Canada: Corportate Digest @ Gowlings - January, 2006

Edited by Mr Rod Seyffert

On December 9, 2005, the Ontario Power Authority (OPA) released its much-anticipated Supply Mix Advice Report. The Report is in response to the Ontario Minister of Energy's request for recommendations on options for the future development of Ontario's electricity system. The focus of the Report was to provide advice on the best way to meet needs over the long term, specifically by 2015, 2020 and 2025.

The recommendations, if adopted by the government, would increase renewable generation, while maintaining the current level of nuclear generation, and would replace the loss of coal-fired generation with a combination of gas-fired and renewable generation. The report noted that, if no action were taken to replace existing generation, the "combination of demand growth and generation retirements would create a gap of roughly 24,000 MW by 2025, equivalent to about 80% of Ontario's current capacity."

As a starting point, the OPA recognized three established Ontario government policies:

• Creation of a conservation culture

The OPA explored a range of gains from 1,800 MW to 4,300 MW that may be achieved through various initiatives, both current and anticipated. For long-term planning purposes, the OPA believes that conservation of 1,800 MW, or 5% of requirements, is a reasonable and prudent assumption.

• Preference for renewable sources of energy

The OPA notes that electricity generated from wind and small hydro projects, together with, imported electricity can provide a significant portion of the required capacity. However, the infrastructure to take advantage of these forms of generation will take considerable time and money to develop.

• Replacement of coal-fired generation for environmental and health reasons

The Report notes that, in addition to generation from renewable sources, gasification could play a part in the future supply mix. Gasification is the process of converting a variety of fuels, such as coal and municipal solid waste, into a synthetic, combustible gas or "syngas". Gasification could be used to provide base-load capacity at low risk to the environment. However, the Report also notes that this technology is not yet sufficiently developed to be relied upon as a major contributor to the generation supply mix.

The following graphs summarize the current and forecast installed generation capacity.

To view graph Installed Generation Capacity 2005 please click here

To view Installed Generation Capacity 2025 please click here

The following graphs summarize the current and forecast electricity production.

To view graph of Electricity Production 2005 please click here

To view graph of Electricity Production 2025 click here

The Report is intended as a plan for Ontario to:

• Maximize conservation and build upon its potential in the future;

• Pursue an aggressive course for renewables within current constraints, while looking at ways to reduce these constraints;

• Adopt a "smart gas" strategy that takes advantage of the benefits of natural gas-fired generation but limits exposure to its price and supply risks; and

• Benefit from supply options that need long lead times, such as nuclear, large-scale wind generation, hydro imports and gasification.

The report will be posted on the Ministry of Energy's website for 60 days to allow the public the opportunity to review the report and provide input.

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The Order adding the Greenhouse Gases (GHGs) specified in the Kyoto Protocol to the United Nations Framework Convention on Climate Change was published in the Canada Gazette Part II on November 21, 2005. The substances which were added to Schedule 1 of the Canadian Environmental Protection Act, 1999 were carbon dioxide, methane, nitrous oxide, hydro fluorocarbons, perfluorocarbons and sulphur hexafluoride.

The Order adding the 6 GHGs to Schedule 1 enables the federal government to take appropriate measures during the risk management phase, when the government will undertake an assessment of the potential impacts of a suite of instruments. These measures and technologies are expected to be considered in consultation with various government departments, provincial and territorial governments and other stakeholders.

Environment Canada had examined the legislative options available for addressing the environmental risks posed by GHGs, and had concluded that Part V of CEPA 1999 is the preferred vehicle under which the GHGs regulatory and management regime should be developed. There are no compliance or enforcement requirements associated with the addition of the GHGs to Schedule 1 itself.

