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Listen to "Pet Trust Funds"
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In this episode of Hull on Estates, Ian and Suzana talk about a few case studies, the topic of substantial gifts to animals, and the community of podcasting.

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Transcription

Pet Trust Funds - Hull on Estates Podcast #76

Posted on September 11^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estates. You’re listening to Episode #76 of our podcast on Tuesday, September 11^th, 2007.

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.

Ian Hull: Hello Suzana.

Suzana Popovic-Montag: Hi there, Ian. How are you?

Ian Hull: Just great.

Suzana Popovic-Montag: That’s good.

Ian Hull: Great to be on Hull on Estates. One of the things I tried to do this summer was catch up on the podcasts over the year that I had missed. And enjoyed listening to a bunch of the Hull on Estates earlier ones to catch up a little bit on my continuing legal education. So that was kind of fun.

But today we want to sort of turn our focus on a couple of things which we find in our other podcast, Hull on Estates and Succession Planning, we do much more of. And that is sort of look at some real world and what’s the real world doing in estates. And we are always struck by the fact that the practice of law in the area of estates, whether it’s contentious or non-contentious, touches the different parts of our lives in so many ways. And I had the privilege of being interviewed by the Globe & Mail last week…not last week, I guess it was a couple of weeks ago now. In August 30^th, there was an article about what I thought was sort of a fun topic and that was the gifting of substantial gifts to animals. So why don’t we spend a couple of minutes just talking about that, ‘cause that was kind of a neat twist on estate planning that came out of New York City.

Suzana Popovic-Montag: It is an interesting twist, as you say Ian, and it’s one that we’re seeing more and more of, surprisingly. These pet trust funds and a very interesting concept. And, you know, in today’s day and age, I think we’ll see even more of it.

Ian Hull: Well, the article that we’re talking about is an article about the late Leona Helmsley who was a very wealthy woman and managed to accumulate a lot of money over her days and she left $12,000,000 in a trust for her dog. I was asked by the Globe & Mail what my impression of that was and I bluntly said that’s a lot of dough for a dog. But more importantly…

Suzana Popovic-Montag: You got quoted on that exact comment.

Ian Hull: …I did get quoted on that, that’s right. I did get that quoted. But more importantly, I just think it was an interesting dialogue that we had. There was a couple of other…Michael Sullivan, who’s the President of the…essentially the overriding…it’s not the Humane Society, but I’ll check his exact title here, but it’s…and McCray, a great lawyer from out in Vancouver, was also…Bill MacRae was also interviewed. But, you know, the twist was this. I thought it was interesting is that this brings a unique situation obviously, but it brings the issue of estates alive and in person, so to speak, and brings it to the front of what every day-to-day people see and think about and it goes to the glamorous side of estates. 

But Michael Sullivan is the head of the SPCA in Canada, had a great sort of view on it and admitted…and the article talks about the fact that people are using pet trusts more and more. And so the idea of a pet trust is, this is sort of an extreme example putting $12,000,000 in, but the idea of a pet trust is something that we can add to our arsenal of options we want to put to our clients. Because as was noted in the article, an elderly person who may have got real fond affection for their animal, a dog or a cat, may be one of the main things in their lives because they may be a bit lonely or people aren’t around as much to spend time socially with. The succession of the animal itself can be a really, really important factor in the estate plan.

Suzana Popovic-Montag: No, I think it’s really a product of our day, our generation, and I’m not surprised that it has come to that level. And I think we’ll see, as I said earlier, a lot more of these kinds of trusts and these kinds of plans being put into people’s estates.

Ian Hull: So we want to just add that to our checklist and make sure that we’ve canvassed it with our clients. Not all of them will have $12,000,000 bucks to throw around but nonetheless.

We’ve got a couple of cases we just want to make a comment on as well today, on this podcast. But before we go to that, one of the sort of underlying themes of Hull & Hull in the past year or so has been to develop and work with this whole new social media world. And in so doing, we’ve experimented with podcasting, we’ve experimented with blogging, but we’ve also had the chance to meet really great people in the new social media environment. And one of those great people is Joseph Thornley. And Joe is President of Thornley Fallis, a Public Relations firm that operates out of Toronto and Ottawa. And Suzana and I were privileged enough to be interviewed for an article that was published in the Ottawa Business Journal last…I guess it was published on August 31. It’s available on-line. But it was a fascinating sort of discussion that we had about where social media is going and what our firm has been doing with it and other firms like ours to enhance our market position, but also to spread the message of the importance of social media.

