Author: Garrett Horrocks

10 Apr

The Policy of Setting Policy: Cotnam v Rousseau and Judicial Activism

Garrett Horrocks Beneficiary Designations, Estate & Trust, Estate Planning, Litigation, Pension Benefits, Public Policy, RRSPs/Insurance Policies, Support After Death Tags: , , , , 0 Comments

The practice of injecting policy considerations into court decisions has long been a tenet of the Ontario judiciary.  However, such considerations may arguably raise questions that go beyond the scope of the decision.  Cotnam v Rousseau, 2018 ONSC 216, is one such case.

In Cotnam, the Court was tasked with determining whether a pre-retirement death benefit received by a surviving spouse was available to be clawed back into an Estate pursuant to section 72 of the Succession Law Reform Act (the “SLRA”).  The Respondent took the position that section 48 of the Pension Benefits Act (the “PBA”) sheltered the death benefit from being clawed back given that she was the spouse of the Deceased.  The Court disagreed and held that such benefits ought to be available for claw back in order to prevent irrational outcomes resulting from their exclusion.

In the context of the facts at play in Cotnam, the Court reasoned in favour of equity, in particular, to ensure a dependant disabled child of the Deceased was properly provided for. However, the Court’s reasons appear to gloss over a fundamental conflict between the SLRA and the PBA, a clash about which the estates bar might have appreciated some judicial commentary.  Specifically, the Court held that the provisions of the SLRA ascribing pension death benefits as available to satisfy a claim of dependant’s relief ought to prevail over the PBA’s provisions sheltering them from claw back.

Section 114 of the PBA provides that, “[i]n the event of a conflict between this Act and any other Act […] [the PBA] prevails unless the other Act states that it is to prevail over [the PBA].”  The SLRA, in contrast, is silent as to whether its provisions are to prevail over those of the PBA.

However, the Court’s reasons make no mention of the interplay between section 114 of the PBA and the equities of ensuring the dependant daughter in Cotnam was properly provided for.  While we may opine on the fact that the outcome in Cotnam favours equity over rote statutory interpretation, the estates bar is left to grapple with the apparent inconsistency with the intention of the Ontario legislature, and whether it will affect similar decisions going forward.  As of this date, no written decisions have yet interpreted Cotnam, nor has the decision been appealed.  Accordingly, it may be some time before the impact of the decision, if any, is felt.

Thanks for reading.

Garrett Horrocks

If you enjoyed this blog, please consider these other related posts:

Dependant Support and Pre-Retirement Death Benefits

Rehel v Methot: Life Income Funds and Spousal Entitlements

05 Apr

Cheques and Balances: the Enforceability of Promises to Gift

Garrett Horrocks Capacity, Estate & Trust, General Interest, Public Policy Tags: , , , , 0 Comments
The delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed.

In November 2017, my colleague, Sayuri Kagami, blogged about the Ontario Court of Appeal’s decision in Teixeira v Markgraf Estate, which considered the validity of a gift in the form of a cheque cashed after the death of the payor.  Today’s blog discusses similar facts in the court’s decision in Rubner v Bistricer. That is, whether pre-signed blank cheques cashed after the payor is declared incapable of managing property constitute either an enforceable promise to gift or, in the alternative, a valid inter vivos gift.

In the late 1960s, the patriarch of the Rubner family, Karl, purchased a 10% stake in a real estate development in Oakville known as the Lower Fourth Joint Venture.  Karl kept legal title to this interest in the name of his wife, Eda, with the intention that their three children, Marvin, Joseph, and Brenda, each receive beneficial ownership of a one-third share in the Lower Fourth interest.

Brenda subsequently renounced her share in the Lower Fourth interest to avoid triggering certain tax consequences.  Accordingly, her share reverted back to Eda, who then set up an account into which the income generated by Brenda’s former share would be deposited.  Notwithstanding that she had disclaimed her share, however, Brenda nonetheless wanted to retain the income that her share generated.  In 2014, Eda agreed to sign several blank cheques for the benefit of Brenda and her husband, allowing them to collect the income from Brenda’s former share without incurring the tax liability.

