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By Elikem Deley - 2017/28/08

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On December 5, 2016, the Ontario Legislature passed new legislation, called the All Families Are Equal Act, 2016 S.O. 2016, c.23 (Bill 28) (“the Act”).  This new provincial Act, which came into effect on January 1, 2017, is a tremendous move forward for Ontario’s diverse families.

The Act has amended a number of different acts, including the Children’s Law Reform Act, the Family Law Act and the Succession Law Reform Act, by changing the rules of parentage, and expanding the definition of family.  The Ontario government drafted Bill 28, which became the Act, to reflect the composition of the modern family.  These new rules of parentage have been expanded to include children conceived through assisted reproduction and also changed the definition of birth parents to include same sex partners.  Formerly, there were administrative hurdles for same sex parents in registering the birth of their children because the registration process was only set up for a mother and father.

The Act also amended the definitions of “child” and “spouse” in the Succession Law Reform Act.  The definition of child has changed to include posthumously conceived children, the effect of which being that a posthumously conceived child could benefit from the Estate of a deceased parent.  Under the Succession Law Reform Act, children and spouses may bring a claim against the estate of a deceased if sufficient provision was not made for their support.  There are a number of criteria that must be met before a judge will award a dependant support, including that the deceased was supporting, or had an actual obligation to pay support, immediately before death.

With the change of the definition of spouse under the Act, there was an inadvertent omission.  Divorced spouses were excluded from the definition of “spouse” and were therefore barred from being able to bring a claim for dependant support, which they were previously allowed to do.  This had a significant impact on the enforcement of the deceased’s support obligations to their former spouse.    [*Update: The 2017 Ontario Budget introduced the Stronger, Healthier Ontario Act (Budget Measures), 2017, S.O. 2017, c.8  to amend the definition of “spouse” to include divorced spouses for the purpose of dependant support.  These changes received Royal Assent and came into effect on May 17, 2017.  As it only came into effect on May 17, 2017, any dependant support claims that were brought by a former spouse against an Estate between January 1, 2017 and May 17, 2017, may not be allowed to proceed.  We will have to wait to see how the court considers dependant support claims caught in this gap period.*]

The changes to the new Act mean that a posthumously conceived child could be taken into account when considering whether adequate support has been afforded to the dependants of the deceased.  Due to the newness of this amendment, the circumstances under which a posthumously conceived child would be considered by the court have not yet been determined.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Elikem Deley is a member of the estates group and practises in the areas of wills, powers of attorney, estate administration and estate litigation.

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By Yervant Boghossian - 2017/28/08

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Many spouses are now choosing to enter into domestic contracts, either at the outset, during, or after their marriage or cohabitation has ended. The negotiation and drafting of these domestic contacts are taking place under various situations and fact patterns. As a result, much litigation has revolved around a party or parties seeking to set aside a domestic contract under the various legal grounds discussed in this article below. 

 Setting Aside Domestic Contracts “in accordance with the law of contract”

Subsection 56(4)(c) of the Family Law Act provides that domestic contracts may be set aside in accordance with the law of contract. Some of these common law grounds include duress, undue influence, misrepresentation, mistake, and non est factum.

The onus is on the person alleging that a contract is invalid to prove his or her case.

Duress

Duress means coercion of the will or giving no realistic alternative but to submit to the pressure being exerted. To prove duress, the applicant must show that he or she was compelled to enter into the final agreement out of fear of actual or threatened personal injury or confinement. There is no evidence to support a claim of duress where there is no attempt by one spouse to dominate the will of the other at the time of execution of the contract. The reality of the negotiations should be considered to determine if there is evidence to support a finding of duress.

Undue Influence

A person seeking to set aside a contract because of undue influence must prove that, as a result of a pre-existing relationship, the other party to the contract had control/power over him or her and took advantage of his/her position to extract an unfair bargain. The court must inquire into whether (a) the agreement was an improvident bargain; and (b) if so, was there inequality of bargaining power.

The test of unconscionability was formulated by the Court of Appeal for Ontario in Rosen v. Rosen. In order for a contract to be set aside on the basis of unconscionability, there must be “an inequality between the parties and a preying of one upon the other which when combined with improvidence, cast the onus upon the other party of acting with scrupulous care for the welfare and interests of the other.” To prove unconscionability, a person must prove that he or she was in a vulnerable position at the time of contracting and that the other party was aware of this and took advantage of the situation to extract a bargain that is grossly unfair. The objecting party must meet a high burden of proof.

