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letters to the editor Send your letters to: gail.cohen@thomsonreuters.com O P I N I O N BY JIM MIDDLEMISS BACK PAGE Crime stats Scott Newark and Ian Lee. In February and March, Newark, a T former Crown counsel, and Lee, a busi- ness professor with a PhD in public policy at Carleton University, had the audacity to challenge recent Statistics Canada conclu- sions about crime in the country. There is a perception among many Canadians that crime is on the rise. However, naysayers from the defend-the- criminal lobby insist that's not the case, citing StatsCan reports to back them up. A 2009 StatsCan study on police-reported crime found: • police-reported crime in Canada contin- ues to decline, in severity and volume; • the crime severity index decreased four per cent and was 22-per-cent lower than in 1999; • violent crime is declining, down one per cent, and the violent crime severity index was down six per cent from a decade ago; and • most violent crimes declined, including homicide, serious assaults, sexual assaults, and robbery, however, there were increas- es in attempted murder, extortion, fire- arms offences, and criminal harassment. That all sounds well and nice. However, Newark and Lee — writing in papers prepared for the Macdonald-Laurier Institute, an Ottawa think-tank — looked behind the numbers to paint an entirely different picture. Their findings are concerning. While violent crime may be declining in the near term, it is up dramatically over the long term. Newark thoughtfully reviews the Statistics Canada reports and methodolo- gies, essentially cross-examining them the way a lawyer would cross-examine an expert witness. He pokes holes at short- comings in the way Statistics Canada slic- es and dices data. Among his concerns: o borrow from Mark Twain, there are lies, damn lies when Statistics Canada reports on crime. That is if you believe • the report provides incomplete offender information; • recent format changes are counterpro- ductive; • data on incidents of crime are lacking; • serious violent crime is increasing con- trary to the report's claim; • the crime severity index is not a suitable tool for gauging the incidence of crime; and • youth crime is systematically under- reported. Newark then went on to make a num- ber of thoughtful recommendations. Needless to say, this raised the hackles of the defend-the-criminal lobby, that left- wing cabal of criminologists, sociologists, lawyers, and activists who would rather hug killers than hang them. Their answer to crime is to mollycoddle criminals and all will be fine. They proceeded to skewer Newark's findings, accusing him of using inaccurate figures and ignoring evidence, calling his report "highly politicized" — as if their reports aren't. In March, Lee weighed into the debate with his own critique, using a range of government facts and figures to defend those who perceive crime to be a prob- lem in this country. He said the criticism of Newark's work reflected a "paternal- istic rejection of any questioning of the received wisdom, instead of engaging in an open-policy debate with Canadians." Lee found that violent crime has increased 500 per cent over 30 years. Moreover, he found only 34 per cent 54 M AY 2 0 1 1 w w w . C A N A D I A N Lawye rma g . com CL_May_11.indd 54 4/14/11 12:48:07 PM of crimes were reported, leading to a vast under-reporting of crimes, including sexual assaults (92 per cent unreported), physical assaults (61 per cent), and rob- beries (54 per cent). He then went on to examine incarceration rates and found an "extraordinarily low ratio of federal incar- ceration relative to crimes committed in 2009." There are about 14,000 people in federal prisons for a population of 34 mil- lion, a number he called a "vanishingly small percentage." Of that, 69 per cent are there because of violent crime. He then examined prison statistics and found that Canada's rate of incar- ceration is below average for a developed nation. Based on federal incarcerations, Canada was below every European country, including places like Sweden, Finland, and Norway. He said Canada spends 2.5 per cent of its budget on its criminal justice system, which he called a "very small percentage to protect Canadians and ensure the rule of law." He noted that no federal prison has been built since 1988 and 28 federal prisons are more than 40 years old, which is near the end of a jail's life cycle. At least three prisons date back to the 1800s. The business professor concluded that Correctional Service of Canada's $230- million capital budget is "profoundly insufficient and completely