Zaleschuk Estate

Victor Stephen Zaleschuk died on January 2, 2022, leaving his spouse, Wendy Chen, and two children, Shane Zaleschuk and Christian Zaleschuk. Most of his wealth was in California, and was held in two trusts. This case considers the interpretation of a Will he made on January 12, 2020, governing his British Columbia assets, which consisted of a residence in Victoria, and a handful of assets of significantly less value, and no funds. His son Shane was living in a suite in the residence.

The Will appointed Ms. Chen has his executor and included the following:

a).        I DISTRIBUTE MY ASSETS AS FOLLOWS:

i).         Residence at 750 Pears Road, Victoria, British Columbia, Canada, V9C 3Z8 to Wendy Xin Hong Chen. All Farm equipment and implements included.

ii).        2016 Ford Flex to Wendy Xin Hong Chen.

iii).        2011 Ford F-150 to Shane Zaleschuk.

iv).       All shop tools, Nikon Camera, Gold Bracelet with Lapis & Diamonds to Shane Zaleschuk.

b).        I DISTRIBUTE ANY RESIDUE OF MY ESTATE AS FOLLOWS:

To both Wendy Xin Hong Chen and Shane Zaleschuk all Art & Jewelry and personal belongings as they see fit.

5).        I give my Executrix the following POWERS:

Power of sale, realization, employ agents, and power of dispute resolution.

***When and if the property is sold: Shane Zaleschuk to receive $150,000 CAD. Steve Whitner (a minor) to receive $25,000 CAD invested towards a[n] Educational Trust Fund.

6).        This Will was executed in Canada for Canadian Assets ONLY. My updated (01-01-2020) USA Children’s Trust takes precedent of ALL MY ASSETS OUTSIDE OF CANADA.

There was an error in the description of the beneficiary Steve Whitner, whose last name is Widner.

In a letter to his lawyer in California seeking advice concerning his U.S. estate planning, he described his plans for his residence in Victoria:

This property to be gifted (***) to Wendy Xin Hong Chen with the following caveats

i).         Suite will remain as Shane Zaleschuk residence. If the property is sold Shane to receive $150,000 CAD. A $25,000 Education Fund gifted to Steve Whitner.

A Canadian Trust does not work as I am not a full time resident of Canada. A Canada Will is included to clarify Canadian assets only.

ii).        As the mortgage renewal will be due April - 2020.....Wendy will be added to the title.

***After which Wendy will automatically inherent by Canada Law. But the Will must be adhered to regarding the sale of the property.

It should be noted that Wendy Chen was not in fact added to the title of the residence and it formed part of the British Columbia estate.

In her reasons for judgment, in Zaleschuk Estate, 2023 BCSC 523, Madam Justice Young first dealt with a challenge by Shane to his father’s capacity to make a will, and found that he did have capacity and that the Will is valid.

The more interesting aspects of the decision involve the interpretation of the will in light of reforms made in 2014 to British Columbia’s succession laws when the Wills, Estates and Succession Act came into effect. The reforms liberalized the types of evidence admissible when construing a will, permitted the court to rectify mistakes in a will, and also permitted the court to give effect to a document or other record that does not comply with the formal signing and witnessing requirements of a will.

Wendy Chen argued that she was entitled to the residence, and that the payments of $150,000 and $25,000 were void because they are inconsistent with the gift of the residence to her.

Shane Zaleschuk argued that the gift of the residence was subject to a trust requiring her to pay those cash gifts when she sold the residence. He also argued that the letter to the California lawyer, referred to in the decision as the “Record,” gave him the right to occupy the suite in the residence.

The most relevant provisions of the Wills, Estates and Succession Act are: 4(2), 58 (1) through (3), 59 (1) and (2):

4(2)        Extrinsic evidence of testamentary intent, including a statement made by the will-maker, is not admissible to assist in the construction of a testamentary instrument unless

(a)        a provision of the will is meaningless,

(b)        a provision of the testamentary instrument is ambiguous

(i)         on its face, or

(ii)        in light of evidence, other than evidence of the will‑maker's intention, demonstrating that the language used in the testamentary instrument is ambiguous having regard to surrounding circumstances, or

(c)        extrinsic evidence is expressly permitted by this Act.

