legal opinions: sample opinion letters nos. 4a and 4b€¦ · irene m. stewart of gowling lasfleur...
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16 October 2014
LEGAL OPINIONS:
SAMPLE OPINION LETTER NO. 4A: REAL ESTATE (Fee Simple Title)
SAMPLE OPINION LETTER 4B: REAL ESTATE (Fee Simple Title Held by Corporate Trustee)
The Solicitors' Legal Opinions Committee was constituted for the purpose of reviewing materials
previously published with respect to solicitors' opinions and preparing guides for the assistance of
the profession.
Sample Opinion Letters Nos. 4A and 4B are published as reference tools for the use of e legal
profession in British Columbia and without liability on the part of the Solicitors' Legal Opinions
Committee or any of its members. These Sample Opinion Letters are not a replacement for careful,
knowledgeable-transaction-specific legal work which should be undertaken by a solicitor delivering
an opinion.
The members of our Committee at this time are:
Sandra D. Sutherland, QC (Chair)
Paul D. Bradley of Lawson Lundell LLP
Linda G. Brown of McCarthy Tétrault LLP
Mitchell H. Gropper, QC of Farris, Vaughan Wills, & Murphy LLP
Greg Lewis of Bull, Housser & Tupper LLP
J. Michael (Mitch) McCormick
John D. Morrison of McMillan LLP
Mark Schmidt of Davis LLP
Tim Sehmer of Borden Ladner Gervais
Anne M. Stewart, QC of Blake, Cassels & Graydon LLP
Irene M. Stewart of Gowling LasFleur Henderson LLP
Ron Stuber of Dentons LLP
The Committee created a real estate subcommittee chaired by Paul D. Bradley of Lawson Lundell
LLP assisted by:
Damon Chisholm of McMillan LLP
Greg Umbach of Blake Cassels & Graydon LLP
Irene M. Stewart of Gowling LaFleur Henderson LLP
Earlier Statements
Our Committee has issued numerous earlier statements concerning legal opinions. Those
statements are listed as Items 1.1 to 1 12 inclusive on the list of reference materials (the
Page 2 of 5
“Reference Materials”) included at the end of this statement and published on the website of the
Law Society of British Columbia. Attached Sample Opinion Letters Nos. 4A and 4B provide specific
opinion language and updates to the Statement of the Committee Concerning Legal Opinions: Real
Estate issued in December 1993 and listed as Item 1.5 of the Reference Materials and replaces
Item 1.7 of the Reference Materials. Our Committee has reviewed the earlier Statements and,
apart from such necessary updating, confirms the principles set out therein.
Sample Opinion Letter No. 4A: Real Estate (Fee Simple Title)
Sample Opinion Letter No. 4B: Real Estate (Fee Simple Title Held by Corporate Trustee)
The Committee has prepared the attached Sample Opinion Letters Nos 4A and 4B as “third party
legal opinions”, that is, opinions to be given by a solicitor for one party in a commercial transaction
to the other party in the transaction. Sample Opinion Letters Nos. 4A and 4B relate to real
property registered in the land registration system established under the Land Title Act of British
Columbia.
The assumptions, qualifications, and limitations in Sample Opinion Letters Nos. 4A and 4B are not a
replacement for careful, knowledgeable, transaction-specific legal work (including inquiries) which
should be undertaken by a solicitor delivering such a real estate opinion.
Sample Opinion Letters Nos.. 4A and 4B merely set down those basic matters that the members of
our Committee consider they would address in opinions of this nature. Two principles must override
all other considerations in Sample Opinion Letters Nos. 4A and 4B and in all similar opinions:
1) the opinion giver may not rely on information (whether contained in certificates or in other
documentation) or assumptions, otherwise appropriate in the circumstances, if the opinion
giver knows or has reason to believe that the information or assumptions are inaccurate or
incomplete; and
2) the opinion giver may not rely on a general qualification or limitation (such as the
“bankruptcy and insolvency exception”) to the “remedies opinion” (the opinion that a
document creates a legal, valid, and binding obligation and is enforceable) if the opinion
giver knows or has reason to believe that an existing issue would limit the enforceability of
a specific provision of the document or of the entire document, and accordingly either the
opinion giver must decline to give the remedies opinion or the existing issue and its effect
must be specifically addressed in the opinion.
Wilfred M. Estey has also set down some general rules concerning assumptions in commercial
transactions which are worth noting. They are contained at pages 81 to 83, inclusive, of his book
Legal Opinions in Commercial Transactions, 2nd edition, listed as Item 4 of the Reference
Materials. Briefly, Mr. Estey states that assumptions should be limited, so far as possible, to
matters of fact, assumptions of facts should not be made as to matters that it would normally be
the duty of the giver of the opinion to inquire into, and assumptions of fact that render a legal
conclusion meaningless should be avoided in virtually all circumstances. The last point is a reference
to some fortunately rare requests to make particular assumptions that go to the heart of the
opinion requested in order to arrive at a particular legal conclusion.
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Although it would appear to many that contemporary opinions are burdened with an ungainly number
of assumptions and qualifications, there are almost an equal number of unstated assumptions which
apply to opinions. Because solicitors are not normally able or expected to investigate impossibility
or illegality which may arise, not on the face of the instrument but out of an undisclosed intended
use of the instrument, opinions are generally not qualified as to these kinds of vitiating elements
unless the giver knows or has reason to believe such a vitiating element exists. Our Committee has
concluded that a similar unstated assumption applies in respect of statutes of limitations. Although
clearly such statutes limit the enforceability of every instrument, to our knowledge, qualifications
for such statutes are generally not inserted into enforceability opinions.
Our Committee points out that the equitable principles limitation included in Sample Opinion Letters
Nos. 4A and 4B cover both the traditional discretion of a court of equity and the newly emerging
concepts of materiality, reasonableness, good faith and "fair dealing". Refer to pages 206 to 216 of
Wilfred M. Estey's book Legal Opinions in Commercial Transactions, 2nd edition, listed as Item 4 of
the Reference Materials. A doctrine of performance in good faith appears to be emerging from
recent Canadian decisions (some unreported).
Sample Opinion Letters Nos. 4A and 4B are not intended for use as multi-jurisdictional opinions.
They do not address conflicts issues, choice of law clauses, or jurisdictional questions. If the facts
of the transaction require that such matters be addressed, then assumptions, qualifications, and
limitations will be required in addition to those contained in Sample Opinion Letters Nos. 4A and 4B.
Our Committee refers the reader to Item 8 of the Reference Materials as a source for information
on multi-jurisdictional opinions and to the Addendum to Sample Opinion No. 3 Commercial re:
Foreign Law listed as Item 1.11 of the Reference Materials.
The organization of a commercial opinion varies from firm to firm. Some firms append the
qualifications and limitations as a separate schedule to the opinion. Some firms incorporate by
reference terms defined in the documents into the opinion letter. Sample Opinion Letters Nos. 4A
and 4B merely indicate one way of organizing the material, which our Committee considers is by no
means the only way.
Guidelines
In Item 1.3 of October 1992, our Committee recommended adherence to Certain Guidelines for
Negotiation and Preparation of Third Party Legal Opinions (the "Guidelines"), listed as Item 9 of
the Reference Materials, which were published with the Silverado Accord, listed as Item 5 of the
Reference Materials. The Guidelines address many of the ethical issues that arise between lawyers
when they are negotiating and preparing opinions. The Guidelines can be read and applied quite
separately from the Silverado Accord. Our Committee continues to endorse the Guidelines for
third party legal opinion practice in British Columbia. With the permission of the American Bar
Association, the full text of the Guidelines was reproduced and attached to the October 1992
Statement of the Committee listed as Item 1.3 of the Reference Materials.
© Solicitors’’ Legal Opinions Committee of British Columbia
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Reference Materials
1. Statements of the Solicitors’ Legal Opinions Committee of BC:
1.1. Statement of the Solicitors’ Legal Opinions Committee Concerning Legal Opinions:
Standard Form Security Instruments, adopted 2 May 1989 and published in the Benchers’
Bulletin, 1989: No. 10 November
1.2. Statement of the Solicitors’ Legal Opinions Committee Concerning Legal Opinions:
Personal Property Security Act, adopted 4 July 1991 and published in the Benchers’
Bulletin, August 1991
1.3. Statement of the Solicitors’ Legal Opinions Committee Concerning Legal Opinions: The
Silverado Accord including Certain Guidelines, adopted August 1992
1.4. Statement of the Solicitors’ Legal Opinions Committee Concerning Legal Opinions: PPSA
Sample Opinions, with Sample Opinion Letters No. 1 and No. 2, all adopted 4 March 1993
1.5. Statement of the Solicitors’ Legal Opinions Committee Concerning Legal Opinions: Real
Estate, December 1993 (replaced by 1.7 below)
1.6. Statement of the Solicitors’ Legal Opinions Committee Concerning Sample Opinion No. 3:
Commercial, adopted February 2002 with Sample Opinion Letter No. 3, adopted 13 July
2004 (revised by items 1.8. 1.9 and 1.11 below)
1.7. Statement of the Solicitors’ Legal Opinions Committee Concerning Sample Opinion No. 4A:
Real Estate (Fee Simple Title), with Sample Opinion No. 4A, all adopted 19 October 2006
(replaced by Item 1.13 below)
