2017 NLCA 46, 2017 NLCA 46

Judy Melendy (first appellant) and Lloyd Melendy (second appellant) v. Lisa Drodge (first respondent/first appellant by cross-appeal) and Tonia Rowe (second respondent/second appellant by cross-appeal) and Cheryl Rowe (third respondent/third appellant by cross-appeal) and Lisa Green (fourth respondent/respondent to cross-appeal) (17/24 and 17/41) Indexed As: Melendy v. Drodge 2017 NLCA 46 2 C.A.N.L.R. 114 Court of Appeal of Newfoundland and Labrador Welsh, Harrington and Hoegg JJ.A. July 26, 2017

Summary: Judy and Lloyd Melendy, the appellants, were each bequeathed one-third of the residue of Myrtle Kennedy’s substantial estate by her will. The remaining third was bequeathed to the testatrix’s granddaughter, Lisa Green. The respondents, Ms. Green and three others, contested the bequests to the Melendys. The trial judge concluded that the bequests to the Melendys were invalid as a result of fraud and undue influence. The Melendys appeal that decision. The trial judge removed the Melendys’ names from the residue clause with the result that Lisa Green inherited the entire residue.

The respondents, other than Ms. Green, cross-appeal on the basis that the will should have been set aside in its entirety and the estate distributed under an intestacy. Held: Appeal dismissed, cross-appeal allowed in part Welsh J.A. (Harrington and Hoegg JJ.A. concurring): To make a valid will, the testator requires a sound and disposing mind and memory able to comprehend the essential elements of will-making.

The testator must be sufficiently clear in his understanding and memory to know, on his own, and in a general way (1) the nature and extent of his property, (2) the persons who are the natural objects of his bounty and (3) the testamentary provisions he is making; and he must, moreover, be capable of (4) appreciating these factors in relation to each other, and (5) forming an orderly desire as to the disposition of his property. A bequest will be invalidated if the beneficiary perpetrates a fraud on the testator and obtains the legacy by virtue of that fraud.

What must be regarded as suggestion and undue influence will depend on the specific circumstances of the case under consideration. The testator’s age, state of health and condition in life, may all play a role in the degree of resistance he is able to make to the manoeuvres focused upon him. After carefully assessing the circumstances surrounding the execution of Myrtle Kennedy’s will, the judge concluded that, despite her reputation as an independent-minded individual, due to the interference and conduct of the Melendys and her reliance on them, Mrs. Kennedy had not fully appreciated the effect of her will.

The Melendys submit that the trial judge erred by taking into account conduct and events that

took place after the execution of Myrtle Kennedy’s will. However, the trial judge had ample evidence on which to find a scheme of fraud and undue influence as it relates to the Melendys’inclusion in the residue clause. While the manner in which the Melendys dealt with Myrtle Kennedy’s money after the execution of hernew will supports the above conclusion, there was sufficient evidence of a scheme of deceit at the time the will was made. The judge didnot err in her conclusions. The Melendys’ appeal was dismissed.

Regarding the cross-appeal, as a general principle, the courts will strive to give effect to a testator’s stated intention. The failure of aparticular bequest will not result in the will being set aside as a whole, with a consequent intestacy, where such an outcome can beavoided by a proper

interpretation of the will. Where a gift fails is in the residue clause, it will not be possible to determine the testator’s intention regarding that gift since, when thewill was executed, the testator believed the residue would be disposed of as stipulated. The appropriate remedy in such a situation willdepend on the particular circumstances, with the object being to give effect to the testator’s intention. If possible, effect should be givento gifts that have not failed.

The options for a remedy in this case must be assessed in light of the trial judge’s finding that the fraud and undue influence exerted bythe Melendys related only to the bequests to the Melendys in the residue. It did not affect the testator’s independent intentions regardingthe specific bequests to the other beneficiaries. While the testatrix intended Ms. Green to benefit, it cannot be said that she intended that Ms. Green would inherit the residue in itsentirely. Two-thirds of the residue that was gifted to the Melendys, must be disposed of on an intestacy. Applying the Intestate Succession Act, RSNL 1990, c.

I-21, the net effect is that Lisa Green would be entitled to one-third of the residueplus one-half of the remaining two-thirds of the residue. Tonia Rowe and Nakita Drodge, would each be entitled to one-quarter of thetwo-thirds of the residue that had been bequeathed to the Melendys. The cross-appeal was therefore allowed in part. While parties in estate litigation may be compensated from the estate, the costs of the Melendys should not be paid out of the estate,given their conduct leading to the litigation.

