Categories
Real Estate Law Residential Real Estate

Failure to Close May be a Costly Risk

In today’s competitive housing market, it is becoming more and more common for purchasers to enter into an Agreement of Purchase and Sale with no conditions. Where it was once standard for a purchaser to insist on a home inspection and financial approval before finalizing a deal, the fierce competition means that people may be willing to take a bigger risk in order to secure the home of their dreams.

However, this can be a big risk that may result in significant cost to the purchaser should they be unable to secure financing in time before the closing, as illustrated in a recent decision of the Ontario Court of Appeal.

Financing Troubles After the Fact

In the case at hand, the vendors listed their home for $1,398,000. The market was especially active at this point in time and there were multiple offers. The vendors ultimately accepted the purchaser’s offer of $1,555,000. The closing date was set for two months later. In the meantime, the vendors agreed to purchase a new home closing a month before their sale, and took out bridge financing to cover the gap in between the transactions.

Leading up to closing, the purchaser’s lawyer was in communication with the vendor’s lawyer. The vendors’ lawyer sent a closing package to the purchaser’s lawyer 10 days before closing. Then just two days before the deal was set to be finalized, the vendor’s lawyer was informed that a new lawyer had taken over in representing the purchaser and asked for an extension on the closing date by approximately a week. A few days later, the purchaser requested a further extension for another three days.

The vendors agreed to the extension, provided the purchaser agreed to pay the additional interest on their mortgage, line of credit and bridge loan. the purchaser agreed. On the new closing date, the purchaser’s lawyer advised that she did not yet have mortgage instructions from a financial institution. Later that day, she followed up to let the vendors’ lawyer know that the purchaser had ceased communication with her.

Meanwhile, the purchaser applied for a mortgage with two financial institutions and was denied. He informed his real estate agent that he would not be able to purchase the home.

When the transaction did not close, the vendors re-listed the home at the original asking price. Nearly two weeks later, their lawyer was contacted by a new lawyer for the purchaser, saying he had received approval on a mortgage and sought a 10% reduction in the price of the home. They responded with a proposal to resolve the matter and did not receive a reply. The vendors ended up selling their home for considerably less than the original sale – a difference of $275,000. The vendors brought an action against the original purchaser for damages.

The Deposit & The Damages – One and the Same?

The purchaser claimed that he had never needed financing approval to purchase the home because he had intended to pay with cash. He further argued that the vendors had not fully tendered for closing and had further failed to mitigate their damages by not accepting his offer to purchase the home at a reduced price.

The motions judge held that the purchaser could not rely on the defence of tender when he was clearly not in a position to close the transaction. Further, while it had been open to the vendors to accept the purchaser’s offer to close and pay a reduced price, they could not be obligated to do so. Further, the judge found that the vendors had taken reasonable steps to mitigate by not accepting the first offer once the home was re-listed and instead waited for the best possible price. The judge awarded the vendors damages for the difference in the purchase price, as well as costs of re-staging the home, carrying costs and interest, totalling over $300,000. Further, the judge held that the purchaser had forfeited his deposit, which would not be credited toward the damages award. The purchaser appealed.

The Court of Appeal dismissed the purchaser’s appeal except with respect to the issue of the deposit. The purchaser argued that the deposit should be credited towards the total amount of damages, and the Court of Appeal agreed, finding:

While the agreement only specifically calls for the deposit to be credited to the purchase price on completion of the agreement, the measure of damages is based on the difference between the purchase price and the lesser amount that the property sold for after the purchaser’s default. In other words, it is based on the vendor receiving the purchase price that was bargained for. One can infer that the intent of the parties was that the deposit be applied to the purchase price whether received on completion or as damages…The motion judge in the instant appeal erred in law by holding that the deposit be forfeited and not credited to the vendor’s damages.

Exercise Caution Before Signing an Agreement

As demonstrated above, failing to close on an Agreement of Purchase and Sale can have hefty financial consequences for the party in breach. You may be held liable for interests and carrying costs, but there is also the consideration of the purchase price. The housing market can fluctuate quite significantly, and as in this case, result in drastically different purchase prices just months apart. While the temptation to enter into an Agreement condition-free is strong when the market is hot, purchasers are advised to complete their due diligence in advance and know their financial situation before they begin a house search in earnest.

At Baker & Company in Toronto, our real estate lawyers take the time to meet with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of transactions, or through litigation. Call us at 416-777-0100or contact us online for a consultation.

