Canada: The Open For Business Act: Bill 68 – An Act To Promote Ontario As Open For Business By Amending Or Repealing Certain Acts - Enacted As: Chapter 16 Of The Statutes Of Ontario, 2010

1.1 Overview

Bill 68 – An Act to promote Ontario as open for business by amending or repealing certain Acts (the "Open for Business Act")¹ received Royal Assent on October 25, 2010. It is an omnibus Act which contains more than 100 amendments to existing legislation spread out across 10 ministries. The Open for Business Act was an Ontario initiative to streamline government to business services and to encourage a competitive business environment for Ontario businesses.² The government drafted the legislation with an eye to modernize government regulatory oversight, improve government service delivery and create new and transparent relationships between business and government. To develop the legislation, the Ontario government used other jurisdictions as models of government efficiency and transparency and engaged in consultations with business and industry stakeholders.

The Open for Business Act's provisions come into force on various dates, depending on the specific Act or Regulation being amended. Attached as Schedule "A" is a copy of the Explanatory Note which accompanies the Open for Business Act as a "reader's aid" and which provides a brief summary of amendments to the various pieces of legislation.

As it is impossible to review each of the Acts and Regulations being amended, we have focused on the major amendments to the following five (5) Acts which we believe to be of particular interest to solicitors: the Construction Lien Act, the Execution Act, the Creditors' Relief Act, the Environmental Protection Act and the Personal Property Security Act. We believe that this review will be of particular interest to practitioners who operate in the areas of financial services and real estate.

1.1 Construction Lien Act

The Open for Business Act makes four (4) major changes to the Construction Lien Act.³ First, it expands the definition of "improvement." Second, it establishes a requirement to publish notice of the intended registration of a condominium. Third, it removes the requirement for an Affidavit of Verification to validate a lien. Finally, it makes changes to sheltered liens. All of the changes except those dealing with the elimination of the affidavit are in force at the time of writing this paper.

1.1.1 Definition of "Improvement"

Under the old definition, "improvement" required a direct physical connection with the land to constitute an "improvement."⁴ The Open for Business Act broadens the definition and now includes "installation of industrial, mechanical, electrical or other equipment on the land or on any building, structure or works on the land that is essential to the normal or intended use of the land, building, structure or works."⁵ The definition was changed in response to the Ontario Court of Appeal's decision in Kennedy Electric Ltd. v. Dana Canada Corporation,⁶ which held that the plaintiff installer did not have a lien on an assembly line because it was not an "improvement" since it was portable.

1.1.2 Public Notice of Intended Registration of a Condominium

An owner of land who intends to register land in accordance with the Condominium Act, 1998 must now publish notice of the intended registration.⁷ The publication must be made in a construction trade newspaper at least five (5) days but not more than fifteen (15) days (excluding Saturday, Sunday and Public Holidays) before the description is submitted for approval under the Condominium Act, 1998. The notice must be on a prescribed form and include the owner's name and address for service, an overview of the land including reference to the lot and plan or parcel number, and if a contractor supplied services or materials during the 90 day period before the description is submitted, that contractor's name and address. Failing to comply requires the owner to compensate any person entitled to a lien who suffers damages.

The purpose of this provision is to make it easier for contractors and subcontractors to enforce their liens against the owner for common elements. If the lien is registered prior to the condominium's registration, the lien can be enforced against the condominium as a whole. After the condominium's registration, however, a separate lien has to be made against each condominium owner to establish a lien against the common elements. This should reduce the costs involved in enforcing liens against large condominiums with numerous units.

1.1.3 Elimination of Affidavit of Verification

Under the old Construction Lien Act, in order to make a claim for a lien, it had to be verified by an affidavit of the person claiming the lien.⁸ The Open for Business Act repeals this requirement.⁹ The amendment eliminated a clear redundancy because the Construction Lien Act provided that a claim for a lien can be electronically registered and because courts have held that the electronic statement in the electronic form was sufficient to satisfy the affidavit requirements.

