Sections 58 and 59 of WESA are clearly the most significant differences between the former legislations and the new legislation to be brought into effect on March 31, 2014. These two sections basically allow the court to cure defects in a will and to rectify an error in a valid will and allow it to carry out the will maker’s intentions.
The clear intent of the legislation is to allow the court to focus on what was the testator’s intent rather than on technical deficiencies to the execution of the will.
Much will be written about and litigated for many years concerning these two sections.
Todays blog will include a copy of section 58, that allows the Court to cure deficiencies, with a few comments.
Court order curing deficiencies
58 (I) In this section, “record” includes data that
(a) is recorded or stored electronically,
(b) can be read by a person, and
(c) is capable of reproduction in a visible form.
(2) On application, the court may make an order under subsection (3) if the court determines that a
record, document or writing or marking on a will or document represents
(a) the testamentary intentions of a deceased person,
(b) the intention of a deceased person to revoke, alter or revive a will or testamentary disposition of the deceased person, or
(c) the intention of a deceased person to revoke, alter or revive a testamentary disposition contained in a document other than a will.
(3) Even though the making, revocation, alteration or revival of a will does not comply with this Act,
the court may, as the circumstances require, order that a record or document or writing or marking on a
will or document be fully effective as though it had been made
(a) ■ as the will or part of the will of the deceased person,
(b) as a revocation, alteration or revival of a will of the deceased person, or
(c) as the testamentary intention of the deceased person.
(4) If an alteration to a will makes a word or provision illegible and the court is satisfied that the alteration was not made in accordance with this Act, the court may reinstate the original word or provision if there is evidence to establish what the original word or provision was.
The first paragraph defining “record”to enable electronic wills, which are undoubtedly noncompliant by definition, but can still be accepted for probate by the court under section 58 by virtue of the new definition of “record”.
The court has in effect changed the law after hundreds of years of being relatively “strict compliance”re-the execution of wills, to now about more of an “imperfect compliance”, that can be remedied by the court in its search for what was the true intention of the testator.
Garnett Estate v Garnett Estate 2013 BCSC 1731 is an interesting case where pre WESA, a lawyers questionnaire re will instructions was determined by the court to be a valid will and admitted into probate.
In this case the executrix brought an action to prove the will of the deceased in solemn form.
The deceased was in palliative care and it became apparent that she would not survive long enough to meet with a lawyer to complete a new will. She then had two witnesses sign the lawyers questionnaire left by the lawyer, which the deceased signed in the witnesses presence.
The will questionnaire did not have a residue clause, and in fact the two witnesses to the will were beneficiaries so they could not inherit under that document.
Nevertheless the court determined that the testamentary intention of the deceased was to make “a fixed and final expression as to the disposal of her property on death “( Das Estate 2012 NSSC 441 at para 18).
The court found that despite the unconventional form of the 2008 document and its original generation as a lawyers questionnaire which would ordinarily have led to the finalization of a more sophisticated document, the court found in the circumstances of the deceased demonstrated her obvious intention that the document constituted testamentary disposition.
Proof of a will in solemn form
[35] I quote from Gillis v. Ardies, 2009 BCSC 215 at paras. 19-20 per Parrett J.:
[19] In today’s process, proof in solemn form requires the executor (or the will’s proponents) to meet the evidentiary burden of proving the will before the court. In such a hearing the executor must satisfy the court by adducing evidence –
that the will in question was duly executed;
that the testator had the capacity to appreciate and understand its contents; and
that he had the ability to sign the will.
[20] In the present case, proving the will in solemn form is required to address the issue of whether or not portions of the writing are invalid, and to determine what, in fact, constitutes the will.
[36] I find the above a helpful summary of the steps I must take to deal with the application to prove Ms. Garnett’s will in solemn form.
The doctrine of ademption by conversion — a rule of the law of wills whereby a specific bequest “adeems”, or fails, if at the testator’s death the specified property is not found among his or her assets — either because the testator has parted with it, or because the property has “ceased to conform to the description of it in the will”, or because the property has been wholly or partially destroyed. (J. MacKenzie, ed., Feeney’s Canadian Law of Wills (4th ed., loose-leaf, 2000) at §15.2.)
The doctrine applies as a matter of law, irrespective of the testator’s intentions in the matter, although his or her intentions are clearly relevant to the anterior question of whether the gift in question is a “specific” legacy (and therefore subject to ademption), or a general one (not subject to ademption). The doctrine is also subject to the qualification that even if the gift in question is a specific legacy, it may be saved in some circumstances if the property has changed “in name or form only”, and still forms part of the testator’s property at the date of death.
Being a specific legacy, the gift will be adeemed by conversion if the property has “ceased to exist as part of the testator’s property in his lifetime” (Jarman, at 1065) or has ceased to conform to the description in the will (Feeney, at §15.2).
Whether it was intended for the gift to be adeemed is not relevant: the doctrine applies “irrespective of the testator’s intentions.” (Hurzin v. Neumeyer Estate (1990) 69 D.L.R. (4th) 18 (B.C.C.A.), at 22; Jarman, at 1065
Ademption will not occur where the specific property in question has been changed “in name or form only” so that it “exists as substantially the same thing, although in a different shape.” (Halsbury, supra, vol. 50 at para. 394, citing Oakes v. Oakes (1852) 9 Hare 666 at 672, approved in In re Slater [1907] 1 Ch. 665 at 672 (C.A.).) Whether the change is one in name or form only is a question of fact: In re Jameson [1908] 2 Ch. Ill at 115; Feeney, at §15.27.
Predictably, a body of case-law has developed involving situations in which someone other than the testator has caused the change to occur — e.g., where corporate shares have been forcibly exchanged on an amalgamation or statutory reorganization (see In re Jameson, supra, In re Slater, supra, In re Faris [1911] 1 I.R. 165, In re Leeming [1912] 1 Ch. 828, Re Humphreys (1915) 60 Sol. Jo. 105, In re Kuypers [1925] Ch. 244, and Re Ogilvy (1966) 58 D.L.R. (2d) 385 (Ont. H.C.),
In most of these cases the gift was saved on the basis that the Court found that the change was one in form only.
It is often difficult to determine if a document is testamentary or not when it purportedly takes effect upon death.
Shortly before writing this article, I settled a Wills Variation action on the eve of trial where the deceased had deliberately used an estate planning procedure so as to deliberately disinherit four of her five children from the biggest asset, namely the shares in a company that owned a commercial building. The child that was left the significant share of the deceased estate was realistically unemployable and not very capable. The deceased therefore had wanted to retain as much control as possible of her estate until her demise. Accordingly, the handling solicitor prepared a will, and a year later, just prior to her death, prepared an option to purchase the shares of the company in favor of the incapable son, that became exercisable upon her death and for up to two years thereafter. The assets that remained in her estate were also substantially depleted by the payment of the capital gains taxes due and owing on the deemed disposition of her shares. The four disinherited children argued that the option, because it could only be exercised upon her death, was therefore a testamentary document, and because it had not been duly executed in accordance with the provisions of the Wills Act, was therefore void. Essentially the entire Wills Variation action came down to whether or not the option to purchase was or was not a testamentary document. If it was not testamentary, then the shares passed outside of the estate, and could not be attacked by the claimants.
An inter vivos gift occurs when the donor intends the transfer of the interest to be immediate and irrevocable. The gift is perfected during the lifetime of the donor, and there is said to be a “present passing interest”, even when the donee’s right to actual enjoyment is postponed.
A will is the most common form of a testamentary document. The essential elements of a valid will are:
1)It is intended to have a disposing effect;
2)It is intended not to take effect until after death and to be entirely dependent on death for its operation;
3)It is intended to be revocable;
4) It is executed in accordance with the wills legislation of the relevant jurisdiction.
Many documents in fact have a” testamentary look” because the intended gift may be revocable by the donor and enjoyment of the gift has been postponed until the death of the donor. The fact that a document looks testamentary does not necessary make it so. In many situations the donor is able to enjoy the benefits of the subject matter during his or her life and is still able to avoid the formal requirements of the Wills Act. If the transaction is not testamentary, then the property will not be included as part of the estate, and will not be subject to attack by creditors and Wills Variation claimants.
For example, in Re Walmsley Estate, 2001 SKQB 105, a purported last will was found to not be a testamentary document because the testator’s “will” stated that the executor could divide up the estate as he saw fit. The Court held that the document did not manifest a true testamentary intention , and the Court did not have the power to render a document testamentary in nature when it is otherwise not so.
It is therefore of the utmost importance to the drafting solicitor, when preparing documents that are to carry out a transaction outside of the estate, to ensure that the document is not testamentary, as there is always the likelihood that some potential creditor or claimant will question the validity of the instrument by attempting to show that it is in fact a testamentary document.
Again, the fact that a document describes itself as testamentary and is executed in accordance with the Wills Act, does not necessary make it testamentary. As a general rule, the entire document will be rejected from probate if all of its dispositions are operative before death. There have been situations on the other hand, where a part of a document is found to be testamentary because it has no operation at all until death, and it may be severed and admitted to probate.
