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Ontario Introduces New Online Business Registry, Streamlining Filings

On October 19, 2021, the government of Ontario introduced a new Ontario Business Registry that will streamline access for organizations that are registered, incorporated or licensed to carry on business in Ontario, “making it easier, simpler, and more affordable for millions of businesses and not-for-profit corporations to interact with the government.” The new online registry replaces out-dated technology and will now provide individuals across the province with direct access to government services 24 hours a day, 365 days a year.

Benefits of the New Online Business Registry System

According to the Minister of Government and Consumer Services, Ross Romano:

“The new system will provide a modern, streamlined digital platform that saves business owners’ time by limiting the need for in-person interactions and cumbersome paperwork.”

Specifically, for the first time ever, businesses will be able to use the new registry to complete over 90 transactions, including registering a new business, dissolving an existing business, incorporating, ordering search products, and filing an annual return. Registrations and filings can now be instantly completed through the online registry, with users receiving automatic email notices with electronic attachments. Previously, such registration and filings that were submitted by mail or fax would take four to six weeks to complete and required the use of paper documents. The filing of annual returns will also be migrated from the Canada Revenue Agency to the new online registry, allowing businesses to keep all their filings in one place.

Using the Online Business Registry

Who Can Use the Registry?

All corporations filing under the Business Corporations Act, the Business Names Act, the Corporations Act, the Not-for-Profit Corporations Act, 2010, the Corporations Information Act, the Extra-Provincial Corporations Act, the Partnerships Act, and the Limited Partnerships Act will be able to use the Registry for filings.

Accessing Your Existing Business or Not-For-Profit Corporation

Corporations that are already registered or incorporated in Ontario will automatically have a Registry profile when the site launches. To access a business or not-for-profit corporation profile or make a filing under the business statutes, you will need its company key.

You can get your company key here.

Once you have your company key, you can use it to log in here.

Create a New Business Entity or Not-for-Profit Corporation

If your business or not-for-profit corporation is new and does not already have a profile in the Ontario Business Registry, you will need to create a new business entity or not-for-profit corporation. You must get a company key to access the system, as described above.

You can register a business name for a sole proprietorship, incorporate an Ontario business corporation or not-for-profit corporation, here. Or you can access other options for new business entities, such as incorporating a business, continuing as a business corporation transferring to another jurisdiction, applying for a license for a foreign corporation, and filing an initial return for an extra-provincial corporation here.

If you are incorporating a business or not-for-profit and are proposing a name that you have chosen yourself, you must get an Ontario-biased Nuans Report to confirm that no existing Ontario corporation has the same name or a name that’s similar to the one you are proposing.

Searching for a Business or a Not-for-Profit Corporation

Anyone can do a free search of the Ontario Business Registry to get basic information about a business or not-for-profit corporation. Once you find the profile of a business entity you want to know more about, you can choose to order a search product (for example, a detailed profile report) to get additional information about that entity.

Corporations

Services that are currently provided by Dye & Durham Corporation and ESC Corporate Services Ltd. will continue to be offered when the Ontario Business Registry launches. To order a search product, other than for your own corporation, one of these government service providers must be used.

Other Types of Businesses

To order a search product for your own entity or an entity that is not a corporation (for example, sole proprietorship, partnership), you can choose to go through one of the above service providers or direct through the government look for the “Search Products” drop-down list in the entity’s profile in the Ontario Business Registry.

Law, Accounting and Search Firms

A business entity or not-for-profit corporation may hire a law, accounting or search firm (referred to as an intermediary) to transact on its behalf. Currently, intermediaries can transact via authorized service provider or by mail. At this point in time, they cannot transact directly in the Ontario Business Registry, however future system updates will address online access for intermediaries.

The following qualified intermediaries can continue to transact via email:

lawyers and paralegals governed by the Law Society of Ontario

Chartered Professional Accountants governed by the Chartered Professional Accountants of Ontario

law clerks filing under the direction and guidance of a lawyer governed by the Law Society of Ontario

members of the Ontario Association of Professional Searchers of Records who regularly file with the ministry on behalf of corporations and other entities, law firms and accounting firms

The Not-for-Profit Corporations Act, 2010 Came into Force with the Registry

The Not-for-Profit Corporations Act, 2010 received Royal Assent on October 25, 2010 but was not able to come into force until the Ontario Business Registry launched. The Not-for-Profit Corporations Act provides a modern legislative framework for Ontario’s not-for-profit corporations. The legislation moves not-for-profit corporations from a paper-based filing system to a digital one thereby reducing the bureaucratic burden on these organizations and enhancing flexibility.

Not-for-profits will have three years after the Not-for-Profit Corporations Act’s proclamation to transition to the new rules. In the meantime, not-for-profits rules in articles and bylaws will continue to be valid under the previous governing legislation, the Ontario Corporations Act.

The government is currently engaging with intermediaries such as legal professionals, accountants, and search firms to gather information to support future alignment and their use of the Ontario Business Registry will begin in September 2021.

Contact the Business Lawyers at Prudent Law in Mississauga for Skilled Assistance with Corporate Law Matters

The business lawyers at Prudent Law in Mississauga are trusted professionals who can assist your corporation in streamlining its governance practices to ensure maximum efficiency. We provide practical advice on all corporate law matters. If you have a question about the new Ontario Business Registry system or have another corporate law issue you’d like to discuss it with one of our experienced corporate lawyers, please call us at 905-361-9789 or contact us online.

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When is a Verbal Agreement Binding in the Purchase of Real Estate?

A recent Ontario case between a father and a daughter concerning the transfer of property has stressed the importance of having a written contract in place to set out the specific terms of a purchase agreement, even if the agreement is between family members. In Downey v. Arey, 2021 ONSC 2781 the court determines whether the verbal agreement may be binding, and what parts, if any, of the agreement may still be enforceable.

Verbal Agreement to Purchase Property between Father and Daughter

The property in question was a Mississauga, Ontario home owned by the defendant, Mr. Arey. The plaintiffs were Mr. Arey’s daughter and son-in-law (a construction contractor). The plaintiffs lived in the Mississauga home with their two teenage children. The parties agreed that there was a verbal agreement in place whereby the daughter would purchase the house from her father, with the closing date originally set for August 31, 2016. The plaintiffs claimed they and Mr. Arey orally agreed to extend the closing to May 31, 2017 under certain terms. In contrast, the defendant claimed he never agreed to extend the agreement to May 31, 2017.

Verbal or non-written agreements between family members or close friends are relatively commonplace. The close personal relationship between friends and family often leads parties to believe a written agreement is unnecessary; however, the close personal relationship doesn’t make verbal agreements any less problematic. As stated by the trial judge in this case “Absent a written agreement, the parties’ expectations about the transfer went unexpressed, terms about the agreement were uncertain, and assumptions made by each were unshared.”

The uncertainty surrounding the verbal agreement ultimately led to a nightmare situation where litigation ended up being necessary between a daughter and her father.

Disagreement Over the Fair Market Value of the Home

In April 2017, the defendant refused to close the sale, demanding more money to meet the increased market value of the home. The plaintiffs were not willing to pay more money, so the father demanded they vacate the house so he could sell it for full value on the open market.

The plaintiffs then sued the father for specific performance, or in the alternative, damages for breach of contract, punitive damages, and “special damages” equal to the cost of renovating the home and potential lost profit. The father filed a counter-claim for rent payments starting from the date he demanded the couple and their teenage children vacate the house.

Specific Performance for Breach of Contract

Specific performance is an equitable legal remedy for breach of contract. The party who commits the breach is required to perform a specific act, usually to fulfill the terms of the agreement. Specific performance is typically reserved for situations where monetary damages are inappropriate or inadequate, such as real estate transaction agreements. No two properties are identical. Even carbon copy homes built by the same developer, at the same time, using the same materials, sit on different pieces of land, making them uniquely distinct. One of the parcels of land might have a slightly better view of a lake or be closer to certain amenities, for example.

Specific performance with respect to real estate agreements usually requires the sale/purchase of property to be completed. This was the remedy sought by the plaintiffs in Downey v. Arey who claimed the house was unique and damages were therefore insufficient.

Transfer of Land must be in Writing

Section 1 of Statute of Frauds, R.S.O. 1990, c. S.19 states that an agreement to transfer property must be in writing and signed by both parties. The Statute of Frauds gets its name from its historical purpose which was to prevent fraudulent dealings in land transfers arising from false or fraudulent oral testimony provided in the courts. However, despite not having a written agreement in place in Downey v. Arey, both parties agreed that the plaintiff’s renovations constituted partial performance of their verbal contract. In other words, failure to comply with the Statute of Frauds for lack of a written real estate agreement did not exclude the existence of a contract. Statue of Frauds notwithstanding, the court found a valid agreement between the parties did not exist because the verbal contract negotiations failed the test for determining whether an oral agreement existed.

Contract Negotiations or an Intention to Contract do not create an Enforceable Contract

Citing the Ontario Court of Appeal’s decision in S & J Gareri Trucking Ltd. v. Onyx Corporation, 2016 ONCA 505, the judge noted that for any oral agreement to exist, there has to be a “meeting of the minds” – a consensus between the parties to the contract as to the terms of the contract. A mutual intention to enter into a contract is not sufficient. “It is necessary that the essential terms of the agreement are also sufficiently certain.” Contract negotiations cannot create an enforceable or binding agreement where there is uncertainty about the essential terms or if parties do not intend form a binding contract until a formal written document has been executed.

In Downey v. Arey, there was an essential contractual term that was not agreed upon between the two parties – the selling price. Although there was an agreement to pay $850,000, there was disagreement over when and how the “family discount” was to be applied. The father claimed he applied a discount of $100,000 to reduce the price to $850,000, while the daughter and her partner believed the discount was to be applied to the $850,000. Since there was no written record, and each respective party to contract honestly believed their version of how the discount was to be (or already had been) applied, there was no “meeting of the minds” on a vital term of the contract. As such, the judge held that a valid contract did not exist. Consequently, the plaintiffs were unable to claim specific performance on the contract.

Damages for Compensation Awarded despite the Absence of a Valid Contract

The plaintiffs were awarded $163K in damages as compensation for the renovations made to the home. The plaintiffs we permitted to remain in the home until it was sold and pay property taxes, property insurance, and any other expenses that the father would have been paying as the owner of the property.

