THE IMPACT OF COVID-19 ON THE JUDICIAL SYSTEM

From March 15 to September 1, 2020, the courts were suspended by ministerial decree except to address emergencies. During this period, it was not possible to initiate legal actions, submit ongoing court applications, or file new legal proceedings in court. Additionally, many trials had to be postponed.

However, the long-term effects of COVID-19 on the administration of justice continue to expand, as this unique situation is likely to bring about jurisprudential changes in several areas of law.

Extended Delays

Measures were taken to prevent the suspension of courts from causing harm to litigants. Thus, an extension of the statute of limitations, i.e., the period granted by the justice system to initiate legal proceedings, was provided and granted for a duration equivalent to the suspension of judicial activities. In civil cases, this period is generally three years, but there are exceptions to this rule.

Me Olivier Martineau, from La Boite Juridique, explains: “Any potential action whose statute of limitations ended during the specified period or extended beyond it can be initiated five and a half months later than originally established. This is an important factor to consider in evaluating the admissibility of a legal claim and in assessing the deadlines and conditions for initiating legal proceedings.”

The postponement of trials previously scheduled between March and September 2020, coupled with a high concentration of legal claims following the reopening, has resulted in a significant backlog in the justice system. “There were no trials during this period. Since the reopening of the courts, there has been a catch-up, and it is likely that additional delays are to be expected,” reports Me Martineau.

Positive Changes

The pandemic, however, had positive effects on the judicial system. At a time when everyone was trying to limit gatherings and direct contact between individuals, a long-awaited and desired technological shift within the courthouses took place. It is now possible to file procedural documents and other papers online through digital filing, whereas, before the pandemic, only in-person and paper filing was possible.

Furthermore, ongoing court applications are now generally heard virtually, just like some trials. “Thanks to videoconferencing appearances and digital filings with the registry, fewer trips are necessary for lawyers. This benefits our clients as they save time and money,” says the lawyer. This also applies to the ability to allow remote participation of witnesses during examinations and hearings before the court.

Puzzle

As the courts face an unprecedented situation, this will undoubtedly lead to new avenues of thought to address it, across all legal domains.

Following the reopening of businesses (gyms, restaurants, entertainment venues), it is possible that a company may be in a precarious financial situation and may not be able to rehire all its employees. However, the current prevailing legal trend does not generally consider this reason as reasonable grounds for termination, which would normally entitle the employee to reinstatement or compensation. It remains to be seen how the courts will react when the impact of the pandemic is added to the considerations.

What about a company that, deprived of operating income due to mandatory closure, may have omitted or neglected to pay its taxes? Will the Revenue Agency be willing to grant an additional deadline? Will the entrepreneur still be subject to interest and penalties despite these exceptional circumstances? “The jurisprudence remains applicable, but the courts will have to decide whether there is a need to provide exceptions that take into account the specific context created by the pandemic,” says Me Martineau.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

SOCIAL MEDIA: WHAT CONTROL DO YOU HAVE?

Can you restrict the use that your employees make of social media even during their personal hours? What recourse will your company or organization have if it is defamed by one of your workers? In an era where information —and misinformation—circulate at the speed of light, establishing a clear policy on the use of social media in the workplace is essential.

Companies are quickly evaluated by reviews, and public opinion rarely expresses itself in moderation. If your company can manage comments expressed on its website, it’s challenging to control what is said on social media. A work stoppage, an unpopular decision, a misunderstanding, and suddenly the “victim” ignites a fire that is difficult to extinguish.

Allowed or not allowed

“We are dealing with two rights that clash: the right to freedom of expression and the right to reputation. The balance between the two is precarious,” states Me Isabelle Tessier, a lawyer at La Boite Juridique.

What does defamation consist of? It is communication that diminishes someone’s esteem or consideration or arouses unfavorable or unpleasant feelings toward them. It occurs when one disseminates or allows the dissemination of information that one knows or should know is false. The court even recognizes cases where true information is communicated but is not of public interest and is disseminated inappropriately.

“In the context of employment, it is unlikely that a court would allow you to impose a general and formal prohibition on your employees to prevent them from talking about your company online. However, there is certainly a framework that can be put in place to define what goes beyond reasonable use of social media and would harm the commercial interests of your company,” she says.

