Wills and Estates — No comments
17
Apr 12

MULTIPLE WILLS: AN INCREASINGLY VALUABLE ESTATE PLANNING DEVICE

Multiple Wills and limited grants have been a staple of estate planning in Ontario for many years encouraged by the 1998 Ontario Superior Court decision in Granovsky Estate v. Ontario 1998 CanLII 14913 (ON SC) which upheld the testator’s making of two wills – the Primary Will to be probated for all of his assets other than, essentially, shares in four private companies and the Secondary Will not to be probated for his private company shares which were valued at $25,000,000.00 – resulting in a savings in Estate Administration Tax (the “EAT”) of $375,000.00.

While most estates do not approach the Granovsky Estate in size, the EAT savings for estates with private company shares are significant – $15,000.00 for each $1,000,000.00 dollars of value – easily offsetting the additional advisory and drafting costs associated with Multiple Wills.

Facing deep deficits and an eroding tax base, concern has been expressed that future amendments or Regulations to the Ontario’s Estate Tax Administration Act (the “EAT Act”) may curtail the use of Multiple Wills as a means to avoid EAT.

Time will tell, if and when this shoe will drop.

What is certain, for now, is that, for reasons discussed below, pending changes to the EAT Act which comes into force on January 1, 2013 have significantly increased the attractiveness of Multiple Wills as an estate planning device by:

  • tangibly reducing the cost of administering estates where the testator owns private company shares at the time of his/her death and such shares are being transferred to his/her surviving spouse, and
  • potentially, reducing the liability of estate representatives.

In its 2011 budget, the Ontario Government demonstrated a newly found determination to collect the maximum EAT payable by replacing historical self-reporting and lax policing with a sophisticated compliance regime similar to that contained in the Income Tax Act (Canada) incorporating audit and verification functions, as well as assessment, objection and appeal mechanisms.

Beginning January 1, 2013, gone will be the day when the value of a deceased person’s estate, as disclosed, by the estate’s representative, on the Application for a Certificate of Appointment of Estate Trustee will be accepted at face value.

Instead, the Minister of Revenue will, inter alia, have the right to:

  • assess and reassess an estate in respect of EAT within 4 years of the tax being payable (or outside the 4 year limitation period if any person made a misrepresentation attributable to neglect, carelessness or wilful default, or committed fraud in supplying (or omitting to disclose) information regarding an estate to the Minister of Revenue),
  • require the estate representative to provide to the Minister of Revenue all reasonable assistance and answer all questions in respect of an audit being conducted, and
  • require the estate representative to provide to the Minister of Revenue any information as may be requested and prescribed by Regulation (none of which has been enacted), and
  • require third parties to give the Minister of Revenue access to their premises and/or permit the Minister of Revenue to examine their assets and records.

The enhanced audit, verification and assessment powers given to the Minister of Revenue will place additional responsibilities on the estate’s representatives to obtain full and complete valuations of the deceased’s assets.

While valuation is not necessarily difficult for assets for which there is a market (such as shares in the capital of a publicly traded company), the valuation of private company shares is often:

  • complicated and controversial (giving rise to concerns whether an asset-based approach (on a going concern or liquidation basis), an earning value approach or a market value approach is most suitable)  and
  • costly necessitating the use of a qualified valuation professional (such as a Chartered Business Valuator).

Valuation of private company shares would, in any event, have to be undertaken for the purposes of the Income Tax Act (Canada) if there was a deemed disposition on the death of the testator, but not if the shares passed to the surviving spouse.

Therefore, where the testator owns private company shares at the time of his/her death and such shares are being transferred to his/her surviving spouse, the complexity and cost associated with the valuation of such shares could be avoided if the testator makes Multiple Wills with a Secondary Will which is not to be probated for his/her private company shares.

At the same time, by eliminating the private company shares from the mix of assets in respect of which EAT is payable, the testator would effectively reduce the estate representative’s exposure to liability under the EAT Act which, while, traditionally, restricting the estate representative’s liability in respect of EAT to his or her representative capacity, only, will, as a result of the recent amendments, make it an offence – punishable by fine (the minimum fine being $1,000.00 and maximum being twice the EAT payable), imprisonment, or both – for any person to make, or assist in making, a false or misleading statement (or omission of relevant facts) in connection with the filing of an Application for a Certificate of Appointment of Estate Trustee.

Therefore, potential liability for estate representatives arising from false or misleading statement (or omission of relevant facts) could be limited if the testator makes Multiple Wills with a Secondary Will which is not to be probated for his/her private company shares.

For owners of private company shares looking to reduce:

  • the amount of EAT payable,
  • the potential liability of their estate representatives, and
  • the complexity and cost of estate administration (where assets are being transferred to a surviving spouse),

Multiple Wills – with a Secondary Will which is not to be probated for his/her private company shares – will, barring further amendments to the legislation or Regulations, become a more attractive estate planning device after January 1, 2013 once the amendments to the EAT Act come into force.

Link to: Granovsky Estate v. Ontario 1998 CanLII 14913 (ON SC) at http://canlii.ca/t/1wckg

Custody/Access / Family Law — No comments
02
Apr 12

MOBILITY APPLICATIONS: A CHILD-CENTRED APPROACH

Following the breakdown of the relationship, it is not uncommon for one parent to declare that he/she wants to relocate, with the child/children, for personal and/or professional reasons. Not surprisingly, mobility is among the most emotionally challenging issues for both parents – particularly, involved parents – and children.

The recent Ontario Court of Appeal decision in Berry v. Berry, 2011 ONCA 705 (CanLII) reiterated the foundational principles developed by the Supreme Court of Canada (the “SCC”) Gordon v. Goertz, 1996 CanLII 191 (SCC), [1996] 2 SCR 27 which, after 16 years, continues to be the leading Canadian authority.

In the Berry case, both the father and mother were loving, caring and engaged parents of a seven year old boy with significant health challenges and special medical needs. The mother sought to permanently relocate with the child from Toronto, where the child had lived all of his life, to Kingston, where she had family support.

At the trial of the issue, the trial judge granted the mother’s application, preferring the mother’s parenting plan – based on her living permanently in Kingston – over the father’s.

