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

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.

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

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

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

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.  Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.

David Smith: Good afternoon, Craig.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

David Smith: That’s right.

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

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

This has been Hull on Estates with the lawyers of Hull & Hull. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

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

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This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

Deductions from Compensation - Hull on Estate and Succession Planning Podcast #125

Posted on August 12, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #125 of our podcast on Tuesday, August 12^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Suzana Popovic-Montag: Hi there, Ian.

Ian Hull:  Hi, Suzana. How are you doing?

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

Ian Hull: Just great. We’re having some fun with this whole question of accounting, and I think I’ve done the numbers, and I think we’re almost done. But before we go through our podcast today, let’s remind everyone, please feel free to call in on our call-in number and our call-in number is of course, 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com or of course, you can visit our blog at estatelaw.hullandhull.com as well. 

Ian Hull: So before we launch into the substantive podcast today, I just wanted to do a couple of things. One, I want to deal with an e-mail that came in and another is I want to just welcome people to listen and look at the, last week we enjoyed Jordan Atin who is our associate counsel here, our Senior Associate Counsel, and he was on Canada AM for four days in a row talking about family feuds and the link to the webpage where CTV is still running the streaming is worth looking at, and we’ll make sure that’s in our show notes.  But Jordan had a great opportunity to talk about family feuds and sort of the issues that arise out of his book, “The Family War” which is co-written by Les Kotzer and of course, my good friend, Barry Fish.

Alright, so we were talking about some of the e-mails. And we had two e-mails last week come in. Both of them were semi-related and so I’m sort of going to merge the two of them together. And the question really comes down to this:  What are we talking about with The Shoebox Effect? And what we’ve been mentioning in the past and what we’re going to talk a little bit about today, because part of our wind-up is the importance of vouchers, is The Shoebox Effect is this. When you are a trustee, no matter what you think, no matter what you do, you will be someday possibly asked to show your receipts and that’s all I’m saying The Shoebox Effect is. Make sure you keep receipts, even if it’s in a shoebox. Your lawyer or your accountant can work on the presentation of it when you ultimately have to go to Court, but keep the receipts. So that was the two questions that came in, actually, both were from different parts of Canada but asking about the same question. So I’m not going to dwell on it other than that and say that when we’re winding up our comments on accounting, please, please, please keep your receipts if you’re a fiduciary.

Suzana Popovic-Montag: And just to add one thought to that, Ian, I would also suggest that it’s really helpful to make sure that you document as much as possible everything that you do as a trustee.  And when it comes to exercising your discretion, and if particularly the Will or the trust document allows you to have a broad discretion, to write down your thoughts or your reasoning or the underlying reasons that you decided to do something or not do something and include that in the shoebox that you end up bringing to a lawyer one day possibly.

Ian Hull: That’s a great suggestion and it comes down to, when we’re talking about getting paid for all of these efforts, the deductions from compensation that we briefly talked about in the last podcasts, what can you look to? So we talked about that you can get paid, say approximately 5% as a tariff, so to speak.  And we’ve talked about some of the things we’re going to knock you out from, but one of the easy deductions is the delineation between the executor’s work and lawyer’s work or accountant’s work. And that ties into your comment, Suzana, on docketing, keeping records beyond just the receipts that I talked about.

Suzana Popovic-Montag: And things for instance, like the preparation of tax returns, when fees are associated with that, depending on who’s preparing the tax returns and how much those fees are, that’s another thing that might possibly be a deduction from compensation if the trustee for instance is an accountant. And these are situations where a trustee is an accountant or a lawyer that you see most often, where these issues can arise.

Ian Hull: Alright, so another concern that we raise and probably the last deduction from compensation we’ll just mention now, is this whole idea of pre-taking compensation. Under Ontario legislation, if you’re a fiduciary or, as I say, a guardian under the Substitute Decisions Act, they actually allow you to pre-take your compensation, take before you’ve made your efforts. But we’ve talked about in the past the cases, and we’ve talked about them in the show notes as well, the case law that talks about Re: Knoch which we talked about in our previous podcast and others, and we want to be very, very careful about pre-taking, getting paid before you’ve done your work. So that’s an easy deduction.

Suzana Popovic-Montag: Ian, just a question that I find often gets asked is whether or not GST is actually payable on executor’s compensation. What are your thoughts about that?

Ian Hull: Well, that’s a great question and it’s a murky area of the law.  And what has happened in the past is you would typically have to look at it case by case. First and foremost, you have to look at the amount of the payment that the compensation is. If it is over $30,000 that you’re being paid in compensation, which could be the case because it’s typically a one-time payment, you may have to pay GST on that income as having rendered services. So it’s really case-by-case. Talk to your accountant, get good advice before you wrap up that issue, but that’s an excellent question and a really important heads-up for people who are accounting and doing compensation work.

Okay, I think we’ve pretty well covered off our accounting in the in-depth form and so we wanted to make sure that we stayed the course and came full circle to our sort of checklist that we’re trying to work through. And one of the things I will say is we’re hopefully going to be changing our format and trying to pick up a video feed for our podcasts which is in the process. Some technology glitches haven’t allowed for it to fall in just yet, but we’re going to be moving into some different topic areas. But one of the topic areas that we have to, I think, just sort of at least wrap up in a minimum way, is the process itself. We’ve talked about the passing of accounts process but let’s talk about the physical steps that are taken because many people don’t understand passing of accounts and what you can expect in the courtroom once we’ve got the Court format accounts.  And my introduction to this, by way of the fact that we’re going to be moving this into an audio, is that we’re going to have our own mini-series on this issue, where we’re really going to flush out these topics.  But I think its worthwhile talking about them briefly now, so that people understand what they’re going to get themselves into once they’ve got these beautifully created Court format accounts.