In Simpkins v. Simpkins, the Court of Appeal for Ontario found that, “in many family law settings, a more lenient test may pertain and the circumstances of vulnerability of oppression do not have to meet the higher threshold of unconscionability as the term is understood in the common law of contract.”

Misrepresentation

In Dougherty v. Dougherty, the court noted that “in contract law, a misrepresentation must be material in the sense that a reasonable person would consider it relevant to the decision to enter the agreement in question. In addition, the material misrepresentation must have constituted an inducement to enter the agreement upon which the party relied.”

Mistake

Where the existence of mistake has been alleged, the courts must balance the conflicting principles of preserving the sanctity of contracts, and of recognizing circumstances where holding a party to a bargain resulting from a fundamental mistake would be unjust.

The court must initially determine whether or not there was in fact an operative mistake. Before the court can turn to the rules as to mistake, whether at common law or in equity, it must determine whether the contract itself, by express or implied condition precedent or otherwise, provides who bears the risk of the relevant mistake.

Non Est Factum

Non est factum, one of the grounds in accordance with the law of contract, is restated in section 56 of the Family Law Act as a party’s failure to “understand the nature or consequences” of the contract.

Financial Disclosure

Of fundamental importance is the requirement for financial disclosure. There is a positive obligation on each of the parties to a domestic contract to make full and complete financial disclosure during the negotiations, which disclosure is to be made before signing a domestic contract.  If a party fails “to disclose significant assets, or significant debts or other liabilities, existing when the domestic contract was made,” the contract or a provision in it may be set aside. A failure to make disclosure is not justified by pointing out that no one asked for it. The onus is on the party himself or herself to come forward with the information without being asked.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Yervant Boghossian is a lawyer in the family law group at SorbaraLaw, practising in our Guelph office.

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By James M. Peluch - 2017/28/08

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In the current era of “Big Data” and information overload, law is no different from other aspects of life in the sense that one must be careful not to cut corners impetuously due to the oversimplification and unwary distillation of complex legal matters. Self-represented litigants in family law may be particularly vulnerable when it comes to the issue of retroactive support when conducting an internet search. While the idea of using Google is perhaps more trustworthy than resorting to an unpredictable odyssey through the neighbourhood grapevine, even the case law found on the internet can be challenging for some.

The 2006 Supreme Court of Canada decision in DBS v SRG, 2006 SCC 37 has often been cited as the seminal authority for a (maligned) three-year rule on ordering retroactive child support. On December 13, 2016, the Ontario Court of Appeal released its decision in Wharry v Wharry, where it had to deal with the trial judge’s decision in 2015 regarding retroactive child support. At trial, the judge noted there was a “judicially imposed three-year limitation on retroactive child support” when he made reference to the Supreme Court of Canada decision in DBS. The trial judge effectively allowed child support to be only calculated from 2012 up to the trial date in 2015, even though the parents separated in 2006 and commenced litigation in 2007. The appellant mother ultimately was successful in her argument on this issue at the Ontario Court of Appeal.  In its reasoning, the Ontario Court of Appeal correctly followed DBS and considered the four factors that had to be weighed to determine whether the trial judge was correct in deciding on the overall appropriateness of retroactive child support. Having done so, the trial judge then had to go back in time to start the clock running, so to speak. The trial judge had four dates to choose from: 1) the date of the court application, 2) the date from which child support ought to have been increased, 3) the date the payor received effective or constructive notice of the request for support from the recipient, 4) the date the payor received formal notice.

In DBS, the Supreme Court of Canada stated that the date of “effective notice” will generally serve as a default option when choosing a date of retroactivity since it served as a fair balance between certainty and flexibility. Where it becomes complicated is that DBS also stipulated that even though there may be a general default to effective notice, it will usually be inappropriate to make a support order retroactive to a date more than three years before formal notice was given. In Wharry, the appellant mother filed her request for child support in March of 2007, shortly after the separation date. In other words, she gave both effective and formal notice eight years before the trial in 2015; so, for the trial judge to limit her support from 2012 to 2015 was an error. In Wharry, the payor (father) did begin his child support payments of $360 per month under an interim order dated July 11, 2007 predicated on an income of $25,000 per year, however, the interim payments were not based on persuasive evidence of the father’s income.  Thus, the Ontario Court of Appeal felt the trial judge should have overridden the interim support payments made for the period of 2007 to 2012.

