This week on Hull on Estates, Craig Vander Zee and David Smith discuss conflicts of interest during Passing of Accounts trials and rules of professional conduct.

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Passing of Accounts and a Joint Retainer - Hull on Estates Podcast #124

Posted on August 19^th, 2008 by Hull & Hull LLP

David Smith:  Hello and welcome to Hull on Estates. You’re listening to Episode #124 on Tuesday, August 19^th, 2008.

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.

David Smith: Good afternoon, Craig.

Craig Vander Zee: Good afternoon, Dave. How are you?

David Smith: I’m doing well, Craig. And Craig, today we thought we’d talk about conflicts of interest, and more specifically, Craig, what were you thinking we’d talk about?

Craig Vander Zee: Well I thought we would talk about the Olympics first, and how Canada, I believe, has got to be about 8 or 9 medals right now, so they’re just coming into their own.

David Smith: That’s right. We’re just behind Phelps.

Craig Vander Zee: But I guess you want to talk about the podcast and certainly that’s what we’re here to do.

David Smith: That’s right, that’s right, Craig. Alright, so in terms of conflicts of interest generally, the Rules of Professional Conduct, and specifically Rule 2.04 speak to this issue.  And I thought maybe you could sketch out in sort of general terms what we’ll talk about and then I’ll refer to the applicable Rule. 

Craig Vander Zee: Sure, Dave. What we thought we’d touch upon today is passings of accounts trials and conflicts that might arise at a trial or just prior to a trial, and really how to avoid them. So again, this is more specifically in the context of a passing of accounts hearing, that is, a trial if the hearing or trial ultimately becomes necessary. And really there’s two kinds of conflicts of interest generally speaking, from the standpoint of who you might be representing. It could be the case where there are multiple estate trustees, and as such, the belief certainly and the understanding and all the discussions would lead one to believe that there are no conflicts of interest as between the multiple estate trustees, that they’re on the same page with respect to all of the issues and the compensation. And the other potential set of clients you could have are beneficiaries which are objecting to the passing of accounts.

Dave Smith: Okay. And it’s beneficiaries that we’re really concerned with today.

Craig Vander Zee: From that standpoint, yeah, we’ll focus on that.

David Smith: Right. Okay.  Well, when we look at the applicable rule, Craig, it’s the Rule of Professional Conduct that talks about this. It basically talks in general terms about, you know, there’s a bit of lawyer language in there but in general terms, a lawyer can’t advise or represent more than one side of a dispute and cannot continue to act where there is likely to be a conflict of interest. And I guess the issue that’s sort of relevant to our issue which we might want to dive into is the whole issue of joint retainers and when can you, as a lawyer, act for more than one beneficiary of the estate having regard to our concern?

Craig Vander Zee: Well it’s really in a situation where you’re comfortable that they’re aligned on all of the issues and have the same thinking with respect to and the same positions with respect to all of those issues. But when we talk about a joint retainer, the retainer itself sounds like the piece of paper that you’re asking the clients to sign retaining you, and that certainly can be in the form of a letter or an agreement.  But even before I decide whether I’m going to accept multiple beneficiaries as clients, I want to explore with them all of these issues. I want to know the issues, identify the issues and then also see where their respective positions are. It could very well be that there’s really only one main consideration from all of the beneficiaries and that’s that there’s just excess compensation. It could just very well be that that’s really the fight. It’s not a fight that includes dozens or even several objections to the accounts themselves per se, it could just be a fight based on compensation. Well the fewer the issues that you’re dealing with at the trial, it would seem that it would be, frankly, narrowed in terms of the potential conflicts of interest.  So at the very beginning of the file, even though we’re talking about a trial or hearing, that is when I would want to speak to all of them at the same time and find out what their respective positions are going to be.  And then in the retainer document, I specifically include a provision that deals with the potential conflict of interest and advises them that while there is no conflict of interest at this time, should one arise, what the potential results could be of that; whether I might not be able to represent any of them, one of them. That will depend again on the very facts and the circumstances of the situation.

David Smith: Right and when we talk about joint retainers, I mean a stark illustration of a conflict would be a situation where you might learn in the course of representation that one of the beneficiaries is in debt to the estate, let’s say, and that might change their position. If that’s a situation that you become aware of as a lawyer, it’s my understanding from the Rule that you would be obligated to share that information with the other clients and if that conflict was such as to cause the clients to have a conflict which prevented you from acting, you would not be able to act for any of them?

