British Columbia’s new Construction Prompt Payment Act is intended to address this problem by setting clear payment deadlines and creating a faster way to resolve certain payment disputes.

The Act has been passed, but is not yet in force. The Province must still finalize the regulations and establish the system that will oversee the new dispute-resolution process.

Clear Deadlines for Payment

The new system will require a contractor to give an owner a “proper invoice.” In simple terms, this means an invoice that includes the information required by the Act and the parties’ contract.

An owner who believes an invoice is missing required information will have seven days to raise that concern. If the owner does not respond within that time, the invoice will generally be treated as “proper”.

Once a proper invoice is received:

• the owner must generally pay the contractor within 28 days;
• the contractor must then pass payment on to its subcontractors within the required timeframe; and
• payment must continue down the construction chain within short deadlines.

The goal is to prevent money from becoming unnecessarily delayed at one level of a project while subcontractors and suppliers wait to be paid.

What Happens When Payment Is Disputed?

An owner will still be able to dispute all or part of an invoice. However, the owner will need to provide a written notice of non-payment within 14 days of the invoice date.

That notice must explain:

• how much is not being paid; and
• why payment is being withheld.

This means that simply delaying payment while a concern is investigated may no longer be an option. Payment issues will need to be identified, documented, and communicated quickly.

A Faster Way to Resolve Disputes

The Act also introduces a process called interim adjudication.

This process will allow certain construction payment disputes to be decided much faster than a typical court case or arbitration. It may be used for disputes involving issues such as:

• whether an invoice meets the required standard;
• whether payment was made on time;
• the value of work or materials;
• notices of non-payment; and
• payment for change orders.

An adjudicator will review the dispute and issue a decision within a short period of time. That decision must generally be followed unless the parties later resolve the matter through a court proceeding, arbitration, or agreement.

Changes to Builders’ Lien Rules

The legislation will also make several changes to B.C.’s existing builders’ lien system.

One important change is that the holdback period will be reduced from 55 days to 46 days. The Act will also remove a type of claim commonly known as a “Shimco lien,” which is a separate lien claim against the statutory holdback.

Looking Ahead

B.C.’s new prompt payment regime will create a major change in how construction payments are managed. The most important difference is not simply that payment will be required sooner. It is that owners, contractors, and subcontractors will have much less time to identify and respond to payment problems.

Businesses that prepare early will be better positioned to avoid missed deadlines, reduce disputes, and manage projects smoothly once the Act comes into force.

McQuarrie’s construction and dispute-resolution lawyers can assist owners, developers, contractors, subcontractors, and other industry participants with reviewing their contracts and preparing for the new prompt payment requirements.

This article is for general information only and is not legal advice.

Article by: Doug Conolly and Armaan Kahlon

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Consideration is a fundamental principle of contract law. Except for contracts executed under seal, it is one of the essential ingredients that must be present for a contract to exist. At a basic level, consideration can be thought of as an exchange, one that takes a simple promise (which the Courts will not enforce) and elevates it into an enforceable contractual obligation. In other words, consideration is the purchase price of a promise, so long as the promisor has agreed to accept it.

Naturally, issues with consideration most often arise in contract disputes. However, it can also be a central issue in disputes outside of a purely contract law context, particularly in real estate disputes where beneficial ownership of property is at issue. As cases can be won or lost on the question of consideration, it is important to understand how the Courts view it.

How do the Courts View Consideration?

Traditionally, Courts do not inquire into the value or adequacy of consideration. This idea is often referred to as the “peppercorn” principle or theory, which arose out of old case law that held even a peppercorn (a metaphor for something of nominal value) is sufficient consideration for a contract to exist. The reasoning behind it is more economic than legal – the value of consideration is best determined by the parties to the bargain rather than the Courts.

In certain legal contexts, however, the Courts may examine whether meaningful consideration was actually given. For example, in disputes about beneficial ownership of property the absence of meaningful consideration can be important evidence in determining who is the beneficial owner. If a person transfers property to another but receives no consideration in return, the transferor can ask the Court to return the property to them on the basis of a resulting trust. Here, the “peppercorn” principle is no aid to a transferee as the Courts require the transferee to prove they provided meaningful or tangible consideration for the property (Freeland v. Farrell, 2022 BCCA 99).

When disputes arise over the enforceability of a contract or the ownership of property, consideration can be central to the outcome. Parties to these disputes need clear legal advice on whether the facts and evidence support a viable claim or defence and how the issue of consideration is likely to be treated by the Court on the specific facts of the case.

Article by: Robert Goddard and Doug Conolly.

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What Happens to a Deposit When a Purchaser Defaults on a Contract of Purchase and Sale?

A deposit is a common feature in contracts of purchase and sale, particularly in real estate transactions. It serves as a demonstration of the purchaser’s commitment to complete the transaction and provides the seller with a measure of security. But what happens to the deposit if the purchaser fails to fulfill their obligations under the contract?

Purpose of the Deposit

The deposit is typically paid by the purchaser at the time the contract is signed or shortly thereafter. Its primary purpose is to secure the purchaser’s performance and to compensate the seller in the event of a default. The deposit is usually held in trust by a third party, such as a real estate brokerage or lawyer, until the transaction is completed or terminated.

Default by the Purchaser

A purchaser is considered to be in default if they fail to complete the transaction as required by the contract. The most common default is the failure to pay the balance of the purchase price on the closing date. Other defaults may include failing to provide required documentation, breaching warranties, or not satisfying condition precedent.

Forfeiture of the Deposit

When a purchaser defaults, the fate of the deposit depends on the terms of the contract and the applicable law. In most cases, the seller is entitled to retain the deposit as liquidated damages. Courts generally uphold the forfeiture of a reasonable deposit, recognizing it as a genuine pre-estimate of the seller’s damages resulting from the purchaser’s breach.

However, if the deposit is disproportionately large relative to the purchase price, a court may find it to be a penalty and refuse to enforce its forfeiture. The key consideration is whether the deposit amount is reasonable in light of the anticipated loss from a default.

Deposit as Liquidated Damages

The deposit is often characterized as “liquidated damages,” meaning it is intended to represent the damages the seller would suffer if the purchaser fails to complete the transaction. If the seller accepts the deposit as liquidated damages, they may be precluded from pursuing further damages unless the contract expressly allows for additional recovery.

Seller’s Right to Additional Damages

If the seller’s actual losses exceed the amount of the deposit, and the contract does not limit the seller’s remedy to forfeiture of the deposit, the seller may seek additional damages. These damages are typically calculated as the difference between the contract price and the resale price, plus any consequential losses directly attributable to the purchaser’s default.

Return of the Deposit

In some circumstances, the purchaser may be entitled to the return of the deposit. For example, if the contract is terminated due to the seller’s default, or if a condition precedent in the contract is not satisfied through no fault of the purchaser, the deposit is typically returned.

Practical Considerations

The contract should be carefully reviewed to determine the specific terms governing the deposit and the consequences of default.

The deposit is usually held in trust and cannot be released to the seller without the written consent of both parties or a court order.

Disputes over the deposit may require negotiation, mediation, or litigation to resolve.

Conclusion

When a purchaser defaults on a contract of purchase and sale, the deposit is generally forfeited to the seller as liquidated damages, provided the amount is reasonable and the contract so provides. The specific outcome will depend on the terms of the contract and the circumstances of the default. Both parties should ensure they understand their rights and obligations regarding the deposit before entering into a contract of purchase and sale.

If you are currently involved in a dispute pertaining to the return of deposit, you should reach out to me at suppal@mcquarrie.com.

Prepared by,

Sunny Uppal

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1. What is a section 3 agreement?

When the government intends to take an individual’s land pursuant to the Expropriation Act, RSBC 1996, c. 125 [the “Act”], one of the options a landowner has is to enter into a section 3 agreement. Section 3 agreements are used in situations where the landowner agrees to transfer or dedicate their land to the “expropriating authority” but cannot necessarily agree with the compensation to be paid.

When section 3 agreements are used, there is no “expropriation” in the strict sense of the word because the land is transferred by consent. Proceeding in this way can be advantageous for both landowners and expropriating authorities because it avoids the formal proceedings for expropriation under the Act while preserving an owner’s right to claim compensation within 1 year.

Call Amy Salak at 604.580.7066 to schedule a free, no obligation meeting with Doug Conolly to discuss your options if you have signed or have been asked to sign a section 3 agreement.

2. What can I do if I disagree with an amount paid to me by an expropriating authority who takes my land?

If a landowner disagrees with the compensation they received from an expropriating body, the landowner can apply to the court for a determination of the compensation to be paid. It is important for the landowner to act quickly in these circumstances as pursuant to s. 25 of the Expropriation Act, if a court application is not made within one year, the landowner is deemed to have accepted any advance payment as full and final compensation.  

Call Amy Salak at 604.580.7066 to schedule a free, no obligation meeting with Doug Conolly to discuss your options.

3. Is an expropriating authority permitted to take my property without my consent?

The short answer is, yes. Pursuant to the Expropriation Act, RSBC 1996, c. 125, “expropriating authorities” can take an individual’s property without consent through a process called expropriation. There are a number of expropriating authorities that have the power to take an individual’s property without consent, such as municipalities, school boards, and even TransLink, to name a few.

While the procedure for expropriation is governed by the Expropriation Act, an expropriating authority’s power to expropriate comes from other legislation. For example, the City of Vancouver is given the power to expropriate pursuant to the Vancouver Charter, SBC 1953, c. 55, s. 533, while other municipalities are given the power to expropriate pursuant to the Community Charter, SBC 2003, c. 26, s. 31.

