Barbeau, Evans & Goldstein – Law Blog

If you have ever had a niggling feeling that you should get around to writing your Last Will and Testament, you may be surprised to know that there are a couple of other documents you should also consider in order to plan for incapacity (if that should happen).

Having a Representation Agreement and Power of Attorney can ensure that if you became incapacitated in an accident, diagnosed with dementia, or are otherwise unable to make decisions regarding yourself, you and your estate will be looked after as you direct in those documents.

Should you become incapacitated without the above-noted documents and your family is left trying to take care of you, it makes things very difficult if it is not clear who can make decisions regarding your healthcare (as set out in a Representation Agreement).  In addition, it is also difficult for your family to get you the care you need if no-one has authority (through a Power of Attorney) to access your bank accounts or capital to pay for it.

Your family members may be left with no option than to apply to the court for Committee of your estate and person.  This process can be anything but straightforward if there is discontent between family members and the Committee is contested it can leave you in limbo somewhere while the application goes through the court process. If no family members are willing or able to apply you could have the Public Guardian and Trustee appointed as your Committee, however your estate will be responsible for their fees (which are approximately 5% of the value of your estate).

Turning your mind to having these documents prepared for you when you are healthy can save your family a lot of time, effort and money and can ensure that if the worst was to happen, at least your family has some direction from you.

Should you wish to discuss any estate planning requirements you may have we would be happy to assist you.

A recent landmark decision of Fundy Settlement v. Canada, 2012 SCC 14, issued by the Supreme Court of Canada (the “SCC”) on April 12, 2012, has clarified the rules for determining where a trust is resident for the purposes of the Income Tax Act (Canada).

The SCC, in its reasoning, set out that the determination of the residency of a trust for the purposes of the Income Tax Act,  should be made following the established test for the residency of corporations.  Residency for corporations is determined to be where the central control and management of the corporation actually takes place.

In this case, the St. Michael Trust Corp. (a corporation resident in Barbados) was the trustee (the “Trustee”) of two trusts that were originally settled in the Caribbean.  The beneficiaries of the trusts were residents of Canada. The trusts disposed of shares resulting in $152 million dollars being withheld by the purchaser to be remitted to Canada Revenue Agency (“CRA”) as withholding tax on capital gains that were realized on the sale.

The Trustee and the Minister of National Revenue (the “Minister”) had a clear difference of opinion as to if the withholding tax should be paid or not and the deciding issue was based on where the trust was determined to reside.  The Trustee argued that the residence of the trust would be determined to be the same place as the residence of the trustee, which in this case would be Barbados.  Any capital gains realized on the sale would be taxed under the law of Barbados in accordance with a tax treaty between Canada and Barbados.  It just so happens that Barbados does not have capital gains tax and the amount of tax payable would therefore be nil.

The Minister did not agree with this view and was of the opinion that the trusts are resident in Canada because the central management and control of the trusts was carried out by the beneficiaries, who were resident in Canada.

The SCC of Canada ultimately decided that the test to determine residency of corporations would also be applied to the test to determine residency of trusts. Therefore the Minister’s argument prevailed and it was found, on the facts, that as the beneficiaries had exercised the main management and control of the trust from Canada, the capital gains realized by the trust was determined to be taxable in Canada.

What does this mean for overseas trusts that have Canadian beneficiaries? Ultimately, the determination of residency will be based on the facts applicable to each case.  Beneficiaries of overseas trusts who are located in Canada will need to ensure that the overseas trustee carries out the central management and control of the trust.  In this case the trustee had a limited administrative role with little or no responsibility beyond that, they would execute documents when required, but the beneficiaries made the decisions.

This decision from the SCC does not mean that all overseas trusts will be taxed in accordance with Canadian laws but care needs to be taken so that the beneficiaries do not exercise the management and control of the trust from Canada.

Should you have any trust related questions we would be happy to assist you.

A recent decision from the National Arbitration Forum demonstrates how Sir Richard Branson was caught out and embarrassed when a new Sponsored Top Level Domain (“sTLD”) was registered along with his name. sTLD’s are a select domains that have been applied for by sponsors and released by the Internet Corporation for Assigned Names and Numbers (“ICANN”).

Mr. Sean Truman, located in Australia, registered the domain name “www.richardbranson.xxx” (the “Domain Name”) a few days after it became available for public registration on December 10, 2011.  The sTLD “.xxx” is associated with the adult industry.  Sir Richard Branson, upon finding out about the registration filed a complaint with the National Arbitration Forum.

Mr. Truman alleged that he was not involved in the adult industry, but had simply registered the Domain Name as a ‘souvenir’.  However, Sir Richard Branson was able to prove the required elements of the ICANN Dispute Resolution Policy, in particular he was able to prove that he holds the common law trademark rights in his name.  Subsequently, the National Arbitration Forum decision transferred the Domain Name to Sir Richard.

