Category: Continuing Legal Education
Just over a week ago I had the privilege to attend the OBA’s annual evening with the judges of the Toronto Estates List. Unfortunately, due to the pandemic, the event was held virtually this year, but it was nonetheless very interesting and informative and I’m sure everyone appreciated the judges sharing their time. I take this opportunity to mention a few of the topics discussed.
- New Technology Implemented by the Court
The Estates List judges shared with event attendees that the new technology that has recently been adopted by the Court is here to stay. It was suggested that counsel invest the time to learn how the CaseLines system works and get comfortable with it, as it is intended that CaseLines will be in use going forward. The use of sync.com is already being phased out, and mainly CaseLines will be used in the future. This is expected to be the case even when we are able to return to in-person hearings.
- New Model Orders
We have previously blogged about the model orders that have recently been added to the Estates List Practice Direction. At the event, the judges emphasized that the model orders are an excellent resource and should be used going forward.
- Availability of Case Conferences
The Estates List judges clarified that case conferences continue to be available. It was suggested that before parties take steps to gear up for a contested motion, if they are not able to solve the matter on their own, they should consider scheduling a 30 minute case conference, and try to work it out with the assistance of one of the members of the Estates List Bench. This may allow matters to be resolved more quickly, thus freeing up court resources for other matters, and in a way that is more cost-effective for the parties.
- The Court’s Workload
Between January and March of this year, the Estates List heard between 400-500 matters, which is close to the number of matters that would be heard in a regular year. The number of matters being heard in writing has almost doubled from the norm, with the Estates list having heard almost 900 matters in writing so far this year, compared with around 1500 in a whole year in normal times. It is clear that the Estates List continues to operate effectively notwithstanding the lack of in-person attendances.
I understand that the event was recorded and will be available for later viewing. I encourage anyone who missed the event to check out the recording and take advantage of the advice and tips from the Bench.
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If you enjoyed this blog post, you may also enjoy these past blogs:
Earlier this week, I had the pleasure of hosting the Family Dispute Resolution Institute of Ontario’s webinar on “Special Considerations When Valuing a Family-Owned Business” featuring Tom Strezos, Adam Guyatt, and Claudio Martellacci of Grewal Guyatt LLP. A link to their article on this topic is available here.
In the estates context, we often encounter situations where a family business needs to be valued after death. While we will often defer to experts for assistance in this regard, it can be helpful to keep in mind some considerations unique to family businesses that might affect valuation. These may include the following:
- Payroll considerations: including whether any family members are on the business payroll and paid compensation greater or less than standard market rates;
- Related party transactions: for example, whether a family member owns a supply company and that relationship may increase or decrease business expenses and impact its value upon any change in that relationship;
- Non-operating assets or liabilities: whether there are investments in assets that do not impact cash flow directly or liabilities payable to family members;
- Internal controls and governance: such as whether additional staffing costs would need to be considered as part of the valuation to reflect the situation if certain family members were no longer involved in the operations of the business;
- Transferability of goodwill and discounts for reliance on certain individuals: some family businesses may have limited assets beyond goodwill and it can be worthwhile to consider how a departing family members (such as a divorced spouse or incapable or deceased family member) may impact value going forward.
These considerations may be relevant to probate applications, estate administration, and certainly where there are claims against an estate or specifically against a family business.
Also discussed during yesterday’s webinar was the idea of business valuation expert hot-tubbing, whether formally at trial or otherwise working together in a similar manner to try and determine a reasonable value of a company for the purposes of settlement discussions. This is an Interesting concept that may work well for some estate matters where valuation issues are at play.
A recording of this week’s FDRIO webinar is available to FDRIO members free of charge and will be replayed at a fee for non-members later this month. More information is available at fdrio.ca.