Suzana Popovic-Montag: And procedurally speaking, certainly here in Ontario, the Rules of Civil Procedure will govern what is included in an Application to pass the Court format accounts. And we started when, before we got into this discussion of how we would audit estate accounts or how to prepare a best kind of set of accounts in the circumstances, we talked about the fact that it’s all part of an application process.  And so there will be an actual Court date that’s assigned to the hearing for the return of the executor’s accounts, and you’ll serve a Notice of that application on all the beneficiaries together with, in many circumstances and many situations, a copy of the accounts as well. And the Rules themselves specifically provide what has to be in this Application record and I thought, Ian, it might be good to just sort of flush out some of those specific requirements.

Ian Hull: Alright. Well I think and it’s helpful because it’s not quite as daunting when you get the document itself thrown at you because, as I say, a lot of these accounts are passed in a non-contentious environment.  But it’s legal mumbo-jumbo to some people so you want to make sure you sort of know what you’re getting yourselves into when you get it. And the main document behind the accounts is the Affidavit verifying the accounts, they’re proving that you’re swearing to the truth of the accounts, and that’s the fiduciary sort of statement that says these accounts are true and accurate.

Suzana Popovic-Montag: And that Affidavit, as I say, is included in the record that is served upon everyone who has a financial interest in the estate. And financial interest in the estate I think we’ve talked about on previous podcasts, has a very broad meaning in the sense that even people with a contingent interest in an estate will be served with the accounts as well.

Ian Hull: And talking about service, we don’t want to forget that there may be government agencies that we have to serve, of course; the Office of the Children’s Lawyer should there be any minor child’s interests, or interests of those who are unborn and unascertained.  And without getting too technical about it, we just want to look at the trust document or the Will and see if there is a trust. And typically if there’s a trust, more often than not, almost certainly in fact, the Children’s Lawyer would be served, that’s the Office of the Children’s Lawyer.  And it’s different in each Ontario jurisdiction, but basically the lawyer in charge of minor interests. Another person to be concerned about serving is

Suzana Popovic-Montag: the Public Guardian and Trustee. That office would be served on behalf of any incapable beneficiaries of the estate. And so just like the Children’s Lawyer protects the minor, the unborn or the unascertained, the Public Guardian and Trustee here in Ontario will represent those incapable beneficiaries.

Ian Hull: So those are just things to keep a heads-up on so that you don’t get out of the box and miss a page of the application process by not putting important entities on notice. Obviously, we come back to our cardinal rule: Read the document, read the Will, read the trust and make sure you’ve served everyone named in that, but the Public Guardian and Trustee and the Office of the Children’s Lawyer, are two entities that aren’t necessarily named and quite often aren’t named, so just a heads-up. 

So I think that gives you sort of a sense of what the document itself, in a friendly environment will be, so I think we’ll wrap up today’s podcast and again reminding you, please feel free to e-mail at hullandhull, h u l l a n d h u l l @gmail.com.

Suzana Popovic-Montag: Or feel free to call and leave us an audio 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 a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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This week on Hull on Estates and Succession Planning, Ian and Suzana discuss the question of compensation and complaints regarding compensation.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

This week on Hull on Estates and Succession Planning, Ian and Suzana conduct a quick lesson on capital encroachment and discuss the role of investment accounts in the passing of accounts.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

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.

Posted on June 3^rd, 2008 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates. You’re listening to Episode #113 on Tuesday, June 3, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.  Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and wills. Now, here are today’s hosts.

Diane Vieira: Hi Paul, how are you?

Paul Trudelle: Oh hi, Diane, very good, how are you today?

Diane Vieira: I’m good.

Paul Trudelle: We are podcasting together again and today we thought we’d talk about the issue of accounting under Powers of Attorney and the duty to account after the grantor of the Power of Attorney passed away.

Diane Vieira: So we’re going to discuss a 2008 Ontario decision, De Zorzi Estate v. Read.

Paul Trudelle: And we’ll have a link to that on our website. This is an interesting case that just came to our attention. It was released just recently, in March of 2008. Megan Connolly blogged on it earlier last week and we thought we’d go into a little more detail in our podcast today.

Diane Vieira: So this is a case which discusses the duty of an attorney to disclose financial records for the grantor of a Power of Attorney.

Paul Trudelle: Right, and it’s an interesting case because there, there was a Power of Attorney that was granted. The grantor passed away and the beneficiaries sought to get an accounting from the attorney after the death of the grantor.

Diane Vieira: Why don’t I just give a bit of the background to the case and the different parties?

Paul Trudelle: Sure, that’d be great.

Diane Vieira: The respondents in this case were the residual beneficiaries of the estate. And the other side was a person who was both attorney and estate trustee.

Paul Trudelle: I think that’s pretty important and we’ll talk a bit about how important that is down the road.

Diane Vieira: And the beneficiaries had the question with respect to what happened to some bank accounts, prior to the death of the grantor.

Paul Trudelle: Right, and that would be relevant because the question was, what assets fell within the estate at the time of death? So the actions of the Power of Attorney prior to that would be very relevant to the size and nature of the estate.

Diane Vieira: And in this case, the grantor, there was no question that she was competent and that she never became incapable and actually there was evidence before the Court that she was the one making the financial decisions prior to her death.

Paul Trudelle: Right, and I think that’s an important factor as well. This was not the case where there was an incapable grantor who wasn’t able to look after her affairs.  I think that would be a much easier case for getting disclosure in accounting down the road. But here she was capable throughout and was able to consent and in fact, directed the transactions and that was something that the attorney appears to have relied upon in trying to avoid an accounting.

