Estate Litigation Blog
by Robin Spurr, Published: January 10, 2017
We are very pleased to announce that Schnurr Kirsh Oelbaum Tator LLP has once again been recognized as one of the Top 5 Wills, Trusts and Estates boutiques in Canada. We appreciate the ongoing support of our peers in the legal community across Canada, and look forward to continuing to serve our clients in an effective, pragmatic and personable manner.
by Robin Spurr, Published: December 05, 2016
Robin Spurr recently presented at the Ontario Bar Association’s program entitled “Managing Family Conflicts in Estate Administration”. The following is Robin’s commentary on the mutual will doctrine and how it was applied in two recent decisions; Rammage v. Roussel Estate and Lavoie v. Trudel.
The doctrine of mutual wills is not widely understood and is often conflated with the legal concept of “mirror wills”. Mirror wills are wills made by two individuals, usually spouses, which contain reciprocal terms. Most often, the wills say something to the effect of everything to my spouse, if he or she should predecease me, then to my children.
A mutual will agreement is when two individuals (again, usually spouses) make mirror wills, but do so pursuant to a binding agreement to dispose of their combined assets in an identical manner, regardless of who predeceases whom. Not only do the wills have to have reciprocal terms, but there must also be a binding legal contract between the testators that the survivor of them will not be permitted to revoke their will after the first testator has died. The legal repercussion of such an agreement is the imposition of a constructive trust on the survivor’s estate in favour of the ultimate beneficiaries, as agreed to in the mutual wills.
Mutual will agreements are often entered into in blended family situations where each spouse has children from a previous relationship and each one wants to ensure their children receive an equal benefit from the family property, regardless of which spouse dies first.
The case law is consistent that in order to make a finding of a mutual will agreement, it must a) satisfy the requirements of a binding legal contract; b) it must be proven by clear and satisfactory evidence; and c) it must include an agreement not to revoke the wills.
This last requirement is perhaps the most important, and the one that is not always understood, as we will see in the discussion of the two cases. It is not merely enough for individuals to agree to distribute their estates a certain way; they must also agree that such distribution is irrevocable by the survivor. Meaning, that after the first person dies, the survivor cannot change the beneficiaries.
Now let’s turn to how this doctrine was applied in two different superior court cases.
The facts of the cases are very similar. Both cases are situations of blended families wherein both parents had children from previous relationships. In these cases, the surviving spouse changed their will after the first spouse died, to benefit their biological children to the detriment of the step children. The step children then commenced actions to invalidate the last will of the surviving spouse on the basis that the previous wills constituted a mutual will agreement and were therefore incapable of revocation.
In both cases, a husband and wife made mirror wills which had reciprocal terms. There was no indication on the face of the wills that they were meant to be mutual or that there was an agreement that they were irrevocable. The courts therefore had to look to extrinsic evidence to determine whether a verbal agreement had been made between the spouses.
The court in each case took differing views on the evidence required to establish the existence of mutual wills, and each case had a different result to the inquiry into the existence of a mutual will agreement.
Lavoie v. Trudel
In the case of Lavoie and Trudel, the deceased and his wife, Lucien and Madeleine, made mirror wills in 1983. The wills left everything to each other, if alive, and in the alternative their entire estate would be left to Madeleine’s two children. After Madeleine died, Lucien revoked that will and made a new one in which he left his entire estate to his four biological children, completely cutting out Madeleine’s two children, with whom he actually had a very close relationship.
The plaintiffs (Madeleine’s two children) claimed that the 1983 wills were in fact mutual wills and therefore Lucien was prohibited from revoking his will and designating new beneficiaries of his estate. The defendants argued that the 1983 wills were only mirror wills and therefore capable of revocation.
In its endeavour to determine whether Lucien and Madeleine had entered into a mutual will agreement in 1983, the court considered the evidence required to establish such an agreement.
Justice Gareau found that Lucien and Madeleine made mirror wills in 1983, but that there was no documentary evidence that they were meant to constitute mutual wills. There was nothing on the face of wills, nor any collateral written agreement. Therefore, any agreement made between them would have had to have been verbal. In considering whether such an agreement existed, the court followed the decision of Justice Cullity in Edell v. Sitzer. That is, that only clear and satisfactory evidence of a binding legal contract can establish an agreement between the testators. A loose understanding or sense of moral obligation will not suffice.
The court heard evidence from the plaintiffs, as well as third parties who knew Lucien and Madeleine. The evidence was consistent that Lucien and Madeleine intended to gift their estates to the plaintiffs.
While there was evidence presented by the plaintiffs that their mother had always told them that she had made arrangements for their inheritance, and that those arrangements were permanent, the court found this evidence to be self-serving. And even if true, it appeared to be more of a directive to Lucien not to change his will rather than indicating a legally binding agreement between Lucien and Madeleine.
The court therefore found that, while the evidence suggested that Lucien and Madeleine intended for their estates to be distributed in a like manner in accordance with their 1983 wills, there was insufficient evidence of a binding legal contract not to revoke these 1983 wills.
The court therefore found that the 1983 wills were not mutual wills, and that Lucien was capable of revoking his will in favour a new one after Madeleine’s death.
Rammage v. Roussel Estate
The next case of Rammage v. Roussel Estate, has very similar facts. The deceased was Ruth, who survived her husband, Alf who had died several years before her. The plaintiffs were Alf’s children, and the defendants were Ruth’s children.
Ruth and Alf made mirror wills in 1998. The wills left everything to each other, and otherwise to the four children equally. Alf died in 2009, and in 2010 Ruth made a new will leaving her estate exclusively to her two biological children.
In making a determination on the existence of a mutual will, the court heard evidence from the parties regarding their parents’ intentions and reasons for making the estate plans that they did. The evidence of the plaintiffs was that they were a cohesive happy family, without distinctions based on parentage and that Ruth and Alf had discussed wanting to leave their estate equally to their four children.
