Will Witnesses No Longer Required

Will Witness No Longer Required

For my first 40 years of practice, and for time immemorial before , there were strict requirements for the execution of a will – a failure thereof could result in an invalid or partially invalid will.

That all changed under sections 58 and 59 of WESA, known as the “curative provisions” or the “ dispensation powers”.

Many recent decisions have allowed what would have been previously invalid wills to be admitted into probate as valid , despite the lack of any witnesses to the will, provided the court is satisfied it is the will makers signature and firm intention as to the disposal of his/her property after death. ( This is to be distinguished from other Province’s holographic wills which must be “ wholly written and signed by the will maker so typed and drug stores do not apply there but do in BC under WESA).

One of the interesting by products of the liberalization of the requirements for will execution is that many more people will do their own wills to save money and this will result in more estate litigation for various later discussed reasons.

The Law

The BC Courts have followed the reasoning of a Manitoba Court of Appeal case George v. Daily (1997) 143 DLR (4th) 273 which discussed at length the limits placed on a courts “curative powers” and held there must be a deliberate or fixed and final expression of intention as to the disposal of his/her property on death.

The chambers judge who had held that a letter written by the deceased’s accountant to the deceased’s solicitor containing proposed revisions to the deceased’s will should be admitted to probate was reversed. The accountant had prepared the letter after receiving instructions from the deceased to change his will to leave most of his estate to various charities rather than to his children. When the deceased later met with his solicitor and confirmed the alterations to the will contained in his accountant’s letter, the solicitor requested the deceased obtain a certificate from his doctor confirming that he had the capacity to execute the will. The deceased died two months later without having obtained the medical certificate. The solicitor had not spoken with the deceased in the interim, nor had he prepared a new will.

In George, the Court stated the following principles:

It is well established that imperfect compliance, even non-compliance, with the formal requirements of The Wills Act may be excused. However, it must be established that the document being propounded was intended by the deceased to have testamentary effect. The court must therefore be satisfied on a balance of probabilities that the writing embodies the testamentary intent of the testator or testatrix

(a) The standard of proof on an application under the curative provision is proof on a balance of probabilities (para. 20).

(b) The greater the departure from the requirements of formal validity, the harder it may be for the court to be satisfied that the document represents the deceased’s testamentary intention (para. 19).

(c) The requirements for formal validity of a will serve several purposes or functions, including:

  1. an evidentiary function by providing the court with reliable and permanent evidence of testamentary intention and the terms of the will; and
  2. a cautionary function by impressing upon the testator the solemnity, finality, and importance of his actions in making his “last will and testament” (at paras. 21-26).

(d) The evidentiary and cautionary functions are particularly relevant to the determination of whether or not a writing or document embodies the testamentary intentions of a deceased (para. 22).

(e) Not every expression made by a person, whether orally in writing, concerning the disposition of his or her property on death embodies his or her testamentary intentions (para. 62).

(f) The court held at para. 65:

The term “testamentary intention” means much more than a person’s expression of how he would like his/her property to be disposed of after death. The essential quality of the term is that there must be a deliberate or fixed and final expression of intention as to the disposal of his/her property on death: Bennett; Molinary v. Winfrey (1960), [1961] S.C.R. 91; and Canada Permanent Trust Co. v. Bowman, [1962] S.C.R. 711.

The leading case on the curative powers of section 58 and 59 WESA in B.C. are those of Madam Justice Dickson ( since elevated to the Appeal Court) in Re Young Estate 2015 BCSC 182 which largely follows George v. Daily:

… The key question is whether the document records a deliberate or fixed and final expression of intention as to the disposal of the deceased’s property on death. A deliberate or fixed and final intention is not the equivalent of an irrevocable intention, given that a will, by its nature, is revocable until the death of its maker. Rather, the intention must be fixed and final at the material time, which will vary depending on the circumstances.

Other Cases

In Beck Estate (Re), 2015 BCSC 676, Master Young (as she then was) considered a handwritten document in letter form, which the deceased dated and signed. The court found that the words “Codicil to my Last Will” and instructions that the document was to be read out by her lawyer suggested a deliberate or fixed and final expression of intention regarding the disposal of the deceased’s property upon her death. The deceased had also given the document to her executor for safekeeping one week before her death, and had told him that she thought the unwitnessed Codicil was valid.

Re Lane 2015 BCSC 2162 held that none of  seven handwritten notes made between April 14, 2012 and January 9, 2015 represented the intention of the deceased to alter her Last Will and Testament dated July 12, 1994 and could not be cured under s 58 of WESA, the “curative provisions”.

The case is helpful in determining the boundaries of the curative provision of s 568 in that the judge sets out the various reasons why the scrap notes could e testamentary and then the reason why they may not be testamentary, and concludes the latter.

In an uncontested application Re the Estate of David Woolrich, deceased Vancouver Registry V140043 ( unreported dated January 21,2015, ), a short 4 page hand printed suicide note of the deceased was approved as his last will and testament under the curative powers of S 58 WESA and George v. Daily was followed.

Affidavit materials filed made it clear that it was the deceased who wrote the note and that it was his final testamentary intention.

Homemade wills lead to litigation

The public is reluctant to pay a lawyer’s hourly rate to prepare what they invariably regard is a “simple” will. (Every lawyer  should know there is no such thing as a simple will)

Many lawyers have historically been prepared to prepare wills as a loss leader , but with increased overheads and consumer  sensitivity to price,  there is friction in the area of preparation of wills, powers of attorney, representation agreements and other estate planning documents  that, when combined with the information available on the Internet , will cause many in the public to cost  save by preparing their own wills and other estate documents .

As the public becomes more aware of the curative provisions of WESA, they will become increasingly encouraged  to prepare their own wills.

Most law firms that are economically viable in wills and estates now charge their hourly rate which  is often much higher than the client is prepared to pay.

The Curative provisions  of WESA were well-intentioned and generally are reasonable once the court is satisfied that the documents reflect the intentions of the deceased .

The problem essentially is that the legal test for mental capacity is a legal test, not medical, and the removal of the  lawyer  from the preparation of the will process  is simply an unintended  consequence  that will ultimately lead to more contested “homemade” wills  litigation, particularly in issues related to mental capacity, undue influence and wills interpretation .

