A Faulty Settlement and Some Buyer's Remorse

The recent decision of the Superior Court of Justice in the Murphy Estate considers what happens when parties to a proceeding settle a matter on the basis of faulty facts and one of the parties suffers from “buyer’s remorse”. 

Murphy Estate involved a dispute between the Deceased’s step-children and biological children after she died leaving in a will preferring her own children and leaving her step children with only nominal gifts.  Rather than litigating, the children and step-children reached an agreement that they would all split the estate equally and signed minutes of settlement to this effect.

When the settlement was reached, it was assumed the value of the estate was approximately $270,000 (and included a RRIF of $150,000).  This was based on a schedule prepared by the estate solicitor which listed the RRIF as an estate asset. However, the minutes of settlement themselves did not include any reference to the assets of the estate but instead simply contemplated the division of the residue.  

After the minutes of settlement had been signed, it was discovered that the beneficiary on the RRIF was not the Deceased’s estate, but was the Deceased’s two children.  The bank holding the RRIF then paid the proceeds to the children on the basis of the beneficiary designation. 

One of the step-children brought a court application seeking the repayment of the RRIF to the estate and arguing that, notwithstanding the fact that the biological children were the designated beneficiaries, the proceeds of the RRIF were to be distributed as per the terms of the settlement.  She argued that because the RRIF had been included on the statement of assets she had relied upon in reaching the settlement, a mistake had occurred and the RRIF should be included in the estate. 

The court found that in order to rely on the doctrine of mistake to set aside the agreement, the applicant would have to establish that the deceased’s children (who were the beneficiaries of the RRIF) had also been aware of the mistake when the settlement was reached.  Here, the court held that this wasn’t the case – all parties had believed that the estate was the beneficiary of the RRIF and it was only after the minutes of settlement had been signed did they learn the truth. 

Ultimately, the court decided that while step-daughter may have made a “bad bargain” by signing the minutes of settlement she was bound by them and the RRIF did not need to be repaid to the estate.    

In Estate Planning, When Does "Equal" Mean "Unequal"?

Figuring out how to divide your estate can involve making tough choices.  This is particularly the case when there are multiple potential beneficiaries who have differing (and sometimes conflicting) expectations about what they’re going to inherit from a loved one’s estate. 

In situations where the beneficiaries of the estate will be an individual’s children, a difficult decision can involve whether the estate is divided equally between them or whether different kids receive different shares.  A recent article from the Wall Street Journal considers some of the complications that can arise in both scenarios.

Sometimes, a decision about how to divide an estate can be driven by spite – a parent, angry that a child didn’t live up to expectations simply disinherits him.  However, frequently, the individual making the will has sound reasons for distributing his estate in a specific way. 

For example, it might have been that one child received considerable financial assistance when the parent was still alive, so the parent decides to use her will to “equalize” the situation between the children.  Or, one child might have considerably more financial resources than another and the parent decides to “help out” the poorer child. 

Whatever the rationale behind the way you divide your estate, there are a couple of things to keep in mind.  First, consider the legacy you want to leave behind.  Just because you had very good reasons for the way you decided to divide your estate does not mean that the beneficiaries will figure them out; instead, they may end up angry and bitter. Second, consider the way the distribution of an estate will affect the relationship between surviving family members – good intentions behind an estate plan might be rendered meaningless if the result is family infighting and broken relationships. 

It is a good idea to discuss the contents of your will with those who will be affected by it.  Although the idea of children expecting an inheritance may seem distasteful to some parents, a very common impetus for estate litigation is a child being unpleasantly surprised by the terms of a parent’s will – having a discussion while you’re alive can help stave off bitterness (and litigation!) when you’re dead.   

Gatti Estate Dispute Almost Settled?

Members of the family of Arturo Gatti appear to be close to settling litigation involving the deceased boxer’s estate.  Gatti died in 2009 and was survived by his wife, their son, and a daughter from another relationship. 

Gatti’s cause of death is murky.  He was found dead in an apartment he was renting with his wife at a resort in Brazil.  Initially, Brazilian police identified Gatti’s wife as the prime suspect in his death and alleged that she’d strangled him with a purse strap while he slept.  However, the final report of an investigation into his death concluded that he had committed suicide.  Gatti’s family have refused to believe he committed suicide and his mother and his daughter are currently suing his wife in a wrongful death lawsuit. 

Approximately three weeks before his death, Gatti made a will leaving his entire estate to his wife.  The value of his estate is unclear – it has been estimated that it was worth $6 -$8 million at his death but at present it is currently worth about $3.5 million. 

After Gatti’s death, his family alleged that he had made a will in 2007 in which he left everything to his mother and his daughter.  However, no one has produced a signed copy of the will. 

In a trial which is currently ongoing in Montreal, Gatti’s family is seeking to have his final will (in which he left his estate to his wife) set aside on the basis that he was subjected to undue influence when the will was signed.  Over the weekend, negotiations between the parties appeared fruitful and they were hopeful they would reach a settlement this week.

Take Care to Ensure Your Will is Properly Executed

A recent decision from the United Kingdom considered whether the will of an individual who had benefited only some of his children was properly executed.

Ranjit Singh died in March 2009.  Pursuant to the terms of a will he made in 1999, he left the bulk of his £870,000 estate to his three sons.  His three daughters didn’t fair as well – two of them received bequests of £20,000, while the third daughter received nothing.

After the deceased’s death, one of the daughters challenged his will on the basis that it had not been properly executed.  In the United Kingdom, the rules regarding the proper execution of a will are the similar to those in Ontario –  pursuant to s. 9 of the Wills Act 1837, the will must be signed by the testator in the presence of two witnesses who must then witness the testator’s signature in the presence of the testator.  

Here, the deceased’s daughter alleged that the witnesses to the will were not actually present when the deceased signed it.  One of the deceased’s sons (who was a lawyer) defended the will and argued that the reason the deceased had left his estate mainly to his three sons was because in Sikh tradition daughters are treated as being part of their husband’s family and financially provided for through dowries when they marry.  However, it’s not clear whether the son had any evidence to suggest the will had been properly executed. 

Ultimately, the court found in favour of the daughter and set aside the deceased’s will.  In considering the evidence, the judge found that there was strong evidence to suggest that the will was not executed properly.  Particularly persuasive was the evidence of one of the witnesses that he and the other witness were not present when the will was signed. 

The court found that notwithstanding the fact that setting aside the will would frustrate the deceased’s intentions regarding the distribution of his estate, given the will was not properly executed it simply wasn’t valid.  The effect of the court's decision was that the decesed's estate was distributed pursuant to the rules of intestacy and all his children shared in it equally. 

How Does an Equalization of Net Family Property Work?

When someone dies, his surviving spouse isn’t necessarily bound by the provisions of the deceased spouse’s will (or the distribution scheme set out in the intestacy provisions in Part II of the Succession Law Reform Act).  In many circumstances, instead of taking an entitlement under a will or pursuant to the intestacy laws, the survivor has the option to trigger a property division scheme set out in in Part I of the Family Law Act (“FLA”) (referred to as electing to equalize net family property (“NFP”)). 

Before I go further, there are a few things I want to point out.  Firstly, the right to equalize NFP exists solely when the spouses were legally married – meaning that it is not an option available to common law spouses.  Secondly, the reason I say that an equalization is available in “many circumstances” is because it is possible to contract out of the option in a domestic (or separation) agreement.  Thirdly, if a spouse elects to equalize NFP then she releases her rights under the will (or the intestacy laws) – she doesn’t get to benefit under both.

An equalization of NFP is the same property division scheme that’s available when married spouses divorce (the difference being that, in the estates context, the triggering date is the date of the spouse’s death, rather than the date of separation).  In the case of the death of a spouse, it involves determining the value of the assets that each spouse acquired during the marriage.  If the value of the assets acquired by the surviving spouse is lower than the value acquired by the deceased spouse then the survivor (should she elect to equalize) in entitled to half the difference.  Believe me when I say that this explanation is incredibly simplistic!

Determining each spouse’s NFP can involve complex mathematics – because the FLA allows spouses to exclude various assets (both that they owned at the date of marriage and that they acquired during marriage) from the calculation – and at times determining NFP can be a highly contentious procedure.

It’s essential for any spouse considering whether to equalize NFP to know that the FLA imposes a deadline of 6 months after the death of a spouse to file an election (otherwise the spouse is deemed to take under the will – or intestacy rules).  The court has the discretion to extend time (and will frequently agree to do so in appropriate circumstances) – however, an extension should be sought prior to the limitation period elapsing, not afterwards.

Estates Lawyers...Don't Forget About Family Law

On Wednesday I blogged about will drafting and professional negligence issues that can arise for a lawyer.  I commented that “dabbling” in an area of the law can be a bad thing – however, knowing about another area of the law is a very good thing.  In its most recent Webzine, LawPRO (the professional insurer for lawyers in Ontario) discusses how estates and trusts lawyers can benefit from knowing a thing or two about family law.

When drafting wills, something that is often overlooked is the role family law has on an individual’s ability to dispose of his estate.  While it might be nice to think that when doing a will an individual can do whatever he wants with his assets, in many situations this is not the case and there are in fact legal limitations when it comes to disposing of assets. 

Some of the “hot button” issues that LawPRO raises include the following:

  1. Matrimonial home – in Ontario, a spouse can’t dispose of a matrimonial home without the consent of the other spouse – irrespective of who holds title to the property.  Keep in mind that that the definition of “matrimonial home” is broad and will frequently include a vacation property. 
  2. Child/Spousal Support – child and spousal support obligations are frequently binding on an individual’s estate – and not simply those obligations that arise by way of court order.  Often, domestic agreements and separation agreements will impose support obligations that should be considered when doing a will. 
  3. Dependant Support EntitlementPart V of the Succession Law Reform Act allows certain classes of people (including a spouse or child) to bring a support claim against an individual’s estate if the individual did not provide adequate provision for dependants in his/her will.  The right to bring a claim of this nature applies to former spouses – and can’t be “contracted out of” by a separation agreement.

LawPRO’s article includes a few other issues which are worth a review – and should be kept in mind by any lawyer drafting wills (as well as the litigators that come on to the scene post-death). And in a future blog, I'll comment on some of the issues that family law lawyers need to remember about estates law.

How Does a Separation Agreement Affect Your Estate Plan?

The effect that marital breakdown has on an estate plan is an issue that confuses many.  As I’ve blogged about before, a divorce will generally revoke a gift to a spouse and an appointment of the spouse as executor under a will; however, mere separation will generally have no impact at all.  But what happens when separated (but not divorced) spouses enter into a separation agreement?

The recent decision of Makarchuk v. Makarchuk addresses the impact of a waiver of rights to an estate in a separation agreement when there is also a will leaving an entitlement to the spouse.  In this case, the spouses were separated, but not divorced.

Six months before the spouses separated, the husband had a made a will naming his wife as his executor and as the sole beneficiary of his estate.  Subsequent to their separation, the spouses entered into a separation agreement that provided that “subject to any additional gifts from one of the [spouses] to the other in any will validly made after the date of this agreement” the spouses both released any rights they may acquire “under the laws of any jurisdiction in the estate of the other…” 

The husband later died and a dispute arose as to whether the wife was entitled to receive the estate pursuant to the husband’s will and act as executor.  Their son argued that the wife had no entitlement to the estate as the separation agreement acted as a waiver to any rights she might have. 

The wife argued that there were only three ways that the provisions in the husband’s will could fail: (1) through the husband making a new will; (2) through the husband marrying someone else; or (3) in compliance with the provisions of s. 15 of the Succession Law Reform Act (which sets out the formal requirements when revoking a will). 

Ultimately, Justice Hennessy found in favour of the wife.  She determined that the language in the separation agreement that referred to the release of “rights acquired under law” did not apply to those acquired under the husband’s will.  Accordingly, Hennessy J. found that the language in the separation agreement did not trump the wife’s rights under the will and the wife was entitled to take as the will provided. 

Court Battle Over James Brown's Estate Drags On

When James Brown died on December 25, 2006, he directed that his approximately $100 million fortune be held in a trust for the benefit of poor and needy children in Georgia and South Carolina.  Unfortunately, since Brown’s death his estate has been embroiled in litigation that shows no sign of ending any time soon

Less than a month after Brown’s death, his fourth wife and his seven children challenged his will on the basis of mental incapacity or undue influence.  In 2009, the parties appeared to have reached a settlement with the Attorney General in South Carolina in which Brown’s will was affirmed but the assets of his estate were divided between the trust and the family members – one-quarter was to go to the wife, one-quarter was to pass to Brown’s children, and half was to be used to establish the charitable trust. A probate judge in South Carolina approved the settlement   

Unfortunately, this did not resolve the dispute.  Two of Brown’s former trustees (who had been removed from administering the trust) appealed the probate judge’s decision to approve the settlement to the South Carolina Supreme Court arguing that the intent of Brown’s will was clear and that the will had never been declared invalid.  Additionally, one of Brown’s former producers is also attempting to have the settlement set aside arguing that Brown had assigned all of his assets to the trust and had entered into a partnership with her allowing her to manage the trust.

It’s not yet clear how this will all end – but one thing seems obvious…the lawyers are guaranteed to benefit from Brown’s estate!

Marvel Wins Copyright Fight with Jack Kirby's Heirs

A judge in the US recently decided a dispute over the rights to various comic book characters between Marvel (and its parent, the Walt Disney Company) and the heirs of the late Jack Kirby. 

Jack Kirby was a comic book artist and author who co-wrote some of Marvel’s most iconic comic book titles, including Spider-Man, the Incredible Hulk, the Fantastic Four, and X-Men.  Marvel owns the right to those characters and, along with Disney, has made a fortune off various movie franchises involving them. 

In the United States, copyright law provides that, in some circumstances, creators or their heirs can regain copyright they have sold to characters or stories after a given number of years.  In 2009, Kirby’s heirs sent termination notices to Marvel, Disney, and other studios, expressing their intention to regain copyright to various creations starting in 2014.  Marvel responded to the termination notices by starting a lawsuit claiming that it owned the works in question.

The case turned on the character of Kirby’s employment relationship with Marvel when the works were produced – specifically, was Kirby an independent freelancer or were the works made at the “instance and expense” of Marvel?   

Marvel argued that it employed Kirby when the works were created and, as a result, owned the works.  Kirby’s heirs argued that Kirby had acted on a freelance basis and that, accordingly, they were entitled to send the termination notices and gain ownership of the works. 

Last week, US District Judge Colleen McMahon ruled in Marvel’s favour.  She found that the issue was not whether Kirby had created the works and characters in question but rather whether his work qualified as “work for hire” under the US Copyright Act of 1909 and in this case she found that it did.  Kirby’s heirs have said they intend to appear the ruling.  

