Monthly Archives: November 2015

Limitation Periods

The firm has just completed two mandates raising the issue of limitation periods which may bar a legal proceeding before it is commenced. One common issue arose in both matters: “discoverability” of the cause of action, which triggers the running of the limitation period. The test of discoverability raises an objective, rather than subjective, test because it asks: when ought the plaintiff, having regard to all the circumstances, to have realized that a legal claim had arisen? From that date, the limitation time period commences to run. A careful marshalling and review of the evidence on this issue is required. The court will hold a party to the standard of reasonableness; whereas a mere possibility of discovery of the cause of action imposes too high a standard on a plaintiff.

Good Faith in Contracts

The Supreme Court of Canada has recently rendered a decision – Bhasin v Hrynew – of importance to all clients engaged in business activity. The issue of “good faith” in regard to contacts and negotiations has been the subject of much litigation over the years. In Bhasin, the court decided that a party to a contract has an obligation to act in good faith when it comes to the performance of its contractual obligations. The court held that there is a broad “organizing principle” of good faith that requires “honest, candid, forthright or reasonable contractual performance”. Parties cannot contract out of this duty.

The degree to which this case conflicts with the economic theory of “efficient breach” is yet to be determined, as are the additional damages to which a party may be exposed for breach of the additional contractual obligation, i.e., the damage from a breach in “bad faith” may be no greater than an innocent breach. Much depends on the particular circumstances of the breach. One thing is predictable for all business clients: the case will give rise to an increase in standardized allegations of “bad faith breach” by litigation lawyers as the details of the “new” doctrine are worked out in future cases.

Older Condominiums are Heading for Litigation

Under the Condominium Act , a board of directors owes legal obligations in regard to reserve funds for the replacement of common elements. Ron recently acted in such a dispute. Many older condominium buildings have underfunded reserve funds, which can occur due to the failure of directors to appreciate their legal duty to provide for adequate funding for the replacement of deteriorating infrastructure/common elements. Funding must be based on accurate estimates of the useful life and accurate estimates of the cost of replacement, as set out in the reserve fund study mandated under the Condominium Act. Third party purchasers may rely on the accuracy of representations contained in reserve fund studies. In practice those studies constitute the inspection by a purchaser of a condominium unit and building.

Directors risk personal liability for misrepresentations in the reserve fund studies, even though the reserve fund engineers also bear responsibility for any negligence on their part.

Terminating the Nuisance Commercial Tenant

It is possible to terminate a commercial tenancy on the basis that the tenant creates a nuisance – whether through sound, unsightliness, smells, or general lack of care for the premises – depending on the terms of the lease and the degree of misconduct. The situation is more difficult where the tenant has been punctual on its rent payments. Unilateral termination may in such cases be imprudent due to the uncertainty inherent in the face of disputed evidence. Wrongful termination of a viable business may give rise to a claim for damages by the tenant. The landlord may invoke the Court’s assistance, seeking an order terminating the lease or declaring it validly terminated. These are the practical issues that arise on two of our recent mandates.

Injunction versus Claim for Damages – Competitive Activity

Whether it is better to seek to enjoin the defaulting fiduciary for acting unfairly, or to seek damages and suffer the delay and uncertainty of extended litigation, that is the question. An injunction is appropriate to enjoin actions threatening imminent harm which is difficult to quantify and therefore not easily remedied by an award of damages. However, seeking an injunction involves considerable up-front cost for the applicant and, in the event the motion is unsuccessful, significant cost exposure to the other side. In contrast, a claim for damages postpones much of the cost burden and may impose pressure on the defendant to curtail the activity giving rise to the claim. These are the tactical issues to be considered by an employer seeking to enjoin competitive activity.

Shareholder Agreement – Oppression

Does the Shareholder Agreement exhaust “reasonable expectations of a shareholder”? In a number of oppression cases one or both parties point to the Shareholder Agreement as the source or fountain of shareholder expectations. This issue arises in a current case where Ron represents a former shareholder who was excluded from the board contrary to the assumptions, but not the terms, underlying the Shareholder Agreement at the time it was made.

Libel of a Professional

Professionals such as doctors, lawyers and accountants succeed or not based on their reputation.  The firm was recently retained to consider whether a lawyer should sue for libel based on emails by the potential defendant to third parties which referred to the lawyer as “avaricious”.  Generally, the man in the street believes that statements denigrating the character and professional habits of a professional harm the professional’s reputation and as such are defamatory.  When the words are merely spoken, the wrong is characterized as a slander and the plaintiff must prove actual financial damage flowing from the slander.  When the words are written, the defamation constitutes a libel.  In libel, the law presumes damage (the actual amount being in the discretion of the court taking into account factors such as the presence of malice on the part of the defendant and the extent and manner of publication).  In some cases, the defendant may seek to invoke a variety of defences, including justification because the words were true, fair comment or qualified privilege.  In this case the defence of qualified privilege may have provided a legal excuse for the defendant, not in respect of the libelous words, but with respect to the occasion on which they were uttered.  If the defendant has a sufficient interest or duty to communicate to a person that has a corresponding interest or duty or to receive such communication, then the occasion may provide an excuse to the defendant even though the words are indeed defamatory.  There is no catalogue of occasions of qualified privilege; the categories cannot be closed in the nature of things.  Therefore, although it may be an easy matter to prove a libel, litigation over libel can be complex.

Adverse Possession, Trespass, Conversion and Damages

Ron McCloskey has been acting as counsel in an ongoing trial that will continue in the spring of 2014 involving claims for damages that arose over damage caused to property by a neighbour who claimed to own the property and its fixtures such as retaining walls and fences and interlocking brick etc.  The defendant claimed actual ownership, and alternatively rights accruing through the doctrine of prior adverse possession even though the property was registered under the Land Titles Act.  In the further alternative, the defendant is putting the plaintiff to the strict proof of all damages incurred as a result of the remedial work that had to be undertaken to the property by the plaintiff, including taking full advantage of the doctrine of causation (which of course underlies all claims for damage) pursuant to which the plaintiff bears the burden to prove to the court that the loss damage as claimed was caused by the defendant and the amounts incurred to remedy the damage were reasonable — all of which makes for a time-consuming trial given the engineering fees, professional fees and contractors’ fees.

« Older Entries