Legal Blog: Lawyers’ Issues

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.

Court Shopping

On occasion, the choice of court (including venue) or procedure is very important to one or both of the litigants. The court used or the procedure to follow can affect the cost and efficiency of an action. Sometimes strategies to get the most advantageous court or procedure are successful and sometimes they are not. In Canaccede Credit LP v. Schulz-Hallihan (and two other separate actions) and Bank of Nova Scotia v. Carmichael, 2021 and 2022 decisions of the Ontario Superior Court of Justice, the lawyers in collection proceedings did not get what they wanted.

Court & Venue

The creditor in Canaccede purchased credit card debts from a bank, assumedly for a significant discount from the actual debt amounts. The creditor then retained its lawyers to collect the debts. The cases involved three debtors, but, later in the reasons for decision, we learned that the creditor had commenced 109 collection actions.

Concepts

We frequently review cases that raise some interesting legal concepts, but whose facts are so convoluted or whose issues are so diverse that they are difficult to summarise. Invariably, these cases gravitate to the bottom of the pile. Sometimes, they stay at the bottom and are then discarded; other times, they get appealed and the appeal decisions are usually more focused. We will now review two such decisions, both appealed, so that we can move the cases out of the pile.

Deemed Admission

Rule 19.02(1)(a) states that a defendant who has been noted in default (for failing to file a statement of defence in time) is deemed to admit the truth of the allegations of fact made in the statement of claim. However, we often see allegations in a statement of claim that are not merely allegations of fact. They are allegations of mixed fact and law or, in some cases, conclusions of law. So, what exactly is being admitted when a defendant is noted in default? This question was answered in Paul’s Transport Inc. v. Immediate Logistics Limited, 2022ONCA573.

Uncertainty

The Mortgages Act contains many provisions governing the relationship between mortgagors and mortgagees and, additionally, some provisions protecting purchasers of property under power of sale. Sometimes, a breach of a provision protecting a mortgagor can create havoc with what would normally seem to be an ordinary real estate transaction. This was demonstrated in 2544176 Ontario Limited v. 2394762 Ontario Inc. 2021 ONSC 3067.

However, the application judge’s decision in 2544176 Ontario Limited v. 2394762 Ontario Inc. 2021 ONSC 3067 was overturned by the Ontario Court of Appeal, after this case comment was written, holding that the mere fact that a mortgagee’s rights are suspended, does not eliminate its ability to provide good title. An amended discussion of the case will be available in early October 2022 under the collection category.

Holograph Will

A holograph will is referenced in section 6 of the Succession Law Reform Act. Unlike a normal will, which has specific formalities such as the signatures of two witnesses, a holograph will may be valid without any formalities if it is made wholly in the testator’s own handwriting and the testator signs it. A holograph will, however, is no different from an ordinary will in that the testator must have a sound disposing mind (i.e., have testamentary capacity to make the will) and must not be signing the will as a result of undue influence by another person. Some of these issues were dealt with in Re Lacroix Estate 2021 ONSC 2919 and Joy Estate v. McGrath, 2022 ONCA 119.

Writs Bind

Before closing a land transaction, real estate lawyers search for writs of execution that may be filed against the vendor. Why? Because writs against a debtor will bind the lands of that debtor and a purchaser will take title subject to those writs. But do all writs bind the land? That question, which most real estate lawyers assumed had an affirmative answer, was dealt with in Dhatt v Beer 2021 ONSC 770 (SCJ).

Mess

It started as a simple real estate transaction and turned into the case from hell. The vendors decided in their wisdom not to close the transaction. The purchasers sued and obtained a judgment for specific performance and an order for costs to be paid from the purchasers’ purchase price. The vendors did not like this decision and appealed it. The previous lawyers for the vendors were also not pleased with this decision and, more importantly, were not pleased that the vendors had not paid their fees.

Hardball

A trial judge has discretion to award costs of the litigation process. Usually, that award would be to the successful party, but not always. May a trial judge refuse to award costs to a successful defendant because that defendant was insured, refused to accept any settlement before trial, or was “known” to generally play hardball in its defences?  This question was answered in Przyk v. Hamilton Retirement Group Ltd. 2021 ONCA 267.

Merits

The plaintiff had slipped and fallen on a sidewalk on the grounds of a retirement home where she resided. She sued the owner of the retirement home for negligence and breach of the Occupiers’ Liability Act. The parties agreed on damages and the trial proceeded before a judge and jury on liability alone. The jury found no liability on the part of the defendant and the action was dismissed against it. The defendant requested an award of costs against the plaintiff. Actually, to be more specific, it requested its costs only to the extent of an insurance policy that the plaintiff had taken out for the very purpose of indemnifying her against an award of costs if she were unsuccessful in the action. The defendant was not seeking any award of costs against the plaintiff personally.

Honour

Let’s discuss writs of seizure and sale aka writs of execution, formerly known – if you have been around far too long – as writs of fi fa (short for fieri facias – translated from Latin as “cause to be done”). A creditor may enforce a monetary court order by requesting the court to issue a writ of seizure and sale. Once the court has done so and the creditor files the writ with a sheriff of any jurisdiction in Ontario, that writ binds the debtor’s lands in that jurisdiction. For example, a writ filed with the Sheriff of Peel binds the lands in Peel, but does not bind lands in Toronto. In essence, the debtor is not able to sell or mortgage lands that a writ binds until the court order is fully paid.

We now have an electronic land registration system. Writs are filed with a sheriff and subsequent purchasers or mortgagees need only rely upon specified statements – depending on the circumstances and, particularly, the writ amount. One of these statements is a “a law statement” of a lawyer. That statement attests that, if a writ has been filed that would otherwise bind the land, the debtor has obtained a complete, unconditional, and unqualified release from the judgment creditor for the writ. “It is an honour system largely dependant (sic) on lawyers’ honesty.”