Release of an Original Will to an Applicant for Letters of Administration

Ameena Sulton at Walley Estate Litigation Blog has written about a case in Ontario, Hope v. Martin, 2011 ONSC 5447, in which the Superior Court of Justice considered when a lawyer holding an original will may release the will to a person who was not named in the will as an executor (referred to as an estate trustee in Ontario), but who wishes to apply to court to be appointed as an estate trustee. You can read her post here.

In that case, the will-maker had named an estate trustee and an alternate, but both renounced. A family member wished to apply to be appointed as trustee by the court to administer the estate, but required the original will to file in court with the application. The lawyer who held the original will would not release the original will to the applicant. He was concerned that the applicant, not being named as the estate trustee in the will, and not yet having been appointed by the court, did not have authority to direct the lawyer to release the will. He was also concerned that releasing the will to someone other than the named would be a breach of his duties of confidentiality and solicitor-and-client privilege to the now deceased will-maker who had been the lawyer's client.

The applicant applied to court for an order that the lawyer release the original will, and Justice Brown granted the order. Justice Brown said that in the circumstances--there not being any dispute about the will, and the beneficiaries all consenting to the release of the will--a court order should not be necessary for the lawyer to release the original will. Justice Brown said,

[23] As identified by Mr. Rabinowitz in his paper, the real issue facing solicitors who are asked to produce the original of a will is whether the person making the request possesses the authority to do so. The appropriate response will depend upon the particular circumstances of the case and the application of practical judgment and common sense. Where a named executor makes the demand, production should be made. Where a solicitor is faced with conflicting demands, he can legitimately require the conflicting parties to obtain a court order. However, where, as here, the solicitor knew that both executors had renounced and there was no evidence of conflicting demands to assume the administration of the estate, the solicitor should have exercised some practical judgment to ensure that the testatrix’s intentions were performed without imposing unnecessary costs on the estate.

I like the practical approach suggested by the Ontario Court, but I suggest that a lawyer holding an original will must exercise caution before releasing it to someone who is not named as an executor. A lawyer who agrees to hold an original will takes a significant responsibility for safekeeping the document.  At minimum a lawyer, or anyone else holding an original will, should be satisfied that the person requesting the will has a genuine intention to apply to court to be appointed as an administrator or trustee of an estate. This can generally be satisfied when the request is being made by another lawyer, and conditions can be placed on that lawyer to hold the will until it is filed in court.

In British Columbia, if a lawyer or anyone else holds an original will, and refuses to release it, you can apply for a citation to be issued requiring the person holding the original will to deposit it with the Registrar of the Supreme Court of British Columbia. I wrote about citations to bring in a will here.

Jackpot

A group of friends in the Elks lounge in the town of Okotoks, Alberta, bought lottery tickets together, 6/49 and Super 7. They did so for years. They didn’t buy every time. They waited until the first prize reached $10 million. A few of them bought tickets fairly consistently. Among this group, it was common for one or another to buy tickets for those who weren’t at the lounge when the lottery ticket money was being collected. If someone bought a ticket for another, he or she would be repaid. Although there was a group who bought tickets fairly consistently, others could join in. One of them collected the money to buy the tickets in an envelope, marking down the names of those who bought tickets (including those for whom tickets were bought) on the envelope.

The patrons of the Elks lounge bought tickets together since the 1990s. For years, they did so, apparently, without dispute. Then again, like most lottery participants, for years they had never won much.

On November 23, 2007, there were two jackpots of more than $10 million coming up, one a Super 7, and the other a 6/49. Two of the frequent participants, Mr. and Mrs. Clancy were not at the Elks lounge. Mr. Christensen bought tickets for Mr. and Mrs. Clancy. He had bought for other friends as well, and didn’t have enough cash to buy tickets for both lotteries for Mr. and Mrs. Clancy. He chose to buy tickets for the 6/49 for Mr. and Mrs. Clancy, and he later collected the money for them.

The Super 7 ticket one the jackpot: 20 million dollars.

Mr. Johnson, who contributed funds to purchase the winning ticket, agreed to pay Mr. and Mrs. Clancy a part of his winnings from the Super 7 jackpot. The others did not.

