The Decision on Court Costs in Woodward v. Grant

I wrote previously about Woodward v. Grant, 2007 BCSC 1192, a case in which the plaintiffs unsuccessfully challenged the validity of Joseph Roberts’ last will. The plaintiffs had alleged that Mr. Roberts’ did not have the capacity to make his last will. The court found that he had.

Last week, Madam Justice Gray released her reasons for judgment on the issue of court costs. The decision on costs is at 2007 BCSC 1549.

The first issue the court considered was whether the successful defendants were entitled to double costs because they had made a formal offer to settle under Rule 37 of the Supreme Court of British Columbia Rules of Court.

In this case, Madam Justice Gray found that the offer to settle was not relevant to the case. The offer was for $1.00 “in full and final satisfaction of the plaintiffs [sic] claim for general damages, special damages and court order interest….” But, the plaintiff’s were not seeking damages, but were seeking an order pronouncing against the validity of the will.

On the other hand, the court also rejected the plaintiffs’ submissions that their costs should come out of the estate.

Madam Justice Gray reviewed the case law, and noted that the trend in lawsuits over wills was for the court to award costs to the successful party against the unsuccessful party. There are exceptions in some cases where the court finds that there is an issue that needs to be litigated often brought about by the testator’s conduct. Sometimes, where capacity is in doubt, the courts have awarded costs to all parties out of the estate.

But in this case, Madam Justice Gray found that the dispute was in substance adversarial between beneficiaries, some of whom would have benefited financially from a previous will. She found it appropriate to order that the unsuccessful plaintiffs pay the defendant’s court costs.

I don’t think there is a clear cut rule on whether the court will award costs out of the estate to all parties in a dispute concerning the validity of the will, or require the unsuccessful party to pay the successful party’s costs. In reading this case, and other cases, the cost awards may tend to reflect the trial judges’ views on the relative merits of the each side’s position. If a party has a reasonably good case to put forward, he or she may be awarded costs out of the estate, even if he or she loses. But, if the court finds that the unsuccessful party did not have a sufficiently good case to bring to trial, the court is more likely to apply the ordinary rule in lawsuits in British Columbia that the unsuccessful party must pay the successful party’s costs.

Offers to Settle and Court Costs

[Since I wrote this post, the Rules have been changed. I wrote an updated post on December 18, 2010 here.]


In British Columbia court cases, the judge has discretion to award court costs to a party. The usual rule is that the unsuccessful party is required to pay costs to the successful party. The costs do not generally fully cover the party’s legal fees, but the court costs award can be substantial.

Rule 37 of the Supreme Court Rules is designed to facilitate settlements before trial. If the plaintiff makes an offer to settle that complies with Rule 37, and receives an award after a trial that is equal to or better for the plaintiff than the offer, the plaintiff is entitled to costs up to the date of the offer, and double costs thereafter.

The defendant may also use Rule 37 to make offers. If the defendant makes an offer, and the plaintiff is successful at trial, but does not get a result that is better than the defendant’s offer, the plaintiff is entitled to costs only to the date of the offer, and the defendant is entitled to costs thereafter. If the plaintiff loses at trial, the defendant receives costs up to the date of the offer, and double costs thereafter.

Rule 37 can be used by either side to put pressure on the other to accept an out-of-court offer by increasing the potential costs to the other side if he or she loses, or does not do better than the offer.

When a party makes an offer to settle under Rule 37, he or she may not disclose the offer to the judge during the trial. After the judge has ruled on the substantive issues in the case, the parties may disclose the offer when making submissions on costs.

[Update: Effective July 1, 2008, Rule 37 was replaced by a more flexible Rule 37B. See my post on the amendment here.]

Distributions from Canadian Estates to Non-Resident Beneficiaries

I suspect that many executors and administrators are not aware of Canada Revenue Agency’s requirements for distributions from Canadian estates to beneficiaries who are not Canadian residents.

Canada Revenue Agency requires that an executor or administrator withhold and remit a portion of the distribution (usually 25%) to Canada Revenue Agency. The beneficiary can avoid the withholding by obtaining a Certificate of Compliance from Canada Revenue Agency first. The withholding requirement is set out in s. 116 of the Income Tax Act. Canada Revenue Agency takes the position that this requirement applies to after-tax cash distributions of a share of the residue (what is left after payment of liabilities, specific gifts and specific amounts of cash) to those beneficiaries who are not residents of Canada.

