Commercial Leasing

A few weeks ago the Bank of Canada raised its key lending rate for the first time in seven years by a quarter-percentage-point. Although a move like this signals a growing confidence in the Canadian economy, not everybody shares this excitement.

For lenders, it can make the business of lending a bit more enticing, but for borrowers, an interest rate increase is not news that makes you want to call home. With concerns that this increase could ultimately hurt consumers who are already stretched too thin, it is a good reminder for lenders and creditors to secure their loans to protect themselves against borrowers who are unable to pay off all or part of their debt.

In Ontario, the Personal Property Security Act (PPSA) is a statutory regime that governs the taking of and enforcement of security in the property of a borrower. If you are a lender, by registering with the Personal Property Security Registration (PPSR) system, it will help you secure your loan interests and help establish priorities between you and other lenders with competing interests in the same debtor property, to protect you in the event the borrower does not pay.

We always recommend our clients who are lenders to secure their interests using the PPSR system rather than risk being an unsecured lender with no protection to secure repayment of their loan. Please feel free to connect with us if you would like to learn more about this regime or if you would like help in becoming a secured creditor.

Michelle Eames, LL.B, LL.M.
Business Lawyer
meames@andriessen.ca

At the end of last week, the Judge handed down his decision in the Jian Ghomeshi case. The finding was that the Crown had not proven its’ case “beyond a reasonable doubt”. That is the technical definition of what needs to be established in a criminal case before someone is convicted of an offence.

In Business Litigation, which is generally a Civil matter, the burden of proof is: has the plaintiff proven their case “on the balance of probabilities”? This is often described as a lower threshold.

While this threshold is lower than the criminal requirement, it still exists and a Judge will not simply “take your word for it” that something happened. You must prove your case.

To prove a case, evidence is gathered: emails, notes, contracts, photos and witness statements. These all form an important part of proving your case.

If you “forget” something until the defendant’s lawyer is cross-examining you, the decision is not likely going to go in your favour. If a Judge decides you’re lying or colluded with people to build up your case, you’re definitely not going to win.

Believing you are entitled to Judgment is not the same as proving it: you must prove your case or you’re not going to win.

Inga B. Andriessen JD
iandriessen@andriessen.ca

I recently had a meeting with a client who retained us to draft a Shareholder’s Agreement for her and the co-owner of her business. This type of an agreement lets the shareholder of a company control what happens in the event of certain things such as change in ownership, death of a shareholder or the divorce of a shareholder.

Some of the items she easily had an opinion on, however, some items she said “let’s leave those out and we’ll deal with them later.” I encouraged her not to do that, rather than to tackle the hard issues head on and while that advice was with respect to her particular situation, the advice that follows applies to all business issues, not just legal ones.

It is better to plan for something than to respond to it happening.

From a legal point of view, it costs far less to draft a legal agreement that sets out what will happen if an event takes place as opposed to litigating the issue when it happens and there is no agreement in place. This applies to employment agreements, contracts with customers and suppliers. Litigation dollars are easily ten times the amount of dollars spent on drafting documents: use your legal fees wisely, plan ahead.

From a general business point of view, facing the possibility of an unpleasant event head on, let’s you plan how to deal with it before you are in “crisis mode” and struggling to deal with shock as well as coming up with a plan.

Plan your response before you need it. We can help with that.

Inga B. Andriessen JD
iandriessen@andriessen.ca

It’s July 1, let’s celebrate 147 years of our Country by bringing the commercial use of email to a screeching halt.

I’m not going to repeat what you need to do to comply with the Canadian Anti-Spam Legislation here. Scroll down our Blog and read the CASL Blog for that information.

What I will tell you is that I think this legislation is overkill.

I think this legislation is too expensive for Small Business to comply with.

I think that making Officer & Directors personally liable for email violations is wrong.

If you agree, please write your MP and let them know.

In the mean time, it’s July 1, 2014. Save those unsolicited emails you receive, they are worth $ 200/email come July 1, 2017.

Judgments entitling you to money are just pretty pieces of paper until you take steps to enforce it.

Those Judgments can cost a lot of legal fees to obtain and there should be no satisfaction in obtaining a Judgment that only has value of principle, rather than enforcement.

So, what are the options for enforcing a Judgment?

The easiest option is a garnishment. A garnishment of a bank account that is solely owned by the debtor can be 100% garnished. The money is paid by the bank to the Sheriff, the Sheriff waits at least 30 days to see if there are other Judgments and then distributes the money pro-rata to everyone who has a Judgment against the debtor. The exception to that is that if a government agency has a writ filed, they have a priority to be paid before other Judgment creditors.

Jobs can be garnished at the rate of 20% net income. However, if there is a Family Law garnishment (50% of wages) that garnishment has a priority over non-Family Law Judgment creditors.

