Cash Today or Equity Tomorrow? The Real Tax Cost of Bonuses vs. Stock Options As the new year begins, many employees enjoy their year-end bonuses earned on top of their salary for a job well done. For these employees, bonuses come in the form of a straightforward cash payout. For other employees, especially those in the startup space, compensation may come with a strategic choice: receiving cash bonuses or employee stock options (“ESOs”). ESOs are rights conferred upon an employee to purchase a certain number of shares of a corporation at a fixed price during a certain period of time. Tax treatment for cash bonuses is vastly different when compared to ESOs, and as such, merits careful consideration for whether taking ESOs is the financially correct decision for any given employee. Not only is tax treatment inherently different between the two, but the complexity of the tax regime for ESOs is arguably much higher and therefore can put off some employees from even considering them. However, it would be prudent to know the pros and cons of either compensation structure before making a concrete decision as an employee. Choose wisely, and your wallet will thank you. Division C Deductions on Taxable Income Per section 2(2) of the Income Tax Act (the “ITA”), taxable income is calculated as your total income for the year plus additions (such as taxable capital gains) less deductions permitted under Division C of the ITA. One of those deductions, found in section 110(1)(d) or (d.1) , applies a deduction when qualifying ESOs are exercised. As a result, unlike bonuses, which are fully taxable, only 50% of the benefit gained from exercising the ESOs will be subject to taxation at the employee’s progressive tax rate, effectively halving the tax payable. Qualifying for a Deduction In order to qualify for a deduction when exercising ESOs, several conditions must be met: the employee must deal at arm’s length with the employer, meaning the parties are unrelated and act independently; the shares are “prescribed shares” as described in Regulation 6204 of the Income Tax Regulations (effectively a “normal” common share); and the stock option price is greater or equal to the fair market value of shares when ESOs were first given. Amount and Timing of Benefit of ESOs Section 7(1) of the ITA governs how ESOs are taxed when they are exercised. It is to be noted that section 7(5) stops claimants who did not receive the ESOs by virtue of employment, and instead, for example, received the benefit as shareholders, from utilizing section 7. Initially, an employee will be presented with an ESOs contract, specifying their contractual right to purchase company shares at a fixed price. No taxation occurs at this point. Strategically, an employee should exercise their stock options when the exercise price is lower than the fair market value of the shares. Any benefit received at this point must be reported on the employee’s annual tax return, unless the employer is a Canadian-controlled private corporation (“CCPC”). At this point, a deduction may be applied to the benefit derived from qualifying ESOs. In other words, unless the employer is a CCPC, taxation of ESOs occurs when you exercise the option to buy the shares. If the employee paid to receive the ESOs, the cost is deductible. To illustrate with a simple example, assume an employee was granted ESOs to acquire 10 shares at a price per share of $10 when the fair market value of each share was also $10. The employee then exercises the ESOs when the fair market value of each share jumps to $20. The benefit is the difference between the fair market value of the shares at acquisition time, the amount paid by the employee to exercise the ESOs, and any price paid to acquire the ESOs by the employee, all multiplied by the amount of shares acquired. Thus, in this example, the benefit is $100 ($10 difference x 10 shares). After holding the shares, an employee may later sell them for a capital gain or loss pursuant to the ESOs contract. A gain occurs if the shares are sold for more than what the employee paid to obtain them. To prevent the same shares from being taxed twice (because it was already taxed when the employee exercised their stock options), section 53(1)(j) provides a tax mechanism to avoid double taxation under the capital gain mechanisms. Where an employee exercises stock options granted by a CCPC, they enjoy a tax deferral. The employee only reports the aforementioned benefit when the shares are sold, at which point the Division C tax deduction can be claimed. However, this can only be done if the employee holds the shares for a minimum of 2 years. Cash Bonuses Unlike ESOs, cash bonuses offer little flexibility in tax treatment and therefore do not provide any deduction. They are treated the same as all other income, subject to the same progressive tax income rates, as well as pension and employment insurance deductions. Despite offering no deductions, cash bonuses do come with a special advantage: they can be directly deposited by the employer into an employee’s registered retirement savings plan (“RRSP”), effectively bypassing the withholding taxes that would otherwise apply to RRSP contributions equal to the employee’s progressive tax bracket, thereby allowing an employee to receive and invest the full untaxed amount of the bonus into their RRSP. The real benefit to cash bonuses as compared to ESOs is simple: cash bonuses are money now. As such, cash bonuses can be seen as short-term gain, while ESOs are more long-term investments, and their viability for any given employee depends on risk tolerance and most importantly, patience. If you are presented with a choice of stock options or a cash bonus and need assistance understanding what makes more sense for you, our tax planning lawyers can help you decide. Have further questions? Contact our tax planning lawyer. Alex Shchukin is a Toronto lawyer who joined the commercial litigation team at Devry Smith Frank in 2025 and has expertise in a broad range of commercial litigation and tax planning matters. Alex can be reached at alex.shchukin@devrylaw.ca and/or 416-446-5099. This blog was co-authored by articling student Mariem Naem. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.” By AlyssaBlog, TaxJanuary 26, 2026January 26, 2026
Devry Smith Frank LLP Announces New Partners for 2026 Devry Smith Frank LLP is pleased to announce that Tijana Potkonjak, Graeme Oddy, and Jillian Bowman have joined the firm’s partnership, effective January 1st, 2026. Tijana Potkonjak practises within the firm’s insurance defence, personal injury and estate litigation departments. She has built a strong litigation practice informed by her experience before all levels of Ontario courts and administrative tribunals. Graeme Oddy practises within the firm’s commercial litigation and tax law departments. His work spans commercial disputes and tax litigation, including shareholder and partnership disputes, professional negligence claims, and CRA audit and appeal proceedings. Jillian Bowman practises within the firm’s family law and estates departments, with a practice that includes child protection and estates administration. She has particular experience representing children through her work with the Office of the Children’s Lawyer. We congratulate each of them on this well-earned achievement and look forward to their continued hard work and dedication. By AlyssaBlogJanuary 12, 2026January 12, 2026
