Re Moss (Bank): A Case Comment

Laura West
 

Pytka v. Pytka: Conduct and Costs

Ameena Sultan
 

In this endorsement dated December 31, 2010, Justice Brown considered the issue of costs in a motion to set aside a settlement previously entered into by the parties.

Rita Pytka (Rita) passed away in January 2004. Her daughter, Marilyn Pytka (Marilyn), brought an application in March 2005 seeking extensive dependant relief from Rita’s estate, including the right to remain in her mother’s home, the main asset in the estate. Marilyn’s claim was based on the fact that she and her daughter had always lived with her mother and that she had cared for her mother before her death.

Kaptyn Estate – Estate Trustee Litigants Denied Bulk of Claimed Costs

Dina Stigas
 

Winter Reading 2011: A Year to Learn About Negotiation

Jane E. Martin
 

Case Comment: Abrams v. Abrams

Megan Connolly
 

Wilson v. Lougheed, [2010] B.C.J. No. 2628: Love and Affection Are Getting Expensive!

Julia Evans
 

Brown Bag Lunch Summary 

Sharon Davis and Natalia Angelini
 

The following topics were discussed at our Brown Bag Lunch on December 21, 2010:

Bill 113 

We opened our lunch with discussion about Bill 113, Protection of Vulnerable and Elderly People from Abuse Act (Powers of Attorney), 2010, which amends the Substitute Decisions Act regarding powers of attorney. The Bill has passed first reading. We discussed the Registry for Powers of Attorney and there was some comment on the current Will registry, which not many people are using.

I was running out of topics for this column when a kind reader suggested I tackle the use of “due to”. The reader asked whether “due to” should only be used following the “to be” verb.

I looked into the issue on the internet. I thought I would have a two line answer to this question … I was wrong.

It appears that the common error is substituting “due to” when “because” should be used.

Editors:
Dina Stigas
Irit Gertzbein
 

Lucinda Main*

On December 20, 2010, Greer J. brought an end to protracted litigation in which over a dozen court orders and endorsements were made when she sentenced Barry Landen to 14 months in jail for contempt of court, with no chance of parole. While the facts in the case are extraordinary, the decision acts as a reminder of the importance of giving careful thought to the testator’s choice of estate trustee, the fiduciary duties of the estate trustee and the serious consequences that can befall an estate trustee who repeatedly fails to follow court orders.

Paul Penna died of prostate cancer at the age of 73 years on August 29, 1996. His estate (the “Estate”) was valued at approximately $24,000,000 at the time of his death. He named his wife, his colleague (Charles Langston) and Mr. Landen as his estate trustees. Mr. Landen was a senior officer of Agnico-Eagle Mines Ltd., a company Mr. Penna founded. Mr. Landen worked for the company since 1980 and over the years had gained both the respect and trust of Mr. Penna.

Pursuant to the terms of the Will, Mr. Penna’s wife was to receive a life interest in a portion of the residue of the Estate and, after certain legacies were paid, the remainder of the residue was to be used to create the Penna Charitable Fund. Mr. and Mrs. Penna did not have children. Mrs. Penna died in 2003. Her nephew, Ernie Sheriff, replaced her as an estate trustee. 

From the very start, Mr. Landen controlled and managed all of the Estate’s assets. He did not co-operate with his co-trustees and, consequently, the co-trustees were not involved in the (mis)administration of the Estate. The Will was not probated and, therefore, the legatees did not receive notification of their gifts in the Will. Only some of the specific legacies set out in the Will were paid. A $1,000,000 legacy to Mrs. Penna was not paid to her during her lifetime. 

Following a forensic accounting by a third party, the extent of Mr. Landen’s fraud against the Estate became apparent. By this time, there were very few assets left in the Estate. The co-trustees successfully brought an application for a Mareva injunction in 2005. The order provided, inter alia, that Mr. Landen was not permitted to dispose of or reduce the value of his assets, his bank accounts were to be frozen and he was to produce an affidavit setting out all assets in which he had an interest. Mr. Landen complied and produced an affidavit; however, it was deficient. Moreover, he breached the Mareva injunction order on numerous occasions.

In May 2006, all three estate trustees were removed by court order and required to pass their accounts. None of the estate trustees passed their accounts. The Nova Scotia Trust Company and Ronald Rutman were appointed as estate trustees during litigation. The trust company soon thereafter resigned and Mr. Rutman has acted alone for most of the period following the Mareva injunction.

Greer J. provides examples in her decisions of the Landen family’s use of the Estate funds to bank roll their attempt to propel themselves into Toronto high society. Amongst other things, Mr. Landen and his wife used the funds to purchase and renovate a home in Forest Hill ($2,127,054.75 was recovered when it was subsequently sold), purchase season tickets to the Raptors and Maple Leafs games, lease and insure several luxury cars, and transfer almost $1,000,000 to charities not named in Mr. Penna’s Will. Millions of dollars remain unaccounted for and, without a passing of accounts, will be very difficult to trace. Greer J. asserted the following:

This is not a matter of a few hundred thousand dollars being lost on a bad stock transaction, or errors made in not balancing the estate portfolio, or a failure to provide some vouchers. This is a case where millions of dollars have disappeared without explanation, and where no Accounts were ever kept by the Estate Trustees…¹  

Mr. Landen’s wife was not found to have acted with her husband in perpetrating the fraud. Greer J. asserted that “[s]he, in my view, purposely ignored what took place in their joint bank account and opted for the false image of wealth they put forth to the community in which they lived.”² She has, apparently, left Mr. Landen. 

Most recently, on February 27, 2009, Greer J. ordered Mr. Landen to set out in an affidavit what he had done with the assets that were to have been frozen as a consequence of the Mareva order. He refused to do so. In addition, he was ordered to attend at an Examination in Aid of Execution. Mr. Landen attended the examination but failed to fully answer many questions, provided false answers to some questions and did not bring any documents with him.

Rule 60.11 of the Rules of Civil Procedure permits a court to make an order “…to enforce an order requiring a person to do an act, other than the payment of money, or to abstain from doing an act.” In dealing with a motion for contempt, subrule 60.11(5) provides that:

…the judge may make such order as is just, and where a finding of contempt is made, the judge may order that the person in contempt, (a) be imprisoned for such period and on such terms as are just; (b) be imprisoned if the person fails to comply with a term of the order; (c) pay a fine; (d) do or refrain from doing an act; (e) pay such costs as are just; and (f) comply with any other order that the judge considers necessary, and may grant leave to issue a writ of sequestration under rule 60.09 against the person’s property.

