Filtered Insights

Cogent evidence required to avoid automatic dismissal for delay

Mon, 30 Mar 2026 00:00:00 Z

On March 10, 2026, the Ontario Court of Appeal released its decision in Bellefeuille v Tamarack Developments Corporation (Tamarack Homes), 2026 ONCA 170. The decision confirms that moving promptly to set aside the dismissal is not necessarily sufficient to save the action. The plaintiff must put forward cogent evidence to explain the delay. The decision also confirms that the primary responsibility for an action’s progress lies with the plaintiff.

Background

The action arose out of a dispute over alleged deficiencies in the plaintiffs’ new home. They made warranty claims to Tarion as early as November 2016. In October 2018, they commenced an action against the builder/vendor and the City of Ottawa. It was not until January 2020 that the plaintiffs instructed their counsel to add Tarion as a defendant and adjourned the examinations for discovery that had been scheduled for February of the same year. Tarion was not added as a defendant until August 2022. Examinations for discovery were rescheduled for January 2024, but the plaintiffs cancelled them, alleging deficiencies in the builder/vendor’s affidavit of documents.

The action was administratively dismissed for delay under Rule 48.14(1) because it was not set down for trial within five years of its commencement. The plaintiffs brought a motion to set aside the dismissal.

The motion decision

The motion judge dismissed the plaintiffs’ motion to set aside the dismissal, finding that they did not adduce sufficient evidence to explain the delay and that the delay led to inferred prejudice against the respondents. Although the plaintiffs brought the motion to set aside the dismissal promptly, the motion judge found that there was not enough evidence that the respondents caused some of the delay to “tilt the…factors” in the plaintiffs’ favour. Furthermore, while the plaintiffs provided an affidavit sworn by their counsel purporting to provide reasons for the delay, the motion judge found that the affidavit contained “bald assertions” that did not adequately explain the delay in adding Tarion to the action.

The appellate decision

The Court of Appeal upheld the administrative dismissal of the plaintiffs’ action for delay. The Court agreed with the motion judge that although the plaintiffs moved promptly to set aside the dismissal, they failed to provide sufficient evidence explaining years of inactivity, including a long gap in adding Tarion as a defendant. Applying the factors from Reid v Dow Corning Corp. contextually, the Court held that the plaintiffs failed to identify a palpable and overriding error in the motion judge’s reasoning.

The Court of Appeal also accepted the motion judge’s finding of inferred prejudice arising from the prolonged delay. The Court found that this case was unlike those in which courts have set aside dismissals because the defendants’ conduct contributed meaningfully to inactivity or the matter was otherwise ready for trial. To the contrary, the plaintiffs in Bellefeuille did not adduce sufficient evidence to demonstrate that the defendants contributed to the delay, the plaintiffs’ explanations for the delay were largely unsupported by evidence, and the action had not yet even reached the discovery phase. As a result, the motion judge was entitled to reject the plaintiffs’ arguments. The appeal was dismissed, with costs awarded to all three respondents.

Commentary

This decision highlights that Rule 48.14 can be strictly enforced. If an action is not set down for trial within 5-years, the delay can be considered presumptively “inordinate”. The plaintiffs then bear the burden of overturning the presumption by adducing evidence to explain the delay. In determining whether the plaintiffs have met their burden, courts will apply the Reid factors contextually and therefore defendants will want to carefully consider the evidence in taking a technical position to oppose a motion to set aside an automatic dismissal under Rule 48.14.

2026 CUSMA review: Enhancing trade negotiation transparency

Wed, 25 Mar 2026 00:00:00 Z

Trade negotiations are in the air, everywhere you look around. They are launched, paused, restarted and concluded. Agreements are reached, then rescinded, ignored or revivified. This past year, the public airwaves have featured more mention of tariffs and negotiations and trade deals than the last thirty years combined. Not since 1988, the year when an entire election was fought over free trade with the United States, has “trade” been a headline concern, and in any event, never for so long.

Yes, an election was fought over trade relations with the United States four decades ago. Trade and economic management are at the heart of democratic governance; democratic accountability requires transparency. And yet, trade negotiations, diplomatic and commercial exercises rolled into one, are steeped in discretion.

In two sentences lies the conundrum at the heart of trade policy in democratic states. The higher the stakes, the more complex the conundrum.

And the stakes have never been higher.

The four stages of gri-, uh, negotiations

But why a “conundrum”?

Broadly speaking, trade negotiations comprise four distinct phases:

Planning and preparation, within the government but also including domestic consultation with stakeholders such as provincial governments, companies engaged in trade, industry associations, civil society groups, and unions.
Negotiations between two sovereign states.
Conclusion, parliamentary review, and ratification.
Implementation – usually through an act of Parliament.

Trade negotiation stage one: Planning

You want to buy a car. You identify the size and perhaps the model. You set a budget and put money aside. Then you go to the dealership. You tell the seller what you’re looking for, and make sure they know you’ll settle for something less because, in reality, you are desperate to have a car. You also tell the seller’s brother that although you have a budget, you’re flexible and can go above that. Less for more.

No you don’t. Of course that’s not how even the most basic negotiations roll out.

You state your preferences and a rough budget, and keep the rest to yourself; and then – and only then – you start the negotiations.

Now imagine you have a business or a life partner. The “decision” is no longer yours and yours alone: you need to discuss the purchase. If you exceed your credit limit, the bank has to be brought in. You might need a different parking spot at the condo. The car dealership is the only one with a credible mechanic and lots of choice within 300 kilometers.

You get the picture.

Now extrapolate this to a $3 trillion economy covering a continent, almost $1 trillion in bilateral trade, fourteen governments, and over 165 years of trade friction and expansion with its closest neighbour and the richest market in the world.

Planning for such an endeavour is not a matter simply of saying publicly, though emphatically, “here are our demands and redlines and deadlines” and expecting all to go well. You need to know what you want, but also what you can give. You need to know where you have room to move, and where to not. You need to know what to ask for and what to expect. You need to talk to those affected, and those who might well lose out. You need to have a team in place that is cohesive, coherent, and that knows not just trade patterns but economic and political pressure points. Ah yes, and then there are thirteen other governments that are looking over your shoulders.

And this is just the planning phase.

Trade negotiation stage two: Negotiations

Recent high-profile travels appear to suggest that trade negotiations are about personal engagement between two old college buddies and side handshakes with this or that “Very Important Person”.

Actual trade negotiations are much more prosaic: there are multiple negotiating groups working in parallel – this on services, that on agriculture, a third on rules of origin, and so on – and offers and concessions are made and accepted provisionally, with the understanding that nothing is agreed until everything is settled. And there are usually outstanding issues (these are usually highly sensitive deal-breakers) that are left on the table waiting for high-level or political resolution. Prosaic. And complex. It would be unusual to have a sectoral settlement when there are other matters on the table. Usually, no photos. Certainly no scrums right outside the negotiating rooms.

Meanwhile, after every session, there are briefings – for parliamentarians, provinces, big exporters, major domestic industries, and other civil society stakeholders – about how things are going, in fairly broad outlines. If there are specific concessions on the table, the sector affected will be given additional briefings. But the tenor of offers received and concessions given remains fairly general.

Trade negotiation stage three: Parliamentary review

Once negotiations are concluded, the parties can move to initialling an agreed text, legal “scrub”, approval by political masters and, since 2008, review by Parliament. The House of Commons has 21 sitting days to debate the treaty before ratification. Parliament does not, however, have the authority to amend the treaty; ratification remains a Crown prerogative.

Trade negotiation stage four: Implementation

A trade agreement typically involves changes in tariffs and other barriers to trade; and this typically requires legislation. It means that Parliament gets another bite at the trade agreement apple, though indirectly.

“Not in the ordinary course”

All this means that, in the ordinary course, Parliament’s review and substantive engagement come at the end of a long, complex process. Because of commercial confidentiality and privacy concerns, parliamentarians are not privy to submissions made to the government. And because of diplomatic sensitivities during potentially difficult negotiations, they are not privy to offers made or concessions rejected. Each Member of Parliament (MP) brings to the House their past experience and the interests of their constituency; but the government usually has the deeper well of substantive expertise and the democratic mandate to conduct the affairs of the state.

The challenge is that since February 1, 2025, we have not been in “the ordinary course”. Is it time to rethink how Parliament engages trade – not just the final product, but the negotiations themselves?

The 2026 CUSMA review and other discontents

As a rule, trade agreements do not have an expiry date.

This does not mean that once a country enters into a trade agreement, it is locked in it forever. There is always an exit ramp.

Rather, to allow private enterprises to make long-term investment decisions on the basis of negotiated and established rules and market conditions, trade agreements tend to be timeless.

The Canada-United States-Mexico Agreement (CUSMA), in force as of July 1, 2020, has a “best before” date of sixteen years. And the parties agreed that six years after its entry into force, they would conduct a review to see if it should be extended for another sixteen years. We are now at the six-year mark. And the CUSMA review on which the government of Canada announced consultations last year is about to begin.

Here’s the thing: the context in which this review is taking place is not in the ordinary course even by the unusual features of CUSMA. That is, the review is not taking place against the background of a normally functioning CUSMA, but rather one that is in deep distress. In parallel to the CUSMA review, Canada and the United States are engaged in negotiations to address the tariffs the United States imposed on Canada last year. A “USMCA-compliant” rider was attached to some of these tariffs, which have since been declared illegal; sectoral tariffs remain in place. The United States Trade Representative (USTR) has now launched new investigations, under a new authority, that includes Canada.

So, there is a CUSMA review. There are sectoral tariff negotiations. And we have to start worrying about s. 301 investigations. Not in the ordinary course.

It’s natural in these circumstances that Canadians, and their elected representatives, are anxious to know what’s going on. What is the government hearing? Whose voices are privileged? Which sectors are in danger? Whose jobs will be saved? Do values matter?

What is going on?

Perhaps, a new balance

Parliamentarians, stakeholders, and the public have limited visibility into the views expressed during the consultation process or how those views may be shaping Canada’s negotiating position.

These concerns reflect a broader and recurring tension in trade policy. Greater transparency can strengthen democratic accountability, public trust, and parliamentary oversight. At the same time, governments must protect sensitive negotiating positions to preserve leverage in discussions with international partners. Premature disclosure of negotiating strategies risks undermining a country’s position at the negotiating table.

As Canada prepares for the 2026 CUSMA review, striking the right balance between transparency and confidentiality will be essential. Clearer communication of objectives, structured parliamentary engagement, and more meaningful consultation could improve governance around the negotiation process and help ensure that Canada enters the review with both a strong mandate and public confidence.

Mechanisms to enhance trade-related governance

We know how things work. We also know we do things better. We know what challenges we face. How we do things better without compromising core values that we must respect is not always easy. Below we canvas a number of practical mechanisms that we have already tried in this country, or that others within the Westminster framework have implemented.

Confidential privy council briefings for opposition leaders

An established way to enhance transparency while safeguarding sensitive information is to provide confidential briefings to opposition leaders under Privy Council terms.

Under this model, leaders of recognized opposition parties would be sworn into the King’s Privy Council for Canada (if they are not already – all former ministers are members of the Privy Council for life) and receive regular, confidential briefings on the objectives, constraints, and progress of trade negotiations.

Here is the catch: as Privy Councillors, they would be bound by an oath of secrecy. This ensures that sensitive negotiating positions remain protected, but it also limits the use that an opposition leader can make of the information they have been entrusted for political purposes.

This approach is well established in Westminster systems.

In the United Kingdom, the Leader of the Opposition is typically sworn into the Privy Council and briefed on matters of national importance on “Privy Council terms,” allowing governments to share sensitive information while maintaining confidentiality and continuity in the national interest. Canada has previously appointed opposition leaders to the Privy Council, including Ed Broadbent in 1982, Stephen Harper in 2004, and Michael Ignatieff in 2010.

More recently, policy discussions have explored expanding confidential briefings to opposition leaders in other contexts. In 2024, federal officials recommended that leaders of major opposition parties receive regular classified briefings, coordinated by the Privy Council Office, on issues such as foreign interference and national security threats. These briefings would be provided under formal protocols, with access limited to security cleared leaders on a need to know basis.

Applied to CUSMA negotiations, this mechanism would narrow the information gap between the executive and Parliament without risking public disclosure. It would promote informed, non partisan engagement on trade policy, reduce unnecessary politicization, and strengthen democratic accountability while preserving Canada’s negotiating position.

Parliamentary oversight of trade negotiations on a confidential basis

Briefing leaders provides some transparency, but probably not enough. At any rate, a “briefing” is static, negotiations are dynamic, and other options might well be more suited to the function.

This is where the National Security and Intelligence Committee of Parliamentarians (NSICOP) model might be interesting.

NSICOP allows security cleared MPs and senators to review classified national security information across government. Members are bound by strict secrecy obligations and operate outside the normal committee system to protect sensitive information, while still providing meaningful parliamentary oversight.

A similar model could be adapted for trade policy. A dedicated parliamentary committee could receive confidential briefings on negotiations such as the CUSMA review. Membership would include representatives from multiple parties and both chambers of Parliament, with members subject to security clearances and an oath of secrecy comparable to that required of NSICOP members.
Adapting this model to trade negotiations would provide parliamentarians with greater insight into negotiating strategy while preserving the confidentiality required for effective bargaining.

Secure parliamentary reading rooms for negotiation documents

Is there a risk that we end up with a two-tiered parliament? What about members whose ridings are directly affected by ongoing negotiations? It is not a given that there is a match between committee membership and economic impact.

Another mechanism already in use in international negotiations is the establishment of secure reading rooms where legislators can review sensitive negotiating documents without risk of public disclosure.

During negotiations for the Transatlantic Trade and Investment Partnership (TTIP), select members of the European Parliament were granted access to draft negotiating texts in secure facilities subject to strict confidentiality rules, including prohibitions on copying or removing documents. This approach allowed legislators to engage meaningfully with the substance of negotiations without undermining the European Union’s negotiating position.

A similar approach could be adopted in Canada. Secure reading rooms within Parliament could allow designated individuals to review confidential documents related to the CUSMA review, subject to controlled access and strict confidentiality requirements.

This mechanism would provide parliamentarians with direct insight into the negotiation process while avoiding the risks associated with public disclosure.

Strengthening parliamentary scrutiny of trade agreements

Canada could consider strengthening its broader framework for parliamentary scrutiny of international trade agreements. In recent years, parliamentary committees in other jurisdictions, particularly in the United Kingdom, have called for earlier and more structured legislative involvement in treaty negotiations.

Arising out of the Brexit crisis and in the midst of U.K.-EU negotiations, the U.K. Public Administration and Constitutional Affairs Committee, the House of Lords International Agreements Committee, and the House of Commons International Trade Committee emphasized the need for clearer information sharing, earlier consultation on negotiating objectives, and enhanced opportunities for parliamentary review before agreements are finalized.

These discussions highlight a broader shift toward treating parliamentary scrutiny as an integral part of treaty making, rather than a final stage review once negotiations are complete. Early engagement allows legislators to understand the government’s objectives and constraints, identify potential concerns sooner, and contribute constructively without undermining the executive’s negotiating role.

Toward a more transparent and resilient trade governance framework

The 2026 CUSMA review will shape the stability of Canada’s most important trading relationship and have direct consequences for businesses, workers, and supply chains across the country.

It also brings into focus a recurring challenge in trade policy: balancing the confidentiality required for effective negotiations with the transparency expected in a democratic system. The mechanisms outlined above demonstrate that this balance can be achieved. These tools provide an opportunity to strengthen confidence in Canada’s negotiating strategy while preserving the discretion necessary for effective bargaining.

A turning point for AI in Canada in 2026?

Wed, 25 Mar 2026 00:00:00 Z

In this article, we take a step back to reflect on the developments that shaped the recent AI landscape in Canada and highlight the emerging trends organizations should focus on in 2026.

Grouped under overarching themes, BLG lawyers selected the most important insights from the past year to offer a clear overview of what to anticipate for this year along with actionable takeaways. This complements BLG’s 2025 Privacy and Cybersecurity Year in Review, as well as our recently updated Guide on Québec’s Private Sector Act.

Key takeaways

The past year underscored that, on the one hand, new AI-related risks are emerging and existing ones are amplified, while on the other, regulatory scrutiny is heightened. Organizations are encouraged to reinforce their governance and supervision frameworks to keep pace with evolving regulatory expectations.
Organizations should strengthen enterprise‑wide AI governance programs grounded in algorithmic and impact assessments, human‑in‑the‑loop safeguards, and rigorous vendor due diligence. This includes ensuring that all AI use complies with existing privacy and cybersecurity obligations, particularly for the use of agentic AI.
Where necessary, these frameworks should be tailored to different uses of AI tools and to different positions within organizations.
In the absence of AI-specific legislation, soft‑law standards and sector‑specific guidance will continue to serve as critical benchmarks.
Organizations that invest early in robust governance and supervision frameworks will be best positioned to innovate responsibly while maintaining compliance and public trust.