58 (1)   In this section, “record” includes data that

(a)        is recorded or stored electronically,

(b)        can be read by a person, and

(c)        is capable of reproduction in a visible form.

(2)        On application, the court may make an order under subsection (3) if the court determines that a record, document or writing or marking on a will or document represents

(a)        the testamentary intentions of a deceased person,

(b)        the intention of a deceased person to revoke, alter or revive a will or testamentary disposition of the deceased person, or

(c)        the intention of a deceased person to revoke, alter or revive a testamentary disposition contained in a document other than a will.

(3)        Even though the making, revocation, alteration or revival of a will does not comply with this Act, the court may, as the circumstances require, order that a record or document or writing or marking on a will or document be fully effective as though it had been made

(a)        as the will or part of the will of the deceased person,

(b)        as a revocation, alteration or revival of a will of the deceased person, or

(c)        as the testamentary intention of the deceased person.

 

59 (1)   On application for rectification of a will, the court, sitting as a court of construction or as a court of probate, may order that the will be rectified if the court determines that the will fails to carry out the will-maker's intentions because of

(a)        an error arising from an accidental slip or omission,

(b)        a misunderstanding of the will-maker's instructions, or

(c)        a failure to carry out the will-maker's instructions.

(2)        Extrinsic evidence, including evidence of the will-maker's intent, is admissible to prove the existence of a circumstance described in subsection (1).

Ms. Chen argued that there was no ambiguity in the will permitting extrinsic evidence, but rather two inconsistent gifts, and the absolute gift to her prevails over the inconsistent cash gifts. Madam Justice Young wrote:

[58]       The executor here submits that it is not appropriate to consider extraneous evidence when constructing a will which needs no clarification. Extraneous evidence is only considered when there is a need for clarification of a will. She cites ElliottEstate v. Elliott, 1998 Can LII 4471 which has some similarities to the present case. Of note, that case predated the enactment of the WESA, and so deals with the stricter common law rules of construction. The WESA came into force in 2014. Prior to that, the court had no power to rectify a will (Simpson v. Simpson Estate, 2022 BCCA 208 at para. 70).

[59]       In Elliott the will provided the petitioner with an absolute bequest of the testator’s estate. The respondents who had lived on the property for many years submitted that it was most probable that the testator intended to bequeath his property in trust to the petitioner subject to the life estate of the respondents.

[60]       The central issue in the case was what interest under the testator’s will did the respondents have in the house that they occupied. Justice Edwards found that this was not a case of a patent omission or even of ambiguity. It was a case where unambiguous but contradictory bequests were found in the same will. If the initial bequest to the executor of the property stood alone in the will it could only be interpreted as an absolute gift of the entire estate to her. If the other bequests stood alone they could not be said to be ambiguous as to the intention to create life estates or specific bequests of modest sums. The two gifts were inconsistent (Elliott at para. 19).

[61]       Justice Edwards found that the case before him was not a case of ambiguity which would permit the court to entertain evidence of surrounding circumstances in order to determine the testator’s intention or supply some omission (para. 20). He found that it was a case of a will containing incompatible bequests which were governed by the Blackburn and Cox v. McMillan (1902), 33 S.C.R. 65 line of authority (para. 21).

Citing Theimer Estate, 2012 BCSC 629, Justice Young held that the proper approach is to consider the Will as a whole in light of properly admissible extrinsic evidence.

She held that she could consider the letter to the California lawyer to assist in determining Victor Zaleschuk’s intentions. She found that it supported the view that he intended to impose a trust on the residence requiring payment of the cash gifts if and when it is sold.

In contrast, Madam Justice Young did not give effect to the statement in the letter permitting Shane to continue to live in the suite in the residence. The letter, though authentic, did not represent Victor Zaleschuk’s final testamentary intention.