Categories
Employee Policies (Including Sexual Harassment Policies) Employment Law

Vacation Time: Employee Rights and Obligations

Now that the end of the year is within sight, many employees across the province are examining the vacation time they have remaining in 2019 and making plans to use it before the end of the year. Given that many people have getaways on the mind leading up to and during the holiday season, it’s an opportune time to provide an overview of vacation entitlement in Ontario.

How Much Time Are Employees Entitled To Each Year?

Under provincial employment legislation, set out in the Ontario Employment Standards Act (ESA), employees have minimum entitlement with respect to both vacation time and vacation pay. It is important to note that some occupations and professions are excluded from coverage under the ESA, including:

  • Secondary school and post-secondary students working in co-operative programs authorized by their school board or school;
  • Police officers (with the exception of  lie detector sections in Part XVI of the ESA;
  • Politicians, judges, religious officials or elected trade union officials; and
  • Employees whose jobs are regulated by federal employment laws and standards.

The majority of employees in Ontario will be entitled to the minimums set out in the ESA, which states that employees with less than five years of service are entitled to two weeks of vacation time for each 12-month period of employment (otherwise referred to as an entitlement year). For any period of employment before the start of a full entitlement year (called the “stub period”), the vacation time earned during that period will be pro-rated. For example, if an employee were to begin work with an employer six months before the end of the entitlement year, they would be entitled to one week of vacation time during that period. Employees with over five years of service are entitled to three weeks’ vacation per entitlement year.

Of course, there is nothing stopping employers from going above and beyond the minimums set out in the ESA. So long as the minimums are being met, employers are free to offer additional vacation time as an enticement to attract prospective employees or as a reward for long-time or more senior employees.

Vacation Pay Entitlements

Rather than providing employees with vacation time, employers may instead provide vacation pay. This is especially common in part-time and contract or temporary roles. In this case, the ESA sets the minimum vacation pay requirements as follows:

Vacation pay must be at least four per cent of the gross wages (excluding any vacation pay) earned in the 12-month vacation entitlement year or stub period (where that applies) for employees with less than five years of employment. Employees with five or more years of employment at the end of a 12-month vacation entitlement year or stub period (if any) are entitled to at least six per cent of the gross wages earned in the 12-month vacation entitlement year or stub period.

Unused Vacation Time

Many employees will find that their employers will begin to send out reminders about unused vacation time as early as midway through the year. This is because of the obligation on employers to provide vacation pay in lieu of unused vacation days. Therefore, any unused days within the year must instead be paid out, which in turn affects the employer’s annual budget, particularly in large organizations where unused days can add up to a significant sum.

In the alternative, employers may allow employees to carry unused days forward to the following year, increasing the number of days the employee can take the next year. Some employers will allow for this, while others will not. The reason for this is likely for the benefit of the employees, despite the fact that some employees may find this frustrating. Many employers believe that employees derive a significant benefit from taking time off each year, and do not want their employees to hoard vacation time at the expense of their own well-being.

Employers also have a third option available to them with respect to employees who are not using their full vacation entitlement. Rather than paying them for the time or allowing a rollover, employers are also permitted under the ESA to schedule vacation time on behalf of an employee who has not used all of their days. New or prospective employees should be sure to check their employer’s vacation policies to see how vacation is handled beyond the minimum ESA standards so that they can plan accordingly.

At Baker & Company, we take the time to meet with you and understand your unique needs in order to offer solutions to the diverse problems you may encounter in the workplace. The highly skilled Toronto employment lawyers at Baker & Company can review your employment policies and/or contracts and ensure that you are meeting your legal obligations while addressing and mitigating risk. Protect yourself, your workplace, and your employees. We rely on our broad base of experience and expertise to provide clear, pragmatic legal advice, and representation in litigation.  Call us at 416-777-0100 or contact us online for a consultation.

Categories
Family Law High Conflict Divorces Support Claims

Daily Sanction Imposed on Husband for Failure to Disclose

In divorce matters, particularly in highly contentious situations, spouses may attempt to hide some of their assets in order to impact any support awards ordered by the court. While full financial disclosure is a cornerstone of determining a fair award, hidden assets are not uncommon. In one recent decision, the husband in a divorce proceeding had repeatedly failed to comply with court orders for disclosure, and so a unique tact was taken in order to compel his compliance.