Joe really prodded us and, you know, forced us to consider what is it that, as a boutique estate litigation firm, that made the social media, the blogging and podcasting, something that we would want to sort of step into and pour our time and resources into.

Suzana Popovic-Montag: And one of the neat comments that you made in that article was the fact that we’re…and Joe picked up on this as well…that, you know, suddenly businesses are using social media in a different way, in a social environment, in a non-traditional fashion. And I think it’s been really interesting to see. Certainly our experience has seen us use it in a different fashion than we would have ever expected and yet it seems to be working.

Ian Hull: And we, you know, sort of just to give people an understanding. I mean this is, it is working. We’ve been out doing this for about a year now. Our stats are, what we consider to be, just terrific. We get literally thousands of hits on our blogs in a month, we get hundreds and hundreds of downloads of the podcasts.  And we think that it’s being downloaded and blogs are being read by people who are specifically interested in what we do. And so that’s very rewarding as well.

Suzana Popovic-Montag: And that was a neat comment that Joe himself made in the article, the fact that, you know, it’s a very narrow focused marketing. And it’s a little bit different from the traditional way where you just sort of advertise and hope that it’ll hit or stick on someone. Whereas here we’re just picking a niche and we’re really focusing on that and hopefully it’s doing a general service to everyone.

Ian Hull: So, just to wrap up.  One of the things we, you and I Suzana, get to have the privilege of doing next week or is it the week after, I forget now. But coming up soon, we’ve got a couple of interesting events that we’re going to be participating in. One is we are speaking at the Windsor Estate Planning Council about succession planning issues and estate planning and trying to factor in more than just the conventional thinking inside the box. Think outside the box a little bit, like we talked about a pet trust. Think about, you know, involving the family. Think about other unique twists and turns on making an estate plan work. And so we’re really looking forward to going down to Windsor and speaking to that group. And then Suzana, I know you’re speaking to the Ontario Bar Association a week or so later, to talk about just this point of niche marketing and niche positioning yourself in ways, of using creative ways and creative tools, with the Ontario Bar Association.

Suzana Popovic-Montag: I’m definitely looking forward to that one.

Ian Hull: So just as a sort of added little academic wing to the discussion today, I just wanted to talk about two cases briefly. Both recently decided. One is the Mernick and Mernick decision. And it came out in 2007. It’s actually just been published in the ETRs in the August edition of the Estates and Trusts Reports, at Volume 32. And the Mernick decision itself is at page 288. It’s an interesting case and really what I wanted to comment on was more about the process as opposed to the decision itself. What happened in Mernick and Mernick is, is that there was an interesting dovetailing between the Ontario Superior Court’s jurisdiction and a religious court Order.   And how that religious court Order was to be applied and how it impacted on us, on the parties outside of the religious sphere. It was a Rabbinical Court and they…without getting too much into the details, the family, two brothers, were disputing over an estate. They went outside of the Court system, so to speak, went into the religious court to resolve the problem. They resolved it and then for enforcement purposes, they had to eventually come into the Superior Court. And why I think it’s an important case is….well there’s lots of interesting cases. They talk about how the summary judgment was effected in this case and so on. But what I thought was interesting to me was how again the different worlds in a sense collide and how they work together. And more and more often, we’re seeing the role of a religious court in resolving disputes in estates is happening. I’ve participated in some of these hearings and these types of scenarios myself and I just think this Mernick and Mernick decision is a helpful decision. And take a quick look at it if you’re interested in seeing how this twist of the two jurisdictions work themselves through.