Court of Appeal Allows Courts to Interpret Trust Documents

Appeal JudgeCourt of Appeal Allows Courts to Interpret Trust Documents

 

The almost chestnut re Engleman Estate 1986 23 ETR 30, BCCA,

The will of the deceased made his two brothers co-executors and sole beneficiaries. A major asset of the estate was a farm on which the respondent brother resided. The will empowered the executors to sell and convert property of the estate into money. The petitioner wished to accept a third party’s offer to purchase the farm. The respondent wished to reject this offer and was himself prepared to offer to purchase the petitioner’s interest in the farm for an amount that equalled the proceeds the petitioner would receive from the third party purchaser.
The petitioner sought the direction of the Court pursuant to s. 88(1) of the Trustee Act (British Columbia). The respondent originally took the position that the Court had no jurisdiction under s. 88(1) to make an order directing the sale of the farm since that provision could not be used to decide a question affecting the rights of the parties to property. During the course of the argument, however, the respondent argued that the Court should direct the petitioner to accept the respondent’s offer to purchase his share.
At first instance it was held that the Court should direct the respondent to accept the third party’s offer since the result of the ensuing sale would be to give each party his legal entitlement under the will: this direction would, consequently, give effect to the parties’ rights. However, the Court did not have jurisdiction to require the petitioner to accept the respondent’s offer to purchase his interest: such a direction would alter the petitioner’s right under the will to require that the property be sold and converted into cash.
The respondent appealed.
Held:
The appeal was allowed.
The Judge at first instance incorrectly interpreted the will as containing a direction to sell the property rather than a discretionary power to do so. The executors were not bound to sell the estate and divide the proceeds in cash. It was open to them to distribute the estate in specie. Accordingly, a sale of the farm to one brother could not be said to frustrate the intention of the testator.
Moreover, the Judge was not restricted to the exercise of jurisdiction pursuant to s. 88 of the Trustee Act. In the circumstances that there was a deadlock, the Court had an inherent equitable jurisdiction to intervene to break the deadlock.
The proper order to make was to direct the sale of the farm to the respondent at the same price as the third party had offered. This was just and equitable since the respondent had a particular and long-lasting connection with the property and he had a personal interest in being able to continue to reside on it. Such an order would not, moreover, cause any prejudice to the petitioner since it was established that the price offered was the proper market price and the sale would give to the petitioner his proper share of the value of that part of the estate.

Probate Procedure When Four Wills In Dispute

Re Dow Estate 2015 BCSC 292 an issue of probate procedure arose  due to the fact that the deceased made four wills in the last 2 1/2 years of his life.

The plaintiff was Disputed Willsnamed as a beneficiary in the first and third wills, but not the second or the final fourth will.

The applicant, who stood to inherit $255,000 at of an estate worth approximately $2.6 million, raised the issue of the testator’s capacity when he made his final will, as well as alleging undue influence.

The master found that the applicant met the threshold of Rule 25-2 (1) finding that there was a risk that the applicant would otherwise be prejudiced, since if probate were granted, that the estate could be distributed before her claim as to the alleged lack of mental capacity could be assessed.

Accordingly she was allowed to join in the court action.

 

14]         A person who is interested in an estate including an applicant for the estate grant (in this case, Mr. Cosar) could apply to set aside the notice of dispute pursuant to Rule 25-10(10). The court may remove the notice of dispute if the court determines that the filing is not in the best interests of the estate (Rule 25-10(11)). Whether the court might consider setting the notice of dispute aside on terms which protect Ms. Golos’s interests and at the same time allowing for an interim distribution remains to be seen. Also, s. 103 of the Wills, Estates and Succession Act provides for the court-supervised administration of an estate pending legal proceedings concerning the validity of a will. If those procedures are invoked, then the administration of the estate can move forward pending the applicant’s investigation of her concerns about mental incapacity and undue influence.

[15]         The applicant has met the threshold required by Rule 25-2(14). There is a risk that if she is not included in the class of persons entitled to receive information about the estate and to file a notice of dispute, she will be prejudiced. The prejudice is the risk that Mr. Cosar will be granted probate and the estate will be distributed before the applicant’s claim can be assessed. That prejudice outweighs the possible delay in the distribution of the estate.

Executor Ordered to Repay Monies

Executor Ordered to Repay Monies Back to Estate

Executor Ordered to Repay Monies Back to Estate Paid Out Before Expiration of 6 Month Limitation

Stevens v. Wood Estate (Re), 2013 BCSC 2380. Until six months have passed from the issuance of probate of a will, s. 12 of the Wills Variation Act, R.S.B.C. 1996, c. 490 (the “WVA”) prohibits, absent consent or court order, the distribution of any portion of an estate to its beneficiaries.

The question for determination on this application is the appropriate remedy when such a distribution has been made.

However, the case of Etches v. Stephens (1994), 99 B.C.L.R. (2d) 171 (S.C.) [Etches] assists with determining the purpose of s. 12(1) of the WVA.  Etches deals with the precursor to what is now s. 3(1) of the WVA which requires that an action under this Act must be brought within six months from the date of the issue or resealing of probate.  The court stated that this provision must be read alongside the precursor to what is now s. 12(1) which has the same time-limited language.  When the two sections are read together, the reason for the limits become clear (see paras. 9-12, and 15):

  1. The “main aim” of the WVA is “adequate, just and equitable provision for the spouses and children of testators” when a will does not provide for this: see Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807 at 815.  As such, it must allow those falling within these groups to apply to the court to have the will varied.
  2. If those affected were allowed to apply to court for a variation without any time limit on the action, then there would be the danger that the distribution of the assets would remain uncertain for a prolonged period of time.  Thus there is a limitation period of six months on the action.
  3. On the other hand, if there was not a rule against distributing the assets before the limitation period to challenge the will was expired, then there would be the danger that a legitimate action could be started but the assets would already have been distributed.  This would deprive those affected of an effective remedy and potentially result in an injustice.
  4. Furthermore, without the restriction placed on the administrator of the estate by s. 12(1), it would be possible for that administrator to attempt to thwart a legitimate claim by the dependents under s. 2 of the Act by distributing the assets before an action is brought.

