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Registrar Says It Is Role of Courts to Interpret Documents

Interpret DocumentsA Registrar declined to interpret documents on a  Passing of Accounts hearing in Lam v Daphne’s Fund ( Trustee of) 2015 BCSC 623, in effect stating that it was the role of the  Courts to construe underlying trust documents and not the Registrar.

 

Since the respondent wished to contest the validity of the alter ego trust, he should bring a court action to do so. Due to the complexity of the situation, the Court ordered that the registrar should report to the court and make recommendations to the court but it was the court that should make the final order with respect to the accounts.

I have noted that there is often a great deal of confusion in the practice of estate litigation as to the proper format of determining such questionable transactions and documents at a formal passing of accounts, as opposed to a separate court action. It would appear that the preferable remedy is to have a separate court action to contest the validity of documents in question, and save the passing of accounts for after their validity has been determined.

The Court Stated In Part:

Ms. Chan asks that the court direct the registrar to inquire into and report on matters such as the validity of the alter ego trust and the exercise by the deceased of a special power of appointment under the trust on the validity of terms of paragraphs 9 and 10 of a testamentary instrument dated November 13, 2009, on the appropriateness of the manner, timing and proportionality by which the trustees of the alter ego trust funded a $5 million sum in “Deborah’s fund” it is called, including seeking an assurance and use of the $5 million insurance monies received by certain corporations, and on the nature and extent of the beneficial interest held by Daphne’s trustee in Deborah’s fund, including the $5 million added to Deborah’s fund and further.

Before his death Mr. Lam had engaged in estate planning with the assistance of professionals, including lawyers and accountants. The estate planning resulted in a sophisticated and complex series of inter-related documents that included the creation of an alter ego trust by deed of settlement effective April 26, 2006. Mr. Lam’s will, dated the same day, April 26, 2006, which is the will subject to this petition, as is the alter ego trust I just referred to, Mr. Lam also made a life insurance trust declaration on the same day, April 26, 2006. On November 13, 2009, Mr. Lam executed a codicil to his will and on the same day, November 13, 2009, he executed a testamentary instrument exercising a power of appointment. That last document is not subject to any relief sought in this petition.

Ms. Chan asks that the court direct the registrar to inquire into and report on matters such as the validity of the alter ego trust and the exercise by the deceased of a special power of appointment under the trust on the validity of terms of paragraphs 9 and 10 of a testamentary instrument dated November 13, 2009, on the appropriateness of the manner, timing and proportionality by which the trustees of the alter ego trust funded a $5 million sum in “Deborah’s fund” it is called, including seeking an assurance and use of the $5 million insurance monies received by certain corporations, and on the nature and extent of the beneficial interest held by Daphne’s trustee in Deborah’s fund, including the $5 million added to Deborah’s fund and further.

In deciding whether to order the executors and trustees to pass the estate accounts, I must keep in mind that the executors derive their authority from the will, not from any order of probate. I also bear in mind that, although probate can be recalled or set aside, so long as a probate order remains in effect, it is proof that the will is valid and that it is the last will of the deceased. Conversely, until probate is granted, passing of accounts of an executor and trustee named in a will who has not sought to have the will admitted to probate might turn out to be a waste of judicial resources if a later will is found or if a defect in the will leads to it being found ineffective.

Some of the directions Ms. Chan seeks would have the court attach to the order for the passing of the accounts terms that would call upon the registrar to construe the underlying trust documents. I refer here to the request the registrar be directed to inquire into and report on things like the validity of the alter ego trust and any exercise by the deceased of a special power of appointment under the trust, or the validity of the terms of paragraphs 9 and 10 of the testamentary instrument of November 13, 2009.

[36]         With respect to these requests, these are matters that this court, and not its registrar, should deal with. If Ms. Chan wishes to question the validity of the alter ego trust and/or paragraphs 9 and 10 of the testamentary instrument, it should bring the appropriate action seeking construction of these documents or attacking their validity.

This is a complicated situation. It is no doubt going to be difficult for the registrar to work his or her way through it, meaning absolutely no disrespect to the registrars of this court, these are matters where the responsibility for the final decision should rest with the court and not with the registrar. That means that the registrar should report to the court, make recommendations to the court if appropriate, but that the court should hear from the parties and make the final order with respect to the accounts.

[43]         I therefore decline to order that the registrar certify their findings and they become binding on the beneficiaries without further order of the court, but order instead that the registrar state the results of the passing of the accounts of the alter ego trust and the insurance fund in the form of a report and recommendations to the court.

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