Sharing The Holidays After Separation Holidays can be difficult for separated families. It may be impossible for the children to celebrate with both parents and their families or to have the most important time, that is, Christmas morning, with both parents. So how can separated parents divide up those special times? Doing so can be one of the biggest challenges after separation or divorce. When it comes to holidays, the first and most important consideration is that these are special times for the children too. Often they are even more special for the children than for the adults. The children do not want to spend these special times marked by fights among their parents. Especially fights where the child must take the side of one loved parent against another loved parent. That can ruin the entire special day or the entire holiday season for the child. Parents who love and want to protect their children must avoid fights over their children at these special times. It is always more important for the children to be happy than for a parent to be right. Of course, finding a fair plan for the children over the holidays can be hard. There are a few general principles that parents can use to help them make their plans. The Golden Rule for Parenting After Separation Where a judge has to decide what time the child gets to spend with each parent over the holidays, the main consideration is what is in the children’s best interest.What is in the best interest of the child always trumps what is in the best interest of the parent. What is best for the child can vary from family to family and can be affected by what is usual for the family. What is best for the children during these holidays and lockdown remains the focus of the Courts and should be the focus of every separated parent. Every Family Court Judge who has faced making a decision about parenting has commented about how the pandemic represents extraordinary times. It is an event that is having a profound impact on children, even children who are not in the midst of parenting conflict. Justice McGee noted that even young children will carry the residual emotions into adulthood, at which time those children will reflect back on whether their parents eased their fear and disruption, or whether their parents were focused on their own needs. How parents act during this difficult time not only sets an example for their children, but can affect their children’s development. It has never been more important to put children’s needs first and do whatever is necessary to avoid conflict – especially during the holidays. The Impact of the Pandemic Family Court Judges have also made it clear that it is essential for children to have relationships with both parents during the pandemic. Judges have repeatedly quoted Justice Pazaratz’s decision early in the pandemic in which his Honour said “In troubling and disorienting times, children need the love, guidance and emotional support of both parents, now more than ever.” Judges have specifically held that parents are expected to find ways for children to move between homes and spend time with both parents in a safe way. Only actual EVIDENCE, not speculation, that a parent is putting children at actual risk of harm will cause a judge to restrict parenting. As public health officials are saying everyone must limit contact with other people, it seems like it might be in the children’s best interest to stay in one spot and have contact with as few people as possible. Obviously, it would not be in the children’s best interest to engage in any activity that could put them at risk of infection. That certainly has impacted what parents are doing with their children on a daily basis throughout this crisis. However, the current view of parenting professionals and judges is that having contact with both parents is important to a child’s sense of well-being and healthy development. This means that seeing both parents is also in the child’s best interest. Children suffer when deprived of contact with their one of their parents. They suffer even more when there is conflict between their parents over things like the schedule. So, disturbing the current arrangements without your ex’s agreement could lead to some serious situations and repercussions, perhaps even serious consequences imposed by the judge down the road. To summarize, the decision that parents have to make is: is it in the children’s best interest to remain isolated with one parent, so as to avoid the chance of infection, or is it in the children’s best interest to spend time with both parents even if that means they will come into contact with other people? Again, a lot depends on the new specifics of the situation. If the children can go from one asymptomatic parent to the other parent through a method of travel that does not involve them coming into contact with a lot of other people, and both parents are not going to engage in behaviors that are currently considered risky or that could result in the spread of the virus, then there may be no reason to change the arrangements at all. What Judges Think is Fair During the Holidays Specifically with respect to the holidays, there are an abundance of decisions from Family Court Judges about what is fair. The following are what most Family Court judges expect: First, children should rotate where they wake up on Christmas morning or with whom they spend special events. Christmas is often the most problematic, but this can apply to any holiday or special event that is of particular importance to the family. Children should get the opportunity to spend this time with each parent. But keep in mind that for really young children, the fight may not be worth it. They may not know what day it is, so it may be possible to create a special time on any day. Second, where possible, traditions should continue for the children. This may conflict with the first point. But that is usually rather an opportunity to resolve the conflict than to create it. If for example, one side of the family has traditionally celebrated Christmas on Christmas Eve, and the other side on Christmas Day, it can be possible for the children to attend both family celebrations every year rather than miss one. Dinner on Christmas Day is not a prize to be won. Especially if it means