Category: Estate Litigation

15 Jul

Where There’s a Will to Contract, There’s a Contract to Will

David M Smith Beneficiary Designations, Estate & Trust, Estate Litigation, Estate Planning, Mutual Wills, Support After Death, Trustees, Uncategorized, Wills 0 Comments

In researching common errors in will drafting, we recently stumbled (as one often does through research) on the following question:

In the case of mutual wills, what happens in the event of remarriage?

Mutual wills operate as a contract. Simply put, the terms of the contract are that absent any revocation during the joint lives of the parties, the survivor will not revoke thereafter. The conundrum then becomes: If a will by its very nature is revocable, and wills are automatically revoked by marriage, what then happens to the agreement in the event of a second or third marriage?

The question at hand is best described with an example:

Jane has two children from a prior marriage, as does John. John and Jane get married and draft wills. The wills of Jane and John are identical except for some names and dates and include an agreement that says in part, that if John dies, all assets will be transferred to Jane absolutely, and when Jane dies all assets shall be divided equally among their four children. When John dies, his assets vest in Jane, and her will is now locked such that changing it would frustrate the terms of her agreement with her now deceased husband. But what if then Jane meets and marries Oscar? If all prior wills are null. . . Now what?

The courts have wrestled with the concept of mutual wills since the death of Lord Horatio Walpole in 1797. In his will of 1756, a nephew of the English author and statesman, George Earl of Walpole, demonstrated intent to enter in to a “compact” with his late uncle for the disposition of his and his uncle’s estates to the benefit of their respective families. The question that arose then, as it still does today, is upon what terms the two parties were transacting, and how should they be bound? Or, to quote a commentary from the turn, “How far in law and equity was each at liberty to repent, and to recall his share of the testamentary exchanges between them?”

204 years later, the question continued to be addressed in a seminal decision of the Ontario Superior Court of Justice. In 2001’s Edell v. Sitzer, Cullity J, was tasked with unpacking a bitter family dispute where an alleged agreement not to depart from equal division of assets was at stake. The question before the court then (in part) was, do the facts give rise to a constructive trust? Justice Cullity set out the test for mutual wills thusly:

  1. The mutual wills were made pursuant to a definitive agreement or contact not only to make such wills, but that the survivor shall not revoke.
  2. Such an agreement is found with certainty and preciseness.
  3. The survivor has taken advantage of the provisions in the mutual will.

If the test is satisfied, the court can impose a constructive trust. Rooted in the law of equity, an implied or constructive trust aims to remedy any unjust enrichment by one party of a contract (a surviving spouse, for example) over another.

But what consistently seems to trouble the conscience of the court, is the idea of “contracting-away” one’s testamentary freedom. There is no restriction for a will made in defiance of such an agreement, but in equity, the court is almost bound to treat mutual wills as a single testamentary instrument. This was the problem in the 2016 ONSC case of Rammage v. Estate of Roussel: Alf and Ruth Roussel had made mutual wills 13 years prior to Alf’s death in February of 2009, agreeing in part to divide their estate equally among their four children (both Ruth and Alf went into the marriage with 2 children each). One year after Alf’s death, Ruth made a new will, disinherited Alf’s children, and left everything to her own two kids. Upon the death of Ruth, the litigation began.

The court in Rammage determined that the wills of the deceased testators amounted to mutual wills, imposed a constructive trust, and divided the assets according to the terms of the first wills of Ruth and Alf.  If the court is satisfied that the wills are mutual, any property disposed of in a subsequent testamentary document is subject to a constructive trust in favour of the named legatees, and the subsequent will fails.

Returning to the question of remarriage, one could expect the need for administration and ultimately judicial intervention, should all the beneficiaries not consent to the changes in subsequent wills. Like many decisions that seem like “a good one at the time,” mutual wills should be considered very carefully and with the advice of independent counsel. A decision to enter into a contract that prohibits one from ever changing their last will and testament must be considered from all sides. To quote the late Horatio Walpole, the 4th Earl of Orford: “The wisest prophets make sure of the event first.

Thanks for reading!

