Rectification under section 59 of WESA
Have you been disinherited by the effect of a mistake contained in a will?
Rectification under Section 59 of WESA: what happens when a will contains a mistake?
Have you been disinherited by the effect of a mistake contained in a will? A mistake in a will could stem from many sources, including: a clerical error, a miscommunication between the testator and the will draftsperson, a legal drafting error, or a misunderstanding by the testator as to the legal effect of the language used in the will.
Often, a mistake contained in a will is only realized after the death of the testator. This presents a unique conundrum: the testator is dead and can no longer speak to their intentions. There is often no reliable guide as to what the testator’s intentions were and litigation may be necessary.
For example, in Jamt Estate (Re), 2021 BCSC 788, the sole beneficiary’s name was recorded incorrectly in a will when the testator confused the beneficiary’s middle name with the name of his predeceased brother. This mistake meant that the beneficiary could not inherit the estate without the court first correcting the error.
In Rondel v. Robinson Estate, 2011 ONCA 493, the testator had separate Canadian and Spanish wills. The Spanish will applied to the testator’s European property and the Canadian will applied to her Canadian property. The testator revised her Canadian will. The testator’s lawyer, unaware of the testator’s Spanish will and European assets, included a clause in the new Canadian will that revoked all other wills. The effect of this mistake was to revoke the Spanish will. Consequently, the distribution of the testator’s property in Europe was governed by the Canadian will and the assets passed to her Canadian beneficiaries instead of the beneficiaries under her Spanish will.
Section 59 of the British Columbia Wills, Estates and Succession Act, SBC 2009, c. 13 (“WESA”) allows the court to rectify a mistake in a will if the will fails to carry out the will maker’s intentions because of:
a. an error arising from an accidental slip or omission,
b. a misunderstanding of the will-maker’s instructions, or
c. a failure to carry out the will-maker’s instructions.
In Simpson v. Zaste, 2022 BCCA 208 (“Simpson”), the British Columbia court of appeal considered the rectification of a will under section 59 of WESA for the first time, interpreting the power conferred by the statute broadly. The court confirmed that the legal test under s. 59 is as follows:
1. The court will determine the testator’s intentions with regard to the issue for which rectification is sought;
2. The court will determine if the will as drafted fails to carry out the testator’s intentions;and
3. The failure must be a consequence of one of the reasons specified in section 59 (1) (a)-(c) – an error arising from an accidental slip or omission, a misunderstanding of the will-maker’s instructions, or a failure to carry out the will-maker’s instructions.
Use of Extrinsic Evidence
According to section 59 (2) of WESA, extrinsic evidence, including evidence of the will-maker’s intent, is admissible to prove the existence of the circumstances described in section 59 (1) (a) - (c) of WESA.
In Simpson, the court reviewed the file of Janet Slade, the lawyer who drafted Mr. Simpson’s will, which was admissible extrinsic evidence under section 59 (2). Ms. Slade’s file contained notes that she recorded during her meetings with Mr. Simpson prior to her drafting his will.
Facts in Simpson
In Simpson, Mr. Simpson’s will gifted shares that he held in a private corporation to the two children of his first marriage. The residue of the estate went to Mr. Simpson’s second spouse, Ms. Zaste. The shares were subject to a shareholder agreement. Under the shareholder agreement, if Mr. Simpson failed to buy out the shares of the other 50% shareholder during his lifetime, the shares would be purchased by the other shareholder on Mr. Simpson’s death for a set price. A life insurance policy paid for by Mr. Simpson would supplement the difference between the market value of the shares and the set price. Mr. Simpson designated his second spouse, Ms. Zaste, as the beneficiary of the life insurance policy. As it happened, Mr. Simpson never bought out the other shareholder, and on his death, pursuant to the shareholder agreement, the surviving shareholder purchased Mr. Simpson’s shares. Consequently, Mr. Simpson did not own the shares at his death, and the gift to his children adeemed–or in other words, failed. The estate received the net proceeds of the sale of the shares, which was their market value, less the life insurance policy proceeds. The life insurance policy proceeds went directly to Mr. Simpson’s second spouse, Ms. Zaste.
