Converting a Petition or Application to Prove a Will into an Action

The Supreme Court Civil Rules provide that a proceeding to prove the validity of a will must be started by either a notice of application, if there is an existing proceeding in which it is appropriate to do so, or by a petition. This is set out in Rule 25-14(4). This is a significant change to the practice. Prior to the changes to the Rules with the coming into force of the Wills, Estates and Succession Act, contested proceedings to prove a will were brought by a notice of civil claim. A proceeding begun by Notice of Civil Claim is referred to as an “Action.” The difference is that an Action has pretrial procedures such as disclosure of documents, and oral examinations for discovery, and ultimately a trial with witnesses testifying in court. In contrast, a notice of application or petition does not have the pretrial disclosure process and the evidence is by way of affidavits.

The changes in the procedure may have significant implications for someone challenging a will, perhaps on the grounds that the will-maker did not have the mental capacity to make a will or was unduly influenced. The person making the claim often will not have as much information as the person seeking to uphold the will, often the named executor. Successful challenges of wills may depend on obtaining pretrial disclosure from the other parties, as well as information from persons who are not part of the lawsuit. Accordingly, the Rule change may tend to work against those challenging a will, including those with meritorious claims.

Fortunately, the Supreme Court Civil Rules allow the application to prove a will to be converted into an Action. Rule 22-1(7)(d) allows the court to convert an application or petition into an action. Rule 25-14 (8) allows the court to give directions about procedure in estate maters and includes such things as ordering examinations for discovery and discovery of documents and how the evidence will be presented.

How difficult is it to persuade the court to convert a proceeding to prove a will into an Action? The criteria were recently considered by the British Columbia Court of Appeal in Kerfoot v. Richter, 2018 BCCA 238. In this case, Mary Richter is claiming that her mother, Bernice Richter’s will dated July 19, 2012 is invalid. In the will, Mary Richter’s brother and sister are each left 45 percent of the residue of their mother’s estate and she is left the other 10 percent. She alleges that her mother did not have capacity to make the will and that her mother was unduly influenced to make the will.

The named executor, Mr. Barry Kerfoot, brought a petition in accordance with the Rules to prove the validity of the will in solemn form. Mary Richter applied to convert the proceeding into an action, and the Supreme Court Judge hearing the application dismissed her application. She appealed to the Court of Appeal.

In allowing the appeal and ordering that the proceeding be converted into an action, Madam Justice Fisher applied the decision in BritishColumbia (Milk Marketing Board) v. Saputo Products Canada G.P. / SaputoProduits Laitiers Canada S.E.N.C., 2017 BCCA 247, which held that a proceeding brought by petition should be converted into an Action if there are disputes of facts or law, unless the party requesting a trial is bound to lose.

Madam Justice Fisher wrote that the judge hearing the application should not weigh the evidence. She wrote at paragraph 27:

[27]       In my view, the Saputo test precludes a judge from weighing evidence. Applying Robertson v.Dhillon, 2015 BCCA 469, this Court confirmed that the test is akin to the test to be applied for summary judgment: whether, on the relevant facts and applicable law, there is a bona fide triable issue. In the context of this case, where there are factual disputes, the chambers judge was to determine whether Mary, as the party requesting the trial, was bound to lose; more particularly whether there was a triable issue with respect to Bernice’s testamentary capacity or the issue of undue influence.

The judge hearing the application may, however, consider affidavit evidence as well as the pleadings in determining whether there is a triable issue. Madam Justice Fisher wrote:

[31]       While a judge is not to weigh evidence, he or she may draw inferences that are strongly supported by undisputed facts. Importantly, a party seeking to establish that there is a triable issue cannot rely on mere allegations but must establish the existence of material issues: Canada (Attorney General) v. Lameman, 2008 SCC 14 at para. 11. It is this latter requirement that precludes a matter from being referred to trial on the basis of mere assertions.

