The Trial Book,  co-authored by Jacqueline King and Joel Berkovitz, provides lawyers with a reference guide to all essential topics at trial.  Please click here for more information and to purchase the book. 

An amendment to Ontario’s Condominium Act outlining the legal test for requiring an owner to sell their unit, won’t make the process of removing an owner any easier for condo corporations, says Toronto condominium lawyer Joel Berkovitz.

The proposed s. 135.1 will clarify the extraordinary situations where a condo corporation can ask a court to intervene and force an owner to vacate their unit — for example, where an owner's behaviour is threatening or dangerous, says Berkovitz, a lawyer with Shibley Righton LLP.

The section allows a court to order someone to vacate a condo unit if the person poses a serious risk to someone’s health and safety, has damaged property or assets of the corporation, or if “the person is unsuited” for the communal use and occupation of the property — and no other order will be adequate to enforce compliance.

He tells AdvocateDaily.com that while a condo corporation doesn’t have the ability to force a sale without a court order, the section could be used if no other order of compliance is adequate. But he's not sure if adding the clause to the Act makes much difference, as the “jurisprudence was already fairly clear that this was a last-resort remedy,” and that it’s "only likely to be applied to those who don’t have it in them to live with others.”

“To remove an owner is extremely difficult,” Berkovitz says. “It’s only been done in a handful of cases in Ontario in the last couple of decades. It requires that the owner be violent, threatening, or repetitively engaged in very serious behaviour. Only then is a court going to say, ‘You must sell this unit.’”

He cites an Ontario Superior Court case where the requirements for a court order were clear. The court found a unit owner’s behaviour breached s. 117 of the Act by being intimidating, threatening, and verbally and physically abusive to the personnel of the condo corporation. In another ruling, a condo owner — whose behaviour was described by a Superior Court judge as “appalling” — was ordered to “vacate her unit within 30 days and to sell it within 90 days, failing which the applicant may sell the unit for her and recoup the costs of doing so from the proceeds of sale.”

Both cases reflect the high threshold the courts demand before ordering a unit owner to sell, Berkovitz says. He describes it as one of the most difficult orders to get from a court.

“It’s an extreme remedy to force someone to vacate and sell a piece of property,” Berkovitz says.

The new section in the Act provides clarity to the requirements, he says

“This is the standard you have to meet, and it helps that it’s codified,” says Berkovitz.

“If you live in a condo in Ontario, you are required to comply with the Condominium Act and with the applicable condo corporation’s bylaws,” he says. “That applies to everybody.”

Berkovitz says not all bad behaviour requires removing the offending unit owner or tenant. There are other methods. For example, financial penalties can be added to the monthly fees to cover the repair costs of any damage done.

“We can directly charge the owner for damages and recover that sum via a lien against the unit,” he says.

But the process is different for tenants of a condo, Berkovitz says.

“If anyone causes an issue, the owner is responsible for that person,” he says.

Berkovitz says the process to evict a tenant is a more straightforward matter. If someone doesn’t respond to multiple requests to comply with condo bylaws, corporations can use a two-step process to evict the person.

The first step is to obtain a compliance order from a court demanding the tenant follow the condo documents, he explains.

“If you get that order and the person breaches it, then you can get an order for eviction,” says Berkovitz, noting that it could be a “fairly lengthy process.”

He says lawyers usually get involved after the condo manager has made repeated attempts to solve the matter.

“We send a letter saying this is your final warning, and if there are any further incidents, we will seek an order,” Berkovitz says. “Only if there are further incidents do lawyers go to court because there are costs involved, which get charged back the unit owner.

“It’s best to try to resolve the issue without going to court,” he says. “But sometimes, we’re not left with any options.”

A Supreme Court of Canada (SCC) criminal decision offers important guidance to condos that monitor their property with video surveillance, Toronto condominium lawyer Joel Berkovitz tells AdvocateDaily.com.

All nine judges on the top court panel agreed that a former high school teacher should be convicted of voyeurism after using a pen-mounted camera to secretly record the faces and breasts of his female students.

But Berkovitz, a lawyer with Shibley Righton LLP, says it's the court’s lengthy consideration of the circumstances under which a reasonable expectation of privacy will arise that is most valuable to condo boards and their advisers.

“I think it really supports many of the best practices that people have been advocating with respect to video surveillance and how it should be undertaken on condo property,” he says. “If condos are going to use cameras, it’s valuable to have a written policy on the subject. Setting out the rules in writing will protect you if someone comes along alleging a violation of their privacy.”

The case made its way to the Supreme Court after a split decision by the Ontario Court of Appeal (OCA), which ruled by a 2-1 majority in favour of acquitting the teacher.

All three appeal court judges disagreed with a trial judge who had cleared the man on the basis that there was a reasonable doubt over whether the recordings had been made for a sexual purpose — one of two essential elements of the crime of voyeurism.

However, the OCA majority found the Crown’s case faltered on the second pillar of the offence because the public nature of the school's hallways and classrooms where the incidents took place did not give rise to a reasonable expectation of privacy.

But the SCC unanimously disagreed, siding with the dissenting judge at the Court of Appeal who would have convicted the teacher.

“In this case, when the entire context is considered, there can be no doubt that the students’ circumstances give rise to a reasonable expectation that they would not be recorded in the manner they were,” Chief Justice Richard Wagner wrote on behalf of the panel. “They were recorded by their teacher in breach of the relationship of trust that exists between teachers and students as well as in contravention of a formal school board policy that prohibited such recording.

"Significantly, the videos had as their predominant focus the bodies of students, particularly their breasts. In recording these videos, the accused acted contrary to the reasonable expectations of privacy that would be held by persons in the circumstances of the students when they were recorded.”

The decision also talked about the expectation of privacy in "public" places, including changing rooms and washrooms. “These examples illustrate that 'privacy,' as ordinarily understood, is not an all-or-nothing concept. Furthermore, being in a public or semi-public space does not automatically negate all expectations of privacy with respect to observation or recording."

