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The Prince Edward Island court recently entertained an Application for directions by the trustees of the estate of Owen Connolly, reported at Connolly Estate (Re) [2006] P.E.I.J. No. 61.

Mr. Connolly died in 1887. He left a will which established a trust “for the purpose of educating or assisting to educate poor children resident in Prince Edward Island who are members of the Roman Catholic Church and who are either Irish or the sons of Irish farmers...".

The trust was said to have paid out over $1 million in bursaries since inception, and had a reserved capital of approximately $1 million.

The trustees stated that with the passage of time, the question of eligibility had become more difficult. The trustees sought direction from the court as to whether eligibility was open only to males, and whether eligibility was open to those who had “significant” Irish ancestry, being at least 50%.

It was noted that the administration of the trust was not affected by the discrimination provisions of the relevant human rights legislation.

The court had little difficulty in concluding that the trust did not benefit males only.

A more difficult question is what was meant by the term "Irish". The court reviewed the history of Ireland and its society and noted that 19th century Ireland was not the product of a pure strain of "Irish", but was a melding of a variety of ethnic strains of immigrants who arrived at different times through history. The court traced the history of Ireland back to 3000 B.C. The court concluded that when he referred to a person being “Irish”, the testator intended to refer to either a person who had emigrated from Ireland, or to a person who was a descendent of a person who had emigrated from Ireland. By making reference to "sons of Irish fathers", the court concluded that the testator had visualized the Irish blending into the larger community in PEI, and thus, felt that having 50% Irish blood was reasonable and sufficient.

The case is an interesting read, as it not only reviews Irish history, but it sets out in some detail the life of the testator in the mid-1800s, including a detailed report of his death in December, 1887.

Thanks for reading,

Paul Trudelle

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The Ontario Supreme Court of Justice recently ruled on the issue of whether a solicitor can assert a solicitor’s lien over an original will.

In Szabo Estate v. Adelson (2007), CanLII 4588, the solicitor acted as estate solicitor, having been retained by the estate trustee named in the will. He rendered an account for legal services in the amount of $3,230.79. This account was not paid, and the solicitor asserted a solicitor’s lien over the documents in his file, including the original will.

Interestingly, the solicitor offered to release the will if the estate trustee agreed to a charge against the estate. The estate trustee would not agree.

The estate trustee brought an Application under s. 9 of the Estates Act for the production of the original will. In considering the Application, the court noted the basic proposition that where a client discharges a solicitor without cause, the solicitor may exercise a lien for his or her fees over the documents in the solicitor’s possession, and may retain them until paid. 

The estate trustee relied upon an article and an excerpt from a text that stated that a solicitor’s lien did not extend to a will. The court found that the article did not cite any authority for that proposition, and that the case referred to in the text, an 1823 decision, did not support the proposition, either. 

This illustrates that one should not blindly rely on articles and texts as setting out black letter law (unless, of course, one is relying on Hull and Hull, Probate Practice).

The court concluded that a solicitor can exercise a lien over a will, just as he or she could over any other important document.

However, the court can and will intervene in order to prevent an injustice to a client resulting from the exercise of the lien. In the case under consideration, the court ordered the solicitor to deliver up the will IF AND WHEN the estate trustee agreed to a charge against the estate in the amount of the solicitor’s account.

Thanks for reading,

Paul Trudelle

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Leona Helmsley’s estate continues to raise eyebrows, and serves as an illustration of what not to do when estate planning.

Following her death, it was revealed that she set up a $12m US trust to care for her dog, Trouble.

Last week, it was reported that the named trustee of the trust, her 80 year old brother (who received over $15m US himself from the estate) does not want to care for Trouble. It is yet to be seen whether the alternate trustee, Leona’s grandson, will take on the responsibility.

In addition, Leona’s will directed that Trouble, following his death, be buried with her at the family mausoleum. However, state laws forbid animal remains from being interred at human graveyards.

To make matters worse, it appears that Trouble bit a housekeeper, and the housekeeper now wants a piece of Trouble’s money.

The present circumstances illustrate the need for open discussion of estate plans. Trustees should be consulted in order to ensure that they actually will agree to take on the role of trustee; special requests should be explored to ensure that they are feasible.

Thank you for reading,

Paul Trudelle

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Unfortunately, the following quote applies to many of the cases that we deal with on a daily basis:

“To say that brother and sister do not get along in this case is an understatement. There is plenty of mistrust, suspicion and bitterness to go around. The applicant blames her brother for high-handed and unilateral conduct. He claims he has acted improperly. On the other hand, [brother] blames his sister for being non-communicative and hard to get along with. He was compelled to take the steps that he did because his sister which not deal with him.”

The quote is from Hill v. McLoughlin, 2007 CanLII 1334 (Ont. S.C.). There, brother and sister were co-estate trustees and residual beneficiaries of their mother’s estate. As a result of the above-noted mistrust, sister brought an application to have brother removed as an estate trustee.

The court found that while there was friction and hostility between brother and sister which hindered the administration of the estate, it was not satisfied that brother committed a breach of trust as alleged, or was in a conflict of interest.

The court stated that where the deceased has expressly appointed trustees, a court should be loath to interfere with the testator’s expressed intention except on the clearest of evidence that there was no other course to follow. The expressed wishes of the testator should be respected and not interfered with lightly. It is only where a court determines that the welfare of the beneficiaries requires removal and replacement of trustees that the court should undertake such action. It is not any mistake or neglect of duty on the part of the trustees which would lead to their removal. It must be shown that the non-removal of the trustee will likely prevent the trust from being properly executed.

