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Listen to The Estate Trustee During Litigation

This week on Hull on Estates Megan Connolly and Craig Vander Zee discuss the topic of the estate trustee during litigation (ETDL). Their discussion is based off a paper Paul Trudelle prepared and spoke about at the Hull and Hull breakfast series on June 4, 2009. They look at the circumstances when you would need an ETDL, the procedure for appointing the ETDL and the powers and duties of the ETDL.

For more information on this topic, see:
Jordan Atin's article, The Estate Trustee During Litigation, in 'Estate Litigation' by Brian A. Schnurr. volume 2. 2nd ed. (Toronto: Thomson Carswell, 2000)

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

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Listen to Protection For a Trustee Against Personal Liability.

This week on Hull on Estates, Craig Vander Zee and Bianca La Neve discuss protection for a trustee against personal liability. There are a variety of ways that protection is afforded to a trustee against liability, such as exculpatory clauses in trust documents, various provisions of the Trustee Act, passing of accounts, and releases by beneficiaries and/or third parties.

Feel free to send us an email at hull.lawyers@gmail.com or leave us a comment on the Hull on Estates blog.

Protection for a Trustee Against Personal Liability - Episode #151

Posted on February 24^th, 2009 by Hull & Hull LLP

Bianca La Neve: Hello and welcome to Hull on Estates. You are listening to Episode #151 on Tuesday, February 24^th, 2009.

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.

Bianca La Neve:   Hi and welcome to another episode of Hull on Estates. I’m Bianca La Neve.

Craig Vander Zee:   And I’m Craig Vander Zee.

Bianca La Neve:    If you want to be heard on Hull on Estates, you can participate by leaving us a comment, e-mail us at hull.lawyers@gmail.com or you can always visit our blog at estatelaw.hullandhull.com.

Craig Vander Zee:   How are you today, Bianca?

Bianca La Neve:   I’m great, how are you?

Craig Vander Zee:   Good, how are the little ones?

Bianca La Neve:   My little one is awesome. You have the two kids - I have the one.

Craig Vander Zee:   Yes, yes.

Bianca La Neve:   Sometimes you forget there are two, right?

So today, Craig, I thought we’d talk about your paper that you recently presented at one of the annual institutes and you spoke about protection for a trustee against liability.

Craig Vander Zee:   That’s right, Bianca. That was the annual institute for the OBA which was held on February 4^th, earlier this month. And I thought it might be worthwhile to again discuss the protections for a trustee against potential liability.

Bianca La Neve:   Now a trustee, whether incoming or outgoing, always needs to be aware and consider his or her potential liability as a trustee and over the administration of the trust. And this is because trustees are principals and not agents of beneficiaries and so prima facie they’re personally liable on obligations owed to any third parties and they can incur personal liability in tort or under statutes.

Craig Vander Zee:   That’s right. I mean, trustees are potentially personally liable when they undertake what I’ll call the office of trusteeship and that potential risk or liability can be to a beneficiary, depending on what the allegation is. Or it might be to, as you have indicated, a third party whether by way of a contract or perhaps in the law of tort or by way of a statute such as the Environmental Protection Act. And so once a trustee or an individual or a company is considering becoming a trustee - perhaps they haven’t even agreed to the appointment yet - one of the things that they would be concerned with is the potential risk that might arise from the trust that they are being asked to administer. It might also be that they’re into the actual trusteeship and issues arise and they want to consider what their potential liability might be. And so that was really one of the focuses to my paper and what I thought we would touch upon today.

Bianca La Neve:   Great. Now I guess the first step when you’re looking at what kind of protection there is for a trustee in undertaking his or her duties is you look to the trust document.

Craig Vander Zee:   Well that’s right. The trust document itself, whether it’s an incoming or an outgoing trustee, may provide terms of protection to the trustee. Sometimes these provisions are called exculpatory clauses and may appear to absolve the trustee, perhaps even entirely, from consequences of a breach of trust by the trustee. What one has to be careful about is that exculpatory clauses, even if they’re expressly contained in the trust document, may not be enforceable and may not be valid in law. A number of papers have been written on this very subject and it seems that when it comes to exculpatory clauses, although there’s not a great deal of case law in Canada, that it appears that certain principles will be held to be enforced by Canadian Courts. And those are that an exculpatory clause cannot excuse liability for acts of gross negligence. They can’t excuse liability for wilful defaults or intentional wrongdoing. That they can’t excuse liability for acts of fraud or dishonesty. On the other hand, an appropriately drafted exculpatory clause will and can be effective to relieve a trustee from liability for breaches of trust of what one might consider lesser culpability than acts of gross negligence, intentional wrongdoing or bad faith. And again, those aren’t principles that I would say are set out in certain Canadian cases per se all in the same place, but ones that come really more from a collection of cases on how the Canadian Courts might apply that.