The other decision I just thought I’d point out was, and I don’t want to harp on the whole question of joint accounts endlessly. But the Nova Scotia Court of Appeal, in the Comeau decision, reported again in the same ETRs at page 216, came out with a great summary of a joint account dispute between parent and child. The deceased died intestate, survived by 10 kids and the whole question was, was the joint account for the kids surviving or was it for the 10 kids, ‘cause it was an intestacy? And what I liked about this case was it went to the Court of Appeal. Two things that I thought were helpful, because these cases are popping up so often in our practices. Number one is that it carefully reviewed the whole trial court decision process and how a court will analyze this question of joint accounts. So that if you have to roll your sleeves up and get into a fight over a joint account, you look at this decision and it talks about what were the bullet points, what were the important steps in the game to…that the court thought were important at the trial level. And so that’s good to know because again, we’re always trying to either propound or to dispute the joint ownership issue, and it depends on what side you’re on. But the second part I thought was helpful about this decision was that it then took us to that next analysis. And that was, what is an Appeal Court going to do with a carefully reasoned, properly analyzed joint account case? And in this case, they held that there was no grounds for appeal and the appeal was dismissed. But the way that the Court does it…is again, it’s one of these cases that it’s not a seminal case. It doesn’t say things that we haven’t heard before. But too often we read these cases looking for the newest word on something. But this case shows us how to, from a practical standpoint, work through and build a case on a joint account facts. And then how to deal with it at the appeal level, on both sides. So it didn’t matter whose side you were on in this one. You can learn what the Courts were looking for, the kinds of trends they’re looking for and the kinds of approaches that worked in this case. Because the facts again tie into the simple, you know, who owns on the account on death question. 

But those are just two decisions I thought were kind of fun and worth looking at from an academic standpoint. And also from a practical standpoint.

Suzana Popovic-Montag:  Well, that’s great Ian. Thank you very much for that. And we’ll speak soon.

Ian Hull: Great, thanks a lot Suzana.

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.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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Listen to "Family Cottage Cases of Ownership Transfers"
Read the transcribed version of "Family Cottage Cases of Ownership Transfers"

In this week's episode of Hull on Estate and Succession Planning, Ian and Suzana share a few stories involving cases of ownership and the family cottage.

Click "Continue Reading" for the transcribed version of this podcast.

 SFamily Cottage Cases of Ownership Transfers - Hull on Estate and Succession Planning Podcast #75

Posted on August 28^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You are listening to Episode #75 of our podcast on Tuesday, August 28^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.

Ian Hull: So, you know, having some fun with this whole cottage issue and talking a little bit about solutions instead of just about problems.  You know one thing that arose recently on a file that I thought was interesting and something that we’ve talked a little bit about this, but a real life example of what’s happened was we were in a situation where it was a relatively friendly transition of the family cottage. And lo and behold, what happened was, as we were going to deal with it, the actual title documents hadn’t been looked at for a long time. The father had died.  I’m sorry, the mother had died about thirty years ago and the father had lived in the cottage and shared it with his kids and grandkids and enjoyed it. And then the children and the grandkids came up with a solution as to how to deal with the cottage before the father died. And father was happy with the solution. And then they went to deal with it and this was a property that was north of North Bay and it was particularly problematic in terms of the title holding. And it hadn’t been dealt with for thirty years prior and had never been dealt with. So interesting enough, and that’s fine, the lawyers stepped in and they figured out, smart real estate lawyers figured out how to, you know, transfer the one property and part of it had be severed.  And there was a whole bunch of interesting legal issues. But what happened was, in the interim, when the kids, they had gelled with the solution, and then the delay which was partially the process in the system, in between the delay which took about eighteen months to clear up some of the title problems, two new kids were born into the loop.  And one of the kids had gone offside on the deal.  

So we had to go back and rework the deal, revisit almost all of the issues that we thought we’d resolved. And then ultimately, we came up with a solution.  But, I just thought it was an interesting point to make in the sense that when you go into these things, often people roll their eyes when the lawyers say, well let me see what’s involved, per se.  Do you own all of the property you’re owning?  Or who owns it and does your great-grandfather still have some estate that we have to deal with to transfer it in? Because when you go to move on these things, it’s like anything in a business deal or on any transactions. They, no matter what, life is transaction based.  And when you’ve got a deal, you wanna crystallize the deal, move forward. And then when you hit a stumbling block like this and you can’t give people the tangible result that they thought they had achieved, things loosen up. 

And in this case, things loosened up to the point where it wasn’t destructive, but it was harmful.  Because again, some of the hard feelings and things were raised again. We were just reinventing the wheel in some level. So I’ve, you know, I wasn’t involved in the early part but we learned a good lesson that it’s really important to get a handle on the true ownership interests of, in this example, the cottage property, what properties exist where, what slices of land are appropriately to go where and who owns them and what’s the history behind them. And you can do that by working concurrent with the plan.  When we get the family together and we want to work through the transition, we often will say, well let’s start from ground zero here, make sure we’re at the right spot, the starting spot, leave that to the lawyers and we’ll deal with that concurrent with our efforts to work with you in terms of the solution. 

