Author Archives: Brian Jalonen

Some Basic Information on Dividing Matrimonial Property

CautionsignMPA

When married couples decide to part ways, one of the things that needs to be determined is what to do with all of the stuff that they’ve amassed during the relationship.

In Canada, the law of divorce falls within the federal sphere of power but the division of a married couple’s property is governed by provincial law. In Alberta, that law is the Matrimonial Property Act (MPA). The MPA empowers a court to distribute the property owned by either or both of the spouses.

(The MPA does not apply to unmarried couples. We will discuss how property for unmarried or “common law” couples gets divided in a future blog post. Stay tuned!)

The general concept is that spouses are financial partners in a marriage and, broadly speaking, each spouse has a claim to half of the value of the property that the couple acquired during the marriage. This means that it usually doesn’t matter whether a car is registered in only one spouse’s name or whether the home the couple lives in has only one name on the title – each spouse has a claim to half the value of that property if it was acquired during the marriage.

However, not all property owned by a spouse is necessarily subject to an equal split. The MPA identifies three broad categories of property and how they are dealt with:

1) Exempt Property. Certain property is exempt from being distributed as matrimonial property, based on the idea that not all property falls within the financial partnership of a marriage. This category includes gifts from third parties, inheritances, property that was owned before the marriage, awards for damages (such as an award in a slip-and-fall lawsuit) and proceeds of certain insurance policies. The value of the property at the date of the marriage or at the date the thing was acquired (whichever is later) is exempt from distribution.

2) Increases in the Value of Exempt Assets. The court must order a “just and equitable” distribution of property for the increase in value of an exempt asset or the income generated by an exempt asset for the period of the marriage. For example, the value of a collectible car owned by one spouse before the marriage is exempt, but the increase in its value over the course of the marriage – the accrued equity – is subject to a “just and equitable” division (which is not necessarily 50/50). Determining what is “just and equitable” requires the court to consider a variety of specific factors. For example, one such factor that the court will consider is any contribution (financial or otherwise) made by a spouse (or on behalf of spouse) in relation to the acquisition, conservation or improvement of the property.

3) Everything Else. If the property does not fall into the first two categories, then its value is subject to division between the parties. This is typically an even-steven split but it doesn’t have to be, if the court thinks that an even split would actually be unfair.

Most of the time, couples are able to come to an agreement on how they will split their property. The MPA specifically allows couples to make agreements that opt out of the MPA default rules for dividing property, so long as the agreement is in writing and both spouses have independent legal advice before signing. For the times when a couple doesn’t agree, Alberta courts rely on the MPA to determine the division of property.

If you have questions about divorce and your legal entitlements to property, Patriot Law Group can help.

The Basics of Support

family-hands

Whenever a client’s relationship breaks down, we consider whether child support and spousal support come into play. They are different things and different rules apply. Here are some quick facts about child and spousal support in Alberta.

  • Child support is automatic. Every child is entitled to support from his or her parents, at least up until the age of majority. Support is the right of the child, not the parent who receives payment.
  • Spousal support is not automatic. A spouse claiming support must first prove an entitlement to support.
    • In Bracklow v Bracklow ([1999] 1 S.C.R. 420), the Supreme Court of Canada set out 3 grounds for possible entitlement: compensatory, non-compensatory (“needs”) and contractual.
  • The Federal Child Support Guidelines set out the amounts payable in basic monthly child support in divorce cases and courts rarely allow deviations from the guideline amount. The Alberta Child Support Guidelines apply when the parents are not married.
  • The Spousal Support Advisory Guidelines set out a range of amounts payable in monthly support and courts routinely deviate from the suggested range because these guidelines are only advisory (not binding).
  • Adult Interdependent Partners (“Common law” spouses) may also have an obligation to support each other.
  • Basic monthly child support amounts in the Child Support Guidelines are determined by reference to the payor parent’s income (usually the amount on line 150 of the payor’s tax return), the number of children and the province where the payor parent resides.
  • Monthly spousal support amounts are calculated in the  Spousal Support Advisory Guidelines by comparing the two spouses’ disposable income, calculated “net” of any child support obligations.
  • There are two aspects to child support: basic support (also called “section 3 support”) and “special and extraordinary expenses” (also called “section 7 expenses”)
    • Basic support is generally meant to contribute to those everyday requirements of every child, such as food, shelter, clothing and schooling.
    • “Special and extraordinary expenses” are those expenses that are unique to the child, such as child care costs to allow a parent to go to work, or orthodontic braces or specialty education (this is an area of considerable debate). Parents typically share the expenses based on their respective incomes.
  • All aspects of spousal support can be negotiated between the spouses – entitlement, payment by lump sum or by installments, amount and duration of payments.
  • Child support is payable at least until the child reaches the age of majority. In certain circumstances (such as a child living at home to attend university classes full-time), child support is payable when the “child” is otherwise considered an adult.
  • Courts cannot take “spousal misconduct” into account when making an order for spousal support.