Greer J. confirmed the test for contempt of court:

In making a finding of contempt, the Judge is required to review the three-part test as set out in G.(N.) Services aux enfants & adults de Prescott-Russell (2006), 82 O.R. (3d) 686 (C.A.) at para. 27 as follows:

(a) the Order that was breached must state clearly and unequivocally what should and should not be done;
(b) the party who disobeys the Order must do so deliberately and wilfully.
(c) The evidence must show contempt beyond a reasonable doubt.³ 
 

After carefully canvassing all of the facts and applying the above test, Greer J. held that: (a) Mr. Landen purposefully disobeyed the Mareva Order; (b) Mr. Landen failed to pass his accounts; and, (c) Mr. Landen lied in his affidavits following the Mareva Order by failing to list all of the assets he controlled. Greer J. found Mr. Landen in contempt of four court orders and stated the following:

The steps Landen took in the face of such Orders, were egregious in nature and showed the extent of Landen’s sociopathy when he knowingly, deliberately and wilfully breached his fiduciary duties to the Estate and it [sic] beneficiaries, committed breach of trust, defrauded the Estate of millions of dollars, failed to keep or produce estate accounts, treated the deceased’s widow with total disrespect and defrauded her by never paying her the money she was entitled to under the Estate.⁴ 

It is an accepted practice for the court to allow a brief period of time upon proving liability prior to determining the appropriate punishment. While providing for such a brief period of time, Greer J. noted that it would be impossible, given the circumstances, for Mr. Landen to purge his contempt. Greer J. in her December 20, 2010 decision, after considering the different orders she could make, determined that imprisonment was the most appropriate form of punishment. Greer J. wanted to set an example with this case: “[d]eterrence plays a big role in how Landen is sentenced, given that the message is that such persons who have an obligation to keep accounts must realize the severity of sanctions against them if no accounts are kept and they have personally taken and used estate assets.”⁵ 

Counsel provided Greer J. with similar cases in which the sentences ranged from six days to 15 months. She settled on a sentence of 14 months. Greer J. made note of the fact that she is fully aware that the Parole Board has no jurisdiction to grant parole when the warrant of committal mandates that the contemptor return to the Superior Court of Justice. Greer J. ordered Mr. Landen to return to court following his incarceration to explain what he has done with all of the Estate’s assets. Consequently, Mr. Landen is in jail for 14 months for his actions and has no chance of parole.

The lengthy litigation that resulted from the death of Mr. Penna highlights the need for testators to give careful thought to whom they wish to entrust with the duties of the estate trustee. The decisions in this case also provide a useful summary of the current test for a finding of contempt of court in a civil action. In particular, the sentencing decision provides a thorough overview of factors used to determine the most suitable sentence.

*Lucinda Main is an associate lawyer at Beard Winter LLP. She can be reached at lmain@beardwinter.com or 416.306.1785.

_______________

¹ 2006 CanLII 15755 (ON S.C.), at para 26.
² 2010 ONSC 6993, at para 19.
³ 2010 ONSC 4730, at para 69.
⁴ Ibid., at para 77.
⁵ Supra note 2, at para 46.
 

Laura West*

The decision of the Manitoba Court of Appeal in Re Moss (Bankrupt), 2010 MBCA 39 (CanLII), considers the question of whether attorneys appointed pursuant to continuing powers of attorney are capable of designating beneficiaries of life insurance policies on behalf of the grantors of such powers of attorney. Leave for appeal of this decision was dismissed by the Supreme Court of Canada in Danny Moss et al. v. Keith G. Collins Ltd. as Trustee of the Estate of Danny Moss, a Bankrupt et al., 2010 CanLII 62502 (S.C.C.).

The main issue in Re Moss (Bankrupt) was the validity of the execution of six notice of change of beneficiary forms for life insurance policies. Disagreement arose as to whether these designation forms were validly executed by the insured, Eliza Moscovici, in favour of her granddaughter, Carrie Moss. The validity of these forms was pertinent because a determination of invalidity would result in the proceeds of the six underlying life insurance policies being the property of the insured’s son, Danny Moss, a bankrupt and the former sole beneficiary of all six policies, and not that of his daughter, Carrie Moss.

The appellants, Keith G. Collins Ltd., as trustee in bankruptcy, and BMO Nesbitt Burns Inc., were contesting the trial judge’s decision that the notice of change of beneficiary forms were validly executed, and they sought a declaration that the insurance proceeds were the property of Danny Moss and should be paid to his trustee in bankruptcy. 

At trial, Danny Moss and his wife testified that Eliza signed the beneficiary designation forms with Danny’s physical assistance (i.e. he supported her hand as she executed the documents). However, alternate pleas were also submitted stating that at all material times, Danny was either instructed or authorized by Eliza to complete the forms or was doing so as Eliza’s attorney pursuant to a properly executed power of attorney for property. These alternate pleas were withdrawn during the course of discoveries.

The trial judge did not believe Mr. and Mrs. Moss’s testimony as to how Eliza’s signature was placed on the forms, and he rejected their claim that Mr. Moss guided or assisted Eliza’s hand as she signed the forms. However, the trial judge did reach the conclusion that when Mr. Moss signed Eliza’s name to the six forms, he was authorized by her to do so impliedly, if not expressly, by the general power of attorney Eliza had executed naming him as her attorney. As a result, the trial judge reached the conclusion that the change of beneficiary forms were validly executed and that Carrie Moss was the correct beneficiary of the insurance proceeds of each of the six insurance policies.

The appellants objected to this decision and took the position that the trial judge had erred in law when holding that the forms were validly executed because he gave effect to alternate pleas that had been withdrawn before trial, and had not reached his conclusions based on the evidence and pleas before him which were limited to the argument that Danny Moss had physically assisted his mother in signing the forms.

The Court of Appeal decision in Re Moss (Bankrupt) agreed with these arguments of the appellants, and found that the trial judge had failed to recognize the fact that specific pleas had been withdrawn and that this was a palpable and overriding error that coloured his ultimate findings. In this regard, the trial judge had placed the “appellants in the untenable position of retaining an onus to disprove a theory that had been explicitly withdrawn by the respondents.”

According to the Court of Appeal decision, the trial judge also erred in finding that Danny Moss had the authority to sign the designation forms as a result of the general powers of attorney that he held to act on Eliza’s behalf. As the decision notes, a general power of attorney is insufficient to vest the attorney with the requisite authority to sign insurance designation forms under the governing legislation, and the powers of attorney held by Danny Moss did not permit the designation or the alteration of beneficiaries in a policy of insurance.

Based upon the foregoing, the appeal was allowed and the Court of Appeal granted the declaration and relief being sought by the appellants.

The trial judge’s finding that Danny Moss’s execution of the insurance beneficiary designation forms on his mother’s behalf was valid because he was acting pursuant to his authority as her attorney was not in line with prevailing law in Ontario. The provisions of the Substitute Decisions Act, 1992 S.O. 1992, c. 30 do not authorize attorneys acting pursuant to continuing powers of attorney of property to “make a Will”, which for the purposes of the legislation is defined to include “any testamentary disposition”. For the purposes of Ontario law, it is generally understood that a change of beneficiary designation for an insurance policy constitutes a testamentary disposition and is therefore outside the scope of an attorney’s power. The status of Ontario law in this regard was noted by Justice Strathy in the decision of Richardson Estate v. Mew 93 O.R. (3d) 537, which was upheld by the Court of Appeal in Richardson Estate v. Mew 2009 ONCA 403: “I agree with the submission….that the designation of a beneficiary under a life insurance policy is akin to a testamentary disposition. Counsel….could point to no authority to the effect that an attorney can change the designation.” 

As a result, the Manitoba Court of Appeal’s decision to overturn the trial judge’s finding with respect to an attorney’s ability to make beneficiary designations is more in line with the current law of Ontario. However, given the rise in power of attorney related litigation and the possibility of legislative amendments in this area, it is likely that further judicial consideration of these issues will arise in the future.

*Laura West is an associate in the Trusts, Wealth Management, Estates and Charities Group at Fasken Martineau DuMoulin LLP.
 

Ameena Sultan

In this endorsement dated December 31, 2010, Justice Brown considered the issue of costs in a motion to set aside a settlement previously entered into by the parties.

