SOLICITOR’S NEGLIGENCE IN THE 21ST CENTURY: A TRUSTS AND ESTATES PERSPECTIVE
Prepared by Kimberly A. Whaley (2002)

Increasingly, solicitors who have been retained to draft estate planning documents are coming under scrutiny for their actions not only concerning the protection of the deceased’s estate in a proper and tax effective manner, but also the deceased is intended and unintended beneficiaries.

The duty of care owed by solicitors is arguably widening and there have been a number of interesting decisions which support the contention that this duty of care is widening. The estate planning solicitor has a number of obligations to discharge. The cases herein will illustrate a widening scope of duty and the increasing areas of negligence that estate planning solicitors are finding in their practices.

The case of Whittingham v. Crease (1978), 88 DLR (3d) 353 (BCFC) established for the first time in Canada, that there is a duty of care owed by the solicitor to the intended beneficiaries. Similar conclusions were then reached in the English cases of Ross v. Caunters [1980] 1 Ch.297 and White v. Jones [1995] 1 All ER 691 (HL).

In Whittingham v. Crease, the solicitor prepared a will in accordance with the testator’s instructions. The solicitor attended at the testator’s home and read the will in the presence of the testator and the testator’s son and the son’s wife. The son was the main beneficiary under the will. The solicitor asked the son’s wife to attest the will and she did so. This rendered the gift to her husband void by reason of Section 12(1) of the Wills Act. Ultimately, the court held that the solicitor was negligent.

In Whittingham v. Crease, the British Columbia Federal Court allowed recovery on the basis of principles long enunciated in the case of Hedley Byrne & Co. Ltd v Heller & Partners Ltd. [1963] 2 All E.R. 575, the particular principle of that case being, that if a person seeks information from a person possessing a special skill and trusts that person to exercise due care, and if that person knew or ought to have known that reliance was being placed on his or her skill and judgment, then the skilled person owes a duty of care to the first person. Further, the first person can recover damages for financial loss caused by the negligent misrepresentation of the second person.

In Ross v. Caunters [1980] 1 Ch.297, a similar kind of situation arises and is analogous. The defendant’s solicitors drafted the testator’s Will, and then, upon the request of the testator, sent it to him for signing. The husband of the beneficiary under the Will was one of the witnesses.

Again, the plaintiff’s gift was void. The solicitors failed to notice the problem when the Will was returned to them.
The plaintiff brought an action against the solicitors for damages for the loss of her benefits under the Will. The defendants admitted the allegations of wrongdoing, but denied liability on the grounds that they only owed a duty of care to the testator and not to the plaintiff/beneficiary.

The court awarded damages to the plaintiff for the loss of benefits that the testator intended to leave to her in the Will. In doing so the court stated as finding, that “a solicitor who is instructed by his client to carry out a transaction that will confer a benefit on an identified third party owes a duty of care towards that third party in carrying out that transaction, in that the third party is a person within his direct contemplation as someone who is likely to be so closely and directly
affected by his own acts or omissions that he can reasonably foresee that the third party is likely to be injured by those acts or omissions”.

The Court’s principle considerations in Ross v. Caunters are as follows:

(1) the close proximity of the plaintiff to the defendants;
(2) that this proximity was a product of the duty of care owed by the defendants to the testator; and
(3) that to hold the defendants were under a duty of care to the defendants would not impose an uncertain and unlimited liability, but a finite one to a finite number of persons, namely, one.

Accordingly, the Court held that the defendants owed a duty of care to the plaintiff because it was obvious that if they were careless, she would suffer loss.

In the subsequent decision of the House of Lords in White v. Jones, [1995] 1 ALL E.R. 691 (U.K.H.L.) the duty of care owed to intended beneficiaries by solicitors drafting wills was affirmed. Considerable weight, however, was given to the absence of any remedy available to the deceased’s personal representatives in such a case.

In White v. Jones, the House of Lords rejected the approach used in Ross v. Caunters, but held that the principle in Hedley–Byrne could be extended to cover cases in which beneficiaries were unaware of the making of the Will. In this case, solicitors were asked by the testator to disinherit his two daughters given that they had had a quarrel. The firm prepared the Will and it was executed by the testator. Three months later the testator and his daughters reconciled. The testator told his daughters what he had done and that he was going to rectify it. He asked the firm to prepare a new Will with a gift of money to each of his daughters. The Will did not get prepared, and a few months thereafter the testator died. The two daughters brought an action for damages and negligence. The Trial Judge dismissed the action and the daughters appealed.

