbia, Alberta, Ontario and Québec has been working on a draft Uniform Securities Transfer Act and commentaries for a number of years. A number of delays have been encountered in achieving consensus on an appropriate approach to resolution of the issues encountered, including those pertaining to differences in drafting protocols among the various jurisdictions. In addition, there was a need to draft consequential amendments to PPSA legislation. I understand from having spoken to Eric Spink that these consequential amendments are now ready and will soon be made available to the PPSA working group for comment.

A more detailed review of progress on this subject will be presented by Eric Spink tomorrow. In light of the challenges faced by this working group over many years, their members are to be applauded for having persisted to the end.

(D) Federal Secured Transactions

This project, which is being carried out jointly with the Law Commission of Canada ("LCC"), seeks to address inconsistencies, uncertainty and other difficulties relating to security interests under the different federal statutes that regulate particular industries or types of property. Of particular concern are problems relating to leveraging "knowledge assets" in secured transactions.

Last August, I reported that the LCC had retained Howard Knopf (Shapiro Cohen) to prepare an issues paper which would form the basis of discussions at a roundtable of experts from industry, the Bar, government and academia to be held in London, Ontario on November 16-17, 2001.

The London meetings took place as planned with the participation of experts knowledgeable with respect to relevant laws and experience in Canada, the United Kingdom, the United States, Australia and the EU.

The first day of the meeting began with a cross Canada video-conference with interested parties participating electronically in Vancouver, Calgary, Toronto, London, Montreal and Halifax. This was followed by a number of presentations by the experts which led to discussions aimed at identifying practical solutions to the problems identified during the video-conference.

In addition to the London meeting, an on-line survey was developed by the LCC and the Richard Ivey School of Business which sought to obtain data on the experience in Canada of those who have sought to leverage knowledge assets. The survey inquired specifically into attempts to leverage these assets using licensing, angel investors, venture capital, government funding, non-equity based funding and other types of funding vehicles.

Following the meetings, the LCC retained Professors Catherine Walsh (McGill University) and Norm Siebrasse (University of New Brunswick), both of whom had participated in the London meetings, to conduct further research to determine (i) whether it is possible to facilitate access to investment for enterprises that hold mostly intellectual property assets, (ii) whether this problem stems from the uncertainty in the law relating to registration of federal security interests on these assets or/and from the culture of traditional lenders and valuation problems and (iii) whether there are some practical improvements that could be made to facilitate access to investment for information-based enterprises. Their report will summarize the research already completed for the LCC and the Conference and explore the different solutions put forth by participants in the London Conference and in the survey responses. A more detailed report on this project will be presented by Professor Siebrasse tomorrow morning.

(E) Jurisdiction and Consumer Protection in Electronic Commerce

As a result of the exponential increase in cross-border electronic transactions involving consumers, both the Consumer Measures Committee (whose mandate includes improving the marketplace for Canadian consumers, through harmonization of laws, regulations and practices) and the Conference felt there was a need to develop jurisdictional rules for Internet transactions. The development of such rules would instill consumers with confidence in shopping on the Internet and allow the Internet to develop to its full potential. It was also believed that these rules should be consistent such that results would be predictable regardless of the jurisdiction of residence of a buyer or seller.

In my report last year I referred to papers prepared for the Conference and the Consumer Measures Committee ("CMC") by Professor Michael Geist and Roger Tassé (Gowling Lafleur Henderson LLP) on this subject. While Professor's Geist's paper examined the determination of jurisdiction as it applies to contractual and private law rights in business to consumer online transactions, Mr. Tassé's paper examined regulatory or public law considerations.

After our meeting last August, the CMC and the Conference established a joint working group to consider policy options and to develop a draft proposal for jurisdictional rules for cross-border business-to-consumer transactions on the Internet. The joint working group has developed a consultation paper in this regard which should be distributed to business, legal and consumer stakeholders by the CMC in mid-July. Comments on the draft proposal are invited by September 6, 2002.

The members of the joint working group are (in alphabetical order): André Allard (Government of Québec), Larry Bryenton (Industry Canada), David Clarke (Industry Canada), Philip Halliday (Industry Canada), Rob Harper (Government of Ontario), Gerald Hashey (Government of Nova Scotia), M. Kolbe (Government of Manitoba), Peter Lown (Alberta Law Reform Institute), Doug Moen (Government of Saskatchewan), Karen Pflanzer (co-chair, Government of Saskatchewan) Rob Phillips (Government of Alberta), Tim Rattenbury (Government of New Brunswick), Lynn Romeo (co-chair - Government of Manitoba), Kathryn Sabo (Justice Canada), Frédérique Sabourin (Government of Québec), Johannes Wolff (Government of Ontario) and Hélène Yaremko-Jarvis (ULCC Commercial Law Strategy).

Karen Pflanzer will present a detailed report on the work of this working group tomorrow morning.

Next Annual Meeting

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