Saturday, January 29, 2011

Hearsay and Estate Litigation

If I testify in court that Jill told me that Jack fell down and broke his crown in order to prove that Jack did, in fact, fall down and broke his crown, then my evidence is hearsay. Testimony about an out of court statement by someone else to prove the truth of the matter asserted by that other person is hearsay. In British Columbia, hearsay is generally not admissible in court.

But my testimony about what Jill told me about Jack may be admissible in some circumstances. For example, I may be relating what Jill told me, not to prove that Jack fell down and broke his crown, but for the non-hearsay purpose of explaining why I called an ambulance. Or, the court might admit my testimony, even to prove that Jack fell down and broke his crown, if the court finds that the evidence is necessary and it is sufficiently reliable to consider despite the fact that it is hearsay.

In estate litigation, the courts often consider statements about what the deceased person had said. Often the court receives such evidence without objection. On what basis are these statements admitted? Most reported estate litigation judgments in British Columbia do not contain discussions about the admissibility of statements about what the deceased said. Mr. Justice Groves’ decision in the recent case of Modonese v. Delac Estate, 2011 BCSC 82, is an exception.

Regina Delac died on August 20, 2005. She had two children: a son, Marko Delac, and a daughter, Helena Modonese. With the exception of a three-year period beginning in 1989, Marko Delac lived with his mother in her home on Royal Oak Avenue in Burnaby. His wife and, while they were growing up, his children, also lived in the Royal Oak Avenue home.

A couple of years before she died, Regina Delac signed a transfer form, transferring her house into a joint tenancy with her son. She signed the transfer in front of a notary public, whom her son had contacted, while sitting in Marko Delac’s car. Mr. Delac was either in the car or standing nearby when she signed the transfer.

On Regina Delac’s death, title to the house at Royal Oak Avenue passed to her son by right of survivorship. Her only other financially valuable asset was her bank account which held about $35,000.

In her will, Regina Delac said that her estate was to be divided equally between her son and daughter. But if the house passes to Marko Delac by right of survivorship, there would only be $35,000 less estate liabilities to be divided between Regina Delac’s two children.

Helena Modonese challenged the transfer of her mother’s house into a joint tenancy with her brother on the grounds of undue influence and resulting trust.

To establish undue influence, Ms. Modonese relied on a presumption that arises when the nature of the relationship between the person who makes a gratuitous transfer (in this case Regina Delac) and the recipient (her son) is such that the recipient s in a position to dominate the transferor. When the presumption arises, then the recipient must prove that he did not exercise any undue influence, often by showing that the transferor acted spontaneously and received independent advice.

A resulting trust is a presumption that arises when one person gratuitously transfers property to another. The presumption is that the transferor did not make a gift, but rather that the recipient holds the property in trust for the transferor, and after the transferor’s death, for his or her estate. The recipient may rebut the presumption of resulting trust by proving that the transferor intended to make a gift of the property.

Ms. Modonese relied on statements her mother made to her, to daughter Linda Modonese, and to Regina Delac’s sister Helen Uzelak, to challenge the transfer of the house into a joint tenancy with her brother. For example, Regina Delac told her sister that Marko Delac had slapped and choked her in 1989 or 1990. After this incident the police came, and Marko Delac and his family moved out of the home for three years. Mr. Justice Groves summarized the evidence objected as hearsay at paragraphs 73 and 74:

[73] In their written submissions, the parties highlight a number of statements made by the deceased, which the defendant asserts are inadmissible hearsay. The most important of these for the present purposes appear to be:
(a) A statement to Linda Modonese regarding a physical altercation between Marko and Regina;
(b) A statement to Helena and Linda Modonese to the effect that it was Regina’s intention for Helena and Marko to share equally in the estate and more specifically in the house;
(c) A statement to Helen and Helena wherein Regina told them that she was afraid of upsetting Marko;
(d) A statement to Helen and Helena wherein Regina told them that she was afraid of Marko;
(e) Most importantly, Helen’s evidence that prior to her death, Regina told her that she had signed something and that she did not know what she signed. The defendant had told her to sign. She did not like this. She wondered how the defendant’s name was on the municipal tax notice.  
[74] An out of court statement tendered for the truth of its contents is presumptively inadmissible. The hearsay rule has been traditionally regarded as an absolute rule, and acts as an exception to the general principle that all relevant evidence is admissible.