[29]         The purpose of s. 12(1) is to keep the estate intact to ensure that a successful plaintiff is able to recover that to which they may become entitled. A breach of this statutory provision is a serious matter.  It goes to the heart of the legislative scheme.

[30]         Until the six-month limitation period has passed, a beneficiary’s entitlement to a share in the estate is not absolute. It is subject to variation if a successful action is brought under the WVA. Unless consents are obtained, the beneficiaries are not entitled to receive and benefit from their share of the estate until the WVA claims have been resolved or a court order has been obtained.

[31]         Similarly the plaintiff in a WVA action is entitled to have the assets in the estate preserved pending the outcome of their claim. They should not be put in the position of having to pursue after the executor or other beneficiaries to reap the benefits of a successful action.

[32]         Where there is a breach of the statutory provision and funds are distributed contrary to the legislation, the remedy of a claim against the executor or other beneficiaries, after the completion of the WVA action, does not sufficiently protect the successful WVA claimant. Those parties may, by then, be without assets or have taken steps that make it difficult to locate their assets.

[33]         It is the party who has breached the provisions of the statue who must make matters right. This application is not the forum to determine the strength or otherwise of a WVA claim. The WVA claimant is entitled to have the estate reconstituted to its state prior to the wrongful distribution.

[34]         I find that the appropriate remedy for a breach of s. 12 of the WVA is for the party who has breached the provisions to either repay the estate or to post security in the entire amount which has been wrongfully disbursed.

[35]         The Executrix in this matter must make matters right. She must, within 30 days of the date of these reasons, repay the estate or post security in the amount of $202,000, being the amount which she has improperly advanced to the beneficiaries. If the security is not posted within 30 days the plaintiff will be at liberty to seek further relief.

Trustee Removed For Selling Assets Below Market Value and Benefiting

Trustee Removed For Selling Assets Below Market Value and Benefiting

VanKoughnett & Others v. Austin, 2006 BCSC 1856 is authority for the proposition that a trustee removed under section 30 of the Trustee Act where there is potential conflict of interest between the personal interests of the trustee, and those of the beneficiaries, particularly in this situation where the trustee sold assets at far below market value, and the trustee had benefited from her administration of the estate

The Law

The present petition seeks to replace the designated executor and trustee with the alternate named in the will of the deceased.

[20]            The application is brought, in part, under s. 30 and 31 of the Trustee Act, R.S.B.C. 1996, c. 464, and amendments, which provide:

30         A trustee or receiver appointed by any court may be removed and a trustee, trustees or receiver substituted in place of him or her, at any time on application to the court by any trust beneficiary who is not under legal disability, with the consent and approval of a majority in interest and number of the trust beneficiaries who are also not under legal disability.

31         If it is expedient to appoint a new trustee and it is found inexpedient, difficult or impracticable to do so without the assistance of the court, it is lawful for the court to make an order appointing a new trustee or trustees, whether there is an existing trustee or not at the time of making the order, and either in substitution for or in addition to any existing trustees.

[21]            The test to be applied in an application to remove an executor on the basis of misconduct is that set out by our Court of Appeal in Conroy v. Stokes, [1952] 4 D.L.R. 124.  To succeed on this basis the evidence must show that the executor acted in a manner that endangered the estate, or that as executor he or she acted dishonestly, without proper care, or without reasonable fidelity.

[22]            Misconduct is, however, not a prerequisite to the court removing a trustee “when the continued administration of the trust with due regard for the interests of the cestui que trust has by virtue of the trustees become impossible or improbable”, Re Consielio Trusts (No. 1) (1973), 36 D.L.R. (3d) 658 at 660 (Ont. C.A.).

[23]            In Hall v. Hall (1983), 45 B.C.L.R. 154, the court granted an application for removal of an executor where the executor’s duties were in conflict with his or her personal interests, estate assets had been endangered by the executor’s conduct, and the executor had benefited at the expense of the estate.

 

The Executors Obligation To Maintain Estate Assets

The Executors Obligation To Maintain Estate Assets

 

Executors obligation cannot just idly stand by and allow estate assets to deteriorate or waste- the executor and trustee has a duty of care to mange and preserve the estate assets.

The legal test is as follows:

The traditional standard of care of an executor/trustee is “that of a man of ordinary prudence in managing his own affairs” (Fales v. Canada Permanent Trust Co., [1977] 2 S.C.R. 302, at para. 32). At paragraph 34, Dickson J. (as he was then) explains that:

“[e]very trustee has been expected to act as the person of ordinary prudence would act. This standard, of course, may be relaxed or modified up to a point by the terms of a will…[b]ut however wide the discretionary powers contained in the will, a trustee’s primary duty is preservation of the trust assets, and the enlargement of recognized powers does not relieve him of the duty of using ordinary skill and prudence, nor from the application of common sense.”

Scott on Trusts, 3rd ed. (page 1501) (“Scott”) states that “[i]n determining whether the trustee is acting within the bounds of a reasonable judgment the following circumstances may be relevant:

  • the extent of discretion intended to be conferred upon the trustee by the terms of trust;
  • the existence or non-existence, the definiteness or indefiniteness, of an external standard by which
  • the reasonableness of the trustee’s conduct can be judged;
  • the circumstances surrounding the exercise of the power;
  • the motives of the trustee in exercising or refraining from exercising the power;
  • the existence or non-existence of an interest in the trustee conflicting with that of the beneficiaries.”

Scott also states that “where a trustee is granted powers which are to be exercised at his discretion, the court traditionally will not interfere unless the trustee has not turned his mind to the exercise of his discretion or has acted unfairly or in bad faith”.