The SCC went on to detail a non-exhaustive list of considerations for judges tasked with determining whether subjects have a reasonable right to privacy. While not all apply to the condo law realm, Berkovitz identifies a few that are most pertinent for his clients:

•  “It’s pretty rational to assume that when you’re on condo property that is publicly accessible, that you can expect to be observed,” Berkovitz says.Location of the person when observed or recorded:
• The awareness or possible consent of the person observed or recorded: “We always tell condos that if they’re using video-recording equipment in particular areas, that they should make people aware by posting signage,” he says. “If there’s a camera in the party room, they might want to make that disclosure in the rental form so that people are aware when they book it.”
• The subject matter or content of the observation or recording: “The court warns that you can invade a person’s privacy if you target recordings at specific individuals or times, so a camera that is pointed at someone’s unit could be offside,” Berkovitz says. “But full-time recording of most areas of the common elements is probably not going to offend privacy rights.”
• Rules, regulations or policies governing the observation or recording: “This is why it’s so important that you have appropriate policies regarding who can view recordings, how it’s stored, for how long, and what use can be made of the footage,” he says. “It’s one thing to record a person, but quite another to use the recording for a specific purpose, and that’s usually where problems arise.”

Robert Buckler, Joel Berkovitz and Derek Brovold discuss the implications of cannabis legalization on the property management field.

Please click here to read the full Article.

“Reprinted from The Journal of Property Management, Vol. 81, No. 1, with permission from the Institute of Real Estate Management. For more information on IREM and its publications, visit www.irem.org.”

Several recent cases help spell out the duty of good faith contractual performance that exists in contract law, Toronto business lawyer Joel Berkovitz tells The Lawyer’s Daily.

In this case, for example, the Supreme Court of Canada “recognized that a duty of good faith contractual performance exists as a general organizing principle of the common law of contract,” writes Berkovitz, a lawyer with Shibley Righton LLP.

And two recent Ontario Court of Appeal (OCA) cases “interpreted this duty in the context of lending relationships and the termination of fixed-term service contracts,” he says.

In this case, writes Berkovitz, the OCA “considered whether a lender was obligated to continue providing overdraft lending to a borrower, given a history of such lending.”

The plaintiff was a commercial client of the defendant bank, he explains.

“Its nursery business was seasonal, and so during its busy season it routinely requested to borrow above the maximum amount of its line of credit so that it had the working capital it needed. [The bank] granted these requests for several years. However, in 2007 [the nursery] did not repay in full the additional amount which it borrowed, and in 2008, when [the company] again sought to borrow additional funds … above its credit line, [the bank] refused to provide the funding,” says Berkovitz.

The company sued, claiming the bank “had breached the duty of good faith contractual performance by refusing to advance the additional funds,” he says.

The OCA upheld the trial court decision in the bank’s favour, writes Berkovitz, “and found that it had not breached its duty of good faith contractual performance. While this duty required a bank to give its customer a notice if there was a change in the ‘prevailing course of lending conduct between the parties’ with respect to overdraft lending, the court found that, in this case, it was [the nursery] which had changed the prevailing course of conduct by failing to repay its 2007 overdraft in full as it had in previous years.”

Citing the Supreme Court decision, the court “reiterated that the duty of good faith contractual performance does not require a party to forgo advantages flowing from a contract or impose a general duty on a party to subordinate its interests to that of the other party,” he says.

In the nursery’s case, the court found that the bank exercised “rights afforded to it under its contract with [the nursery], and was under no obligation to advance further funds … if this was contrary to [the bank’s] interests.”

In a more recent case, says Berkovitz, the OCA “considered whether the duty of good faith contractual performance required a party to provide notice of termination earlier than required by its contract, when it knew well in advance that it intended to end the contractual relationship.”

The plaintiff in the matter provided maintenance services to 10 condominiums under separate seasonal contracts.

The winter contract allowed the condominiums to terminate it on only 10 days’ notice, says Berkovitz. Because of performance issues during the first winter, the condominium decided to terminate the contract, but they decided to wait to tell them so that the summer work wouldn’t be affected.

“When the condominiums eventually terminated the winter contract,” he says, the company “sued and claimed they had acted in bad faith by withholding the fact that they intended to terminate the winter contract and by representing that the winter contract was not in danger of non-renewal.”

At trial, says Berkovitz, the judge “found that the minimum standard of honesty would have required the condominiums to address the alleged performance issues … and provide prompt notice, or refrain from any representations in anticipation of the termination notice period.”

He says the condo appealed and the OCA overturned the trial judge’s decision.

“While the court found that the condominiums may have failed to act honourably, they had not breached the duty of good faith contractual performance,” he explains.

“Significantly, the court found that there is no unilateral duty to disclose information relevant to termination. All [the company] was entitled to was 10 days’ notice of termination as per the contract. While [the plaintiffs] may have been hopeful for a renewal and a new contract, the duty of good faith performance did not limit the condominiums’ freedom regarding future contracts which had not yet been negotiated or entered into.”

Berkovitz says the duties imposed by the trial judge “went beyond what the duty of good faith performance required.”

In the first case cited above, the Supreme Court “emphasized that its recognition of a duty of good faith contractual performance was a modest, incremental step, and that it was not to be applied to undermine long-standing principles of contract law and create commercial uncertainty,” writes Berkovitz, adding that subsequent decisions “affirm the limits of the duty’s application.

Now that Oct. 17 has come and gone, there may be a whiff of something else in the autumn air, Toronto business lawyer Joel Berkovitz writes in Shibley Righton’s Condo Law Newsletter.

The smell of now-legalized marijuana should be a reminder to condominium boards to reflect on whether they’re ready for the changes, says Berkovitz, a lawyer with Shibley Righton LLP.

“While much will be written about the effects of legalization on the country as a whole, condominium directors and managers will need to consider the effects of legalization on their individual communities,” he writes.