When Can a Trustee Be Excused for Causing a Loss?

On Wednesday I blogged about the decision of the Ontario Superior Court of Justice in the McDougall Estate.  The case involved a handwritten will and codicil made by the deceased that was difficult to decipher.  A dispute arose between the estate trustee and the residual beneficiary about whether the will authorized the estate trustee to make a charitable gift.   Ultimately, van Rensburg J. found that although the deceased had intended that a charitable gift be made, the gift failed because the deceased had failed to specify the amount. 

Given that the estate trustee had already made the $10,000 donation, an issue arose as to what recourse the residual beneficiary of the estate had.  The beneficiary argued that as the donation had been improper, the estate trustee ought to be required to repay it (as well as the travel expenses incurred delivering the funds to the charity).  The estate trustee took the position that notwithstanding that she had made the donation in error, she had acted reasonably and in good faith and ought not to be held personally liable. 

Section 35 of the Trustee Act provides the court with the authority to relieve a trustee from liability for an improper act if it is satisfied that the trustee acted reasonably and honestly.  Additionally, the common law also allows the court to excuse a trustee from liability for an innocent mistake made in good faith. 

Here, van Rensburg J. found that notwithstanding the court determined that the gift to charity was not valid, the estate trustee’s interpretation of the will had not been unreasonable.  Additionally, she pointed to the fact that although the estate trustee had erred, she had derived no personal benefit from the error.  Ultimately, van Rensburg J. found that the circumstances were such that the trustee ought to be excused from liability and not required to repay the estate for the donated funds.

Yet Another Reason to Leave the Will Drafting to a Lawyer

There are innumerable problems that can arise when people try to do their own wills.  The recent decision in the McDougall Estate discusses the difficulties that arose in trying to decipher an individual’s largely illegible will. 

The deceased left a will and a codicil that were both in his own handwriting.  The parties were all in agreement that, when taken together, the documents constituted a valid holograph will and codicil.  Unfortunately, there were large parts of both documents that were illegible – and insofar as the court was able to decipher the language of the documents, it was still difficult to make out exactly how the deceased was trying to distribute his estate. 

The parties agreed that the effect of the will was to leave the bulk of the deceased’s estate to his sister.  However, there was a dispute over whether the will authorized the estate trustee to make a donation to charity.

Although the wording of the will was ambiguous, the parties agreed that, read without the codicil, the will authorized the charitable donation only if the residual beneficiary died before the testator or renounced her share of the estate.  The parties disagreed as to the effect of the codicil.

The estate trustee argued that the codicil permitted her to make a bequest to charity prior to transferring the balance of the estate to the residual beneficiary.  The beneficiary argued that the relevant words of the codicil were illegible and should be given no meaning.  Moreover, she argued that the language of the codicil, as it could be deciphered, was not particular as to the dollar amount of any charitable donation and, accordingly, should fail.

Justice van Rensburg found that when reading the will and codicil together it appeared that the deceased intended that a bequest to charity be paid prior to the residue being distributed to the beneficiary.  However, van Rensburg J. went on to find that the fact the amount of the bequest was not specified was fatal and on this basis the gift failed.  Accordingly, she found the estate trustee had wrongfully made the payment to the charity.

Tune in on Friday to find out what the consequences to the estate trustee were.  

Fight Ensues over Georgia Woman's Remains

On Tuesday of this week, a judge in Georgia will be asked to decide a dispute over who can take control of a deceased woman’s body and decide her manner of burial. 

Nique Leili vanished on July 9, 2011.  Two days later her husband reported her missing to police and two days after that he filed for divorce claiming that Ms. Leili had abandoned him and their two minor children. 

Ms. Leili’s body was found in a wooded area near her home on July 16, 2011.  Her husband has been named as a suspect in her death; however, he has not been charged with any crime and last week he released a statement denying any involvement in her death.

Ms. Leili’s daughter from a previous relationship has filed a court petition seeking to take control of Ms. Leili’s remains.  Georgia law stipulates that in the case of a death, the spouse is the next-of-kin and has the right to make funeral arrangements.  However, there is an exception to this rule if the spouse has been charged with murder or voluntary manslaughter. 

Ultimately, the judge will have to decide whether the fact that Ms. Leili’s husband had filed for divorce before her remains were discovered and is now a suspect in her death is enough to depart from the general rule that the spouse can decide the manner of burial. 

In Ontario, an individual’s burial is determined by his estate trustee.  In cases where there is a will, the executor named under it determines the manner of burial.  In situations where there is no will it will fall to the court to determine who is entitled to be appointed as estate trustee (I have previously blogged on the law regarding who plans a funeral when there's no named executor).

Who Qualifies as a "Grandchild" and a "Great-Grandchild"?

Blended families can make it difficult to figure out who qualifies as a relative.  The recent decision of the Supreme Court of British Columbia in the Lang Estate considers the interpretation that should be applied to the words “grandchildren” and “great-grandchildren” in a testator’s will. 

Here, the testator died leaving a will in which the residue of her estate was to be divided equally between her grandchildren and great-grandchildren.  The issue that arose was whether the words “grandchildren” and “great-grandchildren” should be taken to include only those who were legally descended from the testator or whether they should include the testator’s step-grandchildren and step-great-grandchildren. 

When the testator married her husband he had two children from a previous marriage.  The testator and her husband adopted two children of their own.  At her death, the testator had two grandchildren and one great-grandchild who were her legal descendants.    

The testator’s grandchildren and great-grandchild took the position that they were the only ones who qualified as beneficiaries under the residue clause in the testator’s will.  Opposing them were the step-grandchildren and step-great-grandchildren of the testator (who numbered 27 in total).  Their position was that the testator had intended for them to inherit under the residue clause in the will. 

In her decision, Justice Brown provided a very helpful overview of the law relating to will interpretation. 

With respect to the word “grandchildren” Brown J. found that there was a legal presumption in favour of the testator’s legal descendants.  However, she also found that when the words in a will are ambiguous, the judge is able to consider “arm chair evidence” of the circumstances known to the testator when the will was made.

Here, Brown J. was swayed by written notes made by the testator around the time the will was made – on a schedule setting out the distribution of the estate there was a heading “grandchildren and great-grandchildren” – it appeared that the testator had written the names of the children and grandchildren of her adopted children – and did not include the step-relatives. 

Ultimately, Brown J. found that there was no reason to depart from the legal presumption in favour of legal descendants and accordingly decided the step-relatives were not entitled to take under the will. 

Heirs Fight With Government Over Coins Worth Millions

An interesting estate dispute is being litigated in the United States over the ownership of exceedingly rare Depression-era gold coins.  The case, which is currently before a federal jury in Philadelphia, pits the heirs of the deceased gold dealer Israel Switt against the United States government.  At stake are ten $20 Double Eagle gold coins, minted in 1933, which currently carry a value of at least $7.59 million each. 

Switt died in 1990 at the age of 95.  In 2003, his daugther found 10 Double Eagle gold coins in Switt’s safety deposit box.  The coins are dated 1933 and considered extremely valuable because although they were minted they were never released.  In the 1930s, the US government minted approximately 450,000 of the coins; however, President Roosevelt ordered that they be melted back into gold bars to stem the risk of gold hoarding during the Great Depression. 

When Switt’s daughter found the coins she took them to the U.S. Government for authentication and was hoping to find out they were worth millions.  Instead, officials at the U.S. Mint confirmed they were genuine and promptly confiscated them, saying that the only way that Switt could have come into possession of the coins was illegally.       

Switt's daughter then sued for the return of the coins.  In court the government is arguing that in the 1930s Switt was somehow involved in the theft of the coins – likely with the help of a cashier at the Mint.  It claims to have evidence that every coin that was not melted down and has since come to light can be traced back to Switt one way or another.  It alleges that the rightful owners of the coins are not Switt’s heirs but rather the American people. 

Switt’s heirs argue the government is over-reaching – that it should not be able to simply seize property from American citizens unless it proves it is entitled to.  They also argue that there is an alternate explanation to how the coins came into Switt’s possession other than that argued by the government.

It will be interesting to see what the jury decides…

Don't Delay When Claiming for Life Insurance Benefits

The recent decision in Dicaro Estate v. Manufactures Life Insurance Company considered an estate trustee's ability bring a claim for insurance proceeds more than ten years after the deceased's death.  

The deceased died in 1999 due to complications relating to liver disease and after undergoing a biopsy.  He had worked for Molson Breweries for almost 25 years and had various insurance policies issued by Manulife, the defendant in the proceeding. 

After the deceased’s death, his widow (who was the plaintiff in the action) applied for and received the basic benefit claim of $45,000.  On the proof of claim form filed, the plaintiff specified that the death was NOT accidental (and, accordingly, no accident/dismemberment benefits were paid). 

In 2000, the plaintiff commenced a medical malpractice claim against the hospital and medical practitioners involved in the deceased’s care at the time of his death.  The decision was released in 2003.  It was during that proceeding that the plaintiff later claimed she first learned that the deceased’s death was caused by an ‘accidental poke’ during the biopsy.  As a result, in 2007, the plaintiff filed a claim with the defendant for accident benefits.  In 2008, Manulife denied the claim due to lateness as well as non-compliance with the proof of claim provisions in the insurance contract. 

The plaintiff commenced an action against the defendant in 2010 seeking the accidental death benefits under the deceased’s various insurance policies.  The defendant then moved for summary judgment seeking to have the plaintiff’s claim dismissed arguing that there was no genuine issue for trial. 

Justice Chapnik considered the various limitation periods that could possibly apply – under the policy itself as well as (the now revoked) s. 206(1) of the Insurance Act and s. 34(5) of the Limitations Act.  She found that no matter what permutation of the limitation periods was applied, the plaintiff was clearly out of time for bringing the claim. 

The plaintiff also relied on s. 96(1) of the Courts of Justice Act, arguing that principles of fairness and equity should be applied in the circumstances.  However, Chapnik J. found that this would not be appropriate in the given case given the plaintiff’s non-compliance with limitations imposed by statute. 

Accordingly, she granted the defendant’s motion for summary judgment and dismissed the plaintiff’s claim.    

"The Cleavers"?...More Like "The Tangled Family Tree"

Forget Ward, June, Wally, and Beaver -  as a recent article in the New York Times discusses, the modern family tree has started to resemble a “tangled forest.”

Census data from the United States indicates that for the last six years the number of unmarried households has exceeded married households.  Add to the mix an increasing prevalence of same sex marriages, sperm donors, and surrogacy, and defining who qualifies as “relatives” has started to get kinda complicated….and not just for intellectual reasons.  The changing family form has distinct legal implications. 

In Canada, the law has started to slowly grapple with diverse family relationships.  One example is the Ontario Court of Appeal’s 2007 decision in A.A. v. B.B. where it considered whether a child could have more than two parents.  Here, a same sex couple (AA and CC) wanted to have a child and sought the assistance of a male friend (BB).  The result was that CC and BB were the biological parents of the child.

AA and CC were to be the child’s primary caregivers; however, they all decided it would be in the child’s best interest for BB to be a part of the child’s life.  The problem that arose was that AA was not the child’s biological parent and that if she adopted him, BB would lose his rights as a parent. 

The Court of Appeal considered whether the court had the authority to declare that AA was also the parent of the child (along with BB and CC).  It ultimately decided that, pursuant to its parens patriae jurisdiction, it did.  The result of the decision was the child has two legal mothers (AA and CC) and a father (BB).

Obviously, cases like this are still relatively rare – but will likely continue to become more and more frequent.    

'I've Gotta Claim' 'You Gotta Claim' 'Legals Ate the Estate'

Estates lawyers frequently tell their clients that they should be careful with their claims, lest there’s no money left.  The recent decision of Kazarian v. Fraser considers the situation of where all the money is eaten up.

The deceased died without a will.  He was survived by his common law spouse and his two daughters.  Pursuant to the rules of intestacy, Part II of the Succession Law Reform Act [“SLRA”] provides that his two daughters were entitled to share equally in the estate.  His common law spouse brought a claim for dependant support pursuant to Part V of the SLRA

Following the Deceased’s death, there was litigation involving his estate (including allegations that the Deceased hid assets outside Canada to defeat claims of his former wife).  As part of the administration of the estate, the estate trustee was required to hunt down assets as well as defend various claims brought against the estate.

By the time the court adjudicated the common law spouse’s dependant support claim, the estate was insolvent – in large part because the legal fees incurred (both in regard to the litigation and administration expenses) exceeded the value of the assets. 

An issue arose as to whether the legal fees and administration costs incurred took priority over the dependant support claim of the common law spouse.  The estate trustee argued that she administered the estate she was left with – and had to hunt down assets, defend claims, and retain counsel to do so.  As such, the attendant costs were justifiably the expense of the estate.

The common law spouse argued that the legal costs were not appropriately administration expenses of the estate and, in the event they were, they ranked in priority after her claim for dependant’s relief. 

Justice Crane agreed with the estate trustee.  At first instance, he found that legitimate estate expenses took precedence over a dependant support claim.  In addition, he found that insofar as the estate trustee had to track down foreign assets, this was the estate’s expense.  Moreover, the claims against the Deceased were rightfully defended by the estate trustee and the legal expense was that of the estate.  

In any event, this has ended up as the proverbial “Bleak House” scenario.  The common law spouse with the dependant support claim lost in court – and as for the two daughters who were the intestate heirs? It appears estate expenses apparently ate up their inheritance.   

Anna Nicole Smith's Estate Loses Legal Fight

The fifteen-year saga started by Anna Nicole Smith against her late husband’s estate appears to have finally come to an end.  Smith (whose given name is Vickie Lynn Hogan) made headlines in the mid-1990s when the then-26 year old married 89-year-old J. Howard Marshall.

Marshall died just over a year after his marriage to Smith.  More than a decade prior, Marshall had established a trust, which had the effect that on his death his assets would pass directly to his son.  Smith brought a claim in Texas against Marshall’s estate alleging that after she married Marshall he had intended to set up a trust for her but that his son had interfered, the result being she received nothing from the estate.   

Along the way, Smith filed for bankruptcy in a California bankruptcy court.  Marshall’s son filed a claim against her in bankruptcy court alleging that she defamed him by having her lawyers make derogative statements about him in the press.  Smith counterclaimed and alleged tortious interference with the gift that Marshall had intended to leave her (essentially, the same claim she asserted in the probate proceeding in Texas).  The bankruptcy court sided with Smith, granting her summary judgment with respect to the claim Marshall’s son commenced and granting her judgment for about $425 million for her own claim. 

Since that time, the matter has bounced around the appeals courts with the parties arguing about whether the California bankruptcy court had the jurisdiction to adjudicate the claims or whether they were properly within the jurisdiction of the Texas probate court.  Smith died in 2007, but her estate continued to pursue her claim. 