On that basis, the court concluded that Ruth and Alf always intended to distribute their estates in accordance with the 1998 wills, and that there was a legally binding verbal contract between Alf and Ruth that neither of them could change their will without the consent of the other. The court found that the wills made sense in the context of the family constellation and that the evidence was consistent that both Ruth and Alf, for their separate reasons, wanted their estates to be distributed pursuant to the terms of the 1998 wills, regardless of who died first.
What was missing from the court’s decision in Rammage was evidence that Ruth and Alf, in addition to agreeing to the manner in which their wills would direct the distribution of their estates, had a legally binding contract not to revoke those wills. Without such a finding, wills cannot be found to be mutual wills.
Rather than making a finding that there was an actual agreement not to revoke, the court relied more on a finding that Ruth and Alf agreed to distribute their estates pursuant to a certain agreed upon scheme as set out in the 1998 wills. This is clear from the court’s unusual step of finding that the existence of the 1998 wills themselves were corroborative material evidence to the plaintiff’s claim of a legally binding agreement between Alf and Ruth, pursuant to section 13 of the Ontario Evidence Act.
There is no indication in the reasons delivered by the court that any evidence was considered with respect to the agreement not to revoke. Wills by their innate nature are revocable, subject to a legal obligation to the contrary. There was no indication on the face of the wills that they were irrevocable, and no finding by the court that there was evidence of a verbal contract not to revoke. The wills, at their best, are evidence of an agreement to distribute a certain way, but are not evidence of an agreement not to revoke them. The wills themselves cannot be corroborative material evidence of a mutual will agreement pursuant to Section 13 of the Evidence Act.
There was, therefore, insufficient evidence before the court for a finding that the wills of Ruth and Alf were mutual wills.
Despite the facts and the evidentiary record being quite similar in both of these cases, it is interesting that the results were so different. The main difference between these two cases was what the court considered to be the necessary content of the agreement between the two testators. In Lavoie, the court looked for evidence that the testators had made a legally binding contract that the survivor of them would not revoke their will. In Rammage, the court looked for evidence that the testators made a legally binding contract to distribute their estates in an identical manner. In the latter case, evidence that the wills were irrevocable was missing from the court’s decision. This is important because irrevocability is a crucial element of mutual wills. Furthermore, relying on the wills themselves as corroborative evidence sets a dangerous precedent. Any time spouses make mirror wills, which is often the case, any beneficiary who claims that mom and dad alluded to a loose understanding that their estate would be distributed a certain way, would have sufficient evidence to prove a mutual will.
As the judge in Lavoie quite aptly pointed out, there is good reason that the law insists on clear, cogent and compelling evidence to find that there is a legally binding contract of mutual wills. A finding that a will is a mutual will, and therefore incapable of revocation, restricts the testamentary freedom of the testator. Testamentary freedom is a deeply entrenched common law principle and should not be interfered with lightly.
by Rob Levesque, Published: September 11, 2016
It is well-settled that in estate litigation the unsuccessful party must generally pay some of the successful party’s costs – this is often referred to as the “loser pays principle”.
Importantly however, the loser pays principle is subject to certain exceptions that are unique to estate litigation. For instance, where there is a genuine dispute about the validity of a will, even an unsuccessful party may be awarded costs out of the estate. The rationale for this exception is that it is important for the courts to give effect to valid wills that reflect the intentions of competent testators.
That doesn’t mean that the parties to every will challenge should expect that they will receive their costs from the estate, as illustrated by the recent case of Sweetnam v. Lesage. In that case, the testator had left a will disinheriting his daughter, and leaving the entirety of his substantial estate to his fishing buddies. At the conclusion of a long trial, the court found that the deceased suffered from delusions that caused him to disinherit his daughter. As a result, the deceased’s will was declared invalid, and his entire estate passed to his daughter. The fishing buddies received nothing.
When it came to decide the issues of costs, the Court applied the loser pays principle in ordering the unsuccessful party to pay a portion of the daughter’s legal costs. Moreover, the Court refused to allow the unsuccessful party to recover any of her own costs from the estate. The Court acknowledged that an unsuccessful party may be awarded costs out of the estate in appropriate cases, but noted that in this case the unsuccessful party had rejected a number of reasonable settlement offers made by the daughter. Furthermore, since the daughter received the entire estate as a result of the will having been declared invalid, ordering the unsuccessful party’s costs out of the estate would be the same as ordering the daughter to pay the costs personally.
by Mitchell Rattner, Published: September 02, 2016
When meeting with a lawyer to discuss estate planning, most often the client will consider the dispositions of his/her real property, personal possessions, business interests, and other investments. Proper consideration also needs to be given to the extent and nature of the client's digital assets.
Almost everyone has a digital presence, but every individual’s digital presence may vary significantly in scope and in economic value. Most people today have an email address and account. A client should consider whether there are any emails he or she wishes to share with a beneficiary, whether an important financial document or an email of particular emotional significance, and direct the estate trustee to dispose of any such emails according to particular instructions.
Many individuals also have profiles on social media websites such as Facebook, LinkedIn, Pinterest, Instagram, etc. With the increase of posting pictures and videos online, and the decline of creating printed photo albums and tapes/DVDs of home videos, it may be that family photographs that would otherwise have been bequeathed as a physical asset, exist only in digital form, whether on an online social media server, or on the hard drive of a computer, tablet, mobile phone, or memory card. A testator should carefully consider which of these digital assets are to be preserved, and how to distribute these assets to the intended beneficiary/ies.
Another digital asset that should be considered is one’s digital music and movie collection, given the monetary value of a media collection purchased through a service such as iTunes. There is also value in domain names, as well as in digital currency such as Bitcoin. The above are only examples of a few types of digital assets, and this list is not meant to be exhaustive.