The court below found that Mr. Simpson intended to gift his children the fair market value of the shares and rectified the will as such. The practical effect of the decision was to gift the children a surplus of what the surviving shareholder actually paid for the shares (remember, the life insurance proceeds went to Mr. Simpson’s spouse and were deducted from the market value of the shares).
What is ademption?
A gift will “adeem” where a specific item of property is gifted through a will, and that piece of property is sold or otherwise ceases to exist at the time of the testator’s death. If this occurs, the gift fails and the beneficiary receives nothing.
Because Mr. Simpson left his children a specific gift of his shares in the private corporation, and the shares were no longer owned by Mr. Simpson on his death, the gift to the children adeemed and they received nothing under his will. The residue of the estate passed to Mr. Simpson’s spouse.
What did the testator intend?
Did Mr. Simpson intentionally choose not to buy out the other shareholder during his lifetime and, by extension, intend that the gift to his children fail? Did Mr. Simpson instead want his children to have the fair market value of the shares in the event that he died without first buying the other shareholder out? Or, in the event that he did not buy out the other shareholder, did Mr. Simpson intend that his children receive the proceeds of the sale of the shares less the life insurance proceeds?
The court grappled with these questions in Simpson and ultimately found that the evidence supported an inference that Mr. Simpson intended that his children receive the amount owed by the surviving shareholder under the shareholder agreement: i.e. the fair market value less the life insurance proceeds. The court found that Mr. Simpson intended that his spouse receive the life insurance proceeds.
The court came to this conclusion by analyzing the available extrinsic evidence—Janet Slade’s file. Ms. Slade was the lawyer who drafted Mr. Simpson’s will. Ms. Slade’s notes indicated that Mr. Simpson and Ms. Zaste intended that their estates pass to each other, with the exception of the shares which were carved out to go directly to Mr. Simpson’s children. The court also found that Mr. Simpson knew about the provision of the shareholder agreement that required the buy-out at his death if he had not purchased the other shareholder’s shares.
The court found that Mr. Simpson failed to appreciate that in the absence of him buying out the other shareholder, the shares could not go to his children because on his death the
shareholder’s agreement required his executor to transfer the shares to the other shareholder (see para 110). Consequently, the gift of the shares adeemed. Ms. Slade did not review the shareholder agreement before drafting the will, so she did not advise Mr. Simpson on the interaction between it and the will.
A Note on Intention
In Simpson, the court of appeal cautions that the general principles of rectification in the context of section 59 (1) of WESA are that rectification align the will with what the will maker intended to do, and not—what with the benefit of hindsight—the will-maker should have intended to do (see para 99). The court cites Canada (Attorney General) v. Fairmont Hotels, 2016 SCC 56, for this proposition.
In Fairmont, the Supreme Court of Canada states: “rectification is not equity’s version of a mulligan. Courts rectify instruments which do not correctly record agreements. Courts do not rectify agreements where their faithful recording in an instrument has led to an undesirable or otherwise unexpected outcome” (see para 39). Section 59 (1) (a) of WESA: “An error arising from an accidental slip or omission”
The court of appeal found that the mistake contained in Mr. Simpson’s will was an omission arising from Mr. Simpson’s failure to realize that his intended gift of the shares would not go to his children due to the operation of the survivor clause in the shareholder agreement and his failure to address this clause with the lawyer drafting his will (see para 148).
The court of appeal interpreted the wording of section 59 of WESA to be broader than that of the English legislation on which it was based, which only allows for the rectification of a “clerical error” made in a will by the draftsperson or a “failure [of the draftsperson] to understand the will-maker’s instructions” (see paras 145-147).
The court interpreted the statutory language contained in s. 59 of WESA liberally and clarified that the statutory power allows the court to go beyond remedying mistakes made in drafting by the will drafter or transcriber—the mistake may also be that of the testator.
Ultimately, “what matters is that [there] must be an error; it must be intentional; and it must be one that prevents the will-maker’s true intentions from prevailing” (see para 147).