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.

Parker v. Felgate

My friend and colleague John Poyser sent these photographs of Upper Gloucester Place, Dorset Square, to me.

This building was the home of Georgina Annie Stephens Compton, who died on September 2, 1882.

Mary Ann Flack, signed Georgina Compton’s will on her behalf, three days earlier on August 29, 1882. Georgina Compton had become ill with Bright’s disease earlier that year. She had met with her solicitor, Mr. Parker, on various occasions to discuss making her will. She instructed him that she wished to leave 500 pounds to her father, and 250 pounds to her brother, with the residue of her estate Hospital for Sick Children in Great Ormond Street.

While Mr. Parker was away on holidays, Georgina Compton’s condition took a turn for the worse. She was in and out of consciousness. Dr. Hickman said that she "was capable of being roused and could speak, and did talk about her will." He also said that he "could hardly say she was perfectly rational."

Mr. Parker’s partner, Mr. Ponsford, drafted Georgina Compton’s will on the basis of Mr. Parker’s notes. The circumstances of the signing of the will were as follows:

On the 29^th Dr. Tanner was called in that a fresh opinion might be taken the time when it was proposed to have the will executed. He stated that she opened her eyes, put out her hand, and smiled; that he consulted Dr. Palmer, rustled the will in front of her face, and thus roused her; that he said “This is your will. Do you wish this lady (Mrs. Flack) to sign it?” And that she replied, “Yes” Dr. Tanner added, “I have no doubt about it;” and he further added, “As far as I could judge, she understood what she did.”

The issue to be decided by a jury in Parker v. Felgate (1883), L.R. 8 P. D. 171 (Eng P.D.A.), was whether Georgina Compton was competent to make her will. There was no question that Georgina Compton had capacity to make a will when she gave her instructions to Mr. Parker. In light of her capacity when she gave instructions, what level of functioning was required for her to make a valid will at the time she answered "yes" when asked if she wished Mrs. Flack to sign on her behalf?

Sir J. Hannen, in his charge to the jury, set out the law on this point as follows:

This being the material evidence, the law applicable to the case is this: If a person has given instructions to a solicitor to make a will, and the solicitor prepares it in accordance with those instructions, all that is necessary to make it a goodwill, if executed by the testator, is that he should be able to think thus far, “I gave my solicitor instructions to prepare a will making a certain disposition of my property. I have no doubt that he has given effect to my intention, and I accept the document which is put before me as carrying it out.”

Further in his charge, Sir J Hannen said:

A person might no longer have capacity to go over the whole transaction, and take up the threat of business from beginning to the end, and think it all over again, but if he is able to say to himself, “I have settled that business with my solicitor. I rely upon his having embodied it in proper words, and I accept the paper which is put before me as embodying it;” it is not, of course, necessary that he should use those words, but if he is capable of that train of thought in my judgement that is sufficient.

The jury found that although Georgina Compton did not remember and understand the instruction she gave to Mr. Parker, nor could she have understood each clause of the will if it had been put to her, she was “capable of understanding, and did understand, that she was engaged in executing the will for which he had given instructions to Mr. Parker.”

Accordingly, the will was valid.

Mr. Poyser writes about Parker v. Felgate and the law of capacity to make a will in depth in his textbook Capacity and Undue Influence, published by Carswell in 2014.

Hiding Assets in Divorce Proceeding Backfires

To some extent, the court process depends on the integrity of the people involved, including the parties to a lawsuit, as well as their lawyers. Of course, some people do lie. The process allows for pre-trial document disclosure and examinations under oath. At a trial, there are usually several witnesses, and lawyers have the opportunity to question opposing parties as well as all of the witnesses. After a full trial, the judge then weighs the evidence, considering such things as the internal consistency of a witness’s own evidence, as well as each witness’s evidence when weighed against the evidence of others.  Finally, is the evidence overall believable, or, to use the language of the courts, does it meet the preponderance of probabilities? My sense is that judges do quite a good job in weeding out fabrications, but they cannot see into the hearts and minds of those who appear before them.

The majority of the cases settle before trial, without the benefit of a judge assessing credibility. It must be tempting for some in a bitter dispute to lie, or in the case of a divorce, to hide assets. Doing so may backfire.

In divorce proceedings, Rosa Donna Este was required to disclose her assets to her former husband. She disclosed some, but apparently not all. She and her former husband settled the proceedings; their assets were divided in accordance with a consent order, and the Court granted the divorce.