1.1.4 Sheltered Liens

Sheltering is an exception to the requirement that a lien be properly perfected. To be perfected, an action to enforce the lien must be commenced and a certificate of action must be registered against title to the premises.¹⁰ Sheltering allows a lien claimant to preserve the claim under the certificate of action of another lien claimant.¹¹ An issue arises, however, where the other lien is vacated. Is the sheltered lien unperfected?

The Open for Business Act amends the Construction Lien Act to provide that a lien claimant's sheltered lien may proceed with an action to enforce the sheltered lien as if the order to vacate the other lien was never made.¹² The amendment allows courts to vacate liens without having to worry about the rights of sheltered liens.

1.2 Execution Act

The Open for Business Act amended the Execution Act¹³ to bring it into line with the current court rules and practices regarding seizure and sales pursuant to Court orders. Notably, it expanded definitions, modified the personal property exempt from execution and set out the way in which executions are recorded.

1.2.1 New Definitions

The Open for Business Act added definitions for "execution creditor," "execution debtor," "judgment creditor" and "judgment debtor." These definitions help to clarify the difference between those who have obtained a writ of execution or have a writ of execution against them and those who simply have a judgement in their favour or against them and streamline application of the Execution Act.¹⁴ The Open for Business Act also now adds a definition for "writ of execution," which includes a writ of seizure and sale; a writ of seizure and sale of land; a writ of seizure and sale of personal property; a writ of sequestration; a subsequent writ given effect to the previous four (4) writs; an order for seizure and sale of personal property, real property or both real and personal property; and any other process of execution issued out of the Ontario Court.¹⁵ Previously, the Execution Act only defined an execution as "a writ of seizure and sale and every subsequent writ for giving effect thereto."¹⁶ These definitions are all now in effect.

1.2.2 Changes to Personal Property Exempt from Seizure

The Open for Business Act also changes what is exempt from seizure in Ontario for personal property of a debtor that is not a corporation.¹⁷ First, the upper limit on necessary clothing is removed. The default upper limit on household furnishings and appliances and on tools and other personal property used to earn income from the debtor's occupation is removed and will only be set by regulation. The tools provision no longer distinguishes between those farming and those not engaged in farming, which previously allowed for a greater exemption amount for farmers ($28,300 versus $11,300). The upper limit will also be prescribed for the value of motor vehicles and the default of $5000 is removed. There is a provision allowing for other personal property to be defined and set out by regulation. Finally, there is an upper limit on the value of all exempted personal property, which will be prescribed by regulation. No such limit was previously imposed. Moving the exemptions and values from statute to regulation allows the government to respond more quickly and efficiently when it wants to change those items rather than having to engage the legislative process, which can often take some time to complete. Note that these provisions are not yet in force, likely because the government has yet to pass the regulations setting the exemption upper limits. Also taking note of the upper limits is important in order to understand which assets will be sheltered from seizure and sale and which assets may be realized upon to satisfy the debt. The addition of the overall upper limit should provide some more room for creditors to seek repayment of the debt since it would likely have a cumulative total which is less than all the individual totals if they were combined.

1.2.3 The Electronic Database

Also of note is that a writ of execution will now be binding once it has been filed with the sheriff and entered into the electronic database maintained as the index of writs of execution.¹⁸ Previously, there was no obligation that the writ be placed in an electronic database and the sheriff was only required to place it in the book or record for it to be binding.¹⁹ There are now also specific requirements as to how the electronic database is to be maintained.²⁰ These changes should help streamline execution searches and keep records uniform across the province. They are all now in force.

1.3 Creditor's Relief Act

The Open for Business Act repeals the Creditor's Relief Act (1990) and replaces it with the Creditors' Relief Act, 2010, which is now in force. It seeks to modernize the provisions and streamline them in a logical fashion. It also seeks to bring the provisions in line with the current court rules and practices. The most significant change, however, is the elimination of the summary procedure whereby creditors who have not obtained judgement can participate in the distribution.