Last week the United States Supreme Court settled the issue once and for all.  It found that while the California bankruptcy court had the authority to resolve Smith’s debts it did not have the Constitutional authority to decide the probate dispute.  A result of the decision is that Smith's estate is entitled to nothing from Marshall's estate. 

Man Who Killed Wife Is Denied Her Life Insurance

There’s a common law rule that if you wrongfully kill someone and you’re the beneficiary of their life insurance policy, you don’t get the proceeds.  The recent decision in Dhingra v. Dhingra considers whether this principle applies if the prospective beneficiary is found not criminally responsible because of a mental disorder. 

The applicant commenced an application seeking insurance proceeds of $50,000 from the policy of his deceased ex-wife.   The applicant had been charged with second-degree murder after bludgeoning and stabbing his ex-wife (who was the insured life on the policy) to death – but was found not criminally responsible by reason of mental disorder.  The deceased’s executor (who was her son with the applicant) opposed the payment of the proceeds to the applicant, arguing that they should be paid to the estate.

The executor argued that the applicant was disentitled to the insurance proceeds by virtue of the “public policy rule,” which provides that an individual who wrongfully kills another may not profit from the act of killing (a very helpful discussion of the pubic policy rule can be found in the Ontario Court of Appeal’s decision in Oldfield vs. Transamerica Life Insurance Company of Canada). 

The executor’s position was that, in this case, it was clear that the applicant had committed murder and, on the basis of the public policy rule, it was clear that the applicant ought to be barred from receiving property he otherwise would have acquired as a result of the death. 

The applicant argued that he was the only one named as a beneficiary on the policy and, as such, he was the only one entitled to make a claim to the proceeds.  He also pointed to the fact that the insurance company did not oppose payment to him.  Additionally, the applicant argued that given the finding of no criminal responsibility in regard to the death of his ex-wife, the public policy rule did not apply to this case.

Justice Pollak disagreed with the applicant.  She found that notwithstanding that the applicant had been found not criminally responsible for killing his ex-wife, it was obvious he had physically committed the crime. She further noted that there was no judicial support for the contention that for the public policy rule to apply the court was required to find an intent to commit a crime.  Accordingly, she found that the public policy rule applied so as to disentitle the applicant to the insurance proceeds.  According to this article from the Toronto Star, the applicant intends to appeal the ruling.   

A Slithery Reason Why It's Important to Have a Will

Here’s another one to add to the long list of problems that can arise when you die without a will: your family members might start fighting about what happens to your reptile collection. 

This is the issue that has plagued the estate of Karel Fortyn.  Mr. Fortyn died in early May of this year and was survived by his brother, his fiancée, and his common law spouse of 27 years from whom he had recently separated.

Chief amongst Mr. Fortyn’s personal effects was a collection of some 200 reptiles he kept in his Welland, Ontario home, including 150 venomous snakes and two very large crocodiles.  He owned the Seaway Serpentarium, which he had been operating from his house with the animals in enclosures.

After Mr. Fortyn’s death, a dispute erupted over who would decide the reptiles’ fate.  Pursuant to the intestacy rules in the Succession Law Reform Act, Mr. Fortyn’s brother is the sole residual beneficiary of the estate. However, his former common law spouse owned the house where the Serpentarium was located and believed that this gave her the authority to decide what to do with the animals. She donated them to the Indian River Reptile Zoo a couple of days after Mr. Fortyn’s death.  However, the Welland Humane Society seized control of the home a day later. 

Earlier this week the matter came before the Superior Court of Justice in Welland, and Justice Maddalena ruled that Mr. Fortyn’s brother has the authority to decide what happens to the reptiles.  Maddalena J. further ruled that the crocodiles should be removed from the Serpentarium as soon as possible and the balance of the animals should be removed within the next 21 days. 

Apparently, Little Ray’s Reptile Zoo in Ottawa will receive the non-venomous reptiles while Reptilia Zoo in Vaughan while receive the venomous reptiles. It is not yet clear what will happen to the crocodiles.   

Oh, the Problems the Words "Per Stirpes" Cause...

The words “per stirpes” are found frequently in wills drafted by lawyers.  However, issues can arise when trying to determine, in the context of a will, what those words are supposed to mean.  This was the issue considered by the court in the recent decision of Dice v. Dice

Joseph and Eileen were married and had two children, Marlene and Eddie.  Joseph died in 1975 leaving a will which provided a life interest in his estate to Eileen (who died in 2010).  Joseph’s will provided that on Eileen’s death, the remainder of his estate was to be divided equally between Eddie and Marlene, per stirpes. Unfortunately, Eddie pre-deceased Eileen in 2000.  He left a will in which he named his second wife Suzanne as sole beneficiary (he also had three children).  On Eileen’s death, an issue arose as to who was entitled to the remaining residue of Joseph’s estate.

Generally speaking, the phrase “per stirpes” is taken to describe a manner of distribution to one’s issue (i.e. lineal descendants).  If an individual divides her estate amongst her “issue in equal shares per stirpes” it means that, at first instance, the individual’s children will be entitled to the estate; however, if one child has died leaving children of her own, those children will receive the deceased child’s share. The problem that arose here is Joseph had divided the remainder of his estate between his named children and it was unclear what effect the words per stirpes were supposed to have. 

Marlene, Joseph’s surviving daughter, argued that it was not legally possible to leave a gift to “children per stirpes” and that Joseph had intended to benefit his children alone, not their heirs.  Accordingly, Marlene’s position was that since Eddie had died, she alone was entitled to what remained of the estate.  Suzanne, Eddie’s widow, argued that the remainder of the residue of Joseph’s estate was intended to be divided equally between Marlene and Eddie, and that Eddie’s share should devolve to his estate and be distributed according to his will (meaning Suzanne would receive it).  Eddie’s children argued that by including the words “per stirpes” in his will, Joseph had intended to create a “gift over” to the issue of Marlene and Eddie if either died – and that had it been intended that the residue was simply divided between the two of them the words “per stirpes” would be rendered meaningless. 

Ultimately, Justice Turnbull agreed with Eddie’s children.   He found that a gift to children, per stirpes is to be construed so as to allow representation by the issue of any child living at the testator’s death but who predeceases a life interest.  Moreover, Turnbull J. found that in reviewing the will as a whole he had no doubt that this is what Joseph’s intention was.  Accordingly, he decided that the appropriate interpretation of the will was for Eddie’s share to be divided amongst his children.   

Can a Disinherited Beneficiary Sue an "Undue Influencer"?

Undue influence is a basis on which a court can set aside the validity of someone's will.  However, does the individual alleging undue influence have any independent claims against the “undue influencer”? This was an issue recently considered by the BC Supreme Court in the decision of Moore v. Piccioni.

The plaintiff commenced an action against his mother for damages alleging that she had made defamatory statements about him to his grandmother which resulted in his grandmother changing her will to disinherit him.  He also sought damages as against his mother on the basis that she had exerted undue influence over the grandmother (in convincing the grandmother to change her will). 

The defendant (i.e. the mother) brought a motion to dismiss the plaintiff’s action for defamation on the basis that it was statute barred by the Limitation Act in British Columbia.  She also sought the dismissal of the claim for damages resulting from undue influence on the basis that it did not disclose a cause of action.

With respect to the issue of defamation, the defendant argued that a right to bring an action of this nature arises at the time the alleged defamatory statements were made and that the Limitation Act required the claim to have been commenced within two years.  Given that the plaintiff alleged that the defamatory statements had been made in 2003 and had commenced the claim in 2010, the defendant argued the plaintiff was out of time. 

The defendant argued that because he was not aware that he had been disinherited until 2010, it was only then he realized the damages he had suffered and that, as a result, the limitation period should be extended. 

While Justice Ross, the motions judge, agreed with the defendant that knowledge that a breach caused injury was a relevant fact for extending the limitation period, she also found that it was settled law that the postponement provisions in the Limitation Act did not apply to claims brought in defamation.  Accordingly, she dismissed the plaintiff’s claim for defamation. 

As to the action for damages on the basis of undue influence, Ross J. found that while the plaintiff could allege undue influence in the context of the will challenge that he had started, undue influence did not give rise to an independent action against the defendant.  Accordingly, she dismissed that claim as well. 

Court Allows Widow to Use Dead Husband's Sperm

Last week, the Supreme Court of New South Wales (in Australia) declared that the sperm of a dead man was the property of his widow.  Mark Edwards died in a workplace accident last year.  In the hours after his death his wife, Jocelyn, obtained an urgent court order that his sperm be harvested and crypto-preserved. 

Last week, Jocelyn was granted a court order allowing her to take possession of the sperm.  Her evidence was that the day after Mark’s death, they had been scheduled to sign consent forms to commence treatments at a fertility clinic near their home. 

In his judgment, the judge pointed out that there were only two outcomes for the sperm: either it was given to Jocelyn or it was destroyed.  An interesting aspect of the decision is that Jocelyn will have to travel elsewhere to receive IVF treatment.  Notwithstanding the fact the court gave Jocelyn a proprietary right to the frozen sperm, in New South Wales IVF treatments require the consent of the donor (and in this case, the husband died the day before he was scheduled to give consent). 

Cases like this are becoming more and more common.  Last October I blogged about a woman in New York who was given permission by the court to harvest her recently deceased husband’s sperm – and similar cases have arisen in the UK.    

In Canada, the posthumous collection of genetic material is governed by the Assisted Human Reproduction Act (“AHRA”) and seems to be much more restricted than in other jurisdictions.  Section 8 of the AHRA limits the use of human reproductive material for the purpose of creating an embryo (including post-death extraction) to circumstances where the donor has given written consent while alive (which is something people rarely think to give).   This means that the emergency legal proceedings to harvest reproductive material post death that are becoming more common elsewhere don't really happen in Canada.

When Cottage Succession Planning Turns Toxic

With the Victoria Day weekend upon us, there are many who will be taking their first trip to the cottage of the season.  While a family cottage can be the site of many cherished memories, it can also be a battleground for angry estate disputes. 

Dealing with a cottage in an estate plan can be a very challenging task.  This is because that, more than almost any other asset, a family cottage generally carries with it significant sentimental value. 

A frequent mistake made in estate planning is failing to be specific about what is to happen to the cottage.  A parent dividing her estate equally amongst her children might simply assume that they will all agree on what to do with it.  Unfortunately, this frequently does not occur. 

A problem with evenly dividing a cottage amongst beneficiaries is that it is not uncommon for the beneficiaries to feel differently about the property.  For example, one child might have rarely visited the cottage and want it sold so he can receive his inheritance in cash, while another child might have expected that the beneficiaries would keep and use the cottage and be unable to afford to buy out the other child. As a result, a significant amount of hostility can arise between the two children.    

Another problem that can arise is when a cottage trust is created in a will so as to keep the property in the family but inadequate consideration is given to the costs that will be involved (such as taxes on death, probate fees, and ongoing expenses like property taxes, utilities, and maintenance).  The unfortunate result can be that there is not enough money in the estate to pay the associated costs and the beneficiaries cannot afford to do so, leaving the trustees with no choice but to sell the cottage – much to the beneficiaries’ angry dismay!  

While there is never any way to guarantee smooth succession planning, a good start is to discuss the cottage with the prospective beneficiaries and determine what everyone’s expectation is.  Additionally, careful consideration should be given to the estate planning techniques used to avoid unintended consequences post-death.

Who Administers the Estate When There's No Executor?

Last week I blogged about an executor’s ability to renounce his appointment if he doesn’t want to act, which leaves an important question – who administers the estate where there’s a will and no executor willing or able to act?  A similar question arises where the deceased dies without a will (an “intestacy”), meaning there was no one named as executor.   

Where the deceased died with a will, she may have named an alternate executor.  In this case, that individual has the authority to act.  However, where there is no one named as alternate executor (or there was no will to begin with) the court must appoint one. 

Section 29(1) of the Estates Act provides the court with the authority to appoint an estate trustee where this is an intestacy or where the executor named in the will cannot act. Specifically, s. 29(1) allows the court to appoint the deceased’s (a) spouse/common law partner; (b) next of kin; or (c) spouse/common law partner and next of kin.  Where there are more than one individual “equal in degree of kindred” asserting rights as next of kin, the court has the authority to appoint more than one person.       

The general practice of the courts has been to prefer the spouse/common law partner’s right to the appointment over that of the next of kin.  However, this is not an absolute rule – in Mohammed v. Heera, Justice Warkentin noted that while there might be a “usual” order of priority when determining who should receive the appointment as estate trustee the court maintains an unqualified discretion.  This means that the ultimate decision is that of the judge alone. 

The practical reality is, as noted above, that where the deceased is survived by a spouse, the court will appoint the spouse unless there is good reason not to do so. 

The Will Has Been Destroyed...Is It Still Valid?

When someone decides that she doesn’t like the terms of her will, any lawyer will say the best way to change it is to make a new one.  However there are also other ways to revoke a will, one of which is to physically destroy it.  The problem is, there are times when an individual’s will is found destroyed after her death and it isn’t clear whether she intended to revoke it. 

This was the issue that was considered in the recent British Columbia decision of Jorsvick Estate.  After the Deceased’s death, her son applied to prove her will in solemn form.  The applicant’s sister opposed the application on the basis that when the Deceased’s will was located after her death, it was found torn into pieces.

Section 14(1) of the Wills Act in BC provides, in part, that a Will can be revoked if the testator destroys it.  In Ontario, a similar provision can be found in s. 15 of the Succession Law Reform Act.  Both pieces of legislation provide that the will must be destroyed (a) by the testator or someone acting at the testator’s behest; and (b) the destruction must be with the intention to revoke the will. 

Operating along with the statutory requirements for revocation is a common law presumption that when a will is found destroyed, the testator intended to revoke it.  In this case, the court had to determine whether the applicant was able to rebut the presumption that the Deceased had destroyed the will with the intention of revoking it.    

Ultimately, Justice Barrow found the applicant was able to rebut the presumption of revocation and that the will should be admitted to probate. A few reasons were set out in the decision, the main one being that the day before the Deceased’s (unexpected) death, she had met with her lawyer and discussed her desire to make changes to her existing will.  Barrow J. determined that had she previously destroyed her will with the intention of revoking it, surely she would have advised her lawyer of this. 

How Long Can an Executor Wait to Distribute an Estate?

The general rule in estate administration is that an executor has twelve months to realize the assets of an estate (referred to as the “executor’s year”).  However, the terms of a Will often give the executor the discretion to determine when and how to liquidate the estate.  The recent decision of the Supreme Court of British Columbia in Hriczu v. Mackey Estate considers how long the executor might have.

Here, the deceased died in 2000 leaving a will dividing the residue of her estate in equal shares between five relatives.  The main asset of her estate was a piece of land. By 2011, the land remained unsold. 

