Case Commentary: Law Society of Saskatchewan v Abrametz, 2022 SCC 29

by | Jul 11, 2022 | Area of Expertise, Articles & Research, Case Comments, Lawyers, Professional Discipline and Liability, Sean M Sinclair

In a much-anticipated decision for professional regulators, the Supreme Court of Canada has released its decision in the case of Law Society of Saskatchewan v Abrametz, 2022 SCC 29.

For those working in the professional disciplinary realm, the Saskatchewan Court of Appeal’s decision in this matter was rather shocking. The Court of Appeal stayed the disbarment of Mr. Abrametz because of delay in the investigation and hearing of the professional disciplinary case.

In this recent decision, the Supreme Court of Canada overturned the Court of Appeal’s stay of the penalty and found that the delay in investigation and the hearing process did not amount to an abuse of process.

Facts:

In the original hearing, the discipline committee found that Mr. Abrametz had:

  1. Issued cheques to clients that were then endorsed by the client and cashed by Mr. Abrametz;
  2. Issued three cheques to a fictitious person, endorsed that false name on the cheques and cashed them; and
  3. Loaned (or advanced) money to clients, charging them a flat 30 percent fee of the amount advanced as well as a 30 percent contingency fee and interest.

The investigation was commenced in 2012. The investigation was complex and involved significant work from the Law Society’s auditor.

Ultimately, the discipline hearing took place on various dates between May and September 2017. A decision was rendered on January 10, 2018 finding Mr. Abrametz guilty of conduct unbecoming a lawyer.

After the decision was rendered but prior to a penalty hearing, Mr. Abrametz applied for a stay of proceedings on the basis that the time taken by the Law Society to investigate and decide his case constituted an abuse of process. The stay application was dismissed on November 9, 2018.

On January 20, 2019, the penalty decision was rendered which ordered that Mr. Abrametz be disbarred without a right to reapply for readmission until January 1, 2021.

The Court of Appeal overturned the hearing committee’s decision on the issue of the stay of proceedings application. The Court of Appeal found that the delay in the investigation and hearing of Mr. Abrametz’s case was so significant that it constituted an abuse of process. It found that the appropriate remedy was to retain the finding of conduct unbecoming, but stay the penalty such that there would be no further penalty imposed upon Mr. Abrametz.  In other words, Mr. Abrametz would not be disbarred.

It should be noted that Mr. Abrametz was subject to practice conditions while the investigation and hearing process was taking place. The conditions required that Mr. Abrametz retain another lawyer to supervise and monitor his practice and trust account activities; he had to seek prior approval from the supervisor for withdrawals/cheques from any trust account; and he could not accept the return of trust cheques from clients, nor accept endorsed cheques to be cashed or negotiated. Although there had been threatened interim suspensions, an interim suspension was not imposed.

In totality, there had been a 71-month delay between the commencement of the investigation until the stay decision was completed.

Takeaways from the Supreme Court

Some of the key takeaways from the Supreme Court’s decision are:

