Solicitors preparing Wills need to be mindful of the obligations they owe to a testator. The seminal Court of Appeal decision in Hall v Bennett Estate provides a helpful refresher of the steps a solicitor should consider to ensure best practices are followed.
According to the Court, it is well established that a “solicitor who undertakes to prepare a will has the duty to use reasonable skill, care and competence in carrying out the testator’s intentions. This duty includes the obligation to inquire into and substantiate the testator’s capacity to make a will”.
Testing for capacity is fundamental – a solicitor has a duty to make inquiries into the testamentary capacity of the testator.
Should the solicitor have any doubt as to capacity, Justice Cullity in Scott v Cousins, famously states that “…careful solicitors who are in doubt on the question of capacity, will not play God – or even judge – and will supervise the execution of the will while taking, and retaining, comprehensive notes of their observations on the question”.
The Court of Appeal proceeds to summarize an article written by M.M. Litman & G.B. Robertson outlining errors made by solicitors in the preparation of a Will, leading to negligence claims, including failing to:
- obtain a mental status examination;
- interview the testator in sufficient depth;
- properly record or maintain notes; and
- test for capacity.
As such, notes from a drafting solicitor should ensure that all of these are addressed.
In certain instances, although narrow, a duty of care might also be owed to a disappointed beneficiary. A two part test is applied as set out by the Supreme Court of Canada in Cooper v. Hobart.
While claims for negligence by testators and disappointed beneficiaries cannot be stopped, a file with detailed notes can go a long way in defending such a claim.
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In Foisey v. Green, 2017 ONSC 7140, the estate trustee of the estate was required to pass her accounts as estate trustee, even though the beneficiary signed a full and final release.
There, the deceased died intestate, and was survived by two sisters. One sister, Joyce, was appointed as estate trustee. She distributed what she said was half of the estate to her sister, Darlene, who signed a release as against the estate and the estate trustee.
Darlene was later found incapable of managing her property, and the Public Guardian and Trustee was appointed as her statutory guardian. They looked into the estate, and had concerns about whether Darlene received her full entitlement from the estate. The estate was said to have a gross value of $830,000, but Darlene only received $291,000. The PGT sought an accounting from Joyce. Joyce resisted, relying on the release signed by Darlene.
The court held that Joyce had to pass her accounts, notwithstanding the release. The court referred to the presumption of capacity in the Substitute Decisions Act, and the fact that a person is entitled to rely on the presumption of capacity unless the person has reasonable grounds to believe that the other person is incapable. However, the court noted s. 2(4) of the SDA, which provides that where a contract was entered into within one year of the creation of a guardianship, “the onus of proof that the other person who entered into the contract …did not have reasonable grounds to believe the person incapable is on that other person.”
In the Foisey case, the court found that there were “red flags” that precluded the court from finding that Joyce satisfied the court that she did not have reasonable grounds to believe that Darlene was incapable. These included:
- Darlene was living in an assisted living facility; and
- Darlene was participating in a trusteeship program.
To Joyce’s credit, however, her lawyer met with Darlene, in the presence of Darlene’s apparent lawyer, a childhood friend, and the administrator of the facility of the lodge where Darlene resided. Apparently no one objected to Darlene signing the release, or advised that Darlene did not have capacity.
In ordering the passing of accounts, the judge noted Joyce’s evidence that after the signing of the release, she did not keep any of the estate accounting.
One takeaway is to take steps to ensure that beneficiaries are capable of signing a release if there is anything to suggest that capacity may be in issue. A second takeaway, as noted by the judge, is to always keep records. “Although unfortunate, this case underscores the importance of keeping adequate records notwithstanding the execution of an estate release.”
As a postscript, an appeal to the Court of Appeal was dismissed, as the Court of Appeal determined that because the order directing the passing of accounts was interlocutory, the appeal would lie to the Divisional Court, with leave.
Have a great weekend.
