Whittling Down Our Testamentary Freedom

Written by on January 21, 2016.

Testamentary freedom – the principle that a person of sound mind is free to leave his or her estate to whomever they like, for whatever reason, and without explanation– is a deeply entrenched notion in Canadian common law and society. However, as those of us in the estates and trust field know quite well, testamentary freedom is not absolute; it is subject to numerous constraints and limitations.

One such limitation arises from the doctrine of public policy which can void bequests that are in violation of public policy. The doctrine recently garnered renewed attention in the estates field with the release of two controversial decisions: McCorkill v. McCorkill Etate 2014 NBQB148, upheld on appeal, 2015 NBCA 50 [McCorkill] and Spence v. BMO Trust Company 2015 ONSC 615 [Spence]. Both decisions encroach further than the established common law on testamentary freedom.  Both decisions are presently under appeal.

By way of background, the doctrine of public policy has typically been used to void offensive conditions attached to bequests. The rationale is that the testator cannot compel an estate trustee or a beneficiary to do something contrary to public policy.  Acts are said to be against public policy “when the law refuses to enforce or recognize them, on the ground that they have mischievous tendency so as to be injurious to the interests of the state, apart from illegality and immorality.”[1] For instance, our common law has invalidated bequests that require the beneficiary to commit a crime or other act prohibited by law or statute, to require the beneficiary to separate from his or her spouse or to restrain the beneficiary from certain types of marriage.

Whereas previous cases have applied the doctrine to invalidate conditions that were clearly offensive, in both McCorkill and Spence, the doctrine was used to void bequests which were fine on their face.  Many have criticized these decisions for their extension of the doctrine to effect undue encroachment on testamentary freedom.

McCorkill v. McCorkill Estate

In McCorkill, the testator’s will provided for his residue to be transferred “to the NATIONAL ALLIANCE, a Virginia Corporation…” the National Alliance is a long-standing neo-Nazi group known to promote hate propaganda and inspire hate motivated violence and terror. Due to the National Alliance’s notorious activities, the deceased’s sister brought an application to void the residual clause on the grounds of public policy.  The application drew a lot of attention: the Province of New Brunswick, The Centre for Israel and Jewish Affairs and The League of Human Rights of B’Nai Brith Canada all intervened in support of the sister while the Canadian Association for Free Expression opposed the sister’s application.

After reviewing extensive evidence on the activities of National Alliance, the New Brunswick Court of Queen’s Bench determined that the writings and other communications of the National Alliance are illegal and/or in violation of public policy. They are prohibited by s.319(2) of the Criminal Code (public incitement of hatred), in contravention of the Charter and provincial human rights legislation, and in contravention of the International Conventions entered into by Canada which prohibit discrimination.

The Court went on to consider whether the residual clause was invalid on the grounds of public policy. The National Alliance argued, among other things, that whereas previous case law in this area typically dealt with voiding conditions attached to gifts or trusts with a repugnant purpose which violates public policy, here, there was nothing wrong with the residual clause itself. It further submitted that whereas interference with testamentary freedom due to a bequest/condition’s violation of public policy is justified, interference with testamentary freedom due to the character of the beneficiary as a person or organization is not.

The Court nevertheless declared the bequest invalid. It held that National Alliance’s foundational documents confirm principles and policies that are both illegal and contrary to public policy in Canada. The fact that the testator left his entire estate to National Alliance, whose raison d’etre violates public policy, infers that he intended it to be used for their clearly stated, illegal purposes.  Therefore, [para 89] “while the voiding of a bequest based on character of the beneficiary is, and will continue to be, an unusual remedy, where, as here the beneficiary’s raison d’etre is contrary to public policy, it is the appropriate remedy.”

The Canadian Association for Free Expression appealed the decision of the New Brunswick Court of Queen’s Bench.  The Court of Appeal denied the appeal in a succinct 2 paragraph decision without any meaningful consideration of balancing public policy and testamentary freedom. In November 2015, the Supreme Court of Canada received an application for leave to appeal the McCorkill decision.

The McCorkill decision is precedent setting in that the contravention of public policy was based on the character of the beneficiary as opposed to the repugnancy of a condition attached to a bequest. Many argue that there should be a distinction between a bad gift and a bad beneficiary. Should the Court be determining the worthiness of an heir?

While the New Brunswick Court of Queen’s Bench distinguished National Alliance from most other beneficiaries, and particularly natural persons, by virtue of there being “foundational documents” indicating that National Alliance “stands for” a purpose which violates public policy, this distinction is blurred when it comes to other notorious organizations (e.g. Hell’s Angels) or organizations which are pro or against certain societal issues which are not in line with government policy (e.g. pro-life vs. pro-choice, assisted suicide, same-sex marriage). Based on McCorkill, would a gift to a pro-life organization be invalid? Would a testator not entitled to leave bequests to organizations like the Hell’s Angels, if he or she so wishes?

