In the case of multiple executors, in order to avoid a conflict of interest the controversial issues need to be addressed and discussed in detail. For instance, how will executor’s compensation be apportioned as between them? Is there a different relationship between each executor and the beneficiaries? Does one executor disagree with any actions taken by any of the other executors? Will their evidence be the same? Do the executors share the identical expectations of how the litigation should proceed as well as in respect of potential settlement? The potential disagreements can be discovered by exploring the issues up front.
 

Joint retainer agreements or letters explaining the joint retainer relationship can set out the above issues so that clients and their lawyer are clear on their relationship and the passing of accounts.

Canadian Olympic medal count: 13. Keep watching.

Craig
 

This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss compensation for work done by estate trustees and estate solicitors.

Case citation:

Rooney Estate v. Stewart Estate 2007 WL3019262 (Ont. S.C.J.), 2007 CarswellOnt 650

Comments? Send us an email at hull.lawyers@gmail.com, call us on the comment line at 206-350-6636, or leave us a comment on the Hull on Estates blog.

Posted on June 3, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #115 of our podcast on Tuesday, June 3^rd, 2008.

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: Just terrific, thanks. And I understand that we’ve been having a fair amount of activity on our e-mail and our phone-in and so we again remind people on the phone-in, please feel free to call in. Our number is 206-457-1985.

Suzana Popovic-Montag: And that number you’ll find if you need in the show notes, along with our e-mail address which is hullandhull@gmail.com, and, of course, you can feel free to visit our blog at estatelaw.hullandhull.com as well.

Ian Hull: Alright, before we get into the meat and potatoes of today’s podcast, I think Suzana, you had an interesting article that you saw and you thought you might have some comments on.

Suzana Popovic-Montag: Well there was a great article actually, Ian, in The Globe & Mail on Tuesday, May 27^th, so that’s about two weeks ago now.  And it was actually entitled, “Mean Girls, but with walkers”. And I just thought that it was a remarkable and refreshing kind of reminder of the fact that there is this circle of life. And what the article actually talks about is the fact that no matter how old you get, you know, you can still be dealing with the issues of what they call “social Siberia” where whether you’re young or you’re old, women can and have been known to treat one another badly.  And here they just did an exposé of, you know, how people who are living in either retirement homes or nursing homes are experiencing these issues still to the very end.

Ian Hull: Well, it’s a really interesting dynamic and as the population ages in Canada, it’s another twist and turn that we want to keep our eyes open to. I’m going to be watching this series as it goes along. I don’t know how many part series The Globe & Mail is publishing, but this was Day Two of the series and I think it’s coming out every Tuesday.  So we’ll look for it and see what else is going on with this tremendously important issue in Canada.

Okay, so thanks very much Suzana for bringing that to our attention.  And why don’t we turn now to our continued search for the perfect set of accounts. And we have, working on our last podcast, a checklist of sorts that identifies the kind of buttons that will get pushed in some considerable detail if the accounts aren’t properly prepared. And we finished off the last podcast dealing with the question of original assets and capital receipts.

Suzana Popovic-Montag: And just to sort of carry on from that, Ian, when we’re looking at a set of accounts or preparing a set of accounts, one of the things that I like to remind people of is the fact that we want to make sure that if it’s a subsequent passing of accounts, that you’re picking up and sort of those last balances on those first set of accounts, so that there is this natural transition from this last to the next set of accounts, picking up all the unrealized assets, picking up the ending balances which become starting balances on the new set of accounts as well.

Ian Hull: And that really makes sense if you’re going to balance your chequebook, you want to make sure you know what you left off at before you want to start recalculating on a go forward basis.  So it’s really no different than taking your personal finances for the period of say, a three month period, and then balancing your chequebook so to speak, checking off the cheques that come in and went out, and then you have a final amount that’s still left in your account. While you may wait another three months to update your chequing account and when you do that, you’ll want to go back to your starting balance, your beginning moment in time when you finished your last balancing, so to speak. 

So it’s not, you know, really all that complicated, it’s just a task that some people overlook when they’re preparing the accounts and then they have difficulty reconciling the set of accounts from a historically, the previous set of accounts because they haven’t really thought about what was there to start with.

Suzana Popovic-Montag: That’s a great point, Ian. And the fact is, we want to make sure that we’re picking up all of the assets. Every original asset is either going to be somehow realized, it’s going to be written off or shown at the end of the accounting period as an unrealized asset to be dealt with during the subsequent period.

