Legal Blog: Lawyers’ Issues
Real estate default cases keep coming. The issues are often the same: who breached, who was ready willing and able to close, was repudiation accepted, what happens to the deposit?
The case of Azzarello v. Shawqi 2019ONCA820 had all of the issues, as well as an unusual one dealing with the deposit. Purchaser was unable to close the transaction and requested an extension, which was given. On the extended closing date, purchaser requested a further extension. Vendors agreed, but on terms that, if not met, purchaser would be in default of the agreement. Purchaser did not respond. Vendors did not tender. Ultimately, vendors re-sold the property at a significant loss.Continue Reading >
In our February 2020 newsletter, we commented on the Ontario Superior Court of Justice decision in Austin v. Bell Canada. In that case, an interpretation of a pension plan revolved around the placement of a comma. After a thorough review of grammatical rules of interpretation, the motion judge decided that the terms of one section, on its face, would indicate a construction that would result in a rounding to one decimal point, as set out in the Consumer Price Index. However, the judge then reviewed another provision of the plan and, based on the evidence he received, decided that a one-decimal rounding policy would render that section meaningless. He therefore decided that there should be 2-decimal rounding. This decision, deciding between a 1.49% or 1.5% interpretation, was not trivial. The plan went on to note that whatever the percentage, it would be rounded to the next whole number (i.e. 1% or 2%). A 1% difference in an annual increase of payments in a pension plan for 35,000 pensioners would, according to the Ontario Court of Appeal, result in an increase in the first year of over $10 million and, for the long term, over $100 million.
In our newsletter, setting out the facts, the interpretation, and the decision, our main complaint lay with the drafting of the pension plan and our contention “that many agreements are simply drafted improperly.” In this case, Bell Canada was successful at the motion level and disaster was averted.Continue Reading >
At times, one reads a case and wonders “Why did the defendant not settle?” We asked ourselves this question while reading the decision in 6071376 Canada Inc. v. 3966305 Canada Inc., 2019 ONSC 3947 (SCJ). As we describe some of the lies of the defendant, remember: the defendant admitted almost all of the facts and, for those it disputed, it provided no documents to support its position.
An individual (“BadGuy”), through his one-man corporation, entered into an agreement of purchase and sale for a commercial Ottawa property. He arranged financing and agreed to guarantee the mortgage. BadGuy required a $584,000 down payment to close the transaction. He had 60% of it and needed an additional 40% (i.e. $233,600).Continue Reading >
Grammar seems to be a lost art these days. Rules of grammar and drafting often do not mean anything, if only because neither the writer nor the reader knows what the rules are. This writer is often asked to opine on various clauses in an agreement and, in some cases, throws up his hands in disgust, noting that the clauses are so badly drafted that no one would know what they mean. This can be a problem when an agreement is being interpreted in court, particularly if a lot of money rides on the interpretation. This is exactly what happened in Austin v. Bell Canada 2019 ONSC 4757. The entire decision revolved around the insertion of a comma.
A Bell Canada (“Bell“) retiree was the representative plaintiff in a class action. He claimed that his pension, and those of 35,000 other pensioners, should be calculated for 2017 with a 2%, rather than a 1%, increase over the 2016 pension. Of course, this difference would affect the 2018 and subsequent pension amounts because each increase is piggybacked on the previous year’s pension amount. That lowly 1% difference could have cost the Bell pension plan up to $130 million. The dispute revolved around the interpretation of one clause in the pension plan’s constating documents (the “Plan“).Continue Reading >
We often read about agreements or portions of them that are unconscionable and should therefore be set aside. Most lawyers used to consider unconscionability in the same manner as some judges considered pornography (i.e. I cannot define it, but I know it when I see it). Unconscionability has been defined and that definition was applied in Heller v. Uber Technologies Inc. 2019 ONCA 1.
