Author: Doreen So
The basic limitation period under section 4 of the Limitations Act, 2002 provides that a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered. However, pursuant to section 7(1) of the Act, the “clock” does not run when the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
A person is also presumed to be capable of commencing a proceeding in respect of a claim at all time unless the contrary is proved (section 7(2)), although minors are dealt with separately under section 6 of the Act.
The issue of the plaintiff’s capacity to commence a proceeding in respect of his claim was considered at length by the Court of Appeal in Carmichael v. GlaxoSmithKline Inc., 2020 ONCA 447. Carmichael is a tragic case involving the murder of the plaintiff’s 11 year old son. The plaintiff strangled his son to death in 2004 when he was suffering from mental illness and psychotic delusions. During this time, the plaintiff was also taking an anti-depressant that was manufactured by the defendant drug company. The plaintiff was charged with murder and he was found to be not criminally responsible as a result of his mental disorder. He later received an absolute discharge from the Ontario Review Board on December 2, 2009. Nearly two years after that, the plaintiff commenced his claims against the drug company on October 5, 2011.
The defendant drug company brought a motion for summary judgment to dismiss the plaintiff’s claim as statute barred. The motions judge dismissed the motion because he found that the plaintiff was incapable of commencing a proceeding because of his psychological condition until the day of his absolute discharge from the Ontario Review Board. The Court of Appeal disagreed.
The Court of Appeal affirmed the use of the Huang/Hengeveld indicators as a list of non-exhaustive, objectively verifiable indicators of incapacity under section 7(1)(a) of the Act (see paras. 94-96):
- a person’s ability to know or understand the minimum choices or decisions required to make them;
- an appreciation of the consequences and effects of his or her choices or decisions;
- an appreciation of the nature of the proceedings;
- a person’s ability to choose and keep counsel;
- a person’s ability to represent him or herself;
- a person’s ability to distinguish between the relevant and irrelevant issues; and,
- a person’s mistaken beliefs regarding the law or court procedures.
Moreover, the plaintiff’s physical, mental, or psychological condition must be the cause for the incapacity in order to meet section 7(1)(a). The incapacity cannot arise from other sources, such as lack of sophistication, education, or cultural differences (para. 101).
The Court of Appeal ultimately found that the plaintiff had the capacity to sue the defendant drug company prior to his absolute discharge from the Ontario Review Board. The Court disagreed with the motions judge’s view of the plaintiff’s expert evidence. The plaintiff’s expert witness was criticized for never having prepared a capacity assessment before and for making conclusions that were unsupported by the evidence. Rather,
“The evidence shows that Mr. Carmichael had several reasons for not suing GSK before December 2, 2009: he did not believe he had the necessary expert evidence until he received the genetic test from Dr. Lucire in October 2009; he was worried about repercussions if the Hospital decided that he was not taking responsibility for his actions; and he was concerned for his own and his family’s well-being. These are understandable reasons for not commencing a lawsuit. But in my view, none of these reasons, alone or together, prove that Mr. Carmichael was incapable of suing GSK until December 2, 2009 because of his psychological condition.” (para. 163)
Leave to appeal to the Supreme Court of Canada was denied last week.
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Section 38 of the Trustee Act, except in cases of libel and slander, permits estate trustees to commence actions, on the deceased’s behalf, for all torts or injuries to the person or to the property of the deceased, and vice versa for those seeking to commence actions with respect to a wrong committed by a deceased person, so long as those claims are brought within two years of the deceased’s death.
The discoverability principles under the Limitations Act, 2002 are not applicable to toll the two-year limitation period under section 38(3) of the Trustee Act. The application of this strict two-year limitation period is only mitigated by common law principles such as the doctrine of fraudulent concealment: Giroux Estate v. Trillium Health Centre, 2005 CanLII 1488 (ONCA), Bikur Cholim Jewish Volunteer Services v. Penna Estate, 2009 ONCA 196, and Levesque v. Crampton Estate, 2017 ONCA 455.