  1. The Supreme Court’s prior decision in Blencoe v British Columbia (Human Rights Commission), 2000 SCC 44 was reaffirmed. In Blencoe, the Supreme Court found that delay in an administrative process can result in abuse of process. The test to determine whether there has been abuse of process is relatively high: paragraphs 38 to 44.
  2. There is an express rejection of requests to “Jordanize” the Blencoe Specifically, unlike in Jordan, the Court did not adopt a requirement that a proceeding be completed within a certain number of months, failing which there would be a presumption that the case would be stayed: paragraphs 45 to 48.
  3. There are two ways in which delay may constitute an abuse of process. The first is where the delay has compromised the fairness of a hearing, such as when memories have faded, essential witnesses are unavailable, or evidence has been lost. The second is when significant prejudice has come about due to inordinate delay: paragraphs 41 and 42.
  4. On the second form of abuse of process (ie. prejudice caused by inordinate of delay), there is a three-part test to determine whether delay constitutes an abuse of process:
  1. The delay is inordinate;
  2. The delay must have caused significant prejudice; and
  3. Whether the delay amounts to an abuse of process by being manifestly unfair to a party or in some other way bringing the administration of justice into disrepute: paragraph 43.
  1. In assessing whether delay is “inordinate”, the following considerations apply
  1. The period of delay starts when there is a practical necessity to engage the investigatory process and ends when the proceeding is completed: paragraph 58. Thus, for all practical purposes, the time starts ticking when a complaint is received or an investigation is started;
  2. A lengthy delay is not automatically inordinate. It can be justified where, for example, a case involves parallel criminal and administrative proceedings: paragraph 59;
  3. The reasons for a delay are important. To the extent that the member contributed to or waived parts of the delay, this is an important consideration: paragraph 61;
  4. Delay can be waived explicitly or implicitly. If the member asked for suspension of the proceedings or did not object to a suspension of the proceedings while other investigations proceeded and acted in a way that unequivocally suggests they acquiesce to such delay, it can constitute a waiver: paragraph 63;
  5. The complexity of the facts and issues must be considered in determining whether the delay is inordinate: paragraph 66.
  1. In assessing whether there was “significant prejudice”, the following considerations apply:
  1. Delay alone is not sufficient to lead to an abuse of process. Otherwise, it would be “tantamount to imposing the judicially created limitation period”: paragraph 67;
  2. The prejudice alleged by the member must relate to the delay, not to the fact that such proceedings were undertaken: paragraph 68;
  3. Some examples of prejudice would include: psychological harm, stigma attached to the individual’s reputation, disruption to family life, loss of work or business opportunities, as well as extended and intrusive media attention: paragraph 69.
  1. In assessing whether the inordinate delay amounts to an abuse of process, a decision-maker is to consider whether the delay is manifestly unfair to the party to the proceeding or in some way brings the administration of justice into disrepute: paragraph 72;
  2. In terms of remedies for abuse of process, the Court made the following observations:
  1. It is possible for a hearing committee to permanently stay proceedings because of abuse of process through delay. The threshold is very high. It is only where delay is so significant that it would “shock the community’s sense of fairness and decency” that it would be open for a hearing committee to stay the proceeding: paragraph 76;
  2. There is a duty both on the regulator and the member to ensure that matters proceed without delay. To the extent that a party feels aggrieved by delay, it should avail itself of the tribunal procedures to have matters proceed in an expeditious manner. Further, a member concerned about delay has the option of seeking a court order to have the matters proceed more expeditiously, including through an application for mandamus. A failure by a member to take these steps can be considered in relation to the remedy for abuse of process: paragraphs 78 to 82;
  3. Often, the appropriate remedies for abuse of process by reason of delay are to order a reduction in sanction and/or costs: paragraphs 89 to 99.
  1. The Supreme Court found that, although the Court of Appeal correctly determined that it should provide deference to the hearing committee’s findings of fact, it did not actually do so. Some of the comments in that regard were:
  1. The Court of Appeal erred by analyzing the evidence and making its own findings of fact as to whether various delays were “undue”. In essence, the Supreme Court found that the Court of Appeal interfered with factual conclusions merely because it disagreed with the weight to be assigned to the underlying evidence: paragraphs 107 to 116;
  2. The Court of Appeal failed to set out a proper basis for interfering with the finding that Mr. Abrametz did not suffer significant prejudice from the conditions imposed on his practice: paragraph 122.
Conclusion

The decision from the Supreme Court is good news for professional regulators. The Supreme Court has rejected a presumption that significant delay, on its own, constitutes abuse of process.   Further, the threshold for what constitutes abuse of process and the remedy for a stay of proceedings is high.  Lastly, the Supreme Court makes it clear that appellate bodies hearing professional regulatory appeals are to provide real and meaningful deference to hearing committees.

If you have any questions about this or any other regulatory matters, please feel free to contact Sean Sinclair at 306-933-1367.

Contacting a Lawyer on this Subject

Sean Sinclair, a partner with Robertson Stromberg LLP, has experience in most areas of civil litigation but focuses on family law, professional regulation, estate litigation and media law. Sean is also recognized as a family law arbitrator. Contact Sean at 1-306-933-1367 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

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Saskatchewan Estate Litigation Update: Kaushik v Kaushik, 2022 SKQB 135

by | Jun 23, 2022 | Area of Expertise, Articles & Research, Case Comments, Estate Litigation, James D Steele, Lawyers, Wills, Estates, Trusts, Health Care Directives and Powers of Attorney

The recent Saskatchewan Queen’s Bench decision in Kaushik v Kaushik, 2022 SKQB 135, offers an overview of a situation in which multiple persons concurrently seek to be appointed as the sole administrator of an Estate. 

Overview:
  1. Sadhna Kaushik applied for appointment as the administratrix of the estate of Daya Chand Kaushik [Daya], her late father;
  2. Daya died on June 7, 2019;
  3. Daya’s last will and testament dated September 22, 1987, named his wife, Vimla Devi Kauchik [Vimla] as executrix. It directed further that in the event she predeceased him, Rakesh Kaushik [Rakesh], Sadhna’s brother, and one of the respondents on this application, should serve as executor of his estate;
  4. Vimla predeceased Daya;
  5. To date, no application to have Daya’s will probated had been made, as the original will had been lost;
  6. Rakesh, brother of Sadhna, argued that he himself should be appointed as administrator. Rakesh relied on the below facts:
  1. On or about August 30, 2016, Daya executed an Enduring Power of Attorney naming Rakesh as his personal and property attorney. Rakesh acted in this capacity until Daya’s death in 2019;
  2. However, on or about September 20, 2016, Daya purportedly executed a Revocation of Enduring Power of Attorney setting aside the previous document. However, Rakesh only learned of this after Daya’s death;
  1. The six beneficiaries were divided as to their choice of the appropriate administrator of Daya’s estate. Three beneficiaries, Douglas, Sheila, and Hazel signalled their support of Rakesh, and each formally renounced her right to letters of administration in favour of Rakesh.
  2. The last two beneficiaries – Elizabeth and Neil – adamantly reject the appointment of either Sadhna or Rakesh to be administrator of Daya’s estate. Instead, they proposed that the parties be directed to attend mediation in an attempt to resolve this dispute.
  1. Elizabeth and Neil opposed appointing Sadhna because she allegedly mismanaged the affairs of Vimla’s estate when Sadhna served as her mother’s executrix; and
  2. Elizabeth and Neil opposed appointing Rakesh because of his alleged continuing failure to account adequately for monies transferred from Daya’s accounts during the latter years of Daya’s life, even in the face of an order of the court dated August 13, 2020.
  1. As for Sadhna, only Sadhna supports an order appointing herself to be the administratrix of Daya’s estate.
Who had priority to apply to administer?