Since the “.xxx” domains were introduced in late 2011, there has only been one other complaint filed with The National Arbitration Forum regarding registration of a “.xxx” domain, but it is likely to become increasingly common as domain name squatters register the names of high profile individuals along with the “.xxx” sTLD.

This new sTLD domain poses a real risk to businesses and individuals that can have their reputation tarnished by a third party registering their name along with “.xxx”. Sir. Richard Branson was able to get control over the Domain Name because he was able to prove that he had common law trademark rights in his name. It will be difficult for many people to be successful with such an argument.

One way to try and protect yourself or your business, is to register any embarrassing sTLD domains yourself. Although generally you must be a member of the ‘adult industry community’ in order to register a “.xxx” domain name, they also accept registrations from non-members who wish to protect their intellectual property.

Should you have any domain name or trademark issues we would be happy to assist you.

What happens when you register a Trademark and then never use it? Sometimes this may result in your registered trademark being expunged from the register of trademarks.

This is the situation TSA Stores, Inc., the second largest sporting goods retailer in the world, found themselves in[1].  They had six trademarks registered with the Canadian Intellectual Property Office when Heenan Blaikie LLP, on behalf of their clients, requested that the Registrar issue notices pursuant to section 45 of the Trade-marks Act requiring the owner of the trademarks to show evidence of use of the trademark in Canada during a three year period immediately preceding the date of the notice.

TSA Stores Inc. appealed to the Federal Court after the Registrar of Trademarks decided that all six trademarks should be expunged from the Register. TSA Stores Inc., agreed that two of the six trademarks had not been used during the said three year period, and that they should be expunged. But they insisted that four of the trademarks were in use on their website.

TSA Stores Inc., operated a website which sold sporting goods to Canadian consumers, although it was based in the United States.  There were no physical TSA Stores located in Canada.

TSA Stores Inc. contended that the the use of the four trademarks on the TSA Stores website resulted in use in Canada. They were able to demonstrate that their United States based website was being visited by Canadian customers who were then having goods sold through the website shipped to them in Canada. The court accepted that this constituted evidence of use in Canada during the three year period.

The result was that they were allowed to keep the four of their trademarks registered, although amendments were made to two of the trademark descriptions pursuant to the judgement.

Should you have any questions concerning trademarks, please do not hesitate to contact us.

Estate of James Brown  v. LAC Music – Jack Bart c/o Gregory J. Chamberlain and jamesbrown.com

A recent decision[1] rendered by the National Arbitration Forum in accordance with ICANN’s Uniform Domain Name Dispute Resolution Policy (the “Policy”), highlights the limitations of the Policy when it comes to matters that fall outside the scope of the Policy.

LAC Music (also known as LAC Management, Inc.), was allegedly contacted by the Estate of James Brown (the “Estate”) and offered to sell the jamesbrown.com domain (the “Domain Name”) to the Estate. [N.B.  LAC Management, Inc. manages the RJ & The James Brown Band, the group which performed with James Brown up until his death in 2006[2]].

The Estate proceeded to file a complaint with the National Arbitration Forum in accordance with the Policy.  In their complaint, the Estate stated that they held the common law and federal rights to the trademark “James Brown”.  They asserted that LAC Music had no rights or legitimate interest in the Domain.

In order to be successful in a Policy complaint, the Estate had to prove three elements, in accordance with Paragraph 4(a) of the Policy:

(1)          the domain name registered by the Respondent is identical or confusingly similar to a trademark or   service mark in which Complainant has rights; and

(2)          Respondent has no rights or legitimate interests in respect of the domain name; and

(3)          the domain name has been registered and is being used in bad faith.

The Estate was able to prove the first element, however, they had some trouble when it came to the third element of bad faith.  LAC Music contended that the registration of the Domain Name was obtained with the consent of James Brown and was used for legitimate business purposes during the lifetime of James Brown.

The Estate responded to LAC Music’s response with arguments surrounding the laws of agency and how they apply to LAC Music’s relationship with the late James Brown. The Estate also applied estate law to the evidence presented by LAC Music.

The panel, of three arbitrators, disregarded the agency and estate law arguments and declared that these were outside the scope of the Policy and not applicable to the arbitration proceeding.  They then continued with their analysis of the three elements and found that the Complainant had failed to prove that the Domain Name was registered in bad faith, as even the Estate admitted in their own evidence that LAC Music had registered and used the Domain Name during James Brown’s lifetime with his consent.

Where does this leave the Estate?  Although the ICANN dispute resolution process was unable to address their arguments regarding agency and estate law, a court of competent jurisdiction may still be able to consider these.  For now the Domain Name will continue to be owned by LAC Music.

Should you have any trademark or domain name queries, we would be pleased to discuss them with you.