Diane Vieira: Yeah, the attorney had argued that she doesn’t have to disclose this financial information. The only person she had to account to would have been the grantor who was capable.

Paul Trudelle: Right.

Diane Vieira: So the beneficiaries had a few questions with respect to the administration of the estate but the sticking point was these bank accounts as we discussed, which would require the attorney to provide disclosure of financial information predating the death of the grantor.

Paul Trudelle: That’s right. So the application was before the Court. The question was whether the attorney had to account to these beneficiaries. The attorney took the position that they didn’t have to account and the Court then considered whether the beneficiaries would have a right to compel an accounting. 

I think the important sections of the legislation which is the Substitute Decisions Act in Ontario, is Section 42. Section 42 provides for an attorney to pass their accounts and sets out or enumerates who can apply to have accounts passed. Clearly, the grantor, if alive and capable, can request that the accounts be passed. There’s a number of other parties that are listed as being able to compel an accounting: the grantor, the attorney themselves, the Public Guardian and Trustee and the Children’s Lawyer have an automatic right to apply for an accounting, a judgment creditor of the grantor or the incapable person.  And at the end of Section 42(4) there is a catch-all: any other person with leave of the Court, and that’s the key there. If you’re falling into that ‘any other person’ category, you have to apply to the Court to get leave to get permission from the Court to compel the passing. And the question here was whether beneficiaries of an estate fell within the ‘any other person’ category who could then apply to the Court to compel a passing.

Diane Vieira: That’s right. Justice Herman looked at case law but with reference to this Section. She did find the beneficiaries within the Court were allowed to ask for an accounting.

Paul Trudelle: Right, and I think the cases, the Court identified the unusual or probably it’s usual, it happens a lot, the factor is that here, the attorney under the Power of Attorney was the same person as the estate trustee. So whereas normally an estate trustee would step into the shoes of the grantor and be entitled to compel an accounting from an attorney, here that estate trustee was one and the same as the attorney.  And the Court felt that it wasn’t likely that that person would compel an accounting from themselves and, therefore, opened the door to allow the beneficiaries of the estate to ask for this accounting. 

So, having qualified as a person or other person entitled to apply for leave to pass the accounts, the Court then turned their mind to whether the beneficiaries should be granted leave in this case.  And the Court considered a number of factors and looked at the issue of whether the fact that the grantor was capable throughout had an impact on whether leave should be granted.

Diane Vieira: Well in the Stickles Estate v. Fuller, the Justice based her decision on Section 42(1) of the Act which provides that the Court can order the accounts of the attorney to be passed and it doesn’t depend on whether the grantor became incapable or not.

Paul Trudelle: Right, and I think there’s a very broad and clear requirement that attorneys keep their accounts and pass them or produce them when asked for.  And the fact that the person was capable is not going to be seen as something that negates the requirement to pass accounts. The Stickles case was one where the grantor was capable and yet the Court still required the passing. 

Another factor is, another issue that the Court looked at in this decision is, how far back you have to go when passing your accounts. In this case, there was a Power of Attorney granted in September of ‘04 before death, and the person died in December ‘04. The beneficiaries sought an accounting that went back well before that, back to January ’04.  And the Court found that the duty or requirement to pass accounts will only go back as far as the Power of Attorney itself. And in fact, the Court looked at other cases and those cases dealt with attorneyships that predated the Substitute Decisions Act and in those other cases, the obligation to account only went back as far as the passing or the effective date of the Substitute Decisions Act. So in most cases then, the duty to account will start from when the Power of Attorney is actually granted.

So just to wrap up then on this topic, first of all I’d like to refer you to a very helpful article by Kim Whaley in the 2008 issue of Deadbeat that discusses this case and a number of the cases that are referred to in the De Zorzi Estate decision.  And it summarizes the applicable law and concludes by saying that the case is very helpful in clarifying the law with respect to the duty to account. Generally speaking, there is a heavy onus on an attorney to keep records and to pass those accounts when required and it clarifies who can request the passing of accounts after the death of the grantor. And you may be required to account to beneficiaries of the estate, even though the grantor was capable while you were acting as attorney and even though you are the estate trustee for that person’s estate as well.

Diane Vieira: Thanks, Paul.

Paul Trudelle: Well thanks, Diane. And before we leave, we’d just like to refer you to our contact information.

Diane Vieira: You can reach us by e-mail at hull.lawyers@gmail.com or you can call us on our telephone line which is 206-350-6636.

Paul Trudelle: We also invite you to visit our webpage where we have daily blogs and links to our podcasts on Hull and Estates and also our podcasts on Hull and Estate and Succession Planning. That can be found at estatelaw.hullandhull.com.

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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Posted on May 20, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #113 of our podcast on Tuesday, May 20^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Ian Hull:    Hi, Suzana.

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

Ian Hull: I am fantastic. Looking forward to lucky 113 on our podcast efforts.  And we finished off last week reminding our listeners to please feel free to contact us.  And the best way is to jump on our webpage at hullandhull.com and we have an easy navigation to our podcasts and our other sources we have on the webpage.

Suzana Popovic-Montag: And we had a couple of comments this week, Ian. People were looking for the article that we had referred to during our last podcast from The New York Times and I just want to remind people that they can actually find that link on our webpage under the News and Links icon at the very bottom of the page. We have started what we call sort of our recommended reading list, and it’s what I kind of call behind the doors, you know “the Oprah’s Book Club”. So there’s actually a link to the article there and so for anyone who’s interested, please feel free to go there.