Problems typically arise where deeds and similar transfers are prepared, and the grantor retains control over the deed and does not intend that it shall have effect until his or her death. If that is the situation, then the deed is really a will, because it is dependent upon his or her death for its “vigor and effect”, and unless it is executed with the appropriate formalities, it cannot take effect as one.
The problem is illustrated by the case of Carson v. Wilson (1961) O.R. 113, (C.A.).
The deceased Wilson owned certain parcels of land and executed deeds and lodged them with his solicitor with instructions to hold them and not deliver them until after his death. It was always understood that Wilson could demand to documents back at anytime. Wilson managed the properties until his death. The court held that the transactions were ineffective to transfer title as there was no delivery of the documents, and in any event, they were not intended to take effect until his death. The court found that the transfers were testamentary in nature, and since they did not comply with the formalities of the wills act, they failed. It was also found by the court that they could not take effect as inter vivos trusts, because Wilson retained complete control over the properties while he lived, and he did not intend to create an inter vivos trust.
Generally speaking, the law appears to be reasonably well settled that if that the time of its execution, the document is legally effective to pass some immediate interest in the property, no matter how slight, the transaction will not be classified as testamentary. Stated another way, if the document is intended to have, and does have the effect of transferring the property, or of setting up the trust”in praesenti” ( the present), though to be performed after the settlor’s death, it is not testamentary.
Accordingly, in the case that I referred to in the first paragraph of this article, I found a Supreme Court of Canada case to the effect that an option to purchase created an interest as soon as it was executed that could be enforced by the courts. I therefore argued that even though the option could not be exercised until the death of the testator, it’s still created an immediate interest in the property, in favor of the donee, that was not dependent upon the death of the testator for its “vigor and effect”.
2. CASE LAW WHERE THE TRANSACTION IS NOT TESTAMENTARY
A) Wonnacott v Loewen (1990) 37 E. T.R. 244, B.C.C.A.
This is the leading decision in British Columbia on what constitutes a testamentary document.
In Wonnacott, the defendant moved in with the deceased in March 1988 and the two planned to marry when the defendant’s divorce was granted. The deceased wished to give the defendant some financial security, regardless of the outcome of the litigation with her husband, so they consulted a solicitor. Certain documents were prepared and executed, including a transfer of estate in fee simple of the deceased’s residence to the defendant, to be used in the event of the deceased’s death. The terms governing the use of those documents were contained in an “escrow agreement” which gave the defendant an immediate right to live in the residence. It also provided that the deceased could take the transfer back in specified circumstances, in which case he was required to pay the defendant $60,000. The defendant’s divorce was delayed and she was not free to marry before the deceased died in August 1988. She obtained the transfer and had it registered, thereby obtaining title to the residence. The deceased’s executor brought an action to set aside the conveyance on the ground that the agreements were testamentary and invalid because of failure to comply with the Wills Act. The action was dismissed and the executor appealed.
The Court dismissed the appeal and held that whatever the form of a duly executed instrument, if the person making it intends that it not take effect until after his death, and it is dependent on his death for its “vigour and effect”, it is testamentary. However, if the document creates a gift in praesenti, albeit to be performed after the donor’s death, it is not dependent on his death for its “vigour and effect”. The documents here, examined in isolation, appeared to be testamentary, but it was clear that they had life and vigour from the beginning. The documents conferred an interest on the defendant that had real value no matter what happened. They gave her an immediate interest in the property and they were not testamentary.
The court examined the decision of Cock v. Cooke (1866), L.R. 1 P.p. & D. 241 at 243, that held that:
“It is undoubted law that whatever may be the form of a duly executed instrument, if the person executing it intends that it shall not take effect until after his death, and it is dependent upon his death for its vigour and effect, it is testamentary.”
The court then adopted the reasoning of an Alberta Court of Appeal case, Corlet v. Isle of Man Bank Ltd., [1937] 2 W.W.R. 209, 4 I.L.R. 246, [1937] 3 D.L.R. 163 (Alta. C.A.), which states at p.p. 211:
“The fallacy in the argument based upon the “oft quoted words” of Sir J.P.p. Wilde in Cock v. Cooke (1866) L.R. 1 P.p. 241, 36 L.J.P.p. 5, lies in a misunderstanding of what the words “vigour and effect” are applicable to. They are clearly applicable not to the result to be obtained by, or to the performance of, the terms of the instrument, but to the instrument itself. The question is whether the instrument has “vigour and effect”, and does effect, or is “consummate on execution” to effect, a gift or to create a trust. If the document is “consummate” to create a trust in praesenti, though to be performed after the death of donor, it is not dependent upon his death for its vigour and effect.”
The court went on to also adopt another Alberta Court of Appeal case, Anderson (Costello) v. Patton, [1948] 1 W.W.R. 461, [1948] 2 D.L.R. 202 (Alta. C.A.), which stated at p.p. 463:
“The question of whether a document evidencing a voluntary settlement, either by way of gift, in the sense of transferring the property in question, or by way of the creation of a trust, is or is not testamentary, depends upon the intention of the settlor.
If the document is not intended to have any operation until the settlor’s death it is testamentary.
If the document is intended to have and does have the effect of transferring the property or of setting up a trust thereof in praesenti, though to be performed after the settlor’s death, it is not testamentary.
The reservation of a power of revocation is not inconsistent with the creation of a valid trust and does not have the effect of making the document creating it testamentary.”
An important aspect of the Wonnacott decision is that the court did not examine the subject document in isolation, but instead looked at the larger picture as to what was intended by the donor . The court accepted that in determining whether a transaction amounts to a testamentary disposition, the court is not limited to an examination of the document of transfer itself, and may look at extrinsic evidence relating to the creation of the document. The Court of Appeal adopted the rule set out in Riddell v. Johnston, 66 O.L.R. 554, [1931] 2 D.L.R. 479 (H.C.) that [at p. 482, D.L.R.]:
“In determining what was the real transaction and its nature and effect, the other documents which were made concurrently with the conveyance and which set forth important parts of the bargain which were not embodied in the conveyance itself, and which expressed the intention of the parties should not and cannot be disregarded. ”
B) National Trust Co. v Robertshaw (1986) 5 W.W.R. 695
This case involved the issue as to whether or not a previous designation of a beneficiary in an R.R.S.P. was a testamentary disposition which had been revoked by a subsequent will.
In 1967 the deceased, Robertshaw., designated his wife the beneficiary of a R.R.S.P. (R.R.S.P. No. 1). In 1972 Robertshaw and his wife were divorced. In July 1985 Robertshaw transferred funds from three other R.R.S.P.s into R.R.S.P. No. 1. In August 1985 Robertshaw with her executed a will revoking all former testamentary dispositions and leaving his estate to his three children. The will made no mention of any R.R.S.P. The executors of the will took the position that the 1967 designation of a beneficiary in R.R.S.P. No. 1 was a testamentary disposition which had been revoked by the will. They applied pursuant to R. 18A for a declaration that they were beneficially entitled to receive the proceeds of the R.R.S.P.
Judge Boyd held that while any instrument which is entirely dependent for its vigor and effect upon death must be held to be testamentary,the full “vigor and effect” of the designation of the beneficiary contained in the R.R.S.P. was not entirely dependent on the death of the annuitant as the annuitant may well have affected an inter vires transfer of a contingent interest.
Justice Boyd quoted the following passage from Professor Feeney in Canadian Law of Wills:
“As Professor T. G. Feeney has pointed out in the Canadian Law of Wills, 2nd ed. (1982), vol. 1 (Probate), there is no clear dividing line between a revocable trust inter vivos and a testamentary disposition. Rather, a Canadian court will likely base its decision on the degree of control retained by the settlor. As the learned author states at pp. 11-12:
A court will scrutinize each transaction very carefully, asking itself such questions as the following: Does the settlor retain a life interest or the right to the income from the property until his death? Does he have the right to revoke the trust or withdraw from the scheme? (And what is the effect of revocation? Does he get the property back for himself?) Does he have the right to change the beneficiaries? Does he control the investments that are to be made? Does he have the right to encroach on the capital of the fund?
Clearly the retention of a life interest means nothing by itself, but taken together with such indicia of control over the corpus or capital as the right to revoke, particularly if revocation means getting back complete control of the property, the right to change the beneficiaries, the right to control the investments, or some combination of these and especially the right to encroach on the corpus or capital, is very apt to result in a court declaring the transaction testamentary and void for want of due execution. Control is a question of degree, and exactly when a Canadian court will consider that the settlor retains too much control is difficult to say.”
C) Albert v Albert (1982) 13 E.T.R. 149
In this case the court examined an estate that consisted of two term deposits that were held jointly between the deceased and his two daughters which he alone managed and he alone received the interest. An application was brought regarding entitlement two term deposits after his death.
The Court held that although the deceased had exercised sole management of the term deposits before his death, in the absence of evidence to the contrary they constituted a present gift of a joint interest, not a testamentary gift or a donatio mortis causa. The fact that one of the deposits did not contain the words “or survivor” had no effect upon this daughter’s survivorship rights.
