Articles

On this page you can read useful articles written by Robert Monterio to help his clients understand some key principles of BC legal procedures. Please click on the name of the article to read full content.

According to Common Law, every mortgage comes within the right of the lender to take back the property if the borrower defaults on the loan. However, it is standard procedure not to defer to common law, but rather provide for the right of foreclosure, by way of contract between lender and borrower.
In British Columbia, the foreclosure process is controlled by the B.C. Supreme Court. The Supreme Court Civil Rules assure the borrower each of the following steps of a foreclosure proceeding must be approved by the Supreme Court:
 
1. Demand for Payment
To initiate foreclosure proceedings the lender sends a letter to the borrower informing them that the balance of the mortgage is due and demanding payment of arrears plus legal costs.
2. Petition
If the situation is not resolved by the borrower, the lender’s lawyer files a foreclosure petition in B.C. Supreme Court. Lender is referred to as petitioner. The borrower, (respondent), is served with a copy, as well as all other interested parties, (mortgage holders, tenants, lien holders).
3. Order Nisi
The petition prompts an action known as the order nisi which establishes the amount required to redeem the mortgage and the time period in which to do so. This time period is referred to as the redemption period, and is approximately six months.
One of two things can occur following the order nisi and the redemption period. The lender may choose to have the property listed for sale by the court, (a judicial sale), or seek an Absolute Order of Foreclosure from the court.
4. (a) Judicial Sale
The lender may seek an order approving the sale of the property. In this case, the property will be listed for sale by a realtor, who will collect offers from prospective buyers and present them to the court. The court will review the offers, and if they are deemed fair to both parties, the court will order that the property be sold with a clear title.
If the sale does not generate enough money to pay the lender in full, the lender can seek a deficiency judgment against the borrower.
4. (b) Absolute Order of Foreclosure
If the following conditions exist after the redemption period has expired, the lender may petition the court for an absolute order of foreclosure:
i) The value of the property is equal to or exceeds the mortgage debt.
ii) The borrower is declared “judgment proof”, having no assets to apply toward the deficiency.
iii) No offers are received in the judicial sale.
 
Once an Absolute Order of Foreclosure is granted, the lender becomes the new registered owner of the property and all other respondents are removed from the title. This is a final decision. No further action can be taken against the borrower.
While there are many possible ways to buy a business, the first step for a perspective business buyer is often finding a viable business they wish to purchase. Businesses not found by a perspective buyer through employment, or industry associations are often found through a business broker or commercial realtor (“broker”). Most brokers have listings or access to listings of businesses for sale, or can approach businesses not listed if given sufficient information by a perspective buyer. A competent and experienced broker can often help a perspective buyer evaluate a business. Evaluations are done in many different metrics, but often equate to a multiple of business profit plus assets and minus liabilities.
 
Those who use the services of a commercial realtor or business broker will often have a letter of intent or contract drafted with the seller prior to meeting with or obtaining legal counsel. At this stage, most deals are still subject to a number of conditions which remain at the discretion of the perspective buyer to satisfy, and therefore the deal is not truly binding.
 
Another major consideration for a perspective business buyer is the structure of which the purchase will take. Early in the process, a determination will be whether the purchaser wishes to buy shares or assets of the target company. In a share purchase, everything which the company owns, both good and bad is acquired. One major advantage of share purchases ( with some exceptions) is that any contract which the target company was a party to will continue. In other words, the new purchaser will simply stand in the shoes of the existing company, and not be forced to apply for permits or licenses. The flipside is any liabilities which are attributed to the company will now become the responsibility of the purchaser. Thus, when a share purchase is chosen, the purchaser cannot pick and choose elements of a company. In the event of the company owned by multiple shareholders, it is important to ensure all shareholders are willing to sell their shares on the same terms and conditions or on conditions acceptable to the purchaser.
 
Because of the increased risk assumed by the purchaser in a share purchase agreement, the role of a lawyer is greater. The lawyer will be spending a greater amount of time and resources trying to minimize any risks being assumed by the purchaser, including liens and encumbrances, legislative or employment liabilities, and legal and tax responsibility.
 
By contrast, an asset purchase allows a purchaser to select assets it desires and leave behind those it does not. However, in the case of property, this will likely increase the transitional costs and taxes payable for a purchaser. Also with an asset purchase, the parties will have to agree on a price allocation among such things as assets, goodwill, equipment and inventory. Each of these categories has a different tax treatment, and therefore there is a vested interest in the purchaser having a higher depreciating category assigned a higher value.
 
