This week on Hull on Estate and Succession Planning, Ian and Suzana  talk about the first, pre-probate stages of administering an estate.

The deceased left a will kit-type will directing that all “just debts, funeral and testamentary expenses, all succession duties, inheritance and death taxes, and all expenses necessarily incidental thereto, to be paid and satisfied by” my executor as soon as convenient after her death. 

The will went on to provide that the following distributions were to be made:

To son A, Property A "with all loans, leins [sic], mortgages attached”.

To son B, Property B, “free and clear of all debt". 

The residue was to be divided between A and B. For the purposes of the trial, the only assets of significance were the real estate: Properties A and B.

At the time of her death, the deceased had no debt other than certain mortgages registered on title against Property A.

The issue in dispute was what assets were to be chargeable for paying the deceased's taxes, including estate administration tax and income taxes, and funeral and testamentary expenses.

A took the position that these expenses were paid out of the residue, and in the absence of any residue, were to be chargeable equally as against Property A and B. (Properties A and B were of equal value.)

B took the position that Property B was conveyed to him "free and clear of all debt", and thus, those expenses were payable out of Property A only.

What did the court do? Tune in tomorrow.

Until then, thank you for reading.

Paul Trudelle

Posted on December 4^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #89 of our podcast on Tuesday, December 4^th, 2007.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by

Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada, from the offices of Hull Estate Mediation in Toronto, Ontario, Canada.  Here are Ian and Suzana.

Ian Hull:  Hi Suzana.

Suzana Popovic-Montag:  Hi there Ian, how are you today?

Ian Hull:  I’m awesome, thanks.

Suzana Popovic-Montag:  That’s good.

Ian Hull:  Always looking forward to our podcasts once a week to sort of sit back and reflect on relatively new and exciting stuff in the estates law world, so looking forward to today’s podcast.  I spent a bit of time on the weekend and saw our friend, Terry Fallis, who has just launched his book.  It’s out in Indigo and it’s in some of the major bookstores and he was very excited.  We missed his book launch last week because of a mediation that went too long but Terry’s very excited about it and it’s been fun to catch up with him.

Suzana Popovic-Montag:  It’s a wonderful accomplishment.  And speaking of accomplishment s, Ian, I did want to mention the fact that I saw that article that featured you and your Dad in the Bay Street Bull Magazine talking about family businesses.  And I just thought it was a wonderful expose that did a lot of credit to the two of you and your accomplishments.

Ian Hull:  Well, thank you very much.  That was fun to do and it was fun photograph to take with my Dad, which…we got in our gowns and went down on the street and took a photo.  So it was pretty neat.

Suzana Popovic-Montag:  Well, that’s wonderful, congratulations on that.

Ian Hull:  Thank you.

So last week, we were working through and pretty well completed the whole sort of analysis of charitable tax issues and how that sort of unfolds at the level that we’ve been trying to sort of portray the basic tax issues from.  Today, let’s start turning the corner on payment of taxes on death, because that is sort of a first starting point.  Everybody thinks that that’s the worst thing that can happen to them after death.  So I guess dying is worse but paying the taxes is second worst, so...

Suzana Popovic-Montag:  But when you’re dead, you don’t have to pay those so…

Ian Hull:  That’s true.  So why don’t we talk about payment of the taxes on death.

Suzana Popovic-Montag:  Sure Ian.  We know that typically the Wills will provide the actual debt clause that will direct that the payment of taxes and of debts will be paid out of the residue of the estate.

Ian Hull:  Now, an interesting thing that can develop is because of the rule that taxes are paid out of residue, inequitable situations arise where you have one beneficiary receiving, for example, an RRSP or a specific bequest.

Suzana Popovic-Montag:  And I guess that’s because there is a tax that may be associated with either of those two bequests and in that kind of situation, normally, if there is a residue clause that provides that debts will be paid out of the residue, then the individual would be entitled to that RRSP or that specific bequest net of tax, so to speak.  So they wouldn’t have to bear the tax consequences, but it would be the estate that would.