1.8. Statement of the Solicitors’ Legal Opinions Committee Concerning Sample Opinion No. 3.
Commercial, with Revised Sample Opinion No. 3, all revised 1 May 2007
1.9. Addendum to Sample Opinion No. 3 Commercial - Extracts re: Private Placement for a
Non-Reporting Issuer, adopted 19 November 2009
1.10. Addendum to Sample Opinion No.3 Commercial re: Foreign Law, adopted 10 February 2011
(replaced by item 1.11 below)
1.11. Addendum to Sample Opinion No.3 Commercial re: Foreign Law. adopted 21 March 2013
1.12. Suggested Protocols for Virtual Closings, adopted 15 July 2014
Page 5 of 5
1.13. Statement of the Solicitors’ Legal Opinions Committee Concerning Sample Opinion Letters
Nos. 4A and 4B: Real Estate, with Sample Legal Opinion Letters Nos 4A and 4B, adopted
18 October 2014 (replacing Item 1.7 above)
NOTE: Statements of the Solicitors’’ Legal Opinions Committee may be found on the website of the Law Society of BC at:
https://www.lawsociety.bc.ca/page.cfm?cid=2738&t=Solicitors'-Legal-Opinions-Committee-of-British-Columbia
2. Paper of the Subcommittee of the Commercial, Consumer & Corporate Law Section of the British Columbia Branch of the Canadian Bar Association: Solicitors’ Opinions in Commercial Transactions, 1977
3. Legal Opinions in Corporate Transactions, by A. Field and R. Ryan, Business Law Monographs
Vol. C6, Mathew Bender, New York, 1988
4. Legal Opinions in Commercial Transactions, 2nd edition, by Wilfred M. Estey, Butterworths,
1997
5. Third Party Legal Opinion Report, including the Legal Opinion Accord, of the Section of
Business Law, American Bar Association, 1991 (the “Silverado Accord”)
6. Fitzgibbon and Glazer on Legal Opinions, by Scott Fitzgibbon and Donald Glazer, Aspen
Publishers, last supplemental dated 2/3/2006
7. Opinions Requested by Lenders: Not a Negotiable Instrument II, Sandra D. Sutherland,
Q.C., Vancouver, B.C., Continuing Legal Education of British Columbia, November, 1989
8. Cross Border Issues in Secured Lending, David Zacks, Insight Conferences, “Commercial Loan Transactions, Achieving Bullet-Proof Security”, May 30, 1996, Vancouver, (see also the paper of Michael Disney and Ian McBride for Toronto Conference on the same subject, January, 1996)
9. Certain Guidelines for Negotiation and Preparation of Third Party Legal Opinions, The Committee on Legal Opinions of the Section of Business Law, American Bar Association, 1991 (now replaced by Guidelines for the Preparation of Closing Opinions, The Committee on Legal Opinions of the Section of Business Law, American Bar Association, February 2002 57 The Business Lawyer 875, which Guidelines can also be found at:
http://www.abanet.org/buslaw/tribar/materials/20050120000001.pdf
10. CRA Deemed Trust Claims, by Louis LHeureux (Counsel, Tax Litigation, Department of Justice Canada) and Bill Walker (Gowling Lafleur Henderson LLP), Tab 5 in material from the 10th Annual Real Estate Law Summit, April 10, 2013, The Law Society of Upper Canada, Continuing Professional Development
11. Waters' Law of Trusts in Canada, 4th Edition, Donovan W.M. Waters, Mark Gillen, and, Lionel Smith, Carswell Canada, 2012
Endnote 1
Describe: (i) limited or special role, if
appropriate; (ii) the Client(s); (iii) the
transaction; (iv) the principal agreement.
If the Principal Agreement does not
contain a precise legal description of the
lands to which this opinion relates, and a
defined term identifying those lands (i.e.
“Lands”), insert PID number and legal
description, including city/municipality
and define lands to which opinion relates.
If the Lands are a strata lot add “together
with an interest in common property in
proportion to the unit entitlement as
shown on Form V”.
The description of the Lands is complete
without reference to easements and
restrictive covenants which may be
appurtenant to it.
The opinion should not be based on any
document or certificate which the opinion
giver knows or has reason to believe is
inaccurate or incomplete. If any
document or certificate is not current, add
an appropriate assumption, as in 2.3 or
2.4.
SAMPLE OPINION LETTER NO. 4A (2014 REVISION):
REAL ESTATE (Fee Simple Title)
(British Columbia Transaction)
(to be given by lawyer for one party to the other party, and if
appropriate, the lawyer for the other party)
(limited to an opinion on land registered in the registration
system established under the Land Title Act)
[DATE]
[ADDRESSEE]
Dear ,
Re: _________________________________________________
We have acted as (i) counsel to (ii) ([X Co.]the “Corporation”)
in connection with (iii) [describe transaction; e.g. purchase of
land etc.] pursuant to (iv) [describe principal agreement; e.g.
purchase and sale agreement, loan agreement etc.] (the
“Principal Agreement”) between the Corporation and [insert
applicable party or parties (the “Mortgagee”)].
Terms used in this opinion letter and defined in the Principal
Agreement but not in this opinion letter have the meanings given
to them in the Principal Agreement.
This Sample Opinion is published as a reference tool for the use of the legal profession in British Columbia and without liability on the part of the Solicitors' Legal Opinions Committee or any of its members. This Sample Opinion is not a replacement for careful, knowledgeable, transaction-specific legal work which should be undertaken by the solicitor delivering the opinion.
16 October 2014
2
Endnote 2
List documents and certificates which
were reviewed, stating whether they were
originals, copies or certified copies. If
they were the last-mentioned, consider
whether the person certifying is
appropriate to do so.
For 1.2, consider whether additional
assumptions or qualifications are
appropriate where you are acting for the
Mortgagee and the Mortgagee requires
that its “standard” Express Mortgage
Terms be used without review or
alteration.
Certificate under 1.4 – Facts only, e.g.
confirmation that there is no leasehold
interest of 3rd parties for term not
exceeding 3 years under which there is
actual occupation; that Corporation (if
registered owner) is not acting as trustee
and has not disposed of its interest in the
Lands by an unregistered document.
SEE SUGGESTED FORM OF
OFFICER’S CERTIFICATE
ATTACHED AS APPENDIX I.
If applicable, list additional documents in
connection with the transaction which
were reviewed.
If a search cannot be made, consider
relying on a State of Title Certificate of
appropriate date.
No assumption should be made with
regard to a fact which the opinion giver
knows or has reason to believe is
inaccurate or incomplete.
It may not be appropriate to assume the
1. EXAMINATIONS
In connection with this opinion letter, we have examined the
following; [copies of which are enclosed or have previously been
delivered to ]:
1.1 the Principal Agreement;
1.2 the Form B mortgage (including the Mortgage Terms –
Part 2 (the “Mortgage Terms”) [attached thereto/filed
under No. and incorporated therein by reference]) in
the principal amount of $ made by the Corporation in
favour of the Mortgagee dated (the “Mortgage”);
1.3 [Identify any other transaction documents e.g.
purchase agreement, Form A Transfer];
(collectively, with the Principal Agreement and the
Mortgage, the “Documents”);
1.4 a certificate dated of [an officer] of the Corporation;
1.5 a copy of the Certificate of [Good Standing]
[Compliance] with respect to the Corporation issued on
by [the Registrar of Companies] [Industry Canada];
1.6 [other].
We have also examined such other corporate records and
documents and certificates of public officials, made such
investigations and searches and considered such questions of law
as we have considered necessary to give the opinions expressed in
this letter. The opinions expressed herein are based on our
search(es) of the records of the [applicable] Land Title Office
(the “LTO”) made at ____________AM/PM on the _______ day
of ________________, 20____.
3
identity of corporate officers if the
opinion is being given in respect of the
opinion giver’s own corporate client.
Endnote 3
Include second part if certificate not
dated the date of the opinion.
Use only where Mortgage secures
2. ASSUMPTIONS
For the purposes of the opinions expressed in this letter we have
assumed:
2.1 the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity
with authentic originals of all documents submitted to us
as copies, the identity and personal legal capacity of all
individuals acting or purporting to act as corporate
officers, and the identity and capacity of all individuals
acting or purporting to act as public officials;
2.2 the accuracy and completeness of all information provided
to us by offices of public record;
2.3 that the facts set out in the certificate described in section
1.4 are true and correct [and that there have been no
change in those facts set out in such certificate since
the date of such certificate];
2.4 that the Certificate(s) of [Good Standing] [Compliance]
[Status] for the Corporation remains valid as of the date
of this opinion;
2.5 that each of the Documents creates legal, valid and
binding obligations of, and is enforceable in accordance
with its terms against, each of the parties thereto other
than the Corporation;
4
blended payment of principal and
interest.
The language in 3.1 is either the same
language used in the relevant Certificate
or reflects legal conclusions which can be
drawn from the language in the relevant
Certificate. It is possible that the
language used in one or both Certificates
will change over time, so the Certificate
should be reviewed to ensure the
language is still appropriate. Variations
of the 3.1 opinion can be used so long as
the language either is the same as the
language in the Certificate or reflects
legal conclusions which can be drawn
from such language.
Expand to include powers to
borrow/guarantee, as appropriate see
Endnote
2.6 that the [yearly/half-yearly] rate of interest disclosed in
the Mortgage for the purposes of Section 6 of the Interest
Act (Canada) is accurate;
3. OPINION
Based and relying upon, and subject to, the foregoing and subject
to the qualifications and limitations set out below, we are of the
opinion that:
3.1 the Corporation exists as a company under the law of the
Province of British Columbia, is a valid and existing
company and is, with respect to the filing of annual
reports, in good standing with the office of the Registrar
of Companies for the Province of British Columbia;
-or-
[the Corporation exists under the Canada Business
Corporations Act, has filed all required annual returns
under said Act, is registered as an extra-provincial
company under the law os the Province of British
Columbia and is, with respect to the filing of annual
reports, in good standing with the Office of the
Registrar of Companies for the Province of British
Columbia;]
3.2 the Corporation has the corporate power and capacity to
own its interest in the Lands and to enter into and perform
its obligations under each of the Documents to which it is
a party;
3.3 the execution and delivery by the Corporation of each of
the Documents to which it is a party, and the performance
by the Corporation of its obligations thereunder, have
been duly authorized by all necessary corporate action of
the Corporation;
5
Add if applicable.
For compliance with laws see Endnote 4.
Obtain and rely on a certificate as to
assets and business.
Some commercial opinions include
opinions as to absence of breach of
specified documents and/or applicable
law, though this would not be usual in an
opinion dealing only with a mortgage.
See Section 3.7 of the Committee’s
Sample Opinion No. 3 Commercial for
the form of expanded opinion.
Endnotes 5, 6 and 7.
The use of only the word “registered”
limits the scope of the opinion. If
“registered” is omitted or “beneficial” is
used it is necessary to ensure there is no
unregistered trust or transfer, which could
be done by way of officer’s certificate.
In (a) add reference to 23(2)(d) if
officer’s certificate does not address
unregistered leases for terms of 3 years or
less or confirms existence of such leases.
3.4 each of the Documents to which the Corporation is a party
has been duly executed and delivered by the Corporation;
3.5 each of the Documents to which the Corporation is a party
creates legal, valid and binding obligations of the
Corporation and is enforceable against the Corporation in
accordance with its terms;
3.6 the execution and delivery of the Documents to which it is
a party by the Corporation and the performance by the
Corporation of its obligations thereunder do not conflict
with or result in a breach of any provisions of the
[constating documents – specify Notice of Articles,
Articles, Incorporation Agreement, etc. as
appropriate] of the Corporation [if appropriate refer to
unanimous shareholders agreement, etc.];
3.7 the execution and delivery of the Documents to which it is
a party by the Corporation and the performance by the
Corporation of its obligations thereunder, do not violate,
conflict with, or result in any breach of any laws of British
Columbia or the laws of Canada applicable in British
Columbia (collectively, the “Applicable Law”);
3.8 no consent, approval, authorization, exemption, filing,
order or qualification of or with any governmental
authority is required under the Applicable Law for the
execution, and delivery by the Corporation of the
Documents to which it is a party or the performance by
the Corporation of its obligations therein;
3.9 the Corporation is the registered owner of the Lands in fee
simple subject only to:
(a) the exceptions and reservations stated in
subsections 23(2)(a), (b), (c), (e), (f), (h), and (i)
and 108(2) of the Land Title Act (British
Columbia);
(b) the exceptions expressed in sections 50 and 55 to
58 of the Land Act (British Columbia);
(c) where any of the Lands is or becomes a strata lot,
6
Endnote 8
Legal Notations which refer to benefits
which are appurtenant to the Lands, such
as easements, restrictive covenants over
other lands etc. should be described
separately as shown below. No comment
is made as to the proper form of opinion
where the title to the Lands or minerals is
an absolute title. See section 174 of the
LTA.