David M. Smith & Daniel Enright (Summer Law Student)

12 Jul

Intervention: Trying to Get In The Game

Paul Emile Trudelle Beneficiary Designations, Estate & Trust, Estate Litigation, Estate Planning, Uncategorized Tags: , , , , 0 Comments

Sometimes, you are added as a party to a proceeding when you don’t really want to be. In other cases, a proceeding is started, and you are not a party, but want to be. What can be done about this? Intervention.

Under Rule 13.01(1) of the Rules of Civil Procedure, a person who is not a party to a proceeding may move for leave to intervene as an added party if the person claims:

  1. an interest in the subject matter of the proceeding;
  2. that the person may be adversely affected by a judgment in the proceeding, or
  3. that there exists between the proposed intervenor and one or more of the parties a question of law or fact in common with one or more of the questions in issue in the proceeding.

Rule 13.01(2) adds another consideration. The court shall consider whether the intervention will unduly delay or prejudice the determination of the rights of the parties to the proceeding.

Intervention was considered in the decision of Arnold v. Arnold, 2019 ONSC 3679. There, the proceeding involved a Power of Attorney dispute between 3 of the incapable person’s children. The issue was whether a 2011 Power of Attorney, which appointed children 1, 2 and 3 as attorneys, governed or whether a 2019 Power of Attorney, which only appointed children 2 and 3 as attorneys governed.

The proposed intervenor was child 4. He was not named as attorney in any of the Powers of Attorney, and was not a party to the proceeding. Child 4 was diagnosed with schizophrenia and lived in his mother’s, the incapable person’s, house. He was receiving support from her. He sought to intervene to ensure that his needs were protected.

The court considered the criteria for intervening, and refused to allow child 4 to intervene.

As to the first criteria, the court found that essence of the application was who was to be responsible for the management of mother’s property, not how it was to be managed. While child 4 may have an interest in how the property was being managed, he had not genuine interest in who.

Regarding the second criteria, child 4 acknowledged that he was not adversely affected by the management of mother’s property, as long as the responsible person fulfills that role properly. The court added that child 4 would benefit from the determination of the question raised in the proceeding, as he would then know with whom he is dealing.

With respect to the third criteria, child 4 argued that he had potential claims as against his father’s estate and his mother for child support. The court found that the questions raised in those potential proceedings were not the same as the questions raised in the existing proceeding regarding who was to care for mother. Further, child 4’s lack of intervenor status would not prejudice his claims.

The court also found that allowing child 4 to intervene would result in undue delay and prejudice. The proceeding was already being expedited, and was scheduled to be heard two weeks after child 4’s motion to intervene. Allowing child 4 to intervene would likely delay the proceeding. Had child 4 moved to intervene sooner, this might not have been the case.

Costs were awarded against child 4. However, due to his being on ODSP, costs were awarded against child 4 in the amount of $4,000 to each of the other groups of litigants. Payment was deferred until child 4 received his share, if any, of his mother’s estate.

Thanks for reading.
Paul Trudelle

11 Jul

Trustee Act – Limitation Periods and Discoverability

Stuart Clark Estate Litigation Tags: , , , , , , , , , , , , , , , , 0 Comments

When most people reference a “limitation period” in Ontario, chances are that they are referencing the limitation period imposed by the Limitations Act, 2002, which generally provides an individual with two years from the date on which a claim is “discovered” to commence a claim before it is statute barred. Although an individual is presumed under the Limitations Act to have “discovered” the claim on the date that the loss or injury occurred, if it can be shown that the individual did not “discover” the claim until some later date the limitation period will not begin to run until that later date, potentially extending the limitation period for the claim to be brought for many years beyond the second anniversary of the actual loss or damage.

Although the limitation period imposed by the Limitations Act must be considered for situations in which an individual intends to commence a claim against someone who has died, individuals in such situations must also consider the much stricter limitation period imposed by section 38 of the Trustee Act.

Section 38 of the Trustee Act imposes a hard two year limitation period from the date of death for any individual to commence a claim against a deceased individual in tort. Unlike the limitation period imposed by the Limitations Act, the limitation period imposed by section 38 of the Trustee Act is not subject to the “discoverability” principle, but is rather a hard limitation period that expires two years from death regardless of whether the individual has actually yet to “discover” the claim. If an individual starts a claim against a deceased individual in tort more than two years after the deceased’s individual’s death it is statute barred by section 38 of the Trustee Act regardless of when the claim was “discovered”.

