Category: Estate Planning
One steady source of estate litigation is the uncertainty around estate trustee compensation. There is no statutory formula for determining the appropriate quantum. Instead, estate trustees come up with a percentage that is supposed to reflect their contributions, and the beneficiaries are left with the options of accepting, objecting, and everything in between. If matters proceed to court, judges apply an age-old customary analysis in order to find a number that suits the unique circumstances of the estate administration. One of the five factors the courts look at is the size of the estate. Whereas traditionally bigger estates have led to bigger compensation, we have seen a potential turning point out in New Brunswick in the case of Atlantic Jewish Foundation v. Leventhal Estate,  N.S.S.C. 297.
Section 61 of the Trustee Act directs that estate trustees be paid “fair and reasonable allowance[s]” for their “care, pains and trouble”. Over time, courts have set the “tariff guideline” or customary rate at “2.5% of each of the capital receipts, capital disbursements, revenue receipts, and revenue disbursements” (Freeman Estate, Re,  O.J. 3402 at para. 30). This rate must be cross-checked, however, against the five factors, which look at the actual work done, before a final quantum is reached.
Size and Complexity
Historically, estate trustees have earned more in administering bountiful estates, and vice versa. The administration of a small yet convoluted estate has typically been far less lucrative than the administration of a large estate comprised of a handful of simple assets. Courts have, however, been ready to reduce compensation when an estate, despite its net value, involves little complexity – for instance, when the assets are easy to liquefy and distribute (see Forrest Estate v. O’Donohue,  O.J. 1898 (Gen. Div.) at para. 14).
A Deviation in New Brunswick
What is unique with the compensation reduction in Atlantic Jewish Foundation is that the estate trustee’s duties were not particularly simple. He managed the deceased’s hotel, sold it at a good price, oversaw numerous agents, and generally displayed skill and sophistication. Yet the court slashed his proposed compensation in half – a pronounced reduction – and did so not on the basis that the estate was simple, but that he should not receive remuneration that was tantamount to a “windfall or a bequest”. Certainly his case was not helped by the fact that the objector, and residuary beneficiary, was a charity, and that he was seeking $900,000 for 77 hours of work …
In the wake of this case, it will be interesting to see if other courts lessen compensation because the figure is merely too high, rather than applying percentages that coincide with the work done.
Thanks for reading,
Suzana Popovic-Montag and Devin McMurtry
Section 9(1) of the Estates Administration Act, R.S.O. 1990, c. E 22 (“EAA” ) provides, among other things, that real property vests in persons beneficially entitled to that property under a will if that property was not disposed of, conveyed to, divided or distributed among the persons beneficially entitled by the personal representative within three years after the death of the deceased (unless a caution has been registered on title). The EAA does not provide further clarification on when vesting takes effect if a property is subject to a life interest, and further, what happens to that property upon the termination of the life interest.
The recent decision of Lewis Pelicos, Executor and Trustee of the Estate of James Pelicos v. The Estate of Stelios Pelicos, 2019 ONSC 5304 provides clarity on when vesting takes place in circumstances where real property is subject to a life interest.
In that case, the Applicant’s father, James, died testate. The beneficiaries of James’ estate were his two sons, Steven and Lewis (the Applicant). James’ last will and testament required his two sons, Steven and Lewis (the Applicant) to hold his residential property in trust for his wife, Lillian, for her lifetime. Steven passed away some years later, leaving only the Applicant as the beneficiary of his father’s estate. The Applicant was also the executor and trustee of his father’s estate.
Following the death of the life tenant, the Applicant wished to sell the property, but required the court’s direction on whether Steven’s estate would be entitled to a share of the proceeds of sale. The answer to that question depended on whether the property vested in the beneficiaries of James’ estate on his death, or the death of the life tenant.
The Applicant brought an application seeking the court’s directions, with the issues stated as follows:
(1) Can it be inferred that the property falls into the residue of the estate upon the termination of the life interest?
(2) In the alternative, do the beneficiaries of James’ estate take their interest on the testator’s date of death, or the date of death of the life tenant?
The court ultimately found that the property vested in both Steven and the Applicant as of the date of death of the testator, and as a result, the property did not fall into the residue of the estate upon the death of the life tenant.
To learn more about Vesting of Real Property, check out this blog:
Thank you for reading!
The Ontario Court of Appeal recently set aside an order committing an estate trustee to 15 days in jail, to be served on weekends, for contempt of an order requiring the estate trustee to pass his accounts.
