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Undue Influence in the Estate Context amongst Orthodox Jews – is Arbitration before a Beis Din a viable option?

May 6, 2013 by Charles Wagner

Is there a moral dilemma for the Orthodox Jewish litigator? On June 4, 2013, the B’nai Brith Canada Trust and Estates Group will be presenting a seminar on dealing with fraud as it impacts on the elderly, their assets and estate disputes. In choosing topics for this year’s seminar and having in mind our constituency, the committee felt it would be remiss if it did not address this topic and how members of our community who face this issue deal with alternative dispute resolution avenues.

Many Jews believe that when there is a dispute between Jews, those altercations must be decided in accordance with Jewish law and before a Jewish court. Such Jews may believe that, to do otherwise, would be tantamount to declaring publicly that the secular court system of justice is preferable to that of the Beis Din. The Shulchan Aruch condemns those who go before a secular court for challenging the value of the Torah’s legal system. Nonetheless, both in commercial and estate contexts, we sometimes see Orthodox Jews bringing their disputes before the secular courts.

For an Orthodox Jewish lawyer who is representing Jewish parties who are suing one another in a secular court, an ethical question arises. It gets further complicated where the client’s rights under secular law far exceed the rights they may have under Orthodox Jewish law. And this may very well be the case in the laws of inheritance. For the upcoming seminar on June 4, 2013, we have invited Archie Rabinowitz of Dentons Canada LLP and Rabbi Mordechai Torczyner of Yeshiva University to address this topic. What happens when an Orthodox Jewish client believes that his Orthodox Jewish sibling has committed a fraud to secure assets he might otherwise be entitled to under secular law but not under Jewish law? How would a secular court deal with these issues and how would the Beis Din? Both Archie Rabinowitz and Rabbi Mordechai Torczyner are uniquely suited to address these questions.

Rabbi Mordechai Torczyner is Rosh Beit Midrash of the Yeshiva University Torah miTzion Beit Midrash Zichron Dov, Toronto, Ontario. Previously he served as a pulpit rabbi in Allentown, Pennsylvania, and in Pawtucket, Rhode Island. Since his arrival in Toronto, he has impressed many in the community with his intellectual honesty, breath of knowledge in both secular and religious studies and commitment to raising the level of Jewish study amongst the modern Orthodox Jewish community.

Archie is certified by the Law Society of Upper Canada as a specialist in Estates & Trusts Law. He has chaired the prestigious Law Society of Upper Canada Annual Estates and Trusts Summit since 2008 and is preferred counsel for LawPRO advising on professional negligence cases arising out of contentious estate and trust matters. He has extensive trial and appellate experience, including cases which in part deal with Halachic issues.

The event will take place on June 4, 2013at Shaarei Shomayim Synagogue, 470 Glencairn Avenue, Toronto, Ontario, M5N 1V8. Registration is at 7:30 a.m. and the presentations will begin at 8:00 a.m. sharp. The event is open to lawyers and accountants. Those lawyers and/or accountants who are interested in attending should contact Anita Brombergof B’nai Brith Canada at 416 633 6224 x130 or email abromberg@bnaibrith.ca.

Dealing with a Testator Whose English is Suspect

April 18, 2013 by Charles Wagner

It seems self evident and almost trite to say that a will must reflect the intention of the testator. Accordingly, those parties who come to court and submit that the will in question is authentic and valid must prove, among other things that the Testator knew and approved of the content of the will.[1] Mistakes in how instructions are taken and the execution of the will may result in disappointed beneficiaries and liability to the solicitors who took the instructions, drafted the Will and saw to its execution. The purpose of this paper is to:

examine how courts have dealt with the issue of knowledge and approval of contents as it relates to non English speaking testators;
reflect on the risks to having the will declared invalid; and
address the issue of potential liability to disappointed beneficiaries and consider the wisdom of certain practices when dealing with such testators.

A careful review of the court’s treatment of these issues may give solicitors reason to reexamine and adjust their will drafting practices.

What is Knowledge And Approval of Contents

In Lidstone v McWilliams[2], the Supreme Court of Canada stated that:

“…The propounder of a will must satisfactorily establish (a) that the testator had testamentary capacity at the date of the execution of the will; (b) that the will had been duly executed and attested, and (c) that the testator knew and approved of the contents thereof.”

The Supreme Court of Prince Edward Island[3] described the obligation of knowledge and approval as follows:

“For knowledge and approval it must be proven that the testator knew and approved of the contents of the will, that the testator realized what is in the will and agreed that is what she wanted. Once the propounder proves that the will was properly executed after it was read to or by the testator and the testator appeared to understand it, the propounder is aided by a rebuttable presumption that the testator knew and approved the contents. The presumption is rebutted if it is shown that the testator did not really understand the contents even though it was so read. When suspicious circumstances are shown, the propounder must show knowledge and approval affirmatively, or depending on the circumstances probate may be refused for all or part of the will: Oosterhoof on wills and Succession (5th ed.), at pp. 168-169; Feeney’s Canadian Law of Wills (4th ed.), at § 3.1.”

It is important to note that knowledge and approval may overlap with issues relating to capacity or undue influence, but they are not the same thing. One may understand and approve of a aill, but still not possess the testamentary capacity either because the decisions contained therein are rooted in delusions or a result of disease or forgetfulness.[4] Furthermore, a testator may know and understand the contents of a will, but has been coerced to sign because of undue influence which goes to capacity.[5]

In Vout v Hay[6] the Supreme Court of Canada indicated that while the propounder of the will has the legal burden to show due execution, knowledge and approval, and testamentary capacity, once there is evidence of due execution and of the will having been read over to the testator, who appeared to understand it, a rebuttable presumption exists that the testator knew and approved of the contents of the will. The Court further went on to explain that this presumption of knowledge of form and content is rebutted where there are suspicious circumstances present. At that time those seeking to establish that the will is authentic reassume the legal burden of proving knowledge and approval.

Suspect English and Suspicious Circumstances

Does the inability of the testator to read or write English constitute suspicious circumstances? In certain circumstances the courts have concluded that the testator’s inability to read or speak English gives rise to suspicious circumstances. Let’s review the case law. In Re Sopel[7] an elderly woman could neither read nor write English, but knew the language well enough to understand what was being said to her in English. The testatrix executed a will, the prime beneficiary of which was the wife of the lawyer who drafted and facilitated its execution. The application for probate was rejected, in part, because the will was not read to the testatrix and the court concluded that she did not know or approve of the contents of the will. While it was in dissent, one of the judges made the following comment that impacts on our discussion:

“Mrs. Sopel was in the position of a marksman or blind person. It was the duty of the appellant to advise her that it was necessary that it be read over to her in the presence of the witnesses. Considering the bequest to his wife, the fact that he did not so advise her gives rise to suspicion.”

In the Schatz Estate case, [8] the testatrix was a woman whose native tongue was German. She was not comfortable speaking English and could neither read nor write. The testatrix’s daughters (and beneficiaries under the will) reviewed the will with their mother and summarized its contents to her in German. The Court referred to the Saskatchawan Surrogate Court Act which required that the due execution of a will for an illiterate person required that the will was read over to the testator. The Court also noted comparable practice in Ontario and quoted MacDoneel, Sheard and Hull which stated:

“When the testator has executed his will by making his mark, the proof shall show that before its execution the will was read over to him and that he had knowledge of its contents and appeared perfectly to understand the same. This rule does not mean that if the will has not been read over to such a testator it can never be proved, but only that it cannot be proved in common form. The will could still be propounded in solemn form, and if it was established that the testator had a clear knowledge of its contents it would be entitled to probate.”

In the Schatz Estate case, the court considered what “read over” meant in this context. Its relevance to our discussion bears it being quoted in full.

5. There is something to be said for reading the words “read over to” in a wide sense to include “summarized to”, “explained to” and the like. In fact, one dictionary definition is “to cause another to become acquainted with the contents of something written”. If narrowly interpreted, petitions which really involve only non-contentious business may come to involve proof in solemn form. Moreover, those involved in the execution of wills know that, in fact, wills are, in circumstances involving execution by mark, often summarized or explained rather than read over word for word, the latter being, in many situations, a futile exercise. Putting this thought into terms of the present petition it may be said:

(1)		That word for word translation from a will written in English (to a testator whose “comfortable” language was German) to German is not theoretically possible.
(2)		The testator would not have understood a word for word reading of the will in any event.

Does this lead to a wide and flexible interpretation of the words “read over” as a practical step?

6. I think, as seems to be suggested in Probate Practice, supra, that the words “read over” mean exactly what they say. If a broad and flexible interpretation were accepted, witnesses to the execution of wills executed by mark would soon be swearing that the will had been “read over” in various broad and flexible senses and all that would be coming before a surrogate or probate judge would be the affidavit in statutory form provided by section 38(2). There would be no question by the surrogate or probate judge — the statutory requirement would have technically been met. The decision would be for the petitioner and his solicitor whether the circumstances of the execution and explanation or summarization justified the swearing of the affidavit in statutory form. The words would eventually come to mean different things to different people.

7. In result, in my view, it is better that the words “read over” be regarded as meaning read over verbatim and not be equated with “summarized”, “explained” or “made acquainted with”. If the words “read over” are to routinely appear in affidavits in support of common form petitions for grants of probate, it is best, and the legislature must have so intended, that the words have the usual and restricted meaning. If it were otherwise it would be for an individual deponent to use the words as he sees fit. While a layman may be able to “explain” or “summarize” this will adequately, it will not always be so. Errors — intentional and nonintentional — are certain. There are not that many cases of testators executing by mark without the will having been read over. Solicitors rarely omit reading over and they supervise most executions by mark. Executions by mark are unusual with lay people. Proof in solemn form need not be, in non-contentious cases, overly formal or lengthy. In the present case my present inclination is that little will be required to prove the will of the testatrix in solemn form.

In a 1999 Alberta Surrogate Court case[9] the validity of the will was attacked. The testator’s English skills were virtually non-existent and the interpreter for both the providing instructions and reading of the will was a non-arm’s length party to the beneficiary. The court concluded,

“The problem in this case is that the deceased had little or no ability with the English language. His interpreter was a loyal supporter of the beneficiaries named in the will. I am not sufficiently satisfied that the deceased understood how he was disposing of his property in order to be able to hold, in good conscience, that in this case there was a proper testamentary disposition.”

In the 1994 Sguigna Estate case before the Ontario Court of Justice – General Division[10] the testratix could not read or write English and had only very basic verbal English skills. The court opined that her inability to communicate in English directly related to her lacking knowledge and approval of the contents of the will. The Court quoted the principle stated in Tyrrell v. Painton et al.,[11] by Davey L.J. as follows:

“the principle is, that wherever a will is prepared under circumstances which raise a well-grounded suspicion that it does not express the mind of the testator, the Court ought not to pronounce in favour of it unless the suspicion is removed.”

The lawyer taking instructions spoke to the testator in Italian. However, the lawyer was from the north of Italy and the testator was from the south. They spoke different dialects so that while the lawyer could understand the testator, the testator was unable to completely understand the lawyer. The son of the testator, who was the prime beneficiary under the will, picked up the copy of the will and presented it to his mother for signature before two witnesses (who also did not speak English). The court rendered the following decision.

“I am satisfied from this evidence that Annetta [the testator] was presented with a document which was entirely in English, which she could not read, and which Fred confirms he did not read to her. Nor did he explain to her its contents. I find that it was witnessed by two persons who did not know what was in the document and who cannot testify to the formalities for execution required under the Succession Law Reform Act. On those grounds and on that evidence alone I find that Fred, as the person offering the will for probate, has failed to meet the onus of proving due execution and knowledge and approval of the contents of the will by the testratrix. Accordingly this will shall not be admitted to probate.”

