The Ontario Superior Court of Justice Divisional Court upheld a widely used method of writing wills that had been called into question by two conflicting cases in the lower court.
The Ontario Superior Court of Justice Divisional Court upheld a widely used method of writing wills that had been called into question by two conflicting cases in the lower court.
The court set aside a previous decision by Ontario Superior Court Justice Sean Dunphy, which had said it was invalid to use a phrase called a “basket clause” to distinguish between the contents of primary and secondary wills. A panel of judges allowed an appeal in the Jan. 24 decision, Milne Estate (Re), 2019 ONSC 579, written by Associate Chief Justice Frank Marrocco with justices Katherine Swinton and Harriet Sachs concurring.
Ian Hull, co-founder of Hull & Hull LLP and one of the lawyers who acted for the Toronto Lawyers Association as an intervener, says he thinks the profession will be relieved by the decision, which focuses the law around secondary wills.
“The TLA wanted to make sure the specific concept — that fiduciaries have the right to exercise their discretion widely — be preserved. There was some concern that Justice Dunphy’s decision was undermining that aspect of the law. And in a couple of paragraphs in the Milne decision, the Divisional Court has beefed up [the concept] and responded to the concerns,” says Hull, who is based in Toronto but practises across Ontario.
In September, Dunphy’s decision said the registrar should not accept the uncontested primary wills of John Milne and Sheilah Milne, which were submitted for probate after their death on Oct. 2, 2017. The pair each had two wills, a primary and secondary will.
“The use of Primary and Secondary Wills is often used to reduce tax payable . . . to avoid the delay associated with obtaining a Certificate of Appointment or preserve privacy in respect of certain assets,” wrote Marrocco. “Because a testator often executes their Last Will and Testament several years in advance of death, it is often not practical to provide a definitive list of assets …. To overcome this practical problem, estate planning lawyers often provide estate trustees with the power.”
The wills contained a phrasing of an allocation clause, sometimes called a basket clause, to differentiate between the two wills — a “common estate-planning technique,” according to Marrocco.
“The Primary Will settled upon the executors ‘all property owned by me at the time of my death EXCEPT . . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for a transfer or realization thereof’ [emphasis added]. The Secondary Will, expressly not revoking the first, settled upon the executors ‘all property owned by me at the time of my death INCLUDING . . . [certain named assets and] any other assets for which my Trustees determine a grant of authority by a court of competent jurisdiction is not required for the transfer or realization thereof,” Dunphy wrote in the September decision, Milne Estate (Re), 2018 ONSC 4174.
There is no ban on multiple wills and wills do not always need to be submitted for probate, Dunphy wrote.
However, in the case of the Milnes, Dunphy questioned whether a valid will grants the executors the discretion to determine what property is subject to the will. Dunphy wrote in the decision that the primary and secondary wills were “materially identical” and that the secondary will “includes all of the property of the testator of every kind without exclusion.” Thus, Dunphy wrote, the Milnes’ primary wills were invalid because they “fail to describe with certainty” any property that is subject to the wills.
“If multiple wills are to be employed — and I fully recognize that these are a quite common and normally unobjectionable estate planning tool — the property that is subject to each must be ascertainable objectively based upon the expressed intent of the testator without regard to discretion of the Estate Trustees exercised afterwards. That is simply not the case here,” Dunphy wrote.
One of the main points of contention in the decision and the appeal was whether a will is a trust, says Pia Hundal, a partner at Dentons Canada LLP in Toronto and chairwoman of the Trusts and Estates Law Section Executive Committee of the Ontario Bar Association.
“As with any trust, a valid will must satisfy the ‘three certainties:’ certainty of intent to create the trust, certainty as to the subject-matter or property committed to the trust and certainty as to the objects of the trust or the purposes to which the property is to be applied,” Dunphy wrote.
The panel of appeal judges did not agree, calling it an “error of law” to conclude a will is a trust.
“A will may contain a trust, but this is not a requirement for a valid will,” wrote Marrocco. “Even if the ‘three certainties’ apply, the subject matter of the Primary Will is certain. . . . The property in the Primary Wills can be clearly identified because there is an objective basis to ascertain it.”
Hundal says that, in the wake of Marrocco’s decision, lawyers want to return to what they were doing before Milne — being as descriptive as they can in the secondary will, but then including a basket clause as a catch-all.
“The analysis for the validity of a will is different from what constitutes a properly constructed trust. For a will, it has to be in writing, it has to be signed by the testator, in front of two witnesses, and testamentary in nature. For a trust to be properly constituted, it has to have the ‘three certainties,’” Hundal says. “And then, there are various requirements for vesting that would apply in the equitable analysis. So, trusts are really a creature of equity and wills are a creature of statues. That analysis is what caused a lot of consternation . . . taking the trust law approach to the validity of a will.”
In overturning Dunphy, the Divisional Court referenced the Nov. 13, 2018 Superior Court decision Panda Estate (Re), 2018 ONSC 6734, written by Justice Michael Penny.
Penny had rejected Dunphy’s reasoning and validated the wills in the Panda estate, writing that Dunphy’s decision raised both procedural and substantive issues.
“A will is a unique instrument. A will shares some of the attributes of a contract and some of the attributes of a trust but it is neither; a will is its own, unique creature of the law,” Penny wrote. “The estates bar is not of one mind on how to draft provisions that facilitate reduction of estate administration tax by placing one set of the testator’s assets under a will intended for probate and leaving another set of assets to be administered without the need for probate. While, as some commentators argue, detailed lists are preferable in terms of certainty, they can become problematic when certain assets take on a different form between when the wills are drafted and the testator’s death. To deal with this problem, some suggest consideration be given to adopting language of the very kind used in this case.”
The panel of appeal judges wrote in the January Milne decision that they agreed with Penny’s approach.
Jonathan Friedman, an estate litigation lawyer at Heft Law PC in Richmond Hill, Ont., says the decision quashes uncertainty around the practice and gives solicitors peace of mind.
“What interested me as a litigation lawyer was the fact that two judges who sit on the same bench in the same court could disagree fundamentally on the same issue,” says Friedman. “It is important to have the right to appeal for reasons such as this.”
