Rowsell v. MacKinnon

I don’t encourage people to write their own wills. But what’s worse than writing your own will? If you’re not a lawyer or notary public, writing someone else’s will. This is as true for members of other professions as for anyone else.

A recent decision in Newfoundland and Labrador illustrates why.

When Gidues Sacrey decided to change his will to leave his friend Toni Rowsell a gift of $100,000 he asked his accountant, Mr. MacKinnon, to write his will for him. Mr. MacKinnon was reluctant to do so, suggesting he see a lawyer. But Mr. MacKinnon relented and prepared a new will in accordance with his instructions. He, or someone at his accounting firm, used Mr. Sacrey’s then current will, made in 1998, as a precedent. Although Mr. Sacrey had at one time employed lawyers for his wills, the one he then had does not appear to have been professionally drawn.

The accounting firm made a couple of key changes to the will. One change was to add a gift to Ms. Rowsell. The other change was in the attestation clause, which is near where the will-maker and the witnesses sign a will. The 1998 will said

SIGNED published and declared by the above-named GIDUES SACREY the TestatOR as and for hIS last Will and Testament, in the presence of us both present at the same time, who at hIS request and in hIS presence have hereunto subscribed our names as witnesses.

The new will, made in 2004, was a little different:

SIGNED published and declared by the above-named GIDUES SACREY the Testator as and for his last Will and Testament, in my presence, who at his request and in his presence have hereunto subscribed my name as witnesses.

Do you notice the differences? The 2004 will refers to the will being signed “in my presence” rather than “in the presence of us both present at the same time.” It refers to subscribing "my name" intstead of "our names."

I suspect the difference in the wording of the attestation clause would not have been fatal. The bigger problem is that Mr. MacKinnon arranged for one person in his firm to see Mr. Sacrey when she went to Gander where Mr. Sacrey lived. She took the will to him and witnessed him sign it. She was the only witness.

Unfortunately, the will being witnessed by only one witness, did not comply with the formalities for signing a will in the Province of Newfoundland and Labrador. It was invalid.

Fortunately, Mr. Sacrey wanted changes to his will in 2005. If the new will had been properly witnessed, the problem would have been fixed. Unfortunately, Mr. Sacrey’s accountant agreed to make the changes, and the will in 2005 was also signed by only one witness. The 2005 will, which also contained a gift to Ms. Rowsell was also invalid.

The accounting firm billed Mr. Sacrey for the wills, but after he called, reduced their bill by the amount they charged for writing and witnessing the wills.

The defect in the signing of the wills came to light after Mr. Sacrey’s death. It was then too late to fix, and his 1998 will was his last valid will, with the result that Ms. Rowsell was not entitled to the $100,000 that Mr. Sacrey intended for her to receive.

Ms. Rowsell sued Mr. MacKinnon and his firm.

Canadian courts have held lawyers who were negligent in preparing wills responsible to compensate those whom their clients intended to benefit if as a consequence of lawyer negligence the gifts to the intended beneficiaries are ineffective.

But should the same principles that apply to lawyers also apply to accountants, who are not, after all, legally trained? Should accountants be held to the same standard as lawyers if they agree to prepare wills for their clients?

Mr. Justice Handrigan of the Supreme Court of Newfoundland and Labrador Trial Division (General), in Rowsell v. MacKinnon, 2011 NLTD 36 (CanLII), held that the same principles apply, and he held Mr. MacKinnon to the same standard as a lawyer. He wrote at paragraphs 74 – 75:

[74] Standard of care in negligence actions is the degree of care that a reasonable person should exercise; or as I said earlier in these reasons, if duty of care underpins liability between plaintiff and defendant in negligence actions, standard of care defines its scope. I hold Mr. MacKinnon not to a standard of perfection but to what would be expected of an ordinarily competent solicitor in these circumstances. 