The Court went on to state the law re joint interests as follows:
” In my opinion, a correct statement of the law is as follows: Unless the evidence supports a contrary conclusion, in the typical case of a joint account being established by one of the parties, or of money being deposited by one party as an investment with a financial institution in the names of that party and another party jointly with a right of survivorship, there is a present gift of a joint interest, not a testamentary gift or a donatio mortis causa.
As Ferguson J.A. said in Re Reid (1921), 59 O.L.R. 595, 64 D.L.R. 598 at 608 (C.A.):
If there was a present gift of a joint interest, it seems clear that it was neither a testamentary gift nor a donatio mortis causa, because it is an essential of both that no title vests until the death of the donor: White & Tudor’s L.C. 8th ed., p. 425. The title in right of survivorship was an incident of the joint ownership, an accretion to a title already vested — the donee’s absolute title to the fund arose by operation of law, and not, I think, by reason of two separate gifts, i.e., first, a gift of the joint interest, and, second, a gift of a complete and absolute ownership effective only and on and after the death of the donor.”
D) Hutton v Lapka Estate (1991) 44 E.T.R. 231
The decision of our Court of Appeal in Hutton v Lapka illustrates just how far our courts will go to seemingly try and find that a document is not testamentary in nature if it has even a small immediate effect, and is thus not totally dependant on death for its “vigour and effect”.
The case dealt in part with an action brought by the administrator of the deceased estate on a $295,000 interest-free promissory note signed by a third party in favor of the testator before his death. The note was given as security for a loan for a land purchase and was to be forgiven in the event that the testator died. The trial Judge held that the forgiveness provision of the promissory note was ineffective because it was a testamentary disposition which failed because it was not properly executed pursuant to the Wills Act.
The Court of Appeal allowed the appeal on the basis that the promissory note was not a testamentary disposition, but instead was a contract which had immediate effect . The trial judge was found to have erred in considering the forgiveness clause in isolation from the provisions of the note as a whole, and in holding that separate consideration was needed for the forgiveness clause. The Court followed its previous decision of Wonnacott.
E) Hecht v Hecht ( 1993) 7 W.W.R. 295
Here our Court of Appeal dealt with a Wills Variation action that dealt with inter alia an estate planning scheme devised by Mr. Hecht immediately prior to his death whereby he gifted $9 million through the use of promissory notes. No demand could be made on the promissory notes until 60 days after the testator’s death.
The trial judge found that the promissory notes were inter vivos gifts, and the Court of Appeal did not disturb that finding . The trusts were properly constituted and had “vigor and effect” from the time they were settled and funded, which was before the testator’s death. The fact that they were funded by promissory notes that were not payable until 60 days after the death of the deceased did not alter this.
F) Corlet v Isle of Man Bank Ltd. (1937) 3 D.L.R. 163 ( Alberta Court of Appeal)
The Alberta Court of Appeal upheld a lawyer’s scheme to avoid succession duties as a valid injury vivos transfer, even though the trust was totally revocable by the settlor. The scheme involved the transfer of three life insurance policies are on the life of the settlor to a bank as trustee for the named beneficiaries. In lieu of a will, a the trust document provided the disposition of the proceeds of the policies among those named beneficiaries on the settlor’ s death.
The Court held that the beneficiaries obtained in immediate interest, namely the future interest or right to obtain the proceeds of the policies on the settlor’s death, was vested in immediately on the execution of the trust. Because the settlor had a right to revoke the trust during his or her lifetime, the Court held that the gift had vested. Death was not the event that gave rise to the beneficiaries’ interest in or right to the property, it was the execution of the trust. For a transaction to be testamentary, the death must be more than incidental to the enjoyment of the property : it must be the event that gives rise to the right to so that it can be said that there was no right of any extent vested in the beneficiaries before death.
Professor. Feeney in his book Canadian Law of Wills states
“It should be observed that in the Corlet case, the property involved life insurance policies, rather than an existing fund of money, and that my revocation, the settlor could not get the return of the property for himself, which would have been the case of the property were an existing fund . This is an important distinction and, among other matters, casts some doubt on the non testamentary validity of a revocable trust of an existing fund payable only on the settlor’s death and entirely under his or her control during his or her lifetime.
By analogy, and in the absence of applicable legislation, non testamentary designations of beneficiaries under various insurance and retirement benefits scheme may depend, in part, on whether the person making the designation is entitled to receive or to recover any personal benefit if he or she revokes the designation during his or her lifetime.”
3. CASE LAW WHERE THE DOCUMENT IS TESTAMENTARY
A) Carson v Wilson (1961) O.R. 113 (C.A.)
The deceased Wilson owned certain parcels of land and executed deeds and lodged them with his solicitor with instructions to hold them and not deliver them until after his death. It was always understood that Wilson could demand to documents back at anytime. Wilson managed the properties until his death. The court held that the transactions were ineffective to transfer title as there was no delivery of the documents, and in any event, they were not intended to take effect until his death. The court found that the transfers were testamentary in nature, and since they did not comply with the formalities of the wills act, they failed. It was also found by the court that the could not take effect as inter vivos trusts, because Wilson retained complete control over the properties while he lived, and he did not intend to create an inter vivos trust.
B) Re Bottcher Estate ( 1990) 45 E.T.R. 19
In 1980 the testatrix purchased an R.R.S.P. from a trust company, designating her son as beneficiary. The application form was accepted by the trust company over the signature of its agent, although the testatrix’s signature did not appear. The R.R.S.P. was transferred to another trust company in 1984 and the transfer documents recorded that the son had contributed to it. In 1987 the testatrix made her will, which contained a general revocation clause, revoking all former wills and testamentary dispositions.
The administrator applied to the court under s. 88 of the Trustee Act for inter alia directions with respect to the entitlement to the R.R.S.P.,
The court held that the designation was testamentary in nature, but was not affected by the general revocation clause in the will. While s. 46(3) of the Law and Equity Act provides that a designation of a beneficiary may be revoked, it does not indicate a manner of revocation. The legislature has specifically permitted beneficiaries to be designated without complying with the formalities of the Wills Act, not only as regards R.R.S.P.s, but also insurance policies and employee benefit plans. Specific provisions are made for revocation in the case of insurance policies and employee benefit plans. To conclude that only designations under an R.R.S.P. would be caught up by a general revocation clause in a will would be incongruous and defeat the apparent legislative intent. Accordingly, something more than a general revocation clause in a will is required to revoke a designation validly made other than by will. Moreover, it has been held that a general revocation clause in a will does not in every instance revoke previous dispositions made by will or outside a will, at least if the court is satisfied that there was no intention to revoke a particular gift or legacy.
C) Reference Re Pfrimmer estate (1936) 44 Man.R. 96
Pursuant to a plan to avoid probate costs and succession duties with respect to his estate, the deceased executed transfers, duly registered, of his properties to himself, his wife, his son, and his son-in-law, as joint tenants. At the same time an agreement, entitled “Declaration of Trust” , was executed by all four.
The Court held that the conveyances and the writings were intended by the deceased to take the place of a testamentary disposition under The Manitoba Wills Act, in order to avoid probate expense and succession duties, and not to create an irrevocable trust by a binding transfer of the properties. The court cited to following passage:
” The law is clear that, to give validity to a declaration of trust of property, it is necessary that the donor or grantor should have absolutely parted with his interest in the property, and have effectually put such interest beyond his own reach. See Warriner v. Rogers (1873) L.R. 16 Eq. 340, 42 L.J. Ch. 581; Richards v. Delbridge (1874) L.R. 18 Eq. 11, 43 L.J. Ch. 459; In re Shield; Pethybridge v. Burrow (1885) 53 L.T. 5. Whatever may be the form of an instrument, if the person executing it intends that it shall not take effect until after his death, and it is dependent upon his death for its vigour and effect, it is not a trust: In re Cassidy (1832) 4 Hagg. Ecc. 360, 162 E.R. 1477; Cock v. Cooke (1866) L.R. 1 P. 241, 36 L.J.P. 5; Sproule v. Murray (1919) 45 O.L.R. 326. Thus, in Malin v. Keighley (1794) 2 Ves. Jun. 333, 30 E.R. 659, the Master of the Rolls said:
I will lay down the rule as broad as this; whenever any person gives property, and points out the object, the property, and the way it shall go, that does create a trust, unless he shows clearly, that his desire expressed is to be controlled by the party; and that he shall have an option to defeat it.
Hence it is the rule that an instrument even though in the form of a deed which is not to become operative until the maker’s death is testamentary in its character, and its operation depends upon its execution complying with The Manitoba Wills Act: Habergham v. Vincent (1793) 2 Ves Jr. 204, 30 E.R. 595; Shinbane v. Minuk, 36 Man. R. 530, [1927] 2 W.W.R. 121; Hill v. Hill (1905) 8 O.L.R. 710; Towers v. Hogan (1889) 23 L.R. Ir. 53.”
