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What happens when a testator’s Will attempts to gift assets that the testator doesn’t actually own?

A fundamental proposition of the common law with its own impressive Latin maxim (Nemo dat quod non habet) is that one cannot pass title to property one doesn’t own. Normally one expects that those drafting Wills will investigate title to property to ensure that the testator actually owns it such that an enforceable gift of the same property is made in the Will. Where title is not held by the testator, the solicitor may be liable. Indeed one of the first Canadian appellate decisions dealing with professional negligence in Will drafting dealt with this precise point; Wilhelm v. Hickson, 2000 SKCA 1 (Sask. C.A.). Other times, mere mistakes in drafting can be rectified to ensure that a misdescribed asset can pass according to the Will; Re Beauchamp (1975), 8 OR (2d) 2 (H.C.J.). A third method is for the Court to find that the Will, properly read, avoids the problem altogether by providing the machinery necessary to allow the gift to take – which was the case in the recent judgment of the Court of Appeal for Ontario in Trezzi v. Trezzi, 2019 ONCA 978 (Ont. C.A.).

In Trezzi v. Trezzi, the Will provided gifts of corporate assets rather than held by the testator personally. Jamal J.A. set out the issue as follows:

[10]  The clauses of Peter’s will that are impugned by Gina, Bianca, and Emily, are as follows:

    • Clause 3(d), which gave Albert “[a]ll equipment and chattels owned by Trezzi Construction Ltd.”.
    • Clause 3(e), which gave Albert “[t]he real property municipally known as 220 Regina Road, Woodbridge”, which was owned by Trezzi Construction.
    • Clause 3(m), which gave “[a]ll other assets owned by Trezzi Construction Ltd.” in equal shares to Gina, Albert, Emily, and Bianca.

The problem is immediately apparent – if corporations are legal persons, how can one person give away property that belongs to a corporation in his Will? The trick here is to consider the subjective intention of the testator and the powers provided to the Estate Trustee. A careful reading of the Will, as analyzed by Jamal J.A., revealed that the testator intended for the Estate Trustee to manage the testator’s controlling interest in the corporation to make the gift of corporate assets set out in the Will.

Thus, Jamal J.A. continued:

[17]       … [i]n my view, the application judge correctly held that the executors of Peter’s will have two independent sources of authority to implement his intention to wind-up Trezzi Construction: (a) their general powers under corporate law; and (b) their powers under clause 3(a) of the will.

[18]       With respect to the executors’ general powers under corporate law, s. 193(1) of the Business Corporations Act, R.S.O. 1990, c. B.16, provides that “[t]he shareholders of a corporation may, by special resolution, require the corporation to be wound up voluntarily”. Section 67(2)(a) of the Business Corporations Act provides that an executor or estate trustee of the estate of a deceased security holder may exercise all the rights that the deceased security holder had before their death. Thus, while he was alive Peter had the corporate authority, as the sole shareholder of Trezzi Construction, to wind-up the corporation. Upon his death, that authority devolved to his executors or estate trustees. As a result, under Ontario corporate law Peter’s executors have the power to implement his intention to wind-up Trezzi Construction.

[19]       With respect to the executors’ powers under the will, the application judge found that clause 3(a) of Peter’s will also provides the executors with the necessary powers to implement Peter’s wish to have Trezzi Construction wound up. Clause 3(a) states in relevant part:

      1. I GIVE, DEVISE AND BEQUEATH all my property of every nature and kind wheresoever situate, including any property over which I may have a general power of appointment, to my said Trustees upon the following trusts, namely:

(a) To use their discretion in the realization of my estate, with the power to my Trustees to sell, call in and convert into money any part of my estate not consisting of money at such time or times, in such manner and upon such terms, and either for cash or credit or for part cash and part credit as my said Trustees may in their uncontrolled discretion decide upon, …

[20]       While this clause does not refer expressly to a power to wind-up Trezzi Construction, but rather refers only to converting the estate’s assets into money, I conclude that the gifts do not fail on this basis. As the application judge correctly noted, the executors’ power to wind-up the corporation already exists under corporate law. I also agree with him that the executors implicitly have this authority in their discretionary power to convert the estate’s assets into money. Because Peter’s shares in Trezzi Construction were part of his estate “not consisting of money”, clause 3(a) of his will authorizes his executors to take any steps that may be needed to sell, call in, and convert those shares into money. This would include winding-up the corporation. As such, I agree with the application judge that Peter’s will conferred on his executors the authority to wind-up Trezzi Construction.

[21]       Because of these two independent sources of authority for Peter’s executors to wind-up Trezzi Construction, I would reject Gina’s contentions that the gifts of the assets of Trezzi Construction fail because Peter did not directly own those assets and that upholding these gifts would disregard Trezzi Construction’s separate corporate personality. While it is true that Peter, as the sole shareholder of Trezzi Construction, did not directly own the corporation’s assets, that does not complete the analysis. In substance, Peter’s shares in Trezzi Construction became part of the estate, and Peter effectively directed his executors to wind-up the company and to distribute its assets in accordance with his will, even though he did not own those assets directly. As already noted, the key question thus boils down to whether this was indeed Peter’s subjective intention in his will: see Re Kaptyn Estate [2010 ONSC 4293 (S.C.J.)], at paras. 126-144. For the reasons stated above, I conclude that the application judge did not err in concluding that this was Peter’s intention.

          [Emphasis added.]

This approach to the interpretation of a Will based on testamentary intent is a traditional one; cf. Tornroos v Crocker, [1957] SCR 151 (S.C.C.) (trustee had an implied authorization to purchase trust property personally). That is, while it might appear that a provision of the Will is unenforceable on some basis, an analysis of the Will taken as a whole and the identification of the testator’s intention may allow the Court to enforce the provision – in effect, holding that what appears to be a problem on the face of the Will is not a problem when the provision is read in its proper context.

What do we learn from Trezzi v. Trezzi? Obviously it would be best for those drafting Wills to make it plain what the testator intends and authorizes his or her Estate Trustee to do in respect of certain assets. However, where there are problems on the face of the Will – even as fundamental as ownership of a particular asset – it may well be that the machinery provided to the Estate Trustee in dealing with assets may provide a solution, and in this respect, the subjective intention of the testator will be the ultimate touchstone in interpreting the Will.


David Freedman - Lawyer At Wagner Sidlofsky Llp

David Freedman LLB, MA, PhD, TEP is Counsel to our firm.

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This blog is not intended to serve as a comprehensive treatment of the topic. It is not meant to be legal advice. Every case turns on its specific facts and it would be a mistake for the reader of this blog to conclude how it might impact on the reader’s case. Nothing replaces retaining a qualified, competent lawyer, well versed in this niche area of practice and getting some good legal advice.
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