However, it is important to note that landowners do have rights when faced with an expropriation of their land. Most significantly, a landowner must be fairly compensated. Since determining the appropriate compensation is often a highly complex matter, a landowner should always consult an experienced lawyer in the area to ensure they are adequately compensated.

Call Amy Salak at 604.580.7066 to schedule a free, no obligation meeting with Doug Conolly to discuss your options.

4. How long do I have to claim additional compensation if my lands have been expropriated?

If a landowner has their land expropriated and is not satisfied with the compensation received, the landowner must act quickly. Pursuant to section 25 of the Expropriation Act, RSBC 1996, c. 125, a landowner has one year from the date of receiving payment to make an application to court and claim additional compensation. If an application is not made within one year of receiving payment, the landowner will be prevented from claiming any additional compensation.

Call Amy Salak at 604.580.7066 to schedule a free, no obligation meeting with Doug Conolly to discuss your options and ensure you do not miss your time limit to apply for additional compensation.

5. What heads of damage can I be compensated for as a result of expropriation?

There are a number of different heads of damages that a landowner can be compensated for when their land is expropriated, including, but not limited to:

• fair market value;
• disturbance damages;
• injurious affection;
• ancillary rights; and
• costs.

Fair market value of the land being expropriated is the foundation of a landowner’s compensation. The expropriating authority must pay to the landowner whatever amount the expropriated land would have sold for if it had been sold in the open market by a willing seller to a willing buyer.

Disturbance damages are all reasonable costs, expenses, and financial losses that are directly attributable to the disturbance caused to the landowner by the expropriation.

Injurious affection refers to the decrease in value of the remainder of their lands that are not expropriated in a partial taking situation.

Ancillary rights typically refer to implied rights that are deemed necessary in order to exercise express rights taken by an expropriating authority. In these circumstances, the landowner is entitled to compensation.

Finally, a landowner may entitled to compensation for legal and other costs that they incur as a result of expropriation.

As expropriation can be a highly complex and specialized area of the law, landowners faced with expropriation of their land should consult a lawyer with specific knowledge and expertise in this area to ensure they receive appropriate compensation.

Call Amy Salak at 604.580.7066 to schedule a free, no obligation meeting with Doug Conolly to discuss what heads of damages may be applicable in your unique situation.

Need Help With Your Expropriation or Property Dispute Case?

Contact us today to discuss your case and explore your options for fair compensation.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post Expropriation in British Columbia: Your Rights, Compensation, and Legal Options Explained appeared first on McQuarrie Legal Services.

In a landmark decision, the BC Court of Appeal recently ruled in favor of a BC homeowner, whose claim for an insurance payout was initially denied due to his legal cultivation of medicinal marijuana. This was made possible by the efforts of Sepideh, Partner at McQuarrie, who represented the homeowner throughout the legal battle.

The Background

In 2017, the homeowners’ home in Peachland, BC, was destroyed by an accidental kitchen fire. While the cause of the fire was undisputed—an accidental kitchen mishap—the issue arose when Gore Mutual Insurance Co. discovered that the homeowner had been legally growing medicinal marijuana in his home under a Federally regulated license. Despite the fact that the fire had no causal connection to the marijuana cultivation, the insurer refused to pay out the claim, citing exclusionary language in the policy which Gore Mutual argued permitted them to deny coverage for properties used for the cultivation of marijuana.

The Legal Challenge

In 2021, the BC Supreme Court sided with Gore Mutual. The trial judge agreed with Gore Mutual, upholding the policy’s exclusion clause that denied coverage for the fire because the homeowner was cultivating marijuana, even though the cultivation had no connection to the fire. The judge acknowledged that this outcome might seem harsh but still interpreted to the exclusionary  language to Gore Mutuals advantage, and applied in a similar Ontario Court of Appeal case where similar exclusionary language was considered.

Sepideh argued that the exclusion clause should not apply in this case because the marijuana cultivation did not cause the fire, and it was entirely legal under Canadian law. In particular, Sepideh emphasized that the homeowners’ cultivation was permitted by his federally regulated Health Canada license, allowing him to grow marijuana for medicinal purposes. Lastly, the Court of Appeal accepted that the homeowners’ circumstances permitted the court to exercise its discretion to excuse imperfect compliance with a contractual term where the strict application would create unjust and inequitable results. With this solid legal grounding, she appealed the decision to the BC Court of Appeal.

The Appeal Court’s Ruling

The BC Court of Appeal ruled in the homeowners’ favor, reversing the trial judges’ decision. The Court of Appeal found that the BC Supreme Court judge had erred in applying the exclusion clause, by concluding that it was unambiguous, therefore she was not required to resort to principles of contractual interpretation and that the exclusionary language encompassed legal marijuana activity and not considered unjust or unreasonable.  Justice Janet Winteringham, on behalf of the three-judge panel, agreed with the homeowner that the exclusion clause was ambiguous therefore requiring the court to apply the exclusion as narrowly as possible.

In delivering this judgment, the BC Court of Appeal effectively clarified that where clauses in an insurance contract are ambiguous, the ambiguity must be resolved against the insurer as the party who has the benefit of drafting the policy. After all, if an insurer wishes to narrow coverage, they are free to do so. Further, the court reminded the industry that legislation in British Columbia permits a court the power to protect the public from the loss of an interest or right due to a condition or agreement in contract. The court cited the Supreme Court of Canada where the courts held that they must look at whether the outcome of applying unjust or unreasonable insurance conditions would create an unfair or inequitable result.

Defending Rights in Insurance Disputes

Throughout the case, Sepideh’s expertise in navigating insurance law proved invaluable. With her extensive background in challenging insurance providers on behalf of plaintiffs, she has consistently demonstrated a strong commitment to ensuring that clients receive fair treatment. Whether it involves disputing life insurance denials, long-term disability coverage issues, or fire loss claims, Sepideh is known for her determination to represent individuals against unfair exclusionary clauses.

Her success in this case further solidifies her reputation as a trusted advocate for clients dealing with complex insurance matters. Sepideh is particularly focused on protecting the rights of those whose claims are unjustly denied, and her work in this case was a crucial step toward ensuring that insurers cannot deny coverage simply because of legal marijuana use.

The Broader Implications

This case sets an important precedent for the future of insurance claims involving legal marijuana cultivation. As marijuana continues to become more accepted in Canada, it is essential that the legal system reflects the changing landscape, ensuring that policyholders are not unfairly penalized for engaging in legally protected activities. This decision could have wide-reaching implications, prompting a re-evaluation of exclusion clauses in insurance policies that might inadvertently penalize individuals for legal activities.

Moreover, the ruling emphasizes the importance of having skilled legal counsel to challenge unfair insurance practices. As an advocate for fairness, Sepideh continues to lead the charge in ensuring that clients’ rights are protected, regardless of the complexities of their case.

Looking Ahead

For the homeowner, this victory marks the beginning of a much-needed resolution after years of legal battles. While it is still uncertain whether the insurer will seek further appeals, the BC Court of Appeal’s decision is a powerful statement in favor of policyholders who face unfair exclusions due to legal marijuana cultivation.

As the legal landscape continues to evolve, Sepideh and her team at McQuarrie remain committed to fighting for the rights of individuals who deserve fair treatment from their insurance providers. Whether you are dealing with an insurance claim denial or other complex legal issues, Sepideh and the McQuarrie team are here to provide guidance and advocacy.

Need Help with an Insurance Dispute?

If you’re facing an insurance claim denial or need legal guidance on a complex insurance matter, Sepideh and our team at McQuarrie are here to help. With extensive experience in challenging exclusion clauses and advocating for clients against major insurance providers, we can guide you through every step of the process.

Get in touch with us today to schedule a consultation and learn how we can assist with your case.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post BC Homeowner Wins Appeal After Insurance Denied Payout Over Legal Marijuana Cultivation: Led by Sepideh at McQuarrie appeared first on McQuarrie Legal Services.

Default Judgements

On occasion, our client may be lucky and the opposing party (who has been properly served) has failed to file and serve a response to the claim within the time allotted.^[1] Even luckier if the opposing party willfully and deliberately failed to file a defense, took an excessive amount of time to file a response, and/or never had a claim worth investigating in the first place.^[2]

The defendant has essentially accepted the claim against them, for the debt owed or assets to be transferred. However, if this step requires any form of investigation, even though judgement has been made, the file becomes more complex as it is now an issue regarding damages, which falls under the jurisdiction of a Judge and not a Registrar.

Therefore, even before a claim is made, it is key to determine exactly what the client is looking for as there are several pitfalls that can prevent a default judgement from being obtained.

Liquidated Claims

As per Rule 3-8(3) of the SCCR, default judgement is available for claims against a defendant for a recovery of money in an ascertainable or specified amount, and can only be for the amount claimed, the interest, if any, and costs. This can extend to third parties as well, with the same limitations.

The operative test as to what constitutes a liquidated demand is expressed in Standard Oil Co. of B.C. Ltd. v. Wood (1964)^[3]:

“A liquidated demand in the nature of a debt, i.e., a specific sum of money due and payable under or by virtue of a contract. Its amount must either be already ascertained or capable of being ascertained as a mere matter of arithmetic. If the ascertainment of a sum of money, even though it be specified or named as a definite figure, requires investigation, beyond mere calculation, then the sum is not a ‘debt or liquidated demand,’ but constitutes ‘damages.’

