The recent decision of Fletcher’s Fields Limited v Estate of Samuel Harrison Ball, 2018 ONSC 2433 considered whether an appointment of trust funds for a particular purpose created an interest in land.
Fletcher’s Fields is a not-for-profit Ontario corporation which owns land that is predominantly used as a sports facility for rugby football union (the “Land”). Mr. Jenkins was the trustee of the estate of Samuel Harrison Ball. He was also a lawyer, and over the years had been actively involved with Fletcher’s Fields, as General Counsel, and as a member of the board of directors. In Jenkins’ role as trustee of Mr. Ball’s estate, he had the power to appoint money forming part of the estate as he saw fit.
In 1994, Jenkins exercised his power to provide Fletcher’s Fields with $100,000.00 pursuant to a “Deed of Appointment”. The Deed of Appointment provided that (a) the money must be used solely for the purpose of improving the sports facility on the Land; (b) the trustee had the right to revoke any or all of the money if the Land was not kept in good condition suitable for playing the sport; and (c) if revoked, Fletcher’s Fields was required to transfer the fund to the trustee, with interest.
In 2015, a new board of directors for Fletcher’s Fields was elected, which did not include Jenkins. It seems that Jenkins may not have been pleased with this development. The following year, Fletcher’s Fields discovered that a notice had been registered on title to the Land by Jenkins, under s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5. It appears that the notice had been registered after Jenkins had ceased to be a member of the board.
Fletcher’s Fields took the position that the funds provided pursuant to the Deed of Appointment were a gift or, alternatively, trust funds. Jenkins took the position that the Deed of Appointment was not a trust, but rather that it was a loan that was to be repaid if certain conditions crystallized. He characterized it as an equitable mortgage.
The Court noted that the terms of the Deed of Appointment were key to determining whether or not an interest in land had been created. There was no indication of an express intent to create an interest in the Land, or provide that failure to repay the funds would result in a charge over the Land. Without such an express intent, the notice should not remain on title to the land. The Court also held that the parties’ conduct supported the position that there was never any intention to create an interest in the Land.
The Court ordered that the notice that had been registered by Jenkins on title to the Land be removed. The result of this case seems correct, as one would expect that an interest in land should not be created unilaterally and without notice. There are significant differences between types of financial arrangements such as loans, mortgages, gifts, and appointments of trust funds. It is reassuring that the Court in this situation upheld the integrity of the parties’ intentions in crafting their financial arrangement and did not impose a charge-type interest in the Land where none existed.
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Although decided over twenty years ago, Re Nicholls 57 O.R.(2d) 763 remains a leading case and is a fascinating decision of the Ontario Court of Appeal that goes to great lengths to defend testamentary freedom and the fundamental distinction between a trust and a power of appointment. In that case, the testator gave her estate to her executor in trust and directed the executor "to follow the dictates and directions given to him from time to time by Carson Cowan as to the distribution of the rest and residue of my estate." Mr. Cowan was a "minister" of a "religious group" that the testator had been a member of for some fifty years. After the testator’s death, Cowan gave the executor written directions to distribute to six member of the religious group. The executor sought directions. When the lower Court accepted the validity of Mr. Cowan’s authority, the executor appealed.
The Court of Appeal dismissed the appeal. The general power of appointment given to Mr. Carson was deemed to be equivalent to property. Unlike a trustee, Carson could have appointed himself as donee. The Court of Appeal approved of the lower court’s distinction between the case at bar and the prohibition against an estate trustee selecting beneficiaries that would have been void for uncertainty. The testator in Re Nicholls chose to create a Will where the trustee was subject to the exercise of the power of appointment by Carson. This the testator was free to do.
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A Certificate of Appointment as Estate Trustee without a Will can be issued under s. 29(1) of the Estates Act to the person to whom the deceased was married immediately before death; the person with whom the deceased was living in a conjugal relationship outside of marriage immediately before death; the next of kin of the deceased, or a combination of the above.
Often, there are competing claims for a Certificate of Appointment by different individuals who may be entitled the Certificate.
The question of how this issue of competing claims is properly brought before the Court was considered in Gardiner v. Whetung, 2009 CanLII 70510 (Ont. S.C.), a decision of Quinn J.
