Law Clerks' Review

Substantive decision in family law from Ontario Court of Appeal on issue of applying the Spousal Support Advisory Guidelines to high income cases. We attach a summary, an article and the case law.

This summary was originally published by John Polyzogopoulos of Blaney McMurtry LLP.

In Halliwell, the Court discussed in detail the difficult issue of applying the Spousal Support Advisory Guidelines to high income cases (over $350,000). It also canvassed the "double dipping" issue discussed in Boston v Boston, in this case, in the context of the equalization of a business rather than a pension. The support order was reduced and no double-dipping was found. For a full summary: http://www.mondaq.com

This article was originally published by The Lawyer’s Daily (www.thelawyersdaily.ca).

MARITAL PROPERTY - Equalization or division – Asset types - Business, commercial or non-family assets - Valuation of assets - Practice and procedure – Appeals

(May 16, 2017, 8:42 AM EDT) -- Appeal by the husband from an order for equalization of net family property and retroactive and ongoing spousal support. The parties married in 1983, separated in 2009 and divorced in January 2016. Their two children were independent adults. The wife left work as a real estate agent to raise the children and manage the household. She returned to work in 1994 to support the family following the husband's sudden loss of his job. She continued part-time work until 2012. Meanwhile, the husband reestablished his career, achieving significant success and amassing substantial wealth. The wife played a role in the administration of the husband's companies until just after separation. Her involvement was abruptly terminated and her monthly advances were reduced from $11,500 to $5,000. Litigation ensued. An interim order provided for spousal support of $10,000 per month. The 2016 trial judgment required the husband to pay the wife $3 million to equalize net family property in five equal annual installments based on valuation of the husband's corporate interests. The wife was awarded monthly spousal support of $28,978 based on the husband's imputed annual income of $1 million and the wife's imputed annual income of $35,000. Arrears of retroactive support were fixed at $1.1 million, subject to an income tax reduction. The husband appealed.

HELD: Appeal allowed in part. The trial judge did not err in his determination of the appropriate equalization payment. The husband's contention that it was unreasonable for the trial judge to utilize the same valuation multiplier in assessing the value of two different companies was not borne out, as the companies were in the same business, used the same key employees, and had the same management team and expertise. The trial judge provided sufficient explanation for valuing various assets based on the wife's expert valuation evidence. With respect to spousal support, the trial judge erred in the assessment of quantum. Although there was no error in the approach to imputing income, the trial judge failed to undertake an individualized, fact-specific analysis that fully considered the effects of the equalization payment on the wife's compensatory and non-compensatory entitlement. In addition, the trial judge failed to exclude the effect of investment income from equalized assets. Approaching the issue afresh resulted in substituting a monthly figure of $20,000 per month for ongoing support, with arrears calculated using a figure of $21,000 per month rather than $30,028.

Halliwell v. Halliwell, [2017] O.J. No. 2230, Ontario Court of Appeal, E.E. Gillese, S.E. Pepall and L.B. Roberts JJ.A., May 2, 2017. Digest No. TLD-May152017003

Much ink has been spilled, so to speak, on the Ontario courts’ failure to move into the digital age. Despite this frequent criticism, the problem persists without a solution in sight.

Technology has made nearly every aspect of my day-­to-­day life more efficient and convenient. I now pay for my morning coffee and my groceries using my phone. I pre-order my lunch on an app while sitting at my desk. I use Skype to speak face-­to-­face with clients on the other side of the country and FaceTime to catch up with my five-year­-old nephew.

And yet, when perfecting an appeal recently, I had to hire a process server to pick up boxes of paper transcripts, exhibits, appeal books and factums from my office, lug them to Osgoode Hall, wait in line and physically hand over these materials to the court registry officer for filing. This came at considerable cost to my client, notwithstanding the fact that the Rules of Civil Procedure also required us to file additional electronic copies of the transcripts and factum with the Court of Appeal for Ontario.

Recently, I served a defence on opposing counsel by fax — the latest and most efficient technology I can use to effect service without the express consent of the opposing parties. (If you’re not yet convinced that our profession has fallen behind, ask your non-­lawyer friends about the last time they used a fax machine.)

Neglecting to fully embrace simple, everyday technologies such as email, searchable PDFs and electronic scheduling creates unnecessary costs, wastes time and perpetuates inefficiencies in an already backlogged system. Moreover, the continuation of this woefully inadequate state of affairs erodes public confidence in the administration of justice and in the legal profession.

Last summer, Ontario Attorney General Yasir Naqvi expressed a commitment to “find ways to introduce more technological solutions” to make our courts “more effective and user-­friendly.” He has emphasized the need for Ontario to take incremental steps and research and build on what other jurisdictions have already done in this regard.

Although pleased he has identified this as a priority, I am skeptical. We’ve been down this road before. One need only look at Ontario’s history with the failed “Integrated Justice Project” in the late 1990s and the “Court Information Management System” abandoned in 2013 to lose confidence in the prospect of seeing progress any time soon.

On April 24, a new Rule quietly came into effect. Rule 14.04 now provides that a statement of claim “may be filed electronically . . . in a court location for which the software authorized by the Ministry of the Attorney General for the purpose may be used . . . ” Indeed, since 2014, various other rules have referred to “authorized software” for filing and issuing documents.

There has been no word, however, as to what this software might be and when it might be authorized. Given past experience, I expect it is years away. In the meantime, litigants and lawyers should not be stuck in an antiquated and expensive paper-­based system. Here are three changes that can and should happen right now:

Eliminate the consent requirement for service by email:

The rules permit service by email only “if the parties consent or the court orders.” This is a modest, 20th century improvement on the pre-­2014 rule, which required the recipient lawyer of record to reply to the email to validate service. The consent requirement is enough of an impediment to steer many of us to serve documents using more archaic means and, in any case, adds time and cost to the litigation process. Most lawyers’ email addresses are published online (whether on their firm website or the Law Society directory), and Microsoft Outlook can provide delivery receipts as proof of service. There is no reason I should have a fax number in 2017.

Accept electronic documents through existing filing systems:

As noted above, the rules already require parties to file electronic copies of documents in certain circumstances, whether by sending the files to a dedicated court email address or by bringing a USB key to the court office. The Ontario Court of Appeal and the Commercial List have developed detailed guidelines to facilitate these filings — no “authorized software” required. Nevertheless, these electronic copies must be filed in addition to paper copies of the same documents. As a stop-gap until they implement effective online filing software, our courts should accept electronic documents as an alternative — not supplement — to paper copies. Our clients’ legal bills are high enough; asking them to shell out hundreds of dollars for printing and binding is unjustifiable when the courts can and do accept electronic filings.

Research other jurisdictions’ court technology:

E-filing is permitted, at least to some extent, in British Columbia, Alberta, Newfoundland, New York, Delaware and California, to name a few. Despite the Rules’ reference to “authorized software,” MAG has not commenced an initiative to implement a province-wide e-­filing system. Ontario does not have to re-­invent the wheel; the software is out there, waiting to be authorized. Enough is enough. MAG should begin studying the options and their potential to scale in Ontario without delay.

Lawyers say a recent Divisional Court decision will reinforce shareholders’ rights to call special meetings.

In Koh v. Ellipsiz Communications Ltd., the court overturned an application judge’s decision to grant an exception to the board of directors of a company, which would have stopped a shareholder from requisitioning a meeting. The court found that in order to provide this exception, the board of directors must clearly prove that enforcing a personal claim or grievance was the primary purpose of the requisition.

“It affirms the basic principles of a shareholder democracy,” Geoff Moysa, the lawyer who represented the shareholder, says of the decision.

“It’s the shareholders that ultimately own the company and will make these decisions.”

Lawyers say the decision sets a high threshold that directors must meet to receive the exception, making it harder for them to decline a requisition request based on the personal grievance exception.

The decision was also the first by an appellate court to acknowledge the right of shareholders to requisition a meeting as a “fundamental right,” lawyers say.

Derek Bell, a partner with DLA Piper (Canada), who was not involved in the case, says the decision reflects a concern about board entrenchment and how directors may use a part of the Ontario Business Corporations Act, known as the personal grievance exception, to prevent shareholders from removing them.

Under the act, all shareholders who hold at least five per cent of the company’s stock have a right to requisition the board of directors to call a meeting unless one of three exceptions applies. One of those exceptions is when it “clearly appears that the primary purpose of the proposal is to enforce a personal claim or redress a personal grievance against the corporation or its directors, officers or security holders.”

Bell says that directors could adopt a loose interpretation of the exception in order to stifle shareholders meetings that could oust them.

“The real concern about this exception to the statute is that a board who wants to keep their job could employ a pretty liberal definition of this exception and say, ‘Oh, well, sorry you’re not going to be able to decapitate us this week because we think that you’re advancing a personal grievance,’” Bell says. “And, really, what the appeal court has done here is bat that down.”

But the Divisional Court decision shows the personal grievance exception will not be an “easy catch-all” for denying a requisition request, he says.

