This week on Hull on Estates, Stuart Clark and Doreen So discuss the Residents’ Bill of Rights within Ontario’s Long-Term Care Homes Act, 2007.
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Henson trusts are a valuable estate planning technique to protect the interests of individuals receiving asset-dependant social assistance, such as ODSP. However, as discussed in the recent decision of the Supreme Court of Canada in S.A. v Metro Vancouver Housing Corporation, a Henson trust may be invaluable in preserving other forms of need-based assistance.
The appellant, S.A., was a disabled individual receiving monthly distributions under British Columbia’s Employment and Assistance for Persons with Disabilities Act. S.A.’s father passed away in 2012 and S.A. was one-third residuary beneficiary of his Estate. In order to preserve her entitlement to assistance, her share was settled in a Henson trust in which S.A. was the primary beneficiary and a co-trustee.
In 2015, S.A. submitted an application (the “Application”) to the Metro Vancouver Housing Corporation (“MVHC”) in order to be eligible for subsidized rent. The Application required S.A. to disclose whether she held assets totaling in excess of $25,000. S.A. indicated that she did not. MVHC was made aware of the existence of the Trust as a result of prior correspondence with S.A. and, as a result of her failure to disclose her contingent interest, S.A.’s application for subsidized rent was denied.
S.A. commenced proceedings against MVHC seeking, among other relief, a declaration that her contingent interest in the Trust was not an asset for the purposes of the Application. Both the trial judge and the British Columbia Court of Appeal dismissed S.A.’s petition. S.A. appealed to the Supreme Court of Canada.
This case was the first instance in which the Supreme Court was tasked with considering the nature of a Henson trust. As such, the Court restated the central features of a Henson trust, namely:
- The beneficiary in question must not have a fixed entitlement;
- The trustees retain absolute discretion as to whether any distributions are made to the beneficiary, including the discretion to make no distribution; and
- The beneficiary must not retain the entirety of the beneficial interest in the trust such that he or she could collapse it pursuant to the Rule in Saunders v Vautier.
S.A. was ultimately successful at the Supreme Court level, but on the basis of contractual interpretation rather than the nature of her interest in the Trust itself. The central issue was whether S.A.’s beneficial interest in the Trust was an asset for the purpose of the Application.
The Court considered the Application and applied basic principles of contract law, namely, that the Application was to be read as a whole with the words to be given their ordinary grammatical meaning. The term “asset” was not specifically defined in the Application to include a contingent interest in a trust.
MVHC attempted to point to an Asset Ceiling Policy that it relied on to inform its definition of an “asset” for the purposes of the Application. This Policy was a separate document setting out a non-exhaustive list of assets that ought to be disclosed by applicants. However, the Court noted that the Policy was not referenced in the Application proper. The Court held that a “reasonable person” interpreting the Application would not consider a contingent interest in a trust to be an asset for the purposes of that Application.
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The recent Ontario Superior Court of Justice decision of Zecha v Zecha Estate, 2017 ONSC 1972, 2017 CarswellOnt 4882, raises the issue of how separation agreements ought to be interpreted in circumstances where one party to the contract has predeceased the other.
In this case, a separation agreement was entered into by the plaintiff and her husband, who had since died. With respect to the sale of the couple’s matrimonial home, the separation agreement, dated May 31, 2012, stipulated as follows:
- The plaintiff and the deceased would advise one another of all offers to purchase the matrimonial property;
- If the plaintiff received an offer to purchase the property for less than $1,500,000.00, the deceased could require that the plaintiff accept the offer, but, upon compelling her to do so, would be responsible for paying any shortfall between the sale amount and $1,500,000.00;
- If the property had not been sold within 18 months of the date of the agreement (and the plaintiff had not declined an unconditional offer to purchase the property for a price higher than $1,500,000.00):
- The deceased would assume carriage of the sale;
- The plaintiff would cooperate with the sale process and sign any documents to give effect to the sale; and
- If the property sold for less than $1,500,000.00, the deceased would be responsible for any shortfall between the purchase price and $1,500,000.00.
