Robins Appleby

Commercial Tenant Cannot Rely on Force Majeure Clause to Excuse Non-Payment of Rent during Pandemic

Samuel Mosonyi and Amelia Briggs-Morris

n a recent Ontario Superior Court of Justice decision, Durham Sports Barn Inc. Bankruptcy Proposal2020 ONSC 5938,Justice Gilmore held that a commercial tenant could not rely on the force majeure clause in its lease to excuse non-payment of rent during Ontario’s shutdown of non-essential businesses in response to the COVID-19 pandemic.

force majeure clause in a contract excuses a party from performing certain contractual obligations due to circumstances beyond its control rendering the performance of such obligations impossible, for example, due to a natural disaster, an act of terrorism or an epidemic.

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Robins Appleby

Supreme Court of Canada Decision: When Silence can be Deceptive

Samuel Mosonyi and Dominique Michaud

The Supreme Court of Canada recently clarified the duty of honest contractual performance in C.M. Callow Inc. v. Zollinger. In a nutshell, the Supreme Court has clarified that silence, omissions, and half-truths can be deceptive and a breach of the duty of honest contractual performance. The remedy to such a breach is damages that place the injured party in the same position as if the breach had not occurred.

While the duty of honesty is not a new concept in the realm of contract law, this case helps to define the scope of that duty.

Callow builds on pre-existing case law that establishes a duty of good faith in contractual performance and extends this duty to circumstances where a party knowingly misleads a counterparty or fails to correct the counterparty’s mistaken assumptions. The leading case on this duty prior to Callow was the Supreme Court decision in Bhasin v. Hrynew, which discussed an organizing principle of good faith that parties must perform their contractual duties honestly, and that a contracting party should have appropriate regard to his counterparty’s legitimate contractual interests.

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Robins Appleby

COVID-19 Litigation – SUPPORTING ONTARIO’S RECOVERY ACT, 2020

Darrell Gold and Samuel Mosonyi

My last two articles have been about the CERS program which provides a subsidy to commercial tenants, as well as Bill 229 which is now law, which provides a commercial tenant with protection (until a date to be determined) from eviction and distraint by its landlord for rent default.

In addition to that legislation, on November 20, 2020 Bill 218 received Royal Assent and is now in force[1] and statutorily bars causes of action (subject to certain exceptions discussed below) by a “person” arising from infection by or exposure to COVID-19. This is important to most workers/employers and for the purpose of this article, those in the Real Estate industry be it landlord, property manager, tenant, real estate broker or agent.

The Purpose for the Act

According to the Ontario parliamentary debates (the Hon. Doug Downey – Attorney General), the Act is intended to afford protection from lawsuits to “thousands of Ontario workers, employers, volunteers, non-profits and other organizations who make an honest effort to follow public health advice, follow public health guidance and law as Ontario responds to the COVID-19 pandemic” and who by doing so, “…risk significant liability in the event of transmission to third parties”.

Loss of Right to Sue for Exposure to or Infection with COVID-19

The prohibition on causes of action applies where the exposure or infection arose on or after March 17, 2020 as a direct or indirect result of an act or omission of the person if:

  1. at the relevant time, the person acted or made a good faith effort to act in accordance with,
  1. public health guidance relating to COVID-19 that applied to the person, and
  2. any federal, provincial or municipal law relating to COVID-19 that applied to the person; and

(b)        the act or omission of the person does not constitute gross negligence.

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Robins Appleby

Zombie Deeds: The Dead Cannot Be Resurrected

Samuel Mosonyi, Ellad Gersh, Heela Donsky Walker, and Ladislav Kovac

A legal decision rarely begins with a discussion of magic and bringing back the dead. But that is precisely how a recent Superior Court decision begins on a complex issue involving “zombie deeds”: Thompson v. Elliott Estate.

A “zombie deed” is when an owner of property signs an Acknowledgement and Direction to transfer land, and the transfer is registered following the owner’s death. It is sometimes used (improperly!) as an estate planning technique in an attempt to avoid estate administration tax (also known as probate). However, lawyers and individuals considering the use of a zombie deed should be aware that this tool is prohibited by Ontario law. The Thompson decision confirms that a zombie deed is an improper way to transfer property, in part because it requires the lawyer who completes the registration to make a fraudulent representation that the owner of the property is still alive.

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Robins Appleby

Government of Ontario Clarifies COVID-19 Leave Rules for Employers

Barbara Green and Samuel Mosonyi.

On Friday, May 29, 2020, the Ontario government passed a new regulation (O. Reg. 228/20) under the Employment Standards Act, 2000 that made a fundamental change to the rules governing employees who had lost work or had wages reduced as a result of COVID-19.

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Robins Appleby

Court of Appeal confirms additional protections for contractors in construction projects: Urbancorp Cumberland 2 GP Inc.

Ellad Gersh and Samuel Mosonyi.

This is a significant decision for contractors and for project owners, particularly in the COVID-19 world, in which the financial viability of construction projects is more and more uncertain.

The Ontario Court of Appeal recently considered protections for contractors in construction projects where the owner becomes insolvent in Urbancorp Cumberland 2 GP Inc. (Re). Specifically, the Court of Appeal considered whether section 9 of the Construction Act applies when the owner becomes insolvent.

The Cumberland Group was a residential condominium developer that consisted of a number of related entities. These entities owned unsold condominium units in a project that they had constructed. The appellants were contractors who had supplied work and material to these units and they were owed significant amounts by the Cumberland Group.

