Listen to Will Challenge Litigation - Part 11

This week on Hull on Estate and Succession Planning, Ian and Suzana talk about the differences between quantum meruit and propriety estoppel. As with any add-on claims, the courts require solid corroboration. They also discuss claims of resulting trust and claims of constructive trust.

If you have any comments, send us an email at hullandhull@gmail.com or leave a comment on our blog.

Will Challenge Litigation Part 11 - Hull on Estate and Succession Planning - Podcast #136

Posted on October 28, 2008 by Hull & Hull LLP

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, here are Ian and Suzana.

Suzana Popovic-Montag: Hi and welcome to Hull on Estate and Succession Planning. You’re listening to episode 136 of our podcast on Tuesday, October 28, 2008.

Ian Hull: Hi Suzana.

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

Ian Hull: Great thanks. It’s a big day. It’s my brother’s birthday so “happy birthday” to my brother.

Suzana Popovic-Montag: Happy birthday.

Ian Hull: And we’re going to, I’m sure he’s not listening, he’s stuck in the throws of a software development firm that is going crazy. 

Suzana Popovic-Montag: So you’re not going to sing?

Ian Hull: No, we’re not going to sing, we’ll definitely not sing. But we will invite everyone please, to come and hit our web page because we have had such great fun with feedback and just engaging in the social media world with people: estatelaw@hullandhull.com is where you can get your blog and hullandhull@gmail.com; we invite you to please feel free to send us an e-mail.

Suzana Popovic-Montag: Or feel free to leave an audio comment for us at 206-457-1985. We always appreciate hearing from people directly in terms of what they think.

Ian Hull: Absolutely. So where we left off last week was, and I actually got an e-mail from one of my colleagues about this question. And so we left off on this pointing out the difference. We talked about the concept of proprietary estoppel. We talked about the importance of not just throwing stuff at the wall to see if it sticks but pursuing claims that need to be pursued. We talked about how best to pursue it with good corroborative evidence. But what we left off was, we left it sort of with the listeners hanging, so to speak, is what’s the difference between the two? And I guess, let’s talk about the result. What is the different result that you achieve between pursuing a proprietary estoppel claim and a quantum meruit claim? And then let’s talk a little bit about what a quantum meruit claim is because then you can frame the kinds of approaches you want to take in respect of an add-on claim to a Will challenge.

Suzana Popovic-Montag:  Well Ian, I typically tend to think of a quantum meruit claim as a claim like an hourly paid claim for services rendered to someone without having been paid at the time, but with the expectation that at some later point they’d somehow be compensated. Is that sort of how you view it as well?

Ian Hull: No question. And the big difference between a quantum meruit claim and a proprietary estoppel claim is that a proprietary estoppel claim allows the Court to give you a home run. Whereas the quantum meruit claim restricts the Court because it is a fee for services claim. As you say, it’s an hourly wage based claim. How much did you work for the individual whose now died who promised to pay you when they died and didn’t? And the Court will calculate your hours. So it’s a very different claim and we’ll talk a minute about how we pursue those claims but I think the result is the key and where again we come back to being surgical about what kind of claims we want to take is that if we think we can get the home run play, and that is, get the whole house as opposed to just some repayment of hourly wages, the proprietary estoppel claim opens us up to a tremendous result. And again, we come back to the classic example of a nice, elderly gentleman who was helping a widow with her home and when she said, in one of the leading proprietary estoppel cases, this will all be yours, the Court was able to say, this is really all of yours and that meant the house as opposed to don’t worry, you’ll be looked after. And that could be construed as more of a quantum meruit claim.

So let’s talk a little bit about the history as we’re in the world of, our case law is always historic in every way. The history of quantum meruit claims, so that we can help better understand how we’re going to pursue those kinds of claims.