ruining your family’s traditional Christmas Eve celebration. Be sensible and practical about how the children can maximize their celebrations. Third, holiday time is usually shared equally. As with the first point, the children are getting a good opportunity to experience the holidays with each parent and their families. There are some obvious exceptions to this, such as when such an arrangement is not safe for the children or where one parent has to work and cannot take advantage of the extra time with their children. Again, this division of time has to be what is best for the children. Fourth, for Christmas, parents often share the time from Christmas Eve to Boxing Day equally and then share the rest of the school break equally. For this special period, it makes sense for the special day to be divided and it can make no sense for one parent to get the entire week around Christmas and the other parent being shut out of Christmas entirely. Fifth, travel with the children is okay during the holidays as long as it does not interfere with the other parent’s holiday. There are steps to be taken when the other parent refuses to let you travel without good reason. Sixth, trying to give bigger or better presents than the other parents teaches the children to be manipulative. The children will play one parent against the other for the better gift when they know that their parent will fall for it. Seventh, just because you are angry or emotional about the holidays after your separation does not mean your children are feeling the same way. Although it can be hard, parents should try to make holidays a happy time for their children. The separation was not the child’s fault, so they have no reason to feel angry or guilty. Trashing the other parent around the holiday table or at any other time the children are present is never okay. Family court judges say that is bad parenting and even a reason to change custody or the parenting schedule. During the pandemic, things become more difficult when one parent decides that he or she does not want to follow the advice of public health officials. Or, when a parent insists on engaging in other risky behavior at this unusual time. Chances are that if a parent is going to engage in risky behavior now, they probably have engaged in it before and the parenting arrangements take that into account. If the arrangements do take that type of behavior into account, then no change may be necessary. However, if a parent is insisting on engaging with the children in activities that are clearly not in the children’s best interest in light of the advice and information from our public health officials, then changes may be necessary. The Ontario Courts have supported the directions from Public Health Officials. If a parent is going to disregard those directions, thereby putting a child at risk, the Family Court will intervene. But what most kids of separated parents want during the holidays is to be free from experiencing their parents fighting. Parents must put the children first, realizing that children need both parents and that COVID19 means that everyone has to be careful about making that happen. Taking the High Route Nothing ruins holidays for children like fights between their parents. It is one of the most psychologically harmful things parents can do to their children. As unfair as the other parent may be to you over organizing the holiday, exposing your children to conflicts over or about the holidays is more unfair to the children. If you cannot get matters sorted out before the holidays in or out of family courts, then it is much better to take the high route and save your children from the fight. Then take this to the judge or an arbitrator to fix it for the next holidays. The judge will appreciate that you put your child’s well-being ahead of your own and they will be displeased with any parent that uses their children as pawns over the holidays. Taking the high route can only lead to things working out better for you and your children in the long run. “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 situation and needs.” By Fauzan SiddiquiBlog, COVID-19, Family LawDecember 24, 2020July 29, 2021
New Extensions To Canada’s Working Holiday Permits DSF’s immigration law group is hopeful about a 2021 that will see increased immigration to Canada by skilled young workers to complement our labour force and fill necessary labour shortages. Canadian immigration strategies regarding the Express Entry process for permanent residence announced this fall aim to do just that. See our interview with Canada’s Minister of Immigration, Refugees, and Citizenship for more details about that. And even further measures were recently announced with respect to temporary work permits. On December 11, 2020, Canada’s immigration minister and Italy’s Minister of Foreign Affairs signed a new bilateral youth mobility agreement between Canada and Italy. This will see an expansion to existing work-and-travel opportunities between Canadians and Italians between the ages of 18 and 35. Click here – http://bit.ly/3mI78PN The International Experience Canada program allows citizens aged 18-35 of a number of countries to work in Canada under agreements that allow reciprocal opportunities for Canadians. Available work permit categories and lengths of time allowed per category in Canada depend on where the person is from. A full list can be seen here – http://bit.ly/38zrZzM Since 2006, Canada has had such agreements with Italy. The current agreement with Italy has allowed Italians to come to Canada for up to 6 months on Working Holiday work permits and to extend their stay for up to 6 months further as a visitor. The Working Holiday permit is an open work permit that allows the temporary foreign worker to work in Canada for any employer. Under the new bilateral agreement, expected to be ratified in 2021, the options available to Italians have increased to allow up to 12 month long initial permits with the possibility of extending for a further 12. This can provide crucial Canadian work experience to Italians considering applying for permanent residence down the road as such experience can provide points in Canada’s Express Entry process for permanent residence. The agreement also allows Italians to participate in the Young Professionals category, a closed work permit category that provides for employer specific work permits in professional jobs. This participation can prove further useful for those seeking eventual permanent residence as employer specific job offers may provide even further points in Canada’s Express Entry process for permanent residence. While the COVID-19 pandemic has created some roadblocks this year for IEC participants to come to Canada to commence work, the new bilateral agreement hints at a more hopeful and expansive 2021 for Italians seeking work and travel options to Canada. For more information contact immigration lawyer Maya Krishnaratne at maya.krishnaratne@devrylaw.ca “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 situation and needs.” By Fauzan SiddiquiBlog, COVID-19, ImmigrationDecember 23, 2020December 23, 2020