Any money owed to a Judgment debtor by another person/entity can also be garnished. Think of garnishment as a game of keep away. The debtor and person who owes them money are throwing a ball. The judgment creditor jumps in the middle of the two and takes (garnishes) the ball.

Another option to enforce a Judgment is to sell property. This is only a good option if the property is solely owned in the name of the Judgment debtor and the mortgage on the property is not significant. The Judgment creditor must pay significant fees to Sheriff for this process and the proceeds are shared by all Judgment creditors.

The Sheriff can also seize and sell goods of value. This process generally has significant fees and the Sheriff is reluctant to proceed with this in many areas of Ontario, resulting in significant legal fees being incurred to sell goods.

An examination in aid of execution is a once a year opportunity for a Judgment Creditor to ask the debtor questions under oath regarding assets that can be used to satisfy the Judgment: this is a good way to get information, but often expensive. Many Judgment debtors know the game: they take steps to increase the legal fees incurred before they finally provide answers.

At our firm we have even had several Judgment debtors choose 10 days in jail instead of answering questions about assets. Of course, ultimately, they answered the questions and they
had the 10 days in jail as an added bonus.

The best way to obtain information to enforce a Judgment is to conduct a Credit Search. This can only be done with the debtor’s permission or with an agency that has the right to search credit when a Judgment is obtained. We recommend our clients include ongoing Credit Search authorizations as part of their new customer intake forms: better to be safe than sorry.

Our firm has been successfully enforcing Judgments for over 22 years. We don’t like to get paper Judgments, we like to get money for our clients.

Inga B. Andriessen JD
iandriessen@andriessen.ca

I snagged the title to this Blog from a Huffington Post Blog by Krizia. The original blog described the evolution of a small business called Lotus Premium Denim. This Blog is not about Denim.

The title of the Blog grabbed my attention because it refers to two things many lawyers fail to do, but two things I know that we do at our firm.

The title of the Blog grabbed my attention because it refers to two things many lawyers fail to do, but two things I know that we do at our firm.

Delivering on our promise is critical in maintaining the client relationships we have established over the past 20 years. I’m proud to say that many of the clients we have today are clients we have had for the entire 20 years the firm has been around.

The keys to “promising” as a lawyer in my opinion are:

1. Communicating clearly to the client what you will be charging them.
As lawyers all we have to sell is our time, but how we sell it (by the hour or by the task) is an important difference and clients must be told about this up front.

2. Honestly evaluating any litigation and being clear, even if you have a strong case, there is always a possibility of a Judge finding against you.
Clients have to be told Judges are human and let’s face it, there is a reason we have Courts of Appeal.

3. Before starting any litigation, assess the likelihood of collecting on a Judgment and advising the client if the only result will be a “pretty piece of paper stamped Judgment”.
No one just wants a pretty piece of paper and why should the law firm be the only party that benefits from litigation?

If you are our client, we understand you and we promise to continue delivering excellent legal services to you.

Inga B. Andriessen JD
iandriessen@andriessen.ca

One of the areas where our firm really excels – and it’s an area that I don’t have a lot to do with, so my beaming sense of pride is socially acceptable – is in the area of collections. Whether it be in making sure you get paid for the work you do at the outset, on an ongoing basis, or after some deadbeat has tried to get you to do something for nothing; in all areas we do good things.

This last area is what I’m going to talk about today. Although Inga preaches 30-60-90 Sue™ like a preacher from the old time gospel hour, we often don’t even hear from clients until a debt is well past due and all internal attempts at collection have been met with failure. Any firm worth its salt can take on a matter at this point and set the normal chain of litigation events in motion – but what Inga and Paul and Murray do, is a little bit different, and a little bit special. They actually plan out the course of events that are going to transpire and give clients an honest appraisal about the reality of not only getting a judgment on the debt, but of ultimately collecting on that judgment. Our mantra being that a paper judgment doesn’t benefit anyone – even us – sure you’ve paid our fees, but we’ve given you no value for that and you probably won’t be a client for very long.

Collecting on judgments can be as simple as enforcing a payment plan or as complicated as seeking a court order to go after hidden assets, fraudulently conveyed assets, or playing a shell game of find the assets among a bunch of numbered companies set up to evade creditors.

The last one is particularly challenging, but we’re pretty capable people. For example, in the recent case of Pitney Bowes of Canada Ltd. v. Belmonte, Inga sought an order from the court allowing us to go after a debtor’s other corporations, after proving that they were established solely for the purpose of trying to avoid paying our clients what they owed them under a lease. In that case, the debtor figured that transferring assets to a spouse, and ultimately to newly formed corporations, who were not party to the original debt, would somehow magically defeat his responsibility to pay our client. The debtor was wrong. The case is a particularly excellent example of our founder being out in the trenches, kicking ass and taking names, and setting a great example not only for us, but for other firms who work in collections law.

Scott R. Young

Amidst all the Facebook IPO hype this week, there was the release of an e-mail from Mark Zuckerberg to his corporate lawyer, instructing them to dilute Facebook co-founder Eduardo Saverin’s share in the burgeoning company.

Aside from the obvious professional responsibility issue that this presents for the lawyer (assuming the lawyer was acting for the corporation, they had an immediate duty to declare a conflict of interest and cease all representation of the company), the story highlights the need to get good independent legal advice before entering into any legal agreement. I had a great example of the right way to do things last week – we were retained to give ILA to a shareholder on a Shareholder’s Agreement that they had largely formulated. Despite the fact that this shareholder had been the principal instructor to the corporation’s lawyer, and was intimately familiar with most of the terms of the agreement, the corporation’s lawyer still thought it would benefit all of the shareholders to get ILA – not just to waive it as is sometimes (unfortunately) done.

The shareholder was convinced that ILA would add value even if only to have a fresh set of eyes review the agreement. In our review, we offered more than that; considering various critical events from the shareholder’s individual perspective was very different than the perspective of corporate representative they had while preparing the agreement.

The details of the Facebook dilution are not entirely clear (the ensuing litigation was settled and not much is on the public record) but presumably the restructuring that diluted Savarin down to 10% was ultimately effected, and presumably without Savarin retaining counsel to explain this to him. And when he did realize the dilution, litigation was the only option available.

Getting independent legal advice is not cheap, but the value in what you are getting is often immeasurable. If you are entering into an agreement of any significance (including potential future liabilities), you absolutely must have legal counsel review the agreement and confirm that your interests are protected (or that your unprotected interests are known to you). It’s that simple.

Scott R. Young

One of the many positives to being a small law firm is the close interaction between the litigation and non-litigation sides of the firm. We meet together on a regular basis to discuss files from both perspectives (how to avoid litigation and what strategy to pursue when litigation becomes inevitable). We also talk about avoiding disputes from the very beginning of a commercial relationship – this usually means getting the documentation right.

When we draft documentation for a client, we try to find out as much as we can about the way they do business; or more exactly, we find out about the way they want to do business and then we try to make sure that its completely compliant with the statutory framework under which the client operates, and any applicable case law. When possible, we try to approach the process holistically, and address as much of the business relationship as possible. We consider client solicitation, customer intake, the review of documents, imbalances in bargaining power, the need to retain specialized counsel on both sides of a transaction, the execution of the documents, the clarity of the documents, the term and termination of the agreement and what rights the parties have after the life of the document has ended.

When we talk about the clarity of legal documents, we’re talking about more than plain language and the clarity of our words – although we are talking about that too. We’re talking about everything from the readability of documents to font size, white space, kerning, the appropriate placement of margins in the event that a document will be faxed repeatedly, organization, numeration, and everything else we can think of. And then the litigators look at the document from the perspective of a judge, squinting to read and understand what exactly the parties have bargained for. And we fine tune.

At the end of the day, our goal is to provide a legal document that envisions the intention of the parties in a clear manner, contemplates current and incoming legislation, is adaptable for changes in case law and will add value to the underlying interaction between the parties. Our multi-disciplined and flexible approach produces excellent documentation. And that documentation improves the systems of our clients.

That’s the Andriessen Document Advantage.

Scott R. Young

We’ve rolled out a new service for clients that has met with a considerable degree of success; so much so that we’re planning on expanding it in the coming months. Combining two of my favourite things – eating and getting free legal advice – our Lunch and Learn series focuses on getting small groups of clients into our office to talk about areas of law specific to their interest.

The intimate lunchtime gathering is the perfect setting. Instead of sitting and listening to a lawyer drone on about the law, the atmosphere is much more give and take and we get to talk about the real world business application of the law. It’s a good place to find workable solutions for our clients. And it’s a good place for us to find out what our clients are doing in their day to day operations – we do as much learning as anyone.

Inga had the opportunity to speak about our 30-60-90 Sue™ philosophy to a few groups recently and it was very well received – to some clients, the idea of getting paid for the work they did was somewhat revelatory – to others, it just tweaked the good habits that they already had.

Paul Voorn will be hosting a Lunch and Learn soon on Construction Lien Act considerations. If you perform any construction services or have an interest in commercial property, this event will be enormously beneficial to you.

I’m planning a complete corporate compliance Lunch and Learn in the coming weeks that will deliver a broad overview of the current legislative scheme and a focus on what smaller businesses really need to concentrate on in terms of legal compliance.

Also in the pipeline, some litigation-oriented events, focusing on the stages of a lawsuit, as well as some specific corporate events.

If you have any ideas for a topic that you’d like to see covered, or want to attend one of the lunches I’ve mentioned, please drop us a line.

Scott R. Young