All About Estates

Creativity Can Kill: Striking Out Pleadings

closeAuthor: Angelique Moss Name: Angelique Moss
Email: amoss@devrieslitigation.com
Site: http://www.devrieslitigation.com
About: Angelique's legal practice focuses on estate, trust, and capacity litigation. She frequently appears before the Ontario Superior Court of Justice and has also appeared before the Divisional Court. Angelique has written a variety of articles for continuing legal education events and newsletters, and recently co-authored, with Justin de Vries, a paper published by Irwin Law in the Law Society of Upper Canada's Special Lectures in Estates (2010).See Authors Posts (43)

A decision of the Ontario Superior Court, Catford v. Catford 2014 ONSC 135 demonstrates the importance of getting pleadings right. In this case, the plaintiff sued his niece for “$670,000 or such other sum as may represent one-third of the Catford family estate”. The facts pled in support of this claim was that the plaintiff’s mother had allegedly severed ties with the plaintiff and “all support” (presumably financial). From this, the plaintiff inferred that he had been disinherited. He claimed that his disinheritance was a foreseeable consequence of his niece’s actions in “demonizing the plaintiff to his mother”. The plaintiff also pled that the defendant had alienated the affection of the plaintiff’s mother.

The defendant brought a Rule 21 motion to strike out portions of the plaintiff’s claim. Rule 21.01(1)(b) provides that a party may move before a judge to strike out a pleading on the ground that it discloses no reasonable cause of action or defence, and the judge may make an order or grant judgment accordingly.No evidence is admissible on this type of motion.  Instead, the judge must determine whether any of the plaintiff’s claims disclose a reasonable cause of action, or whether it is “plain and obvious” that the claims cannot possibly succeed.

Justice Healey found that there was no chance of success with respect to the plaintiff’s claim that the defendant had interfered with his inheritance rights to his mother’s estate. The problem (at least from the perspective of the pleadings, although probably not from her perspective) was that the plaintiff’s mother was still very much alive. As such, she retained “full discretion as to how to dispose of her estate.” The plaintiff’s claim was merely speculative, speaking to a possible future harm. There is no tort of interference with future inheritance, Justice Healey found.

As for the plaintiff’s pleading regarding the defendant’s “alienation of affection”, the court re-iterated the Supreme Court of Canada’s refusal to recognize this tort in Frame v. Smith, [1987] 2 S.C.R. 99 (S.C.C.). One reason why the majority in Frame v. Smith refused to entertain such a remedy was the “undesirability of provoking suits within the family circle.”  The court frowned on the “spectacle of parents not only suing their former spouses but also the grandparents, and aunts and uncles of their children, to say nothing of close family friends, for interfering with rights of access…”

The self-represented plaintiff, having been ordered by the court to amend his claim, was sent back to the drawing board. The costs payable to the defendant for this particular motion were $4,326.93 (the costs endorsement for both this and a related motion, is here).

TGIF!

Angelique Moss

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Tags: Angelique Moss, de VRIES LITIGATION, Estate Litigation, litigation

Posted in Estate Litigation

NEW ESTATE INFORMATION RETURN: ADDITIONAL NOTES OF CAUTION

closeAuthor: Steven Frye Name: Steven Frye
Email: sfrye@cwcagroup.com
Site: http://www.cwgroup.com
About: CW group is a firm of professional advisors providing a comprehensive suite of services to a diverse client base. Our experienced and skilled team can provide personal and corporate solutions to maximize growth potential, wealth and value.See Authors Posts (86)

In a recent blog – just in time for the holidays as the blogger put it – executors and prospective executors were alerted to the requirement in Ontario for a new estate information return to be filed in addition to an application for a Certificate of appointment of Estate Trustee (also known as a “Probate Certificate”) effective January 1, 2015.

Since this blog was written, the regulations have been formalized and I wanted to update you on the requirements and use the opportunity to connect this to a blog I wrote a couple of years ago related to this matter.

First the good news, albeit minor – this new information return must be filed within 90 days of the estate trustee being issued a Probate Certificate, not 30 days as previously indicated in the draft regulations.

This estate information return does require the estate trustee or executor to provide a complete and detailed inventory of estate assets and a declaration of values for each asset.

In previous blogs, I have written about the need to obtain properly supported valuations of estate assets such as real estate, securities and business interests for a number of purposes. You can add this estate information return to the list of purposes.