Estate planning is complicated, and it is always recommended that you consult with a lawyer to assist in your estate planning needs, but while going through the process of reflection on and evaluation of your estate, and deciding how it is to be distributed, it is important to turn your mind to your digital assets, so you can instruct your lawyer which of these assets are to be preserved, and how they are to be distributed.
by Mitchell Rattner, Published: June 06, 2016
Amendments to the Income Tax Act (R.S.C., 1985, c. 1 (5th Supp.)) (“ITA”), which came into effect on January 1, 2016, stipulate that the income and realized capital gains of testamentary trusts will now be taxed at the highest marginal rate (29%), but for two key exceptions.
Exception #1: Graduated Rate Estate
Graduated Rate Estate (“GRE”) is defined in section 248(1) of the ITA, and per the new tax regime, is an exception to the new mandate that trusts are taxed at 29%. In order to benefit from the graduated rate, the estate must be designated as a GRE in the estate’s first tax return (T3), beginning after taxation year 2015. The income tax return must include the individual’s social insurance number for the given taxation year and all prior taxation years that ended after 2015. The estate must be a testamentary trust that arose on and as a consequence of the individual’s death, and it must be the only estate designated as a GRE for a taxation year beginning after 2015. Finally, the eligibility of the estate to be designated as a GRE and taxed accordingly, expires 36 months after the death of the individual.
Exception #2: Qualified Disability Trust
Qualified Disability Trust (“QDT”) is defined in section 122(3) of the ITA, and is another exception to the 29% rate at which other trusts are now taxed. As with GREs, the QDT must be a testamentary trust such that it arose on and as consequence of the individual’s death, and further, the trust must be resident in Canada for the given taxation year. The trust requires that there must be a joint election in the T3 with one or more of the ‘electing beneficiaries,’ and the electing beneficiary’s/ies’ social insurance number/s must be recorded in the election. The electing beneficiary must be named personally as a beneficiary of the trust by the trust instrument. The electing beneficiary is only allowed to elect one trust in each given taxation year to be the Qualified Disability Trust. Most importantly, in order to qualify as an electing beneficiary, the individual must be eligible for the Disability Tax Credit (“DTC”).
The DTC is a non-refundable tax credit that is available for persons with disabilities or for those that support them. The qualifications for the Disability Tax Credit are as follows, per section 118.3(1)(a) and (b) of the ITA:
· The individual must have an impairment of mental of physical function/s that is prolonged (12 months or more);
· The individuals’ impairment of mental or physical function/s must be severe such that it restricts him or her at least 90% of the time; and
· The severe and prolonged impairment of mental or physical function/s must be certified by a physician using Form T2201, Disability Tax Credit Certificate.
A QDT need not be comprised entirely of electing beneficiaries; it only needs a minimum of one electing beneficiary to be qualified accordingly.
However, 122(2) of the ITA provides for a recovery tax where QDT status is lost for a particular year. This would occur when there is a capital distribution made to a non-electing beneficiary after a given year`s income had already been taxed at the graduated rate. The recovery tax claws back any tax savings, by, roughly, taxing the trust the amount that would have been payable in the previous year had it been subject to the highest marginal rate, excluding the amount of any capital that was subsequently distributed to any electing beneficiaries.
The recovery tax will also apply when the trust ceases, in a given year, to have among its beneficiaries any individuals who previously were electing beneficiaries, or when the trust ceases, in a given year, to be a resident of Canada. The former condition includes the death of the last living electing beneficiary.
The QDT, as an estate planning tool, has several limitations, not the least of which is that only one testamentary trust can be designated as a QDT. In the case where an individual is a named beneficiary of multiple trusts – for example, one testamentary trust established by a grandparent, and one established by a parent – the individual will have to elect as between the two trusts which should be designated as the QDT and subject to graduated rate taxation. Further, as a given trust is subject to recovery tax in the year it ceases to be designated as a QDT, it would be in the interest of the electing beneficiary not to change his or her election too frequently, unless the poor performance of a particular QDT necessitates the change to another. In order to maximize the benefit for a potential electing beneficiary, family and/or other grantors of trusts intended for eligible beneficiaries should consider cooperating in channeling assets into the possession of a single testator, to the extent possible, and where family relationships so allow. Further, the CRA stipulates that a valid testamentary trust cannot include property contributed to it other than by a deceased individual as a consequence of the individual’s death [s. 108(1) of the ITA], so caution should be afforded to ensure that the testamentary trust intended to be designated as the QDT is not tainted.
The implementation of these estate planning strategies is complicated, and it is recommended that you consult with a lawyer to assist with your estate planning needs.
by Robin Spurr, Published: April 25, 2016
In this particular case, a door-to-door sales company allegedly induced an elderly woman with Alzheimer’s disease to sign unfavourable contracts for heating/air-conditioning services locking her in for the next 15 years. According to her son, the woman was diagnosed with Alzheimer’s disease two years before the contract was signed, and was showing clear signs of forgetfulness and delusion. The son has taken legal action in Small Claims Court to have the contract declared void. The sales company has brought its own claim against the woman for breach of contract. These allegations have not been proven in court.
Whether the family in this situation succeeds in court or not, the fact is that this type of situation happens all the time. Whether it is a door-to-door salesperson, a “helpful” neighbour, or leeching family members, elderly and incapable people are frequently induced into signing contracts or giving gifts when they lack the capacity to understand the consequences of such actions.
In order to sign contracts or give gifts, the law states that the person must be able to appreciate the reasonably foreseeable consequences of a decision, or lack of decision, to enter into the contract. There is a presumption that everyone over the age of 18 has that capacity. However, that presumption does not apply where the other party to the contract has reasonable grounds to believe the person is incapable of giving or refusing consent. There are a number of factors which could lead to the person having “reasonable grounds” to believe that the person entering into the contract does not have capacity, for example if they show signs of confusion or disorientation, or if the other person is aware of a diagnosis/capacity issues, even if symptoms are not being exhibited at that moment.
