andriessenlaw

The stages of a Regular Procedure Law Suit

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For many companies, they have limited experience in a law suit and are overwhelmed with the unknown.  I am going to discuss over my next few blog entries the different types of law suits in Ontario and how their procedures differ.

This week’s entry is “Regular Procedure” – let me start off by saying there is nothing actually called the “Regular Procedure”; however, there is something called the Simplified Procedure which I”ll address another time.   Before the days of the Simplified Procedure there was just the one type of way to run a law suit and to have a point of reference I”m starting with it here.

Regular Procedure is available for all law suits that are claiming over $ 50 000.00.

A statement of  claim is issued and must be served within six months of being issued. 

Once served with a claim the defendant(s) must serve and file a defence within a specific period of time (20 or 40 days depending on where they are located).  This can be extended an automatic 10 days by filing a Notice of Intention to Defend or longer by agreement.

The plaintiff has the option to serve a Reply within 10 days of receipt of the Defence. 

The Statement of Claim, Statement of Defence and Reply are referred to as Pleadings. 

Once the Pleadings are exchanged, each party must serve an affidavit of documents which is a 3 schedule listing of all documents relevant to the issues in the litigation.

The next step is examinations for discovery – these are an opportunity for each party to ask a representative of the other party questions regarding their allegations under oath.  A transcript is formed from the examination and it can be used to impeach credibility at trial.

At any time during a law suit, but most frequently after discoveries, either party may bring a motion before the Court asking for an Order regarding a step in the proceedings.  The most commong motion after discoveries is to ask a Court to Order a party answer a question they refused to answer on discovery.

In certain cases there is mandatory mediation required – this is an off the record meeting with a neutral party who attempts to broker a settlement of the action.

All cases have a pre-trial after discoveries are concluded.  The pre-trial is an off the record meeting with a Judge who does not hear the trial of the action – the purpose of pre-trial is to narrow the issues and attempt to see if a settlement is possible.

If the matter does not settle at pre-trial, the final step is trial. 

The length of time all of the above takes depends on many factors, lawyer and client schedules as well as Court schedules.

In our firm the above generally takes between 1 1/2 and 4 years to complete, depending on the jurisdiction where the trial is heard.

Next blog from me will be about the Simplified Procedure.

Inga B. Andriessen

Incorporation – Scott promised he'd get to telling you about it ….

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Incorporation

 In a recent blog entry I touched on the question of when to incorporate your small business.  I’d like to give that question a little more consideration here.

 I see the incorporation question as a two-part test where the bottom line is how incorporation affects your bottom line.  The first part of the test is the legal analysis of risk and reward and the second part is the budgetary analysis.  They both come down to the question of which form of business operation is going to save or make you the most money.

 Liability

  The primary legal benefit to incorporation is the limitation on liability that the corporation affords.  Barring improper or fraudulent conduct, the legal liability of the corporation, including debts to suppliers and others, is limited to the corporation itself.  This means that if there is a risk of exposure due to either the nature of your business or the marketplace, then incorporation may properly restrict the risk of failure to the business itself. 

 This doesn’t mean, however, that corporations are get-out-of-jail-free cards.  There are considerable penalties for those who use corporations to fraudulently convey funds or for those who act in bad faith and then try to hide behind the corporate veil.  If you do business with honour and integrity, bargain in good faith, and conduct your business as a prudent business owner, the liability limitation is there – but if you play with fire, you’re going to get burned.

 Accounting

 I will not get into the specifics of an accounting analysis of incorporation – that’s the role of a good accountant, and in some cases, a really good tax-specific lawyer.  But I always try to give my clients a list of things to talk about with their accountant so that they can do a real analysis of the possible advantages of incorporating.  Some of those things include:

  • Preferred tax rate
  • Small business deduction
  • Deductibility of professional fees (including incorporation)
  • Various industry-specific tax credits

 The Other Reasons

 In addition to the two-part test that covers most contingencies, there are sometimes other reasons for incorporating.  I’ve recently had a number of clients who needed to incorporate their business in order to qualify for government funding of a project; others who had an existing corporation in one jurisdiction and needed to move it (a “continuance”) to another in order to be eligible for federal licensing requirements.

 There are many compelling reasons to incorporate and every growing business will have to ask itself, when, not if, is the right time for us.  If you are asking that question, please contact me and we can see if you have crossed your threshold.

 Scott R. Young

"Coles Notes" on Constructions Liens

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If you are a construction contractor or your business involves the supply of services or materials for construction projects, you likely have some knowledge of lien rights.

