Law of the Lands - Farm, Energy and Enviro Law

Drainage Petition Fails Over Area Requiring Drainage

noreply@blogger.com (John D. Goudy, Lawyer) — Thu, 02 Apr 2026 23:00:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

New municipal drains in Ontario are created by “petition” made to the local municipality. Pursuant to Section 4 of the Drainage Act (the “Act”), petitions may be made by the majority of the number of landowners in an “area requiring drainage”, by any one owner who owns at least 60% of the land within that area, by the municipal engineer or road superintendent where a municipal drain is required for a road, or by the “Director” appointed by the Province in the case of drains required for agricultural purposes. Where the municipality accepts the petition, it appoints a drainage engineer and that engineer must prepare a report for the proposed drain. The report includes the design and specifications of the drain as well as a table of assessments in which each participating landowner’s respective share of the costs of the drain is assigned.

Section 5 of the Act requires a municipal council that receives a petition to consider the petition forthwith and to decide whether to proceed or not to proceed with the drainage works. Where the municipality decides to proceed with the works, the municipality must appoint an engineer to examine the area requiring drainage and to prepare a report for the proposed drainage works. Pursuant to Section 9 of the Act, before making the examination and report, the engineer must hold an on-site meeting with landowners within the area and shall at the meeting: (a) determine the area requiring drainage; (b) determine whether the petition complies with Section 4 for the area requiring drainage; and, (c) where the engineer is of the opinion that the petition fails to comply with Section 4, establish the requirements for a petition to comply.

The term “area requiring drainage” is not defined in the Act. Once an engineer has been appointed by the municipality, in order to determine the validity of a petition brought by a private landowner(s), the engineer must make his or her own identification of the area requiring drainage (which may differ from the area described in the petition) and of the property(ies) lying within that area. The Drainage Act requires this confirmation of compliance with Section 4 because the legislation compels area landowners to participate in (and pay for) municipal drains. Only a landowner or landowners with a sufficient ownership interest in the “area requiring drainage” can compel non-petitioning neighbours to accept a municipal drain. The proper determination of the sufficient ownership interest places an important limit on this forced participation.

The Drainage Referee, who is a judge or a lawyer appointed by the Ontario Cabinet, is given jurisdiction under the Act to determine the validity of a petition, effectively creating an appeal from the engineer’s determinations about the area requiring drainage. A recent decision of the Acting Drainage Referee for Ontario dealt with such an appeal. The Acting Referee noted in his decision:

It is essential to determine an area requiring drainage in order to be able to apply those percentages and thus test for the validity of a petition. Once the area requiring drainage has been determined, the rest is a mathematical calculation. However, if an area requiring drainage is determined solely and simply based on the owner of a single property’s desire for a legal outlet, then what is the purpose of Section 4 of the Act? The legislature knows how to create laws that allow for single-person initiation, as in Sections 78 and 79 of the Act. However, it has not done so in relation to the establishment of new municipal drains. Careful attention is therefore required in the determination of an area requiring drainage to preserve the integrity of section 4 of the Drainage Act.

In the case before the Acting Referee, a single landowner had signed a petition for a new municipal drain to address a “low depressional area” located in part on the petitioner’s property but mainly on the neighbouring property. The neighbouring owner did not sign the petition. The engineer prepared a report for the proposed municipal drain and identified the property owned by the petitioner as the area requiring drainage (being the area within which the owner planned to install a systematic tile drainage system). The questions for the Acting Drainage Referee were whether the engineer was correct to define the area requiring drainage by reference to property ownership boundaries and whether it was correct to exclude the neighbour’s property from the area requiring drainage for purposes of Section 4 of the Act.

The Acting Drainage Referee did not foreclose the possibility that ownership boundaries might be relevant in some circumstances to the determination of the area requiring drainage, but found in this case that ownership boundaries should not have formed the basis for the engineer’s determination. Further, the engineer was wrong to exclude the neighbour’s portion of the “low depressional area” from the area requiring drainage. The engineer had suggested that the neighbouring land should be excluded because it had existing riparian access to an outlet (a nearby creek). However, the Acting Drainage Referee found that the portions of the low area on both sides of the property line had “technical access … for outlet” and neither had “reasonably feasible riparian access to that outlet.”

The result of the Acting Drainage Referee’s findings was that petition was invalid because it was not signed by 60% of the landowners of the area requiring drainage. The engineer’s report was set aside and the municipality’s provision drainage by-law was quashed. As the Acting Referee concluded:

The Engineer is entitled to great deference with respect to the question of the area requiring drainage for the purposes of section 4 of the Drainage Act, and his conclusions ought not to be disregarded except when there is clear evidence of error or unless a question of law is involved. But if his conclusion is patently wrong, it cannot stand.

Read the decision at: 2025 ONDR 5 (CanLII)

Zombie Deeds (yes, Zombie Deeds)

noreply@blogger.com (John D. Goudy, Lawyer) — Wed, 18 Mar 2026 16:48:28 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Imagine the following scenario: Party X has entered into an Agreement of Purchase and Sale to sell her property to Party Y; all of the conditions of the sale have been fulfilled or waived; title searches have been completed; the closing date is next Monday; Party X comes into her real estate solicitor’s office on Thursday and signs all of the required closing documentation including an Authorization, Acknowledgement and Direction to her solicitor authorizing the solicitor to register an electronic Transfer/Deed in the Land Registry conveying ownership of the property to Party Y once the purchase funds have been received; Monday arrives and, sadly, Party X passed away over the weekend. Party X wanted to complete the sale to Party Y and, indeed, was obligated to complete the sale to Party Y. She already authorized her solicitor to register the Transfer/Deed to make that happen. Can Party X’s solicitor not register the deed in accordance with the client’s wishes and obligations?

The answer is “no”. If the real estate solicitor went ahead and attempted to register the Transfer/Deed on the basis of the Authorization, Acknowledgement and Direction signed by Party X before her death, the solicitor would be attempting to register what is commonly (and maybe a bit flippantly) referred to as a “Zombie Deed”. For several years now, the Land Registry in Ontario has expressly prohibited the registration of such deeds on the basis that the authorization to register terminates when the vendor dies. The late Director of Titles for Ontario, Jeffrey Lem, issued a bulletin in May, 2020 titled “Zombie Deeds are Dead!” with the following introduction:

As most of you know, the Director of Titles has always been opposed to the so-called “Zombie Deeds” – transfers registered by owners who have already died. Well, there is finally a case dead on point (pun intended) confirming that Zombie Deeds are improper in all circumstances.

Mr. Lem went on to discuss the decision of Madam Justice MacLeod-Beliveau of the Superior Court of Justice in Thompson v. Elliott released in March, 2020. Justice MacLeod-Beliveau had confirmed that it is never appropriate for a solicitor to register a Zombie Deed:

I find the lawyer erred by registering the "zombie" deed/transfer severing the joint tenancy in the property after Ms. Elliott's death based on his erroneous understanding that her instructions survived her death. A court application for a declaration of an interest in land is the proper legal procedure to follow by the lawyer to correct the error made by the lawyer after her death.

The proper course of action to be taken by a lawyer in these circumstances upon the discovery of such an inadvertent error, is for the lawyer to bring an application in the Superior Court of Ontario requesting a certificate of pending litigation and a declaration of an interest in land and for a vesting order under s. 100 of the Courts of Justice Act, R.S.O. 1990, c. C.43 to be made, setting out all the material facts in support of the application for an interest in land to be determined by the court.

Despite the clear statements from Justice MacLeod-Beliveau and the Land Registry about how solicitors should handle Zombie Deed scenarios, problems still arise. In April this year, Justice Myers of the Superior Court made an interim decision in a case that calls into question the direction to seek a vesting order as the alternative to attempting to register a Zombie Deed. A woman on her deathbed transferred title to herself and her nephew as joint tenants. The woman’s solicitor visited her in the afternoon and had her sign the transfer documentation. She passed away before the documents were submitted for registration the following morning. Following the direction of Justice MacLeod-Beliveau in Thompson v. Elliott, the aunt’s estate applied to the Court for a vesting order to permit the registration in the Land Registry of the conveyance of title from the Estate to the nephew.

Justice Myers identified a unfortunate problem with the vesting order request: “Here, the nephew holds title to the property at law. There is nothing for me to vest in him. … I do not understand a request for a court to vest title in the person who already holds it.” By law, the nephew had become joint tenant with his aunt when the documents were signed and he took title by operation of the law of survivorship when his aunt passed away. The vesting order was sought as a way to deal with the requirements for registration of the conveyance of ownership and the prohibition of the registration of Zombie Deeds. If a vesting order is not available, what is the solution?

Justice Myers ended up adjourning the application before him to allow counsel to provide further legal authorities and also perhaps to serve the Director of Titles with the application. Real estate solicitors across Ontario will no doubt await with bated breath the solution to this difficult situation.

Read the decision at: 2025 ONSC 2661 (CanLII)

Farm bridge collapses beneath sprayer - who is at fault?

noreply@blogger.com (John D. Goudy, Lawyer) — Mon, 09 Feb 2026 20:36:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In 2017, a custom sprayer operator from a local farm supply company was crossing a private bridge on a farm with a self-propelled sprayer when the bridge broke. The sprayer fell into the river that ran beneath the bridge. The operator was trapped underwater but managed to escape his machine. The sprayer sustained very significant damage. Over the course of 11 days in 2023 and 2024, a trial was held in the Superior Court of Justice to determine who was at fault for the incident and what compensation might be owing for damage to the sprayer. A decision was rendered at the end of March this year.

The sprayer involved in the case weighed over 15 tons when empty and had 100-foot booms. It had been purchased in 2014 for just under $343,000. The operator of the sprayer was a long-time employee of the farm supply company and had operated the sprayer (and only that sprayer) for four years. He had finished spraying one field on the customer’s farm and was moving to another field across the bridge when the collapse occurred. The sprayer was about two-thirds of the way across when wooden planking broke beneath the sprayer’s front right tire. The sprayer rolled completely and landed upright in the deep river below. The cab was submerged and quickly filled with water, but the operator found a way out. He escaped with cuts to his hands from broken glass.

The farm bridge had originally been constructed in the early 1900s by the same family that owns and operates the farm today. In 1980, the bridge was rebuilt with concrete abutments placed at each end of the bridge. The river was spanned using five steel beams spaced to create a supporting structure 10-feet-wide. A wooden deck was placed over the beams with wooden planks running parallel with the beams on each side of the deck to hold the deck together. In all, the wood deck stretched 57 feet from one side of the river to the other. The deck extended in an overhang of approximately 3 feet beyond the edge of the steel beams on each side of the bridge.

No building permit was required for the bridge; the only legal requirement for the private bridge was that it be high enough above the river to allow water to pass under the bridge if the river flooded. The unchallenged evidence of the farm family was that the bridge was crossed between 40 and 50 times a day by large-sized farm equipment weighing from 15 to 40 tons.

After the bridge collapse, the sprayer sat mostly submerged in the river for 10 hours. It was extricated from the water and taken back to the equipment retailer for an assessment of the damage to the machine and an estimate of the cost of repair. A consultant engaged by the insurer for the farm supply company didn’t believe the sprayer was a write-off; he thought the unit could be repaired for roughly $332,000 including taxes. The cost of a new replacement sprayer was over $435,000. The insurer gave the farm supplier the following options: 1) repair the sprayer; 2) purchase a replacement sprayer of similar value to the damaged sprayer; or, 3) take the estimated cost of the repairs and apply it to the purchase of a new sprayer. The farm supply company chose the third option and purchased a new sprayer.

Having paid out the estimated cost of repairing the damaged sprayer, the insurer for the farm supply company had a right of subrogation meaning that it could now pursue a claim to recover the money it had paid out. The insurer sued the farm corporation that owned the bridge, claiming that the farm was at fault for the collapse because: the overhang was unsupported; the bridge was in a state of disrepair including rot; the wooden deck was free to shift over the steel beams; and, there was no warning that the overhang of the wooden deck was unsupported. The farm corporation defended the action arguing that the incident was caused by driver error. Provided that a vehicle was kept centered over the steel beams, the farm corporation contended that the bridge could support equipment much heavier than the sprayer had been at the moment of the collapse.

The Court sided with the farm corporation and ruled that driver error was the cause of the incident and of any losses suffered by the farm supply company. Although there was evidence of some rot in the wooden deck of the bridge, the bridge did not break at the point of the rotted wood. Instead, the bridge broke only where the sprayer tire reached a point two-thirds across the overhang. If the tires had been centered on the beams, the bridge would not have collapsed whether the wood on the overhang was rotten or brand new. The Court found that the likely explanation for the sprayer veering toward the edge of the bridge was driver inadvertence. A warning to keep the machine in the centre of the bridge and off the overhang wouldn’t have helped: the sprayer operator already knew he needed to keep the vehicle centred when crossing the bridge. The insurer’s subrogated action for damages was dismissed.

Read the decision at: 2025 ONSC 1996 (CanLII).

Dump Trucks are not Ubers

noreply@blogger.com (John D. Goudy, Lawyer) — Thu, 22 Jan 2026 17:53:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

A case decided in the Ontario Court of Justice in 2024 holds some valuable lessons for landowners and commercial trucking operators. The decision resulted in convictions for a trucking company under the Environmental Protection Act – that was the quasi-criminal part of the story. In the background, it is likely that the circumstances of the case will also give rise to civil claims against some of the parties involved. The landowner is now confronted with huge potential costs.

Back in 2020 or so, the owner of a 36-acre rural property obtained a permit to fill in a low-lying area of his property to expand the workable land for agricultural purposes. It’s not clear what initiated this, but the common-law partner of the owner was approached by the principal of a landscaping company offering to source fill to be used on the property. The “soil broker” proposed a formal agreement to the landowner. The landowner didn’t sign the agreement initially, wanting to wait to see what material was delivered to his property. The landowner viewed the first few dump truck loads that came in and the fill appeared to be clean fill – exactly what he wanted. That was on October 30, 2020.

The landowner was away on business on November 5 and 6 when more trucks arranged by the soil broker came to the property. On November 6, the owner’s partner called him in a panic to explain that personnel from the Ministry of the Environment, Conservation and Parks (“MECP”) had attended at the property and told her that the material that was being delivered was not appropriate for the site. The owner arrived back at the property late at night on November 6. He went out to the fill area with a flashlight and could see that the material deposited contained rubber, tires, building debris, pink plastic from insulation, shoes, wood, metal and various pieces of garbage.

The evidence before the Court showed that some of the fill brought to the site was clean but much of the fill was waste from a particular property where there had been a historic unapproved landfill and where old industrial waste was mixed with the soil. That source property could not be developed by its owner until the waste was eliminated. Apparently, the soil broker was going to help that owner solve its problem with the historic waste by moving the waste to the 36-acre property and using it to fill in the low-lying area. In all, 199 truckloads of material were brought to the landowner’s property through trucking arranged by the soil broker. The landowner testified that, as of the date of the hearing before the Court, 167 loads-worth of waste-containing material probably remains. He’s afraid he’ll go bankrupt if he has to haul the material away to a proper waste-disposal site.

The hearing before the Ontario Court of Justice was a trial on charges laid against the soil broker and the trucking company that had delivered the waste material to the landowner’s property. Both parties were charged under the Environmental Protection Act with depositing waste on land that is not a waste disposal site and with operating a waste management system (which would include transporting waste) or waste disposal site without authorization under the Act. The soil broker did not attend the trial, which proceeded on an ex parte basis against him. He was convicted on both charges in respect of the November 5 and 6 delivery dates.

The trucking company that delivered the waste to the landowner’s property did attend the trial and contested the charges. The trucking company argued that other trucking companies were involved, that the MECP could have done more to stop the dumping, that the landowner should have been charged, etc. One final argument made by the trucking company was that “the dump truck industry operates like Uber, renting out trucks and drivers to customers and that the responsibility of the trucking company is limited only to providing the trucks and drivers and has nothing to do with what is being hauled.”

The Justice of the Peace conducting the trial rejected all of the trucking company’s arguments as to why it should not be convicted. She explained:

Dump trucks are not Ubers. There is a legal and regulatory framework that applies to dump trucks that choose to transport and dump waste. A dump truck company is expected to know what these legal requirements are and to ensure that they obtain the appropriate authorizations if they engage in this activity. If they do not, they should be taking steps to ensure they do not transport waste. This is their obligation under the law. Full stop. They cannot simply excuse themselves from legal and regulatory requirements by ignoring them. They bear the legal risk if they choose to do so.

The lesson for trucking companies is clear – ignorance of what is being hauled is no defence to a charge for transporting waste without proper authorization. The lesson for landowners might be to refuse the importation of any fill to a property without personally ensuring that the fill is appropriate and can legally be deposited. There will no doubt be a cost to achieving that level of assurance. However, the cost of having your property turned into an illegal waste dump will be far higher.

Resulting Trusts Part 2: Joint Tenancy and Estate Planning

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 28 Oct 2025 09:00:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Last month’s article explored the legal concepts of resulting trusts and beneficial ownership of land. There is a presumption that a “resulting trust” arises when property is held in the name of a party who provided no value for it. The “legal owner” in whose name the property is held is considered to hold the property in trust for the true “beneficial owner” who actually did provide the value by which the property was acquired. Prime examples of circumstances giving rise to resulting trusts are where a parent provides the purchase money for a property held in the name of an adult child or where the parent adds the child to title for no consideration. The presumption of a resulting trust is rebuttable. The child could demonstrate, for instance, that the transfer of the property interest was intended as an outright gift by the parent.

This month’s article is Part 2, because it just so happens that the Ontario Court of Appeal decided a case last December dealing with questions of beneficial ownership and resulting trusts in the context of estate planning that is worthy of attention. In his reasons for the initial application decision that led to the appeal heard in the Court of Appeal, Justice Charney of the Superior Court of Justice had noted that the case was “a cautionary tale for persons who might be tempted to use joint tenancy as an estate planning mechanism to avoid the payment of probate fees.”

The case involved the residence of a Mr. J. that he had purchased in 2011 using the proceeds from the sale of another property that he had previously owned jointly with his former partner, Mr. T. Mr. J. and Mr. T. had owned the other property as “joint tenants”, meaning that if one owner died, the other would receive the deceased owner’s interest by right of survivorship without the property interest entering the deceased owner’s estate and without requiring the payment of estate taxes or “probate fees”. Mr. T. passed away and Mr. J. became the sole owner of the property by right of survivorship. Mr. J. sold that property and used the proceeds to buy his new residence.

Mr. J. and Mr. T. had also made mirror wills in which they both named the other as sole beneficiary of their respective estates and named Mr. T.’s great-niece, Ms. R., as their alternate beneficiary. Although the will didn’t apply to the property that was sold by Mr. J. (because Mr. J. and Mr. T. had owned the property as joint tenants), it was a relevant part of the factual background to the court case. The year after he purchased his new residence, Mr. J. added Ms. R. to the title to his new residential property as a joint tenant. Ms. R. didn’t live in the residence, but she would become the sole owner of the residence if Mr. J. predeceased her (similar to the way in which Ms. R. had been named as alternate beneficiary in the mirror wills made by Mr. T. and Mr. J.) and no probate fees would be payable.

Unfortunately, the relationship between Mr. J. and Ms. R broke down. Based on a conversation with Ms. R.’s husband, Mr. J. came to believe that Ms. R had plans to sell Mr. J.’s residence and to buy another property where she and her husband and Mr. J. could live together. In response, Mr. J. instructed his lawyer to “sever” the joint tenancy. A transfer was registered by which Mr. J. conveyed his interest in the property to himself, with the result that he and Ms. R. were now co-owners of the property as “tenants in common” and not joint tenants. Mr. J. and Ms. R. then each held separate 50% interests in the property.

Justice Charney in the Superior Court and the Court of Appeal on appeal were tasked with determining whether Mr. J. had the right to sever the joint tenancy and what ownership situation currently exists. Justice Charney found that Mr. J.’s transfer of an interest in his residence to Ms. R. involved a gift only of the right of survivorship. Otherwise, Ms. R. held her interest in the property in trust for Mr. J. by way of resulting trust. Justice Charney also found that Mr. J. was entitled to sever the joint tenancy. The Court of Appeal agreed with Justice Charney’s decision on these points.

However, the Court of Appeal did not agree with Justice Charney’s depiction of the resulting ownership situation. Justice Charney’s opinion was that the right of survivorship that Mr. J. had gifted to Ms. R. still remained in effect as to a 50% interest in the property. Mr. J. held a 50% interest as tenant in common in the property free and clear of any right of survivorship for Ms. R. Ms. R. held a 50% interest as tenant in common in trust for Mr. J., but with a right of survivorship so that she would take over full legal and beneficial ownership of that 50% interest when Mr. J. died (if he still owned the property by then). The Court of Appeal found instead that any right of survivorship disappeared when the joint tenancy was severed. It could not continue to attach to the 50% interest that was held in the name of Ms. R. By severing the joint tenancy, Mr. J. had effectively revoked the entirety of his gift of a right of survivorship, something that he was entitled to do while he was still alive.

Read the decision at: 2024 ONCA 875

Resulting Trusts and Beneficial Ownership of Property

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 21 Oct 2025 13:49:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

There is a common law presumption that a transfer of land grants to the transferee an absolute right and title in the land (“beneficial ownership”). However, there is also a presumption that a “resulting trust” arises when property is held in the name of a party who provided no value for it. For instance, where a parent provides the purchase money for a property held in the name of an adult child or adds the child to title for no consideration, it is presumed that the child is not a beneficial owner and only holds title to the property in trust for the parent. To rebut this presumption, the burden of proof rests on the child to demonstrate on a balance of probabilities that the property was received as an outright gift rather than being held in trust for the parent.

Under Ontario law, real property can be held personally or in trust for someone else. When property is held in trust, the trustee is the legal title holder while the beneficiaries hold an unregistered beneficial interest in the trust property. As there is no mechanism under Ontario’s Land Titles system of land registration to identify trust interests, the Land Register may not provide the full picture to those who are investigating property ownership. Creditors looking to collect on debts are tasked with determining whether a registered owner holds a beneficial interest in a property or is merely holding title in trust. A creditor who does not pay close attention risks pursuing a claim against a debtor who appears to own property only later to discover that the debtor has no real ownership interest in any property. Just because a debtor is shown on title to be a registered owner does not mean that there is property against which to collect on a debt.

In a recent case, the Ontario Superior Court of Justice determined that a trial would be necessary to determine whether a registered owner of property held title in trust, thereby postponing the possible enforcement of a judgment against the registered owner’s recorded interest. A creditor was seeking to enforce a judgment against a property held jointly by the judgment debtor and her mother. The mother, seeking to avoid enforcement against the property, applied to the Court for a declaration that her judgment debtor daughter only held an interest in the property in trust for the mother. The Court ultimately determined that the matter could not be decided on the basis of a paper record as a court application and that a mini trial would be necessary.

Between 2016 and 2017, the mother and her late husband had added the judgment debtor to title of three properties they owned based on “natural love and affection”. The Land Transfer Tax affidavits sworn in respect of the transactions stated: “Transfer from parents to themselves and their daughter for natural love and affection.” In 2023, the creditor obtained judgment against the daughter for nearly $1.8 million. The judgment debtor daughter was found to have made false representations to the creditor in a transaction involving the supply of food products on credit. The daughter had failed to pay for these products and it was determined that a fraud had been committed. The creditor wanted to enforce its judgment against the properties owned (or apparently owned) by the daughter.

There were two issues examined by the Court in its ruling. The first issue was whether the transfer from parents to daughter was a gift, in which case the daughter was a beneficial owner of the properties, or created a resulting trust, in which case the daughter was only holding title in trust for her parents. The Court referred to the seminal Supreme Court of Canada case of Pecore v. Pecore, which held that a transfer of property from a parent to an adult child without consideration leads to the rebuttable presumption of a resulting trust for the benefit of the parent. In this case, the onus was on the judgment creditor to prove that the transfer of title was a gift and did not give rise to a resulting trust (so that the creditor could collect its judgment debt against the property). The Court found that this issue could not be resolved unless a mini trial was held.

The second issue was whether the entry of the daughter’s name in the Land Register as a registered owner in and of itself meant that she had a beneficial interest in the real estate properties (rather than just holding the property in trust for her parents). Here the judgment creditor relied on a case called Bao v. Mok to argue that the Land Titles parcel register is definitive and makes the judgment debtor daughter a beneficial owner. However, the Court found that the circumstances in the Bao v. Mok case were distinguishable. There, land had been transferred to a bona fide purchaser for value without notice that the transferor (the registered owner on title) was not actually the beneficial owner of the property but was holding it in trust for someone else. The bona fide purchaser for value was entitled to rely on the Land Register and didn’t have to investigate behind it to see whether a trust interest was present. The Court found that the situation of a judgment creditor seeking to enforce a judgment against property is different. The Land Titles Act doesn’t protect the creditor in the way that a bona fide purchaser for value without notice is protected. Creditors beware!

Read the decision at: 2024ONSC 6155

Fraudulent Conveyances

noreply@blogger.com (John D. Goudy, Lawyer) — Mon, 11 Aug 2025 04:00:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

According to Ontario’s Fraudulent Conveyances Act, any conveyance of real property or personal property made with the intent to defeat, delay, or defraud creditors or others of their just and lawful actions is void as against such persons. You can’t transfer ownership of your property to someone else in order to keep it out of the hands of your creditors. The Courts have established a system for identifying the types of behaviour captured by fraudulent conveyance legislation. These guidelines, referred to as the “badges of fraud”, include:

a) the donor continued in possession and continued to use the property as his own;

b) the transaction was secret;

c) the transfer was made in the face of threatened legal proceedings;

d) the transfer documents contained false statements as to consideration;

e) the consideration is grossly inadequate;

f) there is unusual haste in making the transfer;

g) some benefit is retained under the settlement by the settlor;

h) embarking on a hazardous venture; and,

i) a close relationship exists between parties to the conveyance.

Courts have interpreted the term “creditors and others” broadly to include potential beneficiaries of a guarantee (even if no demand has been made) and future creditors. In some cases, courts have held that the presence of existing creditors at the time of a transaction is not required to establish an intent to defeat creditors. In situations where there has been good and valuable consideration (i.e. an actual conveyance for real value), a transaction may still be deemed a fraudulent conveyance if it was not conducted in good faith or if it was made to an individual who knew of the debtor’s intent to defraud. Some transactions like those done for estate planning may appear legitimate, but property transfers may be considered fraudulent conveyances and set aside where there is evidence that the estate planning was undertaken because of outstanding debts.

A case considered by the Court of Appeal for Ontario involved a creditor seeking to enforce a 2009 judgment against property owned by the spouse of the debtor. The debtor had borrowed $250,000 and defaulted on the loan. The creditor obtained default judgment against the debtor (“default” because the debtor didn’t defend the proceeding) for $268,920. The debtor claimed to have no assets to pay the judgment, asserting that he dealt only in cash, kept no business records, and had a gambling problem. The debtor’s family home and a cottage were both registered in his wife’s name and the debtor claimed that he had made no contribution toward the purchase of the properties. The debtor also alleged that his wife made all mortgage payments from the income earned from her part-time jobs.