Ian Hull: And I remind people again that we have on our webpage, I think it’s the June 2005 Breakfast series, we have a precedent in the system that people can look at. I know that we had a couple of e-mails last week asking us specifically just to point them to it, and it’s easy to find, it’s in our media centre.  So you can sort of, as you hear about these issues, you can see how they are set up in hard form, so to speak. It’s our version of a white paper.

Alright, so now, let’s talk about what is a general concept in passing of accounts that can be a little bit daunting as an issue of law, but more importantly, what does it mean in sort of simple terms. And that is the whole question of capital disbursements. And when I think of a capital disbursement, I think of it no different than when you have an investment, so to speak. Say you invested in a company and the tax laws in Canada are very straightforward. If you put capital in to the company, say you put after-tax dollars and invested into it, you are allowed to pull that capital out tax-free essentially. And with passing of accounts, it’s the same thing. They want to delineate or separate the income that’s coming in and out and they want to delineate and separate the capital that’s coming in and out.  So you have the capital coming in.  For example, you might have…an easy example might be the family home. And it comes in, in the form of cash or it comes in as the form of the house if you haven’t sold it. Now we have to start talking about how things get disbursed or sent out of the accounts into the hands of the beneficiaries or into the hands of creditors, depending on the situation, to pay bills and so on, and these are capital disbursements.

Suzana Popovic-Montag: And that’s all part of your chequebook analogy in that everything that’s paid out of the estate has to be recorded, including just starting at the very beginning with funeral expenses.  And then any time that any other expenses are paid on behalf of the estate, that’s reflected in the accounts, as well as the purchase of any investments.

Ian Hull: So another identifiable capital disbursement is where legacies are paid out, typically within the year of the date of death or not.  You have to consider whether or not it was paid and if there’s interest attracted to that legacy.  And the rule there is not hard and fast, but it’s typically considered to be an executor’s year. So if you have a gift of $10,000 to my niece, Betty, you have typically, the Courts have said, you have a year to pay niece Betty. Now if it takes more than a year to pay niece Betty, sometimes niece Betty is entitled to ask for interest on that payment. So again, it’s a question of how you want to reflect that in the accounts as well.  But if it’s a normal situation, where it’s paid within the year, then niece Betty typically does not get any interest on her $10,000 gift.

Suzana Popovic-Montag: And as part of reviewing a set of accounts, when you’re looking at the capital disbursements that are actually recorded by the executor, you’re checking for these kinds of things, whether or not in hindsight they’re reasonable and in proportion to the value of the estate.  And when you’re dealing with distributions to the beneficiaries, again, you want to make sure that they’re in the correct amounts and that they’re paid out to the correct recipients pursuant to the terms of the Will or any subsequent Court Order that may have been made interpreting that Will.

Ian Hull: And this is a really good point because the distributions to the beneficiaries have to be done so carefully. I had a case within the last year where there was a lot of money distributed and the executor may be carelessly, but not carelessly but inadvertently, didn’t do the math and sent out  it was split between six different beneficiaries  but didn’t send out the distributions in one-sixth portions for a bunch of reasons.  But the point was is that the beneficiary who didn’t get her sixth percentage of an interim distribution was frustrated by that.  And I think it’s just a question of “do the math”. Carefully look at how many residual beneficiaries there are and make sure you do the apportionment without mistake.

Suzana, what is the other sort of area where, in terms of attracting attention on the distributions, that we find difficulties with beneficiaries?

Suzana Popovic-Montag: Well certainly Ian, in my experience, I find that when you’re dealing with encroachments on capital, that’s a big issue for a lot of different estates.  And the main question there is, is such an encroachment on capital actually permitted by the terms of the Will? And then the second follow-up question to that, of course is, well was the encroachment a reasonable one, given the size of the estate, given the nature of the administration? 

Ian Hull: So when you say encroachment on capital, let’s go back to our example where we have sent in a big chunk of money maybe from the sale proceeds of the house or we have the house itself in there and then it gets sold within the administration of the estate. When you say encroachment on capital, what does the executor have to think through in this issue and what does it mean by encroachment on capital?

Suzana Popovic-Montag: Well typically, Ian, we’re dealing with a situation where there’s a life interest in an estate and we’ve talked about these on previous podcasts where, for instance, a spouse passes away and leaves the surviving spouse with a life interest in the income of the estate, and then the right to encroach on capital, perhaps on certain conditions and perhaps, you know, an unbounded right to encroach on capital.

Ian Hull: So basically, it gives the right of the executor to look at the circumstances and notwithstanding the trust provisions that look like on the face of it everything goes to the surviving spouse in terms of income, the executor is given language in the Will that says “don’t forget you can top up a monthly payment to the income beneficiary by taking capital or encroaching on capital”.  And the step of taking out of capital is a really important one and I think maybe in our next podcast, we’ll start off by talking a little bit about problems that arise when you get into situations where you need to encroach on capital and those kinds of considerations.

