2017 Canadian Elder Law Conference

I have the privilege of speaking at this year's Canadian Elder Law Conference at the Pan Pacific Hotel, in Vancouver, B.C. The 2017 Conference will be held on Thursday, November 2, and Friday, November 3.

I will be on a panel with Sara Beheshti of O'Sullivan Estate Lawyers LLP in Toronto, and Kimberly Whaley of Whaley Estate Litigation Partners, also based in Toronto. Our topic is "Capacity, Undue Influence, and Independent Legal Advice: How To Interview and When To Insist On Independent Legal Advice."

The Conference is presented by the Canadian Centre for Elder Law and the Continuing Legal Education Society of British Columbia.

You can find the full agenda and registration information here.

B.C. Supreme Court Rules Committee Inviting Comments on Proposed Changes to Probate Rules

The Attorney General’s B.C. Supreme Court Rules Committee is requesting comments on proposed changes to the probate rules. You can read the proposed changes here.

A couple of the proposed changes caught my eye. One proposed changes to broaden the class of persons who may file a notice of dispute to oppose an estate grant. As I previously wrote the current Rule 25-10 (1) is too restrictive. Only those to whom notice of the application for an estate grant must be given are entitled to file a notice of dispute. In the case of an application to probate a will, the applicant must give notice to all of those who are named beneficiaries in the will, and anyone else who would be entitled to share in the estate on an intestacy. However, someone who does not fall within one of those categories, but who is a beneficiary under a previous will, does not appear to have the right to file a notice of dispute. The proposed change would allow anyone with an interest under a prior or later will to file a notice of dispute.

A second proposed change the caught my eye is a proposed change to Rule 25-14 which currently provides that some types of claims could be commenced by a requisition if there has been no application for an estate grant. For example, currently you can apply to pass over and executor by requisition, if no application for an estate grant has been filed.

Requisitions are in my view inappropriate for commencing litigation. There are no rules governing who is entitled to notice of the application, nor times for responding. The proposed change would eliminate the ability to make applications by a requisition. The exceptions under the proposed changes are applications which may appropriately be made without giving anyone notice. For example, under the proposed changes, you would be able to make an application to shorten the 21-day waiting period to file a submission for an estate grant following the date you mail a notice to the beneficiaries and those who would be entitled to a share of the estate on an intestacy.

In most cases, a petition would replace a requisition. However, I am concerned that the proposed changes may leave some gaps. For example, if the executor has not probated the will, but wishes to seek approval of her accounts or her remuneration from the court, how does she make the application? Perhaps she may be able to do so under Rule 2-1 (2), but it is not clear to me. It would be preferable to provide that a proceeding may be commenced by petition if there has not been an application for an estate grant. There could then be exceptions carved out for bringing certain  applications by requisition.

You may make comments by email to AGSupremeCourtRulesCommittee@gov.bc.ca  until October 16, 2017.

Undue Influence by Inducing False Beliefs: Re: Patterson Estate

Undue influence usually implies coercion. Someone may challenge a will or a benefit in a will on the basis that another procured the will or benefit by applying pressure to the will maker. The pressure may be overt threats of violence, or perhaps subtler forms of pressure such as an implied threat by the will maker’s caregiver to withdraw care.

A recent decision of the Nova Scotia Supreme Court, Re: Patterson Estate, 2017 NSSC 221, identifies as undue influence a child procuring a will by inducing her mother to believe that her other children did not care about her.

Joan Patterson had four children, Reed Patterson, Randall Patterson, Darlene Marriott, and Marlene Patterson. She died on June 13, 2016, the age of 70, and her husband had died four months before. Marlene Patterson had been estranged from both of her parents for about 20 years, but reconciled in 2012. On March 4, 2016, Joan Patterson moved from her home into Marlene Patterson’s home. On May 13, 2016, she made a new will, leaving her estate to Marlene Patterson, disinheriting her other three children.

