Listen to Will Challenge Litigation - Part 12

This week on Hull on Estate and Succession Planning, Ian and Suzana clarify the distinction between 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 12 – Hull on Estate and Succession Planning – Podcast #137

Posted on November 7, 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 137 of our podcast on Tuesday, November 4^th, 2008.

Ian Hull:  Hi Suzana.

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

Ian Hull:  Just great.

Suzana Popovic-Montag:  That’s good.

Ian Hull:  Remember, of course, we’ve got our call-in, 206-457-1985.

Suzana Popovic-Montag:  And please feel free to continue with the feedback at hullandhull@gmail.com.

Ian Hull:  And speaking of feedback, we got an interesting comment on our last podcast and thought we might touch on it today as we were working through additional issues beyond the Will challenge, but in the context of a Will challenge.  And the comment was that they didn’t understand when we referred to a Supreme Court of Canada case, the Picori decision, how it sort of was relevant.  So it was a timely question and one that we are going to deal with today actually because we want to talk a little bit about what those two claims are and how they fit into a global Will challenge piece of litigation.  They can be separated from Will challenge litigation but they also can be part and parcel of the Will challenge.  So why don’t we spend a little bit of time talking about them.  First of all, the concept of resulting trust is again and what constructive trust is again, and then we’ll talk a little bit about how we’re using them in our day-to-day practice.

Suzana Popovic-Montag:  That’s great Ian.  And we know basically that a resulting trust is a trust that arises at law by virtue of the fact that Courts are looking for ways to make sure that people are treated equitably.  And so if someone is left in a situation where they ought to be able to make some kind of claim against a certain pool of funds, for instance, or some other type of asset, that this remedy is something that is available to them.

Ian Hull:  And the constructive trust, really the concept comes from this idea of unjust enrichment that we talked about and that someone’s done work and not been paid for it.  It’s as simple as that.  With the constructive trust world and where it developed, and it certainly developed very intensely out of the United Kingdom and the in Canada.  In Canada, there was sort of a trilogy of cases that developed.  But what happened was, the cases that started if off and why its sort of helpful is that it gives us an idea of how its being used today, is that the Courts sat back and said, in this case, the Murdoch and Murdoch decision and the following decisions that came from that, the Court sort of said look, there was an unequitable treatment of a husband and wife.  This was pre-family law equalization times.  And the Court said, well the wife has demonstrated that she participated equally in the marriage but on death, I mean not on death, in this case on marriage breakdown, the assets were being split up based on legal title.  And the Court said that’s not fair.  So they stepped in and said if you’re going to participate, you are constructively holding, you’re actually participating in the growth and the build up of assets, then you’re entitled to be replenished from your work.  And whether you have legal title, whether the farm is in your name or its not, the Courts have said that doesn’t really matter.  What matters is, what did you do?  And it comes back to our similar way that we looked at quantum meruit as well.

Suzana Popovic-Montag:  And in fact unjust enrichment is very, very similar to constructive trust except whereas you’re looking for payment of money in the cases of unjust enrichment, with constructive trust you’re usually looking to have some kind of claim to an asset itself, some interest in, you know, because these cases seem to have arisen in a family law context, an interest in the family home or some other property that is owned by one of the two people in a relationship.

Ian Hull:  So that’s developed and in the estates law, the constructive trust claim is prevalent, certainly easily identified in a Will challenge scenario when you might have someone who is excluded from the Will.  And say doesn’t get any of the family farm, and let’s say it’s the son.  But that son has been working the farm for many, many years.  And instead of looking to get paid for work and services as we did in quantum meruit or instead of trying to create a claim of proprietary estoppel which we talked about in a prior podcast, there is the claim that that asset is being held in trust by virtue of the work and services performed, and that you’re entitled to a portion of it.  Not maybe more than you’d get paid on a quantum meruit, maybe less than you’d get on a proprietary estoppel.