This issue came to my attention from reading the minutes of the September 25, 2007 Victoria Wills and Trust Section meeting of the Canadian Bar Association, B.C. Branch.

This is the kind of issue that highlights the need for executors and administrators to get advice from experienced estate accountants as well as estate lawyers when administering estates.

Prince George Courthouse

I took this photograph of the Prince George Courthouse this August. My son Thomas and I were visiting my friend Oliver Hui, a lawyer at the law firm of Wilson King LLP in Prince George. Oliver, who unwittingly finds himself in the photograph at the right side.

Alberta and British Columbia Review Pensions Legislation

The British Columbia and Alberta governments issues a press release on Friday, October 19, 2007, announcing the appointment of an expert panel to review pension legislation in both provinces. According to the release,

The Joint Expert Panel on Pension Standards will consult with stakeholders and present their findings and recommendations to both provinces’ finance ministers by Sept. 30, 2008. The panel will examine key issues that include:
· the role of pensions in attracting and retaining the future work force while ensuring fairness for both employees and employers, balancing risks and rewards;
· encouraging the establishment and maintenance of employee pension plans;
· changes that will continue making both provinces attractive jurisdictions for investment; and
· removing barriers to the creation and maintenance of pension plans in the two jurisdictions.

As more members reach retirement and pension plans mature, funding and sustainability have become important issues. At the same time, the proportion of workers enrolled in pension plans is on the decline, raising concerns about the future of retirement incomes for today’s younger workers. The panel will take these trends into account as part of their review and effort to create greater harmonization of pension standards between the two provinces.

Wills and Lists of Gifts of Sentimental Items

As I have written before, British Columbia has strict formal requirements for making a valid will. The will must be properly signed and witnessed to be valid.

What if you have furniture and other personal effects that have sentimental value, rather than financial value, that you wish to give to specific people? Do you have to put all of these in your will? What if you make a list that is not witnessed according to the Wills Act requirements?

I think it is common for people to make lists, and change them from time to time. In most cases these lists are not valid wills, and are not binding on your executor. As a practical matter, your executor and beneficiaries of your will may agree to give the items on such a list to the people you intend.

What if you want to make the list binding?

Probably the best way is to make the gifts of articles right in the will. This works best when there are a few items that you feel strongly about. It gets cumbersome if there is a long list.

A second way to make the list binding is to write the list before you make your will. In your will, you can then have a clause that says that your executor is required to distribute these items as set out in your list. The list should be dated, and the will should refer to the date of the list, so it is clear that you made the list before the will. If you make the list after you make the will, the list will not be binding unless it is signed and witnessed according to the Wills Act requirements. If you wish to change the list after you have signed your will, you will need to do a new will or a codicil.

CBC Story on Abuse in Nursing Homes

CBC TV will be airing a story on abuse of residents in nursing homes tonight on Marketplace. According to the CBC website article "Violence on rise among residents in Ont. nursing homes," there has been an increase of violence by residents with severe dementia on other residents. There is a debate in Ontario about whether those patients suffering from severe dementia with violent tendencies should be in nursing homes or in separate psychiatric facilities.

Although the story is based on Ontario, these issues are certainly not confined to Ontario.

A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency)

Is an organization whose main purpose is to support and promote amateur youth soccer in one Canadian Province entitled to registration as a charity under the Income Tax Act?

The Supreme Court of Canada, in A.Y.S.A. Amateur Youth Soccer Association v. Canada (Revenue Agency), 2007 SCC 42, considered this question. The case illustrates that Canadian law of charities is more easily understood historically, than by a principled analysis.

By way of background, the Income Tax Act, Canada provides favourable tax treatment to organizations that fall under certain categories. “Registered charities,” and “registered Canadian amateur athletic associations,” are not required to pay income tax on revenues they earn, and may provide donors with tax receipts. The donors may then use the tax receipts for tax credits (or deductions for corporations). “Non-profit organizations,” also are not required to pay income tax. But, non-profit organizations my not issue tax receipts. For an organization trying to raise funds, the ability to issue tax receipts, which will reduce a donor’s taxes, is quite attractive.

