Author: Kira Domratchev

26 Mar

What is a Rule 49 Offer to Settle?

Kira Domratchev Litigation Tags: , , , , , , , 0 Comments

Ontario is a jurisdiction where parties are encouraged to settle their legal disputes well before reaching the ultimate hearing of a matter, and as such it is not uncommon for opposing parties to exchange offers to settle throughout the duration of the dispute.

An additional incentive provided for under the Rules of Civil Procedure to settle the matter is what is called a “Rule 49” offer to settle. Generally, it operates by ensuring a costs award that is favourable to a party who:

(i)         makes an offer to settle that complies with the specifications of Rule 49; and

(ii)        achieves a more favourable result at the hearing than offered under the offer to settle.

General Requirements

An offer to settle under this rule can be served by a plaintiff, defendant, applicant or respondent in an action, application, counterclaim, third party claim, crossclaim or motion. This means that this rule is applicable to motions on discrete issues within a legal dispute and is not limited only to offers made to settle the entire dispute.

In order to be eligible for the benefits provided under Rule 49, the following requirements must be met:

(i)         the offer to settle must be made at least 7 days prior to the commencement of the hearing;

(ii)        the offer to settle must be fixed, certain and understandable; and

(iii)       it cannot be withdrawn or expire before the commencement of the hearing.

In deciding whether or not to make an offer to settle under this rule, it is important to take into account the fact that the court, in exercising its discretion with respect to costs, may take into account any offer to settle made in writing, the date the offer was made and the terms of the offer.

Cost Awards

Where a plaintiff or applicant makes an offer under this rule and the judgment is as or more favourable to that party than the offer to settle, the plaintiff or applicant is entitled to the following:

(i)         costs on a partial indemnity basis to the date of the offer to settle; and

(ii)        costs on a substantial indemnity basis from that date forward.

Where a defendant or respondent makes an offer under this rule and the judgment is as or less favourable to the plaintiff or applicant than the terms of the offer to settle, the following applies:

(i)         the plaintiff or applicant is entitled to partial indemnity costs to the date that the offer to settle was served; and

(ii)        the defendant or respondent is entitled to partial indemnity costs from that date forward.

In the event that a party that made an offer to settle under this rule wishes to withdraw it, such withdrawal must be clear and unequivocal.

For more information on the manner in which Rule 49 operates, the Ontario Bar Association summarized the general rules and case law related to it here: https://www.oba.org/getattachment/Sections/Civil-Litigation/Resources/Resources/Litigation-Fundamentals-Sunrise-Series/Offers-to-Settle/Rule49OffersToSettle.pdf

Thanks for reading.

Kira Domratchev

Find this blog interesting? Please consider these other related blogs:

Revoking a Rule 49 Offer to Settle

Cost Awards and Offers to Settle

Offers to Settle: Open Until When?

 

25 Jan

Are Registered Education Savings Plans Different from Trusts?

Kira Domratchev Estate & Trust, Estate Planning, General Interest Tags: , , , , , 0 Comments

On Tuesday, I blogged about Registered Education Savings Plans (“RESPs”), the statute governing their administration, and the difference between Family Plans and Individual Plans.

When people usually hear about RESPs though, they often think that it is some kind of trust. However, that is most likely not the case.

What Are Trusts?

The general structure of a trust under Canadian law is that a settlor gives property to a trustee for the benefit of some third party. In turn, the trustee holds legal title to the property but is bound by fiduciary duties to administer such trust, on behalf of the beneficiary.

To create a trust, under Canadian law, there must be:

1)         A certainty of intention;

2)         A certainty of subject matter; and

3)         A certainty of object.

How are RESPs Different?

In the case of an RESP, as discussed previously, the subscriber keeps title to the property until the beneficiary uses it for his/her post-secondary education. A promoter, which is the financial institution that is administering the RESP, similarly does not take title to the property in the RESP. As such, the property belongs to the subscriber until such time that the beneficiary attends a post-secondary institution, or a successor subscriber is appointed.

How Have the Courts Treated RESPs?

Multiple courts have held that the RESP does not meet the criteria of “certainty of intention”, and as such, it cannot be considered a trust.

The Alberta Court of Queen’s Bench held that a person who filed for bankruptcy was not holding the RESP for the exclusive benefit of her children but, rather, that she could have cancelled the plan at any time (see Payne, Re (2001), ABQB 894, 109 ACWS (3d) 687). This Court further held that since there was no intention to create a fiduciary relationship in the case of an RESP, it did not meet the certainty of intention. The same result was reached by the New Brunswick Court of Queen’s Bench and the Saskatchewan Court of Queen’s Bench (see Vinneau, Re (2007), NBQB 332, 160 ACWS (3d) 939 and MacKinnon v Deloitte & Touche Inc. (2007), SKQB 39, 155 ACWS (3d) 27).

The Ontario Superior Court of Justice has, however, come to a different conclusion. The Court held that the subjective intent at the time of the creation of the RESP could create a trust (see McConnell v McConnell (2015, ONSC 2243, 252 ACWS (3d) 300). This case dealt with a family law dispute and the question arose whether an RESP belonged to the beneficiary child or the subscriber parent. The Court did not consider certain characteristics of an RESP that are not congruent with the finding that it is a trust, such as the fact that a subscriber may collapse the RESP at any time, as well as use it as security for a loan.

As such, it is possible that McConnell v McConnell could be restricted to the facts at hand and assessed in the context of the circumstances that the Court was presented with; namely, whether or not to attribute an asset to the child or the parent, in a divorce proceeding.

Thanks for reading.

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

Registered Education Savings Plans: A Primer

RESPs vs. ITFs – Protecting Children’s Money from Parent’s Creditors

RESPs – Not just an end of year issue

 

23 Jan

Registered Education Savings Plans: A Primer

Kira Domratchev Estate Planning, General Interest Tags: , , , , 0 Comments

Registered Education Savings Plans or “RESPs” are education savings accounts registered with the Canada Revenue Agency. RESPs are used by individuals to save for their children’s post-secondary education. Once it is registered, it becomes the repository for education savings incentive payments made on behalf of an eligible beneficiary.

RESPs are a creature of statute and are governed by section 146.1 of the Income Tax Act (the “Act”). An RESP must be terminated by the end of the 35th year, following subscription.

A subscriber of an RESP is the person who makes contributions, and in whose name it is registered. A beneficiary, on the other hand, is a person on whose behalf the subscriber opens the RESP.

There are two types of RESPs that one could subscribe to: a family plan and an individual plan.

Family Plans

Under a family RESP, the subscriber can name one or more children as beneficiaries with the requirement that each beneficiary be related to him or her by blood or adoption.

A “blood relationship” is defined under section 250(2) and (6) of the Act, as a relationship between:

  • siblings;
  • a child and his/or her parents;
  • a child and each set of his or her grandparents; and
  • a child and each set of his or her great-grandparents.

An aunt/uncle, niece/nephew or cousins, are not considered related by “blood” under the Act.

A relationship by “adoption” includes both legal adoption and “adoption in fact”. When a beneficiary is legally adopted s/he is considered to be connected to the adoptive parents and both sets of grandparents and great-grandparents. Where, however, a legal adoption has not taken place, an “adoption in fact” may exist. For example, the beneficiary is considered to be the adopted child “in fact” of the common-law relationship, if the spouse provided parental care on a continuing basis.

An aunt/uncle, niece/nephew or cousins, are not considered related by adoption under the Act.

Individual Plans

Under an individual plan, only one child can be named as a beneficiary; however, there is no requirement that the beneficiary be related to the subscriber under the Act. In fact, the subscriber can even name himself or herself as a beneficiary under such an RESP.

The Contract

In addition to the statutory provisions of the Act that deal with RESPs, the contract between the subscriber and the promoter (the organization administering the RESP), can provide additional terms and conditions. It is important to review such terms before choosing the promoter that suits your needs, as the contract can provide further restrictions than the statutory framework of the Act.

Thanks for reading.

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

RESPs vs. ITFs – Protecting Children’s Money from Parent’s Creditors

RESPs – Not just an end of year issue

15 Jan

Is Acting as an Estate Trustee a Good Idea?

Kira Domratchev Estate & Trust, Estate Planning, Executors and Trustees, Trustees, Uncategorized, Wills Tags: , , , , , 0 Comments

If someone asks you to act as their Estate Trustee, or you learn to your surprise that you are named as an Estate Trustee after the person’s passing, there are a number of things that you should consider before accepting such a responsibility. Given the significant duties involved in such a role, it is important to be aware of the potential for personal liability.

An Estate Trustee’s Legal Duties

An Estate Trustee is a fiduciary and, as such, s/he owes a duty to exercise the care, diligence and skill that a person of ordinary prudence would exercise in dealing with the property of the Deceased.

Furthermore, an Estate Trustee owes a “duty of loyalty”, which has been described as the duty to act honestly and in good faith, and to use powers solely for the purposes for which they were granted (see Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed.). The “duty of loyalty” means that:

(a) An Estate Trustee must exercise powers and perform duties solely in the interest of the Estate.

(b) An Estate Trustee must not knowingly permit a situation to arise where:

(i) The Estate Trustee’s personal interest conflicts in any way with the exercise of powers or performance of duties; or

(ii) The Estate Trustee derives a personal benefit or a benefit to a third party, except as far as the law or the Will expressly permit.

Additional legal duties of an Estate Trustee are:

  • The “prudent investor” rule which ensures that the Estate Trustee properly invests the Estate assets;
  • The “even-hand” rule which ensures that the Estate Trustee acts impartially among all the beneficiaries;
  • The “duty of transparency” which ensures that the Estate Trustee provides information to the beneficiaries; and
  • The “duty to account”.

Some Practical Considerations

From a practical stand point it is also prudent to consider the overall complexity of the Estate and what type and quantity of work will be expected from you in your role as an Estate Trustee. Certainly, some Estate Trustees can be compensated for the work they perform; however, there is a limit to what one may claim and it largely depends on the circumstances.

There are certain tasks that an Estate Trustee may want to delegate to third parties; however, there is a limit as to what type of work may be delegated and what is considered reasonable.

You should consider whether the Will properly sets out the powers as well as the responsibilities of the Estate Trustee which will aid you in the future, should any of your decisions be challenged. Another useful consideration is whether there are any third parties, or specifically, any beneficiaries who may be difficult to deal with in your role as an Estate Trustee, or may want to challenge your authority in the future.

In making the decision whether or not to act as an Estate Trustee, it may also be a good idea to speak to a lawyer regarding whether taking on this role may present an unacceptable legal risk for you in the future.

Thanks for reading.

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

The Difference Between Powers and Duties of an Estate Trustee

Estate Trustees’ Standard of Care

Estate Trustee Duties

09 Jan

Estate Planning…For Your Pet!

Kira Domratchev Beneficiary Designations, Estate & Trust, Estate Planning, Executors and Trustees, Pets, Trustees 0 Comments

Many of us are familiar with the New York case where Leona Helmsley left a $12 million trust for her pet Maltese dog, named Trouble. The trust was later reduced to $2 million, by the Court, which ruled that the trust was excessive. Trouble went on to live for another four years following Mrs. Helmsley’s death.

Such cases seem outrageous to some, but make others wonder, what will happen to my fur baby in the event of my passing? That is especially a topic for one’s consideration, if you don’t have children or other family members who are willing and able to take care of your pet, in the event of your passing.

This topic was discussed in a paper by Jenny Pho of Dale & Lessmann LLP for the Law Society of Upper Canada’s Practice Gems: Probate Essentials program on September 29, 2017. Ms. Pho considered the topic of estate planning for pets, in Ontario.

In Ontario, pets are considered property, even though to many of us, they are anything but. Since pets are considered property, they cannot hold other property in their names alone. That means, that you cannot leave a simple cash legacy to your pet. Similarly, in Ontario, you cannot set up a trust where the beneficiary is a pet rather than a person, because there is no certainty of objects, meaning that such a trust is invalid. No certainty of objects means that there is no ascertainable person who benefits from the trust and one who can enforce it. Interestingly enough, a Saskatchewan Court recently found that a $10,000.00 trust for the testator’s four cats was valid. Such trusts are also valid in certain states of the United States of America.

There are some options for people residing in Ontario, who would like to include their pets in their estate planning, including leaving a cash legacy to a pet guardian, setting up a trust for a pet guardian and participating in a pet stewardship program.

Cash Legacy to a Pet Guardian

You can leave a cash legacy to a pet guardian and bequeath the pet to him or her. You can include a condition precedent whereby the pet guardian cannot accept the cash legacy, without accepting the pet as well.

One disadvantage of this option is that you cannot enforce any instructions for the care of your pet along with the cash legacy. In addition to that, you cannot provide for a pet in the event that it outlives the pet guardian.

This option is recommended for those who trust the person that they are appointing as the pet guardian.

Trust for Pet Guardian

With this option, you can include instructions for the care of the pet and the ongoing use of funds. Notably, the trustee and guardian should be different people in order to ensure that a separate party enforces the terms of the trust (i.e. the trustee).

With this option you can also plan for an alternative beneficiary as the guardian as well as alternate trustees. On that end, it is important to keep in mind the “rule against perpetuities” and that the ownership of the pet will have to vest in a pet guardian.

You can also determine the residuary beneficiary when the pet dies. It is not typically good planning to include the pet guardian as the residuary beneficiary because it may perpetuate the type of behaviour where the pet guardian spends less money on the pet in order to receive a larger trust when the pet dies.

Finally, you will also want to consider what is reasonable so that the trust is not ultimately challenged in Court as being excessive, such as what happened with Mrs. Helmsley’s trust for Trouble.

Pet Stewardship Program

You can also make an agreement with an organization to bequeath your pet to them along with an enrollment fee and any other amounts in addition to that. Their objectives under such a program will typically include things like finding a permanent home for your pet as well as providing ongoing medical care throughout your pet’s lifetime.

On that end, it is important to keep in mind that there is typically a minimum enrollment fee with such programs. Some organizations that offer programs like that are the Ottawa Humane Society and the Windsor/Essex Humane Society.

Thanks for reading.

Kira Domratchev

Find this blog interesting? Please consider these other related posts:

Pet Trusts, Charitable Bequests, and Will Challenges

Observations Pertaining to Estates and Trusts Law – Hull on Estate #212

Pet Trust Statute Watch: Inevitable for Ontario?

10 Oct

The Difference Between Powers and Duties of an Estate Trustee

Kira Domratchev Estate & Trust, Estate Planning, Power of Attorney, Trustees, Wills Tags: , , , 0 Comments

A “power” is an authority to act, whereas a “duty” is an obligation. A duty of an estate trustee compels her to act, or prohibits her from acting in certain situations. A power, on the other hand, allows her to act in a certain way, subject to her discretion.

An estate trustee faces potential personal liability from unauthorized actions in the administration of an estate. Although, generally a will prescribes specific powers and duties for an estate trustee when it comes to the administration of the estate, there may also be a situation which the will simply does not contemplate.

As an estate trustee, or even as a beneficiary under such a will, how does one assess what an estate trustee can and cannot do?

The Trustee Act, RSO 1990, c. T23, as amended, is helpful in determining what an estate trustee’s powers and duties are, in the absence of a clear direction from a will.

It is not unusual for an estate trustee to be given discretion with respect to the exercise of administrative powers conferred to manage the estate. However, she may also be given the authority to allocate estate property to the beneficiaries. That kind of power is referred to as dispositive power or discretion and may require an estate trustee to do such things as, divide income and/or capital between beneficiaries at a time of her choosing.

Generally, the powers of an estate trustee will depend on the specific nature of the estate. For example, if the estate consists of property that is to be administered as an investment, the estate trustee will likely be allowed a power of sale, a power to mortgage, and a power to lease. The estate trustee must have the power to keep the property intact as well as meet all financial claims of third parties. An estate trustee will also generally have the power to insure any real property, against loss or damage.

With respect to expenses related to the estate, the estate trustee who believes that an expense is properly incurred, may either pay for it directly from the estate property or pay for the expense personally and later recover the corresponding amount. It is important to note, however, that a court may later disallow an expense if it concludes that it was not properly incurred.

In exercising each power that the estate trustee might have, she must keep in mind that there are certain duties that limit her powers.

  1. If a power of sale is to be exercised, she cannot delegate it to a third party and later escape responsibility in the event that there is an issue, on the ground that she did not choose the purchaser.
  2. An estate trustee cannot sell a property to herself, a beneficiary, or a third party with the agreement that she will then re-purchase the said property.
  3. If the estate trustee sells the trust property, not only must she be honest, but also show a reasonable level of care and skill in her conduct, throughout the transaction. For example, she should not convey title until payment is received, and if she does do so and there is a resulting loss to the estate, there may be personal liability.

An estate trustee with significant discretion in administering the estate can certainly be put in a difficult position with respect to how such discretion is to be exercised. Unfortunately, there are few guidelines available on that end, short of exercising one’s own good sense.

Thanks for reading.
Kira Domratchev

Find this blog interesting? Please consider these other related posts:
Estate Trustees’ Standard of Care

Estate Trustee Duties

Some Challenges for Estate Trustees

 

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