Morrison Estate (Re), 2015 ABQB 769

Court of Queen ’ s Bench of Alberta Citation: Morrison Estate (Re), 2015 ABQB 769 Date: 20151208 Docket: ES03 142785 Registry: Edmonton Court File Number ES03 142785 Court Court of Queen’s Bench of Alberta (Surrogate Matter) Judicial Centre Edmonton Estate Name John Robert Morrison Applicant John Cameron Morrison Respondent Douglas Roy Morrison Heather Maureen Fulmer _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice Robert A.

Graesser _______________________________________________________ Introduction [ 1 ] This is an application for advice and direction brought by one of the beneficiaries of the Estate of John Robert Morrison. [ 2 ] The application seeks a direction that a certain Registered Income Fund (“RRIF”) with the Independent Order of Foresters (“IOF”) is an asset of the estate and not the property of the beneficiary named in it; that the Executors give the applicant authorization to obtain the deceased’s banking records; or alternatively, an order directing the trial of the RRIF ownership issue. [ 3 ] The Estate itself did not participate in this application.

While Cameron Morrison necessarily brought that application against

the Estate, Douglas Morrison defended his personal position and the Estate essentially took no

part in the dispute. Background [4] Mr. Morrison died on November 10, 2011. He was predeceased by his wife, Lily Maureen Morrison on June 19, 2002. He issurvived by four children, Robert, Douglas, Cameron and Heather. [5] His will was signed on March 25, 2002. It was prepared by a lawyer (not associated with any of the firms involved in thisapplication).

He appointed his wife as his executor, but in her absence appointed Douglas and Heather as joint executors. [6] His will left everything to his wife, and in the event of her predecease, everything was to be divided equally among thechildren with the exception of $11,000 which was to be deducted from Robert’s share (because of a loan given to Robert some time ago).That $11,000 was to be divided equally among Mr. Morrison’s surviving grandchildren. [7] Mr.

Morrison’s house had been sold shortly before his death, and he gave each of the four children $25,000 from the saleproceeds. [8] When Douglas and Heather began the process of calling in Mr. Morrison’s estate, they learned that Douglas had beendesignated as the sole beneficiary of the IOF RRIF. The RRIF was the largest asset Mr.

Morrison had other than the house, which hadbeen sold before his death. [9] The beneficiary designation was signed on July 30, 2002, which was shortly after the will had been signed and after Mr.Morrison’s wife’s death. [10] Because of the income tax treatment of RRIFs, the proceeds of the RRIF went to Douglas, while the tax burden resulting fromMr. Morrison’s death fell on his estate. [11] The result of this is that there is insufficient money in Mr. Morrison’s estate to satisfy the bequests to the grandchildren.

Application [12] Cameron brought this application seeking a declaration that Douglas holds the RRIF proceeds in trust for the estate, on thebasis that there was no consideration for him to have been designated as a beneficiary and that Douglas has failed to prove that his fatherintended to gift him the RRIF to the exclusion of his siblings. [13] Cameron cites Kerr v Baranow, 2011 SCC 10 with respect to his arguments concerning the gratutitous nature of thebeneficiary designation, and Pecore v Pecore, 2007 SCC 17 , [2007] 1 SCR 795, regarding the effect of joint bank accounts. [14] He also references McConomy-Wood v McConomy, (ONSC) which considers Pecore in the context ofRRIFs, and Neufeld v Neufeld, 2004 BCSC 25 relating to resulting trusts and annuity payments.

Also cited is Dreger v Dreger, (MB CA), [1994] 10 WWR 293 (MBCA) which considers resulting trusts in the context of beneficiary designations underinsurance policies. [15] Cameron’s argument is straightforward. There is no clear indication that Mr. Morrison intended a gift to Douglas so thepresumption of resulting trust should be applied. [16] Cameron notes that Mr.

Morrison’s intent was obviously expressed through his will in 2002 and through the distribution ofsale proceeds of his home equally among his children in 2011: his estate should be divided equally among his children. [17] Douglas responds, citing Nelson v Little Estate, 2005 SKCA 120 and Pecore. Douglas argues that the Saskatchewan Court ofAppeal decision on Nelson v Little Estate should be applied in Alberta. That case holds that simple lack of consideration does not avoidthe effectiveness of the designation of a beneficiary of a RRIF and as such the principles surrounding resulting trusts should not beapplied.

Analysis [18] The results of this application could have significant impact on the investment and brokerage industry.

There are undoubtedlymillions of RRSPs, RRIFs and life insurance policies that have designated beneficiaries instead of the proceeds going to the owner’sestate. [19] I suspect that many owners, as well as many investment advisors and brokers, are unaware of the potential consequences ofthe Supreme Court’s decision in Pecore as it relates to beneficiary designations, as well as the income tax consequences of an RRIF orRRSP beneficiary being someone other than the owner’s spouse. [20] There has always been the potential issue of a resulting trust being imposed in the event of a gratuitous and unexplainedbeneficiary designation.