To qualify as a Canadian amateur athletic organization, an organization must be national in scope. Because A.Y.S.A. Amateur Youth Soccer Association (“A.Y.S.A.”) operated exclusively in Ontario, it did not qualify under this category.

A.Y.S.A. applied to Canada Revenue Agency to be registered as a charity. But Canada Revenue Agency rejected the application. The Federal Court of Appeal agreed with Canada Revenue Agency, and A.Y.S.A. appealed to the Supreme Court of Canada.

The Income Tax Act relies on the common law to determine what is charitable. The starting point of Canadian common law on this point goes back to mother England, and the Charitable Uses Act, 1601 (Eng.), 43 Eliz. 1, c. 4, (the "Statute of Elizabeth") which includes as charitable such activities as the following:

. . . relief of aged, impotent, and poor people; the maintenance of sick and maimed soldiers and mariners, schools of learning, free schools, and scholars in universities; the repair of bridges, ports, havens, causeways, churches, sea banks and highways; the education and preferment of orphans; the relief, stock, or maintenance of houses of correction; marriages of poor maids; supportation, aid, and help of young tradesmen, handicraftsmen, and persons decayed; the relief or redemption of prisoners or captives and the aid or ease of any poor inhabitants concerning payments of fifteens, setting out of soldiers, and other taxes.

(I suspect the starting point is really earlier, but the cases I have read all start with the Statute of Elizabeth.)

The House of Lords rationalized (to some extent) these activities into four categories in Income Tax v. Pemsel, [1891] A.C. 531. Charitable purposes fall under one of the following categories:

1) the relief of poverty; (2) the advancement of education; (3) the advancement of religion and (4) certain other purposes beneficial to the community, not falling under any of the preceding heads.

A.Y.S.A, not unreasonably, argued that its purposes fell under number four. Amateur youth soccer is beneficial to the community.

But, it is not that simple.

The common law only recognizes some purposes that are beneficial to the community as charitable. Many beneficial purposes are not.

Mr. Justice Rothstein, writing for him and seven others, took the following approach:

To summarize, in determining if an organization is charitable under the fourth head of Pemsel for purposes of registration under the ITA [Income Tax Act], it will be necessary to consider the trend of cases to decide if the purposes are for a public benefit which the law regards as charitable. It will also be necessary to consider the scheme of the ITA. Finally, it is necessary to determine whether what is sought is an incremental change or a reform best left to Parliament.

He held that A.Y.S.A. was not a charity at common-law.

In considering the cases, Mr. Justice Rothstein found that “[t]he trend of the cases supports the proposition that sport, if ancillary to another recognized charitable purpose such as education, can be charitable, but not sport in itself.” In A.Y.S.A.’s case, the sport was not ancillary to education.

With respect to the scheme of the Income Tax Act, Mr. Justice Rothstein emphasized the importance of maintaining the distinction between charitable and non-profit activities. The Income Tax Act does not support a significant change in the definition of charity to encompass all “non-profit social welfare activities.”

Mr. Justice Rothstein noted the potentially significant impact of recognizing all non-profit sporting and recreational activities as charitable. He wrote that it was better to leave reform up to Parliament.

I have a couple of concerns.

First, although in principle I agree that the court should defer to Parliament on questions of taxation policy, in a sense Parliament has deferred to the courts. Parliament could provide a comprehensive, principled definition of charity for tax purposes, but has chosen to rely on the common law. If Parliament does not like the way the courts evolve what is charitable at common law, it can always legislate something else.

Secondly, my related concern is that the common law notions of what is charitable impact trust law as well as taxation law. For example, in British Columbia, one can create a trust in perpetuity for the benefit of charities, but not for other beneficiaries.

Reform of the legal notion of charity in Canada is long over due. If Parliament and provincial legislatures won’t act, surely the courts can legitimately rationalize this area of law in light of the significant social and economic changes since the Pemsel case was decided in 1891.

Why I Prefer to Draft a New Will Instead of a Codicil

There are two ways lawyers use to make changes to a will: draft a codicil or draft a new will.

