legal opinions: sample opinion letters nos. 4a and 4bpage 2 of 5 “reference materials”) included...

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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

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“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

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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

http://www.abanet.org/buslaw/tribar/materials/20050120000001.pdf

http://www.carswell.com/product-search/?qa=auth&qt=Donovan+W.M.+Waters

http://www.carswell.com/product-search/?qa=auth&qt=+Mark+Gillen

http://www.carswell.com/product-search/?qa=auth&qt=+Lionel+Smith

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.];


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 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


knows, or has reason to believe is


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.


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


knows or has reason to believe is


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;


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.];


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 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 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


knows, or has reason to believe is


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


RE: [Describe the Lands] (the “Lands”)


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.



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


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.




____________________________

[Name]

[Title]

13


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


RE: [Describe the Lands] (the “Lands”)


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.



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


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.




______________________________

[Name]

[Title]

15


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.
