Rule of Law

McPeake v. Canada (Attorney General)

2012-01-29T12:58:00.002-08:00

If a trust agreement does not accurately reflect the intentions of the parties creating the trust, the trustees may make an application to court to rectify the trust. The power to rectify a trust may be used to save the parties from significant taxes that they would otherwise have to pay. Taxpayers sometimes employ trusts to arrange their affairs to minimize income tax. Provided it is not a sham or done to hide property or income, the use of trusts to minimize income tax is legal in Canada. But transferring property to a trust can be tricky: if it is not set up just right, the terms of the trust may run afoul tax provisions that can result in a big and unexpected tax bill.

Barry McPeake owned one-fifth of the shares in a software development company in the 1990s. After receiving tax advice, he transferred his shares in the company to a family trust, of which he, his wife, and a legal advisor were the trustees. Members of his family were the beneficiaries of the trust. The purpose of the trust was to avoid tax if the shares were sold. Growth in the value of the shares could be allocated to the beneficiaries, who could then each use a capital gains exemption, which at that time was $500,000 on qualifying shares. The effect was that instead of there only being one $500,000 exemption available to Mr. McPeake when the shares were sold, there would be several $500,000 exemptions, significantly reducing capital gains tax.

The software development company was sold to Microsoft in 1999. Mr. McPeake’s family trust received $3,950,000 for its shares.

Canada Customs and Revenue Agency assessed Mr. McPeake for income tax on income and capital gains in respect of the shares after he transferred the shares to his family trust. The reason was that the terms of the trust document was caught by section 75(2) of the Income Tax Act, which is one of several sections containing rules that attribute income to someone who has transferred property.

In a nutshell, if after you transfer property to a trust, the terms of the trust permit the property to revert to you, or allow you to determine who the property can pass to, or if your consent is required to dispose of the property, income and capital gains are attributed back to you during your lifetime. The section says:

75. (2) Where, by a trust created in any manner whatever since 1934, property is held on condition

(a) that it or property substituted therefor may
(i) revert to the person from whom the property or property for which it was substituted was directly or indirectly received (in this subsection referred to as “the person”), or

(ii) pass to persons to be determined by the person at a time subsequent to the creation of the trust, or
(b) that, during the existence of the person, the property shall not be disposed of except with the person’s consent or in accordance with the person’s direction,
any income or loss from the property or from property substituted for the property, and any taxable capital gain or allowable capital loss from the disposition of the property or of property substituted for the property, shall, during the existence of the person while the person is resident in Canada, be deemed to be income or a loss, as the case may be, or a taxable capital gain or allowable capital loss, as the case may be, of the person.

Canada Customs and Revenue Agency identified several ways in which the trust was caught by section 75 (2), some of which were fixed in a rectification proceeding in 2009, which Canada Customs and Revenue Agency did not oppose. But problems remained after the 2009 rectification. The terms of the trust required that the trustees must make decisions unanimously, which means that Mr. McPeake would have to consent to any disposal of the trust property. McPeake could also become the sole trustee, which would enable him to determine beneficiaries after the creation of the trust.

The trustees applied to the Supreme Court of British Columbia to rectify the trust document to rectify those provisions that triggered attribution under section 75(2) in McPeake v. Canada (Attorney General), 2012 BCSC 132. This time the government opposed the rectification.

In her decision, Madam Justice Dorgan neatly summarized British Columbia law on rectification as follows:

[16] Rectification is an equitable remedy that courts may apply to various legal documents that stand as instruments expressing intended legal relations. Rectifiable documents can include contracts (Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd., 2002 SCC 19, 1 S.C.R. 678 (“Performance Industries”)), land deeds (771225 Ontario Inc. v. Bramco Holdings Co. (1994), 17 O.R. (3d) 571 (Gen. Div.) (“Bramco SC”)), documents relating to corporate transactions (Juliar v. Canada (Attorney General) (1999), 46 O.R. (3d) 104 (Sup. Ct.) (“Juliar SC”)), and trust deeds (Rose v. Rose (2006), 81 O.R. (3d) 349 (Sup. Ct.)). Rectification does not change the intended legal relation: it would not, for example, change the essence of the agreement between contracting parties. Rather, rectification changes an instrument’s mistaken expression of that intention. Rectification is restorative, not “retroactive”: “[Rectification] is to restore the parties to their original bargain, not to rectify a belatedly recognized error of judgment by one party or the other” (Performance Industries, para. 31). Since rectification restores a truth to an instrument’s expression, it acts, in time, from the point of instrument formation forward.

[17] The party seeking rectification bears the onus. For the court to exercise its equitable jurisdiction to rectify a document, a petitioner must satisfy the court that the request to rectify merely aligns the document with the true intentions underlying it, and that the aspects to be rectified are mistakes that obstruct the true intentions behind the document’s formation. Long before Binnie J. discussed rectification in Performance Industries, Vice-Chancellor W. M. James wrote in Mackenzie v. Coulson, (1869) L.R. 8 Eq. 368 at 375, “Courts of Equity do not rectify contracts; they may and do rectify instruments purporting to have been made in pursuance of the terms of contracts.”

[18] As set out in Bank of Montreal v. Vancouver Professional Soccer Ltd. (1987), 15 B.C.L.R. (2d) 34 (C.A.) at 36 - 37 (“Bank of Montreal”) by McLachlin J.A. as she then was, a petitioner for rectification of any document must establish:
1. that the written instrument does not reflect the true agreement of the parties; and
2. that the parties shared a common continuing intention up to the time of signature that the provision in question stand as agreed rather than as reflected in the instrument.
See: Joscelyne v. Nissen, [1970] 2 Q.B. 86 at 98 - 99, [1970] 2 W.L.R. 509, [1970] 1 All E.R. 1213 (C.A.); Frederick E. Rose (London) Ltd. v. William H. Pim Junior & Co., (1953), 2 Q.B. 450 at 451, [1953] 3 W.L.R. 497, [1953] 2 All E.R. 739 (C.A.).
The intention underlying the document must be more than a general intention. Exactly what constitutes sufficient specificity of intention varies by context.

In this case, Madam Justice Dorgan found that Mr. McPeake and the other parties to the trust had a sufficiently specific intention in creating the trust of maximizing capital gains exemptions on the shares of the company for the court to rectify the trust document to correspond with that intention. Accordingly, she ordered the trust document rectified so that the income and capital gains would not be attributed back to Mr. McPeake.

Canadian Centre for Elder Law Announces 2012 Canadian Conference on Elder Law

2012-01-26T20:43:00.000-08:00

The Canadian Centre for Elder Law has announced that it is holding the 2012 Canadian Conference on Elder Law on November 16 and 17 in Vancouver, B.C. According to the press release:

The Canadian Centre for Elder Law is pleased to announce the 2012 Canadian Conference on Elder Law is taking place November 16 to 17, 2012. This is the sixth elder law conference hosted by the CCEL, and for 2012 the Conference returns to beautiful downtown Vancouver, British Columbia. We hope you will join experts, academics, lawyers and advocates from across the globe to advance the discussion of elder law issues.

Over the years this inter-disciplinary event has been a site for discussion of issues of interest to practitioners working in law, policy, government, policing and justice, health care, finance, education and front line advocacy. The theme for this year's conference is "Advocacy and Aging: From Storytelling to Systemic Change."

The conference pre-day, the World Study Group, will be held November 15, 2012. The World Study Group offers scholars an opportunity to share their research and ideas with academics from around the world.

Domicile

2012-01-22T17:33:00.001-08:00

The laws governing the estate of a person who has died can vary considerable from country to country, and in Canada, even from province to province. For example, in British Columbia, an independent adult child can apply to court under the Wills Variation Act to vary the will of her parent if the parent did not make adequate provision for her. Many other provinces don’t have legislation permitting and independent adult child to vary a parent’s will. It may make a big different to a child wishing to bring a claim whether the law of British Columbia will apply or the law of another province will apply to her parent’s estate.

Sometimes this is fairly straightforward. If the person who died lived in British Columbia all of his life and all of his real estate is located in British Columbia, then British Columbia law will apply.

But in an age where people move all around the world it is not always so simple. Some people may have two or more homes they live in for part of the year. Or they may spend only a short time in a new province before their death.

The law of place where someone is “domiciled” at death will often determine what law governs the administration of that person’s estate (other than interests in real estate which is governed by the law in the jurisdiction where the real estate is located).

Domicile can be an elusive concept as is demonstrated in the decision of the Alberta Court of Appeal in Foote v. Foote Estate, 2011 ABCA 1.

Eldon Foote lived in Alberta for the first 43 years of his life. He built an international business distributing the cleaning product Swipe. In the early 1970s, he bought a large property in Norfolk Island, an Australian protectorate with favourable tax laws, and he moved there.

In 1999, Mr. Foote bought a condominium in Victoria, British Columbia, and spent the summers of 2001, 2002, and 2003 at his Victoria condominium. He and his wife made some plans to sell the Norfolk Island residence to move to Victoria.

In April of 2004, he was diagnosed with cancer, and went returned to Edmonton, Alberta for cancer treatment, where he died in May 2004.

At his death, his estate was worth approximately $130 million. He had three wills dealing with assets in different jurisdictions. He left some of his assets to his wife, his six children, and other family members, but he left most of his wealth to two charities: the Edmonton Community Foundation and the Lord Mayor of Melbourne’s Charitable Fund.

All of the parties agreed that Mr. Foote had established his domicile in Norfolk Island in the 1970s.

Mr. Foote’s children argued Mr. Foote changed his domicile to British Columbia before his death, and that the law of British Columbia governs the administration of his estate. His widow argued that he had abandoned his domicile in Norfolk Island but had not established a new domicile. Accordingly, she argued, his domicile reverted to his domicile of origin, Alberta. She argued that the law of Alberta governed the administration of his estate. The charities argued that Norfolk Island remained Mr. Foote’s domicile at his death, and the administration of his estate was domiciled in that jurisdiction.

The parties’ motives for adopting the positions they did are not apparent from the judgment. Presumably, British Columbia law would be favourable to the children, Alberta law favourable to the widow, and Norfolk Island law favourable to the charities.

The Alberta Court of Appeal in its Memorandum for Judgment explained the concepts of domicile of origin and domicile of choice as follows:

[19] The concept of domicile is relevant to the law governing a person’s status and property. For purposes of this appeal, the relevant point is that the domicile of a deceased person determines the law that will govern estate administration. A person will always have one, and only one, domicile at any point in his or her life. A person begins with a domicile of origin, generally the place where he or she was born. No one disputes that Mr. Foote’s domicile of origin is Alberta, where he was born and lived for the first 43 years of his life, and where he attended university, embarked on the practice of law, married and had five children.

[20] One’s domicile of origin can be displaced by a “domicile of choice”, a place where a person has chosen to live. The classic description of domicile of choice is found in Udny v. Udny (1886), L.R. 1 Sc. & Div. 441:

Domicile of choice is a conclusion or inference which the law derives from the fact of a man fixing voluntarily his sole or chief residence in a particular place, with an intention of continuing to reside there for an unlimited time. ... There must be a residence freely chosen, and not prescribed or dictated by any external necessity, such as the duties of office, the demands of creditors, or the relief from illness; and it must be residence fixed not for a limited period or particular purpose, but general and indefinite in its future contemplation.

The Court of Appeal described how a domicile may change:

[22] The acquisition of a domicile of choice involves two factors: “the acquisition of residence in fact in a new place and the intention of permanently settling there ... in the sense of making that place [one’s] principal residence indefinitely”: Trottier v. Rajotte, [1940] S.C.R. 203 at 206, 1 D.L.R. 433.

….

[25] The following rule is set out in Dicey, Morris and Collins on The Conflict of Laws, 14th ed. (London: Sweet & Maxwell, 2006) at 151:

Rule 13 - (1) A person abandons a domicile of choice in a country by ceasing to reside there and by ceasing to intend to reside there permanently or indefinitely, and not otherwise.

[26] The test for loss of domicile of choice is two-fold: it requires an intention to cease to reside in a place coupled with acts that end one’s residence. It is described in Dicey as follows:

A domicile of choice is lost when both the residence and the intention which must exist for its acquisition are given up. It is not lost merely by giving up the residence nor merely by giving up the intention.

[27] Castel & Walker, in their Canadian Conflict of Laws at s. 4.8, 6th ed. (Markham, Ont.: LexisNexis Butterworths, 2005), describe the process of abandonment of a domicile of choice as “the converse of its acquisition”. They also note the dual nature of the test. To paraphrase, for Mr. Foote to have abandoned his domicile of choice on Norfolk Island, it would be necessary for him to cease to reside there and also to cease to have the intention to return to Norfolk Island as his permanent home. “Absence without the intention of abandonment is of no effect, nor is intention without any actual change of residence”: Castel & Walker at s. 4.8.

The Court of Appeal upheld the trial judge’s decision that Norfolk Island remained Mr. Foote’s domicile on death. The trial judge had found that Mr. Foote planned to change his primary residence to British Columbia at some point, but his plans were provisional. He had not taken any steps to appraise or market his considerable home and property in Norfolk Island. He would not likely have changed his residence without tax planning. He began to receive tax advice in 2002, but had not taken any steps to implement it. The trial judge found that the intention to change his residence to British Columbia, and the preliminary steps Mr. Foote had taken, were insufficient to displace Norfolk Island as his domicile of choice.

Accordingly, the laws of Norfolk Island will govern the administration of Mr. Foote’s estate.

Elder and Guardianship Mediation

2012-01-16T20:11:00.003-08:00

The Canadian Centre for Elder Law has published its report on Elder and Guardianship Mediation. As set out in the Executive Summary:

The Elder and Guardianship Mediation report is the first comprehensive study of elder and guardianship mediation in Canada, bringing together various material that should be considered in the determination of how to move forward with the development of elder and guardianship mediation in BC. The report compares the experience with voluntary and mandatory mediation of aging-related and guardianship matters in Canada (with a particular focus on BC) and selected US states where court-connected guardianship mediation programs exist. The practical and ethical issues that confront mediators handling cases involving older persons and persons with diminished mental capacity are analyzed with a view to formulating best practices. Recommendations stated in the report are based on the results of the consultations and research, and represent a high degree of consensus among the many experts and sources consulted in terms of best practice and what is needed to create a viable elder and guardianship mediation program in a jurisdiction.

The report includes several components: an outline of the overarching legal context,clarification of the meaning of the concept of elder and guardianship mediation; background on elder mediation in Canada; a comparative analysis of select US court-annexed guardianship mediation programs; and a discussion of ethical issues that arise in the context of mediating at that place where age and mental capacity intersect.

You may read the report here.

British Columbia Law Institute’s Recommended Practices for Wills Practitioners Relating to Potential Undue Influence: A Guide

2012-01-09T21:29:00.001-08:00

The British Columbia Law Institute has published “Recommended Practices for Wills Practitioners Relating to Potential Undue Influence: A Guide.”

The impetus for this Guide is a change to the legislation in British Columbia that will come into effect when the new Wills, Estates and Succession Act is brought into force. Section 52 of the new Act will shift the burden of proof when a claim is made that a will has been procured by undue influence in some circumstances. Under the common law in British Columbia, the burden of proof was on the person alleging that the will was procured by undue influence. When the new legislation comes into effect, if the challenger can establish that the person whom is alleged to have procured the will or a provision in the will by undue influence was in “a position where the potential for dependence or domination of the will-maker was present,” then the onus will be on the person defending the will from the allegation of undue influence to establish “that the person in the position where the potential for dependence or domination of the will-maker was present did not exercise undue influence over the will-maker with respect to the will or the provision of it that is challenged.”

As set out in the Executive Summary, the aim of the Guide is to:

• raise awareness of undue influence as a potential cause of estate litigation and invalidity of a will;

• assist will drafters to recognize red flags of undue influence;

• enable will drafters to interact tactfully but effectively with will-makers to elicit information necessary for them to properly assess the will-makers’ individual situations and ability to act independently; and

• insulate wills they prepare against successful challenges based on undue influence.

The Guide is divided into five chapters. Chapter I sets out the background including a discussion of practitioners’ responsibilities of vigilance in respect of undue influence. Chapter II contains a summary of the law of undue influence, including leading authorities in British Columbia as well as other jurisdictions. Chapter III has a discussion of how undue influence operates in fact, and includes models developed by psychologists and other researchers to describe the dynamics of undue influence. Chapter III also sets out three undue influence scenarios as illustrations of the kinds of fact patterns practitioners may encounter. Chapter IV outlines various “red flags” to assist practitioners in identifying when further inquiry into the potential for undue influence may be warranted. Chapter V provides recommended practices in screening for undue influence.

Chapter IV of the Guide identifies an extensive list of “red flags,” which are subdivided into categories relating to:

“Someone in whom the will-maker invests significant trust and confidence is – or is connected to – a beneficiary”

“Physical, psychological and behavioural characteristics of the will-maker”

“Isolation resulting in dependence on another person to meet physical, emotional, financial, and other needs”

“Circumstances relating to the making of the will and the terms of the will”

“Characteristics of influencer in testator’s family or circle of acquaintances”

“One’s ‘gut feeling’ that undue influence is going on.”

The authors of the Guide indicate that a single “red flag,” may not be significant. The likelihood of undue influence increases with the number of risk factors.

Chapter V sets out the basic rule that the will-maker should be interviewed alone, without any interested parties present, and explanations that a practitioner may give to a person who accompanies the will-maker to the appointment on why the practitioner needs to meet alone with the will-maker. This is followed by a discussion of open-ended questions the practitioner may ask if “red flags” are present, as well as some specific questions probing the relationship between the will-maker and others who may be in a position where there is the potential for dependence or dominance, and probing whether the will-maker may be a victim in other contexts. The report contains a discussion of obtaining information from third parties, including the will-maker’s physician, and the types of notes and records the practitioner should make and keep irrespective of whether the practitioner drafts a will, or declines to do so.

The Guide concludes that if the index of suspicion of undue influence remains high after the practitioner has done a reasonable investigation, the practitioner should decline to draft the will.

The Guide was prepared by a multi-disciplinary project committee comprised of professionals from the fields of medicine and social work, as well as notaries public and lawyers. The project committee was chaired by D. Peter Ramsay Q.C. and the project manager was Greg Blue Q.C.

I had the privilege of being a member of the committee.

What Records Must an Attorney Keep When Acting Under An Enduring Power of Attorney in British Columbia?

2012-01-08T18:59:00.000-08:00

If you are acting as an attorney under an enduring power of attorney in British Columbia you are now required under the Power of Attorney Act, and the Power of Attorney Regulation to keep financial records in respect of the person who appointed you. I previously wrote about an attorney’s duties under changes to the legislation that came into effect on September 1, 2011, here.

The Regulation sets out the types of records you need to keep if you are acting under an enduring power of attorney:

Records of attorneys
2 (1) An attorney acting under an enduring power of attorney must make a reasonable effort to determine the adult's property and liabilities as of the date on which the attorney first exercises authority on the adult's behalf, and maintain a list of that property and those liabilities.

(2) An attorney acting under an enduring power of attorney must keep the following records in relation to the period for which the attorney is acting:
(a) a current list of the adult's property and liabilities, including an estimate of their value if it is reasonable to do so;
(b) accounts and other records respecting the exercise of the attorney's authority under the enduring power of attorney;
(c) all invoices, bank statements and other records necessary to create full accounts respecting the receipt or disbursement, on behalf of the adult, of capital or income.

I have three comments.

First, this section setting out the records you must keep if acting under a power of attorney only applies to enduring powers of attorney. An enduring power of attorney is a power of attorney that continues to have effect while, or comes into effect when, the person for whom you are acting is incapable. If you have a power of attorney that is not “enduring,” one that ceases to be effective if the person who appointed you becomes incapable, then you are not required to keep all of these records.

Second, the fact that someone, perhaps one of your parents, has made an enduring power of attorney appointing you as his attorney does not trigger the record-keeping requirements. It is only when you start to act under the enduring power of attorney that you need to keep all of these records. Enduring powers of attorney are planning tools, made in case the person granting the power of attorney later becomes incapable of making his or her own financial decisions. It is often never necessary to use them, or it may only become necessary many years after they are made. But once you begin to using the enduring power of attorney, for example, by doing banking transactions for your parent, you must keep all of the records required in Section 2 of the Regulation.

Third, the Regulation does not require that the person who appointed the attorney is incapable to trigger the record-keeping requirements. The records must be made and kept whenever the attorney uses the power of attorney. For example, suppose your mother grants you an enduring power of attorney, and then, while still perfectly capable, goes to Asia on a vacation when her house is being sold. She asked you to sign the real estate documents for her as her attorney under the enduring power of attorney. If you sign for her the record-keeping requirements are triggered, even though you are only doing a specific transaction, at her request, while she is fully capacitated. In those circumstances, it would make sense for your mother, before she goes to Asia, to sign a second power of attorney that is not an enduring power of attorney. The second power of attorney would grant you the power to sign the documents needed to sell and transfer title to her house. You would then not use the enduring power of attorney, thereby avoiding the need to keep the records of all of your mother’s assets in order to assist her in selling her house.

2011 CLawBies

2012-01-03T22:56:00.001-08:00

Steve Mathews of Stem Legal has announced the winners of the 2011 CLawBies, which is short for Canadian Law Blogs Awards. The winner of the best Canadian Law Blog was Erik Magraken's B.C. Injury Law Blog.

Although, alas, Rule of Law did not win an award, it was one of the runners up in the category of Best Practitioner Blog. The winners in that category were Employment & Human Rights Law in Canada, James Gannon's IP Blog; and Youth and Work.

Thank you to Kieran Moore publisher of Employment Law Canada blog, and Nate Russell at The Stream for nominating Rule of Law.

Check out the winners and runners up here. You will discover some great legal blogs.

United States District Court, Sacramento, California

2012-01-02T21:40:00.000-08:00

Temoin v. Martin

2011-12-20T21:25:00.001-08:00

If you believe that a member of your family, or a friend, is no longer capable of managing himself or his affairs, you may apply to the Supreme Court of British Columbia to be appointed as a committee, or in other words a guardian, of the incapacitated person. To succeed, the Patients Property Act provides that you must have affidavits from two medical practitioners providing their opinions that the person you are seeking to have declared incapable is in fact incapable.

But what if the person you believe is incapable refusing to be examined by a physician? Can you apply to court for an order that he be examined?

Madam Justice Fisher considered this question in a decision last week, Temoin v. Martin, 2011 BCSC 1727.

Lynn Temoin was seeking an order declaring that her father, Llewellyn Martin, was incapable of managing his own affairs. There was evidence that he had memory loss, and she was concerned that his wife, Ms. Temoin’s step mother, was taking advantage of his weakened mental functioning to persuade him to change his will and estate plan to benefit his wife and her children. A psychiatrist examined Mr. Martin, and opined that Mr. Martin had mild dementia and that he did not have capacity to make a will. But the psychiatrist did not conduct an examination of his ability to manage his own affairs.

Mr. Martin declined to undergo examinations to determine his capacity to make his own financial decisions, and Ms. Temoin applied for an order that he be examined by two physicians.

The Patients Property Act has a provision in section 5 allowing the court to order someone to attend before a physician for an examination, but the Court of Appeal, in McNeal v Few, (1975) 63 BCLR 281 (CA), held that the court could only make an order under what is now section 5 for an examination if there was already affidavit evidence of incapacity from two physicians.

Ms. Temoin argued that there is a legislative gap in the Patients Property Act, and the Supreme Court of British Columbia had inherent jurisdiction, known as the parens patriae jurisdiction, to order an examination to protect a vulnerable person.

Madam Justice Fisher agreed that the Court has the jurisdiction to make an order that a person in respect of whom an application is made attend an examination with a physician. But it is a power that the Court should employ sparingly. She wrote at paragraph 63:

[63] There is no question that compelling a person to submit to a medical examination is intrusive to personal autonomy and any order doing so would have to respect the values of the Canadian Charter of Rights and Freedoms. It is an order that should be made in rare circumstances, where there is “proof of incompetence” and where there is a compelling need for protection. The need for protection may be based on evidence that the person is personally or financially vulnerable due to things such as dangerous or erratic behaviour or abuse by others. The exercise of parens patriae jurisdiction requires that any order made is in the best interests of the person requiring protection.