Justice Young wrote:

[97]       I conclude that the Record is a working paper prepared to obtain advice from Mr. Watt and possibly from Shelsey Robertson as to whether the deceased’s overall estate plan is “doable”. It does not set out the deceased’s fixed and final expression of intention as to the disposal of the deceased’s property on death. I am influenced by his statement that “this is the second draft that I mailed to Mr Watts after he made a few changes”.

[98]       The gift to Shane of a life estate to the suite in the Residence is inconsistent with the gift of the property to Wendy. It is not provided for in the Will.

….

[100]    The cash legacies to Shane and to Steve Widner are repeated in the Will and although inconsistent with an absolute gift, I am satisfied that the deceased did intend that these cash legacies be paid. I find that the cash legacy clause should be read in as a trust imposed on Ms. Chen to pay if she sells the Residence.

[101]    I am not satisfied that the words “Suite will remain as Shane Zaleschuk residence” should be added to the Will. The Record is not a testamentary document. It sets out a plan for the U.S. and Canadian assets but some of it was not implemented, and the note changed on a few occasions, although the orphan signature page remains the same.

Justice Young declared:

      iii.        the subclause in clause 5 of the Will as corrected is valid:

 ***When and if the property is sold: Shane Zaleschuk to receive $150,000 CAD. Steve Widner (a minor) to receive $25,000 CAD invested towards a[n] Educational Trust Fund.

Huber Estate

There are very few reported cases in British Columbia in which a will has been rectified under section 59 of the Wills, Estates and Succession Act. This section has been in effect for five years, which is still relatively new. Section 59 allows the court to correct drafting and other errors in wills. The operation of this provision is illustrated in a recent decision of Madam Justice Francis, Huber Estate, 2019 BCSC 866.

Section 59 allows the court to rectify a will if the judge finds that the will does not reflect the will-maker’s intentions because of

(a)an error arising from an accidental slip or omission,
(b)a misunderstanding of the will-maker's instructions, or
(c)a failure to carry out the will-maker's instructions.

The court may consider direct evidence of the will-maker’s intentions, such as the drafting lawyer’s evidence of what the will-maker told the lawyer what she wanted in her will.

When Mary Louise Huber instructed her lawyer to draft her last will, she told her lawyer that she wanted the residue of her estate divided equally among her three sons. The will as drafted provided that her estate was to be payable to her “children.” The will then had the following clause:

"If any of my children are not then living but such child has left children of his who is or are then living, then the portion that such deceased child would have received if he had been living on the 30th day following the date of my death shall instead be divided in equal shares amongst his children who are then living."

The will was dated November 18, 2015, and Ms. Huber passed away March 23, 2018

Ms. Huber had a daughter who passed away in 1986, and her daughter had children. As drafted the will appears to divide the estate into four shares with one share going to Ms. Huber’s daughter’s children.

The lawyer who drafted the will gave evidence that Ms. Huber told her that she wanted to leave her estate to her three sons, and had not advised her that she had a daughter who had passed away.  in an estate-planning questionnaire Ms. Huber completed, she indicated that she only had three children. She told her lawyer that she the only change she wanted to make from her previous will was to change the executor, because her husband, who was her executor, had passed away. Under the previous will, Ms. Huber’s estate would have been divided among her three sons.

Madam Justice Francis granted the order rectifying the will so that the estate would be divided among the three sons. She wrote:

[8]             It is significant, in my view, that paragraph (j) uses the masculine gender in reference to the children of the Will-Maker.  It is also significant that the Will makes specific gifts to named grandchildren but does not include any gifts to the children of the Will-Maker’s predeceased daughter.

She also based her decision on the lawyer’s evidence. She found that based on the questionnaire, the lawyer reasonably understood Ms. Huber’s sons to be her only children. In this case, the error was rectified on the basis that the lawyer had misunderstood the will-maker’s instructions.