Factors to consider before taking legal action

Do you believe that statements circulated on social media are harming your company? The following information is relevant to consider in the decision-making process of taking legal action against the author of such statements.

“First, you must be able to prove the identity of the author of the defamatory statements,” emphasizes Me Tessier. “However, the person sometimes hides behind a pseudonym or expresses themselves in a closed group, making formal identification more difficult.”

Next, if the platform or individual behind the statements is based abroad, the court must first determine if it is competent to hear your claim. If there is a significant connection with another province or country, your claim may need to be filed or transferred to a judicial authority in that district.

Regarding the constraints applicable to such legal action, note that it cannot be brought before the Small Claims Division and you only have a one-year deadline to file it, compared to three years in most other civil cases.

Is it worth it?

To determine the amount of damages, the court will want to know the number of people exposed to the defamatory message. Is it a small group of friends or millions of internet users? The reputation of the company or person defamed will also be taken into account in the calculation.

Moral damages awarded by Quebec courts rarely exceed a few thousand dollars. “Cases where a real drop in traffic is observed are certainly the most interesting to pursue for the average business, as the loss of profit can be significant,” she says. As for obtaining an injunction to remove statements from these platforms, the procedure remains difficult to completely erase information from the web due to the multiple shares that a publication can receive. Nevertheless, for the future of the company, it can certainly be worthwhile.

Also, think about the image that such legal action will project to your clients or the public. Do you want the statements to make headlines during a public hearing? Will you be able to rehabilitate your image? In the case of legal action, consider requesting a closed-door session and a prohibition on dissemination to limit potential drawbacks.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

DIVIDENDS

THE REVENUE AGENCY HAS ITS EYE ON YOU!

You are being asked for several thousand dollars because you, or a person with a dependent relationship, received a dividend or benefit while the company had a claim against the Agency. Is this attempt to claim payment from you legitimate?

First of all, it should be noted that shareholders and even directors usually cannot be held personally liable for corporate taxes and do not expose their personal assets when they invest, in exchange for shares, in a corporation. By definition, a corporation is a separate entity with a distinct property from its shareholders. Only a special provision allows for an exception.

However, “there is a growing number of claims from the Canada Revenue Agency based on transfers of property or money by corporations or general tax debtors,” explains Me Dani Ann Robichaud. “Such a transfer exposes both the transferee and the transferor to joint liability up to the amount or value of the property received.”

Typical Case

This possibility has been analyzed by the courts when a tax debtor transferred assets to their spouse (e.g., transferred their half-interest in the family residence without consideration, contributed to their spouse’s RRSP without consideration) and subsequently did not pay their tax debt. Moreover, the intention to evade the tax debt is not relevant.

The transferee of the transfer can, however, be released from liability to the extent that consideration equal to the fair market value of the transferred property has been given. This consideration may sometimes result from their family responsibilities under the Civil Code of Quebec following a marriage breakdown.

Shareholders

As the main shareholder, you received a dividend on the company’s income rather than a salary. At the time of receiving the money, the financial situation of the company was good. However, for reasons that did not exist at the time of the payment, losses occur (a disruption in the supply chain or health measures force you to close doors or significantly reduce activities). Revenues being absent, the year ends with a debt to the CRA.

Against all expectations, the CRA tries to claim the amount received as a dividend to apply it to the corporate debt. “The Agency suggests that in the case of a tax debt owed by the corporation, it should not have paid dividends to its shareholder(s) because the result is to deprive it, in whole or in part, of the equivalent in cash required to settle its debts to the state. It is rather unusual to go after shareholders in such circumstances,” says Me Robichaud for the following reasons.

Already Seen

Readers will recall that we have previously addressed the question of the liability of directors, which can be incurred under certain circumstances under civil laws (for claims for unpaid GST/QST or source deductions). However, none explicitly provides for the possibility of invoking that of shareholders.

“The case law is still evolving, and the analysis gives a mixed result,” she notes. “Moreover, in Quebec, the argument that the payment of dividends (when replacing a salary) can serve as the basis for a claim by the tax authorities seems to be rejected.”