And we go back to the 1940s in Canada, the Supreme Court of Canada, where they started to develop the law out of England. And it basically came out of the same, the Degelman case its called and we’ll have the case in the Show Notes. But the case was much like my proprietary estoppel example in terms of the facts. And in Degelman the same sort of thing happened. A nice gentleman came to assist, in that case again, a widower and the comments were made and expectations were created that he would be paid for cutting the lawn and looking after the house and so on. And sure enough, when she died, he wasn’t. So the Court struggled with how we can deal with this unjust enrichment because the Court doesn’t like the idea that this person acted to his detriment and didn’t get paid. And so the Court basically sat down, and as you say, did an hourly wage basis analysis and said, took the Latin phrase quantum meruit, paid for work for services rendered approach, and said well, how many hours did you work and what’s a fair hourly wage? So the Degelman case established what is, I think, a really important add-on claim in a Will challenge because sometimes you can’t prove there’s lack of capacity. Sometimes you can’t prove you were promised the whole enchilada and the whole house. But you can prove your services rendered. And it comes back to this high standard that the Courts expect on corroboration and the fact that you’ve got to put such good evidence forward to the Court, or they’re not going to give you your claim.

Suzana Popovic-Montag: That’s right. I mean, the truth is, we do have the benefit of an equitable Court, I’d say, in the sense of what you just said, nobody wants to see someone work for free on an expectation that they would receive something at the end of the day. And when you’re in these situations, the facts are really going to drive, I think, the result, in addition to the evidence that you can put forward in support of it. But if you’ve got someone who is mowing the lawn, buying groceries and taking someone to appointments and that, you can see where a Court might think more in terms of a quantum meruit kind of claim, because those are kind of services that are rendered, as opposed to the other situation where you’re claiming proprietary estoppel and you’re dealing maybe specifically with maintaining a house or a farm property or something to that effect, where it might make more sense that the whole enchilada, as you say Ian, was what was expected, what was intended, and what hopefully you’ll be able to prove in terms of entitlement at the end of the day.

Ian Hull: So now that we’ve got two efficient and can be very powerful add-on claims, we also have to keep in mind the two other historic claims and that is, claims of resulting trust and claims of constructive trust. And why don’t we start with the resulting trust because that was historically, in a chronological order, the one that was established first. And it is the one that had such a big impact when you have joint assets. So let’s spend a minute on the concept of resulting trust.

Suzana Popovic-Montag: Sure Ian, that’s a good idea. Now when we talk about a resulting trust, of course we’re talking about a situation where assets are held jointly and on the death of one of them there is an expectation, either of obtaining those assets by right of survivorship or by way of a resulting trust.

Ian Hull: And what the Courts have done is they’ve said if you have an asset and say this, even if it’s not jointly in some cases, if the asset is held by an individual. So you hold an asset that over the years you have allowed me to participate in and a classic example is a cottage property. So you hold it and over the years you’re the one that has put all the money in, you bought it, you kept it up. But from time to time, I used it or I at some level paid toward the costs, that kind of situation. The Courts will look at that illustration as something that may require a resulting trust because on my death, for example, like you said, say that cottage is jointly held between you and I. On my death, it would be by right of survivorship. But what if I held the property in my own name and you had paid me all the money to buy the cottage because you were lending me the money and you hadn’t shown anything on mortgage or anything like that. The bottom line was that you ended up, the title didn’t pass to you. That scenario can create a situation where a resulting trust argument needs to be pursued. And the joint accounts is the other classic.

So anyway what we’ll do in the next podcast is talk a little bit about the examples so that we can really lock down this concept of a resulting trust and then see where it developed in a constructive trust. And we remind everyone please, look forward to your feedback at hullandhull@gmail.com.

Suzana Popovic-Montag: Or estatelaw@hullandhull.com which is our blog. And, of course, our phone number, 206-457-1985.

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 any questions or comments, please visit our website at hullestatemediation.com.

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Landen's wife appealed.  However, the Court easily concluded that the fact that legal title was in her name was irrelevant in circumstances in which the entire purchase proceeds came from the estate.  Adopting a quote from the Reasons for Decision of Justice Greer, the Court stated: "Since the money came from Landen in his capacity as a fiduciary, the constructive trust or express trust flows from him and the money can be traced from him to the house purchase and renovation." 

So too, for the same reasons, the wife's entitlement to any share of the property as the "matrimonial home" was negated.  Of passing interest to the profession was the Court's additional conclusion that Justice Greer was well within her jurisdiction by imposing a vesting order on the house for the benefit of the estate in the absence of a motion seeking such relief. 

