Legal Blog:

Expert Reports Late Deliver

Agha v. Munroe 2022 Ont SCJ

Rule 50.03 has changed regarding timelines within which expert reports be served. Previously, if a report was served late, a trial judge had to grant leave to allow the expert evidence, but on terms that were just. The new rule, Rule 53.08, states that leave may (not shall) be granted and only if (i) the party at fault gives a reasonable explanation for the failure and (ii) the granting of leave would neither prejudice the opposing party that could not be compensated by costs or an adjournment nor unduly the conduct of the trial. In this case, the request for leave came in the middle of trial and the judge refused to grant it.

Will – Pour Over Clause

Vilenski v. Weinrib-Wolfman 2022 Ont SCJ

The will contained a provision (the “pour over clause”) by which the residue of the estate was to be paid to the trustees of an existing inter vivos trust, which also happened to be an Alter Ego Trust. The judge followed precedent in British Columbia to declare the pour over clause to be invalid because the trust was set up so that it could be amended. The mere possibility of an amendment once the disposition had “poured over” into the trust was outside the strict formality requirements for testamentary documents. Because the clause was held to be invalid, the court declared an intestacy.

Prompt Payment

SOTA Dental Studio Inc. v. Andrid Group Ltd. 2022 Ont SCJ (Div Ct)

An adjudicator’s decision may not be appealed, but is made without prejudice to a party’s rights to deal later with the issue in court or in arbitration. Section 13.18(1) of the Construction Act provides that an unhappy party may apply for judicial review, but only with leave of the court. Section 13.18(7) of the Construction Act provides that an application does not stay the requirement to comply with the decision unless the court orders otherwise. In this case, the applicant neither paid the amount the adjudicator ordered, nor attempted to obtain leave for judicial review, nor requested a stay of the decision. It just brought the application. The court dismissed the application without inquiry into the merits noting that prompt payment was integral to the scheme of the Act and that failure to comply with a decision may lead the court to refuse leave and, even with leave, the applicant must first obtain a stay of the decision.

Limitations – Claim Appropriate

Georgian Properties Corporation v. Robins Appleby LLP 2022 Ont CA

A condo had executed debt instruments in favour of the developer. When the debts were due, the condo failed to pay, ultimately attacking the debt instruments as unenforceable. The condo ultimately was successful in its attack. After the decision, the developer commenced an action against its lawyers who drafted the debt instruments. The court held that the condo suffered damages as set out in s.5(1)(a)(i) of the Limitations Act, not when the condo failed to pay the developer according to the debt instruments, but when the judge decided that the debt instruments were invalid. Similarly, commencement of an action was “appropriate” (ss. a(iv)) after the decision was rendered, not when the allegations of invalidity were made.

BIA Undervalue Transactions

Ernst & Young v. Aquino 2022 Ont CA

Shareholders siphoned tens of millions of dollars from two construction corporations, corporations that subsequently went into receivership or bankruptcy. The money was taken by way of false invoicing schemes. The trustee/monitor moved under section 96 of the BIA to have the shareholders repay the money. The shareholders had two major defences. First, they claimed that, at the time they stole the money, the corporations were financially stable and therefore the purpose was not to defeat creditors, just to fraudulently strip assets from the corporations. The court disagreed that the corporations were financially stable at the time. Second, the shareholders argued that s. 96 only applies if the corporations were fraudulent and, in this case, the corporations did nothing wrong, just the shareholders. The court upheld the motion judge’s decision to apply the shareholders’ fraudulent intent to the corporations. It recognised that you cannot do this in a criminal or civil setting (e.g. a fraudulent shareholder cannot bring criminal or civil liability on a corporation unless the corporation benefitted from the action). In a bankruptcy scenario, however, the corporation is just a bundle of assets and the trade-off is between protecting the shareholders or the creditors. The court chose to protect the creditors.

Limitation – Proceeding Appropriate

Thermal Exchange Service Inc. v. Metropolitan Toronto Condominium Corporation No. 1289 2022 Oct CA

Section 5(1)(a)(iv) of the Limitations Act, 2022 notes that limitation period does not start to run until, having regard to the injury or damages, “a proceeding would be an appropriate means to remedy it.” Appropriate means legally appropriate, not tactically appropriate. Contractor was attempting to be paid for its ongoing work on condo units and condo manager kept saying that she would take care of it, but needed more time because she was busy. This went on for years – until the manager stated for the first time that, if the unit owners did not pay the condo, then the condo would not pay the contractor. The court found that it was only then that it became legally appropriate to bring a proceeding; until then, because of the manager’s statements, the contractor reasonably believed it would be paid once the manager got around to reviewing the invoices.

Security

When it comes to vacating a lien and the posting of security is a lien bond equivalent to cash? The answer, like many in law, is that it all depends. On what, you say? Well, for starters, the province in which the project is situated and, of necessity, the statute governing construction and liens. Cases in one province may or may not apply in other provinces depending on the legislation involved. An example of the differences between Ontario and Manitoba construction lien legislation is set out in Bird Construction Group v. Trotter and Morton Industrial Contracting Inc., a 2021 decision of the Manitoba Court of Queen’s Bench.