Endnote 9
any lien registered by the strata corporation
pursuant to section 116(1)(a), (b) or (c) of the
Strata Property Act (British Columbia);
(d) the equitable discretion of the Court to order
rectification of any instrument relating to an
interest in land;
(e) [list (or add as schedule) all legal notations
ranking in priority to the Mortgage which are
in the nature of restrictions or charges,
registered charges, registered liens and
registered interests or use a term like
“Permitted Prior Encumbrances” if
appropriately defined in the Principal
Agreement]; [if there is restrictive condition,
right of reverter, or obligation imposed on the
Lands by the Forest Act (British Columbia)
which is endorsed on title specify the nature of
the endorsed right (see 23(j) LTA)];
(f) statutory trusts arising under federal or provincial
statutes which extend to the lands or any portion
thereof;
(g) the Mortgage, and
(h) [list (or add as schedule) all legal notations
ranking subsequent to the Mortgage which are
in the nature of restrictions and charges,
registered charges, registered liens and
registered interest or use term like “Permitted
subsequent Encumbrances” if appropriately
defined in the Principal Agreement].
[if applicable add: The following interests are
registered as being appurtenant to the Lands: (a) an
easement registered under No. against [describe
servient tenement]; (b) a restrictive covenant, etc.]; and
3.10 the Mortgage was registered in the LTO on under No.
and constitutes a fixed and specific mortgage and charge on the
Lands, subject only to the matters specified in clauses (a) to (e)
inclusive and (to the extent any such trust ranks in priority to a
7
No qualification should be included with
regard to a fact which the opinion giver
knows, or has reason to believe is
inaccurate or incomplete.
Known bankruptcy, insolvency and other
similar issues must be specifically
addressed.
Endnote 10
Endnotes 11 and 12
registered mortgage under Applicable Law) clause (f) of Section
09 hereof.
4. QUALIFICATIONS AND LIMITATIONS:
4.1 Enforceability of the Documents is subject to:
(a) applicable bankruptcy, insolvency, receivership,
fraudulent preference, fraudulent conveyance,
reorganization, moratorium, arrangement, winding
up and other similar enforcement of the rights of
creditors or others;
(b) general principles of equity (whether or not
enforcement is considered in a proceeding in
equity or at law), including the discretion
exercisable by the court with respect to equitable
remedies such as specific performance and
injunction and the concepts of materiality,
reasonableness, good faith and fair dealing in the
performance and enforcement of a contract
required of the party seeking its enforcement;
(c) the discretion exercisable by the court with respect
to stays of enforcement proceedings and execution
of judgements;
(d) the effect of a vitiating factor such as mistake,
misrepresentation by a person other than the
Corporation, fraud, duress or undue influence;
(e) each Document will be enforced by the court only
to the extent that the court determines that any
provision which is unenforceable or invalid can be
severed without impairing the interpretation and
application of the remainder of that Document;
(f) the rate of post judgement interest applicable to
any amount owing under any of the Documents
will be the rate specified pursuant to the Court
Order Interest Act (British Columbia), subject to
variation on application to the court as provided
for in such Act;
8
See Interest Act (Canada) Section 8
(g) the discretion exercisable by the court to enjoin the
enforcement of any right of private sale provided
for in the Mortgage and to require that the Lands
be sold pursuant to a court supervised foreclosure
proceeding; and
(h) the possible unenforceability of the provisions of
Section of the Mortgage which provide that any
receiver be appointed thereunder is the agent of the
Corporation rather than the agent of the
Mortgagee,
4.2 Agreements or arrangements to pay interest at a criminal
rate (the terms “interest” and “criminal rate” having the
meanings specified in Section 347 of the Criminal Code
(Canada)) are not enforceable.
4.3 Any provision in the Documents requiring the payment of
interest at a higher rate after rather than before default
may not be enforceable.
4.4 We express no opinion as to the enforceability of
provisions of the Documents which require the
Corporation to pay any amounts to the Mortgagee in
respect of fines, penalties, legal fees or costs levied
against, imposed upon or incurred by the Mortgagee,
exceeding those awarded to or recoverable by the
Mortgagee pursuant to applicable law or the order of a
court.
4.5 Section of the [describe document] may be
unenforceable if a court decides that the amount required
to be paid pursuant thereto constitutes a penalty and not a
reasonable pre-estimate of damages.
4.6 Notwithstanding the provisions of the Documents as to the
conclusiveness of a fact or the determination of a matter a
court may permit the Corporation to introduce evidence in
proceedings for the purpose of proving that the
conclusiveness of a fact or the determination of a matter is
contrary to the evidence.
4.7 The enforcement of the Documents is subject to the
discretion of a court to impose restrictions on the rights of
9
Include where amounts are payable in
foreign currencies.
Endnote 13
Endnote 14
Endnotes 15 and 16
Amendment to this paragraph to permit
disclosure to and/or reliance by certain
types of third parties may be appropriate
where it is contemplated that, for
example, the Documents may be
assigned, syndicated or securitized. The
opinion giver should ensure, where
extended reliance is permitted, that
creditors to enforce immediate payment of amounts stated
to be payable on demand.
4.8 We express no opinion as to the priority of the Mortgage
with respect to advances made after the date of this
opinion. The Mortgagee should search title to the Lands
immediately prior to each advance under or secured by the
Mortgage.
4.9 Any court action to recover any amount payable in a
foreign currency will require conversion of such amount
into Canadian dollars at a rate of exchange which may not
be the rate in effect on the date of payment or the rate
prescribed in the Documents.
4.10 We have made no independent investigations of the facts
referred to in the certificate described in Section 1.4
hereof.
4.11 We express no opinion on any interest in or registered in
respect of the Lands that may be held or claimed by or for
any aboriginal people in their capacity as an aboriginal
people.
4.12 The opinions expressed herein are restricted to the
Applicable Law on the date hereof.
4.13 We have pursuant to your instructions, used the Mortgage
Terms without review or amendment (other than
amendments specified by you). Accordingly, we express
no opinion as to any limitations on the enforceability of
the Mortgage arising from such Mortgage Terms (as so
amended).
4.14 In the event of expropriation of any of the Lands pursuant
to the Expropriation Act (British Columbia), payment of
the Mortgage will be determined in accordance with the
provisions of such Act and the General Regulation
thereunder.
[Add specific qualifications arising from the Documents and
the nature of the transaction, if any]i
This letter is solely for your use and benefit in connection with
10
reliance will be effective as of the date of
the opinion (see qualification 4.12
above).
the transaction described in the first paragraph of this letter and
may not be disclosed to or relied upon by anyone other than you
or used for any other purpose.
11
APPENDIX I
[Corporation]
OFFICER’S CERTIFICATE
TO: [ADDRESSEES OF THE OPINION]
RE: [Describe and define the Lands]
The undersigned hereby certifies, without incurring personal liability, on behalf of [name of
corporation] (the “Corporation”) that I am the [insert title] of the Corporation and that:
1. The Corporation is the owner of the entire fee simple interest in the Lands.
2. No person has a leasehold interest in the Lands for a term of 3 years or less under which
there is actual occupation or, to my knowledge, any other unregistered interest in the
Lands[except as set out in Schedule A hereto].
3. The Corporation has not disposed of the whole or any part of its interest in the Lands to
anyone by an unregistered document [except as set out in Schedule A hereto].
4. Attached as Schedule B hereto are the names, offices and signatures of each person who
has executed and delivered any of the [insert description of Mortgage and other
documents executed by the Corporation (the “Documents”), each person named in such
Schedule B validly holds the office specified and each signature in such Schedule B is the
true and correct signature of the specified person.
5. The addressee(s) hereof and [its/their] solicitors may rely upon this Certificate in
connection with the Documents and the transactions contemplated thereby.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on [insert date].
______________________________
[Name]
[Title]
12
SCHEDULE A – DETAILS OF LEASEHOLDS, UNREGISTERED INTERESTS AND
DISPOSITIONS
SCHEDULE B – NAMES, OFFICES AND SIGNATURES OF SIGNING OFFICERS
[Note – the Certificates addresses only issues which are relevant to the opinion, additional
provision may be necessary or desirable in connection with a purchase or financing
transaction (e.g. certification as to payment of taxes, absence of ongoing construction, etc.]
ENDNOTES:
1. While the Sample Opinion has been drafted to be given by the lawyer for the Corporation
to the Mortgagee (and possibly to the Mortgagee’s lawyer), it has been prepared in this
way primarily for illustrative purposes and the Sample Opinion can be adapted to reflect
different circumstances (e.g. an opinion given by the Mortgagee’s lawyer to the
Mortgagee). The structure of the Sample Opinion should not be taken as a statement by
the Committee that it will always be appropriate for the lawyer for the Corporation to
provide such an opinion. The Committee has previously(see Statement of the Solicitors’
Opinions Committee Concerning Legal Opinions: Standard Form Security Documents
adopted 2 May, 1989 and published in the Benchers’ Bulletin, 1989, No 10 November)
expressed its view that the usual practice in the Province of British Columbia is that the
lawyers for borrowers do not, in most circumstances, provide enforceability opinions on
“standard form” security documents.
If the addressee is a B.C. lawyer, the addressee should consider the extent at law to which
he or she will be entitled to rely on such opinion, except as to matters within the
particular knowledge of the opinion giver (such as incorporation, existence and corporate
capacity and power of the Corporation and the due authorization, execution and delivery
of specified documents by the Corporation).
For the sake of simplicity, the Sample Opinion security document is a mortgage only.
Non-residential mortgages often include an assignment of rents, which is registered under
a separate registration number. Where the mortgage includes an assignment of rents, the
opinion should be expanded to address the creation, enforceability and registration of the
assignment of rents, with appropriate additional qualifications (e.g. enforceability of the
assignment of rents may be subject to notice being given to the lessee, claims of setoff
made by the lessee, etc.). It is not the usual practice to provide a priority opinion with
respect to an assignment of rents (if any such opinion is provided, it should include
reference to the federal Crown’s rights of enhanced garnishment under the Income Tax
Act (Canada) and the Excise Tax Act (Canada), which can rank in priority to existing
security in receivables).
2. It is important that consideration be given to all applicable corporate records, all
documents necessary in connection with the transaction, all places of public record where
there may be relevant documents (which will require knowledge of the nature of the
business of the Corporation), all relevant searches and usually all applicable statutes.