The costs of the respondents, however, should be paid out of the estate on a solicitor andclient basis in this Court and in the Court appealed from. Cases cited: Bolianatz Estate v. Simon, 2006 SKCA 16, 264 D.L.R. (4th) 58, leave to appeal refused, [2006] SCCA No. 222 Leger v. Poirier, (SCC), [1944] S.C.R. 152 Banks v. Goodfellow (1870), L.R. 5 Q.B. 549 Re Schwartz (1970), (ON CA), 10 D.L.R. (3d) 15 (Ont. C.A.), aff’d (SCC), [1972] S.C.R. 150 Stoneham v. Ouellet, (SCC), [1979] 2 S.C.R. 172 Vout v. Hay, (SCC), [1995] 2 S.C.R. 876 Eady v. Waring (1974), (ON CA), 43 D.L.R. (3d) 667 (Ont. C.A.) MacGregor v.

Ryan, (SCC), [1965] S.C.R. 757 Dicks v. Dicks Estate, 2010 NLCA 35, 298 Nfld. & P.E.I.R. 1 Counsel: Phillip Buckingham, Megan Taylor and Raymond Critch, for the first and second appellants; Daniel M. Glover, for the first respondent/first appellant by cross-appeal and the second respondent/second appellant by cross-appealand third respondent/third appellant by cross-appeal;

Paul D. Dicks Q.C., for the fourth respondent/respondent to cross-appeal. This appeal was heard on June 15 and 16, 2017 before Welsh, Harrington and Hoegg JJ.A. The following judgment was delivered on July 26, 2017 by Welsh J.A. for the Court. ______________________________________________________________ Welsh J.A.: [ 1 ] Under Myrtle Kennedy’s will, Judy and Lloyd Melendy were each bequeathed one-third of the residue of the testatrix’s substantial estate. The remaining third was bequeathed to Myrtle Kennedy’s granddaughter, Lisa Green. Ms.

Green and three others, the respondents in this appeal, filed caveats to contest the will, in particular, the bequests to the Melendys. [ 2 ] The trial judge concluded that the bequests to the Melendys were invalid as a result of fraud and undue influence. The Melendys appeal that decision. [ 3 ] By way of remedy, the judge removed the Melendys’ names from the residue clause with the result that Lisa Green inherited the entire residue. The respondents, other than Ms.

Green, cross-appeal on the basis that the will should have been set aside in its entirety and the estate distributed under an intestacy with Lisa Green receiving fifty percent and Tonia Rowe and Nakita Drodge each receiving twenty-five percent of the estate. [ 4 ] In assessing the validity of the bequests to the Melendys, the trial judge filed a lengthy, comprehensive decision reviewing the evidence and making findings of fact on which this decision relies. BACKGROUND [ 5 ] Myrtle Kennedy had one child, a son who predeceased her.

That son, in turn, had a son, who also predeceased Myrtle Kennedy, and a daughter, Lisa Green. While Ms. Green is Myrtle Kennedy’s only surviving grandchild, her grandson left two children, Tonia Rowe and Nakita Drodge. Their mothers, respondents in this appeal, are Cheryl Rowe and Lisa Drodge, respectively. Judy Melendy, who is married to Lloyd Melendy, is Myrtle Kennedy’s niece. [ 6 ] Myrtle Kennedy’s husband, Dr. George Kennedy, died on April 8, 2011.

Myrtle Kennedy died just months later on February 8, 2012. [ 7 ] In October 2009, the Melendys were named as the executors of the wills of both Dr. and Myrtle Kennedy, replacing a trust company. After Myrtle Kennedy’s will was challenged, the Melendys brought an originating motion for proof of the will in solemn form. Later, with the Court’s approval, they renounced their position as executors. [ 8 ] Over the years, Myrtle Kennedy had been in regular contact with her granddaughter and great-grandchildren and was generous with gifts to them.

Contact was maintained largely by phone calls, together with cards and letters, since only Lisa Drodge resides in St. John’s where the Kennedys lived. [ 9 ] Judy and Lloyd Melendy began seeing the Kennedys on a regular basis in 2011 when Dr. Kennedy was no longer able to drive. The Melendys assisted the Kennedys with such things as groceries and attending appointments. Dr. Kennedy transferred ownership of his vehicle to Ms. Melendy before he died. [ 10 ] The family finances were controlled by Dr. Kennedy.

Until her husband’s death, Myrtle Kennedy had a single bank account which was used for the purpose of depositing her pensions and which “never contained more than $3,500” (decision of the trial judge, 2016 NLTD(G) 140, at paragraph 4). The trial judge accepted that Myrtle Kennedy was: [291] … an unsophisticated banking customer, a woman who had a Visa credit card which she did not use at all and a Debit card which she used rarely.