[75] First of all, let me say why it is the appropriate standard for Mr. MacKinnon who is an accountant and not a lawyer: Mr. MacKinnon is a professionally trained accountant, who achieved the highest level of certification in his profession. He practiced public accounting at that level for thirty-five years and had access to Mr. Sacrey business and personal affairs because of his professional status. Mr. MacKinnon understood by his background and training how to engage with clients, the limits of the retainers he received, his clients’ and his own levels of competence and the extent to which his clients relied on him for professional services. He also understood that he was qualified to provide accounting, not legal services and most importantly he understood that it was wise to decline work he was not qualified to do.

[76] Yet he undertook legal work for Mr. Sacrey despite all these considerations. It is true that he recommended that Mr. Sacrey retain a lawyer to change his will in 2004 and that Mr. Sacrey objected. But Mr. MacKinnon relented and he did the work when he knew better. I expect that Mr. MacKinnon wanted to placate Mr. Sacrey and that is why he gave in, just as when the firm wrote off the $650 fee for the wills. Mr. Sacrey relied on Mr. MacKinnon to do his when, and when he agreed to perform it Mr. MacKinnon also agreed to do the work to the standard a lawyer would have done in the same circumstances, including getting them executed properly.

Mr. MacKinnon and his firm are required to pay Ms. Rowsell $100,000 plus interest and costs.

Supreme Court of Canada Grants Leave to Appeal inSt. Michael Trust Corp., as Trustee of the Fundy Settlement v. Her Majesty the Queen

The Supreme Court of Canada granted leave to appeal in St. Michael Trust Corp., as Trustee of the Fundy Settlement v. Her Majesty the Queen this morning, a case in which the Tax Court of Canada and the Federal Court of Appeal applied the test of where the central management and control of a trust was exercised in determining whether a trust was resident in Canada or in another jursidiction for the purpose of applying the provisions of the Income Tax Act, Canada. In this case, the trustee of two trusts was a trust company incorporated in Barbados, and the trustee argued that the trusts were exempt from capital gains tax in Canada on the sale of certain assets persuant to a tax treaty between Canada and Barbados. But the Tax Court of Canada held that because the central management and control of the trusts were really exercised in Canada, the trusts were resident in Canada, rather than in Barbados. The Federal Court of Appeal upheld that aspect of the decision.

The Supreme Court of Canada will now have the opportunity to determine the test for residency of a trust under Canadian income tax law.

I wrote about the Tax Court of Canada decision here. You can read the Federal Court of Appeal decision here.

I found out about this leave to appeal from Eugene Meehan Q.C.'s SCCLawLetter which provides very timely information about Supreme Court of Canada decisions.

Claim For Failure to Maintain Life Insurance

Jean Stewart and Earl Clark Stewart were divorced in Mississippi, on March 23, 1978. Mr. Stewart was required to pay child support for his son, Joseph Stewart. He made a few payments, then stopped, and moved to British Columbia. In 1992 the Mississippi Court held Earl Clark Stewart in contempt for failing to abide by its order to pay support, and ordered him to pay over $26,000 in arrears of support. The Mississippi Court also ordered Earl Clark Stewart to “maintain an insurance policy on his life in the amount of $100,000 and to name the minor child born of this marriage as sole beneficiary of the policy….”

Joseph Stewart is now a man of 34 years. Earl Clark Stewart never did pay the arrears of child support, nor continue to make the support payments. When he died, on December 18, 2008, he left his estate worth approximately $150,000 in his will to three children from a second marriage and to three step children. He did not make any provision for his son Joseph Stewart. Nor did he maintain a life insurance policy naming Joseph Stewart as his beneficiary.

Joseph Stewart sued his father’s estate for $100,000 for his father’s failure to have a life insurance policy in place.  

