Sunday, September 28, 2014

B.C. Court of Appeal Overturns Trial Judgement in Sabey v. Rommel

The British Columbia Court of Appeal overturned the trial judge’s decision to award the plaintiff, Jesse Sabey, the horse farm that had been owned by his friends Kim and Dietrich von Hopffgarten, in Sabey v. Rommel, 2014 BCCA 360.

Jesse Sabey used to ride horses and work at the von Hopffgartens’ farm. He and the von Hopffgartens were all involved in dressage riding. The von Hopffgartens had promised Mr. Sabey that they would leave him the farm, and indeed had tried to make codicils to their wills to do just that, but the codicils were invalid because they were not witnessed by two witnesses. The trial judge held that because Mr. Sabey had relied on the promises they made to him by working for them for less than market value and by making career choices to his detriment, he was entitled to the farm on the basis of the doctrine of proprietary estoppel. I wrote a post about the trial judge’s decision in greater detail previously.

Burgi Rommel, who was the beneficiary of Mrs. von Hopffgarten’s will, appealed the decision to the Court of Appeal. Two of the three judges hearing the appeal allowed the appeal, holding that the award to Mr. Sabey of the entire farm was disproportionate to the detriment he suffered.

Madam Justice Bennett, writing for the majority, set out the legal test as follows:

[25]         The foundation of a claim in proprietary estoppel is an equitable right arising out of the conduct of the parties. In Crabb v. Arun District Council, [1976] Ch. 179 at 192-93, [1975] 3 All E.R. 865 (C.A.), Scarman L.J. stated the test in a claim for a proprietary right on the basis of equity:
1.               Is there an equity established?
2.               If so, what is the extent of the equity?
3.               What is the relief appropriate to satisfy the equity?

A person making a claim on the basis of proprietary estoppel needs to prove three elements: an assurance or representation was made to him, that he relied on it, and that he did so to his detriment.

The majority agreed that Mr. Sabey had proven that the von Hopffgartens had made assurances to him that they would leave him the farm. The also accepted that he relied on those assurances to his detriment by working for them for two and a half years with less than market pay, and for working for Mrs. von Hopffgartens without any pay after her husband’s death. But the majority did not agree that he relied on their assurances when he made his career choices, specifically choosing to become an accountant instead of a professional dressage rider, and then choosing a small firm so he could ride at their farm instead of working for a larger firm that would have provided higher pay, but more travel. Nor did the majority accept the argument that in becoming an accountant and working at a small firm Mr. Sabey had acted to his detriment.

Although, Mr. Sabey established an equity, the majority held that the extent of the equity was not sufficiently great to warrant an award of the whole farm to Mr. Sabey. Madam Justice Bennett wrote at paragraph 80:

[80]         In my view, no equity arises as a result of Mr. Sabey deciding not to pursue professional dressage or limiting his employment prospects to firms that were close to the farm. The extent of the equity that arises in this case is Mr. Sabey’s two and a half years of underpaid work after the assurances were made and his continued work on the farm without payment after Dietrich’s death. If Mr. Sabey had not expected to inherit the farm, then he may not have continued to work on the farm. The trial judge erred in concluding that there were other bases on which an equity arose, and in failing to assess proportionality. As a result, the remedy he crafted is not due deference, and is, with respect, clearly wrong.       

Accordingly, the majority ordered that the case be remitted to the trial judge to consider the alternate claims made by Mr. Sabey on the basis of unjust enrichment, and express or implied trust.

Madam Justice MacKenzie dissented. She would have dismissed the appeal on the basis that the trial judge’s findings were supported by the evidence and that the decision was within the trial judge’s broad discretion. 

Saturday, September 20, 2014

Termination of Statutory Property Guardianship

I have written two previous posts on British Columbia’s new statutory property guardianship legislation and regulation coming into effect on December 1, 2014, the first dealing with the procedures for issuing a certificate of incapacity pursuant to which the Public Guardian and Trustee becomes the statutory property guardian of a person incapable of managing his or her own finances, and the second dealing with the criteria to be applied in determining whether a person is incapable.

In this post, I will summarize how a statutory property guardianship may be terminated.

Section 34 of the Adult Guardianship Act provides that an adult who has a statutory property guardian must be reassessed if any of the following apply:

1.                  “the adult is receiving psychiatric treatment in a facility designated under the Mental Health Act and the adult is discharged,”

2.                  the statutory property guardian decides that a reassessment should occur,

3.                  “the adult requests a reassessment and has not been reassessed within the preceding 12 months,” or

4.                  the court orders a reassessment.

