Tag: Fraud

01 Nov

Fraudulent Concealment and Statutory Limitation Periods

Umair Estate & Trust, Executors and Trustees, General Interest, Litigation Tags: , , , 0 Comments

Section 38 of the Ontario Trustee Act sets out a two-year limitation period from the date of death for actions by or against executors and administrators. However, as illustrated by a recent decision of the Ontario Superior Court of Justice, the equitable doctrine of fraudulent concealment can operate to toll this statutory limitation period.

Fraudulent concealment can affect estate limitation periods
“The equitable doctrine of fraudulent concealment can operate to toll this statutory limitation period”

In Roulston v McKenny, 2016 ONSC 2377, the Estate Trustee of the Deceased’s Estate brought an Application for the directions of the Court as to whether an action against the Estate was statute-barred. The Deceased died on March 20, 2013, and the claim against the Estate was not commenced until September 18, 2015.

The Deceased and his former wife (the “Respondent”) had entered into a separation agreement that required the Deceased to maintain $150,000.00 in life insurance, with the Respondent as the designated beneficiary.

Shortly after the Deceased’s death in March 2013, the Estate Trustee discovered that the Deceased’s life insurance policies had lapsed due to non-payment. However, the Court found that the Estate Trustee initially suggested that the insurance had not lapsed, and then delayed bringing an application for the advice and direction of the Court on the issue until more than two years after the Deceased’s death. The Estate Trustee’s counsel did not advise the Respondent’s counsel of the lapse until September 2013.

In September 2015, less than two years after the Respondent was first advised that the insurance policies may have lapsed, the Respondent sued the Estate to recover the $150,000.00 debt under the separation agreement.

The Respondent argued that the doctrine of fraudulent concealment should apply to toll the limitation period. As set out in the Court of Appeal’s decision in Giroux Estate v Trillium Health Centre, the doctrine of fraudulent concealment operates to forbid a party in a special relationship with a party from using a limitation period for a fraudulent purpose.

In Giroux Estate, the Court of Appeal set out the three criteria to be met for the doctrine to be applied:

  • the parties must be engaged in a relationship of a special nature;
  • due to the special nature of the relationship, the defendant’s conduct is unconscionable; and
  • the defendant conceals the plaintiff’s right of action.

In the present case, given that the insurer would only release information about the Deceased’s insurance policies to the Estate Trustee and the Estate Trustee had “exclusive possession” of the information, the Court concluded that the parties were in a special relationship. The Court also concluded that the Estate Trustee’s conduct was unconscionable, given the special relationship between the parties.

Finally, the Court held that the Estate Trustee’s failure to advise the Respondent of the lapse of the policies had the effect of concealing that the Respondent had a claim against the Estate.

In the result, the Court found that the doctrine of fraudulent concealment applied to toll the limitation period until September 2013, and the Respondent’s claim was thus not statute-barred.

Thank you for reading,

Umair Abdul Qadir

26 Oct

Fraud as an Inducement to Make a Will

Suzana Popovic-Montag Wills Tags: , , , 0 Comments
Establishing a case of fraud in a will challenge
“Even where fraud is established, the provision or will might be saved, if the testator had reasons other than the fraud for making the disposition.”

If a fraudulent misrepresentation affects a testator’s testamentary intentions, either the provision or the entire will may be set aside. It has been settled law for centuries that fraud is sufficient grounds to set aside a will (see: Lord Donegal’s Case (1751), 2 Ves Sen 407). Despite this, there is relatively little case law on the impact of fraud on a will. Some possible reasons for this dearth might include the difficulty in establishing a case of fraud, the potential uncertainty of the consequences of the fraud, and a general preference to plead undue influence, where there is overlap.