Multiple Orders Ignored

In a proceeding that had dragged out for more than four years, the husband had failed to comply with four separate orders of the court to produce full financial disclosure to the wife. In response to the most recent order, the husband had proved more than 150 pages of documents to the wife, however it had turned out to be mostly comprised of duplicates of items that had already been submitted. There were several items the husband had been ordered to submit that remained unaccounted for.

In response, the wife brought an application to dismiss the husband’s pleadings in the matter due to his lack of disclosure. In the alternative, she sought a further order to produce, this time with a penalty attached for each day of non-compliance.

“Exceptional and Egregious” Circumstances

The court was unwilling to dismiss the husband’s pleadings, given that he had demonstrated at least a degree of willingness to cooperate with orders. However, the court did note that the husband’s actions had been “exceptional and egregious”, noting:

The wife states that another court order alone will not compel the husband to provide the documents. Five other orders have already been made, he has paid the associated costs and yet he has not complied with them. All of this shows that he believes he can disregard court orders.

The court found that the husband was not in violation of the orders as a result of a lack of understanding or ability. The husband was a savvy financial investor and he had willfully kept certain information from his wife in direct contravention of the court’s orders. Given his demonstrated unwillingness to comply, the court felt that the wife’s suggested daily penalty may be the only way to compel his full disclosure. As a result, the court set a new deadline or his full and complete disclosure and ordered that the husband face a penalty of $500 per day of non-disclosure after that date. The court expressed clear frustration with the husband’s explanations for non-disclosure, stating:

Most of the outstanding items are easy to obtain.  The husband simply has to write to financial institutions to request the information.  If it cannot be provided, the institution can provide this response.  The husband has to provide to the wife with copies of the requests and the responses.  This is basic family law practice… The husband knows how to prepare a financial statement.  Considering the passage of time, he should have been able to provide values for his assets and liabilities well before now.

This is the sixth court order requiring disclosure.  Given the husband’s litigation history, I agree with the wife that the prospect of compliance with this order is very poor unless stiff consequences are imposed.  These circumstances are exceptional and egregious.

It remains to be seen what effect the sanctions will have, but it may prove an effective option for spouses who refuse to comply with financial disclosure obligations in family disputes. Presumably, when all is said and done, the husband will also be required to cover any and all costs associated with the unnecessary delay of this matter.

For spouses who suspect that their former partner may be hiding or otherwise obfuscating assets in order to affect support findings, it is important to take action. There are practices that can be employed in order to locate assets such as the use of financial experts or forensic accountants. If you suspect that your former partner may be hiding assets, speak with an experienced family law lawyer right away to explore your options.

At Baker & Company, our Toronto family law lawyers are highly experienced in high-conflict divorce matters and support litigation. We are committed to making the process of legally addressing a family matter as clear and approachable as possible. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Employee Policies (Including Sexual Harassment Policies) Employment Law

Prospective Employee Awarded $120,000

In a previous post, we discussed various employer obligations to prospective employees with respect to human rights considerations. Not long after, the Human Rights Tribunal of Ontario issued a precedent-setting decision that found an employer in violation of the Ontario Human Rights Code (the “Code“) with respect to its hiring practices and ordered a hefty damages award in favour of the applicant.

Background of the Case

The applicant was a mechanical engineering student at McGill University in Montreal who applied for a position with the respondent Imperial Oil Company. He was an international student with a visa that granted him the right to work on-campus during the academic year and on breaks between terms. Upon graduating, he was eligible for a post-graduate work permit (PGWP) that would allow him to obtain full-time employment anywhere in Canada for a period of three years. He expected that he would be able to obtain permanent residency status within the three-year period, allowing him to settle down in Canada indefinitely.

He applied for a role as a Project Engineer with Imperial Oil. He had learned from his peers that Imperial Oil required non-citizen applicants to have already obtained permanent residency status in Canada in order to be considered for a role. As a result, he provided false answers throughout the interview process whenever he was questioned about his eligibility to obtain permanent, full-time work in Canada.

The applicant was the top choice for the role and was offered the job on the condition that he provide evidence of his ability to work in Canada on a permanent basis, such as a birth certificate, citizenship card or evidence of permanent residency. He was unable to do so, and so the offer was rescinded.

He received a letter stating that should he become eligible for permanent work in Canada, he should reapply to the company. The applicant commenced a proceeding before the HRTO claiming Imperial Oil had discriminated against him on the basis of citizenship.

