This week the Court of Appeal released their reasons in Holgate v. Sheehan Estate, 2015 ONCA 717, a will interpretation case, the appeal of which focussed primarily on the procedure followed at trial.
Facts
The facts of the case are not unusual. Ms. Sheehan and Mr. Holgate married later in life; they both had children from previous marriages. When Mr. Holgate died, he left behind a will which gave Ms. Sheehan a life interest in two trusts. Upon Ms. Sheehan’s death in 2012, Mr. Holgate’s sons inherited the residue of these trusts in equal shares, as per the terms of Mr. Holgate’s will. Ms. Sheehan left the bulk of her estate to her own children.
Apparently, the trust residue fell short of what the sons anticipated. They commenced this litigation against their father’s estate, Ms. Sheehan’s estate, and Ms. Sheehan’s daughter personally, seeking an accounting, a freezing of funds and general damages of $5,000,000. They also sought a declaration that they were entitled to a resulting or constructive trust interest in both estates.
The sons argued that Ms. Sheehan had violated the terms of the two trusts by accumulating wealth. The terms of both trusts (one of which was over the testator’s Canadian property, and the other the testator’s UK property) provided that the trustee was to hold and keep invested the residue “for the sole use and benefit of my wife,” and gave the trustee the power to draw on the income as much as the trustee considered advisable. The terms of the Canadian trust also allowed the trustee to encroach on the capital for Ms. Sheehan’s benefit; those of the UK trust did not.
The sons argued the trusts’ terms allowed Ms. Sheehan the “use” of the money during her life time, but that by saving money, Ms. Sheehan was not “using” it, and was defeating the purpose of the life interest, which was to preserve capital for the residual beneficiaries (themselves). In the sons’ view, Ms. Sheehan took a life interest in these trusts and converted into an absolute gift to her own children, by depleting the trusts and then leaving her savings to her own family. (Interestingly, Ms. Sheehan was also the trustee of the trust, which no doubt fuelled the sons’ suspicions.)
The procedure at trial
Three days into the trial, the trial judge indicated that the issue of whether the provisions of either trust precluded Ms. Sheehan from accumulating wealth was a critical issue that needed to be determined. He invited the parties either to bring a motion for directions under Rule 75.06(3) or to bring a Rule 21 motion. Counsel agreed to proceed by Rule 21 motion.
The trial judge (at para. 3) had the following to say about the unusual step of hearing a Rule 21 motion mid-trial:
While a motion to determine an issue before trial is generally not considered after a trial has commenced, the purpose of the rule is to dispose of all or part of an action, substantially shorten the trial or reduce costs. Having regard to the general principle set out in Rule 1.04(1) of the Rules of Civil Procedure that directs that the Rules are to be “liberally construed to secure the just, most expeditious and least expensive determination” of a proceeding, I conclude that nothing prevents the court from proceeding with such a motion after a trial has commenced and where the parties consent.
To say that Rule 21 motions are “generally” not considered after commencement of trial might be an understatement. Rule 21 is in fact titled “Rule 21: Determination of an Issue Before Trial,” and the full text reads as follows:
To Any Party on a Question of Law
21.01 (1) A party may move before a judge,
(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; …
…
and the judge may make an order or grant judgment accordingly.
(2) No evidence is admissible on a motion,
(a) under clause (1) (a), except with leave of a judge or on consent of the parties…
The court, of course, has inherent jurisdiction to control its own process. Further, as the trial judge noted, Rule 1.04(1) of the Rules of Civil Procedure directs that the Rules are to be “liberally construed to secure the just, most expeditious and least expensive determination” of a proceeding. (I would argue that a “liberal” construction still does not allow one to remove an entire phrase from the wording of the rule, but nevertheless.)
The practical difficulty with hearing a Rule 21 motion mid-trial is that, as indicated in the rule, no evidence is admissible on the motion. Here, the trial judge had already heard three days of the plaintiffs’ evidence, and none of the defendants’. There is therefore a risk that the trial/motions judge will improperly take into account evidence already presented at trial.
However, in his reasons on the motion, it seems clear the judge is solely focussed on the law and the issue of interpretation, both because Rule 21 so mandates, and because as a matter of will interpretation, his focus is properly on the language of the will itself. At paragraph 15 of his reasons the motions judge quotes Smith v. Chatham Home of the Friendless, 1932 CanLII 12 (SCC) for the principle that in construing a will, “the duty of the court is to ascertain the intention of the testator, which intention is to be collected from the whole Will taken together.” He then refers to Re Burke and the “armchair rule” – that it is only if the testator’s intention cannot be ascertained from the plain meaning of the language used that the court can consider the surrounding circumstances known to the testator when he made his will.