Canada’s New Citizenship Rules Explained: What Bill C-3 Means for Canadians Born Abroad As of December 15, 2025, Bill C-3, An Act to Amend the Citizenship Act (2025), is officially in force. This significantly changes Canadian citizenship law, specifically for families with children born or adopted outside Canada, or families impacted by the first-generation citizenship limit. First-generation citizens are characterized as the first person born or adopted outside Canada to a Canadian citizen parent or parents, as described in detail below. With the passing of Bill C-3, outdated and restrictive provisions that limited Canadian citizenship by descent have been struck, allowing citizenship to individuals who were previously excluded under the first-generation limit and other historical rules. The Previous Legal Framework Originally, the Canadian Citizenship Act of 1947 contained provisions that caused many individuals to either lose their Canadian citizenship or not acquire it in the first place. Specifically, Canadian women who married foreign national men could not pass on their Canadian citizenship to their children born abroad. People born outside Canada to a Canadian parent lost their citizenship if their birth was not registered and they did not file to retain their citizenship before their 22nd birthday. For people born after 1953, citizenship could only be preserved if they were living in Canada by that age. If a Canadian-born citizen left Canada for more than 6 consecutive years, they would lose their citizenship. Dual citizenship, i.e., citizenship of Canada together with the citizenship of another country, was not permitted. These restrictive rules resulted in many “Lost Canadians”, who had lost or did not acquire citizenship as a result of these provisions. Following legislative amendments in 1977, 2009, and 2015, these outdated provisions were corrected, restoring or granting citizenship to the most affected individuals. As a result, between 2009 and 2015, approximately 20,000 people came forward seeking proof of Canadian citizenship. Despite making historic strides, there were still significant restrictions in place. One example is the 2009 Citizenship Act amendments, which resulted in the first-generation limit to citizenship by descent. This meant that any Canadian citizen who was born or adopted outside of Canada could not automatically pass on their citizenship to a child who was also born or adopted outside of Canada. On December 19, 2023, the Ontario Superior Court of Justice ruled that key provisions of the Citizenship Act, which related to the first-generation limit, were unconstitutional. The Court found that the law produced unfair and unacceptable outcomes for children of Canadians born outside the country. Following the ruling, Immigration, Refugees and Citizenship Canada (“IRCC”) introduced interim measures to support those affected by the first-generation limit. The New Legal Framework under Bill C-3 With Bill C-3 now in force, the Citizenship Act has been formally and permanently amended. IRCC will process citizenship applications under the new rules. Effective immediately: Individuals born or adopted on or after December 15, 2025, in the second generation (or later) may be Canadian if their parent was also born or adopted outside Canada to a Canadian citizen (meaning their grandparent was Canadian) and the same parent spent at least 3 years in Canada before the birth or adoption. This means the first-generation limit is no longer in effect. Individuals born or adopted before December 15, 202,5 outside of Canada to a Canadian citizen, who would have obtained citizenship but for the first-generation limit or other outdated rules, are now Canadian citizens and may apply for proof of citizenship. An individual born to someone who becomes a Canadian Citizen because of these legislative changes can also apply for citizenship. Individuals who applied under the interim measures do not need to submit a new citizenship certificate application. IRCC will process applications using the new legislative framework. Conclusion This amendment closes one of the most criticized gaps in Canadian citizenship law. It restores fairness for families previously excluded due to restrictive generational cut-offs and aligns citizenship by descent with real, demonstrated ties to Canada. Individuals impacted by these changes are encouraged to assess their eligibility and prepare supporting documentation. The immigration lawyers at Devry Smith Frank LLP can provide strategic guidance tailored to their circumstances. Contact Us If you or your family may be affected by the amendments under Bill C-3, timely legal advice is critical. Citizenship by descent cases often involve historical facts, documentary gaps, and multi-generational considerations that require careful analysis. The immigration lawyers at Devry Smith Frank LLP advise individuals and families on eligibility, citizenship status confirmation, and proof of citizenship applications under the amended Citizenship Act. To discuss how these changes may apply to your circumstances, we invite you to contact our immigration law group for a confidential consultation by emailing info@devrylaw.ca or by calling 416-449-1400. This blog was co-authored by articling student Mariem Naem. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.” By AlyssaBlog, ImmigrationDecember 24, 2025December 23, 2025
The Evolution of Termination Clauses in Ontario and What it Means for Employment Contracts The legal landscape in Ontario surrounding the enforceability of termination clauses in employment contracts continues to develop at a rapid pace. Employers are now more aware than ever that one misplaced phrase in a termination clause can expose them to significant financial liability. Ontario courts have grappled with the enforceability of termination clauses in several recent cases, including Chan v. NYX Capital Corp., Li v. Wayfair Canada ULC, Jones v. Strides Toronto, and Baker v. Van Dolder’s Home Team Inc. Other cases, such as Dufault v. Ignace (Township) and Bertsch v. Datastealth Inc., have even come before the Court of Appeal. Nevertheless, the law remains unsettled and uncertain as to when a termination clause will be struck down for failing to comply with the minimum standards set out in the Employment Standards Act, 2000 (the “ESA”). While the prospect for employers has been bleak, recent cases suggest that there may be a light at the end of the tunnel and hope for drafting an enforceable termination clause that complies with the ESA and rebuts the presumption of reasonable notice at common law. Review of the Law on Termination Clauses in Employment Contracts It is well-established law that employment contracts are interpreted differently from other commercial contracts.[1] With employment contracts, there is an inherent power imbalance between the employer and employee due to the employee’s lack of bargaining power and lack of knowledge of their statutory and common law rights.[2] As a result, employees are granted additional protections by the courts and employment contracts are interpreted in a way that favours ESA compliance. With termination clauses, employers often seek to limit an employee’s rights upon their termination to the minimum standards set out in the applicable legislation, namely, the ESA or Canada Labour Code. However, if the termination clause provides for a lesser entitlement than the minimum statutory standards, the clause will be unenforceable, and employees will be entitled to a longer notice period at common law.