Discrimination Based on Citizenship

Before the HRTO, the applicant set out the fact that he was eligible to work in Canada at the time the offer was made, and that he expected to be able to work indefinitely after being granted permanent residency status. He felt that he would have become a permanent resident prior to the expiration of the PGWP visa, so he would have been able to continue working for Imperial Oil uninterrupted. He brought in an expert witness to testify to the likelihood and reasonableness of this plan.

Imperial Oil raised three defences to the claim of citizenship discrimination; specifically:

  1. The applicant had demonstrated dishonesty throughout the application and interview process;
  2. The company did not discriminate based on citizenship, as it welcomed employees with permanent residency status. If there was discrimination, it was on the basis of immigration status, which was not a protected ground under the Code; and
  3. It is reasonable for an employer to require the ability to work in Canda indefinitely due to the significant investment a new employee requires.

The HRTO disagreed with point two above, finding that discrimination based on immigration status was tantamount to discrimination based on citizenship. Distinguishing potential candidates based on their eligibility to work permanently in Canada was a direct violation of the Code. Further, the tribunal held that permanent residency was not an essential requirement to perform the role in question.

With respect to the applicant’s dishonesty during the interview process, the HRTO held that were it not for Imperial Oil’s discriminatory policies, the applicant would have had no reason to lie.

Pending any judicial review, this case has a significant impact on any employer who has used immigration or citizenship status as a basis for selecting or ranking job candidates. Any employer who has done so in the past would be advised to reconsider and make changes to its policies. It is still wise to enquire about a candidate’s legal entitlement to work in Canada at the time of hiring, however inquiries beyond that point run the risk of violating the candidate’s human rights under the Code.

At Baker & Company, we take the time to meet with you and understand your unique needs in order to offer solutions to the diverse problems you may encounter in the workplace. The highly skilled Toronto employment lawyers at Baker & Company can review your employment policies and ensure that you are meeting your legal obligations while addressing and mitigating risk. Protect yourself, your workplace, and your employees. We rely on our broad base of experience and expertise to provide clear, pragmatic legal advice, and representation in litigation.  Call us at 416-777-0100 or contact us online for a consultation.

Categories
Litigation Probate & Estate Administration Wills & Estates

Declaratory Relief and Limitation Periods

We have posted previously on the topic of limitation periods as they pertain to civil litigation in Ontario, however, we did not discuss the specific instance of an action seeking declaratory, rather than consequential, relief. A recent Ontario decision was faced with the question of whether an application was outside the limitation period, and whether the relief the applicant sought was purely declaratory.

What is the Difference Between Declaratory and Consequential Relief?

Consequential relief is what an applicant is generally seeking when bringing an action in court. They seek an order that something will happen; payment of damages, an injunction being granted, or an award of support. They have brought the action in an effort to bring about a certain consequence.

Declaratory relief is when an applicant presents a legal question to the court seeking only a declaration with respect to the parties’ rights. There is no consequence sought beyond the court’s opinion on the matter.

A Recent Decision

Limitation periods, typically a two-year period in Ontario for most civil actions, do not apply to matters that seek a purely declaratory order. This is not controversial. A recent decision, Piekut v. Romoli, required the court to make a determination as to whether an action was statute-barred due to being outside the limitation period. The sole basis for this determination was whether the relief sought was consequential or solely declaratory.

The case involved two of the three daughters of a deceased man. Each of the man’s daughters had been appointed as Estate Trustees under their father’s Will. Each of the daughters was also a beneficiary under the Will, which had stated that the residue of the estate was to be divided equally among the deceased’s three daughters, one of whom was not a party to this action.

However, after the death of her father, the respondent daughter presented a codicil which she claimed her father had executed two years before his death. In this codicil, the father gifted two of his properties to the respondent daughter alone.

The plaintiff daughter and the third sister were unsure how to handle the codicil, which they felt was not valid. Due to the disagreement between the daughters, they did not attempt to probate the Will for several years after their father had passed. Eventually, the plaintiff brought an application seeking an order as the validity of the codicil so that she could carry out the administration of the estate. The respondent sought to dismiss her sister’s application as it had been brought outside the two-year limitation period.

The Court’s Findings

The key issue in the case became the determination of whether the relief sought was purely declaratory or if it involved a degree of consequential relief. The court noted that no action had ever been brought to prove the validity of the codicil one way or the other. Had the respondent brought an action to prove the validity of the codicil and the plaintiff had challenged it, the relief sought would have been consequential, with each party seeking a specific outcome from the court. In that case, the limitation period would have applied.

