Thursday, November 02, 2006

You Snooze; You May Lose

Will disputes, and other estate litigation cases, can have some interesting dynamics. There might be several people who, being beneficiaries under an earlier will, may benefit by challenging a will they believe to be invalid. But only one or two of them is willing to hire a lawyer. The others stand to gain if the will is declared invalid at a trial, but don't want to bear any of the costs of the case. This is a classic free-rider problem. Sometimes, sitting back, and letting someone else do the work and pay, backfires.

This is what happened in a recent British Columbia case, Gin v. King, 2006 BCSC 1610.

Ms. Adon Gin made a will in July 1998. She made a later will in January 2000, revoking the 1998 will. Under the 1998 will, she divided the residue of her estate (after payment of her debts and a $10,000 gift) into tenths, leaving two-tenths to her nephew Trevor Gin, two-tenths to her friend Anoinette Chan-Pensley, one-tenth to her friend Ernest King, and the rest to various other beneficiaries. Under the January 2000 Will, Ms. Adon Gin left seven people, including Ms. Chan-Presley and Mr. King, $10,000 each, with the residue going to Mr. Gin.

When she died in 2004, Ms. Adon Gin left a $1.5 million estate.

Ms. Chan-Presley and Mr. King objected to the 2000 will, arguing that Adon Gin did not have the capacity to make a valid will in January 2000. In light of some medical evidence that Ms. Gin did suffer from dementia in March, 2000, this was a reasonable position for them to take. On the other hand, her family doctor, who had assessed her mental condition in July 1999, and saw her again in November 1999, opined that she did not have dementia when she examined Ms. Gin.

Ms. Chan-Presley and Mr. King required Mr. Gin to prove the 2000 will in solemn form. This means that he would have to prove the will in a lawsuit, instead of the more usual and simpler procedure of proof in common form. Mr. Gin named Ms. Chan-Presley, Mr. King and all of the other beneficiaries of the 1998 will as defendants.

The rules of court provide times for defendants to file documents in response to a lawsuit. The first document is called an appearance. Then if a defendant wishes to defend, he or she must file a statement of defence.

Ms. Chan-Presley and Mr. King retained a lawyer, filed a statement of defence, and a counter-claim seeking probate of the 1998 will. Initially, some of the other defendants filed an appearance, but none of the others filed a statement of defence within the times set by the rules of court.

Some of the other defendants made it clear in letters that they did not want to bear any costs of the lawsuit. One even sent a letter to the court registry advising that she had "not given consent or agreed to any legal costs being deducted from my share as beneficiary."

Ms. Chan-Presley and Mr. King proceeded through the various steps in a lawsuit, and a trial date was set. A couple of weeks before the trial date, they reached a settlement with Mr. Gin. Under the settlement, Ms. Chan-Presley would get $290,000 and Mr. King would get $145,000 plus $25,000 each toward legal costs. (I have trouble conceiving of a better settlement for them in the circumstances.)

Mr. Gin then brought a summary trial application to prove the will in solemn form and approve of the settlement. A summary trial is a form of trial based on affidavit evidence. Although Mr. Gin would still need to satisfy the court of the validity of the will, this should not be difficult if the application went unopposed.

Guess what happened next? Yes, you are correct. The other defendants--who had not taken part in the proceeding for two years--then filed statements of defence, and opposed Mr. Gin's application to prove the will. They opposed the settlement.

Mr. Gin argued that the other defendants were out-of-time to file statements of defence, and it would be an abuse of process to proceed. Mr. Justice Nathan Smith rejected these arguments. The rules do not prevent a defendant from filing a statement of defence and counter-claim after the time set out in the rules. In fact, it is not unusual for a defendant to file a statement of defence late. The risk that defendants usually take in not filing in time is that the plaintiff might take default judgment. But, in a case to prove the validity of a will, the plaintiff can't take default judgment.

Nor did Mr. Justice Smith find the other defendants' conduct to be an abuse of process. It was "irresponsible, unwise and disrespectful," but not a deliberate abuse of process.

Mr. Justice Smith held that he could take the other defendants' conduct into account when considering whether it would be unjust to determine the case on the evidence before him in a summary trial. The alternative would be to allow the other defendant's to conduct pre-trial discovery, and have the matter heard by way of a full trial (that is, witnesses in the witness box, and cross examination, instead of affidavit evidence).

In the circumstances, Mr. Justice Smith found that it would not be unjust to decide the case by summary trial on the basis of the evidence before him. He held that Mr. Gin had proven the validity of the 2000 will, and he approved the settlement.

Of those defendants who had not participated for two years, but now wanted to proceed, Mr. Justice Smith wrote at paragraph 47,
This is not a case of a merely technical irregularity. These defendants made a deliberate decision to not participate in the action. The plaintiff proceeded for two years on the basis that these defendants were taking no position and that he only had to overcome the arguments being raised by the defendants Mr. Wing King and Ms. Chan Pensley. If these defendants actually believed that their interests were being protected by Mr. Wing King and Ms. Chan Pensley, they had no reasonable basis in fact or law for such a belief. Any prejudice suffered by these defendants is entirely self-inflicted and there is nothing unjust about granting judgment.

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