The Consolidated Practice Direction Concerning the Estates List in the Toronto Region was established for the hearing of certain proceedings involving estate, trust and capacity law, applying to matters on the Estates List in the Toronto Region.
As of March 9, 2021, Part VII (Contested Matters – Estates) of this practice direction was amended to make reference to model orders prepared by the Estate List Users’ Committee.
Generally, parties are expected to take the time and care to prepare proposed orders giving directions for consideration by the court. If the parties are unable to agree upon an order giving directions and a contested motion for directions is required, each party must file a copy of the draft order giving directions it is seeking with its motion materials.
In addition to providing requirements for what orders giving directions should address, where applicable, this practice direction now includes the following model orders:
- Order Giving Directions – Appointment of Section 3 Counsel
- Order Giving Directions – Power of Attorney/Guardianship Disputes
- Order Giving Directions – Will Challenge
- Order Giving Directions – Dependant’s Support
- Order Giving Directions – Passing of Accounts
As noted in the practice direction, the preparation of draft orders for consideration by the court will greatly expedite the issuance of orders. Where the relevant model orders have been approved by the Estate List Users’ Committee, a copy of the draft order showing all variations sought from the model order must be filed.
The addition of model orders can greatly benefit the Estates List in the Toronto Region. Among other things, these model orders provide a baseline for all parties, such that it can significantly reduce drafting time and potential disagreements on wording among parties, which in turn can increase efficiency and reduce costs.
Many thanks to the Estate List Users’ Committee for their time and efforts in preparing these model orders!
Thank you for reading.
Earlier this year, our colleague Doreen So, blogged in two parts (here and here) on the matter of PGT v Cherneyko. It is a blog that discusses a litany of failures by an attorney for property. While Doreen covered the facts in full, they are worth repeating here in part:
“Jean Cherneyko is a 90-year-old woman. Jean did not have any children of her own. Her closest known relative was a niece in the US. By the time of the PGT application, Jean was in a long-term care home. Prior to that, Jean lived alone in the same home that she had lived in since 1969. Jean had a friend named Tina who she had known for about five years. On August 15, 2019, Jean and Tina went to a lawyer’s office. Jean named Tina as her attorney for property and personal care. Jean also made a new Will which named Tina as the estate trustee and sole beneficiary of her estate. A week or so later on August 27th, Jean and Tina went to Jean’s bank where $250,000.00 was transferred to Tina […]”
The PGT applied to take over as guardian for property and, among other things, to set aside the gift to Tina. The court agreed and ordered the $250,000 returned to Jean on the basis of resulting trust.
In a novel approach to the law of gifts, the court in Cherneyko relied on Pecore to establish that the gift ought to be returned, saying: “The leading Canadian case on the law of gifts, the Supreme Court of Canada in Pecore v Pecore, 2007 SCC 17 (CanLII) at paras. 24-26 established that where a gratuitous transfer of property is found, there is a presumption of a resulting trust. The onus falls to the recipient to rebut the presumption.” In the court’s view, Tina failed to rebut the presumption.
But this represents a new application of the Supreme Court’s analysis and it’s worth revisiting Pecore.
In 2007, Justice Rothstein, writing for a unanimous court (Justice Abella concurring) looked closely at gratuitous gifts of joint bank accounts, between parents and children, and whether the presumption of resulting trust and advancement applied in modern times:
“The presumption of resulting trust is a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged, the presumption allocates the legal burden of proof. Thus, where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended: see Waters’ Law of Trusts, at p. 375, and E. E. Gillese and M. Milczynski, The Law of Trusts (2nd ed. 2005), at p. 110. This is so because equity presumes bargains, not gifts.”
The decision in Cherneyko represents a significant expansion of the principles of Pecore by applying them to inter vivos gifts between unrelated adults. Traditionally, if the courts determine that a transferor lacked the requisite capacity, the gift is void as the transferor lacked the capacity to form the proper intention to gift. Ball v. Mannin, an almost 200-year-old UK case established the original test for granting a gift and held that a person had capacity if the person was “capable of understanding what he did by executing the deed in question, when its general purport was fully explained to him.” The Supreme Court has previously outlined a separate test in Geffen v Goodman Estate in 1991, examining the nature of the relationship itself, and applying a presumption of undue influence where there is the presence of a dominant relationship. While the failed gift in Cherneyko was ultimately returned under a resulting trust, it will be fascinating to see if other courts also continue this expansion of Pecore. We’ll keep you posted.