The court in White v. Jones listed the reasons why they decided that a duty should be owed by the testator’s solicitor to a disappointed beneficiary:

(1) The fact that if such a duty is not recognized, the only persons who might have a valid claim (i.e. the testator and his estate) have suffered no loss, and the only person who has suffered a loss (i.e. the disappointed beneficiary) has no claim.

It can therefore be said that, if the solicitor owes no duty to the intended beneficiaries, there is a lacuna in the law, which needs to be filled. This is a point of cardinal importance in the present case;

(2) The injustice of denying such a remedy is reinforced if one considers the importance of legacies in a society, which recognises the right of citizens to leave their assets to whom they please;

(3) There is a sense in which the solicitor’s profession cannot complain if such a liability may be imposed upon their members. If one of them has been negligent in such a way as to defeat his client’s testamentary intentions, he must regard himself as very lucky indeed if the effect of the law is that he is not liable to pay damages in the ordinary way. It can evolve no injustice to render him subject to such a liability, even if the damages are not payable to his client’s estate for distribution to the disappointed beneficiary, but rather directly to the disappointed beneficiary.

Result:

These cases have served to widen the scope of duty of a solicitor to those other than just the testator when providing services with respect to the creation of a testamentary or estate planning document. Food for thought: Could the theories found in these cases be used to widen the scope of duty in cases involving solicitors’ involvement in inter vivos transfers?

The series of “disappointed beneficiary” cases resulting from the faulty preparation of testamentary documentation has widened the scope of duty of a solicitor beyond the testator to include beneficiaries who are disappointed as a result of a failed testamentary disposition.

Courts have continued to find in the 21st century that the intended beneficiary is someone that the solicitor can reasonably foresee who may, as a result of the solicitor’s negligence, be deprived of an intended beneficial interest in a deceased’s estate.

The Application of White v. Jones [1995] 1 All ER 691 (HL) In Canada in the 21st Century.

So in what ways is the application of White v. Jones in Canada continuing to contribute to the widening of principles already enunciated in cases referred to herein. There continues to be further expansion of the boundaries of the tort of negligence.

The Saskatchewan Court of Appeal in Earl v. Wilhelm (2000) 189 Sask R. 71, was the first Canadian appellate decision to adopt the principles articulated in White v. Jones, by which a remedy, akin to that flowing from the application of Hedley-Byrne principles, is accorded an intended beneficiary where a solicitor, on taking instructions for a will, can reasonably foresee the deprivation of an intended legacy if due care is not taken.

In Earl v. Wilhelm, a lawyer incorporated the testator’s farming operation for tax purposes. Subsequently, the same lawyer drafted a will for the testator, making several bequests of the farmland which had already been transferred to the corporation. Those bequests failed and the residual beneficiaries inherited the land. The specific beneficiaries successfully sued the solicitors for negligence. The Court adopted the reasoning of the House of Lords in White v. Jones [1995] 1 All ER 691 (HL), finding that the law previously contained an anomaly where a disappointed beneficiary had no remedy for a loss arising out of professional negligence and more importantly, giving credence to the “third party beneficiary principle” being now, well-established in most common law jurisdictions.

The Court in Earl v. Wilhelm also concluded in justification for its adopting of the principles enunciated in White v. Jones [1995] 1 All ER 691 (HL), the following:

“Let me emphasise that I can see no injustice in imposing liability upon a negligent solicitor in a case such as the present where, in the absence of a remedy in this form, neither the testator’s estate nor the disappointed beneficiary will have a claim for the loss caused by his negligence. This is the injustice which, in my opinion, the judges of this country should address by recognising that cases such as these call for an appropriate remedy, and that the common law is not so sterile as to be incapable of supplying that remedy when it is required.”

Per Sherstobitoff, J.A.

In the Saskatchewan Law Review (64 SASKLREV 113), on Earl v. Wilhelm, it was stated: “the unanimous judgment of the Saskatchewan Court of Appeal represents the first appellate decision in Canada on this issue.” In adopting the decision in White v. Jones, the Court of Appeal noted that applying Hedley Byrne & Co. Ltd v Heller & Partners Ltd. [1963] 2 All E.R. 575, to the situation between the negligent lawyer and the disappointed beneficiary caused difficulties, particularly with respect to the requirement of reliance.