Suzana Popovic-Montag:  And just by virtue of a claim, of course, Ian, there has to be a real relationship between the work that was done for the property and the property itself.  So that’s what takes this sort of, I think, outside of the box of being entitled to just a money payment for services rendered, that there’s actually a correlation between what you did and the property that you were doing it for.

Ian Hull:  Absolutely.  So I think its just one of those things that if we can consider, looking at both resulting trust and constructive trust.  We’ve talked a little bit about the distinction.  Sometimes on the facts it’s a distinction without any difference because you’re sometimes looking at trying to oppose a constructive trust or a resulting trust over a joint bank account.  You can sometimes impose it over land or specific items.  So, you know, we’ve tried to get into the distinction a little bit today but as long as we remember, and we try to remind our clients, you know, it’s an option.  And it is part of the various approaches that we may or may not want to take when we’re dealing with a Will challenge-like scenario where we have been excluded or we are excluded and on what basis.  And I think really from our perspective anyway, it is one of the more difficult claims to pursue.  So we typically don’t want to pursue it unless we think we’ve got some decent hold on it because it’s a bit of a flaky claim, to use a term of art and the Courts are not going to use it unless you’ve got the rights facts.  And where the Courts have historically imposed these kinds of trusts is when you’ve got obvious unjust deeds being done here, where someone has been unjustly treated at a level that there is no other way to solve it but by imposing these principles of equity on top of the facts and ultimately then coming to the Court, coming to say look, now I have a legal reason to say why that farm should go to Johnny and actually I only need 25% of the farm to go to Johnny because that represents the efforts that Johnny put into the farm property.

Suzana Popovic-Montag:  That’s a really good point, Ian, because the truth is, these kinds of cases are hard to demonstrate factually because of the requirement for corroboration, because of the fact that so much of the evidence that would traditionally be led is more or less viewed by the Court as self-serving evidenced.  And so to be able to find third party evidence of these situations is not necessarily that easy, but when it is, then strictly these claims are ones that we do pursue and as best as we can in the circumstances, knowing of course that there’s no guarantees even with that at the end of the day.

Ian Hull:  Absolutely.  Alright, well before we turn to our next topic, one of the things that we’re trying to work through with our video podcasts is we’re going to, from time to time as well, we wanted to let everyone know that we’re going to try to do from time to time an audio and a video blog where we run into an issue that demonstrates a really interesting point that in and of itself doesn’t justify a whole podcast or a video podcast, but might be worthwhile having a couple of minutes.  So you’ll see us, from time to time, putting our little short snippets in, hopefully they’re helpful.  And we have a couple of ideas and really we’re going to try to do is just grab them from our practice.  And it may not happen once a week, it may not happen once a month, but every once and a while you’ll see that.  So we look forward to that new little twist in our day-to-day social media efforts.

So thank you very much. That winds up, I think, our discussions for today’s podcast.  We’ll continue with our Will challenge series and please feel free to send us an e-mail at hullandhull@gmail.com.

Suzana Popovic-Montag:  Or, of course, call us and leave us a video comment at 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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This week on Hull on Estates, David Smith and Natalia Angelini talk about the duties an estate trustee he or she is charged with from the moment of a testator's passing. Duties include locating the will, making funeral arrangements and being responsible to see the intentions of the testator preserved.

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

Dealing with Estate Issues That Arise Immediately Upon Death - Hull on Estates Podcast #135

Posted on November 4^th, 2008 by Hull & Hull LLP

Natalia Angelini: Hello and welcome to Hull on Estates. You’re listening to Episode #135 on Tuesday, November 4^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: Hi and welcome to another episode of Hull on Estates. I’m David Smith.

Natalia Angelini: And I’m Natalia Angelini.

David Smith: 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 visit our blog at estatelaw.hullandhull.com. Hello, Natalia.

Natalia Angelini: Hi David. How are you?

David Smith: You know I’m okay. I’ve got a bit of a cold so my voice is about an octave lower than usual, but we’ll do our best today. So today, Natalia, we thought we were going to talk about the issue of what duties an estate trustee is charged with from the minute the deceased passes away.