Therefore, a liquidated demand only if it is a “specific sum” which is either “already ascertained or capable of being ascertained as a mere matter of arithmetic”.^[4]

Therefore, default judgements can only be allowed for cases where the debt that is easily determined by simple arithmetic, as in for the completion of a simple contract.

An example of arithmetic in a default judgement can be one where $100,000 were provided as per a contract, and only 1000 square feet of tiles priced at $8 per a square foot was provided, and the project was not completed, therefore the remaining $92,000 is due and owing. Anything more complex than this would place this claim under the jurisdiction of a judge.

As per Rule 3-8(4), the definition of a liquidated amount also extends to interest, as interest is purely a mathematical calculation on the original debt owing as it is ascertainable and specified, usually as a percentage calculation. It is good practice to include a claim for interest under the Court Order Interest Act^[5] when there was no interest defined in the contract between the parties.

Other Claims

Issues arise when trying to obtain a default judgement for unliquidated claims, these are amounts that are not fixed by an account, nor ones ascertained by a simple calculation. Tort claims pleading non-pecuniary damages for “pain, suffering, loss of enjoyment of life and loss of amenities,^[6]” damage to property, punitive (punishment for wrongdoing) cannot be secured with a default judgment alone and the plaintiff must prove their claim for damages.^[7]

If the claim against a defendant is neither specified nor ascertainable at the time of the claim, under Rule 3-8(5) the plaintiff may still obtain a default judgement against the defendant. However, when a client is asserting claims and requesting these sorts of damages in their pleadings, it is key to inform the client that the process will be longer, because even if the judgement has been obtained, an Assessment of Damages would be required.^[8]

The Assessment may include expert evidence, witnesses, and documentary evidence. It is exceedingly rare for general damages to be awarded for inconvenience, mental distress or punitive damages in contract cases outside of insurance, employment and intellectual property cases where these sorts of damages can be demonstrably justified.^[9]

As per Rule 3-8(6) of the SCCR, the plaintiff’s claim with respect to a default judgment can also include detention of goods, require the delivery of the goods, have the value of the goods be assessed at a later date, and costs. As the value of the goods can be ascertained (even if it has to be a later date), they are treated as liquidated assets and under the jurisdiction of a Registrar to allow a default judgement. Shares of a company may appear to be assets that can be detained, however their actual value would also have to be assessed prior to the payment order being made.

It is important to inform the client of these additional steps, and the time and money that might be required to complete a claim. If the client is already tight on funds, the assessment process can extend the claim into the years.

It is also important to take note if the claim pleads damages in a liquidated amount and makes an alternative claim for damages in an unliquidated amount, default judgment could still be available for the liquidated amount.^[10] You may still obtain default judgment on a claim for the money that is in a specific ascertainable amount, and the SCCR do not preclude a party from doing so where the claim is coupled with a claim in the alternative. In the case of Global, the amounts held as security in the court that was determined to be ascertained were released on default judgement, however the amounts that required further assessment remained in the courts.^[11]

As stated by Justice Weatherill in Interior Lumbermen’s Pension Plan (Trustees of) v. Moore, 2016 BCSC 89:

“Where the former rule referred to a claim “solely for recovery of a debt or liquidated demand”, Rule 3-8(3) refers to an action that “includes a claim for recovery of money in a specified or ascertainable amount”. The language in the old rule is exclusive; the language in Rule 3-8(3) is inclusive.”

Third-Party Claims

A defendant may commence a third party proceeding against any person, whether or not that person is a party to the action, if the party alleges one or more of the matters set out in SCCR 3-5(1):

a) The party is entitled to contribution or indemnity from the third party;

b) The party is entitled to any relief against the third party relating to or connected with the original subject matter of the action; or

c) A question or issue relating to or connected with any relief claimed in the action, or with the original subject matter of the action, is substantially the same question or issue as between the party and the third party and should properly be determined in the action.

If the defending third party, who have been provided a third-party notice, does not file a response to the notice within 42 days after being served, the party that issued the third-party notice can apply for default judgment as per Rule 3-5(16) of the SCCR.

Default judgment against third parties are given the same reverence as those against a defendant, and can be struck out if there is a meritorious defence.^[12]

Need Help With Your Legal Claim?

If you’re navigating a legal claim and aren’t sure if you qualify for a default judgment—or if you’re facing complications with liquidated or unliquidated claims—reach out to us today. Our experienced legal team can help you assess your case, explain your options, and guide you through the process to ensure the best possible outcome.

Contact us now to schedule a consultation and get the legal support you need.

[1] Rule 3-8(1), Supreme Court Civil Rules (the “SCCR”).
[2] Miracle Feeds v. D. & H. Enterprises Ltd. (1979), 10 B.C.L.R. 58 (B.C. Co. Ct.) at 61
[3] Standard Oil Co. of B.C. Ltd. v. Wood (1964)47 W.W.R. 494 at p. 497 (B.C. Co Ct.), cited in Busnex Business Exchange Ltd. v. Canadian Medical Legacy Corp., 1999 BCCA 7, para 8 (“Busex”).
[4] Busex, para 9.
[5] (RSBC 1996) Chapter 79.
[6] Jackson v. Lai, 2007 BCSC 1023 (B.C. S.C.) at para. 134.
[7] Besic v Kerenyi, 2011 BCSC 1277 at para 7.
[8] Rule 3-8(12),(13) of the SCCR.
[9] Evocation Publishing Corp v Hamilton, 2002 BCSC 1797.
[10] Global Fleet Management Inc. v. Deltaura Canada Inc., 2020 BCSC 1938 (“Global”).
[11] Global para 16.
[12] Crosato v. George (1984), 6 C.C.L.I. 316 (B.C. S.C.).

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post Default judgment for a liquidated claim, other claims, third-party claims, and the test on each appeared first on McQuarrie Legal Services.

There are frequent situations where purchasers and sellers get cold feet and may not want to complete a contract. Time is often of the essence in these agreements, and when an agent for the seller or the buyer fails to properly assign the contract before the completion date, the other party may have grounds to rescind the contract. This can lead to significant legal disputes.

Background:

In the context of real property transactions, it is common practice that parties entering into a contract may be required to provide an assignment of contract in certain circumstances, particularly when there are obligations to transfer property interests. When a contract stipulates that time is of the essence, the timely provision of necessary documents—such as an assignment of contract—becomes critical for the completion of the transaction.

In any scenario, where the party (or the party’s representatives) fail to provide the required assignment of contract prior to the completion date, the opposite party can, as a result, assert that the contract is terminated. The failure to provide the assignment within the prescribed timeframe could be considered a material breach of the contract.

Key Legal Considerations:

A. Time is of the Essence

The contractual terms explicitly provided that “time is of the essence,” meaning that any delay in fulfilling obligations, such as the provision of the assignment of contract, can result in a breach. When time is of the essence, failure to meet deadlines specified in the agreement often gives the non-breaching party the right to terminate the contract or seek other legal remedies. This principle is well-established in case law and acts as a strict condition precedent in performance-based agreements.

In Samra Bros. Roofing & Insulation Ltd. v. Funk,1995 CarswellBC 253 (BCCA) at para. 20, the court made note of the essentiality of time in standard contracts of purchase and sale, and held that

The rule that when time is of the essence of a contract, a breach of a time clause is a breach of a condition of that contract, is subject to at least two exceptions:

(a) it does not apply when the party seeking to enforce the time clause contributed to its breach…; [and]

(b) it does not apply when there has been a change of the completion date after the execution of the contract and that and the other circumstances of the case make it unconscionable for the party seeking to enforce the time condition from doing so.

Court further noted that the more general rule is that a party to a real estate contract who acts in bad faith when performing the contract cannot benefit from having so acted.

B. Privity of Contract

I. Failure to Provide Assignment of Contract:

The contract [of purchase and sale] requires the seller to provide an assignment of contract prior to the completion date. Despite this contractual obligation, where the seller or the buyer fails to deliver the assignment in a timely manner, and as the assignment is a critical component of the overall transaction, this failure constitutes a fundamental breach of the terms of the contract. In cases where a party to the contract fails to perform a fundamental obligation, the other party may terminate the agreement.

Gupta v. Gill, 2024 BCSC 193, is a key case that highlights the issue of privity of contract in real estate transactions. In this case, the court addressed the assignment of a purchase contract to a corporate defendant and ruled that there was no “privity of contract” between the vendor and the assignee. As a result, the court dismissed the claim against the assignee. Since the assignee was not a party to the original contract, the court found it unjust to allow the corporate defendant assignee to be included in the litigation.

In British Columbia, it is well-established that if a party seeks to pursue a claim directly against the assignee—whether a corporation or an individual—and the assignee did not sign the Contract of Purchase and Sale, no privity of contract exists between the party and the assignee. As a result, any claim made against the assignee in such circumstances is likely to be dismissed.

Similarly, in Main Acquisitions Consultants Inc. v. Prior Properties Inc., 2021 BCSC 1449, the court affirmed that the failure of agents to properly assign the contract can impact the enforceability of the agreement. The court emphasized that without a perfected assignment, a party that is not in privity with the original contract cannot claim performance or pursue legal action against the vendor

In the recent case of Bene (Oval) Development Ltd. v. 1148538 B.C. Ltd., 2024 BCSC 2080, the Court addressed the issue of improper assignment of contractual rights and its effect on contract enforceability. The case highlights that when the conduct of the parties, including claims and counterclaims, creates uncertainty due to improper assignment, the courts may void the contract. The court’s analysis of whether the contract was void for uncertainty underscores the significant implications of failing to properly assign interests before the completion date.