On the facts before her, Madam Justice Fisher declined to make an order that Mr. Martin be examined by two physicians. She found there was insufficient evidence of his capacity and vulnerability. She wrote:

[64] Re Eve [[1986] 2 SCR 388,] is not instructive about what “proof of incompetence” means. In my view, there must be evidence which establishes that the person who is the subject of the application is prima facie incompetent. For the purpose of ordering a medical examination, this will be something less than the court being satisfied that the person is incapable of managing himself or his affairs. There must be some medical evidence. There may also be evidence from family, caregivers and close friends, which may provide important insight into the condition of the individual and any need for protection. I agree with the comments of Vickers J. in [British Columbia (Public Trustee of) v Batiuk, (1996), 14 ETR (2d) 5] Batiuk #1 (at para. 35) that “proper assessments are multi-disciplinary in nature and they will include the observations of persons close to the individual concerned.” This is consistent with the commentary in G. B. Robertson, Mental Disability and the Law in Canada, 2nd. Ed. at 27.

[65] In this case, I am not satisfied that the evidence is sufficient to establish that Mr. Martin is prima facie incompetent or that he is in need of protection. There is evidence that Mr. Martin has memory problems and some cognitive deficits. However, there is little evidence that he is incapable of managing his affairs, and there is conflicting evidence on his ability to make financial decisions. There is no evidence that Mrs. Martin has taken advantage of her husband in any way that requires this Court’s protection.

Court of Appeal Reaffirms When Limitation Period Begins to Run for Delayed-demand Notes

2011-12-16T23:41:00.000-08:00

The British Columbia Court of Appeal has reaffirmed the rule that the limitation period of six years in British Columbia does not begin to run until the creditor has made a demand for payment under a promissory note that was made payable after a specified period of time from demand (a delayed-demand note). The case is Ewachniuk Estate v. Ewachniuk, 2011 BCCA 510.

In that case, the defendant’s mother had lent him $750,000 in 1980. He signed a promissory note stating that the $750,000 was “payable one (1) year after demand, without interest.”

After the defendant’s mother’s death, the administrator of her estate demanded payment under the note on November 29, 2008. The defendant refused to pay, and the administrator sued on July 23, 2009.

The Supreme Court of British Columbia relying on previous cases, including Zeitler v. The Estate of Alfonse Zeitler, 2008 BCSC 775 (which I wrote about here), held that the limitation period did not begin to run until a year after the administrator demanded payment. The cause of action, or right to sue, only arises after the demand, and the time for payment has expired. The limitation period does not begin to run until the creditor has a cause of action.

A delayed-demand note may be contrasted with a demand note, which is a promissory note payable “on demand.” In the case of a demand note, the limitation period begins to run when it is signed, even if the creditor does not demand payment. (In the case of a demand note, the running of the limitation period may still be postponed if within six years of the date the note is made, the debtor makes payments or acknowledges the debt in writing.)

The defendant appealed the Supreme Court of British Columbia’s decision, challenging the authority of cases and texts going back 200 years relied upon by the trial judge. He also argued that a delayed-demand note function like demand notes and it is anomalous to treat them differently. In both cases, the defendant argued, there should be a “finite and predictable limitation period.” Furthermore, because the creditor does not have to make a demand, there is effectively no limitation period.

The Court of Appeal rejected the defendant’s arguments and held that the limitation period does not begin to run until after the creditor has demanded payment, and the period of time for payment under the note has expired.

With respect to the argument that there is effectively no limitation period if demand is not made, Chief Justice Finch noted that there are other equitable defenses if a creditor unreasonably delays in perusing a claim that may apply to a claim when the Limitation Act does not apply.

The distinction between a demand promissory note and a delayed-demand promissory note is an important one in practice. I often see these in loans within a family. Parents may make a loan to a child to assist her. The parents may not have any real need for repayment, but may wish the loan to be repaid in some circumstances, such as if there is a breakdown of the child’s marriage. If the loan is a demand loan, they may find out that the limitation period has expired when they demand repayment. A delayed-demand note affords greater protection to the parents, by delaying the time from which the limitation period begins to run.

Fat Cats & Lucky Dogs

2011-12-09T23:35:00.000-08:00

I have just finished reading Fat Cats & Lucky Dogs: How to leave (some of) your estate to your pet by Barry Seltzer and Gerry Beyer, and published by Prism Publishing Inc., 2010.

Fat Cats & Lucky Dogs offers practical advice on planning for your companion animals in case you die before them or you become incapacitated and are no longer able to care for your pets. The authors identify five situations in which your pets can run into problems. They are:

1. When you are incapacitated.
2. Immediately after you die and your pets are home alone.
3. Between the time you die and the time your will is read.
4. Between death and the admission of your will to probate.
5. The ongoing period after your death.

You can plan for each of these five situations, and the authors offer suggestions for each of them, ranging from informal arrangements such as asking a friend to take care of your pet and then leaving your pet to that person in your will, to formal trusts with funds provided on an ongoing basis to your caregiver, with an independent trustee and protector to monitor the administration of the trust.

This book is written for pet owners, and is easy to read. As the title implies, the book has a nice playful style, with pet trivia or “factoids,” and humourous quotations. One of my favourite quotations has to come from one of my favourite humour writers, Dave Barry:

You can say any fool thing to a dog, and the dog will give you this look that says, ‘My God, you’re RIGHT! I NEVER would’ve thought of that!’

Fat Cats & Lucky Dogs sets out the legal framework for estate planning for pets, in Canada and the United States, and to a lesser extent in Australia, New Zealand and the United Kingdom. As the authors note, the law does vary from place to place. I found it quite interesting to learn that many States in the United States have legislation recognizing and facilitating the creation of trusts for animals.

There is a variety of resources in the appendices, such as a summary of state laws, a list of prohibited versus acceptable animals as pets, and contact information for animal retirement homes, temporary pet care providers and sanctuaries.

Fat Cats & Lucky Dogs was helpful to me as an estate-planning lawyer in raising my awareness of some of the issues those of my clients with pets should consider in their estate and incapacity planning.

Barry Seltzer is a lawyer practicing in Richmond Hill, Ontario. Gerry Beyer is Governor Preston E. Smith Regents Professor of Law, at Texas Tech University School of Law. Professor Beyer is also the author of Wills, Trusts & Estates Prof Blog.

When to Go to Court, and When to Settle.

2011-12-04T21:26:00.001-08:00

Anytime you are involved in a will or estate dispute you have recourse to the courts. Sometimes it is difficult to resolve a problem without the involvement of a judge. Certain cases need to be decided by a judge. On the other hand, many disputes are best resolved by negotiations. Two Supreme Court of British Columbia decisions, both released the same day, November 25, 2011, illustrate this point well.

In Re: Brooks Estate, 2011 BCSC 1606, Mr. Justice N. Smith was asked to interpret a homemade will. The will said:

“I leave my property [address and legal description of the real property] to my brother George Brooks [address] Executor with Power of Attorney. Also my accounts at Royal Bank of Canada Merritt B.C.”

This was followed by the names of five of the will-maker’s nieces and nephews, and then the words “I would all the people named above to share equally in my estate.”

George Brooks argued that the will-maker intended for him to receive the house and the bank accounts, with the rest of the will-maker’s estate to be shared among the nieces and nephews.

Mr. Justice Smith noted the remainder of the assets in the estate was only worth about $500. It was unlikely that the will maker meant such a small amount when he wrote that they would “share equally in my estate.” The plain meaning of the word “estate” included all of the estate assets.

Accordingly, Mr. Justice Smith interpreted the will to mean that all of the will-maker’s assets would be divided equally among George Brook and the nieces and nephews.

He also ordered that the costs of all of the parties be paid out of the estate. He noted that it was appropriate for George Brooks as the executor to bring the question to court:

“[19] Given the positions of the parties, the petitioner as executor had a duty to seek guidance from the court and it was in the interest of all parties that he do so. I therefore order that the special costs of all parties be paid from the estate.”

Contrast Mr. Justice Smith’s remarks above, with the Court’s plea to the parties in Hansen v. Hansen, 2011 BCSC 1601, to settle their disputes out of court.

Hansen concerns a dispute among siblings over how one of them, the executor of their father’s will handled the administration of his estate. The executor’s siblings were critical of her handling of their father’s house. It is not clear from the reasons for judgment what precisely their claims were, but in an earlier hearing on a passing of the executor’s accounts, the Registrar found that she had delayed too long in marketing the house, and did not receive an appropriate amount of income from the property for the estate. The Registrar also disallowed some of her expenditures.

As noted above, the executor had passed her accounts before the court, a process that included a two-day hearing before the Registrar. It appears that the executor’s siblings were also suing her for negligent handling of the estate. The executor brought an application to dismiss their claims on the basis that the subject matter of their claims had already been dealt with at the passing of accounts.

Mr. Justice Leask heard the executor’s application. Although he expressed some sympathy for her position, he held that the passing of accounts decided the amount of the executor’s remuneration, but the court had not rendered a decision on the other claims. The executor’s siblings were entitled to proceed with those claims.

In his decision, Mr. Justice Leask quoted Master Tokarek at an earlier hearing:

[17] In the course of the hearing, Master Tokarek said:
... I don't know why you people can't agree on things instead of spending money on the court system.
(Transcript p. 8, lines 35-37)
[18] Later he said:
And I don't understand why people just don't do a reasonable thing. Like any other settlement, sometimes you have to give a little that you don't want to give. And sometimes you have to eat crow a little bit and just back off and do it. Because there's a practical result and there's a principled result. And the principled result, which I – is fine, but it costs money to get to a principled result. The practical result is usually the most efficacious way, least expensive way, to do what needs to be done.
(Transcript p. 13, lines 25-35)

After dismissing the executor’s application, Mr. Justice Leask concluded:

[23] I cannot leave this matter without joining my voice to Master Tokarek's plea. This matter should be settled between the parties. The family is tearing itself apart and wasting money and emotional energy on disputes with little or no economic justification. Please stop.

[24] This is a sad case.

[25] Who would be an executor? The dead cannot thank you; and the living will not.

New Family Law Act and Standby Guardians

2011-11-27T17:42:00.001-08:00

The new Family Law Act, Bill 16, has now been passed by the British Columbia Legislature, and has received Royal Assent, but as of the date of this post is not yet in effect.

If you are the guardian of a minor child, there is a provision that will, when it comes into force, allow you to appoint a standby guardian of the child in case because of illness or mental incapacity you become incapable of acting as the child’s guardian.

Section 55 provides as follows:

55 (1) A guardian facing terminal illness or permanent mental incapacity may appoint a person to become, when the conditions set out in the appointment are met, a child's guardian, in addition to the appointing guardian.

(2) An appointment under subsection (1)
(a) must be made in the prescribed form,
(i) signed at its end by the guardian, or the signature at the end must be acknowledged by the guardian as his or hers, in the presence of 2 or more witnesses present at the same time, and
(ii) signed by 2 or more of the witnesses in the presence of the guardian,
(b) must state the conditions that must be met for the appointment to take effect, and
(c) may provide that a designated person certify that a condition referred to in paragraph (b) has been met and that, if such a certification is made, it is conclusive.
(3) For the purposes of subsection (2) (a),
(a) a witness may not be a person appointed to be the child's guardian, and
(b) a reference to the signature of a guardian includes a signature made by another person in the guardian's presence and by the guardian's direction, and the signature may be either the guardian's name or the name of the person signing.
(4) In carrying out his or her parental responsibilities, a guardian appointed under this section must consult with the appointing guardian to the fullest possible extent regarding the care and upbringing of the child.

(5) Unless the appointing guardian, while capable, has revoked the appointment or the appointment provides otherwise, a guardian appointed under this section continues as the child's guardian on the death of the appointing guardian despite any other instrument made by the appointing guardian.

I am concerned about how the first part of this section is worded. Do the words “A guardian facing terminal illness or permanent mental incapacity,” mean you can only make the appointment if you have been diagnosed with an illness or for some other reason anticipate that you will become terminally ill or suffer permanent mental incapacity? I doubt that this is what the Legislature intended. You should be able to appoint a standby guardian incase you become incapacitated without there being an immediate prospect of such incapacity. You may be perfectly healthy, but want to name a standby guardian for your child incase you are incapacitated in a car accident.

This section should be amended by deleting the words “facing terminal illness or permanent mental incapacity.” They either limit the application of the section in an irrational way, or, as is more likely, they don’t add anything to the meaning of the section.

Inheritances and the New Family Law Act

2011-11-19T10:55:00.000-08:00

On November 14, 2011, the Government of British Columbia introduced Bill 16, the Family Law Act, into the Legislative Assembly. The new Act, if passed, and brought into force, will make significant changes to family law in British Columbia. J.P. Boyd has written a nice summary of the Family Law Act for the Stream, Courthouse Libraries B.C. Blog, which you may read here.

I am going to focus a few posts on those aspects of the Family Law Act that will affect my practice areas of estate planning and administration and incapacity planning.

My clients sometimes express concerns about what will happen to property they give or leave to their children or other beneficiaries on the breakdown of a beneficiary’s marriage.

The basic structure of the Family Law Act is that when a married couple or common-law couple (which is defined in the legislation) separate, each has an undivided half interest in the “family property.” Section 84 sets out a broad and inclusive definition of family property, while section 85 excludes some categories of property. Significantly, section 85 (1) (b) excludes “gifts or inheritances to a spouse.”

Problem solved, right? It’s more complicated than that.

Section 84 (2) (g) includes in family property:

the amount by which the value of excluded property has increased since the later of the date
(i) the relationship between the spouses began, or
(ii) the excluded property was acquired.

To illustrate how I expect this will operate, suppose you give your married daughter $200,000 (or she inherits that amount on your death while she is married). She invests the funds in mutual funds. She and her husband separate. On the date of separation, the value of the mutual funds has grown to $400,000. The $200,000 she received from you is excluded, but the $200,000 of growth is divided equally between your daughter and her former husband. She is entitled to $300,000, and he, $100,000.

In this illustration, I have assumed an outright gift. I will talk about trusts in a later post.

I should note that although the basic rule in the Family Law Act will be that family property is divided equally, the court may order an unequal division if it is “significantly unfair” to order equal division. The parties may also make an agreement providing for an unequal division on the breakdown of their marriage or common law relationship.

Although excluded property is normally excluded, the court may order a division of excluded property in some circumstances. Section 96 provides:

The Supreme Court must not order a division of excluded property unless
(a) family property or family debt located outside British Columbia cannot practically be divided, or
(b) it would be significantly unfair not to divide excluded property on consideration of
(i) the duration of the relationship between the spouses, and
(ii) a spouse's direct contribution to the preservation, maintenance, improvement, operation or management of excluded property

Overall, I think the treatment of gifts and inheritances in the Family Law Act will be better than under the current legislation, which includes gifts and inheritances that are used for a “family purpose” as “family assets,” to be divided between the spouses, but then gives the court discretion to order an unequal division having regard to the fact that the property was acquired through inheritance or gift. The new Family Law Act may bring greater certainty to how gifts and inheritances are treated, but until it is passed, brought into effect, and the courts have interpreted it, we really won’t know.

Cost Award in Mawdsley v. Meshen

2011-11-13T14:39:00.000-08:00

Last July, Madam Justice Ballance provided her decision on the issue of court costs in Mawdsley v. Meshen, 2011 BCSC 923. I previously wrote about the substantive issues in the case here. Mr. Meshen was successful in his application to vary his late common law wife, Joan Meshen’s will. But before her death, Ms. Meshen had transferred much of her wealth to a trust for herself, and then on her death for her children and her first husband’s brother. Mr. Mawdsley was not successful in challenging the trust. One of the grounds on which Mr. Mawdsley unsuccessfully attempted to challenge the trust, as well as other transactions, was that Ms. Meshen’s transfers of assets our of her name were fraudulent conveyances to defeat his claims as a “creditor or other.” The court found that he was not a creditor or other within the meaning of the Fraudulent Conveyance Act, and the transfers were not fraudulent conveyances. Accordingly, although he was successful in his Wills Variation Act claim, he received far less than what he was claiming.

Following her decision on the merits of the case, Madam Justice Ballance considered the issues of costs. In British Columbia, the usual rule is that the unsuccessful party has to pay court costs to the successful party or parties. These costs usually represent only a portion of the actual legal expenses the parties incur, but they can be substantial. In some cases the courts order “special costs” which provide a higher level of costs, sometimes even the full amount of the legal fees a party has incurred.

Mr. Mawdsley argued that as the successful party, he should recover costs from the defendants, which include Ms. Meshen’s children and the brother of her first husband. They, on the other hand, argued that he should be awarded some costs, reflecting his success on the Wills Variation Act issue, but they should also be awarded costs against him to reflect that he was not successful in challenging the trust and some of the property transfers Ms. Meshen made before she died. Their position was that costs should be apportioned.

The defendant beneficiaries also argued that Mr. Mawdsley should be required to pay “special costs” on the basis that he was not successful in his allegation that she fraudulently conveyed assets to the trust. He had also sought to set aside the trust on the basis that she had been unduly influenced and did not have capacity. He was not able to prove either allegation.

The executor of Ms. Meshen’s will and trustee of the trust she settled asked the court to order that he be fully indemnified for his legal expenses out of the estate and out of the trust.

Madam Justice Ballance set out in some depth the principles involved in cost awards. To summarize and paraphrase from her reasons:

The usual rule is that the successful party is entitled to costs from the unsuccessful party.
In some types of estate litigation, the courts may award costs to all parties out of the estate on the theory that the litigation was brought about by the conduct of the deceased.
More recent decisions have applied the rule that the unsuccessful party is required to pay costs to the successful party in disputes concerning the validity of wills.
In Wills Variation Act cases, the courts have followed the approach that the unsuccessful party pays the costs, but not in all cases.
Executors and trustees when acting within their fiduciary capacities are entitled to be indemnified for costs they reasonably incur. They may be indemnified in disputes over the validity of wills, even where the wills are found to be invalid.
Costs may be apportioned, but this is an exception to the usual rule that the successful party is entitled to costs. A party seeking apportionment must show that there are separate and discrete issues. There must also be a basis on which the judge can assess the time at trial attributable to the separate issues, and the result of the apportionment must be just.
The amount awarded to the successful party is not the proper method of assessing that party’s success for apportionment.
Special costs may be awarded against a party to discourage reprehensible conduct, including making unproven allegations of fraud or undue influence, both of which are serious allegations that can harm the reputation of a party. But the award of special costs is discretionary and the court will consider the particular circumstances.

Madam Justice Ballance found that it was appropriate in this case to apportion costs by awarding the Mr. Mawdsley his costs for only seven of the nine days of trial. She found that much of the evidence that related to those claims in which Mr. Mawdsley was not successful, was also relevant to his Wills Variation Act claim. But there were some discrete issues as well. She held that he should not receive his costs for the time spent at trial for testimony on the question of whether Ms. Meshen intended to put assets out of Mr. Mawdsley’s reach when she made the transfers or for the time spent on the question of whether Mr. Mawdsley had standing as a “creditor or other” to seek to have the transfers set aside under the Fraudulent Conveyance Act.

Madam Justice Ballance declined to award special costs against Mr. Mawdsley. She found that in making the fraudulent conveyance argument, he was not motivated by malice, nor was “it devoid of any evidentiary foundation, speculative [or] frivolous.” The allegation that a transfer was “fraudulent” for the purpose of the Fraudulent Conveyance Act does not necessarily imply immoral conduct. The Act does require proof of dishonesty or other moral blameworthy conduct for the court to set aside a transfer as a fraudulent conveyance.

With respect to the allegation of undue influence, Madam Justice Ballance found that it was not central to the case, but a secondary consideration.

Madam Justice Ballance held that the executor of the will, and trustee of the trust, is entitled to be indemnified for his legal expenses relating to those functions, to be paid in part out of the estate, and in part out of the trust.

Release of an Original Will to an Applicant for Letters of Administration

2011-10-30T22:34:00.001-07:00

Ameena Sulton at Walley Estate Litigation Blog has written about a case in Ontario, Hope v. Martin, 2011 ONSC 5447, in which the Superior Court of Justice considered when a lawyer holding an original will may release the will to a person who was not named in the will as an executor (referred to as an estate trustee in Ontario), but who wishes to apply to court to be appointed as an estate trustee. You can read her post here.

In that case, the will-maker had named an estate trustee and an alternate, but both renounced. A family member wished to apply to be appointed as trustee by the court to administer the estate, but required the original will to file in court with the application. The lawyer who held the original will would not release the original will to the applicant. He was concerned that the applicant, not being named as the estate trustee in the will, and not yet having been appointed by the court, did not have authority to direct the lawyer to release the will. He was also concerned that releasing the will to someone other than the named would be a breach of his duties of confidentiality and solicitor-and-client privilege to the now deceased will-maker who had been the lawyer's client.

The applicant applied to court for an order that the lawyer release the original will, and Justice Brown granted the order. Justice Brown said that in the circumstances--there not being any dispute about the will, and the beneficiaries all consenting to the release of the will--a court order should not be necessary for the lawyer to release the original will. Justice Brown said,

[23] As identified by Mr. Rabinowitz in his paper, the real issue facing solicitors who are asked to produce the original of a will is whether the person making the request possesses the authority to do so. The appropriate response will depend upon the particular circumstances of the case and the application of practical judgment and common sense. Where a named executor makes the demand, production should be made. Where a solicitor is faced with conflicting demands, he can legitimately require the conflicting parties to obtain a court order. However, where, as here, the solicitor knew that both executors had renounced and there was no evidence of conflicting demands to assume the administration of the estate, the solicitor should have exercised some practical judgment to ensure that the testatrix’s intentions were performed without imposing unnecessary costs on the estate.

I like the practical approach suggested by the Ontario Court, but I suggest that a lawyer holding an original will must exercise caution before releasing it to someone who is not named as an executor. A lawyer who agrees to hold an original will takes a significant responsibility for safekeeping the document. At minimum a lawyer, or anyone else holding an original will, should be satisfied that the person requesting the will has a genuine intention to apply to court to be appointed as an administrator or trustee of an estate. This can generally be satisfied when the request is being made by another lawyer, and conditions can be placed on that lawyer to hold the will until it is filed in court.

In British Columbia, if a lawyer or anyone else holds an original will, and refuses to release it, you can apply for a citation to be issued requiring the person holding the original will to deposit it with the Registrar of the Supreme Court of British Columbia. I wrote about citations to bring in a will here.

Jackpot

2011-10-28T21:50:00.006-07:00

A group of friends in the Elks lounge in the town of Okotoks, Alberta, bought lottery tickets together, 6/49 and Super 7. They did so for years. They didn’t buy every time. They waited until the first prize reached $10 million. A few of them bought tickets fairly consistently. Among this group, it was common for one or another to buy tickets for those who weren’t at the lounge when the lottery ticket money was being collected. If someone bought a ticket for another, he or she would be repaid. Although there was a group who bought tickets fairly consistently, others could join in. One of them collected the money to buy the tickets in an envelope, marking down the names of those who bought tickets (including those for whom tickets were bought) on the envelope.

The patrons of the Elks lounge bought tickets together since the 1990s. For years, they did so, apparently, without dispute. Then again, like most lottery participants, for years they had never won much.

On November 23, 2007, there were two jackpots of more than $10 million coming up, one a Super 7, and the other a 6/49. Two of the frequent participants, Mr. and Mrs. Clancy were not at the Elks lounge. Mr. Christensen bought tickets for Mr. and Mrs. Clancy. He had bought for other friends as well, and didn’t have enough cash to buy tickets for both lotteries for Mr. and Mrs. Clancy. He chose to buy tickets for the 6/49 for Mr. and Mrs. Clancy, and he later collected the money for them.

The Super 7 ticket one the jackpot: 20 million dollars.

Mr. Johnson, who contributed funds to purchase the winning ticket, agreed to pay Mr. and Mrs. Clancy a part of his winnings from the Super 7 jackpot. The others did not.

Mr. and Mrs. Clancy sued. They alleged that there was an agreement among the regular participants to ensure that each of them was always in the draw. The also asked the Alberta Court of Queens Bench to find that those who participated in the Super 7 draw held a portion of the jackpot in trust for Mr. and Mrs. Clancy.

Madam Justice Bensler in Clancy v. Gough, 2011 ABQB 439, found that Mr. and Mrs. Clancy sincerely believed that their friends would ensure that they would be in the draw every time the group participated. But she also found that there was no binding legal obligation to do so among the group of regular participants. The participants did not either say that they agreed to be legally bound to make sure everyone participated, nor did their conduct show that they intended to be legally bound. They did not in fact make sure that each of them was in each draw in which the group participated.

Nor did the participants hold a portion of a jackpot in trust for Mr. and Mrs. Clancy. A trust requires three certainties: the certainty of the subject matter or property held in the trust; certainty of the objects or beneficiaries of the trust; and certainty of the intention to create a trust. Mr. and Mrs. Clancy argued that the subject matter was the lottery tickets, and the object was the sharing of the benefit of the benefits from the lottery tickets among the group.