Bianca La Neve:   And it seemed all those sort of limits that you just talked about are really self-explanatory. I mean, you would think that no matter how broad an exculpatory clause can be, you shouldn’t be able to protect against or to protect yourself from something when you did engage in fraud or dishonesty as the trustee.

Craig Vander Zee:   Well that’s certainly one side of the argument. And, you know…

Bianca La Neve:   And here as lawyers we argue both sides.

Craig Vander Zee:   Now when talking about exculpatory clauses, though, Bianca and I were really mentioning those that remove all liability, in any circumstance. But you could have provisions in a trust document which may raise the level of culpability before one is to be held accountable or liable. Or on the other hand, it could limit the extent to which a trustee might be liable in terms of the assets of the trust itself, regardless of the conduct. So there could be different provisions within the trust document that may be of assistance to the trustee. I think what we’re talking about here is really that when looking to protect a trustee, really the first step, I would think, is going to the trust document itself and carefully reading it to see what it says or doesn’t say.

Bianca La Neve:   For sure. And so after we’ve looked at that, you can also consider protection found in various statutes.

Craig Vander Zee:   Well that’s right. And one such statute, you know, is the Trustee Act itself and certainly I don’t intend to get into all the sections in the Trustee Act that would provide protection or other Acts that would provide protection, but two sections in the Trustee Act I think are certainly noteworthy. And one would be Section 28 of the Trustee Act which provides that a trustee won’t be liable for a loss in a trust arising from the investment of trust property, if the conduct of the trustee that led to the loss conformed with a plan or strategy for investment amongst other things, and that such a plan would be adopted by a prudent investor under comparable circumstances. And that’s not a word-for-word reading but, you know, certainly Section 28 deals with that. And then Section 28 deals with really the damage side of things. Section 28 is relieving a trustee of liability in a circumstance where there’s been investment losses. And 29 then goes on to damages and says that where a Court is assessing damages, it can look to the overall performance of the portfolio and taking that into consideration. And so I think those two are worth mentioning as well.

Bianca La Neve:   And I thought, you should also touch on Section 35 of the Act because this is a sort of a really good provision that you can look to when you’re considering whether the conduct of a trustee met the standard of care.

Craig Vander Zee:   Right, in Section 35 of the Trustee Act really goes to what I would call the power to excuse the trustee because and without reading it, it deals with the ability in a situation where a trustee has acted honestly and reasonably and ought fairly to be excused from a breach, can be, if in the discretion of the Court, its appropriate in the circumstances. The caveat to this is that subsection 35(2) of it indicates that this doesn’t apply to liability for a loss of a trust arising from the investment of the property.

Bianca La Neve:   If you want to be heard on Hull on Estates, you can participate by leaving us a comment. E-mail us at hull.lawyers@gmail.com or visit our blog at estatelaw.hullandhull.com. Thanks for listening.

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 Short-circuiting the frivolous will challenge

This week on Hull on Estates Natalia Angelini and Craig Vander Zee discuss the frivoulous will challenge from the perspective of how you might short-circuit it.

Feel free to send us an email at hull.lawyers@gmail.com or leave us a comment on the Hull on Estates blog.

Short-circuiting the frivolous will challenge - Episode #146

Posted on January 20^th, 2009 by Hull & Hull LLP

Natalia Angelini: Hello and welcome to Hull on Estates. You’re listening to episode number 146 on Tuesday, January 20, 2009.

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.

Craig Vander Zee: Hello Natalia, how are you today?

Natalia Angelini: I’m good Craig, how are you?

Craig Vander Zee: Excellent. Happy New Year, by the way.

Natalia Angelini: And to you.

Craig Vander Zee: Welcome to another episode on Hull on Estates. I guess this is the first one for you and I in the 2009 year so it’s a pleasure being able to do this again with you to start the year.

Natalia Angelini:  For me as well.

Craig Vander Zee: If you want to be heard on Hull on Estates, you can participate by leaving us a comment and e-mail us at hull.lawyers@gmail.com or you can visit our blog at estatelaw.hullandhull.com.

Natalia Angelini: So Craig, today we’re going to talk about the frivolous Will challenge.