In this case, the Court of Appeal found that Mary Richter had sufficient evidence to establish a trial issue. Madam Justice Fisher wrote:

[34]       I appreciate the chambers judge’s concerns about the weakness of Mary’s evidence, as some of it went no further than mere allegations. However, the fact that Mary had no first-hand knowledge of the events leading up to the making of the impugned will is hardly surprising given the nature of the issues. Proving undue influence is not easy. Section 52 of WESA has shifted the onus of proof to the defender of a will once the person challenging it has shown that the testatrix was in a relationship of dependency with the person alleged to have exerted undue influence, or one in which the potential for domination existed.

[35]       Undue influence may be established through circumstantial evidence. Mary’s pleadings and evidence contain conclusory statements about many of the events leading up to the execution of the impugned will, but they also raise factual issues from which inferences of undue influence could be drawn. These issues relate to Bernice’s advanced age and declining health, her dependence on John and Janet [Mary Richter’s brother and sister] at the relevant times, John and Janet’s advance knowledge of the impugned will, and the marked difference between the impugned will and the prior wills. Mary also provided direct evidence contradicting most of the reasons expressed in the impugned will for disinheriting her.

As I interpret this decision, the party seeking to convert the procedure into an action will generally not be required to have significant evidence (which as noted above, may be difficult for a party challenging the will to obtain without document discovery and examinations for discovery) but must have some basis for demonstrating that there is a triable issue.

This brings me to my criticism of the changes to the Rules when the Wills, Estates and Succession Act came into force. Although a proceeding to prove a will may be relatively easy to convert into an Action, it requires an additional step in the lawsuit, namely the application to court to convert the proceeding. This just adds extra legal expense. It would be preferable if the Rules were changed to allow a proof of a will proceeding to be started by a notice of civil claim.

Gordon Estate

Section 151 of the Wills, Estates and Succession Act permits a beneficiary of a will, or in the case of an intestacy, an intestate successor to apply to court to bring or defend a claim in the name of the personal representative.

The conditions for a successful application are set out in section 151 (3) as follows:

(3)The court may grant leave under this section if

(a)the court determines the beneficiary or intestate successor 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 beneficiaries or intestate successors, 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 beneficiary or an intestate successor for the proceeding to be brought or defended.

In Gordon Estate, 2018 BCSC 487, Mr. Justice Milman granted leave to the University of British Columbia to bring a claim in the name of the executor of Mary Gordon’s will, David Ohori, against Mr. Ohori himself and his wife to set aside the transfer of a house from Ms. Gordon to them, as well as claims to other assets they received during her lifetime.

The University of British Columbia is alleging that the transfer of the house was gratuitous and as such the presumption of resulting trust, or in other words, the presumption that the transfer was not a gift, applies to the transfer. The University is also alleging that Ms. Gordon did not have sufficient mental capacity at the time of the transfer to confer a gift. If the claim is successful, the house and other assets will form part of Ms. Gordon’s estate, distributable under her will.

The University is the residual beneficiary of Ms. Gordon’s will, and if the transfer and other transactions stand, then there would only be about $153,000 in her estate, most of which would be distributed to other beneficiaries, with little or nothing left for the University.

To succeed in the application, it was necessary for the University to show that it was necessary or expedient to allow the University to bring the claim on behalf of the personal representative.

In this case, the University provided evidence from Ms. Gordon’s long-time lawyer, Mr. Berardino, that when he met with her before she signed a transfer of her house to Mr. Ohori and his wife, she appeared confused and he did not consider that she had the mental capacity to transfer the house. He declined to act in the transfer, but a different lawyer, Mr. Miller, considered that she had capacity and witnessed the transfer document.

In this kind of application, the judge does not make a determination on the ultimate question of whether the transfer and other transactions are valid, but rather whether there was a sufficient basis for the claim to proceed.

Mr. Justice Milman found that the University of British Columbia met the requirements to satisfy section 151. He wrote:

[49]         I have concluded that UBC should be granted leave to commence an action on the terms sought. Because the proposed action will therefore proceed, I intend to say the minimum necessary to explain my conclusion in that regard. 

