Saturday, February 01, 2020

Trezzi v. Trezzi: Can You Leave Assets Owned by a Company in Your Will?

I have on rare occasions seen wills in which the will-maker has left assets that are owned by a corporation to beneficiaries. In each case, I have sought instructions to do a new will, leaving the shares, rather than corporate assets. The problem is that a corporation is in law a separate person than a shareholder. Its natural for people to think of say real estate owned by a company as their own, if they own all of the shares of the company, but that is not how the law works.

The problem with attempting to leave assets owned by a company to a beneficiary in your will is that the court may very well find the gift invalid, even if you own all of the shares of the company. I am not aware of cases that have decided that issue in British Columbia, but I know of cases in Alberta and Saskatchewan in which the courts have said that a will-maker cannot effectively leave assets held in a corporation to beneficiaries.

But in a recent decision, Trezzi v. Trezzi, 2019 ONCA 978, the Ontario Court of Appeal upheld a gift in a will of assets held by a company.

Peter Tezzi died on January 8, 2016. He owned all of the shares of Trezzi Construction Ltd. In his will he had clauses that left all of the assets owned to beneficiaries as follows:

·      Clause 3(d), which gave Albert “[a]ll equipment and chattels owned by Trezzi Construction Ltd.”.
·      Clause 3(e), which gave Albert “[t]he real property municipally known as 220 Regina Road, Woodbridge”, which was owned by Trezzi Construction.
·      Clause 3(m), which gave “[a]ll other assets owned by Trezzi Construction Ltd.” in equal shares to Gina, Albert, Emily, and Bianca.
Gina was Peter Tezzi’s wife, Emily and Bianca are their daughters, and Albert, his son from a previous relationship. Gina, Emily and Bianca challenged the gifts of assets in Trezzi Construction, arguing that he because the company owned the assets, and he did not, he could not gift them in a will.

The application judge who heard the argument upheld the provisions of the will, and the Ontario Court of Appeal agreed. Justice M. Jamal, writing for the Court of Appeal, noted under both the terms of the will and Ontario’s Business Corporations Act, Peter Trezzi’s estate trustees had the power to wind-up the company and distribute its assets. Although he did not expressly say that the trustees should wind-up the company, his intent to gift the assets was clear, and they had authority to wind-up the company to carry out his intentions. As set out in paragraphs 20-22 of the reasons for judgment:

[20]       While this clause does not refer expressly to a power to wind-up Trezzi Construction, but rather refers only to converting the estate’s assets into money, I conclude that the gifts do not fail on this basis. As the application judge correctly noted, the executors’ power to wind-up the corporation already exists under corporate law. I also agree with him that the executors implicitly have this authority in their discretionary power to convert the estate’s assets into money. Because Peter’s shares in Trezzi Construction were part of his estate “not consisting of money”, clause 3(a) of his will authorizes his executors to take any steps that may be needed to sell, call in, and convert those shares into money. This would include winding-up the corporation. As such, I agree with the application judge that Peter’s will conferred on his executors the authority to wind-up Trezzi Construction.
[21]       Because of these two independent sources of authority for Peter’s executors to wind-up Trezzi Construction, I would reject Gina’s contentions that the gifts of the assets of Trezzi Construction fail because Peter did not directly own those assets and that upholding these gifts would disregard Trezzi Construction’s separate corporate personality. While it is true that Peter, as the sole shareholder of Trezzi Construction, did not directly own the corporation’s assets, that does not complete the analysis. In substance, Peter’s shares in Trezzi Construction became part of the estate, and Peter effectively directed his executors to wind-up the company and to distribute its assets in accordance with his will, even though he did not own those assets directly. As already noted, the key question thus boils down to whether this was indeed Peter’s subjective intention in his will: see Re Kaptyn Estate, at paras. 126-144. For the reasons stated above, I conclude that the application judge did not err in concluding that this was Peter’s intention.
[22]       It follows that I also do not agree with the conclusions reached in the Saskatchewan and Alberta cases relied on by Gina, Bianca, and Emily, to the extent that those cases can be read as holding that a sole shareholder of a corporation can never effectively gift corporate assets because they are owned by the corporation: see Re Thornton Estate (1990), 85 Sask. R. 34 (Surr. Ct.), at paras. 4-5; Earl v. Wilhelm, 2000 SKCA 1, 183 D.L.R. (4th) 45, at para. 12, leave to appeal refused, [2000] S.C.C.A. No. 124; Re Meier(Estate of), 2004 ABQB 352, 366 A.R. 299, at paras. 16-22; and OryshchukEstate, 2009 ABQB 688, 485 A.R. 379, at para. 35. As noted, the principle of corporate separateness does not complete the analysis of whether a testator who is the sole shareholder of a corporation can effectively gift corporate assets. The court must go on to consider whether that authority exists under corporate law or under the terms of the relevant will. I agree with the application judge that because both sources of authority are present in this case, Peter could effectively bequeath assets held by Trezzi Construction.
Although I like the result of this decision in giving effect to the will-maker’s intentions, I would still be very reluctant to draft a will leaving corporate-owned assets to beneficiaries in British Columbia. If I did, I would want to include provisions as to how this is to be accomplished, and a fall-back position, such as a gift of the shares to the beneficiaries if the gifts were found invalid.