Shareholder Disputes: An Overview of Three Procedures to Achieve a Business Divorce While business partners will usually be totally optimistic at the time of start-up, it is important to provide for a solution to unresolvable disagreements. This post considers three different solutions by which business partners can go their separate ways. Each of these establishes a procedure whereby one shareholder can buy out the other shareholder(s) or force the other shareholder(s) to buy, or require the other shareholders to co-operate in a sale of all shares in the business. 1) Shotgun Provision The “shotgun” is the most commonly used provisions in shareholder agreements and works best with two shareholders, although it can work with more shareholders. Under this provision, one shareholder presents another shareholder with an offer to purchase all of the other shareholder’s shares in the business at a specified price. The other shareholder then has two options: i) sell all of the other shareholder’s shares in the business to the offering shareholder at the specified price; (or) ii) buy all of the offering shareholder’s shares in the business at the same price. This result is that the offering shareholder is either bought out or ends up owning 100% of the business. The shareholders’ agreement will usually, or should, set out all of the terms that will apply to any sale. There are some potential disadvantages of shotgun provisions. First and foremost, they are not ideal if there is disparity between the economic strength of the shareholders. If one shareholder has considerably more financial means than the other(s), a shotgun provision can result in a situation where a stronger party can effectively force a weaker party to sell shares to the stronger party for consideration below market value. Another issue to be considered is where one of the shareholders has considerable operating knowledge about the business that might put the other partner, especially a passive partner, at a disadvantage by having to step into managing the business when they have no past experience or contacts with the customers or suppliers. Furthermore, a shotgun provision may not be ideal in the early stages of a business. One party could choose to exit or force another party out before the business has gained much value. To avoid this, it is recommended that a provision be included in the agreement that states that the “shotgun” provision, or for that matter any similar provision, may not be exercised until after the business has been operating for a certain period of time, say three to five years. 2) Put option, with option to buy or cause sale of 100% of business One alternative to the shotgun provision is to provide the shareholders with a ‘put option’. This enables a shareholder (an “Offering Shareholder”) to request that the other shareholder(s) purchase the shares owned by the Offering Shareholder at a price specified by the Offering Shareholder. If the other shareholder(s) decide not to buy the Offering Shareholder’s shares, the Offering Shareholder has the option to buy the shares owned by the other shareholder(s) or cause the sale of 100% of the shares of the company. The advantage of this provision over the shotgun provision is that the Offering Shareholder cannot find himself forced to be the buyer. There is, however, still a risk that the other shareholder(s) may refuse to co-operate in a sale of 100% of the shares of the Company, however the agreement can contain penalties for refusal to co-operate. 3) Private Auction Provision Under a private auction, one shareholder can require that all shares in the business be placed on auction. Only the shareholders can bid at the auction. A minimum starting price and minimum bid increments can be set. The auction continues until one shareholder’s bid is accepted by the other shareholder(s) or the other shareholder(s) do not respond with a higher bid. Essentially this is a variation of the shotgun provision, that provides all shareholders with more control over the price at which shares in the business are ultimately bought or sold. The private auction also reduces the risk of stronger economic parties taking advantage of weaker economic parties because it increases the likelihood that a buyout will occur close to the market value of the shares. Summary There are a variety of provisions that can be used in shareholder agreements to govern shareholder buyouts or provide for the sale of a company in the event of a breakdown in the relationship between shareholders. To further discuss these provisions or other aspects of shareholder agreements, please contact our corporate law department to book a consultation. “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 situation and needs.” By Fauzan SiddiquiBlog, Corporate LawDecember 17, 2020February 22, 2024