Supreme Court of Canada Decision Takes a Narrow Approach to Rectification

The majority of the Supreme Court of Canada has construed the equitable power of the court to rectify a contract or other document relatively narrowly in a recent decision, Canada (Attorney General) v. FairmontHotels Inc. 2016 SCC 56.  

Fairmont Hotels Inc. and two subsidiaries sought to rectify a directors’ resolution in which the directors had redeemed certain shares, triggering a tax liability. The redemption was part of a number of transactions by the companies to finance the acquisition of two hotels. Both the Ontario Superior Court of Justice and the Ontario Court of Appeal had allowed rectification, finding that the parties had from the outset a continuing intention to structure the transactions in a tax neutral way. Those two Ontario Courts had applied a previous leading authority from the Ontario Court of Appeal, Juliar v. Canada (Attorney General),    46 O.R. (3d) 104, aff’d (2000), 50 O.R. (3d) 728. In Juliar the Ontario Court of Appeal held that a transfer of shares for a promissory note that triggered a tax liability could be rectified so that the transaction would be an exchange of shares for shares, with the effect of deferring tax, on the bases that the parties had a common continuing intention to avoid an immediate tax liability.

Canada appealed the decision allowing rectification in Fairmont, and Mr. Justice Brown for the majority of the Supreme Court of Canada, allowed the appeal, holding that Fairmont Hotels Inc. had not met the criteria for rectification. The majority found that the parties had not established that they had “reached a prior agreement with definite and ascertainable terms. “ It was insufficient for the parties to intend to structure their affairs in a tax neutral manner in order to rectify the transaction. The court may rectify a document that incorrectly sets out a specific agreement.

Mr. Justice Brown summarized the law on rectification as follows:

[38]                          To summarize, rectification is an equitable remedy designed to correct errors in the recording of terms in written legal instruments. Where the error is said to result from a mistake common to both or all parties to the agreement, rectification is available upon the court being satisfied that, on a balance of probabilities, there was a prior agreement whose terms are definite and ascertainable; that the agreement was still in effect at the time the instrument was executed; that the instrument fails to accurately record the agreement; and that the instrument, if rectified, would carry out the parties’ prior agreement. In the case of a unilateral mistake, the party seeking rectification must also show that the other party knew or ought to have known about the mistake and that permitting the defendant to take advantage of the erroneously drafted agreement would amount to fraud or the equivalent of fraud.

In this case, in the majority’s view, the facts did not permit rectification. As set out in paragraph 40,

The error in the courts below is of a piece with the principal flaw I have identified in the Court of Appeal’s earlier reasoning in Juliar. Rectification is not equity’s version of a mulligan. Courts rectify instruments which do not correctly record agreements. Courts do not “rectify” agreements where their faithful recording in an instrument has led to an undesirable or otherwise unexpected outcome. 

In dissent, Madam Justice Abella, for herself and Madam Justice Cote, would have dismissed the appeal, and upheld the orders allowing rectification. They considered that the majority applied rectification too narrowly, and that Canada Revenue Agency would be unjustly enriched if the parties were not allowed to rectify their mistake. 

Marley v. Rawlings

As I wrote in my most recent post, Fuchs v. Fuchs, I am looking at cases in other jurisdictions dealing with rectification of wills for a paper I am working on. I am not aware of any cases in British Columbia interpreting our new provision allowing for rectification of a will, section 59 of the Wills, Estates and Succession Act. Accordingly, I am looking elsewhere. Fuchs is an Alberta case. 

England has had legislation permitting rectification of wills for longer than either Alberta or British Columbia. Section 20 of the Administration of Justice Act, 1982, c. 53 is similar, but section 20 (1) is worded somewhat more narrowly than section 59 (1) of the WESA. Section 20 (1) provides:

(1)If a court is satisfied that a will is so expressed that it fails to carry out the testator’s intentions, in consequence—

(a)of a clerical error; or 

(b)of a failure to understand his instructions, 

it may order that the will shall be rectified so as to carry out his intentions. 