I have a number of reasons for my hesitancy.

First, although a British Columbia court may find this Ontario decision persuasive, a British Columbia court is not bound to follow it, and could decide to follow the decisions in Alberta and Saskatchewan.

Second, in Trezzi, Peter Trezzi was the sole shareholder, and his estate trustee had the power to wind-up the company acting unilaterally. If there were another shareholder, that would not be the case. Even if at the time the time the will is drafted, the will-maker is the sole shareholder, that may change before death. The will-maker could transfer some or all of his shares, perhaps to other family members. His personal representative would no longer have the power to unilaterally wind-up the company.

Third, the company might dispose of the assets left in the will. This problem is not unique to corporate-owned assets. Anytime a will-maker is leaving specific property to beneficiaries, the will-maker should consider making other provisions in case the property is disposed of between the will and the date of his death.

Sunday, January 19, 2020

Hubschi Estate

The decision in Hubschi Estate, 2019 BCSC 2040, illustrates three significant points concerning the application of section 58 of British Columbia’s Wills, Estates and Succession Act, which allows the Supreme Court of British Columbia to give effect to a document  or record that does not comply with the formal signing and witnessing requirements for a valid will. First, the case illustrates the importance of the factual context including the relationships between the deceased and the beneficiaries. Secondly, this case confirms that the court may give effect to a digital record on a computer. Thirdly, the maker of the document need not have intended that the specific document or record to operate as a will. 

Beat George Hubschi died in June 2017, without a formal signed and witnessed will. He did not have a spouse or children. His mother left him in the care of the Children’s Aid Society of the Catholic Archdiocese of Vancouver at the age of three. He did not have contact with her after that, nor with her relatives. He grew up in the home of Mary and Jack Stack under a foster home agreement. They treated him as their own, and they had five children, who treated him as a brother. Mary Stack, who died in 2011, including him among her children in her will. However, he was never adopted.

After his death, one of the Stack children, Gregory stack found the following records on Mr. Hubschi’s computer:
a.     “Budget for 2017”
b.     the document called Budget for 2017 included the following:
Get a will made out at some point. A5 – way assets split for remaining brother and sisters. Greg, and at or Trevor as executor.
Mr. Hubschi had surgery for problems in his legs and died 22 days after he was discharged from the hospital. He was in pain after his discharge, lived alone, and did not leave his home. 

Greg Stack applied to court to give effect to the computer record as Mr. Hubschi’s testamentary intentions. If successful, the estate would be divided equally among the five Stack children. If not, then it would go to Mr. Hubschi’s intestate heirs. Mr. Hubschi’s biological mother had died before him, and the closest living biological relatives appear to be his aunt and a cousin, both of whom lived in Switzerland, and were sent notice of the application, but did not appear to oppose it.

Section 58 (1) through (3) provides:

