Legal Blog: Lawyers’ Issues

Norwich Order (2)

Does an aggrieved party have any recourse when it suspects that it has been wronged, but needs information from a third party to either confirm or allay its suspicions? Under the right circumstances, the creditor can obtain a Norwich order, named after the plaintiff in a 1974 English case.

We first discussed this concept in a February 2009 newsletter discussing Isofoton v. TD Canada Trust, a 2007 decision of the Ontario Superior Court of Justice. Until the Isofoton decision, in Canada there had been a 2002 Alberta decision and that was about it. In our newsletter, we noted that the Norwich order remedy had not been used extensively in Ontario or Canada but suspected that it would have far more use because of the Isofoton decision. We were not wrong. In the past 18 years, the Isofoton decision has been cited seventy times in reported cases and articles and, in 2018, the Supreme Court of Canada examined and applied the concept.

We have used this remedy extensively while acting for a creditor when we suspect that a judgment debtor has fraudulently transferred assets to a third party and we need information from the judgment debtor’s financial institution to determine whether the requested information supports our suspicion. If the information does, we commence a fraudulent conveyance or trust action.

The latest case to deal with a Norwich order is Taylor v. Metrolinx 2024 ONSC 4774, a decision of the Ontario Superior Court of Justice.

Contributory Fault

Everyone knows about contributory negligence. The Negligence Act (s. 3) spells it out. In an action founded on the negligence of a defendant or group of defendants, if a plaintiff’s negligence contributes to the damages that the plaintiff incurs, then the court is to apportion the damages among all parties, including the plaintiff. But what happens if the action is not based on negligence; rather, it is based on a breach of contract? This was the crucial issue in Arcamm Electrical Services Ltd. v. Avison Young Real Estate 2024 ONCA 925.

The Problem

A sudden electrical failure caused a complete power outage at the owner’s property. The owner, through its property manager, hired the electrical contractor to restore power to the property on an emergency basis. The contractor de-energised the two semi-fried transformers, removed them from the grid, stored them in the electrical room of the property, and installed temporary generators to restore power. The parties had hoped that the electrical contractor would be able to replace the damaged electrical switchgear and thus make the transformers usable again.

Reliance

This is a tale of two reliances.

Sole practitioners, or small law firms, dealing in real estate work often rely heavily on conveyancing staff. These are the people who do the yeoman’s work in ensuring that a real estate file is properly documented and that money flows properly from purchasers and mortgagees to vendors and mortgagors. Why do sole practitioners and lawyers in small firms do this? Because if they were to delve into the nitty gritty of conveyancing, they could not make a decent living; they need to leverage their non-lawyer staff. Unfortunately, some lawyers rely too heavily on their staff and, in doing so, abrogate their responsibilities to their clients.

Clients rely on their lawyers to ensure, for purchaser clients, that they get what they are paying for and, for vendor clients, that they get their money from the sale of their properties. Sometimes, fortunately only seldomly, that reliance is misplaced.

These reliances were dealt with in Pallotta v. Cengarle, a 2024 decision of the Ontario Superior Court of Justice.

Sever (2)

In our June 2012 newsletter, we discussed how a joint tenancy could be severed. The usual way is for one party to deal with that party’s share (e.g. selling or encumbering it). However, even if the joint tenancy is severed, sometimes the actual result of the severance is not apparent.

A joint tenancy can be created by way of a transfer from an owner to the owner and another as joint tenants. Often, an owner decides to do this to avoid probate tax – with the understanding that the owner has full control over, and all monetary benefits of, the transferred property until the owner’s death. This is a dangerous game. Execution creditors of the new joint tenant can be waiting in the wings and pounce. The owner can have a change of mind. The new joint tenant can start to assert ownership rights. The exact nature of a joint tenancy and a severance under these circumstances was discussed in Nigel v. Rosenberg, a 2024 Ontario Court of Appeal decision.

Corporate Attribution

The common law doctrine of corporate attribution provides guiding principles for when the actions, knowledge, state of mind, or intent of the directing mind of a corporation may be attributed or imputed to a corporation. Attribution is generally inappropriate if the directing mind acted to defraud the corporation or those actions were not designed to benefit the corporation.

The Supreme Court of Canada has ruled in both civil and criminal cases that it would give effect to the exceptions and would not apply the corporate attribution doctrine in the contexts of those cases.