For further information, see Canada Gazette Part II, Vol. 139, No. 24, page 2568 at: www.ec.gc.ca/press/2005/051122_n_e.htm

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On November 16, 2005, the Draft Air Quality Regulation was published in the Gazette Officielle du Québec. The comment period with respect to the Draft Regulation will expire on January 16, 2006. The proposed regulation is intended to replace the Regulation respecting the quality of atmosphere ("RQA") that was initially adopted in 1979 under the Environment Quality Act. The Draft Regulation comprises some 216 sections and 11 schedules and represents a complete overhaul of the existing RQA. The objectives of the draft Regulation will be to ensure a higher rate of protection of the atmosphere and to prescribe, for all sources of contamination, emission limit values for various contaminants that cause air pollution such as particulate matter, nitrogen oxides, sulfur dioxides, fluorides, mercury, dioxins and furans. It also determines the classes of industrial or commercial activities for which specific limit values are also established. If adopted, the Draft Regulation will require the installation of continuous emission measuring and recording equipment as well as the obligation to implement emissions monitoring measures. A mandatory sampling follow-up intended to be an integral component of emissions monitoring processes is prescribed by the Draft Regulation. It will further require operators of a source of contamination to which a standard has been set under the Draft Regulation to provide the Minister of Sustainable Development, the Environment and Parks with necessary information to identify the nature of contaminants being emitted or likely to be emitted into the atmosphere, to evaluate the quantity or concentration of said contaminants and to locate the emission sites.

The Draft Regulation requires for example operators of petroleum refineries, petrochemical plants and organic chemical plants to implement leak control programs with respect to volatile organic compounds (VOC). The Draft Regulation further lowers the allowable maximum sulphur content of heavy fuel oils, coal, coke and pitch in connection with the use of fossil fuels. These measures would apply as of March 2006. Specific limit values and other standards are prescribed with regard to fuel burning equipment and industrial furnaces fuelled with used oil or other residual materials.

Industrial sectors targeted by the Draft Regulation will thus be subject to its requirements to install continuous emission monitoring equipment, maintain corresponding records and report to the Minister. In an effort towards harmonization, the Draft Regulation incorporates the guidelines of the Canadian Council of Ministers of the Environment (CCME) in respect to reducing nitrous oxide (NOx) and VOC emissions.

The Draft Regulation contains several transitional provisions in order to facilitate the transition to the new standards which it prescribes with respect to those facilities already existing at the time of the coming into force of the Draft Regulation. As pointed out by the Minister of Sustainable Development, the Environment and Parks, Thomas Mulcair,

"the overhaul of the regulation has become necessary to take into account the scientific, technological and economic developments of recent years, as well as new knowledge about the effects of atmospheric contaminants on health and ecosystems. The Draft Air Quality Regulation updates emission and air quality standards while ensuring a better coverage of industrial and commercial activities. This legislation will also make it possible to harmonize Québec's requirements in the air quality control field in keeping with its commitments to deal with atmospheric problems".

We will be keeping our subscribers informed as to the evolution of the draft Regulation and its eventual adoption in final form

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"The Greater Golden Horseshoe will be a place where residents enjoy a high standard of living and an exceptional quality of life." Achieving this vision is the goal of the Ontario Government's Places to Grow initiative. By 2031 the Greater Golden Horseshoe (GGH) is expecting 3.7 million more people and 1.8 million more jobs. If properly planned for, this growth will be positive. Currently, however the sprawling development patterns of the GGH are impacting Ontario's competitive potential, comprising economic performance, and damaging our health and quality of life.

The Proposed Growth Plan (PGP) for the GGH was released November 24, 2005. This PGP has been developed under the authority of the Places to Grow Act, 2005 . The PGP is a growth management framework for implementing the Government's smart growth vision for building stronger, healthier and prosperous communities. The PGP contains policies for co-ordinating new and intensified growth with strategic infrastructure investment in the GGH to the year 2031.

The fundamental direction of the PGP is intensification and compact urban form. The PGP will inform and integrate municipal decision making on a wide range of issues including land-use and transportation planning, infrastructure prioritizing and co-ordination and on urban form, natural heritage and resource protection imperatives. In short, the PGP aims to:

• Create more liveable multi-use communities;

• Revitalize downtowns to become vibrant and convenient centres;

• Provide competitive economic conditions to keep Ontario a top place in which to invest;

• Curb sprawl and minimize the pressures on our farm lands and natural areas;

• Reduce traffic gridlock by improving access to a greater range of transportation choices; and

• Invest in community infrastructure such as hospitals, schools and affordable housing.

The principal policy emphasis of the PGP is on the further intensification of the already designated and approved urban envelope of the GGH (the Settlement Area). Referring to the illustration, the Settlement Area consists of two parts, the more urbanized "Built-up Area", and an under-developed outer area (the Designated Greenfield Area).

