Author: danny

The Benefits of a Secondary Will

Posted on by danny

A common question wills/estate lawyers are asked is: what can I do to minimize paying the government taxes? There is no one-size-fits-all answer, but for many individuals, preparing a Secondary Will is a great option.

A Secondary Will is exactly what it sounds like – it is a second Will, which works in tandem with a first Will (often called the “Primary Will”) to separate the assets that require probate, from those that do not.

One Will (the Primary Will) covers only the assets that require probate, whereas the other Will (the Secondary Will) is not submitted for probate and governs only the assets that can be administered without probate.

When used properly, this estate planning strategy means that Estate Administration Tax (“EAT”) is paid only on the assets governed by the Primary Will, and not on the assets governed by the Secondary Will. The tax savings can be quite sizable.

Probate and Estate Administration Tax

When you pass away, the assets that you own at the time of your death form what is referred to as your “Estate.” Your Estate is comprised of all assets owned or registered solely in your name, including for example; real estate, vehicles, bank accounts, and corporate shares. Most jointly held assets with a spouse (i.e., real estate, bank accounts, etc.) and assets with named beneficiaries (RRSP’s, Pensions, etc.), are not included in your Estate but instead pass directly to the surviving owner.

Generally, before Estate assets can be distributed to the beneficiaries named in your Will, your Estate Trustee (executor) needs to apply to the court for a Certificate of Appointment of Estate Trustee (more commonly known as “probate”). Whenever a Will is probated, your Estate must pay EAT. Currently in Ontario, EAT is equal to 1.5% of the entire value of your Estate (with the first $50,000.00 being exempt). Importantly, EAT is only paid when an Estate Trustee must apply to the court for probate. If you do not need probate, you do not pay EAT.

For certain assets, for example; real estate (located in Ontario), bank accounts, investments, and vehicles it is required to apply to court and receive a grant of probate. Without probate, the assets would be frozen in the name of the deceased owner. Whereas certain other assets, for example; shares in a private corporation like a family business, do not require probate.

However, the problem is that if one asset requires probate, then EAT must be paid on the value of ALL Estate assets, including the exempt assets (private shares). When used properly, a Secondary Will saves your Estate taxes by separating the exempt assets that can be administered without probate, so that the taxable value of your Estate is reduced. This is illustrated in the example below.

Tax Savings Example

Let’s assume you are the sole owner of the following assets when you die:

Asset Value
Home $500,000
Bank Account

 

 $100,000
Shares in a Private Corporation $1,000,000

 

Secondary Will: If you have a Secondary Will, EAT is levied on the assets that require probate (the home and the bank account) which are governed by your Primary Will; however, EAT is not levied on the exempt assets governed by your Secondary Will (the shares).

The total amount of EAT payable by your Estate, is $8,250.00 [calculated as ($500,000 + $100,000 – $50,000) x 1.5%].

Primary Will: If you only have a Primary Will, EAT is levied on all the assets that form your Estate.

The total amount of EAT payable by your Estate is $23,250.00 [calculated as ($1,000,000 + $500,000 + $100,000 – $50,000) x 1.5%].

In this example, preparing a Secondary Will saves the Estate $15,000.00 in taxes. This is a simplified scenario, but it shows how using a Secondary Will can reduce EAT, which ultimately means a larger inheritance for your beneficiaries.

Other Benefits

In addition to the reduced EAT liability, there are other benefits that can be achieved by having a Secondary Will in place, for example:

Real Estate located outside of Canada: It may be beneficial to have multiple Wills when you own property outside of Canada. The laws in foreign jurisdictions often differ from Canadian law making it difficult for a Canadian Will to be compatible with the estate administration rules in that jurisdiction. Preparing a Secondary Will under the laws of the foreign jurisdiction, may streamline the estate administration process by allowing your Estate Trustee to distribute the Ontario assets governed by your Primary Will, before receiving approval from foreign government(s) to distribute your foreign property (which can often take a longer time to obtain).

Real Estate (First-Dealings-Exemption): Where an Ontario property has been converted to the Land Titles system from the Land Registry system and is being dealt with for the first time since that conversion, the requirement to apply for probate to sell the property may be waived. This exception is becoming increasingly less common, but if you have owned real property for decades and have not dealt with it since your purchase (i.e., added/removed another owner) this should be discussed with your estate lawyer. The use of a Secondary Will governing this type of real property means that no EAT will be levied against the value of the home.

Confidentiality: When a Will is probated, it becomes a matter of public record. Therefore, if you have privacy concerns with respect to your Estate and would prefer your assets, and the beneficiary(s) of those assets to be confidential, having a Secondary Will may help ensure confidentiality and privacy.

Other Valuable Assets: Secondary Wills can also be used to separate expensive assets; such as paintings, artwork, and jewelry that would not otherwise require probate. When these types of personal assets are covered under a Secondary Will you do not pay EAT on their value. For example, if you have $100,000.00 worth of jewelry that you want to leave to your child, it will need to be appraised and the value is included in the calculation of EAT. However, because no one (i.e., a bank or the government) needs to approve the transfer of your jewelry, you can exclude it from your Primary Will, by including it in your Secondary Will. If you take this step, the value of that jewelry will not be included in the EAT and you would save taxes.