In Ross v. Ross, 2019 ONCA 724 (CanLII), the estate trustee was a lawyer, 73 years of age, with no prior convictions or findings of contempt. At the time of the appeal, the estate trustee had purged his contempt.
At the hearing below, the judge found that the contempt arose from “a failure to understand and appreciate or to ignore the need for, and importance of, complying with the order within the specified time or within a reasonable time.” The Court of Appeal held that this finding meant that the estate trustee’s actions did not amount to a callous disregard for the court’s authority. Accordingly, a jail sentence was not appropriate.
For other cases on contempt and sentencing, see our blog, here and here. In the first blog, reference is made to a case where an 88 year old litigant with health issues was sentenced to 30 days in jail for contempt. In the second blog, we discuss a case where an attorney for property failed to pass accounts as required by court order. He was fined $7,000.
Finally, consider the case of Canavan v. Feldman, 2004 CanLII 4787 (ON SC). This was a claim by an estate trustee against his former lawyer. There, the estate trustee, 67 years old, spent 35 days in jail for contempt of court orders relating to a passing of accounts, and was only released when new counsel put further evidence before the court. The estate trustee’s prior lawyer had consented to an order of contempt without the estate trustee’s knowledge. The lawyer told the estate trustee that he had “nothing to worry about”. At a sentencing hearing, the lawyer did not attend. The estate trustee was sentenced to 6 months in jail. The estate trustee was awarded general damages of $200,000 and punitive damages of $100,000 against his prior lawyer.
Thanks for reading.
No, we are not referring to the 1979 film featuring Dustin Hoffman and Meryl Streep, but a far more recent (but nonetheless interesting) legal dispute involving an application to pass accounts, suspicious activity on behalf of an Attorney for Property, and the resurgence of the equitable defences of laches and acquiescence.
A complex series of facts is present in the Estate of Ronald Alfred Craymer v. Hayward et al, 2019 ONSC 4600: two Attorneys for Property, six marriages, seven children, thirty years of estrangement between Ronald and his four children, and virtually no financial records for the period during which the first Attorney for Property oversaw the affairs of her incapable husband’s estate.
The cruxes of the dispute are that the first Attorney for Property (Joan, Ronald’s wife) transferred the title of the matrimonial home to herself, she kept scanty financial records, and the value of her assets (over $1 million) dwarfed that of her late husband’s (around $35,000). When Joan died suddenly, John Craymer (Ronald’s son, the plaintiff) applied for a passing of accounts and the second Attorney for Property (Linda, Joan’s daughter) was left in the unenviable position of potentially having to answer for the conduct of her late mother in relation to accounts of which she, Linda, had no knowledge.
Under section 42 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30, the Court may order a passing of accounts. In considering whether to do so, it should examine “the extent of the attorney’s involvement in the grantor’s financial affairs and second whether the applicant has raised a significant concern in respect of the management of the grantor’s affairs” (McAllister Estate v. Hudgin, 42 E.T.R. (3d) 313 (ONSC), at para 13). Since section 42 carries a high threshold, and Linda was not responsible for her mother’s conduct, the Court did not grant the application. In its reasons, moreover, the Court found fault with the transfer of the home, but given the marital relationship between grantor and attorney, it did not attach much weight to the scantiness of detailed accounts.
Noteworthy in this case is the Court’s consideration of the equitable doctrines of laches and acquiescence in the context of a motion for a passing of accounts (in which, in Ontario, there is no limitation period). In determining whether these defences apply, the Court looks at the length of the delay and the resulting prejudice. Neither of these components were applicable here, for when John learned of the value of his father’s estate as well as the transfer of the home into Joan’s name, he acted promptly. Instead, his application was dismissed on the Court’s discretion.
Thank you for reading.
Ian Hull & Devin McMurtry
Previously, Hull and Hull LLP blogged on the decision of Tarantino v. Galvano, 2017 ONSC 3535 (CanLII). After a ten day trial, the court set aside a transaction whereby the deceased’s daughter, acting as attorney under a Power of Attorney, transferred the deceased’s interest in her home to the daughter. The court also allowed a claim by the daughter for services provided to the deceased. The court disallowed a claim for occupation rent against the daughter.
We also blogged on the costs decision, reported at Tarantino v. Galvano, 2017 ONSC 6635 (CanLII). The collective legal fees of the parties on a substantial indemnity basis (ie., the actual legal fees were higher) were $621,660. The main asset of the estate was 80% of a house valued at $680,000 in 2012. Neither party was awarded costs, other than a reimbursement for the cost of an expert report.
