Sunday, May 13, 2012

Thiemer Estate

What does “money” mean? Is it just cash? Or does it include bank accounts? How about Guaranteed Income Certificates? Mutual funds? Mortgages? Shares of companies traded on stock exchanges? Shares of companies that are not traded on stock exchanges?

Making a gift of “money” in a will can create interpretation problems, even when the will includes a definition of money. This is illustrated by the recent Supreme Court of British Columbia decision in Thiemer Estate, 2012 BCSC 629.

When Randy Thiemer died on August 7, 2008, he left an estate consisting of assets worth over $20 million. The assets included real estate in Vancouver that he left to his common law spouse, Gigi Schlappner, GICs worth about$ 1.4 million, and shares in privately held companies worth over $14 million as well as shareholder loans owing to him of about $900,000.

In addition to the real estate, he left his personal effects and the balance of “any money” he may have at the time of his death to Ms. Schlappner. He also directed his executors to cause the directors of one of the companies to transfer a Cadillac to her.

He left a total of $7 million in cash bequests to his brother, a niece, nephews and friends.

In his will, he directed that his executors and trustees would hold the residue of his estate in trust during Ms. Schlappner’s life. She would receive the income of the trust, and the trustees had discretion to use the capital for her benefit. On her death, the trustees were to distribute the remainder of the trust among Mr. Thiemer’s brother, sister, niece, three nephews and parents.

Mr. Thiemer’s will included a definition of “money”:

For the purposes hereof, the word “money” will include the balance of any monies in any savings and current accounts in my name, any savings certificates, shares and bonds but excluding the proceeds of any insurance policies or registered retirement savings plans.

One of the questions Madam Justice Dardi was asked to consider in this case was whether “money” included Mr. Thiemer’s shares and shareholder loans.

When considering the meaning of words in wills, you can’t just look them up in a dictionary, or even use meanings ascribed to the words in previous court decisions. The approach the courts in British Columbia take is to attempt to determine the will-maker’s subjective meaning by considering the words in the context of the will as a whole, and the will-maker’s circumstances when the will was made.

Madam Justice Dardi described the principles applied by the courts to interpret wills in paragraphs 48 through 51:

[48]         In keeping with contemporary judicial thinking, the courts of this province have favoured the subjective approach to interpreting wills, wherein the objective is to ascertain the actual meaning the testator ascribed to the words he or she used in the will. In determining the testator’s intention the courts have endorsed the analytical approach commonly described as the “armchair rule”. The rule requires that the court put itself in the position of the testator at the point in time when he or she made the will, and from that vantage point construe the language in the will in light of the surrounding facts and circumstances known to the testator.
[49]         In Re: Burke, the Ontario Court of Appeal articulated the guiding principles which were cited with approval by our Court of Appeal in Davis Estate v. Thomas (1990) 40 E.T.R. 107 (B.C.C.A.) and Smith v. Smith Estate, 2010 BCCA 106, at paras. 18 and 28 respectively:

... Each Judge must endeavour to place himself in the position of the testator at the time when the last will and testament was made. He should concentrate his thoughts on the circumstances which then existed and which might reasonably be expected to influence the testator in the disposition of his property. He must give due weight to those circumstances in so far as they bear on the intention of the testator. He should then study the whole contents of the will and, after full consideration of all the provisions and language used therein, try to find what intention was in the mind of the testator. When an opinion has been formed as to that intention, the Court should strive to give effect to it and should do so unless there is some rule or principle of law that prohibits it from doing so.

[50]         Although the primary source of evidence is the “four corners” of the will, the armchair rule entitles the court to look to extrinsic evidence to identify the surrounding circumstances known to the testator at the time the will was made which might reasonably be expected to influence the testator in the disposition of his or her property. The facts and circumstances that a court may consider include the occupation of the testator, the state of his or her property, and the general relationships of the testator to his or her immediate family and other relatives: Kaptyn Estate (Re), 2010 ONSC 4293 at para. 38. The weight of the authorities demonstrates that the modern judicial approach to interpreting a will is to admit all the evidence regarding the surrounding circumstances at the start of the hearing and then to construe the will in the light of those surrounding circumstances. Ambiguities in the will may only become apparent in the light of the surrounding circumstances: Rondel at paras. 23‑24.
[51]         Since the meaning of words in wills can differ so much according to the context and circumstances in which they are used, previously decided cases are of limited assistance except in so far as they may express general principles of construction. This notion has repeatedly been embraced by Canadian courts: Kaptyn Estate (Re) at para. 32; Perrin at 406; Re: Burke at 398.

Applying the “armchair rule,” Madam Justice Dardi found that Mr. Thiemer did not intend to include shares in privately-held companies (as opposed to shares of public companies traded on stock exchanges) in the gift of money to Ms. Schlappner. There were several reasons to conclude that the reference to “shares” in the definition of “money” included only shares in public companies, and not the shares in the private companies held by Mr. Thiemer:

1.                The other things in the list of inclusions as money, such as savings and current accounts, savings certificates and bonds were easily converted into money. Publicly-traded shares are also readily sold for money, but private shares are not.

2.                  If the shares of the companies were included in the gift of money to Ms. Schlappner, she could have arranged to have the Cadillac transferred to her by the directors, and the provision that the trustees require the directors to do so would not have been necessary.

3.                  Mr. Thiemer appointed three trustees, including two legal advisors, and he gave them extensive powers for managing his businesses in his will. These provisions were consistent with the view that he intended for the shares of the company to be held in the trust, and for his trustees to manage the companies, rather than for the trustees to distribute the shares to Ms. Schlappner.

4.                 If the shares of the companies were part of the gift of money to Ms. Sclappner, then substantially all of the estate would be distributed in the specific gifts, and there would be little value that would fall into the spousal trust. The creation of the spousal trust, and the gift of the remainder on Ms. Schlappner’s death to relatives with whom the court found Mr. Thiemer had close relationships, would be an “empty gesture.” A finding that the shares were not comprised in the gift of money to Ms. Schlappner was more consistent with the overall scheme of distribution in the will.

Madam Justice Dardi found that the gift of money did include the GICs, but did not include a mortgage owed to Mr. Thiemer, which was more in the nature of an interest in land than money. She also found that the shareholder’s loans were not generally easily liquidated, and accordingly were not intended in the gift of money. Tax refunds and a CPP death benefit were not money he had at his death, but were payable later. Accordingly she found that they were not included in the gift of money. 

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