Mr. Justice Wright found that Joan Patterson’s will was properly signed and witnessed in accordance with Nova Scotia law. She knew and approved of the contents of the will, and she had testamentary capacity.

The decision turned on whether Marlene Patterson procured the will by fraudulently inducing her to disinherit her other children. Mr. Justice Wright quoted from John Poyser’s book Capacity and Undue Influence (which I have reviewed here) in setting out the legal issue:

[17] In pressing their grounds of fraud as a subspecies of undue influence, the applicants rely on the following passage from the text book Capacity and Undue Influence (Carswell 2014) authored by John E.S. Poyser (at pg. 318):

Testamentary undue influence is typically thought of in terms of coercion. There is good reason for that. Dozens of cases have stated that conduct must amount to coercion if it is to amount to testamentary undue influence. Yet there are also abundant comments in the same cases and others that open the door to characterize testamentary fraud as a second type of conduct that can amount to undue influence. Coercion forces a person to do something against his or her will. Fraud operates differently. Testamentary fraud is an effort to fool a person into believing a false state of affairs that is then instrumental in causing that person to make a testamentary gift that otherwise would not have been made. As indicated earlier, persuasion is permitted, but persuasion is not permitted when it is mounted on a foundation of deliberate lies. Testamentary undue influence by coercion is difficult to establish. It is often pled but rarely proved as the facts rarely sustain it. Undue influence by fraud will be more easily sustained. Isolation, falsehood, and ingratiation are a common recipe employed by predatory family and peers in a bid to subvert a vulnerable person’s property at death.

[18] In the pages that follow, the author traces the development of fraud as a subspecies of undue influence in the case law. He refers to the decisions in Anderson v. Walkey, 1961 CarswellOnt 91 and in Timlick v. Crawford, 1965 CarswellBC 86 as instances where Canadian courts have invalidated a Will on the grounds of undue influence, not as the result of coercion, but as the result of manipulation and deceit.

[19] It is also noted (at pg. 324) that the party alleging undue influence has to prove not only the impugned conduct but that it in fact caused the Will-maker to sign the Will.

Marlene Patterson’s sister and brothers alleged that she had manipulated her mother into making the will isolating them from their mother and making false statements about them. Darlene Marriott testified that Marlene Patterson had asked her to assist her in persuading their mother’s disinherit their brothers. It was also evident that Marlene Patterson assisted her mother and making notes for her meeting with the lawyer who drew the will.

Mr. Justice Wright found that Marlene Patterson did in fact induce her mother into making the will she did by manipulation.

[87] It is not only from these suspicious circumstances but rather from the evidence as a whole, including Marlene’s lack of credibility, that the Court is prepared to draw the inference that Joan was induced to form the false beliefs she held about her other childrens’ lack of caring, through manipulation and deceit on the part of Marlene under whose control she remained after the move. Joan then acted on those false beliefs in changing her Will as she did. I therefore find that the actions of Marlene, on a balance of probabilities, crossed the line into the sphere of undue influence. As noted earlier, while persuasion is permitted without legal consequence, persuasion of a testator is not permitted when it is mounted on a foundation of untruths induced by the proponent of a Will.

In the result, the May 13, 2016 will is invalid.

Sato v. Sato

Things would be simpler, but not nearly as interesting, if everyone remained in the same place.

Hiroyuki Rex Sato, often referred to as Rex, immigrated with his family to British Columbia in 1969. He became a Canadian citizen in 1975. Following his graduation from university, Mr. Sato lived and worked in several different cities, first in Toronto, then back in Vancouver, followed by the Cayman Islands, Tokyo, Guernsey, and then Luxembourg. He died on March 7, 2015 in Japan where he was being treated for cancer. For Canadian income tax purposes, the Canada Revenue Agency agreed that he became a non-resident of Canada in 1999.

Mr. Sato made a will in Vancouver on May 19, 2011, while visiting. In his will, Mr. Sato appointed his sister Helen Sato as his executor, and divided most of his estate equally between his two sisters. This will was his last.