Craig Vander Zee: Well, again, if there is a conflict, then you would want to make it exactly clear from the get-go as to what’s going to happen.  And usually, I would typically provide options as to whether there would be no possibility of being involved in the file or being partially involved in the file or representing one of the beneficiaries. It would depend on the fact circumstances. But again, right from the initial meeting, I would advise the beneficiaries that whatever one tells me cannot be held, is not confidential to the other beneficiaries.  Putting it perhaps another way, you don’t have a solicitor-client relationship with each one of them, you have it with all of them. And as such, you have to tell them up front, or at least I tell them up front, that what one shares with me is shared with all of them.  And where, sometimes at the beginning of a file everybody is on the same page, prior to a trial, circumstances could change. It may be that your clients don’t hold the same views as to settlement per se. Perhaps as you get close to trial, or even in trial, there are offers to settle which are going back and forth in respect of the issues and it may very well be that while the beneficiaries all agree on the issues and the extent of the issues, they may not all agree on the settlement aspect of all of it.

David Smith: And let me just interject, Craig. I would say that that creates the greatest likelihood for conflict, doesn’t it?

Craig Vander Zee: I would think in those circumstances, because certainly by the time you’re approaching a hearing in terms of a passing of accounts, you’ve already canvassed all the other issues.  And it would seem that the clients are all continuing on the same page or they haven’t, in which case you will have addressed that issue.

David Smith: And I guess the other issue too is, you know, settlement is always such a, especially in estate fights, it can be such a personal issue that clients feel about and some will feel that it’s a business decision and others will be driven more by emotion.  And getting them all to agree to give you the same instructions on settlement, that can be the biggest challenge when you’ve got a joint retainer.

Craig Vander Zee: Well, what you can do, and again it depends on the clients, and the circumstances, is ask the clients to put in writing what the parameters of settlement are. And then before, plenty of time before the hearing, go over those parameters with each of the beneficiaries so it’s clear what the range of settlement instructions are and get everybody’s comfort level. Ideally you’d like to be in a position to be able to approach this as early as possible so that if one of your beneficiaries needs independent legal advice, you know, that appears to be a conflict, you can refer them out for independent legal advice with respect to something and you might be able to deal with it in that fashion. If it turns out that it is a conflict, a conflict which absolutely has to be addressed by all the beneficiaries, well then there would be enough time to have that person represented separately at the hearing.

David Smith: Right. I want to explore this issue, Craig, a little more about getting instructions in writing. I think it’s an interesting point and I guess the thing that comes to mind is, in your practice, do you generally ask them all to sign one piece of paper with settlement parameters? Or do you get each of them to give you separate instructions that you then share with each other?

Craig Vander Zee: Well I think the mechanics is based on one’s own preference.  But certainly having all on the same page, I mean that metaphorically, not literally, it may very well be that you know, you send a letter with respect to instructions which are confirming and all the clients sign off on it.  Whether they sign the same page or not, they’re all agreeing to the same parameters.

David Smith: Okay, Craig, well this brings us to a good point, I think, to sum up the discussion and perhaps we can talk about the obligations generally.

Craig Vander Zee: Well again, Dave, I always canvass with multiple clients right from the get-go, sort of what the ground rules are. Again, that all information obtained from one is accessible and to be provided to the other so that there’s no issue of confidentiality as between the clients.  Again, and really at the utmost from my perspective, but what I didn’t mention earlier, is that all the clients must consent to the joint retainer. Obviously, if there’s dissention with respect to a joint retainer, then that would be a situation where I wouldn’t even embark upon a joint retainer. Again then, the retainer or letter agreement would confirm this, would confirm that they all wish me to act on their behalf.  And would also set out the consequences in the event that a conflict or a potential conflict seems to be arising as to what would be done.  And again, depending on the facts and the circumstances of the case, it could be that I no longer represent anyone, or with the consent of the parties, I continue to represent one of them. It just depends on the situation, but certainly I would not leave that unclear.  And if there was not consent amongst the multiple beneficiaries, then I would not proceed with one.

David Smith: Right. And that consent, Craig, just for clarification, would be that if there is knowledge of an existing conflict, you can still act for all of them as long as they all consent to act, notwithstanding the conflict?

Craig Vander Zee: And they’re all clear as to what that conflict is. And if there is a situation where maybe they’re not completely sure or don’t understand, then you can always refer them out to independent legal advice at that point in time, so that they can be clear in their own minds if they’re not already clear, as to how they wish to proceed.  But, you know, again, set the ground rules from the beginning, tell them of the obligations to disclose information and of any potential conflicts and if those potential conflicts appear to arise, you have to deal with it as soon as possible.