Until Pecore, the presumption of advancement in favour of children generally prevented the potentialapplication of resulting trusts in most family situations. [21] Since the decision in Pecore, however, there is the potential that any non-spousal designated beneficiary (whether under anRRSP, RRIF or life insurance policy) will be deemed to hold proceeds in trust for the donor’s estate unless he or she can prove that a gift

was intended. [22] It is frequently said that hard cases make bad law, and there is certainly the potential for a hard case such as this to impactmany other plan or policy owners and their designated beneficiaries. [23] There is little law on the subject, and almost all of it predates Pecore. Counsel advised me that they have searched for relevantlaw and have put all they can find in front of me.

My own research, which I hasten to add has not been exhaustive, has turned up nothingfurther of any assistance. [24] There are three appellate level cases: Nelson v Little Estate from Saskatchewan and Dreger v Dreger and Northern TrustCompany v Coldwell et al, (1914), (MB CA), 25 Man R 120 (MBCA) from Manitoba. [25] From these cases, if Nelson v Little Estate is applied, as argued by Douglas, the presumption of a resulting trust because ofthe gratuitous beneficiary designation would not apply and Cameron would bear the onus of proving that Mr. Morrison did not intend togift Douglas the RRIF.

If Dreger v Dreger, the obiter comments in McConomy-Wood v McConomy and Neufeld v Neufeld are applied,the presumption of a resulting trust under Pecore would apply here, and Douglas would bear the onus of proving that his father intendeda gift to him. [26] Douglas argues that the case does not have to be determined on the basis of onus, as the evidence put forward by Douglassupports on a balance of probabilities that Mr.

Morrison intended to give the RRIF to Douglas. [27] His affidavit in opposition to Cameron’s affidavit sets out that he did not know that his father had designated him asbeneficiary of this RRIF. [28] He deposed that his father “treated all children fairly and not equally”. His affidavit goes on to describe problems his parentshad with Cameron and criticisms of Cameron. He takes no issue with his parents’ relationship with his other siblings. [29] He points out that he did more for his father after his mother became ill and “certainly after her passing”.

He described how hehelped his father maintain his home, taking him to and from medical appointments and helping him hire housekeepers. That evidence isnot contradicted. [30] Douglas describes events in 2011 and his and his father’s apparent unhappiness that Cameron received a full commission onthe sale of the home. [31] Little of Douglas’s evidence has any relevance at all to the issue of whether his father intended to give him the RRIF. Thebeneficiary designation took place six weeks after Mrs.

Morrison’s death and long before Douglas appears to have taken on adisproportionate share of his father’s care, although he says that he was of particular assistance to his father in the time immediatelyfollowing his mother’s death. [32] Little in his affidavit explains or suggests why his father would want to favour him over Robert and Heather. He focuses onhis parents’ relationship with Cameron and appears to be suggesting that it is clear why his parents would want to favour him overCameron. That misses the point, however.

The fact that Heather and Robert do not appear to be supporting Cameron in this challengedoes not mean that the parents’ attitudes towards them are irrelevant. They too were excluded by the beneficiary designation to Douglas.Thus Douglas’s attack on Cameron is of no assistance in determining the issue here. [33] The beneficiary designation form was witnessed on July 30, 2002. I have been provided with no information from or aboutthe witness or the circumstances surrounding the document.

It appears have been part of a transfer of funds from an existing investmentcertificate and is related to the administration of Mrs. Morrison’s estate. The form contains in the “remarks” section: “Estate settlement,death cert already on file.” From Douglas’s cross-examination, it appears that the RRIF was owned by Mrs. Morrison, and was inheritedby Mr. Morrison from her on her death on June 19, 2002. [34] At the time of Mr. Morrison’s death, the RRIF was worth $72,683.25. It went to Douglas in accordance with the designationof beneficiary completed by Mr. Morrison in July, 2002.

The Estate consisted of approximately $77,000 in various bank accounts andinsurance proceeds. $28,780.19 was paid to the Receiver General of Canada on account of taxes. Those taxes resulted mainly from thedeemed disposition of the RRIF on Mr. Morrison’s death. [35] From a cursory review of Mr. Morrison’s terminal tax return, it would appear that little or no income tax would have beenpaid by the Estate but for the tax on the RRIF. [36] After payment of funeral expenses and debts, $21,733.64 remains in trust. That amount is insufficient to create the $11,000fund Mr.

Morrison intended to have divided among his 11 grandchildren, as that amount is to come from Robert’s one quarter share inthe residue because of a debt owed by Robert to his parents. There needs to be a minimum of $44,000 to be divided among the childrenso that the grandchildren’s fund is fully funded.. [37] I note that if the Estate had not been required to pay the taxes on the RRIF and if that amount were added back to the Estate,the estate would have been sufficient to pay the bequests to the grandchildren in full. [38] There is no information to suggest that Mr.