For the Built-up Areas of all single and upper-tier municipalities, the PGP mandates intensification and density targets on a phased basis towards more compact, transit-supportive land-use patterns in order to capitalize on underutilized infrastructure investment.

Intensification Targets. All upper- and single-tier municipalities must plan for phased intensification. By 2015, a minimum of 40% of all residential development occurring annually must be contained within the Built-up Area. Municipal plan policies will prescribe precisely where in the Built Up Area this intensification will occur – employment lands will be protected and targeted for intensification, including Brownfields/ greyfields, and so too will existing transit corridors connecting Urban Growth Centres.

The balance of a municipality's growth can occur within its Designated Greenfield Area at a mandated density level of not less than 50 residents and jobs combined per hectare, which is seen as a minimum threshold for transit-supportive land use.

Density Targets.

To view image click here.

The PGP designates 25 existing centres as Urban Growth Centres (UGC's) (see map), and prescribes minimum density levels. These UGC's are the government's planned targets for a significant portion of the expected population and employment growth to 2031. These UGC's will be focal points for continued infrastructure investment - transit, public services and cultural amenities.

UGC's located in the current City of Toronto boundary will densify to achieve a minimum target of 400 people and jobs per hectare. UGC's located in the GTA, as well as Hamilton, Kitchener, Waterloo and Cambridge will densify to achieve a minimum target of 200 people and jobs per hectare, and the smaller UGC's including Barrie, Brantford, Guelph and Peterborough will densify to achieve a target of 150 people and jobs per hectare.

The precise boundaries of Built up Areas and the Urban Growth Centres still need to be worked out with the Province.

The PGP acknowledges that bringing new lands into the urban envelope will be required. The following tests to achieving an expansion are:

• Any expansion must accord with the maximum expansion permission contained in the upper tier plan, in consultation with the Minister;

• The timing and phasing of such expansion shall not adversely affect the municipality's ability to achieve its mandated intensification and density targets;

• That any required infrastructure can be provided in a financially and environmentally sustainable manner;

• On prime agricultural lands, there are no reasonable options that involve lower priority lands, and the lands do not comprise specialty crop lands;

• The location of such expansion does not encroach upon environmentally sensitive or contaminated lands and accords with Sections 2 (Resource Management) and 3 (Public Health) policies of the Private Policy Statement; and

• For small cities and towns in the outer ring, such expansion results in a minimum of one full time job per three residents within or in the immediate vicinity, or moves the small city or town significantly toward such ratio.

The policy directions of the PGP for intensification and compact urban form will guide infrastructure priorities in the three key areas of transportation, water and wastewater systems, and community infrastructure – hospital, schools etc. The PGP will be supported by the long term multi year provincial infrastructure strategy, ReNew Ontario, and by sustainable financing models and sound infrastructure asset management practices.

The transportation policies of the PGP promote the co-ordination and consistency of land use and transportation planning investment. From this will shortly emerge the Greater Toronto Transportation Authority, the mandate of which will be to ease gridlock by creating a seamless transportation network across the GTA. An immediate priority will be developing an integrated ticket system allowing users regional movement with a single ticket.

Investment in water and wastewater systems will be stepped-up, renewal and capacity expansion issues will be addressed, and investment will be co-ordinated, and systems will be planned on a full cost recovery basis.

Investment in community infrastructure including affordable housing will be stepped-up to keep pace with intensification, and promoting more complete communities. The long-term infrastructure strategy, ReNew Ontario, will begin to address the infrastructure gap. The government has committed $7.5 billion in the GGH over the next five years to these three infrastructure target areas.

The key to the success of the PGP is effective implementation. The Minister, in consultation with other ministers, will shortly:

• Release a proposed Built-up Area boundary for review, refinement and verification with municipalities which is slated for early 2006;

• Develop a detailed assessment of the need for future designated greenfield areas;

• Determine the boundary of Urban Growth Centres; and

• Undertake sub-area assessments to refine the policies of the PGP at the regional scale.

There is still much work to be done. Most importantly is the delineation of the Built-up Area boundary and the UGC boundaries. As well, the sub-area assessment exercise will play a role in how this plan is implemented at the regional scale. These items will not be addressed in any substantive way until final approval of the Plan by the Minister. In the interim, there will be a short period of consultation consisting of nine stakeholder meetings around the GTA in early December, with final comments to the Minister by January 27, 2006. Final approval and promulgation of the PGP is expected in late February or early March, 2006.

