Contempt Motions and Estate Litigation - Part II

Burden of Proof

Although the procedure for a contempt motion is civil in nature, the actual determination is criminal in nature. Thus, the burden of proof in civil contempt proceedings is proof beyond a reasonable doubt, as apposed to the balance of probabilities. Any doubt must be exercised in favour of the person alleged to be in breach of the order. The burden of proof is the same for both civil or criminal contempt motions, as the sanctions which flow from both forms are criminal/quasi-criminal in nature.
Sanctions

Under Rule 60.11(5) of the Rules of Civil Procedure, a judge, in disposing of a contempt motion, 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 the 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 a person’s property.

The imposition of a sanction, however, is permissive not obligatory. The actual sanction will be dependent on the circumstances of the case and the mitigating/aggravating factors involved. It is clear, however, that judges have a broad discretion to fashion their sanctions.

Although Orders for contempt may be procedurally encumbering, courts will not shy away from the appropriate sanction. For example, in Sussex v. Sylvester, (2002), 62 O.R. (3d) 123 (Ont. S.C.J.), the Court noted that imprisonment was deemed to be an appropriate sanction because in the particular circumstances of the case, paying a fine would have been ineffectual.

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Hull on Estates Podcast #32 - The Family War - Winning the Inheritance Battle

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During Hull on Estates Episode 32, we discussed the book by Jordan Atin, Barry Fish and Les Kotzer titled "The Family War: Winning the Inheritance Battle" including how to avoid inheritance battles, how to deal with them when they do occur and strategies to end them quickly and successfully.

Hull on Estate and Succession Planning Podcast #32 - Canadian Conference on the Elderly Continued

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During Hull of Estate and Succession Planning Episode 32, we continued to discuss the Elder Law Conference with an emphasis on what the Canadian Centre for Elder Law Studies is currently working on, highlighing their past work and discussing its mission of enriching and informing the elderly in the law.

Contempt Motions and Estate Litigation - Part I

This week’s blogs will focus on contempt motions, generally and in the context of estate litigation.

Counsel have long attempted to craft solutions to situations where they are faced with stubborn parties who defy court orders. One solution may be to bring a motion for contempt against a disobedient party; that is, to have the party held in contempt for not abiding by a previous court order. At times, a contempt order can be the only way to make a party accountable for his or her lack of respect for the judicial process. Some have argued, however, that judges should restrain in the use of their contempt powers, arguing that contempt should be used sparingly and only in the most obvious of cases. In Fisher v. Fisher, [2003 Carswell Ont 1170] (Ont. S.C.J.) the Court noted that “to use contempt motions to enforce minor but annoying breaches of conduct takes away and waters down the effectiveness of the contempt procedure. Contempt should be reserved for those serious breaches, which justify serious consequences”.

Rule 60 of the Rules of Civil Procedure addresses the manner in which court orders may be enforced. Specifically, Rules 60.05 and 60.11 deal with contempt orders.

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Harvard Business Review Ideacast - Management Issues Discussed

In the August 31, 2006 Harvard Business Review Ideacast, listeners were treated to another useful podcast on dealing with innovation within the company, and secondly dealing with under-performing employees in a company. Essentially, the podcast addresses both sides of an important management aspect of running a business.

The podcast considered changes to the business model, whereby sources of innovation and change are no longer primarily being sought from internal sources. Rather, they are introduced into the corporate environment by external resources.

The host of the first portion is Jeff Kehoe who sat down with author Henry Chesborough to look at Chesborough's model for open innovation.

Chesborough initially made the point that invention is something that is new and untested, whereas innovation is essentially taking an idea into the marketplace and doing something with it. Once you are able to separate these two ideas, one can be inventive but not at all innovative. Furthermore, you can be innovative without being particularly inventive. Innovation is all about solving a problem once it is in the the market and it is not completed until a positive benefit has been achieved.  

There were many more interesting aspects of this podcast so we highly recommend listening to it in its entirety.

All the best , 

Suzana and Ian.

Managing the Grey - Personal Branding - Part II

Continuing from yesterday's blogpost on C.C.Chapman and Mitch Joe's podcast about personal branding, we wanted to elaborate on the importance of authenticity . Your success using social medium such as blogs and podcasts lies in producing a personal brand that is truly "you" and not something that is manufactured to fit within your business model or personal agenda.