Cannabis And Cars – Highs And Lows Of Defending A Driver That Consumed Cannabis In Tort Litigation Like alcohol-impaired driving, drug-impaired driving is a criminal offence. Cannabis-impaired driving can result in injury or death for the driver, passengers or others on the road including pedestrians and other drivers. Cannabis: impairs judgment impairs the ability to react increases the chances of being in a crash[i]. The combination of alcohol and cannabis can further exacerbate the impairment. In 2018, the Criminal Code of Canada was changed to allow possession of marijuana for recreational use but Bill C-46 created new criminal offences for driving while impaired by tetrahydrocannabinol (THC), the active ingredient in marijuana. These new offences are based on the level of THC in a person’s blood within two hours of driving. Alcohol The prohibited blood-alcohol concentration (BAC) is 80 milligrams (mg) or more of alcohol per 100 millilitres (ml) of blood. Cannabis (THC) There are two prohibited levels for THC, the primary psychoactive component of cannabis: it is a less serious offence to have between 2 nanograms (ng) and 5 ng of THC per ml of blood. It is a more serious offence to have 5 ng of THC or more per ml of blood. Combination of alcohol and cannabis The prohibited levels of alcohol and cannabis, when found in combination, is 50mg or more of alcohol per 100ml of blood and 2.5 ng or more of THC per ml of blood. Other drugs Having any detectable amount of LSD, psilocybin, psilocin (“magic mushrooms”), ketamine, PCP, cocaine, methamphetamine or 6-mam (a metabolite of heroin) in your system within two hours of driving is also prohibited. The prohibited level for GHB is 5mg or more per litre of blood since the body can naturally produce low levels of this drug. A challenge however, is that THC can sometimes be detected in a person’s blood even 30 days after they consumed cannabis. Impaired Driving Has Tort Implications While charges are not admissible evidence in tort litigation, criminal convictions are admissible evidence of wrongdoing. Accordingly, any criminal conviction is problematic to the defendant driver. Where there were no convictions, then the usual rules of negligence will dictate exposure. An area to consider when mounting a defence is to determine in what format was the cannabis consumed? For example, was it inhaled? Was it in the form of a baked good? A gummy? Was any alcohol consumed? What prescription medication was the driver taking? Different formats have different effects on different timeframes. When was it was consumed? During the car ride? 2 hours before the car ride? The night before? THC, the psychoactive ingredient, takes time to leave the system and its metabolized carboxyTHC takes even longer – some say it can even take up to a month. Accordingly, any test that is positive for carboxyTHC is arguably only evidence that cannabis had been consumed and not that the driver was impaired by cannabis. Assessing the impact of cannabis is far more complicated than assessing the impact of alcohol. While, alcohol levels are correlated to impairment, the same is not true of cannabis. Another area to consider once cannabis consumption has been raised is to determine the level of the driver’s impairment. What was the driver’s condition? Were the driver’s eyes bloodshot? Glassy? Pupils dilated? Did the driver have balance issues? Slurred speech? Confusion? Inappropriate responses? Delayed responses? Was the driver tired, sleepy? A final area to consider is whether the accident was caused by marijuana impairment or by some other factor. For example, was there poor lighting, was there black ice, did another driver do something that triggered the accident, did an animal jump out of the road unexpectedly etcetera. It may be there were other causes to the accident that had nothing to do with impairment. In order to defend a driver about the effect of the cannabis consumed, witness statements from everyone that had contact with the driver at the scene will be useful to determine whether or not the driver exhibited any evidence of impairment. A toxicologist expert will also be necessary to determine the levels of cannabis and the anticipated effects or lack thereof in the particular circumstances. An accident reconstruction may be considered as well. This area is developing. There have been criminal trials dealing with impairment, there have been labour decisions, human rights decisions and union arbitrations that are starting to consider and challenge the consumption versus impairment issues. I expect court decisions in the tort context will follow but the litigation process is longer and has been slowed down due to COVID. [i] Cannabis impairment – Canada.ca “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 situation and needs.” By Fauzan SiddiquiBlog, Cannabis Law, COVID-19, Insurance DefenceDecember 17, 2020March 13, 2024
Can I be summoned to pay my fiance’s child support in Ontario? Question: I am engaged to someone who already has kids from a previous marriage: 6, 13 and 14 years. If he defaults on his child support payment, will I be asked to pay his support? Will my income be factored in? How can I protect myself? – Advice Scene Child support is the right of the child and the obligation of the parent. So, the quick answer is no. But, like most things in the law, things can be more complicated than that.Child support is always payable by a biological or adoptive parent that has a child for 50% of the time or less (where there is “shared parenting”, the amount of child support can vary from the child support tables, but usually both parents paytable child support to each other). For more about how child support works watch this video and listen to this podcast.In Ontario, getting married does not mean you “own” your spouse’s assets nor does it mean you are responsible for their debts – including any debts for child support. Part 1 of Ontario’s Family Law Act covers property division on separation. For a full explanation of how that works, watch this video, and listen to this podcast. But to summarize, separated married spouses share in the increase in each other’s net worths, but not in the actual assets themselves. Common-law couple have even fewer property rights. So, if your fiancé is in debt to his ex for child support, that is not your debt.However, unfortunately, that may not be where it ends. Your fiancé’s child support debt could end up being your problem too.First, with regard to property division, if you separate, you share in the increase in your spouse’s net worth. If you are married to your spouse, and he builds up a child support debt, that debt decreases his net worth. So, on separation, his net worth is lessened by the amount of that child support debt. Since, on separation, you essentially get half of his increase in net worth (and he gets half yours), any debt he reduces is how much you will get by