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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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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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Further to my blog on Monday, the Court of Appeal also released another interesting decision last week with respect to the tort of conspiracy in the context of a family law proceeding. Leitch v. Novack, 2020 ONCA 257, is an appeal from a summary judgement motion that was brought by the husband’s father, a family trust, and a family company. Summary judgment was brought because the wife sought damages against the moving parties for an alleged conspiracy that they were intentionally withholding payments to the husband in order to reduce his family law obligations.
The motion judge, in 2019 ONSC 794, held that the conspiracy claim was appropriate for partial summary judgment. The conspiracy claims were dismissed even though the wife could still pursue a claim to impute additional income to the husband for the purposes of determining his income at trial. Over a million dollars in costs were later awarded to the husband and the moving parties and there was a subsequent order for security for costs that effectively froze all of the wife’s assets.
The appeal was allowed. The Court found that there was a material risk of inconsistent results because the wife was allowed pursue her claims that additional income ought to be imputed to the husband despite the motion judge’s finding that there was no unlawful conspiracy.
As for the tort of conspiracy, Justice Hourigan confirms and clarifies the application of this doctrine in the context of family law matters. The tort of conspiracy is part of the judicial toolbox to ensure fairness and for deterrence. It is also there for enforcement purposes because the purpose of the conspiracy is to hide income or assets and “a judgment against a co-conspirator will often be the only means which by which a recipient will be able to satisfy judgment” (paras. 46-47).
Justice Hourigan commented that
“a transfer of funds by loan, gift, or otherwise, is not the only way that the alleged co-conspirators could have acted in furtherance of the conspiracy. If the trial judge is satisfied that [the husband] had an entitlement to funds and that a co-conspirator withheld the transfer of funds to him as part of a conspiracy with the understanding that he would receive the money at some future date, the withholding of funds may itself be an act in furtherance of the conspiracy. It is not necessary to establish more than an acted-upon conspiracy to conceal [the husband’s] entitlement.” (para. 51).
The costs awards and the preservation order were also set aside.
This decision is certainly important to keep in mind when advising trustees of discretionary trusts.
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There are numerous resources available to estates and trusts lawyers to help them navigate their practice during these COVID-19 times. As there does not yet seem to be one amalgamated repository, I thought I would use today’s blog to highlight some sites that I tend to be frequenting:
The Law Society of Ontario
The LSO has created an easy to read list of FAQs. Certain questions that I have found particularly helpful include: the requirements regarding commissioning an affidavit, including affidavits of service; the use of virtual means to identify or verify the identity of a client; whether virtual means can be used to assess a client’s capacity; and, what are the best practices for using video conferencing in providing legal advice or services.
LawPRO is continuing to update avoidaclaim.com. Given that new claims reports continue to come in at pre-crisis numbers, lawyers must remind themselves that although the physical location of their practice may have changed, the level of service provided must not.
Hull & Hull LLP
If you are reading this blog, you are probably already aware of the comprehensive resources being provided by Hull & Hull LLP, which can be found here. If not, we are covering everything from estate planning to estate litigation, including the execution of wills and how to have litigious matters heard by presiding judges.
Ontario Bar Association
The OBA has set up a COVID-19 Action Centre. While helpful information continues to be provided, I find myself continually looking forward to their ‘mindful moments’ which arrive daily in my inbox.
Stay safe and wash your hands,
If you consider this topic interesting, please consider these other related sites:
Today’s blog is a continuation of yesterday’s discussion regarding the limitations analysis in Piekiut v. Romoli, 2019 ONSC 1190, 2020 ONCA 26. No limitation period was found to apply where an estate trustee was simply seeking a determination and declaration as to whether certain codicils were valid or not valid.
The testators in this case died in 2008. They had 3 children, Helen, Victor, and Krystyna. A meeting took place in 2008 between all 3 children and a lawyer to discuss the administration of the Estate. During this meeting, Krystyna revealed, for the first time, the existence of codicils and declarations of gift that provide her with an interest in certain properties. Helen refused to acknowledge the validity of these new documents.
