The Deemed Undertaking Rule in Ontario Litigation In television dramas, lawsuits often appear to move at an unrealistic pace, with a claim filed one day and the parties appearing in court the next. In reality, litigation is a highly structured and often lengthy process, involving multiple procedural steps before a matter ever reaches trial. One of the most significant steps that occurs prior to trial is the discovery process. Discovery allows counsel to uncover relevant information and narrow the issues in dispute. In order to promote a fair and equitable litigation process, discovery is governed by the Rules of Civil Procedure (the “Rules”). One of the key protections outlined in the Rules is the deemed undertaking rule. What is The Deemed Undertaking Rule? The deemed undertaking rule is codified in Rule 30.1.01 of the Rules. It provides that parties and their lawyers agree that the information and evidence (including documentary discovery, examination for discovery, inspection of property, medical examination, examination for discovery by written questions) obtained through the discovery process will only be used for the purpose it was collected and nothing further. Rule 30.1.01(3) specifically states: All parties and their lawyers are deemed to undertake not to use evidence or information to which this Rule applies for any purposes other than those of the proceeding in which the evidence was obtained. In Juman v Doucette, the Supreme Court of Canada interpreted the deemed undertaking rule and explained that it exists to protect privacy interests, including innocuous personal information that is neither confidential nor discloses any wrongdoing, while it also protects against self-incrimination and the efficient and fair conduct of civil litigation. Statutory Exceptions Under Rule 30.1.01 While the Rule is strict, it is not absolute. Rule 30.1.01(6) sets out express exceptions. Subrule (3) does not prohibit: a use to which the person who disclosed the evidence consents; the use for any purpose of, (a) evidence that is filed with the court; (b) evidence that is given or referred to during a hearing; (c) information obtained from evidence referred to in clause (a) or (b); the use of evidence obtained in one proceeding, or information obtained from such evidence, to impeach the testimony of a witness in another proceeding; the use of evidence or information in accordance with subrule 31.11 (8) (subsequent action); and if satisfied that the interest of justice outweighs any prejudice that would result to a party who disclosed evidence, the court may order that subrule (3) does not apply to the evidence or to information obtained from it, and may impose such terms and give such directions as are just. Can Discovery Evidence Revealing a Crime Be Disclosed to Police? Given the deemed undertaking rule, many people wonder whether information collected during the discovery process that reveals a crime was committed can be disclosed to police. Interestingly, the short answer is, no, not without a court order, except in truly exceptional circumstances. The Supreme Court of Canada in Juman affirmed that parties require a court order to disclose discovery evidence suggesting criminal conduct to police or other parties. Simply because a person being examined implicates self-incrimination, it does not amount to unnecessary disclosure. Importantly, though, in situations of immediate and serious danger, the applicant may be justified in going directly to the police without a court order. The onus will be on the person applying for the exemption to demonstrate on a balance of probabilities that the existence of public interest and protection outweighs the values that the deemed undertaking is designed to protect. Does the Deemed Undertaking Apply to Rule 30.10 (Non-Party) Documents? The production of documents from non-parties with leave is codified as Rule 30.10 in the Rules and states: 30.10 (1) The court may, on motion by a party, order production for inspection of a document that is in the possession, control or power of a person not a party and is not privileged, where the court is satisfied that, (a) the document is relevant to a material issue in the action; and (b) it would be unfair to require the moving party to proceed to trial without having discovery of the document. It is important to note that Rule 30.1.01 (1) specifically identifies Rule 30 as one of the provisions that triggers the deemed undertaking rule. As a result, information obtained through a Rule 30.10 motion is likely captured by Rule 30.1.01 (1). Rule 30.10 authorizes the court to order document production from a non-party where relevance and fairness are established. Importantly, this form of production is court-ordered and therefore compulsory, not voluntary. Accordingly, documents produced to a Rule 30.10 order should be treated subject to the deemed undertaking rule and the associated exemptions. “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.” This blog was co-authored by articling student Adriana Piccolo. By AlyssaBlog, LitigationMarch 9, 2026February 26, 2026
