Raman: Hello, everyone. Thank you for spending your lunch hour with us. We are just a minute after noon so we should get started. My name is Raman Johal and I'm with my partner here, Raphael Tachie, and we are partners in the Private Client Services group at Gowling WLG in Vancouver. First, we'd like to recognize that while we are all gathered remotely, Raphael and I are presenting from the traditional ancestral and unceded territories of the Musqueam, Squamish and Tsleil-Waututh Nations who cared for these lands since time immemorial. Just housekeeping matters as well. We'll be going over a few topics but if you have questions please include them in the Q&A at the bottom of our screen and Raphael and I will try to address them in a timely way. We are presenting on a very timely topic, we think, with our aging population and the huge accumulation of wealth by the Baby Boomers. You've got their increased life spans and prevalence of age related dementias and then just the bonkers real estate market in Vancouver. So it's a bit of a hotbed of circumstances that are very attractive to certain opportunists out there. Hence this rise of predatory marriages. To be clear, we're not really talking about those May / December romances that some folks might judge or questionable behaviour from a widow or a widower who, in the eyes of their child, might be a bit generous to a love interest. We're talking about elder abuse and so today, when we talk about love and predatory marriages, we're going to address these topics here.
I'll start off by kind of going through the legal analysis of what predatory marriage is with the discussion on marriage contracts and tests for capacity, what some red flags are and how you can set aside predatory marriages. Also we'll talk about a couple of cases that are pretty recent and give some hope, I think, and then Raphael will take us through a pretty detailed case study that kind of highlights the practical difficulties that we sometimes encounter in either recognizing or dealing with predatory marriages.
As I said, predatory marriages are, in my mind and the mind of others, classified as a type of elder abuse and exploitation based on the fact that there's a vulnerable person, whose probably losing capacity, and somebody comes into their life with the express purpose of gaining access to their finances. You'll see behaviours which will be contrary to that vulnerable person's prior intentions or strongly stated views and you'll see large sums of money going out, in terms of gifts to the new spouse, their family members, putting assets into joint tenancy, creation of new Wills and there's also automatic spousal rights that arise from marriages. So previously when someone got married it would revoke a Will that they had and that was changed in 2014 with the introduction of a provision in the Wills, Estates and Succession Act that, for public policy reasons, was introduced as a way to protect beneficiaries so that if an elder person in their life got married it wouldn't automatically revoke their Will. For the purposes of today we're really just talking about marriages which are easy to identify because you've got a marriage certificate, as opposed to a common law relationship, which can also have the same rights and privileges as a spouse but which are bit more difficult, I think, to recognize. There's a whole case law out there, that's been determined by the Courts, that outlines the factors that you look at about whether or not is in a common law relationship and that includes living arrangements. Shockingly you don't have to live in the same house to be common law spouses. Living arrangements like whether or not they have meals together; whether they support each other in sickness and in health; whether they mix their finances; whether they're holding themselves out to the world as being married. So a whole bunch of factors that are involved in determining whether or not someone is in a marriage like relationship. But it's in some ways easier to recognize a marriage itself because you've got that marriage certificate.
There's kind of a difficult balance. I guess if you're a loved one, or even a bank or financial institution or professional involved, when you see something like this you want to protect the autonomy and the independence of a person but also be sure to try to protect them if they are vulnerable. So it's a difficult balancing act. Our law states that capacity is presumed. So the starting point in the Adult Guardianship Act, Representation Agreement Act, Power of Attorney Act, pretty much most legislation, says that capacity and capability is presumed and if you've been involved with someone who's got some declining cognitive issues you know that it's continuum. It fluctuates day to day. It fluctuates within the hours of a day but overall there is a progressive decline. Although there's medical analysis, and medical evidence that can be used to described whether or not someone does not have capacity, the tests that we use, as far as the law is concerned, is kind of a judge made legal analysis on whether or not they had capacity to do a specific task. So interestingly it keeps the work of a lawyer interesting is that there's different levels of capacity for different tasks, and we'll turn to the Wolfman case in a second which kind of tries to outline that, but essentially, if you're challenging someone's capacity, if you're saying that someone didn't have the capacity to get married, what you do is you have the onus, you have the responsibility, to gather enough evidence to show on a balance of probabilities that that person did not have capacity.
In BC, in 2011, this Wolfman and Stotland case kind of tried to create a hierarchy of levels of capacity when it comes to marriage and such. The Courts said that separation is the simplest act and requires a very low level of understanding. Basically you want to know who you do and don't want to live with. Divorce, also still simple, but a little bit more complex. It means that you want to remain separate and apart. So we need to take kind of that extra step to obtain a divorce and undue the contract of marriage, which we'll talk about in a bit. The contract of marriage, which there's a very relevant case from the 1800s, is based on this notion that marriages, and the desire or contract to marriage, are very simple decisions that we make. I don't know about you but I think it's a bit more complicated than that, and perhaps I'm jaded and think that it's not just about love, because certain rights and responsibilities arise from the simple fact of a marriage. But the Courts have kind of distinguished between personal matters, such as marriage and love, and financial matters. So I think it's a bit of an academic exercise given such pension rights and property rights arise when you do actually get married and there are certain benefits of getting married.
If you look at this definition you can see just from some of the words here that it's not quite relevant and it's a bit outdated. The Court said, as recently I guess as '83, at law the essence of a marriage contract is an engagement between a man and woman, which again is outdated, to live together (apparently you don't have to live together), to love one another (whoo), as husband and wife and to the exclusion of all others. So the key portion here is that they say it's simple contract, which does not require a high intelligence to comprehend, and it doesn't involve consideration of other acts involving others such as the making of the Will. That's where I really disagree because being married you automatically have certain rights. If there is no Will you have primary rights over your spouse's property on an intestacy. There's pension and survivor benefits, tax planning advantages and the family law equalization provisions. So just by being married there are a lot of things that come into play that don't seem to be considered when the law talks about the marriage contract.
But why? Why do they think it's such a simple contract? I think it comes from this decision which is that they want to uphold the sanctity of marriage, the Courts do, and so they say it's in the interest of the public in upholding marriages is recognized in law by the rule that everything, including capacity of the parties, is presumed in favour of marriages. So the law already presumes capacity and then you've got decisions like this which further presume, kind of in that higher threshold, the sanctity of marriage. They're talking about marriage as being really simple. They don't think marriages involve decisions about Wills and financial decisions. So you have here the marriage contract and it being a simple thing and it's all based on this case from 1887, called Durham and Durham, which I love talking about because it's such a wacky set of facts that are pretty unbelievable when you look at them through 2022 eyes. But even in 1930, which we're getting closer to the present, the Courts have said that the test in Durham and Durham is set out and it says that to enter into a valid contract of marriage you have to understand the nature of the contract and the duties and responsibilities which it creates. I've been married a bunch of years now and I still question the duties and responsibilities that my husband and I share, but apparently the Supreme Court of Canada has decided that there's some sort of test, that's simple, that lets you decide whether or not you are in a valid marriage contract. But it's based on this decision, like I said, and I'm going to talk about that decision right now.
So the Earl of Durham, in 1887, wanted to leave his wife and at that time annulment was the only option, and so in a very clever fashion he decided to pitch to the Court that his wife, the Countess of Durham, had become hopelessly insane. He said that the wife was also insane on the day that she married him. In support of this he said that she was a person of low intellectual power. He said her coldness after the engagement was so unnatural in the circumstances that as evidence of a deranged intellect. She avoided walking hear him. She didn't want to hold hands. He said she suffered from delusions and stated there was something dreadful and awful, I ought to tell you. This is the kicker. He said the fact that she did not love him was evidence of her insanity. I just wished that they had pictures of what the Earl of Durham looked like, or some kind of description of his characteristics, because maybe he wasn't such a catch. Anyways, the Court found that the wife was shy and unhappy at the time of her marriage but not insane. He denied the Earl of Durham's application to have the marriage voided due to mental incapacity of the wife, but he further went on to describe the marriage contract, and said that it appears to him that the contract of marriage is a very simple one which does not require a high degree of intelligence to comprehend. He's kind of saying that the Countess of Durham wasn't that bright anyways, but it doesn't matter how smart she was, because you don't actually have to be that smart to be married. So this test is based on the Durham decision from 1887. It has all these elements that we've talked about. In fact, it talks about the marriage contract, duties and responsibilities it creates, reduced cognitive abilities don't destroy your ability to get marriage. So it's a mash up of this kind of presumption that you don't have to be smart to be married. We want to uphold the sanctity of marriage and marriage is a contract that doesn't really recognize financial affairs.
So what do you do? If you're trying to question or set aside a marriage for a lack of capacity on the part of the vulnerable individual, and if you are successful, the marriage is void ab initio. So from the get go. It's as if it never happened. It is difficult to set it aside though. You need to investigate. You need medical records which are so helpful, which are becoming more and more available, and you'll see from the two decisions I'll discuss in a minute. You need information about the circumstances of the marriage. If family members, trusted individuals weren't there, if it was done really quickly and in secrecy, that's kind of a red flag that this person is a predator. If there's an unusual pattern of large gifts, whether it to be to them, to their friends and family, like I said earlier whether joint assets have been put in joint tenancy. These are kind of all red flags to suggest there's some sort of predatory relationship. There are other ways, as opposed to just undoing the relationship itself, to try and invalidate the gifts and the marriage. You can say that it was unconscionable, that you were taken advantage of this individual, that there was some sort of fraud or undue influence at play, and this is something new that I learned a few months ago but in BC, and other Provinces, you can actually file a caveat to prevent the issuance of a marriage certificate. Interestingly, any person can file that caveat. Whether it's a disgruntled former love interest, whether it's children and beneficiaries under the Will of a person who's vulnerable, but all that you have to do is send in a form to Vital Statistics that say that you want to stop any issuances of a marriage certificate and then it's up to the folks at Vital Statistics to decide whether or not that caveat has any merit. I've never seen it done. Presumably if the Commissioner doesn't know the circumstances it's up to the person trying to become married, or trying to get the marriage certificate, to try and set it aside but it will be interesting to see, if and when, that provision is actually ever used in terms of a predatory marriage.
I want to talk about two cases that have kind of recently come up. There's one in BC, Devore-Thompson and Poulain and then there's another one out of Ontario, which is called Hunt. So Devore-Thompson was related to a woman called Mrs. Walker and I imagine she's like these ladies you see at Safeway, at about 8 o'clock in the morning on a Saturday when you're in your sweats and your flipflops, and she's dressed up, make-up applied, lovely clothing, all set to go. The way she's described is kind of like that really sophisticated lady, who had been married previously, had shared with her family that she never intended on getting married again. She proudly lived alone, kept a meticulous apartment and luckily she had a niece in the area, in BC, who helped her out. A lot of her family was in Alberta and so she would often go back for weddings and funerals and high school graduations. But over time she needed a little extra help and so her niece took it upon herself to become more involved in her care. The niece took her regularly to geriatric medical specialists, which is key in this case, because there is a significant amount of medical evidence that showed that Mrs. Walker had started to lose capacity and was in need of some assistance. Luckily she appointed, Mrs. Walker did, appointed her niece and a good friend as her powers of attorney in 2007. That was shortly after she had met Mr. Poulain. So apparently she met Mr. Poulain outside of a grocery store. He asked her for five bucks and then asked her for her phone number and address so he could kindly return that five dollars back to her. Over time the family members didn't know about Mr. Poulain. Didn't know that she was kind of intimate with him or what the extent of the relationship was. It was described to them as just being like a friend and certainly they had no indication that she had married this man, which was done in secret in June 2010, and from that period of time between meeting him and getting married her family did notice a steep decline in how she kept herself, how she behaved. There's a lot of great evidence from people in Alberta, who didn't see her regularly but saw her after several month periods, and could notice every time that she had more and more difficulty. She would kind of stare off into space. She at one point had trouble opening a doorknob. She was very forgetful. Her hygiene was unkempt, unlike this fastidious woman they had come to know, and when her niece went to her apartment she noticed that there was food in the sink and it was unkept and untidy. So definitely a lot of evidence from non-interested third parties who weren't beneficiaries under her Will and then had no financial interest. So that is very, very helpful here.
So she had this secret wedding, and shortly thereafter was deemed incapable, and died a couple of years later while she was in a care home. After she passed away her niece brought an action against Mr. Poulain to invalidate the marriage and the 2009 Will that made him a primary beneficiary. Luckily, like I said, there was a geriatric expert who described her impairment as an insidious onset of cognitive impairment with the overall picture consistent with dementia, probably of the Alzheimer's type. That was a geriatric expert she had started seeing before the marriage, had seen regularly, so her evidence was really key in the Court finding that the marriage was invalid. But like I said, her friends and family, their evidence lined up with the expert. Kind of this progressive cognitive decline, a slowing of her decision making and kind of a lack of awareness on what was happening around her. Mr. Poulain, on the contrary, his evidence was that Mrs. Walker was picture of health, and so the Court didn't really buy it. I find it actually interesting that his own lawyer said that Mr. Poulain was of low intellectual capacity and so he might not have noticed the decline in Mrs. Walker. That was just a factor in him not noticing was because he was not that bright, but that he should still be found credible, which is kind of laughable when you think about it.
The Court then discusses the test for capacity to marriage. They go over what we talked about a few moments ago which is the marriage contract. They talked about the threshold for capacity, for the formation of a marriage contract, which again is that simplicity test. Here Mrs. Walker didn't really meet that threshold because of all the evidence showed that she didn't. But the Court did talk about the person needing to have an understanding of who they want to live with, the effect on their future, which is kind of an intro into, I feel, acknowledging that there is more at play than just wanting to live with them but that there's future aspect of a relationship in terms of financial security and responsibility. In any event, they found that this marriage did not match up with her prior stated intentions, that she would never marry again. It was done in secret. At some point she didn't even really recognize that she was married. So the Court decided that she did not have the capacity to get married in 2010 and they declared that the marriage was void ab initio. Because she had been struggling with capacity issues for so long, the 2009 Will was also declared invalid and the Court went further and declared an earlier Will, in which the niece was the primary beneficiary, to have that Will invalid in any event. I hardly doubt that the niece was at all concerned about that.
Then you've got this Hunt and Worrod case, which all these cases are so sad when you think about how people kind of fall under the spell of or find themselves in circumstances where people are taking advantage of them. I think Raphael will speak to this at the case study, on steps and measures you can take in terms of whether you're an advisor or financial institution, things that could be done to try and shelter these folks from this. Mr. Hunt actually was still alive, as opposed to the earlier decision I mentioned, and some of the earlier decisions that are in the case law. But Mr. Hunt and Ms. Worrod had been in an on / off relationship. A lot of turmoil. She was an alcoholic. They had kind of had several breakups, here and there, and ultimately several months before he was injured in an accident they broke up for good. The police attended at this home that they had previously shared and Mr. Hunt described Ms. Worrod to the police officer as not being his girlfriend. That was very important evidence to show later that they weren't in a marriage relationship. So they had been in a relationship. Kind of a on / off, like I said. They had bought a home together. Their relationship fell apart and they entered into a settlement agreement about this property, and like I said, the police showed up when there was an incident and he didn't describe her as his spouse. Unfortunately, shortly after they broke up, Mr. Hunt was involved in an ATV accident and he suffered a catastrophic brain injury and he was actually in hospital in a coma for 18 days. His sons brought this litigation after they discovered this marriage, as his litigation guardians, and were very involved with him at the hospital. They're there every day. They had a previously very close relationship and 3 days after being released into the care of his son, who I think was only like 21 or 22 at the time, Mr. Hunt disappears. He disappears and it takes 3 days for his sons to find him in a nearby town, shacked up in a hotel with Ms. Worrod and having been married. So it turned out that Ms. Worrod's uncle had picked him up on the side of the road, and taken him to this motel and they had had a marriage ceremony with none of his family or friends there, and now they're relying on that to say that Ms. Worrod was the wife.
So the sons brought this action to say that this marriage was invalid and the Court agreed. In the alternative, which I had mentioned earlier is something you can try to undo a relationship through unconscionability or unjust enrichment, that wasn't done here because the Court did find that the marriage was void ab initio. But it is something in future to try on and see if that works. They talked about the test for capacity as the Ross and Potvin case, that we talked about earlier, you have to know what you're getting into in terms of the marriage contract and the duties and responsibilities that marriage creates, which apparently is more than just taking out the garbage. They talked about having the ability to kind of manage themselves and their affairs. Because capacity is presumed the sons, who are the litigation guardians, had the onus of proof of showing that their father did not have the mental capacity at the time of the marriage to agree or consent to this marriage. Thankfully, there's a lot of evidence in favour of voiding the marriage, again, like there was in the prior case and oftentimes that is not the case. But here we had the police who showed up on his doorstep and who gave evidence that he did not describe Ms. Worrod as his spouse. There was pre-release medical summary, before he was released after the 18 days in hospital, that talked about his reduced ability to recognize his cognitive impairments and it made it difficult for him to fully experience what was happening around him, and further consequences of events that might jeopardize his personal safety. So Ms. Worrod was, like I said an alcoholic, she had some drinking and driving convictions and some orders, against her and she wasn't really caring for him and the Court went through a lot of the medical evidence and suggested that he just didn't know that she was bad news for him. As a result of the sons trying their hardest to look out for the dad, and take care of him, the judge decided that the marriage was void. Interestingly, the Court went on to actually issue a no contact order because Ms. Worrod was just such bad news for Mr. Hunt.
You have to see that this case and the last one are really extreme circumstances. You've got these predators, who I guess aren't as sneaky as some of them out there, in terms of maybe rushing too much into these marriages and trying not to take a long approach. So those two cases, I think, give us hope but like I said they are very unique because there's medical evidence and really credible evidence from third parties who don't really have a financial interest in the outcome, that swayed the day for the judges. I'm going to turn it over to Raphael now. He'll talk to you about his case study which kind of takes the elements that we've talked about here, in terms of determining whether or not someone is in a predatory relationship. Raphael.
Raphael: Thank you, Raman. So Raman's walked you through the legislative landscape around predatory relationships but you're probably sitting there asking yourself, in all these really interesting cases I didn't hear an investment advisor, insurance advisor or an accountant mentioned in any of them. How does this apply to me? What hopefully this case study will do is make it real for you. In 2019 CBC did a series on seeing other financial exploitation and in that series that they did there's a quote from Gary Clement, who is a former RCMP officer. What he said in that expose that CBC was doing around exploitation I believe got adopted by the Feds and the regulators. So if you're a financial advisor, you're insurance advisor, you're investment advisor, this quote that I'm about to read to you really starts to apply to you and brings this home for you in what you do. So Mr. Clements says:
"What we need is to have our financial institutions ensure anything that's an anomaly, involving a senior, there's questions and red flags raised."
Now that quote was before, if you're a banker you would have heard the Seniors Code came into place. That quote was before the amendments of the National Instrument 31-103 which applies to older and vulnerable investors came into place. So increasingly the media attention around vulnerability and older investors being financially exploited, including through predatory marriages, has become forefront for regulators. It's become forefront news for the media and so increasingly as a reputational risk attached to it and then increasingly when the money is gone, there is litigation risk attached to it because as the advisor, as the insurance company, or the investment business or the bank, the disappointed beneficiary whose family has lost access to an inheritance because of a predatory marriage, will potentially look to you to satisfy their disappointment.
Now this case study is what can you do and what are the signs you should see and what kind of steps would you take when these things pop on your screen. A lot of the work that I do here, I do estate planning, and you know how people put in place POAs and Wills and Trusts, but increasingly a lot of my practice is focused on advising insurance advisors, investment advisors, banks, wealth management companies on how to deal with these scenarios. Helping them develop playbooks around exploitation and the different guises of exploitation comes into. So let's start with this case.
So M is married to D. They've been married for a very long time. M has an adult child from a previous marriage, C, and you'll see that a child becomes a critical component of this fact scenario. M is in her 70s and has lost mental capacity due to progressed dementia and is now in assisted living. D's in his 70s as well as but he seems to be fine just living on his own at home. This whole file got started because C, who is a busy executive of a financial institution, noticed something had gone wrong. D and C have a good relationship and so they could talk. But you'll find that in a lot of these cases how you're pulled into these issues is because the family pulls you into it. They put you in the middle. In this instance, because D and C have a good relationship, when things start to go wrong she's unwilling to speak to D about what's going wrong and pulls in the financial institution mediator between her and the step-father. A few months after M becomes incapable D enters into a relationship with P, which started off as a friendship and slowly got to become much more than that.
Now I want to highlight some of the, they had done planning. So in this instance the family had done planning. M had an Enduring Power Of Attorney in place where D was the attorney, and if D couldn't act then her child, C, will step into D's place to act. The attorney could use M's assets for his benefit and so this is not a case where there is no planning done. This is a case where there's actually a lot of good planning that had been done. Next slide, please.
Now what are the financial circumstances of this case? There's approximately 2 million dollars of investment account, held jointly between M and D. They had been married for a long time. They had $200,000.00 in a private banking account, that's also joint, and there's a principal residence, about 3 million dollars also in joint names. Now the key distinction that I want to highlight for you is that on the joint account, the agreement that governed the joint account said anyone between M and D could sign. So this is the case for most spouses. When you open a joint investment account, or banking account, with a partner you don't say we both need to sign to be able to access the account. You usually allow each other to sign or to transact on your account without the other person being present. So this set of facts is very normal, how you can see a normal set of facts between a couple that had been together for a long time. What was a concern? What brought the issue to head? Over the last year, when it came to me, he had depleted all the funds in the private banking account and was increasingly making withdrawals from the investment account. Remember that they were joint. He was an attorney but he was also a co-owner so he has an ownership interest in the account. He didn't have to account to anybody. D had moved P into the home that he and his wife shared before she went to assisted living, because increasingly he, one of the things that you find out in the sub list below is once his wife became incapable, one of the things that he realized was life was too short. At least that's the answer he was giving. That he wanted to live to the fullest and P gave him happiness and joy so he wanted to make sure that he could spend as much time as with her as possible. So he moved her into it.
Now when the concern comes to financial institution, they interview D and ask him, what were all these transactions for? And he said, I purchased a Porsche for P. I rented or purchased equipment for hair salon. We took a number of vacations where I paid for the vacations and that he wanted a relationship with some permanence with P, seeing as his wife was not going to come back to him, so that's why he was looking to move her into their place. What if you're an advisor? If you work with the financial institution, if you're a trust officer, if this comes across, what's the concern? Now this case, the family saw it first. C saw those things and got concerned and then raised it to the institution where the assets were held. The FIs view was that they permitted these transactions because both D and M, while M was capable, spent lavishly. They lived a lavish life. They traveled a lot. They bought expensive things and so they did not see any issue with the purchase of a Porsche, the extravagant vacations. That was normal course of action. Why is that important? As an advisor, a lot these things when they land on your plate, the first question that you're going to get is, given your knowledge of your client, did anything, did any red flag show up for you? In this instance, if you can point to past behaviour in transactions, then you can explain why this was not unusual even though the expenditure was a little higher than normal. The advisor in this case said he did not appear to lack capacity when he interviewed him, when he came in for his annual investment reviews, and even though they're having concerns now raised he was not willing to submit to capacity assessment because he was fine. He was just living his life to the fullest because of what he seen happen to his wife. C is unwilling to confront D directly about her concerns but she then reports it to the investment advisor, as well as the head of the investment business, and so this pulls in the advisor and the business into the middle of this family situation.
The first analysis when this comes is, one, let's look at M's needs and she might be a victim of any exploitation that's happening. M is incapable so she cannot manage her own affairs. She cannot see what's happening to her share of the money. Cannot remove the attorney because she's incapable. Now this issue becomes important to a financial institution or advisor, when you're dealing with an attorney that is managing property for an incapable person. There's some case law out there that says that your obligation is higher than when you're dealing with a client directly because it's almost akin to a trust in that case. So in this instance you have a couple who both own the asset but one of them is incapable, so that the incapable person still have an interest in that asset and is being depleted, you need to pay attention to what's happening and you need to take steps to make sure that what's happening isn't raising the likelihood of financial exploitation for the incapable person. Now a lot of FIs, you have in your agreements, if you don't you should probably look into including in it, that permits restricting an attorney's access to accounts if you find that they're acting improperly. What that does around these issues is if you see exploitation, you have a mechanism for stopping the exploitation and investigating. For the investment advisors you know that now there's a temporary rule for you to follow around investments. This is an opportunity to implement that temporary hold. It's a basis for implementing that temporary hold. You also now know that you have to collect trusted contact person and what does that around these cases is it brings in other people. It brings in, if C wasn't already involved in this case, it brings her into it if she's a trusted contact person. You need to open up the people that you're dealing with when you start to see some of these red flags.
Now bullet 4 talks about if an attorney's acting improperly then there's a basis to refer the matter to the Public Guardian and Trustee to look into it. Now why would you do this? In this instance, again, D has an ownership interest but he's also an attorney for his incapable spouse and you need to bring in as much tools as you can to try and look after the incapable person's interest, especially if these are also being exploited because of the potential predatory relationship.
Now let's look at D's needs. D is not willing to submit to a capacity assessment because he's fine. He's just living his life to the fullest. The law, as explained around these things, is that it's a presumption that you're capable, even around your own financial affairs and so if your capable of managing your financial affairs, and you're not willing to submit to a capacity assessment, as a financial institution, as an advisor your options then start to look limited on that client's behalf. The question that you need to then look at is, is there potential for undue influence in this case? Is the spending a result of an undue influence being put on him? So you look at that and you realize, one, you have an obligation to protect M because she's incapable. Two, you have to presume D is fine, but there might be a chance that his expenditure might be a function of undue influence and so what can you do as an advisor? What can you do as a financial institution? Next slide, please.
The first place you look to is your agreements. You say, what does my agreements, what are the tools available in my agreements that govern the accounts I opened? If you're an advisor you should be clear on these issues now because of what I mentioned before. It's increasingly public. It's increasingly being regulated around exploitation and so, in this instance, the FI agreements permit D to spend funds in joint accounts for his sole benefit, since D is a joint account holder with anyone to sign. The FI can place a temporary hold if there's a high likelihood of financial harm due to financial exploitation. This is similar language under the National Instrument 31-103. It's similar approach that banks have taken under the Seniors Code around these issues. But if you place a temporary hold, what do you do next? Now if you're an investment advisor there's some reporting requirements you have to do. Every 30 days you have to give notice back why you placed a hold. But some of the tools that you can rely is investigate the transactions, interview everybody. Offer if, D in this instance because we have to presume capacity and he was unwilling to submit himself to a capacity assessment, offer him independent legal advice. To say, hey, do you understand the nature and effect of what you're doing and what that might mean for your obligations as an attorney? As well as your own financial welfare in terms of the transactions you are doing. He refused in this instance. A lot of this kind of options that we're walking through is so that the institution, as an advisor, you can tell a good story. You can highlight how you've met your obligations. The FI offered supportive decision making. So what does that mean? That means where you think a client's incapable or vulnerable in some way, you bring in a trusted contact person or somebody else that they trust, who has no interest in the transactions that are happening, to walk them through why you have concerns. We think you're spending too much money. You have an obligation as an attorney. What's happening here? In this instance they did that, they had both people in the meeting and they D rejects the undue influence and exploitation rationale that's given to him. So what do you do next? Next slide, please.
So the solution was place a temporary hold on your accounts and your expenditures because now you have a regulation that allows you to do this. Refer the matter to PGT because in his capacity as attorney he might be acting contrary to the fiduciary obligations placed upon him. So let the PGT look into it. Bring other parties to help you investigate it and see what other tools are available to you. In this case, a temporary hold and the PGT referral leads to an agreement between D and C, the child. The agreement ended up being that we'll split the accounts into two. D will have his own accounts. M will have an account held in trust for her. When first of M and D dies, the balance will go the survivor. So it's still a joint, remember we started off with joint accounts here. The idea is to allow the person that's, because capacity is hard to determine and because you can't control everything as an institution, you have to allow D to be able to control his own funds but also protect M. In this instance, D had agreed to resign as attorney for M, and C stepped in as attorney. The idea here is people can want to look after somebody but being an attorney or fiduciary for somebody is busy and is hard and it takes time. In this instance, C was willing to overlook everything but she didn't have the time to create monthly bills and arrange for things to get done. So as a trust officer on this call, you might be happy to hear the solution here was to have C act as attorney but hire a trust company as an agent. To deal with the day to day management of M's affairs. What does that mean? You end up with, not a win here, but really it is a solution that hopefully works for everybody. It addresses the concerns in the best way an FI can. You can't solve predatory marriages. You're not the forum for it. Come to Raman so she can go to Court and get a declaration for you. That is what we do here. As an FI, what you want to do is to say, what are my obligations? What can I do to protect my client, my customer the best way I can and what is outside of the scope of my responsibility? Assets stay with the FI because in this instance C's happy because mom's interest is look after, and the FIs able to give the trust company extra business because now they're acting as agent for C to look after mom's affairs on an ongoing basis, and C's really kind of giving general directions or advice based on her fiduciary obligation. M's interest is protected. The investment advisor and a private banker learn more about what the trust business offers. If you're an advisor and you're hearing this and you don't understand what trust companies do, please pay attention because sometimes they offer solutions to you that you are not aware of, and you're going to end up in situations where you shouldn't be when a trust solution might really help. You can help your clients by referring them to a trust company to step in and help in scenarios that are difficult to manage. Then the best part of all, is C stops complaining to the head of the business, which was what led them to me so everyone was kind of happy. We didn't solve the predatory relationship. We couldn't solve it as a financial institution. You could not solve issue. But you could protect yourself. You could protect your client and you can come up with a scenario that allows you to do the best you can in this scenario. So I will stop here and then we'll take questions if there are any.
Raman: Raphael, thanks for that. It's very practical advice and I see that the attendees here, like you said are from trust companies and some financial institutions, so I'm sure they appreciate that. We've got some time for questions and a couple have rolled in. One related to whether or not criminal charges were ever brought against some of these unscrupulous people in the cases that I cited earlier. Unfortunately, no. In those cases at least there was family members that brought civil proceedings but hopefully we'll see more and more mechanism to bring criminal charges against these people, and certainly the PGT, the Public Guardian and Trustee, has more teeth these days in terms of investigating and taking steps to protect an individual, more so than they used to.
Raphael: Raman, can I add something to that really quickly?
Raman: Sure, please, yeah.
Raphael: The criminal code has provisions around senior exploitations. Now they're not great but there is some. So exploitation by using POA, for example, I forgot the section number. I'm happy to shoot out the section to anybody that emails me. But there's now criminal code sections that apply to exploitation and so sometimes the function of reporting to these institutions, I thought I saw … on the list here. … … works in Ontario with an organization called, Martin, I apologize if I don't say the name right, but it is Police Officers Working - I'm killing the name. Police officers that are working primarily on elder abuse issues. BC has an organization that's similar. If you reach out to me I'm happy to give you the names but when you have these files, these are community organizations that can help you identify, kind of bring in the police and get kind of criminal law solutions as well if you need it.
Raman: Excellent. Excellent. Hopefully we see those provisions used more and more. So there's a couple of questions here. What if the individual has capacity to marry? Can you challenge the Will that gives everything to a predatory spouse in some other way? I mentioned in Hunt and Worrod there was an alternative argument that the marriage was unconscionable. The Court didn't actually decide on that so I think there's ample room to have that argument later on. But you can try undue influence. It's also the case with a common law marriage. Like I said earlier on, we were talking about marriages that are defined with a marriage certificate, common law marriages aren't as easy to spot sometimes where that's the case, or it's the case of the caregiver, who claims to be a spouse. But if the marriage is deemed to be valid or the relationship qualifies, I guess as the threshold common law marriage, it doesn't revoke the Will like I said and if you've got an already vulnerable adult who makes a new Will, the child always have recourse to Wills Variation Act if they didn't receive just and adequate gift, but there's also the ability, like I said, to claim undue influence. The burden of proving that is on the person challenging the Will and they have to show that on a balance of probabilities, which means more likely than not. They have to show that the Will of the Will maker was overborne by the predatory spouse, such that the action of making their Will wasn't voluntary. We've said time and time again that everyone's deemed capable. There is some help through the Wills Variation Act revisions that were done a few years ago. So if it's a relationship that kind of has dependence or dominance in the situation, like a caregiver, who's got a lot of ability to isolate the individual. So if you've raised some circumstances that are suspicious to show that it's a relationship of dependence, and that gives rise to these circumstances, the burden shifts to the predator. So then the predator has to prove that the Will maker has capacity. This has kind of helped to make things a little bit easier in undoing transactions where there's a situation, potential predatory relationships.
I'll throw the next question over to Raphael. Could the alter ego trust be an effective tool to protect assets if the assets are held in the alter ego trust prior to the predatory marriage?
Raphael: Thanks, Raman. The answer is two ways. What the law does and what practical reality means. So an alter ego trust is protected in terms of potential family law issues, if you're not in a predatory marriage and the marriage is found to be valid, and it doesn't work or your ending it. But the reality is if I have an alter ego trust and I'm in that relationship I'm vulnerable in some way, I will pull the assets out and I'll probably give it away. It's not the case study I walked. There's good planning in place. It's not the planning that's the issue. It is a relationship and the person's vulnerability to the other person that's the issue. So the structure might be fine. Alter ego trusts have really great rules and can serve a function here. But the reality is if you're part of a predatory relationship, and you have control over the alter ego trust, you'll pull it out as trustee, give it to yourself because entitled to all the income and as much as the capital you want, and then turn it over to somebody else. So, again, the planning here isn't what you have in place. It's good to have those structures. It is better to address the relationship issue and the vulnerability issue.
Raman: Excellent. Another question here. When the PGT gets involved, what is the likelihood of them managing the funds and removing the assets from the advisor? I'll take this one. I would say, not much. So typically when it's family member against family member, the Public Guardian might take on that role of managing the funds more readily, but they don't want to. They don't want to be managing people's funds unless they have to. Unless there's a better option. When it's family members, there's probably higher likelihood that they will get involved. When there's a trusted advisor and a third party, like a trust officer, very unlikely that they'll remove the assets from that advisor, I think, if that was the pre-ordained relationship. Raphael I think wants to say something.
Raphael: I was going to add a couple, at least from my experience. Two things have happened on files. Sometimes even if the PGT steps in, they don't manager your assets. They will act as the attorney. So the assets stay where they are. I've have had files where that's happened. I have had files where I want the PGT to take the assets and they won't. So Raman's experience, my experience, at least on these files, have been narrow when the PGT actually wants to actively take assets and manage them. I've had actually many files where I want them to. That's the solution the FI would like because it takes the problem away from the advisor and they won't do it.
Raman: Someone has a follow up question, Raphael, on the alter ego trust. What if you have an independent trustee in place?
Raphael: So now, again, the structure itself works. But remember you have an independent trustee. Maybe they have discretion to distribute or not but the person's entitled to all the income and as much as the capital. If they are capable, the case that I have here, capacity was the challenge. We didn't know they were incapable or not. Can they essentially bring a claim to force a distribution to them seeing as they are sole beneficiary while they are alive and … … ? It's the structure itself works. I think the structure itself will help. Where you really want to address these things is the predatory relationship and how you address that piece. I'm not saying don't do alter ego trust. That's what I do for a living. Please come to me. I'll do them. I think they will help. But my solution is in these cases it's not the structure that matters. It is removing and addressing the relationship that matters.
Raman: So someone has jokingly asked, thanks, Troy, does marrying someone several years younger qualify as insanity? No. We only have to look at Robert Kraft and I'm sure he's got a lot of good advisors him. So as I said in the beginning, those May / December relationships don't actually qualify, or it's not evidence that would support that it was a predatory marriage. Especially in this day and age.
Another question. What is the reasonable amount of time to delay transactions if it is in the investment contract and is one liable for arbitrarily delaying transactions? I'll let you handle that, Raph.
Raphael: Yeah, so the National Instrument 31-103 gives you 30 day reporting obligations. It doesn't tell you how long you can hold it. It actually isn't helpful. We started putting regs in place but those regs don't speak to your reality of advisors. So it says put a temporary hold in place, report every 30 days. It doesn't tell you how long you have. The advice I give advisors and to institutions is this: as long as you set the conditions under which you will remove the temporary hold. Client, we have reasonable basis that you are suffering diminished capacity or lack of a capacity. So submit to a capacity assessment or provide us evidence that you're fine to manage your assets and we'll let you. The client says I'm not submitting. As long as every 30 days you are reminding them that these are the conditions on which we'll remove the hold, and you're not doing it and you continue to engage other support systems, so trusted contact person, the PGT if you have to, then you can put the asset on hold. The challenge is we've never had a case where it's been on hold indefinitely. Most instances, this is the big piece that comes up in most scenarios, is that client still has needs. Like financial needs. They are lifestyle needs exist they have to address. So as an advisor, as institution you have to then make a risk based judgment on permitting certain transactions to happen, because you have to balance client experience with the protection of vulnerability. That's really why you're doing this scenario, and the longer you go you have to kind of set out what risk you're willing to live with, while you resolve this issue. But there isn't a good answer. You can place a hold for a year or something like that. There's no timeline.
Raman: Thanks, Raphael. Noting the time I'll take one last question. It's an easy one. What is the level of evidence needed to rebut the presumption of capacity to marry? Like I said earlier, the onus, the burden of doing so is on the person who wants to undo the marriage and it's on a balance of probabilities. So more than likely than not. Some people define that as 51% but I think certain factors would probably be weighed heavier than others. Age, not so much. Health and vulnerability, definitely priority. Prior habits I think that are suddenly changing. In the case of the first case I talked about, hygiene and just her mannerisms had changed so you just have to show more likely than not that they didn't have the capacity to enter into that marriage contract at the time when it was done.
So that's that. I encourage you please to reach out to myself and Raphael if you have any more questions. We really appreciate you spending your lunch hour with us. We're going to be sending a copy of this presentation, as well as a short survey, to you by email and we'd sincerely appreciate if you could fill that out to help us in creating new content for you in the future. With that I wish you a good afternoon and thank you very much.
Raphael: Thanks, everyone.