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.
In his reasons for judgment, Mr. Justice Armstrong set out the legal tests as follows:
[30]         Under s. 58, there is no “minimum level of execution or other formality for a testamentary document to be found fully effective” (Hadley Estate at para. 35). If a court grants an order under s. 58(3) a document may be admitted to probate regardless of its form (at para. 35).
[31]         The party seeking an order under s. 58(3) must demonstrate, on a balance of probabilities, that: (1) the testamentary document is authentic; and (2) the testamentary document contains the full, final and fixed intention of the will-maker.
[32]         Hadley Estate states:
[36]         As discussed in Estate of Young, s. 58 is very similar to Manitoba’s curative provision and thus the leading appellate authority on its meaning is George v. DailyGeorge and several other Manitoba authorities are reviewed in Estate of Young, which review need not be repeated. Their import is summarized at paras. 34–37:
[34]      As is apparent from the foregoing, a determination of whether to exercise the court’s curative power with respect to a non-compliant document is inevitably and intensely fact-sensitive. Two principal issues for consideration emerge from the post-1995 Manitoba authorities. The first [is] an obvious threshold issue:  is the document authentic?  The second, and core, issue is whether the non-compliant document represents the deceased’s testamentary intentions, as that concept was explained in George.
[35]      In George the court confirmed that testamentary intention means much more than the expression of how a person would like his or her property to be disposed of after death. The key question is whether the document records a deliberate or fixed and final expression of intention as to the disposal of the deceased’s property on deathA deliberate or fixed and final intention is not the equivalent of an irrevocable intention, given that a will, by its nature, is revocable until the death of its maker. Rather, the intention must be fixed and final at the material time, which will vary depending on the circumstances.
[36]      The burden of proof that a non-compliant document embodies the deceased’s testamentary intentions is a balance of probabilities. A wide range of factors may be relevant to establishing their existence in a particular case. Although context specific, these factors may include the presence of the deceased’s signature, the deceased’s handwriting, witness signatures, revocation of previous wills, funeral arrangements, specific bequests and the title of the document:  Sawatzky at para. 21; Kuszak at para. 7; Martineau at para. 21.
[Emphasis in Mr. Justice Armstrong’s reasons.]
[37]      While imperfect or even non-compliance with formal testamentary requirements may be overcome by application of a sufficiently broad curative provision, the further a document departs from the formal requirements the harder it may be for the court to find it embodies the deceased’s testamentary intention:  George at para. 81.
Mr. Justice Armstrong confirmed that the computer document is a “record” to which section 58 may be applied. Although I think this is clear from a reading of section 58, I am not aware of any previous reported British Columbia cases considering this issue.

Mr. Justice Armstrong was satisfied that Mr. Hubschi created the record. He then considered the wording indicating that Mr. Hubschi intended to make a formal will in the future. He found that the fact that Mr. Hubschi intended to make a formal will int eh future did not prevent the court from giving effect to the computer record, provided that it represented Mr. Hubschi’s fixed and final intention. In looking at the record in the context of Mr. Hubschi’s relationships with the Stack family, he found that it did.

Mr. Justice Armstrong wrote:
[56]         The next question is whether these words represent a deliberate or fixed and final expression of Mr. Hubschi’s intention to dispose of his property to his family members at death. The question is whether the noncompliant computer record embodied Mr. Hubschi’s testamentary intentions on the day he died.
[57]         The question to be answered in this case is whether the deceased’s use of the phrase “get a will made out at some point” is sufficient, in the light of all of the circumstances including the relationship with his siblings, the proximity of his death to his last viewing of the document, the proposed disposition of his entire estate to his siblings, and his receipt of an equal share in Mary Stack’s estate.
[58]         Although the words in his computer record contemplate preparation of a formal will at some time in the future, I conclude that Mr. Hubschi’s testamentary intentions were reflected at the time he created the computer entry and when he reviewed the document on the day he died based on:
a.     the details concerning his history and ongoing close relationship with the Stack children,
b.     the Stack children’s ongoing care for him,
c.     the obvious deterioration in his health at the time he opened this document on his computer on the day he died, and
d.     the division of Mrs. Stack’s estate between Mr. Hubschi and his brothers and sisters.
[59]         Thus, although the deceased’s words are noncompliant with the provisions in WESA, I conclude that it was the deceased’s testamentary intention that his estate should be divided by “A 5 – way split for remaining brother and sisters.”
[60]         I order that the document prepared by Mr. Hubschi will be fully effective as though it had been made as the testamentary intention of Mr. Hubschi and that probate of the will be granted to Gregory Kenneth Stack on the basis each of the Stack children will receive a one-fifth interest in his estate.

Sunday, January 05, 2020

Geluch v. Geluch Estate

A recent decision, Geluch v. Geluch Estate, 2019 BCSC 2203, illustrates that a court may find part of a will to be valid and another part invalid. To make a valid will, the will maker must have the capacity to understand the nature and effect of the will, or testamentary capacity, and must know and approve of the contents of the will. I am not aware of any cases in which a will made by someone who is found not to have capacity is found to have some valid gifts, but the court may find that the will-maker with capacity knew and approved of some gifts in the will, but not others.

Jean Geluch signed two wills shortly before she died. She signed a will dated January 12, 2016, in which she appointed her brother Ted Josefowich as her executor, left seven charities $50,000 each, 17 individuals cash gifts in varying amounts and the residue to her niece Carol Wells. The cash gifts to individuals included a $15,000 gift to her daughter Sharon Geluch who had developmental disabilities, $105,000 to Mr. Josefowich and $250,000 to Carol Wells.

