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Month: January 2019

Death doesn’t stop the limitation period

Lee v. Ponte

In this case, an estate trustee brought a claim on behalf of a deceased. In 2007, Shui Yee Lee loaned $55,000 to Cesar Ponte. This loan was secured by a promissory note payable on demand or on the sale of a specific property, whichever occurred earlier.

Ms. Lee became aware that Ponte had sold the property on June 6, 2013. However, Ms. Lee passed away and her estate trustee made a demand for payment in May 2015, but didn’t bring an action until July 17, 2015.

Her claim was dismissed on summary judgment as the motion judge found that the action was statute barred. The judge found that the limitation period began when Ms. Lee was aware that the property was sold, and the estate trustee commenced the action more than two years after June 6, 2013.

Special treatment for an estate trustee?

The Limitations Act 2002 (the “Act”) sets out in section 4 a basic limitation of two years.

However, section 7(1) states that this limitation period does not run any time in which the person having the claim is incapable (s.1(a)) or not represented by a litigation guardian (s.1(b)). Section 7(2) clarifies that a person is presumed to be capable of commencing a proceeding, unless the contrary in proven.

The estate trustee argued that s.7 of the Act should be liberally interpreted and cited the case Papamonolopoulos v. Toronto (City) Board of Education, 56 O.R. (2d) 1. In this case, Justice Brooke stated that there should be liberal interpretation of the statute of limitations and the benefit should be given to the person whenever his right to sue for compensation is in question.

In Lee v Ponte, the estate trustee argued that a deceased person is incapable of bringing a proceeding. The Act affords for time for a litigation guardian to be appointed and this should also apply to an estate trustee.

Give an estate trustee the same leeway as a litigation guardian?

The estate trustee pointed out that it “takes time for an estate trustee to review the affairs of the deceased, and to obtain probate.”

The Court of Appeal dismissed the appeal by rejecting the arguments of the estate trustee.

The court found that the motion judge was not wrong in dismissing the claim as it was correctly barred by the limitation period. The court stated that the language of section 7 is not “elastic” in the “grammatical and ordinary of the words” to apply to a deceased person.

No – Estate Trustee not same as Litigation Guardian

The Court of Appeal did not consider an estate trustee to be a litigation guardian.

The court made it clear that a person who has died with a claim cannot be considered an incapable person. Also, the estate trustee who commences a proceeding for the claim cannot be considered to be the deceased’s a litigation guardian.

File that Claim!

Time plays a vital role in litigation. The Act dictates that generally a person should initiate legal proceedings within 2 years from when the claim is discovered by the person making the claim. Limitation periods exist to provide certainty to all parties.

This decision is a reminder that an individual should bring a legal proceeding as soon as the cause of action arises. Once the limitation period begins and the clock starts, it can only be stopped in certain (‘non-elastic’) circumstances. Even after a claimant passes away, their claim is still subject to the limitation period and it is up to the estate trustee to carry the torch, before the clock blows it out.

 

Re Milne Clarified: A Will is Not a Trust | Yesterday’s Appeal Decision

Yesterday’s decision, Milne Estate (Re), 2019 ONSC 79, which was an appeal from the Superior Court to the Divisional Court, provided much needed clarity on the question as to whether a will is a trust, whether a will must satisfy the three certainties test, and the investigative role of the court during a probate application. Also, Allocation Clauses (or basket clauses), which were under fire for potentially invalidating a will, were deemed to be acceptable. This blog will look at Justice Dunphy’s decision in Re Milne in the Superior Court, then Justice Penny’s decision in Re Panda and finally, Justice Marrocco’s decision in Re Milne in the Divisional Court.

Why two wills?

Preparing more than one will is a general practice adopted by many will drafting solicitors.

In order to appreciate this dilemma, it is important to understand the meaning of probate, estate administration tax and the benefit of using an Allocation Clause (also known as a basket clause).

Probate is basically a formal approval process where the Court validates a will and confirms the appointment of an the estate trustee. If the probate application is successful, the court issues a Certificate of Appointment of Estate Trustee, which gives the executor legal authority to deal with the estate.

