In early 2022, the Ontario Court of Appeal released an important decision titled Walters vs. Walters Estate. The case is a family tale of disharmony. Unusually, this case was not about a second marriage. In this case the Mother died, survived by her husband of 60 years and two adult sons. The sons and father did not like each other. One can assume that there had to have been a great deal of family history for this type of friction to have evolved.
In boilerplate language, the wife’s Will said keep all of my estate after I die in a fund for the benefit of my husband and pay the interest and even as much as of the capital as is necessary to care for him. Upon his death, the balance of the estate would go to the children. The clause which one will find in most Wills contains in retrospect two contradictory terms. On one hand the will stated that in essence, the executors in their absolute discretion shall decide how much money should go to their father. In contrast, the same clause contains the marching orders that their father’s comfort and welfare are their mother’s first consideration. The case revolved around the husband’s demand that his sons, as executors, release to him sufficient money to live in an unofficial retirement setting. The sons who strongly disliked their father delayed matters. Their lawyer asked for details of their father’s needs and his own financial ability to pay for them. While technically correct, it breached the spirit of the wills phrase “..my husband’s comfort and welfare on my first consideration.” Further, the monthly amount requested was reasonable. Father & sons duked it out in court.
The sons pointed and relied upon their unrestrained discretion. The father pointed to the intent of his comfort and welfare being primary as contained in his late wife’s Will.
Which one wins? Not surprisingly the father. The absolute discretion came with guiding language. The sons breached their duty as executors and were removed.
This case is a careful summary of the law on executor’s duties and the limits on their discretion.
In the order listed by the court, it stands for the following:
(a) The armchair principal of Will interpretation, The Will makers’ intention is determined by the words in the Will itself and its surrounding circumstances at the time the Will was written.
(b) The court cannot easily interfere with an executor’s exercise of their discretion.
(c) The court can interfere if there is a breach of fiduciary duty or if the executor has acted with a lack of good faith.
(d) Good faith can mean not being influenced by extraneous matters. A clear example is a decision based on racial prejudice.
(e) Waters’ Law of Trust in Canada (for non lawyers, think of the fattest most complicated legal textbook imaginable), yet it is the Bible on the law of trust in Canada. Waters said the court can interfere with an executor (who are generally all trustees) even if the Will gives them a free hand to make decisions, if:
- The decision is so unreasonable that no honest or fair dealing trustee could have come to that decision;
- The trustees have taken into account considerations which are irrelevant to the discretionary decision they had to make: or
- The trustees in having done nothing cannot show that they gave proper consideration to whether they ought to exercise the discretion.
(f) Maybe and maybe not, determining the financial resources of the father was relevant.
(g) The sons’ distrust of their father was an extraneous factor in other words a breach of their fiduciary duty.
(h) All of this was decided without a trial. It was heard as an application. Just written sworn statements (affidavits) and lawyers standing up on their hind legs and making submissions to the court. There were no cross-examinations. No Perry Mason moments.
(i ) The available evidence was dad was almost broke and the money dad wanted was in line ($3,875 monthly) with other retirement homes.
(j ) The cost award was a bit of a joke. $26,000 all in for the application and $5,000 all in for the appeal. I have no hesitation in speculating that the legal fees easily exceeded $100,000 per side and I would not be surprised if they exceeded $200,000.