Individuals with a dependent relationship

Transfer of money or property to a person with a dependent relationship without a direct contribution to the corporation can lead to a different outcome. As a shareholder, you made a contribution to your spouse’s RRSP, or you provide your child with a vehicle paid for by the corporation without them actively contributing to its business activities. In both cases, the Agency has considered that these transfers or benefits give rise to joint liability for the value received in order to reduce the corporation’s tax debt due to the lack of consideration. In the event of a claim against the shareholder or a person with a dependent relationship, know that a specialist in tax litigation can help you contest it and avoid repaying thousands of dollars.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

AT OUR PLACE, IT’S AT YOUR PLACE

If you desire to acquire a property on which a servitude grants a right of access to another owner or the lot is sold with a right of access connecting it to the public road or a lake, conflicts between neighbors may arise depending on the time or the way the deed was drafted.

A servitude is a broad legal concept often found in the form of a right of way. For the purposes of this article, we will not discuss business or public service easements.

“First, we must determine whether we are dealing with a servitude or a personal privilege clause,” says Olivier Martineau of La Boîte Juridique. “Unlike a servitude, a personal privilege is granted to an individual and their guests but does not extend to future owners. For example, if a property owner grants a neighbor a right of access to their private beach, this right may not necessarily be transferred if the property is sold, even if the use of the beach by the new owners is tolerated for several years. That’s why it’s important to understand what characterizes servitudes.”

Where, when, how?

A servitude is a set of obligations and rights attached to a property. The dominant land is the lot in favor of which the servitude is granted, while the servient land is the property that serves for the passage by others. The servitude can also extend over a series of properties, such as when only one of these contiguous lands has access to the public road. In this case, the non-accessible lands are called landlocked, and a servitude may grant a right of way to each of these properties through the most natural route, which may extend over several lands.

By definition, the owner of the servient land accepts a certain loss of enjoyment of their property. “Indeed, they must grant and tolerate the use of a portion of their land by others, including for circulation or to make improvements to make the access drivable,” says Mr. Martineau.

Responsibility

However, it is the owners of the dominant land who must ensure at their expense the maintenance and conservation of the plot of land on which the servitude is located. Moreover, if its use causes damage to the servient land, they must bear the costs related to repairs.

A servitude must confer a real advantage on the dominant land, not just its owner, and is therefore, by nature, perpetual upon the sale of the property. “If you want to limit its scope, it must be provided for in the drafting of its constitutive act,” says the legal expert.

Accurate description?

The constitutive act of the servitude, which must be registered in the land registry, describes the extent of the rights granted by it and the exact location where it is located on the servient land. However, one must be cautious because several servitudes date back a long time and are described in terms that lack precision, potentially leading to litigious situations. This is especially true since sometimes what is indicated in the deed of sale of the properties concerned is mutually contradictory or does not correspond to what is indicated in the constitutive act of the servitude. It is still possible to amend the servitude by mutual agreement between the owners by publishing a rectifying act.

Eternal servitude?

Servitudes are not necessarily eternal and can be extinguished in a few cases provided for by law. “Thus, when one becomes the owner of both the dominant and servient land, the servitude does not survive and will no longer exist for future owners. There may also be an express waiver by the owner of the dominant land, for example, if they no longer need it. It also comes to an end through non-use for a period of 10 consecutive years,” he says.

It is sometimes mistakenly believed that a servitude automatically ceases to exist when it loses its usefulness. However, case law is clear that this is not a cause of extinction. It is possible, however, that a specific clause stipulating this be included in the constitutive or rectifying act of the servitude. In this way, a servitude allowing a right of way to a landlocked plot could cease as soon as the plot is no longer landlocked.

However, one must be aware that granting a servitude or losing its benefits can affect the resale value of a property or significantly reduce its use.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

S

JUDGMENT RENDERED: WHAT’S NEXT?

A debtor owes you a significant sum of money, and resorting to the courts seems inevitable to recover what is owed to you. However, the success of this process depends in part on the diligence you put into preparing your recourse.