Practice varies as to the detail of documents and searches listed. The opinion giver must
ensure that copies of all documents examined or relied on by the opinion giver are
delivered to the other side. Counsel for the Mortgagee should consider whether originals,
certified copies (and if so, certified by whom) or simple photocopies of relevant
documents are appropriate. Where the opinion is given after the document is certified or
otherwise provided or the search has been made, it may be necessary to include in the
opinion an assumption as to the absence of any change.
14
3. Irrespective of assumptions in the opinion as to the identity of individuals, the opinion
giver should be aware of, and take steps to counter, the risks of fraud which can arise
from impersonation or identity theft. This could involve obtaining and keeping
photocopies of picture identification of relevant individuals as well as complying with
any requirements imposed by the Mortgagee (where the solicitor for the Mortgagee is the
opinion giver) regarding the confirmation of identities of individuals.
4. An opinion that the Corporation has complied with ALL laws relating to its business
should not generally be given, even if it is limited or qualified.
5. If the Corporation acquired the Lands prior to the date of the Certificate referred to in
clause 1.5 of the opinion, it is important for the opinion giver to determine if the
Corporation has ever been struck off or dissolved. If this has happened the opinion giver
must determine that the Corporation has been restored. If a British Columbia company
was restored prior to the Business Corporation Act coming into effect the opinion giver
needs to ensure that the appropriate language (e.g. “the company shall be deemed to have
been continued in existence as if its name had never been struck off” see Natural Nectar
Products Ltd. v. Theodor (1990) 46 BCLR (2d) 394 9BCCA)) was in the restoration
order and, as the opinion addresses title to real property, the opinion giver must ensure
that there has been compliance with the requirements of the Escheat Act.
6. An opinion is sometimes requested that the owner of real property “has good, safe
holding and marketable title” to such property; such a request will most often come from
an out of province opinion recipient. It is not the usual practice of British Columbia
lawyers to provide an opinion in this form, as the wording of the opinion does not reflect
the title provided by the Torrens system under the Land Title Act. Providing such an
opinion may require consideration of matters which are not addressed in the Sample
Opinion (such as determining the existence of a bare trust or unregistered instrument,
considering whether possible contamination may affect the marketability of the land,
identifying ambiguities in documents registered against the land which could give rise to
litigation, etc.).
7. The opinion on title or the registration and priority if the Mortgage cannot be given if
registration of the applicable Form A Transfer or Mortgage has not been completed. If
the application is pending at the time the opinion is given the opinion giver can state:
“Upon completion of the registration in the LTO of the Transfer [use defined term] the
Corporation will be the registered owner ….Upon completion of the registration in the
LTO of the Mortgage….We know of no reason why such registration should not be
completed in the ordinary course of the LTO procedure.”
8. Courts have an equitable jurisdiction to rectify instruments. It must be established that
the written instrument does not reflect the true agreement of the parties and that the
parties shared a common intention up to the time of signature that the provision in
question stands as agreed rather than as reflected in the instrument. The standard of proof
is a stringent one. The B.C. Court of Appeal recognized the applicability of rectification
of instruments creating interests in land (but did not grant rectification) in Hawkes
15
Estates v. Silver Campsites Ltd. (1991), 79 D.L.R. (4th)
677, and granted rectification of
an easement (expanding the area of its application in Banville v. White 100 B.C.L.R. (3rd
)
88, a 2002 decision of the B.C. Court of Appeal. In Banville both parties had acquired
the properties in question subsequent to the granting and registration of the easement and
neither was a party to the easement.
9. A failure by a person to make or remit deductions in compliance with the Income Tax
Act (Canada), the Employment Insurance Act (Canada) or the Canada Pension Plan
(Canada) or to collect or remit GST/HST in complains with the Excise Tax Act (Canada)
can, pursuant to those statutes give rise to a deemed trust in favour of the federal Crown
which extends to all assets of such person. The purpose of such deemed trust is to give
the federal Crown the equivalent of a first priority lien over such assets. The statutes and
regulations thereunder provide that a registered mortgage will have priority over such
deemed trust, to the extent of “prior advances,” if it is created and registered prior to the
creation of the trust; a mortgaged created or registered after the creation of the trust will
be subordinate to the trust. The priority of the mortgage does not extend to equipment
and fixtures which can be removed from the real property and sold. The amount of the
priority may be reduced by the value of other security held by the mortgagee at the time
of failure to remit and by payments, whether of principal or interest, received by the
mortgagee after the failure to remit. The effectiveness of these provisions and the
interpretation thereof by the Canada Revenue Agency has not yet been the subject of
definitive judicial decisions.
Deemed trusts arising under federal legislation are not specifically contemplated as
exceptions to title in the Land Title Act (unless one considers them to be “liens” arising
under federal statutes), but, to the extent such federal legislation validly grants priority to
deemed trusts, the priority would likely override the provisions of the Act on
paramountcy grounds.
The Act does not provide for any title exception for deemed trusts arising under
provincial legislation (again, unless one considers them to be “liens”) and at this date
there do not appear to be any British Columbia statutes which create deemed trusts which
extend to real property. One possible exception is the Income Tax Act (British
Columbia), which provides, in Section 56, that the deemed trusts provisions of the
Income Tax Act (Canada) apply to the provincial statute. It is not entirely clear whether
this is an attempt to have provincial tax deductions secured by the federal deemed trust
(which may be unnecessary if the federal statute already creates a deemed trust for
provincial tax deductions which must be remitted to the federal Crown pursuant to its
collection arrangements with British Columbia and other provinces) or whether it is an
attempt to secure such amounts by a separate deemed trust under provincial legislation.
10. Paragraph 4.1(b) (the equitable principles limitation) covers the traditional discretion of a
court of equity as well as newer concepts of materiality, reasonableness, good faith and
“fair dealing”. Field & Ryan Legal Opinions in Corporate Transactions (New York,
1988) as quoted in Estey, Legal Opinions in Commercial Transactions (Toronto, 1997)
p.210.
16
11. The Committee considers that giving an opinion as to the validity, legality and binding
effect and enforceability of a document does not impose any obligation to enquire into
vitiating elements. However, the opinion cannot be given of the opinion giver knows or
has reason to believe any of these elements are present.
12. In circumstances where the opinion giver is aware of fraud, illegality, bankruptcy or
similar elements in the transaction, the opinion giver should consider any potential effect
of those elements on the title opinion – e.g. where title is being acquired pursuant to a
transaction reviewable under the Bankruptcy and Insolvency Act (Canada).
13. The qualification is likely to be appropriate only in circumstances where the Mortgagee’s
lawyer is providing an opinion to the Mortgagee or where the Corporation’s lawyer is
providing an opinion to the Mortgagee and the Mortgagee does not have its own counsel.
Mortgagees which are financial institutions will typically have standard form Mortgage
Terms which they will specify be used. It is a question of fact, which would have to be
reviewed in the particular circumstances of the transaction, as to whether the instructions
of the Mortgagee expressly or impliedly require that the standard form Mortgage Terms
be reviewed on an individual transaction (the Mortgagee may have such Mortgage Terms
reviewed and amended on an ongoing basis by its general counsel). In circumstances
where the Mortgage Terms are not to be reviewed, this qualification is necessary to
establish that the Mortgagee carries the risk of any enforceability arising from
deficiencies in its Mortgage Terms. A lawyer for the Corporation who is not reviewing
the Mortgage Terms should, of course, also obtain appropriate instructions from the
Corporation as to this course of action.
14. Sections 4 and 5 of the General Regulation under the Expropriation Act (British
Columbia) govern compensation to the holders of security interests (which will include
mortgages) in expropriated land. These provisions may prescribe terms applicable to the
payment of a deficiency which are inconsistent with the original repayment terms and
may be inconsistent with restrictions on or conditions to prepayment. The provisions
may also limit an action for any deficiency, but this apparently has not been judicially
determined.
15. This opinion has been prepared in respect of a transaction where the Mortgage is granted
to secure indebtedness owing by the Corporation to the Mortgagee in a commercial
transaction such as a loan or a sale of real property with a mortgage back. Additional
considerations, assumptions or qualifications may be necessary where the mortgagor is an
individual (e.g. to determine compliance with interest disclosure requirements under
applicable consumer protection or other legislation or in connection with prepayment
rights), where the relationship between the Corporation and the Mortgagee or the nature
of the amount secured by the Mortgage might impact the priority of the Mortgage (e.g.
the provisions of Section 5 of the Partnership Act (British Columbia)) or where the
Mortgage purports to secure certain types of obligations other than or in addition to
“normal” indebtedness (e.g. a profit participation or an option to acquire the mortgaged
property).
17
16. A “generic” qualification is often found in opinions for U.S. real estate financing in a
form such as the following:
“Certain provisions of the Documents may be unenforceable, but such unenforceability
will not, subject to the other exceptions, qualifications and limitations in this opinion,
render any Document invalid as a whole or substantially interfere with realization of the
principal benefits provided by each Document.”
The use of this form of qualification is rare in British Columbia or elsewhere in Canada.
While an argument can be made that is appropriate where there are a number of minor
enforceability issues which cannot be dealt with by amending the document (e.g. the
document is a “standard form” document, the document has been executed prior to
review by the opinion giver, etc.), the Committee is of the view that the usual and better
practice is to identify specific enforceability issues by way of individual qualifications.
© Solicitors’’ Legal Opinions Committee of British Columbia
Endnote 1
Describe: (i) limited or special role, if
appropriate; (ii) the Client(s); (iii) the
transaction; (iv) the principal agreement.
If the Principal Agreement does not
contain a precise legal description of the
lands to which this opinion relates and a
defined term identifying those lands (i.e.
“Lands”), insert PID number and legal
description, including city/municipality
and define lands to which opinion
relates. If the Lands are a strata lot add
“together with an interest in common
property in proportion to the unit
entitlement as shown on Form V”.
The description of the Lands is complete
without reference to easements and
restrictive covenants which may be
appurtenant to it.
The opinion should not be based on any
document or certificate which the opinion
giver knows or has reason to believe is
inaccurate or incomplete. If any
document or certificate is not current,
add an appropriate assumption, as in 2.3
or 2.4.
SAMPLE OPINION LETTER NO. 4B:
REAL ESTATE (Fee Simple Title Held by Corporate
Trustee)
(British Columbia Transaction)
(to be given by lawyer for one party to the other party, and if
appropriate, the lawyer for the other party)
(limited to an opinion on land registered in the registration
system established under the Land Title Act)
[DATE]
[ADDRESSEE]
Dear ,
Re: _________________________________________________
We have acted as (i) counsel to (ii)[X Co.] (the “Corporation”)
and [Y Co.] (the “Trustee”) in connection with (iii) [describe
transaction; e.g. purchase of land etc.] pursuant to (iv)
[describe principal agreement; e.g. purchase and sale
agreement, loan agreement etc.] (the “Principal Agreement”)
between the Corporation and [insert applicable party or parties
(the “Mortgagee”)].