Makiko Sato and Rex Sato were married in April 2013. At that time, he was living in Luxembourg. He had moved there in 2009, and remained a resident of Luxembourg until his death.

The issue Mr. Justice Funt was asked to decide in Sato v. Sato, 2017 BCSC 1394, was whether Mr. Sato was domiciled in Luxembourg at the time of his marriage or still in British Columbia. Why is that important?

The law in British Columbia in April 2013 was that a marriage revoked a will unless the will was made in contemplation of marriage. (The law has since changed in British Columbia, and a marriage occurring on or after March 31, 2014, no longer revokes a prior will.) If the court found that Mr. Sato was domiciled in British Columbia, then British Columbia law would apply. The result would then be that Mr. Sato’s will was revoked, and his wife would inherit estate on the basis that he died without a valid will.

But the law in Luxembourg was different. Under Luxembourg law at the time marriage did not revoke a will. If Mr. Sato were domiciled in Luxembourg, then his marriage did not revoke his 2011 Will, and his sisters would inherit the residue of his estate.

Although Mr. Sato was resident in Luxembourg, and had not resided in British Columbia since 1999, domicile means something more than residence. To change domicile, it is necessary to both reside in a new place, and intend to permanently settle their. Mr. Justice Funt quoted from several cases, including the following at paragraph 9 of his decision:

[9]            In Osvath-Latkoczy v. Osvath-Latkoczy, [1959] S.C.R. 751, the Supreme Court of Canada considered whether the appellant’s domicile of choice was Ontario. Justice Judson writing for the Court stated at 753:

The principle to be applied is that stated in Lord v. Colvin, which was adopted in Wadsworth v. McCord, and followed in Gunn v. Gunn:

That place is properly the domicile of a person in which he has voluntarily fixed the habitation of himself and his family, not for a mere special and temporary purpose, but with a present intention of making it his permanent home, unless and until something (which is unexpected or the happening of which is uncertain) shall occur to induce him to adopt [some] other permanent home.

Mr. Justice Funt found that Mr. Sato was not domiciled in Luxembourg. When Mr. Sato applied to Canada Revenue Agency to determine his residency status when he left Canada, Mr. Sato wrote in the form that he intended to return to Canada. He wrote that he had a strong desire to be involved in international business, and planned to retire in Canada.

Helen Sato had the burden of showing that Mr. Sato had changed his intention to eventually retire in Canada. She was unable to provide sufficient evidence to persuade the Court that Mr. Sato intended to make Luxembourg his permanent home. There was some evidence that Mr. Sato wished to retire in Japan, which Mr. Justice Funt noted “further supports the proposition that the deceased did not intend to reside in Luxembourg indefinitely.”

The result is that Mr. Sato’s marriage revoked the 2011 will, and his wife, Makiko Sato, is entitled to his entire estate as the intestate heir.

Capacity to Marry: Devore-Thompson v. Poulain

Marriage has significant legal implications on the succession of property. Yet, I don’t come across either in my practice or my reading, that many cases where a marriage is challenged on the basis that someone did not have the mental capacity to marry. I certainly don’t see as many cases challenging the validity of a marriage as I do challenging the validity of a will or transfer of property.

In a recent decision, Devore-Thompson v. Poulain, 2017 BCSC 1289, Madam Justice Griffin found that Donna Walker did not have the capacity to marry on June 14, 2010, when she went through a marriage ceremony with Floyd Poulain. The validity of the marriage was challenged by Ms. Walker’s niece Donna Devore-Thompson, who was an executor named in a will Ms. Walker made before her marriage ceremony, and who was close with her.

The question of whether Ms. Walker had the capacity to marry is significant, because if she did have capacity and the marriage were valid, pursuant to the Wills Act, the marriage would have revoked all of her previous wills. Because she had no descendants, Mr. Poulain would be entitled to her estate as her surviving spouse on the basis that she died without a valid will. I should add that the Wills Act was revoked and replaced by the Wills, Estates and Succession Act on March 31, 2014. Although the new legislation no longer has a provision that says that a marriage revokes previous wills, the Wills Act still applies to revoke prior wills on marriage if the marriage took place before March 31, 2014 (unless the will was made in contemplation of the marriage).