Rita Pytka (Rita) passed away in January 2004. Her daughter, Marilyn Pytka (Marilyn), brought an application in March 2005 seeking extensive dependant relief from Rita’s estate, including the right to remain in her mother’s home, the main asset in the estate. Marilyn’s claim was based on the fact that she and her daughter had always lived with her mother and that she had cared for her mother before her death.

There were various offers made back and forth between Marilyn and the estate. Marilyn’s representation also changed on two separate occasions which further prolonged matters. Finally, a trial of an issue was ordered for June 18, 2007, peremptory to Marilyn. On June 15, 2007, the Friday before the trial was set to begin, the parties entered into a settlement agreement. That settlement was approved by Justice Morawetz on June 18, 2007.

The settlement required Marilyn to vacate the house no later than July 19, 2009. Marilyn failed to vacate the house by the date set out in the settlement. She subsequently brought a motion to set aside the settlement and judgment, arguing that she had only agreed to the settlement under duress and that it was unconscionable.

In hearing the motion, Justice Brown reviewed the facts leading to the settlement, including the ongoing negotiations between the parties from 2004 to 2007, the fact that Marilyn was continuously represented by able counsel, and frequently on a pro bono basis. Justice Brown found no duress and held that the fact that Marilyn was represented on a pro bono basis meant that she was free of any financial pressure, as she was not required to pay her counsel’s fees. Justice Brown reviewed the assertion that Marilyn had been compelled by her lawyers to agree to the settlement and found that, while Marilyn had some hesitations about settling the case, she ultimately had agreed to the terms. Justice Brown examined Marilyn’s conduct following the settlement and found that while she expressed some doubts about settlement, she also expressed gratitude to her lawyers.

As for Marilyn’s claim that the settlement was unconscionable, Justice Brown also rejected that position, finding that Marilyn did well under the settlement. The settlement provided her with 47.5% of her mother’s estate, as opposed to the 25% that the Will had provided her. Furthermore, Marilyn’s daughter received another $25,000.00 that she would not have received under the Will. Marilyn also had the right to remain in her mother’s home for an additional two years after the settlement.

Justice Brown found no basis on which to set aside the settlement and judgment and Marilyn’s motion failed.

As the parties were unable to agree on costs, Justice Brown ruled on the issue following his ruling on the motion. Saul Pytka, the responding party and estate trustee, sought substantial indemnity costs in the amount of $86,014.00 to be deducted from Marilyn’s share of the estate upon distribution. Marilyn argued that no costs should be awarded against her personally.

In considering whether costs should be ordered personally against Marilyn, Justice Brown first reviewed his earlier decision in Smith v. Rotstein,² as well as the Court of Appeal decision in McDougald Estate v. Gooderham³ on the issue of costs. Justice Brown found that neither of the exceptions to the “loser pays” axiom - that is, either the existence of reasonable grounds to question the execution of the Will or the testator’s capacity in making the Will, or where the difficulties in the Will that gave rise to the litigation were caused by the testator – applied. As a result, Justice Brown held that Marilyn was liable to pay costs to the estate trustee.

As for the scale of costs payable by Marilyn, Justice Brown further reviewed Smith v. Rotstein, as well as the principles elucidated by the Court of Appeal in Davies v. Clarington (Municipality).⁴

Justice Brown found that Marilyn’s actions in bringing and pursuing the motion fell within the ambit of “reprehensible” conduct that would lead to full indemnity costs. His Honour pointed to the fact that the motion was an attempt to subvert an agreement that Marilyn had knowingly and with the full assistance of able counsel, entered into. Specifically, Justice Brown characterized Marilyn’s behavior as “myopic, self-centred conduct activated by an obvious animus against the other beneficiaries” that “rose to the level of a malicious effort by Marilyn Pytka to set aside the Settlement and consent Judgment and to subject her siblings to the harassment of a completely meritless piece of litigation which had the effect of inflicting unnecessary costs on the Estate and delaying the final administration of the Estate.” Justice Brown concluded that such conduct warranted elevated costs and awarded substantial indemnity costs against Marilyn.

In reviewing the quantum of costs, Justice Brown reduced the cost amount claimed, finding that more work should have been delegated to junior counsel and clerks, so as to reduce costs. Justice Brown noted that of the 160.3 hours of legal work noted in the Bill of Costs, 143 hours were performed by senior counsel. On the basis of proportionality, Justice Brown re-apportioned the quantum of costs and calculated the costs on the basis of calculation of half of the legal work being performed by junior counsel, and fixed fees at $55,200.00. As for disbursements, Justice Brown reduced them from $7,359.52 to $4,500.00, finding the cost of photocopying elevated.

Justice Brown applied the “loser pays” principle for costs on a motion and finding the conduct of the moving party to be motivated by malice, awarded substantial indemnity costs against her. In the Court’s view, Marilyn’s motion was entirely self-serving and a naked attempt to obtain more from her mother’s estate and delay its distribution to the other beneficiaries. The conduct of the moving party led to serious cost consequences for her. From a practitioner’s perspective, it is worth noting that although substantial indemnity costs were awarded, counsel’s bill was reduced by Justice Brown for failing to delegate to junior counsel, on the basis of proportionality. Justice Brown also reduced the disbursements charged, finding them elevated.

This endorsement reflects the move toward the “loser pays” approach to costs in estate litigation and, in particular, the readiness of courts to penalize parties for conduct that delays and protracts matters unnecessarily.

__________

¹ 2010 ONSC 6406
² 2010 ONSC 2117
³ 2005, CarswellOnt 2407, 17 E.T.R. (3d) 36 (Ont. C.A.)
⁴ (2009), 100 O.R. (3d) (C.A.)
 

Dina Stigas*

In his decision in the Estate of John Kaptyn, [2011] O.J. No. 285, released on January 25, 2011, Justice Brown of the Ontario Superior Court of Justice denied the estate trustee litigants the bulk of their claims for costs.

Background

John Kaptyn died in May 2007. The value of his estate was approximately $75 million. His sons Simon and Henry were named estate trustees under each of his primary and secondary wills. Both of them were residuary beneficiaries with Henry given 80% of the share of the estates, and Simon 20%. Alex, Henry’s son, commenced a will challenge (the validity of the codicil to the secondary will), while Henry and Simon each brought a separate will interpretation application.

Henry and Simon did not get along. This was evident since they were both represented by separate counsel at the 2-week will challenge trial. Justice Lederer presided over the trial and found that the testator had testamentary capacity and confirmed his intentions (i.e. the testator wanted his real estate assets to be distributed to his grandchildren, and the proceeds from the liquidation of Marktur Limited, along with John Kaptyn’s stock portfolio, be used to pay taxes, inter-company loans and specific legacies). Although Alex was not successful, Justice Lederer concluded that the loser pays principle did not apply because it was reasonable for Alex to bring the challenge. In December 2008, he awarded costs against the estate in the amount of $1,982,313.17.

Henry and Simon proceeded to bring separate interpretation applications seeking the opinion, direction and advice of the court on the interpretation of the two multiple wills. The case at bar deals with the claim before Justice Brown for full indemnity costs of all of the parties for the 4-day argument of the said applications and the 14 associated pre-hearing motions in the amount of $4,435.050.18.