“Too Good to be True” Returns: Ontario Judge Orders Ponzi Investors to Repay Profits Ontario’s Superior Court of Justice has released an important decision in the bankruptcy of Hamilton resident Douglas Grozelle, who ran a large Ponzi scheme disguised as a high‑yield real estate lending business.[1] The ruling matters for anyone in Ontario who makes private investments or high‑interest loans, especially where returns seem unusually good. Background Grozelle raised money from 236 investors by promising short‑term “bridge loans” on real estate with fast repayment and very high returns. There were no real bridge loans or business profits as Grozelle simply used new investors’ money to pay “interest” and “profits” to earlier investors. Over $103 million flowed through his accounts between 2021 and 2023, and the scheme collapsed when he could no longer bring in enough new funds to satisfy existing investors. When the scheme stopped, 116 investors were left out‑of‑pocket by about $24.6 million, while 120 “net winners” had recovered all of their capital plus roughly $21.6 million in profit. Those profits ranged from modest returns to eye‑watering gains of up to 6,700% on principal. Grozelle went into receivership and then bankruptcy, and he and others now face criminal charges. The central issue in the bankruptcy was whether net winners could keep their profits while others recovered only a fraction of their original investments. The court‑appointed bankruptcy trustee, Grant Thornton, asked the court to order winners to repay only their profits, i.e., the amounts they received over and above what they invested, so those funds could be shared among the net losers. The trustee did not seek to claw back capital; winners would still be ahead of those who lost principal. Decision of the Court The court agreed and held that Grozelle operated a fraudulent Ponzi scheme that was legally insolvent from day one. In that context, every profit payment to winners was a “fraudulent conveyance” under Ontario’s Fraudulent Conveyances Act, because it was made with intent to “defeat, hinder, delay or defraud” other creditors. The judge emphasized that in a Ponzi scheme, there is no need to prove fraudulent intent separately for each payment; the structure of the scheme itself allows the court to infer that all such profit payments were made with that intent. Many investors relied on promissory notes that appeared to promise high but fixed returns for short terms. The court found those notes were largely useless as legal protection, as most were incomplete, unsigned, internally inconsistent, or promised criminally high (usurious) rates once annualized (up to 18,250% in some cases). Payments to investors bore little relationship to the notes’ terms and instead depended on what cash Grozelle had available when investors demanded money. The court treated the notes as marketing props rather than genuine evidence of a legitimate business and held that they did not justify keeping profits. Practical Takeaways for Investors The decision confirms that in a Ponzi scheme, there is no “good consideration” or “good faith” defence to keeping profits. While many investors were innocent and unaware of the fraud, the court found that no one provides real value in exchange for profits that are simply paid out of other victims’ capital. Innocent investors can keep their principal, but they cannot reasonably expect to keep gains that depend on others’ losses. For Ontario retail investors, the lessons are clear. Extremely high, “too good to be true” returns combined with vague or inconsistent explanations should trigger serious caution. Fancy‑looking promissory notes are not a guarantee of safety, especially if the underlying business model is opaque or implausible. And if an investment later turns out to be a Ponzi scheme, even innocent investors who came out ahead may face demands to return their profits so losses can be shared more fairly among all victims. If you wish to pursue an investment-related civil claim arising from breach of contract, unjust enrichment or fraudulent misrepresentation, please contact Unwana Udo to discuss and assess your options. [1] In the Matter of the Bankruptcy of Douglas Grozelle, 2026 ONSC 758 (CanLII) By AlyssaBlog, LitigationMarch 2, 2026February 25, 2026
Can an Estate Be Settled Before Someone Dies? Ontario’s Rules for POAs and Guardians Clients often ask whether an estate can be “sorted out” or “distributed early” while the testator is still alive, especially where a Power of Attorney (POA) or Guardian is already managing finances. Generally, a person may deal with their own assets freely during life as long as they have capacity, but no attorney or guardian has authority to pre-distribute an estate or settle testamentary gifts before death. Typically, estate distribution only legally occurs after death, through probate or small-estate pathways. While attorneys and guardians can manage property, sell assets, and spend funds for the incapable person’s benefit, they cannot make a will, amend a will, or wind up the estate during the person’s lifetime. However, there may be limited circumstances where a POA or Guardian can facilitate dispositions prior to a testator’s death. Can An Estate Be Pre-Settled Before The Testator’s Death? Under the Succession Law Reform Act (“SLRA”), a testator can revoke or alter a will while capable, provided revocation involves both intention and a physical act (e.g., destruction of the original document). Alterations require proper execution with signatures and two independent witnesses. This means that a