The intent to deceive is central to making out a case of fraudulent misrepresentation. An innocent misrepresentation that affects a testator’s intentions will not be sufficient grounds to set aside a will, even if the ultimate impact is the same as if the representation had been fraudulent. In the English case of Posner, Re, [1953] 1 All ER 1123, a will was challenged on the grounds that the legatee described as “wife” of the testator had not in fact been his wife, because of alleged bigamy. However, because there was no allegation of fraud on the part of the “wife”, the bequest was upheld. This case can be contrasted with Wilkinson v Joughlin (1866), LR 2 Eq 319 (Eng Ch), which also involved a bigamous marriage. In this case, the court held that because the beneficiary had fraudulently represented herself as a widow to the testator at the time of their marriage, she could not inherit under the will. However, the court upheld the gifts to her daughter, whom the testator believed to be his step-daughter, because the daughter had not participated in the fraud.

Even where fraud is established, the provision or will might be saved, if the testator had reasons other than the fraud for making the disposition. In Posner, Re, the court held that a legacy will fall if it is induced by fraud, “which alone can be supposed to have been the motive of the bounty.” This suggests that if the testator has more than one reason to give a gift, one of which is fraudulent, the gift may still be valid. This approach was followed in Ontario in Isaacs, Re, [1954] OR 942, in another case in which a marriage was found to be void ab initio. The court held that it could not be assumed that the deceased would have acted differently if he had known the beneficiary did not have the legal status of wife.

Alleging fraud can be risky for an objector, because an unfounded allegation of fraud can result in cost consequences against the party making the unfounded allegations. In many cases where fraud might be alleged, an allegation of undue influence may also be available.

Thank you for reading.

Suzana Popovic-Montag

 

26 Sep

Fraudulent Concealment

Ian Hull Beneficiary Designations, Estate & Trust, Estate Planning, Executors and Trustees, Litigation, Trustees, Wills Tags: , , , , , , , 0 Comments

Pursuant to section 4 of the Limitations Act, generally, a claim should be started by an individual within two years of the claim being discovered. Section 5 of the Limitations Act, defines discovery as “the day on which a reasonable person with the abilities and in the circumstance of the person with the claim first ought to have known of the matters referred to.”

Beneficiary Fraudulent Concealment
“What if an individual was unaware that they were named as a beneficiary of an estlocked-out-beneficiaryate?”

These provisions raise an interesting estates question:  What if an individual was unaware that they were named as a beneficiary of an estate? Would the Limitations Act apply in these circumstances, even though the beneficiary was unaware of their claim?

The doctrine of fraudulent concealment may operate to provide for an equitable tolling of the limitation period. Simply put, this means that discoverability is a factor in considering fraudulent concealment for estates purposes. The doctrine will suspend the running of the limitation clock until the reasonable party can reasonably discover the cause of action.

As stated in Roulsten v McKenny et al, 2016 ONSC 2377 para 41, and as established in Giroux Estate v Trillium Health Centre, 2005 CanLII 1488 (ON CA),  “the purpose underlying the doctrine of fraudulent concealment is to prevent defendants who stand in a special relationship with a party from using a limitation provision as an instrument of fraud”. A special relationship can be defined as one in which the plaintiff may rely on the defendant’s word and defendant ought to reasonably foresee that the plaintiff would rely on his representation.

As defined in the case of KM v HM, [1992] 3 SCR 6, at para 65, “‘Fraud’, for the purposes of fraudulent concealment, is defined as “conduct which having regard to some special relationship between the two parties concerned, is an unconscionable thing for one to do towards the other.”

As established through the existing jurisprudence, in order to make out the doctrine of fraudulent concealment, there are three necessary elements:

  • the defendant and the plaintiff are engaged in a special relationship with one another;
  • the defendant’s conduct is unconscionable; and
  • the defendant conceals the plaintiff’s right of action

As stated above, if an individual was unaware that they were the beneficiary of an estate, and a named estate trustee actively concealed the fact, it is possible that the remedy of fraudulent concealment provision would apply. It appears the provision will not apply if you knew or ought to have known that you were a beneficiary of an estate.

Thanks for reading,

Ian M. Hull

12 Sep

The Estate Planning Pitfalls of an Invalid Marriage

Ian Hull Estate & Trust, Estate Planning, General Interest, In the News, News & Events, Wills Tags: , , , , , , , , 0 Comments

A recent story in the news featuring a fraudulent wedding officiant, raises some interesting estate planning issues. Mr. Cogan, who held himself out as an authorized wedding officiant, was charged with performing unauthorized marriages. Cogan had been licensed to perform marriages in the past, but it is reported that his license was revoked before he performed at least 48 marriages between August 2013 and July 2016.