Morrison was ever of unsound mind and there are no suggestions of any undueinfluence having been exerted on him. [39] It seems manifestly unfair for this estate to be unable to pay modest bequests to the testator’s grandchildren because he hadgiven most of his estate away to one of his four children and the tax consequences of that transfer denuded the estate.

Applicability of Pecore [ 40 ] It is certainly tempting to overturn the transaction and direct that Douglas holds the RRIF proceeds in trust for the estate. He would still benefit from one quarter of that amount rather than the whole thing. That would be the consequence of applying Pecore to the gift here, subject to him being able to prove that his father intended to gift him the RRIF. [ 41 ] Beneficiary designations are part of many of not all RRSP and RRIF plans. It is not mandatory for someone to have a designated beneficiary.

There are undoubtedly a number of considerations relevant to deciding whether to have a beneficiary designated or whether to have the asset go to the owner’s estate. There are income tax consequences relating to this issue as well. [ 42 ] Beneficiary designations should be made with full knowledge as to the benefits and detriments and as to the consequences of making a designation or not making a designation. There is no evidence here as to why Mr. Morrison did what he did.

In the absence of evidence to the contrary, it should be presumed that he knew what he was doing. [ 43 ] The Wills and Succession Act , SA 2010, c W-12.2 , expressly recognizes and deals with beneficiary designations in

section 71: Under Plans Designation of person to receive a benefit under a plan 71(1) In this section, (a) “annuity” includes an amount payable on a periodic basis, whether payable at intervals longer or shorter than a year; (b) “beneficiary”, except in subsection (17), means a person designated under subsection (2); (c) “participant” means an individual who is entitled to designate a person to receive a benefit payable under a plan on the individual’s death; (d) “plan” means (

i) a pension, retirement, welfare or profit-sharing fund, trust, scheme, contract or arrangement for the benefit of employees, former employees, agents or former agents of an employer or their dependants or beneficiaries, whether created by or pursuant to a statute or otherwise, (ii) a fund, trust, scheme, contract or arrangement for the payment of an annuity for life or for a fixed or variable term or under which money is paid for the purpose of providing, on the happening of a specified event, for the purchase of, or the payment of, an annuity for life or for a fixed or variable term, whether created before or after this

section comes into force, (iii) a registered retirement savings plan or registered retirement income fund as defined in the Income Tax Act (Canada), (iv) a TFSA within the meaning of

section 146.2 of the Income Tax Act (Canada), or (

v) a fund, trust, scheme, contract or arrangement prescribed in the regulations.

(2) A participant may designate a person to receive a benefit payable under a plan on the participant’s death (

a) by an instrument signed by the participant or signed by another individual on the participant’s behalf, at the participant’s direction and in the participant’s presence, or (

b) by will, and may revoke the designation by one of those methods.

(3) A designation under subsection (2) that relates to a plan referred to in subsection (1)(d)(iii) has effect whether it is made, or the participant making it dies, before or after subsection (1)(d)(iii) comes into force. (4) Subsection (3) does not apply if its application would (

a) alter the result in any proceedings in which a judgment or final order was granted before February 1, 2012, regardless of whether the judgment or order is appealable, or (

b) impose on a person the obligation to repay or account for proceeds of a plan referred to in subsection (1)(d)(iii) received or paid out by that person before February 1, 2012.

(5) A designation in a will is effective only if it refers to the plan either generally or specifically.

(6) A revocation in a will of a designation made by an instrument is effective to revoke the designation made by the instrument only if the revocation refers to the plan either generally or specifically.

(7) Despite

Part 2, a later designation revokes an earlier designation to the extent of any inconsistency.

(8) Revocation of a will is effective to revoke a designation in the will.

(9) A designation or revocation contained in an instrument purporting to be a will is not invalid by reason only of the fact that the instrument is invalid as a will.

(10) A designation in an instrument that purports to be but is not a valid will is revoked by an event that would have the effect ofrevoking the instrument if it had been a valid will.

(11) Revocation of a designation does not revive an earlier designation.

(12) Despite

Part 2, a designation or revocation in a will is effective from the time when the will is signed.

(13) After the death of a participant who has made a designation that is in effect at the time of the participant’s death, the beneficiarymay enforce payment of the benefit payable under the plan to the beneficiary, but the person against whom the payment is sought to beenforced may set up any defence that the person could have set up against the participant or the participant’s personal representative.

(14) If this

section is inconsistent with a plan, this

section applies unless (

a) the inconsistency relates to a designation made or proposed to be made after the making of a benefit payment, and (

b) the benefit payment so made would have been different if the designation had been made before the benefit payment was made,in which case the plan applies.

