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.
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).
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.
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.
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
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):...
First "reminder":
"If multiple wills exist and the executors plan to obtain probate for each, in addition to including an affidavit attesting to non-revocation as I described above, the applicants should ensure that the draft limited assets certificates of appointment which they submit each clearly identify the will for which probate is sought - e.g. the General Will dated X, or the Secondary Will dated Y, or the "will dated Z styled as the Limited Assets Will". With each will clearly identified on the face of each certificate, the risk of any confusion arising from the issuance of separate certificates for each will should be kept to a minimum."
Second "reminder":
"If the application for a certificate involves a Granovsky-type situation where probate is sought only for one of the wills, it is important that the application materials contain a brief affidavit attesting that the non-probated will does not contain any provision revoking the will for which probate is being sought. Such evidence will permit the Estates Office to be satisfied that the will for which probate is sought remains in force and governs the disposition of the assets enumerated in it: Re Kerzner Estate, 2008 CanLII 42020 (ON S.C.)."
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.
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 hullandhull@gmail.com or call us on the comment line at 206-457-1985 or leave a comment on our blog.
Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, here are Ian and Suzana.
Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening, and some of you may be watching, Episode #127 of our podcast on Tuesday, August 26th, 2008.
Hi there, Ian.
Ian Hull: Hi Suzana.
Suzana Popovic-Montag: How are you today?
Ian Hull: Just great, thanks.
Suzana Popovic-Montag: That’s good
Ian Hull: Looking forward to our second attempt at the video casting combined with the podcasting. So we want to turn back to this whole Will challenge process. And in our last podcast, we were talking about situations where people come to see us where they feel that they have been left out of the Will or those who come to see us who want to uphold the Will. And today we’re going to talk about the process itself. Now, we ended our last podcast talking about Will challenges in the context of what were the importance of the testamentary documents, what were the Wills and why we needed to get them under control. Today we’re going to talk about the process, the litigation process. Now interestingly enough, while we practice in downtown Toronto in Canada here, the process itself is generally very consistent throughout different jurisdictions. And so what we want to talk a little bit about today is the global litigation process. And for those of you watching, we’ve got our Smart Board up and running and we’re going to spend some time walking through our chart that we find very helpful with our clients to talk about the process itself.
Suzana Popovic-Montag: And the very first step for those of you who can see it is the preliminary investigation stage. And this is where we try to find the basic known facts. And during our last podcast, we talked about things like developing the family tree, developing and understanding of the background of who the deceased really was, what their life was like, what the circumstances surrounding his or her Will making was all about. And so this is where you start in the whole process by getting the story, getting an understanding of the players and then we take it to the next level.
Ian Hull: And so we’re working through our chart here. We’ve started with our preliminary facts, alright. And the investigation into this. Now this stage has to be done fairly comprehensively. We want to get the information at the outset, but we’ll need to then go back and do some digging. And sometimes follow-up with witnesses or get a better sense of the type of evidence that’s out there. Because again, with a Will challenge, we’re mostly focusing on questions of capacity, questions of undue influence, pressuring the elderly person or the person who is doing the Will to do something that you may or may not think they should be doing.
The next step is setting the stage for the litigation. Now here in Ontario, we typically do it by way of a motion. But it doesn’t really matter. What happens in all jurisdictions is that the claim gets commenced, either by a Statement of Claim or a writ or some document that’s filed with the Court that starts the process. And as I say, in Ontario, we actually bring a motion, we go to the Court and set the stage, setting out what legal issues are at stake in the process.
Suzana Popovic-Montag: And, of course, the ultimate goal of a motion for directions is to obtain an Order giving directions. And we tell clients that that really is a map work of the litigation process, it gives the timelines for when things will be done, it gives authority to individuals to collect some of the documentation that is crucial for a Will challenge and it most often deals with vesting someone with authority to deal with the estate, pending the entire litigation process.