The trial judge examined the language of the will and found clear indication that Ms. Sheehan was able to accumulate and save income from the trust. This conclusion was based not only on the plain meaning of the phrase “for her use and benefit,” as interpreted in the case law, but also on the following addition terms of the Canadian trust that made it clear the testator sought to provide liberally for his wife:
- Ms. Sheehan was given power to encroach on the capital.
- The trustee was told to be “generous” in exercising her discretion, even if that meant considerable or total depletion of the capital of the estate.
- Indeed, there was a specific provision that the trustee could deplete the entire trust if necessary: “I do not feel that my estate need be largely conserved for the future use of my children and step-children”.
- All Ms. Sheehan’s needs and requirements “of every kind” were to be provided for.
- The trustee’s first consideration in exercising her discretion was to be “my wife’s well-being and comfort and that all her needs and requirements of every kind shall be provided for adequately in all respects out of my estate.”
Reasons of the Court of Appeal
The Court of Appeal upheld the trial judge, but nevertheless admonished him for the process undertaken, and issued a word of caution to trial judges that a Rule 21 motion should not be entertained after the trial judge has begun to hear evidence:
When a r. 21 motion is conducted by a trial judge after the evidentiary phase of the trial has commenced, there is a risk that incomplete or untested evidence can inadvertently seep – or be seen to seep – into the consideration of the motion on its merits. While I am satisfied that this did not occur in this case, the danger is nonetheless real. [para. 30]
The preferable procedure in this case, held the Court, would have been for the trial judge to determine the question of law at the conclusion of the trial, based on all the evidence and submissions (or, presumably, to determine the issue in a Rule 21 motion at the outset).
The Court of Appeal was critical of the fact that the Rule 21 motion, decision, and appeal had held up the trial of the remaining issues, namely the accounting.
Analysis
The Court of Appeal continues to exhort trial judges to find proportionate and cost effective routes to justice, particularly since the Supreme Court’s decision in Hryniak v. Mauldin, 2014 SCC 7. At the same time, the Court is critical when a trial judge’s attempt to streamline the process instead results in potential “tainting” of the process or unforeseen additional cost, as here. (For a similar criticism of a motions judge’s decision to grant partial summary judgement, see Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450.)
Hryniak tells judges that the process of adjudication must be fair and just, but that they must avoid unnecessary expense and delay. This can be a difficult balance to achieve, especially when the parties are not seeking the same balance. Often, the problems with a chosen procedure are only apparent after the fact, when the motion does not have the anticipated effect.
It seems reasonable for the trial judge here to think that the will interpretation issue would be dispositive of the entire matter. If Ms. Sheehan had nearly unlimited power to encroach on capital, the only real remaining issue would be the sons’ claim for an accounting, but this seems a fruitless and expensive procedure to pursue after it has been determined that the language of the will “came as close as possible” to conferring an absolute gift on Ms. Sheehan of the entire residue (reasons of the trial judge, 2015 ONSC 259, at para. 51).
As I’ve already indicated, I do not see how Rule 1.04’s direction to consider a “liberal” interpretation of a rule can allow a court to ignore the part of Rule 21 that directs it is to be used prior to commencement of trial. At the same time, one wonders how the result would have been different, if at all, had the parties opted to pursue the more flexible and discretionary route of a motion for directions, which was the other option offered by the trial judge. Surely it was open to the trial judge to convert the trial into a trial of an issue, or to otherwise focus on the legal issue of the will’s interpretation, without specifically pursuing a Rule 21 motion.
The lessons
The simplest lesson to be learned here, by both counsel and trial judges, is that Rule 21 motions are to be brought only before trial. Once evidence has been presented, this is no longer an appropriate route.
However, this decision also serves as a warning to counsel not to participate or otherwise consent to a procedural route if you think it may prejudice your client’s rights. The Court of Appeal did not look favorably on the appellants’ decision to participate in Rule 21 motion without complaint, only to launch an appeal when they did not obtain the desired result:
The appellants consented to the process without objection about the timing. They also participated in the drafting of the question to be answered. Insofar as the result was not what they hoped for, they cannot now claim lack of jurisdiction. [para. 26]
This can be a delicate situation for counsel. If a judge tells counsel, as in this case, that he wants them to follow a specific procedure, such as bringing a Rule 21 motion, then it may not be in counsel’s best interests to refuse. That said, it is advisable to carefully consider your potential concerns at the outset, and to get them on the record.
