Articles by Charles Wagner

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Suing an Ontario Defendant – Security for Costs

January 13, 2011 in Commercial Litigation, Commercial Litigation Matters, Costs, cross border litigation, The Estate Trustee During Litigation by Charles Wagner

Tal lives in Tel Aviv.  He invests $500,000 with Allen for a business venture located in Toronto Canada.  An additional $1,500,000.00 is borrowed and then Allen ignores Tal’s calls and refuses to report about the business.  Upon investigation Tal finds out there was no business.  Allen refuses to give Tal his money back and a law suit is launched.  The first hurdle Tal will face is a motion brought by Allen for security for costs.

In Ontario the loser of the law suit is often ordered to pay a portion of the winner’s legal costs.  Allen argues that if Tal loses his law suit there is a concern that any cost order against him would be unenforceable.  In cases like this the Ontario Rules of Civil Procedure provides a mechanism for the Ontario defendant to ask the court to order Tal to provide security for costs (FN1). 

Allen will argue that Tal is ordinarily resident outside Ontario, that there is good reason to believe that the law suit is frivolous and vexatious and/or that Tal has insufficient assets in Ontario to pay the costs of the defendant.

Tal might respond that the reason he has no assets in Ontario is because Allen took it all for an apparently bogus business deal.  Tal will argue that his claim has merit and that Israel has a statute (FN2) that provides for reciprocal enforcement of judgments so the risk of an unpaid cost order is minimized.  Further, Tal has a home in Israel which is worth more than enough to satisfy any Ontario court cost order.

Under Ontario law a foreign plaintiff can possibly defeat an order for security by establishing that he has assets that can be used to satisfy a cost order in a reciprocating jurisdiction.  However, Allen will argue that under Israeli law (FN3) there are restrictions on the ability to take someone’s home away to pay a debt so Tal should pay the security for costs. What would the court say?

There is a very interesting case relevant to our scenario that was heard by the Superior Court of Justice in Ontario called Uribe v. Sanchez (FN 4).  In that case a Florida plaintiff claimed he had no money to pay security for costs and that Florida had legislation permitting the enforcement of foreign money judgments that would include a judgment for costs made in Ontario.  So – argued the plaintiff, there was no risk to the defendant.  The judge disagreed. 

The problem with the Florida plaintiff’s argument was that Florida law exempts a person’s primary place of residence from such a judgment. In this case the court ruled that this does not meet the test as to sufficiency and quality of assets in the reciprocating jurisdiction. Despite the merits of the plaintiff’s claim, the judge was not satisfied that the plaintiff could not post security or that the plaintiff would be prevented from pursuing a meritorious claim if he were required to do so.  Would an Ontario Judge see the Israeli legislation called the “Execution Law” the same way? It provides that a property that is the family home is not to be sold unless the Execution Office is convinced that the family has reasonable alternate accommodation.

This short review of the case law should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.
 
Charles B. Wagner is a partner at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate, commercial and tax litigation.

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(FN1)  See Rule 56 Security for Costs RULES OF CIVIL PROCEDURE – R.R.O. 1990, Reg. 194

(FN2)  See Foreign Judgments Enforcement Law – 1958

http://www.israelinsurancelaw.com/foreign-judgments/foreign-judgments-enforcement-law-1958.html

(FN3) See the Israeli statute called the ‘Execution Law’, which says that a property that is the family home is not to be sold unless the Execution Office is convinced that the family has reasonable alternate accommodation.

הגנת דירת המגורים (תיקון מס’ 15) תשנ”ד-1994 (תיקון מס’ 29) תשס”ט-2008

38.   (א)  היו המקרקעין שעוקלו משמשים, כולם או מקצתם, דירת מגורים לחייב, לא יהיה רשם ההוצאה לפועל רשאי להורות על מכירת המקרקעין ועל פינוי החייב ובני משפחתו הגרים עמו מהמקרקעין, אלא לאחר שהוכח, להנחת דעתו, שיהיה לחייב ולבני משפחתו הגרים עמו מקום מגורים סביר או שיש לו ולבני משפחתו הגרים עמו יכולת כלכלית המאפשרת מימון מקום מגורים סביר, או שהועמד לרשותם סידור חלוף.

 

(FN4)  Uribe v. Sanchez 2006 CanLii 19498 (ON S.C.)

Are Adult Children Legally Entitled To Inheritance?