In summary, while the greatest benefit to using multiple Wills (Primary and Secondary Will) is often the tax savings potential, there are several benefits that can be achieved. We recommend consulting with one of our estate lawyers to discuss how a Secondary Will can help you accomplish your estate planning objectives.

Retroactive Child Support & Children Over the Age of Majority

Posted on by danny

The Door Remains Open: Retroactive Child Support & Children over the age of majority

Prior to this landmark case, courts deemed that they do not have authority to grant individuals retroactive child support because the child does not fall under the definition of “a child of marriage”.  This means that if the child has reached the age of majority (which is 18 years in Ontario) the payor spouse no longer has to pay retroactive child support. Retroactive child support pertains to backdated support a spouse pays to another for their child and/or children. The decision in Michel v Graydon has now completely changed the law.

The Supreme Court Canada decision in the September 2020 case discusses Retroactive Child Support Orders in relation to children over the age of majority. The decision explains that a payor spouse cannot excuse themselves from child support obligations, simply because a child was an adult at the time the support claim began and therefore is no longer eligible for support.

The parties were in a common law relationship where they had one child. Ms. Michel applied for retroactive child support based on the Father’s income. When Ms. Michel applied for the support, their child had reached the age of majority. The lower courts concluded that Mr. Graydon owed Ms. Michel $23,000 in retroactive child support. The appellate courts overturned the amount stating that the child was over the age of majority and therefore no longer a “child of marriage”. This allowed Mr. Graydon justification to not pay the child support that has been accrued retroactively.

The appellate court decision was struck down by the Supreme Court of Canada on the basis that a payor parent should not avoid support obligations merely because their child has reached the age of majority. The Supreme Court of Canada held that Ms. Michel was entitled to retroactive child support. Parents now have legal recourse if they apply for retroactive child support even if their child has reached the age of majority.

The Use of Electronic Documents and Electronic Signatures

Posted on by danny

Did you know that electronic signatures are valid in Ontario?

They are and have been for quite some time!

If it is legal, why do many institutions remain hesitant to accept documents executed digitally? Using e-signatures can pose issues with ID verification, capacity to be bound to contracts, authority to execute documents, and duress, among others. Further, they are not legal in all circumstances. However, if handled with care, the use of e-signatures is both legal and efficient, especially in this ever-changing world.

This article provides a general overview of some of the risks and recommendations for businesses who use or are considering using e-documents and more specifically, e-signatures for commercial client offerings.

 

Overview of the Electronic Commerce Act (the “Act”)

In 2000, the Ontario Government enacted the Electronic Commerce Act, S.O., 2000 to modernize commerce and legitimize electronic commerce. Essentially, the Act gives electronic contracts the same legal status as documents signed on paper.

Under the Act, electronic signatures can include documents signed with an electronically formed signature, as well as pushbuttons, i.e., “Accept” or “I agree.” There is no legal requirement that the electronic signature actually look like the individual’s hand-written signature.

The Act does not specify a requirement to accept the use of electronic signatures. If someone uses a system that requires an e-signature, their consent is inferred, and they cannot after the fact refuse to abide to an agreement simply because it was electronic. However, at the outset, prior to moving forward, someone can refuse the use of e-signatures. It is for this reason that it is generally recommended to obtain consent from the other party before drafting documentation, so everyone agrees in advance of the signing stage.

Some legislation requires documents to be “in writing” to be considered legal (i.e. commercial leases, etc.). The Act provides that an electronic document can satisfy the requirement for a document to be “in writing” so long as the electronic document is both:

  • accessible by the other person so it can be used for subsequent reference; and,
  • capable of being retained.

In other words, a readable/usable saved version of the executed document must be provided to all parties for it to be considered “in writing”.

The Act also provides that electronic documents can be considered “originals.” To be considered an original, documents must be accessible and usable for subsequent reference and there must be assurance that the information contained in the electronic document has been unaltered. Essentially, if there is evidence of an electronic document’s alteration, it will not be considered an “original.”

 

Exclusions under the Act

The Act has effectively legitimized many forms of electronic commerce but it also specifies several exclusions that businesses should be aware of. Under subsection 31(1) of the Act, the following documents are not acceptable in electronic form:

  1. Wills and Codicils;
  2. Trusts created by wills or codicils;
  3. Powers of attorney, to the extent that they are in respect of an individual’s financial affairs or personal care;
  4. Negotiable instruments, including promissory notes, cheques and bank drafts, among others; and
  5. Documents that are prescribed or belong to a prescribed class.

 

The Act, at subsection 8(4), also limits the use of electronic documents when dealing with chattel papers and the Personal Property Security Act, R.S.O. 1990, c. P.10 (the “PPSA”). A chattel paper is a document “that evidences both a monetary obligation and a security interest in or a lease of specific goods”. This is particularly important in the leasing and financing business. Effectively, this means that any document evidencing a loan with a security interest that was done electronically, would not be protected under the PPSA.

