Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates

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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.

Certain obligations can trump testamentory freedom

June 1, 2012 by Charles Wagner

As regular readers of this column undoubtedly know there is a seminar set for June 5, 2012. For this column, I want to focus on one aspect of the seminar, organized by B’nai Brith Canada’s Estates and Trusts, Lawyers Division, that deals with the moral obligation of parents in their testamentary planning to include children as beneficiaries.

At common law the proposition that a testator has testamentary freedom is foundational. Yet over time, Ontario’s courts and legislature have recognized that a testator has certain obligations that may trump that freedom. For example, the courts have used legal mechanisms like constructive trusts to protect disinherited spouses. The legislature has also passed laws that provide disinherited spouses with a division of net family property, as well as dependants, like children and common law spouses, with rights to receive support if they were not adequately provided for in the will. A question this seminar is raising is where to draw that line on the restriction of testamentary freedom. Will an Ontario court vary a will when a parent disinherits an adult child? The courts in British Columbia have.

In Tataryn, a British Columbia case, the court stated that a parent has a moral duty to act like a judicious parent and give a proper share of the estate to his or her spouse and children. In the court’s view, this obligation is based on the prevailing societal, legal and moral norms. The court noted that the moral claims of adult children are not as strong as dependants, but if the estate is large enough, the court can vary the will and provide for the disinherited adult child who is not a dependant. The Ontario Court of Appeal, in the Cummings decision, indicated that statutes in British Columbia and Ontario are similar enough that the principles of Tataryn apply to Ontario. So let’s review the facts of the case in our seminar and see how an Ontario court might rule.

In the fictional scenario before the Moot Court, the elder Mr. Shapiro had two children. In his will, he divided his estate equally between them, but to inherit, each child was required to marry a Jewish spouse. In the Moot Court, the executor and the daughter are arguing that Mr. Shapiro’s will is valid and should not be changed. The son, who chose to marry outside the faith, is arguing the opposite.

Kimberly Whaley, counsel for the disinherited son, will be arguing that the principles of Tataryn have been accepted by Ontario’s Court of Appeal and accordingly the Moot Court should vary Mr. Shapiro’s will and give the disinherited son his half of the estate. She will point to the Ontario case of Perilli v. Foley Estate, where the judge said that in determining how much to award a dependant who was disinherited, the court should not just look to need, but also consider the deceased’s moral duty to the dependant. Clearly the decisions in British Columbia are having some impact. Whaley will be arguing that, given that Ontario’s Court of Appeal has adopted the principles of Tataryn, the court should vary a will where a parent has not complied with his moral duty to act like a judicious parent and disinherited a son who conducted himself in a way that is acceptable to the majority of Canadians.

Kelly Charlebois will be arguing that Ontario law is different from that of British Columbia. As counsel for the executor and daughter, she will be pointing out that to date no Ontario court has understood Cummings to mean that the moral claim of a disinherited adult non-dependent child is legally enforceable. Ontario cherishes the principle of testamentary freedom, as it has for centuries, and that is why both the statute and the court decisions in this province have never adopted the law of British Columbia.

The seminar will take place on June 5, 2012, at Shaarei Shomayim Synagogue, 470 Glencairn Ave., Toronto, ON M5N 1V8. Registration is at 7:30 a.m. and the Moot Court will begin at 8 a.m. The event is open to lawyers and accountants. Those lawyers and/or accountants interested in attending should contact Anita Bromberg, B’nai Brith Canada, at (416) 633-6224 ext. 130 or at abromberg@bnaibrith.ca.

Unjust Enrichment, Equity and your Mother in Law

August 3, 2011 by Charles Wagner | 2 comments

The average person goes to a lawyer because they just feel they were treated unfairly. I read a case recently and thought long and hard about how the plaintiff, Mary, must have felt. Her lawyer could not go to court and just say Mary was treated inappropriately. We lawyers must apply the facts to legal doctrines and theories. We rely on older cases to show that in similar circumstances the courts have granted damages to our clients. So let’s go through the facts of this case, see why Mary felt she was treated unjustly, and look how the courts applied the law to her situation.

Mary, her husband Franco and their children lived on a farm owned by Mary’s mother in law. They paid no rent. Franco ran a construction company and used that company to renovate his mother’s farm. He never charged his mother a penny for what amounted to over $200,000.00 worth of work. Instead, for between 30% and 50% of the cost of the improvements Franco billed his company’s other clients.