January 6, 2011 in Applications for the Opinion and Direction of the Court, Challenging the Validity of Wills, Claims Against Estate: Summary Procedure, Court Proceedings to Ascertain Heirs of an Estate, Dependant Support Claims, Variation of Trusts, Wills by Charles Wagner

While their father loved both Samantha and Reuben equally, in his will, and in accordance with his culture, all the assets of the father were left to the male heir.  Is this legal?

The legality of father’s will may depend on which province’s law applies.  If the law of British Columbia governed there is a very good chance that Samantha would succeed and the Court would order the estate be split equally.  If Ontario law applied and there were no other legal issues raised concerning the validity of the will then Samantha would have a less likely chance to win.  Why the uncertainty?  Let’s look at three cases to explain, Tataryn v Tataryn (FN1), Cummings v. Cummings (FN2) and Johnson v. Huchkewich(FN3).

Tataryn was a case in British Columbia.  It was ultimately decided by the Supreme Court of Canada.  In summary, the deceased’s will favoured one son and disinherited the other son and gave less money to the deceased’s wife.  The court varied the will based on the deceased’s moral obligation to his wife and disinherited adult son.  In British Columbia, unless there is some debt or the favoured child is a dependent, or there is a valid reason for disinheriting a person, each child has a moral and legally enforceable claim against the estate.

The importance of “moral claims” as set out in the Tataryn case was adopted by the Ontario Court of Appeal in 2004 in Cummings v Cummings.  In this unfortunate case a second wife was litigating against dependent adult children of a first marriage.  The son, Paul, suffered from a progressively debilitating incurable neuromuscular disease known as Becker’s muscular dystrophy.  Paul, was arguably entitled to the all of the small estate.  Citing Tataryn, Justice Cullity explained, “The issue of the weight to be given to moral considerations is relevant in this case: it is posed quite directly by the [second wife’s] concession that she is not in need of support. On a strictly needs-based approach, I might well be justified in ordering that the entirety of the net testamentary estate be transferred to the support of Paul…I do not think that this would be the correct disposition of the case. I believe that, apart from any residual value that is to be attributed to freedom of testamentary disposition….moral considerations continue to play a part in the analysis.”

So has Ontario followed British Columbia’s lead?  Maybe, maybe not. 

I have reviewed many related Ontario cases post Cummings.  To the best of my knowledge no Ontario court has understood Cummings to mean that the moral claim of a disinherited adult non dependent child was legally enforceable.  As you recall both the adult children in Cummings were dependants which means that the father was providing support or was under a legal obligation to provide support immediately before his death.  It may be that the courts apply the moral obligation only for dependents.  For example, in a recent Ontario case, Johnson v. Huchkewich, one disinherited daughter challenged her mother’s will.  The judge did not even address whether a child’s moral claim constitutes a legal claim.  The only relevance of “moral claims” was how it reflected on capacity.  The daughter argued that her mother lacked the ability to assess and appreciate the moral claims of her children and therefore did not have capacity.  The judge did not accept that argument.

So will the winds of non dependent adult children’s moral claims from British Columbia blow through Ontario?  It still remains to be seen.  However, there are a number of lawyers who believe it’s coming.  In her article on this topic, prepared for the Law Society of Upper Canada’s continuing legal education program, Susan Woodley (a very well respected member of the bar in Ontario) answered the question this way,  “almost, possibly, probably”.

This short review of the case law should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.
 
Charles B. Wagner is the managing partner at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate, commercial and tax litigation.

FN1  Tataryn v Tataryn 3 E.T.R. (2d) 229 S.C.C.

FN2  Cummings v. Cummings ( (2004), 5 E.T.R. (3d) (81) (Ont. S.C) (Cullity, J.); see Cummings v.Cummings (2004) 5 ETR (3rd) 97 (Ont. C.A.)

FN3  Johnson v. Huchkewich, 2010 ONSC 6002

Who Gets The Engagement Ring?

December 13, 2010 in Claims by Common Law Spouse, Commercial Litigation, Commercial Litigation Matters, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates by Charles Wagner

Marsha’s met Marc only 3 months ago.  When she agreed to marry him she thought he was a wealthy entrepreneur.  Instead, she found out that Marc only owned a small store and was barely making ends meet.  When Marsha discovered her mistake she immediately started to date other men.

After Marsha agreed to marry him, Marc gave her a $20,000.00 diamond engagement ring.  Soon after Marc caught Marsha on a date with another man.  He demanded that she give back the engagement ring.  She refused.  In her mind the engagement ring was a gift.  Marc sued. Who do you think should get the ring?   Let’s see what the courts say.