These are just the basics of support. If you need more information, we invite you to come in and see us.

 

Why Does It Cost So Much?

Zimbabwe_$100_trillion_2009

Recently, I was talking to my mother (who lives one of the lesser nine provinces outside of Alberta) and she was complaining about the amount of money it cost her to tidy up a few legal loose ends following the passing of my Dad. As the only lawyer in my extended family, my Mom (a retired accountant) put me on the spot to explain the costs she had to pay, with a look that implied that I must also justify the existence of my profession. (I’m assuming she looked like that because we were actually on the phone at the time. You can insert “an awkward silence” for “a look” and probably get the same effect.)

I explained Patriot Law Group’s dim view of the billable hour and the way we price our services but my explanation of our practices didn’t answer the question she had. I brought up the hoary old cliché used by building contractors: “Good, fast, cheap: pick two.” But that didn’t quite resonate for her, either. She wanted to know “why”, not “how” (although she mercifully stopped short of demanding that I formulate a complete economic and sociological justification for the capitalist free market system).

The “why” boils down to the nature of the work we do and the sizeable risks people need to manage in their lifetimes. In the legal profession, we routinely assist people to navigate the most important and stressful events in a person’s life. Beyond the physical and emotional stress of these events, there are typically very significant legal and financial aspects attached. It pays to handle these events properly.

In the legal world, agreements, contracts and documents work great until they don’t. When handled improperly, things can go pear-shaped in dramatic fashion. An incomplete or ambiguous Will could cost the estate thousands of dollars in legal fees to determine who the beneficiaries are and what their entitlements are. A poorly-drafted settlement agreement to a divorce might not provide the clear and final settlement of spousal support that was intended, leaving the door open to expensive disagreements later on. A carelessly-handled real estate conveyance might miss encroachments shown in the real property report that could cost thousands of dollars to rectify.

At Patriot Law Group, we take care to handle the legal parts your matter in the right way to protect you from needless risks and, by doing so, we try to minimize the stress that come with life’s big events. It’s a big responsibility that we take very seriously. And that’s why we charge for what we do.

Legal writing vs. Legalese

You don’t have to look too far to find “legalese” in your life. Look at your mobile phone bill or your iTunes terms of use or the so-called bumper-to-bumper warranty on your car. We really aren’t fans of it, either.

The thing is that not all legal writing is really legalese. Every profession and every industry has its own terminology, jargon and pet phrases. The legal profession is no different. For example, I had never heard or read the word “sedulously” until I went to law school (I  am yet to use it in speech or writing, but I bet it would kill in Scrabble).

Some of the terms we use have a very specific and clear meaning, even though the term may be completely unfamiliar to non-lawyers. For example, in a will, a “per stirpes distribution” has a clear and definite meaning that can save the lawyer from having to write a paragraph of explanation. The problem is that most people need that term explained and this is why we generally prefer the plain language version, even if it takes a little longer to say or write. (Incidentally, our support staff get the double-whammy of hearing both legal jargon and military slang – including the odd bit of jackspeak).