half of the value of that debt. So, you end up indirectly paying half of that child support debt because of the decrease in what he shares with you. If you have a greater increase in net worth during the marriage, you would owe him an “equalization payment”. So, if his net worth is decreased by child support debt, how much you owe would be increased by half the amount of that debt. In that case, you are, indirectly, paying half of that child support debt. These types of debt problems, which can have very unfair results, can be fixed with a marriage contract. Click the link to see a video on how to use a marriage contract to avoid sharing your spouse’s debts. You could have a contract that says your spouse’s child support debts will not affect the property. Equalization if you’re separate.There is another way child support for your spouse’s kids can become your problem. I noted that child support is the obligation of parents. That can mean more than just biological or adoptive parents. While biological and adoptive parents always pay full table child support, other people who have acted as a parent to a child can be on the hook for child support too. That means that, as a step-parent, you could end up owing child support to your spouse’s ex. Listen to this podcast that explains more. This does not mean you share in your spouse’s child support obligation, but it means you have your child support obligation for the kids. As explored in this video from a high-profile new story, acting as a parent to someone else’s kids can create a child support obligation – especially where you do it with the best motivations.So, while you are not directly responsible for your fiancé’s child support, you could end up sharing in that debt if you separate from him after getting married if he owes back child support. You could also end up owing child support yourself if you act like a parent to his kids. “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 situation and needs.” By Fauzan SiddiquiBlog, Family LawDecember 17, 2020June 24, 2021
The Importance Of Legal Writing And How To Do It There is perhaps no course in law school that is more important than Legal Writing. The reason is that legal writing is the central medium with which a lawyer communicates his or her work. The most brilliant legal mind will have a difficult time in the legal profession, if their writing skills are not on par with their ability to effectively read, research, analyze, and reason about the law and the facts of the case. Effectively communicating one’s work is key at every stage of a lawyer’s career. As a student-at-law, it will be a daily task to report to a supervising lawyer on the research conducted that day, or to prepare the first draft of a Small Claims Court claim, or to present a summary of a file, or to write a blog for the firm’s website about a recent case. The successful performance of all of these tasks will depend on the legal writing skills of the student. If you can effectively communicate in written form, your reader will fully comprehend your analysis without having to retrace all of the steps you needed to take to get to your conclusion. You will save your supervisor time and effort, and you will establish yourself as a professional who is ready to excel as a lawyer. At a later stage of the career, it will often be the client or the court composing the audience of the lawyer’s writing. The reports to clients, the drafts of contracts, and the pleadings submitted to court are a lawyer’s portfolio. To a large degree, they form the basis on which the lawyer’s ability will be assessed and judged. A lawyer’s reputation stands and falls to quite an extent with what they produce in writing. A pleading that wins over the court or a report to a client that presents the solution to their problem clearly and succeeds in guiding their action is the goal every lawyer works toward. How can it be done? The most important maxim for legal writing is this: begin with your main point. Legal writing is not about building suspense. Usually, someone comes to a lawyer for an answer, and they would like it straight away. They do not care to puzzle out the answer from a disorganized pile of information. Be clear, comprehensive, and concise in offering complete and correct information. Leave out irrelevant remarks that merely divert the focus of what is important. Keep your audience in mind when determining how much detail is required to make yourself understood. It can be helpful to remind yourself that you are attempting to advise, or persuade, as the case may be, and not to write a work of literature or poetry. Secondly, take the time to edit what you have written, ideally more than once. Every mistake in spelling or grammar will make your reader stumble for a moment, pause, and perhaps reread the sentence. Such an interruption takes away the focus from the argument you were trying to make and it will inevitably leave the impression of a lack of care and, if repeated too often, of competence as well. If flawless grammar and spelling are not what law school teachers commonly praise your work for, there is still hope. In the 21st century, the technology exists to mitigate such deficiencies. Much of such software is free and user-friendly. Nevertheless, it may be good advice to attempt becoming comfortable with the vocabulary, style, structure, and tone of voice lawyers use daily. The obvious way to hone this skill is to read court decisions, legal journals, and other relevant and quality materials. Of course, polished legal writing skills do not come overnight. Seize every opportunity to practice. If you get the opportunity to work under the supervision of an experienced lawyer and draft legal documents for him or her, make sure to read the final, edited product, so you can see what changes were necessary and what you can improve. If you are still in law school, do take a course on legal writing. It will without a doubt have a notable effect on your performance in every other class and on your proficiency as a legal practitioner. “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 situation and needs.” By Fauzan SiddiquiBlog, Corporate LawDecember 10, 2020December 10, 2020