In reviewing the case law, it seems that the most important factor for the courts was who broke off the engagement (FN1). Applying this reasoning to our story, if the courts believed that Marsha’s dating other men constituted a breaking off of the engagement they would order her to give back the ring.  In some cases the courts did not consider infidelity by the woman to constitute a breaking off of an engagement (FN2).  If that reasoning were applied here and the court felt it was Marc who ended the engagement then the court would allow Marsha to keep the ring. Academics criticized these decisions because, in their view, an engagement ring was a gift conditional on a marriage that did not take place and should be returned regardless of fault.  That reading of the law is more consistent with section 33 of the Marriage Act which provides “Where one person makes a gift to another in contemplation of or conditional upon their marriage to each other and the marriage fails to take place or is abandoned, the question of whether or not the failure or abandonment was caused by or was the fault of the donor shall not be considered in determining the right of the donor to recover the gift”(FN3).

Whatever the husband’s rights may be to get the ring back the courts have also denied him the return of the engagement ring if he fails to ask for it because the delay seems to mean the ring changed from a gift conditional on marriage to an absolute gift.

In Okahai v.  Sharify (FN4) a judge ruled that the woman had to return the engagement ring This case and other like it (FN5) were decided on the assumption that engagement rings were given in contemplation of marriage.  Under these circumstances, there is an implied condition attached to the ring that the woman would marry him.  The ring has the character of a pledge or something to bring the bargain or contract to marry and was  given on the understanding, or the implied term, that a party who breaks the contract must return it.  Since the women broke off the marriage she had to return the ring.

This short review of the case law should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.
 

FN1.  See  Marcon v. Cicchelli ( 1993), 47 R.F.L. ( 3d) 403 (Ont. Gen. Div.); Iliopoulos v. Gettas (1981), 32 O.R. (2d) 636 (Ont. Co. Ct.).

FN2.   See paragraph 61 of McArthur v. Zaduk 2001 CarswellOnt 2117, 21 R.F.L. (5th) 142, 106 A.C.W.S. (3d) 380

FN3.  In an annotation on Marcon v. Cicchelli the late James McLeod who was Counsel, at Mamo & Associates, London, Ontario, and Professor of Law at the Univrsity of Western Ontario expressed the opinion that the Divisional Court of Ontario was wrong.  In his view a gift is either conditional or absolute. If the gift is conditional and the condition is not met, then there is no gift and the property should be returned to the donor.  He based his view on Hough v. Champagne (1991), 35 R.F.L. (3d) 27, 42 E.T.R. 252 ( Ont. Gen. Div.).and s. 33 of the Marriage Act.

FN4.   Okahai v.  Sharify [2004] O.J. No. 4186 ( Ontario SCJ).

FN5.   Veitch (Trustee of) v. Rankin (1997), 41 O.T.C. 14, [1997] O.J. No. 4642 (Gen. Div.); Marcon v. Cicchelli (1993), 47 R.F.L. (3d) 403 at 407-408 (Gen. Div.): Hough V. Champagne [1991] O.J. No. 1322; 42 E.T.R. 252 (Gen. Div.); Iliopoulous V. Gettas (1981), 32 O.R. (2d) 636 At 639 (Co. Ct.); Seiler V. Funk [1914] O.J. No. 115;  32 O.L.R. 99 ( Ont. Ca); D’andrea v. Schmidt [2005] S.J. No. 290; 2005 Skqb 201; Q.B.G. No. 2166 Of 2002 J.C.R. (Saskatchewan Court Of Queen’s Bench ).

Second Marriages and Risks to the Estate

November 29, 2010 in Applications for the Opinion and Direction of the Court, Capacity, Challenging the Validity of Wills, Claims Against Estate: Summary Procedure, Dependant Support Claims, Estate Litigation, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills by Charles Wagner

Joseph was 60 years old when lost his wife to cancer. On line he met an Israeli called Rebecca, a 40 year old widow. They emailed each other, grew to care for one another, and decided to marry. Rebecca and her children moved into Joseph’s home. Joseph’s adult children from his  first marriage feared that Rebecca and her children were going to take away their inheritance. Joseph assured his children that Rebecca signed an agreement under which she gave up all her claims under the Family Law Act and could not claim support against his estate when Joseph died. Joseph assured them that  he left his children all of his money. Should the children have relaxed? Maybe – Maybe not.

Revocation by marriage
Unless Joseph made a new will after he remarried or in contemplation of marriage Joseph’s old will was revoked by his marriage to Rebecca. By virtue of the laws of intestacy(FN1) , despite the contract, Rebecca would receive a preferential share (the first $200,000.00) and a distributive share (1/3) of the balance.