Another concern relates to the evolving nature of public policy. “Public policy” embodies the interests of society as expressed in the morals at the time, the common law and legislation.[2] It is transitory and subject to change. Whereas a bequest to an organization advocating same-sex marriage could have been challenged as contrary to public policy prior to 2005, it would not be questioned today.  Therefore, invalidating bequests based on the activities or character of a beneficiary, and specifically, whether those activities align with public policy, could create inconsistencies and unpredictability in estate planning.

Spence v. BMO Trust Company

Eight months after the New Brunswick Court of Appeal upheld the McCorkill decision, the Ontario Superior Court of Justice released its decision in Spence.

In Spence, the testator, Rector Spence, executed a will which expressly disinherits his daughter Verolin in favour of his estranged daughter Donna and her two kids. His will contained the following clause:

I specifically bequeath nothing to my daughter, Verolin Spence, as she had no communication with me for several years and has shown no interest in me as a father.

Verolin challenged her father’s will on the grounds that it was void for public policy reasons. She asserted that the only reason she was written out of her father’s will was because her father disapproved of her having a child with a man of a different race. Uncontradicted affidavit evidence of a family friend confirmed Rector’s intentions to discriminate against Verolin for having a child out of wedlock with a Caucasian man.  Verolin argued that the racist underpinnings of her father’s will are offensive to society’s sensibilities; the will ought to be set aside and his estate administered pursuant to the intestacy laws.

When Verolin and Donna were children, their parents separated. Donna went to live with her mother and Verolin went to live with her father.  After the separation, both Verolin and Rector were effectively estranged from Donna. For many years, Verolin had a very close relationship with her father.  However, in 2002, their relationship came to dramatic end when Verolin announced that she was pregnant with a mixed-race child. According to Verolin, Rector made it clear that he would not allow a Caucasian man’s child in his house.  From 2002 until his death in 2013, Rector would not return Verolin’s calls and refused to have anything to do with his grandson.

The Court ultimately agreed with Verolin and set aside Rector’s will. In its decision, the Court departed from jurisprudence in two respects:

  1. It went beyond what is written in Rector’s will to look at his intention; and
  2. It invalidated the entire will, rather than simply striking out the impugned clause.

As previously indicated, jurisprudence on public policy cases in the estate context has historically turned on the wording of the impugned condition, and not the testator’s intention. The testator’s intentions are only relevant in disputes challenging the validity of a will on the basis of undue influence or capacity, or if there is ambiguity or uncertainty on the face of the will. However, these issues were not present in Spence.  Like in McCorkill, the clause in question itself did not contravene public policy nor cause harm to the public.[3] On its face, it was not discriminatory: there was no mention of Verolin being disinherited because the father of her baby is not Caucasion.

Moreover, the Court’s decision to invalidate the entire will, instead of simply striking out the clause pertaining to Verolin, is also surprising and contrary to established caselaw. The Court failed cite any authority for its decision.

The Spence decision was appealed to the Court of Appeal. The appeal was heard in early fall 2015. Many practicing in the area of wills and estates are anxiously awaiting its release.

If the Spence decision is upheld, the Courts may see an influx of discrimination cases brought by adult children left out of wills. For example, what if a parent and child grew estranged as a result of the child’s criminal activity, and consequently, this adult child was left out of the parent’s will? A record of offence is a ground of discrimination under the Ontario Human Rights Code and could give rise to a valid challenge on the basis of public policy. Similarly, what if a parent left much more of an estate to an adult child who happens to be a single mother, and left very little to a child who is married to a wealthy spouse? Or, what if a parent gave the eldest son a larger inheritance, as per cultural customs? Both marital status and sex are grounds of discrimination and could be used to challenge the will. With the opening of litigation floodgates, parents will be left with no alternative other than to divide their estate equally between their children.

 

In both McCorkill and Spence, the doctrine of public policy was stretched, albeit in different ways, into unprecedented territory. The scales balancing public policy and testamentary freedom tipped in favour of the Court’s intervention.  Critics are concerned that decisions such as McCorkill and Spence will erode our entrenched testamentary freedom to deal with our affairs as we see fit, irrespective if others disagree.

It’ll be interesting to hear what our highest Courts have to say on the matter.

[1] McCorkill at para. 58.

[2] McCorkill at para. 61

[3] The Court in Spence relied on McCorkill as authority that it is not necessary to have specifically recited terms in the granting document that are offensive, in order to void a clause on the grounds of public policy.

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