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The Vulnerable Trust?

By Dylan Switzer on January 17th, 2012

A recent decision of the Ontario Court of Appeal , Duca Financial Services Credit Union Ltd. v. Bozzo, sent estate planning solicitors into a frenzy in a short, two page, decision which purported to set aside a trust.   To understand the fear that gripped these lawyers, the role and purpose of trusts must first be considered.

Trusts have long been the vanguard of the estate planner.  As mentioned in previous posts, trusts are an extremely useful tool that effectively satisfies a number of planning objectives.  One of the trust’s greatest benefits is the difficulty adverse parties experience in challenging them.   This protection is used by estate planners for a number of reasons.

For example, in British Columbia will makers are typically prevented from unevenly distributing their estate to their children because of the equalizing provisions of the Wills Variation Act.  Frequently there are good reasons to disinherit one child or provide a larger gift to another, but within a will such distributions can be challenged and are frequently set aside by the courts.   Many estate planners, when faced with instructions that contravene the objectives of the Wills Variation Act, will recommend that a trust be established.  A well drafted trust provides individuals more freedom to distribute their estate in accordance with their desires and without the fear of court interference.

After the Bozzo decision some estate planners began to question whether such trust planning had been jeopardized for the future as the trust was determined void.   More alarmingly lawyers were left considering the dozens of trusts they had drafted in the past and wondering whether they were subject to attack in the future.

While lawyers should always question whether the planned trusts will withstand a challenge, a closer reading of Bozzo reveals that the panic was not merited.  The Court actually did not set aside a valid trust exposing the assets to the creditors; instead, the Court determined that the trust never came into existence.  This is an important distinction.  The Bozzo decision would have been much more interesting had the Court found that a valid trust had been settled and then chosen to set it aside at the request of the creditors.  But this decision does provide solicitors an important reminder.  When drafting trusts, the bare elements of the trust must be in existence or the plan is at considerable risk.  Trusts are still a valuable mechanism but they can only be implemented in certain circumstances and only add value when properly drafted.

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In which Court should you commence poroceedings for small personal injury cases?

By Clay Williams on January 3rd, 2012

Part 2

In my last blog, I provided my opinion that the Supreme Court was the preferred Court in which to bring even small personal injury cases.  The final nail in the Small Claims Court’s coffin (at least for bringing injury claims) is how the chronic lack of funding has affected it.  Recently, there have been many news articles about the underfunding of our judicial system.  In a recent speech, the top judge of the BC Supreme Court, Chief Justice Bauman, warned that years of government underfunding have resulted in our courts approaching the tipping point, after which they will collapse.  You have probably read about how accused criminals walk free because of judicial stay of proceedings being imposed because the case took too long to go to trial due to court delays.  There have also been recent news articles about the lack of court staff resulting in court being adjourned or orders taking months to be processed.

In my experience, the lack of funding is most apparent in Small Claims Court.  Chief Justice Bauman noted in his speech that there are now 17 fewer sitting judges in Provincial Court than there were in 2005.

The lack of judges and lack of funding in general in our Provincial Court has had an extremely detrimental effect on Small Claims Court.  It appears to me that scant resources are being directed towards the criminal and family divisions of the court.  As a result, waiting times are becoming longer and longer and it is no longer possible to set a trial down for longer than one day.  Yet most injury trials take more than a day to complete.  Now, the lack of resources means that trials are conducted in two (or three or four) parts over a huge period of time.  It must be very difficult for a judge to remember all the evidence when it is dished out in small pieces over months!  In my opinion, the tipping point has been reached and there is no longer any good reason for bringing an injury claim in Small Claims Court.

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In which Court should you commence proceedings for a small personal injury case?

By Clay Williams on January 3rd, 2012

Part 1

If you are injured due to the fault of another in British Columbia, you have the choice of bringing an action for damages in either the Small Claims division of the Provincial Court or the Supreme Court.  One distinction is that Small Claims Court has a limit for awarding damages of $25,000.00; whereas, the Supreme Court has no monetary limit.

In personal injury cases of lesser severity, there may be a temptation to bring the lawsuit in Small Claims Court and, at first blush, there appears to be advantages to doing so.  The Small Claims Act states that the purpose of the Act and the [Small Claims] Rules [of Court] is to allow people who bring claims to the Provincial Court to have them resolved and to have enforcement proceedings concluded in a just, speedy, inexpensive and simple manner.  In an attempt to turn that purpose into reality, there are simple, easy to fill out court forms and, in comparison to the Supreme Court, fewer opportunities to bring applications or to discover the opposing side’s case.  Moreover, there is a more relaxed trial procedure involving less rules.  The stripped down application, discovery and trial process removes the risk that a litigant might abuse the rules to make the process time consuming and expensive, and thereby force a settlement.  Insurance companies have been accused of doing just that by conducting overly long oral discoveries, by bringing numerous applications to ferret out evidence (no matter how remotely relevant to the case) and by setting jury trials.

The simplicity of the Small Claims Court encourages some individuals to forego a lawyer and bring their own personal injury claim.  But remember:  most injury claims are defended by insurance companies that do hire lawyers:  professionals with both the training and experience to destroy the case of an injured, unrepresented plaintiff.

It is my opinion that the Small Claims Court is not the best to bring an injury action. In my experience, the lack of structure in Small Claims Court means more lawsuits proceed to trial rather than being settled and the process takes longer.  Another downside I have found is that as Provincial Court judges are limited to a jurisdictional maximum of $25,000.00, they seem to treat that amount as reserved for the extraordinary cases.  In my experience, Small Claims judgments are often lower than awards made in Supreme Court.  Moreover, Provincial Court judges are often less experienced in dealing with injury matters than their Supreme Court counterparts, as most of the Provincial Court schedule is taken up with criminal and family matters.  As such, I have found results to be less predictable than in Supreme Court cases.

The Supreme Court has recently put into place rules that provide a better balance of structure for smaller cases (defined as being less than $100,000 and that can be heard in 3 days or less).  Stay tuned for more on that topic in a forthcoming blog.

Wills, Estates & Trusts View Comments

Incapacity Planning Update: New Attorney Requirements

By Dylan Switzer on November 14th, 2011

On September 1st, 2011, British Columbia introduced various amendments to its incapacity planning legislative regime causing practitioners across the province to revisit their incapacity practices.  Enduring Powers of Attorney were significantly altered by way of amendment to the Power of Attorney Act.  There are a number of significant changes that warrant detailed discussion, however this entry will limit its scope to those new responsibilities legislated for Attorneys appointed by the adult in an enduring power of attorney.

To comprehend the importance of an attorney’s duties, the nature of enduring powers of attorney must be considered.  Enduring powers of attorney differ from general powers of attorney in that an enduring power of attorney remains effective upon the incapacity of the adult who granted the power of attorney.  General powers of attorney are rendered void  upon the incapacity of the adult.  The mere fact that enduring powers of attorney require attorneys to act upon the incapacity of the adult places considerable pressure on the attorneys.  Historically, there has been little guidance provided to the attorneys in respect of their duties and responsibilities.  The revised Power of Attorney Act clearly outlines the attorney’s requirements to do away with the ambiguity of the past.

Unfortunately, it is not necessarily clear when an attorney’s duties arise.  The common law provides that the duties only arise once the attorney is required to act in that role.  The amendments muddy these waters and can be interpreted to require the attorney to act, and accordingly be subject to the legislated duties, upon the execution of the power of attorney.  It will be necessary for the attorney to receive legal advice on this issue until the practice developments over time.

Once acting, the attorney must exercise those duties set out in section 19 of the Act, which reads as follows:

19 (1) An attorney must

(a) act honestly and in good faith,

(b) exercise the care, diligence and skill of a reasonably prudent person,

(c) act within the authority given in the enduring power of attorney and under any enactment, and

(d) keep prescribed records and produce the prescribed records for inspection and copying at the request of the adult.

(2) When managing and making decisions about the adult’s financial affairs, an attorney must act in the adult’s best interests, taking into account the adult’s current wishes,

known beliefs and values, and any directions to the attorney set out in the enduring power of attorney.

(3) An attorney must do all of the following:

(a) to the extent reasonable, give priority when managing the adult’s financial affairs to meeting the personal care and health care needs of the adult;

(b) unless the enduring power of attorney states otherwise, invest the adult’s property only in accordance with the Trustee Act;

(c) to the extent reasonable, foster the independence of the adult and encourage the adult’s involvement in any decision-making that affects the adult;

(d) not dispose of property that the attorney knows is subject to a specific testamentary gift in the adult’s will, except if the disposition is necessary to comply with the

attorney’s duties;

(e) to the extent reasonable, keep the adult’s personal effects at the disposal of the adult.

(4) An attorney must keep the adult’s property separate from his or her own property.

(5) Unless the enduring power of attorney states otherwise, subsection (4) does not apply to property that

(a) is jointly owned by the adult and the attorney as joint tenants or otherwise, or

(b) has been substituted for, or derived from, property described in paragraph (a).

Perhaps the most interesting duty is found in section 19(1)(d) which requires the Attorney to keep those records set out in the regulations as soon as the Attorney begins to Act.  This is a new requirement that Attorneys must satisfy and can, in some cases, require careful planning.   A lawyer should be consulted to ensure that you, as Attorney, are satisfying the requirements placed on you as Attorney.