David Smith: Right and true in any case, but especially true, given our context in the passing of accounts.

Craig Vander Zee: In the passing of accounts and going from there.

David Smith: Right. Okay Craig, well this was a good discussion. Thanks very much.

Craig Vander Zee: And I guess we’re now on Day 12 of the Olympics, Dave.

David Smith: That’s right.

Craig Vander Zee: And I’m hoping that Canada’s got a few more medals.

David Smith: Let’s hope for the best! Take care.

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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Say Joe Smith is the executor of an estate but also received gifts from his mother the testator during her lifetime.  One of these gifts, say, came in the form of a transfer of a bank account into joint ownership between the two of them. 

Wearing his executor's hat (to use some traditional vernacular), Joe may have a duty to determine whether the bank account transfer was not a gift at all and actually subject to a resulting trust in which case the estate might have a claim to the asset.  Joe may need to do so because, as executor, his duty is to identify estate assets and bring them into the estate. 

However, wearing his hat as a recipient of the bank account, Joe is unlikely to want to give the bank account back to the estate. 

In short, Joe may have a conflict of interest.

In such circumstances, Joe may need two lawyers, one to advise him as estate trustee, the other to protect him personally.  Sometimes an executor’s conflict is such that he cannot continue to act as estate trustee. 

While this example may be simple enough, there is a tremendous range of conflicts that can creep into estate matters.

Thanks for reading.

Sean Graham

Posted on February 26^th, 2008 by Hull & Hull LLP

Diane Vieira: Hello and welcome to Hull on Estates. You’re listening to Episode #99 on Tuesday, February 26^th, 2008.

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.

Diane Vieira: Hi and welcome to another episode of Hull on Estates. I’m Diane Vieira and I’m here with Craig Vander Zee.

Craig Vander Zee: Good morning Diane.

Diane Vieira: Hi Craig, how are you?

Craig Vander Zee: Great, thanks. And it’s my pleasure to be podcasting with you today. We’re going to continue on talking about experts in the context of estates.  And last day, I had the pleasure of podcasting with Sarah Fitzpatrick on her initial podcast and it’s a treat to be dealing with this topic with you now. With Sarah, we had talked about experts in the context of estates, really in certain kinds of situations you might consider an expert, the timing of expert reports and other issues and considerations that come up with experts in the reports. Today what I thought we would focus on is considerations in really choosing the individual expert, not identifying the issue for the expert that’s needed. But really what might you consider in choosing an expert. And then touching upon considerations for the report itself.

Diane Vieira: So selecting an expert is probably the most critical decision that you have to make. And what should you be mindful of when choosing that expert?

Craig Vander Zee: Well, there’s certainly a number of factors. But right off the bat, you want to make sure that there’s no conflict of interest. When you’re retaining an expert, it may very well be that that expert unknowingly or unwittingly has already talked about the case with the other side. And perhaps it’s only through a thought out discussion that you identify who the parties are and who the counsel involved are and even former counsel because it may be that they’ve talked to former counsel if the matter’s gone on for quite some time. And certainly confirm that there’s no conflict of interest. What you don’t want to get into, and certainly I don’t want to find myself in this situation, is where I’ve retained an expert and then I find out after the expert report is delivered that the expert is conflicted out. And so that has to be your first or one of your very first considerations.

Diane Vieira: What about experience of the expert witness? What are you looking for in that regard? Do you want someone with Court experience, academic experience…

Craig Vander Zee: That would depend on the issue itself. Certainly experience and reputation go hand in hand when we’re looking at that consideration. And by that, I mean you want to know whether your expert is experienced in this area for a significant amount of time. Whether they may not be youngsters in terms of age, but they may not have been experts in this area for very long. Maybe they’ve had a change in career. And so you just want to discuss the background of your expert. Find out how long they have experience with this area and what kind of experience. And then dealing with the other point that you raised about Court time, you should also know whether they’ve been an expert before in another litigation proceeding. Perhaps one very much like this. Was their evidence accepted? Was it not accepted by a judge? And that can be something which may factor this particular witness as a candidate. Also with reputation, what is the reputation of your expert? And what are the comparison reputations? That is, how does the reputation of the expert that you intend on retaining or proposing to retain meet up against the likely expert for the other side. Maybe they’ve told you who the expert is, maybe they haven’t.  But maybe there is a limited number of experts in this area and you have an idea as to who they might be choosing. And so you want to have a good handle on the reputation, not of just your expert, but how that will compare to the expert that might be used on the other side.

Diane Vieira: So you basically… you want to interview the expert witness to get all this information out and something else to consider is their availability. I know sometimes the date from when the report is needed and the date from when they may need to testify in Court is months and years. And depending on who your witness is, they may have… they may be teaching somewhere out of the country, they may be on a sabbatical, so that’s also something you have to discuss right from the beginning.

Craig Vander Zee: You’ve really hit on another consideration there which is the availability of your expert. And the example that you’ve given is a very good one. It could very well be that you’re thinking of retaining an expert at the beginning of a litigious matter but perhaps for strategic reasons, you may not require a report for some months.  And then even beyond that, just because of the litigation steps and perhaps the timing of availability of trials if it were to ever go to trial… it may be months and even years down the road. You want to make sure that your expert at least understands the timing involved and when the report may very well come into play. And certainly as you’re approaching a trial, you want to make sure that your expert can be available. For example, if your expert is a professor and he or she is expecting to go on a secondment to a university in Europe for a couple of years.  It sounds like an extreme example but if it would arise, you’d want to make sure that they knew that the trial is probably going to happen while they’re away. And then, you’d also have to factor in that you’d have to pay for their cost to come back and to give evidence of the trial. So availability is an important factor.

Diane Vieira: And when you’re first interviewing that witness, I guess you’re also judging their demeanour and imagining how they would be up there when they’re testifying.

Craig Vander Zee: And I think that that’s obviously an important factor. You want to assess your expert as a witness, not just as a professional who is going to give evidence. What is your view on how they’ll hold up on cross-examination? And that kind of interrelates with another point which is, kind of client fit and case fit for a matter. And by that I mean… is this the right expert? Even given that they might have tremendous experience and good credentials, are they the right expert for your case? Is this a case where you need an institutional type of expert coming from a large firm or can you have someone from a small firm? Where is this going to be heard? Do they have local reputation versus sort of a reputation on a provincial or national basis? It may very well be that having an expert with an excellent local reputation in the area where the Court proceeding is taking place may be better than an expert who also has a good reputation but isn’t known perhaps by a local counsel or even the judges that may be hearing it.

Diane Vieira: And what about the cost of retaining an expert?

Craig Vander Zee: Well that is something that you must deal with up front, for a number of reasons. One reason is, you need to know what it’s going to cost for the expert and the experts’ costs themselves can vary from expert to expert, depending on the demands that are being put on the expert, depending on the nature of the expert report that’s going to be, depending on the number of days the expert’s going to be at trial.  So you’d like to establish all of that and you also have to do that, certainly I do it, so that my client knows up front what the cost of the expert’s going to be. And in doing that, I can tell the client, “Here, this is what the estimate is going to be. We certainly hope and trust that the cost will fit into this range.” But at least they have an idea going into the process the costs that are associated with the expert.

One thing just before we jump to the report is the subspecialties that an expert might have. It could very well be the case that your expert is… you’re retaining them for a certain area. But there could be other issues that might be coming up where you might be able to use their expertise if it’s called upon. So while you initially retain them for one issue, if they have subspecialties, it may be that they may become very useful in giving expert evidence in response to another report down the road. So that is an important factor. And again, just on the timing of the report, it’s important to convey to the expert when you expect a report to be given to you for review, because clearly, if there is the need for the opportunity to discuss with the expert the presentation of the report and have your client read it and perhaps comment on that, you want to give yourself enough time before you have to deliver it according to the Rules of Civil Procedure. And you don’t want to sort of brush up against that period of time that you have to deliver it within, if it’s not absolutely necessary. So this should be something that you take care of as soon as possible.

Before we get to the actual written report, there’s a couple of things that really from a common sense standpoint, at least I like to treat them as a common sense consideration, is the report when you get it. Is it thorough? Is it careful? Is it mainstream? Is this an extreme at the end of a spectrum type of opinion? Is that what you were expecting? So that is certainly a gauge you want to have in your mindset when you’re looking at an expert report. It’s also… is this a consensus type of report? Is this an expert that’s providing an opinion that, on the balance, would be what the majority of experts would say? Is this a report where the methodology is important? And if it is, is that methodology set out? Does it deal with the issue it needs to deal with? Are there professional differences of opinion? And this really touches upon what I was just mentioning about, is it a consensus report? And if it is a report where there are professional differences, I would want to discuss with the expert what those differences are, not just hone in on my own view of the case, but where I can expect to see some opposition because the expert is going to be cross-examined and I want to make sure that that’s covered off in the preparation of the expert. And it may very well be that we put in differences in the report if these are alternative arguments which have to be addressed. And if there are weak points on my issue, considering whether that should be in the report as well. So those are kinds of considerations that I like to consider from a general standpoint. They may seem a little bit vague because they are not formula driven, but it’s certainly things that I’m mindful of when I’m discussing what kind of report I’m expecting from the expert in terms of its presentation and format.