There, a purported spouse applied for a Certificate of Appointment. The deceased’s mother objected by filing a Notice of Objection. The mother also brought an application under Rule 14.05 of the Rules of Civil Procedure, seeking an Order appointing her as Estate Trustee.
The purported spouse brought a motion to dismiss the mother’s application. She argued that the mother did not have a “financial interest” in the estate, and thus, could not object to the application brought by the purported spouse.
Quinn J. held that while the mother did not, in fact, have a financial interest in the estate, and thus could not file a notice of objection, she could properly bring an application to be appointed estate trustee. S. 29 of the Estates Act sets out who can apply, and a financial interest in the estate is not a prerequisite to such an application.
Quinn J. considered the legislation and the Rules and found that the Rules do not clearly set out how competing claims should be brought or decided. An Order for Assistance is not appropriate, as, there too, a financial interest in the estate is a prerequisite.
Quinn J. concluded that the mother could have submitted her own application for a Certificate. However, this would simply mean that the registrar would have two applications, and the matter would have to be brought before a judge.
The better approach, Quinn J. observed, was to issue a Notice of Application for opinion, advice and directions of the court under Rule 14.05(a).
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In Re Estate of Michael O’Flynn, 2009 CanLII 57149 (ON S.C.), the Honourable Justice Brown encouraged the development of a culture of common sense in processing applications for certificates of appointment of estate trustee. This approach is further illustrated in the recent decision in Re Estate of Daniel O’Donnell, 2010.
In Re Estate of Daniel O’Donnell, the date of Mr. O’Donnell’s death was mistakenly listed as May 1, 2009 (not May 2) on the application for a certificate of appointment and resulting certificate. This mistake did not stop the administration of the estate. Mr. O’Donnell’s Will named Mr. Wilson as the sole estate trustee and sole beneficiary, and Mr. Wilson distributed virtually all of the estate assets to himself. He died a short time later, in July 2009. The administration of Mr. O’Donnell’s estate was yet to be completed, but the alternate estate trustee in Mr. O’Donnell’s Will had renounced her right to act.
Accordingly, the named estate trustee for Mr. Wilson’s estate, Ms. Thomas, applied for a certificate of appointment as succeeding estate trustee with a will for Mr. O’Donnell’s estate. The application materials filed by Mr. Wilson’s estate trustee listed May 2, 2009 as Mr. O’Donnell’s date of death. The original error in the date of death went unnoticed for some time.
When the mistake in the date of Mr. O’Donnell’s death was finally identified, the Toronto Estates Office took the position that the applicant should bring an ex parte motion to correct the error made in the original certificate before the second certificate could be issued. Ms. Thomas argued, among other things, that she should not have to bear the cost of correcting a mistake she had not made and that the cost of preparing such a motion was out of proportion to what was at stake in the succeeding application (the succeeding application was only needed to complete tax filings and distribute the remaining assets valued at only $1,000.00.)
Justice Brown’s solution was as follows. If the Estates Office identifies a discrepancy in the date of death between the original certificate and the application for a succeeding certificate, it should request an affidavit from the applicant that confirms that a mistake was made on the original certificate and attests to the correct date of death. Upon receiving such an affidavit, the Estates Registrar can then process the application for a succeeding certificate using the corrected date of death, and make any required changes to the original certificate and Ontario’s central registry which records information regarding estates.
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An Estate Trustee During Litigation (“ETDL”) is typically seen as an officer of the court who represents the Deceased. An ETDL has a wide variety of duties, which fundamentally includes administering assets, and paying the outstanding debts of the Deceased. The purpose of today’s blog is to consider two Ontario decisions where an application seeking the appointment of an ETDL was rejected and granted, respectively.
Re Lloyd, 24 O.R. (2d) 340, is a 1979 decision by the Ontario Surrogate Court, as it was called. In this case, the widow of the deceased filed a Notice of Objection challenging the Last Will and Testament of the deceased and sought the appointment of an ETDL. On the motion, the evidence indicated that the Applicant was unhappy because she was not being kept aware of the status of the assets, but there were no allegations expressing a concern about the preservation of estate assets or that an ETDL was necessary to prevent waste or mismanagement. In fact, the evidence indicated that the assets of the estate were well managed, and increasing in value. Accordingly, the Honourable Justice Clements refused the appointment of the ETDL.
