Author: Nick Esterbauer

10 Dec

Are remedial constructive trusts available on the basis of “good conscience”?

Nick Esterbauer Estate & Trust, Litigation, RRSPs/Insurance Policies Tags: , , , , , , , , , 0 Comments

The Supreme Court of Canada’s recent decision in Moore v Sweet provided meaningful clarification on the Canadian law of unjust enrichment and, in particular, the juristic reason analysis.

As it made a finding of unjust enrichment, it was not necessary for the Court to consider the second issue before it, being whether, in the absence of unjust enrichment, a constructive trust could nevertheless be imposed in the circumstances on the basis of “good conscience”.

In 1997, the Supreme Court released its decision in Soulos v Korkontzilas.  That case considered situations that may give rise to a constructive trust remedy.  In referring to the categories in which a constructive trust may be appropriate, which were noted to historically include where it was otherwise required by good conscience, Justice McLachlin (as she then was) stated as follows:

I conclude that in Canada, under the broad umbrella of good conscience,  constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation…Within these two broad categories, there is room for the law of constructive trust to develop and for greater precision to be attained, as time and experience may dictate.

Since 1997, Soulos and the above excerpt have been interpreted inconsistently by scholars and courts of appeal throughout Canada.  Some consider Soulos to restrict the availability of constructive trust remedies to only situations where there has been a finding of unjust enrichment or wrongful conduct, while others favour a more liberal interpretation.

The appellant in Moore v Sweet sought, in the alternative to a remedy on the basis of unjust enrichment, a remedial constructive trust with respect to the proceeds of the life insurance policy on the basis of good conscience.  In choosing not to address this issue, Justice Côté (writing for the Majority) stated as follows:

This disposition of the appeal renders it unnecessary to determine whether this Court’s decision in Soulos should be interpreted as precluding the availability of a remedial constructive trust beyond cases involving unjust enrichment or wrongful acts like breach of fiduciary duty. Similarly, the extent to which this Court’s decision in Soulos may have incorporated the “traditional English institutional trusts” into the remedial constructive trust framework is beyond the scope of this appeal. While recognizing that these remain open questions, I am of the view that they are best left for another day.

It will be interesting to see if and when the Supreme Court ultimately chooses to determine “the open questions” regarding the availability of the remedial constructive trust.  Until then, it appears that some debate regarding the circumstances in which it may be imposed will remain.

Thank you for reading.

Nick Esterbauer

11 Oct

The Importance of Filing Comprehensive Management Plans

Nick Esterbauer Guardianship Tags: , , , , , , , 0 Comments

A decision released earlier this week highlights the importance of a complete Management Plan supported by evidence when seeking one’s appointment as guardian of property.

Sometimes, the necessity of filing a Management Plan is viewed as a formality without proper attention to the details of the plan.  However, the failure to file an appropriate Management Plan may prevent the appointment of a guardian of property, putting the administration of the incapable’s property in limbo.

In Connolly v Connolly and PGT, 2018 ONSC 5880 (CanLII), Justice Corthorn declined to approve of a Management Plan filed by the applicant and, accordingly, refused to appoint her as guardian of property.  The Management Plan was rejected for the following reasons (among others):

  • it did not address an anticipated increase in expenses over time (including when the applicant was no longer available to serve as the incapable’s caregiver and he may incur alternate housing costs);
  • there was no first-hand evidence from BMO Nesbitt Burns or Henderson Structured Settlement with respect to the net settlement funds in excess of $1.4M and their payout and investment in a portfolio on the incapable’s behalf;
  • the Court was concerned that stock market volatility could threaten to deplete the invested assets;
  • the Public Guardian and Trustee had strongly recommended that the applicant post security, the expense of which was reflected as a deduction from the incapable’s assets (while not suggested that this was unreasonable, Justice Corthorn took issue with the absence of any case law or statutory provision cited by the applicant in support of the payment of the expense by the incapable rather than the applicant herself); and
  • while the applicant had agreed to act as guardian without compensation, the plan did not contemplate how compensation would be funded if claimed by a potential successor guardian.

