(i) Blood Rules on Intestacy

http://canlii.ca/t/ggmgg

A recent case from the Alberta Court of Queen's Bench highlights the issues that can arise when someone makes plans or promises regarding their estate, yet fail to make a Will.

Promises carry little weight without an actual Will and laws of intestate succession will prevail. The end result can be harsh, especially in situations of second marriages with step-children, as was the case before this court. No matter how sympathetic the facts may be, blood relatives trump step-children on intestacy, even if those children were treated as the deceased's own. In other words, blood rules on intestacy.

Background

In Peters Estate (Re), 2015 ABQB 168 the facts are fairly straightforward and, for the most part, probably quite common: A single father of four daughters married for the second time.  With his second wife, he had a son. While the wife never adopted her new husband's daughters, she treated them as her own and introduced them as her daughters. They were a family for 43 years until the husband died.  At the time of the husband's death, the husband and wife were on the verge of bankruptcy. One of the daughters (the Applicant in this case) assisted in bringing about a successful conclusion to the bankruptcy for her step-mother. All five children decided to give up their interest in their father's estate so that the mother could benefit. After these events, according to the Applicant, the mother advised that her estate would be distributed amongst all five of the children accordingly. However, despite these assurances, the mother died without confirming these instructions in a Will and died intestate.

The Applicant brought an application, taking the position that all five children should inherit equally pursuant to the Alberta Wills and Succession Act S.A. 2010, c.W-12.2. However, the court disagreed and the Honorable Justice Jerke held that the biological son was the one and only beneficiary.

The Law

Section 65 of the Wills and Succession Act provides that if an individual dies leaving no surviving spouse (as was the case here) the intestate estate shall be distributed to the "descendants" of the intestate and that where a distribution is made to "descendants" the intestate estate "shall be divided into as many shares as there are . . . children of that individual who survive the intestate".[1]
 

The Wills and Succession Act s.1(1) describes "descendants" as "lineal descendants". Justice Jerke referenced the definition in Black's Law Dictionary to determine that "lineal descendants" means only "a blood relative in the direct line of descent - children, grandchildren and great grandchildren are lineal descendants".[2] As the step-daughters were not blood relatives they were not lineal descendants. The son was the deceased's only blood relative, so he was her sole beneficiary.

The Applicant argued that section 68(b) in the Act should be applied. That section provides that: "descendants of the half-kinship inherit equally with those of whole kinship in the same degree of relationship to the intestate". The Applicant argued that the step-children should be treated as equal to the biological son because the father was the father to all five children, the mother stood in loco parentis to them, introduced them as her daughters and treated them in every respect as daughters, and their children as her grandchildren. Justice Jerke noted that while the deceased's treatment of them as daughters was "as it should be", it did not change the law.[3] They were not blood relatives, and blood trumps step-children at law.

Justice Jerke concluded the decision with the following warning:

"This case is an example of the personal difficulties and harm to relationships which can occur when individuals do not have a will. The distribution of this modest estate has become an instrument with the potential to create, enhance or perpetuate ill will amongst five family members at a time when they should instead be benefiting from good memories of their mother and father."[4]

Intestacy legislation is based on the assumption that most people would want to pass their estate to their kin and the next generation of their family. For the most part this is likely true. Nevertheless, situations arise where someone may feel closer to a non-relative or step-child than their own 'flesh and blood'. While it is important to have a Will in any case, it is ever so much more important where your wishes or intentions may conflict with the intestacy legislation in your jurisdiction. We have many similar such cases arising from our Succession Law Reform Act intestate succession legislation.

(ii) Universal wisdom from Bambi and why litigants should heed it

by Lionel Tupman

In reviewing the Court's Endorsement on Costs in Bryant v. Best, 2015 ONSC 1853, released on March 23, 2015, I am reminded of the enduring wisdom which derives from Thumper, the cartoon bunny rabbit character in Walt Disney's classic movie, Bambi.  So Thumper's advice goes:  "[i]f you can't say something nice, don't say anything at all."  It appears, in communications between forest animals, and in Estate Litigation, this adage remains as true as ever.

Facts

On January 9, 2015, the Honourable Madam Justice Gauthier dismissed the moving party's motion.  We have previously written about this case, and you can read all about it on our blog.  I'm not going to address the merits of the decision in this article, but rather, Justice Guathier's decision on costs.

Justice Gauthier's decision on costs was released on March 13, 2015.  The Estate Trustee During Litigation (the Respondent) (the "ETDL") was entirely successful in defeating the moving party's motion.  Justice Gauthier refers to the ETDL's argument on costs, describing the evidence filed and the conduct of the parties during the motion, stating:

[4] Throughout the proceedings initiated by the August 5, 2014, Notice of Motion, the Trustee was repeatedly accused of dishonesty, and incompetence. The language used in Steven's material was intemperate and disrespectful. The complaints made against the Trustee in the execution of his duties were unfounded and unjustified. Sarah supported Steven's Motion, and herself made unfounded and unjustified accusations against the Trustee.

