Intentional Interference In Contractual Relations Vs. Economic Relations
If a third party interfered with your ability to conduct business, you may have a cause of action against the third party under the tort of intentional interference in contractual relations, or the tort of intentional interference in economic relations. While both the torts are intentional torts, Canadian courts have attempted to distinguish between the two. What Is the Tort of Intentional Interference with Contractual Relations? When one party, without legal justification, inhibits another party from completing their contractual responsibilities with a third party, the tort of intentional interference with contractual relations can be established. This could happen, for example, if a supplier deliberately acts to prevent a distribution company from satisfying its contractual responsibilities to deliver items to a retailer with whom they have a contract. The plaintiff must show the following to prove the tort of interference with contractual relations: There was a contract between the plaintiff and a third party; the defendant was aware of the contract; the defendant’s conduct hindered contract fulfillment; the defendant acted with the intent to interfere with the contract; and the plaintiff suffered damages as a result. While it is clear that the defendant’s primary intention must be to interfere with the plaintiff’s contractual connections with another party, provincial courts have differed in their interpretation of the required intention to establish the tort. The Ontario Court of Appeal concluded that it is insufficient for a violation to be a foreseen result of the defendant’s actions[1], however the Manitoba Queens Bench determined that recklessness as to contractual interference satisfies the requirement of intent[2]. The intentional act, however, does not have to be malicious or unlawful. What Is the Tort of Intentional Interference with Economic Relations? The tort of Intentional interference with economic relations is defined as the “intentional infliction of economic injury on the plaintiff by the defendant’s employment of unlawful measures against a third party”.[3] The tort of intentional interference with economic relations has three components: The defendant must have interfered with the plaintiff’s economic interests; the interference must have been illegal; and the plaintiff must have suffered economic harm as a result of the interference. AI Enterprises Ltd v Bram Enterprises Ltd, an unanimous Supreme Court of Canada decision, clarified that “unlawful means” refers to the defendant’s activities that might give rise to a civil claim by a third party against the defendant[4]. As a result, “unlawful means” refers to the civil damage done to a third party rather than the criminality of an action. The plaintiffs in AI Enterprises sued a joint owner who was jeopardizing the sale of a property to a third party. The tort was not established, according to the court, because the injury done to the third-party purchaser was not actionable. The tort, however, was established in Grand Financial Management Inc v Solemio Transportation Inc, where the court found that Grand Financial jeopardized the plaintiff’s business by illegitimately obtaining security interests owned by a third party[5]. If you have any questions about potential breaches of contract or intentional interference claims, contact Cactus Law today to speak with a civil litigation lawyer. Disclaimer: The information presented […]
Read moreThe New Residential Rental Property Rebate
The New Residential Rental Property Rebate You are entitled for the new residential rental property rebate (NRRPR) if you bought a newly constructed home or condo as an investment property and have a tenant who has signed a lease for at least one year. Notably, when you purchase a new residential property to rent out, the condo or home developer is not allowed to apply for the new home HST rebate on your behalf, as they would if it were your primary residence. As a result, buyers are forced to pay the HST for the rental property up front and then must wait for the Canada Revenue Agency (CRA) to issue a refund. This often places a temporary financial burden on the individual purchasing the investment property because they will be out a considerable amount of money for up to a year and will have to endure any interest costs in the interim. It is strongly advised that you file your HST rental refund application as soon as you close on the property and find a tenant to reduce the amount of money you spend servicing this additional debt. HST Rebate for Primary Residences vs. Rental Properties If you are purchasing a home to live in or for a close relative to live in, the seller will usually reduce the final selling price, including HST, by the sum of the new housing rebate in return for full access to your rebate when it is released by the CRA. Not only does this make it easier for the buyer to afford the property because the selling price is lower, but it also saves them the time and effort of applying for the new home refund themselves since the seller takes care of it. This also enables condo and home builders in Ontario to advertise a lower “sticker price” for their new developments. When looking for new real estate, you will notice that many of the advertised prices already include the HST rebate for new homes. Notably, however, sellers are only allowed to do this for buyers who are purchasing a primary home. This means that all other buyers, including those buying a rental property, must pay the HST in full up front, resulting in a selling price that is higher than what is usually advertised. Fortunately, in Ontario, there is a special HST rebate intended to ensure that investors do not pay more for a new home than they would if it were to be occupied by the owner. The NRRPR is a HST rebate for rental properties provided by the CRA, and it is available to any landlord who purchases a new home or condo of which the first occupant is a tenant. The main difference between the rental property rebate and the regular HST new house rebate is that the buyer must pay all of the HST upfront and can only apply for it themselves, rather than the seller “fronting” the reimbursement to reduce the purchase price and then handling the application for you. Since most property owners who are interested in applying for the NRRPR are not tax […]