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To read the full report please click here.

http://www.gowlings.com/resources/newsletterPDFs/InksterReportFall05.pdf

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On October 21, 2005, the Canadian Securities Administrators ("CSA") published a request for comment concerning proposed amendments to National Instrument 45-106 Prospectus and Registration Exemptions and the adoption of local prospectus and registration exemptions for certain capital accumulation plans (the "CAP Exemption"). The comment period with respect to proposed changes to NI 45-106 ends on January 19, 2006.

A capital accumulation plan ("CAP") is a tax-assisted investment or savings plan that permits the members of the CAP to make investment decisions among two or more options offered within the plan. A CAP may be established by an employer, trade union, association or any combination of these entities for the benefit of employees or members. The CAP Exemption is intended to implement certain parts of the Guidelines for Capital Accumulation Plans (the "Guidelines") which were developed by the Joint Forum of Financial Market Regulators and which regulators expect CAP sponsors and service providers to comply with by December 31, 2005.

The CSA is adopting the proposed exemptions locally pending amendment of NI 45-106. In provinces other than Ontario and Quebec, the CAP Exemption is expected to be adopted in the form of a blanket exemption from the dealer registration and prospectus requirements for certain trades in mutual fund securities. In Ontario and Quebec, interested parties will have to file an application requesting relief. The CAP Exemption will be used by the Ontario and Quebec regulators as a standard template for such exemptive relief.

The CAP Exemption provides prospectus and registration relief in respect of trades of mutual fund securities in certain capital accumulation plans. The relief is subject to a number of conditions which include the provision of certain information, tools and documents to CAP members to enable them to make informed investment decisions.

The purpose of the CAP Exemption is to provide certain registration and prospectus relief while ensuring an adequate substitute for the benefits a plan member would receive from dealing with a registrant and obtaining the disclosure in a prospectus. Despite comments from some industry stakeholders recommending they do so, the CSA have decided not to incorporate the CAP Guidelines by reference in the CAP Exemption. The CSA state that it chose to incorporate only those elements of the CAP Guidelines that address investor protection and market efficiency issues addressed by securities regulation. Accordingly, persons relying on the CAP Exemption must carefully consider its specific terms to ensure that they can rely on the relief provided. It is not sufficient to only conclude that there is compliance with the CAP Guidelines.

Prior to relying on the CAP prospectus exemption for the first time, a mutual fund must file a notice in a prescribed form with the securities regulators, in each jurisdiction where the mutual fund expects to distribute securities.

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On October 31, 2005, the Mutual Fund Dealers Association ("MFDA") published a notice (the "Notice") intended to clarify the obligations of mutual fund dealers and sales representatives with respect to the approval and sale of investment products by MFDA member firms.

The Notice states that the requirement of dealers and sales representatives to ensure that each order accepted or recommendation made for any account of a client is suitable for the client and in keeping with the client's investment objectives can only be properly discharged if sales representatives and supervisory staff of the dealer fully understand the products that are being recommended.

A "reasonable level" of due diligence review should be conducted on products before they are approved for sale. MFDA member firms must have written policies and procedures that describe in detail the steps to be followed in the due diligence process. Different levels of review may be required for different types of products. The MFDA goes on to make the following statement:

In light of this statement, MFDA members should ensure that all appropriate reviews have been conducted for products currently on their approved lists and that the review process has been documented.

The Notice goes on to describe some of the factors to be considered as part of the due diligence review including investor risk levels, time horizon, income and net worth. Also, investors for whom a product is not suitable should be clearly identified.

MFDA members are reminded that inclusion of a product on a firm's approved list does not in any way reduce the obligation to ensure that each recommendation made for a client is suitable and in keeping with the client's investment objectives.

The Notice also addresses the sale of exempt securities. MFDA members are reminded that they must, "after due inquiry", satisfy themselves that the conditions of any exemption claimed apply before they trade in reliance on the exemption. Another reminder is that suitability reviews are required even if an investor is considered a "sophisticated purchaser" or "accredited investor". Also, the MFDA requires clients to be clearly advised about the nature of exempt trades including the absence of a secondary market and that an offering memorandum does not provide the same rights as a prospectus.