As of January 9, 2012, it will be possible to establish an Individual (Single-Member) Limited Liability Company (“EIRELI”) in Brazil, following an amendment to the Brazilian Civil Code (Law No. 12.441).  While the EIRELI represents an improvement in simplifying corporate formation in Brazil, by allowing the separation of assets (i.e. assets of the company versus personal assets) and by eliminating the legal requirement of a minimum of two partners/shareholders (i.e. one shareholder is now permitted), it does not address the greater issues of effective and varied restrictions on foreign access to the Brazilian market, and makes no change to the stifling bureaucratic burden imposed on Brazilian business generally.  By way of background, the World Bank ranks Brazil 120^th out of 183 countries, on the issue of ease of commencing business.  As the economic expansion in Brazil continues, further economic liberalization will inevitably and necessarily follow.

Many United States (“US”) citizens living around the world may not be aware of the US tax reporting requirements that every US citizen, regardless of where they live in the world, has an obligation to file a federal US income tax return declaring their worldwide income (apart from a few exceptions).

The United States income tax requirements are different to other countries, such as Canada, which require residents to file income tax returns only if they are resident in that country.  The US requires every citizen who earns over an exemption amount (currently around USD$10,000) to file a Form 1040 every year, reporting their total worldwide income to the Internal Revenue Service (the “IRS”).  If you are a US citizen living outside of the United States, this will likely mean that you will need to file two income tax returns, one in the United States and one in the country you are resident in.

For the last couple of years the IRS has been cracking down on US citizens living abroad and allowing several amnesty reporting periods for people to bring themselves into compliance with the United States tax reporting requirements.

Although the amnesty periods have now passed, it is up to the discretion of the IRS to decide if penalties will be imposed for failure to file federal income tax returns or to pay tax.  Individuals making late filings or tax payments must show that their failure to file was due to “reasonable cause and not wilful neglect”. Reasonable cause can be considered based on the circumstances of each case.  An IRS official will look at the individual’s education, if they have previously been subject to the tax, if they have been penalized before, if there have been any changes in the tax forms or law that they could not be reasonably expected to know and the level of complexity of a tax or compliance issue.

It is important for US citizens to note that there is an earned income exclusion which exempts a certain amount of income from taxation in the United States.  In 2011 the amount of foreign income excluded from taxation may be up to USD $92,900.00 if certain conditions are met.

Any United States citizens who are living out of the United States and who have not attended to filing income tax returns in the United States in prior years, should consult a cross-border tax specialist and attend to those filings as soon as possible. The 2011 federal tax return is due on April 31, 2012 and a two month extension may be possible if you are living outside of the United States.

More information can be found at the IRS website here.

What do you do when you find that someone has obtained the same domain name as you and is using it to compete or drive customers away from your website?

In this situation, the results or outcome of any action you take against the other party will depend on if you have a registered trademark which is the same or very similar to the domain name in question (the “Infringing Domain”).

Having a registered trademark allows you to effectively use the procedure set out under the Internet Corporation for Assigned Names and Numbers (“ICANN”).  This is an international body set up to protect, amongst other things, the unlawful registration of domain names.  When every domain name is registered with an accredited registrar (such as Godaddy, Tuscows, etc) the person registering the domain agrees to following the mandatory ICANN’s dispute policy procedure should a dispute arise following the registration.

This procedure is an arbitration dispute resolution process which is run by ICANN providers.  These providers follow the ICANN’s rules and procedure to resolve domain name disputes.

What is the ICANN dispute procedure?

If you find that someone has registered an Infringing Domain, you can submit a complaint to a ICANN’s service provider.  That provider runs the dispute procedure. They ensure that the registered owner of the Infringing Domain is provided with a copy of the complaint and gives them a time limit to respond.  Your complaint must prove that the registered owner of the Infringing Domain has breached your registered (or common-law) trademark and that the Infringing Domain name is:

a)      Identical or confusingly similar to the trademark or servicemark that you have rights in;

b)      The registered owner of the Infringing Domain Name has no rights or legitimate interest in the Infringing Domain; and

c)      The Infringing Domain has been registered and is being used in bad faith.

All three of these elements must be proven to reach a finding in your favour.  If you are successful then you can request either that the Infringing Domain is cancelled or transferred to you.  The only way to protect the Infringing Domain from being registered to someone else is to request that it is transferred to you if the panel reaches a decision in your favour.

The transfer process is relatively straightforward as the registrar of the Infringing Domain contacts you directly to arrange the transfer.  The original registered owner does not have to consent to the transfer.

There are several advantages of following the ICANN’s procedure, the main advantage being that once you have filed a complaint it places a ‘freeze’ on the registration of the Infringing Domain, so the owner is unable to transfer it until the complaint has been resolved.  In addition, the process is timely.  Most complaints seem to be resolved within two months of filing the original complaint.  This is significantly quicker than taking legal action through the courts.  The cost of the process is relatively inexpensive compared to commencing litigation.