Craig Vander Zee: Well, and I think more specifically, from the perspective as to how you might deal with a frivolous Will challenge to short-circuit it, if you will, or to try and deal with it, terminate the challenge as soon as possible. And I think what’s important to keep in mind is that in a typical Will challenge, the process can involve an Application or a Motion for directions, documentary discovery from parties and non-parties, examinations of parties and non-parties, perhaps even interlocutory Motions. You know, those Motions in a proceeding before a trial is actually heard. Mediation, whether formal or informal, expert reports, a pre-trial conference and a trial. So as we know, it’s a very extended process unfortunately, if the Will challenge goes from its commencement right through to and including a trial.

Natalia Angelini: Yeah, and that’s why I think that one of the best tools to manage the process of a Will challenge is an Order for Directions.

Craig Vander Zee: Well, that’s right, Natalia. An Order for Directions is often the best tool a party has at first instance to manage the Will challenge. Its through the Order for Directions that you will lay out the parties, what the issues are.  Is there any interim relief you need? Are you going to have Orders with respect to documentation production, examinations, etc.? So that is the time when you can best, in a typical Will challenge, craft how you want to manage the Will challenge going forward with a mind to the kind of evidence that you will need to marshal for the Will challenge itself as well as the prospects of settlement. And that is certainly what one would want to take advantage of in a typical Will challenge. 

Where it’s a frivolous Will challenge and its certainly identified as that, there are other alternatives or proceedings in addition to an Order for Directions that can be utilized. One being a Motion for summary judgment. Another being a Motion for security for costs.

Natalia Angelini: Right. And if you intend to bring those Motions, its I think important to have that as one or both of the provisions in your Order for Directions.

Craig Vander Zee: Well that’s right. At least if they’re not expressly in your Order for Directions, then its something that you give thought to so that (1) if you’re going to need certain evidence for a Motion for summary judgment per se, that you consider how that’s going to be marshalled, even at the time you’re doing your Order for Directions; and also how the provisions in the Order for Directions are going to deal with how the proceeding will be heard. It may very well be, given the case law, that you don’t want to expressly state in an Order for Directions that the matter will only be heard by way of trial, as you want to leave it open for a Motion for summary judgment. And while it appears that even if that form of provision were in the Order for Directions you could still proceed with a summary judgment Motion, why complicate the matter if you don’t need to, and pave the route for that kind of Motion if that’s what you think you’re going to pursue?

Natalia Angelini: Right, good point.

Craig Vander Zee: So, as we know, Rule 20 of the Rules of Civil Procedure, governs Motions for summary judgment in the civil context, both in terms of commercial litigation and in the sense of estate litigation as well. Certainly in the civil litigation context, Motions for summary judgment are by no means unusual and have found their way as a common place mode of dealing with a particular matter. There are a number of Ontario Court of Appeal cases and even Supreme Court of Canada cases that deal with Rule 20 and summary judgment Motions.

Natalia Angelini: Right, and the test which the Supreme Court of Canada set down in the case of Guarantee of North America and Gordon Capital Corp. is that the applicant has to show that there is no genuine issue of material fact requiring trial and therefore that summary judgment is a proper question for consideration by the Court. And once the moving party has shown that, then the responding party has to establish that his or her claim is really one that has a real chance of success.

Craig Vander Zee: And perhaps another way of putting it, the burden to prove that summary judgment is appropriate in the circumstances is on the moving party, that the moving party must show that there’s no genuine issue for trial, that issues of credibility aren’t existent such as to be fatal to the Motion for summary judgment. And then once that’s established, then the responding party has to step up to the plate and prove that there is a genuine issue for trial. It is possible that a responding party may not file materials on the belief that the issue of there being credibility or a genuine issue for trial is so clear cut; however the cases have indicated that…and its possible if there’s holes in the moving party’s case, that that can well indeed be fatal to the Motion for summary judgment. However the cases have indicated, though, that if it is established that there’s no genuine issue for trial, the respondent needs to put its best foot forward with respect to its evidence, play trump if you will, in order to establish that there is a genuine issue for trial.

Natalia Angelini: So why don’t we turn to summary judgment Motions in the estate context. There’s a case by the name of Straus and Bainbridge which was affirmed in 1999 by the Court of Appeal where the Court granted summary judgment in the estates context. And maybe I’ll just go through the facts briefly.

Craig Vander Zee: Sure.

Natalia Angelini: It was a Will challenge and the basic issues were not in dispute. Ms. Straus was the executrix and sole beneficiary under Mr. Bainbridge’s last Will. She was a long-time neighbour and close friend of him and his wife. His wife had predeceased him. And Ms. Straus had assisted Mr. Bainbridge in the care of his wife. It appeared that the Bainbridges had no children. However it was later revealed that Mr. Bainbridge had fathered two children as a result of a prior union. So that prior union ended when the eldest of the two children was 2 years old and the younger child was still in gestation. The facts are that there was no further contact between the two children and Mr. Bainbridge and that both children were later adopted by the mother’s second husband.

