Legal Blog

15-Yr Limitation and Wills

Tessaro v. Gora 2025 Ont SCJ

A lawyer drafted a will that had an ambiguous residual clause. The beneficiaries under each interpretation settled the issue between themselves and both sued the lawyer for the damages that they incurred because of the ambiguity causing the settlement. The lawyer drafted the will in 1991. The beneficiaries commenced their actions in 2019 and 2020. The beneficiaries had no problem meeting the basic two-year rule under the Limitations Act, 2002 because they did not know of the problem until after the testator died in 2018 and, indeed, until their settlement in 2024. However, the motion judge decided that s.15(2) of the Act precluded their actions because the 15-year absolute limitation period, which started January 1, 2004, had expired.

Personal Liability

Business people use corporations for many reasons, the most important of which relate to tax (paying as little of it as possible) and liability (having as little of it as possible). Because tax is not our area of expertise, we will only discuss liability.

A corporation has a separate existence quite apart from the people who own or control it (i.e. shareholders, officers, and directors). A corporation that enters into a contract may be liable if it breaches that contract, but, unless the other contracting party can demonstrate unusual circumstances, the corporation’s shareholders, officers, and directors are not personally liable for the breach. Of course, there are exceptions to the rule and, consequently, the other contracting party often joins the principal(s), who run and own a corporation, as defendants in an action against the corporation. In many cases, it is not necessary to do this because the corporation is viable and will have sufficient assets to pay a judgment; in other cases, when it is apparent that the corporation either does not, or is unlikely to, have sufficient assets to pay a damages award, it is crucial to join its principals if there is any evidence to support personal liability.

Examples

We will discuss two 2024 Ontario Superior Court of Justice cases in which one contracting party joined, in its action against the other corporate contracting party, that party’s sole shareholder, officer, and director: To v. Psonic Inc. and Forefront Electric v. Dutchies.

The Civil Rules Review Releases Phase 2 Consultation Paper

The Civil Rules Review was launched by Attorney General Doug Downey and Superior Court Chief Justice Geoffrey B. Morawetz with a mandate to identify issues and develop proposals for reforming the Rules of Civil Procedure to make civil court proceedings more efficient, affordable, and accessible. As the Chief Justice made clear in his remarks at the Opening of the Courts Ceremony, the objective is not just to tinker with the Rules, it is wholesale reform.

On April 1, 2025, the CRR released its Phase 2 Consultation Paper, which provides a comprehensive overview of the reforms the CRR is proposing. The Phase 2 Consultation Report can be found here: https://www.ontariocourts.ca/scj/files/pubs/Civil-Rules-Review-2025-phase-two-EN.pdf

The co-chairs of the CRR, Justice Cary Boswell and SNF partner, Allison Speigel, will be discussing the proposed reforms at two up-coming virtual events put on by the Advocates’ Society and Toronto Lawyers’ Association:

• https://advocates.ca/TAS/Events/Showcase_Pages/Overhauling_Ontarios_Civil_Rules_Proposed_Changes.aspx?EventKey=ONRULES25&utm_source=TAS&utm_campaign=a4d4baf156-ed-rules-april-2-25&utm_medium=email&utm_term=0_-a4d4baf156-443965443
• https://www.tlaonline.ca/?pg=events&evAction=showDetail&eid=300877

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.

Direct Payments (2)

In our October 2024 newsletter, discussing the motion judge’s 2024 decision in Demikon Construction Ltd. v. Oakleigh Holdings Inc. (Ontario Superior Court of Justice), we said, “In some cases, however, we just cannot fathom the position that the lawyers for one of the parties take.” In doing so, we implied that the lawyers for the lien claimant were taking an unreasonable position that was bound to fail. The lien claimant appealed the decision we were discussing and, now, after reviewing the reasons of the Divisional Court, we can “fathom” the position that the lien claimant’s lawyers were taking.

Recap

The construction manager of a condominium project registered a $5 million claim for lien. The developer posted security for $5,050,000 to vacate the lien from title to the condo lands. The developer later moved under s. 44(5) of the Construction Act for an order reducing its posted security by the additional $3.5 million it had paid to the construction manager’s subs. Section 44(5) gives the court authority to reduce lien security “where it is appropriate to do so.”

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.

Severance (2)

In our August 2011 newsletter, we discussed the severance of a joint tenancy and stated:

“Two or more people may own property together in one of two ways: as joint tenants or as tenants in common. On death, the interest of one joint tenant passes to the other joint tenant whereas the interest of a tenant in common passes to that person’s heirs in the normal course. Joint tenants acting together may, if they wish, choose to convert (or sever) a joint tenancy to a tenancy in common. Indeed, one joint tenant can unilaterally sever a joint tenancy. Is there ever a circumstance in which a third party can sever a joint tenancy?”

The answer to the last question was yes. If a creditor moves to have a joint tenant’s interest sold under a writ of seizure and sale and the sheriff advertises the property for sale, that is sufficient to sever the joint tenancy.

What happens when a joint tenant applies for an order taking back a full interest in the property, but, in the meantime, a creditor has filed a writ of seizure and sale against the other joint tenant. This situation arose in Brunton v. Lanzarotta, a 2024 decision of the Ontario Superior Court of Justice.

Construction Act (#5)

In 2018, we devoted four newsletters to the revamp of the Construction Lien Act, including its change of name to the Construction Act (the “Act“). Most of the changes to the Construction Lien Act took effect as of July 1, 2018; the prompt payment and adjudication provisions took effect as of October 1, 2019. On November 6, 2024, the Act had its first revamp. The bill making these changes has been enacted, but has not yet been proclaimed into force. Similarly, contemplated new regulations have not yet been promulgated.

Rather than a whole-scale change, the new legislation is more akin to a significant tweaking of some existing concepts in the Act. We will now review the more important of these tweaks. To meet space requirements, we will limit our comments to a prime contract scenario; however, the changes are applicable to subcontracts with only slight variations.

Krystyne Rusek’s Appointment by the Executive of the Trusts and Estates Section of the OBA

Krystyne Rusek has been appointed by the Executive of the Trusts and Estates Section of the OBA to act as the liaison for the OBA’s Civil Rules Review Taskforce.  The Taskforce will be making submissions to the Civil Rules Review Group, co-Chaired by Allison Speigel and the Honourable Justice Cary Boswell, and participating in consultations regarding a proposed overhaul of the Rules of Civil Procedure.

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.