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Gowlings was involved in two recent Supreme Court of Canada cases that may change the way famous trade marks are protected under Canadian law. In the Ottawa office, Paul Blanchard, Henry Brown and Lisa Vatch represented Mattel in its attempt to protect its famous trade mark BARBIE from registration by a chain of Montreal restaurants. In the Toronto office, Scott Jolliffe and Kevin Sartorio prepared the International Trademark Association's (INTA) intervention in the VEUVE CLICQUOT case, against the use of CLIQUOT by a chain of clothing stores. Both cases were heard on October 18, 2005.

The common theme in both cases is the ambit of protection available to famous trade marks when applying the test for confusion under section 6(5) of the Trade Marks Act. In the decisions under appeal, the Federal Court declined to give an extended ambit of protection to famous marks, taking the position that, absent a connection between the wares or services associated with the respective trade marks, there could be no finding of confusion. However, the appellants argued that famous trade marks are exceptional in their value and reputation, and so require a wider scope of protection. In the VEUVE CLICQUOT case the Supreme Court also considered an additional issue: the scope of protection against dilution under section 22 of the Trade-marks Act.

In these cases the appellants argued that, unlike ordinary trade marks, famous trade marks convey instant recognition to consumers, and for this reason are frequent targets for unauthorized use. Famous trade marks can be widely licensed and used in cross-branding, allowing them to transcend the wares or services with which they are first used. Businesses invest huge sums in the advertising and promotion of famous trade marks in order to build familiarity and goodwill among consumers, to the point where the use of identical or similar marks on any type of wares could lead to confusion. The appellants argued that, the greater the fame of a trade mark, the greater the protection it requires, in order to avoid consumer confusion and to preserve the broader rights of trade mark owners.

The two Gowlings teams led by Paul Blanchard and Scott Jolliffe are looking forward to these forthcoming Supreme Court decisions as rare opportunities for the nation's highest court to consider the scope of protection of famous trade marks. These decisions should be released in May or June 2006.

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On November 1, 2005, Ontario Regulation 278/05, the regulation respecting Asbestos on Construction Projects and in Buildings and Repair Operations came into force. This regulation revokes and replaces Ontario Regulation 838 of the same name. Some of the changes in the new regulation include:

• A new definition of "asbestos-containing material". Under the new regulation, asbestos-containing material means material that contains 0.5 per cent or more asbestos by dry weight,

• Updated respiratory protection requirements with specific requirements depending on the type of work being performed,

• Clarified duties of owners, and

• Updated requirements for bulk sample asbestos analysis.

A copy of the new regulation is available at www.e-laws.gov.on.ca.

The changes contained in Regulation 278/05 are significant and will impact virtually all employers with asbestos on their worksite. Most employers that were in compliance with Regulation 838 will be in contravention of Regulation 278.

The maximum penalty for a contravention of the Occupational Health and Safety Act or the Regulations is $25,000 and/or 12 months imprisonment for individuals. Corporations face a maximum penalty of $500,000 per count. Employers should review their Asbestos Control Program in order to ensure compliance with the new regulation. Gowlings' OHS Consultants are available to assist with Asbestos Control Program reviews or to assist in program development.

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The following is the final article of a three part series dealing with the expansion of employers' liability in their dealings with independent contractors. The articles are based on a paper written by Mark Josselyn,² who is a partner in the Gowlings Ottawa office.

The first part of the series (http://www.gowlings.com/resources/enewsletters/onrisk/Htmfiles/V2N01_20041015.html) discussed the increasing liability of employers for the actions of their employees and how this principle is expanding to include independent contractors. The second article (http://www.gowlings.com/resources/enewsletters/onrisk/Htmfiles/V2N02_20041214.en.html) continued that discussion, by examining the developing case law on vicarious liability and agency, focusing on the distinction between actual and apparent or ostensible authority, and how this distinction can affect employers' liability.

This article will conclude the series by addressing the risk employers now face of being found vicariously liable as a result of the development of the enterprise theory. It will go on to illustrate the problems facing employers by reviewing recent insurance cases, and conclude with some practical considerations and tips on how to reduce the risk of liability in dealing with independent contractors.