Ian Hull: That’s great. And we’re going to try to build that link up a little bit. I had a great meeting the other day with one of Canada’s leading social media new members, and a great guy, Bob Berman, who is a lawyer up in Yorkville who does family law.  But he and I were talking about that and developing our own reading lists on our own webpages and he and I were sharing some books. Right now, I know, I’ve just finished “Blink” and “Tipping Point”, which were both excellent books and we’re going to put those on the link page.  And we’re also, I know, Suzana you and I are just starting through “Ground Swell”, which really now seems to be one of the “must reads” in the social media world in terms of getting a handle on marketing and working through the social media network. So that’s another great book.

Alright, we left off last week talking about accounting issues and I was speaking to a great friend of mine up in northern Ontario the other day, about this very topic.  And she’s a lawyer there and she said to me, “You know, Ian, one of the things that amazes me is that I’ve been doing this practice of law for many, many years, and I have never had to formally pass my accounts”. And we talked about yesterday, the last podcast, how we had talked a little bit about the informal expectations and the way you can resolve the question of your ongoing obligations to account as a trustee informally. We’ll give some more ideas on that as we work through, but the point sort of struck me that here’s a lawyer that’s been practicing for 20 years in a busy estates practice.  And most people just don’t force their hand of going to Court and having what is called essentially a Court audit, where the judge essentially has to go through line by line. Now having said that, in our practice, we see a lot of it, and it’s one of those things that this lawyer pointed out to me was that she wished that she had more or had seen a bit more of it because it is becoming more and more prevalent. One is, is that people are expecting this standard of good record keeping and if you don’t have it, they’re pushing you on to Court. And number 2 is, is that we can’t forget that where there are minor children’s interests or interests beyond the scope of able-bodied adults, we have to pass our accounts in any event. 

So we thought, Suzana and I thought it would be a good exercise to go through some of the details and specifics of what happens when one passes their accounts, when they have to actually draw that short straw and go to Court.

Suzana Popovic-Montag: And as we were discussing during our last podcast too, Ian, and I think that with the increasing size of estates that are out there now and this huge transfer of tremendous wealth, we are dealing with bigger estates and more at-risk, so to speak, when you are the executor of an estate, and different kinds of beneficiaries.  And so it’s not surprising that we will probably see more and more of the formal passing when a trustee ultimately says, “Well what’s the downside, why wouldn’t I get the Court, you know, seal of approval on my administration, why would I forego that opportunity if I don’t have to?”

Ian Hull: Well that’s for sure and so let’s talk a little bit about what the process is. Now, we’re going to talk a bit about some of the Ontario centric steps, but I know certainly across Canada and in most of the jurisdictions in the United States, the process is almost identical, in that you go to Court and you file what is called a Notice of Application to pass your accounts. It’s a formal bound copy of a couple of very important things. One are the accounts themselves that you want the Court to audit; the other is a copy of the Will or the trust that is involved, the kind of core document. And number 3 is you file what you hope to be the final Order, the final result you look to achieve.  So you give everybody sort of the information, you give them the basics of the documents that you need to work from and then you say this is where I want to land, I look forward to your comments, so to speak.

Suzana Popovic-Montag: And as part and parcel of that Notice of Application, it’s going to certainly quantify the period of time during which the accounts are being passed and it’s also going to refer to the compensation, specifically that the trustee is looking for, as well as the legal fees to which he or she is seeking, on basically on an unopposed basis. And then there is, certainly in Ontario, there is provision for the costs and what that amount would be for anyone who has actually reviewed the accounts.  It’s usually either half or three-quarters of the amount that the executor would otherwise be entitled to.

Ian Hull: So we have this application and the form of it is basically we’re going to the Court to say, “We want our accounts passed” and we say it in a more legalistic way, but that’s the long and the short of it. The second part of it, though, is in the Application material, is in the Affidavit of Verification. And this Affidavit, you have to, as the executor, swear to the truth and accuracy of the accounts attached.  So that someone, basically the information you’re putting to the Court, sticks to you from an evidentiary standpoint. The form of that Affidavit is, there’s sort of two approaches: One is a very straightforward, one sentence long that says, “I attach the accounts and I swear them to be true and accurate”; and the other is one where, if you’re looking and you’re seeing a fight on any of the issues, you may want to flush out your position a little bit in some of the facts.

Suzana Popovic-Montag: And that’s, I think, more the unusual circumstance but one that we certainly see and I think it ultimately helps a Court who is dealing with the situation know the facts up front and know what’s sort of coming down the pipes before the parties actually show up in Court to argue those issues.

Ian Hull: So this expanded Affidavit of Verification, the form of the first one is obviously simple enough to do.  Obviously you hope that the accounts are accurate and true, prepared typically by a third party, someone who has a specialty in estate format accounts, but the comprehensive Affidavit in support will typically tell the story. So, for example, say you have an estate that has a large amount of assets in it and you are looking for significant compensation. You may want to, in the Affidavit of Verification, set out some of the detail of your work. Sometimes, for example, the Court likes to see copies of your dockets that you kept track of your efforts over the years in administering the estate, so that they have a sense of the time. They also may want to put a sense of the complexity and the background in it. This is just one example of what you can do to expand your Affidavit to help tell a better story to the Court, and also, quite frankly, to sell it to the other side.

Suzana Popovic-Montag: And that’s particularly so, I think, when you’ve got beneficiaries of an estate who are not familial members. So when you have, you know, third parties who wouldn’t know necessarily the extent of the work that the executor is doing, like a charity for instance, or another beneficiary who is far removed from the process, and it can only help to have all that information put to them sooner rather than later.