Whether the debtor is a legal entity or an individual, it is important to determine their solvency before pursuing legal action. ‘In case of doubt, the creditor should consider the services of a professional who will investigate the debtor’s assets and liabilities before anything else,’ warns Attorney Jérome Kara-Godin from La Boîte juridique.

Choices

The goal of initiating legal action is to obtain repayment of the debt, but there are mechanisms that can help certain creditors optimize their chances of being repaid, such as the legal mortgage resulting from a judgment, the legal mortgage of the person who participated in the construction or renovation of a building, and the conventional mortgage to secure the performance of obligations arising from a lease or to guarantee a loan, for example. These will allow these creditors to be paid in priority over other creditors without a mortgage.

In the case of a construction contractor, the contractor must register a mortgage on the property to guarantee payment for their work, which will be preserved through certain steps to be taken within the specified deadlines. However, it should be noted that mortgage claims will be repaid after priority claims, such as state claims for amounts due under certain tax laws.

Voluntary or forced

You have obtained a favorable judgment? Congratulations. It remains to be seen whether the recovery of your debt will be done amicably or forcefully. The debtor usually has 30 days to comply voluntarily. If they do so within this period, the matter will end there.

On the other hand, if the debtor is facing financial difficulties or wants to give you a hard time, you will likely have to proceed with forced execution. ‘You can then retain the services of a lawyer who will coordinate the steps to seize the debtor’s assets (real estate, vehicles, etc.). In some cases, there may even be a third-party seizure, such as seizing part of the debtor’s salary.’

This will be followed by the sale of assets and the distribution of the proceeds from the sale and/or the seized amounts. Subsequently, the co-location statement must be prepared, which proposes the order in which the claims will be repaid and is of great importance when there are multiple creditors. ‘In the case where the debtor owes $200,000 to the tax authorities and the balance in a mortgage, you increase your risk of ending up empty-handed if you have no mortgage,’ warns the lawyer. ‘However, if you have a judgment, it will still be valid for 10 years, allowing you to exercise your right later when the debtor’s financial situation is restored.

Can it be avoided?

Sometimes, a debtor restarts their business under a different name to circumvent their creditors. However, this does not necessarily protect them, but recovering your claim will become more complicated. ‘A creditor who suspects this type of misconduct can request the lifting of the corporate veil or argue that the new business is the alter ego of the old one. In the case of a judgment against a legal entity, a new action could, for example, be brought against the shareholder or the new business, provided that they can demonstrate to the court their intention to challenge the judgment,’ he points out.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

Divided co-ownership, part 2

DOES THE LONG-AWAITED REFORM MEET EXPECTATIONS?

You may not be aware, but the government of Quebec has undergone a thorough overhaul of the rules surrounding divided co-ownership; some changes have been in effect since January 2020, others since April 2021, and more are still expected.

It is to prevent unpleasant surprises for future condo buyers and current co-owners that the legislator deemed it necessary to better regulate the divided co-ownership system, adding a series of new rules. When all these rules come into effect, they will impose a strict, complex, and possibly more costly regime for developers and condominium associations. Consequently, this means more fees but also greater protection desired for co-owners.

To address the problems of condominium associations with an insufficient contingency fund to cope with exorbitant expenses due to the discovery of defects or negligence in building maintenance, the legislator enhances the current regime so that the association can respond to the building’s needs promptly.

Contingency fund and self-insurance

“Since January 1994, we know that the Condominium Association is required to establish a contingency fund to cover anticipated repair costs,” explains Me Dani Ann Robichaud. “But with the reform, the Association will have to revise its method of determining the required amount, and there is reason to believe that this amount will necessarily be revised upwards.”

Moreover, since April 2021, the fund must now provide for reconstruction in accordance with the standards, practices, and rules of the art applicable at that time, and the amount of insurance taken out must be evaluated at least every 5 years by an accredited appraiser to ensure that the held insurance is sufficient.

“Furthermore, starting in April 2022, a self-insurance fund must be established for the payment of the highest deductibles provided by the insurance policies and for the repair of damage to the insured property (the building and its components); moreover, it must take out insurance covering liability to third parties as well as that of its board members,” says the lawyer.