Financing the acquisition of the business is something that is often done before a purchaser contemplates searching for a given company. However, financing generally cannot be finalized until such time as the lender has an opportunity to view the target company. Therefore, almost every asset or share purchase agreement contains a clause making its finality subject to the purchaser obtaining financing. Also common in smaller transactions involving owner-operator is the seller providing some financing to the purchaser, or the sale price being paid contingent upon future revenue of the company.
 
When a seller is providing financing, security is often taken back in form of a personal guarantee of the buyer and/or the shares of the company being held in escrow in the event the buyer fails to abide by the agreed payment term.
 
The role of a lawyer throughout this transaction is to assist the purchaser with the issues he or she faces, which are often as unique as the number of businesses existing. The coordination of a team of financial, accounting and other experts is required to meet this challenge. Equally important is to ensure that no key items are missing from the deal, and to restrict the seller from competing with the purchaser as much as possible after the transaction is closed.
Many individuals or companies decide to enter into a commercial relationship with other individuals or companies. In the absence of a written partnership agreement or another form of written agreement such as a joint-venture agreement, the parties conducting themselves in such a commercial relationship are more than likely to be deemed partners. In the absence of a partnership agreement, the Partnership Act of British Columbia is the legislation which governs the rights, obligations, and duties of the parties to each other. Pursuant to the Act, all parties will be deemed to share equally in profits realized by the business, liabilities created by the business, and the management of the business.
 
Favourable aspects of partnership
In British Columbia, a partnership is very informal. There is no requirement to register a partnership unless the parties intend to operate in the area of mining, manufacturing or trading. Thus, the creation of a partnership is simple and cost-effective. One of the major advantages of a partnership versus incorporation is tax treatment. In the event a business is not earning money, generally, the parties to a partnership can deduct business losses from other income.
 
Disadvantages to partnership
The main disadvantage is the liability which could attach to any partner for the acts of another, or the business in general. Generally, each partner is 100% liable for these actions. Therefore, the need for proper insurance is heightened.
 