(15) If a plan requires or permits a designation or revocation of it to be filed with a specified person or body and any benefit is paidunder the plan to a beneficiary on the basis of the latest designation so filed, the payment is deemed to be validly made, as against theperson required by the plan to make the payment, despite that (

a) a later designation or revocation of a designation is filed under the plan after the payment was made, or (

b) the person or body is notified, after the payment was made, of an event that had the effect of revoking a designation so filed.

(16) If a plan requires or permits a designation or a revocation of it to be filed with a specified person or body, then, in the case of adesignation or revocation made by a will, the filing of a copy of the will with that person or body, authenticated in the manner, if any,required by the plan, is sufficient compliance with the requirement under the plan.

(17) This

section does not apply to a contract or to a designation of a beneficiary to which the Insurance Act applies.

(18) The Crown is bound by this section.

(19) The Lieutenant Governor in Council may make regulations prescribing funds, trusts, schemes, contracts and arrangements asplans for the purposes of this section. 2010 cW-12.2 s71;2014 c13 s13 [44] Like designations of beneficiaries under insurance policies, there is a benefit to the owner of an RRSP or RRIF to be able todesignate a beneficiary rather than have the plan go to his or her estate.

That may be tax roll-over provisions relating to spousalbeneficiaries and there may be an element of creditor-proofing if there is designated beneficiary rather than having the plan go to theowner’s estate. [45] I can frankly think of no sound policy reason why beneficiary designations under RRSPs, RRIFs and insurance policiesshould not be treated in a similar fashion to beneficiary designations under a will. None of these “gifts” take effect until the death of theowner of the plan or policy.

With the exception of irrevocable beneficiaries under some life insurance policies, the owner is free tochange beneficiaries during his or her lifetime, so long as he or she is of sound mind. [46] I recognize the historical concerns surrounding the formalities required of testamentary dispositions.

The intent of formalitywas undoubtedly to attempt to add a level of assurance that the donor intended the consequences of his actions and was in fact the authorof the testamentary disposition. [47] While such designations have been treated as inter vivos transactions and not testamentary transactions, they are certainlymuch closer to testamentary transactions than to inter vivos gifts such as transferring bank accounts, investment accounts or property intojoint names. Such transactions cannot be unilaterally undone, unlike beneficiary designations.

I note that RRSP beneficiary designationsappear to be “testamentary dispositions” in Ontario as a result of Ontario’s Succession Law Reform Act, RSO 1990, c S.26 (see AmherstCrane Rentals v Perring, (ONCA)). [48] It may well be arguable that Alberta’s Wills and Succession Act accomplishes the same thing in s 71. I need not make thatfinding because of my ultimate conclusion. [49] Beneficiary designations are unlike joint ownership of bank accounts or investment accounts, which confer a present propertyinterest. Beneficiary designations do not.

Beneficiary designations are essentially powers of appointment conferred on the owner by theterms of the contract. [50] If there was some expectation that requiring formalities would ensure that the testator obtained appropriate advice beforecompleting a will or codicil, that is entirely undone by the law respecting holograph wills. [51] I ask rhetorically, if a few handwritten notes on the back of a cigarette package signed by the testator is a valid testamentaryinstrument and not subject to the law relating to resulting trusts, why should a beneficiary designation signed and witnessed (presumablyby a knowledgeable investment advisor) be treated differently? [52] This may be one of the unintended consequences of Pecore v Pecore and the abolition of the presumption of advancement infavour of able, adult children.

I suspect, without knowing, that the vast majority of beneficiary designations under RRSPs, RRIFs and life

insurance policies are spouses or adult interdependent partners or children. [53] In my view, Pecore and Kerr v Baranow should not be applied to beneficiary designations for RRIFs (and by inferenceRRSPs and life insurance policies).

To apply Kerr v Baranow and Pecore v Pecore to RRSP, RRIF or life insurance beneficiarydesignations would, in my view, create untold uncertainties in what are likely hundreds of thousands if not millions of beneficiarydesignations in Canada. [54] That approach is consistent with the brief comment in Nelson v Little Estate that “simple lack of consideration would notavoid the designation of a beneficiary of the RRIF and, accordingly, the presumption of resulting trust would not apply” (at para 19). [55] That case was decided before Pecore, but it appears to have recognized (somewhat tacitly as there was no discussion on thepoint) that beneficiary designations are different from gratuitous inter vivos transfers that carry with them the presumption of resultingtrust. [56] However, the Manitoba Court of Appeal came to a different conclusion in Dreger v Dreger.

There, the court was dealing witha designation of beneficiary under insurance policies and RRSPs. The insured had designated her son (and executor) as beneficiary underseveral insurance policies and her RRSP. Sometime after, she had another child, and in her will, she made provision for that child.Instructions to her solicitor for the preparation of that will and a subsequent codicil indicated that she believed that the insurance policiesand the RRSP would form part of her estate.