Family Law Act Considerations
So let’s assume Joseph makes a new will. Can his children rely on the fact that their father had Rebecca sign a domestic contract? Rebecca’s lawyer may argue that Joseph failed to disclose significant assets when the domestic contract was signed. Furthermore, her lawyer may argue that Rebecca’s English was minimal and she did not have independent legal advice so there is no way she understood the nature and consequences of signing this contract. Accordingly, the contract may be set aside and Rebecca could exercise her right under section 6 of Ontario’s Family Law Act. That would entitle Rebecca to receive an equal division of net family property under section 5 of the legislation.

Succession Law Reform Act Issues
Now let’s imagine that at Joseph’s insistence Rebecca hires a lawyer who speaks Hebrew so she cannot later claim she did not understand the contract. Joseph’s lawyer makes full and frank disclosure of all of his assets in the agreement. Can the children now relax? Unfortunately – the answer is not yet. Under the legislation a domestic contract is only one factor the court has to take into account and the court has the discretion to ignore the contract(FN2). For example, in Butts Estate v Butts(FN3) a husband and wife signed a separation agreement providing for $500 per month support. No one disputed that this was to be a final agreement. Despite the fact that there was a contract where both parties fully understood the terms of that agreement the court decided that the support provided was insufficient and increased the support payments to be paid by the estate to the separated wife by $1000 per month.

There is a very old joke that death is not the end – it is the beginning of estate litigation. While the scenario outlined above is fictional it nonetheless reflects a growing trend. People often feel they were treated unfairly and go to court despite signing a contract where they agreed not to make any claim. Based on my experience in dealing with these cases, and what should be evident from this review. each situation’s facts may make a world of difference to how a court might view a case. Whether a party is seeking is getting married or there is a dispute after death there is no replacement for seeking out the advice of a competent experienced lawyer who knows how to protect your interests.

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FN1. See section 16 of Succession Law Reform Act, R.S.O. 1990, c. S.26

FN2 See See Part V of the Succession Law Reform Act, R.S.O. 1990, c. S.26 and in particular section 62(1)(m) which lists the factors taken into account. By virtue of an “agreement” being only one factor the courts have made awards of support even though there was a domestic contract. As well, section 63(4) which provides that an order under this section may be made despite any agreement or waiver to the contrary.

FN3. Butts Estate v Butts (1999), 27 E.T.R. (2d) 81 (Ont.GenDiv.)   For an excellent reviewon this topic see Archie Rabinowitz’s article  Dependant’s Support Applications – The Statute that Continues to “Speak”

Rectification – the Equitable Remedy to Fix Errors in a Will

November 12, 2010 in Applications for the Opinion and Direction of the Court, Challenging the Validity of Wills, Estate Litigation, Executors / Trustees, Public Policy & Estates, Solicitors’ Negligence in Estate Matters, Wills by Charles Wagner

Sometimes even professionals just drop the ball. Imagine walking into your lawyer’s and asking him to make a few changes to your will. Instead of typing in a bequest of $2,500.00 the lawyer types $25,000.00. The Will is signed and no one notices the mistake until after the testator dies. That is what happened in Nugent v. Lang (http://bit.ly/dhN38j ). The lawyer admitted the error was his and he testified that the testator wanted the bequest to be $2,500. It should be simple right? Not so fast.

The Plaintiff asked the court to fix the mistake. The legal term for this request is “Rectification”. Courts use this equitable remedy very carefully. Exactly what type of evidence a judge may consider is being debated in the courts. How sure does the court have to be to fix the mistake? Is the court limited in how it can fix the mistake? In exercising the remedy is the court limited to only being able to delete certain parts of the will? Can a judge add missing words? In this case the court rectified the draftsman’s error and changed the bequest from $25,000 to $2,500.
Cases like Lipson v Lipson,( http://bit.ly/lipson ), Binkley Estate v. Lang, (2009) 50 E.T.R. (3d) 44 and Balaz v Balaz,( http://bit.ly/cq9BJi] ) all involve situations where the courts fixed some form of lawyer mistake. Either there was an accidental slip or omission because of a typographical or clerical error, the testator’s instructions had been misunderstood, or the testator’s instructions had not been carried out. Despite these recent cases where judges fixed mistakes made in the will it is very important to remember that not every error will be rectified by the courts.
In Re Estate of Blanca Esther Robinson (http://bit.ly/9x5g0B ) the court refused to fix the mistake. In that case the testator signed a Will dealing with her European property. She also signed a Canadian Will dealing with her Canadian property. Years later, she made a new Canadian Will but did not tell her new lawyer about the Spanish will. Since the lawyer had no knowledge about the Spanish Will the solicitor included the standard provision revoking all previous wills. The beneficiaries asked the court to fix the mistake. The court refused. The judge stated, “….if no errors were made by the solicitor and the words in the will were reviewed and approved by the testator, rectification will not be available simply because the testator was mistaken about their legal effect.” So it seems that not every mistake will be rectified.
This short review of the case law on rectification should not be taken as legal advice. Based on my experience in dealing with these cases, they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.