 

However, on May 29, 2019, the PPSA was revised by adding the term “electronic chattel paper.” Electronic chattel paper is defined as “chattel paper created, recorded, transmitted or stored in digital form or other intangible form by electronic, magnetic or optical means.” Essentially, the PPSA is providing the opportunity to secure electronically signed security interests in a similar manner as wet-ink signed documents. To be considered valid, an electronic chattel paper will have to meet strict guidelines also set out in the PPSA. For more information on this, please review the PPSA (or contact our office).

 

Issues with Electronic Documents

The Act states that a document is not invalid or unenforceable by reason only of being in electronic form. In other words, except for the above noted exceptions, an otherwise legal document that is in electronic form would still be legal, despite being electronic.

If this is the case, if this legislation has been in place for over 20 years, then why are electronic signatures not more widely used? The two biggest issues that most institutions have with e-signatures are:

  1. Fraud

First, the potential for fraudulent transactions increases with electronic commerce in the following ways, among others:

  • The removal of face-to-face interactions impacts the ability to determine relevant facts such as mental capacity and understanding;
  • There may be an increased risk of identity theft; and
  • There is a reduced ability to confirm identification.

Though there are higher risks of fraud with electronic commerce, there are also steps businesses can take to mitigate the increased risk. The following methods, among others, could be used to assist in reducing fraud:

  • The use of specialized electronic commerce systems that have built in security features;
  • Increased computer security;
  • Additional training for employees to recognize potential issues/red flags of fraud; and,
  • Multi-step processes for document approvals.

While these methods certainly assist in reducing the risk of fraud, an analysis of the benefits of electronic commerce should be undertaken to determine if they outweigh the risks of fraud and the costs of protecting against it.

  1. Concerns Based on Contract Law

Second, the fact that a contract is done online or electronically does not remove the general requirements of contract law. The standard contract elements still apply, and it remains necessary to satisfy them for the electronic document to be considered a legal and binding contract. Here are some considerations:

  • Accuracy of the Parties Listed: It is important in contract law to know who you are contracting with and organizations should ensure practices are in place to confirm that the person executing the document is the person named.

 

  • Capacity of the Parties:
    1. Lack of Capacity to Understand: A contract may not be enforceable if a party is incapable of understanding what they are agreeing to. This risk is increased if there is less face-to-face interaction to ascertain an individual’s mental capacity.

 

  1. Duress: Duress is illegal pressure or coercion put on another person to force them to sign a document against their will. Although videoconferencing can alleviate some concern, without in-person meetings, there is increased risk that an individual may be influenced by a third-party to execute a document against his or her will.

 

  • Unequal Bargaining Power: Situations may arise where an individual argues that they did not understand what they were signing, because it was too complicated, or too lengthy and no one reviewed it with them. With the use of e-documents, it is more difficult to confirm that a client has had an opportunity to review the information and ask questions to ensure they understand what they are signing. Some options to reduce this risk are again; the use of video-conferencing calls, and online prompts that bring important aspects of the agreement to the user’s attention.

 

  • Timing of Acceptance: If offers are time-sensitive, the signatures representing their acceptance are crucial. Under the Act, acceptance occurs when the document is sent back to the offeror. A document is considered “sent” when it enters a system outside of the sender’s control or, if using the same system, when it becomes capable of being retrieved by the other party.

 

Conclusion

In summary, despite not being universally used, electronic signatures are legal in Ontario, with limited exceptions. The most obvious reasons behind the aversion to electronic signatures are the exceptions to the Act, the risk of fraud, and the potential complications with contract law. Further, there may be additional costs associated with an electronic signature platform. While there are methods that can be used to limit the issues with electronic signatures, the risks cannot be eliminated. As is the case for most business decisions, an analysis of the benefits versus the risks of electronic signatures should be undertaken. It may be worthwhile to investigate how use of electronic signatures can be implemented in your organization.

Buyer Beware: the legal effect of the SPIS

Posted on by danny

In the recent case of Picard v Grgurich, Ontario’s Divisional Court provided a detailed analysis of the doctrine of caveat emptor (let the buyer beware) and the legal implications of a vendor’s refusal to complete the Seller Property Information Statement (the “SPIS”), also known as the vendor disclosure form.

Background

This case involves a detached rental property in Thunder Bay. Prior to listing the property, the vendor’s real estate agent advised that homes with fully-finished basements generally fetch a higher sale price. Following that advice, the vendor hired a contractor to finish the basement to make the house more appealing.

An offer to purchase was accepted by the vendor with standard conditions; financing, insurance, and home inspection.  The vendor provided an SPIS form with the purchase agreement but did not complete the form.  The Vendor instead crossed out the SPIS, indicating that they were not making any representations or warranties and the purchase was on an “as is” basis.  

Two months after taking possession of the home, the purchaser noticed water in the basement.  The purchaser then hired contractors to repair the damage and sued the seller and a former contractor.