However, in the case at hand, the applicant did not seek that the court award the properties in question to anyone in particular. She simply sought a declaration as to the validity of the codicil. Once a declaration was made, she would move on to the administration of the estate in accordance with the court’s determination. While there was no question that consequences would flow from the declaration of the court, the plaintiff did not seek one consequence over another. This was the key distinction for the court.

The two-year limitation period will still apply to most civil actions, however, it is important to understand the difference between the types of relief that may be sought. Seeking a declaration rather than an outcome could be a way to resolve an ongoing matter than has progressed beyond the statutory limitation period.

At Baker & Company, our Toronto estates and litigation lawyers can help you establish an estate plan tailored to your needs, or bring or defend a challenge in court. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. We also rely on our broad base of experience and expertise to provide you with exceptional legal guidance in any litigation matter when necessary. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Commercial Leases Real Estate Law

Tenants in Default & Relief for Forfeiture

Can a party in default of a commercial lease successfully claim relief for forfeiture? This was the question recently considered by the Ontario Court of Appeal (ONCA) when a tenant who had been found in default of its commercial lease sought to exercise its right to renew and was refused by the landlord.

Dispute Over Terms

The plaintiff in the case was a commercial tenant renting space in a cold storage facility owned by the defendant landlord. The lease was for a term of five years and contained a clause allowing the landlord to pass on certain increases in energy costs to the tenant. The lease granted the tenant the right to renewal, providing the tenant was not in default of any terms of the lease at the time of renewal.

Approximately three years after the start of the lease, an issue arose around the term with respect to the increased energy costs. The landlord took the position that it was entitled to additional payment under the clause, while the tenant refused. The tenant continued to make its rent payments each month but refused to pay the additional fees charged for the increased energy costs. A few months into this dispute, the landlord informed the tenant that it considered the tenant’s failure to pay these costs a default under the terms of the lease. The landlord reiterated its position two more times and notified the tenant that it would not be permitted to renew the lease if it failed to pay the energy costs.

The Initial Application

A few months later, the tenant informed the landlord that it wished to exercise its option to renew. The landlord rejected this, owing to the tenant’s default. Five years after the start of the original lease, the tenant brought an application seeking an interpretation of the increased energy clause of the lease. The tenant sought the following relief:

  1. a declaration that it was not in default under the terms of the lease and that it had properly exercised the option to renew; and
  2. if the tenant was found in default, then a declaration that it was entitled to relief from forfeiture.

The application judge held that the tenant was, in fact, in default under the terms of the lease and as such, was not entitled to exercise its option to renew. With respect to relief for forfeiture, the judge looked to the reasoning in 120 Adelaide Leaseholds Inc. v. Oxford Properties Canada Ltd., and determined that the court’s equitable jurisdiction to grant relief for forfeiture was limited in cases where there is a failure to perform a condition precedent to a right, as in the case at hand. The court held that the tenant had failed to complete its due diligence with respect to securing the right to renew, and therefore was not entitled to relief for forfeiture.

The Appeal

The tenant appealed the application’s judge finding with respect to forfeiture. The tenant argued that the judge had applied the wrong test when determining the court’s discretion to grant relief for forfeiture and that the test from Saskatchewan River Bungalows Ltd v. Maritime Life Assurance Company should have been used instead.

The ONCA dismissed the appeal, finding that the applications judge had used the appropriate test. There was no question the tenant was in default of the lease. The court stated:

[W]here preconditions to the renewal of a lease are in issue, the jurisdiction to grant relief from forfeiture is narrower than the three-pronged test applied in cases such as Saskatchewan River Bungalows. With respect to the renewal of a lease, a precondition for the exercise of any such equitable discretion is that the tenant has made diligent efforts to comply with the terms of the lease which are unavailing through no default of his or her own[.]

The tenant in this case would have been better off paying the increased energy costs and maintaining its good standing under the lease. It could have then sought a return of those funds had the court found that the clause did not require they pay additional funds to the landlord. By refusing to pay, the tenant found itself in default with no options for relief, and without a place to operate its business.

At Baker & Company in Toronto, our real estate lawyers take the time to meet with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of transactions, or through litigation. Call us at 416-777-0100or contact us online for a consultation.