The son testified that he had no previous knowledge of having been designated asbeneficiary under the insurance policies or RRSP, and that he had no discussion with his mother about being a trustee. [57] Much of the argument at trial centred on whether it was necessary for the beneficiary to consent to being a trustee. [58] At the Court of Appeal level, the decision focused on resulting trusts, and the competition between the presumption ofadvancement in favour of a child, and the presumption of resulting trust in the context of gratuitous transfers. [59] The Court of Appeal relied on In re A Policy No. 6402 of the Scottish Equitable Life Assurance Society, [1902] 1 Ch.

D.282, a case where the named beneficiary under an insurance policy had been the insured’s sister in law at the time the policy was takenout. The insured’s wife died shortly after, and two years later the insured and the sister in law (beneficiary) married. She died in 1870,but the designation was unchanged. The insured continued to pay premiums for the next 30 years.

The Court held in those circumstancesthat the long-dead beneficiary held the insurance proceeds in trust for the insured’s estate. [60] The Court of Appeal referenced the English trial decision at para 25: It comes really to this: a purchase by one in the name of another with no other circumstances at all proved. Therefore, in my opinion,although the legal personal representative of the lady in this case would be the person entitled to receive the money at law and to give areceipt for it, in equity the money belongs to the legal personal representatives of Mr.

Sanderson, who took out the policy. [61] Dreger also referenced Northern Trust Company v. Coldwell et al, (1914), (MB CA), 25 Man. R. 120(MBCA), which referred to the Scottish Equitable Life case as “authoritative”. [62] Little Estate makes no reference to any of these cases. [63] The only post-Pecore decision on point, McConomy-Wood v McConomy. While recognizing the resulting trust issue in thecontext of a RRIF beneficiary designation, Herold J concluded that he did not need to “resort” to the presumption as there was adequateevidence of the deceased’s intentions (at para 55).

Thus that case is of no assistance here. [64] The absence of any discussion on the applicability of principles of resulting trust to beneficiary designations makes thestatement at para 19 of Nelson v Little Estate limited assistance. The Manitoba Court of Appeal has on two occasions considered thatScottish Equitable Life should be followed. [65] Pecore has, of course, changed the law since Dreger v Dreger, such as there are no competing presumptions here.

There isonly the presumption of resulting trust. [66] While I am sorely tempted to hold that designations of beneficiary forms for RRIFs (and inferentially RRSPs and lifeinsurance) should be treated differently from other forms of gifts (such as joint ownership of property, joint bank accounts and jointinvestment accounts where an actual present ownership interest is transferred to the done), I am mindful of stare decisis and am loatheon the facts of this case to reject what appears to be settled law in England through Scottish Equitable Life and the Manitoba Court ofAppeal in Dreger and Northern Trust. [67] When I review the evidence before me, I consider that I am able to resolve the matter without resort to presumptions, and theissue of beneficiary designations and the presumption of resulting trusts is one that should be left to a case where it must be decided as aresult of an evidentiary vacuum on the issue of the donor’s intent. [68] Thus, the question for me is, has Douglas proven on a balance of probabilities that his father intended to give Douglas theRRIF?

If not, the RRIF is to be held in trust for Mr. Morrison’s estate. Analysis of Evidence [69] The evidence here is somewhat conflicting. By all outward appearances, Mr. Morrison treated his children equally in thecontext of gifts and in his will. Even if I accepted Douglas’s evidence as to some estrangement between Cameron and his parents, thatdid not extend to any differential treatment of the other children, at least in Mr. Morrison’s gifts and his will.

[ 70 ] The RRIF designation appears to be an aberration. It is unexplained and came as a surprise to all of the children, including Douglas. [ 71 ] Nevertheless, the evidence suggests that of all of the children, Douglas was the closest to his father. There would be no reason to have a designated beneficiary for the RRIF if Mr. Morrison intended it to go to his children equally.

If it had gone to his estate, that would be the result: equal division among his children. [ 72 ] If he had intended for some reason to designate his executors rather than specify his estate (which on the evidence here does not make much sense) Mr. Morrison would have known to designate Douglas and Heather, as they were the joint executors of his will, and he had only made his will a few months earlier. [ 73 ] On the evidence before me, I find that Douglas has established on a balance of probabilities that his father intended to give him the RRIF.

I make that finding on the basis of several factors: 1) The close relationship between Douglas and his father that existed at the time of the beneficiary designation; 2) The assistance rendered to Mr. Morrison by Douglas in the time surrounding and immediately following Mrs. Morrison’s death; and 3) The close temporal connection between the making of the will appointing Douglas and Heather joint alternate executors and the signing of the beneficiary designation in favour of Douglas only. [ 74 ] I recognize that this is a very thin finding. However, the balance of probabilities tips at 50.01%.