Ian Hull:  And it’s sort of an interesting planning point that a lot of people forget, and that is, of course, that when you give an RRSP to someone specifically, the tax is payable out of the residue.  So this person gets the $100,000 RRSP tax-free unless you properly plan.  So it’s a fairly basic gifting technique that we see in Wills, so we don’t want to have it come back on us later, if we’re not watching where the tax is going to be paid.

Suzana Popovic-Montag:  Because if we don’t, the truth is, the residual beneficiaries are going to resent the fact that their funding someone else’s tax liability and that someone else is getting their gift free of the tax.  So it’s just something, as you say, important that we want to keep in mind.

Ian Hull:  So another…let’s talk about real property and real estate, when we’re gifting real estate.  How do we deal with that, and the tax questions that might arise there?

Suzana Popovic-Montag:  Where a residual beneficiary, Ian, desires to get real estate as part of his or her share of the estate, so instead of taking the cash equivalent of the value of the property, they actually want the real estate itself, in those situations the individual is going to be liable to pay the land transfer tax that’s going to be associated with that property.

Ian Hull:  So it seems to me, though, it is quite unusual to see the payment of land transfer tax addressed in the Will and this is a big tax now in Toronto here.  We’ve got an even bigger land transfer tax now added to our tax burden here and a great gnashing of teeth and crying about that here in Toronto.  But it is a bit unusual to see that actually being dealt within the Will, isn’t it?

Suzana Popovic-Montag:  It is, Ian.  I don’t think I can recall too many Wills where I’ve ever seen it, but it certainly is something that, you know, is a good idea to include in a clause that actually provides the executor with the ability to transfer real property as part of a residual share without having the land transfer tax liability associated with it.

Ian Hull:  Now, we’ve talked about the separate Wills and mutual Wills in other podcasts.  That’s obviously another factor to consider in terms of taxes and payment of taxes on death.

Suzana Popovic-Montag:  That’s for sure because we know that we’ve seen many situations where there are separate Wills set up, for instance, for the private company’s shares and for other assets that don’t necessarily require probate, and then a separate Will dealing with those assets that will require probate.

Ian Hull:  And one of the things that we’re starting to see, because these primary and secondary Wills are starting to fall in more and more, is that sometimes when we’re estate planning, we’re not considering when we have a primary and a secondary Will, like you say, where the tax is to be paid.  And we’re not putting in the Wills precisely, for example, if the holding is in the secondary Will, do all the taxes in respect of the holding company get paid under the secondary Will or does the primary Will fund the tax liability that may be the subject to the holding company, those kinds of things.  So it’s a good point to press our advisors when we’re setting up our estate plan to just make sure that we might say to them look, okay this is all very fancy-dancy, two Wills.  I like the approach, but who’s going to pay the tax and where and does it set out in the Will clearly where the liability of tax will flow, because it can be a big issue.

Suzana Popovic-Montag:  Particularly, Ian, when the residual beneficiaries under the primary Will or the secondary Will are different.  Because in those situations, you know, despite all the planning, I’m actually quite surprised that, you know, secondary and primary Wills are quite sophisticated estate planning.  And notwithstanding that, as you say, we don’t many times see a clear delineation between the two Wills as to who’s responsible for those kinds of debts and taxes.

Ian Hull:  Alright.  So we’ve considered the RRSP unique situation.  We’ve considered the land transfer tax unique situation.  What about properties with accrued capital gains which get bequeathed to an individual beneficiary?  Like, for example, a cottage or something that’s, say you bought when…thirty years ago and then on the death, it’s a significant capital gain that is owed on the cottage, or something like that?

Suzana Popovic-Montag:  That’s an interesting scenario and one that quite often does arise.  And one of the things that I know you always recommend is considering whether the tax should actually be funded by a mortgage on the property or directly out of the residue of the estate.