Properly drafted partnership agreement
Most sophisticated businesspersons will require a written partnership agreement to be in place before investing in a business partnership or proceeding with operations. This is a way to counteract presumptions of the Partnership Act and ensure that the rights and obligations of all parties to the partnership are clearly spelled out and delineated. It is important to ensure the proper decision-making procedures are spelled out and clear to all parties as well as matters of dispute resolution.
The B.C. Provincial Nominee Program (PNP) provides a way to accelerate Permanent Resident applications for skilled and/or experienced workers and experienced business persons who want to settle in B.C. permanently. The program is administered by the province through the Ministry of Jobs, Tourism and Skills Training in collaboration with Citizen and Immigration Canada (CIC). For those attempting to fast-track the immigration process by way of the B.C. PNP, the applications and requirements vary according to the category under which application is made.
There are two components to the B.C. PNP: Strategic Operations and Business Immigration.
Strategic Operations is an employee driven program which is used to address skill shortages in the labour force. It aids B.C. employers in recruiting or retaining qualified foreign workers to meet labor needs. Nominees for Strategic Operations must have a job offer from a B.C. employer in an eligible occupation, (levels O, A and B of Canada’s National Occupation Classification Matrix, (NOC), and select level C and D jobs), or have completed a masters or doctorate degree at a B.C. post secondary institution in either the natural, applied or health sciences.
The Level O, A and B occupations are generally higher skilled jobs that require some formal training. Select entry level or semi-skilled workers (level C and D occupations) are also eligible for nomination.
Occupations in Skill Types 1 through to 9 are classified under Skill Levels A, B, C or D. Management occupations, which span all Skill Types, are found above the Skill Level categorization in the NOC Matrix.
Skill Level is referenced by the second digit of the NOC code. The second numeral in the NOC code for an occupation identifies the Skill Level as follows:
• 1 corresponds to Skill Level A
• 2 or 3 correspond to Skill Level B
• 4 or 5 correspond to Skill Level C
• 6 corresponds to Skill Level D
NOC Skill Types:
• 0 Management Occupations
• 1 Business, Finance and Administration Occupations
• 2 Natural and Applied Sciences and Related Occupations
• 3 Health Occupations
• 4 Occupations in Social Science, Education, Government Service and Religion
• 5 Occupations in Art, Culture, Recreation and Sport
• 6 Sales and Service Occupations
• 7 Trades, Transport and Equipment Operators and Related Occupations
• 8 Occupations Unique to Primary Industry
• 9 Occupations Unique to Processing, Manufacturing and Utilities
For international students studying at the graduate level at a publicly funded institution in the province, if they are offered employment in their field that is legitimate and the salary and conditions are standard, then a nomination can be granted. This is a helpful way of circumventing the federal regulation that skilled workers must have at least one year of work experience. Graduates of both four year degree programs and two year diploma programs are eligible as follows:
Acceptable 4 Year Programs:
Natural Sciences, Applied Sciences or Engineering
Health Science
Computer Science, Information Systems or Digital Media
Business or Commerce
Acceptable 2 Year Programs:
Applies Sciences or Technologies or Engineering
Health Science or Technologies
Computer Science or Technologies, Information Systems or Digital Media
Business or Commerce
The Business Immigration component of the B.C. PNP accelerates the immigration process for investment-ready and qualified entrepreneurs ready to invest in and actively manage an eligible business in B.C. General guidelines are as follows:
• The business’ primary purpose is to earn profits from active income from the supply of products/services;
• The sustained commercial viability of the business must be feasible.
• The business needs to provide economic benefits to the province through one of the following avenues:
• increasing the exports of goods/services;
• increasing value-added manufacturing, processing, or primary resource activity;
• increasing tourism to the province;
• increasing research and development and technology commercialization;
• creating innovative approaches to traditional businesses;
• providing services to an underserved regional market;
• transferring skills, technology, and know-how to the province;
• succession plan buy-outs where eligible businesses are purchased from retiring owners.
There are three categories of Business Immigration:
1. Business Skills
2. Regional Business
3. Strategic Projects
Each category has different requirements for the minimum personal net worth of the applicant, the amount of investment, geographic location and number of Canadian employees in proposed business.
Business Skills
Applicants must have a personal net worth of $800,000, make a minimum investment of $400,000 to establish the business, and own at least one third of the equity in the business. Applicants must create a business plan that generates at least three jobs for Canadian citizens and be actively involved in the daily management of the business. In addition to the principal applicant, one foreign national may be included on the application as a staff member.
Regional Business
To be considered for this program, the business that the applicant invests in must be located outside of the Vancouver metropolitan areas and the Abbotsford metropolitan area. Applicants must have a personal net worth of $400,000, make a minimum investment of $200,000 in the business, and own at least one third of the equity in the business. The applicant must create at least one job for a Canadian citizen and be actively involved in the daily management of the business. Foreign staff may not be included on the application under this category.
Strategic Projects
This category aids existing foreign-controlled companies who wish to expand their business in B.C. Under this category, applicants may bring up to five professional, managerial or technical support staff members. Companies applying must make an equity investment of at least $500,000. For each foreign staff member included in the application, three jobs must be created for Canadian citizens.
Business Succession Plan Buy-Out
Applicants who commit to purchasing an existing business receive priority processing and a reduced job creation requirement. For example, in the Business Skills category, the job creation requirement is reduced by one. For applicants under the Regional Business category, the job creation requirement is dropped.
In the role of Trustee, a Trustee typically has the power to invest the funds. This begs the question as to what this power entails. It is imperative that a Trustee is aware of the limits of this power to prevent liability. Unless the Trust Deed explicitly sets out the scope and limits of the power, the Trustee Act, RSBC 1996 and case law govern.
 
Section 15 of the Trustee Act
Under section 15.1 of the Trustee Act, the standard stated is that of a prudent investor. Section 15.2 provides the standard of care, which mandates a “[trustee] must exercise the care, skill, diligence and judgment that a prudent investor would exercise in making investments”. Section 15.3 limits the liability of the Trustee in the event of losses so long as the overall investment strategy is prudent. A Trustee may also utilize an agent to make investment decisions if it is consistent with ordinary business practice to delegate. A Trustee would need to be prudent in who it selects as its agent, in establishing the terms and limits of the authority and in monitoring the performance of the agent to ensure compliance with the given authority.
 
Case law
Legislation does not explicitly describe what a prudent investor is. Case law can be elucidating for this matter.
 
