J. 2003 SKQB 397 Q.B.G. A.D. 1999 No. 2709 J.C.S. IN THE QUEEN’S BENCH JUDICIAL CENTRE OF SASKATOON BETWEEN: GARRY MAYER and DARRELL NORDSTROM and DATAPLAN SECURITIES LTD. DEFENDANTS L.J. Litman for the plaintiff K.L. Smith for the defendants JUDGMENT FOLEY J. September 19, 2003 [1] William Mayer (Mayer) died on June 16, 1997. His will directed that the residue of his estate be divided between two of his three children, namely, his son Garry Mayer, the plaintiff in this action and his daughter, Cheryl Pokol. One of the estate assets was Trimark mutual fund which Mayer had purchased in November 1996 for $60,000. In June 1997 its value was $68,501.10 which was eventually distributed to the two beneficiaries. [2] Garry Mayer by this action claims that the mutual fund ought never to have formed part of his father’s estate. It was, he says, his father’s intention to name him as beneficiary of the fund, but that this plan was defeated by the negligence of the defendants Darrell Nordstrom (Nordstrom) and Dataplan Securities Ltd. [3] As this action is brought under simplified procedure, the evidence-in-chief of the plaintiff, Garry Mayer and his wife Lynn Mayer, is by way of affidavit while the defendants’ case is submitted through the affidavit of Nordstrom. Each party gave notice of intention to cross-examine on the affidavits. [4] The facts arising from the affidavits and cross-examinations which are not in dispute are: 1. The defendant, Nordstrom, is chartered life underwriter and financial consultant who sells life and investment products through Canada Life Assurance Company and Dataplan Securities Ltd. He and Mayer had business relationship from 1981 to 1987 during which time Mayer purchased life insurance and made investments. 2. In 1993, Mayer purchased an annuity life policy through Nordstrom for lump sum premium of $60,000, naming Garry Mayer as its beneficiary. When the annuity matured in August 1994, it was withdrawn by Mayer and deposited to his own account. 3. In 1996, Mayer again invested $60,000 through Nordstrom who recommended the purchase of units in Trimark Select Balanced Fund, mutual fund which had shown good performance. Nordstrom was aware that Mayer wished to designate Garry Mayer as beneficiary of the fund. In his completion of the application form for the units, Nordstrom entered Garry Mayer’s name in the beneficiary designation portion at Part 10 of the form, and as well he indicated in Part of the form that Mayer’s application was for non-registered plan. The completed application form was executed by Mayer on October 31, 1996. 4. The Part 10 beneficiary designation was void and had no legal effect by virtue of it being non-registered plan. On Mayer’s death, the fund amount was paid to Mayer’s estate and, in result, Garry Mayer received only one half of the fund. [5] The plaintiff’s position is that as Nordstrom was aware of Mayer’s intention to designate Garry Mayer as sole beneficiary of the investment, it was incumbent on him to ensure that Mayer’s objective was achieved. That duty is said to have been breached when Nordstrom failed to realize that the Trimark fund would not recognize designated beneficiary or alternatively, by his failure to recommend that the investment be made in the joint names of Mayer and Garry Mayer, or in his decision not to place before Mayer known alternate investment vehicles in which the beneficiary designation would be effective. [6] Support for the plaintiff’s submission that Nordstrom was ignorant of the beneficiary limitation in this case is said to be found in Nordstrom’s entry of Garry Mayer’s name as designated beneficiary on the application form and Lynn Mayer’s evidence that, subsequent to Mayer’s death and upon being apprised by her of the designation problem, Nordstrom had merely stated that he would need to look into the matter. [7] Nordstrom acknowledges that he was aware of Mayer’s plan to have the investment pass to his son in the event of Mayer’s death, but denies being unaware of the limitation to the Trimark fund. He says “I advised William Mayer that he would have to make specific gift or bequest in his Will stating that Garry Mayer was to receive the Mutual Fund in order to ensure that the Mutual Fund would in fact be received by Garry Mayer following William Mayer’s death.” [8] On cross-examination, Nordstrom said it was his general practice to issue this type of caution and that consequently “he believed he did so” on this occasion. He agreed that there were other investment vehicles which could have borne valid designation of beneficiary and, in any event, had father and son been named as joint owners the investment would have passed to Garry Mayer on Mayer’s death. His justification or rationale for