I also mentioned that the Minister of Finance for Ontario is now empowered to conduct audits in respect of an estate and its estate administration tax (EAT) liability, which is commonly referred to as the fee or tax on the probate of an estate.

In addition, the Minister will have the right to assess an estate up to four years from the date the return is filed. In cases where the estate trustee has not filed the information required within the 90 day time limit, or has made a misrepresentation that is attributable to neglect, carelessness or fraud, the assessment or reassessment can be made at any time and offences are punishable by fine, imprisonment or both.

To use an old perhaps tired expression, when the power to audit was legislated, I was waiting for the other shoe to drop. I think it has now with this new filing requirement. You can expext that audits and (re)assessments will take on some prominence.

Thanks for reading

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Tags: cookson walker, estate & trust, Estate Administration, Estate Litigation, estate trustee, Executors, passing of accounts

Posted in Estate Administration, Estate Litigation, Estate Planning, Executors, In the News, Passing of trustees' and executors' accounts, Trusts, Wills

Al-Hossain – A Reminder of the Importance of Documenting Trust Relationships

closeAuthor: Katie Ionson Name: Katie Ionson
Email: kionson@fasken.com
Site: http://www.fasken.com
About: Katie Ionson is an Associate in Fasken Martineau DuMoulin LLP’s Wealth Management, Charities and Not-for-Profit Group. As part of her wealth management practice, Katie assists clients with Wills, powers of attorney, trusts, marriage and domestic contracts, and trust and estate administration. She has experience using estate planning to address a variety of client objectives, including income splitting arrangements, asset protection and business succession issues. Katie is engaged in a broad practice in the areas of charities and not-for-profit law, which includes preparing applications for charitable status, assisting clients with transitioning to the new federal or provincial not-for-profit legislation, drafting endowment and gift agreements and advising on administrative and tax-related issues.See Authors Posts (9)

The Tax Court of Canada recently released its decision in the case of Al-Hossain v. The Queen, 2014 TCC 379. The case centred around two unrelated individuals who jointly purchased a home. The central issue was whether the buyers satisfied the requirements for the new housing GST/HST rebate. However, of most interest to the likely readers of this blog is the judge’s commentary regarding the evidence required to prove a “bare trust” relationship.

The reason the buyers did not qualify for the rebate was that they had not both occupied the home following its purchase. To avoid the requirement that they both occupy the home, the buyers argued that one of them held the property on bare trust for the other.[1] When property is held on bare trust, the trustee holds legal title only to the property. Beneficial ownership, and therefore all meaningful rights to the property, remains with the beneficiary.

The buyers executed a declaration of trust evidencing this bare trust relationship a few weeks after finalizing the agreement of purchase and sale of the property. The judge rejected this evidence of the trust relationship, stating:

“The creation of a trust must be properly documented containing the requisite elements of a trust, dated, signed and in existence prior to or contemporaneous with the matter that is the subject of the trust arrangement.”

The judge did not cite authority for this proposition. Her statement is surprising.[2] Several cases from the Federal Court of Appeal have found that the execution of trust documentation does not need to be performed prior to or contemporaneous with the transfer of trust property to the trustee[3] and there are many historic examples in our common law where trusts have been created by words only and/or implied from the actions of the parties.

Undocumented trust relationships are very common. Many aging parents transfer bank accounts or homes into joint ownership with their children, in hopes of facilitating the management of their affairs and possibly reducing probate fees on their death.[4] Although the principle cited above may be questionable, the case of Al-Hossain is another reminder of the importance of documenting the true nature of trust relationships at the time property is transferred to the intended trustee or trustees. If a parent does not intend to make a gift to his or her children of part of his or her interest in the property at the time the transfer to joint ownership occurs, legal help should be sought to clearly document this intention.

[1] There is some question whether, even if the buyers had been successful in convincing the court that there was a bare trust relationship, this argument would have succeeded.

[2] I note, however, that she provided other reasons, separate from the execution of the declaration of trust, to support her finding that a bare trust relationship did not exist between the parties at the time the property was acquired.

[3] See for example Nelson v. The Queen, 74 DTC 6266, and Bouchard v. The Queen, 83 DTC 5193.

[4] As previous blog posts have discussed, there are many potential issues with these strategies, which are beyond the scope of today’s blog post to discuss.

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Tags: Fasken Martineau, Trusts

Posted in Trusts