Craig Vander Zee: That’s right Natalia. And the Motion for summary judgment was brought by Ms. Straus to dismiss the challenge by one of the estranged sons, if you will, to Mr. Bainbridge’s last Will. The challenge alleged that Mr. Bainbridge lacked testamentary capacity at the time he made his Will and that the Will was procured by way of undue influence. There were some interlocutory issues dealt with by Justice Sheard and then the ultimate Motion for summary judgment was heard by Justice Hoylett who had little trouble, it appears, in granting the Motion for summary judgment and dismissing the Will challenge. On appeal, the Ontario Court of Appeal affirmed, albeit with rather short reasons, but nevertheless affirmed Justice Hoylett’s decision that Motion for summary judgment be granted in the circumstances. And what’s particularly interesting about this decision or the comments by Justice Hoylett are that he found that the responding Affidavit to the Motion for summary judgment was really a punitive Affidavit put in and was replete with speculation, innuendo, hearsay, gossip and rumour. And it went on to say that property characterized, not only has the responding party failed to play trump, but at the risk of over-extending the metaphor, His Honour said that he was afraid the responding party had played a joker. So clearly, in that particular case, the facts were such that it was clear that it was a frivolous Will challenge and the Court granted summary judgment.

Natalia Angelini: Right, and the Court didn’t expressly address the applicability of Motions for summary judgment to Will challenges. That was considered somewhat later in a couple of other decisions.

Craig Vander Zee: Well that’s right, but just on that point, in Justice Hoylett’s decision and that of the Court of Appeal as I recollect, the specific question as to Rule 20 of the Rules of Civil Procedure being the Rule governing Motions for summary judgment and its applicability to Will challenges, wasn’t considered as expressly as it was by the Court in later years. Having said that, both Justice Hoylett and the Court of Appeal did not express any difficulties in granting the Motion for summary judgment.

Natalia Angelini: Right. And after that decision, a few…about two or three years later in Knox and Trudeau and Ostrich and Brunhuber (if I’m pronouncing that correctly) the Court denied summary judgment and in the case of Knox did so on the ground that such Motions were not available in contested estate proceedings?

Craig Vander Zee: And again, what is interesting about those two decisions is that it appears anyways that they were released in 2001, days apart from each other.

Natalia Angelini: Right.

Craig Vander Zee: Unbeknownst, if you will, to the other in that neither case considered the Straus case. So it appears that Motions for summary judgment were ‘walking through the wilderness’, to use that metaphor, for several years. And it wasn’t really until Justice Cullity in his Atori decision where the applicability to Will challenges, that is summary judgment Motions in the case of Will challenges, was again expressly considered.

Natalia Angelini: Right. And there have been several cases since then that have considered summary judgment and have granted it.

Craig Vander Zee: Well, and just before we follow-up on that, in Atori, Justice Cullity did find that summary judgment Motions, despite the comments of the judges in Knox and Trudeau and Ostrich and Brunhuber was available in estate matters in a Will challenge. And as you mentioned, there were a number of cases following those ones we’ve mentioned, that have gone on to consider Will challenges and other estate matters, if you will, in the context of a Motion for summary judgment. Sometimes its granted; sometimes it’s not. But it appears that the ability to bring a Motion for summary judgment is available.

Natalia Angelini: Right, it’s no longer in question. And with that in mind, since its clear that summary judgment is available in contested estate proceedings and more specifically, in a Will challenge, its also important to note that, you know, summary judgment Motions are risky. The moving party has to first meet its onus of proving that there’s no genuine issue for trial. The evidence must be clear and concise and the credibility of witnesses cannot be in doubt, as Craig stated earlier.

Craig Vander Zee: That’s right. Competing evidence as to testamentary capacity, undue influence or the due execution, you know, can very well be fatal to the Motion and will lead to a finding that there is a genuine issue for trial. And the overlay to a Motion for summary judgment is that there are cost sanctions for both winning and losing the Motion. And Rule 20.06, I believe, deals with that. But they can be very substantial. And if you lose your Motion, even if the Will challenge itself is a weak one but the Court finds that there’s a genuine issue for trial, or competing evidence or issues of credibility, then your client could find, or a client could find themselves paying costs in respect of losing the Motion but maybe winning the Will challenge at the end of the day. And since those costs can be substantial, its always a factor, at least I would think, taken into consideration when bringing such a Motion.