Franco died. Six months later Mary and her children left the farm. The mother sold the farm for $880,000 and gave $200,000 to her daughter. Mary and her children got nothing. Does that sound unfair to you? It did to Mary. Were Franco’s children also not entitled? Didn’t Franco add value to the Property? Were his children not entitled to the benefit of their father’s work? The matter went to trial and was appealed (FN1). One can surely understand how Mary felt cheated. Let’s see how the courts dealt with her complaint in the legal context.

Mary’s lawyer argued that Franco’s estate had a quantum meruit claim for unjust enrichment(FN2). Essentially, this Latin phrase describes a legal doctrine standing for the proposition that a person should be compensated for services or goods provided even if there was no legally enforceable contract. Based on seminal cases such as Peter v. Beblow, 1993 CanLII 126 (S.C.C.), [1993] 1 S.C.R. 980 and Garland v. Consumers’ Gas Co., 2004 SCC 25 (CanLII), [2004] 1 S.C.R. 629 Mary’s lawyer argued that she should be compensated because Franco’s mother was enriched by virtue of the work done by Franco, that Franco suffered a corresponding deprivation for what he could have charged her and there was no juristic (legal) reason for Franco’s mother to get that work done for free. The other side disagreed.

While the trial judge and Ontario Court of Appeal agreed that Franco’s mother was enriched they did not believe that he suffered a corresponding deprivation. In other words – he did not lose anything. Firstly – it was his company not Franco that did the work. Secondly the company was paid for the work already, albeit by other customers. How could Franco have been deprived of compensation for his work if he was already paid for it by his other customers? Finally – when addressing the third part of this test, that being the absence of a juristic reason for Franco’s mother to retain the benefit, the court pointed out that it was just and fair that the mother keep the benefits without paying for it. After all, Franco and Mary lived on the property rent free. They benefited from the renovations and most importantly they never indicated to Franco’s mother that there was any expectation at all of compensation for Franco’s work.

Before leaving this case I want to address an interesting side point. Ordinarily, a plaintiff cannot come to court seeking an equitable remedy & compensation for unjust enrichment, if she does not come to court with clean hands. Even though Franco charged his clients for the work done on his mother’s farm the court did not hold that against Mary. Why? Because while improper, those actions were not immediately and necessarily related to the claim (FN3).

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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FN 1. The Court of Appeal Decision is accessible on line at http://www.canlii.org/eliisa/highlight.do?text=simonin&language=en&searchTitle=Ontario&path=/en/on/onca/doc/2010/2010onca900/2010onca900.html&searchUrlHash=AAAAAQAHc2ltb25pbgAAAAAAAAE , 2010 ONCA 900 (CanLII) — 2010-12-24 and the trial decision can also be found on line at http://www.canlii.org/eliisa/highlight.do?text=simonin&language=en&searchTitle=Ontario&path=/en/on/onsc/doc/2008/2008canlii58155/2008canlii58155.html&searchUrlHash=AAAAAQAHc2ltb25pbgAAAAAAAAE, 2008 CanLII 58155 (ON SC).

FN 2. On our firm’s website I have provided a case scenario and some of the seminal cases dealing with the doctrine of unjust enrichment. This might assist the reader in dealing with this issue and I refer you to this link http://www.wagnersidlofsky.com/quantum-meruit-claim.php

FN 3. See paragraphs 56 -62 of the trial decision at 2008 CanLII 58155 (ON SC). As Daley J. stated at paragraph 62 “ As such, while the manner in which the renovation costs were paid for through Spancrest may have been improper, it is not immediately and necessarily related to the plaintiff’s claim of unjust enrichment. In the result, I conclude that that arrangement does not bar the plaintiff from making the claim for a remedy based on alleged unjust enrichment.”

Are Promises Enforceable?

June 10, 2011 by Charles Wagner

Lora and Jeffrey started living together. As their 23 month relationship grew stronger Jeffrey promised Lora that when he died Lora would get his RRSPs worth about $1,750,000 as long as they were still living together. Jeffrey insisted that Lora sign a cohabitation agreement before he would keep his promise. Before the agreement was signed Jeffrey died. Was Jeffrey’s promise legally enforceable? At trial Justice Brown of the Ontario Superior Court of Justice (FN1) decided that Lora would get the money. Jeffrey’s estate appealed.

Lora sued the estate on a number of different grounds. I would like to focus on one which the Ontario Court of Appeal (FN2) addressed – was Jeffrey’s promise legally enforceable under the doctrine known proprietary estoppel? Let’s start by defining some terms.

