Hey Adam:

I am somewhat in agreement on the point that there is a rationale for Fox beyond the public policy concern.  I do think the judges as a whole are not entirely in agreement on what that rationale is, however.  Students and commentators spend a lot of time on Galligan’s opinion, but a close look seems to indicate that there is a great deal of disagreement on the rationale.  At least one, and perhaps both, justices are uncomfortable with Galligan’s  approach.

I also agree that public policy was not necessary in Fox.  That has long been my objection to it.

I, too, have puzzled about why counsel were unprepared to argue the question of whether public policy prevents discrimination in “private, family trusts.”  Perhaps I’m giving them all too much credit, but I half wonder that it’s because they might have been surprised by the question.  Having been told in Leonard that the decision does not apply to private trusts, they perhaps thought that question was settled, or at least not up for discussion in the context of the facts in Fox.  Perhaps like you and I, counsel in Fox were well aware that courts have long countenanced religious discrimination in trusts even in Ontario and so were not prepared with any comprehensive argument.  The fact that no one was prepared to argue the question should have been a sign to the court that it’s off-hand treatment of the issue was ill-advised.  That, for me, raises deep concerns about the motives and wisdom of just charging ahead.  It’s why I say that the public policy portion of Galligan’s opinion is just sloppy.

I am also hostile to Murley’s Estate.  That really does seem to be an ill-bred opinion.

The combination of Galligan J. in Fox and the single sentence in Murley provide ammunition to those, like me --- and I agree I  may be a small and eccentric minority --- who are hostile to the sweeping use of public policy  to justify what appear to be personal preferences of the judges involved.

I do agree with your view on McCorkill, however.  It really does raise some interesting points.

Best

Matt

---------------------------------------

Matthew P. Harrington

Professeur titulaire

Faculté de droit

Université de Montréal

3101 chemin de la Tour

Montréal, Québec H3T 1J7

514.343.6105

www.droit.umontreal.ca

---------------------------------------

From: Adam Parachin<mailto:aparachi@uwo.ca>

Sent: ‎Tuesday‎, ‎August‎ ‎05‎, ‎2014 ‎12‎:‎41‎ ‎PM

To: obligations@uwo.ca<mailto:obligations@uwo.ca>

I agree with Lionel that Fox Estate has a compelling rationale completely unrelated to the doctrine of public policy.  Of course, this is one of the very reasons why the Court's comments on the public policy issue are so notable: it was completely unnecessary to even go there.  And having gone there, Galligan J. does not proceed cautiously but rather boldly reasons (para 18) from the premise that testators cannot lawfully discriminate on religious grounds to the conclusion that neither can trustees.  The numerous authorities upholding religiously conditioned testamentary dispositions were effectively ignored.  Given the sensitivities surrounding public policy as a basis for striking testamentary (and other) dispositions, it is surprising that Justice Galligan saw no need to offer much in the way of explanation here.

What is even more surprising is the revelation in para 18 that counsel would not argue, despite being expressly invited by the Court, that religious conditions in private family trusts are valid.  Given that it is not obvious, at least not to me, that testators are prohibited from drawing religious and other like distinctions, it would be interesting to discover why counsel for the trustee conceded this point.  Whatever the explanation, this meant that Galligan J's dogmatic comment on the limits of testamentary freedom resulted from the absence of argument on point rather than a fulsome consideration of the relevant authorities (of which there are many).

Murley Estate v Murley [1995] N.J. No. 177 is also an interesting example of a thinly reasoned judgment in which a religiously conditioned testamentary disposition was struck on public policy grounds.  The Court dealt with the public policy issue in but a single sentence with no explanation whatsoever.

McCorkill at least attempts to provide a plausible account of why the bequest to the National Alliance was struck on public policy grounds.  It is just that the explanation expands the focus, which has traditionally been on the character of the bequest, to now also include some assessment of the character of the beneficiary.  True, the case is unique.  However, if we accept that the testator's estate would have had no recourse had the National Alliance used the bequest for some purpose unrelated to its discriminatory ends, then the case starts to look very similar to a bequest subject to a non-binding precatory condition that the beneficiary use the bequest in some objectionable way.  Perhaps others are aware of cases in which a testator's mere non-binding wishes have been held sufficient to vitiate a bequest but I am not.

On 08/02/14, "Lionel Smith, Prof." <lionel.smith@mcgill.ca> wrote:

In my view Fox v Fox Estate (1996) <http://canlii.ca/t/6j90> was correctly

decided, and the Court in that case had no reason to refer to Leonard

(1990) <http://canlii.ca/t/g186s> or to public policy in the strict sense.

In Fox, a fiduciary power holder used the fiduciary power to indulge her

personal prejudices. That is not allowed in any jurisdiction, not because

of public policy, but because of the nature of fiduciary powers and their

correct interpretation. Fox inscribes itself in a long line of cases that

have held that a dispositive discretion held in a fiduciary capacity must

be exercised, or not, in what the fiduciary subjectively believes to be

the best fulfilment of the purpose for which the power was granted:

Vatcher v Paull [1915] AC 372, 378 (PC); Klug v Klug [1918] 2 Ch 67;

McPhail v Doulton [1971] AC 424 at 449, 457; Re Hay¹s Settlement Trusts

[1982] 1 WLR 202, 209 (Ch D); Turner v Turner [1984] Ch 100, 109-110 (Ch

D); Re Beatty [1990] 1 WLR 1503, 1506 (Ch D); Hayim v Citibank NA [1987]

AC 730, 746 (PC).

When the fiduciary power holder uses the power for extraneous and

therefore improper reasons, such as the disapproval of a marriage as in

Fox and also Klug, he or she acts unlawfully and the exercise of the power

is voidable (or, as in Klug, the refusal to exercise the power leads to

the disqualification of the fiduciary, allowing the other, properly

acting, fiduciary to act alone).

McCorkill did not involve a fiduciary power and is quite a different case.

The intended donee and the intended purpose of the gift were indeed ugly

and in this sense, I wish the decision long life and wide influence in

similar situations that may arise in the future.

Lionel

On 02-08-14, 10:01 , "Harrington Matthew P."

<matthew.p.harrington@umontreal.ca> wrote:

How¹s this:

I read Leonard as a rather narrow case, applicable to its facts.  The

majority clearly says it is not making any decision as to discrimination

in charitable trusts in general.  Other courts that have considered

Leonard have clearly noted this, with the BC courts saying Leonard is

³limited to its facts.²

As for Fox¹s Estate, I contend that it is simply wrong.  It cites Leonard

as outlawing all discrimination in trusts, both public and private.  It

completely ignores Leonard¹s refusal to go beyond the facts of the

Leonard trust and then misconstrues Leonard¹s holding with respect to

private trusts.  I am quite hostile to Fox, and I think more people ought

to be.  Read it carefully as an analysis of Leonard, one might give it an

³F² if handed in by a student.  Beyond mis-citing Leonard, the judges in

Fox give no reasons for their decision --- no explanation as to how the

expansion from Leonard¹s plain language that it applies to charitable

trusts winds up affecting family trusts.  In short, Fox is a sloppy piece

of work, even if one thinks it is the right result.

If you look at the cases outside Ontario, almost no court follows Leonard

or Fox.  (If you have one, please do let me know since I`m working on

this problem.)  Courts in NS, BC and Mann have ignored Fox completely and

limited Leonard to its facts.  (NFLD has an outlier case but it's thin.)

Leonard, Fox and McCorkill raise the public policy question.  Fox gives

the public policy argument a bad name since its lack of reasoning leaves

it open to the challenge that it is just a case of judges substituting

their preferences for precedent.

I wonder that McCorkill may not be considered similar to Leonard, i.e.,

limited to its facts:  It¹s an egregious example of discrimination, but

is there really enough there in the reasoning to suggest anything about

how gifts to foreign corporations or individuals ought to be decided?

After all, despite the way people talk about Leonard, trusts for

religious groups that discriminate against non-members are still valid,

as are trusts that discriminate on the basis of race (even in Ontario).

This is true no matter how many casebooks repeat the assertion that

³discriminatory trusts are invalid.²

Can¹t McCorkill be seen as simply a rather ugly one-off?

---------------------------------------

Matthew P. Harrington

Professeur titulaire

Faculté de droit

Université de Montréal

3101 chemin de la Tour

Montréal, Québec H3T 1J7

514.343.6105

www.droit.umontreal.ca

---------------------------------------

From: Lionel Smith, Prof.<mailto:lionel.smith@mcgill.ca>

Sent: Friday, August 01, 2014 5:44 PM

To: Adam Parachin<mailto:aparachi@uwo.ca>

Cc: Stephen Pitel<mailto:spitel@uwo.ca>,

obligations@uwo.ca<mailto:obligations@uwo.ca>

Hi Adam and Stephen,

The debt question is a good test. I suppose a hard-working judge who

liked my analysis might allow a claim in unjust enrichment by individuals

(members, shareholders) who would be deprived by the non-recognition of

the corporation. After all, if you say it does not exist for the purposes

of NB law, you have to analyse the case as if it did not exist, i.e. only

looking at the natural people involved, so the borrower, having secured

the non-recognition of the corporation, could not turn around and say "I

did not borrow from the individuals, I borrowed from the corporation".

On the other hand, if the loan was linked to the criminally unlawful

(under Canadian law) activities of the NA, I would not expect the the

debt claim to succeed, any more than I would expect a debt claim by a

foreign organized-crime loan shark to succeed in a New Brunswick court.

Alternatively, it may be correct to say that the case is more about

limits on testamentary freedom, leaving the debt case untouched. I agree

with Adam that this is how it is reasoned.

But either way I think this case goes beyond 'unpalatable' in relation to

the beneficiary's activities/objects. I would use the word 'unlawful'.

Criminally unlawful, in Canada, with clear private law effects inasmuch

as also in violation of the human rights acts. Surely no one is surprised

by the intervention of public policy reasoning in the face of criminal

activity? That is the easiest case for when the normal rules have to

yield.

I tend to agree that both the reasoning in the case, and my spin, lead to

a situation where a gift to a racist individual would be valid. So far as

I understand, the recognition of a non-forum natural person as a person

in forum law does not pass through private international law.

Right now, that does not bother me, that is, I find McCorkill appealing

even though I accept that a gift to a racist individual could not be

stopped by its reasoning. I'm not sure I see a problem with this. If Mr.

McCorkill leaves his money outright to Mr. Racist, the head of the

organization, then of course Mr. Racist can do whatever he wants with the

money. McCorkill, I suspect, did not want that. He wanted the money to be

assigned to particular activities. That is the whole problem, because

those activities are criminally unlawful in the forum. As in many fields,

you can't have it both ways. If he gave it to Mr. Racist subject to an

express or secret trust to employ it in certain ways, no one would

disagree that that those trusts or conditions would be subject to a

public policy analysis. So, I don't see the problem with applying the

same filter just because a corporation is involved in order to ensure the

affectation of the property to a particular purpose.

I teach corporate law and I think that in most situations, corporate

personality should be taken very seriously. The reason so much economic

analysis of corporate law goes off the rails is that, being economic

analysis, it tends to ignore the corporation and look only at the natural

people, which may be fine for economic analysis but is not right for

legal analysis. But when we are in the realm of criminal illegality, we

are not constrained by the same principles that otherwise apply.

L.

From: Adam Parachin <aparachi@uwo.ca<mailto:aparachi@uwo.ca>>

Date: Friday, 1 August 2014 at 14:09

To: ODG <obligations@uwo.ca<mailto:obligations@uwo.ca>>

Subject: Re: ODG: Unconditional Bequest Struck on the Basis of Public

Policy

I share Stephen's suspicion that an NB court would indeed be likely to

recognize the National Alliance as a foreign entity possessing the

capacity to enforce a debt obligation, or other like proceeding, in an NB

court.  This complicates the suggestion that McCorkill is ultimately

concerned not with the public policy limits of testamentary freedom but

rather with the application of public policy in private international law.

One might say in reply that a bequest is readily distinguishable from a

debt proceeding.  As a donative transfer, the bequest does more than any

other kind of transaction or proceeding to economically enable the

nefarious pursuits of the National Alliance.  But the difference here is

merely one of degree.  It is not a difference in kind.  It is therefore

not obvious why the repugnant activities of the National Alliance would

be a controlling consideration in one context but not the other, unless,

of course, what is ultimately driving the analysis in McCorkill is a

concern over policing the limits of testamentary freedom (which is how

McCorkill was expressly reasoned).  This takes us back to the issues I

previously raised about McCorkill having potentially expanded the

doctrine of public policy to now include a judicial discretion to strike

unconditional bequests to unpalatable beneficiaries.

What if the beneficiary in McCorkill was not a foreign corporation but

rather a foreign individual?  Would principles of private international

law still allow the court to disregard the individual as a legal person

with capacity to receive an NB bequest due to his or her racist

tendencies?  If so, then the court's insistence in McCorkill that

bequests to individuals are categorically distinct from bequests to

corporations comes under attack.  If not, then we are left with a

doctrine allowing bequests to racist individuals but not to racist

corporations.  If this is the law, then foreign racists are well-advised

to not incorporate and/or testators with racist sympathies are

well-advised to leave their estates to the directing minds of the

National Alliance rather than to the National Alliance itself.  There is

something not particularly satisfying about either outcome.

How will future courts deal with McCorkill?  The cases in this area of

law reveal a certain willingness of late on the part of courts to give

large and liberal interpretations to precedents limiting testamentary

freedom on the basis of public policy.  In the not too distant past, the

Ontario Court of Appeal in Canada Trust Co. v. Ontario Human Rights

Commission [1990] O.J. No. 615 struck the shockingly bigoted provisions

of a charitable trust on the basis of public policy, expressly noting in

paragraph 100 that that case "does not affect private, family trusts."  A

few years later, the very same court in Fox v. Fox Estate [1996] O.J. No.

375 cited Canada Trust Co. (paragraph 16) in the context of - of all

things - a discriminatory exercise of a power of appointment under a

private family trust.

On 08/01/14, Stephen Pitel <spitel@uwo.ca<mailto:spitel@uwo.ca>> wrote:

Three questions:

Question #1: if the NA loaned someone in NB some money and then was not

repaid, and the NA started proceedings in NB to recover the money, would

the NB court hold that the plaintiff is not an entity with the capacity

to sue?

Normally the capacity to sue for fictional legal entities is governed by

the law of their "home" jurisdiction.  So entities that would not be seen

to have the capacity to sue in the forum nonetheless can so sue if they

have that capacity under that law.  I assume the NA does have such

capacity under the law of its "home" jurisdiction.

Would the NB court say that as a matter of NB's public policy, the NA is

so awful that its very existence and capacity to sue should not be

recognized, so that it cannot bring a claim to recover the money it

loaned?  It would surprise me if it did.  And so I am equally surprised

that it would say it is not a valid entity for purposes of receiving a

gift.

Question #2: if the gift was not to the NA but instead to an individual,

resident in Virginia, who believed and did all the same things the NA

did, would the NB court say that the individual was a non-entity and so

not able to receive the gift?

Question #3: why is this interesting and controversial decision not in

CanLII or QuickLaw?  Is it on a public website at all?  I found it, with

some effort, through the Canadian Lawyer magazine.

My first two questions point in the direction that this decision might

not be adequately explained in capacity or entity terms.  Beyond that, I

worry that this decision is counter to comity.  Conduct that clearly does

not fly in NB does fly, legally, in other parts of the world, and so

there seems the possibility of over-reaching in the court's decision to

invalidate this gift based on conduct that will happen elsewhere.  The

decision seems quite a broad deployment of public policy.

Stephen

On 31/07/2014 6:16 PM, Lionel Smith, Prof. wrote:

Thanks Adam.

It is not quite a question of capacity in the strict sense‹in most

jurisdictions today, just as in some contexts since long ago, the stated

objects of a corporation do not limit its capacity, but acting outside

the objects is still unlawful and can be sanctioned in various ways.

A charitable corporation does not hold its property in trust, but it is

required to operate according to its constitution which, in the case of

charitable corporations, will include stated objects (because without

them it would be impossible to say that the entity existed for solely

charitable purposes).

Of course, many modern corporate regimes (outside of charity) permit

corporations that lack stated objects. So a more difficult question is

whether the result in McCorkill could follow if the National Alliance was

unrestricted by its constitution, but still carried on its hateful

activities.

I think it is germane that the recognition of any legal construct

originating in another jurisdiction‹a corporation, a trust, a marriage or

other contract‹is always pursuant to principles of private international

law. Most constructs are recognized as a matter of routine comity, but

even though we might not notice this, recognition is always subject to

the limits of public order.

If an entity is devoted to the carrying on of repulsive activities, that

are contrary to the fundamental values of the forum, then the forum court

should simply not recognize it as a matter of local law. This would be

possible even if that entity was free to carry on other activities, and

indeed even if, according to the law of the place of origin of the

entity, its activities are permissible.

Perhaps this is the best reading of the judgment: the gift failed because

it was made to an entity that, according to the public policy (in the

private international law sense) of New Brunswick law, was a non-entity.

Lionel

From: Adam Parachin <aparachi@uwo.ca>

Date: Thursday, July 31, 2014 at 17:12

To: Lionel Smith <lionel.smith@mcgill.ca>, ODG <obligations@uwo.ca>

Cc: "Angela Campbell, Prof." <angela.campbell@mcgill.ca>

Subject: Re: ODG: Unconditional Bequest Struck on the Basis of Public

Policy

Thank you Lionel.  There is an indeed an appeal to that reasoning, though

it rests on an assumption that corporations hold property for the stated

purposes of the corporation.  That needs to be reconciled with the

principle - common to many jurisdictions - that corporations have the

capacity of natural persons.  I confess that I have not looked at the

state of Virginia corporate law on point.  Assuming that principle

applies in Virginia, which was not considered in McCorkill, the idea

developed by the Court that a bequest to a corporation is readily

distinguishable from a bequest to an individual becomes more difficult to

sustain.

Even in the charitable context, the most apt analogy is not to a

contribution to a charitable trust, which very clearly becomes subject to

the purposes of the trust, but rather a contribution to a charitable

corporation.  I am not aware of any authority having definitively

established that a charitable corporation necessarily holds all donations

in trust for its purposes as they existed at the time of the donation.

On 07/31/14, "Lionel Smith, Prof." <lionel.smith@mcgill.ca> wrote:

Thanks for this Adam. Very interesting indeed.

Surely one could argue that it is not like an unrestricted bequest to an

individual, since presumably the foreign corporation has a constitution

that requires it to pursue certain goals and/or activities. This point is

made by the judge at [73]ff. In the same way, an 'unrestricted' bequest

to a charity that was organized in the form of a trust would not be an

unrestricted bequest, but effectively an accretion to the existing trust

and thus an adoption by the testator of the terms of that charitable

trust. (Of course, a corporation can change its constitution, but then

again any trust can in principle be varied (in most jurisdictions)).

So this testator wanted to make a gift to a corporation but the

corporation would not, I presume, be recognized as a legal person under

Canadian law, because its constitution (or activities, or both) were

unlawful under our laws. In that perspective the decision is not so

surprising.

Lionel

From: Adam Parachin <aparachi@uwo.ca>

Date: Thursday, 31 July 2014 at 16:10

To: ODG <obligations@uwo.ca>

Subject: ODG: Unconditional Bequest Struck on the Basis of Public Policy

Dear All:

A recent decision of the New Brunswick Court of Queen's Bench (McCorkill

v Streed 2014 NBQB 148) is attracting some attention here in Canada

amongst estates lawyers.  The Court took the unusual step of striking an

unconditional residual bequest on the basis of public policy.

The beneficiary of the bequest was the National Alliance, a Virginia

corporation with a white supremacist agenda.  Justice Grant assessed the

formal validity of the bequest by looking to the purposes to which the

National Alliance would apply the bequest.  Finding that the National

Alliance engages, albeit in the U.S., in what qualifies as unlawful hate

speech under Canadian criminal law, Justice Grant concluded that the

bequest was against public policy and thus void.

Justice Grant essentially reasoned that, since the racist purposes to

which the National Alliance would presumably apply the bequest could be

inferred, and were presumably in the contemplation of the testator, the

validity of the bequest could (and should) be assessed from the vantage

that the unconditional bequest was in reality an express trust for those

racist purposes.

I confess to this being my first experience with this reasoning.  The

case equates an unrestricted bequest to a known racist with an overtly

racist purpose trust.  It contemplates a judicial discretion to

re-characterize facially valid testamentary dispositions into problematic

legal forms never intended by testators.  It invites future courts to

evaluate not only the express conditions attaching to bequests but also

the ways in which beneficiaries are anticipated by testators to use

unconditional bequests, or more generally, the deservedness of

beneficiaries.

I would be much obliged if anyone can point me in the direction of

similar cases or relevant scholarly commentary.

Regards,

Adam

--

Adam Parachin

Associate Professor

Faculty of Law

University of Western Ontario

(519) 661-2111 Ext. 81445

--

Adam Parachin

Associate Professor

Faculty of Law

University of Western Ontario

(519) 661-2111 Ext. 81445

--

Professor Stephen G.A. Pitel

Faculty of Law, Western University

(519) 661-2111 ext 88433

--

[http://communications.uwo.ca/brandnew/images/esig/esig-law.gif]

Adam Parachin

Associate Professor

Faculty of Law

University of Western Ontario

(519) 661-2111 Ext. 81445

--

[http://communications.uwo.ca/brandnew/images/esig/esig-law.gif]

Adam Parachin

Associate Professor

Faculty of Law

University of Western Ontario

(519) 661-2111 Ext. 81445