Ian Hull:  It’s just something to consider if the residuary beneficiaries are looking to make sure that flows through without too much tax burden.

Alright, now if the residuary beneficiaries are different under a primary and a secondary Will, that’s another situation as well where it becomes very important to make sure you set out who’s going to pay what tax and on what basis in this whole primary Will and secondary Will equation.  Sometimes, for example, the operating company is going on to the daughter because she’s been in the business all these years.  But…and that goes in the secondary Will, no probate fees, all is well.  But in the primary Will, the main assets, the conventional investment account and maybe the house or something are going to the son to equalize.  In that kind of scenario, again we want to make sure that when we have secondary and primary Wills with different beneficiaries, obviously different assets as well, we really want to make sure we’ve addressed what tax liability is to be paid and where.

Suzana Popovic-Montag:  And Ian, what would you say would be the result in those situations where there is no clear distinction between which estate, so to speak, is liable for those taxes.  What would we do in those circumstances?

Ian Hull:  Well, I think the tragic part of this, and if we don’t start addressing these in our Wills carefully is, is that you’re going to end up in Court because the law is very mixed in terms of where the tax will fall because, quite frankly, it is new law in every respect.  So you’re not…you’re going to be looking to the Will and you’re going to be looking to case law that really is very light on how this is to be…this competing battle is to be figured out.  There’s some great stuff written, Clare Sullivan wrote a great article about a year and a half ago on where liability of tax lies and where it’s paid in primary and secondary Wills, and you know, her conclusion was, is that the Courts are going to be stepping in and really having to grapple with this, if it becomes a big issue and it becomes a big number.  Now, that’s obviously in situations where you’ve got significant tax liability and the amounts have to make sense before you’re going to get into those battles.  But, boy, that would be a shame to have to go to Court if the Will isn’t clear, to get some direction on what is a very important issue, and that is, who pays the tax and where from.

Suzana Popovic-Montag:  Well, that’s a good point, and I’m sure a very expensive proceeding as well.  So to the extent that we can try to predict and deal with that in advance, I think that can only help us in our estate planning.

Ian Hull:  Okay.  Well I think that touches on some of the core tax issues and payment on death.  What we thought we might do in our next podcast is, because of the fact that in Canada anyway certainly, there are lots of foreign real estate issues, situations where someone might have a condominium in Florida or something like that.  What are some estate planning issues to consider and what are some tax issues to consider in the context of those assets.  So I think we’ll try to turn to that at our next podcast.

Suzana Popovic-Montag:  I look forward to that discussion.  Thanks very much, Ian.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag.  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.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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A starting point is s. 18 of the Succession Law Reform Act (“SLRA”). This section provides that an alteration is not effective unless it made in accordance with the provisions of the SLRA regarding due execution, or unless the alteration makes a word or words “no longer apparent”.

If the will is a formal will, holograph alterations are not permitted (although a holograph codicil is permitted).

These principles were applied in the case of Luty v. Magill. There, it was found that handwritten alterations to a will that were undated and that did not totally obscure the original bequest were invalid, but that other alterations that were initialled (initials can constitute a signature for the purposes of the SLRA) and dated were considered holograph codicils, and were therefore valid.

With respect to obliteration, if the original words cannot be read, by holding the will up to the light or by using a magnifying glass, (but without the assistance of any other mechanical aids) then the words will be considered to be revoked, regardless of when they were obliterated.

Altered wills will usually require an application for the opinion, advice and direction of the court. Testators should be cautioned as to the requirements for validly altering a will so that the costs of such a court application can be avoided.

Thanks for reading,

Paul Trudelle

The article quotes Hull and Hull's own Jordan Atin: "A will is usually the last thing that a parent says to his or her children...". As such, the document "creates a definitive, lasting record of the relationship between parent and child and among a child and his or her siblings. That reason alone explains why estate disputes are so hotly contested".