Aside from obscure terms, another complaint about legal writing is that it’s just too wordy. We learned in law school that lawyers are professionally descended from scribes, who were paid by the word. (I assure you that this is no longer the case.) This payment scheme explains how redundancies like “null and void” and “cease and desist” came about.

However, not every long-winded document is chock-full of filler words. We often see real estate deals or separation agreements written from scratch or filled in from a Mad Libs-like online form. The people that bring these in are often surprised to find out that their nice, short document does not do what they want it to do (or may be entirely unenforceable) because certain provisions are missing.  A comprehensively written document, while a bit of a long read, can go a long way to properly identify and protect your rights.

At Patriot Law Group, we are big on clarity. We want to do more for our clients than just deliver a fair result; we want our clients to understand what we’re doing and why we’re doing it, so they will understand what they’re signing and why. This is one of the reasons we prepare plans for our clients and it’s a big reason why we write in plain language as often as possible.

If I had to sum up my thinking on legal writing in two words, I would say, “eschew obfuscation.”

Your Certificate of Title is both a Mirror and a Curtain

Here in Alberta, we have a “Torrens Title” land title registration system that we imported. from Australia in the late 19th century. Robert Torrens was unhappy with the laborious deeds-based system that Australia had received from English law and he developed the simpler, more efficient system that now bears his name.

In the Torrens Title registration system, the state keeps a register of land holdings and transferring land is simplified by changing the registration of the title to the land, rather than registering deeds to land that show a party’s interest in or ownership of the land. Registration of title significantly simplifies the transfer of land. When land is sold or transferred, the change in title to the land is registered. The evidence of ownership is the Certificate of Title.

The Certificate of Title is evidence of the owner’s “indefeasible” title.  The Certificate of title can be described metaphorically as a “mirror” and a “curtain” as it relates to the land.

The Certificate of Title is an accurate and complete depiction of all of the rights or interests that relate to the land and so “mirrors” the state of title. Such interests could be a bank’s mortgage that is secured by the land (allowing the bank to foreclose on an unpaid mortgage and sell the property) or a utility right-of-way (that permits a utility company to be on the property to maintain its equipment or infrastructure) or perhaps a restrictive covenant registered by a municipality that prevents certain use of the land (for example, a restriction against using a home as a place of business). The Certificate of Title shows who owns the land, who else has an interest in the land, and the nature of the interest.

All the information pertaining to ownership of the land is on the title (since it is a mirror), so there is no need to look any further to determine all there is regarding the ownership of the property.  In this way, the Certificate of Title draws a “curtain” on the past. A potential buyer can rely entirely on the information on the existing Certificate of Title, without peering into the past to ensure previous transfers occurred correctly or to see if there are any hidden interests lurking.

The mirror and curtain metaphors (or principles) are bolstered by the principle of indemnification. That is, the registrar makes full compensation for losses that its errors may cause.

There you have it: that 8.5″ x 14″ sheet of pink paper is more than just a document that proves you Own your property. It’s a metaphor. It’s a mirror and a curtain.

At Patriot Law Group, we enjoy the occasional metaphor but we avoid similes like the plague. More importantly, we are happy to handle your real estate transactions for you.

Facebook Meets the Law

There are those that will tell you that Facebook’s day is done and that it is time to move on with new technologies. Here at Patriot Law Group, we scoff at such futurists but at the same time, we do secretly wonder why no one is visiting our myspace and friendster pages. Facebook, whether cool or not, remains a communication and cultural phenomenon and it is no surprise that it rears its head more and more in legal matters.

People tend to treat Facebook  as an extension of private conversation and post things they might not have fully thought out. The public accessibility of its content can mean that these “private” messages are seen by unintended audiences. For example, a few years ago at the University of Calgary, a group of dissatisfied students created a Facebook page to share their stories about a certain professor. The University caught wind of the page and cited each of the members of the Facebook page for academic misconduct. The students had the University’s disciplinary decision overturned in a judicial review at the Court of Queen’s Bench, whose decision the University appealed in the Alberta Court of Appeal.  The Court of Appeal agreed with the students that (among other things) the University had infringed upon their right to free expression.