 

If you have a solid understanding of liening projects, you need read no further.

 

But if you have only a vague understanding of lien rights, then what is below will give you some more insight.

 

If you have not been paid on a project, you have the right to lien for the amounts that are owed to you.  However, you must do this within 45 days of the last date that you provided services or materials to the project or the date that substantial completion of the project was published in the Commercial Daily News, whichever date is earlier.  This is the general rule.  There are some tweaks to this, but this rule will cover most situations.

 

If you want to lien a project, we would search title for you to ensure that we place the lien on the correct property.  You would sign the lien documents and then we would register the lien on title.  By registering the lien documents on title, we have “preserved” your lien rights.  Don’t wait to the last minute to have us register a lien.  Title searching can be complex, especially for subdivision projects where lien rights may be expiring on a lot by lot basis.

 

We would place the owner of the property on notice of your lien, as well as the contractor and any mortgage company who has registered a charge against the property.  The lien will generally stop the flow of construction funds from the mortgage company to the owner.

 

If the lien does not result in you getting paid and us discharging the lien that we registered, then you have to “perfect” your lien.  This means that we have to start a court action no later than 90 days after the last date that you provided services or materials to the project or the date that substantial completion was published, whichever date is earlier.  Once again, this is the general (but not universal) rule.  Notice is put on title that an action was commenced, which then perfects the lien.

 

We then have two years to set the matter down for a trial and we begin to duke it out with the other lawyers.

 

Something else to remember – under the Construction Lien Act, an owner’s liability for the debt owed to you will be restricted to the amount of the holdbacks it has in hand and any portion of the contract not yet paid out to the party above you in the construction chain.

 

When it comes to lien matters, I always recommend that you do your best to ensure you have a strong position going in.  Ensure the contract is signed and all change orders are in writing and signed.  Keep stringent records of all phone calls.  Keep copies of all plans, emails, letters, payments, invoices and purchase orders – and of course, keep my number handy.

 

Paul H. Voorn

When to call a lawyer

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Two weeks ago our Blog Entry dealt with when to use a law firm in Small Claims Court, but the question doesn’t just come up with matters that are $ 10 000.00 or less.

 

In the ordinary course of your business you may run into a situation where you would be better off (and spend less money on legal fees in the long run) if you called a lawyer, rather than dealing with the situation yourself.

 

A good general rule is that if you are contacted by a law firm representing someone other than your company, you should consult a lawyer. 

 

This rule applies to both positive and negative situations – if a lawyer contacts you regarding a client who is interested in entering into a trade relationship with you or if the lawyer represents a former employee seeking compensation.

 

No doubt you’re wondering why you should call if a positive event is happening, well, colour me pessimistic, but deals can go sour and while people enter into deals with the best of intentions, it is important to protect yourself, just in case things go wrong.  It is also much less expensive to have a lawyer review documentation before entering into a  transaction, rather than paying a litigation lawyer to fix the problems it after the fact.

 

With respect to calls or letters from lawyers threatening to sue you, this is very dangerous territory to handle without a lawyer: you likely do not know the law, nor what can be used against you as evidence: it is better to simply take a name and number and contact your lawyer to ensure you are protected.

 

A common situation that many employers believe they can handle on their own is termination of employees and this is simply not the case.  Employment law is changing regularly and your obligations to your employees may be different than you believe them to be.  A Wrongful Dismissal Law Suit that goes to the conclusion of trial will cost at least $ 15 000.00 in legal fees.  Obtaining legal advice prior to dismissal will usually be less than $ 1 000.00.  The savings on money and the headache of a law suit are worth consulting your lawyer.

 

Another common problem that many business owners have and sometimes don’t even realize they have is protecting their ability to take back product that is not paid for under a conditional sales agreement.  A lawyer can guide you through what your agreement must contain in order to be able to register it and take priority over any other creditors – an important consideration given the economy these days, you don’t want your goods going to your customer’s bank instead of back to you if they are not paid for.

 

So while the old joke claims that a  thousand lawyers at the bottom of the sea is a  “good start”,  before you put us there, you may want to consider how we can help you save money and protect the business you have worked hard to create.

 

Inga B. Andriessen

Estate Planning for Business Owners & Individual Pension Plans

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 Individual Pension Plans

 

A few weeks ago I had an interesting lunch with Scott Plaskett, CFP of IRONSHIELD Financial Planning.  We were talking about some of the different kinds of estate planning work that we do for our respective clients – I draft wills and powers of attorney, establish trusts and offer advice on corporate divestment, and Scott works on the financial side of things.  During the conversation, Scott brought up something that I wasn’t familiar with – the Individual Pension Plan.