Jordan Atin states that in addition to addressing the mechanics of the estate plan, solicitors also need to address their client’s family dynamics. Lawyers should consider with their clients the emotional effects of the will may that arise after the testator passes away. 

In the article, Sender Tator, a solicitor with Schnurr Kirsh Stephens, notes that in the context of litigation, “emotion often gets in the way of legal or practical realities; your client is often looking for a certain result, which legally may not be feasible".

The interplay of family dynamics and human emotion is one factor that makes estate litigation so interesting. (It is also a factor that often makes the practice so frustrating!)

One of the functions of a solicitor in estate litigation is to consider the role of family dynamics, and to see that it is identified and addressed. In addition, the solicitor should strive to ensure that the legal or practical realities are not overlooked, and that passion alone does not drive the litigation.

Thanks for reading, and happy Halloween.

Paul Trudelle

The deceased had sold her home and had given the proceeds of sale, being $65,000, to her boyfriend, and then moved into his home.

The Court found that there was insufficient evidence to establish that the advance was a gift. 

As to a remedy, the Court heard evidence that the advance was likely for the purpose of defeating creditors of the deceased. As such, the Court declined to apply the doctrine of resulting trusts, applying a Court of Appeal statement to the effect that "evidence of an illegal scheme will not be received to support a resulting trust."

However, the Court found that it was not necessary to rely on the doctrine of resulting trusts. The Court found that it was able to make a monetary award, and granted judgment in favour of the deceased’s estate.

In advancing a claim on behalf of an estate, the imposition of a trust is not always necessary, and a monetary award will often be the most appropriate remedy.

Have a great day,

Paul Trudelle

Turning to today’s blog, I read with interest that Pavarotti’s Will was recently opened. The great tenor ultimately succumbed to pancreatic cancer. Pavarotti was colourful both on and off the stage. He was married twice and sired 4 children. It now turns out that Pavarotti’s estate is as rich as his voice.

Pavarotti left the bulk of his estate to his second wife and four children pursuant to a recent June 13^th Will (his youngest and only child from his second marriage is four years old). In a second Will dated July 29^th Pavarotti apparently created a trust in favour of his second wife of approximately €15 million.  This was a surprise to his friends and family.  The second Will dealt with Pavarotti’s three New York apartments as well as personal items, including paintings by Matisse.  The family has denied rumours in the Italian press that Pavarotti’s first and second families were at odds. Like so many, Pavarotti waited until the end of his life to deal with his Estate.  No doubt, the opera star was reluctant to confront his own death (though death looms large in many operas).  

The reading of a Will by family members is often fertile ground for surprise and disappointment. Many testators use a Will to settle old scores, reward or punish behaviour, or favour those who nursed the testator through illness or old age. 

I struggle with whether to advise a client to reveal the contents of his/her Will to family members before death. Overcoming the trepidation to execute a Will is one thing, but to then reveal its contents to family members, who may benefit unequally, is an entirely different matter. For example, a disappointed son or daughter may punish their parents by no longer seeing them or cutting off access to grandchildren.  However, if the Will comes as a surprise after the testator’s death and is a disappointment, the potential for litigation is rife.  A disappointed beneficiary will justify litigation by claiming that they are only doing “what mom really wanted”.  Emotions come into play, judgment becomes clouded, and lawyers are retained. 

In the end, there is no easy answer as to whether to advise your client to reveal the contents of his/her Will.

Ciao, Justin

Mr. Connolly died in 1887. He left a will which established a trust “for the purpose of educating or assisting to educate poor children resident in Prince Edward Island who are members of the Roman Catholic Church and who are either Irish or the sons of Irish farmers...".

The trust was said to have paid out over $1 million in bursaries since inception, and had a reserved capital of approximately $1 million.

The trustees stated that with the passage of time, the question of eligibility had become more difficult. The trustees sought direction from the court as to whether eligibility was open only to males, and whether eligibility was open to those who had “significant” Irish ancestry, being at least 50%.

It was noted that the administration of the trust was not affected by the discrimination provisions of the relevant human rights legislation.