The court also found that Ms. Walker did not have the mental capacity to make her will on July 2, 2009, or a previous will in February, 2007, but I will focus this post on her capacity to marry.

Madam Justice Griffin sets out in some detail the evidence of family, friends and others as well as expert evidence concerning Ms. Walker’s mental functioning. This is a sad story of Ms. Walker’s decline over several years to the point where she could no longer use eating utensils properly, didn’t appear to know how to use stairs, she had difficulty using a telephone and her grooming declined significantly. She became paranoid that family were trying to take her money, when there was no basis for such a suspicion.

The law on capacity to marry is set out in the decision as follows:

[43]         The starting point for understanding the test for capacity to marry is the notion that a marriage is a contract. Similar to entering into any other type of contract, the contracting parties must possess the requisite legal capacity to enter the contract.

[44]         That said, the common law has developed a low threshold of capacity necessary for the formation of a marriage contract. The capacity to marry is a lower threshold than the capacity to manage one’s own affairs, make a will, or instruct counsel: see Wolfman-Stotland v. Stotland, 2011 BCCA 175 at para. 26, leave to appeal ref’d [2011] S.C.C.A. No 242 (S.C.C.), [Wolfman-Stotland]; and A.B. v. C.D., 2009 BCCA 200 at para. 27 [A.B.].

[45]         In Hart v. Cooper, [1994] B.C.J. No. 159 (B.C.S.C.) at para. 30, Lowry J. described the prerequisites for marriage in the following manner, “a person is mentally capable of entering into a marriage contract only if he or she has the capacity to understand the nature of the contract and the duties and responsibilities it creates”.

[46]         In A.B., the Court of Appeal addressed the issue of marriage capacity. The Court accepted the characterization of capacity to enter a marriage as being equivalent to the capacity to form an intention to live separate and apart, which was restated in Wolfman-Stotland. In Wolfman-Stotland, the Court remarked that the capacity to marry requires “the lowest level of understanding” in the hierarchy of legal capacities.

[47]         In Wolfman-Stotland, the Court referred to Calvert (Litigation Guardian of) v. Calvert (1997), 32 O.R. (3d) 281 (Ont. Gen. Div.), aff’d (1998), 37 O.R. (3d) 221 (Ont. C.A.), leave to appeal ref’d [1998] S.C.C.A. No. 161 (S.C.C.), which contains a useful discussion of the hierarchy of capacities:

[54] Separation is the simplest act, requiring the lowest level of understanding. A person has to know with whom he or she does or does not want to live. Divorce, while still simple, requires a bit more understanding. It requires the desire to remain separate and to be no longer married to one’s spouse. It is the undoing of the contract of marriage.

[55] The contract of marriage has been described as the essence of simplicity, not requiring a high degree of intelligence to comprehend: Park, supra, at p. 1427. If marriage is simple, divorce must be equally simple. The American courts have recognized that the mental capacity required for divorce is the same as required for entering into marriage: re: Kutchins, 136 A. 3d 45 (Ill., 1985).

[56] There is a distinction between the decisions a person makes regarding personal matters such as where or with whom to live and decisions regarding financial matters. Financial matters require a higher level of understanding. The capacity to instruct counsel involves the ability to understand financial and legal issues. This puts it significantly higher on the competency hierarchy. It has been said that the highest level of capacity is that required to make a will: Park, supra, at p. 1426. …

[48]         The authorities suggest that the capacity to marry must involve some understanding of with whom a person wants to live and some understanding that it will have an effect on one’s future in that it will be an exclusive mutually supportive relationship until death or divorce.

[49]         I leave open the possibility that in some cases a marriage can take place without an immediate plan to live together, such as in a situation where two people work in different cities. But there is no suggestion in this case that the alleged Marriage was a long-distance one. Here Mr. Poulain claimed that he and Ms. Walker were living together.