[3] The 2020 Court of Appeal decision in Waksdale v. Swegon North America Inc. dealt a significant blow to employers seeking to enforce termination clauses.[4] The Court concluded that: “An employment agreement must be interpreted as a whole and not on a piecemeal basis. The correct analytical approach is to determine whether the termination provisions in an employment agreement read as a whole violate the ESA. Recognizing the power imbalance between employees and employers, as well as the remedial protections offered by the ESA, courts should focus on whether the employer has, in restricting an employee’s common law rights on termination, violated the employee’s ESA rights. While courts will permit an employer to enforce a rights-restricting contract, they will not enforce termination provisions that are in whole or in part illegal. In conducting this analysis, it is irrelevant whether the termination provisions are found in one place in the agreement or separated, or whether the provisions are by their terms otherwise linked.”[5] The Court also confirmed that non-reliance on the unenforceable clause is not a defence; if any part of the clause is unenforceable, then the entirety of the clause is unenforceable.[6] There are two main types of termination provisions: “with cause” termination provisions and “without cause” termination provisions. A common issue for “with cause” termination provisions is the failure to distinguish between “just cause” and “wilful misconduct.” Just cause at common law can be any conduct that is serious enough to damage the employee-employer relationship, including negligence or poor performance. In contrast, wilful misconduct is much more difficult for employers to establish and requires intentional and deliberate acts. If an employee is found to be “guilty of wilful misconduct, disobedience, or wilful neglect of duty that is not trivial and has not been condoned by the employer,” then they lose their ESA entitlements.[7] However, if an employee is terminated for just cause, then they are not entitled to a reasonable notice period at common law but retain their ESA entitlements. As such, a termination clause which provides an employee with no compensation upon termination for “just cause” but not “wilful misconduct” is unenforceable for violating the ESA. If employers seek to exclude an employee’s ESA entitlements on termination, they must refer to the statutory test of “wilful misconduct.” However, it is the “without cause” termination provisions which have attracted the most attention in the last year. “Without Cause” Termination Provisions “At Any Time” Language Under Strict Scrutiny As we have discussed in previous blogs on the decisions of Dufault v. Ignace (Township) and Baker v. Van Dolder’s Home Team Inc., the most contentious enforceability issue that courts are currently grappling with is “without cause” termination provisions, which purport to grant employers “sole discretion” to terminate employees “at any time.” Decisions such as Dufault v. The Corporation of the Township of Ignace[8] and Baker v. Van Dolder’s Home Team Inc.[9] have found that termination clauses containing language permitting employers to terminate employees at any time in their sole discretion are unenforceable. In Dufault, the Court confirmed that employers could not terminate employees at any time for any reason; specifically, the ESA prohibits termination at the end of an employee’s protected leave (s. 53) or in reprisal for exercising their rights under the ESA (s. 74).[10] Baker followed the reasoning set out in Dufault and concluded that “[a]n incorrect statement as to the ESA is not saved by general language stating that the employer will comply with the ESA.”[11] An Evolving Contextual Approach to “At Any Time” After Dufault and Baker, courts began to take a more contextual approach in their contractual interpretation. In Li v. Wayfair Canada ULC.,[12] the Court upheld a termination clause with “at any time” and “for any reason” language. The Court took a holistic approach to the termination clause and found that repeated references to ESA compliance and the inclusion of specific ESA entitlements, such as termination pay, severance pay, and benefits, saved the clause and distinguished the case from Dufault. The Court also found that the “for cause” termination provision was enforceable as it tied the definition of “cause” to the ESA “wilful misconduct” standard.[13] Similarly, in Jones v. Strides Toronto,[14] the Court analyzed a “without cause” termination provision which permitted the employer to terminate employment “at any time.” As the clause did not grant the employer “sole discretion” to terminate employment, it was distinguished from Dufault and not deemed unenforceable on those grounds.[15] However, the clause was ultimately deemed unenforceable due to issues with the “for cause” termination provision. There has been some controversy surrounding the legal reasoning in the decisions of Li and Jones, as well as suggestions that the decisions are inconsistent with Dufault and Baker. Li is also currently under appeal. Subsequent cases, such as Chan v. NYX Capital Corp.[16], have also applied the reasoning in Baker and Dufault without references to Li and Jones. The Court in Chan specifically objected to the termination clauses permitting the employer to terminate an employee “at any time and for any reason at its discretion” during the employee’s three-month probationary period and “at any time without cause.”[17] These inconsistencies are unlikely to be resolved without intervention from the Court of Appeal. The Importance of Precise Contract Drafting The most important takeaway for employers is that great care must be taken when drafting termination clauses, particularly in ensuring that they are unambiguous and comply with the ESA. In Bertsch v. Datastealth, the Court of Appeal confirmed that it was possible for Ontario employers to draft an enforceable termination clause which precluded employees from claiming reasonable notice at common law. The Court found that the language in the termination clause was precise, unambiguous, and specifically provided for an employee’s minimum payments and entitlements under the ESA.[18] Termination clauses in employment contracts should be carefully drafted to explicitly reference minimum ESA entitlements and to expressly displace the presumption of reasonable notice at common law. At the same time, termination clauses should not be ambiguous or open to multiple interpretations that may deny an employee their minimum statutory entitlements upon termination. “Without cause” termination clauses should avoid overly broad terms like “at any time” and “sole discretion,” and “with cause” termination clauses should differentiate between the standards of “just cause” at common law and “wilful misconduct” under the ESA. If you have any questions about your employment contract and its enforceability, please contact the employment lawyers at Devry Smith Frank LLP for more information. This blog was co-authored by articling student Mariem Naem. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.” [1] Wood v. Fred Deeley Imports Ltd., 2017 ONCA 158 at para 26. [2] Machtinger v. HOJ Industries Ltd., 1992 CanLII 102 (SCC). [3] Ibid. [4] 2020 ONCA 391. [5] Ibid at para 10. [6] Ibid at paras 11-12. [7] O. Reg. 288/01: Termination and Severance of Employment, ss 2(1)(3) and 9(1)(6). [8] 2024 ONSC 1029 [Dufault, ONSC], aff’d Dufault v. Ignace (Township), 2024 ONCA 915. [9] 2025 ONSC 952 [Baker]. [10] Dufault, ONSC, supra at para 46. [11] Baker, supra at para 10. [12] 2025 ONSC 2959. [13] Ibid. at paras 13-21. [14] 2025 ONSC 2482. [15] Ibid at paras. 21-23. [16] 2025 ONSC 4561. [17] Ibid at paras 11-12. [18] 2025 ONCA 379 at paras 9-11. By AlyssaBlog, Employment LawDecember 8, 2025November 24, 2025
