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In an unusual move, the Supreme Court of Canada (SCC) issued a snap decision yesterday in the Dejong v Spadina case, in favour of arguments put forward by the Canadian Chamber of Commerce. The Canadian Chamber acted as an intervener in the case.

“Yesterday’s decision speaks to a common sense approach whereby innocent parties are not unduly harmed or held responsible for the illegal actions of others. Today brought an important measure of predictability and certainty to doing business in Canada,” said Scott Smith, Senior Director, Innovation and Intellectual Property Policy.

The case dealt with the legal test for “knowing receipt” and “knowing assistance” – that is, when a corporation can be liable for receiving funds from the proceeds of a fraud. 

The case was important because it dealt with a circumstance where a corporation that received the proceeds from fraud is owned partly by a fraudster and partly by an innocent party.  The question is whether, and in what circumstances, it is fair or reasonable to obtain damages against the corporation and thereby harm the innocent shareholders.

The SCC was asked to decide what “participation” entails in knowing participation in fraudulent misrepresentation and how the corporate identification doctrine applies — must the courts consider the effect on third party investors when awarding remedies for knowing participation?

Geoff Hall, a senior litigator from McCarthy Tetrault LLP and legal counsel representing the Canadian Chamber as intervener in this case, successfully argued that the test for the doctrine of corporate identification should not be relaxed in civil cases, as the Court of Appeal for Ontario did.

For more information, please contact Scott Smith, Sr. Director, Innovation and Intellectual Property Policy (ssmith@chamber.ca)