i) McLaughlin v. McLaughlin, 2015 ONSC 3491 (June 1, 2015)

and 2015 ONSC 4230 

2015 ONSC 3491: http://canlii.ca/t/gjbpn

2015 ONSC 4230: http://canlii.ca/t/gjswn  

by Benjamin D. Arkin

Just because a will was rectified or interpreted, does that mean it is valid? Not necessarily, according to a paradoxical decision of the Ontario Superior Court of Justice.

In the June 2015 case of McLaughlin v. McLaughlin,[1] the court considered whether it retained the jurisdiction to hear a will challenge after an earlier court order[2] rectifying the challenged will. The court found that the two phases of the case could co-exist harmoniously. It discussed the practical interplay between the two different steps, which involved the application of the principles res judicata and issue estoppel.

Facts

Mrs. McLaughlin died in 2012 leaving a primary will and a secondary will, both made in 2010. As with her previous wills from 1994 and 2002, she intentionally excluded two of her children, who were estranged from her.

According to her lawyer, the only reason that Mrs. McLaughlin made the new wills in 2010 was to take advantage of an opportunity to reduce the estate administration tax that would need to be paid when her executor applied for probate. There were to be no changes to the beneficiaries or the amount of the gifts. The lawyer was the sole motivating force for the new estate plan, as he had reached out to her to suggest it.

The plan was typical of a two-will estate planning strategy. Assets requiring probate to be administered would pass through the primary estate and assets that could be administered without probate - and without paying estate administration tax - would pass through the secondary estate.

Unfortunately, the secondary will contained serious drafting errors. These included a clause revoking the primary will, an unintentional duplication of legacies in the primary will, and a lack of a residue clause.

The most dramatic effect of the errors was to cause the majority of the assets in the estate to be administered on intestacy. This entitled the two estranged children to shares of the estate, something that Mrs. McLaughlin was - and her other surviving children still were - vehemently against. This was the driving force behind the litigation.

The rectification proceedings

The named estate trustee in the 2010 will applied to rectify the secondary will. Equipped with the drafting solicitor's evidence about the deceased's intentions, he argued that the secondary will could be rectified by removing the provision revoking the primary will, adding in a residue clause, and removing the duplicated legacies, among other fixes. Justice Lemon agreed and rectified the secondary will in a form annexed to the order.

The two estranged children unsuccessfully opposed the rectification application on a number of grounds. However, importantly, they did not allege that the secondary will was invalid. Neither did the court consider the question of whether or not the secondary will was valid.

One of the findings of fact that the court made in reviewing the evidence was that the testator had never actually read the secondary will before signing it. She had relied on the lawyer, who had, in turn, relied on his assistant and, thus, the errors were not caught. This finding became pivotal in the next phase of the case.

The will challenge proceedings

Justice Lemon's rectification order did not deal with the Notice of Objection filed by one of the estranged children, and the objector refused to withdraw it. As a result, the matter came back on for two hearings in June 2015 before Justice Price, resulting in two sets of reasons that must be read together.

At the hearings, the estranged children raised the issue of the validity of both the primary will and the secondary will (as rectified). The court found that it needed to decide whether: 

b) the court would undertake an inquiry into the validity of the secondary will, as rectified, despite there being no Notice of Objection formal challenge;

c) the doctrine of res judicata applied to bar a challenge to the validity of the rectified secondary will; and

d) if these issues were answered in the affirmative, then were the wills valid?

The last two issues generated an interesting and perhaps novel discussion about the influence of a prior rectification proceeding on the application of the doctrines of res judicata and issue estoppel on the court's ability and approach to consider the validity of the previously rectified will.

Standing

The court held that, at this stage of the case, the estranged child would not be denied standing to challenge the validity of the wills (if the rectified secondary will could even still be subject to a challenge, which was a separate issue).

The issue of standing is governed by sections 23 the Estates Act and rule 75.03 of the Rules of Civil Procedure. Any person with a financial interest in an estate or pretending to have such an interest - pretending in the sense laying legitimate claim to an interest rather than falsely or deceptively claiming an interest - may seek proof of the will. Being a child of the deceased is not enough on its own; it is necessary to show that if the will is found to be invalid, the child would have a financial interest under a prior will or upon intestacy.

Interestingly, while the estranged children in this case surely had a financial interest in the estate as an intestate heir before the secondary will was rectified, this interest evaporated following the rectification order; and the prior wills entitled them to nothing. Nonetheless, the court was not prepared to deny the estranged children standing at this stage. The court said that a final finding on standing should await determination of the question of the wills' validity.

Court's jurisdiction to consider the validity of the secondary will where no Notice of Objection has been filed

The next issue was whether the court could entertain a challenge to the validity of the secondary will, since no Notice of Objection had been filed and the estate trustee had not applied for a Certificate of Appointment.

Justice Price began by noting that the court will normally not embark on a will challenge that it has not been asked to undertake. However, following Justice Cullity's discussion in Otis v. Otis[3] of the court's unique and inquisitorial role in probate proceedings, it was appropriate for the court to inquire into the validity of the will on its own initiative.