The court had little difficulty in concluding that the trust did not benefit males only.

A more difficult question is what was meant by the term "Irish". The court reviewed the history of Ireland and its society and noted that 19th century Ireland was not the product of a pure strain of "Irish", but was a melding of a variety of ethnic strains of immigrants who arrived at different times through history. The court traced the history of Ireland back to 3000 B.C. The court concluded that when he referred to a person being “Irish”, the testator intended to refer to either a person who had emigrated from Ireland, or to a person who was a descendent of a person who had emigrated from Ireland. By making reference to "sons of Irish fathers", the court concluded that the testator had visualized the Irish blending into the larger community in PEI, and thus, felt that having 50% Irish blood was reasonable and sufficient.

The case is an interesting read, as it not only reviews Irish history, but it sets out in some detail the life of the testator in the mid-1800s, including a detailed report of his death in December, 1887.

Thanks for reading,

Paul Trudelle

In Szabo Estate v. Adelson (2007), CanLII 4588, the solicitor acted as estate solicitor, having been retained by the estate trustee named in the will. He rendered an account for legal services in the amount of $3,230.79. This account was not paid, and the solicitor asserted a solicitor’s lien over the documents in his file, including the original will.

Interestingly, the solicitor offered to release the will if the estate trustee agreed to a charge against the estate. The estate trustee would not agree.

The estate trustee brought an Application under s. 9 of the Estates Act for the production of the original will. In considering the Application, the court noted the basic proposition that where a client discharges a solicitor without cause, the solicitor may exercise a lien for his or her fees over the documents in the solicitor’s possession, and may retain them until paid. 

The estate trustee relied upon an article and an excerpt from a text that stated that a solicitor’s lien did not extend to a will. The court found that the article did not cite any authority for that proposition, and that the case referred to in the text, an 1823 decision, did not support the proposition, either. 

This illustrates that one should not blindly rely on articles and texts as setting out black letter law (unless, of course, one is relying on Hull and Hull, Probate Practice).

The court concluded that a solicitor can exercise a lien over a will, just as he or she could over any other important document.

However, the court can and will intervene in order to prevent an injustice to a client resulting from the exercise of the lien. In the case under consideration, the court ordered the solicitor to deliver up the will IF AND WHEN the estate trustee agreed to a charge against the estate in the amount of the solicitor’s account.

Thanks for reading,

Paul Trudelle

Following her death, it was revealed that she set up a $12m US trust to care for her dog, Trouble.

Last week, it was reported that the named trustee of the trust, her 80 year old brother (who received over $15m US himself from the estate) does not want to care for Trouble. It is yet to be seen whether the alternate trustee, Leona’s grandson, will take on the responsibility.

In addition, Leona’s will directed that Trouble, following his death, be buried with her at the family mausoleum. However, state laws forbid animal remains from being interred at human graveyards.

To make matters worse, it appears that Trouble bit a housekeeper, and the housekeeper now wants a piece of Trouble’s money.

The present circumstances illustrate the need for open discussion of estate plans. Trustees should be consulted in order to ensure that they actually will agree to take on the role of trustee; special requests should be explored to ensure that they are feasible.

Thank you for reading,

Paul Trudelle

“To say that brother and sister do not get along in this case is an understatement. There is plenty of mistrust, suspicion and bitterness to go around. The applicant blames her brother for high-handed and unilateral conduct. He claims he has acted improperly. On the other hand, [brother] blames his sister for being non-communicative and hard to get along with. He was compelled to take the steps that he did because his sister which not deal with him.”

The quote is from Hill v. McLoughlin, 2007 CanLII 1334 (Ont. S.C.). There, brother and sister were co-estate trustees and residual beneficiaries of their mother’s estate. As a result of the above-noted mistrust, sister brought an application to have brother removed as an estate trustee.

