Saturday, April 17, 2010

McBride v. Voth

In her will, Edith McBride provided that her daughter Margot McBride could live in Ms. McBride’s home for life, as long as she paid the property taxes and other expenses for the house.
Margot McBride had lived with her mother for almost all of Margot’s life, and cared for and supported her mother in her later years, when her mother’s health declined.

Edith McBride had two other children, Jennifer McBride and Daniel McBride. Edith McBride’s son Daniel McBride was financially well off, but Jennifer McBride was not. Edith McBride had a good relationship with all of her children.

Edith McBride provided in her will that if Margot McBride moved out of the house, or didn’t pay the property taxes, the house would be sold, and the proceeds divided with the rest of her estate equally among her three children.

After Edith McBride’s death on March 1, 2007, Jennifer McBride and Daniel McBride applied to the Supreme Court of British Columbia to vary the will. In British Columbia, the Wills Variation Act allows a child, including an adult child, to apply to court to vary her parent’s will if the parent did not make adequate provision for the child. If the court finds that adequate provision has not been made, the court may order such provision as the court considers adequate, just and equitable in the circumstances.

The practical difficulty in this case is that the house was the main asset of the estate. If Margot McBride chose to remain in the house for the rest of her life, her siblings might never see any benefit from their one-third shares of the residue of their mother’s estate.

Madam Justice Ballance, in McBride v. Voth, 2010 BCSC 443, found that Edith McBride had a moral obligation to each of her children.

In her discussion of the moral obligations to children, Madam Justice Ballance discussed some of the factors the courts consider:

1. Contribution and expectation

[129] Contributions by the claimant to the accumulation of a testator’s assets with little in exchange, or providing other types of contribution or care to a testator will generally serve to strengthen the moral obligation, other things being equal. The contribution may also found a legal claim in unjust enrichment or quantum meruit: Tataryn; Re Sleno 78 D.L.R. (3d) 155, [1977] B.C.J. No. 140 (S.C.); Lee v. King Estate, [1975] B.C.J. No. 893 (S.C.); Harris v. Harris, [1980] B.C.J. No. 1417 (S.C.); Ryan v. Delahaye Estate, 2003 BCSC 1081, 2 E.T.R. (3d) 107 [Ryan]. Contributions made by a first spouse who predeceased the testator may support a moral obligation to the adult claimant children of that first marriage: Saugestad v. Saugestad, 2008 BCCA 38, 77 B.C.L.R. (4th) 170; Waldman v. Blumes, 2009 BCSC 1012, 51 E.T.R. (3d) 253.

[130] A moral duty may arise where the testator’s conduct has created a bona fide expectation on the part of the plaintiff to receive a benefit which does not come about on death: Marsh v. Marsh Estate 19 E.T.R. (2d) 184, [1997] B.C.J. No. 1286 (S.C.); More v. More Estate, 2002 BCSC 920, 46 E.T.R. (2d) 96.

2. Misconduct/Poor character

[131] Section 6(b) of the Act empowers the court to refuse variation to a person whose character or conduct, in the opinion of the court, disentitles him or her to relief. Such misconduct is measured as at the date of death, not subsequently, and must be directed at the testator. Generally speaking, the conduct must be relatively severe in order to justify disinheritance: Gieni v. Richardson Estate, [1995] B.C.J. No. 1227 (S.C.); Sammon v. Stabbler, 2000 BCSC 1048, 77 B.C.L.R. (3d) 283. A child who is a disappointment overall (Sawchuk v. MacKenzie Estate, 2000 BCCA 10), is an “incompetent weakling” (Re Bailey Estate, [1972] 1 W.W.R. 99, 1971 CarswellBC 195 (S.C.)), or is unsuccessful in multiple business ventures and has a difficult time “fighting the battle of life” (Re Radcliffe, 2 B.C.L.R. 220, [1977] B.C.J. No. 1036 (S.C.)) was not considered to be sufficiently defective.

3. Estrangement/Neglect

[132] In the early development of the caselaw, a long period of separation, abandonment or estrangement between a child and testator was frequently, though not invariably, taken to militate against finding a moral duty to an adult child. The modern judicial trend indicates that the court will enquire into the role played by the testator in the estrangement or relationship breakdown, and where it is seen to be largely the fault of or at the insistence of a testator, it will likely not negate a testator’s moral duty, and may even enhance it. The weight of the authorities also indicates that the court may discern a moral duty as a means of rectifying the testator’s childhood neglect of the children: Gray v. Gray Estate, 2002 BCCA 94, 98 B.C.L.R. (3d) 389, Doucette v. Clarke, 2007 BCSC 1021, 35 E.T.R. (3d) 98 [Doucette]; Tomlyn v. Kennedy, 2008 BCSC 331, 38 E.T.R. (3d) 289; Wilson v. Watson, 2006 BCSC 53, 21 E.T.R. (3d) 285; P.S.G. v G.G. Estate, 2005 BCSC 1855; Ryan.