In 2018, the creditor commenced a new action against the debtor and the debtor’s wife claiming that the debtor held a beneficial interest in his wife’s properties against which the 2009 judgment could be enforced. The creditor alleged that the transfer of title to the properties into the debtor’s wife’s name and not into their names jointly (or into the debtor’s name alone) constituted a fraudulent conveyance. While the wife passed away prior to the trial, there was evidence from her admitted in the trial that she was to be the sole owner of the properties to safeguard them from any future debts arising from the debtor’s gambling habit. She had attempted to demonstrate how she was able to pay for the mortgages without contributions from her husband. The wife’s total income from 2010 to 2019 was only $15,471, yet bank records showed total debits to her account of $449,668 in the same period. The source of these funds was redacted in the records, and neither the debtor’s wife nor her legal counsel disclosed the origin of the funds. As the trial judge found no evidence that the debtor himself had provided any of the original funds to purchase the properties, the Fraudulent Conveyances Act claim seeking a declaration that the debtor had an ownership interest in the properties failed. The debtor had never owned the properties or transferred them to his wife.

However, that’s not the end of the story. The trial judge did find that the debtor’s wife had received $434,000 from unidentified sources and drew an adverse reference against her for the lack of disclosure regarding the sources of the funds. The trial judge also did not accept the claim that the debtor made no contributions to paying the mortgages or the household finances generally. The judge considered that each spouse would be apportioned an equal share of the unidentified source funds, meaning that the debtor was considered to have contributed $217,000 in value to his wife. On that basis, the trial judge ordered that the transfer of $217,000 was a fraudulent conveyance and void as against the creditor. He ordered the debtor’s wife’s estate to pay the creditor $217,000, which fell short of the full amount owed under the 2009 judgment.

The creditor appealed the decision to the Court of Appeal, arguing that the trial judge erred both in not attributing a 50% beneficial interest in the properties to the creditor and also in his analysis and computation of the amount of cash to be awarded to the creditor. The Court of Appeal accepted the trial judge’s finding that that there was no fraudulent conveyance of real property. However, the Court of Appeal found that the trial judge erred in designating only $217,000 as the amount fraudulently conveyed by the debtor to his wife (to be paid by the wife’s estate to the creditor). The Court of Appeal decided that the correct interpretation of the trial judge’s adverse inference was that the entire $434,000 was attributable to the debtor and available to the creditor for execution of its judgment.

Read the decision at: 2024 ONCA 733 (CanLII).

Land Registry Errors and the Land Titles Assurance Fund

noreply@blogger.com (John D. Goudy, Lawyer) — Mon, 21 Jul 2025 04:00:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Mistakes sometimes happen, even in the land registry system. The Land Titles Assurance Fund operates under the Land Titles Act and is designed to provide compensation to individuals for financial losses arising from real estate fraud or from errors and omissions of the land registration system. To be eligible for compensation, a claimant must ensure the time required to file the claim has not expired – applications must be made within 6 years of suffering the loss – and the claim made must meet the criteria for coverage. Examples of eligible claims include fraud, errors or omissions by the land registration system, errors in recording land that is brought under the Land Titles Act, and errors in recording a registered document in the automated land registration system.

A decision of the Ontario Superior Court of Justice dealt with a situation where the Land Registry Office (“LRO”) had mistakenly deleted a valid and active first mortgage from title to a residential property. The LRO deleted 23 instruments from the property identification number (“PIN”) assigned to the property, including the first mortgage. Importantly, the mortgage was deleted without a discharge being formally registered or any reference to the registration number of the discharged mortgage so that anyone looking at the PIN would not see any reference to it. Several years later, the homeowner sold the property to a new purchaser. The lawyers involved conducted title searches which indicated that the first mortgage had been deleted from title and there were no legal claims or restrictions against the property. There was nothing to suggest that the purchasers had any prior knowledge that the first mortgage had been mistakenly deleted from the PIN. As far as the purchasers knew, the mortgagee to whom the homeowner vendor had given the first mortgage had no ongoing interest in the property.

The property was sold to the purchaser free any clear of any interest on the part of the original mortgagee. When the original mortgagee found out that its first mortgage had been deleted, it asked the LRO to correct the problem. The LRO cooperated and reinstated the mortgage by way of a Reinstatement Order registered on title. That mortgage went into default (not surprisingly, since the new owners would not likely have known about it) and the original mortgagee sought to recover the debt from the new owners of the property. The new owners applied to the Director of Titles for Ontario to have the Reinstatement Order set aside and to remove the order and the mortgage from title to the property. The Director of Titles determined that a member of LRO staff had unintentionally deleted the first mortgage and concluded that the reinstated mortgage should be removed from title.

The matter came to the Court as an application by the first mortgagee to reverse the decision of the Director of Titles and to have the first mortgage once again restored to title to the property. The parties put forward competing expert opinions about the conduct of the real estate lawyers involved in the new owners’ purchase of the property. The Applicant mortgagee argued that the purchasers’ lawyers failed to meet the required standard of care because they should have been aware of red flags regarding the title and should have investigated further (which would have revealed the ongoing interest of the mortgagee in the property). The expert for the Respondent purchasers/new owners contended that such a standard of care in this case was unreasonable and unrealistic as lawyers should be able to rely on the Land Registry for updated and accurate information – the principle of indefeasibility of title. Three principles of indefeasibility of title embody the philosophy of the land titles system in Ontario: 1) the Land Register is the perfect mirror of the state of title; 2) the purchaser need not investigate past dealing with the land or search behind the Register; and, 3) the state guarantees the accuracy of the Register and compensates any person who suffers loss as a result of an inaccuracy.

The Application Judge rejected the argument that the purchasers’ lawyers failed to meet the standard of care required and identified the significant constraint on the ability of the Court to rectify (change) the Land Register. Subject to two exceptions, fraud and actual notice of an unregistered interest, the Court cannot rectify the Register if it would interfere with the registered interest of a bona fide purchaser for value (such as the Respondent purchasers/new owners). Fraud was not relevant in this case, so the Court considered whether the Respondent purchasers/new owners had actual notice of the Applicant’s unregistered mortgage. The Court found that whether a party received enough information to prompt inquiry and what actions the party took to investigate the matter are questions about constructive notice and are irrelevant to the actual notice analysis. As the Court did not find that the Respondent purchasers/new owners had actual notice, the Court had no authority to order rectification to restore the priority position of the Applicant’s first mortgage. The Applicant’s recourse was to seek compensation from the Land Titles Assurance Fund for the error made by the LRO.

Read the decision at: 2024 ONSC 3398 (CanLII).

Repair and Maintenance of Easements – Whose Responsibility?

noreply@blogger.com (John D. Goudy, Lawyer) — Mon, 07 Jul 2025 14:42:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

The Ontario Superior Court of Justice ruled on a case where the duties surrounding easements and who has the obligation to maintain an easement were at issue. An easement is a legal right to use another person’s land for a specified purpose and must have four characteristics to be effective. There must be a dominant and a servient tenement – the “dominant” land is benefitted by the “servient” land over which the easement applies; the easement must “accommodate” the dominant tenement in that it is reasonably necessary for the enjoyment of that land; the owners of the dominant and servient tenements must be different persons (you can’t have an easement over your own land); and a right over land cannot amount to an easement unless it is capable of forming the subject-matter of a grant (for instance, the right can’t be vague or uncertain). Case law has established that where an easement is created by express grant, the nature and extent of the easement should be determined based on the language of the instrument that created it, taking into account the circumstances at the time the easement is created.

In the recent court decision, the “dominant” owner was found to have no positive obligation to repair and maintain a drain located on the “servient” owner’s land. The servient land was located adjacent to the Highway 401 corridor. In 1959, the owner of the servient land, part of a farm, had granted the Province an easement for the installation of a drainage system. The drain was properly installed but, as the years went by, the drain deteriorated and caused the farm property to retain water. The servient owner experienced crop loss and had to undertake significant repairs to the drain at a cost of roughly $60,000. The servient owner sued the Province (and later the Municipality that took over the easement) to recover his losses. After the Plaintiff passed away, his estate carried on the action and asked the Court to grant summary judgment (a decision made by the court without a full trial) against the Municipality.

After repairing the drainage system, the Plaintiff had contacted the Province and the Municipality to inform them of the problems in hopes of having the repair costs covered. The Municipality informed the Plaintiff that it only had the right to maintain the drain and not an obligation to do so. Hearing this news caused the Plaintiff to write a letter to the Mayor of the Municipality setting out the background behind the drainage easement. The Municipality did not respond to the letter or take responsibility for the repair costs, which led to the Plaintiff commencing his action.

The Plaintiff’s claims included requests for a declaration that the Municipality is liable for the continuing maintenance of the drain, reimbursement of the costs to repair and replace the drain, and damages for the loss of crops. The Court considered several issues in deciding the claim, including the applicable test for summary judgment, the nature of the easement, whether the Municipality had a positive obligation to repair the drain, and whether the Municipality was liable to the Plaintiff for the cost of the drain repair and/or the crop loss and in what amount(s).

In considering what the nature of the easement was, the Court determined that both the original easement (originally granted to the Province) and the transferred easement (as transferred from the Province to the Municipality) are valid in law. The Highway 401 corridor was considered to be the dominant tenement and the Plaintiff’s property was the servient tenement; the original easement and the transferred easement accommodated the drainage of the highway (reasonably necessary for the use of the highway); the owners of the dominant and servient tenements were different persons; and, the right to build and maintain a tile drain on a strip of the property was a right capable of forming the subject matter of a grant. Having concluded that the easements are valid, the Court then addressed the Plaintiff’s claim that the Municipality had a positive duty to repair and maintain the drain and cover the costs incurred. The Court ruled against the Plaintiff based on its interpretation of the easement.

The Court referenced the legal principles established by the Supreme Court of Canada in a 2014 decision that stated evidence should be examined by considering the mutual and objective intention of the parties. When it comes to easements, the words of the grant must be interpreted in an ordinary and grammatical meaning that aligns with the circumstances of the parties involved at the time the easement was created. The Court found in this case that the original easement was silent with regard to any obligation to repair. While in some cases, the party enjoying the use of the easement will be liable for repairs, that was not the case in this scenario.

Absent express language in the grant of the easement, the “dominant owner” (the person benefitting from the easement) does not have an obligation pursuant to the grant of easement to keep the easement in proper condition. However, that doesn’t necessarily leave the “servient” owner (whose land is subject to the easement) without a remedy. Where the dominant owner acts negligently or commits a nuisance, they can still be held liable for repair costs and damages. In this case, the Plaintiff’s estate was permitted to continue with a claim for damages based on the law of nuisance.

Read the decision at: 2024 ONSC 2811 (CanLII).

Long-time farmhand awarded damages and retirement allowance

noreply@blogger.com (John D. Goudy, Lawyer) — Mon, 07 Apr 2025 16:46:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Employees in Ontario can be formally dismissed or “terminated” from their jobs for just cause or without just cause. If a dismissal is for cause, such as in the case of serious misconduct, habitual neglect of duty or incompetence, for instance, no prior notice is required. Where an employee’s job is terminated without just cause, the employer must provide reasonable notice of termination to the employee. The length of the notice period will depend on factors such as the character of the employment, the length of the employee’s service, the age of the employee, the availability of similar jobs, etc. In some cases, working notice will be given and the employee will continue to work until the end of the notice period. In most cases, though, payment in lieu of notice (i.e. the payments that the employee would have received during the notice period) will be provided.

However, many terminations occur without the employer formally firing or dismissing the employee. An employee can be constructively dismissed where the employer’s conduct amounts to a repudiation of the employment contract. For example, an employer might unilaterally change a significant term of an employee’s employment such as imposing a pay cut and by doing give the employee the right to treat the employment contract as terminated. If the boss says that the employee now needs to work extra hours for less pay, it may be that the employee can leave the job and then seek compensation on the basis that the employee was constructively dismissed. The employment was effectively, but not formally, terminated by the employer.

Constructive dismissal was the finding in a recent decision of the Ontario Superior Court of Justice in a case involving a long-time farmhand. The claimant in the case had worked exclusively for one individual farmer (and the individual farmer’s companies) for over 40 years, his entire adult working life, employed as a farm labourer and manager in a mixed cash crop and livestock operation. In January, 2019, the claimant was told that he was laid off but that the layoff would be temporary and would last only a few months. The claimant actually continued to assist the employer from time to time with work tasks where needed during the layoff, but was not paid by the employer after January, 2019.

In May, 2019, the employer met with the claimant and told him that he could come back to work at the farm on the condition that the claimant continue to collect Employment Insurance benefits with the balance of his salary (about $55,000 per year) paid in cash. Also, the employer confirmed that the claimant would no longer have the assistance of a student for heavy lifting jobs, something that the claimant required because of a back injury suffered several years earlier when lifting a propane tank. In effect, the employer was asking the claimant to do the same job as before but on vastly different terms.

Justice G.D. Lemon did not hesitate to find that the claimant had been constructively dismissed by his employer when the employer: 1) told the claimant that there would be fundamental changes to his job duties, effective immediately; 2) required that the claimant agree to improper and illegal payment arrangements as compensation for the job; and, 3) having effectively terminated the claimant’s previous employment, failed to provide the claimant with any notice of the termination or payment in lieu of notice. Justice Lemon examined the relevant factors for determining the reasonable notice period and found that the claimant was entitled to 24 months of salary in lieu of working notice, amounting to just under $110,000.

The claimant also requested an order for payment of a retirement allowance from his former employer. At the time of his layoff in January, 2019, the claimant’s annual salary was approximately $55,000, an amount that had remained more or less unchanged for the previous 25 years. Also, prior to 1996, the claimant had been provided by his employer with an on-farm residence. After 1996, the residence was no longer provided such that the claimant’s overall compensation was significantly reduced. Nevertheless, the employer induced the claimant to continue to work for less money, even including overtime, on the basis of assurances and agreement that the employer would provide a retirement allowance to the claimant.

The claimant sought $250,000 for his retirement allowance. The employer had told the claimant that he would be well taken care of and would receive 8-10% of non-voting shares in one of the farm companies. The employer said that “the big money is at the end”, being a reference to a future sale of the company. The claimant learned in 2008 or 2009 that the company was sold for $2,200,000 and assumed that he would receive about $250,000. For that reason, the claimant continued to work on the farm, his concerns about a lack of a retirement safety net having been addressed.

Justice Lemon awarded the full $250,000 retirement allowance, finding that the claimant worked long hours at a “reducing income” in reliance on the employer’s assurances. Justice Lemon also awarded the claimant $5,000 for unpaid wages (for the “layoff” period when the claimant continued to work without pay), $50,000 for aggravated damages (based in part on the manner of termination of employment which left the claimant with “the embarrassment of having been betrayed and cheated by the man he had trusted for many years”), and $20,000 for punitive damages (for conduct overall that “drops to the level of being so malicious and outrageous that it is deserving of punishment on its own”).

Read the decision at: 2024 ONSC 3876 (CanLII).

Supreme Court talks de facto expropriation again

noreply@blogger.com (John D. Goudy, Lawyer) — Mon, 10 Feb 2025 17:20:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

The concept of “de facto” expropriation was the focus of another decision of the Supreme Court of Canada in 2024. In certain cases, government action outside of expropriation legislation may effectively result in a taking of property, which may entitle a property owner to compensation for the taking. This is known as a “constructive” or “de facto” taking. There is a presumption that there will be no expropriation without compensation. If government action (often in the form of regulation) removes all reasonable uses of a property, then the property has been effectively expropriated and compensation may be payable.

Importantly, though, “compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition.” This “Pointe Gourde principle”, taken from a 1945 case of the same name heard before the Judicial Committee of the Privy Council in the UK, flows from the rule that compensation is to be based on the value of property to the owner, not the value to the taker. An owner who suffers expropriation, de facto or otherwise, is entitled generally to be compensated for the market value of the property based on its highest and best use before the taking. If the expropriating authority’s reason for taking the property actually enhances the market value of the property, the property owner does not get to rely on the enhanced value in the calculation of compensation payable.

The Pointe Gourde case involved the expropriation of land in Trinidad for use as a quarry from which stone would be taken to construct a nearby naval base. The compensation owing to the owners was to reflect the “value of the quarry as a going concern”. The quarry owners argued that the value of their quarry should include consideration of the higher profits they would make because their stone was to be used for the naval base. The Judicial Council, which was the highest court for cases from Trinidad (as it was at one time the highest court for Canadian cases), decided against the quarry owners. The increase in the market value of the property was due entirely to the expropriating authority’s plan to build the naval base. The expropriating authority benefitted from a nearby and accessible source of a large quantity of stone, but without the plan for the naval base construction this did not increase the value of the quarry to the owners. Value to the owner, not value to the taker.

The Supreme Court of Canada addressed similar issues in the recent Canadian case, which originated in Newfoundland. In 1917, a landowner was issued a Crown grant for the purposes of harvesting trees to produce barrels and for firewood. The grandchildren of the original grantee still own a 7.36-acre portion of the original Crown grant. This remaining land is in a natural state, covered in trees and shrubs, and is located within a watershed area that drains into a river used by the City of St. John’s for its local water supply. For decades, the land has been made subject to a series of by-laws and regulations prohibiting development in the watershed area.

Since the 1990s, the grandchildren landowners have attempted to obtain permission to develop their property. In 2011, they asked the City about the possibility of residential development and also other activities such as tree harvesting, farming, saw milling, and the installation of solar panels and wind turbines. The City advised that those uses were not permitted and that the land must be kept “unused” in its “natural state”. The landowners went ahead in spite of this and applied for permission to develop a 10-lot residential subdivision. Their application was rejected, in part on the basis of the watershed zoning that prohibited most if not all forms of development on the landowners’ property.

The landowners sued the City of St. John’s in court and obtained a declaration (upheld by the Court of Appeal of Newfoundland and Labrador and not contested before the Supreme Court of Canada) that their property had been “constructively expropriated”. The Court of Appeal ruled that the City had acquired a “beneficial interest” in the land that consisted of “the right to a continuous flow of uncontaminated groundwater downstream to the City’s water facilities”. While the grandchildren landowners had acquired the land their grandfather had received through the Crown grant, all they had now was a right to keep the land “unused in its natural state”. The Court of Appeal concluded that this was a taking of “virtually all of the aggregated incidents of ownership” and that the landowners had no remaining reasonable use of the property.

The case that came to the Supreme Court arose from a legal question posed to the lower court in Newfoundland by the Board of Commissioners of Public Utilities, the authority tasked with determining the amount of compensation owing to the landowners. The landowners were arguing that compensation should be based on land value as if the watershed regulations were not in place and a medium-density residential development were possible. The City contended that value should be based on a highest and best use of agriculture and forestry that would be acceptable to the City and would not cause adverse impact to the watershed (something possible within the watershed zoning). The lower court in Newfoundland relied on the Pointe Gourde principle and sided with the City. The Court of Appeal in Newfoundland reversed this decision.

The Supreme Court of Canada restored the decision of the lower court on the basis of the factual finding that the watershed zoning “was an independent enactment and not made with a view to expropriation”. If the City had enacted the zoning specifically for the purpose of reducing the value of the landowners’ land so that it could then take the land for a public use, the value of the land could be determined as if the land were not subject to the zoning and was eligible for subdivision development. However, as it was found that the zoning was enacted independent of any plan to “take” (constructively) the land, the landowners were only entitled to compensation based on the value of the land with the watershed zoning regulations in place.

Read the decision at: 2024 SCC 17 (CanLII).

Supreme Court of Canada digs up the dirt on the Sale of Goods Act

noreply@blogger.com (John D. Goudy, Lawyer) — Fri, 10 Jan 2025 22:31:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

The Supreme Court of Canada issued a decision at the end of May, 2024 in a case about topsoil. Of course, the case was not only about topsoil. Topsoil just happened to be the subject matter of the contract at the heart of the dispute between the parties. The Supreme Court chose to hear the case because it involved important questions about contracts for the sale of goods and the statutory conditions that are implied through legislation to form part of those contracts.

With the exception of Quebec, all Canadian provinces and territories have a statute governing the sale of goods that is modelled on a 19^th-century law from the United Kingdom – the Sale of Goods Act, 1893. That UK legislation codified common law (judge-made, non-statutory) that had developed in the English courts throughout the 19^th century. Passed down to Canadian law were three implied obligations that certain sellers of goods can owe to buyers related to the characteristics or properties of the goods sold even though the contract between seller and buyer might not mention the obligations: 1) fitness for purpose (that where the buyer makes known to the seller the particular purpose for which the goods are to be used, the goods will be reasonably fit for the purpose); 2) merchantability (that the goods sold by description will be of “merchantable” or reasonable quality and fit for sale in the usual course of trade); and, 3) correspondence with description (that goods sold by description will match the seller’s description of the goods).

According to the Supreme Court in its recent decision, those implied obligations were likely imposed by judges to relieve buyers from the harsh effect of the law of “caveat emptor” (buyer beware) that left all of the risk related to the characteristics or properties of the goods on the buyer where the contract was silent on those matters. In Ontario, the Sale of Goods Act contains the three implied obligations of fitness for purpose, merchantability and correspondence with description and makes them implied “conditions” rather than “warranties”. Contractual terms are “conditions” where they are fundamental to the contract: breach of a condition would give the buyer the right to reject the goods from the seller. Contractual terms that are not fundamental to the contract are “warranties”: breach of a warranty would give the buyer a claim for damages but would not entitle the buyer to reject the goods. Where a condition is breached, the buyer would actually have the option to reject the goods or keep the goods and sue for damages (as if a warranty had been breached).

In the case that went to the Supreme Court, the issue was whether or not the parties to a contract for the supply of topsoil had “contracted out” of the implied condition in the Sale of Goods Act that the goods sold by description correspond with the description. Parties don’t have to leave the implied conditions in place – they can use express language in their agreement to say that the implied conditions will not apply.

The buyer in the case was engaged by a municipality to remediate flooding in an area, which involved the removal and replacement of topsoil. The buyer needed topsoil with a specific composition in order to provide the drainage required to solve the flooding problem. The topsoil was sourced from the seller on the basis of the seller’s description, which included laboratory reports based on topsoil samples taken six weeks prior to the eventual delivery of the soil. Although the seller warned that updated test results should be obtained, the buyer had missed project deadlines and wanted immediate delivery of the soil to avoid paying damages to the municipality. The seller and the buyer agreed to go ahead with the transaction and delivery of the soil, but with exclusions of implied conditions. The buyer would have the right to test and approve the topsoil before it was shipped to the site, but if the buyer waived that right the seller would not be responsible for the quality of the topsoil once it left the seller’s facility.

It turned out that the topsoil delivered had substantially more clay content than indicated by the earlier test results. The soil didn’t drain the way it was supposed to and ponding developed on the project site, forcing the buyer to remove the topsoil and replace it with new topsoil that would drain properly. The buyer sued the seller for damages claiming that the seller failed to deliver topsoil that had the composition of the soil shown in the test results that had been provided.

The majority of the members of the Supreme Court (there was one dissenting opinion) sided with the seller, finding that the parties had contracted out of the implied “correspondence with description” condition in the Sale of Goods Act. Although the exclusion language used by the seller and buyer in their contract referred to “quality”, which is arguably something different than the matching of “identity” between the description of the soil (the test results) and the soil as delivered, the Supreme Court found that the buyer had chosen deliberately to assume the risk of not having further testing carried out on the topsoil before delivery. The use of the word “quality” in the exclusion clause didn’t allow the buyer to avoid the objective intention of the exclusion clause – that the seller was not to be held liable for any claim relating to the topsoil.

Read the decision at: 2024 SCC 20 (CanLII).

The Mythical Inoperable Tractor

noreply@blogger.com (John D. Goudy, Lawyer) — Fri, 13 Dec 2024 19:00:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

This month’s article doesn’t have much to do with farming, but I couldn’t pass on the opportunity to share a farming-related analogy at the centre of a recent impaired driving case. A “mythical inoperable tractor” served as the basis for the initially (but not ultimately) successful defence of the charge.

The facts of the case are simple. A driver was involved in a single motor vehicle accident in the early morning hours one day in December, 2019 in the City of Toronto. The sound of the accident had been overheard by a witness who happened to be walking home at the time. When that witness arrived at the scene, he found a vehicle stationed under a streetlight and off the travelled portion of the road and noted that the vehicle was not running and had its four-way flashers engaged. There was a man behind the wheel of the vehicle and there was a female present outside the vehicle. The witness did not see the accident and there were no other witnesses who had seen any accident.

The man in the driver’s seat was arrested for impaired operation of a motor vehicle on the basis of two breath samples showing his blood alcohol over the legal limit. At his trial in June, 2022, the accused did not call any evidence or testify in his own defence. Instead, he relied on an expert report that was entered into evidence with the consent of the Crown. The expert report confirmed that the accused’s vehicle was completely inoperable at the time it was discovered and was immobile.

The accused was acquitted at trial. The trial judge accepted that the vehicle was inoperable and immobile when the accused was found sitting in the driver’s seat with a blood alcohol level above the legal limit. There had been an accident, but it was not proven beyond a reasonable doubt that the accused was driving the vehicle at the time of the accident. The accused was found sitting in the driver’s seat and could be found to have had the “care and control” of a “conveyance” necessary to support a conviction for impaired driving. However, the trial judge ruled that “care and control” of a “conveyance” had not been proven beyond a reasonable doubt in spite of the following presumption set out at Section 320.35 of the Criminal Code: “In proceedings in respect of an offence under s. 320.14 or 320.15, if it is proved that the accused occupied the seat or position ordinarily occupied by a person who operates a conveyance, the accused is presumed to have been operating the conveyance unless they establish that they did not occupy that seat of position for the purpose of setting the conveyance in motion.”

The trial judge likened the situation to that of the “mythical inoperable tractor” found in the middle of a farmer’s field: could an individual seen drinking alcohol in a rusted-out old tractor with no windows or tires be convicted of impaired driving? Would it not be unreasonable to convict where there was no realistic or even speculative risk of danger and no evidence of intent to put the tractor in motion? The trial judge accepted that where it had been proven that a vehicle was inoperable and immobile and posed no apparent danger to the public, and there was no evidence of an intent on the part of the accused to drive the vehicle, the presumption in Section 320.35 of the Criminal Code did not provide the “care and control” of a “conveyance” necessary for a conviction.

The acquittal of the accused was appealed by the Crown to the Superior Court of Justice. On appeal, the acquittal was overturned and the matter remitted to the Ontario Court of Justice for a new trial. Although the appellate judge saw some “appeal” to the accused’s argument (and the trial judge’s reasoning) about the “mythical inoperable tractor”, the judge found nothing in the language of Section 320.35 of the Criminal Code that suggests that the presumption of “care and control” can be rebutted simply by establishing that a vehicle was inoperable and posed no risk to public safety. The definition of “motor vehicle” in the Criminal Code does not exclude an inoperable vehicle. If Parliament wished to make such an exclusion, it could through an amendment to the Code.