The misapplication of the three-year rule in DBS appears not only in Wharry but in many other cases involving retroactive support. It is clearly not a simple issue of just starting the clock 36 months before the trial date and then reverting to the Child Support Guidelines. Although the Guidelines were designed to promote fairness and predictability, the concept of retroactive child support in DBS must be remembered as a rule to promote or advance parties’ support discussions during the time between effective notice and formal notice, not as a “one size fits all” type of rule to simply limit retroactive claims to an artificial three-year maximum.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Jim Peluch is a lawyer at SorbaraLaw, practising predominantly family law in the firm’s Guelph office

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By Jackie Johnson - 2017/28/08

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If you are involved in a private Ontario corporation, whether as a director, officer or shareholder, you may be aware that there are a number of record-keeping requirements that need to be met.  These requirements include maintaining an up-to-date list of the directors, officers and shareholders of the corporation, as well as the details of the head office of the corporation, and all share transfers that take place.  These requirements are set out in the Business Corporations Act (Ontario) (the “Act”).

Recent amendments to the Act have created a new register that needs to be maintained by a corporation: a corporate property register.  These amendments came into effect in December 2016, and may become quite a burden on Ontario corporations that frequently buy and/or sell real property, such as developers.

The purpose of this new requirement is to ensure that a corporation’s interest in land is known, and is transferred or dealt with prior to a corporation dissolving.  It should be noted that this requirement applies only to real property ownership in Ontario; however, ownership is not defined, and as such, may broadly include registered interests, beneficial interests, as well as leasehold interests.  This is yet to be determined.

The information that is to be included on the property register is as follows:

  • The date the real property was acquired (and subsequently disposed of);
  • The municipal address;
  • The registry or land titles division where the real property is, and the PIN (property identifier number);
  • The legal description of the real property; and

All corporations incorporated prior to December 10, 2016 must be in compliance with the above by December 10, 2018.  If corporations were incorporated after December 10, 2016 this is a requirement that should already be met.  Failure to comply with these requirements may result in the corporation being found guilty of an offence, and liable for a penalty of up to $25,000.00, in addition to potential individual director/officer liability.

Please contact our corporate department to discuss this new requirement, or to provide information on real property interests to be added to your corporation’s property register.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Jackie Johnson is a lawyer in the Intellectual Property group and a member of the SorbaraLaw litigation group, practising in the areas of commercial litigation and employment law.

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By Rade Sajic - 2017/28/08

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In 2005, the Ontario government passed the Accessibility for Ontarians with Disabilities Act (“the Act” or “AODA”).  The AODA is tightly connected to the Ontario Human Rights code, as it ensures that all Ontarians have equal access to organizations providing goods and services in Ontario.  The AODA establishes a standard for accessibility.  All businesses and organizations are required to comply with the AODA in an effort to make Ontario accessible for all Ontarians.  The businesses and organizations captured by the AODA include every business and organization in the public and private sectors in the Province of Ontario.  This applies to housing, places of employment, and public retailers, to name a few.

The AODA sets an accessibility standard that businesses and organizations must meet.  It requires businesses and organizations to identify, remove and prevent barriers for people with disabilities.  It is an attitude change, which empowers business and organization employees to be confident when providing customer service to people with disabilities.  Disability is more than physical, and includes, mental impairment, learning dysfunction or disability, mental disorder, and any injury or disability for which benefits were claimed or received.  The standards that need to be met are based on the determination made by the Ontario’s Accessibility Standards Advisory Council/Standards Development Committee (the “committee”).  In defining the standard, the Committee first determined a set of goals, and targets for that standard.  Once the goals and targets were set, the committee subsequently set policies that would achieve that standard in a manner that was not overly burdensome to persons and organizations.

To ensure compliance and reduce the burden with meeting the AODA, the Act sets accessibility standards that are to be phased in over time.  The phasing in of the accessibility standards started in 2011 and is set to be complete by 2025.  The rolling phases incorporate two key components.  The first component deals with understanding accessibility.  All businesses and organizations must create “an accessible customer service plan” that outlines how their business or organization will provide service to people with disabilities.  This includes identifying potential barriers and figuring out ways of dealing with them.  The second component deals with implementing the accessible customer service plan.  Businesses and organizations are required to train their staff to provide accessible customer service.  Staff are required to be trained on how to communicate with people with different types of disabilities and how to interact with people who use assistive devices or service animals.