Clearly this case indicates that when a testator does not speak English, it can give rise to suspicious circumstances which rebuts the presumption that the testator had knowledge and content of the will. Claims of solicitor’s negligence may arise if those who propound the will fail to prove it authentic and are unable to establish that the testator knew and approved of the content of the will. For those with non English speaking clients this issue suggests that one would be wise to review the manner of taking instructions and seeing to the execution of a will.

Of particular interest to me is paragraph 31 of Haley J.’s decision, “It is not sufficient in establishing the knowledge and approval of the contents of the will by the testatrix to show that she understood the primary dispositive feature of the will. While she may not understand the technical law relating to powers of executors and priority in payment of debts it is essential that she understand the complete chain of the dispositive provisions, e.g., gifts over.” Often lawyers dealing with unsophisticated illiterate clients only deal with the main points in the will in a very summary fashion. Is that enough? For Justice Haley the answer seems to be no.

Dealing With Testator Who Cannot Read, Speak or Understand English

Solicitors who do not take proper steps to ensure that the will properly reflects the testator’s instructions risk liability to disappointed beneficiaries. In discussing the issue of solicitors’ liability in negligence cases, Ontario’s Court of Appeal[12] referred to M.M. Litman & G.B. Robertson G.B. article on “Solicitor’s Liability for Failure to Substantiate Testamentary Capacity”. [13] The Court states:

“….The authors then identify solicitors’ common errors that have been either the subject of criticism by the courts or the basis of liability for professional negligence in the preparation of a will. These include:

• the failure to ascertain the existence of suspicious circumstances,

• the failure to react properly to the existence of suspicious circumstances,

• the failure to provide proper interview conditions (e.g., the failure to exclude the presence of an interested party),”

So what is the best way to deal with a testator whose English skills are so suspect such that those who oppose a will may use that deficiency in the English language to challenge the will?

In preparation for this paper I have reviewed a number of the checklists, text books and cases relating to this issue and will review some of the options presently in use by solicitors and recommended by different authorities.

The Client’s English is good enough……

There are some solicitors who feel quite capable of communicating with a testator whose English is suspect either because the testator’s will is a simple one or they are persuaded that the testator’s English is good enough to understand the explanation given. Some cases suggest that regardless of a testator’s suspect English skills, a will should be probated if the solicitor satisfies the court that he sufficiently explained the will so that the testator had knowledge and approved of the will’s Content. [14]

On the other hand, there is case law that says the exact opposite. In the case of the Dansereau Estate[15] the testator was bilingual in matters of everyday living, but her first language was French. She felt more comfortable speaking French when dealing with complicated or sensitive issues. Therefore even when the will was reviewed and explained to her by a senior estate lawyer, the court found that the testator did not have the requisite knowledge and approval of the will because the lawyer seeing to its execution was unable to explain in French the documents that he presented to her for execution.

Clearly, the court’s decisions will always turn on facts specific to each case. However, the best practice is to ensure that the manner of a will’s execution leaves little room for doubt and that the testator’s knowledge and approval of the will can later be proven in court.

Someone in my office speaks……

A common practice for people working with ethnic communities is to hire administrative staff who speak the language. As well, lawyers sometimes work in their own ethnic communities and use their supplementary languages skills as a marketing feature. Under these circumstances the courts have often approved of lawyers who read over and explain the will to testators in their own language[16] and the various law society and text book checklists often recommend referring such a testator to someone who speaks the testator’s language in order to avoid the allegation of suspicious circumstances.[17]

Unless the person in the law office has a proper command of both the English language and the language of the testator there is the risk that the will cannot be probated and the solicitor who took the instructions and saw to its execution risks liability to disappointed beneficiaries. The courts have looked askance at wills when the comprehension of the testator was put into question because the lawyer and client spoke Italian of different dialects.[18] Each case will turn on its facts, but common sense dictates that if either the testator’s or translator’s language skills are not sophisticated enough to accurately communicate the contents of the will the risk of the will being overturned and liability to the solicitor is enhanced.[19]

Testator’s Friend acts as Interpreter

The testator brought in a friend and makes it clear in broken English that this friend will translate on his behalf. The friend translates the instructions and reads over the will and summarizes it for the plaintiff.

This practice poses a number of difficulties. Unless the solicitor is familiar with the client and his friend it is difficult to independently determine the testator’s intentions, capacity and knowledge of the content of the will. In Re Vleeming Estate[20] the testator knew no English. He brought in a friend to act as translator who, unbeknownst to the solicitor who drafted the will, was a loyal supporter of the beneficiaries named in the will. The court ruled that this was not a proper testamentary disposition.

In his book, W. A. McIntyre rejects this option because “doubt will remain as to the competence and objectivity of the interpreter.”[21]

Employ A Certified Interpreter – The Gold Standard

The Law Society of British Columbia recommends, “As for the testator whose first language is other than English, the wisest course, if the solicitor does not speak the client’s first language, is either to send the client to a solicitor who does speak that language, or if that is not possible, to employ an interpreter.”[22] One author suggests that the solicitor should retain an independent professional interpreter who will certify that the will was fully and fairly translated to the testator.[23]

Two objections have been raised with respect to this solution. Some suggest it raises the bar too high and that the additional costs make it impractical. Adding an additional $150 will price the solicitor’s services out of the market.

Despite these objections, McIntyre’s suggestions seem like the best way for a solicitor to ensure that the propounders of the will can later prove that the testator possessed knowledge and content of the will. The fact that this practice may be more than is usually necessary should not dissuade those considering its uses. An independent interpreter’s certification kept on file will further limit will challenges and reduce the chance of accusations of negligence.

The concern that using a translator makes the drafting of simple wills cost prohibitive is a concern. However, for many who practice in this area it is rare that a solicitor ever recovers his/her usual hourly rate for the preparation of a simple will. They are drafted in any event because the solicitor anticipates additional revenue streams from the fees associated with acting for the estate upon the testator’s demise. If that is the case the additional costs are a low price to pay.

One final comment. This article is intended to help those involved in the estate planning process to be familiarized with some of the issues relating to the requirement that a testator have knowledge and approval of the contents of his or her will. It is not a substitute for lawyers’ own research and analysis. It is not intended to provide substantive legal advice nor opinions.

[1] Feeney’s Canadian Law of Wills, 4th ed., loose leaf, by Thomas G. Feeney & James Mackenzie (Toronto: Butterworths, 2000) Chapter 3 page 3.1

[2] Lidstone v McWilliams, [1931] 3 D.L.R. 455 (S.C.C.)

[3] Praught Estate, Re, 2002 PESCTD 1, 2002 CarswellPEI 2, 208 Nfld. & P.E.I.R. 64, 624 A.P.R. 64, 43 E.T.R. (2d) 289 (P.E.I. T.D.)

[4] Batten Singh v Amirchand (1947), A.C.. 161 (P.C.) 170

[5] Martin Estate, Re 53 D.L.R. (2d) 126; [1965] S.C.R. 757,

[6] Vout v. Hay, [1995] 2 S.C.R. 876, 7 E.T.R. (2d) 209, 125 D.L.R. (4th) 432

[7] Reference Re Sopel Estate, 1951 CarswellMan 39, 3 W.W.R. (N.S.) 451

[8] Schatz Estate, Re (1976), [1976] 5 W.W.R. 549, 1976 CarswellSask 68 (Sask. Surr. Ct.)

[9] Vleeming Estate, Re [1999] A.J. No 180; 1999 ABQB 141

[10] Sguigna Estate, Re, 1994 CarswellOnt 3298, [1994] O.J. No. 1612 (Ont. Gen. Div.)

[11] Tyrrell v. Painton et al., [1894] p.151 at pp. 159-60

[12] Hall v Bennet Estate 2003 CarswellOnt 1730, 15 C.C.L.T. (3d) 315, 171 O.A.C. 182, 64 O.R. (3d) 191, 227 D.L.R. (4th) 263, 50 E.T.R. (2d) 72

[13] “Solicitor’s Liability for Failure to Substantiate Testamentary Capacity” [13](1984), 62 Can. Bar Rev. 457.

[14] Krzanstek Estate v. Volcko [1990] A.J. No. 416

[15] Dansereau Estate v. Vallee[1999] A.J. No. 878 1999 ABQB 557

[16] Boutzios v. Boutzios, 2004 CanLII 14219 (ON S.C.); Karzanstek Estate v Vocko 74 ALtlR 2d 221

[17] http://www.lawsociety.bc.ca/docs/practice/checklists/G-2.pdf; www.lawsociety.bc.ca/docs/practice/checklists/G-3.DOC

[18] Sguigna Estate, Re, 1994 CarswellOnt 3298, [1994] O.J. No. 1612 (Ont. Gen. Div.)

[19] Dansereau Estate v. Vallee[1999] A.J. No. 878 1999 ABQB 557

[20] Vleeming Estate (Re) [1999] A.J. No. 180; 1999 ABQB 141

[21] McIntyre, WA, Practical Wills Drafting. Toronto: Butterworths, 1992 p. 6.

[22] http://www.lawsociety.bc.ca/licensing_membership/pltc/docs-material/estates _ch3.pdf paragraph 3.05; Re Shumlay Estate [1946] 3 W.W.R.. 540

[23] McIntyre, WA, Practical Wills Drafting. Toronto: Butterworths, 1992 p. 6 and Chapter 14.

Capacity in the Estate Context

November 28, 2012 by Charles Wagner

I was invited to speak at a Law Society of Upper Canada CLE seminar that took place on October 30, 2012. It featured many people who I consider some of the best practioners in this area. My paper[1] analyzed whether Justice Cullity, in Banton v. Banton,[2] expanded the test on insane delusions. At the actual presentation, Jordan Atin, the Chair of the program, asked Ian Hull and me to address a potpourri of issues. My topics included capacity, undue influence, managing client expectations, and evidence in the context of estate disputes. Ian Hull spoke on strategy in estate litigation among other topics. At the conclusion of the seminar I received a number of requests to provide my notes or something more formal to those who enjoyed the presentation. They felt the time was short and wanted specifics of some of the source material I referred to for use in their practice. This blog is, in part, a response to those requests and provides a review and sources for my comments on capacity and undue influence.

When challenging a will, testamentary capacity is often the key issue. Let’s first review the seminal English case Banks v. Goodfellow[3] which has been adopted in Ontario[4]. This case stands for the proposition that the testator has testamentary capacity if:

the testator understands the nature of making a will and its effects;
the testator understands the extent of the property being disposed of;
the testator understands the nature of the act and its effects;
the testator appreciates the claims to which he or she ought to give effect; and
finally, no insane delusion influences his or her will in disposing of the property and brings about a disposal of which, if the mind had been sound, would not have been made.

In the authoritative text of Feeney’s Canadian Law of Wills[5] the learned author answers the question “what is testamentary capacity” as follows, “To use the time-honoured phrase, a person must be “of sound mind, memory and understanding” to be able to make a valid will. When a will is contested on the ground of mental incapacity, the propounder must prove that the testator understood what he or she was doing: that the testator understood the “nature and quality of the act.” The testator must be able to comprehend and recollect what property he or she possessed, the persons that ordinarily might be expected to benefit, the extent of what is being given to each beneficiary and, finally, the nature of the claims of others who are being excluded.”

For the purpose of this blog I prefer not to revisit in detail the issue of delusions. I have addressed that topic extensively in the paper I delivered at the CLE event which is available online for the reader at this link Insane Delusions – Has The Test Been Expanded? Suffice to say that the test for delusions is two pronged. Firstly for a testamentary document to be set aside there must be a delusion. For it to be a delusion the belief held must be one that no one could reasonably believe. Secondly, mental disease is not enough. For the will to be set aside the decision by the testator to disinherit a person must be rooted in the delusion. It behooves us to remember that in Banks v. Goodfellow[6] the testator believed that he was molested by evil spirits, but the will was upheld because there was no connection between the delusions and the dispositions made by the testator.