In 2015, Helen brings a court application. Her application was later amended, on the consent of parties, in 2018 to reflect that Helen was only seeking a declaration in respect of the validity of the codicils. Thus in 2019, Justice Dietrich’s decision was made in the context of Krystyna’s motion for summary judgment to dismiss Helen’s application on the basis that it was statute barred and Helen’s cross-motion for summary judgment on her application. Justice Dietrich found that, since Helen did not ask the court to determine the ultimate beneficiaries of the properties that were subject to the Codicil or to vest such properties in any particular beneficiary or beneficiaries, her application was not barred by the Limitations Act, 2002.
The Court of Appeal agreed with Justice Dietrich. The panel was also of the view that this case is distinguishable from Leibel v. Leibel, 2014 ONSC 4516 and Birtzu v. McCron, 2017 ONSC 1420 because of the consequential relief that was pleaded in those cases. Since the Court of Appeal decision did not go into the details of the relief sought in Birtzu (unlike its description of Leibel), it is helpful to understand the breadth of the Statement of Claim in Birtzu, which sought the following:
- an Order setting aside the Will;
- an Order setting aside the Deceased’s Powers of Attorney;
- an accounting of the entire Estate, as well as all financial transactions undertaken by the Deceased, or on his behalf, or on behalf of his Estate, from the date that the Deceased’s matrimonial home was sold in 2003 to the date of trial;
- Orders for the production and release of financial and medical information;
- an Order reversing all transactions undertaken by the Defendant, either directly or indirectly, without authority or in breach of her authority, or in breach of her fiduciary duties to the Deceased and to his beneficiaries, including the Plaintiffs;
- an Order tracing the property of the Deceased into the property owned by the Defendant, including her home;
- Orders for injunctive relief, including the issuance of a certificate of pending litigation;
- a Declaration that all property held in the name of the Defendant, or part thereof, is held by her for the benefit of the Plaintiffs;
- damages against the Defendant in the amount of at least $400,000.00, for conversion of property, breach of statutory duty, and/or breach of fiduciary duty;
- pre- and post- judgment interest; and
- costs fixed on a substantial indemnity basis, plus H.S.T.
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The main issue on appeal was whether Justice Dietrich was right in finding that the applicant could still ask the court to determine whether certain codicils were valid (or invalid) seven years after death. Justice Dietrich based her limitations analysis on whether this proceeding would fall under section 16(1)(a) of the Limitations Act, 2002 where there is no limitation period in respect of “a proceeding for a declaration if no consequential relief is sought”.
In her reasons, Justice Dietrich distinguished the case before her from the other limitations cases that have applied the two-year, basic limitation period to will challenges: Leibel v. Leibel, 2014 ONSC 4516, Birtzu v. McCron, 2017 ONSC 1420, and Shannon v. Hrabovsky, 2018 ONSC 6593. The case before her was different from Liebel, Birtzu, and Shannon because nothing had been done by the respondent beneficiary to propound the codicils that she had an interest in. If the proceeding was started differently in 2015, by the very beneficiary who has an interest in the codicils, then the estate trustee would have a limitations defence against the beneficiary. Since the beneficiary had done nothing, it remained opened to the estate trustee to commence an application for declaratory relief. Such declaratory relief is “a formal statement by a court pronouncing upon the existence or non-existence of a legal state of affairs.’ It is restricted to a pronunciation on the parties’ rights” (see para. 46, 2019 ONSC 1190).
The Court of Appeal agreed that there was no limitation period in this case because the applicant did not seek consequential relief in addition to a determination of the validity or invalidity of the codicils. The Will had not been probated and nothing had been done for seven years to resolve the issue.
“In these circumstances, Helen was entitled to seek declaratory relief, simply to establish the validity, or lack of validity, of the codicils – to define the rights of the parties in order to avoid future disputes.”, Strathy C.J.O., MacPherson J.A., and Jamal J.A.
