Recently, Stuart Clark blogged on the procedural differences between Applications and Actions in the context of civil litigation. In his blog, he aptly describes key differences between the two proceedings, which rests largely on the manner in which evidence is heard. Applications are determined on a written record, meaning that evidence before the court is contained in affidavits sworn by the parties in advance of the hearing date. In contrast, actions are heard by way of viva voce evidence (i.e. parties are examined, and cross-examined in open court).
As parties inch towards their final hearing date, the benefits and disadvantages of proceeding by way of application versus action may sharpen into focus. As Stuart noted, parties may decide that there are strategic benefits to converting their application into an action, such as having a sympathetic witness. Parties are free to take steps necessary to effect that change.
However, if parties don’t convert their proceedings in advance of their hearing, Judges have the discretion to convert applications to actions, and can order a conversion at the hearing of an application. In other words, if a Judge decides that justice would best be served by hearing a matter by way of trial, they can order the conversion of a proceeding at the hearing of an application.
Such was the case in Halar v Bacic, wherein the court determined that there were significant and material facts in dispute relating to capacity, and that a trial was necessary to assess the credibility of the witnesses.
In that case, a mother appointed her son and daughter to act as her attorneys for property and personal care in 2017. Following execution of the POAs, she was diagnosed with moderate Alzheimer’s disease and dementia. Shortly thereafter, the mother and her husband sold their home and moved back to Croatia. The proceeds of sale of their home were deposited in their Canadian bank account, with the understanding that the son and daughter would send money from the Canadian bank account when funds were requested by the mother.
The daughter and son ran into some conflict with respect to how the Canadian bank account was managed, resulting in the mother executing a new Power of Attorney in 2018, which raised questions regarding whether the mother had capacity to execute the new Power of Attorney.
The Judge was not satisfied that the medical evidence before him supported the position of the applicants and was not satisfied that he was in a position to make the findings and orders requested of him on the evidentiary record before him.
Ultimately, the Judge converted the application to an action and ordered that a trial be directed pursuant to Rule 38.10(6).
Thanks for reading!
Regardless of the wisdom of the federal government’s fateful decision to tax income trusts, its impact on the trust sector has been profound. Retail investors, corporate managers, lawyers and accountants, government tax departments: all are affected by this policy decision. Trust lawyers, for instance, have certainly seen a vast potential pool of future work relating to the conversion to and operation of income trusts disappear.
On the bright side, there will be a great deal of work relating to the restructuring (re-converting? de-converting? re-incorporating?) from income trusts back to business corporations. This seems to be a trend, since the tax exemption that makes operating as an income trust more tax-efficient than a traditional corporation disappears in 2011. A contemporary example is CI Financial Income Fund, which announced plans last month to return to a tradional corporate business structure (it converted to an income trust in 2006). Other recent examples of de-conversions are Newalta Income Fund, which converted to a trust in 2003 and BFI Canada Ltd., listed on the TSX on Oct. 2, 2008, formerly BFI Canada Income Fund.
CI Financial also says that operating as a trust constrained its ability to make acquisitions, and it has just announced an ambitious plan to raise funds to that end. It will not surprise any lawyer with experience in both corporate law and trust law that operating as a trust is more constraining than as a corporation. According to a newspaper article, CI incurred $11 million in costs relating to its plan as well as restructuring costs.
Keep your eyes off the stock ticker and enjoy the day,