One of the beneficiaries (the plaintiff) who had previously agreed to hold the land decided she wanted it sold.  She was living in impoverished circumstances and wished to receive her inheritance.  When the executor refused, the plaintiff commenced an action seeking, amongst other things, an order that the land be sold. 

The executor (with the support of the other beneficiaries) argued that the wording of the Will provided him with wide discretion to determine how and when to convert the estate (as well as giving him the discretion to postpone conversion).  He further argued that the court should not interfere with the discretion given to him under the Will unless it was clear that the executor had breached his duties.    

Justice Beames, the trial judge, determined that, pursuant to the Will, the executor had been given broad discretion to postpone converting the assets of the estate and so long as the discretion was exercised in a way that was honest, reasonable, intelligent, and in good faith the executor was behaving appropriately. 

While Beames J. found that the executor was not entitled to postpone converting the land indefinitely, she also found that this was not the case here – the executor had provided evidence that he did intend to convert the estate but had decided that it was not yet advantageous to do so. 

Accordingly, Beames J. dismissed the plaintiff’s claim and ordered that costs be paid from the plaintiff’s share of the estate. 

What Happens When Limitation Periods Conflict?

The recent case of Whorpole v. Echelon General Insurance raised the issue of how to interpret a conflict between a limitation period in the Trustee Act relating to claims by a deceased’s executors and other limitation periods that may apply to the claims. 

In this case, the deceased had been killed in an automobile accident and just less than two years after her death her executor commenced an action against the deceased’s insurer.  The insurer brought a motion for summary judgment arguing that the claim was statute barred because the Insurance Act provided that claims of this nature must be commenced within a year. 

S. 259.1 of the Insurance Act provides that a proceeding against an insurer regarding loss/ damage to an automobile or its contents must be brought within a year of the loss/damage occurring.  However, s. 38 of the Trustee Act gives a deceased’s executor the right to maintain an action for tort or injuries to the person or property of the deceased and provides for a limitation period of two years from the deceased’s death. 

The plaintiff’s counsel argued that a claim against an insurer in regard to loss/damage to an automobile/its contents constituted a claim for injuries to the property of the deceased as contemplated by s. 38 of the Trustee Act and that the limitation period found in s. 38 of the Trustee Act overrode the limitation period set out in the Insurance Act.    

Justice Heeney, the motion judge, noted that neither the plaintiff’s counsel nor that of the defendant had submitted case law for or against this interpretation.  In fact, Heeney J. noted that there didn’t appear to be any case law at all on this issue. 

In examining the point of law, Heeney J. found it would make a lot of sense that s. 38 of the Trustee Act operated to extend any limitation period that would have otherwise applied to the deceased and found that if s. 38 did not do so then the section could potentially be rendered meaningless. 

Ultimately, Heeney J. declined to make any “new law” on the issue and instead found that the plaintiff’s claim could proceed for other reasons he set out in his decision. 

When Should Litigation Privilege Be Set Aside?

In the recent decision of Sangaralingam v. Sinnathurai, the Ontario Divisional Court considered the issue of when a statement subject to litigation privilege must be produced in a legal proceeding. 

The plaintiff (who was the respondent on the appeal) had been involved in a motor vehicle accident and had commenced an action against, amongst others, the driver of the other motor vehicle and the driver’s insurer.  After the accident, the driver met with his insurer and gave a statement. 

When the driver was examined for discovery as part of the action, the plaintiff’s lawyer asked the driver to provide the statement he gave to the insurer or to provide the information in the statement.  The driver’s lawyer objected, claiming litigation privilege. 

The plaintiff brought a refusals motion, during which the Master decided that the driver was not required to provide the information in the statement given to the insurer.  However, the plaintiff appealed the decision and a judge in the Superior Court ordered that the information be provided. 

The driver then appealed to the Divisional Court. On the appeal, the plaintiff argued that litigation privilege was not an issue because he wasn’t asking for the statement to be produced – just its contents.  The driver argued that there was no difference between the statement itself and the contents and, moreover, the plaintiff could obtain information relevant to the matters in issue through other means. 

Writing for the Divisional Court, Justice Herman pointed out that a party being examined can’t withhold relevant information just because it might appear in a privileged document. However, she also found that this was not what had occurred in this case. 

Rather, the plaintiff’s counsel had the opportunity to examine the driver about matters relevant to the material issues and the driver had not withheld information about the issues. Herman J. went on to find that there was an alternative means for the plaintiff to obtain the relevant information (i.e. by examining the driver), disclosure of the contents of a privileged statement was unnecessary and litigation privilege should not be set aside.  Accordingly, she allowed the appeal.    

When Should the Court Set Aside A Release?

When parties to a legal proceeding reach a settlement, the defendant will generally require from the plaintiff a release of any and all claims.  The recent decision in Jones v. Jenkins considers the circumstances under which the court can set aside a release. 

Jones v. Jenkins involved a motor vehicle accident.  The plaintiff had sustained injuries and sued the other driver.  The driver’s insurer was defending the claim.  After entering into discussions with an adjuster with the insurance company, the plaintiff, who was self-represented, signed a release in which he accepted a payment of approximately $20,000. 

The defendant later brought a motion for judgment seeking to enforce the release.  The issue the court had to determine was whether the release was valid and judgment should be granted or whether the release should be set aside on the basis that it was unconscionable.

When deciding whether to set aside a release as unconscionable, the test the court is to apply is whether, when considering all the circumstances surrounding the making of the agreement, the transaction is so unconscionable that it requires the court’s intervention.  The questions the court should consider are (1) was there an inequality in bargaining power between the parties? (2) has the stronger party unconscientiously used its position to achieve an advantage? (3) is the agreement substantially unfair to the weaker party?

Here, Justice MacPherson easily found that there was a substantial inequality in bargaining power – the insurance adjuster was experienced while the plaintiff was very unsophisticated.  Moreover, it was clear that the plaintiff believed that the adjuster was looking after his interests as well as those of the insurance company, was impartial, and was not an adversary – and the adjuster was aware of this.   

MacPherson J. also found that the insurer had used its position to gain an unfair advantage.  The adjuster had received medical information that the injuries the plaintiff had sustained were far worse than initially believed and had withheld that information from the plaintiff. 

Finally, MacPherson J. decided that the settlement was substantially unfair to the plaintiff.  In deciding the appropriate amount of the settlement, the adjuster had reduced general damages and future economic loss by 75% on the basis that the plaintiff had been 75% responsible for the accident – even though there was absolutely no evidence that this was the case.

Accordingly, MacPherson J. dismissed the motion for judgment.  

Should Interim Costs be Awarded When a Litigant Dies?

The recent decision of the Superior Court of Justice in Bruno v. Calcaterra considered the liability for costs incurred in a proceeding involving the validity of a power of attorney, when the grantor of the power of attorney died before the issue of validity had been determined.

The applicants to the proceeding were the three younger children of the deceased.  The respondents were the mother and her two older children.  In January 2009, the mother had changed her power of attorney for property, which had originally named one of the older children and one of the younger children as her attorneys, to appoint the two older children instead. 

The three younger children commenced an application challenging the validity of the power of attorney on the basis that their mother had been incapable of granting it.  The mother died before the matter was adjudicated. The younger children then obtained leave to amend their application to add the mother’s estate as a party and to add a claim challenging the validity of her will on the basis that she was incompetent when it was signed or that the older children unduly influenced her. 

The older children argued that by adding the mother’s estate as a party, the younger children were discontinuing the proceeding against the mother personally and that, as a result, pursuant to r. 23.05(a) of the Rules of Civil Procedure, they were entitled to their costs (which, by that point, had escalated to $73,000). The younger children argued that as the discontinuance was precipitated by their mother’s death, it should not attract costs as might have occurred had the elder children been successful in the litigation. 

Justice Price, the motions judge, found that the substitution order the younger children had obtained did not have the effect as discontinuing the proceeding against the mother, but rather had the same effect of continuing it against her estate as permitted by r. 11.01 of the Rules (notwithstanding that the younger children had not actually filed the materials required to obtain an order to continue.)  In the result, Price J. declined to grant the cost order and instead deferred the issue of costs to the judge hearing the application.     

Supreme Court of Canada Weighs In on Death Benefits

Last week, the Supreme Court of Canada [“SCC”] released a decision which considered whether age-based reductions in death benefits paid to the surviving spouses of civil servants and military members violated equality provisions found in s. 15(1) of the Charter of Rights and Freedoms [the “Charter”]. 

Withler v. Canada (Attorney General) involved an appeal of two class action lawsuits by the representative plaintiffs [the “appellants”] in the actions.  The appellants were widows whose supplementary death benefits were reduced because of the age of their respective husbands at death.  

Both the Public Service Superannuation Act and the Canadian Forces Superannuation Act, provide military members, federal civil servants, and their families a lump sum death benefit (paid to the plan member’s designated beneficiary) on the plan member’s death. The size of the lump sum starts being reduced once the plan member reaches a designated age [the “reduction provisions”].

The appellants argued that the reduction provisions in both Acts discriminated on the basis of age and violated the equality provisions in s. 15(1) of the Charter.  The Attorney General of Canada [the “AG”] argued that although the reduction provisions distinguished on the basis of age, the distinction did not violate the equality provisions and did not amount to discrimination. 

Ultimately, the SCC agreed with the AG’s position and dismissed the plaintiffs’ appeal.  Writing for the Court, Chief Justice McLachlin and Justic Abella found that while the distinctions clearly fell under one of the protected grounds of the s. 15(1) equality provision in the Charter (i.e. age), they were not discriminatory in nature.  They found that the death benefit was not meant to be a long term income stream but was instead akin to life insurance.

They further held that although it was true that surviving spouses of older members were entitled to lesser death benefits, those same spouses also had access to other pensions and benefits that the spouses of younger members couldn’t access.

The Globe and Mail reports that the feds are currently paying out $138 million in survivor benefits and this ruling will affect about 5000 plan members.     

With An Executor Like This Who Needs Enemies?

Over this past weekend, the Globe and Mail published the much read article “The Dark Side of Canada’s Inheritance System”.  The article detailed the unfortunate administration of Paul Penna’s estate.  Penna died leaving a $24 million estate, mainly to charity.    

The Penna Estate has resulted in long standing and most unfortunate litigation in Toronto.  In brief, Mr. Penna died in 1996.  In his will, he appointed three trustees, one of whom was his friend, Barry Landen [“Landen”].

In the context of a blog, there’s no way to be concise about the large scale litigation involving Mr. Penna’s estate. However, Landen has been accused of looting Mr. Penna’s estate to the tune of millions of dollars; ignoring the terms of Mr. Penna’s will (which included valuable bequests to charities); being completely unable to account for missing assets from Mr. Penna’s estate; and donating funds to a charity not named in Mr. Penna’s will (while the charities named in Mr. Penna’s will have gone without). 

While Landen has not yet been fully called to account for the missing millions, the Honourable Madam Justice Greer had no patience whatsoever when Landen failed to adhere to numerous (and long standing) court orders, including those requiring Landen to disclose estates assets and what had become of them. 

Greer J. eventually found Landen in contempt of a number of court orders and sentenced him to 14 months in jail.  In her decision, Greer J. noted that Landen “perpetuated a massive fraud in his administration of [Penna’s Estate]”, found that Landen “deliberately, knowingly, and improperly” removed funds from an account frozen by the court, and remarked that “Landen’s sociopathy is such that all his actions appeared to be a deliberate course of greed”. 

Charming!

Ironically, over the past week, the New York Times published an article, “Choosing the Right Executor for Your Estate”.

Should an Impecunious Litigant Be Spared a Cost Order?

The general rule in litigation is that the unsuccessful party pays the legal fees of the successful party.  This rule doesn’t just apply to the final adjudication of a proceeding, it also applies to motions.  But what happens when the unsuccessful party lacks the ability to pay the cost order?   

The recent decision in Sutherland v. Manulife from the Superior Court of Justice considers the issue of whether a party who was unsuccessful on a motion could avoid a cost award on the basis of her impecuniosity.

Sutherland v. Manulife involved two actions commenced as a result of a motor vehicle accident. The plaintiff had failed to answer undertakings given on an examination despite multiple orders requiring her to do so.  On a motion for dismissal, Justice Brown ordered the actions stayed until the plaintiff complied with the orders. 

The defendants sought their costs of the motion against the plaintiff, who, in turn, argued that she lacked the financial means to pay.

Although the court does have the authority to decline to award costs against a litigant because of her financial position, in doing so it must weigh competing policy considerations: (1) an individual with an arguable case should not be denied access to the court because of impecuniosity; and (2) the “loser pays” principle is meant to encourage parties to conduct their litigation in a reasonable manner. 

A litigant arguing impecuniosity is required to put evidence of her financial situation before the court.  Here, Brown J. found that the plaintiff had failed to do so.  In addition, he also determined that the motion had been brought about by the plaintiff’s “wholly unreasonable conduct” and her unwillingness to comply with court orders.  Accordingly, Brown J. found no reason to depart from the usual rule that costs follow the event and ordered costs again the plaintiff.     

What's the "Even Hand Rule"...and When Might it Apply?

When discussing a trustee’s obligations, the duty to be “even handed” is often mentioned.  However, it’s not always clear what the duty entails. 

The even hand rule is sometimes described as an executor or trustee’s obligation to treat all the beneficiaries of an estate/trust equally.  However, this isn’t quite accurate – sometimes, under a will/trust, beneficiaries will have different types of interests (e.g. one beneficiary receives a car, the other beneficiary receives the residue of the estate) – and the nature of those interests might dictate differential treatment.

A trustee’s duty to be even handed is perhaps better described as the duty to ensure that: (1) the beneficiaries receive what they are entitled to under the terms of the will/trust; (2) one beneficiary does not receive an advantage or bear a burden that other beneficiaries with the same interest do not receive/bear; and (3) the trustee is acting impartially. 

A trustee’s obligation to be even handed can be effected by the terms of the will/trust.  There are some situations where a trustee might be given discretion to prefer the interests of one beneficiary to the expense of others (such as when there’s a testamentary trust and the trustee has the discretion to pay capital of the trust to the benefit of an income beneficiary). 

Still, even when a trustee has certain discretions, the even hand rule might nevertheless apply.  Cullity J’s decision in Edell v. Sitzer includes a very helpful discussion of the impact that discretionary powers have on the even hand rule.  

There are also situations where the terms of a will (or trust) are such that the trustee’s obligation to be evenhanded is completely ousted.  Pattillo J’s recent decision in the Primo Poloniato Grandchildren’s Trust is an example of when that might occur.

In any event, the application and scope of the even hand rule is complex and can often cause confusion.  A trustee who is concerned about her obligations in this regard is strongly advised to seek advice – making a wrong decision can result in personal liabilty on the part of the trustee. 