The matter was before the courts once again. On September 6, 2019, the Ontario Court of Appeal dismissed the appeal brought by the grandchildren of the deceased (the daughter’s nieces): Tarantino v. Galvano, 2019 ONCA 699 (CanLII).
The Court of Appeal held that with respect to the dismissal of the claim for occupation rent, the trial judge did not err. The daughter remained in the house (of which she owned 20%) after death. However, the granddaughters had sought and obtained an undertaking from the daughter not to sell the house while the litigation was pending. Of note is the fact that the daughter, under the deceased’s will, had a first option to purchase the house. As the daughter was prevented from selling the house by reason of the undertaking sought by the granddaughters, it would be “unfair” to charge the daughter rent when she was unable to deal with the house.
With respect to a second ground of appeal, the Court agreed with the trial judge that the costs of maintaining the home during the deceased’s lifetime, and while she was in poor health, should fall on the deceased. As the trial judge concluded, “Having accepted that [the deceased’s] wish was to be looked after at home, and having accepted that in her capacity as attorney for personal care it was appropriate for [the daughter] to make arrangements for [the deceased] to be looked after in the home, those expenses are properly attributable to the care of [the deceased].”
The appeal was dismissed, with costs of $15,000 payable by the granddaughters to the daughter.
I expect that this is the last chapter in this unfortunate, expensive saga.
Thank you for reading.
The Substitute Decisions Act (the “SDA”) was passed in 1992. It governs what happens when a person becomes incapable of managing their own property or personal care. Under section 3 of the SDA, if the capacity of a person in a legal proceeding is in issue, the Public Guardian and Trustee (the “PGT”) may arrange for the legal representation of that person. Section 3 also provides that the person shall be deemed to have the capacity to retain and instruct counsel.
Although section 3 seems to be fairly straightforward, the details surrounding the appointment and position of section 3 counsel are somewhat obscure. Cases such as Sylvester v Britton and Banton v Banton have added some clarity to the role of section 3 counsel. The recent case of Kwok v Kwok provides a further illustration as to when section 3 counsel is to be appointed.
In Kwok v Kwok, Jiefu Kwok was involved in two motor vehicle accidents in 2011. He suffered a traumatic brain injury as a result and commenced two legal actions in relation to the accidents. A capacity assessment was conducted in 2014, which revealed that Jiefu was incapable of taking care of himself and managing his own property. In 2015, Jiefu’s son, Derek, was appointed as his guardian for property and personal care. Derek later filed an application to be released from these roles as he stated that it was putting a strain on his relationship with his father. Derek’s mother, Ellie, brought an application to take Derek’s place and be appointed as Jiefu’s guardian of property and personal care.
The PGT took the position that section 3 counsel should be appointed to represent Jiefu and obtain his wishes before Ellie was appointed as Jiefu’s guardian of property and personal care. The PGT was of the view that Jiefu’s capacity assessment conducted in 2014 was outdated and that a more limited guardianship might be appropriate for him.
Counsel for Derek and Ellie (the “Applicants”) argued that section 3 counsel is to be used in cases where a capacity assessment has not already been conducted. They added that, since a capacity assessment was already conducted in this case, the appointment of section 3 counsel was inappropriate. Moreover, a primary concern for the Applicants was the high costs associated with the appointment of section 3 counsel.
The Court considered the arguments of the PGT and the Applicants and noted the following about the role of section 3 counsel:
- The appointment of section 3 counsel is a safeguard that protects the dignity, privacy and legal rights of a person who is alleged to be incapable
- Section 3 of the SDA does not make the appointment of legal representation mandatory
- In deciding whether to appoint section 3 counsel, the Court must consider the specific facts and issues in each case
- The Court can appoint section 3 counsel even in cases where a capacity assessment has already been conducted or where there is an existing Court order declaring that a person is incapable
The Court concluded that the appointment of section 3 counsel would not be in Jiefu’s best interests and would be a waste of resources. The Court made this finding based on the following reasons:
- There were no completing claims amongst Jiefu’s closest relatives as to who should be his legal representative. Both Derek and Ellie supported the appointment of Ellie as Jiefu’s guardian of property and personal care
- There was no evidentiary basis to question the validity of the 2014 capacity assessment
- A letter from Jiefu’s primary care physician regarding his current condition did not suggest that Jiefu’s condition had improved
- Jiefu attended Court and expressed that he supported the appointment of Ellie as his guardian of property and personal care
As a result, Derek was released from his role as Jiefu’s guardian for property and of the person and Ellie was appointed in his place.