Eight days later, on January 20, Jean Geluch signed a new will and a transfer of her home into a joint tenancy with Carol Wells. She again named her brother as her executor, and she left $15,000 to her daughter to be held in trust, $105,000 to brother, and the residue to her niece Carol. On January 20, Carol also signed a declaration of trust declaring that upon Jean Geluch’s death, she will not be entitled to the home, but will hold it for the benefit of beneficiaries listed in two schedules, which set out the same cash gifts to the same beneficiaries as were listed in the January 12, will.

Jean Geluch died four days later, on January 24. She had bank accounts worth approximately $384,000 and the home sold for just over $1,423,000. The total value of the assets subject to the lawsuit was approximately $1.8 million.

The Public Guardian and Trustee of British Columbia, acting as litigation guardian for Sharon Geluch, challenged both of the wills, the transfer of the home into a joint tenancy and the declaration of trusts, alleging that Jean Geluch did not have the capacity to make the wills or transfer, and that she did not know and approve of the estate plan.

Although the wills, transfer and trust declaration were drafted by a lawyer, much of the instructions came from Jean Geluch’s brother and niece rather than directly from her. The lawyer did not have a clear recollection of events, and his notes were sparse and were not dated. He did not ask the questions needed to establish her capacity.

In deciding the case, Madam Justice Francis relied to a significant extent on the email correspondence among Ted Josefowich, Carol Wells and the lawyer.

Madam Justice Francis found that Jean Geluch did have the capacity to make the estate-planning documents. She then considered whether Jean Geluch knew and approved of the planning. She summarized the issue as follows:

[124]     In the recent decision of Halliday v. Halliday Estate, 2019 BCSC 554, at para. 178, Hinkson C.J. cites John Poyser’s text Capacity and Undue Influence (Toronto: Carswell, 2014) and its formulation of the distinction between testamentary capacity and knowledge and approval:
Testamentary capacity includes the ability to make choices, whereas knowledge and approval requires no more than the ability to understand and approve the choices that have already been made.
[125]     While I am satisfied that Jean was capable of making choices with respect to her testamentary dispositions in January 2016, I am not at all satisfied that she knew or approved of the choices that she purportedly made.
[126]     To have knowledge and approval of testamentary dispositions, it is necessary for the will-maker to be aware of the contents of the will she is executing: Johnson v. Pelkey (1997), 36 B.C.L.R. (3d) 40 (S.C.) at paras. 114-116.
[127]     Knowledge and approval requires more than simply knowing the contents of the will. The will-maker must be aware of the magnitude of the residue of her estate and must “appreciate the effect” of the disposition of her estate: Russell v. Fraser (1980), 118 D.L.R. (3d) 733 (B.C.C.A.) [Russell] at para. 12.
[128]     Since the plaintiff has established suspicious circumstances, the burden falls on Ted and Carol to prove that Jean had knowledge and approval of the dispositions she made on January 20, 2016. I find that Ted and Carol have fallen far short of meeting that burden.

Madam Justice Francis found that they had not met the burden of proof that Jean Geluch knew and approved of the January 20 will, property transfer or declaration of trust. There was no evidence that the instructions for the changes, which came from Mr. Josefowich and Carol Wells, were confirmed with Jean Geluch. Madam Justice Francis emphasized that these changes were significant:

[130]     There was a wholesale change in the structure of Jean’s estate plan between January 12, 2016 and January 20, 2016. Jean went from having a conventional will that disposed of all her property on death to transferring her primary asset, the Home, to Carol on trust terms that even Jean’s lawyer did not appear to fully understand. The notion that Jean, without ever talking to her lawyer prior to the January 20, 2016 execution date, could have known and approved of the change in plan that would have her most significant asset pass outside her estate, pursuant to a declaration of trust that was signed by Carol and not Jean (and which Jean may never have seen), is simply not plausible.

Madam Justice Francis rejected the argument that the January 20 will could be upheld even if the property transfer and declaration of trust were invalid. The effect would be to disinherit beneficiaries of cash gifts and there was not evidence that Jean Geluch wished to do so.

