McDougald Estate, Re, (2005) 199 O.A.C. 203 (CA)

• Judge: Cronk, Gillese and MacFarland, JJ.A.
• Court: Court of Appeal (Ontario)
• Case Date: June 15, 2005
• Jurisdiction: Ontario
• Citations: (2005), 199 O.A.C. 203 (CA)

McDougald Estate, Re (2005), 199 O.A.C. 203 (CA)

MLB headnote and full text

Temp. Cite: [2005] O.A.C. TBEd. JN.046

The Canada Trust Company, in its capacity as an Executor and Trustee of the Estate of Hedley Maude McDougald, deceased (applicant/counter-respondent/respondent in appeal) v. Edward Douglas Gooderham, Edward Douglas Gooderham in his capacity as sole Executor and Trustee of the Estate of Cecil E. Hedstrom, Duncan Gibson , Alexander Gibson , Cecil Paddy Fennell, Timothy Phillips, Melinda Briell (in her capacity as a Trustee of the Melinda Briell Family Trust) and Melissa Phillips (in her capacity as a Trustee of the Melissa Roecker Family Trust) (respondents/counter-applicants/ appellants )

(C40584)

Indexed As: McDougald Estate, Re

Ontario Court of Appeal

Cronk, Gillese and MacFarland, JJ.A.

June 15, 2005.

Summary:

A testator bequeathed a property to her sister. The testator executed a continuing power of attorney. Her attorneys sold the property and set aside the proceeds. The testator died. The parties sought directions as to whether the proceeds of that sale adeemed and became part of the residue at the date of death, or whether s. 36(1) of the Substitute Decisions Act applied to prevent ademption.

The Ontario Superior Court, in a decision reported at [2003] O.T.C. 723, held that the gift had not adeemed. Two residuary beneficiaries appealed.

The Ontario Court of Appeal dismissed the appeal.

Executors and Administrators - Topic 5541

Actions by and against representatives - Costs - General - The Ontario Court of Appeal discussed the awarding of costs in estate litigation - The court stated that, traditionally, the principle was that the costs of all parties were ordered payable out of the estate if the dispute arose from an ambiguity or omission in the testator's will or other conduct of the testator, or there were reasonable grounds upon which to question the will's validity - The court held that the traditional approach had been, correctly, displaced by the modern approach to fixing costs in estate litigation - The modern approach was to carefully scrutinize the litigation and, unless the court found that a public policy consideration applied, to follow the costs rules that applied in civil litigation - The court stated that "Gone are the days when the costs of all parties are so routinely ordered payable out of the estate that people perceive there is nothing to be lost in pursuing estate litigation." - See paragraphs 74 to 92.

Executors and Administrators - Topic 5548

Actions by and against representatives - Costs - Where payable out of estate - [See Executors and Administrators - Topic 5541 ].

Executors and Administrators - Topic 5550

Actions by and against representatives - Costs - Where payable by claimant - [See Executors and Administrators - Topic 5541 ].

Persons of Unsound Mind - Topic 703

Committees (incl. substitute decision maker) - General - Incompetence to manage estate - [See Wills - Topic 305 ].

Persons of Unsound Mind - Topic 743

Committees (incl. substitute decision maker) - Powers and duties - Mortgage, sale or disposal of estate assets - A testator bequeathed a property to her sister - The testator executed a continuing power of attorney - Her attorneys sold the property because of the significant costs to maintain it and set aside the proceeds - Section 35.1 was added to the Substitute Decisions Act - It prohibited some dispositions of property by a property guardian and permitted other dispositions - The testator died - The Ontario Court of Appeal held that s. 35.1 was not retroactive - The governing provisions affecting a sale of property were those in effect at the time of the sale, not those in effect at the time of the testator's death - See paragraphs 34 to 38.