This section gives a person in respect of whom a certificate of incapability has been issued the right to have a reassessment annually.

Under section 37 (3), if as a result of the reassessment, a qualified health care provider determines that the adult is capable of managing the adult’s financial affairs, and the health authority designate accepts that determination, then the statutory property guardianship ends, and the adult may then manage his or her own finances.

A second way that a person in respect of whom a certificate of incapability has been issued may terminate the statutory property guardianship is by making a successful application to court.

If the Public Guardian and Trustee as the statutory property guardian is satisfied that the statutory property guardianship is no longer necessary, she may also end it on giving the patient notice.

Finally, if the court appoints a committee for the adult under the Patients Property Act, then the statutory property guardianship ends, but the effect is to transfer the management of the adult’s finances to the committee. Under this provision a relative or friend of the adult in respect of whom a certificate of incapability has been issued may take over management from the Public Guardian and Trustee, by making an application to court.

It should be noted that the provisions for terminating a statutory property guardianship will apply to certificates of incapability that were issued under the Mental Health Act, before the new legislation and regulation comes into effect. 

Sunday, September 14, 2014

Kimberly Wallis Speaking About Rectification at Okanagan Wills and Trusts CBA Section Meeting

My partner Kim Wallis will be speaking this Wednesday, September 17, 2014, on the topic of rectification including the new provision, section 59, in the Wills, Estates and Succession Act on rectification of wills, to the Okanagan Wills and Trusts section of the Canadian Bar Association. The meeting is open to members of the Canadian Bar Association, B.C. Branch.

Wednesday, September 10, 2014

Test of Incapability in New Statutory Property Guardianship Regulation

In my post last week, I wrote about the new statutory property guardianship legislation and regulation coming into effect on December 1, 2014, under which the Public Guardian and Trustee may be appointed a statutory property guardian for a person who is not capable of managing his or her own financial affairs. I wrote specifically about the procedures for determining whether a certificate of incapability should be issued and the Public Guardian and Trustee appointed in respect of someone who may not be capable of making financial decisions.

One welcome change is the introduction of a test of incapability in the new Statutory Property Guardianship Regulation. It is set out in section 9:

Test of Incapability 
9 (1) An adult is incapable of managing the adult's financial affairs if, in the opinion of a qualified health care provider, any of the following apply:
(a) the adult cannot understand the nature of the adult's financial affairs including the approximate value of the adult's business and property and the obligations owed to the adult's dependants, if any; 
(b) the adult cannot understand the decisions that must be made or actions that must be taken for the reasonable management of the adult's financial affairs; 
(c) the adult cannot understand the risks and benefits of making or failing to make particular decisions, or taking or failing to take particular actions in respect of the adult's financial affairs; 
(d) the adult cannot understand that the information. referred to in this subsection applies to the adult;
(e) the adult cannot demonstrate that hear she is able to implement, or to direct others to implement, the decisions or actions referred to in paragraph (b). 
(2) For the purposes of section 34 of the Act, a qualified health care provider must consider the changes, if any, in the adult's incapability since the previous assessment and the adult's understanding of those changes. 
Although this provision does not directly apply to applications for the appointment of a committee under the Patients Property Act, the above criteria could be applied to an application for an order declaring a person incapable of managing his or her affairs under that Act. A lawyer asking for a physician's opinion on capacity could ask the physician to address those criteria. This may provide more nuanced and clearer evidence to assist the court in making a determination of capacity under the Patients Property Act.

Saturday, August 30, 2014

New Statutory Property Guardianship Legislation and Regulation Coming into Effect December 1, 2014

There are some significant changes coming into effect on December 1, 2014 to British Columbia’s adult guardianship legislation. The changes will primarily effect both how the Public Guardian and Trustee is appointed to manage the property of persons who are considered to be incapable of managing their financial affairs, and the rights of those persons.

Currently, the Public Guardian and Trustee may be appointed to manage the financial affairs of a person who is incapable either through a certificate under the Mental Health Act, or through a court application under the Patients Property Act.

Effective December 1, 2014, the process by which the Public Guardian and Trustee may be appointed by certificate under the Mental Health Act will be replaced by provisions in Part 2.1 of the Adult Guardianship Act, and the Statutory Property Guardianship Regulation.