Ian Hull:  So if you’ve got your package ready, another thing that you want to keep in mind is, I think, I always tell my clients, is that watch your timing. This process takes a lot of time.  In the grand scheme of things, it may not be a lot of time if you’ve administered an estate for many years, but in Ontario and in most other jurisdictions, there is a substantial amount of time that people have to respond. For example, when you send out your Notice of Application in Ontario, and you serve everyone who has an interest in these accounts, what we call a financial interest, they have at least 45 days to respond.  So you’re looking out, you prepare the materials, take some time, then once you serve it you’re still looking at another 45 days minimum to have the accounts audited by the Court.

Suzana Popovic-Montag: And if the beneficiaries actually reside outside of Ontario, you’re looking at 60 days as the minimum service requirement. And that basically gives the parties hopefully enough time to review the accounts, to seek advice if they need to do so, and at the end of the day, ultimately the expectation or the hope being by the trustee, that they will consent to the accounts.

Ian Hull: So we’ve got it out there, we know it’s going to take some time. In our next podcast, we’re really going to flush out what our, I mean, you can never say typical in our world, but what are traditionally the areas of objection. But the procedural step is once you serve the account on those with a financial interest is you will then…they have an opportunity to file what is called a Notice of Objection, so a complaint, formally with the Court. And this is done either typically not in Affidavit form, but it is filed through the form of the Court and there they set out the nature and extent of the objections. So in our next podcast, I think it would be helpful for us to just take a little bit of time drilling down on some of the, what we call the low-hanging fruit issues, the issues that are often criticized in a passing of accounts so that we can help get better prepared for that inevitable day and hopefully have done our work before, to sell the Volkswagen to the beneficiaries.

Suzana Popovic-Montag: Well, thanks very much, Ian.  I look forward to our next podcast, and I remind our listeners who are interested in providing us with some feedback on this or any other podcast, to feel free to visit our webpage at hullandhull.com and leave us a message.

Ian Hull: Thanks very much, 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 a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Posted on May 13, 2008 by Hull & Hull LLP

Suzana Popovic-Montag:  Hi, and welcome to Hull on Estate and Succession Planning.  You’re listening to Episode #112 of our podcast on Tuesday, May 13^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada.  From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Ian Hull: Hi, Suzana.

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

Ian Hull:  I’m great thanks.  This week is a big week.  We had the pleasure earlier this week to record Hull On Estates as well, so we did both of the firm podcasts, so to speak.  Before we get into our topic today, I just want to remind everyone that we welcome comments and that’s our call-in number at 206-457-1985.

Suzana Popovic-Montag:  And, of course, that number, if you didn’t catch it, will be in our show notes as well as our e-mail address which is:  hullandhull@gmail.com, if you prefer to send us a comment by e-mail. 

Ian Hull:  So we had some really interesting blogs last week and I noticed yesterday’s blog was particularly interesting.  When I say yesterday, when it goes into the Internet we won’t know what yesterday is, but I encourage you looking at our blog as well, because it’s at hullandhull.com.  But we had some interesting comments by Chris Graham last week and Diane Vieira this week as well. 

Alright, now before…oh yeah, also our last podcast that we did on Hull On Estates, we spent more time than I intend to today, but we would like to again note with great enthusiasm that Terry Fallis, our great friend at Inside PR, has won the Stephen Leacock Medal of Humour Award, which was given to him last week.  And is an incredible result for him because he self-published his book, “The Best Laid Plans”, and as a result of winning the award, he also had the book reviewed in The Globe and Mail which was very exciting for him.  So, it’s a tremendous honour for him, no doubt, but well deserved.  It’s a terrific book called, “The Best Laid Plans”, and we congratulate you, Terry.

Suzana Popovic-Montag:  That’s for sure.  Congratulations, Terry.  Your book is outstanding and it’s great to see good things happen to good people.

Ian Hull:  Okay, so let’s talk about accounting.  And it seems like a good segway because no doubt Terry is counting his money as it comes in with his self-published book.  But we finished off our last podcast and the work that we’re doing really focusing…we touched briefly on the whole question of accounting.  But certainly, and it’s one of these things with podcasting, every week that we do this you live on the experiences of the week before, and unfortunately for the clients that I’ve seen in the last week, there has been a myriad of messy accounting situations come into our office.  And, you know, you do feel very badly for some clients who do not understand some of the basic expectations of an accounting that come from your role as an estate trustee.

Suzana Popovic-Montag:  And generally speaking, what you’ll do as an estate trustee, of course, is to try to keep as detailed an accounting as possible so that you can, at the end of the day, indicate everything that’s come into the estate and everything that’s been paid out of the estate and to whom.  And as part of that whole process, you want to prepare this accounting for review ultimately by the beneficiaries of the estate.

Ian Hull:  And one of the things I like to do before we get into some of the formal steps, is the informal step of making sure my beneficiaries know what’s going on, on a fairly regular basis.  And I compare it to a stockbroker or an investment advisor who would be expected to give quarterly updates as to the status of their account with their client, but certainly would expect it to do an annual update.  And many financial planners will sort of identify annually that they have to at least once a year sit down with their client.  They will be in contact with them throughout the year, but once a year they make an effort to go and see them or meet with their financial advisor.  And that’s sort of a good benchmark if I’m an executor.  And that’s just business thinking, not necessarily fiduciary law.  There is not, sort of, something written in stone, but it’s a good informal benchmark.

Suzana Popovic-Montag:  And we certainly know from our experience, Ian, that it just helps if people are kept informed.  As soon as there’s a cloud of some secrecy or not being fully apprised of what’s going on, that just leads to uncertainty with respect to the whole process.  So it just makes sense to provide this information, provide it regularly and provide it completely.