Fortunately, pursuant to section 31 of the Marriage Act, if the couple married in good faith the marriage may be deemed valid despite the revoked licence. Indicia of good faith include: the intention to have a legally binding wedding, no disqualifications due to capacity and impairment, and proof that the couple lived together after the wedding ceremony.

The Estate Planning Pitfalls of an Invalid Marriage
“Notwithstanding this statutory remedy, larger consequences for estate planning arise if the couple do not satisfy the prerequisites for the remedy provided in the Marriage Act.”

Notwithstanding this statutory remedy, larger consequences for estate planning arise if the couple do not satisfy the prerequisites for the remedy provided in the Marriage Act.

Firstly, an invalid marriage may present an issue for individuals who created a will after the fact, leaving bequests to their “spouses” in their wills. Due to the fact the individuals are not “spouses” as defined pursuant to the intestacy provisions of the Succession Law Reform Act (excluding Part V) or Divorce Act, it would be interesting to see how the court would treat the inheritance should the spouse who made the will die.

Pursuant to Part V of the Succession Law Reform Act, if the couple has been cohabiting continuously for a period of not less than three years, or are in a relationship of some permanence, or if they are the natural or adoptive parents of a child, they may be considered a dependant spouse (within the meaning of Part V). This may entitle the individual a fair share of the estate in this case, but being recognized as an unmarried spouse is not always certain. In any case, it would be necessary to litigate the issue, adding an unnecessary expense to the estate.

Secondly, an invalid marriage would create issues for individuals who die intestate. Pursuant to the intestacy provisions of the Succession Law Reform Act,  the spouse is first entitled to the preferential share ($200,000) of an estate. If an individual dies and their marriage was not valid, the spouse that would normally be entitled may be disinherited. The result of this is that the preferential share may go to somebody who was not meant to inherit such a large portion of the estate.

Thirdly, a will is automatically revoked upon marriage. Because he did not have the authority to perform marriages, if a person was “married” by Cogan but had a pre-existing will, that will might not be found to have actually been revoked. This uncertainty creates the potential for litigation.

Thanks for reading,

Ian M. Hull

20 Sep

Forensic Document Analysis

Hull & Hull LLP Estate & Trust Tags: , , , , 0 Comments

In a recent article published in STEP’s Trust Quarterly Review, Audrey Giles profiles technological advances in the electronic recognition of handwriting.  For example, The Center of Excellence for Document Analysis and Recognition (CEDAR) at the University at Buffalo, State University of New York has developed electronic processes for the assessment of handwriting.  While such systems are funded by governments primarily concerned about white collar crime, forensic document examination is of great assistance to the estate litigator especially when trying to prove a fraud.

The difficulty is that, as Giles notes, while handwriting analysis can entail the comparison of hundreds of characteristics such as spacing between characters and the slope of letters, a signature is a very small sample which provides limited points of comparison for the document examiner.  To further compound the challenge to the document examiner, all signatures demonstrate some degree of natural variation and different people will exhibit different degrees of variation in their signature.  It is for this reason that the forensic document examiner will want as many samples of a true signature as possible before rendering an expert opinion.

The objective of the forensic document examiner is to provide opinion evidence for the consideration of the trier of fact as to whether a signature (on a Will for example) is that of the testator or a forgery.  One tool in the arsenal of the examiner is the Video Spectral Comparator which can reveal pencil guide lines or impressions that may have been used by the forger in an attempt to duplicate the testator’s signature. Such attempts at forgery are remarkably crude when considered in the context of advances in scanners and software which present new challenges to those charged with trying to detect a fraud.

David Morgan Smith   – Click here for more information on David Smith.