In Re: McDonald Estate, 2012 ABQB 704, the Alberta Queen’s Bench provides that if a trustee fails to meet the standard of care, he or she will “generally be held accountable and liable for any loss resulting from the breach, and must place the trust estate in the same position as it would have been in if no breach had been committed.” Similarly, if the assets of an estate have been damaged or wasted, “the beneficiary’s remedy is against the executor in the context of an action for breach of fiduciary duty or a challenge to the executor at the passing of accounts.” (at para. 85)

Lawyers Questionnaire Admitted Into Probate Will

questionnaireGarnett Estate v Garnett Estate 2013 BCSC 1731 is an interesting case where pre WESA, a lawyers questionnaire re will instructions was determined by the court to be a valid will and admitted into probate.

In this case the executrix brought an action to prove the will of the deceased in solemn form.

The deceased was in palliative care and it became apparent that she would not survive long enough to meet with a lawyer to complete a new will. She then had two witnesses sign the lawyers questionnaire left by the lawyer, which the deceased signed in the witnesses presence.

The will questionnaire did not have a residue clause, and in fact the two witnesses to the will were beneficiaries so they could not inherit under that document.

Nevertheless the court determined that the testamentary intention of the deceased was to make “a fixed and final expression as to the disposal of her property on death “( Das Estate 2012 NSSC 441 at para 18).

The court found that despite the unconventional form of the 2008 document and its original generation as a lawyers questionnaire which would ordinarily have led to the finalization of a more sophisticated document, the court found in the circumstances of the deceased demonstrated her obvious intention that the document constituted testamentary disposition.

Proof of a will in solemn form

[35] I quote from Gillis v. Ardies, 2009 BCSC 215 at paras. 19-20 per Parrett J.:

[19] In today’s process, proof in solemn form requires the executor (or the will’s proponents) to meet the evidentiary burden of proving the will before the court. In such a hearing the executor must satisfy the court by adducing evidence –

that the will in question was duly executed;
that the testator had the capacity to appreciate and understand its contents; and
that he had the ability to sign the will.
[20] In the present case, proving the will in solemn form is required to address the issue of whether or not portions of the writing are invalid, and to determine what, in fact, constitutes the will.

[36] I find the above a helpful summary of the steps I must take to deal with the application to prove Ms. Garnett’s will in solemn form.

Fiduciary Relationships- Leading Case

 

Fiduciary- Privy Council

It is important on occasion to revisit some of the  British Privy Council case authority chestnuts that have developed as pillars of certain areas of the law.

One such case would be the Privy Council case of Noriah v Omar 1929 AC 127  relating to fiduciary relationships.

The facts were that a very elderly woman in Malaysia, wholly illiterate, executed a deed of gift of land property in Singapore in favor of her nephew, who had the management of all her affairs.

Before executing the deed, the elderly woman had independent advice from a lawyer who acted in good faith.

The lawyer however was unaware that the gift constituted essentially the entirety of the donors property, and did not bring home to her mind that she could be more prudent, and equally effective, by benefiting the donee by bestowing that property upon him in her will.

The trial reached the highest court of the land in London England where the court held that where the relations between the donor and a donee raise a presumption that the donee had influence over the donor, the court will set aside the gift unless the donee establishes that it was of a spontaneous act of the donor acting in circumstances which enabled him to exercise an independent will, and which justified the court in holding that it was the result of the free exercise of the donors free will

If the evidence however establishes the fact above stated it should not be disregarded merely because the donor did not receive independent legal advice.

On the other hand, the receipt of independent legal advice may rebut the presumption although it is not acted upon. But to have that effect, the court held that it must be given with the knowledge of all of the relevant circumstances, and the such as a competent and honest advisor would give if acting solely in the interest of the door.

The court set aside the gift as the presumption was not rebutted

Neighbour Found to Be a Fiduciary re Finacial Advise/Abuse

Neighbour Found to Be a Fiduciary re Finacial Advise/Abuse

Neighbour Found to Be a Fiduciary

Janz v. McIntosh [1999] S.J. No. 121 is an excellent example of a court finding a breach of fiduciary duty where the alleged fiduciary was not a professional .

In fact he was simply a neighbor.

The Plaintiff was 58 years old female with Grade VIII education, who had never worked outside home, and lived at home with her parents until she married. The Plaintiff’s husband asked the defendant neighbour to assist plaintiff after his death.

Soon after the husband’s death, the defendant began to assist plaintiff with financial affairs to prevent the plaintiff squandering her inheritance.

Defendant borrowed $4,400 from plaintiff, then borrowed additional $10,000

Plaintiff received further inheritance after her father’s death, and defendant borrowed substantial sums from that amount to discharge his mortgage.

On her sister’s advice, the plaintiff brought action for repayment and damages from breach of trust, and the action was allowed.

While the relationship was not within recognized classes of fiduciary relationships, but defendant never the less acted in a fiduciary capacity with respect to financial advice.

The Plaintiff was vulnerable, defendant recognized plaintiff’s vulnerability and plaintiff trusted defendant to act in her best interests .

The defendant never disclosed to the plaintiff the benefits he derived from borrowing on her inheritance.

The Defendant never advised plaintiff to seek independent legal advice.

Defendant was in breach of fiduciary obligation

Plaintiff awarded outstanding amount of $58,111.40.

The defendant repaid most of the funds, but ultimately went bankrupt. The court imposed a constructive trust on the defendant’s home to the extent that the money that the neighbor obtained from the plaintiff was used to pay off the mortgage. The court further ordered that the plaintiff was entitled to bring legal action against the neighbor’s pension to the extent of the monetary compensation the court awarded the plaintiff.

A. Fiduciary Relationship

(1) The nature of a fiduciary relationship

20 In Frame v. Smith, [1987] 2 S.C.R. 99 (S.C.C.), at 136, Wilson J. in dissent identified criteria indicative of the existence of fiduciary relationships:

Relationships in which a fiduciary obligation have been imposed seem to possess three general characteristics:

(1) The fiduciary has scope for the exercise of some discretion or power.

(2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.

(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

The criteria were adopted by the majority of the Supreme Court of Canada in International Corona Resources Ltd. v. LAC Minerals Ltd. (1986), 53 O.R. (2d) 737 (Ont. H.C.).

21 In Hodgkinson v. Simms, [1994] 3 S.C.R. 377 (S.C.C.), at 408-09, LaForest J. described the criteria as a useful rough and ready guide, but clearly indicated that the criteria were not definitive. In that case, a stock broker approached an accountant for tax planning advice in what was apparently a commercial arm’s length transaction. The accountant was held to be a fiduciary. Because the accountant was also acting for the developers of a real estate project, the majority found that he breached his fiduciary duty to the appellant when he advised the appellant stock broker to invest in the project and failed to disclose his pecuniary interest in the project. Writing for the majority about fiduciaries and their duties, LaForest J. stated at p. 405:

… From a conceptual standpoint, the fiduciary duty may properly be understood as but one of a species of a more generalized duty by which the law seeks to protect vulnerable people in transactions with others. I wish to emphasize from the outset, then, that the concept of vulnerability is not the hallmark of fiduciary relationship though it is an important indicium of its existence. Vulnerability is common to many relationships in which the law will intervene to protect one of the parties. It is, in fact, the “golden thread” that unites such related causes of action as breach of fiduciary duty, undue influence, unconscionability and negligent misrepresentation.

At p. 406, LaForest J. stated that undue influence and inequality of bargaining power are not elements which must be present to make a finding that a fiduciary relationship exists. He stated:

… Indeed, all three equitable doctrines are designed to protect vulnerable parties in transactions with others. However, whereas undue influence focuses on the sufficiency of consent and unconscionability looks at the reasonableness of a given transaction, the fiduciary principle monitors the abuse of a loyalty reposed. …

With reference to factual situations which fall within the guidelines provided by Wilson J. in Frame, supra, La Forest J. noted that there are three uses of the term fiduciary, only two of which he considers truly fiduciary. He stated at p. 409-10:

… The first is in describing certain relationships that have as their essence discretion, influence over interests, and an inherent vulnerability. In these types of relationships, there is a rebuttable presumption, arising out of the inherent purpose of the relationship, that one party has a duty to act in the best interests of the other party. Two obvious examples of this type of fiduciary relationship are trustee-beneficiary and agent-principal. In seeking to determine whether new classes of relationships are per se fiduciary, Wilson J.’s three-step analysis is a useful guide.

As I noted in Lac Minerals, however, the three-step analysis proposed by Wilson J. encounters difficulties in identifying relationships described by a slightly different use of the term “fiduciary,” viz., situations in which fiduciary obligations, though not innate to a given relationship, arise as a matter of fact out of the specific circumstances of that particular relationship; see at p. 648. In these cases, the question to ask is whether, given all the surrounding circumstances, one party could reasonably have expected that the other party would act in the former’s best interests with respect to the subject matter at issue. Discretion, influence, vulnerability and trust were mentioned as non-exhaustive examples of evidential factors to be considered in making this determination.

Thus, outside the established categories, what is required is evidence of a mutual understanding that one party has relinquished its own self-interest and agreed to act solely on behalf of the other party. This idea was well-stated in the American case of Dolton v. Capitol Federal Sav. & Loan Ass’n, 642 P.2d 21 (Colo. App. 1982), at pp. 23-24, in the banker-customer context, to be a state of affairs

… which impels or induces one party “to relax the care and vigilance it would and should have ordinarily exercised in dealing with a stranger.” … [and] … has been found to exist where there is a repose of trust by the customer along with an acceptance or invitation of such trust on the part of the lending institution.

In relation to the advisor context, then, there must be something more than a simple undertaking by one party to provide information and execute orders for the other for a relationship to be enforced as fiduciary. …

22 The hallmark of a fiduciary duty would appear to be loyalty reasonably reposed in another, abuse of which would constitute a breach of the duty of loyalty or the fiduciary duty. To determine whether loyalty had been reasonably reposed in another one would have to examine the circumstances to see whether “one party could reasonably have expected that the other party would act in the former’s best interests with respect to the subject matter at issue.”

(2) Was Sam in a fiduciary relationship with June Ann?

23 Sam and June Ann’s relationship does not fit into any of the recognized classes of fiduciary relationships such as trustee — beneficiary, agent — principal, or solicitor — client. That, however, does not determine the question. The existence or absence of a fiduciary relationship is a question of fact to be determined by examining the circumstances and characteristics of the relationship.

24 There are several factors which point to the early formation of a fiduciary relationship. These include the following:

a) the request by June Ann’s husband that Sam look after June Ann;

b) June Ann’s request for help in dealing with her affairs;

c) June Ann’s reliance on Sam’s advice;

d) Sam’s knowledge that June Ann had difficulty managing her affairs;

e) Sam’s intervention when he believed June Ann was spending her inheritance recklessly;

f) Sam’s acceptance of an obligation to care for June Ann.

25 June Ann would appear to be vulnerable. This was evident from the manner in which she testified. She had only a grade eight education, had never managed her own affairs and had never taken care of herself until Jake died. Sam recognized her vulnerability. He referred to her as being mentally challenged and also described her as being a dependent adult. He said that on a scale of 1-10, June was a “2” as a financial person. He said he began acting as her advisor — not only on financial matters, but also on emotional matters. Sam knew June Ann trusted him and that she believed he was looking out for her interests.

26 All of these factors support a finding that Sam accepted a fiduciary obligation early on in the relationship and acted in a fiduciary capacity when advising June Ann with respect to the administration of her affairs.

27 June Ann had the right to expect that Sam would act in her best interests, as that appeared to be the basis of their relationship. Sam agreed to intervene for her to manage her financial affairs. Their agreement went beyond Sam simply providing information to June Ann and carrying out her orders. June Ann relied on Sam’s advice and Sam knew that she did and encouraged her to do so. The circumstances support a finding that Sam owed a fiduciary duty to June Ann with respect to the advice he gave regarding the management of her affairs. Sam cannot act as an advisor and expect to receive benefits from his role as advisor (other than any remuneration for his services agreed to by the parties) without risking the scrutiny of the court and possible sanctions for breach of fiduciary duty.