Canadians’ right to free expression and the potential anonymity provided by Facebook does not necessarily mean that anything goes, though. In a disturbing case, the Supreme Court upheld the Nova Scotia Court of Appeal’s decision to force an internet service provider to disclose the profile information of a cyberbully. The cyberbully had posted a fake Facebook account that purported to be a young girl, with accompanying insulting and inappropriate commentary regarding the actual girl. The Supreme Court took the view that the need to protect the child from cyberbullying overrode the right to privacy.

Even outside of rude or offensive posts, Facebook can be used to provide evidence to help determine the outcome of a case. In this Alberta Court of Appeal case, a murderer was identified and convicted in part because he was identified in a Facebook photo by an eye-witness.

Facebook can even be used in the boring, procedural parts of the law. In an unreported Alberta case, posting notice of an action on a person’s Facebook page was deemed to be effective “substitutional service” on that person.

In conclusion, maybe the cool kids are right. Maybe Facebook is over. After all, it’s showing up in court decisions, so how cool could it possibly be? Regardless, if you’re going to use Facebook, we recommend you do so smartly and with the knowledge that your posts may be seen or shared or read by people you didn’t intend and your posts may have real consequences that you didn’t expect.

What is a “Commissioner for Oaths”, anyway?

People often come to us at Patriot Law Group asking that we “commission” documents for them. This usually means they need someone to administer an oath to properly execute the document (although sometimes they really need the services of a Notary Public). Certain documents require more than just a signature to verify that the contents of the document are true. The person who is signing the document must somehow indicate that what they have signed is true and accurate. For example, an affidavit to be filed in court must be given under oath or by affirmation.  A declaration of common law status to Canada Revenue Agency is made as a solemn declaration. A Commissioner for Oaths is a person who is authorized to administer oaths, affirmations, and solemn declarations.

In Alberta, the appointment of Commissioners for Oaths is governed by the provincial Commissioners for Oaths Act.

Members of certain professions are empowered to be Commissioners for Oaths by virtue of their status as a professional. Members of the Law Society of Alberta (lawyers, students-at-law) judges, police officers, Notaries, commissioned officers of the Canadian Armed Forces (who serve full-time), municipal councilors, school board trustees, provincial MLAs, Members of Parliament from Alberta and members of the Senate who live in Alberta are all empowered as Commissioners for Oaths in Alberta and can administer oaths. Their “commission” remains in effect as long as they remain an active member of their profession or in their positions.

People outside of these occupations can be appointed a Commissioner of Oaths by the government but their commissions expire after three years unless they are renewed.  Many support staff members at law offices, insurance brokers and municipal offices have this type of Commissioner.

It is important to remember that a Commissioner for Oaths in Alberta can only administer oaths for documents to be used within Alberta. If a document is going to be used outside of Alberta or sworn by a person who resides outside of Alberta, the person signing will generally need the services of a Notary Public.

It is also important to understand that a Commissioner for Oaths is only empowered to administer an oath, affirmation or solemn declaration. You need a Notary Public to get notarized copies of documents and you still need a lawyer for legal advice.

Acting as Commissioners for Oaths is just one small part of what we do at Patriot Law Group.

Agreements and Child Support

At Patriot Law Group, we are big believers in reaching a negotiated settlement to resolve the issues that can arise out of your separation. A recent case heard by the Alberta Court of Appeal (the province’s highest court) highlighted the need for parents to follow through on their obligations  under their agreement, particularly when it affects child support. It dealt with the issue of retroactive child support (the mother’s attempt to collect child support payments that had accumulated in the past)[1] .

A couple had a brief relationship that resulted in a child being born. The couple had very little contact after the relationship ended and the father paid no child support for the first four or five years of the child’s life. Eventually, the couple came to a written agreement dealing with child support that set out the amount the father would pay to the mother, based on his income at the time. They went on to live their separate lives in different towns. The child lived with the mother and the father rarely saw the child but paid the amount directed in the agreement.