The case serves as a potent example of the value of written contracts, even when the parties involved are family. It also highlights the importance of seeking the advice of a knowledgeable real estate or contract lawyer to ensure compliance with all applicable laws to create a valid and enforceable agreement.

Contact the Real Estate & Contract Lawyers a Prudent Law to ensure Agreements are Legally Valid and Enforceable

The lawyers at Prudent Law in Mississauga are trusted advocates for real estate transactions, real estate litigation, and contract disputes. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and would like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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“Non Est Factum” in Contract Law: What is it, and How is it Used as a Defense?

Latin legal terms sometimes cause confusion for those outside the practice of law, making basic concepts seem more complex than necessary. In this post, we will break down a legal principle expressed in Latin that can be used as a defence in Canadian contract law; the defence of non est factum.

Defining Non Est Factum

The Latin phrase non est factum roughly translates to “that is not my doing”. In contract law, a party to a contract may invoke the concept when claiming a contract is invalid because they were mistaken about its meaning or nature at the time it was signed. As such, they should not be responsible to fulfill their obligations under the contract. If successfully pleaded as a defence, the contract may be rendered void.

In a future blog, we’ll look at situations where there is a mistake between both parties to the contract, but the doctrine of non est factum almost always applies in situations where there is a unilateral mistake; that is, a mistake by just one of the parties. For this reason, it can often be more difficult to establish this claim since most often there won’t be a mutual agreement that the party claiming non est factum was mistaken about its terms. Indeed, in order to be able to plead this defence successfully, the party to the contract (who is most often the defendant in a contract dispute) has a three-pronged threshold test that they have to meet.

Establishing “Non Est Factum” in a Contract Dispute

A party invoking non est factum as a defence in a contract dispute must prove on a balance of probabilities that:

(a) they were mistaken about the nature of the contract;

(b) the mistake regarding the nature of the contract was due to a misrepresentation by the other party to the contract; and

(c) that they were not careless in signing the contract.

Perhaps the most important thing to understand in pleading this legal defence is that the burden of proving the defence rests on the party which is effectively seeking to “disown” their signature on a contract. It’s not an easy burden to meet. The doctrine was originally intended to address situations (and was thus restricted to cases of) where one party to a contract was illiterate or blind, or other situations in which one party would have to rely on another party to understand the contents of a contract. The defence has now been expanded so that it applies to other situations, but that three-part threshold test must still be met.

Mistake via Misrepresentation

In order for the non est factum defence to successfully apply, the defendant must show that not only did the plaintiff misrepresent the nature of the contract, but they must also show they fully believed in the truth of the misrepresentation. If the defendant knew or ought to have known of the falsity of a statement, they can’t then rely upon that misrepresentation to claim they didn’t understand the nature of the contract (or its terms) when they signed.  The defendant must reasonably believe the misrepresentation to be true and rely upon that misrepresentation.

Many misrepresentation cases involving a successful non est factum involve real estate disputes, where an agent (whether deliberately or inadvertently) misrepresents the property to a buyer, who then wants to have the Agreement of Purchase and Sale voided because the property isn’t what they thought they were buying.

However, the doctrine can apply in other contractual situations that have nothing to do with real estate. For example, in Xerox Canada Ltd. v. Vandesign Graphix Ltd., the defendant was able to successfully plead non est factum in a case where the plaintiffs sued her for nearly $70,000 plus interest over a lease for copier equipment. The defendant had thought that she had signed the lease on behalf of the Vandesign Graphix company, rather than in her personal capacity. The judge ruled that the plaintiff (Xerox), had contributed to the plaintiff’s misunderstanding due to the form of contract used. The signature line, in particular, contributed to the defendant’s belief that she was only signing on behalf of the company, rather than her own behalf. Crucially, the judge also ruled that even if the defendant had read full text (or “fine print”) of the lease, it would not have made the defendant aware that she was signing it in a personal capacity and the plaintiff took no steps to inform her of this fact. As such, she was deemed not to have been careless or negligent and was able to successfully apply the non est factum defence.

Carelessness and Negligence

As mentioned, the defendant must prove they were not careless or negligent in signing the contract to meet the third part of the threshold test. Legal advice often plays a key role in determining whether someone was careless or negligent when signing a contract.  If the person did have legal advice, it could be determined that they ought to have understood the contractual transaction, making it difficult to meet the third test in the threshold. On the other hand, if the person did not obtain legal advice before signing, they may be found to have been careless. There are, of course, many situations in which someone could sign a contract without the aid of legal advice for legitimate reasons, such as impracticality. For example, people commonly sign car rental agreements while on vacation without first having the contract reviewed by a lawyer.

Where it is convenient and practical to obtain legal advice before signing a complex contract, we always recommend doing so. If it is not practical to obtain legal advice and a dispute later emerges, especially in a situation where you may feel that you have been misled as to the nature of the contract, we can advise you on whether the defence of non est factum or other legal defences may apply.

Contact Prudent Law in Mississauga for Skilled Representation in Civil Litigation Matters

The lawyers at Prudent Law in Mississauga are trusted advocates in any type of civil litigation, including contract disputes. We provide practical advice and passionate representation in litigation, and contract disputes. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Inadmissibility to Canada for Criminal Reasons

One of the more common grounds of deeming someone inadmissible for immigration to Canada, such as permanent resident applications, is evidence of past criminal activity. More specifically, it is what the Immigration and Refugee Protection Act refers to as either “criminality” or “serious criminality”.

The recent case Garcia v. Canada (Citizenship and Immigration) provides a good example of the factors that will be considered in deciding whether or not someone with a history of criminal activity (or in this case, an alleged history of criminal activity) will be deemed admissible or not. The case also how serves to demonstrate that even when there is evidence of such activity, all is not necessarily lost. The Garcia decision is notable as it was not just was an alleged case of criminality, but “serious criminality”.

Serious Criminality

Section 36 of the Immigration and Refugee Protection Act (“IRPA”) covers the criteria on which a permanent resident or a foreign national will be deemed to be inadmissible to Canada on the grounds of “serious criminality” or “criminality”.  If the applicant has been convicted in Canada of a charge which has a maximum sentence of at least 10 years or if it has resulted in an actual sentence of at least six months imprisonment, then they are considered to have a history of “serious criminality”. The section also covers criminal activity committed outside Canada. If the applicant has been convicted of a crime in a foreign jurisdiction which, if it had been committed in Canada, would be punishable by a maximum term of at least 10 years then they will also fall under the “serious criminality” designation.

However, the definition does not stop there. Section 36(1) (c) also covers situations where someone has committed a “serious” criminal act (again, using the maximum term of 10 years or more criteria), but has not been convicted for it. It was this particular section that applied to the circumstances of the Garcia case.

Inadmissibility Due to Assault Causing Bodily Harm

The Garcia case involved an applicant whose application for permanent residence was initially refused because her husband was found criminally inadmissible to Canada under Section 36(1) (c) of the IRPA. (It’s important to recall that a family member can also render an applicant inadmissible due to criminal history or other reasons.) The grounds of inadmissibility was based on a 2006 bar fight in which the husband had been involved in the Philippines. The charges in the Philippines were later withdrawn because the person who had been injured in the fight had filed what’s known as in the Philippines an “Affidavit of Desistance”. This affidavit stated that the accused had no intention to injure him and that if the victim was called to testify against the accused, his testimony would exonerate him.

Back in Canada, a visa officer considering the application concluded that the husband’s acts in the bar brawl amounted to assault causing bodily harm under Sections 265 and 267 of the Criminal Code and that there were reasonable grounds to believe the offence had occurred. Because assault causing bodily harm carries with it a maximum term of 10 years, this meant that the applicant would be deemed inadmissible on the grounds of serious criminality. Section 36(1) (c) in particular indicates that you don’t have to have been convicted of a serious crime if there is a reasonable belief that you committed the criminal act, the inadmissibility will still apply.

However, upon appeal to the Federal Court of Canada, the court found that the officer’s decision was unreasonable and unfair. The court found that the visa officer failed to conduct a proper assessment of the elements required of the Canadian offence assault causing bodily harm. The most significant issue was a lack of assessment of whether the defence of self-defence applied, and a failure to adequately assess the evidence as a whole. Because the criminal charges were dropped and there had been no trial, it was unfair and unreasonable for the visa officer to fail to consider or evaluate whether the husband had been acting in self-defence during the brawl. The court also thought it was unfair for the visa officer to assume that the Affidavit of Desistance and subsequent withdrawal of the charges resulted from a settlement between the prosecutors and the accused, rather than because the complainant subsequently realized he was at fault and thus wanted the charges withdrawn.

As such, the decision to deem Garcia inadmissible was quashed and the matter was sent back to immigration to be reconsidered by a different visa officer.

Non-Serious Criminality

As we’ve discussed “serious criminality”, it makes sense to point out that this is not the only criminal law grounds that someone can be deemed to be inadmissible to Canada. Section 36 (2) covers non-serious criminality (just referred to as “criminality”). We can examine this sub-section of the clause in greater detail in a future blog, but to summarize, if an applicant has been convicted of an indictable offence (or if outside Canada, the equivalent of an indictable offence) or has had more than one summary conviction (similar to what might be called “misdemeanour” offence in the United States), then they can also be deemed to be inadmissible.

The distinction between indictable offences constituting serious criminality and indictable offences constituting criminality, or between indictable offences and summary conviction offences can often be complicated, particularly when the offences occurred in a foreign jurisdiction. As the Garcia case demonstrates, the visa officers deciding on cases can make errors in their assessment of applications. Therefore, it’s highly recommended to have legal representation to help guide you through the application process and provide the best possible applications which will stand the greatest chance of being successfully granted, whether these applications be for work permits, student visas or permanent resident applications.