Read moreForeign Entities Acting as Shareholders in Ontario
Foreign Entities Acting as Shareholders in Ontario In general, foreign entities enjoy much of the freedom that Canadians do in terms of investing in corporations as shareholders in Ontario. However, there are certain situations in which investors may be restricted or limited. Non-Residents can invest as shareholders in Ontario An individual meets the definition of a non-resident if they: (1) normally, customarily, or routinely live in another country and are not considered a resident of Canada; and (2) do not have significant residential ties in Canada, meaning they live outside Canada throughout the tax year or they stay in Canada for less than 183 days in the tax year.[1] According to the Government of Canada, “Any ‘person’ can hold shares in a corporation. In addition to an individual, a ‘person’ can include a legal entity such as trust, a mutual fund or another corporation.”[2] Because non-residents fall under this definition, they may become shareholders in a Canadian corporation. However, they may be subject to special tax laws, not to mention that foreign entities will likely be subject to special tax treatments and that the number of non-resident investors in a corporation and the control of shares may impact that company’s classification. The number of non-resident investors in a corporation may change its classification A Canadian-controlled private corporation (CCPC) is a particular type of private corporation and is subject to lower income tax rates. A CCPC is a private corporation that is not controlled, directly or indirectly, by non-residents, public corporations, or any combination of the two.[3] Notably, for a corporation to qualify as a CCPC, it does not need to be controlled by Canadian residents; rather, a lack of control by non-residents of Canada is required.[4] Therefore, a private corporation whose ownership is divided, such that 50% of the company is owned by non-residents of Canada and 50% is owned by residents of Canada, qualifies as a CCPC.[5] However, if 51% of the voting shares belongs to non-residents and/or public corporations, the corporation no longer qualifies as a CCPC and therefore may be subject to increased taxes. Conditions & Restrictions for Foreign Entities In some instances, there may be a concern that a foreign shareholder of a Canadian corporation or the non-resident corporate parent of a Canadian subsidiary may be carrying on business in Canada. However, this is not usually a concern in normal circumstances as the legal form and relationship between a Canadian subsidiary and its shareholders is one that would not result in the shareholders being considered to be carrying on business in Canada. In other words, a foreign shareholder of a Canadian corporation can not be found to be carrying on business in Canada solely by virtue of being a shareholder of that Canadian corporation. Even when a foreign shareholder has significant or even complete control of a corporation, this is usually not sufficient to draw the conclusion that the corporation’s business was actually the shareholders. However, a significant exception to this rule is where the Canadian corporation is essentially a sham or façade. As seen in Gurd’s Products Co, the court found that a US corporation was essentially operating all aspects […]
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Piercing the Corporate Veil: The Basics
There are many benefits to incorporating your business including tax benefits and reducing liability. Incorporating a business provides protection or a ‘veil’ to shareholders from personal liability, as the corporation becomes legally liable for the actions and finances of the business. Nonetheless, Canadian courts have the capacity to breakdown this veil and make individual parties liable for actions undertaken by a corporation. What does it mean to pierce a corporate veil? Piercing the corporate veil will hold individuals operating business under a corporation liable for their fraudulent actions. For example, if a creditor demands payment for a loan from a corporation, a court may “pierce the corporate veil” and hold the stakeholders, such as shareholders and directors, personally liable for the corporation’s debts. In order to “pierce the veil”, it must be established that a corporation is acting illegally, fraudulently or for an improper purpose. Usually this occurs when the corporation has only one or a few individuals acting as shareholders or directors, as it is evident who is directing the corporation’s actions. It is much more difficult to pierce the corporate veil of a large publicly traded corporation, since there are many more shareholders and other stakeholders. When will courts pierce the corporate veil? There are a few common justifications for courts to hold the individuals working under a corporation personally liable: Firstly, if there is no true separation between the corporation and its shareholders, evidenced by, for example, their financial affairs, the court can assert that the corporation is used to avail the financial obligations of its shareholders. Second, if there is evidence that the company initiates fraudulent or wrongful actions, such as entering into dealings that the corporation cannot afford, or recklessly borrowing money, the court may find individuals of a corporation personally liable for financial fraud. Lastly, if there is evidence that someone who engaged in business with the corporation is left unpaid, and one of the above scenarios is also present, a court can pierce the corporate veil to rectify the unjust actions. To avoid having a court ‘pierce their corporate veil’, small businesses should avoid commingling personal and company assets, and establish separate bank accounts that are strictly used for their respective purposes. Contact our Toronto commercial and corporate lawyer at Cactus Law to learn more about how to best protect your personal and corporate assets. Disclaimer: The information in this article is provided as general introductory information and should not be relied upon as legal advice. Author: Stephanie Lanz Editor: Mobina Basiri