David M. Smith

Posted on November 6^th, 2007 by Hull & Hull LLP

David Smith:  Hi.  Welcome to Hull on Estates.  You’re listening to Episode #84 on November 6^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.

David Smith: Hi, my name is David Smith.  I’m one of the partners at Hull & Hull LLP.  And with me is Megan Connolly, one of our associates.  Hi Megan.

Megan Connolly:  Hi David.

David Smith:  Megan, I thought today we would talk about constructive trust claims made against an estate by a non-married spouse.  And this was an issue that I recently wrote a blog on and noted that there is a fairly interesting case called Belvedere and Brittain Estate of the Ontario Superior Court of Justice.  Now before we get talking about the case, I just wanted to point out at the beginning the case is under appeal apparently, more as to the quantum of damages than anything else.  But it does provide a very interesting fact situation to discuss.

Megan Connolly:  The case involves an unmarried couple who had met in 2000 and had apparently moved in together in June, 2000 although that was under dispute in the case.  Now, on the deceased’s death, he didn’t provide for Laura, his common-law spouse, at all in his Will and made no other provision for her on his death.

David Smith:  That’s right, Megan.  And the claim made against the estate by Laura was based on several arguments.  She argued proprietary estoppel, basically saying that she entered into the relationship in reliance upon receiving certain gifts from the deceased’s estate.  But the primary basis upon which the Court ordered a constructive…awarded damages, was on the basis that there was found to exist a constructive trust in the estate for her benefit.

Megan Connolly:  Right.  Now she said that it was always her partner’s intention that on his death, she receive his RRSPs, the use of his house or alternatively, funds to purchase a new house, as well as a new car.  And in support of that, I guess she pointed out that in moving in with him, she had sold her home for I think less than its market value.  She had given up her car.  She hadn’t kept any of her possessions and she’d also I guess reduced her…she reduced the amount of time she spent working.

David Smith:  That’s right.  And so what the Court did, in terms of analyzing her claim, was looked at the various components of constructive trust and there is a three-fold test, which is an enrichment of the estate to the detriment of the claimant in the absence of any juristic reason.  Megan, what was it about the fact situation that made the Court think that she was enriched?  Or sorry, rather that the deceased was enriched?

Megan Connolly:  Well, as I said, when she moved in with him, she first of all had given everything up.  But she’d also spent a lot of time looking after his home.  He had a young child which she cared for.  She provided clerical support in his office.  She’d worked for Air Canada and she, I think, received heavily discounted flights for her friends and family as well as herself.  And both the deceased and his son, I guess, benefited from this.  Her family also had a condo in Florida that they would visit frequently and that they’d stay at.

David Smith:  When we talked about such an enrichment of the deceased, Megan, is it an enrichment of the estate, or is it, what do we mean exactly by enrichment?

Megan Connolly:  Well I guess basically it’s sort of the idea of getting something for nothing.  Here, the Court was saying that she’d provided, I guess, different services for him, whether it was through childcare, through maintenance to his property, to assistance with his business, etc., that she’d also been deprived as a result in that she’d given up income from her job, she’d sold her home and her car and I guess a Court’s interest is making sure that he didn’t receive anything without her also receiving a corresponding benefit.

David Smith:  It strikes me that the Court’s always interested to look at the relationship between her deprivation and his enrichment in the sense that there’s a trade-off there, isn’t there, between her loss and his gain.  And I guess that’s really what they’re talking about when they say that it’s got to be corresponding.  One thing I didn’t understand about the decision, quite frankly, was the fact that the Court considered the fact that apparently his death was unexpected and that she reacted very badly to this and caused her great emotional upset.  And the Court considered that as a factor to consider when looking at the phrase corresponding deprivation.  I mean, what do you think of that?  Because, to my mind, it’s not corresponding to any of the enrichment he gained…what do you think about that?