In November 2016, Eda was assessed as being incapable of managing property.  Shortly thereafter, Brenda’s husband filled in and deposited two of the blank cheques previously signed by Eda in order to prevent Brenda’s brothers from using those funds to pay for Eda’s expenses.

Brenda’s brothers subsequently commenced an application seeking, amongst other relief, a declaration that the funds withdrawn by Brenda after Eda became incapable were held on a resulting or constructive trust for Eda’s benefit.  Brenda took the position that Eda had intended that these funds be considered gifts for Brenda’s benefit. She claimed that at a family meeting in 2012 or 2013, Eda had specifically agreed to gift to Brenda all future income generated by Brenda’s former share in Lower Fourth.

The court was tasked with considering whether a purported promise of future gifts could constitute valid inter vivos gifts.  In order to establish a valid inter vivos gift, the recipient must show:

  • An intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
  • An acceptance of the gift by the donee, and
  • A sufficient act of delivery or transfer of the property to complete the transaction.

The court held that the first step and third steps in this analysis could not be satisfied once Eda had been declared incapable of managing her property.  Eda was deemed to have been unable to formulate the necessary intention to make a gift with respect to the blank cheques.  Moreover, the court held that the delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed.  Once Eda became incapable of managing her property, the gift could no longer be perfected.  The blank cheques that were cashed after Eda was assessed as incapable of managing her property were held to be invalid, and Brenda was ordered to repay the amounts withdrawn.

Thanks for reading.

Garrett Horrocks

29 Mar

Predatory Marriages: knowing what it means to say “I do.”

Garrett Horrocks Capacity, Common Law Spouses, Elder Law, Ethical Issues, General Interest, Health / Medical, In the News, Public Policy Tags: , , , , , 0 Comments

The interplay between evolving social norms and the legal foundations that predate or accelerate these changes has seen significant development in the last decade.  Courts of law and of public opinion have made important strides in shaping  social policy in many areas, such as medically-assisted death, gender diversity and inclusion, and marriage rights, to name a few.  A recent case out of the Ontario Superior Court of Justice considered this last issue, marriage rights, with a particular focus on predatory marriages.

A person has the capacity to enter into a marriage contract only if that person has the capacity to understand the duties and obligations created

In Hunt v Worrod, 2017 ONSC 7397, the Court was tasked with assessing whether an individual who had suffered a catastrophic brain injury possessed the necessary capacity to marry.  In 2011, Kevin Hunt suffered a serious head injury following an ATV accident and spent four months recuperating in hospital.  He was eventually discharged into the care of his two sons, but three days after his release, Mr. Hunt was whisked away by his on-and-off girlfriend, Kathleen Worrod, to be ostensibly married at a secret wedding ceremony.

Mr. Hunt’s children brought an application to the Court on his behalf to void the marriage, partly to preclude Ms. Worrod from accruing spousal rights to share in Mr. Hunt’s property or assets.  Ultimately, the Court concluded that Mr. Hunt did not possess the requisite capacity to enter into the marriage.

In its reasons, the Court relied heavily on the opinions of several expert witnesses and the existing body of legal authority.  The Court began by reviewing section 7 of Ontario’s Marriage Act, which provides that an officiant shall not “solemnize the marriage” of any person that the officiant has reasonable grounds to believe “lacks mental capacity to marry.”

The expert evidence tendered by the parties suggested that Mr. Hunt had significant impairments in his ability to make decisions, to engage in routine problem-solving, and to organize and carry out simple tasks.  He was characterized as “significantly cognitively impaired”, and was assessed as being incapable of managing his property, personal care, or safety and well-being.

The Court subsequently relied on the test for capacity to enter into a marriage contract established by the British Columbia Supreme Court in Ross-Scott v Potvin in 2014.  The Court held that a person has the capacity to enter into a marriage contract only if that person has the capacity to understand the duties and obligations created by marriage and the nature of the commitment more generally.

The Court also identified the tension between balancing Mr. Hunt’s autonomy as against the possibility that he lacked the capacity to appreciate the legal and social consequences of marriage.  Ultimately, the Court was satisfied that Mr. Hunt’s children had met their burden of demonstrating that their father lacked the necessary capacity to marry Ms. Worrod.  The marriage was declared void ab initio, and the attendant spousal property rights that would have otherwise flowed to Ms. Worrod were lost.