She then turned to the January 12 will, and her evaluation of the evidence was nuanced. There was evidence that Jean Geluch gave significant consideration to the cash gifts, making changes requiring numerous drafts, which contrasted with the residue clause. Madam Justice Francis wrote at paragraph 157:

It is evident that Jean agonized over the list of Charitable Bequests and Individual Bequests, in terms of whom she wished to benefit, in what amount, and in some cases what trust terms to attach to certain gifts. For example, at one point she considered making the $5,000 gift to Michael Geluch conditional on his marital status. The level of detailed consideration given to these small bequests is completely inconsistent with Carol’s evidence that Jean simply announced one day that Carol was to inherit the residue without further discussion.
In contrast, although the residue clause disposed of approximately $900,000, Madam Justice Francis found it “more probably than Jean did not turn her mind to the residue because no one…pointed out to her that the Charitable Bequests and the Individual Bequests would dispose of less than half of her estate….The only credible explanation for Jean’s scrupulous attention to the Charitable Bequests and Individual Bequests, and her lack of attention to her residue, is that she had no idea of the magnitude of the residue of her estate.

The result is that the cash gifts to charities and individuals in the January 12 will is upheld. The residue was not effectively disposed of in the will, and will go on an intestacy to Sharon Geluch.

Sunday, December 01, 2019

Part 3 of the Health Care (Consent) and Care Facility (Admission) Act is Now in Force

Part 3 of the Health Care (Consent) and Care Facility (Admission) Act came into effect on November 4, 2019. Part 3 sets out the criteria for an adult to be admitted into a care facility.

There are three ways that a person may be admitted into a care facility. The person may consent if she is capable. Second, if she is not capable, an application may be made on her behalf by a substitute decision maker. Third, she may be admitted on an emergence basis, for example, if it is necessary to preserve her life or prevent serious physical or mental harm to her, or serious physical harm to any person.

If the person is incapable, section 22 sets out who may act as the substitute decision maker, in order of priority, beginning with the person’s guardian, followed by a representative under a representation agreement. Section 22 (1) and (2) provide:

22   (1)A manager may admit an adult to a care facility without the adult's consent if consent is given by
(a)a personal guardian who has authority to consent to the admission and is capable of giving or refusing consent, or
(b)a person listed in subsection (2) of this section, if the manager has made every reasonable effort to obtain consent from the adult but the adult is determined under section 26 to be incapable of giving or refusing consent.
(2)Subject to subsection (3), substitute consent to an adult's admission to a care facility may be given or refused by the first, in listed order, of the following who is available and qualifies under subsection (4):
(a)the adult's representative, if the representative has authority to consent to the admission;
(b)the adult's spouse;
(c)the adult's child;
(d)the adult's parent;
(e)the adult's brother or sister;
(f)the adult's grandparent;
(g)the adult's grandchild;
(h)anyone else related by birth or adoption to the adult;
(i)a close friend of the adult;
(j)a person immediately related to the adult by marriage.

Sunday, November 10, 2019

Separation Without Termination: Robledano v. Queano

Can you separate from your common-law spouse without terminating the relationship? Apparently, according to the British Columbia Court of Appeal decision in Robledano v. Queano, 2019 BCCA 150.

Spousal status is often critical in estate disputes. A “spouse” as that term is defined in the Wills, Estates and Succession Act (the “WESA”) may apply to vary her deceased’s spouse’s will. If there is no valid will, she will be entitled to a share of the estate on an intestacy (sometimes the entire estate). There is not surprisingly a great deal of litigation over the question of whether someone meets the definition of spouse.

Section 2 of the WESA sets out the criteria for a spouse under the Act. I will leave out subsection (2.1) which is not necessary for this discussion.