Thanks for reading!
Ian Hull and Daniel Enright
Yesterday, I blogged on Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107. Today’s blog will focus on some of the breaches of fiduciary duty that were found by the Court. For those who have not read yesterday’s blog, this is a case that involves Jean, a 90 year old woman, and Tina, the attorney for property, who was purportedly given a gift of $250,000.00 just days before Jean was hospitalized for acute delirium and progressive cognitive decline.
While the purported gift of $250,000.00 to Tina was found to be invalid, the Court went on to find that Tina was in breach of her fiduciary duty to Jean by accepting the money. Tina was in breach because she knew that Jean was exhibiting signs of cognitive decline when they went to the bank. In the Court’s view,
“a person acting in a fiduciary capacity for a person actively demonstrating moments of irrationality should be very cautious about any big financial moves that person claims they want to make in and around such periods of demonstrated incapacity. Even if Jean was clearly acting in a competent manner during the few hours she attended the CIBC with Tina on August 27, 2019, I agree with the submissions of the PGT it is no answer to an accusation of breach of duty to assert that an attorney was simply acting in accordance with the wishes of the grantor of the attorney. Tina should have proceeded with caution at that time. I find she did not exercise the appropriate degree of caution and good judgment given the circumstances about which she knew.” (para 42)
The Court also reiterated Justice Penny’s comments in Ontario (Public Guardian and Trustee) v. Harkins,  O.J. No. 3313, that a fiduciary’s first duty is to see to the best interest of the person regardless of what their stated wishes may be. The Court was very critical of how a $250,000.00 gift to Tina could possibly benefit Jean, and expressed disapproval on how there was no evidence of any effort on Tina’s part in considering whether this money would better serve Jean if it was applied towards Jean’s in-home care instead of admitting Jean to a long term care home.
Of relevance to the unique circumstances that surround the care of others during Covid-19, the Court commented that,
“since March 2020 more than at any time in the past, any genuinely concerned person charged with caring for an elderly person in long term care would have at least considered the issue of taking whatever steps could be taken to remove the person from this situation if it was in any way possible.” (para. 47)
Instead, Tina allowed her adult son to move into Jean’s home, and she was found to be actively misusing Jean’s assets for her own and her family’s benefit which were additional breaches of her duties as fiduciary. The Court also disapproved of how Tina did not take any steps to sell Jean’s house in order to maximize or preserve its value which, reading between the lines, seem to be a concern for the uncertainty in today’s markets.
Thanks for reading! Stay safe!
Right from the start, 2021 is starting to look like it will be another extraordinary year of historic significance. In the world of estates, trusts, and capacity litigation, there was a decision released on January 5th where serious breaches of fiduciary duty by an attorney for property were found and the PGT was ordered to take over. The facts in Public Guardian and Trustee v. Cherneyko et al, 2021 ONSC 107, read like a law school case study and the reasons are worth noting.
Jean Cherneyko is a 90 year old woman. Jean did not have any children of her own. Her closest known relative was a niece in the US. By the time of the PGT application, Jean was in a long term care home. Prior to that, Jean lived alone in the same home that she had lived in since 1969. Jean had a friend named Tina who she had known for about five years. On August 15, 2019, Jean and Tina went to a lawyer’s office. Jean named Tina as her attorney for property and personal care. Jean also made a new Will which named Tina as the estate trustee and sole beneficiary of her estate. A week or so later on August 27th, Jean and Tina went to Jean’s bank where $250,000.00 was transferred to Tina, and $195,329.50 was transferred to Jean’s niece. Days later on August 31st, Jean was hospitalized for acute delirium and progressive cognitive decline. During Jean’s admission, Tina noted that Jean had become increasingly confused over the prior few months and that Jean exhibited lethargic behaviour and complained of bodily soreness. On September 1, 2019, Jean was diagnosed as being cognitively impaired. Thereafter, Jean was transferred to long term care on October 1st based on Tina’s authorization as Jean’s attorney for property. Short time after that, Tina’s son moved into Jean’s home and the PGT started to investigate in March, 2020 when the bank froze Jean’s accounts.