Ian Hull:  So carrying on with this theme that should we have done that or should we be in a situation where it is not contentious, there are no beneficiaries that are upset with our work as executor, at the end of the process, and the end of the administration, you can typically write to the beneficiaries sending out your accounts, maybe in an informal form, and look to them to provide you with a release.  And that release, before you finally distribute all the money, in most cases, and, you know, this is a complicated area, but generally speaking, if you can get a release, that, in most cases, will end your involvement and it will wrap up your disclosure obligations on the estate.

Suzana Popovic-Montag:  And just to keep in mind that you can get a release in situations where all the beneficiaries are adults and have consented to the accounts.  If, though, you’ve got an incapable beneficiary or a minor beneficiary of an estate, it’s not as easy.

Ian Hull:  That’s for sure.  So, let’s talk about the more formal passing of accounts because, like you say, there are situations where, if you have a minor or you have an incapable beneficiary, you simply have to formally pass your accounts.  But there are also cases where the beneficiaries will not agree to sign a release and close things off for you, so you still need to go into the Court system to pass your accounts.

Suzana Popovic-Montag:  And the ultimate goal, just for a passing of accounts, is to provide the executor with a release from the Court now because the beneficiaries themselves may not be able to or will not consent.  And so it’s basically a stamp of approval by the Court saying that what you’ve done during the course of this administration has been proper.  And that really is important to close the loop in terms of the fiduciary responsibilities of a trustee at the end of a day.

Ian Hull:  That’s such a good point.  Because really, at the end of a day, all we’re trying to do is allow for either an informal (when you just look for a release and a letter), or a formal audit of your work.  And when you’re an estate trustee, your work really is, although we’ve talked a lot about the kinds of things like worry about burial arrangements, worry about all of this.  When it comes right down to it, your work is fundamentally based on how you handle the money; paying the bills, paying the beneficiaries and so forth.  So there is this need at the end of the process for an audit.  And whether it’s formal or informal, you want to make sure you’ve done one or the other, finally wrapped up by a blessing from Canada Customs and Revenue, who will give you what we call a Clearance Certificate.  But that’s a little different in the sense that you do that right at the end.  And so, let’s talk a little bit about the process, so people can get a sense of what you’re going to get into should you be forced to pass your accounts in the formal courtroom setting.

Suzana Popovic-Montag:  And if you’re actually doing a formal passing, we would certainly recommend the assistance of an accountant or an account preparer who is familiar with the process of preparing accounts in Court format, because those are very different.  And I know my clients are always surprised by the fact that they’re very different from the normal financial statements that accountants prepare for companies.  And it’s a very different process.  So to the extent that you can have that done properly, right from the get-go, I think it saves time and aggravation at the outset.

Ian Hull:  And if you want to get an example, and we say this to clients and they sort of glaze their eyes over it, and say, “yeah, yeah, yeah, we’ll talk to the accountant”.  But if you want to get an example of what these accounts look like, go to our webpage and there’s a Breakfast Series that we produced, and in that we talk about various passing of accounts.  And we have precedents in there of accounts that Suzana and I worked up as a format account to show people what these things actually look like, because it’s hard to describe the form of estate accounts until you see them.  But it is essentially a bank book ledger, a start to finish line-by-line listing of all of the financial transactions which then isn’t in the courtroom but then has to be backed up by receipts; no different than the real world when you’re running your own chequebook and you’re balancing your own chequebook.

Suzana Popovic-Montag:  And in terms of the actual application itself, that’s really a very formalized set of requirements that are set out here in Ontario in our Rules of Civil Procedure.  So there is, for instance, a Notice of Application that has to be issued by the Court that will refer to the accounts, will refer to the period of time during which the accounts are being passed and also set out what the claim for compensation by the estate trustee is for that period of time.

Ian Hull:  And in the materials, and they’ll always include as well a copy of the Will, or the trust or whatever instrument that you’re passing your accounts under in that sense, so you can understand or the Court more particularly can understand what should have been done at law.  For example, if it was set up in a trust arrangement where all of the estate passed to the wife and then on her death, it passed to the kids; that’s a classic spousal trust arrangement.  Well, you need to look at the Will, make sure that that was the case.  Maybe there were some specific bequests as well that needed to be paid and the trustee missed that; maybe there were $100 gifts to all the grandkids and they were never paid or something like that.  When you check the Will, you make sure that those gifts were paid.  Those are the sorts of inquiries that, you know, this doesn’t take training as a lawyer to look for, but, you know, these are kinds of inquiries that you could make at this initial stage.  So, we’re going to start, I think at this point we want to talk in our next podcast in a little bit more detail about what the process is, so that you can get a feel for it.  But, again, the application itself sets the stage, so to speak.

Suzana Popovic-Montag:  Well I think that, Ian, will wrap up this podcast for this week.  I want to thank everyone for having listened and remind our listeners that if they have any comments, that if they’d like to phone and give us their comments by voicemail, feel free to call us at 206-457-1985.

Ian Hull:  And generally speaking, of course, getting a hold of us, chasing us down with an e-mail, giving us some comments is welcomed and encouraged.  We’ve got a hullandhull@gmail.com address and obviously feel free to go to our webpage at hullandhull.com, which will guide you through a myriad of options.

Suzana Popovic-Montag:  Well, 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 a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Pierce J. held that in order for a release to be enforced, the beneficiary who signs the release:

1.   must be “fully informed”;
2.   must have received competent legal advice in a review of the accounts;
3.   should understand how compensation has been charged; and
4.   should know what legal services have been provided and what the fees were.