The plaintiff driver was the representative in a class action claiming that Uber drivers were employees and that, in its treatment of them, Uber had breached the Employment Standards Act (ESA). Uber moved to dismiss the action, arguing that the drivers’ agreements mandated arbitration only. The driver argued that the drivers’ agreement was ineffective to preclude the class action because (i) the arbitration clause breached the ESA and, therefore, was an exception, under s. 7(2) of the Arbitration Act, to the mandatory nature of an arbitration clause and (ii) even if it were fully effective, it was unconscionable and ought not be enforced.Continue Reading >
How does a sublease differ from an assignment of lease? The answer to this question informs the final question: if a sublease ends at the same time as the head lease, rather than some time (even a day) before, does the tenant who subleased the premises retain any rights in the lease, in particular the right, granted in the lease itself, to exercise a renewal of the term. These questions were answered in V Hazelton Limited v. Perfect Smile Dental Inc. 2019 ONCA 423.
The lease had a term of seven years with a five year right of renewal. With about one year left in the original term, the tenant subleased the premises for the entire remainder of the term (no reversion for a day). The sublease specifically stated that the tenant had no right to the benefit of the renewal rights in the lease. The tenant attempted to renew the lease, with appropriate notice, but the landlord, who wanted the premises back, took the position that the tenant, having subleased the premises for the entire term, had assigned the lease and, therefore, had no right to extend the term.Continue Reading >
The Limitations Act, 2002 was proclaimed in force as of January 1, 2004. Subject to some other qualifications, the Act has a basic limitation period of two years from discovery and an absolute limitation period of 15 years regardless of discovery. However, not every request for a court order is caught by the Act. This was made apparent in Armitage v. Salvation Army, 2016 ONCA 971.
The deceased appointed a realtor as his attorney for property as far back as 1990. The deceased died in 2013. In the same year, the realtor submitted her claim for attorney compensation and, within two years of the date of death, issued a notice of application for the passing of accounts, both under her power of attorney and for the estate accounts.Continue Reading >
We have a sophisticated tenant and a large and sophisticated landlord. They have a dispute over the terms of the lease and neither blinks. Sort of like playing chicken. This was the situation in McRae Cold Storage Inc. v. Nova Cold Logistics ULC, 2019 ONCA 452.
The lease was for 5 years with a term ending March 31, 2018. The tenant had an option to extend the term for two additional 5 year terms, which could be exercised only if the tenant were not in default of the lease at the time of extension.
In 2016, the landlord informed the tenant that, under the terms of the lease, the tenant had to pay a portion of the increased energy costs. The amount in issue to the end of the original term was $136,000. The tenant disagreed with the landlord’s interpretation and did not pay those increased costs. The landlord sent a notice of default in November 2017. Notwithstanding this notice of default, the tenant sent a notice exercising its right to extend the term for a further 5 years.Continue Reading >
We thought it time to explore how many angels can dance on the head of a pin. Put another way, if a condition in an agreement allows a party full discretion to determine its satisfaction regarding an aspect of the property, is the agreement still binding or, because it is so dependent on the party’s subjective state of mind, is it unenforceable? Further, even if the agreement is binding, must, and did, the party act reasonably in determining its “satisfaction?” The trial judge in Hacquard Wolfe Trust v. Richmond Holdings Ltd. 2016 BCSC 2139 had to conduct this exercise.
An agreement for purchase and sale contained a condition that provided for each party to be “completely satisfied in its sole and absolute discretion” with environmental reports as to potential contamination. The purchaser obtained a stage 2 environmental report and a further detailed report and provided them to the vendor. The parties extended the condition while the vendor removed the significantly contaminated soil. The parties obtained a new report, which indicated that the remaining contaminated soil was marginal and manageable.Continue Reading >
This is the 2nd newsletter dealing with purchasers refusing to close agreements and the issues raised in ensuing actions.
Ready or Not
In Di Millo v. 2099232 Ontario Inc. 2018 ONCA 1051, a purchaser bought a lot in the vendor’s subdivision. The agreement provided that the purchaser was to construct a building within 30 months of closing, failing which the vendor had the option to buy back the land at the original price less real estate commission. Once the vendor exercised the option, the parties were to complete the sale within one month.
The purchaser failed even to start to construct, much less construct, the building within 30 months. He asked for and was granted a one-year extension. One year later, he had done nothing. The vendor’s lawyer gave notice (improperly) of the exercise of the option three months after the date on which the purchaser was to have built his building, but, regardless, gave proper notice of the option exercise three months after the first notice.Continue Reading >