Wednesday, April 19, 2017

Supreme Court of B.C Decision Lends Support to Use of Multiple Wills to Reduce Probate Fees

A recent Supreme Court of British Columbia decision has lent support to the strategy of reducing probate fees by making two wills in British Columbia, one that deals with those assets that may be transferred to your personal representative without a grant of probate, and the other that deals with assets requiring a grant of probate. This strategy of probate fee reduction has been successfully employed in Ontario, and because of wording changes to the legislation in British Columbia when the Wills, Estates and Succession Act came into effect, is utilized more frequently in British Columbia. 

Suppose you own shares in a company that is not traded on a stock exchange, and the company is used for a family business. Let’s say your interest in the company is worth $10 million. You also have a house in your own name, worth $700,000 and some investment accounts worth $1 million. You then have two wills, one of which deals with your interest in the company (we will call it the “Secondary Will”), and the other which deals with your other assets, including your home and investment accounts (the “Primary Will”). You name a different executor in each of the wills (an important detail in British Columbia). 

On your death, your executor of your Secondary Will does not apply for probate; the shares may be transferred into his name as the executor without a grant of probate. But the executor of your Primary Will, for which a grant of probate is required to transfer the assets into her name as executor to deal with them, probates that will. The executor of the Primary Will pays probate fees on those assets, but not the company. If the executor of the Primary Will is not required to pay probate fees on your interest in the company, and the executor of the Secondary Will does not need to probate the Secondary Will, then this will save $140,000 in probate fees (really a probate tax if the government were honest about it), when contrasted to the probate fees if you had only made one will.

In reasons for judgment issued on April 13, 2017, in Berkner(Estate), 2017 BCSC 619, Master Wilson held that an executor of a will dealing with some of the will-maker’s assets, the Primary Will in our example, without applying to probate the Secondary Will.

Master Wilson set out the background as follows:

[1]             Norman Frank Berkner (the “Deceased”) died on February 24, 2016. He was predeceased by his spouse and left one child, the applicant, Shelley Dorothea Berkner.
[2]             The Deceased’s estate plan utilized two wills, both dated January 28, 2016. The applicant is the executor under what is referred to as the Primary Will, but is not the executor under the Secondary Will as she renounced her executorship. The executor under the Secondary Will is an accountant, Mr. Robert L. Gruber.
[3]             This application is for a grant of probate of the Primary Will only.
[4]             The Secondary Will identifies those assets that comprise the Secondary Estate at paragraph 4(g) which provides as follows:
Definitions

4.   In this Will:
      (g)  “Secondary Estate” means collectively:
            (i)   all Private Businesses;
            (ii)  any assets held in trust for me by the Private Businesses;
            (iii) any beneficial interests I may have in any trust for which a Grant is not required for a transfer or realization;
            (iv) any interest I may have in any real property for which a Grant is not required for the transfer or realization;
            (v)  all articles of personal household and domestic use or ornament belonging to me at my death for which a Grant is not required for a transfer or realization;
            (vi) any amounts owing to me from my children; and
            (vii)      any other assets for which my Secondary Trustee determines a Grant is not required for a transfer or realization;
            but excludes my property comprising my Primary Estate; provided that my Secondary Trustee may exclude an asset from being part of the Secondary Estate, in which case it shall become part of the Primary Estate;
      (h)  “Private Businesses” means and includes all securities of private companies or partnerships (which, without limiting the generality of the foregoing, shall include shares, bonds, debentures, notes, receivables, book entries, amounts owing to me, investments in and all other interests in private companies) I may own legally or beneficially at the time of my death and “private companies” for the purposes hereof including, but not limited to, the following:
            - Berkner Egg Farms Ltd.;
            (the “Company”), and any company which is a successor to the Company, or has amalgamated or as a result of any reorganization become a part thereof, and does not include any shares or other interest I may own of a publicly traded company;
[5]             I understand the deceased’s interest in Berkner Egg Farms Ltd. to have significant value.
[6]             All of the deceased’s assets that do not form a part of the Secondary Estate fall under the Primary Will. Although this application is for probate of the Primary Will, no application has been brought, and I infer no application is contemplated, for probate of the Secondary Will. The applicant applied for probate of the Primary Will by way of desk order in the ordinary course, but the Registry required that the matter be spoken to, a process contemplated by Rule 25-4(6)(b) of the Supreme Court Civil Rules.
[7]             The applicant submits that she should be granted probate of the Primary Will because:
a)    a will maker is permitted to make more than one valid will;
b)    a personal representative is not required to probate a will;
c)     in the absence of any rules or legislation that prevents multiple wills or requires that all wills be probated, she is entitled to the order sought.
[8]             For the reasons set out below, the applicant is granted probate of the Primary Will.
Master Wilson agreed with the applicant, represented by Geoff White, that a will-maker may make more than one will, and there is no requirement to probate a will. In granting the application to probate the Primary Will, without applying for a grant of the Secondary Will, Master Wilson applied the Ontario decision in Granovsky Estate v. Ontario, 1998 CanLII 14912, as follows:

[18]         The applicant says that since multiple wills are permitted at common law and there is no obligation on the part of Mr. Gruber to apply for probate of the Secondary Will, the applicant is entitled to the order granting her probate of the Primary Will.
[19]         In Granovsky, the dispute was between the administrator of the primary will and the Province of Ontario on the question of whether probate fees were payable on the entire estate. At paras. 23 and 26 of Granovsky, the court considered the legislative scheme in Ontario and concluded that multiple wills are permitted in Ontario, that limited grants of probate are available and there was no need to probate the second will:

23.        The estate planning of having multiple Wills in the form of a Primary Will and a Secondary Will which take effect on death is, in my view, simply another example of how a careful testator plans to have her or his estate pay the least possible probate fees on death. There is no legal obligation to obtain probate and, as I have noted above, limited grants are permissible. If the directors of the private companies in which the deceased owns shares or has an interest at death do not require the formal grant from the Court to deal with the transmission of the assets and are prepared to deal with the estate trustees named in the Secondary Will, why then should the estate have to pay probate fees on those assets?

26.       … In my view, there is no legislative prohibition against asking the Court for a limited grant of the deceased's Primary Will and I find that there is no requirement for the Estate Trustees to submit the deceased's Secondary Will to probate or to pay probate fees on the value of the assets governed by it.
[20]         The question of probate fees is not before me on this application, and no notice of this application was provided to the Province of British Columbia.
[21]         Turning to the legislation of this province, I find support for the applicant’s position that she be entitled to a grant of probate over what amounts to only a portion of the deceased’s estate can be found in s. 136 of the Wills, Estates and Succession Act, S.B.C. 2009, c. 13, which states:

136      A representation grant, whether or not power is reserved to another person to apply for a subsequent representation grant, gives to the personal representative exclusive authority to administer the estate or that part of the estate to which the representation grant applies in accordance with its terms.
[Emphasis added]
[22]         In my view, this section contemplates that a grant may be issued for something less than the entirety of the deceased’s estate.

Subject to Master Wilson’s comment that the issue of probate fees was not before him on the application, this decision lends support to the view that the multiple-strategy may be an effective way to reduce probate fees on death in appropriate circumstances. That said, I am concerned that the multiple-will strategy has become a bit of the flavour of the day in British Columbia, and there are pitfalls and lots of room for error, but I will save that for other posts. 

Sunday, April 16, 2017

The Rule in Cherry v. Boultbee

If you wait too long to sue on a debt, your claim may be statute-barred by the applicable limitation legislation. But can the personal representative of a deceased person require a beneficiary to bring into account an amount the beneficiary owed to the deceased even though the limitation period for the deceased to bring a claim has expired?

The answer in British Columbia is yes.

The principle is known as the rule in Cherry v. Boultbee, and was recently applied by Madam Justice Church in Re: Johnston Estate, 2017 BCSC 272.

The applicant and the respondent in Johnston Estate were the two sons and sole beneficiaries of their father, William Leonide Johnston's will. William Johnston had lent the respondent son $70,000 in 1996 and the respondent had not made any payment since 2000. Under the applicable limitation legislation, William Johnston's claim would have been statute-barred. (There have been significant changes to British Columbia's limitation legislation in respect of debts.) The applicant, as his father's personal representative following his father's death, sought to have a debt brought into account and deducted from his brother's share.