National AI strategy: Anticipated updates in 2026

The year 2025 was pivotal for the development of the Pan-Canadian Artificial Intelligence Strategy.

A major development was the creation of an AI Strategy Task Force, which invited input from the industry, academia, and the public to shape the next phase of Canada’s AI roadmap. In late February, the Government published a report summarizing the answers received from the public and the Task Force. Over 11,000 participants submitted answers.

Namely, respondents highlighted the importance of accelerating AI adoption across the economy while ensuring appropriate safeguards, governance, and risk management, such as with certification standards and independent audits. With the feedback received, the federal government has indicated that a revised AI strategy is to be expected this year.

Through Budget 2025, Canada established AI as a central pillar of the federal economic strategy. This includes substantial investments in sovereign compute capacity and the expansion of AI adoption across the public sector. Collectively, these measures point to a coordinated and ambitious national direction. Yet, Canada still finds itself without a federal AI statute after the Artificial Intelligence and Data Act (AIDA) died on order paper as part of Bill C-27 in January 2025.

In 2026, a successor to the now-defunct AIDA is widely expected to be tabled. While no official statement has been released on the potential bill, Minister of Artificial Intelligence and Digital Innovation Evan Solomon announced his intention to propose a law that would not be a repeat of AIDA but instead be its own regulatory initiative. Together, these developments position the coming year as a significant moment for AI as a national priority.

What does this mean for organizations?

For organizations, these developments underscore the need for proactive compliance and risk‑management measures. Businesses are encouraged to continuously assess their AI activities against existing legal obligations and evaluate whether appropriate resources can be mobilized to adapt to future changes.

As we progress into the year, organizations should closely monitor upcoming legislative and policy updates. Rest assured that BLG will deliver timely commentary on the matter.

Responsible AI adoption: A key priority across sectors

As organizations across sectors transition from pilot projects to enterprise‑wide AI deployment, Canadian regulators focused on promoting responsible adoption in 2025. Regulatory bodies increasingly recognized that scaling AI brings not only opportunities but amplified risks in the operational, ethical, and consumer protection spheres.

In the financial sector

Regulators identified these risks and put forth guidance on how to manage them. The Office of the Superintendent of Financial Institutions (OSFI) released updated expectations under Guideline E‑23 – Model Risk Management, explicitly expanding its scope to encompass AI and machine‑learning‑based systems used by federally regulated financial institutions.

The guideline introduces strengthened enterprise‑wide controls, expectations for proportional governance, and clearer accountability for third‑party AI models, reflecting OSFI’s concern that rapid AI integration could exacerbate model risk if left unmanaged.

In parallel, the Financial Consumer Agency of Canada (FCAC) hosted four workshops as part of the Financial Industry Forum on Artificial Intelligence with industry leaders to highlight best practices that should be followed to respect principles of fairness, accuracy, and transparency.

Meanwhile in Québec, the Autorité des marchés financiers (AMF) published guidance (available in French only) which identifies expectations that financial institutions should aim to meet over the lifecycle of the AI system, such as data sourcing and oversight measures. Moreover, the document targets specific governance principles that apply to boards and executives and should be implemented within institutions. Altogether, these guidance documents are further contributing to a converging national emphasis on trustworthy AI practices.

In the healthcare sector

Privacy regulators are focussing on challenges arising from the use of AI scribes. After a confidentiality incident involving the use of an AI scribe in a hospital setting occurred, both Ontario and British Columbia’s privacy commissioners issued detailed guidance for healthcare providers identifying best practices both to comply with privacy requirements and to use the tool responsibly.

The new guidance highlights the need for a privacy‑by‑design approach, rigorous vendor oversight, and mandatory human oversight of AI-generated clinical documentation, especially given the severity of potential consequences for patients in case of a breach or inaccuracy.

In the absence of AI-specific legislation at the federal or provincial level, these guidelines add to the body of soft law standards that have become influential benchmarks for organizations. Looking ahead, in 2026 the expansion of AI use cases will only continue to accelerate, along with the risks that come with such technology.

How can organizations adopt AI responsibly?

Organizations need to operationalize responsible AI practices now, rather than treating them as mere advice. Businesses deploying AI systems should embed privacy‑by‑design, data governance, and human‑oversight measures throughout the AI lifecycle, from data sourcing and model development to deployment and monitoring.

These governance principles should apply at different levels within the organization, with boards and senior management maintaining visibility over AI‑related risks. Otherwise, businesses may face regulatory scrutiny, operational disruption, and reputational harm.

For more information:

AI training and privacy: Regulatory scrutiny intensifies

OPC investigates the usage of personal data to create deepfakes

A key development in 2025 was the Office of the Privacy Commissioner of Canada (OPC) launching an ongoing investigation into X Corp.’s use of AI, examining whether X is collecting, using, and disclosing Canadians’ personal information without valid and meaningful consent, particularly for training its AI models.

Recently, the OPC expanded this investigation following multiple reports that Grok had been used to generate non‑consensual sexualized deepfake images of real individuals.

The OPC’s approach echoes its earlier joint investigation into OpenAI, which also focused on issues of consent, transparency, and purpose limitation. These investigations highlight that when it comes to AI training, privacy concerns are under scrutiny by regulators. Until official findings are issued, organizations should tread lightly when considering training AI models or that of third-party vendors with customer data.

Clearview AI findings reveal that not all online information can be used without consent

On the question of using information available online for AI training, 2025 also brought the notable Clearview AI v. Alberta decision. While the Court emphasized that not all online information automatically qualifies as “publicly available” and therefore exempt from consent requirements, it ultimately deemed the exception as unconstitutional, finding that its narrow definition of “publicly available information” unduly restricted freedom of expression.

Clearview AI v. Alberta thus raises complex questions about the permissible use of publicly accessible data for AI training, which remain unsettled until the province’s legislator officially amends the law.

Moreover, as well as the Alberta decision, British Columbia’s ruling on Clearview AI also confirms that foreign entities who have no assets physically present in the country can still be subject to Canadian privacy laws.

The test is whether there is a sufficiently real link between the foreign entity and the jurisdiction, such as collecting personal information of individuals who are on the given territory. Non-Canadian organizations are therefore not automatically exempt from the application of provincial laws.

The Court of Appeal in British Columbia recently confirmed these findings, thereby rejecting Clearview AI’s position that it should have been allowed to scrape personal information found online to train its AI without consent.

While the findings in both decisions are restricted in their reach to Alberta and B.C., it would not be surprising to see other provinces adopt a similar standing in future litigation. These developments underscore the need to exercise heightened caution when using personal information, even if collected online, for AI training purposes.

How can organizations favour compliance in training their AI models?

Businesses should reassess the legal basis for using customer, employee, or publicly accessible data to train AI models, ensuring that consent, purpose limitation, and transparency requirements are clearly met and documented.

Foreign organizations should carefully examine whether there might exist a real link between their business and Canadians, triggering the application of provincial privacy laws.

As regulatory scrutiny intensifies, AI training practices should be treated as a core privacy‑risk issue, requiring the same level of caution as other high‑risk data‑processing activities.

For more information:

AI and cybersecurity: New threats to thwart

As reported in the G7 Cyber Expert Group Statement on Artificial Intelligence and Cybersecurity, AI tools can strengthen defences by automating anomaly detection, fraud prevention, and incident response, but they also introduce significant new risks.

For example, AI can be leveraged to amplify the scale and sophistication of cyberattacks, craft hyper-personalized phishing campaigns, automate exploit development, and create adaptative malware.

In its Ransomware Threat Outlook 2025-2027, the Canadian Centre for Cyber Security warns that threat actors are adopting AI to lower technical barriers, making it easier for less skilled criminals to launch ransomware and extortion campaigns. From 2021 to 2026, the Centre observed a 26 per cent average year-over-year increase in reported incidents. This trend is only expected to accelerate in 2026.

In 2025, an increasing number of organizations deployed agentic AI systems, which should continue to expand this year. As opposed to other types of AI, agentic AI is defined by its ability to act autonomously and make decisions without direct human oversight.

Consequently, these AI agents increase the complexity and unpredictability of cyber threats, as they may inadvertently expose sensitive data, be manipulated through prompt injection or data poisoning, or become direct targets for attackers seeking to exploit vulnerabilities in AI design and training data.

How can organizations prepare for AI-related cyber threats?

Businesses should update their cyber risk frameworks and security controls to account for AI‑specific threats, including AI‑driven phishing, automated malware, and the exploitation of AI models through prompt injection or data poisoning.

Organizations deploying agentic or autonomous AI systems in particular should implement enhanced safeguards, including stricter access controls, continuous monitoring, and clear human‑in‑the‑loop escalation mechanisms.

For more information:

Readiness is your best cyber defence (May 2025)
Privacy and cybersecurity are no longer IT issues, they are board issues (Sept. 2025)

BLG can assist

As one of the most respected Privacy & Cybersecurity teams in Canada, we have leading expertise on AI matters, and can provide you with tailored advice and actionable solutions to mitigate potential risks.

Let’s work together to make 2026 a year where innovation meets compliance.

U.S. trade developments: IEEPA tariffs end, but will new Section 301 tariffs follow?

Tue, 24 Mar 2026 00:00:00 Z

A month ago, the Supreme Court of the United States ruled that the International Emergency Economic Powers Act (IEEPA) does not authorize the president to impose broad‑based tariffs, a decision outlined in our recent insight. But that was never expected to be the end of the tariff story.

And it was not.

Four days after the ruling, President Trump implemented a 10-per-cent worldwide tariff under Section 122 of the Trade Act of 1974 (Trade Act 1974). Goods compliant with the Canada-United States-Mexico Agreement (CUSMA) will not be subject to this tariff. These tariffs are time-limited and are set to expire on July 24, 2026. Of course, that was never going to be the end of the tariff story, either.

And it was not.

On March 11, 2026, the United States Trade Representative (USTR) initiated investigations under Section 301 of the Trade Act 1974 into policies and practices of its trading partners. The object is to assess the extent to which "structural excess capacity" and subsidies constitute unfair trading practices that should be addressed through specific measures. The European Union (EU) and 15 individual countries are subject to the investigation: China, Singapore, Switzerland, Norway, Indonesia, Malaysia, Cambodia, Thailand, South Korea, Vietnam, Bangladesh, Mexico, Japan, and India. A day later, USTR initiated a separate set of Section 301 investigations, alleging failure on the part of various economies to deal with goods produced with forced labour. The investigation targets 60 countries – Canada among them.

Nice trade you got there. Shame if something happened to it.

Unlike IEEPA, Section 301 comes with a clear process – and a long track record.

For USTR, Section 301 is the go-to-tool for dealing with what it sees as unfair trade. USTR investigates whether another country's laws, policies, or practices discriminate against U.S. commerce or place an unreasonable burden on it.

USTR can start an investigation on its own initiative or in response to a petition from industry. If a petition is filed, the USTR has 45 days to decide whether to proceed. In this instance, the USTR launched the investigation on its own initiative.

Once an investigation begins, the USTR must first seek consultations with the government concerned. In theory, this encourages a negotiated solution. In practice, consultations do not always resolve the dispute – and when they don't, things escalate.

How a Section 301 investigation unfolds

Each Section 301 investigation is handled by a dedicated committee operating under the Trade Policy Staff Committee (TPSC). The process includes:

public notice of the investigation;
opportunities for written submissions and public comment; and
a public hearing where stakeholders can make their case.

Following this process, the committee makes recommendations to the USTR on whether action is warranted – and if so, what form it should take.

If USTR concludes that a foreign country's conduct is actionable, the statute gives it a wide range of options, including (at the president's direction):

suspending trade concessions or benefits;
imposing duties or other import restrictions (including quotas);
withdrawing preferential tariff treatment; or
negotiating binding agreements to eliminate or modify the offending practice.

The reach is broad. USTR does not have to limit its response to the specific product or sector involved in the underlying conduct. Any measures imposed must only be "equivalent in value" to the harm caused to U.S. commerce.

This is not a dormant power

Section 301 is not used lightly. But when used, the effects are significant.

During President Trump's first term, Section 301 investigations into China resulted in tariffs on hundreds of billions of dollars' worth of goods. Many of those tariffs remain in place today.

What this means for Canadian businesses

For now, CUSMA-compliant goods remain exempt from the temporary 10 per cent tariff imposed under Section 122. That protection matters, and it should not be taken for granted.

Canada is now directly within the scope of at least one Section 301 investigation. And unlike the Section 122 tariff, Section 301 measures are not temporary by default.

The sectors most likely to feel the effects include:

automotive and transportation;
technology and electronics;
energy and materials; and
industrial goods.

Even where Canadian exports are not directly targeted, supply chains that touch other investigated economies may be.

Canadian exporters should not assume this will resolve itself quietly. In light of these developments, Canadian businesses may wish to consider the following next steps:

consider CUSMA eligibility and documentation. Maintaining tariff-free treatment depends on it.
map supply chains to identify exposure to countries under investigation.
monitor USTR proceedings, including public consultations and interim reports, for early signals of potential measures.
consider engagement opportunities, particularly where Canadian interests may be affected by sector-specific action.

BLG's International Trade and Investment group continues to monitor these developments closely and is available to assist clients in assessing exposure, navigating compliance requirements, and developing strategic responses to evolving U.S. trade enforcement measures.

For more information, please reach out to the key contacts below.

PTAS report cites unpaid oil and gas taxes, impacts on Alberta’s municipalities and industry

Fri, 20 Mar 2026 00:00:00 Z

PTAS recommends 17 policy directions aimed at addressing growing municipal tax arrears in the oil and gas sector

On March 16, 2026, the Government of Alberta, along with the Alberta Energy Regulator (AER), and municipal stakeholders released a report titled the Property Tax Accountability Strategy (PTAS) Final Report (the Report). The Report is the final report of the Property Tax Accountability Strategy (PTAS), which is a working group comprised of the Government of Alberta (the Province), AER (AER), and municipal stakeholders. The PTAS was formed to address the large amount of property tax arrears that accumulate annually from the oil and gas sector in Alberta. The Report offers a comprehensive overview of the issue, detailing its underlying causes, current impacts, and proposed reforms. Importantly for oil and gas industry members and stakeholders, the Report proposes 17 policy directions which this article summarizes.

Key takeaway

The Report’s proposed measures propose a further incorporation of oil and gas property tax compliance into licensing decisions and regulatory oversight. If the recommendations proposed by the Report are implemented, unpaid oil and gas taxes will affect a company’s ability to maintain licences, transfer assets, and continue operations.

This is a further expansion on previous efforts to collect on municipal tax arrears, such as the AER’s Bulletin 2023-22¹ which made municipal tax arrears above $20,000 payable before a well license may be transferred, and amendments to the Municipal Government Act which restored a special priority lien for taxes owed on certain property such as wells and pipelines.²

The Report’s recommendations

The Report presents 17 recommendations to strengthen enforcement, improve stakeholder coordination, and reduce future arrears. These recommendations are organized across 5 themes as follows:

integrating property tax arrears into the AER’s mandate;
treating tax compliance as a measure of industry and regulatory performance;
enhancing municipal enforcement capacity to enforce oil and gas tax accountability;
mitigating municipal impacts of property tax arrears; and
strengthening collaboration and communication between municipalities, the Province, and the AER on property tax payment.

The recommendations under each theme of the Report are as follows:

Theme 1: Integrating property tax arrears into the AER’s mandate

1. Make property tax payment a condition of holding or maintaining an AER licence.

2. Empower the AER to initiate compliance action based solely on a licensee's tax arrears, enabling earlier intervention.

3. Establish a definition of "good standing in property tax payments" to inform AER compliance and enforcement action, with a licensee considered in good standing if it has no outstanding property tax arrears or if any arrears are fully covered by - and compliant with - a municipal tax repayment agreement.

4. Require the AER to prohibit licence transfers and the acquisition of new licences when a company is not in "good standing in property tax payments," as per the recommendation directly above.

5. Authorize the AER to use a licensee's history of property tax arrears as a basis for enhanced financial or compliance reporting requirements.

Theme 2: Property tax payment as a key measure of industry and regulatory performance

6. Revise how property tax arrears information is used when determining a company's Licensee Capability Assessment (LCA) by doing the following:

a. Determine and implement a consistent and impactful weighting for tax arrears within the broader LCA formula.

b. Provide public-facing information on how tax arrears inform the LCA determination process.

c. Provide municipalities with detailed information on how tax arrears are factored and weighted within LCA formula on a regular basis, including when the weighting changes.

d. Periodically evaluate the weighting to ensure it is effective in compelling payment of property taxes.

7. Treat property tax arrears as a formal compliance metric for industry-wide performance.

8. Include municipal tax payment indicators in AER performance dashboards and risk tools.

9. Require the AER to improve transparency and accountability by publishing how its risk-weighting methodology informs regulatory decisions and disclosing how property tax arrears influence risk assessments.

Theme 3: Enhancing municipal capacity to enforce oil and gas tax accountability

10. Municipalities utilize enhanced access to relevant regulatory and financial-risk information for companies with assessed assets in their jurisdiction to support earlier identification of potential non-payment risks and enable timely enforcement or mitigation actions. This should include developing, through Rural Municipalities Association, a municipal working group to continually review, evaluate, and share best practices related to company risk-monitoring and the use of local compliance and enforcement tools.

Theme 4: Mitigating municipal impacts of property tax arrears

11. Implement mechanisms to remove insolvent companies' assets from the assessment roll more expediently.

12. Renew and streamline the Provincial Education Requisition Credit (PERC) program, ensuring it is adequately funded to meet municipal needs until unpaid oil and gas taxes no longer present a material impact on rural municipalities.

13. Explore creating a financial support program to assist municipalities disproportionately affected by unpaid oil and gas property taxes.

Theme 5: Strengthening collaboration and communication between municipalities, the Province, and the AER on property tax payment

14. Enhance municipalities' collection and reporting of property tax arrears through the following actions:

a. Undertake consistent and fulsome reporting of tax arrears in accordance with new mandatory provincial reporting requirements.

b. Develop a uniform mechanism for tracking and reporting on repayment agreements.

15. Enhance Government's collection and reporting of provincewide oil and gas property tax arrears data through the following:

a. Establish mandatory municipal tax arrears reporting periods, including related to repayment agreements.

b. Broaden current data collection to include unpaid municipal and education property taxes, penalties, and interest.

c. Update processes for verification and sharing of municipal data.

d. Publish periodic public reports summarizing the status of unpaid municipal oil and gas property taxes across Alberta, including any relevant trends or analysis.

16. Enhance the AER's collection and reporting of company-specific property tax arrears through the following:

a. Develop and implement a system to directly notify a municipality when a company operating within the municipality is in non-compliance with a regulatory requirement.

b. In conjunction with municipalities, develop a municipal collaboration system to ensure that all municipalities have timely and direct access to the AER for questions, concerns, or sharing of information.

c. Regularly gather tax agreement information from municipalities, including a mechanism to allow for immediate municipal reporting of non-payment.

d. Publish periodic public reports summarizing how unpaid taxes informed compliance and enforcement action, as well as trends, analysis and linkages between non-payment of taxes and other regulatory non-compliance issues.

e. Establish a mandatory enforcement reporting system that publishes detailed investigation summaries, enforcement outcomes, timelines from non-compliance to resolution, and data on repeat non-compliance and operator behaviour change.

17. Establish a formal quarterly working group with participation from the AER, RMA, and rural municipal representatives to monitor trends and issues related to property tax payment, coordinate cross-jurisdictional concerns, and ensure municipalities receive timely notification of relevant AER compliance and enforcement actions.

Considerations

If the Report’s recommendations are adopted, it will have numerous implications on members of the oil and gas industry and stakeholders. These include tax compliance becoming an important consideration in licensing and well transfers. Under Theme 1, an AER licensee would be required to have good standing on municipal property tax payments (i.e. being less than 120 days behind on their property tax payments or having any arrears fully covered by a municipal tax repayment agreement) in order to maintain or transfer their AER license. Consequently, the presence of property tax arrears would prevent a licensee from continuing to operate, including when the licensee keeps persistent property tax arrears under the current $20,000 threshold.

Under Themes 2 and 3, municipalities, and specifically rural municipalities, will take comfort in recommendation #9, which will require the AER to improve its transparency by publishing its methodology in regulatory decision making, and recommendation #10, which will provide municipalities with the information to better identify property tax collection risks for assets in their jurisdiction.

Municipalities would also benefit from Theme 4, where increased funding is made available to them, and they will be able to more accurately monitor insolvent companies by their removal from the assessment roll in a more expedient manner.

The most detailed recommendations are in Theme 5. The recommendations include enhanced measures for reporting repayment agreements along with other enhanced and mandatory reporting requirements. Recommendation #15 will require companies to report to the Province on repayment agreements. Recommendation #16 will allow the AER to better monitor and collect information when a company is non-compliant with tax obligations.

Conclusion

In light of the recommendations, should they be implemented, compliance with municipal tax obligations may become increasingly linked to a company’s ability to operate within the Province. The Report highlights that unpaid oil and gas property taxes are a pervasive issue. The Report’s recommendations combined with recent legislative amendments and regulatory bulletins, make clear that oil and gas property tax compliance should be top of mind for all involved in Alberta’s oil and gas sector. While the recommendations are just that, recommendations, they signal a willingness for the Province to take steps to enhance the tools available to municipalities and the AER to recover tax arrears.

Court of Appeal comments on a possible duty of care owed by the Attorney General of Canada

Thu, 19 Mar 2026 00:00:00 Z

In Sienna v. Duckett, 2025 ONCA 867, the Court of Appeal allowed the plaintiffs leave to amend their claim against the Attorney General of Canada relating to an alleged failure to properly administer regulatory oversight in issuing firearms licences under the Firearms Act.

Background

In 2019, Nikkolas Sienna called the police to report that he and his family were concerned about the erratic behaviour of their neighbour, Mark Duckett. Following a brief police investigation, Mr. Duckett shot and killed Mr. Sienna. Subsequently, Mr. Sienna, and members of his family, commenced a claim against the Attorney General of Canada, alleging that the Attorney General failed to properly administer regulatory oversight in issuing a firearms licence to Mr. Duckett. It was alleged that the Attorney General owned the plaintiffs a private law duty of care by virtue of its control over the issuance of firearms licences.

The Attorney General successfully brought a Rule 21.01(1)(b) motion for an order striking the claim against it in its entirety, without leave to amend, on the ground that it failed to disclose a reasonable cause of action. The motion judge found that the facts as pleaded could not support a relationship of proximity between the plaintiffs and the Attorney General to establish a duty of care.

The appellate decision

The plaintiffs appealed the motion judge’s decision, arguing that there is a proximate relationship between the plaintiffs and the respondent which establishes a duty of care under two of the three categories of circumstances set out in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42: (1) where the alleged private law duty of care arises explicitly or implicitly from the statutory scheme; (2) where there are specific interactions between the government and the plaintiff that create a relationship sufficient to establish the proximity required for a duty of care that is not negated by the statute; and (3) where a combination of interactions and statutory duties establishes sufficient proximity to give rise to a private law duty of care.

The Court agreed with the motion judge that under the first category, a private law duty could not arise explicitly or implicitly from the legislation alone. The Court visited the language of the Firearms Act and found that there is nothing in the statutory language to support converting the Chief Firearms Officer’s licensing and investigative powers, exercised in the public interest, into private law duties.

However, the Court found that a private law duty could arise under the third category set out in Imperial Tobacco. The Court found that the motion judge erred in narrowing the proximity inquiry between the plaintiffs and the respondent by limiting the analysis to whether the plaintiffs’ pleadings alleged the respondent had any “personal interactions” or communications with the plaintiffs. The Court clarified that personal interaction is not always necessary to establish proximity.

The Court stated that this is not a case where it is plain and obvious that the plaintiffs could not plead a viable cause of action if they were granted leave to amend. If facts were pleaded to support that the respondent knew or ought to have known, when issuing the firearms licence, that Mr. Duckett posed a risk to Mr. Sienna or to a particularized group that included Mr. Sienna, that could create sufficient proximity to ground a duty of care, forming the basis of a reasonable cause of action.

Lastly, the Court considered the motion judge’s policy analysis and clarified that the limited application of this case does not amount to a situation that would “effectively make Canada the insurer for victims of firearm related crimes committed by [licence] holders”.

Commentary

This decision reiterates that statutory powers exercised in the public interest do not on their own give rise to private law duty of care. This confirms that acting pursuant to a legislative framework does not automatically result in liability for negligence when harm is caused by a third party. However, this decision is also a cautionary reminder that a motion to strike a duty of care claim for failing to disclose a reasonable cause of action may not succeed where the pleadings leave open a realistic possibility that a duty could arise on a more particularized evidentiary record.

Termination risk at the executive level: Lessons from Adelman v. IBM Canada Limited

Mon, 16 Mar 2026 00:00:00 Z

Employers in Ontario are increasingly operating in a termination landscape that feels uncertain. A recent Ontario Superior Court (the Court) decision, Adelman v. IBM Canada Limited (Adelman), illustrates how common‑law notice exposure, discretionary compensation, and equity‑based incentives can intersect to produce significant liability where contractual protections are absent or unclear.

While the case involved a senior executive at a large organization, the Court’s reasoning has broader implications for employers managing terminations of long‑service employees, particularly where bonuses and equity awards form part of the compensation framework. The decision highlights the importance of disciplined processes, clear documentation, and careful reliance on discretion when employment relationships come to an end.

Background

In Adelman, the Court considered the wrongful dismissal claims of a long‑service IBM executive terminated without cause in January 2023.
Mr. Adelman had approximately 18.5 years of service, held an executive‑level role at the time of dismissal, and was 59 years old.
His employment agreement did not contain any termination provisions.
The dispute raised issues concerning the appropriate reasonable notice period, entitlement to bonus compensation, and damages for restricted stock units (RSUs) and stock options cancelled on termination.

Reasonable notice and the use of comparator case law

The Court determined that Mr. Adelman was entitled to 24 months’ reasonable notice, applying the Bardal factors. In doing so, the Court relied on and distinguished Nagpal v. IBM Canada Ltd., in which a non‑executive IBM employee with longer service but who was significantly younger had been awarded 22 months’ notice. The Court concluded that Mr. Adelman’s executive status and age justified a longer notice period, notwithstanding his slightly shorter tenure. This analysis reinforces that length of service is but one factor to consider, and that age, position and employability are also important factors.

Bonus entitlement during the notice period: Applying Matthews and Dawe

The Court rejected Mr. Adelman’s claim for bonus compensation during the notice period, applying the two‑part framework articulated by the Supreme Court of Canada in Matthews v. Ocean Nutrition Canada Ltd.

At the first stage of the analysis, the Court had to determine whether Mr. Adelman’s bonus was an integral part of his compensation. In making its finding, the Court considered, among other factors, how often Mr. Adelman received a bonus, if bonuses were required for IBM to remain competitive, and whether bonuses were historically awarded.

The Court found that Mr. Adelman’s bonus was not an integral component of his compensation. The evidence demonstrated inconsistent bonus payments (Mr. Adelman did not receive a bonus at all in some years), frequent zero‑bonus outcomes within IBM’s executive ranks, and the absence of any role for bonuses in maintaining market competitiveness. Having found no common‑law entitlement, the Court did not proceed to consider whether the bonus plan language displaced such rights.

Discretionary bonuses and fairness

The Court reached a different conclusion with respect to Mr. Adelman’s 2022 bonus (i.e. the bonus in the final year of his employment). Relying on the Ontario Court of Appeal’s decision in Bowen v. JC Clark Ltd., the Court emphasized that discretionary bonuses are subject to an implied obligation that discretion be exercised fairly and reasonably. In such cases, the court must analyze the evidence (e.g. employer policies and language of bonus compensation plans) in the applicable case and determine whether the process followed by an employer was fair and reasonable.

The Court rejected IBM’s position that the zero bonus reflected performance‑based considerations, relying instead on contemporaneous internal documents and testimony on cross-examination indicating that the bonus was denied primarily because Mr. Adelman had separated before the payout date. In awarding a bonus for the 2022 year based on the average of Mr. Adelman’s last two years, the Court confirmed that where discretion is exercised unfairly, courts may substitute a reasonable proxy grounded in historical practice.

Equity compensation

With respect to RSUs and stock options cancelled on termination, the Court applied the reasoning in Milwid v. IBM Canada Ltd., in which nearly identical IBM equity plan language was held insufficient to clearly displace common‑law vesting rights during the notice period. IBM ultimately conceded entitlement, leaving valuation as the central issue.

In valuing damages, the Court accepted Mr. Adelman’s evidence of his actual investment behaviour and valued the equity based on implied future sale dates, resulting in damages exceeding $269,000. The decision underscores that equity damages will be grounded in evidence of how an employee has actually treated prior awards, rather than assumed or hypothetical conduct.

Punitive damages

Lastly, although the Court was critical of IBM’s handling of the bonus and equity issues, it declined to award aggravated or punitive damages. The Court held that the evidence did not establish distress beyond the normal consequences of termination or conduct rising to the exceptional threshold required for punitive damages.

Takeaways for employers

Adelman illustrates the continued willingness of Ontario courts to award the upper range of reasonable notice in appropriate cases, and to scrutinize the exercise of discretion in bonus decisions. For employers, the decision reinforces that contractual clarity and defensible decision‑making processes remain critical tools in managing termination risk, particularly for senior employees with incentive‑based compensation.

Keeping Canadian start-ups Canadian

Fri, 13 Mar 2026 00:00:00 Z

There are many Canadian tax benefits associated with starting a business in a corporation created under Canadian federal or provincial law, which is a necessary (but not sufficient) condition for a corporation to qualify as a “Canadian-controlled private corporation” (CCPC):

CCPC status is one of the requirements for a corporation’s shares to constitute “qualified small business corporation shares”, which Canadian-resident individuals may claim the lifetime capital gains exemption (LCGE) of $1.25 million on;
CCPCs receive preferential tax treatment on scientific research and experimental development (SR&ED) expenditures, which the government recently expanded in the 2025 federal budget to increase the existing 35 per cent SR&ED refundable tax credit to up to $2.1 million of a CCPC’s first $6 million of qualifying expenditures;¹
holders of employee stock options issued by CCPCs receive preferential tax treatment relative to those issued by other corporations;
CCPCs are taxed at lower rates on up to $500,000 of active business income under the “small business deduction”; and
only CCPCs can be “eligible small business corporations”, the shares of which may qualify for a tax-deferred exchange in certain circumstances.²

These and other factors make Canada a great choice as a place to incorporate a technology sector start-up venture.³

Our tax system needs to help more

That said, there is certainly much more Canada could do with its tax system to support the innovation sector and those who invest in it (as discussed at length elsewhere)⁴. For example, as of yet no action has been taken on the proposal in the Liberal platform from the 2025 election to extend flow-through share financing to the innovation sector, nor on the previous government’s consultation to establish a patent box regime to support commercialization of IP developed in Canada (implementation of which was also promised in the Liberal election platform). Lower personal tax rates (which could be funded by shifting Canada’s tax mix more towards consumption taxes and away from income taxes) would help to keep entrepreneurs, investors and highly-skilled workers here and attract new ones. Canada also urgently needs to respond to recent U.S. tax measures such as the 50 per cent increase in the investor exemption for gains on qualified small business stock and expanding permissible investments for tax-exempts such as 401(k) plans. Creating a federal counterpart to the new Québec tax credit for research, innovation and commercialization would also help level the playing field with the U.S.. The U.K. Seed Enterprise Investment Scheme and Enterprise Investment Scheme are other examples of effective programs providing tax-advantaged support to high-risk early-stage business.

Financing remains a particular challenge, as many small-to-mid-sized Canadian technology companies and their founders know. Capital pools in Canada are simply not as deep as elsewhere, and frequently Canadian start-ups trying to scale up are forced to look outside Canada to find funding required to grow and thrive.⁵ This makes it vitally important to remove impediments and create incentives for Canadian capital (both taxable and tax-exempt) to increase its investment in the Canadian innovation sector, particularly at the small-to-mid-size level where Canadian corporations often turn to non-resident (typically American) investors.

Non-resident investment in Canadian technology corporations

Increasing the level of Canadian investment in our technology sector benefits Canada’s tax base. Non-residents of Canada are generally not subject to Canadian capital gains taxation on shares of Canadian technology companies, since Canada only taxes non-residents on capital gains from “taxable Canadian property” (which for shares is limited to those deriving their value primarily from land in Canada). As such, when Canadian investors rather than foreign ones finance Canada’s innovation sector, the future gains enhance Canada’s tax base even if taxed at low rates: anything above zero is a net increase in potential tax revenue relative to investment from foreign sources.

Bringing in non-resident investors potentially impacts a Canadian corporation’s ability to qualify as a CCPC. This is because a corporation cannot qualify as a CCPC if:

it is controlled either in law (i.e., majority voting power) or in fact by one or more non-residents of Canada and/or public corporations; or
all of its shares that are in fact owned by non-residents (or public corporations) would, if aggregated together, constitute control at law (i.e., majority voting power) of the corporation.

The fact that contingent rights to acquire or redeem shares or control the votes attached to shares (present or future) are taken into account when applying these tests makes it challenging to accommodate a significant non-resident investor (or many smaller ones) while retaining CCPC status.⁶ As such, Canadian technology companies can find themselves caught between inadequate access to domestic capital and Canadian tax rules that penalize them for relying on foreign investors.

In the past various strategies have been tried to mitigate the impact of foreign investment on a Canadian corporation’s CCPC status. These include so-called “straddle structures”, whereby Canadian and U.S. corporations are created as sister entities with the same shareholders, with different business functions divided between them. These arrangements have generally proven to be expensive to create and maintain and very unwieldy to administer. As a result, Canadian start-ups have for the most part either managed to limit foreign investment to what is permissible within the constraints of the CCPC rules or simply abandon CCPC status and the associated tax benefits.

What about emigrating to the U.S.?

In some cases U.S. investors considering an investment in a Canadian start-up have asked the founders to move the corporation to the United States, so as to make the corporation governed by the corporate law of a U.S. state (typically Delaware) rather than whatever Canadian corporate statute it currently exists under. Indeed, the recent announcement by Y-Combinator that it would not invest in Canadian-incorporated entities (which was quickly reversed) had been made on the premise “that our top-performing Canadian companies reincorporated in the US.”

Effect on Tax Residency

When a Canadian corporation changes its governing law to a jurisdiction outside of Canada, it may or may not still be considered to be a resident of Canada for Canadian tax purposes depending on the facts. If its “mind and management” is not located in Canada, it will cease to be a resident of Canada for Canadian tax purposes.⁷ Conversely, if its “mind and management” remains in Canada post-reincorporation, Canadian domestic law considers it to still be a Canadian resident (and subject to Canadian tax on its worldwide income), unless the tax treaty (if any) Canada has with the country in which the corporation emigrated to includes a “tiebreaker” rule providing that where both countries assert a corporation to be resident, it will be deemed to be resident in the country under whose corporate law the corporation exists (i.e., country of governing law trumps location of mind and management). The Canada-United States Income Tax Convention (the Treaty) includes just such a tie-breaker rule, meaning that a Canadian corporation that changes its governing law to Delaware or another U.S. state will cease to be a resident of Canada for Canadian tax purposes.

Ceasing to be resident in Canada: Effect on emigrated corporation

It is important to understand that ceasing to be a resident of Canada for Canadian tax purposes is a significant event usually accompanied by materially adverse tax consequences. There is generally a “settling up” of matters within the Canadian tax system for the emigrating corporation, which is accomplished in two ways.

First of all, an emigrating corporation is deemed for Canadian tax purposes to have disposed of all of its property for fair market value proceeds of disposition immediately before emigrating (and to have a tax year-end), such that all gains and losses are deemed to be realized, viz., all properties are marked to market. In most cases the primary value of a tech sector corporation’s assets are its intellectual property and goodwill, which often have little or no cost basis for tax purposes, with the result that the gains realized could be quite substantial.⁸ However, in some cases the corporation may have tax loss carryfowards from previous years (or unused deductions for tax purposes in the current year) that may offset some or all of the income created from realizing all accrued gains.⁹

In addition, a special departure tax is levied on the emigrating corporation, based on its net surplus (the fair market value of its assets less the sum of its debts and the paid-up capital of its shares). The rate of such tax is 25 per cent of its net surplus, but if the corporation is emigrating to a country with a Canadian tax treaty, the 25 per cent rate is reduced to the most favourable dividend withholding tax rate in that treaty (5 per cent in the case of the U.S.). This departure tax is roughly comparable to what would occur if the corporation were liquidated and its net assets distributed to shareholders who are non-residents of Canada. It cannot be reduced by any loss carryforwards the corporation may have, nor by the fact that some or even most of its shareholders are in fact Canadian residents. Note that where the corporation emigrates to the U.S., this may be a taxable event for existing U.S.-resident shareholders under American tax laws, depending on the circumstances.

Post-departure, an emigrated corporation that is no longer a resident of Canada for Canadian tax purposes will generally be subject to Canadian tax only on its Canadian-source income.¹⁰ This means that to the extent the corporation still has offices, employees and assets located in Canada, any income attributable to them will generally be considered to be subject to Canadian corporate income tax as a Canadian branch of a foreign corporation. Foreign corporations carrying on business in Canada are required to file a Canadian corporate income tax return and determine what portion of their income is attributable to the Canadian branch. As such, emigrating a Canadian corporation to another country while leaving a significant portion of its operations here tends to make little sense from a tax perspective.

Ceasing to be Resident in Canada: Effect on Canadian-Resident Shareholders

The taxation of Canadian shareholders of a corporation that has reincorporated in the U.S. will change significantly once that corporation is no longer a Canadian tax resident. Since the corporation will no longer be a CCPC, capital gains on its shares will not be eligible for the LCGE going forward. Because the corporate emigration itself will not cause a shareholder to be deemed to have disposed of their shares of the corporation, some form of self-help planning before it ceases to be a CCPC will be needed to utilize any LCGE that may be available to Canadian-resident individuals to absorb accrued but unrealized gains on their shares. In either case, Canada will continue to tax Canadian residents on any existing and future gains on those shares when they are ultimately sold.

If a U.S.-reincorporated corporation pays dividends, U.S. dividend withholding tax will generally apply at the rate of 30 per cent. Canadian residents entitled to benefits under the Canada-United States Income Tax Convention can generally claim a reduced 15 per cent dividend withholding tax rate under Article X(2) of the Treaty.¹¹ Canada will also tax such dividends, at rates higher than dividends from Canadian corporations and typically with a credit given for U.S. withholding taxes paid. In general, the integration provisions of the Canadian tax system (e.g., capital dividends, the dividend tax credit, etc.) that try to equalize the tax burden on income/gains earned by a Canadian corporation and distributed to a Canadian-resident shareholder with the tax that would have arisen had the Canadian-resident shareholder earned the same income/gains directly will no longer apply. This means that careful pre-emigration planning must be undertaken to maximize these benefits for Canadian-resident shareholders before they cease to be available.

Somersault transactions

Another form of transaction sometimes considered is a somersault, whereby a new foreign holding corporation is interposed between the Canadian corporation and its shareholders. In this transaction, the existing shareholders transfer their existing shares to the new foreign holding company (Parentco), but the Canadian corporation remains governed by Canadian corporate law and does not cease to be a Canadian tax resident. This will result in the loss of CCPC status for the Canadian corporation, but does not trigger the emigration taxes described above.

For Canadian-resident shareholders, the transfer of their shares to Parentco in exchange for Parentco shares will cause any accrued gains to be realized for Canadian tax purposes, which may not be problematic depending on the size of the gains and whether the LCGE or other tax shelter exists to absorb them. If a taxable exchange is not acceptable to Canadian-resident shareholders, deferral of their Canadian tax otherwise triggered by the exchange can be provided to them by using an “exchangeable share” structure, whereby such shareholders (but not foreign shareholders) hold shares of a Canadian subsidiary of Parentco that mirror the economics of (and eventually will be exchanged for) the same Parentco shares that non-Canadian shareholders are receiving. Such a structure involves some cost and complexity, and so is not appropriate in all cases. An example of such a transaction is the corporate reorganization of Starton Therapeutics Inc. (a British Columbia corporation) to become a subsidiary of Starton Holdings, Inc. (a newly-created Delaware corporation) completed on Nov. 5, 2025.

Conclusion

The Canadian innovation sector represents Canada’s tax base of the future. It needs and deserves greater support from our tax system to grow and create national champions capable of competing with their foreign peers. Many of these changes are reasonably simple to make, and require only the willingness to invest in our own economy and the will to implement. The cost of not making them is to see more of our start-ups and the people who work for them leave or invest outside of Canada. The time to act is now.

Commercial transactions in Canada: Four essential privacy tips for U.S. businesses

Thu, 12 Mar 2026 00:00:00 Z

If you are a consumer-facing business in the United States or are in the field of advising them on privacy matters, you are aware of the importance of privacy and data protection compliance.

Despite this awareness, too many companies and counsels tend to overlook the need to consider Canadian privacy laws when engaging in cross-border commercial transactions, also overlooking that Québec privacy law has a strict regime comparable to the General Data Protection Regulation (GDPR), with fines reaching up to $25 million or 4 per cent of global revenue.

This article provides four essential privacy and data protection elements to keep top of mind prior to engaging in and during commercial transactions.

1 – NDAs require specific customization

Standard non-disclosure agreements (NDAs) may not meet the legal requirements in provinces like Québec where the law mandates specific language to protect personal information during a transaction. Legal counsel familiar with the province’s privacy regime should review and tailor NDAs to ensure they reflect legislative obligations.

2 – Privacy due diligence is critical

During the due diligence phase, it is essential to identify and assess specific legal privacy requirements. Even if a target organization may have a robust privacy framework, a thorough risk and gap analysis based on applicable provincial privacy laws and regulatory guidance must be conducted by local counsel. This review may reveal compliance issues that can either be remediated post-closing or justify the inclusion of additional indemnity provisions in the share or asset purchase agreement.

3 – Post-closing notification obligations

Following a transaction, the acquiring entity may be required to notify affected individuals of changes in the possession or control of their personal information. Local legal advisors play a key role in crafting these communications to ensure they are tailored to the specific groups affected, written in plain language, and compliant with applicable privacy laws.

4 – Ongoing privacy management post-transaction

After closing, the new entity must promptly address any privacy risks identified during the due diligence process to avoid penalties and reputational damage. The new entity must establish an ongoing privacy management process, including proper training for its privacy officer and all personnel who handle personal information. A local lawyer can provide ready-to-use templates and can help adapt existing policies and processes to ensure optimal compliance.

Conclusion

We hope that these four key privacy points, are carefully considered during your company’s next commercial transaction in Canada.

For tailored guidance, please reach out to BLG’s Privacy team. We are here to help you navigate the evolving legal landscape.

Canada privacy laws: What U.S. businesses need to know

Tue, 10 Mar 2026 00:00:00 Z

If you are a consumer-facing business in the United States or are in the field of advising them on privacy matters, you are aware of the importance of privacy and data protection compliance.

Despite this awareness, too many companies and counsels tend to overlook the need to consider Canadian privacy laws, especially when engaging in cross-border commercial transactions, and overlooking at the same time Québec privacy law which has a strict regime comparable to the GDPR, with fines reaching up to $25 million or 4 per cent of global revenue.

To assume that U.S. and Canadian privacy laws are the same would be misleading. This page offers guidance on how U.S. businesses can navigate Canadian privacy laws. It provides an overview of Canadian privacy legislation, highlights key elements, and concludes with practical considerations to keep top of mind prior to engaging in and during commercial transactions.

Overview – Canada’s privacy laws

Canadian privacy laws do not contain residency restrictions, they apply regardless of the nationality of the individuals when their personal information is processed in Canada, but also regardless of where the data processing occurs – even outside Canada - when personal information of Canadians is processed. As such, U.S. organizations that process Canadian personal information may be subject to both U.S. and Canadian privacy laws.

Canada has a comprehensive federal privacy law, the Personal Information Protection and Electronic Documents Act (PIPEDA). PIPEDA governs how private sector organizations collect, use, and disclose personal information about individuals in the course of commercial activities.

PIPEDA applies across Canada, except in provinces that have enacted privacy laws deemed "substantially similar", notably Alberta (Personal Information Protection Act), British Columbia (Personal Information Protection Act), and Québec (Act respecting the protection of personal information in the private sector) – see BLG guide on Québec private sector Act here for more information. PIPEDA also applies to organizations that transfer personal information across provincial or international borders.

While the privacy laws in the provinces of Alberta and British Columbia are akin to PIPEDA, the privacy laws in the province of Québec are frequently compared to the European General Data Protection Regulation (GDPR) given its strong alignment with the regulation, including in terms of sanctions.

Last, in the employment context, PIPEDA applies only to federally regulated industries, such as banking, airlines, and railways.

Key elements of Canada’s privacy laws

1 – Consent

Canadian privacy laws are built around the principles of transparency and consent. Before collecting, using or disclosing personal information, organizations must ensure individuals understand and agree to the specific purposes for which their data will be used. Consent must be meaningful and clearly communicated in plain language. The form of consent, express or implied, depends mainly on the sensitivity of the information and the context.

That being said, Canadian privacy laws, depending on the province, may provide exceptions to these consent requirements in certain situations such as in an employment context, during a commercial transaction or a business context. These various exceptions highlight the need for businesses to tailor their privacy practices to the province with which they are dealing.

2 – Limitations

U.S. businesses operating in Canada must understand that indiscriminate data collection is not permitted. Canadian privacy laws mandate data minimization, meaning organizations may only collect personal information that is necessary for the identified purpose. Both the amount and type of data must be limited accordingly. Additionally, organizations are required to implement retention policies that ensure personal information is only kept for as long as needed to fulfill its purpose. Once the purpose is met, the data must be destroyed, erased or anonymized, unless retention is required by law.

Canadian privacy laws impose a reasonableness standard that applies regardless of consent. Organizations may only collect, use or disclose personal information for purposes that a reasonable person would consider appropriate under the circumstances. Privacy regulators apply a four-part test to assess this, notably whether: (1) the organization’s purpose represents a legitimate need/bona fide business interest, (2) the process would be effective in meeting this need, (3) there aren’t any less-invasive ways to achieve the same ends at comparable cost and with comparable benefits, and (4) the loss of privacy is proportional to the benefits. This element adds a layer of accountability that goes beyond consent, ensuring that an organization’s privacy practices are not only lawful, but also minimal and reasonable.

3 – Cross-border transfers

While Canadian laws are not as stringent as the GDPR in this area, U.S. businesses must still be aware of the requirements they must meet before transferring personal information of Canadian customers or employees to the United States.

At the federal level, PIPEDA requires organizations to remain responsible for personal information that has been transferred to a third party for processing, including those located outside Canada. PIPEDA requires organizations to use contractual or other means to ensure a comparable level of protection while the data is being processed. As well, the Office of the Privacy Commissioner’s (OPC) federal guideline explains that, in accordance with the obligation of transparency, organizations must notify the individuals concerned that information is being transferred outside Canada along with the fact that there is a risk foreign authorities may access it.

In Québec, the provincial law explicitly states the requirement of organizations to inform the person concerned of the possibility that the information could be communicated outside Québec and requires organizations to conduct a privacy impact assessment (PIA). The transfer may only proceed if the PIA concludes that the information will receive adequate protection considering the generally-recognized principles regarding the protection of personal information. Furthermore, a written contract is also required to govern the transfer, which is discussed further below in Section 6 – Data Processing Agreements. For more detailed guidance, we invite you to consult BLG’s bulletin on cross-border transfers.

4 – Breaches

U.S. businesses should be aware of Canada’s breach notification obligations. Canadian privacy laws require organizations to report to the competent privacy regulator and notify the individual (and any other organization it believes may be able to mitigate harm) of any breach of security safeguards involving personal information under its control if it is reasonable in the circumstances to believe that the breach creates a real risk of significant harm/risk of serious injury to the individual. Organizations must take reasonable measures to reduce the risk of injury and to prevent new incidents of the same nature. Organizations shall also keep and maintain a record of every breach that has occurred under its control, in accordance with specific regulatory requirements.

5 – Biometrics

With the rise of technologies like facial recognition and voice analysis, privacy regulators have begun to address the unique risks posed by biometric data. At the federal level in Canada, the OPC recently issued a new guidance on protecting privacy in biometric initiatives. The OPC guidance for private-sector organizations provides information on privacy obligations under PIPEDA and best practices for processing biometric information, such as identifying an appropriate purpose, obtaining consent, limiting its collection, use, disclosure, and retention, and issuing appropriate safeguards. BLG has analysed this guidance for you here.

While U.S. businesses should certainly read and comprehend the guidance, it is, nonetheless, their responsibility to ensure they understand all their obligations under applicable laws and regulations that apply to them. For example, privacy laws in Québec impose additional and stricter obligations with respect to biometric information. Organizations wishing to use biometrics are required to disclose this fact to the Commission d’accès à l’information (CAI) prior to implementation if they: (1) verify or confirm the identity using a process that captures biometric characteristics, and/or (2) create a database of biometric characteristics or measurements, in which case, disclosure must be made at least 60 days before the database is put into service.

6 – Data processing agreements

U.S. businesses operating in Canada should be aware of a common legal requirement when contracting with third party service providers involving personal information: the need for a data processing agreement (DPA). When a business engages a third party to process personal information on their behalf, Canadian privacy laws require that a DPA be in place. This agreement, either as a standalone contract or an addendum, ensures that service provider processes personal data in compliance with applicable privacy legislation.

Under PIPEDA, organizations remain responsible for personal information in their possession or custody, even when it is transferred to a third party for processing. To meet this obligation, organizations must use contractual means to ensure a comparable level of protection while the data is being processed. A DPA helps clarify the roles and responsibilities of both parties.

In Québec, DPAs are especially critical as these fall under one of the exceptions to obtaining consent, subject to specific legal requirements. The law requires that a DPA be made in writing and specify certain requirements such as: (1) the measures that the processor must take to protect the confidentiality of the personal information communicated, (2) a prohibition on using the data for any purpose other than fulfilling the contract and a requirement to delete it after the contract ends, (3) an obligation to notify the disclosing party without delay of any violation or attempted violation by any person of any obligation concerning confidentiality, and (4) the disclosing party’s right to conduct any verification relating to confidentiality requirements.

7 – Privacy-by-default

Depending on how a business intends to collect personal information, it should be aware of certain default privacy settings required under Canadian privacy laws, particularly in Québec, though similar principles are reflected in federal reports under PIPEDA.

Québec’s privacy law states that an organization that collects personal information using technology that includes functions allowing the person concerned to be identified, located or profiled must first inform the person of the use of such technology and, more importantly, of the means available to activate the functions that allow for such features. The term “profiling” includes the analyzing of a person’s work performance, economic situation, and health. This means that such functions must be deactivated by default, requiring users to take an affirmative action to signify their agreement to activate those functions. While PIPEDA does not contain an equivalent provision, the OPC has emphasized that technologies involving sensitive information such as precise location typically require express (opt-in) consent under their general consent rules.

In addition, under Québec’s privacy laws, an organization that collects personal information when offering to the public a technological product or service having privacy settings must ensure that those settings provide the highest level of confidentiality by default, without any intervention by the person concerned. This rule does not apply to privacy settings for browser cookies. Although PIPEDA does not contain a specific provision on default settings, the OPC has taken the position that these settings should be set in accordance with the reasonable expectations of individuals.

8 – Enforcement

U.S. businesses should be aware of Canada’s privacy enforcement structure. At the federal level, the OPC oversees compliance with PIPEDA. The OPC has the authority to investigate complaints, conduct audits, and issue reports containing non-binding recommendations. It can also enter into compliance agreements with organizations to encourage corrective action. However, the OPC’s enforcement powers are limited in that they cannot issue direct fines or binding orders. To enforce its findings, the matter must be brought before the Federal Court, either by the OPC or the complainant.

By contrast, provincial regulators have more robust enforcement powers. In Québec, the CAI has all the powers necessary for the exercise of its jurisdiction, which includes making an order it considers appropriate to protect the rights of the parties. There are three types of sanctions that the CAI can impose, notably: (1) an administrative monetary penalty of up to $10 million or 2 per cent of global turnover, (2) a penal penalty of up to $25 million or 4 per cent of global turnover, and (3) punitive damages of no less than $1,000 when the violation is intentional or results from gross fault.

In addition to privacy-specific regulators, the Competition Bureau of Canada plays a complementary role in privacy enforcement where privacy intersects with consumer protection and deceptive marketing practices. For instance, the Bureau in 2020 concluded its first privacy-related settlement with Facebook in which it agreed to pay a $9 million penalty for making false and misleading claims about the privacy of Canadians’ personal information on Facebook and Messenger.

Practical considerations and obligations for commercial transactions

This section outlines the practical considerations and obligations for U.S. businesses during commercial transactions in Canada. As a final note, we highlight four essential privacy and data protection elements to keep top of mind.

1 – NDAs require specific customization

Standard non-disclosure agreements (NDAs) may not meet the legal requirements in provinces like Québec where the law mandates specific language to protect personal information during a transaction. As generic templates often fall short of compliance, legal counsel familiar with the province’s privacy regime should review and tailor NDAs to ensure they reflect legislative obligations.

2 – Privacy due diligence is critical

During the due diligence phase of a transaction, it is essential to identify and assess specific legal privacy requirements. Even if a target organization may have a robust privacy framework, including detailed policies and procedures governing the processing of personal information from customers and employees, a thorough risk and gap analysis based on applicable provincial laws and regulatory guidance must be conducted by local counsel. This review may reveal compliance issues that can either be remediated post-closing or justify the inclusion of additional indemnity provisions in the share or asset purchase agreement.

3 – Post-closing notification obligations

Following a transaction, the acquiring entity may be required to notify affected individuals of changes in the possession or control of their personal information. Notifications must clearly inform individuals of the nature of the change, the new entity’s identity, and how their personal information will be used going forward. This may even trigger a requirement to obtain new informed consent if the purpose differs from those originally disclosed. Local legal advisors play a key role in crafting these communications to ensure they are tailored to the specific groups affected, written in plain language, and compliant with applicable provincial and federal obligations.

4 – Ongoing privacy management post-transaction

After closing, the new entity must promptly address any privacy risks identified during the due diligence process to avoid penalties and reputational damage. The new entity must establish an ongoing privacy management process, including proper training for its privacy officer and all personnel who process personal information. A local lawyer can provide ready-to-use templates and can help adapt existing policies and processes to ensure optimal compliance.

BLG can help

We hope that this article, including the four key privacy points, are carefully considered during your company’s next commercial transaction in Canada.

For tailored guidance, please reach out to BLG’s privacy team. We are here to help you navigate the evolving legal landscape.

Canada extends clean economy ITC filing deadlines

Fri, 06 Mar 2026 00:00:00 Z

Over the past few years Canada has introduced a series of “clean economy” investment tax credits (ITCs) designed to support Canada’s transition towards a net-zero economy by 2050. These new ITCs (described here) represent a major tax policy expenditure by the Canadian government, with tax credit rates as high as 60 per cent of qualifying expenditures.

The general rule for claiming clean economy ITCs in any given taxation year is that the prescribed form must be completed and submitted to the Canada Revenue Agency within the later of (1) one year following that year’s tax return filing due date (generally 6 months after the taxation year-end), and (2) Dec. 31, 2025, with no discretion for the Canada Revenue Agency to accept claims received after that deadline. This time limit may be ready attainable for most clean economy ITC claimants. However, in a number of cases it could be a challenge for taxpayers faced with interpretational uncertainty in understanding the rules and/or practical difficulties in ensuring compliance (in particular with the labour requirements in s. 127.46 of the Income Tax Act (Canada)) to meet this deadline.

In its omnibus legislation to implement various provisions of the federal budget of November 4, 2025, the federal government helpfully included provisions to extend the time in which taxpayers may file their clean economy ITC claims. Specifically, Bill C-15 proposes to amend the following provisions:

for the carbon capture, utilization and storage (CCUS) ITC, s. 127.44(17);
for the clean technology ITC, s. 127.45(3)
for the clean hydrogen ITC, s. 127.48(4);
for the clean technology manufacturing ITC, s. 127.49(3) ; and
for the clean electricity ITC, draft s. 127.491(6).

In each case, the amendment extends the deadline for filing clean economy ITC claims for any particular taxation year to the later of (1) one year after the tax return filing due date for that year, and (2) Dec. 31, 2026. For each particular clean economy ITC, the proposed amendment is applicable retroactively to the date on which expenditures for that particular clean economy ITC first became ITC-eligible. While this measure will be helpful for claimants of all clean economy ITCs, it will likely be of greatest assistance for taxpayers claiming the CCUS ITC, since that particular clean economy ITC has the earliest eligibility date (Jan. 1, 2022).

With Bill C-15 having cleared the House of Commons and now before the Senate, the enactment of this measure would seem fairly certain. The government is to be commended for taking action to give taxpayers more time to complete and verify their clean economy ITC claims, which is in the interests of both taxpayers and tax administrators.

Permanent establishment and remote work: OECD's 2025 update and your organization

Fri, 06 Mar 2026 00:00:00 Z

Since COVID-19, remote and hybrid work have permanently reshaped where people work, leading to real tax consequences for employers. On Nov. 19, 2025, the Organisation for Economic Co-operation and Development (OECD) released updates to the Model Tax Convention and its Commentary, introducing a clearer framework for assessing when a remote employee's home office may constitute a "permanent establishment" (PE) of their employer in another jurisdiction. Canadian organizations with cross‑border workforces may wish to review their existing structures and policies in light of these updates.

We note that the updates relating to the establishment of a PE are not changes to the treaty provisions themselves but rather to the Commentary.

What you need to know

The new two-part test

The updated Commentary to Article 5 introduces a structured analytical framework that focuses on two key factors, both of which are highly relevant in determining whether a fixed place of business PE exists.

First, the employee must work from a home office — or other non-traditional location — in a foreign country for at least 50 per cent of their total working time over any rolling 12-month period.
Second, there must be a genuine commercial reason for that person being physically present in that country, meaning their presence actually advances the employer's business there. For example: active client engagement, hands-on supplier management, or a role that requires meaningful local market participation.

Where either factor is absent, a fixed place of business PE will generally not arise, although the analysis remains fact‑specific.

What counts as a "commercial reason"?

The updated Commentary is explicit that employee preference, talent retention goals, and office cost savings do not qualify as commercial reasons. Nor do occasional visits to clients — the OECD commentary specifically notes that quarterly meetings, without more, would generally fall short of the standard. What does qualify is presence that materially facilitates the employer's business in that jurisdiction: regular local client interaction, supplier oversight, time zone coverage that meaningfully improves service delivery, or collaboration with local institutions.

However, even where no commercial reason exists, the PE analysis is not automatically closed. All relevant facts and circumstances must still be weighed, and other indicators could nonetheless support a PE finding.

Dependent agent PE

It should also be noted that the 2025 update does not alter the dependent agent PE analysis, which remains a separate and, in many cases, more significant source of PE risk where employees are habitually involved in contract negotiation or conclusion on behalf of their employer in other jurisdictions.

Takeaway: What this means in practice

The updated Commentary can impact certain arrangements for cross-border employers.

Historically, where, for example, a U.S. employer had Canadian employees working from home in Canada performing a sales function, the prevailing advice was that those employees would not, in and of themselves, create a Canadian permanent establishment, provided the employer did not have the home workspace at its disposal.

Following the Nov. 19, 2025 update to the OECD Commentary, this conclusion is no longer as robust. Where a Canadian‑based employee performs core sales activities from home on a regular and sustained basis, and where there is a commercial reason for those activities to be carried on in Canada, the risk that the home workspace could be viewed as constituting a fixed place of business permanent establishment has increased, even if the formal indicia of employer control over the workspace have not materially changed.

For other organizations, the new framework confirms that cross-border employees working remotely for personal reasons without any real local business purposes should not inadvertently create greater PE exposure than under previous guidance. Companies that maintain small foreign subsidiaries for just one or two employees may also find it worth revisiting whether those entities are still necessary.

While OECD Commentary is not binding on Canadian courts, it is a well-established interpretive tool in applying Canada's tax treaties. Further, if the Canada Revenue Agency (CRA) accepts and assesses taxpayers on the principles in the updated Commentary, deviation from those rules could result in costly dispute procedures before a court will evaluate the applicability of the updated Commentary in Canada. As of the date of publication, the CRA has not issued a formal administrative statement expressly confirming whether it will adopt or apply the revisions to the OECD Commentary on PEs. However, Canada has not filed a reservation or observation objecting to the updates to the commentary on PEs. Historically, Canadian courts and the CRA have treated OECD Commentary as a persuasive, though not determinative, aid to treaty interpretation.

Organizations should use this update as an opportunity to audit their cross-border remote work arrangements, build rolling 12-month work-location tracking into their HR and tax processes, and document the business rationale for any arrangements that approach or exceed the 50 per cent threshold.

BLG can assist

BLG's Tax Group and Labour and Employment Group regularly advise Canadian and multinational organizations on cross-border tax structuring, permanent establishment risk, and global mobility matters. If you have questions about how these changes apply to your workforce, please reach out to a member of one of those groups.

Hold the housewarming party: Three FHSA considerations before making a down payment

Thu, 05 Mar 2026 00:00:00 Z

The First Home Savings Account (FHSA) emerged as a federal policy response to the growing housing affordability challenges faced by first time home buyers, particularly younger Canadians. Legislation establishing the FHSA received royal assent in late 2022, formally embedding the account into Canada’s registered savings framework.

Since its launch, the FHSA has been administered by the Canada Revenue Agency (CRA) who has provided guidance via interpretive updates and technical clarifications. A review of these interpretive documents provides insight into some of the planning that can be considered when leveraging the tax-free nature of the FHSA.

Previous BLG articles relevant to the subject of FHSAs include Canada’s First Home Savings Account and Mr. Grenon’s legendary RRSP and its implications for Registered Plan Trustees.

1. Combination with Home Buyers’ Plan (HBP)

The FHSA was first introduced in the 2022 federal budget and included FHSAs as a measure of supporting first-time home buyers and to encourage tax-free savings for a down payment on a newly purchased home.

The original draft income tax legislation (August 9, 2022), provided that although the HBP would continue to be available, an individual could not utilize both the HBP and the FHSA for the same purchase. This effectively resulted in a taxpayer having to make a choice as to which approach would be best for their particular circumstances.¹ Later legislative amendments removed those restrictions, which no longer appear in the Income Tax Act (ITA).²

Under the currently enacted version of the legislation an individual can withdraw amounts under both the HBP and FHSA for the same home purchase. This intention has been made clear in CRA Doc No 2023-0965261E5-T (unofficial translation), in which the CRA acknowledges:

Parliament's intent was to allow an individual to benefit from both the FHSA and the HBP for the same qualifying home. When the FHSA measures were announced in the 2022 Budget, it was announced that it would not be possible for an individual to make both a FHSA withdrawal and a Registered Retirement Savings Plan (RRSP) withdrawal under the HBP for the acquisition of the same qualifying home. However, this restriction has been dropped and does not appear in the Act.³

The revised FHSA framework is better aligned with its core objective: giving first-time home buyers access to more tax-free funds, while also offering flexibility through additional tax-deductible contributions.

2. Double deduction strategy

The ability to access both the HBP and the FHSA raises a unique situation where a double tax deduction can be utilized. More specifically, a taxpayer can withdraw funds from an RRSP under the HBP, contribute those same funds to an FHSA (subject to FHSA contribution limits and conditions), and then make a qualifying FHSA withdrawal tax-free to purchase a home. The funds contributed to the RRSP receive a deduction when they are first contributed to the RRSP, and those same funds when withdrawn under the HBP and deposited into an FHSA will be eligible for another deduction. The individual could then withdraw these amounts from his or her FHSA tax-free for the purpose of acquiring a qualifying home, subject to satisfying conditions under the ITA.⁴

The CRA has confirmed the viability of this strategy within CRA Views Doc 2023-0965261E5-T, which states (translated):

It is also possible for an individual to use amounts withdrawn from his or her RRSP under the HBP to contribute these amounts to a FHSA when all the conditions for the application of the HBP and the FHSA are otherwise met. In such a case, the individual could then withdraw these amounts from his or her FHSA for the purpose of acquiring the qualifying home, provided that all the conditions are met.⁵

This effectively increases the total pool of tax advantaged capital available for a first home purchase beyond what either program could achieve on its own and allows an additional tax deduction without the need to contribute (or have available cash) to contribute to the FHSA. The FHSA qualifying withdrawal is permanently tax‑free but note that HBP repayment obligations remain fully applicable and are not altered by this strategy.

The CRA statements provide comfort for advisors and taxpayers that the double deduction strategy is not abusive, is consistent with the legislative purpose under the ITA and is unlikely to be challenged solely on anti‑avoidance grounds if statutory conditions are met.

3. Timing of marriage or common-law partnership

Opening an FHSA

The marital status of a taxpayer at the time of opening or making a qualifying withdrawal under an FHSA is important.

An FHSA generally has a 15-year window for contributions and making a qualifying withdrawal. An individual’s marital status can change over the course of the plan, and particularly, a spouse’s (or common-law partner's) ownership of a home can affect the tax-free nature of a qualifying withdrawal or eligibility for opening an account.

Individuals who are about to enter into a spousal or common-law relationship should consider opening an FHSA if they qualify, even if they do not have immediate plans to purchase a qualifying home. This is because the home ownership status of a spouse or common law partner will affect FHSA eligibility.

Only a qualifying individual can open an FHSA. A qualifying individual is an individual who is a resident of Canada, at least 18 years of age and a first-time home buyer. Specifically, an individual is considered a “first-time home buyer” only if they did not at any time in the current calendar year or the past four calendar years inhabit as a principal place of residence a qualifying home that was owned, whether jointly with another person or otherwise, by the individual or owned by their spouse or common-law partner at the time the FHSA is opened.

The definition of “qualifying individual” prevents an individual from opening an FHSA after they have entered into a spousal or common-law relationship if their spouse or common-law partner already owns a housing unit, regardless of whether that individual has any ownership interest in that housing unit.

It is therefore advantageous to open an FHSA before this time as the holder of an FHSA can later roll their FHSA into their RRSP tax-free without impacting unused RRSP deduction room or unused FHSA participation room.⁶ An individual may transfer property from their FHSA to a RRSP (or Registered Retirement Income Fund (RRIF)) without any immediate tax consequences, as long as it is a direct transfer and there is not an excess FHSA amount.⁷

This effectively allows an additional $40,000 contribution room for an individual’s RRSP, so long as they do not make a withdrawal (or qualifying withdrawal) for 15 years. The amounts contributed to the FHSA reduce the taxable income of the individual, similar to an RRSP, which allows an immediate tax-deferral advantage.

Contributing to an FHSA

Opening the account prior to entering into marriage or a common-law relationship does not taint an FHSA account. So long as an individual opened an FHSA before residing with their spouse or common-law partner (in a home owned by the spouse or common-law partner), they can continue to contribute to their FHSA and deduct contributions from their taxable income, reducing the tax paid in the year the deduction is claimed. This offers meaningful upfront tax savings even if the purchase of a qualifying home is not imminent.

Furthermore, an FHSA holder who has entered into a spousal or common law relationship with a homeowner after opening the FHSA can, subject to the limits within the ITA, still make a “qualifying withdrawal” from their FHSA to purchase a housing unit in which both they and their spouse will reside. Contributions and a tax-free qualifying withdrawal can still be made long after an FHSA holder has regularly resided with a spouse or common-law partner. This approach may be particularly important for young Canadians who are looking to purchase a new home together.

Although this position has not been explicitly confirmed by the CRA, it has been acknowledged that “the “qualifying withdrawal” definition does not consider the home ownership status of the FHSA holder’s spouse or common law partner.”⁸ Further, given the context, it would be an absurd result to allow the opening of an FHSA account but then also prevent contributions.

This publication is not legal or financial advice and provides general information only. If you have any questions about the FHSA, please feel free to reach out to your BLG lawyer or any of the key contacts listed below.

The author would like to thank Robert Rizzuti for his contributions to this article.

Modern slavery compliance in Canada: Essential guidance for the 2026 reporting landscape

Wed, 04 Mar 2026 00:00:00 Z

Canada's modern slavery regime operates through two distinct but interconnected mechanisms: the Fighting Against Forced Labour and Child Labour in Supply Chains Act (the Supply Chains Act), which sets reporting requirements, and the import ban on goods produced in whole or in part with forced or child labour. Both aspects are evolving, and as the third reporting cycle approaches, businesses should pay close attention to the shift in expectations and regulatory focus affecting both their annual reporting duties and their import compliance obligations. The upcoming reporting deadline under the Supply Chains Act is May 31, 2026.

Key takeaways

What are the most critical changes for 2026 compliance? While the Supply Chains Act itself does not prescribe a baseline compliance standard or require goal setting, Public Safety Canada (PSC) in its guidance now expects entities to demonstrate measurable progress year-over-year and set specific short, medium, and long-term goals, moving beyond basic reporting to active due diligence frameworks. Coupled with other developments such as a shifting market baseline, organizations should carefully assess where their existing frameworks fall on the spectrum in planning their due diligence frameworks moving forward.
How did enforcement escalate in 2025? Parallel to PSC reporting requirements evolving, Canada Border Services Agency (CBSA) detention actions related to forced and child labour jumped to nearly 50 shipments in 2025 compared to minimal enforcement in previous years, while the government committed $617.7 million over five years for enhanced border enforcement capacity.
What new legislative requirements may affect imports? Bill C-251 proposes presumptive import bans on goods from designated countries and entities, requiring importers to prove supply chain compliance before entry. However, Bill C-251 is not yet in force and remains under parliamentary consideration.
Which compliance standards now represent market baseline? 96.6 per cent of reporting entities have embedded responsible business conduct into management systems, while 84.1 per cent maintain formal due diligence processes, signaling a shift in market practices.
When must organizations submit their next reports? The third reporting deadline is May 31, 2026, with PSC launching new assessment tools by March 31, 2026, to evaluate compliance quality.

Quick refresher: Understanding the basics of Canada's modern slavery regime

Federal Financial Institutions Legislative and Regulatory Reporter – January 2026

Tue, 03 Mar 2026 00:00:00 Z

The Federal Financial Institutions Legislative and Regulatory Reporter provides a monthly summary of Canadian federal legislative and regulatory developments of relevance to federally regulated financial institutions. It does not address Canadian provincial financial services legislative and regulatory developments. In addition, purely technical and administrative changes (such as changes to reporting forms) are not covered.

January 2026

Published	Title and Brief Summary	Status (if applicable)
Office of the Superintendent of Financial Institutions (OSFI)
January 29, 2026	Consultative Document on Credit Risk Management OSFI is seeking early stakeholder input on the Credit Risk Management Guideline (CRM Guideline) that it is developing, and it has issued a consultative document for this purpose. OSFI intends that the CRM Guideline: Strengthen credit risk management of all exposures at federally regulated financial institutions by applying international best practices for lending, account and portfolio management and addressing areas where there may be gaps in existing regulatory guidance. Promote greater regulatory and supervisory efficiency by consolidating and clarifying OSFI’s existing credit risk-related expectations, including in key credit segments like real estate secured lending (RESL) and wholesale credit. Modernize OSFI’s guidance to enable agile responses to emerging credit risk areas, such as non-bank financial intermediation and sound counterparty credit risk management.	Comments are due July 29, 2026.
January 29, 2026	Consultative Document on a Proposed Senior Leader Regime OSFI is in the process of reviewing its suitability and accountability expectations for senior leaders of federally regulated financial institutions, and it is seeking input from stakeholders. OSFI considers senior leaders to be members of the board of directors and senior management, including the “c-suite,” heads of oversight functions, heads of business platforms, or anyone else reporting directly to the CEO or the board. OSFI is looking to modernize the regime, with particular emphasis on accountability (the clear assignment of senior leader responsibilities, oversight, and an obligation to be answerable for decisions, conduct, and outcomes) within institutions. While federal statutes and OSFI guidance incorporate elements of suitability and accountability, OSFI considers that the rapidly evolving landscape requires stronger measures, especially with respect to accountability, to complement the existing framework.	Comments are due October 31, 2026.
January 29, 2026	Liquidity Adequacy Requirements (LAR) – Guideline (2026) OSFI has issued Liquidity Adequacy Requirements (LAR) – Guideline (2026) for banks, bank holding companies and trust and loan companies. The liquidity metrics set out in this guideline provide the framework within which the Superintendent assesses whether a bank, a bank holding company or a trust and loan company maintains adequate liquidity pursuant to the Bank Act and Trust and Loan Companies Act. For this purpose, the Superintendent has established two minimum standards: the Liquidity Coverage Ratio (LCR) and the Net Stable Funding Ratio (NSFR). These standards – in conjunction with additional liquidity metrics where OSFI reserves the right to apply supervisory requirements as needed, including the net cumulative cash flow (NCCF), the operating cash flow statement (OCFS), the liquidity monitoring tools and the intraday liquidity monitoring tools – when assessed as a package, provide an overall perspective of the liquidity adequacy of an institution. The LAR Guideline should be read together with the Basel Committee on Banking Supervision's (BCBS) Principles for Sound Liquidity Risk Management and Supervision and OSFI's Guideline B-6: Liquidity Principles.	Effective May 1, 2026.
January 29, 2026	Guide to Administrative Monetary Penalties OSFI has issued a guide, aimed at federally regulated financial institutions and their senior management, which provides an overview of select provisions of the legislative framework for the administrative monetary penalties (AMPs) set out in sections 24 to 37.01 of the Office of the Superintendent of Financial Institutions Act, and information on the AMP assessment process. It outlines OSFI’s AMP procedures and its approach to assessing the statutory penalty criteria.	Published January 29, 2026.
January 29, 2026	Deferral of the Public Consultation on Guideline B-15 Disclosure Expectation for Financed Emissions Related to Off-Balance Sheet Assets under Management OSFI has issued a letter that notes that, on January 8, 2026, it paused the planned public consultation on the disclosure expectation for financed emissions related to off-balance sheet assets under management (AUM) under Guideline B-15. In connection with this pause, OSFI will also be deferring the implementation for this expectation to a future date. It does note that it still expects financial institutions to quantify and manage their climate-related transition risks, including for off-balance sheet AUM.	Published January 29, 2026.
January 8, 2026	Postponement: Consultation on Revised Guideline B-12 on Interest Rate Risk Management OSFI has stated, on its page Modernizing policies, guidance, and supervision for regulatory efficiency, that it is postponing its consultation on revised Guideline B-12 on Interest Rate Risk Management, which will be rescheduled for a later date.	Published January 8, 2026.
January 8, 2026	Climate Risk Forum – Winding-Down OSFI will wind down its Climate Risk Forum. OSFI has indicated that this step reflects the sector's growing maturity, streamlines engagement, and allows OSFI to focus on core supervisory priorities while maintaining clear expectations through existing guidance.	Published January 8, 2026.
Bank of Canada
January 19, 2025.	Retail Payments Supervision: How to Complete an Annual Report: A Step-by-Step Guide Annual reporting by payment service providers (PSPs) under the Retail Payment Activities Act will be due on March 31, 2026. Annual report requirements are laid out in section 21 of the Act and in sections 18 and 19 of the Retail Payment Activities Regulations. To assist PSPs in their preparation, the Bank of Canada has issued a guide to completing an annual report. It explains the questions PSPs will need to answer in PSP Connect and helps identify the documents and information needed to complete and submit the annual report.	Published January 19, 2025. Annual reports are due March 31, 2026.
Bank for International Settlements (BIS)
January 6, 2026	Implementation of the Principles for Effective Risk Data Aggregation and Risk Reporting (BCBS 239 Principles) The Basel Committee on Banking Supervision has issued a newsletter that summarizes key themes and challenges related to banks' risk data aggregation and risk reporting practices (RDA). It does not represent supervisory guidance or expectations but is for informational purposes only. Key themes of the newsletter include: Adapting to a changing operating environment; Governance and data; Addressing data challenges; Cross-border implementation; Leveraging emerging technologies and compensating controls.	Published January 6, 2026.
Financial Stability Board (FSB)
January 21, 2026	Good Practices for Crisis Management Groups (Revised Version) In 2021, FSB published a practices paper aimed at promoting good practices for Crisis Management Groups (CMGs) of Global Systemically Important Banks (G-SIBs). CMGs have been in place for over 10 years as part of the post global financial crisis coordination infrastructure. FSB’s Key Attributes of Effective Resolution Regimes for Financial Institutions set out that home and key host authorities of all G-SIBs should maintain CMGs with the objective of enhancing preparedness for, and facilitating the management and resolution of, a cross-border financial crisis affecting the G-SIBs. Pursuant to the Key Attributes, CMGs focus on a broad range of crisis management issues, including but not limited to crisis management-related information sharing, recovery and resolution planning, and the assessment of resolvability of a particular G-SIB. This new version of the practices paper includes a supplementary note on implementation observations following the 2023 bank failures on communication with host authorities not members of a CMG.
International Association of Insurance Supervisors (IAIS)
	IAIS publishes its Roadmap 2026-2027 IAIS has published its Roadmap 2026-2027, which outlines its strategic priorities and workplan for the next two years. Guided by the Strategic Plan 2025-2029, the Roadmap reflects the IAIS’ commitment to addressing structural shifts in the insurance sector, tackling climate-related risks and natural catastrophe protection gaps, adapting to increasing digital innovation and cyber risks and supporting the consistent implementation of global standards. Its planned activities are organized according to IAIS’ core objectives: Monitor and respond to key risks and trends in the insurance sector; Set and maintain globally recognized standards for supervision that are effective and proportionate; Support members by sharing good supervisory practices, promoting understanding of supervisory issues and facilitating capacity building; Assess comprehensive and globally consistent implementation of global standards.

Disclaimer

This Reporter is prepared as a service for our clients. It is not intended to be a complete statement of the law or an opinion on any subject. Although we endeavour to ensure its accuracy, no one should act upon it without a thorough examination of the law after the facts of a specific situation are considered.

To view the Reporter for previous months, please visit our Banking and Financial Services publications page.

BC Budget 2026: PST expansion increases costs for commercial real estate

Mon, 02 Mar 2026 00:00:00 Z

Background

Subject to Royal Assent of Bill 2 and final regulations, effective Oct. 1, 2026, British Columbia will expand the provincial sales tax (PST) to apply to several professional services commonly used in commercial real estate. As a result, buying, selling, managing, and developing commercial properties, such as office, retail, and industrial buildings, will generally become more expensive across B.C.

Analysis

What changed

BC Budget 2026 expands the scope of PST to cover several professional services that were previously not subject to this tax. While the PST rate itself is not changing, the tax will apply to a wider range of services that businesses regularly rely on.

In practical terms, this means many professional service fees that were previously paid without PST will now include PST starting Oct. 1, 2026.

Services newly subject to PST (Effective Oct. 1, 2026)

PST will apply at rate of 7 per cent to the following services:

Non-residential real estate services, including:
- commissions related to buying and selling non-residential real estate;
- trading services;
- rental property management services; and
- strata management services.
Architectural, engineering, and geoscience services. Note: PST will apply to only 30 per cent of the purchase price of those services, resulting in an effective PST rate of 2.1 per cent on the full fee.
Accounting and bookkeeping services.
Security and private investigation services.

Businesses that provide these services will be required to register for PST (if they are not already registered), and to collect and remit PST on their fees as well as disbursements billed to clients, unless specific exemptions apply.

Legal framework

These changes are implemented through Bill 2, the Budget Measures Implementation Act, 2026, which amends the Provincial Sales Tax Act (subject to Royal Assent). The Minister of Finance has also issued administrative guidance in Notice 2026-001, confirming the scope of taxable services and registration obligations.

Practical commercial real estate impacts

Although PST is charged by service providers, the added costs are often passed on to property owners, tenants and in some cases consumers.

Transaction costs

PST will now apply to brokerage commissions on commercial real estate transactions, increasing closing costs for purchasers and vendors.
Whether PST applies may depend on when services are performed, not necessarily when agreements are signed or invoices are issued. For example, brokerage contracts entered into in 2025-2026 but completed after Oct. 1, 2026 may still attract PST.

Operating costs

Property management and strata management fees will be subject to PST. Whether tenants ultimately bear these costs will depend on the wording of their lease agreements.

Development costs

Although architectural, engineering, and geoscience services are only partly taxable, the effective PST may increase soft costs on development projects.

What does not change

For clarity, the PST rate remains 7 per cent, and residential real estate commissions are outside the scope of this expansion.

What is still unclear

How PST will be allocated between landlords and tenants under existing net lease provisions.
Whether further exemptions or clarifications will be introduced by regulation.
How PST will apply to mixed-use properties where services relate to both residential and non-residential components.

What you can do now

Budget for added tax on listed services for work performed on or after Oct. 1, 2026.
Review contracts and leases to see who pays service costs and taxes (especially in net leases and management agreements).
Consider timing for major projects or transactions where professional fees are significant.
Service providers: get ready to register, update invoicing, and adjust pricing so you can charge and remit PST where required.

This publication is of a general nature only. If you have any questions or require advice regarding specific transactions or circumstances, please contact one of the authors listed below.

Beyond BC: Court of Appeal upholds broad reach of provincial privacy laws

Mon, 02 Mar 2026 00:00:00 Z

BC privacy commissioner’s findings that facial recognition software company, Clearview AI, contravened privacy laws upheld on appeal

On Feb. 18, 2026, the Court of Appeal for British Columbia issued its decision, Clearview AI Inc v British Columbia (Information and Privacy Commissioner), 2026 BCCA 67 (the BC Appeal Decision) in which it upheld the Office of the Information and Privacy Commissioner of British Columbia’s (the Commissioner) decision (Order P21-08) (the OIPCBC Decision)¹ that U.S.-based Clearview AI Inc. (Clearview) had contravened BC’s Personal Information Protection Act (PIPA) through its facial recognition tool.

This appeal follows the Supreme Court of British Columbia’s highly-anticipated December 2024 decision², which also upheld the Commissioner’s decision on judicial review, and reaffirms the following key principles of Canadian privacy law:

The collection of personal information of British Columbians is likely to create a real and substantial connection between a foreign organization’s activities and the province, meaning that PIPA will be constitutionally applicable to that foreign organization.
- This is particularly the case where an organization’s business model depends on the systematic collection of personal information about individuals from online sources, even where an organization has ceased doing business in BC.³
Due to the quasi-constitutional status of privacy laws, it is reasonable for privacy commissioners to narrowly interpret exemptions (such as the “publicly available” exemption) to the requirement to obtain consent from individuals for the collection, use, or disclosure of their personal information.
- The exemptions to consent under PIPA do not create a competing “dual rights” regime where the rights of individuals to the protection of their personal information ought to be balanced with the rights of organizations to collect and use personal information for reasonable purposes. As the Court notes, “the legislation does not aim to balance competing rights, it balances a need with a right.”⁴
Regardless of whether an exemption to the general consent requirement applies, an organization’s collection, use, and disclosure of personal information must still be for purposes that a reasonable person would consider appropriate in the circumstances.
- This overarching “reasonableness” requirement is viewed by Canadian privacy regulators as a critical gateway under applicable privacy laws and a legal boundary that protects individuals from inappropriate data practices of companies, separating those legitimate information management practices that organizations may undertake in compliance with the law, from those areas in which organizations cannot venture, otherwise known as “No-go zones”.