Within the AODA, businesses and organizations are divided into two categories: large businesses/organizations (with 50+ employees), and small businesses/organizations (with 1-49 employees).  The size of the business and organization determines the type of accessibility standard that is to be phased in at any given year.  As we are currently in the sixth (6th) year of the phasing in of AODA accessibility standards, businesses and organizations should have already implemented a number of the accessibility standards.  For example, in 2016 compliance with the AODA required small and large businesses and organizations to provide accessible customer service, provide accessible transportation services, provide accessible emergency information, create an accessibility policy multi-year plan, buy goods, services or facilities that are accessible, make websites accessible, train staff on accessibility laws, provide assessible forms of feedback, make employment practices accessible, and file multiple Accessibility Compliance Reports.

The current 2017 requirements are minimal, as large and small businesses/organizations are required to file an Accessibility Compliance Report.

Enforcement of the AODA has been minimal, but there are plans to target large retailers with accessibility blitzes.  To ensure compliance, it is recommended that all businesses and organizations develop and have in place written processes for the development of accommodation plans. These written accommodation plans should include the manner in which an employee can request an evaluation, the means in which the employee is assessed, how the employee took part in the accommodation plan, how it is determined if the employer can accommodate, and if so, what was done to accommodate the employee, the steps taken to protect the privacy of the employee, the frequency of accommodation reviewal, and, if accommodation is denied, in what manner and for what reasons.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Rade Sajic is a lawyer in the Intellectual Property group and a member of the SorbaraLaw litigation group, practising in the areas of commercial litigation and employment law.

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By Yervant Boghossian - 2017/24/03

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As an increasing number of families in Ontario are experiencing conflict or a devastating event in their relationship, more and more third parties, including grandparents, are finding themselves in the middle of that event, seeking custody of and access to the child(ren) of that relationship. As a result, litigation has focused on the issue of custody and access rights of third parties and grandparents, which this article seeks to address.

The “Best Interests of the Child” Threshold

In determining who should have custody of the children, and what terms of access should be given to the other parent, the best interests of the child is the sole consideration under the Divorce Act (see s. 16) and Children’s Law Reform Act (see s. 24). Any inquiry is always focused on this issue.

Third Party Access

Access is for the benefit of the child. It follows from this that persons who are involved in the life of the child should be allowed access where their presence is in the best interests of the child. Both federal and provincial legislation contain provisions which allow persons other than parents to seek such access.

Under subsection 16(4) of the Divorce Act, the Court may make an order granting access to any child of the marriage (as well as custody) to “any one or more persons”. However, if the applicant is not a parent, the application may be made only with leave of the court (Divorce Act, s. 16(3)).

Similar powers are given to the Court under section 28(a) of the Children’s Law Reform Act to grant access to a child to one or more “persons” in proceedings not involving divorce. As well, section 21 of the Children’s Law Reform Act states that a parent of a child or any other person, including a grandparent, may apply to a Court for an order respecting custody of or access to the child or determining any aspect of the incidents of custody of the child.

Substantively, non-parents seeking access must first establish an existing close and warm relationship with the child. The Ontario Court of Appeal has held that the application cannot be used to create or establish a relationship for the first time (W.(C.G.) v. J.(M.)), but where there is an existing relationship beneficial to the child, the access requested may be found to be in the best interests of the child. In most cases, it is in the child’s best interest to keep the maternal and paternal and other links open as much as possible, so that the child is aware of the wider base of affection that exists and support networks that may be utilized.

Access by third parties, however involved they may be with the child’s life, should not be taken for granted. In Morecraft v. Morecraft, the New Brunswick Court of Queen’s Bench indicated, “While the ‘best interests’ must remain paramount, the considerations revolving around the issue of access to third parties, including blood relatives, are far different from those involving natural parents. There is no automatic right of access to third parties. Great weight must be given to the custodial parents and care must be taken not to unduly interfere with the parents’ inherent right to determine the course of their child’s upbringing.” Although this case is not binding in Ontario, it has been quoted with approval in the Ontario Courts.

The onus of proof lies on the non-parent to demonstrate why access is in the child’s best interests. The Court of Appeal for Ontario has held that “in the absence of any evidence that the parents are behaving in a way which demonstrated an inability to act in accordance with the best interests of their children, their right to make decisions and judgments on their children’s behalf should be respected, including decisions about whom they see, how often, and under what circumstances they see them.”