Suzana Popovic-Montag: Ian, that’s a great story and it sort of brings to mind a story that I’ve encountered as well in the past where the ownership is not by the individuals but by corporations and private corporations owned by the individuals. And, you know, we know with family companies, people sometimes get lazy with the formalities that are required in these kinds of situations.  So directors, you know, they’re not always in place, the by-laws are not always up-to-date and the resolutions aren’t necessarily in place. So that, at the end of the day, when some form of transfer of ownership has to take place, it really can become a nightmare procedurally and at law, where by, you know, like you say, the possibility of actually losing an otherwise simple, deal can really become a reality.

Ian Hull: And one interesting thing on this, just to follow up on that too was, in the situation that I was involved with, was one of the brothers actually owned a sliver of the land and that brother had died without kids. So it added a whole twist on it and it was, everyone knew he was dead and everybody knew he had no kids.  But what we had, it added a whole twist in terms of regularizing things.  And again, it just comes back to doing your homework, if you’re gonna start the process, start early. And one of the things that I often will say to my clients, if they’re in the business of wanting to transfer, whatever it is, say it’s the cottage, the family business or whatever, start the succession plan the day you buy the business or the day you start the business or the day you buy the cottage. And start thinking through that, if that’s the goal, one of your goals, even if it’s a modest property, you never know.  I mean, people who bought cottages in Ontario and Northern Ontario in the early ‘60s and late ‘60s, early ‘70s, had no idea what these cottages would be worth today. And so you want to factor in that possibility of a transition.  Because if you buy the cottage now and you set it up in some elaborate trust arrangement for tax driven reasons, that may not be what you want to do ultimately in the sense that maybe you’ll save some tax, but you may not achieve your goal of succession. 

So talking about succession with family cottages, let’s talk a little bit about some of the basic ideas of just what we can do, transferring the cottage on your death and what steps can be taken.

Suzana Popovic-Montag: Well Ian, during our last podcast, we talked about, you know, those situations and what you would do in the situations where you were really concerned about the tax consequences of the transfer. But if the tax issues aren’t necessarily a concern for you or you’ve somehow already covered the tax liability through perhaps life insurance or some other arrangement, then you’ll likely choose to transfer your cottage or your vacation property on your death.

Ian Hull: Yeah, and that’s the likely scenario.  I mean, you know, the elaborate schemes of doing things during lifetime and things like that that we talked about before are useful and they’re worth considering. And even some of the creative schemes of passing on partial ownership and so on. But what 90% of estate planning is death-based in the sense that it’s triggered on the death. And so let’s start to flesh out some of what are the more conventional ways because there are so many ways that transfer options are available. Each with different potential benefits and really depending on your family’s current situation and future situation and prospects.  So let’s start with, let’s just talk through some of these options that are available upon death.

Suzana Popovic-Montag: Well, one of the ones that easiest comes to mind, Ian, and one that probably most people are familiar with is the concept of joint tenancy. And what joint tenancy means is that you can decide to hold your property jointly with someone else, for instance, your children or your grandchildren or some other family members who then are the joint beneficiaries of that property. And so then on your death, there’s an automatic transfer of that property to the surviving joint tenant or tenants.

Ian Hull: Now once that’s property transferred though, it passes directly to the other joint tenant on your death.  And, of course, there’s this benefit in Canada of the no capital gains are triggered necessarily depending if it goes to, for example, a spouse. If you have a joint tenancy with your cottage and it transfers to your spouse, then there’s a rollover on the tax payable. If it goes to a joint tenancy with a child, then there is no rollover available and you will crystallize part of that gain at that time. But another nice benefit is the fact that you’ll avoid probate fees likely when you pass through this joint tenancy process. 

Suzana Popovic-Montag: Now if we put on our litigators’ hat, though, Ian we certainly know that this option which is very frequently used, can however have some very complicated results or exceptions to it that often do lead to disputes.

Ian Hull: And we’ve certainly, on previous podcasts, talked about how the Supreme Court of Canada talked about joint accounts.  Well, in some ways, this is a similar scenario. And that is, what comes right down to it when you get into these disputes, is the court wants to know who really owns the asset.

Suzana Popovic-Montag: And that fundamentally is based upon what was intended at the time that the property was transferred.

