Category: Disappointed Beneficiaries
This blog is the second and final blog in my series discussing estates-related topics in the film The Grand Budapest Hotel. While the first part focused on the application of forfeiture rules in the context of a testator’s murder, this blog specifically discusses the policy considerations that arise as a result of the further Last Will and Testament executed by one of the film’s characters, Madame D.
As a brief refresher, late in the film, a further Last Will and Testament executed by Madame D is discovered, the operation of which is only to be given effect in the event of Madame D’s death by murder. While the concept makes for an interesting twist in the film, in reality the purported condition precedent that the Will takes effect only upon death by murder likely means nothing in the context of Madame D’s estate planning.
Part I of Ontario’s Succession Law Reform Act specifically contemplates that a Will is revoked by, among other actions, the execution of a subsequent Will made in accordance with the provisions of that section. It is not made clear in the film which of Madame D’s two Wills were executed last. If the further Will was executed most recently and complied with all of the requirements of due execution, the prior Will would have been revoked and the second Will would likely prevail irrespective of the condition precedent.
Alternatively, a Will may also be revoked by a written direction of the testator to do so. Failure to expressly revoke a prior Will can potentially create problematic administration scenarios in which a testator may have believed, albeit mistakenly, that a prior Will had been revoked when in fact it had not.
While executing a Will in accordance with the provisions at Part I of the Succession Law Reform Act is sufficient in and of itself to revoke prior Wills, it is nonetheless prudent from an estate planning perspective to include a written intention to revoke prior Wills (provided, of course, the testator intends to do so).
Separately, even if we were to disregard the provisions of the Succession Law Reform Act, there would be a number of practical policy concerns if a Will whose effects were subject to a condition precedent. Notably, a reasonable debate could arise between beneficiaries in scenarios in which the cause of death is ultimately unclear.
The film suggests Madame D’s reason for executing a further Will to take effect on her murder is to ensure her nephew could not benefit from her demise at his hand. However, as discussed in Tuesday’s blog, that goal is accomplished by the operation of the slayer rule. Alternatively, Madame D could have relied on a common estate planning technique by making her nephew’s interest in her estate, rather than the Will in its entirety, subject to a condition precedent.
While Ontario prohibits conditions precedent that are deemed to be contrary to public policy, such as restraining marriage or promoting discriminatory behaviour, other conditions precedent are recognized at law. For example, Madame D could have simply made Dmitri’s interest contingent on his reaching a certain age, or reaching a certain milestone in his life, such as graduating from university. Instead, the purported condition precedent that the further Will was to take effect on her murder likely has no effect at all, provided the evidence shows it was executed after the initial Will and in compliance with the provisions of Part I of the Succession Law Reform Act.
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Competing applications about the ownership of a home were before the Court in Marley v. Salga, 2019 ONSC 3527. On the death, the home was jointly owned between the deceased (Salga) and his wife (Marley). Notwithstanding the registered, legal ownership of the property, Salga’s Will gave Marley a lifetime right to occupy and use Salga’s one-half interest in the property and thereafter directed that the house be sold for the benefit of the residuary beneficiaries.
This led the residuary beneficiaries to commence an Application for a declaration that the Estate is entitled to an undivided one-half interest in the home and for an order requiring the Estate Trustee (Klassen) to sell the home right away (the “Salga Application“). Thereafter, Marley commenced her own Application for a declaration that she was the sole legal and beneficial owner of the property, or, alternatively, that her interest in the property is greater than 50% (the “Marley Application“).
Ultimately, Justice Reid found that ownership of the property was severed by the deceased in the course of his dealings but denied the Salga Applicants’ request that the property be sold before the termination of Marley’s interest under the Will. The Marley Application was also denied. Our blog on this decision can be found here.
The parties were unable to agree to the issue of costs. Justice Reid, 2019 ONSC 6050, followed the traditional approach to costs in estate matters and the costs of both applications, on a partial indemnity scale, were ordered from the Estate. In reaching this conclusion, Justice Reid considered and found the following:
- The Marley Application was in essence a response to the Salga Application and the costs of both proceedings were treated as one;
- Both parties were found to be partially successful: the Salga Applicants were successful in obtaining a declaration that 50% of the home belongs to the Estate and the Marley Applicant was successful in preventing an immediate sale of the home;
- Consideration was given to the fact that an award of costs from the Estate meant that the Salga Applicants (as the residuary beneficiaries) would be effectively bearing their own costs as well as Marley’s costs. However, that was not enough to outweigh the deceased’s responsibility to act unambiguously by severing his interest on title during his lifetime.
- Costs against the Estate in this case “places the responsibility for the litigation squarely on [the deceased] where it belongs“.
This costs decision is also an informative read for the costs of an estate trustee as a respondent in both proceedings and how costs should be paid from an estate where there is no liquidity.
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Mutual wills are a common tool used by two (or more) people who wish to preserve a will (or specific provisions thereunder) by entering into an agreement to avoid future changes. This is a particularly useful tool in blended families where partners have children from prior relationships, and both want to ensure that their children are equally provided for post-death.
The requirements for an application of the doctrine of mutual wills are three-fold: (1) there must be an agreement between the individuals who made the wills, which amounts to a contract; (2) the agreement must be proven by clear and satisfactory evidence; and (3) it must include an agreement not to revoke wills.