Mr. Justice Groves considered whether the evidence fell within a tradition category of hearsay exceptions. These are certain categories of out-of-court statements that the courts have developed over many years. He then considered whether those statements that do not fall within a traditional category should be admitted under the principled approach of considering the necessity and reliability of the evidence.

Statements Regina Delac made to others that she was afraid of her son, and that she intended for her children to share her house and bank accounts equally, fall within the traditional hearsay exceptions for statements made to prove a person’s intention, mental or emotional state. Mr. Justice Groves wrote at paragraphs 82 through 86:

[82] In Pasko v. Pasko, 2002 BCSC 435, 100 B.C.L.R. (3d) 354 [Pasko], a dispute arose as to the admissibility of statements made by deceased parents to their children in connection with a dispute over whether property had been gifted to certain of the children. Halfyard J. noted at para. 10 that there is an “exception to the hearsay rule which permits evidence to be given of statements made by deceased persons as to their present state of mind (including intention), which statements need not be against interest, provided that the deceased person's state of mind is relevant to an issue in the case.” 
[83] Pursuant to this exception, Mr. Justice Halfyard admitted statements relating to the deceased parents’ intentions to confer a gift, made before and at the time of the two transactions in question.
[84] Following Pasko, if I am wrong in concluding that the statements concerning Regina’s intention to divide her assets equally are not admissible pursuant to s. 5 of the WVA, they ought to be admitted pursuant to this exception to the hearsay rule.
[85] Declarations of mental or emotional state are also an established exception to the rule against hearsay. In R. v. Smith, [1992] 2 S.C.R. 915, 94 D.L.R. (4th) 590 [Smith cited to S.C.R.], the Court held that the state of mind exception to the hearsay rule permits reception of evidence to prove the declarant’s state of mind, but not the truth of the factual assertion which may be contained in it. Statements attributed to a deceased declarant tending to show her state of mind, namely a fear of the defendant, are admissible under this exception to the hearsay rule: R. v. Evans, 2002 BCSC 1674 at para. 35, [2002] B.C.J. No. 3100. 
[86] Accordingly, the statements attributed to Regina concerning her fear of the defendant and her fear of upsetting him are admissible pursuant to this exception.