 

Scott explained that IPPs, introduced by legislation in 1991, worked similar to RRSPs in that they allowed for tax deferred accumulation of income, for the purpose of retirement planning; however, they differ in that they are characterized by greater flexibility and higher contribution limits than RRSPs.  IPPs must be tied to a sponsoring corporation, so they are a perfect fit for small business owners and professionals who work through personal corporations. 

 

I immediately thought of several of my clients who fit these criteria; business owners between the ages of 40 and 71 who typically max out their RRSP contributions.  IPPs offer considerably more than just tax deferral though.  When we sat down and looked at some of the case studies that his firm had worked on, the results were impressive:

  • Savings of thousands of dollars per year versus RRSPs
  • Tax deductibility of management fees
  • Generous past service buy-in allowances
  • Complete flexibility in contribution amounts
  • Tax preferred transferability of unused pension on death

 

The last item is of particular interest to small business owners who are interested in adding value to the corporate assets that they leave behind to loved ones.  Although my typical estate planning practice includes significant consideration for the succession planning of the corporation, in the past, the bulk of pension contributions were lost.  That doesn’t have to be the case anymore.

 

Clearly this is not your parents’ pension plan.  It’s a highly customizable financial vehicle that offers excellent savings for the right candidate.  Despite the fairly complicated process involved in setting the plan up, Scott will provide us with an illustration that will offer hard numbers  to reveal whether the plan is going to save the client money. 

 

I know that this is another great option that I’ll be keeping in mind when I do estate planning work for my business clients and something I’ll be recommending to a few of you in particular.  If you have any questions about your business and personal estate plan, contact me.  If IPPs fit into that plan, Scott Plaskett would be happy to assist in adding that part to the overall package.

 

Now my obligatory disclaimer – Scott Plaskett and Ironshield Financial Planning are not related to Andriessen & Associates in any way and the comments above are not meant to endorse any particular product or service.  That said, if you think that the product or service may be right for you, I encourage you to seek out the professional of your choosing to get more information.

 

Scott R. Young

Should I represent myself in Small Claims Court?

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So you’re thinking about suing that customer that defaulted on its account. Or perhaps your company is being sued by a disgruntled former employee. The amount is under $10,000.00, and therefore it falls within the jurisdiction of the Small Claims Court. You wonder: should I represent myself at court?

 

Here is some food of thought when deciding whether you should just DIY at court:

 

Consider if you have the time to represent yourself. Many people think that they only have to attend at court for an hour or two. This is not true, and whoever told you this was misinformed. If you’re scheduled to appear at court, be prepared to be there from 9 am to 4:30 pm. If you are there for a trial, there is a possibility that the judge may put it to another day. Do you have the time to deal with all the paperwork involved? It may take you some time to complete court documents if you are unfamiliar with the process. Also, you will likely have to take time communicating with the other party throughout the process, especially if you both want to settle. Do you have time to deal with all this?

 

Also, ask yourself: how well do you understand the legal process? Because if you are not familiar with them, you could make mistakes, and those mistakes could cost you. For example, if you failed to file a defence with the court before the deadline, and a judgment is awarded against you. Or, if you bring a Motion without filing sufficient evidence, a judge might order you to attend court again with better evidence – costs would be awarded against you for wasting everyone’s time. In litigation, timing is everything. The multiple documents that have to be issued, served, and/or filed on time can be overwhelming. Even the language used in the court system – what we call legalese – can be difficult to understand.

 

Lastly, do you think you can handle arguing evidence and law before a judge? Not only can it be intimidating, but often, laypeople do not know what type of evidence is relevant to the matter and should be raised before the Court, or irrelevant and need not be raised. There is a misconception that the legal issues in the Small Claims Court is somehow different from those that appear in the higher courts, when in fact, the only difference between the courts is the lower monetary jurisdiction. The legal issues are the same, and often, the interpretation of the facts of a case can turn on the legal arguments raised by the parties.

 

While you might not be aware of the legal issues involved or the necessity of filing a particular court documents, lawyers and paralegals, on the other hand, are trained to understand and work in the legal system. That said, hiring legal representation will mean paying legal fees for their services, and this too is something you need to consider: of course our firm handles this on a flat fee basis, which makes it economical to have us represent you in Small Claims Court.

 

Jessie Chui

Student-At-Law

 

Should you provide a Personal Guarantee ?

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Here are two seemingly random legal questions that I deal with on a regular basis:  Should I incorporate my business?  And – Should I give a personal guarantee? 