his action or lack thereof was that, having cautioned Mayer to change his will, he had satisfied any obligation and the onus to act then rested upon Mayer. He described Mayer as very private person who would not have acceded to recommendation of joint ownership or request for the production of his will for Nordstrom’s examination. He says he entered Garry Mayer’s name in the designated beneficiary section only because that was Mayer’s instruction and “in any event, it did no harm and went to intent.” [9] Even if Nordstrom gave the caution he claims he did, his completion of the beneficiary designation on the application form could do nothing but cause confusion in Mayer’s mind. That entry, for all intents and purposes, resulted in an investment and designation almost identical to the one made by Mayer in 1993. Nordstrom’s attempt to justify the entry he made in Part 10 was not convincing. Had Nordstrom refused to include this inappropriate and void beneficiary designation he may well have lost this particular product sale. So be it. Had he in fact recommended joint ownership or, alternatively, given Mayer an opportunity to consider the alternate products which he says would have achieved Mayer’s goal, the void designation may well have been avoided. In any event Nordstrom’s claim that he met his duty to the client would be more convincing. His failure to take these steps and his inexplicable compliance with Mayer’s request to designate beneficiary regardless of its efficacy do not reflect the standard of conduct and care one is reasonably entitled to expect of such professional. Indeed, such failures fly in the face of Nordstrom’s own testimony as to his professional association’s code of practice. [10] Mayer cannot give his side of the conversation. When, as here, it is alleged that deceased was the author of his own misfortune in ignoring advice and where the only evidence of the advice is from the advisor, there is an evidential onus upon that professional to demonstrate that the caution or advice was in fact given and ought reasonably to have been understood by the client. Nordstrom failed to satisfy that onus. Good reasonable practice would have been to at least make note of the advice or, better still, confirm the advice in writing with the client. Death of the client was clearly within Nordstrom’s contemplation and it is with that event Nordstrom ought to have turned his attention to give effect to his client’s intention in realistic manner. [11] In summary, given Nordstrom’s knowledge of Mayer’s intent, his failure to advance products that would meet that intent, and his reliance on Mayer fathoming that the beneficiary designation made was void in law, all evidence failure of Nordstrom to discharge his duty of care to Mayer and consequently, his negligence. [12] In this case however neither Mayer nor his estate suffered loss as result of that negligence. The issue in this case is whether, in addition to the duty owed by Nordstrom to Mayer, he also owed one to the plaintiff as an identified potential beneficiary of the fund. [13] The plaintiff says that the circumstances of this case give rise to the same considerations as occur in disappointed beneficiary cases such as Wilhelm v. Hickson, 2000 SKCA (CanLII), (2000), 189 Sask. R. 71 (C.A.). [14] In that case the Court of Appeal adopted the principles articulated in White v. Jones, [1995] A.C. 207 (H.L.), by which remedy, akin to that flowing from the application of Hedley Byrne principles, is accorded an intended beneficiary where solicitor, on taking instructions for will, can reasonably foresee the deprivation of an intended legacy if due care is not taken. [15] These defendants say that Wilhelm v. Hickson, supra, has no application in that they are not solicitors providing legal advice or services and the public interest arguments adopted by the Saskatchewan Court of Appeal have no application. Financial planners, they say, merely assist people to make appropriate investment decisions during their lifetime and therefore their advice affects testamentary issues only in minor way. They assert that any attempt to determine the investor’s intentions in particular financial planning decision subsequent to that investor’s death would amount to an exercise in speculation and should not form the foundation for liability. [16] In my opinion, the facts of this case do not involve speculation about Mayer’s intentions any more so than was the case in Wilhelm v. Hickson. Nordstrom knew (as did Wilhelm), that it was the client’s intention and instruction to benefit specific third party on the investor’s (testator’s) death. It may well be that other cases will arise where the investor’s or testator’s intentions are not clear or