The challenge is learning to understand what message you need to communicate, rather than the actual presentation of the message itself. Essentially you have to do your best to make sure there is no disconnect between who you are and what you are trying to communicate.

Throughout this podcast, C.C. and Mitch continually impressed the importance of finding the “real you”. In order to successfully accomplish this difficult task, you have to discover what your story is. Mitch makes it clear that a real story lies at the core of any good, transparent and authentic communication piece and the story is generated from your natural passion.

An interesting example of a corporation who has successfully driven home their message is the Harley Davidson Company. They truly tell a story. One would initially assume that the Harley Davidson Company simply manufactures motorcycles. However, they go much further to market their product. In fact, they market their motorcycles as components of a lifestyle founded on American values, specifically power and freedom.

The ultimate marketing goal is to become a mental tattoo on your audience or client base.

We hope that this introduction to the wise words of C.C. Chapman and Mitch Joel has been helpful.

All the best,

Suzana and Ian.

Managing the Grey Podcast - C.C. Chapman and Personal Branding

In  Managing the Grey Podcast - Building Your Brand C.C. Chapman republished his recent speech which he had given with Mitch Joel to a group of podcasters at PodCamp Boston. The two speak about the process of creating your own brand.

What struck us, almost profoundly, at the outset of this podcast, was Chapman's commentary on the power of the personal branding that Starbucks has achieved. This power lies in our willingness to spend $6.00 on a cup of Starbucks coffee in an effort to be associated with the brand. C.C. Chapman went on to tell us about some of the techniques that we should consider employing to achieve Starbucks-like success.

A personal brand is all about creating a buzz, that is essentially fed by the fact that someone else wants to experience your particular brand. You need to develop an interaction between the listeners and yourself to personalize your point. To elaborate, it was noted that it is not at all important as to whether or not your listener is particularly interested in say, your podcast that day; rather if he trusts your brand, then he trusts your enthusiasm for the topic and is engaged. You are creating personal attachment to your brand as opposed to simply interest in your content. This is not to dismiss the importance of content; rather, the "hook" is the personal brand and not the day-to-day content.

More commentary about this informative podcast in tomorrow's blog.

All the best,

Suzana and Ian.

 

Hull on Estate and Succession Planning Podcast #31 - Canadian Conference on the Elderly

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During Hull on Estate and Succession Planning Episode 31, we discussed the various aspects of the Canadian Conference on the Elderly presented by the Canadian Centre for Elder Law including how the Courts are dealing with elder law and elder law situations.

Hull on Estates Podcast #31 - Contingency Fee Agreements in the Context of Estate Litigation

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During Hull on Estates Episode 31, we discussed contingency fees in the context of estate ligitation including:

  •  the fact that Ontario is now allowed to have contingency fee agreements;
  •  what a contingecy fee is;
  •  the risk involved in taking a contingecy fee;
  •  how disbursements are handled in a contingency fee agreement;
  •  fees and the percentage that is taken; and
  •  what provisions should be included in a contingency fee ageement to make it binding.

Duct Tape Marketing Podcast - What is a Blog?

Continuing with our review of the Duct Tape Marketing Podcast of September 12, 2006, Debbie Weil reminds us that there truly is a ROB (Return on Blogs).

In her view, there are three central aspects of what you can expect to get out of blogging in a corporate environment. The first is buzz. This is the word-of-mouth that gets created about your product or service.

The second is "brand". In Debbie's view, blogging can truly enhance your brand. If blogging is done properly, it really does make you or your company more authentic, more transparent, and as a result, more appealing.

The third aspect that Debbie describes is the "blooper effect". She indicates that if you have the open channel, established by having a blog, and something goes wrong  in the process of providing your service or product,  you have an avenue to publish a response and to address the issue directly.

This podcast certainly gave us both true inspiration as we have worked hard to provide a regular blog and certainly from ours and Debbie Weil's perspective, it appears to be a venture that is financially worthwhile.

All the best,

Suzana and Ian.

Duct Tape Marketing Podcast - What is a Blog?

John Jantsch, the host of the excellent podcast, Duct Tape Marketing, interviewed Debbie Weil for the DTM podcast of  September 12, 2006.

Debbie is a marketing and public relations consultant with a core focus on social media for companies and the author of The Corporate Blogging Book.