I’m going to deal with these questions out of their logical order by addressing the guarantee question now and the incorporation question in a later entry. 

Well, okay, just so everything makes sense in a chronolinear fashion, yes you should incorporate your business; now let’s get on to the guarantee question. 

The primary reason behind incorporating (are we on that again?) a business is to turn that business entity into a distinct legal entity that is responsible for its own debts and other liabilities.  Once your accountant and your lawyer have recommended incorporation, the basic presumption is that your business is acting as a separate and distinct party in its day to day operations.  And with very few exceptions (such as director liability law), the corporation itself is the extent of the liability for those operations.  If the corporation makes a profit, it is up to the corporation to disperse or re-invest that profit.  If the corporation loses money, it is up to the corporation to pay back that money or to make a proposal to its creditors if it cannot.

But as both public and private lenders are increasingly reluctant to lend these days, we are seeing more and more demands for the principals of a corporation to guarantee the debts that the corporation enters into.  Guarantors need to think long and hard before entering in to any agreement in such a capacity.  They need to understand the full extent of their exposure.  They need to understand that (in most cases) they are joint and severally liable for the entire debt they are guaranteeing.  And while it is obvious that this means that they are on the hook if the corporation goes bankrupt, they need to understand that there are various other scenarios where they may be liable for the debt.  They need to know that the guarantee may affect their credit rating.  They need to know that there may be very specific criteria in place for being released from the guarantee – I have acted for more than one person who has had a guarantee come back to haunt them years after separating themselves from the corporation that required the lending in the first place.

I would caution anyone who is considering entering into a personal guarantee, large or small, to get detailed and thorough advice on all of the ramifications before signing anything. 

Coming soon – Should I incorporate my business?  I’ll give you a hint – the answer might have something to do with your willingness to act as a guarantor…

Scott R. Young, LL. B.  

To Sue or Not to Sue, That is the Question

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With the coming of spring and life reborn, thoughts turn to the sounds of returning robins, upcoming summer vacations and time to spend outdoors with friends and family.

In reality, you should be thinking about people who owe you money and how to get paid.

A demand letter sent by us to your debtor followed up by a statement of claim is great if it gets you paid.  If not, it is a waste of time and money.

 So, how to decide when to pay us to chase a debt for you?

 Here are some tips, hopefully you are using some or all of them already:

 –          do you have lien rights, whether they are construction liens, repair liens or PPSA liens?  If so, there are mechanisms to register your liens to protect your rights in the property and possibly arrange for a seizure to then force payment on the debt

 –          if you could use lien rights as a means of leverage with your customers in the future, then consider setting up an appointment with our corporate lawyer, Scott Young, who can prepare the necessary paperwork for you to have your customers sign before you do work for them.

 –          Has a debtor bounced a cheque on you?  Consider trying to certify it a half dozen times before you contact us to send a demand letter or chase the debt in court.  If you can’t certify it a half dozen times, this may give you an indication of how successful collection by us will be.

 –          How sophisticated is your debtor?  Threats of litigation or actual litigation can spur payment at an early stage from unsophisticated debtors.

 –          Limit your own demands for payment to two verbal demands and 1 written demand.  If payment is not forthcoming, continued demands by you for payment without taking any other action is like having a guard dog with no teeth.  If payment is not forthcoming, it is time to engage legal counsel.

 –          If you are a supplier of product, put your debtor on COD payment status, requiring double payments for any product ordered.

 –          Is the debt owed to you between $10,000.00 and $25,000.00?  Consider waiting until 2010 to sue, as the small claims court limit will be moving to $25,000.00 on January 1, 2010.

 –          Significant legal cost savings can be had by proceeding in small claims court, so consider waiving a part of the debt if you are owed more than the small claims court limit.

 –          Beware of the general limitation period of 2 years to sue from the time of default by the debtor in delivering payment to you.

 –          In your dealings with your debtor, did she/he/it authorize you to conduct a credit inquiry?  Do an updated inquiry with the Credit Bureau or Equifax and see what it reveals about the debtor’s financial status.

 –          Have us conduct a PPSA or writ search on the debtor.  Sometimes Rev Can will register in those systems for unpaid remittances.  If there is a debt owing to the government, the likelihood of collection via litigation may be slim unless a voluntary payment is made by your debtor in settlement.  Writ searches will also reveal any other creditors who have already obtained judgment.

 –          If the debtor owns real estate, have us conduct a property search to reveal the extent of mortgages on the property.  If it is mortgaged to the hilt, it will not be a viable source for payment on your judgment if the debtor defaults with the bank.