Megan Connolly:  No, it seemed like the Court was saying that, well he died, and it was really, really upsetting to her.  She’d apparently also been bipolar for a long time and I think this just worsened it.  She wasn’t working after his death.  And I think it seemed if not doubtful, at least questionable, whether she’d ever be able to work again.  And part of may be just, I guess, equity in a way, that the Court saw that, because of the situation, she was going to be severely I guess harmed in a sense, and wanted to correct that.  I’m not sure how solidly that’s grounded in legal principles.  I think it’s also worth mentioning that his estate was worth about $6,000,000.  So there seemed to be a lot of money to be spread around here.  And I think that was probably also a consideration.

David Smith:  And of course the third branch of the test is absence of juristic reason.  And again, this is a concept I wrestle with in the sense that I don’t think it’s always clear what a juristic reason could possibly be and what is an example of a juristic reason.  Do you have any thoughts on that?

Megan Connolly:  Well here, the defendants, the trust company, argued that her lifestyle had improved as a result of being with him.  So even if she was deprived and he was enriched, she too was also enriched by the fact that she went from, if not a low-paying job, a financial situation that wasn’t as comfortable as what she had when she was with the deceased.  And they sort of argued that that was a reason for his enrichment and her deprivation.  Now the Court didn’t accept that.  They said that, first of all, the improvement in her lifestyle was arguable, although I’m not sure if it is or not.  And that in any event, it didn’t constitute a juristic reason.  The Court also found that a lot of what she was doing was stuff she would have done even without him.  For example, the travel that they did a lot, was a result of her job at Air Canada.  And the Court found that well, she would have done that anyway.

David Smith:  That’s an interesting point, isn’t it?  So I guess really the Court’s got to look at all the circumstances.  And what struck me about this case to a large extent was, and maybe I’m being a bit cynical, but it seemed to me that the Court saw that she could not fit within the parameters of a support claim and under the SLRA, and looked for…well maybe looked for a way or looking at the facts, decided that there must be a way to benefit this woman, who had clearly given a great deal of herself to the benefit of this gentleman before he died.  And I guess, really, that’s what Courts of equity are there to do.

Megan Connolly:  And I think it’s also interesting that there was a lot of discussion in the decision about his intent.  The fact that even though he never made a Will, there was a lot of evidence that he’d intended to make one and that he’d intended to name her as the beneficiary of his RRSPs, which I think were worth about $2,500,000 at his death.  And there was also surrounding evidence from his friends and financial advisors that he’d always intended to do this.  And I think, just going back to the idea that he died in an accidental way, I think the Court was convinced that, well had he not died all of a sudden, he would have gone ahead and made these changes and that she would have become a beneficiary of the RRSPs and probably received some other money on his death.  So I think that was another, I guess, motivating reason for the Court to make the decision that it did.

David Smith:  Well that’s right.  I mean, as I understood the facts, the Court found that or considered evidence that he intended to marry her.  I think they’d even fixed a date.  And, of course, had he married her, that marriage would have revoked the Will, in which case she would have had all of the entitlements of a wife on an intestacy or under any Will that he would have made after that marriage, because of course the marriage would have revoked the pre-existing Will.

I guess to wrap it up, Megan, what I’d like to just touch on, or discuss, is the whole issue of damages here.  As I understand the nature of the appeal of this case, is primarily concerned with the quantum of damages.  The argument being that the value of the RRSP on a rollover was what she was entitled to receive. And I should point out the RRSP, as I understand it, no longer was in existence at the time of the judgment.  And so we’ve got a cash judgment payable by the estate in an amount equal to the RRSP on a rollover, even though the RRSP no longer exists.

Megan Connolly:  And I think that in this decision, the Court had also said that she wasn’t going to have to pay taxes on any of this, that to the extent taxes were payable, they’d be paid by the estate.

David Smith:  Which again is certainly a better result than would be the case had she made a support claim, in which case her support and entitlement, were it to be an income stream, would be taxable in her hands.

Megan Connolly:  And so I think this is another situation where, I mean, in the discussion of the case about constructive trusts, it was very interesting.  But I think it’s a situation where the Court sort of looked at a situation that seemed patently unfair and wanted to, I guess, manoeuvre the law in such a way as that she would get what she otherwise would have received from him.