New York Court Finds Canadian Gay Marriage Valid in Probate Case

An appeals court in New York has ruled that the surviving spouse in a same sex marriage that took place in Canada could inherit the estate of his deceased husband.

In Re Estate of H. Kenneth Ranftle, the deceased and his partner were American residents who married in Canada in June 2008.  In August 2008, the deceased made a will in which he made bequests to his goddaughter and three brothers, and left the residue of his estate to his spouse, who was also named as executor.  Unfortunately, the deceased died three months later, in November 2008. 

The surviving spouse applied for probate in December 2008 and it was granted in January 2009.  When granting probate, the court declared that as the surviving spouse would be the only one entitled to the residue of the estate (whether there was a will or not), notice of the probate proceeding did not have to be granted to anyone. 

Apparently one of the deceased’s brothers had been considering challenging the will.  He objected to the court’s order that notice of the probate proceeding did not have be given to anyone on the basis that the Canadian marriage was not valid in New York because it would violate public policy.  He argued that, as a result, he had a financial interest in the estate as an intestate heir and was entitled to notice of the probate application so he could file an objection. 

The court rejected the brother’s argument.  In New York, there is a “marriage recognition rule” that provides that marriages that were valid in the place where they were celebrated should be recognized as valid in New York unless (1) the marriage is contrary to the prohibitions of natural law; or (2) it violated statute. 

Here, the court found that same sex marriage did not violate natural law and that although same sex marriage wasn’t legal in New York, in the absence of an express statutory prohibition the marriage recognition rule applied. 

Remember to Read a Mediation Agreement Carefully

In late January I wrote a blog on the Ontario Divisional Court’s decision in Saltsov v. Rolnick which considered whether costs incurred by parties in the context of a voluntary mediation were recoverable at the end of a court proceeding.  After I posted that blog, Philip Hesketh, a lawyer in the UK (who is the principal of Hesketh Mediation) contacted me to draw to my attention the 2006 decision of the England and Wales High Court in National Westminster Bank Plc v. Feeney & Anor [“National Westminster”].

National Westminster considered the interesting issue of how a mediation agreement entered into by parties to a proceeding might affect a later cost order by the court.  Although the decision emanates from the UK, the terms of the mediation agreement in question are similar to those you often find in mediation agreements in Ontario. 

In National Westminster, the parties to the proceeding had entered into, what in the UK is referred to as a “Tomlin order”.  In Ontario terms, this is akin to a consent order which stays a legal proceeding as a result of settlement but keep the proceeding open subject to the completion of terms of the settlement.

In National Westminister, the Tomlin order dealt with costs of the action at hand, but the respondents to the proceeding later applied to amend their bill of costs to include fees incurred by their counsel for preparing for and attending at a mediation. 

In disallowing the respondents’ claim for mediation expenses, the court examined the mediation agreement the parties had entered into.  It noted that the mediation agreement provided that the parties to the litigation would bear their own costs of the mediation (a term frequently found in Ontario mediation agreements).

The court observed that, pursuant to UK rules, mediation costs are generally recoverable as costs of an action.  However it also found that, in this case, the mediation agreement was specific that each party would bear its own costs of the mediation. 

While the court acknowledged that it did have discretion to fix costs (as the court also does in Ontario), it determined that given the fact that the parties had all entered into the mediation agreement and given the fact that the Tomlin agreement did not specifically override the provisions of the mediation agreement, the terms of the mediation agreement should prevail.  As noted above, the court disallowed the mediation costs.

Although this decision arose from the UK, given that the terms to the mediation agreement in question are similar to what you see in Ontario, it stands as a good reminder that it’s important to review the terms of any mediation agreement and consider how they may affect a proceeding. 

Who Plans the Funeral When There's No Named Executor?

One of the obligations of an executor is to arrange for the deceased’s funeral and burial.  However, it is not uncommon for an individual to die without a will, leaving no one with the legal authority to dispose of the deceased’s remains.  Sometimes this isn’t a huge issue – the deceased’s next of kin agree on the manner of burial.  However, when they can’t agree, problems can arise.

This was the situation in the recent decision of Buswa v. Canzoneri.  By way of background, the deceased died unexpectedly without a will, and was survived by seven siblings (who were the applicants in the proceeding).  After the deceased’s death, an individual came forward alleging that she was his daughter (this was denied by the siblings). She was the respondent in the proceeding.   

Unfortunately, a disagreement arose over the proper burial of the deceased’s remains.  The deceased was a member of the Whitefish River First Nation, as were his siblings (the applicants) and they wanted him to be buried in accordance with traditional Anishnabek practices.  The respondent argued that at the time of his death the deceased was no longer an adherent to the Anishnabek belief system and had wanted to be cremated. 

The applicants brought a motion seeking the appointment of an estate trustee during litigation for the limited purpose of disposing of the deceased’s remains.  S. 29(1) of the Estates Act provides that where there is no will naming an executor, the court has the discretion to appoint (a) the deceased’s spouse/common law partner; (b) the deceased’s next of kin; or (c) the partner and the next of kin. 

Although “next of kin” is not defined in the Estates Act, Justice Stinson (the motion judge) considered definitions of the term found in various legal texts and determined that it referred to the person most closely related to the deceased.  Stinson J. then considered whether he was satisfied that the respondent was the deceased’s natural child. 

While there was no DNA evidence and the deceased and the respondent did not meet until 2008, Stinson J. found other evidence to suggest a father/daughter relationship (such as that the deceased had signed a statutory declaration that he was the respondent’s father).  He decided that on a balance of probabilities  the respondent was the deceased’s natural daughter.

Stinson J. then concluded that as the deceased’s natural daughter, the respondent qualified as his “next of kin” and, accordingly, appointed her as estate trustee during litigation for the purpose of dealing with the deceased’s remains.     

Is it a Gift or a Loan?

The issue of whether a transfer is a gift or a loan arises frequently in estate litigation.  It was one that was addressed in Justice Lauwers’ recent decision in Church v. Church.  While the character of the litigation was a gift vs. loan dispute, the decision in question resulted from a motion for summary judgment brought by the plaintiffs. 

By way of background, the parties were all relatives – the defendants were the daughter-in-law and grandson of the plaintiffs.  The plaintiffs advanced funds to the defendants to purchase a new home.  As is quite common involving advances between family members, no written agreement existed characterizing the nature of the advance. 

A dispute later arose as to whether the funds advanced to purchase the home were a gift or a loan and the plaintiffs commenced an action claiming the property was held on a resulting trust for their benefit.  They then proceeded to bring a motion for summary judgment (arguing there was no genuine issue for trial and that they were entitled to judgment). 

In order to conclude that an advance was a gift, the court must find that there was an intention to donate by the donor; an act of delivery; and an acceptance by the donee. Here, the dispute was over whether there was an intention to donate.  Since the grandson who received the funds was over 18, there was a legal presumption that he held the funds on a resulting trust that he was required to rebut in order to prove a gift (although, on the motion for summary judgment, the onus was on the plaintiffs to, at first instance, establish that there was no genuine issue for trial). 

While there was no formal agreement setting out the terms of the advance, after the funds had been transferred there were numerous emails between the plaintiffs and defendants discussing the terms of the repayment of the funds. Lauwers J. found that after the transfer of funds, the defendants had behaved as though they were indebted to the plaintiffs.  Additionally, he found that the defendants could produce no evidence to support their contention that the funds had been gifted.  Accordingly, he granted the plaintiff’s motion for summary judgment. 

For more information on loans vs. gifts, please see my blog from October on Brown J’s decision in Colangelo v. Amore.

Is Summary Judgment Available Once A Trial Has Been Ordered?

When a party to litigation believes that there are no material issues requiring adjudication and wishes to have the proceeding disposed of without a trial, it can bring a motion for summary judgment under R. 20 of the Rules of Civil Procedure.  In a summary judgment motion, the court has the jurisdiction to dismiss all or part of a party’s claim.

Justice Mesbur’s recent endorsement in Western Larch v. Di Poce considers whether a party can move for summary judgment when the court has already ordered an expedited trial. 

Western Larch v. Di Poce involved a dispute over the provisions of a partnership agreement. Early in the litigation, the plaintiff brought a motion seeking injunctive relief.  During the motion, counsel for both the parties had asked for an expedited trial.  Justice Cumming, the judge on the motion, dismissed the request for an injunction, noting that there appeared to be no serious issue to be tried, and ordered that the trial be expedited. 

The defendant, noting Cumming J’s comment that there was no serious issue to be tried in the proceeding, decided to bring a motion for summary judgment to have the plaintiff’s action dismissed.  The plaintiff sought to have the motion for summary judgment stayed, arguing that having agreed to an expedited trial, the defendant had expressly waived its right to seek summary judgment.  The plaintiff also argued the defendant’s motion was an abuse of process because it was on the defendant’s suggestion that the parties had requested the order expediting the trial.

Mesbur J. rejected both the plaintiff’s arguments. She found that if there was no genuine issue for trial, then no trial (whether expedited or not) should occur.  As to the “abuse of process” argument, while Mesbur J. acknowledged that summary judgment motions were sometimes brought to delay a proceeding or wear a party down by driving up costs, she did not think that was likely in this situation (the parties were all “big pocketed”). 

Accordingly, Mesbur J. declined to stay the defendant’s summary judgment motion and instead ordered the parties to arrange a scheduling appointment to set a timetable for the motion. 

Tips for Avoiding Real Estate-Related Negligence Claims

It’s not unusual for lawyers practicing estates and trusts law to also practice real estate law (providing they've complied with the provincial and insurance requirements).  This might occur when a lawyer is acting as estate solicitor (representing the estate trustees on the administration of an estate) or is representing a party during estate litigation and one or more of the assets is real estate. 

Real estate law can be a tricky (and liability filled) business. An article in the December edition of LawPRO Magazine, published by LawPRO, the liability insurer for lawyers in Ontario, discusses some of the most common reasons behind malpractice claims involving real estate transactions.

As the article points out, real estate law gives rise to the second highest number of negligence claims against lawyers in this province (civil litigation is number one) – and that number is rising.  Over the past decade, real estate-related claims have amounted to nearly 30% of the claims LawPRO sees.

Amongst the most common errors cited are the following:

  1. Lawyer/client communications failures (such as failure to inform a client or follow a client’s instructions);
  2. Inadequate investigation or discovery of facts (such as misreading a survey or not obtaining a title search);
  3. Failing to know or properly apply the law;
  4. Clerical and delegation errors (such as over-delegating to a law clerk or failing to review real estate documents for clerical errors); and
  5. Time and deadline-related errors. 

As the article points out, it’s never possible to completely eliminate the possibility of a negligence claim.  However, good client communication, attention to detail, and careful documentation can go along way towards reducing the risk.

If a lawyer becomes aware of a potential claim, it’s absolutely essential to advise LawPRO quickly (even if negligence hasn’t been alleged).  Reporting a potential mistake to LawPRO is never fun – but not nearly as "unfun" as LawPRO discovering the lawyer was well aware of the potential claim and delayed reporting it!

For more information on professional negligence, please see my blog from September on avoiding claims for estates and trusts lawyers.  Additionally, LawPRO publishes the “Avoid a Claim” blog which is a fantastic resource!

What's a Spouse's Entitlement When There's No Will?

When an individual dies without a will (an “intestacy”), the law dictates how his or her estate is to be divided.  For today’s blog, I want to address what entitlement the surviving spouse might have.  

When determining what a spouse is to receive, the first question to ask is whether the couple was legally married or not.  In a previous blog I did about the author Stieg Larsson’s estate, I discussed what rights a common law (i.e. unmarried) partner might have.  So, here, I’m going to focus on the entitlement of a surviving married spouse.

Part II of the Succession Law Reform Act ("SLRA") governs intestate succession.  When an individual dies and is survived by a spouse and no children, then the surviving spouse (“survivor”) is entitled to the entire estate. 

When there are children, the survivor is entitled to receive the “preferential share” of the estate (in Ontario, this is currently $200,000) – everything over and above the preferential share is then split between the survivor and the deceased's children (when there is one child, the survivor and the child split the excess 50/50; when there is more than one child, the survivor receives 1/3 of the excess and the children split the remainder).  

The survivor also has rights under s. 5(2) of the Family Law Act (“FLA”), which provides that where the deceased’s net family property exceeds that of the survivor, the survivor has the right to equalize net family property.  Note, however, that the survivor must choose whether to equalize under the FLA or inherit under the SLRA – he or she can’t do both.     

Finally, in situations where it appears that neither an equalization of net family property or an inheritance pursuant to the intestacy rules will be sufficient to meet the survivor’s financial needs, he or she might have a claim for dependant relief under Part V of the SLRA

Word to the wise – claims under both Part V of the SLRA and s. 5 of the FLA carry tight limitation periods (for example, the right to elect under the FLA expires six months after the deceased's death).  Accordingly, in situations where either might apply, the survivor should seek legal advice soon after the deceased’s death.

When Might a Court Deny a Successful Party its Costs?

In the context of contentious litigation, the successful party will frequently seek its costs against the unsuccessful party.  The court enjoys wide discretion in determining how costs of a proceeding should be apportioned.  While the usual rule is that the “loser pays”, as evidenced by Justice Lederer’s costs endorsement in Watson Estate v. Beatrice Watson-Acheson Foundation, this will not always be the case.

The Watson Estate had involved several court proceedings.  In 2006, Low J. had ordered the removal of one of the three executors and ordered that the executor pass accounts.  In doing so, she was also quite critical of the conduct of the other two executors.  On the removed executor’s application to pass accounts, Lederer J. ordered that she repay executor’s fees that she had previously received.

The residual beneficiary of the estate (which was a foundation) then asked that its legal fees for the passing of accounts be paid by the executor.  S. 131(1) of the Courts of Justice Act provides that the issue of costs is in the discretion of the court and the court may determine by whom and in what amount costs must be paid. 

The residual beneficiary pointed to cases which held the successful party to a proceeding could expect to be awarded costs and argued that this served to narrow the court’s discretion.  Lederer J. disagreed with this and held that being a successful party does not automatically lead to an entitlement to costs.

Here, Lederer J. determined that there should be no award as to costs. Specifically, he found that one of the remaining executors (who was a director of the foundation that was the residual beneficiary) had also played a significant role in the problems with the administration of the estate and ill will that developed between the executors.  Lederer J. also found that the foundation had relied on that executor’s behaviour and, as such, could not separate itself from it when seeking costs. In this situation, he determined that if he awarded costs then he would be compensating a party who contributed to the very problems to which it later complained and declined to do so.  

When Should the Court Appoint a Monitor?

The recent decision of Justice Quinn in the D’Angelo Estate considers the interesting question of whether the court has the authority to appoint a monitor to oversee the administration of an estate. 

