In August of 2021, we commented on Simpson v. Simpson Estate, 2021 BCSC 1486, a decision that considered, for the first time, the test to be applied by the Court in deciding whether to extend the time for applying to rectify a will that fails to carry out the will-maker's intentions. In a recent decision from the Court of Appeal, the Simpson case has again provided the judiciary with the opportunity to develop the law in Simpson v. Zaste, 2022 BCCA 208, the first appellate decision to consider rectification under s. 59 of the Wills, Estates and Succession Act.
Rectification of Wills
As discussed in our previous case comments regarding s. 59,1 in 2014, the coming into force of the Wills, Estates and Succession Act greatly expanded the Court's powers to rectify Wills. Previously, the Court had limited powers to correct Wills that failed to properly carry out a will-maker's intentions. Under s. 59 of WESA, however, the Court may rectify a Will if it determines that the Will fails to carry out the will-maker's intentions for certain reasons sets out in the statute.
Facts
The facts giving rise to Simpson Estate are reviewed in our initial case comment. Briefly, it will be recalled that case involved a dispute between Mr. Simpson's surviving spouse, Ingrid Zaste, and his adult children from a previous relationship, Kirsten and Christopher. Mr. Simpson left a Will leaving his shares in a private company to his children, and provided the residue of his Estate to Ms. Zaste, his spouse of 27 years. The shares, however, were subject to a shareholder agreement, pursuant to which the surviving shareholder had the right to buy the deceased's shareholder's shares. The agreement provided that the amount payable was the fair market value of the shares, less the life insurance proceeds payable under policies that each shareholder was required to obtain.
When Mr. Simpson died, he and his business partner each held shares. As a result, the shareholder agreement required Mr. Simpson's Executor to sell the shares. The effect was that unless the Will was rectified, Mr. Simpson's children would not receive anything under their father's Will.
Mr. Simpson's children applied to rectify the Will to provide that they would receive the shares or the fair market value of the shares, as determined in the shareholder's agreement.
Supreme Court Decision
At first instance, Justice Coval articulated a test for determining whether to grant an extension to the time period for bringing a rectification claim, being 180 days from when a representation grant is issued to the Executor or Administrator of an Estate. He then determined that the interests of justice favoured extending time, and granted the rectification application. In doing so, he considered Mr. Simpson's intentions, holding as follows:
[53] In my view, it is a reasonable inference that, since Mr. Simpson wanted the plaintiffs to have the Shares, it is more likely than not that he also wanted them to receive the market value of the Shares if bought under the Survivor Clause by Mr. Lawler. It would be unusual to want them to have the Shares but not their market value purchase price from their sale.
The judge confirmed that the Will failed to carry out these intentions as a result of "an accidental slip or omission" as contemplated by s. 59(1). The failure occurred because of the omission to address the sale of the shares under the shareholder's agreement. The judge therefore rectified the Will to order that the children receive the fair market value of the shares, instead of the shares themselves, in the amount of $268,750.
Ms. Zaste appealed.
On Appeal
On appeal, Ms. Zaste argued that Justice Coval had erred in both (1) extending the time for the children to seek rectification; and (2) rectifying the Will to provide the children with the fair market value of the shares. Despite the Wills, Estates, and Succession Act having coming into force 8 years ago in 2014, these were issues that the Court of Appeal had not yet had an opportunity to consider.
The Court affirmed the tests articulated by Justice Coval for rectifying a Will and extending the time to apply for rectification. In doing so, however, the Court was divided with respect to whether these tests were established on the facts of Simpson Estate. Justice Grauer, for the majority, answered these questions in the affirmative, though reduced the amount payable to the children. Justice Griffin, in dissent, disagreed, and would have reversed Justice Coval's decision with respect to both the extension of time and rectification of Mr. Simpson's Will.
Test for Extending Time
The majority, affirmed that Justice Coval had identified the correct test in deciding whether to extend the time to apply for rectification. The ultimate question is whether it is in the interests of justice that an extension be granted. This question is to be considered with reference to the merits of the proposed rectification application, the timing factors, and the issue of prejudice.
Both the majority and the dissent held, however, that the judge had erred in analyzing the prejudice to Ms. Zaste. Allowing the rectification application meant that the children received over $268,000, leaving the Estate in a negative position, even before taking into account probate fees, creditors, tax, executor fees, and administrative expenses. There would be no residue left for Ms. Zaste, as Mr. Simpson's long-term spouse, and the time for allowing Ms. Zaste to seek a variation of the Will would have already expired.
The judge did not consider this prejudice to Ms. Zaste. He had therefore improperly exercised his discretion by failing to weigh a relevant consideration such that it was open to the Court of Appeal to reconsider whether leave ought to have been granted. The Court split on this issue, with the majority finding that it was nonetheless in the interests of justice to extend the time for the children's rectification application. Justice Griffin in dissent, however, considered this prejudice to Ms. Zaste to have been so significant that she would not have granted leave.
