Business and Commercial
Business law and commercial law sometimes are used interchangeably but the two are actually quite different. Using a broad brush, business law is focused on the internal affairs of a company (i.e. how it is managed), while commercial law focuses on the external affairs of a company (i.e. the relationship between the business and its customers).
Most often business law revolves around resolving disputes between directors and shareholders as to the conduct of a corporation. If two directors are at a gridlock as to how a family may move forward, and the articles of the corporation do not provide a way to solve the impasse, then either one may apply to Court. This may occur in closely held family corporations. Another example of business law is if a minority shareholder has been excluded from voting in an annual general meeting or the actions of the majority shareholder unfairly prejudice them – such as selling the assets for below market value. If a corporation fails to pursue its lawful claims to the detriment of the shareholders then a single shareholder can start a derivative action to gain the right to sue on behalf of the corporation, or in their own name. As a final example, a director who takes a secret profit or causes the business to enter into a business relationship with another company that they have an interest aim may not be upholding their fiduciary obligation to the corporation.
Commercial disputes arise when the relationship between two companies goes sour. This may be a simple relationship of purchaser / vendor, where one party fails to promptly deliver the promised goods or services, they are defective, or the other side refuses to pay. Other forms of commercial disputes may occur when a franchisor and franchisee have a dispute about their respective obligations. More complicated cases arise when the corporations enter a joint venture or where one party is exclusively tasked with the manufacture or distribution of the other’s goods.
Partnership and franchise disputes don’t fall neatly into their own category and sometimes are labelled as their own areas of law. However they share many of the same principles as both business and commercial cases and actually have a heightened duty of disclosure and fair dealing. Both partnership and franchise cases have additional statutory remedies that do not exist for commercial cases – but sometimes those remedies have very short limitation periods.
Every business relationship, whether internal or external, requires an understanding of the relationship between the parties in dispute and their respective rights and obligations. Unlike personal injury cases, the rights, timelines, and remedies that one party may have against the other can be contractually limited. The very first step is to find the applicable governing document. For business disputes this will usually be the Articles of the corporation, along with any unanimous shareholders agreement. For commercial cases, there will almost always be some form of contract or at the very least some communication that lead to a quote or the start of the business relationship.
Except in cases of fraud, many business and commercial disputes need to be evaluated to determine whether they want to continue the relationship but perhaps in a more formal or organized manner, or with some adjustment as to the rights and obligations of the parties.
Depending on the specific outcome you want at the end of the day, some of your limitation periods may be quite short. For instance, under the Franchises Act, a franchisee may rescind the franchise agreement within 60 days after receiving the disclosure documents mandated by the legislation.
Like many other cases, key documents must be preserved and backed up, and if witness testimony will form an important part of the case it is advisable to get some form of recording – whether written or audio taped before the witness’s memory fades with the passage of time. For franchise cases, it is important to find and locate any franchise disclosure documents that were provided at the time the relationship commencement. For shareholders, obtaining copies of all director’s resolutions, minutes of the annual general meetings, and financial documents will allow us to give practical and detailed advice. Most business and commercial cases are financed solely by the parties as commercial disputes are generally not insurable and knowing the financial position of your opponent will provide a tactical advantage.
Depending on the client’s objectives, alternative forms of dispute resolution such as mediation or arbitration should be investigated. These allow privacy to the dispute, the appointment of a mediator or arbitrator with specialized knowledge in the industry as opposed to a random draw for a trial judge, and a much faster hearing or mediation date. It is not uncommon for dates to occur in the range of 1-4 months away which is much faster than Supreme Court.
Unlike professional malpractice and negligence cases where it is rare to get any meaningful offer before a Notice of Civil Claim is filed, many such disputes are resolved without the need to file any court documents which allows the dispute to remain private. Negotiation is an important part of our job in these cases, particularly if you wish the relationship with the other side to continue.
Where appropriate, we have a network of other professionals such as accountants, economists, and business valuators that assist us in business, partnership, and franchise disputes. Claims of loss of profit arising from such disputes generally require expert evidence and substantial documentation in order to allow the Court to support an extrapolation.
After consulting with us, we may decide together that the best strategy, particularly if you want the relationship to continue, is for yourself to directly negotiate with the other side after being properly informed of your rights and odds of success. We recognize that introducing lawyers into the equation is seldom welcomed.
In cases of misappropriation of funds, or fraud, it may be necessary to apply for a freezing order – commonly referred to as a Mareva injunction. In commercial cases where there are non-compete clauses or trade secrets that are at risk of being dissipated, we can take steps to enjoin the other side from breaching those and damaging your competitive advantage.
For most cases we begin by reviewing the rights and obligations both contained in any formal documents between yourself and other parties, as well as those available under specific pieces of legislation and advising you of the different options available to you. Commercial cases in particular often have elections that you must make at an early stage of a case – such as whether you repudiate a contract and put the obligations of both parties to an end and sue for the breach, or do you affirm the contract and sue for the ongoing breach? The measure of damages can be quite different depending on the election made.
No two cases are the same and so the advice and strategy developed will be unique to your situation. The timing of filing a Notice of Civil Claim is particularly important in these cases as there may be strategic advantages gained by filing it prior to an annual general meeting or before a company begins the process of becoming publically owned.
Most cases only advance to a court file if attempts to resolve the claim prior to the limitation period are unsuccessful. Due to the fact that commercial and business cases generally do not have insurance companies backing them, and that there are usually benefits to keeping a business relationship going, we have found that many cases can be resolved on terms that are more than satisfactory to our clients.
Some cases however require prompt and urgent filings in order to protect our client’s interests. Cases where money has been stolen, or where your book of business or other sensitive information may be disclosed seriously jeopardize your advantage in the marketplace and quick steps must be taken to protect you.
As soon as we feel that we are at an impasse then we will explore alternative dispute resolutions, in particular mediation and arbitration. Despite these mechanisms costing more than opening a court file, the quick turnaround time, lack of any public record, flexible procedures, and ability to select an adjudicator that truly understands the nature of the business relationship is very valuable.
Business and commercial cases are generally handled on an hourly fee, however commercial cases where we act for a Plaintiff may be considered to be handled on a contingency fee. In exceptional circumstances partnership or franchise cases may be offered on a contingency, particularly if there is a claim for aggravated and punitive damages.
As many cases are resolved without any court filing, clients need to be prepared for the very real possibility that the other side will not contribute anything towards their legal fees. This is different in commercial cases where the agreement governing the relationship between the parties provides for indemnification, although it is rarely exercised for relationships that are going to continue except in commercial landlord / tenant situations where there is a significant period remaining in the lease.
In cases of fraud, or breach of fiduciary duty, it may be possible to obtain special costs which may provide full, or close to full indemnity for your actual legal fees. If the case proceeds to Supreme Court and you are successful, then you are likely to be awarded costs which should offset a healthy portion of your legal fees.
Contact us either at (604) 259-6200 or using the form below for assistance with Business and Commercial law
The foregoing provides legal information and does not constitute legal advice. As an analogy, legal information are equivalent to learning the rules of chess, and legal advice is the tactics and strategy that goes into winning a game. Lawyers are trained to give valuable advice that is specific to you after learning about the details of your case. Readers are cautioned that they will rarely achieve the best outcome for their case without actual advice. A consultation is often the best next step to take.