D) MacInnes v MacInnes (1935) S.C.R. 200
This Supreme Court of Canada case involved an insured who was a member of a fund established by his employers in the nature of insurance or provision for the future of such employees who joined. If a participating employee died, an amount was payable to his beneficiary as designated by him, and he might change the beneficiary or revoke the designation. In an instrument called the “Employee’s Acceptance”, the insured directed the trustees of the fund upon his withdrawal therefrom to pay to him the amount to which he was entitled, upon his death to pay such amount to his wife, or otherwise as he might have last designated by writing lodged with the trustees, or by will. The document was witnessed by one witness only, and the Court held that the document was testamentary in nature and was thus ineffective to allow the named beneficiary to take. The insured’s share in the fund became part of his estate as the right of the beneficiary was dependant upon the death of the participating employee for its “vigour and effect”.
4. CONCLUSION
The issue as to whether or not a document is testamentary in nature is an interesting yet somewhat confusing area of the law. The general principle of law is that if at the time of its execution, the document is legally effective to pass some immediate interest in the property, no matter how slight, then the transaction will not be classified as testamentary. In many of the cases the courts have taken a very liberal approach to find that an immediate interest in the property has been created that is not dependent on death for its “vigor and effect”. Nevertheless, estate solicitors should be well aware of the possible pitfalls in the drafting of documents that are not intended to be testamentary in nature, but by reason of estate planning procedures, could very well be deemed to be such by a subsequent Court, if proper care is not applied.
Most of us likely do not give a moment’s notice to the concept of the fiduciary relationships. This concept, however, is an extremely important principle of the common law. It provides a very flexible legal remedy often used used to protect vulnerable individuals who have been wronged by another who holds a position of power over them.
Understanding fiduciary relationships and fiduciary duties is especially important to legal professionals as we are all in fiduciary relationships with our clients.
The focus of this paper will be to explain and give some examples of how fiduciary relationships have been imposed and interpreted by our courts.
Background
As you may know, our common law legal system originally developed from judicial precedents established by English courts beginning almost 1000 years ago. Over the centuries our courts have developed legally recognized rights and duties that arise when persons are in certain relationships with others. For example, the case law developed the principle that a parent has a duty to provide necessaries to his or her child.
A fiduciary duty is the most onerous duty imposed by the common law. It is imposed by the courts whenever they find that a fiduciary relationship exists. The concept originally developed in Roman law and was borrowed by the Courts of Equity who developed the branch of the common law known as equity. These principles of equity are now part of our common law and are used by our modern day courts generally to avoid injustices being perpetrated.
Fiduciary duties originally developed as part of the law of trusts. Thus, fiduciary duties would arise whenever parties made a trust agreement. Under the terms of a trust, the trustee became the legal owner of the property yet owned and managed that property for the benefit of the beneficiary. In such a case, the trustee was said to be in fiduciary relationship with the beneficiary.
Equitable notions of justice demanded that trustees who had undertaken responsibility for the property or affairs of another, should not be permitted to exploit their position for their own benefit at the expense of the beneficiary.
Our courts have expanded this very useful concept of a fiduciary relationship well beyond the law of trusts. Thus, in general terms, modern courts will likely find that a fiduciary relationship exists whenever a relationship of trust or confidence exists between two parties. For example, because clients rely upon the integrity of their lawyer the courts will deem this legal professional to be in a fiduciary relationship with his or her client.
Whenever a fiduciary relationship exists the court will impose fiduciary duties upon the fiduciary who is in a position of trust towards another person.
The essence of a fiduciary relationship is that the fiduciary is in a position of confidence and power over another person and thus must exercise their power or discretion in the other’s best interest.
Simply put where a fiduciary relationship exists, the fiduciary must not make a personal profit from his or her position and must not allow personal interest to conflict with his fiduciary duties. The fiduciary owes a duty of loyalty, a duty to act in good faith and a duty to avoid any conflict of interest or self-interest.
Every fiduciary is required to subordinate his or her own interests to the promotion of the interests of the beneficiary. The law dictates that the fiduciary cannot utilize his or her position of power to their own advantage or to the other’s detriment. Thus, the fiduciary must act solely and selflessly in the interests of the beneficiary.
How do we recognize a fiduciary relationship?
In the decision of Frame v Smith ( 1987) 2 S.C.R. 99 the court set out the following guidelines to help recognize fiduciary relationships, stating as follows :
“Relationships in which a fiduciary obligation has been imposed seem to possess three general characteristics:
(1) The fiduciary has scope for the exercise of some discretion or power.
(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.
(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power. ”
Fiduciary relationships are of many different types and can range from giving money to the errand boy who is bound to bring back the change to the most intimate and confidential of trust. For example all professionals handling the affairs of others are typically in a fiduciary relationship with their clients. This would include partners, agents, directors and legal professionals as previously mentionned.
There is no closed category of cases where the courts will find a fiduciary relationship to exist. Indeed they have recognized fiduciary obligations in a wide variety of situations. Here are some examples
Guerin v. The Queen [1984] 2 S.C.R. 335 involved a lawsuit brought by the Musqueam against the federal government who made an agreement to lease their lands in 1958. These lands were 162 acres of superb green space, much of it waterfront, near UBC. The government rented these lands for 75 years to Shaughnessy Golf & Country Club in a sweetheart deal with a rent of merely $29,000. More troublesome yet was the lack of rent escalation for 15 years. Even then the escalation was capped at a maximum of 15 per cent per annum.
The Supreme Court of Canada found that this was an exploitative bargain which was “unconscionable” and a breach of the Crown’s fiduciary duty to the Musqueam nation whose affairs the Crown was managing. The court thus awarded damages of $ 10 million to the Musqueam.
More recently, in Norberg v Wynrib ( 1992) 92 DLR (4th) 449, at 499. McLachlin J. declared that “fiduciary relationships are capable of protecting not only narrow legal and economic interests, but can also serve to defend fundamental human and personal interests”.
In this case Ms. Norberg was a young woman addicted to painkiller medication. She was obtaining these drugs from an elderly doctor, who suggested that he would supply drugs in return for her giving him sexual favours . This casual arrangement of “sex for drugs” continued for some time. When Ms. Norberg asked Dr. Wynrib for help getting off drugs, he advised her simply “to quit”. He continued supplying drugs to Ms. Norberg until she decided, on her own, to go to a rehabilitation centre to get help with her drug addiction.
When the case reached the Supreme Court of Canada, two of the justices found that a fiduciary relationship existed. They found the doctor to be a fiduciary because he was in a relationship of trust and confidence who had the power to exercise a discretion over his patient. This discretion made her particularly vulnerable to any abuse by him and they ruled that the doctor had breached his fiduciary duties to his patient and awarded damages on that basis.
This case is also a good illustration of the courts’ ability to shape the common law to make it more socially responsive and acceptable to the community.
Similarly other decisions have recognized a fiduciary relationship between parent and child and school boards and students.
Another good example of the scope of fiduciary duties is the recent case of Olive Hospitality Inc. v. Woo 2006 BCSC 1554, appeal decision at 2007 BCSC 355. The facts and trial decision are summarized in the opening paragraphs of the appeal decision :
“Olive Hospitality Inc. was engaged in the development of a specialty restaurant franchise in this province, financed by Asian investors seeking entrepreneurial opportunities to facilitate their immigration to Canada. With an investment of $2,178,500 and financing from HSBC Bank Canada, the company had, through its subsidiaries, opened three restaurants and was about to open a fourth as part of a business plan for the eventual operation of 30 restaurants. Tae Soo Woo was a director of the company. He resigned in acrimonious circumstances. He sent a notice of his resignation to the bank and in so doing maliciously defamed the company in statements he made relating to its financial stability. The fourth restaurant was never opened and the investment was then lost when the company sold its assets for $10 and the assumption of some debt.
On the trial of this action, commenced by the company and its subsidiaries against its former director, Madam Justice Ross awarded general and punitive damages of $60,000 for defamation (plus $6,323.39 in respect of funds improperly taken from the company) and $1,088,995 in damages for breach of fiduciary duty based on the value of a lost opportunity to realize a future financial advantage: 23 B.L.R. (4th) 78, 2006 BCSC 1554.”
In this case, the BCCA overturned the trial decision essentially on the basis that the resultant loss to the company had not been properly established. At trial the loss that was proven was actually the loss to the other individual shareholders rather than to the company who was the plaintiff.
The list continues to expand. As this article goes to press, Madame Justice Wedge has very recently reserved in the case of Canucks dispute involving Francesco Aquilini’s purchase of the team. According to press reports Tom Gaglardi and Ryan Beedie have brought that action alleging that Aquilini was their partner and thus owed them the duties of a fiduciary. They allege that he breached those duties by secretly negotiating to purchase the Canucks while they were still attempting to do so.
Powers of Attorney
A common fiduciary relationship is that of a person holding a power of attorney for another. Many B.C. decisions have made it clear that a holder of a power of attorney owes a fiduciary duty to the donor.