Section 20 was recently considered by the United Kingdom Supreme Court in Marley v.Rawlings, [2014] UKSC 2 (BAILII). In that case, two spouses intended to make wills leaving their estates to each other, with a provision that if the other did not survive by one month, each left the residue of his or her estate to Terry Michael Marley, who was unrelated, but they considered him to be like a son to them. The wills were straight forward enough, but with one problem: the husband signed will intended for the wife, and the wife intended to sign the will intended for the husband. After the husband’s death, his wife having predeceased him, the United Kingdom Supreme Court rectified his will so that it contained the typed parts of the will signed by his wife.

Fuchs v. Fuchs

I am still waiting for some reported British Columbia cases interpreting section 59 of the Wills, Estates and Succession Act (“WESA”), which expressly allows the court to rectify a will. Subsections 59 (1) and (2) provide as follows:

Rectification of will
 59  (1) On application for rectification of a will, the court, sitting as a court of construction or as a court of probate, may order that the will be rectified if the court determines that the will fails to carry out the will-maker's intentions because of

(a) an error arising from an accidental slip or omission,

(b) a misunderstanding of the will-maker's instructions, or

(c) a failure to carry out the will-maker's instructions.

 (2) Extrinsic evidence, including evidence of the will-maker's intent, is admissible to prove the existence of a circumstance described in subsection (1).

In the absence of finding a British Columbia cases dealing with this section, I have been looking at cases in other jurisdictions for a paper I am writing for the Continuing Legal Education Society of British Columbia, and have come across some decisions from Alberta.

Alberta, like B.C., recently overhauled its succession law. Alberta’s Wills and Succession Act came into effect in February 1, 2012 (we were a little behind, with B.C.’s WESA coming into effect March 31, 2014). Alberta also now has a provision allowing the court to rectify a will. The wording of subsection 39 (1) of Alberta’s legislation is similar:

Rectification 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.

One of the cases I have found in which the Alberta Court of Queen’s Bench rectified a will under Alberta’s legislation, Fuchs v. Fuchs, 2013 ABQB 76 (CanLII), is interesting because of an interplay between changes in legislation dealing with the effect of marriage on a will, as well as the transition rules reflecting whether the new legislation applies or the old.

In 1998, Hans Fuchs and Barbara Fuchs began co-habiting. Mr. Fuchs made his will on June 22, 1999 leaving his estate to Barbara Fuchs. They were not yet legally married, and the will did not contain a clause stating it was in contemplation of marriage. Mr. and Mrs. Fuchs were legally married on April 20, 2001. Mr. Fuchs died on February 8, 2012.  

At the time Mr. Fuchs made his will, the old Alberta law, the Alberta Wills Act, provided that marriage revoked a will unless there was a declaration in the will that it was made in contemplation of marriage. Again, this is similar to British Columbia’s old Wills Act. Like British Columbia, Alberta’s new legislation has changed the law so that marriage no longer revokes a will.

If the Fuchs’ marriage revoked Mr. Fuchs’ will, then he would have died without a will, and Mrs. Fuchs would be entitled to half of the estate under Alberta’s intestacy rules, and his children from a previous marriage would be entitled to the other half. But if the will were found to be valid, then Mrs. Fuchs receives the entire estate.

Here is where the transition rules become interesting. You may notice that Mr. Fuchs died shortly after the new legislation came into effect in Alberta. The old law said marriage revokes a will unless there is a declaration that it is made in contemplation of marriage, but the new legislation does not. Associate Chief Justice Rooke held that the old law still applies in this case because under section 8 of Alberta’s Wills and Succession Act, the old law applies if the will was made before February 1, 2012. The date of the will, rather than the date of death, is the key date in respect of whether marriage revokes a will.

However, section 8 also provides that section 39 of Alberta’s Wills and Succession Act allowing the court to rectify a will applies if the will-maker died after the new law came into effect.

Associate Chief Justice Rooke found that Mr. Fuchs intended that his will would remain valid after his marriage, and that he made it in contemplation of his marriage to Mrs. Fuchs. Accordingly, Associate Chief Justice Rooke applied Alberta's rectification provision to rectify teh will by adding the sentence: "This will is in contemplation of my marriage to my friend BARBARA LIPPKA [Mrs. Fuchs' maiden name] at such time as I am legally able to do so." 