Grandparents – Custody and Access

The Ontario case of Moreau v. Cody, succinctly summarizes the law arising from access claims by grandparents:

“Firstly, clearly grandparents do not have a specific right to access. It is a right of the children and is to be exercised in their best interests. Secondly, the right of a grandparent to access is different than the right of a parent to access. The right of a parent to access is enshrined in the legislation, under the Children’s Law Reform Act in this case. Thirdly, in the normal course of events, the law recognizes that it is of benefit for children to have contact with their grandparents and extended family members. The importance of the extended family is recognized, and it is also recognized that children should have the opportunity to know their heritage and their background through their extended family members. Fourthly, a great deal of weight should be given to the wishes of the custodial parent.”

Whether the Court will interfere with a parent’s decision to deny access appears to depend on the level of acrimony that exists between the parent and the grandparents. If the friction does not negatively impact on the children, typically some form of access will be ordered. If, however, tension is high, deference will be given to the parent’s right to make decisions about who the child sees.

As with all custody and access disputes, the best interests of the child test will prevail. In most cases, however, a grandparent or other non-party will only be successful if the child has been living with him or her and the parent has effectively abandoned the child or is otherwise seen to be unfit in order to justify granting custody to a third-party.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Yervant Boghossian is a lawyer in the family law group at SorbaraLaw, practising in our Guelph office.

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By Elikem Deley - 2017/24/03

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Imagine that you are an Estate Trustee for a family member or friend’s Estate, and that she has asked you to cremate her body and to dispose of the ashes in a public place that is special to her. Would you do it?  An opera-lover from Dallas, Texas did exactly this for his friend: he brought his opera-loving departed friend’s ashes to a performance of William Tell at the Metropolitan Opera in New York City, and sprinkled the ashes into the orchestra pit during the second intermission.  Not surprisingly, the rest of the performance was cancelled and a police investigation ensued.  The man, who later apologized for his ill-advised trip to the opera, simply wanted to do what his friend had requested.

In Ontario, an Estate Trustee has control of the deceased’s body, and has the ultimate authority on the disposal of the body, as long as it does not contravene any laws.  The Criminal Code, R.S.C., 1985, c. C-46 (Federal) and the Funeral, Burial and Cremation Services Act, 2002, S.O. 2002, c.33 (Provincial) outline what can or cannot be done with human remains.  Permission must be sought from the relevant authority before the disposal of human remains, except for the scattering of ashes on unoccupied Crown land (provincial park, conservation areas, Great Lakes etc.) where there are no signs posted prohibiting the act.  The services relating to a cemetery in Ontario are regulated by the Cemeteries Act (Revised), R.S.O. 1990, c. C.4.  The Ministry of Government and Consumer Services is the provincial authority on cemeteries and funerals.  As long as the above laws are followed, an Estate Trustee can decide whether to cremate or bury the deceased’s body in a casket, even if it is contrary to the deceased’s wishes as outlined in the Will or otherwise, the deceased’s religious or cultural beliefs, or the family’s wishes.

Apart from an Estate Trustee’s ability to stray from a Will with respect to funeral plans, an Estate Trustee takes his or her authority from the Will and does not generally have any other discretion when distributing the Estate.  He or she must act in accordance with the terms outlined in the Will as well as in accordance with the laws of the province.  Even if the testator has discussed post-mortem plans with the Estate Trustee, like making a gift to someone not named in the Will, the Estate Trustee cannot deviate from the distribution outlined in the Will.  If the Estate Trustee does not follow the Will and the relevant succession laws exactly, and distributes any of the funds of the Estate to a person who is not a beneficiary under the Will, the Estate Trustee may be personally liable to the Estate’s beneficiaries for the amounts incorrectly distributed.

The only way to ensure that a testator’s Estate plans are followed is to have a valid Will.  It is not enough for someone to simply hold a discussion with loved ones as to what they wish to happen after their death.  If there is no Will, or if the Will is deficient in some way that it renders one or more of the clauses invalid, there will be an intestacy.  When there is an intestacy in Ontario, the Succession Law Reform Act dictates who may step forward to be the Estate Trustee and how the Estate will be divided.  This means that without a Will, the person appointed to administer the Estate may not be the person the deceased would have chosen, and that person will have the authority to dispose of the deceased’s body.  In addition, the Estate may be distributed to family members whom the deceased had no intention to benefit.  Just as with a Will, when there is an intestacy, the Estate Trustee has no discretion or authority to deviate from what is outlined in the Succession Law Reform Act.  An Estate Trustee can be held personally liable for acting contrary to Ontario’s succession laws.