Notwithstanding that neither the incapable nor the Public Guardian and Trustee had opposed the Management Plan or the appointment of the applicant as guardian of property, Justice Corthorn found that the appointment of a guardian to manage over one million dollars in settlement funds was “contentious” and, accordingly, under Rule 39.01(5) of the Rules of Civil Procedure, direct evidence from a representative of the financial institution was required.  In short, although the applicant was accepted as being a suitable candidate for appointment as guardian of property (and it was anticipated by the Court that she would ultimately be appointed), the Court was not satisfied on the evidence available that the management of the incapable’s property in accordance with the contents of the Management Plan was consistent with the man’s best interests.

While Justice Corthorn declared the individual respondent incapable and in need of assistance by a guardian of property, Her Honour adjourned the balance of the matter, suggesting that the applicant’s appointment as guardian of property could be revisited once additional evidence was filed in support of the contents of the Management Plan and/or the plan was further revised.

Thank you for reading.

Nick Esterbauer

 

Other blog entries and podcasts that may be of interest:

09 Oct

Attempts to Minimize Inheritance Tax

Nick Esterbauer Estate & Trust, Estate Planning, In the News Tags: , , , , , , 0 Comments

Previous entries in our blog have covered inheritance taxes in the United States and other jurisdictions and President Trump’s proposed elimination of the tax altogether.  Recent news coverage has zeroed in on how the family of the American president has allegedly evaded over half a billion dollars in tax liabilities that should have been paid on the transfer of significant family wealth.

Certain exceptions apply, but inheritance tax (more frequently referred to as “death tax” by President Trump himself) of 40% typically applies to assets of American estates beyond an initial value of $11.18 million.  This means that estates up to this size are exempt from inheritance taxes, while the wealthy engage in complex planning strategies to minimize tax liabilities triggered by death (some of which mirror those used by Canadians in an effort to avoid payment of estate administration taxes on assets administered under a probated will).

Despite Trump’s previous statements that he has independently earned his fortune without reliance on prior family wealth, The New York Times reports that he and his siblings together received over $1 billion from their parents’ estates and that $550 million (55% under the old inheritance tax regime) ought to have been paid in taxes.  However, in 1999-2004, during which years the estates of Fred and Mary Trump were administered, a rate of closer to 5% was paid in taxes.  Whether the tax-minimizing methods used by the Trump family were legitimate or questionable remains unclear:

The line between legal tax avoidance and illegal tax evasion is often murky, and it is constantly being stretched by inventive tax lawyers. There is no shortage of clever tax avoidance tricks that have been blessed by either the courts or the I.R.S. itself. The richest Americans almost never pay anything close to full freight. But tax experts briefed on The Times’s findings said the Trumps appeared to have done more than exploit legal loopholes.

Sometimes, the line between legitimate tax-minimizing planning strategies and outright tax evasion can appear thin.  It is important to avoid improper strategies that put the assets of an estate and their intended distribution at risk, and which may ultimately serve only to complicate and delay the administration of the estate.

Thank you for reading.

Nick Esterbauer

02 Aug

Aging in Place in Canada

Nick Esterbauer Elder Law, General Interest, In the News Tags: , , , , , , , , 0 Comments

A recent survey commissioned by HomeEquity Bank suggests that the majority of older Canadians plan on staying in their homes as they age (otherwise known as aging in place) rather than downsizing and/or moving into assisted living or retirement communities.  93% of survey respondents aged 65 or older felt that it was important that they remain at their current home throughout retirement.  69% of them advised that their primary reason for wishing to remain at home was to maintain independence as they age.

The older respondents (75 years or older) advised that it was important to them that they remain in their current home to stay close to family, friends, and/or the community (51%) and that emotional attachment and memories were also contributing factors (40%).