On the father’s appeal to the Ontario Court of Appeal, the parties agreed that the applicable legal test was set out in the Goertz decision, in which McLachlin, J. (as she then was) provided the following useful summary of the law at para. 47:

  1. The parent applying for a change in the custody or access order must meet the threshold requirement of demonstrating a material change in the circumstances affecting the child.
  2. If the threshold is met, the judge on the application must embark on a fresh inquiry into what is in the best interests of the child, having regard to all the relevant circumstances relating to the child’s needs and the ability of the respective parents to satisfy them.
  3. This inquiry is based on the findings of the judge who made the previous order and evidence of the new circumstances.
  4. The inquiry does not begin with a legal presumption in favour of the custodial parent, although the custodial parent’s views are entitled to great respect.
  5. Each case turns on its own unique circumstances.  The only issue is the best interest of the child in the particular circumstances of the case.
  6. The focus is on the best interests of the child, not the interests and rights of the parents.
  7. More particularly the judge should consider, inter alia: 
  • (a)   the existing custody arrangement and relationship between the child and the custodial parent;
  • (b)   the existing access arrangement and the relationship between the child and the access parent;
  • (c)   the desirability of maximizing contact between the child and both parents;
  • (d)   the views of the child;
  • (e)   the custodial parent’s reason for moving, only in the exceptional case where it is relevant to that parent’s ability to meet the needs of the child;
  • (f)    disruption to the child of a change in custody;
  • (g)   disruption to the child consequent on removal from family, schools, and the community he or she has come to know.

(Note: In cases, as in the Berry case, where there is no custody or access order in place, there would be no threshold issue which would need to be satisfied (i.e., the applicant demonstrating the court that there has been a material change in the circumstances affecting the child) before the best interests of the child are considered.)

In applying the child-centred principles developed by the SCC in the Goertz decision to the Berry case, the Ontario Court of Appeal rejected the mother’s mobility application concluding that the trial judge had made both errors of fact and law.

The error of fact was the trial judge concluding that the mother had permanently moved to Kingston, when she had testified that, if she was not successful in her application, she would live in Toronto.

The error of law was that, contrary to the principles developed by the SCC in the Goertz decision, the focus of the trial judge’s inquiry was parent, and not child, centred. Instead of considering whether or not the mother’s application to relocate the child, thereby practically denying maximum contact between the child and his father, was in the child’s best interests, the trial judge mistakenly regarded the sole issue to be which of the two conflicting parenting plans ought to be given effect.

In its application of the principles developed by the SCC in the Goertz case, the Ontario Court of Appeal has sent a clear message that mobility issues will be decided, not on the basis of a parent’s preference or convenience, but having regard to the best interests of the child. Following Goertz, a parent’s reasons for moving ought to be considered only in those exceptional circumstances where it impacts on his/her ability to meet the child’s needs and, in the rare instances where it is relevant, is only one of several factors meriting consideration.

Link to: Berry v. Berry, 2011 ONCA 705 (CanLII) at http://canlii.ca/t/fns84

Link to: Gordon v. Goertz, 1996 CanLII 191 (SCC), [1996] 2 SCR 27 at http://canlii.ca/t/1fr99

Uncategorized — No comments
31
Jan 12

SPOUSAL SUPPORT VARIATIONS: THE WEIGHT TO BE GIVEN TO SEPARATION AGREEMENTS

There is, in reading the recent Supreme Court of Canada (the “SCC”) decision in L.M.P. v. L.S., 2011 SCC 64 (CanLII), no controversy that the analytical starting point for a support variation application under section 17 of the Divorce Act (Canada) is the threshold variation question set out in Willick v. Willick, 1994 CanLII 28 (SCC): has a material change in circumstances (i.e., a change which, if known at the time, would likely have resulted in different terms) occurred since the making of the order?

Where Abella, Binnie, Deschamps, LeBel and Rothstein, JJ (the “Joint Decision”) and Cromwell, J. and McLachlin, C.J. (the “Concurring Decision”) diverge is the weight to be afforded a Separation Agreement (the terms of which have been incorporated into a court order) on a variation application.

This disagreement reflects competing approaches to resolving the inherent and unavoidable dialectical conflict between:

  • Separation Agreements, through which parties freely and willingly attempt to bring certainty and finality to their affairs, and
  • the variation provisions in the Divorce Act (Canada), through which the courts endeavour to ensure compliance with the objectives of the legislation.

The Concurring Decision

Building on the expansive approach endorsed by the SCC for initial support applications under section 15.2 of the Divorce Act (Canada) in Miglin v. Miglin, 2003 SCC 24 (CanLII), the Concurring Decision adopted  Miglin’s central teaching that the “assessment of the appropriate weight to be accorded a pre-existing agreement requires a balancing of the parties’ interest in determining their own affairs with an appreciation of the peculiar aspects of separation agreements generally and spousal support in particular” (para. 64) when it observed that, in determining materiality, the change must be one that:

“ (1) relates to something that was not either expressly addressed by the parties in the agreement or that cannot be taken as having been in their contemplation; and (2) results in the support provision, considered in the context of the entire agreement, no longer being in substantial compliance with the objectives of the Act as a whole. (para. 92)”

Under point (1), the court would, in answering the Willick threshold variation question, examine the Separation Agreement to ascertain whether or not the matter relied on as constituting a change was known at the time of the making of the order. In this analysis, the issue for the court is whether the parties:

  • have expressly contemplated, having regard to the terms of the agreement, the current situation to be a material change, or
  • must be taken as having been contemplated, having regard to both the terms of the agreement and the surrounding circumstances, the current situation to be a material change.

Under point (2), the court would embark on the second stage of the Miglin investigation by assessing whether the Separation Agreement continues to reflect the original intention of the parties and the extent to which it is still in substantial compliance with the objectives of the Divorce Act (Canada) including “not only the statutory objectives specific to support orders but also the broader objectives of finality, certainty and autonomy that Parliament has endorsed in the Act.” (para. 92)

The Joint Decision

While recognizing the sound policy reasons for enabling the parties to “be free to order their lives as they wish” (para. 14), the Joint Decision was less favourably disposed to the liberal application of contract law principles of freedom and autonomy in the family law context (para. 15) citing:

“[15] … Because a separation may result in dramatic life changes and emotional stress, Parliament has decided through the Divorce Act that these circumstances give rise to the possibility that the ability of separating spouses to realistically and objectively assess their current and future needs and preferences can be impaired. It also goes without saying that the economic terms of spousal support agreements can affect third parties, such as the children of the relationship. For these reasons the Divorce Act authorizes courts to vary the spousal support terms, either on an initial application for support under s. 15.2, or on an application to vary an existing order under s. 17, whether or not that order incorporates a spousal support agreement.”

Relying on the differences in the statutory language and a close reading of the majority judgment in Miglin, the Joint Decision restricted the application of the Miglin approach to initial support applications.

In doing so, the Joint Decision also constrained the weight to be given to the parties’ Separation Agreement on a support variation application under section 17 of the Divorce Act (Canada) by limiting its potential evidentiary value to assisting in the determination  whether or not a change in circumstances is material, particularly where the parties expressly:

  • anticipated future circumstances and allocated the risks, as between themselves, or
  • defined what does or does not constitute a material change.

The Joint Decision thereby places a substantial responsibility on the parties and their lawyers – at the time their Separation Agreements are being negotiated and finalized – inasmuch as the probative value hereinafter afforded a Separation Agreement on a support variation application will be a function of its specificity.

Most persuasive will be those in circumstances which the parties have:

  • put their minds to whether a specific change will or will not support a variation, and
  • formalized their consensus in a Separation Agreement incorporated in an order (which has thereby resulted in the agreement having received prior judicial approval).

When this degree of specificity is achieved, the Joint Decision observed that the parties may have provided the answer to the Willick threshold variation question (i.e., has a material change of circumstances occurred since the making of the order?): 

“[39] … Even significant changes may not be material for the purposes of s. 17(4.1) if they were actually contemplated by the parties by the terms of the order at the time of the order. The degree of specificity with which the terms of the order provide for a particular change is evidence of whether the parties or court contemplated the situation raised on an application for variation, and whether the order was intended to capture the particular changed circumstances, Courts should give effect to these intentions, bearing in mind that the agreement was incorporated into a court order, and that the terms can therefore be presumed, as of that time, to have been in compliance with the objectives of the Divorce Act when the order was made.”

Where the Separation Agreement does not specifically address the matter relied on as the basis for the claimed change in circumstances, the court will be required to undertake the Willick analysis by examining the terms of the initial order and the circumstances of the parties at the time it was made to determine what does, and does not, amount to a material change.

This will, generally, arise where the Separation Agreement includes:

  •  a general provision stating that the order is subject to variation in the event of a change in material circumstances without there being “any additional information as to whether a particular change would have resulted in different terms if known at the time of that order.” (para. 40), or
  • “a general term providing that it is final, or finality may be necessarily implied”. (para. 41). Such terms are:
    • entirely ineffective in ousting the court’s jurisdiction under section17 of the Divorce Act (Canada), and
    • of little assistance to the court, stating, as they do “the obvious: the order of the court is final subject to s.17 of the Divorce Act (Canada).” (para. 41)

The lesson to be derived from the Joint Decision in the LMP case is that, while boilerplate in a Separation Agreement will have little or no impact on a support variation application under section17 of the Divorce Act (Canada), a Separation Agreement which specifically addresses the matter relied on as the basis of the change will be given special weight and may be determinative of the issue before the court.

 Link to: L.M.P. v. L.S., 2011 SCC 64 (CanLII) at http://canlii.ca/t/fpddd

 Link to: Miglin v. Miglin, 2003 SCC 24 (CanLII) at http://canlii.ca/t/1g5lh

 Link to: Willick v. Willick, 1994 CanLII 28 (SCC) at http://canlii.ca/t/1frq8

Family Law / Support — No comments
23
Jan 12

SPOUSAL SUPPORT VARIATIONS: THE SUPREME COURT OF CANADA’S 2-STEP APPROACH

Family law resolutions are unique in that they are not only retrospective (allocating historical rights and responsibilities between the parties), they are also prospective (anticipating the future needs and capacities of the parties).

Recognizing the limits of prognostication, Parliament has, through s. 17 of the Divorce Act (Canada) conferred on the parties the right to bring an application to vary an existing order. The recent Supreme Court of Canada (the “SCC”) decision in L.M.P. v. L.S., 2011 SCC 64 (CanLII) clarifies when a court will intervene on such an application and the proper scope of the court’s intervention.

The facts of the LMP case are as follows:

  • the former wife had been diagnosed with multiple sclerosis shortly after her marriage in 1988,
  • the former wife, in the course of her 14 year marriage looked after the household and the children while the husband pursued his career outside the home,
  • the former husband paid the former wife spousal support of $4,294.48 per month in accordance with the terms of  a comprehensive separation agreement entered into in  April 2003 with the benefit of independent legal representation (incorporated into the terms of a May 2003 Divorce Order (the “2003 Order”)),
  • in 2007, the former wife brought what appeared to be a pro forma application to vary an existing support order under s. 17 of the Divorce Act (Canada) for an increase in child support in accordance with the Quebec Child Support Guidelines.
  • the former husband countered seeking both, a reduction in, and ultimately termination of, spousal support arguing that the former wife was able to find work outside the home and ought to make efforts to do so.

Following the presentation of expert evidence by both parties with respect to the former wife’s ability to work, the trial judge found that:

  • “there has been little or no progression of the illness since the initial episodes, 19 years ago”,
  • the former wife’s condition was not as serious as she had made it out to be, and
  • the former wife was, therefore, capable of working outside the home.

Without making a finding that this represented a material change in the former wife’s circumstances, the trial judge, nonetheless, first, reduced and, then, terminated spousal support.

The former wife appealed the trial decision to the Quebec Court of Appeal arguing that the trial judge had erred in varying spousal support without having first found that there had been a material change in circumstances pursuant to s. 17 of the Divorce Act (Canada). The former wife’s appeal was dismissed on the basis that:

  • the trial judge’s approach respected the requirements of s. 17 Divorce Act (Canada), even if she had not explicitly mentioned the existence of a material change,
  • the trial judge was justified in finding that the former wife was able to work and, as such, there was no basis for interfering with the trial judge’s decision, and
  • a material change in circumstances could be inferred from the passage of time, together with the former wife’s failure to become, or attempt to become, self-sufficient (notwithstanding the absence of a time limitation in the 2003 Order).

The former wife then appealed to the SCC, which unanimously found in her favour by restoring the 2003 Order.

While the Justices agreed on the outcome – that there was no evidence of a material change in circumstances and that a variation of spousal support was, therefore, not justified – there was a 5 (the “Joint Decision”) to 2 (the “Concurring Decision’) split as to the appropriate test, or factors to be considered, on a variation application under section 17 of the Divorce Act (Canada) where the parties have entered into a comprehensive separation agreement as outlined in the table below:

    Approach Endorsed by the Joint Decision (Abella, Binnie, Deschamps, LeBel and Rothstein, JJ)   Approach Endorsed by the Concurring Decision (Cromwell, J. and McLachlin, C.J.)
Initial Application under s. 15.2   Miglin v. Miglin, 2003 SCC 24 (CanLII)   Miglin v. Miglin, 2003 SCC 24 (CanLII)
Application to Vary an Existing Order under s. 17   Willick v. Willick, 1994 CanLII 28 (SCC)   Miglin v. Miglin, 2003 SCC 24 (CanLII)

The two-step analysis set out in the Willick case endorsed by the Joint Decision on applications to vary an existing order under s. 17 of the Divorce Act (Canada) may be summarized as follows:

Step 1

Step 2
  • the party seeking the variation must prove that the conditions for a variation exist by satisfying the court that there has been a material change in circumstances since the making of the prior order or variation (para. 31 and 32).
  • for a change in circumstances to be “material”, the change must be one that “if known at the time [that the original order was made] would have likely resulted in different terms.”
  • where the conditions for a variation are shown to exist, the court must determine what variation of the existing order ought to be made given the material change in circumstances and, in so doing, limit itself to making only such variation as is justified by the change bearing in mind the observation of Justice L’Heureux-Dubé that “a variation under the Act is neither an appeal of the original order nor a de novo hearing.” (para. 47).

In applying the Willick test to the LMP case, the SCC found that the threshold question (i.e., has there been a material change of circumstances since the making of the order?) had not, on the evidence, been satisfied and reversed the Quebec Court of Appeal whose “findings are, with respect, unsustainable.” (para. 53)

The dearth of evidence in the LMP case supporting a material change in circumstances included:

  • the former wife had been living with multiple sclerosis for 14 years when the 2003 Order was made,
  • the former wife had been receiving disability payments because her insurer had concurred that she was unable to work outside the home,
  • the former husband was not only aware of the former wife’s medical condition, he had made representations that she was unable to work to her disability insurer, pension personnel and tax authorities, both before and after their separation, and
  • the expert evidence tendered at trial showed that there had been little change in the former wife’s medical condition in 19 years. (para. 54 and 55)

This last factor – that there had been no improvement in the former wife’s condition since the 2003 Order – should, according to the SCC, have, in and of itself, disposed of the former husband’s application to vary inasmuch as no improvement means that there was no change in circumstances, let alone a material one, since the 2003 Order had been made. (para. 55).

The SCC attributed the trial judge’s failure to dispose of the former husband’s application to her failing to apply the proper approach to the variation application.

Instead of determining whether or not, on the evidence, there had been a material change in the former wife’s circumstances in accordance with the Willick test, the trial judge conducted a de novo hearing of the former wife’s ability to work whereupon she concluded that the former wife was “capable of working outside the home and that she should seek to become economically self-sufficient.” (para. 52).

By providing much needed clarity, it is hoped that the SCC’s decision in the LMP case will deter applications being brought where the threshold question has not been satisfied and encourage the prompt and cost-effective resolution of those where one or more material changes in circumstance have taken place.

Our next blog entry will consider an evidentiary question (and the major point of departure between the Joint Decision and the Concurring Decision) raised in the LMP case: the weight to be given to a separation agreement which has been incorporated into an order on the application to vary a spousal support order.

Link to: L.M.P. v. L.S., 2011 SCC 64 (CanLII) at http://canlii.ca/t/fpddd

Link to: Miglin v. Miglin, 2003 SCC 24 (CanLII) at http://canlii.ca/t/1g5lh

Link to: Willick v. Willick, 1994 CanLII 28 (SCC) at http://canlii.ca/t/1frq8

Custody/Access / Family Law / Procedure — No comments
19
Dec 11

EXCEEDING THE BOUNDARIES OF LEGAL CREATIVITY

The recent Ontario Superior Court of Justice decision in Kroupa v. Stoneham, 2011 ONSC 5824 (CanLII) is instructive because it reminds lawyers that, while creative solutions to difficult issues are to be encouraged, they must, at all times, comply with the law.

The Kroupa case involved an arrangement advocated repeatedly by the father – who was said to be occasionally employed,  a drug user  and  abusive  –  and eventually agreed to by the mother, whereby the  father gave up access to his young son in return for his being discharged from his responsibility to pay on-going child support. The father and mother entered into a written agreement (the “Agreement”), and a formal Order was signed on Consent (the “Final Order“), reflecting the terms of the Agreement.

Within a year or so of the Final Order, the father, who had taken tangible steps to secure steady work, refrain from drug use and obtain counseling, now regretted his decision and, arguing that there had been a material change in circumstances, sought to change the Final Order.

The mother, satisfied with the status quo provided for in the Final Order, not surprisingly, disputed the father’s characterization of material change in circumstances arguing that the only change that had taken place was the father’s willingness to live by the terms of the Agreement.

In his deliberations, Justice Gray of the Ontario Superior Court of Justice acknowledged that, while, jurisdictionally, a child support order under section 15.1 of the Divorce Act (Canada) or a custody order under section 16 of the Divorce Act (Canada) could only be changed where there is an explicit finding of a material change in circumstances (para. 21), this limitation does not apply in circumstances where “the agreement giving rise to the Order is inconsistent with the policies underlying the Divorce Act, and is invalid” (para. 20). Justice Gray went on to state that the Court not only has the right to vary an Order based on an invalid agreement, but that it had the duty to do so (para. 20).