Estate Administration Tax (also known as a probate fee) is a tax imposed on the estate of the deceased person. The rates are:

$5 per $1,000 of estate assets up to $50,000, and.

$15 per $1,000 of estate assets over $50,000.

What is an Allocation Clause?

Probate is not mandatory and not all assets need to be submitted for probate. That is where the Allocation Clause comes in handy and allows the estate trustee discretionary power to determine which estate assets should be probated and which one should not.

An Allocation Clause uses language that is all encompassing. It states that the primary will includes “all assets that require a probated will.” The secondary will includes “all of the assets that do not require probate will.” Assets in the “Primary Will” will be submitted for probate and assets in the “Secondary Will” will not be submitted. The Allocation Clause allows the estate trustee to determine which assets fall under the Primary and Secondary Will.

Even though it is a common practice to include Allocation Clauses, it was uncertain whether using this clause in a will was a “safe” practice or not – until now.

Re Milne in the Superior Court

On September 11, 2018, Justice Dunphy ruled in Milne Estate (Re), 2018 ONSC 4174 that the Primary wills that used the Allocation Clause were invalid.

His honours reasoning was simple: A will is a trust. Therefore, there the “three certainties” applied. These are certainty of intention, subject-matter, and objects. He also stated that is was proper for the court to examine these elements at the stage of probate because the probate function of the court has an inquisitorial function.

Justice Dunphy considered the Secondary Wills to be valid but held that the Primary Wills were invalid “as they failed to describe with certainty any property that is subject to them” (para 28).

This ruling created a sense of insecurity (or panic) in the mind of testators and litigants in respect of the validity of their wills.

Re Panda

On November 13, 2018, Justice Penny’s endorsement respectfully disagreed with Justice Dunphy’s decision in Re Milne Estate and granted probate for a Primary Will that used an Allocation Clause.

The same issue arose before Justice Penny in Re Panda, 2018 ONSC 6734. A motion for directions was brought before Justice Penny where probate was sought for a Primary Will where the Secondary Will had an Allocation Clause which was substantially similar to the one in Re Milne. When the application for Certificate of Appointment of Estate Trustee of the Primary Will came before Justice Dunphy, he refused to grant probate.

Justice Penny held that firstly, the inquisitorial role of the court is limited to whether the document is in fact a will, whether it meets the formal requirements of the Succession Law Reform Act (SLRA) and whether its testamentary in nature. Beyond that, such as broader interpretation questions, should not be addressed on probate applications.

Secondly, Justice Penny ruled that a will is not a trust, therefore, the three certainties test cannot be applied to wills. A will is a different testament then a trust. It is unique in itself. Though it has some features of trust and some of contract, it is neither a trust nor a contract. As Justice Penny stated, “a will is its own, unique creature of law.”

Lastly, in determining whether a testator can confer the ability of his representatives to seek probate of assets as per their discretion, Justice Penny was of the view that this is an issue of construction of a given instruction in the will. This issue was not before him in the Application, however, he stated that a resolution should occur in a case where the issue was raised “in the context of a mature dispute.”

Re Milne Appeal to the Divisional Court

In yesterday’s released decision dated January 24, 2019, Justice Marrocco of the Divisional Court ruled, with Justice Swinton and Justice Sachs consenting, that the appeal was allowed and set aside the order of Justice Dunphy. The Primary Will was deemed valid and there were no costs ordered (as none were sought).

Allocation Clauses: Common Technique

The court acknowledged that Primary and Secondary Wills are a commonly used technique as confirmed by Justice Greer in Granovsky Estate v Ontario (1998) 156 D.L.R (4th) 557. Additionally, Allocation Clauses are a common estate planning technique and the fact that they remain discretionary does not mean that the power is arbitrary. An estate trustee must act as a fiduciary.

Re Panda

Justice Marrocco agreed with Justice Penny’s reasons and conclusions in Re Panda. Kindly see above that decision.