2   (1) Unless subsection (2) applies, 2 persons are spouses of each other for the purposes of this Act if they were both alive immediately before a relevant time and
(a)they were married to each other, or
(b)they had lived with each other in a marriage-like relationship for at least 2 years.
(2) Two persons cease being spouses of each other for the purposes of this Act if,
(a)in the case of a marriage, an event occurs that causes an interest in family property, as defined in Part 5 [Property Division] of the Family Law Act, to arise, or
(b)in the case of a marriage-like relationship, one or both persons terminate the relationship.
(3) A relevant time for the purposes of subsection (1) is the date of death of one of the persons unless this Act specifies another time as the relevant time.
The Family Law Act (the “FLA”) has similar, but as we shall see, not identical, criteria for determining when someone is a spouse. Section 3 provides:
3  (1) A person is a spouse for the purposes of this Act if the person
(a)is married to another person, or
(b)has lived with another person in a marriage-like relationship, and
(i)has done so for a continuous period of at least 2 years, or
(ii)except in Parts 5 [Property Division] and 6 [Pension Division], has a child with the other person.
(2)A spouse includes a former spouse.
(3)A relationship between spouses begins on the earlier of the following:
(a)the date on which they began to live together in a marriage-like relationship;
(b)the date of their marriage.
(4) For the purposes of this Act,
(a)spouses may be separated despite continuing to live in the same residence, and
(b)the court may consider, as evidence of separation,
(i)communication, by one spouse to the other spouse, of an intention to separate permanently, and
(ii)an action, taken by a spouse, that demonstrates the spouse's intention to separate permanently.
Section 81 of the FLA deals with the rights of each spouse to property held by the other on separation. It reads:
81  Subject to an agreement or order that provides otherwise and except as set out in this Part and Part 6 [Pension Division],
(a)spouses are both entitled to family property and responsible for family debt, regardless of their respective use or contribution, and
(b)on separation, each spouse has a right to an undivided half interest in all family property as a tenant in common, and is equally responsible for family debt.
The main issue in the Court of Appeal in Robledano was whether Maria Robledano was Barbara Jacinto’s spouse when Ms. Jacinto died on April 14, 2014. If so, because the court had found that Ms. Jacinto did not have a will, Ms. Robledano is entitled to the entire estate. If not, the estate goes to other relatives. In the Supreme Court of British Columbia, the trial judge found that Ms. Robledano was Ms. Jacinto’s spouse. One of Ms. Jacinto’s sisters, Milagros Queano, appealed.

Ms. Robledano and Ms. Jacinto were not married. The parties agreed that Ms. Robledano and Ms. Jacinto were in a marriage-like relationship from 1985 to 2000, and again from 2005 to 2010, but Ms. Queano argued that they were no longer in a marriage-like relationship after 2010. From November 2010, Ms. Robledano and Ms. Jacinto had separate residences, but Ms. Robledano maintained that they did continue to reside together part of the time.

The Court of Appeal held that the trial judge applied the correct legal tests and did not make any palpable and overriding error.

In his reasons for judgement, Mr. Justice Groberman held that it is not necessary for a couple who were in a marriage-like relationship to be in a marriage-like relationship at the time of death, as long as the relationship had not been “terminated.” Termination is not the same as separation, although separation is a factor that may be considered.

Mr. Justice Groberman wrote:

[39]         Ms. Queano says an unmarried person can only be the spouse of a deceased person if they were living together at the time of death and for at least the two years immediately preceding it. In my view, that is not a correct interpretation of s. 2(1).
[40]         Paragraph 2(1)(b) of the statute uses the past perfect tense (“had lived together”) rather than the past continuous tense (“were living together”). The ordinary grammatical meaning of paragraph 2(1)(b) is that in order for a person who was not married to the deceased to be their spouse, the two must have lived together in a marriage-like relationship for two years, but not necessarily for the two years immediately preceding the deceased’s death. In contrast to paragraph 2(1)(b), paragraph 2(1)(a) uses the past continuous tense (“were married”) rather than the past perfect tense (“had been married”). The statute is professionally drafted and the use of these different tenses should be presumed to be deliberate.
Further on:
[44]         Ms. Queano contends that the question to be asked under s. 2(2)(b) is whether the parties separated. She says that the parties clearly did so at the end of 2010, and that they remained separated for the rest of Ms. Jacinto’s life.
[45]         Again, I am unable to fully agree with Ms. Queano’s interpretation of the statute. Paragraph 2(2)(a) of the WESA provides that married persons cease to be spouses when events occur that engage the property division provisions set out in Part 5 of the Family Law Act, S.B.C. 2011, c. 25. Typically, those provisions are engaged, under s. 81 of the Family Law Act, when the parties separate.
[46]         Paragraph 2(2)(b), on the other hand, which applies to persons who are not married but are in a marriage-like relationship, does not mention “separation” nor does it incorporate any test involving Part 5 of the Family Law Act. It simply states that persons in a marriage-like relationship cease to be spouses when either or both of them “terminate the [marriage-like] relationship”. I do not suggest that separation is an irrelevant consideration under the provision. The fact that parties have separated may lead a judge to infer that one or both of them has terminated the marriage-like relationship. That said, separation, per se, is not the test for termination of a marriage-like relationship.
Mr. Justice Groberman wrote that the standard for termination is a flexible one.