At the outset of the interview, Debbie was put to the challenge and asked, what is a blog?

In Debbie's view, a blog is a form of website, specifically an interactive website. The beauty of a blog is that it is so easy to publish and update, you do not need to have a lot of  knowledge about technology to regularly publish entries. She emphasizes that a blog truly puts the "website" back into the hands of those who are dealing with the product on a day-to-day basis and is truly an efficient and strategic way to market your product and services.

Debbie reminds us that we cannot let our guard down and in any way send out weak content or long messages, as this can easily happen given the free flow of information when publishing within the context of a blog.

We are also reminded that inherent within the existing blog publishing software is a fairly straightforward and easy method of distribution out into the blogosphere. Essentially if you can produce good work, then good blog software will disseminate that work fairly rapidly and easily.

We encourage you to listen to this podcast if you are interested in trying to get a better sense of the use of blogs in the corporate environment.

All the best,

Ian and Suzana.

Dealing with Stress - Part I

As we know, in our professional life and in our personal life, we are constantly dealing with and managing stress. In Dr. John's August 29th 2006 podcast, he dealt with this issue from an interesting perspective, focusing on the effect that stress has on your body, how to recognize stress and how to de-stress.

Dr. John began by reminding us about the harmful effects that negative emotions can have on your body.  Negative emotions cause the body to respond by releasing hormones, that can be helpful if released in moderation, however in the context of a stressful situation, these hormones become harmful, and can actually reduce the amount of blood flowing to your heart.

Dr. John elaborated, explaining that adrenaline is one of these hormones which can be very damaging to the your body when it reaches a high level and remains for too long in the body. It increases your heart rate and blood pressure, prevents deep breathing, and tenses up your muscles. If you are chronically stressed, the constant presence of these harmful hormones results in a decline of your immune system functioning, you will lose bone and muscle mass, and your fat will accumulate at a faster rate. Memory and learning capability can also be impaired.

Dr. John identifies a little-known fact. In regard to stress, it is not so much the stressful big events (such as a death in the family) which cause the most damage. Rather it is the little things that are slowly killing us. The daily accumulation of little stressors does the majority of the damage because it takes a constant toll on our body.

Things like traffic, deadlines and running late cause chronic stress, and as these factors put a constant strain on the body, you cannot rest enough to properly recover.

In a future blog, we will talk about some of the suggestions that Dr. John has with regard to avoiding chronic stress and changing your lifestyle to eliminate stress.

All the best,

Ian and Suzana.

Innovative Uses of Podcasting - Talkr

The MarketingMonger Podcast #84 explored a new podcasting trend as the host, Eric Mattson, interviewed Chris Brooks, the CEO of an interesting podcast adjunct, Talkr.

Talkr is a program which takes a RSS feed and converts it into audio.  You can take the feed from a blog or from a media source webpage, such as a headline in the New York Times, and Talkr will pull those feeds every hour and once a new entry is available, the text will be converted into audio format so that it can be listened to at your convenience, just like a podcast.

Another useful source of  Talkr is that you can include a "listen to this" button to your blogpage, and the Talkr program will convert your blogposts into audio and allow those listeners who would prefer to listen instead of read, to access your blog in an audio format.

If you are interested in trying out the program quickly, it is installed on the Talkr blogpage.

Good luck in your review of this interesting and innovative social media tool.

All the Best,

Ian and Suzana

Seth Godin on the Duct Tape Marketing Podcast

During Duct Tape Marketing's August 16 2006 podcast, the host, John Jantsch, interviewed Seth Godin, who has just published a new book,   Small is the New Big, which is essentially a compliation of Seth's popular blogs.

The theme of this book is that big used to matter.  Working for big companies used to be enviable, as big companies could defeat small companies with large marketing and advertising budgets. People were obsessed over the economies of scale and no one ever talked about economies of little.

However,  Seth's view is that when treat people with respect and as individuals, you have the flexibility to react to different changes and circumstances, in a sense you are acting small.

Seth points out that it doesn't matter if you are a big or small businesses, rather he is saying that businesses must focus on how they act, and the way that they operate in their own economic environment. When you act small, you can eventually become big.


Therefore, Seth expresses that in his experience there does not seem to be any core relationship between the size of the business and how the business acts.

