Sunday, November 24, 2013

Norman v. Watch Tower Bible and Tract Society of Canada

In Norman v. Watch TowerBible and Tract Society of Canada, 2013 BCSC 2099, Madam Justice Warren considered whether funds that were given to a charity under an agreement by which the donors could have the funds returned was testamentary in nature, requiring that the agreement by signed and witnessed as a will to be effective.

During their lifetimes, Lloyd and Lily Norman made loans and gifts to support their local congregation of Jehovah Witnesses in Abbotsford, B.C. as well as to the national charity Watch Tower Bible and Tract Society of Canada.

On July 3, 2001, they signed a “Conditional Donation Agreement,” which read as follows:

The Watch Tower Bible and Tract Society of Canada (SOCIETY) acknowledges the receipt of a voluntary conditional donation in the amount of $200,000.00 … (hereinafter called FUNDS) to be held for the use and benefit of SOCIETY for the purpose of advancing the work of Jehovah’s Witnesses of preaching the good news about Jehovah’s Kingdom according to the judgment and sole discretion of the SOCIETY. The initial voluntary conditional donation is accepted from the following DONOR(S):  Lloyd E. and Lily Norman …

Any future funds advanced will be accepted by the SOCIETY and held according to this agreement if the DONOR(S) so indicates in a letter sent with any future funds.

DONOR(S) may personally request in writing the refund of all or any part of the FUNDS from the SOCIETY and such request shall be honoured. No request for a refund may be made by a power of attorney, an estate, or legal representative. The SOCIETY shall, however, in its sole discretion, consider refund requests from such parties, particularly if any financial need is being experienced by any who are DONORS and keeping in mind the best interests of all concerned. The total sums refunded shall not exceed the total of FUNDS.

After the death of all DONORS, the remainder interest that may exist in the balance of FUNDS held by the SOCIETY according to this agreement shall be in SOCIETY.

Pursuant to the agreement, they contributed $310,000, some of which, $60,000 was made into outright gifts for which they received tax receipts.

Following Lloyd Norman’s death, his wife having predeceased him, his administrator, Dana Norman brought a claim on behalf of Lloyd Norman’s estate seeking payment of the $250,000 (being the difference between the $310,000 contributed and the $60,000 that had been converted to outright gifts) from the charity to the estate. The basis of his claim was that because Lloyd and Lily Norman could compel the charity to return the funds during their lifetimes, the agreement was testamentary in nature, dependant on their deaths for its vigour and effect. If so, then as a testamentary gift, the agreement must meet the formal signing and witnessing requirement in the Wills Act to be effective. In this case, it was not witnessed and was not valid in British Columbia as a will.

Madam Justice Warren summarized the factors the courts consider in deciding whether a gift is testamentary as follows:

[23]         The BC Court of Appeal in Wonnacott [ v. Loewen (1990), 44 B.C.L.R. (2d) 23] went on to cite with approval several Canadian decisions. From that analysis, the following principles emerge:

·       The question of whether a disposition is or is not testamentary depends upon the intention of the maker (para. 19).

·       The intention of the maker is a question of fact. In determining the intention, the court is not restricted to the wording of the document alone, but can and should consider extrinsic evidence relevant to the transaction (para. 20).

·       If the document is not intended to have any operation until the maker’s death, it is testamentary (para. 19).

·       If the document is intended to have and does have the effect of transferring some interest in the property or of setting up a trust thereof in praesenti, it is not testamentary (para. 19).

·       The reservation of a right to revoke the transfer or bring a trust to a close does not necessarily have the effect of making the document testamentary (para. 19).

·       Cases where documents are held to be testamentary often include the following factual elements: 1) no consideration passes; 2) the document has no immediate effect; 3) the document is revocable; and 4) the position of the donor and donee does not immediately change (para. 21).
 [24]         Other relevant principles drawn from the authorities relied upon by the parties include the following:

·       Even where an intended disposition is revocable by the maker or where enjoyment of it is postponed until the death of the maker, if, at the time of its execution, the document is legally effective to pass some immediate interest in the property, no matter how slight, the transaction will not be classified as testamentary:  James MacKenzie, Feeney’s Canadian Law of Wills, 4th ed. (Markham, ON: LexisNexis Canada Inc., 2000), para. 1.20.

·       The level of control the donor exercises over the property during his or her lifetime is a factor to be considered in determining whether a disposition is inter vivos or testamentary and the more control the donor exercises, the more likely the disposition will be considered testamentary:  MacKenzie, paras. 1.25 to 1.27.

·       However, the central question is whether the maker of the document intended the document to pass some immediate interest or whether the maker intended the document to have no effect until his death. The degree of control the donor retains over the property during his or her lifetime is relevant to ascertaining that intention. However, if it is clear that the document is intended to have immediate effect it is not testamentary even if the donor retains control, such as the ability to call for the return of the property during his or her lifetime:  Mordo [v. Nitting, 2006 BCSC 1761], para. 335.

Madam Justice Warren found that the gift was not testamentary but took effect during the Normans’ lifetimes, and was not dependant on their death for its vigour and effect. The charity had the right to use the funds. The fact that Lloyd and Lily Norman could call for the return of funds made the gift subject to a condition, but that did not alter the fact that the funds became the property of the charity immediately.

She wrote at paragraphs 37, 38 and 39:

[37]         The next question is whether the Conditional Donation Agreement took immediate effect. In my view, it is clear from the Conditional Donation Agreement itself that it had vigour and effect upon execution. The Conditional Donation Agreement, once executed, governed the relationship between the parties with respect to the Conditional Donations. The positions of the parties immediately changed.

[38]         On the signing of the Conditional Donation Agreement, the defendant obtained both an immediate and future interest in the funds. The defendant already had physical possession of, and at least legal title to, the initial $200,000, but the terms upon which the defendant held those funds and any future contributions were settled with the signing of the Conditional Donation Agreement. The defendant acquired the immediate right to use the funds:  the Conditional Donation Agreement expressly states that the funds are “to be held for the use and benefit of [the defendant] for the purpose of advancing the work of Jehovah’s Witnesses of preaching the good news about Jehovah’s Kingdom according to the judgment and sole discretion of the [defendant]”. Further, as would be the case if the money was in a joint account, the defendant received an unrestricted future interest when the condition was cleared upon Mr. Norman’s death. The Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17, at paras. 48 and 50, held that the gift of the right of survivorship is inter vivos in nature and not testamentary.

[39]         The Conditional Donation Agreement changed the position of the Normans in that upon its execution they were bound by its terms. They gave up the funds and, unless they requested a refund of them in accordance with the terms of that agreement, nothing would change on their deaths. The ultimate disposition did not depend on the Normans’ deaths but rather on their decision not to request a full refund during their lifetime.

The result is that the Watch Tower Bible and Tract Society of Canada are entitled to retain the full amount of the donations Lloyd and Lily Norman made to it.

[This decision has been upheld by the Court of Appeal. You can read the decision at 2014 BCCA 277.]

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