The court found that while there was friction and hostility between brother and sister which hindered the administration of the estate, it was not satisfied that brother committed a breach of trust as alleged, or was in a conflict of interest.

The court stated that where the deceased has expressly appointed trustees, a court should be loath to interfere with the testator’s expressed intention except on the clearest of evidence that there was no other course to follow. The expressed wishes of the testator should be respected and not interfered with lightly. It is only where a court determines that the welfare of the beneficiaries requires removal and replacement of trustees that the court should undertake such action. It is not any mistake or neglect of duty on the part of the trustees which would lead to their removal. It must be shown that the non-removal of the trustee will likely prevent the trust from being properly executed.

While the court did not order removal of the brother, it did not condone his actions. The court required that the brother undertake certain steps, such as provide specific information to the sister.

On the issue of costs, judge ordered that each party should bear their own costs.

It is often hard for siblings or others to get along and cooperate in the administration of an estate. Further, actions taken by trustees, out of spite or otherwise, can serve to exacerbate the mistrust that already exists. Knowing that the courts will not automatically step in and remove an estate trustee in the circumstances should encourage the parties to an estate to act reasonably and simply get the job done.

Thank you.

Paul Trudelle

Ms. Wente sees a future where “mature lifestyle residences” replace schools, nannies are imported to care for your mom rather than for your kids, and the most popular diapers will be size XXL. Industries will sprout up to service this aging population, medicines will improve, and the political clout of this older group will ensure their comfort and entitlements.

This optimistic future is contrasted by reports earlier last week that one in three Canadians worry about outliving their savings (Toronto Star, July 16, 2007). The report found that many older Canadians did not foresee such a rosy retirement. 33% of respondents over 60 worked either part-time or full-time, and 19% indicated that their financial situation was worse or much worse than 5 years ago.

The vision of the baby boomer generation, on the cusp of becoming senior citizens, being the most affluent group ever is not universal. “There’s going to be a group of baby boomers for whom all of this image of affluence and consumption isn’t reality,” said professor Doug Owram of the University of British Columbia.

Rich or poor, the articles both highlight the importance of planning for our later years.

Thank you.

Paul Trudelle

In this most unusual case, Bernard's estate will be entitled to receive payment equal to Bernard’s salary until 2012, notwithstanding Bernard's death.

The case turns on the peculiar wording of Bernard's employment agreement with his employer, the Blue Button Club. Pursuant to this agreement, which was entered into on March 1, 2002, Bernard was employed as the Executive Manager of the Club. The agreement had a 10 year term. The agreement described Bernard's duties at the Club. It provided that he was to be paid at least $60,000 per year.

An unusual provision of the employment agreement provided that the Club was to maintain insurance on the life of Bernard, naming the Club as beneficiary, so that the Club could comply with the termination provisions of the agreement. The termination provisions provided that the employment agreement could be terminated in the event that Bernard failed repeatedly and demonstrably to perform his duties, and failed to remedy this problem after receiving reasonable notice; for just cause; or upon his death, in which case, the Club was to collect the insurance proceeds and pay these to Bernard's estate.  Apparently, the Club did not take out such a policy of insurance.

In resisting the claim by Bernard’s estate, the Club argued that, prior to his death, Bernard failed to fill his duties. The court rejected this submission, holding that the Club did not provide the required written warning to Bernard.

The Club also submitted that the agreement was not enforceable, and that neither of the parties expected the agreement to be enforceable. The court easily rejected this submission.

As the agreement clearly contemplated Bernard’s death, it was not frustrated by his death.

The court found that Bernard's estate was entitled to the payments due until the end of the agreement. These damages totalled $410,000.

In this case, the employment agreement was drafted by or on behalf of the Club. The court held the Club to its agreement, notwithstanding its unusual provisions, or the fact that it produced, at least at first blush, an unusual result.

Thank you,
Paul Trudelle

In 2001, Maria prepared her will. In it, she left specific legacies totalling more than $100,000, and divided the residue of her estate amongst various named persons and a charity. Three weeks later, she died.