Madam Justice Bensler found that there was no certainty of intention to create a trust. There was no agreement to create a trust.

Nor could the Court find that there was a trust based on the funds contributed by Mr. Christensen on behalf of Mr. and Mrs. Clancy, funds which they repaid. The funds provided by Mr. Christensen for the purchase of lottery tickets were used to buy lottery tickets in the 6/49 rather than the Super 7 lottery.

Accordingly, Mr. and Mrs. Clancy were not entitled to a share of the jackpot from the Super 7 lottery.

Should I Have a Trust?

2011-10-23T18:45:00.001-07:00

You can separate the legal title and management of assets from the benefits derived from the assets through a trust. You can create a trust in your will, called a testamentary trust, or you can transfer assets during your lifetime to a trustee to manage them both during your lifetime and after your death.

There are many good reasons why you might want to create a trust to hold assets either during your lifetime or after your death. For example, if you have young children, you might want to create a trust in your will so that if you die while they are young, someone else will manage the money they will inherit for them until they reach a certain age. Or perhaps you wish to benefit someone with a disability who cannot manage his or her own money. There are many, many situations in which trusts are excellent estate planning tools to accomplish various goals.

While I have seen trusts work very well in accomplishing specific goals, I am leery of generalizations about trusts (or just about anything else when it comes to estate planning). From time-to-time, I see trusts that appear to have been set up for their own sake, without any real purpose.

There can be disadvantages as well as advantages to creating a trust. A trust requires on going administration by the trustee. The trustee may charge for his or her time and effort. Sometimes a family member will act as trustee without charging any fees, but there is still a cost to that person in time and effort. Nor are family members always the best choice. A professional trustee, such as a trust company, may be a good choice, but may be more expensive. There can be tax advantages in using trusts, but there can also be tax disadvantages. Beneficiaries may be unhappy that funds intended for them are controlled by someone else.

Sometimes people tell me that they have heard that trusts are a good idea, and wonder if they should have a trust. I am always happy to talk about trusts, but I think this approach is backwards. Rather than take a concept such as a trust, and see if it fits into your circumstances, start by explaining your circumstances to an estate-planning lawyer, and then ask him or her for advice on estate-planning tools that meet your objectives. The advice you get may include creating a trust. The lawyer should advise you on both the advantages and disadvantages of a trust, and any alternatives, so that you can make a well-informed decision. But don’t create a trust for its own sake.

It is also important to keep in mind that there are many different trusts, which can go on for just a few years, or for over a lifetime, which can be relatively easy for a trustee to administer, or very complex, which can be set up to benefit one person, or many, and which can be relatively inexpensive for a lawyer to draft, or can be quite expensive. The level of complexity should be balanced with your specific circumstances and goals.

Estate planning is often not simple. In some cases very sophisticated estate planning, perhaps including multiple trusts, is appropriate. But my philosophy is don’t make it unnecessarily complicated either. Choose the estate-planning tools that are sensible for you.

Peri v. McCutcheon

2011-10-14T21:11:00.001-07:00

This morning, the British Columbia Court of Appeal released its decision in Peri v. McCutcheon, a case in which it was asked to give an expanded interpretation of the meaning of “children” in the Wills Variation Act. The Court was asked to interpret the word "children" to allow child who was neither the biological or adopted child of a person to apply to vary his will. In British Columbia, the Wills Variation Act allows a child, including an independent adult child, to apply to court to vary his or her parent’s will if the parent has not made “adequate provision” for the child in the will. If the court finds that adequate provision has not been made, the court may order such provision for the child as the court decides is “adequate, just and equitable in the circumstances."

In the past the courts have interpreted “children” under the Wills Variation Act to be limited to either the parent’s biological children, or children that the parent has legally adopted. This means that a step-child cannot make a claim under the Wills Variation Act to vary the step-parent’s will (unless the step-parent adopted the step-child). In 1994, in a decision called Hope v. Raeder Estate, the Court of Appeal held only a biological or adopted child could apply under the Wills Variation Act. In Hope the Court held that it was not open to the Court to give the word “children” an extended meaning. The Court said that only the Legislature could extend the meaning under the Wills Variation Act to include step-children.

In Peri, the British Columbia Court of Appeal sat as a five court paned. Usually, three judges of the Court of Appeal hear an appeal from a decision of the Supreme Court of British Columbia. But a party to an appeal may request that five judges sit in order to reconsider a decision in an earlier case.

Deborah Peri was seeking to vary the will of Harbanse Doman, who made no provision in his will for her. Mr. Doman was married to Ms. Peri’s mother when Ms. Peri was born, but he was not her biological father. Ms. Peri was born in Seattle, and Mr. Doman identified himself as her father on her registration of birth, and on immigration papers allowing her to immigrate to Canada. He arranged for her to live with another family, and paid support for her. He also paid for a private school for her, paid expenses while she was in college, and paid wedding expenses for her. He met with her occasionally. However, he kept a physical and emotional distance from her, and made it clear to her that he was not her father, did not intend to be her father, and did not consider her as part of his family.

The Court of Appeal declined to give “children” an extended meaning in this case to include Ms. Peri.

But what is most intriguing about this decision is that the Court of Appeal did not rule out the possibility that the court might give the word “children” an extended meaning to include a step-child under the Wills Variation Act in a future case. The Court of Appeal did not consider the facts of this case compelling, finding that Mr. Doman’s did not stand in the position of a parent to Ms. Pari.

Madam Justice Prowse wrote:

[ 36] In the absence of a more compelling case than has been presented, I do not find it necessary to grapple with the question of whether it should be left to the Legislature to expand the scope of who may claim as a “child” or “children” of a testator under the Act, or whether social, scientific and other circumstances have changed so significantly that it is appropriate for the Court to re-interpret those words. Thus, I find no basis for interfering with the decision of the chambers judge that Ms. Peri is not a child of the Testator within the meaning of s. 2 of the Act.

The Court of Appeal left the door open—just a crack—to a step-child with more compelling circumstances showing that he or she had a parent-child-like relationship with a step-parent to persuade the Court of Appeal to give the word “children” an extended meaning under the Wills Variation Act.

Sledin Estate v. Rusin

2011-10-10T19:46:00.001-07:00

In a decision last month, Mr. John Rusin was ordered to pay the estate of Johanna Sledin over $800,000 in damages as compensation for funds she invested in companies, the shares of which he owned, and for the transfer of her house to him. In this case, Sledin Estate v. Rusin, 2011 BCSC 1207, Mr. Justice Gaul held that the nature of Mr. Rusin’ relationship was such that he owed fiduciary duties, in other words a duty of loyalty, to Mrs. Sledin, and that by his conduct he was in breach of his fiduciary duties.

Mr. Rusin met Mrs. Sledin and her husband in 1971. He was 32 and she 69. After her husband died in 1975, she became reliant on a small circle of friends, including Mr. Rusin, to assist her. She did not have a drivers licence.

Mrs. Sledin invested in various companies that were controlled by Mr. Rusin. The Court found that she received interest payments, but that she reinvested them with Mr. Rusin, who often did not keep records of the funds she provided.

In 1994, she sold her house to Mr. Rusin for $270,000 receiving a debenture from one of Mr. Rusin’s companies in the amount of $260,000 in return. She did not receive any legal advice on the sale of her home. Mr. Rusin sold the house a couple of months later at a profit for $311,000. The company was later struck from the Registrar of Company because Mr. Rusin’s did not keep the required filings up to date. As a result, Mrs. Sledin received only a small amount of interest, and none of the principal of the $260,000 debenture.

Mr. Rusin’s companies were engaged in real estate speculation and were not successful, several having been struck for failing to file annual reports.

Ms. Sledin suffered a stroke in 1996, following which her nephew Gordon Drewitz was appointed by the Supreme Court of British Columbia as her committee (or guardian). He demanded an accounting from Mr. Rusin of Ms. Sledin’s investments, but Mr. Rusin would not provide any.

On her death on September 11, 2000, Ms. Sledin had cash of $31,000, a Guaranteed Investment Certificate of $12,400 and a Term Investment of $10,000. She had invested large amounts of money with Mr. Rusin. After Ms. Sledin’s death, Mr. Drewitz as her executor sued Mr. Rusin.

Mr. Rusin sought to portray Ms. Sledin as a savvy investor, who knew what she was doing when she invested in his companies. To succeed, Mr. Drewitz needed to do more than show that his aunt made unsuccessful investments in Mr. Rusin’s companies. You can’t successfully sue the principal of a company in which you have invested just because you lost your investment. Mr. Drewitz needed to show that Mr. Rusin had a legal duty to Ms. Sledin, and that he breached that duty. He argued that in the circumstances Mr. Rusin had fiduciary duties Ms. Sledin to protect her interests, and that Mr. Rusin did not do so.

In determining whether Mr. Rusin had fiduciary duties to Ms. Sledin, Mr. Justice Gaul considered the legal principles as follows:

[64] Certain relationships on account of their very nature result in fiduciary obligations for one of the parties. For example, a lawyer has a fiduciary obligation to his or her client and a trustee has a similar duty to his or her beneficiary. These types of relationships are generally referred to as per se fiduciary relationships.

[65] An ad hoc fiduciary relationship is one that does not fall within the traditional categories of fiduciary relationships. Instead, it is one that arises out of the specific circumstances and dynamics of the particular relationship.

[66] In dissenting reasons in Frame v. Smith, [1987] 2 S.C.R. 99 at para. 60, Wilson J. described what she considered to be the general characteristics of a fiduciary obligation as follows:
1. The fiduciary has scope for the exercise of some discretion or power.
2. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.
3. The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
[67] These observations of Madam Justice Wilson were later endorsed in Lac Minerals v. International Corona Resources Ltd., [1989] 2 S.C.R. 574.

[68] The Supreme Court of Canada revisited the issue of fiduciary obligations and the constituent elements of such relationships in Hodgkinson v. Simms, [1994] 3 S.C.R. 377, and Galambos v. Perez, 2009 SCC 48.

[69] While the characteristics of a fiduciary relationship articulated in Frame continue to be relevant in determining whether such a relationship exists, the more recent case authorities have recast those characteristics and added to them.

[70] It is now clear that for an ad hoc fiduciary relationship to exist, the court must be satisfied that one party undertook, either expressly or by implication, to act for the benefit and best interest of another party: Galambos, at para. 66.

[71] Moreover, a relationship whose distinguishing feature is only the vulnerability or power imbalance of one party vis à vis another will not, without any additional features, meet the threshold of a fiduciary relationship: Galambos, at paras. 67 and 74.

Applying these criteria, Mr. Justice Gaul held that Mr. Rusin had fiduciary duties to Ms. Sledin. He undertook to look after her financial well being. He made decisions for her as to which companies to direct her investments, and what type of security if any to giver her. She trusted him to act in her best interest. She was vulnerable, being dependant on his for a significant portion of her income.

Mr. Justice Gaul found that Mr. Rusin had breached his fiduciary duties to Ms. Sledin. He failed to properly record her investments. He provided inadequate or worthless security to her for the investments. He allowed some of the companies to be struck from the Corporate Registry without telling her. He failed to repay principal amounts she invested with him.

Mr. Justice Gaul agree with Mr. Drewitz’s lawyer’s description of Mr. Rusin’s dealings with Ms. Sledin as a “variation of an unsophisticated, limited investor ‘Ponzi scheme’, an investment operation that pays returns to investors out of the money paid by subsequent investors rather than from profit. Mrs. Sledin was both the initial and the subsequent investor”.

Report on Proposals for Unfair Contracts Relief published by the British Columbia Law Institute

2011-09-28T21:32:00.000-07:00

The British Columbia Law Institute has published its "Report on Proposals for Unfair Contracts Relief," which you may read here.

As set out in today's press release:

The report recommends that British Columbia enact a Contract Fairness Act to consolidate and modernize the leading concepts that contract law deploys against contractual unfairness.

“The current law on contractual unfairness is largely found in court cases and this body of precedent contains needless complexities, gaps, and uncertainties,” noted committee chair Prof. Joost Blom,QC. “The time is ripe to address these issues and make the law more certain and accessible by enacting legislation.”

The proposed Contract Fairness Act will clarify vexing ambiguities in the application of unconscionability, duress, and undue influence, create a framework for integrating those concepts, provide for a duty of good faith in the performance of contracts and supply a definition of “good faith,” and address concerns about remedies for misrepresentation.

Continuing Legal Education: Estate Litigation Updade, 2011

2011-09-25T14:45:00.000-07:00

I have the honour of being on the faculty for the upcoming "Estate Litigation Update, 2011" course presented by the Continuing Legal Education Society of British Columbia.

This course will be held on Thursday, November 3, 2011, at 9:00 am – 4:30 pm. The location is the Pan Pacific Hotel, 999 Canada Place, Vancouver, B.C.

I will be speaking about "Delusions and Impact on Capacity."

Registration information is available here.

Here is the course agenda:

Welcome and Introduction

Helen H. Low — Fasken Martineau DuMoulin LLP, Vancouver

Wills, Estates and Succession Act Impact on Litigation

Helen H. Low — Fasken Martineau DuMoulin LLP, Vancouver

Wills Variation Act Update

•recent cases
•inter vivos trust as a WVA avoidance tool
Andrew S. MacKay — Alexander Holburn Beaudin & Lang LLP, Vancouver

Estate Litigation Potpourri: Recent Law

•costs
•common law spouses—who qualifies
•solicitor’s file production
•Pecore issues
Anna Laing — Fasken Martineau DuMoulin LLP, Vancouver

Networking Break

Pleading Estate Claims Under the New Rules

•proof of will in solemn form
•undue influence/coercion
•wills variation claims
•resulting trust and breach of trust claims
•unjust enrichment and quantum meruit
Patrice B. Newman — Horne Coupar, Victoria

Ethical Issues in Estate Litigation: Panel Discussion

This is a groundbreaking interactive session to discuss various ethical issues related to estate matters. You will be able to provide real-time input and interact with a panel as to how you believe particular ethical issues should be addressed. We encourage you to raise scenarios which you would like discussed, and the panel will address those scenarios during the presentation.

Roger D. Lee — Davis LLP, Vancouver
E. Jane Milton, QC — Bull, Housser & Tupper LLP, Vancouver

Networking Lunch

Finding an Amicable Resolution: Judicial Settlement Conferences and Non-Judicial Mediation

•considerations in selecting the appropriate process
•the difference from commercial dispute mediation
•combining mediation and arbitration
•allowing the parties to have their say
•preparing the case for judicial settlement
The Honourable Madam Justice Mary A. Humphries — Supreme Court of British Columbia, Vancouver
Martin R. Taylor, QC — Hunter Litigation Chambers, Vancouver

Contentious Account Passing

•proper account preparation
•preparing for the hearing
•pre-hearing conferences
•minors as beneficiaries
Amy D. Francis — Legacy Tax + Trust Lawyers, Vancouver
Registrar Kathryn S. Sainty — Supreme Court of British Columbia, Vancouver

Settlement of Estate Litigation

•releases, indemnities, and consents
•disclaimers and assignments
•court approval/confirmation of settlement
•costs considerations
M. Scott Kerwin — Borden Ladner Gervais LLP, Vancouver

Networking Break

Delusions and Impact on Capacity

•what constitutes a delusion that affects capacity
•effect of a mistake of fact
•recent developments in the law
Stanley T. Rule — Sabey Rule LLP, Kelowna

Contested Committeeship Applications

•recent case law update
•effect of a nomination of committee
•costs in contested proceedings
•division of responsibility between committee of estate and person
Deidre J. Herbert — McLellan Herbert, Vancouver

Tax Essentials For Estate Litigators

•rules related to deemed disposition and spousal rollovers
•avoiding double tax for corporate interests
•ways to minimize tax in settlement arrangements
James P. Shumka — Legacy Tax + Trust Lawyers, Vancouver

Easingwood v. Cockroft (Part 2)

2011-09-22T20:11:00.003-07:00

In Part 1 of my posts on Easingwood v. Cockroft, 2011 BCSC 1154, I wrote that Madam Justice Dillon held that Reginald Henry Easingwood’s children validly settled a trust into which they transferred most of his wealth using their enduring power of attorney, while he was incapable of managing his affairs. After his death, Henry Easingwood’s widow, Kathleen Easingwood, challenged the trust and the transfer, but the Court held that they had the authority under the enduring power of attorney to settle the trust, and they had not misused it in doing so. You may read a summary of the facts in Part 1.

In this Part, I will discuss the second ground on which Mrs. Easingwood challenged the trust. She argued that the transfer was a fraudulent conveyance.

Under British Columbia’s Fraudulent Conveyance Act, if someone transfers assets “to delay, hinder or defraud creditors and others of their just and lawful remedies,” the creditor is entitled to have the transfer set aside. In a simple example, someone is sued, and they transfer their house to a family member or friend so that if they lose the lawsuit, their creditor cannot have the house sold to satisfy the court judgment. That is an example of a fraudulent conveyance, and that transfer is liable to be set aside by the court if the creditor asks the court to do so.

Mrs. Easingwood was making a claim under the Wills Variation Act to vary her late husband’s will. But the Wills Variation Act only gives the court the power to vary a will, and would not give the court any power to vary the provisions of the trust settled for Mr. Easingwood by his children during his lifetime. For this reason, it would be to her advantage if the trust and transfer of assets to it were set aside.

In previous court cases, claims to set aside a transfer as a fraudulent conveyance by someone who is making a claim under the Wills Variation Act have not been successful. A couple of these cases have been claims by children, who have asked the court to set aside transfers made by a parent as part of an estate plan that disinherited the child. The Supreme Court of British Columbia has said that if a child did not have any legal claim against the parent before the parent died, the child was not a “creditor or other,” and could not have the transfer set aside. (I wrote about a previous case, Mordo v. Nitting, 2006 BCSC 1761, in which a child unsuccessfully tried to have a transfer by his parent to a trust to avoid his future Wills Variation Act claim here.)

But, Mrs. Easingwood argued that when her husband’s children settled the trust, she did have a potential legal claim under the Family Relations Act. If there had been a breakdown of their marriage, Mrs. Easingwood could have claimed an interest in her husband’s assets under that Act. Accordingly, her argument went, she was a “creditor or other,” and the transfer should be set aside on the basis that it was intended to put the assets out of her reach.

Madam Justice Dillon rejected Mrs. Easingwood argument that she was “a creditor or other.” She wrote:

[51] In my view, in order to qualify as a potential claimant so to be a creditor or other within the meaning of the FCA [Fraudulent Conveyance Act], a spouse must either have begun an action under the FRA [Family Relations Act] or there must be an evidential basis to reasonably conclude that the claimant has a potential right or claim to have asserted entitlement to family assets on marriage breakup under s. 56 of the FRA. The plaintiff does not qualify under any of these criteria. Kay and Reg were happily married at all material times and there was no likelihood that the marriage was about to break up in November 2008. There were no irreconcilable differences between them, no periods of separation, or indicators of strife except for the stress of Reg’s illness. Kay always knew the terms of Reg’s will and the Trust does not depart from those terms. Kay had never said that the provision for her under the will was inadequate or indicated that she would contest it. She was never involved in decisions about Reg’s business or investments as she had recognized Reg’s desire for Hank and Lauren to manage his affairs in June 2007. She could have had access to the information in Reg’s accounts at the bank and she participated in discussions at the bank where it was clear that she was neither the decision-maker nor the beneficiary. There is no reality to a claim under the FRA when there is no evidence as to the value of any of either Reg's or Kay’s assets at the time of the marriage and no description of Kay’s present needs, notwithstanding the presumption in s. 60 and the provisions of s. 65 of the FRA. The marriage agreement which, I find, was applied by both Reg and Kay, kept Reg’s business and other assets that were transferred to the Trust as separate property of Reg. Kay kept her own property to herself. It is not sufficient for Kay to now maintain that she is a creditor or other because she might have brought a claim under the FRA if she and Reg had separated.

Madam Justice Dillon also rejected Mrs. Easingwood’s argument that she would have had a legal claim in unjust enrichment.

Even if Mrs. Easingwood were a “creditor or other,” Madam Justice Dillon found that Mr. Easingwood’s children settled and transferred the assets into the trust for the legitimate reason of ensuring continued management of Mr. Easingwood’s affairs if his son, Hank Easingwood, died before him. The trust was consistent with Mr. Easingwood’s will, and it was not set up to put the assets out of Mrs. Easingwood’s reach.

This case may narrow the circumstances in which a spouse may successfully have a transfer made by his or her deceased spouse set aside as a fraudulent conveyance on the grounds that the transfer would defeat a claim under the Family Relations Act. It suggests that the surviving spouse’s claim must be more than theoretical. There must be an air of reality to the Family Relations Act claim, such as a breakdown of the marriage, or the likelihood that the surviving spouse would have been successful in making a Family Relations Act claim. But I don’t read this case as precluding a surviving spouse from successfully set aside a transfer, and then pursuing the claim under the Wills Variation Act, in different circumstances than those found by Madam Justice Dillon in Easingwood v. Cockroft.

New Courthouse Libraries BC Practice Portal Blogs

2011-09-12T21:24:00.000-07:00

Courthouse Libraries BC has published the Stream, a blog that helps lawyers and others interested in the law keep on top of developments in British Columbia law for quite some time.

Starting today, the Stream is publishing blog posts in five separate practice portals: Civil Litigation, Family Law, Personal Injury, Practice Management & Technology, and Wills & Estates.

I had the privilege of writing the Forward for the Wills & Estates portal.

Easingwood v. Cockroft (Part 1)

2011-09-11T18:18:00.003-07:00

The Supreme Court of British Columbia upheld a trust that was created by two children for their father using a power of attorney in a recent decision, Easingwood v. Cockroft, 2011 BCSC 1154. The trust was challenged by their father’s widow, Kathleen Easingwood, after his death. She argued that the power of attorney did not give them the authority to transfer his assets into a trust, and that the transfer was a fraudulent conveyance intended to defeat her potential claims under the Family Relations Act and the Wills Variation Act. The question of whether the transfer of assets to the trust was valid had important implications for Ms. Easingwood. If not, then the assets would fall into her husband’s estate, and would be subject to her Wills Variation Act claim.

In this post, I will discuss the issue of whether the children could validly set up a trust for their father using an enduring power of attorney. In a later post, I intend to discuss the issue of whether the transfer was a fraudulent conveyance.

Reginald Henry Easingwood was married to Kathleen Easingwood. They were married in 1983. He had four children with his first wife, who died in 1976. Two of his children died before him.

Before their marriage, Reginald Easingwood and Kathleen Easingwood had signed a marriage agreement, in which each gave up any claim to the other’s assets other than in accordance with the agreement or with their wills.

On April 18, 2001, Reginald Easingwood signed an enduring power of attorney, appointing two of his children, Lauren Cockroft and Hank Easingwood as his attorneys. The power of attorney provided that they must act together. This means that if either died, the other could not act under it.

On March 4, 2004, Mr. Easingwood signed his will naming the same two children as his executors. In the will he provided for a fund for his wife of $525,000 plus an adjustment for each year between the date of his will and his death, or 15 percent of his estate (whichever is greater). She would receive the income from the fund during her lifetime, and on her death, the fund would be divided among his then living children, the children of his deceased children, and his wife’s children. In the will, he also gave his wife a life interest in his house, and set aside $100,000 to pay for expenses for his house. He provided that the residue of his estate would go to his children and some of his grandchildren.

In 2007, Lauren Cockroft and Hank Easingwood were managing their father’s financial affairs. He was suffering from dementia and was no longer able to look after his own finances. Hank Easingwood was diagnosed with cancer, and he and Lauren Cockroft were concerned that if Hank Easingwood died before their father, Lauren Cockroft would not be able to act on her own under the terms of the power of attorney. Accordingly, she or someone else would have to apply to court to be appointed his committee (adult guardian). They were concerned that there could be a dispute over who would become their father’s committee.

In order to allow for the continued management of their father’s finances without having to make a court application, Lauren Cockroft and Hank Easingwood, used the power of attorney from their father to settle an alter ego trust on his behalf in 2008. They transferred substantially all of his wealth into the trust, except for his house, which remained in his name, subject to a life estate in favour of his wife. They were appointed as the first trustees, but the trust provided for the appointment of a successor trustee on Hank Easingwood’s death. The assets of the trust could only be used for Reginald Easingwood’s benefit during his lifetime. On his death, the terms of the trust mirrored his will. The trust provided for a fund for his wife, and for the house, and the residue of the trust funds would be divided in the same way as set out in his will.

Reginald Easingwood died September 12, 2009, after his son Hank Easingwood’s death.