One of the significant changes over the past short while, in Seth's view, is that people will now seek out information that they think is either important or interesting to them. As there are more alternatives, people are pickier about what they will participate in. He notes that the minute that you treat the client or consumer like a cog in the wheel, you will find your customer/client immediately looking at another competitive alternative.

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Hull on Estate and Succession Planning Podcast 30 - Calgary STEP Seminar and the Family Conference

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During Hull on Estate and Succession Planning Episode 30, we discussed our attendance at the Calgary STEP Seminar, the family meeting and the process followed during the family meeting and we discussed the new book by Jordan Atin, Barry Fish and Les Kotzer entitled "The Family War, Winning the Inheritance Battle".

 

Marketing Online Live - The Final Five of the Ten Commandments of Business Podcasting - Part III

During the Marketing Online Live podcast #39, the hosts, Paul Colligan and Alex Mandossian, went on to provide us with the final three commandments of business podcasting.

Number Eight: Thou shalt Have a Monetization Strategy. This extends beyond the scope of Number Six, which discusses global strategies and focuses on the requirement to eventually truly monetize your podcasts. This monetization strategy could be something such as the book strategy, or simply ensure that your core audience is receiving helpful and relevant information and then throw out the possibility that you can be eventually retained to provide your services.

In our specific case, the obvious model is to assist estate lawyers in the process of their day-to-day practice with a view to being available to provide services beyond that which come naturally to the audience, such as litigation support.

Number Nine: Thou Shalt Consume the Best. The two speakers remind us that there is, of course, some prioritization that needs to happen in the context of podcast listening. You may listen to many hours of podcasting, you must ensure you are consuming the best of that podcast, and also ensure that you too are on top of the best in what is going on.  We already follow this practice in our daily lives, as most of us naturally want to watch the Olympics not the local regional finalists, just as we watch Tiger Woods, and not the 100th place PGA Tour Leader.

Number Ten: Thou Shalt Live the Freedom Lifestyle. By following the Ten Commandments, you can ultimately end up in this last commandment.

We really hope that this series on business podcasting best practice has been helpful and as always please send us your comments and questions, we would love to get your feedback on both our blogposts and podcasts.

All the best,

Ian and Suzana

Hull on Estates Podcast #30 - Security for Costs Motions

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During Hull on Estates Episode 30, we discussed security for costs motions including the concepts involved in security for costs motions and the Courts awarding of security for costs motions.

We also discussed Rule 57 of the Rules of Civil Procedure in respect to costs and Rule 56 of the Rules of Civil Procedure in respect of security for costs motions.

Marketing Online Live - Business Podcasting Part II

During the Marketing Online Live podcast #39, the hosts discussed the final five commandments of business podcasting.

Number Six: Thou shalt go in with a strategy.  As we were told, strategy acts as the hinges that open the doors to great business opportunities. The hosts provided us with a four-part breakdown on the question of strategy: strategize, monetize, residualize, and capitalize.

Never Seven: Thou shalt teach consumption. As podcasters, we need to get better at teaching people how to access and use our new venue. Adding easy access to the podcasts by clicking on the play button on your webpage is an illustration of how to assist the non-techy users to embrace podcasting. A great example is Proctor & Gamble, one of the best consumer companies in the world. who doubled their sales in shampoo by simply adding the word "repeat" to the back of their shampoo bottles.

In our next blog, we will talk about the final three commandments.

All the best,

Suzana and Ian

POWERS OF ATTORNEY FOR PROPERTY REVISITED - PART IV

The provisions of the legislation implementing electronic registration of real estate documentation in Ontario have given rise to some interesting issues relating to the exercise of a Power of Attorney.

An attorney acting under a Power of Attorney may sign documents which are to be registered electronically as part of a real estate transaction.

Where an individual is involved, the Power of Attorney in question is registered in the Land Registry Office where the document is being registered. The document must contain: (i) the registration number of the Power of Attorney, (ii) the date of registration of the power of attorney, and (iii) a statement that the power of attorney is in full force and effect.

Under the Land Registration Reform Act – Electronic Registration Regulation a power of attorney must contain: (i) name of the grantee, (ii) a statement that the attorney is entitled to make statements of spousal status under the Family Law Act on behalf of the Grantor, and (iii) a statement that the granting of the Power of Attorney has been witnessed in accordance with the provisions of the Substitute Decisions Act, if applicable.

