Another will challenge was before the Court of Appeal this month on February 5, 2019. Reasons for the panel, comprised of Pepall, Trotter, and Harvison Young JJ.A., were released in writing on February 13th. Quaggiotto v. Quaggiotto, 2019 ONCA 107, can be found here.
The issue of validity was solely focused on a codicil that was executed by Maria Quaggiotto when she was 87 years old. The codicil left the residue of her estate to one son, Livio, while her will had previously left an equal division of the residue to both of her sons, Livio and Franco.
After a 10 day trial, Justice Rogin found that the codicil was valid.
On appeal, the challenger Franco sought to overturn various findings of fact and findings of mixed fact and law.
Ultimately, the panel upheld the decision of Justice Rogin.
The panel reaffirmed the Court of Appeal’s decision in the Orfus Estate with respect to the notion that testators are not required to have “an encyclopedic knowledge” of their assets in order to satisfy the test for testamentary capacity.
Interestingly enough, the Court of Appeal found that the trial judge was sufficiently alive to corroboration requirements of section 13 of the Ontario Evidence Act even though Justice Rogin’s decision would appear to have erroneously cited section 13 of the Ontario Estates Act for this important statutory requirement. The adage “form over substance” did not hold water in this appeal given that the actual legal requirement was adequately considered by Justice Rogin.
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A recent decision of the Ontario Court of Appeal considered whether s. 7 of the Limitations Act, 2002 applies to extend the time within which an estate trustee can bring a claim that arose prior to a deceased person’s death.
Section 7 of the Limitations Act, 2002 provides as follows:
7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. 2002, c. 24, Sched. B, s. 7 (2).
(3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends.
In Lee v Ponte, 2018 ONCA 1021, the estate trustee of the deceased person commenced a claim more than 2 years after the date on which the limitation period began to run, as determined by the trial judge. As a result, the action was statute barred.
The estate trustee appealed, taking the position that section 7 of the Limitations Act, 2002 should be “liberally construed”. The estate trustee argued that a deceased person is incapable of commencing a proceeding because of “his or her physical, mental or psychological condition”. He also argued that policy reasons support allowing additional time for an estate trustee or litigation guardian to be appointed and take over the management of the affairs of the incapable/deceased person.
The Court of Appeal disagreed and did not allow the appeal. In its view, the “grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.”
Although the outcome is not surprising, it does serve as a reminder that limitation periods can be unforgiving. Estate trustees would be well-advised to act swiftly in reviewing the affairs of a deceased person in order to determine whether any claims may have arisen prior to death, and whether the expiry of any limitation periods are looming.
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It is not uncommon for a trust or a Will to provide a trustee with broad and unfettered discretion in the administration of the trust or estate. We have previously blogged about the powers and duties of estate trustees, stating that it can be difficult to determine how such discretion should be exercised. Often, a trustee is given broad discretion to encroach on the capital of a trust or estate, for the benefit of a beneficiary. The issue then is: what factors can a trustee consider in determining whether to exercise their discretion to make a capital encroachment?
Broadly speaking, if a trustee is given unfettered discretion by a settlor or testator, the court will only intervene in the trustee’s decision-making if the trustee has exercised his or her discretion on the basis of mala fides, or bad faith. While there are a number of specific factors that a trustee may properly consider, for the purpose of this blog I will focus on one, namely the extent to which a trustee can consider a beneficiary’s income and/or assets.
Where a trustee is being asked to encroach on capital for the benefit of an income beneficiary, the trustee must consider the application of the even hand rule (briefly discussed in this blog). In doing so, a trustee may be tempted to consider the income beneficiary’s financial circumstances, as this information could illuminate how the trustee’s decision may affect the income beneficiary as compared to the capital beneficiary. However, the case law seems to indicate that this would not be a proper consideration.
In Re: Luke,  O.W.N. 25, the court considered whether the income beneficiary, who was also the trustee, should first look to her own financial resources before exercising her power to encroach on capital for her own benefit. The court determined that she did not have to first exhaust her own resources, as the testator had not expressed an intention in his Will that she do so. Similarly, in Hinton v. Canada Permanent Trust Company, (1979), 5 E.T.R. 117 (H.C.), a corporate trustee requested information from an income beneficiary as to the beneficiary’s own financial resources in the context of the trustee exercising its discretion to encroach on capital. Again, the court found that the testator had not indicated an intention in his Will that the income beneficiary’s income should be a factor in determining whether to encroach on capital, and the income beneficiary’s resources were, accordingly, not relevant.