What the trial judge got wrong in his decision was that there was an onus on the accused to show that he was not sitting in the driver’s seat “for the purpose of setting the conveyance in motion.” It was not for the Crown to prove the intention; it was for the accused to prove the absence of an intention to drive the vehicle. As the accused called no evidence at trial (save for the expert report that went in on consent), there was no evidence of an absence of intention. The “mythical inoperable tractor” got the accused part way in rebutting the presumption of “care and control” of a “conveyance”, but not far enough.

Read the decision at: 2024 CanLII 24885 (ON SC).

Get on with your deal or lose the farm

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 10 Dec 2024 20:19:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

A recent decision of the Ontario Superior Court of Justice tells a sad tale of sisters fighting over the family farm. The 100-acre farm with a two-storey farmhouse and bank barn had been in their mother’s family since the 1920s. By the time the father died in the late-2000s, the mother was living in a long-term care home, incapable of managing her property. Her four daughters held power of attorney for property, but could not agree on how to manage the property including the farm. For five long years, the sisters engaged in “bitter litigation”, launching court actions back and forth.

Things looked up by the end of 2015 when the sisters resolved their litigation through Minutes of Settlement. They agreed to structure their mother’s property so that it would be divided equally among the sisters consistent with the wording of their mother’s will. With respect to the farm, though, the will and a codicil to the will directed that the farm not be sold for one year after the mother’s death “to enable one or more of my children to find a way to keep it in the family, failing which the farm shall be sold and the proceeds shall form a part of the residue of my estate. It is my fervent wish that my children will assist one another in ensuring that, if at all possible, the farm will remain in the ownership of one or more of them.”

The sisters’ mother passed away in late-2020, triggering a countdown of sorts towards dealing with the farm property. By the mother’s date of death, the farm was valued at approximately $1.9 million. However, in 2014, the farm had been appraised at $890,000 and the sisters had already agreed in their Minutes of Settlement that two of the sisters would pay the other two sisters $422,750 for the farm (being one-half of the $890,000 less $44,500 real estate commission). Each sister was entitled to one-quarter of the value of the farm property. Title to the property was to be transferred to the purchasing sisters by a closing date to be the later of a date in February, 2016 and the date on which certain of the mother’s investment assets were to be disbursed.

The farm transaction was not completed in February, 2016. By March, 2018, the transaction had still not been completed. The selling sisters wrote to the purchasing sisters stating: “the agreement was not intended to extend over a period of time and needs to be fulfilled”. They set a deadline of April 15, 2018 for completion of the deal failing which they would conclude that the purchasing sisters didn’t “intend to fulfill the Minutes of Settlement” and would “take the appropriate course of action.”

Fast-forward to 2022 and the purchasing sisters commenced a court application asking the Court to order that they could pay $422,750 to the selling sisters and that the selling sisters would have to transfer to the purchasing sisters title to the farm. Again, as at the time of the mother’s passing in 2020, the farm had been valued at about $1.9 million – a $422,750 purchase price would represent a discount on the 2020 value of the farm of more than 50%. It was the court application brought by the purchasing sisters that culminated in the recent Superior Court decision.

Madam Justice C. D. Braid heard the application and concluded the following: 1) the Minutes of Settlement were a contract between the sisters; 2) the purchasing sisters “repudiated” the contract by failing to complete the transaction with the selling sisters; and, 3) the selling sisters accepted the repudiation of the contract, bringing their agreement to accept $422,750 in exchange for the farm to an end. As such, the purchasing sisters were no longer entitled to purchase the farm pursuant to the terms of the Minutes of Settlement.

While the purchasing sisters had never expressed an intention not to complete the transaction as required by the Minutes of Settlement, Justice Braid found that the purchasing sisters’ “extreme delay” meant they repudiated (or disavowed) their contract with the selling sisters. Where a contract contains sufficiently clear terms about price, the property, and the parties, the Court will infer that the parties expect a transaction to be closed “within a reasonable period of time”. Where a contract doesn’t stipulate a specific time of performance, the law implies a term that the contract is to be performed “within a reasonable time”. Where delay in performance “becomes so long as to go to the root of the contract”, the contract will be considered repudiated or fundamentally breached and the party suffering the delay will be excused from performance.

Faced with repudiation of the Minutes of Settlement by the purchasing sisters, the selling sisters could have chosen to keep the contract alive and have sought to enforce the deal. However, it was their option to accept the repudiation and end the contract. With the Minutes of Settlement now unenforceable, Justice Braid ordered that the family farm be sold on the open market and the net proceeds from the sale be divided equally between the sisters in accordance with their mother’s will. Her Honour did specify that the purchasing sisters were not prohibited from making an offer to purchase the farm once it was listed, but the purchasing sisters had lost the opportunity to buy the farm at the 2014 price.

Read the application decision at: 2024 ONSC 603 (CanLII).

UPHELD ON APPEAL: 2024 ONCA 791 (CanLII).

Court not convinced that area is wetland – farmer acquitted

noreply@blogger.com (John D. Goudy, Lawyer) — Fri, 20 Sep 2024 15:50:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Conservation Authorities in Ontario are authorized by the Conservation Authorities Act (the “Act”) to make regulations “prohibiting, regulating or requiring the permission of the authority for straightening, changing, diverting or interfering in any way with the existing channel of a river, creek, stream or watercourse, or for changing or interfering in any way with a wetland”. Authorities can also make regulations “prohibiting, regulating or requiring the permission of the authority for development if, in the opinion of the authority, the control of flooding, erosion, dynamic beaches or pollution or the conservation of land may be affected by the development”. There is almost no area within Southern Ontario that is not subject to a regulation passed by a local or regional Conservation Authority. However, generally, these regulations can only apply to river or stream valleys, hazardous lands or wetlands – “regulated areas” or “zones”.

What constitutes a regulated area or zone is not always obvious. For instance, a river or stream valley doesn’t actually have to contain a watercourse – the regulations can apply to areas with “depressional features associated with a river or stream”. The Act defines “hazardous land” as “land that could be unsafe for development because of naturally occurring processes associated with flooding, erosion, dynamic beaches or unstable soil or bedrock”, but doesn’t define what might be unsafe. To be considered “wetland” under the Act, land must meet the following four highly technical requirements (and not fall under the exception):

(a) be seasonally or permanently covered by shallow water or have a water table close to or at its surface,

(b) directly contribute to the hydrological function of a watershed through connection with a surface watercourse,

(d) have vegetation dominated by hydrophytic plans or water tolerant plants, the dominance of which has been favoured by the presence of abundant water, but not be periodically soaked or wet land that is used for agricultural purposes and no longer exhibits a wetland characteristic referred to in clause (c) or (d). [emphasis added]

The regulation of development also applies to “other areas where development could interfere with the hydrologic function of a wetland, including areas within 120 metres of all provincially significant wetlands and areas within 30 metres of all other wetlands.”

In a prosecution by a Conservation Authority for development in a regulated area without a permit or for interference with a wetland, the Authority must establish beyond a reasonable doubt that the activity carried out by the party charged occurred within a regulated area. The Ontario Court of Justice recently dismissed charges against a farmer related to clearing work carried out in 2019 because the Conservation Authority failed to prove beyond a reasonable doubt that the area cleared was a wetland, as was alleged by the Authority. The farmer had removed trees and vegetation from a “wooded area” located between tile-drained cultivated land to the north and east and intersecting drainage ditches to the south and west. The land was cleared to extend the tile drainage system and bring the land under cultivation. After receiving an anonymous complaint about trees being removed from the farmer’s property and conducting a further investigation, the Conservation Authority laid various charges, including a charge for interference with a wetland.

At trial, both the Conservation Authority and the farmer called expert witnesses to testify on the question of whether the area cleared was, in fact, a wetland. The Authority called one of its employees who had taken soil samples from the cleared area a few months after the clearing work was completed and took photos. She confirmed that on her visit to the site in the midst of the spring thaw in April, 2020 she did not observe water on the cleared area. She confirmed that she did not encounter the water table in any of her examinations of the area. However, the Conservation Authority’s expert witness did say that the clay soil and “orange soil” she encountered could be indicators of hydric soils. Also, she observed vegetation that she considered to be “hydrophytic plants” adjacent to the cleared area and in the piles of cleared vegetation or “slash piles”. The Authority’s expert’s opinion was that the cleared area met the statutory definition of a wetland.

The farmer’s expert witness dug two 1-metre-deep pits just outside the cleared area to assess the soil in the cleared area. His opinion was that hydric soils must contain gley soil, a rich grey clay-like soil. The farmer’s expert did not encounter any gleys. While he did find that the soils were imperfectly drained and opined that imperfectly drained soil could be considered hydric soil depending on the vegetation present, his conclusion was that the cleared area was not a wetland within the meaning of the term used in the Act.

The Justice of the Peace presiding over the case observed that there was no evidence that the cleared area was seasonally covered by water, that any hydric soils present were caused because of an abundance of water in the area, or that hydrophytic or water tolerant plants dominated the area (as favoured by an abundance of water). As such, three of the four requirements for a “wetland” under the Act were not met and the wetland interference charge had to be dismissed.

Statute Labour for the 21st Century?

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 13 Aug 2024 19:53:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

I probably shouldn’t have been surprised, but I was surprised upon learning recently of a municipal by-law requiring landowners to keep grass and weeds down below a maximum height on the municipal boulevard abutting private properties. The by-law was passed by an urban municipality – a city in the GTA area – and applies to all “private land” regardless of its use. While it is easy to picture the small strip of grass located between the edge of the street or sidewalk and a residential front yard and to understand why a municipality might expect the homeowner to cut the grass on the boulevard (road allowance) strip if the homeowner is cutting the lawn on the private property anyway, what about larger farm properties or industrial properties within the municipality? Is it fair to impose an obligation to maintain large stretches of municipal property on non-residential landowners? Is it legal?

It turns out that boulevard maintenance by-laws are fairly common in Ontario. A 2012 report from the “Boulevard Maintenance Task Force” to municipal council in one community explains the rationale and authority for the by-laws:

“Most residents and business owners … assume responsibility for maintaining turf areas on municipal boulevards abutting their properties, however, some property owners only cut the grass within their own fenced yards or only up to the limit of the sidewalk fronting their homes. This practice creates an unsightly, unkempt appearance within the community particularly on residential corners and side lots.

[…]

“Amendments to the Ontario Municipal Act now authorize municipalities to enact By-laws requiring property owners to maintain the boulevard areas abutting their private properties. Enforcement of the By-law would be similar to the current practice whereby Enforcement Officers would respond to complaints by conducting site visits and providing formal notice to the owner to cut the grass. However, if the owner chooses to ignore the notice, the Town will undertake the work and add the costs incurred (including administration and overhead) to the tax roll.”

I have been unable to find any specific authorization in the Municipal Act, 2001 for by-laws that require property owners to maintain abutting municipal lands, whether within a road allowance or not. The preamble to the by-law I looked at from the GTA-area municipality refers to the very broad authorizations in Section 11 of the Act, which permit by-laws for the “economic, social and environmental well-being of the municipality, including respecting climate change” and for the “health, safety and well-being of persons.” The Act also provides that municipalities may require a property owner to clean and clear the owner’s own land and may prohibit and regulate with respect to public nuisances. However, there doesn’t appear to be any specific authority to require private landowners to carry out maintenance work on municipal-owned property.

Another by-law I reviewed stated in its preamble that: “AND WHEREAS … section 446 of the Municipal Act, S.O. 2001, c.25, grants a municipality the authority to direct or require a person to do a matter or thing, and the municipality may also provide that, in default of it being done by the person … directed or required to do it, the matter or thing shall be done at the person’s expense and, the municipality may recover the cost of doing a matter or thing from the person directed or required to do it by action or by adding the costs to the tax roll and collecting them in the same manner as property taxes”. However, Section 446 of the Act doesn’t actually grant authority to order someone “to do a matter or thing” – it only provides for the municipality’s right to charge back the cost of doing the matter or thing where a person doesn’t do it. The municipality still has to have had the legal authority to order someone to do something in the first place.

So are municipalities really authorized to order landowners to maintain the municipal boulevard or road allowance adjacent to private lands? Keeping weeds and grass down to an acceptable height along streets and highways is certainly a reasonable goal that should be supported by all members of a community. However, boulevard maintenance by-laws don’t just call on certain members of the community to devote time and expense to the upkeep of public lands; a requirement to carry out work on municipal lands also shifts the risk of liability to private landowners. I didn’t see any by-law that mentioned protections for landowners who are required to enter upon and carry out work on boulevards or road allowances. If damage is done or someone gets hurt, the landowner may very well be on the hook.

If there is legislation that authorizes a municipality to require private landowners to carry out operations on abutting municipal lands (and to take on the risk of liability), it doesn’t seem to me to be the Municipal Act, 2001. There used to be a law in Ontario called the Statute Labour Act, which obligated landowners to contribute labour to maintain municipal roads. The law dated back to the first Acts of the Parliament of Upper Canada in 1793 and effectively enabled property owners to contribute labour in lieu of paying taxes in cash. The original Act provided: “That the roads and highways, in and through every parish, township or reputed township shall be cleared, repaired and maintained by the inhabitants thereof, and that every person being a householder or freeholder, shall either in person or by a sufficient man in his stead, be obliged to work on the roads …”. The Statute Labour Act was repealed on January 1, 2022 and no new legislation has been passed to replace it.