The non-applicability of the “discoverability” principle to the two year  limitation period imposed by section 38 of the Trustee Act is confirmed by the Ontario Court of Appeal in Waschkowski v. Hopkinson Estate, (2000) 47 O.R. (3d) 370, wherein the court states:

As indicated earlier in these reasons, based on the language of the limitation provision, the discoverability principle does not apply to s. 38(3) of the Trustee Act. The effect of s. 38(3) is, in my view, that the state of actual or attributed knowledge of an injured person in a tort claim is not germane when a death has occurred. The only applicable limitation period is the two-year period found in s. 38(3) of the Trustee Act.” [emphasis added]

Although the Court of Appeal in Waschkowski v. Hopkinson Estate appears firm in their position that the court should not take when the claim was “discovered” into consideration when applying the limitation period from section 38 of the Trustee Act, it should be noted that in the recent decision of Estate of John Edward Graham v. Southlake Regional Health Centre, 2019 ONSC 392 (“Graham Estate“), the court allowed a claim to brought after the second anniversary of the deceased’s death citing “special circumstances”. Although the Graham Estate decision is from the lower court while the Waschkowski v. Hopkinson Estate decision is from the Court of Appeal, such that it is at least questionable whether it has established a new line of thinking or was correctly decided, the Graham Estate decision may suggest that the application of the limitation period from section 38 of the Trustee Act is not as harsh as it was once considered. More can be read about the Graham Estate decision in Garrett Horrocks’ previous blog found here.

Thank you for reading.

Stuart Clark

10 Jul

I’ll be dead before that railway gets built

Suzana Popovic-Montag Estate & Trust, Estate Litigation, Estate Planning, Uncategorized 0 Comments

In 2014, just before a provincial election, the Ontario government (then Liberal) announced that a high-speed rail line would be built within 10 years, linking downtown Toronto, Pearson airport, Kitchener, and London.

As the CBC so adeptly noted later, the high-speed rail project soon “slowed to choo-choo speed.” But that didn’t stop the promises. In May of 2017, that same Liberal government announced that the high-speed rail project would be extended to Windsor.

It all sounded great, except there was no sign of action. We hit 2019 – five years into the “built within 10 years” promise – and not a single railway tie had been laid. And then the inevitable happened – the new Conservative government announced that all funding for the high-speed rail had been “paused.”

The downside of democracy

I like our democratic system, but the glacial pace of building key infrastructure projects highlights a huge downside. Politicians make quick headline-grabbing promises to get elected, they delay those promises once elected, and then the promises are cancelled when a new party comes to power.

The result? Nothing gets done, not even little improvements to what we already have. And this isn’t just an Ontario issue – it’s Canada-wide and often occurs when municipal, provincial and federal governments intersect on projects.

A solution

I would love to see a national Canadian transportation super-agency, staffed by smart people making good non-political transit decisions, and with the power and money to make projects happen.

But that’s unlikely to happen soon. As an alternative, I propose the Chinese model. Decree that projects be built, then build them fast. Anyone who’s been to Shanghai recently knows how quickly things can get built.

And back to trains for a moment. This one-minute, time-lapsed video shows how 1,500 Chinese workers built the railway tracks for an entire train station in just 9 hours.

Now that’s the way to get things done!

Thanks for reading … Have a great day,
Suzana Popovic-Montag

05 Jul

Estate Planning With Drake: Money in the Grave

Paul Emile Trudelle Estate & Trust, Estate Litigation, Estate Planning, Trustees, Wills Tags: , , 0 Comments

In a recent recording, “Money in the Grave”, Drake asks that he be buried with his money. He sings:

In the next life, I’m tryna stay paid
When I die, put my money in the grave.

Several issues come to mind.

First, Drake’s wish to be buried with his money is not binding on his estate trustee unless it is in a properly executed testamentary instrument.

Second, even if the money is buried with Drake, his estate trustee may have to pay Estate Administration Tax on the buried money if the will is to be probated. Drake may want to consider multiple wills. (Well-considered primary and secondary wills might also avoid the payment of Estate Administration Tax on the value of all of his chains, and other bling.)