inadequate in light of the large number of much older federal penitentiaries." Newark and Lee's reports are a wel- come addition to the argument about crime in Canada. They are adding a cred- ible and valuable voice to the discussion. Their work is a welcome respite from the usual tripe produced by Canada's criminologists. Let's hope their voices aren't drowned out by those who value criminals over victims. Jim Middlemiss is a Toronto lawyer and co-owner of WebNews Management Corp. He can be reached at jmiddlemiss@ webnewsmanagement.com. Middlemiss is the new Ezra When Ezra Levant's consistently extreme views left your magazine, I was hopeful for a bit more balance on the Back Page. Instead we get Jim Middlemiss who is just as much, if not more, of an ideologue. Could you hire someone with slightly more equilibrium? To some degree when you use the words "Canadian Lawyer" in the title of your magazine you could be perceived as speaking for, as well as to lawyers. Perish the thought that the public should perceive that Canadian lawyers as a group thought along the lines of these two immoderates. — JIM JOOSSE Edmonton, Alta. O P I N I O N BY JIM MIDDLEMISS BACK PAGE egal aid a ent to e were basic of life cloth- cloth- ording d state yer is r law- ho led l Aid report s B.C. d legal duca- d it be public me, or f the ely it izing ice is nded l and nt to zens, long ocial our y." only ublic ome vail- here ding all to expand the legal aid social program beyond criminal matters into everything from debt to housing and even employ- ment. "Government has a responsibility to provide access to legal representation in these circumstances when a person can- not afford to pay a lawyer." He slams legal aid cutbacks and bemoans a system that "has been stripped down to almost exclusively cover only those services that have been proven in court to be constitutionally required." Imagine the gall, a Canadian social pro- gram that only delivers what is constitu- tionally required? Like many legal aid advocates, Doust believes the Charter of Rights and Freedoms should be interpreted to ensure legal aid includes civil matters. He argues that legal aid should be deemed an essen- tial public service on the basis that by nipping legal problems in the bud, it cuts down the public costs of wasted court time and lowers costs associated with health care and welfare. Interesting arguments; however, his report is short on specifics. Nor does he build a business case to prove his point. He merely states it as fact and relies, instead, on hearsay evidence. He tosses in some reports from foreign jurisdictions such as Texas, New York, and Australia, to further make his case — evidence that would muster at most a passing glance by most courts in Canada. He writes, "there is no magic bullet or panacea that will cure the defects within our legal aid system." Yet, Doust con- stantly criticizes funding levels, and baldly asserts: "The requirement of increased, stable, long-term public funding for legal aid is non-negotiable. . . ." Doust's panacea then would appear to be more cash for legal aid. How much is not clear. Tax dollars are finite, good intentions are not. According to Statistics Canada, legal aid plans spent a sizable $762 million in 2009-10 on 500,000 Canadians. That's rma g . com about $23 for every Canadian. Spending was up four per cent from the previous year, more than inflation. At a time when think-tanks warn that health-care spending is unsustainable and roads and sewers are crumbling, it's hard to believe there is an appetite among Canadians to expand legal aid beyond the bare minimum. Most Canadians would rather their tax dollars go to fund chemo- therapy for an 11-year-old cancer patient, than pay a lawyer to argue a breach of probation case brought on by a convicted thief 's lack of moral conduct and certainly not to pay a lawyer to deal with an aggres- sive bill collector. As reports like Doust's mount and advocates use the Charter to persuade judges to order governments to pay for lawyers in an increasing range of ser- vices, legal aid is becoming a public tick- ing time bomb. Governments need to look at other solutions to the problem of overburdened courts and lack of access to justice. It's the complexity of laws and the ever-expanding waistline of legislation and regulation into areas such as social assistance, marital breakdown, unemploy- ment rules, workers' compensation fights, and landlord-tenant disputes that have created the growing need for legal advice. The state should start there when looking for solutions to justice problems. As for legal aid advocates, rather than mouthing platitudes and demanding