The first question is whether an attorney appointed under a general enduring power of attorney had any authority at common law to settle a trust, without specific authorization in the power of attorney. Madam Justice Dillon held that there is no outright prohibition against attorney’s settling a trust. The issue is whether the attorneys were acting in breach of their duties of loyalty to their father in settling the trust in the manner they did. She wrote at paragraphs 36 through 38:

[36] It is undisputed that when the Trust was created in 2008, Reg lacked mental capacity to deal with his property. In this situation, the attorneys under the 2001 Power of Attorney held a continuing power without specific instructions from the donor except as set out in the instrument conferring the power (Banton v. Banton, 1998 CanLII 14926 at para. 183 (Ont.C.J.) [Banton]; Egli v. Egli, 2004 BCSC 529 at paras. 81-82). The power here was stated to “act together to be my attorney in accordance with the Power of Attorney Act and to do on my behalf anything that I can lawfully do by power of attorney”. As attorneys for Reg, Hank and Lauren had fiduciary obligations towards Reg as the donor, but not obligations as a general trustee for the benefit of others (Banton at para. 185). As such, they owed duties of loyalty, prudence, and good faith to Reg (Banton at para. 184). This is similar to the duties that a committee owes to a patient (O’Hagan v. O’Hagan, 2000 BCCA 79; British Columbia (Public Trustee) v. Bradley Estate, 2000 BCCA 78 at para. 16 [Bradley Estate]).

[37] As stated in Bradley Estate at paras. 16-17, there is not a clear rule against certain types of transactions and the question in all cases is whether a reasonable and prudent businessman would think that the proposal in question would be of benefit to the patient and to his family in light of the circumstances known at the time and that might arise in the future. Planning opportunities considered after obtaining tax or other professional advice are not to be denied a committee. There is no prohibition against transactions because they are not necessary. The goal is the proper management and administration of the patient’s estate.

[38] A power of attorney with the generalized power as here includes the power to settle an irrevocable inter vivos trust (Banton at para. 188). It follows that the question is not whether the terms of the power were wide enough for this purpose, but whether the trust should be set aside because, in exercising the power, the trustees were in breach of fiduciary duty to the donor (Banton at para. 188).

Madam Justice Dillon found that Lauren Cockroft and Hank Easingwood were legitimately concerned about the management of their father’s affairs after Hank Easingwood’s death. The trust mirrored his will. Accordingly, it reflected his wishes. The attorneys were entitled to establish a trust as an estate planning tool. She found that “it was reasonable and proper to create the Trust to effectively manage Reg’s affairs because the Trust did not go beyond what Reg himself had contemplated.”

The trust was validly settled.

Commentary
This decision is a significant decision concerning the authority of an attorney acting under an enduring power of attorney.

But I urge caution to those considering using an enduring power of attorney to settle a trust especially if the power of attorney document does not have an express authorization. I have three main concerns.

First, I don’t know whether this decision will be appealed. Madam Justice Dillon relied to some extent on two decisions of the Court of Appeal, Bradley and O’Hagan, in which the British Columbia Court of Appeal held that in some circumstances a court appointed committee may engage in sophisticated corporate reorganizations to save the patient and his family income tax. (In O’Hagan, the court authorized the proposed transactions; in Bradley the court did not.) Although there are similarities between the duties of a committee and of an attorney under a power of attorney, the analogy is not a perfect one. Section 18 of the Patients Property Act provides that the committee must exercise its powers “for the benefit of the patient and the patient's family.” This may allow a committee greater latitude than an attorney under a power of attorney to consider the interest of other family members in, for example, creating an estate plan to save taxes.

Secondly, this decision considered the duties of an attorney under a power of attorney before the recent amendments to the Power of Attorney Act came into effect on September 1, 2011. The changes will likely have some implications to an attorney’s ability to engage in estate planning. For example, there are provisions which I wrote about here, setting out and limiting an attorney’s authority to use the power of attorney to make gifts. Would a transfer of assets into a trust that provides for beneficiaries on the death of the person who granted the attorney be gifts? If so, they must either come within the limitations of the Power of Attorney Act and Regulation, or be authorized by the power of attorney document.

Thirdly, it’s important to keep in mind that Madam Justice Dillon found that the attorney’s were acting for a valid reason, and that the estate plan perfectly mirrored the will. If the estate plan were designed to benefit some family members over others in a manner inconsistent with the will, I doubt the trust would have been upheld.

If you are giving someone an enduring power of attorney, consider whether you want to give the person you appoint the authority in the power of attorney to settle trusts for you or engage in corporate reorganizations on you behalf. Most powers of attorney don’t have these types of clauses, but you can have one inserted when you have the power of attorney made.

Changes to Incapacity Planning Legislation and new Standard Forms

2011-09-05T17:30:00.000-07:00

Amendments to the legislation in British Columbia, including the Power of Attorney Act, and the Representation Agreement Act are now in force. They came into effect on September 1, 2011 (while I was on holidays).

The changes will require some changes in the forms used for enduring powers of attorney and representation agreements in British Columbia. The Ministry of the Attorney General has published some standard forms, which you may access from here.

The forms are not mandatory, and are not appropriate in all circumstances. I am working on modified forms for my clients.

Estate of Watts

2011-08-20T12:02:00.004-07:00

Although I don’t recommend taking shots at family members from the grave in your will, it can make for entertaining reading.

I came across a case from New Brunswick, In re Estate of Watts, 1933 CarswellNB 9 (S.C. App. Div.) in which the will-maker left to her husband the sum of $1 "as memento of the manner in which my husband treated me during our married life."

Her husband was not overly pleased with the will. After her death he challenged it in court. He argued that she was under an insane delusion that he had been unfaithful to her, and accordingly that she did not have the mental capacity to make the will. If the Court found that the will-maker was influenced in her decision to essentially disinherit her husband by an insane delusion about him, then she likely was incompetent and the will invalid. There was evidence that she did indeed believe that her husband was unfaithful.

But the Court had some trouble with the argument that the will-maker’s belief that her husband was unfaithful was a delusion, notably the evidence of the family physician that he had treated the husband for gonorrhea, and then treated her for the same disease.

The husband also argued that the amount of the gift was itself an indication of incapacity. In rejecting that argument, Gimmer J. for the court wrote at paragraph 12:

12 It has been held that mere estrangement, distrust, unfounded jealously and unjust resentment of fancied wrongs will not necessarily constitute delusions. They must be shown to be due to some erroneous belief for which there is no foundation in evidence. Mere peculiarities of mind and eccentricities of conduct in the testator are not in themselves sufficient to render him incompetent.

Appointing an Attorney in an Enduring Power of Attorney in B.C.

2011-08-12T20:57:00.003-07:00

On September 1, 2011, amendments to the Power of Attorney Act in British Columbia will come into effect.

Section 18(1) through (3) sets out whom you may appoint as your attorney in an enduring power of attorney. It says:

18 (1) An adult may name one or more of the following persons as an attorney:
(a) an individual, other than an individual who
(i) provides personal care or health care services to the adult for compensation, or
(ii) is an employee of a facility in which the adult resides and through which the adult receives personal care or health care services;
(b) the Public Guardian and Trustee;

(c) a financial institution authorized to carry on trust business under the Financial Institutions Act.
(2) Despite subsection (1) (a), a spouse or near relative of the adult who receives compensation for providing personal care or health care services to the adult may be named as an attorney.

(3) If an individual who is not an adult is named as an attorney, the individual must not act as attorney until that individual is an adult.

Up until these amendments, you could appoint a paid caregiver or an employee in a facility in which you resided and received care as an attorney. Now you cannot, unless the paid caregiver or employee is your spouse, child or parent. ~~or near relative, which is defined as an "adult child, a parent, a grandparent, an adult brother or sister or any other adult relation by birth or adoption."~~ [When I first posted this, I made an error, which I have now crossed out and corrected. The crossed out portion was in original Bill 7 amending the Power of Attorney Act, but that billl was subsequently amended. Thank you to Joanne Taylor, Executive Director of the Nidus Personal Planning Resource Centre and Registry, for pointing this out.]

Interestingly, you will now be able to appoint someone who is under the age of majority, but he or she cannot act until attaining the age of 19.

Banks v. Goodfellow: Delusions and Testamentary Freedom

2011-08-05T21:44:00.000-07:00

It is essential to the exercise of such a power that a testator shall understand the nature of the act and its effects; shall understand the extent of the property of which he is disposing; shall be able to comprehend and appreciate the claims to which he ought to give effect; and with a view to the latter object, that no disorder of the mind shall poison his affections, pervert his sense of right, or prevent the exercise of his natural faculties — that no insane delusion shall influence his will in disposing of his property and bring about a disposal of it which, if the mind had been sound, would not been made.

Per Cockburn C.J. in Banks v. Goodfellow (1870), L.R. 5 Q.B. 549 (Eng. Q.B.) at p. 565

Banks v. Goodfellow, and the above quoted passage in particular, is frequently cited as the authoritative tests for testamentary capacity. (Westlaw shows 261 Canadian cases that have cited Banks v. Goodfellow). The case is cited for all manner of disputes over testamentary capacity, but the judgment was really about one aspect of capacity: delusions and their relationship to testamentary capacity.

Chief Justice Cockburn’s judgment focused on the question of whether a man could have legal capacity to make a will if he suffered from delusions that were unrelated to his will. John Banks made a will in which he left his estate to a niece, who was also his heir-in-law, and who died intestate after Mr. Banks. Her heir would, therefore, receive his estate. Mr. Banks had for some time both before and after he gave instructions for, and executed, his will, believed that he was pursued and molested by devils and evil spirits. He also believed that a man named Featherstone Alexander pursued and molested, and he held this belief even after Mr. Alexander died. There was a medical opinion that he was insane and incapable of managing his affairs, but there was also evidence that he did manage his own funds and financial interests.

Chief Justice Cockburn, considered and rejected the doctrine that “the mind, though it has various faculties, is one and indivisible; if it is disordered in any one of these faculties, it if labours under any delusion arising from such disorder, though its other faculties may remain undisturbed, it cannot be said to be sound; such a mind is unsound, and testamentary incapacity is the necessary consequence.”

In arriving at a more nuanced approach to the question of when delusions vitiated capacity to make a will, Chief Justice Cockburn considered the question in the context of testamentary freedom. The underlying principle of testamentary freedom is that “the instincts, affections, and common sentiments of mankind may be safely trusted to secure on the whole a better disposition of the property of the dead, and one more accurately adjusted to the requirements of each particular case than could be obtained through a distribution prescribed by the stereotyped and inflexible rules of a general law.”

But as a condition to the exercise the power of making testamentary dispositions, the maker must possess sufficient intellectual faculties. It is in that context, that Chief Justice Cockburn sets out the above-quoted tests for testamentary capacity.

Chief Justice Cockburn reasoned that if the delusions did not have an impact on Mr. Bank’s decisions about his will, he should not be deprived of his testamentary autonomy.

But where a jury are satisfied that the delusion has not affected the general faculties of the mind , and can have no effect on the testator’s will , we can see no sufficient reason why the testator should have lost his right to make a will, or why a will made under such circumstances should not be upheld.

The Court upheld the jury’s finding that Mr. Bank’s will was valid. The delusions could not have had any influence on Mr. Bank’s decisions in disposing of his property.

Fresno County Courthouse, Fresno, California

2011-08-04T21:24:00.000-07:00

Compensation for an Attorney Appointed in an Enduring Power of Attorney

2011-07-25T21:25:00.000-07:00

On September 1, 2011, amendments to the Power of Attorney Act in British Columbia will come into effect.

One of the new provisions, section 24, sets out the requirements for an attorney acting under an enduring power of attorney to be paid for his or her time and effort. Section 24 will provide as follows:

Payment and expenses of attorney
24 (1) An attorney must not be compensated for acting as an adult's attorney unless the enduring power of attorney expressly authorizes the compensation and sets the amount or rate.

(2) An attorney may be reimbursed from an adult's property for reasonable expenses properly incurred in acting as the adult's attorney.

Before this provision was passed the Power of Attorney Act did not set out any provision for payment of an attorney. I suspect most of the time when someone has appointed a family member as an attorney under an enduring power of attorney, there is no provision for fees. Some people give enduring powers of attorney to trust companies, and trust companies often have fee agreements setting out their fees if they later act under the enduring power of attorney. Before September 1, 2011, fee agreements were usually separate documents.

After September 1, 2011, the enduring power of attorney will need to set out the amount or rate of any compensation the attorney charges.

But the Power of Attorney Regulation will grandfather compensation arrangements in respect of powers of attorney signed before September 1, 2011 if the power of attorney provided for compensation (but did not set the amount or rate), or if there were a separate compensation agreement signed by the person granting the power of attorney.

I am not sure what the rationale is for requiring that the rate or amount be set in the power of attorney itself, as opposed to in a separate agreement. It strikes me as an unnecessary intrusion into private arrangements. If the enduring power of attorney is registered in the Land Title Office, then the compensation arrangement becomes a public record.

Blueberry Interim Trust

2011-07-16T19:14:00.002-07:00

One hundred dollars today, is worth more than a hundred dollars next year. If you give me a hundred dollars today, I can invest it, and use it to earn more money, so that it will be worth more next year. Granted it doesn’t always work out that way, particularly not recently, but if I invest conservatively my investments will grow more often than not over time. This is the time-value of money.

Although I think of this as an economic principle, rather than a legal one, it is a principle that may inform the duties of trustees when administering trust funds for beneficiaries.

In 1998, the Blueberry First Nations Band received a large settlement from the Government of Canada, as a result of a court decision in which the Government was found liable for breaching its duties to the Blueberry Band in respect of a sale of mineral rights.

The settlement was made to the band members collectively. The Band Council set up trusts to hold the settlement proceeds, and the Band Council was proposing to transfer funds to further trusts for distribution.

The Band Council was proposing distributions totalling $125,000 to each adult member. Minors, those under 19 in British Columbia, would not receive payments until they attained the age of majority. The trustees were to hold funds in trust for the minors, and then pay them out later.

The Band Council proposed that each member would receive the same dollar amount, $125,000, whether they received the funds now as adults, or, in the case of minors, later when they became adults. The minors would not receive any interest on the $125,000.

The trustees of one of the trusts holding the settlement funds asked the Supreme Court of British Columbia for directions on whether the trustees had to pay the minors interest in addition to the $125,000.

The Public Guardian and Trustee of British Columbia, acting on behalf of the minors argued that because the minors would have to wait to receive their funds, they should get interest to reflect the fact that they were going to get the funds later.

Mr. Justice Bowden, in Re: the Blueberry Interim Trust, 2011 BCSC 769, found that the Band Council intended to treat the members equally. He found that they were mistaken in their view that the proposed distribution treated the members equally. After quoting testimony from a Band Council member, he wrote at paragraph 13:

I find as a fact that in not making provision for interest payments to minors, the Band Council considered that was necessary to ensure that the adult and minor members of the Band were treated equally and did not take into consideration the time value of money which would have necessitated an interest payment to minors to achieve the objective of equality.

Mr. Justice Bowden held that from the time the Band Council received the settlement funds, the Council had a fiduciary duty (duty of loyalty) to the band members including minors. He wrote at paragraph 46:

[46] In my view, there is no question that the Band Council stood in a fiduciary relationship with respect to the minors of the Blueberry Band. The Band Council, acting as elected officials, undertook to act in the best interests of its members, including the minors. This duty extended to the manner of its control over the interests and assets of the Band, and in particular the Settlement Funds which it eventually undertook to distribute. As band members, the minors held an entitlement at law to the Settlement Funds. The Band Council was in a position to decide how to administer those funds. When the Band Council exercised its power over the Settlement Funds in a manner that affected the legal interests of the minors, it was obligated to do so in accordance with its fiduciary duties.

Mr. Justice Bowden found that if interest were not paid to the minors, they would effectively be receiving less than the adults. Accordingly, the Band Council and the trustees had a duty to pay interest to the minor band members. He wrote further at paragraph 62:

[62] As indicated above, it is my view that the Band Council and Chief owe a fiduciary duty to all band members, including minors, with respect to their exercise of discretion over the distribution of the Settlement Funds. This obligation arose either at the time the settlement funds were received by the Band from the Government of Canada and placed in the Joint Trust for the benefit of the Bands, or, at the latest, when the Band Council undertook to distribute the settlement funds. In either case, this duty pre-existed the settling of the Interim Trust. I also conclude that this duty required the Band Council and Chief to treat all beneficiaries fairly and equally. It is clear on the evidence that the non-payment of interest has resulted or will result in the minors receiving a lesser amount of money upon each distribution than the other members. It is therefore my view that the duty required the payment of interest on any amounts paid to minors upon their reaching the age of 19 in order to achieve equality. The settling of provisions of the Interim Trust, Distribution Trust and Permanent Trust to the contrary did not alter that obligation.

The court approved of a hold-back fund that would be used to pay interest to the minors.

Consultation Paper on the Partition of Property Act

2011-07-10T17:38:00.001-07:00

The British Columbia Law Institute has published a Consultation Paper on the Partition of Property Act The Consultation Paper is prepared by the Real Property Reform (Phase 2) Project Committee, and includes tentative recommendations for new legislation.

The British Columbia Law Institute is asking for comments on these tentative recommendations before publishing a final report. You may comment by September 1, 2011, as follows:

By mail: British Columbia Law Institute
1822 East Mall
University of British Columbia
Vancouver, BC
V6T 1Z1
Attention: Gregory G. Blue, Q.C.

By fax: (604) 822-0144

By email: gblue@bcli.org

Estate Planning and Investing 101 Seminar on July 14, 2011

2011-07-09T10:33:00.001-07:00

I am co-presenting with Shannon Jones, wealth advisor, at ScotiaMcLeod, a seminar "Investing and Estate Planning 101" on Thursday, July 14, 2011. The seminar will start at 10 am and will finish at noon. Our topics will be:

How to choose an advisor.
Is your asset allocation appropriate for you?
Pros and Cons of a Fee-based versus Commission.
Powers of Attorney.
Representation Agreements.
Wills and Will Substitutes.

The seminar will be held at ScotiaMcLeod, Landmark V Building,
Suite 600 - 1620 Dickson Ave.
Kelowna, British Columbia

If you are interested in attending, please RSVP Shannon Jones at (250) 868-5535, or by email at shannon_jones@scotiamcleod.com.

B.C. Law Institute Consultation Paper on Joint Tenancy

2011-07-02T23:03:00.002-07:00

The British Columbia Law Institute has published a Consultation Paper on Joint Tenancy in June, 2011. The paper was prepared by the Real Property Reform Project Committee.

If two or more people own land as joint tenants, when one joint tenant dies, his or her interest ends, and the surviving owners continue to own the property. The title of the first-to-die does not pass under his or her will.

In contrast, when two or more people own land as tenants in common, when one dies, his or her interest forms part of his or her estate. An owner as a tenant in common may leave his or her interest in the land by will to a beneficiary.

To create a joint tenancy, there must be four unities which are summarized in the paper as follows:

Unity of title: The interests of the co-owners must be created by the same act or instrument, such as a transfer of land or a will.

Unity of time: The interests of the co-owners must be created at the same time.

Unity of interest: The interests of the co-owners must be of equal nature, size, and duration. For example, one cannot be a life interest and another an interest in fee simple. If there are three co-owners, one cannot have a half-interest and two others one-fourth each. Each must have a one-third interest.

Unity of possession: Each co-owner is entitled to possession of the whole of the land and none is entitled to any part of it to the exclusion of the other co-owners. (This is actually a characteristic of both joint tenants and tenants in common. For this reason, the respective interests of both kinds of co-owners are said to be “undivided.”)

One of the key recommendations set out in the paper is to allow joint tenancies to be created without all four unities: only unity of possession would be required. Accordingly, if the recommendation were implemented, two owners could acquire property with one owner having say a 65% interest and the other a 35% interest, and hold title so that on the death of one, the survivor will hold the entire interest by right of survivorship.

The terms “joint tenancy” and “tenancy and common” are perhaps not well understood by people not trained in the law. The report recommends that these terms be replaced by “co-ownership with survivorship” for joint tenancies, and “co-ownership without survivorship” for tenancies in common.

In British Columbia it is possible for one co-owner to sever a joint tenancy secretly, without the knowledge of the other co-owner or co-owners. If the joint tenancy is severed by one joint tenant, then he or she becomes a tenant in common and can leave his or her interest by will. The report contains a recommendation that to sever a joint tenancy (or co-ownership with survivorship) the severing owner must give notice to the other owner or owners.

The British Columbia Law Institute is asking for comments on these tentative recommendations before publishing a final report. You may comment by September 1, 2011, as follows:

By mail: British Columbia Law Institute
1822 East Mall
University of British Columbia
Vancouver, BC
V6T 1Z1

Attention: Gregory G. Blue, Q.C.

By fax: (604) 822-0144

By email: gblue@bcli.org

Rowsell v. MacKinnon

2011-06-24T22:34:00.003-07:00

I don’t encourage people to write their own wills. But what’s worse than writing your own will? If you’re not a lawyer or notary public, writing someone else’s will. This is as true for members of other professions as for anyone else.

A recent decision in Newfoundland and Labrador illustrates why.

When Gidues Sacrey decided to change his will to leave his friend Toni Rowsell a gift of $100,000 he asked his accountant, Mr. MacKinnon, to write his will for him. Mr. MacKinnon was reluctant to do so, suggesting he see a lawyer. But Mr. MacKinnon relented and prepared a new will in accordance with his instructions. He, or someone at his accounting firm, used Mr. Sacrey’s then current will, made in 1998, as a precedent. Although Mr. Sacrey had at one time employed lawyers for his wills, the one he then had does not appear to have been professionally drawn.

The accounting firm made a couple of key changes to the will. One change was to add a gift to Ms. Rowsell. The other change was in the attestation clause, which is near where the will-maker and the witnesses sign a will. The 1998 will said

SIGNED published and declared by the above-named GIDUES SACREY the TestatOR as and for hIS last Will and Testament, in the presence of us both present at the same time, who at hIS request and in hIS presence have hereunto subscribed our names as witnesses.

The new will, made in 2004, was a little different:

SIGNED published and declared by the above-named GIDUES SACREY the Testator as and for his last Will and Testament, in my presence, who at his request and in his presence have hereunto subscribed my name as witnesses.

Do you notice the differences? The 2004 will refers to the will being signed “in my presence” rather than “in the presence of us both present at the same time.” It refers to subscribing "my name" intstead of "our names."

I suspect the difference in the wording of the attestation clause would not have been fatal. The bigger problem is that Mr. MacKinnon arranged for one person in his firm to see Mr. Sacrey when she went to Gander where Mr. Sacrey lived. She took the will to him and witnessed him sign it. She was the only witness.

Unfortunately, the will being witnessed by only one witness, did not comply with the formalities for signing a will in the Province of Newfoundland and Labrador. It was invalid.

Fortunately, Mr. Sacrey wanted changes to his will in 2005. If the new will had been properly witnessed, the problem would have been fixed. Unfortunately, Mr. Sacrey’s accountant agreed to make the changes, and the will in 2005 was also signed by only one witness. The 2005 will, which also contained a gift to Ms. Rowsell was also invalid.

The accounting firm billed Mr. Sacrey for the wills, but after he called, reduced their bill by the amount they charged for writing and witnessing the wills.

The defect in the signing of the wills came to light after Mr. Sacrey’s death. It was then too late to fix, and his 1998 will was his last valid will, with the result that Ms. Rowsell was not entitled to the $100,000 that Mr. Sacrey intended for her to receive.

Ms. Rowsell sued Mr. MacKinnon and his firm.

Canadian courts have held lawyers who were negligent in preparing wills responsible to compensate those whom their clients intended to benefit if as a consequence of lawyer negligence the gifts to the intended beneficiaries are ineffective.

But should the same principles that apply to lawyers also apply to accountants, who are not, after all, legally trained? Should accountants be held to the same standard as lawyers if they agree to prepare wills for their clients?

Mr. Justice Handrigan of the Supreme Court of Newfoundland and Labrador Trial Division (General), in Rowsell v. MacKinnon, 2011 NLTD 36 (CanLII), held that the same principles apply, and he held Mr. MacKinnon to the same standard as a lawyer. He wrote at paragraphs 74 – 75:

[74] Standard of care in negligence actions is the degree of care that a reasonable person should exercise; or as I said earlier in these reasons, if duty of care underpins liability between plaintiff and defendant in negligence actions, standard of care defines its scope. I hold Mr. MacKinnon not to a standard of perfection but to what would be expected of an ordinarily competent solicitor in these circumstances.