capable testator can change their will to reorganize assets, make gifts, or sell property at any time, until they become incapable, signaling the end of testamentary autonomy. It’s important to note that while testators enjoy flexibility in distributing their assets , they cannot delegate the act of making or revoking a will to someone else. Can a Power of Attorney or Guardian Pre-Settle Before a Testator’s Death? Power of Attorney vs. Court-Appointed Guardian vs. Statutory Guardian (for Property) When considering substitute decision-making, it is essential to distinguish between a Continuing Power of Attorney for Property (“CPOA”), a Statutory Guardian, and a Court-Appointed Guardian, all governed by the Substitute Decisions Act, 1992 (“SDA”). A CPOA is a private, pre-incapacity instrument executed while capable and generally becomes effective during incapacity. Once in effect, the CPOA may do anything the incapable person could do regarding their property, with certain exceptions. If incapacity arises, the CPOA’s powers engage guardian-style fiduciary obligations, requiring property to be managed in the incapable person’s best interests. A Statutory Guardian arises automatically when incapacity is formally confirmed, either through a Mental Health Act certificate or through a capacity assessment leading to a certificate. Initially, the Public Guardian and Trustee (“PGT”) becomes guardian, but spouses, relatives, prior CPOAs or trust corporations may apply to replace the PGT with an appropriate management plan. A Court-Appointed Guardian, in contrast, requires a judicial finding of incapacity and necessity. Courts will refuse appointment where a less-restrictive alternative exists and may impose conditions, security requirements, or time limits on guardianship. Court appointments also carry the highest level of oversight and variation authority. Guardian’s Powers A CPOA or Guardian must exercise their powers diligently, honestly, and in good faith. This includes selling or charging property, severing joint tenancy, handling bank accounts, pensions, benefits, investments, collecting debts, paying bills, buying goods and services, starting or defending lawsuits, if there are financial implications, lending, selling, storing or disposing of personal property and maintaining or selling a house or vehicle. These powers come with limits; Guardians cannot make a will, and they cannot dispose of property that they know is subject to a specific testamentary gift in the incapable person’s will, unless it’s a specific gift of money (testamentary disposition). A Guardian’s authority ends if and when the person under guardianship passes. Guardian’s Distribution of the Estate Prior to Testator’s Death The SDA provides guidance for Guardians who choose to dispose of property that is given in a will. As previously mentioned, a Guardian of property cannot dispose of property they know is subject to a specific testamentary gift in the incapable person’s will, excluding gifts of money. However, where a Guardian disposes of property because it’s necessary to comply with their duties OR where the disposition is made to the entitled beneficiary in accordance with SDA s. 37, the SDA will permit the disposition, and the gift will be subject to abatement. To comply with SDA s. 37, a Guardian may only transfer assets to an entitled beneficiary where the expense is reasonably necessary for the incapable person’s care; for the care of their dependants; or to meet the person’s legal obligations. The expenses follow a clear priority. The incapable person and their dependants must be provided for first, before legal obligations are addressed. This effectively means that a Guardian is able to distribute money, or property, if the considerations in SDA s. 37 are met, to settle an estate prior to the testator’s death and administration of the estate. Legal Considerations Regarding Settlement There are additional legal considerations when these settlements are made. Under Rule 7.08 of the Rules of Civil Procedure, any settlement involving a party under disability requires court approval to become enforceable, regardless of whether a legal proceeding has commenced. The settlement may be valid when reached, but cannot be enforced until approval is granted. This means that even if the parties agree to a settlement, it will not be legally binding and enforced by the law unless it has been approved by the courts. If the person under disability dies before approval is sought, court approval may no longer be required where the settled contractual right survives to the estate. Bottom Line An estate cannot be pre-settled. However, there may be limited circumstances where distributions to beneficiaries can be made by POAs and Guardians. If you are navigating estate planning, incapacity, or a dispute involving a Power of Attorney or guardianship, obtaining early legal advice can help avoid costly missteps and ensure that legal and practical considerations are met to guarantee that any settlements you agree to are legally binding and enforceable. Our estate and litigation lawyers can assist. Contact us by calling 416-449-1400 or by emailing info@devrylaw.ca to discuss your situation. 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, Wills and EstatesFebruary 24, 2026
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