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Written by: WEL Partners
Posted on: November 10, 2015
Categories: Commentary
This week the Court of Appeal released their reasons in Holgate v. Sheehan Estate, 2015 ONCA 717, a will interpretation case, the appeal of which focussed primarily on the procedure followed at trial.
Facts
The facts of the case are not unusual. Ms. Sheehan and Mr. Holgate married later in life; they both had children from previous marriages. When Mr. Holgate died, he left behind a will which gave Ms. Sheehan a life interest in two trusts. Upon Ms. Sheehan’s death in 2012, Mr. Holgate’s sons inherited the residue of these trusts in equal shares, as per the terms of Mr. Holgate’s will. Ms. Sheehan left the bulk of her estate to her own children.
Apparently, the trust residue fell short of what the sons anticipated. They commenced this litigation against their father’s estate, Ms. Sheehan’s estate, and Ms. Sheehan’s daughter personally, seeking an accounting, a freezing of funds and general damages of $5,000,000. They also sought a declaration that they were entitled to a resulting or constructive trust interest in both estates.
The sons argued that Ms. Sheehan had violated the terms of the two trusts by accumulating wealth. The terms of both trusts (one of which was over the testator’s Canadian property, and the other the testator’s UK property) provided that the trustee was to hold and keep invested the residue “for the sole use and benefit of my wife,” and gave the trustee the power to draw on the income as much as the trustee considered advisable. The terms of the Canadian trust also allowed the trustee to encroach on the capital for Ms. Sheehan’s benefit; those of the UK trust did not.
The sons argued the trusts’ terms allowed Ms. Sheehan the “use” of the money during her life time, but that by saving money, Ms. Sheehan was not “using” it, and was defeating the purpose of the life interest, which was to preserve capital for the residual beneficiaries (themselves). In the sons’ view, Ms. Sheehan took a life interest in these trusts and converted into an absolute gift to her own children, by depleting the trusts and then leaving her savings to her own family. (Interestingly, Ms. Sheehan was also the trustee of the trust, which no doubt fuelled the sons’ suspicions.)
The procedure at trial
Three days into the trial, the trial judge indicated that the issue of whether the provisions of either trust precluded Ms. Sheehan from accumulating wealth was a critical issue that needed to be determined. He invited the parties either to bring a motion for directions under Rule 75.06(3) or to bring a Rule 21 motion. Counsel agreed to proceed by Rule 21 motion.
The trial judge (at para. 3) had the following to say about the unusual step of hearing a Rule 21 motion mid-trial:
While a motion to determine an issue before trial is generally not considered after a trial has commenced, the purpose of the rule is to dispose of all or part of an action, substantially shorten the trial or reduce costs. Having regard to the general principle set out in Rule 1.04(1) of the Rules of Civil Procedure that directs that the Rules are to be “liberally construed to secure the just, most expeditious and least expensive determination” of a proceeding, I conclude that nothing prevents the court from proceeding with such a motion after a trial has commenced and where the parties consent.
To say that Rule 21 motions are “generally” not considered after commencement of trial might be an understatement. Rule 21 is in fact titled “Rule 21: Determination of an Issue Before Trial,” and the full text reads as follows:
To Any Party on a Question of Law
21.01 (1) A party may move before a judge,
(a) for the determination, before trial, of a question of law raised by a pleading in an action where the determination of the question may dispose of all or part of the action, substantially shorten the trial or result in a substantial saving of costs; …
…
and the judge may make an order or grant judgment accordingly.
(2) No evidence is admissible on a motion,
(a) under clause (1) (a), except with leave of a judge or on consent of the parties…
The court, of course, has inherent jurisdiction to control its own process. Further, as the trial judge noted, Rule 1.04(1) of the Rules of Civil Procedure directs that the Rules are to be “liberally construed to secure the just, most expeditious and least expensive determination” of a proceeding. (I would argue that a “liberal” construction still does not allow one to remove an entire phrase from the wording of the rule, but nevertheless.)
The practical difficulty with hearing a Rule 21 motion mid-trial is that, as indicated in the rule, no evidence is admissible on the motion. Here, the trial judge had already heard three days of the plaintiffs’ evidence, and none of the defendants’. There is therefore a risk that the trial/motions judge will improperly take into account evidence already presented at trial.