Mr. Justice Groves admitted Regina Delac’s statements of physical violence, and that she signed something her son told her to sign but did not know what she signed under the principled exception, which he explained as follows:
[88] The statements referred to above under headings “a” and “e” (the physical altercation and the evidence that Regina did not know what Marko had asked her to sign) do not appear to neatly fit under any of the established exceptions to the hearsay rule. I now turn to a consideration of the “principled approach” to hearsay.
(i) Necessity
[89] The principle of necessity does not mean that the hearsay evidence must be necessary in order for a party to prove his or her case. As described by the Court in Smith at 933, the criterion of “necessity” refers to the necessity of the hearsay evidence to prove a fact in issue. To satisfy necessity, the party adducing the evidence must prove that hearsay is the only available means of putting that evidence before the court. Necessity is obviously made out in this case. If Regina’s statements are to be adduced at all, they can only be presented in hearsay form because of her death.
(ii) Reliability
[90] When assessing the reliability of a hearsay statement, the court should adopt a functional approach. Starting from the premise that hearsay statements are presumptively inadmissible, it should then search for indicia of trustworthiness sufficient to displace the general exclusionary rule. In each case, the focus of the inquiry must be on the particular dangers arising from the hearsay nature of the evidence: R. v. Blackman, 2008 SCC 37 at para. 42, [2008] 2 S.C.R. 298. 
[91] This requirement can be satisfied in one of two ways: First, where there is an absence of any real concern about the truth of the statement because of the circumstances in which the statement was made; and second, where the truth and accuracy of the evidence can be sufficiently tested by means other than contemporaneous cross examination: Khelawon at paras. 62-63.
[92] All relevant factors and the context should be considered, including the presence of supporting or contradictory evidence in appropriate cases.
[93] In Anderson v. Anderson, 2010 BCSC 911, 58 E.T.R. (3d) 291 [Anderson], the pivotal issue in the trial was similar to that raised in the present case: Did the deceased gift the defendant the legal and beneficial interest in property absolutely through an inter vivos transfer? Accordingly, the actual intention of the deceased at the time of the transfer was of fundamental importance. On the issue of hearsay pertaining to this issue, Dardi J. held:
57 The reporting of some of the Deceased's statements by interested parties raises a concern regarding the reliability of those statements. This evidence must be carefully scrutinized. Adopting the approach in Stephens v. Austin, 2003 BCSC 341, I have nevertheless determined that the Deceased's statements adduced in evidence meet the threshold requirement of reliability. I conclude that the fact that some of the witnesses relating the statements are interested parties may be adequately dealt with in the determination of the weight to be attributed to any particular statement.
58 In my view, the real issue with some of the evidence and the weight to be accorded to it is whether the statements were in fact made by the Deceased. The Court must first find on a balance of probabilities that the statement was made before it goes on to determine the treatment and weight of such evidence: Creutz v. Winther Estate, 2007 BCSC 1463. In essence, this assessment turns on the reliability of the various witnesses: Halfpenny v. Holien (1997), 37 B.C.L.R. (3d) 186 (S.C.).
[94] Regina had no motive to fabricate the two statements attributed to her. They were not self-serving. The statements at issue were made in the context of everyday intimate conversations between close relatives and friends, which is an accepted indicator of reliability: R. v. Pasqualino, 2008 ONCA 554 at para. 43, 233 C.C.C. (3d) 319. The defendant has pointed to no evidence that would contradict these statements. Accordingly, the statements possess sufficient hallmarks of threshold reliability to justify admission under the principled exception.
[95] As Dardi J. noted in Anderson, the real issue in this case is whether or not Regina actually made the alleged statements at issue to Helen and Linda Modonese, which requires an assessment of these witnesses’ credibility. I find them both to be credible witnesses.
(I think that the statement that Regina Delac did not know what she signed could also have been admitted under the state of mind exception.)

Mr Justice Groves found that the presumption of undue influence applied because there was a potential for domination in the relationship between Marko Delac and Regina Delac. In making that finding, he considered:

1. Regina’s statements that she feared Marko and did not want to upset him;
2. Marko’s physical abuse of his mother;
3. Regina’s statement to Helen that she signed documents at Marko’s direction and that she did not appreciate the nature and consequences of these documents;
4. Marko was granted an enduring power of attorney, which he used over the plaintiff’s assets, granting him control over her affairs and subjecting him to fiduciary obligations (On the fiduciary relationship between an attorney and donor, see Egli v. Egli, 2004 BCSC 529 at paras. 76-79, 28 B.C.L.R. (4th) 375, aff'd 2005 BCCA 627, 48 B.C.L.R. (4th) 90.);
5. Marko’s attempts to prevent his mother from having contact with the plaintiff, isolating her from other family members;
6. Regina’s reliance upon Marko for companionship, help around her home, and in dealing with her general affairs.

Marko Delac did not rebut the presumption of undue influence. The notary did not provide any independent advice to Regina Delac.

Furthermore, the transfer into a joint tenancy was subject to the presumption of resulting trust, and Marko Delac was unable to prove that his mother intended to make a gift of the house to him.

In the result, Helena Modonese was successful, and the house will be divided equally between Regina Delac’s two children under her will.

I should note that although I have focused this post on the hearsay issues, Mr. Justice Groves’ reasons for judgment in Modonese v. Delac Estate also contain thorough analyses of the law of undue influence, the requirements for independent legal advice, and the presumption of undue influence in British Columbia.


Paul McLaughlin said...

Stan, is there an equivalent in BC of the following section of the Alberta Evidence Act?

Evidence in action by heir, etc.
11 In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposed or interested party shall not obtain a verdict, judgment or decision on that party’s own evidence in respect of any matter occurring before the death of the deceased person, unless the evidence is corroborated by other material evidence.

Stan Rule said...

No. The equivalent provision in the B.C. Evidence was repealed. I think it was repealed in the 1970s. There is case law that says that claims against an estate should be examined with the most careful scrutiny, but there is no statutory requirement for corroboration.