Third, the act of destroying money is illegal in many jurisdictions. In Canada, under the Currency Act, it is illegal to “melt down, break up or use otherwise than as currency any coin that is legal tender in Canada”. The Criminal Code creates an offence for defacing a current coin. There is no similar prohibition on defacing or destroying paper money. However, in the US, burning money or any other act that renders a note “unfit to be reissued” is illegal. Arguably, the act of burying money is not the same as destroying money.

(Read Stuart Clark’s blog, here, about a woman who cut up the equivalent of $1.4m CDN to disinherit her heirs.)

Fourth, Drake’s estate trustee might be accused of waste. He or she may want to seek the opinion, advice or direction of the court before they “Bury my [expletive] Chase Bank.”

More on point, in the US decision of Eyerman v. Mercantile Trust Co., 524 S.w.2d 210 (1975), the testator directed that her house be burned down, the lot sold, and the proceeds added to the residue of her estate. A neighbour wasn’t too crazy about the idea, and applied for an injunction.  The injunction was, at first, denied. On appeal, the court held that the direction in the will was against public policy.

The court in Eyerman cited the decision of In re Scott’s Will, 88 Minn. 386 (1903). There, the testator directed his estate trustee to destroy money belonging to the estate. The court there found that the clause was void. The court also quoted from Restatement, Second, Trusts, 124, at 267.

“Although a person may deal capriciously with his own property, his self interest ordinarily will restrain him from doing so. Where an attempt is made to confer such a power upon a person who is given no other interest in the property, there is no such restraint and it is against public policy to allow him to exercise the power if the purpose is merely capricious.”

In Restatement, an example is given of a bequest from A’s estate to B in trust to throw the money into the sea. (Query: more lyrical or less lyrical than Drake’s direction?) “B holds the money upon a resulting trust for the estate of A and is liable to the estate of A if he throws the money into the sea.”

In another, earlier Drake ditty, “Crew Love”, Drake boasted about spending $50K on a vacation, and needing restaurant reservations for twenty. “I never really been one for the preservation of money. Much rather spend it all while I’m breathing.” It seems that he now has so much money that he may not be able to spend it all while living, and he is turning his thoughts to succession planning. He may want to get some professional estate planning advice.

Thank you for reading.

Paul Trudelle

04 Jul

Watch what you do, you may be held accountable

Christina Canestraro Estate Litigation, Ethical Issues, Litigation, Passing of Accounts Tags: , , , , , 0 Comments

Noah Weisberg’s recent blog on the Court of Appeal decision in Dzelme v Dzelme, serves as a great reminder that ordering a passing of accounts remains in the discretion of the court.

Building on this idea of judicial discretion is the recent case of Dobis v Dobis recently heard and decided by the Ontario Superior Court of Justice, whereby the court ordered a passing of accounts by a party who was deemed to have misappropriated funds from an estate asset.

Elizabeth commenced an application in her role as the estate trustee of her late husband’s estate. She sought, among other things, certain orders that would allow her to gain and maintain possession and control over one of the estate assets, a four unit rental property. She also sought an order requiring her son, Mark, to pass his accounts in respect of funds she alleged were misappropriated from the rental property.

Mark resided in one of the units of the rental property with his spouse, and alleged that it was his father’s intention that he maintain a life interest in the property. During the lifetime of the deceased, Mark acted as a manager/superintendent of the rental property in exchange for reduced rent. He also collected rent from one of the tenants and deposited the funds into a bank account owned jointly by his parents. Following his father’s death, Mark began diverting rent from the rental property to himself rather than depositing it in the joint account.

Despite requests from Elizabeth, Mark failed to properly account for the rental income. The accounting that was provided to Elizabeth was not supported by vouchers, and contained no detail of the expenses incurred. Elizabeth submitted that Mark had no legal or beneficial interest in the property, that he was holding the property hostage while unlawfully benefiting personally from the funds generated by the property, and that he failed to account for those funds.

In arriving at its decision, the court relied on the 2016 Ontario Superior Court decision in Net Connect Installations Inc. v. Mobile Zone Inc., which held that a court has jurisdiction to order an accounting where a party is deemed to have misappropriated funds.

Ultimately, Mark was compelled to pass his accounts for all monies received by him in connection with his management of the property. All this to say, watch what you do, because you may be held accountable.

Thank you for reading!

