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What does “appears to have a financial interest” mean?

Who has a right to get a copy of the last will and testament?  Or the right to see the estate’s accounting records?  What about if the executors have sat on their hands and not done anything – who can ask the court to make those executors apply for probate?  The answer to this riddle is a question: who appears to have a financial interest in the estate?

In Ontario, estate matters are governed by different statutes, regulations and case law.1 Who may apply for the relief listed above is governed, in part, by Rule 74.15 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.  The Rules describe these requests to the court as “Orders for Assistance.” Let’s take a look at the preamble of the Rule:

74.15 (1)  In addition to a motion under section 9 of the Estates Act, any person who appears to have a financial interest in an estate may move,…

Who are the people who appear to have a financial interest? And, more importantly, even if someone appears to have a financial interest, is the court going to automatically grant the relief they seek? The recent case of Klatt v. Klatt,2 which is the subject matter of this blog, suggests that the answer is more nuanced than you might think.3 But before looking at Klatt, let’s look at some of the previous case law and authorities to provide some context for the discussion.

An authoritative text often quoted by judges is Macdonnell Sheard & Hull on Probate Practice.  This is what the learned authors say in their text:

The term ‘financial interest’ is not defined in the rules and presumably includes any interest in property that a person may have under the terms of any testamentary instrument duly executed by the deceased person, or on an intestacy of that deceased person, whether such interest is vested, vested subject to being divested, or contingent….… all persons who have a financial interest in the estate consent thereto, which presumably would include all persons entitled under the will sought to be proved, all prior wills, and those entitled on an intestacy of the deceased person (emphasis added).4

This would suggest that a person who appears to have a financial interest in the estate would include: (1) all beneficiaries (including contingent beneficiaries) named in any will or previous will or codicil, and (2) any person who would inherit on an intestacy.5

In Korsten v. Lovett,6 a disinherited granddaughter who was not a beneficiary under the latest will was found to have a financial interest in the estate. One might have argued that, until the last will and testament was set aside, the granddaughter did not have a financial interest in the estate. Justice Matheson wrote:

The will under review was executed on February 6, 2002. It does not have as a beneficiary the Applicant. If the will is not proven then the Applicant would have a right to take on intestacy, as she is one of the three granddaughters, unless a previous will is located and if valid and she is not made a beneficiary. I am advised that previous wills had been destroyed at the direction of the deceased. I find that the Applicant has met the threshold in that she is a person with a financial interest.

The case law and the authorities above seem to make it clear that a contingent beneficial interest is enough to obtain an order for assistance. But Klatt adds a nuance to the discussion.

So what happened in the Klatt case?  In Klatt, Grandfather Carl left his farm to his two sons, Lorne and Victor, as tenants in common. The brothers would hold the farm in trust until the second one of them died. The beneficiaries of the trust were to be the children of Lorne and Victor, and the trust was to terminate upon the death of the second of the said Lorne and Victor.7 In other words, the ultimate beneficiaries, according to Carl’s will, were only those children of Lorne and Victor who were living at the time of death of the last brother to die.

The two sons were named executors. Carl died in 1995. Lorne died in 2009, leaving his brother Victor in charge of their father’s estate as the sole remaining trustee. Lorne’s son, David, brought an application to court to have his Uncle Victor pass his accounts for the administration of his grandfather’s estate.

Did David, the applicant in Klatt, appear to have a financial interest in the estate of Carl?  Based on the case law and the authoritative texts, the answer is yes.  Did he get an order for his Uncle Victor to commence an application to pass his accounts?  Let’s see what the judge said.

In paragraphs 21 and 22, the judge made these comments, which I quote in full:

21.    1 think that properly characterizing the status of the applicant’s present interest in the trust fund is relevant to the issue of whether the respondent ought to be required to pass the accounts. It appears to me that the applicant does not have a presently-vested interest in the trust fund. I say this because only those children of Lorne and Victor who are living at the time of Victor Klatt’s death will be entitled to a share of the proceeds. While it is certain that at some point Victor Klatt will die and the trust fund will come to an end, it cannot be said with certainty that the applicant will receive a share. He must be alive at the time of Victor Klatt’s death to have an interest. When an interest is contingent (i.e ., subject to the happening of an event which may never happen) it is one that may never come into being. (see MacKenzie, Feeney ‘s Canadian Law of Wills, 41h ed., LexisNexis Canada Inc., 2000,p. 17-1). Accordingly, I have determined that the interest of the applicant in the trust fund is a contingent interest only

22.  My conclusion that the applicant has a contingent rather than vested interest in the trust fund is not intended to be determinative of the applicant’s request. There are many situations where a court has determined that potential beneficiaries have interests that warrant protection. It is, however, a relevant factor to be considered when assessing the position of the applicant in relation to the provisions of rule 74.15.