The Court of Appeal provided two reasons for adopting the rationale of White v. Jones [1995] 1 All ER 691 (HL): Firstly there had evolved an obvious lacuna in the law. Secondly, most judgments and academic materials favoured the result in White v. Jones [1995] 1 All ER 691 (HL). Further, there was no independent analysis of what constitutes reliance on the part of a beneficiary, or assumption of responsibility on the part of a solicitor. Important public policy arguments were not fully analyzed. In short, the Court of Appeal accepted the decision of the House of Lords in White v. Jones [1995] 1 All ER 691 (HL) without further independent analysis.

The Saskatchewan Court of Appeal reasoning for applying White v. Jones [1995] 1 All ER 691 (HL), was subsequently followed by the Alberta Court of Appeal in Graham v. Bonnycastle (2004 Carswell Alta 1098), where the Court concluded that:

“A solicitor could not have a duty to follow a client’s instructions regarding the creation of a new will and simultaneously have a duty to beneficiaries under previous wills whose interests would likely be affected by the new will. When making inquiries regarding a client’s testamentary capacity, a solicitor must be able to act in the client’s best interests free of concerns regarding the interests of others.”

Per McFayden J.A. (Ritter J.A. concurring)

A solicitor does not owe a duty of care to a beneficiary under a previous will in relation to the solicitor’s conduct in assisting a testator in the preparation and execution of a new will.

The Court of Appeal, in Graham v. Bonnycastle stated that liability arises only where the interests of the client and the third party are in harmony and there is no possibility of conflict. There does not exist any general duty to third parties to take care.

In Graham v. Bonnycastle, the Court was requested by the Appellants to extend the White v. Jones [1995] 1 All ER 691 (HL), duty of care owed to intended third party beneficiaries to those beneficiaries under a previous Will. The Court concluded that this would raise a conflict of interest for the solicitor, and so relegated the solicitor’s duty only to those beneficiaries intended under the new Will as clarified in the following excerpt at paragraph 29:

“ The imposition of a duty to beneficiaries under a previous will would create inevitable conflicts of interest. A solicitor cannot have a duty to follow the instructions of his client to prepare a new will and, at the same time, have a duty to beneficiaries under previous wills whose interests are likely to be affected by the new will. The
interests of a beneficiary under a previous will are inevitably in conflict with the interests of the testator who wishes to change the will by revoking or reducing a bequest to that beneficiary.”

Per McFayden, J.A.

Ontario – in the 21st. Century.

1.

In the case of Hall v. Bennett Estate 2003 Carswell Ont 1730, the Court of Appeal considered the situation of a lawyer who failed to follow the instructions of a terminally, temporarily lucid client. After a brief interview with the client on his deathbed, the lawyer opted not to follow instructions by his client to draw up a new will awarding property to the third party plaintiff.

The client died later that day. In its decision, the Court concluded that a lawyer’s first obligation was to enquire into his client’s testamentary capacity before undertaking to make a will.

The Judgment at first instance of the Honourable Mr. Justice Manton of the Ontario Superior Court of Justice at Belleville on September 28, 2001, and reported at [2001] O.J. No. 5092, 40 E.T.R. (2d) 65 initially wreaked havoc amongst Estate practitioners over solicitors’ negligence and liability concerns.

Facts:

Mark Frederick, (“Frederick”) the solicitor who attended on Bruce Bennett (deceased), terminally ill in hospital, in deathbed circumstances, faced with questions of testamentary capacity, was found negligent in failing to prepare a Will, thereby depriving the Plaintiff, a prospective beneficiary, (Peter Douglas Hall) of a property Bennett intended him to have on death.

The essence of Justice Manton’s judgment is reflected in the following passage:

“I find that Bennett had the capacity to make a Will on January 13, 1996, and that the Defendant had enough information to prepare a Will to dispose of at least part of his assets. I also find that the Defendant did not fulfill his duty of care to the Plaintiff to prepare a Will for Bennett. ……. If the Defendant was not sure or had a doubt with respect to Bennett’s capacity, he should then have prepared the Will and signed it in accordance with Section 4 (1) of the Succession Law Reform Act, R.S.O. 1990, c.s.26, and let the court decide on capacity, if necessary to do so at a later time. I therefore, conclude that the Defendant was negligent in failing to prepare a Will thereby depriving the Plaintiff of a property Bennett intended him to have upon his death”.

The Honourable Justices O’CONNOR, WEILER, and CHARRON of the Court of Appeal for Ontario, heard the appeal of Hall v Bennett on March 13, 2003.

The Issues:

In Justice Manton’s judgment, the issues were characterized as follows:

“1. Did Bennett have the capacity to make a Will on January 13, 1996? and
2. Did Frederick fulfill his duty of care to Hall? ”

However, the justices of the Court of Appeal characterized the issues on the question of liability as follows:

“(a) Did Frederick owe a duty of care to Hall as a prospective beneficiary under Bennett’s Will?
(b) If so, what was the standard of care?
(c) Did Frederick’s conduct fall below the standard of care?
(d) If so, did the breach of duty occasion any loss to Hall? ”

On the issue of liability, the Court of Appeal were of the view that: “the relevant question with respect to testamentary capacity, was not whether Bennett in fact was capable of making a Will, but whether a reasonable and prudent solicitor in Frederick’s position could have concluded that he did not.….. This crucial question was never addressed by the trial judge, leading to a mischaracterization of the issues which led him into error.”

The Court of Appeal considered and set out the law on testamentary capacity and thereafter considered the evidence relating to Bennett’s condition and Frederick’s assessment of his prospective client’s testamentary capacity.

Analysis:

Duty of Care:

In so far as the duty of care owed to the client is concerned, the Court of Appeal was of the view as voiced by Justice Charron that:

“the existence of a retainer is fundamental to the question of duty of care. The retainer is usually the very basis of the relationship between a solicitor and a client. In so far as the client is concerned, the absence of a retainer will usually be determinative, and no duty of care will arise in respect of the preparation of a Will. …… In so far as any possible liability to the client in tort is concerned, in the absence of a retainer, there would have to be other circumstance that gave rise to a duty of care. Such circumstances would be unusual… there is no suggestion that anything of the sort happened in this case.”

Liability and Negligence:

Justice Charron’s analysis regarding liability:

“insofar as the potential liability and negligence to a third party is concerned, the existence of a duty of care, will depend on the presence of both forseeability and proximity. In the absence of a retainer, the harm that may be occasioned to the third party beneficiary by the failure to make a Will may still be foreseeable but, absent exceptional circumstances, it is my view that there would be insufficient proximity between the parties to give rise to a duty of care. It is usually the retainer that creates the necessary proximity not only between the solicitor and the client, but between the solicitor and the third party. Frederick’s first obligation was to inquire into Bennett’s testamentary capacity before undertaking to do a Will. It is my view [Charron J.A.] that the evidence in support of Frederick’s opinion that he did not have sufficient instructions to prepare a Will and that Bennett lacked testamentary capacity was overwhelming. Indeed, in the circumstances, it is my view that his duty was to decline the retainer.”

Holding:

Charron J.A. concluded that:

“ on all the circumstances, ….. Frederick fulfilled any obligation that he owed to Bennett and, in the absence of any retainer to prepare a Will, he owed no duty of care to Hall. Justice Charron therefore concluded that as a result the appeal should be disposed of.”

It is worthwhile to review the Court of Appeal decision in detail since Justice Charron goes on further to comment briefly on the question of whether it was even open to the court to found liability on Frederick’s decision to decline the retainer to prepare a Will, whereon Justice Charron comments,

“it is at least questionable whether Frederick, regardless of his opinion on Bennett’s capacity, could be found to be under any legal obligation to accept the retainer to prepare Bennett’s Will.”

Errors of Law:

Justice Charron concluded that the judgment at first instance was based on the trial judge’s,

“mischaracterization of the issues… misapprehension of the test on testamentary capacity and for which both errors of law were subject to review by the Court of Appeal on a standard of correctness.”

Costs:

In allowing the appeal and setting aside the trial judgment, the Court of Appeal awarded the Appellant his costs of the trial to be assessed and his costs of the appeal fixed at $25,000.00.