The new legislation that will come into effect later will establish the keeping of a maintenance and repair log for the building, outlining forecasts for upcoming work. Since most members of the Condominium Association’s Board are condo owners, it is highly likely that legal expertise and other assistance will be required to help them carry out their duties.

“But that’s not all: the developer will also have to open his wallet. Among other obligations, he will have to commission a study of the contingency fund, which must be given to future condo owners. While waiting to receive the study, he must place 0.5% of the rebuilding value of the building in trust. For a $10 million project, we’re talking about committing $50,000,” emphasizes Me Robichaud.

The alternatives?

Clearly, the legislator’s desire is to improve the situation for condo owners, but the adjustment may be harsh. Although some provisions of the reform are already in effect, they do not seem to be systematically applied in real estate transactions conducted since January 2020. They may be poorly understood by those responsible for ensuring their compliance.

It should be noted that buyers of a single-family home or a semi-detached house are obviously not targeted. Owners of condominiums held in indivision will also be exempt (see part 1 of our column in September).

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

CIVIL LITIGATION

GIVE MEDIATION A CHANCE

Although it has existed since 1990, civil mediation remains underutilized, perhaps because it is still relatively unknown to both citizens and lawyers. However, when undertaken in good faith, mediation can save time, money, and reputation.

Despite the pursuit of best practices, business people may find themselves in conflict with a supplier, a client, or a neighbor: neighborhood disturbances, disputes between landlords and tenants, unpaid accounts, conflicts between business people, etc.

Resorting to the courts can take years, involve high costs, provide no guarantee of success, and can tarnish a company’s reputation. By its very nature, mediation is faster, aims for a win-win scenario, and benefits from the principle of confidentiality.

In front of a mediator, parties do not have to convince them of the validity of their position. Unlike a legal action where the focus is generally on the law and the points that oppose the parties, and where each one tries to convince the judge of the fairness of their claims, mediation is a flexible process that emphasizes consensus points.

A conflict is generally emotionally charged; that is why it is important to take a step back and engage in a mediation process with an open mind, consulting an experienced mediator.

To reach a winning solution, a satisfactory amicable agreement, it is important to understand that the concept of civil mediation is based on five elements: the presence of an impartial mediator, low cost to participate, absence of prejudice in case of failure, the voluntary nature of the mechanism, the confidentiality of the process, and its speed.

Prevention is Better

It is essential to highlight that resorting to the courts is a reactive step that occurs when there seems to be no possibility of an amicable agreement. However, savvy entrepreneurs will include in contracts between businesses a clause specifying: In the event of disputes, the parties agree that, before unnecessarily initiating legal proceedings, they will reevaluate their agreement together using the mediation process or any other method of conflict resolution.

The Civil Code specifies that ‘these private methods are mainly negotiation between the parties to the dispute, as well as mediation or arbitration in which the parties seek the assistance of a third party. The parties can also use any other method that suits them and that they consider suitable, whether or not it borrows from these methods.’

Confidentiality

An important advantage of the mediation process is confidentiality. Everything said or written during the mediation process is without prejudice and is not admissible as evidence in legal or other proceedings. However, nothing can compromise the right of the party that provided a disclosed document to produce any evidence or document in court according to the rules of law. It is up to the parties to establish the limits of this confidentiality jointly. If it is decided that mediation should remain confidential, the parties and the mediator should sign a clause to that effect.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

PROTECTING THE CONSUMER IS YOUR BUSINESS!

The explosion in the popularity of online platforms for conducting business with consumers does not change your obligations in terms of advertising, where you must continue to play by the rules. It is important to ensure that your contracts are concluded at a distance (online, for example) and the terms stated therein are comprehensive and comply with the Consumer Protection Act.

The need to stand out from the competition by displaying the best prices does not exempt you from your obligation to present clear and complete information in your advertising. Thus, all financing, delivery, setup, etc., fees must not only be included in the announced final price but must also be clearly detailed in the advertisement.

Any truth is worth telling

You cannot include only the information that suits you! Thus, the goods or services offered in an advertisement must be distinguished. For example, you cannot simultaneously advertise a property for sale and promote its financing. The offer must then promote either the property alone or the financing, not both in a single ad. If you are promoting financing, the ad must contain all the details: interest rate, term, required deposit, applicable fees, and other strict requirements as per the Regulatory Provision.

