Commercial

While the Canadian government has said it intends to pass legislation dealing with cybersecurity (see Bill C-26 to enact the Critical Cyber Systems Protection Act), many companies have already taken significant steps to protect their IT infrastructure. However, the Internet of Things is too often overlooked in this process. This is in spite of the fact that many devices are directly connected to the most important IT infrastructure for businesses. Industrial robots, devices that control production equipment in factories, and devices that help drivers make deliveries are just a few examples of vulnerable equipment. Operating systems and a range of applications are installed on these devices, and the basic operations of many businesses and the security of personal information depend on the security of the devices and their software. For example: An attack could target the manufacturing equipment control systems on the factory floor and result in an interruption of the company’s production and significant recovery costs and production delays. By targeting production equipment and industrial robots, an attacker could steal the blueprints and manufacturing parameters for various processes, which could jeopardize a company’s trade secrets. Barcode scanners used for package delivery could be infected and transmit information to hackers, including personal information. The non-profit Open Web Application Security Project (OWASP) has released a list of the top ten security risks for the Internet of Things.1 Leaders of companies that use this kind of equipment must be aware of these issues and take measures to manage these risks. We would like to comment on some of the risks which require appropriate policies and good company governance to mitigate them. Weak or unchangeable passwords: Some devices are sold with common or weak initial passwords. It is important to ensure that passwords are changed as soon as devices are set up and to keep tight control over them. Only designated IT personnel should know the passwords for configuring these devices. You should also avoid acquiring equipment that does not allow for password management (for example, a device with an unchangeable password). Lack of updates: The Internet of Things often relies on computers with operating systems that are not updated during their lifetime. As a result, some devices are vulnerable because they use operating systems and software with known vulnerabilities. Good governance includes ensuring that such devices are updated and acquiring only devices that make it easy to perform regular updates. Poor management of the fleet of connected devices: Some companies do not have a clear picture of the Internet of Things deployed in their company. It is crucial to have an inventory of these devices with their role in the company, the type of information they contain and the parameters that are essential to their security. Lack of physical security: Wherever possible, access to these devices should be protected. Too often, devices are left unattended in places where they are accessible to the public. Clear guidelines should be provided to employees to ensure safe practices, especially for equipment that is used on the road. A company’s board of directors plays a key role in cybersecurity. In fact, the failure of directors to monitor risks and to ensure that an adequate system of controls is in place can expose them to liability. Here are some elements of good governance that companies should consider practising: Review the composition of the board of directors and the skills matrix to ensure that the team has the required skills. Provide training to all board members to develop their cyber vigilance and equip them to fulfill their duties as directors. Assess cybersecurity risks, including those associated with connected devices, and establish ways to mitigate those risks. The Act to modernize legislative provisions respecting the protection of personal information sets out a number of obligations for the board of directors, including appointing a person in charge of the protection of personal information, having a management plan and maintaining a register of confidentiality incidents. For more information, you can read the following bulletin: Amendments to Privacy Laws: What Businesses Need to Know (lavery.ca) Lastly, a company must at all times ensure that the supplier credentials, passwords and authorizations that make it possible for IT staff to respond are not in the hands of a single person or supplier. This would put the company in a vulnerable position if the relationship with that person or supplier were to deteriorate. See OWASP top 10