Kwok v Kwok adds to a growing body of cases examining the role of section 3 counsel. It provides that the Court can appoint section 3 counsel even in cases where a capacity assessment has already been conducted or where there is an existing Court order declaring that a person is incapable. Furthermore, it indicates that the wishes of the incapable person are to be given a considerable amount of weight in assessing whether section 3 counsel is appropriate.
For further reading on section 3 counsel, check out these other blogs:
Thanks for reading – have a great day!
Suzana Popovic-Montag and Celine Dookie
“There is no love lost between sisters [K] and [A].” So starts the endorsement in Nutzenberger v. Pryde, 2019 ONSC 5030 (CanLII).
There, the parents made a loan to A of $75,000. In their wills, the residue of the estate is to pass to the surviving parent. Both wills contained a clause that provided that if the other spouse was not living on the 30th day following the first spouse’s death, the $75,000 was to be forgiven.
Mother died on September 25, 2015. Father died on May 30, 2016.
K, as estate trustee of mother’s estate, brought a claim against A for the repayment of the loan. A moved for summary judgment on the claim.
Justice Harris agreed that summary judgment was appropriate. There were no primary facts in dispute, and no credibility issues. He dismissed the claim on two basis: first, mother’s estate had no standing to bring the claim, and second, the loan had been forgiven according to the terms of the wills.
On the first point, the loan came from father’s assets. Any interest that mother had in the loan passed to father under the terms of her will. Only father, or father’s estate had standing to pursue the loan.
Secondly, although the terms of the wills forgiving the loans were not “a model of drafting dexterity, to put it mildly”, the court interpreted the wills to mean that the intention of the parents was that either one could call in the loan while alive, but upon the death of the survivor, if no action was taken, the loan would be forgiven.
In determining the intention of the parties, the court looked at other terms of the wills. One term in both wills gave the estate trustee the discretion to pursue a loan. Another term acknowledged that a certain advance was in fact a gift. The term in question was “an awkward hybrid”. However, the court was able to conclude that the intention was that the loan would be forgiven if the surviving parent did not take any steps to collect on it.
As usual, more careful drafting may have avoided the litigation.
Thank you for reading.
In September 2016, Elizabeth Wettlaufer quit her nursing job and checked herself into the Centre for Addiction and Mental health in Toronto where she subsequently confessed to harming and killing a number of people during the last nine years of her nursing practice. Wettlaufer’s choice method of harm was injecting her victims with insulin overdoses. The majority of these incidents took place in licenced, regulated long-term care homes in southwestern Ontario. Wettlaufer is, by all accounts, a healthcare serial killer.
In June 2017, Wettlaufer was convicted of eight counts of first-degree murder, four counts of attempted murder, and two counts of aggravated assault. She was sentenced to life in prison with no chance of parole for 25 years.
But the story did not end there. Wettlaufer’s crimes spurred public outrage and debate over the quality of Ontario’s long-term care system and the safety of those who rely on it. One of the many troubling questions that arose was: how could a registered nurse commit such serious crimes in regulated healthcare facilities for years without getting caught? To find answers and figure out how to prevent similar tragedies from occurring in the future, the Long-Term Care Homes Public Inquiry was launched (the “Public Inquiry”).
The Public Inquiry concluded on July 31, 2019 when the Honourable Eileen E. Gillese, Commissioner of the Public Inquiry, released her four-volume final Report of the Public Inquiry into the Safety and Security of Residents in the Long-Term Care Homes System (the “Report”).
The Report makes three chief findings. First, the harmful acts committed by Elizabeth Wettlaufer would not have been discovered if not for her confession. Second, systemic vulnerabilities in the long-term care system are to blame for the harms that took place, rather than any individual or organization operating within the system. Third, the long-term care system is strained but has the robust regulatory regime and workforce needed to address existing systemic issues that have been exposed by the Public Inquiry.
Though I write at the risk of fear-mongering, that is by no means my intent. Indeed, I firmly believe that the large majority of healthcare providers uphold the ideals of patient or resident-centred care. The Report, in my view, is noteworthy for the bright light it shines on the potential for a nurse or other healthcare professional to intentionally harm those under their care. As astutely stated in the Report, “We can prevent, deter, and detect only matters of which we are aware” (volume 1, page 18).
It is prudent for residents or their substitute decision-makers to be on high alert for signs of abuse by staff in long-term care homes and issue complaints where appropriate. The Long-Term Care Homes Act , the statute which governs Ontario’s long-term care homes, contains several provisions concerning residents’ rights and the complaints process that can be of assistance. The takeaway is that anyone can be a potential advocate for a vulnerable resident of a long-term care home.