What Should I do if I’m in a Car Accident? Ontario is governed by a “no-fault” scheme of insurance for things like covering the damages to your vehicle and providing you certain benefits (“accident benefits”) to pay for physical treatment, replace a portion of your missed income, and provide reimbursement for attendant care expenses. Other Canadian provinces have their own, similar versions of this. If you’re in an accident, the first thing you should do after reporting it to the police and/or a local collision reporting centre and seeking medical attention is to call your insurance company. Your insurer can advise you about the next steps for repairing your vehicle and seeking accident benefits. There may be an inclination to seek the advice of a personal injury lawyer if you were injured. But you might also be concerned you are at fault for the accident and wonder how to protect yourself against future claims. If you think you may be at fault, it is possible that other people who were injured in the incident will bring a claim against you in the future. In most cases, they have two years to do so, though sometimes they will do so well before that and in other cases may have reasons for doing so later than that. It is wise to consider gathering names and information of witnesses who may have observed the incident, particularly if they can speak to details that may suggest you are not at fault, or not fully at fault. For example, if you were making a left turn when the collision happened, it would be useful to know if any witnesses observed the other car coming through on a red light as you were making that turn. If you feel there were outside factors that contributed to the accident, like the actions of another driver, poor lighting conditions, or the like, make note of these things too and report them to your insurance company. They may decide to make further investigations and gather evidence that could be helpful down the road if you are sued. It can be difficult gathering this information as time passes. Consider taking photos of the scene of the accident if possible and of your vehicle. Accidents happen and it can be overwhelming if you’re both injured and concerned about claims against you. Reporting important details to your insurance company and keeping records of those details yourself can help you maintain a solid defence should claims arise against you. For queries regarding insurance defence, please contact our Personal Injury lawyers at 416-449-1400. “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 situation and needs.” By Fauzan SiddiquiBlog, Insurance DefenceNovember 27, 2020March 18, 2024
Failure To Close An Agreement Of Purchase And Sale In The Context Of COVID-19 The COVID-19 pandemic has lead to noticeable changes in the real estate market in the GTA as well as to a general recession, according to Statistics Canada. While detached houses and living space in the suburbs in general increased in value, smaller living spaces such as condominiums are in very low demand. Purchasers who entered into an Agreement of Purchase and Sale (APS) may no longer be able to secure financing for the property. This may be due to the recession and/or the purchaser’s loss of employment between signing the APS and the closing date. The consequences of a failure to close on an APS were previously addressed in detail here. Consequences of failure to close In brief, the consequences for the purchaser who fails to close are as follows: the purchaser will likely forfeit their deposit; the purchaser may also be liable for the difference in value between the purchase price agreed upon in the APS and the re-sale price the vendor can obtain, less the amount of the forfeited deposit; the purchaser furthermore can bear liability for the vendor’s costs until the re-sale, for example, gas, hydro, taxes, etc. as well as interest and other consequential losses the vendor suffered if the vendor was relying on the money from the purchase to buy another property. Legal considerations A change in the market conditions or loss of employment does not constitute a legally valid reason not to fulfill the obligations arising from the APS. Generally, there is no frustration of contract or force majeure at work. Frustration A contract is frustrated when a supervening event has occurred after entering into the contract, without the fault of either party, which renders the performance of the contract substantially different than the parties had bargained for (Bang v. Sebastian, 2018 ONSC 6226). The event must have been unforeseeable. The courts have held that parties to an APS know that market prices can go up and down. While the magnitude of the downturn may have been unexpected, that does not render it unforeseen. It also does not alter completely the nature of the APS (Paradise Homes North West Inc. v. Sidhu, 2019 ONSC 1600). Force Majeure In Paradise, the purchaser also argued the defence of force majeure. The court did not assess the merits of this defence. In fact, this defence is rarely litigated. One reason is that there is no common law doctrine of force majeure. This defence can only be brought forward if the contract explicitly provides for it. Such a clause would often provide that the parties are relieved from their contractual obligations when an unexpected, external event has occurred that prevents the parties from performing their obligations. Recent Case Law The recent Ontario case law concerning breach of an APS in the COVID-19 context does not address the defence of force majeure. Since there is no common law doctrine of force majeure and given its relatively low success rate in courts, frustration is predominatly the defence of choice. However, frustration, has not yet been found to relieve a party from the obligations of an APS due to the ongoing pandemic. Two cases before the Superior Court of Justice are illustrative. In FSC (annex) Limited Partnership v. Adi 64 Prince Arthur L.P., 2020 ONSC 5055, a commercial real estate case concerning a condominium project in Toronto, the respondent argued that difficulties obtaining financing during the COVID-19 crisis frustrated the shotgun provision under which the respondent had previously elected to purchase the applicant’s interest in the project. This argument failed. While this case is not a classic APS case, it still clearly demonstrates that the court is not