Suzana Popovic-Montag: Well, that’s great Ian. I think that will end up this podcast and I do look forward to our next one, where we can flush that issue out a little bit more.

Ian Hull: Well remember again, please feel free to call in. Our call in number, 206-457-1985.

Suzana Popovic-Montag: Or e-mail us at hullandhull@gmail.com or visit our blog at estatelaw.hullandhull.com.

Ian Hull: Thanks very much, Suzana.

Suzana Popovic-Montag: Thanks, 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.

/mem

Posted on May 13, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #112 of our podcast on Tuesday, May 13^th, 2008.

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 great thanks.  This week is a big week.  We had the pleasure earlier this week to record Hull On Estates as well, so we did both of the firm podcasts, so to speak.  Before we get into our topic today, I just want to remind everyone that we welcome comments and that’s our call-in number at 206-457-1985.

Suzana Popovic-Montag:  And, of course, that number, if you didn’t catch it, will be in our show notes as well as our e-mail address which is:  hullandhull@gmail.com, if you prefer to send us a comment by e-mail. 

Ian Hull:  So we had some really interesting blogs last week and I noticed yesterday’s blog was particularly interesting.  When I say yesterday, when it goes into the Internet we won’t know what yesterday is, but I encourage you looking at our blog as well, because it’s at hullandhull.com.  But we had some interesting comments by Chris Graham last week and Diane Vieira this week as well. 

Alright, now before…oh yeah, also our last podcast that we did on Hull On Estates, we spent more time than I intend to today, but we would like to again note with great enthusiasm that Terry Fallis, our great friend at Inside PR, has won the Stephen Leacock Medal of Humour Award, which was given to him last week.  And is an incredible result for him because he self-published his book, “The Best Laid Plans”, and as a result of winning the award, he also had the book reviewed in The Globe and Mail which was very exciting for him.  So, it’s a tremendous honour for him, no doubt, but well deserved.  It’s a terrific book called, “The Best Laid Plans”, and we congratulate you, Terry.

Suzana Popovic-Montag:  That’s for sure.  Congratulations, Terry.  Your book is outstanding and it’s great to see good things happen to good people.

Ian Hull:  Okay, so let’s talk about accounting.  And it seems like a good segway because no doubt Terry is counting his money as it comes in with his self-published book.  But we finished off our last podcast and the work that we’re doing really focusing…we touched briefly on the whole question of accounting.  But certainly, and it’s one of these things with podcasting, every week that we do this you live on the experiences of the week before, and unfortunately for the clients that I’ve seen in the last week, there has been a myriad of messy accounting situations come into our office.  And, you know, you do feel very badly for some clients who do not understand some of the basic expectations of an accounting that come from your role as an estate trustee.

Suzana Popovic-Montag:  And generally speaking, what you’ll do as an estate trustee, of course, is to try to keep as detailed an accounting as possible so that you can, at the end of the day, indicate everything that’s come into the estate and everything that’s been paid out of the estate and to whom.  And as part of that whole process, you want to prepare this accounting for review ultimately by the beneficiaries of the estate.

Ian Hull:  And one of the things I like to do before we get into some of the formal steps, is the informal step of making sure my beneficiaries know what’s going on, on a fairly regular basis.  And I compare it to a stockbroker or an investment advisor who would be expected to give quarterly updates as to the status of their account with their client, but certainly would expect it to do an annual update.  And many financial planners will sort of identify annually that they have to at least once a year sit down with their client.  They will be in contact with them throughout the year, but once a year they make an effort to go and see them or meet with their financial advisor.  And that’s sort of a good benchmark if I’m an executor.  And that’s just business thinking, not necessarily fiduciary law.  There is not, sort of, something written in stone, but it’s a good informal benchmark.

Suzana Popovic-Montag:  And we certainly know from our experience, Ian, that it just helps if people are kept informed.  As soon as there’s a cloud of some secrecy or not being fully apprised of what’s going on, that just leads to uncertainty with respect to the whole process.  So it just makes sense to provide this information, provide it regularly and provide it completely.

Ian Hull:  So carrying on with this theme that should we have done that or should we be in a situation where it is not contentious, there are no beneficiaries that are upset with our work as executor, at the end of the process, and the end of the administration, you can typically write to the beneficiaries sending out your accounts, maybe in an informal form, and look to them to provide you with a release.  And that release, before you finally distribute all the money, in most cases, and, you know, this is a complicated area, but generally speaking, if you can get a release, that, in most cases, will end your involvement and it will wrap up your disclosure obligations on the estate.

Suzana Popovic-Montag:  And just to keep in mind that you can get a release in situations where all the beneficiaries are adults and have consented to the accounts.  If, though, you’ve got an incapable beneficiary or a minor beneficiary of an estate, it’s not as easy.

Ian Hull:  That’s for sure.  So, let’s talk about the more formal passing of accounts because, like you say, there are situations where, if you have a minor or you have an incapable beneficiary, you simply have to formally pass your accounts.  But there are also cases where the beneficiaries will not agree to sign a release and close things off for you, so you still need to go into the Court system to pass your accounts.

Suzana Popovic-Montag:  And the ultimate goal, just for a passing of accounts, is to provide the executor with a release from the Court now because the beneficiaries themselves may not be able to or will not consent.  And so it’s basically a stamp of approval by the Court saying that what you’ve done during the course of this administration has been proper.  And that really is important to close the loop in terms of the fiduciary responsibilities of a trustee at the end of a day.

Ian Hull:  That’s such a good point.  Because really, at the end of a day, all we’re trying to do is allow for either an informal (when you just look for a release and a letter), or a formal audit of your work.  And when you’re an estate trustee, your work really is, although we’ve talked a lot about the kinds of things like worry about burial arrangements, worry about all of this.  When it comes right down to it, your work is fundamentally based on how you handle the money; paying the bills, paying the beneficiaries and so forth.  So there is this need at the end of the process for an audit.  And whether it’s formal or informal, you want to make sure you’ve done one or the other, finally wrapped up by a blessing from Canada Customs and Revenue, who will give you what we call a Clearance Certificate.  But that’s a little different in the sense that you do that right at the end.  And so, let’s talk a little bit about the process, so people can get a sense of what you’re going to get into should you be forced to pass your accounts in the formal courtroom setting.

Suzana Popovic-Montag:  And if you’re actually doing a formal passing, we would certainly recommend the assistance of an accountant or an account preparer who is familiar with the process of preparing accounts in Court format, because those are very different.  And I know my clients are always surprised by the fact that they’re very different from the normal financial statements that accountants prepare for companies.  And it’s a very different process.  So to the extent that you can have that done properly, right from the get-go, I think it saves time and aggravation at the outset.

Ian Hull:  And if you want to get an example, and we say this to clients and they sort of glaze their eyes over it, and say, “yeah, yeah, yeah, we’ll talk to the accountant”.  But if you want to get an example of what these accounts look like, go to our webpage and there’s a Breakfast Series that we produced, and in that we talk about various passing of accounts.  And we have precedents in there of accounts that Suzana and I worked up as a format account to show people what these things actually look like, because it’s hard to describe the form of estate accounts until you see them.  But it is essentially a bank book ledger, a start to finish line-by-line listing of all of the financial transactions which then isn’t in the courtroom but then has to be backed up by receipts; no different than the real world when you’re running your own chequebook and you’re balancing your own chequebook.

Suzana Popovic-Montag:  And in terms of the actual application itself, that’s really a very formalized set of requirements that are set out here in Ontario in our Rules of Civil Procedure.  So there is, for instance, a Notice of Application that has to be issued by the Court that will refer to the accounts, will refer to the period of time during which the accounts are being passed and also set out what the claim for compensation by the estate trustee is for that period of time.

Ian Hull:  And in the materials, and they’ll always include as well a copy of the Will, or the trust or whatever instrument that you’re passing your accounts under in that sense, so you can understand or the Court more particularly can understand what should have been done at law.  For example, if it was set up in a trust arrangement where all of the estate passed to the wife and then on her death, it passed to the kids; that’s a classic spousal trust arrangement.  Well, you need to look at the Will, make sure that that was the case.  Maybe there were some specific bequests as well that needed to be paid and the trustee missed that; maybe there were $100 gifts to all the grandkids and they were never paid or something like that.  When you check the Will, you make sure that those gifts were paid.  Those are the sorts of inquiries that, you know, this doesn’t take training as a lawyer to look for, but, you know, these are kinds of inquiries that you could make at this initial stage.  So, we’re going to start, I think at this point we want to talk in our next podcast in a little bit more detail about what the process is, so that you can get a feel for it.  But, again, the application itself sets the stage, so to speak.

Suzana Popovic-Montag:  Well I think that, Ian, will wrap up this podcast for this week.  I want to thank everyone for having listened and remind our listeners that if they have any comments, that if they’d like to phone and give us their comments by voicemail, feel free to call us at 206-457-1985.