Charles B. Wagner is the managing partner at Charles B. Wagner and Associates. This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

Do Mistresses Have a Right to Inheritance?

October 21, 2010 in Applications for the Opinion and Direction of the Court, Claims Against Estate: Summary Procedure, Claims by Common Law Spouse, Dependant Support Claims, Estate Litigation, Public Policy & Estates, Uncategorized, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates by Charles Wagner

Can you imagine burying a spouse and then being sued for support by his mistress? For those who believe in primacy on marriage and that marriage obligates its partners to fidelity, the idea of rewarding a mistress to a portion of the family’s an inheritance is unjust. Others argue that financial obligations should flow from the intensity and duration of life partner relationships regardless of the partners’ marital status. What do the courts think?

In Nowell v. Town Estate (http://bit.ly/nowell ) the deceased had a 24 year extramarital affair. During the week he lived with his wife, but on the weekends this man spent time with his mistress, gave her gifts worth about $125,000 and promised to support her. The mistress contributed to the man’s work as an artist without compensation. Left nothing in the will she sued the estate. Do you think she deserved any money? The Ontario Court of Appeal did.

The judges recognized that a 24 year relationship was more than casual and for the last 13 years it was quasi-spousal. The judges felt the mistress should be fully compensated because the estate was unjustly enriched. Mr. Town accepted his mistress’ help, did not pay for it, and he benefited financially. The court was influenced by the fact that the mistress made Mr. Town the focal point of her life and that through the years Mr. Town assured his mistress that he would look after her. While this did not create a legal relationship it proved the nature of the relationship. The court still awarded her $300,000.

In Mahoney v. King 1998 CarswellOnt 2348 a mistress successfully sued a married man for support because the court found that she was a common law spouse. Arguably, a mistress suing her paramour’s estate could use this case as a precedent. As a “spouse” the mistress would qualify as a dependant and would be entitled to support under the Succession Law Reform Act, R.S.O. 1990, c. S.26 if her paramour did not provide her with adequate support. There are those like the late law professor James G. McLeod who disagreed with this decision. He took exception to the idea that a woman who had an affair with a married man who lived with his wife may be a “spouse”. While Professor McLeod understood the argument of making an unjustly enriched estate compensate a mistress like in Nowell v. Town Estate he felt that to suggest that a mistress was a spouse for support purposes takes away whatever meaning is in the word “spouse”. 

The different views of a mistress entitlement to support under the law should tell you that this issue is not a simple one. My short review of these cases should not be taken as legal advice. Based on my experience in dealing with these cases they often turn on the specific facts. If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.

DISINHERITING CHILDREN WHO MARRY OUTSIDE THE FAITH

October 3, 2010 in Applications for the Opinion and Direction of the Court, Capacity, Challenging the Validity of Wills, Estate Litigation, Executors / Trustees, Halacha and Estate Litigation, Public Policy & Estates, Wills by Charles Wagner

While I have previously addressed the legality of disinheriting intermarried children in both in the Tribune (http://bit.ly/9ADVJY ) and in the Ontario Lawyer’s Weekly (http://bit.ly/bv9Rjm) a recent case suggests another review is warranted.    In Re Estate of Max Feinberg (http://bit.ly/cb5CKo ) three Illinois courts reviewed what they called the Jewish Clause which stated: “A descendant of mine other than a child of mine who marries outside the Jewish faith (unless the spouse of such descendant has converted or converts within one year of the marriage to the Jewish faith) and his or her descendents shall be deemed to be deceased for all purposes of this instrument as of the date of such marriage.”

The court weighed testamentary freedom against the common law’s disdain for wills that restrain people from entering into an otherwise legal marriage.  The Illinois’ court of first instance and appellate court ruled that the Jewish Clause was invalid because it seriously interfered with the right of individuals to marry a person of their own choosing.  It was now up to the Supreme Court of Illinois. 

