On September 6, 2012, I posted an item about claims against an estate for unjust enrichment.  The post described circumstances under which a claim for unjust enrichment might still be available to someone who feels short changed by a deceased. 

The Ontario Court of Appeal has very recently issued a decision in the case of Mountain v. TD Canada Trust Company and others on a related topic.  In this case, a claim was made against an estate on the basis of an alleged contract between the Plaintiff and his deceased parents.  The Plaintiff claimed that the terms of the contract were breached by his late parents’ will and asked the court to order that he be given what he felt that he had been promised. 

This case provides a good illustration of the circumstances in which the terms of a contract, even if unwritten, can prevail over a will that is not consistent with it.

Jack and Helen Mountain owned a dairy farm in Caledon which had been in the Mountain family since 1830.  They had two children, Gary and Louanne.  Gary worked on the farm full time for 24 years.  Louanne was not involved in running the farming operation. 

Jack and Helen had identical wills, each leaving all of his/her estate to the other. 

Helen was diagnosed with Alzheimer’s disease in 1999.  She died 10 years later.  Jack died suddenly in late 2001. 

In 2004, three years after Jack’s death but while Helen was still alive, Gary sued Jack’s estate, Helen and Louanne for an Order declaring that he was beneficially entitled to the farm property and the farm business.  The basis of his lawsuit was what he claimed to have been an oral agreement with his parents that if he stayed on the farm and farmed with them, and the farming was his main occupation, he would receive the farm land and the farm business after his parents retired.

Louanne responded by denying her brother’s entitlement to the farm and asking for an Order requiring Gary to account to the estate for his use of the farm property and its business since Jack’s death.

Helen died in 2009.  The trial took place a few months later. 

At trial, the judge determined that Gary had not proven the alleged contract with his parents.  He also awarded costs to Louanne payable by Gary in the amount of $275,000. 

Gary appealed from that judgment. 

In this case, Gary was seeking specific performance, which is a court order requiring that parties to a contract complete the contract.  It is possible for a party to an oral contract with a deceased to obtain specific performance of that contract, but three hurdles have to be overcome:

1. there has to be evidence of the terms of the contract with enough detail to permit the court to order its performance;
2. the evidence has to be corroborated by some material evidence other than the evidence of the party seeking specific performance; and
3. there must be evidence of acts by which the contract has been at least partially performed.  In other words, the claim of an oral contract has to be supported by evidence that a party to that contract did something that showed an intention to fulfill the contract.  The acts of part performance have to be sufficient to indicate the existence of an oral contract

The Court of Appeal made it clear that each of these tests is to be considered in the context or circumstances of each case.  The Court of Appeal decided that the trial judge had failed to take into account the fact that Gary and his father had operated this farm as partners, and that there was an abundance of evidence showing that they were viewed by everyone concerned as equals in their operation of the farm.  Gary’s work managing the farm allowed Jack to pursue his career as a cattle buyer which involved significant travel away from the farm.  Before his death, Jack transferred a very significant asset of the farm business to Gary.  Prior to her death, Helen signed a deed of land transferring a part of the farm with a house located on it to Gary and his wife for free.  All of these acts, according to the Court of Appeal, represented both part performance and evidence corroborative of Gary’s claim. 

Unfortunately, the Court of Appeal did not feel comfortable deciding the factual issues based on trial transcripts.  As a result, it set aside the trial judge’s Order but, rather than substituting its own decision, ordered a new trial on all issues.  The substantial costs award was set aside as well.

Wisely, the Court of Appeal pointed out that since a new trial would not be in the interests of either side, and as the case “cries out for a mediated, consensual resolution”, the court took the rare step of directing a mediation to be conducted before any new trial. 

Whether or not Gary and Louanne Mountain can settle their dispute at mediation remains to be seen.  In the meantime, this case provides a good illustration of the circumstances in which the terms of a contract, even if unwritten, can prevail over a will that is not consistent with it. 

The recent Court of Appeal decision in Oak Incentives Group Inc. v. Toronto Dominion Bank brings up an important point about the duty that banks owe to their customers to deliver accurate information.  In this case, the information in question involved the nature of a deposit into the customer’s account. 

The customer, Oak Incentives Group Inc., was a distributor of consumer appliances.  It received an unusually large order of televisions from a new customer and required payment to be made by wire transfer.

In ordinary circumstances, the bank is not responsible to ensure that deposits made into a customer’s account are genuine.

Funds were deposited into Oak’s account by the customer.  Oak informed the employees of its bank, then called the Toronto Dominion Bank, that it was requiring a wire transfer from the customer and asked if such a transfer would be secure.

The bank employees confirmed to Oak that wire transfers were indeed secure but failed to mention that the new customer had actually deposited funds into Oak’s account by way of a regular cheque. 

Oak shipped the goods, and the cheque was later discovered to be counterfeit.  Oak sued the bank for negligence in the advice that it had given.  Continue reading →

In the world of residential real estate transactions in Ontario, it has become customary for buyers to request a Seller Property Information Statement (“SPIS”) in their Offers to Purchase.  Sellers sometimes agree to provide them.

An SPIS is a three-page pre-printed standard form document prepared by the Ontario Real Estate Association.  The purpose of the document is to protect buyers by requiring sellers to provide complete information about their experience with the property.  The form includes, in its instructions, a requirement on sellers to provide answers that are complete and accurate.  It also warns buyers that they must still make their own inquiries notwithstanding the information in the SPIS.  

Good intentions alone do not protect the seller completing a SPIS.

At the end of the form, there is a statement indicating that sellers “are responsible for the accuracy for all answers”, but also that their information is “true based on their current actual knowledge as of the date below”. 