[75] First of all, let me say why it is the appropriate standard for Mr. MacKinnon who is an accountant and not a lawyer: Mr. MacKinnon is a professionally trained accountant, who achieved the highest level of certification in his profession. He practiced public accounting at that level for thirty-five years and had access to Mr. Sacrey business and personal affairs because of his professional status. Mr. MacKinnon understood by his background and training how to engage with clients, the limits of the retainers he received, his clients’ and his own levels of competence and the extent to which his clients relied on him for professional services. He also understood that he was qualified to provide accounting, not legal services and most importantly he understood that it was wise to decline work he was not qualified to do.

[76] Yet he undertook legal work for Mr. Sacrey despite all these considerations. It is true that he recommended that Mr. Sacrey retain a lawyer to change his will in 2004 and that Mr. Sacrey objected. But Mr. MacKinnon relented and he did the work when he knew better. I expect that Mr. MacKinnon wanted to placate Mr. Sacrey and that is why he gave in, just as when the firm wrote off the $650 fee for the wills. Mr. Sacrey relied on Mr. MacKinnon to do his when, and when he agreed to perform it Mr. MacKinnon also agreed to do the work to the standard a lawyer would have done in the same circumstances, including getting them executed properly.

Mr. MacKinnon and his firm are required to pay Ms. Rowsell $100,000 plus interest and costs.

Supreme Court of Canada Grants Leave to Appeal inSt. Michael Trust Corp., as Trustee of the Fundy Settlement v. Her Majesty the Queen

2011-06-23T22:11:00.003-07:00

The Supreme Court of Canada granted leave to appeal in St. Michael Trust Corp., as Trustee of the Fundy Settlement v. Her Majesty the Queen this morning, a case in which the Tax Court of Canada and the Federal Court of Appeal applied the test of where the central management and control of a trust was exercised in determining whether a trust was resident in Canada or in another jursidiction for the purpose of applying the provisions of the Income Tax Act, Canada. In this case, the trustee of two trusts was a trust company incorporated in Barbados, and the trustee argued that the trusts were exempt from capital gains tax in Canada on the sale of certain assets persuant to a tax treaty between Canada and Barbados. But the Tax Court of Canada held that because the central management and control of the trusts were really exercised in Canada, the trusts were resident in Canada, rather than in Barbados. The Federal Court of Appeal upheld that aspect of the decision.

The Supreme Court of Canada will now have the opportunity to determine the test for residency of a trust under Canadian income tax law.

I wrote about the Tax Court of Canada decision here. You can read the Federal Court of Appeal decision here.

I found out about this leave to appeal from Eugene Meehan Q.C.'s SCCLawLetter which provides very timely information about Supreme Court of Canada decisions.

Claim For Failure to Maintain Life Insurance

2011-06-18T18:42:00.001-07:00

Jean Stewart and Earl Clark Stewart were divorced in Mississippi, on March 23, 1978. Mr. Stewart was required to pay child support for his son, Joseph Stewart. He made a few payments, then stopped, and moved to British Columbia. In 1992 the Mississippi Court held Earl Clark Stewart in contempt for failing to abide by its order to pay support, and ordered him to pay over $26,000 in arrears of support. The Mississippi Court also ordered Earl Clark Stewart to “maintain an insurance policy on his life in the amount of $100,000 and to name the minor child born of this marriage as sole beneficiary of the policy….”

Joseph Stewart is now a man of 34 years. Earl Clark Stewart never did pay the arrears of child support, nor continue to make the support payments. When he died, on December 18, 2008, he left his estate worth approximately $150,000 in his will to three children from a second marriage and to three step children. He did not make any provision for his son Joseph Stewart. Nor did he maintain a life insurance policy naming Joseph Stewart as his beneficiary.

Joseph Stewart sued his father’s estate for $100,000 for his father’s failure to have a life insurance policy in place.

The first question that Mr. Justice Butler considered in Stewart v. Stewart, 2011 BCSC 774, was what law should apply to determine the extent of the obligation to maintain the life insurance? The case was heard by the Supreme Court of British Columbia, which usually applies British Columbia law, but the order to maintain the life insurance policy was made by a Mississippi court. Mr. Justice Butler held that Mississippi law governed. The law of the jurisdiction of the court that made the order should be applied to determine the obligations. Furthermore, child support obligations are governed by the law of the jurisdiction most closely connected to the child and custodial parent, which in this case was Mississippi.

When the court in British Columbia applies the law of a foreign jurisdiction, the court will generally consider expert evidence from a lawyer in that foreign jurisdiction.

In this case, the executor filed evidence from, James Farrior, a lawyer in Mississippi. According to Mr. Farrior, the order that Earl Clark Stewart maintain life insurance is a form of support, intended to provide security in case Earl Clark Stewart died while the child support obligation continued. Under Mississippi law, the obligation to pay child support ends when the child attains the age of majority, which is 21 in that State.

Mr. Justice Butler accepted Mr. Farrior’s opinion on Mississippi law, and held that the obligation to maintain the life insurance policy ended when Joseph Stewart turned 21. The Supreme Court of British Columbia dismissed Joseph Stewart’s claim against his father’s estate for $100,000.

Los Angeles County Hall of Justice

2011-06-12T14:22:00.000-07:00

I took this photograph two summers ago (I'm a bit behind on my courthouse photo postings) in Los Angeles. The Los Angeles County Hall of Justice housed L.A. County Sheriff's offices, a jail, as well as county courtrooms. It has been vacant since damaged in the 1994 earthquake. I found a good article entitled "Hall of Justice: Restoring a Piece of History," published by the Los Angeles County Sheriff's Department. The article discusses the history of the building, the earthquake, and the hoped for restoration.

Wills, Estates and Succession Amendment Act, 2011 Passes Third Reading

2011-06-08T20:45:00.000-07:00

On May 26, 2011, the British Columbia Legislative assembly passed Bill 10, which amends the Wills, Estates and Succession Act.

I have not heard any word on when the Wills, Estates and Succession Act will come into effect.

Changes to Power of Attorney Act Will Provide Limited Power to Appoint Beneficiaries

2011-06-05T19:14:00.002-07:00

Changes to the British Columbia Power of Attorney Act that come into effect on September 1, 2011, will clarify the authority of an attorney appointed under an enduring power of attorney to designate beneficiaries for the person for whom the attorney is acting.

If the person who made the enduring power of attorney becomes incapable of making his or her own decisions, the attorney may manage the incapacitated person’s affairs. The attorney may contemplate making or changing a beneficiary of a pension plan, Registered Retirement Savings Plan, Tax Free Savings Account, or insurance policy.Can the attorney do so?

Section 20 of the Power of Attorney Act will provide a limited power for an attorney under a power of attorney to make a beneficiary designation. Section 20 (5) provides:

(5) An attorney may, in an instrument other than a will,

(a) change a beneficiary designation made by the adult, if the court authorizes the change, or

(b) create a new beneficiary designation, if the designation is made in
(i) an instrument that is renewing, replacing or converting a similar instrument made by the adult, while capable, and the newly designated beneficiary is the same beneficiary that was designated in the similar instrument, or
(ii) a new instrument that is not renewing, replacing or converting a similar instrument made by the adult, while capable, and the newly designated beneficiary is the adult's estate.

I stress the limited nature of the power. Essentially, this provision allows an attorney to maintain the same beneficiaries as those appointed by the person for whom the attorney is acting. For example, if the person who appointed the attorney had a Registered Retirement Savings Plan with a designated beneficiary, and the attorney transfers the funds to a different plan, the attorney may designate the same beneficiary. But if the attorney wishes to change the beneficiary, he or she must first apply for authorization from the Supreme Court of British Columbia.

If there is no named beneficiary, then the attorney may designate the estate of the person for whom the attorney is acting, in which case the asset will ultimately be distributed to the beneficiaries of that person's will.

The Power of Attorney Act will also contain an express provision in section 21 that the attorney may not make or change a will on behalf of the person for whom he or she is acting.

Can an Attorney Under an Enduring Power of Attorney Make Gifts?

2011-05-28T19:24:00.002-07:00

In British Columbia, when you are acting under an enduring power of attorney for a person who is no longer capable of managing his or her affairs, you must act in the best interest for the now incapacitated person who appointed you as his or her attorney. (I will refer to the person who makes the power of attorney and appoints someone as the "donor" and the person appointed as the "attorney.") Generally, this means that you may only use the donor’s money for his or her benefit. But can you make gifts to the donor’s family on behalf of the donor? How about loans? What if the donor had regularly given money to his or her church or some other charity? Can you continue to do so?

Although I have had my opinions on these questions, until recent changes in our legislation that will come into effect on September 1, 2011, I have not been able to point to any legislation in British Columbia.

But as of September 1, 2011, the Power of Attorney Act and the Power of Attorney Regulation will address the question of whether an attorney (the person named in the power of attorney) acting under a Power of Attorney may make gifts including charitable gifts or loans from the donor’s assets.

Section 20 of the Power of Attorney Act, when it comes into effect, will allow the attorney to make gifts or loans in two circumstances. First, if the power of attorney document expressly allows the attorney to make gifts or loans, then the attorney may do so as authorized in the documents.

Secondly, even if there is no express authorization in the power of attorney document, the attorney may make gifts including gifts to charities or loans from the donor’s property if:

(a) the adult will have sufficient property remaining to meet the personal care and health care needs of the adult and the adult's dependants, and to satisfy the adult's other legal obligations, if any,
(b) the adult, when capable, made gifts or loans, or charitable gifts, of that nature, and
(c) the total value of all gifts, loans and charitable gifts in a year is equal to or less than a prescribed value.

The prescribed value is set out in section 3 of the Regulation as “the total value of any gifts, loans and charitable gifts made by an attorney in a year must not be more than the lesser of
(a) 10% of the adult’s taxable income for the previous year, and
(b) $5000."

But the attorney may only receive a gift or loan if the power of attorney authorizes it.

If you are making an enduring power of attorney, and you would like your attorney to be able to make more substantial gifts, loans or charitable gifts than the lesser of $5000 or 10% of your income per year, or if you would like the attorney to be able to receive gifts or loans, you may have your lawyer put in an express provision setting out what gifts or loans you would like your attorney to be able to make in the power of attorney document.

Canadian Bar Association Webinar on B.C.'s Incapacity Planning Legislation

2011-05-23T17:19:00.000-07:00

On Wednesday, May 25, 2011, from 11:30 am to 1:30 pm I will be speaking at a Canadian Bar Association, British Columbia Branch webinar on the changes in legislation on incapacity planning in British Columbia that are coming into effect on September 1, 2011.

It's been an experience trying to figure out the changes to the legislation. There are several statutes being amended, including the Adult Guardianship Act, the Power of Attorney Act, the Representation Act, and the Health Care (Consent) and (Care Facility Admissions) Act. Most of the amendments are in Bill 29, the Adult Guardianship and Planning Statutes Amendment Act, 2007. But Bill 29 was amended by Bill 33, the Miscellaneous Statutes Amendment Act, 2008, and then by Bill 13, the Miscellaneous Statutes Amendment Act, 2009. Now the further amendments have been introduced in the Legislative Assembly in Bill 7, the Miscellaneous Statutes Amendment Act, 2011. Of course, not all of the provisions in the Adult Guardianship and Planning Statutes Amendment Act, 2007 are coming into effect on September 1. You have to figure out which ones will come in, and which ones won't.

Fortunately, the legislation will be consolidated, and I anticipate that after September 1, 2011, you will be able to click on the legislation you are looking for on BC Laws and read the amended version.

Saxer v. Saxer Estate

2011-05-14T09:07:00.003-07:00

Anne Saxer wanted to leave of portion of her waterfront land near Nanaimo, B.C. to her grand-nephew Ulrich Saxer when she died. Under her will, another portion of her land would go to the city for use as a park, and the rest of the land to Georgine Allen-Newman, whom Anne Saxer appointed as her executor. Ms. Allen-Newman would need to subdivide the land to give Ulrich Saxer his portion. It was not certain whether she would be able to obtain subdivision approval. Accordingly, in the will, Anne Saxer, provided for a gift of $200,000 for Mr. Saxer if he did not receive his portion within five years of Anne Saxer’s death (this period was extended by court order).

The will provided that the costs of subdivision would be paid out of Anne Saxer’s estate. But what about property taxes on the land? The will was silent on whether Mr. Saxer would have to pay any of the property taxes from the time of Anne Saxer’s death until he received the property. This was significant because Anne Saxer died in February, 2006, but it took until August 25, 2009 to subdivide the lot for Ulrich Saxer. There was a dispute between the executor and Mr. Saxer concerning what costs he was responsible for, and he had not yet received the lot as of the date of hearing, March 29, 2011. The executor refused to convey the lot to Mr. Saxer until he reimbursed the estate for a number of expenses, including a portion of the property taxes for the land reflecting the lot he inherited...

Mr. Justice Blok, in Saxer v. Saxer Estate, 2011 BCSC 584, noted that the law is that when the executor assents to a specific gift of property in a will (by transferring the property to the beneficiary or providing the beneficiary with a transfer), the assent relates back to the date of death, and the beneficiary is entitled to any profits from the property, but is responsible for expenses for the maintenance of that property, from the date of death.

But in this case, it was by no means certain at the date of death that Mr. Saxer would receive the property. If the executor could not get approval for the subdivision, he would receive $200,000 instead of the property. The gift was contingent on the land being subdivided in the manner set out in Anne Saxer’s will.

Mr. Justice Blok held that Mr. Saxer would not be entitled to any income from the property before the land was subdivided, and should not be responsible for the expenses related to the maintenance of the land until the contingency was removed. Accordingly, Mr. Saxer was not responsible for the property taxes until the lot he will receive was created. Mr. Saxer will be responsible for the property taxes on his lot from the time it was created in August 2009.

Distinctions Between a Court of Probate and Court of Construction

2011-05-07T11:44:00.001-07:00

In British Columbia, if you think the wording of a will does not intend reflect what the will-maker intended or if it is not clear what he or she intended, you may apply to the Supreme Court of British Columbia. But at what stage you apply, and what the court may do is not always straightforward. Distinctions are made between the Court sitting as a probate court and a court of construction, and the evidence it may consider and the remedies the court may grant depend on whether it is sitting as a probate court or court of construction.

To someone who is not a lawyer—and perhaps to many lawyers—the rules must seem archaic and common-sense defying. Some of the court cases seem to muddy the distinctions. Yet conceptually, the distinctions do make sense. In a recent decision, Re Ali Estate, 2011 BCSC 537, Madam Justice Dardi explains the distinctions quite clearly.

In Re Ali Estate, Muntaz Ali left his “interest” in a company to certain beneficiaries. He owned shares in the company, and the company also owed him money through shareholder loans and a promissory note.

One of the executors brought an application to Court to rectify the will by adding the words “including my shareholder loans and Promissory Notes owing to me,” in the clauses of the will leaving the interest in the Company to the beneficiaries. The effect would be that those beneficiaries will receive the amounts owing to Mr. Ali as well as the shares.

The executors did not yet have the grant of probate (in other words, they had not yet proved the will).

Madam Justice Dardi held that she could not add words to the will as part of the probate. After probate of the will is granted, she can later interpret the will to determine whether Mr. Ali intended to include the shareholder loans and promissory notes as part of the “interest” in the company he was leaving to certain beneficiaries.

She explained the distinction between a probate and court of construction (a court of construction interprets the will):

[21] The Supreme Court has jurisdiction to sit both as a court of probate and as a court of construction. Notwithstanding that the single court is empowered with dual jurisdictions, historically the court has exercised its probate function and its interpretation or construction function in separate proceedings. In broad terms, when ruling upon the validity of a will, the court sits as a court of probate, and when interpreting a will, it sits as a court of construction. The divided jurisdiction is significant because the powers available to the court depend on which jurisdiction it assumes: Law Reform Commission of British Columbia, Report on Interpretation of Wills, LRC 58 (Victoria, 1982) at 1.

[22] The jurisdiction exercised by a court of probate relates to whether the testamentary instrument submitted for probate represents the true last will and testament of a deceased and whether the named personal representative is entitled to administer the estate. In essence, a court of probate focuses on what constitutes the testamentary instrument of the testator and its validity. The inquiry pertaining to the validity of the testamentary document encompasses the issues of the capacity and the volition of the testator and whether the testator duly executed the testamentary document with knowledge and approval of its contents.

[23] On the other hand, in exercising jurisdiction as a court of construction, the court is concerned with ascertaining the meaning of the testamentary documents that have been approved by the court in the exercise of its probate jurisdiction. It is axiomatic that court must interpret or construe a will in the form in which it has been admitted to probate.

The distinction is important because the court of probate may consider evidence that the court of construction may not. Madam Justice Dardi wrote:

[24] In probate hearings, the court, in determining whether or not the document before it is truly the testator's will, is permitted to consider extrinsic evidence, including direct evidence as to the testator's intentions. That evidence may include copies of earlier wills and codicils, prior drafts of the will, and the notes of the solicitor who prepared the will. In contrast, the scope of admissible evidence is generally more constrained in a construction hearing. In that instance, a court may only consider the words of the will and if, applying the subjective approach, the evidence of the surrounding circumstances known to the testator at the time the will was made. Except in very restricted circumstances (such as equivocation), the court is not permitted to review direct evidence of the testator's intentions on a construction application: British Columbia Law Institute, “Wills, Estates and Succession: A Modern Legal Framework,” in B.C.L.I. Report No. 45 (B.C., 2006) at 37.

The probate court may omit words if the court finds that the will maker did not know and approve of those words when he or she made the will Madam Justice Dardi considered whether the probate court could also add words, and concluded based on previous case law, that it could not. The reason a probate court can’t add words to the will is that to do so would run afoul of the signing and witnessing requirements of the Wills Act for making and changing a will.

Madam Justice Dardi then considered whether she should interpret the will at this stage, and held that the better course is to do so after probate had been granted.

[44] Although the two applications being heard together is attractive for reasons of expediency of the litigation, in my view a distinction should be maintained between the court's probate and construction jurisdiction. The practice and procedure on a probate application is different than on a construction application. Ordinarily an application brought as a probate application should be limited to probate matters and, ordinarily a will should be admitted to probate before it is presented to the court for interpretation.

[45] As referred to above, the evidence which is admissible on a rectification application is different than that which is admissible on an interpretation. Before proceeding with the construction application, the court should have before it the affidavits with only that evidence which is properly admissible on a construction application. Otherwise it falls to the court to parse out that evidence which is properly admissible from that which is not. I cannot endorse such an approach. This two-step procedure also provides the parties with an appropriate opportunity to make submissions on the admissibility of any controversial evidence.

When the new Wills, Estates and Succession Act comes into force (it has been passed by the Legislative Assembly, but as of the date of this post, the Government has not said when it will come into effect), the Supreme Court of British Columbia will have an express power to rectify a will, which it may exercise either at the probate stage or after probate. In exercising this new jursidiction the courts should be able to add words as well as delete them. The new provision is as follows:

Rectification of will
59 (1) On application for rectification of a will, the court, sitting as a court of construction or as a court of probate, may order that the will be rectified if the court determines that the will fails to carry out the will-maker's intentions because of
(a) an error arising from an accidental slip or omission,
(b) a misunderstanding of the will-maker's instructions, or
(c) a failure to carry out the will-maker's instructions.

(2) Extrinsic evidence, including evidence of the will-maker's intent, is admissible to prove the existence of a circumstance described in subsection (1).

(3) An application for rectification of a will must be made no later than 180 days from the date the representation grant is issued unless the court grants leave to make an application after that date.

(4) If the court grants leave to make an application for rectification of a will after 180 days from the date the representation grant is issued, a personal representative who distributes any part of the estate to which entitlement is subsequently affected by rectification is not liable if, in reasonable reliance on the will, the distribution is made
(a) after 180 days from the date the representation grant is issued, and
(b) before the notice of the application for rectification is delivered to the personal representative.

(5) Subsection (4) does not affect the right of any person to recover from a beneficiary any part of the estate distributed in the circumstances described in that subsection.

Destroyed Will

2011-05-01T16:03:00.000-07:00

In British Columbia, there are different ways you can revoke your will. The most common way is to make a new will with a clause that says you revoke your previous wills. Another way to revoke a will is to destroy it, either yourself, or by directing someone else to destroy it for you, but if you direct someone else to destroy it, they must do so in your presence. To revoke a will by destruction, you must intend to revoke it. If you accidentally tear up your will, perhaps thinking you are tearing up a different document, then the will is not revoked.

But what happens if someone dies, their will is found torn to pieces, but nobody knows the circumstances of the destruction? Nobody even knows who tore it up, let alone whether the now deceased person had intended to revoke it.

Mr. Justice Barrow, in Jorsvick Estate, 2011 BCSC 528, dealt with this issue. Mrs. Jorsvick died on July 31, 2010. When she died, her husband was in a care facility, and was not capable of managing his own affairs. They had two children, Scott Jorsvick and Linda Samis.

Mrs. Jorsvick had made a will in 2005, in which she had left half of the residue of her estate to Scott Jorsvick, one-sixth to her daughter Linda Samis, and one-sixth to each of Linda Samis’ children.

In 2009, Mrs. Jorsvick had a disagreement with her son about her husband’s bank accounts. In 2010, she instructed her lawyer that she wanted to change her power of attorney to appoint her daughter in place of her son. She signed a revocation of the power of attorney to her son, and the new power of attorney in the presence of her lawyer on July 30, 2010—the day before she died. She told her lawyer that she wanted to meet with him the following week to discuss changes to her will, but died before the meeting could take place.

Mrs. Jorsvick kept her important documents in a locked filing cabinet in her home. But after her death, her son could not find the will in the cabinet. Her daughter later found an envelope containing the will torn to pieces behind a chest of drawers at her father’s care facility.

The question before the court was whether or not Mrs. Jorsvick revoked the will by destruction, in which case she would have died without a will, and her estate would go to her husband and two children in the proportions set out in the Estate Administration Act. If not, then the will would govern the distribution of Mrs. Jorsvick’s estate.

There is a presumption in British Columbia that if a destroyed will is found among the deceased’s papers, or in a place it would normally expected to be found, then the deceased had destroyed the will in order to revoke it.

But in this case the torn will was not found among Mrs. Jorsvick’s papers. Nor would it make sense for her to keep the will, or the remnants of the will, at her incapacitated husband’s care facility.

Accordingly, Mr. Justice Barrow found that the presumption that Mrs. Jorsvick destroyed the will intending to revoke it does not apply.

Mr. Justice Barrow also found it significant that when she met with her lawyer the day before she died, and said she wanted to change her will, she did not mention that she destroyed her will. If she had destroyed her will, she would likely have mentioned that fact. She spoke as if she still had a will.

The Court found that Mrs. Jorsvick did not revoke her 2005 will, and held that it remained her valid will.

Passing Over an Executor: Re Thomasson Estate

2011-04-21T19:55:00.000-07:00

In British Columbia, you may choose in your will whom you wish to be your personal representative, or executor, on your death. If the person you choose is able and willing to act, the Supreme Court of British Columbia will usually grant probate of your will to your chosen executor.

But there are circumstances where on application of a beneficiary, the court may pass over an executor.

This occurred in the recent decision In Re Thomasson Estate, 2011 BCSC 481.

Agnes Thomasson and Herbert Thomasson had four children. In their wills, they appointed two of them, Brian Thomasson and Alexander Thomasson, as their executors, and left their estate to three of their children. They had previously transferred shares in their family business to Alexander Thomasson, and he was not left anything in his parents wills.

In addition to transferring shares in the family business, Agnes and Herbert Thomasson transferred some land to Alexander Thomasson. Brian Thomasson wanted to make an inquiry into the transfer of the land, and he applied to pass over Alexander Thomasson. Brian Thomasson argued that Alexander Thomasson would have a conflict of interest if the court granted probate to Alexander Thomasson.

Madam Justice Gerow agreed with Brian Thomasson’s submissions and ordered that Alexander Thomasson be passed over, but reserved his right to be added in the future after any enquiries into the transfer of land to him were completed. She wrote at paragraphs 27 through 29:

[27] In this case, Alex is not a beneficiary under either of his parents’ wills, and his only interest in the estates is as an executor. The other named executor wants to make enquiries into the transfer of the Property to Alex in order to determine what, if any, interest the estates have in the Property, and what, if any, obligations Alex and his wife have to the estates as a result of the transfer.

[28] The application is not to remove Alex as an executor but simply to pass over him so that an enquiry can be undertaken of the transfer of the Property to him and his wife by the deceased in 2006, and a determination can be made if any further actions need be taken in regards to the Property.