Even when an Estate seems straightforward, it is important for a testator to seek legal and financial advice to ensure that the Estate plan is feasible and that their plan is properly documented in a Will.  It is also important for an Estate Trustee to seek legal and financial advice, when acting for an Estate, to ensure that they are acting in accordance with the Will and the applicable laws.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Elikem Deley is a member of the estates group and practises in the areas of wills, powers of attorney, estate administration and estate litigation.

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By Greg Murdoch - 2017/24/03

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There has been much discussion in recent years concerning the decision in Royal Bank of Canada v. Atlas Block. That 2014 decision of the Ontario Superior Court dealt with the conflicting rights of a secured lender and a supplier with a trust claim under the Construction Lien Act (“CLA”) in the context of a bankruptcy. The case is being relied on by secured lenders and Receivers as authority for the proposition that 1) trust claims under the CLA do not survive bankruptcy where trust monies have been co-mingled with other monies, and 2) there is no legal obligation on a Receiver to segregate monies it collects in order to ensure that trust monies retain their status. We can expect this case to be challenged in 2017 and hopefully replaced by a more reasoned and fair approach.

By way of background, Holcim supplied cement powder to Atlas who in turn incorporated that powder into products sold to construction projects and retailers. Atlas became insolvent and its Receiver collected millions of dollars in receivables from construction projects and retailers. The Receiver co-mingled all of the funds in one account as did Atlas before the Receiver. Atlas eventually made an assignment into bankruptcy.

The Court found that while s.67(1) of the Bankruptcy and Insolvency Act (“BIA”) excludes trust monies from the bankrupt’s estate, any trust created by provincial statutes such as the CLA must strictly comply with the common law test for trusts in order to fall outside of the distribution scheme of the BIA.

The Court concluded that because Atlas and the Receiver had co-mingled all monies collected, any trust monies could not be adequately identified and therefore did not meet the common law test for a trust. The funds therefore would go to the secured lender and not the trust claimants under the CLA. More troubling was the Court’s conclusion that there is no obligation on the party owed money to segregate monies collected in order to avoid the co-mingling that can destroy the trust. By extension, Receivers have no obligation to segregate monies collected in order to ensure trusts are preserved.

The decision is bad for suppliers and constructors who have trust claims against insolvent companies. The case is good for secured lenders and Receivers who assume now they have no obligation to preserve trusts by segregating monies collected. Indeed, Receivers could intentionally take steps to destroy trusts for the benefit of the secured lenders who appointed them. It is respectfully submitted that the decision is wrong. It is not consistent with existing case law and unfairly ignores the purpose of the trust provisions of the CLA.

It is anticipated that the decision in Royal Bank v. Atlas will be challenged on two fronts.

First, the Court in Atlas concluded that co-mingling of trust monies with non-trust monies automatically destroys the trust because trust monies are no longer traceable. This conclusion is not correct either in logic or law. It is often possible to identify and trace trust monies co-mingled with non- trust funds.

The case of Kel-Greg Homes is a 2015 decision of the Nova Scotia Supreme Court. In that case, Kel-Greg (“KG”) was a general contractor and had one bank account into which trust and non-trust monies flowed with no means of distinguishing them. KG went bankrupt and a trustee was appointed. KG had received deposits from home buyers to be held in trust. The question was whether the funds retained their trust character.

The Court in Kel-Greg Homes, relying on the leading Supreme Court of Canada case of British Columbia v. Henfrey Samson (1989), concluded that the mere co-mingling of trust monies with other trust or non-trust monies does not necessarily eliminate the trust. The critical element to that determination is whether the trust monies can be either identified
or traced.

After determining that co-mingling of trust funds with other funds destroys the trusts, the Court in Royal Bank v. Atlas concluded that there is no obligation on a party receiving payment on more than one construction project to segregate monies collected in order to preserve deemed trusts. This logic was extended to Receivers of insolvent companies.

In fact, a party receiving monies impressed with a trust has an obligation as a trustee to preserve those funds and allocate them as prescribed by the CLA. A trustee does not have carte blanche to treat trust monies as he pleases.