blank cheques, they could win support by providing cost estimates and making a business case for rejigging the way legal aid is delivered. There is a long way to go in this debate before taxpayers will be convinced more of their hard- earned money should go to paying for lawyers. Jim Middlemiss is a Toronto lawyer and co-owner of WebNews Management Corp. He can be reached at jmiddlemiss@ webnewsmanagement.com. I was disappointed by Jim Middlemiss' Back Page article "Crime stats don't add up," Canadian Lawyer, May 2011. Initially, I was intrigued by his account of the dispute over crime statistics. About halfway through the article, however, the author's reference to a "left-wing cabal of criminologists, sociologists, lawyers, and activists who would rather hug killers than hang them" alerted me to the possibility that the column might be a tad shy on academic objectivity. Middlemiss relies on the much-disputed Newark and Lee studies, but, instead of addressing the dispute in a substantive way, he suggests that those who question Newark and Lee want to "mollycoddle criminals." Middlemiss wraps up his treatise with a rhetorical flourish about "those who value criminals over victims." I have been in private practice for 20 years and I have as yet to meet anyone who wants to hug killers or even mollycoddle them a bit. The strident tone of Middlemiss' article raises the obvious concern that his take on crime statistics is coloured by his strong opinions. I hope that it is not beyond human capability to first compile data about crime in a dispassionate, objective manner, and only then to enage in policy debate. Mr. Middlemiss is clearly of the opinion that we have a growing crime problem, but it is not clear from his article if there is any basis in reality for that opinion. I rather suspect that Mr. Middlemiss shares Stephen Colbert's concern that "reality has a well- known liberal bias". — PAUL BIGIONI Bigioni LLP, Markham, Ont. Your Back Page could be put to far better use than to publish the ideological rant of one Jim Middlemiss, who thinks that name-calling is a substitute for argument. — JOHN EDMOND Ottawa welcomes letters to the editor but reserves the right to edit for space, taste, and libel considerations. Please include your full contact information. Comments from canadianlawyermag.com O P I N I O N BY CHERYL SATIN BANKING ON CORPORATE Keep in mind Get rid of the doctrine of privity of contract The time has come for Canadian law to get rid of the doctrine of privity of contract as well as the requirement of consideration. A contract is all about the intention of the parties. We are long past the days of irrational formalistic requirements of seal, consideration and what knows. It is the 21st century, so let us advance to where the Romans were 2,000 years ago, namely the intention of the parties and consensus. That includes making a promise enforceable. — online comment from ANDRÉ ROOTHMAN 6 JULY 2011 www. CANADIAN Lawyermag.com A recent U.S. court deci- sion reminds us of the importance of consid- ering potential third- party-beneficiary issues when drafting contractual indemnity provisions in Canada. On March 3, the New York Supreme Court (Appellate Division) upheld a lower court decision giving Diamond Castle Partners, a U.S. private equity firm, the right to sue IAC/ InterActiveCorp. for damages for breach of representations IAC made in con- nection with the sale of its subsidiary, PRC LP, in late 2006. Diamond Castle was not a party to the purchase agree- ment. Instead, the representations were made to Panther/DCP Acquisition LLC, an affiliate of Diamond Castle formed for purposes of completing the acquisition. After the deal closed, PRC and Panther merged. In January 2008, PRC filed for bankruptcy and Diamond Castle's equity interest in PRC was extinguished as part of the ensuing reorganization. Diamond Castle sued IAC claiming it was entitled to the benefit of the indem- nity extended to the buyer and its affili- ates under the purchase agreement and sought to recover losses suffered due to alleged inaccuracies in statements made by IAC about the financial impact of PRC's customer contracts. IAC asked that the claim be dismissed on the grounds that Diamond Castle was not a signatory to the agreement, which contained a no-third- party-beneficiaries clause limiting enforce- ment of the agreement to the parties. The court rejected IAC's position on the basis that, although Diamond Castle was not a signatory, the agreement "plainly intend- ed to give the buyer and its affiliates enforceable rights," and the undefined term "parties," as used in various clauses in the agreement, referred