Legal Analysis

In his analysis, Justice Brown referred to MacDougald Estate v. Gooderham, wherein the Ontario Court of Appeal confirmed the two fundamental principles that govern the award of costs in estate litigation: 1) s. 131 of the Courts of Justice Act, Rule 57 of the Rules of Civil Procedure and the principle of proportionality in Rule 1.04(1.1); and 2) public policy, i.e. it is reasonable to look to the estate to bear the costs of the litigation if: a) reasonable grounds exist that put into question the execution of the will or the testator’s capacity; or b) the difficulties or ambiguities in the will were caused in whole or in part by the testator and gave rise to the litigation.

Justice Brown clarified as follows:

… responsibility of the costs of will interpretation and will validity litigation may well be placed on the shoulders of the individual litigants. Only where the parties can demonstrate that reasonable ground existed to question the exception of the will or the competency of the testator, or the presence of a reasonable dispute about the interpretation of a testamentary document will the courts consider whether it is appropriate to award costs of the litigation from the estate, rather than apply the “loser pays” principle. The costs inquiry therefore will be specific to the facts and issues raised in each particular piece of estate litigation…”

…

Trustees’ costs of applications seeking advice and direction on the construction of a testamentary instrument normally are regarded as properly incurred. As put by Professor Waters, “the court is only likely to take a different view in those rare circumstances where it considers the answers to the questions put to the court to be well-settled and obvious.”

Decision

Justice Brown held that the estate trustees acted unreasonably as fiduciaries by advancing positions in their interpretation applications that ignored many of Justice Lederer’s findings regarding the testator’s intention, which were binding on the parties. If they had followed them, many of the questions in the applications would not exist. However, he did conclude that it was reasonable for the trustees to seek the opinion, advice and direction of the court on three of the issues raised (specifically, 30% of the issues).

Upon examining the Offers to Settle that were made before the release of Justice Lederer’s reasons, Justice Brown observed that the parties were very close to settling and that the only disagreement between them related to the mechanics of dealing with Maktur Limited. However, instead of referring that discrete question to the court, the parties put forth a host of issues which they appeared to have agreed on behind the scenes. Yet, at the hearing, they each took polar opposite positions on these issues. Justice Brown held that this was not reasonable conduct by fiduciaries.

In arriving at his decision, His Honour took into account the factors enumerated in Rule 57, including the time spent, the result achieved, the complexity of the matter and the principle of proportionality. He concluded that neither party was overwhelmingly successful and that the matter was not complex.

Justice Brown held that the estate trustees were not entitled to their full indemnity costs from the Estate or any other party. Instead, he concluded that they were each entitled to $350,000.00, inclusive of fees, disbursements and GST/HST. The difference between the amounts claimed and awarded would have to be borne personally by Henry and Simon. In addition, two conditions were set out: 1) the costs awarded did not constitute a first charge against the assets of the primary and secondary estates – instead, they were to fall to the bottom of the pile of liabilities; and 2) the estates would not pay the cost awards to Henry and Simon until the gifts given by the testator to his grandchildren had taken effect.

The named beneficiaries and the Children’s Lawyer were entitled to an award since the positions taken by the estate trustees would have materially reduced the value of their gifts. Although they sought $1.135 million, Justice Brown awarded them $475,000.00 in total. He noted that they were previously awarded $659,499.80 in total by Justice Lederer from the estate for the 2-week trial.

The following is a chart summarizing the total costs claimed and awarded for the interpretation applications:

Finally, Justice Brown remarked that litigious families could not expect that unlimited judicial resources be available to them and stated that: “… the Toronto region lacks an adequate complement to meet the demands of present day litigation.”

This case demonstrates the willingness of courts to penalize parties who demonstrate unreasonable conduct, such as failing to carefully reflect on previous court decisions or failing to fulfill their fiduciary duties. In these circumstances, the courts may order that each party personally bear their own costs.

*Dina Stigas is a lawyer and freelance writer in Toronto and can be reached at (416) 488-1282 or at stigasd@gmail.com.
 

Jane E. Martin*

I recently had the privilege of speaking on the topic of costs decisions at the Ontario Bar Association’s Annual Institute, held on February 2nd at the Royal York Hotel. My co-panelists and I reviewed recent jurisprudence, largely stemming from the Toronto Estates List, on costs awards in estates litigation. In preparation for the panel, I became a bit despondent about the odds of getting paid on a few of my files, but I also became very aware of how few of my files end up in court. Aside from procedural appearances, with the odd interlocutory order, my clients’ disputes are resolved through negotiation and mediation. Most of what we do as lawyers – whether litigators or solicitors – is to negotiate: with clients over fees and instructions, with counsel over settlements, and with spouses and teenagers over housework. It is unavoidable.

I read current cases, attend workshops on oral advocacy skills, keep up to date on the latest court room fashions and trends in typesetting facta: but what of my negotiation skills? I have decided to make the balance of 2011 the year I take my negotiation skills up a notch, and have compiled a reading list to get the ball rolling. Here is an overview of a few of the must-have titles for the lawyer about town who, like me, is ready to fill this void in his or her training:
 

1. “Getting to Yes: Negotiating Agreement Without Giving In”, 2nd Edition (Robert Fisher, William Ury and Bruce Patton, Penguin 1991)

Truly the gold standard of negotiation, this accessible paperback is probably on most lawyers’ book shelves. Take it off the shelf and re-read it. The book is accessible, clearly written and, although it’s been around for years, is immensely applicable.

Based upon the work of the Harvard Negotiation Project, “Getting to Yes” introduced the process of principled negotiation. Contrasted with positional bargaining, which often involves holding on to a fixed idea or position of what you want, and arguing for it and it alone, positional bargaining is an interest-based negotiation technique and has become synonymous with the phrase “Win-Win” – originally taken from game theory.

The book identifies the problems inherent with positional bargaining, breaks down the methodology of principled or interest-based bargaining and explores common questions arising from the use of the technique. The exploration of the common questions (how to deal with power imbalances, how to deal with parties who will not play along and let go of their positions, and how to deal with parties who play dirty) is particularly useful and applicable to the lives of many estates practitioners. Convincing clients to engage in interest-based problem solving is one of the most difficult things we have to do, made all the more challenging by the reality that many of the positions held by our clients have been held for years.

It is impossible to master any technique – macramé or negotiation – in a vacuum. The next book, also from the Harvard Negotation Project, is quickly becoming as well thumbed as my copy of the Rules of Civil Procedure.

2. “Getting Ready to Negotiate: the Getting to Yes Workbook” (Roger Fisher and Danny Ertel, Penguin, 1995)

It is trite to say that a key to a successful day in court is preparation. The key to successful mediation, much of which is done informally and off the cuff, is also preparation. Taking account of the particular people with whom we are dealing and the unique facts of the situation at hand, even if we are ‘just talking’, serves us and our clients well. How can we fit systemic preparation into our busy lives without overworking files and running up costs? The authors posit that the result of a good negotiation involves seven elements: interests, options, alternatives, legitimacy, communication, relationship and commitment. Bearing these elements in mind may assist us in finding better outcomes for our clients. The book can be used to: prepare when the lead up time is short and the substance is of limited importance; (“Sudden Prep”), to jump right in to analyzing an upcoming negotiation (“Priority Preparation”); or full preparation, moving back and forth between the detailed worksheets throughout the book. This flexibility makes the workbook incredibly versatile.