[50]         In summary, I am not persuaded that I can properly presume that the Deceased was competent to transfer her assets and that Mr. Miller competently assessed her competence to do so, as Mr. Ohori urges me to do. There is other evidence before me, particularly that of Mr. Berardino and the results of the testing that the Deceased underwent shortly before those events, that, at the very least, calls into doubt the soundness of any such presumptions, even if they might otherwise apply. 

[51]         Mr. Miller did not provide an affidavit himself. His hand-written notes of his one and only conversation with the Deceased, which are attached to Mr. Ohori’s affidavit, do not elucidate his practice in interviewing persons in the Deceased’s situation. In particular, there is no description of the specific questions he asked and the specific answers the Deceased gave to support Mr. Miller’s apparent conclusion that the Deceased “was able to tell me about her assets.”  That is particularly problematic in light of Mr. Berardino’s account of how the Deceased had earlier, on more than one occasion, laboured under the false impression that she had two pieces of real property to dispose of, rather than just one. Mr. Berardino’s concerns as to the Deceased’s ongoing lack of capacity are entitled to significant weight because of his longstanding relationship with her. 

[52]         The observations of Mr. Miller, even if taken at face value, pertain only to the transfer of the Property. Mr. Ohori has adduced little or no evidence to support the validity of the other transfers that he received in the final months of the Deceased’s life. 

[53]         Finally, although I agree with Mr. Ohori that his evidence, if accepted, could rebut the presumption of resulting trust, that evidence can only be assessed properly in the context of the broader inquiry that will now have to take place into the Deceased’s state of mind, particularly her capacity to form the intentions that Mr. Ohori attributes to her.

Quinn Estate

Estate planning for people with assets and connections to both the United States and British Columbia is fraught with potential legal and tax pitfalls. It is important to get tax and legal advice with respect to the implications on both sides of the border. This is illustrated by the recent decision concerning the former NHL coach Pat Quinn in Quinn Estate, 2018 BCSC 365.

Mr. Quinn and his wife Sandra Quinn settled a trust in the United States which dealt with assets in the United States. Mr. Quinn was an American citizen, and Mrs. Quinn had U.S. Green Card, but they lived in British Columbia. Their U.S. lawyer also draft a will for Mr. Quinn dealing with his assets in Canada. The will provided that the residue of his Canadian Estate would “pour over” into a U.S. trust, referred to as the Quinn Family Trust.

The issue in this case was whether the distributive provision of the Canadian will is valid under British Columbia law. The will was signed by Mr. Quinn in the presence of two witness in accordance with the requirements of section 37 of the Wills, Estates and Succession Act. The will itself was formally valid. The difficulty was the “pour over” clause, which I understand is valid in at least some states. The terms of the Quinn Family Trust allowed Mr. and Mrs. Quinn to amend it. Because they could amend the trust, the beneficiaries could be changed without compliance with the requirements of section 37.

Mr. Justice Funt, who heard the application, applied the decision in Kellogg Estate, 2013 BCSC 2292, appeal dismissed as moot 2015 BCCA2013:

[39]         In Kellogg Estate, Justice Gray held a pour-over clause to a revocable, amendable, inter vivos trust to be invalid. As in the case at bar, the inter vivos trust was amended after the execution of the deceased’s will. In Kellogg Estate, the amendment served to remove one of the primary beneficiaries of the trust.

[40]         After a review of the relevant English and Canadian cases, American legislation and cases, and academic commentary, Justice Gray concluded:

[69]      In my view, the fact that the Pour-Over Clause refers to future amendments of the KF Trust and the fact that the KF Trust Indenture was amended by the Amendment to KF Trust following the execution of the Will is determinative.

[70]      The gift cannot “pour over” to be held by the trustee of the KF Trust on the terms which existed at the time the Will was executed, because that trustee is now obliged to follow the terms set out in the Amendment to KF Trust. The gift cannot “pour over” to be held by the trustee on the basis of the Amendment to KF Trust because the effect would be to permit RPK to have effectively amended his Will without complying with the Wills Act [now section 37 of the Wills, Estates and Succession Act].

[71]      Even though there is some formality associated with acknowledging execution of a document before a single witness who is a notary public, the court does not have jurisdiction to weigh the degree of formality. The failure to comply with the Wills Act is fatal.

[72]      The doctrine of “facts of independent significance” has not been recognized in B.C., and applying such a doctrine here would require bypassing the Wills Act.

There was an amendment to the Quinn Family Trust, but it was administrative in nature. Mr. Justice Funt rejected the argument advanced by one of Mr. Quinn’s children that this case could be distinguished on that basis. Mr. Justice Funt held that the problem with the clause was that the Quinn Family Trust could be amended to change the beneficiaries, and it did not matter whether an amendment had been made.

Since the decision in Kellogg Estate, British Columbia law has changed to allow the court to give effect to a document that does not comply with the formal signing and witnessing requirements for a valid will. Section 58 of the Wills, Estates and Succession Act allow the court to give effect to a non-compliant record if the court finds that it represents the “testamentary intentions of a deceased person.”

Can section 58 be applied to save the “pour over’ clause?

Mr. Justice Funt held that it cannot. In this case, the will itself complied with the formal signing and witnessing requirements. It was rather the structure that is inconsistent with the formal requirements of a will, by allowing changes to be made without compliance. He wrote:

[55]         Section 58 is not an independent provision. From its language, “[e]ven though the making, revocation, alteration, or revival of a will does not comply with this Act”, s. 58 is tethered to s. 37. I agree with Ms. Francis, counsel for Sandra Quinn in her personal capacity, in her written submission:

44. The policy reason behind section 58 is to enable the Courts to step in where a person has taken real steps to make a will, but the formalities have fallen short. It does not exist to enable the court to bless structures that circumvent the formalities all together, which is what a pour over clause to an amendable trust does. If the policy behind section 58 were to do away with testamentary formalities, then our WESA would not contain testamentary formalities. Rather, what section 58 reflects is a policy to ensure that a document that reflects the deliberate, fixed and final intention of a Deceased person is not set aside on the basis of failure to comply with a formality.

[56]         Section 58’s scope is reflected in s. 59(1). Section 59(1) enables a will to be rectified where the will “fails to carry-out a will-maker’s intentions” in specified circumstances. Section 59 does not allow rectification under any circumstances. If s. 58 were to be given an overly broad interpretation, s. 59(1) would have no purpose. Rectification could occur under s. 58 based on a simple assertion of testamentary intentions. Section 58 is a curative provision and not an independent provision designed to change fundamental principles of the law of wills.

[57]         In short, the statutory context shows that the purpose of s. 58 of WESA is to permit the Court to address circumstances of “formal invalidity” where the will-maker’s “deliberate or fixed and final intention” as to the disposal of his or her property on death is found. [Quotation from Hadley Estate (Re), 2017 BCCA 311 omitted.

 [58]         In the case at bar, the deficiency is not one of proper execution. All parties agree that the Will was properly executed. 

…. 

[62]         The Quinn Family Trust was a revocable, amendable, inter vivos trust with the deceased being one of the two settlors and trustees. Although, as may be seen from clause 6.04, the Quinn Family Trust was part of an estate plan functioning during the deceased’s life time, it was designed to be flexible, and left matters in flux. For example, shortly before the deceased’s death, counsel had sent the November 21, 2014 letter addressed to the deceased and Sandra Quinn, which Sandra Quinn had the opportunity to read, and which recommended the assets be distributed “now”. The distribution of all of the Quinn Family Trust assets would have had the effect of a revocation.

The result is that the Canadian assets will be distributed to the persons entitled under on an intestacy.

The case does not deal directly with the taxation aspects of Mr. Quinn’s estate plan, but Mr. Justice Funt quoted from a tax opinion letter, which indicated that the structure could result in a significant tax burden to the Quinn family by triggering taxes in Canada that would not be offset by credits in the United States. This highlights the need to get specialized tax advice concerning the implications of a plan in both jurisdictions.