In this case, there is slightly more evidence of an intention to favour Douglas than to have Douglas hold the RRIF as a resulting trust for the estate or his siblings. [ 75 ] Thus, Douglas is entitled to the RRIF. Income Tax Issue [ 76 ] However, the matter does not end there. There is the question of the tax paid on the RRIF. It is manifestly unfair that the Estate bear the burden of the tax while Douglas enjoys the benefit of the RRIF. [ 77 ] It is impossible to go into Mr. Morrison’s brain and determine his understanding of the implications to his estate of designating a non-spouse as beneficiary of the RRIF.

That results in a tax liability to the estate, leaving the estate to pay the tax on the RRIF from its other assets. In this case, the tax on the RRIF has denuded the Estate to such an extent that it is unable to pay all of the specific bequests. [ 78 ] The only evidence I have of any understanding on Mr. Morrison’s

part is in relation to the sale of his home, shortly before his death. None of the children suggest that he was in any way confused or lacking capacity at the time of the sale or the distribution of $25,000 to each of them. [ 79 ] In the absence of the tax on the RRIF being paid out of his estate, there was just enough left in his estate (after payment of debts and expenses) to create the $11,000 specified to be divided among his grandchildren. [ 80 ] It would seem highly unlikely that Mr.

Morrison, by giving each of his children $25,000, intended to leave insufficient funds in his estate to satisfy the bequests to his grandchildren. That suggests to me, and I draw the inference, that Mr. Morrison was unaware of the tax consequences of designating his son as a beneficiary. He must have been under the impression or understanding that Douglas would bear any tax liability on the RRIF and no burden would fall on his estate. [ 81 ] This is another area that should be of particular concern to the investment community.

I wonder how many investment advisors who give advice concerning beneficiary designations are aware of the tax consequences of the designation? [ 82 ] If Mr. Morrison had been aware that the RRIF would be taxable in his estate’s hands, it is unlikely that he would have given as much as he did to his children out of the sale proceeds of his house. If he had been aware of those consequences, I infer that he would have changed his will or changed the designation making the designation conditional on Douglas paying the tax. [ 83 ] I draw the inference and find on a balance of probabilities that whatever motivated Mr.

Morrison to designate Douglas as beneficiary for the RRIF, he did not intend Douglas to be the beneficiary of the tax payable by his estate on the RRIF. [ 84 ] I thus find that Mr. Morrison either intended Douglas to be responsible for the tax on the RRIF and expected that the tax would be deducted from the RRIF when it was transferred or paid to Douglas, rather than left to be paid by the Estate, or that Mr.

Morrison was mistaken about the tax treatment of his RRIF having designated Douglas as beneficiary based on the above intention and expectation. [ 85 ] In either circumstance, Douglas has received an unintended and unexpected benefit from the Estate. [ 86 ] As an aside, I was surprised to learn that the RRIF funds were paid directly to Douglas without deduction for tax.

This would have been a different application had the IOF withheld tax from the RRIF and remitted it to the Canada Revenue Agency (as is the case with most RRIF or RRSP withdrawals) and Douglas then seeking to recover the amount of the withholding from the Estate. [ 87 ] Many wills provide that the executor has a discretion to transfer assets in specie to a beneficiary on condition that the beneficiary be liable for any resulting tax, or to reimburse the estate for any tax. Carefully drawn wills will take tax consequences into account.

[ 88 ] Beneficiary designations under the Wills and Succession Act and under the Insurance Act may be affected by the owner’s will. [ 89 ] In my view, there are two potential remedies to right the wrong done to the Estate and other beneficiaries by the Estate having had to pay the tax on the RRIF. Rectification [ 90 ] One such remedy is under the Wills and Succession Act , which is the power to rectify under s 39: 39(1) The Court may, on application, order that a will be rectified by adding or deleting characters, words or provisions specified by the Court if the Court is satisfied, on clear and convincing evidence, that the will does not reflect the testator’s intentions because of (

a) an accidental slip, omission or misdescription, or (

b) a misunderstanding of, or a failure to give effect to, the testator’s instructions by a person who prepared the will. (2) Subsection (1) applies to the omission of the testator’s signature only if the Court is satisfied on clear and convincing evidence that the testator (

a) intended to sign the document but omitted to do so by pure mistake or inadvertence, and (

b) intended to give effect to the writing in the document as the testator’s will.

(3) An application under this

section may not be made more than 6 months after the date the grant of probate or administration is issued, unless the Court orders an extension of that period.

(4) The Court may order an extension of the period on any terms the Court considers just. [ 91 ] Since I have concluded that Mr.

Morrison intended Douglas to be responsible for the tax, or was mistaken as to the tax consequences of the beneficiary designation, I might be able to rectify the will by inserting a provision to the effect that “any tax payable by my estate on any asset or funds received by a designated beneficiary of such asset under s 71 of the Wills and Succession Act RSA 2000, shall be deducted from any share of my estate otherwise payable to such beneficiary.” [ 92 ] In this case, that provision would have some slight impact, but would still not fully fund the $11,000 to be divided among Mr.