Justice Gray observed that the Agreement failed because, in bargaining away the father’s obligation to pay child support, it threatened to negate the child’s fundamental right to receive child support

  • See D.B.S. v. S. R. G., 2006 SCC 37 (CanLII) at para. 54): “… parents have an obligation to support their children in a way that is commensurate with their income.  This parental obligation, like the children’s concomitant right to support, exists independently of any statute or court order.” (referred to at para. 24)

Moreover, Justice Gray noted that the Agreement failed because, in bargaining away the father’s access, it attempted to eliminate the child’s fundamental right to have access to a non-custodial parent.

  • See V.S.J. v. L.J.G. 2004 CanLII 17126 at para. 128 in which Justice Blishen of the Ontario Superior Court of Justice held that “There is a presumption that regular access by a non-custodial parent is in the best interests of the child. The right of a child to visit with a non-custodial parent, to know and maintain or form an attachment to a non-custodial parent is a fundamental right which should only be forfeited in the most extreme and unusual circumstances. To deny access to a parent is a remedy of last resort.” (quoted at para. 25)
  • See MacGyver v. Richards 1995 CanLII 8886 (ON CA) in which Justice Abella of the Ontario Court of Appeal (as she then was) stated that “It is the child’s right to see a parent with whom she does not live, rather than the parent’s right to insist on access to that child.” (quoted at para. 26)

Having concluded that the Agreement failed to comply with the objectives of the Divorce Act (Canada) by improperly bargaining away the rights of the child without any consideration of his best interests, Justice Gray regarded the Agreement to be void ab initio and, as such, was not constrained by the threshold issue of whether or not there was a material change in circumstances.

The Kroupa case calls for ingenuity to be tempered by an appreciation for the objectives of the law – particularly in cases involving the rights of children.

Link to: Kroupa v. Stoneham, 2011 ONSC 5824 (CanLII) at http://canlii.ca/t/fnbdh

Link to: D.B.S. v. S. R. G., 2006 SCC 37 (CanLII) at http://canlii.ca/t/1p0tv

Link to: V.S.J. v. L.J.G. 2004 CanLII 17126 at http://canlii.ca/t/1h7jj

Link to: MacGyver v. Richards 1995 CanLII 8886 http://canlii.ca/t/22r1c

Custody/Access / Family Law — No comments
07
Dec 11

PARENTAL CHILD ABDUCTION: WHERE FAMILY LAW AND CRIMINAL LAW INTERSECT

There has been extensive media coverage in the past few days over two cases involving alleged parental child abduction.

In one, a 54 year old woman, arrested in Victoria, BC, is accused of having fled from Toronto in 1993 with her then-20 month old daughter following a hotly-contested custody battle with the child’s father.

In the other, a 31 year old father was arrested in Toronto after having disappeared with his still missing, 9 week old son who, along with his 11 month old brother, was placed in the care of York Region Children’s Aid Society.

Both have been charged under the provisions of Section 282 of the Criminal Code (Canada) which criminalizes the taking of a child under 14 years of age in contravention of a custody order made by a Canadian court (Section 283 of the Criminal Code (Canada) criminalizes parental abductions whether or not there is a custody order restricting parental rights, but, before proceedings are commenced, the consent of the Attorney General or counsel instructed by him for that purpose must be obtained).

The seriousness of this offence is reflected in the maximum penalty available on conviction: imprisonment for up to 10 years. Additional charges against each of the accused, and against those who may have aided and abetted each of them, may be laid.

Unfortunately, incidents of this nature are all too common in Canada.  In 2009, the most recent year for which statistics have been compiled by the RCMP’s National Missing Children Services agency, there were 237 reported parental abductions in Canada (54% of which had no custody order in place), with children under the age of 12 making up 72% of those abducted (http://205.193.86.86/pubs/omc-ned/an-ra/annrep-rappann-09-eng.htm#2).

Having regard to the continuum reflected in the widely accepted concept of the “crime funnel” (the number of criminal acts committed > the number of crimes reported > the number of incidents in which charges are laid > the number of cases successfully prosecuted) it is expected that the actual number of children abducted by their parents in Canada exceeds, and perhaps significantly, the reported number. The order of magnitude, howver, remains a mystery.

To succeed in aparental abduction prosecution, the Crown must prove each of the following five elements beyond a reasonable doubt:

  • the accused is a parent, guardian or person having the lawful care or charge (a “Caregiver”) of the child who was taken,
  • the child was less than 14 years old when he/she was taken,
  • the child was taken by the accused Caregiver,
  • the accused Caregiver’s taking of the child was (a) in a prosecution under Section 282 of the Criminal Code (Canada), in contravention of the custody provisions of an existing custody order made by a Canadian court and that, at the time of the taking, the accused knew that such order was in force and that such taking was in violation of such order, or (b) in a prosecution under Section 283 of the Criminal Code (Canada), there may or may not have been a custody order made by a Canadian court, and
  • the accused Caregiver took the child with the intent to deprive the other Caregiver of possession of the child.

In addition to the common law defences preserved under Section 8(3) of the Criminal Code (Canada), a person charged under Section 282 or Section 283 of the Criminal Code (Canada) may avoid liability if he/she satisfies the Court that (a) the other Caregiver had consented to such taking (Section 284), (b) such taking was necessary to protect the child from danger of imminent harm (Section 285), or (c) the accused Caregiver was escaping from danger of imminent harm (Section 285).

It is not, however, a sufficient defence for the accused Caregiver to assert simply the child either consented to his/her taking or suggested to the accused Caregiver that he/she should be taken from the other Caregiver (Section 286), nor will an accused Caregiver charged under Section 282 of the Criminal Code (Canada) avoid liability simply by asserting that he/she did not believe that there was an existing custody order made by a Canadian court. In such a case, if the evidence proves an offence under Section 283 of the Criminal Code (Canada), then the accused Caregiver may be convicted under Section 283 (Section 282(2)).

While determination of the status of the accused abductor, the age of the abducted child, the existence of a custody order, the consent of the other Caregiver and the existence of danger or imminent harm to either the child or the accused Caregiver may all be essential issues in a parental abduction case, they, ultimately, all turn on the specific facts which may or may not established on the evidence and should not be particularly demanding for the trier of fact (See the Ontario Court of Appeal decision in R. v. L.R.F., 2003 CanLII 12095 (ON CA) for a case in which the defences of colour of right and imminent harm were each summarily dispensed with on the basis of there being “no air of reality”).

The mens rea component of the offence is much more challenging.

In the case of R. v. McDougall (1990), C.C.C. 3d 174 (ON CA), the Ontario Court of Appeal was asked to consider the point at which an accused Caregiver steps over the line when retaining a child beyond the terms of a court order during an access visit. This is a particularly vexing question for family law practitioners who commonly encounter parents who, by ignoring or overstepping the terms of a custody order, deprive the other parent of custody, if only temporarily.

In the McDougall case, Justice Doherty held that the language of the Criminal Code (Canada) provision “specifically requires proof of an intention to deprive the other parent of possession of the child” thereby precluding “reliance on any lesser level of intent, such as recklessness, and requires proof that the act was done for the express purpose of depriving the other parent of possession of the children (emphasis added).”

In dististinguishing between child abduction and failure to adhere to the strict terms of a custody/access order, Justice Doherty observed that “the genesis of the legislation, the serious potential penalty, and the constitutional limits of the federal criminal law power all preclude an interpretation of the section which would extend it to all conduct in relation to children by a parent which violated a custody order. The section is not aimed at parents who refuse to act in a responsible and cooperative manner in the administration of the terms of the custody order. It targets parents who abduct their children in contravention of custody orders (emphasis added).”

Justice Doherty’s thoughtful distinction ought not to be considered a licence for a parent to withhold his/her child(ren) in contravention of the terms of a custody/access order.  Instead, it delineates the state of mind required for the criminal sanction to be properly applied.

Link to: RCMP 2009 Missing Children Reference Report: National Missing Children Services at http://205.193.86.86/pubs/omc-ned/an-ra/annrep-rappann-09-eng.htm#2.

Link to: R. v. L.R.F., 2003 CanLII 12095 (ON CA) at http://canlii.ca/t/drf

Wills and Estates — No comments
18
Nov 11

THE INADMISSABILITY OF THIRD PARTY EVIDENCE OF A TESTATOR’S INTENTIONS

As an instrument permitting, within legal bounds, a person to decide how his/her estate will be managed and distributed after death, a Will is, by its very nature, an expression of intentions. Where such intentions are in controversy, Courts have, traditionally, looked to the express language of the Will and, in appropriate cases, to extrinsic evidence of the testator’s circumstances (e.g., the testator’s mental capacity to make the Will) or the circumstances surrounding the making of the Will (e.g., undue influence on the exercise of the testator’s freedom to express his/her intentions).

In the recent Ontario Court of Appeal case of Rondel v. Robinson Estate, 2011 ONCA 493 (CanLII), the appellants argued not about the facts and circumstances surrounding the making of the Will, in question, but that the Will ought to be disregarded (in part) because it did not, based on their understanding, conform to the testator’s intentions. In so doing, the appellants took the position that extrinsic evidence of the testator’s intentions was admissible and was wrongly excluded by the application judge, Justice Edward P. Belobaba of the Superior Court of Justice.

In dismissing the appeal, and upholding the decision of Justice Belobaba, the Ontario Court of Appeal clearly demarcated what extrinsic evidence may be admissible and what will not be, namely:

  • Extrinsic Evidence Which May be Admissible: evidence going to the facts and circumstances of the making of a Will
  • Extrinsic Evidence Which is Not Admissible: evidence of the testator’s intent.

The pertinent facts in the Rondel case may be summarized as follows:

  • the testatrix (“BR”) was a woman of considerable means and sophistication who owned property in Spain, England and Canada and who, in 2002, made a Will, in respect of her European property, only, in Spain (the “2002 Spanish Will”) in which, inter alia, she conferred a life interest to her partner (“RR”) in her London flat,
  • in the late summer of 2005, BR had provided her lawyer in Toronto (“BR’s Lawyer”) with drafting instructions for a “new will” dealing with the “entire residue” of her estate, which instructions were incorporated in a Will (the “2005 Will”)  drafted shortly thereafter in accordance with BR’s instructions and which was reviewed, clause by clause, by BR with BR’s Lawyer before it was signed,
  • according to BR’s Lawyer, no discussion had taken place between him and BR about any prior Wills, the nature and the location of BR’s assets or about BR’s family and, as such, BR’s lawyer was unaware of the existence of the 2002 Spanish Will,
  • the 2005 Will contained a standard revocation clause revoking all prior Wills (the “Revocation Clause”) and a general clause disposing of all of BR’s “property of every nature and kind wheresoever situate” (the “General Disposition Clause”), and
  • in the summer of 2006, after learning that she had an inoperable brain tumour and a very short time to live, BR instructed BR’s Lawyer that she wanted to leave a gift of $1,000,000 to RR. A new Will (the “2006 Will”), identical to the 2005 Will except for the addition of the gift to RR, was reviewed and signed by BR, who passed away shortly thereafter. The 2006 Will contained the Revocation Clause and the Disposition Clause, as well.

The clear and unambiguous language of both the 2005 Will and the 2006 Will was that, by the Revocation Clause, they revoked the 2002 Spanish Will and that, by the General Disposition Clause, they dealt with all of BR’s property, including her European property.

From RR’s perspective, while he, no doubt, benefitted from the substantial gift in the 2006 Will, his entitlement would have been greater had the 2002 Spanish Will remained in full force and effect alongside the 2006 Will, because then he would have retained the life interest to the London flat.

Applications were brought before Justice Belobaba of the Superior Court of Justice by:

  • BR’s Lawyer (who happened to be BR’s executor) who asked the Court, in his capacity as executor, for advice and direction regarding the interpretation of the 2006 Will (the “Executor’s Application”), and
  • RR (supported by BR’s Lawyer) who sought an Order to set aside the grant of probate and to rectify the 2006 Will by deleting the Revocation Clause (“RR’s Application”)

In total, three Affidavits were filed in support of the applications which, after establishing the affiant’s connection to BR and the basis of the affiant’s belief, attempted to establish as BR’s true testamentary intention that, notwithstanding the Revocation Clause, she had not intended to revoke the 2002 Spanish Will.

Justice Belobaba held that such third party affidavit evidence of intention was inadmissible and dismissed both applications finding that the 2006 Will was drafted in accordance with the BR’s instructions, that BR’s Lawyer had reviewed the 2006 Will “clause by clause” with BR and that there was no suggestion of any drafting errors. Justice Belobaba’s evidentiary finding was appealed by BR’s Lawyer and RR.