The foregoing principle has been followed in a number of other decisions over the years, thus appearing to support the impropriety of considering a beneficiary’s personal financial resources as a factor in making capital encroachments, absent an intention by the testator in this regard.
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This week on Hull on Estates, Natalia Angelini and Kira Domratchev discuss the decision in Shannon v Hrabovsky, 2018 ONSC 6593, and the question of a limitation period in a Will challenge.
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
Although knowledge and understanding of the issue of elder abuse is growing, I don’t think we have yet arrived at a point where it is openly discussed among different groups of people, or where victims of abuse feel completely comfortable coming forward.
In New Brunswick, the Abuse and Neglect of Older Adults Research Team (ANOART) is conducting research into abuse of older adults, and specifically looking at how abuse affects older men and women differently. This article discusses ANOART’s work and an upcoming conference on this topic.
According to the ANOART, older men more often suffer abuse from their children, but older women are more likely to experience intimate partner violence. This specific type of abuse in relation to older women is not mentioned in discussions of elder abuse as often as other types of abuse, such as financial abuse, or general physical abuse. However, ANOART has found that intimate partner violence against women earlier in life does not stop later in life, but rather evolves.
Although the aggressor of intimate partner violence may be less physically capable of physical abuse as they age, the older woman who is being abused may still feel pressure not to speak out, as to do so may create tension or conflict within their family. Older women may also be financially dependent on their partner, which can be a significant barrier to reaching out.
Services for intimate partner violence are usually focused and targeted at younger women, leaving a gap when it comes to older women. ANOART is working to break the stigma surrounding intimate partner violence against older women, to spread information, and to raise awareness. The hope is that this will assist in reaching out to those who need help more effectively, and make it easier for olden women to seek help.
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Although there are certainly some benefits that may result from making ownership of a property or other asset joint with another individual (e.g. avoiding payment of estate administration tax in relation to that property upon the death of one of the joint owners), there can also be risks associated with jointly-held property.
In the recent British Columbia Supreme Court decision in Gully v Gully, 2018 BCSC 1590, a mother added her son as a joint tenant on real property that she owned (the “House”). Her decision to do so was based on estate planning advice that she had received. The mother did not tell her son that she had added him as a joint tenant, and the son did not contribute to the House in any way, either before or after it was transferred into joint tenancy. Contemporaneously with the registration of title to the House in joint tenancy, the mother also executed a last will and testament specifically setting out that in naming her son as a joint owner, she intended that the asset would belong to him upon her death.
A couple of years after the mother had added the son as a joint tenant on her House, the son and his software company consented to judgment in favour of a creditor in the amount of $800,000.00. At the time he consented to judgment, the son was still not aware that he was a joint owner of his mother’s House. The creditor subsequently registered a certificate of judgment on the son’s undivided half interest in the House.
The mother brought an application seeking a declaration that the son held his interest in the House on a resulting trust in her favour. The court stated that the proper evidence of a transferor’s intention is at the time of the transfer, because a transferor can change his or her mind subsequent to the transfer, but may not retract a gift once it has been made. In this case the court concluded that the mother did intend to gift an interest in the House to her son at the time the joint tenancy was registered on title, and that the son did not hold his interest on a resulting trust in favour of the mother.
Further, the court stated that even if it had found that the mother had not intended to gift the House to the son, the fact that the joint tenancy was registered on title to the House meant that the creditor could rely on title to enforce its judgment against the son’s interest in the House. Although the issue of whether or not a resulting trust arises in the circumstances may be relevant as between family members or beneficiaries of an estate, it is not applicable in the case of a third party creditor claiming against a registered interest in land. As a side note, the creditor in this case did advise the court that it did not intend to execute the judgment against the House while the mother was still living there.
Before making any changes to ownership of an asset, it is crucial to obtain comprehensive advice as to all of the possible consequences of doing so—both positive and negative. Communication regarding joint tenancy is also important. This will help ensure that all parties are aware of the assets in which they may have an interest and the nature of any such interest, so they are in a position to manage their affairs accordingly.
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Last year I blogged about some possible changes to the CRA’s Voluntary Disclosure Program (“VDP”). The new VDP rules came into effect March 1, 2018.
One of the concerns that had been raised in relation to the VDP changes in advance of them coming into effect, is that it seemed the CRA was attempting to make the VDP less accessible for taxpayers. For example, the changes created a “tiered” system for VDP applications, meaning that applications would fall under either the “general program” (for more minor non-compliance) and the “limited program” (for major non-compliance). Another example is the apparent elimination of the “No-Name” method for submitting disclosure (which allows the taxpayer to gain some understanding of how their situation may be treated by CRA in advance of officially submitting his or her application).
According to this article, in July and August 2018, the CRA responded to the first round of disclosure applications that had been filed under the new rules. The CRA’s approach in practice was troubling to the article’s authors.
In particular, the CRA appears to be taking the position that it will be rejecting VDP applications if the relevant tax returns aren’t enclosed. This seems to be contrary to the guidelines set out in CRA’s Information Circular IC00-1R6. While CRA takes the position that it will reject applications that do not enclose tax returns, the Information Circular seems to indicate that a taxpayer may submit additional information or documentation to complete the VDP application up to 90 days from the day that the CRA receives the application. The article’s authors are of the view that the language of the Information Circular in this regard would include the relevant tax returns, as these are clearly documents required to complete the disclosure. The position taken by CRA provided confirmation to the authors that CRA was seeking to make the VDP inaccessible for taxpayers.
As we previously set out in this blog, the VDP can be relevant to an Estate Trustee if the deceased was not in compliance with his or her obligations to the CRA, such as failure to file income tax returns, or reporting of inaccurate information. The VDP may allow an Estate Trustee to voluntarily disclose such non-compliance and avoid penalties. Unfortunately, with the new VDP rules in effect, and the apparent uncertainty regarding how the CRA will apply its guidelines, it may be tricky for Estate Trustees to make effective use of the VDP. It will be interesting to see how the new VDP rules develop, and any further feedback to their practical application.
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A decision released earlier this week highlights the importance of a complete Management Plan supported by evidence when seeking one’s appointment as guardian of property.
Sometimes, the necessity of filing a Management Plan is viewed as a formality without proper attention to the details of the plan. However, the failure to file an appropriate Management Plan may prevent the appointment of a guardian of property, putting the administration of the incapable’s property in limbo.
In Connolly v Connolly and PGT, 2018 ONSC 5880 (CanLII), Justice Corthorn declined to approve of a Management Plan filed by the applicant and, accordingly, refused to appoint her as guardian of property. The Management Plan was rejected for the following reasons (among others):
- it did not address an anticipated increase in expenses over time (including when the applicant was no longer available to serve as the incapable’s caregiver and he may incur alternate housing costs);
- there was no first-hand evidence from BMO Nesbitt Burns or Henderson Structured Settlement with respect to the net settlement funds in excess of $1.4M and their payout and investment in a portfolio on the incapable’s behalf;
- the Court was concerned that stock market volatility could threaten to deplete the invested assets;
- the Public Guardian and Trustee had strongly recommended that the applicant post security, the expense of which was reflected as a deduction from the incapable’s assets (while not suggested that this was unreasonable, Justice Corthorn took issue with the absence of any case law or statutory provision cited by the applicant in support of the payment of the expense by the incapable rather than the applicant herself); and
- while the applicant had agreed to act as guardian without compensation, the plan did not contemplate how compensation would be funded if claimed by a potential successor guardian.
Notwithstanding that neither the incapable nor the Public Guardian and Trustee had opposed the Management Plan or the appointment of the applicant as guardian of property, Justice Corthorn found that the appointment of a guardian to manage over one million dollars in settlement funds was “contentious” and, accordingly, under Rule 39.01(5) of the Rules of Civil Procedure, direct evidence from a representative of the financial institution was required. In short, although the applicant was accepted as being a suitable candidate for appointment as guardian of property (and it was anticipated by the Court that she would ultimately be appointed), the Court was not satisfied on the evidence available that the management of the incapable’s property in accordance with the contents of the Management Plan was consistent with the man’s best interests.
While Justice Corthorn declared the individual respondent incapable and in need of assistance by a guardian of property, Her Honour adjourned the balance of the matter, suggesting that the applicant’s appointment as guardian of property could be revisited once additional evidence was filed in support of the contents of the Management Plan and/or the plan was further revised.