Advertising has the gift of embellishing things; however, remember that you cannot claim that your product or service has virtues it does not have or that cannot be reasonably demonstrated (e.g., longevity). A merchant cannot mislead the consumer in any way, and their claims must be truthful. Thus, scientific tests and testimonials must be referenced and cannot be modified at your discretion, and their dissemination requires the author’s authorization.

Online Contracts

A contract concluded on the Internet is equivalent to a contract concluded at a distance. An online order therefore carries the same legal obligations for the parties involved, even if the contract is not signed in person. The legislator recognizes the validity of electronic signatures. However, the merchant has the duty to clearly display its policy regarding the sale and its cancellation, refund, and return conditions. Furthermore, the form must be designed to allow the consumer to make changes and corrections before signing. Failure to do so exposes you to the possibility of sanctions.

Service Fees

The Law is also clear on the subject of additional or hidden fees: the merchant must avoid applying hidden service fees, and all fees must be clearly stated, and transparently before the contract is concluded. Also, the imposition of certain fees is prohibited. For example, additional fees cannot be demanded due to the payment method chosen by the consumer. Although some companies impose a service fee for the use of a credit card, this practice is entirely illegal and is likely to be reported to the Office de la protection du consommateur with the unpleasant consequences that follow. Similarly, adding “administrative fees” is equally dubious, especially if they are not disclosed in advance.

In general, only sales taxes can be added to the total price, but again, it is better to specify this in your explicit conditions to avoid any ambiguity.

Anti-Spam Law

The Canadian Anti-Spam Law adds additional terms and restrictions to businesses that communicate with their customers and prospects by mail, email, or phone. Every merchant has an interest in adhering to the provisions of this law because the penalties for violation are prohibitive.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

IN COLLABORATION WITH JIMMY ARSENEAULT, RE/MAX BROKER.

THE IMPORTANCE OF THE PURCHASE OFFER

The real estate market is in turmoil. It is not uncommon in 2021 for a selling homeowner to receive five, ten purchase offers for a property listed on the market. Should the potential buyer, therefore, give up on restrictive clauses to remain competitive?

Every legally constituted business or organization has its own legal existence. Its destiny is generally determined by its directors, who may or may not be shareholders. Shareholders invest funds in exchange for an ‘ownership’ percentage of the company; the directors convened in a board, make management decisions for the company and may delegate certain decisions to committees or executives. Although shareholders are allowed to act in their own interests, the same does not apply to directors, who must always ensure the best interests of the company or organization.

One might think that in real estate, the purchase offer is a bit like an engagement: a commitment to proceed formally if both parties keep their word. However, the difference is that a purchase offer is a legal document that can be enforced if either party refuses to fulfill their commitments after acceptance.

The Far West?

The current real estate market is unprecedented. Re/Max broker in Gatineau, Jimmy Arseneault, knows this well: “Just five years ago, it was challenging to sell without the help of a broker. Today, anyone can sell without an agent, and that’s precisely the danger because, without the guidance of a professional, the potential for conflict is greater.”

He cites an example of a seller who accepts a first purchase offer and then accepts a higher second one a few days later. “The seller exposes themselves to a lawsuit because they won’t be able to deliver on one of the two offers,” he says.

Usually, the purchase offer is valid for about ten days, allowing for the fulfillment of conditions. “But financial institutions struggle to meet demand, and obtaining financing confirmation can sometimes take more than 15 days. The preference today is for the buyer to obtain prequalification,” explains Mr. Arseneault. That said, “the time stipulated in the purchase offer for the fulfillment of conditions may not be decisive unless the parties have expressly provided for it or the delay results from a lack of diligence on the part benefiting from it,” adds Me Dani Ann Robichaud.

The Offer to Purchase

Whether it’s a commercial or residential building, the purchase offer will essentially contain the conditions of the sale. A building inspection is usually part of it. The seller, in commercial matters, who wants to dispose of a building might be tempted to avoid conducting an inspection before putting it on the market. However, lawyer Me Robichaud points out that ‘he remains responsible for any latent defect existing at the time of the sale, whether known to him or not.’