Persons of Unsound Mind - Topic 743

Committees (incl. substitute decision maker) - Powers and duties - Mortgage, sale or disposal of estate assets - A testator bequeathed a property to her sister - The testator executed a continuing power of attorney - Her attorneys sold the property because of the significant costs to maintain it and set aside the proceeds - The testator died - Section 35.1(3)(a) of the Substitute Decisions Act provided that "the guardian may dispose of the property if the disposition of that property is necessary to comply with the guardian's duties" - The Ontario Court of Appeal opined that the language of the section was broad enough to encompass prudent dispositions of specifically bequeathed property - See paragraph 39.

Persons of Unsound Mind - Topic 743

Committees (incl. substitute decision maker) - Powers and duties - Mortgage, sale or disposal of estate assets - [See third and fourth Wills - Topic 4150 ].

Practice - Topic 3685

Evidence - Affidavits - Use of - At trial - A testator bequeathed a property to her sister - The testator executed a continuing power of attorney - Her attorneys sold the property and set aside the proceeds - The testator died - The parties sought directions as to whether the proceeds of that sale adeemed and became part of the residue upon the testator's death, or whether s. 36(1) of the Substitute Decisions Act applied to prevent ademption - The testator's mental capacity at the time of the sale was disputed - Early in the hearing, the application judge ruled that witnesses who had provided affidavit evidence respecting the testator's capacity would be required to give oral testimony - She later excused a witness from giving oral testimony for health reasons and, over the appellants' objections, admitted the affidavit - On appeal, the appellants submitted that the application judge was bound to follow the procedure that she had established - The Ontario Court of Appeal rejected the submission - See paragraphs 61 to 66.

Statutes - Topic 2414

Interpretation - Interpretation of words and phrases - General principles - Disjunctive words or phrases - [See fourth Wills - Topic 4150 ].

Wills - Topic 305

Testamentary capacity - General principles - Requirement that testator understand what is being done - A testator appointed attorneys under a continuing power of attorney - Her attorneys sold one of her properties based on, inter alia, their belief that she lacked capacity to manage her property - Approximately four months later, the testator executed a codicil to her will and changed the age at which beneficiaries would receive their shares of her estate to 21 - An application judge held that the testator lacked capacity at the time of the sale of the property - The Ontario Court of Appeal upheld the decision - The testator may have had one of her "windows" of superficial lucidity, and thus was mentally capable for the purpose of executing the "very narrow codicil" - In any event, there was a considerable difference between deciding the simple issue of the age at which beneficiaries were to take and comprehending the complex considerations involved in the sale of the property - See paragraphs 48 to 60.

Wills - Topic 4150

Failure of gifts - Implied revocation - Ademption - Rights in place of property devised - Section 36(1) of the Substitute Decisions Act provided that "The doctrine of ademption does not apply to property that a guardian of property disposes of under this Act, and anyone who would have acquired an interest in the property acquires a corresponding interest in the proceeds." - The Ontario Court of Appeal held that there was nothing in the anti-ademption provision that suggested that the word "property" should be limited to property that an incapacitated person held personally, as opposed to through a corporation - See paragraph 24.

Wills - Topic 4150

Failure of gifts - Implied revocation - Ademption - Rights in place of property devised - Section 36(1) of the Substitute Decisions Act provided that "The doctrine of ademption does not apply to property that a guardian of property disposes of under this Act, and anyone who would have acquired an interest in the property acquires a corresponding interest in the proceeds." - The Ontario Court of Appeal held that there was "nothing in s. 36(1) to suggest that it was to apply only to unintended dispositions. To read that limitation into s. 36(1) would undermine its remedial intent. Moreover, it would lead to the absurd result that conscious, thoughtful dispositions by attorneys are to be treated in a less favourable manner than dispositions made through inadvertence." - See paragraph 40.