Terms used in this opinion letter and defined in the Principal
Agreement but not in this opinion letter have the meanings given
to them in the Principal Agreement.
This Sample Opinion Letter is published as a reference tool for the use of the legal profession in British Columbia and without liability on the part of the Solicitors' Legal Opinions Committee or any of its members. This Sample Opinion Letter is not a replacement for careful, knowledgeable-transaction-specific legal work which should be undertaken by the solicitor delivering the opinion.
16 October 2014
2
Endnote 2
List documents and certificates which
were reviewed, stating whether they were
originals, copies or certified copies. If
they were the last-mentioned, consider
whether the person certifying is
appropriate to do so. For 1.2, consider
whether additional assumptions or
qualifications are appropriate where you
are acting for the Mortgagee and the
Mortgagee requires that its “standard”
Express Mortgage Terms be used without
review or alteration.
Endnote 3
Certificates under 1.7 – Facts only, e.g.
confirmation that there is no leasehold
interest of 3rd parties for term not
exceeding 3 years under which there is
actual occupation; that neither Trustee
nor Corporation has disposed of its
interest in the Lands by an unregistered
document. SEE SUGGESTED FORM
OF OFFICERS’ CERTIFICATE
ATTACHED AS APPENDIX I.
1. EXAMINATIONS
In connection with this opinion letter, we have examined the
following; [copies of which are enclosed or have previously been
delivered to ]:
1.1 the Principal Agreement;
1.2 the Form B mortgage (including the Mortgage Terms –
Part 2 (the “Mortgage Terms”) [attached thereto/filed
under No. and incorporated therein by reference]) in
the principal amount of $ made by the Trustee in favour
of the Mortgagee dated (the “Mortgage”);
1.3 the equitable mortgage in the principal amount of $
made by the Corporation and the Trustee in favour of the
Mortgagee dated (the “Equitable Mortgage”);
1.4 the guarantee of the indebtedness of the Corporation made
by the Trustee dated (the “Guarantee”)
1.5 [Identify any other transaction documents e.g.
purchase agreement, Form A Transfer, guarantee];
(collectively, with the Principal Agreement, the Mortgage,
the Guarantee and the Equitable Mortgage, the
“Documents”);
1.6 the [declaration of trust/trust agreement/nominee
agreement] made between the Trustee and the Corporation
with respect to the Lands dated (the “Declaration of
Trust”);
1.7 two certificates, each dated , of [an officer] of each of
the Corporation and the Trustee;
3
If applicable, list additional documents in
connection with the transaction which
were reviewed.
If a search cannot be made, consider
relying on a State of Title Certificate of
appropriate date.
No assumption should be made with
regard to a fact which the opinion giver
knows or has reason to believe is
inaccurate or incomplete.
It may not be appropriate to assume the
identity of corporate officers if the
opinion is being given in respect of the
opinion giver’s own corporate client.
Endnote 4
Include second part if certificate not
dated the date of the opinion.
1.8 copies of the Certificates of [Good Standing]
[Compliance] with respect to the Corporation and the
Trustee issued on by [the Registrar of Companies for
the Province of British Columbia] [Industry Canada];
1.9 [other].
We have also examined such corporate records and documents
and certificates of public officials, made such investigations and
searches and considered such questions of law as we have
considered necessary to give the opinions expressed in this letter.
The opinions expressed herein are based on our search(es) of the
records of the [applicable] Land Title Office (the “LTO”) made
at ____________AM/PM on the _______ day of
________________, 20____.
2. ASSUMPTIONS
For the purposes of the opinions expressed in this letter we have
assumed:
2.1 the genuineness of all signatures, the authenticity of all
documents submitted to us as originals, the conformity
with authentic originals of all documents submitted to us
as copies, the identity and personal legal capacity of all
individuals acting or purporting to act as corporate
officers, and the identity and capacity of all individuals
acting or purporting to act as public officials;
2.2 the accuracy and completeness of all information provided
to us by offices of public record;
2.3 that the facts set out in the certificates described in section
1.7 are true and correct [and that there have been no
change in those facts set out in such certificates since
he respective dates of such certificates];
4
Use only where Mortgage secures
blended payment of principal and
interest.
The language in 3.1 is either the same
language used in the relevant Certificate
or reflects legal conclusions which can
be drawn from the language in the
relevant Certificate. It is possible that
the language used in one or both
Certificates will change over time, so the
Certificate should be reviewed to ensure
the language is still appropriate.
Variations of the 3.1 opinion can be used
so long as the language either is the same
as the language in the Certificate or
reflects legal conclusions which can be
drawn from such language.
2.4 that the Certificate(s) of [Good Standing] [Compliance]
[Status] for the Corporation and the Trustee remain valid
as of the date of this opinion;
2.5 that each of the Documents creates legal, valid and
binding obligations of, and is enforceable in accordance
with its terms against, each of the parties thereto other
than the Corporation and the Trustee;
2.6 that the [yearly/half-yearly] rate of interest disclosed in
the Mortgage for the purposes of Section 6 of the Interest
Act (Canada) is accurate;
3. OPINION
Based and relying upon, and subject to, the foregoing and subject
to the qualifications and limitations set out below, we are of the
opinion that:
3.1 each of the Corporation and the Trustee was incorporated
as a company under the laws of the Province of British
Columbia, is a valid and existing company and is, with
respect to the filing of annual reports, in good standing
with the office of the Registrar of Companies for the
Province of British Columbia;
-or-
[each of the Corporation and the Trustee exists under
the Canada Business Corporations Act, has filed all
required annual returns under said Act, is registered
as an extra-provincial company under the laws of the
Province of British Columbia and is, with respect to
the filing of annual reports, in good standing with the
Office of the Registrar of Companies for the Province
of British Columbia;]
5
Expand to include powers to
borrow/guarantee, as appropriate – see
Endnote 1. Consider whether Trustee
Act applicable (i.e. carrying on trust
business)
For 3.3, 3.4 and 3.5, where Declaration
of Trust has been executed prior to
involvement of solicitor for
Trustee/Corporation and corporate
records are not complete, there may be
difficulty for solicitor to provide the
opinions; consider whether an
assumption would be acceptable, whether
reliance on the Officer’s Certificate is
appropriate or whether having
resolutions passed confirming
authorization, execution and delivery of
Declaration of Trust is appropriate. See
also Endnote 3.
It is the practice of some solicitors not to
request, or provide, opinions regarding a
Declaration of Trust. In these
circumstances, the opinion recipient will
have to satisfy itself as to the matters in
Section 3 relating to the Declaration of
Trust, typically by relying on the
Certificates of Officer.
Some commercial opinions include
opinions as to absence of breach of
specified documents and/or applicable
law, though this would not be usual in an
opinion dealing only with a mortgage.
See Section 3.7 of the Committee’s
Sample Opinion No. 3 Commercial for
the form of expanded opinion.
3.2 each of the Corporation and the Trustee has the corporate
power and capacity to own its respective legal or
beneficial interest in the Lands, to enter into and perform
its obligations under each of the Documents to which it is
a party and the Declaration of Trust and, in the case of the
Trustee, to hold the Lands as trustee for the benefit of the
Corporation under the Declaration of Trust;
3.3 the execution and delivery by each of the Corporation and
the Trustee of each of the Documents to which it is a party
and the Declaration of Trust, and the performance by it of
its obligations thereunder, have been duly authorized by
all necessary corporate action of the Corporation or the
Trustee, as the case may be;
3.4 each of the Documents to which the Corporation or the
Trustee is a party and the Declaration of Trust has been
duly executed and delivered by the Corporation or the
Trustee, as the case may be;
3.5 each of the Documents to which the Corporation or the
Trustee is a party and the Declaration of Trust creates
legal, valid and binding obligations of the Corporation or
the Trustee, as the case may be, and is enforceable against
the Corporation or the Trustee, as the case may be, in
accordance with its terms;
3.6 the execution and delivery of the Documents to which it is
a party and the Declaration of Trust by each of the
Corporation and the Trustee and the performance by it of
its respective obligations thereunder do not conflict with
or result in a breach of any provisions of the [constating
documents – specify Notice of Articles, Articles,
Incorporation Agreement, etc. as appropriate] of the
Corporation or the Trustee, as the case may be [if
appropriate refer to unanimous shareholders
agreement, etc.];
3.7 the execution and delivery of the Documents to which it is
a party and the Declaration of Trust by each of the
6
Add if applicable.
For compliance with laws see Endnote 5;
also consider Trustee Act (i.e. carrying
on trust business)
Obtain and rely on a certificate as to
assets and business.
Determine whether Trustee is authorized
to execute and deliver Documents
pursuant to the Declaration of Trust, a
separate direction or consent from the
Corporation or a direction or consent
from the Corporation contained in the
Equitable Mortgage.
Endnotes 6, 7 and 8.
The use of only the word “registered”
limits the scope of the opinion. If
“registered” is omitted or “beneficial” is
used it is necessary to ensure there is no
unregistered trust or transfer, which
could be done by way of officer’s
certificate.
In (a) add reference to 23(2)(d) if
officer’s certificate does not address
unregistered leases for terms of 3 years
or less or confirms existence of such
leases.
Legal Notations which refer to benefits
which are appurtenant to the Lands, such
as easements, restrictive covenants over
other lands etc. should be described
separately as shown below.
No comment is made as to the proper
form of opinion where the title to the
Lands or minerals is an absolute title.
See section 174 of the LTA.
Endnote 9
Corporation and the Trustee and the performance by it of
its respective obligations thereunder, do not violate,
conflict with, or result in any breach of any laws of British
Columbia or the laws of Canada applicable in British
Columbia (collectively, the “Applicable Law”);
3.8 no consent, approval, authorization, exemption, filing,
order or qualification of or with any governmental
authority is required under the Applicable Law for the
execution, and delivery by the Corporation or the Trustee
of the Documents to which it is a party or the Declaration
of Trust or the performance by each of the Corporation
and the Trustee of its respective obligations thereunder;
3.9 all requirements of the Declaration of Trust necessary to
authorize the execution and delivery by the Trustee of the
Documents to which it is a party and the performance of
its obligations thereunder have been satisfied;
3.10 the Trustee is the registered owner of the Lands in fee
simple subject only to:
(a) the exceptions and reservations stated in
subsections 23(2)(a), (b), (c), (e), (f), (h), and (i)
and 108(2) of the Land Title Act (British
Columbia);
(b) the exceptions expressed in sections 50 and 55 to
58 of the Land Act (British Columbia);
(c) where any of the Lands is or becomes a strata lot,
any lien registered by the strata corporation
pursuant to section 116(1)(a), (b) or (c) of the
Strata Property Act (British Columbia);
(d) the equitable discretion of the Court to order
rectification of any instrument relating to an
interest in land;
(e) [list (or add as schedule) all legal notations
ranking in priority to the Mortgage which are
in the nature of restrictions or charges,
registered charges, registered liens and
registered interests or use a term like
7
Endnote 10
The opinions in 3.10 and 3.11 assume the
Declaration of Trust is not registered in
the LTO.