Subsection 13(1) of the Administration of Estates Act stipulated that no letters of administration shall be granted to any person unless:

  1. all persons with a prior or equal right have renounced their right to administration; or

  2. a judge has made an order dispensing with the requirement to obtain the renunciation of the right to administration of persons mentioned in clause (a)

In the context of this application, this meant Sadhna was not entitled to be appointed administratrix because Rakesh has not renounced his right to administration, and vice versa. Thus, the court had to intervene to break the deadlock between the two siblings.  

The court ultimately appointed Rakesh as administrator:

As the only surviving children of Daya and Vimla, both Sadhna and Rakesh were potentially entitled to apply to be appointed as administrator of Daya’s estate. The question was which of them, if either, is the most appropriate person to serve in that capacity.

The court ultimately found that Rakesh was the preferable person to administer the Estate. The three main factors could be summarized below:

  1. Reason 1: First, Daya decided in 1987 to appoint Rakesh as the alternate executor of his estate should Vimla predecease him. Despite Vimla’s death in 2016, at no time prior to his death in 2019 is there any evidence to show that Daya revised his will, let alone executed a new one. This consideration weighed heavily in favour of appointing Rakesh as administrator, by showing the intention of Daya as to who would administer his estate;
  2. Reason 2: Rakesh was opposed by some beneficiaries, but he ultimately did have the consent of a majority of the beneficiaries. In addition to himself, Rakesh had the consent of Sheila, Hazel, Douglas, all of whom have formally renounced their rights;
  3. Reason 3: The evidence discloses that Rakesh maintained a closer relationship with Daya than did Sadhna;
  4. Reason 4: Rakesh purported to act as Daya’s attorney pursuant to the terms of an Enduring Power of Attorney dated August 30, 2016. It is true that there is evidence that Daya revoked this, but no one appeared to learn of this until after Daya’s death. The fact that Rakesh did look after Daya’s affairs for a time, would support a finding that Rakesh was well placed to “convert [Daya’s estate] to the advantage of those who have claims against it, either by paying the creditors or by making the appropriate necessary distributions”.

The one aspect which gave the court pause, was about the allegation that Rakesh had refused to provide an accounting of his handling of Daya’s estate from September 1, 2016 – the approximate date when the enduring power of attorney took effect – to June 7, 2019, the date of Daya’s death.

However, the court found that Rakesh in his affidavit had spoken to the steps he took to comply with the order to account. The court took comfort from the fact that Rakesh had retained local counsel, who would direct Rakesh on how to carry out his responsibilities as administrator in an appropriate and lawful manner.  

Moreover, the court found that, while Rakesh has been slow to provide an accounting of his management of Daya’s affairs, he had now provided one in the requisite form prescribed by The Queen’s Bench Rules. Additionally, his affidavit provides further information respecting his dealings with Daya’s estate while he acted as his father’s attorney.

Moreover, the court was not ultimately swayed by  two findings of profession misconduct made against Rakesh by the discipline committee of his professional regulatory body, the Chartered Professional Accountants of Saskatchewan. While these were stain on a professional’s reputation, they were not enough on its own to disqualify him or her from acting as the administrator or testator of a deceased’s estate.

Outcome and costs order:

The court in Kaushik ultimately appointed Rakesh as administrator, but did require that he obtain a bond. Interestingly, despite the success of Rakesh in this application, the court ordered that each side bear its own costs:

63      I am satisfied that considering all the circumstances, this application was necessary in order to settle the question of who should be appointed administrator of Daya’s estate. A stalemate had occurred between the two people legally authorized to apply for letters of administration. It so happens that it was Sadhna who initiated the application. In my view in the unusual circumstances of this case Daya’s estate should not be burdened with the costs of this application. Rather, I have determined that each party should bear his or her own costs of this application, and I so order.

The reasoning above – that “Daya’s estate should not be burdened with the costs of this application”  – is unusual.

In this situation, the Estate benefited from the clarity of this court order, which finally appointed someone to administer the Estate, and which took the estate out of the administrative limbo it had fallen into. Thus, it would have been entirely customary for the Estate to bear some or all of the legal costs incurred by a newly appointed administrator in his successful application.