Ian Hull:  And generally speaking, of course, getting a hold of us, chasing us down with an e-mail, giving us some comments is welcomed and encouraged.  We’ve got a hullandhull@gmail.com address and obviously feel free to go to our webpage at hullandhull.com, which will guide you through a myriad of options.

Suzana Popovic-Montag:  Well, thanks very much, Ian.

Ian Hull:  Thanks, Suzana.

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.

/mem

In Rooney, the beneficiary was provided with a form of accounts, and was told that if she signed a release, she could receive a distribution from the estate. (The court was critical of this practice.) The beneficiary did so.

Later, the beneficiary sought to compel a passing of accounts. The court allowed the Application.

The trustee had asserted that because of the release, the beneficiary could not compel a passing. The court stated “It is not an answer to say that the beneficiary approved of the accounts and gave a release. One of the obligations of the solicitor acting for the trustee is to ensure that all beneficiaries have competent, independent advice in reviewing the accounts. There is no suggestion by the solicitor that he advised the [beneficiary] to obtain independent legal advice when reviewing the trustee's accounts which he had prepared.”

Additionally, the court noted that the account rendered by the solicitor to the estate was a blended account, and included both solicitor’s work and trustee work. “The solicitor was in the best position to know what charges related to which services. He was also in the best position to know what portions of his fee account should be paid by the trustee out of her compensation or by the estate. There is no evidence that he gave any advice about these distinctions to the beneficiary so that she could consider them.”

The court concluded by stating that “There is no evidence that the beneficiary executed the release knowing that double charges for the trustee's work had been made against the estate. There is no evidence that the beneficiary knew the solicitor charged the estate more for legal and trustee's services than would arguably be allowed on quantum meruit basis. In these circumstances, the release was not a fully informed one; it cannot be enforced against the beneficiary.”

What is an Estate Trustee to do to protect himself or herself? The Estate Trustee might send out accounts that are as complete and informative as possible, so that the release can truly said to be an informed one.   Solicitor’s accounts might be included, and these accounts could specify the nature of the services provided. Beneficiaries should be advised to obtain independent legal advice. 

In many cases, an Estate Trustee may wish to obtain a court passing in any event.

Thanks for reading.

Paul Trudelle

One of the responsibilities of the Estate Trustee is to prepare a set of accounts for the approval of the beneficiaries or the court, as may be required.

The decision expands on this requirement. Citing an article prepared by Rodney Hull, Q.C. (“Fundamental Principles and Concepts Relating to Executors and Trustees’ Accounts” (1983), Estates and Trusts Quarterly 146), the duty of an Estate Trustee in keeping accounts is said to include the duty:

1.                  To keep clear and accurate accounts of the estate, rendered at appropriate intervals to the beneficiaries;

2.                  To keep the accounts distinct from other accounts;

3.                  To retain supporting documents for all accounts;

4.                  To produce to any beneficiary the accounts when requested. Income or revenue beneficiaries are entitled to have accounts at reasonable intervals; accounts must be presented to residuary beneficiaries when entitled to possession;

5.                  To make all beneficiaries fully aware of their rights;

6.                  To disclose any and all breaches of trust;

7.                  To allow all beneficiaries adequate time to investigate the accounts;

8.                  To ensure that all beneficiaries have competent, independent advice in reviewing the accounts; and

9.                  To notify all interested beneficiaries of any court audit.

In Rooney, the court held that a release signed by a beneficiary was not a bar to compelling a passing of accounts. The beneficiary was not advised to obtain independent legal advice when reviewing the trustee’s accounts, and the accounts did not disclose that there were double charges for the trustee’s work made against the estate, or that the solicitor charged more for legal and trustee’s services than would arguably be allowed on a quantum meruit basis. As such, there was a breach of one of the obligations associated with keeping accounts. Furthermore, the release was not a fully informed one. Accordingly, it was not enforceable as against the beneficiary.

Thank you for reading.

Paul Trudelle

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

Paul Trudelle:  Hi and welcome to Hull on Estates.  You’re listening to Episode #88 on Tuesday, December 4^th.

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 Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

Paul Trudelle:  Hi Craig, how are you today?

Craig Vander Zee:  Good Paul, yourself?

Paul Trudelle:  Very good, thanks.

Craig Vander Zee:  Have you done your holiday shopping yet?

Paul Trudelle:  No, not at all.  That’s, that’s what Christmas Eve is for.  We were talking before…

Craig Vander Zee:  I hope you’re…wife has different thoughts on that.

Paul Trudelle:  Yeah, well I hope so too, she won’t be listening to this one.  We were talking before we started recording today about passing of accounts and how it’s very common these days to see accounts being prepared and passed.  And that often is where things end.  With a proper passing, questions can be raised, objections raised and they can be dealt with there.  But sometimes, as we’ve talked about, a trial is necessary.  So we thought today we’d talk a bit about preparing for trials in the context of contested passings of accounts.