[50]         A lack of capacity to marry will render a marriage void ab initio: Ross-Scottv. Potvin, 2014 BCSC 435 at para. 39.

Madam Justice Griffin, in finding that Ms. Walker did not have capacity at the time of the marriage ceremony, considered the types of factors a person entering into a marriage should be able to understand. She wrote:

[343]     As of the date of the marriage ceremony, Ms. Walker was at a stage of her illness where she was highly vulnerable to others. She had no insight or understanding that she was impaired, did not recognize her reliance on Ms. Devore-Thompson and Ms. Devore-Thompson’s assistance, and was not capable of weighing the implications of marriage to Mr. Poulain even at the emotional level.

[344]     The fact that Ms. Walker told some people that she had married Floyd Poulain does not overcome all of the evidence as to her disordered thinking. This does not mean she had any understanding of what it means to be married.

[345]     It is also clear that Ms. Walker’s mental capacity had diminished to such an extent that by 2010 she could not have formed an intention to live with Mr. Poulain, or to form a lifetime bond. She did not understand, at that stage, what it meant to live together with another person, nor could she understand the concept of a lifetime bond.

[346]     Ms. Walker did not have a grip on the reality of her own existence and so could not grip the reality of a future lifetime with another person through marriage.

[347]     I find on the whole of the evidence, given her state of dementia, Ms. Walker could not know even the most basic meaning of marriage or understand any of its implications at the time of the Marriage including: who she was marrying in the sense of what kind of person he was; what their emotional attachment was; where they would be living and whether he would be living with her; and fundamentally, how marriage would affect her life on a day to day basis and in future.

[348]     I conclude that Ms. Walker did not have the capacity to enter the Marriage.

[349]     Since I have concluded that Ms. Walker did not have the capacity to enter the Marriage, the Marriage is void ab initio. Because the Marriage is void ab initio, s. 15 of the Wills Act does not apply and, therefore, the Marriage does not revoke the prior wills.

In British Columbia, a person who has lived in a marriage-like relationship with another for at least two years immediately before the other’s death has the same rights to property if the other dies without a will, and the same rights to apply to vary a will. There are quite a few cases dealing with whether there was in fact a marriage-like relationship, but I am not aware of any where a marriage-like relationship has been challenged on the basis that a person did not have the mental capacity to enter into a marriage-like relationship. It would be interesting to see how the factors the courts consider in determining whether a person has capacity to marry might be applied to a marriage-like relationship. One difference is that a legal marriage takes place at a certain time, while a marriage-like relationship develops over time. What if when two people begin cohabiting in a marriage-like relationship they both have capacity to marry, but one declines to the point where she would not have capacity to marry before they have been in a marriage-like relationship for two years? 

Johnson v. North Shore Yacht Works Corp.

In British Columbia, a trustee acting in the administration of a trust is generally entitled to be reimbursed for his or her reasonable expenses out of the trust assets. But what if the trustee makes a contract in respect of the trust assets, and there are insufficient assets in the trust to pay the amount owing? Might the trustee have to pay the shortfall out of his or her own pocket?

The answer is that unless the trustee has limited the trustee’s liability in the contact, he or she will be out of pocket.

This point is illustrated by the recent decision in Johnson v. North Shore Yacht Works Corp., 2017 BCSC 1229.

Garfield Johnson and Robin Macfarlane are the trustees of the Chester Allison Johnson Alter Ego Trust (which I will refer to simply as the trust). They contracted with North Shore Yacht Works Corp. (which I will refer to as North Shore) to repair a yacht which was an asset of the trust. Ultimately, more money was spent on the repairs than what the yacht could sell for. Mr. Johnson and Mr. Macfarlane as trustees sued North Shore, and North Shore made a counter claim against both Mr. Johnson and Mr. Macfarlane as trustees, and against Mr. Johnson personally. Mr. Justice Grauer ultimately found Mr. Johnson and Mr. Macfarlane in their capacity as trustees liable to North Shore for $166,219, but dismissed the counter claim against Mr. Johnson personally. (The contract dispute is reported at 2014 BCSC 2057.)

