One of the ways a Will can be declared invalid is if the court finds that there were suspicious circumstances surrounding the preparation of it. In Graham v. Graham, the Ontario Superior Court of Justice found that significant involvement from the testator/grantor’s child was indicative of suspicious circumstances regarding the preparation of a Will and Power of Attorney (POA).
The testator, Jackie, had four children: Tim, Robert, Christine and Steven.
Jackie suffered from terminal cancer. She was hospitalized from November 22, 2015 to December 7, 2015, and again from December 22, 2015 to December 24, 2015, to receive treatment for severe pain.
In mid-December 2015, Robert’s wife, Tammy, searched for and contacted a lawyer to prepare a Will and POA for Jackie. Tammy obtained a Client Information Sheet (CIS) from the lawyer’s office and completed it herself. The lawyer prepared the documents based on this CIS. At Robert’s request, the lawyer went to the hospital to meet Jackie and have her sign the Will and POA. This was the first time Jackie met the lawyer and saw the Will and POA.
Jackie’s Will named Robert as estate trustee and sole beneficiary of her estate. The POA named Robert as Jackie’s sole attorney for property. Robert’s wife, Tammy, was named as the alternate estate trustee and attorney.
On January 4, 2018, Robert used the POA to transfer Jackie’s house to himself as sole owner. Four days later, Jackie died of cancer.
Tim challenged the validity of Jackie’s Will and POA claiming that they were prepared under suspicious circumstances and that Jackie was subject to undue influence by Robert and Tammy.
- Jackie had been in ill health for a long time prior to her death, so it was reasonable to infer she had chosen to die without a will, until Robert’s involvement.
- Jackie was treated with heavy painkillers on the night and morning of the day she signed the will and POA.
- Robert and Tammy “orchestrated virtually every aspect of the Will and the POA”, which included searching for a lawyer, providing instructions, arranging for the lawyer to meet Jackie, remaining in Jackie’s room for part of the meeting, and taking part in the discussions concerning the Will and POA.
- The drafting lawyer relied entirely on Robert and Tammy to provide him with all of the information concerning the Will and POA.
After finding that suspicious circumstances existed, the burden then shifted to Robert to prove that Jackie had testamentary capacity and that she knew and approved of the contents of the Will and POA. Using the test for testamentary capacity as outlined in Banks v. Goodfellow (1870), the court found that Robert could not establish that Jackie had testamentary capacity. In coming to this conclusion, the court considered the following:
- There was no evidence that Jackie was given the Will or the POA to read or that it was read to her.
- Although Jackie knew where she was living, there was no evidence to indicate that she had any knowledge or understanding of the monetary value of her house.
- It was unclear whether Jackie could do more than repeat what she was told.
- Jackie was confused and/or mistaken in certain beliefs about her son, Tim.
- The medications that Jackie was taking for her pain left her confused and drowsy.
As a result, the Will and the POA were declared invalid.
Graham v. Graham serves as a cautionary tale for adult children who become too involved in the drafting of their parents Wills and POAs. It warns us that the courts view this type of involvement as suspicious. Moreover, Graham v. Graham suggests that physical impairment can impact a testator’s mental state, thus making them vulnerable.
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Ian Hull and Celine Dookie
In today’s podcast, Noah Weisberg and Rebecca Rauws discuss executor and trustee compensation, and particularly the circumstances in which a trustee may be able to claim a special fee. This topic was also discussed in a recent paper by Lisa Toner, “When Can a Trustee Claim, and Justify, a Special Fee?”
Should you have any questions, please email us at firstname.lastname@example.org or leave a comment on our blog.
A recent decision of the Ontario Court of Appeal considered whether s. 7 of the Limitations Act, 2002 applies to extend the time within which an estate trustee can bring a claim that arose prior to a deceased person’s death.
Section 7 of the Limitations Act, 2002 provides as follows:
7 (1) The limitation period established by section 4 does not run during any time in which the person with the claim,
(a) is incapable of commencing a proceeding in respect of the claim because of his or her physical, mental or psychological condition; and
(b) is not represented by a litigation guardian in relation to the claim.
(2) A person shall be presumed to have been capable of commencing a proceeding in respect of a claim at all times unless the contrary is proved. 2002, c. 24, Sched. B, s. 7 (2).
(3) If the running of a limitation period is postponed or suspended under this section and the period has less than six months to run when the postponement or suspension ends, the period is extended to include the day that is six months after the day on which the postponement or suspension ends.
In Lee v Ponte, 2018 ONCA 1021, the estate trustee of the deceased person commenced a claim more than 2 years after the date on which the limitation period began to run, as determined by the trial judge. As a result, the action was statute barred.
The estate trustee appealed, taking the position that section 7 of the Limitations Act, 2002 should be “liberally construed”. The estate trustee argued that a deceased person is incapable of commencing a proceeding because of “his or her physical, mental or psychological condition”. He also argued that policy reasons support allowing additional time for an estate trustee or litigation guardian to be appointed and take over the management of the affairs of the incapable/deceased person.
The Court of Appeal disagreed and did not allow the appeal. In its view, the “grammatical and ordinary sense of the words of s. 7 are simply not elastic enough to apply to a deceased person and to construe an estate trustee to be a litigation guardian.”
Although the outcome is not surprising, it does serve as a reminder that limitation periods can be unforgiving. Estate trustees would be well-advised to act swiftly in reviewing the affairs of a deceased person in order to determine whether any claims may have arisen prior to death, and whether the expiry of any limitation periods are looming.
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While digital assets constitute “property” in the sense appearing within provincial legislation, the rights of fiduciaries in respect of these assets are less clear than those relating to tangible assets. For example, in Ontario, the Substitute Decisions Act, 1992, and Estates Administration Act provide that attorneys or guardians of property and estate trustees, respectively, are authorized to manage the property of an incapable person or estate, but these pieces of legislation do not explicitly refer to digital assets.
As we have previously reported, although the Uniform Law Conference of Canada introduced the Uniform Access to Digital Assets by Fiduciaries Act in August 2016, the uniform legislation has yet to be adopted by the provinces of Canada. However, recent legislative amendment in one of Ontario’s neighbours to the west has recently enhanced the ability of estate trustees to access and administer digital assets.
In Alberta, legislation has been updated to clarify that the authority of an estate trustee extends to digital assets. Alberta’s Estate Administration Act makes specific reference to “online accounts” within the context of an estate trustee’s duty to identify estate assets and liabilities, providing clarification that digital assets are intended to be included within the scope of estate assets that a trustee is authorized to administer.
In other Canadian provinces, fiduciaries continue to face barriers in attempting to access digital assets. Until the law is updated to reflect the prevalence of technology and value, whether financial or sentimental, of information stored electronically, it may be prudent for drafting solicitors whose clients possess such assets to include specific provisions within Powers of Attorney for Property and Wills to clarify the authority of fiduciaries to deal with digital assets.
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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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The Supreme Court of Canada released a decision last Thursday that is a must read for estates and trusts practitioners. Interestingly enough, Valard Construction Ltd. v. Bird Construction Co., 2018 SCC 8, arose from a commercial matter.
Bird was a general contractor for a construction project. When Bird subcontracted with Langford, Langford was required to obtain a labour and material payment bond which named Bird as trustee of the bond. If Langford was delinquent in paying its contractors, the bond would permit the contractor to sue and recover from Langford’s surety on the condition that notice of the claim must be made within 120 days of the last date in which work was provided to Langford. Langford became insolvent and some of Valard’s invoices went unpaid. Unfortunately, Valard was not notified of the existence of the bond and did not inquire about whether there was a bond in place until after the 120 day notice period. The surety denied Valard’s claim and Valard sued Bird for breach of trust. This matter was dismissed at first instance by the Alberta Queen’s Bench, dismissed again by the Alberta Court of Appeal, and finally reversed by the Supreme Court of Canada (with a dissent from Justice Karakatsanis).