The court also noted, in the second set of reasons, that beneficiaries are generally entitled to have a will proven in solemn form:

There has been a recent trend in the jurisprudence to apply limitation periods, and the principle of estoppel by convention, to curtail the ability of children and, by implication, the court, to require wills to be proven in solemn form. It is true that at some point, estate trustees and beneficiaries require certainty and closure in the administration of a testator's estate. However, it should be presumed that children are entitled to have their parents' wills proven in solemn form in the absence of compelling reasons why the court should not entertain their request. [4]

The court continued:

Based on this reasoning, it was appropriate for the court to inquire into the validity of the secondary will at the estranged children's informal request.

Was the issue of validity of the secondary will subject to res judicata?

This is perhaps the most interesting part of the case. The court pondered the question of whether a previous order rectifying a will precluded the court from later inquiring into the validity of the same will.

Does rectifying a will implicitly approve its validity, thus engaging the principle of res judicata? Or are the questions of construction and validity substantively different and unrelated? The court decided that the answer was the latter: the two questions are substantively different. The court may still undertake an inquiry into the validity of the will even after the will has been interpreted or rectified.

While there is some debate over whether there is a distinction between the court's jurisdiction sitting as a court of probate versus when sitting as a court of construction, as the court discussed in its first set of reasons, there is no doubt that there is a practical distinction between the issue of probate and the issue of construction or rectification. The two are different questions subject to different legal tests.

In the second set of reasons, the court reviewed the doctrine of rectification, quoting from the Ontario Court of Appeal's explanation in Robinson Estate v Rondel:[6]

Where there is no ambiguity on the face of the will and the testator has reviewed and approved the wording, Anglo-Canadian courts will rectify the will and correct unintended errors in three situations:

(1) where there is an accidental slip or omission because of a typographical or clerical error;

(2)  where the testator's instructions have been misunderstood; or

(3)  where the testator's instructions have not been carried out.

The equitable power of rectification, in the estates context, is aimed mainly at preventing the defeat of the testamentary intentions due to errors or omissions by the drafter of the will. This is a key point. Most will-rectification cases are prompted by one of the above scenarios and are typically supported with an affidavit from the solicitor documenting the testator's instructions and explaining how the solicitor or his staff misunderstood or failed to implement these instructions or made a typographical error....

[...]

The court contrasted the question at issue in a rectification application with that in a proceeding to prove a will in solemn form. Establishing that a will is valid means proving the testamentary capacity of the testator, the testator's knowledge and approval of the contents of the will, and the testator's due execution of the will.

Based on this comparison, the court came to this conclusion:

Rectification is concerned with correcting the drafting errors of the will, whereas the proving of a will in solemn form concerns the validity of the will.  These issues are substantively different, and I am therefore satisfied that I would not, in effect, be reversing Lemon J.'s decision as to rectification of the secondary will should I find that will to be invalid.[7]

Thus, the court embarked on an inquiry into the validity of both the primary and secondary wills - the latter in its rectified form.

It is worth mentioning that, elsewhere in the reasons, the court recognized a typical instance where res judicata would apply to bar a reconsideration of the validity of the will. An executor who wants protection from will challenges may seek to engage the principle of res judicata by seeking proof of the will in solemn form.

In Romans Estate v Tassone, in 2009, Savage J, of the British Columbia Supreme Court, explained the practical implications of having a will proved in solemn form.  In particular, he noted that having a will proved in solemn form allows the principle of res judicata to apply to the will's validity. Savage J stated:

Often proof of a will in common form is all that is required for the administration of an estate where there is a will.  Proof in common form, however, does not conclusively determine the will to be the valid last will of a person.

Proof of the will in solemn form provides some protection for the will, in that it will not later be set aside, unless obtained by fraud or a later will is found:  Tristam & Cootes Probate Practice (27th Edition, 1989, p. 572.  As noted by the authors of the British Columbia Probate & Estate Administration Manual, 2nd Edition, 2008 Update, at p. 18-17, "[t]he safeguarding effect of a grant in solemn form is an application of the principle of res judicata to what is a judgment in rem".[8]

Issue estoppel and the validity of the secondary will

The court found that there was insufficient evidence to determine the validity of the primary will and adjourned that issue so that the parties could carry out further investigation.

The court's analysis of the validity of the secondary will is far more interesting. It found that the doctrine of issue estoppel applied to Justice Lemon's finding of fact in the rectification motion that the testator had not read her secondary will before signing it. On this basis, it was held that the testator had not read the will, and therefore did not have knowledge and approval of its contents; a required element for the validity of a will. Thus, Justice Price declared the secondary will to be invalid.