The first question that Mr. Justice Butler considered in Stewart v. Stewart, 2011 BCSC 774, was what law should apply to determine the extent of the obligation to maintain the life insurance? The case was heard by the Supreme Court of British Columbia, which usually applies British Columbia law, but the order to maintain the life insurance policy was made by a Mississippi court. Mr. Justice Butler held that Mississippi law governed. The law of the jurisdiction of the court that made the order should be applied to determine the obligations. Furthermore, child support obligations are governed by the law of the jurisdiction most closely connected to the child and custodial parent, which in this case was Mississippi.

When the court in British Columbia applies the law of a foreign jurisdiction, the court will generally consider expert evidence from a lawyer in that foreign jurisdiction.

In this case, the executor filed evidence from, James Farrior, a lawyer in Mississippi. According to Mr. Farrior, the order that Earl Clark Stewart maintain life insurance is a form of support, intended to provide security in case Earl Clark Stewart died while the child support obligation continued. Under Mississippi law, the obligation to pay child support ends when the child attains the age of majority, which is 21 in that State.

Mr. Justice Butler accepted Mr. Farrior’s opinion on Mississippi law, and held that the obligation to maintain the life insurance policy ended when Joseph Stewart turned 21. The Supreme Court of British Columbia dismissed Joseph Stewart’s claim against his father’s estate for $100,000.

Los Angeles County Hall of Justice

I took this photograph two summers ago (I'm a bit behind on my courthouse photo postings) in Los Angeles. The Los Angeles County Hall of Justice housed L.A. County Sheriff's offices, a jail, as well as county courtrooms. It has been vacant since damaged in the 1994 earthquake. I found a good article entitled "Hall of Justice: Restoring a Piece of History," published by the Los Angeles County Sheriff's Department. The article discusses the history of the building, the earthquake, and the hoped for restoration.

Wills, Estates and Succession Amendment Act, 2011 Passes Third Reading

On May 26, 2011, the British Columbia Legislative assembly passed Bill 10, which amends the Wills, Estates and Succession Act.

I have not heard any word on when the Wills, Estates and Succession Act will come into effect.

Changes to Power of Attorney Act Will Provide Limited Power to Appoint Beneficiaries

Changes to the British Columbia Power of Attorney Act that come into effect on September 1, 2011, will clarify the authority of an attorney appointed under an enduring power of attorney to designate beneficiaries for the person for whom the attorney is acting.

If the person who made the enduring power of attorney becomes incapable of making his or her own decisions, the attorney may manage the incapacitated person’s affairs. The attorney may contemplate making or changing a beneficiary of a pension plan, Registered Retirement Savings Plan, Tax Free Savings Account, or insurance policy.Can the attorney do so?

Section 20 of the Power of Attorney Act will provide a limited power for an attorney under a power of attorney to make a beneficiary designation. Section 20 (5) provides:

(5) An attorney may, in an instrument other than a will,

(a) change a beneficiary designation made by the adult, if the court authorizes the change, or

(b) create a new beneficiary designation, if the designation is made in
(i) an instrument that is renewing, replacing or converting a similar instrument made by the adult, while capable, and the newly designated beneficiary is the same beneficiary that was designated in the similar instrument, or
(ii) a new instrument that is not renewing, replacing or converting a similar instrument made by the adult, while capable, and the newly designated beneficiary is the adult's estate.

I stress the limited nature of the power. Essentially, this provision allows an attorney to maintain the same beneficiaries as those appointed by the person for whom the attorney is acting. For example, if the person who appointed the attorney had a Registered Retirement Savings Plan with a designated beneficiary, and the attorney transfers the funds to a different plan, the attorney may designate the same beneficiary. But if the attorney wishes to change the beneficiary, he or she must first apply for authorization from the Supreme Court of British Columbia.

If there is no named beneficiary, then the attorney may designate the estate of the person for whom the attorney is acting, in which case the asset will ultimately be distributed to the beneficiaries of that person's will.

The Power of Attorney Act will also contain an express provision in section 21 that the attorney may not make or change a will on behalf of the person for whom he or she is acting.