Ian Hull:   And another, I guess, not to be naysayers, but another downside of joint tenancy arrangement is that if any of the joint tenants pre-decease you, their interest automatically, of course, passes to the other joint tenants. Which means that their children or other beneficiaries may not receive any of their interest in the vacation property.  And the classic illustration is if you have three children and you put your cottage in the name of yourself and the three children and your spouse having died, say a couple of years earlier. Three healthy adults and yourself.  they’ve got their own kids, you think this is gonna be a perfect estate plan. Well, if that person then tragically dies before you and you’re looking at a situation where a whole string of their children may not take the cottage.  And then you sit, you know, when you talk about these things, you say, oh gosh, nobody would do that to the grandchildren and to the nieces and nephews. But if it’s been a long period of time and certainly, in my experience, is, is that not that they’re estranged, but they’re distant typically. And so, you know what, the linkage to them and the importance of preserving their Mom or Dad’s, you know, inheritance that way on a gratuitous basis without being properly setup legally, it wanes.

Suzana Popovic-Montag: That’s for sure, Ian and we certainly can attest to that. You can also choose to give away your vacation property or your cottage property in your Will by either an outright gift or even a trust.

Ian Hull: And in most cases, the beneficiary of the property will have to wait until the Will is probated and you pay probate tax and capital gains tax on the receipt of that gift.

Ian Hull: But there’s exceptions to all of these taxes and you really need to sit down with a lawyer and determine if gifting by Will is the right answer. Alright, well, why don’t we, we’ve got some other suggestions to talk about and we’ll save them for our next podcast, that start to sort of flush out these options of transferring the cottage property on death.

Suzana Popovic-Montag: That’s great, 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.

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Listen to "Estate Law Case Study"
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In this week's episode of Hull on Estates, Justin and Megan discuss a case study.

Click "Continue Reading" to read the transcribed version of this podcast.

Estate Law Case Study - Hull on Estates Podcast #72

Posted on August 14^th, 2007 by Hull & Hull LLP

Justin de Vries: Welcome to Hull on Estates. You’re listening to Episode #72 of our podcast on Tuesday, August 14^th, 2007.

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.

Justin de Vries:  I’m Justin de Vries and I’m with Megan Connolly.

Megan Connolly: Hi.

Justin de Vries: And we’re going to discuss a case from our famous Court of Appeal. It’s actually a 2005 decision but I think it recently came into my path and I thought it was worthwhile talking about. Its Simone Estate vs…

Megan Connolly: Cheifetz.

Justin de Vries: Cheifetz, thank you Megan.  I’m not very good at that.  It’s a silent “C”. In any event, the panel was Doherty, LaForme and MacFarland.  So Megan, why don’t you take it away and just give us a little bit of the factual background and then we’ll discuss the meat of the decision.

Megan Connolly: The deceased in this case were Emidio and Laila Simone.  They were killed in a plane crash. Emidio had been an entrepreneur and he owned a tooling company. They had a lawyer who was Stephen Cheifetz and he did all of their legal work for them.  This included drafting both of their Wills.  Now in their Wills, they named him and I’m guessing each other, the estate trustees because they died together and the case says that when they died he was the only existing estate trustee.

Justin de Vries: I think that’s right.

Megan Connolly: Now the Simones’ were survived by two daughters who were eighteen and nineteen at the time.  And I think the two daughters inherited the entire estate.

Justin de Vries: And it would have been a significant estate.  And the case also says, of course, and maybe this is why, there was a decision that the relationship deteriorated between Cheifetz and the two daughters.  And then the two daughters brought an application to remove him as executor and trustee.  And he eventually resigned and then there was a passing of accounts.

Megan Connolly: That’s right.  So he brought an application to pass accounts and the daughters objected and sought through a payment of money that had been paid to him and to his holding company in the way of salary and compensation. At the passing of accounts, the judge ordered Cheifetz to repay about $500,000 in compensation and other fees that he and his holding company had received.

Justin de Vries: And there was some questions raised by Mr. Justice Flinn who was hearing the case that it may be that Mr. Cheifetz was self motivated.  But in the end, he really didn’t make any profound findings on that. And interestingly enough, the kids, the two daughters, had asked for over $900,000 to be repaid.  So they got some but not all. And then what was interesting is the TD Canada Trust Company was appointed executor of the estates of both parents as well as trustee for a family trust.  And then Canada Trust, in its capacity as estate trustee, sued Mr. Cheifetz, his wife Barbara, and two companies of which they were the sole officers and directors, their family trusts.  And as the court said “person unknown” for damages, essentially for breach of trust and breach of fiduciary duty on the part of Mr. Cheifetz while he acted as executor and estate trustee.