The dispute arose when a shareholder, Tat Lee Koh, who holds around 42 per cent of the company’s shares, requisitioned a meeting to consider removing newly elected directors.

The company became publicly traded in 2015, and it held a first annual general meeting in 2016, in which a slate of directors was elected, including a group referred to in the decision as the “Canadian Directors.”

Koh opposed this election and demanded the Canadian Directors resign. Otherwise, he said, he would requisition a shareholders’ meeting to remove them.

When they did not resign, Koh submitted the requisition and the board declined it, saying it was for the primary purpose of redressing a personal grievance against the company. The board claimed that Koh’s personal grievances included that he wanted to be chairman of the company among a number of other complaints.

The case turned on whether Koh had requisitioned the meeting because of a personal claim or personal grievance.

The court found that the board of directors had failed to establish that the primary purpose of the requisition was to redress a personal grievance against them, and that if the directors and the shareholder disagree on the direction of the company, the shareholders should be allowed to decide those issues.

“On fair review of the record, it appears that the appellant and the Canadian Directors have a significant difference of opinion as to the course that the company should take, and how it should be managed,” Justice Ian Nordheimer wrote in the decision.

“It seems to be that the shareholders ought to be permitted to decide those issues.”

Nordheimer also said it is not “sufficient to show simply that the shareholder requisitioning the meeting has an element of personal interest in the matter.

“That would cast the scope of the personal grievance exception too broadly.”

Moysa says the decision confirms that the exceptions to a shareholder’s fundamental right to call a meeting should be construed narrowly. He says the decision ultimately puts the onus on directors to prove that a shareholder is acting out of a personal grievance.

Moysa says the decision also affirms the court’s role in corporate disputes.

“The role of the court is one of a referee to these disputes rather than being the forum that determines the dispute itself,” says Moysa, who is a partner with McMillan LLP.

“The court is there to essentially determine whether or not the shareholder has that right . . . but, ultimately, it will be up to shareholders in a proxy fight or in a meeting of shareholders to determine the actual business matters and issues.”

The court also determined that while Koh had expressed his concerns to board directors in “personal terms” he had a valid difference of opinion as to the business steps that should be taken by the company.

Jim Blake, a corporate lawyer, who was not involved in the case, says historically the courts have deferred to the business judgment sense of a board of directors under the business judgment rule. The rule holds that directors are in a better position than the courts to make decisions concerning their company.

“This is a bit of a breakthrough. It changes it from business judgment rule in the case of a requisition meeting to saying unless the board can prove this is truly a personal claim then the meeting must be held,” says Blake, a partner with McLean & Kerr LLP.

“It’s a little bit of a shifting of power in favour of existing shareholders and their ability to requisition a shareholders meeting.”

Jay Naster, the lawyer representing the respondent, said he was not in a position to comment.

For Canadians, summer is always a welcome sight. The change in seasons automatically invokes thoughts of sunny days, picnics, barbeques and road trips. Regardless of whether it is a short drive to the beach, a cross-Canada road trip, or a cross-border excursion into the United States, vacations can be interrupted by accidents anywhere and at any time.

Being confronted with the immediate aftermath of a car accident in your home province is difficult enough to deal with, but this overwhelming feeling is multiplied when you are in a different country. As such, it is a good idea for Canadian vacationers to have a grasp of the landscape prior to setting out on the open road.

Does My Canadian Car Insurance Cover Me While I Am Driving In The United States?

Often, the answer is yes, as long as the trip is only for visitation purposes and not for permanent habitation. However, as it will become clear throughout this article, it is always prudent to contact your insurance provider and confirm that you are covered prior to embarking on your road trip.

Does My Canadian Car Insurance Cover My Rental Car While Driving In The United States?

Often, the answer is yes. However, this depends on your specific car insurance policy. For example, some car insurance policies do not have the same full range of coverage that is provided to you when you are driving your own car in Canada. Again, it is best to contact your insurance provider and confirm what coverage you have prior to renting.

The rental car provider will also offer some form of insurance coverage. When offered this insurance coverage, ensure that you are aware of what type of insurance coverage you are purchasing. You don’t want to make the mistake of misunderstanding what type of insurance coverage you are actually purchasing. For example, some renters make the mistake of purchasing collision damage coverage and believing that it is comprehensive bodily injury insurance.

Also, different rental companies have different rental contract and exclusionary terms (i.e. sets of circumstances where the rental car company can completely deny you coverage after an accident). As always, the fine print in the rental contract will detail what type of coverage you are actually purchasing and what sets of circumstances will preclude insurance coverage. Make sure to take the time to read the contract and ask for assistance from the rental car company’s salesperson to explain anything that is unclear to you. These employees have been trained to assist you in understanding their rental contracts.