Background

Clearview provided facial recognition services to third parties, such as law enforcement, other government agencies and private sector entities, allowing them to match faces to the images contained within Clearview’s searchable biometric database. Clearview developed its facial recognition tool by “scraping” billions of facial images of individuals – including individuals in Canada – without their consent from various online sources, such as social media platforms.

In February 2021, following a joint investigation, the Commissioner, along with the federal, Alberta and Québec privacy commissioners, issued a report that found that Clearview had contravened Canadian privacy laws and recommended that Clearview cease offering its facial recognition services to clients in Canada, cease collecting, using, and disclosing personal information of individuals in Canada, and delete personal information of individuals in Canada (the Report)⁵. Notably, the Canadian privacy commissioners concluded in the Report that the “publicly available” exemption to the requirement to obtain an individual’s consent for the collection of their personal information did not apply to Clearview’s activities.

When Clearview refused to comply with the Report’s recommendations, the Commissioner issued an order (the Order) to enforce the recommendations as they apply to individuals in British Columbia.

Clearview applied for judicial review of the OIPCBC Decision and similar orders made by the Alberta and Québec privacy commissioners.⁶ Please see BLG bulletins The extraterritorial reach of B.C.’s privacy laws: Court upholds privacy commissioner’s order against foreign AI company and Alberta judgment opens the door to the legitimization of data scraping and AI model training for more details on the judicial review decisions of the Supreme Court of British Columbia and the Court of King’s Bench of Alberta.

The Appeal Court’s decision

Clearview argued that PIPA could not apply to Clearview as a matter of constitutional law, and that it did not need to obtain the consent of individuals whose facial images it collected from online sources. Clearview also argued that the Order was unnecessary, unenforceable and/or overbroad.

The Court concluded that PIPA is constitutionally applicable to Clearview as there is a real and substantial connection between Clearview and BC Even though Clearview had ceased its marketing activities in B.C. in July 2020, it continued to acquire facial images of individuals in BC after that time.

The Court emphasized that when assessing whether a real and substantial connection exists, factors such as physical location of content providers, servers and end users, which were important in historical cases, are less important today due to the evolution of the internet. Rather, the Court conducted a contextual analysis of the relationship between B.C., the subject matter of PIPA, and Clearview and determined that “BC’s relationship to Clearview is substantial, not incidental.”⁷ The key factual basis for this finding was that Clearview’s services depended on its ability to collect facial images from individuals around the world to build its database, and that because it was unable to exclude BC from its scraping activities, that meant that “Clearview’s access to BC (and every other jurisdiction) is essential to its operation.”⁸ The Court also commented on the quasi-constitutional nature of the right to personal privacy:

“Clearview conflates the right to personal privacy with PIPA when it submits that “[t]he importance of provincial legislation is not a basis to expand that legislation’s reach beyond provincial borders”. The right to personal privacy is not coextensive with PIPA; PIPA is simply one of many legislative and common law mechanisms through which protection of personal privacy is achieved. The importance of the public interest in protecting that fundamental right is highly relevant in the sufficient connection analysis.”⁹

And further that:

“Clearview’s position that PIPA is constitutionally inapplicable to it means that it, and any other company that acquires personal information on the internet using a global search engine, would be immune from domestic privacy laws. This would significantly compromise the ability of jurisdictions such as BC to protect personal information on the internet. In light of this, I consider Clearview’s relationship to the subject matter of PIPA also militates in favour of a sufficient connection.”¹⁰

Further, the Court held that the Commissioner did not unreasonably interpret and apply PIPA in concluding that: (i) the “publicly available” exemption to consent did not apply to Clearview’s activities, and (ii) Clearview did not have a reasonable purpose for its collection, use, and disclosure of personal information. The Court acknowledged that while the OIPCBC Decision did not address Clearview’s argument that PIPA infringed its freedom of expression under the Canadian Charter of Rights and Freedoms (this argument was key in the judicial review decision of the Court of King’s Bench of Alberta¹¹), this did not make the Commissioner’s decision unreasonable.

Finally, the Court held that the Commissioner’s remedial Order was reasonable and enforceable. Clearview’s appeal was dismissed.

Conclusion

The British Columbia Court of Appeal’s decision in this case provides a clear and forceful affirmation of the broad territorial and substantive reach of BC’s PIPA. Organizations operating in digital and data-driven environments should take careful note: the absence of a physical presence in British Columbia will not insulate a business from the application of provincial privacy laws where there is a real and substantial connection to the province.

In particular, companies whose business models rely on the large-scale collection of personal information from online sources—especially through automated scraping or AI-enabled data aggregation—face heightened regulatory scrutiny. The Court’s reasons underscore that (i) consent exceptions will be interpreted narrowly, (ii) the “publicly available” exemption does not create a parallel right to collect personal information at scale, and (iii) the overarching “reasonable purposes” requirement functions as a meaningful legal boundary, prohibiting data practices that fall into regulatory “no-go zones,” even where technical arguments regarding consent may be advanced.

The decision also reinforces the quasi-constitutional status of privacy rights in Canada and signals judicial deference to privacy regulators’ contextual and purposive interpretations of their home statutes. For multinational organizations, this ruling confirms that global data strategies must be assessed against local privacy frameworks, and that reliance on the borderless nature of the internet will not defeat domestic enforcement efforts.

In light of this evolving jurisprudence, organizations should proactively review their data sourcing practices, AI training methodologies, consent frameworks, and cross-border compliance strategies to ensure alignment with Canadian privacy laws. The Clearview decisions collectively represent a strong statement from Canadian courts: innovative technologies and global business models must operate within clearly defined legal limits designed to protect individuals’ fundamental privacy rights.

For more information on how our team can assist, please contact the individuals below.

Extreme circumstances call for extreme measures: NL’s pandemic travel restrictions upheld by SCC

Fri, 27 Feb 2026 00:00:00 Z

In a decision released Feb. 13, 2026, the Supreme Court upheld a province’s ability to impose inter-provincial travel restrictions in times of crisis (Taylor v Newfoundland and Labrador, 2026 SCC 5).

In May 2020, at the start of the COVID-19 pandemic, Nova Scotia resident Kimberley Taylor was denied entry to Newfoundland and Labrador (NL), where the rest of her family grieved the sudden death of her mother. Shortly before NL’s Chief Medical Officer of Health had ordered that non-residents were prohibited from entering the province, with only limited exceptions. Although Ms. Taylor was granted an exemption authorizing her entry 10 days later, she along with the Canadian Civil Liberties Association (CCLA) sought a declaration that the travel restrictions unjustifiably infringed her rights under s. 6(1) and 6(2) of the Charter of Rights and Freedoms, which provide for mobility rights. It was the first time the courts were asked to consider whether s. 6 guarantees a right of movement simpliciter—the right to travel freely within Canada for any purpose.

Key takeaways

Sections 6(1) and 6(2) guarantee Canadian citizens and permanent residents the right to travel freely throughout Canada, including across provincial borders. This means that restrictions that are more than trivial—laws that prevent free movement, or which make movement contingent on government approval (such as the exemptions at issue), will infringe s. 6.
Travel bans and other significant restrictions on mobility will generally not be justifiable in a free and democratic society. However, where travel restrictions are part of a comprehensive government response to a crisis, including restrictions designed to save lives and protect the health of a vulnerable population, they may be able to pass scrutiny under the Oakes test.
The purposive approach remains central to Charter interpretation, which is a unique exercise from ordinary statutory interpretation. The analysis starts with a consideration of the underlying interests the provision is designed to protect before considering the text of the provision and other context. Courts must interpret a Charter provision in a manner that best protects those underlying interests. Where the provision is capable of more than one such interpretation, the Court should favour the broadest, most liberal interpretation.
The well-established 3-step methodology applicable to bilingual interpretation of legislation—where the narrower shared meaning between the English and French versions is preferred—does not apply in the Charter context. Instead, the interpretive approach must follow the same purposive approach as all Charter interpretation. A purposive approach to bilingual Charter interpretation requires courts to select whichever reading better protects the right, which will generally be the broader of the two readings.
The precautionary principle adopted in the environmental context—whereby the lack of full scientific certainty should not be used to justify inaction in the face of a threat of serious or irreversible harm—is not a freestanding principle of the s. 1 analysis. However, the concerns underlying the precautionary principle already underpin the s. 1 Oakes test. That test is flexible and considers the context of the state action, according the government significant deference on complex policy issues, including where the evidence is inconclusive.

The decisions below

The application judge at the Supreme Court of Newfoundland and Labrador canvassed the jurisprudence regarding s. 6 of the Charter and determined that the question before him—whether s. 6 guarantees a right to travel across provincial borders—was one of first instance. He concluded that s. 6(1) but not s. 6(2) guaranteed Canadian citizens a right to travel across provincial borders. He held that the travel restrictions infringed Ms. Taylor’s right to mobility under s. 6(1), but that the infringement was justified under s. 1, concluding: “In the circumstances of this case Ms. Taylor’s right to mobility must give way to the common good.”

Ms. Taylor and the CCLA appealed. Before the appeal was heard, the travel restrictions were repealed. Although both the appellants and the province urged the Court of Appeal to proceed, the Court declined to decide the appeal on the basis that it was moot.

The Supreme Court interprets section 6 purposively and broadly

The majority confirms a purposive approach to bilingual Charter interpretation

Justices Karakatsanis and Martin, writing for the majority (with Côté, O’Bonsawin and Moreau JJ) set out the purposive approach to Charter interpretation—an approach that is distinct from ordinary statutory interpretation. This approach starts by examining the interests protected by the Charter provision at issue. The Court then must consider the broader context, including the character and objects of the Charter more broadly; the text of the Charter provision, including any headings; the history of the Charter right; analogous international and comparative law; interpretation of any related Charter rights and freedoms; the drafting history of the Charter provision; and any other relevant context. Then, taking all of these sources of information into account, the Court must interpret the provision to provide the most generous protection to the underlying interests. This approach differs from the usual approach to statutory interpretation, where the analysis starts with the plain meaning of the text before considering context.

The majority also confirmed that this same purposive approach applies to bilingual interpretation of Charter rights. The Court rejects the well-established 3-step Daoust methodology for bilingual interpretation of legislation as inapplicable in the Charter context. Under the Daoust methodology, the Court gives priority to the narrowest area of overlap between the English and French versions of the statutory text on the basis that this will be best reflective of legislative intent. In contrast, Charter interpretation must start with a broad, liberal, and purposive reading of the text. Both the English and French versions are authoritative and must be read together to give colour and content to the interests protected and the purpose of the right. Where the two versions cannot be read harmoniously, the Court must select the reading that better protects the right, which will generally be the broader of the two.

The majority grounds a right of mobility simpliciter in both sections 6(1) and 6(2)

The majority applies this purposive approach to interpreting the scope of protection of mobility rights in s. 6 of the Charter. The majority identifies twin purposes of s. 6 working in harmony—section 6 “is designed to protect a broad interest in human mobility” both “to facilitate individual autonomy and dignity”, and to “promote national unity and a common Canadian identity”.

One of the key issues before the Court was whether a right to travel simpliciter, if it exists, is found in s. 6(1) or 6(2) or both. With respect to s. 6(1), the debate centered on whether the language guaranteeing the right “to enter, remain in and leave Canada” includes a right to travel across provincial borders or is limited to a right against exile and banishment. With respect to s. 6(2), the debate centered on whether the provision protects only a right to move and take up residence in another province, or includes a right to travel between provinces for other purposes. The plain reading of the French text appears to encompass both, whereas the English version is more ambiguous.

The majority adopts the broader interpretations of both provisions, concluding that both s. 6(1) and 6(2) guarantee the right to travel freely throughout Canada, including between provinces. This is important because each of s. 6(1) and 6(2) is limited in different ways. Section 6(2) is subject to certain economic limits set out in s. 6(3) and 6(4) that do not apply to s. 6(1). And s. 6(2) applies to both citizens and permanent residents, whereas s. 6(1)—the only section relied on by the application judge—only applies to citizens. By grounding the right of mobility simpliciter in both s. 6(1) and 6(2), the right applies to a broader subset of the Canadian population.

The majority therefore concludes that government actions that limit in a non-trivial way the ability of Canadian citizens and permanent residents to travel freely within Canada, or that require government approval for such travel, infringe s. 6(1) and 6(2) of the Charter.

The Court finds the travel restrictions to be reasonable and justified in the context of a crisis

The Supreme Court is unanimous in finding that the travel restrictions were justified under s. 1 of the Charter. They are found to be a “reasonable component of a comprehensive government response to the extraordinary crisis of the pandemic”.

The respondents and numerous interveners made a novel argument that the “precautionary principle” should apply as part of the Oakes test under s. 1. The precautionary principle was developed in the context of international and domestic environmental law, and calls for governments to take a preventative mindset and not allow lack of scientific certainty to justify inaction in the face of a threat of serious or irreversible environmental damage. The argument was that the principle should be similarly applied in the constitutional context to support greater deference to legislative choices made in the face of threats of serious harm and scientific uncertainty.

The majority rejects this novel argument, holding that there is no need to formally recognize the precautionary principle as part of the s. 1 test. Instead, the majority holds that the Oakes test is sufficiently flexible and nuanced to allow consideration of the same factors that underly the precautionary principle, and notes that considerable deference is already accorded to governments under that test on issues of public policy, including where the scientific evidence is uncertain

Here, the majority concludes that the objective of preventing illness and death caused by travellers’ importation and spread of the virus was rooted in public health, a goal of collective importance. The limit on Canadians’ s. 6 rights is found to be “carefully tailored”, particularly in light of the vulnerability of the province’s population and healthcare system. Importantly, the Court repeats at several junctures that an analysis of lawmakers’ responses in times of crisis cannot operate with the benefit of hindsight. In this case, the Court upholds the province’s decision while acknowledging it was made without the benefit of concrete scientific or medical evidence, but rather the limited amount that was understood about COVID-19 at the early stages of the pandemic.

The Supreme Court splits on the proper interpretation of section 6

Justices Kasirer and Jamal JJ (Wagner CJ concurring) and Justice Rowe separately dissented in part. They all agree with the majority that a right to interprovincial travel is protected by s. 6 of the Charter; that Newfoundland and Labrador’s travel restrictions violated that right; and that the violation was justified under s. 1. However, Justices Kasirer and Jamal are of the view that the scope of protection in s. 6(1) is limited to international mobility and only s. 6(2) protects interprovincial mobility. Justice Rowe takes the opposite view—he writes that interprovincial travel simpliciter is protected only by s. 6(1) (and is therefore guaranteed only to citizens), whereas s. 6(2) protects the right to move and take up residence in another province, not simply to travel.

An ongoing dialogue regarding restriction of rights in a crisis

In addition to the merits, the majority addresses its exercise of power under s. 40(1) of the Supreme Court Act to hear a moot appeal, finding that the Court of Appeal erred in the circumstances by refusing to exercise its discretion to do so. The majority describes how the issues at play are “of manifest public importance” and that there is a “clear social cost” in leaving the question of state limitations on mobility unconsidered.

Indeed, as the once widespread pandemic restrictions remain only in memory, Canadian courts are tasked with determining how far government restrictions can go in times of crisis without unreasonably impinging upon Canadians’ rights. Principles of national unity and self-determination, which are top of mind for many Canadians, appear throughout the Court’s analysis.

This case forms part of a broader legal dialogue involving the adoption of emergency measures that interfere with individual choice and freedom, including the Federal Court of Appeal’s recent decision in Canada (Attorney General) v. Canadian Civil Liberties Association. For an analysis of the FCA’s decision finding that Cabinet lacked reasonable grounds to believe a national emergency existed when it invoked the Emergencies Act to counter the “Freedom Convoy” demonstrations, see BLG’s article. With this more recent decision, the Supreme Court sends a clear message that restrictions on fundamental Charter rights will be subject to intense scrutiny, but that extreme circumstances can justify equally (or proportionally) extreme measures.

Final CSA rules on related party reporting and disclosure in financial statements: What investment fund managers need to know

Fri, 27 Feb 2026 00:00:00 Z

On January 22, 2026, the Canadian Securities Administrators (CSA) published final amendments (the Final Amendments) to National Instrument 81‑101 Mutual Fund Prospectus Disclosure (NI 81‑101), National Instrument 81‑102 Investment Funds (NI 81‑102), National Instrument 81‑106 Investment Fund Continuous Disclosure (NI 81‑106) and National Instrument 81‑107 Independent Review Committee for Investment Funds (NI 81‑107). The Final Amendments are part of the CSA’s broader project to modernize the investment fund continuous disclosure regime, which is being implemented in three workstreams, as set out below. The Final Amendments – which come into force on April 22, 2026 – implement Workstream Two (related party transaction reporting), Workstream Three (financial statement disclosure) as well as editorial updates to simplified prospectus disclosure.