Craig Vander Zee:  Perhaps, you know, said a different way too, with the onset of contested passings, its very regular or common that they can be resolved to everyone’s satisfaction at a pre-trial stage.  But there are certain passings, perhaps because of the size of the estate, perhaps because of the involvement of the specific parties, perhaps because of the complexity of the estate and the issues that arise from that, a contested passing can only be dealt with by way of a trial.  And there’s a number of issues that we could all consider in preparing for trial.  And again, trial preparation doesn’t begin after the pre-trial conference and before trial.  It really begins when you meet with your client and you’re identifying the issues, you’re deciding how you’re going to prove your case and how you’re going to marshall the evidence.  Because how you go about that process will ultimately leave you in a position well prepared or not so well prepared, or perhaps not as well prepared as you wanted to be, prior to trial.  So, it’s important to be mindful of a trial and the preparation that you will need for that, as you’re dealing with each of the pre-trial stages.

Paul Trudelle:  I think that’s a very fair comment.  I think everything that we do along the road in handling a file can be considered trial preparation, from the initial file meeting to how you set up the discussions with your client, the obtaining of evidence, identifying issues, and I think that just the sheer scope of the issues that the Court can deal with on a passing, often give rise to contentious matters that can’t be dealt with simply by way of an accounting, and a trial is necessary.  But I think everything we should be doing should be with an eye towards trial, and at the same time, an eye towards avoiding that trial through obtaining proper answers through resolving the issues along the way.  But I think the backdrop has to be the trial preparation.

Craig Vander Zee:  Certainly, when you’re formulating your strategy, even on a preliminary basis, it’s got to be in one’s mindset.  And albeit that a trial strategy can’t really be finalized until you’ve had the ability to marshall all the evidence and have a thorough review and careful review of the evidence to know where your client stands particularly on all the issues, certainly the mind’s eye needs to be on the trial preparation when the strategy is formulated.

Paul Trudelle:  That’s right.  And I think the solicitor has to always be aware of what is he going or she going to be able to prove in Court and how are they going to prove that in Court, if it gets there.

Craig Vander Zee:  With all of that said, Paul, I think the first place to start with is the parties themselves.  Are all the parties who ought to be involved in the passing actually involved, and if so, whether any of the parties that are involved need representation that don’t already have it.  It could very well be the case that at the beginning of a contested passing, for example, there was no one with a disability.  But if the passing, because of discovery stages, takes quite some time, perhaps there’s a party now, a beneficiary of the estate, who’s become disabled or is no longer capable and in some way needs representation that didn’t have it prior to that. 

So there are a number of questions that you can ask in dealing with this issue, some of which are again, are any of the parties self-represented, and if so, have they been notified of all of the critical steps along the way.  Has anyone filed a Notice of No Objection, has anyone filed a Statement of Submission of Rights, and if so pursuant to the Rules of Civil Procedure, they’re entitled to notification of the time and date of the trial, even if they’ve submitted their rights.   Is a minor involved, and if so, is the Children’s Lawyer involved, and again, is there an adult who is disabled or perhaps is there a representation Order necessary pursuant to Rule 10 of the Rules of Civil Procedure.  So there are a bunch of questions you can ask dealing with the issue in respect of parties.

Paul Trudelle:  I think that net has to be cast as wide as possible from the outset.  There’s nothing more embarrassing than getting to Court only to have a judge say, what about beneficiary A or potential beneficiary B?  Where are they?  Why haven’t they been notified of this?  Is this person, or are there minor interests that should be identified and the Children’s Lawyer put on notice?  That sort of thing.  It’s best to get that dealt with from the earliest stage possible, and also be aware, as you said, that the status of parties may change as time goes on and it may be that the representation will have to change as a result of that.

Craig Vander Zee:  It could very well be that the Children’s Lawyer is representing a minor at the beginning of a contested passing and the minor becomes 18 years of age during it, and as such, the Children’s Lawyer may not have jurisdiction anymore to represent that minor and that minor would then become an unrepresented party unless they get their own representation.  So there are certainly are ways where representation issues can come into play.

Paul Trudelle:  Similarly, that child may become an adult, but adults may become incapable as time goes on, especially if it’s a long, drawn out piece of litigation, in which case, other representation may need to be brought in.  So assuming we have all of the proper parties at the table and everyone has filed their Notice of Objection or submitted their rights to Court or indicated they are not taking any part in the proceedings, once we’ve gone through the pre-trial steps and we want it to get to trial, we need to set it down for trial. 