A very important question regarding the issue of testamentary capacity is at what time in the process is the capacity of the testator relevant? The rule is set out in Parker v. Fieldgate – the key moment is the time the testator provides instructions.[7] What is also important is that at the time of execution the testator needs a sufficient level of capacity to comply with the formalities of execution.[8] A will may be set aside for failure to comply with the formalities of execution[9].

A foundation point in these sorts of discussions is that the testamentary document should genuinely reflect the decisions of the testator[10]. Was there coercion? Did the testator know and approve of what was set out in the will? These two issues are referred to as undue influence and “knowledge and approval”. To be clear it may very well be that a person has testamentary capacity but the testamentary document can be set aside for other reasons. For example, it may be set aside because of coercion and/or fraud (i.e. undue influence). The testamentary documement may be set aside because the testator did not understand the wording or there perhaps it will be rectified because there was an error when drafting the will such that the testator’s intentions were not set down accurately. In that sort of case it is arguable that the testator did not know or approve of the testamentary document. This topic of rectification is one that is beyond the scope of this blog, but merits careful review. As a starting point, I refer the reader to Rectification – the Equitable Remedy to Fix Errors in a Will.

One basis for challenging the validity of a Will is the allegation of undue influence. If there are suspicious circumstances surrounding the testator then the normal presumption, that a Will is valid if properly executed, is rebutted. It is now up to the person claiming that the new testamentary document is valid to prove that there was no coercion or undue influence on the testator.[11]

The equitable doctrine of undue influence was developed[12],not to save people from the consequences of their own folly but to save them from being victimized by other people. These cases may be subdivided into two groups. In the context of a will challenge the question is whether there was any coercion by a beneficiary on the testator. Whether the influence is “undue” is a matter of fact and there is arguably a sliding scale depending on the vulnerability of the testator and his/her dependence on the person exercising the influence. Has the person being accused of exercising undue influence exercised some unfair and improper conduct, some coercion from outside, some overreaching, some form of cheating, some sort of fraud?

The second group deals with disputes surrounding gifts that took place prior to the demise of the testator. At issue is whether the person accused of undue influence has gained some personal advantage because of the reliance of the donee on the recipient of the benefit. In Ontario, Canada those who are appointed as Attorney for Property are designated by statute as a fiduciary. Other parties may also be considered fiduciaries depending on the role they played in the testator’s lives[13]. As articulated by Professor Waters in Law of Trusts in Canada, Second Edition (Carswell: 1984, Toronto): “It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside”. So what happens when a fiduciary gets a gift? There is a presumption of undue influence.[14]

Mr. Justice Cullity[15] set out the following factors to consider in an undue influence claim:

the willingness or disposition of the persons to have exercised undue influence;
whether an opportunity existed;
the vulnerability of the testator[16];
the degree of pressure that would be required;
absence of moral claims of the beneficiaries;
whether the will departs radically from the dispositive pattern of earlier wills.

When investigating if someone knew and approved of the testamentary document these are some red flags to watch for including blindness, illiteracy, inability to understand English,[17] unexplained radical departure from previous wills, sequestration of testator, manipulative behavior by the main beneficiary to obtain all of the deceased’s assets, the presence of a new lawyer or the absence of independent legal advice, and whether statements or actions of the testator subsequent to the making of the alleged will were fundamentally inconsistent with its terms.

The capacity to grant or revoke powers of attorney and capacity to manage one’s property and personal care is a different test. These disputes often arise when families wrestle over control of aging parents’ assets or the responsibility for their care. Ever increasingly the behaviour of financial predators, caregivers, friends and family members lead to disputes regarding the capacity of seniors to make gifts and even the capacity to marry. The latter becomes all the more significant because marriage can involve revocation of previous wills[18], entitlement to property and support rights under Part II and Part V of the Succession Law Reform Act, R.S.O. 1990, c. S.26. When discussing the different types of capacity it is important to remember that the definitions of capacity are task specific. From highest to lowest they are:

Testamentary capacity.[19]
Capacity to manage property has a lower threshold than testamentary capacity.[20]
Capacity to manage personal care has a lower threshold than the capacity to make a will or manage property.[21]
The threshold for capacity to appoint or revoke a power of attorney is lower than the threshold for testamentary capacity and or the capacity to manage property or personal care.[22]
Capacity to make a gift or enter into a contract is a sliding scale depending on the size of the gift.[23]
The threshold for the capacity to marry seems to the lowest. I caution the reader that this may be subject to change and there are several excellent papers and books written that should be reviewed when confronted with this situation[24]

This short blog was based on my notes, with respect to capacity, from the CLE event. It is not meant to provide anything more than an overview of the topic on capacity as well as access to some of the very excellent books and papers on the topic.

[1] C. Wagner and N. Herrmann, Insane Delusions – Has The Test Been Expanded? (Toronto: LSUC Estate Litigation Practice Essentials, 2012).

[2] 1998 CarswellOnt 3423, 164 D.L.R. (4th) 176, 66 O.T.C. 161.

[3] Banks v. Goodfellow (1870), All E.R. Rep. 47 (Q.B.) is the seminal case. See page 565, which sets out the test. It has been adopted by Canadian courts. See Popke v. Bolt (2005), ABQB 214 (Alta. Q.B.), and Larocque v. Landry (1922), 52 O.L.R. 479 (Ont. C.A.). I would also refer the reader to Justice Laskin’s summary of the elements of capacity in Schwartz v. Schwartz, [1970] 2 O.R. 61 (Ont. C.A.). The testator must be sufficiently clear in his understanding and memory, to know on his own and in a general way, (a) the nature and extent of his property, (b) the persons who are the natural objects of his bounty, and (c) the testamentary provisions he is making; And he must be capable of (d) appreciating these factors in relation to each other, and (e) forming an orderly desire as to the disposition of his property.

[4] Banks v. Goodfellow has expanded on the factors that will demonstrate that a testator has the “sound and disposing” mind necessary to make a valid will. Justice Charron, of the Ontario Court of Appeal, summarized these requirements in Hall v. Bennett Estate, noting that in order to have a sound and disposing mind a testator:

• must recollect the nature and extent of his or her property; *must understand the extent of what he or she is giving under the will;

• must remember the persons that he or she might be expected to benefit under his or her will; and * where applicable, must understand the nature of the claims that may be made by persons he or she is excluding from the will.

[5] Feeney, Thomas G. & Jim Mackenzie. Feeney’s Canadian Law of Wills, 4th ed., looseleaf (Toronto: Butterworths, 2000), paragraph 2.6

[6] See Footnote 3 for the citation.

[7] Parker v Fieldgate (1883), 8 P.D. 171. The rule, in Parker v. Felgate provides that even if the testator lacked testamentary capacity at the time the will was executed, the will is still valid if: The testator had testamentary capacity at the time he or she gave the lawyer instructions for the will; (b) The will was prepared in compliance with those instructions; and (c) When the testator executed the will, he or she was capable of understanding that he or she was signing a will that reflected his or her own previous instructions.This, keeping in mind the requirements for due execution as set out in the Succession Law Reform Act, R.S.O. 1990, c. S.26

[8] Section 4.(1) of the Succession Law Reform Act, R.S.O. 1990, c. S.26 states, “Subject to sections 5 and 6, a will is not valid unless,

(a) at its end it is signed by the testator or by some other person in his or her presence and by his or her direction;

(b) the testator makes or acknowledges the signature in the presence of two or more attesting witnesses present at the same time; and

[9] Please see Have Ontario’s Courts Dispensed with Strict Compliance with the Formalities of Execution? – this is article found at http://www.hg.org/article.asp?id=27886

[10] I make this comment with some trepidation given the recent case law on rectification. Often disappointed beneficiaries ask the court to fix the mistake where the lawyer who drafted the will may admit that he inadvertently drafted the will contrary to the instructions of the deceased. 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? I refer the reader to Rectification – the Equitable Remedy to Fix Errors in a Will .

[11] See analysis of Vout v. Hay 1995 CarswellOnt 186, 7 E.T.R. (2d) 209, 125 D.L.R. (4th) 431, [1995] 2 S.C.R. 876, 183 N.R. 1, 82 O.A.C. 161 at http://www.wagnersidlofsky.com/articles/grounds-for-challenge.php

[12] as was pointed out by Lindley L.J. in A/Icard v.Skinner. 36 Ch. D. 145, [1886-90] All E.R. Rep. 90 (C.A.),

[13] I found the looseleaf text “Fiduciary Duties in Canada” By: Mark Vincent Ellis a useful reference for this issue.

[14] For those advocating that a challenged gift is valid I refer you to section 2(4) of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 which deals with onus of proof, contracts and gifts. The section provides, “In a proceeding in respect of a contract entered into or a gift made by a person while his or her property is under guardianship, or within one year before the creation of the guardianship, the onus of proof that the other person who entered into the contract or received the gift did not have reasonable grounds to believe the person incapable is on that other person.” Query whether a gift is valid if the recipient of the gift had reasonable grounds to believe the incapable person to be capable? I know of no determinative judicial review of this section.

[15] See Scott v. Cousins (2001), 37 E.T.R. (2d) 113 (Ont. Sup. Ct. J.),

[16] For an excellent article on this topic see Assessment of Testamentary Capacity and Vulnerability to Undue Influence Kenneth I. Shulman; Carole A. Cohen; Felice C. Kirsh; Ian M. Hull; Pamela R. Champine Am J Psychiatry 2007;164:722-727.

[17] See “Testator Does Not Speak English by Charles B. Wagner

[18] See section 15(1) of the the Succession Law Reform Act, R.S.O. 1990, c. S.26.

[19] The threshold for testamentary capacity is the highest. See Penny v. Bolen, 2008 CanLII 48145 (ON.S.C.) at para. 19: “There are different tests for the capacity to make a Power of Attorney for personal care and for property. A person may be incapable of managing property but capable of making a Power of Attorney for Property. With respect to Powers of Attorney for Personal Care the capacity threshold is much lower than for Power of Attorney for Property which is lower than the capacity required to execute a will.”

[20] The test for determining the capacity to manage property is found at section 6 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 . Capacity to manage property is defined as: (a) The ability to understand the information that is relevant in making a decision in the management of one’s property; and (b) The ability to appreciate the reasonably foreseeable consequences of a decision or lack of a decision.

[21] Under section 45 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 , the test for determining capacity required for managing personal care is: (a) The ability to understand the information that is relevant to making a decision relating to his or her own health care, nutrition, shelter, clothing, hygiene or safety; and (b) The ability to appreciate the reasonably foreseeable consequences of a decision or lack of decision. A person who is sixteen years of age or older is presumed to be capable of making personal care decisions.

[22] Please see section 8 of the 47 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 . For property the threshold requires (a) knowledge of what kind of property he or she has and its approximate value; (b) awareness of obligations owed to his or her dependants;(c) knowledge that the attorney will be able to do on the person’s behalf anything in respect of property that the person could do if capable, except make a will,

subject to the conditions and restrictions set out in the power of attorney; (d) knowledge that the attorney must account for his or her dealings with the person’s property; (e) knowledge that he or she may, if capable, revoke the continuing power of attorney; (f) appreciation that unless the attorney manages the property prudently its value may decline; and (g) appreciation of the possibility that the attorney could misuse the authority given to him or her.

