Jun 15, 2020

Serving as an Estate Trustee Can be Very Expensive

Sweetnam v. Williamson Estate, 2017 ONCA 991 (CanLII)

Acting as the Executor of an estate is a serious obligation, and it can become particularly onerous when there is litigation. In this Ontario case, the estate trustees were personally required to bear legal costs of about $1 million after the will that they propounded was found to be invalid.

Wills Made Under the Influence of a Brain Tumour

The case concerns the will of an Ontario businessman, Martin Williamson, who left an estate worth $7.5 million. After he was diagnosed with a brain tumour, he made two different wills in rapid succession. The facts are neatly summed up by the Court of Appeal:

[4] Following a seizure on July 20, 2010, he was diagnosed with brain cancer. He made two wills: one on August 16, 2010, leaving the majority of his estate to his common law partner and excluded his only child. In a second will, made on September 8, 2010, he repeated the exclusion of his daughter and left legacies to his common law partner, a friend from Québec, his former business associate, the two estate trustees and the residue of his estate to a number of friends, including a share of the residue to the spouse of one of the trustees.

In the first will, his common law wife was the main beneficiary. However, he soon came to the view that she had lived with him for the past seven years, in an apparently good relationship, because she was only after his money. He decided to change his will, but reportedly could not think of anybody else to leave it to. Subsequently, a friend, Ms. Lesage, apparently suggested that he should leave the residue of his estate to “four or five friends,” and that is what he did. One of the friends happened to be Ms. Lesage’s husband, and Ms. Lesage was named estate trustee under this new will. Within a few months of being diagnosed, Mr. Williamson had passed away.

Suspicious Circumstances Leading to Invalidity of the Will

Notably, neither of these post-tumour wills left anything to Star Sweetnam, Mr. Willamson’s only child. Star was the mother of Mr. Williamson’s only grandchildren, and moreover is disabled and in need of money. According to witnesses, Mr. Williamson and Star had always been close, and he had always talked of leaving his business to her.

The trial concerning the will itself is reported as Sweetnam v Lesage, 2016 ONSC 4058 (CanLII). The trial before Gray J. took eleven days and heard numerous witnesses. It pitted two of the highest profile estate lawyers against each other, Gregory Sidlofsky for the plaintiff, and Ian Hull for the defendant Dianne Lesage. It is a 110-page decision that includes a careful sifting of the facts.

Gray J. noted that the mere fact that somebody has a brain disease is not sufficient by itself to prove that he was incompetent to make a will. It is just one factor to be taken into account. In this case there were numerous suspicious circumstances. There was evidence of serious changes in Mr. Williamson’s personality and lapses of memory and knowledge, which may have led him to misidentify his daughter as his ex-wife. Gray J. observed the “errors Mr. Williamson made when he was discussing his wills with his solicitors,” that resulted in errors in the wills.

Gray J. concluded on the evidence that Mr. Williamson lacked testamentary capacity. Therefore, the will was invalid, and he had died intestate. Under the rules of intestacy, his only child, Star Sweetnam became the sole beneficiary of his estate.

The Costs Award

The more interesting part of the case deals with the costs award, which is reported as Sweetnam v Lesage, 2016 ONSC 5110 (CanLII).

There used to be a tradition that in estate litigation the parties are all given the benefit of the doubt as to their sincerity. Therefore, regardless of who won or lost, the legal costs were borne by the estate. That tradition has been partially abandoned in Ontario, and often the usual loser-pays rule also applies in estate litigation.

In this case, Star Sweetnam had incurred legal costs of over $300,000 for which she asked to be reimbursed by Ms. Lesage. Ms. Lesage herself had incurred legal bills exceeding $641,000, which she asked to have paid out of the estate.

Gray J. ruled largely in favour of Ms. Sweetnam. He ordered Ms. Lesage and the other trustee to bear their own legal costs, and to pay about $312,000 to Ms. Sweetnam. He noted that, as Ms. Sweetnam was the sole beneficiary, requiring the estate to pay any legal costs would in effect be forcing Ms. Sweetnam to pay them, even though she was the successful party in the litigation.

A second factor was that Ms. Sweetnam had made two settlement offers, both of which were much more modest than what she ended up with, and both of which were rejected by the estate trustees. Gray J. concluded that rejecting those offers was unreasonable.

The third and probably decisive factor was the way that the litigation had been conducted:

[31] I also note that this litigation was not conducted as a proceeding that simply consisted of the trustees putting forward the evidence in a non-contentious way for the consideration of the Court. This was hard-fought litigation from day one. Ms. Lesage, in particular, conducted the proceedings in a very adversarial manner. Among other things, she retained private investigators to look into Ms. Sweetnam’s activities.

The Court of Appeal Affirms the Trial Judge’s Decision

In a short endorsement, the Court of Appeal entirely dismissed the appeal of the estate trustees. As is typical in reviewing trial decisions, they are not overturned absent palpable and overriding errors of fact or mistakes of law:

[7] He applied the test for testamentary capacity as outlined in the leading jurisprudence. He concluded that the testator was not aware of the nature and extent of his assets at the time he made the wills, did not remember the person he might be expected to benefit under his will and did not understand the nature of the claims that may be made by persons he was excluding. He found that the dispositions were affected by delusions and articulated what those delusions were in his reasons.

[8] We see no palpable errors of fact. The inferences drawn by the trial judge were reasonably supported by the evidence. We see no errors in the analysis or the application of the law by the court below.

Similarly, the Court of Appeal upheld the trial judge’s discretion on the costs award:

[10] … While in estates matters costs awards are often borne by the estate, “… a court may order otherwise if an estate trustee has acted unreasonably or in substance for his or her own benefit, rather than for the benefit of the estate”…

[11] In the case at bar, the trial judge found that the estate trustees were adversarial and unreasonable in refusing to consider offers of settlement that were less than the result obtained and that they took unreasonable positions such as the hiring of a private investigator and claiming costs double those claimed by the respondent following trial. Both estate trustees were responsible in carrying the litigation forward. There is no reason to interfere with the exercise of discretion of the trial judge

The lesson to be drawn from this is that estate trustees should take a mainly neutral and circumspect position if a will is disputed. The role of the trustees is to carry out the intentions of the deceased. However, in some situations, the will may not be a good reflection of those intentions. Whether it is or not is for the court to decide, and the estate trustees are not the right persons to take a strong stance on that.

If there is to be a strongly adversarial position from two sides, the appropriate party to fulfill the role of the defendant and propounder of the will is the beneficiary whose entitlements under the will have been challenged. In many situations, the estate trustees and primary beneficiaries may be one and the same, but that is not always the case.

Peter Spiro is Principal of Spiro Law P.C. and counsel to www.rogersonlaw.com for estate litigation. This article is for general information purposes and you should seek specific advice for your particular case.