A recent decision from the Court of Appeal for Ontario, Dujardin v Dujardin, 2018 ONCA 597, considers an appeal with respect to a Will challenge on the basis that the testator lacked testamentary capacity. The testator in this situation was a frequent consumer of alcohol. Despite what the trial judge called the testator’s “chronic alcoholism”, it seemed as though he was able to function normally on a day-to-day basis, including in business dealings relating to a family farm owned by the testator and his brother. Following the testator’s death, his wife disputed his Will, under which she received no benefit.
Recently, my colleagues, Noah Weisberg and Garrett Horrocks, discussed whether the classic test for testamentary capacity as set out in Banks v Goodfellow should be updated, and a new test as proposed in an article in the Canadian Bar Review, Vol 95 No. 1 (2017), Banks v Goodfellow (1870): Time to Update the Test for Testamentary Capacity.
The article opines that the context of the testator, including, for instance, family dynamics, should be incorporated explicitly into the test for testamentary capacity. This means that we would be asking the question: “can this particular person, with his or her particular mental abilities, in this particular situation, make this particular Will, at this particular time?”, rather than “can this testator make a Will?”
I thought the suggestions in the article were interesting when considering the facts of the Dujardin decision, and the findings of the trial judge. It seems as though the lower court took into account a number of contextual factors in applying the Banks v Goodfellow test, ultimately leading to a conclusion that the testator did possess the requisite testamentary capacity, a conclusion which was upheld by the Court of Appeal.
In particular, some of the interesting contextual factors included:
- the history of the testator and his brother’s ownership and operation of the family farm, and the brothers’ consistent desires to leave their respective shares of the farm to each other upon their death;
- prior mirror Wills executed by the brothers 13 years before the testator’s death, which reflected the same intention as the later Will that was being challenged (the testator’s prior will was revoked in 2000 when he married his wife); and
- the testator’s relationship dynamic with his wife, with whom it appeared he was not close, and the provision that he made for her outside of his Will.
In particular, the Court of Appeal commented that “[g]enerally, the manner in which [the testator] disposed of his property made sense in the context of his life and familial relationships.”
Had the trial judge not considered the various contextual factors, it’s possible she could have arrived at a different conclusion. Subject to the medical evidence, given that the testator suffered from alcoholism, it may have been open to the court to conclude that this condition had, in fact, affected the testator’s cognition.
In any event, it is interesting to see a practical example of the ideas put forth in the article mentioned above, and to consider how the suggestions of the authors may come into play in real-world situations.
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Capacity is a fundamental consideration in many aspects of estate, trust, and attorneyship litigation. The capacity of an individual to take a particular legal step, for example, to effect a distribution of property or to make a valid testamentary document, will often form the basis of a claim or court application. However, as set out in today’s blog, capacity is specific as to task, time, and situation. Context is a key factor in assessing capacity or lack thereof.
Whether an individual will be found to be capable of taking a particular legal step depends on the nature of the step being taken and when this step was taken. By way of example, the threshold for the capacity required by a testator to execute a valid Last Will and Testament differs from, and is considerably higher than, the threshold of an individual seeking to grant a power of attorney for property or personal care.
The capacity to make a valid will requires an individual to have a clear understanding of the nature and extent of their assets, and to understand the effects of the dispositions being made including any claims that might arise as a result. The capacity to grant a power of attorney for property, while similar to testamentary capacity, is a lower threshold. An individual will be capable of granting a power of attorney for property provided that,
- they have a general understanding of the nature and value of their property;
- are aware of the obligations owed to any of their dependants; and
- understand the nature of the rights being given to the attorney as well as the rights that they retain as the grantor of the power of attorney, for example, the right to revoke the power of attorney if capable.
While the capacity to grant a power of attorney for property only requires the grantor to have a general understanding of their property or their obligations, testamentary capacity requires specific knowledge and appreciation of potential legal ramifications. Accordingly, an assessment of an individual’s capacity in each respect will impart different requirements.
Capacity is also specific as to time, particularly as an individual’s capacity may fluctuate depending on illness or circumstance. While somewhat uncommon in practice, an individual who was previously assessed as incapable may subsequently regain the capacity to take a particular legal step. Accordingly, when acting on behalf of an individual challenging the validity of a testamentary document or disposition of property, it is important to consider not only the grantor’s historical capacity or lack thereof, but also whether capacity may have been regained at some point prior to the disposition being challenged.
