Author: Stuart Clark
Many people are aware of the rule in Saunders v. Vautier (1841), 41 E.R. 482, which essentially provides that when all potential beneficiaries who may receive an interest in a trust are sui juris (i.e. legally capable), and consent to the variation and/or winding up of a trust, that it is within the rights of these individuals to do so. No further involvement of the court is necessary, and the sui juris beneficiaries may amongst themselves dictate how the trust is to be varied and/or wound up. Should even one sui juris beneficiary refuse to consent to the proposed variation or wind up of the trust however, the trust cannot be wound up, and must be continued to be administered in accordance with the terms as settled.
While the rule in Saunders v. Vautier works well in situations where the potential recipients of a trust is a closed class, and all are sui juris and consenting to the proposed variation, complications can arise when there are minor and unborn beneficiaries. As minors and/or unborn beneficiaries are themselves unable to consent to the proposed variation, the other beneficiaries of the trust are unable to effectively vary the terms of the trust amongst themselves as all beneficiaries of the trust would not be consenting to the variation.
In circumstances where there are minor/unborn beneficiaries, the Variation of Trusts Act authorizes the court to consent to the variation of a trust (including its winding up) on behalf of any individual who is legally unable to do so themselves such as a minor/unborn beneficiary. In determining whether to approve the variation on behalf of a minor/unborn beneficiary, the court is to ask whether the proposed variation is for the benefit of the person on whose behalf the court is consenting.
Practically speaking, when you wish to wind up a trust that includes minors and/or unborn beneficiaries, you need to approach the Office of the Children’s Lawyer (“OCL”) to advise them of your intention, and seek their position on the proposed variation. While the OCL’s consent is not itself required under the Variation of Trusts Act, from our experience it is very unlikely that the court will consent to a variation without first hearing the position of the OCL. Under many circumstances, in the event that there is a gift over to the issue of a beneficiary, the OCL will often consent to the proposed winding up of a trust provided that a certain percentage of the trust (how high depending on how remote the interest) is paid into court for the benefit of the minor/unborn children.
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The use of private corporations, both as a tax planning strategy and as a way to potentially limit personal liability, has become an increasingly popular way for individuals to control and manage their property during their lifetime. While the actual management structures of these corporations are limitless, under many circumstances the structure is fairly straightforward, with the individual setting up the corporation often also being the sole shareholder and director. While this arrangement often works while the individual is alive and capable, complications can arise in the event of incapacity, as the individual left behind to manage the incapable individual’s property is often unsure of how to deal with property that is held through a private corporation.
While at first glance the control and management of property held through a private corporation may seem daunting, in reality there is no reason that it need to be any more complicated to manage than any other asset held by the incapable individual. Under normal circumstances, the shareholders of a corporation appoint the board of directors, who in turn see to the management of the corporation. As such, in the event that the incapable person was the sole or majority shareholder of the corporation, and subject to any contrary provision in the by-laws or a unanimous shareholders agreement, it should simply be a matter of the individual who is managing the individual’s property to use their authority over the shares owned by the incapable to appoint a new board of directors.
In the case of a Power of Attorney for Property, section 7(2) of the Substitute Decisions Act, 1992, allows the grantor of a Power of Attorney for Property to entrust the following authority to an individual:
“The continuing power of attorney may authorize the person named as attorney to do on the grantor’s behalf anything in respect of property that the grantor could do if capable, except make a will.”
As such, assuming that the Attorney for Property’s authority has not been limited in any way, under normal circumstance an Attorney for Property would have the authority to control any shares that the incapable person may have as if they were the incapable person themselves. This power would include any voting authority held by the shareholder vis-à-vis their interest in the corporation, including their power to appoint a board of directors. Under many circumstances, assuming that the incapable person was the sole shareholder and director, it is often just the case of the Attorney for Property appointing themselves as director in place of the incapable individual, and they may then in turn manage the corporation (and any assets it may hold) on behalf of the incapable person.
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Divorce is an expensive fact of life for many in today’s world. It is for this reason that many people, especially in second marriages, opt to enter into a marriage contract at the time of their marriage, which clearly sets out what is to happen between the two spouses as it relates to their property. While the main focus of the marriage contract is often what will happen in the event of a divorce, attention is also often given to what should happen in the event of the death of one of the spouses, with language often being included providing that the surviving spouse has given up any right against the deceased spouse’s estate.
While on its face this broad language may appear to bar the surviving spouse from commencing any proceeding against the deceased’s spouses estate after their death, what many may not be aware of is that the Succession Law Reform Act (the “SLRA”) specifically contemplates that certain types of proceedings may be commenced by the surviving spouse notwithstanding any agreement which may have been entered between the parties saying otherwise. These types of proceedings include an Application for support as a dependant under Part V of the SLRA, where section 63(4) contemplates:
“An order under this section [i.e. dependant’s support] may be made despite any agreement or waiver to the contrary.”
In Butts Estate v. Butts (1999), 27 E.T.R. (2d) 81, Justice Killeen provides the following commentary on how the court may interpret the provisions of a marriage contract in the wider context of an Application commenced by a surviving spouse for dependant’s support:
“…s. 63(4) gives the court a broad judicial discretion to award support to a dependant, as defined in s. 57, notwithstanding the existence of any prior agreement or waiver. The language of s. 63(4) could not be broader or clearer in its purpose and is obviously aimed at achieving justice and equity at the date of the hearing, notwithstanding what the parties might have agreed to earlier on.”
Simply put, the court may ignore any marriage contract or other agreement that may have been entered into between the parties in making an Order for dependant’s support under Part V of the SLRA. If the court is of the opinion that the surviving spouse is a dependant within the requirements of Part V of the SLRA, then they are free to make an Order providing for their support notwithstanding any agreement entered between the parties which may provide otherwise.
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