Megan Connolly: So Cheifetz then submitted his defence.  And Canada Trust turned around and tried to strike out parts of that defence on the basis that some of issues he’d raised in the defence had been previously decided by the judge on the passing of accounts. And they said that since these matters had already been decided, he couldn’t raise them once again.

Justin de Vries: And just from a procedural point of view, Canada Trust brought a Rule 20 motion which is a Summary Judgment Motion, which was ultimately not allowed or not granted by the judge at first instance.  And they also brought a Rule 21 motion, presumably for failing to show a reasonable cause of action or abuse of process or more likely res judicata and that was granted. And in fact, the court, in first instance, and it wasn’t Flinn ‘cause this is a separate proceeding, but the judge at first instance agreed that Flinn had already considered these matters on the passing of accounts and certain defences were struck from the Cheifetz’s Statement of Defence. That in turn was appealed to the Court of Appeal, which brings us to this decision. 

What the Court of Appeal said, which has caused, I think, some controversy among the estate bar, is that essentially all that a passing of accounts is looking at is compensation and the right amount of compensation, even though the court recognizes that Section 49 of the Estates Act says that on a passing, the court has the discretion, and it’s quite wide discretion, to look into any matters and order damages or that amounts be repaid. So many people in the bar, in the estate bar, felt that if you don’t raise it on an estate, on a passing of accounts, in other words, if you didn’t raise some sort of a claim for damages or a surcharge for money to be paid back, then you were out of luck and doing it in a separate proceeding at a later date. But this case made it clear that the court didn’t believe that to be the case.  They felt, in fact, that a passing was more or less limited as I said to compensation and that a breach of trust or breach of fiduciary duty claim was really separate.  And there was no reason that this could not be brought now. And while some of Mr. Cheifetz’s behaviour would have an impact on the breach of trust and was considered in the passing of accounts, when it was considered in the passing of accounts, it just reduced his compensation.  It didn’t go to whether or not he was negligent.

Megan Connolly: Right and the Court of Appeal said that during the passing of accounts, the judge never specifically decided or even considered whether there had been a breach of trust or breach of fiduciary duty. Now while a breach of trust could be a reason for reducing compensation, the fact that compensation was reduced doesn’t mean the judge decided a breach of trust occurred.

Justin de Vries: And Mr. Cheifetz didn’t argue interestingly enough, to say well hold on, there was a passing of accounts - you should have raised these issues as to damages because of my behaviour and an ordering back of money on the passing and therefore you’re barred because of this order from proceeding. In fact he said listen, I have a right to defend this action for breach of fiduciary duty, breach of trust and I’m doing it. And what is a little bit unclear, at least from the Court of Appeal decision and we would have to look carefully at the lower Court decision, is whether or not Section 49 was relied on to pay back the money. But I don’t think it was.  I think it was all the compensation taken by Mr. Cheifetz and part of that was ordered repaid.

Megan Connolly: Now the other point the Court of Appeal raised was that in the action for damages for the breach of trust and breach of fiduciary duty, the parties for the proceeding were different. In the action, the parties included Cheifetz’s wife, and I guess two holding companies they had an interest in. The wife wasn’t a party to the passing of accounts.  So if on the action the court had said we’ll rely on the findings of the judge in the passing of accounts, the effect would have been they would’ve in effect been binding the wife who wasn’t a party to that passing of accounts to the findings that had been made in it. 

Justin de Vries: Yeah and not surprising, the court said there’s a high onus or a high standard when that is the case. It is possible, but the court wasn’t prepared to find it in this case. What I think is interesting as well is I wonder, just sort of cloud punching, how aware or why the Court of Appeal didn’t consider the fact that on a passing of accounts where Section 49 is relied on and serious damages are asked for, or what some people call a surcharge, in other words, the money to be paid back because of a breach of trust or negligent management of monies or administration, that usually what happens is that there is a trial of an issue that is carved out.  So you can have pleadings ordered by the court, you can have discoveries, and you can have actually a trial. So it seems to me there’s some merit to say listen, on a passing of accounts, if you want to take a run at someone and want damages, you need to raise it then, because there is a procedure to handle that, and that is, trial of an issue. But the Court of Appeal said no, we essentially think that a passing is just for comp and you can always bring a breach of trust and fiduciary claim later. 