The opinion in 3.11 regarding the
beneficial interest requires appropriate
review of the Declaration of Trust,
Equitable Mortgage, any direction given
by the Corporation to the Trustee, all to
determine whether the grant of the
Mortgage by the Trustee is sufficient to
charge the beneficial interest of the
Corporation in the Lands. Consider
whether there are any potential
circumstances which might prevent this
opinion from being given with respect to
the beneficial interest arising from
dealings by the Corporation.
No qualification should be included with
“Permitted Prior Encumbrances” if
appropriately defined in the Principal
Agreement]; [if there is restrictive condition,
right of reverter, or obligation imposed on the
Lands by the Forest Act (British Columbia)
which is endorsed on title specify the nature of
the endorsed right (see 23(j) LTA)];
(f) statutory trusts arising under federal or provincial
statutes which extend to the Lands or any portion
thereof;
(g) the Mortgage; and
(h) [list (or add as schedule) all legal notations
ranking subsequent to the Mortgage which are
in the nature of restrictions and charges,
registered charges, registered liens and
registered interest or use term like “Permitted
Subsequent Encumbrances” if appropriately
defined in the Principal Agreement].
[if applicable add; The following interests are
registered as being appurtenant to the Lands: (a) an
easement registered under No. against [describe
servient tenement]; (b) a restrictive covenant, etc ]; and
3.11 the Mortgage was registered in the LTO on under No.
and constitutes a fixed and specific mortgage and charge
on the Lands, (including for greater certainty the
beneficial interest of the Corporation therein), subject only
to the matters specified in clauses (a) to (e) inclusive and
(to the extent any such trust ranks in priority to a
registered mortgage under Applicable Law) clause (f) of
Section 3.10 hereof.
4. QUALIFICATIONS AND LIMITATIONS:
4.1 Enforceability of the Documents and the Declaration of
Trust is subject to:
(a) applicable bankruptcy, insolvency, receivership,
8
regard to a fact which the opinion giver
knows, or has reason to believe is
inaccurate or incomplete.
Known bankruptcy, insolvency and other
similar issues must be specifically
addressed.
Endnote 11
Endnotes 12 and 13
fraudulent preference, fraudulent conveyance,
reorganization, moratorium, arrangement, winding
up and other similar enforcement of the rights of
creditors or others;
(b) general principles of equity (whether or not
enforcement is considered in a proceeding in
equity or at law), including the discretion
exercisable by the court with respect to equitable
remedies such as specific performance and
injunction and the concepts of materiality,
reasonableness, good faith and fair dealing in the
performance and enforcement of a contract
required of the party seeking its enforcement;
(c) the discretion exercisable by the court with respect
to stays of enforcement proceedings and execution
of judgements;
(d) the effect of a vitiating factor such as mistake,
misrepresentation by a person other than the
Corporation or the Trustee, fraud, duress or undue
influence;
(e) each Document and the Declaration of Trust will
be enforced by the court only to the extent that the
court determines that any provision which is
unenforceable or invalid can be severed without
impairing the interpretation and application of the
remainder of that Document or Declaration of
Trust, as the case may be;
(f) the rate of post judgement interest applicable to
any amount owing under any of the Documents or
the Declaration of Trust will be the rate specified
pursuant to the Court Order Interest Act (British
Columbia), subject to variation on application to
the court as provided for in such Act;
(g) the discretion exercisable by the court to enjoin the
enforcement of any right of private sale provided
for in the Mortgage and to require that the Lands
be sold pursuant to a court supervised foreclosure
9
See Interest Act (Canada) Section 8
proceeding; and
(h) the possible unenforceability of the provisions of
Section of the Mortgage or Section of the
Equitable Mortgage, which provide that any
receiver be appointed thereunder is the agent of the
Corporation or Trustee, as the case may be, rather
than the agent of the Mortgagee,
4.2 Agreements or arrangements to pay interest at a criminal
rate (the terms “interest” and “criminal rate” having the
meanings specified in Section 347 of the Criminal Code
(Canada)) are not enforceable.
4.3 Any provision in the Documents or the Declaration of
Trust requiring the payment of interest at a higher rate
after rather than before default may not be enforceable.
4.4 We express no opinion as to the enforceability of
provisions of the Documents or the Declaration of Trust
which require the Corporation or the Trustee to pay any
amounts to the Mortgagee in respect of fines, penalties,
legal fees or costs levied against, imposed upon or
incurred by the Mortgagee, exceeding those awarded to or
recoverable by the Mortgagee pursuant to applicable law
or the order of a court.
4.5 Section of the [describe document] may be
unenforceable if a court decides that the amount required
to be paid pursuant thereto constitutes a penalty and not a
reasonable pre-estimate of damages.
4.6 Notwithstanding the provisions of the Documents and the
Declaration of Trust as to the conclusiveness of a fact or
the determination of a matter a court may permit the
Corporation or the Trustee, as the case may be, to
introduce evidence in proceedings for the purpose of
proving that the conclusiveness of a fact or the
determination of a matter is contrary to the evidence.
4.7 The enforcement of the Documents and the Declaration of
Trust is subject to the discretion of a court to impose
restrictions on the rights of creditors to enforce immediate
10
The second sentence of 4.8 might be
excluded from an opinion given by
counsel for the Corporation/Trustee.
Include where amounts are payable in
foreign currencies.
There does not seem to be any
“standard” wording used in the
profession for this type of qualification.
Endnote 14
Endnote 15
Endnote 16 and 17
payment of amounts stated to be payable on demand.
4.8 We express no opinion as to the priority of the Mortgage
with respect to advances made after the date of this
opinion. The Mortgagee should search title to the Lands
immediately prior to each advance under or secured by the
Mortgage.
4.9 Any court action to recover any amount payable in a
foreign currency will require conversion of such amount
into Canadian dollars at a rate of exchange which may not
be the rate in effect on the date of payment or the rate
prescribed in the Documents or the Declaration of Trust.
4.10 We have made no independent investigations of the facts
referred to in the certificate described in Section 1.7
hereof.
4.11 We express no opinion on any interest in or registered in
respect of the Lands that may be held or claimed by or for
any aboriginal people in their capacity as an aboriginal
people.
4.12 The opinions expressed herein are restricted to the
Applicable Law on the date hereof.
4.13 We have pursuant to your instructions, used the Mortgage
Terms without review or amendment (other than
amendments specified by you). Accordingly, we express
no opinion as to any limitations on the enforceability of
the Mortgage arising from such Mortgage Terms, as so
amended.
4.14 In the event of expropriation of any of the Lands pursuant
to the Expropriation Act (British Columbia), payment of
the Mortgage and Equitable Mortgage will be determined
in accordance with the provisions of such Act and the
General Regulation thereunder.
[Add specific qualifications arising from the Documents or
the Declaration of Trust and the nature of the transaction, if
any]
11
Amendment to this paragraph to permit
disclosure to and/or reliance by certain
types of third parties may be appropriate
where it is contemplated that, for
example, the Documents may be
assigned, syndicated or securitized. The
opinion giver should ensure, where
extended reliance is permitted, that
reliance will be effective as of the date of
the opinion (see qualification 4.12
above).
This letter is solely for your use and benefit in connection with
the transaction described in the first paragraph of this letter and
may not be disclosed to or relied upon by anyone other than you
or used for any other purpose.
APPENDIX 1
OFFICER’S CERTIFICATE - TRUSTEE
TO: [ADDRESSEES OF THE OPINION]
RE: [Describe the Lands] (the “Lands”)
The undersigned hereby certifies, without incurring personal liability, on behalf of [name of
Trustee] (the “Trustee”) that I am the [insert title] of the Trustee and that:
1. The Trustee is the owner of the entire legal fee simple interest in the Lands.
2. No person has a leasehold interest in the Lands for a term of 3 years or less under which
there is actual occupation or, to my knowledge, any other unregistered interest in the
Lands [except as described in Sections 4 and 5 hereof or as set out in Schedule A hereto].
3. The Trustee has not disposed of or encumbered the whole or any part of its interest in the
Lands to anyone by an unregistered document [except as set out in Schedule A hereto].
4. Attached as Schedule B hereto is a true and complete copy of a [insert description of
Declaration of Trust] made between the Trustee and [insert name of Corporation] (the
“Corporation”) dated (the “Declaration of Trust”), which Declaration of Trust is in full
force and effect as of the date hereof, unamended [, save for such amendments as are
included in Schedule B hereto] and which Declaration of Trust is the sole agreement or
instrument in effect with respect to the legal ownership of the Lands by the Trustee for
the benefit of the Corporation;
5. The Trustee is the sole trustee under the Declaration of Trust and the Corporation is the
sole beneficiary thereunder;
6. Attached as Schedule C hereto is a true and complete copy of resolutions of the
[director/sole director] of the Trustee, which resolutions are in full force and effect,
unamended, on the date hereof;
7. Attached as Schedule D hereto are the names, offices and signatures of each person who
has executed and delivered any of the [insert description of Mortgage and other
documents executed by Trustee] (the “Documents”), each person named in such Schedule
D validly holds the office specified and each signature in such Schedule D is the true and
correct signature of the specified person.
8. The addressee(s) hereof and [its/their] solicitors may rely upon this Certificate in
connection with the Documents and the transactions contemplated thereby.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on [insert date].
____________________________
[Name]
[Title]
13
SCHEDULE A – DETAILS OF LEASEHOLDS, UNREGISTERED INTERESTS AND
DISPOSITIONS
SCHEDULE B – COPY OF DECLARATION OF TRUST
SCHEDULE C – CERTIFIED RESOLUTION OF DIRECTOR(S)
SCHEDULE D – NAMES, OFFICES AND SIGNATURES OF SIGNING OFFICERS
[NOTE: - A certificate such as this may contain provisions to the effect that the Trustee has
the power and authority, under the Declaration of Trust or otherwise, to execute and
deliver specified documents and to charge the interest of a beneficiary. These are legal
issues which are not properly the subject of an officer’s certificate and it would be
inappropriate for an opinion-giver to rely on a certificate as to matters of law. Any such
opinion should be based on a review of the Declaration of Trust or other documents (with
either assumptions or reliance on the certificate as to accuracy, completeness and
currency). These provisions may, however, properly be the subject of representations and
warranties in the documents on which the mortgagee could rely.]
OFFICER’S CERTIFICATE - CORPORATION
TO: [ADDRESSEES OF THE OPINION]
RE: [Describe the Lands] (the “Lands”)
The undersigned hereby certifies, without incurring personal liability, on behalf of [name of
Corporation] (the “Corporation”) that I am the [insert title] of the Corporation and that:
1. The Corporation is the owner of the entire beneficial fee simple interest in the Lands.
2. No person has a leasehold interest in the Lands for a term of 3 years or less under which
there is actual occupation or, to my knowledge, any other unregistered interest in the
Lands [except as set out in Schedule A hereto].
