Estate Litigation


A Smorgasbord of Issues between an Estate Trustee and His Solicitor

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Abuse of Process

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Assessing Testamentary Capacity

An article was recently published in the American Journal of Psychiatry in May 2007 and can be found www.ajp.psychiatryonline.org.

Among other things, the article considered the common cognitive screening tests used by the medical profession to assess testamentary capacity.

By way of introduction, the article states:

Clinicians and legal experts must understand that cognitive tests are not diagnostic of dementia and cannot be used as a measure of capacity. Their value lies in the ability to screen for cognitive impairment and to reflect changes in cognition over time. The Mini Mental Examination (MMSE) and the clock-drawing test are the two most common used cognitive screening tests.

The MMSE is widely used and is generally regarded as a test of cognitive function, albeit with limitations. The MMSE canvasses seven cognitive functions with a possible total score of 30. Scores below 26 suggest that a person is impaired. However, there are a variety of outside biases that may affect the MMSE score, including education and language. The MMSE is therefore not necessarily determinative or diagnostic of incapacity, but simply instructive as to whether the person being assessed is cognitively impaired. It is a test that can be repeated over time with good results.

The clock-drawing test simply shows a circle. The person being assessed is then instructed to place numbers on the circle so that the circle looks like a clock. The patient is then asked to set the time to ten past eleven.

It is widely accepted that the clock-drawing test covers a wide range of intellectual and perceptual skills. According to the article, the clock-drawing test measures: comprehension; planning; visual memory and reconstruction of a graphic; motor programming and execution; numerical knowledge; abstract thinking; etc. While no specific score is given, the actual test provide a universal global assessment of cognitive function. For anyone with small children, they will know that telling time on a conventional clock is not necessary an easily acquired skill and takes some degree of cognitive proficiency on the part of a child. The value of the clock-drawing test in assessing cognitive function therefore becomes apparent when dealing with adults.


Court Etiquette

In Kaplun v. Kaplun, Brown J. of the Ontario S.C.J. reminded all counsel of certain basic expectations that a court has of counsel who appear in Motions Court:

1. Be on time and ready to start at 10:00 a.m. Tardiness displays a lack of respect for the court, its staff, and fellow counsel;

2. Counsel should always be courteous and civil to opposing counsel.

3. Ill feelings that may exist between clients, particularly during litigation, should not influence counsel in their conduct and demeanour towards opposing counsel.

4. When scheduling a motion, counsel should consult the responding side before setting a date.

5. Requests for an adjournment should be communicated to opposing counsel well in advance of the hearing date. The not uncommon practice of adjournment by ambush is unacceptable;

6. Counsel should follow the two basic rules of courtroom etiquette:

(a) When one counsel is standing to make submissions, the other should sit down. Success in Motions Court does not depend on the last person standing; and

(b) Avoid "Jack-in-the-box" advocacy. Standing up to interject repeatedly during opposing counsel's oral argument on a motion is rude and wastes time. Counsel should deal with any disputed matter and respond in a reply argument.

7. Finally, Brown J. states that for Motions Court to work efficiently and fairly, the court depends upon counsel observing the three "Cs": courtesy, civility and co-operation.


Enforcing Judgments and Orders

A forgotten cousin of litigation is the enforcement of judgments and orders (including cost orders). Here's a general overview.

To enforce the payment or recovery of money, a party has the following options: a writ of seizure and sale, garnishment, a writ of sequestration, appointing a receiver (Rule 60.02/Forms 60A and 60B).

A party can enforce an order for the recovery or possession of land by a writ of possession (Rule 60.03/Form 60C).

An order for the recovery of possession of personal property, other than money, may be enforced by a writ of delivery (Form 60D).

An order requiring a person to do an act, other than the payment of money, or to abstain from doing an act, may be enforced against the person refusing or neglecting to obey the order by a contempt order (Rule 60.05). A motion before a judge is required (Rule 60.11).

I recently issued a writ of seizure and sale in respect of land. As with all of the enforcement provisions referred to above, a writ of seizure and sale in respect of land has its own unique sub-rules (counsel should read the applicable sub-rules carefully). For example, once a writ of seizure and sale of land has been issued by the local registrar, a creditor may not take any step to sell land under the writ until four months after the writ was filed with the sheriff (Rule 60.07(17)). No sale of land may be held until six months after the writ was filed with the sheriff (Rule 60.07(18)). The sale of land cannot be held under a writ of seizure and sale unless notice of the time and place of sale has been mailed to the creditor and to the debtor at least 30 days before the sale (Rule 60.07(19)).