Justice Brown for the majority (per McLachlin C.J., as she then was, Abella, Moldaver and Rowe J.J.) found that Bird had a fiduciary duty to disclose the terms of the trust, i.e. the bond, to Valard notwithstanding the fact that the express terms of the bond did not stipulate this requirement. Justice Brown was clear that “While the ‘main source’ of a trustee’s duties is the trust instrument, the ‘general law’ which sets out a trustee’s duties, rights and obligations continues to govern where the trust instrument is silent” (para.15). Justice Brown then went on to say that a beneficiary’s right to enforce the terms of the trust is precisely what keeps the trustee from holding the “beneficial as well as legal ownership of the trust property” (para. 18). Otherwise, no one would have an interest in giving effect to the trust.
With this logic in mind, Justice Brown developed the following framework at paragraph 19,
“In general, wherever “it could be said to be to the unreasonable disadvantage of the beneficiary not to be informed” of the trust’s existence, the trustee’s fiduciary duty includes an obligation to disclose the existence of the trust. Whether a particular disadvantage is unreasonable must be considered in light of the nature and terms of the trust and the social or business environment in which it operates, and in light of the beneficiary’s entitlement thereunder. For example, where the enforcement of the trust requires that the beneficiary receive notice of the trust’s existence, and the beneficiary would not otherwise have such knowledge, a duty to disclose will arise. On the other hand, “where the interest of the beneficiary is remote in the sense that vesting is most unlikely, or the opportunity for the power or discretion to be exercised is equally unlikely”, it would be rare to find that the beneficiary could be said to suffer unreasonable disadvantage if uninformed of the trust’s existence.”
Thanks for reading and more to follow later this week on Valard Construction Ltd. v. Bird Construction Co.
Over the holidays I had a great nostalgia trip watching the recent Netflix series “The toys that made us” about the history of toys. One of the episodes focused on “He-Man and the Masters of the Universe“. For those of you who did not grow up in the 1980s, the titular character had a habit of loudly proclaiming “I have the power” right before getting down to business and saving the day. I feel like loudly proclaiming “I have the power” is as good a segue as any to discuss the general principles surrounding the rule in Saunders v. Vautier.
The term “Saunders v. Vautier” is often thrown around by estates lawyers as if it is a foregone conclusion that everyone in the room, including clients, should instinctively know what is meant by the phrase. This, of course, is not always the case. For those needing a general refresher look no further.
When lawyers mention the rule in “Saunders v. Vautier” it is often done in reference to a scenario wherein a beneficiary is not to receive certain property until a specific age, however as the provision providing for the gift does not contain a “gift-over” to another beneficiary should the originally named beneficiary not reach the specified age, the beneficiary immediately demands receipt of the gift upon attaining 18 years of age thereby collapsing the trust. While the rule in Saunders v. Vautier can be utilized in such a scenario, it would be a mistake to assume that this is the only scenario in which the rule in Saunders v. Vautier may be utilized, as the potential applications of the rule are much more expansive than this.
At its most expansive the rule in Saunders v. Vautier can be thought of as the rule which allows a beneficiary(s) to ignore the testator’s/settlor’s intentions and vary the terms of a trust. It stands for the proposition that if all potential beneficiaries of a trust, collectively representing 100% of the potential “ownership” of the assets of the trust, unanimously direct that the trust is to be wound up and/or varied, the trustee(s) must act in accordance with the beneficiaries’ direction regardless of whether such direction goes against the testator’s/settlor’s “intention” in establishing the trust. As summarized by the Supreme Court of Canada in Buschau v. Rogers Communications Inc.:
“The common law rule in Saunders v. Vautier can be concisely stated as allowing beneficiaries of a trust to depart from the settlor’s original intentions provided that they are of full legal capacity and are together entitled to all the rights of beneficial ownership in the trust property. More formally, the rule is stated as follows in Underhill and Hayton: Law of Trusts and Trustees (14th ed. 1987), at p. 628:
If there is only one beneficiary, or if there are several (whether entitled concurrently or successively) and they are all of one mind, and he or they are not under any disability, the specific performance of the trust may be arrested, and the trust modified or extinguished by him or them without reference to the wishes of the settlor or trustees.”