Recently, the Court of Appeal has considered limitations defences in three of its estates decisions so far in 2021. One of them was the case of Zachariadis Estate v. Giannopoulos, 2021 ONCA 158, which I blogged about the other day. The other two cases were Beaudoin Estate v. Campbellford Memorial Hospital, 2021 ONCA 57, and Hayward v. Hayward, 2021 ONCA 175.
The Beaudoin Estate is a medical malpractice claim by the Beaudoin Estate and the deceased’s wife, daughter, grandchildren as claimants under the Family Law Act. The claimants alleged that the deceased was negligently diagnosed and treated when he was brought to the hospital’s emergency department which led to a delay in surgery that could have saved his life. Mr. Beaudoin died on January 9, 2015 and the action as commenced on April 27, 2017 by way of a statement of claim. The defendants asserted amongst other things in their statement of defence that the plaintiffs were statue barred pursuant to section 38(3) of the Trustee Act. The plaintiffs then alleged that the hospital had fraudulently concealed their cause of action by failing to provide them with the deceased’s complete medical records when they were requested from the hospital, particularly certain CT imaging that was not provided to them until May, 2017.
The hospital then brought a rule 21.01(1)(a) motion to determine an issue of law raised by the pleadings so as to dispose of the action without trial. It is important to note that, unlike a motion for summary judgment under Rule 20, no evidence is admissible on a motion under r. 21.01(1)(a), except with leave of a judge or on consent of the parties: r. 21.01(2)(a).
The Court of Appeal found that the motion judge erred in deciding the question of fraudulent concealment as a question of law under r. 21.01(2)(a). Motions under r. 21.01(1)(a) are not the proper procedural vehicle for weighing evidence or making findings of fact (para. 30). Similar to limitations issues under the Limitations Act, 2002 and the factual dispute surrounding the discovery of a claim, factual disputes surrounding the fraudulent concealment of a cause of action are more properly determined under a motion for summary judgment under Rule 20. To do so would be unfair to a plaintiff when no evidence is admissible on such a motion except with leave of the court or on consent (para. 34).
In Hayward v. Hayward, the appellants raised as a ground of appeal that the trial judge erred by failing to find that the applicants were statute bared. The Court of Appeal dismissed this ground of appeal on the basis that the defence was not raised by counsel regardless of the fact that the application did not have full pleadings like an action would. The trial judge cannot be criticized for failing to respond to a defence that was not raised by counsel (para. 7).
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Dr. Zachariadis was divorced and estranged from his two daughters. After his divorce, he began a romantic relationship with Ms. Giannopoulos. They were together for almost twenty years as common law spouses until Dr. Zachariadis’ passing. A year before his death, Dr. Zachariadis moved in with Ms. Giannopoulos and they had plans to marry. Dr. Zachariadis transferred his medical practice to Ms. Giannopoulos’ son Aris, and he gave Ms. Giannopoulos a bank draft for $700,000.00 which she deposited into her own bank account. He died within six months of that bank draft.
Dr. Zachariadis did not have a relationship with his daughters from his first marriage. He was not invited to their weddings and he has never met his grandchildren. Dr. Zachariadis died without a Will and his daughters became the estate trustees and beneficiaries of this Estate. More than two years after Dr. Zachariadis’ passing, the daughters commenced an action against Ms. Giannopoulos to recover the payment of $700,000.00 to her on the basis of breach of trust, fraud at equity, conversion and unjust enrichment. The action was dismissed on a motion of summary judgment by Justice Koehnen. The appeal of Justice Koehnen’s decision, 2019 ONSC 6505, and his Honour’s costs order, 2020 ONSC 588, were also dismissed by the Court of Appeal, 2021 ONCA 158.
On the motion for summary judgment, Justice Koehnen found that the daughters were statute barred by section 38(3) of the Trustee Act in failing to commence their claims within two years of Dr. Zachariadis’ death. The daughters failed to make out any fraudulent concealment on Ms. Giannopoulos’ part that would toll the operation of section 38(3). Rather, Justice Koehnen found that there was no positive obligation on Ms. Giannopoulos’ part to tell the daughters about the payment, and he found that the payment was a gift in any event. All of which were upheld by the Court of Appeal.