In holding that the applicant was entitled to deduct the amount owing from the respondent's share, Madam Justice Church described the rule in Cherry v. Boultbee as follows:

[28]         The applicant relies on what is commonly referred to as the rule in Cherry v. Boultbee which provides that where a legatee of a share of the residue is a debtor of the estate, he or she is not entitled to receive his or her legacy without bringing his or her debt into account.   The rule derives from the case of Cherry v. Boultbee (1839), 4 My. & Cr. 442.  It is an equitable principle designed to ensure fairness.  The purpose of the rule was to prevent a beneficiary who owed money to an estate from receiving more than his or her fair share of the estate.  In the case of Re: Akerman, Akerman v. Akerman, [1891] 3 Ch. 212, Kekewich J. stated: 

A person who owes an estate money, that is to say, who is bound to increase the general mass of the estate by contribution of his own, cannot claim an aliquot share given to him out of that mass without first making the contribution which completes it.  Nothing is in truth retained by the representative of the estate; nothing is in strict language set off; but the contributor is paid by holding in his own hand a part of the mass, which, if the mass were completed, he would receive back.

[29]         The rule has been held to apply even where the debt is statute-barred: see  Re: Akerman.

The respondent argued that the rule no longer applied in Canada, citing a decision of Mr. Justice Clark in the Alberta case, Re: Moody Estate, 2011 ABQB 222. But Madam Justice Church declined to follow Moody Estate:

[36]         With all due respect to Clark J., I cannot agree with either his reasoning or his conclusion.  In my view, he begins his analysis from the premise that the “rule permits an executor to recoup the amount owing, even though the deceased would have been unable to do so.”  In my view, that is not an accurate description of the application of the rule.  The rule in Cherry v. Boultbee does not confer on the estate any right to recoup the amount owing but rather operates to ensure fairness in the distribution of an estate, recognizing that the relationship between a testator and his or her beneficiaries is typically not at arm’s length.   The fundamental purpose of the rule is to ensure that beneficiaries are treated fairly and it embodies the principal that he who seeks equity must do equity.  As the court noted in Re: Akerman, nothing is being retained by the representative and nothing is being set off but rather, the contributor is paid by what he is holding in his own hand.  The court in Re: Goy & Co Ltd. [1900] 2 Ch. 149, also noted that the claimant has in his own hands that which is applicable to the payment and should pay himself out of that.  The question of whether the testator or the estate can recover the debt or whether the debt is statute barred is therefore largely irrelevant to the application of the rule.  In my view, the change in approach to limitation provisions by the Supreme Court of Canada in Tolofson does not affect the application of the rule in Cherry v. Boultbee.


In the result, the respondent's debt will be brought into account when his father's estate is distributed. 

Friday, March 24, 2017

Court Orders Interim Distribution Under Section 155 of the Wills, Estates and Succession Act

In a recent decision, Davis v. Burns Estate, 2016 BCSC 1982, the Supreme Court of British Columbia allowed an interim distribution to be made to a beneficiary of a will under section 155 of the Wills, Estates and Succession Act pending the resolution of a wills variation claim. Section 155 prohibits the personal representative from making a distribution after someone has started a wills variation claim without the consent of the Court. As far as I know,  this is the first reported decision dealing with an interim distribution pursuant to section 155, although there were cases under the now repealed Wills Variation Act considering whether to allow an interim distribution under that Act (which contained a prohibition on distribution during the first six months following probate, but did not expressly prohibit a distribution after the six-month period if a claim had been commenced).

Patricia Burns died on March 17, 2015. In her will dated October 23, 2010,  she left 20% of the residue of her estate to Brent Dale, with whom she lived, and 80% to her friend George Quan, disinheriting her daughter, Leslie Davis. Mr. Dale provided evidence that he and Ms.Burns were in a marriage-like relationship.  The gross value of the estate was over $2.5 million.

Ms.Davis filed a claim under Division 6,  Part 4 of the Wills, Estates and Succession Act, in August 2015, seeking to vary her mother's will on the basis that her mother had not made adequate provision for her.

Mr. Dale asked the court to order an interim distribution of $250,000 to him. Ms. Davis opposed the application unless she too received an interim distribution of $250,000. Similarly, Mr. Quan opposed the application unless an interim distribution were made to him as well.