Once one of the parties to a mutual will agreement dies, the survivor is then bound by that agreement not to revoke his or her will. Typically, we see mutual wills cases arising after the death of both spouses, once it is discovered that the surviving spouse drafted a new will in breach of their mutual will agreement or disposed of assets contrary to their agreement.
The recent case of Nelson v Trottier grappled with a novel issue with respect to mutual wills: whether, in light of the existence of a mutual wills agreement, beneficiaries to a survivor’s estate could claim a constructive trust over her assets while she was still alive.
The applicants in this case were the deceased’s children. They were not beneficiaries under their father Bill’s will, but were beneficiaries under his wife Huguette’s will. After making a donation in Bill’s honour, the applicants sought, among other things, a declaration imposing a constructive trust over Huguette’s assets and preventing her from gifting property without further order of the court or the consent of the applicants.
After establishing that a mutual wills agreement existed between Bill and Huguette, the court then examined when a constructive trust is established. In deciding this issue, Justice Pattillo stated,
“in circumstances where one of the parties to a mutual wills agreement has died, however, and based on the nature of a mutual wills agreement and the purpose of imposing a constructive trust in respect of such agreement, it is my view that a constructive trust does not arise until either the survivor dies or earlier, in the event there has been a breach of the agreement by the survivor”
Since Huguette was still alive, the question became whether she had breached the mutual wills agreement by making the donation in Bill’s honour. Justice Pattillo ultimately found that Huguette had not breached the mutual wills agreement. His reasons included that the agreement provided that both Bill and Huguette would give the survivor all of their property absolutely and that the surviving spouse could deal with the property as absolute owner while alive (which includes the ability to make gifts).
Interestingly, Justice Pattillo acknowledged that the mutual wills agreement stipulated that the survivor could not dispose of “substantial” portions of the property received during his or her lifetime in order to defeat the agreement; however, he did not find that the donation given to be “substantial” in comparison to the size of the estate.
The application seeking, among other things, a declaration that there was a constructive trust over Huguette’s assets, was ultimately dismissed.
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The Ontario Superior Court of Justice recently released a decision that provides a helpful and comprehensive overview of the case law regarding solicitor’s negligence claims brought by non-clients.
Within the estate litigation context, this issue sometimes arises where a claim is brought by a disappointed beneficiary as against the drafting solicitor of a testator’s will. The generally accepted origin and definition of a “disappointed beneficiary” is White v Jones,  1 AII E.R. 691, which sets out that those who may bring a claim against a lawyer as a “disappointed beneficiary” are those individuals whom the deceased had intended to include as a beneficiary in their Last Will and Testament, but, as a result of an error or negligence on part of the drafting lawyer, such a bequest was not carried out.
The “disappointed beneficiary” is therefore an exception to the general rule that the only individual a lawyer owes a duty of care to in a retainer is the client. However, the extension of a duty of care to a “disappointed beneficiary” applies solely as it relates to those beneficiaries that a solicitor can reasonably foresee that as a result of their negligence, the beneficiary may be deprived of his or her intended legacy, and where the testator nor the estate would have a remedy against the solicitor.
The Alberta Court of Appeal has held that a drafting solicitor does not owe a duty of care to beneficiaries named under a prior will, as to do so would create inevitable conflicts of interest for the solicitor. Furthermore, the court held that beneficiaries named under prior wills have other options available to them, such as challenging the validity of the will.
General Principles Applying to Solicitor’s Negligence Claims
In the ONSC’s recent decision, 2116656 Ontario Inc. v Grant and LLF Lawyers LLP, 2016 ONSC 114, the particular claim arose in the context of mortgage fraud, however, the general principles that are confirmed by the court are applicable generally to solicitor’s negligence claims. Some of the salient points discussed by the court are summarized below:
- In order for a solicitor to be liable to a non-client, the solicitor must know – from placing him or herself in a position of sufficient proximity with the non-client third party – that the particular non-client is relying on his or her skill. Therefore actual knowledge is a prerequisite for a finding of care, such that it is not sufficient that the solicitor “ought to have known” of the reliance;
- The non-client third party’s reliance must have been reasonable;
- The existence of “red flags” or “warnings” alone will not be sufficient to give rise to a duty of care on the solicitor’s part, unless a duty of care is first established under the ordinary principles;
- The imposition of a duty of care on a solicitor to a third party non-client raises numerous concerns, including:
- it makes a solicitor responsible to someone who has not retained and does not pay him or her;
- It is illogical to impose such a duty on a solicitor where the solicitor’s client themselves do not owe a duty to the third-party;
- It is usually not possible to disclaim or limit liability to such a non-client third party; and
- Making a solicitor assume such a duty to a non-client third party may place the solicitor in a conflict with the interests of the solicitor’s own client;
- The court held that due to the above concerns, it will “only be under “narrow”, “exceptional”, “very limited” and “well defined circumstances” that a lawyer can be held to owe a duty of care to a non-client third party to protect his, her or its economic interests”; and
- The court outlined the various indicia of a solicitor-client relationship, including, inter alia, a contract, retainer agreement or letter of engagement, an open file, the giving and taking of instructions, the creation of legal documents, and the rendering of bills.
This decision provides a comprehensive summary of the existing jurisprudence and reiterates the principle that: but for exceptional and rare circumstances, a solicitor will only owe a duty of care to his or her client. This may be “disappointing” news to non-client, third party claimants.
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