Myrtle Kennedy could not access electronic banking records and was entirely reliant on her husband (prior to his death) and thereafter on Lloyd and Judy Melendy for decisions respecting money and her access to funds. [ 11 ] Dr. Kennedy had significant financial investments managed by Roger Maunder of Wood Gundy. On April 21, 2011, less than two weeks after Dr. Kennedy’s death, the Melendys arranged for a meeting among themselves, Myrtle Kennedy and Mr. Maunder. At that meeting, Myrtle Kennedy instructed Mr. Maunder, against his advice, to liquidate all the investments.

The trial judge explained: [16] … The statements confirm that this consisted of cash, fixed income investments, equities and mutual funds valued at $788,000.00, held jointly by [Dr. and Myrtle Kennedy]. Mr. Maunder also held $83,486.00 in a RIF in [Dr.] Kennedy’s name with Myrtle Kennedy named as beneficiary. [ 12 ] The judge described other actions taken shortly after Dr. Kennedy’s death on April 8, 2011: [17] On April 25, 2011, at the request of Judy Melendy, Robert Hickey [lawyer for Myrtle Kennedy] attended at Myrtle Kennedy’s home and took instructions on a new Will.

On the same date, Lloyd and Judy Melendy brought Myrtle Kennedy to the Avalon Mall Branch of the Bank of Nova Scotia where she executed forms adding the Melendys to her account … (“Account 28”).

[18] Two days later, on April 27, 2011, with Mrs. Kennedy’s written confirmation, Lloyd Melendy picked up a cheque for $577,006.15 at Wood Gundy. The unendorsed cheque was deposited on the same day to Account 28, now in the joint names of Myrtle Kennedy, Lloyd Melendy and Judy Melendy. On the same date, Robert Hickey witnessed Myrtle Kennedy’s new Will … . The terms of this Will represented a significant change from the 2008 Will.

It referenced specific bequests of cash to various family members and friends totaling $115,000.00 and then left the residue in three equal shares to Judy Melendy, Lloyd Melendy and Lisa Green. [ 13 ] Myrtle Kennedy had also inherited money from Dr. Kennedy’s estate: [19] Letters of probate for the Last Will & Testament of Dr. George Kennedy were granted to Lloyd and Judy Melendy on May 11, 2011 … .

The Inventory filed with the Application for Probate reflected assets with a value of $950,260.00 consisting of $940,000.00 in stock and shares in companies, $10,000.00 in life insurance, $200 in furniture and $60 in cash on hand. This Inventory did not reflect any of the assets that had been managed by Mr. Maunder at Wood Gundy. [ 14 ] The judge noted that, upon a passing of accounts for Dr. Kennedy’s will in December 2014, the report “concluded there was a shortfall of $257,107.20 in Dr.

Kennedy’s Estate” (decision of the trial judge, at paragraph 26). [ 15 ] In summarizing the evidence and the relationship of each witness to Myrtle Kennedy, the trial judge included her assessment of their credibility. Regarding those challenging the bequests to the Melendys in Myrtle Kennedy’s will, the trial judge concluded: [279] On the whole, I was entirely satisfied that each of the [respondents] gave their evidence with the hallmarks of truth and sincerity. I saw no signs of exaggeration of the facts and no evidence of a scheme or that a story had been concocted as suggested by counsel for the [Melendys].

Each of the [respondents] had their own lifetime of interactions with, and memories of, Myrtle Kennedy. This was the thrust of their evidence and the basis of their mutual concern for the validity of the Will and suspicion for the actions of Lloyd and Judy Melendy. I had no concerns for the credibility of [the respondents]. [ 16 ] By contrast, the trial judge concluded that she “had serious misgivings about the credibility of both Lloyd and Judy Melendy” (decision of the trial judge, at paragraph 311).

She described evidence of Lloyd Melendy’s criminal fraud, which she determined was relevant and material: [282] Lloyd Melendy did not voluntarily testify that he had been convicted on January 22, 1987 of two counts of fraud (s. 338(1)(a) 1976 C.C.C.) and two counts of causing or attempting to cause any person to use, deal with, or act upon forged documentation (s. 326(1) (b) 1970 C.C.C.). However, on cross-examination he admitted his record and that he had received a suspended sentence and six months’ probation. [ 17 ] The judge concluded, based on the evidence, that Dr.

Kennedy would not have selected Lloyd Melendy as an executor for their wills had he known about the criminal convictions. Further, the judge was satisfied that none of those who filed caveats contesting Myrtle Kennedy’s will, nor Roger Maunder of Wood Gundy, nor Myrtle Kennedy’s solicitor, Robert Hickey, knew about the convictions. [ 18 ] Citing reasons, the judge did not accept the Melendys’ testimony that they had a close relationship with the Kennedys.