All seemed well. However, after nearly 13 years receiving the exact same amount of support, the mother asked the father for his most recent financial information. Their agreement required them to exchange information annually, but they never did. When the mother received the father’s financial information, it was clear that the father’s income had increased dramatically since the agreement was made. Child support is directly related to the payor parent’s income, so the father had been underpaying child support for years.

The mother then brought an application in court for “retroactive” child support. The Supreme Court of Canada had previously dealt with the matter of retroactive child support[2] and came up with a series of four factors that a Canadian court should consider when making an order for retroactive child support: unreasonable delay by the recipient parent; “blameworthy” conduct of the payor parent; circumstances (or “needs”) of the child; and hardship caused to the payor parent by a retroactive award.

The Alberta Court of Appeal looked at each of the factors through the “lens” of the child support agreement. The Court of Appeal found that the father had undertaken a positive ongoing obligation to disclose his income and that his failure to meet the obligation trumped any delay by the mother in seeking increased support. Next, the Court  found that despite his lack of intention to do so by underpaying support, he had disadvantaged the child in reality, so the ‘conduct’ factor weighed against him. The court determined that since a child has the right to be supported commensurate to the parents’ income, “need” for support at the payor parent’s level of income is presumed. That is, it did not matter that the child had not suffered actual hardship; the child should have had a higher standard of living because the father should have been paying support based on his increased income. Lastly, the Court found that a payor parent can’t claim financial hardship without significant proof of actual hardship and the enforcement of the obligation to pay child support from a prior period is not hardship in itself.

The takeaway point is that Alberta’s Court of Appeal has taken a hard line on enforcing settlement agreements. This case creates a precedent that allows the courts to claw back underpaid support, particularly when an agreement has been ignored. Parents can no longer sign an agreement and forget about the ongoing obligations in it. Payor parents must stay up to date with providing annual financial disclosure and adjusting the amount of support accordingly. It does not matter whether the recipient parent asks for the information or provides any. It does not matter whether or not the payor intended to underpay support. It does not matter if the child does not have a documented “need” for more money to live. It does not matter that paying back the child support owed will be financially inconvenient. The Alberta Court of Appeal has spoken: parents must honour their agreements and fully support their children.

Of course, every case is different and different facts can lead to different results. We would be pleased to discuss with you whether and how this case applies to your own circumstances.

 

[1] Goulding v Keck, 2014 ABCA 138

[2] DBS v SRG, 2006 SCC 37

Personal Guarantees for Corporate Loans

Michelle explained in an earlier post that many small business owners choose to incorporate their business to protect themselves from personal liability from the obligations of the business. The corporation has its own separate legal identity from the corporation’s directors and shareholders. For example, a supplier can demand payment for unpaid goods from an incorporated business but not directly from the directors of that business. The corporation has the obligation, not the corporation’s directors or shareholders. The corporation’s directors and shareholders are protected behind the “corporate veil.”

There are times, however, when the corporate veil is pulled aside and the directors or shareholders (or both) can be made liable for the corporation’s obligations. One such instance often occurs when a small, closely-held corporation needs to borrow money from a bank.

Banks are well aware that a corporation and its directors have separate legal identities and, therefore, if a corporate borrower fails to pay its loan back, the bank has no legal ability to demand payment from the directors and shareholders. It will come as no surprise that an ingenious workaround has been developed to ensure that banks can get their money back; it’s called the personal guarantee.

In addition to other security a bank may demand (such as a mortgage on corporate real property or a security agreement on corporate personal property such as equipment or inventory), the bank may require a personal guarantee. That is, the bank requires someone (the “guarantor”) to guarantee the loan, in the event that the corporation fails to pay the loan back (although the bank usually doesn’t need to wait until the corporation defaults to seek payment from the guarantor).