In the result, the Court held that Mr. Fuchs' will was not revoked by the marriage, and Mrs. Fuchs was entitled to his estate under the will.

The transition rules in British Columbia are a little different, but I think a court in B.C. could apply the same analysis on similar facts. In British Columbia, although I am not aware of any cases on point yet, the key event for determining whether a marriage revokes a will is likely the date of the marriage (rather than the date of the will or the date of death). This is because of section 186 (3). Section 186 says,

Transition — application of Part 4

186 (1)Subject to subsections (2) and (3) of this section and section 189, Part 4 [Wills] applies to a will, whenever executed, if the will-maker dies on or after the date on which Part 4 comes into force.

(2) Subsection (1) does not invalidate a will validly made before the date on which Part 4 comes into force.

(3) Subsection (1) does not revive a will validly revoked before the date on which Part 4 comes into force.

Under B.C.s old Wills Act, marriage revoked a will unless it was made in contemplation of marriage. If the marriage occurred before WESA came into effect on March 31, 2014, the marriage would have revoked the will, and pursuant to subsection 186 (3), the will would not be revived by WESA.

However, the rectification provision in section 59 applies if the will maker died after WESA came into effect. Accordingly, if a will-maker in B.C. dies on or after March 31, 2014, and the court finds that the will made prior to marriage omitted the phrase “this will is made in contemplation of my marriage to…” because of

“(a) an error arising from an accidental slip or omission,
(b) a misunderstanding of the will-maker's instructions, or
(c) a failure to carry out the will-maker's instructions…,”

the court could rectify the will by adding the necessary words, in which case, the marriage will not have revoked the will.

McPeake v. Canada (Attorney General)

If a trust agreement does not accurately reflect the intentions of the parties creating the trust, the trustees may make an application to court to rectify the trust. The power to rectify a trust may be used to save the parties from significant taxes that they would otherwise have to pay. Taxpayers sometimes employ trusts to arrange their affairs to minimize income tax. Provided it is not a sham or done to hide property or income, the use of trusts to minimize income tax is legal in Canada. But transferring property to a trust can be tricky: if it is not set up just right, the terms of the trust may run afoul tax provisions that can result in a big and unexpected tax bill.

Barry McPeake owned one-fifth of the shares in a software development company in the 1990s. After receiving tax advice, he transferred his shares in the company to a family trust, of which he, his wife, and a legal advisor were the trustees. Members of his family were the beneficiaries of the trust. The purpose of the trust was to avoid tax if the shares were sold. Growth in the value of the shares could be allocated to the beneficiaries, who could then each use a capital gains exemption, which at that time was $500,000 on qualifying shares. The effect was that instead of there only being one $500,000 exemption available to Mr. McPeake when the shares were sold, there would be several $500,000 exemptions, significantly reducing capital gains tax.

The software development company was sold to Microsoft in 1999. Mr. McPeake’s family trust received $3,950,000 for its shares.

Canada Customs and Revenue Agency assessed Mr. McPeake for income tax on income and capital gains in respect of the shares after he transferred the shares to his family trust. The reason was that the terms of the trust document was caught by section 75(2) of the Income Tax Act, which is one of several sections containing rules that attribute income to someone who has transferred property.

In a nutshell, if after you transfer property to a trust, the terms of the trust permit the property to revert to you, or allow you to determine who the property can pass to, or if your consent is required to dispose of the property, income and capital gains are attributed back to you during your lifetime. The section says:

75. (2) Where, by a trust created in any manner whatever since 1934, property is held on condition

(a) that it or property substituted therefor may

(i) revert to the person from whom the property or property for which it was substituted was directly or indirectly received (in this subsection referred to as “the person”), or

(ii) pass to persons to be determined by the person at a time subsequent to the creation of the trust, or 

(b) that, during the existence of the person, the property shall not be disposed of except with the person’s consent or in accordance with the person’s direction,

any income or loss from the property or from property substituted for the property, and any taxable capital gain or allowable capital loss from the disposition of the property or of property substituted for the property, shall, during the existence of the person while the person is resident in Canada, be deemed to be income or a loss, as the case may be, or a taxable capital gain or allowable capital loss, as the case may be, of the person.