The new process appears to provide more procedural protections and more transparency when the Public Guardian and Trustee assumes responsibility for a person’s (or to use the language of the new provisions, the “adult’s”) financial-decision making. In this post I will outline the new process.

The Public Guardian and Trustee will become the "statutory property guardian" when a “health authority designate” issues a certificate of incapability.  Before the health authority designate may issue a certificate an assessment must be completed consisting of two components: a medical component consisting of a physician’s medical assessment, which looks at the medial diagnosis and prognosis, and a functional component, which may be conducted by a physician or other health care provider, such as a nurse, or social worker, and which consists of an evaluation of the adult’s understanding and ability to manage his or her finances.  

Unless there is a risk of serious physical or mental harm or significant damage or loss to the adult’s property, the person responsible for each component must inform the adult of the purpose of the assessment, that the adult may have someone else present, and after the assessment is completed, the adult must be offered a copy of the assessment report.

Once the assessment is completed, if the health authority designate considers it appropriate to issue a certificate of incapability then he or she must give the adult, and the adult’s spouse or other near relative notice of his or her intent to issue the certificate, and the adult, spouse or near relative must be given at least 10 days to respond.

If after considering any responses, the health authority designate decides to issue a certificate of incapability, the Public Guardian and Trustee must give notice to the adult that she has been appointed as the adult’s statutory property guardian, and the adult may within 40 days of receipt of the notice request a second assessment.

If after the second assessment, the health care provider responsible for the second assessment considers the adult to be incapable, then the adult may apply to the Supreme Court of British Columbia for review of the determination.

It should be noted that an assessment that an adult is incapable of managing his or her financial affairs will not necessarily lead to a certificate of incapability. If, for example, if the health authority designate is aware that the adult has made an enduring power of attorney, and the person appointed is both willing to act and is complying with the duties, then the health authority designate should not issue a certificate.

I plan to write some future posts on the new legislation and regulation including the criteria for determining if a person is incapable, and the process for terminating a certificate of incapability.

Sunday, August 24, 2014

Can You Revoke a Quebec Notarial Will by Destroying a True Copy?

A notary in Quebec always retains the original of a notarial will and registers it under the Quebec Civil Code. Despite the usual rule in British Columbia that an executor must probate the original will, an exception is made for Quebec notarial wills, in which case, under section 36(1) of the Evidence Act, you may probate a copy that is certified by a notary as a true copy of the original. I have written about this before.

Under British Columbia law, one of the ways to revoke a will is to destroy the original. This is set out in section 55 (1) (c) of the Wills Estates and Succession Act, and was set out in section 14(1) (d) of the now repealed Wills Act.

This raises an interesting question. Under British Columbia law, can the maker of a Quebec notarial will revoke it by destroying a certified true copy of it?

John David Christian made a notarial will when he lived in Quebec in 1991. In it, he appointed Lorraine Leigh Morton, with whom he was living in a marriage-like relationship, as his executor and the beneficiary of his estate. The Quebec notary retained the original and gave Mr. Christian three certified copies.

Mr. Christian and Ms. Morton moved to British Columbia, and Mr. Christian became domiciled here.

In 2009, Mr. Christian and Ms. Morton separated and following mediation agreed on the division of their assets.

Mr. Christian died on December 29th, 2011, and he did not have any of the certified copies of the 1991 Quebec will or any new will among his possessions.

Ms. Morton received another certified true copy of the original will from a Quebec notary and applied to probate the copy in British Columbia. Mr. Christian’s mother, who would be entitled to the estate if her son died without a will, filed a caveat to oppose the application for probate.

There was evidence from both his family law lawyer and another lawyer that following his separation from Ms. Morton, Mr. Christian wished to change his will so that Ms. Morton would not be a beneficiary. He told his girlfriend that he had ripped up the will that left everything to Ms. Morton and pointed to the recycling basket, which had some ripped paper.

Mr. Justice Johnson, in Morton v. Christian, 2014 BCSC 1303, accepted the evidence of the lawyers and Mr. Christian’s girlfriend, but found it insufficient to prove that Mr. Christian in fact destroyed any or all of the certified true copies of the notarial will in his possession. But even if Mr. Christian had destroyed the true copies, doing so, would not, under British Columbia law revoke the notarial will. To revoke a will by destruction, it is necessary to destroy the original will, which is not possible with a Quebec notarial will, which remains in the possession of the notary.