“Many condominiums have chosen to take this as an opportunity to address both tobacco and cannabis smoking in their buildings, with many choosing to pass rules which will eventually make their buildings entirely smoke-free,” Berkovitz says. “Others have taken a less restrictive approach and have only passed rules governing the growing of cannabis, and smoking of cannabis on the common elements.”

He advises condominium boards to consider whether they have appropriate rules in place to deal with marijuana.

“While nearly all corporations have some sort of anti-nuisance provision (either in the declaration or rules) which can be applied if there are smoke migration issues that arise (whether from tobacco or cannabis), many have decided to pass additional rules governing where cannabis can be smoked, whether it can be grown, how cannabis packages are treated by the corporation's staff, and other matters,” Berkovitz writes.

He says condo corporations should act promptly to avoid “arguments from owners that they are entitled to grandfathering.”

Berkovitz says policies should also be in place for employees.

“Unlike alcohol, cannabis impairment can be hard to detect, and reliable tests for detecting impairment (rather than trace amounts of cannabis metabolites which remain in the body for days or weeks after use) are still being developed. If there are any concerns about drug use in your workplace, having the appropriate policies in place can help to avoid difficult employment law situations,” he advises.

Berkovitz says it’s important to remember that laws which dictate where cannabis can be used have now been "synced" with tobacco laws.

“While originally the [former Liberal] government had passed legislation which would restrict cannabis use to private homes, the new Conservative government has introduced legislation which will allow cannabis smoking wherever tobacco smoking is permitted. This means that if you have outdoor common elements on which tobacco smoking is permitted ... cannabis smoking will also be permitted in those areas unless you take steps to restrict its use,” he says.

The “long and twisting saga” that pits South American villagers against a global oil giant took another turn recently in a Canadian courtroom, Toronto business lawyer Joel Berkovitz tells The Lawyer’s Daily.

“At its core,” explains Berkovitz, a lawyer with Shibley Righton LLP, “this case is about attempts to enforce a US$9.5 billion judgment in Canada which was obtained in Ecuador against the U.S. company … A New York court declined to enforce this judgment in the United States, finding that the Ecuadorian judgment was obtained by fraud.”

In a previous post with AdvocateDaily.com, Berkovitz said the case began in 1993, after roughly 30,000 Ecuadorian villagers alleged that an oil company dumped billions of litres of toxic oil-drilling byproducts into the environment. They alleged the toxins caused increased health problems, including more frequent cancer deaths and a higher rate of miscarriages.

In a 2011 decision, Ecuadorian courts ordered the company to pay the villagers US$9.5 billion. Since the company didn’t have assets in Ecuador, the plaintiffs looked elsewhere to collect on the judgment. They tried in the U.S., but the judge found there had been extensive acts of fraud, bribery, forgery, intimidation and collusion in the Ecuadorian proceedings.

The plaintiffs then sought to seize the shares of the company’s Canadian subsidiary — a seventh-level subsidiary of the American company — by piercing the Canadian company’s “corporate veil so that its shares and assets would be available to satisfy the judgment against its parent,” writes Berkovitz.

“In a 2017 ruling, the Ontario Superior Court of Justice granted the … defendants summary judgment, finding that the shares and assets of [the Canadian company] were not available for seizure to satisfy the Ecuadorian judgment, and that [the Canadian company’s] corporate veil should not be pierced.”

On appeal, he says, the Ecuadorian plaintiffs sought to overturn the Superior Court ruling on both issues.

“The Court of Appeal unanimously dismissed the appeal and ruled in favour of the … defendants, though the majority and concurring minority opinions came to different conclusions about the test for piercing the corporate veil,” says Berkovitz.

“The majority opinion largely echoed the analysis and findings of the Superior Court’s ruling, finding that [the Canadian company’s] shares and assets were not subject to be seized under the Execution Act (as these shares were not held directly by [the U.S. company]) and that the applicable test to pierce [the Canadian subsidiary’s] corporate veil had not been met.

“The majority rejected the argument that courts can pierce the corporate veil for reasons of equity, reiterating that the applicable test for piercing the corporate veil is set out in” this case.

To pierce a subsidiary’s corporate veil, says Berkovitz, the court must be satisfied that “the subsidiary was incorporated for a fraudulent or improper purpose or used by the parent as a shell for improper activity. In the present case, the majority found that this test was not satisfied as there was no allegation of wrongdoing against [the Canadian company].”

He says the majority worried that abandoning the test “would lead to ad hoc applications of equity to pierce the corporate veil, introducing uncertainty into corporate law.”

“While Justice Ian Nordheimer (writing a concurring minority opinion) also dismissed the appeal, he disagreed with the majority about whether the Transamerica test was applicable in these circumstances and on the general approach with respect to when the corporate veil can be pierced,” says Berkovitz.

“Regarding the Transamerica test, Justice Nordheimer explained that it was adopted in the context of deciding whether liability could be imposed by lifting the corporate veil, but that it may not be applicable to the judgment enforcement context, as ‘it would appear to be very difficult to conceive of a factual situation where the Transamerica test could be met by a judgment creditor, that is, where the corporate structure would be found to have been ‘used as a shield for fraudulent or improper conduct’ solely in the execution context.’”

The judge then reviewed the case law for piercing the corporate veil, “noting several instances in which it appeared that the courts had applied equity to do so and observing that the power to pierce the corporate veil stems from the courts' equitable jurisdiction,” writes Berkovitz.

Nordheimer wrote that “it would take much stronger language in the jurisprudence, or a clear statutory amendment, to displace or limit the courts’ equitable power to pierce the corporate veil in those extraordinary situations where liability has been established but the judgment creditor is nevertheless left without any remedy because of the judgment debtor’s internal corporate structure.”