Diane Vieira: So in a way, you’re the first person to cross-examine your own expert witness.

Craig Vander Zee: Really, and you need to be able to do that to clearly understand the issue, I think, anyways. But then also so that you know how you’re going to attack the expert on the other side, assuming that there is one, and what to expect at a trial. And again, we’re getting these expert reports usually in the context of working towards a resolution of the matter. But ultimately, they have to be with the mindset of going before a judge at a trial. And if that is the case, you want to deal with both, not only the issues that are in your favour, but how are the issues not in your favour going to be dealt with and how are you going to deal with the other side.

Diane Vieira: Now in terms of the physical report itself, what are the reasons for including an executive summary and your academic credentials?

Craig Vander Zee: Well the C.V., the Curriculum Vitae, the academic credentials and sometimes they can be quite long, especially if you have a professor that’s done a lot of writing on a specific issue.  One, you have to establish the credibility of your expert. And obviously that can be done by your examination-in-chief when you’re introducing your expert and going through their credentials. But oftentimes at trial, the Curriculum Vitae will be just handed in with the consent of both counsel and marked as an exhibit and then you hit the highlights and that allows the trier of fact to be able to go through and see some of the main points. And that’s not always an issue between counsel, if it’s recognized that both of these individuals are experts. If you’re not attacking the credentials of the other side and they’re not attacking yours, it’s just a difference of opinion. It may very well be that the C.V. is what’s handed up as well. Again, remembering that there’s no unqualified right or no qualified right, I should say, to file the report.

Diane Vieira: Okay.

Craig Vander Zee: But as an assistance to the Court, it can be frequently done with the consent of both counsel. And again, we’re not dealing in situations where there’s juries. Often a judge may want to see the report, if it’s a very technical issue, to help with understanding the two different methodologies. It may be that the experts both agree here are the two options the judge has, they just don’t agree on which one should follow. And so both counsel want to have before the Court what the particular methodologies are. And I guess I’m getting off point now from the C.V., but the C.V. can be handed up. Also you want to establish your credentials to the other side.  Other counsel in the case they don’t know your expert and the other party before you get to a trial, so they know that you have a good expert and hopefully one that is well recognized. And then also on the formatting, I like to have an executive summary so that it’s clear what our point is upfront and easily understandable. It can be sometimes a case where, if it’s a complicated issue, if it’s an issue driven on a mathematical calculations as to what the rates of return ought to have been for certain products and present day value calculations, all of that coming into play where there’s perhaps an allegation of a malfeasance with an investment, then it may very well be the case that having the executive summary is the best way to get that point across to the other side. Again, at the back of my mind, if I want to have that report before the judge and it’s agreeable, then that executive summary will be of assistance to the judge, as opposed to having to go through the report and trying to understand it.

And again, one other factor which I always want to ensure when I’m dealing with an expert is that the expert is the one writing the report. Often being the case where the expert may have a junior and the junior is putting down on paper what the expert opines on a matter. And you want to make sure that it’s signed by the expert and the expert knows the report, it’s not just a report that was signed off without the expert knowing all aspects of the report.

Diane Vieira: Now in terms of the scope of what the expert can testify on, is that something that you discuss at the beginning and in that initial retainer letter to him?

Craig Vander Zee: Well the rules of fair play and the Rules of Civil Procedure would require that the report is supposed to encompass what the expert is going to give evidence on. So you have to make sure that the report covers the intended areas of expert opinion. And it may very well be that if a sub area comes up, that that would be dealt with, but at least with respect to the issue that you’re trying to get across to the Court in terms of an expert opinion, you want to make sure that the report covers that off clearly and in a manner that’s going to be understood by the other side. And again, with the mindset that the report might end up in front of the judge.

Diane Vieira: I think that brings us to an end of this week’s discussion. Thank you very much.

Craig Vander Zee:  My pleasure.

Diane Vieira: And just on a final note, you can send us an email at hull.lawyers@gmail.com or you can leave us a message on our comment line which is 206-350-6636. Once again, thank you and have a good week.

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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