Canada Customs and Revenue Agency identified several ways in which the trust was caught by section 75 (2), some of which were fixed in a rectification proceeding in 2009, which Canada Customs and Revenue Agency did not oppose. But problems remained after the 2009 rectification. The terms of the trust required that the trustees must make decisions unanimously, which means that Mr. McPeake would have to consent to any disposal of the trust property. McPeake could also become the sole trustee, which would enable him to determine beneficiaries after the creation of the trust.

The trustees applied to the Supreme Court of British Columbia to rectify the trust document to rectify those provisions that triggered attribution under section 75(2) in McPeake v. Canada (Attorney General), 2012 BCSC 132. This time the government opposed the rectification.

In her decision, Madam Justice Dorgan neatly summarized British Columbia law on rectification as follows:

[16] Rectification is an equitable remedy that courts may apply to various legal documents that stand as instruments expressing intended legal relations. Rectifiable documents can include contracts (Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, 1 S.C.R. 678 (“Performance Industries”)), land deeds (771225 Ontario Inc. v. Bramco Holdings Co. (1994), 17 O.R. (3d) 571 (Gen. Div.) (“Bramco SC”)), documents relating to corporate transactions (Juliar v. Canada (Attorney General) (1999), 46 O.R. (3d) 104 (Sup. Ct.) (“Juliar SC”)), and trust deeds (Rose v. Rose (2006), 81 O.R. (3d) 349 (Sup. Ct.)). Rectification does not change the intended legal relation: it would not, for example, change the essence of the agreement between contracting parties. Rather, rectification changes an instrument’s mistaken expression of that intention. Rectification is restorative, not “retroactive”: “[Rectification] is to restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other” (Performance Industries, para. 31). Since rectification restores a truth to an instrument’s expression, it acts, in time, from the point of instrument formation forward.

[17] The party seeking rectification bears the onus. For the court to exercise its equitable jurisdiction to rectify a document, a petitioner must satisfy the court that the request to rectify merely aligns the document with the true intentions underlying it, and that the aspects to be rectified are mistakes that obstruct the true intentions behind the document’s formation. Long before Binnie J. discussed rectification in Performance Industries, Vice-Chancellor W. M. James wrote in Mackenzie v. Coulson, (1869) L.R. 8 Eq. 368 at 375, “Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts.”

[18] As set out in Bank of Montreal v. Vancouver Professional Soccer Ltd. (1987), 15 B.C.L.R. (2d) 34 (C.A.) at 36 - 37 (“Bank of Montreal”) by McLachlin J.A. as she then was, a petitioner for rectification of any document must establish:

1. that the written instrument does not reflect the true agreement of the parties; and
2. that the parties shared a common continuing intention up to the time of signature that the provision in question stand as agreed rather than as reflected in the instrument.
See: Joscelyne v. Nissen, [1970] 2 Q.B. 86 at 98 - 99, [1970] 2 W.L.R. 509, [1970] 1 All E.R. 1213 (C.A.); Frederick E. Rose (London) Ltd. v. William H. Pim Junior & Co., (1953), 2 Q.B. 450 at 451, [1953] 3 W.L.R. 497, [1953] 2 All E.R. 739 (C.A.).

The intention underlying the document must be more than a general intention. Exactly what constitutes sufficient specificity of intention varies by context.

In this case, Madam Justice Dorgan found that Mr. McPeake and the other parties to the trust had a sufficiently specific intention in creating the trust of maximizing capital gains exemptions on the shares of the company for the court to rectify the trust document to correspond with that intention. Accordingly, she ordered the trust document rectified so that the income and capital gains would not be attributed back to Mr. McPeake.