The Illinois Supreme Court held that the Jewish Clause was valid.  The test was whether the provision was capable of producing harm that its enforcement would be contrary to the public interest. The Illinois Supreme Court upheld the Jewish Clause because they placed a premium on the right of individuals to decide what happens to their assets after they die. They disagreed with the lower courts who suggested that the clause in question was a restraint of marriage.  

What is the position of other jurisdictions?  As Illinois’ Justice Greman, pointed out, “… In most states they allow this – not just with Jews but for Catholics and others.” So what about Ontario?  The Ontario Court of Appeal, in a non-binding aside (obiter), addressed this issue in the Fox Estate case (http://bit.ly/98b5gw).  Fox’s will gave the executor absolute discretion to use trust money for his grandchildren.  The executor removed all the money to disinherit her son because he married a non Jew.  At issue was whether the executor’s conduct was proper.  The judge commented, “….in response to a query from the bench, counsel in this case were not prepared to argue that any court would today uphold a condition in a will which provides that a beneficiary is to be disinherited if he or she marries outside of a particular religious faith”.

Given the treatment of this issue in the US, does that mean a Jewish Clause would be void in Ontario? Maybe – Maybe not. The fact that three Illinois courts came to different conclusions should tell you that this issue is complicated and this review should not be taken as legal advice. I receive calls about this and other similar issues all the time. Cases often turn on the specific facts.  If you have a legal question relating to something similar, you are best advised to seek out competent legal counsel to determine your best course of action.

Scams on the Internet

October 2, 2010 in Commercial Litigation Matters, Fraud by Charles Wagner

In this blog I write mostly about estate or commercial disputes.  But given my recent unsuccessful attempts to defang a financial predator, I am taking the opportunity to alert people to fraudsters seeking to take advantage of the unsuspecting.

There are people who pretend to be lawyers and use the internet to scam the naive and inexperienced.   Others pretend to be clients and use unsuspecting lawyers as pawns in fraudulent schemes.  These financial predators promise money or business opportunity.  For example, there are those who email people claiming to have found an inheritance and for a small fee these rogues promise the potential victim his inheritance. Other ne’er do wells pretend to represent companies outside of Ontario looking for a local lawyer to collect some debt.  These con artists rely on fake bank drafts or certified cheques to scam lawyers before the cheques bounce back.  A common scam involves identity fraud.  For example, a stranger contacts a real estate lawyer and shows the lawyer a deed transferring title from the real owners to the stranger.  The stranger tells the lawyer that he wants to refinance, get a new mortgage and discharge the old mortgage.  The lawyer arranges the mortgage, gives the money to the stranger/new client and discharges the old one.  One problem- the real owners never signed the deed – their signatures were forged.  And by the way and there was no real first mortgage. 

Some advice to the public when dealing with these situations:

  1. If it’s too good to be true…..  If someone contacts you out of the blue and tells you something that is too good to be true then recognize it’s likely a scam.  The unheard of fourth cousin who left you lots of money is the stuff of fairy tales.   I was first alerted to this type of a scam when a woman from Kansas called me and asked where she should send the cheque.  I told this person that no one from my office ever contacted her.  She forwarded me the emails of a person claiming to be me and seeking a “small payment” for accessing her new found inheritance.  The victim looked up my number on the internet and called me because she wasn’t sure where to send the money.  I alerted her to contact the police and warned her she was the victim of a fraud.
  2. Check the Identity of the Stranger/Client: Almost every week I receive an email from a non Ontario company who invites me to represent his company in the collection of certain debts.  A variation of the scheme occurs when a person claiming that their ex spouse won’t pay support payments.  When I research the company I invariably find that the email address given and the name of the representative is bogus.  Sometimes, the rogue assumes the identity of a real person at the company.  Just last week I was contacted by someone purporting to represent an Israeli company seeking representation in my state (clearly, this rogue didn’t realize Canada is made up of provinces).  As a courtesy, I called the company and alerted them.  As I expected, there was no such person and they were not looking for legal representation.  I forwarded the bogus email to their Israeli lawyer.  So again, it’s always important to verify the person’s identity.
  3.  When a lawyer contacts you…..Every province in Canada has a law society.  If someone claims to be a lawyer in Ontario then check with local law society of the province in question.  For example, the Law Society of Upper Canada Ontario has a website which will tell you whether the person is a lawyer or paralegal in Ontario.  See http://bit.ly/bVJUzs  Last month I ran across a fraudster who calls himself Ernest Wong.  The owner and operator of this website copied my website in its entirety and just replaced my name with his.  This rogue even had the audacity to include my name on his website.  See http://ernestwongassociates.com/commerciallaw.htm .  If you check the LSUC website there is no Ernest Wong who is a lawyer.  Remember, don’t feel reassured that a website on Google means a person is really a lawyer.  In this case, Ernest Wong was not on the LSUC website, has been reported to Google, the Law Society and the Fraud Squad.  His site is still up on Google.  It is not even enough for you to see if that a lawyer exists because someone can claim to be that lawyer.  Call the number given by the law society website and speak to the lawyer who left you the message to verify it’s him. 
  4. Verify the office location:   Fraudsters like Ernest Wong and the person who claimed to be me to the almost victim in Kansas sometimes list their office as Osgoode Hall, 130 Queen St, West Toronto.   Local Lawyers who see this recognize a red flag of fraud because there are no private law offices at Osgoode Hall.   That building houses the Court of Appeal for Ontario, the Superior Court of Justice and the Law Society of Upper Canada.
  5. Reporting Fraud.  I must confess that with respect to my personal experience, I have found this process frustrating.  But, here are some sites of interest if you suspect fraud.  Phone Busters (http://bit.ly/Rc38 ), The Royal Canadian Mounted Police -RECOL (‘Reporting Economic Crime On-Line ), Ministry of Consumer Services (http://bit.ly/aQb24A).