While the court did not order removal of the brother, it did not condone his actions. The court required that the brother undertake certain steps, such as provide specific information to the sister.

On the issue of costs, judge ordered that each party should bear their own costs.

It is often hard for siblings or others to get along and cooperate in the administration of an estate. Further, actions taken by trustees, out of spite or otherwise, can serve to exacerbate the mistrust that already exists. Knowing that the courts will not automatically step in and remove an estate trustee in the circumstances should encourage the parties to an estate to act reasonably and simply get the job done.

Thank you.

Paul Trudelle

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In Thursday’s Globe and Mail, Margaret Wente wrote about “Geezers in Paradise”, and observed that tomorrow’s seniors will be able to enjoy “the most delightful old age of any generation the world has ever known”. Seniors are the fastest growing group in Canada, and by 2017, seniors will outnumber those under 15.

Ms. Wente sees a future where “mature lifestyle residences” replace schools, nannies are imported to care for your mom rather than for your kids, and the most popular diapers will be size XXL. Industries will sprout up to service this aging population, medicines will improve, and the political clout of this older group will ensure their comfort and entitlements.

This optimistic future is contrasted by reports earlier last week that one in three Canadians worry about outliving their savings (Toronto Star, July 16, 2007). The report found that many older Canadians did not foresee such a rosy retirement. 33% of respondents over 60 worked either part-time or full-time, and 19% indicated that their financial situation was worse or much worse than 5 years ago.

The vision of the baby boomer generation, on the cusp of becoming senior citizens, being the most affluent group ever is not universal. “There’s going to be a group of baby boomers for whom all of this image of affluence and consumption isn’t reality,” said professor Doug Owram of the University of British Columbia.

Rich or poor, the articles both highlight the importance of planning for our later years.

Thank you.

Paul Trudelle

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Mr. Bernard Bayer has won the right to receive a salary from his former employer until March 1, 2012. Unfortunately, Bernard died on April 23, 2005.

In this most unusual case, Bernard's estate will be entitled to receive payment equal to Bernard’s salary until 2012, notwithstanding Bernard's death.

The case turns on the peculiar wording of Bernard's employment agreement with his employer, the Blue Button Club. Pursuant to this agreement, which was entered into on March 1, 2002, Bernard was employed as the Executive Manager of the Club. The agreement had a 10 year term. The agreement described Bernard's duties at the Club. It provided that he was to be paid at least $60,000 per year.

An unusual provision of the employment agreement provided that the Club was to maintain insurance on the life of Bernard, naming the Club as beneficiary, so that the Club could comply with the termination provisions of the agreement. The termination provisions provided that the employment agreement could be terminated in the event that Bernard failed repeatedly and demonstrably to perform his duties, and failed to remedy this problem after receiving reasonable notice; for just cause; or upon his death, in which case, the Club was to collect the insurance proceeds and pay these to Bernard's estate.  Apparently, the Club did not take out such a policy of insurance.

In resisting the claim by Bernard’s estate, the Club argued that, prior to his death, Bernard failed to fill his duties. The court rejected this submission, holding that the Club did not provide the required written warning to Bernard.

The Club also submitted that the agreement was not enforceable, and that neither of the parties expected the agreement to be enforceable. The court easily rejected this submission.

As the agreement clearly contemplated Bernard’s death, it was not frustrated by his death.

The court found that Bernard's estate was entitled to the payments due until the end of the agreement. These damages totalled $410,000.

In this case, the employment agreement was drafted by or on behalf of the Club. The court held the Club to its agreement, notwithstanding its unusual provisions, or the fact that it produced, at least at first blush, an unusual result.

Thank you,
Paul Trudelle

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From 1993 to 1996, Daniel Assh, a Pensions Advocate with the Bureau of Pensions Advocates, Veterans Affairs Canada assisted Maria Orn, a veteran and the widow of a veteran in obtaining her pension benefits.

In 2001, Maria prepared her will. In it, she left specific legacies totalling more than $100,000, and divided the residue of her estate amongst various named persons and a charity. Three weeks later, she died.

One of the specific legacies was a $5,000 bequest to Daniel.

Daniel told his superiors about the bequest, and that he intended to accept it as it could not give rise to a conflict of interest. They told him to "hold off" on accepting the bequest until the matter was cleared through the “appropriate department channels”.
Daniel argued that because he did not know of the bequest in advance, and because there could not be the expectation of further services, and no possibility that Daniel could provide special assistance to Maria or her family, there was no conflict. Daniel submitted that he had stopped providing services to Maria long before her death. It was agreed that Daniel had in no way attempted to influence Maria into making the gift.

Did he get to keep the bequest?

No. Veterans Affairs determined that accepting the gift would be in contravention of the federal Conflict of Interest Code.

Daniel grieved the decision through two levels of the internal grievance process, and then applied for judicial review when the decision was upheld at both levels. Judicial review was allowed, and Daniel was allowed to keep the bequest. However, the decision was appealed to the Federal Court of Appeal (“FCA”).

The FCA held that the bequest could give rise to a perception of conflict. The question was whether a reasonable person would think that there was a realistic possibility that acceptance of the legacy could influence the employee’s future performance of official duties. The FCA noted that a pensions advocate is in a position of confidence and influence. The clientele are usually elderly and vulnerable, and often in difficult circumstances, such as the death of a spouse.
The FCA stated that while Daniel could not accept the gift, “the acknowledgment of her gratitude to him for assisting her is effectively communicated to him, and to others.”

Thank you for reading.
Paul Trudelle