J. G. Fleming originally advanced the "enterprise theory", stating that:

A person who employs others to advance his own economic interests should in fairness be placed under a corresponding liability for losses incurred in the course of the enterprise. ³

The theory was launched into popularity by Justice McLachlin's decision in the Supreme Court of Canada case Bazley v. Curry. ⁴ The case included an analysis of employer liability for the unauthorized acts of employees where such acts are so connected with authorized acts that they may be regarded as modes (albeit improper modes) of doing authorized acts. The Court held that vicarious liability will be found where there is a "sufficient connection" between the creation or enhancement of a risk and the ensuing wrong even if unrelated to the employer's desires.

The portion of the decision, which has subsequently impacted upon the jurisprudence with respect to non-employees, is found in the discussion of policy objectives:

However, effective compensation must also be fair, in the sense that it must seem just to place liability for the wrong on the employer. Vicarious liability is arguably fair in this sense. The employer puts in the community an enterprise which carries with it certain risks. When those risks materialize and cause injury to a member of the public despite the employer's reasonable efforts, it is fair that the person or organization that creates the enterprise and hence the risk should bear the loss. This accords with the notion that it is right and just that the person who creates a risk bear the loss when risk ripens into harm. While the fairness of this proposition is capable of standing alone, it is buttressed by the fact that the employer is often in the best position to spread the losses through mechanisms like insurance and higher prices, thus minimizing the dislocative effect of the tort within society. ⁵

This was not the Supreme Court of Canada's final word on the enterprise theory. Two years later in 671122 Ontario Ltd. v. Sagaz Industries Canada Inc.,⁶ the theory was revisited. While this case is more frequently referred to for its analysis of the distinction between employees and independent contractors, the Court also discussed the policy consideration in Bazley. Justice Major adopts the same arguments as Justice McLachlin stating that:

Vicarious liability is fair in principle because the hazards of the business should be borne by the business itself. ⁷

While the comments were intended to apply to employees and not independent contractors, the enterprise theory has not yet subsequently been so limited in its application.

While the enterprise theory was being developed in the Supreme Court of Canada, the British Columbia courts were dealing with two cases involving the same insurance agent who defrauded clients of monies that were to be invested specifically in Clarica products.

In these situations the agent was virtually exclusive to the principal (Clarica/Mutual Life). The agent had business cards identifying the principal and conducted transactions at the principal's office, which had signage identifying the principal. In both cases it could be said that the customers approached the agent because of his association with the principal rather than seeking him out personally. Although the agent had actual authority to receive funds on behalf Clarica, he had no actual authority to bind Clarica contractually.

Ultimately, in Thiessen v. Clarica Life Insurance Co.,⁸ the B.C. Court of Appeal made a finding of apparent authority in the case sufficient to affix Clarica with liability for the conduct of its agent. The reasoning of the B.C. Court of Appeal in the second case, Wilson v. Clarica Life Insurance Co.,⁹ is not as clear, and the affixing of liability appears to be based on a finding of "negligent hiring". There is no discussion of the trial judge's finding that the agent was acting within the scope of his actual authority and that the agent had been permitted to "clothe" himself with the reputation of Clarica thereby occupying a position from which he could misappropriate money, which he received on behalf of Clarica.

What is more problematic is the trial decision in Thiessen and its application of the policy considerations of Bazley to an independent contractor situation. According to the Court:

A finding of vicarious liability in this case conforms with the policy considerations summarized in Bazley, supra. It provides a "just and practical remedy". Given that Mutual had contracted with Dennis for him to advance Mutual's interest, thereby introducing the risk into the community, it is fair that Mutual should bear the risk of the loss. In fact, in this case, Mutual introduced Dennis to the Plaintiffs; assigning him to them to be their Mutual agent. Mutual controls both the price of the product and the amount of the commission. In this respect, Mutual is in the best position to spread the loss. Mutual profits from the economic activity. It should bear responsibility for misconduct committed in the course of the activity. ¹⁰

The Court of Appeal chose not to deal with this issue.

More recently, the 2003 Alberta Court of Appeal decision in Doiron v. Manufacturers Life Insurance Company ¹¹ provided an analysis of ostensible authority. In this case the agent invested customers' money in a high-risk venture described as a "sham" contrary to their instructions. The agent had previously invested customers' money in products of the principal (Manulife) and was known to the customers as a Manulife investment advisor. They were unaware of the non-exclusive nature of the agency arrangement and believed that they were investing in a Manulife product.