Under the old Creditors' Relief Act, creditors could obtain execution without obtaining judgment.²¹ If the debtor permitted execution against them and the sheriff has seized property, the creditor could access a summary procedure to obtain judgement. This had been described as a way for creditors to "piggyback" on others. The creditor had to deliver an affidavit of claim to the debtor, which could be contested. If the debtor did not contest the claim, the court issued a certificate which is registered with the sheriff. The creditor could then share in the distribution on a pro-rata basis.

The Creditor's Relief Act, 2010 eliminates this procedure in its entirety. This means that in order to share in the distribution, creditors will have to obtain judgement against the debtor. They must be an "execution creditor" such that they are "a person in whose name or on whose behalf a writ of execution is issued on a judgment, or in whose favour an order has been made for the seizure and sale of personal property, real property or both real property and personal property." The practical effect is that it will take much more time and expense to collect on debts.

There are transitional provisions for existing certificates issued under the old Creditors' Relief Act.²² Certificates in force on the day the Act was repealed (the day the Open for Business Act received Royal Assent, October 25, 2010), remain in force for three (3) years and may be renewed in the same manner as an execution. Thus, although new certificates are impossible to obtain, the old certificates are grandfathered in until October 25, 2013.

1.4 Environmental Protection Act

The Open for Business Act makes significant changes to the powers and procedures in the Environmental Protection Act. The system under the Environmental Protection Act had not substantially changed over the last thirty (30) years. It remained paperbased and all applications were dealt with in the same manner, regardless of how little or great the environmental risk. The process resulted in significant backlog with the 6000 requests for certificates each year. The Open for Business Act modernizes the approval process and increases the role of the Director and the powers of Provincial Officers to ensure compliance with the prohibitions and approval requirements in the Environmental Protection Act.

1.4.1 Two Track Approval System

The two track approval system creates two (2) regimes which apply based on the risk an activity proposes. The first track is known as the "Environmental Activity and Sector Registry Process." Under the Environmental Protection Act, the Director must establish and maintain an electronic registry which allows persons to register their activities and provide such information to the public.²³ If a person is engaged in an activity prescribed by regulation and registers the activity, receives confirmation and engages in the activity in accordance with the regulations, no approval process is required.²⁴ So far, the Ministry of the Environment has proposed to allow the following sectors and activities to register on the Environmental Activity and Sector Registry:

• Automotive Body, Paint and Interior Repair and Maintenance Sector;
• Provision of Comfort Heating in Buildings; and,
• Standby Power Generation Equipment in Buildings.²⁵

The second track is called the "Environmental Compliance Approvals Process." This process involves an application to the Director to engage in an activity mentioned in s.9(1) or 27(1) of the Act, which are essentially activities that may discharge contaminants into the environment.²⁶ The application will have to prepared and submitted in accordance with the regulations, which have yet to be prescribed. The process, however, has been made more flexible to match operational realities of businesses. In particular, it provides for a single approval system for businesses with multiple activities at one site or multiple sites.²⁷

These changes are expected to be fully implemented in 2012.

1.4.2 Director's Powers and Duties

The Director has significant powers and duties in respect of the Environmental Compliance Approvals Process.²⁸ The Director has the power to require an applicant to submit any plans, specifications, technical reports or other information or report on any tests or experiments relating to the activity. This provision remained substantially the same from the old Environmental Protection Act certificate of approval regime.²⁹ The more notable change is that the Director can require an applicant to consult with any persons in any manner the Director specifies. Such power did not exist under the old regime. This provides the Director with more opportunity to ensure that stakeholders have been adequately appraised and that their viewpoints are taken into consideration in how the applicant carries out its activities.