II. Oral vs. Written Assignment of Your Contract: What You Need to Know?

In real estate transactions, one critical issue that can arise is the assignment of contract—specifically, whether it can be done orally or must be documented in writing. Can you assign your contract to a third party, such as family members or friends, through an oral agreement (also known as an “equitable assignment”), or does the assignment need to be formalized in writing (a “statutory assignment” under the Law and Equity Act, RSBC 1996 c. 253) with express notice given to the seller?

In British Columbia, the courts have generally been flexible, allowing for oral, written, or even partially oral assignments, but they stress the importance of following the express terms outlined in the contract, especially when it comes to notifying the seller. Understanding these nuances is vital when drafting a Contract for Purchase and Sale to avoid the costly and often unnecessary pitfalls of litigation.

In the case of Rakhra v. Jhutty, 2012 BCSC 882,the court held that the lack of proper notice rendered the assignment unenforceable, which is directly applicable to situations where agents fail to properly assign contracts before completion. The Court stressed on a written notice in this because the Contract itself required that from the parties. Therefore, buyer in this case could not have made an equitable (“oral”) or statutory assignment without a clear written notice to the seller. This case underscores the necessity of express written notice to the vendor for a valid assignment under s. 36(1) of the Law and Equity Act.

However, the court also clarified that if the seller receives notice in writing, their consent is not necessary for the assignment to be valid. In such cases, providing timely written notice before the completion date would eliminate the need for seller approval.

You can also give a notice of waiver to do away with the requirement of a written notice to the Seller. For a waiver to be effective, the waiving party must have both full knowledge of its rights and an unequivocal and conscious intention to abandon those rights: Dunn v. Vicars, 2009 BCCA 477 (B.C. C.A.) at para. 45.

On the other hand, the Court, in Gauraya v. Kalia, 2019 BCCA 367, gave effect to a verbal/oral assignment by the Buyer even when no notice was given to the Seller. The Court relied on the express terms of the Contract for Purchase and Sale to hold that the assignment of the Buyer right to purchase of the property was ana equitable assignment within common law and thus, valid between the assignor and assignees. The provisions of the Law and Equity Act did not override the expectations of the parties expressed in their agreement. This was due to the following provision in the contract that allowed the buyer to assign the contract without further notice to the seller, demonstrating how careful contract drafting can avoid disputes over assignment:

The Buyer reserves the right to assign this contract in whole or in part to any third party without further notice to the Seller.

Ultimately, whether you’re buying or selling real property, it’s wise to consult a lawyer to ensure your Contract for Purchase and Sale is legally sound and to prevent any future issues related to contract assignment.

Conclusion

In numerous cases, courts have held that a material breach of an agreement (such as the failure to provide a necessary assignment or document) can result in the termination of the contract, especially where time is of the essence. The non-breaching party is typically entitled to treat the contract as void and may seek damages for any losses suffered as a result of the breach.

If you’re navigating a real estate transaction and facing issues around the assignment of contract, it’s essential to understand your rights and remedies. Failure to meet time-sensitive obligations can have significant consequences for both parties involved, and legal precedents support the notion that a breach of assignment requirements can lead to contract termination.

Ensuring your contract is airtight is key to avoiding unnecessary headaches. Seeking professional legal advice can help you navigate potential pitfalls and secure a smooth transaction.

If you need help navigating the process or have other legal questions, our team is here to assist you on your case. Reach out today for professional legal advice tailored to your situation.

📞 Contact us today at 604.581.7001 to schedule a consultation.

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Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. While we strive to provide accurate and up-to-date information, every legal situation is unique. For personalized legal advice tailored to your specific case, please consult with a qualified lawyer. We are happy to assist you with your legal needs, but this post should not be relied upon as a substitute for professional legal counsel.

The post Can a purchaser rescind a Contract of Purchase and Sale if the contract is not properly assigned by the either party before the completion date? appeared first on McQuarrie Legal Services.

Originally published: August 2, 2023
Updated on January 18, 2024

A. Introduction

The federal government has expanded the mandatory disclosure rules in the Income Tax Act (“ITA”) by making changes to the reportable transaction rules and introducing a new notifiable transaction regime, as outlined in this Memorandum. Notifiable transactions differ from reportable transactions in that notifiable transactions are those that the Minister of National Revenue specifically designates as requiring reporting, whereas reportable transactions require reporting if certain specified criteria are met.

The primary objective of these amendments is to promote transparency and compliance in tax-related matters. To achieve this goal, the amendments impose specific obligations on taxpayers, advisors, and promoters to provide comprehensive information returns regarding reportable and notifiable transactions to the Canada Revenue Agency (CRA).

The proposed changes have undergone significant legislative progress, with draft legislation being presented on February 4, 2022, and further developments occurring since August 9, 2022. The bill, known as Bill C-47, received Royal Assent on June 22, 2023, transforming the rules in their current form into law.

B. Reportable Transaction Rules

A “reportable transaction” refers to an avoidance transaction that is entered into by or for the benefit of a person. This includes not only the specific avoidance transaction but also any transaction that is part of a series of transactions (referred hereto as “transaction or series”) that consists of the avoidance transaction.

The mandatory disclosure rules in respect of reportable transactions apply when two criteria are satisfied:

a) A transaction or series has at least one of three generic hallmarks, which will be explained in further detail later in the memorandum; and

b) It can reasonably be concluded that one of the main purposes of entering into the transaction or series of transactions is to obtain a tax benefit.

Before the introduction of changes to the reportable transaction rules, taxpayers were obligated to report transactions that meet the criteria of an “avoidance transaction” as defined in section 245 of the General Anti-Avoidance Rule (GAAR).¹ Under this definition, a transaction or series would not be deemed an avoidance transaction if it could be reasonably demonstrated that it was primarily undertaken or arranged for bona fide purposes other than obtaining the tax benefit.

According to the new regime, an “avoidance transaction” is defined as a transaction that may reasonably be considered to have as one of its main purposes, or one of the main purposes of a series of transactions of which it is a part, to obtain a tax benefit. This definition establishes a lower threshold compared to the former definition modelled in the GAAR. This lower threshold implies that a transaction could be classified as an avoidance transaction even if it has additional legitimate purposes or motivations. Therefore, under the new reportable transaction rules, it is important to note that there is no requirement for a transaction to be abusive.

When discussing the avoidance transaction definition, the Department of Finance made the following statement in the explanatory notes to the April 2023 Notice of Ways and Means Motion (the “Explanatory Notes”):

“Normal commercial transactions that do not pose an increased risk of abuse, in and of themselves, are not intended to result in a reporting obligation under these rules.”²

That said, the language of the definition of “avoidance transaction” may catch normal commercial transactions. Whether such transactions pose an increased risk of abuse may be a matter of some controversy.

1. The Three Hallmarks

As discussed, one of the criteria for determining whether a transaction or series is reportable is the presence of at least one of three generic hallmarks. Conversely, if none of the three generic hallmarks, as defined below, are present in a transaction or series, there is no legislative requirement to report it, even if it can be reasonably concluded that one of the main purposes of entering into the transaction or series is to obtain a tax benefit. According to the CRA Guidance released on July 5, 2023 (the “CRA Guidance”), transactions such as estate freezes, debt restructuring, loss consolidation arrangements, shareholder loan repayments, purification transactions, claiming of the capital gain exemption, divisive reorganizations and foreign exchange swaps may not trigger a reporting requirement, though they are typically driven by a desire to obtain tax benefit. This list is not exhaustive.³

a. The Contingent Fee Arrangements Hallmark

The first hallmark pertains to the circumstances where an advisor or promoter is entitled to receive a fee based on the presence of a tax benefit. This hallmark encompasses the following situations:

a) computation of fee is based (to any extent) on the amount of a tax benefit that could result;

b) entitlement to fee contingent upon the obtaining of, or failure to obtain, a tax benefit; or

c) the fee is attributable to the number of persons who

i) enter into the avoidance transaction or

ii) have been provided access to advice or opinion given by the advisor or promoter regarding tax consequences.

Exclusions⁴

According to the CRA Guidance and the Explanatory Notes, the following activities do not trigger the contingent fee hallmark and as a result, are not reportable to the extent the transaction is limited to the circumstances below and no other specific hallmark is met:

a) A fee for the claiming of the scientific research and experimental development (SR&ED) tax credits;

b) A fee for the preparation of an annual income tax return that results in a taxpayer obtaining a refund of tax, including entitlement to personal tax credits, such as the disability tax credit or refundable tax credits, the Canada child benefit, the GST/HST credit or the Canada workers benefit;

c) Fees based on the numbers of preparations of and filings of income tax elections in respect of a transaction or series of transactions. This also extends to the fees for the preparation of the documents effecting those elections when the person in charge of preparing the documents is different than the person filing the elections;

• As an example, a commercial reorganization may require the filing of multiple T2057s pursuant to section 85 of the ITA for the purpose of deferring capital gains. A firm may bill for the preparation of the T2057s on a per-transferor basis given the work to be done for each taxpayer will be similar. For greater certainty, the fees are only contingent on the number of returns prepared and not the attainment of the tax benefit.

d) In certain circumstances, a firm may bill a fee attributable to the number of taxpayers that participate in or have been provided access to the advice given on the tax consequences of the transaction. It is important to note that the fees must only be contingent on the number of returns or elections prepared, rather than the attainment of a tax benefit. A few examples are outlined below:

• A section 85.1 rollover (excluding subsection 85.1(3) for foreign affiliates) for the tax-deferred exchange of shares between public corporations to the extent that it is not part of a broader series. This may be in the context of takeover bids, share exchanges based on plans of arrangement, and other acquisitions where shares of a target corporation are exchanged for shares of the acquiring corporation.