AI and the Importance of Communication Skills for Legal Professionals I recently received an email from opposing counsel; pretty standard follow-up on some delayed answers to undertakings. Maybe it was more wordy than it needed to be, but I didn’t think much of it. Then, down below the signature, a strange question: “Would you like me to make it sound firmer (to emphasize urgency) or more diplomatic (to maintain a cordial tone)?” Two years ago, I would have had no idea what was going on. But I was quick to realize (as would most professionals nowadays) that my opponent must have been asking ChatGPT, or some other AI tool, for help drafting their email, and they had inadvertently copied the extra text into their email client. This led me down a real mental rabbit hole… I understand the appeal of using large language models (or “LLMs,” the technical name for what we’ve come to refer to as “Artificial Intelligence” on a daily basis) to help you analyze or summarize a large document. Same for blog posts, marketing material, catchy “click-bait” content; I get it. AI is rapidly becoming decent at those products. I can also totally see why some professionals would use LLMs to draft a demand letter or simple document for them, at least as a starting point. But simple correspondence? Really? The email from the other lawyer was only about 120 words long. Being such a short email, it struck me that they may have very well used just as many words to prompt the AI! I couldn’t help but wonder… Why didn’t you just type the email out yourself? This was hardly the first time I’d received an email drafted by ChatGPT… these days, that happens on a daily basis. But it WAS the first time I’d received one – at least a blatantly obvious one – from another lawyer (by the way, I used em dashes before they were uncool). And then I was thinking more and more about the value (and purpose) of communication skills more generally, in the legal profession. Call me old-fashioned, but I think writing emails and letters is a crucial skill for most lawyers to have. Maybe it sounds trite, but even when you send a simple email, you’re communicating! And in the litigation and advocacy world, your ability to communicate – your mastery of the English language – is so often what decides whether you win or lose. Language, critical thinking, argument, persuasiveness; these things are all intrinsically linked. When you send and receive adversarial correspondence, you’re not just typing or reading the words. You’re also testing and learning what works for you and what doesn’t, in terms of advocacy styles. You’re finding new ways to convey the information you think is important. You’re laying the groundwork for your submissions to a future judge. Maybe you’re experimenting with new punctuation marks. You’re practicing law! I won’t pretend that I don’t sometimes hate sending emails as much as the next person… of course I do. But I also think almost every email is an opportunity to become a slightly better writer, a better communicator, a better thinker. That is, a better lawyer. Does one email make a noticeable difference? No, probably not. But over a year? A decade? Over a career? In this specific example, I’m not even convinced that opposing counsel actually benefited. I suspect they could have written their own email just as easily, with the same time (and brain power) it took them to write their prompt. Right now, fortunately (or unfortunately, depending on how you feel about it), AI’s powers of reasoning and communication aren’t anywhere close to those of a lawyer’s. And “garbage in, garbage out” still applies; being able to intelligently prompt the LLM is half the battle. But as AI gets better and better, don’t we lawyers have to keep improving, too? Let me put the question differently: Do you think a client wants a litigator who can only communicate persuasively or effectively with the assistance of AI? Until that answer changes, I’ll be writing my own emails. By AlyssaBlogDecember 1, 2025November 21, 2025
Constructive and Resulting Trusts: What They Are and Why They Matter When most people hear the word trust, they picture a financial planning tool catered to the wealthy. However, in Canadian law, two special types of trusts are relevant among a wide array of individuals. These are known as constructive and resulting trusts. Unlike traditional trusts that are planned and prepared in advance, constructive and resulting trusts are imposed by courts as remedial measures once a dispute arises. These trusts are used to ensure fairness and equity within our justice system. Constructive Trusts A constructive trust is ordered when the court decides that one party to an action will be unjustly enriched at the other party’s expense. For example, in Pettkus v. Becker,[1] Ms. Becker and her significant other were in a common-law relationship for nearly 20 years. During this time, Ms. Becker invested her time, effort, and own income into a beekeeping business she built with her partner. All property and assets associated with the business were in Mr. Pettkus’ name. When their relationship came to an end, the Supreme Court of Canada recognized that allowing her partner, Mr. Pettkus, to walk away with the entire business would unjustly enrich him at her expense, recognizing her significant contributions to the business. Here, the Court imposed a constructive trust as a remedy, granting Ms. Becker a proprietary share despite her name never being on title. While Ms. Becker succeeded, the Court emphasized that a constructive trust is not automatic; the claimant must satisfy a three-part test to obtain this remedy. Specifically, the claimant must prove: Enrichment of the defendant; Corresponding deprivation of the plaintiff; and Absence of juristic reason for the enrichment. If all of these steps are met, a claimant will have a successful argument for the court to order a constructive trust. It is important to note that constructive trusts are not limited to situations where there has been unjust enrichment. The Supreme Court of Canada in Soulos v. Korkontzilas,[2] expanded the applicability of constructive trusts to include situations where there have been breaches of fiduciary duties. In this case, the defendant, a real estate agent, failed to disclose an offer to the property owner and instead arranged for his wife to secretly purchase the property. Although the agent was not necessarily enriched, because the property dropped in value, the Court still imposed a constructive trust to uphold “good conscience” and protect the integrity of fiduciary relationships. In order for a constructive trust to be applied in situations of breaches of fiduciary duties, the court imposed a four-part test that must be met: The defendant must have been under an equitable obligation in relation to the activities giving rise to the assets in his hands; The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff; The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties and; There must be no factors which would render the imposition of a constructive trust unjust in all the circumstances of the case. If the court is satisfied that all four factors are successfully met, a constructive trust will likely be granted. Taken together, these two cases illustrate that constructive trusts are a tool used by the courts to ensure no one unfairly profits from another’s contribution or where breaches of relevant duties are prevalent. Resulting Trusts Resulting trusts, though also an equitable remedy, differ slightly from constructive trusts. Resulting trusts operate on the assumption that people do not part with their property for free unless they clearly illustrate an intention to do so. More specifically, when someone transfers property without clear evidence of the property being a gift, courts will assume the transferee is holding it “in trust” for the original owner. To better illustrate resulting trusts, we can look at the Supreme Court of Canada decision in Pecore v. Pecore.