She found the Melendys were “evasive in their testimony”, avoided providing information, “refused to acknowledge discrepancies and remained vague and unhelpful”, and “were overall uncooperative and non-responsive relative to the challenge made to Myrtle Kennedy’s April 27, 2011 Will” (decision of the trial judge, at paragraphs 287 and 288). [ 19 ] The lists of documents required under the Rules of the Supreme Court, 1986 “were incomplete and became the source of several Applications for production, all of which were resisted [by the Melendys]” (decision of the trial judge, at paragraph 289). [ 20 ] The judge found that the Melendys were vague and inconsistent in responding to questions concerning the various bank accounts: [294] Firstly, Lloyd Melendy was asked what accounts he had set up after George Kennedy’s death and he said, “I didn’t set up any”.

This answer is reflective of the generally evasive nature of his testimony. As is discussed later herein, there were numerous accounts established; funds were transferred between them by Lloyd Melendy and funds were withdrawn from them and utilized by Lloyd Melendy for personal purposes.

As statements for the various accounts were put to Lloyd Melendy, he pretended to have a limited appreciation for them, notwithstanding that the majority of the transactions had been made by him. [295] I start with the underlying premise of the testimony of Lloyd and Judy Melendy that they had the right to use Myrtle Kennedy’s funds as they saw fit both before and after her death despite being added to her modest Account 28 for the first time on April 25, 2011 (when it had only a $3,000.00 balance) and there being no corroboration to their suggestion that the addition of their names was for any purpose other than convenience of banking for Myrtle Kennedy. … As will be discussed later herein, Robert Hickey advised the [Melendys] not to deal further with the Estate assets after the Caveats were filed, but they ignored his direction. [ 21 ] Indeed, Judy Melendy acknowledged that, even before Myrtle Kennedy’s death, she used Mrs.

Kennedy’s money, which was inherited from Dr. Kennedy’s estate and obtained from the sale of the Kennedy house, for her own benefit and that of her husband, without the knowledge or consent of Myrtle Kennedy. Similarly, Lloyd Melendy “had withdrawn several large sums of money for his own benefit or the benefit of his son, Trevor, including $150,000.00 on November 9, 2011 and $30,000.00 on December 6, 2011” without Myrtle Kennedy’s approval (decision of the trial judge, at paragraph 303).

Further, after caveats challenging the will had been filed, disregarding the advice of Robert Hickey, “on July 4, 2012, Lloyd Melendy withdrew $109,000.00 from Account #81 for his own use; he placed $60,000.00 of it against his mortgage and put the balance in his own bank account” (decision of the trial judge, at paragraph 310). [ 22 ] In addition to the above, in concluding that the bequests to the Melendys were invalid, the trial judge also relied on (decision of the trial judge, at paragraphs 429 to 441): The Melendys’ undue haste in encouraging and arranging for Myrtle Kennedy to execute a new will without providing any rationale that

was reasonable. The Melendys’ attempt to control who visited Myrtle Kennedy to reduce the possibility that she would discover how they were handlingand using her money. The Melendys deposited all the funds from the Wood Gundy investments into Account 28, the only account to which their names hadbeen added. Myrtle Kennedy did not need $800,000 in her chequing account, and there were other options for that money. The Melendys had Myrtle Kennedy add their names to Account 28 before any large deposits were made.

If the account had contained asubstantial balance or was about to receive a large deposit, the teller who usually served Mrs. Kennedy would have dealt with theaddition of the names under an appropriate procedure. Judy Melendy was well informed about banking affairs having been employed ina bank for approximately thirty years. When she retired in 1995, she had responsibilities for personal investments, loans and mortgagesin the bank. There was no evidence that Myrtle Kennedy knew or approved of the Melendys’ use of the Wood Gundy funds “as their own”.

After Myrtle Kennedy’s home was sold, the Melendys concealed from her how much money had been received. They did not invest theproceeds wisely, but gave $150,000 to their son, who had no relationship with Myrtle Kennedy, and retained $30,000 for their own use. The movement of funds among the bank accounts “was an attempt to disguise the [Melendys’] actions and intent”. The Melendys paid $136,150 in expenses associated with Myrtle Kennedy’s estate with funds from Dr.

Kennedy’s estate for the purposeof artificially increasing the value of the estate under which they were beneficiaries to the detriment of an estate under which they wouldnot benefit. The Melendys made attempts to obtain confidential information from Roger Maunder on the Wood Gundy investments prior to Dr.Kennedy’s death.

Part of the Melendys’ scheme was to reduce the value of Myrtle Kennedy’s estate by converting assets to their benefit before her death. [23] The judge considered conduct of the Melendys that occurred after the execution of Myrtle Kennedy’s will for two purposes: first,in her assessment of their credibility generally; and, second, based on the continuing nature of their fraudulent conduct, as further supportfor her conclusion that, at the time when Myrtle Kennedy executed her will, the testator was subjected to undue influence and fraud bythe Melendys.