• A section 85 rollover in the context of a share-for-share exchange to defer a gain in a large commercial reorganization to the extent that it is not part of a broader series.

• Wind-ups as outlined in subsection 88(1) and amalgamations described in subsection 87(1) that result in tax benefits, where the shareholders’ shares or properties of subsidiary or predecessor corporations are rolled over on a tax-deferred basis during wind-up processes or amalgamations.

e) Value-billing arrangements by professionals such as lawyers and accountants, where a fee is agreed to at the time of billing and is based on criteria other than the value of the tax benefit resulting from the transaction or series, which might include:

• the level of training and experience of the persons engaged in the work;

• the time expended by the persons engaged in the work;

• the degree of risk and responsibility that the work entails;

• the priority and importance of the work to the client; and

• the value of the work to the client;

f) Contingent tax litigation fee arrangement in relation to an appeal of a tax assessment by a lawyer in respect of a tax benefit from a completed transaction or series.⁵ Therefore, the litigator would not generally be an advisor in respect of a transaction or series solely because of the existence of the contingent litigation fee arrangement that is implemented after the completion of the transaction or series that is the subject of an appeal. This position would also generally extend to the professional assistance provided to a taxpayer in relation to an audit as well as the issuance of assessments (including proposed reassessments); and

g) Billing practices and circumstances of an advisor in respect of an avoidance transaction involving the collection of a standard fee (generally available to the public under normal commercial terms and in comparable circumstances) by a financial institution:

• for the establishment and ongoing administration of a financial account, such as a registered retirement savings plan (RRSP), or a financial instrument, such as a related segregated fund investment, including where the fee is determined in relation to the amount of the investment;

• where the fee offered to a particular client is discounted in relation to the number of financial accounts maintained by the financial institution for the particular client;

• for the establishment of a bank account for a trust;

• for a loan to allow for the subscription of shares by a family trust as part of an estate freeze, the annual fee earned by the Trustee(s) or fees for the establishment of a bank account for such a trust;

• for the repayment of a shareholder loan where a taxpayer is indebted to a Canadian-controlled private corporation, borrows sufficient funds from a Canadian Bank and the latter charges lending fees and interest;

• as a normal per-transaction charge for each security trade in the context of a year-end tax-loss selling program operated by the financial institution.

On this basis, no reporting obligation would generally arise for a financial institution that collects a standard fee in relation to the provision of an ordinary financial account that is broadly offered in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly.

It should be noted that exclusion may not apply where the financial institution can reasonably be expected to know that the financial account will be used in a reportable transaction to their client.⁶

b. The Confidential Protection Hallmark

This applies when an advisor or promoter obtains “confidential protection” regarding an avoidance transaction. “Confidential protection” means anything that prohibits the disclosure to any person or to the Minister of National Revenue (“MNR”) of the details or structure of the transaction.

It is important to note that confidential protection does not include provisions that solely disclaim or restrict an advisor’s liability if the disclosure of transaction details or structure is not prohibited. Furthermore, the requirement for confidential protection to be applicable must relate to the tax treatment of the avoidance transaction.

It may be advisable for lawyers to consider including “notwithstanding language” in their engagement or retainer letters to clarify that any confidentiality clauses contained within their documents should not be interpreted as providing confidential protection under the reportable transaction rules. This issue is elaborated on in detail in the “Recommendations” section of this Memorandum.

Exclusion

In the absence of any other specific hallmark, the CRA Guidance clarifies that the protection of trade secrets unrelated to tax matters does not trigger a reporting obligation. Moreover, standard confidentiality agreements that do not require tax advice to be confidential, such as a letter of intent that includes a confidentiality requirement, do not give rise to a reporting requirement. Similarly, the CRA Guidance stipulates that standard commercial confidentiality provisions in standard client agreements or documentation, which do not contemplate a specific identified tax benefit or tax treatment, do not, in and of themselves, impose a reporting obligation.

c. The Contractual Protection Hallmark

The third hallmark applies when a taxpayer or certain other individuals, including promoters or advisers, receive contractual protection if the transaction in question fails to achieve the intended tax benefit. It pertains to transactions that involve insurance or other forms of protection, including an indemnity, compensation or guarantee that:

a) protects against a failure of the transaction or series to achieve any tax benefit; or
b) pays for or reimburses expenses, fees, taxes, interests, penalties, or any other costs that may arise during a dispute related to a tax benefit.

Exclusions

According to the CRA Guidance and the Explanatory Notes, in the absence of any other specific hallmark, the below-listed matters would not give rise to a reporting requirement:

a) A limitation of liability clause in a professional engagement letter, provided that the purpose of the limitation clause is to generally limit the accountant’s liability for negligence (i.e., it is related to professional indemnity insurance).

b) Standard professional liability insurance of a tax practitioner.

c) Standard representations, warranties and guarantees between a vendor and purchaser, as well as traditional representations and warranties insurance policies, that are generally obtained in the ordinary commercial context of mergers and acquisitions transactions to protect a purchaser from pre-sale liabilities (including tax liabilities).⁷ It is important to note that the Explanatory Notes do not explicitly mention other types of commercial transactions. Therefore, this hallmark may still be applicable where agreements drafted in respect of other commercial transactions, contain tax indemnities and the like.

d) Standard commercial indemnities provisions in standard client agreements or documentation, which do not contemplate a specific identified tax benefit or tax treatment.

e) Tax return insurance – It is our general view that tax return insurance would not constitute contractual protection insofar as the insurance is extended to a taxpayer’s filings generally, and does not contemplate any particular transaction or series entered into by a taxpayer and those who engage in aggressive tax planning would continue to bear potentially significant financial risks associated with such activities. The insurance would not pay for or reimburse taxpayers for tax imposed as a result of disputed tax positions in respect of aggressive tax planning, and it is subject to maximum amount of coverage (or protection) which would not likely cover a material portion of the total expenses incurred by a taxpayer as a result of an audit in respect of aggressive tax planning.

f) Re-insurance – For greater certainty, where the original insurance policy is not subject to a reporting obligation, the reinsurance of the risk generally should not cause further reporting.

g) A reporting obligation would not arise solely in respect of contractual protection in the form of insurance that is integral to an agreement between persons acting at arm’s length for the sale of a business⁸ where it is reasonable to conclude that the insurance protection is intended to ensure that the purchase price paid under the agreement takes into account any liabilities of the business immediately prior to the sale and the insurance is obtained primarily for purposes other than to obtain a tax benefit from the transaction or series.

• Indemnities related to existing pre-closing tax issues, or the amount of existing tax attributes (tax pools, capital cost allowance, etc.).

• An acquisition by a public company where the acquisition transaction is specifically and carefully structured by the public acquiror (the Purchaser) and its tax advisors to achieve a paragraph 88(1)(d) bump of non-depreciable capital property owned by the target company (the Target) and the Purchaser obtains specific contractual covenants and/or indemnities from the Target and the significant shareholders of the Target (whether under the acquisition agreement or under separate support agreements) that are intended to ensure the Target and/or the significant shareholders do not take certain steps that may cause the bump denial rules to apply and, in the event the covenants are breached, that the Purchaser is indemnified for the additional taxes payable as a result of the loss of the paragraph 88(1)(d) bump. Contractual protection obtained in respect of indemnifications provided by the Purchaser would generally not be considered to trigger the contractual protection hallmark. This could also apply in a private corporation context.

• A purchase of taxable Canadian property from a non-resident of Canada, who could be liable for 25% (or in some cases 50%) of the purchase price for the property pursuant to subsection 116(5) of ITA in the absence of a certificate of compliance issued by the CRA under subsection 116(2) or subsection 116(4) in respect of the disposition. Tax insurance may allow the parties to complete the transaction and go their separate ways without concern for lingering tax liabilities. Tax insurance or other contractual protection obtained in such circumstances would generally not be considered to trigger the contractual protection hallmark.

• A pre-sale transaction where intercorporate dividends are paid to a holding company to extract safe income from the target company. Contractual protection obtained in respect of the calculation of safe income would generally not be considered to trigger the contractual protection hallmark.

• Indemnities or covenants to a purchaser and/or target in respect of Part III tax liabilities and other adverse tax consequences arising from dividends paid as part of a pre-closing reorganization.

It should be noted that this exception does not extend to other forms of insurance or protections that may be obtained to cover specific identified tax risks (other than the risks specifically discussed above), such as tax liability insurance policies used in avoidance transactions. The existence of such insurance may often be an indication of aggressive tax planning.

h) Standard price adjustment clauses, as discussed in the Income Tax Folio S4-F3-C1.⁹

i) Other price adjustment clauses that are not tax-driven (such as a working capital adjustment clause in a Purchase and Sale Agreement).

j) Obtaining an advance income tax ruling from the CRA or other tax administrations on non-Canadian tax issues, by a person seeking a tax benefit from an avoidance transaction or series of transactions involving an avoidance transaction.

k) Contingent litigation fee arrangement in relation to an appeal of a tax assessment by a lawyer in respect of a tax benefit from a completed transaction or series. This position would also generally extend to the professional assistance provided to a taxpayer in relation to an audit as well as the issuance of assessments (including proposed reassessments).

l) Withholding tax – Standard contractual representations and indemnities with respect to the failure to deduct or withhold an amount under section 215, in an arm’s length situation.

m) Partnership investment – For greater certainty, a partnership agreement containing a standard clause to the effect that, in the event of an audit of a partner, the partnership will provide reasonable assistance to that partner to help them resolve such an audit generally would not be considered to meet the contractual protection hallmark. However, the contractual protection hallmark would be met if the purpose of the clause contemplates any particular avoidance transaction or series (including an avoidance transaction).

n) Mutual fund merger (where an investment fund manager merges two investment funds within a fund family) – The merger is structured to be tax-deferred pursuant to section 132.2 of ITA such that the surviving fund acquires the assets of the terminating fund. If under the terms of the merger agreement, the fund manager agrees to indemnify the trustee of the terminating fund for any liabilities that might arise in respect of the terminating fund (commercial disputes, securities law claims, etc.) such indemnity would not constitute contractual protection. 

o) The contractual protection hallmark will not apply in a normal commercial or investment context in which parties deal with each other at arm’s length and act prudently, knowledgeably and willingly, and does not extend contractual protection for a tax treatment in respect of an avoidance transaction. Without providing an exhaustive list of examples, these can include:

• Tax indemnities in standard provisions such as gross-up clauses in loan agreements or International Swap and Derivative Agreements.

• Tax indemnities in employment agreements and severance agreements.

• In the course of the establishment of a self-directed RRSP with a Canadian Bank, the RRSP plan document includes a Tax Indemnity, where the client agrees to indemnify the Trustee (the subsidiary of the Canadian Bank which agrees to act as the plan trustee) if the RRSP plan faces tax consequences, such as holding a non-qualified investment. Despite the RRSP being potentially considered an avoidance transaction, the Tax Indemnity is not regarded as contractual protection since it aligns with standard market practices and applies in a regular commercial or investment context.

2. Tax Shelters and Flow-Through Shares

Disclosure under the reportable transaction regime is not required for the acquisition of a tax shelter or the issuance of a flow-through share where the appropriate information return has been filed. Please consult with your tax advisor.

3. Who Should File?

According to the reportable transaction rules, several parties have an obligation to file information returns with the appropriate authorities. These include:

a) Every person for whom a tax benefit results or is expected to result from the reportable transaction or series;

b) Advisors and promoters who are entitled to a fee in respect of the reportable transaction or series; and

c) Every person who is not dealing at arm’s length with the advisors or promoters, and is entitled to a fee in respect of the transaction or series.

It is important to note that clerical or secretarial services are excluded from the filing obligation. Additionally, it is worth emphasizing that each obligated person is responsible for fulfilling their individual reporting obligations.

For a partnership or employer who receives a fee as an advisor or promoter in respect of an avoidance transaction and discloses a reportable transaction as required, its partners or employees including in-house tax advisors would generally not also need to make a disclosure. The foregoing also applies to an individual who provides services as an employee of a professional corporation that is a partner of the relevant partnership, directors of a corporation and former employees or former partners.

4. What Is an Advisor?

In the context of reportable transactions, an advisor refers to any person who provides, directly or indirectly, in any manner whatever:

• any contractual protection in respect of the transaction or series, or
• any assistance or advice with respect to creating, developing, planning, organizing or implementing the transaction or series

to another person (including any person who enters into the transaction for the benefit of another person).

5. What is a Promoter?

A promoter, in respect of a transaction or series, means each person who

a) promotes or sells (whether as principal or agent and whether directly or indirectly) an arrangement, plan or scheme (referred to as an “arrangement”), if it may reasonably be considered that the arrangement includes or relates to the transaction or series;

b) makes a statement or representation (whether as principal or agent and whether directly or indirectly) that a tax benefit could result from an arrangement, if it may reasonably be considered that
ii) the statement or representation was made in furtherance of the promoting or selling of the arrangement, and
iii) the arrangement includes or relates to the transaction or series; or

c) accepts (whether as principal or agent and whether directly or indirectly) consideration in respect of an arrangement referred to in paragraph (a) or (b) above.

6. When To File?

Taxpayers, advisors, and promoters must file information about reportable transactions within 90 days of the earlier of:

a) the date on which the person becomes contractually obligated to enter into the transaction; and

b) the date on which the person actually enters into the transaction.

The revised rules governing reportable transactions are applicable to transactions or series that occur after royal assent, which took place on June 22, 2023. This means that if an individual enters into a contract for a reportable transaction on June 1, 2023, but the actual transaction occurs on June 30, they are still obligated to report it, and the 90-day reporting period will begin on June 30, 2023. Similarly, if a person is involved in a series of transactions that span the date of royal assent, the reporting requirement will be triggered by the first reportable transaction entered into after the date of royal assent.¹⁰

7. How To File?

Reportable transactions are required to be disclosed to the CRA in the prescribed form, RC312 Reportable Transaction and Notifiable Transaction Information Return.

C. Notifiable Transaction Rules

Under the new regime, there is an obligation to report transactions or series that are designated as “notifiable” transactions as well as transactions that are “substantially similar” to notifiable transactions. The term “substantially similar” is defined as encompassing transactions or series that are expected to result in “the same or similar types of tax consequences” and are “either factually similar or based on the same or similar tax strategy”. The legislation expressly states that “substantially similar” should be “interpreted broadly in favour of disclosure”.¹¹

1. Designated Transactions

Effective November 1, 2023, the Minister of National Revenue with the Concurrence of the Minister of Finance, designated the following transactions and series of transactions as notifiable transactions. The descriptions and examples provided are directly quoted from the CRA’s publication:¹²

1) Straddle loss creation transactions using a partnership

The following series of transactions has been designated as a notifiable transaction:

a. A taxpayer enters into an agreement to acquire a partnership interest from an existing partner.

b. The partnership trades foreign exchange forward purchase and sale agreements on margin through a foreign exchange trading account. The foreign exchange forward agreements are essentially straddle transactions where it is reasonable to conclude that each agreement is held in connection with the other and where, in the aggregate, the individual agreements (legs) will generate substantially equal and offsetting gains and losses. 

c. Shortly before the taxpayer’s acquisition of the interest in the partnership, the partnership disposes of the gain leg(s) of the foreign exchange forward agreement(s). 

d. The income from the gain leg(s) is then reflected in the income of the partnership and is allocated to the original partner immediately prior to the acquisition of the interest in the partnership by the taxpayer.

e. Following the acquisition of the partnership interest by the taxpayer, the loss leg(s) are realized and a business loss is allocated to the taxpayer.

2) Avoidance of deemed disposal of trust property

The following transactions and series of transactions have been designated as notifiable transactions:

a. Indirect transfer of trust property to another trust

A Canadian resident trust (“New Trust”) holds shares of a corporation resident in Canada (“Holdco”) that is or will become a beneficiary of another Canadian resident trust (“Old Trust”) that holds property that is capital property or land included in the inventory of a business of Old Trust. At any time prior to its 21-year anniversary, Old Trust transfers the property to Holdco on a tax deferred basis pursuant to subsection 107(2).

In the result, the 21-year rule will not apply to Old Trust, and a new 21-year period will start to run with respect to New Trust, providing for a much longer period of deferral. New Trust’s assets will reflect the property formerly held by Old Trust but may have a higher tax basis than such property.

b. Indirect transfer of trust property to a non-resident

One or more of the non-resident beneficiaries of a Canadian resident trust hold shares of a corporation resident in Canada (“Holdco”) that is or will become a beneficiary of the trust. At any time prior to its 21-year anniversary, the trust transfers property (other than property described in any of subparagraphs 128.1(4)(b)(i) to (iii)) to Holdco on a tax deferred basis pursuant to subsection 107(2).

In the result, the 21-year rule will not apply to the trust, with the transfer of the trust’s property to Holdco providing for a much longer period of deferral. The non-resident beneficiaries of the trust hold shares of Holdco that reflect their former indirect interest in the property of the trust, possibly providing an opportunity to have such property transferred by Holdco to the non-resident beneficiaries at some future time without triggering the application of subsections 107(2.1) and 107(5). 

c. Transfer of trust value using a dividend

A Canadian resident trust (“New Trust”) holds shares of a corporation (“Holdco”) that is or will become a beneficiary of another Canadian resident trust (“Old Trust”) that holds property that is shares in a Canadian corporation (“Opco”).  At any time prior to Old Trust’s 21-year anniversary, Opco redeems shares held by Old Trust and issues a promissory note or gives cash as consideration. In so doing, Opco is deemed pursuant to subsection 84(3) to have paid, and Old Trust is deemed to have received, a dividend equal to the amount by which the amount paid by Opco on the redemption exceeds the PUC in respect of the shares. The deemed dividend is designated by Old Trust and deemed to be received by Holdco pursuant to subsection 104(19). The dividend is deductible in the hands of Holdco pursuant to subsection 112(1). The cash or the promissory note is paid or made payable in the year by Old Trust to Holdco as payment for the dividend allocated to it.

In the result, the 21-year rule will not apply to Old Trust, and a new 21-year period will start to run for New Trust, providing for a much longer period of deferral. New Trust’s assets will reflect the value of the property formerly held by Old Trust but will undoubtedly have a significantly higher tax basis than such property.

3) Manipulation of bankrupt status to reduce a forgiven amount in respect of a commercial obligation

The following series of transactions has been designated as a notifiable transaction:

a. A person or partnership (“Debtor”) is assigned into bankruptcy.

b. While Debtor is a bankrupt, a commercial obligation of the Debtor is settled, deemed to be settled or extinguished for an amount that is less than the principal amount of the obligation.

c. At any point in time, Debtor files a proposal under Part III of the Bankruptcy and Insolvency Act and the bankruptcy is annulled either upon the approval of the proposal by a court or on the date stated in a court order.