Natalia Angelini: Right. It’s a really interesting topic because it’s a time when I think the estate trustee has to act fairly quickly to do a number of things, and I think the first of those is locating a Will.

David Smith: That’s right and I suppose at the outset too, we should give a little plug to Paul Trudelle of our office who has given a paper.  And there’s a webcast available on the website dealing with this issue as well. We’re, in our podcast, going to try and explore in a little more detail some of the issues that Paul touched on in his discussion.  So we commend that webcast to you. So I guess, what’s the first issue that usually arises for the estate trustee?

Natalia Angelini: I think the first can definitely be finding the Will of the deceased, because the first thing the estate trustee wants to ascertain is what the deceased’s testamentary wishes were.  And so that’s definitely an important thing to look for.

David Smith: That’s right and of course, you know everybody keeps their stuff somewhere different. In some cases, it’s a safety deposit box. In other cases, it’s a filing cabinet, under the mattress. It will depend on the person.  So if the executor is charged with the responsibility to look for the Will, they’re going to look in the obvious locations, and hopefully be able to find the Will.  And of course, the lawyer plays a role, because if the lawyer is known, he or she might have a copy of the Will.

Natalia Angelini: Right, exactly, so it’s a good idea to make inquiries with the lawyer of the deceased if you know who that lawyer is, or perhaps looking through the deceased’s personal papers, you can determine who the lawyer is and contact him or her that way.

David Smith: Right and you know, if you get into a situation where there’s just no luck finding a Will, you can advertise in the Ontario Reports.  That happens on occasion, we all see lawyers do that on the odd occasion.

Natalia Angelini: Right.

David Smith: When someone says, yeah, I knew so and so had a Will but I didn’t know who drew it.

Natalia Angelini:  Um hm. So I think aside from finding the Will, and probably one of the next things that the estate trustee is going to definitely be thinking about is making funeral arrangements.

David Smith: That’s right. And in the cases of an unexpected death, obviously that’s going to probably be a situation where the executor’s got to take some action of their own accord. Of course, with older people and people who are contemplating their own death through illness or what-have-you, or some other really sad situation, we’re seeing more and more that people will prepay their funeral or have them organized ahead of time.  But in most instances, the estate trustee is going to have to deal with this, you know, obviously rather unpleasant task, and certainly it’s the foremost concern.

Natalia Angelini: Absolutely.  And with respect to payment of the funeral, I think it’s helpful to note that those costs are of priority payment and come out of the assets of the estate.  So if it’s not prepaid then at least the estate trustee hopefully has assets available to make that payment.

David Smith: Well that’s right and it’s probably worth just making the point at this stage too, that the government provides a death benefit of $2,500.  And really that’s there primarily to fund the cost of the funeral or to contribute towards the cost of the funeral.

Natalia Angelini: Right, that’s a good point. In dealing with the funeral, I think this is a real interesting one, especially if you’ve maybe got a dispute between family members as to how it should happen, and potentially that may even differ with what the deceased has set out in his or her Will, and you’ve got a really interesting situation about how this deceased person is going to be put to rest.

David Smith: Well you’re right Natalia and we’ve seen situations where it’s potentially very emotionally volatile. You can have a situation where you have religion sometimes clash with the intentions of the testator. There’s one case where, the name escapes me, but Rick Bickhram of our office recently, I think a couple of weeks ago, blogged on a case where a deceased person named her boyfriend as executor. He was charged with acting as executor and intended to cremate her remains. The family, for religious reasons, opposed that and this matter ultimately went to Court and the Court decided that it was in the authority of the executor to make that decision.

Natalia Angelini: Right, and during Paul’s talk, he went through a few cases dealing with this issue and it seems to be that the consensus of the Court is that the duty of an estate trustee includes that duty to dispose of the body and that the estate trustee really has final say.