Morrison’s grandchildren. [ 93 ] In any event, I am hesitant to apply rectification, as s 39 requires “clear and convincing evidence”. I am not going to embark on an analysis of whether “clear and convincing” means more than the balance of probabilities. FH v McDougall , 2008 SCC 53 has for many purposes determined that there are only two standards of proof: balance of probabilities and proof beyond a reasonable doubt. [ 94 ] Obviously, the legislature intended something more than 50.01% when it specified “clear and convincing”.

That is significant, as the Wills and Succession Act was enacted after the Supreme Court decision in FH v McDougall . I note that this

section was dealt with by Rooke ACJ in Fuchs v Fuchs , 2013 ABQB 78 . There, he found the affidavit evidence to be “clear and convincing” without commenting on how that test relates to the onus of proof. [ 95 ] Here, it would be an overstatement to find that there is “clear and convincing evidence” of any mistake or contrary intention on Mr. Morrison’s part. On the evidence before me, a mistake can only be inferred from the evidence. Clear and convincing evidence might come from the witness to the beneficiary designation form, but that evidence is absent here.

I cannot conclude that the evidence of intention is strong enough for me to use s 39 here. [ 96 ] In the event the beneficiary designation is a testamentary disposition under the Wills and Succession Act , for which there appears to be a strong argument, it would be possible to rectify the beneficiary designation to add a provisio to the effect “subject to the designated beneficiary being responsible for any tax payable on the RRIF or its proceeds”. [ 97 ] However, for the reasons stated above, the absence of clear and convincing evidence dictates against this remedy.

Judicature Act [ 98 ] The alternative approach, and the one which I adopt in this case, is to apply s 8 of the Judicature Act , RSA 2000 c J-2. That

section provides:

(8) The Court in the exercise of its jurisdiction in every proceeding pending before it has power to grant and shall grant, either absolutely or on any reasonable terms and conditions that seem just to the Court, all remedies whatsoever to which any of the parties to the proceeding may appear to be entitled in respect of any and every legal or equitable claim properly brought forward by them in the proceeding, so that as far as possible all matters in controversy between the parties can be completely determined and all multiplicity of legal proceedings concerning those matters avoided. [ 99 ] The application of s 8 entitles me to fashion a remedy with the effect that Douglas reimburse the Estate the full amount of the tax paid by the Estate on the RRIF.

I have found that Mr. Morrison did not intend Douglas to receive the RRIF and leave the tax burden on his Estate. Tax was to follow the RRIF. [ 100 ] I am not required to have “clear and convincing” evidence to grant equitable relief. The granting of such relief is dependent on

the normal civil standard of proof: the balance of probabilities. [101] S 8 has been applied recently in Lee v Yoo, 2015 ABQB 522. There, Veit J held at para 32: [32] Pursuant to its jurisdiction as a superior court, as the Ontario Court of Appeal held in 80 Wellesley St. East Ltd., this court has therequisite jurisdiction to do justice between the parties even if there is no formal application for relief filed by either one of them: As a superior Court of general jurisdiction, the Supreme Court of Ontario has all of the powers that are necessary to do justice betweenthe parties.

Except where provided specifically to the contrary, the Court's jurisdiction is unlimited and unrestricted in substantive law incivil matters. In Re Michie Estate and City of Toronto et al., (ON SC), [1968] 1 O.R. 266 at pp. 268-9, 66 D.L.R. (2d)213 at pp. 215-6, Stark, J., after considering the relevant provisions of the Judicature Act and the authorities, said: It appears clear that the Supreme Court of Ontario has broad universal jurisdiction over all matters of substantive law unless theLegislature divests from this universal jurisdiction by legislation in unequivocal terms.

The rule of law relating to the jurisdiction ofsuperior Courts was laid down at least as early as 1667 in the case of Peacock v. Bell and Kendall (1667), 1 Wms. Saund. 73 at p. 74, 85E.R. 84: " ... And the rule for jurisdiction is, that nothing shall be intended to be out of the jurisdiction of a Superior Court, but that whichspecifically appears to be so; and, on the contrary, nothing shall be intended to be within the jurisdiction of an Inferior Court but thatwhich is so expressly alleged." [102] In RP v RV, 2012 ABQB 353, Hughes J used s 8, stating at para 16: [17] In R. v.

Caron, 2011 SCC 5 , [2011] 1 S.C.R. 78 at para. 24, the Supreme Court of Canada quoted with approval I. H.Jacob, "The Inherent Jurisdiction of the Court" (1970), 23 Curr. Legal Probs. 23, in describing inherent jurisdiction as: "a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so" ...

These powers arederived "not from any statute or rule of law, but from the very nature of the court as a superior court of law" … to enable "the judiciary touphold, to protect and to fulfil the judicial function of administering justice according to law in a regular, orderly and effective manner".[citations omitted] [103] I recognize those two cases arose in a family law context and in circumstances where injunctive relief was sought.