[23] The test for capacity to give a gift changes if the gift is significant in value, in relation to the donor’s estate. In such cases, the applicable capacity test changes to the test for capacity to make a will, that is , testamentary capacity. In the English case of Re. Beaney, the judge explained the difference in tests for capacity to give gifts or make gratuitous transfers as follows: At one extreme, if the subject-matter and value of a gift are trivial in relation to the donor’s other assets a low degree of understanding will suffice. But, at the other, if its effect is to dispose of the donor’s only asset of value and thus for practical purposes to pre-empt the devolution of his estate under his will or on an intestacy, then the degree of understanding required is as high as that required to make a will, and the donor must understand the claims of all potential donees and the extent of the property to be disposed of. See Kimberly Whaley, “Comparing the Various Tests of Capacity” Law Society of Upper Canada, 13th Annual Estates& Trusts Summit (November 18, 2010). See http://www.whaleyestatelitigation.com/

[24] A must read for anyone dealing with this issue is the book “Capacity to Marry and the Estate Plan” in 2010, with co-authors: Kimberly Whaley, Dr. Michel Silberfeld, Heather McGee and Helena Likwornik, the February 9, 2012 paper “The Capacity to Marry and Divorce” presented at the OBA Institute Trusts and Estates Law Seminar on February 9, 2012 and the decision of Justice Cullity in Banton v Banton. This is a case that addresses this threshold issue. Section 7 of the Ontario Marriage Act prohibits a person from issuing a license to or solemnizing “the marriage of any person who, based on what he or she knows or has reasonable grounds to believe, lacks mental capacity to marry by reason of being under the influence of intoxicating liquor or drugs or for any other reason.” Common law capacity to marry was essentially equivalent to the capacity to enter into any binding contract, and certainly at a lower threshold than testamentary capacity.

What is a Resulting Trust

August 4, 2012 by Charles Wagner

“I don’t care who paid for the property – it’s in my name.” But that’s the middle of the story – let’s start at the beginning.

Situations arise where legal title may be in one person’s name , but the courts presume there was a decision to create a trust so that the equitable or beneficial ownership really belongs to another. Let’s take a look at the recent British Colombia Supreme Court case of Borkenhagen v. Kessler (FN 1). It is a worthwhile read for those interested in area of estates and trusts because it reviews the basic tenets of resulting and constructive trusts.

Mr. and Mrs. Borkenhagen purchased a rental property which they agreed to rent to Mr. Borkenhagen’s elderly aunt, Mrs. Kessler. The terms of the agreement were that the aunt would pay a modest rent, approximately equivalent to the rent that she was paying in her previous apartment, and the aunt could remain at the rental property for as long as she liked. Prior to the purchase of the rental property, it was discovered that the bylaws and strata had a restriction requiring anyone who lived in the unit to be an owner and over the age of 55. Neither of the plaintiffs was over the age of 55 and as such the aunt was the only one that could satisfy the requirements for ownership. It was decided that all three parties would go on title to the property as joint owners. The relationship between the parties soured, the aunt severed the joint tenancy and asserted that she was the legal and beneficial owner of 1/3 of the rental property. The plaintiffs on the other hand, sought a declaration that they were the sole and legal beneficial owners of the property.

The parties each relied on Kerr v. Baranow (FN 2), which dealt with the issue of unjust enrichment and the “common intention” resulting trust. A resulting trust is created when title to a property is in the name of a party that did not provide any value for the property, and that party is then required to return the property to the true owner (FN 3). The Court determined that the focus of analysis with respect to a resulting trust is the actual intention of the transferor, in this case, the plaintiffs. On the review of the evidence, the Court found that the plaintiffs’ intent was that their aunt would occupy the rental unit as a renter and not as an owner. The aunt did not contribute to the purchase price of the rental property and did not assume any of the normal obligations associated with ownership. The purpose of the aunt’s title was simply to satisfy the strata requirements. The Court found that in this instance, there had been a gratuitous transfer and the presumption of a resulting trust had not been rebutted. As such, the Court found that the aunt held her 1/3 interest in trust for the plaintiffs, reaffirming that the concept of a resulting trust stems from the idea that people make bargains – not gifts.

The Court arrived at the same result when applying the principles of unjust enrichment and constructive trusts. A constructive trust is imposed when there has been unjust enrichment, regardless of the intention of the parties. Unjust enrichment occurs when there has been (1) an enrichment to the defendant; (2) a corresponding deprivation to the plaintiffs; and (3) there is an absence of any juristic reason for the enrichment. The Court found a constructive trust in favour of the plaintiffs based on the fact that the plaintiffs had paid all of the purchase money, and that the aunt did not have any obligations that an owner would normally have, such as paying property taxes. Therefore the aunt would be unjustly enriched if she was allowed to retain her 1/3 interest in the property. The Court did find that there was an agreement between the parties which permitted the aunt to remain at the property until she wished to leave, but it did not amount to a juristic reason for the enrichment nor the defendant’s acquisition of title to the property.

Every situation is fact specific and you might think that your facts resemble this case enough to jump to a legal conclusion. That would be a mistake. This short review of the law is not meant to be legal advice. In our experience dealing with these cases, the Court’s decisions turn on the specific facts. If the reader has a legal question dealing with a similar problem the reader would be well advised to seek out competent legal counsel to determine the best course of action.

The authors are Charles B. Wagner and Liliana Ferreira. Liliana is an associate and Charles is certified by the Law Society of Upper Canada as a specialist in Estates &. Trusts Law and is a partner and at Wagner Sidlofsky LLP. This Toronto Law office is a boutique litigation firm whose practice is focused on estate, commercial and tax litigation.

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FN1 2012 BCSC 467I

FN2 2011 SCC 10

FN 3 Pecore v. Pecore, [2007] 1 S.C.R. 795. The Supreme Court of Canada defined a resulting trust as follows: “A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner. While the trustee almost always has the legal title, in exceptional circumstances it is also possible that the trustee has equitable title.” Pecore is the seminal case that deals with the presumption of a resulting trust that arises when children hold joint accounts with their elderly parents. The presumption is that upon the parent’s demise the money does not pass by right of survivorship to the child – rather it is held in a resulting trust for the estate.

How To Remove an Executor

July 28, 2012 by Brendan Donovan

Trustees have a duty to act with loyalty, prudence and good faith.(1) Executors who breach their fiduciary duty risk being removed. So let’s review how that might take place.

Under the Trustee Act of Ontario, it is possible for any person with an interest in the estate(2) to apply for an order removing a trustee.(3) The courts are reluctant to use this power, however, and will only remove a trustee if it is in the best interests of the beneficiaries.(4)

A recent and striking example of this rule is the Ontario case of Venables v. Gordon Estate.(5) In his will, Percival Hector Gordon established a generous trust for his daughter Helen. The income was to be paid to her for her life, with the remainder distributed equally to her two sons, Peter Gordon and Michael Venables. Helen was appointed as trustee, with Peter named as an alternative should his mother become unable to act. At the time of the litigation, the value of the trust was about $570,000.00 and Helen had reached the ripe old age of 100. Not surprisingly, she was having difficulty in carrying out some of her duties as executor.

In mid-September, 2006, Peter notified Michael that he would be taking over as trustee according to their grandfather’s will. This led to almost immediate problem. Peter started taking management fees out of the income account,(6) making unauthorized investments,(7) and at one point even stopped making payments to his mother.(8) Michael, who was Helen’s attorney under a power of attorney, applied to have Peter removed as executor.

Was Peter’s behaviour bad enough for the court to order him removed as the executor of his grandfather’s estate? In a word, yes. This case was different from some previous cases that held that a trustee can only be removed where it is clearly necessary,(9) where there is no other course to follow,(10) or where non-removal would prevent the proper execution of the trust.(11) The court in Venables found that Peter had crossed the redline. The court appointed a corporate trustee to take his place.

The Venables case is interesting to lawyers for several reasons. First, it re-emphasizes the fact that, when deciding whether or not to remove a trustee, the courts tend to focus on the best interests of the beneficiaries and the future administration of the estate.(12) Removing a trustee is primarily about protecting the beneficiaries and not about punishing the trustee for past misdeeds. Second, Venables suggests that the courts might be more willing to remove a trustee where the conflict erupts between the trustee and someone who is “more than a mere beneficiary.”(13) In Venables, Michael was the litigation guardian and attorney for property of his mother, who was the original trustee. Michael and Peter had also signed a settlement agreement in 2009 pursuant to which Peter agreed to give monthly bank statements to Michael and seek his approval for new investments. The court found: “Even if Michael was considered a mere beneficiary, Peter’s removal would be justified; but Michael stands in an enhanced position.”(14) A question that intrigued me was why Michael did not seek his own appointment. Why did Michael want a corporate trustee instead? In our experience, when families argue over who should be executors, the court’s default position is to appoint a neutral estate trustee. I speculate that perhaps – being aware of that, Michael’s counsel may have advised him to take the high road and opt for a corporate trustee.

So what’s the bottom line? Every situation is fact specific and even if you think your situation resembles a case you read about, it would be a mistake to jump to a legal conclusion. However, as a general rule, when considering whether to remove an executor, judges tend to focus on the future administration of the trust, the protection of the beneficiaries and the status of the applicant seeking the executor’s removal. This short review of the 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 would be well advised to seek out competent legal counsel to determine your best course of action.

The authors are Charles B. Wagner and Brendan Donovan. Charles is a partner and Brendan is an associate at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focused on estate, commercial and tax litigation.

Footnotes

(1) In addition, trustees have a duty to avoid conflicts of interest, to account, to act gratuitously, etc. The various duties of trustees are outlined in Donovan Waters, Waters’ Law of Trusts in Canada, 3d Ed. (Thomson Canada Limited, 2005) at Chapter 18. See, e.g., Banton v. Banton, [1998] O.J. No. 3528, 164 D.L.R. (4th) 176 (Ont. Gen. Div.). Joint trustees also have a duty to act jointly; that is, unanimously. See A. Oosterhoff, Oosterhoff on Trusts: Text, Commentary and Materials, 7th Ed. (Thomson Reuters Canada Ltd., 2009) at p. 1050-1051.

(2) Trustee Act, R.S.O. 1990, c. T.23, s. 37(3).

(3) Trustee Act, R.S.O. 1990, c. T.23, s. 37(1). The court also has an inherent jurisdiction to remove a trustee.

(4) The classic statement of the rule may be found in Lord Blackburn’s speech in Letterstedt v. Broers (1884), 9 App. Cas. 371 (P.C.).

(5) Venables (Litigation Guardian of) v. Gordon Estate (2012), 76 E.T.R. (3d) (Ont. S.C.J.).

(6) Supra, at paras. 12 and 16. By taking management fees out of income, a person entitled to the remainder is essentially preserving his own inheritance at the expense of the life tenant.

(7) Supra, at para. 17. He executed trades totaling $56,000.00 in one month.

(8) Supra, at para. 14.

(9) Re Weil, [1961] O.R. 888 at 889 (C.A.).

(10) Crawford v. Jardine, [1997] O.J. No. 5041 (Ont. Ct. (Gen. Div.), citing Re Tempest (1866), L.R. 1 Ch. 485.

(11) Supra, Crawford.

(12) See St. Joseph’s Health Centre v. Dzwiekowski (2007), 162 A.C.W.S. (3d) 348 (Ont. S.C.J.).

(13) Venables, supra at para. 32.

(14) Venables, supra, at para. 36.

Cross Border Issues – Israel and Canada

February 24, 2012 by Charles Wagner

Ontario lawyers are increasingly establishing strategic alliances with Israeli attorneys to better serve their clients. Why? There are lots of reasons. Enforcement of Israeli court orders in Ontario, increased trade between the countries requiring cooperation between corporate and tax counsel, and families with members in both jurisdictions requiring cooperation in Family law and estate disputes.

Take this scenario for example – Stella lives with her son in her Toronto home. She bought an apartment in Jerusalem to be close to her daughter. She lives ½ the year in her Toronto home to be close to her son and ½ the year in Jerusalem to be close to her daughter. In her will Stella appointed her two children as executors and divided her estate equally between them. Simple – yes? Not really.