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On a recent trip to Rochester, New York, my fiancée and I had the pleasure of touring the George Eastman Museum and came across an interesting piece of estates lore.
George Eastman, the founder of Kodak and a pioneer of bringing photography to the mainstream, died leaving a Will drawn in 1925. As his wife had predeceased him and they had no children, Mr. Eastman devised all of his real property and left a substantial cash legacy to his closest family member, his niece, Ellen Dryden. Mr. Eastman’s estate held significant assets, and the value of liquid assets alone was estimated as exceeding the equivalent of USD$35 million today.
However, on March 9, 1932, only five days before his death, Mr. Eastman had a change of heart with respect to the distribution of his estate. Rather than leave the bulk of his estate to an individual, Mr. Eastman wished to ensure that his legacy would be one of service to the community that had fostered his photography empire. True to form as a philanthropist and benefactor of local enterprise, Mr. Eastman executed a Codicil to his Will, changing the primary beneficiary of his estate from his niece to the University of Rochester.
The testamentary dispositions under the Codicil represented a significant deviation from those under his Will. Typically, where a testator’s dispositions vary substantially from one instrument to another, concerns may arise with respect to the their testamentary capacity or the presence of undue influence.
A shrewd entrepreneur in his own right, Mr. Eastman recognized the risk that the Codicil might later be the subject of scrutiny or litigation. On the date the Codicil was to be executed, Mr. Eastman hosted a gathering at his residence and invited many guests and acquaintances. He devoted time to speaking to each individual guest about topical, personal subjects so that they could attest to Mr. Eastman’s soundness of mind in the event that a certain disgruntled niece chose to commence a Will challenge.
In a way, Mr. Eastman’s goal is not too dissimilar from some of the criteria that are relied on even today to assess a testator’s capacity. Third-party evidence that a testator appeared to be of sound mind immediately prior to the execution of a testamentary document may help a trier of fact draw a favourable conclusion with respect to capacity. While the formal criteria to assess capacity primarily consider a testator’s appreciation and understanding of his or her assets, Mr. Eastman’s clever scheme demonstrates that he turned his mind to questions about his own capacity and took steps to mitigate the risks.
Mr. Eastman’s Codicil was not later subject to any litigation, and the University of Rochester received a handsome distribution out of his estate.
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The general rule, one that most people are probably familiar with when they think of a Will, is that the testator has to have the requisite capacity in order to be able to execute it. But what does that mean?
Generally, it means that a person should be of sound mind and understanding and have sufficient capacity to appreciate the various dispositions of property that would be put into effect with his or her execution of the Will. In other words, the testator must:
(1) understand that they are giving their property to one or more objects of his or her regard;
(2) have the capacity to comprehend the extent of their property and the nature of the claims of others to whom they are giving nothing under the Will.
In the case of a deceased who committed suicide, a question that may arise is whether a person who is about to commit suicide has the appropriate testamentary capacity to be able to execute a Will?
In that regard, it is important to remember that the onus is on the person who is propounding the Will – in other words applying to the court for an order that the Will is valid. In the usual course, there is certainly no presumption against the testamentary capacity of a testator. Indeed, it is quite the opposite. However, in cases where a proposition is made that a death (suicide) note is the last valid will and testament of a testator, it is more likely that someone may object. That is especially the case where an expected beneficiary is disinherited under such a circumstance.
As soon as capacity is called into question, the onus lies on the party propounding the Will to affirm testamentary capacity.
Suicide, in itself, does not equate to testamentary incapacity – although it is a circumstance that may be considered. In fact, a testator may have testamentary capacity even if they are not of entirely sound mind. That means that prior to committing suicide, a person can very well have testamentary capacity. If that is the case, then a death note can be considered a Holograph Will, which in Ontario, in accordance with section 6 of the Succession Law Reform Act, has the following requirements in order to be valid:
(1) It must be entirely in the testator’s hand writing; and
(2) It must be signed by the testator.