Mr. and Mrs. Clancy sued. They alleged that there was an agreement among the regular participants to ensure that each of them was always in the draw. The also asked the Alberta Court of Queens Bench to find that those who participated in the Super 7 draw held a portion of the jackpot in trust for Mr. and Mrs. Clancy.

Madam Justice Bensler in Clancy v. Gough, 2011 ABQB 439, found that Mr. and Mrs. Clancy sincerely believed that their friends would ensure that they would be in the draw every time the group participated. But she also found that there was no binding legal obligation to do so among the group of regular participants. The participants did not either say that they agreed to be legally bound to make sure everyone participated, nor did their conduct show that they intended to be legally bound. They did not in fact make sure that each of them was in each draw in which the group participated.

Nor did the participants hold a portion of a jackpot in trust for Mr. and Mrs. Clancy. A trust requires three certainties: the certainty of the subject matter or property held in the trust; certainty of the objects or beneficiaries of the trust; and certainty of the intention to create a trust. Mr. and Mrs. Clancy argued that the subject matter was the lottery tickets, and the object was the sharing of the benefit of the benefits from the lottery tickets among the group.

Madam Justice Bensler found that there was no certainty of intention to create a trust. There was no agreement to create a trust.

Nor could the Court find that there was a trust based on the funds contributed by Mr. Christensen on behalf of Mr. and Mrs. Clancy, funds which they repaid. The funds provided by Mr. Christensen for the purchase of lottery tickets were used to buy lottery tickets in the 6/49 rather than the Super 7 lottery.

Accordingly, Mr. and Mrs. Clancy were not entitled to a share of the jackpot from the Super 7 lottery.

Should I Have a Trust?

You can separate the legal title and management of assets from the benefits derived from the assets through a trust. You can create a trust in your will, called a testamentary trust, or you can transfer assets during your lifetime to a trustee to manage them both during your lifetime and after your death.

There are many good reasons why you might want to create a trust to hold assets either during your lifetime or after your death. For example, if you have young children, you might want to create a trust in your will so that if you die while they are young, someone else will manage the money they will inherit for them until they reach a certain age. Or perhaps you wish to benefit someone with a disability who cannot manage his or her own money. There are many, many situations in which trusts are excellent estate planning tools to accomplish various goals.

While I have seen trusts work very well in accomplishing specific goals, I am leery of generalizations about trusts (or just about anything else when it comes to estate planning). From time-to-time, I see trusts that appear to have been set up for their own sake, without any real purpose.

There can be disadvantages as well as advantages to creating a trust. A trust requires on going administration by the trustee. The trustee may charge for his or her time and effort. Sometimes a family member will act as trustee without charging any fees, but there is still a cost to that person in time and effort. Nor are family members always the best choice. A professional trustee, such as a trust company, may be a good choice, but may be more expensive. There can be tax advantages in using trusts, but there can also be tax disadvantages. Beneficiaries may be unhappy that funds intended for them are controlled by someone else.

Sometimes people tell me that they have heard that trusts are a good idea, and wonder if they should have a trust. I am always happy to talk about trusts, but I think this approach is backwards. Rather than take a concept such as a trust, and see if it fits into your circumstances, start by explaining your circumstances to an estate-planning lawyer, and then ask him or her for advice on estate-planning tools that meet your objectives. The advice you get may include creating a trust. The lawyer should advise you on both the advantages and disadvantages of a trust, and any alternatives, so that you can make a well-informed decision. But don’t create a trust for its own sake.

It is also important to keep in mind that there are many different trusts, which can go on for just a few years, or for over a lifetime, which can be relatively easy for a trustee to administer, or very complex, which can be set up to benefit one person, or many, and which can be relatively inexpensive for a lawyer to draft, or can be quite expensive. The level of complexity should be balanced with your specific circumstances and goals.

Estate planning is often not simple. In some cases very sophisticated estate planning, perhaps including multiple trusts, is appropriate. But my philosophy is don’t make it unnecessarily complicated either. Choose the estate-planning tools that are sensible for you.