Contact Prudent Law in Mississauga for Advice on Immigrating to Canada Through a Variety of Pathways

The lawyers at Prudent Law in Mississauga are trusted advocates in immigration law, including permanent resident applications, temporary residency applications and citizenship and passport applications. We provide practical advice and passionate representation in a wide variety of immigration applications. If you are facing or anticipating a challenge to your immigration application and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Commissions Can Be Payable Without a Signed Contract

When working with a real estate agent, a homebuyer will typically enter into a Buyers Representation Agreement with their agent, which creates an exclusive relationship between the parties for the duration of the contract. The Agreement will further set out each party’s obligations, including any agreed-upon terms related to the payment of commission. A recent case decided in the Ontario Courts signals a note of caution for residential real estate purchasers with respect to these contracts – or lack thereof. The decision in Homelife Maple Realty et al v. Singh et al makes it clear that commission may still be owed to a real estate agent even without a written agreement being in place if the legal principle of “unjust enrichment” applies.

What is unjust enrichment?

Unjust enrichment refers to a situation where one party to an agreement is enriched at the expense of another, typically in a manner that is unfair.

The Singh case outlines the established three-step test for determining when unjust enrichment applies, as follows:

One party became enriched;

There was a “corresponding deprivation” to the other party (in more plain language, the other party has been deprived of what they are owed for services rendered); and

There is a lack of any “juristic reason” for the enrichment (in other words, there is a lack of legal justification for the enrichment of one party at the expense of the other).

Real Estate Commissions

The facts of the Singh case illustrate how the principle of unjust enrichment can apply to real estate transactions. The buyers, in this case, were two brothers and their spouses, who had been looking for a property large enough that would allow both families to live in the same house. As such, they were looking for a house with unique features that would be conducive to their needs, such as a house containing two separate kitchens.

One of the brothers worked at a car dealership and met a real estate agent from Homelife Maple Realty there. That agent, without the “safety net” of a signed Buyers Representation Agreement (BRA), then began researching properties that would meet the specific needs of the buyers and found one in Caledon, Ontario. A series of offers to this property were made by the agent on behalf of the brothers and their spouses but were ultimately not accepted. The buyers then informed the agent that they were no longer going to pursue the Caledon property. However, a few months later the property in question went back on the market and the buyers opted to make an offer through the seller’s agent. They did not involve their original agent in the deal, or inform him that they were considering the property again.

When the original agent discovered that the two families had bought the property that he had found for them, he took them to Small Claims Court to retrieve his commission. The Small Claims Court judge found in favour of the agent, inferring from the evidence presented at trial that the buyers had deliberately cut the agent out of the transaction to save on having to pay the agent his commission. The buyers then appealed the decision to the Ontario Superior Court.

Unsigned Agreements

Rather than focusing on the lack of a signed agreement, the buyers argued that the terms of the unsigned BRA should be determinative of any oral contract or agreement between the buyers and the agent. Since the unsigned BRA had been set to expire on September 1, 2014, the buyers argued that the terms of any verbal agreement between the parties should not extend past that date. Since the home was ultimately purchased in February 2015, they argued that they were no longer obligated to use the original agent’s services.

On appeal, the Superior Court affirmed the decision of the Small Claims Court, dismissing the notion that a verbal agreement between the parties could be said to have expired by September 1, 2014, because:

(a) The parties were still working together to find a property after September 1, 2014 (the agent had, on behalf of the buyers, put an offer towards the property after that date);

(b) The buyers had not wanted to be bound by the terms of the BRA, hence they were not in a position to later claim that those terms in the BRA which happened to be in their favour should apply; and

(c) It was fair for the Small Claims Court judge to infer from the evidence that the way the buyers were able to overcome the gap between the price that they were willing to pay for the house, and the price that the sellers were willing to accept, was to cut the agent and his commission out of the equation.

To apply this back to the principle of unjust enrichment, the agent had expended time and money finding a property for the buyers which the buyers eventually purchased, and was deprived of payment for his services. This satisfied part (b) of the unjust enrichment test. The buyers argued that this case failed part (a) of the test because they had not in fact been “enriched” because they didn’t receive any money as a result of the purchase of the home.

However, as the Judge noted, “[t]he case law makes it clear that an enrichment of the Defendant can come where there is either a positive or a negative benefit.” The buyers were effectively enriched because they were able to purchase the property for less than the listing price, because they paid a reduced commission.

Legal Doctrines

Among the lessons to remember here are that contracts (including those involving real estate transactions) don’t have to be signed or in writing in order to be considered valid. Additionally, it is beneficial to retain a real estate lawyer early on in the process of buying or selling a home. Involving a lawyer in the purchase or sale process will enable them to advise a party if any of their actions may run afoul of a legal doctrine (such as unjust enrichment) with which they may not otherwise be familiar. Understanding one’s obligations early on can help to avoid costly litigation in the future.

Contact Prudent Law in Mississauga for Skilled Representation in Real Estate and Contract Litigation

The lawyers at Prudent Law in Mississauga are trusted advocates with respect to real estate transactions, real estate disputes, and contract litigation. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and you’d like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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Is a Release a “Regular” Contract?

Often when parties are involved in litigation and the parties are able to agree on a settlement, one of the parties – quite often a corporation or government entity – will ask the other party to sign a “release” as part of the settlement. Usually, the purpose of the release is to prohibit that other party (the “signee” who is signing the release) from pursuing any further litigation against the company or government entity. But what happens in a situation when the party that asked for the release to be signed becomes drawn into further litigation as a “third party” to a dispute by the signee? Is this type of third-party claim by the release?

The Supreme Court of Canada recently released a decision, Corner Brook (City) v. Bailey, which had to determine the answer to this question and more generally whether releases should just be considered “regular” contracts in and of themselves.

Before we take a look at the facts of this case, let’s define the relevant legal terms.

What is a “Release”?

A “release” is a binding legal agreement between two parties in which one party agrees to relinquish a claim or right under the law that they had against another party. Although a release often comes into play in tort litigation, there doesn’t have to be a legal dispute in order for a release to be presented or signed. A release can be part of a broader signed contract, such as a termination agreement in an employment scenario. In order for the release to be valid and take effect, there needs to be adequate consideration provided to the party who is signing it. In other words, the signee must receive something of value in exchange for giving up their right to assert a legal claim against that other party.

What is a “Third-Party Claim”?

A third-party claim happens when, during litigation proceedings that are already underway, a claim is put forward within the existing litigation by a party (normally the defendant) against a party that wasn’t named in the original action. Often the purpose of doing so is to have the third party share some portion (if not all) of the liability should the defendant be found liable.

Can a Release Prohibit a Third-Party Claim?

To apply these concepts to the Corner Brook (City) v. Bailey case, the case concerned a woman, Mrs. Bailey who was driving her husband’s car in the City of Corner Brook, Newfoundland. She struck a city employee by the name of David Temple, who was performing road construction work, with the car. Mr. Temple sued Mrs. Bailey for damages resulting from his injuries.

Prior to the suit against Mrs. Bailey, Mr. and Mrs. Bailey had sued the City for damages to the car and for the injuries that she sustained in the incident. The Baileys and the City reached a settlement out of court for the damages, and as part of that settlement, the Baileys signed a release which agreed to exempt the City from any past, present or future claims relating to the accident. The “consideration” for this release was the financial settlement which the Baileys received from the City.

As part of the lawsuit between Temple and Bailey, Mrs. Bailey’s insurance company filed a claim against the City so that if she was found liable, the Judge would order the City to pay for Mr. Temple’s damages. This was the proverbial “third-party claim”, as Bailey was bringing the City into the legal action that was originally just between her and Mr. Temple.

In a nutshell, Bailey’s argument was that the release she signed did not apply because a third party claim had not been specifically contemplated by the parties (neither the Baileys nor the City) when the release was signed. The City countered that Bailey could not bring any kind of action against it due to the terms of the release. The trial judge agreed with the City, but on appeal, the Court of Appeal agreed with Mrs. Bailey. The matter was then sent to the Supreme Court of Canada (“SCC”) on appeal.

General Principles of Contract Law Interpretation

The SCC ended up agreeing with the City and the trial judge. They held that a release is very much just a regular contract between two parties and was not subject to any special or different rules of contract interpretation. Instead, the general principles of contract law interpretation apply. The Court noted that the release clearly stated that Mrs. Bailey was giving up her rights against the City in “all actions, suits, causes of action… foreseen or unforeseen… and claims of any kind or nature whatsoever arising out of or relating to the accident” and also that the term of this release lasted “forever”.

As such the SCC concluded that Mrs. Bailey’s third-party claim against the City came within the “plain” or “ordinary” meaning of those words and that there was no reason to interpret them to mean something else. The Court also determined that the surrounding circumstances of the case confirmed that the parties, when they had signed the release, had contemplated the possibility of a third-party claim.

The Court effectively adopted the trial judge’s reasoning that “it was not necessary that the parties be specifically contemplating a particular type of claim.” It was sufficient that the parties (of the Release) were contemplating any and all types of claims relating to the accident, which thus encompassed a potential third-party claim. As the SCC wrote, “Even though they may not have explicitly turned their minds to the possibility of a third party claim in particular, it was their objective, mutual intent to cover such a claim within the scope of the release.”

Signing Releases

This case stresses the importance of seeking legal advice before signing any kind of release that is asking you to give up a legal claim or right under the law. When entering into agreements, it is best to carefully consider what claims the release will or won’t cover, and for what period of time. Legal representation can assist in this regard, particularly if the terms of the release need to be re-drafted or re-negotiated.

The lawyers at Prudent Law in Mississauga are trusted advocates in any type of civil litigation, including contract disputes. We provide practical advice and passionate representation in litigation, contract disputes and business law. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Humanitarian Exemptions to Findings of Medical Inadmissibility

In immigration applications, such as permanent resident applications, one of the most important issues for applicants to be aware of concerns what is known in the profession as “H&C” claims; that is, claims or applications based upon “Humanitarian & Compassionate” reasons. Often, if someone applying for permanent resident status (or another immigration-related application) is denied and deemed inadmissible to Canada, they can seek an exemption by citing humanitarian and compassionate grounds. Whether someone can qualify for admission under “H&C” grounds is complex and generates plenty of cases in Canadian immigration law. This is because there are several reasons someone may be barred from entry, such as medical inadmissibility, and several grounds upon which one can argue that H&C reasons should provide an exemption.

The recent case Juan v. Canada (Citizenship and Immigration) illustrates a typical example of the factors involved in evaluating how H&C claims should be considered, but also how serves to demonstrate the potential for the legal proceedings involved to be unfair to applicants without the help of legal counsel to safeguard their rights.

Medical Inadmissibility

In the Juan case, the Applicant was a Filipino citizen who arrived in Canada on June 22, 2012, on a work permit issued under Canada’s “Live-in Caregiver Program”. The Applicant’s spouse, who has been diagnosed with chronic kidney disease in addition to other medical conditions, and her daughter still live in the Philippines. The Applicant applied for permanent resident status in Canada, listing her husband and daughter as accompanying dependents on her application. She received a letter in return from an immigration officer with Immigration, Refugees, and Citizenship Canada (IRCC) advising her that her husband had been determined to be a person whose health condition might reasonably be expected to cause excessive demand on health services in Canada – what’s known as “medical inadmissibility”.

Upon receiving this letter, the Applicant obtained the services of a lawyer and made submissions to rebut the medical inadmissibility finding. However, she also sought (under Section 25(1) of the Immigration and Refugee Protection Act) an exemption based on “H&C” grounds in the event that her challenge of her husband’s medical inadmissibility failed. The Applicant’s H&C argument was based on three points:

Her degree of establishment in Canada (she had now been in Canada several years and had started to establish roots here),

The impact of losing her Canadian income on her family if she was forced to return to the Philippines to seek employment, and

The best interests of her daughter.

Despite having a three-fold argument, the H&C claim was denied by the immigration officer. The Applicant appealed the decision, asking the courts to overrule the decision.

Applicant Alleged Officer Failed to Properly Consider Certain Elements of Her Claim

Upon judicial review, the main issue the Court had to consider was the immigration officer’s analysis of the H&C claim and their reason for denying the claim. The Applicant pointed out that the analysis provided by the officer failed to indicate whether or how certain elements of her claim were considered. She argued that the decision provided by the immigration officer had not properly addressed her claim indicating that she would be unable to continue contributing to her husband’s medical expenses or her daughter’s educations costs if she was forced to return to the Philippines, nor her claim that she would face age and sex discrimination in the Philippines when seeking employment there. The immigration officer’s decision indicated that he found the Applicant’s claims that she couldn’t pay for her husband’s medical and daughter’s education expense to be “speculative as the applicant has not put forth objective documentary evidence to support that she will be unable to secure employment in the Philippines”.

Court Finds Officer Provided “Strawman Argument” as Reason for Denial

The Court agreed with the Applicant, effectively indicating that the immigration officer had denied the claim what might colloquially be known as a “strawman argument”. That is, refuting or making a counter-argument to an argument or claim the Applicant had never made in the first place. As the Court noted “The Applicant did not argue that she would be unable to find work; rather she submitted that given the wages paid in the Philippines for the type of work she was likely to find there, she would be unable to support her family, in particular her husband’s medical expenses and her daughter’s education. This is not directly addressed [by the immigration officer] in the decision.”

As for the specific evidence that the Applicant cited in her submissions that indicated she would face age and sex discrimination in seeking employment in the Philippines, the Court noted that it had been seemingly ignored altogether.

In the eyes of the Court, the issues concerning the Applicant’s ability to pay for her husband’s medical bills and daughter’s education went to the heart of her claim for an exemption based upon Humanitarian and Compassionate grounds. The immigration officer’s failure to explain how these issues were considered in the denial of the H&C claim was considered such an egregious error as to render the decision “unreasonable” by the Courts. This allowed the application to be sent back for reconsideration by a different immigration officer (one who presumably would pay heed to the Court’s judgement to take the aforementioned aspects of the Applicant’s claim into account).

Common Grounds for H&C Claims

This case is a useful example of how H&C claims work as it involved a number of factors that typically come into play when a claim will be considered by the government (or if necessary, the courts). These include:

What is in the best interests of a child or minor?

Will the Applicant potentially face hardship if they are forced to go back to their home country?

Is the Applicant able (or have they been able) to establish their lives in Canada?

Are there medical concerns or factors that would affect the Applicant or an Applicant’s loved one/family member?

This is by no means an exhaustive list of all the factors that can be considered in H&C Claims, just some of the common ones that happened to be in this particular case. But what the case also demonstrates is that H&C exemptions to inadmissibility findings are not especially easy to obtain. They are only granted if you can convince the immigration officer receiving the claim that you have sufficient grounds and suitable circumstances for an exemption to be made and as this case demonstrates, immigration officers can make errors that could require an appeal to the Courts to correct. Therefore, it’s highly recommended to have legal representation to help guide you through the application process and provide sufficient supporting documentation, whether these applications be for work permits, student visas or permanent resident applications.

The lawyers at Prudent Law in Mississauga are trusted advocates in immigration law, including permanent resident applications, temporary residency applications and citizenship and passport applications. We provide practical advice and passionate representation in a wide variety of immigration applications. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Inadmissibility to Canada Due to Misrepresentation

We have previously written on the topic of being inadmissible to Canada for various reasons. One of the more common reasons in Canada that someone can be denied a work permit or permanent resident application is if they misrepresent themselves in their application for immigrating to Canada. The deliberate misrepresentation of an important or significant fact about oneself is something that seems fairly understandable as a reason to deem someone inadmissible to Canada. But what about a situation where the misrepresentation is made in good faith by someone attempting to submit an application to the best of their knowledge and understanding of the requirements of the application procedures?

This was the issue that the courts had to grapple with in the recent case Kangah v. Canada (Public Safety and Emergency Preparedness), where the applicant had received what’s known as an “exclusion order” for allegedly misrepresenting a “material fact” about herself in an application for a work permit. The applicant appealed the decision to the Federal Court of Canada, arguing that the decision was incorrect because the misrepresentation was the result of strictly following the explicit guidelines and instructions that Immigration, Refugees and Citizenship Canada (IRCC) provides for individuals in her particular situation.

Circumstances Which Can Prompt a Finding of Misrepresentation

Under Section 40(1) of the Immigration and Refugee Protection Act, a permanent resident or foreign national is inadmissible to Canada on the grounds of misrepresentation in the following circumstances:

if they directly or indirectly misrepresent or withhold material facts relating to a relevant matter that induces or could induce an error in the administration of this Act; or

if they were sponsored by a person who is determined to be inadmissible for misrepresentation; or

on a final determination to vacate a decision to allow their claim for refugee protection or application for protection; or

on ceasing to be a citizen (for various possible reasons under the Canada Citizenship Act).

It is important to note with respect to the first ground that it is not just any misrepresentation that can make a person inadmissible to Canada, it has to be one that misrepresents “material facts” (that is, facts which are very important about the applicant and relevant to the decision to admit her or not). On the other hand, the misrepresentation can be either “direct” or “indirect”. An example of an “indirect” misrepresentation would be if someone else made the misrepresentation on behalf of the applicant in the application process or as part of the same process (for example, a family member applying along with the applicant as part of the same application to gain entry into Canada).

Applicant Said to Have Misrepresented Facts After Following Application Instructions

In the Kangah case, the applicant was a citizen of France. She had filed an application for a work permit while she was in Canada but had indicated that she was in France in the application. The reason she did so was that the instructions she was following (provided by the Canadian Embassy in Paris and on the IRCC website) had specifically stated “Even if the candidate is in Canada, he must complete an Application for Work Permit Made Outside of Canada [IMM 1295] and indicate as country of residence his country of usual residence, not Canada, in order to obtain the correct document checklist”.

The Immigration Division (the government arm which considered the application) deemed that there was a material misrepresentation in her application as a result. The applicant successfully appealed the decision, with the Court agreeing with her that it was unreasonable to find that a misrepresentation was “material” when Kangah had in fact followed the instructions provided by IRCC. The Court pointed out that “a misrepresentation is only material if it affects the process undertaken or the final decision” [of whether or not to grant the application] and since Kangah was following the requirements of the process, it would be unreasonable to hold that against her.

What Can Constitute a Misrepresentation?

The Kangah case was unusual in that it is not easy to get the courts to set aside a finding of misrepresentation in one’s work permit or permanent resident application. One suspects that the instructions provided by the IRCC will have been (or will be) adjusted following this decision to avoid future unreasonable decisions by the Immigration Division. Regardless, what this case illustrates above all else is how much of a minefield immigration-related applications can be where even someone following instructions provided by the government to the letter can run into legal problems which need to be sorted out.

The following is a summary of some circumstances that might constitute a misrepresentation (though this is not necessarily an exhaustive list):

A misrepresentation can be made orally or in writing.

A misrepresentation can also be made by omission – that is, failing to disclose information that is material to the application.

A misrepresentation can be made “directly” (that is, by the applicant in their application) or “indirectly” (that is, by another person who was applying as part of the same application process, or by a person’s agent.

A misrepresentation doesn’t have to be intentional in order for the applicant to be considered inadmissible to Canada.

A misrepresentation can occur without the applicant’s knowledge and without any intent to mislead. The exception to this is when the applicant both honestly and reasonably believed they were not misrepresenting a material fact.

Above all, the misrepresentation must be material. The misrepresentation will be considered “material” if it is important enough to affect the process.

Misrepresentation cases for immigration applications are almost always fact-specific and can be very complex as a result. Legal representation in such matters is always highly recommended. This is not just for the purposes of providing the strongest application possible to help avoid having any application rejected on the grounds of a material misrepresentation but also to safeguard your rights in the event of errors being made by those in the Immigration Division reviewing the applications.

The lawyers at Prudent Law in Mississauga are trusted advocates in Immigration Law, including permanent resident applications, temporary residency applications and citizenship and passport applications. We provide practical advice and passionate representation in a wide variety of immigration applications. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Immigration & The Best Interests of the Child

In our first blog focused on immigration law in Ontario, we discussed the fact that S.25.1 of the Immigration and Refugee Protection Act provides for a frequently sought-after exemption for those applicants who have applied for permanent resident status in Canada and been deemed inadmissible. The exemption is provided on the grounds of “Humanitarian and Compassionate Considerations”, although it is not available for anyone who had been deemed inadmissible on the following grounds:

S.34 (Security – for example, someone who has engaged in espionage or terrorism),

S.35 (Human or international rights violation), or

S.37 (“Organized criminality”, which effectively refers to taking part in organized crime, including money laundering or human trafficking).