Estate Litigation Basics Course, April 13, 2018

I have the honour of speaking at the Continuing Legal Education Course on Estate Litigation Basics, at the Rosewood Hotel Georgia, 801 West Georgia Street (I had earlier put the Pan Pacific but the location has changed) in Vancouver on April 13, 2018. I am speaking about evidence in estate litigation. My paper is co-authored (or will be when it's done) by Taeya Fitzpatrick of my firm.

The course is chaired by Lauren Blake of Legacy Tax and Trust Lawyers, Vancouver. The other faculty are:

The Honourable Madam Justice D. Jane Dardi — Supreme Court of BC, Vancouver
The Honourable Sandra K. Ballance — Mediator, Vancouver
Colleen Cattell, QC, C. Med. — Mediator & Arbitrator, Vancouver & Victoria
Coran Cooper-Stephenson — Claims Counsel, Lawyers Insurance Fund, Vancouver
Rhys Davies, QC — DLA Piper (Canada) LLP, Vancouver
M. Scott Kerwin — Borden Ladner Gervais LLP, Vancouver
Kimberly A. Kuntz — Norton Rose Fulbright Canada LLP, Vancouver
Anna Laing — Farris, Vaughan, Wills & Murphy LLP, Vancouver
Amy A. Mortimore — Clark Wilson LLP, Vancouver
Maryanne Prohl — Claims Counsel, Lawyers Insurance Fund, Vancouver

You may attend in person or by webinar.

The agenda and registration information is available at the CLEBC website here.

Downey Courthouse, Downey California

I took this photograph last October, when I was, perhaps not surprisingly given the photo, in Downey, California.

Kimberly Rule Presenting at "Death is Not the End" Continuing Legal Education Course

Kimberly Rule of our firm will be one of the group leaders at the two-day estate-administration workshop, "Death is Not the End." The course will be held on March 8th and 9th at the Pan Pacific Hotel, 999 Canada Place, Vancouver, B.C. For further course information and registration, see the Continuing Legal Education website here.

MacKinnon v. Donauer

There is no shortage of court cases in British Columbia of informal family arrangements going awry. A parent may assist a child and the child’s spouse in purchasing a home with the expectation of sharing the home. The idea may make good sense. Unfortunately, neither side may consider what will happen if the arrangement doesn’t work out. In the case I am about to write about, MacKinnonv. Donauer, 2017 BCCA 437, for example, Madam Justice Newbury, noted at paragraph 3,

As is usually the case in family arrangements of this kind, none of the parties sought legal advice, and no one seems to have considered various contingencies that could arise in the parties’ lives or in their relationship.

Fortunately, the courts do have a fair amount of flexibility in fashioning a remedy consistent with what the parties may have reasonably expected had they turned their minds to the potential problems that might arise. Unfortunately, by the time the matter gets to court, the parties may spend a hundred times as much in legal expense than what they would have spent if each had received independent advice and entered into a formal agreement.

Joy MacKinnon paid $150,000 to her daughter, Tina Maria Donauer, and her daughter’s husband, Michael Donauer, toward the purchase of a home. In return the Ms. MacKinnon and her husband (who later died in 2013), moved in to the new home to live in the basement suite. The understanding among the parties was that Ms. MacKinnon would be entitled to live in the suite indefinitely without paying rent. She was 58 years old when she contributed the funds toward the purchase and moved into the suite,

She lived in the suite for about 9 years. She contributed $28,500 towards some of the property expenses. Following a disagreement with her daughter and son-in-law, Ms. MacKinnon moved out of the suite in January, 2015.

Ms. MacKinnon sued her daughter and son-in-law, claiming a 29 percent interest in the home on that basis that she contributed 29 percent of the purchase price. She claimed the interest on a resulting trust, or, alternatively, unjust enrichment. The trial judge dismissed her claim for an interest in the home, but awarded her $28,500 for the funds she contributed to the expenses. The trial judge found that she did not prove her claim in either resulting trust or unjust enrichment.