For example Kask Estate v. Welsh 2000 BCSC 791 which involved a daughter who held a POA for her elderly father. She succeeding in depleting his estate in the years before his death after he became mentally incompetent. By the time of his death, little was left in the estate. In finding the daughter liable for breach of fiduciary duty, Lysyk J. said as follows :
[24] In that Ms. Welsh held her father’s power of attorney, she owed to him a fiduciary duty: ” It was her duty not to prefer her interest or that of her family over his in the handling of his money which he had entrusted to her. I do not consider that Ms. Welsh determined she would deplete all of what would be her father’s estate once she held his power of attorney and had the opportunity to spend his money. Rather, it seems more probable that she simply found his money to be a ready resource and, instead of preserving it as apart from the costs of maintaining him she was duty bound to do, she spent it. ”
A similar case, Egli (Committee of) v. Egli 2004 BCSC 529, involved a son who had transferred his father’s home and investment accounts to him and his wife under a power of attorney that the father had given him some years before. By the time of the father’s death, the estate had been completely depleted by these inter vivos transfers.
The trial judge ultimately decided that the transfer of the family home was valid however the transfer of an investment account was in breach of the son’s fiduciary duty. The son was thus ordered to compensate his father’s estate for the amounts transferred.
Garson J. stated at paragraph 82:
“It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage (Chapman) The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor. I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members”.
In this case, the judge found the transfer of the house was done with full knowledge and consent however the transfer of the investment account was not.
The principle enunicated in the above case may be somewhat problematic in that, almost invariably, where the holder of the power of attorney executes some transaction which personally benefits the holder, he or she will insist that all was done with the full approval and knowledge of the elderly, frail donor.
In Fraser v Fraser 2000 BCSC 0211, four brothers were assisting their 90 year old mother to manage her financial affairs. One of them, unbeknowst to his three brothers, obtained a power of attorney from their mother without her first obtaining independent legal advice. A few days later he convinced her to take $ 40,000 from her GIC and invest it in Eron Acceptance. This represented 70% of her estate and was clearly a risky investment in which he lost all of her money. Although he did not use the POA to effect the transaction, the judge found that he had obtained the POA specifically for that purpose and would have used it, if necessary.
In finding the defendant liable for the loss, Dillon J. observed as follows :
[26] The defendant breached his fiduciary duty to the plaintiff in conducting himself in this manner when he knew that the plaintiff relied upon him. This fiduciary duty arises in all of the circumstances here, but also arose from the power of attorney whether or not it was actually used in the transaction “… He failed to exercise reasonable care in numerous respects, including: failing to read or understand the investment documents, failing to adequately protect the bulk of the plaintiff’s assets, failing to diversify the investment, failing to obtain independent advice, unreasonably relying on oral representations made at large meetings, investing at high risk in all of the circumstances, failing to obtain the consent and advice of his brothers, and failing to inform the plaintiff or his brothers either before or after the investment. ”
Remedies for Breach of Fiduciary Duties
Whenever a court finds a breach of fiduciary duty, then the fiduciary will be liable to place the beneficiary in that same position as the claimant would have been, had no breach been committed. Equity adopts the position that, where a breach occurs, any gain resulting belongs to the beneficiary whereas any loss is the trustee’s personal loss and full restitution must be made.
A breach of a fiduciary relationship can give rise to a wide range of remedies. Generally speaking, in addition to awarding compensation (damages are the common law remedy, compensation is the equitable remedy) our courts can impose restitutionary remedies such as the constructive trust, rescission, injunctive relief , equitable compensation and tracing and lastly an accounting for profits. Thus a claim of breach of fiduciary duty may open many doors not otherwise available at common law.
Conclusion
Whenever there is an inherent trust relationship between the parties with a corresponding potential for exploitation or damage, our courts are increasingly willing to recognize the existence of a fiduciary relationship and award a remedy for breach of fiduciary duties.
The concept of fiduciary relationships with corresponding fiduciary duties is one of the most sensible and flexible responses of the common law to the modern requirements of justice in individual cases.
Some years ago the Vancouver Sun ran a feature on dysfunctional families and reported that one in three British Columbians expect to be disinherited by their parents.
Practising estate litigation for over 40 years, it is easy to believe there are more dysfunctional than functional families. Indeed the dysfunctional family is the bread and butter of our practice. With the growing number of second marriages and blended families, the numbers are ever increasing.
In this article wehope to share some insights into dysfunctional families. IWe have no scientific expertise, only a wealth of practical experience dealing with the financial, emotional and psychological aftermath of such families.
WHAT IS A DYSFUNCTIONAL FAMILY?
Most of us grow up believing our own family is “normal”. It is only with life experience that we may come to recognize there is perhaps “something unusual” about our own upbringing and family life. We may also come to realize that many families are unfortunately not the happy, healthy families to which we all aspire.
Typically a dysfunctional family is one where the relationships between parents and children are strained and unnatural. Although there may be many different root causes, such families usually involve one or more family member with a serious problem that impacts every other member of the family. In turn, the other family members adopt atypical roles and behavior that allow the family to function on a basic level. For example, an older child may assume a caretaking role towards younger siblings to cover for an alcoholic mother.
A dysfunctional family often means parents fail to adequately provide for their children’s emotional, psychological and/or physical needs. Such children often suffer from low self-esteem all of their lives. Needless to say, this impacts every aspect of their lives from jobs to marriages to financial security.
Many families may seem normal at first glance. Scratch the surface, however, and some surprising relationships are exposed. For example, a recent case involved a family who, four days before the death of the patriarch, learned that he had another family in another city. You can imagine the profound shock and grief caused by this deception. The surviving family questioned their basic beliefs about who they were.
TYPES OF DYSFUNCTIONAL FAMILIES
The following are some examples of patterns occurring in dysfunctional families. Although classifed under various titles, there is often a great deal of overlap as often many problem behaviours occurs in the same family.
1) Addiction
In this scenario one or both parents have addictions relating to drugs, alcohol, gambling, sex, work or food. Any such addiction can clearly have strong negative effects on other family members. One case we had involved a crack cocaine addict who was disinherited by his father after moving in with him and turning his home into a crack house.
Alcohol abuse is far more common and is extremely destructive as well.
2) Physical Violence
In such families, one or both parents use physical violence as a means of control through intimidation. The children may be the victim of violence, may be forced to witness their mother being beaten, to participate in punishing siblings or simply may live in fear of explosive outbursts. Such children frequently grow up with anxiety and depression issues. What is more, they are far more susceptible to abuse themselves. Sons raised in such families are at a much higher risk of becoming abusive husbands while the daughters more often become victims of violence.
3) Lack of Emotional Support
In these families, one or both parents fail to provide their children with adequate emotional support (often they also fail to provide basic physical and financial care at the same time). For example, one case involved a man who had simply been ignored as a child and left to fend largely for himself. He grew up to be an emotional cripple who completely lacked social skills and lived a very isolated existence. Thus he was awarded a large share of his parents’ estates. He would need those funds to survive since he was effectively unemployable.
4) Religious Fundamentalism and Rigidly Dogmatic Beliefs
Such families frequently involve parents who exert a strong authoritarian control. These families rigidly adhere to a particular belief, sometimes religiously or culturally based. Compliance with cultural or religious expectations is not expected, it is demanded.
For example we had a one case involving an overly strict mother who put down the family dog because her daughters girls did not keep their room clean enough.
A more extreme example of such behavior would be the family “honour killings” we read of from time to time. These involve male family members killing a female member because she is believed to have “brought shame” on the family.
5) Overly Possessive Parents
We have had many cases involving overly possessive parents who exploit their children, treating them as possessions whose primary purpose is to respond to the parents’ needs. They often do not encourage their child to become independent. This sometimes results in this scenario where one child, typically the youngest, never leaves home. Instead the child cares for the parent until death and is often “rewarded” or “compensated” for his or her “sacrifice”. Most often the other siblings view him or her as a freeloader.
It is sometimes amazing to hear the childish emotions these situations continue to evoke in adult children. In one case we represented a youngest child who had never left home and who was rewarded with privileges and a larger inheritance than his 4 older siblings. At the examinations for discovery when the older sister was questioned as to why the others hated our client , she responded “Because he was allowed cheese sandwiches before bed, and we were not.”
5) Sexual Abuse
As more cases of family sexual abuse surface, it is clear that sexual abuse by anyone but especially a parent will produce lifelong emotional scars for the victim. Typically it is the father or stepfather who sexually abuses a daughter or stepdaughter. It is shocking however, how frequently mothers ignore the disclosures of abuse and deny that their husband (the breadwinner and meal ticket) could have perpetrated such acts. This failure to believe and to protect the child only aggravates an already difficult situation.
One case we had involved the death of a father who had divided his estate in equal shares among his children and one grandson. When his daughter was questioned as to the motives for such a distribution, she disclosed that her father had sired this son. .
CONCLUSION
Every family varies greatly in the frequency and severity of dysfunctional interactions.