Natalia Angelini: Yeah, so that said, risk also lies on the shoulders of the responding party as well. Unsupported allegations of capacity or undue influence will not likely win the day if the moving party proves there’s no genuine issue. And an Affidavit that’s replete with speculation, innuendo, hearsay, gossip and rumour, like in the Straus case, would also not win the day. You know, as is commonly said, you have to lead trump or risk losing.

Craig Vander Zee: Well and again, just before we close out Natalia, on the issue of costs. Again, the issue of costs is in the discretion of the judge. But again, it is a factor that can certainly sway one from either bringing a Motion for summary judgment if its not clear on the face of it that there’s no genuine issue for trial. So again, they’re available, they’re risky, the Court may proceed hesitantly, but there is certainly case law where summary judgment has been granted. And especially in the case of a frivolous Will challenge. But again, the burdens must be met. And with that in mind, if a summary judgment Motion is going to be brought, going back to our initial comments about Orders for Directions, it may very well be that the Order for Directions contemplates a summary judgment being brought, not necessarily expressly but leaving it open for the opportunity to do so, if it is an appropriate, reasonable and right circumstance to bring the Motion. And I think that’s where we’ll end off today.

Natalia Angelini: Great, thanks Craig. And thanks for listening. And it was a pleasure podcasting with you, Craig. I look forward to podcasting with you again soon.

Craig Vander Zee: Thanks Natalia. And again, we look forward to hearing from our listeners. You can send us an e-mail again at hull.lawyers@gmail.com. Again, be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information and discussion on today’s practice of estate law. We hope that you enjoyed the podcast again today and it was a pleasure, Natalia. 

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 Offers to Settle in the Context of a Will Challenge

This week on Hull on Estates, Craig Vander Zee and Bianca La Neve talk about offers to settle in the context of a will challenge. They explain the difference between a will challenge and civil litigation and discuss several examples of will challenge cases.

Feel free to send us an email at hull.lawyers@gmail.com or leave us a comment on the Hull on Estates blog.

Offers to Settle in the Context of a Will Challenge – Hull on Estates Podcast #137

Posted on November 18^th, 2008 by Hull & Hull LLP

Bianca La Neve: Hello and welcome to Hull on Estates. You’re listening to episode number 137 on Tuesday, November 18, 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.

Bianca La Neve: Hi and welcome to another episode of Hull on Estates. I’m Bianca La Neve.

Craig Vander Zee: And I’m Craig Vander Zee. And today I think, Bianca, we were going to talk about Offers to Settle in the context of a Will challenge. But first of all, how are you?

Bianca La Neve: I’m great, how are you?

Craig Vander Zee: Not too bad, did you have a nice weekend?

Bianca La Neve: I did, we celebrated our 5 year anniversary this past weekend.

Craig Vander Zee: Congratulations, but there’s many more to go.

Bianca La Neve: Yes, that’s what everyone keeps telling me.

Craig Vander Zee: What is the fifth anniversary? Is that a paper…?

Bianca La Neve: I don’t know and I know I didn’t get any jewellery so…

Craig Vander Zee: Well I guess that’s the tenth year anniversary, isn’t it? 

But back to the Offers to Settle. The starting point for all of this is to recognize that Will challenges, by their nature and the function of the Court with a Will challenge, is different than in civil litigation. In civil litigation, it’s maybe A Co. against, A company that is against B company, there’s a winner, there’s a loser, the Court determines and then you have cost consequences that follow. And in the context of having made Offers to Settle, those cost consequences that may follow an award usually may be affected by the Offers, depending on if the Offers are more favourable than what the result was achieved at trial.

In the Will context, of course, it is the Court that is granting the validity of the Will. And in that case, as the Will, you know, is applicable to the world at large, or in rem as it is, the Court does have a function here. Having said all of that, there is a case in Ulinick that is very often quoted that considered this very issue.

Bianca La Neve: For background purposes, the facts of the case are as follows: the deceased had executed a Will in approximately 1979 and at the time, the deceased had been in and out of hospital and had actually undergone major surgery. One of the deceased’s children ultimately challenged the Will, asserting lack of capacity and undue influence by his sibling, who was the sole beneficiary of the deceased’s estate. There were two competing opinions from medical experts as to the testator’s capacity during the time of the Will, but ultimately Justice Sheard dismissed the Will challenge.