David Smith: Right, and you know that really seems to be a very settled law. Unfortunately, I think you’re still going to see cases go to litigation on this in the odd instance, not because the outcome is ever really going to be in question because the law seems so settled that the estate trustee can do what he or she wants.  But I suppose if I’m a bit cynical, for settlement purposes, someone might start that litigation in the hopes of arriving at some kind of compromise. So you know, certainly that’s an issue which regrettably can result in litigation on the odd situation.   But, you know, we keep repeating the same refrain which is that the executor has that responsibility.  And it’s worth also mentioning I think, Natalia, that you can say whatever you want in your Will about how you would like your remains to be disposed of; the reality is that the executor does not have to follow those, does he or she?

Natalia Angelini: Absolutely.  He or she does not, but interestingly though, his or her duty is to dispose of the body in a manner suitable with the estate of the deceased.  So even though the estate trustee may seem to be able to do whatever he or she wants, there’s definitely going to be criticism of a trustee who just, you know, goes ahead and, for instance, has an elaborate $50,000 funeral where the deceased has a fairly modest estate.

David Smith: Right. I think generally it’s expected that the funeral will be commensurate with the size of the estate, so I think that’s a really good point.  And also, there’s just a moral duty, I think, in this situation, where you’d expect the executor to do what the testator wanted.

Natalia Angelini: Right.

David Smith: It’s probably worth doing a little segway here, while we’re on this topic. I mean, this has to do now with the issue of donation of body parts.  And, of course, there’s legislation in Ontario that deals with that, right Natalia?

Natalia Angelini: There is. It’s the Trillium Gift of Life Network Act and it’s an interesting piece of legislation that allows a person to consent to the donation of their own body, or body parts, upon death.

David Smith: That’s right. So we’ve all sort of seen the situation where the consent card is kept quite often with someone’s driver’s license and this is an important priority.  And, of course, it plays an important role in given the success of transplant surgeries and what have you, that this is obviously an important legislative prerogative that this kind of intention can be preserved, even if it’s not contained in the Will.

Natalia Angelini: Right. And a spouse or other family members can also give their consent, even if the deceased hasn’t done so during his or her lifetime. So the difference here, I think, with the ability to dispose of the body, is that the family members seem to get priority over the wishes of the estate trustee.

David Smith: Right and it’s obviously a specific situation but it’s important to know because it’s the one significant departure from the common law rule that the executor’s decisions are paramount. 

Natalia Angelini: And frankly, it makes sense to me anyway.

David Smith: Oh, absolutely. I don’t see how we can quarrel with that. So you know, harking back to our topic for the day which is the executor’s duties, again it all boils down to fiduciary duty, doesn’t it Natalia? I mean really the executor’s got to make sure that he or she does what is necessary to see the intentions of the testator preserved.

Natalia Angelini: That’s right and I think it’s important to note particularly with this issue of disposing of the body, the estate trustee has to do so in a dignified way.  And so I think that’s in keeping with fulfilling his or her fiduciary duty. 

David Smith: Good point. Okay, so I guess we should move on to a couple of more issues, just given our limited amount of time that’s left.  And we were going to touch on children and pets, in that order. So let’s talk about children briefly speaking. It’s possible in your Will, isn’t it, to speak to guardianship?

Natalia Angelini: That’s right. Under the Children’s Law Reform Act, you can appoint someone to have custody of your child upon your death, and I think sometimes people do this, and they put this provision in their Will and I’m not sure that they’re always aware that this has some limited value.

David Smith: That’s right. The appointment is valid for 90 days but, of course, it’s important to note that if anybody else is entitled to custody and is not named in the Will, that that person obviously has a right to exercise custody and it might be pointed out that an application for custody can be commenced within that 90 day period.  And so, to some extent the wishes of the guardian, with respect to their children in their Will is somewhat precatory, isn’t it, in that it’s subject to other considerations.

Natalia Angelini: That’s right, but I think it may give some assistance to the family and to the children, really, so they know I guess who they’re going to be spending time with, at least in the short-term.