There is one other insurance provider that may assist rental car drivers which many Canadians are unaware of: their credit card company. Many credit card companies, especially travel credit card providers, offer some form of rental car coverage. The best way to find out what type of coverage you have through your credit card is to review the benefits booklet that you received with your credit card or online, or to contact the toll-free number on the back of your credit card and speak with a representative. These credit cards often require that you pay for the rental car with the credit card itself.

Your credit card company may actually provide other forms of travel insurance that you may have never expected; for example, insurance for the theft of personal items while on vacation outside of Canada.

A Critical Difference In Canadian and American Auto Insurance

One major difference between the Canadian and American auto insurance system is the requirement of vastly different statutory minimum policy limits. In Ontario, it is a mandatory requirement that a car insurance policy has at least $200,000 of third party liability coverage. In most cases, Ontarians have a policy that has $1,000,000 of third party liability coverage. In the United States, in some states, the minimum mandatory coverage is as low as $10,000 U.S.D.. This difference between Canadian and American insurance coverage can be shocking, especially if a Canadian is involved in a car accident in the U.S. and has suffered severe injuries.

Fortunately, there is protection for Canadian vacationers. Most drivers will be able to access insurance benefits through their own insurance company even if the car accident occurred in the United States. In addition to seeking accident benefits from your own insurance company, you may also be able to claim against the insurance company of the other vehicle/driver in the United States.

If the other driver’s car insurance limits are insufficient to respond to your claim, Canadians may be entitled to start a claim against their own insurance company for underinsured benefits (i.e. OPCF 44R coverage). Underinsured benefits are, in effect, a form of protection that drivers have to protect them when an at-fault driver’s insurance coverage is not enough to compensate them for their losses. In other words, after an accident in the United States, Canadian drivers can seek compensation from their own insurance company and the American driver’s car insurance policy for their losses.

As many American lawyers are not familiar with Canadian auto insurance and accident benefits, it is best to consult with a Canadian lawyer who can assist with the Canadian accident benefits, pursue the underinsured benefits, and he/she can facilitate the finding of an American lawyer who can simultaneously advance the lawsuit against the at-fault American driver in the United States.

Enjoy the summer and the open road. Be safe and happy travels!

Putting a parent's affairs in order creates a great deal of added pressure and responsibility for executors during an already traumatic time.

"Taking care of an extremely ill parent or dealing with their loss can be overwhelming" says Viraf Baliwalla, President of Transition Squad®, an expert in senior downsizing. "There are emotions of sadness, issues of sibling rivalry, pressures of work and family life, stress of regulatory requirements and feelings of guilt in how to deal with parents' belongings which have been accumulated over decades."

According to Baliwalla, one of the most daunting questions executors face as they get ready for probate is "what do I do with all the stuff"? Here are five of the most frequently asked questions and corresponding answers, during such a time.  

Do I need to have the contents appraised for probate?

No. You can determine the value any way you wish. However the rules require that, in case you get audited by the CRA, you have adequate evidence to demonstrate how you came up with the figures and the methodology is reasonable. So long as the methodology makes sense and you have everything documented, then you don't need to pay for an appraisal.

How do I know what the contents are worth?

Fair market value is established when you have a motivated seller, a motivated and informed buyer and a mutually agreeable price. To determine fair market value, you can take a number of different approaches. You can bring in a professional appraiser whose appraisal report should provide comparables and a reasonable market value based on those comparables. In an ideal world, their research tools will show what these comparables recently sold for, not just the asking price, since asking price and sale price may be two very different things. The appraiser will typically charge for their time and expertise to generate the report. However, remember that an appraiser designation can be obtained through a simple weekend course and not all appraisers are created equal.

Instead of hiring an appraiser, you can get a ballpark idea for free by simply searching 3rd party websites, such as Kijiji or Craigslist, for similar items. You'll see asking prices but with some allowance for negotiation, you can arrive at a reasonable estimate. For the purposes of probate, this approach is quite acceptable to demonstrate the value of the contents.

You can also put the items up for auction which is a much better reflection of fair market value because of the competitive bidding process. If someone pays $X through competitive open market bidding, then there is no disputing the value or method use. The proceeds may have to be paid to the estate account for future distribution depending where in the process you are.

What are the ways of selling the contents?

There are A LOT of options available for selling second-hand estate contents. It is important to do your research and check references when determining which way to go.

• Classic garage sale
• Estate sale/tag sale
• Physical auction house
• Online auction
• Consignment store
• Classified websites (kijiji, craigslist etc.).