[29] In the circumstances of this case, it is my opinion that there is a perceived conflict of interest between Alex in his role as an executor and his interest in his personal capacity. If an action is instituted by the executors as a result of the transfer of the Property, it would be against Alex. In my opinion, Alex, in his capacity as executor, cannot attack the transfer of the Property to himself while at the same time maintaining, in his personal capacity, that the transfer of the Property was proper. By making such a finding I am not prejudging the case. I am simply of the view that, in the circumstances of this case, if an action is commenced as a result of the enquiries into the transfer, Alex cannot conscientiously act as a plaintiff in his capacity as an executor in a case where he will be the defendant.

Executor's Discretion to Decide When to Sell Land

2011-04-16T09:29:00.002-07:00

How long may an executor wait to sell land and distribute the proceeds to the beneficiaries?

The Supreme Court of British Columbia considered this question in the recent case of Hriczu v. Mackay Estate, 2011 BCSC 454.

In her will, Mary Mackay left her estate to be divided equally among her son and four grandchildren. She died on April 30, 2000.

Mary Mackay owned 17.5 acres of land in Revelstoke, British Columbia. This was the main asset in the estate. The land’s estimated value was $118,000 when Mary Mackay died, but the current assessed value $1,143,600.

The executor, Mary MacKay’s son, and father of the other beneficiaries, has held the land in the estate. Initially, all of the beneficiaries agreed to hold it, and there were discussions about subdividing the land.

Now, one of the beneficiaries, Leanne Hriczu, wants the land to be sold so that she may receive her inheritance. She brought an application to court to have the land sold, and to have her father removed as executor.

The will contained a clause providing the executors with the following authority:

(a) To use their discretion in the realization of my estate, with power to my Trustee to sell, call in and convert into money any part of my estate not consisting of money at such time or times, in such manner and upon such terms, and either for cash or credit or for part cash and part credit, as my said Trustee may in their uncontrolled discretion decide upon, or to postpone such conversion of my estate or any part or parts thereof for such length of time as they may think best, and I hereby declare that my Trustee may retain any portion of my estate in the form in which it may be at my death, (notwithstanding that it may not be in the form of an investment in which Trustees are authorized to invest trust funds, and whether or not there is a liability attached to any such portion of my estate) for such length of time as my said Trustee may in their discretion deem advisable, and my Trustee shall not be held responsible for any loss that may happen to my estate by reason of so doing.

Clauses similar to this one are fairly common in professionally drawn wills in British Columbia.

Madam Justice Beames held that this clause gave the executor a broad discretion to determine the timing of the sale of the property. She found that he was acting in good faith, and intended to sell the land and distribute the estate. She wrote:

[16] I accept that those principles apply here. The Executor has been given a broad discretion to postpone converting (or selling) the land in question. That discretion must be exercised “honestly, reasonably, intelligently and in good faith”. It cannot be exercised in such a way as to give the executor a personal benefit or put him in a conflict of interest. It must also not be exercised in such a way as to defeat the purpose of the testator, which was to make a gift to each and every one of her five beneficiaries. In other words, the executor is not entitled to refuse to convert, or to postpone conversion indefinitely.

[17] The evidence in this case satisfies me that the executor is intending to convert the estate and distribute in accordance with the Will, when he feels it is advantageous to do so. The issue of sale, or subdivision and sale, has been the subject of various discussions amongst the beneficiaries in the almost eleven years since the death of Mary Mackey. So long as he has a bona fide intention to perform his obligation to convert and distribute, the exercise of his discretion should not be interfered with by this court.

Madam Justice Beames dismissed Leanne Hriczu’s application to order the land sold and to remove the executor. The court did order the executor to provide accounts of his handling of the estate to Leanne Hriczu within 30 days.

This case illustrates the court’s deference to executors in the administration of estates when the will gives the executors broad powers. But as noted, an executor’s discretion is not unlimited. He or she must act “honestly, reasonably, intelligently and in good faith.”

It is significant that the executor had been holding the land initially with the agreement of all of the beneficiaries. I suspect that the outcome may very well have been different if the executor had held the land for over 10 years against the wishes of all of the other beneficiaries.

Free Wills

2011-04-10T13:16:00.003-07:00

The other day, a friend and colleague casually suggested to me that the market wants free wills.

I suspect that there are a large number of consumers in British Columbia who are not willing to pay very much to have their will prepared for them. Some don’t make a will. Others choose to try to write it themselves, perhaps using a form-will kit, or using an online service. Still others seek out quotes from lawyers and notaries public, and select the one with the lowest quote.

Historically, legal fees for drawing wills in British Columbia were lower than the fees charged by lawyers for most other types of legal work. When I started practicing law 22 years ago, another lawyer explained to me that lawyers charged little for a will in the expectation that someday after the client’s death, the lawyer would get to handle the more lucrative legal work for the client’s executor in applying for probate, for which lawyers were handsomely paid. This is not practice I endorse. For one thing, charging little for a will undervalues the importance of good estate planning. Fortunately, that practice has changed, and if lawyers are charging more for wills, fees for probate work have come down over the years. At least that’s my perception.

I like the fact that people have choices, including very inexpensive options for planning their estates. Competition is healthy. Our economy is built on it.

So why should you pay to see a lawyer who specializes in estate planning to make a will, when it is going to cost more than some of the alternatives? Do you really need a lawyer?

You might expect me to tell you about all of the things that can go wrong if you don’t use a lawyer. Well, I could give you anecdotes about things that have gone wrong in other cases. I have written about court decisions involving people who have drawn their own wills or trusts, including my posts entitled “The costs of not having a lawyer prepare your will,” and “ Do-it-yourself trust: Canada v. Rudolf.” On the other hand, that does not mean things will go wrong for you (or actually your heirs, because you won’t be around to find out). It is also true that lawyer-drawn wills are not infallible. I do think that there is a much greater risk of problems when someone who is not legally trained tries to write their own will, including using a kit or an online service, than if they see a lawyer. But to me that is a secondary consideration.

The main question is, does a lawyer, and in particular, one who specializes in wills, estates and trusts, add value over the alternatives? Is that value worth the additional expense?

What an estate-planning lawyer does is distill a vast amount of legal knowledge and practical experience and apply that knowledge and experience to his or her client’s particular circumstances. The estate-planning lawyer is first-and-foremost an adviser.

There are things you can learn about law on your own. There are good books out there, as well as articles, and now legal blogs. But estate-planning law is humongous. No book, article, or blog post is going to tell you everything that might be relevant to your will and estate planning. Not even a 1000 page text book. Browse through my blog, and see the number of issues I have written about, and I have barely scratched the surface. I learn new things about wills, estates and trusts all of the time, even after over 20 years of practice, much of it specializing in this field.

But book-knowledge is just a part of the equation. How does the law apply to you and your own unique circumstances?

To me, the most important meeting I have with an estate-planning client is the first meeting, when I get to know my new client. Who are your family? What are your financial circumstances? What are your estate planning goals? I ask a lot of very personal questions because I need to in order to apply that large body of law to my client’s circumstances.

It’s not just about what goes in the will. Many people have assets that go to their heirs outside of their will. For example, you can hold property with another in a joint tenancy such that title of the whole property passes to the survivor on the death of one joint owner. Or you can designate beneficiaries of your life insurance policy or Registered Retirement Savings Plans. Your beneficiary designations and how you hold property needs to be carefully coordinated with your will if you are going to have a coherent estate plan and minimize the risk of disputes.

When you meet with an estate-planning lawyer, you will also likely have questions. The questions will be based on your own unique circumstances. Here are some that sometimes come up:

I am getting remarried, and I have children from my first marriage. I want to make sure that my new husband is provided for if I die before him, but I also want my children to eventually have an inheritance. How can I accomplish that?
One of my children has a disability, cannot handle money well, and receives British Columbia disability benefits. How do I provide for him after my death, without him losing the money I leave him, or losing his disability benefits?
I am estranged from one of my children and want to disinherit her. I have heard that she can challenge my will. What options do I have?
I am concerned that my daughter’s marriage may break down, and I want to protect any inheritance she gets from me from any claims her spouse may make if it does. How can I protect her?
I have heard that British Columbia has high probate fees? How can I save probate fees?
Someone told me that it is a good idea to put my house into a joint tenancy with one of my children. Is it?
I have three children, one of whom is working in the family business. I would like to leave the business to her. How can I accomplish that?

What if your circumstances are really simple? You and your spouse have been married to each other for 40 years, have two grown, healthy children with stable marriages, and you and your spouse want to leave everything to each other, and then equally to your children. Will a simple will do? Perhaps. But there may be estate-planning opportunities you will miss if you don’t get good advice. For example, it may be possible to reduce the tax burden of the survivor of you and your spouse, or of each of your children, through the use of trusts in your wills. In some cases the potential tax savings to your heirs will be thousands of dollars each year for the rest of their lives following your death. I doubt that you will be able to accomplish those tax savings for your heirs using a will-kit.

Does an estate-planning lawyer add value over the alternatives? Is that value worth the additional expense?

British Columbia Law Day

2011-04-10T09:53:00.001-07:00

During April, the Canadian Bar Association, B.C. Branch is co-presenting law day events in various cities in British Columbia. According to thehe Canadian Bar Association, B.C. Branch website:

The Law Day 2011 theme is Access to Justice: The Changing Face of Law. Law Day events provide the public with the opportunity to learn about the law, the legal profession and some of the legal institutions that form the cornerstones of our Canadian democracy. Law Week events in British Columbia will include Dial-A-Lawyer, mock trials, a public speaking contest for students, free law classes, citizenship ceremonies, courthouse tours, a free public forum and a fun run in Vancouver.

Law Day events will be held in communities throughout British Columbia in April. In British Columbia, Law Week is a collaborative project organized through the partnership of the BC Branch of the Canadian Bar Association, the Continuing Legal Education Society of British Columbia, the Law Foundation of British Columbia, the Law Society of British Columbia and the Vancouver Bar Association.

The dates and events are as follows:

Vernon: Saturday, April 16th. Events include: Mock trial , RCMP, Specialized Victims, legal aid, sheriffs, tours of the court house and cells, and a composition competition for elementary and high schools.

Cranbrook: Wednesday, April 27th. Events include: Mock Trial will be held at the Key City Theatre at 7:00pm. The theatre is donated through the generosity of our Key City Theatre Society.

Kamloops: Wednesday, April 6th. Events include: Cell and vehicle tours by sheriffs, RCMP dogs, RCMP drug and forensic displays, Court house library tour and a Billy Miner display, Treasure hunt for kids, Community organization displays, ICBC display, and a Mock trial (based on Peter Pan).

Kelowna: Wednesday, April 13. Events include: Girl Guide arrests and a mock trial, RCMP dogs, RCMP motorcycle demonstration, Courthouse and cell tours, Poster Contest and scavenger hunt, Community displays and a BBQ.

Nanaimo: Saturday, April 9th. Events include: The Trial of Hansel and Gretel with a real judge, RCMP lecture, Police K-9 Unit Demonstrations, Panel of two judges and a Crown counsel with questions from the public, tour of the Sheriff’s Van, Resource Tables and Information, and a Wills & Estates Skit with the big bad wolf.

Victoria: April 16, 2011. Events include: Mock Trial: Harry Potter, Police k-9 Unit Demonstrations, Community Forum: Q&A on The Changing Face of Law, Tour of Sherriff’s vehicles, Tour of court cells, The Provincial Mock Trial Competition, Resource tables and Information, Passport to Justice (Treasure Hunt with various door prizes and give-a-aways) and Police Presentation on Ecstasy.

Click here for more details.

Attorney's Duties Under Amendments to the British Columbia Power of Attorney Act

2011-04-02T11:38:00.000-07:00

When portions of the Adult Guardianship and Planning Statutes Amendment Act, 2007 come into effect on September 1, 2011, in British Columbia, the Power of Attorney Act will be transformed from a short Act of 9 sections to an Act of 42 sections. One of the additions is section 19, which will set out an attorney’s duties when acting under a power of attorney.

The Power of Attorney Act was silent on the attorney’s duties to the person who appointed the attorney. This is not to say that the attorney did not significant responsibilities before these amendments. He or she did. But we relied on the common law, which requires an attorney to act in the best interest of the person who appointed him or her.

When the new legislation comes into effect, section 19 will set out an attorney’s duties as follows:

Duties of attorney
19 (1) An attorney must
(a) act honestly and in good faith,
(b) exercise the care, diligence and skill of a reasonably prudent person,
(c) act within the authority given in the enduring power of attorney and under any enactment, and
(d) keep prescribed records and produce the prescribed records for inspection and copying at the request of the adult.

(2) When managing and making decisions about the adult's financial affairs, an attorney must act in the adult's best interests, taking into account the adult's current wishes, known beliefs and values, and any directions to the attorney set out in the enduring power of attorney.

(3) An attorney must do all of the following:
(a) to the extent reasonable, give priority when managing the adult's financial affairs to meeting the personal care and health care needs of the adult;
(b) unless the enduring power of attorney states otherwise, invest the adult's property only in accordance with the Trustee Act;
(c) to the extent reasonable, foster the independence of the adult and encourage the adult's involvement in any decision-making that affects the adult;
(d) not dispose of property that the attorney knows is subject to a specific testamentary gift in the adult's will, except if the disposition is necessary to comply with the attorney's duties;
(e) to the extent reasonable, keep the adult's personal effects at the disposal of the adult.

(4) An attorney must keep the adult's property separate from his or her own property.

(5) Unless the enduring power of attorney states otherwise, subsection (4) does not apply to property that
(a) is jointly owned by the adult and the attorney as joint tenants or otherwise, or
(b) has been substituted for, or derived from, property described in paragraph (a).

I will address a couple of these matters in this post.

Where I think some attorneys under powers of attorney who otherwise do a good job fall short is in record keeping. I have seen disputes among family members, particularly siblings, over how one of them is handling or has handled a power of attorney. One sibling may accuse another of improperly taking or spending a parent’s funds while acting as an attorney under the parent’s power of attorney. These disputes may arise during the parent’s lifetime, or after the parent’s death. If the parent is incompetent, the Public Guardian and Trustee may be asked to investigate, and the attorney will need to produce good records showing that he or she acted properly. After the parent’s death, the attorney is accountable to the executor of the parent’s will, or if he or she is also the executor, then to the beneficiaries. This will be difficult without proper records of expenditures or other financial transactions. No matter how conscientious you are when acting as an attorney under a power of attorney, you must keep good records in case anyone questions what you have done.

Subsection (4) clearly spells out that if you are acting under a power of attorney, you cannot commingle the assets belonging to the person for whom you are acting with your own. For example, if you are the attorney for your parent under a power of attorney, you must not change your parent’s accounts into joint accounts with you even if that may appear more convenient. Instead you may use your power of attorney to access your parent’s funds to use them as required for your parent’s benefit.

But subsection (5) sets out an important exception that will often apply to spouses. If, for example, you and your spouse hold title to your house as joint tenants, and have joint bank or investments accounts, you are not required to sever the joint ownership if you start using your power of attorney to act on behalf of your now incapable spouse. If you decide to sell the residence that your spouse and you own together as joint tenants, and buy another residence using the sale proceeds, you may register the new residence in both of your names as joint tenants. The new residence will be substituted property for the residence you held together as joint tenants, and subsection (5)(b) will apply.

Supreme Court of Canada Dismisses Withler Appeal

2011-03-13T15:02:00.001-07:00

In a decision released on March 4, 2011, the Supreme Court of Canada upheld the constitutionality of provisions in both the Public Service Superannuation Act, and the Canadian Forces Superannuation Act that reduced the amount of a supplementary death benefit paid to the spouse of a deceased member after the member reached a certain age. The case is Withler v. Canada (Attorney General), 2011 SCC 12.

I described this case in my post on the British Columbia Court of Appeal decision as follows:

Both pension plans provide members with group life insurance, but the amount payable on the death of a member is reduced after a certain age. The death benefits payable under the Public Service plan equals twice the annual salary of a member who dies before the age of 66. If the member dies after the age of 66 the death benefit is lower. Beginning at the 66, the payment is reduced by 10% a year. The Canadian Services plan is similar except that the payouts are reduced at the age of 61.

A class action lawsuit was brought on behalf of spouses and partners of deceased members who received a reduced benefit. They argued that the legislation violates section 15(1) of the Canadian Charter of Rights and Freedoms, which says:

15.(1) Every individual is equal before and under the law and has the right to the equal protection and equal benefit of the law without discrimination and, in particular, without discrimination based on race, national or ethnic origin, colour, religion, sex, age or mental or physical disability.

The trial judge, Madam Justice Garson, held that these provisions of the pension plans did not violate section 15(1), and dismissed the claims. The majority of the Court of Appeal agreed with the trial judge.

The Supreme Court of Canada dismissed the plaintiffs' appeal of the Court of Appeal decision. Although on its face, the lower death benefits on the death of older members creates a distinction on the basis of age, viewed in the overall context of the pension scheme, the Court held that they did not offend the Charter protection of substantive equality.

Chief Justice McLachlin, and Madam Justice Abella, stressed the importance of considering the context of the plan:

[71] In approaching this question, it is useful to identify at the outset the relevant contextual factors. As discussed above, a central consideration is the purpose of the impugned provision in the context of the broader pension scheme. It is in the nature of a pension benefit scheme that it is designed to benefit a number of groups in different circumstances and with different interests. The question is whether the lines drawn are generally appropriate, having regard to the circumstances of the groups impacted and the objects of the scheme. Perfect correspondence is not required. Allocation of resources and legislative policy goals may be matters to consider. The question is whether, having regard to these and any other relevant factors, the distinction the law makes between the claimant group and others discriminates by perpetuating disadvantage or prejudice to the claimant group, or by stereotyping the group.

The Supreme Court of Canada agreed with the trial judge’s analysis of the plan. In the cases of the death of younger members, the death benefit provided a limited income stream to their spouses and partners on the unexpected death of the members. The surviving spouses and partners of deceased younger members would not usually have the protection of a pension.

On the death of older members, their spouses and partners receive survivor’s pension benefits and health and dental care benefits under other provisions of the pension plans. These benefits provide a stream of income to the spouses and partners. The supplementary death benefits have a more limited function of assisting with last illness and death expenses when older members die.

The Supreme Court of Canada held that the distinctions based on age in the pension scheme as a whole corresponded with the needs of the claimants, although the correspondence was not perfect. Accordingly, the reduced death benefits based on age did not violate section 15 of the Charter.

Kerr v. Baranow

2011-03-05T10:14:00.001-08:00

On the breakdown of an unmarried couple’s relationship in British Columbia, disputes about property are often decided on the basis of unjust enrichment. One party may make a claim that she enriched the other through labour or money, that she suffered a corresponding deprivation, and that there is no juristic reason that the other should retain the benefits. Sometimes each party makes a claim against the other in unjust enrichment.

For most couples, each person benefits the other. How should a court deal with mutual benefits? How can each person’s contributions be quantified, especially in a long-term relationship where one may contribute more money to the relationship, but the other may contribute more to managing the household or raising the children? What if the contributions are roughly equal, but one person accumulates more wealth as a result during the relationship than the other?

The courts may make a monetary award for unjust enrichment, in other words require the person who has benefit to make a payment to other. Or if the person making the claim shows a sufficient connection between his or her contributions and specific property, or if for some other reason a monetary award is not adequate compensation, the court may give the claimant an interest (referred to as a remedial constructive trust) in specific property the title to which was or is owned by the person who has benefited from the claimant’s contributions.

If the court makes a monetary award, must the court calculate the award on the basis of what the claimant’s contributions would cost (value received)? Or may the court consider how the person benefiting from the claimant’s contributions wealth has been enhanced (value survived). For example, in a marriage-like relationship, one person may stay at home, focusing her efforts on maintaining the household and raising the children, while the other may focus on building a successful business, perhaps worth millions of dollars. On the breakdown of the relationship, if the person who has expended her efforts on the home and the family makes a claim in unjust enrichment, and the court grants her a monetary award, is the award based on the cost of hiring a nanny and a housekeeper? Or may the award reflect the fact that her efforts allowed her domestic partner to focus on building a multi-million dollar business, in which case she may be entitled to a portion of the value of the business?

In the recent Supreme Court of Canada decision in Kerr v. Baranow, 2011 SCC 10, Mr. Justice Cromwell for the Court set out an analytical framework for determining unjust enrichment cases in the context of a joint family venture. If the couple were engaged in a joint family venture, the court may find that one party has been unjustly enriched on the basis that he or she has retained a disproportionate share of the accumulated wealth. A disproportionate share means a share that is disproportionate to that person’s contributions when compared to the other’s contributions.

Mr. Justice Cromwell identified several factors that the courts should consider when deciding if the couple was engaged in a joint family venture. These are whether the couple made mutual efforts, working collaboratively towards common goals, the extent to which their financial affairs were integrated, their actual intentions to share (or not to share) and the priority they gave to the family in their decisions.

A monetary award is not limited to the calculation of the cost of services or other contributions made by the person making the claim in unjust enrichment. Where the court finds that there was a joint family venture, it is appropriate to consider the enhancement to the other person’s wealth (the value-survived approach). Mr. Justice Cromwell wrote at paragraph 100:

1. The monetary remedy for unjust enrichment is not restricted to an award based on a fee-for-services approach.

2. Where the unjust enrichment is most realistically characterized as one party retaining a disproportionate share of assets resulting from a joint family venture, and a monetary award is appropriate, it should be calculated on the basis of the share of those assets proportionate to the claimant’s contributions.

3. To be entitled to a monetary remedy of this nature, the claimant must show both (a) that there was, in fact, a joint family venture, and (b) that there is a link between his or her contributions to it and the accumulation of assets and/or wealth.

4. Whether there was a joint family venture is a question of fact and may be assessed by having regard to all of the relevant circumstances, including factors relating to (a) mutual effort, (b) economic integration, (c) actual intent and (d) priority of the family.

The fact that there are mutual or reciprocal benefits will not be considered when determining whether the claimant enriched the other person and suffered a corresponding deprivation. It may be considered on the question of whether there is a juristic reason for the enrichment, but will usually be considered in determining the remedy, or the extent of the remedy. The defendant in an unjust enrichment claim will be entitled to a set off benefits received by the claimant when the court assesses the amount of any award to the claimant. The Supreme Court of Canada endorsed the approach taken by Madam Justice Huddart in the British Columbia Court of Appeal in Wilson v. Fotsch, 2010 BCCA 226, which I discussed in an earlier post.

As I understand the analysis in Kerr, if over a twenty-year relationship, each person makes roughly equal contributions to the joint family venture, but one of them retains 90 percent of the wealth they accumulate as a result of their joint efforts during that period, and the other only 10 percent, then the person with only 10 percent will be entitled to be compensated so that he or she ends up receiving half of the accumulated wealth. If the contributions are unequal, then the award will reflect the unequal contributions.

As a lawyer who practices estate litigation, I am naturally interested in how this decision may apply to my practice. Although Kerr deals with the breakdown of a marriage-like relationship, that analysis should apply where one domestic partner dies without making provision for the other. The survivor could bring a claim in unjust enrichment against the personal representative of the deceased’s estate for a monetary award out of that estate, or where assets flow to beneficiaries outside of the estate against those beneficiaries, in which case the survivor would seek a remedial constructive trust. The claimant could assert a claim to a share of the wealth the deceased had retained on his or her death that was generated by the joint family venture. If the survivor brings a claim under the Wills Variation Act to vary the deceased's will, the court may apply the analysis in Kerr when determining the deceased's legal obligations to the claimant as part of the court's analaysis of what provision would be adequate, just and equitable in the circumstances.

This analysis may also apply to relationships other than marriage-like relationships, if the hallmarks of a joint family venture exist. For example, in some circumstances family members such as siblings or parents and children might integrate their financial affairs and work collaboratively toward common goals, with an intention of sharing the wealth they accumulate.

Common Intention Resulting Trust

2011-02-27T20:51:00.003-08:00

In British Columbia, a resulting trust usually arises in a couple of different circumstances. First, where one person gratuitously transfers an asset to another, or purchases an asset but puts the title in someone else’s name, there is a presumption of that the recipient of the asset holds it in trust for the benefit of the person who transferred or purchased the asset. The asset “results” back to the person who transferred or purchased the asset. This is a presumption only, and may be rebutted if the recipient of the title to the asset proves that it was a gift. I have written several posts, including this one, on the presumption of resulting trust.

Second, a resulting trust may arise when someone transfers assets to a trust, but the trust is invalid or fails. Perhaps it is too uncertain whom the trust is intended to benefit. In that case, the assets result back to the person who originally transferred the assets into the trust.