By way of background, the deceased died leaving a will in which he named as executors two individuals residing in New York.  As foreign executors, they were obliged to post a bond in order to obtain probate; however, the insurer, being concerned that the executors’ assets were considerably less in value than the deceased’s estate, advised that it would only issue a bond if a member of the estate solicitor’s law firm was appointed by the court as a monitor. 

The executors brought a motion for assistance under R. 74.15(1)(i) of the Rules of Civil Procedure seeking the appointment of a monitor.  R. 74.15(1)(i) permits any person appearing to have a financial interest in an estate to move for an order seeking the court’s direction on issues relating to the administration of an estate. 

Quinn J. noted that while the court has very limited discretion when it comes to granting probate, it enjoys wide discretion when determining whether to attach conditions to the grant.  While the appointment of a monitor is very unusual, he found that the court does have the discretion to do so (an appointment of this nature occurs with the most frequency in commercial disputes). 

Although Quinn J. was satisfied he had the discretion to appoint a monitor, he pointed to the fact that the role of monitor was extremely ill-defined.  He determined that a monitor could be classified as an “officer of the court” (which, again, is not the most well defined concept). However, in this particular case, he found that the duties of the monitor would be to (1) monitor the co-executors; (2) ensure the estate was administered properly; (3) comply with the terms of the order of appointment; and (4) be otherwise “faithful to the responsibilities of an officer of the court.”

Accordingly, he allowed the appointment of the monitor.   

When Can Powers of Attorney Be Invalid?

In his recent decision in Baranek Estate, Justice Brown observed that “the so-called ‘battle of competing powers of attorney’ is emerging as a growing area of litigation.  This is a most unhealthy development.”  The facts behind Justice Price’s recent decision in Nguyen-Crawford v. Nguyen would seem to give credence to Brown J.’s complaint.

Nguyen-Crawford v. Nguyen involved a fight amongst the five children of an elderly woman who was impaired by a stroke.  In 1998, powers of attorney for property and for personal care had been executed by the woman in favour of her youngest daughter.  In 2009 (after she had suffered a stroke) the mother granted powers of attorney for property and personal care to her other four children. 

The youngest daughter then commenced an application seeking a declaration that the 2009 powers of attorney were invalid on the basis that her mother was incapable. After conceding the invalidity of the 2009 powers of attorney, the four other children challenged the validity of the 1998 powers of attorney on the basis of incapacity and undue influence. Specifically, they argued that the only translation their mother (who did not speak English) received of the powers of attorney was from the daughter being named. They also asked to be appointed as the mother’s guardians of property and personal care.

Pursuant to s. 8 of the Substitute Decisions Act, 1992 (“SDA”) an individual is capable of granting a continuing power of attorney for property if she understands, amongst other things, the nature and extent of her assets as well as the obligations of an attorney for property.  Pursuant to s. 47 of the SDA, an individual is capable of granting a power of attorney for personal care if she is able to understand whether the proposed attorney has a genuine concern for the person’s welfare and appreciates that the attorney might need to make decisions for the person. 

Here, Price J. found that although the mother was not under disability in 1998 and had the capacity to sign powers of attorney there were suspicious circumstances surrounding the execution of the documents.  The mother was dependant on the daughter being appointed and the daughter had provided the only translation of the powers of attorney and the legal advice given concerning them.  As a result, he found that the circumstances of undue influence were such as to render the powers of attorney invalid. Ultimately, he appointed the four other children as the mother’s guardians of property and personal care.   

For a Great Deal, Try an Estate Sale

While Boxing Week sales are a popular way to get things cheap, there's another type of sales which have become popular – estate sales.  The New York Times reports that because of the increasing number of baby boomers who are downsizing (or selling off the belongings of their deceased parents) there has been a dramatic rise in the number of estate sales occurring.

It’s not just the supply, either – the demand is also increasing and is fueled in large part by the still-weak economy.  While the hope of finding unique and inexpensive items for their homes lures some shoppers, there are also those inspired by the desire to flip items for a profit on online auction sites. 

The increase in popularity of estate sales has also led to a subtrade of professional organizers like Sisters in Charge Tag Sale Professionals and JBD Estate Sales.  Online sites like EstateSales.net, Estatesales.org, and WeekendTreasure.com, which list the sales, are also becoming more common.   

For those interested in hitting the estate sale circuit, there are rules of protocol to keep in mind:

  • The first person to arrive distributes “pre-numbers” to others as they arrive – these are then exchanged for real numbers when the organizer arrives, which dictate the order of admission;
  • If you see something you like, don’t dither.  Pick up anything that seems even remotely interesting and then make a final decision later;
  • If the piece is too big to carry, just remove the price tag and take it to the register;
  • Don’t apply “sold” stickers to items before you’ve actually purchased them.  This is considered tacky!

So just keep those rules in mind and get ready to shop ‘til you drop!

Celebrating the Christmas Eve Birth of Winnie the Pooh

Eighty-five years ago today, on December 24, 1925, a short story written by A.A. Milne (then an assistant editor at the humour magazine Punch) appeared in the London Evening News.  It was titled “The Wrong Sort of Bees” and told the tale of a boy named Christopher Robin and his bear, “Winnie-the-Pooh”.

The boy was based on Milne’s young son (also named “Christopher Robin”) and the bear of very little brain was based on Christopher’s teddy who, having been initially named “Edward Bear”, was later renamed “Winnie-the-Pooh” – a name derived from combining the names of a real bear and a fictional swan.  “Winnie” was the name of a bear in the London Zoo who had been the mascot for the Winnipeg regiment of the Canadian army while “Pooh” was the name of the pet swan in Milne’s book, “When We Were Very Young.”

In 1926, the book Winnie-the-Pooh was published, which featured Christopher Robin, Pooh, and his other animal friends (who were also based on Christopher’s stuffed animals).  Two more books would follow by Milne about Pooh and the gang before the rights to the characters were licensed in the United States.  Currently, Christopher’s stuffed versions of Pooh, Piglet, Kanga, Eeyore, and Tigger reside in the New York Public Library

Milne died in 1956 and was survived by his wife and Christopher.  In his will, he left his assets in trust to his widow for her lifetime and, upon her death, in trust for his descendants and a few charitable institutions. Unfortunately, it has not all been smooth sailing – for a good part of the past decade Christopher’s daughter, Clare, was involved in unsuccessful litigation with the American licensor of the works over entitlement to royalties.  

For those in New York City over the holidays, Christopher’s stuffed animals can be viewed at the Children’s Center in the Schwartzman Building at 5th Avenue and 42nd Street.

Have a very Merry Christmas!

Considering the Duty to Disclose in the Pension Context

The recent decision in Pryden v. Swiss Reinsurance Company considers the circumstances under which a trustee is obligated to disclose information to a beneficiary and, in particular, the application of the joint interest principle.

The case involved a class proceeding over a pension plan (which is a form of business trust) and specifically whether surplus assets attributable to the wind up of a company pension plan belonged to the class members (who were former employees of the company).  An issue raised was whether the respondent (who had employed the class members) had improperly amended the plan so as to recover surplus contributions.

The applicant brought a motion seeking the production of documents contained in the files of the law firm who had represented the company at the time the plan had been amended. She argued that she was joint in interest with the respondent (the employer) and, as such, no privilege attached to the files. 

The joint interest principle provides that when a lawyer’s advice is obtained for the administration of a trust or estate, there is no privilege since the advice is obtained for the interests of the beneficiaries and the trustees. There is a shared interest between trustees and beneficiaries because trustees have an obligation to act in the beneficiaries’ best interests and, accordingly, any legal advice obtained must be to further those interests. The court has previously held that the principle applies in the context of pension law.    

The respondent argued that there was no joint interest because if the law firm in question had given advice about the amendment it was to the company, not to the trustees of the plan. 

Master Glustein agreed with the respondent.  He pointed to the distinction between being a plan sponsor (i.e. the employer) and being the plan administrator (i.e. the trustee).  A plan sponsor does not owe trustee-like obligations to the plan members. If an employer in its capacity as plan sponsor (and not as plan administrator) obtains legal advice regarding the plan then it is not subject to the joint interest principle.  Here, Master Glustein found that it was clear the legal advice was provided to the company as plan sponsor, not to the trustees, and the joint interest principle did not apply.    

When Can the Public Guardian & Trustee be Appointed as Estate Trustee?

The recent decision in Baranek Estate reviews the circumstances under which the Public Guardian and Trustee ("PGT") should be appointed as estate trustee of an estate. 

By way of background, prior to the deceased’s death, his former attorney for property had commenced an application to pass accounts.  Subsequent to the deceased’s death, it was not immediately apparent whether he had a will; as such, the attorney brought a motion to appoint a lawyer as litigation administrator of the estate, pursuant to R. 9.02 of the Rules of Civil Procedure, so the application could be continued. 

The PGT opposed the appointment, and instead asked that it be permitted to apply to be estate trustee, pursuant to s. 1 of the Crown Administration of Estates Act (“the Act”).  Specifically, s. 1(1) of the Act allows the court to appoint the PGT as estate trustee when an individual who dies in or is a resident of Ontario does not leave a will (or does not name an executor) and there are no known adult next of kin who are willing or able to administer the estate. 

Justice Brown, the motions judge, found that in this case it was unclear whether the conditions that would permit the PGT’s appointment under s. 1 had been met.  Specifically, he found that on the evidence it appeared that the deceased may have had a will and, as such, there might be an executor out there somewhere. 

Accordingly, Brown J. determined it would be premature to appoint a litigation administrator or authorize the PGT to apply for probate.  Instead, he adjourned the motion and ordered the PGT to make such investigations as were necessary to ascertain whether an estate trustee of the estate existed and, if not, to determine whether it intended to apply for the appointment.    

When are Mutual Will Agreements Enforceable?

The recent decision of the Supreme Court of British Columbia in Brewster v. Lenzi, considers the enforceability of mutual will agreements and the relief available when an agreement is breached.  

By way of background, the defendant and her husband were married in 1988.  It was a second marriage for both.  In 1992 they had wills prepared.  The defendant’s will provided that in the event that she survived her husband, then one-half of the household effects and a one-half interest in their matrimonial home (a condo) were to go to the husband’s daughter, who was the plaintiff in the action. The husband’s will contained a similar provision which would have left the one-half interest in the home and its contents to the defendant’s niece and nephew). 

The husband was the first to die and on his death the condo, which was held by him and the defendant as joint tenants, passed to the defendant by right of survivorship.  After title to the condo had been transferred, the defendant’s lawyer wrote to the plaintiff advising that the defendant intended to honour her agreement with the husband by leaving the plaintiff a half-interest in the condo.

Sometime later, the defendant changed her mind and made a new will which did not make any provision for the plaintiff.  Somehow, this came to the attention of the plaintiff, who then proceeded to commence an action against the defendant seeking a declaration that a half interest in the condo was held in trust for the plaintiff.  This is an interesting aspect to the decision, because claims of this nature generally occur after the death of the party who breached the agreement, while in this case she was still alive.  

Bracken J., the trial judge, found that when the wills were executed in 1992, a common intention (between the defendant and her husband) existed that the husband’s one-half interest in the condo would pass to his daughter on the defendant’s death. Bracken J. further found that the husband intended to impose an irrevocable obligation on the defendant to leave the one-half interest to his daughter, the defendant understood and accepted this obligation at the time the wills were made, and the intention and obligation were still alive at the husband’s death.  In the result, he declared that the defendant held one-half of the condo in trust for the plaintiff. 

Will or No Will: When Are Handwritten Changes Valid?

When enterprising individuals try doing their own estate planning, things can get dicey – but when they start trying to mess with professionally completed estate plans, it can end up being a real disaster!  In the recent decision of Gibbon Estate v. Sleeping Children Around the World, the court had to determine what constituted a creative do-it-yourselfer’s valid last will and testament. 

The deceased had made a handwritten will in 1989 that was attested by two witnesses.  In 1994, she executed a formal will which was prepared by a lawyer, although she later made handwritten changes to it.  Sometime after the 1994 will was made, she made a number of handwritten alterations on the 1989 will. 

The 1994 will contained a standard revocation clause (which revoked all prior wills).  The issue that arose was whether the handwritten notations made on the 1989 will after the 1994 will had the effect of “reviving” the 1989 will. 

Section 19(1) of the Succession Law Reform Act provides that a will which has been revoked is revived only by:

  • A will made in accordance with Part I of the SLRA (which relates to testate succession);
  • A codicil made in accordance with Part I of the SLRA which shows an intention to give effect to a previously revoked will; and
  • The re-execution of the revoked will with the required formalities. 

Justice Stinson, the application judge, determined that the issue was whether the handwritten markings amounted to a codicil.  In order to qualify as a holographic codicil, the document must conform to s. 6 of the SLRA and be entirely in the testator’s own handwriting and signed by the testator.

In this situation, while the deceased initialed some of the changes to the 1989 will, she did not sign any of them.  As such, Stinson J. decided that the alterations did not amount to a valid codicil and, accordingly, did not revive the 1989 will.

Stinson J. then considered the markings on the 1994 will.  He found that as they were entirely in the handwriting of the deceased and had been signed by her they qualified as a codicil.  Accordingly, he found the 1994 will as amended by the handwritten codicil to be the deceased’s valid last will and testament.

...it would have been so much easier if she’d just seen a lawyer!      

When Should the Court Approve a Sale by an Executor?

The recent decision of Jochem v. MacPherson addresses the circumstances under which the court should approve a sale transaction made by an executor. 

By way of background, the applicant was one of four executors of the deceased’s estate.  The other three executors were the applicant’s children. The applicant, as an executor of the estate, accepted an offer to sell shares the estate held in a privately-owned company to a corporation owned by her son (who was also an executor). 

The applicant then brought an application seeking a declaration that she had acted within her discretion and in accordance with her fiduciary duties when accepting the offer and an order approving the transaction. 

Justice Hoy set out the test that the court should apply when determining whether to approve a sale transaction.  Specifically, the court must be satisfied that the sale price is the “best which can be obtained” and that the sale is in the best interests of the beneficiaries.  In seeking court approval, the trustee has an obligation to obtain and put before the court all the material appropriate to allow the court to make the determination sought. 

In this situation, Hoy J. had significant concerns about the sale of the shares, including the following:

  • The applicant did not consult the other executors about the selection of the valuator of the shares or the parameters of the valuation;
  • A number of the valuator’s underlying assumptions appeared questionable;
  • The valuation was a “limited exercise” and the information used appeared to have been received, in part, from the prospective purchaser of the shares;   
  • No attempts had been made to sell the shares on the open market and alternate purchasers had not been sought; and
  • The other executors were neither consulted with nor informed of any discussions regarding the sale.