Categories
Commercial Real Estate Real Estate Law Residential Real Estate

Provincial Government Considering Private Lender Registry

The real estate market in Ontario, particularly in the Greater Toronto Area, seems to be ever-expanding, and with it, the demand for financing from purchasers. The private lending market, once a source for a small subset of Ontario mortgages, has also been growing. In 2017, it made up 8%, or approximately $10.6 billion, of Ontario’s mortgage transactions. This was up from $6 billion just three years prior. Due to the increase in private lending, the Ontario government is now considering a provincial registry for these lenders, in order to better regulate the industry, and better understand the level of risk in the private lending sector.

Lack of Information and Oversight

The recommendation for the registry comes from a report released at the end of September by the Ministry of Finance, which discussed concerns with respect to the lack of oversight and insight into the growing market.

The private lending market has gained traction in the last couple of years due to the implementation of stress tests for uninsured mortgages in 2018. Private lenders have become more popular with those facing financial difficulty, who may not qualify for a traditional bank-funded loan. The report indicates the need for better oversight into this industry, in a way that will enable the province to gain a much-needed glimpse into the role private lenders play in the provincial economy and housing market.

Money Laundering Concerns

There is also a growing concern that private lending could be a potential hotspot for money laundering, given similar issues found through recent investigations in British Columbia. The report encourages collaboration between the Financial Services Regulatory Authority of Ontario (FSRA) and the Ministry in order to create a registration system that would be mandatory for lenders who meet a certain threshold, and voluntary for those who don’t.

The report also suggests that the FSRA work with the Law Society of Ontario to create an exchange of information with respect to private lending facilitated by Ontario lawyers. The creators of the report would also like to see a requirement for lenders to periodically report their activities to a regulatory body.

Potential for Implementation

The provincial government is currently weighing the suggestions contained in the report, and considering implementing some of the recommendations as soon as next year. It will be interesting to see what if anything comes from this report. Currently, private lenders are often the only option for people who are already strained financially but are also often charging much higher interest rates than traditional regulated lenders. As a result, the private mortgage industry sees the highest rate of default across all mortgage lenders. Perhaps regulation could help to narrow this gap somewhat and help lessen the consumer’s risk when it comes to unregulated mortgage lenders. This remains to be seen.

Seek Experienced Legal Advice

Any person seeking to obtain a mortgage, whether through a regulated entity or a private lender, should seek the advice of a qualified real estate lawyer. Your lawyer can review all associated documentation with you and ensure that you are aware of your obligations before entering into a commitment. Defaulting on a mortgage is a demoralizing process that can affect your financial standing for years afterward. It’s best to have a full understanding of what you are committing to before signing.

At Baker & Company in Toronto, our real estate lawyers take the time to meet with you and understand your unique needs in order to guide you through your real estate matter, whether commercial or residential.  We rely on our broad base of experience and expertise to provide exceptional legal advice and risk management in a variety of transactions, or through litigation. Call us at 416-777-0100or contact us online for a consultation.

Categories
Domestic Agreements Family Law Support Claims

Spousal Support Release Clauses: When Will They be Set Aside?

When a couple agrees to forego spousal support as part of a separation agreement, a court is generally reluctant to order a change. However, if a clause is deemed unfair in light of the circumstances, a court may step in to restore equity between the parties. This was the case in a recent decision of the Ontario Court of Appeal when the court had to consider whether to uphold a support release clause or set it aside.

Background Facts

The husband and wife had been married for 18 years and separated in 2008. The couple had two children. The following year, the couple executed a separation agreement which stated that the husband would be responsible for paying a disproportionate amount of the couple’s shared debts. As a result, the couple agreed that the husband would not be responsible to pay child support to the mother, who remained in the matrimonial home with the two children. The parties also released all rights to spousal support via a spousal support release clause.

The debts assigned to the husband exceeded his assets by over $500,000. The husband had become unemployed prior to executing the separation agreement. At one point, he stopped paying the debts and the wife took responsibility for them herself. At this point, she had assumed full financial responsibility for the couple’s children, the mortgage on the matrimonial home and over half of the couple’s shared debts.

The husband did not become re-employed, and three years after executing the agreement, the husband sought to challenge it, seeking an equalization payment, which he later amended to a lump-sum spousal support award. The trial judge did not see a reason to set aside the agreement in full, however using the reasoning from Miglin v. Miglin, found that the husband was entitled to a lump-sum payment of $143,933, as the spousal support waiver did not fully align with protections under the Divorce Act.

The Court of Appeal

Both parties appealed the lower court decision. The husband argued that the trial judge had erred in not setting aside the agreement in full, while the wife appealed the support award, arguing that the spousal support release clause should be honoured.