In dysfunctional families children may be forced to take sides in conflicts, they may be ignored, discounted, criticized or abused. Other parents may be inappropriately intrusive, overly involved and protective. Many children of dysfunctional families complain that their parents were emotionally distant and uninvolved. The fundamentalist family may provide excessive rules while the addicted parents may provide no guidelines or structure. Some children may be rejected while their siblings receive preferential treatment. Children may be slapped, punched, kicked or emotionally abused and locked out of the house. Some children runaway or leave home at an early age. Others never leave.
The bottom line with all dysfunctional families is that such abuse and neglect inhibit the development of healthy adults with healthy relationships. As adults, such people often have difficulty in judging and trusting others and themselves. They often experience difficulties in their workplace, in their relationships and with their very identities.
What is more, in the world of the estate litigation, they are often disinherited.
If the court comes to the conclusion that the testator intended to pass a bequest, and can determine what that something is, then the fact that the testator wrongly described the bequest in his or her will, does not prevent the will taking effect in regard to the subject matter intended by the testator.
The principle may be applied in whatever part of the description the error occurred
Baxevandis Estate case( 2007 BCSC 1657) in its entirety as it is a good summary of the topic of abatement, and specifically the issue of where a specific gift abates and is sold and there is a surplus of funds after the liabilities are paid, who is entitled to the surplus?
The case also discusses the difference when a gift is said to abate as opposed to the gift having adeemed, when in both cases, the gift no longer exists at the time of death.
Any property which has to be sold to satisfy creditors is said to abate, rather than to adeem.
The court held that the balance of the proceeds from the sale of abated property goes to the divisee of the abated property, and not into the residue.
Background
[1] The deceased, Grammata Margaret Baxevanidis, died on May 24, 2004 (the “Deceased”).
[2] The Deceased left a will dated June 25, 2002 (the “Will”), which was granted probate on October 28, 2004.
[3] During her lifetime, the Deceased had two main assets: the home she lived at in Vancouver, British Columbia (the “Home”) and the home she owned in Vancouver, British Columbia that was rented to various tenants (the “Rental Property”).
[4] The Deceased’s daughter, Agapie Kennell, (the “Daughter”), had lived with the Deceased in the Home until the Daughter was 40 years old, during which time she provided the Deceased with care and companionship. Because of this, the Deceased promised the Daughter to gift to her the Home.
[5] However, during her lifetime, the Deceased transferred the Home to her son, Athanasios Dennis Baxevanidis, also known as Dennis Baxevanidis (the “Son”). The Deceased then promised her Daughter that the Rental Property would be given to her in the Deceased’s Will instead.
[6] In her Will, the Deceased gifted the Rental Property to the Daughter and directed that the remainder of her assets be divided equally between the Son and the Daughter.
[7] At the time of death, the Deceased’s estate consisted of the Rental Property, a real property located in Point Roberts (the “Point Roberts Property”), various bank accounts, a Registered Retirement Income Fund (“RRIF”), and a Canada Death Benefit.
[10] The petitioner, Jimmy Malamas, is the executor of the Deceased’s Will (the “Executor”).
[11] On May 7, 2007, the Canada Revenue Agency reassessed the Deceased’s income tax return concluding that a further $71,122.47, plus interest, was owed by the estate.
[12] The exact amount of the estate’s debts is still unknown. However, it is likely that the estate’s assets (not including the Rental Property) are insufficient to satisfy the whole debt.
[13] The Daughter has agreed to either loan or gift the appropriate sum to the estate to ensure that the Rental Property does not have to be sold in order to pay the estate’s debts. She has paid $74,000.00 into her lawyer’s trust account for this purpose.
Abatement
II. The Executor seeks advice and directions from the court, under s. 86 of the Trustee Act, R.S.B.C. 1996, c. 464, as to the following questions:
(i) If the Rental Property must be sold to satisfy debts of the estate, do the net proceeds of that sale fall into the general residue of the estate to be split equally between the Son and the Daughter?
(ii) If the answer is yes, can the Executor transfer the Rental Property to the Daughter subject to a charge with respect to the outstanding debts of the estate, pursuant to s. 79 of the Estate Administration Act, R.S.B.C. 1996, c. 122, without any regard to the Son’s possible interest?
(iii) Can the Daughter pay the estate debts herself, without a sale of the Rental Property and maintain the specific gift of the Rental Property to her?
(iv) Can the Executor borrow funds from the Daughter or anyone else, secured by way of a mortgage on the Rental Property, to pay the estate debts, pursuant to s. 67 of the Estate Administration Act?
III. Decision
(i) If the Rental Property is sold, do the proceeds convert to the estate’s residue?
[14] According to James MacKenzie, ed., Feeney’s Canadian Law of Wills, 4thed. (Toronto: Butterworths, 2000) at para. 15.3:
An estate may be legally unable to satisfy a legacy or devise not only because the property has ceased to exist or has ceased to exist in substantially the same state (not only that is, by reason of an ademption by conversion), but also because of the testator’s debts which must be satisfied out of the estate property. However, this latter situation is technically referred to as an abatement. Any property which has to be sold to satisfy creditors is said to abate, rather than to adeem. [emphasis mine]
[15] In Thompson (Guardian ad Litem of) v. Thompson Estate, 2005 BCSC 1814, 22 E.T.R. (3d) 268, Melnick J. at para. 15 described the law, as follows:
Unless there is a contrary intention in the Will, “the order in which assets are liable to pay debts is determined by well defined rules” (A.H. Oosterhoff,Oosterhoff on Wills and Succession, 5thed. (Scarborough: Carswell, 2001) at 499). The rules are described in James Mackenzie, Feeney’s Canadian Law of Wills, 4thed. looseleaf, (Markham: Butterworths, 2000) at para. 8.52:
In the payment of debts the residuary estate must first be exhausted and residuary personalty and realty are liable rateably for the debts. After the residuary estate has been exhausted, general legacies abate pro rata, then demonstrative and specific rateably after that, and finally devises. Devises abate last because of the general rule that personalty is primarily liable for the payment of debts.
[16] At para. 16 in Thompson, supra, Melnick J., quoting from Smith Estate, Re, 2003 SKQB 361, [2004] 7 W.W.R. 516, set out the order of abatement, as follows:
First, residuary personalty;
Second, residuary real property;
Third, general legacies, which include pecuniary bequests from the residue;
Fourth, demonstrative legacies, that is bequests from the proceeds of a specific asset or fund not forming part of the residue; [See Re Culbertson (1967), 62 D.L.R. (2d) 134 (Sask. C.A.)]
Fifth, specific bequests of personalty;
Sixth, specific devises of real property.
[17] The types of legacies have been described in Feeney’s Canadian Law of Wills, supra at para. 8.51, as follows:
A general legacy is a gift out of the residuary estate after the payment of debts and specific legacies. The most usual kind of a general legacy is a pecuniary legacy. A specific legacy is one which the testator has separated from the residuary estate in favour of a particular legatee and since the testator has shown that he or she intends that the legatee shall take the specific thing unconditionally, while it may have to be sold to pay debts, it will not abate to meet debts until the residuary estate and general legacies have been exhausted.
[18] In Thompson, supra, a number of real estate lots (Lot 1, 2, and 3) formed the largest part of the deceased’s estate along with a truck, a boat, and the contents of some bank accounts. There were three beneficiaries under the will, namely the wife, and two of the deceased’s daughters. The will provided that Lot 1 was to go to the wife, while Lots 2 and 3 were to be sold and the proceeds divided more or less equally amongst the three beneficiaries.
[19] As of the date of the hearing, legal title of Lot 1 remained with the executor for the estate, while both Lots 2 and 3 were sold in accordance with the deceased’s wishes. The estate owed significant debts. A large portion of the proceeds of the sale of Lots 2 and 3 and various other funds received after the deceased’s death had been used to pay the debts of the estate. However, after the debts were satisfied, there remained some cash.
[20] The court held that as there was not enough money in the estate to pay all the gifts made in the will, some or all of the gifts had to abate and be reduced pro rata. At issue was the order in which the assets of the estate were liable to pay its debts.
[21] The court found that the contents of the bank accounts formed the residue of the estate and were first liable for the debts of the estate (even though the will contained no residuary clause, which meant that the residue would pass according to the law of intestate succession). The truck and boat were both gifted to the wife as general legacies and were liable to pay the debts of the estate after the residue was abated, but prior to Lots 1, 2 and 3. The court found that the gift to the wife of Lot 1 was clearly a devise of real property and it was therefore last in line for liability for the estate’s debts. What cash remained in the estate after payment of the debts was solely attributed to the sale of Lots 2 and 3. The court held that the remaining cash did not fall into residue, but was to be divided equally by the three beneficiaries in accordance with the will.
[22] Thus, even though the legacies of Lots 2 and 3 abated, the remainder of the proceeds from the sale of these lots did not fall into residue.
[23] In Patry Estate v. Robinson, 2003 ABQB 707, [2004] 2 W.W.R. 378, the testator left a vehicle to his common law wife, “free of all encumbrance”. The residue of his estate was to be shared equally by his three children. At the time of his death, the vehicle was valued between $24,500.00 and $26,000.00. However, the outstanding loan on the vehicle was $29,000.00. The executrix returned the vehicle to the car dealership and they extinguished the loan. There was only $13,316.26 left in the estate after payment of estate taxes and other debts.