Wills - Topic 4150

Failure of gifts - Implied revocation - Ademption - Rights in place of property devised - A testator bequeathed a property to her sister - The testator executed a continuing power of attorney - Her attorneys sold the property because of the significant costs to maintain it and set aside the proceeds - The testator died - Section 36(1) of the Substitute Decisions Act provided that "The doctrine of ademption does not apply to property that a guardian of property disposes of under this Act, and anyone who would have acquired an interest in the property acquires a corresponding interest in the proceeds." - The Ontario Court of Appeal held that s. 36(1) was not limited to dispositions made under s. 37(1) (required expenditures) - The court held that while the testator's attorneys were acting pursuant to the terms of the power of attorney when they sold the property, it was equally correct to say that they were acting in accordance with the dictates of s. 32 of the Act (duties of guardian) - Accordingly, the disposition of the property was made "under this Act" - See paragraphs 41 to 47.

Wills - Topic 4150

Failure of gifts - Implied revocation - Ademption - Rights in place of property devised - Section 36(1) of the Substitute Decisions Act provided that "The doctrine of ademption does not apply to property that a guardian of property disposes of under this Act, and anyone who would have acquired an interest in the property acquires a corresponding interest in the proceeds." - Section 38(1) of the Act provided that s. 36 applied to an attorney acting under a continuing power of attorney if the grantor was incapable or the attorney had reasonable grounds to believe that the grantor was incapable - The Ontario Court of Appeal held that the use of the disjunctive "or" in s. 38(1) made it clear that its provisions applied so long as there was actual incapacity on the part of the grantor or the attorney had reasonable grounds to believe, at the relevant time, that the grantor was incapable of managing property - Section 38(1) did not require that both conditions be met - See paragraphs 44 to 49.

Words and Phrases

Property - The Ontario Court of Appeal discussed the meaning of the word "property", as found in s. 36(1) of the Substitute Decisions Act, S.O. 1992, c. 30 - See paragraph 24.

Words and Phrases

Under this Act - The Ontario Court of Appeal discussed the meaning of the phrase "under this Act", as found in s. 36(1) of the Substitute Decisions Act, S.O. 1992, c. 30 - See paragraphs 41 to 47.

Cases Noticed:

Doyle v. Doyle Estate (1995), 9 E.T.R.(2d) 162 (Ont. Gen. Div.), affd. (1998), 22 E.T.R.(2d) 17 (Ont. C.A.), refd to. [para. 40].

Mitchell v. Gard (1863), 3 Sw. & Tr. 275; 164 E.R. 1280, refd to. [para. 78].

Spiers v. English, [1907] P. 122, refd to. [para. 78].

Lotzkar, Re (1985), 19 E.T.R. 135 (B.C.S.C.), refd to. [para. 81].

Beaurone v. Beaurone Estate (1997), 31 O.T.C. 236 (Gen. Div.), refd to. [para. 82].

Marshall Estate, Re (1998), 50 O.T.C. 357 (Gen. Div.), refd to. [para. 83].

McCormick Estate, Re, [2002] O.T.C. Uned. 234; 4 E.T.R.(3d) 209 (Sup. Ct.), refd to. [para. 84].

Gamble v. McCormick - see McCormick Estate, Re.

Fleck, Re (1924), 55 O.L.R. 441 (C.A.), refd to. [para. 86].

Haig, Re (1925), 57 O.L.R. 129 (C.A.), refd to. [para. 87].

Smith, Re (1927), 61 O.L.R. 412 (C.A.), refd to. [para. 88].

Eady v. Waring (1974), 2 O.R.(2d) 627 (C.A.), refd to. [para. 89].

Statutes Noticed:

Substitute Decisions Act, S.O. 1992, c. 30, sect. 36(1) [para. 18]; sect. 37(1) [para. 34]; sect. 38(1) [para. 48].

Counsel:

Harry Underwood and Erica J. Baron, for the respondent;

V. Ross Morrison and Stephen Lamont, for the appellants.

This appeal was heard on May 3 and 4, 2005, by Cronk, Gillese and MacFarland, JJ.A., of the Ontario Court of Appeal. Gillese, J.A., delivered the following decision for the court on June 15, 2005.