Comments:

This appeal decision has been long in coming for the wearied Estate Practitioner, yet is a welcome relief to practitioners in reaffirming the duty of care owed in circumstances where lack of testamentary capacity is evident.

The Appellant’s Factum, in my view, correctly and succinctly sets out the apparent dilemma of the practitioner in considering there is no suggestion that anything of the sort happened in this case.”

The Appellant submitted:

“… that the imposition of the duty of care in respect of the preparation of a Will in deathbed circumstance such as those that arose in this case, would place solicitors in an untenable situation… to impose a duty of care in favour of third party prospective beneficiaries in deathbed circumstances where there is a risk that the testator lacks capacity, makes solicitors in those circumstances the guarantors of third party beneficiaries’ inheritances. If the solicitor determines that the testator lacks capacity and declines to draw the Will, the solicitor is exposed to a suit by the third party prospective beneficiaries.

If, on the other hand, the solicitor in the same situation, draws the Will and attends to it’s execution, the solicitor is exposed to a suit by the personal representatives of the Estate for the costs incurred by the Estate in determining that the testator lacked capacity. The result is a no-win situation for solicitors.”

In Summary:

The Court reviewed the indicia a lawyer must assess in addressing the issue as to whether her client has the proper testamentary capacity.

In order to have a sound disposing mind, a testator:

• must understand the nature and effect of a will,
• must recollect the nature and extent of his or her property,
• must understand the extent of what he or she is giving under the will,
• must remember the persons that he or she might be expected to benefit under his or her will, and
• where applicable, must understand the nature of the claims that may be made by persons he or she is excluding from the will.

The Court here found that it is also clear from the jurisprudence that the test to be met to prove testamentary capacity is a high one and the onus falls on the propounder of the Will. The jurisprudence abounds with statements that it is not sufficient simply to show that a testator had the capacity to communicate his or her testamentary wishes. Those wishes must be shown to be the product of a sound and disposing mind as described above.

The Court further concluded that if the testator does not have the requisite testamentary capacity, the preparation of a Will in accordance with expressed wishes at the time may only serve to defeat true intentions. The Court considers, the first and foremost duty of a solicitor is to serve the interests of the client, which may, depending on the client’s wishes, extend to a particular intended third party beneficiary.

A further issue arose in this case insofar as the solicitor had yet to accept a retainer for services. As noted by the Court, this fact went to the issue as to the duty of care owed to the client, and by extension, to any intended third party beneficiary as per White v. Jones [1995]

1 All ER 691 (HL). At paragraph 56-57:

“As a general proposition, I agree with counsel for the appellant that the existence of a retainer is fundamental to the question of duty of care. The retainer is usually the very basis of the relationship between a solicitor and a client. Hence, insofar as the client is concerned, the absence of a retainer will usually be determinative, and no duty of care will arise in respect of the preparation of a will.

It is simply a matter of common sense that there can be no liability in contract for the negligent performance of services that a solicitor never undertook to perform. Insofar as any possible liability to the client in tort is concerned, in the absence of a retainer, there would have to be other circumstances that gave rise to a duty of care. Such circumstances would be unusual.

….In the absence of a retainer, the harm that may be occasioned to the third party beneficiary by the failure to make a will may still be foreseeable but, absent exceptional circumstances, it is my view that there would be insufficient proximity between the parties to give rise to a duty of care. It is usually the retainer that creates the necessary proximity not only between the solicitor and the client but between the solicitor and the third party.”

Caution:

There is no precise time standard for the preparation of Wills after instructions have been given to a client.

2. In Rosenberg Estate v. Black (2001 Carswell Ont 4504), the Court considered the principles enunciated in White v. Jones with regard to preparation of a will as a component of drawing up a complex estate plan. The Court here distinguished the facts from White v. Jones insofar as the facts did not encompass merely a simple will, but rather a number of interdependent documentary tasks as part of the overall estate plan.

In the context of the retainer, the duty owed involved a number of tasks in addition to the drawing up of the will. In considering the solicitors’ administration of all the required, interdependent tasks, the Court determined that they were not negligent in their duty of care owed to a prospective third party beneficiary.

