Tracing and Accounting For Assets

TracingTracing & Accounting For Assets

It is very common in estate litigation that the form of an asset may change substantially over a period of time.

For example a bank account of cash can be converted into a stock portfolio, which in turn can be used to buy a house that is subsequently sold and put into long-term bonds.

As long as those funds can be identified, they can be traced and accounted for, and where appropriate and ordered by the court, transferred into the name of a rightful heir.

 The principals relating to orders for tracing and accounting were articulated by  Pitfield J. in  Ruwenzori Enterprises Ltd. v. Walji, 2004 BCSC 741 at paras. 240-242 and 245, aff’d 2006 BCCA 448:

1]    Neither tracing nor an accounting is a remedy.  Each is a process designed to assist in the perfection of a remedy…

2]    It follows that tracing is the process employed to identify and particularize the manner in which funds have been applied.  The results of the tracing permit a claimant to determine whether it will opt for a proprietary remedy in respect of funds derived from it, or a monetary judgment in respect thereof.

3]    An accounting is directed at the determination of profit, gain or loss derived from assets in respect of which tracing has identified a right to, and the claimant has opted to assert, a proprietary interest.

 

4]    Upon termination of any part of the tracing process at their option or otherwise, [the plaintiffs] will be entitled to elect to apply to confirm a proprietary interest in respect of assets other than those in respect of which the election to do so has already been made and by virtue of my reasons granted, or to enter judgment for the amounts I have enumerated and to apply for judgment in respect of any additional funds identified by the tracing process.

Agreements Not to Revoke a Will

Binding agreementBinding Agreement Not to Revoke Will

Kayne v Wright et al  2012 BCSC 119 is an excellent example of “mutual wills” which on occasion arise in estate litigation disputes.

The general principle in law is that a will is always revocable.

Most married couples execute what are commonly known as mirror wills, as the wills are virtually identical but for the change of names between the testators.

In a mutual will situation however there must be evidence of an agreement not to revoke one’s will that must be  clear and unequivocal.

If the court finds that there was a binding agreement between the parties, and one of the parties subsequently revokes that will and executes another, then the beneficiaries of the revoked will have a claim in law for constructive trust against the offending testator’s estate and its beneficiaries.

In this case, the husband agreed to give his wife a life interest in a condominium, make provisions in his will giving her a life interest in another property he might own at his death, and transferring to her his registered retirement income funds.

In exchange, the female party agreed to use the condominium for maintenance and support during her lifetime and to make a will which provided for in your revocable gift of the remainder of her estate to the males estate after gift of $30,000 was paid to each of her children.

The court referred to each of their wills/codicil and noted for example that the male parties’ will contained the following words:

“and it is understood that this paragraph of my will shall be your revocable, this life estate being granted to my wife in consideration of the term in her will providing for the remainder of her estate, after gift of $30,000 paid to each of her children, to fall into my estate.

The wife had similar wording in her will.

The husband subsequently died and the wife shortly thereafter changed her will on two occasions prior to her death, and change the beneficiaries from her late husband’s estate, to her own new beneficiaries.

 

THE LAW AND ANALYSIS

 

[      The doctrine of mutual wills and the obligations flowing from them was discussed by Mr. Justice Cullity in Edell v. Sitzer (2001), 55 O.R. (3d) 198 (Ont. Sup. Ct. J.).  He stated at paras. 57-58:

[57]    ”  The doctrine of mutual wills has traditionally been applied in cases where individuals have made separate wills pursuant to an agreement with respect to their terms.  Most commonly, they have agreed that each will obtain a benefit under the other’s will and that other specified individuals will receive the property of each of them on the death of the survivor.  In some cases of this sort, the benefit obtained by the survivor under the other’s will has been a life interest; in other cases, it has taken the form of an outright gift.  Where the requirements for the application of the doctrine are satisfied, the survivor will not be permitted to defeat the agreement by revoking his or her will after the death of the other.  This result is achieved by the imposition of a constructive trust on the survivor’s estate for the benefit of those who were intended to benefit under the agreement. ( emphasis added)

[58]      The most fundamental prerequisite for an application of the doctrine is that there be an agreement between the individuals who made the wills.  It has been repeatedly insisted in the cases that:  (a) the agreement must satisfy the requirements for a binding contract and not be “just some loose understanding or sense of moral obligation” (Re Goodchild (Deceased), [1996] 1 All E.R. 670 (Ch. D.), at p. 681)[;] … [b] It must be proven by clear and satisfactory evidence; and (c) it must include an agreement not to revoke the wills.”

This doctrine was also discussed extensively by Madam Justice Southin for the Court of Appeal in Brynelsen Estate (Administrator of) v. Verdeck and O’Hara, 2002 BCCA 187 at paras. 14-29.

Lost Wills and the Presumption of Revocation

Lost WillsLost Wills and the Presumption of Revocation

An update to this article is that since the introduction of WESA on April 1, 2014, I anticipate that the courts will be more willing to allow copies of wills as proof of the testator’s intention to more easily admissible into probate

Often when a person dies, his or her original will cannot be found and will never be found.

Frequently years have passed between between the date the will was signed and the testator’s death.

In many circumstances a true copy of the will be accepted for probate in the place of the original will.

However, if the will was last known to be in the custody of the testator, and is not found after the death of the testator, then the presumption is that the testator destroyed the will with the intention of revoking it.

The presumption of revocation may be rebutted by evidence such as the following:

A. The character of the testator;

B. The existence of codicils;

C. Statements made to beneficiaries with respect to provisions made for them; and

D. Words and actions of the testator before and after the execution of the will.

The degree of evidence required by the Courts to rebut this presumption is not usually very high.

If the existence of a valid will is proved then the presumption of revocation is rebutted. The contents of the will must then be proved.

If there is a copy or completed draft, and the solicitor who prepared the will gives evidence as to proof of execution by the testator, there should be sufficient evidence of the contents of the will.

If there is no copy or completed draft, the evidence of the witness as to the contents of the will may be sufficient, even if that witness has an interest in the will.

Such evidence may include statements made by the testator before or after the execution of the will, evidence that the witness with the will, evidence of codicils to a will that reference to the will in written documents.

Rectification of Error in Will Refused

rectification 2Rectification of Error in Will Refused By Ontario Court of Appeal

Robinson Estate v Robinson 2011 CarswellOnt 5819 once again demonstrated the limited jurisdiction that exists in the courts to remedy a mistake and omission made in the deceased’s will, even by the drafting lawyer.

The deceased testator executed 2 separate wills, one was to deal with property held in her native Spain as well as England, and a subsequent one to deal with her Canadian property.Continue reading

Court “Regrettably” Declares Will Executed Before Marriage To Be Void

Will Executed After MarriageWill Executed Before  Marriage “Regrettably” Declared Void

 

Please note that due to the implementation of WESA. this will no longer be the law for wills signed on or after  April 1, 2014 

MacLean Estate v. Christiansen 2009 BCSC 1159 is a good example of the legal hardship that can ensue if a testator executes a will before his or her marriage.

This is because section 15 (a) of the Wills Act, RSBC, provides that a will is revoked by the marriage of the testator, unless there is a declaration in the will, that it is made in contemplation of the marriage.Continue reading