Craig Vander Zee: And in that regard, or perhaps more specifically, Justice Sheard found that with respect to the lack of testamentary capacity, that that allegation had been justified, that is, that it was reasonable to make in the circumstances because there was actually two expert neurologists who gave competing evidence at the trial. And as such, he found on that issue while ultimately he dismissed that issue, he found that it was justifiable to bring it up. And on that issue, he then found with respect to costs that the unsuccessful party shouldn’t have to pay the costs of the successful party. It’s interesting to note, though, that with respect to the assertion of undue influence, that there wasn’t any justification according to Justice Sheard for bringing that allegation. So with respect to that allegation, Justice Sheard found that whatever the cost of the proceedings were that could be reasonably demonstrated to have resulted from that allegation, were going to be on the shoulders of the unsuccessful litigant here. And that is interesting because it wasn’t a case where Justice Sheard found that costs are payable out of the estate regardless of success, and considered even the separate allegations in terms of warding off the requirement to pay costs was going to be dealt with. On the issue of Offers to Settle, though, Justice Sheard found that the offer made on the eve of trial didn’t factor into his consideration on costs. And so in that respect, actually, His Honour found that the Offer to Settle didn’t have effect.

Bianca La Neve: But Craig, other cases in Will Challenges have considered Offers to Settle.

Craig Vander Zee: And that’s right. And perhaps before touching on some of those cases, and we’ll probably just mention them by name given the time today, but I think it is helpful to consider the traditional approach to costs and the modern approach to costs when it comes to awards in Will challenges because it does seem to signify a change in the way at least the Court intends to look at how costs are going to be applied.

Bianca La Neve: For many, many years, in most Will challenge cases, the Courts would order all or most of the costs of the parties to be paid out of the estate. Not only was the Court disinclined to require the unsuccessful party to pay the costs of the successful party, it would also direct that the unsuccessful party be partially or even wholly indemnified by the estate.

Craig Vander Zee: Well, and that meant that the traditional approach to the award of costs in a Will challenge really was a departure from the usual rule in civil litigation, which is to award costs following the event. But while I completely agree with your comment, Bianca, that in many, many cases, for many, many years, it seemed that there was almost an impunity with respect to cost consequences in dealing with Will challenges for the unsuccessful litigant, that that’s not really what the traditional approach stood for. And the traditional approach derived from a case called Mitchell and Garde which is a case from 1863. And not really wanting to go through it, it really boiled down to two principles or policy reasons for an order for costs that would guide how the Courts should look at it. And it was basically this: that the usual rule that costs follow the event will not apply where firstly, the testator or those interested in the estate have been the cause of the litigation; and secondly, where the circumstances reasonably lead to an investigation of the Will itself. 

So in the first scenario, it’s where the testator has drafted a Will which would lead one, or has done it in circumstances which would lead one, to challenge it, so where the cause of the litigation is the testator or, again, those interested in the estate. And then the second one is where there is a reasonable basis to have an investigation in respect of the document being propounded. In those scenarios, costs will not follow the event. But that became, over the years, interpreted by at least many judges to mean that there was impunity in bringing Will challenges. In the modern approach, that was more spelled out in a very directed way by the Court of Appeal in its 2005 decision of McDougall Estate and Gooderham.

Bianca La Neve: So in that case, the Court of Appeal found that the traditional approach had been displaced. The modern approach to fixing costs is to carefully scrutinize the litigation, so the Will challenge, and unless the Court finds that one or more of the public policy considerations set out by Craig applies, then a Court should follow the cost rules that apply in regular civil litigation.

Craig Vander Zee: And the Court went on to say, the modern approach to awarding costs at first instance, and again this is in a Will challenge, recognizes the importance of the Courts and the role that they play in ensuring that only valid Wills are executed by competent testators. It also recognizes, though, and this is where it is set out I think expressly now, and clarified, that the need to restrict unwarranted litigation and protect estates from being depleted by litigation, is going to be front and centre. And indeed, the Court of Appeal went on to say gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation. So from that perspective, the Court hasn’t said that in the appropriate circumstances, at least in my view, that an unsuccessful litigant in a Will challenge won’t get their costs or there won’t be the cost consequences that follow the event. But if they find that the public policy reasons that I mentioned before or the basis I mentioned before are not fittingly applied to the situation, then civil litigation rules are going to apply. And what that really is instructive as well is in respect of Offers to Settle because that would also mean that in the case where the public policy reasons are not affecting cost consequences and civil litigation rules apply with respect to costs consequences, that Offers should have that effect. Offers to Settle have been, in a number of cases, considered by Courts in Will challenges. But here it opens the door for a Rule 49 Offer to be more consistently applied because the Courts in the past have differed in their approach to Rule 49 Offers.

Bianca La Neve: So Craig, you mentioned earlier we would go through some of the cases. And in Barone Estate, without going into the facts, in the end the judge found that there was no incompatibility in applying Rule 49 and traditional non-estate cost principles to Will challenge proceedings.