The Land Registration Reform Act – Electronic Registration Regulation appears, then, to create a Power of Attorney for the purposes of a real estate transaction by electronic registration. The intention behind the legislation is, clearly, to facilitate a completely paper-free regime.

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POWERS OF ATTORNEY FOR PROPERTY REVISITED - PART III

The relationship between the grantor of the Power of Attorney and the Grantee (“the Attorney for Property”) will vary depending on the grantor’s capacity. The Power of Attorney may provide that the Attorney for Property is to act on behalf of the grantor either before and/or subsequent to any incapacity (of the donor) to manage property.

If the Attorney for Property acts prior to any incapacity on the part of the grantor, s/he is acting as a fiduciary. However, in such capacity, the Attorney for Property is “merely an agent and, notwithstanding the fact that the power may be conferred in general terms, the attorney’s primary responsibility in such a case is to carry out instructions of the donor as principal.”

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POWERS OF ATTORNEY FOR PROPERTY REVISITED - PART II

What are the hallmarks of a valid Power of Attorney? Prior to October 3, 1995, the law relating to Powers of Attorney was exclusively governed by the Powers of Attorney Act. Under this act, a Power of Attorney was validly made if witnessed by only one person.

On October 3, 1995, the Substitute Decisions Act came into force. The Substitute Decisions Act requires that two persons witness a Power of Attorney. Note that the following persons are excluded as witnesses:

  • The grantee or the grantee’s spouse;
  •  The grantor’s spouse or partner;
  •  A child of the grantor or a person whom the grantor has demonstrated a settled intention to  treat as his or her child; 
  •  A person whose property is under guardianship or who has a guardian of the person; and
  • A person under 18 years of age.

A Power of Attorney that was made prior to October 3, 1995 pursuant to the provisions of the Powers of Attorney Act remains valid and effective and may be used for the transfer of real estate. Powers of Attorney made after October 3, 1995 must comply with the execution requirements set out in the Substitute Decisions Act.

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Hull on Estate and Succession Planning Podcast #29 - Full Disclosure at the Family Conference

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During Hull on Estate and Succession Planning Podcast #29 , we discussed the need for disclosure of all financial information during the family conference.

Hull on Estates Podcast #29 - Podwise Social Media Inc.

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During Hull on Estates Podcast #29, Ian Hull and Jordan Atin, Senior Associate Counsel at Hull and Hull LLP, spoke with Kate Morgan, President of Podwise Social Media Inc. to discuss the concepts of Social Media and how they are relevant to the growth and success of law firms and small businesses.

 

POWERS OF ATTORNEY FOR PROPERTY REVISITED - PART I

Hi. My name is David M. Smith. I am a partner at Hull & Hull LLP. This week’s blogs provide an overview of the law relating to Continuing Powers of Attorney for Property (“Power of Attorney”) and to consider various issues commonly encountered in circumstances wherein someone delegates authority to a grantee under a Power of Attorney.

The purpose of a Power of Attorney is to provide for a substitute decision maker for the grantor in the event of certain contingencies, the most common of which being the mental incapacity of the client. Indeed, many Powers of Attorney only take effect upon the incapacity of the grantor.

Where the grantor is capable and trusts the grantee to act on his of her behalf at any time and for any purpose, the Power of Attorney will contain no restrictions and will take effect immediately upon execution.

There are, however, many situations in which a person will make a Power of Attorney to take effect for a specific purpose while the grantor is mentally capable but, for one reason or another, unable to attend to the specific transaction. For instance, the grantor may be out of the country at the time that a specific transaction is to take place, or simply too busy with other matters.

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TRUSTEE DISCRETION AND CAPITAL ENCROACHMENTS - PART V

The Scope and Extent of the Power to Encroach (cont'd) Yesterday, I considered the Fox Estate case and the issue of trustee discretion based on "extraneous" matters. An interesting issue arises in cases where a beneficiary has adequate personal resources of her own.

May a trustee consider the beneficiary's personal resources when exercising discretion to encroach upon capital? If the capital encroachment provision does not require the trustee to consider such personal resources, is such a consideration "extraneous" to the exercise of the trustee's discretion? In the case of Re Luke [1939] O.J. No. 27 (H.C.J.) (Q.L), the testator named his wife as his principal beneficiary and his executrix.

The will provided for the wife to use the income and so much of the capital as she may need for her comfort, maintenance and support during her lifetime. The issue considered by the Court was whether the wife should first exhaust her own financial resources before she could exercise the discretionary power to encroach on the capital. The Court held that the wife did not have to exhaust her own resources before encroaching on the capital, as there was no specific requirement in the Will that she do so:

   

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TRUSTEE DISCRETION AND CAPITAL ENCROACHMENTS - PART IV

The Scope and Extent of the Power to Encroach (cont’d)
The term “mala fides” can be broadly interpreted.  In the Fox Estate case (discussed yesterday), Galligan J. held that the term means more than just fraud.  The term is sufficiently broad to include acts by a trustee based on “extraneous” matters, that is, considerations which are in fact extraneous to the purposes of the testator as set out in the Will.

An example of trustee action based on “extraneous” matters is found in the Fox Estate case.  In this case, the mother was named as the estate trustee of her late husband’s estate, and the Will granted her uncontrolled discretion to encroach on the capital of the estate for the benefit of her son’s children.  When the son married outside of the Jewish faith, the mother used her discretion to give all of the assets to the son’s children.  Galligan J. concluded that the mother had been motivated to exercise her power to encroach by her disapproval of her son’s marriage.  He then held that this motivation was entirely extraneous to her duty as executor and that it demonstrated sufficient mala fides to bring her conduct within any reasonable interpretation of this term.

In holding that courts may interfere if an executor’s decision making process is influenced by extraneous matters, Galligan J. relied upon the judgment of Steele J. in Hunter Estate v. Holton (1992), 7 O.R. (3d) 372 (Gen. Div.).

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TRUSTEE DISCRETION AND CAPITAL ENCROACHMENTS - PART III

The Scope and Extent of the Power to Encroach (cont'd)
Today, I want to continue discussing the limits on a trustee's discretion to encroach on capital. Particularly, I want to deal with the concept of mala fides or bad faith.

The Exercise of Discretion: No Mala Fides
The concept of mala fides has been employed by the courts to limit trustees in the exercise of their discretion to encroach upon capital. The leading case in this area is a decision of England's House of Lords: Gisborne v. Gisborne (1877), 2 App. Cas. 300 (H.L.). Although Gisborne was not strictly speaking an "encroachment" case, it dealt with the underlying issue of the scope of an executor's discretion, particularly in circumstances where the income beneficiary had financial resources of her own. In Gisborne, the Will at issue established a trust fund for the care of the principle beneficiary, the testator's wife, with the trustees being granted "uncontrolled authority" over the application of the trust fund. The principle beneficiary had her own property. She was eventually declared incapable and required full-time care. She argued that the trust fund should be treated as the primary source of funds for her care. The trustees countered that they should only pay her such income from the fund as was required after her own resources had been exhausted. The House of Lords held that the trustees enjoyed an absolute discretion in how they applied the trust fund so long as they did not act with mala fides or bad faith:

[the trustees'] discretion and authority, always supposing that there is no mala fides with regard to its existence, is to be without any check or control from any superior tribunal. (at p. 305)
The Gisborne decision was considered and confirmed by the Ontario Court of Appeal in Fox v. Fox Estate (1996), 28 O.R. (3d) 496 (C.A.). This case dealt specifically with the scope of an executrix's power of encroachment. The Court of Appeal affirmed that the main judicial limitation on the exercise of discretion is whether or not the trustee acted in bad faith or mala fides:
The entire question of the degree of control which the courts can and should exercise over a trustee who holds an absolute discretion is filed with difficulty. The leading case, or at least the case to which reference is almost always made, is Gisborne v. Gisborne. It stands for the proposition that so long as there is no mala fides on the part of a trustee the exercise of an ablsoute discretion is to be without any check or control by the courts. (at para. 11).
I will continue my discussion of the Fox Estate decision tomorrow.
Have a wonderful day!

--Bianca

TRUSTEE DISCRETION AND CAPITAL ENCROACHMENTS - PART II

The Scope and Extent of the Power to Encroach
Once it is determined that a Will grants a power to encroach on capital, the next step is to determine the scope and extent of this power. As can be seen from the example set out in yesterday's blog of a typical capital encroachment provision, a trustee is usually granted "uncontrolled discretion" in exercising such power. However, the scope and extent of a trustee's discretion is subject to certain limits. One such limit is a trustee's fiduciary duty to act impartially as between beneficiaries, known as the even-hand principle.

The Even-Hand Principle
In Water's Law of Trusts in Canada (3rd ed.) the even-hand principle is described as follows (at pp.966-67)

It is a primary duty upon trustees that in all their dealings with trust affairs they act in such a way that, if there are two or more beneficiaries, each beneficiary receives exactly what the terms of the trust confer upon him and otherwise receives no advantage and suffers no burden which other beneficiaries do not share. In this way the trustees act impartially; they hold an even hand. The settlor or testator may choose to give disproportionate interests to various beneficiaries, and he very often does so in practice, but that is his privilege. It is still the duty of the trustees to carry out the terms of the trust as they find them, and to ensure that in the administration of the trsut they do not give advantage or impose burden when that advantage or burden is not to be found in the terms of the trust.
In the context of a trust with both income and capital beneficiaries, Waters describes the importance of applying an even-hand approach as follows ( at p. 968):
It is the distinction between income and capital that is so important in the context of this rule; here are two classes of beneficiaries, for income and capital beneficiaries are interested in different things. With regard to the trust fund the income beneficiary is looking for the best yield obtainable, while traditionally the capital beneficiary is concerned with the safety of the fund. It is the duty of the trustees so to manage the fund that they do the best possible for both, and this means holding an even balance between yield and risk.
A trustee's fiduciary position requires her to maintain an even hand between beneficiaires when exercising a discretionary power, unless the trust provisions specifically authorize the trustee to ignore the even-hand principle and act otherwise. A power to encroach upon capital for the benefit of the life tenant or income beneficiary is usually interpreted as authorizing partiality.
Have a wonderful day!

--Bianca

Hull on Estates Podcast #28 - Solicitor's Negligence

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During Hull on Estates Episode 28, we discussed:

  • Solicitor's negligence and the type of claims that can arise in Estate Litigation;
  • Prevention of claims; and
  • The importance of making an early report of a claim to LawPRO.

 

Hull on Estate and Succession Planning Podcast #28 - Attending the Family Conference

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During Hull on Estate and Succession Planning Episode 28, we discussed:

  • attendance at the family conference;
  • the steps followed once there;
  • the role of the mediator;
  • the content of the Family Conference Agreement; and
  • the Family Conference Rules.

TRUSTEE DISCRETION AND CAPITAL ENCROACHMENTS - PART I

Hello, my name is Bianca La Neve and I am an associate at Hull & Hull LLP. This week, I will be blogging on trustee discretion and capital encroachments. An important part of advising clients with respect to the administration of an estate is providing them with advice as to their duties and responsibilities in ongoing trust administration matters.

In this week's blogs, I want to tackle the issue of capital encroachments in the context of trust arrangements established in Wills. Specifically, I will address whether or not a trustee has the power to encroach on capital and if so, what considerations need to be taken into account by the trustee in determining the amount of the encroachment.

Does the Will Allow the Trustee to Encroach upon Capital?

In determining whether a trustee has the power to encroach upon capital and the scope of such power, one must first look to the specific wording of the Will.  Typically, a testator's Will establishes a trust that provides for income to be paid to a life tenant over their lifetime and capital to be distributed on the death of the life tenant to capital beneficiaries. It is also typical in such a trust arrangement to grant the trustee the discretion to encroach upon capital for the benefit of the life tenant. The following provision is what I consider a typical example of a wide power to encroach upon capital:

    ...to my said trustees to pay to my wife for the benefit of my said wife, such part or parts or the whole of the capital of the residue of my estate as, in their uncontrolled discretion, my said trustees consider advisable.

In interpreting the relevant provisions in a Will, one must endeavor to give effect to the testator's intentions as ascertained from the express language of the Will and the surrounding circumstances. If the language of the Will and/or the specific capital encroachment provision is unclear, then an Application for the advice and direction of the Court should be brought to determine the extent of the power to encroach. Tomorrow, I will begin to tackle the scope and extent of a trustee's power to encroach on the capital of a trust.

Have a wonderful day!

--Bianca