Humanitarian and compassionate grounds is just one factor immigration authorities will consider when deciding whether to grant an exemption. Another factor is the best interests of any child or children who are part of an application. The recent case of Adair v. Canada (Citizenship and Immigration) provides for a good illustration of when such an exemption to a ruling of inadmissibility for a permanent resident application may be granted.

Humanitarian & Compassionate Grounds and the Best Interests of the Child

In the Adair case, the applicant, a citizen of Saint Vincent and the Grenadines, was the mother of two Canadian-born children, who were 17 and 15 years old. She applied for a permanent resident visa as a member of the family class, sponsored by her aunt. The visa officer found that the applicant was not a member of the family class and thus was inadmissible. The applicant requested an exemption based upon humanitarian and compassionate Considerations (“H & C grounds”), but the visa officer concluded that an exemption on H & C grounds was not warranted. Although the applicant did not dispute the finding that the aunt was not a member of Ms. Adair’s family class, she did contend that the visa officer’s H & C decision was unreasonable. She appealed the decision of the visa officer to the Federal Court.

Immigration Officer Made Errors in Considering the Best Interests of the Child

The Court concluded that the visa officer committed errors in considering the best interests of the applicant’s children, especially in regards to the younger of the two, making the original decision unreasonable. The applicant had provided a report detailing the fact that the younger of her two children (the 15-year-old) had learning and developmental disabilities. The visa officer characterized this report as a “physician’s opinion” and did not give it much weight on the basis that no medical diagnosis was provided in the report and that proper care for the child appeared to be available to the child in the home country of St. Vincent and the Grenadines.

The Court ruled that the officer gave “short shrift” to the younger child’s challenges, failing to focus on the simple fact that the child had not been treated for the issues identified in the expert report. It also wasn’t clear why the absence of a medical diagnosis should negate the conclusions in the report (which was provided by a person qualified to detail the 15-year-old’s developmental challenges). The visa officer also failed to address evidence detailing the resource challenges affecting the St. Vincent and the Grenadines educational system, and the impact these challenges had on the availability of the services the child required.

Most notably, the visa officer didn’t seem to take any notice of the evidence that proper care to address the child’s learning disabilities wasn’t in fact available to her in St. Vincent (as was claimed in the officer’s report), given that the family had been unable to obtain the assistance of education professionals who could help the child in this regard in over four years since the original assessment indicating that she suffered from learning disabilities had been provided.

Visa Officer’s Decision Missing Compassionate Analysis

Finally, the visa officer concluded the best interests of the child analysis by stating that the children, as Canadian citizens, were at liberty to pursue education in Canada without their mother. The problem for the Court was that the visa officer had reached this conclusion without providing any analysis of the compassionate factors that this scenario would entail. As the Court noted, “[w]hen conducting an H & C assessment, it is not enough to address the hardship. Compassionate factors must also be weighed and considered.”

The visa officer’s decision was completely empty of any compassionate considerations, and certainly, nothing was provided in the decision which could possibly be used to understand how it was that the children being separated from their mother could be seen as being in the child’s “best interests”.

While a child’s disability doesn’t, on its own, automatically provide for an exemption to inadmissibility that is based upon an “H & C” claim, neither does it relieve a visa officer of the responsibility to fully examine and assess the evidence, or address the compassionate factors that might warrant an exemption to inadmissibility. That is effectively what happened here in the Adair case. As such, the Court ruled the decision unreasonable, and the matter was returned for redetermination by a different decision-maker.

What this case demonstrates is the continued importance of compassionate grounds and circumstances that may warrant an exemption to grant someone permanent resident status in Canada when they would otherwise be inadmissible. It also provides for a good illustration that errors can be made in the initial assessment which may necessitate an appeal. Legal representation in such matters is always highly recommended, not only for providing the strongest initial application possible but also to safeguard your rights in the event of errors being made in the initial assessment by the visa officer.

Contact Prudent Law in Mississauga for Family Status Immigration Applications and Appeals

The lawyers at Prudent Law in Mississauga are trusted advocates in immigration law, including permanent resident applications, temporary residency applications and citizenship applications. We provide practical advice and passionate representation in a wide variety of immigration applications. If you are facing a legal dispute and you’d like to discuss it with one of our experienced immigration lawyers, please call us at 905-361-9789 or contact us online.

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Canadian Immigration: Admissible vs. Inadmissible Status

Perhaps the most fundamental issue when it comes to immigration into Canada is whether the person(s) seeking entry is considered “admissible” to Canada. This effectively means whether the person has the right to be admitted into the country as an immigrant. Whether a person is admissible or inadmissible is determined by the Immigration and Refugee Board of Canada, and in particular, the Immigration Division of the Board (one of four divisions that makes up the Board). The Immigration Division renders decisions on whether a person is inadmissible to Canada and also deals with detention and release under Division Four of the Immigration and Refugee Protection Act.

Grounds for Inadmissibility

While Canada enjoys a worldwide reputation as one of the leading progressive countries with respect to immigration as well as the acceptance of refugees, the criteria under which someone may be inadmissible to Canada is actually quite extensive. A foreign national (or in many cases, a permanent resident) may be inadmissible as an immigrant for the following reasons:

Security reasons

Human or international rights violations

Being convicted of committing a crime

Being a member of a criminal organization (which can include membership in a group which participates in money laundering)

Medical reasons, including medical conditions that endanger public health or safety (for example, having a contagious illness)

Financial reasons (for example, being unable or unwilling to support yourself or family members).

Misrepresenting yourself in your immigration application

Failing to comply with the terms of the Immigration and Refugee Protection Act (“IRPA”)

Having a family member who has been deemed to be inadmissible.

Within each of the above-listed reasons, there are a myriad and multitude of additional factors to consider or sub-criteria which may apply. For example, a misrepresentation can be a situation where false representation information is provided as well as a situation where information is withheld by the applicant that might be relevant to the decision by the Board. Similarly, security reasons can include having allegedly committed espionage, violence, terrorist or subversion activities. Criminal activity which can render one inadmissible encompasses all sorts of crimes ranging from murder or homicide to drinking and driving convictions as well as taking part in organized crime for such activities as money-laundering.

Humanitarian and Compassionate Grounds

There are also exemptions and exceptions that can come into play. All tribunals in Canada, including those concerned with immigration and refugee claims, are required to exercise their discretionary decisions in a manner that is consistent with “Charter” values (that is, with the principles set out in the Canadian Charter of Rights and Freedoms), can result in challenges to decisions made by the Board if the argument can be successfully made that the decisions are inconsistent with the values of the Charter, perhaps most notably S.7 which affirms that “Everyone has the right to life, liberty and security of the person”.

Perhaps most notably, exemptions to people considered inadmissible to Canada can be granted permanent resident status for what is known as “Humanitarian and Compassionate” considerations, under S.25.1 of the Immigration and Refugee Protection Act.

Under this section, the Ministry of Immigration will consider such factors as:

how established or settled the person is in Canada

the person’s ties to Canada, including family ties, and what might happen if family members were separate

physical health or mental health concerns

the impact on their lives of family violence they have experienced or will experience if they have to return to their home country

the best interests of any children involved.

hardship or difficulties they might face if they were sent back to their own country

Discretionary Decisions

Decisions for admitting a person on humanitarian and compassionate grounds (known as “H&C Applications”) are discretionary, giving immigration officers a lot of freedom. While these decisions can be appealed, ideally one wants to be granted admittance as soon as possible, especially if genuine hardship will result otherwise. It is crucial to provide a strong application explaining all of the reasons why the permanent resident status needs to be granted (ensuring that the applicant stays in Canada) supported by as much evidence as possible, which is something that an experienced immigration lawyer can assist you with.

Contact Prudent Law in Mississauga for Advice on Immigrating to Canada Through a Variety of Pathways

The volume of case law precedent over the years with respect to the grounds of inadmissibility and for “H&C applications” is enormous. We will endeavour to keep readers abreast of the most interesting cases and new developments with respect to immigration law in Canada to help keep people informed, but it is highly recommended that professional legal advice is sought in order to help protect and retain your rights to enter and remain in Canada.

The lawyers at Prudent Law in Mississauga are trusted advocates in immigration law, including permanent resident applications, temporary residency applications and citizenship applications. We provide practical advice and passionate representation in a wide variety of immigration applications. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Understanding Buyer Representation Agreements

When buying a home, before the Agreement of Purchase and Sale is even a consideration, there is another form of contract buyers must sign that people may not be as familiar with. The Buyer Representation Agreement (BRA), a contract that a realtor or agent may ask the buyer to sign, gives the real estate company exclusive permission to act on the buyer’s behalf in the acquisition of a piece of real property. Below, we review the purpose behind the BRA and the typical legal obligations of each party to a BRA.

Buyer Representation Agreement Objectives

Basically, the BRA aims to govern the terms of the agency relationship of the Real Estate company or brokerage on behalf of the buyer. The BRA typically will indicate the buyer’s agreement to pay the agent a commission for their role, which will normally include the agent managing much of the purchasing process, including contract negotiations with the seller and all of the required paperwork.

BRA’s almost always provide for a period of exclusivity for the term of the contract, so that if you purchase property during the contract term, the real estate agent will receive a commission regardless of whether they were involved with the purchase of the property. The exclusivity will also mean that the buyer can’t use another real estate agent for a purchase during the term of the agreement. There is usually a fixed term to the agreement so that buyers can seek new representation if they haven’t found a property to purchase by the end of the term. BRA’s also often provide for an indemnification clause which removes any liability for the real estate agent for the physical condition of the purchased property.

The terms (especially the duration) of the BRA are negotiable and should be in writing, as this helps to ensure all parties are clear on their obligations. This is particularly important with respect to the commission, as this can often be a source for legal disputes. A recent case decided by the courts, Sutton Group-Admiral Realty Inc. v. Taborovska, illustrates the need for both parties to a BRA to have an understanding of the obligations and the terms within it.

Real Estate Agent Commissions

In the Taborovska case, an agent from a realty group worked with the parents of the respondent (Ms. Taborovska) to find a home for her. The parents, who live in Ukraine, made an offer on a home in Mississauga under their daughter’s name. The daughter also signed an Agreement of Purchase and Sale for the property and a BRA which provided the agent with a 2.5% commission for any home she purchased between mid-November 2018 and mid-March 2019.