While the proposed purchase price was the appraised value of the shares, given the limitations of the valuation and the material before the court, Hoy J. was not persuaded that the applicant was acting in accordance with her fiduciary duty.  She was also unconvinced that the offer was the best price that could be obtained.  As a result, Hoy J. declined to approve the sale of the shares.  

Setting Aside a Settlement on the Basis of Duress

It’s not uncommon for litigants who have settled a matter to question whether they could have done better.  Usually, they just live with it.  However, in situations where an agreement was entered into under duress and the terms are unconscionable, the court has the discretion to set aside the agreement.  In the recent decision of Pytka v. Pytka, Brown J. considered the circumstances under which this should occur.   

By way of background, the daughter of a deceased brought an application for dependant support (under Part V of the Succession Law Reform Act) against her late mother’s estate.  The mother’s will divided the estate equally amongst her four children but the daughter argued that she was a dependant and her needs were such that she was entitled to support.    

The litigation continued until the eve of trial, when the parties settled the dispute.  Pursuant to the settlement, the daughter was entitled to continue residing in the estate residence for a period of time and was to receive 47.5% of the residue. The parties proceeded to obtain a judgment incorporating the settlement terms.

The daughter later brought a motion to set aside the settlement on the basis that she entered into it under duress and the terms were unconscionable.    

Brown J. held that an agreement could only be set aside for duress if it was imposed by a counter-party to the agreement or, if the duress came from a third party, the counter-party was aware of it.  In order for duress to occur the pressure exerted must be to the extent it amounted to a “coercion of will”.

In this case, Brown J. found that there was simply no evidence that the estate exerted duress on the daughter to enter into a settlement.  On the contrary, the stress she experienced was that which is naturally associated with litigation.  The daughter was the one who initiated settlement discussions, so it could not be said she was forced into settlement and the terms of the settlement itself were fair considering the nature and strength of the daughter’s claim. 

The decision itself is an interesting and comprehensive one and certainly worth a read. 

When Can a Capacity Assessment be Ordered by the Court?

The Superior Court of Justice’s recent decision in Urbisci v. Urbisci discusses the circumstances under which the court should require an individual to undergo a capacity assessment against his or her will. 

By way of background, the applicants were the daughter and estranged husband of the alleged incapable person (“Maria”).  They sought a court order requiring Maria, who had an incurable brain tumor, to submit to a capacity assessment.  Maria opposed the order.    

Section 2 of the Substitute Decisions Act, 1992 (the “SDA”) provides that absent reasonable grounds to believe to the contrary, an individual is presumed to be capable.  However, pursuant to s. 79(1), if an individual’s capacity is in issue in a proceeding under the SDA and the court is satisfied that there are reasonable grounds to believe a person is incapable, it can order a capacity assessment. 

The court has long rejected the idea that it was harmless to require an individual to undergo a capacity assessment.  The decisions of Strathy J. in Abrams v. Abrams and Pattillo J. in the unreported decision of Flynn v. Flynn, both discuss the intrusive and demeaning nature of the process.   

Brown J., the judge hearing the application, proceeded to set out some of the factors the courts have turned their minds to when determining whether there were reasonable grounds to believe that a person was incapable, including:

  • The wishes of the person sought to be examined;
  • The nature and quality of both medical and non-medical evidence regarding the person’s capacity;
  • Where there has been a previous assessment, the assessor’s qualifications, the comprehensiveness of the report, the report’s reliability, whether there is evidence of bias, and whether the evidence considered was appropriate;
  • The probative value of the assessment vis-à-vis the issue before the court;
  • The potential harm that might result if the assessment does not take place; and
  • The urgency of the capacity assessment.

Ultimately, Brown J. decided not to order the capacity assessment.  He found that although Maria’s health was declining, the evidence suggested that she still had the capacity to manage her own affairs. Particularly persuasive were medical records and opinions filed by Maria’s various doctors suggesting capacity; evidence of her capacity provided by her estate planning lawyer; and supportive evidence provided by disinterested family and friends.

The "When, Who, and How" of Replacing an Executor

A couple of months back I blogged on the Court of Appeal’s decision in Gonder v. Gonder Estate, which found a court could only remove a trustee without appointing a replacement when there were mechanisms in place to protect the interests of the beneficiaries.  However, when a trustee is removed, resigns, or dies, it is usually preferable to appoint a replacement.    

When determining whether a new trustee is necessary, the first thing to do is to read the will (or trust agreement, as the case may be).  In circumstances where there are multiple trustees, the will may provide for the minimum number who must be acting.  Sometimes, when a trustee resigns or is removed, there are still enough remaining trustees that the minimum number is met, meaning the appointment of a new trustee is unnecessary.

If it becomes clear that a new trustee is necessary, the will should be reviewed to determine whether an alternate has been named.  If one has, then he or she is entitled to the appointment.  If no alternate has been named, and the trustee being replaced has died, the will of the deceased trustee should be reviewed to determine whether he or she nominated a replacement – s. 4 of the Trustee Act (the “Act”) permits the last surviving or sole trustee to appoint a successor by will. 

If no one has been named, then a new trustee is necessary – in some circumstances, it will be appropriate for one of the beneficiaries to be appointed; in others it might be preferable to seek the appointment of a trust company or professional, such as a lawyer or an accountant.

When it comes to actually appointing a new trustee, s. 3 of the Act provides for certain circumstances where the appointment can be made in writing by the surviving trustees.  Additionally, the court has the authority to appoint a replacement pursuant to s. 5 of the Act.   

When is a Gift not a Gift? When it's a Loan, Instead

When money is received from a bank, there’s usually no doubt that it’s a loan.  However, in situations where property is being transferred between friends or family, it is not unusual for no written documentation to exist characterizing the nature of the transfer - and this is when disputes can arise.  The recent decision in Colangelo v. Amore discusses the legal requirements for proving that property was received as a gift, not a loan.   

In Colangelo v. Amore, the plaintiff and the defendant were in a relationship for a little over two years, during which time the plaintiff made transfers to the defendant totalling $16,000.00. There was no dispute that the money was advanced.  The only issue was whether the advances constituted a loan or a gift. 

The plaintiff argued that the funds were only advanced because the plaintiff was unemployed and couldn’t meet her monthly expenses.  He stated that there was a clear understanding that the loan would be repaid when the defendant found a job. 

The defendant argued that the funds had been offered by the plaintiff when she was unemployed – and after rejecting the offer a few times, she finally accepted out of financial desperation. Her evidence was that the money was advanced not as a loan but rather was a gift made because the plaintiff wanted to take care of her. 

Justice Brown ruled that the amount constituted a loan not a gift and granted judgment to the plaintiff. 

He found that when money is transferred in situations where the transferor is not indebted to the transferee and where no presumption of advancement exists, the burden falls to the transferee (in this case, the defendant) to establish the intention of a gift.  The burden of proof required is the civil standard of “the balance of probabilities”.

In considering the circumstances that existed when the funds were advanced, Brown J. determined that the defendant could not provide sufficient evidence that the plaintiff had intended a gift.  He noted that it was not enough for the defendant to believe she was receiving a gift, the plaintiff also had to intend to make one.

This decision underscores the importance of anyone receiving funds to ensure that if the money is not to be repaid, this is documented sufficiently so problems do not arise down the road.

Establishing a Litigant's Capacity on Motions for Court Approval of a Settlement

Sometimes, legal proceedings must be commenced or defended by a litigation guardian on behalf of someone who is mentally incapable.  Recent endorsements in Carano v. Manduck underscore the importance of establishing that a litigant remains incapable when asking the court to approve a settlement on the litigant’s behalf.   

In Carano v. Manduck, a plaintiff had been severely injured in an automobile accident and the Public Guardian and Trustee had been appointed as his litigation guardian. The litigation settled and the parties sought court approval of the settlement.  The affidavit filed in support of the motion made reference to the fact that the plaintiff had been tested and found capable of managing property.

Given the evidence of capacity, Wilkins J., the motions judge, found that it had to be established that the plaintiff approved of the settlement (and apparently there was evidence that he did not approve). 

Supplementary materials were filed and the motion subsequently came before Brown J. in August 2010.  There was evidence that in June 2008  a doctor had provided an opinion that the plaintiff was unable to make decisions about the settlement, while in December 2008 and April 2009 there were opinions that the plaintiff did have capacity.

Brown J. found that the opinion evidence had become stale-dated and declined to make any findings regarding capacity.  He found that if the litigant was capable, the court lacked jurisdiction to make determinations about his financial affairs.   Brown J. also emphasized the necessity of including evidence of a party’s current level of capacity on any motion for court approval of a settlement on an incapable party’s behalf.    

Brown J. acknowledged that there would certainly be circumstances where a litigant’s incapacity would remain static throughout a proceeding (such as when the party had been catastrophically injured).  However, he also noted that injuries can resolve themselves and capacity can improve over time.    

Counsel proceeded to file further submissions on the issue of the plaintiff’s capacity.  After having considered the additional evidence (which included an August 2010 assessment), Brown J. found that the plaintiff was incapable of making property decisions and, after reviewing the terms of the settlement, approved it on the plaintiff’s behalf.   

The endorsements in Carano v. Manduck stand as an important reminder that once incapable doesn't mean always incapable.  When a court is being asked to approve a settlement on an incapable litigant's behalf, it is absolutely essential that evidence is provided to satisfy the court the litigant remains incapable and the court has jurisdiction to approve the settlement.

Stieg Larsson's Books Might Be Good, But His Estate Planning? Not So Much...

Swedish author Stieg Larsson died without knowing how successful the publication of his “Millennium Trilogy” would be.  Since his death, it is estimated that worldwide sales of his books have topped 40 million. Unfortunately for Eva Gabrielson, Larsson’s partner of more than 30 years, she will not be sharing in any of the financial benefits.

Larsson died without a will (this is called dying “intestate”) and Swedish law does not provide inheritance rights to common law spouses on an intestacy.  As a result, the beneficiaries of Larsson’s estate are his father and his brother.    

Gabrielson’s recent interviews on the CBC radio show, The Current, and with the Globe and Mail provide additional information about her situation.    

While the intestacy law in Ontario is more forgiving to common law spouses than it is in Sweden, it does not make things particularly easy.  Part II of the Succession Law Reform Act provides inheritance rights to a spouse on an intestacy.  However, it defines “spouse” as either of two people who are married to each other, leaving a common law spouse without rights. 

Similarly, while s. 5(2) of the Family Law Act entitles a surviving spouse to elect to equalize net family property (which is the same property division that occurs on divorce), the election is available only when the spouses were married - it doesn't apply to common law relationships.   

This does not mean that a common law partner has no redress at all.  Under Part V of the Succession Law Reform Act, a common law partner has the right to bring a claim for dependant support.  Depending on the circumstances, common law claims on the basis of quantum meruit or constructive trust might also be available. 

Still, it hardly seems desirable for a surviving partner to be put to the expense and uncertainty of litigation on the other partner’s death.  Additionally, the litigation can become very contentious when the family members who are to receive the estate under the intestacy rules become reluctant to part with any of their inheritance. 

The best way to avoid these types of problems is to have a will.  That way the deceased's estate will be distributed as she or he intended – no doubt that Eva Gabrielson is wishing that Stieg Larsson had one. 

Consent and Capacity Board Appeals - Naming and Paying an Amicus

The Consent and Capacity Board (“CCB”) is an independent provincial tribunal in Ontario.  A large part of its mandate involves reviewing a person’s involuntary admission to a psychiatric facility pursuant to the Mental Health Act or a person’s capacity to refuse medical treatment pursuant to the Health Care Consent Act

An individual has the right to appeal the decision of the CCB to the Superior Court of Justice.  Appeals of CCB decisions in Toronto are currently subject to pre-hearing case management, during which the court has the discretion to appoint an amicus (the role of which is to help the court understand the legal and factual issues raised by the patient).

Brown J.’s recent decision in Cavalier v. Ramshaw addresses the issue of payment of amicus appointed by the court. 

Initially, an amicus was either nominated by the parties (subject to court approval) or, at the court’s request, the Ministry of the Attorney General (“MAG”), in conjunction with Legal Aid Ontario (“LAO”), would forward names of counsel from LAO’s Consent and Capacity panel to the court for approval. 

Counsel was to be paid according to LAO’s “standard administrative terms”. However, this proved problematic, because LAO caps hours spent by counsel on CCB appeals at 16, when, in reality the time involved is significantly more (generally between 30 – 50 hours for an average appeal).  

MAG’s position in Cavalier v. Ramshaw was that the amicus should be subject to the LAO cap, unless LAO exercises its discretion to allow more time spent.  Brown J dismissed this argument on the basis that if the court imposed an unrealistic cap on the time spent, many very qualified lawyers would not offer their services. 

Brown J. determined it was preferable for the court to select the panel of counsel from whom amicus could be appointed, fix the hourly rate that could be charged, and monitor the hours that were being billed to ensure they were reasonable.  Providing the accounts were, they would be forwarded to MAG for payment. 

Acknowledging the issue of whether the court had the authority to order MAG to pay the legal fees of amicus, he requested that MAG advise the court by mid-November as to whether it was prepared to fund the fees.  In the event that it was unwilling to do so, Brown J determined that there was no point continuing to case-manage CCB appeals and that the old system would return. 

This is a scary thought because under the “old system” appeals languished, typically because the patient did not have the expertise or the capacity to complete necessary court materials.  Until an appeal has been heard, treatment usually cannot be given and a patient who is not improving will frequently remain detained. 

It will be very interesting to see what MAG decides to do.   

Collaborative Law and Estate Disputes

An article in the latest edition of Canadian Lawyer magazine explores the question of why collaborative law has not caught on for estate disputes. 

For the uninitiated, collaborative law is a form of dispute resolution which is popular in family law matters.  The objective is to resolve disputes without invoking the court process.   The parties and their counsel all sign an agreement that they will not go to court and attempts are made to resolve the dispute through discussions, information-sharing, and mediation. 

The process is consensual, and the parties are permitted to withdraw from it at any time; however, if they do decide to litigate the dispute, the counsel involved in the collaborative process cannot continue to represent them.  The website for Collaborative Family Lawyers of Canada provides useful information on the approach. 

There have been initiatives to integrate collaborative law into the estates and trusts field but, so far, success has been limited.  A large stumbling block is the notion that if the collaborative process fails (and litigation ensues) the parties will need to retain new counsel. 

From a practical level, this is problematic because the estates and trusts bar is pretty small – this, combined with the fact that estates disputes often have numerous parties, would create complications if counsel were disqualified from a file. 

Another problem relates to situations where there are minor or mentally incapable beneficiaries, thus requiring the involvement of the Office of The Children’s Lawyer (“OCL”) or the Office of the Public Guardian and Trustee (“PGT”).  Both government agencies only have the authority to act once a legal proceeding has been commenced, which obviously creates problems if the premise of the collaborative approach is to avoid litigation.  Additionally, the potential disqualification of counsel if the approach is unsuccessful again becomes a problem – the OCL and the PGT are the only ones with the authority to represent minors and incapable persons, respectively.  