In order to remain living at home as long as possible into retirement, advance planning in terms of finances and logistics may be necessary.  A recent article appearing in Forbes suggests that the following steps, unrelated to financial planning, may be especially useful in facilitating successful aging in place:

  • Maintaining social connections to avoid social isolation;
  • Identifying who will help, whether family members, friends, or public services;
  • Planning for the transition as needs change over time and identifying the resources and services available in the community;
  • Preparing the home to accommodate increased needs (for example, by installing grab bars and a chair in the shower);
  • Reviewing and updating the plan to age in place as may be necessary (due to a change in health, available support, or financial constraints).

Notwithstanding one’s plans to continue living at the family home, increasing longevity, a lack of liquidity, unrealistic expectations in terms of income sources after retirement, and the high cost (or local inaccessibility) of caregiving services may contribute to a decision to sell the home and relocate earlier than intended.

Thank you for reading.

Nick Esterbauer

31 Jul

Undue Influence in the Context of Separation and Reconciliation

Nick Esterbauer Estate & Trust, In the News, Wills Tags: , , , , , , , , 0 Comments

A recent decision of the New South Wales State Supreme Court considers allegations of suspicious circumstances and undue influence within the context of marital separation and subsequent reconciliation.

Colleen McCullough, an Australian author famous for having written The Thorn Birds and a number of other novels, died in January 2015, leaving an estate of approximately CDN $2 million.  McCullough also left a series of testamentary documents executed during 2014 and 2015, several of which contained technical defects.  Most of the documents named McCullough’s long-time husband, Ric Robinson, as sole residuary beneficiary.  One document executed in July 2014 (and a subsequent purported codicil), however, directed the distribution of the entire estate to the University of Oklahoma Foundation (of which McCullough was a founding member).

The plaintiff, McCullough’s friend and agent who had been named as estate trustee in the Oklahoma Will, challenged the subsequent documents on the basis of lack of knowledge and approval and undue influence.  She relied, in part, upon the fact that Mr. Robinson had an affair of which McCullough had become aware in or about 2010, and that, in July 2014, she wished to disinherit him as a result of the state of their relationship around the time of their separation.  Further, the plaintiff argued that Mr. Robinson’s request of McCullough that she execute a new Will later in 2014 represented suspicious circumstances.

Notwithstanding the concerns raised by the plaintiff, the Court found that the October 2014 Will naming Mr. Robinson was valid.  Evidence in support of such finding included the involvement of McCullough’s lawyer in the preparation of the Will.  The Court acknowledged the absence of evidence that Mr. Robinson had pressured or coerced McCullough or her lawyer into preparing/executing the October 2014 Will or that her testamentary intentions remained unchanged following a reconciliation with her husband in late July 2014.  The plaintiff’s submission that a request by Mr. Robinson that McCullough make a new Will leaving him an interest in her estate after their relationship had improved was not considered to constitute suspicious circumstances and fell far short of the coercion necessary for a finding of undue influence.

This decision emphasizes the difference between influence and undue influence.  Among spouses, a degree of influence is to be expected in respect of estate planning.  Such influence does not in itself invalidate a testamentary document and may not even satisfy a judge that suspicious circumstances surround the execution of a will.

Thank you for reading.

Nick Esterbauer

30 Jul

Should advanced age be a factor considered during criminal sentencing?

Nick Esterbauer Elder Law, Ethical Issues, Health / Medical Tags: , , , , , , , , , , 0 Comments

The Supreme Court of Canada recently refused leave to appeal a decision of the Quebec Court of Appeal that raises the issue of whether old age should be considered as a factor during sentencing.

The appellant had been convicted of fraud, conspiracy to commit fraud, and laundering the proceeds of crime at the direction of or in association with a criminal organization.  A prior appeal regarding the conviction itself had been dismissed by the Quebec Court of Appeal.

The Lower Court recognized the role of the appellant as a directing mind of a criminal organization and the losses suffered by the government as a result of his fraudulent acts.  The Court had stated that age, even if it could be taken into account, was “only one factor among many”, which “cannot have a determinative impact because of the great number of aggravating factors”.

The appellant subsequently sought leave to appeal his four-year prison sentence.  The appellant asserted that, at 81 years of age and in a poor state of health, his sentence ought to be replaced with a conditional sentence to be served in the community or otherwise limited in duration to allow him the prospect of life after prison.