[3] In Pecore, a father added his adult daughter as a joint holder of an investment account. On his death, she claimed the accounts by right of survivorship. However, her siblings argued that the funds belonged to the estate. The Court held that with transfers to adult children, the presumption of a resulting trust applies. Therefore, unless the daughter was able to show that the transfer of assets was a gift explicitly from her dad to herself, the property would revert back to the estate. Resulting Trusts – Ongoing Uncertainty in Regard to Beneficiary Designations The law is fairly clear when it comes to resulting trust presumptions in regard to transfers of property or joint accounts; however, the law is a little less clear with beneficiary designations on instruments like Registered Retirement Savings Plans (RRSPs), Registered Retirement Income Funds (RRIFs), Tax Free Savings Accounts (TFSAs), or life insurance policies. These are technically contractual or statutory arrangements and not necessarily “transfers” in the traditional sense. Therefore, the law has been contradictory and is unsettled as to whether the presumption of a resulting trust should apply in these situations. For instance, in Calmusky v. Calmusky,[4] a father named one of his adult sons as the beneficiary of his RRIF. After the father’s death, his other son argued that those funds should fall to the estate, as they would if the presumption of a resulting trust were to be applied. The Court held that the presumption of the resulting trust does apply to beneficiary designations, meaning that the designated beneficiary of an account would have to adduce independent evidence of a gift to rebut the presumption that the beneficiary was intended to hold the account for the estate. However, Mak (Estate) v. Mak,[5] departed from the Calmusky decision. Here, the dispute was over a similar beneficiary designation of an RRIF account. The Court rejected Calmusky’s approach, finding that beneficiary designations are governed by statute, specifically by Ontario’s Succession Law Reform Act.[6] The beneficiary in this scenario was directly entitled to the proceeds and, therefore, the presumption of a resulting trust was inapplicable. Subsequent court decisions have continued to be divided on this point; there is no clear common law on the applicability of resulting trusts to beneficiary designations. This leaves great uncertainty for legal professionals and the general public alike. This blog was co-authored by articling student Adriana Piccolo. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.” [1] [1980] 2 SCR 834. [2] [1997] 2 SCR 217. [3] 2007 SCC 17 [Pecore]. [4] Calmusky v. Calmusky, 2020 ONSC 1506 [Calmusky]. [5] Mak (Estate) v. Mak, 2021 ONSC 4415. [6] Succession Law Reform Act, R.S.O. 1990, c. S.26. By AlyssaBlog, Wills and EstatesNovember 24, 2025November 3, 2025
Do I Still Have a Claim? Continuous Contract Breaches and Rolling Limitation Periods In Ontario, the Limitations Act, 2002, S.O. c. 24 Sched B. imposes deadlines by which claims for damages, injury, or loss must be brought. Generally, the deadline or “limitation period” is two years from the date upon which the claimant discovers or reasonably ought to have discovered the wrongdoing (s.4 Limitations Act). Failure to commence a claim within the Limitation Period will result in the claim being statute-barred, meaning the claim cannot proceed. Often, contracts include continuing obligations which create uncertainty as to when the claim is discovered. If the claim involves ongoing obligations, such as recurring payments, does the claim arise when the first payment is missed, or does it arise each time a payment is missed? Where there is a continuous breach of contract, the court may apply a “rolling limitation” perio,d which allows the limitation clock to begin anew each time a new breach is made. The Courts have had difficulty identifying when a claim has been discovered and whether to apply a rolling limitation period or not. The Trilogy Pickering Square Inc. v. Trillium College Inc., 2016 ONCA 179 (“Pickering”) Pickering involved a lessee (“Trillium College”) and a lessor (“Pickering Square”). The terms of the lease required Trillium College to pay monthly rent, maintain the premises, and operate its business continuously throughout the term of the lease. When Trillium College vacated the premises, Pickering Square sued for failing to conduct its business continuously. The issue before the Court of Appeal was “when is a claim discovered for limitations purposes in the context of a continuing breach of contract?” Justice Huscroft’s analysis first assessed the nature of the breach to determine the discovery date. In determining the nature of the breach, the Court outlined three potential breach of contract situations: Failure to perform a single obligation due at a specific time Failure to perform an obligation scheduled to be performed periodically Breach of a continuing obligation under a contract. Justice Huscroft held that Trillium College’s breach fell into the third category. The rationale was based largely on contract law principles. Specifically in contract law, upon the default or breach of one party, the innocent party has two options: accept the breaching party’s repudiation and sue for damages; or affirm the contract, in which case both parties are required to fulfill their obligations. Justice Huscroft imposed a rolling limitation period, noting that Pickering Square affirmed the contract and each day that Trillium College failed to conduct its business continuously, a fresh cause of action occurred. This entitled Pickering Square to sue for damages for every day from two years prior to the claim being commenced. Marvelous Mario’s Inc. v. St. Paul Fire and Marine Insurance Co., 2019 ONCA 635 (“Marvelous Mario”) Marvelous Mario involved a bankruptcy of the company Bakemates Group of Companies (“Bakemates”). The appellants claimed for business interruption losses on the grounds that the receiver in bankruptcy stole or mishandled the property of Bakemates. On December 28, 2002, the receiver sold the Bakemates Group of Companies’ businesses. It was determined that at this time, the Appellants ought to have been aware of a claim under their insurance policy. However, the trial judge held that because business interruption losses are, by their nature, an ongoing claim, the rolling limitation period applied. Justice Hourigan of the Court of Appeal overruled this interpretation, finding that the business interruption losses were not subject to a rolling limitation period. Justice