As a result of their investigation, the PGT brought an application to remove and replace Tina as Jean’s attorney for property. The PGT also sought to set aside the $250,000.00 transfer to Tina and the return of various other sums that were received by Tina, which totalled approximately $350,000.00.
First, the Court found that the transfer of $250,000.00 to Tina was not a gift. Tina failed to rebut the presumption of resulting trust for the gratuitous transfer. Tina put forth evidence that there was a bank manager who spoke to Jean at the time of the transfer, and that the banker told Jean that she would have still have enough money to live after the transfers to Tina and the her niece. This evidence was tendered through Tina’s affidavit without any direct evidence from the banker. The Court disregarded Tina’s reliance on the banker’s involvement because Tina herself had deposed that Jean was having “moments of delirium and irrationality, her condition fluctuated between lucidity and confusion” in late August, 2019 (para. 31) and there was no evidence that the banker was informed.
The Court also seriously questioned whether any of the payments to Tina were truly what “Jean wanted” because Jean’s power of attorney for property clearly stated that there was to be no compensation. The Court agreed with the PGT’s contention that Tina should not have paid herself $2,000.00 per month in compensation and on how that sum was unreasonably high given that Jean’s long term care costs were only $2,701.61 per month.
The value of the transfers, which was about a quarter of Jean’s net worth at the time, when considered in the context of Jean’s September 1st diagnosis also led the Court to find that Jean lacked capacity to gift Tina such a substantial sum.
The Court’s focus on context, timing, and proportionality as benchmarks in its analysis are very important for litigators and advisors to keep in mind.
Stayed tuned this week for Part 2 on Cherneyko: the breaches of fiduciary duty.
Thanks for reading,
The court’s authority to approve settlements of claims that impact the interests of persons under a legal disability, including minors and incapable persons, is well-known. Rule 7.08 of the Rules of Civil Procedure provides that any settlement of claims made by or against a person under disability is not binding unless approved by a judge. Implicit in this Rule is that the court is to ensure that a settlement impacting the rights of individuals who cannot legally consent to such a settlement is, in fact, in the best interests of those individuals.
Rule 7.08(4) lists the court material that must be delivered as part of any such motion for court approval and includes, among other items, an affidavit of the lawyer acting for the litigation guardian of the incapable person “setting out the lawyer’s position” vis-à-vis the proposed settlement. In the recent decision of the Superior Court of Justice in Grier v Grier, the Court grappled with the extent of the lawyer’s obligations in preparing such an affidavit, particularly when questions of privilege are invoked.
In the Grier decision, the parties to the litigation had agreed on terms of settlement. However, as they were both under a legal disability, the parties brought a motion seeking court approval of the settlement not only on their behalf, but also on behalf of two non-parties whose interests were impacted by the settlement. One of the non-parties, S, brought a subsequent motion seeking copies of the materials exchanged by the parties in the litigation generally, as well as on the motion for court approval.
The court denied the former on the basis that the non-party was not entitled to service of any court material exchanged by the parties unless otherwise ordered by the court, as she had not filed a Notice of Appearance. As to the latter, the parties had previously agreed to an order that the two non-parties would be entitled to service of materials relating to settlement. As such, the court found that S was entitled to service of the materials for the motion for court approval.
However, the main issue before the court related to the adequacy of the materials produced. The parties had each served the non-parties with incomplete motion materials, including affidavits of counsel for the litigation guardians which had select sections omitted on the basis of privilege. S, as moving party, sought disclosure of the complete motion materials inclusive of the omissions.
The Court considered the authorities, including the Rivera and Boone decisions, and held that lawyers delivering affidavits pursuant to Rule 7.08(4) ought to be more than capable of doing so without breaching privilege. The lawyer’s obligation in that respect is to simply provide assurance to the court that they advised their client as competent counsel would and that the settlement is in their client’s best interests.
