Listen to Will Challenge Litigation - Part 11

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

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

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

Posted on October 28, 2008 by Hull & Hull LLP

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

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

Ian Hull: Hi Suzana.

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

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

Suzana Popovic-Montag: Happy birthday.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Thanks very much, Ian.

Ian Hull: Thanks Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave any questions or comments, please visit our website at hullestatemediation.com.

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The sister argued that her brother intended to gift to her the balance of the funds as he did not have a good relationship with his son. The son of the deceased, the sole beneficiary of his estate, contented the funds belonged to the deceased’s estate on the basis of a resulting trust. The court found as the deceased was the only contributor to the account, the sister had to rebut the presumption of a resulting trust and as she was neither his spouse nor his child, she derived no benefit from the presumption of advancement.

Referencing the Supreme Court of Canada decisions of Pecore v. Pecore and Madsen Estate v. Saylor, the court looked at the evidence to determine the deceased’s actual intention. The court found the testimony by the deceased’s lawyer and a bank employee indicated that the deceased was interested in providing his sister with the authority to manage his finances and had not intended to gift her funds.

Weighing the evidence, the court found on a balance of probabilities that the resulting trust had not been rebutted and the intention of the deceased was to have his sister assist with bill payments if he became incapable.

To learn more about joint accounts, listen to Episode HOESP #60  where Ian Hull and Suzana Popovic-Montag discuss Percore v Pecore or read the transcribed version.

Thanks for reading,

Diane Vieira

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

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

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

In short, Joe may have a conflict of interest.

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

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

Thanks for reading.

Sean Graham

This week on Hull on Estates, Paul Trudelle and Diane Vieira discuss the case of Karkus v. Cotroneo 2007. The case addresses many of the issues that estate lawyers face on a daily basis, such as: proving or disproving gifts, slander of title and the importance of corroborative evidence.

Posted on January 15^th, 2008 by Hull & Hull LLP

Paul Trudelle: Hi and welcome to Hull on Estates.  You’re listening to Episode 93 on Tuesday, January 15^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.

Paul Trudelle: I’m Paul Trudelle.

Diane Vieira:  I’m Diana Vieira.

Paul Trudelle:  Hi Diane.  How are you?

Diane Vieira:  I’m good.  How are you?

Paul Trudelle:  Very good.  This is our first podcast together and our first podcast of 2008, so I wish everyone a Happy New Year.  And why don’t we get into what we thought we would talk about today.

Diane Vieira:  Sure.  This is an interesting case that deals with a lot of things that we deal with in our practice.

Paul Trudelle:  Yeah, the case is Karkus and Cotroneo.  It’s a 2007 case, April 19, 2007, out of the Ontario Superior Court of Justice.  It’s a decision of the Honourable Mr. Justice Sheppard.  And I thought that it would be great to talk about this case because it deals with a number of issues that we deal with day in and day out.  It deals with issues such as gifts, proving a gift or disproving a gift, corroborative evidence required, remedies where there is a finding that there was no gift.  It talks about resulting trusts, set-offs, slander of title, costs regarding Certificates of Pending Litigation when those are resorted to early in the litigation, and also costs of the litigation.  So there’s a lot in this relatively short case…11 pages…but I thought we would spend a little time going through some of those issues.   Perhaps we can talk a bit about the background or the facts of the case.

Diane Vieira:  Oh, sure.  This is a case where the deceased died without a Will and her daughter was appointed the estate trustee.  The deceased was a business woman and near the end of her life, her business had been failing so there was a number of creditors.  And her daughter, the estate trustee, who is the plaintiff in this action, was looking through her mother’s financial records and an entry in her bank book showed a $65,000 transfer from her mother to her mother’s boyfriend, who’s the defendant in this case.

Paul Trudelle:  Right.  And I think just before we go on, I think the fact that the deceased was in some financial difficulty in her business, is an important factor that the Court relies on later on, so that’s important to note.

Diane Vieira:  Later on, the defendant admits that he received the $65,000.  His position is that this was a gift.  The daughter’s position is that this represents money that the defendant was holding on behalf of his mother.  A little more explanation to that was that the $65,000 the defendant used to purchase a property.  And then on that property, the defendant’s name is listed alone, but the property is listed as registered as being in trust.

Paul Trudelle:  That’s right.  And I think that’s important as well.  The Court deals with the resulting trust claim and looks at that factor, and we’ll talk about that briefly in a second.  So in essence the claim was by the estate for the return of the $65,000 and for a claim that the defendant held a property on a resulting trust and the estate had an interest in that property.  The Court looked at the evidence with respect to the gift and before doing that, set out the test that is required and what the estate must argue or try to establish in order to show that there was a debt or resulting trust and what the defendant needs to show in order to prove that there was in fact a gift.

Diane Vieira:  I just wanted to…another point of fact is where the $65,000 came from and when it was transferred.  The deceased had sold her house and she was moving in…she moved in with her boyfriend, who is the defendant.  And the $65,000 represents the proceeds of the estate…the proceeds of the sale of the house, excuse me.  And the money wasn’t gifted or transferred to the defendant until six or seven months later on, which is something that the Court reflected on.

Paul Trudelle:  That’s right. They looked at the fact that the parties had moved in together, the $65,000 was used to, in part, to purchase this house and make renovations that the plaintiff wanted.  The Court considered the fact that the onus is on the defendant to prove, or the recipient to prove that this was a gift, there was no presumption that would work in his favour.  And in fact, the presumptions which aren’t really referred to, would be the opposite, that there was a resulting trust or the money was owed back to the estate.  And the Court found ultimately that the defendant wasn’t successful in proving that this was a gift.  His evidence was that the money was used…was given to him to help with the purchase of the house and to pay for expenses and that was contrary to a finding of a gift.  Just another point on that - the Court refers to the evidence required in order to establish a claim by or against an estate and dealt with the issue of corroborative evidence.  Perhaps we can talk a bit about what corroborative evidence is required and what the rule is there.

Diana Vieira:  With respect to corroborative evidence, Section 13 of the Evidence Act requires that there be some corroboration of the material evidence.  And the onus is the civil litigation onus, but with corroboration.  And in this case, the judge and the Court had problems with the defendant and the plaintiff’s evidence.  He called that evidence unreliable.

Paul Trudelle:  Right.  He felt that the evidence of the parties was of questionable credibility and in the absence of any corroborative evidence, he wasn’t able to find that there was in fact a gift.  And as you mentioned, the Court referred to the burden on the defendant to prove it but said that there was also what he said was a healthy scepticism in addition to that.  Now there’s other cases that talk about whether there’s a higher burden on a party.  The burden is still the civil burden but the Courts will look at these claims with some scepticism.

So the result of the defendant’s failure to prove that it was a gift meant that money was owing to the estate.  The Court went on to deal with the issue of whether the estate had a trust claim against the defendant.  And the Court dismissed the trust claim for a number of reasons.  The first reason, or one of the reasons was that in establishing a trust, there is case law to the effect that evidence of an illegal scheme will not be received to support a resulting trust.  And the illegal scheme that the Court referred to here was the fact that the monies were transferred by the deceased to the plaintiff probably for the purpose of avoiding creditors.  And as a result, they had…the Court had a difficult time in finding that the estate could rely on the doctrine of resulting trust in these circumstances.   So how did the Court deal with the money owing to the estate then?

Diane Vieira:  The Court goes on to find that the defendant does owe money to the estate.  It’s a debt to the estate.  And he then goes on to discuss the concept of unjust enrichment.

Paul Trudelle:  Yeah, and the Court found that the money was owing to the estate and I guess the defendant had assets here.  The Court felt that it wasn’t necessary, in fact, to rely on the concept of trust or impose a trust over the property owned by the defendant.  A judgment, a monetary judgment, was sufficient.  You mentioned the unjust enrichment part of it and the Court talked a bit there about when they will find unjust enrichment in order to bring in the equitable remedy.

Diane Vieira:  Yes, the Court refers to the Supreme Court of Canada case, Peter vs. Bellow and the three steps that are needed for a finding of unjust enrichment.  And all three were here in this case.  There was an enrichment on behalf of the defendant receiving the $65,000 and a corresponding deprivation to the deceased, now the estate of the deceased, and then an absence for the reason of this enrichment.

Paul Trudelle:  Yeah, but having found all of those circumstances present, the Court still goes on to say that they won’t impose the equitable remedy of a constructive trust.  The Court refers to that Supreme Court of Canada decision and extracts a point to the effect that a monetary award would be the appropriate remedy in many cases, and that was the case here.  And the Court concludes that a monetary award is appropriate and makes an Order that the defendant pay back the $65,000 to the estate.  However, he doesn’t end there.

Diane Vieira:  No, it’s…the Court goes on to find that the estate is not entitled to that full $65,000 because the defendant did provide something in the excess of $20,000 in renovations to the house.  And if the deceased’s $65,000 was in a gift to the defendant, then the money that he contributed to the relationship was also not a gift. 

Paul Trudelle:  That’s right.  So in effect, they awarded the defendant…they made an award in favour of the defendant with respect to his Counterclaim for money that he said he spent on behalf of the plaintiff, and that reduced the recovery by the estate.  There is also the issue of a claim by the defendant for slander of title.  The defendant alleged that a Certificate of Pending Litigation put on his property was slander of title, and the Court dealt with that in very short order.

Diane Vieira:  Yes, the Court found that the plaintiffs did not…didn’t have a credible position to have had that Certificate of Pending Litigation registered.  And consequently they awarded the money that the defendant had spent on removing that Certificate, credited back to the defendant.

Paul Trudelle:  That’s right.  And finally, on the issue of costs of the action itself, the Court considered the fact that the plaintiff had some success, made recovery for the estate.  However, it didn’t establish its claim for resulting trust.  The Court also felt that the evidence of the witnesses was unreliable to a certain extent and in fact in some parts the judge said that in some parts, the evidence was fabricated.  And as a consequence of that he ordered that there be no order as to costs, and each party had to bear its own costs.

Well, I think that’s an interesting case on a number of grounds.  We’ve touched on a few of the points that the case deals with.  I recommend the case highly to anyone dealing with those types of situations where there are gifts, where you’re considering a claim for a resulting trust, an interesting counterclaim where you’re faced with a claim for the return of a gift or money advanced on the basis of benefits provided to the deceased, and also considerations for dealing with Certificates of Pending Litigation and the costs that may be involved in that.

Well thank you very much, Diane.

Diane Vieira:  Thanks Paul.

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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In the above context, it is worth considering what I believe to be the motivating factor or thinking behind the Supreme Court of Canada’s (“S.C.C.”) decisions in Pecore v. Pecore and Madsen Estate v. Saylor. The two recently released companion cases were eagerly anticipated by the estate bar and addressed the transfer of property by an ageing parent into joint ownership with one of their children.

The S.C.C. made it clear that the “presumption of resulting trust” is the general rule that applies to gratuitous transfers of property into joint ownership. The onus is therefore placed on the person who received the gift to demonstrate that a gift was, in fact, intended. The court also held that the “presumption of advancement” applied to transfers of property by parents into joint ownership with their minor children. The burden of rebutting such a presumption falls to the party challenging the transfer rather than the gift-receiver.

The transfer of property by an ageing parent, particularly funds into joint bank accounts, is becoming widespread. In the context of an ageing population, Rothstein J., writing for the majority of the court, specifically addressed why the presumption of resulting trust arose rather than a presumption of a gift.

As Rothstein J. noted in his decision: “… it is common nowadays for ageing parents to transfer their assets into joint accounts with their adult children in order to have that child assist them in managing their financial affairs. There should therefore be a rebuttable presumption that the adult child is holding the property in trust for the ageing parent to facilitate the free and efficient management of their parent’s affairs”. In taking note of this stepped-up practice, the S.C.C. recognized the changing dynamics of Canada’s population and framed its decision accordingly.

Thanks for reading!

Justin