CASE LAW

Legislative Framework
Types of Creditor Claims
Stupid Lawsuits
Employee Retirement Income Security Act (USA)

Society is becoming ever more increasingly litigious. This has made for developing a strategy to protect your estate ~ and if you are on the right side of the tax and creditor paying line ~ now and more importantly than ever. Identifying ways to arrange your affairs to avoid claims that might be made against you during your lifetime and against your estate at death will enhance the overall value of your estate and preserve the integrity of your estate plan, ensuring your assets are passed to those you wish to benefit.

The Legislative Framework

When considering how to preserve your estate and asset base strategies in some of the provinces in Canada, three statutes must be addressed.

The first is the federal Bankruptcy and Insolvency Act (the "BIA"). Under the BIA, creditors can challenge transfers of assets known as "settlements" which are made within one year before the earlier of the filing or making of an Assignment in Bankruptcy, a Notice of Intention, a Proposal or a Petition for which a Receiving Order is made. Such settlements are void as against the trustee in bankruptcy. Settlements made more than one year but within five years from the date of bankruptcy are void if the bankrupt required the property included in the settlement for the payment of her debts at the time the settlement was made. A settlement includes the transfer of a beneficial interest in property to a trust. If a settlement is declared void as against the trustee, the settled property goes back to the bankrupt’s estate and falls into the possession of the trustee in bankruptcy for dispersing to your creditors.

The Assignments and Preferences Act (the "APA") has strict provisions, but applies in limited circumstances. Specifically, the APA requires that a person be insolvent before it applies. The APA does not apply unless a transfer intended to protect assets from creditors is made at a time when an individual cannot pay her debts as they become due or knows that she is about to become insolvent. Insolvency for purposes of the APA is a question of fact. If the APA does apply, a fairly strict determination of what is "fair and reasonable" consideration for a transfer and a presumed intent to defeat creditors can follow.

Broader still is the Statute of Elizabeth (the "Statute"). This statute was enacted in 1570 in England, but is still in force in Nova Scotia. The significant difference between it and the APA is that it does not require the person making the transfer of property be insolvent or in anticipation of insolvency at that time. If the Statute applies, the transaction is void.

In order for the Statute to apply, the conveyance must be without consideration, have the intent to delay or defeat a creditor and have the effect of delaying or defeating a creditor’s claim. However, if a transferor had no debt at the time of the transfer (or had a debt that could be repaid from other assets that were not transferred), it may be difficult for a subsequent creditor to prove intent absent an express intent to defeat creditors. The burden of proof rests with the creditor.

Types of Creditor Claims

Anticipating the full extent of claims that might be advanced against an individual in Canada during his or her lifetime or upon death is becoming increasingly difficult. In a summary way, some of the claims that a person might face could include:

• Normal business debts, including those secured by personal guarantees.
• Damages for personal injuries and claims arising from motor vehicle accidents which exceed insurance policy limits.
• Personal liability imposed on directors of corporations by various federal and provincial statutes in connection with employee source deductions, environmental claims and other matters.
• The costs of nursing home care.
• Claims by a spouse for a division of matrimonial assets under the Matrimonial Property Act arising on marriage breakdown or death.
• Claims by a spouse and/or children under the Testators’ Family Maintenance Act for failure to make "adequate provision" for them in a will.

• Corporate Veil Piecing/ Business Disasters
• frivolous ICBC Claims
• Divorce
• Fraud, Identity Theft
• Inheritance/Real Estate Scandals

Your input and feedback is always greatly appreciated!

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Stupid Lawsuits

The cases are good for cocktail parties and illustrate some out of law suits in the United States.

A Canadian man sues a New York coffee shop after suffering what he calls “damage to his manhood”. His penis somehow got pinched between the toilet seat and bowl while he was reaching forward for toilet paper. He is asking for $1 million to compensate for his "dire and permanent" injuries. His wife is also suing for $500,000, claiming her husband cannot perform his marital duties.

An inmate in Tennessee, Gary Bradford Cone, sued the state because they have taken away his "right" to possess pornography (A new state law does not allow it.) Cone is currently on Death Row.

Another Death Row inmate sued the author of a book that described the murders he had committed. The convicted killer asked for $60 million in damages, claiming that the book would make it difficult for him to find a job. (The case was eventually thrown out.)

A man riding his bike home from work at night with no lights, only reflectors, was hit by a Jeep after the driver ran a stop sign. The bicyclist sued the bike manufacturer because he was not warned that reflectors might not be enough to prevent an accident. The man was awarded $6 million.

A New York small-business owner is suing Air France after crew members broke down the bathroom door and pulled him out in front of other passengers, fully exposing him. A smoke alarm had gone off on the plane, and the crew members thought he was smoking. He is suing for $12 million.

A young woman sued a nightclub after she fell out of a bathroom window, knocking out two of her front teeth. She won $12,000 plus dental expenses. (She fell from the window as she was attempting to sneak into the club to avoid the $3.50 cover charge.)

A Philadelphia restaurant was sued after Amber Carson of Lancaster, Pennsylvania, slipped and broke her coccyx on a beverage that had been spilled on the floor. She was awarded $113,500. (Not bad, considering she had thrown the drink at her boyfriend during an argument 30 seconds earlier.)

An inmate in a Virginia penitentiary has filed a lawsuit against himself, claiming that he violated his own civil rights by getting arrested. He is suing for $5 million and is asking the state to pay, since he can't
have an income in prison.

A man is suing a strip club for $200,000. He claims that one of the strippers caused him "emotional distress, mental anguish, and indignity" when she bashed her breasts against his head. Carson also claimed to have been "bruised, confused, lacerated and made sore." The stripper's breasts are rumored to weigh up to 40 pounds each.

A 27-year-old man was killed while rocking a vending machine that tipped over on him. The man was attempting to steal a drink out of the machine. Relatives in New York are suing for $400,000 in damages.

A man who had purchased a BMW and found that some of the car had been repainted to cover acid-rain damage sued and won $3 million in damages. The garage where the car was purchased appealed the ruling, and the damage award was cut in half, to $1.5 million.

A woman is suing a guide-dog school for $150,000 after a blind man allegedly stepped on her foot. A dog trained at the school was leading the man at the time.

A phone-sex operator in Florida won a settlement after filing for worker's
compensation, saying she had suffered repetitive-motion injuries in both hands. The repetitive motion was the result of using her hands to give herself as many as seven orgasms a day while talking to clients.

The Anheuser-Busch Company was sued by a man for emotional distress, because he had no luck with the ladies after drinking their product.

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