In the case reported by CBC, after the son found out about the contract signed by his mom, he contacted the company directly and explained that his mother did not have the capacity to enter into a contract. In our experience, that kind of direct action can be effective and can result in the incapable person being released from the contract. In other situations however, such as the current case, it does not work. In that case, legal action can be taken. As in the CBC case, the son sought legal advice and commenced a claim against the sales company. Taking proactive steps and seeking the necessary advice can lead to getting the contract voided and restoring any money lost as a result.
by Rob Levesque, Published: March 08, 2016
Last year we blogged about Spence v. BMO Trust Company, a case that was causing a sitr in the estates and trusts bar.
In Spence, the testator made a will that explicity disinherited his daughter. The daugher sought to set aside the will on the grounds that the testator's motives for disinheriting her were fundamentally racist: that the testator, who was black, disinherited her because he was displeased that she had conceived a chlld with a white man. The judge who heard the daughter's application accepted that the testator had been motivated by his racist views, and held that this evidence was sufficent to render the will invalid, marking the first time in canadian legal history that a will has been set aside on the basis of discriminatory views held by a testator.
The application judge's decision caused such a commotion among estates lawyers because it contradicted the well established principle of testamentary freedom -- that a testator is free to dispose of his estate as he chooses, for such reasons as he sees fit. If the application judge was correct, then it would mean that testamentary freedom is limited by the Court's view of what is or is not against "public policy".
The Court of Appeal has now weighed in on the Spence case, and has overturned the application judge's decision. In doing so, the Court reaffirmed that in Ontario, testators have the freedom to dispose of their estate as they see fit. This freedom includes the right to disinherit a child for reasons that are explicitly discriminatroy. Thus, the Court held that, even if the testator's will had explilcity referred to a discriminatory reason for disinheriting his daughter, it would not have been open to the application judge to set it aside.
by Jovan Cvejic, Published: December 23, 2015
Schnurr Kirsh Oelbaum Tator LLP is proud to announce that once again our partners have been recognized by their peers in the 2016 Edition of The Best Lawyers in Canada in the practice area of Trusts and Estates.
by Robin Spurr, Published: November 06, 2015
Scalia v. Scalia is a Court of Appeal decision, which provides guidance for Power of Attorney disputes, specifically the scope of the attorney for property’s authority with respect to joint assets, as well as the cost consequences for an unreasonable attorney for property. This was an appeal involving a dispute over the financial affairs of Joe Scalia. The dispute was between Joe’s son from his first marriage, John Scalia, and Joe’s widow and second wife, Pina Scalia.
Joe developed Alzheimer’s disease and was moved into a long-term care home in 2012 when John took over many of Joe’s affairs. John became concerned that Pina was diverting funds that belonged to Joe. John sought financial information from Pina about the whereabouts of certain monies, and information about Pina’s personal finances. When that information was not forthcoming, John emptied the joint account held by Pina and Joe and moved the funds into a trust in Joe’s name alone to which Pina did not have access. These funds were subsequently frozen by the bank as a result of the dispute. John also stopped depositing Joe’s pension income into the joint account so that despite the fact that they had always shared income and expenses equally, by the end of 2012 Pina was receiving little to no income from Joe.
In 2013, John, acting as Joe’s litigation guardian, commenced an application seeking, among other things, that Pina deliver information about her personal finances; and that she account for the rental proceeds and other funds from her and Joe’s joint account. Pina then filed her own application and sought among other things, the removal of John as Joe’s Power of Attorney; an order that the frozen funds be released back into her and Joe’s account, and an order for support from Joe pursuant to the Family Law Act.
The application judge dismissed Joe’s application and granted Pina’s application, in part. In dealing with costs, the application judge found that John had acted in bad faith and his conduct had led to these adversarial proceedings that split the family. The judge relied on the Substitute Decisions Act to find that John had a fiduciary duty to act with integrity and in good faith. By unilaterally withdrawing funds from the joint account and holding back support from Pina, the application judge found John had not acted in Joe’s best interests. For these reasons, the costs of Pina’s application were ordered to be paid on a substantial indemnity basis by John personally.
John appealed the application judge’s decision and was successful on two of the three substantive grounds of appeal. However, the Court of Appeal declined to overturn the cost award made against him personally, even though the panel found that John’s conduct was not considered bad faith.
The court set out the test for bad faith in the family law context, which is that the behaviour must be carried out with the intent to inflict financial or emotional harm, or to deceive the parties or the court. However, the court found that many of the facts the application judge relied on to find bad faith on John’s part could not stand, and as such John’s conduct on the record did not meet the threshold for bad faith.
Regardless, however, John, as a fiduciary, owed a duty to Joe to act in his best interests. The court found that the litigation was of no benefit to Joe. Rather, the litigation was the result of John’s ill-advised handling of Joe’s affairs. The litigation was disproportionately costly and was not a reasonable reaction to John’s concern about his father’s finances. The court of appeal went further to admonish Joe for his actions. As the application judge had noted, instead of assisting the family to resolve the issues at stake, John’s conduct turned the matter into an unnecessarily brittle and adversarial proceeding that split the family.
This Court of Appeal decision provides us with several insights regarding what Attorneys for Property can do with joint assets, specifically real property and bank accounts. Most notably though, the court made it clear that in litigation the Attorney will be held to standard of conduct that must be in line with his role as fiduciary. Despite the Attorney being successful on two of the three substantive grounds of the appeal and indeed clawed money back into the estate, the court still declined to overturn the cost award. This is a lesson to Attorneys for Property faced with contentious family disputes – they must remember that their fiduciary obligation in litigation is not solely a question of financial benefit for the incapable person. Rather, the Attorney must consider what is in the person’s best interests overall, which may include mending family ties and settling at an early stage. Otherwise, unreasonable conduct could result in the Attorneys finding themselves personally liable for the legal costs.
by Robin Spurr, Published: September 19, 2015
In an effort to streamline the litigation process and free up much needed court resources, the Rules of Civil Procedure were amended as of January 1, 2015 to provide that the Registrar shall dismiss an action if it has not been set down for trial within 5 years.