One of the specific legacies was a $5,000 bequest to Daniel.

Daniel told his superiors about the bequest, and that he intended to accept it as it could not give rise to a conflict of interest. They told him to "hold off" on accepting the bequest until the matter was cleared through the “appropriate department channels”.
Daniel argued that because he did not know of the bequest in advance, and because there could not be the expectation of further services, and no possibility that Daniel could provide special assistance to Maria or her family, there was no conflict. Daniel submitted that he had stopped providing services to Maria long before her death. It was agreed that Daniel had in no way attempted to influence Maria into making the gift.

Did he get to keep the bequest?

No. Veterans Affairs determined that accepting the gift would be in contravention of the federal Conflict of Interest Code.

Daniel grieved the decision through two levels of the internal grievance process, and then applied for judicial review when the decision was upheld at both levels. Judicial review was allowed, and Daniel was allowed to keep the bequest. However, the decision was appealed to the Federal Court of Appeal (“FCA”).

The FCA held that the bequest could give rise to a perception of conflict. The question was whether a reasonable person would think that there was a realistic possibility that acceptance of the legacy could influence the employee’s future performance of official duties. The FCA noted that a pensions advocate is in a position of confidence and influence. The clientele are usually elderly and vulnerable, and often in difficult circumstances, such as the death of a spouse.
The FCA stated that while Daniel could not accept the gift, “the acknowledgment of her gratitude to him for assisting her is effectively communicated to him, and to others.”

Thank you for reading.
Paul Trudelle

The respondents were success at trial and sought their costs. The applicant, the Ukrainian Catholic Episcopal Corp. of Easter Canada (the “Church”), argued that no costs should be awarded and that the costs requested were, in any event, excessive.

The court recognized that in estate matters, issues frequently arose upon which “reasonable persons” could “reasonably disagree”. Ambiguity in a testamentary document was cited as one such example. The court held that where there were reasonable grounds for an application, costs should generally be paid by the estate.

However, in the case at hand, there was no dispute arising out of any mistake or lack of clarity or default of the testator. According to the court, the lack of evidence supporting the Church’s position ought to have been apparent from the beginning and certainly at the end of discoveries (a good reminder to counsel to write to clients at the end of discoveries to address the merits of the case). Given the allegations of misconduct, coupled with the lack of evidence, the court held that costs, on a partial indemnity scale, should follow the cause (loser pays the winner).

The fact that the Church was a not-for-profit organization carried no weight with the court. Moreover, even though there was no adversity of interest between the respondents, the court was satisfied, despite the arguments of the Church, that it was reasonable for the parties to be separately represented. The respondents were awarded their separate costs.

Thanks for reading and have a good weekend.

Justin

In the above context, it is worth considering what I believe to be the motivating factor or thinking behind the Supreme Court of Canada’s (“S.C.C.”) decisions in Pecore v. Pecore and Madsen Estate v. Saylor. The two recently released companion cases were eagerly anticipated by the estate bar and addressed the transfer of property by an ageing parent into joint ownership with one of their children.

The S.C.C. made it clear that the “presumption of resulting trust” is the general rule that applies to gratuitous transfers of property into joint ownership. The onus is therefore placed on the person who received the gift to demonstrate that a gift was, in fact, intended. The court also held that the “presumption of advancement” applied to transfers of property by parents into joint ownership with their minor children. The burden of rebutting such a presumption falls to the party challenging the transfer rather than the gift-receiver.

The transfer of property by an ageing parent, particularly funds into joint bank accounts, is becoming widespread. In the context of an ageing population, Rothstein J., writing for the majority of the court, specifically addressed why the presumption of resulting trust arose rather than a presumption of a gift.

As Rothstein J. noted in his decision: “… it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of their parent’s affairs”. In taking note of this stepped-up practice, the S.C.C. recognized the changing dynamics of Canada’s population and framed its decision accordingly.

Thanks for reading!

Justin