Berkovitz says “even if principles of equity can be applied to pierce the corporate veil, Justice Nordheimer was not convinced that it would be appropriate to do so in this case in light of the U.S. court’s conclusion that the judgment against [the company] was obtained by fraud. Absent a Canadian court finding that the Ecuadorian judgment was valid, he could not conclude that failing to enforce the judgment would be ‘too flagrantly opposed to justice’ as to permit the corporate veil to be pierced.”

He says the decision “confirms the principle of corporate separateness and the applicable test for piercing the corporate veil, the concurring minority opinion may provide fodder for further arguments that principles of equity should be applied to pierce the corporate veil in some cases where a party is seeking to enforce a judgment whose validity is not in question.”

Given the dollar value of the judgment and “the legal issues at stake, the Supreme Court of Canada may be called upon to review this matter in the near future,” says Berkovitz.

Condominium corporations should adopt rules that prohibit growing marijuana in their complexes ahead of legalization later this year, says Toronto condominium lawyer Joel Berkovitz.

While the pending federal law will allow people to grow four plants for personal consumption, growing marijuana isn’t compatible with condos because of the amount of energy and water it needs, says Berkovitz, a lawyer with Shibley Righton LLP.

He tells AdvocateDaily.com growing plants will require heat and humidity — both of which are major factors in mould growth.

"And once you get mould in a unit and it starts spreading, it's incredibly hard to contain and very expensive to treat," he says.

"It also takes a significant amount of electricity and, if the cost is shared among all the owners, is it fair that you're paying for the guy down the hall who’s growing marijuana?" he wonders. "I would say probably not."

The province limits where marijuana can be used and who can use it, says Berkovitz.

He says his firm is urging clients to implement rules rather than bylaws to prohibit the growing of cannabis.

Bylaws focus on the governance of condos, he explains, while rules deal with safety, security and preventing unreasonable interference with the enjoyment of the building.

As for smoking marijuana, the legislation will prohibit its use in public spaces and indoor common areas, Berkovitz says. Whether someone can smoke marijuana in their unit or on their balconies at a condo depends on each building's rules, he says.

Indoor smoking is "something the individual condos have to decide on," Berkovitz says.

He says some clients don't want to add new rules but are instead relying on "existing prohibitions regarding behaviour that interferes with the use and enjoyment of the units or common elements by other owners."

"Nearly every single condo in Ontario will have a rule in place that prohibits owners from causing a nuisance or interfering with other owners' enjoyment of their units," says Berkovitz. "Condo boards can, if they wish, rely on these existing provisions to control the potential for second-hand smoke," says Berkovitz.

"Others want to be more proactive and specifically address this so owners fully understand what is and isn't allowed," Berkovitz says.

"Most places are putting in full bans on smoking marijuana anywhere on their property," he says, adding the main concern involves smoke migration through conduits and under doorways, or via balconies.

"Smoke does have a way of getting into neighbouring units and most condo boards are thinking, ‘Why allow another potential nuisance when it can be prohibited,’" Berkovitz says.

Tobacco smokers were grandfathered as anti-smoking legislation developed, he says. Berkovitz says there will likely be no need to grandfather existing marijuana smokers, as it is currently not legal.

But, he says, condo rules, bylaws and declarations won't apply if the user has a medical reason to smoke it.

"This need for accommodation will take priority over the condo's governing documents," says Berkovitz.

Eating marijuana in baking or cooking is an alternative to smoking it and won't disturb neighbours, he suggests.

"The owner could say that they need marijuana for medicinal reasons, but the condo can respond by saying, ‘Tell us why you have to smoke it,’" Berkovitz says. "It'll be interesting to see if that becomes more common once legalization comes into effect.

"I think most condos would say if you can do it in a way that doesn't impact anyone else, we don't want to get involved," he says.

Changes to the Condominium Act will affect the ability of condo owners to access records from corporations, Toronto real estate lawyer Joel Berkovitz writes in Condominium Manager magazine.

In fact, that may be the area most affected by the legislative changes contained in Bill 106, the Protecting Condominium Owners Act, 2015, says Berkovitz, a lawyer with Shibley Righton LLP.

“Up until now, the process by which owners requested and obtained (or were denied!) access to records has been unregulated,” writes Berkovitz.

He says the legislative changes establish new procedures, terms and forms.

Here are the highlights as outlined by Berkovitz:

1. These documents are now defined as either “core records” or “non-core” records. Core records are fundamental documents such as the declaration, bylaws, rules, financial statements, meeting minutes and prescribed notices. If unit owners request electronic copies of core records, they must be provided free of charge within 30 days. Condominium corporations may have more time to deliver non-core records.
2. Condominiums can charge for the cost of producing non-core records and for making copies of core records. But they can only charge for actual costs incurred by the corporation. Labour costs must be reasonable and copying/printing cannot exceed 20 cents per page.
3. A new procedure for requesting these documents is being introduced. A formal request must be submitted to the board, which will have to issue a response indicating what they will provide and the estimated cost of production. The requester would then have to confirm which records they want and pay the fee. The time limit to respond and the amount charged the owner will depend on whether the record is core or non-core. A request is deemed abandoned by an owner if they don’t respond within 60 days, or if they don’t bring an application to the Condominium Authority Tribunal (CAT) within six months of their initial request.
4. Disputes can be brought before the CAT with the goal of streamlining the resolution process. The penalty for non-compliance with s. 55 of the Condominium Act has been increased from $500 to a maximum of $5,000.
5. A minimum retention period for all records is being prescribed. Most operating and financial records must be kept for seven years, while fundamental documents (declaration, bylaws and rules, current agreements and insurance policies) must be kept indefinitely. These periods can be extended if the documents are part of a litigation matter or a records request.
6. Information can now be stored either electronically or in hard copy. Electronic records will be acceptable if they can be reproduced and there is protection against their loss. Hard copies must be kept in a location “reasonably close” to the condominium or at the manager’s office.
7. Bill 106 also identifies records that a corporation does not have to provide. For example, owners don’t have a right to the email addresses of other owners, opinions from legal counsel, and any portion of a ballot that identifies the owner or a proxy.