This dismissal for delay provision is appealing in that it forces litigants to bring matters before the court in a timely manner and not to delay the proceedings unnecessarily. However, the recent case of Michie v. Turalinski demonstrates how this rule is, unfortunately, not universally applicable.
In this case before Hon. Justice Mesbur in Toronto, the daughter of the deceased brought an application to compel the appointed estate trustee without a will, the applicant’s brother, to produce a statement of assets of the estate. Despite the application having been brought in 2011 and the existence of an Order Giving Directions setting out a timetable for the application, by August 2015, no cross-examinations had taken place, let alone a hearing date set.
The respondent brought a motion to dismiss the application for delay based on the new Rules. Unfortunately, the Court found against the respondent and did not order the application be dismissed.
The Court gave two reasons. The first was that the relevant rule, 24.01 of the Rules of Civil Procedure, sets out the circumstances in which the Court may dismiss an action for delay applied only to actions and not to applications. Additionally, the Court found that even if Rule 24.01 did apply, the new rule 48.14 which provides that the Registrar shall dismiss an action if it has not been set down for trial within 5 years, was not met in this case as it had only been 4 years.
This case leaves many questions unanswered. Particularly, how does one effect the dismissal of an application in the event one or both parties refuse to cooperate to move the application along. Litigation is a time-consuming process as it is and there should be limits imposed on the time a party can take to bring an application before the Court for a hearing in the same manner an action can be dismissed for delay.
by Jovan Cvejic, Published: March 06, 2015
We congratulate our friend and former colleague Susan Woodley on her judicial appointment to the Ontario Superior Court of Justice.
We are pleased to announce that Schnurr Kirsh Oelbaum Tator LLP will take over carriage of Susan’s Estate, Trust and Guardianship practice. We will have an additional office at 55 Temperance Street, Bowmanville, Ontario. We look forward to serving the community of Bowmanville and the County of Durham.
by Robin Spurr, Published: February 27, 2015
The recent decision in Spence v. BMO Trust Company raises very interesting questions about testamentary freedom and the power of the courts to remedy wills which contravene public policy.
In this case, the testator, Rector Emmanuel Spence, executed a will which disinherits his daughter Verolin in favour of his estranged daughter, Donna and her two kids. Verolin challenged the will on the grounds that it was void for public policy reasons and argued that it should be set aside. Verolin asserted that the only reason she was written out of the will was because her father was against her having a child with a man of a different race.
When Donna and Verolin were children, their parents separated and each of the girls went to live with one of the parents. Verolin lived with her father, and Donna lived with her mother. Neither the deceased nor Verolin had any contact with Donna from that time on. Verolin continued to have a very close relationship with her father for years. However, he cut off all contact with her the moment he found out that she was pregnant with a child whose father was Caucasian.
Uncontested affidavit evidence showed that the only reason the deceased stopped speaking to Verolin and disinherited her from his will was because of the race of her child. Verolin argued that this underlying reason for her being written out of the will was racist and therefore against public policy.
If you ask 100 people on the street whether you can do what you want in your will, 99 of them would say “yes”. In reality, wills are subject to court intervention for a variety of reasons, including not providing for dependants or because the conditions of the will are void for vagueness. Occasionally clauses in wills are found to be void because they are against public policy, for example leaving a gift to a grandson but only if he remains Catholic and does not marry a woman who has been divorced. It’s easy to see how society would not want to enforce that kind of clause – it is blatant discrimination based on religion and gender.
In the Spence case, Verolin argued that the racist underpinnings of her father’s will result in the will being offensive to society’s sensibilities. The court agreed and set aside the entire will aside.
It is easy to see how setting aside the will is an attractive position to take. There is no question that Mr. Spence was a racist and repugnant man, and his treatment of his daughter is wildly offensive to our moral sensibilities. And it is in the public’s interest to squash out such racist views in our society and to not compel an estate trustee to give effect to the distasteful whims of a racist man.
However, this decision departs from the jurisprudence on public policy cases.
There are two very striking things about this decision:
1) The court goes behind what is written in the will to look at the intention of the testator; and
2) The entire will is found to be void, rather than only striking out a clause of the will.
In past jurisprudence, the courts struck out specific conditions or phrases of wills or trust documents because the condition placed on a gift was offensive. The courts found that they could not compel an estate trustee to do something was against the public interest. The subject of these cases has always been the wording on the face of the will or trust document.
The court in Spence stretched the analysis of previous case law to look at the intention of the testator and the will as a whole beyond what was apparent on the face of the will. There does not appear to be anything in the case law cited by the court that would allow for such an undertaking.
There are compelling reasons for why such an undertaking should not be done by the courts. It is a significant departure from established principles of testamentary freedom and would open up the floodgates of litigation.
If public policy considerations are imposed on private familial testamentary gifts that are set out without conditions, there may be no limit on the discrimination cases that will appear before the courts. Parents will be left with no alternative other than to divide their estate equally between their children.
For example, what if a parent did not leave a gift, or a sufficient enough gift, for an independent adult child because the child struggled with a drug addiction and was liable to squander his inheritance? Addiction is a mental illness and therefore the will may be found to be discriminatory on the basis on disability.
Or, in many cultures it is customary to give the eldest son a larger inheritance – this could be found to be discrimination based on sex.
Undertaking to make sure the public’s interest and society’s morals are upheld is always a valiant endeavour, but we must not lose sight of the testamentary freedom afforded to individuals to deal with their affairs as they see fit, even if we may disagree. BMO Trust Company is appealing the decision so it will be interesting to see how the Court of Appeal deals with these competing principles.
by Jovan Cvejic, Published: January 30, 2015
We are very excited to announce that Schnurr Kirsh Oelbaum Tator LLP has been named one of the Top 5 Boutique Wills, Trusts and Estates firms in Canada by Canadian Lawyer magazine! The list is compiled and voted on by lawyers across Canada. We are grateful to our peers for the recognition and honoured to have earned their confidence.
by Rob Levesque, Published: November 15, 2014
It can be comforting to think of the law as an objective system that produces consistent, predictable results. However, judges aren't computers, and different judges can interpret the same facts and the same law in different ways, producing totally different outcomes.
It can be particularly difficult to predict the outcome of a dependant support application brought under Part V of the Succession Law Reform Act. Determining what constitutes "adequate support" of a dependant spouse or child is not an exact science, and raises questions that don't have easy answers. How do you place a value on a spouse's relationship with the deceased? How can you treat the deceased's dependants and other family members equitably, having regard to their legal and moral claims against the estate? While judges have developed various rules and principles that apply to dependant support claims, the fact remains that different judges will reach different conclusions based on the same facts and law.
The recent case of Quinn v. Carrigan 2014 ONSC 5682 is a perfect example of this phenomenon.
The late Mr. Carrigan left assets with a total value of approximately $2.4 million to his wife and two children, and nothing to his common law spouse of eight years, Ms. Quinn. Not surprisingly, Ms. Quinn retained a lawyer and made a claim against Mr. Carrigan's estate for dependant support. Ms. Quinn's claim went to trial, and the Court concluded that she was entitled to receive the deceased's pension death benefit, worth about $1.4 million.
The deceased's wife appealed the Court's judgment to the Court of Appeal. The Court of Appeal found that the trial judge had erred in concluding that Ms. Quinn was entitled to the death benefit, and accordingly ordered a second trial of her dependant support claim. At the end of the second trial, the Court concluded that Ms. Quinn was entitled to a lump sum payment of $350,000.00.
Ms. Quinn appealed the second judgment to the Divisional Court. The Divisional Court held that the judge in the second trial had erred in calculating Ms. Quinn's spousal support payment. However, rather than ordering a third trial, the Divisional Court conducted its own analysis of the dependant support claim, ultimately concluding that Ms. Quinn was entitled to a lump sum payment of $750,000.00.
In the end, Ms. Quinn had three separate hearings to determine her entitlement to a share of the deceased’s estate, and got three very different results. The lesson for potential litigants is clear. As expressed by Justice Corbett, who delivered the reasons of the Divisional Court in this case: "no litigation outcome is inevitable".
by Robin Spurr, Published: November 07, 2014
There has been a lot of buzz in the legal community recently about the case of Leibel v. Leibel (reported as Leibel v. Lewis), which was decided by the Honourable Justice Greer in August of this year. The reason for all the legal chatter is that this case clarified whether there is a limitation period on will challenges. It turns out, according to Justice Greer, that the regular two-year limitation period set out in the Limitations Act, 2002 applies equally to will challenges as it does to any other civil litigation.
This case concerned a will challenge commenced by the son, Blake, more than two years after his mother, Eleanor, had died. Blake was an adult and lived in California. Eleanor had another a son, Cody, who was also an adult and living in California. Eleanor was married to Lorne, but they had been separated for 30 years at the time Eleanor died. When they separated, Cody went to live with Lorne and Blake lived with Eleanor.
In previous wills, Eleanor had left her considerable estate solely to Blake. In her last will, and the one immediately preceding it, Eleanor gave the majority of her estate to Blake, but included a sizeable inheritance for Cody. Blake contested Eleanor’s last will on the grounds that his mother was unduly influenced and/or lacked capacity to make the will. Eleanor died in June 2011, and Blake commenced his application in September 2013. Justice Greer ultimately held that Blake’s claim was out of time as it was more than two years after Eleanor’s death.
There has been a lot written about this decision and how it reconciles with past decisions and what this means going forward. These are all interesting and relevant discussions to have, but I think it is also important to look not just at the law of this case but also the facts and how they contributed to the outcome of the case.
At the recent 17th Annual Estates and Trusts Summit, Felice Kirsh spoke to estates practitioners about the Leibel case and highlighted why this particular fact pattern made it the prime case for this ruling. First and foremost, Blake did not attend his mother’s funeral. This is very poor form, especially when you then go before the court claiming that you did not get enough money from your mother’s estate. As Felice said, this is not the way to get the court’s sympathy. Secondly, Blake was active in helping the estate trustees liquidize estate assets in order to receive cash from the estate. He actively participated in the selling of Eleanor’s Toronto home and a condo in Florida, both of which were gifted to him in the will, and he accepted the several millions of dollars that the properties sold for. While there is the legal issue of estoppel that comes into play as result of these actions, it is also just common sense that you should not take everything you can from the estate and then turn around and ask the court to set aside the will because you would now like some more.
These facts were obviously not favourable for Blake and likely worked against him in this case. The moral of the story is that if you are going to challenge a will, make sure you do it within two years of the death of the testator, and always go to the funeral.
by Rob Levesque, Published: October 15, 2014
In the administration of any estate, one of the estate trustee's first jobs is to identify potential creditors who might advance claims against the estate. The general wisdom has always been that an estate trustee should make sure that he or she has held back sufficent funds from the estate to satisfy the claims of all potential creditors before making distributions to the beneficiaries, heirs and dependants of the estate. It may therefore come as a surprise to many lawyers that in a recent case, Grieco v. Grieco Estate, 2013 ONSC 2465, the Court held that dependant support claims have priority over the claims of potential creditors with pending, but unproven claims.