The process for setting it down for trial is set out in the Rules.  It may also be covered by the Order giving directions that the parties obtain before the litigation is started.  Rule 48 deals with setting matters down for trial and what needs to be in the trial record and the parties setting it down for trial should have mind of that, so that the matter can be put onto a trial list and eventually, depending on your jurisdiction, called to trial.

Craig Vander Zee:  There are a couple of manners in which a trial may ultimately be scheduled and attended upon.  One of them is, of course as you’ve referred to, by way of Rule 48 of the Rules of Civil Procedure which is a formal service and filing of a trial record.  It could be, though, in a contested passing, if there’s been Orders for directions, or at the pre-trial conference, where there is an Order that the length of the trial is fixed and that the actual date itself is to be set by the Registrar on dates convenient to the parties, and as such, it may not be necessary with contested passings, that a formal Rule 48 process be in place.  But that could very well depend on the location Courthouse and practice of the judges in that area as to which method is preferred.

Paul Trudelle:  Right.  Every jurisdiction seems to have their own particular practise.  The order that I normally see, though, is a provision in the Order giving directions setting out how the matter is to be set down for trial, what is to be in the trial record.  The next thing we should talk about then in preparing for trial is getting your documents in order.  I was going to say that in passing of accounts matters, documents are of particular importance.  The accounting is an accounting issue.   It’s usually based on the vouchers that the parties will have to produce and therefore the documentary production is probably paramount when preparing for trial.

Craig Vander Zee:  It’s critical, Paul, I agree with you, that the documents need to be organized and need to be organized prior to trial.  The last thing that one wants to see is, you know, the weekend or a week or two weeks even before trial, and organizing the documents and there’s documents missing.  And there may be insufficient time to get copies, to go over copies with witnesses.  So it’s critical in doing trial preparation that the documents themselves be collected and organized far in advance of the trial. 

And with a contested passing, some of the documents that you’re going to want to include or have at your fingertips are the Notice of Application, even if the matter has gone by way of pleadings in a certain…like a Statement of Claim or Statement of Defence.  You still want the original Notice of Application.  The estate accounts obviously, Certificate of Appointment, any prior judgment related to the passing even if it’s two or three passings before.  It’s always important to have the record as to when the estate administration started and how many passings there have been.  It could very well be that one of the issues really arose during a prior passing period, and the accounts during that period had been passed. 

And so you’d want to be able to prove that to the judge and deal with that.  All Orders regarding the passing of accounts before the Court, all Notices of Objections, all pleadings again, Statements of Submission of Rights.  If the parties have consented or are providing any releases, it could be that some of the parties have consented to the accounts or have released the estate trustee, and any Affidavits of Service regarding any of the documents we have discussed here.  And again, of course, all the vouchers and the documents and the productions that the parties have produced, and being mindful again that production can happen by way of Affidavit of Documents.  It can also be ordered by the Court and it can also be dealt with by agreement of the parties.  So you really want to ensure that whatever the other side is to produce, it has been produced.  And if you’ve been required to produce something, that you do it, so that no adverse inference can be drawn at Court against you that you haven’t produced a document that you want to rely on but haven’t done so, perhaps merely by inadvertence.

Paul Trudelle:  Yeah.  And the shopping list that you ran through is very important and it’s something that the Court is going to want, the parties are going to want.  That can normally be put into a compendium or a joint document brief.  I don’t think there’s any issue with respect to the relevance or appropriateness of putting those documents that you’ve referred to before the Court.  And there’s other evidence that we’ll talk about it where it may be a little harder to get before the Court.  But I think the pleadings and the other notices and the position of the parties are all matters that should be before the Court, ideally put before the Court in an organized fashion as part of a joint document brief.  And that’s something that you should, as counsel, or you may want to address at the pre-trial, to make sure that someone is taking care of that and you’re not scrambling the weekend before trial to make sure the other side has done it or you’ve…if you’re objecting, or that you’ve done it as estate trustee.

Craig Vander Zee:  Again, you know, part of the manner in which you can succeed at trial is by staying organized and knowing that the judge is following along.  And so again, with the laundry list that I mentioned, leaving aside the documents to be produced and exchanged between the parties, really dealing with the other items which were more or less pleadings, or be classified as pleadings, if they’re set out and perhaps put in a compendium for the judge, then that’s simply going to help the judge along the way and help keep the judge focused on the issues.  One thing, too, with respect to documents, is bearing in mind issues of privilege.  If there are any issues of privilege, perhaps you want to challenge a document that’s listed in Schedule B of the Affidavit of Documents as being privileged, that challenge should take place prior to the commencement of trial.  It could be that counsel haven’t identified the documents in Schedule B and you have asked them to identify that by way of an undertaking and they haven’t done that.  You’d want the answer to that undertaking before trial. 