There is a third situation where the courts have occasionally found a resulting trust. This is the “common intention” resulting trust, and it has been applied to give a spouse, or partner in a spousal relationship, an interest in assets owned by the other spouse or partner after a breakdown in the relationship. Although title to the asset was only owned by one spouse or partner, the courts have on occasion either found or implied that there was a common intention by both spouses or partners to share the asset. The court could then hold that the party with the title held it on a resulting trust for both parties, even if the person making the claim did not contribute to the asset.

The common intention resulting trust has not been very common in recent years. Claims by married spouses on the break down of a relationship are generally dealt with under family property legislation such as the Family Relations Act.

Since the Supreme Court of Canada decision in Pettkus v. Becker, [1980] 2 S.C.R. 834, the courts have generally considered property claims on the breakdown of an unmarried couple's relationship in accordance with the principles of unjust enrichment. The partner without title is required to prove that his or her contributions have enriched the other party, that he or she as suffered a corresponding deprivation, and that there is no juristic reason for the enrichment.

The common intention resulting trust doesn't made a lot of sense to me. For one thing, in a resulting trust, assets “result” back to the person who contributed or purchased the assets. But in the common intention resulting trust, the asset may never have been owned by the claimant, and the claimant might not have even contributed to the acquisition or preservation of the asset. The asset doesn’t result back to anyone. If the spouse or partner who had the title intended to hold it in trust for both parties, that is an express trust. But in most of the common intention resulting trust cases, the evidence would fall short of establishing an express trust.

It turns out that on this issue, I am in good company. On February 18, 2011, the Supreme Court of Canada, in two cases decided at the same time, Kerr v. Baranow, and Vanasse v. Seguin, 2011 SCC 10, expressly held that the common intention resulting trust has no further role to play in resolving property disputes in domestic cases. Mr. Justice Cromwell wrote at paragraphs 23 through 29:

[23] The Court’s development of the common intention resulting trust ended with Pettkus, in which Dickson J. (as he then was) noted the “many difficulties, chronicled in the cases and in the legal literature” as well as the “artificiality of the common intention approach” to resulting trusts: at pp. 842-3. He also clearly rejected the notion that the requisite common intention could be attributed to the parties where such an intention was negated by the evidence: p. 847. The import of Pettkus was that the law of unjust enrichment, coupled with the remedial constructive trust, became the more flexible and appropriate lens through which to view property and financial disputes in domestic situations. As Ms. Kerr stated in her factum, the “approach enunciated in Pettkus v. Becker has become the dominant legal paradigm for the resolution of property disputes between common law spouses” (para. 100).

[24] This, in my view, is as it should be, and the time has come to say that the common intention resulting trust has no further role to play in the resolution of domestic cases. I say this for four reasons.

[25] First, as the abundant scholarly criticism demonstrates, the common intention resulting trust is doctrinally unsound. It is inconsistent with the underlying principles of resulting trust law. Where the issue of intention is relevant to the finding of resulting trust, it is the intention of the grantor or contributor alone that counts. As Professor Waters puts it, “In imposing a resulting trust upon the recipient, Equity is never concerned with [common] intention (Waters’, at p. 431).” The underlying principles of resulting trust law also make it hard to accommodate situations in which the contribution made by the claimant was not in the form of property or closely linked to its acquisition. The point of the resulting trust is that the claimant is asking for his or her own property back, or for the recognition of his or her proportionate interest in the asset which the other has acquired with that property. This thinking extends artificially to claims that are based on contributions that are not clearly associated with the acquisition of an interest in property; in such cases there is not, in any meaningful sense, a “resulting” back of the transferred property: Waters’, at p. 432. It follows that a resulting trust based solely on intention without a transfer of property is, as Oosterhoff puts it, a doctrinal impossibility: “. . . a resulting trust can arise only when one person has transferred assets to, or purchased assets for, another person and did not intend to make a gift of the property”: p. 642. The final doctrinal problem is that the relevant time for ascertaining intention is the time of acquisition of the property. As a result, it is hard to see how a resulting trust can arise from contributions made over time to the improvement of an existing asset, or contributions in kind over time for its maintenance. As Oosterhoff succinctly puts it at p. 652, a resulting trust is inappropriate in these circumstances because its imposition, in effect, forces one party to give up beneficial ownership which he or she enjoyed before the improvement or maintenance occurred.

[26] There are problems beyond these doctrinal issues. A second difficulty with the common intention resulting trust is that the notion of common intention may be highly artificial, particularly in domestic cases. The search for common intention may easily become “a mere vehicle or formula” for giving a share of an asset, divorced from any realistic assessment of the actual intention of the parties. Dickson J. in Pettkus noted the artificiality and undue malleability of the common intention approach: at pp. 843-44.

[27] Third, the “common intention” resulting trust in Canada evolved from a misreading of some imprecise language in early authorities from the House of Lords. While much has been written on this topic, it is sufficient for my purposes to note, as did Dickson J. in Pettkus, at p. 842, that the principles upon which the common intention resulting trust jurisprudence developed are found in the House of Lords decisions in Pettitt v. Pettitt, [1970] A.C. 777, and Gissing. However, no clear majority opinion emerged in those cases and four of the five Law Lords in Gissing spoke of “resulting, implied or constructive trusts” without distinction. The passages that have been most influential in Canada on this point, those authored by Lord Diplock, in fact relate to constructive rather than resulting trusts: see, e.g., Waters’, at pp. 430-35; Oosterhoff, at pp. 642-43. I find persuasive Professor Waters’ comments, specifically approved by Dickson J. in Pettkus, that where the search for common intention becomes simply a vehicle for reaching what the court perceives to be a just result, “[i]t is in fact a constructive trust approach masquerading as a resulting trust approach”: D. Waters, Comment (1975), 53 Can. Bar Rev. 366, at p. 368.

[28] Finally, as the development of the law since Pettkus has shown, the principles of unjust enrichment, coupled with the possible remedy of a constructive trust, provide a much less artificial, more comprehensive and more principled basis to address the wide variety of circumstances that lead to claims arising out of domestic partnerships. There is no need for any artificial inquiry into common intent. Claims for compensation as well as for property interests may be addressed. Contributions of all kinds and made at all times may be justly considered. The equities of the particular case are considered transparently and according to principle, rather than masquerading behind often artificial attempts to find common intent to support what the court thinks for unstated reasons is a just result.

[29] I would hold that the resulting trust arising solely from the common intention of the parties, as described by the Court in Murdoch and Rathwell, no longer has a useful role to play in resolving property and financial disputes in domestic cases. I emphasize that I am speaking here only of the common intention resulting trust. I am not addressing other aspects of the law relating to resulting trusts, nor am I suggesting that a resulting trust that would otherwise validly arise is defeated by the existence in fact of common intention.

Sections of the Adult Guardianship and Planning Statutes Amendment Act, 2007 come into effect September 1, 2010

2011-02-10T23:10:00.001-08:00

Portions of the Adult Guardianship and Planning Statutes Amendment Act, 2007 will come into force effective September 1, 2011. The Courthouse Libraries B.C. website sets out the proclamation here as follows:

IN FORCE DATE: Sep 1, 2011

Sections IN FORCE:section 1 (k) as it enacts the definitions of “attorney”, “enduring power of attorney”, “financial affairs” and “power of attorney”; the rest of the Act EXCEPT the following: the remainder of section 1 (k); sections 1 (b) and (c), 4, 5, 15, 18, 31 (b), 33, 67, 73, 82, 94 to 97, 100 to 103, 105 (a), and 110 (b) and (c); section 17 as it repeals section 62 of the Adult Guardianship Act; section 17 as it enacts sections 62, 62.1, 62.2 (2), 62.3 and 63 (2) (a) to (r) and (3) to (6) of the Adult Guardianship Act; section 29 as it enacts section 19.92 of the Health Care (Consent) and Care Facility (Admission) Act; section 31 (a) as it enacts section 34 (2) (n) of the Health Care (Consent) and Care Facility (Admission) Act; section 91 as it amends section 282 (2) of the Land Title Act, and section 99 as it enacts section 9 (1) (b) and (c) of the Partition of Property Act

It's a bit confusing trying to figure out exactly what sections are in force, but it appears that the amendments to the Power of Attorney Act and the Representation Agreement Act are being brought into force. The repeal of the Patients Property Act, and its replacement with new legislation is not being brought into effect.

Adequacy of Legal Advice and the Presumption of Undue Influence

2011-02-06T16:58:00.001-08:00

Last week I wrote here about the evidentiary issues in Modonese v. Delac Estate, 2011 BCSC 82, concerning the admissibility of out-of-court statements made Regina Delac. The case was a dispute between her two children about whether her son was entitled to keep his mother’s house as the surviving joint tenant or whether the house formed part of her estate to be dividing equally between her son and daughter in accordance with her will. A couple of years before her death, Regina Delac had signed a transfer which when registered at the Land Title Office, transferred the title to her house from her sole name into a joint tenancy with her son, Marko Delac. Mr. Justice Groves declared that the house is an estate asset.

Today I am writing about a different aspect of this decision: Mr. Justice Groves’ discussion of independent legal advice.

In Modonese, Mr. Justice Groves found that the nature of the relationship between Regina Delac and her son was such that her son was in a position to dominate his mother. There was evidence that he had been violent with her, that she was afraid of him and did not want to upset him, and that she wasn’t sure what she had signed. Because of the dominating nature of their relationship, the court applied a presumption that Marko Delac had obtained an interest in the title to the house by undue influence.

The presumption of undue influence is only a presumption. It may be rebutted, but the burden is on the person who benefited from the transaction, in this case Marko Delac, to show that the transfer was made voluntarily, without undue influence.

One way to rebut the presumption of undue influence is to show that the person who made the transfer received independent legal advice.

Regina Delac signed the transfer document in front of a notary public. Mr. Justice Groves summarized the notary public’s evidence as follows:

[39] Michael Tin, a notary public, gave evidence for the defence. He indicates that on the 23rd of May 2003, following instructions received, he arranged for the signing of a transfer for the Royal Oak property, which was previously in the name of Regina Delac alone, to be transferred into the name of Regina Delac and Marko Delac, as joint tenants. He testified that Marko Delac is a long time client of his and that Marko approached him about doing the transfer. He indicated that he would have had to receive instructions from Regina to effect the transfer; he further indicated that between the 19th of May 2003 and the 23rd of May 2003, he spoke to Regina two or three times.

[40] He testified that he arranged with Marko to have his mother brought to his office. Marko drove Regina and called from downstairs. Michael Tin was clear that he asked Marko to wait outside and that she spoke to Regina alone with just himself in the car. He indicated that he went over joint tenancy and tenancy-in-common with Regina and explained the difference between the two. He said that Regina had indicated that she wanted a joint tenancy arrangement.

[41] Michael Tin was clear that Marko was not present and not visible during this signing. Michael Tin indicated that he felt Regina was capable of providing instructions and that she knew what she was doing. In cross examination it became clear that Michael Tin had, for the most part, relied on information he received from Marko to draw up the transfer. It was further clear that the appointment with Regina was arranged through Marko that Marko had brought Regina to his office and that Marko had arranged for Michael Tin to go downstairs to meet them.

[42] In cross examination he confirmed that issues which never came up included a general discussion of assets, a discussion of debts, a discussion of estates, Regina’s level of health, other funds advanced by Regina, or any inquiry as to Regina and Marko’s personal relationship.

[43] The fee for services was also discussed in cross examination. The total bill was approximately $200, of which only $32.93 was for fees. Michael Tin indicated that that was the price he charged for a transfer at the time. Michael Tin confirmed that Marko paid the account.

[44] Michael Tin’s evidence stands alone in regards to who was present during the transfer.

Mr. Justice Groves found that Marko Delac was either in the car or close by when his mother signed the transfer.

What advice is required from a lawyer or notary public to rebut a presumption of undue influence? Did the notary public take sufficient steps to see that Regina Delac was acting voluntarily, free of any undue influence?

Mr. Justice Groves quoted from a Newfoundland Court of Appeal decision on the requirements for independent legal advice as follows:

[121] In Stewart [v. McLean, 2010 BCSC 64], Punnett J. followed Coish v. Walsh, 2001 NFCA 41, 203 Nfld. & P.E.I.R. 226 [Coish], where Wells C.J.N. addressed the issue of whether independent advice rebuts the presumption of undue influence as follows:

[23] The trial judge also correctly set forth the law respecting the manner in which such a presumption may be rebutted. In particular, he identified, from the comments of Green J., in [Fowler Estate], factors to be taken into account in considering whether or not evidence of legal advice given to the granting party is sufficient to rebut the presumption. At paragraph 24 of [Fowler Estate], Green J. identified factors which may affect the character of legal advice to be as follows:
1. Whether the party benefiting from the transaction is also present at the time the advice is given and/or at the time the documents are executed.
2. Whether, though technically acting for the grantor, the lawyer was engaged by and took instructions from the person alleged to be exercising the influence.
3. In a situation where the proposed transaction involves the transfer of all or substantially all of a person’s assets, whether the lawyer was aware of that fact and discussed the financial implications with the grantor.
4. Whether the lawyer enquired as to whether the donor discussed the proposed transaction with other family members who might otherwise have benefited if the transaction did not take place.
5. Whether the solicitor discussed with the grantor other options whereby she could achieve her objective with less risk to her.

What advice is adequate to rebut the presumption of undue influence will depend on the circumstances of the case. The lawyer or notary must give sufficient advice to be satisfied that the client understands the nature and effect of the transaction and is acting voluntarily. The lawyer or notary may also need to give advice on the merits of the transfer.

Mr. Justice Groves found that the advice the notary public gave to Regina Delac was inadequate to rebut the presumption of undue influence. He wrote:

[125] In this case, each of the 5 factors from Coish suggests that the advice Mr. Tin provided to Regina was completely inadequate and insufficient to rebut the presumption of undue influence. Marko was either nearby or in the car at the time the advice was given. He orchestrated and oversaw the entire process. Mr. Tin asked very few questions, did not know Regina had a daughter or a will, and provided no “objective advice” on the merits of the transaction. He did not inform himself of the circumstances in which the transaction was taking place nor of the motivations behind it.

Hearsay and Estate Litigation

2011-01-29T12:40:00.001-08:00

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.

Clara Shortridge Foltz Criminal Justice Center, Los Angeles, California

2011-01-27T20:46:00.000-08:00

I took this photograph of the Clara Shortridge Foltz Criminal Justice Center in August 2009.

A Practical Guide to Elder Abuse and Neglect Law in Canada

2011-01-23T15:42:00.000-08:00

The Canadian Centre for for Elder Law has published A Practical Guide to Elder Abuse and Neglect Law in Canada. The content and purpose of the guide is summarized in the Canadian Centre for Elder Law's media release as follows:

This comprehensive resource includes snapshots of the law in each of the thirteen provinces and territories,a comparative table that allows for quick reference, a set of guiding principles for working with vulnerable adults, and sections that discuss mandatory reporting of abuse
and neglect, rules around confidentiality of personal and health information, and the relationship between mental capacity and elder abuse. The guide also contains a lengthy list of resource agencies.

“Circumstances of abuse, neglect and risk present practitioners from every discipline with ethical dilemmas and challenging questions about how to respond pppropriately in order to protect clients without over-stepping oundaries,” says Staff Lawyer Krista James. “Elder abuse is a complex area of practice that involves many areas of law and rules that vary depending on the province in which you are practicing. It is hard for even a specialist to appreciate their obligations. This tool is a practical resource that will help lawyers, social workers and health professionals to enhance their practice in this area.”

You can also read A Practical Guide to Elder Abuse and Neglect Law in Canada in French here.

Committeeships

2011-01-15T11:18:00.000-08:00

“Committeeship” is the legal term we use in British Columbia when the court appoints a guardian to make decisions for an adult who cannot manage himself or his finances. In other places this is called—logically enough—“guardianships.” In some places the term is “conservatorship.”

Whatever term is used, if someone through illness or accident is unable to make their own decisions, it may be necessary for another to make decisions for them. In British Columbia if a family member or friend is mentally incapable of making decisions, then you can apply to the Supreme Court of British Columbia for an order appointing you as that person’s committee.

The requirements are set out in the Patients Property Act, which unfortunately is somewhat dated (thus the words “committee” and “committeeship”). You apply to court by a petition supported by affidavit evidence, including the affidavits of two medical practitioners stating their opinions that the person (referred to in the Act as the “patient”) is incapable of managing himself or his affairs. You also need to set out the person’s next of kin and financial circumstances in an affidavit for the court.

You usually need to serve the person with the petition and the affidavits before the application is heard. This gives him the opportunity to contest the applications. If there is evidence that serving him with the petition will be injurious to his health, you can apply to court to dispense with the requirement that you serve the person.

You also need to provide the Public Guardian and Trustee of British Columbia notice of the application and copies of the petition and supporting affidavits. The office of the Public Guardian and Trustee will then provide you and the court with a letter setting out its position on the application.

The Patients Property Act does not say who else you need to serve before the court hears your application. It says that the court may direct you to give notice to others. In practice, you should either obtain consents to your appointment as committee from anyone who is a close family member of the person, or arrange for them to serve them with the petition and affidavits. For example, if you are applying to be appointed committee of your mother, and she has a spouse, and two other children, you may ask them for consents to your appointment, or if they won’t consent, serve them with the application.

If the person had signed a nomination of committee when they had capacity to do so and which met the formal requirements for making a valid will in B.C., the court must appoint the nominee if the nominee is willing to act unless there is good and sufficient reason to refuse to appoint the nominee.

If the Supreme Court Judge or Master hearing the application is satisfied that the person is incapable of managing himself and his affairs, and that you are the appropriate person to be appointed committee, the court will grant an order declaring that the person is incapable of managing himself and his affairs, and appointing you as committee of his person and his estate.

I should note that it is possible to be appointed as committee of the person only (which gives the committee authority over health care and personal decisions) or of the estate only (which gives the person authority over property and finances). Often the same person is appointed as committee for both, but sometimes these functions are separated with different people appointed for each.

In some cases you may be required to arrange to be bonded before you can act as committee of the person’s estate. Often the Public Guardian and Trustee will suggest that instead of a bond, restrictions be placed on your handling of real estate and investments. For example, the court order could provide that you cannot spend the person’s capital without the consent of the Public Guardian and Trustee or of the court. You could use the patient’s income for the patient, and keep the capital invested.

After you have been appointed a committee, you must keep complete records of your handling of the person’s finances, and you will be required from time to time to provide the office of the Public Guardian and Trustee with your accounts. Keep all receipts and other records.

Is it always necessary for a committeeship when someone becomes incapable of managing their affairs? No. This process can often be avoided by advance planning. If the person made an enduring power of attorney while he or she was capable, the named attorney may use the power of attorney to look after the person’s property and finances (subject to any restrictions in the power of attorney document). Similarly, if the person made a representation agreement, the representative may make health care and personal care decisions for the person who is now incapable of making his own decisions.

I often get telephone calls from people who say something to the effect of “my mother’s doctor says I need power of attorney over her.” In some cases, the mother may still have sufficient mental capacity to make a power of attorney. But more often than not, by the time her physician says that another family member needs one, it is too late for her to make one. In those circumstances, a committeeship is necessary.

Finally, I should note that new legislation, Adult Guardianship and Planning Statutes Amendment Act, 2007 has been passed by the British Columbia Legislative Assembly to repeal the Patients Property Act and replace it with new legislation. Unfortunately, the government has not brought the new legislation into effect, and I don’t know when, if ever, it will be implemented. If it is, “committees” will be replaced with “adult guardians,” and “committeeships” with “adult guardianships.”

Wilson v. Lougheed

2011-01-09T13:35:00.001-08:00

In a recent decision, Wilson v. Lougheed, 2010 BCSC 1868, Madam Justice Ballance varied the will of Norma Yvonne Lougheed to provide Mrs. Lougheed’s daughter, Kelly Wilson, $5.5 million, out of an estate of about $19.5 million. The main beneficiary of Mrs. Lougheed’s will was her husband William Lougheed.

This case was decided pursuant to the Wills Variation Act in British Columbia, which provides that on application by a child or spouse of a deceased person, the Supreme Court of British Columbia may vary the will if it finds that adequate provision has not been made for the child or spouse. The court may then award such provision as the court considers “adequate, just and equitable in the circumstances.”

Norma Lougheed and William Lougheed were married for 35 years, when Norma Lougheed died on May 24, 2007. Kelly Wilson was her only child from a previous marriage. William Lougheed, who also had four children from a previous marriage, adopted Ms. Wilson.

William Lougheed was a very successful real estate developer. As a result Mr. and Mrs. Lougheed lived a privileged lifestyle. They were generous with their daughter and her family, assisting her in acquiring real estate, through gifts and loans, and paid for private schools for her two children. Mr. Lougheed also provided her with substantial investments through a holding company, which was worth approximately $860,000 at Norma Lougheed’s death.

In her will made in March, 1989, Norma Lougheed left her daughter cars, boats, bank accounts and four parcels of real estate, with the rest of her estate going to William Lougheed if he survived her. But before her death, Mrs. Lougheed sold all of the real estate she had left to her daughter in the will. The result was that under the will, Kelly Wilson’s most significant gift was Jewelry worth approximately $273,000, and her share of the estate would be less than 2%.

Not all of Norma Lougheed’s assets passed through her estate. Her half-interest in jointly owned assets with Mr. Lougheed that passed to him by right-of-survivorship was worth over $6,000,000. Kelly Wilson was entitled to her mother’s Registered Income Funds, which were worth about $420,000.

The court found that Kelly Wilson had a close relationship with her mother, and until her mother’s death, with her father, William Lougheed. After Norma Lougheed’s death, William Lougheed became angry Kelly Wilson, and they became estranged.

At the time of her mother’s death, Kelly Wilson and her husband Blair Wilson were having financial difficulties as a result of a failed restaurant business. They had significant debts, and had been depleting their savings. Madam Justice Ballance found that the total net value of Kelly Wilson’s assets was just over $1.2 million.

William Lougheed’s net worth, excluding his share of his wife’s estate, but including the joint assets, was approximately $32 million.

In reaching her decision, Madam Justice Ballance considered the following factors as relevant considerations to a parent’s moral obligations to an adult child:

• relationship between the testator and claimant, including abandonment, neglect and estrangement by one or the other;

• size of the estate;

• contributions by the claimant;

• reasonably held expectations of the claimant;

• standard of living of the testator and claimant;

• gifts and benefits made by the testator outside the will;

• testator’s reasons for disinheriting;

• financial need and other personal circumstances, including disability, of the claimant;

• misconduct or poor character of the claimant;

• competing claimants and other beneficiaries:

In contrast to other recent court decisions, Madam Justice Ballance rejected the view that the court may consider what the claimant would receive under the intestate succession laws if the deceased had died without a will. (See my previous posts here on this issue).

The award in this case reflected the large size of the estate, and Kelly Wilson’s legitimate expectations based on her mother’s history of treating her generously. Madam Justice Ballance wrote:

[357] Moral obligations are independent of a claimant’s financial need. The standard of living a claimant ought to have had or which he or she has become accustomed as facilitated by the testator, may influence the degree of a testator’s moral obligation: Re Berger, [1978] 2 E.T.R. 275 (B.C.S.C.); Mordo v. Nitting, 2006 BCSC 1761 [Mordo]; Walker v. McDermid, [1931] S.C.R. 94; Marsh v. Marsh (Estate), 19 E.T.R. (2d) 184, [1997] B.C.J. No. 1286 [Marsh]. The standard of living and relative financial situation of each person to whom the testator owed a moral obligation are relevant when considering their competing moral claims: Mordo. The standard of living peculiar to the testator may also play a role in determining what constitutes adequate provision: Sawchuk v. MacKenzie Estate, 2000 BCCA 10 [Sawchuk].

[358] It is frequently the case that a claimant’s expectation will be linked to his or her standard of living and the standard of living of the testator, as well as to an appreciation of the nature of any competing interests at play. A testator who has given an assured or implied expectation to an adult child arising from the magnitude of the estate and/or from the testator’s treatment of the child may bring forth or heighten a moral duty: Clucas; Marsh; Saugestad v. Saugestad, 2008 BCCA 38; DeLeeuw v. DeLeeuw, 2003 BCSC 1472.

[359] Throughout their 35-year marriage, William showered Norma with expensive jewellery and other gifts. They drove luxury brand vehicles such as Porsche, Mercedes and Rolls Royce, and owned valuable yachts which they had towed to regattas on the eastern seaboard and raced using hired crews. The palatial custom homes that the Lougheeds constructed over the years were of the finest quality and decorated with the assistance of Norma’s professional designer. Over the years, they owned various vacation properties, including in Hawaii, Palm Desert and on Bowen Island which was purchased, in part, with the proceeds from the sale of Norma’s pre-marriage home. Although Norma was occasionally thrifty over small things, by and large she and William lived in lavish style.