The Cumberland Group became insolvent under the Bankruptcy and Insolvency Act and were later afforded protection under the Companies’ Creditors Arrangements Act (CCAA). A monitor was appointed over the Cumberland Group entities under a CCAA order. The monitor sold the condominiums in the project on behalf of the Cumberland Group, and used the proceeds as follows:

  1. To fund the insolvency proceeding and repay financing; and
  2. Excess proceeds of the sale were placed into bank accounts opened by the monitor in the Cumberland group entities’ names.

Section 9 of the Construction Act provides that where an owner’s interest in a premises is sold by the owner, a trust arises over that amount after payment of reasonable expenses by the vendor arising from the sale or to discharge any mortgages on those premises.

The Court of Appeal concluded that the excess sale proceeds in the Cumberland Group’s bank accounts were subject to the section 9 trust and found that there was no conflict between this provision and any federal legislation. Section 9 was valid provincial legislation as it “protected the rights and interests of those engaged in the construction industry and to avoid the unjust enrichment of those higher up the construction pyramid”.

In the circumstances of this case, the Court of Appeal found that the monitor sold the “owner’s interest” in the premises and that the requirements of the trust had been met. Therefore, the funds in the sum of nearly $3.9 million were impressed with a trust in favour of the contractors on a pro rata basis.

This decision is significant because it provides additional protection to contractors working on major construction projects. There are strong policy reasons to protect contractors in such a manner, as otherwise this would impose an unfair burden on contractors to either assess the financial viability of a construction project before commencing their work or take on undue risk in proceeding with construction of a project that could become financially insolvent, thereby leaving them without proper security or recourse.

However, the Court of Appeal cautioned that, depending on the nature of the sale and other factors, the trust may not attach and protect the contractor. Ascertaining whether the trust attaches can be a complex matter, and contractors and owners alike should consider retaining legal counsel for an opinion on this topic.

Original post here.

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Robins Appleby

Legal Urgency in the time of COVID-19

Ellad Gersh, Philip Holdsworth, and Samuel Mosonyi.

If you have an urgent civil or commercial legal matter during the COVID-19 state of emergency, this article is the place to start.

On March 15, 2020, in response to the public health emergency of COVID-19, Chief Justice Morawetz issued an unprecedented “Notice to the Profession, the Public and the Media“, suspending the regular operations of the Ontario Superior Court of Justice until further notice (“March Notice”). An additional “Notice to the Profession, the Public and the Media Regarding Civil and Family Matters” was issued on April 2, 2020 (“April Notice”) and revised on April 22, 2020.

The suspension does not mean that the courts are closed. In an April 6, 2020 virtual fireside chat hosted by The Advocates’ Society, the Chief Justice stated unequivocally that the Ontario Superior Court of Justice “has never closed … we suspended in-court operations, but [the Court] continues to operate, and it is never going to stop operating”.

The March Notice states:

The Court will continue to hear urgent matters during this emergency period. The Court plays a fundamental role in our constitutional democracy. Access to justice for the most urgent matters must always remain available.

With respect to civil and commercial matters,[1] the March Notice defined “urgent” to include:

Urgent and time sensitive motions and applications in civil and commercial list matters, where immediate and significant financial repercussions may result without a judicial hearing.

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Robins Appleby

Supports for Ontario Employers and Employees During COVID-19

Barbara Green and Samuel Mosonyi.

April 21, 2020 (last updated April 27, 2020)

COVID-19 has changed the landscape for employers and employees. We are writing this article to provide some clarity as well as to inform employers and employees what government support is available to them.

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Publications

Sentencing Guidelines for Canada: A Re-Evaluation

Canadian Criminal Law Review 22, no. 3 (2017): 275-295.

Abstract: The current federal Liberal government should analyze the experience of England and Wales when exploring alternatives to mandatory minimum sentences. Sentencing guidelines of the variety used in England and Wales can contribute to consistent sentencing practice while still retaining significant judicial discretion. This study examines the factors that Canadian policymakers should consider in their deliberations using interviews with sentencing guideline drafters, the judiciary, and other criminal justice experts in England and Wales.

[Published by Thomson Reuters; Available on Westlaw].

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Publications

Bylaw Battles: Explaining Municipal-Provincial and Municipal-Federal Win-Rates

Samuel Mosonyi and Dennis Baker, “Bylaw Battles: Explaining Municipal-Provincial and Municipal-Federal Win-Rates,” Canadian Journal of Urban Research 25, no. 2 (2016): 11-22.

Abstract:

Municipal bylaws are routinely contested in court on the grounds that they are “ultra vires” or beyond the legal authority of the municipality. Many of these challenges allege that the municipal exercise of power infringes on federal or provincial powers as assigned by ss. 91 and 92 of the British North America Act, 1867. These conflicts have not been systematically studied and we address this lacuna by surveying the reported cases of municipal-federal and municipal-provincial conflicts in the LawSource database of Canadian judgments. Our preliminary finding—that challenges on federal grounds are much more likely to succeed than those on provincial grounds—requires an explanation. After factoring some disparities in the case sets (including a disproportionate number of zoning cases in the provincial context), we argue that the persistent difference in win-rates is due to a greater acceptance of municipal autonomy in the provincial context (despite their origins as “creatures of the province,” a number of provincial statutes have granted broad authority to many municipalities) whereas the federal conflicts run more clearly against constitutionally-defined interests. We conclude by considering this asymmetry and its significance for Canadian multi-level governance.
Full text here.
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