I employed the “Sudden Prep” worksheet before picking up the phone to deal with counsel. I wanted to pin down the scope of discovery for a bitter family dispute. Counsel wanted to convince me that my client was wrong and would lose everything if he did not immediately capitulate. Filling in the worksheet, I identified my client’s interests (a concise timeframe for the production of financial records), options (agreeing to a longer timeframe), legitimacy (explained as external standards or precedents that might convince the other side that a proposed idea is fair), and the other side’s interests (a 25-year time frame). I identified the ‘walk away alternative’ (likely appearing in court to argue the terms for an order for directions) or the commitment (who will request records, who will pay for them). As it turned out, counsel would not focus on the discovery plan and continued to argue the merits of her case. No agreement was reached, however, the three minutes I spent identifying my goals for that particular phone call kept me focused, helped me to realize when it was time to end the phone call (before losing my temper) and reminded me I need to re-read chapter 7 of “Getting to Yes” (What If They Won’t Play?).

3. “Difficult Conversations: How to Discuss What Matters Most” (Douglas Stone, Bruce Patton, Sheila Heen, Penguin, 2000)

Mixed in with the legal problems our clients bring to us is often a freight train worth of emotional baggage. One of the biggest challenges in managing client expectations arises when it is time to take our clients from a position of entrenched anger or hurt, to a position of compromise. Convincing our clients that a compromise is fair and in their best interests can involve very heated exchanges. Maintaining hospitable relations with opposing counsel can be similarly charged. This book – yet another from the Harvard Negotiation Project team - provides a pragmatic and accessible road map to tacking conversations that cause anxiety and frustration and have the potential to disrupt client relationships professional relationships, or to disrupt settlements.

The premise of the book is that difficult conversations are often three conversations: the ‘what happened conversation’, the ‘feelings conversation’ and the ‘identity conversation’. The ‘what happened conversation’ is simple: who did what, who said what, who is right? The ‘feelings conversation’ is more ephemeral: are my feelings valid, what do I do about your hurt feelings? And the ‘identity conversation’ is understood as the conversation we have with ourselves and what the situation at hand means to us. The authors unpack these meta- conversations and urge the reader to shift from message delivery (‘you are wrong and my client is right’) to a ‘learning stance’. The learning stance is where we get behind the conversation in question, decipher the significance of what is being said, identify the ingrained assumptions that keep our clients stuck and intractable, manage the emotions of the players, and identify the way that self-image affects the conversation and impedes resolution. Less concrete than the previous two titles, the book is nevertheless a useful tool in the arsenal for managing client relationships and entering the negotiation fray.

4. “Bargaining for Advantage: Negotiation Strategies for Reasonable People” (Richard G. Shell, Penguin, 2006)

Lest you think that I only read books affiliated with the Harvard Negotiation Project, fear not. This book is a gem: Shell offers a practical advice, as well as a theoretical framework for effective negotiation. His premise is that we have distinct bargaining styles, identified as accommodating, avoiding, compromising, collaborating and competing, and that our strengths and weaknesses as negotiators are rooted in our personalities. In this second edition of the book, Shell includes a bargaining styles assessment tool to allow the reader to better understand their own style, and incorporates and understanding of how gender and culture impact negotiation variables.

Shell identifies the foundations of bargaining: bargaining style, goals and expectations, authoritative standards and norms, relationships, other parties’ interests and leverage. His insightful analysis provides an explanation of these foundations and how they interact to impact the outcome of negotiation.

Next, Shell explores the process of negotiation: preparation of strategy, exchanging information, opening and making concessions, closing and gaining commitments.

As a whole, the book is incredibly useful at locating the negotiator within the negotiation. I can picture some of the lawyers I have encountered among Shells ‘archetypes’ and have a better understanding of how the mesh of personalities of counsel and mediators has worked, both constructively and destructively, in past files.
 

*Jane E. Martin, Eisen Graham Barristers & Solicitors, jmartin@eisengrahamestatelaw.com
 

Megan Connolly

The reasons of Justice Brown in the May 2010 decision of Abrams v. Abrams, 2010 ONSC 2703, address the inherent power of judges to manage civil litigation and, in particular, whether judges posses the jurisdiction to manage litigation on the estates list in Toronto. 

Background

Abrams involved lengthy and acrimonious capacity litigation. Stephen Abrams, the applicant to the proceeding, commenced proceedings in January 2008, seeking a declaration that his mother (Ida) was incapable of managing her affairs and an order appointing him as her guardian. The respondents were Ida; her husband, Philip; and Stephen’s sisters, Judith and Elizabeth. As it proceeded, the scope of the litigation widened and included issues as to whether the powers of attorney Ida had granted were valid, and whether Philip was capable of managing Ida’s affairs.

In November 2009, Brown J., at the request of all the parties (including Stephen), agreed to case manage the proceeding. During subsequent case management conferences (as well as conference calls between Brown J. and the parties), Brown J. issued various directions regarding the conduct of the proceeding. None of the parties took issue with his jurisdiction to grant the directions or appealed any of his endorsements. 

Issue

At a case management conference in April 2010 (after two previous case management conferences and two conference calls had occurred), Stephen raised for the first time the issue of whether judges enjoyed the jurisdiction to manage proceedings on the estates list in Toronto.

Argument 

The main thrust of his argument was that case management in Toronto, pursuant to R. 77 of the Rules of Civil Procedure, did not apply to most matters on the estates list. As such, Stephen argued that judges had no statutory authority to impose case management on a proceeding on the estates list, nor did they have the inherent jurisdiction or power to manage matters on the list. 

Analysis

Brown J. acknowledged that there was a “gap” in the language of R. 77. Citing his previous decision in Hallman Estate v. Cameron,¹ he noted: “strictly speaking, the type of case management described in Rule 77 is not available for the majority of disputes heard on the Estates List.” 

However, again referring to his reasons in Hallman, Brown J. found that even if it were assumed that R. 77 case management was not available for estates list matters, judges sitting on the estates list were not prevented from “implementing more informal ways of managing cases that appear on the List.” 

The authority for the ability to case manage derives not from statute but rather from the court’s inherent jurisdiction to control its own processes. As Brown J. noted, these inherent powers have been acknowledged on numerous occasions to ensure that the court acts effectively and that the civil process proceeds in a way that is expedient and proportionate. 

In his decision, Justice Brown specifically addressed the relationship between the court’s inherent jurisdiction and the rules of practice. In doing so, he considered the effect of s. 146 of the Courts of Justice Act, which states that the “jurisdiction conferred on a court…shall, in the absence of express provision for procedures for its exercise in any Act, regulation, or rule, be exercised in any manner consistent with the due administration of justice.” 

Brown J. found that the effect of this provision is that the court’s inherent jurisdiction extends to matters which are regulated by statue, so long as that jurisdiction is exercised without contravening any of the statute's provisions. In this regard, he determined that the court’s inherent jurisdiction to manage proceedings co-existed with statute and the specific rules of practice, except if there was clear and unambiguous statutory language that the court could not manage its processes. 

The inherent powers are broad in nature. This is because the court’s obligations with regard to the administration of justice require it to have wide ranging powers to control its own processes. While Brown J. acknowledged that there are limits on the power imposed by both legislation and natural justice, he also pointed to the fact that the court has the obligation to ensure that matters proceed without unnecessary delay or inappropriate use of costs and resources. 

In the context of estates proceedings, His Honour noted that the Rules of Civil Procedure provided the court with the ability to manage litigation in ways that were not confined to R. 77 case management. These include the ability to issue directions for the conduct of a proceeding, provide case management directions in the context of summary judgment motions, and provide case management directions in the context of pre-trial hearings. Additionally, as he pointed out, it is not unusual for parties to litigation to proactively seek out the assistance of a judge (for example, by formally seeking the appointment a judge to hear all motions in a proceeding or by requesting that a judge lead a mediation). 