The plaintiff listed the matrimonial property for sale on October 29, 2012. On April 30, 2014 (23 months after the execution of the separation agreement), the plaintiff entered into an agreement of purchase and sale, and sold the property for $1,180,000.00. There was no evidence before the Court that the plaintiff had advised the deceased that she had received or accepted an offer to purchase the property for less than $1,500,000.00. The deceased died on November 28, 2014, and the plaintiff commenced proceedings against the deceased’s estate for the difference between the sale price of $1,180,000.00 and $1,500,000.00, relying upon the terms of the separation agreement.
At trial, the plaintiff submitted that, pursuant to the terms of the separation agreement, she was entitled to $320,000.00, representing the difference between the sale price of the property and $1,500,000.00, because the property had been sold more than 18 months from the date of the separation agreement. The deceased’s estate asserted that the plaintiff could not enforce the terms of the separation agreement, as she had not complied with its terms as to which party would control the sale of the property if it took place more than 18 months after execution of the separation agreement. Pursuant to the separation agreement, the deceased was only responsible for paying the shortfall if (a) he had compelled the plaintiff to accept an offer to purchase the property for less than $1,500,000.00 within 18 months of the date of the separation agreement, or (b) he had assumed control of the sale of the property 18 months after the date of the separation agreement and accepted an offer to purchase the property for less than $150,000.00.
The Court found that the separation agreement was a properly executed contract and should be interpreted as a whole, giving meaning to all of its terms and avoiding an alternative interpretation that would render a term ineffective (in a manner consistent with commercial law principles). Accordingly, the Court dismissed the action, declining to order payment of the $320,000.00 shortfall by the estate to the plaintiff. The Court stated that the plaintiff had interpreted the terms of the contract too narrowly, in an attempt to obtain a greater payout from the proceeds of sale of the matrimonial property. The Court found that, pursuant to the separation agreement, the deceased had a clear right to decide if an offer to purchase the property for less than $1,500,000.00 would be accepted at the time of its sale, being more than 18 months after the execution of the separation agreement, and the plaintiff could not rely upon the corresponding provisions of the separation agreement.
Circumstances like these, in which one party to a separation agreement has died and the assistance of the Court is required in interpreting the contract for the purposes of considering a claim made (or if an entitlement is apparently limited) under the contract, are not uncommon. It can be important for estate lawyers who may encounter this issue to understand how separation agreements are most likely to be interpreted by the courts.
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An estate trustee has the legal authority to arrange the place and manner of the burial or cremation of the deceased. The estate trustee also has a duty to see that the deceased is buried in a suitable manner and that no undue expense is incurred. Where a person dies without a will, and an administrator has not yet been appointed by the court, the deceased’s next of kin may direct the manner of burial or cremation. In some cases, the deceased may have made arrangements for a funeral and pre-paid for their own burial or cremation. There are certain statutory and common law consumer protections in regard to the procurement of funeral services.
Burial and cremation services are governed by the Funeral, Burial and Cremation Services Act, 2002. Pursuant to s.42(1), a purchaser of internment rights, defined in s. 1 as “the right to require or direct the interment of human remains in a lot”, may cancel the contract at any time within 30 days after the contract was made. The operator must fully refund all money received upon notice of cancellation. A cemetery operator will be unable to enforce a contract unless it meets the formal requirements set out in the regulations.
Contract law also provides certain protections to those purchasing funeral or burial services. In the recent case of Tsekhman v Spero, the Court held that contracts for funeral and interment services are contracts for “peace of mind”. A breach of contract, therefore, can result in damages for mental suffering. In this case, the Court found that a delay in fulfilling the contract for burial prejudiced the Plaintiffs’ ability to abide by their Jewish laws and customs and to honour their parents’ wishes. The court held damages for loss of peace of mind in a contract case such as this one should be modest.
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An estate trustee may be bound to a contract previously entered into by the deceased. This duty is distinct from the duty of an estate trustee to discharge all debts of the deceased.
There are four main elements of a contract:
- Intention (consensus ad idem/meeting of the minds)
Prior to the formation of a contract, it is possible for an offer to be revoked by death, if the contract has not been accepted by the surviving party. If performance of a contract has already been initiated by the surviving party, the contract may not be able to be revoked. This is due to the fact that part-performance of a contract may validate a contract. The doctrine of part-performance has been upheld in cases such as Lensen v. Lensen, 1984 CanLII 2424 (Sask CA), and Thompson v Guaranty Trust Co.,  S.C.R. 1023.