The power to invest is informed by the what the primary duty of a Trustee is. The Supreme Court of Canada held in Fales v Canada Permanent Trust Co., [1977] 2 SCR 302 that the primary duty of a Trustee is to preserve trust assets, even if wide discretionary powers are contained in the trust deed. This need to preserve the assets suggests a level of conservatism as to how a Trustee is to exercise its power to invest. In essence, a Trustee would not be able to invest freely in anything if that could mean losing the assets of the trust.
 
In the persuasive English trusts law case, Cowan v Scargill [1985] 1 Ch 270, the main takeaway is that the investment policy is up to the Trustee so long as it is reasonable. In being reasonable, it held that the duty to invest must consider the financial interests of the beneficiaries and employees. This means that to reduce risk, a Trustee should know the needs and goals of the beneficiaries. The case outlines that an ordinary prudent person is someone who will get advice on investments, particularly where their own personal knowledge is limited. The case also emphasized the need to look at investments in the broadest way. This means considering different investments to ensure diversification. Diversification is prudent as it moderates risk by not investing too heavily in a limited number of investments. The concept for diversification can be illustrated by a British Columbia case, Miles v Vince, 2014 BCCA 289, where the Trustee invested only into one investment. Here, it was held that a Trustee must assess whether diversification is required to preserve the trust assets.
 
Given the discussion above, liability is not imposed on a Trustee for simply having a loss on the investment, where the Trustee has acted within the prudent investor standard. The Supreme Court of Canada held in Ermineskin Indian Band and Nation v Canada, 2009 SCC 9 that a Trustee does not have a duty to guarantee against risk of loss to the trust due to the investment nor to guarantee a return on the investment.
 
The Main Takeaways
First, it is important that a trust deed is explicit about the scope and limitation of the power. If a trust deed does not provide for this, then the power of investment is going to be informed by the existing case law and the limited Trustee Act. Therefore, it is good practice to be explicit with what a Trustee can or cannot do with respect to its power to invest.
 
Secondly, as a Trustee, it is necessary to know the needs and objectives of the beneficiaries. They may be in a position where they need steady income, in which case a regular income bearing investment may be a good option whereas for some beneficiaries, an investment focused on long term capital growth may be the better route.
 
Lastly, managing the investment itself is important. This starts with developing an investment plan in writing at the beginning and seeking professional assistance when necessary. When making the investment, it is important to practice both diversification and conservatism to limit liability. Subsequently, a Trustee must continue to monitor that investment to continuously reassess its performance and its fit with the overall investment objectives.
Review will
 
Determine who will act as executor or administrator of estate
 
Order Death Certificate (Issued by Provincial Government)
 
Secure estate assets and ensure adequate insurance coverage
 
Notify Canada Post to redirect mail
 
Call Service Canada, advise of death, and obtain information regarding Canada Pension Plan, Old Age Security and related benefits, tel: 1-800-277-9914
 
Contact life insurance company to obtain benefits / claim forms
 
Contact financial institutions to remove deceased’s name from join accounts or to transfer accounts held solely by deceased into the name of Estate
 
Contact credit card companies to remove deceased’s name from accounts or cancel accounts
 
Contact local ICBC Autoplan broker, or private insurer if applicable, to cancel or change car insurance
 
Notify phone and utility companies to change the name on bills or change service
 
Contact accountant to file tax returns and apply for clearance certificate
 
Locate estate assets and safety deposit box
 
Contact Elections BC if death occurred outside of British Columbia
 
If deceased received pension benefits, extended health and dental benefits from a pension plan, contact the pension plan administrator to advise of death and determine eligibility for continued benefit coverage for dependents
 
Contact Service Canada regarding employment insurance
 
Contact Medical Services Plan to confirm MSP coverage termination, tel: 604-663-7100
 
Contact Passport Canada to cancel deceased’s passport, tel: 1-800-567-6868
 
Contact Social Insurance Registration to cancel deceased’s Social Insurance Number, tel:1-800-206-7218
 
Notify Canada Revenue Agency of death and cancel benefit payments in name of deceased, tel:1-800-277-9914
 
If deceased was receiving veteran’s benefits, call Veterans Affairs Canada, tel:1-800-522-2122
 
Cancel deceased’s Driver’s License at local ICBC Driver Licensing Office, tel:604-661-2800
 
Sell real estate, if applicable (seek advice of realtor)
 
Contact BC Gazette (and local newspaper) to arrange for publication of notice to creditors, tel: 1-800-663-6105
 
Pay debts of deceased
 
Maintain detailed accounting of assets as well as receipts and disbursements during administration of estate