We have recent experience using the ICANN dispute resolution process to successfully transfer a Infringing Domain to our clients.  This result was mainly due to their ownership of a trademark that was part of the Infringing Domain.

Should you have any trademark or domain name queries, we would be pleased to discuss them with you.

The application of the Federal legislation encroaching on solicitor-client privilege has, in recent years, become a more significant issue for lawyers and their clients.  In that regard, a recent British Columbia Supreme Court decision has upheld the importance of solicitor-client privilege, as a fundamental aspect of the lawyer and client relationship.

In a September 2011 decision, the B.C. Supreme Court held that provisions of the federal Proceeds of Crime (Money Laundering) and Terrorist Financing Act and related regulations are constitutionally invalid to the extent that they apply to legal counsel and law firms. At issue was a government proposal to require lawyers to collect and maintain records on the identity of their clients when acting as financial intermediaries on behalf of clients.

The decision underscores the importance of solicitor-client privilege and confidence in our system of justice. It also serves to strengthen the role of self-regulation, recognizing that law societies are best situated to regulate the conduct of lawyers because they can do so in the public interest, while at the same time maintaining protections for solicitor-client privilege.

While it is highly likely that this issue will receive further judicial consideration, this decision is a very significant and positive one, upholding a basic legal right for the protection of client confidentiality privilege.

Changes are on the horizon for those operating in the “not-for-profit” sector in Canada.  Although the Canada Not-for-profit Corporations Act (the “CNCA”) received Royal Assent on June 23, 2009, it has not yet been proclaimed into force. The Government of Canada is currently engaged in a regulatory approval process regarding the implementation of the CNCA, with the anticipated introduction into force of the CNCA to take place in the Fall of 2011.  To ensure that your not-for-profit organization (“NPO”) is prepared for the CNCA, and that a timely and informed decision can be made regarding continuance under the CNCA, NPOs should be aware of the requirements for continuation under the CNCA.

A NPO may apply for a certificate of continuance if it is so authorized and if the NPO satisfies the requirements for incorporation under the CNCA.  In that regard, the following corporations may continue under the CNCA:

i)      corporations incorporated under Part II of the Canada Corporations Act (the “CCA”)[1];

ii)    Canadian Special Act Corporations; and,

iii)  corporations formed under provincial, territorial or foreign law (if so authorized by the laws of their jurisdiction).

If an NPO wishes to continue under the CNCA, without making any amendments to their charter[2], the NPO would require only the approval of its board of directors to apply for a certificate of continuance. A special resolution of members authorizing the directors to apply for a certificate of continuance will however be required where the NPO makes any further amendment to its charter that is permitted under the CNCA.

In addition to the articles of continuance, a NPO must file a notice of registered office and a notice of directors. There is no requirement to file the by-laws of the NPO with the articles of continuance and there will be no fee for filing the articles. On receipt of the articles of continuance, Corporations Canada will issue a certificate of continuance.

The information required in the articles of continuance, as set out below, mirrors that of the articles of incorporation:

i)      The name of the corporation;

ii)    The province where the registered office is to be situated;

iii)  The classes, or regional or other groups, of members that the corporation is authorized to establish and, if there are two or more classes or groups, any voting rights attaching to each of those classes or groups;

iv)   The number of directors or the minimum and maximum number of directors;

v)     Any restrictions on the activities that the corporation may carry on;

vi)   A statement of the purpose of the corporation; and

vii) A statement concerning the distribution of property remaining on dissolution.

While some NPOs will carry most of the content of their letters patent over to the articles of incorporation, others will want to take the opportunity to implement overdue corporate or governance changes.

It will also be necessary for the NPO to consider the classes, or regional or other groups of members of the NPO, the number of directors or the minimum and maximum number of directors of the CNCA corporation, as well as inclusion in their articles regarding limitations on the activities they may carry on for the purpose of evidencing their non-profit status or maintaining their charitable registration under the Income Tax Act (Canada), and revisions to their by-laws (although the bylaws will no longer to subject to ministerial approval).

With regard to the application of the Income Tax Act (Canada), CRA is expected to release a policy directive or other information to explain how the agency proposes to deal with federally incorporated entities continuing under the CNCA and what will be required of them in respect of the preparation and filing of their articles of continuance.

Once a NPO is continued under the CNCA, the articles of continuance will be deemed to be the articles of incorporation of the continued corporation and the certificate of continuance will replace the letters patent (or other form of charter or incorporation instrument). Thereafter, the NPO is subject to the CNCA as if it had been incorporated under the CNCA.

We would be happy to assist your NPOs transition from the CCA to the new CNCA.  If you require assistance in this regard, please feel free to contacts us to discuss your needs in further detail.