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Approaching Your Contractual Obligations During COVID-19
For parties who entered into commercial contracts prior to 2020, the impact of COVID-19 was unknown. Even in the first few weeks of 2020, it was unforeseeable that this outbreak would wreak havoc upon the world to this stupendous degree. Consequently, there are many uncertainties surrounding the contractual obligations of businesses. Fortunately, contract law provides us with some tools that may help parties accommodate for unexpected barriers to contractual performance. The Doctrine of Frustration Frustration of contract occurs when something unanticipated happens after entering the contract that makes its performance impossible. It is not enough to claim that the contract has become more expensive or difficult to perform. The party claiming frustration must demonstrate that the purpose of the agreement has been completely undermined by an unforeseeable event, and it would be unjust for the party to continue their contractual obligations. It is important to remember that the doctrine of frustration applies only if neither party is responsible for the interrupting event; the party responsible will bear the burden of the loss or resulting damages. Although it may be that the doctrine of frustration can aid parties facing difficult obligations amidst COVID-19, it is still uncertain if pandemics are considered capable of frustrating contracts. Courts today seldom use the doctrine to avoid helping contracting parties caught in a bad bargain searching for an escape route. Additionally, courts expect contracting parties to be accountable by making provisions to guard against unanticipated barriers to contractual obligations. Even if frustration is successfully invoked, its consequences are often inflexible, resulting in termination of contract irrespective of the wishes of the parties. However, with the novel coronavirus affecting businesses and individuals in decimating ways, the courts may consider a pandemic as sufficiently capable of frustrating a contract. Force majeure clause Alternatively, contracting parties can protect themselves by including or excluding a force majeure clause within written agreements. A force majeure clause is used to address the perceived pitfalls of the common law doctrine of frustration. A force majeure clause is meant to avoid liability for failure of performance where a party cannot meet their contractual obligations due to circumstances beyond their control, but which would otherwise fail to satisfy the rigid requirements of frustration. Similar to a frustrated contract, a force majeure clause acts to absolve the non-performing party of liability for its failure to meet contractual obligations due to unforeseen circumstances. The clause will typically include a list of events that the parties deem appropriate to warrant a change in one or both parties’ obligations. A force majeure clause should be drafted carefully so as to make clear what events will trigger its application, and the available remedies. Will the COVID-19 pandemic trigger a force majeure clause? For COVID-19 to constitute as a force majeure, it is important for the language of the clause in question to explicitly capture a pandemic event (Atcor Ltd v Continental Energy Marketing Ltd (1996)). Specific wording such as “pandemic”, “communicable disease” or “public health emergency” contained within the list of force majeure events will almost certainly include COVID-19. If a force majeure clause fails to include such explicit […]
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Construction Lien
What is a Construction Lien? A construction lien is a security interest on a property that can be registered on title to the property by anyone who has supplied work or material to improve the property. The lien on the improved property is for the outstanding price owed for the services or materials provided. Registrants are typically builders, contractor, construction sub-contractor and suppliers. Under Ontario’s Construction Act, a lien first arises and takes effect when a party first supplies services or material to the improvement. The party paying for the services is entitled to holdback or retain 10% of the price of the services or materials until all liens that may be claimed against the holdback have expired, satisfied, or been discharged. Since 2018, there have been changes with respect to the time line for preserving and perfecting a lien. Preserving a Lien A lien can be preserved during the supplying of service or material or at any time before it expires, by registering the lien in the proper land registry office on the title of the premises. Any number of persons having liens upon the same premises can bring forward a joint claim for a lien. A party who wishes to preserve a lien will have 60 days to do so starting from the date that a certificate of declaration of the substantial performance of the contract is published, or the date on which the contract is completed, abandoned or terminated. Perfecting a Lien After an individual preserves a lien, they can then perfect it. However it is important to note that the