The Quebec Court of Appeal summarized the law as it relates to the consideration of age during sentencing as follows (at paras 38, 39, 42, 43):

The advanced age of an accused must be taken into account when determining a sentence, as Chief Justice Lamer indicated in R. v. M. (C.A.)

The age factor must, however, be considered in light of the health of the offender as it relates to his life expectancy. Consequently, the mere fact that an accused is elderly is not, in and of itself, a mitigating factor in determining a prison sentence, unless the evidence reveals that he has little chance of serving the sentence before passing away. This is increasingly true with the general aging of the Canadian population and the raised probability of longer life expectancies.

As a result, if at the time a sentence is imposed, the offender’s state of health does not suggest that he is unlikely to complete the sentence before his demise, the judge then has the necessary discretion to impose an appropriate sentence in light of all the usual factors and criteria…

It is possible that an offender’s state of health deteriorates following sentencing. This possibility increases with the age of the offender. The sentencing judge may not, however, speculate on this subject and must determine the sentence in accordance with the evidence before him when it is rendered…

The Court nevertheless considered the prison sentence to be appropriate, notwithstanding the expectation of the appellant that he may not survive it.  The Supreme Court agreed with the reasons of the Quebec Court of Appeal.

With Canada’s aging population, cases like this, in which an individual convicted of a crime is elderly and/or in a poor state of health, can be expected to increase in frequency.  The Supreme Court has confirmed that (for the time being at least), while age is a factor to be considered during sentencing, it is merely one to be assessed among others, rather than being determinative of the issue.

Thank you for reading.

Nick Esterbauer

27 Jul

Legal Fees as a Settlement Consideration

Nick Esterbauer In the News, Litigation Tags: , , , , , , , , , , , 0 Comments

This weekend marks the end of the 105th Tour de France.  This year’s race has been full of controversies, first as a result of allegations of doping by pre-race favourite and four-time winner Chris Froome (and a related threatened cyclist strike) and subsequently ranging from disqualification of one cyclist for punching another to the inadvertent tear-gassing of cyclists by French police.

This spring, news surfaced regarding a settlement negotiated in respect of the claims against controversial cycling figure Lance Armstrong.  Armstrong’s former teammate, Floyd Landis, had commenced proceedings against him in 2010 under the False Claims Act.  The United States government became involved in the fraud proceedings in 2013 after Armstrong admitted to using performance-enhancing drugs after years of public denial.

The litigation commenced by Landis was settled earlier this year.  Terms of settlement were reported to involve a payment by Armstrong of $5 million (of the $100 million claimed against him), as well as a payment to Landis of $1.65 million in legal fees.  Accordingly, Landis’ one-quarter share in the settlement payment is less than what he will receive in legal fees.

It is not unusual in our work to see settlement terms involving the payment of one or more party’s legal fees as part of or in addition to a settlement payment.  Especially where litigation spans the better part of a decade, the legal fees incurred can rival or exceed the quantum of the settlement payment itself and may form an important part of negotiations.

Have a great weekend,

Nick Esterbauer

17 May

The Power of a Great Dissent

Nick Esterbauer General Interest, In the News, Litigation Tags: , , , , , , , , , , , , , 0 Comments

Last night, I attended an advance screening of RBG, a documentary focusing on the career of Justice Ruth Bader Ginsburg, a current Associate Justice of the Supreme Court of the United States.  Justice Ginsburg is a long-time social rights activist and advocate well known for her work in promoting gender equality on both sides of the bench.

More recently, Justice Ginsburg has gained notoriety for frequent dissenting opinions within the context of a primarily conservative judiciary.  While a dissent is, by definition, “a disagreement with [the] majority decision” (Black’s Law Dictionary) that becomes law, one should not underestimate the value of a strong dissent over time.

At provincial appellate courts in Canada, a strong dissent may be of great assistance in preparing an application seeking leave to appeal to the Supreme Court, as well as at the appeal stage if leave is granted.  Dissenting opinions of the Supreme Court of Canada have been referred to as the voice of the future, with prophetic potential.