Small Claims Court

At trial before the Small Claims Court, the Deputy judge did not express what specifically amounted to a representation by the vendor, but stated:

“The nature of the failure to disclose in this instance is more significant when considering that the [SPIS] was not completed by (the vendor). He was leaving the impression that he did not know virtually anything about the subject property when he most assuredly did.”

The Deputy Judge found that whether the vendor fraudulently or negligently failed to disclose relevant information was ultimately irrelevant to the legal consequences of the situation. The Deputy Judge ruled that the situation resulted in liability resting on the vendor because a representation of some form happened in this instance. In other words, the Deputy Judge ruled that no representation in itself was a misrepresentation.  The Deputy Judge awarded the Purchaser $25,000.00 in damages. The vendor appealed the decision to the Divisional Court.

Divisional Court Decision

On appeal, the Divisional Court addressed the following issues:

  1. Did the vendor have to tell the Purchaser about the water issue?
  2. Did the vendor fraudulently or negligently misrepresent the status of the basement by crossing out questions and signing the SPIS?

Latent Defect vs Patent Defect

To understand the Court’s decision in this case, it is important to know the difference between a latent defect and a patent defect.  Patent defects are defects that are discoverable on a quick inspection of the property. A vendor has no duty to draw the purchaser’s attention to patent defects. Latent defects are defects which an ordinary purchaser would not be expected to discover in a routine walk through of the property. For example, a crack on an interior wall that was covered up with drywall and no longer visible.

The Divisional Court upheld the concept that a vendor can rely on the defence of caveat emptor so long as there is no attempt at concealing a latent defect.  An act of concealment is an attempt to hide or be willfully blind to a defect known to the vendor. Concealing would be considered a misrepresentation, and therefore, a breach of contract. In other words, so long as there is no attempt at concealment, caveat emptor remains a viable defence for latent defects.

The Court did caution that a purchaser may bring a viable claim if the vendor failed to inform the purchaser of a latent defect that renders the property unfit for habitation, or where the latent defect renders the premise dangerous.

In the case at hand, the Court found that the vendor’s renovations prior to listing the property were simply a good faith effort to increase the value of the property and not to actively conceal any defects.  There was also no factual finding that the property was unfit for habituation or dangerous. During the Court process, the purchaser admitted the home was safe and habitable despite the water issue.

Nature of the SPIS

Completing an SPIS is not mandatory under any provincial law, however, the Thunder Bay Real Estate Board has a by-law that states that every house listed on the MLS must have a Seller Property Information Sheet. Vendors have the option to cross it off rather than fill it out.  In Picard v Grgurich, instead of answering the questions, the vendor crossed out the questions and signed the bottom.

On appeal, the Divisional Court ruled that the Vendor did not fraudulently or negligently misrepresent the status of the basement. The Court explained that, once a vendor “breaks his silence” by answering the questions and signing the SPIS, the doctrine of caveat emptor can no longer be relied on. In this circumstance, the Court held that crossing out the questions on the SPIS was actually a refusal to answer the questions and did not amount to breaking his silence.  The Divisional Court overruled the Small Claims Court and concluded that a failure to complete an SPIS cannot give rise to misrepresentation.   

Summary

As many real estate agents are aware, the SPIS forms can cause uncertainty and liability concerns.  The Small Claims Court decision in this case added much more confusion as it was decided that a failure to make any representations was in itself a misrepresentation by the vendor. On appeal, Justice Nieckarz clarified that this was an error in law and Buyer Beware remains the presumptive rule in real-estate transactions.

One practice point all vendors and purchasers should be aware of is that several Judges have previously concluded that the SPIS cannot be relied on unless (i) the purchase agreement is conditional upon receiving the SPIS; or (ii) the SPIS was completed by the vendor and provided to the purchaser prior to the purchase agreement being signed.  In other words, if an offer is made, accepted, and then the vendor later completes the SPIS, it cannot be relied on as it does not form part of the purchase agreement.

Time for New Employment Contracts

Posted on by danny

The rules of the game have changed. Due to a significant decision by the Ontario Court of Appeal, many existing termination clauses in employment contracts may not be enforceable any longer. This decision could have sweeping implications for both employers and employees.

Waksdale v Swegon North America Inc.

In this case, an employee sued his employer for wrongful dismissal upon being terminated “without cause” after only 9 months of employment. The employment contract between the employer and employee had two termination provisions. One provided for a “without cause” termination, and the other provided for a “for cause” termination.  The parties agreed that the “for cause” termination clause was unenforceable. The issue in this case was whether the “for cause” termination clause being unenforceable rendered the “without cause” termination clause unenforceable, too.

The Court of Appeal held that both clauses are unenforceable because termination clauses must be read as a whole and not considered on a piecemeal basis.  Further, it is irrelevant where the termination clauses are found in the agreement, or whether the “without cause” and “for cause” termination clauses are linked to each other. In reaching this decision, the Court of Appeal refused to given any effect to the severability clause as severability clauses cannot save clauses which are void by statute.

Why is this important?

