In the Trenches

By John Barzo, Associate 

Sometimes a litigation file acts as a lightning rod for multiple areas of law that I am not otherwise regularly engaged in (in this case Family Law and Mortgage transactions).  A matter I am currently working on is just such an example.

Essentially, legal title to a very nice and significant cottage property was in the husband’s name.  It was and is a great family property on the water, used for the usual summer recreational activities, but also for holidays, including Thanksgiving, Easter and Christmas.

Husband was a co-owner of a land development business which needed funds for continued operations.  So he offered up the cottage property as collateral security.

Under the Family Law Act, a property that is ordinarily occupied by spouses as a family residence constitutes a “matrimonial home”.  This elevated status provides some protection to a spouse who does not have his or her name on the legal title.  The Act prohibits someone from selling or mortgaging such a property without obtaining the spouses consent.

More importantly, no buyer or lender will conclude a transaction without either a consent signed by the spouse, or a declaration by the title holder (in this case, the husband) confirming that it is not ordinarily occupied as a family residence.

What if the husband is….to put it gently, “incorrect” in his declaration?

If the Act is contravened, it could result in a transaction, or a mortgage in being completely set aside by the court.  What the law does however is to set out that the making of the declaration is sufficient proof that the property is not a matrimonial home.  Thus if the statement turns out to be incorrect, the transaction for either the lender or purchaser is still valid.

There is one exception however.  If the purchaser or lender had “notice to the contrary”.  What does that mean?  Firstly, it does not have to be “actual notice”.  It can also mean constructive and / or imputed notice.  Imputed notice is where your agent or representative (real estate agent, mortgage broker, lawyer) has such information.  This information would be deemed notice to you, even if no one told you.

Constructive notice is a bit trickier.  It is where you (or others acting on your behalf) are aware of facts or information that ought to put you to an inquiry.  It’s intent is to avoid the use the old “hear no evil, see no evil, speak no evil” approach, otherwise known as “willful blindness”.

What is probably not as clear as it should be (even to lawyers) is that the “declaration” indicating that the home is not a matrimonial home, is not a cure-all that will effectively insulate all transactions.  The lender or purchaser can only rely on the declaration if he or she had no information that would indicate that the true state of affairs was otherwise.

 By Eric Gionet, Partner 

On numerous occasions I have had employer clients being sued by a former employee for wrongful dismissal even though the employer complied with certain provisions of the Ontario Employment Standards Act, 2000 (“the ESA”).  Frequently, the employer client assumes that the lawsuit is completely without merit simply because the employer has complied with the statutory requirements of the ESA. Sometimes this is true, but many times it is not. 

What many employers fail to understand is that the ESA, in many situations, merely provides for the minimum obligations that an employer must meet. In many areas of employment law, the ESA does not establish the maximum or even a "reasonable" standard. Instead, it is critical that an employer first consult the employment contract, the hiring letter or established employment policies at the workplace before the employer take steps to terminate an employee’s employment, or even before the employer significantly modifies the duties or workplace conditions of an employee.  Simply consulting the ESA requirements will likely not be sufficient for the employer to understand its full legal obligations, which includes its contractual obligations, as opposed to its statutory obligations. 

Here is a good example of the above caution.  The ESA permits “temporary layoffs” as long as the conditions of layoff meet the requirements of the legislation. However, that does not necessarily mean an employer is contractually permitted to temporarily lay off an employee. Even though a temporary layoff may not contravene the ESA, in many situations in Ontario it may nonetheless be a breach of the employment agreement. Accordingly, in a situation where an employee’s employment contract or unwritten employment relationship does not specifically authorize a temporary layoff, the employee may have a valid legal claim for breach of contract (commonly referred to as “constructive dismissal” or “wrongful dismissal”) even though the employer has fully complied with the minimum statutory requirements for temporary layoffs under the ESA. 