[24] Coutu J., at para. 12, relying on Feeney’s Canadian Law of Wills, supra,found that because the vehicle was a specific bequest, it did not abate until the residuary estate and general demonstrative legacies had first been exhausted. Therefore, the court found that the estate’s residue was subject to abatement before the gift of the vehicle. This meant that the wife’s claim as specific legatee took priority to the claims of the children as residual beneficiaries. The wife was entitled to the $13,316.26 left in the estate.
[25] The court ruled that even though the vehicle, as a specific bequest, had to be sold to satisfy the estate’s debts, the gift itself did not fail nor did the proceeds of sale fall into the estate’s residue.
[26] Tamboline v. Dobbs(1998), 25 E.T.R. (2d) 50 (B.C.S.C.) is a Wills Variation Act action, which also required the court to consider the issue of abatement and the estate’s tax liability.
[27] The testator’s daughter was named beneficiary of certain property and claimed that tax liability relating to disposition of property should be borne by the estate. The testator had also left a number of specific bequests including real property as well as stocks, bonds and jewellery. In addition, the residue was to be divided equally amongst two of the testator’s three children. The estate’s debts exceeded the value of the property that was left as residue.
[28] Pitfield J. found at para. 59 that “income tax obligations arising as a consequence of death are legally enforceable debts to be discharged by the executor. In the absence of any specific direction in the will, there is no reason to conclude that the tax burden should fall upon any asset, not in residue, to the exclusion of any other.”
[29] Pitfield J. also found that after the residue was exhausted to pay the estate’s debts, the specific bequests of land, jewellery, shares, etc. were to bear their “rateable proportion of all debts of the estate” payable as a consequence of death, including taxes, interest and penalties but excluding mortgages.
[30] In the case at bar, clause 3(a) of the Will states, as follows:
I GIVE, DEVISE AND BEQUEATH all my property of every nature and kind and wheresoever situate, including any property over which I may have a general power of appointment to my Trustees upon the following trusts:
(a) To pay out of and charge to the capital of my general estate my just debts, funeral and testamentary expenses and all estate, inheritance, succession, probate and other taxes, duties and fees whether imposed by or pursuant to the law of this or any other jurisdiction whatsoever, that may be leviable or payable in connection with any property passing … Without imposing any obligation upon my Trustees to do so I hereby AUTHORIZE them to pay out of and charge to the capital of my general estate any and all tax on capital gains which may be deemed to arise on my death or on any subsequent disposition of assets which may be made or deemed to be made by my Trustees during their administration of my estate.
[emphasis added]
[31] Applying the above noted law to the facts in this application, the Point Roberts Property, the various bank accounts, the RRIF, and the Canada Death Benefit form the residue of the Deceased’s estate, while the Rental Property is properly described as a specific devise of real property.
[32] Further, the income tax payable by the estate to the Canada Revenue Agency is an obligation arising as a consequence of the Deceased’s death and is thus a legally enforceable debt to be discharged by the Executor.
[33] There is no specific direction in the Will that the estate’s income tax or other debt attach specifically to the Rental Property, and thus, must be paid out in accordance with the rules described in Thompson, supra.
[34] The Rental Property, as a specific devise of real property, is last in line for liability of the estate’s debts.
[35] Thus, the estate’s debts must be satisfied by exhausting the assets contained in the residue first, and only then would the gift of the Rental Property abate.
[36] Accordingly, I find that if the Rental Property must be sold to satisfy the debts of the estate, the net proceeds do not fall into the residue of the estate, but must be transferred to the Daughter.
[37] Given my answer to the first question, it is not necessary to answer question (ii).
(iii) Can the Daughter pay the estate debts herself, without a sale of the Rental Property and maintain the specific gift of the Rental Property to her?
[38] In Holmes Estate (Re), 2007 BCSC 51, 29 E.T.R. (3d) 67 at para. 6, Goepel J. states, as follows:
The primary objective for the court in interpreting a will is to determine the testator’s intention. The will must be considered in its entirety. If there is no ambiguity on the face of the will then it should be interpreted according to the ordinary meaning attributed to the words used. Only if there is an ambiguity should the court resort to evidence of surrounding circumstances. In the leading case of Perrin v. Morgan, [1943] A.C. 399 (H.L.) the court stated at p. 406:
[T]he fundamental rule in construing the language of the will is to put on the words used the meaning which, having regard to the terms of the will, the testator intended. The question is not, of course, what the testator meant to do when he made his will, but what the written words he uses mean in the particular case – what are the “expressed intentions” of the testator.
In Davis Estate v. Thomas (1990) 40 E.T.R. 107 (B.C.C.A.) the court adopted the words of Mr. Justice Laidlaw in Re Burke (1959), 20 D.L.R. (2d) 396 at 398 (Ont. C.A.) at p. 110 as follows:
The Court is now called upon to construct a particular document and at the outset, I emphasize what has been said before so frequently. The construction by the Court of other documents and decisions in other cases respecting the intention of other testators affords no assistance whatsoever to the Court in forming an opinion as to the intention of the testator in the particular case now under consideration. Other cases are helpful only insofar as they set forth or explain any applicable rule of construction or principle of law. Each Judge must endeavour to place himself in the position of the testator at the time when the last will and testament was made. He should concentrate his thoughts on the circumstances which then existed and might reasonably be expected to influence the testator in the disposition of his property. He must give due weight to those circumstances in so far as they bear on the intention of the testator. He should then study the whole of the contents of the will and, after full consideration of all of the provisions and language used therein, try to find what intention was in the mind of the testator. Where an opinion has been formed as to that intention, the Court should strive to give effect to it and should do so unless there is some rule or principle of law that prohibits it from doing so.
[39] In the instant case, clause 7(ii) of the Will provides, as follows:
7. IN ORDER THAT my wishes may be more effectively carried out I hereby give my Trustees the following additional powers:
…
(ii) To compromise, settle and waive any claim or claims at any time due to or due by my said Estate for such consideration and upon such terms and conditions as my Trustees may deem advisable. [emphasis mine]
[40] On my interpretation of the Will, I find that clause 7(ii) contains a broad power to the Executor to accept funds from the Daughter to preserve the promise the Deceased made to the Daughter during her lifetime so that the Daughter can receive her bequest of the Rental Property.
[41] Given the answer to question (iii), I do not find it necessary to answer question (iv).
Chang Estate v Chang 2013 BCSC 976 is a well considered judgement of Justice Dardi, who had extensive experience in estate litigation prior to her elevation to the Bench.
The testatrix,a widow, died in 2007 at age 98. She and her late husband had four children, and their only daughter the plaintiff, was the youngest. Their three sons were the defendants.
In 1998 the deceased and her husband purchased a house and put one son on title as a joint tenant with his parents. The testatrix and her husband never did live in that property, and that particular son collected the rent and prayed paid the property taxes and expenses , until 2004 when the testatrix paid two thirds of the property taxes and utilities.
In 1997 that sons, son sued his grand mother and grandfather over a dispute that had arisen regarding the property.
The matter went to trial in July 1999 and was dismissed.
The testatrix found those events very distressing and in January 1998 she and her husband severed the joint tenancy , leaving that son with a one third interest as a tenant in common.
The testatrix executed her will in July 2000, and her husband executed a reciprocal will at the same time.
The plaintiff was appointed the executrix, and the son with the one third interest in the property was given a $10 bequest, with the remainder of the estate being divided 30% to the plaintiff, 30% to one brother and 40% to the other brother.
The will explain the reasons for the minimal bequest to the one son, saying the testatrix and her husband had provided much assistance to him and had given him one third of the Surrey property, from which he had collected all of the rents for his own use.
The will also said that he and his family house have caused us much grief, heartache, and unhappiness and shame.
The plaintiff applied to prove the will and codicil dated July 2005 in solemn form.
The son challenged the validity of the will and codicil on the grounds that the testatrix lacked testamentary capacity and that the will was a product of coercion and or undue influence.
The court held that the testatrix had proved on the balance of probabilities that the will was executed in compliance with the statutory formalities, that the testatrix knew and approved of the contents of the will, and that she had testamentary capacity.
The professionals who prepared the will gave evidence, and it was proven that both documents were executed after having been read to the testatrix, who appeared to understand the contents.
The law presume the testatrix knew and approved of the will and possess the requisite testamentary capacity.
The evidence of the testatrix physician and those who prepared the documents and attended upon execution also established attempted testamentary capacity.
No suspicious circumstances arose in the facts established by the evidence, nor was there any evidence of undue influence by the plaintiff or anyone else.
Legal Framework
[25] The Supreme Court of Canada in Vout v. Hay, [1995] 2 S.C.R. 876 clarified the principles with respect to the burden of proof in litigation regarding contested wills. The Court articulated the considerations which govern the interrelation of the doctrine of suspicious circumstances and the issues of testamentary capacity, knowledge and approval, undue influence and fraud.