So the one cautionary note, I think, is that when people say, well there’s a passing of accounts and you’re essentially…your liability is extinguished or you can’t be sued once the accounts are passed, certainly for a breach of trust case that may not be quite as clear.  And you may be able to argue that you’re entitled to bring it, even though there has been a passing.

Megan Connolly: Right.

Justin de Vries: Alright, that’s our podcast for today.  Hope you enjoyed listening and we’ll speak with you again next time.

Megan Connolly: Bye.

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.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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Listen to "Real Case Studies"

Read the transcribed version of "Real Case Studies"

This week on Hull on Estate and Succession Planning, Ian and Suzana talk about some of the real-life case studies that they encounter every day. They  go through a case that tore a family apart: Rose v Rose, in a case over the family cottage.

Click "Continue Reading" for the transcribed version of this podcast.

Real Case Studies - Hull on Estate and Succession Planning Podcast #70

Posted on July 24^th, 2007 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You are listening to Episode #70 of our podcast on Tuesday, July 24^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.

Ian Hull: How are you doing?

Suzana Popovic-Montag: I’m good thanks, how are you?

Ian Hull: I’m just great. We’re, as we are working through our summer podcasts, a couple of things have come up. I was at a conference just before the summer.  And someone came up to me and was asking me about a specific case.  And they said to me, you know, they tried to tell me…well they went ahead and told me their story and their concerns about their own personal families.  And they said, you know, do these things really happen in real life? And, and it sort of struck me that I thought what might be fun to do for a couple of podcasts is just talk about a few cases that are of some note. That, not to get overly legalistic about the cases and what the judges are doing, but tell a bit about the story, about what happens out there, what we actually see day in and day out in the courtrooms unfolding. And it’s real family drama as we’ve said.  And we spend a lot of time trying to avoid these family dramas.  But I just thought it might be kind of fun to talk about a few of the cases that actually do land in the system, so to speak.

Suzana Popovic-Montag: I think that’s a neat idea Ian, because so many times, you know, we take these fact scenarios for granted basically, because we’ve seen so many.  And a lot of them have, you know, some common themes.  But everyone is still fact specific. But the individuals who are actually living through these difficulties, through these trying times, for them this is their one and only. And it’s really important for us as, you know, when we’re involved, to keep those kinds of things in mind.

Ian Hull: So, one of the things that we talk about and we’ve talked about on different podcasts is the family tensions that get created by what are essentially, some consider may be luxury items or recreational properties. And I was privileged to be interviewed by the Globe and Mail, and I was quoted in an article on Friday, June 29^th, about a case about a family cottage fight. And that was the case of Rose vs Rose which is, the headline calls it a “Lakeside War of the Roses”.

Suzana Popovic-Montag: And what was this case about Ian?

Ian Hull: Well it was a case about a family and how to divvy up or to split up, and as it turned out to be, the family cottage. And what was interesting, not as much about as I say.  I’m not sure it’s all that interesting for us today to go through all of the facts and the law and all of the stuff that really resulted of some note to our day-to-day practice. But more importantly, to see some of the themes that flow through this case and some of the other cases we want to talk about. 

And this case was a classic situation where a trust was arranged for the kids to enjoy the benefit of a cottage that was held in the trust. And sure enough, for…we won’t, as I say, for a variety of reasons, the trust had to be wound up. And in the course of winding up the trust, the big question came up.  What do we do with this asset? And in a lot of trusts, you might set them up with putting shares in a company.  Or say it’s a new venture and you start a company and you put shares in it or something like that. But in this case, of course, the main asset was the cottage itself. And that was the source of tension in the context of the wind up of the trust. What do we do with this asset? Short question was who gets it? And I just thought it was an interesting point.  I mean, this case is obviously become a bit of a flashpoint for people.  And I think it sends a couple of messages. One is, is that we can never forget that when we do bring these family estate planning disputes to the forefront, it can become particularly public.  And in this case, it became so public that, well, lots of the lawyers knew about it.  But then it was interesting enough even for the Globe and Mail to write a small article about it. So, you know, we want to try to create an estate plan that doesn’t cause a family fight.  But again, add the extra layer of what might be seen by some as some embarrassment for having got there…drag their dirty laundry through the media is another, you know, sort of side issue.