Ian Hull: So we’ve got a couple of things here. Because if we remember, when we started this litigation, it actually stops the administration of the estate, it puts everything on hold. So that’s no good. There’s bills to be paid, the funeral expenses, there’s things to be done that have to be done no matter who wins or loses this lawsuit. So at the motion for direction stage, getting the Order, one of the things we get and we’re going to come back to, is that you talk about who has the authority. We’re going to talk about what we call here in Ontario an estate trustee during litigation. But before we come to that, Suzana is going to talk about that, is I just want to mention that at this Order we will get, let’s talk a little bit about what we’re going to get at that Order. And that Order, we’ve already said, is going to set the stage, who’s challenging the Will, who’s defending the Will, and all those with a financial interest are put on notice. It also gives us expansive roles of an ability to get documents organized, to do investigation. Coming back to this, we talked about the preliminary investigation. But we can’t do a preliminary investigation properly without getting some of the core documents.
Now Suzana, what are some of the core documents that we’d be looking for at this disclosure stage at this point?
Suzana Popovic-Montag: Well typically, Ian, those documents will include three different types of information or evidence that we’re going to try to get so that we can establish our Will challenge and proceed with it. Firstly, there’s the medical records; secondly there’s the solicitor’s notes; and then thirdly, there is in many cases the financial disclosure, the financial records that will help build a Will challenge case as well.
Ian Hull: So in the course of getting this Order, we will want to have as expansive as possible, so that we can pull in as much of the relevant documentation as we can. And we’ll often take sort of a three year window, going back three years, maybe going forward three years, in that range. Now sometimes each case is different, but we’ll go back and get all of the medical records of the individual, especially if we are alleging capacity and so on. So now let’s talk about, so presumably we can get together all of this documentation. Once we get the Order, we send it to these third parties like hospitals and we had a case recently we sent them to the dentist because this gentleman had seen a dentist many times right around the time of the Will. You wouldn’t always think of that individual as being someone to be involved with.
So once we get the disclosure organized in the Order, the other thing you mention Suzana, was the appointment of someone with authority, and which we call an estate trustee during litigation. But forget our terminology, it’s someone who has authority, a litigation trustee is essentially what happens.
Suzana Popovic-Montag: And the reason we need this individual is because as Ian just said, as soon as you start a Will challenge, the administration is essentially frozen. So you are actually challenging a Will that may or may not appoint an executor. And as soon as you do that, then that appointment is in question. So we need to vest someone with authority to act on behalf of the estate in the meantime, and that’s this litigation administrator. The old terminology used to be just an administrator, an individual who can act on behalf of the estate.
Ian Hull: Okay, Suzana, the tough question is though who will take this job on and on what circumstances do they typically take it on?
Suzana Popovic-Montag: Well that’s a good question, Ian and it’s usually a very contentious one as well because in many situations, the person who has been named will try to hold onto their job as the executor. That may or may not work, depending on how contentious that appointment is and the Will challenge itself. There’s always an opportunity to have a neutral third party put in, and that really is based on the cases that have been resolved out there, that’s the Court’s preference. To put someone in who has no vested interest in it but will administer the estate during the course of the litigation.
Ian Hull: And often that entity is a trust company. We see that a lot of times because they are professionally trained and ready to step in. Professionals: accountants, lawyers, they can sometimes come in depending on the pricing and things like that, depending on the kind of assets. We had an interesting case where we had a tremendous piece of real estate that needed to be developed, it required someone with real estate expertise, development expertise. So all the parties sat around and said well, we’re not sure who’s going to get this, but we do know that we want to sell it and we need someone well qualified to sell it, we can’t just put it in the hands of just anyone. So those are the kind of choices you have.
Alright, we’re going to talk now about discoveries. And that is the next stage before we wind up this podcast today. And that is the process where you make a real strategic call. We’re going to talk about discoveries in mediation, what the best steps are to take and when to take them, and investigate into that sort of, those important timetables. But we’ll save that for our next podcast.
Thanks very much, Suzana.
Suzana Popovic-Montag: Thanks to you, too, Ian.
You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.
To listen to other Hull On podcasts, or to leave any questions or comments, please visit our website at hullestatemediation.com.