The Court of Appeal rejected the husband’s appeal and also upheld the support award. The trial judge had found that the release clause did not align with the objectives of the Divorce Act because, at the time of execution, it had been highly unlikely the husband would be able to support himself while assuming responsibility for over $600,000 in debt.

The trial judge had also correctly identified a material change in circumstances between the time that the agreement had been executed and the support award. The husband had been unable to secure new employment after being terminated from his previous job and was unable to become self-sufficient as a result.

Based on the husband’s need for support and the wife’s means to pay support, the trial judge had correctly set aside the support release clause and awarded the lump sum payment to the husband.

This case makes clear that while couples are entitled to enter into any agreement they wish upon separating, the clauses within cannot contravene statute-based protections for either party. If an agreement, or a portion of it, is deemed inequitable under the legislation, a court will set the agreement or clause aside. Seeking skilled input and guidance from a family law lawyer when drafting such an agreement will help to ensure that the agreement will be in compliance with all relevant legislation.

At Baker & Company, our Toronto family law lawyers are highly experienced in high-conflict divorce matters and support litigation. We are committed to making the process of legally addressing a family matter as clear and approachable as possible. Call us at 416-777-0100 or contact us online for a consultation.

Categories
Employment Law

Employer Not Bound to Provide Benefits to Part-Time Employee

The Ontario Superior Court recently overturned an arbitrator’s decision which said that the City of Toronto had erred by transferring a disabled employee from full-time to part-time status, affecting his benefits. The arbitrator held that the employer’s decision had resulted in a breach of the City’s duty to accommodate an employee with a disability. The City appealed the decision in court and was successful.

Background Facts

The respondent had been employed with the City of Toronto on a full-time basis for eight years. When the employee’s disabilities prevented him from working a full week, he reduced his hours to a four-day week. At the time, he was permitted to use a sick day for the day each week that he wasn’t working, until his sick days were exhausted, after which he would not be paid for the days he wasn’t able to work.

In 2009, the City and its employees entered into a new collective agreement, which offered a new Illness or Injury Plan for existing employees. It would allow any employee who joined the plan to receive pay for up to 26 weeks per year when the employee was away for health reasons. The employee, in this case, chose to opt into the plan. From that point on, he was able to work four days per week but be paid for five, under the new plan.

The following year, the employee needed to reduce his working hours further so that he was only working three days per week. He remained in the full-time collective bargaining group. A few years later, the City asked the employee to provide medical documentation as to whether the accommodation was a permanent one. He did provide that evidence, with his doctor confirming that he would not be in a position to resume working full-time hours in the future.

In 2016, just before the negotiation of a new collective agreement, the City notified the union that it would be discontinuing its practice of allowing part-time employees to remain in the full-time bargaining unit if there was no reasonable expectation they would return to full-time work. Employees in this category were given a two-year grace period during which they remained in the full-time unit, before being transferred to the part-time unit. The part-time unit benefit coverage was less, requiring the respondent to pay a pro-rated portion of his extended health and dental care. His vacation days, sick days and pensionable service were also pro-rated.

The Arbitration

After examining the circumstances, the arbitrator noted that the transfer of the grievor to the part-time unit was an administrative act within the scope of the City’s management rights. Further, the arbitrator found the City had met its duty of accommodation in allowing the respondent to reduce his hours to part-time. However, the arbitrator did find that the City was not permitted to alter the existing accommodation without demonstrating either a change in circumstances or a significant hardship. The City had not established either, so the arbitrator found that the change was a violation of s. 17 of the Ontario Human Rights Code (the “Code”)

The Appeal

The Court found that the arbitrator’s decision had been unreasonable. The Court held that the change to the part-time bargaining unit was due to the hours that the employee was able to work, and not to his disability, and therefore the change was not in violation of the Code. This is positive news for employers, in both the labour and employment sector. Employees must be able to contribute the work necessary in order to accumulate the associated benefits. however, as always when navigating employee rights and accommodations, it is advised that employers seek legal advice before making changes to existing accommodations to ensure that they are not overstepping.

At Baker & Company, we take the time to meet with you and understand your unique needs in order to offer solutions to the diverse problems you may encounter in the workplace. The highly skilled Toronto employment lawyers at Baker & Company can review your employment policies and ensure that you are meeting your legal obligations while addressing and mitigating risk. Protect yourself, your workplace, and your employees. We rely on our broad base of experience and expertise to provide clear, pragmatic legal advice, and representation in litigation.  Call us at 416-777-0100 or contact us online for a consultation.