4) Reliance on purpose tests in section 256.1 to avoid a deemed acquisition of control

The following transactions and series of transactions have been designated as notifiable transactions:

a. Purpose test in paragraph 256.1(2)(d)

Lossco is a taxable Canadian corporation that has tax attributes that are subject to the application of one of the provisions listed in the definition of “attribute trading restriction” in subsection 256.1(1). Another person (“Aco”) does not, immediately before the particular time, hold shares of Lossco with a FMV that satisfies the 75% FMV threshold test. At a particular time, Aco acquires shares of Lossco and, following the acquisition, Aco does not control Lossco but satisfies the 75% FMV threshold test. The taxpayer takes the position that because the purpose test in paragraph 256.1(2)(d) is not satisfied, subsection 256.1(3) does not apply.

b. Purpose test in paragraph 256.1(4)(a)

Lossco is a taxable Canadian corporation that has tax attributes that are subject to the application of one of the provisions listed in the definition of “attribute trading restriction” in subsection 256.1(1). A corporation (“Profitco”) and another person (“Aco”) not dealing at arm’s length with Profitco acquire shares of Lossco. Following the acquisition of the Lossco shares, Profitco does not control Lossco and does not hold shares of Lossco with a FMV that satisfies the 75% FMV threshold test. However, Profitco would satisfy the 75% FMV threshold test if the acquisition of the Lossco shares by Aco is ignored. The taxpayer takes the position that subsection 256.1(3) does not apply solely because the purpose test in paragraph 256.1(4)(a) is not satisfied.

c. Purpose test in paragraph 256.1(6)

Lossco is a taxable Canadian corporation that has tax attributes that are subject to the application of one of the provisions listed in the definition of “attribute trading restriction” in subsection 256.1(1). Lossco acquires control of a particular corporation (“Profitco”) and it can reasonably be concluded that one of the reasons for the acquisition is so that a specified provision as defined in subsection 256.1(1) does not apply. However, the taxpayers take the position that subsection 256.1(6) does not apply solely because its purpose test is not satisfied.

5) Back-to-back arrangements

The following transactions and series of transactions have been designated as notifiable transactions:

a. Thin capitalization

Non-resident 1 (NR1) is a relevant non-resident in respect of a taxpayer. NR1 enters into an arrangement with an arm’s length non-resident (NR2) to indirectly provide financing to the taxpayer. The taxpayer files, or anticipates filing, its income tax returns on the basis that the debt or other obligation owing by it, and the interest paid thereon, is not subject to the thin capitalization rules.

b. Part XIII tax

A non-resident person (NR1) enters into an arrangement to indirectly provide financing to a taxpayer through another non-resident person (NR2). If interest had been paid by the taxpayer directly to NR1, it would be subject to Part XIII tax. The taxpayer’s income tax reporting reflects, or is expected to reflect, the assumption that the interest it pays in respect of the arrangement is either not subject to withholding tax at all or is subject to a lower rate of withholding tax than the rate that would apply on interest paid directly by it to NR1.

Alternatively, similar arrangements are entered into in respect of rents, royalties or other payments of a similar nature, or to effect a substitution of the character of the payments.

2. Who Should File?

Similar to the new reportable rules, the following parties have the obligation to file information returns:

a) Every person for whom a tax benefit results, or for whom a tax benefit is expected to result based on the person’s tax treatment of the notifiable transaction, from the notifiable transaction or series;

b) Every person who enters into a notifiable transaction for the benefit of a person described in (a);

c) Every advisor or promoter in respect of the notifiable transaction; and

d) Every person not dealing at arm’s length with an advisor or promoter in respect of the notifiable transaction and who is or was entitled to a fee in respect of the notifiable transaction.

As with the reportable transaction rules, there is no filing requirement if a person provides clerical or secretarial services only.

3. What Is an Advisor?

Under the notifiable transaction rules, the definition of an advisor includes any person who provides any assistance or advice with respect to creating, developing, planning, organizing or implementing the notifiable transaction to another person. Additionally, anyone who provides assistance or advice to any promoter or any other advisor in respect of the transaction is an advisor.

The definition of promotor with respect to the notifiable transaction rules is the same as the definition of promoter for the reportable transactions rules.

It is important to highlight that, unlike the reportable transaction rules, an advisor or promoter does not necessarily need to be entitled to a fee to be caught by the notifiable transaction rules. There can be more than one advisor in respect of a notifiable transaction or series, each of whom may be subject to a filing obligation. However, a person that provides advice or representation in respect of an audit or tax dispute is excluded from the definition of an advisor or promoter, unless they are otherwise involved in the notifiable transaction.

4. When To File?

A taxpayer who enters into a notifiable transaction or another person who enters into such a transaction in order to procure a tax benefit for the taxpayer must file information returns within 90 days of the earlier of the date on which the taxpayer (or a person who entered into the transaction for the benefit of the taxpayer) becomes contractually obligated to enter into the notifiable transaction and the day on which the taxpayer (or a person who entered into the transaction for the benefit of the taxpayer) enters into the notifiable transaction.

5. The Information Required for Notifiable Transactions

The prescribed form for disclosing the notifiable to the CRA is RC312 Reportable Transaction and Notifiable Transaction Information Return. The relevant person would indicate on Form 312 that the transaction is a reportable transaction, a notifiable transaction or both. For notifiable transactions, the relevant person has to complete Part 3, “Notifiable transaction” and then continue with Part 5, “Penalty” of the form.¹³

6. Filing Requirements Rule

Under the filing requirements for notifiable transactions, a separate information return is required for each transaction within a series. However, in some cases, a single information return that provides details of every transaction within the series may be sufficient.

Like the reportable transaction regime, each person who is affected by the notifiable transaction is required to file an information return. Employees and partners are deemed to have met their reporting requirement when the employer or partnership has filed the required information return. The foregoing also applies to an individual who provides services as an employee of a professional corporation that is a partner of the relevant partnership, directors of a corporation and former employees or former partners.

7. Due Diligence Defence

A person who obtains or expects to obtain a tax benefit from a notifiable transaction and for taxpayers entering into such transactions for their own benefit, a defence against penalties imposed for failure to comply with reporting requirements may be available, if they have exercised a degree of care, diligence, and skill in determining whether the transaction qualifies as a notifiable transaction. This exemption recognizes that if a person has taken reasonable measures to assess the nature of the transaction and has acted in a manner that a reasonably prudent person would in comparable circumstances, there is no obligation to file an information return. For example, this defence may be available where the taxpayer seeks the opinion of their advisors regarding potential reporting obligations and is informed by the advisors that there is no requirement to file.

For advisors, promoters, or persons not at arm’s length with advisors or promoters who are entitled to a fee, the due diligence defence may be available where it can be established that the person does not know or should not reasonably be expected to know that the transaction qualifies as a notifiable transaction.

The determination of what a person should “reasonably be expected to know” is assessed objectively, taking into account all the relevant facts and circumstances. It does not rely on the person’s subjective intention or knowledge alone. The question is whether a reasonable person, in the same position and having the same knowledge and information, would be aware that the transaction meets the criteria for being considered a notifiable transaction.

Advisors who provide ancillary services or have narrow mandates may not be expected to know that a transaction is a notifiable transaction, depending on the nature of their involvement and expertise. This applies particularly to members of a team with limited involvement or knowledge of the transaction or series, such as junior employees with specific and focused roles.

D. Penalties

Failure to report or late filing of a reportable or notifiable transaction can result in penalties imposed on taxpayers. The specific penalties are as follows:

b) For taxpayers:
i) $500 per week for each failure to report a reportable or notifiable transaction, up to the greater of $25,000 and 25% of the tax benefit, or
ii) for a corporation with assets having a total carrying value of $50 million or more for its last taxation year that ends prior to the day on which the information return is required to be filed: a penalty of $2,000 per week for each failure to report a reportable or notifiable transaction, up to the greater of $100,000 and 25% of the tax benefit.

c) For advisors, promoters or persons not at arm’s length with advisors or promoters who are entitled to a fee: a total of
i) 100% of the fees charged by that person in respect of the reportable or notifiable transaction,
ii) $10,000, and
iii) $1,000 per day that the person fails to report the reportable or notifiable transaction, up to a maximum of $100,000.

In order to avoid imposing two sets of penalties upon a person who both 1) enters into a reportable or notifiable transaction for the benefit of another person, and 2) is a person who does not deal at arm’s length with an advisor or promoter in respect of the reportable or notifiable transaction and is entitled to a fee, the legislation provides that such a person would be subject only to the greater of these two penalties.

It is unclear whether professional liability insurance would cover the above penalties. We would recommend that affected parties clarify this with their insurance providers.

It should be noted that when required filings for a notifiable transaction are not made, the Minister has the authority to take certain additional measures, which may include denying tax benefits that could result from the notifiable transaction. Moreover, the Minister can reassess a participant in a notifiable transaction outside of the normal reassessment period for a taxation year in respect of the transaction.

E. Solicitor-Client Privilege

According to the CRA Guidance and the relevant provisions, the information is not required to be disclosed if it is reasonable to believe that the information is subject to solicitor-client privilege.¹⁴

F. Recommendations

1. As so many transactions could potentially be in play due to these new rules, it is prudent to review and update the firm’s Engagement Letters, Closing Agenda, Transaction Checklists and Reporting Letters.

2. A step may be added to the Closing Agenda and Transaction Checklists to include a review of the transaction for possible reporting requirements.