Unless proper steps were taken in her estate planning there could be adverse tax consequences that could have otherwise been planned for and perhaps avoided to achieve her goals. If Stella is determined to be a Canadian resident, the Canadian government will tax her worldwide income and assets, including the Israeli property. If her executor is a Canadian resident, then her estate will be deemed to be resident in Canada and the executor will be required to remit withholding taxes to Canada in respect of any amounts paid or property transferred to a beneficiary living outside of Canada. If Stella is determined to be an Israeli resident, then her executor must take into account the withholding tax payable on any transfer of the Canadian property. If she is determined to be an Israeli resident, but her executor is a Canadian resident, the estate will immigrate back to Canada for Canadian tax purposes.

Now let’s talk about the Israeli tax issues. If, for the purposes of Israeli tax law, Stella lives in Jerusalem, then Israeli Tax Authorities (ITA) require her to report her foreign assets and income. The ITA will impose penalties and interest charges for her failure to do so. Moreover, the ITA will consider Stella’s worldwide income taxable subject to relevant tax treaties. If Stella has not addressed these issues during her lifetime than that means this responsibility falls to her executors. Stella’s children will likely have to deal with her failure to report her assets and income to the ITA.

When Canadian and Israeli estate and tax issues are explained to executors the reaction is usually the same – Gevalt!

The above is a fictional scenario. While my office only litigates, over the last several years I have been consulted by people like Stella’s children because of my experience in wills and trusts and my network of Israeli attorneys and Canadian lawyers whose practices deal with these issues. These lawyers are often called upon to address problems that arise when individuals did not take into account the different tax ramifications of multiple residences, beneficiaries and executors in different jurisdictions. One such lawyer who has assisted me on occasion is Gilead Sher.

Mr. Sher is the senior partner of Gilead Sher & Co. Law Offices. He is a household name in Israel and regardless of where you sit on the Israeli political spectrum he is regarded as a patriot. You may recognize him as the former chief of staff to former Prime Minister Ehud Barak or for his role as chief peace negotiator for Israel during the Camp David Summit in 2001 and the Taba talks in 2001. On the last file I dealt with Gilead’s tax partner, Yehuda Mulaem, and my Canadian Tax Counsel Leigh Somerville Taylor. Together we successfully saved our client a lot of money and aggravation because both Leigh and Yehuda knew the law in their respective jurisdictions and were experienced in cross border issues.

So what’s the bottom line? What should Stella have done? I can attest that it’s better to retain the competent professionals in the first place and thereby avoid these issues later on.

This short review of the 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.

May 16, 2011 Seminar – Bnai Brith Seminar – “Financial Predators and the Elderly – Banton v Banton.”

May 1, 2011 by Charles Wagner

The Estate and Trusts Group, Lawyers Division Bnai Brith and the adult education committee of Shaarei Shomayim are sponsoring a continuing legal education seminar entitled “Financial Predators and the Elderly – Banton v Banton.”

In this case the 88 year old George Banton fell in love with a 32 year old waitress named Muna. He married Muna and made a new will that disinherited his children. Virtually all contact with his kids stopped. At the time Mr. Banton was depressed, terminally ill, and mentally unwell. On hearing that their father was certified as incapable and that Muna, had withdrawn $10,000 from his account, George’s sons used their power of attorney to transfer George’s money into an irrevocable inter vivos trust under which they and CIBC Trust Corporation would be the trustees. The trust allowed the money to be used for George’s during his life and would go to his children after his death.

When George died his children challenged the new Will and the validity of the marriage to the much younger Muna. She challenged the sons’ creation of the trust. The fact situation in Banton v Banton underscores the risk to the elderly of being victimized by financial predators who look to marry a vulnerable older person as a means to take away their money and disinherit their children. To quote the judge in the Banton case, “I have no doubt at all that this influence was deliberately exerted to enable her to obtain control and, ultimately, the ownership of his assets…. After she consented to marry him, her influence became overwhelming and irresistible. The speed with which she was able to procure a will and a power of attorney in her favour is testimony to this as well as to his weak and vulnerable mental condition. …Thereafter, he was held incommunicado as far as his family were concerned…. I believe George Banton was a mere puppet, when he was not simply a bystander, during the guardianship proceedings.”

These continuing B’nai Brith legal education seminars have been going on for approximately four years. Many members of B’nai Brith are professionals whose practice involves servicing senior citizens and their families. B’nai Brith runs these seminars in order to meet present and future educational needs of our membership’s legal and accounting profession. These seminars were inspired, in part, by legal problems of concern to the Jewish community as well as the community at large.

To educate attendees these seminars feature some of Ontario’s premiere estate litigators. These lawyers will be participating in mock court proceedings based on the fact scenario of Banton v Banton. Prior to the moot court Rachel Blumenfeld, an estate lawyer at Miller Thomson (bit.ly/rblumenfeld), will explain the legal options open to children wanting to protect elderly parents in second marriage situations. Thereafter Rabbi Joe Kanofsky of Shaarei Torah will speak from an ethical pastoral perspective about the obligations and choices to the children, parent and professionals when dealing with this type of scenario. The Rabbi’s presentation can be used by lawyers towards fulfilling part of their mandatory 3 hours of continuing professional development related to professional responsibility, ethics and practice management.

The judge for the moot appeal will be Jordan Atin (http://bit.ly/jordanatin). Archie Rabinowitz (http://bit.ly/arabinowitz) and Kimberly Whaley (http://bit.ly/kwhaley) will be representing the Banton children and Ian Hull (http://bit.ly/ianhull) and Charles B. Wagner (http://bit.ly/cwagner) will be representing the waitress.

Each attendee will receive a binder and a flash drive which will contain papers prepared by the lawyers about different aspects of the case as well as some actual court documents relating to Banton. At the end of the seminar there will be a question and answer session from the panel and the participants.

The seminar will be held Monday, May 16^th, 2011 at Shaarei Shomayim 470 Glencairn Ave ON M5N 1V8. Registration starts at 7:30 am. and the seminar starts at 8:00 a.m. For information or to register, call Hyla Reichmann at (416) 633-6224, ext. 128, or email hreichmann@bnaibrith.ca .

A Trustee Is Not Entitled To Use Trust Property For His Own Benefit

March 29, 2011 by Charles Wagner

Justice Strathy of the Superior Court of Justice ordered that Mr. Zimmerman repay nearly $500,000 in compensation he took as an attorney for property (FN1). The judge also ordered that he personally pay the legal costs of the other side amounting to $284,362.19 (FN2). What happened?

Let me first introduce you to Robert and Signe McMichael. During their lives they collected Canadian art from artists like Tom Thomson and the Group of Seven members. In 1964 they donated their art collection to the province of Ontario and by 1981 the Collection had grown to include more than 2,000 artworks. This Collection is truly a Canadian national treasure. (FN3).

In 2001 Robert and Signe McMichael made mirror wills (FN4). Both husband and wife left everything to each other. Signe’s Will, (like her husband’s) said that if her spouse predeceased her, then when she died, Signe’s assets would be donated to the Collection. Mr. McMichael died in 2003 and his assets were inherited by his wife.

After her husband’s death, Mrs. McMichael signed a power of attorney appointing Mr. Zimmerman as her sole attorney for property. In early 2004 Mr. Zimmerman’s lawyers prepared a trust document appointing Mr. Zimmerman as the trustee. Mr. Zimmerman then transferred virtually all of Mrs. McMichael’s assets including the art collection into the trust so that there was virtually nothing left in her estate.

Under this new trust, Mr. Zimmerman had sole and unfettered discretion to decide which art related organization would receive Signe’s assets years after her death. Effectively, the new trust rendered the Will meaningless. Instead of inheriting everything immediately after Signe’s death, the Collection would get nothing. If the new trust went unchallenged it was totally up to Mr. Zimmerman to decide whether the Collection would receive any of Signe’s assets.

When Mrs. McMichael died in 2007 her niece and husband, the executors under the Will, commenced a legal proceeding. They asked the court to declare that the Power of Attorney and the Trust were void on the ground that Signe lacked capacity. They also wanted Mr. Zimmerman to pass his accounts in a separate proceeding.

The only issue before Justice Strathy was Mr. Zimmerman’s passing of accounts. To pass his accounts Mr. Zimmerman had to show what assets of Signe’s he received and how the money under his control was spent. As an attorney for property it was Mr. Zimmerman’s statutory and common law duty to keep proper accounting records and proof/vouchers to demonstrate that the money spent was for the benefit of Mrs. McMichael. This duty is imposed on trustees because it is a basic fundamental principle of trust law that Mr. Zimmerman, as a trustee, was not entitled to use the trust property for his own personal benefit. If Mr. Zimmerman did use Signe’s assets for his own personal benefit or if he could not account or explain to the court how he spent the money then he would be liable to return it.

When Mr. Zimmerman tried to pass his accounts the fireworks started.

Whatever accounting that was provided was incomplete. Mr. Zimmerman could not or would not provide proper explanations about how he spent the money. The court found that Mr. Zimmerman breached his fiduciary duties and failed to exercise his powers and duties diligently, with honesty and integrity and in good faith, for the incapable person’s benefit. Mr. Zimmerman did not comply with his obligation to keep proper accounts and was not in a position to prove that he administered the trust prudently and honestly. He did not have the accounts ready and was not able to give full information when required.

Mr. Zimmerman infuriated the court because he failed to respond to appropriate objections to his accounts. The judge drew an adverse inference that by failing to respond properly to the questions raised by the Collection and the estate trustees Mr. Zimmerman was guilty of taking the money for himself and would be required to reimburse the estate for those disbursements and expenses (FN5).

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. Please see Zimmerman v. McMichael Estate 2010 CarswellOnt 3481, 2010 ONSC 2947, 57 E.T.R. (3d) 101, 103 O.R. (3d) 25 and in particular paragraphs 29 and 88 and 90 for the proposition that a fiduciary may not profit from his role, paragraph 30 for the fiduciary’s duty to account, and paragraphs 35,43 45, 49 and 89.

FN2. Please see the second Zimmerman decision. The first was decided on May 20, 2010 and cited in FN1. The second was decided on October 4, 2010 and can be found as Zimmerman v. Fenwick 2010 CarswellOnt 8372, 2010 ONSC 5452.

FN3. Robert and Signe McMichael founded the Collection,. Some of the history of the Collection, is described in the judgment of the Court of Appeal in McMichael v. Ontario (1997), 36 O.R. (3d) 163, [1997] O.J. No. 4661 (Ont. C.A.), leave to appeal refused, (S.C.C.).. Their website can be found at http://www.mcmichael.com/

FN4. It is important not to confuse the terms “Mirror Wills” and Mutual Wills. Mirror Wills are identical to one another. Mutual Wills creates an agreement which equity enforces that the wills will not be changed. I refer you to the explanation of Histrop, Estate Planning Precedents which excerpts from Canadian Forms of Wills, 4th ed. BY Terence Sheard and the late Rodney Hall, “ Although a will is by its nature revocable, a testator may, by agreement, create equities in his assets that will be enforceable against those who derive title from him (Dufour v. Pereira (1769), 1 Dick. 419; Stone v. Hoskins, [1905] P. 194; 39 Hals., 3rd ed., p. 851; see also Re Hagger, [1930] 2 Ch. 190). The commonest manner in which such equities are created is through the making of joint or mutual wills but the mere fact that two wills are made in identical terms does not of necessity imply any agreement to constitute equitable interests so as to, in effect, make the will of the survivor irrevocable” .