And then another issue that can come up, although not that commonly, but can come up is under Rule 30.09 of the Rules of Civil Procedure.  And that’s where you’ve taken a position that a document is privilege, but you decide that you want to waive that privilege and use it at trial, for whatever the reason might be.  Rule 30.09 says you have to waive that privilege at least 90 days before trial.  And in doing that, you also offer the other side the opportunity to either review the document or you provide a copy to them, so that there’s no surprise to them as to the documents you’re relying on at trial.

So while that is not a common situation, it’s one to certainly remember before trial.

Paul Trudelle:  Right, and I think the issue of privilege is of particular relevance in a passing of accounts where an estate trustee is relying on solicitor advice or obtaining information with respect to administering the estate and there’s an issue as to whether that document is privileged or whether the beneficiaries are entitled to review that.  I think that’s something that the parties should want to have addressed before it gets to Court and I think the judge would also want that as well.

Craig Vander Zee:  And then perhaps lastly today, Paul, we need to always be mindful of the originals in a file.  And certainly there’s issues as to the admissibility of documents, which we’ll talk about next day.  Because certainly the document itself, the contents of it are hearsay and cannot be submitted for the truth of the contents unless there’s an exception or it’s proved by a witness.  We’ll deal with that on a different day.  And the notices that can be used under the Evidence Act to deal with that and how counsel might agree upon the use of documents so as to avoid the time and cost associated with proving the authenticity and contents of documents.  But from the standpoint of the originals of the documents, it’s always important to know what the originals in fact are.  Have they all been reviewed?  And if you don’t have an original, perhaps through inadvertence or perhaps through longevity of administration of an estate, a document has accidentally been lost…the original, that is…there’s copies of it…it’s important to know how and why the originals are no longer available.  So that can be addressed with through the measures that we’re going to talk about next day and that I just mentioned briefly a minute ago. 

So again, know the originals, know which originals you have and which you don’t.  And it could very well be that there’s handwriting on the back of an original that wasn’t photocopied because only one side of the document was photocopied.  So it is important to have had the opportunity to go through the originals and get full value of the markings on the document.

Paul Trudelle:  I think that’s right.  And we were talking about trial preparation starting when the client first comes into your office.  I think trial preparation may start as soon as the estate trustee takes on the role of estate trustee and may want to ensure that originals are  kept with the…because of the possibility that this may end up in Court and originals will be required if it goes to trial.  That’s quite a bit of information for this podcast.  It may be that…well, we will have to continue this next time.  And that may not be until after, or into the new year.  So I’d like to wish our listeners a happy new year and happy holidays.

Craig Vander Zee:  I also would like to take this opportunity to wish you a happy holiday from a podcasting standpoint because I’ll see you tomorrow but... 

Paul Trudelle:  I’ll see you tomorrow as well.

Craig Vander Zee:  …I won’t see you from a podcasting standpoint until the new year, so I’ll look forward to that and all our podcasts of 2008.

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.

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

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By way of background, section 49(2) of the Estates Act states: “The judge, on passing the accounts of an executor… has jurisdiction to enter into and make full inquiry and accounting of … the whole property that the deceased was possessed of… [including] its administration and disbursement”. Section 49(3) authorizes a judge to order the estate trustee to pay damages if the estate trustee occasioned financial loss to the estate through misconduct, neglect, or default. It is worth noting that the language is permissive, not mandatory, seemingly providing a beneficiary with the opportunity to make a later complaint.

Somewhat complicating the matter was the fact that the decision arose out of a rule 20 and rule 21 motion. However, to cut to the chase, the C.A. held that on the earlier passing of accounts the court was concerned with the proper compensation to be paid to Mr. Cheifetz as estate trustee. Conversely, in the action for damages for breach of trust, the court would be concerned with issues of a very different nature. While aspects of Mr. Cheifetz’s conduct considered on the passing of accounts might be considered in the action for damages, it would be for a different purpose and different legal considerations would apply. 

The C.A. went on to point out the undesirability of litigating the issue of breach of fiduciary duty/breach of trust on a passing of accounts (apparently disregarding the fact that a section 49 claim could be carved out as a trial of an issue). In the end, the action for damages stood and Mr. Cheifetz was permitted to litigate issues pertaining to his alleged breach even if such issues had been raised on the passing of accounts.

For a more fulsome discussion of this case, please see this week’s Podcast. Enjoy and keep reading.

Justin