In granting Mr. Dale's application, Mr. Justice Greyall applied the following criteria from a decision of the British Columbia Court of Appeal in Hecht v. Hecht Estate (1991), 62 B.C.L.R. (2d) 145, decided under the Wills Variation Act:                                                                                                                                                                                                                                                                                                                                                                                                                            

a. the amount of the benefits sought to be distributed as compared to the value of the estate;
b. the claim of the beneficiaries on the testator;
c. the need of beneficiaries for money; and
d. the consent of the residuary beneficiary to the proposed transfer.

In finding that it was appropriate to order the interim distribution to Mr. Dale, Mr. Justice Greyall noted that the net value of the estate available for distribution would likely be at least $2.3 million after expenses and Mr. Dale's share would be $460,000 if Ms. Davis is not successful. If she is successful, it is unlikely that she would receive more than one half of the estate.

Mr. Dale, who was 76, had financial need, with his expenses exceeding his income of $1500 per month. Ms. Burns expressed wishes that Mr. Dale have funds available for travel were unfullfilled becuase of the dealy in distributing the estate as a result of the lawsuit.

Mr. Quan had not brought his own application for an interim distribution, and, accordingly, Mr. Justice Greyall declined to make an order in his favour, but left it open for Mr. Quan to make his own application.

As Ms Davis is not a beneficiary, she is not entitled to an interim distribution. Mr. Justice Greyall found no prejudice to her in making the interim application. She may pursue her claim to a share of the residue expeditiously.

Monday, March 06, 2017

Assets Held in a Discretionary Trust May Affect Some Types of Assistance for Beneficiaries with Disabilities (But Still Often a Good Idea)

I have often suggested to clients with children or other intended beneficiaries of their estates with disabilities that they consider creating discretionary trusts for the beneficiary with a disability if the beneficiary is eligible for British Columbia benefits for persons with disability. For the purpose of determining whether someone is eligible for these provincial benefits, discretionary trusts are not included in that person’s assets. The Provincial Government will also allow a person with a disability who has received an inheritance or perhaps a settlement for a personal injury into a trust to qualify for the disability benefits.

I have discussed these trusts, sometimes referred to as Henson Trusts (named after the Ontario decision of The Minister of Community and Social Services v Henson, [1987] OJ No 1121, aff’d [1989] OJ No 2093 (Ont CA)) here. In a fully discretionary trust, the beneficiary has no right to the income or capital, except to the extent that the trustee exercises her discretion to make payments to the beneficiary.

Although discretionary trusts are a good way of making provision for a person with disability, allowing that person to receive provincial disability benefits, while allowing the trustee of the trust to use the assets in a manner that promotes the person’s independence, the trust may still affect the person with a disability’s eligibility for other programs.

This issue was recently highlighted in the British Columbia Court of Appeal decision in S.A. v. Metro Vancouver Housing Corporation, 2017 BCCA 2. S.A. is a person with disabilities who lives in a subsidized rental residence provided by the Metro Vancouver Housing Corporation. The Metro Vancouver Housing Corporation also provides additional rental assistance to some of its residents who meet certain criteria, including having assets below a certain amount.

S.A. is the beneficiary of a trust, created by court order varying her father’s will. To receive addition rent assistance, S.A. is required to provide verification of her income and assets. She disclosed to the Metro Vancouver Housing Corporation that she was the beneficiary of the trust, but declined to provide any information about the trust assets on the grounds that it was not relevant to her eligibility.

She unsuccessfully sought a declaration from the Supreme Court of British Columbia that the discretionary trust was not an asset within the meaning of her tenancy agreement or the application for additional rent assistance. She appealed the decision to the Court of Appeal, and the Disability Alliance B.C. intervened in support of her position.

Mr. Justice Goepel, writing for the Court of Appeal, held that the Metro Vancouver Housing Corporation was entitled to disclosure of further information about the trust assets. Different programs have different eligibility criteria. Metro Vancouver Housing Corporation has limited funds available for additional rent assistance, and information about discretionary trusts is relevant to choosing which applicants to provide the assistance.

