Thank you to all of our readers for the very positive comments and feedback that we have had on our first three newsletters. We continue to appreciate your comments and look forward to ongoing discussions with you as we continue to develop our newsletter and new blog site.
As ever, we invite contributions of topical relevance to be referenced, linked or included in our monthly newsletter and on our blog site. Please direct your feedback, comments or enquiries to: email@example.com
As a reminder, Whaley Estate Litigation provides legal services in the following areas:
- Will, Estate, Trust Challenges/Interpretations
- Dependant Support Claims
- Passing of Estate and Attorney Accounts
- Capacity Proceedings
- Power of Attorney Disputes
- Consent and Capacity Board Hearings
- End of Life Decisions
- Treatment Disputes
- Elder Law
- Solicitor's Negligence
- Agency Services
We would be pleased to assist you or your clients in dealing with any of these areas of practice or related issues.
Kimberly A. Whaley
Whaley Estate Litigation
|Book Release: "Preparation of Wills and Powers of Attorney, First Interview to Final Report" by Mary L. MacGregor|
Mary MacGregor and Canada Law Book recently launched the newest edition of her book: "Preparation of Wills and Powers of Attorney, First Interview to Final Report."
Ms. MacGregor has been the author of this publication, now in its Fourth Edition, for many years.
News from our Ontario Superior Court of Justice at Toronto
The Ministry of the Attorney General website now permits users to upload the new Estates List confirmation form for hearings, as well as Estate Forms including Probate Application Forms.
A review of the Estates Practice Direction is currently being considered. If practitioners on the Estates List have any suggestions to share, you can contact your Ontario Bar Association Trust & Estates Executive or contact Ameena Sultan at WEL, an executive member.
Scheduling appointments which in future may be referenced as 'Speak to Appointments', have been recently extended from a 10-minute to a 20-minute appointment.
"Refreezing": Estate and Trust Tax Tips by Brian Wilson
Brian Wilson is a tax lawyer, and our mediation partner at estatemediators.ca.
One of the most common objectives of an estate freeze is to pass on the future growth of the shares of a private company to the children of the parents who have built the business. This is accomplished by reorganizing the shares of the company to "freeze" the current value of the existing common shares into a Class of Special Shares (Class A Special Shares") that will not increase or decrease in value. New common shares are then issued to the children or a family trust for them for a nominal amount. As the value of the company grows, it will then accrue to the common shares.
Sometimes, however, the economy does not cooperate and the value of the company actually decreases. Since the value of the Class A Special Shares is fixed, their freeze value stays the same. In this situation, parents may want to consider "refreezing" by reorganizing the Class A Special Shares into a new class of Special Shares ("Class B Special Shares") with a new lower value to reflect the changed circumstances of the company. As the economy recovers, the increase in value from that point will accrue to the children.
There are many technical requirements to properly implement a refreeze. Clients should consult their tax advisors before proceeding.
Salzman v. Salzman : The Complex Role of Section 3 Counsel
By Ameena Sultan, Associate
The recent endorsement of Salzman v. Salzman <1>
highlights the challenges faced by counsel representing allegedly incapable persons under the Substitute Decisions Act, 1992 ("SDA").
Under section 3 of the SDA, a judge may direct the Public Guardian and Trustee to appoint counsel for a person whose capacity is in question. The person is then deemed to have capacity to retain and instruct counsel. Typically, in guardianship proceedings where the subject of the application does not have a lawyer, the court will direct that "Section 3 counsel" be appointed. The task of the lawyer appointed is to represent the alleged incapable person and to advocate for that person's wishes in Court.
In Salzman v. Salzman, Suzanne Salzman's son brought a court application seeking to be appointed co-guardian (with his brother) of her person and guardian of Mrs. Salzman's property. The Court directed that section 3 counsel be appointed for Mrs. Salzman and the application proceeded.
In the course of the case, section 3 counsel met with Mrs. Salzman alone in her home. Unbeknownst to section 3 counsel and to Mrs. Salzman, a caregiver was monitoring the meeting from the next-door apartment using a hidden baby monitor. When Mrs. Salzman swore an affidavit setting out her position in respect of the application, the caregiver swore her own affidavit interpreting what had occurred in the meeting in which Mrs. Salzman's affidavit was sworn. Mrs. Salzman's son then submitted the caregiver's affidavit to Court as evidence of Mrs. Salzman's incapacity.