FN5. The finding of an adverse interest is very important with respect to accounting. Under the common law section 32(6) and 42 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 and under the regulations Accounts and Records of Attorneys and Guardians, O. Reg. 100/96 the attorney for property has a absolute strict duty to in accordance with the regulations, keep accounts of all transactions involving the property of the grantor of the Power of attorney. Justice Strathy, in his judgment, addresses what happens when the attorney fails to keep proper records:

Duty to Account: trustee has an obligation to keep proper accounts. A trustee 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 whenever required. (see para 30)

Adverse Inference: An attorney who fails to retain receipts supporting substantial cash withdrawals or expenses charged against the incapable person’s property has not adequately carried out his/her duties and will be held personally liable for the unsubstantiated withdrawals (para 35) It is a basic principle of trust law that a trustee is not entitled to use the trust property for his or her own personal benefit. Trustee has onus to prove disbursements were legitimate. If a trustee cannot account for or explain disbursements or expenses charged against a trust he/she is personally liable to the trust for those disbursements (paragraphs 43 45, 49 and 89).

DNA Testing and Estate Litigation

February 11, 2011 by Charles Wagner

“She is not my daughter.”

The court heard evidence that the late Kerry Kelly did not believe Shauna was his daughter. (FN1) Kerry believed that Shauna’s mother “… cheated on me with no sex protection”. The judge believed Pamela Proulx, Kerry’s sister, who said that Kerry never recognized Shauna to be his biological daughter. Aunt Pamela applied to court to obtain a DNA test of Shauna and compare it to a sample of Kerry’s DNA to see whether Shauna was Kerry’s biological daughter. Shauna opposed the application. Let us review some of the reasons why the DNA test was worth fighting about and the legal arguments used by each side.

Kerry died intestate which means that he passed away without a legal will. According to the law of Ontario (FN2) where an unmarried person dies intestate his children receive the estate. (FN3) For all purposes, the law of Ontario is that a person is the child of his or her natural parents with the only exception being adopted children (FN4). Since Kerry did not have a will Shauna’s entitlement to an inheritance turned on her being the biological child of Kerry. So now we understand why Aunt Pamela wanted Shauna to take a DNA test and why Shauna resisted taking one. If the DNA test proved that Shauna was not Kerry’s real daughter then she does not get an inheritance from Kerry’s estate. On what grounds could Shauna argue that she did not have to take the DNA test?

Shauna argued that that under s. 8 of the Children’s Law Reform Act Kerry was presumed to be the father of Shauna because he was married to Shauna’s mother at the time of Shauna’s birth and he was also listed as Shauna’s father on the Statement of Live Birth. Shauna argued that it was up to her aunt to rebut that presumption of paternity and, until she did, no DNA test should be ordered.

Aunt Pamela relied on section 10 of the Childrens Law Reform Act which provides that in a court case in which a child’s parentage is at issue the court may order that DNA tests take place and if that person refuses to submit to a DNA test the court may draw such inferences as is appropriate. There is no mention in section 10 that Aunt Pamela had to rebut the presumption of parentage. Now that you have heard both sides – what do you think Justice Coats ordered?

Justice Coats ordered that the DNA test take place. In his view DNA testing was objective, impartial and scientific evidence and it was in the interests of justice for the court to consider the best evidence. He preferred DNA testing to the contradictory and less certain evidence offered by the parties and other family or community members. Does that mean that judges will always order DNA testing? Not necessarily.

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FN1. This name of this case is Proulx v. Kelly, 2010 ONSC 5817 and can be found on line at http://www.canadalawbook.ca/summaries/pdf/10334117.pdf

FN2. See Part II of the Succession Law Reform Act, R.S.O. 1990, c. S.26 and “Law of Intestacy in Ontario” found at http://www.wagnersidlofsky.com/articles/intestacy-in-ontario.php

FN3. This is not a simple matter. For example, see section 47(2) of the Succession Law Reform Act, R.S.O. 1990, c. S.26 which deals with the situation where a child dies before his parent. For example, if father had 3 children A, B and C. Assume A had 2 children of his own. A died before father. If father died without a will then his estate would be divided in three equal shares. 1/3 to B, 1/3 to C and 1/3 to A’s children. With respect to Ontario Intestacy law even if A died before his father the intestate inheritance law acts still gives A his share of the estate just as if A did not predecease his father. The late A’s portion of his father’s estate goes to A’s children.

FN4. See section 1 of the Children’s Law Reform Act

Rectification – the Equitable Remedy to Fix Errors in a Will

November 12, 2010 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.

DISINHERITING CHILDREN WHO MARRY OUTSIDE THE FAITH

October 3, 2010 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.

Money Missing? Powers of Attorney, Executors and Adverse Inferences

September 21, 2010 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,

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.
A trustee must make a proper accounting as a condition precedent to being awarded compensation.
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:

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
Objections to Accounts http://www.estatelawcanada.ca/category/passing-of-accounts-and-executors-fees/
Elder Abuse in Ontario http://www.estatelawcanada.ca/category/court-appointed-guardians-of-property-and-of-person/
Put Your Own Interests Aside – Poa http://www.cbwagnerlaw.com/articles/aside-interests.php

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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.

Objections to Accounts

August 13, 2010 by Charles Wagner

So if you suspect that the power of attorney has done something wrong what are some of the things you should look for? The first thing you should know is that a power of attorney has both a common law and statutory duty to keep proper records of all transactions involving the property (FN1). The court may order that the accounts of an attorney be passed(FN2). When examining those accounts here are some of the things to look for:
1. Are The Accounts In Proper Court Format?Ontario legislation requires a certain format for the accounts. It provides a structure to ensure all relevant assets of the Grantor are listed and indicates what monies have been received and spent. Sometimes a less informal accounting misses information.

2. Are there Missing Assets?A proper accounting lists assets assets as of the date of the first transaction by the attorney and an ongoing list of assets acquired and disposed of on behalf of the incapable person, including the date of and reason for the acquisition or disposition and from or to whom the asset is acquired or disposed. Often the attorney will claim that the grantor gifted an asset. This is a concern because it is “…It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside.(FN3)

3. Are there joint Assets missing from the accounting?One way for two or more people to own an asset is joint tenancy. In the ordinary course when one of those people die the survivor(s) inherit the deceased’s share, However, when a joint account is held by a child together with an elderly parent n the Supreme Court of Canada decisions of Pecore v. Pecore and Madsen Estate v. Saylor, stand for the proposition that there is a legal presumption that all these monies belong to the estate. Accordingly, unlike the normal joint accounts, these monies may not pass to the remaining owner(s) by right of survivorship.

4. Proof of Legitimate expenses - Are there Vouchers? An attorney for property has an absolute duty to keep receipts. Failure to keep receipts may lead to the court drawing an adverse inference that the attorney breached his fiduciary duty.(FN4)

5. How much Compensation was claimed?An attorney is entitled to compensation. While there is a tarrif that is only a guide. How much may depend on the language of the Power of Attorney and the nature of the assets and work done.

These are just some of examples of what should be looked at when examining an Attorney’s accounts. If a person with a financial interest has concerns they are well advised to hire a lawyer with expertise in the area to examine the accounts in detail.

FN1. See sections 32(6), and Substitute Decisions Act, 1992, S.O. 1992, c. 30 Accounts and Records of Attoneys and Guardians, O. Reg. 100/96

FN2. See section 42 of Substitute Decisions Act, 1992, S.O. 1992, c. 30 to describe who may apply to have the accounts passed. The legislation provides that the attorney, the grantor, the attorney for personal care, a dependant of the grantor, The Public Guardian and zTrustee, the Childres’s Lawyer, a judgment creditor or any other person with leave of the court.
FN3. See Jacobs v. Hershorn at http://www.canlii.org/en/on/onsc/doc/2006/2006canlii10522/2006canlii10522.html

FN4. Please see paragraphs 52 – 60 Fareed v. Wood, 2005 CanLII 22134 (ON S.C.) at http://www.canlii.org/eliisa/highlight.do?text=%22adverse+inference%22+accounting+%22power+of+attorney%22&language=en&searchTitle=Search+all+CanLII+Databases&path=/en/on/onsc/doc/2005/2005canlii22134/2005canlii22134.html

In this case the court drew an adverse inference because t the attorney esd unable to properly account for the transactions occurring while he was attorney. In part, this results from his failure to maintain proper records. As a result of transactions occurring in her lifetime, the testamentary gifts intended by Ms. McLeod, and clearly stated in her Will, are defeated. In Sopinka, Lederman and Bryant, “The Law of Evidence” the author states, “In civil cases, an unfavourable inference can be drawn when, in the absence of an explanation a party litigant does not testify, or fails to provide affidavit evidence on the application, or fails to call a witness who would have knowledge of the facts and would be assumed to be willing to assist the party. ….. Such failure amounts to an implied admission that the evidence of the absent witness would be contrary to the party’s case, or at least would not support it.”

May An Executor Buy Estate Assets?

June 10, 2010 by Charles Wagner | 4 comments

Executors often want to buy assets belonging to an estate. Beneficiaries often suspect the executors of wrong doing. So I often am asked whether it’s legal for an executor to buy an asset from the estate. The short answer is maybe, possibly, but not usually.

To demonstrate the problem let’s imagine that Ben just died. He and his brother Harry owned an apartment building. These brothers loved and trusted one another their whole lives. Ben never married and treated Harry’s wife like his own sister and Harry’s kids like his own children. Ben was appointed as the executor and estate trustee for his late brother’s estate. The beneficiaries of the estate are the deceased’s wife and two children. The only asset of the estate is 50% of the apartment building.

Ben gets two independent appraisals valuing the apartment building at $2 million. He offers the estate $1.5 million dollars for its ½ of the apartment building. Each of the beneficiaries gets independent legal advice approving the sale. So what do you think? Under these circumstances can Ben buy the estate asset eventhough he is the executor and estate trustee? Would you change your opinion if immediately thereafter Ben gets a call and someone offers to buy the apartment building for $4 million?

The general rule of thumb, as articulated by Professor Waters in his book Waters Law of trusts is that “It is a fundamental principle of every developed legal system that one who undertakes a task on behalf of another must act exclusively for the benefit of the other, putting his own interests completely aside. In the common law system this duty may be enforceable by way of an action by the principal upon the contract of agency, but the modes in which the rule can be breached are myriad, many of them in situations other than contract and therefore beyond the control of the law of contract. It was, in part, to meet such situations that Equity fashioned the rule that no one may allow his duty to conflict with his interest”.

Estate Trustees/Executors are considered fiduciaries. The common law is very clear that as fiduciaries have an exclusive duty of loyalty to the beneficiaries. If so, a court will wonder how could Ben negotiate a deal fairly when he represents the buyer (himself) and the seller (the estate)? That is why at common law, the fiduciary is absolutely forbidden from dealing with estate property for his own benefit regardless of how honest or fair the purchase may be. Nonetheless, despite that general rule of thumb, the courts have not always been consistent in how they apply this rule. While there is a consensus that the executor must act in a way that is in the best interests of the estate the courts differ on how strictly to apply the rule.

Some court decisions suggest that Ben could not buy the estate’s interest in the apartment building because even if he was being honest and even if he meant well he cannot possibly give the exclusive loyalty to the beneficiaries when he himself stands to make a profit. Those cases would suggest any such purchase is a breach of fiduciary duty and the deal can later be set aside even if the purchase was reasonable and the beneficiaries were not harmed. For a review of those cases I refer you to CED Trusts VI.4.(c).(ii) and WatersTrusts 18.II.

Other courts have considered the Fiduciary’s duty of loyalty as being intended to prevent actual harm to the beneficiaries. If there is no harm then these cases suggest there may be some flexibility that would permit the purchase. If Ben could show that the sale caused no harm to the beneficiaries and that his actions were reasonable his purchase may be allowed. For example, Ben might argue that he paid over market value because the apartment was worth more to him because he already owned ½ . Ben might say that the beneficiaries would not have gotten a price as high from anyone else. However, a disgruntled beneficiary might suggest that Ben did not disclose that he had an offer for $4 million dollars for the apartment.

