Estate litigation often involves not only financial, but emotional issues. Among the most common disagreements are those between family members, whether amongst siblings, or between siblings and a surviving spouse. In some cases, the parties cannot get along and they may require that the Court determine the matter in dispute. However, there are also situations where the disagreement can be worked out between the two sides, such as through an Alternative Dispute Resolution (“ADR”) process like mediation, without the extra time and expense that comes with a Court proceeding.
Another form of ADR used primarily in the family law context is Collaborative Family Law (“CFL”). CFL is structured in a series of four-way meetings between the parties and their lawyers. There is no mediator, arbitrator, or judge present, so CFL requires a high level of trust between the lawyers and clients. Candidates for this collaborative approach to dispute resolution are often parties who still get along reasonably well, and who are willing to cooperate with one another.
Based on the frequently emotional and familial aspects of estate litigation, it seems that CFL, or a form of CFL, could be applicable in the estates context. Back in 2010, as noted by this prior blog post, there seemed to be some interest in applying the CFL model to estate Law. This article in Canadian Lawyer from later that same year discussed why collaborative estate law didn’t seem to be catching on.
One of the key features of CFL that seems to make it unattractive in estate law is that, if after the series of four-way meetings, the parties cannot agree between themselves, they must start from scratch. The lawyers who participated in CFL cannot continue to represent the same client in court proceedings. All information produced in the CFL process has to be reproduced, including financial statements, expert reports, appraisals, etc. Although the best case scenario in CFL involves saving money as well as preserving relationships, the worst case scenario could possibly involve additional expenses and harm to relationships in any event.
However, perhaps the clause that restricts a lawyer from staying on the file after unsuccessful meetings could be removed, or at least modified. One possibility considered is to disqualify only the individual lawyer who worked on the file, and not the entire firm. This may make it more accessible to parties who would otherwise be good candidates for resolving their problem in a collaborative way, as opposed to an adversarial one.
Thank you for reading.
The use of a Family Trust is a common estate planning tool, whereby an asset, whether it be cash, a family cottage, or otherwise, is placed into a trust to be held for the benefit of the family. More often than not, when such a Family Trust is established, both spouses are named as trustees of the trust, and the beneficiaries are often the two spouses together with any children that they may have. The trust is often discretionary, whereby the trustees may distribute some or all of the trust assets to any one of the beneficiaries to the exclusion of the others.
While the administration of the trust often goes smoothly while everything is going well in the relationship, the question emerges of what should take place should the spouses later separate and commence divorce proceedings. Although we do not tend to see arbitration used as often within the estates and trusts context, the same cannot be said for family law proceedings, where, anecdotally at least, it appears that parties are much more willing to enter into binding arbitration in order to settle their dispute rather than adjudicate the matter before the courts. When the two spouses (who are also the trustees) separate, and as part of the divorce proceedings agree to enter into binding arbitration, the question often emerges of whether the internal administration of the trust can be caught up in the arbitration process?
Inevitably, as part of such an arbitration, one of the spouses will often take the position that as both trustees have signed the arbitration agreement, that the arbitrator has now assumed the powers of the trustees, and may utilize the discretion afforded to the trustees to determine how the trust assets should be distributed as part of the divorce process. Without commenting on whether a trust may be bound to the arbitration process in the event that the trustees have only signed the arbitration agreement in their personal capacities, and not their capacities as trustees, the courts have been clear that unless the terms of the trust specifically contemplate otherwise, that trustees may not delegate the fundamental decision making powers entrusted to them as trustees to any person (whether it be arbitrator or otherwise). As put by Professor Waters in Waters’ Law of Trusts in Canada:
“The courts, however, continue to adhere to the principle that a delegate may not delegate his duties when the nature of the task is one which he is required to perform personally. This prevents the trustee from appointing an agent to perform the task of this kind, whether or not he has an express, implied, or statutory power to appoint agents. Indeed, any act of an agent purportedly carrying out such a task would have no legal effect; it would bind neither the trust nor any third party.“ [emphasis added] (4th ed., pg. 913)
Using this rationale, unless the deed of trust specifically contemplates that the trustees may delegate their decision making to an arbitrator, the trustees may arguably not delegate their fundamental decision making powers to an arbitrator, for to do so would be an improper delegation of their authority. As made clear by Prof. Waters, any decision made by the arbitrator concerning the internal management of the trust would arguably not be binding upon the trust or any third party, as they could arguably not have assumed such powers in the first place.