 

   

 

27 Apr

Alleging Fraud and Breach of Trust: Need for Particulars

Hull & Hull LLP Estate & Trust, In the News, Litigation, Passing of Accounts, Power of Attorney Tags: , , , , , , , , 0 Comments

Billionaire and recently deceased American shopping mall developer Melvin Simon’s heirs are fighting over his last will.  Mr. Simon’s children from his first marriage are challenging a will that changed the distribution of his estate in favour of his second wife.  Aside from the glamour factor, the case is interesting in that an allegation of fraud was recently dismissed on the grounds that "[t]he complaints fail to allege affirmative misrepresentations that can support a claim of actual fraud".

This illustrates an important point in estate and trust litigation.  Ontario’s Rules of Civil Procedure similarly requires pleadings that contain allegations of fraud or breach of trust to contain full particulars:

"Rule 25.06(8)  Where fraud, misrepresentation, breach of trust, malice or intent is alleged, the pleading shall contain full particulars, but knowledge may be alleged as a fact without pleading the circumstances from which it is to be inferred."

This could theoretically present beneficiaries challenging the actions of a trustee, since the trustee frequently has the particulars and the beneficiaries do not.  In practice, this problem rarely arises because most litigation occurs in the context of a passing of accounts, where it is unnecessary to make allegations against the estate trustee.  Instead, under the procedure in Rule 74, the beneficiaries can simply file and serve a Notice of Objection to Accounts challenging transactions or omissions in the trustee’s accounts.

After filing their Notice of Objection to Accounts, the beneficiaries can then bring a motion for an order giving directions (or an order for assistance) that will provide for the disclosure of the particulars they think exist.  After receiving full disclosure, the beneficiaries should in a position to make a better-informed decision on whether to add such allegations to their pleadings. 

Where this process is anticipated, the order should specifically authorize the parties to return to court for further directions.  Of course, it would rarely even be necessary to allege fraud at all, since the facts that support the allegation of fraud can form the basis of an objection to the accounts without using the words "fraud" or "breach of trust", and this can achieve the same practical result without the risks associated with alleging fraud.  Beneficiaries can also avoid the risk of having their pleadings struck at an early stage.  

Have a great day,

Christopher M.B. Graham – Click here to learn more about Chris Graham.

 

08 Jun

POA Fraud

Hull & Hull LLP Estate & Trust Tags: , , , , , , , , , , , , , 0 Comments

 As an aging society, we are likely to see an increase in issues surrounding abuse of our elderly. Just simply take a look at our recent estate and trust literature and you will notice that there has been an increase in articles about elder law. 


Recently, I read an article labeled “Putting the Brakes on POA Fraud.” This article can be found in Briefly Speaking which is the official magazine of the Ontario Bar Association. The article is authored by David Freedman, who is an associate professor at Queen’s University faculty of Law.  In his article, Professor Freedman looks at the common situation in which elder abuse is likely to occur wherein he states: “The prototypical example is the situation in which the elderly parent resides with one child who is to take principal responsibility for the parent’s care and who has been given a POA by the parent over his or her assets. Perhaps it is the siblings or a third-party care-giver who complains about the exercise or non-exercise of the POA, but there are many cases in which the assets are misappropriated.” Of course there is a strong public interest in protecting our elderly against financial exploitation, but what can we do?

For those of us who practice in this area of the law, how often have we heard of a family member approaching the police  to make a complaint about an elderly person who has been taken advantage of and being told “it’s a civil matter”? False. Section 331 of the Criminal Code of Canada addresses the issue of “Theft by a Person Holding a Power of Attorney.” In addition to the Criminal Code, there are civil remedies that are founded on the principles of restitution. Professor Freedman states that regardless of the type of case (criminal or civil) “the interest is the same, stripping the wrong-doer of any illicit gain and restoring the victim as much as it is possible to do in the circumstances.”

Thank you for reading,

Rick Bickhram

23 Apr

Risk Management: Lenders Beware

Hull & Hull LLP Litigation Tags: , , , , , , , , , 0 Comments

On Tuesday I blogged about mortgage fraud and suggested that financial institutions may be at greater risk because of the B.C. Court of Appeal decision: Re Oehlerking Estate, 2009 BCCA 138.

Why would they be at increased risk?