Section 3 counsel objected to the admission of the caregiver's affidavit on the basis that its contents were protected by solicitor-client privilege and that neither participant had waived confidentiality or privilege. Section 3 counsel also argued that the evidence was not relevant and that its prejudicial value outweighed any probative value. Section 3 counsel could not even respond to contradict the caregiver's affidavit as to do so would amount to a further breach of Mrs. Salzman's lawyer-client privilege.
Despite section 3 counsel's objections, Justice Hoy ruled that the caregiver's evidence of the solicitor-client meeting was admissible as it had bearing on the issue of capacity.
The ruling reflects the complicated nature of representation under section 3 of the SDA. In this case, the content of solicitor-client meetings was used to make a finding of incapacity. This is in spite of the fact that section 3 counsel is appointed only where capacity is in question, so there are necessarily issues of capacity in the solicitor-client relationship. The conundrum is that section 3 counsel could in future find their dealings with their allegedly incapable clients used as a means to find their clients incapable.
Counsel who are appointed under section 3 of the SDA often have to deal with clients who have difficulty understanding the proceedings and providing cogent instructions. Where a client whose capacity is in issue is able to give instructions, however, section 3 counsel must abide by the presumption of capacity under section 3(1)(b) of the SDA and advocate for the fulfillment of those instructions in court
Rule 2.02 (6) of the Rules of Professional Conduct provides some additional assistance for lawyers representing clients who face challenges due to mental disability:
When a client's ability to make decisions is impaired because of minority, mental disability, or for some other reason, the lawyer shall, as far as reasonably possible, maintain a normal lawyer and client relationship. [emphasis added]
The purpose of section 3 counsel is to ensure that the wishes of the most vulnerable persons in capacity proceedings are represented. Section 3 of the SDA and Rule 2.02(6) of the Rules of Professional Conduct together provide a measure of protection for those individuals who find themselves in capacity proceedings, by ensuring that they have lawyers who represent them and treat them as much as possible as they would any other client. One element of a "normal lawyer and client relationship" is the expectation that communications between lawyer and client will be protected by privilege.
The job of section 3 counsel is to ensure that the allegedly incapable person understands the proceedings and his or her rights, to the extent that he or she is able to. Section 3 counsel is tasked with receiving and conveying the wishes of the allegedly incapable person to the Court and ensuring that instructions are obtained without the undue influence of others. Section 3 counsel plays an important role in ensuring that the allegedly incapable person is represented in proceedings that have a profound effect on that person's life and autonomy.
The endorsement in Salzman v. Salzman demonstrates the need for further discussion within the profession and between the profession and the Bench on the role of section 3 counsel in capacity proceedings, as well as the rights of individuals who are represented by section 3 counsel <2>
Health Law News: On Health Law and Privacy
Priscilla Platt of Heenan Blaikie LLP recently spoke on May 2011 on the application to hospitals of the Freedom of Information and Protection of Privacy Act ("FIPPA"). http://www.canlii.org/en/on/laws/stat/rso-1990-c-f-31/latest/
In the practice area of Estates Trust and Capacity proceedings, it is often the case that records are required to be disclosed either in the event of incapacity, or after death, concerning incapacity allegations. FIPPA applies to records which are in the "custody" or "under the control" of hospitals. It is important to recognize the distinction between FIPPA and the Personal Health Information Protection Act, 2004, S.O. 2004, ("PHIPA") http://www.canlii.org/en/on/laws/stat/so-2004-c-3-sch-a/latest/
FIPPA regulates how personal information should be handled, its collection, use disclosure, security and retention rules.
PHIPA on the other hand, applies to records that contain personal health information, i.e. patient records about identifiable individuals.
For information on new developments in privacy regulations, please visit Priscilla Platt's website at: www.accessprivacy.ca.
Substitute Decision Act <1> proceedings involving Power of Attorney and Guardianship disputes, continue to plague our courts in Ontario. It is clear that the message our Ontario Superior Court of Justice continues to convey throughout its various judgments, orders and endorsements, and as publicized in local and national newspapers, is one that is not easily absorbed by potential litigants.