Berkovitz says it’s a good time for condominiums to update how they maintain records.

“We recommend that all core records be stored electronically so they can be quickly and easily provided to unit owners,” he says.

Corporations should consider storing commonly requested documents on an owners' portal or a closed website, says Berkovitz. That way, owners will have direct access, thereby eliminating the need to request them.

Toronto condominium boards should update their unit owners about the status of short-term rentals in their buildings after the city voted to regulate the practice, Toronto condominium lawyer Joel Berkovitz tells AdvocateDaily.com.

According to a CBC report, the City of Toronto will require those renting out units on a short-term basis, on sites such as Airbnb, to register with the municipality.

“We encourage our condo clients to communicate to their unit owners how these changes are going to affect them,” says Berkovitz, a lawyer with Shibley Righton LLP. “Even if there’s no impact, condos should let their unit owners know so there's no confusion.”

The new regulations, which define short-term rentals as those lasting less than 28 days, require renters to obtain a licence. Homeowners or long-term renters are limited to offering up their primary residence and may only do so for a maximum of 180 days in a calendar year, according to the new rules, which also require licensees to meet certain identification requirements.

Berkovitz says his office has been fielding calls from concerned condo managers and directors, wondering how the new regulations will interact with their own declarations or rules on short-term rentals.

“In our view, if condos have existing rules on their books on short-term rentals, then they can be more restrictive than the city bylaw, but not more permissive,” he says.

For example, a Toronto condo that bans rentals for periods of more than 28-days would still be able to continue enforcing its rule, even though the city bylaw sets looser standards, Berkovitz explains.

However, a condo declaration that expressly allows short-term rentals is not enough to release residents from the responsibility of complying with the new city-wide regulations. Unit owners and renters in those situations will still have to get licensed, Berkovitz adds.

He says short-term rentals have become a “hot button issue” for many condo corporations in recent years, and many residents will welcome Toronto’s crackdown on sites like Airbnb.

“You have people buying condos, thinking they’re moving into a residential building where they’ll see the same neighbours every day,” Berkovitz says. “Instead, they see new people coming in, treating the place like a hotel.

“These regulations are going to limit many short-term rentals and will do away with landlords owning units to be used specifically for short-term rentals, but they will continue to allow room-sharing and renting a principal residence while the owner is out of town. I think it’s a fair compromise,” he adds.

According to Berkovitz, other municipalities will be watching closely to see how Toronto’s new regime works out.

“Many others are grappling with this issue and considering similar rules, so Toronto may well be a test case and other municipalities could adopt similar measures if these are successful,” he says.

The expropriation of a condominium's common property has raised the question of who gets the money — those who owned a unit when the land was officially taken or those who live there at the time of payment for the expropriation, says Toronto condominium lawyer Joel Berkovitz.

Berkovitz, a lawyer with Shibley Righton LLP, says he recently advised a Toronto condo corporation, which had a strip of its land that was part of the common elements acquired by Metrolinx, that payment should go to the people who lived in the complex at the time the expropriation legally took effect.

He tells AdvocateDaily.com there's no explicit guidance in either the Expropriations Act or in the Condominium Act, 1998. In fact, s. 126 of the Condominium Act only states that owners get their share of the payment.

Berkovitz says it usually takes some time between the expropriation order and when a price is finalized. During that interval in this case, about 20 residents sold their units and moved.

"Who gets the money?" he asks. "Is it the owners when the land was officially taken or is it the owners at the time of payment?

"In this case, the land was "officially taken" in 2014, but the payment wasn't made until 2017," he explains. "Ultimately, the owners who were there when the land was taken were entitled to the proceeds.”

The advice was based on whether the entitlement to the expropriation proceeds was a right that attaches to the land, Berkovitz says.

"So, when you buy a unit, do you acquire the right to the fund or was it a personal right that was an entitlement when the land was taken? This was an interesting dilemma in the condominium industry that we've never come across before,” he says.

"The government came along and told this condo, 'We need a strip of your common elements and we're taking it, but we'll pay you for it, of course.'"

He said while his firm provided its opinion on the issue, there was disagreement among unitholders and other condo lawyers.

"Until a similar case is decided by the courts, no one can really know for sure," he adds.

"This is our view on it and we based it on a couple of things," Berkovitz explains. "One approach we took was to see if thee were an analogous situations. For example, if a corporation wants to sell common elements voluntarily —and with the necessary owners' consent — the owners at the time of transfer of title would get the money.

"If that's the case for the voluntary sale, then it makes sense that it would apply in an expropriation; it takes effect when the actual transfer of land took place in 2014."

Berkovitz says the opinion was given to a client, but not everyone was happy with it.

"Those who moved in and then learned that money was going to be paid to the condo are disappointed that they may not receive any,” he says. “Tensions are high on this issue."

The condo corporation will take reasonable efforts to track down the owners who moved from the property and "we are advising them on how payment can be made. If the previous owners can't be found — or there is a dispute with the current over who should get the funds — then they will be paid into court until the matter can be resolved," Berkovitz says.

"We tried to see if there was any case law dealing with the issue, but it's a unique situation to condos. In any other case, if the government expropriates your land and you sell the rest, you're not selling it with any entitlement to that land, because it's already been taken,” he says.

“But in condos, the ownership of the common elements is tied back to the ownership of a unit. That’s why the question arises whether the entitlement to money transfers with a sale of a unit to a new owner.

"Different principles apply to condos, but from the city's perspective, it's very simple — they just cut a cheque to the condo corporation. For the condo, it was a complex question of who do they pay and that's what we helped them figure out," Berkovitz says.

Shibley Righton's Joel Berkovitz appeared on CondoVoice's podcast to talk about a recent case concerning the appointment of an administrator.

To listen to the podcase please click here.

An article in CondoVoice where Shibley Righton's John De Vellis and Joel Berkovitz discuss Harassment of Managers or Staff being a serious problem for Condo Corporations.

To read the complete article please click here.

A recent decision in small claims court makes it clear that paralegals must leave lien work to lawyers, says Toronto business lawyer Joel Berkovitz.

“This case is significant because it recognizes that paralegals cannot and should not register or discharge condo liens,” says Berkovitz, a lawyer with Shibley Righton LLP.

The case began when the plaintiff missed an assessment notice from her condominium corporation and failed to pay by the deadline, he tells AdvocateDaily.com. The corporation then registered a lien against her property and charged her for the legal fees.

The plaintiff, a paralegal herself, knew that registering and discharging a lien falls outside of a paralegal’s authorized area of practice and that the condo management company couldn't then collect legal fees for the work, explains Berkovitz.

The condo owner paid the entire amount, then launched the small claims action to recoup the legal fees.

Berkovitz says there was a separate investigation by the Law Society of Upper Canada, which found that the work was outside of the paralegal’s licence.

The judge in small claims court also ruled that the condo corporation's paralegal was acting outside of her scope of authority. In his decision, he wrote “the paralegal was engaged in unauthorized practice, and that preparing and placing liens on property is properly the work of lawyer licensees.”

The question before him, however, was whether the condo corporation could collect fees for those “unauthorized” services.

“On its face, [the Solicitors Act ] prohibits someone who is not a solicitor from recovering legal costs. However, on closer reading, the section appears to be restricted to situations where a person who is not a solicitor represents a party in 'any action or proceeding,'” wrote the judge.

Since discharging liens is neither an action nor a proceeding under the law, the judge dismissed the claim. Usually when that happens, the defendant is entitled to costs, but in this case, the judge decided against it.

He wrote that it was “in the public interest to prevent unauthorized practice, and to discourage [the defendant] from continuing its practice of using paralegals for work they are not authorized to do. [The plaintiff] obviously put time and effort into this and did so at her own expense. Her efforts should have some recognition.”

He awarded her $500.

“While the award doesn’t come close to covering the actual time she expended on this case, it is symbolically significant,” says Berkovitz. “The judge said that while she didn’t win the case, she was entitled to some cost for it.”

He says the case means that the practice in some larger management companies to have in-house paralegals do lien registration work must now stop.

Berkovitz suspects that paralegals can continue to issue the notices that are sent out 10 days in advance of registering a lien. Since the case didn’t address notices, he says paralegals can continue to send them out and charge for the work.

“It’s a reasonable presumption from the case that they can continue to send out notices since this is an administrative task — unless there is some finding in the future that says sending a Notice of Lien is part of the lien registration process. If that happens, the entire lien process must be handled by lawyers,” says Berkovitz.

As for the question that remained surrounding whether liens should be viewed as an “action or proceeding,” the judge wrote: “I regard this as something of a legislative oversight, and one in need of remediation. That however is a matter that must be dealt with by the Legislative Assembly of Ontario.

Canadian subsidiaries can rest easier after the Ontario Superior Court ruled that Chevron Canada can’t be held financially liable for a judgment against its American parent company, says Toronto business lawyer Joel Berkovitz.

“This was a case about whether the assets of a subsidiary can be seized to satisfy a judgment against the parent company and the court here conclusively said, ‘No,’” says Berkovitz, a lawyer with Shibley Righton LLP.

In Yaiguaje v. Chevron Corporation, 2017 ONSC 135 (CanLII), the court ruled that Chevron Canada is a separate entity from the Chevron Corp. and, therefore, not responsible for any judgments against the parent company.

The Chevron case began in 1993, after roughly 30,000 Ecuadorian villagers alleged that Texaco, now owned by Chevron, dumped billions of litres of toxic oil-drilling byproducts into the environment. They alleged the toxins caused increased health problems, including more frequent cancer deaths and a higher rate of miscarriages.

In a 2011 decision, Ecuadorian courts ordered Chevron to pay the villagers US$9.5 billion. But Judge Lewis Kaplan of the United States District Court for the Southern District of New York found, following a seven-week trial, that there were extensive acts of fraud, bribery, forgery, intimidation and collusion in the Ecuadorian proceedings. Chevron has refused to pay the Ecuadorian judgment.

As part of an effort to seize Chevron assets elsewhere in the world, 47 plaintiffs asked the Ontario Superior Court of Justice to execute the Ecuadorian judgment against the assets of Chevron Canada, an indirect subsidiary of the U.S.-based parent company, Chevron Corp.

In his Ontario Superior Court decision, Justice Glenn Hainey refused, effectively protecting Chevron Canada’s assets from being seized.

Hainey wrote: “Chevron Canada’s major business activities involve petroleum and natural gas exploration in Canada. It has never carried on business in Ecuador and played no role in the events leading up to the Ecuadorian judgment.”

The plaintiffs have applied for leave to appeal the decision to the Ontario Court of Appeal.

Berkovitz tells AdvocateDaily.com that Canadian subsidiary companies should be relieved by Hainey’s ruling.

“Companies can rely on the fact that affiliated, subsidiary and parent companies can all be treated as separated corporate persons. That means there is a large degree of protection that their assets will not be available to satisfy judgments against the other companies in their group,” explains Berkovitz.

“The only exception is if the courts find the parent or affiliate exercises complete domination and control of that company and there is some sort of wrongdoing akin to fraud. If those two criteria are met, the courts can pierce the corporate veil and seize the assets of that company. Aside from that, you can rest fairly easy that the general principle of corporate independence and separate corporate personhood is upheld in this case.”

Berkovitz says it’s not unusual for plaintiffs to go after international subsidiaries, especially if they’re not having any luck collecting on the original judgment.

In the Chevron case, the company didn’t have any assets in Ecuador, which is why the plaintiffs looked elsewhere to collect on the judgment.

“Given the size of the judgment, they're going to try and execute it anywhere they have a reasonable legal argument and that there are assets to satisfy the judgment.”