3. The Corporation has not disposed of or encumbered the whole or any part of its interest
in the Lands to anyone by an unregistered document [except as set out in Schedule A
hereto].
4. Attached as Schedule B hereto is a true and complete copy of a [insert description of
Declaration of Trust] made between the Corporation and [insert name of Trustee] (the
“Trustee”) dated (the “Declaration of Trust”), which Declaration of Trust is in full
force and effect as of the date hereof, unamended [, save for such amendments as are
included in Schedule B hereto], which Declaration of Trust is the sole agreement or
instrument in effect with respect to the legal ownership of the Lands by the Trustee for
the benefit of the Corporation;
5. The Trustee is the sole trustee under the Declaration of Trust and the Corporation is the
sole beneficiary thereunder;
6. Attached as Schedule C hereto is a true and complete copy of resolutions of the
[director/sole director] of the Corporation, which resolutions are in full force and effect,
unamended, on the date hereof;
7. Attached as Schedule D hereto are the names, offices and signatures of each person who
has executed and delivered any of the [insert description of Mortgage and other
documents executed by Trustee] (the “Documents”), each person named in such Schedule
D validly holds the office specified and each signature in such Schedule D is the true and
correct signature of the specified person.
9. The addressee(s) hereof and [its/their] solicitors may rely upon this Certificate in
connection with the Documents and the transactions contemplated thereby.
IN WITNESS WHEREOF, the undersigned has executed this Certificate on [insert date].
______________________________
[Name]
[Title]
15
SCHEDULE A – DETAILS OF LEASEHOLDS, UNREGISTERED INTERESTS AND
DISPOSITIONS
SCHEDULE B – COPY OF DECLARATION OF TRUST
SCHEDULE C – CERTIFIED RESOLUTION OF DIRECTOR(S)
SCHEDULE D – NAMES, OFFICES AND SIGNATURES OF SIGNING OFFICERS
[NOTE – The Certificates address only issues which are relevant to the opinion; additional
provisions may be necessary or desirable in connection with a purchase or financing
transaction (e.g. certification as to payment of taxes, absence of ongoing construction, etc.]
[NOTE: - Certificates such as these sometimes contain provisions to the effect that the
Trustee has the power and authority, under the Declaration of Trust or otherwise, to
execute and deliver specified documents and to charge the interest of a beneficiary. These
are legal issues which are not properly the subject of an officer’s certificate and it would be
inappropriate for an opinion-giver to rely on a certificate as to matters of law. Any such
opinion should be based on a review of the Declaration of Trust or other documents (with
either assumptions or reliance on the certificate as to accuracy, completeness and
currency). These provisions may, however, properly be the subject of representations and
warranties in the documents on which the mortgagee could rely.]
[NOTE: - Consider expanding Section 4 of the Certificates to refer to an attached direction
to the Trustee, in circumstances where a direction is required under the Declaration of
Trust and has not been included in the Equitable Mortgage or otherwise in a document
which is also addressed to the Mortgagee.]
16
ENDNOTES:
1. While the Sample Opinion has been drafted to be given by the lawyer for the Corporation
and the Trustee to the Mortgagee (and possibly to the Mortgagee’s lawyer), it has been
prepared in this way primarily for illustrative purposes and the Sample Opinion can be
adapted to reflect different circumstances (e.g. an opinion given by the Mortgagee’s
lawyer to the Mortgagee). The structure of the Sample Opinion should not be taken as a
statement by the Committee that it will always be appropriate for the lawyer for the
Corporation and the Trustee to provide such an opinion. The Committee has previously
(see Statement of the Solicitors’ Opinions Committee Concerning Legal Opinions:
Standard Form Security Documents adopted 2 May, 1989 and published in the Benchers’
Bulletin, 1989, No 10 November) expressed its view that the usual practice in the
Province of British Columbia is that the lawyers for borrowers do not, in most
circumstances, provide enforceability opinions on “standard form” security documents.
The Sample Opinion contemplates that the Corporation, the beneficial owner of the
Lands, is the borrower/principal obligant and that the Trustee, the legal owner of the
Lands, is providing security pursuant to a guarantee for the Corporation’s obligations. (It
is not uncommon to see transactions in which a trustee grants a mortgage as security for
the obligations of a borrower beneficiary without granting a guarantee. Consideration
should be given as to whether the absence of a guarantee – even one under which
recourse is limited to the mortgage – gives rise to any question of the enforceability of the
mortgage.) We believe that this reflects the most common, but by no means the only,
structure used for these types of transactions. The Sample Opinion should be amended
appropriately where the Trustee is the borrower and the Corporation the guarantor.
In the Sample Opinion, the legal owner has been referred to as the Trustee. It is also
quite common to see the term “Nominee” used to describe a legal owner under a trust,
particularly where such owner is not entitled to exercise any discretionary powers with
respect to the lands. The Sample Opinion also refers to the interest of the beneficiary as a
“beneficial interest”, though the term “equitable interest” would be equally correct. The
term “equitable mortgage” is the description usually used for the mortgage given by the
beneficiary in transactions.
If the addressee is a B.C. lawyer, the addressee should consider the extent at law to which
he or she will be entitled to rely on such opinion, except as to matters within the
particular knowledge of the opinion giver (such as incorporation, existence and corporate
capacity and power of the Corporation and the Trustee and the due authorization,
execution and delivery of specified documents by the Corporation and the Trustee).
For the sake of simplicity, the Sample Opinion security document is a mortgage only.
Non-residential mortgages often include an assignment of rents, which is registered under
a separate registration number. Where the mortgage includes an assignment of rents, the
opinion should be expanded to address the creation, enforceability and registration of the
assignment of rents, with appropriate additional qualifications (e.g. enforceability of the
assignment of rents may be subject to notice being given to the lessee, claims of setoff
made by the lessee, etc.). It is not the usual practice to provide a priority opinion with
17
respect to an assignment of rents (if any such opinion is provided, it should include
reference to the federal Crown’s rights of enhanced garnishment under the Income Tax
Act (Canada) and the Excise Tax Act (Canada), which can rank in priority to existing
security in receivables).
2. It is important that consideration be given to all applicable corporate records, all
documents necessary in connection with the transaction, all places of public record where
there may be relevant documents (which will require knowledge of the nature of the
business of the Corporation and the Trustee), all relevant searches and usually all
applicable statutes. Practice varies as to the detail of documents and searches listed. The
opinion giver must ensure that copies of all documents examined or relied on by the
opinion giver are delivered to the other side. Counsel for the Mortgagee should consider
whether originals, certified copies (and if so, certified by whom) or simple photocopies of
relevant documents are appropriate. Where the opinion is given after the document is
certified or otherwise provided or the search has been made, it may be necessary to
include in the opinion an assumption as to the absence of any change.
3. A number of significant issues arise where the legal (or registered) and beneficial (or
equitable) ownership of real property are held by separate entities. At common law, the
legal owner of property could deal with both the legal and beneficial interest (e.g. transfer
or mortgage) if it was so authorized by the terms of the trust or if the dealing was
consented to or otherwise authorized by the beneficiary. In addition, a person dealing
bona fide with a trustee with respect to property would take free of the interest of the
beneficiary if such person either had no notice of the trust or no notice that the dealing
contravened the terms of the trust.
Typically declarations of trust relating to real property are not registered in the Land Title
Office. Section 29 of the Land Title Act provides that the registered owner of real
property is conclusively deemed to have indefeasible title to it, unaffected by
unregistered interests, with some exceptions, including fraud. While this would seem to
allow a person dealing with the trustee owner to acquire an interest in the real property
notwithstanding notice of the trust or any breach thereof, a review of numerous judicial
decisions on the “fraud” exception to Section 29 suggests that it would be imprudent to
proceed in that manner.
A mortgagee will want to establish that the mortgage from the legal owner extended to
and charged the interest of the beneficial owner in the property. Authority for the trustee
to grant a mortgage with this effect may be found in the declaration of trust itself, though
it is not unusual for the declaration to be silent or ambiguous on this issue. A direction
by the beneficiary to the trustee, a consent addressed by the beneficiary to the trustee and
mortgagee or an acknowledgement by the beneficiary to the mortgagee (any of which
should be in writing) can also establish or confirm the authority of the trustee to mortgage
the beneficial interest. Such direction, consent or acknowledgement might either be in a
separate document or be part of the mortgage or a separate equitable mortgage from the
beneficiary.
18
The usual practice would seem to be to require a direction, consent or acknowledgement
be given by the beneficiary, even in circumstances where the declaration of trust
authorizes the charging by the trustee of the beneficial interest. This avoids the necessity
of interpreting what can sometimes be ambiguous provisions of the declaration and also
counters any argument that the mortgagee somehow has notice of a breach of trust arising
from its knowledge of some matter outside the declaration (this may be of particular
importance where the mortgagee is a financial institution which may deal with the trustee
and beneficiary through a number of its employees, giving rise to difficulties in
determining exactly what it might have notice of). This may, however, be impractical in
certain circumstances –e.g. a beneficiary is not available to sign the direction, consent or
acknowledgement or does not have the capacity to do so (e.g. is an infant); in these
circumstances counsel for the mortgagee, in consultation with the mortgagee, will have to
determine whether it is reasonable for the mortgagee to rely on clear authority given in
the declaration, without requiring the additional documentation.
The direction, consent or acknowledgement is typically included in an equitable
mortgage granted by the beneficiary, under which the beneficiary also grants a mortgage
of its beneficial interest in the real property. This additional charge is a common
practice, notwithstanding that it is unnecessary if the trustee has validly granted a
mortgage which extends to the beneficial interest (see also comments in preceding
paragraph regarding possible impracticalities of execution by beneficiary). To give an
opinion that the trustee has executed and delivered an enforceable mortgage which
creates a charge on the real property, the opinion giver would have to consider, inter alia,
whether there is sufficient unambiguous authority for the trustee to do this, either within
the declaration or pursuant to a direction, consent or acknowledgement executed by the
beneficiary and would also have to consider whether the declaration (if the beneficiary is
a party thereto), direction, consent or acknowledgement has been executed and delivered
by the beneficiary as an enforceable obligation.
In the Sample Opinion, the trust is relatively simple, with a single corporate trustee and a
single corporate beneficiary. Trust structures can, of course, be more complex, with, for
example, the beneficiary being itself a trustee for a “second-level beneficiary”. This can
potentially result in the opinion giver having to make reviews of documents, capacity and
authorization at several levels.
