This week on Hull on Estates, Craig and Diane continue the discussion regarding experts in the context of estates. The conversation touches primarily on choosing the expert and considerations for the report.
From 1993 to 1996, Daniel Assh, a Pensions Advocate with the Bureau of Pensions Advocates, Veterans Affairs Canada assisted Maria Orn, a veteran and the widow of a veteran in obtaining her pension benefits.
In 2001, Maria prepared her will. In it, she left specific legacies totalling more than $100,000, and divided the residue of her estate amongst various named persons and a charity. Three weeks later, she died.
One of the specific legacies was a $5,000 bequest to Daniel.
Daniel told his superiors about the bequest, and that he intended to accept it as it could not give rise to a conflict of interest. They told him to "hold off" on accepting the bequest until the matter was cleared through the “appropriate department channels”.
Daniel argued that because he did not know of the bequest in advance, and because there could not be the expectation of further services, and no possibility that Daniel could provide special assistance to Maria or her family, there was no conflict. Daniel submitted that he had stopped providing services to Maria long before her death. It was agreed that Daniel had in no way attempted to influence Maria into making the gift.
Did he get to keep the bequest?
No. Veterans Affairs determined that accepting the gift would be in contravention of the federal Conflict of Interest Code.
Daniel grieved the decision through two levels of the internal grievance process, and then applied for judicial review when the decision was upheld at both levels. Judicial review was allowed, and Daniel was allowed to keep the bequest. However, the decision was appealed to the Federal Court of Appeal (“FCA”).
The FCA held that the bequest could give rise to a perception of conflict. The question was whether a reasonable person would think that there was a realistic possibility that acceptance of the legacy could influence the employee’s future performance of official duties. The FCA noted that a pensions advocate is in a position of confidence and influence. The clientele are usually elderly and vulnerable, and often in difficult circumstances, such as the death of a spouse.
The FCA stated that while Daniel could not accept the gift, “the acknowledgment of her gratitude to him for assisting her is effectively communicated to him, and to others.”
Thank you for reading.
There is scope for serious problems where an executor/trustee is also a director of a company in which the estate or trust has a large or controlling interest. This dual role of trustee/director has a broad potential for inherent conflict. Both roles have very stringently enforced inherent duties. Those two sets of duties can conflict in a given situation. The trustee’s first duty may be to try to sell the shares in the corporation if they are not a good or prudent estate investment. This decision will need to be made in most estates where the corporate holdings is a substantial portion of the estate.
During the testator’s life his or her assets will have been invested as the testator saw fit, for instance in risky but high return ventures. That entrepreneurial approach tends to be inconsistent with estate and trust principles, where somewhat conservative investment principles tend to be more suitable. For example, diversification is so important in trust administration that it has been enshrined in section 27 of Ontario’s Trustee Act, but diversifying may have been the last thing on the testator’s mind during his or her lifetime. Some of the fundamental duties of executors and trustees are:
1. the executor must obey the provisions of the Will; 2. the trustee must act impartially between beneficiaries; and 3. the trustee must exercise ordinary care and prudence.
Duties of a director are somewhat different. Section 34(1) of the Ontario Business Corporation Act provides for the following: 1. every director and officer of a corporation in exercising his or her powers in discharging his or her duties shall,
(a) act honestly and in good faith with a view to the best interests of the corporation; and (b) exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances.
These duties can come in direct conflict as I will discuss further in tomorrow’s blog. Thanks for reading. Sean.