Thanks for reading.

Garrett Horrocks

11 Jan

Trust Law in the Atomic Era: Lessons from Fukushima

Garrett Horrocks Estate & Trust, Executors and Trustees, General Interest, In the News, Trustees, Uncategorized Tags: , , , , , 0 Comments

Likely to be of a surprise to most readers, Canada has a law on the books governing, among other things, policy and financing with respect to the disposal of nuclear waste.  The purpose of the federal Nuclear Fuel Waste Act (the “NFWA”) is to “provide a framework to enable the Governor in Council to make […] a decision on the management of nuclear fuel waste that is based on a comprehensive, integrated, and economically sound approach for Canada.”

The intersection of trust law with the NFWA occurs with respect to how the purpose and the goals of the act are to be financed. Section 9 of the NFWA provides that every “nuclear energy corporation” must maintain a trust fund with a duly incorporated financial institution, the purposes of which are described in greater detail below.  The following entities are defined as a “nuclear energy corporation” under the NFWA:

  1. Ontario Power Generation;
  2. Hydro-Quebec;
  3. New-Brunswick Power Corporation; and
  4. Atomic Energy of Canada Limited.

When the NFWA came into effect, each nuclear energy corporation was required to make a substantial initial deposit into its respective trust fund, and each must make a minimum annual deposit of a prescribed amount to the capital of the trust.  To provide some context, the largest trust fund is that maintained by Ontario Power Generation.  At its inception, OPG was required to make an initial contribution of $500,000,000.00 to its fund, and its minimum annual levy is $100,000,000.00.

The NFWA provides that the corporations may only make withdrawals from their respective funds for the purposes of implementing a plan selected by the Governor in Council to “[avoid or minimize] significant socio-economic effects on a community’s way of life or on its social, cultural or economic aspirations.”  In layman’s terms, the nuclear energy corporations must use the capital of their respective trusts exclusively for the purposes of ensuring the nuclear waste is managed and disposed of in an efficient and comprehensive manner while minimizing the social impact.

Control and management of all aspects of nuclear power generation is top of mind in the wake of the Fukushima nuclear disaster in 2011.  We may all hope the capital of the trusts established under the NFWA continue to be used for their intended purpose rather than to fund clean-up efforts in the event of a similar tragedy.  However, consider that the most recent financial statements for all of the aforementioned trust funds list a total combined balance of approximately $4 billion.  Now consider that some have estimated the total cost of cleaning up and containing the waste and fallout from the Fukushima disaster as exceeding $626 billion.  A drop in the proverbial bucket, to be sure.  Indeed, the magnitude of the Fukushima incident likely far surpassed any reasonable expectations, though it gives us pause to consider whether we are giving nuclear power the deference it deserves.

Thanks for reading.

Garrett Horrocks

08 Jan

The Public Guardian as Estate Trustee: Policy Considerations

Garrett Horrocks Estate & Trust, Estate Planning, Litigation Tags: , , , , , 0 Comments

As the holiday season comes to a close, many of us will take stock of the time enjoyed with friends, family, and loved ones, and look forward to the prospect of a new year.  Unfortunately, as members of the estates bar, we are occasionally called on to review circumstances in which no family members or loved ones are around for the purposes of a deceased individual’s estate planning decisions.  More specifically, we are often asked to consider the proper legal procedures when an individual passes away having named an estate trustee who is incapable of acting, and where the individual died leaving no spouse, children, or next-of-kin in Ontario.

In the foregoing circumstances, Ontario’s Crown Administration of Estates Act gives the Office of the Public Guardian and Trustee (the “PGT”) the appropriate authority to step in to the shoes of an estate trustee and administer the estate, if necessary and subject to certain statutory guidelines.  Section 1 of the Act allows the Superior Court of Justice to issue to the PGT “letters of administration or letters probate”, thereby giving it the authority to administer an estate, provided the following conditions are satisfied:

  1. The deceased person died in Ontario, or was a resident of Ontario but died elsewhere;
  2. The person died intestate (that is, without a validly executed will), or died leaving a will that does not name an executor or estate trustee who is willing and able to administer the estate; and
  3. The Deceased had no known next-of-kin of the age of majority residing in Ontario who are willing to administer the estate.