Investigating performance bond claims: Lessons learned from Graphic Packaging v. 2477621 Ontario Inc.

Thu, 26 Feb 2026 00:00:00 Z

The recent case of Graphic Packaging International Canada, ULC v. 2477621 Ontario Inc. et al.¹ (Graphic Packaging) was described by the Ontario Superior Court as “fundamentally a straightforward construction case”. However, the case, which involved the interpretation of a bespoke form of performance bond not typically used in Canada, resulted in a less than a straightforward decision. Respectfully, the Court made generalized statements regarding certain principles of surety law with only limited analysis of the underlying facts and issues, and without reference to the applicable jurisprudence. Therefore, while it is important to consider the fundamental issues of surety law discussed in the case, the outcome of the case was largely driven by its unique facts, such that its application should be limited accordingly.

Background

Graphic Packaging International Canada ULC (Graphic) sold a contaminated former paper mill in Jonquière, Quebec, to 2477621 Ontario Inc. (247) under an Agreement of Purchase and Sale (the APS). Although title to the property transferred to 247, Quebec environmental legislation required Graphic, as the last operator of the mill, to complete a full site rehabilitation. The APS recognized this ongoing statutory obligation while assigning responsibility for demolition of the mill to 247. Although not provided for in the APS, it was 247’s intention to extract and sell certain high-value metals from the mill structures and equipment onsite.

Under the APS, 247 was required to deliver a scope of work for the demolition within 30 days and complete the specified demolition work within 24 months. The APS also required 247 to obtain a performance bond to secure its obligations, naming Graphic as obligee. 247 obtained the required bond from Talisman Casualty Insurance Company LLC (Talisman), acting as surety. The form of performance bond issued by Talisman (the Bond) differed substantially from the forms commonly used on Canadian construction projects. Instead of using the standard CCDC form of performance bond, the Bond was based on the AIA A312–2010 form used in the United States. It also included a number of modifications to the American form that were negotiated by 247. For example, the Bond removed the requirement that Graphic terminate the APS as a condition for triggering the surety’s obligations. The Bond also imposed notice requirements upon 247 that are not required by the bond forms commonly used in Canada, and it included a condition precedent requiring Graphic to agree to pay the “Balance of the Contract Price”, which was defined as “those monies due and payable to the Purchaser per the terms of the [APS]”.

Having procured the Bond, 247 began its planned salvage operations; however, it did not deliver the required scope of work within 30 days. In fact, it did not deliver the required scope of work within 24 months, nor did it even hire a demolition contractor to start the work before the expiry of the 24-month period. In April 2017, Graphic wrote to 247 to express serious concerns with 247’s commitment to honouring the demolition obligations and document 247’s failure to provide the scope of work proposal within 30 days, as required. While 247 pointed to harsh winter conditions, thefts of salvaged metals, and a months long work stoppage following a fatal workplace incident as reasons for the delays, it did not dispute that it had not provided the scope of work proposal and had not demolished the mill within the specified timeframes.

On July 12, 2017, Graphic formally notified Talisman of the missed 30-day deadline and expressed its concern that 247 would default on the demolition work because of the looming 24-month deadline. Graphic requested a conference with Talisman and 247 to discuss 247’s performance, as provided for in the Bond. Talisman did not respond. The Court found that the July 2017 letter clearly expressed Graphic’s intention to declare 247’s default, as required by the Bond. Talisman’s failure to respond to the request for a conference was found to be, at the very least, a waiver of an opportunity to cure Graphic’s default, realized or anticipated.

On September 21, 2017, Graphic sent a further letter to Talisman. Although the specific content of this letter is not set out in the decision, the Court noted that the Bond required Graphic to “declare the contract default and notify Talisman of same” and it held that Graphic “issued such a default, referring to the July 12, 2017 notice”.

On October 6, 2017, Talisman wrote to Graphic to request various documents to verify Graphic’s claim. Although Talisman later argued that Graphic failed to identify the nature of 247’s default as part of its defence in the litigation, the Court noted that Talisman’s request for information contained no indication that Graphic had failed to identify the default. The Court therefore described Talisman’s position that Graphic failed to identify the nature of 247’s default as “utterly disingenuous”. The Court also described Talisman’s document request as “boilerplate” and noted that Graphic was given ten days to produce “a long and broadly worded” list of documentation and information that the Court described as “largely irrelevant” and “telegraphed the surety’s intention to renege on its performance bond”.

The Court went on to note that the Bond contained no provision entitling Talisman to make the document request, drawing a distinction from the standard requirements upon an insured in reporting a loss to an insurer.

Graphic responded on October 24, 2017, and stated that it required more than ten days to provide all of the information and documentation requested. On March 9, 2018, Graphic provided some of the requested documents and confirmed that 247 had indeed failed to complete the demolition by the December 2017 deadline, which had since passed. As a result, Graphic made a formal declaration of 247’s default under the Bond (presumably in connection with the missed 24-month deadline) and, because time was of the essence, Graphic informed Talisman and 247 that it had started the process of soliciting bids from replacement contractors. The Court noted that the solicitation of bids from other contractors was one of the Surety’s remedial options under the Bond, and that it would have been hard to fault Graphic for taking the initiative because Talisman had not taken any remedial action itself.

The Court found that the correspondence between Graphic and Talisman left no doubt that Graphic had complied with the requirements of the Bond in declaring 247 in default, both with respect to the 30-day scope of work requirement and the 24-month demolition requirement. Having found that Graphic declared and notified Talisman of these defaults, the Court turned to Talisman’s argument that the surety obligation remained untriggered because Graphic had yet to inform Talisman that it agreed to pay the Balance of the Contract Price to the Surety or to a contractor selected to perform the work. Talisman had raised this issue in correspondence sent to Graphic in March of 2018; however, Graphic did not confirm its agreement to make the Balance of the Contract Pirce available until August of 2018. That was apparently because, in the meantime, events occurred that raised hope that 247 would finally comply with its demolition obligations.

As Graphic communicated to Talisman in May 2018, 247 had finally prepared a draft demolition plan. The plan was not immediately approved by the Québec Environment Ministry (the Ministry), but a meeting was scheduled to address the Ministry’s requirements. Ultimately, a demolition plan submitted by Graphic, as adapted from 247’s plan, was approved by the Ministry in June 2018, and a demolition permit was issued. However, 247 did not start the work, even after Graphic obtained an extension of the time for doing so from the Ministry. In early August, 2018, under mounting pressure from the Ministry, Graphic wrote to 247 and Talisman and advised that, if 247 did not start work before August 6, 2018, Graphic would proceed with a replacement contractor it had hired. In response, 247 asserted that the presence of stakeholder representatives on site “sufficed as the start of demolition activities”. On August 21, 2018, Graphic informed 247 and Talisman that the Ministry was dissatisfied with 247’s lack of progress on the demolition and advised that Graphic’s replacement contractor would begin to perform the demolition work on August 27, 2018. Graphic noted in its correspondence that Talisman had not indicated that it would obtain its own bids and that Graphic assumed that Talisman was in agreement with Graphic’s proposed course of action. Graphic at that point addressed an issue previously raised by Talisman regarding payment of the Balance of the Contract Price, which Graphic asserted was “nil” in accordance with the terms of the APS.

Rather surprisingly, Talisman wrote back and asserted that 247 was in fact taking “significant action” to demolish the mill and had “diligently moved forward”. However, since 247 had failed to satisfactorily progress the work, Graphic obtained an interlocutory injunction in September 2018 authorizing it to retake possession of the site and perform the demolition work itself. In November 2018, Graphic excluded 247 from the site.

On March 15, 2019, Talisman provisionally denied liability under the Bond unless Graphic provided the outstanding information listed in its October 2017 request within ten days. This information was ultimately provided by Graphic to Talisman on April 30, 2019, on the condition that Talisman not share the information with 247. While Talisman acknowledged the sufficiency of the information, it took issue with the condition imposed by Graphic with respect to sharing the information with 247. On July 24, 2019, Talisman formally denied liability under the Bond, alleging that Graphic was in default of the APS and that, in any event, Graphic had failed to satisfy the Bond’s conditions precedent to liability, namely by failing to declare 247 in default in a proper or sufficient manner and failing to comply with the requirement to agree to pay the Balance of the Contract Price. In the alternative, the letter outlined several reasons to excuse Talisman from liability on the basis of alleged prejudice, including alleged prejudice arising from “grace periods” provided by Graphic to 247.

In the face of Talisman’s denial of liability, Graphic moved for summary judgment to enforce its claim against 247 for the expenses it incurred to complete the demolition work, and its claim against Talisman for breach of the Bond. Talisman responded by seeking an order dismissing Graphic’s motion by way of “boomerang” summary judgment, on the ground that Graphic’s failure to provide 247 a remediation plan and failure to agree to pay the Balance of the Contract Price for the demolition separately each prevented the triggering of Talisman’s obligations.

The Court’s decision

A significant portion of the Court’s decision is devoted to analyzing the sequence of Graphic and 247’s respective obligations under the APS. The Court ultimately concluded that, as of December 24, 2017, the deadline for completing the demolition work, the only party in breach of the APS was 247.

The Court then turned to a consideration of Talisman’s duties under the Bond and ultimately rejected each of Talisman’s defences. While the Court’s conclusions are largely tied to the unique (and arguably extreme) circumstances of the case, the Court’s analysis of the applicable principles of surety law warrants closer scrutiny.

1. The surety’s right under a performance bond to request documents as part of its investigation of a claim

Although the Court makes broad statements regarding a Surety’s right to investigate claims under a bond, these comments must be interpreted in light of the “snowblower approach” the Court found Talisman to have adopted in its document request. The Court stated that the Bond “contained no provision entitling Talisman to make the document request”, suggesting that a surety has no right (or at least a limited right) to request documents relating to the principal’s alleged default in the absence of express bond language to that effect. However, it has long been recognized at common law that the very nature of performance bonds gives rise to the surety’s right to perform such an investigation and make such document requests. Viewed in this light, the Court’s comments should be understood as simply reflecting its conclusion that Talisman intended to “bury Graphic in a documents and data request resembling a documentary discovery request in litigation” and not that a surety cannot make reasonable requests for information and documents as part of its investigation.

Any broad conclusion regarding limitations on a surety’s right to request information from an obligee is inconsistent with longstanding Canadian (and American) authority recognizing that a surety’s right to investigate under a performance bond arises from the nature of the bond itself – not the presence or absence of express language providing the surety with such a right. As the British Columbia Supreme Court recognized in Fraser Gate Apartment Ltd. v. Western Surety Co.:

Generally the surety will be entitled to […] properly investigate the contractual and factual circumstances of the claim, with particular regard to the question of whether the principal is in default under the contract, and whether the obligee has performed its obligations under the contract. That such an investigation, and reasonable time within which to do it, is required must be evident from the very nature of the bond.

The Court’s reasoning in Graphic Packaging may have been coloured by an apparent conflation of performance bonds with letters of credit, which of course is a distinct credit instrument. Indeed, elsewhere in the decision, the Court characterizes performance bonds as “the construction equivalent of a bank letter of credit.” With respect, that analogy is inappropriate. The defining feature of letters of credit is that they are demand instruments. Letters of credit are intended to ensure prompt payment and an issuer’s obligation is consequently triggered by the presentation of stipulated documents and deliberately insulated from any disputes concerning the underlying contract. As a result, investigation of contractual performance is unnecessary and, indeed, antithetical to the commercial purpose of the instrument. In contrast, the surety’s liability under a performance bond is conditional and dependent upon, among other things, an actual default under the bonded contract and the obligee’s proper declaration of the same. The triggers can therefore be complex and will require multiple determinations. It is for this reason that the surety has a right to investigate, which has long been recognized at common law.

In the circumstances of the case, the Court’s comments regarding Talisman’s right to request documents relating to Graphic’s claim should not be treated as supporting any deterioration of this right. Rather, they are tied to the specific document request made by Talisman, which, as noted above, the Court found to be overly broad and largely irrelevant to the issue of whether 247 or Graphic was in default of their obligations under the APS, or indeed any other issues relating to Talisman’s liability under the Bond. The Court also noted that Talisman did not request any information regarding the nature of the alleged default or raise the absence of this information as an issue at the outset. Therefore, the appropriate conclusion to be drawn from the Court’s decision is simply that a surety is not entitled to make overly broad and irrelevant document requests as part of its investigation. However, a surety is clearly entitled at law to investigate any claims under a bond with appropriate document requests to investigate whether the conditions for liability under the bond have been met.

2. The distinction between notice of default and declaration of default

It is clear from the existing jurisprudence that a surety’s obligation to respond promptly under a performance bond does not arise until a formal demand has been made of the surety. Such a demand must be clear, direct, and unequivocal. Prior to a proper claim being made, the surety does not have a duty to investigate – or even a right to unilaterally intervene in a dispute between the principal and obligee. The application of this principle is critical. It ensures that the obligee, not the surety, bears responsibility for deciding whether the principal’s conduct warrants escalation. As Canadian courts have consistently held, until a formal declaration is made to the surety, the “clock does not start ticking” on the surety’s obligations (Fraser Gate).

While the language of the Bond regarding notice and declaration of default differs from that in the standard forms used across Canada, the crucial distinction between declaring the principal in default, and then making a claim under the bond, appears to be preserved. § 3.1 of the Bond required Graphic to “provide notice to [247] and [Talisman] that [Graphic] is considering declaring a Contractor Default.” §3.2 of the Bond required Graphic to “[declare] a Contractor Default and [notify Talisman]” as a condition precedent to Talisman’s liability. However, the distinction between “notice” and “declaration” of default is not reflected in the Court’s analysis. It is also not clear from the decision when Graphic first declared 247 to be in default and called upon Talisman to perform under the Bond. On the one hand, the Court held that Graphic’s September 21, 2017 communication satisfied the § 3.2 requirement that Graphic “declare the Contractor default,” but the Court later held that Graphic made its “formal declaration of 247’s contractor default” when Graphic delivered some of the requested documents on March 9, 2018, which is obviously inconsistent.

The Court faults Talisman for alleged inaction long before March 2018. As the decision does not describe the contents of the September 21, 2017 letter, it is not clear whether the contents of the letter satisfied the requirements of the Bond. However, if a proper declaration of default was not made before March 2018, or if Talisman didn’t make a claim under the Bond before March 2018, such a criticism would be unwarranted. The subtle but critical distinction between notice and declaration of default is important, as Canadian law does not impose an obligation on a surety to respond under a performance bond until default has been declared and a claim has been made to the surety.

3. Material variation and prejudice to the surety in cases of extension of time for performance

The Court also rejected Talisman’s argument that, by providing 247 with grace periods, Graphic extended the time for performance of the underlying contract and thereby materially varied the contract, prejudicing Talisman and discharging it from liability. The Court correctly recognized the principle that a change that imposes additional risk on the surety without its consent will discharge the surety from its obligations under a performance bond.

However, respectfully, the Court erred in commenting that granting the contractor “more time to perform the work, even past the deadline for completion, cannot prejudice the surety.” This simple proposition misstates the law of material variation. While extensions of time may be benign, or even benefit the surety in some circumstances, it is not the case that such changes to the time for completing the underlying contract “cannot” prejudice the surety. As the British Columbia Supreme Court noted in MGN Constructors Inc. v. AXA Pacific Insurance Company, extensions of time can carry real consequences for the surety’s risk, such as increased overhead or prolonged exposure to adverse weather. As a result, and as the Supreme Court of Canada acknowledged in Ferrara v. National Surety Co., where a bonded contract provides a fixed time for performance, and this period is extended by the obligee and principal without the consent of the surety, the surety will have grounds to be discharged on the basis of material variation of contract if it suffers prejudice as a result.

The Court may well have been correct that, in this particular case, given 247’s pervasive non-performance, no prejudice was actually suffered. However, the broader holding to the effect that extensions of time “cannot” prejudice a surety is inconsistent with longstanding surety law principles.

Conclusion

Although the result in Graphic Packaging may be justifiable based on the specific facts of the case, particularly the extraordinary delays and the extent of non-performance by 247, as well as the unique form of the Bond that was issued by Talisman, the decision diverges from well-established Canadian surety principles in terms of:

The conclusion that the Bond provided the surety with “no right” to make a document request;
The apparent blurring of the distinction between notice and a declaration of default; and
The assertion that extensions of time “cannot prejudice” a surety.

These conclusions must be considered in light of the unique factual circumstances of the case, and not as broadly applicable principles of surety law. For these reasons, the precedential value of the decision in Graphic Packaging should be considered with caution.

Both Talisman and 247 have filed notices of appeal of the motion decision. We will update this commentary after the release of the Court of Appeal decision. For more information, please reach out to any of the key contacts below.