Link: Case Summary Document
Citation:  ONSC 4042 (Ontario Superior Court of Justice, Richetti J.)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.
The deceased had formed a company in the Cayman Islands for tax reasons. He held a 75% interest in the company and his five children the remaining 25% interest. The assets in the company were administered by a trust company, CIBC. The case turned on the fate of seven joint bank accounts, totalling $1,075,872.83. These accounts had been held jointly by the deceased and two of his sons.
The deceased’s lawyer was Mr Pole, who set up the company in the Cayman Islands for the deceased, and prepared his will documents. Two wills were prepared, one in 2004 and one in 2006. The 2004 will provided that the estate was to be divided into five parts, one part for each of his children or their issue. If one of the deceased’s children died without issue, that particular child’s share was to go to the Watch Tower. The 2006 will was prepared on 5 July 2006 along with a purported Transfer and Assignment to the Watch Tower of the deceased’s 75% share in the Cayman Islands company. The will left substantially more of the deceased’s assets to the Watch Tower by not acknowledging the fact that joint bank accounts existed. Joint bank accounts would not have formed part of the deceased’s estate (as would be the case in Australia).
Although by this stage Pole had been the family’s lawyer for more than 12 years, he had not disclosed to the deceased that he was an Elder of the Jehovah’s Witnesses, and that he had acted as counsel for the Watch Tower in the past. After the signing of the Transfer and Assignment document, Pole travelled to the Cayman Islands with the document to effect the transfer of the assets to the Watch Tower, but the trustee, CIBC, refused to recognise or act upon the document. Pole informed the deceased that, notwithstanding this refusal, the residue of the estate would include his share of the Cayman Islands company.
Some weeks after the 2006 will was executed, the deceased transferred more of his assets (about a further 60% in total) from the Cayman Islands company into joint accounts with his sons. His Honour had already pointed to the plethora of evidence that indicated that the deceased clearly intended to excise the joint accounts from his estate, and said that this late change further illustrated that the deceased did not want the assets transferred to be included in his estate.
The deceased died on 27 March 2007. After his death, Pole wrote to the executor (the eldest of the deceased’s sons) to the effect that the Watch Tower was now the majority holder of the Cayman Islands company shares, on the basis that the 75% share had been transferred to the Watch Tower inter vivos (while the deceased was still alive). This was based on the Transfer and Assignment document which had been refused by the Cayman Islands company’s trustee. He also wrote to the trustee threatening legal action if the transfer was not accomplished immediately.
His Honour took a predictably dim view of Pole’s actions. As a lawyer, he should have disclosed the very clear conflict of interest which existed in his dealings with the deceased. His Honour found that his actions were biased towards the interests of the Jehovah’s Witnesses. His Honour said on this point (at ):
I find it surprising and questionable that Mr. Pole would not disclose a conflict or even a potential conflict that he was an ‘elder’ or ‘lay minister’ with the Jehovah’s Witness church and had acted for the Jehovah’s Witness church prior to the preparation of the 2004 Will or the July 2006 Will or the Transfer and Assignment. Mr. Pole’s reason for not doing so – because he wasn’t wearing his Jehovah’s Witness ‘hat’ at the time – is simply not a good answer. Arthur Sawdon and the other shareholders of Sawdon Holdings were entitled to know all of Mr. Pole’s ‘hats’ when Mr. Pole provided advice or prepared documents for Arthur Sawdon…. upon Arthur Sawdon’s death, Mr. Pole’s actions in his attempts and threatens [sic] to get an immediate transfer of the shares of Sawdon Holdings to the Watch Tower, not as a residual beneficiary but as an inter vivos gift, gives the appearance of bias in favour of the Watch Tower. Mr. Pole’s explanation that he did this to avoid estate fees was not a credible explanation….
His Honour went on to find that the deceased had the clear intention of creating joint bank accounts with his sons, and that he did not intend to make any inter vivos gift to the Watch Tower. Nor did the deceased make any gift of the interest on the accounts (as opposed to the accounts themselves) to the Watch Tower. As the ‘gift’ of the joint accounts to his sons was not a testamentary disposition, they were not included in the assets of the estate.
Therefore, the Watch Tower failed in its bid to obtain the benefit of the joint accounts. They were entitled to the residuary of the estate under the will, but as most of the assets had been transferred to joint accounts, very little remained to be distributed.
The case may be viewed at: http://www.canlii.org/en/on/onsc/doc/2012/2012onsc4042/2012onsc4042.html
Implications of this case
This case has been in the courts since 2010, when there was an initial attempt by one of the sons of the deceased to have the 2006 will declared invalid on the grounds of the medical condition of the deceased when he made the will. That application was denied as the evidence pointed to the deceased’s good health at the time. In the same application, the Watch Tower attempted to stop distributions from the estate, and payment of various fees. This was in order to preserve the amount to which they might have been entitled. This decision disposed of any attempt by the charity to have other than the residuary from the will, which had been the deceased’s intention from the beginning.
The case also highlights the conflict of interest which will arise when someone associated with a charity to benefit under a will is also acting as the testator’s solicitor, or in another professional capacity, in the matter of the will or property distribution. The solicitor in this case should have disclosed his connection to the charity and ceased acting for the testator unless there was fully informed consent.