Re Groner Estate, 1994 CarswellOnt 2478, is a decision by the Ontario Superior Court of Justice. In this case, the Applicant filed a Notice of Objection challenging the Last Will and Testament of the Deceased and also sought the appointment of an ETDL. The Applicant was concerned that the named estate trustee had been administering the estate, despite no legal authority to do so. The named estate trustee opposed the appointment of an ETDL. The Honourable Justice Greer held that the size of the estate was large, however the administration of the estate was uncomplicated. Nevertheless, Justice Greer, expressed concern over the conflict in having the named estate trustee’s lawyers acting as de facto administrator. Justice Greer held that assets cannot be administered in a vacuum and that the perception of neutrality must be seen.
From an evidentiary point of view, both cases provide insight into what Lawyers should consider when drafting materials seeking the appointment of an ETDL.
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Powers of Appointment may appear in a Will when a testator wishes to entrust the donee with authority to direct who will be the recipients of the testator’s property. A not uncommon scenario is one in which the donee of the power is given a life interest in the testator’s estate and a Power of Appointment to determine which of the donee’s issue shall be the recipients of the residue of the testator’s estate on the death of the donee.
To exercise such Power of Appointment, the donee has to, first of all, survive the testator and, secondly, make a Will which successfully exercises the Power of Appointment. If the donee dies before the testator whose Will grants the Power of Appointment, the power clearly lapses and the Will will presumably provide a gift over to address such eventuality.
Such a decision to effectively delegate testamentary authority is not without its perils and counsel should probably carefully review with the testator the ramifications of granting a Power of Appointment respecting the distribution of residue. For instance, if the testator has a good relationship with her grandchildren (i.e. the donee’s children) the testator ought not to presume how the donee will in fact exercise the Power of Appointment. In addition, the donee’s Will may be vulnerable to a challenge which could conceivably defeat the testator’s intention in granting the Power of Appointment
David M. Smith
Primary and secondary wills are common enough situations for estates practitioners: one will for probate and the other for assets that can pass outside probate, to minimize estates administration taxes. But what about situations with multiple wills requiring probate?
According to the October 8, 2008 endorsement of Mr. Justice Brown (court file no. 01-2725-08, no link available yet), where a testator makes 2 wills, each covering different assets, and each naming different executors, a local estates registrar can issue separate Certificates of Appointment of Estate Trustees to different executors limited to the assets referred to in each Will.
The endorsement closes with 2 "reminders" to applicants in multiple wills situations (I won’t paraphrase):…
I have learned that only a small percentage of applications for certificate of appointment of an estate trustee, filed in Toronto, are approved without being sent back for correction.
Some common problems associated with these types of applications are, incorrect or inconsistent references to the deceased’s name, problems concerning the mailing of the application to beneficiaries who have an interest in the subject estate, incorrect calculations of estate administration tax and in cases involving holographic wills, a missing affidavit attesting to the handwriting of the deceased. Needless to mention, most of these errors can be avoided if the application is carefully reviewed.
But what happens if the deceased’s name is spelled incorrectly in the Will? If there is an error in the deceased’s name in the Will, the heading on all of the documents should reflect the correct name, followed by a statement stating "incorrectly referred to in the Will as (insert the name is it appears in the Will). It is also important to remember, that the names of beneficiaries shown in the notice of application must be identical to the way in which their names appear in the Will.
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Listen to Will Challenge Litigation – Part 2
This week on Hull on Estate and Succession Planning, Ian and Suzana continue their discussion on the Will Challenge Process, step by step.
They cover how a comprehensive preliminary investigation can help litigation and discuss how a motion of claim is filed to set the stage to move forward with a trial.
Core documents that accompany these stages are:
- Medical records
- Solicitor’s notes
- Financial disclosure
The next stage is the discovery process and will be the topic that gets next week’s podcast off to a start.
If you have any comments, send us an email at firstname.lastname@example.org or call us on the comment line at 206-457-1985 or leave a comment on our blog.
Listen to Administration of the Assets of the Estate
This week on Hull on Estates and Succession Planning, Ian and Suzana discuss things to consider when administrating the assets of an estate and point out burdens of being and executor.