While the judge accepted that David had a contingent interest in the estate, there was more to consider when determining whether he had an apparent financial interest in the estate and therefore a right to apply to have his Uncle Victor to commence an application to pass his accounts.

The judge noted that other contingent beneficiaries whose interests were impacted were not served, and that there was not a lot of money in dispute.  Before making an order for Uncle Victor to commence an application pass his accounts, the judge stated:

The principle of proportionality requires a careful weighing of the prospective costs and benefits of the requested remedy and an assessment of where these costs and benefits fall.

As I read the judgment, the court has no problem making an order that an executor pass his accounts where the rights of prospective beneficiaries were considered in the context of large estates involving substantial sums of money.  But the judge was disinclined to order Uncle Victor to commence an expensive application to pass his accounts when it was not financially proportional. At the same time, the judge was sensitive to the fact that David had a right to review the accounting records and ordered Uncle Victor to provide a copy of the accounting records for the trust fund for David to review.

What general lesson can we take from this case?  Courts accept that, under certain circumstances, contingent beneficiaries appear to have a financial interest in the estate.  Kimberly A. Whaley and Helena Likwornik wrote an interesting article that touches on this topic.8 In their article, they note that the phrase “appearing to have a financial interest” appears in both in Rule 75.01(1) (Application to court for directions) and 74.15 (orders for assistance).  The article references the case of Jafari v. Attar-Jafari,9 in which a person sought to challenge a will under Rule 75.01 claiming that he was so entitled because he was the son of the testator.  The court, in this case, was of the view that being an offspring of the testator by itself was insufficient to be a person who appears to have a financial interest in the estate.  There must be enough there to make a prima facie case that there appears to be a financial interest based on being a child.  To qualify, the son had to present sufficient evidence capable of supporting an inference that the claim is one that should be heard.  If not, he did not appear to have a financial interest and did not have the status to commence the application to court for directions.

Footnotes
  1.   For a comprehensive list and online link of legislation dealing with Ontario litigation I refer the reader to the Wagner Sidlofsky LLP website at https://www.wagnersidlofsky.com/legislation.php  As well, an invaluable tool to solicitors, litigators and law students is the text “The Annotated Ontario Estates Statutes, Second Edition”  by Brain A. Schnurr.  In that text Brian analyzes the relevant legislation, provides his comments and the seminal cases dealing with the issues arising from the legislation.
     
  2.   Klatt v. Klatt, 2015 ONSC 216
     
  3.   Another perfect example of how courts sometimes read the Rules differently is Ignagni v. Ignagni, (2009) No. 4269.  In this case a motion for an order for assistance was made without notice to the other side, which seems to be in keeping with the rules that provide that “motion … may be made without notice…”  Notwithstanding the clear wording of the rules, the court in Ignagni stated that ex parte motions for orders for assistance should only be brought ex parte where there is urgency.  The concern was that these were not merely administrative orders, but orders affecting substantive rights.
     
  4.   R. Hull and I. Hull, Macdonnell, Sheard & Hull on Probate Practice (4th Ed.) (Thomson Canada Limited, 1996) at p.21 (emphasis added)
     
  5.   For details, see the article written by Charles B. Wagner, “Laws of Intestacy in Ontario,” which is available on-line at: https://www.wagnersidlofsky.com/articles/intestacy-in-ontario.php, as well as Part II of the Succession Law Reform Act, R.S.O. 1990, c. S.26.
     
  6.   Korsten v. Lovett (2002), 48 E.T.R. (2d) 4l (Ont. S.C.J.) at paras. 15-16.
     
  7.   Under a tenancy in common, the co-owners are called tenants in common. They each own their own share of the property which goes to their respective estates.  There is no right of survivorship to the surviving owner.
     
  8.   Kimberly A. Whaley and Helena Likwornik, “Applications for Advice and Directions” available on line at http://whaleyestatelitigation.com/blog/2008/10/applications-for-advice-and-directions/
     
  9.   2008 CanLII 37212 (ON S.C.)
     

Charles Wagner and Brendan Donovan

The authors of this blog are Charles Wagner and Brendan Donovan. Charles is a Certified Specialist in Estates and Trusts and partner at Wagner Sidlofsky LLP and Brendan was a partner.

This Toronto office is a boutique litigation law firm whose practice is focused on estate and commercial litigation.

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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