In the Grieco case, the deceased’s ex-wife had an outstanding equalization claim against the deceased’s estate which pre-dated his death. The deceased’s common law spouse and two of the deceased’s adult children bought dependant support claims against the estate. The parties settled their claims at mediation, and obtained a consent judgment providing for the distribution of lump sum equalization and dependant support payments.
The estate trustee was wary of making the payments pursuant to the consent judgment because a number of potential creditors had come forward with claims against the estate. While the claims of the creditors had yet to be proven, if the estate trustee proceeded with the distribution of the dependant support and equalization payments pursuant to the consent judgment, there would be no money left in the estate to satisfy a possible judgment against the estate by the creditors. Accordingly, the estate trustee sought the direction of the Court.
The Court held that the lump sum equalization payment to the ex-wife and the lump sum dependant support payment to the common law spouse took priority over the claims of the potential creditors. In doing so, the Court referred to section 4(1) of the Creditor’s Relief Act, 1990 and Section 2(3) of its successor legislation the the Creditor’s Relief Act, 2010. The Court held that both the 1990 Act and the current Act, “maintain the priority of support claims over virtually all other claims”, and that this priority extended to dependant support orders made pursuant to the Succession Law Reform Act. Accordingly the common law spouse was entitled to recieve her lump sum payment from the estate in priority to the potential creditors.
Furthermore, given that orders made for the support of dependants have priority over debts owing to creditors under section 2(3) of the Creditors' Relief Act; and given that a spouses’ equalization entitlement has priority over orders for the support of dependants other than children of the deceased under subsection 6(12) of the Family Law Act; the Court concluded that the ex-wife’s equalization payment had priority over the claims of the potential creditors. Alternatively, the Court found that the wife was also a dependant of the estate and was entitled to receive her lump sum payment in priority to the creditors on that basis as well.
The Grieco case raises difficult issues for trustees facing competing claims by surviving spouses, dependants of the estate, and other potential creditors of the estate. While the case appears to stand for the proposition that the claims of dependants have priority over the claims of other potential creditors of the estate pursuant to the Creditor’s Relief Act, lawyers who are advising estate trustees should treat the decision with caution. There are currently no other reported cases dealing with the interaction between the Creditors' Relief Act and equalization and support claims in the estates context.
by Robin Spurr, Published: October 03, 2014
Automatic vesting is often an illusory concept and almost always comes as a surprise to the lay estate trustee. The rule as set out in the Estates Administration Act (EAA) is that real property vests in the beneficiaries three years after the death of the testator. Vesting means taking ownership of something. Sometimes a gift is vested only in interest before someone actually takes possession of it. When an interest vests, that is the moment someone has a legal claim of ownership. Once a property vests in the beneficiary, the beneficiary becomes the owner of the property even if it is still technically registered in the name of the deceased person or the estate trustee. After the property becomes vested in the beneficiary, the estate trustee is limited in what he or she can do with the property.
In the recent Ontario Court of Appeal decision of Di Michele v. Di Michele 2014 ONCA 261, the court clarified the circumstances in which automatic vesting will occur. This was a case of an estate trustee (who was also a beneficiary) who mortgaged the estate property to secure his personal debts more than three years after the death of the testator. The estate trustee’s creditor applied to enforce the mortgage and sell the estate property. The other estate beneficiaries tried to block the sale of the estate’s real property by the creditor in the enforcement proceedings on the grounds that the estate trustee had no right to give the mortgage to his creditor in the first place, arguing that the property had vested in them.
At trial, the Court agreed with the beneficiaries that the property had vested in the them pursuant to the EAA and therefore the mortgage was only enforceable against the estate trustee’s 1/3 interest in the property, and not the other 2/3 which had vested in the other two beneficiaries. However, on appeal, the Court overturned this finding. The Court of Appeal held that the mortgage applied to the entire property.
The Court of Appeal concluded that when a will includes a clause allowing the estate trustee to postpone the sale of property or to deal with property as the estate trustee sees fit, as many standard wills do (and this will in fact did), the automatic vesting provisions of the EAA do not apply. If they did, it would limit the power given to the estate trustee in the will to use his discretion to deal with the property, and court is not inclined to do that. The rationale being that section 10 of the EAA states that nothing in the legislation should interfere with the powers given to the estate trustee in the will.
Secondly, the Court decided that only a beneficiary who is specifically gifted property by a testator in his will benefits from automatic vesting. The Court of Appeal held that a residuary interest (even in an estate that has real property in the residue) is not enough of an interest in the property for automatic vesting to apply. The beneficiary can only claim a property interest if the will gives the particular property to the beneficiary as a specific gift.
What we can take away from this case is that automatic vesting is not as widely applicable as we once thought. A will can be drafted to prevent the automatic vesting from occurring and prevent the unsuspecting estate trustee from being caught by the rule during a difficult or lengthy administration.
by Robin Spurr, Published: October 03, 2014
Elizabeth Bozek will be the Chair of the Section Program presented by the Ontario Bar Association, Estates & Trusts Section, on November 25, 2014 on "Complex Passing of Accounts". The panel will review how estate litigators should approach complicated passings of accounts by estate trustees and how to avoid the pitfalls that come with complex estate administrations.
by Robin Spurr, Published: September 25, 2014
On September 24, 2014, Jordan Oelbaum spoke at "Managing, Mediating and Litigating Estates Disputes", a conference held at Osgoode Hall Law School. In his paper, "Discovery and Settlement in the Estate Case: Preparing for Settlement", Jordan explores the discovery and settlement processes in light of the Court's recent comments on the need for proportionality in estates cases.
by Rob Levesque, Published: September 18, 2014
On September 16, 2014, Felice Kirsh gave a talk to a group of financial advisors at CIBC Wood Gundy titled "Keeping the Financial Advisor Out of Litigation". Topics covered included taking instructions from clients; the importance of keeping a well-documented file; and ensuring that advice given is limited to the advisor's field of expertise.
by Rob Levesque, Published: September 17, 2014
by Rob Levesque, Published: September 17, 2014
On Septermber 24, 2014, Felice Kirsh will chair a conference at Osgoode Hall Law School, titled "Managing, Mediating and Litigating Estates Disputes". The conference will cover all stages of an estate litigation matter, from the initial client interview, to discovery, to mediation to trial.
by Rob Levesque, Published: September 08, 2014
by Rob Levesque, Published: May 30, 2014
Sandra Schnurr’s letter to the editor appeared in a recent edition of the Toronto Star, commenting on the Ontario Superior Court of Justice decision of Ciccone v. Côté 94 E.T.R. (3d) 106. The case involves a bitter custody battle between the parents of a 42-year-old developmentally disabled woman who has the mentality of a 6-year-old. Despite their animosity, the parents agree on one point: the best place for their daughter is a group home.