David Smith:  Well that’s right and I mean, equitable principles are such that the law is always a flexible enough instrument and especially equity, which is again, we have to remember that estate courts historically were surrogate courts and courts of equity, rather than courts of law.  And so in that sense, the Court would be looking to make a fair decision all around.  And so in that sense, I think, you know, subject to any reversal on appeal, this is another interesting decision to consider any time as counsel we may be retained by a common-law spouse to consider a claim against an estate.

Megan Connolly:  Um, hmm, it is, so we’ll have to see what the Court of Appeal says.

David Smith:  Right.  Okay, well thanks Megan.

Megan Connolly:  Thank you, David.

David Smith:  Bye-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.

/mem

In 1995, the defendant inherited property from his aunt. The plaintiff helped pay property taxes on the inherited property. Furthermore, as the defendant became ill in 1999, he ultimately contributed less to the parties’ expenses. 

The plaintiff sought a declaration of a constructive trust over the inherited property based on unjust enrichment. The plaintiff claimed she supported the defendant over the course of many years and that her financial contribution to the defendant enabled him, among other things, to pay taxes on the inherited property. Alternatively, she sought monetary compensation for the defendant’s enrichment. 

The defining feature of the case is that the inherited property came to the defendant by way of an inheritance. As noted by the British Columbia Court of Appeal, the case was different from the majority of cases where the parties lived together and jointly built up assets over many years. If, in fact, the plaintiff was entitled to any trust claim to the inherited property, such a claim would derive from what she did after the defendant inherited it.

However, the court found that it would not be appropriate to award the plaintiff a constructive trust remedy over the inherited property, having regard to her relatively sparse direct contributions to maintaining or improving the property after the defendant inherited it. A constructive trust is the appropriate remedy for unjust enrichment only where a monetary award is insufficient and where there has been a direct contribution to the property by the party seeking such a remedy. 

According to the court, spouse-like care and assistance, some personal and some financial, entitled the plaintiff to a monetary award based on unjust enrichment. In the circumstances, the court felt that an award to the plaintiff of one-third of the value of the property accruing to the defendant was fair.

Justin

An extended family can include a spouse, former spouse whether legal or common-law, children and their respective spouses (and former spouses), grandchildren and their spouses (and former spouses), siblings, nieces and nephews, extra-marital partners and other dependents, whether related to you or not. It is possible that any one of the above-noted people might bring a claim against the estate, or raise a dispute. Jealousy amongst family members and/or the anticipation or expectation that they are to or will receive all or a portion of the estate, however unwarranted, may lead to family members taking unreasonable positions with respect to claims they feel they have against the estate.

In making an estate plan then, it is critical to have any and all agreements that may affect your estate plan prepared before you die. These agreements could include separation, marriage, co-habitation, partnership, employment and shareholders agreements depending on the nature and make up of your estate.

While the secrets one has from a family may be extremely touchy, emotional or just difficult to disclose or deal with, their disclosure following death may lead to demands against the estate. An extra-marital relationship, an illness of whatever kind not known to the family, a relationship with a caregiver or promises made to caregivers regarding their compensation can be examples of such secrets. For instance, a friend or family member may be assisting with one’s errands or day to day care. If promises are made to the family friend or relative that they will be “looked after” upon one’s death, then they may make a claim against your estate following your death if their relationship with you and/or compensation is not clearly known.

Another example might be where the major assets in the estate are real estate. The beneficiaries of those assets might well get into an unnecessary argument over the handling of such assets if there is not enough cash to pay for the liabilities (i.e. taxes, expenses) that might arise upon death. This circumstance could be avoided with the purchase of sufficient life insurance to cover these liabilities upon death.

Your choice of a personal representative for your estate should also be given serious consideration. The beneficiaries of your estate will no doubt be critical of the executor and trustee appointed under your Will if the executor and trustee are perceived to be biased to certain family members.

The causes of estate litigation discussed in yesterday’s and today’s blogs are not an exhaustive list. The causes discussed are not in and of themselves a legal basis to make a claim against the estate. Having said that, if one does not have a well planned estate plan, the causes discussed can often lead to family members or others who believe that they deserve or are entitled to a portion of the estate to look for a basis upon which to challenge your Will or bring a claim against the estate for dependent’s relief under the Family Law Act, breach of contract or perhaps constructive trust.

Have a great day.

Craig.