Pierce J. also held that a distribution cannot be withheld pending the execution of a release. It is simply fiction for an executor to believe that he/she can refuse to distribute the estate until a signed release is in hand. A holdback must be reasonable and demonstrably justifiable in the circumstances (i.e. tax liability or the costs of a passing). 

However, in the end, some common sense must prevail. In a simple administration, it is unlikely that formal accounts will be prepared for passing either because no compensation is claimed or the costs of doing so are prohibitive. However, the executor will likely ask for a release on the distribution of the estate. In that case, transparency may be the answer. By communicating regularly with the beneficiaries, sending them pertinent information and updates, and/or preparing an informal accounting (including how compensation has been taken), a court may just be convinced that a signed release is good enough.

“TGIT”

Justin

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

David Smith: Hello, welcome to Hull on Estates. You’re listening to Episode #98 in our continuing podcast series on Tuesday, February 19^th, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

David Smith: Hello Rick.

Rick Bickhram: Hi Dave. How are you doing today?

David Smith: You know, I’m doing well, Rick. And, you know, today we’ve decided… its David Smith here and I’m with Rick Bickhram of my office.  And we’ve decided today, Rick, that what we’re going to podcast on is a bit of a potpourri but the focus is really going to be on the accounting procedure available under the Substitute Decisions Act. And in particular, how the obligation to account as an attorney is the same as or is different from the obligation to account as an executor, for instance. And then we thought we’d talk about the specific procedures under the Substitute Decisions Act that permit someone to compel an accounting. So Rick, let’s talk about this whole idea of accounting generally. What is it about an attorney that opens them up to the whole concept of a duty to account?

Rick Bickhram: That’s a good question, Dave. My understanding is that an attorney, by virtue of the fact that you’re an attorney, there’s a fiduciary relationship. And that fiduciary relationship is established by the fact that the attorney has the power to do what the incapable person or on behalf of the incapable person, anything that the incapable person would have been able to do had he or she been capable.

David Smith: You know, and that’s right, Rick. And certainly, when we’re talking about the Substitute Decisions Act, intuitively we’re thinking about someone substituting their decision-making role for that of someone who can’t otherwise exercise it. Of course, the Substitute Decisions Act also applies to people who are perfectly capable, but who voluntarily surrender their decision-making ability to someone in more of a principal/ agent relationship. But you’re quite right, it’s a fiduciary relationship and it’s clearly a fiduciary relationship when the grantor of the Power of Attorney is incapable, isn’t it?

Rick Bickhram: Absolutely. And I think it’s also important to note that the fiduciary in the fiduciary relationship, whether it be voluntary or involuntary, the attorney or a guardian in the situation would have the ability to manage the grantor’s or incapable person’s finances.

David Smith: And that’s where the duty to account comes in, isn’t it, Rick?

Rick Bickhram: Absolutely, Dave.

David Smith: Rick, when we talk about the form of accounts, obviously it’s beyond the ambit of our discussion today to talk about the form of accounts and the whole process of a passing of accounts which is clearly a subject matter for another podcast. But I think continuing on with this idea of the concept of a duty to account, what ties into that and what we really want to explore to some extent today is, how do we compel an accounting? And what does the Substitute Decisions Act say to the duty of an attorney to account, and what remedies are available to someone who wants to compel an accounting?

Rick Bickhram: Well Dave, the authority to obtain an Order to compel an attorney to account can be found under Section 42 of the Substitute Decisions Act. Now under Section 42 of the Substitute Decisions Act, specifically sub-section 1, it states that the Court may, on an application, order that all or a specific part of the accounts of an attorney or guardian be passed. Going through this section, it lists the types of individuals who can bring this application to obtain this unique remedy.

David Smith: And who are those people, Rick?

Rick Bickhram: Under sub-section 4-- well, first of all, let me take a step back. Looking at sub-section 2, it states an attorney, the grantor or any of the persons listed in sub-section 4, may apply to pass the attorney’s accounts. From this, I gather that it means the attorney or the grantor of the Power of Attorney. Sub-section 4 states the grantor or incapable person’s guardian of the person or attorney for personal care. As we all know, a Power of Attorney can be given with respect to property and personal care. Section 42, sub-section 4, sub 1 states that it’s the guardian or attorney for the personal care that can proceed with the Court application to compel a passing of accounts.

David Smith: Okay, and that’s an interesting safeguard, isn’t it? Because, I mean, there’s a fair bit of case law dealing with situations where somebody appoints different people to be their attorneys for property and attorneys for personal care respectively. And quite often, there’s conflict between those two and the attorney for personal care who, for example, chooses a care facility for a senior grantor, may run into conflict with the person who’s paying the bills, namely the attorney for property. So intuitively, it makes some sense actually to give that attorney for personal care the power to say to the attorney for property, “Hey, attorney for property, I’m not satisfied that you’re doing everything you should or I want to see what you’re doing and make sure that the books are in order”. What about… what other people have the ability there?

Rick Bickhram: Under Section 42, sub-section 4, sub 2, a dependant of the grantor or incapable person. So the individual who grants the Power of Attorney or has been declared incapable, may move by way of a Court application to obtain a passing of accounts from the attorney or guardian. The third, I guess this is an entity, the Public Guardian and Trustee may move by way of an application to obtain a passing of accounts.