The Honourable Mr. Justice David Brown has probably made some of the most telling comments demonstrating the concern of our courts, for example, in Salter v. Salter Estate <2>:
Parties cannot treat the assets of an estate as a kind of ATM bank machine from which withdrawals automatically flow to fund their litigation. The "loser pays" principle brings needed discipline to civil litigation by requiring parties to assess their personal exposure to costs before launching down the road of a lawsuit or a motion. There is no reason why such discipline should be absent from estate litigation. Quite the contrary. Given the charged emotional dynamics of most pieces of estates litigation, an even greater need exists to impose the discipline of the general costs principle of "loser pays" in order to inject some modicum of reasonableness into decisions about whether to litigate estate-related disputes".[Emphasis added].
And in Re Baranek Estate <3> per Brown J.,
"The so-called "battle of competing powers of attorney" is emerging as a growing area of litigation. This is a most unhealthy development. I suspect that when the Legislature passed the Substitute Decisions Act back in 1992 it intended to put in place a legal framework which would protect the affairs of the vulnerable elderly, not spawn a new breed of litigation which would see the hard-earned money of the vulnerable being exposed to claims for the payment of legal fees incurred by those whom they had appointed to protect their interests. [...] [T]he inter-attorney litigation which erupted in this case is symptomatic of a much larger problem which, as Ontario's population ages, risks turning into a very serious social issue. Indeed, I think the time may have arrived for the Legislature of this province to look into this problem of litigation involving competing powers of attorney, especially involving subsequent powers of attorney made during the latter periods of a person's life when they are vulnerable to pressure, in order to see whether new protections are required to ensure that the assets of the vulnerable are used for one purpose only - the satisfaction of the needs of the vulnerable elderly while they are alive."
1. Substitute Decision Act, 1992, S.O. 1992, c. 30
2. Salter v. Salter Estate , 2009 CarswellOnt 3175 (Ont. S.C.J.).
3. Re Baranek Estate, 2010 ONSC 6375 (CanLII)
Guardianships Case Reviews: Osadet v. Ontario (Public Guardian & Trustee)
Osadet v. Ontario (Public Guardian & Trustee) (2010), 2010 ONSC 4951 (Ont. S.C.J.) and Osadet v. Ontario (Public Guardian & Trustee) (2011), 2011 ONCA 269, 2011 CarswellOnt 2293 (Ont. C.A.)
The Osadet v. Osadet decision was appealed by Margaret Osadet ("Margaret") and Bogdan Osadet ("Bogdan"), and heard on April 1, 2011, wherein they appealed the decision of the Honourable Mr. Justice Penny, who ruled inter alia that the Continuing Power of Attorney for Property was not valid and that Margaret would be an unsuitable Guardian of the Property for Stefan Osadet ("Stefan"). The appeal was dismissed with costs ordered against the Appellants, Margaret and Bogdan payable to the Public Guardian and Trustee, and upholding the Honourable Mr. Justice Penny's decision.
The case was originally heard on September 3, 2010 with a judgment issuing on September 15, 2010. The application concerned the guardianship of the property of Stefan. Stefan is an 82-year old man who had been diagnosed with dementia and brain damage related to alcohol consumption. The guardianship application was commenced by Margaret, who is Stefan's daughter-in-law. The application was for:
1. The removal of the Ontario Public Guardian and Trustee (the "OPOGT") as Statutory Guardian of the property of Stefan;
2. A declaration that a Power of Attorney document executed on November 7, 2007, by Stefan in favour of Margaret, is effective; or in the alternative
3. The appointment of Margaret as a replacement Guardian under the Substitute Decisions Act (the "SDA").
There were procedural irregularities. Margaret commenced her application outside of the statutory requirements in form and procedure, and was criticized for doing so. It is important to note that guardianship applications have a particular form governed by the SDA, mandating the content that must be complied with in order for the application to be considered by the OPGT, and ultimately the court.
For this reason, it is important in commencing a guardianship application, that an applicant or applicant's counsel be fully versed in the statutory provisions. Justice Penny concluded that Margaret had not established any grounds to warrant the removal of the OPGT as Statutory Guardian. Moreover, His Honour concluded that the Continuing Power of Attorney for Property executed by Stefan on November 7, 2007, was invalid, because Stefan lacked the requisite capacity to grant same, which capacity requirements are set out in the SDA.
Penny J., concluded also that Margaret was not an appropriate person to manage Stefan's property. Stefan had previously granted a Continuing Power of Attorney for Property and a Power of Attorney for Personal Care in October 2004 to his then wife of approximately three years, Elena. Stefan also in 2004, transferred a half-interest in his only asset to Elena.
Shortly thereafter in June 2005, Stefan was admitted to St. Michaels Hospital for the treatment of permanent toxic brain injury, confusion and anaemia. The Judgment speaks to Stefan having a significant residual cognitive deficit upon his discharge to a long-term care facility. In the intervening period, while Stefan was not living with Elena, she acted on the Power of Attorney for Property granted to her and paid his expenses, but also arranged to sell their condominium and thereafter she moved to Romania.
Stefan was found incapable of grating or revoking a Continuing Power of Attorney for Property by a capacity assessor, qualified and approved under the SDA, in August 2006.
Stefan remained in a long-term care facility until April 2007, where he was thereafter transferred to the Centre for Addiction and Mental Health (CAMH) where he remained until discharged in June 2007.
Bogdan issued a Statement of Claim naming he and Stefan as Plaintiffs, and naming several others as Respondents regarding the alleged wrongdoing of Elena, and other entities.
In November 2007, Margaret purported to obtain a grant of a Continuing Power of Attorney for Property from Stefan, but this was never officially recognized by any entity.
A motion was brought in January 2008 to seek to have the OPGT represent Stefan or to have a litigation guardian appointed on his behalf. Master Brott declared Stefan incapable of managing property and of understanding the litigation and appointed the OPGT as Stefan's Litigation Guardian.
A further capacity assessment was sought in September 2009, regarding Stefan's ability to manage property using the criteria listed in the SDA and in accordance with Section 16 of the SDA which meant that the OPGT thereafter became the Statutory Guardian of Property for Stefan.
The OPGT entered into a settlement on Stefan's behalf seeking court approval in accordance with Rule 7 of the Rules of Civil Procedure.<1> On March 4, 2010, the settlement was approved by the Honourable Justice Belobaba. Thereafter, Margaret and Bogdan, who neither opposed the settlement, nor, attempted to set it aside brought an application to the court, which seemed to be primarily focused on challenging the bona fides of the OPGT in its management of Stefan's property and in settling the litigation as against Elena et als.
Justice Penny in his conclusion commented:
"Margaret's entire challenge to the conduct of the Public Guardian is nothing more than an elaborate collateral attack on final decisions of judicial officers in the conduct of the civil action. Stefan's claims have been finally decided. The time for challenging the propriety of that disposition is long past... Margaret's challenge is ... a form of abuse of process."
It was noted in the judgment that Margaret had been Stefan's de facto Power of Attorney for Personal Care for several years and no issue was taken by any of the litigating parties, including the OPGT, with this power and her exercise of same.
The judgment also speaks to the deficient Management Plan put forward by Margaret, which not only proposed reimbursement for certain out of pocket expenses without back-up vouchers, but also contemplated commencing divorce proceedings as against Elena, in spite of no statutory provision authorizing same, and in spite of Stefan's incapacity. Justice Penny also expressed the view:
"Margaret has ...an unrealistic and inflated view of the value of those claims and the underlying claims made in the original litigation".
In the end, Justice Penny dismissed the application. It is still unknown what the treatment of costs were in this case.
1. Rule 7, Rules of Civil Procedure , Parties under Disability, Representation by Litigation Guardian
Guardianships Case Reviews: Newell v Newell
Newell v Newell, 2011 ONSC 3228, Court File Nos.: 48566/07 and 47410/06 Court File No.: 48566/07
This decision arises out of Court File Nos.: 48566/07 and 47410/06 on May 26, 2011, from the Ontario Superior Court of Justice at Oshawa. It is unreported as yet, and it is a decision by the Honourable Mr. Justice Salmers.
Justice Salmers in setting out the history of the proceedings, comments:
"This is a truly unfortunate matter. As too often happens, children are fighting about their elderly parents. In this case, the children commenced by fighting over the care and property of their mother, Madeline Newell."
1. In December 2006, Donald Newell and Catherine Normandin commenced an application to have their mother, "Madeline", declared incapable of managing her property and her person and asked to be appointed as her guardians.
2. In February 2007, over one year later, Edward Newell and Bernadette Newell commenced a cross-application to confirm a power of attorney, or in the alternative, to have themselves appointed as the guardians of Madeline.