Thank you for reading.

Nick Esterbauer

15 May

Alberta’s Approach to Digital Assets

Nick Esterbauer Estate Planning, Executors and Trustees, Power of Attorney, Trustees Tags: , , , , , , , , , , , , , , , , , , , 0 Comments

Our firm has previously blogged and podcasted at length about digital assets and estate planning, and the issue of fiduciary access to digital assets during incapacity and after death.

While digital assets constitute “property” in the sense appearing within provincial legislation, the rights of fiduciaries in respect of these assets are less clear than those relating to tangible assets.  For example, in Ontario, the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of property and estate trustees, respectively, are authorized to manage the property of an incapable person or estate, but these pieces of legislation do not explicitly refer to digital assets.

As we have previously reported, although the Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act in August 2016, the uniform legislation has yet to be adopted by the provinces of Canada.  However, recent legislative amendment in one of Ontario’s neighbours to the west has recently enhanced the ability of estate trustees to access and administer digital assets.

In Alberta, legislation has been updated to clarify that the authority of an estate trustee extends to digital assets.  Alberta’s Estate Administration Act makes specific reference to “online accounts” within the context of an estate trustee’s duty to identify estate assets and liabilities, providing clarification that digital assets are intended to be included within the scope of estate assets that a trustee is authorized to administer.

In other Canadian provinces, fiduciaries continue to face barriers in attempting to access digital assets.  Until the law is updated to reflect the prevalence of technology and value, whether financial or sentimental, of information stored electronically, it may be prudent for drafting solicitors whose clients possess such assets to include specific provisions within Powers of Attorney for Property and Wills to clarify the authority of fiduciaries to deal with digital assets.

Thank you for reading.

Nick Esterbauer

 

Other blog posts that may be of interest:

14 May

SCC to Revisit Standards of Review

Nick Esterbauer General Interest, Litigation Tags: , , , , , , , , 0 Comments

Last week, the Supreme Court of Canada granted leave to appeal the judgment of the Federal Court of Appeal in the Minister of Citizenship and Immigration v Alexander Vavilov, and announced that this appeal will be heard along with the appeals of two other judicial review matters.

The Vavilov appeal concerns the decision of the Registrar of citizenship to revoke the status of a Canadian on the basis that his parents were not lawful Canadian citizens or permanent residents at the time of his birth.  Though Canadian citizens, the man’s parents had been undercover spies and, under the provisions of the Citizenship Act, were considered to be “employees or representatives of a foreign government”, rather than lawful citizens of Canada whose son would be Canadian by virtue of their citizenship and the place of his birth alone.  The man’s application for judicial review of the decision of the Registrar to cancel his citizenship was initially dismissed by the Federal Court on the basis that the relevant section of the Citizenship Act did not limit the meaning of representatives or employees of foreign governments.  The Federal Court of Appeal reversed this decision, concluding that the decision of the Registrar was unreasonable and that the purpose of the section of the Citizenship Act in dispute was to apply only in respect of representatives of foreign governments who enjoy diplomatic immunities or other privileges.

While it is rare for the Supreme Court to release reasons granting or refusing leave to appeal beyond one sentence, the Court’s recent judgment granting leave to appeal elaborates as follows:

The Court is of the view that these appeals provide an opportunity to consider the nature and scope of judicial review of administrative action, as addressed in Dunsmuir v. New Brunswick, [2008] 1 S.C.R. 190, 2008 SCC 9, and subsequent cases. To that end, the appellant and respondent are invited to devote a substantial part of their written and oral submissions on the appeal to the question of standard of review, and shall be allowed to file and serve a factum on appeal of at most 45 pages.

Matters of judicial review are generally unrelated to estates law.  However, members of our firm have assisted clients with applications for judicial review involving estate-related issues and we can appreciate the value of the clarification of the state of the law involving standards of review that may come from the Supreme Court’s reconsideration of these principles.

Thank you for reading.

Nick Esterbauer

 

Other blog entries that you might enjoy reading:

 

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