A codicil is simply a document amending an earlier will. In British Columbia the same formalities are required for a codicil as for a will. (See my post on the formal requirements for making a will.)

Typically, a codicil will provide that certain clauses in your will are deleted, and new clauses substituted for the deleted clause. In your codicil you may then confirm the rest of your earlier will.

After your death, if your executor requires probate to deal with your estate, he or she must then probate both the will and the codicil together. In British Columbia, in order to apply for probate, the executor is required to mail a copy of the will and the codicil to all of the beneficiaries, as well as to the deceased’s nearest relatives (those who would inherit if you died without a will, and those who may make a claim under the Wills Variation Act.)

This means that all of the beneficiaries will see the changes you made to your will. In some cases, the beneficiaries may be disappointed to see that you have reduced their shares of your estate.

If you do a new will when you wish to make changes instead of a codicil, then after your death, your executor will need to apply to probate only the new will. Your executor will not need to send copies of your older will to the beneficiaries, or others entitled to notice. It is less likely that any beneficiaries whose shares of the estate have been reduced will see the earlier will.

Is it more work to do a codicil than a will? Does it cost more?

In many cases, I find it as easy as or even easier than drafting a new will than to make a codicil. If I prepared the earlier will, then my office will often have it on our computer, and all we need to do is make the changes on our word processor. If a different lawyer drew the earlier will, I may be more comfortable using will precedents that I frequently use than working with a will prepared by a lawyer who uses a different style of drafting.

I don’t think doing a new will should cost more than a codicil, but different lawyers have different methods for charging for their work. In many cases, I spend more time talking to my clients, getting information from them, and giving advice, than preparing the documents. If a client, for whom I have recently done a will, requires minor changes, the cost will be relatively low, regardless of whether I prepare a codicil or new will. On the other hand, when I meet someone for the first time to do estate planning, I am going to take a fair amount of time talking to my new client before I make any changes, even if they are minor. My bill will reflect the time I spend in getting information from my new client, again irrespective of whether I prepare a codicil or a new will.

Making Changes to Your Will

I have sometimes seen professionally drawn wills altered in pen by the testator. If you want to change your will, don't do it this way. Go back to your lawyer, and have the changes made in a new will, or in a codicil.

If you make a change to your will in pen (or pencil, or using a typewriter) after you have signed the will, the change will probably not be valid. In British Columbia, any changes must be signed and witnessed in the same manner as a will. (See my earlier post on the formal requirements in British Columbia on making a will.) There is an exception if words are totally obliterated; then the will can take effect without obliterated words.

This is set out in section 17 of the Wills Act, RSBC 1996, c. 489, as follows:

17 (1) Subject to subsection (2), unless an alteration that is made in a will is made in accordance with the provisions of this Act governing the making of a will, the alteration has no effect, except to invalidate words or meanings that it renders no longer apparent.
(2) An alteration that is made in a will is validly made when the signature of the testator and the subscription of the witness or witnesses to the signature of the testator to the alteration are made
(a) in the margin or in some other part of the will opposite or near to the alteration, or
(b) at the end of or opposite to a memorandum referring to the alteration and written in some part of the will.

What happens after you die if you have made alterations in pen, but have not complied with the requirements of section 17(2). The will can still be admitted to probate, but without the changes. This will likely add some expense to the probate application, and may disappoint those who would have benefited by the changes if valid.

Richfield Courthouse, Near Barkerville, British Columbia

I took these photographs of the Richfield Courthouse, a short wagon ride outside of Historic Barkerville, B.C. In the 1860s, Barkerville was the largest city in British Columbia with a population of about 10,000 people, from all over the world, brought together by one thing: gold. Now few British Columbians can locate Barkerville on a map (its near Quesnel).

During the summers, Barkerville is an amazing place, with actors portraying life in the late nineteenth century, in a humourous, and educational manner. It is great for children as well as adults. This summer, at the Richfield Courthouse, Timothy Sutherland played the role of British Columbia's first Chief Judge, Matthew Baillie Begbie. Dirk Van Stralen played the role of Judge Peter O'Reilly. (I got their permission to post their pictures, but alas, the pictures did not turn out.)

The small child crouching in the entrance to the Courthouse is my son Thomas.