Test for Rectification of a Will
The Court of Appeal also agreed with the test for rectification as outlined by Justice Coval in Jamt Estate (Re), 2021 BCSC 788. On an application to rectify a Will, the Court must consider:
a.) what the will-maker's intentions were with regard to the issue for which rectification is sought;
b.) whether the Will as written fails to carry out those intentions; and
c.) whether the failure is a consequence of one of the reasons set out in s. 59(1), namely:
- an error arising from an accidental slip or omission;
- a misunderstanding of the will-maker's instructions; or
- a failure to carry out the will-maker's instructions.
The Court of Appeal was also divided with respect to whether these criteria were met.
Mr. Simpson's Intentions
Justice Grauer, for the majority, noted that the Court's task is not to fill a gap or lack of intention, but rather to discern whether the evidence establishes true intention – "rectification aligns the will with what the will-maker intended to do, and not what, with the benefit of hindsight, the will-maker should have intended to do" (para. 99). The majority concluded that while Mr. Simpson wanted his children to have the shares he owned on death, it did not follow that he wanted his children to receive the full market value of the shares. The issue for the majority was therefore what compensation Mr. Simpson wanted his children to receive.
Although the judge had concluded that Mr. Simpson intended his children to receive the full market value of the shares, including the amount covered by the life insurance proceeds payable to Ms. Zaste, this conclusion was not supported by any evidence regarding Mr. Simpson's intention and was based on an erroneous understanding of how the shareholder agreement operated. Had Mr. Simpson wanted his children to obtain the full fair market value of the shares, including the life insurance proceeds intended to cover part of the sales price, he could have named them as the beneficiaries of the policy. The evidence established that it was a fundamental part of Mr. Simpson and Ms. Zaste's estate planning that Ms. Zaste would be the beneficiary of his life insurance policies. The majority concluded that, "Mr. Simpson's intention could not have been clearer: the [children] were to benefit from his shares, but [Ms. Zaste] was to benefit from the $150,000 policy" (para. 126).
"Accidental Slip or Omission"?
The majority agreed with Justice Coval that the failure of the Will to carry out Mr. Simpson's intention arose from "an accidental slip or omission" such that the Will could be rectified under s. 59.
Justice Grauer observed that statutes are to be construed as remedial, and must be given "such fair, large and liberal construction and interpretation as best ensures the attainment of its objects". The object of s. 59 is to allow the Court, where the evidence permits, to remedy errors so that the will-maker's true intentions prevail. While the error must arise from "an accidental slip or omission" in order for s. 59(1)(a) to be available, the error could as readily be on the part of the will-maker as on the part of the will-drafter or transcriber. "What matters is that it must be an error; it must be unintentional; and it must be one that prevents the will-maker's true intentions from prevailing" (para. 147).
Here, the omission arose from Mr. Simpson's failure to realize that his intended gift of the shares would never get to the children due to the shareholder's agreement, and his consequent failure to raise this issue with his lawyer.
Rectification of the Will
The majority rectified the Will, in accordance with what Justice Grauer had found Mr. Simpson's intentions to be. While Justice Coval had found that Mr. Simpson intended for his children to receive the full fair market value of the shares, the majority concluded that Mr. Simpson intended that his children would receive the amount owed by the surviving shareholder under the shareholder's agreement, namely, fair market value less the proceeds of the $150,000. Taking into account debts owed by Mr. Simpson, this meant that the children were entitled to receive $91,365.33.
Dissent of Justice Griffin
Justice Griffin would not have rectified the Will as, in her view, both Justice Coval and the majority had drawn inferences not supported by the evidence. She considered that there was simply no evidence as to what Mr. Simpson actually intended, having regard to the shareholder's agreement. Instead, what the majority and Justice Coval had done was "speculate as to what Mr. Simpson would have done had he received legal advice as to the implications of the [shareholder agreement] if he did not own all of the shares in the company" (para. 170).
A Path Forward?
In our case comment regarding Jamt Estate (Re), 2021 BCSC 788, also a decision of Justice Coval, we concluded by observing that the decision had provided welcome guidance regarding rectification issues. Simpson Estate continues this development of the law on rectification, and stands as the first appellate pronouncement of when and how s. 59 is to be applied.
Simpson Estate has also confirmed, however, that different judges may take different views of when rectification will be available. Estate professionals will therefore need to await further judicial guidance regarding how to identify a will-maker's intentions, and what kinds of errors will allow a Court to rectify a Will to give effect to those intentions.
Footnotes:
1: In addition to our discussion of the Supreme Court decision in Simpson Estate, see our case comment regarding Jamt Estate (Re), 2021 BCSC 788, published in May of 2021.
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