British Columbia:

The case of Smolinski v. Mitchell (1995 CarswellBC 453), is one of the earliest Canadian cases to apply the principles set out in White v. Jones. In Smolinski v. Mitchell, the Court had to consider whether a solicitor was negligent in his duty of expeditiously executing a will where he had determined that his client, the testator, first needed independent legal advice on the matter of an intended gift to the solicitor before the solicitor could go further in drawing up the will. The Court concluded as follows:

“The court will not impose a duty on a solicitor to a third party when that duty conflicts with his duty to his client, the testator. The delay and possibly the non-execution of the will occurred because of the defendant’s advice that the testator obtain independent advice and execute the will before an independent solicitor. Taking those steps with such results cannot be said to be in breach of a duty of care to the plaintiff because not to take such steps would be in breach of the solicitor’s duty to his client, in these circumstances, to ensure that he receive independent advice.”

Per Lord Justice Steyn of the Court of Appeal of England.

Accordingly, in this case, at issue was “ a conflict of duties”. The Court held, that the duty to ensure independent legal advice in the circumstances were sufficient to delay the execution of the will. In sum, the duty owed to a potential beneficiary cannot outweigh that owed to the solicitor’s actual client, the testator.

COMMON PITFALLS IN WILL PREPARATION:
• missed time limits
• managing client expectations
• delay
• poor communication with clients, third parties, and within firm
• inappropriate delegation
• inadequate supervision
• undertakings
• poor organization
• lack of knowledge of the particular practice area and legal principles
• understanding who your client is (elderly, prone to undue influence from family members, etc.)
• understanding that a conflict of interests might arise as between clients (eg. When one solicitor represents both husband and wife)
• gauging urgency from a client who might be severely ill – i.e. time is of the essence
• gauging testator capacity (i.e. dementia, mental illness, drug addiction, alcoholism, etc.).
• lack of agreement/advise/information re a time frame for completing the will at the outset with the client. Thus, if the client dies in the interval before the will is completed, evidence of such an agreement as to time may help to refute claims of negligence.
• As to time, there is no clear standard, and it may depend on the circumstances of a case (health, age, travel, etc.). But for a normal case where extreme age or health are not at issue, ten workings days would seem to be a reasonable upper limit.
• Where there is a plain and substantial risk of the client’s imminent death, anything short of a handwritten rough codicil prepared on the spot for signature may be negligent. It is a question of the solicitor’s judgment based on the client’s age and health
• Where it is the testator who is clearly responsible for the delay, a contemporaneous note to the testator, clearly stating that no further action may be taken unless he is heard from to the contrary, is advisable as evidence that the delay is not the fault of the solicitor
• Again, where there is a pattern of non-cooperation from the client, a solicitor should make notes on file so as to evidence this interaction.
• The scope of services to be performed under the retainer should be clearly delineated and limited if necessary. The duty owed to a beneficiary cannot be wider than that owed to the testator client
• the pitfalls of varying one Will where mutual Wills are involved
• draft clear terms that are capable of being carried out without risking further costs through litigation in attempting to determine vague terms
• when preparing a new will or codicil, examine the terms of the previous will and codicil
• there should be written notes of instructions taken and given.
• in executing the will, make a checklist of all necessary items attendant on validity (signatures, dates, witnesses and their contact info, whether all alterations are duly initialled, etc.)

A further English case which should be given due consideration is the case of Clarke v. Bruce Lance & Co. [1988] 1 ALL E.R. 364 (ENG.C.A.), a solicitor prepared a Will for a client. The solicitor subsequently acted for the testator in an allegedly improvident option transaction, causing a decrease in the assets of the testator. The beneficiaries under the will sued the solicitors for the loss. The Court found that the solicitors owed no duty to the beneficiaries.

The court considered, and distinguished, cases including, again Ross v. Caunters in which it had been held that, when preparing or supervising the execution of a will, a solicitor owes a duty of care to the beneficiaries. The court in this case, refused to extend the scope of the duty of care.

Finally, there is also the case of Stern v. Stern (2003) Carswell Ontario 102 (OSCJ), where His Honour Justice Cullity ruled on a Summary Judgment Motion in which case, beneficiaries of an estate were suing the lawyer for, inter alia, the negligence in failing to protect the testator from depletion of his assets by one of the daughters. The argument before Justice Cullity was whether the solicitor in question owed any duty of care to the plaintiffs, who were the beneficiaries of the testator under the will that was submitted for Probate.