The Court of Appeal also found that there was no basis to interfere with Justice Koehnen’s costs order. The Estate and the daughters, in their personal capacities, were ordered to pay Giannopoulos costs of $199,602.46 on a substantial indemnity scale. The allegations of fraud in the underlying claim were unsupported and pursued to the end. Justice Koehnen noted that the daughters could have pursued their claims on the basis of constructive trust and resulting trust without going so far as alleging fraud. The daughters were also found to have taken unnecessarily aggressive steps and to have lengthened the proceeding due to their lack of cooperation with Ms. Giannopoulos’ counsel while Ms. Giannopoulos’ offers to settle were weighed against them. Issue was also taken with the length of the daughters’ materials which were noted to be in violation of the page limits and other formatting requirements for facta. Lastly, Justice Koehnen rejected the daughters’ argument that they were only pursuing the claim to ensure the due administration of the Estate and out of their concern that the Estate would have sufficient funds to pay its CRA liability. Interestingly enough, Justice Koehnen commented that, if that were the case, the daughters could have simply turned over the claim for CRA to pursue.
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Who is ready for some good news? Our firm has been interested in the issue of organ donation for some time now. In 2012, we blogged about whether P.E.I. may be the first province in Canada to automatically enroll all of its people as organ donors until you chose to actively “opt-out”. In 2014 and 2019, we blogged about Nova Scotia’s efforts in this regard.
Today, we are happy to report that this is now the new reality in Nova Scotia as of January 18, 2021.
The Human Organ Tissue and Donation Act was passed in April, 2019. The Act, when it came into effect this Monday, meant that everyone in Nova Scotia are now considered to a potential organ donor until they “opt-out”. This new “opt-out” system is the first of its kind in North America according to the Huffington Post. Ontario, like everywhere else, has an “opt-in” program where you have to actively sign up in order to be considered as a potential organ donor whereas the “opt-out” system is the opposite of that. Nova Scotia is hoping that this will dramatically increase the rate of organ donation in the province like the 35% increase that has been noted in certain European countries.
In order to balance and respect the wishes of each individual, the director of the organ donation program has indicated that the known wishes of an individual will be respected even if he/she has not formally opted out.
This is an issue that is personally meaningful to me because of the statistics surrounding organ donors and organ recipients of colour. People of colour tend to be underrepresented within “opt-in” systems of organ donation. According to the Gift of Life, while race and ethnicity is not determinative of a match, a match is more likely to be found within one’s own ethnic community because of compatible blood types and tissue markers. 60% of patients waiting for a transplant are from communities of colour. I, myself, am registered with the Gift of Life and I can attest to how easy and painless it was to sign up.
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Yesterday, I blogged on Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107. Today’s blog will focus on some of the breaches of fiduciary duty that were found by the Court. For those who have not read yesterday’s blog, this is a case that involves Jean, a 90 year old woman, and Tina, the attorney for property, who was purportedly given a gift of $250,000.00 just days before Jean was hospitalized for acute delirium and progressive cognitive decline.
While the purported gift of $250,000.00 to Tina was found to be invalid, the Court went on to find that Tina was in breach of her fiduciary duty to Jean by accepting the money. Tina was in breach because she knew that Jean was exhibiting signs of cognitive decline when they went to the bank. In the Court’s view,
“a person acting in a fiduciary capacity for a person actively demonstrating moments of irrationality should be very cautious about any big financial moves that person claims they want to make in and around such periods of demonstrated incapacity. Even if Jean was clearly acting in a competent manner during the few hours she attended the CIBC with Tina on August 27, 2019, I agree with the submissions of the PGT it is no answer to an accusation of breach of duty to assert that an attorney was simply acting in accordance with the wishes of the grantor of the attorney. Tina should have proceeded with caution at that time. I find she did not exercise the appropriate degree of caution and good judgment given the circumstances about which she knew.” (para 42)
The Court also reiterated Justice Penny’s comments in Ontario (Public Guardian and Trustee) v. Harkins,  O.J. No. 3313, that a fiduciary’s first duty is to see to the best interest of the person regardless of what their stated wishes may be. The Court was very critical of how a $250,000.00 gift to Tina could possibly benefit Jean, and expressed disapproval on how there was no evidence of any effort on Tina’s part in considering whether this money would better serve Jean if it was applied towards Jean’s in-home care instead of admitting Jean to a long term care home.
Of relevance to the unique circumstances that surround the care of others during Covid-19, the Court commented that,
“since March 2020 more than at any time in the past, any genuinely concerned person charged with caring for an elderly person in long term care would have at least considered the issue of taking whatever steps could be taken to remove the person from this situation if it was in any way possible.” (para. 47)
Instead, Tina allowed her adult son to move into Jean’s home, and she was found to be actively misusing Jean’s assets for her own and her family’s benefit which were additional breaches of her duties as fiduciary. The Court also disapproved of how Tina did not take any steps to sell Jean’s house in order to maximize or preserve its value which, reading between the lines, seem to be a concern for the uncertainty in today’s markets.
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Right from the start, 2021 is starting to look like it will be another extraordinary year of historic significance. In the world of estates, trusts, and capacity litigation, there was a decision released on January 5th where serious breaches of fiduciary duty by an attorney for property were found and the PGT was ordered to take over. The facts in Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107, read like a law school case study and the reasons are worth noting.
Jean Cherneyko is a 90 year old woman. Jean did not have any children of her own. Her closest known relative was a niece in the US. By the time of the PGT application, Jean was in a long term care home. Prior to that, Jean lived alone in the same home that she had lived in since 1969. Jean had a friend named Tina who she had known for about five years. On August 15, 2019, Jean and Tina went to a lawyer’s office. Jean named Tina as her attorney for property and personal care. Jean also made a new Will which named Tina as the estate trustee and sole beneficiary of her estate. A week or so later on August 27th, Jean and Tina went to Jean’s bank where $250,000.00 was transferred to Tina, and $195,329.50 was transferred to Jean’s niece. Days later on August 31st, Jean was hospitalized for acute delirium and progressive cognitive decline. During Jean’s admission, Tina noted that Jean had become increasingly confused over the prior few months and that Jean exhibited lethargic behaviour and complained of bodily soreness. On September 1, 2019, Jean was diagnosed as being cognitively impaired. Thereafter, Jean was transferred to long term care on October 1st based on Tina’s authorization as Jean’s attorney for property. Short time after that, Tina’s son moved into Jean’s home and the PGT started to investigate in March, 2020 when the bank froze Jean’s accounts.
As a result of their investigation, the PGT brought an application to remove and replace Tina as Jean’s attorney for property. The PGT also sought to set aside the $250,000.00 transfer to Tina and the return of various other sums that were received by Tina, which totalled approximately $350,000.00.
First, the Court found that the transfer of $250,000.00 to Tina was not a gift. Tina failed to rebut the presumption of resulting trust for the gratuitous transfer. Tina put forth evidence that there was a bank manager who spoke to Jean at the time of the transfer, and that the banker told Jean that she would have still have enough money to live after the transfers to Tina and the her niece. This evidence was tendered through Tina’s affidavit without any direct evidence from the banker. The Court disregarded Tina’s reliance on the banker’s involvement because Tina herself had deposed that Jean was having “moments of delirium and irrationality, her condition fluctuated between lucidity and confusion” in late August, 2019 (para. 31) and there was no evidence that the banker was informed.
The Court also seriously questioned whether any of the payments to Tina were truly what “Jean wanted” because Jean’s power of attorney for property clearly stated that there was to be no compensation. The Court agreed with the PGT’s contention that Tina should not have paid herself $2,000.00 per month in compensation and on how that sum was unreasonably high given that Jean’s long term care costs were only $2,701.61 per month.
The value of the transfers, which was about a quarter of Jean’s net worth at the time, when considered in the context of Jean’s September 1st diagnosis also led the Court to find that Jean lacked capacity to gift Tina such a substantial sum.
The Court’s focus on context, timing, and proportionality as benchmarks in its analysis are very important for litigators and advisors to keep in mind.
Stayed tuned this week for Part 2 on Cherneyko: the breaches of fiduciary duty.
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I’ve always loved a good story. I found this story from CNN particularly intriguing as it has to do with art that was stolen by the Nazis, and how this stolen piece of art eventually made its way to the U.S. just like its family had done after the Nazis came to power.
According to the Mosse Art Restitution Project, Rudolf Mosse was a successful Jewish entrepreneur in the late 19th and early 20th century. He had a large publishing and advertising business that included the publication of 130 newspapers and journals. In 1900, Mosse purchased “Winter” directly from the artist, Gari Melchers, at the Great Berlin Art Exhibit. Mosse later died in 1920. The sole heir of his estate was his daughter, Felicia Lachmann-Mosse. Thus, Felicia came to own Mosse’s extensive art collection. Felicia and her husband also took over and ran one of Mosse’s most prominent publications, Berliner Tageblatt, and the newspaper was renowned for its criticism of Adolf Hilter. When Hilter came to power in 1933, Felicia and her husband were forced to leave Germany. According to CNN, “Winter” was amongst the art that was seized by the Nazis when the Mosse family fled their home but “Winter” was only one painting out of the hundreds of pieces of artwork that were stolen at the time.
Some of this art was auctioned off by the Nazis; some have simply disappeared. “Winter” left the Nazis’ possession and changed hands a number of times before Barlett Arkell bought it, as an innocent purchaser who was none the wiser, from a prominent gallery in 1934. Since 1934, “Winter” has been displayed in the Arkell Museum in Canajoharie, New York. When the Museum discovered that “Winter” was taken illegally from its original owner, the painting was surrendered to the FBI in 2019.
“Winter” has since been reunited with the Mosse family by way of the Mosse Foundation which represents the remaining heirs of Felicia Lachmann-Mosse. To date, the Mosse Art Restitution Project remains actively engaged in their work to recover all of the artwork that was stolen by the Nazis.
The Mosse Foundation and the Project have plans to auction “Winter” in the near future and it is estimated to be worth hundreds of thousands of dollars.
Talk about a never-ending estate administration.
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“Happy wife; happy life” is an adage that we are all familiar with.
I recently came across a decision of the Manitoba Supreme Court that I thought was worthy as an adage for estates and trusts practitioners. What caught my eye was the way Justice Allen opened his reasons for the decision in Hamm v. Hamm (Estate of), 2014 MBQB 14:
“It is a very risky business for a farmer or business owner to undertake an estate freeze without informing his or her spouse of the plan and indeed, without arranging for independent legal advice to have the ramifications of the freeze explained. It is even riskier to divest oneself of the shares and shareholder loan received from that estate freeze, again without informing one’s spouse.”
The couple, in this case, were married for 41 years when the husband died. The husband was a widower with two sons and a daughter from his first marriage. The couple later had a daughter of their own. The couple and their children lived a typical farm life. In the late 90’s, the husband decided to pass the farm operation to his sons. This was done by way of an estate freeze. The sons were a part of some of the husband’s meetings with his lawyers and accountants, while his wife and daughters were not involved at all.
A NewCo was created in the course of the estate freeze. Over time, the husband’s land, machinery, and farm equipment were transferred into NewCo in exchange for preference shares and shareholder loans from NewCo. The husband also made a new Will that gave his interest in the NewCo to his sons. The husband did not tell his wife about this either and she only found out when he died.
On death, the wife elected for equalization of assets under the Manitoba Family Property Act and she claimed that the value of the husband’s farm assets, notwithstanding the estate freeze, ought to be included in their family property for equalization purposes.
The wife won. Justice Allen was not sympathetic to the Estate’s arguments that she ought to have known about the estate freeze, and made her claims earlier, by investigating further when she was told that NewCo was created for “tax purposes”. This was particularly so because the husband continued to run the farm operations as if nothing had happened.
This case is a straightforward example of how testamentary intentions can be thwarted when a spouse is kept in the dark. It is good practice for lawyers to advise their clients that their spouse should be informed and that their understanding should be documented with independent legal advice. In explaining why a spouse should know about an estate freeze, and the pitfalls of telling one’s spouse, this exercise will have the benefit of emphasizing to the client what he/she is truly giving up and bring “home” the realities of this rather legally complicated transaction.
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The answer is no in Ontario. Currently, only a limited number of Canadian provinces (Quebec, New Brunswick, Nova Scotia, and Saskatchewan) will allow a policy holder to sell his/her insurance policy to a third party.
Life insurance policies are commonplace in Canada. A life insurance policy is a contract with the insurance company and it is a contract to pay out a sum of money upon the death of the life insured. While most people may be content to maintain their life insurance policy, as is, until their death, those who are in need of cash during their lives may wish to sell the policy for a present-day payout while the purchaser maintains the premiums (and any other obligations to the insurance company) in exchange for the payout on the death. The sale of a life insurance policy by the policy holder is also known in the industry as a “life settlement”.
According to Tyler Wade’s article on ratehub.ca, the practice of selling one’s own insurance policy was popularized in the U.S. when investors saw the AIDS epidemic in the 1908’s as an opportunity where they could offer those suffering from AIDS a payout during their lifetime in exchange for the death benefit in their policies believing, then, that this group of individuals had a shorter life span. The vulnerability of the individuals within this market group and the potential for financial abuse are often cited as the reasons why life settlements ought to be prohibited for public policy reasons.
In Ontario, life settlements are prohibited under section 115 of the Insurance Act, as follows:
“Trafficking in life insurance policies prohibited
115 Any person, other than an insurer or its duly authorized agent, who advertises or holds himself, herself or itself out as a purchaser of life insurance policies or of benefits thereunder, or who trafficks or trades in life insurance policies for the purpose of procuring the sale, surrender, transfer, assignment, pledge or hypothecation thereof to himself, herself or itself or any other person, is guilty of an offence.”
In 2017 and 2018, there was an attempt to legalize life settlements by amending section 115 (through Bill 162) and by amending the Act to allow third-party lenders to use life insurance policies as collateral (through Bill 20). Both Bills received opposition from non-profit groups like the Canadian Life and Health Insurance Association due to the potential for financial abuse and section 115 of the Act has remained as is in Ontario.
While it is difficult to comment on how the potential for financial abuse can be mitigated by implementing countermeasures, it is unfortunate that Ontarians have limited options once the policy is in place.
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I learned about Blue Zones recently through Zac Efron’s new Netflix travel show, Down to Earth with Zac Efron. Episode 4 brings Zac and the audience to Sardinia where Zac meets with Dr. Giovanni Pes, nutritionist and medical statistician, and Dr. Valter Longo, bio-gerontologist, to discuss their research on the centenarians who live there. Blue Zones are regions of the world where people live much longer on average than everywhere else. This concept was coined by Dan Buettner and there are five Blue Zones in the world:
- Sardinia, Italy
- Okinawa, Japan
- Loma Linda, California (side note: California is also home to some of the world’s oldest-known living trees)
- Nicoya Peninsula, Costa Rica
- Icaria, Greece
According to Wikipedia, these Blue Zones have the highest rates of centenarians (i.e. people age 100 or above), and the people who live there suffer a fraction of the common diseases that ails the rest of the world and they enjoy more years of good health.
During the episode, Zac also visits a local woman who was born on April 15, 1920. She was 98 years old when the episode was filmed. Her husband had lived to 103 years old before his passing. According to Dr. Longo, it is extremely rare to have a couple with such longevity. Thereafter, Liliana was asked to do a cognitive test that one-third of centenarians or people with dementia will have trouble with, but Liliana does this with flying colours by accurately drawing the numbers on a clock and overlapping shapes on camera.
Liliana’s test was administered in her native language. In North America, the Montreal Cognitive Assessment (also known as the MOCA) is commonly administered to seniors as a screening tool for cognitive impairment like dementia. The MOCA is in the news recently as a result of Donald Trump’s interview with Chris Wallace on Fox News Sunday. Trump didn’t actually identify the exact cognitive test involved but he was proud to have “aced” the test.
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