A will is not a trust

Justice Marrocco stated that Justice Dunphy cited no authority for his decision that a will is a trust. He agreed with Justice Penny and stated that “a will may contain a trust, but this is not a requirement for a valid will” (para 35).

However, the plot thickens, as Justice Marrocco referenced section 2(1) of the Estates Administration Act which “vests all real and personal property of a person who has died in the deceased’s personal property” (para 39). Justice Marrocco points out that even if section 2(1) creates a trust, the trust is created by statute and not by the will and would not be subject to the “three certainties” test.

If the three certainties apply the subject-matter of the primary will is certain

Justice Marrocco covers all his bases by saying that even if he is wrong, and a will is a trust, and the three certainties are required, the Primary Wills subject-matter is still certain.

The definition concerning subject-matter of a trust is that it must have property that is clearly defined. Justice Marrocco states that the property in the Primary Wills is clearly identified due to the “objective basis to ascertain it; namely whether a grant of authority by a court…is required…for transfer…of the property. As a result, the Executors can allocate all of the deceased person’s property between the Primary and Secondary Wills on an objective basis” (para 49).

Simply put, the executors are instructed to ascertain if probate is required to transfer an asset, and categorize the asset based on the “objective criterion” (para 50). If the executors make a mistake allocating a property, this error does not disrupt the subject-matter of the trust.

As a result, Justice Marrocco ruled the subject-matter of the Primary Will is certain.

The scope of Probate Review

Justice Marrocco cited Justice Penny’s view: “Broader questions of interpretation and the validity of powers of appointment or other discretionary decision-making conferred on estate trustees are matters of construction and not necessary to the grant of probate.” His honour was inclined to agree with Justice Penny’s reasoning and stated that “Justice Dunphy exceeded his jurisdiction, such a conclusion is not necessary to decide this appeal” (para 53).

Some Clarity?

Finally, estate planners and litigators have some clarity with the use of Allocation Clauses! Allocation Clauses do not invalidate a will. A will is not trust – but even if it a trust – you don’t have to worry about the three certainties.

Our concern is whether this “will is not a trust, but even it is” conundrum may allow further holes to be poked during probate or will challenge applications. This is yet to be seen, but you can sleep well tonight knowing that Allocation Clauses are in the courts good books.

It is worth noting that this appeal was an effort of many parties and we would like to congratulate the Toronto Lawyers Association, Archie Rabinowitz, David Lobl, Brian Cohen, Ian Hull, Timothy Youdan and Stuart Clark!

The Wife and the Mistress – Can they both be Dependants?

What happens when a man is married, but is in another relationship? Can their mistress be considered a dependant (in addition to their wife)?

The wife and the mistress

In the case of Prelorentzos v. Havaris (2015) the deceased had died at the age of 71 leaving behind his wife with whom he had separated from but never divorced. During the time of his separation, he lived with a woman named Helen whom he initially took in as an act of kindness as she had nowhere else to live. Helen claimed that she lived with him in the same household for about 9 years and that she was a common law spouse of the deceased.

The court noted that the only missing link in this case was whether Helen and the deceased had cohabited. The deceased’s wife claimed that even though they lived together, it was merely a brother-sister type relationship. The wife claims that the deceased always intended to resume his relationship with her and  this is why they never got divorced.

Moral Considerations are important

Justice Grace quoted Cummings v. Cummings (2004) and Tataryn v. Tataryn Estate (1994) and concluded in paragraph 233 that “moral considerations are important in this case.”

[111]   When faced with such an application the court is required to consider the interests of all dependants even if some of them seek no relief.   As Blair J.A. said in Cummings v. Cummings (2004) at para. 27:

When judging whether a deceased has made adequate provision for the proper support of his or her dependants and, if not, what order should be made under the [SLRA], a court must examine the claims of all dependants, whether based on need or on legal or ethical obligations.  This is so by reason of the dictates of the common law and the provisions of ss. 57 through 62 of the Act.

…..