to more than just the signatories. As each clause within a contract must have meaning, the court construed the limitation clause to exclude only persons who were not signatories or buyer or seller indemnified parties. The court also noted that interpreting the purchase agreement in the manner IAC suggested would be inequitable, leaving Diamond Castle without any remedy. While the court referenced the 1998 New York District Court decision Control Data Systems Inc. v. Computer Power Group Ltd., it distinguished Diamond Castle's case based on the wording of the applicable no-third-party-beneficiary clause. In that case, Control Data sought the benefit of an indemnity extended under an agreement with a no-third-party-beneficiary clause and the court ruled that Control Data's parent company, as the signatory, should more properly bring the claim on behalf of its subsidiary. In its reasons for judgment in Diamond Castle Partners IV PRC L.P. v. IAC/InterActiveCorp., the court indicated that the third-party-beneficiaries clause applicable to Control Data's case prevented "any person who was not a signatory" from enforcing any rights, and was therefore a broader restriction. In Canada, the general rule (known as privity of contract) is that only a signatory to a contract may sue upon it. In the lead- ing cases of London Drugs Ltd. v. Kuehne & Nagel International Ltd. and Fraser River Pile & Dredge Ltd. v. Can-Dive Services Ltd., the Supreme Court of Canada created certain principled exceptions to when a third party may obtain the benefit of pro- tections extended under a contract (effec- tively, using the contract as a "shield"), but was reluctant to overthrow the rule entirely New York Appellate Division, First Department Decisions or give third parties the right to enforce a contract to claim a benefit, thereby using the contract as a "sword." Given the SCC's statement in London Drugs that the deci- sion conformed to "commercial reality and justice," it is possible that a Canadian court may have adopted the same position as the New York Supreme Court in Diamond Castle. However, Canadian courts have generally taken the view that any major reform to the established principles on privity of contract must come from the legislature, not the courts. To date, New Brunswick is the only province that has adopted this approach, enacting legislation that abolishes the third-party-beneficiary rule unless the contract provides other- wise. The U.S., United Kingdom, and a number of other Commonwealth jurisdic- tions have adopted similar approaches. Comparable legislative reform does not appear on the horizon in the remain- ing Canadian provinces. As a result, it is important to be mindful of the risks of not including an intended beneficiary of rights under a contract as a signatory, and ensure that a suitable mechanism is put in place to ensure the beneficiary can have those rights enforced should the need arise. While in Diamond Castle's case the court ultimately reached the commercially intended result, the litigation over whether Diamond Castle was entitled to bring a claim for breach of contract could have been avoided had the no-third-party-ben- eficiaries clause in the purchase agreement specifically carved out Diamond Castle's rights to bring a claim for indemnity, and any other rights that it was to receive per- sonally under the agreement. Cheryl Satin is a partner at Blake Cassels & Graydon LLP in Toronto practising in the business group. She can be reached at cheryl.satin@blakes.com. The opinions expressed in this article are those of the author alone. w w w . C A N A D I A N Lawye rma g . com J U N E 2 0 1 1 CL_June_11.indd 17 17 5/16/11 4:04:39 PM b t i c k i n g t i m e b o m b I A C t e n e f i c i a r y tuhei s s r i d s - p a r t y - D /i Ia nm eo An cd t C ia vs et Cl oe r P pa . r r t n e 0 j i 1v . 1 s o m u s hi 7d 5 i n l t i t i a -. fc ro sm -/ dc ea ps ae rs t/ mn ee nw t- /y 2o 0r 1k 1/ /a 2p 0p 1e 1l - t r s I V P l - t R C L aw . l a e . P . v . C anadian L a wy er R e: "K 2011 June eep in mind thir d-party-beneficiary issues" d o n ' t a d d u p SCOTT PAGE O P I N I O N BY JIM MIDDLEMISS BACK PAGE An aggressive federal power play rities regulator is a valid exercise of its trade and commerce law or simply the biggest federal power grab since Confederation. This isn't about a national securities T regulator. It is about how far federal pow- ers extend and is the most important divi- sion of powers case in decades. The heart of the fight is whether the fed's power to regulate trade and commerce under s. 91(2) of the Constitution Act, 1867 trumps the provinces' power to regulate