Mr. Justice Goepel wrote at paragraphs 47 through 49 and 54 through 58,
[47]         I accept the intervenor’s submissions that discretionary trusts play an important role in promoting the independence and full citizenship of PWDs. That said, discretionary trusts also provide some individuals with benefits unavailable to others who are not beneficiaries of such trusts. Whether such benefits should be considered in determining which individuals should receive public assistance raises difficult public policy questions. I do not accept the intervenor’s broad contention that if this Court allows MVHC to take into account an interest in a Henson trust, it would affect not just this housing assistance program but also every other form of social assistance that relies on an eligibility test based on asset value. Each social assistance program has its own individual eligibility criteria. Whether benefits from a discretionary trust must be taken into account will vary from program to program and depend upon the rules and regulations that govern eligibility for any particular program.
[48]         The issue underlying this litigation is what information MVHC can request from tenants in determining whether to grant rental assistance. In the specific context of this case, the question is whether MVHC can require S.A. to provide additional details of the Trust of which she is a beneficiary over and above the information she has provided to date.
[49]         I note at the outset that many of the submissions have lost sight of this fundamental question. The parties have made extensive submissions concerning the tenancy agreement, the nature of the Trust and the difficulty valuing the Trust given its discretionary nature. In doing so, they have conflated the information that MVHC can consider in determining the eligibility of a tenant for rental assistance and the material it may consider in determining which eligible applicants will actually receive rental assistance. This confusion is perhaps understandable given MVHC’s letter of April 23, 2015 that stated it required particulars of the Trust to determine S.A.’s eligibility for additional rental assistance. With respect, the question is not limited to determining S.A.’s eligibility for rental assistance but is also whether MVHC can take the Trust into consideration in determining how to exercise its discretion as to which of the eligible applicants should receive a rental subsidy.
...
[54]         While S.A. may not have a vested interest in the Trust, she clearly has a beneficial interest. If she wishes to apply for a rental subsidy she must disclose the amount in the Trust.
[55]         MVHC, through the Assistance Application, requires applicants to provide information which MVHC considers to determine whether it will provide rental assistance. Applicants agree to provide such additional information as MVHC may require. In this case, MVHC says it requires further information about the Trust to determine both S.A.’s eligibility for rental assistance and, in the context of a program in which assistance is not available for all eligible applicants, whether S.A. should receive such assistance in preference to other eligible applicants.
[56]         I agree with the chambers judge’s analysis that the Trust is an asset of S.A. and that MVHC is entitled, pursuant to the provisions of the Assistance Application, to the further information it requested concerning the Trust to assist it in determining whether to provide rental assistance.
[57]         MVHC operates a subsidy program for persons in need. The Additional Rent Assistance program is discretionary based on a consideration of factors including financial factors and public housing needs. MVHC is entitled to know the particulars of the Trust so it can properly weigh S.A.’s rent assistance application against other eligible candidates. MVHC is entitled to know the respective financial positions of all applicants in determining how to spend its limited funds.
[58]         I find MVHC is entitled to require S.A., if she wishes to seek a rental subsidy, to provide the information requested regarding the Trust. This includes a statement showing the current balance of the trust fund along with details of all disbursements made since it was established.  Because S.A. has refused to provide the requested information, her application is incomplete.  As set out in the Assistance Application, MVHC will not process incomplete forms. Only when S.A. provides the requested information will MVHC have to decide whether to continue to extend her rental assistance.

Creating a discretionary trust for a beneficiary with disabilities in British Columbia is still a good way to provide for the beneficiary without affecting the provincial Persons with Disabilities Benefits, but may affect eligibility for other types of assistance. 

Tuesday, February 14, 2017

I Will be Speaking at the Legal Education Society of Alberta Capacity and Influence Course

I have the honour of being included in the faculty for a course on Capacity and Influence, which will be held in both Edmonton and Calgary, presented by the Legal Education Society of Alberta.