are not admitted and require speculation. That is not the case here. [17] The defendants also argue that to impose duty of care on financial planners in favour of third parties such as this plaintiff would give rise to indeterminate liability and potential conflicts of interest. These issues were addressed and discounted in both the White and Wilhelm cases. In this case as well there is no issue of indeterminate liability nor in the circumstances of this case is there any question of conflict of interest. consequently reject that submission. [18] Although the disappointed beneficiary principle has usually arisen and may well usually arise in the context of solicitors and will preparation, this “disappointed beneficiary” principle is not function merely of the defendant’s occupation. In Esser v. Brown, 2003 BCSC 246 (CanLII), (2003), 223 D.L.R. (4th) 560, the British Columbia Court of Appeal saw as analogous to the role of the solicitor, that of notary public who ought reasonably to have contemplated that carelessness on her part would cause harm to third party. See also: Burnett v. Took Engineering Inc., 2000 BCSC 1630 (CanLII), [2000] B.C.J. No. 2302. [19] Nordstrom was professional who held himself out as possessing special skill, judgment and knowledge in financial planning. The advice and information provided to Mayer was provided in the course of Nordstrom’s business. Nordstrom had a financial interest in the transaction and was cognizant of the fact that the realization of Mayer’s intent to benefit Garry Mayer was dependent upon there being a valid beneficiary designation. The products sold by Nordstrom are frequently used as estate planning tools why else would there be beneficiary designation? The intervention of death removed any opportunity to correct the matter and, without application of the Wilhelm principle, this financial planner would go scott free and the third party, Garry Mayer, would bear the loss. To this case, the situation is analogous to that which occurred in Wilhelm v. Hickson. Consequently the “disappointed beneficiary” principle is equally applicable in this case involving financial planner and his client. [20] In summary conclude that Garry Mayer has cause of action as disappointed beneficiary and that he suffered damages as result of Nordstrom’s negligence. He shall have judgment against Nordstrom for 50 percent of the value of the investment at its maturity, namely $34,250.55. The plaintiff shall have pre-judgment interest from the date of death of Mayer to the date of this judgment and his costs to be taxed. [21] claim was also made for excess probate fees paid by the estate. That was debt of the estate and no action having been brought on its behalf, this portion of the claim is dismissed. Although Dataplan Securities Ltd. was named as defendant, no evidence was lead against it and the claim against it is dismissed. As it was represented concurrently with Nordstrom, there shall be no order as to costs for or against it.
The plaintiff claims that his father intended to designate him as the sole beneficiary of a $60,000 mutual fund but that this plan was defeated by the negligence of the defendants. The defendant admitted he was aware of the deceased's intention to leave the investment to his son. The defendant entered the plaintiff's name in the beneficiary designation portions of the fund application. However, the beneficiary designation was void by virtue of the mutual fund being non-registered. The defendant gave evidence that he advised the deceased that he would have to make a specific bequest in his will. The deceased made no special designation in his will and, at his death, the investment became part of the residue of his estate and was divided between the plaintiff and his sister. HELD: The plaintiff was awarded judgment against the defendant Nordstrom for half the value of the investment at its maturity, plus pre-judgment interest and costs.  1) Nordstrom was a professional, who held himself out as possessing special skill, judgment and knowledge in financial planning. The advice and information provided to the deceased was provided in the course of the defendant's business. The defendant had a financial interest in the transaction and was cognizant of the fact that the realization of the deceased's intent to benefit the plaintiff was dependent upon there being a valid beneficiary designation. The products sold by the defendant are used as estate planning tools. The intervention of death removed any opportunity to correct the matter and, without the application of the Wilhelm principle, this financial planner would go scott free and the plaintiff would bear the loss. The 'disappointed beneficiary' principle was applicable in this case.