Some of the judgment debt to North Shore was satisfied by the seizure and sale of the yacht, but there remained a significant shortfall of over $140,000 and there were no assets left in the trust.

Mr. Johnson and Mr. Macfarlane argued that North Shore was not entitled to collect from them personally. Two or the arguments they advanced were that North Shore knew it was dealing with them as trustees, and Mr. Justice Grauer had dismissed the counter claim against Mr. Johnson personally.

Mr. Justice Grauer held that North Shore was entitled to collect from the trustees’ own assets. They had not limited their liability to the trust assets in the contract. The significance of finding that they were liable as trustees is that they are then entitled to be indemnified out of the trust assets for the liabilities, but it does not negate their personal responsibilities to satisfy the judgment. If the judgment had been against Mr. Johnson personally, he would not have been entitled to be indemnified out of the trust assets.

Mr. Justice Grauer wrote at paragraphs 8 through 10 and paragraphs 14 and 15:

[8]             The defendant [North Shore] submits that it is a long-standing principle of trust law that a trustee is personally liable on contracts into which it enters on behalf of the trust.  The trustee’s remedy is to seek indemnity from the trust for that liability.  The only exception to the trustee being personally liable is where he has specifically contracted to limit his liability to the assets of the trust.

[9]             The authorities bear this out: see, for instance, Benett v Wyndham (1862), 4 DeG F & J 259 (CA);  Muir v City of Glasgow Bank (1879), 4 App Cas 337 (HL); Davis v Sawkiw(1983), 38 OR (2d) 466 (H Ct J); Pettit, Equity and the Law of Trusts, 12^th ed (2012) at pp 413-414; and Underhill and Hayton, Law Relating to Trusts and Trustees, 18^th ed (2010), p. 1066, para 81.5. 

[10]         In Hall v MacIntyre, [1934] 2 WWR 145 (BCCA), Chief Justice Macdonald put it this way:

It is well-understood law that an executor or trustee who makes a contract in relation to his trust is personally liable to the contractor for the price agreed upon.

...

[14]         The plaintiffs [Mr. Johnson and Mr. Macfarlane] then assert that a trustee should not be liable in his personal capacity where the defendant was aware that it was dealing with him in his capacity as a trustee, relying on Gordon v Roebuck, [1992] OJ No. 1499 (CA) at para 16.  I had dismissed the counterclaim against Garfield Johnson in his personal capacity because of my finding that the defendant was aware, if somewhat vaguely, that the yacht was owned by a trust or an estate, not by Mr. Johnson personally.

[15]         But the conclusion in Gordon was that judgment should not be entered against the trustee in his personal capacity when the other party knew it was dealing with a trustee.  I agree it should not, and that was the basis on which I dismissed the claim against Mr. Johnson personally.  A judgment against the trustee qua trustee permits the trustee to seek indemnity from the trust.  A judgment against the trustee in his personal capacity would deprive him of that ability.  The distinction is therefore important.  Here, the issue is quite different: where the trustee is found liable qua trustee, can the judgment creditor execute against the trustee’s personal assets thereby giving rise to the right to claim indemnity?  In my view, the Gordon case does not address that issue.  The authorities cited above do. 

When acting as a trustee, it is important to keep in mind that a trust is not a separate legal person like a corporation. Usually, directors are not personally liable for contracts made on behalf of a corporation (there are exceptions). In contrast, trustees act personally and as this case demonstrates may end up personally on the hook for commitments they make as trustees. 

Sabey Rule LLP Welcomes Mark Brade

I am pleased to announce that Mark Brade has joined our firm as an associate.

Mark is currently focused on real estate law, as well as developing his estate planning, estate administration and business law practices.

He is a graduate of Thompson Rivers University Faculty of Law.