However, the judge notes that, “Isabella has been on a wait list for group home placement dating back to 2008. Inadequate funding by the government of Ontario has created insufficient capacity of this form of community support across the province resulting in wait times of between 5 and 15 years. The evidence is that there are currently 19,000 people waiting for such group home accommodation across Ontario.”
In view of the upcoming provincial election, Sandra’s letter challenges the party leaders to address the desperate shortage of group home space that is so urgently needed by our most vulnerable citizens.
by Rob Levesque, Published: May 15, 2014
Sandra Schnurr recently completed another rewarding year of supervising law students in the Wills Project of Pro Bono Students Canada. These future lawyers volunteer their time to provide wills and powers of attorney to qualifying members of the public.
by Rob Levesque, Published: April 16, 2014
Brian Schnurr, Felice Kirsh, Sandra Schnurr and Jordan Oelbaum has each been recognized as a "Leading Practitioner" in the field of Estate Litigation in the 2014 edition of the Canadian Legal Lexpert Directory.
by Rob Levesque, Published: April 14, 2014
Felice Kirsh was recently quoted in an article on AdvocateDaily.com. In "Choose a power of attorney you trust", Ms Kirsh explains that the first step in avoiding power of attorney fraud lies in who you appoint to take on the role. Continue reading here.
by Rob Levesque, Published: February 26, 2014
On February 25, 2014, Elizabeth Bozek chaired the a seminar entitled "Backgrounder on the Consent and Capacity Board", which was part of the Ontario Bar Association's Trusts and Estates Passport Series. Topics covered included:the role of the Consent and Capacity Board ("CCB"); the type of cases that appear before the CCB; tips on advocacy before the CCB, including how files are referred; and a review of recent decisions from the CCB, including the highly anticipated Rassouli decision from the Supreme Court of Canada.
by Rob Levesque, Published: February 04, 2014
Felice Kirsh was recently quoted in an article on AdvocateDaily.com. In "Consider whether a passing of accounts is worth it", Ms Kirsh emphasizes that beneficiaries of an estate should take time to consider, from a monetary point of view, what’s at stake before insisting on a passing of accounts. Continue reading here.
by Rob Levesque, Published: February 01, 2014
Brian A. Schnurr, Felice C. Kirsh and Jordan D. Oelbaum were recently recognized by their peers as three of the Best Lawyers in Canada for the year 2014 in the "Best Lawyers in Canada" survey for the specialty area of Trusts and Estates.
by Rob Levesque, Published: December 11, 2013
Felice Kirsh was recently quoted in an article on AdvocateDaily.com. In "When estate litigation gets tense, lawyers must stay cool", Ms. Kirsh explains that when an estate litigation scenario becomes heated or tense, it is incumbent upon the lawyer to remain calm and level-headed.
“The vast majority of cases are highly emotional because you’re dealing with family members. Family relationships are complex – they’ve lasted for many, many years,” says Kirsh. “There might be built-up tensions, grudges or jealousies that manifest themselves in this last battle over someone’s estate.” Continue reading here.
by Rob Levesque, Published: October 29, 2013
Sandra Schnurr will be instructing the Wills/Estates/Trusts Bar Exam Prep Course offered by the "Centre for the Legal Profession" and the "Internationally Trained Lawyers Program" at the University of Toronto, Faculty of Law. The Wills/Estates/Trusts course will be offered on Monday, November 11, 2013 at the University of Toronto, Faculty of Law, from 5:30 - 10:00pm. The full schedule can be found here, and instructor biographies are found here.
by Robin Spurr, Published: December 20, 2012
Brian A. Schnurr, Felice C. Kirsh and Jordan D. Oelbaum were recently recognized by their peers as three of the Best Lawyers in Canada for the year 2013 in the "Best Lawyers in Canada" survey for the specialty area of Trusts and Estates.
by Jovan Cvejic, Published: May 30, 2012
Last night, the Ontario Bar Association hosted the annual Estates and Trusts Awards Dinner. The Honourable Madam Justice Greer was the recipient of the OBA Award for Trusts and Excellence in Trusts and Estates. In her acceptance speech, Justice Greer inspired the attendees with her thoughts, and asked everyone to do the following: be brief in submissions in court; be a mentor to those more junior than you; and be kind.
Schnurr Kirsh Oelbaum Tator LLP was a Gold Sponsor of the event, which was held at the Distillery District in Toronto.
by Rob Levesque, Published: January 26, 2012
On January 24, 2012, Felice Kirsh made a presentation on "Trust Company Best Practicies - How to Manage Client Expectations & Reduce Risk" at CIBC Trust.
by Robin Spurr, Published: September 28, 2011
Brian A. Schnurr and Felice C. Kirsh were recently recognized by their peers as two of the Best Lawyers in Canada for the year 2012 in the "Best Lawyers in Canada" survey for the specialty area of Trusts and Estates.
by Robin Spurr, Published: April 23, 2010
Brian A. Schnurr has been designated as 2011 Best Lawyers, Trust and Estates - Toronto. Only a single lawyer in each practice area is awarded this honour.
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