Municipality cuts down abandoned orchard trees deemed noxious weeds

noreply@blogger.com (John D. Goudy, Lawyer) — Fri, 26 Jul 2024 16:02:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

According to Ontario’s Weed Control Act, “every person in possession of land shall destroy all noxious weeds on it.” The owner of land is deemed by the Act to be in possession of the land. Provincial and municipal road authorities are deemed to be in possession of road allowances. Noxious weeds are those that are prescribed in the Regulation made under the Act (including giant hogweed, poison-ivy, leafy spurge, sow-thistle, ragweed, etc.) and other plants that may be deemed to be a noxious weed (called a “local weed”) in a by-law passed by a municipality. The council of upper-tier municipalities (counties, regions, cities) and some other municipalities are required by the Act to appoint one or more area weed inspectors to enforce the Act. Only municipalities that have appointed a weed inspector may pass a by-law deeming other plants to be noxious weeds.

Weed inspectors are empowered to enter any land and buildings (dwelling houses excepted) between sunrise and sunset for the purpose of searching for noxious weeds and weed seeds and may also inspect implements, machinery, vehicles, crops and other plants. Where access to a property is denied, the weed inspector can obtain a search warrant without prior notice to the owner or occupier of the property. The inspector may order a person in possession of land to destroy noxious weeds or weed seeds. If the person in possession does not comply with the order, the weed inspector may “cause the noxious weeds or weed seeds to be destroyed in the prescribed manner”, with the cost of the work charged back to the owner of the lands by the municipality. The prescribed manner of destroying noxious weeds includes pulling or removing the plants from the soil, cutting the roots or stalks of the plants, ploughing or cultivating the soil, or treating the plants with a herbicide.

In August of this year, Justice Sheard of the Ontario Superior Court of Justice released her decision in a lawsuit brought by landowners against their local municipality after the Municipality cut down an apple and pear orchard on the landowners’ property. The orchard was cut down in 2014 and the landowners were billed $12,800 for the work. Their court action was commenced in 2015 and a trial took place before Justice Sheard over several days in 2022 and 2023. The lawsuit included claims for: $1,500,000 in general damages for negligence, misfeasance in public office, negligent assumption of jurisdiction, trespass, and nuisance; $1,000,000 in punitive and exemplary damages; a declaration that the Municipality’s weed by-law was void for bad faith, vagueness, overreach, etc.; a declaration that the landowners’ natural justice rights were violated; and an order for reimbursement of the $12,800 cost of the tree removal work.

The landowners had purchased their property in May, 2011. The property was 20 acres in size and included two abandoned orchards of about 2.5 acres each (only one of which was at issue in the litigation). Very shortly before the landowners’ purchase, a new neighbour purchased an adjacent farm property where he planted apple trees with a view to developing an orchard. That neighbour had concerns that the landowners’ abandoned orchard was full of disease and insect pests that would threaten the existence of his young apple trees. The neighbour raised this concern with the Municipality and had learned through OMAFRA that other municipalities had passed by-laws designating abandoned orchards as noxious weeds. He requested that his own municipality do the same.

In 2013, the Municipality’s Council passed a by-law designating diseased fruit trees as “local weeds” to be treated as noxious weeds pursuant to the Weed Control Act. A “diseased fruit tree” was defined in the by-law as “a fruit tree as herein defined, whether dead or alive, which fruit tree as part of a planting of greater than 0.25 ha (0.618 ac) and which planting is within the 375 m (1,230.31 ft) of a fruit growing operation or plant nursery operation, and which planting has been neglected from normal standards of good farming practices, such that it exhibits fruit tree disease or populations of insects which represent a reasonable threat by movement to such commercial fruit growing operation.” A “fruit tree” included both apple trees and pear trees.

In April, 2014, the Municipality determined that the landowners’ one abandoned orchard contained diseased fruit trees and issued an order to the landowners to “bring down and burn” the apple trees within 30 days of service of the order. Nearly four months later, the trees had not been destroyed. In August, 2014, the Municipality moved in and had the diseased trees cut down.

Justice Sheard dismissed the landowners’ court action in its entirety. She found that the weed control by-law passed by the Municipality was not void – it was clearly within the scope of the Municipality’s statutory authority given to it under the Act. The Municipality followed the proper procedure in passing the by-law and the bylaw was submitted to and approved by the Minister of Agriculture, Food and Rural Affairs as required by the Act. Justice Sheard disagreed with the landowners that the by-law targeted them in particular, commenting:

Had the plaintiffs acted in accordance with “normal standards of good farming practices” in the management of the Orchard, the Bylaw would have been of no concern to them. Indeed, had the plaintiffs acted on their stated objective to develop a commercial apple growing operation, they might well have been advocates for the Bylaw, intended to protect all fruit growing or plant nursery operations.

Having found that the by-law itself was valid, Justice Sheard concluded that the landowners’ court action must fail because their recourse was not to the Court but to the chief weed inspector appointed pursuant to the Weed Control Act. Where a municipal weed inspector makes an order against a person in possession of land, that person may appeal the order to the chief inspector who may either confirm or revoke the order or make a new order. The chief inspector’s order may be appealed to the Divisional Court. In this case, the landowners did not appeal the order and were bound by it. As the order was found to be valid, there was no basis on which the landowners could sue the Municipality for damages allegedly resulting from the operation of the order.

Read the decision at: 2023 ONSC 4540 (CanLII).

Reasonable Apprehension of Bias Strikes Farm Tribunal

noreply@blogger.com (John D. Goudy, Lawyer) — Thu, 14 Mar 2024 14:13:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Courts and tribunals in Canada are to be held to the highest standards of impartiality. This is not just a matter of decision makers subjectively acting fairly and impartially (i.e. actually being fair and impartial) but just as importantly a matter of fairness and impartiality being demonstrated to the public. As articulated by the English Chief Justice Lord Hewitt: “[it] is of fundamental importance that justice should not only be done, but should manifestly and undoubtedly be seen to be done.” A hearing will be unfair, and justice will not be seen to be done, if the words or actions of the decision maker give rise to a “reasonable apprehension of bias” to the “informed and reasonable observer”. Decision makers must be fair and impartial and must also appear to be fair and impartial. If there is an appearance of bias, then the decision maker is subject to review.

Impartiality has been described by the Supreme Court of Canada as “a state of mind in which the adjudicator is disinterested in the outcome, and is open to persuasion by the evidence and submissions.” Bias is the opposite: “a state of mind that is in some way predisposed to a particular result, or that is closed with regard to the particular issues.” The words or actions of a decision maker will give rise to a reasonable apprehension of bias where “an informed person, viewing the matter realistically and practically – and having thought the matter through” would conclude that the decision maker was not impartial. That “informed person” must have knowledge of all relevant circumstances, including “the social reality that forms the background to a particular case”, and must have more than a “mere suspicion” of impartiality. The threshold for finding actual or perceived bias is high because it calls into a question an element of judicial integrity.

Reasonable apprehension of bias became an issue recently in a matter before the Normal Farm Practices Protection Board (the “NFPPB”). The NFPPB is a tribunal with the power “to inquire into and resolve a dispute respecting an agricultural operation and to determine what constitutes a normal farm practice” and “to make the necessary inquiries and orders to ensure compliance with its decisions.” A person directly affected by a disturbance from an agricultural operation can apply to the Board for a determination “as to whether the disturbance results from a normal farm practice.” Farmers directly affected by a municipal by-law or “persons who want to engage in a normal farm practice as part of an agricultural operation on land in the municipality and have demonstrable plans for it” can apply to the Board for a determination “as to whether a practice is a normal farm practice for purposes of the non-application of a municipal by-law.”

Following a seven-day hearing in 2022, the NFPPB dismissed an application made by cottage owners who complained of nuisances caused by a neighbouring farm operation. The Applicants alleged improper storage of manure, an increase in manure odour and flies as a result of the farm’s damage to and/or removal of hedgerows and other vegetative buffers, nuisance caused by manure laden dust, and odour and flies caused by deadstock disposal. The respondent farm had been operating in the same location for 50 years and the NFPPB noted that the cow calf farm was operated using practices similar to other cow calf operations. The NFPPB dismissed the application on the basis that the Applicants did not show “substantial interference and discomfort which would not be tolerated by the ordinary occupier in their location” and did not demonstrate “unreasonable interference with the use and enjoyment of the Applicants’ land.”

The respondent farm applied for a costs award against the unsuccessful applicants, arguing that the application was “frivolous and/or vexatious”. The NFPPB agreed that the application was frivolous because, while the Applicants alleged that the respondent farm had altered its practices intentionally to aggrieve the Applicants, the NFPPB determined that the respondent farm’s operations were “normal farm practices”. The NFPPB also took note of the fact that the Applicants were pursuing other legal actions against the respondent farm outside of the NFPPB process, that the Applicants had raised a multitude of issues without presenting evidence on particular issues, and that the Applicants had through their conduct throughout the proceedings attempted to malign and vilify the respondent farm. In the end, the NFPPB ordered that the Applicants pay the respondent farm $40,000 in costs.

The Applicants requested a review of the decision on costs, both on the issue of the amount of the costs awarded and on the issue of reasonable apprehension of bias. On the latter issue, the Applicants raised a concern about the appearance of a conflict of interest on the part of one of the three members of the NFPPB panel who heard the application and delivered the decision on costs. It turned out that one of the panel members had sat as an adjudicator on a panel of the Agriculture, Food and Rural Affairs Appeal Tribunal (“AFRAAT”) that also included as a member a senior partner in the law firm representing the respondent farm in the NFPPB proceeding. That AFRAAT proceeding was taking place at or around the very same time as the NFPPB hearing in 2022.

The NFPPB Vice-Chair considering the review request determined that an appearance of bias did result from the fact that one of the NFPPB panelists had sat on another tribunal panel with a lawyer who indirectly was the lawyer for the respondent farm (that is, the respondent farm was technically a client of the lawyer’s law firm and, therefore, of the lawyer himself). The Vice-Chair concluded: “When viewed from that perspective, an informed reasonable person viewing the matter realistically and practically, would conclude that the decision maker whether consciously or unconsciously would not decide fairly. There is the appearance of bias at the original hearing that would continue to exist for the subsequent costs decision.” The Vice-Chair ordered a re-hearing on costs before a full panel of the NFPPB.

Read the decision at: 2023 ONNFPPB 3 (CanLII).

“Farm land used only for farm purposes” or just a “hobby farm”?

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 06 Feb 2024 14:31:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

According to the Assessment Act (the “Act”), the legislation that governs property taxation in Ontario, the Assessment Review Board (the “ARB”) has authority to determine whether lands are “farm lands used only for farm purposes by the owner” for purposes of valuing property. Section 19(5) of the Act provides that in valuing “farm lands used only for farm purposes by the owner”, consideration must be given to the current value of lands and buildings for farm purposes only (i.e. not their value for any other purpose) and consideration must not be given to any sales of lands and buildings to “persons whose principal occupation is other than farming”. Generally, lands valued as “farm lands” will be assessed a lower value for property tax purposes than lands valued as residential, commercial or industrial lands because of the restrictions in Section 19(5).

The ARB has previously identified several factors to be considered in determining whether lands are “farm lands”, including: physical characteristics of the land, including soil quality and its capacity to support crops if the activity is raising crops; use of surrounding lands, to the extent that activities in the immediate vicinity suggest that the land on the property will support a farming activity; the history of the use of the property, including whether the land has previously been farmed; whether activities on the land are undertaken with a legitimate intention to “farm”, as opposed to activities intended to create the appearance of “farming” for purposes of obtaining favourable tax treatment; the scale of the farming activity in the sense that the activity must not be too limited to indicate that farming is taking place; permitted use of the land, including zoning; the general nature of the locality; whether the lands have physical characteristics of a farm; and, whether the lands involve a bona fide farmer. The ARB’s focus is on the use of the land – a factual issue to be decided on a case-by-case basis.

The ARB recently considered an appeal by a landowner in the Kingston, Ontario area who claimed a reduction in the assessed value of his property because it should be considered “farm lands used only for farm purposes”. The subject property was assessed at $428,000, with $121,500 apportioned to “Conservation Lands” and $306,500 apportioned to lands in the “Residential” property class. The appellant landowner also contended that the property should be classified in the “Farm property class”. In response to the appeal, the Municipal Property Assessment Corporation (“MPAC”) took the position that the subject property was properly classified as a combination of “Conservation Lands” and “Residential” lands, but offered that the proper value to be assessed was $368,000. The appellant landowner agreed with this proposed value.

It should be noted that while the ARB has authority to determine whether lands are “farm lands” for purposes of assessing the value of the lands, it does not have authority to classify lands as “farm lands”. The General Regulation made under the Act says that, where the ARB has determined the value of “farm lands used only for farm purposes” but there is still a question as to whether the lands should be included in the “Farm property class”, the ARB must refer the question to the Agriculture, Food and Rural Affairs Appeal Tribunal. So, in this particular appeal proceeding before the ARB, there was the odd circumstance of two parties who agreed on the number to be decided (the practical issue that the ARB did have authority to determine) but disagreed on how to get to the number.

Although the ARB could not determine the property classification issue, it did proceed to determine that the appellant’s lands were “farm lands used only for farm purposes by the owner”. The subject property was over 90 acres in size, with a one-storey single family detached residence built in 1981 and outbuildings including a barn and goat pen. The appellant landowner testified that he used roughly 80 acres for farm activity, including some of the lands classified as “Conservation Lands”. He cited activities such as: renting part of the property for horse grazing and boarding; gathering and processing maple sap from trees on the property; keeping laying hens and selling their eggs for cash; raising and harvesting goats; raising and harvesting cattle; clearing pasture land; adding new fences and gates; etc.