Should counsel go further than is required under the Rule, then as the judge in Boone pithily held, “that is counsel’s problem.” If necessary, alternative relief, such as sealing orders, may be considered, but at first instance, it is clear that the court will expect counsel to be able to draft materials in such a way so as to discharge their obligation without butting up against questions of privilege.
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The #FreeBritney movement is a social media movement driven by the fans of Britney Spears, and it has been trending recently this month according to Global News. Britney’s fans are concerned that Britney is being mistreated by her legal conservators. Britney Spears has been under a court-ordered conservatorship since 2008.
In the years leading up to Britney’s conservatorship, there were a multitude of public incidents that called Britney’s wellbeing into question, the most iconic of which was perhaps the viral, tabloid photograph of Britney shaving her head in 2007. In 2008, Britney was involuntarily hospitalized after police were called to her home. Thereafter, Britney was placed under an interim conservatory order, which was ultimately made permanent. Britney’s conservatorship meant that her father, James Spears, and lawyer, Andrew Wallet, had complete control of Britney’s assets, which is similar to a guardianship of property under the Ontario Substitute Decisions Act, 1992. James Spears was given control of Britney’s health like a guardianship of person.
Despite being stripped of the right to control her own property and personal care, Britney’s career has flourished in the twelve years after 2008. During the first year of her conservatorship alone, Britney appeared on television shows and even released a new album (Circus). Britney went on to release 3 more albums after that, and she was the star of a four-year concert residency in Las Vegas (which was excellent in my humble opinion). Britney was also a judge on the television competition show, X Factor, where the judges of the show mentor and critique contestants on their performances. For a list of her accomplishments, check out Britney’s extensive Wikipedia page.
In Ontario, a person is incapable of managing property if “the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of decision” (section 6 of the SDA).
With that in mind, Britney’s role as a judge on X Factor and her reactions on the show seem to show that she was appropriately reacting to the performances of the contestants and that she understood what was at stake in the competition. However, the lay opinion of her fans (myself included) alone would be insufficient to satisfy the statutory requirements of a motion to terminate guardianship of property and person under Part III of the SDA. If the motion is brought on a summary basis under section 73 of the Act, the moving party must include one statement from a capacity assessor and one statement by a second assessor or someone who knows the person, which indicate the following:
(a) that the maker of the statement is of the opinion that the person is capable of managing property, and set out the facts on which the opinion is based; and
(b) that the maker of the statement expects no direct or indirect pecuniary benefit as the result of the termination of the guardianship.
Similar statements are required to terminate a guardianship of person.
Earlier this year, Britney’s conservatorship was extended until at least August 22, 2020.
#FreeBritney and thanks for reading,
Under the Substitute Decisions Act, 1992 (“SDA”), if a person is eighteen years of age or more, there is a presumption of capacity. However, pursuant to section 2(4) of the SDA, if a gift, or contract is made by a person either while the person’s property is under guardianship, or within one year before the guardianship is established, the onus shifts to the other person to prove that they did not have reasonable grounds to believe the person incapable.
In the recent decision of the Ontario Superior Court of Justice (Divisional Court), Foisey v Green, the Court provides clarification on the correct test to be applied under section 2(4).
In Foisey v Green, Ms. Foisey and Ms. Green were the co-beneficiaries of their brother’s estate, who had died intestate. Ms. Foisey and Ms. Green had been estranged for many years, however, through the use of a private investigator, Ms. Green was able to locate her sister at a retirement residence in Ontario. Ms. Green then met with her sister and arranged for legal representation. Ms. Foisey ultimately renounced her right to act as estate trustee of her brother’s estate and when the time came to distribute the assets of the estate, Ms. Foisey provided Ms. Green with a release.
Shortly after having provided the release, Ms. Foisey was found to be incapable of managing her own property, and the Public Guardian and Trustee (“PGT”) was appointed as her guardian of property. The PGT became concerned that Ms. Foisey had received significantly less than what was supposed to be a 50% share in the estate. The PGT made repeated inquiries for more information from Ms. Green and her counsel, but received little to no response. In result, the PGT brought an application seeking to compel Ms. Green to pass her accounts.