But equity isnot limited to injunctions, and the court’s power to use its inherent jurisdiction to give a just and equitable remedy is not limited to familylaw situations. [104] Probate law’s origins are in equity, so I do not find it inappropriate to consider equitable remedies where the common law isinadequate to remedy a wrong. [105] In these circumstances, I find that the tax paid by the Estate conferred a benefit in that same amount to Douglas. He has beenunjustly enriched by the payment.

While the Estate was under a legal obligation to pay the tax, it was under no legal obligation toDouglas to pay it for him. [106] It would be unjust for Douglas to retain the benefit. Principles of unjust enrichment justify a direction that Douglas reimbursethe Estate for the tax it paid on his behalf. [107] An alternative approach using equitable principles and remedies is that the tax paid by the Estate resulted from Mr. Morrison’smistaken understanding of the consequences of the beneficiary designation.

Reimbursement by Douglas flows from equitable principlessurrounding mistake. [108] Either approach results in a declaration of a constructive trust on the proceeds of the RRIF received by Douglas to the extent ofthe Estate’s payment to CRA on account of the RRIF. [109] Requiring reimbursement by Douglas will replenish the Estate to the amount intended by Mr.

Morrison to be available fordistribution, and prevents the manifest injustice of having an unintended tax consequence of a beneficiary designation frustrate thetestator’s intentions. [110] I recognize that the approach I have taken here may be viewed as extraordinary. But that is what s 8 is for: creating an equitableremedy where the law would otherwise leave the injured party (here, the Estate and beneficiaries other than Douglas) with no adequateremedy. Costs [111] I discussed costs in contested estate matters in Re Foote Estate, 2010 ABQ197.

The court has a broad discretion with respect tocosts in estate matters, and there is no longer a strong presumption that the estate should bear all parties’ costs in litigation over theestate. [112] I do not intend to repeat the analysis of estate costs I conducted in Foote Estate here. In all cases, costs depend on the specificsof each individual case. [113] Here, there are two circumstances that I find significant in this case in the context of costs. The first is that this applicationwould not have been necessary had Mr.

Morrison’s will have been clearer as to his intentions regarding tax and if he had not kept thebeneficiary designation a secret. No good usually comes from surprises when the will is read. No fault should be ascribed to Cameron.

[ 114 ] I recognize that Cameron seems to be an outlier in this matter, as his siblings appear united behind Douglas. Some of that may stem from their resentment that he as a licensed realtor got a commission on the sale of his father’s house. There is some thought that there should have been a family discount. However, there is no evidence as to what portion of the commission Cameron got himself. The transaction proceeded as a normal MLS transaction with a listing agreement with a licensed broker.

It hardly lies in Douglas’s mouth to complain about this. [ 115 ] In any event, Cameron has been successful in increasing the share in the estate he and the grandchildren get, as well as Robert’s and Heather’s shares. His costs, on a solicitor and client basis, should be reimbursed from the Estate. [ 116 ] The second circumstance is the manner in which this application was defended by Douglas. Even though the main contributor to the family discord here was Mr. Morrison, I direct that Douglas bear his own costs in the matter.

While he has been successful in terms of keeping the RRIF, his defence of Cameron’s application was largely an unnecessary and irrelevant attack on Cameron. This application might have been avoided had Douglas paid the tax himself on the RRIF rather than requiring the Estate to pay the tax on his windfall for him.

Summary [ 117 ] Douglas is entitled to keep the RRIF. Douglas shall reimburse the Estate for the full amount of tax paid by the Estate in connection with the RRIF. Cameron’s costs on a solicitor and client basis shall be paid from the Estate. Douglas is responsible for his own costs in this matter. [ 118 ] Douglas holds proceeds of the RRIF under a constructive trust for the Estate as to the amount of tax paid by the Estate on the RRIF. Ob s ervations [ 119 ] It is likely that the law in this area will be uncertain for some time.

The “definitive” case may be many years away from being finally decided, and legislatures may never choose to weigh in on these issues. The Pecore issue is one that might be addressed by amending the beneficiary designation forms by having an express statement as to the designator’s intentions, rather than leaving the issue to be dealt with by evidence at trial. It would be a simple matter of having the designator indicate that a gift is intended.

While an explanation might be better yet, even a check mark in a box on a form would be better than an evidentiary void. [ 120 ] If Pecore is found to apply to beneficiary designations, I can forsee a floodgate of litigation against the designated beneficiaries by disappointed siblings. Much of this might be avoided by variations to the beneficiary designation forms, and some documentation of intent by the donor. Certainty is far better than entering the world of secret trusts. Heard on the 28 th day of October, 2015. Dated at the City of Edmonton, Alberta this 8 th day of December, 2015. Robert A.

Graesser J.C.Q.B.A. Appearances: Randy Hobbs Shourie Bhatia LLP

for the Applicant Patty Ko Bishop & McKenzie LLP for the Respondent