A recent Alberta Court of Appeal decision in a case of a will that included a “no-contest” clause may, if the decision ultimately stands, give lawyers greater confidence in including the clause in a client’s will.
No-contest clauses are meant to discourage legal challenges to a will by disinheriting beneficiaries who challenge a will in court and are unsuccessful.
“We haven’t had clear case law letting us know if these clauses have teeth, and now we do,” says Barbara Stratton, a partner with Bennett Jones LLP in Edmonton, and a counsel for the appellants in the decision.
Says Rebecca Hett, vice president of tax, retirement and estate planning with CI Investments Inc. in Calgary: “[The decision] brings to light what’s required for a valid [no-contest] clause, where you are concerned with protecting the wealth you created and having it distributed as close as possible to your wishes.”
While no-contest clauses have fallen out of favour in recent years and aren’t commonly used, due in part to doubts about their effectiveness, the Alberta decision could lead to an increase in their popularity, some estate practitioners suggest.
“I suspect we’ll see an uptick in the inclusion of this clause in wills,” Hett says.
Says Stratton: “To the extent that the estate planners read this [decision] and want to discuss this clause on a go-forward basis with their clients, I would expect we would see more of these clauses.”
In Mawhinney v Scobie, released in February, the majority at Alberta’s highest court ruled in favour of the appellants, who argued that an application by a beneficiary to obtain formal proof of a will would amount to a challenge and trigger the no-contest clause, if the beneficiary chose to proceed. (The application to the court for guidance on the question did not, in itself, trigger the clause.)
James Carl Anderson, a successful businessman, died in September 2015 at the age of 84, leaving three adult children and a long-time companion, Karen Mawhinney. Mawhinney, who was the respondent in the case, says she became Anderson’s fiancé in March 2015. The children, who along with the personal representatives of the estate were the appellants in the case, disputed Mawhinney’s claim, saying she was merely a long-time friend of the deceased.
Anderson’s will, signed in August 2015, left Mawhinney a parcel of land in Alberta, a house in Austin, Tex., a luxury car and $2.6 million. The remainder of the estate was to be distributed to the children.
Mawhinney claimed that the August will was executed under suspicious circumstances while Anderson’s health was declining, and less than a month before his death. In prior wills Anderson had executed, Mawhinney had been both a beneficiary and an equal with the children in the remainder of the estate, she claims.
The Court of Appeal ruled that while the wording of the no-contest clause in the August will allowed for a beneficiary to enforce any rights he or she might have to the estate under the province’s dependency laws, it didn’t allow for the type of application Mawhinney intended to pursue. The majority ruled that Mawhinney could proceed with an application to obtain proof of the August will, but would lose all her entitlements under the no-contest clause should she be unsuccessful.
“The effect of the no-contest clause is to test the fortitude of a potential challenger to the validity of the will and how strongly they believe they can successfully challenge the will,” wrote the majority in the decision. “The clause is designed to discourage litigation, not prohibit it.”
Roy Boettger, a wills, estates, and trusts lawyer with Field Law in Calgary and counsel for the respondent, confirms that Mawhinney will be seeking leave of the Supreme Court of Canada to appeal the decision.
The key issue in the case “was not whether a challenge to the validity of the will would invoke the no-contest clause, [but] whether or not the personal representatives [of the estate] had a positive obligation to seek formal proof of the will in the face of uncontradicted suspicious circumstances,” Boettger states in an email to Investment Executive (IE).
While the decision appears to give estate planners more clarity on how a no-contest clause may be interpreted by courts, what effect the decision might have in other jurisdictions remains unclear, says Sarah Barker, an associate with Carbert Waite LLP in Calgary.
“In Alberta, legislation provides for limited opportunities to challenge a will as compared to other provinces,” Barker writes in an email to IE. “For this reason, the facts in Mawhinney are probably the best example of a scenario where a no-contest clause would be worth considering in Alberta.”
However, Hett believes the decision will have an impact on estate planning across the country: “I’m quite thrilled to see the appeal hold up the [no-contest] clause, and how it was constructed. The validity of it wasn’t even challenged. That speaks well for support of testamentary freedom that we say you have in Canada, and particularly in Alberta.”
Stratton suggests that estate practitioners who consider including a no-contest clause in a will should take measures to ensure it is carefully drafted. Most important, a no-contest clause can’t prohibit individuals from applying to the court for interpretation of the will, or from enforcing their rights under relevant provincial laws.
“This clause, properly drafted, is a good way to prevent family squabbles, years of litigation and losing hard-earned savings to legal costs,” Stratton says.