As noted above, an equitable mortgage of the beneficial interest is often required from
the beneficiary, even where the trustee has granted a mortgage charging the beneficial
interest. It is possible to structure a transaction where the trustee and beneficiary
separately mortgage their respective interests (and this can arise unintentionally where
the documents are unclear as to the nature of the interest being charged by the trustee). In
these circumstances it may be necessary to give separate opinions as to the charging of
the legal interest and the charging of the beneficial interest. An additional issue which
arises in these circumstances is what registration, if any, is required with respect to the
equitable mortgage. If one takes the view that the interest of a beneficiary under a trust
is an interest in the trust assets themselves, the equitable mortgage is a mortgage of an
interest in land, cannot be registered in the Land Title Office (assuming the declaration of
trust is not registered in the Land Title Office) and falls outside of the scope of the
19
Personal Property Security Act by virtue of Section 4 thereof. Presumably the respective
priorities between such a mortgage and other equitable mortgages (granted by the
beneficiary or predecessors in title) would be determined by common law rules –
generally, based on their respective dates of grant. If, on the other hand, one takes the
view that the interest of a beneficiary under a trust is essentially a chose in action (i.e.
enforceable rights under the trust) (and there are conflicting judicial decisions as to which
analysis is correct), the equitable mortgage would appear to create a security interest
governed by the Personal Property Security Act and the registration of a financing
statement (and the obtaining of priority agreements from prior registered secured parties)
may be necessary to obtain the contemplated priority. These potential issues would
suggest that it is preferable to ensure that the mortgage granted by the trustee extends to
the beneficial interest, whether or not an equitable mortgage is obtained from the
beneficiary.
Finally, it is critical to both the transaction and the opinion that it be established that the
trustee and the beneficiary are the only parties to the trust (e.g. there are no other
beneficiaries whose direction, consent or acknowledgement might be required). While
this is not possible to establish beyond all possible doubt, the use of certificates from the
trustee and beneficiary, identifying the declaration of trust and confirming that the trustee
and beneficiary are the only parties to the trust, should put the mortgagee in a position to
meet both the common law test of no notice of trust/breach and any test relevant to the
fraud provisions of Section 29 of the Land Title Act and also permit the opinion to be
given by a reliance on such certificates.
4. Irrespective of assumptions in the opinion as to the identity of individuals, the opinion
giver should be aware of, and take steps to counter, the risks of fraud which can arise
from impersonation or identity theft. This could involve obtaining and keeping
photocopies of picture identification of relevant individuals as well as complying with
any requirements imposed by the Mortgagee (where the solicitor for the Mortgagee is the
opinion giver) regarding the confirmation of identities of individuals.
5. An opinion that the Corporation or the Trustee has complied with ALL laws relating to
its business should not generally be given, even if it is limited or qualified.
6. If the Trustee acquired the Lands prior to the date of the Certificate relating to the Trustee
referred to in clause 1.8 of the opinion, it is important for the opinion giver to determine
if the Trustee has ever been struck off or dissolved. If this has happened the opinion
giver must determine that the Trustee has been restored. If a British Columbia company
was restored prior to the Business Corporation Act coming into effect the opinion giver
needs to ensure that the appropriate language (e.g. “the company shall be deemed to have
been continued in existence as if its name had never been struck off” see Natural Nectar
Products Ltd. v. Theodor (1990) 46 BCLR (2d) 394 9BCCA)) was in the restoration
order and, as the opinion addresses title to real property, the opinion giver must ensure
that there has been compliance with the requirements of the Escheat Act.
7. An opinion is sometimes requested that the owner of real property “has good, safeholding
and marketable title” to such property; such a request will most often come from an out
20
of province opinion recipient. It is not the usual practice of British Columbia lawyers to
provide an opinion in this form, as the wording of the opinion does not reflect the title
provided by the Torrens system under the Land Title Act. Providing such an opinion may
require consideration of matters which are not addressed in the Sample Opinion (such as
determining the existence of a bare trust or unregistered instrument, considering whether
possible contamination may affect the marketability of the land, identifying ambiguities
in documents registered against the land which could give rise to litigation, etc.).
8. The opinion on title or the registration and priority of the Mortgage cannot be given if
registration of the applicable Form A Transfer or Mortgage has not been completed. If
the application is pending at the time the opinion is given the opinion giver can state:
“Upon completion of the registration in the LTO of the Transfer [use defined term] the
Trustee will be the registered owner ….Upon completion of the registration in the LTO
of the Mortgage….We know of no reason why such registration should not be completed
in the ordinary course of the LTO procedure.”
9. Courts have an equitable jurisdiction to rectify instruments. It must be established that
the written instrument does not reflect the true agreement of the parties and that the
parties shared a common intention up to the time of signature that the provision in
question stands as agreed rather than as reflected in the instrument. The standard of proof
is a stringent one. The B.C. Court of Appeal recognized the applicability of rectification
of instruments creating interests in land (but did not grant rectification) in Hawkes
Estates v. Silver Campsites Ltd. (1991), 79 D.L.R. (4th)
677, and granted rectification of
an easement (expanding the area of its application in Banville v. White 100 B.C.L.R. (3rd
)
88, a 2002 decision of the B.C. Court of Appeal. In Banville both parties had acquired
the properties in question subsequent to the granting and registration of the easement and
neither was a party to the easement.
10. A failure by a person to make or remit deductions in compliance with the Income Tax
Act (Canada), the Employment Insurance Act (Canada) or the Canada Pension Plan
(Canada) or to collect or remit GST/HST in complains with the Excise Tax Act (Canada)
can, pursuant to those statutes give rise to a deemed trust in favour of the federal Crown
which extends to all assets of such person. The purpose of such deemed trust is to give
the federal Crown the equivalent of a first priority lien over such assets. The statutes and
regulations thereunder provide that a registered mortgage will have priority over such
deemed trust, to the extent of “prior advances,” if it is created and registered prior to the
creation of the trust; a mortgaged created or registered after the creation of the trust will
be subordinate to the trust. The priority of the mortgage does not extend to equipment
and fixtures which can be removed from the real property and sold. The amount of the
priority may be reduced by the value of other security held by the mortgagee at the time
of failure to remit and by payments, whether of principal or interest, received by the
mortgagee after the failure to remit. The effectiveness of these provisions and the
interpretation thereof by the Canada Revenue Agency has not yet been the subject of
definitive judicial decisions.
Deemed trusts arising under federal legislation are not specifically contemplated as
exceptions to title in the Land Title Act (unless one considers them to be “liens” arising
21
under federal statutes), but, to the extent such federal legislation validly grants priority to
deemed trusts, the priority would likely override the provisions of the Act on
paramountcy grounds.
The Act does not provide for any title exception for deemed trusts arising under
provincial legislation (again, unless one considers them to be “liens”) and at this date
there do not appear to be any British Columbia statutes which create deemed trusts which
extend to real property. One possible exception is the Income Tax Act (British
Columbia), which provides, in Section 56, that the deemed trusts provisions of the
Income Tax Act (Canada) apply to the provincial statute. It is not entirely clear whether
this is an attempt to have provincial tax deductions secured by the federal deemed trust
(which may be unnecessary if the federal statute already creates a deemed trust for
provincial tax deductions which must be remitted to the federal Crown pursuant to its
collection arrangements with British Columbia and other provinces) or whether it is an
attempt to secure such amounts by a separate deemed trust under provincial legislation.
11. Paragraph 4.1(b) (the equitable principles limitation) covers the traditional discretion of a
court of equity as well as newer concepts of materiality, reasonableness, good faith and
“fair dealing”. Field & Ryan Legal Opinions in Corporate Transactions (New York,
1988) as quoted in Estey, Legal Opinions in Commercial Transactions (Toronto, 1997)
p.210.
12. The Committee considers that giving an opinion as to the validity, legality and binding
effect and enforceability of a document does not impose any obligation to enquire into
vitiating elements. However, the opinion cannot be given if the opinion giver knows or
has reason to believe any of these elements are present.
13. In circumstances where the opinion giver is aware of fraud, illegality, bankruptcy or
similar elements in the transaction, the opinion giver should consider any potential effect
of those elements on the title opinion – e.g. where title is being acquired pursuant to a
transaction reviewable under the Bankruptcy and Insolvency Act (Canada).
14. The qualification is likely to be appropriate only in circumstances where the Mortgagee’s
lawyer is providing an opinion to the Mortgagee or where the Corporation’s and
Trustee’s lawyer is providing an opinion to the Mortgagee and the Mortgagee does not
have its own counsel. Mortgagees which are financial institutions will typically have
standard form Mortgage Terms which they will specify be used. It is a question of fact,
which would have to be reviewed in the particular circumstances of the transaction, as to
whether the instructions of the Mortgagee expressly or impliedly require that the standard
form Mortgage Terms be reviewed on an individual transaction (the Mortgagee may have
such Mortgage Terms reviewed and amended on an ongoing basis by its general counsel).
In circumstances where the Mortgage Terms are not to be reviewed, this qualification is
necessary to establish that the Mortgagee carries the risk of any enforceability arising
from deficiencies in its Mortgage Terms. A lawyer for the Corporation and the Trustee
who is not reviewing the Mortgage Terms should, of course, also obtain appropriate
instructions from the Corporation and the Trustee as to this course of action.
22
15. Sections 4 and 5 of the General Regulation under the Expropriation Act govern
compensation to the holders of security interests (which will include mortgages) in
expropriated land. These provisions may prescribe terms applicable to the payment of a
deficiency which are inconsistent with the original repayment terms and may be
inconsistent with restrictions on or conditions to prepayment. The provisions may also
limit an action for any deficiency, but as of this date the Committee is not aware of any
judicial interpretation of this issue.
16. This opinion has been prepared in respect of a transaction where the Mortgage is granted
to secure indebtedness owing by the Corporation to the Mortgagee in a commercial
transaction such as a loan or a sale of real property with a mortgage back. Additional
considerations, assumptions or qualifications may be necessary where a obligant is an
individual (e.g. to determine compliance with interest disclosure requirements under
applicable consumer protection or other legislation or in connection with prepayment
rights), where the relationship between the Corporation and/or the Trustee and the
Mortgagee or the nature of the amount secured by the Mortgage might impact the priority
of the Mortgage (e.g. the provisions of Section 5 of the Partnership Act) or where the
Mortgage purports to secure certain types of obligations other than or in addition to
“normal” indebtedness (e.g. a profit participation or an option to acquire the mortgaged
property).
17. A “generic” qualification is often found in opinions for U.S. real estate financing in a
form such as the following:
“Certain provisions of the Documents may be unenforceable, but such unenforceability
will not, subject to the other exceptions, qualifications and limitations in this opinion,
render any Document invalid as a whole or substantially interfere with realization of the
principal benefits provided by each Document.”
The use of this form of qualification is rare in British Columbia or elsewhere in Canada.
While an argument can be made that is appropriate where there are a number of minor
enforceability issues which cannot be dealt with by amending the document (e.g. the
document is a “standard form” document, the document has been executed prior to
review by the opinion giver, etc.), the Committee is of the view that the usual and better
practice is to identify specific enforceability issues by way of individual qualifications.
© Solicitors’’ Legal Opinions Committee of British Columbia