On July 15, 2022, Justice François Lebel of the Court of Québec rendered a decision1 confirming that, in the case of the sale of immovable property, a clear and unambiguous exclusion clause, whereby the warranty is waived at the buyer’s risk, results in a break in the chain of title preventing the buyer from taking any legal action under such warranty against the seller and previous sellers. Justice Lebel thus declared the originating application against the defendants Marshall and Bergeron inadmissible and dismissed the call in warranty. This decision is consistent with the recent decision of the Court of Appeal of Quebec in Blais,2 rendered in May 2022, which clarified the state of the law on the consequence of waiving a legal warranty where successive sales are involved. The facts In March 2009, the defendant Bergeron sold an income property (hereinafter the “Property”) to the defendants, the Marshalls, with a legal warranty of quality. In May 2012, the Marshalls in turn sold the Property to the defendants Hamel and Drouin, still with a legal warranty of quality. In December 2016, the defendants Hamel and Drouin resold the Property to the plaintiff, but this time [translation] “without legal warranty of quality, at the buyer’s risk, but with warranty of ownership”. In the fall of 2020, the plaintiff had work done to repair the drain tile system. It was at that point that it discovered the presence of petroleum hydrocarbons in the soil under the Property’s foundation, rendering the soil unsuitable for residential use. According to an expert report, the alleged contamination stemmed from a heating oil tank once located in a shed behind the Property. The tank was apparently removed before the sale in December 2016. The plaintiff was seeking a reduction in the sale price and to have the defendants Hamel and Drouin, as well as the two previous sellers, the defendants Marshall and Bergeron, held solidarily liable. The plaintiff referred to the warranty of quality provided for in articles 1726 and following of the Civil Code of Québec (C.C.Q.) and the warranty against public law restrictions provided for in article 1725 C.C.Q. The plaintiff also claimed to be the victim of fraud on the part of the defendants Hamel and Drouin. After being called in warranty by the defendants Hamel and Drouin, the Marshalls moved to dismiss the substantive claim and the action in warranty. They claimed that the sale of the Property between the defendants Drouin and Hamel and the plaintiff was made at the buyer’s risk and that such a clause in a subsequent deed of sale irrevocably breaks the chain of title, thereby preventing the plaintiff from taking any legal action against the seller and previous sellers. The law and the importance of a clear clause According to article 1442 C.C.Q., which codifies the principles arising from the decision in Kravitz,3 buyers may seek to have the sellers previous to their own seller held liable. However, for such an action to be deemed valid, it must be established that: The defect existed at the time that the previous sellers owned the immovable; and The right to the legal warranty was transferred to the plaintiff through subsequent sales. Indeed, the buyer of an immovable may take legal action directly against a previous seller in accordance with article 1442 C.C.Q. However, this article presupposes that the right to the legal warranty was passed on from one owner to the next, right down to the current buyer seeking to file a claim for latent defects. In other words, the legal warranty must have been transferred to each owner through the chain of title. In Blais, the Court of Appeal confirmed that an unambiguous warranty exclusion clause results in a break in the chain of title. Such a clause prevents the buyer of an immovable from taking legal action directly against the former owners who sold the immovable with a legal warranty. Given the decision in Blais, it is now clear that such a clause waiving the legal warranty closes the door to any direct recourse against a seller’s predecessors, even if such predecessors sold the immovable with a legal warranty.4 In these circumstances, a buyer who acquires an immovable at their own risk will be deprived of their right to take legal action directly against the previous sellers, insofar as the warranty exclusion clause in the deed of sale is clear and unambiguous. In this case, Justice Lebel considered that the wording of the warranty exclusion clause in the deed of sale, which was binding on the plaintiff, was clear and unambiguous, and that a sale at the buyer’s “risk” excludes both the warranty of quality and the warranty of ownership, which covers the public law restrictions of article 1725 C.C.Q. Justice Lebel indicated that there was a break in the chain of title resulting from the sale at the buyer’s risk and that the plaintiff could not claim that it was still entitled to take legal action directly against any sellers other than the defendants Hamel and Drouin. He therefore ruled in favour of the defendants Marshall and Bergeron and declared the originating application against them inadmissible. Key takeaways A warranty exclusion clause in a deed of sale will only be deemed valid if it is clear and unambiguous. The mention that a sale is made “at the buyer’s risk” completely eliminates the warranty of quality provided for in article 1726 C.C.Q. and the warranty of ownership provided for in article 1725 C.C.Q. A deed of sale containing a valid warranty exclusion clause AND a mention that the sale is made “at the buyer’s risk” precludes any recourse by the buyer against the seller, but also against previous sellers. With the current state of the Quebec real estate market, the decision in Hamel, which ties in with the Court of Appeal’s teachings in Blais, certainly clarifies how case law established in recent years should be applied, in particular as concerns the effect of a warranty exclusion clause on successive sales. The members of our Litigation and Dispute Resolution group are available to advise you and answer your questions. 9348-4376 Québec inc. c. Hamel, 2022 QCCQ 5217 Blais c. Laforce, 2022 QCCA 858. General Motors Products of Canada Ltd v. Kravitz, [1979] 1 S.C.R. 790 Supra note 1, paras. 6 and 8.