In applying section 2(4) of the SDA, the application judge concluded that because of the existence of red flags, Ms. Green had not satisfied that she did not have reasonable grounds to believe Ms. Foisey was incapable when she signed the release. The red flags identified by the application judge included the fact that Ms. Foisey had a long-standing mental illness, that Ms. Foisey lived in a retirement residence, that Ms. Foisey was part of a trusteeship program and that Ms. Green and her lawyer had failed to provide the PGT with any information to satisfy their concerns. For these reasons, the application judge ordered Ms. Foisey to pass her accounts.
On appeal, the Divisional Court held that the “red flags” test applied by the application judge was the incorrect test to apply, because in doing so, the judge failed to consider the extent to which each red flag was known by Ms. Green, and whether Ms. Green had reasonable grounds to believe that Ms. Foisey was incapable of providing the release.
The Divisional Court examined the meaning of “reasonable grounds to believe” looking to jurisprudence and dictionary definitions, concluding that it means a reasonable probability, or that there be an objective basis for the belief which is based on compelling and credible information.
The Divisional Court went on to hold that when assessing whether a person has capacity to enter into a contract, at the time of entering into the contract, they must understand the information relevant to deciding whether or not to enter into the contract. If they can do this, you must further ask if the person can appreciate the reasonably foreseeable consequences of entering into the contract.
After laying out the framework of section 2(4), the Divisional Court went on to consider the red flags identified by the application judge, holding that:
- there was no evidence to suggest Ms. Green knew of her sister’s mental illness,
- no one from the retirement residence suggested that Ms. Foisey was incapable,
- Green had spoken with the case manager of the trusteeship program and had not been told that Ms. Foisey had severe mental health difficulties,
- There was evidence from Ms. Green’s lawyer that Ms. Foisey had legal representation, and appeared to be lucid and understood the release that was properly explained to her by counsel. The Court further acknowledged that a person who suffers from a cognitive impairment is competent with respect to a specific act as long as the act in question takes pace during a lucid interval.
On balance, the Divisional Court concluded that the application judge erred in pointing to “red flags” without addressing what was actually known by Ms. Green, and whether or not that knowledge would lead to reasonable grounds to believe that Ms. Foisey lacked capacity to enter into the release. The Court noted that the most alarming of red flags was the failure of Ms. Green and her lawyer to provide the PGT with information to address his concerns. However, the Court found that the lack of cooperation of Ms. Green and her counsel was not relevant to whether or not Ms. Green had reasonable grounds to believe Ms. Foisey incapable, and, it occurred many months after the execution of the release.
In reaching this conclusion, the Court noted that there is nothing inherently unusual or sinister about an estate trustee requesting a release from a beneficiary – such releases have been commonly used by estate trustees for decades.
Thanks for reading!
There was a recent decision of the Ontario Superior Court of Justice on the issue of costs in a contested guardianship proceeding. Rather unusually, the endorsement in Howard Johnson v. Howard, 2019 ONSC 4643, dealt with the issue of costs after the parties have resolved the main dispute on consent.
In this case, there were two competing guardianship applications over Elizabeth. The applicants on the one hand were Elizabeth’s daughter and son, Marjorie and Griffin, and on the other hand, Elizabeth’s other son, Jon. All three of Elizabeth’s children were of the view that their mother was in need of a substitute decision maker for both the management of her property and for personal care.
While the endorsement does not specify who the competing applicants were seeking to appoint as Elizabeth’s guardian, the parties eventually settled on the appointment of CIBC Trust Corporation as Elizabeth’s guardian of property and all three children as Elizabeth’s guardians of personal care. On the issue of costs, Marjorie and Griffin sought full indemnity costs from Jon while Jon sought substantial indemnity costs from Majorie and Griffin or, in any event, that he be indemnified by Elizabeth for any amounts not recovered from his siblings.
Pursuant to section 3 of the Substitute Decisions Act, 1992, Elizabeth was represented by counsel throughout the proceeding and on the issue of costs. Submissions were made on Elizabeth’s behalf that she should not have to pay costs of the other parties or the outstanding balance of an invoice that was purportedly incurred by Elizabeth in a joint retainer with Jon.