Advising The Personal Representative

1. INTRODUCTION

It is perhaps trite to state that the role of the drafting notary or solicitor is simply not to fill in the blanks and record the testator’s instructions, including his or her choice of executor, but instead to actively advise and draw to the testator’s attention all of the considerations relevant to his or her decision. Frequently the amount of discussion pertaining to the choice of the executor or administrator, is simply a discussion as to “who do you want your executor to be”? Prudent practice would dictate that any discussions pertaining as to who the appropriate executor or administrator might be, should perhaps be left to the end of the consultation, so that the drafting solicitor or notary is aware of all of the necessary personal and financial information relating to the testator’s intentions, or alternatively, to the estate. There is a huge responsibility to be undertaken on the part of the personal representative. Where so far as possible, the potential complexity and responsibility of the executor or administrator’s role should be impressed upon all concerned.

2. IN GENERAL – THE OFFICE OF EXECUTOR/ADMINISTRATOR

An executor derives the title from the will of the deceased, and does not have to wait for a grant of probate from the court before acting on behalf of the estate. An administrator on the other hand, derives his or her power by appointment from the court. The administrator may be appointed in the situation where the deceased dies intestate (without a will) or alternatively, dies with a will but there is no living named executor. In such instance, it is incumbent on someone to come forth and apply to the court to be appointed administrator.

The executor/administrator is the legal representative of the deceased and is often referred to as the personal representative. The office of the personal representative continues for life, so that if after completing the administration with regard to the assets discovered on the death of the testator, other assets fall into the estate, then the personal representative must reopen the administration and proceed with the distribution of the new assets in accordance with the terms of the will or intestacy.

An executor may be appointed expressly in a will or by implication. Sometimes the deceased fails to expressly name an executor, and upon a reasonable construction of the will being conducted, the court may conclude that the deceased did in fact grant to a named person, the essential duties of an executor. In such a case that person is said to be appointed “according to the tenor of the will”.

3. SHOULD THE PERSONAL REPRESENTATIVE AGREE TO ACT?

No one can be forced to be a personal representative, and an executor always has the option of renouncing, but this must be done before the executor “intermeddles with assets of the estate”. Any prospective personal representative should give serious consideration as to whether or not he or she

is prepared to act as the personal representative. Under no circumstances should the prospective personal representative deal with the assets or otherwise intermeddle in the estate, until he or she has in fact decided to act as the personal representative.

Some of the preliminary considerations for the prospective personal representative to consider are:

(a) the potential for personal liability which may arise under many circumstances;

(b) the possibility for conflict of interest, such as where the executor is also a business partner of the deceased;

(c) the nature of the deceased’s assets, including the complexity of the estate;

(d) the personal relationship of the prospective personal representative with the beneficiaries or intestate successors;

(e) the time, stress and hassle of being an executor and dealing with lawyers, beneficiaries and the like;

(f) the time involved versus the potential remuneration available;

(g) the actual terms of the will and such factors as whether there will be ongoing lengthy trusts.

Once a personal representative accepts an appointment, he or she becomes a trustee for the estate, and he or she must exercise the powers bestowed upon the office, with diligence and care. A personal representative may become personally liable if their office is carried out in a negligent or improvident manner.

There is a technical difference between the personal representative and the trustee, and that is why in most wills, the personal representative is appointed as the executor and trustee. One important difference is that a trustee can appoint other trustees and can also retire from the trust. An executor however cannot appoint someone to act as co-executor, and nor can he or she retire from the office once the will has been proved.

4. INTERMEDDLING

An executor may also be appointed other than by a will, where the executor intermeddles in the assets of the estate, to the extent that the intermeddling makes that person an executor de son tort. This arises where the intermeddler has assumed the authority and office of the personal representative, and has dealt with the assets of the estate. It has arisen in such instances where the executor de son tort has arranged the burial of the deceased, gathered in assets and paid the debts. Once an executor has in fact intermeddled, he or she loses the right to renounce executorship, and may incur personal liability for any loss or damage that has resulted from any improper administration of the estate. However slight acts of intermeddling are not enough to make a person an executor de son tort.

5. WHO MAY BE APPOINTED?

Almost anyone can act as an executor, and generally speaking a testator may appoint whoever he or she likes to be his or her executor. Generally speaking the courts are very hesitant to interfere with the appointment of the executor as chosen by the testator.

However, persons of unsound mind are incapable of acting as personal representatives, and when the personal representative is or becomes insane, the court will grant administration to someone else. An infant may be appointed to be a personal representative, but the infant cannot act as personal representative during his or her minority. Accordingly if an infant is named sole executor, administration is granted with the will annexed to the guardian of the infant or to such other person as the court shall think fit, until the infant attains the age of majority.

In many instances, the court will refuse a grant of probate and will pass over an executor, where the court considers it inappropriate that such an appointment be made. These situations are typically where the proposed personal representative has been convicted of a fraudulent offence or has become bankrupt after the date of the will, or in situations where it has been established that a marked hostility existed between the proposed personal representative and the sole beneficiary. However, as previously stated, the court will not likely interfere with the discretion exercised by a testator in naming his or her personal representative. Before any application can be made for the removal of an executor and the appointment of someone else as administrator, probate must first have been granted to the executor whose removal is sought.

6. QUALIFIED APPOINTMENT

The appointment of a personal representative may be either absolute or qualified. Where the appointment is qualified, it may be either as to time, place or as to purpose or subject matter. When the personal representative is appointed for a fixed period or until a specified event occurs, the authority ceases automatically when the period expires or when the event takes place. When the appointment is subject to a condition precedent, then that condition must be performed and the court has no power to relieve against an inadvertent failure to comply with it. A will may for example appoint one person as the personal representative for certain purposes or property, and another personal representative for general purposes. In that situation, probate will be granted to each personal representative, but will distinguish between their powers.

7. CHOOSING THE EXECUTOR/ADMINISTRATOR

It is extremely important that the testator’s choice of his or her executor be given serious consideration. The attending notary or solicitor must remember that most clients have very little understanding as to the tasks and requirements that a personal representative must perform and the responsibilities that must be assumed. The appointment of the wrong person can be a costly and emotionally draining experience for all concerned. Accordingly it is important that the will’s draftsperson investigate the desired appointment and provide prudent legal advice as to who should be chosen to be the executor and trustee. Very often that choice cannot properly be made, until the attending notary or solicitor firstly enquires as to the nature of the assets, and the intentions to be carried out in the will.