Hourigan attempted to clarify the analysis of rolling limitation periods, providing “the question is not whether the plaintiff is continuing to suffer a loss or damage, but whether the defendant has engaged in another breach of contract beyond the original breach by failing to comply with an ongoing obligation. In cases where there have been multiple breaches of ongoing obligations, it is equitable to impose a rolling limitation period” (Marvelous Mario at para 35). In Marvelous Mario, the business interruption losses were triggered by a single event, which began the limitation period for the insureds; just because they continued to suffer losses did not mean a new cause of action was created each time they suffered loss. Karkhanechi v. Connor, Clark & Lunn Financial Group Ltd., 2022 ONCA 518 (“Karkhanechi v. CCL”) Karkhanechi v. CCL involved a dispute regarding compensation upon termination. The Plaintiff (“Karkhanechi”) entered into a Partnership Agreement with the Defendants Connor Clark and Lunn Financial Group (“CCL”), which set out a payment structure for Karkhanechi. Upon termination, Karkhanechi sued, alleging breach of the post-retirement compensation agreement. The Court of Appeal attempted to reconcile Marvelous Mario and Pickering. Justice Paciocco began the rolling limitation analysis with first principles, asking “what is the nature of the breach”. To determine the nature of the breach, the question is not whether a continuing loss is suffered but whether the defendant has engaged in another breach of contract beyond the original breach (Marvelous Mario at para 35). Justice Paciocco clarified that “the material distinction is therefore between those cases where, in substance, the cause of action alleges a breach that gives rise to continuing loss or damage, and those cases where, in substance, more than one breach is being alleged leading to separate damage claims.” (Karkhanechi at para 27) In Karakhanechi, Justice Paciocco held that the breach of post-retirement compensation was a singular breach of the compensation agreement, which resulted in continuous losses. As such, no rolling limitation period applied, and this case was statute-barred. Post Trilogy This trilogy of cases attempted to clarify the law regarding rolling limitation periods. However, the distinction between whether a breach of contract resulted in continuous losses compared to recurring breaches of contract remained a hotly contested issue in litigation. The Court of Appeal was once again faced with the issue of a rolling limitation period in Spina v. Shoppers Drug Mart Inc., 2024 ONCA 642 (“Spina”). In Spina, the plaintiffs (the “Associates”) were franchisees of Shoppers Drug Mart (the “Franchisor”). A contract dispute arose as to whether the Associates or the Franchisor were entitled to professional allowances per new legislation. The Franchisor alleged that the Associates’ claims were statute-barred. The Associates argued that a rolling limitation period ought to apply. Justice Thornburn approved of the approach in Karakhanechi v. CCL, citing Richards v. Sun Life 2016 ONSC 5492 (“Richards”). Richards lends significant assistance to reconciling the discrepancies between Marvelous Mario and Pickering Justice Bale clearly sets out when recurring breaches result in a rolling limitation period at para 26. If the facts which give rise to a breach ought to be known by the plaintiff, it would be unfair to require a defendant to litigate those facts for a potentially unlimited time; but when the facts which give rise to a claim appear on a periodic basis, it is not unfair to impose a rolling limitation period and require a defendant to litigate those facts. The analysis requires a factual assessment of whether the breach of contract results in continuous breaches which give rise to a new cause of action upon each breach or whether the breach merely creates a continuous loss. In Spina, Justice Thornburn found that, given the trial judge’s findings of fact, the initial breach would have alerted the Associates to the continuous damage claims, thus no rolling limitation period applied. Conclusion The Court is hesitant to grant a rolling limitation period where continuous damages are evident immediately upon the breach of contract. Where a potential claim for damages exists, it is important to immediately consult a lawyer to preserve your rights. If you are in need of guidance as to your rights regarding potential litigation claims and limitation periods, please contact Graeme Oddy at Graeme.Oddy@devrylaw.ca or by phone at 416-446-5810. This blog was co-authored by articling student Jason Corry. This article is provided for general informational purposes only and does not constitute legal advice. Laws and interpretations can change, and specific circumstances may vary. Readers should consult with qualified legal counsel for advice tailored to their situation. By AlyssaBlog, LitigationNovember 17, 2025October 28, 2025
Directors, Don’t Panic: How the Due Diligence Defence Can Protect You from Corporate Tax Debts Directors of a corporation shoulder significant responsibilities in managing a corporation. The corporate veil will generally shield a director from personal liability by recognizing the corporation as a separate legal entity. However, under both the Income Tax Act and the Excise Tax Act, directors can still be held personally liable for unremitted source deductions or GST/HST owed by their companies. If directors can prove they acted with due diligence, they can be protected from being held jointly and severally, or solidarily liable for the corporation’s outstanding tax liabilities. The Legal Framework of the Due Diligence Defence Section 227.1(3) of the Income Tax Act and section 323(3) of the Excise Tax Act both set out the due diligence defence: directors will not be personally liable if they exercised the degree of care, diligence, and skill to prevent the failure that a reasonably prudent person would have exercised in comparable circumstances. Courts have interpreted this standard through a consistent line of cases. The burden of proof lies squarely on the director to demonstrate due diligence on a balance of probabilities. The defence is assessed on an objective standard, based on factual, detailed, and credible evidence of the steps taken to prevent the default. The defence must be based on preventative, not reactive measures. Directors who have taken active steps to avoid non-compliance will be excused from personal liability. Efforts made after the default has already happened will not excuse the non-compliance. Directors must act when they first become aware that the corporation is facing financial difficulties. Courts have held that reliance on experts, such as accountants or lawyers, may form part of a due diligence process, but directors cannot ultimately abandon their responsibilities to the corporation and play a passive role by relying on others’ assurances without independently confirming that statutory remittances are being made. A director’s sophistication or business experience can increase the objective standard expected of them. Where the director is a new business owner or Director, the Courts will grant a measure of flexibility, evaluating what a reasonably prudent person with similar experience could have done in the same situation. Although the Income Tax Act and Excise Tax Act refer specifically to “directors,” personal liability can also extend to “de facto directors”. These are