[55]         What we are left with, in s. 2(2)(b) of the WESA, is a rather imprecise and flexible legal standard. The question of whether a person has “terminated the relationship” requires a judge to consider the expressed and implicit intentions of each spouse, as well as the objective evidence concerning the subsistence of the relationship. The determination is a “judgment call” for the trial judge – the application of a broad legal standard to the factual circumstances of an individual case. It is a question of mixed fact and law. 
I have some doubt as to whether the drafters of the WESA intended to have different criteria for determining when a spousal relationship ends for the purpose of the WESA and for the purpose of the FLA. I understood that the intent was that one could have either a claim under the FLA or the WESA but not both. 

Consider this scenario. A couple living in a marriage-like relationship “separates” but neither one “terminates” the relationship. One of them dies without a will, leaving surviving him a child from a previous relationship. The implication is that the survivor may make both a claim to property under the FLA and a share of the estate under the WESA. Suppose he has an estate of $1 million, and the court finds that the surviving spouse is entitled to $400,000 under the FLA, leaving the value of the remaining estate at $600,000. Of this $600,000, the surviving spouse receives the first $150,000 plus one-half of the balance. The total amount the surviving spouse receives is $775,000 ($400,000 under the FLA, plus $150,000 and $225,000 under the WESA). If the spouses had not been separated, the surviving spouse would have received $575,000. If they had been separated, but the relationship terminated, then the surviving spouse would have received $400,000.

Sunday, October 27, 2019

Volovsek v. Donaldson

The provisions of the Wills, Estates and Succession Act (the “WESA”) allowing a spouse or child to apply to vary a will if the will-maker has not made adequate provision for the spouse or child may be avoided by the will maker settling a trust during his lifetime, and holding significant assets in the trust. The relevant sections in Part 4, Division 6 of the WESA do not apply to assets held in trust. Claims that transfers of assets into a trust to avoid a wills variation claim offend the Fraudulent Conveyance Act have not been successful (although I would argue that in some circumstances it may be open to successfully challenge a trust on the basis of the Fraudulent Conveyance Act, but that’s for another post).

In a recent decision, Volovsek v. Donaldson, 2019 BCSC 1820, the plaintiff’s lawyers came up with a creative argument in an unsuccessful attempt to challenge a trust.

Yasmine Volovsek and Fernand Joseph Boisvenu were in a relationship from 1989 until Mr. Boisvenu’s death in March 2015. In 2014 he settled a trust, which held most of his assets, and he also made a will. Under the will and trust, he provided Ms. Volovsek about $1 million. The total value of his assets, including those he held in trust, was about $8 million. The other beneficiaries were relatives and a friend.

Ms. Volovsek alleged that they were in a marriage-like relationship. If so, she would be able to apply to vary his will, and if they had separated during his lifetime, she could have made a claim to a share of the assets pursuant to the Family Law Act.

She alleged that she was financially dependant on him, and he owed her a fiduciary duty, or in other words a high duty of loyalty, which included a duty to tell her of his estate plan so she could take steps to protect her interest including separating from him and making a family law claim. Mr. Justice Myers set out her argument at paragraph 144:

[144]   Ms. Volovsek argues that the fiduciary duties were owed because (quoting from her written argument):

a)         they were spouses; b) he encouraged and asked Ms. Volovsek to be completely financially dependent on him from the beginning of the relationship and she gave up education and job opportunities to be self-sufficient in reliance on these promises; c) he promised to her multiple times that she would be well provided for from his estate ("there's $5 million in the bank and no Japanese, do you want to see my will?"); and (d) based upon these statements and their relationship, Ms. Volovsek stayed and took care of Mr. Boisvenu when he was sick instead of separating from him upon the [Ms. F.] affair to crystallize her family property claim.
The reference to “no Japanese” was a reference to Ms. F. with whom he also had a relationship.

Although Mr. Justice Myers found that Ms. Volovsek and Mr. Boisvenu did not have a marriage-like relationship, he considered the argument that Mr. Boisvenu had a fiduciary duty to Ms. Volovsek on the assumption that they were in a marriage-like relationship.

There are certain relationships which the courts have recognized as fiduciary relationships such as a trustee-beneficiary, lawyer-client, director-corporation. He rejected the argument that a spousal relationship should fall into a similar category when one spouse is financially dependant on the other. Mr. Justice Myers wrote:

[147]   In my view, the proposed category is not appropriate.  First, it is not simply a type of relationship (as, for example, solicitor-client); rather, it adds an additional quality to the relationship, i.e. financial dependence.
[148]   Moreover, but for the qualification of the relationship having to involve financial dependence, it would engage every spousal relationship.  Yet as the courts have recognised, and as discussed in Mother 1, there is no set type of spousal relationship.  Although, Ms. Volovsek's counsel submitted that, "If it looks like a duck, walks like a duck and quacks like a duck, then it is a duck", there is no defined "duck".
In cases that do not fall within a category recognized by the courts as inherently fiduciary, the courts may still find on the particular facts that one person owed the other fiduciary duties. This is referred to as ad hoc fiduciary duties. Mr. Justice Myers summarized the law:

[157]   In Elder Advocates of Alberta Society v. Alberta, 2011 SCC 24 and PIPSC, the court set out the requirements to establish an ad hoc fiduciary duty.  A plaintiff must show that:
a)              the alleged fiduciary has expressly or impliedly undertaken to act in the best interest of the plaintiff;
b)              the alleged fiduciary has scope for the exercise of some discretion or power;
c)               the alleged fiduciary can unilaterally exercise that power or discretion so as to affect the plaintiff's legal or practical interests;
d)              the plaintiff is peculiarly vulnerable to or at the mercy of the alleged fiduciary holding.
He found on that facts that there Mr. Boisvenu did not undertake to act in Ms. Volovsek’s best interest. Statements made by him to her that he would leave assets to her were not ones that she could reasonably rely on. One statement was a vague statement that she was in his will, and the other two indicating that she would get most of his wealth were made when he in a medical emergency. Mr. Justice Myers did not accept her evidence that Mr. Boisvenu asked her to quite work.

Mr. Boisvenu kept his assets separate, and maintained an independent lifestyle. Mr. Justice Myers distinguished the facts from circumstances in which a couple build a business together, or one spouse stays at home to raise the children.

Might the argument that there is a fiduciary duty owed by one spouse to another be successful in a different case? Perhaps, although the types of circumstances in which I think it might be successful could also give rise to other claims such as unjust enrichment or proprietary estoppel.

Sunday, October 20, 2019

Amendments to section 151 of the WESA

Section 151 of the Wills, Estates and Succession Act (the “WESA”), was amended effective September 16, 2019. This section allows someone who is not the deceased’s personal representative to apply to court to make or defend a claim on behalf of the deceased. The amendments make a number of procedural changes, some of which I will comment on.

As amended, section 151 now says:

151   (0.1)In this section, "specified person" means a beneficiary, an intestate successor or a person who may commence a proceeding claiming the benefit of Division 6 [Variation of Wills] of Part 4 [Wills].
(1)Despite section 136 [effect of representation grant], a specified person may, with leave of the court, commence proceedings in the name of the specified person and on behalf of the estate of the deceased person

(a)to recover property or to enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or
(b)to obtain damages for breach of a right, duty or obligation owed to the deceased person.
(1.1)A specified person may apply for leave of the court under subsection (1) in the proceedings described in that subsection.
(2)Despite section 136, a specified person may, with leave of the court, defend in the name of the specified person and on behalf of the estate of a deceased person, a proceeding brought against the deceased person or the personal representative.
(2.1)A specified person may apply for leave of the court under subsection (2) in the proceeding described in that subsection.
(3)The court may grant leave under this section if
(a)the court determines the specified person seeking leave
(i)has made reasonable efforts to cause the personal representative to commence or defend the proceeding,
(ii)has given notice of the application for leave to
(A)the personal representative,
(B)any other specified persons, and
(C)any additional person the court directs that notice is to be given, and
(iii)is acting in good faith, and
(b)it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a specified person for the proceeding to be brought or defended.
(4)On application by a specified person or a personal representative, the court may authorize a person to control the conduct of a proceeding under this section or may give other directions for the conduct of the proceeding.
First, this section now allows a person who is not a beneficiary or intestate successor, but who is making a claim to vary the deceased’s will, to apply under section 151. A spouse or child who may apply under Part 4, Division 6 of the WESA for a share or larger share of the deceased’s estate. As was noted in Sharma v. Sharma, 2018 BCSC 1262, a wills variation claimant did not have standing under section 151 unless she was already a beneficiary. Now the definition of “specified persons” including wills variation claimants.

Second, it is clear now that the person applying under this section may file a notice of civil claim or petition before making the application. This may be inferred from subsection (1.1) which says that leave may be applied for in the proceedings for which the applicant is seeking leave.

Third, the wording of this section used to say that the person making or defending the claim was to do so “in the name and on behalf of the personal representative of the deceased person.” If say a beneficiary wished to make a claim for the benefit of the estate against the personal representative, she would have to name the personal representative as both a plaintiff and defendant, which is absurd. Now the person making or defending a claim does so in her own name “and on behalf of the estate of the deceased person.”