However, in his reasons on the motion, it seems clear the judge is solely focussed on the law and the issue of interpretation, both because Rule 21 so mandates, and because as a matter of will interpretation, his focus is properly on the language of the will itself. At paragraph 15 of his reasons the motions judge quotes Smith v. Chatham Home of the Friendless, 1932 CanLII 12 (SCC) for the principle that in construing a will, “the duty of the court is to ascertain the intention of the testator, which intention is to be collected from the whole Will taken together.” He then refers to Re Burke and the “armchair rule” – that it is only if the testator’s intention cannot be ascertained from the plain meaning of the language used that the court can consider the surrounding circumstances known to the testator when he made his will.
The trial judge examined the language of the will and found clear indication that Ms. Sheehan was able to accumulate and save income from the trust. This conclusion was based not only on the plain meaning of the phrase “for her use and benefit,” as interpreted in the case law, but also on the following addition terms of the Canadian trust that made it clear the testator sought to provide liberally for his wife:
Reasons of the Court of Appeal
The Court of Appeal upheld the trial judge, but nevertheless admonished him for the process undertaken, and issued a word of caution to trial judges that a Rule 21 motion should not be entertained after the trial judge has begun to hear evidence:
When a r. 21 motion is conducted by a trial judge after the evidentiary phase of the trial has commenced, there is a risk that incomplete or untested evidence can inadvertently seep – or be seen to seep – into the consideration of the motion on its merits. While I am satisfied that this did not occur in this case, the danger is nonetheless real. [para. 30]
The preferable procedure in this case, held the Court, would have been for the trial judge to determine the question of law at the conclusion of the trial, based on all the evidence and submissions (or, presumably, to determine the issue in a Rule 21 motion at the outset).
The Court of Appeal was critical of the fact that the Rule 21 motion, decision, and appeal had held up the trial of the remaining issues, namely the accounting.
Analysis
The Court of Appeal continues to exhort trial judges to find proportionate and cost effective routes to justice, particularly since the Supreme Court’s decision in Hryniak v. Mauldin, 2014 SCC 7. At the same time, the Court is critical when a trial judge’s attempt to streamline the process instead results in potential “tainting” of the process or unforeseen additional cost, as here. (For a similar criticism of a motions judge’s decision to grant partial summary judgement, see Baywood Homes Partnership v. Haditaghi, 2014 ONCA 450.)
Hryniak tells judges that the process of adjudication must be fair and just, but that they must avoid unnecessary expense and delay. This can be a difficult balance to achieve, especially when the parties are not seeking the same balance. Often, the problems with a chosen procedure are only apparent after the fact, when the motion does not have the anticipated effect.
It seems reasonable for the trial judge here to think that the will interpretation issue would be dispositive of the entire matter. If Ms. Sheehan had nearly unlimited power to encroach on capital, the only real remaining issue would be the sons’ claim for an accounting, but this seems a fruitless and expensive procedure to pursue after it has been determined that the language of the will “came as close as possible” to conferring an absolute gift on Ms. Sheehan of the entire residue (reasons of the trial judge, 2015 ONSC 259, at para. 51).
As I’ve already indicated, I do not see how Rule 1.04’s direction to consider a “liberal” interpretation of a rule can allow a court to ignore the part of Rule 21 that directs it is to be used prior to commencement of trial. At the same time, one wonders how the result would have been different, if at all, had the parties opted to pursue the more flexible and discretionary route of a motion for directions, which was the other option offered by the trial judge. Surely it was open to the trial judge to convert the trial into a trial of an issue, or to otherwise focus on the legal issue of the will’s interpretation, without specifically pursuing a Rule 21 motion.
The lessons
The simplest lesson to be learned here, by both counsel and trial judges, is that Rule 21 motions are to be brought only before trial. Once evidence has been presented, this is no longer an appropriate route.
However, this decision also serves as a warning to counsel not to participate or otherwise consent to a procedural route if you think it may prejudice your client’s rights. The Court of Appeal did not look favorably on the appellants’ decision to participate in Rule 21 motion without complaint, only to launch an appeal when they did not obtain the desired result:
The appellants consented to the process without objection about the timing. They also participated in the drafting of the question to be answered. Insofar as the result was not what they hoped for, they cannot now claim lack of jurisdiction. [para. 26]
This can be a delicate situation for counsel. If a judge tells counsel, as in this case, that he wants them to follow a specific procedure, such as bringing a Rule 21 motion, then it may not be in counsel’s best interests to refuse. That said, it is advisable to carefully consider your potential concerns at the outset, and to get them on the record.
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