individuals who, while not formally appointed, effectively act in a director capacity. Hamad v the Queen, 2019 TCC 137: A Blueprint for the Successful Use of the Due Diligence Defence In this case, Hamad was the CEO and director of RER Hydro Ltd, a company developing water-powered turbine technology in Quebec. This company received major funding from the Government of Quebec. In 2014, after a change of government, Quebec terminated its funding commitments. As a result, the company was insolvent, eventually declaring bankruptcy in 2015. The CRA assessed Hamad personally for over $15,000.00 in unremitted employment insurance contributions, insurance contributions, penalties, and interest for the period of June-August 2014. In response, Hamad raised the due diligence defence. Mr. Hamad’s actions showed what genuine due diligence looks like in practice. When the company’s funding collapsed, he called an emergency shareholders’ meeting to be transparent about the financial crisis and propose solutions. He pushed for an additional $3.1 million in shareholder investment, sought restructuring advice, and hired a consultant to help stabilize cash flow and manage financial planning. Further, he personally invested more than $4 million into the company to keep it afloat. Eventually, he made the difficult but responsible decision to lay off employees and seek protection under the Companies’ Creditors Arrangement Act to manage the company’s debts. In the end, management sold the firm’s assets to pay secured creditors, including the CRA. The court found that this was sufficient to demonstrate that Hamad took every reasonable step to prevent losses and act in good faith. Because the default stemmed from unforeseeable external factors, Hamad actively sought solutions and documented his actions, and because he was able to show continuous, good-faith oversight and preventative engagement, even if the company ultimately collapsed, the Court agreed he had met the requirements for the due diligence defence. Hirjee v. the King, 2023 TCC 4: Where the Due Diligence Defence Falls Short In this case, Hirjee was the sole director of 1621844 Alberta Inc., a company that operated 4 Bell Mobility Retail Stores in Alberta. The company ran into financial difficulties after Bell Mobility changed its commission structure, which reduced revenues and caused operating costs to exceed profits. Despite hiring a bookkeeper and external accountant to handle filings, the CRA still held Hirjee personally liable for approximately $375,000 in unremitted GST/HST. Hirjee argued he should be relieved of personal liability because he exercised due diligence by retaining a qualified professional to manage tax filings, and because his ability to act had been severely impaired by mental health challenges during the relevant assessment period. He argued that these factors satisfied his due diligence when measured against what a reasonably prudent person would have done in comparable circumstances. The Tax Court of Canada found that while hiring a bookkeeper and accountant were relevant to the analysis, it was not sufficient to establish due diligence. The Court recognized that serious mental illness could excuse liability when a director is incapable of understanding and discharging their duties. However, Hirjee’s condition did not meet that threshold. He was still capable of overseeing the business, signing filings, and taking active steps to prevent non-remittance. The Court emphasized that directors must take positive, preventative action to ensure statutory remittances are made, not merely rely on others’ expertise. Hirjee had exclusive signing authority over the company’s bank account, yet failed to delegate authority, appoint a replacement director, or establish a separate remittance account to ensure GST/HST funds were protected once he knew the business was struggling and that his mental health was declining. In the Court’s view, he failed to exercise the care, diligence, and skill of a reasonably prudent person in comparable circumstances. The due diligence defence, therefore, failed. The decision reaffirms that the due diligence standard is objective. Personal attributes such as inexperience, ignorance, or diminished capacity do not excuse a director’s obligations unless they render the individual truly incapable of fulfilling them. Conclusion The due diligence defence is a narrow safeguard against personal tax liability. It protects only directors who take concrete, preventative steps, not those who rely passively on others. Hamad shows how proactive leadership can succeed, while Hirjee shows that delegation without oversight is not enough. Diligence means action: stay engaged, anticipate risks, and document efforts to stay compliant. If you are in need of a tax law lawyer, please contact Graeme Oddy at Graeme.Oddy@devrylaw.ca or by phone at 416-446-5810. This blog was co-authored by articling student Mariem Naem. This article is provided for general informational purposes only and does not constitute legal advice. Laws and interpretations can change, and specific circumstances may vary. Readers should consult with qualified legal counsel for advice tailored to their situation. By AlyssaBlog, TaxNovember 10, 2025October 28, 2025
New Ontario Small Claims Court Monetary Limit As of October 1, 2025, the monetary limit for claims brought before the Ontario Small Claims Court will see a substantial increase, a change that will directly affect future litigants. Currently, claims can be commenced in Small Claims Court for amounts up to $35,000.00. Appeals from Small Claims Court to the Divisional Court are permitted only where the amount in dispute exceeds $3,500.00. However, beginning October 1, 2025, both limits are set to increase to $50,000.00 for new claims and $5,000.00 for appeals. What Does This Change Mean For You? Small Claims Court is commonly referred to as the “People’s Court.” This term has been used as Small Claims Court provides an accessible system to individuals with smaller monetary disputes. It contains simple procedural rules, lower costs, and theoretically faster timelines, which makes it a practical alternative to the Superior Court of Justice. In accordance with these advantages, the upcoming increase in monetary limits will further enhance the ability of the courts in Ontario to provide access to the justice system in a convenient, effective manner, as well as ensure claims under $50,000 can be litigated more cost-effectively. This increased monetary limit ought to mean that the burden on the Superior Courts of Justice should be slightly eased, which should enhance the efficiency of Ontario’s justice system. Practical Implications for Claimants When a litigant experiences a loss of $45,000.00, in order to keep legal fees within reason, the litigant may elect to commence the claim in Small Claims Court, thereby electing to reduce the claim by $10,000 for the sake of cost effectiveness and efficiency. With the revised monetary threshold now in effect as of October 1, 2025, that same litigant would now be able to advance their entire claim. Of course, if the claim is over $50,000, a litigant would have to conduct the cost-benefit analysis of commencing a claim in Small Claims Court versus the Superior Court of Justice. With this new monetary increase, litigants will have the option to wait until October 2025 to file and serve their claim, amend an existing Small Claims proceeding, or alternatively transfer their existing claim