The above comments are intended as a generalized, but blunt, word of caution:  just because an employer complies with the ESA, does not mean the employer is shielded from a potential lawsuit in Court for breach of the employment contract. It is important for employers in Ontario to understand the distinction between the statutory minimum requirements of the ESA versus the contractual terms and conditions of employment. In any given situation, if employer has any uncertainty, it is recommended the employer obtain professional legal advice before taking any hasty steps which could lead to an unexpected lawsuit.

By Jason Botelho, Associate

I hear these words almost daily. People get so caught up in emotion that they do not care what the cost consequences of pursuing a claim are. Instead they are bent on achieving their own sense of justice. When I hear those infamous words I am brought back to my first day of law school where my professor warned the entire class to “beware of the client who wants to sue based on principle”. You see, no matter what a client says about principle it almost ALWAYS comes back to the money. I have seen cases where the amount spent on legal fees exceeds the amount being claimed! This is especially evident in Small Claims Court where emotions run extremely high.

Litigation is not a cake walk. It is a slow moving machine that, once started, cannot be stopped with a flick of a switch. It is a multi-party process that no one party has full control over. It is for this reason that the system (see the Rules of Civil Procedure) allows the parties multiple opportunities for settlement.

Make no mistake, litigation is expensive. It is usually charged based on an hourly rate multiplied by time spent. First there is the pleadings stage, (i.e. Statement of Claim, Statement of Defence, Reply). These are then usually followed by Discoveries, then pre-trial conferences, then trial. While the Rules do provide some expedience for claims under a certain monetary amount, it still takes time to go through these steps. And remember time equals money!

Invariably, it can be months or years before a resolution is achieved and there is no guarantee that it will be the result you are expecting. What is certain however is that it took a great deal of money spent to get there.

Now, there may be legitimate reasons to commence an action i.e., breach of contract, negligence, etc. Regardless, in most cases it is worth balancing the costs of proceeding with a claim with the amount being sought. I always advise my clients to do this from the outset. This way they can fully judge for themselves whether the “principle” is worth it. 

So, the next time you hear someone say, “it is not the money it’s the principle!”, be a friend and explain this process to them. Maybe the money saved could be used to treat you out for dinner or a drink.

by Samantha Hicks, Paralegal

Despite being licensed and regulated by the Law Society of Upper Canada, many people still consider paralegals subservient to lawyers - glorified secretaries, who greet clients, answer telephone inquiries and type letters. The ability to provide legal services, at a cost-effective rate, is often overlooked and/or ignored.

“Why”, you ask? Because people have this preconceived misconception that a higher price signifies better quality. I confess, that as a consumer, I too have fallen victim to this social marketing scheme – paying more for a brand name product when a generic one is available for less.

Having graduated with Honours from an accredited paralegal education program, I wrote and successfully passed the Paralegal Licensing Examination, thereby qualifying for a license and earning the right to practice law in Ontario.

As a paralegal, with valid professional liability insurance, I am permitted to give legal advice and represent clients:     

·        in the Ontario Small Claims Court;

·        in the Ontario Court of Justice under the Provincial Offences Act;         

·        on summary conviction offenses where the maximum penalty does not exceed six months’ imprisonment; and

·        before administrative tribunals, including the Landlord and Tenant Board.

Isn’t it nice knowing you have options?

The application of the principles of solicitor-client privilege to the position of in-house counsel has given rise to some debate in the courts and the literature.  The debate relates to both types of privilege, namely, the privilege arising directly from solicitor and client communications and that arising from the “solicitor’s work product” approach.  The genesis of the debate over whether solicitor client privilege should apply to an in-house counsel, however, arises from the role of the in-house counsel as both an employee of the client and  an internal adviser of the organization on matters not restricted to legal opinions.

The most recent statement from the Supreme Court of Canada on the issue of solicitor-client privilege for an in-house counsel came in an appeal which had made its way through the Ontario courts and related to a legal opinion provided by an in-house counsel to the Ontario Human Rights Commission. The appellant had filed a complaint with the Commission against her former employer.  The Commission refused to deal with the complaint and the appellant sought judicial review.  In this proceeding, she brought a motion for production of the Commission’s file, including the legal opinion.  The motion’s judge granted the motion and on appeal to the Divisional Court the decision was upheld.  On appeal to the Court of Appeal, the legal opinion was held to be privileged.  A further appeal to the Supreme Court of Canada was unsuccessful as it was held that the privilege applied to communications between an in-house solicitor and the client organization in the same manner as it applied to retained solicitors.