Subsequently, after a falling out with her mother, Mina Esteghamat-Ardakan, and her brother, Francis Amir Este, Ms. Este sued them alleging that they held millions of dollars worth of assets in trust for her. She alleged that they held the assets belonging to her to avoid creditors, and in particular, the claim by her former husband.

According to Ms. Este’s own allegations, in her Further Amended Notice of Civil Claim,

11C.    From approximately 1990 to late 2014, the Plaintiff, Mina and Francis regularly engaged in discussions and planning regarding the manner in which properties that they owned or proposed to acquire should be held, including the name or names in which title should be held and trust arrangements or other agreements amongst themselves that should be made related to them. The primary objectives which the Plaintiff, Mina and Francis sought to advance through those discussions and planning measures included maximizing the extent to which the capital gains exemption available for gains realized on the sale properties claimed as their principal residences could be claimed, and protecting those properties from potential claims that their present or potential future spouses, romantic partners or creditors might make against them.

Her claim set out that,

(a)    From approximately late-May of 2013 through to October of 2013, Mina, with Francis’ participation and assistance, counseled and encouraged the Plaintiff to propound a false and concocted story, devised by Mina, that Mina was the true owner of assets that were then owned by the Plaintiff in defending a family law action that the Plaintiff’s (then) husband had commenced against her in May of 2013 (“Family Law Action”).

Other particulars of her claim include signing “fake back-dated trust declarations,” adding her mother as an account holder, and then deleting her own name, and giving false evidence.   

After four weeks of trial, Ms. Este’s mother and brother brought an application to dismiss her claim on the basis that there was no evidence to support her claim, and that her claims were an abuse of the court’s process.

Mr. Justice Funt, in Este v. Esteghamat-Ardakani, 2017 BCSC 878, set out the main issue before him:

[1]             Is it an abuse of process for a plaintiff to claim ownership of Blackacre that the defendant claims to own when that plaintiff, in recent divorce proceedings, swore falsely and pleaded not to own Blackacre, thereby deceiving then spouse, counsel, and the Court? Does it matter that the defendant knew of the deception and participated by preparing false documents? These questions are at issue before the Court.

[2]             It is an abuse of process for a plaintiff to ask the Court to perfect a fraud designed to cheat financially one’s spouse in divorce proceedings. An exception does not exist where the defendant knew of and participated in the deception, even where the defendant will enjoy a windfall.

[3]             The foregoing rule protects the administration of justice from being brought into disrepute. The Court will not help to perfect a fraud.

[4]             In the case at bar, the foregoing rule is engaged. The trial of the action is underway with the plaintiff having closed her case in which she seeks to have her claim to ownership in significant funds and various real estate properties recognized (and a particular mortgage declared invalid). Before proceeding further, the defendants seek to have the plaintiff’s claim dismissed as an abuse of process. They say that the plaintiff’s case is not one that a court would put to a jury.

Mr. Justice Funt, in dismissing Ms. Este’s claim, held that her conduct engaged three aspects of abuse of process: illegality, the pursuit of inconsistent rights, and bringing the administration of justice into disrepute.

It is illegal to transfer assets to defeat, delay or defraud creditors. Mr. Justice Funt noted that had Ms. Este sued her mother and brother for the assets before her divorce, she would not have been precluded from pursuing her claim. But in this case, she was relying on evidence of her own illegal conduct, and was accordingly precluded from recovery of the assets.

Secondly, Ms. Este was assertion of rights was inconsistent with her assertions in her divorce proceedings that she did not own the assets she was seeking to recover from her mother and brother. Mr. Justice Funt wrote at paragraph 33,

A litigant cannot use the Court’s process to state one set of rights in a proceeding and then in a subsequent proceeding assert rights inconsistent with the rights first stated. Otherwise, uncertainty would result and many paths for mischief would be introduced into our law for the avaricious, the malicious, and the vexatious. The litigant must elect at the outset which set of rights the litigant wishes the Court to recognize.

Thirdly, allowing Ms. Este to recover the assets in this context would tend to impair the integrity of, and public confidence in, the administration of justice.

The Court will not assist fraud. Mr. Justice Funt wrote,

[76]         In sum, in the divorce proceedings, the plaintiff chose to take steps to defeat her then husband’s legal rights by representing falsely, including in Court documents and under oath, the properties and funds she now claims she rightfully owns. She now wishes to perfect her fraud in the divorce proceedings — a fraud designed to cheat financially her then husband engaging the past unwitting help of officers and a judge of the Court.

[77]         Bluntly stated, the plaintiff now asks the Court to help her with her illegal artifice because her mother and brother no longer will. Such, the Court will not do.