David Smith: Right and then the remaining 3, Rick, are the Children’s Lawyer, in the case of a minor who’s got an interest.  There’s obviously some standing there for them to do it. I think the next two are the most interesting. A judgment creditor of the grantor or incapable person. That’s a rarely used remedy in my experience, but it’s certainly interesting to think that somebody who is owed money by the grantor of the Power of Attorney or the incapable person can seek to compel an accounting, presumably as a way of seeking to recover monies to which they’re owed. So it’s very interesting that that person is given that remedy. And then, of course, the last one is any other person with leave of the Court. And I guess, you know, the interesting question there is, what is the test that the Court’s going to require before granting leave to someone? And certainly, in my experience, the Court is going to say to an applicant seeking leave, what is your reason for doing this? What is your standing before the Court to seek an accounting? Do you have any relationship to the person? Be you a blood relative or someone else with good cause to be concerned about the management of the person’s finances? And Rick, what do you think we’d need to do in terms of Affidavit evidence on that application, to convince a judge that our client should get leave?

Rick Bickhram: The person who is trying to obtain leave would have to demonstrate in his Affidavit that there was a relationship between himself and the incapable person or the grantor who’s granted the Power of Attorney in the situation. Also I would like to believe that the individual, the deponent here, who’s making this Affidavit, would probably want to establish some type of financial interest. Why is it that he’s seeking and why is that he is seeking a compelling of the accounts? What is his interest in this individual or this individual’s estate?

David Smith: Yeah, and you know, that’s a really interesting point, Rick, and something I wrestle with, with clients quite often in the sense that look, quite often, you’ll be dealing with a situation where you’ll have persons who have a financial interest on the death of the grantor. And the problem is this; if they go in front of the Court seeking leave to compel an accounting and say “My interest in this matter is that I have a financial interest on the death of the grantor, therefore in order to make sure that the amount I eventually inherit has not been improperly squandered before the death of the grantor, I want to monitor what’s being done with the money.” Of course, the problem with making that pitch is that the judge hearing this will be inclined to say, “Well, hold on a second. My job is not to protect the inheritance of the grantor for the benefit of the person who benefits under the estate. It’s to make sure the grantor is well looked after”. And the way I approach that is to say, “Certainly it’s relevant to say that you’ve got an expectation of an inheritance and that does give you some financial standing.” On the other hand, I think the Affidavit has to be crafted in such a way as to make it clear to the judge that the overriding, compelling basis by which the person is seeking leave to compel an accounting is to look out for the best interests of the grantor because the Court is not going to care one iota about preserving the inheritance of the grantor for the benefit of the person seeking leave, is it?

Rick Bickhram: And that makes complete sense, Dave. And if you think about it, I guess as an attorney or as a solicitor, I would be a little reluctant to go in front of the judge and explain to the judge that my client is, you know, pretty much monitoring his financial interest in the estate, especially being that the individual, the individual being the grantor or the incapable person, is still alive, it’s his money. And right now, the first concern should be his well-being.

David Smith: Right.  So fine line there. But, you know, something that needs to be mentioned because it does, as you stated at the outset there Rick, tie into what is the interest of the person seeking leave. And a complete stranger seeking to compel an accounting isn’t going to get anywhere if they can’t show a compelling relationship with the grantor. Now Rick, looking at the time, you know, we’re getting close to the end of the podcast.  Did, before we finish, want to touch on Section 39 of the Substitute Decisions Act. And this is a really interesting Section in my mind. It’s probably an underused Section for anyone engaged in capacity litigation. And what it is, is it’s a Section of the Act which provides directions from the Court and I’ll read it. It says, “If an incapable person has a guardian or an attorney under a continuing Power of Attorney, the Court may give directions on any question arising in the management of the property”. And that’s pretty broad language, isn’t it, Rick?

Rick Bickhram: Absolutely. And as I was reading through this section earlier today, I was thinking to myself, “What is the prospects or how likely is it that the individual would bring or ask for a remedy seeking the passing of accounts under this Section, you know, versus 42.” I understand that 42 specifically sets out a passing of accounts. But let’s say there are other Orders that they’re seeking. You would very well stick in Section 39 in there.

David Smith: That’s absolutely right, Rick. I think these two Sections can quite often be used together. And it’s an important tool for the litigator to keep in mind. If you look at the people who are eligible to apply under Section 39. Section 39, sub 3, similarly provides the Court with the power to grant leave to anyone to apply for directions. And the nice thing about Section 39 is you might have a situation where you don’t have a guardianship application; that’s to say that your client isn’t seeking guardianship of the incapable person, but is seeking more than merely an accounting. And Section 39 is this nice… it gives you this nice, intermediary approach between a full blown guardianship application on the one hand and an application for directions or to compel a passing of accounts rather. And it gives you that much more room and it’s nice, broad language. You know, you can be creative, you do some lateral thinking and really, you know, use that Section to your advantage. And remember, the Court is under a duty here to supervise the role of the attorney, the role of the guardian. It’s a powerful Section and the Court has a great deal of power under this Section and it should always be considered when looking at remedies available to the client who is seeking to look out for the concerns of an incapable grantor of a Power of Attorney.

Rick Bickhram: Great point, Dave. Well looking at the time, it looks like we are just about at the end of our podcast. It was great talking with you today, Dave.

David Smith: You know Rick, I enjoyed it too and we’ll look forward to the next opportunity to podcast. Take care.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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Posted on December 4^th, 2007 by Hull & Hull LLP

Paul Trudelle:  Hi and welcome to Hull on Estates.  You’re listening to Episode #88 on Tuesday, December 4^th.

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.

Paul Trudelle:  Hi Craig, how are you today?

Craig Vander Zee:  Good Paul, yourself?

Paul Trudelle:  Very good, thanks.

Craig Vander Zee:  Have you done your holiday shopping yet?

Paul Trudelle:  No, not at all.  That’s, that’s what Christmas Eve is for.