Writing for a unanimous panel of the Ontario Court of Appeal panel, Juriansz J.A., in dismissing the appeal, identified credibility, reliability and public policy as justifications for rejecting the admissibility of extrinsic third party evidence of a testator’s intentions:

  • Credibility: “Credibility is a concern because would-be beneficiaries can, without fear of contradiction by the deceased, exaggerate their relationship and fabricate the promises of requests” (para. 37),
  • Reliabilty: “Reliability is a concern because testators are not obliged to write their wills to accord with the sincere or mendacious assurances they may have given to those close to them. Until they die, testators may freely revoke or vary the directions they have given for the distribution of their estate. The evidence of third parties, who cannot directly discern the mind of the testator, is logically incapable of directly proving the testator’s intent.” (para. 37)
  • Public Policy: “The evidence of disappointed beneficiaries and other third parties is simply not as probative of testators’ intentions as their own clear and unambiguous expressions in the will. Departing from the well-established exclusionary rule would not lead to a more faithful implementation of testator’s true intentions. It would, however, lead to increased litigation.” (emphasis added)(para. 35).

If there was any doubt whatsoever, after reading Juriansz J.A.’s substantive reasons, that the Ontario courts would be prepared to entertain future arguments for the admissibility of extrinsic third party evidence of intention, the cost award in the Rondel appeal dispels any uncertainty. The respondent’s costs of the appeal, fixed at $10,000, were to be paid not out of the estate, but jointly and severally by BR’s Lawyer and RR.

Link to: Rondel v. Robinson Estate, 2011 ONCA 493 (CanLII) at http://canlii.ca/t/fm4rz

 

Family Law / Support — No comments
10
Nov 11

A BREAK IN THE LINE TO ACADEMIC SUCCESS LEADS TO A BREAK IN THE CONTINUING OBLIGATION TO PAY CHILD SUPPORT

Parents of young children can, at best, “crystal ball” their offspring’s academic performance and commitment to higher education. So it is only natural that separation agreements which, when dealing with the duration of child support, are prospective, by their very nature, build in a variety of contingencies to set the temporal limits on the payor’s obligation to pay child support.

In a motion heard in January 2011 reported as Banting v. Banting, 2011 ONSC 406 (CanLII) brought before MacKenzie, J. of the Ontario Superior Court of Justice, the father sought to terminate his child support obligations for his twin sons on the grounds that their entitlement under the separation agreement had come to an end once they turned 18 and ceased to be “in full-time attendance at an educational institution”.

The facts in the Banting case were quite startling. From:

  • the date the sons turned 18 (September 17, 2008) to the end of the school term (June, 2009), and
  • September 2009 to November 13, 2009 (the date both sons were removed from the Grade 12 study program by reason of their absenteeism),

one of the sons had been away from school for approximately 70 days; the other for approximately 90 days.

The sons’ chronic absenteeism from and after the date of their 18th birthdays, which culminated in their ultimate removal from the study program, formed the basis of the father’s claim that his sons were not in full-time attendance at an educational institution following their 18th birthdays and that the $16,596.00 in child support payments paid by the father since their 18th birthdays represented an overpayment which ought to be enforceable by the father as a judgment for debt in accordance with the Rules of Civil Procedure.

The mother countered with the argument that the sons’ absenteeism was mitigated by their involvement in a variety of educational programs at a local community college (albeit with unexplained and unspecified absences) after their 18th birthday, namely:

  • a community college program designed to provide an opportunity for young people to explore career choices, to learn workplace skills and to connect with potential employers (from February 29, 2010 to March 24, 2010),
  • attendance at two, 3 hour Math Labs (April 14, 2010 and April 20, 2010), and
  • attendance at a Literacy and Basic Skills Program (from March 30, 2010 to August 23, 2010; extended to January 18, 2011).

In the circumstances, it was argued on behalf of the mother that the Court ought to interpret “full-time attendance at an educational institution” broadly and, in support of this position, cited the case of Taplin v. Laurie (1992), 41 R.F.L. (3d) 197 (Man. C.A.) in which support was continued for a 20 year old who, as a result of legitimate emotional and physical challenges, was still one year away from completing high school.

In reaching his decision in favour of the father, MacKenzie, J. observed that, while the Courts have:

  • endorsed the general principle that, whenever there is a reasonable doubt, the Courts should err in favour of an adult child who is pursuing an educational plan, even one which may require more time to complete than would be ordinarily expected, and
  • recognized that “the road to academic success is not always a straight line” (McIsaac, J. of the Ontario Superior Court of Justice in Williamson v. Williamson, 2005 CanLII 32210 (ONSC)),

on the evidence before him, given the sons chronic absences which led to their removal from their educational institution’s register, the “line” in question was “broken and thereby lacks the continuity, whether rectilinear or otherwise, of the line or course of action required to give weight to the interpretation of the words “full-time attendance at an educational institution” that is sought by the respondent.” (para. 19)

As a measure of the Court’s uneasiness with this outcome and as instruction for practitioners, MacKenzie J. notes that his conclusion may very well have been avoided had there been evidence, which there was not, in support of the mother’s submissions “that the absenteeism, the deregistration of the boys from the high school program and their academic difficulties in general resulted in whole or in part of the conduct of the applicant and the break-down and dissolution of the matrimonial home and environment.” (para. 20)

Link to: Banting v. Banting, 2011 ONSC 406 (CanLII) at http://canlii.ca/s/16k85

Family Law / Family/Small Business Law — No comments
17
Oct 11

A CASE FOR SHAREHOLDERS AGREEMENTS BETWEEN SPOUSES IN BUSINESS TOGETHER

Operating a business can be challenging, even at the best of times. But when the relationship between the co-owners is marred by mistrust and deteriorates to the point that they are working at cross-purposes to one another, the continued viability of a business enterprise may be called into question.

In the case of Goodwin v. Goodwin, 2011 ONSC 819 (CanLII), Justice John McDermot of the Ontario Superior Court of Justice was asked to consider a motion, and a cross-motion, for an oppression remedy under section 241 of the Canada Business Corporations Act in respect of a successful small, incorporated business with a 20 year track record and $2.1 million in annual gross revenues whose future prospects were threatened by the acrimonious breakdown of a 37 year marriage between two of its shareholders who, between them, were the registered owners of 90% of the issued and outstanding shares in the capital (20% by the husband; 70% by the wife) and who, despite their differences, continued to be actively involved in the day-to-day operations of the business.

As can be expected in a case such as this, allegations of misfeasance and malfeasance were raised by each of the parties, with the husband’s claims bolstered by the Affidavit evidence of the parties’ adult child who was employed in the business.

Most compelling, though, for Justice McDermot was the evidence of objective third parties recruited to try to find solutions to the impasse between the husband and the wife including:

  • the Affidavit of an independent manager selected by the parties and confirmed by the Court, who resigned out of frustration after 2 days when:
    • the wife, first, denied that there was an agreement to retain him and then tried to change the terms of his engagement, and
    • the wife had advised him that, notwithstanding the order of the Court that her daughter and son-in-law’s employment continue without impediment, she would continue with the termination of her son-in-law’s employment,
  • the Affidavit of the corporation’s counsel – who had been personally chosen by the wife over the initial objection of the husband – that it was essential that the wife be removed immediately, that her behaviour was “obsessive” and “bizarre”, that she had “serious mental health problems” and that she was a “danger to the corporation”, and
  • the Affidavit of the corporation’s bookkeeper – who had been personally chosen by the wife, as well – that the wife’s mind was “cluttered with obsessions”, that she provided him with edited financial information such that he could not get a clear understanding of the corporation’s financial situation, that she took papers home every night to shred and that she would permanently remove papers from his desk.

On the whole, the evidence convinced Justice McDermot that:

  • the wife had demonstrated that she was ungovernable by  Court order,
  • while there was no immediate danger to the corporation’s survival, there were 2 urgent issues which the wife had impeded, which required immediate attention and which could only be completed if the wife were temporarily removed from the premises, namely:
    • the valuation of the business, which was a precondition to the parties being able to resolve their family law issues, and
    • the preparation and filing of corporate tax returns which were, at the time, 6 month overdue and which exposed the corporation to penalties and potential criminal sanctions.

In applying the 3 stage test developed by the Supreme Court of Canada in RJR MacDonald Canada Inc. v. Canada, 1994 CanLII 117 (SCC), [1994] 1 S.C.R. 31 as to when an interlocutory injunction ought to be granted, namely:

  • Test 1: having regard to the merits of the case, is there a serious question to be tried?
  • Test 2: would the applicant suffer irreparable harm if the application was refused? and
  • Test 3: which of the parties would suffer greater harm from the granting/refusal of an injunction pending a determination on the merits of the case?

Justice McDermot found, after an exhaustive analysis, in favour of the husband and issued a temporary injunction preventing the wife from entering the business premises for 3 months or such longer period of time as the Court may order by further motion on the husband’s part.

While the outcome in the Goodwin case is both fair and well-reasoned, it, nonetheless, raises the question as to how much unnecessary expense and delay could have been avoided in this case had the parties entered into a binding and enforceable shareholders agreement with the customary buy/sell provisions triggerable on the breakdown of the relationship – marital or otherwise – between the parties.

Link to: Goodwin v. Goodwin, 2011 ONSC 819 (CanLII) at http://canlii.ca/s/16lni

Family Law / Support — No comments
06
Oct 11

HONOUR – MAKE THAT SUPPORT – YOUR PARENTS

A recent story on the Toronto Star’s website with the headline “B.C. Man Sued by Mother for Parental Support Calls for End to Lawsuit” highlighted a lawsuit which has been before the B.C. Supreme Court for the past 11 years – a now 73 year old woman suing each of her four adult children for parental support.

While such a claim is relatively novel, given prevailing socioeconomic and demographic forces, it may be a harbinger of things to come. With unprecedented growth in the seniors’ population, questions about the general adequacy of financial planning for retirement, a social welfare net stretched beyond its capacity and a steadily declining birth rate, the burden of supporting aging parents will fall on fewer and fewer adult children, many of whom will be facing their own financial challenges.

Apart from any moral imperative there may be for an adult child to provide financial support to a needy parent, the legal obligation to do so is well-settled in most Canadian provinces. In Ontario, the law is codified in section 32 of the Family Law Act which provides:

32. Every child who is not a minor has an obligation to provide support, in accordance with need, for his or her parent who has cared for or provided support for the child, to the extent that the child is capable of doing so.

While there is a dearth of case law on the interpretation and application of this legal duty, it is clear that an adult child’s obligation to support a parent who has cared, or provided support, for him or her will arise if both of the following financial tests are satisfied the financial need of the parent, and the financial wherewithal of the adult child to pay parental support, is established. Where neither, or only one, of these two financial tests is met, it can be reasonably expected that the adult child will be relieved of the obligation to pay parental support.

The Ontario Superior Court of Justice case of Daskalov v. Daskalov, 2007 CanLII 37467 (ON SC) involved just such a scenario. Justice Mary Jo McLaren was asked to adjudicate on a fact situation where the financial need of a 79 year old woman was established, but the financial ability of her adult son to pay parental support was not. The evidence in the case disclosed that while the claimant-mother had an income – albeit an inadequate one – which exceeded that of her adult child’s, the indigent son did own a home. in which his equity was estimated to be $87,000.

Having regard to both the inability of the adult son to pay ongoing monthly parental support and the adult son’s ownership of his home, Justice McLaren was asked to consider the merit of ordering either a transfer or encumbrance of the son’s home as an alternative to periodic support payments and, in doing so, she concluded that neither remedy was appropriate having regard to the adult son’s impaired financial circumstances.

The Daskalov decision is significant inasmuch as it enunciates the Court’s self-imposed limitation on its powers – while the Court is, in the appropriate circumstances, prepared to redistribute income (as between adult child(ren) and needy parent(s)), it is not inclined to redistribute assets.

Notwithstanding this limitation, the Daskalov case and the pending B.C. case foretell what promises to be an increasing convergence between elder law and family law with respect to claims for parental support.

Link to  Toronto Star article at http://www.thestar.com/news/canada/article/1057664

Link to: Daskalov v. Daskalov, 2007 CanLII 37467 (ON SC) at http://canlii.ca/s/vrzc

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