claiming party will only have 90 days to perfect a lien, after it has been preserved. Among other considerations generally, in order to perfect a lien, the claimant must commence an action to enforce the lien and then register a certificate of action in the prescribed form on the title of the premises. A perfected lien will expire immediately after the second anniversary of the commencement of the action that perfected that lien, with the exception of an order for a trial in which the lien may be enforced. Time Limitation Suspension during COVID-19 The province of Ontario issued the Emergency Management and Civil Protection Act on April 9, 2020, which put a hold on limitation and procedural time periods that are retroactive to March 16, 2020. The Attorney General however, lifted the suspension of limitation periods for construction liens, effective as of April 16, 2020. This means that amount of time a lien claimant had to preserve a lien prior to March 16, 2020, will resume on April 16, 2020. Therefore, if a lien was established on March 16, 2020, the claimant would have 60 days from April 16, 2020 to preserve it. Have you provided services or materials for improvement of a property for which you have not been paid? If so, contact our Toronto Real Estate and Civil Litigation Lawyer for a free consultation, to discuss how you can protect your interest by registering a line. Disclaimer: The information in this article is provided as general introductory information and shall not be […]
Read moreBusiness Organizations
The three most common forms of business organizations are sole proprietorships, partnerships, and corporations. You may be exposed to different legal obligations and liabilities depending on the chosen form of business structure. It is important to consult with a lawyer before and while you carry on business to better understand your rights and responsibilities. SOLE PROPRIETORSHIPS Sole Proprietorships forms when a person (the sole proprietor) starts to carry on business activities. As a result, the sole proprietor is one and the same with the business. This has several important implications: The sole proprietor has exclusive responsibility for performing all contracts entered into by the business The sole proprietor will be liable for all torts committed by her or any of the employees, in connection with the business The sole proprietor’s personal assets may be seized to fulfil the obligations of the business While no form procedure is necessary to carry on a sole proprietorship, it is important to register the business name that you are operating under. PARTNERSHIPS A partnership is formed when two or more persons carry on business together with a view to profit. There are different types of partnerships: General Partnership: each partner is liable to contribute equally to any debt owed by the partnership. Limited Partnership: a partner shares in the profits and is liable for debts but does not participate in the operations of the business. Limited Liability Partnership: Formed by professionals such as medical engineers, accountants, lawyers, and medical professionals. It is important to remember that assets brought into the business may be considered assets of the partnerships. In order to limit future disputes, it is recommended for the parties to enter into a partnership agreement. If you are working with someone on a project but do not intend to form a partnership, it is important to take the necessary steps to distinguish the form of business. This may require a establishing a joint venture agreement or executing other contracts that establish the boundaries of the partnership. CORPORATIONS You are able to incorporate your business either federally or provincially. Once incorporated, the business becomes a separate legal entity. The property of the corporation is not the property of the shareholders and the corporation is taxed separately. This is often done to reduce liability to shareholders. Shareholders have rights to the corporation through their ownership of shares and are liable for the debts of the corporation only in as much as they have invested. Our business and corporate lawyer can help you structure your business, register your corporation, and draft the appropriate documents to protect your interests, including a shareholders agreement or partnership contracts. Contact us to learn more about business and corporate structures.
Read moreCorporate Law
Are you a shareholder or other interested party unfairly prejudiced by the conduct of a corporation? You may have the right to bring a court action against the corporation under section 241 of the Canada Business Corporation Act. A complainant may be able to bring a court action with the goal to limit a director’s oppressive actions. Such actions can include issuing shares to turn a majority shareholder into a minority shareholder; providing dividends or payments to some shareholders and not others; or otherwise acting to the benefit of some shareholders and the detriment of others. Contact us to learn more about the legal remedies available to you.
Read moreTrademark Opposition
If you have not successfully registered your trademark, your intellectual property may be at the risk of being registered by another person. A complainant has two months from the date of publication in the trademarks journal to oppose the registration of a trademark. Contact us for more information on how you can protect your intellectual property.
Read moreBuying A Real Estate Property
There are many steps involved with a buying a home. Whether arranging for financing or obtaining clear title, it is important to work with a diligent lawyer who understands how to protect your rights and interests. Our Toronto Real Estate Lawyer is here to make sure your moving day is stress free. Contact us to learn more about our residential real estate services.
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