While all of these are valid ways to sell items to determine value, the most accurate method that will also bring in the best results are auctions.

How long will it take to conduct an estate contents sale or auction?

To conduct an online auction or estate contents sale can take as little as two weeks once family and friends have already taken out what was bequeathed in the will and anything else they want, leaving only the items for sale. However, there are often other circumstances such as sibling disputes that could delay the process.

Should I sell the contents before or after listing the home?

Many real estate agents will advise to sell the home first and in order to do so may suggest staging the home. Undoubtedly the stager will recommend decluttering, packing up items to put in storage or throwing items away. However, many such items may be sellable and storage lockers are an expensive and possibly unnecessary extra cost. Selling the contents first which will save you a lot of upfront costs of packing, moving and storing, and generate cash in your pocket which can be used to rent furniture if required based on your realtor's or stager's recommendations. You'll be surprised at what people buy so the things you may have thrown away during staging could have actually fetched you money.

Mike Seto always seemed destined to run a virtual law practice.

Despite receiving his call to the bar in the late 1980s when “there was no Internet and a virtual office was not a true concept,” the Toronto-­based corporate lawyer has remained on the cutting edge when it comes to technological developments in the legal world.

In the 1990s, he worked for the Law Society of Upper Canada, where he was responsible for assessing the regulatory impact of emerging technologies, including the early days of the Internet and email.

And when he left the law society, it was to go in-house with a telecommunications startup.

“I’ve always been a bit of a tech geek to be honest,” Seto confesses.

So when he finally went into private practice on his own six years ago, Seto lived up to his early-adoption track record, becoming one of the first in a growing wave of lawyers that operate virtual practices.

“A lot of people say they practise virtually now. It means different things to different people. Defining your niche is important,” he says.

Seto’s version involves providing corporate counsel-style services as they’re needed by small- and medium-size businesses that may not have the budget to hire someone full time.

“I realized a lot of clients are not interested in a traditional downtown law office anymore. Mine prefer that I don’t have an office, because they’d much rather that I came to them,” he says.

“The practice of law is drastically changing. Clients don’t care about billable hours; they care about outcomes.”

Seto has also built a network of lawyers and clerical support staff from around the province to whom he can farm out work for particular projects.

“If I need assistance on a deal, I can get outsourced legal assistance on a contractual basis,” he says.

“Often, the answer is to go to London or Kingston, where you can get the same calibre of expertise much cheaper than in Toronto.”

Scott Au, partner at Mehdi Au LLP, says the establishment of his firm’s virtual office was also driven by client demand, although it operates as an extension to its bricks-­and­-mortar outpost in Markham, Ont.

“For me, it’s about giving clients the ability to connect with us not just face to face but by lots of different means,” Au says. “Some clients still want you to have a physical presence, so we like to give them that option, too.”

Au says teleconferencing and e-­signature software are crucial to serving the firm’s international clientele, which includes potential immigrants to Canada, commercial real estate investors and cross-­border businesses.

The firm’s practice management software also allows clients to sign up with the firm, meet with lawyers and pay their bills, all over the Internet, while at the same time meeting the law society’s identification verification rules.

“If you want to succeed with the current situation in the legal industry, then you need to be willing to rely on technology. The smaller nimble firms are the only ones that are actively growing,” Au says.

Monica Goyal, a technology lawyer and former engineer who has founded several legal startups, says virtual practice can be convenient for lawyers as well as their clients.

“One of the people I work with now is based in Haliburton, while I’m in Toronto. There’s no way for us to work together physically,” Goyal says.

“You have the freedom to work where you want and engage with people in different locations.”

For clients who still want to come to her, Goyal has signed up with Regus Canada, a virtual-office provider that leases out physical space for meetings when needed.

For lawyers fresh out of law school or starting their own solo practice for the first time, virtual law offices are particularly attractive, says Chatham, Ont. lawyer Daniel Whittal.

Having grown up about 30 kilometres away in Wallaceburg, Ont., he returned to the area in 2011 after a spell at international heavyweight Paul Hastings LLP in New York and launched straight into his own practice.

“I didn’t have a specific office, so by necessity, I had to meet people at home or in private areas of cafés. I did a lot of work by email and over the phone,” he says.

Although his firm, Whittal and Company, has since transitioned to a more traditional setup with a dedicated office and several support staff, he says the firm still “operates as much as we can in a virtual setting.”

The new approach has also given him a renewed appreciation of his early days.

“We’ve got all the normal expenses that come with owning and maintaining a physical space, so sometimes I do miss those tiny overhead costs,” he says.