In fact, the plaintiffs have taken their fight to courts in other countries, including the United States.

The consumer backlash over LoyaltyOne’s plan to void Air Miles that are five years or older is a lesson for companies considering changes to their reward programs, says Toronto business lawyer Joel Berkovitz.

People are fiercely resistant to giving up any benefits they’ve accrued in loyalty programs and companies should expect customers to respond very negatively to any attempts to claw them back, he tells AdvocateDaily.com.

In December, a private member's bill to prevent expiry of loyalty points passed on third reading in the Ontario legislature with a vote of 77-0, and became law under the Consumer Protection Act, reports the Globe and Mail. Shortly before Bill 47 became law, LoyaltyOne announced it was backing down and would allow members to keep any Air Miles they hadn’t already used, explains Berkovitz, a lawyer with Shibley Righton LLP.

“Typically private member's bills have a steep uphill battle to become law and very few ever do, but this bill was heartily embraced by everyone. The political calculus suggests this was an easy win for the government. It’s a pro-consumer change to the law,” he notes.

It also shows there’s an appetite in government for consumer-friendly legislation, Berkovitz points out.

“People like the idea the government is looking out for the little guy against big corporations. And if the government isn’t willing to put forward the legislation, this is an area where private member's bills could gain traction,” he says.

LoyaltyOne likely anticipated some level of pushback from members when it announced in 2011 it would cancel aging Air Miles as of Dec. 31, 2016, but the recent negative optics as consumers rushed to spend their points before the deadline proved too costly for the company to move forward, Berkovitz points out. But, he says, Bill 47 has left the door open to allow points to expire other than for the passage of time, such as when the company can no longer contact the account holder.

“Consumers felt it wasn’t fair — they had earned these points that had value, and they were going to expire due to a policy shift by a private company. The key lesson for companies is to be clear with customers in what situations they might lose their points. If there’s clarity from loyalty and reward companies, it's less likely to cause a big uproar and pushback,” he says.

The misstep is no doubt a costly one for Air Miles, given that reversing its expiry policy, and allowing the expiring miles to survive, will cost the company when those miles are redeemed in the future, Berkovitz adds.

“It’s a complicated calculation, but the company must have decided that the negative optics and backlash was more costly than whatever the financial hit would be from the miles surviving. In the end, they opted to take the one-time hit and allow the points to continue indefinitely rather than make customers angry,” he says.

Given that Ontario is the largest financial jurisdiction in Canada, it will be interesting to see if other companies that offer reward programs across Canada proactively adopt a nation-wide policy compliant with Ontario’s legislation, Berkovitz says.

“Companies offering reward points might decide it’s easier to voluntarily adopt this as the de facto approach across the country, rather than have different expiry provisions in some provinces” he says.

In certain matters, clients may benefit from a co-counsel setting where lawyers tackle different aspects of the case — but the success of these arrangements depends on mutual respect and compromise, Toronto lawyers Armand Conant, Bill Northcote and Joel Berkovitz tell Lawyers Weekly.

As an example, Conant, partner and head of the condominium law group at Shibley Righton LLP, points to a complicated condominium matter where it was clear that drawing in a small team of colleagues in a co-counsel setting to tackle different aspects of the job would be beneficial to the client.

“We needed their skill sets,” Conant says of the decision to bring in Northcote, chair of Shibley Righton’s business law practice group, and Berkovitz, an associate with the firm 

who practises business and condominium law.

“Bill and I would go to the strategy meetings with Joel and talk about how it would all work,” explains Conant. “Joel would then work on multiple agreements, drafting and redrafting them, and then we would review them.”

Northcote says the advantages to co-counsel arrangements extend beyond the sharing of work.

“Sometimes you involve other counsel because you want somebody who brings a fresh perspective,” he says, explaining the value of multiple fields of expertise.

Berkovitz agrees: “We see this a lot, particularly when it comes to corporate counsel and tax issues, where we defer to the advice of our tax specialists just because it’s an area they have so much experience in.”

At the same time, Conant, Northcote and Berkovitz say while co-counsel arrangements can prove beneficial, they require maintenance and consideration.

The three lawyers note they have never experienced serious conflict while working with each other.

“Armand and I haven’t had any conflict because you have to bring a spirit of respect and compromise,” says Northcote.

“But Joel may have experienced conflict thinking who are these guys and why am I working late when they’re sitting at home. But that’s partly a question of what roles people fulfil.”

Berkovitz notes that the stability of the co-counsel relationship indeed depends on each party recognizing their role and their place.

“As a junior you’re expected to be adaptable to your seniors rather than your seniors are expected to adaptable to you,” he explains.

“It’s a matter of you learning their working style, what they’re looking for and how they want to work with you. Do they want you to come back with questions all the time or do they want you to try to find a solution and only come back if necessary? Once you have that all down, then the working relationship is generally pretty smooth.”

Conant adds that senior co-counsel also need to respect junior team members.

“Joel might raise something he saw in another deal, where somebody did a slight twist on a transaction, and it might help on this point too. This kind of interaction, think-tanking and brainstorming is excellent.”

Co-counsel arrangements are common in many areas of practice, from criminal trials and litigation, where there’s significant court work, to complicated paper-laden negotiations.

But can too many hands on deck sink the ship? Insiders who have worked collaboratively with other lawyers recommend respecting boundaries, working as a team and striving for harmony all while focusing on the needs of the client.

Armand Conant, a partner at Shibley Righton in Toronto, recalls a complicated condominium matter where it was clear that client interest would benefit from drawing in a small team of colleagues in a co-counsel setting to tackle different aspects of the job

This article appeared on LawyersWeekly.ca.  Please click here for the full story.

A recent Ontario Court of Appeal decision that extends the “business judgment” rule to condominiums will give condo corporations broader protection when facing legal challenges by owners, says Toronto business and condominium lawyer Joel Berkovitz.