While at common law, the fiduciary is absolutely forbidden from dealing with estate property for his own benefit regardless of his honesty and fairness of the purchase, there are infrequent circumstances that courts have allowed fiduciaries to buy trust property. Examples include Re Nathanson (1971), 18 D.L.R. (3de) 495 (N.S.T.D.) and Mochan v. Omega Oil & Gas Ltd, [1988] 1 S.C.R. 348 (S.C.C.). In these cases the courts approved of sales to a fiduciary. In one instance the trustee showed he unsuccessfully tried to find a buyer and the sale was in the best interests of the estate. In the other it was clear the price was fair and those to whom the fiduciary duty was owed consented to the sale with full knowledge.

Fiduciaries who wish to purchase trust property are well advised to make 100% full disclosure to beneficiaries and obtain their consent to the sale of trust property to the trustee. As well, it would be prudent to for all the beneficiaries to obtain independent legal advice. Furthermore, the purchase price should be somewhat more then fair market value. With all these arrows in his/her quiver the trustee might be well advised to seek preapproval of the sale from the court by bringing an application for the opinion, advice and direction of the court under Rule 14.05(3)(d), and under section 60 of the Trustee Act, R.S.O. 1990, c. T.23. It may happen that a judge will decline to hear the application because they might believe that preapproval of a sale is not the advice or opinion contemplated by the legislation. A judge might point out that if this offer to purchase came from a arms length third party no application for directions would have been made. One senior counsel suggested to me that there are other legal paths which might be a better option. But that – is for another time and another blog. The bottom line is that anyone faced with this issue, whether he/she be a trustee or a beneficiary, should not treat this blog as legal advice and is best advised to seek out a competent experienced lawyer to guide them.

When is Probate Not Needed

May 4, 2010 by Charles Wagner | 3 comments

It is important for people who wish to stop estate assets from being distributed to know that a certificate of appointment (“Probate”) is not always necessary to effect the transfer of assets. For example,

When there is jointly-owned real property or bank accounts those assets pass to the surviving joint tenant by right of survivorship. In this instance the only thing needed by the surviving joint tenant is to have a death certificate. There may still ways to prevent the transfer depending of the facts specific to the situation.
Real Estate, under certain circumstances, may be transferred under a will without probate. See Bob Aaron’s article at http://www.thestar.com/article/248950 and the Memo to Land Registrars from Kate Muray dated October 30, 2000 at Registrar’s Memo where land registars are provided guidelines under what circumstances they are authorized to waive the requirement of a certificate of appointment of estate trustee when approving the transfer of property.
Insurance Policies, RRSPs may designate a beneficiary and probate may not be necessary to access those funds.
Shares in a private corporation. In order to avoid probate fees sophisticated investors use multiple wills. Since a great deal of wealth may be concentrated in the shares of these private corporations the testator may have made a separate will to deal with these shares and probate would not be necessary. For those interested in this topic I refer you to the Granovsky Estate case.

For those who wish to stop the distribution of non probatable assets it is important to know that more might be required then simply blocking probate by filing a notice of objection. If the asset in question is real property then one should contact a lawyer and investigate the possibility of obtaining a certificate of pending litigation or caution against title. If one seeks to stop the transfer of shares then one must go to court and seek judicial intervention. Those who ignore these possibilities do so at their peril.

How to Apply for Probate In Ontario

May 4, 2010 by Charles Wagner

The best step an estate trustee can take is to approach an experienced solicitor for assistance in obtaining probate. The process will likely go far quicker and more efficiently. For those who wish to educate themselves on how to obtain probate here are some sites that might prove useful:

The Law Society of Upper Canada at http://rc.lsuc.on.ca/jsp/ht/prepareAppCertAppEstateTrusteeWithWill.jsp#s7
Ministry of Attorney General – Where do I file an application for “Letters Probate”
See RULES OF CIVIL PROCEDURE – R.R.O. 1990, Reg. 194 Rules 74.04, 74.05, 74.05.1, 74.06, 74.07, 74.08, 74.09
sections 5-7 of the Estates Act, R.S.O. 1990, c. E.21
Estates Administration Act
Estate Administration Tax Act
Succession Law Reform Act

Stopping Probate

May 2, 2010 by Charles Wagner

Why would someone want to stop a probate application? How can probate be stopped?

Imagine that Mom is senile and in the nursing home. She is at death’s door and her daughter Debbie brings in a lawyer to draft a new will in which Mom names Debbie as her executor and bequeaths her home and all her money to Debbie. When Mom dies, her son Ian is upset especially since the previous will divided everything equally between him and Debbie.

WHY STOP PROBATE? In Ontario when the deceased left a Will, Probate is called a “certificate of appointment with a will”. In our case scenario if the court issues Probate Debbie, as estate trustee/executor, has authority to administer the provisions of the Mom’s will. Ian will want to stop probate because otherwise his sister will inherit Mom’s home and get all of Mom’s money. Without probate:

banks are unlikely to release the Mom’s money or give the executor access to the deceased’s safety deposit box;
public companies will not transfer shares to the estate;
insurance companies are loathe to pay out on policies without first seeing a certificate of appointment; and
the land registrar ordinarily does not permit the transfer of land based only on the will. It is for this reason that, more often than not, executors apply for and receive a certificate of appointment with a will.

This certificate of appointment gives these institutions the certainty that the document in question truly is the last will and testament of the deceased and permits the executor to carry out his duties.
So – the bottom line is if there is a will challenge the challengers want to prevent the Will from being probated.

HOW TO STOP PROBATE IN ONTARIO
If the court has not granted probate then the first step should be filing a Notice of Objection to prevent the Will from being probated. The Notice of Objection will set out the nature of our client’s financial interest and the grounds for the objection. As long as the objector follows the necessary legal steps, as a result of filing the notice of objection the applicant for a Certificate of Appointment of Estate Trustee (the Probate application) cannot obtain probate without the issues in dispute being litigated or resolved. For more information on this process see Rule 75.03 of the Rules Of Civil Procedure – R.R.O. 1990, Reg. 194.

If Probate was already granted then the parties challenging the will have stop the executor from administering the estate and the only way to do that is to bring a motion for the return of the certificate of appointment or for the court to revoke the certificate of appointment.

Return Of Certificate Of Appointment Rule 75.05 Ian could bring a motion asking the court to make his sister return the certificate of appointment (the Probate) because he is challenging the will.
Revocation Of Certificate Of Appointment Rule 75.04. Ian could also bring an application to have the Probate Revoked. To do so he would have to have an apparent financial interest in the estate and be able to satisfy the court that :

                o the certificate was issued in error or as a result of a fraud on the court;
                o the appointment is no longer effective; or
               o the certificate should be revoked for any other reason.

Seduction, Marriage and Elder Abuse

April 11, 2010 by Charles Wagner

Maurice Banton was an 88 year old father too unwell to live alone. His children moved him into a senior’s residence. Maurice meets Muna, a waitress working at the senior’s residence, and romance blooms. Did I forget to mention Muna was 50 years younger that Maurice?

This was the case of Banton v Banton (FN1) and its fact situation underscores the risk to the elderly being victimized by financial predators. Was Muna really after Maurice’s money? To quote the judge, “I have no doubt at all that this influence was deliberately exerted to enable her to obtain control and, ultimately, the ownership of his assets.”

Despite the protestations of his children, the young waitress woos the elder Mr. Banton and gets him to marry her. Unbeknownst to his children the young lady also contacts her lawyer and arranges for her new husband to make new wills which cut out his children. Why would a father who loved his children do such a thing? The court found that “It is the case of a lonely, depressed, terminally ill, severely disabled and cognitively impaired old man whose enfeebled condition made him an easy prey for a person like Muna with designs on his property.” Maurice suffered from the delusions that his children did not love him and only wanted his money. This insane delusion directly impacted on the decision to disinherit his children.

It was clear to the judge that the decision to give him money to his wife was not Mr. Banton’s. On the contrary, that decision was really the wife’s who imposed her will on him. The new Mrs. Banton played on her husband’s upset that his children sold his house and, contrary to his hope and expectation, they had put him into Lifestyles instead of allowing him to live with one of them. George Banton believed his unfounded allegation that his children were not interested in him and were only interested in his money. So does this mean Mrs. Banton gets nothing? Not so fast.

The court noted that while the man did not have the capacity to make a will, he did have the capacity to get married. Since the threshold for the capacity to marry was so low, the children’s attempt to annul it did not succeed. Apparently, even a man who is lonely, depressed, terminally ill, severely disabled and cognitively impaired had sufficient memory and understanding to continue to appreciate nature and responsibilities of marriage and that was sufficient to validate the marriage. Furthermore, in Canada, Ontario’s Succession Law Reform Act provides that a Will is revoked by the marriage of the testator so that despite the fact that Muna deliberately planned this charade it looked like Maurice’s previous Will was cancelled and the woman who schemed to obtain his property would succeed. Under the Succession Law Reform Act a spouse would inherit a preferential share of Maurice’s estate ($200,000.00) under an intestacy plus her distributive share. Fortunately for Maurice’s children, Justice Cullity found a way to do the right thing.

In this case, the children were fortunate that the judge found that the father’s residence was really held in trust for the children so it did not form part of the estate. Muna did not get much money. This time the children were lucky. Unfortunately, that is not always the case.

Anecdotally, as someone whose practice focuses in on estate litigation and elder abuse I see it happening more often. There is a very interesting paper (FN2) published by a Statistics Canada based on Statistics Canada sources. They report that “…overall, 7% of older adults experienced some form of emotional or financial abuse by an adult child, caregiver, spouse or common law spouse with whom they had contact in the five years prior to the survey. The vast majority of emotional and financial abuse was committed by spouses. Senior men (9%) were more likely than senior women (6%) to report being victims of emotional or financial abuse.” To measure financial abuse Statistics Canada and the Toronto Police Service (FN3) asked seniors certain questions which I have summarized below. If one suspects the answer is yes to more than half it’s time to seek out professional counsel for advice.

Has the alleged rogue
1.     tried to limit the elderly person’s contact with his family or friends?
2.     put the elderly person down or calls them names to make them feel bad?
3.     is jealous and doesn’t want the elderly person to talk to other men/women?
4.    Threatens to withdraw care or threatens the elderly persons or someone close to the elderly person?
5.    demands to know who the elderly person is with or speaks to at all times?
6.    damages or destroys the elderly person’s possession or property?
7.    prevents the elderly person from knowing or having access to the elderly person’s income or financial information?
8.    tries to compel the elderly person to relinquish control over finances?
9.    tries to force the elderly person to give up something of value?
10.  they try to force you the elderly person sign documents which were not understood or to change Last Will and Testament or try to obtain Power of Attorney over your finances?
11.   introduced a new lawyer into the situation which the elderly person never met before and has no knowledge of the elderly person’s history?

Do not consider this case review as legal advice. It is presented merely to demonstrate some of the disputes dealt with by this firm and its counsel and how one court dealt with some of the issues relating to elder abuse. It is important to remember that each case has a different set of facts which may give rise to additional and or different remedies or prevent the court from awarding the same type of relief. If you believe your fact situation is similar and litigation may be pending or has already begun, it is always prudent to contact a competent lawyer who will deal with the specific fact situation and legal issues particular to your case.