(please download the .pdf for the full paper, with citations)

For those of us who are not natural writers, the category in which I belong, it is not the easiest thing to write something interesting on a regular basis (no debates on the “interesting” self categorization please).  But with the merger we now have many more that can contribute to this blog.  Not only will you see contributions from yours truly, but others (see photo above), including Eric Finn, Scott Fairley, Eric Gionet, Jason Botelho, Samantha Hicks and William Brennan.

Collectively we hope to give you tales from “the trenches” which will both inform and at times entertain.  It is our experience that legal issues do not truly take their form unless tested by the reality of every day experience.  You can expect to hear about issues involving land, contract, employment, debt collection and everything else we run across.

We expect to be rolling out the blogs starting May 1.

We hope you enjoy this effort and look forward to hearing from you!

Regards, John Barzo

In Part 1, I gave a general background as to the types of issues that invariably get raised when this form of war breaks out.

If we are at the stage of “forcing” the sale, let’s assume that common senses has been pushed aside by emotion, anger and perhaps greed (it usually does in my experience).

This will usually take us down the path of the argument over who used the cottage more and should there be an adjustment for that.  This is what we call “Occupation Rent”.  Pretty simple concept.  He who occupies the jointly owned land pays for its use. 

Funny how simple concepts get real complicated real fast.

The worst is when both co-owners use the cottage, but not necessarily in equal amounts.  The reason why that is the worst is that no one ever agrees as to the proportion of actual usage, assuming allocating percentages is the right way to go.  So now there is the need to develop evidence.

I recently had an easy one.  It was easy because one co-owner unilaterally abandoned any use of the property years ago.  But we needed to force a sale.  The occupying co-owner started squawking about my client’s share of the mortgage, insurance and taxes over the years, and tried to negotiate on the basis that my client should share in those expenses.

The interesting part is that when  one co-owner voluntarily abandons use of the property, he/she cannot claim “occupation rent” from the occupying co-owner.  That is, unless, the occupying co-owner (as in this case) started demanding recognition of such expenses.  In that case, occupation rent can be claimed back.

Pointing that out (firmly I might add) finally allowed me to convince the other party to abandon the claim for expenses since once we took into account the notion of occupation rent, it would likely be a wash.

So common sense was restored, and the occupying co-owner finally agreed to simply buy my client out.

Cottages often get passed down to the “kids”.  More often than not, these “kids” are in fact adults, and usually no spring chickens by time a long simmering feud blows up into open warfare.  There are long held grudges, personality conflicts, real or perceived injustices, and always a misplaced sense of entitlement.

The Partition Act is the legislation that can solve the problem.   This is a long standing statute that allows for a co-owner of property (land, buildings) to force a judicial sale of jointly owned property where the other owner neither wants to sell, nor buy out the other co-owner’s interest.

As legal proceedings go, they are usually fairly straight forward.  Part of the reason for that is, absent rare circumstances, the right for an order of sale is absolute.  Thus the reluctant, or delaying co-owner, is quickly brought to the reality that he/she is going to have to deal with the situation by either buying out the other co-owner or watch the cottage get sold on the open market.

The sale part is easy.  It gets tricky when it comes time to divvying up the money.  Who paid what expenses?  Who maintained the property?  What is that worth?  What if one person used it more than the other? 

All these issues are usually never addressed while everyone is co-existing.  But when open warfare erupts, these are the issues that end up draining the resources of all, and that lovely cottage on Lake Paradise that Mom and Dad created such beautiful memories with children and grandchildren alike ends up being the fuel that keeps the fires of your own personal hell going for an eternity.

….hope I am not ruining anyone’s vacation…..

More to follow.