The court noted that issue estoppel had been applied in another estate matter in Kaptyn v. Kaptyn.[9] In that case, the court had established a two-stage procedure to first determine a will challenge and then, at a later step, the interpretation of the will. Issue estoppel was explained in Kaptyn:

Issue estoppel is concerned with whether an issue to be decided in proving the current proceeding is the same as an issue decided in a previous proceeding; issue estoppel precludes the re-litigation of an issue that has been finally decided by a court in another proceeding. In the civil context, three preconditions must be met for issue estoppel to be successfully invoked: (1) the issue must be the same as the one decided in the prior decision; (2) the prior judicial decision must have been final; and (3) the parties to both proceedings must be the same, or their privies. [...] the court must still determine whether, as a matter of discretion, issue estoppel ought to be applied.[10]

The court's conclusion was that the issue was the same, the decision final, and that the parties were the same; accordingly, the finding that Mrs. McLaughlin had not read the will, which was not appealed, was unimpeachable and determinative of the validity - or rather the invalidity - of the secondary will. The court rejected the argument that Justice Lemon's finding that Mrs. McLaughlin had not read the will was speculative or obiter.

This is how it came to pass that a will that was rectified by the court on application by the estate trustee came to be declared to be invalid.

Remarks

McLaughlin may stand for the principle that rectification and validity are two substantively separate things that can be determined independently. An alternative point of view would be that a will can only be rectified after it is implicitly or explicitly deemed to be valid. This case is under appeal. We hope for a definitive statement on which of these points of view, if either, is correct.

Section 40 of the Substitute Decisions Act provides that guardians of property and attorneys for property may take annual compensation in accordance with the prescribed fee scale. The legislation does not provide for compensation for the guardian of the person, though courts have been known to award such compensation[11]. The decision in Brown, Re, 1999 CarswellOnt 4628, provides the principles in determining the appropriate amount of compensation for a guardian of the person.

The recent decision of the Honourable Tranmer J., in Childs v. Childs, 2015 ONSC 4036, deals with compensation for personal care services and is an interesting read to those of us practicing in the area of guardianship applications.

The facts of the case are as follows:

Eileen is 88 years of age and is incapable of managing her property and personal care. Her deemed capable wish was to continuing living in her home. Her children agree that a trust company should be appointed as her guardian of property and that her daughter, Caroline, be the guardian of the person. In addition to Caroline, Eileen had three sons, Michael, Andrew, and Peter.

Caroline had been providing personal care services to Eileen for some years prior to the proceeding. Eileen's sons had not been as much help to her. All agreed that her services had improved and maintained Eileen's wellbeing and wellness. Caroline submitted that she was not motivated to provide this care in the expectation of being compensated and that she would have provided and will continue to provide such care without compensation. Nonetheless, she argued that she should be compensated in the amount of $133,000 for past care she provided over a period of approximately 2 years, prior to her appointment as guardian of the person for Eileen. It is not clear from the decision if Caroline was acting under a power of attorney for personal care during this period. Caroline claimed compensation of $53,600/year for her role as guardian of the person going forward. 

One of the issues on the application was the quantum of compensation to be paid to Caroline. Caroline's brothers, Michael and Andrew, the Public Guardian and Trustee, and section 3 counsel for Eileen disputed Caroline's claim for compensation. Michael and Andrew argued that one should not be paid for looking after one's mother. They opposed any compensation for past care provided by Caroline but were agreeable to paying her a stipend of $500/month plus room and board while Caroline lived with Eileen going forward.

Section 3 counsel took the position that there should be no past compensation.

As for Caroline's compensation as guardian of the person, section 3 counsel argued that the quantum should be conservative and were agreeable to the $500/month stipend. The Public Guardian and Trustee argued that it is an exceptional case where compensation for personal care is claimed and granted. The decision does not state whether the Public Guardian and Trustee was agreeable to the $500/month stipend.

Justice Tranmer commented that a child should not be paid to care for an ailing mother and that the mother was not paid for raising her children. He also commented that the self-satisfaction in knowing that she has done the right thing really should have been enough for Caroline. The judge noted that there was no evidence that Caroline made any sacrifices in order to care for mother - there was no evidence of Caroline giving up a job or leaving a happy established life elsewhere. At the same time, Justice Tranmer acknowledged that there is a role for equity in this case and it was fair and reasons, from the perspective of Eileen's best interest that Caroline be paid $25,000 in recognition for her past efforts over a period of approximately 2 years.

Compensation as guardian of the person was a different matter. The judge agreed with section 3 counsel that Caroline's role was to be the manager of care rather than the primary care provider for Eileen. The judge determined that a $500/month stipend, plus room and board and reimbursements for expenses directly incurred for Eileen's care, was reasonable.

The judge's values are clearly evident in this decision: Ordinarily, a mother would have raised her children and the children are supposed to return the favour. As such, compensation for the services of the said children will likely not be large, if at all. The judge was not particularly sympathetic to Caroline's request for compensation for past services, yet was also not critical of the sons who were not as much help as Caroline. This is consistent with the focus on the incapable person's best interests in all guardianship and power of attorney proceedings.

In our practice we often encounter situations where one child assuming a disproportionate degree of responsibility, relative to her or his siblings, of the care of an elderly parent. Counsel should let this responsible and good-hearted person be aware that there may not be a significant financial reward at the end of the day, even if her or his services served to enhance the parent's wellbeing and alleviate pressures on the siblings' and parent's finances.