If even one beneficiary of the trust, however remote their interest may be, should refuse to consent to the proposed variation, the rule in Saunders v. Vautier may not be utilized and the trust must continue to be administered as settled. If one of the potential beneficiaries of the trust is under a legal disability, whether as a result of being a minor or otherwise, the principles from Saunders v. Vautier may still be utilized, however the consent of the beneficiary under a legal disability must be obtained under the Variation of Trusts Act which allows the court to consent to the proposed variation on behalf of the beneficiary under a legal disability. Should the court ultimately provide such a consent, and assuming all remaining “sui juris” beneficiaries have already consented to the proposed variation, all potential beneficiaries would have consented to the proposed variation and the rule in Saunders v. Vautier would be invoked.
Thank you for reading. Wield that power wisely.
Beneficiaries of a Trust who have a vested interest in the capital can sometimes assign their entitlement to another. But to protect the Trustee, it is critical that any such assignment be properly documented.
Section 11 of the Ontario Statute of Frauds states: “all grants and assignments of a trust or confidence shall be in writing signed by the party granting or assigning the same, or by his or her last Will or devise, or else are void and of no effect.”
Section 11, unlike the rest of the Statute of Frauds, applies to both realty and personalty. The section, moreover, requires that the grant or assignment of the equitable interest be itself in writing, not merely evidenced in writing. Where the beneficiary of a trust of pure personalty directs the trustees hold the property in trust for another person, the direction must be in writing to be valid.
This is a good reminder of how strictly the law considers the relationship between beneficiary and trustee. The fiduciary duty owed to a beneficiary by a trustee requires that any voluntary assignment of the beneficiary’s entitlement be carefully documented to protect both parties. In the unusual circumstance where a beneficiary assigns his or her interest, the trustee needs to be protected. The beneficiary, in turn, needs to clearly convey to the trustee the nature of any assignment and understand (ideally with independent legal advice) the ramifications of such a decision.
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This week on Hull on Estates, Natalia Angelini and Stuart Clark discuss options that may be available to help protect a trustee when drafting a Will or Trust.
Last week we considered the application of solicitor/client privilege to a deceased testator and their testamentary intentions. A further consideration in examining the passing of solicitor/client privilege upon death is whether the individual claiming privilege is a trustee, executor, or a beneficiary.
Trustees, executors, and beneficiaries are generally regarded as having a community of interest, which may entitle them to solicitor/client privilege. Under the common law, there is not a need to protect communications between solicitors and clients from disclosure to persons who are claiming under the estate where the executor (or trustee) and beneficiary have a joint interest in the advice. The common interest/joint interest provision applies so that no privilege will attach to communications between a solicitor and client against a person who has a joint interest with the client in the subject matter of the communication. There can be no privilege asserted against beneficiaries of a trust over communications between a trustee and a trustee’s solicitors regarding the business and affairs of the trust.
Re Ballard Estate, (1994), 20 OR (3d) 189 (Ont. Gen. Div.), held that documents will be said to belong to a beneficiary because the solicitor was engaged and giving advice in regard to the administration of the estate and for the benefit of all beneficiaries who take or may take under the will or trust.
Pursuant to paragraph 16 of Chang v Lai Estate, 2014 BCSC 128, “it is well established that a beneficiary has a proprietary interest in and a right to production of any document relating to advice sought and obtained by an executrix or trustee in connection with the administration of an estate. The executrix cannot claim solicitor/client privilege over such documents because they have a commonality of interest with the beneficiaries in the administration of the estate.” As such, the advice taken by a trustee or an executor is for the benefit of all beneficiaries of the will, establishing a joint interest between the executrix and beneficiaries.
The aforementioned case further highlighted that a beneficiary is not entitled to the production of all communications between legal counsel and an executor. If there is an adversarial relationship between a trustee and a beneficiary, there is no joint interest that would compel disclosure of communications that would normally be protected by solicitor/client privilege. Where a beneficiary is in an adversarial relationship with the executor, solicitor/client privilege would appear to remain in place to preserve confidentiality
Moreover, if litigation is commenced against a third party on behalf of the trust, the trustee cannot generally claim privilege as against the beneficiary, as the beneficiary has an interest in the outcome of the litigation. However, pursuant to the case of Talbot v Marshfield , if a trustee is in litigation against a beneficiary, and especially if the trustee is paying their own legal costs, the trustee can generally uphold privilege as against the beneficiary.
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