There is no requirement for witnesses in the case of a Holograph Will and it must be that the testator intended to dispose of their property after death.
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Previously on our blog and podcast, we discussed Tarantino v. Galvano, 2017 ONSC 3535 (S.C.J.) in the context of the counterclaim for quantum meruit and the costs decision of the Hon. Justice Kristjanson.
Tarantino v. Galvano arose from a lawsuit that was commenced by two out of three Estate Trustees against the third Estate Trustee, Nellie, with respect to her actions as attorney for property for the Deceased, Rosa (i.e. Nellie’s actions while the Deceased was still alive but incapable of managing her own property).
Rosa had two daughters, Nellie and Giuseppina. Giuseppina died before Rosa. Guiseppina’s daughters were the other two Estate Trustees and they are beneficiaries of the Rosa’s Estate along with Nellie. For the better part of her life, Nellie lived with Rosa. She took care of her mother after her father’s death. Nellie and her son were also Rosa’s caregivers as Rosa’s health declined until Rosa’s death in 2012.
Rosa and Nellie owned the home that they lived in together. Rosa held an 80.3% interest and Nellie held an 19.62% interest. Pursuant to Rosa’s 2005 Will, Nellie had a right of first refusal to purchase the home from Rosa’s Estate. In 2008, on the advice of counsel while Rosa was incapable, Nellie entered into an agreement between herself and Rosa. The agreement provided for a transfer of Rosa’s interest in the home and 75% of Rosa’s pension income to Nellie in exchange for Nellie’s caregiving services. The agreement was in writing and it was signed by Nellie. Nellie signed for herself and for Rosa, in her capacity as Rosa’s attorney for property.
Even though the Court found that Nellie was a good daughter who held up her end of the bargain by caring for Rosa, the agreement was set aside because it was a self-dealing transaction that did not meet the requirements of the Substitute Decisions Act, 1992:
“ Under the Substitute Decisions Act, Nellie could only enter into the agreement to transfer the house and pension income if it was “reasonably necessary” to provide for Rosa’s care, which I find it was not. As a fiduciary, an attorney for property is “obliged to act only for the benefit of [the donor], putting her own interests aside”: Richardson Estate v. Mew, 2009 ONCA 403 (CanLII), 96 O.R. (3d) 65, at para. 49. An attorney is prohibited from using the power for their own benefit unless “it is done with the full knowledge and consent of the donor”: Richardson Estate, at paras. 49-50. Rosa lacked capacity at the time of the Agreement, and the transfer of the house and pension income therefore were not done with Rosa’s full knowledge and consent.”
The “reasonably necessary” test was assessed, as of the time of the transfer, rather than from hindsight and it was determined that the decision to transfer 80.3% of a home and 80% of Rosa’s pension income at the outset of care was “an imprudent agreement which benefitted Nellie beyond that ‘reasonably necessary’ to provide adequately for Rosa’s care” (see paragraphs 34-49 for the Court’s analysis of this issue).
As a set off, Nellie’s quantum meruit claim was successful and you can click here for Ian Hull and Noah Weisberg’s podcast on this particular issue. While there was blended success to all parties involved, none of the three Estate Trustees were entitled to indemnification. Our discussion of the denial of costs can be found here and the Endorsement can be found here.
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In November 2017, my colleague, Sayuri Kagami, blogged about the Ontario Court of Appeal’s decision in Teixeira v Markgraf Estate, which considered the validity of a gift in the form of a cheque cashed after the death of the payor. Today’s blog discusses similar facts in the court’s decision in Rubner v Bistricer. That is, whether pre-signed blank cheques cashed after the payor is declared incapable of managing property constitute either an enforceable promise to gift or, in the alternative, a valid inter vivos gift.
In the late 1960s, the patriarch of the Rubner family, Karl, purchased a 10% stake in a real estate development in Oakville known as the Lower Fourth Joint Venture. Karl kept legal title to this interest in the name of his wife, Eda, with the intention that their three children, Marvin, Joseph, and Brenda, each receive beneficial ownership of a one-third share in the Lower Fourth interest.