In general, contracts often will have a clause stating that the terms are binding on the estate of a contracting party. Therefore, if a contract is found to be valid, the estate of a deceased may be bound by a contract entered into by the deceased. It is important to note that a contract need not be formally executed and signed in order to be considered enforceable by the court.
In Bayer Estate v. Blue Button Club, 2007 BCSC 517, the British Columbia Superior Court upheld a contract on the death of a party. In this case, the deceased, Bernard Bayer, and his employer, Blue Button Club, entered into an employment agreement for 10 years, with an annual base salary of $60,000.00 plus benefits. The contract provided that, upon the death of Bayer, the Club would pay into deceased’s estate an amount equal to the salary and benefits that the deceased would have earned. The amount paid into the estate was to be based on how much time was left in the employment contract. The contract also had a provision naming the Club as a beneficiary of the deceased’s insurance policy, so long as the Club was to maintain insurance on the life of Bernard. Upon the death of Bayer, the Club tried to submit that the employment contract was not enforceable. The Court rejected the Club’s submissions and upheld the contract, requiring the Club to pay the deceased’s salary into his estate.
Aside from part-performance of a contract or having a formally executed contract, it is possible to enter into a verbal contract prior to the formal contract being executed. Where a tentative agreement is reached from oral negotiations, the intentions of the parties are the key factor in determining if a contract is in existence. In attempting to enforce a contract in which one of the parties is deceased, the Court will look to the intention of the deceased in order to determine whether or not they intended for a contract to be formed.
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This week on Hull on Estates, Ian Hull and Lisa Haseley discuss the Mutual Wills Doctrine. Link to Paul Trudelle’s paper: Mutual Wills A Review http://bit.ly/2fs2l5P
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In 2014, a Toronto-based company successfully raised $1,235,389 (USD) of its $48,000 goal on Indiegogo for its wireless speaker system promising better-than-stereo sound. More recently, the website Gofundme provided the platform which allowed the parents to a 4 year old girl to raise $2,026,470 (USD) to help their child receive a potentially life-saving therapy trial.
Hardly a week goes by without a story on the success of yet another crowdfunding campaign. In what began as an alternative financing model, modern crowdfunding as it exists today has grown to become an extremely successful and potentially lucrative fundraising source. As a result, the legal question that has been raised is whether funds raised by means of crowdfunding constitute a trust, with all of the rights and obligations that this may entail.
The definition of a trust according to Black’s Law Dictionary is, “An equitable or beneficial right or title to land or other property, held for the beneficiary by another person, in whom resides the legal title or ownership.” At first glance, this is precisely what many crowdfunding campaigns seek to do. The funds raised are often held by a third party for the benefit of another. However, determining who occupies which role within the trust relationship can be difficult to navigate.
There are four parties in most crowdfunding campaigns: the donors, the website provider, the campaign creator, and the beneficiaries. As a result, it is not entirely clear whether it is the website provider or campaign creator that acts as trustee and, if it is the website provider, whether they hold these funds in trust for the campaign creator or the purported beneficiary of the campaign. As each crowdfunding campaign can vary significantly with respect to its set-up and intended purpose, determining whether a trust relationship is present is an exercise to be undertaken on a case by case basis.
For instance, some crowdfunding campaigns offer rewards in exchange for meeting a minimum donation level. In this sense, it could be argued that these rewards constitute consideration and the relationship becomes contractual in nature. In other campaigns, the funds are raised for a charitable purpose and as such, may be qualified as charitable trusts. On the other hand, campaigns established by friends and family that purport to raise funds for their loved ones, seek to provide a benefit to a private individual, as opposed to a general purpose. It is often these cases that lead to questions surrounding whether a trust has been established, or, in the alternative, whether a gift has been made.
According to this paper by Professor Oosterhoff, the law has generally provided that funds raised for a specified object give rise to a trust. Accordingly, Oosterhoff’s answer is that it depends on what the intentions of the donor were. He suggests that we need to look specifically at whether the donors intended to establish a trust or whether their relationship to the other parties can be characterized as one of contract or agency.
If a trust is established, the person(s) receiving the initial funds (whether it is the campaign creator or website provider) may find themselves in a fiduciary relationship. Trust law creates a higher standard of care and imposes and bestows rights and obligations upon both the trustee and beneficiaries. As a result, those engaged with crowdfunding campaigns, in any capacity, should be alert to this possibility and act accordingly.