MPAC’s assessor testified that he saw four cattle, two goats and 40 chickens onsite when he visited the farm. MPAC submitted that the appellant’s activities did not constitute a bona fide farm operation but only a small hobby farm. However, the appellant’s evidence about his activities on the property was uncontested and the ARB accepted that, while the appellant’s operation was small, it was still farming: growing hay, using pasture to raise livestock; harvesting livestock; and, selling eggs. The ARB rejected MPAC’s argument that the subject property was a “hobby farm” and could not qualify as “farm land used only for farm purposes”. The ARB concluded:

“The Board finds that the term “hobby farm” is imprecise in this instance, and the exact parameters of what constitutes a “hobby farm” as compared to “farm land used only for farm purposes” is unclear in the evidence and submissions before the Board. No single factor is determinative of whether a property is, or is not, farm lands used only for farm purposes. Taking a purposive approach to interpreting s. 19(5), considering the entirety of the evidence, and weighing the factors … above, the Board finds that a portion of the Subject Property is farm lands used only for farm purposes within the meaning of s. 19(5) of the Act.”

Read the decision at: 2023 CanLII 39089 (ON ARB)

The dangers of insufficient depth of cover over pipelines

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 09 Jan 2024 18:11:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

At one time, oil and gas pipelines in Canada were installed with as little as two feet of depth of cover – maybe less. Although the minimum depth of cover required over new pipelines as set out in the applicable CSA Standard Z662 remains two feet, companies today routinely install pipelines with four feet depth of cover or more. However, a major deficiency in the depth of cover standard has been the absence of a requirement to maintain depth of cover over pipelines to any specified minimum. A pipeline may be sufficiently deep at installation to ensure the safety of those using the land above the line, but what if depth of cover erodes over time?

Thousands of kilometres of oil and gas pipelines run beneath agricultural land across Canada with ever larger and larger farm equipment tilling, planting, spraying, fertilizing and harvesting above. Pipelines lying four feet or more beneath the surface may be unlikely to pose a risk of danger to agricultural operations above, but what of pipelines only two feet beneath the surface? What if the ground above a pipeline installed long ago with two feet depth of cover has eroded by water or wind or been displaced by decades of tillage?

In Ontario, the CSA standard for depth of cover has been modified by regulation to include the following requirements:

10.6.5.5

Operating companies shall develop written procedures for periodically determining the depth of cover for pipelines operated over 30% of SMYS of the pipe at MOP. Such written procedures shall include a rationale for the frequency selected for such depth determinations. Where the depth of cover is found to be less than 60 cm in lands being used for agriculture, an engineering assessment shall be done in accordance with clause 3.3 and a suitable mitigation plan shall be developed and implemented to ensure the pipeline is adequately protected from hazards.

Where a pipeline company determines that the current depth of cover over a pipeline is less than 60 cm (2 feet), the company must perform an engineering assessment and develop a “suitable” mitigation plan to ensure the pipeline is adequately protected. The company is required to have written procedures for “periodically” determining the depth of cover over its pipelines. What passes for “suitable” in a mitigation plan or “periodically” in monitoring depth of cover over pipelines is not prescribed by the CSA standard or the Ontario regulation.

Are the current requirements for monitoring depth of cover and addressing instances of insufficient depth of cover enough to protect those carrying out agricultural operations and other activities above pipelines? A recent incident suggests pipeline landowners may have cause for concern.

The Transportation Safety Board of Canada (“TSB”) has released a report of its investigation of an October, 2021 natural gas pipeline rupture in Manitoba caused when a farmer struck the line with a ground-scraping blade. The strike happened in an agricultural field in a rural area in southwestern Manitoba near the Saskatchewan border. To the east of the pipeline that runs through the field, there is a drainage channel running almost perpendicularly to the pipeline. The channel crosses over the line and drains into a small marsh area. At the time of the strike, the farmer was pulling an 18-foot-wide landleveller/scraper with a large articulated four-wheel-drive tractor to scrape weeds and silt from the bottom of the drainage ditch. The blade was in a “flat position”, which has a maximum blade depth of just 26 cm (less than 2 feet) according to the manufacturer of the implement. The farmer had carried out the same scraping process periodically for several decades prior to the pipeline strike. It was determined that, at the time of the strike, the ground-scraping blade was penetrating the ground less than 12 cm (less than 5 inches).

The regulation in place at the time the pipeline was installed in 1960 required that it be buried to a depth of at least 61 cm. Obviously, the depth over the line had diminished considerably since the time of construction at least in the location of the strike. The company responsible for the pipeline conducts annual right-of-way inspections, but had not noted any unsafe conditions at the occurrence location. The last depth of cover survey conducted by the company was in 2009, with the closest identified issue being about 700 metres upstream of the occurrence location. The 2009 survey involved taking depth measurements at 25 m spacing generally, at 3 m spacing across sloughs, depressions or abrupt changes in elevation, and at all key features such as the bottom of ditches, drains and streams. The measurement taken closest to the site of the 2021 pipeline strike was 4.5 metres downstream of the site. As depth of cover at that location was 88 cm (approximately 2.9 feet), a more detailed assessment of the area was not triggered.

The TSB concluded that the October, 2021 pipeline strike and rupture was caused in part because the pipeline company did not identify that the depth of cover over its pipeline had been gradually reduced through the removal of weeds and silt from the drainage ditch over time. The TSB warned that: “If a pipeline company’s damage prevention program does not consider variations in a pipeline’s depth of cover over time, depth of cover reductions may go unmitigated, increasing the risk of pipe damage due to agricultural activities.”

Read the TSB Report at: P21H0143.

Seeking a Great-Great-Great Windfall

noreply@blogger.com (John D. Goudy, Lawyer) — Thu, 09 Nov 2023 19:05:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Until recently, there was a thin strip of laneway running behind a building not far from Downtown Toronto that still belonged – at least on paper – to the man who bought it 1824. Although that owner died in 1870, he was still considered by the Land Registry in Ontario to be the registered owner of the strip, which is wide enough only for a car (or horse and cart) to pass along. On an application made to the Superior Court, the present-day corporate owner of the adjacent property has now been declared the owner of the strip of laneway on the basis of adverse possession.

By operation of Sections 4 and 15 of the Real Property Limitation Act, a person who has been in legal possession of another’s land for a period of ten years while the land has been registered under the Registry Act – adverse possession – can obtain possessory title to the land; the ownership interest of the registered titleholder will be extinguished. The claimant for possessory title must meet three requirements: 1) the claimant (or his or her predecessors-in-title) must have had actual possession of the land being claimed, which means “open, notorious, peaceful, adverse, exclusive, actual, and continuous having regard to the nature of the disputed property”; 2) the claimant must have had the intention to exclude the registered owner and other persons entitled to possession of the disputed land (an “animus possidendi”); and, 3) the registered owner and any other persons entitled to possession must have been excluded for the 10-year statutory period. Where the three requirements are met, the claimant can seek a declaration from the Court that the claimant is the true owner of the disputed lands and an order requiring that the Land Register be amended to reflect that ownership (i.e. making the claimant the “new” registered owner).

The claim for possessory title to the lands in this case was fairly straightforward – the Judge even said it was “not a close call”. The Applicant, the current corporate owner of the adjacent property, had purchased its land from a family who had held the land continuously since 1941. The son of the 1941 purchaser gave uncontested evidence in support of the application that his family had always believed that they owned the thin strip of laneway at the back of their property. They didn’t know that it was not part of their property. The 1941 purchaser ran a business and parked his car on the laneway every day. When he passed away, his son continued to park there. No one ever objected to that use or challenged the family’s control of the laneway. In fact, in the early 1970s, the family erected a chain across the entrance to the laneway to prevent any access to it without their permission.

What was noteworthy about this case, though, was the involvement of the great-great-great grandchildren of the 1824 purchaser. The Applicant had hired a genealogist to identify and locate the descendants of the registered owner of the laneway so that they could be given notice of the proceeding. Notice of the application was given so that anyone with rights of ownership in the property could assert their claim to the lands in opposition to the Applicant. However, as observed by the Judge: “some of the respondents seem to have misunderstood the purpose of the notice they received. They oppose the application as if they, as a group, have some residual right to share the property (or its monetary value). They do not have any such rights.”

None of the great-great-great grandchildren of the 1824 purchaser provided evidence to show that any of them had a right to the land in issue. The fact that the respondents could “trace roots to an owner 200 years ago” did not mean they owned the land. While the last will and testament of their ancestor was known, the possible history of the ownership of the land after that is unknown: “… no one knows the identity of any residual beneficiaries of [the owner’s] children, let alone his grandchild, great-grandchildren etc. Gifts could have been made to charity or to relatives by marriage, or to anyone.”

Ownership now of the laneway strip for the great-great-great grandchildren would have been a windfall – there was no evidence that any of them knew anything about the laneway before being given notice of the court application. However, taking a run at that windfall came with a cost. The Applicant incurred costs of more than $112,000; it sought indemnity for about $25,000 from those respondents who opposed the application. In response to the costs claim by the applicant, the respondents pleaded that any costs they are ordered to pay should be reduced because they were self-represented litigants: “Individuals cannot afford the legal costs that a large corporation can afford. Yet we feel we should be able to present our case at a Hearing without having to risk a huge (huge for us) legal bill. For access to justice to be fair, we think it is reasonable that the costs award to the applicant be substantially reduced from the amount requested.”

The Judge didn’t go for that argument, awarding the $25,000 requested by the Applicant. The Judge concluded: “Like all civil litigation, this case was about money. The opposing respondents wanted the developer to pay them for great-great-great grandfather’s laneway. … The opposing respondents felt a heavy responsibility to make a ‘large corporation’ building a ‘high rise development’ pay them money. They chose to see a refusal as an affront.”

Read the decision at: 2022 ONSC 6776 (CanLII).

Rights of First Refusal – give them the attention they deserve

noreply@blogger.com (John D. Goudy, Lawyer) — Wed, 26 Apr 2023 18:04:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In the real estate world, a Right of First Refusal (“ROFR”) creates an opportunity for the holder of the right to match an offer made to purchase a property – it’s a “sort of” option to purchase that will arise in the future under certain circumstances. In the most common scenario, the owner of the property has an obligation to offer the property for sale to the holder of the ROFR when the owner receives a bona fide third-party offer to purchase and intends to accept the offer. The holder of the ROFR can then choose to match the terms of the third-party offer and purchase the property. If the holder of the ROFR doesn’t choose to match, the ROFR will in most cases be exhausted.

A ROFR is commonly created through agreement between the owner of a property and the person to whom the right is granted. Often the ROFR will be given back to a vendor in a property transaction. The vendor sells the property to the purchaser, but the purchaser agrees that the vendor will have a ROFR to re-purchase the property if the purchaser decides to sell. This ROFR is not a true option to re-purchase that can be exercised by the vendor at its discretion. Instead, the purchaser (the new owner of the property) must first decide to sell the property, which gives rise to the obligation to offer it for sale to the vendor (the previous owner of the property).

Sometimes the ROFR will be granted in a detailed and lengthy stand-alone agreement prepared by the parties’ lawyers. Probably more often than not, though, the ROFR is an afterthought thrown into the schedule of additional terms attached to an Agreement of Purchase and Sale. Does a statement as simple as “Vendor will have the first right of refusal to purchase the property from the Purchaser” create an enforceable ROFR? Maybe. Maybe not. A judge being asked to enforce the ROFR would need to “read into” the agreement one or more implied terms: that the Purchaser must present the Vendor with any offer the Purchaser is prepared to accept and that the Vendor would then have an opportunity to match the offer, the Vendor’s right to be exercised, as stated by the Court of Appeal for Ontario in one decision, “in a reasonable time given the circumstances that exist when the offer is made.”

The enforceability of the ROFR is of most importance to the party who is granted the right, so that party would be well-advised to take the time to craft an agreement that won’t depend on the Court’s willingness to infer the existence of unwritten terms. At a minimum, the ROFR should spell out that when the property owner receives an offer to purchase the property that the owner is prepared to accept the owner must notify the ROFR holder of the offer and its terms. And the ROFR should provide clear direction to the ROFR holder on how to exercise the right and within what period of time the right must be exercised. The ROFR holder may also want impose conditions on the terms of third party offers that may be considered by the property owner so that the owner doesn’t use unreasonable terms such as excessively high deposit amounts or very short closing dates to render the ROFR impossible for the right holder to exercise.

This should probably go without saying, but an agreement for a ROFR should always be made in writing. In Ontario, legislation called the Statute of Frauds, R.S.O. 1990, c. S-19 provides the following:

No action shall be brought to charge any executor or administrator upon any special promise to answer damages out of the executor’s or administrator’s own estate, or to charge any person upon any special promise to answer for the debt, default or miscarriage of any other person, or to charge any person upon any contract or sale of lands, tenements or hereditaments, or any interest in or concerning them, unless the agreement upon which the action is brought, or some memorandum or note thereof is in writing and signed by the party to be charged therewith or some person thereunto lawfully authorized by the party.

Generally speaking, contracts for the sale of land must be in writing to be enforceable. One exception to that rule is the equitable doctrine of part performance. If it can be shown that an oral contract was made and that part of the contract was performed by the parties, then the Court may find the contract is enforceable in spite of the Statute of Frauds. As stated in the decision of the Court of Appeal in Erie Sand & Gravel Ltd. v. Seres’ Farms Ltd.:

The purpose of s. 4 of the Statute of Frauds is to prevent fraudulent dealings in land based on perjured evidence. However, Equity will not allow the Statute of Frauds to be used as an "engine of fraud". It created the doctrine of part performance to prevent the Statute of Frauds from being used as a variant of the unconscionable dealing which it was designed to remedy: see Hill v. Nova Scotia (Attorney General) [1997] 1 S.C.R. 69, at para. 10. The requirements in s. 4 of the Statute of Frauds must give way in the face of part performance because the acts of part performance fulfill the very purpose of the written document - that is, they diminish the opportunity for fraudulent dealings with land based on perjured evidence.