In St. Mary’s Cement Corp. v. Construct Ltd., a 1997 decision of the Ontario Superior Court, Justice Molloy held that,

In my view, the language of s. 8(2) of the Act which sets out the obligations of the trustee is mandatory. It provides that the trustee shall not use the trust funds for any purpose inconsistent with the trust until all trades and suppliers are paid all amounts owed to them. Section 8(1) specifically provides that the trust fund is held for the benefit of persons who supplied goods and services to the improvement and who are owed money. … Allowing the trust funds to be intermingled with other trust monies and used for general purposes is inconsistent with the trustee’s duty to maintain proper control of the trust fund.

It is hoped that the next time these issues are before an Ontario Court, proper recognition will be given to the fact that the deemed trust provisions of the CLA apply to money which is “owing” and not just to monies received and segregated. This distinction means that the recipients of trust monies are obliged to preserve those monies for their intended purpose. Court-appointed Receivers owe a duty of fairness to all creditors and should not be allowed to treat trust monies in a way that destroys the trust.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Greg Murdoch is a partner in the firm and head of the litigation group at SorbaraLaw. Greg was recently selected by his peers for inclusion in The Best Lawyers in Canada® 2015 for Litigation.

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By Rade Sajic - 2017/24/03

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Intellectual property (or “IP”) has tremendous value to the company.  IP can be thought of as real estate of the mind.  IP is comprised of two distinct ‘mental’ properties.  The first property is in the mind of the consumer.  This is the way in which consumers relate to the brand the company created and choose the company’s product over its competitors.  The second property is the mind of the company: the creativity and ingenuity of the company in creating products that are unique and solve current problems and shortcomings in the industry.

Property in the Consumer’s Mind

Intellectual property, or property of the mind, is the property or real estate a company owns in the minds of its consumer.  A company can operate from a terrible location in the city, have poor real property, but can generate profits as if it were located in the best part of the city through the use of intellectual property.  It is why companies invest in commercials and marketing to promote their brands.  It is why companies are concerned with brand awareness.

For example, when purchasing over-the-counter medication, we tend to purchase the more expensive name-brand.  We do so simply because we have a subconscious belief that the name-brand product is somehow superior to the no-name brand product.  In reality, there may be no difference in efficacy between the products.  We continually choose the name-brand on a pre-conceived notion that it will work better.  That notion, the subconscious belief, is suggested to us by the brand-name company through intellectual property.  The brand-name company spends millions of dollars for that suggestion, which in effect, is the brand-name’s purchase of real estate in our brains.  That subconscious real-estate is worth more in the medical industry than the physical real estate, namely the location of the product within the pharmacy.  Consumers will search out the name-brand product, as opposed to selecting the first product that they encounter.

A consumer doesn’t even have to be familiar with a specific product. The consumer will recognize the brand, and choose the product containing the recognized brand in a belief that the brand can be trusted to produce effective and reliable product consistently.

Brand identity is protected through the use of intellectual property, namely through trade-marks, industrial designs, and copyrights.  Trade-mark is the logo, or the name, that the company employs to inform its consumer of its product; a flag of sorts telling a consumer of the product’s association with the company.  The flag, which is recognized by the consumer, will subconsciously equate the quality or merchantability of the product to the quality they have come to expect with the brand-name, or with what they have perceived to expect from the brand-name advertisement.  Industrial design is geared towards protecting a recognizable shape of the product.  The shape of the product has nothing to do with the function of the product, but rather, is the unique shape that a consumer has come to recognize as belonging to a particular business or company.  It is the unique look or feel of the product which distinguishes it from the competition.  Copyright, on the other hand, is aimed at protecting the literature or works associated with the company.

Property in the Mind of the Business 

Property in the mind of a company is also very valuable.  In this case, the property in the mind of the company relates to the company’s ability to create and to develop something novel.  It is how a company stands out from the competition.  It is the ingenuity and innovation: a need to provide the consumer with a superior product or a method.

Innovation is very valuable to a company, but it is that much more valuable when the company is the sole provider of the innovative product in the marketplace.  Protection comes in the form of a patent, which prohibits competitors from using the innovation or making the innovation available to consumers.  In doing so, the innovative company has a distinct advantage over its competitors by being able to provide a product that the customer can only obtain from the innovative company.