The Court restated the test for ostensible authority as:

Ostensible or apparent authority which negatives the existence of actual authority is merely a form of estoppel, indeed, it has been termed agency by estoppel, and you cannot call in aid an estoppel unless you have three ingredients: (i) a representation, (ii) a reliance on the representation, and (iii) an alteration of your position resulting from such reliance. ¹²

The Court went on to state that:

The law of ostensible authority does not require an explicit representation of authority. It is found where the principal has created a situation such that it is reasonable to infer and rely upon the apparent authority of the person. ¹³

With the line between independent contractors and employees becoming blurred, employers wishing to have certain workers considered as independent contractors must take steps in order to protect themselves against reassessment or re-determination of the workers' status by a court or tribunal. Employers should ensure that:

1. The contractual documentation between the parties incorporates specific provisions with respect to the nature of the relationship.

2. The contractual documentation allows the worker to provide services to others and, where appropriate, to subcontract the work being undertaken for the principal.

3. Care should be had to create as many distinctions as possible between the independent contractors and the other employees, including without limitation:

(a) Do not provide titles;

(b) Do not provide business cards;

(c) Do not provide letterhead;

(d) Do not provide voicemail boxes;

(e) Do not provide e-mail addresses;

(f) Do not invite workers to office functions/parties;

(g) Do not pay on the same payday (i.e. pay pursuant to delivered invoices);

(h) Do not pay bonuses;

(i) Do not provide training;

(j) Do not provide benefits, vacation, overtime etc;

(k) Do not provide an office or administrative services; and

(l) Do not provide performance reviews.

4. The organization should exercise as little control/management supervision as possible.

5. The workers should use their own equipment and/or tools as well as work premises where possible.

6. Where possible, the work should be completed to a particular deadline without reference to specific hours of work.

7. In a perfect world payment should be per project rather than by the hour so as to create a chance for profit and risk of loss.

8. The independent contractor ought to have other customers/sources of income.

9. Former employees should not be converted to independent contractors where there has been no legitimate change in the relationship.

10.A Clearance Certificate should be obtained from the provincial workers compensation authority and a GST number should be provided.

11.The worker should be required to carry independent general liability insurance coverage.

In the past, employers were often persuaded that there were significant benefits to having their workers categorized as independent contractors notwithstanding the risk of a potential reassessment by the Federal Government. However, it appears now that the common law has moved towards a blurring of the distinction between employees and independent contractors. The same is true not only in terms of the protection afforded to "intermediate workers" but also with respect to the potential liability to the principal for the conduct of its workers, however categorized. With the most recent developments in terms of the enterprise theory, it is likely a further blurring of this line is possible to the point of extinction.

1. http://www.canlii.org/on/cas/onsc/2005/2005onsc14002.html

2. Mark Josselyn, Partner and Heather Wilson, Student-at-Law, Expansion of Employers' Liability in their Dealings with Independent Contractors (Gowling Lafleur Henderson LLP, 2004).

3. J.G. Fleming, The Law of Torts, 7th ed. (Sydney, Australia: The Law Book Company, 1987) at 410.

4. Bazley v. Curry, [1999] 2 S.C.R. 534 [hereinafter "Bazley"].

5. Supra note 3 at 554.

6. 671122 Ontario Limited v. Sagaz Industries Canada Inc., [2001] 2 S.C.R. 983.
7. Ibid. at 999.

8. Thiessen v. Clarica Life Insurance Company (2001), 8 C.C.L.T. (3d) 134 (B.C.S.C.), (2002) 219 D.L.R. (4th) 98 (B.C.C.A.), leave to appeal to S.C.C. refused, [2002] S.C.C.A. No. 454 [hereinafter "Thiessen"].

9. Wilson v. Clarica Life Insurance Company, [2001] B.C.J. No. 2668 (B.C.S.C.), [2002] 11 W.W.R. 17 (B.C.C.A.) [hereinafter "Wilson"].

10. Supra note 7 at 151.

11. Doiron v. Manufacturers Life Insurance Company, [2003] A.J. No. 1389 (C.A.).

12. Ibid. at 14.

13. Ibid. at 15.

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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To read the part 3 of this article please click below.