David Smith: True. And I guess the important point too is, in all likelihood, the custodial parent in their Will will say that if they die, in all likelihood, they’re going to appoint the other parent as the guardian of the children. I suppose you could have a situation where there are two parents, where one parent dies and provides in his or her Will that the guardian for the children is someone other than the other parent.  And obviously in that situation, the other parent is going to have something to say about that. 

Natalia Angelini: Absolutely, I’ve seen that type of case and I think, unsurprisingly, the other parent proceeded with an application in the Family Court for custody and that issue was resolved that way.

David Smith: Now the last point is in keeping with our concern about issues arising immediately upon death, of course, lots of people have pets.  And lots of Wills provide for pets as beneficiaries.  And pets need to be fed and watered, so obviously the executor’s got to look after that.

Natalia Angelini: That’s right and like you said, that’s definitely got to happen at the get go because we don’t want pets to be neglected.  And they’re usually, especially if they’re in a Will, very near and dear to the deceased’s heart.  So it’s important to make those arrangements.

David Smith: Right. And that’s going to also require the executor to act quickly as you pointed out. So good point as well, and Paul, in his paper, talks about crops and perishables. If you’ve got a business that’s running fresh produce for instance, and the business owner dies, any other perishable products, obviously it’s important to keep the electricity on, to keep things refrigerated and all of those sort of important things that have to do with ensuring that any inventory of the estate does not go to waste, because ultimately, the executor is going to be accountable to the beneficiaries, right, for what happens.

Natalia Angelini: Exactly. And I think, I guess the one thing to remember is, it’s so important for the estate trustee, I suppose to know, as far in advance as possible, whether he or she is a trustee and what the assets of the estate are and what the circumstances are so they can do their best to act as quickly as possible.

David Smith: Absolutely. That’s the biggest part of good estate planning, isn’t it? And it makes the job so much easier. And we should point out, too, that if it’s just an insurmountable job for the executor to take on, maybe you renounce.

Natalia Angelini: Right, or get a, if the estate assets can justify it, get a trust company in place or instead.

David Smith: Especially if there’s a business there, yeah, so I think that’s an important point to leave our listeners with is, you know, if you’re named as executor, you’re not duty bound to take on the job at all costs. If it’s not a realistic possibility for you to carry on the task, consider renouncing.

Natalia Angelini: Absolutely. Good point, David. So, I think that brings us to the end of this week’s discussion. Thanks for listening and thanks for joining me today, David.

David Smith: It was a pleasure, Natalia. I really look forward to podcasting with you again soon.

Natalia Angelini: And we look forward to hearing from our listeners. You can send us an e-mail at hull.lawyers@gmail.com. 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 show. I’m Natalia Angelini.

David Smith: I’m David Smith. Until next week, so long.

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

Case citation:

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

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

In light of the recent amendments to the Trustee Act which appear to embrace the modern portfolio theory, it will be interesting to see how the Court will utilize this theory to assess a trustee's investment performance. Section 28 of the Trustee Act adopts an approach that is consistent with the modern portfolio theory.  Under this section, a trustee is insulated from liability if “the conduct of the trustee, which led to the loss from the trust, conformed to a plan or strategy, for the investment of the trust property, comprising reasonable assessments of risk and return that a prudent investor could adopt under comparable circumstances”.

Under the “statutory legal list” approach, which I described yesterday, a trustee was limited to investing trust assets in authorized investments.   However, with the development of the prudent investor rule, trustees are provided with a broader range of investment choices, which will likely increase their responsibility in determining an acceptable standard of care.

Presuming that a trustee is found liable for breaching the standard of care, section 29 of the Trustee Act permits a court to assess “the overall performance of the investments” when it is assessing damages.  Based on the language of section 29, it appears that a trustee may be allowed to offset the loss of a bad investment against the gain of a good investment.

The trusts and estates bar will be watching with interest to see how the judicial consideration of the prudent investor rule evolves.

Happy Super Bowl Weekend!  Go Patriots!

Rick