Another new feature is that the Director can, for these higher risk Environmental Compliance Approvals, order a hearing with respect to the application.³⁰ The hearing would be conducted by the Environmental Review Tribunal (the "Tribunal") and any decision must be implemented by the Director. This power is in stark contrast to the current regime whereby the Director only has the power to request hearings regarding waste management systems or waste disposal sites.³¹ The appeal process remains the same, such that an appeal on a question of law is to the Divisional Court and an appeal on a question other than a question of law is to the Minister. The appeal must be made within thirty (30) days of the Tribunal's decision. Both of these powers appear to be completely unfettered and it remains to be seen whether guidelines will be established to determine when and how the Director will use his or her discretion with respect to ordering consultations or hearings. As they are connected with the new two‐track procedure, these powers are not yet in force.

1.4.3 Provincial Officer Powers

Although Provincial Officers have much the same powers as before, there have been two (2) major changes. First, under the previous Environmental Protection Act and judicial interpretations of its provisions, Provincial Officers must attend a property to obtain information regarding compliance.³² Provisions are now in force which allow Provincial Officers to, at any reasonable time and with any reasonable assistance, require a person to respond to reasonable inquiries.³³ Such inquiries can be made over the telephone or by other means of communications. The amendment effectively overturns the judicial constraint of Provincial Officer powers to have persons provide information without having actually attended the premises to conduct an inspection.

The Open for Business Act also provides a new power to issue an order requiring that a person pay an administrative penalty for failing to comply with certain provisions of the Environmental Protection Act.³⁴ The amount of the penalty cannot exceed $5,000 for each contravention if the order for an administrative penalty is made by a Provincial Officer. The Director can also issue such an order, which has a maximum penalty of $100,000 for each contravention.

1.5 Personal Property Security Act ("PPSA")

The Open for Business Act makes a number of noteworthy changes to the PPSA which primarily address the 2007 accidental repeals of two (2) of the PPSA's provisions: the elimination of the collateral description box and the exclusion of lease‐back transactions. As well, a number of changes were made to bring the PPSA in line with other provincial jurisdictions, including the ability to require that collateral descriptions be amended and to extend the time to register non‐inventory purchase money security interests ("PMSI"). All of these changes are now in force.

1.5.1 Collateral Description – Re Instated

Until August 1, 2007, s. 46(3) of the PPSA provided that, where a financing statement or financing change statement contained an optional "general collateral description" in addition to the mandatory "check box system", the security interest of a secured party was limited to the narrower scope of the general collateral description. However, expecting that Ontario would soon move towards mandatory general collateral descriptions (to replace the "check box system"), the Ontario Government inadvertently repealed s. 46(3) prior to finalizing the extensive computer software upgrades required to support such an amendment. As a result, secured parties could no longer rely on the general collateral descriptions contained in financing statements or financing change statements.

The effect of this inadvertent repeal was that, from August 1, 2007, secured parties had to seek estoppel letters, acknowledgements or waivers confirming the scope of the security interest perfected from all prior registered secured parties. That is, even where a general collateral description had been completed, secured parties could not rely on this description to limit the scope of the security interest. This process was both timing consuming and challenging, as other secured parties did not always respond in a timely fashion to these requests.

The Open for Business Act has amended the PPSA (which amendment is retroactive to August 1, 2007) by restoring the language of former s. 46(3) in new s. 46(2.1), which reads as follows:

Classification of Collateral

(2.1) Except with respect to rights to proceeds, where a financing statement or financing change statement sets out a classification of collateral and also contains words that appear to limit the scope of the classification, then, unless otherwise indicated in the financing statement or financing change statement, the secured party may claim a security interest perfected by registration only in the class as limited.³⁵

1.5.2 Definition of Purchase Money Security Interest

Until 2007, sale leasebacks were expressly excluded from the definition of a PMSI³⁶ on the basis that they are inconsistent with the policy behind a PMSI, which is to encourage debtors to expand their asset pools. However, when the Securities Transfer Act, 2006 was passed and enacted, the exclusion for sale leasebacks was inadvertently deleted. The Open for Business Act corrects this deletion by again excluding sale leasebacks from the definition of a PMSI.³⁷