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The Estate of Irmgard Burgstaler (disability), 2018 ONSC 472, was a costs decision that arose from an application to pass attorney accounts. Erwin was named as the attorney for property for his mother, Irmgard. Erwin was ordered to pass his accounts and his siblings, Barbara and Peter, objected.
A four-day hearing took place. Erwin was self-represented and his accounts were not in court format pursuant to Rule 74.17 of the Rules of Civil Procedure. Extensive written submissions were also filed by both sides.
Erwin was found to have breached his fiduciary duty to Irmgard when $82,000.00 was taken from Irmgard and applied towards the purchase of a home in Erwin’s name. Erwin also took approximately $44,000.00 from his mother’s accounts to pay his legal fees in the proceeding at issue and the Court found that this expense was not for Irmgard’s benefit. Certain other expenses were ordered to be repay to Irmgard as well as the repayment of $5,000.00 from the sale of Irmgard’s trailer.
Given their success, the Objectors sought full indemnity on a blended basis from Erwin (15%) and the Estate (85%). In reviewing the jurisprudence on costs in estate matters, Justice Shaw found that this case fell within the public policy exemption for due administration of estates and allowed the Objectors’ claim for full indemnity.
That said, Justice Shaw disagreed with the Objectors’ proposed 15/85 split on the basis of the “losers pay” principle in general civil costs. Justice Shaw ordered Erwin to pay the Objectors’ costs on a partial indemnity scale while the Estate was ordered pay the full remaining balance. In this case, partial indemnity appears to be close to 70% of the total claimed based on the fixed amounts that were ordered.
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A recent decision of the Hong Kong Court of Appeal addresses the importance of the solicitor’s role in preparing and attending to the execution of a Will, particularly in the context of a Will challenge. The decision is discussed in this article. Although the decision is from Hong Kong, the test applied in respect of testamentary capacity is, as it is in Canada, the classic criteria from Banks v Goodfellow. In this regard, I found it interesting to consider the Hong Kong Court’s decision.
In Ontario, when a Will has been duly executed, meaning that it has been executed in accordance with the requirements set out in the Succession Law Reform Act, R.S.O. 1990, c. S.26, there is a presumption that the Will is valid. However, where suspicious circumstances are shown to exist surrounding the preparation and execution of a Will, this presumption will be spent, and the propounder will be required to prove that the testator had the requisite testamentary capacity to execute the Will. We have previously blogged about which party must prove certain elements in a Will challenge.
According to the article, the same presumption arising from due execution appears to exist in Hong Kong. In the decision of Choy Po Chun & Anor v Au Wing Lun (CACV 177/2014), the Hong Kong Court of Appeal places some additional responsibility with respect to the “due execution” of Wills on solicitors preparing them. In particular, the Court of Appeal sets out that a solicitor should undertake proper groundwork and make proper enquiries, such as following a checklist from the British Medical Association regarding the assessment of mental capacity, and the “golden rule” that a Will for an elderly or ill testator should be witnessed or approved by a medical practitioner who has examined the testator.
In this decision, the Court of Appeal set aside the lower court’s decision that the Will in question was valid. As the solicitor had not taken the additional steps noted above (namely following the checklist and the “golden rule”), it could not be presumed that the Banks v Goodfellow criteria had been met, and therefore each element of the test should have been asked, and proven by the propounder of the Will.
In reviewing the guidelines set out by the Court of Appeal, as summarized in the article, it seems as though the solicitor is being asked to consider whether suspicious circumstances may appear to exist, and to take additional steps if that may be the case. In particular, the Court of Appeal suggests the following:
- Where Will instructions are given by the children of an elderly testator who is not in good health, the lawyer should meet with the testator personally to confirm instructions;
- In the case of an elderly or infirm testator, the solicitor should follow the checklist noted above; and
- The solicitor should follow the “golden rule” when preparing a will for an aged or seriously ill testator.
While this decision is not binding in Canada, it nevertheless raises some interesting points, which a prudent solicitor may wish to consider and implement in their practice. For instance, it may be advisable to confirm instructions directly with the testator if initially provided by another individual, and take steps to confirm whether a testator has the requisite capacity in circumstances where he or she may be elderly and/or in poor health.
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