Legal Blog

Trust & Fraud

Debtors often try to stymie their creditors from seizing their assets in payment of their debts. The most prevalent means to do this is to transfer real property to a non-arm’s-length person. In that way, the debtor can enjoy the use of the property and keep it out of the hands of the creditors. Creditors can attack this transfer, known as a fraudulent conveyance, by way of the Fraudulent Conveyances Act (Ont) and the undervalue provisions (s. 96) of the Bankruptcy and Insolvency Act (BIA). Once a creditor proves that a debtor transferred the property for no or inadequate consideration, the transferee has very little ammunition left to fend off the attack. One defence is a claim that the debtor’s transfer was only made to return legal title to the transferee, which the debtor held by way of a trust, whether express, resulting, or constructive. That was the defence in E. Sands & Associates v. Gidda a 2025 Ontario Superior Court of Justice decision.

Drafting

We have written about contract interpretation and contract drafting on a number of occasions. Of course, lawyers will continue to draft almost unintelligible provisions and leave them for courts to attempt to interpret what the drafter never really understood in the first place. We have concluded that the longer a sentence is, the more likely it is badly drafted. As a case in point, we will discuss Paloma Resources LLC v. Axis Insurance Company, 2025 decision of the United States Court of Appeals, for the Fifth Circuit.

The Issue

A plaintiff sued the insured, claiming that the insured’s employee colluded with two of the plaintiff’s employees to steal confidential information so that the insured could unfairly compete with the plaintiff. The insured settled the action with the plaintiff and then turned to its insurer to recover its defence costs and fund the settlement. The insurer declined coverage; in doing so, it relied on an exclusion clause in the insurance policy. The question for the court was the interpretation of that exclusion clause.

Construction Owner

Demasi Contracting Inc. v. Farahmand 2025 Ont SCJ

A lien claimant obtained default judgment against the landowner. The claimant sought to establish priority over the existing 1^st mortgagee, arguing that the mortgagee was an “owner” under the Construction Act. The judge dismissed the motion. The judge found that the mortgagee knew about the work being conducted, but the work was not conducted at its request. More importantly, the judge found that s. 78 did not grant priority to the lien claimant over the mortgage.

Adjudication

Integricon Construction Inc. v. Stevens 2025 Ont SCJ

Construction contract called for draws to be made at various milestones. The 2^nd draw was to be made when the foundations were completed and backfilled. The owners refused to pay the full 2^nd draw because their mortgagee had determined that the 2^nd draw resulted in a 25% payment whereas the project was only 15% completed. The contractor left the job, filed a lien, and initiated adjudication. After the adjudicator found in favour of the contractor, the contractor garnished the owners. The owners dredged up the same submissions to the judge that the adjudicator rejected. The judge refused to allow a backdoor attack on the adjudication result and allowed the garnishment to continue.

House Inspection

Miller Desjardins v JF Lajoie Construction Inc. 2025 Ont SCJ

A house inspector missed obvious patent defects, resulting in the purchasers having problematic foundation, roof, and some windows and doors. The judge held that there was no breach of contract because the purchasers’ real estate agent retained the inspector and paid his $425 fee. Although we do not agree with this finding, it does not matter; the judge held that the inspector breached his duty of care in tort to the purchasers and awarded damages of approximately $68,000.

Breach of Contract (Real Estate)

Major Weston Homes Ltd v. Li 2025 Ont SCJ

Developer’s standard form agreement included a clause that stated that the purchaser had to retain a lawyer at least 30 days before closing and, if the purchaser did not, the purchaser waived tender and was in breach of the contract. The judge enforced this provision and held that the purchaser was in breach of contract. The judge refused to allow interest on the damages at 20% per year, even though it was set out in the agreement. The judge relied on a previous decision that stated that a “surprisingly onerous interest rate” had to be brought to the purchaser’s attention.

Conflict

Several remedies come into play in determining the outcome of construction disputes. Normally these remedies play nicely with each other, but sometimes they conflict. One such conflict, between the adjudication remedies under the Construction Act and remedies under a bond indemnification agreement, was dealt with in Westport Insurance v. BDA, a 2024 Ontario Superior Court of Justice decision. The losing party in the decision moved for leave to appeal to the Divisional Court, which was refused in 2025.

Bond Stream

A general contractor retained a subcontractor to provide electrical supply and installation for a project. As part of the subcontract, the sub was obliged to, and did, deliver a performance bond and a labour and material payment bond. Under the bonds, the general was the obligee and the sub was the principal.

Damages (Real Estate)

Baldwin v. Williams 2025 Ont SCJ

Purchasers breached an agreement of purchase and sale because they could not get financing after the property had fallen in value. The vendors resold the property for a loss. The court noted that the duty to mitigate only requires the plaintiff to take reasonable steps, not all possible steps, to reduce its loss. The court ordered damages for the difference in the two sale prices and extra costs that the vendor’s incurred as a result of owning the property from the date of the original closing to the date of the final closing of the resale.

Encroachment

Bachli v. McLeod 2025 Ont SCJ

Defendant’s retaining wall encroached on his neighbour’s property. Predecessors in title had entered into an encroachment agreement that allowed the encroachment for 21 years. The agreement had expired and the new neighbour wanted the encroachment gone. The court noted that the parties had not negotiated an extension or a new agreement and granted a declaration that the retaining wall was encroaching on the neighbour’s land.

Krystyne Rusek Recognized by Best Lawyers 2026

Speigel Nichols Fox LLP is delighted to have Krystyne Rusek recognized for a second year in a row by Best Lawyers 2026 in the area of Trusts and Estates in Canada.