3. On consent, a mediation was ordered.
4. The mediation agreement provided that the costs of the mediation would be paid for from Madeline's property.
5. Settlement was reached at mediation and an Agreement in Principle executed.
6. Thereafter Edward Newell and Bernadette Newell brought a motion for judgment in accordance with the settlement and the Agreement in Principle.
7. Before the motion was heard, Madeline died on April 15, 2009.
8. Thereafter, the matter was dismissed by the court since Madeline had deceased and the substantive issues were no longer relevant.
9. Costs could not be agreed upon.
In his analysis, Justice Salmers described Donald's opposition to the motion "was the equivalent of "buyer's remorse." Justice Salmers found that Donald's opposition to the attorneys' motion for judgment was, "most disingenuous." For similar reasons, Justice Salmers also found Ms. Lombardi's opposition to the motion for judgment, to have been "most disingenuous". Justice Salmers commented: "being a guardian or trustee (or, as in this case, an attorney) can be very difficult, as it has been in this case." Justice Salmers found that Edward and Bernadette had acted very reasonably, and in the "best interests" <1> of Madeline.
Importantly, when we see so much litigation, in Justice Salmers' words: "for them [Edward and Bernadette] to be personally at risk for the costs incurred would dissuade others from becoming trustees, guardians, or attorneys, and, accordingly, is contrary to public policy."
Many decisions in this area although appropriately should focus on the "best interests" of the incapable person, have seen harsh costs orders against litigants personally. This has sent a very strong message from our courts to litigants who commence or become involved in this type of litigation, that they must be prepared to bear the costs personally of this litigation. Justice Salmers' words are important from the perspective that access to justice and proportionality must necessarily also provide for the protection of an incapable person's interests, including within reason, the use of their assets, in their own protection where reasonably incurred, and justified.
Notwithstanding that the moving parties in this case, Edward and Bernadette, were not successful on the motion, they were awarded their full indemnity legal costs, incurred on the motion. Donald who successfully resisted the motion for judgment, was also awarded his full indemnity legal costs from the estate.
Justice Salmers stated:
"there are strong public policy reasons for fully indemnifying trustees and guardians (or attorneys in this case) for their expenses incurred in connection with the performance of their duties. From the outset, this has been a very high-conflict, hotly contested litigation."
In the matters raised before the court, Justice Salmers did not find fault with Edward's conduct. There was mention of an allegation with respect to the improper conduct of Edward pertaining to the management of property, but Justice Salmers directed that such an allegation was properly the subject of the recent application to pass accounts. Moreover, His Honour concluded that if there was any improper conduct proven, that any damages could be deducted from Edward's share of the Estate before distribution.
This case is arguably one of the few more recent cases, which apply fundamental principles of proportionality and access to justice, while at the same time, upholding public policy initiatives and providing for protection of the incapable person. It should however, be noted that at the time the costs were awarded, Madeline had since deceased and no longer required her assets for her own care and continued support. I am not sure whether Justice Salmers' decision would have been any different in spite of this fact.
Power of Attorney litigation and Guardianship disputes, all litigation conducted in accordance with the guiding principles as set out in the SDA and at common law, continue to inundate our courts.
These proceedings are high conflict as Justice Salmers had indicated and in fact, have been the overriding commentary of our judiciary and many recent decisions. It is important when approaching this litigation to remember that it is the "best interests" of the incapable person which must be the primary focus of the proceedings.
Guardianship of course also arises contemporaneous with or commensurate with personal injury settlements, both for incapable adults and for incapable children. More often than not in this context, guardianship disputes are not as "hotly" contested and are viewed more as a necessary outcome to injury settlements. That said, careful attention must be paid to the appointment of a guardian of the property and of the person of an incapable adult or child, such that their property is prudently managed for their ongoing needs, and their person is managed, such that appropriate substitute decision maker is put in place to protect.
1. Sections 38 and 66 of the SDA
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LSUC: The Administration of Estates -September 14, 2011
Chair, Kimberly A. Whaley
OBA Section Executive Program on Elder Abuse and the Estate Lawyer - October 26, 2011
Ameena Sultan to moderate
LSUC: The Administration of Estates - October 31, 2011
Chair, Kimberly A. Whaley
LSUC Summit - November 9 & 10, 2011
Kimberly A. Whaley to speak
CLC CBA Vancouver, Blended Family Presentation August 12-14, 2012
Kimberly A. Whaley to speak
This newsletter is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This newsletter is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
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Kimberly A. Whaley
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