Recently, the Collaborative Estates Law Working Group was formed in Ontario, with the objective of elevating knowledge and understanding of the concept amongst lawyers and the public.   It will be interesting to see whether the collaborative approach starts to gain a stronger foothold – if it is to become more popular, it would seem the model will need to be adjusted to account for the unique challenges posed by estates and trusts disputes.  

Keeping Your Estate Administration-Ready

I frequently stress to my clients the importance of keeping their affairs in order. While this means keeping an up-to-date will there is much more to it than that.

The National Post recently ran a helpful article  on keeping your estate “administration ready” in case of your death. Here are the tips that I liked best:

1. Ensure your executors are up to the task

Selecting trustworthy executors is important, but there’s more to the choice than trustworthiness. Administering an estate can be complicated, time consuming, and stressful, particularly when the estate is complex. It is important that the executors have the knowledge and time necessary to administer the estate.

2. Notify the executors that they’ve been named and advise them of the contents of the will

I have seen numerous occasions where the first time an executor learns of his appointment is after the death of the testator. This can cause big problems – especially if the executor renounces the appointment and no alternate has been named.

Explaining the terms of your will to your named executors is also a good idea – it will be easier for them to communicate with the beneficiaries and determine how to make any necessary discretionary decisions.

3. Brief the main adult beneficiaries about the terms of your will

Estate litigation can occur when a beneficiary is unpleasantly surprised by the terms of a will. Being upfront with the beneficiaries during your life can help to stave off the shock and hurt feelings that can lead to infighting and litigation after your death.

4. Keep financial records in order

I always recommend that clients create (and keep updated) a list of assets, such as bank accounts and investments, and where those assets are located. Copies of insurance policies, other beneficiary designations, recent tax returns, and important financial records should also be kept in one place.

This will help to avoid the administration of your estate being delayed as executors search for assets or, even worse, certain assets never being recovered.

While it’s never possible to guarantee a smooth estate administration, the above suggestions will certainly make your executors’ lives easier.

Setting Aside an Unopposed Judgment Passing Accounts

The Superior Court of Justice’s recent decision in Re Estate of Assunta Marino provides guidance on what test the court should apply when setting aside an unopposed judgment passing accounts. 

By way of background, an executor had filed an application to pass accounts.  Rule 74.18 of the Rules of Civil Procedure provides that any notices of objection to accounts must be filed at least 20 days prior to the return date of the application; otherwise the executor is entitled to obtain unopposed judgment. 

One of the beneficiaries retained counsel to review the accounts but the 20 day deadline was missed and an unopposed judgment was issued.  The beneficiary brought a motion to set aside the judgment and obtain leave to file a notice of objection to the accounts. 

Brown J. found that, in the circumstances, the test to be used in determining whether the judgment passing accounts should be set aside was the same as the test used when determining whether default judgment should be set aside on an action when it is obtained by a defendant’s failure to file a notice of defense. 

Specifically, the questions that Brown J. determined that the court should consider were:

  1. Was the motion brought without delay?
  2. Were the circumstances giving rise to the default adequately explained?
  3. Did the beneficiary have an arguable case – could he demonstrate he had arguable objections to the executor’s accounts?
  4. Did the interests of justice favour setting aside the judgment?

Applying the above principles, Brown J. determined that setting aside the judgment was warranted although he found it was a “close call”.  He found that the moving party was prudent in bringing the motion in a timely manner.  With respect to the circumstances, the beneficiary’s counsel had explained that it was through the counsel’s inadvertence that the notice of objection was not filed, rather than the beneficiary not intending to file one – and Brown J. found this explanation adequate. 

He also found that the beneficiary had arguable objections given the accounts indicated unusual expenditures had been made by the executor.  As to the interests of justice, while Brown J wasn’t impressed that the deadline had been missed and believed that there should be protection for litigants, such as the executor, who follow appropriate court procedure, he also found that as the beneficiary had raised arguable objections, they should be considered. 

Proving a Lost Will in Court

Sometimes, on an individual’s death, his or her original last will and testament cannot be located – it might be that only a copy can be found, but sometimes it appears that the will has vanished altogether. 

In situations where a will can be traced to the possession of the individual who made the will (“the testator”) and cannot be found on the testator’s death, there is a legal presumption that the testator destroyed it with the intent of revoking it.  In a situation where a prospective beneficiary believes that the will was never revoked, but has simply gone missing, he or she can bring a court application to prove the will. 

In Ontario, rule 75.02 of the Rules of Civil Procedure sets out the process to be followed when proving a will.  In situations where all of those with a financial interest in the estate consent to the will being proven, the process is easy – an affidavit is filed along with the application and no court appearance is necessary.  The Superior Court of Justice’s decision in Re O’Reilly addresses the form of order that should be included with the application. 

In situations where those with a financial interest do not unanimously agree to the will being proven (this often occurs where different beneficiaries have differing interests depending on whether the will is valid), the process is more arduous – and a court proceeding will occur.

The Ontario Court of Appeal’s decision in Sorkos v. Cowderoy, is helpful in explaining the legal test involved in determining whether a lost will can be proven in contested matters.  The party wishing to prove a will must:

  1. Establish due execution of the will;
  2. Trace possession of the will to the testator’s date of death (and subsequently, if the will was lost after death);
  3. Rebut the presumption that the testator destroyed the will with the intention of revoking it; and
  4. Prove the contents of the lost will.

Mere speculation that a will existed is simply not enough.  Practically speaking, the witnesses of the will should be located so due execution can be established.  Additionally, someone with specific knowledge of the contents of the will (such as the lawyer who drafted it and preferably not the individual seeking to prove the will) should be located.

"If Dementia Were a Country, It would be the World's 18th Largest Economy..."

Over the past week, the Globe and Mail has been running an interesting series on various issues relating to dementia

According to Alzheimer’s Disease International, an estimated 35.6 million people worldwide suffer from dementia.  By 2030, the number is expected to double to more than 65 million.  

The costs of caring for people with dementia are significant – it is estimated that more than $350 billion per year is spent on medical care and residential care. Unpaid labour by family caregivers has an estimated value of $253 billion.  Twenty years from now, the total costs are projected to exceed $1.1 trillion.  To put these numbers into context, Alzheimer’s Disease International estimates the current costs of dementia to be equivalent to 1% of the global gross domestic product – in geographic terms this amount would be equivalent to that of the world’s 18th largest economy, falling in between Indonesia and Turkey. 

While those suffering from dementia clearly need supportive care and medical treatment, they often also need financial protection. 

The financial risks faced by those suffering from dementia are wide ranging.  In some cases, the extent of an individual’s diminished capacity is not spotted quickly enough (or, if it is, there is no one with the authority to make financial decisions on the individual’s behalf).  This can lead to situations where the person enters into unwise financial transactions or is taken advantage of by unscrupulous acquaintances or relatives.  The Ontario Superior Court of Justice’s decision in the much discussed case of Banton v. Banton (involving an 88 year old retirement home resident who married a 31 year old waitress at the home) illustrates the devastating effects that incapacity can have on the financial decisions someone makes.

In other situations, an elderly person’s diminished capacity can provide a battleground for fighting family members, all of whom are convinced that they ought to be the one to control the individual’s finances.  The ongoing case of Abrams v. Abrams provides a good example of the complexity and scope of litigation that can emerge when family members, all with the stated objective of protecting an incapable person, become pitted against each other.

On a non-litigious note, elder mediation is growing in popularity, although it is still fairly new.  The idea behind elder mediation is to get everyone in the same room with the joint objective of getting the individual with dementia the best care.

Coming Soon - Estate Disputes Hit the Boob Tube

It was bound to happen. Really, it was only a matter of time.

A reality show about estate litigation is currently in the works. 

I happened upon this frightening piece of news while reading the Wealth Law Blog (which is published by an Oregon-based law firm).   

In mid-July, the production company responsible for “LA Ink” and “Storm Chasers” sent out a casting call for residents in the New York Tri-State area.  The production notice reads in part:

Are YOU and YOUR RELATIVES arguing over a loved one’s Will? Do you need help resolving family conflicts and evaluating the worth of objects in the Estate?

Was your loved one’s Will vague– who should get what -- and you and your relatives can’t agree, we want to hear from you!!!

Billing the show as a “life-changing new series”, the production company promises to settle the participants’ “estate nightmare” as well as to financially compensate them. 

The casting call doesn’t indicate exactly how they intend to resolve the estate disputes – will the program have a touchy-feely Oprah-esque sentiment to it, or will things be resolved Judge Judy-style?  

I’m curious to know what type of estate disputes will be featured.  A secret I’ll share with you is that a lot of estate litigation isn’t all that exciting – I doubt that disputes over trustee compensation or the appropriate interpretation of administrative clauses in wills would make for particularly fascinating viewing. 

So, would I tune into a show like that?  On the one hand, the idea is about as appealing for me as I imagine that sitting around watching COPS would be for your average police officer.  On the other hand, I can already feel the morbid curiosity getting the better of me. 

Can an Executor be Removed with No Replacement Appointed? Court of Appeal Says "Sometimes"

I recently came across the Ontario Court of Appeal’s decision in Gonder v. Gonder Estate, from March of this year.  In it, the court considers a very interesting issue: does the court have the discretion to remove a trustee without appointing a replacement and, if so, when should that discretion be exercised? 

By way of background, an individual ("the testatrix") left a will naming her sister and brother-in-law as her executors.  After the testatrix’s death, her brother commenced a claim against her estate. 

The executors later brought a motion under s. 37 of the Trustee Act seeking their removal on the basis of, amongst other things, financial stress, ill health, and other personal circumstances.  They did not seek the appointment of a replacement executor.  The testatrix’s brother opposed the motion, arguing that in the absence of a successor trustee, the current executors were “stuck with the job.” 

The motions judge ordered that the executors be removed and held that requiring them to continue acting would cause substantial hardship on them.  He further decided that s. 37 of the Trustee Act did not require the court to appoint a successor when removing an executor and found that an individual could not be compelled to act as a trustee.   

The testatrix’s brother appealed, arguing that the motions judge erred in removing the executors, leaving the estate with no personal representative. 

The Court of Appeal allowed the appeal.  It found that the motions judge was correct that the court does have the discretion to remove a trustee without appointing a successor.  However, this was to occur only in the rarest of circumstances.  It also found that when leaving an estate “trustee-less”, the court had the obligation to ensure “the proper administration of the estate in the best interest of the beneficiaries”.  That is, an alternate mode of administration must be implemented such that the estate assets will be maintained and the beneficiaries’ interests will be protected.

The court went on to conclude that while the circumstances were such that the removal of the executors was warranted, the motions judge erred in failing to ensure that the proper administration of the estate could proceed.  It ordered the Superior Court to reconsider the executors’ removal and, if they were to be removed, to ensure the estate and its beneficiaries would be protected. 

Helpful Tips for Avoiding Negligence Claims for Estates and Trusts Lawyers

I came across an interesting article in the September edition of “Risky Business”, the magazine published by LawPro, the liability insurer for lawyers in Ontario.  The article details the various “malpractice hazards” which arise in various practice areas. 

In the area of wills & estates, the types of claims lawyers face appear increasingly influenced by the demographics of the population.  Specifically, with the aging population, LawPRO sees an increased risk of claims arising because of issues related to a client’s capacity.  In addition, the number of elderly individuals with large estates just increases the incentive that families will have to fight and the potential that those disputes will entangle the lawyer who did the estate planning.  

LawPRO makes the following suggestions of ways to reduce the risk of a claim:

a)    Be on the lookout for signs of undue influence.  In situations where the client is making drastic changes to his or her will, explore who is benefitting from the changes and what has motivated the client to make them;

b)    Make sure to meet with the client alone to ensure that the client understands the legal implications of what he or she is instructing you to do and is making decisions freely;

c)    Clarify who you are acting for and taking instructions from so as to ensure there is no conflict of interest.  This is particularly important when your initial contact is not with the client but rather with a family member of the client; and

d)    Make sure to satisfy yourself about your client’s mental capacity and, just as importantly, make sure to document what enquiries you made in case your client’s capacity is later challenged.

When litigation over an estate occurs, the reasons are frequently unrelated to the lawyer who did the estate planning.  However, angry beneficiaries don’t always feel that way.  It is always a good idea for a lawyer doing estate planning to ensure that he or she will be protected in the future if issues involving the will or the client’s capacity arise.   

Estate Planning in the Face of an Ill Client - What are a Lawyer's Obligations?

A fear shared by many estate planners is a situation where a client making a will ("a testator") dies before the will being drafted has been executed.  

That was the situation in the recent decision of McCullough v. Riffert

In McCullough v. Riffert, the testator visited a lawyer to have a will prepared, leaving everything to his niece.  Unfortunately, the testator died of illness ten days later and before the will had been executed. As such, his estate was distributed on an intestacy.  The niece proceeded to bring a claim against the lawyer for negligence, alleging that the lawyer ought to have recognized the seriousness of the testator’s illness and been faster in preparing the will and attending to its execution.     

The court found that while “best practices” would have involved the lawyer preparing a will on the day of the client meeting or recommending that the testator do a holograph will, in the circumstances, requiring the lawyer to have done so would be imposing too high a burden. 

Some of the factors the court looked at in determining whether the lawyer had met the requisite standard of care were as follows:

  • The testator had taken no previous steps to complete a will;
  • The lawyer was never advised that the testator was terminally ill – indeed, it does not appear the testator knew and after his death his niece expressed surprise he had died;
  • The urgency of the situation was not expressed to the lawyer – during the meeting the testator had mentioned that he was planning on visiting relatives in Texas a few months later and, as such, the lawyer had no reason to believe death was imminent; and
  • After the initial meeting, the testator never contacted the lawyer to enquire about the status of the will. 

Ultimately, the court found that in the circumstances the lawyer had met the standard of care required to her and was not negligent.  However, this case does serve as a useful reminder of how important it is to prepare a will quickly when a testator is elderly or presents as ill.  There are certainly circumstances where failing to do so can result in a finding of negligence.     

Welcome to the Toronto Estates and Trusts Monitor

I am pleased to announce the launch of my new blog.  I hope to update it often, so make sure to come back frequently to see what’s new. 

If you feel like sharing the content, the share link will allow you to post the blog on various social media sites, such as LinkedIn, Facebook, and Twitter or email it to others. 

I’m always happy to hear from my readers, so if you have any questions, comments, or topics you would like me to blog about, please feel free to email me using the enquiry form on the contact page.  

Have a great day!

Megan F. Connolly