Peri v. McCutcheon

This morning, the British Columbia Court of Appeal released its decision in Peri v. McCutcheon, a case in which it was asked to give an expanded interpretation of the meaning of “children” in the Wills Variation Act. The Court was asked to interpret the word "children" to allow child who was neither the biological or adopted child of a person to apply to vary his will. In British Columbia, the Wills Variation Act allows a child, including an independent adult child, to apply to court to vary his or her parent’s will if the parent has not made “adequate provision” for the child in the will. If the court finds that adequate provision has not been made, the court may order such provision for the child as the court decides is “adequate, just and equitable in the circumstances."

In the past the courts have interpreted “children” under the Wills Variation Act to be limited to either the parent’s biological children, or children that the parent has legally adopted. This means that a step-child cannot make a claim under the Wills Variation Act to vary the step-parent’s will (unless the step-parent adopted the step-child). In 1994, in a decision called Hope v. Raeder Estate, the Court of Appeal held only a biological or adopted child could apply under the Wills Variation Act. In Hope the Court held that it was not open to the Court to give the word “children” an extended meaning. The Court said that only the Legislature could extend the meaning under the Wills Variation Act to include step-children.

In Peri, the British Columbia Court of Appeal sat as a five court paned. Usually, three judges of the Court of Appeal hear an appeal from a decision of the Supreme Court of British Columbia. But a party to an appeal may request that five judges sit in order to reconsider a decision in an earlier case.

Deborah Peri was seeking to vary the will of Harbanse Doman, who made no provision in his will for her. Mr. Doman was married to Ms. Peri’s mother when Ms. Peri was born, but he was not her biological father. Ms. Peri was born in Seattle, and Mr. Doman identified himself as her father on her registration of birth, and on immigration papers allowing her to immigrate to Canada. He arranged for her to live with another family, and paid support for her. He also paid for a private school for her, paid expenses while she was in college, and paid wedding expenses for her. He met with her occasionally. However, he kept a physical and emotional distance from her, and made it clear to her that he was not her father, did not intend to be her father, and did not consider her as part of his family.

The Court of Appeal declined to give “children” an extended meaning in this case to include Ms. Peri.

But what is most intriguing about this decision is that the Court of Appeal did not rule out the possibility that the court might give the word “children” an extended meaning to include a step-child under the Wills Variation Act in a future case. The Court of Appeal did not consider the facts of this case compelling, finding that Mr. Doman’s did not stand in the position of a parent to Ms. Pari.

Madam Justice Prowse wrote:

[ 36] In the absence of a more compelling case than has been presented, I do not find it necessary to grapple with the question of whether it should be left to the Legislature to expand the scope of who may claim as a “child” or “children” of a testator under the Act, or whether social, scientific and other circumstances have changed so significantly that it is appropriate for the Court to re-interpret those words. Thus, I find no basis for interfering with the decision of the chambers judge that Ms. Peri is not a child of the Testator within the meaning of s. 2 of the Act.

The Court of Appeal left the door open—just a crack—to a step-child with more compelling circumstances showing that he or she had a parent-child-like relationship with a step-parent to persuade the Court of Appeal to give the word “children” an extended meaning under the Wills Variation Act.

Sledin Estate v. Rusin

In a decision last month, Mr. John Rusin was ordered to pay the estate of Johanna Sledin over $800,000 in damages as compensation for funds she invested in companies, the shares of which he owned, and for the transfer of her house to him. In this case, Sledin Estate v. Rusin, 2011 BCSC 1207, Mr. Justice Gaul held that the nature of Mr. Rusin’ relationship was such that he owed fiduciary duties, in other words a duty of loyalty, to Mrs. Sledin, and that by his conduct he was in breach of his fiduciary duties.

Mr. Rusin met Mrs. Sledin and her husband in 1971. He was 32 and she 69. After her husband died in 1975, she became reliant on a small circle of friends, including Mr. Rusin, to assist her. She did not have a drivers licence.

Mrs. Sledin invested in various companies that were controlled by Mr. Rusin. The Court found that she received interest payments, but that she reinvested them with Mr. Rusin, who often did not keep records of the funds she provided.