Decision 

Justice Brown rejected Stephen’s initial argument that as R. 77.02(2) does not apply to proceedings on the estates list, and that judges hearing matters on the estates list lacked the jurisdiction to manage cases. He gave the following reasons: 

1. R. 77 is one, but not the only, means by which a court can manage a proceeding. The facts that matters on the estates list are excluded from the application of R. 77 does not mean that the court loses its inherent power to manage litigation;
    
2. The reason estates lists matters were not included under R. 77 (and 78) was so the estates list could craft the management practices best suited to the specific needs of proceedings on the list, not because estates list matters were not supposed to be subject to case management; and
    
3. The application of R. 77 is limited to Toronto, Ottawa, and Essex Country. This does not mean that judges sitting elsewhere in the province lack the inherent jurisdiction to manage proceedings in their jurisdictions. 

Accordingly, Brown J. concluded that judges sitting on the estates list in Toronto possess the same inherent jurisdiction to manage litigation on their lists in the same manner as all other judges on the Superior Court of Justice. 

Appeal of the Decision

Stephen decided to bring a motion to appeal Justice Brown’s decision to the Divisional Court.² In seeking leave to appeal, he repeated his argument that, despite the fact he had participated in numerous case management conferences, Brown J. lacked jurisdiction to case manage the proceeding. 

More generally, Stephen again argued that judges had no inherent jurisdiction to case manage an estates matter. He pointed to all the rules and practice directions relating to case management and argued that none of them provided any inherent jurisdiction to case manage. He argued there was no “gap” in the law; the subject of case management was specifically addressed, the result being that the court’s inherent jurisdiction was not invoked. 

Accordingly, Stephen argued that Brown J. had been wrong at law in his decision and the administration of justice would dictate that leave to appeal be granted. 

Rule 62.04(2) of the Rules of Civil Procedure provides that leave to appeal to Divisional Court should not be granted unless: (a) there are conflicting decisions on the matter involved in the proposed appeal, and the judge hearing the motion for leave believes it is desirable for leave to be granted; and (b) the judge hearing the motion for leave believes there are good reasons to believe the correctness of the order at issue and the matters involved in the appeal are such that leave should be granted. 

Ferrier J. found that in his decision, Brown J. had provided extensive reasons setting out that the court’s inherent jurisdiction included the power to control its own process, and there was no reason to doubt the correctness of his decision. Moreover, Justice Ferrier held that even if the issue was open to debate, given the length of time the proceeding had taken, attempting to resolve the issue on appeal was not important to the administration of justice and it was not desirable for leave to be granted. Accordingly, Ferrier J. dismissed Stephen’s motion for leave to appeal.

____________

¹ 2009 CanLII 51192 (SCJ)
² 2010 ONSC 4714
 

Julia Evans

Wilson v. Lougheed (Lougheed) is a recent British Columbia case dealing with that province’s Wills Variation Act (the WVA),¹ wherein a disappointed adult child claims that her mother breached her “moral” duty and failed to make adequate testamentary provision for her. It is worth a read for at least two reasons. First, though it concerns the application of legislation that is unique to British Columbia, it may one day inform how an Ontario court considers “moral obligations” of a testator in the context of a dependant support claim. Second, pursuant to recent changes in the rules governing the mobility of lawyers across Canada,² Ontario estates counsel may well be dealing with this piece of British Columbia legislation and its underlying common law. 

The players in this case are Norma Lougheed (the deceased), her daughter (Kelly Wilson) and the deceased’s spouse, William Lougheed. Blair Wilson is Kelly’s spouse. The main action was brought by Kelly, pursuant to the WVA, against William in both his capacity as the executor of her mother’s estate and in his personal capacity. Kelly sought an order varying Norma’s last will in her favour. Although the case also deals with other actions among these parties, this comment focuses on Kelly’s WVA claim. 

Madame Justice Ballance begins by noting that, “Norma and Kelly enjoyed a loving relationship from the time of Kelly’s birth until Norma’s death…the bond was natural and deep.”³ Norma and Kelly’s biological father divorced when Kelly was about two years of age and Norma married William in February 1971. Kelly was almost 10 years of age at the time of the marriage and was later legally adopted by William. William and his former wife had four children together. They were not involved in this case. 

William was a wealthy man when he met Norma as a result of a successful construction business he operated with his brother. By the 1960s, William had accrued significant wealth and settled a family trust for the benefit of his children. In 1979, however, he transferred the value out of the trust into another company of which he and Norma were the shareholders. 

Ultimately, litigation ensued between William and his children in respect of the transfer of wealth out of the family trust and a settlement was reached whereby each of his children, including Kelly as his adopted daughter, recovered the money he had transferred out of the trust. Kelly received a $270,000.00 lump sum payment and then dividends from William’s company for 20 years, amounting to approximately $2 million by the time of her mother’s death. Kelly relied on her parents to manage her financial matters, including the proceeds of this settlement.

Norma and William raised Kelly together and she enjoyed a very comfortable lifestyle living in a trendy neighbourhood in West Vancouver, horseback riding, and attending boarding school and finishing school in Switzerland. Her mother bought her a horse and her father bought her a Porsche. When she attended college and university, her mother paid her expenses. 

Justice Ballance provides a very detailed story of the financial and emotional relationship between Kelly and Norma, and makes it clear that Norma was consistently very generous with, and emotionally close to, her daughter. She wrote, “…Kelly and Norma had an unspoken understanding that Norma would “be there” for Kelly in the sense that Kelly could rely on her for financial security” and that, “there can be no doubt that Kelly was a vital source of strength, care and emotional support to her mother, including throughout her illness”.⁴ The judgment tracks a history of various real estate acquisitions, loans and inter vivos gifts Kelly enjoyed because of her mother. It also makes clear that Kelly and Blair’s children, Cara and Bo, benefited substantially from their grandmother’s generosity, both with respect to their private schooling and their recreation at Whistler. 

Norma’s will, executed in 1989, which is the subject of Kelly’s claim, provided that Kelly receive cars, boats, jewellery and bank accounts, as well as four parcels of real estate which had adeemed at the time of Norma’s death. If William predeceased Norma, the Will provided that Kelly would also receive a property in Whistler. The residue of Norma’s estate was to be paid or transferred to William and in the event he predeceased her, it was to go to her grandchildren, including all of the children of William’s children, as well as to Kelly’s children in equal shares per capita. 

The total value of Norma’s assets, including those that passed outside her estate, was approximately $26 million. According to the terms of her Will, William would receive about 98.6% of her estate and Kelly would receive 1.4%. 

Although several issues relating to Kelly’s various interests in the estate were considered in this case, it is the Court’s analysis of Kelly’s WVA claim that is the focus of this comment. Kelly conceded that her mother did not owe her any legal duty to provide for her in her Will, and framed her claim on the basis of a moral obligation owed to her by Norma. 

This case follows Tataryn v. Tataryn Estate, (“Tataryn”),⁵ the governing case for the WVA in British Columbia, and provides a detailed analysis of its application to a claim that a testator has a moral obligation to provide adequately for her adult independent child. Justice Ballance asked, “whether in all the circumstances Norma’s testamentary dispositions to Kelly fall within the range of adequate provision made by a judicious parent assessed objectively by reference to contemporary community standards”.⁶ Her analysis as to the existence and strength of Norma’s moral duty to Kelly involved consideration of multiple factors, including whether Norma had made adequate testamentary provision for Kelly based on the circumstances that existed at Norma’s death, the quality of the relationship between Kelly and Norma, the size of Norma’s estate, the contribution Kelly made to enhance the quality of Norma’s life, Kelly’s legitimate expectations based on her lifetime with Norma, the intestate succession regime, and the significance of inter vivos gifts and benefits Kelly received from Norma. Justice Ballance noted that, “in addressing the considerations central to this case, it should be borne in mind that they tend to overlap and should not be approached as independent, air-tight categories”.⁷ 

In the end, the Court found that, “Although Norma’s moral obligation to Kelly does not overtake and is not on par with the intense duty that she owed her husband…Norma owed her daughter a strong moral duty…[that] was not negated by the gifts and financial advantages bestowed on Kelly by her mother over the years or by any other factor.” Kelly was awarded $5.5 million. The Court ordered a variation of Norma’s will that resulted in Kelly receiving approximately 20% of the assets her mother owned at the date of her death, as compared to approximately 1.4% of the estate that she would have received had the will not been varied.

_______________

¹ R.S.B.C. 1996, c. 490
² See: Federation of Law Societies of Canada website (www.flsc.ca)
³ At para 11
⁴ At paras 195 and 199
⁵ [1994] 2 S.C.R. 807 (S.C.C.)
⁶ At para 329
⁷ At para 344
 

Sharon Davis and Natalia Angelini

The following topics were discussed at our Brown Bag Lunch held on December 21, 2011:

Bill 113 

We opened our lunch with discussion about Bill 113, Protection of Vulnerable and Elderly People from Abuse Act (Powers of Attorney), 2010, which amends the Substitute Decisions Act regarding powers of attorney. The Bill has passed first reading. We discussed the Registry for Powers of Attorney and there was some comment on the current Will registry, which not many people are using. 

Drafting solicitor’s obligation to confirm information provided by the testator 

The group considered a drafting solicitor’s obligation to verify information provided by the testator regarding financial information. General discussion followed about obligations to clients with respect to warning of situations occurring after the Will is signed that could invalidate it. The group opined that this kind of information ought to be put in a reporting letter.

Capacity to marry versus capacity to make a Will

We then discussed that the capacity required to marry is different than the capacity required to make a Will. This could result in a situation where a person has capacity to enter a marriage, which marriage invalidates his or her Will, but that person has no capacity to make a new Will. It was suggested that re-examination of the Succession Law Reform Act (“SLRA”) to address such situations would be helpful. 

When a Will is not revoked by marriage

We next considered two situations in which a Will is not revoked by marriage. Section 16 of the SLRA states that a Will is revoked by the subsequent marriage of the testator except where: (a) there is a declaration in the Will that it is made in contemplation of the marriage; or (b) the spouse of the testator elects to take under the Will by an instrument in writing signed by the spouse and filed within one year after the testator’s death in the office of the Estate Registrar for Ontario. The group discussed the fact that if a Will is made in contemplation of marriage, this statement has to be made with respect to a particular marriage to a specific person. 

Insurance designation in a Will

Some in the group commented that where there is an insurance designation in a Will, they send an excerpt from the Will and the signing page to the insurance company. One should caution the client not to sign insurance documents without advice in such situations. We also discussed the difficulty with reference in an insurance declaration to a Will because a Will can change by codicil or by a new Will, and the declaration may be rendered invalid.

Kidd v. Canada Life, 2010 ONSC 1097 (CanLII)

We closed our discussion with comment on the Kidd case that states that beneficiaries of a living Pension Plan member’s potential estate may have rights that are more than mere expectancy if the testator has lost the mental competence to create a Will or to change an existing Will. There is developing case law to the same effect. 

The following topics were discussed at our Brown Bag Lunch held on January 18, 2011:

Obligation of lawyer where incapable person goes to another lawyer to change the Will

We started out with consideration of the obligation on a lawyer who would not draw a new Will for the client who wanted to change the residual beneficiary from a charity to a handyman because he was of the opinion the client lacked capacity to make a new Will. The lawyer was contacted by another lawyer whom he suspected would draw the new Will. The group thought there were privilege problems with telling the charity or the testator’s attorney for property about the situation and the best course of action was not to step in. 

U.S. tax question

One member of the group had a client who wanted to help a relative in the U.S. buy a house but wanted to take back security against the property for the loan. The group thought the security would constitute U.S. property and the thresholds should be checked to see what level attracted tax in accordance with the new U.S. estate tax. Holding U.S. property by a corporation might not work because U.S. tax advisors say avoidance legislation in the U.S. permits authorities to look through a transaction to avoid taxes.

Capital gains triggered by transfer of property into joint tenancy to avoid probate fees

An elderly female client wanted to transfer property into joint tenancy with her son to avoid probate fees. One participant commented that CRA has opined that when the intention is not to transfer beneficial interest and joint tenancy is for estate planning purposes, capital gains should not be triggered at the time of the transfer. All capital gains are triggered at death and are paid at that time. There was an article in the Lawyer’s Weekly in 2005 regarding joint tenancy, bare trustees and estate planning. In situations like this, you could have two Wills with the second one dealing with property you don’t want to probate. One participant cautioned that you should do the cost-benefit analysis before making arrangements that will cost more to implement than the probate fees would have been. 

McNamee v. McNamee, 2010 CarswellOnt 7317 (ON S.C.J.)

The group next discussed the McNamee case, which involved an estate freeze whereby the father did not tell his son he was gifting the corporate shares. The son found out after separation from his wife. The Court below found that had the son known about the gift at the time and that it was subject to exclusion from family property, he would not have accepted it because of the way he had conducted himself during the marriage (i.e. everything was shared equally with the wife). The trial judge found that it was a transfer but not a gift.

Authority of attorney for property 

The group considered when, in a settlement context, one should look beyond the power of attorney to ensure the attorney has the proper authority to settle with the estate on behalf of a beneficiary who is capable but not in the jurisdiction. The issue of identification and verification came up in this context. The group thought that as long as the lawyer is careful and follows a process and can describe that they have done to ensure the proper authority, that this should assist in protecting the lawyer from criticism. 

Payment of Canada Pension Plan deductions on executor’s fees 

We then discussed a situation where a lawyer and another person were both appointed estate trustees. They administered the estate, paid out all bequests and asked for a clearance certificate. They were denied the certificate by CRA until they paid CPP on their executors’ compensation.

The CRA payroll guide requires deduction of CPP on fees earned to administer an estate unless it is business income. While the lawyer did not have to pay because it was business income, the other executor did have to pay.

The following topics were discussed at our Brown Bag Lunch held on February 15, 2011:

McNamee v. McNamee 2010 CarswellOnt 7317 (ON S.C.J.)

We started off the lunch with an update on the McNamee case. The appeal was heard on February 1, 2011 and the judgment was reserved. We await the Court of Appeal decision.

U.S. resident attorney for property 

Next, we discussed the difficulties with a Canadian appointing a person who is resident in the U.S. as his or her attorney for property. The U.S. Securities and Exchange Commission prohibits American residents from dealing with persons who are unlicensed in the U.S.. Canadian financial institutions are sensitive to this requirement because financial advisors and brokers licensed in Canada are generally not licensed in the U.S.. Therefore, U.S. resident attorneys cannot deal with Canadian investments and must liquidate the assets. Such an attorney could act as an agent while the grantor is capable but cannot deal with Canadian assets if the grantor becomes incapable. Once the grantor becomes incapable, the requirement to liquidate is triggered because the residence of the “customer” changes to the U.S. It is therefore wise to review status to ensure attorneys have not changed residence and moved to the U.S. It was mentioned that jurisdiction of license may be an interprovincial issue as well.