There are many questions that the testator should consider prior to naming his or her executor, some of which are:

(i) will the executor be willing to act;

(ii) is the executor sufficiently sophisticated to carry out the job;

(iii) is the person trustworthy;

(iv) is the person young enough or healthy enough to carry out the job;

(v) will the executor be biased;

(vi) will the executor be able to work well with the beneficiaries;

(vii) does the executor have the time to do the job;

(viii) can the executor afford to do the job;

(ix) is there any conflict of interest or potential conflict of interest;

(x) should there be more than one executor;

(xi) the distance between where the testator and the executor reside.

The nature of the client’s affairs must be thoroughly examined to determine the like of active business interests, assets in foreign jurisdictions, loans or gifts to beneficiaries and the complexity of the various personal property and investments in the estate.

Generally speaking the choice for the testator usually comes down to choosing between:

(i) family members;

(ii) friends or acquaintances;

(iii) a corporate trustee.

Testators are often reluctant to talk frankly about the respective capabilities of their family members in choosing an executor. Often it is the notary or the solicitor’s job to tactfully ask the appropriate questions as to each of the respective family member’s strengths and weaknesses. It should be stressed that it should be the most appropriate person in terms of temperament, sophistication and personality that should be selected, rather than for example the oldest child. Certainly the testator should be prodded to speculate as to how the dynamics between his or her children will be after they are no longer alive.

Testators often wish to co-appoint one or more family members and I personally am of the view that this should be discouraged. If the client is adamant that there be a multiple number of family members as executors, then a majority rule clause should be inserted in the Will. If there is a handicapped child or children and discretionary trusts are being established, then careful consideration must be given as to who will be the executor and trustee, particularly as it relates to the possibility of a conflict of interest with respect to any residual funds after the death of the handicapped child.

If there are no appropriate family members, then consideration will then most likely turn to friends or acquaintances Friends or acquaintances are often of the same generation as the testator, and if so may be a bit too old.

The corporate trustee is certainly an appropriate alternative in many instances, particularly where there is a dysfunctional family and/or a complex estate with sizeable assets. The corporate fiduciary is impartial and will have the necessary sophistication and means to handle a sophisticated estate and/or difficult beneficiaries. The corporate trustee will also have a good understanding of the concept of even handedness and the potential for conflict of interest. Certainly the corporate trustee has a wealth of special knowledge and expertise, and this must be weighed against the negative considerations of choosing a corporate trustee, which are typically the expense, and its relative inflexibility and relative lack of personal touch.

8. DUTIES OF A PERSONAL REPRESENTATIVE

A personal representative has a duty to act solely and exclusively for the benefit of the beneficiaries. This duty is construed strictly, and forbids a personal representative from making a profit that is not authorized, or occupying a position where the personal representative’s self interests would conflict with the duty to the beneficiaries. The Courts of Equity have required personal representatives to ensure that each beneficiary receives exactly what he or she is entitled to receive under the will or the estate. The personal representative must maintain an “even hand” when dealing with all beneficiaries.

The personal representative has a duty in exercising all of his or her powers, whether discretionary or administrative, to maintain the standard of care of a reasonably prudent businessperson managing someone else’s property. Generally speaking, the personal representative cannot delegate his or her duties. The Courts in recent years however have permitted delegation of administrative duties that a reasonable and prudent businessperson would delegate in the management of his or her own business affairs. This would include the use of brokers, real estate agents, accountants, lawyers, appraisers and so forth.

The personal representative’s general duties are as follows:

(1) To dispose of the deceased’s body.

It is the executor and not the testator’s spouse or family, who has the right to determine the place and manner of burial. The Cemetery and Funeral Services Act sets up a priority structure as to who has the right to control the disposition of human remains. First priority is given to the executor, then to the spouse, and then to various categories of relatives. If the person who has the right to control disposition is unavailable or unwilling, the right passes to the next person of the priority list. Proper funeral expenses incurred are payable out of the estate. Generally, the person who instructs the funeral director will be personally liable to pay all expenses incurred, but is entitled to indemnity as a first priority against the estate for the reasonable expenses of a suitable funeral. There are some cases where the executor has been denied reimbursement of the full funeral costs, where the costs have been found to be excessive under the circumstances.

(2) Take possession or control of the deceased’s assets.

The personal representative must take steps to search for any cash, jewelry, valuables and the like, and arrange for their safekeeping. Any personal property must be locked up and properly insured. Other assets that may require insurance coverage must also be checked into. Financial institutions and government agencies must be notified of the death. Mail must be re-directed and the bills, including mortgages, must be paid. Rents must be either collected or paid and businesses must be managed for the interim until distribution of the estate or until the sale of the business. A personal representative must enquire as to whether they have sufficient legal authority to carry on the business, and must also be cognizant of the potential for personal liability for carrying on the business.

(3) Complete a schedule of all of the deceased’s assets and ascertain their value.

After the executor has taken charge of the assets of the estate, and has made a full inventory of the assets and a valuation of same, the personal representative should then arrange to have an application made to the court for the issue of a grant of probate. In the case where the deceased dies intestate or without a named beneficiary, there is often a delay experienced in finding some appropriate person to step forward and apply for letters of administration. Rule 61(20) of the Rules of Court, seems to assume that in practice, in the absence of special circumstances, the court will usually give priority to appointing as administrator of the estate, the person or persons who have the greatest interest in the estate. In practice consents will be required from any person entitled to share in the estate who has a greater or equal right to apply. Thus, if two or more persons are equally entitled to apply, they must either apply jointly, consent to the appointment of one of them, or be served with notice under Rule 61(20). There is no limitation on the number of administrators who may be appointment.

(4) Advertise for creditors.

Before any debts of the estate are paid, the executor or administrator should see to the publication of the proper advertisement for creditors, claims and other claims against the estate. From my experience, common sense should prevail in deciding whether or not to advertise for creditors, as the costs can be considerable. In the case of a little old lady with simple assets and a history of paying her bills on time, it may not be necessary to publish such an advertisement. However if the personal representative is to protect him or herself from liability, then serious consideration should be given to the placement of such an advertisement, as Provincial Legislation states that the personal representative shall not be personally liable to creditors, where notice has been properly given and the assets of the estate have already been distributed.