The court has now discussed the corporate attribution doctrine in bankruptcy and insolvency contexts:  Aquino v. Bondfield Construction Co. 2024 SCC 31 and Scott v. Golden Oaks Enterprises Inc. 2024 SCC 32.

Advocacy

Advocacy is an art, not a science – but it still has rules. Break a rule and you are probably not a very good advocate. Good advocacy, whether written or oral, helps clients win cases. Bad advocacy helps clients lose cases.  That said, depending upon the facts, good advocates can still lose cases and bad advocates can still win cases.

First Rule

Cases are usually won or lost on the facts. The law is normally established; the facts are whatever evidence counsel adduce to the court and then are found as part of the decision to be the facts. We talk about lawsuits, but they should really be known as factsuits. The job of a good advocate is to present all of the admissible facts necessary to support the client’s case.

Minefield

We often refer to construction lien law as construction litigation, but with security. The problem for practitioners who dabble in the area is that lien law is also a minefield waiting to blow up on unwary or inexperienced lawyers. Sometimes mistakes can be cured; often they cannot be. Fortunately, lawyers are insured and LawPro, the lawyers’ insurer, will appoint a construction lawyer who knows what to do to deal with these mistakes and sometimes turn a sow’s ear into a silk purse. One such case was Gay Company Limited v. 962332 Ontario Inc., a 2023 decision of the Superior Court of Justice.

What Happened

We are actually not entirely sure – because the references to plaintiff and defendant are interposed from what we would expect. However, we will assume that a contractor registered a lien against the lands of an owner for $767,000. But it is not quite that simple.

Discovery

The Limitations Act, 2002, which has a basic two-year limitation period, builds the discovery principle into its provisions. This is no surprise because the common law, outstanding for years before the Act’s enactment, recognised the discovery principle. In essence, subject to the 15-year ultimate limitation period, the law does not want an injured party to lose a right of action before even being aware of that right. Conversely, the Real Property Limitations Act (RPLA), which has a basic 10-year limitation period, has no discovery principle built into its provisions. Does the discovery principle apply to the RPLA limitation period regardless? The Court of Appeal answered this question in Browne v. Meunier 2023 ONCA 223.

Derelict

In 2017, purchasers bought a cottage abutting a river. Their immediate neighbours bought their property in 2015. When the purchasers bought their cottage, they believed that their property included a derelict boathouse, situate in the river, which they planned to demolish. After closing, they found that their neighbours’ predecessor in title built that boathouse in 1969 and that the purchasers did not own the boathouse.

Spoliation

“Spoliation is ‘the destruction or material alteration of evidence or…the failure to preserve property for another’s use as evidence in pending or reasonably foreseeable litigation’.” It is the law’s response to the age-old excuse that “the dog ate my homework.”

A party to an action is under a duty to preserve documents and information that the party knows, or reasonably ought to know, are relevant to a legal action. Accordingly, “where a party fails in this duty, the doctrine of spoliation imposes ‘a rebuttable presumption of fact that the lost or destroyed evidence would not assist the spoliator. The presumption can be rebutted by evidence showing the spoliator did not intend, by destroying the evidence, to affect the litigation, or by other evidence to prove or repel the case’.”

With that in mind, we discuss the decision of the Ontario Court of Appeal in Trillium Power Wind Corporation v. Ontario 2023 ONCA 412.

Subterfuge

An owner of a property has rented it to a tenant; a purchaser submits an offer to purchase the property, but only with vacant possession so that the purchaser can occupy the property. The owner can deliver that vacant possession with ease, simply by serving on the tenant a notice terminating the tenancy on behalf of the purchaser. But is it that simple? Given the decision of the Ontario Court of Appeal in Elkins v. Van Wissen 2023 ONCA 789, probably not.

Legislation

An owner cannot terminate a tenancy merely on a whim. The owner has to fit within one of the termination provisions of the Residential Tenancies Act (the “Act“) that allow a termination. One of these provisions is found in s. 49(1) of the Act. This section empowers an owner, on behalf of the purchaser, to give a tenant a notice terminating the tenancy if the purchaser “in good faith requires possession of the residential complex or the unit for the purpose of a residential occupation by the purchaser” or the purchaser’s spouse, parent, or child.