easily persuaded that a recession justifies a finding of frustration. The court said: “If decreased liquidity was tantamount to frustration, it would mean that a large number of contracts for which parties required financing would be frustrated in every recession.” The second case relevant in this context is Burrell v. Burrell, 2020 ONSC 3269. In this case, one of the selling spouses unilaterally decided to refuse to sign the closing documents for the former matrimonial home in the course of the divorce, calling upon the pandemic and the health risks the moving arrangements would involve. The court found that the spouse’s argument would not render litigation successful with the purchasers of the house, implying that the APS would not be frustrated due to the pandemic’s health risks. Therefore, the other spouse was permitted to sign the documents for both spouses, so that the obligations under the APS would be honoured. Lessons to be learned The ideal course of action is to include a clause in the APS that makes the APS contingent on the purchaser’s ability to obtain the necessary financing to close the transaction. In the reality of a competitive real estate market, this option will not always be available to the purchaser. A second option, subject to the same flaw, is to include a force majeure clause in the APS. This needs to be individually negotiated because most real estate agents use the Ontario Real Estate Association’s (OREA) standard APS form for residential transactions, which does not include a force majeure clause. Furthermore, the effects of COVID-19 are raising novel issues that have not yet been fully canvassed by courts, and whether such a clause would be successful in allowing a purchaser to pull out of an APS due to financing issues or other issues relating to COVID-19 would remain to be determined. As mentioned above, the precise language will be important when the buyer has to convince the court that performance was truly impossible and that COVID-19’s impact on the real estate market was unforeseeable. If you require legal advice on a commercial litigation matter, such as the above, feel free to reach out to DSF lawyer Stephanie Turnham under 289-638-3182 or stephanie.turnham@devrylaw.ca “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 situation and needs.” By Fauzan SiddiquiBlog, Commercial Litigation, COVID-19November 27, 2020December 17, 2020
How Section 116 of the Income Tax Act Can Affect Your Real Estate Transaction Overview When real property is sold by a non-resident of Canada, both the buyer and seller and their advisors should turn their minds to the provisions of section 116 of the Income Tax Act (the “ITA”). These provisions impose obligations and liability on both the buyer and seller, which should be addressed well before the date that the transaction is scheduled to close. In brief, section 116 of the ITA provides that a non-resident seller may notify the Canada Revenue Agency (CRA) of a proposed disposition of property, such notice setting out, among other things, the estimated amount of sale proceeds to be received, as well as the adjusted cost base of the property. This notice must be given using form T2062, “Request by a Non-Resident of Canada for a Certificate of Compliance Related to the Disposition of Taxable Canadian Property”. If the non-resident has not given such notice to CRA prior to the completion of the transaction (or if the notice was given but the details surrounding the transaction have since changed), the non-resident must notify CRA of the disposition no later than 10 days after closing. In the event that the non-resident seller fails to do so, the seller may have to pay a penalty of up to $2,500, even if the sale of the property does not result in any tax owing. Once CRA has received the non-resident seller’s notice and processed the request for a Certificate of Compliance, CRA will advise the seller of the amount of tax required to be paid and will issue the Certificate of Compliance upon receipt of payment. If no Certificate of Compliance has been issued, section 116 provides that the buyer will be liable to pay 25% (or 50% in some cases) of the purchase price to CRA on behalf of the seller, within 30 days after the end of the month in which the property is acquired (“Remittance Deadline”). The buyer will be entitled to withhold this amount from the purchase price for the purposes of remitting this payment. The Ontario Real Estate Association (OREA) standard form Agreement of Purchase and Sale, used in most residential real estate transactions in Ontario, contains a “residency” clause that is intended to address the requirements of section 116 of the ITA. The Holdback In most cases, the Certificate of Compliance will be issued by CRA after the transaction has been completed, as the tax is normally paid out of the proceeds of the sale. This means that the buyer’s lawyer will have to withhold 25% of the purchase price (or 50% for certain types of property) in trust (the “Holdback Amount”). As the Certificate of Compliance may not be available prior to the Remittance Deadline, the non-resident seller may request a ‘comfort letter’ from CRA which will allow the buyer’s lawyer to continue withholding the Holdback Amount in trust beyond the Remittance Deadline, until otherwise instructed by CRA. Once CRA has advised both parties of the amount of tax payable, the tax can then be paid from the Holdback Amount, and upon the issuance of a Certificate of Compliance, the balance of the funds can then be released to the seller. Accordingly, by applying for a Certificate of Compliance well in advance of the closing date and requesting a comfort letter, the seller may be able to avoid a situation where the entire Holdback Amount is remitted to CRA by the buyer, and avoid having to wait until the seller’s tax returns are filed in order to reconcile this amount with the tax payable as a result of the sale. Buyer’s Liability and “Reasonable Inquiry” into the Seller’s Residence Status If the buyer could have or should have known that the seller is a non-resident, or did not take reasonable steps to investigate the seller’s residence status, the buyer may be liable under section 116. The buyer will not be liable, however, if, after making reasonable inquiry, the buyer had