Legal Blog: Lawyers’ Issues

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.

Overturned

Subject to a decision of the Supreme Court of Canada, a decision of the Ontario Court of Appeal is binding on that court and any lower court – until it is not. Before the Ontario Court of Appeal will overturn a prior decision of a three-person panel of that court, it will deal with the appeal by way of a five-person panel. This is what happened in Bank of Montreal v. Iskenderov 2023 ONCA 528.

Fraudulent Conveyance

In this case, husband and wife were defendants in a fraudulent conveyance action and sought, by way of a summary judgment motion, to dismiss the action on grounds that the limitation period had passed. If the applicable limitation period were the 10-year limitation pursuant to the Real Property Limitations Act (RPLA), the defendants were out of luck; if it were the two-year limitation period pursuant to the Limitations Act, 2002 (New Act), the defendants had a chance.

Damages Not Presumed

In the 2014 decision in Bhasin v. Hrynew, the Supreme Court of Canada recognized a general organizing principle of good faith and the duty of honest performance in contract law. Recognizing the duty, however, was only the first step. Subsequent caselaw has delineated the scope of the duty.

The recent decision of the Ontario Court of Appeal in Bhatnagar v. Cresco Labs Inc. 2023 ONCA 401 clarifies how a court should normally assess damages for breach of the duty. The Court of Appeal confirmed that damages for breach of the duty of honest performance will not ordinarily be merely presumed. Instead, aside from exceptional circumstances, the plaintiff must show that the alleged breach actually caused damages and must lead evidence to prove what those damages are. This is in keeping with the normal approach of expectation damages for contractual breach.

Patent-Latent

In most completed real estate transactions, the purchasers are relatively satisfied with the condition of the property that they purchased (i.e., for the most part, the property is in the condition that the purchasers expected it to be). Sometimes, however, the property is most certainly not in that condition, the purchaser sues, and the outcome depends upon whether the defects were patent or latent or concealed. These were the issues in Purdy v. Russell 2022 ONSC 4692.

Changed Substratum

We learn new things every day. It seems that, for purposes of wrongful dismissal, there is a common law doctrine of “changed substratum.” Under it, provisions in a written employment contract that restrict or limit the amounts payable to a dismissed employee may be unenforceable. The doctrine applies if (i) there were fundamental expansions in the employee’s duties after the employment contract was made so that the foundation of the employment contract had disappeared or substantially eroded, or (ii) it can be implied that the contract could not have been intended to apply to the role the employee ultimately performed.

This issue was discussed in Celestini v. Shoplogix Inc. et al 2023 ONCA 131.

Privilege

Privilege between lawyers and clients is very important. Lawyer and client cannot open up to each other if they think that, in the case of subsequent litigation, the opposing litigants will be delving into their communications and notes. However, privilege extends only to communications between the client and the lawyer for purposes of giving and receiving advice. Accordingly, in a run-of-the-mill real estate transaction, precious little is privileged and we routinely obtain the entire file of real estate solicitors. However, some real estate files are unusual and privilege not only exists, it is crucial. This was illustrated in 1824120 Ontario Limited v. Matich, 2023 ONSC 938 (Div. Ct).

Agreement

An elderly couple agreed to sell their land after a seemingly aggressive real estate agent persuaded them to list the family farm for $18.5 million. The ultimate sale price was $16.5 million. The vendors were elderly and ill, but they were not stupid. They inserted a clause by which the agreement was conditional for 3 days upon the solicitor of the couple approving the agreement terms. The condition was stated to be for the benefit of the vendors, but they could waive it at any time within the 3 days. If the condition was not met or waived, the agreement was “null and void.”

Audit

We often encounter situations in which the shareholders of a closely held corporation do not prepare any annual minutes, never have the financial statements audited, and never obtain waivers of the audit requirement from all shareholders. They just let things drift. This is all right – until it is not – and the shareholders disagree on other matters.

Often, one shareholder has all of the information and power and the other claims oppression. The first thing we do, when acting for the disgruntled shareholder, is to demand an audit of the corporation’s financials for the years for which the corporation had no audit and no waiver of the audit requirements. Yes, this is expensive, but it is necessary for a minority shareholder to understand what is happening with the corporation and it is salutary for the majority shareholder to realise that he or she will be paying the brunt of the costs for it.

Subsequent Creditors

Under the Fraudulent Conveyances Act (“Act“), creditors are given the ability to obtain a court order setting aside a conveyance of property if that conveyance was made with the intent to defraud creditors or others of their lawful debts. The question that often arises is “Which creditors?” Sometimes that question is very easy to answer. A claimant who was a creditor at the time of the transfer is certainly an included creditor. How about a claimant who became a creditor many years after the transfer? This question was answered in Ontario Securities Commission v. Camerlengo, 2023 ONCA 93.