Ms. MacKinnon appealed to the British Columbia Court of Appeal, which overturned the trial judge’s decision in respect of the initial contribution of $150,000. Madam Justice Newbury held that on the facts, Mr. and Mrs. Donauer would be unjustly enriched if they were allowed to retain the full benefit of Ms. MacKinnon’s initial $150,000 contribution. They were enriched by her contribution, she suffered a corresponding deprivation, and there was no juristic reason for the enrichment. Madam Justice Newbury held that the family arrangement did not constitute a juristic reason for the enrichment as the trial judge had found, However, Ms. MacKinnon also received the benefit of living in the suite for nine years, without contributing to the full rental value.

Madam Justice Newbury wrote:

[45]         It seems to me that the appropriate analysis emerges if one imagines a situation in which after a short period of living with Ms. MacKinnon under the family arrangement, the Donauers had expelled her from their home. In that event, I suspect a court would have little difficulty in finding that the defendants had been unjustly enriched – i.e., that it would be unjust for them to retain the full $150,000. Ms. MacKinnon would be found to have a reasonable expectation of some remedy – despite the existence of a family arrangement. It was, of course, Ms. MacKinnon who chose to leave – and not, if I may say so, for any reason that would withstand objective scrutiny. Was it reasonable for her to expect she could unilaterally bring the arrangement to an end and claim a proprietary interest in McClure, with the resulting disruption of a forced sale? It is difficult to say she was “prejudiced” by her own decision to leave. On the other hand, would it be reasonable for the defendants to expect to retain the entire benefit of the funds and their appreciation in the real estate market?

[46]         Considering objectively what the parties could have reasonably expected in light of all the circumstances when they entered into the family arrangement, I believe the trial judge erred in ruling that it constituted a juristic reason that justified the Donauers’ retaining the entire benefit of Ms. MacKinnon’s funds. At the same time, the fact the Donauers accommodated her in their home for over nine years and thus provided a benefit to her must be taken into account in fashioning the appropriate remedy for the enrichment. (As the Court stated in Kerr [v. Baranow, 2011 SCC 10], ‘mutual benefit conferral’ is generally to be taken into account at this “remedy stage” of the analysis: see para. 109.)

Madam Justice Newbury considered that a financial award would be appropriate in the circumstances. In arriving at a formula for calculating the award, she took into account the nine years Ms. MacKinnon lived in the suite by directing that the value of a 29 percent interest as at the date of trial, be reduced by a fraction representing the nine years she was in the suite over her life expectancy when the home was purchased. Madam Justice Newbury wrote:

[48]         In normal circumstances, I would calculate a money judgment with reference to Ms. MacKinnon’s life expectancy when she was 58 years old. I would multiply 29% of the fair market value of the house at the date of trial by a fraction the denominator of which would be the number of years the Donauers could have expected Ms. MacKinnon to be in the house from 2005 on, and the numerator of which would be that number minus nine. I would then adjust for contingencies arising on the evidence that was before the Court at trial, including the contingency she would have left the suite during her lifetime – for health reasons, for example. 

[49]         Unfortunately, there is no evidence before us of the life expectancy of women of the plaintiff’s age in 2005, nor of the market value of McClure as at the date of trial. I would therefore allow the appeal and direct counsel to attempt to determine that market value as at the trial date and Ms. MacKinnon’s life expectancy in 2005, and then to calculate the amount of a judgment in accordance with the foregoing – or to settle upon some other amount. If they are unable to determine or agree upon a figure within 60 days of the date of this court’s order, either party shall be at liberty to return to the Supreme Court of British Columbia, which shall determine an amount in accordance with these reasons.

I have tried working through the formula using made-up values. Say the house was worth $1 million at trial. The value of a 29 percent interest would be $290,000. If her life expectancy in 2005 were 27 years, then she would receive two-thirds of $290,000, which is $193,333. Again, I made these values up, and I don’t know what Ms. MacKinnon will receive in addition to the $28,500, which the Court of Appeal did not disturb.