Until this case, the understanding was “without cause” and “for cause” termination clauses were analyzed independently from one another. This meant just because the “for cause” termination clause was unenforceable did not change an employees’ entitlement upon termination as the “without cause” clause prevailed (so long as it was in compliance with the ESA). This case says the exact opposite.

The reason why this is such a sweeping case is because most “for cause” termination provisions are unenforceable. Many employers – and even lawyers – are unaware there are actually two standards to establish a just cause termination in Ontario: the common law standard, and the ESA standard. The ESA standard requires employers to prove “willful misconduct” whereas the common law standard only requires an employee’s misconduct to produce a “total breakdown in the employment relationship”.

It is entirely possible employee misconduct could constitute a total breakdown of the employment relationship yet not be done by the employee willfully. This means an employee’s misconduct could satisfy the common law standard but not the ESA standard.

Unless your employment contract explicitly carves out a distinction between termination for cause and termination for “willful misconduct”, the “for cause” termination clause may be unenforceable and, now due to this new case, all termination clauses may be rendered unenforceable as well.

Recommended Action

In light of this development, I strongly encourage employers to seek legal advice concerning the enforceability of their existing employment contracts. Not doing so risks all termination provisions in the employment contract being unenforceable. This could result in having to pay common law reasonable notice despite the parties’ intentions to only pay/receive the minimum entitlements pursuant to the ESA upon termination. Updating employment contracts will come at a cost but the cost of doing so will pale in comparison to the unavoidable costs associated with being required to payout larger notice periods and/or the legal fees associated with fighting a wrongful dismissal lawsuit on the basis of unenforceable termination provisions.

On the employee side, all terminated employees should consult with a lawyer for advice about their rights and entitlements upon termination. What may seem like a clear-cut, plainly-worded termination clause may not be enforceable and, in turn, employees may be entitled to much more notice upon termination than expected.

Common law reasonable notice can be wide ranging depending on various factors unique to the employee. It is oftentimes calculated in months and even years. In comparison, the ESA minimum entitlements are calculated in weeks up a relatively low maximum. Accordingly, this decision will have sweeping implications for both employers and employees moving forward.

COVID-19: Is Your Workplace Ready to Return to Work?

Posted on by danny

The province has recently changed the workplace safety guidelines to ensure that workers and the public are protected amongst the COVID-19 pandemic. These guidelines are to ensure that everyone is equipped for when the province decides to slowly re-open. The guidelines that were released provides direction to those working in specific industries such as manufacturing, food manufacturing and processing, restaurant and food service, and the agricultural sector.  Particularly those that are essential workers.

The new guidelines for these sectors include instructions on:

  • Physical distancing: eliminating pay at door option, team meeting outdoors, staggering shift times, using ground markings and barriers to manage traffic flow
  • Changes to the work place: installing plexi glass barriers, proper ventilation and air condition to increase air flow and using boot sanitizing trays
  • Promoting cleanliness: providing proper sanitization, personal protective equipment and enforcing hand washing before and after breaks

Further to this, the province indicated that there will be 58 new inspectors. These new inspectors will join the hundreds that already exist that are providing essential workplaces with COVID safety guidelines to ensure a safe workplace. These inspectors will be able to make sure that workplaces are following the mandated safety protocol.

This workplace safety north link is a useful resource which consolidates guidelines from various health and safety associations for workplaces during the COVID-19 pandemic.

https://www.workplacesafetynorth.ca/news/news-post/health-and-safety-association-guidance-documents-workplaces-during-covid-19-outbreak

Covid-19: Ontario State of Emergency and the Impact on your Business

Posted on by danny

As the Covid-19 pandemic drags on many business owners are doing their best to work through the provincial state of emergency but fear they could face severe penalties from the government or be liable to employees who feel they are put at risk.  To help your business navigate through these uncertain times, this article will provide a brief overview of what “essential” and “non-essential” businesses are, review a non-exhaustive list of liability concerns, and provide a checklist of best practices and recommendations. 

ESSENTIAL VS NON-ESSENTIAL

On April 3, 2020, the Ontario government issued an order reducing the list of businesses classified as “essential” down to 44 categories. The province requires non-essential “workplaces” to close meaning only physical premises must close and not actual “businesses”. The most recent list of essential workplaces is available at https://www.ontario.ca/page/list-essential-workplaces.

The Ontario government has been clear that non-essential businesses may continue to operate and online commerce and work-from-home arrangements are permitted and in fact encouraged. Further, non-essential businesses are allowed to temporarily access their premises for specific purposes such as: performing work at the place of business in order to comply with any applicable law; allowing for inspections, maintenance, and repairs to be carried out at the place of business; allowing for security services to be provided at the place of business; attending at the place of business temporarily to deal with other critical matters related to the closure of the place of business if the critical matter cannot be attended to remotely or to access materials, goods, or supplies that may be necessary for the business to be operated remotely.

Conversely, just because a business is deemed “essential” does not mean it is free and clear from legal obligations to provide a safe workplace under Occupational Health & Safety legislation. As expanded on below, employers must generally identify the risk of exposure, assess the risk of exposure, and take every precaution reasonable in the circumstances to protect all stakeholders of the business.