Certain additional policy considerations not listed in the Act have also been adopted to govern whether the PGT will agree to administer an estate. Notably, the PGT will generally only act as an estate trustee of last resort.  Before agreeing to act, the PGT will typically take steps to locate another interested party who may wish to be appointed, for example, any of the deceased person’s next-of-kin from out of province.  Moreover, the PGT will only step in to administer estates that will hold a value of at least $10,000 after all debts of the estate have been paid.  By its own estimates, at any given time the PGT is actively administering more than 1,400 estates.  Accordingly, these additional policy considerations ensure that the appropriate resources can be directed to the estates that the office has agreed to administer.

Thanks for reading.  Happy New Year!

Garrett Horrocks

02 Nov

Missing and Presumed…Alive? Property Rights under the Absentees Act

Garrett Horrocks Estate & Trust, Estate Planning, Executors and Trustees, Hull on Estates, Public Policy, Trustees Tags: , , , , , 0 Comments

On Monday’s blog, I discussed the mechanisms available to Ontario courts under the Declarations of Death Act to deal with the estate of a deceased person who “returns from the dead.”  In today’s blog, I thought it might be useful to look at similar provisions under Ontario’s Absentees Act and to distinguish between the purpose of each Act as well as the authorities of the court thereunder.

The most obvious distinction is evident in the titles of each Act.  The Declarations of Death Act, unsurprisingly, concerns individuals that have been declared deceased by the courts.  In contrast, and perhaps even more unsurprisingly, the Absentees Act deals with “absentees.”

The Absentees Act gives no authority to the courts to enact distributions of property pursuant to a testamentary document.
The Absentees Act gives no authority to the courts to enact distributions of property pursuant to a testamentary document.

An absentee is defined under section 1 of the Absentees Act as a person, ordinarily resident in Ontario, who “has disappeared, whose whereabouts is unknown, and as to whom there is no knowledge as to whether he or she is alive or dead.”  Similar to the analogous provision in the Declarations of Death Act, section 2 of the Absentees Act allows the Superior Court of Justice to declare a person to be an absentee if a “due and satisfactory inquiry has been made.”

 

The difference in finality of an order declaring an individual to be deceased rather than merely an absentee is also reflected in the authority given to the courts in dealing with an individual’s property under each Act.  Once an individual is declared deceased, that individual’s property is subject to distribution in accordance with any testamentary documents that he or she may have left, such as a will.  Without going into significant detail, the property rights of the testator as well as those of any beneficiaries will be substantially impacted as a result of a declaration of death.  The courts will be reluctant to trigger these rights absent a conclusive determination of death.

As a result of the foregoing, the Absentees Act gives no authority to the courts to order distributions of property pursuant to a testamentary document.  In effect, the authority of the courts over the property of an absentee is severely limited, at least until he or she is declared as such in accordance with the Declarations of Death Act, or unless evidence of his or her death is produced.

Rather than create circumstances that may trigger distributions of an absentee’s property, the Absentees Act may require an individual to instead ensure its upkeep while the absentee is, well, absent.  Section 4 of the Absentees Act allows a court to make an order to ensure the “custody, due care and management” of an absentee’s property by a committee, if needed.

This appointee would essentially function as a caretaker of the absentee’s property.  The committee has all of the powers and duties of a guardian of property under the Substitute Decisions Act, including the authority to expend the absentee’s own funds for the purposes of determining whether he or she is alive or dead.

Thanks for reading.

Garrett Horrocks

30 Oct

Doppelgangers and the Declarations of Death Act

Garrett Horrocks Uncategorized Tags: , , , , 0 Comments

 

Tis the season of goblins and ghouls, of ghosts and gremlins, when the boundaries between the natural and supernatural become ever so slightly blurred.  Pure fiction, no doubt…or is it?  Well, yes, most likely.  However, as Mark Twain famously opined, truth can often be stranger than fiction.  Consider the following story that’s part Dr. Jekyll and Mr. Hyde and part Twilight Zone, one that presents a curious scenario to the estate litigators among us.

Lawrence Bader was a salesman from Akron, Ohio.  One afternoon in May 1957, Mr. Bader rented a boat to go fishing on Lake Erie and told his wife that would be back later that evening.  A few days earlier, Mr. Bader had recently designated his wife as a beneficiary on several life insurance policies totaling approximately $40,000.

Returning Distributed Estate Assets under the Declarations of Death Act
The court can order that the property of an individual, who was declared deceased by the court, be returned to them if they later turn up alive.

Severe storms engulfed the area the night of Mr. Bader’s expedition, and he did not return home as promised.  The following morning, the Coast Guard discovered his empty fishing boat, bruised and battered by the storm and washed up on shore miles from where he had departed.  There was no sign of Mr. Bader.  He was presumed “lost at sea.”’

In 1960, following an application from his wife, the probate court in Summit County, Ohio declared Mr. Bader legally deceased.  Similar authority is granted to courts in Ontario.  The Declarations of Death Act allows an “interested person” to apply to the court for an order that an individual has died if the individual “disappeared in circumstances of peril” and the applicant has “no reason to believe that the individual is alive.”  Accordingly, Mr. Bader might reasonably have been declared deceased by an Ontario court under similar circumstances.

The intriguing tale of Mr. Bader’s whereabouts does not end there, however.  In 1965, more than five years after he was declared legally deceased, a friend of Mr. Bader’s was attending a sports convention in Chicago and encountered an archery enthusiast who bore an uncanny resemblance to Mr. Bader.  In an almost clichéd homage to classic horror and science fiction, the doppelganger purportedly wore an eyepatch and sported a mustache.

The doppelganger introduced himself as Fritz Johnson, a media personality from Omaha, Nebraska.  After speaking to him over the phone at the insistence of the friend, Mr. Bader’s brothers flew to Chicago to meet the man they firmly believed was their brother.  However, the doppelganger appeared to have no memory of his wife and family, his seafaring escapade, or indeed any details of his former life.

Mr. Johnson had purportedly arrived in Omaha only a few days after Mr. Bader had disappeared.  In the years since his apparent alter-ego was declared legally deceased, Mr. Johnson married, fathered a son, became a newscaster, and developed a talent for archery.  Curiously, Mr. Bader’s brothers confirmed that he had been regarded as a skilled archer prior to his disappearance.

To Mr. Johnson’s dismay, the authorities confirmed by way of a fingerprint analysis that Mr. Bader and Mr. Johnson were indeed one and the same, notwithstanding that the latter apparently had no memory of the former.  They surmised that the entire ordeal was merely an attempt by Mr. Bader to get a fresh start, free of debts and obligations, under a new identity.  While this story is likely more hucksterism than it is Hitchcock, there are useful points to discuss.

As estate litigators, our primary area of interest with respect to the Bader-Johnson conundrum would, no doubt, pertain to the distribution of Mr. Bader’s estate.  In particular, it is worth discussing what happens to the estate of an individual who later turns up alive, especially if distributions in accordance with a will, for example, had been made prior to his return.  For those of us who don’t anticipate an undead doppelganger reappearing to cause turmoil for our estate trustees, the approach is fairly streamlined.

Ontario’s Declarations of Death Act provides a mechanism whereby the court can order that the property of an individual, who was declared deceased by the court, be returned to them if they later turn up alive.  Section 6(1) of the Act provides that all distributions out of the estate of an individual who is declared deceased thereunder are final distributions, subject to certain considerations.  One such consideration, under section 6(3), provides that a court may make an order requiring the beneficiary to re-convey to the deceased all or part of any property distributed to him or her “if it is just to do so”.  In other words, a beneficiary of the estate of a now-undead person that has received a distribution out of that estate may be ordered to return all or part of it.

Despite Mr. Johnson’s insistence to the contrary, there was substantial evidence to support that he was, in fact, Mr. Bader, even though he purportedly had no memory of him.  While he ostensibly returned from the dead under a pseudonym and having suffered a bout of amnesia, neither are factors that an Ontario court would likely consider in determining what would happen to his estate.

On Thursday, we will look at similar provisions under Ontario’s Absentees Act.

Thanks for reading.  Happy Halloween!

Garrett Horrocks

 

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