[231]   Non-financial considerations must also be considered.  Blair J.A. used the phrase “moral and ethical obligations” in Cummings, supra at para. 27.  At para. 40 of that decision, Blair J.A. addressed the need to consider such matters in proceedings under Part V of the SLRA.  He wrote:

In my view these questions have been resolved by the decision of the Supreme Court of Canada in Tataryn v. Tataryn Estate…There, the court held that a deceased’s moral duty towards his or her dependants is a relevant consideration on a dependants’ relief application, and that judges are not limited to conducting a needs-based economic analysis in determining what disposition to make.  In doing so, it rejected the argument that the “judicious father and husband” test should be replaced with a needs-based analysis: see para. 23.  I see no reason why the principles of Tataryn should not apply equally in Ontario, even though they were enunciated in the context of the British Columbia Wills Variation Act…in which the language is somewhat different from that of the Succession Law Reform Act.

The court decided that even though sufficient evidence was missing, Helen was still deemed to be the deceased’s common law spouse (by a very thin margin). Therefore, Helen was be entitled to support and was awarded $30,000.

Case Dependant

In this case, the court did not focus on the fact that the deceased already had a wife. Rather, the court was concerned with the moral obligations of the deceased to provide support to Helen. It is evident that even though Helen was a “mistress” she was still deemed to be a common law spouse.

Judges are continually defining the limit and scope of dependants and who shall be considered to be a dependant still varies from case to case.

 

Online Romance & Dependant Support

Who is a dependant?

As opposed to the English law principle laid down by Cockburn CJ in Banks v. Goodfellow (1870) LR 5 QB 549 that a testator enjoys absolute freedom in giving out his estate to any person of his choice, Part V of Succession Law Relief Act (the “SLRA”) makes a provision for dependants to claim support from the estate of the testator, even if they were given something (but not enough or “adequate” support).

Part V of the SLRA was introduced to protect dependants, including individuals in a common law relationship or a parent who was the responsibility of the deceased so that they do not become deprived of their wealth.

Section 58 of the SLRA states that if a person dies (either testate or intestate) without making appropriate provision for the support of his dependants, the dependant may (themselves or through their parents) apply to the court for support. The court shall thereafter order support to be paid from the estate of the deceased to the dependant.

However, who is considered to be a dependant for the purpose of the Act? Section 57 of SLRA states that the spouse, parent, child, brother or sister of the deceased whom the deceased was providing support (or under any legal obligation to provide support) immediately before his death shall be considered his dependants.

Online Romance

Definition of “Spouse”

There have been several cases where courts define the scope of what it means to be a ‘dependant’.

In Stajduhar v. Kerzner 2017 ONSC 4954, Branislava Stajduhar contended that she was a dependant of Jeffrey Kerzner, deceased, merely because she was in an online romantic relationship with him. She had claimed to have been committed to him since August 2009 until his death (December 31, 2016).

The issue was whether Ms. Stajduhar met the definition of a ‘spouse.’

The SLRA defines spouse to include the definition of “spouse” from the Family Law Act (the “FLA”). In s. 29 of the FLA,  “spouse” is defined as including “either of two persons who are not married to each other and have cohabited… continuously for a period of not less than three years.”

Further, the SLRA defines cohabit to mean to “live together in a conjugal relationship, whether inside or outside marriage.”

Ms. Stajduhar claimed that she was in a committed relationship with Mr. Kerzner and that she was being supported by him until the time of his death.

Place of Residence

Justice Dunphy denied Ms. Stajduhar’s claim due to the fact that she was not living with the deceased and that the relationship was not continuous. Justice Dunphy found no clear evidence that they cohabited. His honour defined a residence to mean a “readily identifiable…place where both are ordinarily to be found most of the time when they are at ‘home.'”

This case is helpful to show what the court will (and will not) consider when looking at a relationship and a dependant support application. It is evident that living together is crucial.

While love can be found online, there are other parameters set out in the SLA which judges will take into consideration when determining support, such as the deceased providing support immediately before death, being a couple, living together, and having a continuous relationship for not less than three years.