The Court in this instance considered the modern approach to costs in estate litigation as set out in McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA), with respect to Jon’s claim that Elizabeth ought to be responsible, at least in part, for his costs. The court relied on D.M. Brown J.’s (as he was then) comments that the discipline imposed by the “loser-pays” approach to estate litigation applies with equal force to matters involving incapable persons citing Fiacco v. Lombardi, 2009 CanLII 46170 (ON SC). Only costs incurred for the best interests of the incapable person could be justified as costs payable from the incapable’s assets.
In this case, the competing applications of the siblings were found to contain a number of ancillary issues beyond that of the appointment of a substitute decision maker for Elizabeth. The Court was ultimately unable to see how Elizabeth would have derived any benefit from her children’s disputes. Therefore, the children were all ordered to bear their own costs. There was also no clear benefit to Elizabeth from the invoice that was issued to her prior to the appointment of section 3 counsel and Jon was ultimately left to pay that balance.
At the end of the day, the only costs borne by Elizabeth, as the incapable person subject to two competing guardianship applications, were the costs of section 3 counsel pursuant to the section 3(2) of the SDA.
Here is a Bon Appetit recipe for a frozen margarita pie that we could all benefit from.
The recent Ontario Court of Appeal decision in Dzelme v Dzelme acts as a helpful reminder that even if an attorney has standing to seek a passing of accounts, the Court may still refuse to grant the passing.
John was named as the attorney for personal care for his father, Ritvers, and sought an accounting of Ritver’s financial affairs from his brother Arnis (Ritvers’ other son) who was the attorney for property. Both John and Arnis agreed that John, given that he was an attorney for personal care, could apply under section 42(4)(1) of the Substitute Decisions Act for a passing of accounts without leave. Nonetheless, the Court of Appeal identified that even if a person has standing to apply for an accounting, it remains the discretion of the Court to order a passing of accounts.
In deciding whether to order the passing, the superior court judge made the following findings of fact: (i) both the father and mother were capable when they executed written instructions to Arnis not to produce any financial information about his affairs to John; (ii) the mother maintained this position in response to John’s motion; (iii) a capacity assessment found that the mother was capable of making her own decisions; (iv) a third brother corroborated Arnis’ evidence that he was abiding by his parent’s wishes; (v) the application judge did not doubt that Arnis was following his mother’s wishes; and, (vi) there was no reason to suspect that Arnis was acting improperly with respect to certain transactions.
On this basis, the Court of Appeal upheld the application judge’s dismissal of John’s request for an order that Arnis pass his accounts of Ritver’s property.
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Does an attorney, or guardian, have the power to change a grantor’s estate plan?
According to section 31(1) of the Substitute Decisions Act, a guardian of property (or attorney for property) has the power to do on the incapable person’s behalf anything in respect of property that the person could do if capable, except make a will.
The statute, however, is deceptively simple. Can a guardian transfer property into joint tenancy? Can a guardian sever a joint tenancy? Can a guardian change a beneficiary designation on a RRSP, RRIF or insurance policy? Can an inter vivos trust be established or an estate freeze undertaken to save taxes? There are numerous cases which have tested these issues.
For instance, in Banton v Banton, Justice Cullity found that although the grantor’s attorneys had the authority to create an irrevocable inter vivos trust, they nonetheless breached their fiduciary obligations owing to the grantor, in creating the trust.
The irrevocable trust provided for income and capital at the trustee’s discretion for the grantor’s benefit during his lifetime and a gift over of capital to the grantor’s children, who were also the attorneys. The scheme of distribution of the irrevocable trust was the same as provided for in the grantor’s will. However, the court found that the fact that the remainder interest passed automatically to the grantor’s issue defeated the grantor’s power to revoke his will by marriage and would deprive his common law spouse of potential rights under Parts II and V of the Succession Law Reform Act and Part I of the Family Law Act. The court found that the gift of the remainder of the interest went beyond what was required to protect the grantor’s assets.
Justice Cullity stated:
“I do not share the view that there is an inviolable rule that it is improper for attorneys under a continuing power of attorney to take title to the donor‘s assets either by themselves or jointly with the donor . This must depend upon whether it is reasonable in the circumstances to do so to protect or advance the interest, or otherwise benefit, the donor.”
Find this blog interesting, please consider these other related blogs: