How to Pursue Recovery - Hull on Estates #216
Listen to: How to Pursue Recovery
This week on Hull on Estates Chris Graham and Natalia Angelini discuss how to pursue recovery when one thinks that a trustee or fiduciary has absconded with funds.
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Chris M.B. Graham - Click here for more information on Chris Graham.
Natalia R. Angelini - Click here for more information on Natalia Angelini.
Natalia Angelini: Hello and welcome to Hull on Estates. You’re listening to episode #216 on Tuesday, August 3, 2010.
Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada. Hosted by the lawyers of
Chris Graham: Hi and welcome to another episode of Hull on Estates. I’m Chris Graham.
Natalia Angelini: And I’m Natalia Angelini.
Chris Graham: If you want to be heard on Hull on Estates, you can participate by leaving us a comment. Email us at hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.
Natalia Angelini: So Chris, how was your long weekend?
Chris Graham: My long weekend was very short because it was not a long weekend. How was your long weekend, Natalia, and where did you go?
Natalia Angelini: Mine was nice. We spent it…spent it working out in the back yard so it was nice. Working on my tan a little.
Chris Graham: Great, wonderful, looks fantastic. So today we’re gonna talk about…well, we’ll talk about a couple of things. But we’ll kick off the discussion with a few words about how to pursue recovery when one thinks that a trustee or other fiduciary has absconded with funds.
Natalia Angelini: Right, and I guess there are a couple of options for us to think about when we’re facing that kind of situation. We’ve got clients that are, you know, seriously concerned about that type of situation. And I guess the first thing that comes to mind for me is starting an action with particularized allegations about breach of trust.
Chris Graham: Exactly. And there are lots of ways to skin a cat. And, you know, the basic way that would spring to mind of most lawyers would probably be well just sue them, obviously. But how? If you issue a Statement of Claim, Rule 25.06(8) requires in the case of breach of trust, the pleading has to contain full particulars. And then, of course, the plaintiff is exposed to potentially very serious cost consequences flowing from a potential failure to prove the breach of trust. And, of course, the burden is on the plaintiff. So another way to approach this often…another option would be to compel the fiduciary to pass their accounts.
Natalia Angelini: Right, and that’s…that’s an interesting approach because you’ve definitely got a broader platform to raise objections about their accounting, you know, ask questions about their activities as guardian or attorney or whatever capacity they’re acting in. And certainly cite your objections in that regard.
Chris Graham: Exactly. I mean, every case is gonna be unique. We all know that. But if you know that there are…if you know about transactions or suspect that there are transactions taking money, for instance, when you get the…when you receive the accounts from…pursuant to the passing of accounts proceeding, it’s quite easy to identify, usually quite easy to identify the prohibited transactions. And then you simply…all you have to do is file a Notice of Objection citing the particular line items that you disagree with and often that’s a lot easier than preparing pleadings when you may not have all the facts for a Statement of Claim alleging breach of trust.
Natalia Angelini: Well I guess what we can see a potential benefit is that you’ve…certainly from a standpoint, you may not be faced with the same cost risks as you do in being a plaintiff in a breach of trust action. And you’ve also got the ability to compel answers from the fiduciary because, as you know, it’s…you know, they’ve…that person has the obligation to prove his or her accounts. So it’s…I guess what I think is that you might be in a position of greater strength if you take that approach over commencing a breach of trust action. And then obviously it’s gonna depend on your specific facts. And Chris, you seem to be talking about a case where you’ve got, you know, a pretty good idea that there’s been a breach of trust. And that certainly would help your cause.
Chris Graham: Exactly. I mean , it won’t hold in all cases. But if you have a good idea what the transactions are, in order to flush out the information and get the dispute…get the resolution of the dispute on track, you don’t need to go to discoveries to get the evidence. You simply have to…you can get it through the accounts. And say, well I want your vouchers.
Natalia Angelini: Right, and that said, you may want to, when you get your answers to the objections, you may want to consider cross-examining the fiduciary on those answers, which, you know, is likened to that discovery process. So there might be procedurally similar steps and so I’m not sure that the proceeding would be that much shorter if you take the application to pass accounts route. But I think like I said earlier it certainly puts the fiduciary in the position of having to convince the Court that he or she has done nothing wrong. And that’s quite an onus.
Chris Graham: Exactly, especially when there are legitimate questions relating to the accounts. The passing, of course, is not just a passing to the beneficiaries but the Court has to pass the accounts so the fiduciary has a pretty high onus.
Natalia Angelini: Right, and we’ve seen recently in some cases that the Courts are quite unforgiving with fiduciaries that have breached their duties in applications to pass accounts. They’ve been ordered, for instance, to have been disentitled to compensation, to repay…even repay costs that they’ve incurred in preparing their accounts and also reimbursing the trust for any amounts taken. So in addition to paying, you know, the costs of the other side as well as their own costs. So it’s…the consequences can be pretty severe.
Chris Graham: Yeah, and one more kind of advantage…it’s not really a legal advantage but something else to consider is that if you go by passing of accounts often it takes a little bit of the heat out of the dispute. And, of course, litigants want to and certainly more so at the beginning of a lot of matters, they really want to enforce their legal rights. And they really want to get a perceived wrong righted. And passing of accounts…it’s not necessarily a non-contentious proceeding but it doesn’t have the same anger factor attaching to it that a Statement of Claim saying…making an outright allegation of breach of trust to start off matters has. And if your proceeding is the type that might get bogged down for emotional reasons as opposed to cash reasons…well I guess that could be almost any proceeding…but that’s something else to consider too. You might be able to take some of the air out at an earlier stage.
Natalia Angelini: Right, and if you don’t have the concrete facts like you would need for a breach of trust claim in order to advance it successfully I would think, you’ve got that exploratory venue to find out what you might not be 100% sure of.
Chris Graham: Yeah.
Natalia Angelini: So, I mean, tying in this issue of abuse and we see it more than we’d like to unfortunately and we’ve got guardians that abuse their roles and we’ve got attorneys that do so. And there was an interesting article in the August edition of Briefly Speaking that asks us is it time to think about having a Powers of Attorney Registry in place in Ontario. And it was interesting because Bill 3 which was introduced with the intent to begin a discussion on a legislative framework concerning Powers of Attorney in Ontario and the potential gaps which have allowed and enabled abuse, was really motivated by concerns expressed by, you know, members of the legal community, police community, financial institutions, etc. about fraud and financial exploitation of the elderly. So the Bill has not been passed. It was actually on the second reading, it was…the government voted against it. And that said, we…I don’t think the debate is over and I don’t think the issue is a dead one. It’s actually quite interesting, I think, to see what or to see if it does get put back on the table, what kind of impact it could have. I mean, there are privacy concerns and I think that was one of the reasons that it was shot down. But it certainly might help in providing a transparent process and reduce some of the risks that we see in Powers of Attorney for instance.
Chris Graham: Yeah, I think it…especially when it comes to elder abuse, I mean we all know it’s a problem that will grow as the population ages. And to have individuals potentially running around with documents purporting to be Powers of Attorney that aren’t’, while a Registry might solve some of those problems, I guess on the other hand, you have the privacy concerns about people being able to arrange their legal affairs in private and not wanting to have the structure of their legal affairs disclosed to the public. So that’s a bit of a balancing act. I’ll be curious to see how they address those issues.
Natalia Angelini: Yeah. So that’s…you know, we don’t know where that’s headed but it’s just an interesting note that, you know, it’s one possible way that we can try to curtail abuse of the elderly which I guess we see far too often.
Chris Graham: Yeah, and it’s definitely worth keeping an eye on this process because a Registry, if it comes in, will have a huge impact on practice requirements for any practitioner that regularly does Powers of Attorney along with drafting Wills.
Natalia Angelini: Right. So we’ll keep an eye on that and keep you posted.
Chris Graham: I think that brings us to the end of this week’s discussion. Thanks for listening and thanks for joining me today, Natalia.
Natalia Angelini: Thanks Chris. It was a pleasure chatting with you. I look forward to doing it again. And to our listeners, take care and until next time, so long.
This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
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