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In today’s blog I discuss the legal and bio-ethical questions that stem from contracts between surrogates and “commissioning” parents.
Experts in the field of assisted reproduction suggest that surrogacy arrangements are becoming more commonplace in Canada. While there are no hard and fast statistics to support this proposition, I have no trouble believing it. Larry Kahn, a Vancouver based lawyer who specializes in assisted-reproduction and adoption law, recently advised the National Post that he has arranged more than 35 surrogacy contracts in each of the past 3 years, up from barely 15 such contracts a decade ago.
The National Post article for which Larry Kahn was interviewed dealt with a B.C. couple who urged their surrogate to abort the foetus she was carrying after it was discovered that the foetus would likely be born with Down syndrome. The surrogate, in contrast, wanted to carry the foetus to term.
The surrogacy contract provided that the couple would be absolved from any responsibility for raising and/or providing for the child, should the surrogate carry the foetus to term in the circumstances.
The above scenario raises questions about both the ethicacy and enforceability of a surrogacy contract, including:
1) Should contract law apply to this sort of transaction? If so, are children been reduced to the status of widgets? Juliet Guichon of the University of Calgary opines that the rules of commerce should not apply to the creation of children because children, unlike widgets, can get hurt and, of course, they are not produced on an assembly line.
2) Should family law rules prevail such that the terms contained within a surrogacy agreement which provide that biological parents do not need to support their child in the circumstances described above be invalid?
3) What role, if any, should the government play? To what extent should the surrogacy contract be regulated by provincial law?
The Assisted Human Reproduction Act, 2004 S.C.,c.2 (“Act”) is federal legislation which was proclaimed, in part, on April 22, 2004. On April 22, 2004, all of the prohibitions (sections 5 through 9) came into force except section 8 which came into force on December 1, 2007. Section 6 deals with surrogacy and, in brief, provides that payment of compensation to a surrogate is a prohibited activity under the Act (reimbursement of expenses is currently permitted). The prohibitions related to surrogacy in the Act do not deal with the enforceability of surrogacy contracts because the validity, including civil enforceability, of a surrogacy agreement is a matter of provincial law.
To date, no surrogacy contract has been challenged in a Canadian court, but it may only be a matter of time and it will be interesting to see how a court grapples with this complex issue.
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Kathryn Pilkington — Click here for more information on Kathryn Pilkington.
Mr. Bernard Bayer has won the right to receive a salary from his former employer until March 1, 2012. Unfortunately, Bernard died on April 23, 2005.
In this most unusual case, Bernard’s estate will be entitled to receive payment equal to Bernard’s salary until 2012, notwithstanding Bernard’s death.
The case turns on the peculiar wording of Bernard’s employment agreement with his employer, the Blue Button Club. Pursuant to this agreement, which was entered into on March 1, 2002, Bernard was employed as the Executive Manager of the Club. The agreement had a 10 year term. The agreement described Bernard’s duties at the Club. It provided that he was to be paid at least $60,000 per year.
An unusual provision of the employment agreement provided that the Club was to maintain insurance on the life of Bernard, naming the Club as beneficiary, so that the Club could comply with the termination provisions of the agreement. The termination provisions provided that the employment agreement could be terminated in the event that Bernard failed repeatedly and demonstrably to perform his duties, and failed to remedy this problem after receiving reasonable notice; for just cause; or upon his death, in which case, the Club was to collect the insurance proceeds and pay these to Bernard’s estate. Apparently, the Club did not take out such a policy of insurance.
In resisting the claim by Bernard’s estate, the Club argued that, prior to his death, Bernard failed to fill his duties. The court rejected this submission, holding that the Club did not provide the required written warning to Bernard.
The Club also submitted that the agreement was not enforceable, and that neither of the parties expected the agreement to be enforceable. The court easily rejected this submission.
As the agreement clearly contemplated Bernard’s death, it was not frustrated by his death.
The court found that Bernard’s estate was entitled to the payments due until the end of the agreement. These damages totalled $410,000.
In this case, the employment agreement was drafted by or on behalf of the Club. The court held the Club to its agreement, notwithstanding its unusual provisions, or the fact that it produced, at least at first blush, an unusual result.