Brenda subsequently renounced her share in the Lower Fourth interest to avoid triggering certain tax consequences. Accordingly, her share reverted back to Eda, who then set up an account into which the income generated by Brenda’s former share would be deposited. Notwithstanding that she had disclaimed her share, however, Brenda nonetheless wanted to retain the income that her share generated. In 2014, Eda agreed to sign several blank cheques for the benefit of Brenda and her husband, allowing them to collect the income from Brenda’s former share without incurring the tax liability.
In November 2016, Eda was assessed as being incapable of managing property. Shortly thereafter, Brenda’s husband filled in and deposited two of the blank cheques previously signed by Eda in order to prevent Brenda’s brothers from using those funds to pay for Eda’s expenses.
Brenda’s brothers subsequently commenced an application seeking, amongst other relief, a declaration that the funds withdrawn by Brenda after Eda became incapable were held on a resulting or constructive trust for Eda’s benefit. Brenda took the position that Eda had intended that these funds be considered gifts for Brenda’s benefit. She claimed that at a family meeting in 2012 or 2013, Eda had specifically agreed to gift to Brenda all future income generated by Brenda’s former share in Lower Fourth.
The court was tasked with considering whether a purported promise of future gifts could constitute valid inter vivos gifts. In order to establish a valid inter vivos gift, the recipient must show:
- An intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
- An acceptance of the gift by the donee, and
- A sufficient act of delivery or transfer of the property to complete the transaction.
The court held that the first step and third steps in this analysis could not be satisfied once Eda had been declared incapable of managing her property. Eda was deemed to have been unable to formulate the necessary intention to make a gift with respect to the blank cheques. Moreover, the court held that the delivery of “signed, blank cheques cannot amount to a complete gift”, as the drawer retains an interest in the amount of the cheque until it is cashed. Once Eda became incapable of managing her property, the gift could no longer be perfected. The blank cheques that were cashed after Eda was assessed as incapable of managing her property were held to be invalid, and Brenda was ordered to repay the amounts withdrawn.
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The Court of Appeal of British Columbia (the “BCCA”) recently dealt with an appeal from an Order of the British Columbia Supreme Court which declined to exercise jurisdiction by staying a petition for guardianship of an incapable person. This Order also included various terms relating to the person’s care and property.
This appeal dealt with the guardianship of Ms. Dingwall, the mother of both the Appellant and the Respondent.
At all material times, Ms. Dingwall and the Appellant lived in Alberta and the Respondent resided in British Columbia. Between 2010 and 2014, Ms. Dingwall resided for various periods in both Alberta and British Columbia. At the time of this appeal, Ms. Dingwall lived in a care home in British Columbia. She suffered from advanced dementia.
The Alberta Proceedings
On February 5, 2015, the Appellant sought an Order from the Alberta Court of Queen’s Bench appointing him as Ms. Dingwall’s guardian and trustee. The Respondent opposed this Order and in September, 2015 filed an Application to move the proceedings to British Columbia. This Application was never heard and the matter continued to be heard in Alberta.
On July 7, 2016, the Court granted the Order sought by the Appellant which appointed him as Ms. Dingwall’s guardian and provided him with the authority to make decisions with respect to Ms. Dingwall’s health care, the carrying on of any legal proceeding not related primarily to Ms. Dingwall’s financial matters and Ms. Dingwall’s personal and real property in Alberta.
The British Columbia Proceedings
A few weeks prior to the Alberta hearing, the Respondent filed a petition with the Supreme Court of British Columbia seeking a declaration that Ms. Dingwall was incapable of managing herself or her affairs due to mental infirmity and an Order appointing her as committee of Ms. Dingwall’s person and Estate. The Appellant opposed the Respondent’s petition by arguing that the Supreme Court of British Columbia lacked jurisdiction.
The Supreme Court of British Columbia asserted jurisdiction because Ms. Dingwall was at the time of the decision, ordinarily resident in British Columbia and because there was a “real and substantial” connection to British Columbia. The Court found that, in this case, both Alberta and British Columbia had jurisdiction.
Despite British Columbia having jurisdiction in this case, the Court found that the Alberta forum was nonetheless more appropriate and cited the following factors in favour of its decision:
- The similarity of the proceedings;
- Alberta having issued a final order; and
- The Respondent having attorned to Alberta’s jurisdiction by opposing the Appellant’s petition.
As a result, the Court stayed the Respondent’s petition but also made several Orders respecting Ms. Dingwall’s care and property. The parties’ costs on a “solicitor client basis” were to be payable by Ms. Dingwall’s Estate.
The Appellant appealed the following Orders made by the Court, other than the stay of the Respondent’s proceedings:
- issuing an Order on the matter after declining to exercise jurisdiction respecting it;
- finding the Court had territorial competence over the matter; and
- awarding solicitor-client costs payable from Ms. Dingwall’s Estate.
The BCCA Decision
The BCCA allowed the appeal and found that the lower Court erred in making Orders concerning the very matter over which it had declined to exercise jurisdiction. The Court noted that a decision to decline jurisdiction over a particular matter renders a judge incapable of deciding issues or making orders as to the substance of that matter.
As a result, the Court set aside the Orders respecting Ms. Dingwall’s care and property. In light of that finding, the Court of Appeal found it unnecessary to deal with the issue of whether British Columbia had territorial competence over this matter, given that the lower Court declined to exercise jurisdiction, in any event.
The Court of Appeal found that the Appellant was entitled to special costs payable by Ms. Dingwall’s Estate and that the Respondent was not entitled to costs.
The full decision can be found here: Pellerin v. Dingwall, 2018 BCCA 110
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The interplay between evolving social norms and the legal foundations that predate or accelerate these changes has seen significant development in the last decade. Courts of law and of public opinion have made important strides in shaping social policy in many areas, such as medically-assisted death, gender diversity and inclusion, and marriage rights, to name a few. A recent case out of the Ontario Superior Court of Justice considered this last issue, marriage rights, with a particular focus on predatory marriages.
In Hunt v Worrod, 2017 ONSC 7397, the Court was tasked with assessing whether an individual who had suffered a catastrophic brain injury possessed the necessary capacity to marry. In 2011, Kevin Hunt suffered a serious head injury following an ATV accident and spent four months recuperating in hospital. He was eventually discharged into the care of his two sons, but three days after his release, Mr. Hunt was whisked away by his on-and-off girlfriend, Kathleen Worrod, to be ostensibly married at a secret wedding ceremony.
Mr. Hunt’s children brought an application to the Court on his behalf to void the marriage, partly to preclude Ms. Worrod from accruing spousal rights to share in Mr. Hunt’s property or assets. Ultimately, the Court concluded that Mr. Hunt did not possess the requisite capacity to enter into the marriage.
In its reasons, the Court relied heavily on the opinions of several expert witnesses and the existing body of legal authority. The Court began by reviewing section 7 of Ontario’s Marriage Act, which provides that an officiant shall not “solemnize the marriage” of any person that the officiant has reasonable grounds to believe “lacks mental capacity to marry.”
The expert evidence tendered by the parties suggested that Mr. Hunt had significant impairments in his ability to make decisions, to engage in routine problem-solving, and to organize and carry out simple tasks. He was characterized as “significantly cognitively impaired”, and was assessed as being incapable of managing his property, personal care, or safety and well-being.
The Court subsequently relied on the test for capacity to enter into a marriage contract established by the British Columbia Supreme Court in Ross-Scott v Potvin in 2014. The Court held that a person has the capacity to enter into a marriage contract only if that person has the capacity to understand the duties and obligations created by marriage and the nature of the commitment more generally.
The Court also identified the tension between balancing Mr. Hunt’s autonomy as against the possibility that he lacked the capacity to appreciate the legal and social consequences of marriage. Ultimately, the Court was satisfied that Mr. Hunt’s children had met their burden of demonstrating that their father lacked the necessary capacity to marry Ms. Worrod. The marriage was declared void ab initio, and the attendant spousal property rights that would have otherwise flowed to Ms. Worrod were lost.
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