Craig Vander Zee: Well, that’s right and that was a 1997 case. But then in a case the next year, the following year, Justice Haley found in Schwitzer and Pezecki that Rule 49 didn’t apply to estate proceedings. But with respect to the applicability of 49, it really doesn’t end there. And again, Rule 49 is the rule that specifically sets out, Rule 49.10, specifically sets out cost consequences when an Offer is made and is more favourable than the judgment that’s obtained, vis-à-vis the opposing party. In a case called Kerner and Fiorelli which was a case back in 1990, so 8 years before Justice Haley’s decision, the Court found that Rule 49 could not be ignored. So the case law regarding the applicability of Rule 49.10 seemed to have been unsettled. But it seems to me that the decision in Gooderham opens the door for that applicability of Rule 49 in the appropriate circumstances.

Bianca La Neve: So I think that’s a good place to wrap up today, Craig. If any of our listeners want to leave a comment, they may e-mail us at hull.lawyers@gmail.com or you can visit our blog at www.estatelaw.hullandhull.com. Thanks.

Craig Vander Zee: Thanks very much, Bianca, it’s always a pleasure.

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 Variation of Trusts

Craig Vander Zee and Bianca La Neve discuss variation of trusts, with an emphasis on the Variation of Trusts Act and approval of variations of trusts on behalf of minor, unascertained, unborn or contingent beneficiaries.  The well-known case of R. v. Irving (1975), 11. O.R. (2d) 42 (H.C.) is discussed.

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

Variation of Trusts - Hull on Estates Podcast #127

Posted on September 9^th, 2008 by Hull & Hull LLP

Bianca La Neve: Hello and welcome to Hull on Estates. You’re listening to Episode #127 on Tuesday, September 9^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.

Craig Vander Zee:  Good morning, Bianca, how are you?

Bianca La Neve: Good, how are you, Craig?

Craig Vander Zee: Very well, thank you. It’s nice to have you back here full-time back in the office after being away with your little guy.

Bianca La Neve: Thank you.

Craig Vander Zee: And it’s a pleasure to be podcasting with you today.

Bianca La Neve: It is, it is a pleasure. How was your long weekend?

Craig Vander Zee: Pretty much filled with championship baseball and soccer. The baseball was Saturday, so six hours on the diamond on Saturday for my little guy, and my little girl played in the rain for three separate games on the Sunday. But they had a blast and it was a good weekend.

Bianca La Neve: Great. So, today Craig, I thought we’d talk about variation of trusts. So in starting our discussion of variation of trusts, I think, Craig, the first step is always to look at your trust document. It’s really important to go back to basics, take a look at what the trust document says, its wording, and from there decide on what your next steps are. And those can be?

Craig Vander Zee: Well, I mean, first of all just piggybacking on that, you need to look at, it could be a testamentary trust arising out of a Will, it could be by way of settlement, it could be by other disposition.  So you need to understand the trust document and the exact wording of the document. It may be that what you really need is an interpretation of a section in the trust, or opinion, advice and direction of the court. But if those have been considered and it’s truly a variation of the trust, then when you’re considering how you want to go about it, you look towards the Variation of Trusts Act.  And when I say how you’re going to go about it, it could be that the variation arises just due to a single issue in the trust; it could be tax reasons or the trust doesn’t provide in a manner that it should, it doesn’t allow for an encroachment and everyone believes in the situation that an encroachment is absolutely appropriate and proper and consented by everyone. But it could also arise from Minutes of Settlement dealing from another procedure, such as a passing of accounts which was contested and as a result, that involves a trust, and as a result the settlement may contemplate a variation of the trust.  Obviously, that would have to be done pursuant to the Act and in consideration of the case law criteria.

Bianca La Neve: So it’s important to know that a variation of trust can be a stand-alone procedure, or proceeding, or it can be ancillary to some broader relief sought, like you had, your passing of accounts or approval of a settlement.

Craig Vander Zee: And that’s right, and even if it is piggybacking if you will, on another settlement or another proceeding, you still would bring the application itself. You still do need to bring the application under the Variation of Trusts Act. And the size of the Act or the length of the Act is quite surprising, it’s only one section in length and we shouldn’t let the length of it fool you, because we simply can’t ignore it.

Bianca La Neve: So essentially the Act permits the Court to approve a variation of a trust, whether it be under a Will, a settlement or other disposition, and allows the Court to approve it on behalf of minor, unascertained, unborn or contingent beneficiaries if the variation in the words of the Act appears to be for the benefit of those persons.

Craig Vander Zee: Well in relying on the Act for the jurisdiction to go ahead with it, there are many things to consider in pursuing the variation such as the procedure to follow and the criteria to be met for the variation to be allowed by the Court.