no reason to believe that the non-resident person was not resident in Canada. In a typical purchase and sale transaction, a buyer relies on a statutory declaration made by the seller that the seller is not a non-resident of Canada for the purposes of section 116 of the ITA. In certain circumstances, this declaration may not be available, making it challenging for the buyer to ensure that they are not exposed to liability under section 116. Where a property is being sold by a mortgagee under the power of sale, for example, the registered owner of the property is generally not involved or is uncooperative, and the mortgagee will likely not make any representations or warranties in the agreement of purchase and sale with respect to residency. It is then up to the buyer to make ‘reasonable inquiry’ of the seller’s residence status. What constitutes ‘reasonable inquiry’ is highly circumstantial. In Kau v The Queen, 2018 TCC 156, the buyer of a condominium unit in Toronto was held liable for over $90,000 of tax under section 116 after the Tax Court of Canada determined that he failed to make reasonable inquiry as to whether the seller, who lived primarily in California, was a non-resident. This was despite the fact that the buyer’s lawyer had received a signed but unsworn statement from the seller, in which the seller stated that he was “not a non-resident of Canada within the meaning of section 116 of the Income Tax Act (Canada) and nor will [he] be a non-resident of Canada at the time of closing.” The Court held that this unsworn statement was insufficient to satisfy the purchaser’s obligation to make a reasonable inquiry. The court further held that what is reasonable will be fact-specific. In Kau, the purchaser was aware that the seller owned the unit as an investment property and should have noticed that the seller had an address for service in California. Therefore, in those circumstances, the purchaser should have required more than an unsworn statement to confirm that the seller was not a non-resident. The court noted that the outcome would likely have been different had the seller made such a statement in a solemn declaration or under oath. When the residence status of the seller is unclear, and no assurances are provided by or on behalf of the seller, a prudent buyer may try to err on the side of caution by withholding 25% of the purchase price and remitting the funds to CRA. However, section 116 only entitles the buyer to withhold funds if the seller is in fact a non-resident, and not simply because the buyer has not been able to confirm the seller’s residence status. In these circumstances, it is important for buyers to seek legal advice to ensure that their obligations under section 116 are adequately addressed prior to entering into a binding Agreement of Purchase and Sale. There are some exceptions to the above, and how section 116 of the ITA applies will vary depending on the type of property being disposed of and the circumstances surrounding the transaction. The buyer and seller should consult with their respective lawyers regarding their particular transaction. “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 contact a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, Real Estate, TaxNovember 27, 2020March 20, 2024
Estate Freeze – What Is It and What Does It Do? An estate freeze fixes the value of the asset that is frozen, such as shares of a corporation, in the hands of the owner until the time of death, allowing the freezor to calculate the expected tax liability that arises on death. In the usual course of business, the deceased will be deemed to have disposed of all capital assets immediately prior to death at their fair market value determined on that date. The tax, which is now imposed on one-half of the capital gain is based on the difference between the cost base of the relevant asset and its fair market value at the date of death. Without the estate freeze, the amount of the gain would be expected to increase over time. A further benefit of an estate freeze is the accrual of the post-freeze growth in value in the hands of other persons, usually the owner’s family. This makes the estate freeze an effective way of transferring value to the future generation, and hopefully, defer the tax that would accrue on the future growth to the time that the asset is sold by the persons who are to benefit from the future growth. Under certain circumstances, the receiving family member may be able to claim the lifetime capital gains exemption, so that the tax-saving based on that exemption can be multiplied among several family members when the shares the family member receives in the course of the estate freeze transaction qualify as shares of a “qualified small business corporation”. The estate freeze is also worth considering when the market is experiencing a low, as is the case during the ongoing Covid-19 pandemic. This would permit the owner/parent to fix the capital gain at a lower value, attracting less tax on death. A subsequent increase in value is passed on to the beneficiaries of the freeze. However, care needs to be taken that the value of the assets is not too low at the time of the freeze, as the current owner may wish to retain a reasonable amount of value. The balance that needs to be achieved will depend on the amount of the asset value to be frozen, the age of the freezor and a number of other factors that may be of importance to the person who is implementing the freeze. One size does not fit all. If you have any questions related to tax or business law matters, please contact our Tax and Wealth Planning lawyers at 416-449-1400 to book a consultation. The Firm Devry Smith Frank LLP is the largest full-service firm outside of the Toronto downtown core with additional offices in Barry and Whitby. DSF offers its clients a wide range of legal services including litigation, business, real estate, employment, and family law-related services. The firm is comprised of over 175 lawyers with vast expertise and experience. “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 contact a lawyer. Each case is unique and a lawyer with good training and sound judgment can provide you with advice tailored to your specific situation and needs.” By Fauzan SiddiquiBlog, TaxNovember 4, 2020April 3, 2024