In the B.C. case, the Judge ordered that the fraudster’s title be set aside and that a new title be issued in the name of the plaintiff executrix. However, the Judge was satisfied that the financial institution had not “participated in the fraud” therefore the mortgage remained as a valid charge on title to the land. 

The B.C. Court of Appeal overturned that latter point when it declared that the mortgage is null and void as against the plaintiff and her title. 

The reasons were the same as those presented in a B.C. Court of Appeal decision released on the same day in Gill v. Bucholtz  (2009 BCCA 137). There is a thorough review of the Torrens land registry system and the development of B.C.’s Land Title Act.  Land title systems differ per province but the B.C. decision is likely persuasive.

In Gill v Bucholtz, the Court held that the B.C. Legislature adopted the policy that the cost of frauds perpetrated against mortgagees and other chargeholders should be borne not by the public (as the funders of the Assurance Fund but by lenders and other chargeholders themselves.”

Parties to real estate transactions rely on title searches. The case law shows that title searches have limitations, especially if a fraudster has used someone else’s identification to change the title document. It is up to lenders to now perform due diligence that may require that they delve deeper than the documents alone. Sometimes good old fashioned shoe leather might be put to work to check out the property in question; even a knock on the door to ensure that the owner is actually refinancing by way of a new mortgage. This extra work may come with a fee though. 

Thank you for reading. 

Jonathan

29 Oct

Snowbirds and a Power of Attorney

Hull & Hull LLP Estate & Trust Tags: , , , , , , , , , 0 Comments

The cooler weather is cause for many people, retirees especially, to plan an annual sojourn south.

In preparing for the winter, protecting real property — often a significant asset — may be top of mind.

My colleague, Paul Trudelle, wrote about "Real Estate Transactions Involving Powers of Attorney" in July 2008.  While travelling south for the winter does not require a sale, steps can be taken to minimize risks to real property.  The Government of Ontario suggests that to avoid real estate fraud one should protect his or her identity and be alert to identity theft.

Regarding a Power of Attorney, the government also suggests caution:  "Whenever you give another person a power of attorney that permits them to deal with your personal assets, you should consult with your lawyers or advisers regarding appropriate limitations."

In a 2004 Canadian Bar Association paper — Cross-Border Issues for Snowbirds and Roaming Retirees Marilyn Piccini Roy wrote: "If the Snowbird owns real estate elsewhere, this power of attorney may not be recognized there if the law of the situs applies its own law to the formal or substantive validity of the power of attorney or to its effectiveness vis-à-vis third parties."   If a Power of Attorney deals with assets in different jurisdictions, one should seek legal advice in the jurisdiction of the asset(s).

Recent Ontario case law highlights issues that can arise regarding real estate when a fraudulent Power of Attorney is used.  Reviczky v. Meleknia; Caplan (Intervenor) 2007 Canlii 56494 (On. S.C.) raises quesitons about a solicitor’s duty to"go behind" a Power of Attorney by enquiring about the donor’s mental capacity at the time of signing and later, as well as evidentiary requirements.  The recent case law reminds all of us, including snowbirds, of the risks that exist with a Power of Attorney.  

Jonathan Morse 

30 Sep

Will Challenge Litigation – Part 7 – Hull on Estate and Succession Planning

Hull & Hull LLP Hull on Estate and Succession Planning, Hull on Estate and Succession Planning, Litigation, Podcasts, PODCASTS / TRANSCRIBED, Show Notes Tags: , , , , , , , , , , , , , 0 Comments

 

Listen to Will Challenge Litigation – Part 7

This week on Hull on Estate and Succession Planning, Ian and Suzana continue their discussion on the Will Challenge Process, step by step.

They discuss fraud as one of the most serious ways in which a will can be challenged. Evidential requirements are important when allegations of fraud or forgery are made. Handwriting analysis and other scientific means of determining the legitimacy of evidence can be employed to determine whether or not fraud has occurred. Ian and Suzana also talk about lack of proper execution being grounds to challenge a will.

If you have any comments, send us an email at hullandhull@gmail.com or call us on the comment line at 206-457-1985 or leave a comment on our blog.

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