Categories
Estate Planning, Will Planning, Succession Planning & Inheritance Planning Litigation Probate & Estate Administration Wills & Estates

Dependant Relief Claim

When a person passes away without a will, or intestate, the distribution of the estate’s assets is determined by Part II of the Succession Law Reform Act (the “Act”). For example, a spouse will be first in line, followed by children, and so on. However, it is important to note that this part of the Act only applies to married spouses. What happens in a case where the deceased had a common-law spouse at the time of their death? What are the entitlements owing to that spouse, if any?

Dependant Relief Claims Explained

Common-law spouses retain a right to claim a portion of their spouse’s estate in the form of a dependant’s relief claim. These claims are governed by Part V of the Act. In order to make a successful claim for dependant’s relief, a spouse must be able to demonstrate that they were in a common-law relationship with the deceased at the time of their death. In cases where the deceased did have a will, the spouse must also establish that the will failed to provide adequate provisions for their ongoing support.

Once the spouse has established their right to a claim, the court must then determine the amount of the award. To do this, the court will review a number of factors set out under s. 62, including the following:

  • the dependant’s current assets and means;
  • the dependant’s capacity to contribute to their own support;
  • the dependant’s age and physical and mental health;
  • any agreement between the deceased and the dependant;
  • the claims of any other dependant of the deceased; and
  • the length of time the spouses cohabitated.

These are just some of the factors enumerated in the Act. The full list can be viewed under s. 62(1) of the Act.

A Recent Example

A recent decision of the Ontario Superior Court examined a classic scenario of a common-law spouse’s claim for dependant’s relief. In the case at hand, the deceased died intestate and was survived by an adult child and his common-law spouse. Under the laws of succession, the entire estate, valued at $2,851,125.77, would have gone to the daughter of the deceased. The common-law spouse brought a claim for dependant’s relief, seeking an award of half the value of the estate. Specifically, she sought an absolute transfer of the farm property where she resided with the deceased, which was valued at $580,000.00. In addition, she sought to keep all funds and assets she had received to date, which totalled approximately $570,000.00 and then a further cash payment of approximately $275,000.00. This would leave both the applicant and the respondent with approximately equal shares in the estate.

At the time of her spouse’s death, the applicant was 73 years old. She had no physical or mental health issues and was not employed. She resided on a farm property owned by the deceased, where she had lived and worked since 1991. She had originally met the deceased when he hired her to work as his housekeeper, however, a romantic relationship developed over time. Tax records indicated that the pair had declared themselves to be common-law spouses beginning in 1999.

Records showed that the applicant had paid into the household expenses over the years, including veterinary bills, small tools for the farm, home appliances, and food and clothing for the couple.

The court examined what the applicant would require in order to maintain her own care, with the contemplation of the applicant eventually relocating to a one-bedroom accommodation in a nursing care facility. Relying on expert evidence, the court found that the applicant would be likely to suffer a shortfall if she was entitled only to the assets already in her possession. Given that the estate was sizeable enough to provide for the applicant, the court found that the deceased had failed to provide adequate support.

Once the applicant had successfully established a claim against the estate, the court then turned to the amount. While the court considered providing a life estate in the farmhouse for the applicant, it found that there was a contentious relationship between the applicant and the deceased’s daughter, and a life estate in the home would prolong the need for the parties to interact with each other. Under the circumstances, the court held that both parties would be better served by ordering a transfer of the farmhouse to the applicant.

The court ultimately found that a judicious spouse would have provided for the applicant’s care and her ability to live in relative comfort for the remainder of her life. Given that, the court ordered that the applicant keep the assets already in her possession in addition to the transfer of the farmhouse, and also awarded a further payment of approximately $275,000.00. The applicant received everything she had requested, which amounted to half the value of the estate.

Takeaways

This case serves to illustrate how the law can help to make up for a shortfall when a person dies without properly providing for a dependant. Just because a person has been left out of the will, or in a case where there was no will at all, it does not mean that they are without options. If you find yourself facing a similar circumstance, seek the advice of a skilled wills and estates lawyer.

At Baker & Company, our Toronto estate planning lawyers can help you establish an estate plan tailored to your needs, no matter your current family status. We have extensive experience and expertise in providing you with estate planning advice and implementing your desired plan. Should you find yourself in the position of challenging an existing will or estate, our lawyers can also represent you through the litigation process. Call us at 416-777-0100 or contact us online for a consultation.