ISSUES [24] At issue in the appeal is whether the trial judge erred in finding that the bequests to the Melendys were invalid as a result of fraudand undue influence. [25] At issue in the cross-appeal is whether the trial judge erred by severing the gift to the Melendys from the residue clause asopposed to setting aside the will, with the estate to be disposed of under an intestacy. ANALYSIS The Appeal [26] The Melendys submit that a bequest will not be set aside because of the beneficiary’s bad character, immorality or criminalconduct.

Rather, they say, a testator has the right to dispose of his or her property as he or she chooses. They concede that a bequest willbe invalidated if “the beneficiary perpetrates a fraud on the testator and obtains the legacy by virtue of that fraud” (Bolianatz Estate v.Simon, 2006 SKCA 16, 264 D.L.R. (4th) 58, (leave to appeal refused, SCCA No. 222), at paragraph 57). [27] To make a valid will, the testator requires a “sound and disposing mind and memory” able to comprehend the essential elementsof will-making (Leger v. Poirier, (SCC), [1944] S.C.R. 152, at page 161).

Grounded in the earlier decision in Banks v.Goodfellow (1870), L.R. 5 Q.B. 549, a helpful expansion of the elements relevant to making a will is set out in Re Schwartz (1970), (ON CA), 10 D.L.R. (3d) 15 (Ont.

C.A.), (affirmed (SCC), [1972] S.C.R. 150), at page 32: … In more contemporary terms, [the elements enumerated in Banks] have been stated as follows: The testator must be sufficiently clear in his understanding and memory to know, on his own, and in a general way (1) the nature andextent of his property, (2) the persons who are the natural objects of his bounty and (3) the testamentary provisions he is making; and hemust, moreover, be capable of (4) appreciating these factors in relation to each other, and (5) forming an orderly desire as to thedisposition of his property: see Atkinson on Wills (1953), 2nd ed., p. 232; 39 Hals., 3rd ed., pp. 855-6.

See also, MacKenzie, Feeney’s Canadian Law of Wills, fourth edition, looseleaf (Markham, ON: LexisNexis), at paragraph 2.6. [28] Undue influence and fraud sufficient to invalidate a bequest are discussed in Stoneham v. Ouellet, (SCC), [1979]2 S.C.R. 172.

Beetz J., for the Court, explained, at pages 198 to 199: Chateauguay Perrault … wrote in Les Mélanges Bernard Bissonnette, 1963, at pp. 458 and 459: [Translation] Self-seeking attention to the testator (such as proofs of affection, flattery, care given or services rendered with exaggeratedalacrity, which may have concealed a bogus affection) and mere suggestions or advice to the testator are not in themselves acts ofsuggestion or undue influence that will make the will invalid.

However, the manoeuvring must end there; if it takes on the character offraud, it will be a basis for invalidating the will; as examples of this may be cited … interfering in his affairs; … in a word, deceit or

coercion in all their forms. … [W]hat must be regarded as suggestion and undue influence will vary from one case to another, dependingon the specific circumstances of the case under consideration. The testator’s age, state of health and condition in life may have all playeda role in the degree of resistance he is able to make to the manoeuvres focused upon him. (My emphasis.) [29] Similarly, in Vout v. Hay, (SCC), [1995] 2 S.C.R. 876, Sopinka J., for the Court, explained, at page 891: The distinction to which I have referred is well described by Crocket J. in Riach v.

Ferris, [ (SCC), [1934] S.C.R. 725],at p. 736 where he says: Assuming that in the case in behalf of a plaintiff seeking to establish the validity of a will, there may be such circumstances of apparentcoercion or fraud disclosed as, coupled with the testator’s physical and mental debility, raise a well-grounded suspicion in the mind ofthe court that the testator did not really comprehend what he was doing when he executed the will, and that in such a case it is for theplaintiff to remove that suspicion by affirmatively proving that the testator did in truth appreciate the effect of what he was doing, there isno question that, once this latter fact is proved, the onus entirely lies upon those impugning the will to affirmatively prove that itsexecution was procured by the practice of some undue influence or fraud upon the testator.

A person may well appreciate what he or she is doing but be doing it as a result of coercion or fraud. [30] In Vout, Sopinka J. concluded, at page 893: … I am satisfied that the trial judge scrutinized the evidence to the degree required. He obviously was of the view that this fullycompetent, self-reliant and independent-minded individual would not have made the will as he did if he had not appreciated fully what hewas doing.

The judge went further and negatived undue influence. … [31] By contrast, in this case, after carefully assessing the circumstances surrounding the execution of Myrtle Kennedy’s will, thejudge concluded that, despite her reputation as an independent-minded individual, due to the interference and conduct of the Melendysand her reliance on them, Mrs. Kennedy had not fully appreciated the effect of her will. [32] The Melendys submit that the trial judge erred by taking into account conduct and events that took place after the execution ofMyrtle Kennedy’s will. They rely on the decision in Eady v.

Waring (1974), (ON CA), 43 D.L.R. (3d) 667 (Ont.C.A.), which dealt with the mental capacity of the testator. Arnup J.A., for the Court, explained, at page 679: … While the ultimate probative fact which a Probate Court is seeking is whether or not the testator had testamentary capacity at the timeof the execution of his will, the evidence from which the Court’s conclusion is to be drawn will in most cases be largely circumstantial.

It is quite proper to consider the background of the testator, the nature of his assets, his relatives and others having claims upon hisbounty, and his relationship to them, and his capacity at times subsequent to the execution of the will, to the extent that it throws lightupon his capacity at the time of the making of the will. Proven incapacity at a later date obviously does not establish incapacity at thetime of execution of the disputed will, but neither is that fact irrelevant.

Its weight depends upon how long after the crucial time theincapacity is shown to exist, and its relationship to matters that have gone before or arose at or near the time of the execution of the willitself. … (Emphasis added.) [33] The Melendys’ position fails to take into account the activities that occurred prior to and at the time Myrtle Kennedy made a newwill.

The trial judge found that the “multiple indications of the fraudulent scheme the Melendys were hatching prior to the death of Dr.George Kennedy” began with Lloyd Melendy’s telephone call to Roger Maunder at Wood Gundy inquiring as to the value of Dr.Kennedy’s investments (decision of the trial judge, at paragraph 363, emphasis added). [34] The trial judge also considered the haste with which the Melendys took action regarding the execution of a new will by MyrtleKennedy.

Undue haste is a factor that may be taken into account when assessing whether a testator has been subjected to undueinfluence or fraud (MacGregor v. Ryan, (SCC), [1965] S.C.R. 757). [35] In this case, the Melendys arranged for Myrtle Kennedy’s solicitor to come to her residence to take instructions for a new will onApril 25, 2011 when her husband had died just days earlier on April 8th. The will was executed two days later on April 27th. The judgedid not accept as reasonable the Melendys’ rationale for acting so quickly; that is, they told Myrtle Kennedy that, if she died within thirtydays after her husband, Dr.

Kennedy’s family would be the beneficiaries, and she should act immediately to avoid that possibility. [36] Further, the trial judge accepted evidence that, at the time of Dr. Kennedy’s death, Lloyd Melendy advised Lisa Green not tocome to St. John’s from Australia because her grandmother was “not in very good condition” (decision of the trial judge, at paragraph125).

In the circumstances, the judge drew an inference that the Melendys were acting so as to limit Myrtle Kennedy’s access to herfamily pending execution of a new will. [37] The trial judge also considered the manner in which the Melendys obtained access to Myrtle Kennedy’s bank account and,thereby, to the Wood Gundy investment funds, at the same time as the new will was being prepared and executed.

The judge acceptedthat the Melendys deposited the Wood Gundy cheque, unendorsed, into Account 28, which had always held no more than approximately$3500. [38] Further, at the time the new will was made, Myrtle Kennedy’s solicitor was unaware of the Wood Gundy funds that had beenliquidated, yielding approximately $760,000. Counsel for the Melendys submits that Myrtle Kennedy knew about the funds and that itwas not material that the solicitor was unaware of that money. [39] In fact, the solicitor’s knowledge was an important factor in the circumstances.

The testator was completely unused to dealingwith and understanding financial matters. The solicitor had a duty to advise her regarding the possible effect of bequeathing two-thirds ofthe residue to the Melendys. This he did. However, the potential quantum of one-third of the residue, estimated by Mr. Hickey to be

about $250,000, was grossly undervalued because the Melendys, who orchestrated the drawing of a new will, took no steps to ensure that the solicitor was advised about the substantial Wood Gundy funds. [ 40 ] The Melendys submit that it is unnecessary for a testator to have “detailed” knowledge of the extent of the estate. That proposition is not relevant on the facts of this case. At the time Myrtle Kennedy executed her new will, the Wood Gundy investments were substantial, comprising almost half of a very large estate.

Knowledge and an understanding of the general nature and extent of that estate was of particular concern given Myrtle Kennedy’s lack of experience in financial matters, and her virtually total reliance on the Melendys.

In the circumstances, in order to advise Myrtle Kennedy regarding the effect of her will, it was essential that her solicitor have a broad understanding of the nature and extent of her property. [ 41 ] Focusing on the time when Myrtle Kennedy made her new will in April 2011, the judge had ample evidence on which to find a scheme of “fraud and undue influence as it relates to the [Melendys’] inclusion in the residue clause” (decision of the trial judge, at paragraph 448).

While the manner in which the Melendys dealt with Myrtle Kennedy’s money after the execution of her new will supports the above conclusion, there was sufficient evidence of a scheme of deceit at the time the will was made to conclude that the Melendy bequest had been obtained through fraud and undue influence. [ 42 ] In the circumstances, the trial judge did not err in drawing inferences and concluding that, as a result of the Melendys’ conduct, Myrtle Kennedy did not appreciate the effect of her bequests to them; that the bequests “did not reflect the independent intention of the testatrix”; and that Myrtle Kennedy’s free will was overborne by acts of deception (decision of the trial judge, at paragraph 443). [ 43 ] In the result, the trial judge did not err in declaring the bequests to the Melendys to be invalid.

The Cross-Appeal [ 44 ] Rule 11(1) of the Court of Appeal Rules , NLR 38/16, provides for a cross-appeal: A respondent to an appeal may make submissions by cross-appeal where the respondent (

a) seeks to appeal an order or portion of an order appealed from that is not appealed by the appellant; … (

c) contends that the respondent is entitled to other or different relief or disposition than given by the court appealed from. [ 45 ] The cross-appellants, Lisa Drodge, Tonia Rowe and Cheryl Rowe, submit that the trial judge erred in concluding that the appropriate remedy was simply to sever the bequests to the Melendys from the residue clause with the result that the entire residue would go to Lisa Green.

They submit that Myrtle Kennedy’s will should be set aside in its entirety and the estate disposed of as an intestacy. [ 46 ] As a general principle, the courts will strive to give effect to a testator’s stated intention. The failure of a particular bequest will not result in the will being set aside as a whole, with a consequent intestacy, where such an outcome can be avoided by a proper

interpretation of the will. Accordingly, where a gift in a will fails, the property in question will revert to the residue clause, provided that result is consistent with the testator’s intention upon a reading of the will as a whole. (See Feeney’s Canadian Law of Wills , supra , at paragraph 13.32.) [ 47 ] Where the gift that fails is in the residue clause, it will not be possible to determine the testator’s intention regarding that gift since, when the will was executed, the testator believed the residue would be disposed of as stipulated.

The appropriate remedy in such a situation will depend on the particular circumstances, with the object being to give effect to the testator’s intention. If possible, effect should be given to gifts that have not failed. (See Feeney’s Canadian Law of Wills , supra , at paragraph 13.32.) [ 48 ] In this case, the bequests to the Melendys are found only in the residue clause, which provides: I direct my Trustee to divide the rest and residue of my estate then remaining, both real and personal, of whatsoever kind and wheresoever situate into three equal shares, and to pay one such equal share to each of: (

i) my granddaughter, Lisa Mary Green, of Australia; (ii) my niece, Judy Melendy, of the City of St. John’s, in the Province of Newfoundland and Labrador; and (iii) my nephew-in-law, Lloyd Melendy, of the City of St. John’s, in the Province of Newfoundland and Labrador.

If any of Lisa Mary Green, Judy Melendy or Lloyd Melendy predecease me, but leave issue, then their share of my estate will go to their issue to share and share alike. [ 49 ] There are four possible remedies to consider as a result of the invalidity of the bequests to the Melendys: (1) setting aside the will in its entirety and disposing of the estate on an intestacy; (2) setting aside the residue clause in its entirety and disposing of the whole of the residue on an intestacy; (3) setting aside the bequests to the Melendys and disposing of the property bequeathed to them on an intestacy; and (4) deleting the bequests to the Melendys from the residue, leaving the whole of the residue to Lisa Green. [ 50 ] These options must be assessed in light of the trial judge’s finding that the fraud and undue influence exerted by the Melendys related only to the bequests to the Melendys in the residue.

It did not extend to affecting the testator’s independent intentions regarding the specific bequests to the other beneficiaries. In that circumstance, to set aside the will in its entirety would be inconsistent with the general principle that the courts will strive to give effect to a testator’s stated intention, and will eschew an intestacy where that can be avoided.

[51] For the same reasons, the second and fourth options must be rejected. It clearly was Myrtle Kennedy’s intention to bequeathone-third of the residue to Lisa Green. Effect can and should be given to that gift. However, it cannot be said that the testator intendedthat Ms. Green would inherit the residue in its entirely. Two-thirds of the residue, that which was gifted to the Melendys, fails without adisposition under the will. In the absence of a direction by Myrtle Kennedy in that situation, the property gifted to the Melendys must bedisposed of on an intestacy.

As discussed in Feeney’s Canadian Law of Wills, supra, at paragraph 13.32: … If the property is already part of the residue, it passes on an intestacy unless there is a contrary intention. As the Court of Appeal forBritish Columbia has made clear, the courts will not manufacture a gift out of the air where the will maker has been silent or ambiguous. [52] Accordingly, I am satisfied that the third option, setting aside the bequests to the Melendys and disposing of the propertybequeathed to them on an intestacy, is the proper result in this case. Applying the Intestate Succession Act, RSNL 1990, c.

I-21, the neteffect is that Lisa Green would be entitled to one-third of the residue plus one-half of the remaining two-thirds of the residue. ToniaRowe and Nakita Drodge, as children of Myrtle Kennedy’s grandson, would each be entitled to one-quarter of the two-thirds of theresidue that had been bequeathed to the Melendys. Costs [53] Principles regarding the award of costs in an estate matter are discussed in Dicks v. Dicks Estate, 2010 NLCA 35, 298 Nfld. &P.E.I.R. 1.

Where appropriate, costs of some or all of the litigants may be paid out of the estate on a solicitor and client basis: [62] In considering the question of costs, the analysis starts with the principle that costs follow the cause. That is, in general, thesuccessful party will be entitled to costs from the unsuccessful party. In litigation involving an estate, circumstances may support theconclusion that the costs of some or all of the parties should be paid out of the estate.

Questions as to the validity or meaning of a will orthe capacity of the testator have resulted, where appropriate, in such an order (Orkin, The Law of Costs, looseleaf edition (Aurora:Canada Law Book, 1998), at paragraph 219.3). However, in light of the effect that such an order will have on the value of the estate, thecourt should be satisfied that an order for payment of costs out of the estate is warranted in the circumstances. … [64] The starting point regarding costs here is set out in Elton Estate v. Elton (2010), 2010 NLCA 2 , 292 Nfld. & P.E.I.R. 237;902 A.P.R. 237 (N.L.C.A.).

Mercer J.A., for the Court, wrote: [38] I agree with the trial judge that there was an issue of substance arising under the will that warranted the court application. Accordingly, I order that the costs of the Executor and Kathryn Elton, taxed on a solicitor and client basis, be paid out of Elton’s estate. … [65] Here, the Trustee was successful in responding to the appeal. However, I reject her submission that her costs should, therefore, bepaid by the Beneficiaries.

There were issues of substance raised on the appeal and, applying the principle in Elton Estate, the properorder is that the Trustee shall be entitled to her costs of the appeal on a solicitor and client basis out of the capital of the Estate. [66] Regarding the Beneficiaries other than the Alternate Trustee, I am not persuaded, as suggested by counsel for the Trustee, thatthere is a valid rationale for requiring these Beneficiaries to bear their own costs. Although these Beneficiaries were unsuccessful in theappeal, the principle enunciated in Elton Estate applies.

Accordingly, the Beneficiaries, other than the Alternate trustee, shall also beentitled to their costs of the appeal on a solicitor and client basis out of the capital of the Estate. [54] In this case, the respondents raised substantive issues in the Court appealed from and on the appeal and cross-appeal.

It is clearthat the costs of the Melendys should not be paid out of the estate, given their conduct leading to the litigation and the failure of MyrtleKennedy’s bequests to them. [55] However, I am satisfied that the costs of the respondents should be paid out of the estate on a solicitor and client basis in thisCourt and in the Court appealed from. The estate was not a party to the proceedings but would be in the best position to take actionagainst the Melendys to recoup lost funds and costs.

SUMMARY AND DISPOSITION [56] In

summary, the trial judge did not err in declaring the bequests to the Melendys to be invalid. I would set aside the bequests tothe Melendys and order their share of the residue disposed of on an intestacy. With that exception, I would order disposition of theproperty bequeathed by Myrtle Kennedy to be made in accordance with the terms of the will. [57] In the result, I would order the residue of the estate to be disposed of as follows: Lisa Green is entitled to one-third of the residue plus one-half of the remaining two-thirds of the residue.

Tonia Rowe and Nakita Drodge, as children of Myrtle Kennedy’s grandson, are each entitled to one-quarter of the two-thirds of theresidue that had been bequeathed to the Melendys. [58] Accordingly, I would dismiss the appeal and allow the cross-appeal as set out above. I would order that the respondents shallhave their costs, in this Court and in the Court appealed from, to be paid out of the estate on a solicitor and client basis, with the right ofthe estate to take action against the Melendys to recoup lost funds and costs. Appeal dismissed. Cross-appeal allowed in part.