3. As the CRA announces designated transactions, taxpayers must promptly respond to meet their reporting obligations. This means identifying any planned and pending transactions that fall under these rules and providing the necessary information within 90 days of entering into these transactions.

4. Advisors participating in creating, planning, or implementing a reportable or notifiable transaction should understand their primary duty to uphold the confidentiality of their clients’ information. If the advisor is required by law to disclose confidential information, the advisor must communicate this to the client in writing, informing them of the potential disclosure to the CRA. The client should be fully informed about the nature of the information that might be disclosed, the circumstances under which it may happen, and the potential risks associated with such disclosure.

Reportable Transaction Flowchart

Notifiable Transaction Flowchart

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[1] Section 245(3): An avoidance transaction means any transaction
(a) that, but for this section, would result, directly or indirectly, in a tax benefit, unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the tax benefit; or
(b) that is part of a series of transactions, which series, but for this section, would result, directly or indirectly, in a tax benefit, unless the transaction may reasonably be considered to have been undertaken or arranged primarily for bona fide purposes other than to obtain the tax benefit.

[2] M.P. Deputy Prime Minister and Minister of Finance, “Explanatory Notes Relating to the Income Tax Act and Other Legislation”, published by The Honourable Chrystia Freeland, P.C., April 2023, at p 71, available at: https://fin.canada.ca/drleg-apl/2023/nwmm-amvm-0423-eng.html.

[3] Canada Revenue Agency, “Mandatory disclosure rules – Guidance” (Last modified: November 2, 2023), available at: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/mandatory-disclosure-rules-overview/guidance-document.html

[4] Ibid.

[5] Ibid.

[6] Supra Note 2 at p. 76.

[7] Ibid at p. 73.

[8] For greater certainty, this contemplates an indirect sale of all or part of a business which would include:

• A sale of some, but not all, of the shares of a target corporation or interests in a target partnership or trust.

• An indirect sale of a corporation, partnership or trust in a transaction where the purchaser subscribes for new interests in the corporation, partnership or trust and the subscription proceeds are used to redeem the interests of the existing (selling) shareholders, partners or beneficiaries.

• A merger or acquisition effected by the amalgamation of two arm’s length corporations (including in the context of a standard amalgamation squeeze-out transaction).

[9] The CRA has previously characterized the price adjustment clauses as provisions that can potentially prevent adverse tax consequences (in other words, to protect against the failure to achieve a tax benefit).

[10] Supra Note 3.

[11]             Department of Finance, “Legislative proposals relating to the Income Tax Act and the Income Tax Regulations (Budget 2022 and other proposals)” (October 10, 2020), available at: https://fin.canada.ca/drleg-apl/2022/ita-lir-0822-l-2-eng.html.

[12] Canada Revenue Agency, “Notifiable transactions designated by the Minister of National Revenue” (November 01, 2023), available at: https://www.canada.ca/en/revenue-agency/programs/about-canada-revenue-agency-cra/compliance/mandatory-disclosure-rules-overview/notifiable-transactions-designated-by-minister-national-revenue.html

[13] Supra Note 3.

[14] Supra Note 3.

For all your tax-related legal inquiries, contact McQuarrie at 604.581.7001 or by filling out the contact form below.

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When your relationship ends, you and your ex-partner will need to make arrangements for any dependent children you have. This includes making parenting arrangements and maybe even contact arrangements for other relatives and important people involved in the child’s life.

My name is Aman Kahlon and I’m a family lawyer at McQuarrie. We have helped many clients in British Columbia create flexible child custody arrangements and make a divorce as smooth as possible for their families. In this article on flexible child custody arrangements, I share the top tips about making a child custody arrangement work for you instead of against you.

What is a child custody arrangement?

When parents are separating, there are several important issues to work out. During a divorce, you may want to address the issues of guardianship, parental responsibilities, parenting time, parenting arrangements, and contact with the child.

When making the decision on child custody, BC courts consider the child’s physical, emotional, and psychological safety, security, and well-being. Under the Divorce Act, a Judge makes decisions based only on the best interests of the child. This means that when a Judge is deciding on parenting arrangements, they must think about what’s best for the child and how well the parents will be able to provide a healthy and safe environment for the child.

What are co-parenting agreements?

If you are separating from your spouse, it is a good idea to get a co-parenting agreement. A co-parenting agreement is a written document that outlines how you and your ex-partner will raise your children after a separation.

Some key things that a co-parenting plan may define are the residential arrangements, health care, communication between parents and other family members, travel and accommodation, education and related expenses, language, religion, and cultural traditions in which the child is brought up.

Making a co-parenting agreement that suits you

When deciding on parenting arrangements, courts often use the same template for custody and parenting terms. We understand that each family is different and a parenting arrangement that works for one family may be completely impossible for yours.

When practicing family law in BC, we’re always conscious of the wide diversity of people living here. Different cultures have different customs and social norms around family. Our goal is to make sure that the transition associated with divorce happens as smoothly as possible for the kids and minimizes the damage to the quality of their life.

This means that here at McQuarrie, we are not afraid to offer unconventional solutions to child custody and parenting arrangements.

Conclusion

Divorce is one of the most challenging moments your family may go through. Apart from being stressful and emotional for the couple, a marriage breakdown can also significantly affect kids. If a divorce turns into an ugly process in which the child witnesses the content of their parents, it can leave long-lasting emotional scars.

However, divorce doesn’t have to be so traumatic for children. An experienced family lawyer will be able to work with you to forge individualized and tailored parenting arrangements that work best for your family.

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For over 50 years, McQuarrie has advocated for and helped clients throughout B.C. deal with the complex issues that arise in family law matters.

Because every family is unique, McQuarrie’s lawyers bring a humanized, personal approach to addressing each situation.

In legal separation matters, our team of compassionate family lawyers will help you navigate divorce and ensure that your family’s interests are prioritized during the separation.

We are here to provide guidance and support needed to avoid making similar mistakes during the divorce process.

Contact us at 604.581.7001 to book a consultation with one of our Family Law lawyers today.

The post Flexible Child Custody Arrangements: Co-Parenting Agreements That Work for You appeared first on McQuarrie Legal Services.

When you are disabled due to an injury or an illness, the last thing you should have to deal with is a battle with an insurance company over the interpretation of complex contractual terms to get your benefits.

For example, imagine suffering a cardiac arrest, being hospitalized, and becoming disabled from working only to be told by the insurer that “heart attacks” are covered but “cardiac arrests” are not. Unfortunately, these circumstances are all too common.

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A news story regarding a family man comes to mind. Mr. (name) was a fit man in his mid-30s who suffered a cardiac arrest. He was placed on life support for four days and spent nearly a month in hospital. Following his release from hospital, he was disabled from his occupation as a mechanic because of ongoing issues with his left arm that arose following a surgical implant of a defibrillator.

When he applied for critical illness coverage through his employment’s group coverage carrier, he was denied. The plan purported to treat “heart attacks” differently than “cardiac arrests.”

The insurance company took the position that, while the insured’s heart stopped, it was not caused by a “heart attack”. The insurer defined “heart attack” as the heart stopping due to a blockage. Since the insured’s heart stopped for an inexplicable reason and not due to a blockage, he was deemed not covered. However, the medical community would describe what occurred here as a heart attack.

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What is Contra Proferentem?

Contra proferentem means that where a term is ambiguous, the preferred meaning should be the one that works against the interests of the party who provided the wording. In the insurance context, it’s the insurer who is responsible for drafting standard form insurance contracts. Courts acknowledge that people entering insurance contracts (including disability insurance contracts) have no negotiating power over the terms of these contracts. They accept the terms or they don’t get coverage. Courts also assume that the drafters of these documents are well aware of any limitations or ambiguities and should not be allowed to take unfair advantage of this knowledge. Similarly, if an insurer did not choose its words carefully to avoid misunderstandings, it should not be allowed to benefit from that lack of care.

So, if the normal rules of contract interpretation do not clarify which interpretation was intended by the parties, the courts may apply contra proferentem to break the tie. Some exceptions may apply if the dispute involves an argument over coverage between two insurance companies.

We have resolved many cases favourably for our clients where we have applied this legal concept. You only have a limited time to make an appeal and seek legal action. Contact our Insurance Denial lawyers today at 604.581.7001 to book your free initial consultation.

Read more on 5 additional reasons why your disability claim (could have) been denied.

Don’t Automatically Assume the Insurer’s Interpretation is Correct

An insurer will often deny a claim based on its interpretation of the terms of the policy. Many people simply accept the insurer’s interpretation because, after all, they are the ones administering the policy, and they are assumed to know best. However, it is imperative to review the master policy that sets out the terms of the contract. If there is another, equally compelling interpretation that would cause benefits to be paid, that is the interpretation that should prevail. Further, if there are two equally compelling interpretations, the legal concept of contra proferentem has been used as a tie breaker.

Read more on reasons why long-term disability claims are often denied.

Seek Legal Advice from Experienced Lawyers

When your insurance claim is denied, seek legal advice from a lawyer that has specific expertise in insurance matters. It may make the difference between getting paid or getting nothing.

At McQuarrie, we have over 100 years of combined legal experience dedicated to litigating insurance claims, including denials of short and long-term disability benefits, life insurance and critical illness claims. If your claim has been denied, contact us and our lawyers can offer guidance on your options and how to resolve your situation efficiently.

If you have a question about a disability claim denial, call us at 604-581-7001 for a free, no-obligation consultation.

The post Contra Proferentem in Canada and Your Insurance Claim Denial appeared first on McQuarrie Legal Services.