(5) To notify beneficiaries, and persons who would take on an intestacy with respect to an application for probate or letters of administration;

(6) To act personally, although as aforesaid, delegation may be allowed in certain administrative circumstances;

(7) To ensure that investments are authorized.

There is a duty to examine the assets and investments of the estate, and in general, to convert in a reasonable and timely manner, the assets that do not qualify as authorized investments for the estate. The executor must be concerned with assets that may waste (ie, an unheated greenhouse) or that are to speculative (penny stocks), or reversionary assets;

(8) To complete and file income tax returns and where necessary obtain a Clearance Certificate from Revenue Canada;

(9) To pay the debts, including funeral, legal, testamentary expenses, succession duties and probate fees;

(10) To claim all debts due to the deceased and generally collect all of the assets;

(11) To keep accounts:

The personal representative has a duty to be prepared to account to creditors and to persons who have a beneficial interest in the estate. The personal representative must give to anyone to whom he or she owes a duty such information as that person reasonably requires. The type and amount of information varies, but the duty to account is owed to beneficiaries, unpaid legatees, unpaid creditors, successors, trustees, others who may have an interest in the deceased’s assets, and others provided for by statutes such as the Public Guardian or Revenue Canada.

(12) To continue or bring and maintain court actions on behalf of the estate:

Under Section 59 of the Estate Administration Act, a personal representative of a deceased claimant may continue or bring and maintain an action for a loss or damage to the person or property of the deceased in the same manner and with the same rights and remedies as the deceased, except for certain actions such liable and slander, pain and suffering, and loss of expectancy of earnings. A personal representative may continue or bring and maintain an action under the Wills Variation Act, or an action for constructing or resulting trust on behalf of the deceased.

(13) To distribute the assets in accordance with the will or the laws of intestacy.

8. THE EXECUTOR’S YEAR

Generally speaking the personal representative must not unreasonably delay in calling in the assets and settling the affairs of the estate, and distributing the assets in accordance with the will or the rules of Intestate Succession. There is no hard and fast rule as to what constitutes undue or unreasonable delay, but as a general rule of thumb, there is an executor’s or administrator’s one year to do so. The general rule is that the executor has one year from the testator’s date of death, and in the case of an administration, the administrator has one year from the date of the grant, to settle the affairs of the estate. There is case law to the effect that in the case of a legacy, the executor is entitled to withhold payment during the one year, even though the will indicates that the testator wishes payment to be made as soon as possible.

I will not deal with the topic of removal of an executor in the paper, but will do so at a later date.

9. RENUNCIATION

Where the proposed personal representative has not intermeddled in a substantial way, then he or she can renounce the appointment as executor. Any renunciation must be unconditional and be in writing and properly witnessed. The renunciation takes effect as of the date of execution, but it may be withdrawn prior to filing it with the court. The renunciation is usually filed at the same time that the application for the grant of probate is made.

There are many reasons why an executor may wish to renounce, and this should be canvassed with the proposed personal representative at the initial meeting, and as soon as possible after the death of the deceased. For example I recently had a Provincial Court Judge renounce as executor, when it was likely that he would be named as a defendant as personal representative, in an action brought for an alleged sexual assault. This would be embarrassing to the executor given his job as a Judge.

If the proposed personal representative is one of two or more executors appointed under a will, then he or she may choose not to participate in the administration of the estate initially, and leave it up to the remaining executors to do so. In these circumstances, the remaining executors would apply for probate, and would reserve the right of the prospective personal representative to apply at a later date if he or she should choose to do so. Reserving the right to apply for probate may be appropriate where the prospective personal representative prefers not to act for reasons such as distance, lack of time, age, illness, or other such reasons.

The fact that an executor has not obtained a grant of probate does not mean that person is no longer an executor. Renunciation is generally preferable to a reservation of the right to apply for probate, unless the non-proving executor seriously wishes to reserve the right to apply for probate in the future.

10. THE CHAIN OF EXECUTORSHIP

If two or more executors have proved a will, and one of them dies after the grant, and no alternative executor has been named, then the surviving executor will continue, unless the will requires a minimum number of executors greater than the number of surviving executors.

However if a grant has issued and the sole executor or the survivor of several executors have proved the will, but dies before completing the administration of the estate, and no alternate was named in the will, then the executor of the deceased’s executor will become the executor of the original testator once he or she obtains probate of the deceased executor’s will. The replacement executor will stand in the shoes of the original executor in all respects.

This rule is referred to as the chain of executorship and it applies only in the circumstances where the executor named in the will has taken probate of the will before death, and each will in the chain must have been proved or probated.

11. REMUNERATION

Unless the will provides otherwise, all executors whether lay or professional, whether experienced or not, are entitled to be paid remuneration in accordance with the provisions of Section 88 of the Trustee Act, R.S.B.C. This section allows the executor to be paid, in the discretion of the court, up to a maximum of 5% of the gross aggregate value of the estate, including capital and income, together with an annual care and management fee of up to .4% of the average market value of the estate.

In most circumstances, the beneficiaries may well approve a 5% fee to the executor. In many instances however the courts will not allow the executor be paid the maximum 5% of the gross aggregate value of the estate. The courts will enquire into a number of factors, including the complexity of the estate, the experience of the executor, the time spent by the executor, the value of the estate, the amount of time spent administering the estate, and the like. However from a perusal of the somewhat limited number of cases on point, it would appear that the court very often will award fees more in the range of 2 1/2% to 3 1/2% rather than the maximum.

12. CONCLUSION

It is very important that the testator’s choice of an executor or executors be given sufficient scrutiny and discussion. As previously stated, most clients have little or no understanding of the onerous responsibility that an executor or alternatively an administrator, must perform. An inappropriate or improvident appointment can often complicate the administration of the estate unduly, and in certain cases, unnecessarily result in litigation. Accordingly, it is incumbent upon the drafting notary or solicitor to thoroughly investigate the desired appointment and to provide suitable legal advice.