 

So you may be wondering if I am making a mountain out of molehill.  Law Pro, the organization that insures lawyers stated that in 2008 lawyers reported 10% of all claims involve fraud.  Industry Canada  (http://bit.ly/b79ZXe) suggests fraud is growing rapidly. In the US there are reports of internet fraud quadrupling to about 31,299 cases.  While their statistics are dated, the concern is real.

I strongly urge readers, especially young lawyers, to educate yourselves on this issue.  The best protection against fraud is being informed.  If you are interested in following up this topic I recommend the following articles. 

 

 

  • Fraud:  A growing Problem affecting all Lawyers  (LAWPRO Magazine Summer 2008) http://bit.ly/dwFkIr ;

 

 

 

 

 

Money Missing? Powers of Attorney, Executors and Adverse Inferences

September 21, 2010 in Applications for the Opinion and Direction of the Court, Estate Litigation, Executors / Trustees, Orders for Assistance, Passing of Accounts and Executor's Fees, Retirement and Removal of Trustees by Charles Wagner

Very often a parent appoints the favourite child to manage the parent’s property (“power of attorney”) or be the executor under the parent’s will.   Perhaps the child is honest but has no idea what obligations are involved with being an attorney for property or as an executor and fails to keep proper records.  Perhaps that child is very dishonest and the lack of records is simply his way to hide the improper use of his parent’s money. So what typically happens? 

The power of attorney or executor may put his money together with his parent’s money (intermingling).  Caregivers may be paid cash and there are no receipts.  Expenses (both appropriate and inappropriate) may be incurred and no records are kept.  All of the above scenarios, which may be very innocent, are problematic. 

There is both a common law and legislative duty to keep accounts of all transactions involving the parent’s property by the attorney for property (FN1) and the executor (FN2) if called upon by those with a financial interest to pass those accounts.  What this means is that The Executor/Attorney for Property prepares his records in a form acceptable to the court and a judge approves of the accounts.

Based on my experience in this area it seems as if the strict obligation to keep proper records is often “honoured in the breach”.  People sometimes just do not keep proper records.  So in the scenario I raised above let’s assume this favourite son is unfamiliar with the fiduciary duty (F3) to keep proper records and to show his records, if asked, to people with a financial interest in his mother’s affairs. So what happens if – like in many cases – the son has no records and cannot show where he spent mom’s money? The court’s often will draw on adverse inference and assume the son has used the money for his own purposes and not for his mother’s benefit.

In Zimmerman v. McMichael Estate (FN4) Justice Strathy provides a wonderful summary of the obligations to account and the risks for not doing so.  It is worthwhile for anyone interested in this area of law to review this case.  In part, His Honour explains,

  1. A trustee (FN4) must keep a complete record of his/her activities and be in a position at all times to prove that he/she administered the trust prudently and honestly. He/she must have the accounts ready and give full information.
  2. A trustee must make a proper accounting as a condition precedent to being awarded compensation.
  3. An adverse inference (FN5) may be drawn if the trustee fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property and that attorney will be held personally liable for the unsubstantiated withdrawals. (FN 6).