Christina Canestraro

03 Jul

Sleeper trains – nostalgia for something we may never have done

Ian Hull Estate & Trust, Estate Litigation, Estate Planning, Uncategorized Tags: , , 0 Comments

When was the last time you slept (lying down) on a train? Or a better question: have you ever slept lying down on a train?

My guess is “no” , or, if you have, it was a long time ago. While overnight rail service played a role in Canada’s past, it’s no longer a preferred mode of travel. Multi-lane highways and cheap flights have replaced overnight rail service for most of us.

Still, there’s something alluring about the train. Maybe it’s the romance of exotic railway routes, like the Orient Express or the Trans-Siberian – trains that are still running today. Even if you’ve never slept on a train, you’ve likely read a book or article – or seen a movie – about these trains with their closed cabins and worlds of intrigue.

The sleeper train to Scotland

It’s this romantic nostalgia for something I’ve never done that hooked me on the news that Scotland is introducing a totally new sleeper service between London and many destinations north this summer. These totally new trains are made for the modern traveller. Some cabins have their own shower and bathroom, the mattresses are top notch, and all the mod-cons (like wifi) are onboard. You can read about it here.

The thought of leaving a world city like London at night and waking up in the morning to the Scottish Highlands whizzing by made me want to book an overnight journey. I haven’t yet, but it’s a trip that’s definitely on my list.

There’s a whole world of trains

Of course, the news of the new train in Scotland got me looking at other sleeper train journeys. There are many. Some are luxurious (there are some high-end ones in India and Africa), but many others are just interesting journeys by rail. This Lonely Planet guide to 10 amazing train journeys is worth a read.

And no matter your vehicle of choice, if you’re taking a trip this summer, happy travels!

Thanks for reading,
Ian M. Hull

28 Jun

Court Gestures: Dying Declarations

Paul Emile Trudelle Estate & Trust, Estate Litigation, Estate Planning, Uncategorized Tags: , , 0 Comments

In the Ontario Court of Appeal decision of R. v. Nurse, 2019 ONCA 260, the gestures of a dying man were relied upon to support a murder conviction.

In that case, N owed rent money to his landlord, K. Rather than pay, N lured K to his home, where K was repeatedly and viciously stabbed.

N denied that he was involved in the stabbing, and claimed that another unknown person had stabbed K.

While K was being treated by police on the scene, N approached K and the police. K, who was in obvious and extreme distress, pointed to his stomach stab wounds, and then pointed to N.

The trial judge found that the gesture fell within the “dying declaration” exception to the hearsay rule. The Court of Appeal agreed. They also agreed that evidence of the gesture was admissible under the principled approach to hearsay.

A dying declaration is usually a verbal statement or utterance. However, a gesture can also convey meaning, and may be considered to be a statement or utterance to which the dying declaration exception to the hearsay rule applies.

With respect to the dying declaration exception to the hearsay rule, the Court of Appeal said that the exception could be traced back to the 1789 decision of The King v. Woodcock. There, the court stated:

Now the general principle on which this species of evidence is admitted is, that they are declarations made in extremity, when the party is at the point of death, and when every hope of this world is gone: when every motive to falsehood is silenced, and the mind is induced by the most powerful considerations to speak the truth; a situation so solemn, and so awful, is considered by the law as creating an obligation equal to that which is imposed by a positive oath administered in a Court of Justice.

The trial judge was therefore correct in instructing the jury to consider the evidence of whether K was pointing to N, and if he was, what he meant by this.

Another ground of appeal was with respect to incriminating messages retrieved from N’s cell phone. When N was first arrested, his phone was seized. An analysis of the data on the phone revealed only limited interaction between N and his co-accused. However, about a year later, the analysis software was updated, and a further analysis of the phone revealed the plan to kill K. N argued that the second analysis was a fresh search that was not authorized by the first search warrant. This argument was rejected.

Have a great weekend.

Paul Trudelle

26 Jun

The estate sale – can it be a treasure island?

Suzana Popovic-Montag Beneficiary Designations, Estate & Trust, Estate Litigation, Estate Planning, Uncategorized Tags: , , 0 Comments

We wrote several months ago about the declining value of household furniture and other items – especially antiques that were highly desired decades ago.

