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IS DISINHERITENCE BECAUSE OF SEXUAL ORIENTATION LEGAL?

August 19, 2011 in Challenging the Validity of Wills, Claims Against Estate: Summary Procedure, Dependant Support Claims, Equity, Estate Litigation, Public Policy & Estates, Variation of Trusts, Wills by Charles Wagner

Will a Canadian court vary or set aside a will when a parent disinherits a gay/lesbian child because of his/her sexual orientation?  The law may be different depending on the province.

In Canada, the law balances the idea of testamentary independence against public policy concerns.  While cherishing testamentary freedom, the law intervenes when it finds provisions in the will offensive to public policy and or equity.  In Ontario, this restriction on testamentary freedom has been expressed by laws passed to protect spouses (under Part I of the Family Law Act [FN1]) and dependents (under Parts II and V of the Succession Law Reform Act [FN2]). 

Two true stories from British Columbia:  In both Patterson v. Lauritsen [FN3] and Peden v. Peden Estate [FN4], a parent disinherited or reduced the inheritance of a child because the parent did not approve of the child’s homosexuality.  The Court in each of these cases held that, in today’s society, homosexuality is not a factor that would justify a judicious parent disinheriting or limiting benefits to a child. 

Would the same thing happen in Ontario?  Maybe – maybe not.  In the British Columbia cases, even though the parents had capacity and were not subject to undue influence, their wills were open to challenge on the ground that the parents had disinherited their children without, what the court considered to be, reasonable cause. While the Ontario Court of Appeal has stated that the “moral considerations” underpinning the British Columbia approach apply in Ontario, to my knowledge, there has been no case to date where an Ontario Court has varied a will to benefit a non-dependent disinherited adult child [FN5].  In Ontario, except where a will offends public policy, it is still open to debate whether a capable parent, acting voluntarily, is entitled to disinherit a child - however whimsical, mean-spirited, or controlling such action may seem. 

A comment made by an Ontario judge in 1995 is of interest insofar as it suggests where an Ontario court may draw the line.  In Fox v. Fox Estate [FN6], a decision of the Ontario Court of Appeal, the father named his wife the executrix under his will.  The income was to be used for the grandchildren with the capital for the son.  The will also gave the mother an unfettered discretion to encroach on the capital of the estate for the benefit of her son’s children. She took all the capital, eliminating her son’s inheritance because he was involved with a non-Jew.  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”. The Court viewed the mother’s behaviour as being mala fides and contrary to public policy.

Testators that ignore the changing winds of public policy do so at their own peril.  In M v. H, [FN7] the Supreme Court of Canada compelled Ontario to change the definition of “spouse” as set out in the support provisions of the Family Law Act. Prior to that case, common-law heterosexual couples were included in the definition of spouse, but gay and lesbian couples were not. The Supreme Court of Canada ruled that, for the purposes of support under the Family Law Act, a spouse includes “…either of two persons …”. The court ruled that limiting the definition of “spouse” to heterosexual couples, for the purposes of support, was discriminatory and not justifiable.  In Canada today same-sex marriages are legal.  It is therefore entirely possible that an Ontario court would set aside a provision in a will that disinherited someone because of his/her sexual orientation, on the grounds that such disinheritance offended public policy.

 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.   The author gratefully acknowledges the assistance of Michelle Kotzer in the preparation of this article.

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FN1.  Family Law Act, R.S.O. 1990, c. F.3

FN 2.  Succession Law Reform Act, R.S.O. 1990, c. S.26

FN3.   Patterson v Lauritsen (1984) CarswellBC 381, 58 BCLOR 182, [1984] 6 WWR 329, 17 ETR 316.  Available on line at Patterson v. Lauritsen, 1984 CanLII 353 (BC SC)

FN4.   Peden v Peden Estate (2006) CarswellBC 2801, 2006 BCSC 1713, [2007] WDFL 1837.  Available on line at Peden v. Peden, Smith et al., 2006 BCSC 1713 (CanLII)

FN5.   See Justice Cullity’s 1998 decision of  Banton v. Banton, 1998 CanLII 14926 (ON SC) and in particular paragraph  36  where he states, “It is hardly necessary to say that the principle of freedom of testamentary disposition is in the background to the issues relating to the validity of the wills of December 21, 1994 and May 4, 1995. If George Banton had capacity and was not subject to undue influence at the time of the execution of one of those wills, its validity and effect are not open to challenge on the ground that he thereby disinherited his children. In this jurisdiction, unlike others in Canada and elsewhere, unless the children are dependants, a capable parent acting voluntarily, is entitled to do this however mean and ungrateful it may seem, or how selfish the motive; hence the focus in this case, as in so many others, on testamentary capacity and undue influence.”

Compare this with the decision of the Court of appeal in Cummings v. Cummings CanLII 9339 (ON CA).  At paragraph 40,  Blair J. A. states, “[40]         In my view these questions have been resolved by the decision of   the Supreme Court of  Canada in Tataryn v. Tataryn Estate 1994 CanLII 51 (S.C.C.), [1994] 2 S.C.R. 807.  There, the Court  held that a deceased’s moral duty towards his or her dependants is a relevant consideration on a dependants’ relief application, and that judges are not limited to conducting a needs-based economic analysis in determining what disposition to make.  In doing so, it rejected the argument that the “judicious father and husband” test should be replaced with a needs-based analysis: see para. 23.  I see no reason why the principles of  Tataryn should not apply equally in Ontario, even though they were enunciated in the context of   the British Columbia Wills Variation Act R.S.B.C. 1979, c. 435, in which the language is somewhat different from that of  the Succession Law Reform Act.

I also recommend  the reader to see  Susan J. Woodley’s paper entitled “The (Almost, Possible, Probable) Right of an Adult Child to Receive Support”, presented at the Ontario Bar Association 2009 Institute of Continuing Legal Education.

FN6.    Fox v. Fox Estate 1996 CanLII 779 (ON C.A.), (1996), 28 O.R. (3d) 496, 10 E.T.R. (2d) 229 (C.A.),

FN7. M. v. H. [1999] 2 S.C.R. 3. I refer the reader to an aritlce written by Mary C. Hurly entitled “Sexual Orientation and Legal Rights”. The article appears on the Parliament of Canada Website and can be found at Sexual Orientation and Legal Rights (PRB 08-49E) . When considering the impact of the decision and how it reflects on public policy in Canada her conclusion speaks to how a court may view the public policy issue. “Judicial and legislative reforms, particularly since the M. v. H. decision in 1999, have effected a significant shift in Canadian society with respect to recognition of the legal status and claims of same-sex conjugal couples. The watershed nature of this shift is illustrated, most notably, by federal legislation sanctioning same-sex marriage.

Opponents of these reforms continue to argue that the extension of same-sex rights in general, and same-sex marriage in particular, undermine the traditional family and family values. At the same time, some gay and lesbian couples (like some heterosexual couples) do not want either the legal obligations or the benefits that flow from spousal status or marriage. As the 2002 report of the former Law Commission of Canada and other indicators suggest, the question of whether the matter of entitlements based on the marital or conjugal nature of a partnership should be re-examined remains open.”

Unjust Enrichment, Equity and your Mother in Law

August 3, 2011 in Applications for the Opinion and Direction of the Court, constructive trust, Dependant Support Claims, Equity, Estate Litigation, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills 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 Simonin, 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 Simonin v. Simonin, 2010 ONCA 900 (CanLII) — 2010-12-24 and the trial decision can also be found on line at Simonin v. Simonin, 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 Simonin v. Simonin, 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 in Applications for the Opinion and Direction of the Court, constructive trust, Elder Law, Equity, Estate Litigation, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills 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:

  1.  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;
  2. in reliance upon this belief, the claimant acts to his detriment to the knowledge of owner of the land; and
  3. 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”.

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.  Belvedere v. Brittain Estate  2007 CanLII 32666 (ON S.C.), (2007), 45 R.F.L. (6th) 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, 3rd series 2009.  The cite is 55 E.T.R. (3d) 44.

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

May 1, 2011 in Applications for the Opinion and Direction of the Court, Capacity, Challenging the Validity of Wills, constructive trust, Dependant Support Claims, Elder Law, Estate Litigation, Executors / Trustees, Fraud, Wills 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 16th, 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 .

DNA Testing and Estate Litigation

February 11, 2011 in Applications for the Opinion and Direction of the Court, Claims Against Estate: Summary Procedure, Court Proceedings to Ascertain Heirs of an Estate, Estate Litigation, Evidence in Estate Litigation, Executors / Trustees, Probate, Public Policy & Estates, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills 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.

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.

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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 in Applications for the Opinion and Direction of the Court, Claims Against Estate: Summary Procedure, Equity, Estate Litigation, Evidence in Estate Litigation, Fraud, Unjust Enrichment, Constructive Trust and Quantum Meruit Claims in Estates, Wills 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.

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 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.”

Are Adult Children Legally Entitled To Inheritance?

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

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

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

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

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

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

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

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

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

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

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

FN3  Johnson v. Huchkewich, 2010 ONSC 6002

Second Marriages and Risks to the Estate

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

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

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

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

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

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

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

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

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

Rectification – the Equitable Remedy to Fix Errors in a Will

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

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

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

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

DISINHERITING CHILDREN WHO MARRY OUTSIDE THE FAITH

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

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

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

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

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

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

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