The recent case of Nylander v. Martin involved the purchase by a Mrs. Nylander from a couple named Martin of a house in Ste. Sault Marie in 2008, contains some interesting comments on SPIS forms by the court.

Before entering into the transaction, the Martins signed a SPIS indicating, among other things, that the property was not subject to flooding, that the Martins were not aware of any structural problems, and that the Martins were not aware of any moisture and/or water problems. 

After closing, Nylander discovered a significant amount of water on the basement floor of the home.  Continue reading →

The Supreme Court of Canada rarely hears appeals in commercial disputes anymore, but when it does, one can usually expect that a new direction is about to be taken.  Such was the case in Southcott Estates Inc. v. Toronto Catholic District School Board, a decision just released by the Supreme Court of Canada on appeal from the Ontario Court of Appeal in a dispute involving a land purchase. 

In this case, a developer, Southcott, incorporated a company purely to sign an agreement to purchase a particular piece of land for development (which is a common way of going about these transactions).  The company’s only asset was the deposit given to it by the developer that owned it to submit with its offer. 

Mitigation of damages is always a fundamental aspect of a damage claim.

The Defendant was a school board that agreed to sell the property.  As a condition in the sale agreement, the school board agreed that it would obtain a severance from the local committee of adjustments before closing. 

The board did apply for a severance but ran into procedural problems.  The committee of adjustment indicated to the board that it would have submit a development plan.  It was clear that it would be impossible to close the transaction by the scheduled closing date given the time it would take for a development plan to be prepared and submitted.  Southcott suggested that the closing date be put off into the future to allow for this to take place.  The board refused, declared the deal to be at an end, and returned Southcott’s deposit. 

Southcott felt that the board had breached the sale agreement by taking this step.  It sued the board for specific performance of the sale agreement.  In other words, Southcott asked the court to order the board to complete the transaction.  Continue reading →

Several weeks ago, in an event highly publicized across Canada, a 15-year old teenager from British Columbia named Amanda Todd took her own life.  Apparently, she had been the victim of cyber bullying for quite some time. 

Shortly before her death, she had posted a video on YouTube describing the experiences that eventually motivated her to take her own life. 

Most companies of any size have instituted policies governing the way in which their employees conduct themselves online.

Her death has sparked a great deal of interest on the topic of cyber bullying.  Unfortunately, it has also sparked a great deal of comment of a negative nature. 

One such comment, which was particularly offensive, was posted by a resident of London, Ontario on an Amanda Todd Memorial Facebook web page.  The author wrote the words “Thank God this b—– is dead”. 

A woman living in Calgary noticed the comment and found it sufficiently offensive to try to determine who had left it.  She was successful in doing so and determined that the author was employed by Grafton-Fraser, a national clothier, at one of its stores in London, Ontario.  She reported the event to the company which then terminated the individual’s employment.  The company issued a statement indicating that “our company ethics are based on tolerance, respect and fair and honourable treatment of all individuals, internally, with our customers and the population as a whole”.  Continue reading →

The recent Superior Court decision in 7984987 Canada Incorporated v. Lixo Investments, provides a useful summary and update of the law on the relief from forfeiture.

Ontario’s Commercial Tenancies Act provides that where a tenant is in default with respect to a rent payment of 15 days or more, the landlord can exercise its remedies including termination of the lease (unless the lease itself provides otherwise).

Normally, when the default is merely for nonpayment of rent, relief from forfeiture will be granted.

Landlords do not normally pounce on tenants on the 16^th day after a rent cheque either doesn’t arrive or bounces.  Such events are normally followed by communication between the parties often resulting in the payment being made. 

If the tenant is prepared and able to remedy the default, but the landlord decides that it would prefer to end the relationship, the tenant still has an option.  The same statute provides that the tenant can apply to the court for what is referred to as relief against forfeiture.  The tenant can ask the court to require the landlord to accept the late rental payment and allow the tenant back into the premises.  Continue reading →

From time to time, a party to a commercial contract will feel that the other party to the contract has treated him improperly or unfairly.  A review of the contract, however, does not reveal any specific provisions that have been breached by the other party’s offending conduct.  In those circumstances, is there any room to argue that the other party had a duty implied in the contract to act in good faith, and breached the contract by failing to do so?

This question has been put before the court on a number of occasions over the last several years.  On each occasion, a Plaintiff has alleged that the Defendant had an implied contractual duty to act honestly and in good faith in the performance of a contract between the parties.  The duty is said to be implied simply because there is no explicit term in the contract that specifies the existence of such a duty. 

A duty of good faith has been implied to make sure that parties do not act in a way that defeats the essential objective of the contract.

In the past, when the court has referred to the existence of a duty of good faith, it is done so in circumstances in which the case was decided on the basis of established legal principles.  As one judge has said, “Canadian courts have not developed a comprehensive and principled approach to the implication of duties of good faith in commercial contracts”. 

This issue was very recently addressed again by the Ontario Superior Court in 1001411 Ontario Limited v. City of Toronto Economic Development Corporation.  This case involved a dispute over a lease agreement that commenced in May, 1994.  The Defendant/Landlord had a right to terminate the agreement on notice, although the contract did not specify any particular timeframe for notice.  Notice was provided by the Defendant, but the Plaintiff/Tenant took the position that the parties had agreed at the outset that the notice period would be 18 months and far less than that was given.  The Plaintiff alleged that the failure to give a full 18 months’ notice constituted a breach by the Defendant of an implied duty of good faith in the implementation of the lease agreement, giving rise to damages.  Continue reading →