On the other hand, Jimmy Arseneault emphasizes that the buyer must be realistic and diligent: ‘If the septic field or French drain is working but is 20 or 30 years old, it is unrealistic to expect another 10 years from it. The price will take into account the remaining life expectancy of the facilities.’

Other clauses and ancillary documents:

While property visits are more challenging during a pandemic, they are still possible, and it is the buyer’s responsibility to visit the property to avoid unpleasant surprises. The buyer is, in fact, obligated to accept the property on the date of their last visit.

Although the buyer is required to act diligently, the seller still has the duty to inform them of any condition that could affect their purchasing decision. The broker must also diligently check the property’s history. ‘For example, if there has been a suicide or cannabis cultivation on the premises, it must be disclosed. The same goes for a past recourse to an exterminator,’ says the broker.

The seller’s disclosure must present the current state of the premises; if it is a few months old, it is advisable to review it. Does the location certificate provide an accurate picture of the building and its accessories? The broker is obligated to ensure the accuracy of the information contained.

When possession dates become an issue, what about pre-possession agreements in favor of the buyer? Since this is an unusual situation covering the period between the acceptance of the purchase offer and the signing at the notary, specific clauses and terms must always be provided.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.

SERVING ON A BOARD OF DIRECTORS…

VOLUNTARILY, PAID, OR AS A CORPORATE OFFICER?

Whether you are appointed due to your role within a company or invited as an honorary member to serve on the board of directors of a company or organization, are you aware that you could incur personal liability?

Every legally constituted business or organization has its own legal existence. Its destiny is generally determined by its directors, who may or may not be shareholders. Shareholders invest funds in exchange for an ‘ownership’ percentage of the company; the directors convened in a board, make management decisions for the company, and may delegate certain decisions to committees or executives. Although shareholders are allowed to act in their own interests, the same does not apply to directors, who must always ensure the best interests of the company or organization.

Expressing dissent:

An administrator who does not share the ‘majority opinion’ regarding a board decision has an interest in formally expressing their disagreement in the meeting minutes. For example, if a board of directors decides to pay a dividend to shareholders at the expense of creditors (beyond a threshold established by law), this decision could be overturned and require administrators who allowed the payment of such dividends to reimburse the company.

It is important to emphasize that an administrator who does not formally express disagreement with a proposed resolution is deemed to have voted in favor of it if accepted during a board meeting, even if absent; they may be personally liable for the financial consequences that ensue. Expressing disagreement can also form the basis of a legal defense in the event of legal action taken against the company or organization accused of committing a civil or criminal wrong, or acting in bad faith or fraudulently.

Another effective protective measure is to subscribe, for the benefit of administrators, to a liability insurance policy that indemnifies them in case of unintentional wrongdoing.

Conflict of Interest:

It may happen that an administrator is called upon to make decisions on matters directly or indirectly affecting their professional or personal activities. This administrator would potentially be in a conflict of interest situation. Hence, they must disclose their interest before the discussion begins and choose to withdraw and abstain from voting on the ensuing resolution. The administrator must not only avoid a conflict of interest, but even the appearance of a conflict, which could be detrimental to both the individual and the company or organization. Therefore, the board will regularly require a declaration of interests at the beginning of meetings to identify situations that may lead to closed-door discussions or the exclusion of one or more concerned administrators from debates.

“Payable Bankruptcy”:

We are all familiar with the story of an entrepreneur who goes bankrupt, depriving creditors of thousands of dollars, only to resume business the next day under a new business name. Often, these businesses have a single leader who is both a shareholder, a board director, and an executive. In case this entrepreneur acted in bad faith or fraudulently with the intent to harm suppliers, employees, or other creditors, the court may lift the corporate veil that otherwise isolates the company’s assets from those of its administrator. Such action will be particularly useful when the main objective pursued by the administrator in creating a company is to shield their personal assets from the creditors of their business with the intention of committing fraud.

WARNING: The information contained in this article, while of a legal nature, does not constitute legal advice. It is recommended to consult with a professional for advice that will address your specific situation.