Let’s assume Jeffrey made a promise to Lora. Proprietary estoppel is a legal doctrine which prevents Jeffrey from enforcing his legal rights with respect to property once he made a promise or representation not to do so. This is applied if Lora relied on the representation/promise and would suffer if Jeffrey or his estate enforced his legal rights. The court would force Jeffrey or his estate to keep the promise if it would be palpably unfair to allow him to strictly enforce his legal rights. Proprietary estoppel is an example where courts will look to equitable doctrines to address unconscionable wrongs.

Sometimes courts will use equitable remedies, like proprietary estoppel, to address a situation where the application of strict legal rights would be unfair. Under these circumstances the court may ignore a contract or a testamentary document and provide the plaintiff with a remedy. By applying equitable principals courts will sometimes enforce promises.

The Ontario Court of Appeal in Schwark Estate v . Cutting(FN3) reviewed a number of causes of action and remedies through which a promise may be enforced. In the course of that analysis the Court of Appeal summarized the essential elements of proprietary estoppel as follows:

the owner of land induces, encourages or allows the claimant to believe that he has or will enjoy some right or benefit over the owner’s property;
in reliance upon this belief, the claimant acts to his detriment to the knowledge of owner of the land; and
the owner then seeks to take unconscionable advantage of claimant by denying him the right or benefit which he expected to receive.

So what does proprietary estoppel have to do with Lora and Jeffrey’s situation in the Belvedere v. Brittain Estate? Lora’s lawyers raised a number of equitable arguments (FN4) which the court dismissed. The Ontario Court of Appeal dismissed those arguments finding that Jeffrey’s estate was not unjustly enriched by Lora’s contributions and accordingly the trial judged erred in applying the doctrine of constructive trust. At that point the court considered the alternative remedy of proprietary estoppel.

The first issue addressed by the Court was whether this doctrine of enforcing promises relating to land could be used to enforce promises relating to RRSPs. The Ontario Court of Appeal noted that there is some controversy on this point, but it proceeded with the analysis on the assumption that it did apply. (FN5). A key issue in enforcing such a promise is that Lora had to rely on it to her detriment. Seeing that she did not rely on the promise and suffer any loss the court dismissed the proprietary estoppel argument.

So does that mean that promises are not legally enforceable? Maybe. The Ontario Court of Appeal decision makes room for such an argument if it meets the criteria set out in Schwark Estate v . Cutting. In an article published in the Estate and Trusts Quarterly, Ian Hull, a leading estate litigator stated (FN6), “While the doctrine of proprietary estoppel has deep roots in the British courts, the recent developments in the context of estates seem to point to a new and effective remedy available to claimants in the context of estate litigation”.

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. Belvedere v. Brittain Estate 2007 CanLII 32666 (ON S.C.), (2007), 45 R.F.L. (6^th) 81. Justice E.R. Browne of the Superior Court declared that Ms Lora Belvedere was entitled to a constructive trust in Mr. Brittain RRSPs at the time of his death, to be satisfied by payment to Ms. Belvedere of $1,750,000.

FN2. Belvedere v. Brittain Estate, 94 O.R. (3d) 655 (2009) OCA . To access the case on line see bit.ly/Belvedere/Brittain

FN3. Schwark Estate v. Cutting, 2010 ONCA 61. To access the case on line see http://bit.ly/Schwark

FN4. Lora’s lawyers argued that the estate of Mr. Brittain was unjustly enriched and that the trial judge was correct in finding a constructive trust on $1,750,000 of the estate assets in favour of Lora. Alternatively, Lora’s lawyers argued that the trial judge should have considered the remedies of a “resulting trust” and or “proprietary estoppel”.

FN5. See paragraph 67 of Belvedere v. Brittain Estate, 94 O.R. (3d) 655 (2009) OCA. To access the case on line see bit.ly/Belvedere/Brittain

FN6. Ian Hull and Suzana Popovic-Montag’s article “Proprietary Estoppel — An Innovative Claim Against the Assets of an Estate can be found in the Estate and Trust Reports, 3^rd series 2009. The cite is 55 E.T.R. (3d) 44.

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).

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

Resulting Trusts, Clean Hands and Who Gets the Cottage

January 16, 2011 by Charles Wagner | 1 comment

Albert was always a bully and Dad loved him best. Judy became a successful doctor and, in part to get away from her dysfunctional family, she moved to Montreal. When Dad died, Judy was happy to see that her father left his $1,000,000.00 estate equally to both his children. But, Albert had other ideas.