from the Superior Court of Justice to Small Claims Court. Amending Existing Claims If, as a litigant, you already filed and served a claim in Small Claims Court, you may be able to amend the claim filed after October 1, 2025. However, amending the claim will only be successful if: the amended claim is served on all parties, including any party noted in default; and the amended claim is filed and served at least 30 days before the originally scheduled trial date, unless the court, on motion, allows a shorter notice period or a clerk’s order permitting the amendment is obtained. If these requirements are not met, it will be unlikely that amending your current claim to fit within the new monetary limit will be successful. Transfer Your Existing Claim If you filed and served your claim with the Superior Court of Justice because your claim exceeded the current Small Claims limit ($35,000.00), you may be able to transfer your proceeding to the Small Claims Court as of October 1, 2025, provided it falls within the new monetary limit of $50,000.00. In order to transfer a claim successfully, important procedural steps are required to be taken: If all parties to the lawsuit agree to the transfer, you must: receive written consent from all parties; complete a requisition (Form 4E); file the requisition and written consent from all parties with the Superior Court of Justice; and pay the required fee. If all parties do not agree to the transfer, you can: bring a motion to the Superior Court of Justice to ask the court for permission to do so. Motions are costly, and you will have to weigh the costs of the motion vs the cost savings of proceeding to Small Claims Court, as well as the time and the likelihood of success of such a motion. While these changes are definitely for the better in making the courts more accessible to the people, the transition will undoubtedly have an impact on litigants in the short term. While litigants can and often retain counsel for Small Claims Court matters, the People’s Court is designed so that parties can attend as self-represented litigants to ensure that they are garnering the highest possible amounts for their claims, assuming their claims are successful. This blog was co-authored by articling student Adriana Piccolo. “This article is intended to inform. Its content does not constitute legal advice and should not be relied upon by readers as such. If you require legal assistance, please see a lawyer. Each case is unique, and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situations and needs.” By AlyssaBlog, LitigationNovember 3, 2025November 3, 2025
The 99th Year Anniversary of the Great Stork Derby Contest What if I told you, having the most babies in a decade could make you a millionaire? In 1926, this wasn’t a hypothetical; it was the premise of one of the most bizarre contests in legal history. This all began with a man named Charles Millar. Mr. Millar was a well-known and wealthy Toronto lawyer who practiced between the years of 1881 and 1926. His practice came to an end for only one reason: his death. On Halloween, 1926, Mr. Millar passed away. He never got married, had no descendants, and was pre-deceased by his parents. All of his monetary success was therefore left to his estate, with no relatives to inherit his fortune. Ironically, Millar’s passing on Halloween mirrored his character well. The eerie, unusual, and comically bizarre aura associated with Halloween appears to capture everything Mr. Millar embodied in life. Millar’s unique sense of humour can be demonstrated through the interesting and controversial bequests he left in his Will. In his Will, Millar curiously left his shares in a jockey club to gambling opponents and his shares in a brewery to religious leaders who were in support of Prohibition. Millar also left his house in Jamaica to three lawyers who despised one another on the condition that they own the property together. Through these playful and ironic bequests, Mr. Millar’s personality shines through, demonstrating his commitment to being a practical jokester. The most surprising bequest of all, and one that sparked significant debate, was Millar’s decision to leave the remainder of his fortune to the women in Toronto who gave birth to the greatest number of children in the 10 years following his death. This unusual bequest led to a contest where many Toronto women competed to have the most children within the specified time frame; this was termed the “Great Stork Derby.” This year, 2025, marks its 99th anniversary and is a reminder of how one unusual Will captured the whole city’s attention. In 1926, the contest held significant weight given the historical context of the time period. In the years following Mr. Millar’s death was the Great Depression, where unemployment rates reached 30% and many people were on government relief. At the time, Millar’s estate was worth about a million dollars, which equates to nearly 22 million dollars in Canadian currency today. Therefore, the money offered through Mr. Millar’s estate was viewed as especially promising and enticing during a time of monetary difficulty. This peculiar contest not only captivated the imagination of Torontonians but also sparked national conversation about the boundaries of philanthropy, legality, and social norms. Newspapers across Canada covered the unfolding drama, and the public was both fascinated and divided over Millar’s unconventional approach to distributing his wealth. The event highlighted the intersection of humour and hardship, as families weighed personal values against the lure of a life-changing inheritance. Many women went through challenging experiences to ensure receipt of the estate money. Some women risked their lives to give birth to their children; others lost their children in infancy. These struggles were important given the narrow definition of who was considered a “child” under the law and under the Will. Only “legitimate” children were eligible, leaving “illegitimate” children, including those born out of wedlock and stillborn babies, excluded. Therefore, multiple women who participated in the contest but gave birth to “illegitimate” children were disqualified and were not considered to be recipients of the estate money. In fact, as a response to the extreme measures women were willing to take in order to receive the prize money, the Ontario Government attempted to pass legislation against the Great Stork Derby bequest found within the Will. Despite multiple attempts to request the invalidity of the Will, the Supreme Court of Canada ruled that the Stork Derby was valid. Thus, despite the controversy, the contest ran its course. As the year 1936 approached, so too did the end of the Stork Derby contest. At this time, Toronto women who had borne the most children over the decade came forward to advance their claims. Ultimately, the prize money was split evenly between four mothers, Annie Smith, Lucy Timleck, Kathleen Nagle, and Isobel MacLean, each of whom had birthed nine “legitimate” children within the span of ten years. The extraordinary events of the Great Stork Derby have since been illustrated in both literature and film. The 1981 book The Great Stork Derby, and the 2002 movie illustration continue to engage audiences worldwide for being one of the most fascinating and unconventional moments in Canadian history. This blog was co-authored by articling student Adriana Piccolo. By AlyssaBlog, Wills and EstatesOctober 27, 2025October 23, 2025