In 1994, she sold her house to Mr. Rusin for $270,000 receiving a debenture from one of Mr. Rusin’s companies in the amount of $260,000 in return. She did not receive any legal advice on the sale of her home. Mr. Rusin sold the house a couple of months later at a profit for $311,000. The company was later struck from the Registrar of Company because Mr. Rusin’s did not keep the required filings up to date. As a result, Mrs. Sledin received only a small amount of interest, and none of the principal of the $260,000 debenture.

Mr. Rusin’s companies were engaged in real estate speculation and were not successful, several having been struck for failing to file annual reports.

Ms. Sledin suffered a stroke in 1996, following which her nephew Gordon Drewitz was appointed by the Supreme Court of British Columbia as her committee (or guardian). He demanded an accounting from Mr. Rusin of Ms. Sledin’s investments, but Mr. Rusin would not provide any.

On her death on September 11, 2000, Ms. Sledin had cash of $31,000, a Guaranteed Investment Certificate of $12,400 and a Term Investment of $10,000. She had invested large amounts of money with Mr. Rusin. After Ms. Sledin’s death, Mr. Drewitz as her executor sued Mr. Rusin.

Mr. Rusin sought to portray Ms. Sledin as a savvy investor, who knew what she was doing when she invested in his companies. To succeed, Mr. Drewitz needed to do more than show that his aunt made unsuccessful investments in Mr. Rusin’s companies. You can’t successfully sue the principal of a company in which you have invested just because you lost your investment. Mr. Drewitz needed to show that Mr. Rusin had a legal duty to Ms. Sledin, and that he breached that duty. He argued that in the circumstances Mr. Rusin had fiduciary duties Ms. Sledin to protect her interests, and that Mr. Rusin did not do so.

In determining whether Mr. Rusin had fiduciary duties to Ms. Sledin, Mr. Justice Gaul considered the legal principles as follows:

[64] Certain relationships on account of their very nature result in fiduciary obligations for one of the parties. For example, a lawyer has a fiduciary obligation to his or her client and a trustee has a similar duty to his or her beneficiary. These types of relationships are generally referred to as per se fiduciary relationships. 

[65] An ad hoc fiduciary relationship is one that does not fall within the traditional categories of fiduciary relationships. Instead, it is one that arises out of the specific circumstances and dynamics of the particular relationship.

[66] In dissenting reasons in Frame v. Smith, [1987] 2 S.C.R. 99 at para. 60, Wilson J. described what she considered to be the general characteristics of a fiduciary obligation as follows:

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.

[67] These observations of Madam Justice Wilson were later endorsed in Lac Minerals v. International Corona Resources Ltd., [1989] 2 S.C.R. 574.

[68] The Supreme Court of Canada revisited the issue of fiduciary obligations and the constituent elements of such relationships in Hodgkinson v. Simms, [1994] 3 S.C.R. 377, and Galambos v. Perez, 2009 SCC 48.

[69] While the characteristics of a fiduciary relationship articulated in Frame continue to be relevant in determining whether such a relationship exists, the more recent case authorities have recast those characteristics and added to them.

[70] It is now clear that for an ad hoc fiduciary relationship to exist, the court must be satisfied that one party undertook, either expressly or by implication, to act for the benefit and best interest of another party: Galambos, at para. 66.

[71] Moreover, a relationship whose distinguishing feature is only the vulnerability or power imbalance of one party vis à vis another will not, without any additional features, meet the threshold of a fiduciary relationship: Galambos, at paras. 67 and 74.

Applying these criteria, Mr. Justice Gaul held that Mr. Rusin had fiduciary duties to Ms. Sledin. He undertook to look after her financial well being. He made decisions for her as to which companies to direct her investments, and what type of security if any to giver her. She trusted him to act in her best interest. She was vulnerable, being dependant on his for a significant portion of her income.

Mr. Justice Gaul found that Mr. Rusin had breached his fiduciary duties to Ms. Sledin. He failed to properly record her investments. He provided inadequate or worthless security to her for the investments. He allowed some of the companies to be struck from the Corporate Registry without telling her. He failed to repay principal amounts she invested with him.

Mr. Justice Gaul agree with Mr. Drewitz’s lawyer’s description of Mr. Rusin’s dealings with Ms. Sledin as a “variation of an unsophisticated, limited investor ‘Ponzi scheme’, an investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit. Mrs. Sledin was both the initial and the subsequent investor”.