One of the more controversial clauses that a testator can place in his or her will is a “no-contest” clause, the purpose of which is to deter any would-be challengers to the will and discourage fighting amongst beneficiaries. This objective is accomplished by wording to the effect that a beneficiary will be automatically disentitled to any distribution or gift contained in the will if he or she challenges the will or commences litigation in respect of the will. These clauses have often been challenged as being “in terrorem” – a category of unenforceable forfeiture clauses that includes restraints on marriage and other sanctions on behaviour or conduct. However, when properly drafted, a no-contest clause will be upheld and enforced by the Court.

This was the result of a relatively recent decision of the Alberta Court of Appeal in Mawhinney v. Scobie, 2019 ABCA 76. In that case, the deceased was prominent Calgary businessman J.C. Anderson. Mr. Anderson passed away in September 2015 at the age of 84. His most recent will, executed just one month before his death, contained a no-contest clause. This new will was also significant in that it slightly altered the distribution of his estate from prior versions. In particular, the will changed the status of Mr. Anderson’s long-time partner and alleged fiancée, Ms. Mawhinney, from a residual beneficiary to a recipient of certain specific bequests.

After Mr. Anderson’s passing, Ms. Mawhinney raised concerns about suspicious circumstances and a potential lack of testamentary capacity in respect of the August will. Although the specific bequests to Ms. Mawhinney were substantial (including properties in Alberta and Texas, a Bentley automobile, and $2.7 million in cash), she had substantially more to gain from being a residuary beneficiary as she was in prior wills.

Rather than simply challenging the will outright, Ms. Mawhinney very astutely applied to the Court seeking a ruling on whether or not an action raising the issue of Mr. Anderson’s testamentary capacity at the time he executed the August will would trigger the no-contest clause. Of note is the fact that Ms. Mawhinney did not challenge the validity of the no-contest clause itself.

The text of the no contest clause in question was as follows:

If any beneficiary of this my Will challenges the validity of this my Will or any Codicil hereto or commences litigation in connection with any provision of my Will or any Codicil hereto, other than for:

(a)        Any necessary judicial interpretation or for the assistance of the court in the course of administration of my estate; or

(b)        Seeking to enforce or obtain any rights or benefits conferred by the laws of the Province of Alberta;

then, such beneficiary shall absolutely forfeit and lose all entitlement to benefits or to any gift to him or her hereunder, and every such benefit or gift so forfeited shall fall into the residue of my estate and the residue of my estate shall be distributed as if such beneficiary had predeceased me and left no issue surviving me.

In the first instance, the lower court held that an application pursuant to Surrogate Rule 75(1), which would require the personal representative to obtain formal proof of the will (assuming that sufficient evidence is tendered to rebut the presumption of capacity), would not trigger the application of the no-contest clause because such an application would fall within the second exception. The reasoning of the chambers judge was that Surrogate Rule 75(1) confers a right to make an application for formal proof.

This finding was overturned on appeal. The majority of the Court of Appeal held that Surrogate Rule 75(1) does not confer the type of “right” contemplated in the exception to the no-contest clause.[1] Rather, the Rule merely sets out the procedure that an interested party must follow to raise suspicious circumstances and displace the presumption of testamentary capacity. Furthermore, the chambers judge’s finding would strip the clause of the meaning and effect intended by the testator; namely, to discourage litigation and speculative challenges to the will.

The Court held that the clause was sufficiently narrow so as not to offend public policy (by, for example, precluding an application to obtain statutory benefits) but not so narrow as to also permit applications raising suspicious circumstances. Practically speaking, however, it is not the application itself that triggers the clause, but rather it is the outcome of that application: If the applicant ultimately prevails in proving that the testator lacked capacity, then the will (and the clause) would no longer be valid. The Court observed:

Therefore, 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. The clause is designed to discourage litigation, not prohibit it.

Ms. Mawhinney sought leave to appeal to the Supreme Court of Canada and was denied.

There are several important takeaways from this case:

1.     A no-contest clause can be an effective tool to discourage would-be challengers to a will, especially when dealing with larger estates and where not all beneficiaries are treated equally under the will. Of course, such a clause will not guarantee that no litigation will be commenced in respect of the estate (as illustrated by the ongoing disputes surrounding the Anderson estate). But, as the Court of Appeal observed, the clause does “raise the stakes” for anyone contemplating a challenge to the will. Indeed, such a clause will be a much stronger deterrent now, in light of the Court’s ruling.

2.     Courts in Alberta tend to afford a great deal of latitude and deference to a testator’s wishes. This has been demonstrated in a number of cases dealing with controversial bequests and clauses. If worded carefully, testators can have a significant degree of comfort that their wishes will be honoured and enforced.

3.     Careful drafting is essential. The strength of the no-contest clause in the Mawhinney case was in the details. The clause was carefully drafted so as not to run contrary to any legislation. If the clause was drafted as a blanket restriction on any litigation or court application, it would not likely have been upheld. Competent legal advice is paramount when considering unconventional or non-traditional provisions in a will.

[1] The type of rights contemplated, according to the Court, were akin to those provided for by dependents’ relief legislation and other similar statutory or common law entitlements.

Invitation for Discussion:

Whether you are considering updating your will to include a clause discouraging litigation or you find yourself affected by such a clause in a will to which you have an interest, the estates lawyers at Nerland Lindsey LLP would be happy to speak with you and guide you through your options.

If you would like to discuss this blog in greater detail, or any other estate litigation matter, please do not hesitate to contact Judd Blitt.

Disclaimer:

Note that the foregoing is for general discussion purposes only and should not be construed as legal advice to any one person or company. If the issues discussed herein affect you or your company, you are encouraged to seek proper legal advice.