Lessons learned:

Kaushik reminds us of the some of the factors which a court will rely on, in a situation of competing applicants for administrator. These factors include:

  1. Are there any clues, showing whom the deceased themself had wanted to appoint?
  2. Was there a majority among the beneficiaries, as to whom they want to administer the Estate?
  3. Had one of the potential applicants ever acted as attorney for the deceased before, thus placing them in a better position to now convert the estate to the advantage of the beneficiaries?

Contacting a Lawyer on this Subject

James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

Learn more about James

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The Saskatchewan Estate Law blog is dedicated to providing practical, real-world information on Estate Law issues that affect Saskatchewan residents. The blog is written by RS lawyer, James Steele, whose practice focuses on estate litigation.

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Saskatchewan Estate Litigation Update: McCabe v Kowalyshyn, 2022 SKCA 56

by | May 27, 2022 | Area of Expertise, Articles & Research, Case Comments, Estate Litigation, James D Steele, Lawyers

The recent Court of Appeal decision in McCabe v Kowalyshyn, 2022 SKCA 56, offers various lessons to Estate litigators. These include:

  1. The reality that court approvals of Estate land sales, under s. 50.5 of The Administration of Estates Act, SS 1998, c A-4.1, do not simply focus solely on market value. The court can also look at other considerations, such as whether the sale will reasonably reduce future litigation, wasted effort, or delay in the Estate.
  2. The reality that if parties agree in advance to a certain specified sale process, but do not later like the result, the court may not let them later challenge the outcome of that sale process.
Background:

McCabe arose out of a sale of farmland owned by an Estate. The background of McCabe informs some of the issues addressed by the Court. The background is summarized as follows:

  1. The deceased, Mike Kowalyshyn, died on July 1, 1996, ostensibly leaving a life interest in his estate to his wife and the remainder of it to their 12 adult children. The Estate owned, inter alia, eight quarter sections of farmland (“Farmland”), which had been leased to Nicky (a beneficiary of the Estate) and his wife, Debbie since the 1990s;
  2. Joseph Kowalyshyn was the executor of the Estate and was also one of its beneficiaries;
  3. There were a total of 12 adult siblings involved, who were the children and beneficiaries of their father’s estate, the estate of Mike Kowalyshyn;
  4. In 2017, certain of the Estate’s beneficiaries (the “Objecting Beneficiaries”) commenced proceedings against Joseph and the Estate, as well as against Nicky and Debbie, asserting that the Farmland had been leased at less than fair market rent (thus failing to maximize the Estate value);
  5. The focus of the parties turned to the sale of the Farmland. A variety of purchase offers were made:
  1. Nicky and Debbie offered to buy the Farmland for $987,121, which Joseph “conditionally accepted” as executor of the Estate (Queen’s Bench decision, McCabe v Kowalyshyn, 2021 SKQB 144, at para 8);
  2. This caused rancor amongst the Objecting Beneficiaries because they believed the Farmland was worth more than this price;
  3. On December 9, 2020, the Objecting Beneficiaries advised Joseph Kowalyshyn that some or all of them would be making an offer to purchase the land on more favourable terms, namely a purchase price of $1,000,000.00 (Queen’s Bench decision at para 8);
  4. On January 3, 2021, Nicky and Debbie Kowalyshyn increased their offer to purchase to $1,010,000.00  (Queen’s Bench decision at para 8);

The closed auction process:

  1. The parties could not agree, and the matter went to a court hearing on January 5, 2021, as well as various later conference calls with the Court. As a result of discussions, the parties agreed to a closed, inter-family auction. The process was reduced to writing, and set out a time-sensitive, process-detailed procedure whereby the land would be exposed to offers from the Kowalyshyn family;
  2. In accordance with the proposed method of sale, two groups (Nicky and Debbie Kowalyshyn on one hand, and Joyce Kowalyshyn, Walter Kowalyshyn, Eugene Kowalyshyn and Michael Kowalyshyn on the other hand) presented various back and forth offers on the Farmland;
  3. Nicky and Debbie Kowalyshyn presented the last and highest bid on February 8, 2021 in the amount of $1,325,000.00.
  4. No higher counter offer was received from Joyce Kowalyshyn, Walter Kowalyshyn, Eugene Kowalyshyn and Michael Kowalyshyn;
  5. However, the Objecting Beneficiaries then objected to any sale for $1,325,000.00. They asserted that they had gained evidence that the Land was worth more. For example, on February 24, 2021, Joyce Kowalyshyn contacted SAMA and learned that the Farmland had been newly assessed at $1,422,700.00, an increase from the former assessment of $1,150,681.50;
  6. Further, Joyce Kowalyshyn also contacted Wayne Berlinic, a realtor, and asked him to prepare a marketing plan for the estate land. Mr. Berlinic stated his belief that the most likely sale price for the land would be between $1,448,100.00 and $1,544,800.00 given recent market trends. Counsel for the Objecting Beneficiaries, in correspondence directed to the court, advised that later on March 26, 2021 he was advised that Mr. Berlinic had sold 120 acres of farmland near Buchanan, Saskatchewan for $2,083.00 per acre. If an equivalent price was received for the estate land, the total value of the land would approach $1,778,882.00;
  7. In reply,  the executor, Joseph Kowalyshyn, responded by commissioning a formal appraisal of the land by Robin Johnson, a member of the Appraisal Institute of Canada. He appraised the land using a .86 multiple of the new SAMA assessments and provided a value of $1,209,000.00, including buildings on the home quarter.
Queen’s Bench Ruling in McCabe v Kowalyshyn:

The Objecting Beneficiaries refused to consent to the sale of the land for $1,325,000.00.

The issue for the Queen’s Bench court (“Chambers judge”) was whether to approve the sale for $1,325,000.00, or to send it a future auction on the open market.

For context, s. 50.5(1) of The Administration of Estates Act, SS 1998, c A-4.1  holds that  an executor shall not sell land in an Estate, for the sole purpose of distributing the estate among the beneficiaries, unless those persons concur in the sale. Thus, the executor either needed unanimous agreement of the beneficiaries to the $1,325,000 sale, or, he needed a court order to override the non-consent of certain beneficiaries.

The Chambers judge approved the sale by the Estate of the Farmland to the respondents, Nicky and Debbie Kowalyshyn, for $1,325,000. The Court largely relied on the below grounds:

  1. The Objecting Beneficiaries were reneging (in the view of the Court at least) on a method of sale that they had agreed to, and in which they actively participated;
  2. The Objecting Beneficiaries had changed their position on what was the appropriate value of the Farmland. The Objecting Beneficiaries all agreed in writing that the offer of $1,000,000.00 was “deemed to be in the interest and to the advantage of the Estate.” Notably, that price was not only $325,000.00 below the price offered just weeks later by Nicky and Debbie Kowalyshyn but, more significantly, below the SAMA assessment then in currency ($1,150,681.50);
  3. The sale for $1,325,000 was in the best interest of the Estate. True, such sum may not maximize total market value, but s. 50.5 did not focus solely on market value. It instead allows the Court to look at other facts as well, such as:
  1. What sale would avoid further legal fees and dispute;
  2. What sale would avoid further delay or limbo, for the Estate;
  3. What would avoid having the Farmland sit fallow and unused in 2021.
  1. The Court preferred the appraisal evidence of Mr. Johnson. He used approved methods of appraisal, including comparable land sales as late as April 2021. He had provided topographical photographs of the Farmland. The court said that it would always favour an appraiser’s report over an opinion of value offered by a realtor, particularly a realtor who proposes to be engaged in the sale of the land.
Issue at the Court of Appeal:

The Objecting Beneficiaries appealed to the Court of Appeal. They asked the Court of Appeal to overturn the Chamber judge’s approval of the sale for $1.325 million. They asked instead for the Court of Appeal to direct the Estate to sell the Farmland at public auction.

Court of Appeal decision in McCabe v Kowalyshyn:

The Court of Appeal held that the Objecting Beneficiaries were bound by the process they had helped negotiate, and agreed to. That is, the bidding process had been negotiated and agreed upon by all parties, it had been conducted fairly, and it had established a closed market restricted to Estate beneficiaries and their spouses. Its object was not to achieve a sale at fair market value; it was to resolve the dispute over the sale of the Farmland fairly and finally (Court of Appeal decision at para 35).

Nothing about the new evidence of market value, had impugned the agreed-upon bidding process or how that process had been managed by Joseph.

Thus, the Court of Appeal upheld the Chambers judge’s reliance on factors, which were not limited to market value. For example, the Chambers judge had considered such factors as:

  1. The reality that the Estate faced mounting legal fees due to sharp divisions amongst the beneficiaries and the continuing litigation;
  2. The Estate’s principal asset — the Farmland — would be left fallow in 2021 if not sold, producing neither rent nor crops, until the dispute was resolved;
  3. The Objecting Beneficiaries had not satisfied their burden of proving that the $1.325 million was under value;
  4. Moreover, even if $1.325 million was not the highest possible value, the price was not the sole consideration when giving approval under s. 50.5. Had the Legislature intended for s. 50.5 to solely hinge on market value, when approving a sale, the legislature could have said just that. 
Lessons learned:

First, if beneficiaries agree to the method of sale and, participate in that method of sale, they will have a difficult time in later challenging the outcome.

Second, the criteria of highest “fair market value” is not the only consideration that the Court will consider, when approving a sale under s. 50.5.

Contacting a Lawyer on this Subject

James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

Learn more about James

Read more on our blog.

The Saskatchewan Estate Law blog is dedicated to providing practical, real-world information on Estate Law issues that affect Saskatchewan residents. The blog is written by RS lawyer, James Steele, whose practice focuses on estate litigation.

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My Contractor Doesn’t Exist, Can I Sue?

by | May 20, 2022 | Area of Expertise, Articles & Research, Bankruptcy and Insolvency, Lawyers

It is common for contractors and other service providers to incorporate prior to starting a business. A corporation can provide a certain level of insulation from liability for the people who operate it, and in addition, allows for other advantages such as tax planning. While it provides the operators with liability protection, it can leave an aggrieved customer with nowhere to turn. This is especially true where the issues are not evident at first instance. Many times a construction defect takes years to materialize.

Making this situation even worse for the customer is that by the time the construction defect materializes, the corporation that provided the service may no longer be in business. A corporation can, subject to certain requirements, dissolve and liquidate its assets at any time. If a corporation does so before it is sued, or even knows about the construction defects, any leftover assets can be paid out to its shareholders. At the first instance, the customer is left holding the bag, while the shareholders are left with a windfall.

Thankfully, The Business Corporations Act (Saskatchewan) (the “Act”) contemplated these issues. Section 219 specifically allows someone to sue an inactive corporation. However, even in that instance, you must act fast as you only get two years to do so. While not a perfect solution, it does provide an avenue for aggrieved customers to right the wrong.

In addition, the Act also allows you to attempt to recover the assets or at least their value, that were paid out to the shareholders. This prevents the corporation and its operators from side-stepping its liabilities.

That being said, deciding to sue a dissolved corporation will cost time and money. It may be that the corporation dissolved because it had no assets. In some situations, all of the assets of the corporation may have gone to other creditors such as a bank or someone else who sued the corporation. Therefore, any legal action is unlikely to provide meaningful results.

Before deciding to sue, some background work can be done to determine if legal action is worthwhile. These steps include:

  1. Pulling a corporate profile report from Information Services Corporation. A certificate of dissolution, and sometimes other supporting documents, may be filed online. Recovering a copy of these, for a small fee, may shed some light on the financial situation of the corporation; or
  2. Contact the Ministry of Finance. The Act specifically requires corporations with known creditors, who cannot be located, to payout a certain portion of their assets to the Ministry of Finance for future claims. There is no guarantee that the corporation will have done so, and if it did not know that the construction was faulty, the funds may not have been paid, but it is an inexpensive step that may lead to partial recovery.

At the end of the day, you should ask yourself whether you are ready to commit the time and financial resources to pursue an inactive corporation. In some instances, your first loss is your best loss, and throwing further money down the rabbit hole may only lead to frustration.

However, in others, meaningful recovery may be achieved. You should not simply give up because your contractor has gone out of business, especially where he or she has started a new business. They may have simply taken their assets to avoid their liabilities, and you can still recover.

This article is intended to provide legal information only, not legal advice. 

For further information, please contact:

Travis K. Kusch
Direct: 306-933-1373
Email: [email protected]

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What if I just don’t? A cautionary tale for those who ignore Saskatchewan’s new prompt payment requirements

by | May 9, 2022 | Area of Expertise, Articles & Research, Construction, Lawyers, Misty S Alexandre

For the past several years, we have been presenting to the construction industry the pending (and as of March 1, 2022, now in force) prompt payment provisions, which are now included in The Builders’ Lien Act of Saskatchewan. A common question that arises during every discussion on the topic is “what if I just don’t follow these provisions?” While the answer in many cases is clearly outlined in the legislation, there are many unknowns as well. For example, we know that if an Owner does not formally dispute an invoice within 14 days, the invoice becomes due and payable. However, some wondered about the repercussions of simply ignoring the paperwork or payment requirements along the way.  Surely there would be some second chances? We often rely upon Court decisions to interpret legislation, but since the legislation itself is new, it may be a while before we know how the Saskatchewan Courts will address questions of this nature.

Fortunately, we can now take some guidance from the Courts in Ontario (the first jurisdiction in Canada to enact prompt payment legislation.) Their prompt payment provisions have been in place for over two years, and the related Court decisions are now starting to trickle in. The verdict? The Courts fully appreciate the importance of the prompt payment provisions and will interpret them strictly and to the detriment of those who choose to ignore them.

One such case was very recently reported in SOTA Dental Studio Inc. v. Andrid Group Ltd., 2022 ONSC 2254. SOTA hired Andrid to construct a dental clinic in Vaughn, Ontario. Andrid issued invoices to SOTA, none of which were disputed within 14 days of receipt, making those invoices due and payable. When SOTA did not pay within the required 28 days, Andrid invoked the adjudication process and obtained a decision from the adjudicator requiring SOTA to pay the invoiced amount. SOTA continued to ignore its payment obligations, leaving Andrid to pursue enforcement measures. Andrid was able to garnish a portion of the amount owing from SOTA’s bank account, but the majority of the debt remained unpaid.

Similar to Saskatchewan, Ontario’s prompt payment legislation permits a party to apply for judicial review of an adjudicator’s decision, though in Ontario the parties are required to seek leave of the Court to do so, which is not a requirement in Saskatchewan. However, in both provinces, an application for judicial review does not operate as a ‘stay’ of the adjudicator’s order unless the Court orders otherwise.

SOTA was granted leave to bring the judicial review application but did not seek a ‘stay’ of the adjudicator’s decision in the interim. As such, the adjudicator’s decision remained enforceable until the judicial review application was heard by the Court.

In advance of the hearing, the Court flagged their concern with SOTA’s continued failure to pay the amount owing under the adjudicator’s decision. Notably, the Court outlined the following principles to be understood by all parties in the construction industry:

[12]           …  So that there is no misunderstanding in future cases, we suggest the following principles to be borne in mind.

(a) prompt payment is integral to the scheme of the Construction Act. 

(b) failure to pay in accordance with the prompt payment requirements of the Act may lead this court to refuse leave.  Where leave is granted, an applicant must obtain a stay or must make payment, failing which this court may dismiss the application on motion to quash or at the hearing of the application.

At the hearing, SOTA argued that it had not made payment because “there was no money.” The Court responded sternly:

[13] … If the owner is insolvent, as appears to be the case, it should not be permitted to run up costs and delays through recourse to litigation in the face of the order below and the prompt payment provisions of the Act.  If there are circumstances that should lead the court to grant a stay, in all of these circumstances, these must be established on proper evidence in the context of a motion for a stay.

And with that, the Court dismissed SOTA’s application for judicial review and awarded costs to Andrid in the sum of $10,000.

So, what’s the answer to the question “what if I just don’t?” Well, so far the message appears to be that the Courts will take no mercy upon you. All parties in the construction industry should understand the prompt payment and adjudication requirements that are now in force for non-exempt construction contracts entered into after March 1, 2022. In this case, ignorance will not be bliss!

This article is intended to provide legal information only, not legal advice.  Dividing family property can be quite complicated. It is recommended that you seek the advice of a lawyer when considering the division of family property.

For further information, please contact:

Misty S. Alexandre
Direct: 306-933-1352
Email: [email protected]

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Misty Alexandre and Jared Epp were among the presenters at the Saskatoon Construction Association course Construction 101 on November 23. Construction 101 is offered to all construction industry stakeholders looking to gain a greater understanding of the "big picture"...

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Saskatchewan Estate Litigation Update: Choquette v Viczko, 2021 SKQB 167

by | May 6, 2022 | Area of Expertise, Articles & Research, Case Comments, Estate Litigation, James D Steele, Lawyers, Uncategorized, Wills, Estates, Trusts, Health Care Directives and Powers of Attorney

The recent decision in Choquette v Viczko, 2021 SKQB 167, offers a new interpretation of s. 50.5 of the Administration of Estates Act (“Act”).

Background:

Under s. 50.5 of the Act, if an executor sells land to which a beneficiary is beneficially entitled, the executor requires the consent of that beneficiary. The provision reads as follows:

50.5(1) The executor or administrator shall not sell real property for the sole purpose of distributing the estate among the persons beneficially entitled to it unless those persons concur in the sale.

Facts in Choquette v Viczko

The factual background in Choquette may be summarized as follows:

  1. Joseph Viczko died on September 10, 2011. Joseph had three children, namely, Ms. Choquette, Donna Boots and David Viczko;
  2. Joseph had been a farmer. His will directed that it was his “intention to sell the W1/2 12‑39‑27 W2, or any other farm land that [he owned] while I am living and distribute the proceeds of sale equally between my daughters”. The will further provided that if, at his death, Joseph had not sold the farmland, then it “shall be sold by my Trustee and the proceeds divided equally between my daughters”;
  3. At the time of his death, Joseph had not sold the west half of section 12, and so it was left to be distributed in accordance with his will. Ms. Boots was named as executor under the will;
  4. In 2012, she sold the land to her brother, David Viczko, and his spouse, Jennifer Viczko;
  5. In 2013, Ms. Choquette commenced an action seeking to set aside the sale and transfer. In her statement of claim she identified two grounds. Among her objections, was the assertion that her consent to the sale was required because of s. 50.5(1) of the Administration of Estates Act.
Queen’s Bench Ruling in Choquette v Viczko:

One issue that Choquette considered was this: who qualifies as a  beneficiary whose consent to the sale of the land is required under s. 50.5 of the Act?

Choquette clarified that not every sale of estate land will trigger the need for s. 50.5 consents from Estate beneficiaries.

For example, Choquette said that if the Will is such that the beneficiaries of the Estate are only left the proceeds of the sale of the land (but not given a right to go on title to the land itself), then the executors need not obtain consent.

The Court in Choquette reasoned as follows:

23      This operation of s. 50.4 is consistent with the overall approach of the Legislature to wills and estates. That approach is to accommodate, where possible, the implementation of a testator’s final testamentary wishes. Reading “the persons beneficially entitled to it” to mean “the persons beneficially entitled to the real property” is consistent with that approach. I conclude that “the persons beneficially entitled to it” in s. 50.5(1) means “the persons beneficially entitled to the real property”.

24      Therefore, s. 50.5(1) refers to persons who are beneficially entitled to the real property that is proposed to be sold. Here, Ms. Choquette is not such a person. Rather, she is beneficially entitled to a portion of the proceeds of the sale of the real property. Therefore, the answer to this question is “no”. Ms. Choquette is not a beneficiary whose consent to the sale of the land is required under s. 50.5 of The Administration of Estates Act.

This has practical implications for many executors. Many wills say that the Estate is to be sold (liquidated) and the proceeds divided between the beneficiaries. In such case, the names of beneficiaries are not actually going on title to the land. Rather, the beneficiaries will later get a sum of cash (representing the sale proceeds).

Choquette also declared that where is a direction in the Will to sell land, and distribute the proceeds, s. 50.5 simply does not apply to that situation. That is because the terms of the Will already provide sufficient authority for the Executor to sell Estate land:

27             Put another way, s. 50.5 is an enabling provision, not a restricting provision. It enables an executor to sell real estate where the executor is not otherwise empowered to do so. Here, where the executor was expressly empowered by the testator to sell the land, there was no need for the executor to resort to s. 50.5 for authority to do so.

…

36      The question that I am considering here asks whether the specific direction given in the will of the deceased, to sell the land and distribute the proceeds thereof, is paramount to the provisions of the Act (specifically s. 50.5). The answer effectively is “yes”, but the more precise answer is that, because of the specific direction given in the will, the provisions of s. 50.5 have no application. It is not that both the will and s. 50.5 apply to the circumstances, with the direction in the will being paramount. Rather, because of the direction in the will s. 50.5 of the Act does not apply to the circumstances at all.

The court has the ability to retroactively approve a sale:

Choquette also affirmed that the court has the ability to retroactively approve a sale which occurred without beneficiary approval. The court will look at whether the sale was appropriate (i.e. is there evidence it was sold for fair market value? Would it serve no purpose to re-open the sale, causing delay or expense).

If the sale was appropriate, then the court can “cure” the prior lack of beneficiary consent.

We find the below in Choquette:

39      Section 50.5(4)(b) refers to court approval of a sale where a beneficiary does not concur in the proposed sale. Here, the sale occurred years ago. The sale to the Viczkos is not a proposed sale. What is sought is retroactive approval of the sale. In the circumstances of this matter, it is appropriate to approve the sale retroactively. In so saying, I have reference to the guidance provided to the court, in s. 50.5(5), when considering a request to approve a sale:

(5) On application pursuant to subsection (4), the court may make an order approving the sale of the real property if the court is satisfied that it is in the interest and to the advantage of the estate of the deceased and the persons beneficially interested in it.

(emphasis added)

Leave to appeal:

The unsuccessful party in Choquette sought  an order extending the time within which to appeal the Queen’s Bench decision. The Court of Appeal did not give her permission to appeal. In large part, the Court of Appeal found that there was no error with the underlying conclusion that the sale should be approved as reasonable, in any event.

However, the Court of Appeal did suggest that Choquette’s interpretation of s. 50.5 may one day be revisited (and thus is not yet cemented in stone):

[36]           If the Chambers judge’s decision to dismiss Ms. Choquette’s claim rested solely on his analysis in relation to these three questions, I would have found that there was an arguable issue raised by her appeal and would also have been inclined to grant Ms. Choquette an extension of time to appeal, even in the face of her significant delay in making her application. The conclusions reached by the Chambers judge involve determinations of questions of law, largely turning on the proper interpretation of the Act. In the course of his analysis, he acknowledged the existence of ambiguity in the meaning of several of the key provisions. On several key issues, the Chambers judge referred only to decisions of judges of the Court of Queen’s Bench. In this regard, on the question as to whether s. 50.5(1) is applicable when a will gives an executor a right of appeal was raised, but left undecided, in Viczko CA. Moreover, although the Chambers judge supported his conclusion with reference to several decisions from the Court of Queen’s Bench, he was required to distinguish Tomochko Estate v Wilchuk, 2017 SKQB 381, 34 ETR (4th) 283, and Holter v Holter, 2019 SKQB 102. Regardless of whether the distinctions he offered are sound, it is at least arguable that s. 50.5(1) should be interpreted as applying even when a will provides for a right of sale.

Choquette v Viczko, 2022 SKCA 11

Thus, it is very possible that the proper interpretation of s. 50.5 may continue to be litigated in Saskatchewan court, until the Court of Appeal addresses this specific issue.

The law in light of Choquette

For now, as Choquette was not overturned on appeal, the law of Saskatchewan is currently set out below:

  1. Where a person is merely beneficially entitled to a portion of the proceeds of the saleof the real property, but not the land itself, s. 50.5 does not apply (Choquette at para 24);
  2. Where the executor was expressly empowered by the testator to sell the land, there was no need for the executor to resort to  50.5for authority to do so” (Choquette at para 27).

Thus, some executors may find their task simplified, when they go to sell Estate land.

However, executors should still, if possible, attempt to obtain beneficiary approval to sales of Estate land. While this consent may not be strictly legally required under s. 50.5, getting advance consent can reduce headaches later. That is, a beneficiary could still later complain that land (in whose proceeds they have an interest) was sold for undervalue. Getting prior approval from beneficiaries, is a means to avoid any later complaints.

 

Contacting a Lawyer on this Subject

James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

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The Saskatchewan Estate Law blog is dedicated to providing practical, real-world information on Estate Law issues that affect Saskatchewan residents. The blog is written by RS lawyer, James Steele, whose practice focuses on estate litigation.

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