LIABILITY

In the event your business is deemed an essential service you likely still have many concerns. What if it is impossible for your workers to socially distance on a jobsite? What if one of your workers contracts the coronavirus even though you abided by all safety precautions?  What if your workers do not feel comfortable returning to work but you are contractually obligated to complete a project?  Can your workers successfully file a WSIB claim if they contract the coronavirus?

These questions are just a few of the many we are seeing on a daily basis from employers.  Every situation is going to be fact based and needs to be analyzed on a case by case basis, but here are some key items all employers should keep in mind:

PENALTIES

Ontario has the stiffest penalties for organizations who fail to comply with emergency orders. For corporations, non-compliance carries a maximum fine of $10 million. In the case of a director or officer of a corporation, non-compliance carries a maximum fine of $500,000.00 and a term of imprisonment of not more than 1 year.  The intention of these severe fines was presumably to deter price gougers, but the possibility exists for the government to fine or charge small business owners who are simply trying to keep their company from going under.  As a result, it is imperative that you ensure your business is deemed essential if your place of business is open or your workers are attending job sites. 

TORT/CIVIL

Businesses always have a statutory duty to take reasonable steps to protect their workers. COVID-19 risks may lead to employee claims if employees who are continuing to work do not consider their workplace safe. Social distancing and sterilization measures and practices recommended by public health officials should be rigidly maintained. Businesses should have a written COVID-19 policy regarding the measures that the business has adopted to prevent the spread of COVID-19 and directives regarding employees who are symptomatic or quarantined. This policy should be readily visible to all employees and even customers.

WSIB & COVID

Workers are entitled to benefits for COVID-19 arising in the course of the worker’s employment. Claims will be adjudicated on a case-by-case basis; however, symptom-free workers are not provided with coverage even if the worker is quarantined or sent home for precautionary reasons.

The key factor in determining whether a worker is entitled to benefits is whether the worker’s employment duties were a significant contributing factor in the worker contracting COVID-19. Information about the work environment, work processes, job tasks, use or non-use of personal prospective equipment are all significant considerations.

CHECKLIST OF BEST PRACTICES

Businesses who are deemed essential and continuing to operate physically should implement the following measures:

  • Travel Restrictions: employers are entitled to implement travel restrictions particularly when such travel is deemed as non-essential. While employers cannot ban personal travel, they can require employees to disclose personal travel information
  •  Self-Reporting Policies: businesses should create a system for employees to report their COVID-19 status aligned with public health recommendations
  • Social Distancing Practices: businesses should consider reconfiguring the workplace to ensure an increased physical distance aligned with public health official recommendations
  • Workplace Sanitization: businesses should be rigidly applying its cleaning procedures to ensure regular disinfection of the workplace generally
  • Personal Protective Equipment: some essential businesses are unable to restrict close contact with other stakeholders of the business and should make mandatory the use of certain personal protective equipment

This article is only a brief overview of the most recent emergency provincial government order and it is imperative for businesses to continuously monitor updates from the provincial and federal government and seek legal counsel where appropriate during this pandemic.  For assistance in preparing a Covid-19 workplace policy, determining what your business can and cannot do during the emergency order, or for any other information please contact Ken Ritson or Nathan Wainwright, or for other legal questions visit www.cheadles.com. 

Goodbye Construction Lien Act, Hello Construction Act

Posted on by danny

Changes All Owners, Contractors, and Sub-Contractors Need to Know

The Construction Lien Act has been re-named to the Construction Act (the “Act”) and with the different name came dramatic changes that will undoubtedly alter how you and your company will manage its affairs.

There are many lien amendments; however, this article will focus on the following major amendments: (1) a mandatory “prompt payment” system; (2) a new dispute resolution process; and (3) the Grandfathering provisions. The implications of these changes are significant for construction companies of any size, so it’s important that all owners, contractors and sub-contractors become familiar with them.

PROMPT PAYMENT

The new dispute resolution system ensures compliance with a prompt payment regime by offering parties a fast method to get the money they are owed.

To ensure prompt payment, a contractor must submit a “proper invoice” to an owner on a monthly basis (unless the contract provides otherwise). In order to qualify as a “proper invoice”, the Construction Act lists numerous requirements, highlighted by the following: contractor’s name and address, date of the invoice, identification of the authority for services and materials supplied, amount payable, description of services or materials supplied.

Once a contractor submits a proper invoice to an owner, the owner is required to pay the amount of the invoice within 28 days. The owner may refuse to pay all or a portion of the invoice, but only if the owner issues a “notice of non-payment” to the contractor within 14 days of receipt of the proper invoice. The notice of non-payment must set out the amount and reason for the non-payment. If the contractor disagrees with the notice of non-payment, it can refer the matter to the new adjudication procedure.

A general contractor is required to pay its sub-contractors within 7 days of receiving payment from an owner. The contractor may refuse to pay all or a portion of the sub-contractors’ invoice, but only if the contractor issues to the sub-contractor a notice of non-payment. If the sub-contractor disagrees with the notice of non-payment, it can refer the matter to the new adjudication procedure.

Similarly, a sub-contractor at any level must pay its sub-contractors within 7 days of receiving payment unless it issues a notice of non-payment which can be disputed by the sub-subcontractor and referred to the new adjudication procedure.

DISPUTE RESOLUTION PROCESS

Although the practical effects remain to be seen, the legislature appears to be trying to institute a “pay now, fight later” dispute process. It is designed to provide quick and binding decisions in a hope to minimize project delays and exchange money promptly. The new dispute resolution process will act as an interim process that can be challenged or re-litigated in court or arbitration at a later date.

To initiate the dispute resolution process, a contractor or sub-contractor must deliver a “notice of adjudication” that sets out: (1) the names and addresses of the parties; (2) a description of the issue; (3) how you want the issue resolved;  and (4) the name of the person you want to adjudicate the issue.   All contractors will have access to a special list of approved adjudicators. 

Once an adjudicator has been chosen or appointed, the party who initiated the dispute resolution process has 5 days to provide the adjudicator with the documents it will rely on for the adjudication.

The adjudication will follow the procedure specified in the contract so long as it complies with the Construction Act. If the contract is silent or if the contract does not comply with the Construction Act, the adjudicator has wide-ranging powers to solve the dispute. The adjudicator can request additional documents, conduct an on-site visit, obtain the assistance of experts, and conduct the process in the manner that he or she deems appropriate in the circumstances.

Within 30 days of receiving all the documents sent by the party who started the process, the adjudicator must render a decision. However, the adjudicator can request a 14-day extension. This means that from the date a party delivers a notice of adjudication, the longest it will take to get a binding decision is 60 days.

Once a decision by the adjudicator is made, the party required to pay has 10 days to do so.

GRANDFATHERING PROVISIONS

All parties involved in a current construction project should be aware of which legislation applies to them. 

Situation 1:

A contract for improvement entered into or a procurement process (which includes Requests for Quotations, Proposals and Tenders) issued before July 1, 2018 will be governed strictly by the old Construction Lien Act.

Situation 2:

A contract for improvement entered into or a procurement process issued after July 1, 2018 but before October 1, 2019, will be governed by the new Construction Act’s lien modernization provisions, but the new prompt payment and adjudication regimes will not apply to such a contract.

Situation 3:

A contract for improvement entered into or a procurement process is issued after October 1, 2019, will be governed solely by the new Construction Act.  

KEY TAKEAWAYS

Whether you are an owner, a contractor, or a sub-contractor, the Construction Act amendments will impact all parties to a construction project.  It is difficult to say whether the amendments to the Act will be effective as the practical effects will depend on the quality of the adjudicators available. The adjudicators may be lawyers, architects, engineers, or other professionals in the construction industry. Their decisions are binding. They can be enforced just like a court order.

How can you prepare?

  • Determine whether the new Construction Act applies to your projects (in full or in part).
  • Determine whether your document management systems are accurate, organized, up-to-date, and easily accessible. A company who can quickly retrieve the important documents will have an advantage. Companies who don’t run the risk of missing a date and losing the dispute.
  • Thoroughly review all contracts and consider what type of procedure best suits your interests in the event of a dispute when negotiating a contract.

This is only a brief overview of some of the many changes that are already upon you and soon to be mandatory.

Cheadles LLP has a long history of solving construction law industry issues for our clients. We provide services in the following areas: contract drafting and review, financings, liens, litigation, collections, and defending corporations who are charged with regulatory and quasi-criminal accusations. We take pride in the timely, practical and cost-effective advice we provide to our owner, contractor, and sub-contractor clients.

For more information about the new changes to the Construction Act or any other Construction Law issue, visit www.cheadles.com.

Trademark Registration Changes

Posted on by danny

Trademark Act changes: Hurry up or wait?

Significant changes are coming to the Trademark Act (Canada) as of June 17th, 2019. The question of whether to apply for a registration before then or not is for you to decide but first consider the following.

An application for registration of a trademark before June 17th could save you money. Currently, the fee for an application is $450. After June 17th, the online application fee will be $330 for the initial trademark class plus $100 for each additional class. If you plan on applying for multiple trademark classes prepare to pay more.

Another significant change is the elimination of the “declaration of use” requirement in the trademark registration application. Before June 17th, you can apply for a trademark without it currently being in use. This could provide an advantage over current or potential competition if your trademark concept has yet to be developed.

Also, a registration or renewal before June 17th will be grandfathered to a 15-year term instead of the newly reduced 10-year term. Also, registrations renewed after that date will need to be amended and reclassified under the Nice Classification system, the international classification system for goods and services.

However, it may be advantageous to wait until after June 17th to register your trademark. One advantage is that the application process has been streamlined. A single application now enables trademarks to be registered in more than 100 countries under the Madrid Protocol. The application is now quick and simple. Translations are not required and neither are powers of attorney. Also, since the application is now filed under the World Intellectual Property Organization, it is done in one language and there is only one fee to be paid. This can be a significant administrative advantage to those wishing to pursue global markets.

Another advantage is the broadening of the trademark definition to include “non-traditional” trademarks such as sounds, colour, scent, taste and texture; modes of packaging; and holograms, moving images and three-dimensional shapes. A brand can now be distinguished by such things that serves indicate its source.  The inclusion of such “non-traditional” trademarks, coupled with the pursuit of global markets, can create new opportunities to develop and distinguish your particular brand.

Additionally, the application process has become more flexible. Issues can be corrected after the application is submitted without delaying the process. The application can be split to resolve or clarify submissions while allowing permitted applications to proceed. Once the split applications have been registered they can be combined into a single trademark registration.

Overall, the changes to the Trademark Act (Canada) are designed to benefit applicants in the long run. Distinguishing your brand on the global market is now easier and permitted portions of an application can proceed despite submission issues. Otherwise, the changes could create the necessary impetus to submit your application sooner rather than later while saving a few hundred dollars in the process.

This publication is meant to be a general overview of a few changes to the Trademark Act (Canada). Other changes that will come into force on June 17th may affect your particular circumstances.   Please contact Cheadles Lawyers LLP if you require further legal advice.

Is Your Condominium Prepared For Recreational Marijuana?

Posted on by danny

Is Your Condominium Prepared For Recreational Marijuana?

When Ontario’s Cannabis Act, 2017 comes into effect on October 17, 2018, marijuana use, distribution and sale will become legal. Occupants over the age of 19 will be allowed to use recreational marijuana in their unit or common element space, and grow up to four plants for recreational use per residence/unit.

Why You Should Be Concerned

The legalization of marijuana will likely create tension and complaints towards those who are smoking and growing in multi-dwellings complex such as condominiums. It is reasonable to expect the complaints will have merit and be founded on some of these serious concerns:

  • Damage to units and common areas from mould and spores caused by the humidity required to grow marijuana, which can erode drywall, ceilings, floors and damage window seals;
  • Overloaded electrical system from growing lamps and disproportionate use of water required for marijuana plant growth:
  • Increased risk of fire hazards from growing lamps and drying marijuana in stoves and other electrical devices;
  • Odours traveling to other units;
  • Health concerns from mould and spores.

How to Address Legal Marijuana in Condominiums

Many condominium corporations have already limited or banned the use of tobacco in condominiums. Condominium corporations also typically have general restrictions against the creation of nuisances and the use of a unit that may increase the risk of fire or insurance premiums. Further steps could be taken to restrict the consumption and growing of marijuana.

To limit or restrict marijuana use in condominiums, including common areas, units, balconies and exterior grounds, two options are available:

  1. Amend your Declaration, which requires support of 80 to 90% of the of the owners, depending on what is being changed in the declaration; or,
  2. Create a Rule, which is more easily attained than amending the Declaration.

Enacting a by-law to deal with marijuana use is not available because by-laws deal with the governance of condominium corporations.

The best option to limit or restrict marijuana use is to create a rule. The board may make, amend or repeal rules in order to promote safety, security or welfare of the owners and the property and the assets of the corporation, or to prevent unreasonable interference with the use and enjoyment of the units. The rules must be reasonable and consistent with the Condominium Act. The approach should be similar to how other issues are managed, such as tobacco smoking or service animals.

Steps to Introduce a Rule

  1. The board approves the new rule by resolution at a board meeting.
  2. The board must give notice of the proposed rule to the owners that includes a copy of the rule, date for proposed rule to become effective, statement informing owners of the right to request a meeting, and section 46 and 58 of the Condominium Act.
  3. Effective date at least 30 days after the notice was given.
  4. The rule becomes effective on the day after the 30 days unless:  a) The board receives a requisition for a meeting of owners by at least 15% of owners, and b) The board receives a majority vote against the rule by the owners present at the meeting.

Why Act Now?

Approving a new rule can be fast and effortless; however, problems may arise and slow down the process. To avoid struggling with grandfather clauses, it is recommended to implement rules regarding marijuana now.

A grandfather clause is an exception to a restriction that allows individuals to continue doing the restricted act, even if the new restriction would stop them from doing that act. In the context of marijuana use, this could mean that if the rule is passed after the legalization of marijuana, owners could argue that they should be allowed to continue smoking and growing marijuana, despite any new condominium rules. Any new rule would only be imposed on new owners/renters who bought a unit after the rule was passed. However, if a new rule is passed before legalization of marijuana comes into effect, owners would have to abide by that rule and a grandfather clause would likely not apply.

Be aware that restrictions imposed on marijuana without an exception for medicinal purposes will likely be subjected to human rights complaints.

If your condo has yet to address the upcoming marijuana legislation, we encourage you to act now and seek legal advice from one of our lawyers.

Doug Shanks is a business lawyer and senior partner in Thunder Bay at Cheadles LLP who practices condominium law in Ontario. He advises condominium boards and owners of their rights and obligations under laws affecting condominiums and their owners. Bryant Oakes is a law student at Cheadles LLP from Lakehead University Bora Laskin Faculty of Law and was instrumental in preparing this article.