On June 20, 2022, the federal government registered regulations that, as the name implies, prohibit (or restrict, in some cases) the manufacture, import and sale of certain single-use plastics that pose a threat to the environment. The Regulations will come into force on December 20, 2022, with the exception of certain provisions taking effect in the following months.1 Manufacturing, importing and selling certain single-use plastic products made entirely or partially of plastic, such as foodservice ware, checkout bags and straws, will be soon be prohibited. This regulation is expected to affect more than 250,000 Canadian businesses that sell or provide single-use plastic products, primarily in the retail, food service, hospitality and healthcare industries. The following is a comprehensive list of items that will be prohibited: Single-use plastic ring carriers designed to hold and carry beverage containers together2; Single-use plastic stir sticks designed to stir or mix beverages or to prevent liquid from spilling from the lid of its container3; Single-use plastic foodservice ware (a) designed in the form of a clamshell container, lidded container, box, cup, plate or bowl, (b) designed to serve or transport ready-to-eat food or beverages without further preparation, and (c) made from certain materials4; Single-use plastic checkout bags designed to carry purchased goods from a business and (a) whose plastic is not a fabric, or (b) whose plastic is a fabric that will break or tear, as the case may be, (i) if it is used to carry 10 kg over a distance of 53 m 100 times; (ii) if it is washed in accordance with the washing procedures specified for a single domestic wash in the International Organization for Standardization standard ISO 6330, as amended from time to time5; Single-use plastic cutlery that is formed in the shape of a fork, knife, spoon, spork or chopstick that either (a) contains polystyrene or polyethylene, or (b) changes its physical properties after being run through an electrically operated household dishwasher 100 times6; Single-use plastic straws that either (a) contain polystyrene or polyethylene, or (b) change their physical properties after being run through an electrically operated household dishwasher 100 times7. The main exceptions Single-use flexible plastic straws Single-use flexible plastic straws, i.e. those with a corrugated section that allows the straw to bend and maintain its position at various angles,8 may be manufactured and imported9. These flexible straws may also be sold in any of the following circumstances:  The sale does not take place in a commercial, industrial, or institutional setting10. This exception means that individuals can sell these flexible straws. The sale is between businesses in packages of at least 20 straws.11 The sale is made by a retail store of a package of 20 or more straws to a customer who requests it without the package being displayed in a manner that permits the customer to view the package without the help of a store employee12; The sale of straws is between a retail store and a customer, if the straw is packaged together with a beverage container and the packaging was done at a location other than the retail store13; The sale is between a care facility, such as a hospital or long-term care facility, and its patients or residents14. The export of single-use plastic items - All the manufactured single-use plastic items listed above may be manufactured, imported or sold for export15. That said, any person who manufactures or imports such items for export will be required to keep a record of certain information and documents as appropriate for each type of plastic manufactured item16. Records of the information and documents will have to be kept for at least five years in Canada17. Conclusion: an opportunity to rethink common practices In the short term, businesses will need to start thinking about how they will replace the plastic manufactured items they use. To help businesses select alternatives to single-use plastic items, the federal government has released its Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations.18 According to this document, the aim should be to reduce plastics.  Businesses may begin by considering whether a single-use plastic should be replaced or no longer provided. Only products that perform essential functions should be replaced with non-plastic equivalents. Stir sticks and straws can be eliminated most of the time. Another way to reduce waste is to opt for reusable products and packaging. Businesses are invited to rethink their products and services to provide reusable options. Reusable container programs (i.e. offering customers the option of using their own reusable containers) are a reuse option that businesses may want to consider, in particular to reduce the amount of plastic food containers. Only where reusable products are not feasible should businesses substitute a single-use plastic product with a recyclable single-use alternative. Businesses in this situation are encouraged to contact local recycling facilities to ensure that