[26] In an action for proof of will in solemn form, the party propounding the will must prove on a balance of probabilities that the will was executed in compliance with the statutory formalities, that the will-maker knew and approved of the contents of the will and that the will-maker had testamentary capacity: Vout at paras. 19-20.
[27] In order to make a valid will, the will-maker must have a “baseline level of mental acuity” or a “disposing mind and memory”, sufficient to appreciate and comprehend the nature and effect of the essential elements of the testamentary act. This encompasses an appreciation of the claims of the persons who are the natural objects of her estate and the extent of her property of which she is disposing: Laszlo v. Lawton, 2013 BCSC 305 at para. 185; Banks v. Goodfellow (1870), L.R.5 Q.B. 549; Leger v. Poirier, [1944] S.C.R. 152 at 161. The assessment of whether a will-maker possesses testamentary capacity is a highly individualized inquiry and is a question of fact to be determined in all the circumstances: James v. Field, 2001 BCCA 267 at para. 51; Laszlo at para. 197.
[28] In certain circumstances, the propounder of the will, in discharging the burden of proof, is aided by a rebuttable presumption of validity. If the will was duly executed in accordance with the requisite statutory formalities after being read over to or by a testator who appeared to understand it, it is presumed the testator possessed the requisite testamentary capacity and knew and approved of its contents:Vout at para. 26.
[29] This presumption may be rebutted by evidence of “well-grounded suspicions”, referred to in the jurisprudence as “suspicious circumstances”, relating to one or more of the following circumstances:
(i) surrounding the preparation of the will;
(ii) tending to call into question the capacity of the will-maker; or
(iii) tending to show that the free will of the will-maker was overborne by acts of coercion or fraud: Vout at para. 25.
[30] If suspicious circumstances are established, then the presumption is spent and the legal burden of proof reverts to the propounder of the will. The propounder of the will then reassumes the legal burden of proving knowledge and approval, as well as proving testamentary capacity, if the suspicious circumstances reflect on the mental capacity of the will-maker to make a will: Woodward v. Grant, 2007 BCSC 1192 at para. 108. In order to discharge the burden, the propounder of the will is required to dispel the suspicious circumstances that have been raised: Ostrander v. Black (1996), 12E.T.R. (2d) 219 at para. 30 (Gen. Div.).
[31] In Vout, the Court affirmed that if a court determines that suspicious circumstances exist, the applicable standard of proof is a balance of probabilities. However, the evidence must be scrutinized in accordance with the gravity of the suspicion raised in any particular case.
[32] In order to rebut the presumption of validity, those attacking the will must meet the threshold of demonstrating that there is some evidence “which, if accepted, would tend to negative knowledge and approval or testamentary capacity”: Vout at para. 27; Maddess v. Racz, 2009 BCCA 539 at para. 31. The court in Scott v. Cousins (2001), 37 E.T.R. (2d) 113 (Ont. S.C.J.) describes the requisite evidence as that which “excites the suspicion of the court”. A “general miasma of suspicion that something unsavoury may have occurred” is insufficient to rebut the presumption of validity; the evidence must raise a “specific and focused suspicion”: Clark v. Nash (1989), 61 D.L.R. (4th) 409 at 425 (B.C.C.A.).
[33] The court in Laszlo provides the following instructive observations regarding the doctrine of suspicious circumstances at para. 207:
Suspicious circumstances have been found to exist in a wide array of situations and are not necessarily sinister in nature. There is no checklist of circumstantial factors that will invariably fit the classification. Commonly occurring themes include where a beneficiary is instrumental in the preparation of the will (especially where the beneficiary stands in a fiduciary position to the testator), or where the will favours “someone who has not previously been the object of [the testator’s] bounty and does not fall within the class of persons testators usually remember in their wills, that is to say their next of kin.
Undue Influence
[34] When undue influence or fraud is alleged, the party opposing probate always bears the legal burden of proving on a balance of probabilities the affirmative defence of undue influence: Vout at para. 28. It is important to appreciate that in these circumstances, the doctrine of suspicious circumstances and the shifting of the burden of proof has no application.
[35] In order to invalidate a will on the grounds of undue influence, the asserting party must prove that the influence exerted against the will-maker amounted to coercion, such that the will did not reflect the true intentions of a free will-maker and was not the product of the will-maker’s own act. The undue influence must constitute coercion which could not be resisted by the will-maker and which destroyed his or her free agency. It is well-established on the authorities that if the will-maker remains able to act freely, the exercise of significant advice or persuasion on the will-maker or an attempt to appeal to the will-maker or the mere desire of the will-maker to gratify the wishes of another, will not amount to undue influence: Maddess v. Racz, 2008 BCSC 1550 at para. 324 aff’d 2009 BCCA 539; Freeman v. Freeman (1889), 19 O.R. 141 at 155 (C. A.); Scott at para. 112.
Section 7 of the Estate Administration Act allows the court to appoint a person to administer an estate or part of it where an executor resides out of the province “and it appears to the court to be necessary or convenient by reason of the insolvency of the estate of the deceased or other special circumstances.”
Administration Durante Absentia
Section 11 provides: .(1) This section applies if
(a) the executor to whom probate of a will has been granted, or
(b) the administrator to whom administration of an estate has been granted,
is residing outside British Columbia at the end of 12 calendar months from the death of the deceased.
(2) A creditor, spouse, next of kin or legatee may apply to the court for an order under subsection (3), on an affidavit setting out
(a) the capacity in and the grounds on which the applicant applies, and
(b) that delay is being caused in the administration of the estate of the testator or intestate, owing to the absence of the executor or administrator from British Columbia.
(3) On application under subsection (2), the court may grant to the applicant special administration of the estate of the deceased person, either general or limited, and on the terms as to notice and security as the court thinks fit.
(4) Subsections (1) to (3) do not abridge the powers of the court as defined in preceding sections.
(5) If an executor capable of acting returns to British Columbia and becomes resident in British Columbia when an application under subsection (2) is pending, the executor must be made a party to the application, and the costs incurred by granting administration under subsection (3) are in the discretion of the court.
(6) A person to whom administration is granted under subsection (3) has the same powers as an administrator appointed pending the minority of the next of kin.
(7) Pending an application for the grant of special administration under subsection (3) the court may appoint a person to collect any debts or effects due to the estate and to give discharges for them.
(8) A person appointed under subsection (7) must give security as the court orders for the proper discharge of the person’s duties.
s.11(2) A creditor, spouse, next of kin or legatee may apply to the court for an order under subsection (3), on an affidavit setting out(a) the capacity in and the grounds on which the applicant applies, and
(b) that delay is being caused in the administration of the estate of the testator or
intestate, owning to the absence of the executor or administrator from British Columbia.
Such a grant has been held to continue in force after the death of the original personal representative. (Taynton v. Hannay (1802) 3 Bos. & P26).
The application is made by way of a requisition and should be accompanied by an affidavit setting out the capacity in and the grounds upon which the applicant applies, and that the delay has been caused in the administration of the estate due to the absence of the personal representative from the province. Notice should be given to any person who has received a prior grant.
The grant is usually limited to the time at which the absentee returns to the province.
If an executor or administrator has disappeared (as opposed to being absent from the province) an application for revocation of the grant and issuance of a further grant under s. 7 of the Estate Administration Act may be advisable.
Rule 21 (27) provides for the administration of an estate by an attorney.:
“ If a person entitled to administration resides outside British Columbia, administration by attorney, or administration with the will annexed, may be granted to the person or the person’s attorney acting under a power of attorney”.
The attorney need not be a resident of British Columbia, and such a grant generally will not be made to an attorney residing in the same jurisdiction as the donor.
In re Edmundson Estate 1963, 44 WWR 119 (BCSC) , the court commented at page 123 that the case law:
“suggests that if the principal and the attorney are both resident in the same place, the court would prefer the principle be appointed rather than the attorney. In other words, the provision for the appointment of an attorney is an additional right given to the person otherwise entitled to the administration to have an attorney appointed if the residence of the person otherwise entitled out of the jurisdiction makes it difficult for that person to perform his or her duties.”
The grant is limited for the use and benefit of the person who appoints the attorney and until that person applies for administration in British Columbia.
Administration by an attorney might be used when the person entitled to the administration has one or more of the following criteria:
A. Has language difficulties that may prevent him or her effectively handling the estate in British Columbia;
B. May be difficult to contact for the purpose of providing instructions are executing documents;
C. May have difficulty dealing with assets in this jurisdiction ie running an active business.
If there are several persons entitled to the grant, all residents of the jurisdiction, the grant may be made to the attorney of one, but subject to the consent of the others. Such an attorney is not merely the agent of the principal, but is responsible for the due administration of the assets and is liable to be called to account by the persons interested in the estate.
If the court comes to the conclusion that the testator intended to pass a bequest, and can determine what that something is, then the fact that the testator wrongly described the bequest in his or her will, does not prevent the will taking effect in regard to the subject matter intended by the testator.