The offer for the home in Mississauga was rejected and the purchase didn’t go through. Just ten days after she signed the BRA, the daughter put an offer on another piece of property through another real estate agent. The agent sued to obtain the 2.5% commission on this deal, as per the terms of the BRA. Ms. Taborovska however sought a declaration with the courts that the BRA which she signed was void and unenforceable. She argued this on the legal principle of “Non Est Factum”.

Understanding Contract Terms: “Non Est Factum”

Non Est Factum is a legal defence that means that a written contract is invalid because the defendant was mistaken about its meaning (or the meaning of particular terms within it). To be able to plead this defence successfully, the defendant must prove on a balance of probabilities that:

she was mistaken about the nature of the contract;

the mistake of the nature of the contract was a result of a misrepresentation by the other party to the contract; and

that she was not careless in signing the agreement.

The Judge concluded that Ms. Taborovska was able to satisfy all three elements of the defence and ruled in her favour. Much of this was due to the somewhat unique circumstances of this case, as the BRA (as well as the Agreement of Purchase and Sale) was in English but the conversations between the Agent and the Buyers’ parents were in Russian and the parents relied upon the agent to translate the terms of the contracts to them. In addition, while Ms. Taborovska signed the BRA, the discussions relating to the agreement largely took place between the agent and her parents.

There were different accounts between the parties as to who explained what or what had been explained or translated, including whether there was a clause-by-clause oral translation of the documents or just a general summation of the terms of the BRA. The court ultimately found the testimony of the buyers to be more credible that they did not fully understand the terms of the BRA nor did they have the terms fully explained to them.

Court Finds Agent Misrepresented Contents of the Buyer Representation Agreement

The second threshold was met as the court ruled that the agent mispresented the nature of the BRA to the buyers by telling them that it related only to the Mississauga property. The agent did not explicitly confirm that that the BRA would provide him with a commission should they purchase any other property (whether through another agent or not).

The third threshold with respect to carelessness was also met as the court ruled that the defendant had not been careless in her actions, since the agent had been dealing mostly with her parents and had not communicated directly or often with her during the contract discussions. Effectively, it was reasonable for the daughter to rely upon the information she received from her father who was handling the negotiations as her own de facto agent and who was exercising the necessary due diligence on her behalf.

In contrast, it was the agent who was arguably careless as he never spoke directly to the purchaser, his client, about the BRA directly. According to the court,

Mr. Antonenko had an obligation to ensure Gann understood the documents he was asking her to sign. Having failed to do so, Mr. Antonenko cannot now try to enforce the terms of the BRA he did not explain.

As such, the agent wasn’t able to claim the commission.

The case highlights the need for either party to a BRA to understand their obligations under it and contractual terms in general. Non Est Factum claims are not easy to make successfully, and the burden is upon the defendant to prove beyond a balance of probabilities the necessary threshold elements. Although the defendant was successful in this instance, seeking legal advice to review any contract is always recommended, particularly if one is unsure of the meaning or character of various contract clauses.

Contact the Real Estate Lawyers at Prudent Law for Advice on Residential Real Estate Contracts Before You Sign

The lawyers at Prudent Law in Mississauga are trusted advocates with respect to contract disputes,  real estate transactions and real estate litigation. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and you’d like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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Cottage Properties: Who Has the Right of Way?

With signs that the province is gradually opening and cottage season upon us, it seems an appropriate time to look at a recent decision in the Ontario courts concerning the possible restrictions on the usage of a right-of-way that provides access to a body of water to the owners of non-waterfront cottage property. The case of Fisher v. Saade looks specifically at whether a right-of-way could be restricted from commercial use.

Easements and Rights-of-Way

Before looking at the case, it’s important to understand what a “Right-of-Way” (ROW) is in a real estate context. A right-of-way is a type of easement in which the owner of one piece of land provides the right to another to pass over their land to reach either another property or (as is common in cottage cases) a body of water. For those wondering what an easement is, it’s essentially the legal right for one property owner to enter another’s without permission.

Easements can be created in one of four ways in Ontario:

By an express grant from the owner of the property that is to be entered,

By “prescription” (perhaps better understood as “squatter’s rights”),

By implication (such as with shared walls for semi-detached houses or townhomes), and

By statute (usually for government or municipal purposes).

In the Fisher case, the ROW easement existed as a result of the first example. An express grant was registered on the property by the person who sold both the waterfront property and the adjacent “landlocked” property to the two parties to the legal dispute. The ROW in this case was a typical example that provided the landlocked property owners with access to the body of water by allowing them access to the waterfront property.

Reasonable Use

There was no dispute that the ROW existed and provided pedestrian access to the beach. The contentious matter was who could avail themselves of this access. The owner of the landlocked property undoubtedly had the right to access the property due to the ROW. However, the owner often rented his cottage to various tenants for short-term stays. Were these tenants permitted to also use the ROW?

The waterfront property owners contended that commercializing the ROW was not part of the original intention of the easement as granted by the property owner who sold both properties to the respective parties. An additional dispute surrounded the use of the easement property itself. The landlocked property owner had not only authorized his paying tenants to use the ROW to get to the beach, but he had also built a ramp and erected a floating dock on the shoreline, for use by him or his tenants once they got to the shore. He also supplemented the dock with furniture and a security camera.

The Court’s decision might be said to be a mixed one for both parties. On the one hand, the Court disagreed that the landlocked property owner authorizing his paying tenants to use it was outside the scope of the wording of the ROW or its intended use. The Court looked at both the language of the ROW and how the land in the ROW had been used and found that there was no restriction against commercial use in either the language of the ROW or in the way the ROW had previously been used before the current property owners obtained the land.

The Court pointed out that it is quite customary for cottage property owners to subsidize their property taxes or maintenance costs by renting out their cottages to paying guests (and in fact, the Court pointed out that the waterfront property owners had often done so with their own property). As such, they deemed that providing the ROW to paying tenants renting the cottage property was a “reasonable use” of the ROW.

The Court further indicated that it would be unreasonable for the ROW to now be limited to use by the actual owner of the property or his non-paying guests. The unreasonableness would likely be exacerbated given the extra steps that would presumably be required in determining on the spot whether a guest using the ROW was a paying or non-paying tenant of the property in order to enforce such a restriction.

Unreasonable Expansion of ROW Easements

On the other hand, the Court did agree with the waterfront property owners that the landlocked owner was not entitled to erect a dock or leave beach patio chairs and tables at the area where the ROW met the shoreline. The Court noted that the “unilateral installation of the ramp and dock by Mr. Saade on the Fishers’ land, appears to have followed a complaint from an Airbnb tenant that they had no waterfront area to sit and enjoy the beach area.”

The Court determined that what Mr. Saade had effectively done was to use the ROW to create his own waterfront piece of property that he and his tenants could enjoy, which was an unreasonable expansion of the ROW. The language of the ROW didn’t provide him with a de facto piece of waterfront property, but simply provides access to the water and nothing more. There was nothing in the language (or prior historical use) of the ROW to suggest that he could unilaterally expand the right of access to a piece of property so that he or his tenants could enjoy it as though it was their own waterfront property. The Court ordered that the dock, ramp, furniture and other items be removed.

Right-of-way and easement cases in real estate law can be very fact-specific. Had the language to the ROW specifically excluded commercial usage, the case could well have been decided differently. There are also questions of ancillary rights and implied easements that could have come into play had the landlocked owner been able to prove that the ramp he constructed was truly necessary for the safe use of the ROW.

Contact Prudent Law in Mississauga for Property Easement Matters

Given that each cottage property or ROW can have its own unique characteristics, it is highly recommended that those who have an easement issue seek legal advice to determine their specific rights and/or obligations.

The lawyers at Prudent Law in Mississauga are trusted advocates with respect to real estate transactions and real estate litigation. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and you’d like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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Seller Beware: When a Homebuyer Fails to Deliver the Deposit

There is a growing trend in Toronto and the GTA of residential real estate purchasers failing to provide the agreed-upon deposit after signing an Agreement of Purchase and Sale. This may be an unforeseen consequence of recent changes to the process of purchasing and selling property, but regardless of the cause, it should be guarded against by taking precautions to safeguard the rights of residential real estate sellers.

In Ontario, a deposit is typically due within 24 hours of an Agreement of Purchase and Sale being accepted, unless otherwise agreed to or specified within the Agreement. However, as a consequence of the COVID-19 pandemic, more and more purchase offers are being submitted via email, with the deposit cheque due upon acceptance of the offer by the seller.

This has led to a recent trend where buyers are submitting offers that are accepted and then not providing the deposit cheque, with the speculation being that purchasers are providing offers on multiple properties at the same time and then following through only with the one that they like best or get the best deal on.

The Law Concerning Deposits

In Canada, deposits form a unique aspect of Canadian contract law. Normally, contract law is based upon the notion of damages so that if someone breaches a contract or fails to carry out their duties under the agreement, the aggrieved party will be compensated for damages that they suffered as a result. Deposits work somewhat differently. Where a buyer gives a seller or vendor a deposit to secure the performance of a contract for purchase and sale of real estate, the deposit is forfeited if the purchaser refuses to close the transaction unless the parties bargained otherwise (normally, by stipulating this in the contract or the Agreement of Purchase and Sale).

It may also be possible for the buyer to have their deposit returned if the amount of the deposit is so large that a court would consider it “unconscionable” for the buyer to not get the money back. Of course, the circumstances around why the contract went unfulfilled would also be a factor in such a decision.

If a buyer paid a deposit of, say, greater than 50% of the overall purchase price, it would likely be deemed unconscionable for the seller to be able to keep the deposit if the seller didn’t close the deal.

If the buyer is the one who fails to “close” the purchase deal by not providing the rest of the funds required by the purchase, they are normally out of luck. This is true even if there are no actual damages to the seller – that is, if the seller turns around and sells the property to someone else for the same price or higher than what they had originally agreed to sell to the defaulting buyer. In the landmark decision of Tang v. Zhang, (which has been relied upon by other provincial courts across the country, including the Ontario Court of Appeal) the B.C. Court of Appeal affirmed that if the buyer is the one that is at fault, the seller is entitled to keep the deposit even if they haven’t suffered any damages.