they can successfully recycle products at their end of life. Ultimately, charging consumers for certain single-use substitutes (e.g. single-use wooden or moulded fibre cutlery) may also discourage their use. Ibid, s. 1 Ibid, s. 3 Ibid, s. 6 Polystyrene foam, polyvinyl chloride, plastic containing black pigment produced through the partial or incomplete combustion of hydrocarbons or oxo-degradable plastic; Ibid. This standard is entitled Textiles – Domestic washing and drying procedures for textile testing; Ibid. Ibid. Ibid, ss. 4 and 5. Ibid, s. 1. Ibid, s. 4. Ibid, para. 5(2). Ibid, para. 5(3). Ibid, para. 5(4); According to Guidance for selecting alternatives to the single-use plastics in the proposed Single-Use Plastics Prohibition Regulations, the goal is to ensure that people with disabilities who need flexible single-use plastic straws continue to have access to them at home and can carry them to restaurants and other premises. Ibid, para. 5(5). Ibid, para. 5(6). Ibid, para. 2(2). Ibid., s. 8 Ibid, para. 9(1). https://www.canada.ca/en/environment-climate-change/services/managing-reducing-waste/consultations/proposed-single-use-plastics-prohibition-regulations-consultation-document.html

Earlier this month, Canadian Heritage Minister Pablo Rodriguez introduced Bill C-18 (Online News Act) in Parliament. This bill, which was largely inspired by similar legislation in Australia, aims to reduce bargaining imbalances between online platforms and Canadian news outlets in terms of how these “digital news intermediaries” allow news content to be accessed and shared on their platforms. If passed, the Online News Act would, among other things, require these digital platforms such as Google and Facebook to enter into fair commercial agreements with news organizations for the use and dissemination of news related content on their platforms. Bill C-18, which was introduced on April 5, 2022, has a very broad scope, and covers all Canadian journalistic organizations, regardless of the type of media (online, print, etc.), if they meet certain eligibility criteria. With respect to the “digital news intermediaries” on which the journalistic content is shared, Bill C-18 specifically targets online communication platforms such as search engines or social media networks through which news content is made available to Canadian users and which, due to their size, have a significant bargaining imbalance with news media organizations. The bill proposes certain criteria by which this situation of bargaining imbalance can be determined, including the size of the digital platform, whether the platform operates in a market that provides a strategic advantage over news organizations and whether the platform occupies a prominent position within its market. These are clearly very subjective criteria which make it difficult to precisely identify these “digital news intermediaries.” Bill C-18 also currently provides that the intermediaries themselves will be required to notify the Canadian Radio-television and Telecommunications Commission (“CRTC”) of the fact that the Act applies to them. The mandatory negotiation process is really the heart of Bill C-18. If passed in its current form, digital platform operators will be required to negotiate in good faith with Canadian media organizations to reach fair revenue sharing agreements. If the parties fail to reach an agreement at the end of the negotiation and mediation process provided for in the legislation, a panel of three arbitrators may be called upon to select the final offer made by one of the parties. For the purposes of enforceability, the arbitration panel’s decision is then deemed, to constitute an agreement entered into by the parties. Finally, Bill C-18 provides digital platforms the possibility of applying to the CRTC for an exemption from mandatory arbitration provided that their revenue sharing agreements meet the following criteria: Provide fair compensation to the news businesses for news content that is made available on their platforms; Ensure that an appropriate portion of the compensation would be used by the news businesses to support the production of local, regional and national news content; Do not allow corporate influence to undermine the freedom of expression and journalistic independence enjoyed by news outlets; Contribute to the sustainability of Canada’s digital news marketplace; Ensure support for independent local news businesses, and ensure that a significant portion of independent local news businesses benefit from the deals; and Reflect the diversity of the Canadian news marketplace, including diversity with respect to language, racialized groups, Indigenous communities, local news and business models. A bill of this scope will certainly be studied very closely by the members of Parliament, and it would not be surprising if significant amendments were made during this process. We believe that some clarifications would be welcome, particularly as to the precise identity of businesses that will be considered “digital information intermediaries” for the purposes of the Online News Act.