1.5.3 Collateral Description – Overbroad

The Open for Business Act amends section 56 of the PPSA give debtors the right to demand that the secured party file a financing change statement to amend its registration where the collateral classification or the collateral description is too broad.³⁸

Subsection 56(2.2) requires the secured party to remove a "collateral classification box" where the classification does not pertain to the collateral in which the secured party has acquired a security interest. For example, a debtor can require a secured party to remove the selections of "Equipment" and "Accounts" where the collateral secured only relates to "Inventory."

Subsection 56(2.3) requires the secured party to complete the "general collateral description" to more accurately described the collateral which forms part of the security interest. For example, a debtor can require a secured party to itemize specific pieces of equipment in the general collateral description where the security interest only relates to particular assets.

1.5.4 Purchase‐Money Security Interest Registration Timing

In order to harmonize Ontario with other jurisdictions, the Open for Business Act extends the time to perfect a PMSI in collateral other than inventory from 10 to 15 days.³⁹ In the case of tangibles, the clock starts to run from the time the debtor takes possession of the collateral. In the case of intangibles, the clock starts to run from the time the security interest attaches.

Footnotes

1 2nd Sess., 39th Leg., Ontario, 2010.

2 Ontario Ministry of Economic Development and Trade, "Open for Business," online: http://www.ontariocanada.com/ontcan/1medt/en/ofb_main_en.jsp.

3 R.S.O. 1990, c. C.30.

4 Construction Lien Act, R.S.O. 1990, c. C.30, s. 1(1).

5 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 2(2).

6 2007 ONCA 664.

7 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 4.

8 Construction Lien Act, R.S.O. 1990, c. C.30, s. 1(1).

9 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 2(5)‐(10).

10 Construction Lien Act, R.S.O. 1990, c. C.30, s. 36(3).

11 Construction Lien Act, R.S.O. 1990, c. C.30, s. 36(4).

12 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl.2 (12).

13 R.S.O. 1990, c. E.24.

14 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 3(2).

15 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 3(4).

16 R.S.O. 1990, c. E.24, s. 1.

17 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 3(6).

18 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl.16.

19 Execution Act, ss. 10(1),(3).

20 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 2, cl. 16.

21 Creditors' Relief Act, R.S.O. 1990, C.45. 22 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 4, cl. 21.

23 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(19).

24 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(19).

25 Government of Ontario, "Regulation Proposal Notice: Proposed Environmental Activity and Sector Registry Group 1 Activities and Sectors Regulations," online: "http://www.ebr.gov.on.ca/ERS‐WEBExternal/ displaynoticecontent.do?noticeId=MTEyNTcx&statusId=MTY4ODM0&language&lan guage=en" .

26 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(15).

27 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(15).

28 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(15).

29 Environmental Protection Act, R.S.O. 1990, c. E.19, s. 9(2).

30 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(15).

31 Environmental Protection Act, R.S.O. 1990, c. E.19, s. 32.

32 R. v. Crompton Co./CIE (2005), 78 O.R. (3d) 135 (Ont. C.A.).

33 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(63).

34 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 7, cl. 2(83). 35 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 5, cl. 4(3).

36 Section 1(1) of the PPSA: "A "purchase‐money security interest" means, a) a security interest taken or reserved in collateral, other than investment property, to secure payment of all or part of its price, b) a security interest taken in collateral, other than investment property, by a person who gives value for the purpose of enabling the debtor to acquire rights in or to the collateral, to the extent that the value is applied to acquire the rights, or c) the interest of a lessor of goods under a lease for a term of more than one year, but does not include a transaction of sale by and lease back to the seller."

37 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 5, cl. 4(1).

38 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 5, cl. 4(4).

39 Open for Business Act, 2nd Sess., 39th Leg., Ontario, 2010, Schedule 5, cl. 4(2)

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