Albert went to court and claimed that 20 years ago he bought a cottage which was now in their father’s name. That cottage, now worth 400,000.00, was transferred to Dad 20 years ago because Albert was being investigated by the Canada Revenue Agency for failing to pay taxes for five years. Albert feared that the Canada Revenue Agency would take the cottage away so he transferred the property to his father for $50,000.00 except Dad never paid Albert a dime. Albert claimed that his father had held the cottage in a resulting trust for him and it now had to be transferred back to Albert. With the evidence presented there could be no doubt that Albert paid for the cottage, maintained the property and that the father participated in the scheme to protect the asset from the Canada Revenue Agency.

In our fictional scenario Albert could argue that in Ontario there is a legal presumption that people make bargains and not gifts. Accordingly, if Albert paid for everything the court should presume that he has a beneficial interest in the cottage. This is the basis of his resulting trust(FN1) claim.

Judy might argue that even if Albert’s story was true he still does not deserve to get the cottage when the whole thing was based on a scheme by Albert to cheat Revenue Canada. As Professor Waters stated in his text Waters’ law of Trusts in Canada, “The basic principle is that a person may not have the assistance of equity if the person does not come with clean hands”.(FN2). Arguably, if Albert tried to cheat on his taxes he did not have clean hands and should not benefit from the equitable remedy of a resulting trust. How could it be fair for Albert to have it both ways? To the Canada Revenue Agency Albert said the cottage belonged to Dad and now to Judy he is saying it belonged to him. Given his intention to cheat Canada Revenue Agency does Albert deserve the benefit of an equitable remedy?

In Holland v Holland (FN3) Justice Reilly of the Ontario Superior Court of Justice faced a similar question. A husband transferred a cottage into his wife’s name in exchange for $15,000.00. No money changed hands and the whole thing was a plan to avoid having an asset that would be seized for unpaid taxes. When the couple split up the husband claimed to have a beneficial interest in the cottage. This is an excerpt of the judge’s decision “…a declaration of resulting trust is an equitable remedy. In order to obtain such remedy, the applicant must approach the court with clean hands. In this case, Mr. Holland did not do so. ….It is for Mr. Holland to persuade the court that he is entitled to an equitable remedy and I conclude he has failed to do so.”

Would this reasoning in a family law dispute apply to an estate litigation matter? Maybe. Having dealt with these types of cases I can only repeat that these are very complicated matters and some courts have taken the view that despite the improper intention, if no one was in fact defrauded (for example, if it turned out that Albert never really owed Canada Revenue any money) then he might get the cottage back.

Charles B. Wagner is a partner at Wagner Sidlofsky LLP. This Toronto office is a boutique litigation law firm whose practice is focussed on estate, commercial and tax litigation.

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FN1. There is a difference between a resulting trust and a constructive trust. A constructive trust has nothing to do with the intention of the parties. It is a flexible tool used by the courts to redirect funds or property which has been wrongly taken. It is an equitable remedy used by the courts to address an unjust enrichment. Waters, Law of Trusts in Canada, 2nd ed. (Toronto: Carswell, 1984) at p. Defines a resulting trust as an equitable trust that arises whenever one party buys property and has it gratuitously conveyed to another or into the joint names of himself and another.”:

FN2. See Waters’ Law of Trusts in Canada, 3rd Ed. 9 — Revocation: Setting the Trust Aside
9.II — Setting the Trust Aside B. Fraud by Settlor.

FN3. Holland v. Holland 2007 CarswellOnt 7195, [2008] W.D.F.L. 49, 49 R.F.L. (6th) 97, 161 A.C.W.S. (3d) 767. Justice Reilly’s decision considered a number of cases involving a transfer of property where the intent was to defeat creditors. Most persuasive was His Honour’s quote of Lord Denning in Tinker v. Tinker, [1970], 1 All E.R. 540 at 542:
“… I am quite clear that the husband cannot have it both ways. So he is on the horns of a dilemma. He cannot say that the house is his own and, at one and the same time say that it is his wife’s. As against his wife, he wants to say that it belongs to him. As against his creditors, that it belongs to her. That simply will not do. Either it was conveyed to her for her own use absolutely; or it was conveyed to her as trustee for her husband. It must be one or the other. The presumption is that it was conveyed to her for her own use; and he does not rebut that presumption by saying that he only did it to defeat his creditors. I think that it belongs to her.”

Who Gets The Engagement Ring?

December 13, 2010 by Charles Wagner

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

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

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

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

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

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

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

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

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

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

Second Marriages and Risks to the Estate

November 29, 2010 by Charles Wagner

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

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

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

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

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

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

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

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

Do Mistresses Have a Right to Inheritance?

October 21, 2010 by Charles Wagner

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

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

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

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

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

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.

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