Arielle Di Iulio
With the enactment of Rule 75.1 of the Rules of Civil Procedure, those involved in disputes relating to an estate, trust or substitute decision-making matter in Toronto, Ottawa or the County of Essex are referred to mediation unless there is a court order exempting it under Rule 75.1.04.
As lawyers, “mediation” is a term we are familiar with. However it may not be as familiar to clients. Many of them may have never heard of “mediation” before. As such, if you or a client have an upcoming mediation, it is important to prepare early to avoid being caught off guard during the mediation.
What is Mediation?
Mediation is a form of alternative dispute resolution where people can settle their disputes outside of court. It is a voluntary process in which the parties meet with a neutral third-party (referred to as the “mediator”) who provides them with assistance in negotiating a settlement. The mediator does not impose a judgment as the process is led by the parties.
Mediation vs. Litigation
The big “pull factor” to mediation is that it vastly differs from litigation. The major differences include:
- Decision-Making: With mediation, the parties decide the outcome but with litigation, a judge imposes his or her decision upon the parties
- Private vs. Public Process: Mediation is a private and confidential process, whereas litigation is a public process
- Costs: The costs of mediation are typically lower than that of litigation
- Time: The mediation process tends to be faster than litigation
- Adversarial vs. Non-Adversarial: Mediation is viewed as a non-adversarial process, whereas litigation is viewed as an adversarial process
Preparation for Mediation
Preparation for mediation should start well in advance of the mediation date.
Preparing the Client
Start by explaining to the client what mediation is and how the process works. Assure the client that the mediator will be a neutral facilitator and that abusive behaviour by the other party will not be tolerated.
As part of discussing the mediation process with the client, let the client know about the time commitment that mediation entails. The mediation could last the entire day or even multiple days.
Determine the client’s interests and goals for the mediation. Are they looking to settle the case at mediation or are they prepared to go to trial? What types of offers would they be willing to accept?
Preparation for the Lawyer
Know the mediator’s background and approach beforehand. Is the mediator someone who has a background in estates law? Are they a lawyer? Are they a former judge? Knowing the answers to these questions can help the lawyer determine what approach would be the most beneficial to employ during mediation.
Prepare a comprehensive mediation brief and send it to the opposing counsel and mediator well in advance of the hearing date. A comprehensive mediation brief can maximize a lawyer’s presentation at the mediation. It is helpful to include copies of all relevant documents, such as the wills in question, within the brief. Additionally, it might be helpful to include a chronology of events as a schedule to the mediation brief.
If the mediation results in a settlement, ensure that the terms of the settlement are formally documented and that each client has signed the document. In some cases, however, a “cooling-off period” of one or two days from the proposed settlement might be necessary.
At the end of the day, the best approach a lawyer can take in preparing for mediation is to know the mediator, prepare their documents ahead of time and provide the client with as much information about the mediation process as possible. The more prepared the lawyer and the client are, the smoother the mediation will go.
For more information on preparing your client for an estate mediation, visit this link.
Thanks for reading,
Ian Hull & Celine Dookie
I always thought of Labour Day as more of a new beginning than New Year’s Day. There is a seasonal change: the carefree days of summer give way to cooler, more productive and contemplative days. There is a strong feeling of a fresh start: whether it be at school or at work or otherwise.
That led me to consider Labour Day resolutions. Apparently, I am not alone. An internet search of “labour day resolutions” (or “labor day resolutions”) leads to thousands of results.
Resolve to be better in the months ahead. A study has shown that those wanting to change their behavior are ten times more likely to do so where they make a resolution to do so, compared to those who do not make resolutions.
When making resolutions, experts advise us to set realistic goals. Further, don’t be deterred by slip ups. Look at slip ups or lapses as bumps, not walls.
Each of us has areas where we can improve. I won’t tell you what your resolutions should be. (Although I do make a detailed list of resolutions for my kids each year. One of the resolutions is that they should resolve to be more receptive and appreciative of my list of resolutions.)
However, if you need suggestions, consider the Labour Day resolutions suggested by Heinz Marketing. They include:
- Spend more time on the phone (as opposed to texting or emailing);
- Spend at least one hour a day on focused reading;
- Spend at least 30 minutes a day on networking;
- Complete the day’s most important task before checking your email;
- Read the Wall Street Journal every day; and
- Take at least 10,000 steps every day.
Have a great Labour Day weekend and enjoy the year ahead.