In reaching his decision Mr. Justice Johnson considered section 36 of the Evidence Act allowing a certified copy of the notarial will to be admitted into probate, but held that it did not follow that it was sufficient to destroy a certified copy of a Quebec notorial will to revoke it.

Because the original is in the possession of the notary, destroying a certified copy is at best a symbolic destruction which is insufficient to revoke a will. Mr. Justice Johnson wrote at paragraph 57:

[57]         If I had found the contrary, tearing a copy of a notarial will, knowing that the original is safely lodged with a notary, appears to me to be no more effective than the “symbolical” steps referred to in Cheese v. Lovejoy (1877), 2 P.D. 251 (C.A.):
It is quite clear that a symbolical burning will not do, a symbolical tearing will not do, nor will a symbolical destruction. There must be the act as well as the intention. As it was put by Dr. Deane in the court below, “All the destroying in the world without the intention will not revoke a will, nor all the intention in the world without destroying: there must be the two.

Accordingly, if you have made a Quebec notarial will and wish to revoke it, under British Columbia law, it is not sufficient to tear up a certified copy. The best way to revoke it is to make a new will.

Wednesday, August 06, 2014

Changes to Canadian Charitable Donation Tax Credits for Charitable Gifts on Death

In the 2014 Budget, the Federal Government has proposed changes to the treatment of charitable gifts in wills or beneficiary designations. Essentially, if you include a gift to a charity in your will, under the new tax law, the gift will  be considered to have been made from your estate after your death, rather than immediately before your death. Your executor will then be permitted to allocate the tax credits among the year in which the executor pays or transfers the gift to the charity, an earlier taxation year for the estate, and the last two years of your life.

In many cases, the tax credits may be best applied to the terminal return to offset capital gains arising from the deemed disposition of property at death and other taxes, as may be done under the current rules, but in some cases the changes will provide welcome tax relief if there are significant tax liabilities for an estate after death.

The catch is that the funds or other property must be transferred to the charity within 36 months of death for the tax credits to be available in the last two years of the deceased's life.

The new rules will come into effect in 2016.

Here is the relevant excerpt from 2014 Federal Budget:

Estate Donations 
Donations made by an individual to a registered Canadian charity or other qualified donee are eligible for a Charitable Donations Tax Credit (CDTC). Subject to certain limits, a CDTC in respect of the eligible amount of the donation may be applied against the individual’s income tax otherwise payable. The eligible amount is generally the fair market value of the donated property at the time that the donation is made (subject to any reduction required under the income tax rules). The individual may claim a CDTC for the year in which the donation is made or for any of the five following years. 
Where an individual makes a donation by will, the donation is treated for income tax purposes as having been made by the individual immediately before the individual’s death. Similar provisions apply where an individual designates, under a Registered Retirement Savings Plan (RRSP), Registered Retirement Income Fund (RRIF), Tax-Free Savings Account (TFSA) or life insurance policy, a qualified donee as the recipient upon the individual’s death of the proceeds of the plan or policy. Under these circumstances, the CDTC available may be applied against only the individual’s income tax otherwise payable.

On the other hand, a CDTC available in respect of a donation made by an individual’s estate may be applied against only the estate’s income tax otherwise payable. 
Budget 2014 proposes to provide more flexibility in the tax treatment of charitable donations made in the context of a death that occurs after 2015. Donations made by will and designation donations will no longer be deemed to be made by an individual immediately before the individual’s death. Instead, these donations will be deemed to have been made by the estate, at the time at which the property that is the subject of the donation is transferred to a qualified donee. 
In addition, the trustee of the individual’s estate will have the flexibility to allocate the available donation among any of: the taxation year of the estate in which the donation is made; an earlier taxation year of the estate; or the last two taxation years of the individual. The current limits that apply in determining the total donations that are creditable in a year will continue to apply. A qualifying donation will be a donation effected by a transfer, within the first 36 months after the individual’s death, of property to a qualified donee. In the case of a transfer from an RRSP, RRIF, TFSA or insurer, the existing rules for determining eligible property for designation donations will apply. In any other case, the donated property will be required to have been acquired by the estate on and as a consequence of the death (or to have been substituted for such property). 
An estate will continue to be able to claim a CDTC in respect of other donations in the year in which the donation is made or in any of the five following years.  
This measure will apply to the 2016 and subsequent taxation years.