These guarantees strip away any protection that the individual person would have otherwise had against this financial obligation of the corporation. Signing a personal guarantee for a corporate loan is a personal acceptance of that corporate obligation and represents a significant legal and financial decision for the guarantor.

In Alberta, the government wants to ensure that people who sign a guarantee fully understand the nature and effect of the document. As such, we have provincial legislation called the Guarantees Acknowledgement Act that governs the proper signing of these guarantees. The Act requires that a Notary Public personally meet with the person who has signed the personal guarantee and confirm that the person is aware of the contents of the guarantee and understands it.  A certificate confirming this is completed and attached to the personal guarantee.  The certificate is intended to demonstrate that the guarantor has accepted the obligations knowingly and willingly.

The decision to personally guarantee your corporation’s loan is a significant financial, legal and personal decision. At Patriot Law Group, we can answer the legal questions you might have about running your small business, including questions about personal guarantees.

 

What’s in a (corporate) name?

Juliet:
“What’s in a name? That which we call a rose
By any other name would smell as sweet.”

Romeo and Juliet, Act II, Scene II

Juliet gazed at the starry sky, lamenting that her Romeo was a Montague, a hated name in her family. Why couldn’t he have been Romeo Jones or Romeo Gallagher? Juliet discovered the fundamental truth that all business owners know: names matter.

Let’s say Joe Blow is going to incorporate a company. What should he call it? The question is more than just a matter of personal taste. There are legal considerations involved. In Alberta, every corporate name needs three elements: a distinctive element, a descriptive element and a legal element.

The distinctive element is the part of the name that individualizes the company from other like companies.

The descriptive element is the part of the name that defines the nature of the company’s business.

The legal element indicates that the business is incorporated and not a natural person or a partnership. In Alberta, you usually see the words “Incorporated” or “Inc.”, “Limited” or “Ltd.” (or the French translations of those words).

So if Joe wants to name his newly-incorporated business that builds and services widgets, he could name his company “Blow Widget Services Ltd.”, where “Blow” is the descriptive element, “Widget Services” is the descriptive element, and “Ltd” is the legal element.

What if Joe is a professional, like an accountant or a dentist? If Joe is incorporating a company as a member of a regulated profession, he could call his company “Joe Blow Professional Corporation.” He also has the option of including a professional descriptor within the name, so that the name might be “Joe Blow Chiropractic Professional Corporation” or “Joe Blow Dental Professional Corporation,” depending on his profession.

What if Joe doesn’t really need or want a special name for the company? For example, Joe decides to incorporate a company just to hold shares in other companies.  Joe also has the option to use a number as a name. When the corporate documents are sent to the registry agent, Joe requests the Registrar to assign a designated number to be the corporate name. Joe then ends up owning a company named “1234546 Alberta Ltd.”

You can see that Joe has a lot of choice in naming his company but there are limits to legally acceptable names. The regulations to the Alberta Business Corporations Act lay out prohibited names as well as prohibited affiliations. For instance, Joe’s corporate name can’t be profane or offensive.  Joe’s corporate name cannot suggest an affiliation with a government, a university, royalty,  or imply that it carries on financial services. So Joe can’t name his company “Province of Alberta Widget Services Ltd” or “Her Majesty’s Widget Services Ltd” or “Alberta Savings and Loan Widget Services Ltd.”

Joe must also be careful that his name does not create the potential for confusion with the public by naming his company something that might sound like an existing company. For example, if Joe’s brother Moe already runs “Blow’s Widget Service and Repair Inc.”, Joe shouldn’t name his company “Blow Widget Services, Ltd” because it might confuse customers as to which company they’re dealing with. If Joe isn’t careful with the corporate name, he could get sued for the tort of passing off  (which is misrepresenting your goods and services as another’s).

With this sad eventuality, we would look at the owners of the two competing Widget businesses and conclude: “Never was there a story of more woe / Than this of Joe and his bro Moe.”

Patriot Law Group provides legal services to small businesses – but we’re not very good at poetry.