In the past, courts have issued rulings that demonstrate deference to condo boards’ decisions, but this was one of the first that expressly applies the business judgment rule, he tells AdvocateDaily.com.

“It gives cover to the condo corporation that as long as their decisions are reasonable, the courts won’t step in to overrule their decisions,” Berkovitz says.

The business judgment rule was created in the context of for-profit businesses, but the jurisprudence has extended its application to not-for-profit corporations, and now to condo corporations, explains Berkovitz, an associate with Shibley Righton LLP.

“Oppression is one of the broadest remedies available under the Condo Act,” he says.” If a board unfairly disregards the interests of the owner, the owner might have a claim.”

In 3716724 Canada Inc. v. Carleton Condominium Corporation No. 375, 2016 ONCA 650 (CanLII), Ontario’s top court ruled in favor of an Ottawa condominium board in a dispute over a condo’s owner application to convert commercial monthly parking spaces into an hourly system.

In 2014, the board rejected the company’s request to renovate the parking lot to accommodate hourly parking spaces, saying it posed a security concern. The owner subsequently filed an oppression claim.

The significance of this decision, Berkovitz points out, is that the court recognized that the appropriate test in an oppression claim was not whether the court would have reached the same decision the board did, but rather that the board made a decision that is reasonable and defensible in the eyes of the court.

“Condo corporations have many interests to balance and they need to give due consideration to how they make decisions," he says. “In this case, the corporation was balancing one owner's right to do business with the other owners' rights to security. The board said it would agree to the owner’s proposal if they hired a security guard, but the owner said, 'No'.”

The ruling sends a message to condo corporations that as long as they have exercised prudence and diligence in their dealings with owners, the court will be loathe to interfere, says Berkovitz, who wasn't involved in this matter and makes his comments generally.

“It’s more codified in the case law now and it gives a broader protection to condo boards,” he says. “So courts will defer to a board of directors so long as their decisions measure up against a standard of reasonableness.”

That said, the business judgment rule won’t offer protection to condo boards that don’t act honestly and in good faith, and in such cases, the courts will still bring down the hammer, Berkovitz cautions.

“It won’t protect a board that doesn’t exercise the care, diligence and skill that a reasonably prudent person would exercise,” he says. “If they come to an unreasonable or indefensible decision, if they completely disregard the interests of one party or don’t consider key factors, the courts may find that their conduct was oppressive.”

Condo corporations need to demonstrate they have tried to balance competing interests, and have done so in a timely manner, adds Berkovitz, saying straightforward communication between boards and owners goes a long way in minimizing oppression claims.

“When you’re talking with owners who are potentially bringing a claim, explain in as much detail as is appropriate how the corporation has dealt with your request, including the reasons for rejecting it if that’s the case,” he says. “Rather than giving a blanket denial or just saying no, try to show how you’ve tried to balance interests to make the best decision.”

The Panama Papers scandal should prompt law firms, and other professional services firms, to update their electronic security measures, says Toronto business lawyer Joel Berkovitz.

Panamanian law firm Mossack Fonseca, which specializes in the creation of offshore companies, claims it was the victim of a hacking in the massive leak of its client files — a reported 11.5 million documents covering a 40-year period — turned over to journalists from news outlets around the world.

“This is a bit of a warning signal for Canadian law firms, and other professional entities regarding their electronic security measures,” says Berkovitz, a lawyer with Shibley Righton LLP.

He says the reputational damage done to the firm as a result of the leak could pale in comparison to the financial burden it could face in the years to come.

“This is a huge problem for the law firm because, if they were negligent in their electronic security system, they could be liable to clients for any damage that flows from the material that was leaked. If there are fines or prosecutions as a result, they might look to sue the law firm for damages,” Berkovitz tells AdvocateDaily.com.

Internet security experts recently told Wired magazine that the law firm's front-end computer systems, such as its webmail and client portal software, were outdated and shot through with security vulnerabilities.

“If I were a client of theirs I'd be very concerned that they were communicating using such outdated technology,” Alan Woodward, a professor of computer science at the U.K.'s Surrey University, told Wired.

Berkovitz says there is a chance prosecutors will try to use the leaked documents even though, had they not been leaked, many would be covered by solicitor-client privilege.

“Solicitor-client privilege generally covers all legitimate communications between clients and their lawyers, and is fiercely guarded by courts,” he says. “Lawyers can't waive privilege over documents, because the privilege is not theirs to waive, but in cases of inadvertent disclosure the courts sometimes find that that privilege has been lost. If governments try to bring prosecutions based on the leaked documents, expect to see a fierce fight over whether solicitor-client privilege has been lost.”

The Canada Revenue Agency (CRA) has requested access to the documents in order to determine whether any tax rules were broken by holders of the offshore accounts, while the Royal Bank of Canada has defended its role after it emerged it used Mossack Fonseca to create more than 370 foreign corporations for its clients over the course of many years, the CBC reports.

“Right now, there seems to be some limited ties to Canada, but no evidence of any wrongdoing,” Berkovitz says. “Given the vast scope of the documents though, it's likely more ties to Canada will be discovered as time goes on.”

But, he warns, people shouldn't look at this as a smoking gun.

“People are jumping to a lot of conclusions that offshore accounts and holding companies are necessarily evidence of tax evasion or any other illegal activity,” Berkovitz says. “That may be true for some of these entities, but there are all sorts of legitimate tax-planning reasons for using these types of companies. It comes down to the difference between legitimate strategies to minimize your tax obligations versus tax evasion.”

He says the CRA will look at transactions to determine if they comply with s. 245 of the federal Income Tax Act, the General Anti-Avoidance Rule. The rule requires all transactions to be carried out for a bona fide purpose other than to avoid tax.

“A transaction will not offend the Anti-Avoidance Rule as long as the primary purpose of the transaction is not to avoid tax,” Berkovitz says. “If you're a global company with operations in many countries, there are many legitimate business reasons why you may need to set up a company in Panama or another low-tax jurisdiction.”