Bianca La Neve: Now, Craig, there is that well-known case, R. v. Irving which sets out essentially the three criteria that a Court considers in determining whether to approve the variation.

Craig Vander Zee: Yeah, and those are in summary, does the variation keep alive the basic intention of the testator or the settler? Does the variation benefit those for whom the Court is asked to consent? And then whether, and this is sort of the legal jargon, but whether a prudent adult motivated by intelligent self-interest and sustained consideration of the expectancies and risks of the variation, would likely accept it. So you first consider, who does the variation need to be done on the behalf of and then you look to those criteria.  And for the purposes of today, Bianca, we won’t be getting into the case law that have considered those criteria, because there’s certainly debate as to the importance of each of those specific criteria and how they would apply to different situations, that is, different factual situations. So we’ll leave that for a different day.  But what I thought we could focus on today, for the remainder of our session is, looking at the representation of the incapacitated beneficiaries and then touching upon briefly, the procedure. 

So essentially then, with minors, the Children’s Lawyer in a trust scenario where the minor as a respondent is going to be the representative and we’ll act as the litigation guardian for the purposes of the variation of the trust. And then we can also look at unborn and unascertained beneficiaries as well.

Bianca La Neve: And Rule 10.01(1) authorizes the Court to appoint a person to represent these interests. This is also known as a representation order. Now although Rule 10 doesn’t specifically refer to the Children’s Lawyer, Courts have traditionally appointed the Children’s Lawyer to represent this class of beneficiaries.

Craig Vander Zee: And again, when dealing with the Notice of Application that’s necessary for a variation, the Notice of Application should specifically request such a representation order in this particular circumstance.  And it may very well be that the order is sought for the Children’s Lawyer to represent all minor, unborn and unascertained beneficiaries to cover the global category of those beneficiaries. 

And then I guess lastly, Bianca, we should touch upon those beneficiaries that are mentally incapable persons or absentees.

Bianca La Neve: In the case of a mentally incapable person or absentee, where there is already a person that has the authority to act as their litigation guardian, attorney or committee, such person usually acts as their litigation guardian in these variation of trust applications, unless the Court orders otherwise. If there is no person that has the legal authority to protect the interests of the mentally incapable person or the absentee, and there is no suitable person willing to act, then the order that should be sought is appointing the Public Guardian and Trustee.

Craig Vander Zee: Well and that’s right. And I think, given the amount of time, if we’ve dealt with the representation aspect, obviously those who don’t fall into those categories, beneficiaries who are adults and who are capable, certainly ought to seek independent legal advice as well. But they are capable of obtaining that representation and what we were really touching upon were those who the Court and in law don’t see as being capable and as such, need these types of representation orders or types of representation.  And so I think given the balance of the time, we’ll just touch upon the documents that would be required for a variation.

Bianca La Neve: So the first document you need is the Notice of Application. The Application is brought in the Ontario Court General Division so in your Notice of Application the relief you are seeking is approval of the variation on behalf of the incapacitated beneficiaries.

Craig Vander Zee: And when you’re dealing with the beneficiaries, that’s whether they’re vested or contingent beneficiaries.  And while the Notice of Application is certainly the first document in the Application record, perhaps the most important document in the Application record is the deed of arrangement itself. And the deed of arrangement will set out what the terms of the variation are intended to be.  And that is well, that is being requested to be approved by the Court and is to be executed by all of those beneficiaries that have capacity. So it may also be the case that the trustees sign the deed of arrangement as well. And aside from the deed of arrangement, there would be an Affidavit that will set out what is often in the recitals of the deed of arrangement in terms of the facts in putting that before the Court so the Court can understand the situation of how it arises, and that it is in the best interests of those who the Court is asking to approve it on behalf of. And then there’s a Factum and it may very well be that a Factum isn’t necessary, that leave can be sought, that the Factum not be necessary.  And that is typical in situations where there is Minutes of Settlement arising from a proceeding and the variation is part of that proceeding, albeit an application unto itself, but that it’s clear to the Court how this variation arises. 

And then obviously there’s a draft judgment that would be circulated amongst the parties so that everybody is on notice as to what the terms of the judgment are going to be. And I think that does it for us today, Bianca.

Bianca La Neve: So thank you for listening to our discussion on variation of trusts. As always, we look forward to hearing from our listeners. You may send us an e-mail at hull.lawyers@gmail.com or leave us a message on our comment line, area code 206-350-6636 and be sure to visit our blog post daily at estatelaw.hullandhull.com.

Craig Vander Zee: Thanks very much, Bianca and I look forward to the next opportunity to podcast with you.

Bianca La Neve: Thanks, Craig.

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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