The course is chaired by John Poyser, author of the text Capacity and Undue Influence, Carswell, 2014. The other speakers are:

Dr. Arlin Pachet, Ph.D, R. Psych, ABPP-CN
Pachet Assessment
and Rehabilitation Services
Calgary, Alberta

Shelley E. Waite, TEP
McLeod Law LLP
Calgary, Alberta

Helen R. Ward
Duncan Craig LLP
Edmonton, Alberta

Kimberly A. Whaley, CS, TEP, LLM
WEL Partners
Toronto, Ontario

The topics cover undue influence and capacity in respect of both lifetime transfers and wills, approached from both a litigation perspective, and a planning perspective. I will be speaking the planning side of  undue influence including steps a lawyer may take to recognize risk factors for undue influence, what steps a lawyer may take if it appears likely that his or her client is being unduly influenced, and how the file should be documented in order to provide evidence in case a transaction or will that the lawyer has been involved with is later challenged as having been obtained by undue influence.

The dates and places of the course are as follows:

EDMONTON
March 1, 2017
Chateau Louis Hotel
& Conference Centre
11727 Kingsway NW

CALGARY
March 8, 2017
Glenmore Inn
& Convention Centre
2720 Glenmore Trail SE
9:00 AM–4:30 PM

Registration information is available in the brochure.

On March 15, 2017, I will also be speaking on my topic at the Canadian Bar Association, Okanagan Wills and Trusts section meeting.

Wednesday, February 08, 2017

Court of Appeal Overturns Trial Decision in McKendry v. McKendry

The presumption of resulting trust is a presumption of law that applies when one person gratuitously transfers property to another. The presumption is that the person transferring the property did not intend to make a gift, and that the recipient holds the property in trust for the person who made the transfer. It is a presumption only, and may be rebutted if the recipient proves that the person making the transfer intended to make a gift. The court attempts to determine what the person who made the transfer actually intended, but in many cases this is difficult because the claim is often made after the person who transferred the property died.

The relevant time for determining whether the person who transferred the property intended to make a gift is the time of the transfer.

But what happens if at the time of the transfer, the person who gave an interest in the property did not intend to make a gift, but then later changes her mind, and decides she wishes to make a gift?

I wrote about this in a previous post about the trial decision in McKendry v. McKendry, 2015 BCSC 2433. Because the trial judge’s decision in that case has now been overturned by the British Columbia Court of Appeal in McKendry v. McKendry, 2017 BCCA 48, this issue is worth revisiting.

Mary McKendry transferred title to her home on W 48th Avenue in Vancouver into a joint tenancy with her son, John McKendry, in 2008. The home was worth over $1.9 million when she died on February 23, 2012. There were mortgages registered against the home, which her son had used to finance the purchase of an investment property. Apart from the home, her estate was worth about $465,000.
In addition to her son, she had four daughters who survived her.

Following the transfer, she twice instructed lawyers to draft trust agreements in respect of the home for her son to sign. The first stated that John McKendry held his interest in the title to the home in trust, and on her death he would receive a one-third interest, one of her daughters would receive a one-third interest, and her other three daughters would share a one-third interest. The second trust declaration made in February 2010 provided that on Mary McKendry’s death, each child would be entitled to an equal interest in the home. She signed both trust declarations, but her son did not.

But when she signed her last will, on December 16, 2010, her will contained the following paragraph:

7.         I wish to advise my Trustee/s that I have registered my home civically known as [W. 48th] (hereinafter called the “Home”) in Joint Tenancy with my son, John Alexander McKendry.  My son shall receive the Home subject to the Mortgages registered against [the] Home and shall be responsible for payment of the Mortgages as he was the recipient of the mortgage proceeds.In her will, she left the residue of her estate to her four daughters.

She also signed a letter at the time of her will, stating

I, Mary Alice McKendry, confirm that I wish to cancel any trust agreements or other documents imposing an obligation on my son to share the property I own at [W. 48th] with my other children.  I want my home to be my son’s property on my death absolutely – no strings attached.  I have made this decision after much consideration and I fully understand that this gives my son the majority of my assets.  My house constitutes the majority of my assets.

The issue before the court following her death was whether John McKendry as the surviving joint tenant was entitled to the home, or whether he held it in trust. The trial judge held that he held it in trust. When she transferred title into a joint tenancy with her son, Mary McKendry did not intend to make a gift to him, but rather intended for him to hold title to the home in trust. Accordingly, she had not made a gift. Although she later changed her mind, deciding she wanted John McKendry to have the house as an outright gift, the trial judge held that she needed to do something more to make a gift, such as signing a deed of gift.