FN1 Banton v. Banton 1998 CarswellOnt 3423, 164 D.L.R. (4th) 176, 66 O.T.C. 161. Available on line at http://www.canlii.org/eliisa/highlight.do?text=banton+cullity&language=en&searchTitle=Search+all+CanLII+Databases&path=/en/on/onsc/doc/1998/1998canlii14926/1998canlii14926.html

FN2 http://www.statcan.gc.ca/pub/85f0033m/85f0033m2001008-eng.pdf
FN3 http://www.torontopolice.on.ca/crimeprevention/elderabuse.php

Elder Abuse in Ontario

March 25, 2010 by Charles Wagner | 11 comments

There may be as many as 150,000 seniors being victimized in Ontario.(FN1) The elder abuse can take many forms. One common form of elderly abuse is financial. The purpose behind this blog is to provide some information to people on the first steps they might consider when discovering the problem. Let’s first talk about signs of financial elder abuse.

According to the Toronto Police Service Website(FN2) these are some signs to watch out for:

Has the Power of Attorney been changed?
Is the elderly person suddenly short of money to pay for living expenses?
Has the elderly person been brought to sign legal documents they say they don’t understand?

Another red flag of financial abuse of the elderly occurs when large gifts or transfers of money take place. It is normal for children to become joint account holders in order to help parents pay their bill. However, it is suspicious for large chunks of cash to be transferred out of the joint accounts as gifts or expenses unrelated to the real owner of the account. Often the powers of attorney say that their elderly parent gave them this money as a gift. That might be true – but then again one must ask if there was there pressure placed on an elderly vulnerable person to make that gift? The common law(FN3) and Ontario’s Substitute Decisions Act(FN4) makes it very clear that a Power of Attorney is a fiduciary. What that means is that the power of attorney has undertaken to do things on behalf of a potentially vulnerable person and must act exclusively for the benefit of that person putting his interests totally aside. Taking money from an elderly person who is relying on that power of attorney may go against that Power of Attorney’s duty to act diligently, with honesty and integrity, and in good faith for the donor’s benefit. (FN5)

Options if you suspect Elder Abuse In Financial Matters

Call the Police. The Toronto Police Services Unit has a web site(FN6) which describes their efforts. Their contact numbers for a non emergency is 416 808 7040. For an emergency it is 411. The problem is that while the provincial government recognizes that the financial abuse of the elderly is horribly wrong, it is not always viewed as a crime(FN7). Furthermore, the police will sometimes view accusations against a power of attorney as a family dispute not warranting police charges.

Call the Office of the Public Guardian and Trustee (FN8). In the context of my practice I have dealt with the Public Guardian and Trustee a lot. They are altruistic and genuinely interested in helping the elderly. The problem is that they are under resourced and view themselves as a last resort. If they are convinced that it is a very serious financial abuse of an elderly person they will investigate a report that a mentally incapable person has been victimized and apply to court to become the abused elderly persons Temporary Guardian of Property. To report this type of serious abuse you can call the OPGT at 416 327 6348.

Educate yourself on Elder Abuse issues and get Legal Help. An excellent place to start is with the Advocacy Centre for the Elderly (ACE) a community based legal clinic for low income senior citizens. They have an excellent website which will be helpful (http://www.acelaw.ca/) and the lawyers at will talk to people on the phone and if more than a phone call is necessary they may make an appointment. Their phone number is 416-598-2656.

Hire a Lawyer and seek an accounting. Powers of Attorney have to keep records and receipts of all money they received on behalf of the person under their care(FN9). They also have keep records of the money spent. If you believe an elderly person is being financially abused write down all the facts you are relying upon to support that belief. The lawyer you hire will want to know:

Who is the power of attorney for property?

Who has control over the elderly person?

What is your relationship to that elderly person?

This last point is very important because under the Substitute Decisions Act, the Power of Attorney must keep accounts of all transactions involving property. The courts take this duty very seriously. The court may, on application order that the attorney have to pass his accounts.

But who may apply to the court? The elderly person in question, A dependant of the elderly person, The Public Guardian and Trustee, The Children’s Lawyer, A judgment creditor of the elderly person and Any other person who seeks and obtains permission of the court to apply.

If a court has found that the power of attorney abused their position the court can remove him/her, appoint a new guardian of person. If that Power of Attorney has been unjustly enriched at the expense of the elderly person then the court may order restitution. Now it may be impossible to recover the asset taken in its original form and the court may provide a tracing order

If you need a lawyer it is always a good idea to ensure that the person you hire has expertise in the area. If you do not know someone like that you can contact the Lawyer Referral Service provided by the Law Society of Upper Canada at http://www.lsuc.on.ca/public/a/faqs—lawyer-referral-service/

It would be a mistake to treat this blog as substantive legal advice. For those considering commencing an application to compell an accounting, there is no substitute for hiring a competent lawyer whose own research, analysis and judgment should be canvassed.

Here are some resources which may be of assistance:

Ontario Ministry of the Attorney General website. See the section on Elder abuse: http://www.attorneygeneral.jus.gov.on.ca/english/justice-ont/criminal_law.asp#elder
Advocacy Centre for the Elderly: http://www.acelaw.ca/services.php
Public Health Agency of Canada website. This discusses the financial abuse of the elderly and possible ways to stop it. http://www.phac-aspc.gc.ca/ncfv-cnivf/publications/agefinancialab-eng.php
Ontario’s Seniors’ Secretariat http://www.culture.gov.on.ca/seniors/english/programs/elderabuse/

FN1 http://www.onpea.org/english/contactus/stategytocombatelderabuse.html

FN2 http://www.torontopolice.on.ca/communitymobilization/elderabuse.php

FN3 http://www.cbwagnerlaw.com/pdf/put_your_own_interests_aside.pdf

FN4 http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_92s30_e.htm

FN5 See section 32(1) of the Substitute Decisions Act which provides “A guardian of property is a fiduciary whose powers and duties shall be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.”

FN6 http://www.torontopolice.on.ca/communitymobilization/elderabuse.php

FN7 http://www.onpea.org/english/contactus/stategytocombatelderabuse.html Note that certain financial abuse can be a crime. For example, theft, fraud, forgery and extortion are criminal offences.

FN8 See a very good article “Elder Abuse: The Hidden Crime” by ACE which is the Advocacy Centre for the Elderly and Community Legal Education Ontario (CLEO) at http://www.cleo.on.ca/english/pub/onpub/PDF/seniors/elderab.pdf

FN9 The duty to account is set out in the Substitute Decisions Act. There are regulations which set out how these accounts must be maintained. Please see ONTARIO REGULATION 100/96 ACCOUNTS AND RECORDS OF ATTORNEYS AND GUARDIANS http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_960100_e.htm

First Step in Will Challenge in Ontario

March 24, 2010 by Charles Wagner

The first step to challenging a Will in Ontario depends on whether probate been granted? Any person can go to the local court registrar and do a search to see if the court has granted a certificate of appointment which established the validity of the Will (Probate). If probate has not been granted then the person objecting to the will can file a form called “a Notice of Objection” with the court registrar. If probate has been granted then the person objecting to the will has to bring a motion for the return of the certificate of appointment.

Why is this first step so important? Once the Notice of Objection is filed and in effect the Court Registrar will not issue a certificate of appointment (Probate). It’s important to remember that the granting of probate tells the world that the Will in question is the last will and testament of the deceased and a valid document. It tells the world that the executor is in charge of the assets of the deceased. There is a risk that a dishonest or uninformed estate trustee, when granted Probate, can sell the assets of the estate to an innocent third party or even taken them out of the jurisdiction. This means that even if the will challenge is successful collecting on that judgment may be frustrated because the assets are already gone and possibly untraceable.

Even if the probate application is made in Toronto the person challenging the will can file his/her objection with their local court registrar because Ontario’s court system is linked. But be careful – it is not instantaneous. I have seen certificate of appointments being issued in one city after the filing of notices of objection in another city because they were not inputted into the system yet and the registrar did not know there was any objection. The best practice is to file the notice of objection with the court registrar where the application for probate has been started.

It’s important to remember that filing a Notice of Objection is only one important step in the litigation. The real first step for anyone challenging a will is to seek the advice of a lawyer familiar with the process. That lawyer can review the file and advise you if there is a worthwhile challenge to the will. Furthermore, filing a Notice of Objection is a relatively simple inexpensive step. But, if it is not done properly and as a result the court registrar issues a certificate of appointment. then a more costly process (a motion for the return of the certificate of appointment) will have to be taken.

It is also very important to know that estate assets may be at risk even if the person challenging the will files a notice of objection. Remember, the power of the estate trustee/executor to deal with estate assets comes from the Will itself – not the certificate of appointment. It’s just that there are certain institutions like banks and insurance companies who need to be certain that the documents being shown to them is really the last will and testament of the deceased. There are assets, like the shares in private corporations and real estate (under certain circumstances) that can be transferred without the estate trustee getting probate. An experience lawyer can guide you in how to go to court, freeze the other assets and challenge the will.

Some on line links that may be helpful

Rules 74.12(1) (b) and 75.03 – Objection to Issuing Certificate of Appointment. See http://www.e-laws.gov.on.ca/html/regs/english/elaws_regs_900194_e.htm

Notice of Objection Form 75.1. See http://www.ontariocourtforms.on.ca/english/civil

To Find Lawyers. See the Lawyer Referral Service provided by the Law Society of Upper Canada at http://www.lsuc.on.ca/public/a/faqs—lawyer-referral-service/

Removal of Executor

February 28, 2010 by Charles Wagner

In Canada, attempts to remove an executor are common. These applications are often commenced by disgruntled beneficiaries or frustrated co executors who believe that the person in charge of administering the estate is being unfair and or dishonest. The post reviews some relevant case law to examine under what circumstances an Ontario court decide to remove an executor.

In Canada, Ontario’s courts have the statutory authority to remove executors. Dissatisfied beneficiaries often go to court to compel the removal of the executors and force them to pass their accounts. If the application is successful, the executors are then forced to produce all the records relating their administration of the estate and a new executor is appointed as a replacement. The executors may or may not have done anything wrong. Nevertheless, the beneficiaries’ resentment often stirs controversy and their frustration, mistrust and hostility can result in their asking the court to remove Estate Trustees.

Historically, in Ontario, Canada Courts needed to see evidence of misconduct in order to remove trustees. In Libman v. Feldberg, Mrs. Libman left some money to charities, but the bulk of the estate was left to her daughter. Mrs. Libman’s Will stated that her personal effects were to be given to her daughter, who in her absolute discretion, could decide how they should be divided between herself and Mrs. Libman’s grandchildren. Feldberg, her Estate Trustee, ignored this provision of the Will. He told Mrs. Libman’s niece that she should take whatever she wanted. The daughter found that her mother’s gold bracelet, diamond ring, candelabra and fur coat were gone. Enter the lawyers. Through their efforts, Feldberg was removed as an Estate Trustee, the missing personal effects were retrieved and they recovered $50,000 worth of bonds and valuable coins that had disappeared.

Was the Court’s decision based on the hostility between the beneficiary and Feldberg? The Judge hearing the case relied on Re Davis, a decision of the Ontario Court of Appeal. In that case, Mrs. Davis appointed her friend to be the executrix (the person in charge of administering her estate). The three judges on the Court of Appeal found that ” … the present situation is not any more the fault of the executrix than it is of the beneficiaries…. regardless of what has brought about the present situation,….it is no longer possible for the executrix to exercise (her duties) in a completely impartial and objective manner”. For the Court of Appeal, misconduct was not the issue. What mattered most was the presence of hostility and the inability of an Estate Trustee to be completely impartial and objective in the administration of the estate. In Libman v Feldberg, it was clear that the Court found Feldberg’s administration of the estate wanting. The Court found that he did not carry out his duties “in a completely impartial and objective manner” which resulted in “… a degree of hostility and distrust is so strong, as to make it impossible for the beneficiary to accept Feldberg’s actions…” Apparently, for Ontario Courts, removal of Estate Trustees may no longer only be limited to instances where a Trustee is guilty of misconduct. They key factor seems to be an ability to carry out his/her duties impartially and objectively.