4. Gifts and benefits made by the testator during lifetime

[133] Depending on the circumstances, a testator’s moral duty may be diminished or negated entirely where he or she has made inter vivos gifts to the claimant, or the claimant has received assets on the testator’s death outside the framework of the will. This includes benefits conferred by way of an inter vivos trust, outright gift and assets passing on death by operation of law such as joint tenancies, and by way of specific beneficiary designation of insurance proceeds, RRSPs, pension benefits, RIFs, and the like. On the same reasoning, if a testator has made pre-death gifts to individuals other than the plaintiff, or has arranged his or her affairs to facilitate a passing of assets to such individuals outside the provisions of the will, the moral duty owed to the plaintiff may be intensified. See generally: Ryan; Higgins v. Wojciechowski Estate, [1992] B.C.J. No. 1398 (S.C.); Inch v. Battie, 2007 BCSC 1249, 36 E.T.R (3d) 79 [Inch].

5. Unequal treatment of children

[134] That an independent child has not been given the same provision under a will as the testator’s other child or children will not, of itself, necessarily establish a moral claim: Re Lukie et al and Helgason et al., 72 D.L.R. (3d) 395, [1976] B.C.J. No. 1393 (C.A.); Price. On the other hand, in Vielbig v. Waterland Estate (1995), 1 B.C.L.R. (3d) 76, 6 E.T.R. (2d) 1 (C.A.), the Court of Appeal held that equal treatment among independent adult children is prima facie fair from a moral duty standpoint. In Ryan, the court held that in the absence of relevant reasons for an unequal distribution, there is a reasonable expectation that adult children will share equally, even though no legal obligation requiring equal distribution exists. (para. 67). The emerging rule of thumb to the effect that equal apportionment among children prima facie discharges a testator’s moral duty was applied in Inch. There, the court held that an equal distribution was prima facie fair, despite the fact that one child received significant assets by way of inter vivos transfers. The proposition was recently revisited by the Court of Appeal in Doucette. In that case, the Court of Appeal appeared to have no difficulty with the disinheritance of one of the preferred beneficiaries by allocating her nothing out of the estate in light of the generous gifts that she had received outside the will via jointly held assets.

The other factor Madam Justice Ballance discusses in her reasons for judgment are the testator’s reasons. Section 5 of the Wills Variation Act says that the court may consider evidence of the testator’s reasons for making the provisions she did in her will. The British Columbia Court of Appeal in Bell v. Roy Estate (1993), 75 B.C.L.R. (2d) 213, and Kelly v. Baker (1996), 15 E.T.R. (2d) 219, that a parent may disinherit a child if the parent has rational and valid reasons even if those reasons are not justifiable.

Madam Justice Ballance notes the conflict the subjective standard in assessing the testator’s reasons in Bell, and Kelly, and the objective standard of a judicious parent in assessing the moral obligations of the testator required by the Supreme Court of Canada’s decision in Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807. She writes:

[141] One cannot quarrel with the outcomes in Bell and Kelly in light of their particular facts. The thorny issue is that the model of inquiry endorsed by Bell and followed in Kelly effectively precludes an assessment of whether the testator’s reasons are objectively justifiable from the standpoint of the contemporary judicious parent of Tataryn. In Tataryn, McLachlin J. made passing mention of Bell as an example of a case where a testator’s moral duty was seen to be negated. Notably, she did not say nor delve into whether the proposition espoused by Goldie J.A. to negate that moral duty was sound. If the decisions of Bell and Kelly mean that the applicable test is whether a testator has valid (i.e. factually true) and rational (i.e. logically connected to the disinheritance) reasons for disinheriting a child, even where the reasons are unworthy of an objectively judicious parent based on contemporary standards, then they are difficult to reconcile with the fundamental precepts of Tataryn and the search for contemporary justice in the circumstances.

[142] For the most part, the apparent incompatibility between Bell and Kelly on the one hand, and Tataryn on the other, has not been squarely confronted by this Court (an exception is found in Hammond v. Hammond (1995), 7 B.C.L.R. (3d) 25, 7 E.T.R. (2d) 280 (S.C.)). I would respectfully observe that there appears to be a growing trend in the authorities decided in the aftermath of Kelly to favour rejection of objectively insufficient reasons on the pretence that they are simply not rational.

Madam Justice Ballance found that by allowing Margot McBride to live in the house indefinitely, Edith McBride had not made adequate provision for her other two children. Madam Justice Ballance held that a reasonable provision would have been to allow Margot McBride to live in the house for three years after the date of death.

In determining the relative shares of the children, Madam Justice Ballance assessed their relative moral claims. Margot McBride had the strongest moral claim in light of the care and support she provided to her mother. Jennifer had the next strongest moral claim because of her financial need.

Madam Justice Ballance ordered that after the third anniversary of Edith McBride’s death, the house would be listed for sale. Margot McBride may live in the house until it is sold. The net sale proceeds will then be divided with 45 percent going to Margot McBride, 30 percent to Jennifer McBride and 25 percent to Daniel McBride.

No comments: