We are pleased to announce that Allen Weinberg has recently joined the firm. Allen brings a wealth of legal experience in all areas of law.

He will be instrumental in expanding the breadth and depth of the firm with experience in the following areas:

• Real Estate
• Corporate & Commercial
• Mortgage Enforcement
• Commercial Real Estate & Leasing
• Personal Injury
• Wills & Estates

 Allen can be reached at:

416-597-6492 or weinberg@gsnh.com

Article by: GSNH’s Brian M. Campbell

The Definition of “Builder”

Tarion is particularly focused on ensuring that all builders of new homes are registered and the homes enrolled in the Plan. To that end, Tarion has been diligent in prosecuting any builder it thinks has not enrolled a home or has not registered with Tarion. However, the only test for the requirement of registration and enrollment of any home by a builder, is that the home be new, not previously occupied and built for sale to a new home buyer.

In the recent case of Tarion Warranty Corporation v. Boros (May 13, 2011), the Court of Appeal determined that not all builders of new homes need to register or enroll. It all depends on the initial intention of the builder. In particular, if the initial intention of the builder when the building permit was taken out was to occupy the home, which intention subsequently changed, then the fact that the home was sold to a purchaser thereafter, when the builder later decided to sell the home, did not mean the builder was required to register or enroll the home.

Therefore, if the initial intention of a builder is to build the home for occupancy, or rental, or for any other purpose that is not for the purpose of sale at the time the building permit is taken out, then that builder need not register, and correspondingly, need not enroll the home or homes with Tarion, should the builder subsequently change his mind, and offers the home or project for sale.

In addition, the Court of Appeal adopted the statements of counsel for Tarion at the trial and appeal levels to the effect that such homes, if completed and sold to third party purchasers, will still be entitled to warranty coverage from Tarion, even if there exists no builder or vendor, as defined in the Act.

There have been builders who were charged with building without registration or enrollment, and who argued that their initial intention changed after they obtained the building permit, from intending to occupy to intending to sell, and in those instances the charges were either dropped at the pre-trial stage or they were subsequently acquitted at trial.

However, In the Boros case, a similar acquittal was taken to the Court of Appeal by Tarion and the Court of Appeal stated that if all such builders were supposed to be registered and to enroll homes, despite no initial intention to sell, then the legislation would simply have said that “anyone who completes a home for sale” must be registered and enrolled. Without that wording in the legislation, the intention of the builder at the beginning is all important in determining the question of registration and enrollment.

Tarion sought leave to appeal the Boros decision to the Supreme Court of Canada, but was denied. Tarion may fear that the Court of Appeal’s decision means builders, who obtain building permits to build homes for rental purposes, for occupancy purposes or for investment purposes and then change their minds and sell the homes, need not register or enroll such homes. Tarion may also fear that the decision means that Tarion itself guarantees coverage to the ultimate purchaser even where there is no defined “vendor” or “builder”. Tarion may be the author of its own procedures. For example, Tarion increasingly acts as if Tarion provides the warranty coverage itself. It often acts unilaterally not only to provide warranty coverage, but to leave registered builders and vendors out of the claims process when owners make claims for deficiencies to Tarion. Tarion often settles disputes without adequate input, or the agreement of the builder.

Tarion Assumes Warranty Coverage

It appears Tarion has lost the capacity to distinguish between the warranties provided by vendors and builders under the Act and warranties that may be guaranteed by Tarion in circumstances where the builder is unable and/or unwilling to honor such warranties. Tarion, frequently, intercedes and cash settles claims even where the registrant is prepared to remedy deficiencies. Tarion cannot override provisions of the Act regarding notice to the builder or interfere with the builders repair rights, unless a finding is made against the builder that the builder is unable and/or unwilling to repair or the builder is bankrupt or insolvent.

Nowadays, Tarion increasingly acts as if the warranty is their warranty and protection is guaranteed by them no matter what the status of the builder may be or its intention regarding repairing deficiencies and mitigating its damages.

This thought process is very evident in a number of cases where Tarion has tried to unilaterally process claims made by owners of new homes, either before or after conciliation, without adequate input from or notice to the builder. When the process is completed and settlement is made to the owner by Tarion, it then invoices the registrant for the whole cost of the claim it settled, under threat that it will revoke the registrant and notify Equifax if the registrant does not pay the invoice in full which in turn destroys the builder’s credit rating. In addition, Tarion threatens to sue the builder for the invoice amount which includes an administrative fee of 15% plus HST.

In a recent case, Tarion sued for the settlement amount, but offered to abandon the claim when faced with the argument by the builder that it had been unlawfully left out of the settlement process. The builder had not been advised of the conciliation, had been told it need do nothing while funds were still owed to it by the owner. Out of the blue, the builder was invoiced from Tarion for $125,000 to be paid under threat of revocation and credit disruption.

I have argued that in many such instances, if the issue is one of breach of warranty, it should not be a matter of threatening the registration of the builder, but at best it should be characterized as a legal dispute, where the registrant can defend by asserting it was never given any opportunity to remediate or mitigate its damages. In such circumstances, Tarion has frequently agreed to withdraw registration proceedings in favour of a lawsuit. In most instances, such litigation settles for a fraction of what Tarion paid out to the homeowners’ and the registrants’ registration is not affected.

There is an additional aspect to Tarion’s unilateral actions. In many situations, Tarion’s handling of the file has been detrimental to the registrant’s reputation and has ignored the builder’s rights and obligations under the legislation. In a number of instances, lawsuits have now been commenced against Tarion for negligence and breach of contract (the vendor and builder agreements) and for ignoring the provisions of the Act and Regulations that provide to the registrant the opportunity to deal with deficiency claims without the interference of Tarion, and to mitigate their damages.

Tarion should not be permitted to step in and stand in the shoes of any registrant who is prepared to deal with homeowners in remedying complaints. To the extent that Tarion does so, it overrides the provisions of the Act and the Regulations which provide primary responsibility to the vendor or the builder for dealing with homeowners. In a recent case, Tarion took over dealing with the claim made by a Condominium Corporation claiming construction deficiencies to the common elements. It ignored the vendor’s proposed repair proposals and made its own settlement offer. The Condominium Corporation rejected both. What was left was a vendor whose name has been tarnished by Tarion. Tarion is now faced with a Condominium Corporation that refuses to settle with Tarion and the inability of the vendor to repair the deficiencies and thereafter, provide a one-year warranty as prescribed under the legislation.

If Tarion had advised the Condominium Corporation at the beginning that the vendor was entitled to remedy the deficiencies, then such deficiencies would have been remedied long ago with a guarantee of the work for a one year period. Instead, the Condominium Corporation has sued Tarion, the vendor and numerous others and in turn, Tarion has sued the vendor and builder and a number of other Defendants. In addition, the Condominium Corporation has appealed Tarion’s settlement proposal to the Licence Appeal Tribunal and Tarion has added the vendor to that proceeding, all in circumstances where the vendor was prepared to resolve the initial claim, had a plan, and was ready to repair.

Tarion’s interference with process whereby a builder obtains a building permit, builds a home and sells it to a third party purchaser and thereafter, repairs legitimate deficiencies by way of after sales service, has compromised such process to the detriment of the registrant. In addition, the process has become so complicated and expensive that many builders are discouraged from building because the terms and conditions of the registration imposed by Tarion have become so onerous. Where a single warranted item results in a chargeable conciliation, it affects the builder’s reputation indefinitely. The result pushes smaller builders out of the market, particularly in difficult economic times.

For all such small builders and vendors the remedy is to resist Tarion either at the arbitration level, or challenge Tarion’s terms and conditions of registration or renewal, rather than simply give in to Tarion’s threats. Should Tarion settle a claim, then invoice and sue a registrant the registrant should not be penalized just because there exists a valid deficiency dispute. There may not only be a defence, but a damage claim may exist against Tarion for destroying the builder’s reputation where the builder could not repair because Tarion overrode the builder’s rights and shut it out of the process.

Security

The issue of security has become a critical one for most builders for the following reasons:

Firstly, Tarion has raised the limits of coverage to $300,000 per home for deficiencies, and to $40,000 on deposit refund claims from the previous limit of $150,000 for deficiencies, and $20,000 for deposit refund claims. The rationale is that most claims do not come close to $300,000 and most deposits are not $40,000, therefore, increasing the limits without increasing the enrollment fee or Tarion’s risk.

However, Tarion has covered any possibility of any increased risk, by raising the security requirements in an arbitrary fashion such that builders who originally paid no security may frequently now pay $5,000 per home when they enroll the home, and those who were required to pay $5,000 or $10,000 in security, are now frequently finding that they have to pay double that for each enrolled home in order that their registration is continued or renewed on an annual basis.

This leaves ordinary builders paying so much security to Tarion, which security is now held for two years, that many builders cannot continue to build. I am currently involved in negotiating reductions in such security requirements for several builders on the basis that increasing such security requirements is not reasonable. Any increase in security imposed by Tarion must pass the test of reasonableness, before it can be increased, especially, in circumstances where even without the security; the enrolment fees cover the risk.

Secondly, Tarion’s propensity to pay a claim or settle a claim that the builder disagrees with or challenges, results in Tarion then immediately drawing on the security to repay itself.

I act for a number of builders who have sued Tarion for the refund for all or part of such security seized by Tarion, on the basis that the deficiencies could have been repaired by the builder for a fraction of the settlement cost, and that therefore such settlement is grossly inflated.

Tarion often adopts a policy whereby Tarion is quick to settle and pay such claims, because they know that whatever invoice they send to the builders, if not paid by the builders forthwith, can be seized from security held by Tarion, under threat of revocation procedures or communication of the debt to Equifax, thereby destroying the builders’ credit rating indefinitely.

Tarion should not be permitted to retain the large amounts of security it demands as a common practice, nor use such security to pay itself if the security seized exceeds the cost of the repairs, had the builder done such repairs.

The security must be spent in a prudent fashion, because Tarion has a fiduciary obligation to either have the work done by a sub-contractor and the contractor paid from by the security, or allow the builder to undertake the repairs as mitigation of damages. The security is held in trust and cannot be seized or spent without a full accounting any more than a power of sale Mortgage can sell a home for an arbitrary amount, or ignore the fact it must get the best price for the owner.

Equifax

When Tarion sends out an invoice to a builder after it has settled a claim with the homeowner, it communicates the existence of the unpaid invoice to Equifax which detrimentally affects the credit rating of the builder indefinitely.

This is a powerful tool utilized by Tarion to persuade builders to pay all invoices sent to them by Tarion for whatever sums set out in the invoice, in order to avoid Tarion notifying Equifax.

Such contact to Equifax by Tarion is not found in the legislation. However, from a practical point of view, such communication has a significant negative financial impact on builders whether small, medium, or large.

Indeed, builders see in all Tarion’s letters enclosing invoices to them that Tarion threatens the builder with the fact that Equifax will be notified unless the invoice is not paid in full forthwith.

This defeats the value of the builder’s right to arbitrate.

The Builder’s Arbitration Forum (BAF) was designed to avoid having the builder’s registration challenged for disagreeing with a breach of warranty determination made by Tarion. However, if the invoice is not paid because the matter is being challenged at BAF, then the BAF proceedings do not prevent the black mark given to builder’s credit rating by such communication to Equifax.

Tarion counts on this fact to extract quick payment from the registrants, relying on the fear of the builder being faced with a downgraded credit rating in these difficult economic times.

In my view, if a builder disagrees with an invoice or with a conciliation, Tarion should be notified by the builder that it proposes to either challenge the conciliation by way of arbitration, during which, no notification of Equifax should occur, or that the builder is not arbitrating, but challenges the quantity of the invoice, and therefore Equifax should not be notified until the dispute with respect to the amount has been resolved in either Court or other proceedings.

For Example, Tarion can institute an action under the Simplified Rules for claims up to $100,000 and Equifax should not be notified until that matter has been resolved, otherwise, Tarion has damaged the name of the builder by notifying Equifax before the builder has an opportunity to defend itself.

I am currently involved in a case where the builder settled with Tarion and Tarion failed to properly notify Equifax of the account having been fully settled and paid, and as a result, the builder’s reputation and credit rating continued to be noted by Equifax as unacceptable and as a result, the builder lost numerous potential business deals thereafter.

In that particular case, Tarion was sued by the builder and Tarion has filed a third party claim against Equifax in an effort to try and shift the blame to Equifax.

Bulletin No. 42

With respect to Bulletin No. 42 which discusses inter alia the issue of access by the builder to correct deficiencies both before and after conciliation and the notice that must be provided to Tarion and to the homeowner about request for access, Tarion has always taken a very strict and technical approach to the notice requirements. It has said that unless there are three written requests for access prior to the conciliation and one request for access after conciliation, which requirements have been denied by the homeowners, then the issue of denial of access cannot be raised as a defence for not correcting deficiencies.

In a recent Arbitration the builder made an initial written request for access prior to the conciliation and was told by the homeowner that access would be denied to him.

Tarion took the position that there were insufficient written requests for access made to the homeowner. The Arbitrator determined that once a builder is denied access after a request in writing, there is no point in asking for access, again, because the answer had been clear in the initial denial. The Arbitrator ruled that it is not necessary to make numerous efforts to gain access in a climate where access was never going to be allowed by the homeowner. Because of this ruling, all the claims that were found warranted in the conciliation were denied by the Arbitrator either because they were not warranty items or because the builder simply did not have an opportunity to repair them. This means that refusal to grant access voids the warranty.

It is not necessary to follow every line of Bulletin 42 to rely on the defence of denial of access in arbitration proceedings. In addition, the builder should not be shy in defending against breach of warranty claims found in the conciliations which he believes are wrong, because in my experience, Arbitrators are becoming less reluctant to blindly follow Tarion’s position that all breaches of warranty under a conciliation should be upheld.

It is not for Tarion to interfere with warranty obligations and the rights of registrants to attempt to make repairs to valid deficiencies. Tarion is too quick to find breaches of warranty and impose chargeable conciliations which are so detrimental to builders.

In a recent case, the builder was in the process of doing remedial work with respect to certain deficiencies in a sub-division when Tarion attempted to exclude the builder from the site to complete the repairs. The builder threatened to sue Tarion if it continued to interfere.

This is the type of action by Tarion that defeats the purpose of the Act and the Regulations. It exposes builders to damages from the homeowners for not completing repairs they have begun, and can result in revocation proceedings by Tarion on the issue of failing to comply with breaches of warranty to Tarion’s satisfaction. In addition, it ruins the reputation of the builder in the community and it gives rise to the possibility of Tarion cash settling with owners for large sums of money that are out of proportion to what the builder could repair for, thereby causing financial distress to the builder or the loss of its security.

Such actions by Tarion must be met with the refusal to allow Tarion to interfere, followed by action against Tarion for breach of contract, negligence, and non compliance with the Act.

The provisions of the Act and Regulations are not meant to interfere with contractual and other rights that builders have to mitigate their damages or deal directly with homeowners to effect settlement or repair. Tarion’s right to intercede is limited to obvious cases of builder insolvency or neglect and no other.

Arbitration

In a recent discussion paper dated January 23, 2012, Tarion is proposing to change the arbitration procedures in an effort to streamline the arbitration process. It wants to limit evidence available to builders appealing unfavourable warranty decisions on a conciliation to the evidence known to Tarion at the time of such conciliation. This is totally unacceptable. Tarion is often unprepared at a conciliation, does a cursory inspection, and labels deficiencies as breaches of warranty as it sees fit. At an arbitration, the builder is entitled to dispute the finding by relying on his own evidence. Tarion wants to prevent the introduction of such evidence. This negates the point of an appeal or arbitration and reinforces the fact that Tarion need not justify its decision based on all of the relevant evidence. It is not for the builder to anticipate what Tarion may find warranted. Tarion must defend its decision. All evidence must be available. Tarion’s proposal to limit the evidence renders the arbitration process moot because the builder cannot adduce evidence to refute Tarion’s decision. If Tarion is not sure of its decision, it should not be making it. If the evidence is limited to what Tarion knows, few arbitrations would be of any use to any builder.

Arbitrations are designed to move warranty disputes to another category, rather than have them proceed before the Licence Appeal Tribunal. Full evidence should be allowed because that is the essence of a hearing at first instance which occurs at an arbitration or before the Licence Appeal Tribunal.

Conclusion

Tarion counts on prevailing in most disputes with builders because of its size and its economic resources. However, in many instances, the builder’s who challenge Tarion are frequently successful and should not be afraid to protect their reputation by standing up to Tarion.

I frequently hear from builders who say “if I take issue with Tarion, then I will be a marked builder”; however, that has not been my experience. All builders are entitled to a level playing field and Tarion has no mandate to treat one builder differently from another. It is bound by the decisions of Arbitrators, Judges, or Tribunal members in any contested proceedings and all most builders need is to ensure they obtain a level playing field in such proceedings to equalize the odds.

Shell Company

A tenant should make the necessary searches to determine whether the landlord is financially viable or merely a “shell” company.

If it is a “shell” company, without any assets, this will inevitably leave a problem to the tenant if the landlord subsequently defaults under the lease, or under any mortgage on the property.

The landlord should make the necessary searches to determine whether the tenant is financially viable or merely a “shell” company.

If it is a “shell” company, without any assets, this will inevitably leave a problem to the landlord if the tenant subsequently defaults under the lease.

Always ask

A tenant should always ask what the annual taxes and operating costs are (in addition, of course, to asking what the basic rent, and, if applicable, what the percentage rent is).

Why?

Because the tenant wants to determine their annual budget using relevant figures.

Harvey Haber’s Leasing Tips

We are pleased to announce that Bill Herman has recently joined the firm. He will be instrumental in building the firm’s intellectual property team.

Bill has a wealth of experience advising established and emerging technology companies and investors on patent preparation, licensing and due diligence concerns.

He also regularly counsels clients on trade-mark clearance, prosecution matters and disputes.

 Bill Herman can be reached at:

416-597-6487

herman@gsnh.com

GSNH_HappyPesach_2012

GSNH’s Kenneth Laimon has been invited to join the Ryerson University Ted Rogers Faculty of Business Management as an adjunct evening instructor in undergraduate Business Law this spring.

Ken has 35  years of expertise and experience in an array of business law contexts including running his own private practice, having acted as in-house counsel to two national franchisors in succession, as well as counsel to several significant regional franchisors in the food and hospitality industry.

His practice at GSNH will continue without interruption and we wish Ken well in his teaching endeavours.

Where a Head Tenant is declared bankrupt, the Commercial Tenancies Act of Ontario provides for a Subtenant having the right, if the Landlord had approved the subtenancy, to assume the Head Lease.

But, if the rent under the Sublease is less than the rent under the Head Lease, then the Subtenant has to pay the higher amount set out in the Head Lease.

Notice to Assignee

If a tenant requests, and a landlord agrees, to an assignment of the tenant’s lease to a third party (“assignee”), the landlord should make sure that it includes in the assignment agreement, a provision for how notice is to be given to the assignee.

Why?

Because the landlord wants to know who and where to give notice to not only the tenant, but also to the assignee, and not be in doubt as to how to notify the assignee in the event of a default by either the tenant or the assignee.

Harvey Haber, Q.C.

Ontario Bar Assocation (OBA) Nuts and Bolts – Volume 26, No. 2. February 2012 Construction Law Section

Article by GSNH’s Jessica Caplan.

Background

Internorth Construction Company (“Internorth“) was a design build contractor and general contractor. From 2001 to 2004 the only directors of Internorth were Marvin Marshall (“Marshall“) and Dane Hooks (“Hooks“). During its height Internorth was a successful business involved in multiple construction projects that were all proceeding concurrently. However the company ran into financial difficulty and ultimately ceased operations in 2004. Two subcontractors, Belmont Concrete Finishing Co. Limited (“Belmont“) and Gage Metal Cladding Limited (“Gage“) were subcontractors who supplied concrete and metal on a number of Internorth construction projects in the period from 2001 to 2003. Internorth owed both plaintiffs substantial sums for unpaid invoices. The plaintiffs claimed that various directors of Internorth, including Marshall, were paid out of money impressed with a trust under the Construction Lien Act ( the “Act“) and that the individual defendants assented to or acquiesced in the payments. The trial proceeded only against Marshall as judgment was obtained against Internorth for breach of trust on an unopposed basis and the claims against all the other defendants, but for Marshall, were disposed of prior to trial.

The Trial Decision

The action succeeded against Marshall with $111,306.61 being awarded to Belmont and $143,105.97 being awarded to Gage as damages, plus pre-judgment and post-judgment interest. Punitive damages and the accounting and tracing remedies claimed were not awarded.

The trial judge set out three requirements necessary to impose liability under Section 13 of the Construction Lien Act:

1. A breach of trust by the corporation;

2. The individual must be a director or officer of the corporation or a person in effective control of the corporation; and

3. The individual must have assented to, or acquiesced in, conduct the person knew or reasonably ought to have known amounted to a breach of trust by the corporation. The trial judge noted that the burden of proof rests on the plaintiff in respect of each of these elements.

The trial judge determined that the first element was established by a judgment in 2007 which declared and quantified the corporation’s breach of trust. The second element was proven and was not seriously in dispute. In turning to the third element, the trial judge noted that the plaintiffs were required to demonstrate actual assent to, or acquiescence in, particular conduct amounting to a breach of trust. This conduct must be coupled with actual knowledge, or proof that a reasonable person would have known, that the conduct amounted to a breach of trust.

Although the trial judge did find that Marshall had become involved in the monitoring of receipts and disbursements to the extent that he knew or should have reasonably known that payments were being made by Internorth in breach of its obligations towards the plaintiff from the end of May 2002, he rejected the plaintiffs’ submission that Marshall had the requisite knowledge going back to January 1, 1999. Marshall argued, that in absence of evidence before the court as to when the plaintiffs worked on the relevant projects, when they submitted invoices for such work, and when the owners of the project paid Internorth for the work, the trial judge could not find that Marshall acquiesced in or assented to payments by Internorth in breach of its trust obligations towards the plaintiffs. This argument was rejected by the trial judge who concluded that Marshall personally benefitted from payments by Internorth to himself and his corporation in an amount in excess of $300,000 when he knew that Internorth had received and wrongfully paid out trust funds owed to the two plaintiffs. Marshall directed and oversaw those payments to his own benefit knowing that the plaintiffs’ trust claims remained unsatisfied. Marshall appealed the decision.

The Decision of the Divisional Court

On appeal, the Divisional Court overturned the trial decision and dismissed the claims against Marshall. Prior to delving into its analysis and conclusions, the Court set out several observations with the respect to sections 8 and 13 of the Act. Namely, the court identified the importance of the relationship between these two provisions:

“Section 8 imposes liability for the appropriation or conversion of any part of a project trust fund established thereunder to a contractor’s own use or to any use inconsistent with the trust until the subcontractors are paid. Although section 8 does not use the term breach of trust, any such appropriation or conversion constitutes a breach of trust in respect of the trust funds contemplated by section 8. Section 13 imposes liability on the individuals named therein for breach of trust to the extent that they assent to, or acquiesce in, conduct that such individuals know or reasonably ought to have known amounts to a breach of trust by a corporation”

The Court notes while section 13 does not refer to section 8 directly, it should be clear from the introductory clause that a breach of trust by the corporation as contemplated by section 13 is in fact the action of appropriation or conversion of project trust monies in section 8. The Court concludes that it was not the intention of the legislature for section 13 to impose liability on the individuals named therein for every breach of trust by a corporation. Therefore the breach of trust contemplated by section 8 is in fact the action of appropriation or conversion not the action of failing to remedy the breach of trust after an appropriation or conversion has occurred, i.e. by failing to repay the trust fund or by failing to pay the beneficiaries directly.

In turning to the merits of the case, the Divisional Court held that the trial judge accurately set out the three requirements necessary to impose liability under section 13 of the Act. The issue before the Divisional Court was limited to whether the third requirement had been established by the respondent.

To that end, the Court rejected the trial judgment on the following basis:

1. The trial judge failed to identify the particular conduct, i.e., the particular payments by Internorth that constituted the breach of trust towards the plaintiffs;

2. The trial judge committed an error in law in applying an incorrect interpretation of the concept of a “breach of trust” in arriving at his conclusion that Internorth committed breaches of trust in respect of the plaintiffs after the end of May 2002 because of the failure to rectify earlier breaches of trust. A breach of trust is a distinct occurrence and in this case was not identified and proven against Marshall. The failure to remedy pre-existing breaches of trust under section 8 does not create continuing breaches of trust under that provision. A breach of trust under section 8 of the Act is a discreet event that occurs at a point in time when monies in a trust fund are appropriated or converted;

3. The trial judge also erred in finding that Marshall personally benefitted from payments made to him by Internorth when he knew that Internorth had received and wrongful fully paid out trust funds owed to the plaintiffs. The Court held that these payments by themselves did not establish any breach of trust in the absence of evidence that the monies were actually paid out of trust funds in respect of which the plaintiffs were beneficiaries. The Court also noted that the action creates a breach of trust under section 8 when there is payment by Internorth not a receipt by Marshall as an officer, director or controlling person of the corporation. In order for Belmont and Gage to be successful in the action they would have had to demonstrate that the monies paid to Marshall were paid out of the particular trust funds in respect of which they were beneficiaries. The Court concluded that they had failed to do so. Furthermore the Court was not prepared to conclude that the insolvency of Internorth necessarily established a breach of trust because Marshall had possibly received payments from Internorth when it was insolvent.

With its decision in this case, the Divisional Court seems to be sending a strong message to construction litigators with respect to the establishment of personal liability for breach of trust under the Act. In order to successfully advance such a claim, precise evidence must be led as to the receipt and disbursement of funds on the specific projects which have given rise to a plaintiff’s claim for breach of trust.

Until such time as this decision is appealed (the plaintiffs are currently awaiting a decision with respect to their application for leave to appeal), counsel must be cognisant of the high threshold to be met when advancing breach of trust claims against individuals. No doubt the construction lien bar will be anxiously awaiting the outcome of the pending appeal proceedings…

Lydia Pilch is one of the up and coming young associates at Goldman Sloan Nash and Haber (GSNH) LLP, a well-respected corporate and commercial law firm in Toronto.  Called to the Ontario Bar in 2006, Lydia’s practice focuses in the areas of corporate/commercial, real estate/leasing, information technology law, and she also acts as the firm’s Chief Privacy Officer.

Read the official Innis College Newsletter version of the article.

When the Innis Alumni Network caught up with Lydia in January, she was busy preparing to attend a conference held by the International Council of Shopping Centres (ICSC) in Whistler, British Columbia.  The ICSC is composed of members of the international retail real estate industry and Lydia is an active participant in their events.  Later this month, she will be a roundtable co-leader at the ICSC Law Conference in Toronto. 

“I’m fortunate to be a member of a firm like GSNH.  The opportunities for practice development for associates are fantastic and the mentorship I’ve received has been top notch,” Lydia says.  “I’ve also held an integral role in the planning and hosting of our firm’s lawyers’ social events, which has been a great way to be involved and engage with colleagues.”

As an Innis College student, Lydia pursued an undergraduate degree in Semiotics and Literature. “I really enjoyed writing throughout my undergraduate years and knew I would choose a career that emphasized draftsmanship.  The negotiation and preparation of legal agreements always appealed to me.”  As the future would have it, Lydia would enter law school at U of T and find just such a role with GSNH. “I take great pleasure in helping to ensure the parties’ intentions are expressed clearly and in finding language to anticipate and avoid potential disputes.”

Looking back at her university experience, Lydia recalls her first year at U of T and moving to the big city.  “I grew up in a relatively rural-suburban area in northern Brampton/Caledon, and while the transition was exciting, I can see why the first year away at a large school can be disorienting.”  Lydia quickly found a home base and sense of community by joining a women’s fraternity on U of T campus.  “Alpha Omicron Pi was an amazing experience that really enriched my university experience.  I made friends for life and really found a great personal and professional network.”

Lydia’s advice to undergrads is to study hard and be as involved as possible.  “As trite as that sounds, decision-makers on graduate school admissions boards certainly weigh extracurricular involvement heavily in the admissions process.” 

Outside of her legal practice, Lydia enjoys distance running, equestrian sports, skiing, boating, playing the bass guitar and staying involved in the lives of her Alpha Omicron Pi sisters and former classmates.  “I’m pleased to have found such a great law firm in a great city, close to the campus and friends that made my educational experience so memorable.”

 You can contact Lydia Pilch at:

e: pilch@gsnh.com | t: 416-597-3390