[5] The positions advanced by both Steven and Sarah were ill-considered from the outset and completely unsupported by any cogent or coherent evidence.

[6] It was reckless for Steven and Sarah to have caused such substantial legal expenses to be incurred, and to have delayed the winding up of this estate.

[7]  The material filed on behalf of Sarah contained largely her opinion on matters, and few relevant facts. Likewise, for the material filed by Steven. Even after the cross-examination of the Trustee, there was no evidence obtained that could justify the removal of the Trustee.

[8] Steven's treatment of Lynette Burton was equally disrespectful; his allegations of dishonesty on the part of Lynette Burton were not substantiated by the evidence.[5]

Accepting this as an accurate summary of the conduct of the parties during the motion, and leaving aside the other parties' submissions on costs, it may occur to many litigators reading this article that conduct consistent with that described at paragraphs 4-8 of the decision may and in many circumstances will attract an award of costs on a substantial indemnity basis.

Indeed, Justice Gauthier ultimately found the following:

[34] The Trustee then is entitled to his costs relating to the motion.  Insofar as the scale of costs is concerned:

It is a well-established principle of law that costs on a substantial indemnity basis are to be awarded only in rare and exceptional cases, where there has been reprehensible, scandalous or outrageous conduct in the course of the litigation.

[...]

[36] The jurisprudence also establishes that costs on the higher scale will be awarded where there are unfounded allegations of fraud and dishonesty. (Twaits v. Monk, 2000 CanLII 14725 (ON CA), [2000] O.J. No. 1699, 8 C.P.C. (5th) 230 (C.A.).

[37] Put another way in DiBattista v. Wawanesa Mutual Insurance Co. (2005), 2005 CanLII 41985 (ON SC), 78 O.R. (3d)445 (S.C.J.):

Costs should be awarded on a substantial indemnity basis were unfounded allegations of a fraud or dishonesty or other improper conduct seriously prejudicial to the character or reputation of the party are made.

[38] In the within proceeding, Steven did make unfounded allegations of fraud, dishonesty, incompetence, and other improper conduct "seriously prejudicial to the character or reputation" of the Trustee. Sarah supported Steven's position.

[39] Steven's conduct merits condemnation by way of an award of costs on the higher scale.

[40] The positions taken by Steven and Sarah were not supported by the evidence and were unreasonable. The complaints about the Trustee's actions, and about any delay, were unfounded and unjustified.

[41] In all the circumstances, the Trustee should be awarded his costs on a full indemnity basis.  In addition to the legal fees the Trustee incurred, he expended much time, not in the administration of the estate, but rather, in responding to Steven's and Sarah's unfounded and unjustifiable attacks on his integrity and his competence and professionalism. Further, as a matter of necessity, the Trustee had to retain and pay for legal counsel to represent him on the motion.

Discussion

The fact that unsubstantiated allegations of fraud or dishonesty may attract an award of costs on a substantial indemnity (or other elevated) scale should be familiar to most lawyers.  To be fair, the moving party, "Steven" was a self-represented litigant and may not have been aware of this general rule-we don't know since this information is not provided in the case.

However, it bears repeating to all litigants and counsel who litigate and/or practice in the field of Estate Litigation, that allegations of fraud and dishonesty must not be frivolously or arbitrarily pleaded.  Proving fraud or breach of fiduciary duties as causes of action is not a task to be lightly undertaken.  Without compelling, substantial proof of such causes of action, litigants will have difficulty satisfying a Court that a finding going to the character, integrity, competence or professionalism of a Defendant/responding party should be made. 

Quite simply, you need real evidence of fraud in order to plead it.  Unlike other causes of action which can be pleaded for good measure, any cause of action which indicates "bad faith" or dishonesty on the part of the Defendant/responding party must be carefully considered before being pleaded-the pros and cons must be weighed by litigants and counsel, and the strength of the evidence supporting the allegation must be viewed critically and pessimistically to assess the litigant's risk to an award of elevated costs.

This is not to say, however, that litigants should not plead fraud, dishonesty, etc.  To be clear, where compelling, cogent, convincing evidence exists of dishonesty or fraud (or any other such causes of action), these claims may be advanced. 

Litigants in the Estate Litigation area often suspect that their opponents are dishonest thieves who are attempting to extort or swindle from an Estate, a vulnerable person, or beneficiaries.  What everyone should remember however, (counsel and clients alike) in Estate Litigation, is that allegations of dishonesty and fraud must not be made lightly and without appropriate and compelling evidence to substantiate such claims.

Despite the wisdom of Thumper's advice, Thumper may not have been entirely correct.  The more accurate adage to live by, at least in litigation, goes like this:  "if you can't say anything nice, make sure you can prove whatever bad faith, dishonesty or fraud you are alleging."