 

The bottom line is that those people who take on the responsibility of being a power of attorney and or an executor should familiarize themselves with the obligations flowing from that position.  Some good sites to look at to start your research are listed below in the footnotes.  As well, I suggest you see the following:

  1. Executorship:  A Guide for Those Called Upon to Act as an Estate Trustee published by the Certified General Accounts of Ontario http://www.cga-ontario.org/assets/file/publication_executorship.pdf  
  2. Objections to Accounts  http://www.estatelawcanada.ca/category/passing-of-accounts-and-executors-fees/
  3. Elder Abuse in Ontario http://www.estatelawcanada.ca/category/court-appointed-guardians-of-property-and-of-person/
  4. Put Your Own Interests Aside – Poa http://www.cbwagnerlaw.com/articles/aside-interests.php

 

 _________________________________________________________________________________________

 FN1 Someone who is appointed as an attorney for property has a duty to keep proper records which includes a duty to obtain and keep receipts.  In Ontario that common law duty has been codified under the Substitute Decisions Act, 1992, S.O. 1992, c. 30 ( see sections 32(6)   Duties of guardian, Accounts;  33(1) Liability of guardian and  42; Passing of Accounts) as well as Accounts and Records of Attorneys and Guardians, O. Reg. 100/96

 FN2.  The RULES OF CIVIL PROCEDURE – R.R.O. 1990, Reg. 194 outlines how the accounts should be prepared.  Please see Rules 74.15 and 74.16.  Also see section 39 of the Estates Act and section 23(1) of the Trustee Act, R.S.O. 1990, c. T.23.  As well the LSUC has a very useful site indicating steps to be taken to pass accounts at http://rc.lsuc.on.ca/jsp/ht/passingAccounts.jsp#s9

 FN3.  A fiduciary duty describes a special obligation of a person placed in a position of responsibility or trust in which that person manages the assets or property of another person.  For example, a power of attorney and executor are both at common law and by statute viewed as fiduciaries.  So a person who is appointed as power of attorney has an obligation to act honestly, in good faith and strictly in the best interests of the person who granted that power of attorney.  The same is true for an executor who must act strictly in the best interests of the estate.  Please see 32(1) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30

FN4.  A Trustee includes an executor under a will and these obligations apply equally to a power of attorney.

 FN5  Justice Strathy did not use the words “adverse inference”.  This phrase is my own based on his comments in paragraph 35 of the case.

 FN6  This can be found on line at http://www.canlii.org/en/on/onsc/doc/2010/2010onsc2947/2010onsc2947.pdf .   In paragraph 35 of his endorsement Justice Strathy refers to a number of cases to support his proposition including Lanthier v. Dufresne Estate, [2002] O.J. No 3397, [2002] O.T.C. 671 (S.C.J.) at paras. 52-57; Re Ronson, [2000] O.J. No 1294 (S.C.J.) at paras. 15-20.

Forum Non Conveniens

September 7, 2010 in Commercial Litigation Matters, cross border litigation by Charles Wagner

Private international law and forum non conveniens is complicated.  It is really too complicated to properly address is a simple blog.  But, let’s consider this as wetting your appetite on the subject.  So let me tell you what happened and let’s see if you come to the same conclusion as Justice Hoilett of the Ontario Superior Court of Justice.  In Towne Meadow Development Corp. v. Israel Development Bank the Ontario Superior Court of Justice had to determine the appropriate location for litigating a dispute.  A Canadian construction company hoped to build in Israel. The Israeli bank granted it credit. A shareholder of the company allegedly pledged company assets to secure the loan. The bank then called in its line of credit for repayment wanting access to the assets.  The builder suggested that Ontario law applied and that the court case should be heard in Ontario. The Israeli bank disagreed.

Truth be told my question to you is unfair. The case was far more complicated.  But nonetheless – what do you think?

Cross-border trade means contractual disputes end up in court. Ontario has grappled with issues such as this through passing legislation and application of the common law as it relates to private international law.

The courts apply certain tests to determine whether there is a ‘substantial connection’ between the litigation and Ontario. If there is that connection, our courts make their decisions having in mind that there may be a substantial connection with another jurisdiction, and then decide which forum (i.e., in our case Israel or Ontario) is best suited to hear the case. This is what lawyers mean when they speak of forum non conveniens.

In our scenario, Justice Hoilett felt that Israel was a far more convenient forum for the litigation to proceed than Ontario. The judge arrived at this conclusion by considering the fact that all loans and transactions were made in Israel in relation to projects undertaken in Israel; almost allwitnesses material to the issue were in Israel; the defendant was in Israel and representatives of the plaintiff travelled to Israel often.

This blog deals with the complicated issue of forum non conveniens, comity and private international law and is not meant as legal advice.  For those interested in a more detailed review of the topic I refer you to the following articles:

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