The facts of the case serve to highlight the importance of maintaining a continuing professional standard in dealings with clients. More importantly, an awareness of the duty of loyalty owed to the client, especially where there has been a termination of a retainer and emotions may be running high.
The claim is centered around the Last Will and Testament of Budd Kuehl, the father of two of the plaintiffs, a mortgage transaction that intertwined with his estate, and communications made by the defendant in the course of her retainer and after the termination of said retainer.
In 2010, shortly before the father’s death, he had retained the defendant and her firm to draft a new Will. At the same time, the defendant also acted in a mortgage transaction for the daughter on her home. The father jointly applied for the mortgage with his daughter and it was arranged by the defendant for him to have a 50% interest in the mortgaged home as a tenant in common, pursuant to requirements of the mortgagee.
The 2010 Will provided for the estate to be held in trust for the benefit of the surviving spouse during her lifetime, and subsequent to her passing, for the residue to be divided equally between the father’s children, subject to the condition that each child’s share would first be applied to pay off any mortgages they held.
The defendant had been retained by the estate trustee to assist with administrative matters. However, over the course of her retainer, disputes arose between the defendant and the daughter concerning the amounts owed, if any, relating to the mortgage on the daughter’s home and her father’s ownership interest in it. The plaintiffs, in their capacity as estate trustees and executors, terminated the defendant’s retainer.
After her retainer was terminated, the defendant communicated with the Office of the Public Guardian and Trustee (the “OPGT”) concerning the father’s surviving spouse. These communications formed the core of the claim of defamation, as they resulted in the OPGT refusing to accept the daughter’s application for guardianship of her mother. The court agreed with the plaintiffs that these communications were defamatory in nature, the defendant’s claims of qualified privilege notwithstanding.
The facts of this case are a sober warning to lawyers who act for multiple related parties, to ensure clear communication of the rights and liabilities of each party and how they may overlap. Where a breakdown of the lawyer-client relationship does occur, the duty of loyalty and confidentiality to the client should be given exceptional attention.
Thank you for reading and have a great day!
Ian Hull & Raphael Leitz
We have previously written about the Estate Arbitration and Litigation Management (“EALM”) initiative, which has been spearheaded in an effort to keep estate litigation matters moving forward during the COVID-19 pandemic. Our previous blogs on the EALM initiative can be found here and here.
In its Notice to the Profession dated May 5, 2020, the Ontario Superior Court of Justice announced that it will not resume in-person hearings until July 6, 2020, at the earliest. The notice further states that the scope of matters being heard by courts virtually will be expanded in the near future, but the particulars regarding such an expansion have not yet been released.
While access to the courts remains limited, EALM is available as a means of obtaining assistance in the determination of procedural and/or interim (and certain substantive) matters that are not necessarily urgent in nature and not currently eligible for a virtual court hearing. The matters set out in an EALM agreement can be arbitrated by senior estates practitioners in a timely and cost-efficient manner. EALM arbitrations can take place via teleconference or video conference, depending on the preferences of the parties and the arbitrator.
As previously indicated, EALM is not intended to in any way circumvent the role of the Office of the Public Guardian and Trustee (the “PGT”) or the Office of the Children’s Lawyer (the “OCL”) where the estate matter involves unprotected charitable interests or the rights of persons under legal disability. Since our last blog post regarding EALM was posted, the initiative has received the support of the PGT and the OCL and our precedent EALM agreement has been further updated to recognize the potential role that the PGT and/or the OCL may have in EALM process. Best EALM practices include ensuring that the PGT and/or the OCL are provided with the opportunity to participate, and further include the following:
- Where any substantive issue to be submitted to arbitration affects the rights of persons under legal disability, or an unprotected charitable interest, the parties must provide notice of their intention to enter into an EALM agreement to the PGT and/or the OCL;
- The PGT and/or the OCL should be served at the early stages of a matter, particularly when the issues will have a significant effect upon the interests that they represent;
- Where the PGT and/or the OCL are participating in a proceeding, their consent to proceed to EALM is required;
- Where it is necessary for a court to appoint the PGT or the OCL as litigation guardian, each office may consider requests to engage in the EALM process after they have been appointed as litigation guardian (rather than prior to their formal appointment); and
- An arbitrator’s decision to resolve substantive issues involving the rights of persons under legal disability will be considered to be a final settlement, which requires court approval under Rule 7.08 of the Rules of Civil Procedure.
A revised copy of our precedent EALM agreement, which has been updated in consultation with the PGT and the OCL in consideration of the comments set out above, can be found here. An updated list of senior estates practitioners who are prepared to assist as EALM arbitrators is available here. I again thank all of those who have demonstrated an interest in assisting other members of the Estates Bar as arbitrators.
EALM is a cost-effective measure to move matters forward and provides the parties to litigation with more control than the traditional court process. Once the courts resume full operations, we can only anticipate that they will be at full capacity and hearing dates will be in high demand. In light of this, we are hopeful that EALM will continue to assist parties to estate litigation and their counsel as a suitable and efficient alternative to in-court hearings.
If you are interested in introducing EALM into your own practice, or if you are interested in being added to our roster of EALM arbitrators, please contact me at firstname.lastname@example.org.
Thank you for reading and stay safe.
What do you do as a lawyer when you represent someone who is waiting to receive money from an estate, but the Estate Trustee will not pay? An interim distribution can commonly be made. The Estate Trustee can hold back some of the funds for potential liabilities and distribute some of the money immediately. Potential liabilities can involve delayed tax filings related to Canada Revenue Agency (CRA) procedures being slow, or other estate liabilities. Final distribution can be delayed for a matter of 2-3 years, or even longer. As an example, on a $1,000,000 estate, the hold back might be $200,000 on $50,000 of estate liabilities that are known or can be knowledgeably estimated. This safely leaves $800,000 for immediate interim distribution, without waiting years until concluding administration of the estate. However, the practice of the Office of Public Guardian and Trustee (OPGT) in Ontario is not to do interim distributions. They take the position that even if there is the remotest potential for liability they will not take the risk. As a government entity there is certainly no incentive to take any risk. The following rhetorical question illustrates the problem – What civil servant in a bureaucratic government agency is going to move quickly to take on liability and risk?
A recent decision clearly directs the Office of Public Guardian and Trustee (OPGT) of Ontario to make an immediate interim distribution as Estate Trustee.
It is unfortunate, in my view, that anyone would have to take steps to seek an Order in these circumstances. This is what happened in Foundation for Human Development and Jack Benson v The Estate of Keith Irwin-Reekie, 2020 ONSC 299, with the decision released on January 15, 2020. The court directed an interim distribution by the OPGT, to distribute the inheritance to which the moving parties were entitled. The court found that it was appropriate to exercise discretion under rule 74.15 (1) (i) “Orders for Assistance” of the Rules of Civil Procedure, Courts of Justice Act. The reasoning was that it was usual practice for estate trustees to make interim distributions out of estates, “once the Estate Trustee has a good understanding of the taxes and other liabilities of the estate, holding back sufficient funds in the estate to satisfy those expenses / liabilities”.
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