The general rule if you’re selling home assets (typically in an estate or when moving into a retirement home situation) is that you won’t get as much as you think. Tastes change (grandfather clock anyone?), artists fall out of favour (or never gain much market value) and items fall into disrepair. And you usually have to pay a firm to come in and assess and sell the contents. It may not leave you with much.

Mind the small stuff

What can often get overlooked in content sales is the little stuff. We all bring our personal biases when assessing what’s junk and what could be a little treasure. If you see a figurine or small carving and don’t like it, you’ll assume that others won’t like it either. Under the weight of all the other junk you have to dispose of, the item can end up in the trash.

That can be a costly mistake. I was recently visiting an estate home being prepared for sale, and the daughter of the deceased pointed to a small ceramic cat at the end of the mantle. It was, to me, nothing much of note. It was about 2 inches high and 3 inches long and had stripes. I wouldn’t have thought twice about trashing it if I was clearing out the house.

That’s what the daughter thought too, until they had a friend over who identified the cat as an original ceramic piece by Swedish artist Lisa Larson. What was going to end up in the trash was actually a small sculpture worth hundreds of dollars. Oops …

Be mindful of the art-savvy owner

If a homeowner had a good eye for art during their lifetime, there’s a good chance that even small knick-knacks were bought with purpose and could have value. So, before you clear the little stuff off the mantle of someone’s home, it may pay to have an art-savvy friend tour the house just in case.

Thanks for reading – enjoy your day,
Suzana Popovic-Montag

25 Jun

Constructive Trusts in the Context of Mutual Wills

Christina Canestraro Disappointed Beneficiaries, Estate Litigation, Estate Planning, Mutual Wills, Wills 0 Comments

Mutual wills are a common tool used by two (or more) people who wish to preserve a will (or specific provisions thereunder) by entering into an agreement to avoid future changes. This is a particularly useful tool in blended families where partners have children from prior relationships, and both want to ensure that their children are equally provided for post-death.

The requirements for an application of the doctrine of mutual wills are three-fold: (1) there must be an agreement between the individuals who made the wills, which amounts to a contract; (2) the agreement must be proven by clear and satisfactory evidence; and (3) it must include an agreement not to revoke wills.

Once one of the parties to a mutual will agreement dies, the survivor is then bound by that agreement not to revoke his or her will. Typically, we see mutual wills cases arising after the death of both spouses, once it is discovered that the surviving spouse drafted a new will in breach of their mutual will agreement or disposed of assets contrary to their agreement.

The recent case of Nelson v Trottier grappled with a novel issue with respect to mutual wills: whether, in light of the existence of a mutual wills agreement, beneficiaries to a survivor’s estate could claim a constructive trust over her assets while she was still alive.

The applicants in this case were the deceased’s children. They were not beneficiaries under their father Bill’s will, but were beneficiaries under his wife Huguette’s will. After making a donation in Bill’s honour, the applicants sought, among other things, a declaration imposing a constructive trust over Huguette’s assets and preventing her from gifting property without further order of the court or the consent of the applicants.

After establishing that a mutual wills agreement existed between Bill and Huguette, the court then examined when a constructive trust is established. In deciding this issue, Justice Pattillo stated,

“in circumstances where one of the parties to a mutual wills agreement has died, however, and based on the nature of a mutual wills agreement and the purpose of imposing a constructive trust in respect of such agreement, it is my view that a constructive trust does not arise until either the survivor dies or earlier, in the event there has been a breach of the agreement by the survivor”

Since Huguette was still alive, the question became whether she had breached the mutual wills agreement by making the donation in Bill’s honour. Justice Pattillo ultimately found that Huguette had not breached the mutual wills agreement. His reasons included that the agreement provided that both Bill and Huguette would give the survivor all of their property absolutely and that the surviving spouse could deal with the property as absolute owner while alive (which includes the ability to make gifts).

Interestingly, Justice Pattillo acknowledged that the mutual wills agreement stipulated that the survivor could not dispose of “substantial” portions of the property received during his or her lifetime in order to defeat the agreement; however, he did not find that the donation given to be “substantial” in comparison to the size of the estate.

The application seeking, among other things, a declaration that there was a constructive trust over Huguette’s assets, was ultimately dismissed.

Thank you for reading!

Christina Canestraro

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