Thanks for reading and more on these limitation cases to follow later this week!
Competing applications about the ownership of a home were before the Court in Marley v. Salga, 2019 ONSC 3527. On the death, the home was jointly owned between the deceased (Salga) and his wife (Marley). Notwithstanding the registered, legal ownership of the property, Salga’s Will gave Marley a lifetime right to occupy and use Salga’s one-half interest in the property and thereafter directed that the house be sold for the benefit of the residuary beneficiaries.
This led the residuary beneficiaries to commence an Application for a declaration that the Estate is entitled to an undivided one-half interest in the home and for an order requiring the Estate Trustee (Klassen) to sell the home right away (the “Salga Application“). Thereafter, Marley commenced her own Application for a declaration that she was the sole legal and beneficial owner of the property, or, alternatively, that her interest in the property is greater than 50% (the “Marley Application“).
Ultimately, Justice Reid found that ownership of the property was severed by the deceased in the course of his dealings but denied the Salga Applicants’ request that the property be sold before the termination of Marley’s interest under the Will. The Marley Application was also denied. Our blog on this decision can be found here.
The parties were unable to agree to the issue of costs. Justice Reid, 2019 ONSC 6050, followed the traditional approach to costs in estate matters and the costs of both applications, on a partial indemnity scale, were ordered from the Estate. In reaching this conclusion, Justice Reid considered and found the following:
- The Marley Application was in essence a response to the Salga Application and the costs of both proceedings were treated as one;
- Both parties were found to be partially successful: the Salga Applicants were successful in obtaining a declaration that 50% of the home belongs to the Estate and the Marley Applicant was successful in preventing an immediate sale of the home;
- Consideration was given to the fact that an award of costs from the Estate meant that the Salga Applicants (as the residuary beneficiaries) would be effectively bearing their own costs as well as Marley’s costs. However, that was not enough to outweigh the deceased’s responsibility to act unambiguously by severing his interest on title during his lifetime.
- Costs against the Estate in this case “places the responsibility for the litigation squarely on [the deceased] where it belongs“.
This costs decision is also an informative read for the costs of an estate trustee as a respondent in both proceedings and how costs should be paid from an estate where there is no liquidity.
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A recent master motions in the Estate of Robert William Drury Sr., 2019 ONSC 6071, considered the issue of an extension of time to serve a statement of claim.
Robert Sr. owned a property where the defendant Shirley lived with her spouse Hugh Drury. When Hugh Drury died, Robert Sr. sought vacant possession of his home. Robert Sr. died on September 8, 2016. Days later there was a fire on the property on September 24th and Shirley was criminally charged with arson.
Almost two years later, the estate trustee for Robert Sr.’s Estate issued a statement of claim for malicious and intentional arson damage, or gross negligence causing loss of enjoyment of life, or damages for loss of property. That claim was issued on September 19, 2018 while Shirley’s criminal proceedings were underway. Pursuant to Rule 14.08(1), Robert Jr. had 6 months to serve the civil claim on Shirley which expired on March 19, 2019. Shirley was not served until June 14, 2019 when Robert Jr. brought a motion for an extension of time.
In applying the test that was set out by the Court of Appeal in Chiarelli v Wiens, 2000 CanLii 3904, the extension of time was ultimately allowed by Master Sugunasiri.
The delay was only three months and the prejudice to Shirley was minor. Robert Jr. explained that he acted on the advice of counsel when the decision was made to serve Shirley after the conclusion of the criminal proceeding. This decision was not personal or contemptuous. As for Shirley, while memories fade over time, the criminal proceeding was found to be an ameliorating factor that preserved her evidence for the civil proceeding.
In reaching this decision, Master Sugunasiri also considered an instance where an extension of time was denied because the delay was caused by the Plaintiff’s decision not to serve the claim until he had enough money to fund the proceeding. In that case, the Court found that the Plaintiff ought to bear the consequences of the risk that he took under the Rules.
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