 –          Don’t chase the carrot, squish it underfoot.  Some debtors dangle small payments in front of your nose while still racking up their debt with continued purchases.  It’s a loser’s game, and we know which side you are on if you choose to play.  Focus your energy on paying customers and let us chase payment from the deadbeat.

 I look forward to hearing about your summer plans and who you want me to sue.

Paul H. Voorn

Litigation Association –

tel:  416-620-7020 ext. 23

Is it time for a Trademark?

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Hello to all of our blog readers. I’m the firm’s corporate lawyer which makes me the go to guy on everything from basic incorporations to the finer points of intellectual property law. I’m also a CIPO (Canadian Intellectual Property Office) registered Trade-mark agent, which helps in that regard.

I’ll be blogging about things that might interest our corporate clients – from the basics to developments in case law. I hope you find something useful here…

Recently a lot of our clients have been asking me if they should be registering their trade-marks. While my answer depends on the nature of the business, I find more and more that if a business person is at the point of asking that question, the answer is likely going to be yes.

If you’re asking yourself that question, the first thing you need to know is what a trade-mark is. The Trade-marks Act says its “a mark that is used by a person for the purpose of distinguishing …wares or services manufactured, sold, leased, hired or performed by him from those manufactured, sold, leased, hired or performed by others.”

In more general terms, I would describe a trade-mark as the most concentrated essence of your entire brand. Any cachet that your business has, any reputation you may have earned and any recognition that exists for you and your product in the marketplace is completely tied up in your trade-marks. Your trade-marks are what identify you and they’re your customer’s guarantee that they’re dealing with a known quantity – you.

Rights in trade-marks are what are known as negative or restrictive rights. They restrict the right of others to use your mark, and in many cases to use marks that even ‘get close’ to your mark. They are there so the marketplace knows who made what and who does what. Having a registered trade-mark means people are less likely to come up with brands that are confusingly similar to yours – and when they do, having a registered trade-mark means there is something you can do about it.

So what does registering your trade-mark do? A number of things. It advertises your claim on the mark; it gives you excellent evidence of your use of the mark and it gives you a stronger claim for damages in the event of someone else’s infringing use.

In many cases we find that a business’ brand is their most important asset in terms of guaranteeing future cash flow. And as such, it’s the sort of asset that needs to be reviewed, protected and monitored against unauthorized use. And of course, those are all services that we offer. If you are thinking about registering your trade-mark, please contact us and we will be glad to have a frank discussion about how best to serve you.

If you have any questions about your trade-mark needs, please do not hesitate to contact me at

Scott R. Young LL.B.
Barrister & Solicitor

Andriessen & Associates, Professional Corporation
Barristers & Solicitors
701 Evans Avenue, Suite 900
Toronto, ON
M9C 1A3

Tel: 416-620-7020 ext. 28
Fax: 416-620-1398

When to retain our firm to collect a debt in this economy.

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Rumour has it the economy is not doing so well. Seriously. I’ve read it in papers and as you know, if you read it in the papers, it must be true. Unless of course you read something unflattering about our firm in the papers in which case it’s all lies and likely defamation.

I digress.

So, with the economy faltering, more companies are finding their customers are slowing down payments and the question becomes: when do you do something drastic about it, like hiring our firm to pursue the debt.

Many factors that pop up in evaluating this decision from your perspective are:

  1. Is this customer able to pay, but choosing not to?
  2. Is this customer not paying because they are not being paid?
  3. Is this customer likely to recover their ability to pay in the near future?
  4. Does this customer have ties to other customers and if I pursue them, will I lose other customers?

In evaluating the decision from our perspective, here are the things we look at:

  1. Does your customer have other people suing them or worse, judgements against them?
  2. Does your customer own any property that we could sell once we obtain judgment against them?
  3. Does your customer have cash available to them?
  4. Does your customer have indebtedness to a bank or others which would rank ahead of your judgment in the event of bankruptcy?

If your customer has assets of some sort, including receivables, it is likely worth pursuing, but don’t wait to pursue this, call us now.

My motto is 30 – 60 – 90 – Sue. These days, however, you might want to ditch the 90 and sue after 60 to ensure there is something to recover.

The implementation of the motto goes like this: after thirty days (or whatever your agreed terms are) send a gentle reminder notice. Follow this up with a phone call seven days later to check in with when payment can be expected. If there is no payment after sixty days send a more firm notice advising the fact that this will be turned over to your lawyers if it is not paid right away. If you don’t have the money by 90 days, call our firm and we’ll take it from there.