The ability to provide unique and innovative products or services is an invaluable tool to the company.  It sets the company apart not only in its ability to provide the product or service but associates the product with the company in the mind of the consumer.  Protection of the company’s intellectual property is, therefore, a crucial component of its success.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Rade Sajic is a lawyer in the Intellectual Property group and a member of the SorbaraLaw litigation group, practising in the areas of commercial litigation and employment law.

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By Peter Buza - 2017/24/03

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The infrastructure for many public utilities must run through or on private land. Buried cables and pipes are typical examples of public utilities that might cross private land. The installation of public utilities on private land can create problems by limiting property owners’ freedoms to use and enjoy their properties and by affecting municipalities’ or other authorities’ abilities to provide and maintain infrastructure-based services at reasonable cost. This article briefly introduces some of the issues that arise when municipal public utilities cross private land and some of the remedies and rights available to property owners and municipalities.

Public utilities often run through private land in an area defined by an easement. A public utility easement gives a municipality the right to continue to keep, maintain and upgrade a utility in a defined part of private property. For example, a sewer and water supply easement may be several metres wide and run along the length of one or more edges of a property.

Where there is a valid easement, the private property owner may typically use the land, but may not unreasonably interfere with the rights that an easement provides to the municipality. As a result, an owner often may not build on or develop the area of land affected by the easement in a way that substantially interferes with the municipality’s ability to maintain or replace the utility infrastructure.

There are also situations in which a public utility easement is not registered. These situations may arise where a past owner consented to the installation of a utility and no easement was registered, or where the municipality failed to register a notice maintaining the validity of a registered easement according to Registry Act requirements. The rights and obligations in these situations tend to be highly fact dependent and, as a result, assessing background information is an important first step.

Fortunately for those depending on the supply of the utility, there are clear protections to be found in the Municipal Act, 2001. This Act protects existing municipal public utilities that do not run in easements from interference by any person unless the person obtains a Court Order or the municipality consents to the interference. A landowner who has such a utility in or on his or her land may not, therefore, interfere with the ability to maintain supply of the utility through or across the land unless he or she obtains consent or a Court Order.

Under the Municipal Act, 2001, it is also clear that a municipality may enter upon any land to repair and maintain its utilities, whether the utilities are located in an easement or not.

Lastly, it is worth considering whether the law provides any remedies to a landowner who has a public utility running on or through his or her property without an easement.  These remedies typically depend on the circumstances of each case. While an owner is well-advised to obtain legal advice to determine his or her rights, some specific examples can be highlighted here.

If a person’s use of land in which he or she has an interest is substantially affected by a utility that has no easement, the person may apply for a Court Order authorizing the person to interfere with the utility. In response, the Court can make any order that it considers necessary, including staying the application to give the municipality time to acquire an interest in the land or forcing the person to provide an easement in a different location while ordering compensation for the new easement.

Special situation-specific rules also exist where a municipal public utility was installed before June 21, 1990. For example, due to a provision in the Municipal Act, 2001, the potential for claims to easements to expire and the applicability of 40-year registry search rules are affected by whether or not the utility was built with the consent of the owner. If there is proof that the owner consented to the installation of the utility, then the municipality may still have valid easement rights, notwithstanding that the municipality had not registered timely notice of the claimed easement.

As another example of the situation-specific nature of dealing with the legal status of municipal public utilities, where a utility was installed before June 21, 1990 and the municipality mistakenly believed it was installing a public utility on part of a public road allowance, the municipality is deemed to have an easement and the owner of the land is entitled to compensation for the easement as if there had been an expropriation.

These examples illustrate two of many situations where specific facts related to the history of the installation of the utility and any registration or non-registration of easements might determine whether a valid easement exists and whether an owner might receive compensation for the existence of a municipal public utility on his or her lands. Of course, there will be other situations with different outcomes and this article cannot introduce them all.

Given the impact of the facts in each case, landowners are well-advised to seek legal advice when faced with a municipal public utility that may affect the owner’s planned property use. Similarly, municipalities should, where necessary, ensure they have legal advice covering not only specific situations, but also broader issues such as their rights to maintain utilities and the steps they must take to maintain claims to easements.

* * This article is intended only to inform and educate. It is not legal advice.  Be sure to contact a lawyer to obtain legal advice on any specific matter.

Peter Buza is a lawyer in SorbaraLaw’s municipal, land use and development law group.

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