The group noted that U.S. estate trustees would have the same difficulty if they remain trustees of testamentary trusts. Otherwise, the requirement to liquidate would be consistent with an executor’s duties to liquidate and distribute. Consideration was given to whether the U.S. estate trustee could nominate a Canadian to deal with investments. 

Attorney’s duties regarding investments

We touched on the duties of an attorney for property in light of the choices the grantor made when capable. The group agreed that the attorney had no obligation to manage investments in the same manner as the incapable person did when capable. The attorney has a duty to act prudently and in the incapable person’s best interests and would violate this duty if all investments were left as they were when the incapable chose them.

Will registry

The group was asked about the idea of a mandatory Will registry. It can be difficult to find Wills in some instances and it is also a storage issue for solicitors to keep Wills in their vaults. LSUC has thousands of Wills and it is an option to deposit them there. The group thought that a mandatory Will depository had difficulties, but that a Registry of Notice could be very useful whereby solicitors could file notices of Wills drafted by indicating a testator’s name and date of execution.

Failure of trustees to settle property in trust within time limit in Will

One participant asked what the group would suggest in a situation where the trustees had 36 months to settle property on either a spousal trust or a family trust and did not do so within that time period. Suggestions included consideration of whether a decision had been made as to which trust to put the property into, as it may not be a requirement to have actually transferred the property. There was also a discussion about the property possibly falling into residue to be distributed on intestacy, depending on the terms of the Will. 

Land Transfer Tax on bequests in specie

A couple of people in the group had situations involving Land Transfer Tax questions. In one situation, there were two beneficiaries of an estate containing real property, where one beneficiary wanted the property in specie and the other wanted to have his or her interest bought out. The question was whether tax was triggered in this situation. Comments included the idea that if one had to pay additional money to buy out the other’s interest, then tax might be payable on the amount paid in consideration for the transfer of the other beneficiary’s beneficial interest. 

In another situation, two beneficiaries were bequeathed particular real properties and there was no money in the estate to pay Land Transfer Tax. The tax debt was owed by the estate and had to be paid. The group thought that either both could get mortgages on the properties to pay the tax, or one property could be sold but there was an abatement issue such that the beneficiary who wished to keep the property would have to put the value of the tax back into the estate to equalize the value going to each beneficiary. 

Thanks to all who joined us at our Brown Bag Lunches. Our next Brown Bag Lunch will be held on March 22, 2011. 
 

Susan. J. Stamm

I was running out of topics for this column when a kind reader suggested I tackle the use of “due to”. The reader asked whether “due to” should only be used following the “to be” verb.

I looked into the issue on the internet. I thought I would have a two line answer to this question … I was wrong.

It appears that the common error is substituting “due to” when “because” should be used.

Grammar Girl, who has a lovely and often amusing website, has this to say at: http://grammar.quickanddirtytips.com/because-due-to-since-as.aspx and I had nothing to add, so excuse the republication:

Today we’re looking at various ways to say “because,” including “due to”, “since,” and “as.”

Wordy Ways to Say “Because”

First, let’s disparage all the wordy ways to express the meaning “because.” There are quite a few: “due to the fact that,” “owing to the fact that,” “on account of,” and “on the grounds that,” for example. If you use the word “because”, instead of those beasts, you can save up to four words.

You should also avoid “the reason is because.” For example, a redundant but romantic windbag might say, “The reason I love you is because of your kindness.” Why not be concise and romantic instead? Just say, “I love you because you’re kind.” Some might prefer “the reason is that,” but that is also wordy.

“Due to” or “Because”?

Now let’s discuss “due to” and “because.” As happens so often these days, there’s a traditional way and a rebel way. The traditional view is that you should use “due to” only as an adjective, usually following the verb “to be”. For example, if you say, “The cancellation was due to rain,” the words “due to” modify “cancellation.” That sentence is a bit formal, but it fits the traditionalist rule.

If you want to be more casual, you’ll say, “It was cancelled because of rain.” According to purists, you’re not allowed to say, “It was cancelled due to rain” because “due to” doesn’t have anything to modify. Purists argue that “due to” is an adjective; it shouldn’t be a compound preposition.

Very few of us are thinking about adjectives and compound prepositions when we speak, so it may be difficult to know when you’re using “due to” as an adjective. Strunk & White suggest using “due to” when you can replace it with “attributable to,” whereas in her book "Woe is I", Patricia O'Connor proposes substituting “caused by” or “resulting from.” She explains that if a sentence begins with “due to,” as in “Due to inclement weather, school was cancelled,” the sentence is “probably wrong.”

So if you find yourself agreeing with traditionalists—or if your writing will be judged by one—use “due to” if you can substitute “attributable to,” “caused by,” or “resulting from.” And don’t use it at the beginning of a sentence.

Now let’s be rebellious. Fowler's Modern English Usage points out that the objection to “due to” as a compound preposition is “an entirely 20c phenomenon, but it begins to look as if this use of ‘due to’ will form part of the natural language of the 21c”. The American Heritage Guide to Contemporary Usage and Style agrees, stating that: “The tide has turned toward accepting ‘due to’ as a full-fledged preposition.”

After reviewing the evidence, we say if you’re a purist, go ahead and avoid “due to” as a compound preposition, but understand that the majority may soon be against you. Whichever way you feel about “due to,” remember that our easy-to-use friend “because” is often standing at attention thinking, "You could use me. Pick me!"

Other Times to Use “Due to”

You don’t have to ban “due to” completely. This phrase can mean “payable to” or “supposed to”. For example, you could say, “I ask that you pay what is due to me.” Here, you are asking for money that someone owes you. You could also say, “The plane is due to arrive at noon,” meaning the plane should arrive at 12.

“Since” or “Because”?

Strict grammarians may not like it, but “since” and “because” can be synonyms. My dictionary confirms it. “Since I love you, let’s get married” means the same thing as “Because I love you, let’s get married.” (Yes, you can use “because” at the beginning of a sentence.)

Fussy grammarians might be a teensy bit right in some cases, though. The word “since” often refers to how much time has passed, as in “Since yesterday, all I’ve thought about is you.” Sometimes, a sentence with “since” can be interpreted in two ways, and that is when you should avoid using “since” to mean “because.” Take this ambiguous sentence:

“Since they spoke, she’s had second thoughts.” (“Since” could mean “from the time that” or “because.”)

A similar problem arises with the word “as”, which can also mean “because”, so keep those little grammarians perched on your shoulder to make sure you don’t write an ambiguous sentence. Granted, it is hard to know when you’re being unintentionally ambiguous. Spend some time away from your writing and then look at it again with fresh eyes, or you could always rope in a friend.

Summary

To sum up, English offers many ways to express “because.” Some are wordy and should be avoided due to the fact that they are wordy. (Did you get that? We just made a joke!) Others, like “since” and “as”, need to be used carefully, since you never know if you’ll confuse your readers.

Susan. J. Stamm, Counsel, Office of the Children’s Lawyer

If you would like us to address common errors, please send an email to me at susan.stamm@ontario.ca.
 

• Legal, non-legal and ethical issues confronting mediators and professional advisors
• Whether and how to involve the older person in the mediation process
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