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Listen to  Passing of Accounts and a Joint Retainer

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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Listen to Settlement Issues

This week on Hull on Estates, Paul Trudelle and Christopher Graham talk about settlement issues - considerations that you have to take into account and the potential implications of not settling.

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.

Settlement Issues - Hull on Estates Podcast #122

Posted on August 5^th, 2008 by Hull & Hull LLP

Paul Trudelle: Hello and welcome to Hull on Estates. You’re listening to Episode #122 of our podcast on Tuesday, August 5^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: Hi, I’m Paul Trudelle and welcome to another episode of Hull on Estates.

Chris Graham: And I’m Chris Graham.

Paul Trudelle: How are you Christopher?

Chris Graham: I’m great, Paul, yourself?

Paul Trudelle: Very good. We just came off of a great long weekend and I’m looking forward to a compressed but busy week ahead, but before we do that, we thought we’d put this podcast out there.  So let’s get to that. We were talking about what we were going to talk about today, and we decided we would talk a bit about settlement issues, what a settlement is, and considerations that go into settling, why parties should consider settling and the implications of not settling. So let’s start on that topic. 

Chris Graham: Okay, Paul, settlement is a beautiful word in estates litigation, so why don’t you tell us what a settlement is.

Paul Trudelle: Well a settlement is an agreement or a contract between the parties to end the lawsuit, to determine the matters in issue and to determine how the matter is going to be resolved. It’s a resolution that is arrived at by the parties, not judicially handed down.  However there are matters that still need to be determined by the Court; but usually that is done on consent and the Orders necessary in order to wrap up or finalize the litigation are made by the Court but on the agreement of the parties.

Chris Graham: And are there any special situations where you must go to Court in order to finalize the settlement?

Paul Trudelle: Oh, there’s a number of those. Court approval is required if there are minors involved. If there’s an issue with respect to getting probate of a Will or determining what Will is to be probated, that’s a matter that’s determined by the Court as well. In most cases, you need an Order from the Court dismissing the application or action, if the litigation has actually been started. There are other times when you will need to get other incidental Orders that are necessary in order to implement the terms of the settlement.

Chris Graham: Okay, in estates litigation, experienced practitioners typically throw out the line that 95% of estates litigation matters settle without a trial. I think it might be higher, it might be more like 97 or 98%. Why do so many cases settle in this area?

Paul Trudelle: I think it’s probably by necessity. I think there’s a number of factors that come into play that make going to Court expensive, time consuming, difficult, uncertain, and all of those factors should lead the parties acting reasonably to come to a resolution in order to avoid that, in order to have the matter determined with some certainty, probably, hopefully at a cheaper cost and much quicker, without the risk and uncertainty of trial. So I think those are all factors that play into arriving at a settlement. I’m not sure what the percentages are.  I know that most cases do settle outside of estate litigation and that’s probably the case or higher in estate litigation. We’ve been accused by senior counsel in our firm of being white flag waivers, but I think that’s not a fair assessment. I think that it’s something that is to the benefit of all the parties involved if the settlement can be reached at an early stage.

Chris Graham: Well we never wave a white flag. We never wave any flag. Our clients make all the calls.

Paul Trudelle: Yes. So why don’t we talk a bit about the factors, or reasons why matters settle. I think we talked or touched on one briefly, it’s the cost of proceeding.

Chris Graham: Yeah. Every litigation matter is different but it’s a ball-park figure and a fair one that a basic trial that lasts five or fewer days is going to cost $125,000 - $150,000 per party appearing in the trial, and that cost, of course, is obviously staggering, because that is a modest cost. It can easily far exceed that. 

Paul Trudelle: Yeah, the costs, I think, are one of the biggest factors as to why things should settle. There was a lot of talk in the newspapers last week I think, about the cost of proceeding and the fact that most middle-class people in Ontario couldn’t afford or can’t afford to proceed with full-blown litigation. It’s just simply too cost prohibitive.  And I think that’s a real consideration why things should settle. You know every case is different, but I think what they all have in common is that the expense of proceeding is simply too high and it’s something that the parties all have a difficult time in bearing and in most cases can’t warrant that. In fact, no case should warrant the full cost of proceeding to trial. And that’s a factor that’s got to be taken into account as you proceed and when you turn your mind towards a resolution from the outset.