Suzana Popovic-Montag: I think another thing to keep in mind as well is that, you know, these fights are not always based on just the money.  But many times there’s also the principle and we’ve heard that in many, you know, situations. As well as the emotion that underlies certain assets that mean special things to different people.

Ian Hull: Okay.  So that was the first case that we sort of struck us as one that was worthy of mention. Let’s talk about another case.  One of the other cases that has come up over the last little while and we’ve talked about, and I just want to briefly remind everyone about, was just that case about what happens with joint accounts. And we don’t need to get into that anymore than to say that there has been that significant development.  And again, that was a real life situation. When we’re setting up joint accounts and the Supreme Court of Canada in the case called Pecore came down pretty clearly on that. 

One of the things that we talked about in some of our, in the process of trying to create good estate plans, is to be current and to stay on top of things. And there’s a case that came out in the last year or so called Webster vs Webster.  And in that case, they talked about limitation periods and equalization payments and some of the things, the family law questions and all of that. And again, we’re not trying to get to esoteric about the law about it.  But it was an interesting case in the sense that it reminds us that should we face a situation, as may be unfortunate as it is, that we have a contentious environment.  Or we have a problem that we think needs some attention, or some legal guidance that arises out of an estate.  We cannot forget the hard and fast rules of how quickly you have to move. So, if you’re one of these people that are sitting there and you’re kind of p----d off or you’re kind of angry about a family situation.  Mom or Dad died.  Or your grandmother died.  This decision was, and again we won’t get into all of the facts, but it was a good reminder that we can’t lie, sit back and wait around in respect of our interests. And we can’t wait too long, because if you have that occurring, you could actually lose your rights.  So you may want to be angry, you may want to get yourselves talking to a lawyer quickly and so you don’t miss limitation periods and that.

Suzana Popovic-Montag: And on the flipside of that Ian, many times people are going through a grieving process.  And so there might be situations where not just that they’re angry.  They’re looking to, you know, explore their rights.  But people who are also just in these situations who need to seek legal advice notwithstanding the fact that it’s still too fresh, and it’s still too new.

Ian Hull: Okay.  Another case that came out in the last year is a case call McMullen.  And it was an interesting case because it brought to life, which we’re trying to talk about cases that bring to life the things we’re talking about, so that we’re not just talking about esoteric points. It brought to life the limits of a Power of Attorney.  And in this case, it was this 86 year old widower who had commenced an application against two of his three daughters who held his Power of Attorney. And the application was to set aside the transfer of an interest in the father’s condominium property of his two daughters. And what basically happened was the ownership of the property got pulled out from under his wing, so to speak.  And it turned into an all out war, where the daughters were…one daughter was accusing the other two daughters of manipulating.  They were accusing the father of not having capacity, and they were fighting over money. A case that again illustrates the fact that these are tangible examples of the fact that families get torn apart.  And worst of all, you bring out the dirty laundry. You’re bringing out issues of what was essentially hatred between siblings plus issues of whether or not the father had capacity at the time.  So you were making this gentleman, you know, be tested in that sense as to capacity.  And he was being questioned as to his ability to make decisions, questioned his abilities to make, you know, bring law suits and so forth. So you can see that in this situation, it brings out the worst of everyone.  And in large part, could may have been avoided.  Who knows in this one?  May have been avoided if somebody had sat down before with the three daughters.  The father sat down and said look, this is my Power of Attorney, this is what I’ve decided to do, and this is how I’ve decided I’d like it to be, you know, managed, so to speak. And who knows in this case if it would have helped.  But this case is another illustration, a real life illustration, of how bad goes to worse.

Suzana Popovic-Montag: I think Ian, it’s also a good illustration of the fact that these documents, these Powers of Attorney that so many people make, are very important documents. And they have the potential, as we always say, to be abused and misabused by people. So when you’re setting up these arrangements, you have to keep in mind the fact that you’re choosing someone that you’re relying on implicitly to do what you would want them to do.

Ian Hull: Absolutely.  Well, I think that gives us a few illustrations.  And maybe for our next podcast, we’ll come up with a couple of more just to sort of put some meat on the bones of, you know, to illustrate that these things really do happen and they really do produce cases and produce real life situations.

Suzana Popovic-Montag: That’s great Ian.  I look forward to our next podcast.  Thank you.

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.