John McKendry appealed to the British Columbia Court of Appeal. The Court of Appeal held that he was entitled to the home. Although initially Mary McKendry did not intend to confer a gift when she transferred the home into a joint tenancy with him, when she later decided to make a gift, she did not need to sign a deed of gift, or take any further steps to perfect the gift. It was sufficient for her to make her intention to make a gift clear.

Madam Justice Dickson wrote:

[40]         In January 2008, when Mary gratuitously transferred legal title to the property to John in joint tenancy, she did so with the intent that he hold the property in trust.  The judge found that she intended to retain the entire beneficial interest, including the right of survivorship, for herself and her estate: paras. 124-133. Although John did not sign the trust declaration prepared by counsel, Mary’s intentions were clear and unambiguous.  In consequence, while John held legal title with Mary jointly from January 2008 onward, he held all of the beneficial interest, including survivorship rights, in trust.

[41]         Unless something changed, upon Mary’s death John would have continued to hold legal title to the property only and to hold the beneficial interest in trust.  However, in December 2010 something did change.  As evidenced by the November note and the two-page document prepared by her lawyer, Mary unambiguously renounced her beneficial interest in the right of survivorship in John’s favour should he survive her.  In doing so, she clearly intended to make an immediate inter vivos gift of that incident of the joint tenancy to John.  As explained in Simcoff [v. Simcoff, 2009 MBCA 80] the gift was to whatever remained when Mary died.
.... 
 [43]         Given that she had previously transferred legal title to the property to John in joint tenancy, Mary did everything necessary in December 2010 to give her beneficial interest to John, bearing in mind the nature of that interest.  Her intention was made manifest in the signed two-page document her lawyer prepared and no further act of delivery was required because of the existing joint tenancy.  In particular, nothing more would have been gained had Mary executed a deed of gift under seal, given her clear and formally expressed intention. The immediate inter vivos gift was complete and binding.  In my view, Mary’s intention should prevail.

Tuesday, January 17, 2017

K.L.W v. Genesis Fertility Centre

Mr. A.B. had serious medical problems throughout his life. He and his wife, K.L.W., wished to have children. He arranged to have his sperm stored by Genesis Fertility Centre, so that his wife could use his reproductive material to conceive a child. He wanted her to be able to do so after his death.

A.B. died without a will, and K.L.W. sought to have his sperm released so that she could conceive his child.

Unfortunately, no one advised the couple of the requirement in s. 8(1) of the Assisted Human Reproduction Act, S.C. 204, c. 2 (“AHRA”) and ss. 3(1) and 4(1) of the Assisted Human Reproduction (Section 8 Consent) Regulations, SOR/2007-137 (the “Regulations”) that A.B. consent in writing to K.L.W.’s use of his sperm to create embryos after his death. A.B. did not sign a written consent, but there was clear evidence from several witnesses that he had said that he had wanted his wife to be able to conceive his child even if he died.

Without the written consent, Genesis Fertility Centre, would not release the reproductive material to K.L.W.

In K. L.W. v. Genesis Fertility Centre, 2016 BCSC 1621, K.L.W. asked the Supreme Court of British Columbia to declare that her late husband’s reproductive material was her is her legal property, and for an order that the Genesis Fertility Centre release the reproductive material to her for her use to create embryos for her reproductive use.

Is reproductive material property?

After considering several cases both in British Columbia and other jurisdictions, Mr. Justice Pearlman held that the reproductive material was property in the context of this case. Although there are legislative restrictions based on public policy that do not apply to other types of property, including prohibitions on the sale of reproductive material, the courts have held that reproductive material is property in the context of claims in which it has not been properly stored and in division of family property.

Mr. Justice Pearlman  quoted from Madam Justice Bennett’s reasons for judgment in Lam v. University of British Columbia,  2015 BCCA 2, a case in which the Court of Appeal affirmed that sperm damaged when a freezer malfunctioned was property to which the provisions of the Warehouse Receipt Act (“WRA”) applied. Mr. Justice Pearlman wrote:
[75]    At paras. 113 and 114, Bennett J.A. stated:
[113] The nature and scope of property interests that a person can have in human sperm need not be decided on the facts of this case. This case, unlike for example, J.C.M. v. A.N.A., 2012 BCSC 584, does not deal with competing property interests in human sperm. This case considers whether Mr. Lam, a cancer patient, has ownership of the sperm he produced, such that he can contract for its storage to enable his personal use of the sperm at a later date. If so, the sperm is property, as something must be property if it is capable of being owned. There may also exist things that are property that cannot be owned, but that is not something that needs to be decided in the context of this case.
[114] Not all of Professor HonorĂ©’s 11 incidents of ownership need to be present for ownership to arise (Yearworth [v. North Bristol NHS Trust, [2009] EWCA Civ 37] at para. 28). Ownership of body parts must be contextual, and often limited by legislation because of public policy reasons. No one would argue that if a cancer patient cut her hair and stored it for the purpose of later making a wig after treatment that she did not “own” her hair in that context. On the other hand, legislation prevents the selling of sperm and organs such as kidneys, but does not prevent their donation. The prohibition on sale does not necessarily mean the legislation is inconsistent with ownership. It has provided limits to ownership in some contexts.
[76]         In concluding that each of the sperm donors had sufficient ownership of their stored sperm for it to be “property” and thus “goods” within the meaning of the WRA, Bennett J.A. applied the same analytical framework as the Court had adopted in Yearworth. The donors had ejaculated the sperm; contracted to store the sperm for their own future use; paid a fee for storage; and could consent to the sperm being tested. Further, they could terminate the storage agreement; could consent to the release of the sperm to their physician to be used by their spouse; and could exclude all others from using the sperm.  Although legislation or the storage agreement precluded the donors from disposing of the sperm by leaving it to someone in their will or from selling the sperm, they nonetheless had sufficient rights in relation to their own sperm for it to be defined as property.
Because A.B. died without a will, and did not leave any descendants, K.L.W. as his surviving spouse is the sole beneficiary of his estate. Accordingly, pursuant to section 20 of the Wills, Estates and Succession Act, she is entitled to the reproductive material.

This leaves the fundamental question in this case: may K.L.W. use her husband’s sperm to conceive a child despite the fact that he did not provide consent in writing?

Mr. Justice Pearlman held that A.B. had consented to his wife’s use of the reproductive material, and that it is consistent with the underlying principles of the legislation to allow her to do so. He wrote:
[131]     The circumstances of this case are extraordinary. [A.B.] freely and repeatedly expressed his consent to the petitioner’s use, following his death, of the Reproductive Material. He communicated his agreement to the petitioner's use of his stored sperm to the petitioner, to his social worker, to a nurse at the [content redacted] hospital where his [content redacted] was performed, to his family doctor, and to Genesis.
[132]     [A.B.] fully understood that the Reproductive Material would be used in accordance with his wishes to create an embryo, and would be used, following his death, by the petitioner to attempt to conceive a child.
[133]     One of the guiding principles of the AHRA is the promotion and application of free and informed consent as a fundamental condition for the use of human reproductive technologies. Another guiding principle, set out in s. 2(b), is that the benefits of the technology for individuals, families and society can be most effectively secured by appropriate measures for the protection and promotion of human health, safety and dignity. Here, [A.B.] and the petitioner sought to use the technology in order to have a child of their own. They took appropriate steps to ensure that the [content redacted] would not be passed to any child they conceived through in-vitro fertilization.  They consulted with medical specialists about the safe use of the technology.
[134]     To deny the petitioner the use of the Reproductive Material intended by [A.B.] would be both unfair and an affront to her dignity.
[135]     [A.B.] expressed his consent to the petitioner's use of the Reproductive Material after he had the benefit of professional counselling from his [content redacted] social worker, a nurse trained in [content redacted] fertility issues and his family doctor.
[136]     I conclude that in the circumstances of this case, [A.B.]'s consent, although not in writing, specifically contemplated the petitioner’s reproductive use of his stored sperm after his death, and was sufficient to satisfy the fundamental objective of the AHRA that the donor’s consent must be both free and informed.  Accordingly, the Court may order the release of the Reproductive Material to the petitioner to enable her use of that material for the purpose of creating an embryo.