Chris Graham: You know, typically, when clients come in, of course we see all kinds of cases, strong cases, weak cases, people asking questions about the strength of their case or whether they even have a legal issue.  But certainly, I just named three or four different scenarios. What ties them all together is risk. Can you tell us a little about the risks that litigants face in terms of why those risks may create incentive to settle?

Paul Trudelle: I think that no case that is going to become litigious is without risk. I think there are very few cases that are sure things and any case, if anybody tells you that a case is a sure thing, well I don’t know if that’s a fair thing to say. I think that there are risks involved, issues arise as matters proceed. There’s uncertainty with respect to who your judge is, how he or she is going to see the evidence, the evidence you’re going to be able to get, the evidence that’s going to be admitted, how the witnesses are going to present on a particular day, what their recollection is going to be, whether your witnesses are going to survive and be able to testify as it goes to trial, because of the delays involved and other uncertainties in life that we all know about. There’s just a myriad of risk and uncertainty as matters go to trial and we’re always told in mediation that you can avoid that by coming to a mediated settlement or some agreement that avoids that risk, takes the matter out of the hands of a third party in deciding this and lets the parties come to a resolution. The avoidance of that risk is a paramount concern. 

Chris Graham: Absolutely. Even for parties who may be justified at a particular point in time in feeling like they have a very strong case. The longer the procedure, the process evidence gathering goes, the longer they’re exposed to the risk of evidence that really doesn’t favour them emerging. A phantom letter coming out of nowhere, some long lost relative emerging, a doctor coming forth with notes.  It happens, and not to say it happens in every case, but it really does happen and strong cases may get a lot weaker right before trial.

Paul Trudelle: That’s right. And playing into that is just the time that it takes to get to trial. Unfortunately, it takes months, if not years in most cases, in order to get a matter to trial if you want a trial date that’s, you know, three or four or five days or more. I know that in certain jurisdictions in Ontario they are now setting trials in 2010-2011, which seems like it’s a lifetime away, although it’s quickly creeping up on us. But it does take a long time to get to Court and that’s a factor as well. It’s better to have the settlement funds in your pocket today than win at trial and get that money at a later date.

Chris Graham: And that’s also doubly the case in estates litigation where typically you’re fighting over assets that, a very common one is a house where it has a carrying cost but it may not necessarily be appreciating, or a small business worth $1.5 to $2,000,000. You need a trustee in there managing it, it may not be making money, the estate may be deteriorating in value over the course of this litigation.  And you may wait for two years to get to trial, have a great case that only gets stronger, and find that your ultimate result is far inferior to the settlement you could have taken 2½ years ago that also would have paid you 2½ years of peace of mind.

Paul Trudelle: Yeah, that’s right. I think that the passage of time exacerbates both the costs by necessity and the risk involved and it may mean that you’re dealing with a smaller pie at the end of the day because of that and simply because of the passage of time. One of the things we didn’t mention is that after your trial, there is always the likelihood or prospect of an appeal which may add another year or two years to the matter before it’s finally determined.

Chris Graham: Okay, what we’ve told you so far is generic information about the trial system with a bit of an estates flavour, but generally most of it applies to general litigation as well as estates.  But estates, of course, is a specialized area and there are significant differences with other areas. Can you lead us through some of them, Paul?

Paul Trudelle: Yeah, I think one of them is that in estates matters, for example, usually if we’re talking about the example of a Will challenge, there’s usually a fixed amount, like we talked about the pie, we know what the size of the pie is. Usually by, early on in the litigation or as it proceeds, everyone gets a firm grasp of what the pie is, what the size of the estate is.  So you have a pretty good handle on what it is you’re fighting for, and unlike a personal injury case where that’s another variable, everyone knows what the size of the pie is. I think that allows the parties to, it should make it easier to settle the case because you know what you’re fighting over as opposed to a personal injury case where that’s something that the parties may differ on what the quantum of the damages is going to be. Here, although they’re not damages, you know what the damages are.

Chris Graham: Yeah, and that leads us, because there’s that pot of gold, that leads us into another difference, and this is a huge fundamental difference between estates litigation and say, contract litigation, where you sue someone for breach of contract $2,000,000 or $3,000,000, you win, they may pay, they probably will pay at least some of your costs. How does estates litigation differ in that respect?

Paul Trudelle: In estate litigation there’s another possibility with respect to the costs awards in normal, not normal litigation, not the right word, but in traditional litigation.  Fees are payable by the winner or loser.  That may be varied according to the conduct of the parties, or any offers to settle that are made. But it’s the parties that will end up paying the costs. In estate litigation, that is often the case and that seems to be the trend now, that the winner or the loser will pay the costs. However, there is that third possibility which is that some or all of the costs will come out of the estate. And I think that extra variable leads to the uncertainty, it also leads to the risk on the parties. Historically, costs would always come out of the estate and that would reduce the risk; now the Courts are moving away from or have moved from that and I think that just increases the risk that at the end of the day, someone’s going to be very upset by the outcome.

Chris Graham: Exactly, and let’s take a simple example. If you’re fighting over a $500,000 estate and you have a basic trial, $125,000 a piece, so you’ve got a quarter of a million, half of the estate in legal fees. There’s the risk for the winner. There’s the remote risk that the winner may have to pay his own lawyers, the other side’s lawyers and get the $500,000. So the winner may win and only get a quarter of a million, there’s an outside risk that that person who won may actually lose, pay all his fees, pay all the other side’s fees, so you’re down three quarters of a million dollars, well you’re down a quarter of a million but you’ve lost out on the estate, and those are the two worst-case scenarios. But, I mean, right there, $500,000, you were fighting over $500,000 and your worst-case scenario is negative $250,000, it’s a pretty huge spread.

Paul Trudelle: Yes. I think another difference in estate litigation that you don’t see in other types of litigation is that in a Will challenge, for example, if you can settle it, you can settle it on the basis of some fair division or a division of the estate that would satisfy everyone. When you go to Court though, the Court isn’t able to make that division, it’s not able to split the pie so to speak -- Will challenge is an all or nothing prospect. When it goes to Court, either the Will is valid or it’s invalid. If it’s valid, you may get nothing or you may get everything.  Whereas, if you’re able to negotiate a settlement, you can come to some resolution that’s somewhere between those two extremes. So I think that’s an important factor and another reason why estate litigation settlements make sense and are very important to consider.

Chris Graham: And with the types of assets that we typically encounter, a businessman may die and have a growing business that may roll over into his spouse’s spousal trust so there aren’t taxes, capital gains taxes payable. There are all kinds of opportunities in settlement negotiations to come to genuine win-win bargains where both parties avoid huge risk and potentially come out on top. Sometimes, even on top of where they may have ended up in a “total victory” scenario minus legal fees.

Paul Trudelle: Well that’s great, Chris. Why don’t we end it on a win-win and wrap up for this week. If you have any comments or questions, we hope you can pass them on to us. We love to hear from you. You can send us an e-mail at hull.lawyers@gmail.com, or just pick up the phone and leave us a message on our comment line at 206-350-6636. And be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information about today’s practice of estate law.

Chris Graham: We hope you enjoyed the show. I’m Chris Graham.

Paul Trudelle: And I’m Paul Trudelle. Thank you.

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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Continuing with our review of the Canadian Centre for Elder Law Studies' paper on viatical settlements, we note that the paper is broken down into 7 parts, starting with a brief introduction and an examination of typical viatical settlements. There is also a review of American academic articles and the study looked at the historical developments of viatical settlements in the U.S.

The study goes on to examine the current law in Canada and looks at leading policy arguments for and against removing the legal barriers to viatical settlements in Canada. The study also examines in detail the leading Canadian model for law reform drafted in 2001 by Ontario's Financial Services Commission. The last two parts of the study include a review of several issues for reform and a conclusion to the study paper.

The origins of the project arose out of the Program Committee of the British Columbia Law Institute, whereby they identified examining the possibility of legalizing and regulating viatical settlements as an innovative area for legal reform.

After having reviewed the study paper on viatical settlements, it is clear that, while this is an innovative area of legal reform, certainly in the United States, the concept of viatical settlements is a growing trend and one that will no doubt be considered over the next few years as the increase in population puts pressure on the market forces.

Given that viatical settlements are rare in Canada, the study paper looked at the elements of a typical viatical settlement from the United States as providing the reference point. Again, while there are different approaches in the United States, the study notes (at page 3) that one commentator who recently reviewed the American market concluded that the typical viatical settlement contains six steps.

We will look at the six steps in our next blog.

All the best, Suzana and Ian. --------