property and civil rights under s. 92(13). The federal government lays out a strong argument as to why it can create a national regulator. It argues there is a need to reduce systemic risk and create better investor protection. Since trade in securities crosses provincial boundaries, international trade and commerce pow- ers apply. It doesn't seek to usurp the provinces, it merely claims to coexist with them by creating a national system where provinces can opt in. Those that don't can continue to regulate their own markets. Originally, only Alberta, Manitoba, and Quebec balked at the proposal. That was until other provinces read the legal briefs and began to understand the impact a favourable ruling would have on their domain. The test the federal government proposes is wide and the most aggressive federal power play since Pierre Trudeau unilaterally repatriated the Constitution. In justifying its move into the securi- ties sphere, the federal government makes sweeping statements. It says capital mar- kets: "affect the well-being and prosperity of all Canadians"; "are increasingly nation- al and international"; and "are evolving rapidly and are increasingly complex." The brief argues provinces are ill-equipped to deal with these developments. 54 2 0 1 1 The danger is that today it is capital markets. What is it tomorrow? One can easily argue natural resources affect the well-being and prosperity of all Canadians. Our food systems, technology, and other industries governed by provinces are also becoming more global. If the feds suc- ceed here, how soon before they go after marketing and dairy boards or provincial oversight of professions, mining approv- als, or other local endeavours? It's fine to say we need a national securities regulator. Few dispute that. The provinces have attempted to create a har- monized regime through the passport sys- tem with the lone holdout being Ontario. It is puzzling why the Dalton McGuinty government, which faces a fall election, agrees to back the federal government's intrusion into a space so cherished by provinces as property and civil rights. Meanwhile, playing out in the back- ground is the move by the Toronto Stock Exchange to merge with the London Stock Exchange. That has muddied the waters in a rather humorous way. On one hand, the federal government argues that markets are global and Canada needs a national regulator. Yet, when Canada's biggest exchange claims it needs to merge with a competing exchange because secu- rities markets are global, the government gets cold feet and claims it needs to review the net benefits of the merger to Canada. You can't have it both ways. If you argue Lawye rma g . com his month, the Supreme Court of Canada will decide whether the feder- al government's attempt to create a national secu- on one hand that markets are global, it seems disingenuous to protect a stock exchange from those market vagaries. The federal government also claims a need to protect the public. It already has that right. The feds control the criminal law. Yet, here we are a decade later and the two guys convicted of cooking the books at Cineplex Inc. are still walking the street. It doesn't instil confidence in the fed's abil- ity to regulate the markets when the laws it has written can't garner convictions for the very thing they regulate. Frankly, the provinces aren't much better on enforcement. The Ontario Securities Commission can't seem to secure an insider-trading charge, while other provinces have seen some of the biggest Ponzi schemes operate right under their noses. In the middle of this fight, the B.C. Securities Commission opportunisti- cally decides to crack down on fraudsters — too little, too late. About the only one province that has been effective on behalf of investors is the Quebec Securities Commission in the Norbourg scam. This fight will be divisive but has been simmering for decades. Why Finance Minister Jim Flaherty chose this moment to bring the reference with a pending federal election is not clear. Chances are it was a result of the market meltdown of 2008 and he probably promised other nations Canada would seek a national regulator. But it's not that easy. The coun- try was founded on the division of powers. For the court to allow the gutting of the provinces' powers over property and civil rights — securities are simply contracts — would substantially alter the power bal- ance and shift it to the feds. Let's hope that there are still some provincialists sitting on the Supreme Court bench. Jim Middlemiss is a Toronto lawyer and co-owner of WebNews Management Corp. He can be reached at jmiddlemiss@ webnewsmanagement.com.