The reason for this uniqueness seems to relate to the good faith intentions of the parties in question, particularly the buyers. In the Tang case, the Court affirmed that a deposit is technically not part of the Agreement of Purchase and Sale (although the funds count towards the purchase price). Rather, a deposit “stands on its own as an ancient invention of the law designed to motivate contracting parties to carry through with their bargains” and creates (out of fear of its forfeiture) an incentive for the buyer or purchaser to provide the remaining funds to complete the purchase.

Seller’s Rights

Given that the law concerning real estate deposits doesn’t generally favour the buyer, we can see perhaps why this trend of buyers withholding the deposit has emerged. However, sellers are not totally without legal recourse where a buyer fails to provide a deposit. They can sell to another party and then bring a claim against the buyer for a breach of contract.  Although normally the damages to the seller have to be palpable enough to make this worthwhile given legal costs involved.

Damages in these instances can be calculated by comparing the lower price for which the seller subsequently sold the property, versus the higher price under the original contract. However, given the fact that a failure to provide a deposit is becoming more common, sellers are making the choice to become proactive by including stricter terms in the Agreement of Purchase and Sale.

Drafting Real Estate Agreements of Purchase and Sale

To reduce the chance a buyer will sign an Agreement, only to walk away before providing a deposit, sellers are starting to have additional contractual terms and covenants included in their purchase agreements. These terms impose additional warranties and obligations on the part of buyers in the event they do not provide a deposit after making a firm offer.

All of the above provides a good illustration as to why it is a good idea to consult with a lawyer for a real estate transaction, whether you are a buyer or a seller, before signing the Agreement. Often, the parties only consult with a real estate lawyer once the Agreement is in place, however, a skilled lawyer can provide much-needed advice on the terms of the Agreement before signing.

Safeguards either limiting liability on the part of the buyer in the event that they are unable to complete the deal or protecting the rights of a seller should the buyer fail to follow through with the deposit can be negotiated and added into the Agreement. Both buyers and sellers should seek the advice of an experienced real estate lawyer in such situations to avoid time-consuming and costly legal pitfalls or snags in the purchasing and selling of real property.

The lawyers at Prudent Law in Mississauga are trusted advocates with respect to real estate transactions and real estate litigation. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and you’d like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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When Size Does Matter: Misrepresentation Rescinds Real Estate Agreement

It isn’t very often that a purchaser of residential real property is able to rescind, or cancel, a valid Agreement of Purchase and Sale and reclaim their deposit, but a recent decision of the Ontario Court of Appeal provides a good example of one such scenario where this can happen.  In the case of Issa v. Wilson, 2020 ONCA 756, a purchaser of a property in Stouffville, Ontario was permitted to rescind his purchase agreement and reclaim his $50,000 deposit after the seller misrepresented the size of the property.

In this particular case, a young, first-time homebuyer was looking for a large enough property that he could live in with five other people; namely his parents and three sisters. The real estate agent, in this case, acted for both the seller (Wilson) and the buyer (Issa). The seller indicated that the property was around 2100 square feet in size, which was confirmed by the MLS listing, which stated that the property was between 2000 and 2500 square feet. After visiting the property, the buyer was advised by the agent over the telephone to put in an offer for the home before another prospective purchaser made an offer. The buyer subsequently made a purchase offer for the property which the seller accepted, and the next day, the buyer provided the agent with a cheque for the $50,000 deposit on the property.

The problem arose when the buyer received an appraisal on the property as part of the buyer’s mortgage application, which revealed that the property was in fact only 1400 square feet. The buyer asked the agent why the appraisal said this when the property was advertised as being between 2000 and 2500 square feet. With no explanation forthcoming, the buyer sued to rescind the purchase agreement and have the $50,000 deposit returned to him.

Rescission of Contract

Rescission of a contract is a remedy that is available under certain circumstances. One such circumstance is when one party to the contract has made a misrepresentation to the other. (Other circumstances might include where a genuine mistake has been made, or if a contract was signed under duress). A rescission means that the contract is effectively cancelled, relieving all parties of their obligations under the contract. In the case at hand, this meant the buyer was not obligated to pay the agreed deposit, and therefore was entitled to have the deposit returned. However, it is important to be aware that rescission is not a widely used remedy. It isn’t just any misrepresentation that will trigger the right to rescind a contract.

The Misrepresentation Must be Significant

If the misrepresentation was on a fairly trivial matter regarding the house or didn’t affect the intention of the buyer to purchase the property, chances are that rescission would not be available as a remedy. The misrepresentation needs to be “material” to the agreement and one which induced the purchaser to make the purchase and thus enter into the agreement.

At trial, the judge ruled that the misrepresentation in the size of the property was material and thus did matter. The buyer had specifically indicated that he wanted a property large enough to house his extended family. It was undisputed that both the owner of the property and the real estate agent provided misinformation that acted as an inducement to get him to purchase the property.

Buyer Relied on Representations When Deciding to Purchase Home

The case went to the Court of Appeal largely because of the issue that the buyer had visited the property twice and had seen for himself how large the property was. The real estate agent argued that the two visits effectively nullified the misrepresentation of the size of the property. To put it another way, that the misrepresentation was “immaterial” because the buyer saw the property for himself and should have relied upon his own observation.

The existence of this reliance was supported by the fact that the buyer contacted the agent immediately to say he wasn’t prepared to continue with the purchase once he discovered that the property was much smaller than that. The substantial discrepancy in the size was considered significant by the Courts, as was the fact that the agent in question was negligent in that he never actually checked for himself what the size of the property was before he listed it at the incorrect size.

Executing Real Agreements of Purchase and Sale

Misrepresentation and rescission cases in real estate law are very fact-specific. There have been cases where misrepresentation of the size of the property has not led to the rescission of a contract. In some instances, the discrepancy in the representation of the property size and the actual property size may not have been that significant and the buyer would have bought the property anyway.

In other instances, there may not have been negligence involved on the part of the selling party or its agent. Whether the purchaser is a first-time buyer or is fairly young is also a context that the courts may consider (it was even deemed relevant in the Issa case).

This case demonstrates the benefit of consulting with a skilled real estate lawyer before entering into a purchase contract, whether you are a buyer or a seller of a property. The complexities involved in determining where a misrepresentation has happened or when it might trigger the ability to rescind a contract are not easy to determine and could depend on a legal interpretation of the facts in question.

The lawyers at Prudent Law in Mississauga are trusted advocates with respect to real estate transactions and real estate litigation. We provide practical advice and passionate representation in both residential and commercial real estate deals. If you are contemplating the sale or acquisition of a piece of real property and you’d like to discuss it with one of our experienced real estate lawyers, please call us at 905-361-9789 or contact us online.

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A Binding Contract Can Exist Before Signing on the Dotted Line

The Supreme Court of Canada recently affirmed that a binding agreement or contract can be considered valid even if parties do not have a signed document indicating a contract. Particularly if both sides to the contract show that they intended to enter into an agreement through their actions.

In the recent case of Owners, Strata Plan LMS 3905 v. Crystal Square Parking Corp., the Supreme Court provided a stark reminder that contracts don’t have to be in writing in order to be considered valid and in force. Having a signed contract in place makes it much easier to prove the specific terms of the contract or agreement, but isn’t a requirement to establish the existence of that agreement. In determining either the existence of an agreement between two sides or the terms of the agreement, the courts will look at the actions of both parties. If both sides showed by their conduct they intended to enter an agreement and acted as though there had been both an offer of contractual terms and an acceptance of those terms, as well as an exchange of consideration, then there is a legally binding agreement.

Privity of Contract

In general, if there is no written contract but one side is claiming that a contract nevertheless exists, the courts need to look at whether there is “privity of contract” between the parties, which will be instrumental in determining whether an agreement between two parties is in place. Privity of contract is a common law doctrine that states that a contract cannot confer rights nor impose obligations upon anyone who isn’t a party to the contract. More specifically, the courts will need to consider and ultimately determine whether, absent a written contract, a “reasonable person” would consider that the conduct and actions of one party constituted a contractual offer to another party and conversely, whether the conduct and actions of the other party constituted an acceptance of those terms. If so, then a contract or an agreement is effectively in place even without a signed contractual document.

Binding Terms in Pre-Incorporation Contract

The case at hand concerned a dispute between a condominium corporation and a corporation (“Crystal Square Parking Corporation”) which owned and operated the parking structure at the same “Crystal Development” location where the condo in question was also situated. The developer of the Crystal Square complex (which includes a mall, office tower, hotel, police office and cultural centre in addition to both the parking garage and the residential tower) signed a contract with the City of Burnaby which provided access to parking for each component of the Crystal Square complex and indicated how much they would pay for it, in the form of an annual fee. The Developer sold the parking garage space to Crystal Square Parking Corporation and also assigned to them the contract it had signed with the City of Burnaby regarding the parking space fees. The members of the condominium corporation parked and paid fees as contemplated by this agreement for the next 10 years.

After that 10 year period, the condominium corporation felt that the parking cost was too high. They recalled that they never formally signed a contract with Crystal Square for parking fees, and argued that as such they had never formally agreed to the terms of any such contract and so the terms could not be enforced against them. Conversely, Crystal Square Parking argued that the condominium corporation had accepted the terms of an agreement (particularly regarding the parking fees) because they followed those terms for quite some time, and therefore a contract was in place.

The case made it all the way up to the Supreme Court who decided in favour of Crystal Square Parking. In the decision, the Court indicated firstly that although a corporation (such as the condominium corporation in this case) is not bound by a contract made by other parties before it was incorporated (and thus before it existed), it may, after coming into existence, enter into a new contract on the same terms as those of that prior contract. The Court ruled that this is effectively what the condominium corporation did with Crystal Square Parking. Crystal Square Parking made parking passes available to the condominium corporation. The condominium then used the parking spots and paid the fees as set out in the agreement between the Developer and Crystal Square Parking. In this situation, there was no reason for Crystal Square Parking to think the condominium corporation members had not agreed to these same contractual terms. Therefore, there was a de facto contractual offer and acceptance between Crystal Square Parking and the strata corporation for the use of the parking spaces.

Drafting Contracts

When creating or entering into agreements, businesses (including those dealing with any form of real estate or air space parcels) will want to make note that just because there isn’t a written or signed contract in place, it doesn’t mean that there isn’t a contractual agreement in place between two different organizations or corporations. The facts of the Crystal Square case are somewhat complex, involving the ability of a contract created pre-incorporation can be applied to that corporation once it comes into existence. Businesses will need to examine their own conduct and actions in addition to the written contracts they may have on file. This case demonstrates that the conduct of a business (or individual for that matter) can be just as important to determining the existence of a binding agreement as a written document. Where a potential dispute arises about the possible existence of a contract, seeking experienced legal advice is strongly recommended.

The lawyers at Prudent Law in Mississauga are trusted advocates in any type of civil litigation, including contract disputes. We provide practical advice and passionate representation in litigation, real estate disputes and business law matters. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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Silence Isn’t Always Golden: Breaching the Contractual Duty of Good Faith

The Supreme Court of Canada recently ruled that in certain situations, remaining silent can breach the contractual duty of good faith in contract law. In the recent case C.M. Callow Inc. v. Zollinger. In particular, if a party to a contract has by its prior actions or words created a false impression in the mind of the other party to the contract and is aware that it has done so but doesn’t take any positive steps to correct this impression, the party in question may be liable for damages for breach of contract. All businesses entering into contractual obligations should be aware of this ruling when performing any contract.

Duty of Good Faith

It’s important to understand first what the duty of good faith in contract law is, given that it is a relatively recent development in Canadian common law, first formulated in 2014 in the decision Bhasin v. Hrynew. Essentially, all parties to a contract have a duty to act honestly in the fulfilment of the terms of a contract. It requires parties to not lie or knowingly mislead each other in matters which pertain to the performance of the contract. It is the latter consideration – one party knowingly misleading the other – which was the issue at hand in the recent Callow v. Zollinger case. In particular, the Supreme Court of Canada had to rule on whether a party to a contract could be considered to have knowingly misled the other by not saying anything at all.

Termination of Contract

The case concerned a condominium corporation that entered into a two‑year winter maintenance contract and into a separate summer maintenance contract with a maintenance firm, C.M. Callow Inc. (“Callow”). The contract provided that the condo corporation could unilaterally terminate the contract upon giving 10 days’ written notice to Callow. One year into the agreement the condo corporation decided to terminate the winter maintenance agreement but crucially chose not to inform Callow of its decision. Callow continued to have discussions with the condo corporation about the renewal of its contract through the subsequent summer, performing extra work on summer maintenance that went beyond the contractual obligations, only to be told after this extra work had been completed that the contract for winter maintenance would be terminated.

Callow sued for breach of contract on the basis that the condo corporation had breached its duty of good faith and honest performance and ultimately, the Supreme Court of Canada agreed with them. Notably, the Supreme Court ruled that while the condo corporation had the contractual right to unilaterally terminate the contract, “the right had to be exercised in keeping with the duty to act honestly”. The Supreme Court ruled that the condo corporation had breached this duty because its exercise of the termination clause was dishonest in light of its ongoing communications with Callow which created the false impression that the winter maintenance agreement was not only not going to be terminated early, but actually renewed.

Honesty in Contractual Performance

This should not be taken to say that businesses are obligated to disclose their intention to terminate a contract before actually doing so per the notice period in the contract. What they are obligated to do, however, is to refrain from misleading the terminated party in the exercise of that clause, which the Supreme Court ruled was the case here. The Supreme Court determined that if a party is led to believe by the party who has contracted with them that the latter are content with their work and thus that their ongoing contract is likely to be renewed, it is reasonable for the party to have the impression that the ongoing contract is at the very least, in good standing and certainly that it wouldn’t be terminated early.

In its decision, the Supreme Court clarified that when it comes to performing a contract honestly, “[w]hether or not a party has knowingly misled its counterparty is a highly fact‑specific determination and can include lies, half‑truths, omissions, and even silence, depending on the circumstances. One can mislead through action, by saying something directly to its counterparty, or through inaction, by failing to correct a misapprehension caused by one’s own misleading conduct.” [Emphasis added]

As such, when a business which is a party to a contract is aware that its own actions or words have led the other party to the contract to have a false impression in regards to the contract, the duty of honesty in Canadian contract law requires the business to correct that false impression – or risk being subject to a successful lawsuit against them. This means that businesses need to start turning their mind as to whether the contracted party they are executing a contract with is under a mistaken belief with respect to the execution of that contract, whether the execution refers to termination of the contract, or its renewal, bonus clauses, pricing terms, triggering mechanisms or any other material aspect of the contract. This is especially so since the Supreme Court made it clear that the duty correct a false impression (once a contracting party has created it) exists regardless of whether the “misleading” party to the contract intended or inadvertently created the false impression.

Parties will want to reduce exposure to possible liability through not only careful drafting of contractual terms related to performance but being mindful of their subsequent communications with that party. Based on the Supreme Court’s decision in the Callow v. Zollinger case, if a corporation has made an internal decision regarding a contract with another party (particularly related to termination or contract renewal) and the other party asks about it, they will have to think very carefully about what response it provides, including whether that response is silence. Obtaining legal advice in such circumstances is recommended.

The lawyers at Prudent Law in Mississauga are trusted advocates in any type of civil litigation, including contract disputes. We provide practical advice and passionate representation in both litigation and alternative dispute resolution options. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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A Waste of Good Faith: Exercising Discretion in Performing Contracts

In our previous post, we discussed a recent finding by the Supreme Court of Canada which stated that silence can be an indicator of bad faith under a contract. In this week’s post, we will look at another recent Supreme Court of Canada ruling about the duty of good faith in contract law. Specifically, the Court held that if a party to a contract exercises its discretion unreasonably, it may be in breach of the contractual duty of good faith. In the recent case of Wastech Services Ltd. v. Greater Vancouver Sewerage and Drainage District, the Supreme Court ruled that the common law duty of good faith in contract law does not allow a contracting party to use its discretion unreasonably. The question then becomes, in what circumstances can a party be considered to be using its discretion on an unreasonable basis? The answer is an important one which all business’ entering into contractual obligations – particularly those which allow for some discretion on the execution of the contractual terms – should be aware of when performing any contract.

Duty of Good Faith

It’s important to understand first what the duty of good faith in contract law is, given that it is a relatively recent development in Canadian common law, first formulated in 2014 in the Bhasin v. Hrynew. Essentially it is the duty for parties to a contract to provide an honest performance to fulfill the terms of a contract and applies to all contracts. It requires parties to not lie or knowingly mislead each other in matters which pertain to the performance of the contract.  It also requires parties to exercise any discretion allowed for by the contract in good faith. It is the latter consideration – for contractual discretionary performance to be exercised in good faith – which was the issue at hand in the recent Wastech Services case. In particular, the Supreme Court of Canada had to rule on whether a contractual discretionary power was exercised honestly or dishonestly, with the latter constituting a breach of contract.

Contractual Discretion

The case concerned a contract between waste transportation and disposal company (Wastech), and Metro, a statutory corporation responsible for the administration of waste disposal for the Metro Vancouver Regional District, for the removal and transportation of waste to three disposal sites. Wastech was to be paid a different rate depending on the distance the waste disposal facility was, with the contract providing full discretion to Metro to choose which of the facilities to send the waste to. The contract aimed to pay Metro an operating profit of 11 percent on its operating costs, but – crucially – this level of profit was not guaranteed by the contract.

In 2011, Metro decided that it would send waste to a facility that was closer to the city, which meant that Wastech did not meet the operating profit of 11 percent. Wastech then began litigation proceedings against Metro, claiming that they violated the contract via the use of their discretion to send waste to the nearest disposal facility.

The Supreme Court decided against Wastech, setting aside the original award the arbitrator provided. Although the Supreme Court ruled that the good faith doctrine in contract law does not permit a party to a contract to use its discretion in performing the contract unreasonably, it ruled that Metro did not do so on this occasion. The main reason for this is that the Supreme Court determined that Metro’s exercise of their discretion (to choose which of the three disposal sites the waste could be transported to) was connected to the purpose of the contract (as contemplated by and agreed to by the parties), therefore it was not unreasonable.

Metro’s discretionary decision to send the waste to the nearest of three facilities was guided by the objective of managing waste disposal in the most cost-effective manner. They also determined that there was nothing in the contract to suggest that the parties intended Metro’s discretion must be exercised so as to provide Wastech with a guaranteed level of profit.

Had Metro exercised its discretion in a manner that was in some way unconnected to the purposes underlying the discretion, the Supreme Court likely would have ruled differently. They stated, “…where the exercise stands outside the compass set by contractual purpose, the exercise is unreasonable in light of the agreement for which the parties bargained and may be thought of as unfair and contrary to the requirements of good faith.” However, in this case, the contractual terms agreed to by both parties agreed to give Metro the discretion to choose where to send the waste, so as to keep their costs low.

If, for example, the discretion given to Metro was limited by the need to guarantee Wastech a certain level of profit but they kept deciding to send the waste to the nearest facility in order to prevent Wastech from receiving a certain level of profit, the case would likely have been decided differently. However, no such guarantee existed in the contract, nor were there any other indications that Metro had exercised its discretion to choose which site the waste would be sent to for any other purpose than seeking its own best interest within the commercial scope allowed for by the contract.

Drafting Contracts

When entering into contracts, businesses will want to make note of whether the contractual terms allow for too much discretion on the part of the other party. While the duty to exercise contractual discretion in good faith applies to all contracts, the parties may wish to include provisions in their contract that help identify the purposes for which a contractual discretion is granted. As such, if a draft contract provides a wide or unfettered discretion for one party to make decisions that will affect the other party’s ability to make a profit (which was effectively the situation in the Wastech case), the other party in question will want to try to limit or properly define in the contract what the purpose or scope of that discretion is. The Wastech decision has made it clear that whether a party has satisfied the duty of exercising contractual discretion in good faith in any particular contract will depend on the text and context of the contract, so it becomes increasingly important to get the contractual terms correct and as beneficial to one’s business purposes as possible.

The lawyers at Prudent Law in Mississauga are trusted advocates in any type of civil litigation, including contract disputes. We provide practical advice and passionate representation in both litigation and alternative dispute resolution options. If you are facing a legal dispute and you’d like to discuss it with one of our experienced litigation lawyers, please call us at 905-361-9789 or contact us online.

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