The personal representative (ITA, s. 150(3)) carries the responsibility of addressing the tax consequence of a taxpayer’s death. But the ITA (Income Tax Act) does not merely create a role for the personal representatives; it also imposes personal liability on them for failing to discharge their duty. This is an important consideration for a personal representative and therefore requires close examination.According to provincial common law and statute, a creditor, including a creditor such as the Canada Revenue Agency (CRA), can pursue its claim against a beneficiary who has received funds from an estate, since the right of a creditor to be paid in full takes priority over the right of a beneficiary to receive a gift. Just like other creditors, the CRA is free to seek payment from beneficiaries to the extent that they have benefited from the estate in preference to creditors. Also, under Ontario Provincial law, a personal representative can be held personally liable for creditors’ claims if he or she has distributed property to beneficiaries when he or she knew or ought to have known of creditors’ claims. There is a provision (Trustee Act, s. 53, Advertising for Creditors) for the personal representative to follow if he or she wishes to avoid such a personal liability and a further provision for establishing priorities among creditors.

A pertinent question often asked in respect of taxation at death is: Would there be any estate taxes or succession duties? Strictly speaking, the answer is “no”. In Canada, there is generally no tax on wealth or the value of an inheritance; Canada instead taxes income. However, this is not always true for property held in other countries. For example, in the U.S., an estate tax is levied on the value of the capital of an estate. Therefore, Canadians owning assets with a U.S. situs (such as real estate and securities traded on U.S. exchanges) could be subject to U.S. estate taxes on the value of those assets. Despite the fact that Canada only taxes income, certain specific rules have the effect of casting the “income net” more widely in the year of death. However, there are several special concessionary rules applicable only to taxation at death.Creation of Two TaxpayersOn the death of a person, income earned or deemed to be earned between the end of the last taxation year and his or her death is included in his or her T1 tax return, due in the year of death. As it deals with the income earned between January 1 and the date of death, it is known as a “terminal” return. Furthermore, the day after the taxpayer’s death is the first day in the fiscal period of a new taxpayer, the estate of the

Disposition by the CourtUnder s. 77(3), there are three possible dispositions of the matter by the judge:1) A verdict without a hearing;2) A direction to the parties to provide other evidence or to attend a hearing; or3) An order that the application or any issue proceed to trial along with directions therefor.It is essential that at least one of the s. 72 statements contain a paragraph stating the opinion that it is necessary that decisions are made by an authorized person on behalf of the incapable person.  The prescribed statement is given in the form in such a manner that the maker of the statement can either include it or cross it out. If a non-assessor expresses the view that a person must be appointed to make decisions for the incapable person, but the assessor does not share the same opinion, the court would perhaps refuse to grant the order.

What Documents are Involved?As in the standard procedure, the Notice of Application and the Affidavit of the Applicant (including exhibits) are to be prepared so as to proceed further. Whether or not the medical affidavits required in the standard procedure are also necessary in the summary procedure is not stated clearly. Considering that one statement is required from a qualified assessor as to the mental capability of the person, and that the appointment of a guardian is necessary, it seems then medical affidavits would be unnecessary. Anyway, the courts, in some instances, require at least one medical affidavit by a physician. Such written statements pursuant to s. 72 of the SDA, completed by the assessor or a person who is not an assessor, include a requirement that a declaration be made that the person is incapable of managing property. The basis of the declaration has to be set out in detail in that written statement.Applicant Involves Either Two Assessors or One Assessor and One Non-assessor

Foreclosure: When and Why?It is not uncommon to combine a claim for foreclosure with a claim for the amount due under the covenants contained in the mortgage. Thus, an action for foreclosure is for the recovery of the mortgaged property itself and is a means by which the mortgagor’s equity of redemption is ended, so that the mortgagee may realize on the security without later having to justify the sale price or to account for the sale proceeds.In Toronto, and quite a few other jurisdictions in Ontario, the foreclosure process takes place as a reference pursuant to Rules 54 and 55 of the Rules of Civil Procedure. Besides this, Rule 64 has specific application to foreclosures and sale actions. When a choice is made between power of sale or foreclosure, there are several issues to consider. Such considerations are:  whether the mortgagee is an institutional or private lender; whether there are any subsequent encumbrancers or execution creditors and whether they are private or institutional;

Notice of Sale and RequisitionsIf a purchase is made under power of sale, it is necessary to ensure that the vendor is authorized to conduct the sale and that the power of sale proceeding has been properly commenced. A requisition, in this respect, by purchaser’s legal counsel is expected to bring forth a statutory declaration attaching evidence of service of the notice of sale.  The usual practice is to attach to the statutory declaration evidence of service of the notice of sale by registered mail, including the registered mail receipts. The Court of Appeal ruled in CIBC Mortgage Corp. v. Chopra that service by registered mail to the address provided for in the mortgage would be quite adequate for the purpose.Typical Schedules to APSVendors of properties under power of sale more often than not include a schedule to the agreement of purchase and sale which significantly alters the usual terms of a sale/purchase transaction.

IntroductionCommon issues expected to arise and confront legal counsels in mortgage enforcement practice, whether from the mortgagor’s perspective or from the lender’s perspective are under discussion here. Divided into ten sections, each of which addresses a discrete point, the purpose is to assist counsels in identifying the relevant issues, the common problems, and the usual solutions.Entitlement to 3-Months InterestAccording to Section 17(1) of the Mortgages Act:“Despite any agreement to the contrary, where default has been made in the payment of any principal money secured by a mortgage of freehold or leasehold property, the mortgagor or person entitled to make such payment may at any time, upon payment of three months interest on the principal money so in arrear, pay the same, or the mortgagor or person entitled to make such payment may give the mortgagee at least three months notice, in writing, of the intention to make such payment at a time named in the notice, and in the event of making such payment on the day so named is entitled to make the same without any further payment of interest except to the date of payment.”

Damages and Vesting Orders in Lieu of Constructive TrustThe Ontario Superior Court of Justice in McLean v. Danicic et al. discussed an application by a common law wife for a declaration of a constructive trust over two properties owned by the respondent, who is the common law husband, because of unjust enrichment. The wife was awarded damages and vesting orders over the two properties so as to secure the debt, considering the respondents’ history of failing to comply with court orders and his strenuous efforts to defeat the applicant’s claim.The fighting couple, Traci McLean and Darko Danicic began a romantic relationship in the summer of 1998 and were living together by Christmas. Traci got an engagement ring from Darko and they were working intensely to renovate a property bought by Darko just before he met Traci.

Constructive Trusts Without Unjust EnrichmentIn a majority judgment in Soulos v. Korkontzilas, the Supreme Court of Canada noted that a constructive trust arose in the absence of a finding of unjust enrichment to the benefit of the appellant real estate broker. In 1984, Mr. Soulos selected a building where his banker was a tenant and asked Mr. Korkonztilas to enter into negotiations on his behalf.  The vendor rejected Mr. Soulos’ initial offer of $250,000 and instead, made and tendered a counter-offer of $275,000. Mr. Soulos rejected this offer, but “signed it back” with an offer of either $260,000 or $265,000. The vendor accepted the higher price of $265,000, which Mr. Korkonztilas did not convey to his client. The property was instead purchased for his wife under her maiden name where she later transferred it to her and her husband jointly. Mr. Korkontzilas, however, told Mr. Soulos to “forget about” the property as the vendor was no longer interested in selling and added that he would find him a better property. The matter came to light in 1987 when Mr. Soulos learned that Mr. Korkontzilas had purchased the property for himself . Thereafter, Mr. Soulos brought an action, alleging breach of fiduciary duty giving rise to a constructive trust.  As a further reason for his action, Mr. Soulos said that the property held a special value to him because his banker would be his tenant.  Since having one’s banker as a tenant was a source of prestige within the Greek community to which he belonged, Mr. Soulos wanted it desperately.

The Constructive TrustA constructive trust is formed by operation of law. It is considered an equitable remedy so as to prevent unjust enrichment, which is when the law imposes an obligation upon one party to hold specific property for another. The person so obligated becomes a constructive trustee towards the person to whom he owes performance of the obligation.  Although the application of the constructive trust has been treated as an equitable remedy to prevent unjust enrichment in Canada, recently, constructive trust has been applied as a remedy to wrongful acts in the absence of enrichment and corresponding deprivation on the basis of the good conscience doctrine. There are two situations described by the Supreme Court of Canada when a judge would decide whether good conscience requires the imposition of a constructive trust.  These two conditions are:Ill-gotten property obtained by a wrongful act of the defendant, notably breach of fiduciary obligation or breach of duty of loyalty; andSituations where the defendant has not acted wrongfully in obtaining the property, but would    be unjustly enriched to the plaintiff’s cost by keeping the property.