Before a creditor decides how best to enforce a monetary judgment or order, a creditor can chose to examine a debtor. Rule 60.18 states that a creditor may examine the debtor in relation to: the reason for non-payment of the order; the debtor's income and property; debts owed to and by the debtor; whether the debtor has disposed of any property either before or after the order; and the debtor's present, past and future means to satisfy the order.

Rule 60.19 deals with the cost of enforcement generally. Finally, it is important to note that, pursuant to Rule 60.12, where a party fails to comply with an interlocutory order, the court may stay the party's proceeding, dismiss the party's proceeding or strike the party's defence, or make such order as is just.


Estate Planning Checklists

Checklists are wonderful things when it comes to the practice of law (list makers would argue that that is true in life as well). In today's busy practice, a checklist can ease the troubled legal mind.

I was looking at several estate planning information checklists earlier this week. It is worthwhile to highlight some issues/items that can be easily overlooked but which a thorough solicitor should ensure is on his/her checklist:


Putting Children on Title

Recently, a client came to me regarding the purchase of a family cottage. The client was obviously excited about his new purchase, and wanted advice as to whether he should include his minor children on title. As his children would ultimately inherit the cottage, he thought it would be a good idea to include them on title from the start. My client knew that if his children were joint owners, they would continue to own the cottage after he died by right of survivorship. Not only would capital gains taxes be deferred (until the children ultimately disposed of the cottage), but the cottage would not be included as an estate asset for the purposes of calculating the estate administration tax (i.e. probate fees). It seemed like the perfect plan.

However, despite my client's best intentions, my advice was not to put his children on title. The problem was that if the cottage had to be sold or mortgaged while his children were still minors, a court order would be required. Moreover, The Children's Lawyer would have to be put on notice if such a court order were requested. Finally, the court would only grant an order when it was of the opinion that the sale or encumbrance of the cottage was necessary or proper for the support or education of the children, or would substantially benefit them. In the end, it was better for my client to simply wait until his children were adults before transferring his interest in the cottage to them.


Summary Trial - An Option Worth Considering

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Testamentary Capacity and Undue Influence

Lack of testamentary capacity and undue influence are usually difficult to prove. However, too many clients are willing to advance such claims on the basis of a weak evidentiary record. A recent decision from the Alberta Court of Appeal, Nicholson v. Kurtz sounds a note of caution.

Two sisters appealed a trial decision setting aside their father's Will on the basis of lack of testamentary capacity and undue influence.

The father's previous Will had divided the residue of his estate equally between his three children. However, in 1998, the father, who was 92 at the time, retained a lawyer to prepare a new Will ("1998 Will"). The lawyer asked his client a series of questions. Some of the responses were inaccurate, but the lawyer ultimately concluded his client had capacity. The 1998 Will specifically stated that the father wanted to exclude his son "because I believe if he receives any money he will use it for liquor". The son had been convicted of drinking and driving offences in 1987 and 1992.

The trial judge concluded that the father lacked capacity and was unduly influenced by his two daughters and set aside the 1998 Will. The Alberta Court of Appeal disagreed and reversed the trial judge's decision. The 1998 Will was declared valid.

According to the Appeal Court, there was no medical evidence suggesting the testator lacked capacity and there was no direct evidence that the daughters influenced their father's decision to exclude their brother. Moreover, the father's lawyer specifically questioned his client to gauge his capacity during their first two meetings. Their third meeting lasted two and a half hours and the lawyer had no reason to conclude that his client's capacity had changed. After reading the 1998 Will to his client, the lawyer was satisfied that it expressed his client's wishes.

According to the Appeal Court, the finding of undue influence could also not be sustained on the record. The father's reason for excluding his son was expressly articulated in the 1998 Will. There was also clear evidence that the father's wish to exclude his son arose several months before the 1998 Will was signed. The Appeal Court held that the trial judge simply failed to give any weight to this evidence. The trial judge also failed to give weight to the lawyer's evidence that he discussed the possibility of the daughters' influence with his client who expressly denied such influence.


The Paul Penna Estate & Summary Judgment

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The Vexatious Litigant

Most lawyers have come across the vexatious litigant, the complainant who has an endless array of grievances and regards the courts as a convenient forum to pursue frivolous claims. The Oxford Dictionary defines vexatious as "... not having sufficient grounds for action and seeking only to annoy the defendant". Endless proceedings and countless motions are brought over a number of years. Regrettably, the vexatious litigant knows enough about the rules of court, often through trial and error, to be a menace and not easily put off. As no one judge initially hears all proceedings and accompanying motions, a great deal of sympathy is often extended to the vexatious plaintiff together with ample leeway to pursue his or her claims.

However, there is hope. Section 140 of the Courts of Justice Act states that where a judge of the Ontario Superior Court of Justice is satisfied that a person has persistently and without reasonable grounds instituted vexatious proceedings or conducted proceedings in a vexatious manner, the judge may order that no further proceedings be instituted or current proceedings continued without leave of a judge.

In Dale Streiman & Kurz LLP v. De Teresi, Mr. De Teresi had commenced 73 proceedings over 10 years. According to the court, Mr. De Teresi had a history of serially litigating against the same party over essentially the same set of facts. He brought sequential lawsuits, often suing lawyers who had acted for or against him in past proceedings and continued to litigate even when a settlement had been reached. The court held that Mr. De Teresi had deliberately misled the court and instituted proceedings that could not succeed but were simply designed to harass other parties. Mr. De Teresi was declared a vexatious litigant and could no longer institute proceedings without leave.

Finally, if a section 40 order is not yet open to the defendant, the defendant can ask that a judge be appointed to case manage all proceedings commenced by the vexatious plaintiff. Once assigned, a judge will quickly take the measure of the plaintiff and begin to shut down frivolous proceedings and useless motions.


When a Loan becomes a Gift

A father's intention to gift his children a substantial amount of money and benefit a favoured charity at the same time, albeit indirectly, was at the centre of a recent case decided by the Tax Court of Canada. The case in question is Benquesus v. Canada [2006] T.C.J. No. 149. Gift giving has never been so creative!

Mr. Jacques Benquesus lived in Israel. In 1997, he transferred $1.5 million to the Canadian charity, Sephardic Education Foundation, indicating in writing that his family members (four children and son-in-law) were loaning the monies to the Foundation interest free. Further, if the family members were to forgive the loan, the funds should be considered a donation. His children and son-in-law were all residents of Canada. Mr. Benquesus had made other substantial gifts to family members over the years.

The children and son-in-law forgave some, but not all, of the monies. In 1999, the Foundation issued charitable receipts to them for such gifts. The amount of the gifts was shown as donations in the financial statements of the Foundation for that year, and the amount of loans outstanding were reduced by the amount of the gifts. The family members claimed the amounts as charitable donations in the 1999 taxation year. The Minister of National Revenue disallowed such amounts as charitable donations. The family members appealed the assessment on the basis that their father had gifted them the money, which they then donated to the Foundation. Of course, any charitable tax receipts were useless to Mr. Benquesus as he was not a resident of Canada.

According to the court, the matter turned on whether Mr. Benquesus gifted the money to his family. The court held that Mr. Benquesus had in fact made a valid gift to his children and son-in-law and thus the children were entitled to claim donation tax credits in the year in question.

No witnesses were called by either side. Instead the parties presented an Agreed Statement of Facts at trial.

The Court considered the three requirements for a valid inter-vivos gift: (i) an intention to donate or give; (ii) acceptance by the donee; and (iii) a sufficient act of delivery.

According to the court, all three requirements were met in this case according to the Court. However, while the court quickly determined that the first two requirements were met, the court struggled with whether there was sufficient delivery. The court acknowledged that the family members effectively took over control of the money. They instructed the Foundation how much was to be kept as a donation, and how much was to be paid back by them. This was the only evidence before the court as set out in the Agreed Statement of Facts. The court ultimately decided that there was a sufficient act of delivery to perfect the gift to the family members. It was, therefore, the children and son-in-law who ultimately made the donations to the Foundation.

The court also considered whether an intention to gift money to children in the hopes that they use the money a certain way rendered the gift ineffective. The court was not persuaded that it did. The court recognized that in an ideal world, to perfect delivery of a gift there would be a physical transfer of possession of the property from donor to donee. As a general rule, the donor must have done everything that can be done to perfect the gift. However, courts have found that lesser forms of delivery may suffice. Courts have strained to find sufficient delivery when the evidence of a desire to make a gift is irrefutable. In the case before the court, the evidence set out in the Agreed Statement of Facts clearly signalled Mr. Benquesus' desire to make a gift to his children.


Summary Judgment in Estate Litigation

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