In the ROFR scenario, if the party seeking to enforce an oral ROFR has performed some act under the agreement in reliance on the existence of the ROFR (such as the provision of services), the Court may support the ROFR. However, nothing should be taken for granted. If you want a ROFR, do it right.

Buyer (and Seller) Beware! HST on the Sale of Land

noreply@blogger.com (John D. Goudy, Lawyer) — Wed, 12 Apr 2023 19:43:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

The HST is a potential landmine for real estate solicitors and, consequently, their clients. In Ontario, the 13% surcharge for the Harmonized Sales Tax applies to all real estate transactions unless the transaction is exempt. The default position in the Excise Tax Act is that HST will be added to the cost of a transaction and lawyers and their clients should assume that to be the case unless they can show definitively that an exemption applies – that the transaction is an “exempt supply” within the meaning of the Act.

On a real estate transaction, collection of HST and remittance of the tax to the CRA is normally the responsibility of the vendor. Where HST is payable, CRA will deem HST to have been collected by the vendor. That’s the landmine: even if the vendor didn’t collect HST, the vendor is deemed to have collected it and must immediately pay the amount owing to CRA. Therefore, the question of whether HST is “included in” the purchase price or is “in addition to” the purchase price in a deal between vendor and purchaser can be vitally important. In some cases, a vendor may agree that HST is “included in” the purchase price based on an understanding that no HST is payable. If it turns out that HST is payable, then the vendor’s anticipated recovery on the sale could come up 13% short.

While there are a number of HST exemptions that can apply to the sale of farmland such as sales by an individual to a related person and sales by a partnership, trust or corporation to a partner, beneficiary, shareholder or related person, situations do arise where HST is payable. In a case recently decided by the Superior Court of Justice, a vendor and purchasers sued and counter-sued each other over the way HST was handled in the sale of a mixed-use property after CRA reassessed the HST amount after the transaction closed.

The vendor agreed to sell the purchasers a 14.7-acre property containing a house and equestrian centre. The purchase price was $1.285 million. The parties used the standard Ontario Real Estate Association (“OREA”) Form 100 Agreement of Purchase and Sale and agreed that if HST was payable on the transaction, it would be “included in” the purchase price. As none of the parties to the transaction was an HST registrant, the vendor was responsible to collect and remit any HST payable. The residential portion of the property was not subject to HST, being exempt as used residential property. The commercial/agricultural portion of the property was subject to HST. The vendor and purchasers agreed that 30% of the property would be considered subject to HST, meaning $45,500 would need to be remitted to CRA. The net purchase price would therefore be $1,239,500. After closing, the vendor remitted the HST to CRA and received a Notice of Assessment showing no balance owing.

Before closing, the purchasers’ lawyer had communicated to the vendor that the purchasers intended to use the property for residential purposes. However, the purchasers did not move into the property after closing and instead leased the equestrian part of the property to a commercial tenant and the residential part of the property to a residential tenant. One of the purchasers then applied to CRA to be registered for HST and also requested input tax credits for the HST paid on the purchase of the property. She mistakenly asked for credits based on HST being payable for the whole purchase price (i.e. the entire property) rather than just the non-residential portion.

CRA then looked into the situation and reassessed the HST payable on the original sale transaction. CRA disagreed with the allocation of the purchase price as between the exempt residential portion and the non-exempt commercial/agricultural portion, finding that the commercial/agricultural portion represented 78% of the sale price. The HST payable for the taxable portion of the property was $130,466.88 rather than the $45,500 that had been remitted by the vendor to CRA.

Where a purchaser is registered for HST, the vendor is not required to collect HST generated by the sale of farmland. The purchaser reports the HST payable and claims an offsetting input tax credit in the purchaser’s first HST return after the sale, which is what the purchaser in this recent case did. The problem from the vendor’s point of view was that, had she known that the purchaser would be an HST registrant (which is not what was understood at the time the transaction closed), she would not have had to collect HST and would have kept the full purchase price without the $45,500 deduction. The vendor sued the purchaser to recover that amount.

The vendor later discontinued her claim because CRA refunded the $45,500 to the vendor on the basis that the purchaser (one of the two joint purchasers) was now registered for HST. However, the purchasers continued their counterclaim against the vendor arguing that they had suffered the loss of the $45,500 price adjustment on the sale; effectively, the purchasers contended that they had only agreed to pay the vendor $1,239,500 for the property plus any HST payable. If no HST was payable, then the vendor should refund them $45,500.

The Superior Court dismissed the counterclaim, finding that the purchasers suffered no loss. The purchasers agreed to pay $1.285 million for the property and only paid that amount. The purchaser who was registered for HST received input tax credits for the full amount of any HST that had been paid and suffered no financial loss.

Read the decision at: 2022 ONCS 919.

Built on your neighbour's property? All may not be lost.

noreply@blogger.com (John D. Goudy, Lawyer) — Thu, 06 Apr 2023 18:01:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Everyone knows that you should not cut trees down on your neighbour’s property without permission. You also shouldn’t build structures on your neighbour’s property without permission. In fact, even with a neighbour’s permission it wouldn’t seem to make much sense to build a structure that is located in whole or in part on your neighbour’s property. Fixtures to the land belong to the owner of the land. Why build a structure that you don’t fully own?

Sometimes, though, structures are built which unintentionally encroach on a neighbour’s property. The exact boundary lines between properties may not be apparent; without having a surveyor identify a boundary line, mistakes can be made. In some cases, the property owner having the structure built is mistaken about the actual location of the property boundary. In some cases, the mistaken understanding of the location of the boundary is shared by both neighbouring owners. Think of an old boundary fence that has always been there – it’s just that it was never actually on the boundary.

When some encroachments are discovered, the answer is simply to move the encroaching structure. But there are some structures which cannot be easily moved or cannot be moved without great expense. What then? The structure that is encroaching on the neighbour’s property may have been in place for many decades. Perhaps it is a house that was built long ago in the wrong position. It may be that the current legally recognized property boundary is incorrect and based on a historical mistake and an order from the Court or the Director of Land Titles can be obtained to correct the boundary.

There might also be a case for adverse possession. Depending on how long the structure has been in place, the owner of the structure might actually have obtained legal ownership of the land beneath the structure through the process of adverse possession. Where a person has possessed someone else’s land continuously for a period of ten years or more with the intention of excluding the registered owner (or other persons entitled to possession of the land), the ownership interest of the registered owner may be extinguished and lost to the person actually in possession. The acts of possession must be “open, notorious, peaceful, adverse, exclusive, actual, and continuous having regard to the nature of the disputed property.” Building a house or other building on land and having exclusive occupation of it could very well meet the requirements for adverse possession.

However, adverse possession cannot arise once property becomes part of the Land Titles system of land registration. In Ontario, most properties are now part of that system. While it is still possible that adverse possession could have taken place prior to the date when a property became part of the Land Titles system (if more than ten continuous years of adverse possession were by then completed), no adverse possession of lands after that date will be effective to extinguish the ownership interest of the registered owner in favour of the encroaching party.

So what happens if you accidentally build your structure on your neighbour’s property and adverse possession is not an available solution? What if your neighbour won’t agree to sell you the land or enter into an encroachment agreement with you? There may be another fix available. In a case recently decided by Madam Justice Doyle of the Superior Court of Justice, owners whose garage was accidentally constructed in part on the neighbours’ property were granted an order entitling them to the encroachment lands upon payment to the neighbours of $18,500. The order was made pursuant to Section 37(1) of the Conveyancing and Law of Property Act, which provides:

Where a person makes lasting improvements on land under the belief that it is the person’s own, the person or the person’s assigns are entitled to a lien upon it to the extent of the amount by which its value is enhanced by the improvements, or are entitled or may be required to retain the land if the Superior Court of Justice is of opinion or requires that this should be done, according as may under all circumstances of the case be most just, making compensation for the land, if retained, as the court directs.

The circumstances of the case before Justice Doyle arose from an unfortunate error. Prior to 2006, the owners of what became two adjoining lots built a garage on one of the lots. In the summer of 2006, those owners sold one lot to one purchaser and the other lot to another, but it was discovered before closing of the transactions that the garage on the one lot encroached onto the other lot. The owner-vendors fixed the situation by tearing down the portion of the garage that crossed the property boundary. Unfortunately, as was discovered in 2015 when the garage lot owners decided to sell their lot, the tear down in 2006 didn’t go far enough – the parties were wrong about the actual location of the property boundary.

By 2015, the cost of tearing down the garage and rebuilding it entirely within the lot where it was supposed to be located was understood to be more than $117,000. Justice Doyle granted the order requested to retain land under the Conveyancing and Law of Property Act because the garage lot owners had an honest belief that the land being encroached upon was theirs and they had made a “lasting improvement” to the land (something “not easily removable”). The significant cost quoted for the removal of the garage satisfied the “lasting improvement” requirement.

Justice Doyle determined that the “balance of convenience” was in favour of the garage owners to permit them to retain the encroached land in part because there was no evidence showing that the value of the neighbours’ property would be decreased by the conveyance of the area of the encroachment. Based on appraisal evidence as to the per square foot value of comparable land, the price for the land was set at $18,500.

Read the decision at: 2022 ONSC 105.

The Mystery of the Missing Will(s)

noreply@blogger.com (John D. Goudy, Lawyer) — Tue, 21 Feb 2023 18:18:00 +0000

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Estate administration can be contentious and complex. Family dynamics and emotions often ignite and drive disputes and litigation between executors, estate beneficiaries and others even where the true last wishes of a deceased relative would appear to be clearly stated. There are many formal requirements for making a valid will in Ontario. A failure to fulfill even one of those requirements can provide an opening for a will challenge and costly litigation.

In a case decided by the Court of Appeal, a dispute over the future of an estate farm property boiled down to legal formalities and a scenario that could make for a mystery novel (or at least a short story). The deceased farm owner allegedly signed two versions of the same will, only one of which was witnessed, and neither of which was available in original form at trial. By the time of the appeal, the original copy of one of the wills had been found, but it was not enough to convince the Court of Appeal that either will should be accepted. Instead, the rules of intestacy (where a deceased has no valid will) were to apply.

The farm owner was a bachelor with no children; he died in 2015. He had executed a will in the 1990s naming his parents as sole beneficiaries of his estate, but they had both pre-deceased him. Absent a subsequent valid will, the farm owner’s estate would pass to his brother (50%) and the two daughters of his deceased sister (50% jointly) in accordance with the provisions of the Succession Law Reform Act: “Where a person dies intestate in respect of property and there is no surviving spouse, issue or parent, the property shall be distributed among the surviving brothers and sisters of the intestate equally, and if any brother or sister predeceases the intestate, the share of the deceased brother or sister shall be distributed among his or her children equally.”

For two decades prior to his death, the farm owner had been assisted in his farming operation by a long-time friend. In 2009, he named the friend as his attorney for property and personal care. In 2013, the legal assistant of the farm owner’s long-time lawyer prepared a draft will naming the friend as the sole trustee of the farm owner’s estate and the beneficiary entitled to inherit the farm property. The friend asked the Court to determine that the 2013 will was valid so that she would receive the farm. The farm owner’s brother opposed the request on the basis that there was no valid 2013 will.

At trial, two copies of the 2013 will were marked as exhibits. One copy – Version 1 – had the farm owner’s signature but no witness signatures. The other copy – Version 2 – had the farm owner’s signature as well as the signatures of two witnesses. Both copies were marked “Draft” as the will had only been sent to the farm owner by his lawyer for review and comment; the farm owner had never attended at his lawyer’s office to revise and/or execute the will. However, the friend claimed that Version 2 had been signed by the farm owner and witnessed prior to his death in 2015. The brother claimed that Version 2 was signed by the alleged witnesses only after the farm owner’s death once the friend had discovered that Version 1 would not be valid without the signatures of witnesses.

The friend testified that, after the farm owner’s death, she had searched for a will. She said that she had found Version 1 in a filing cabinet in the farm owner’s house and took it to the lawyer’s office where she learned that the lawyer had no fully executed copy of the will. During the visit, the lawyer’s assistant made a copy of Version 1 and returned the original to the friend. The lawyer’s assistant also advised the friend at that time that Version 1 was not valid because it was not signed by witnesses. The friend further testified that, after her visit to the lawyer’s office, she found the original Version 2 will on top of a kitchen cupboard in the farm owner’s house (not in the filing cabinet where she found Version 1). Version 2 was signed by two witnesses and would be valid. In fact, the Trial Judge found that Version 2 was valid and ruled in the friend’s favour.

No original of Version 1 or Version 2 of the 2013 will was produced at trial. However, between the time judgment was rendered following trial and the hearing of the appeal, the friend located the original of Version 2 of the will and asked the Court of Appeal to allow it to be admitted as “fresh evidence”. The Court rejected the request, finding that the new evidence would not change its conclusion that the friend had failed to prove the validity of the 2013 will. The Court of Appeal found that the Trial Judge made a key error in failing to appreciate the relevance of the evidence of an expert in handwriting called by the farm owner’s brother. The expert testified that the farm owner’s signatures on the two copies of the 2013 will – Version 1 and Version 2 – were identical. Without being able to produce the original of Version 1 and, in doing so, prove that each of Version 1 and Version 2 was signed (separately) by the farm owner, the friend failed to overcome the appearance that Version 2 was not signed by the witnesses until after the farm owner’s death.

Read the Court of Appeal's decision at: 2021 ONCA 442 (CanLII).