[360] From the time that she married William, Norma looked out for her daughter’s financial prosperity. Although it did not match the pampering that the Lougheeds permitted for themselves, Norma ensured that Kelly enjoyed a financially carefree and privileged lifestyle as a young girl and into her adulthood. Providing for Kelly was considered by the Lougheeds as a natural thing to do given their affluence and love for her.

[361] On account of her parents’ economic means and largesse, Kelly was given vehicles, the use of apartments, her own horse and was able to attend private school, a European finishing school, and other post-secondary institutions, without cost to herself.

[362] Upon Kelly’s marriage, Norma’s benevolence expanded to include Blair and the Wilson children. She periodically helped defray the cost of Kelly’s horseback riding, paid for a membership at the North Shore Winter Club, and covered the initial membership fee of approximately $19,440 for the Wilsons to join an exclusive family recreational club. Kelly was also treated to an occasional shopping spree. The Lougheeds paid for Kelly and Blair to accompany them on holidays abroad, and arranged for the Wilson family to vacation at the Lougheeds’ recreational properties.

[363] Although the gifts and other lifestyle comforts were often paid for using the Lougheeds’ commingled funds or funds out of a Norbill account, I find that as between Norma and William, it was typically her idea to confer such benefits and that she usually funded them. William was not always made privy to the details and did not care to be. He was content to allow Norma to do as she pleased.

[364] Kelly was grateful for her parents’ generosity. She was not a grasping or spoiled daughter, and did not have an inflated sense of entitlement. It was not Kelly’s habit to ask her parents directly for sums of money or other material benefits.
….

[368] Through their actions, Norma and William instilled in Kelly their views about the value of money. Norma encouraged Kelly to look to her for financial assistance and security, and to take comfort in knowing that she would ensure that Kelly would not have to want financially. At no time did Norma tell Kelly or even hint that the financial security would effectively dry up on Norma’s death. Kelly’s upbringing by her generous parents and especially her beneficent mother, coupled with the abundance of Norma’s estate and the independent wealth of her father who did not intend to provide for Kelly in his will, could not help but implicitly raise a legitimate expectation on Kelly’s part that her mother would continue to ensure her worry-free financial well-being in death as it had been in life. These factors also support the companion expectation that Kelly would receive a greater share of her mother’s estate than was left to her under the 1989 Will.

[369] In keeping with her discomfort in speaking about death or dying, Norma did not discuss the contents of her 1989 Will with Kelly. In my view, Kelly had every reason to believe that her mother would provide for her on her death in a manner consistent with her pattern of ensuring a lifestyle of financial security and privilege while she was alive. In this case, Kelly’s bona fide expectations significantly strengthen the moral duty that Norma owed to her.

Madam Justice Ballance further found that there was nothing in Kelly Wilson’s conduct towards her mother to disentitle her to a larger share of the estate, and made the $5.5 million award.

Seniors Outreach Workshops

2011-01-03T21:28:00.003-08:00

Seniors Outreach & Resource Centre are presenting a series of weekly workshops from January 11 through February 15, 2011 in or near Kelowna, B.C.

I will be speaking at Trinity Baptist Church, 1905 Springfield Road, Kelowna, on Tuesday, February 8, from 10:00 am to noon. My topic is Powers of Attorney, Representation Agreements and Committeeships (Adult Guardianship).

The complete schedule of workshops is as follows:

Jan. 11, 2011
Topic: Housing Options for Seniors: Independent Market Housing,
Subsidized/Low-Income Housing, Supportive Housing, Assisted
Living and Residential Care
Presented by Seniors Outreach and Resource Centre Interior Health
Time and Place
10:00am to Noon
Trinity Baptist Church
1905 Springfield Road

Jan. 17, 2011
Topic: Your Rights as a Tenant:
The Residential Tenancy Act and How it Protects Renters
Presented by TRAC – Tenant Resource & Advisory Centre
OARS—Okanagan Advocacy and Resource Society
First location—same content as January 18th workshop
Time and Place
10:00am to Noon
Westbank Manor,
(Lions Housing)
3715 Gellatly Road

Jan. 18, 2011
Topic: Your Rights as a Tenant:
The Residential Tenancy Act and How it Protects Renters
Presented by TRAC – Tenant Resource & Advisory Centre
OARS—Okanagan Advocacy and Resource Society
Second location—same content as January 17th workshop
Time and Place
10:00am to Noon
Rutland Senior Centre,
765 Dodd Road

Jan. 25, 2011
Topic: Financial Benefits and Resources: Options and Eligibility
Presented by Seniors Outreach and Resource Centre Service Canada
Service BC Veterans Affairs Credit Counselling Society
Time and Place10:00am to Noon
Trinity Baptist Church
1905 Springfield Road

Feb. 1 , 2011
Topic: Wills and Estates Matters: Planning Ahead
Presented by Dylan J. Switzer, FH&P Lawyers
Time and Place
10:00am to Noon
Trinity Baptist Church
1905 Springfield Road

Feb. 8, 2011
Topic: Representation Agreements, Powers of Attorney and
Committeeships: Who Will Act on Your Behalf?
Presented by Stan Rule, Sabey Rule LLP
Time and Place
10:00am to Noon
Trinity Baptist Church
1905 Springfield Road

Feb. 15 , 2011
Topic: Elder Abuse and Neglect: How are You Protected?
Presented by Interior Health
Public Guardian and Trustee
Time and Place
10:00am to Noon
Trinity Baptist Church
1905 Springfield Road

For more information, you may contact Seniors Outreach:
Phone: (250) 861-6180
Fax: (250) 861-6153
Email: seniors2@telus.net
http://www.seniorsoutreach.ca/

The Effect of Offers to Settle on Court Cost Awards in British Columbia

2010-12-18T10:24:00.002-08:00

The new British Columbia Supreme Court Civil Rules, which came into effect on July 1, 2010, includes changes to the rules respecting the effect on offers to settle on costs orders.

In British Columbia, the usual rule is that the successful party in a lawsuit is entitled to “costs” from the unsuccessful party. These costs do not usually cover all of the successful party’s legal expense, but cover a portion of it. The court has discretion over whether to award costs.

The Supreme Court Civil Rules allow a judge to consider offers to settle when making costs orders. The offers to settle must never be put before the court before the judge makes a decision on the substantive issues. But once the judge has made a decision, the parties may show the judge any offers to settle made in accordance with the rules.

The judge can take offers into consideration on costs in a number of ways. If the plaintiff has been successful at trial, but could have received as good or a better result if the plaintiff had accepted the defendant’s offer, the court may deprive the successful plaintiff of costs in respect of those steps in the lawsuit taken after the offer. If the claim is dismissed, the court may award the defendant double costs in respect of those steps taken after the offer. On the other hand, if the plaintiff makes and offer, and enjoys greater success than she would have if the defendant had accepted the offer, the court may award the plaintiff double costs from the time she made the offer.

The rules respecting offers to settle have been amended a few times over the last decade. At times they have been rigid.

The current Rule 9-1 is quite flexible. Rule 9-1 (5) and (6) provide as follows:

Cost options

(5) In a proceeding in which an offer to settle has been made, the court may do one or more of the following:

(a) deprive a party of any or all of the costs, including any or all of the disbursements, to which the party would otherwise be entitled in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle;

(b) award double costs of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle;

(c) award to a party, in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle, costs to which the party would have been entitled had the offer not been made;

(d) if the offer was made by a defendant and the judgment awarded to the plaintiff was no greater than the amount of the offer to settle, award to the defendant the defendant's costs in respect of all or some of the steps taken in the proceeding after the date of delivery or service of the offer to settle.

[am. B.C. Reg. 119/2010, Sch. A, s. 21.]

Considerations of court

(6) In making an order under subrule (5), the court may consider the following:

(a) whether the offer to settle was one that ought reasonably to have been accepted, either on the date that the offer to settle was delivered or served or on any later date;

(b) the relationship between the terms of settlement offered and the final judgment of the court;

(c) the relative financial circumstances of the parties;

(d) any other factor the court considers appropriate.

In order to for the court to consider an offer to settle when awarding costs, the offer must be in writing, delivered to all of the other parties of record, and the offer must say that the party making the offer “reserves the right to bring this offer to the attention of the court for consideration in relation to costs after the court has pronounced judgment on all other issues in this proceeding."

B.C. Law Institute Consultation Paper on Proposals for Unfair Contracts Relief

2010-12-14T21:32:00.001-08:00

The British Columbia Law Institute published its Consultation Paper on Proposals for Unfair Contracts Relief today.

The B.C. Law Institute is seeking public comments on the proposals. According to today's press release:

"Contract law has traditionally developed case by case in the courts," noted Prof. Joost Blom, Q.C., chair of the BCLI's Unfair Contracts Relief Project Committee. "This consultation paper gives the public the opportunity to participate in policy development on some important longstanding issues in the law of contracts."

The consultation paper contains 46 proposals designed to modernize and clarify how the law of contracts deals with unfairness. Its leading proposal is for British Columbia to enact a Contract Fairness Act. This act would consolidate the major concepts that have evolved in contract law to guard against unfairness.

The consultation paper proposes clarifying the tests for unconscionability, duress, and undue influence and integrating how those concepts operate at the level of procedure and remedy. It proposes establishing an implied duty of good faith in the performance of contracts. And it proposes reforms aimed at modernizing the scope of and remedies available for misrepresentation.

If you wish to comment on the Report, you may provide comments as follows:

by mail:

British Columbia Law Institute

1822 East Mall
University of British Columbia
Vancouver, BC V6T 1Z1

Attention: Kevin Zakreski

by fax: (604) 822‐0144, or

by email: ucr@bcli.org

For comments to be considered before the British Columbia Law Institute prepares its final report, they must be received no later than May 31, 2011.

Parties to a Wills Variation Act Claim

2010-12-12T14:41:00.001-08:00

In British Columbia, a spouse or child of a deceased person may apply to court to vary his or her spouse's or parent's will if adequate provision has not been made for the spouse or child. The application is made under the Wills Variation Act.

I have come across a number of Wills Variation Act claims in which the plaintiff has not named all of the proper parties as defendants in the lawsuit.

The proper parties to a Wills Variation Act suit are as set out in Rule 21-6 (2) of the Supreme Court Civil Rules:

Parties

(2) In a proceeding referred to in subrule (1),

(a) the following persons must be parties to the proceeding:
(i) the surviving spouse and children of the testator;
(ii) all beneficiaries under the testator's will whose interest may be affected by the order sought;
(iii) the executor of the will, and

(b) the court may order that any other person be joined as a party.

In a few cases, I have seen the plaintiff name only the executor. More frequently, I have seen the plaintiff name the executor and the beneficiaries, but not a spouse or child who has also been excluded from the will.

The reason it is important to name all of the beneficiaries in a Wills Variation Act claim is that it is the beneficiaries rather than the executor who has an interest in defending against the claim. The executor is supposed to remain neutral in a Wills Variation Act lawsuit.

A spouse or children who have been excluded also have an interest in the lawsuit, because they may advance their own Wills Variation Act claims in the suit. Once one person has brought a Wills Variation Act claim, it has been brought for all persons who are entitled to make a under the Wills Variation Act.

Werbenuk v. Werbenuk Estate

2010-12-02T22:23:00.006-08:00

My partner Keith Sabey had the privilege of representing Virginia Derksen, one of the successful parties in the case of Werbenuk v. Werbenuk Estate, 2010 BCSC 1678, which is a Supreme Court of British Columbia judgment released on November 29, 2010.

Mrs. Derksen is the eldest of William Werbenuk’s five children. When she was a young child, her parent’s marriage broke down, and her father abandoned her. He had no contact with her between from when she was 4 until she was 14. He did not obey a court order requiring him to pay child support for her. When she was 15, she approached him and asked for $50 to enter a pageant. He refused.

Mr. Werbenuk remarried and had three daughters, Carrie Werbenuk, Lorraine Werbenuk and Patricia Skwarok, and a son, Randall Werbenuk, with his second wife. Mrs. Derksen wanted to have a relationship with her siblings, but her father discouraged them.

Mrs. Derksen continued in later years to try to have a relationship with her father, and eventually was able to establish some contact with him.

William Werbenuk similarly mistreated his other three daughters. Mr. Justice Wong found the following facts in his reasons for judgment:

[12] The evidence of all of the daughters indicate that their father was a hard and rigid man who ruled his family, and especially the women, with an iron fist. He was a racist whose will and personality dominated his family. He was self absorbed and ordered his wife and daughters about as if they were brought into being merely to satisfy his needs, without regard to their emotional well being. Their evidence provides stark testament to the fact that the father, on frequent occasions, resorted to and engaged in harsh and brutal corporal and other punishments. He ruled those who lived with him and those who incurred his wrath by predictable resort to violence and the threat of violence. The father emotionally abused his wife and daughters on a regular basis and engaged in regular assaults upon their bodies as a form of punishment and, ultimately, as a form of ruling by terror.

[13] The most demeaning form of punishment engaged in by the father on a regular basis was his direction to all of his children, with the exception of Randall, to wash his feet.

When Mr. Werbenuk made his will on March 8, 2006, he left his entire estate to his son, Randall Werbenuk. After William Werbenuk died, Randall Werbenuk as the executor of his father’s will filled an inventory of the estate assets indicating that the gross value of the estate was approximately $434,000. But Mr. Justice Wong found that Randall Werbenuk did not include significant estate assets in the inventory, and the estate is worth more.

William Werbenuk’s three daughters from his second marriage brought a claim under the Wills Variation Act, asking the court to vary their father’s will on the basis that it did not make adequate provision for them. They requested the court to vary the will to make a provision that was just, adequate and equitable.

Because Mrs. Derksen was also entitled to apply, they named her as a defendant in the suit, and she retained Mr. Sabey to represent her.

Mr. Justice Wong varied the will. He held that William Werbenuk had a moral obligation to each of his daughters, which he, Mr. Werbenuk, failed to meet. He found that the three daughters from William Werbenuk’s second marriage had a closer relationship than Mrs. Derksen with their father. He also found that they had greater financial needs. Mr. Justice Wong varied the will to provide Carrie Werbenuk with 23 percent of the estate, Lorraine Werbenuk with 22 percent of the estate, Patricia Skwarok with 20 percent of the estate, Randall Werbenuk with 20 percent of the estate, and Virginia Derksen 15 percent of the estate.

One of the things I find most interesting about this case is the reaction. Very few Wills Variation Act cases get reported in the press, but this case has been covered by media across Canada, including the Vancouver Sun, The Globe and Mail, and the CBC. This afternoon, Keith Sabey was interviewed for a radio show in Toronto. The interviewer seemed shocked that the court could vary the will. Indeed, from reading some comments in the web versions of the press, many people find this decision surprising.

The decision is consistent with the legislation, which expressly provides that a court may vary a will if the maker has not made adequate provision for his or her spouse or children. The facts of this case are remarkable in the egregious conduct by William Werbenuk toward his daughters. But the result is consistent with the principles the courts have developed over decades since the legislation, then called the Testator's Family Maintenance Act, was passed by the British Columbia Legislative Assembly in 1920.

The court will view the will from the perspective of a judicious father, in accordance with contemporary standards. In this case, Mr. Justice Wong found that William Werbenuk fell short of that standard, and the court varied the will substantially. In other cases, the courts have refused to vary wills where parents had rational and valid reasons for leaving children little, or even disinheriting them.

In fairness to the radio interviewer in Toronto, Ontario's legislation is different, each province having its own laws governing wills. But it is interesting to see how surprised some of the media are by the decision.

I am pleased to see the interest in the area of law we practice, and the debate this decision has generated.

B.C. Law Institute Report on New Probate Rules

2010-11-21T16:46:00.002-08:00

The British Columbia Law Institute has published its Report on New Probate Rules. The Report includes recommended draft provisions for the Supreme Court Civil Rules that dovetail with the new Wills, Estates and Succession Act (the new Act has been passed, but is not yet in effect as of the date of this post).

The approach taken in the Report is outlined in the Executive Summary as follows:

The Project Committee’s approach to reform of the probate rules was fourfold. First,there would be an attempt to design an optimal procedure instead of simply improving on the existing one. Second,aspects of probate procedure that have outlived their usefulness would no longer be retained simply for historical reasons. Third, in recognition of the fact that unrepresented persons initiate much probate business, procedures would be simplified where possible. The revised probate rules would provide more explicit guidance than Rules 61 and 62 now do. Fourth, differences between procedures in probate matters and general civil procedure as remodelled under the new Civil Rules would be harmonized to the extent possible.

Brewster v. Lenzi

2010-11-15T21:26:00.002-08:00

Peter Lenzi and Lena Lenzi owned a condominium together. They were married, and it was the second marriage for each of them. They owned the condominium as joint tenants, meaning that on the death of one, the title passed to the survivor.

They made wills together. Mr. Lenzi’s will had a provision that if he outlived Mrs. Lenzi (in which case he would own the condominium as the survivor), a one-half interest would go to Lena Lenzi’s niece and nephew on his death. Similarly, Mrs. Lenzi’s will provided that if she outlived her husband, a half-interest would go to his daughter, Lorraine Brewster, on Mrs. Lenzi’s death.

Peter Lenzi passed away before his wife. Mrs. Lenzi arranged through a lawyer to have the condominium transferred into her name as the survivor. Ms. Brewster was the executor of Mr. Lenzi’s will. When Mrs. Lenzi’s lawyer transferred the title to the condominium into Mrs. Lenzi’s sole name, he wrote to Ms. Brewster’s lawyer and advised that Mrs. Lenzi and Mr. Lenzi intended that the survivor of them would leave a half-interest to the intended beneficiary of the first to die. He further advised that Mrs. Lenzi intended to honour that arrangement by leaving a half-interest in the condominium to Ms. Brewster.

Mrs. Lenzi later changed her mind, and made a new will in which she did not make any provision for Ms. Brewster. Somehow Ms. Brewster found out about the will.

Ms. Brewster sued Mrs. Lenzi, alleging that Mrs. Lenzi and Mr. Lenzi had a mutual will agreement, and that Mrs. Lenzi was bound by that agreement.

Mr. Justice Bracken in Brewster v. Lenzi, 2010 BCSC 1488, agreed with Ms. Brewster. He found that Mr. and Mrs. Lenzi had made a mutual wills agreement with each other, and Mrs. Lenzi broke the agreement by making the new will. He imposed a constructive trust on a half-interest in the condominium in favour of Ms. Brewster. On Mrs. Lenzi’s death, Ms. Brewster will be entitled to the half-interest in the condominium.

This case is unusual in a couple of respects. First, most mutual will claims are brought after the death of the surviving spouse. In this case, Ms. Brewster found out about Mrs. Lenzi’s will before Mrs. Lenzi’s death, and brought the suit during her lifetime.

Secondly, in most successful mutual will cases, there is an express written agreement between the spouses (usually spouses, but you can make a mutual will agreement with someone who is not your spouse). The agreement may either be set out in the wills, or in a separate written agreement, signed by both spouses. The fact that spouses make mirror image wills (wills in which each provides that if he or she outlives the other part of the estate will go to beneficiaries related to or chosen by one spouse and part to beneficiaries related to or chosen by the other spouse) is not sufficient to prove a mutual wills agreement.

If Mrs. Lenzi had not instructed her lawyer to send a letter to Ms. Brewster’s lawyer acknowledging the agreement, I think it would have been very difficult for Ms. Brewster to prove that her father and Mrs. Lenzi had a mutual will agreement that bound Mrs. Lenzi to keep Ms. Brewster as a beneficiary of a half-interest in the condominium.

United States Court House, Los Angeles

2010-11-09T20:18:00.004-08:00

I took these photographs of the United States Court House in downtown L.A. in 2009. Here is the wikipedia description of this courthouse.

Re Hall Estate

2010-11-07T15:22:00.002-08:00

When executors and trustees account for their handling of estates, they need to be prepared to explain large expenditures.

In a recent decision in British Columbia, Re Hall Estate, 2010 BCSC 1510, Master Baker declined to pass an executor’s accounts without further explanation from the executor of almost $96,000 in accounting fees.

The executor of Gordon Hall’s will was Mr. Hall’s accountant, John Sims. Gordon Hall died on May 19th, 2007. In his will, he left half of his estate to the Salvation Army, and the other half to such charities as his executor appointed.

Before Mr. Hall died, he became incompetent to manage his affairs. Mr. Sims was appointed by the court as his committee (or adult guardian). As committee, Mr. Sims had passed his accounts before the Public Guardian and Trustee of British Columbia up to February 27, 2005. But after Mr. Hall’s death, the Public Guardian and Trustee is no longer involved in approving a committee’s accounts, Instead a committee may get approval of the accounts from the executor or administrator of the deceased’s person’s estate, or where the committee is also the executor, from the beneficiaries of the will.

The Salvation Army did not approve of Mr. Sims' accounts for acting as committee or executor. It was concerned with the amount of accounting fees, which were charged by Mr. Sims' accounting firms.

Master Baker was not satisfied that Mr. Sims had provided sufficient evidence to justify the accounting fees. He wrote at paragraphs 16 through 20:

[16] The evidence in respect of that expense has been minimal, almost negligible. Mr. Sims confirmed that the fees (with the exception, perhaps, of the accrued portion, above) have been paid. There were no exhibits filed to confirm the accounts or details of them. Three Ernst and Young accounts (May 25, 2007, August 21, 2007, and January 15, 2008, for $4,850.00, $13,600.00, and $9,000.00, respectively) found their way into the court file, attached to a copy of Exhibit 3, the PGT’s letter of March 3, 2006, although the invoices clearly had nothing to do with the letter. The invoice of August 21, 2007, as an example, is brief in the extreme. I can quote it in full: “To accounting and income tax services for the period May 19, 2007 (date of death) to August 17, 2007 and all other services as required - 13,600.00.” There is a handwritten notation on the invoice: “3 months x $4000/mo.” I have no idea who wrote the notation or why. I infer, however, that the invoices may well be typical of the accounting invoices paid. If so, there is a significant dearth of detail and information upon which one can base an assessment of the reasonableness of the accounts. I doubt, for example, that were the accounts for legal services, they would meet the requirements of s. 69(4) of the Legal Profession Act[3]:
A bill under subsection (1) is sufficient in form if it contains a reasonably descriptive statement of the services with a lump sum charge and a detailed statement of disbursements.

I assume that there are time records that would relate to and possibly explain these accounts but if they exist I haven’t seen them.
[17] One of the accounts concerns me for other reasons. The invoice of May 25th, 2007 states that the accounting fees are for services: “...including payment of accounts, investment of funds and all other services in regard to the affairs for the period ended May 18, 2007”.
[18] This concerns me because Mr. Sims seeks a fee, as committee, for, in part at least, those very services i.e. the payment of accounts and investment of funds. How can it be that both he, as committee, and the firm, as accountants, should be remunerated for the same services?
[19] Moreover there is the broader concern: the total accounting fees, whether they total $95,988.15 or $98,028.19 seem disproportionate given the entire estate was valued at $1,100,000.00, and given that after two years’ committeeship and the investment restriction imposed by the committeeship order (para. 4, above) the estate could not have been a complex one. The estate summary for February 28, 2005 to May 19, 2007, in fact, lists only two chequing accounts, a treasury bill, a RRIF, four GICs, the mortgage Mr. Hall held, a small account for his comfort money, and three other accounts (Genus and two Vancity accounts, one for cash and one for securities). Some of these, I understand, were essentially replacements for the others as funds were changed from one institution to the other, or re-invested. So, while Mr. Hall’s funds may have been greater than the average person’s I cannot see how their management, including tax reporting and arrangements, could justify these fees.
[20] It would also seem to me that given that the fees were charged in all instances by firms to which Mr. Sims belonged, it is incumbent on him to be explicit and thorough in justifying them.

In the result, Master Baker declined to pass the accounts, but ordered that Mr. Sims may re-submit the accounts and be given an opportunity to provide further evidence concerning the accounting fees.

Accidental Revocation of Foreign Will

2010-11-04T22:07:00.001-07:00

It is fairly common—or at least not unusual—to have property in different countries. It is often a good idea to have separate wills governing property in separate jurisdictions. Each will is drawn by a lawyer familiar with the laws of his or her jurisdiction, and can tailor your will accordingly. On your death, the executor of each will can apply for a grant of probate for the will in the jurisdiction for which it is intended to apply.

But if you have more than one will, it is important that the wills be carefully coordinated. If you change one will covering assets in one country, make sure that you do not accidentally revoke a will you indent to keep in effect for your property in another country.

This is what happened in an Ontario case, Re Estate of Blanca Esther Robinson, 2010 ONSC 3484. Esther Robinson owned property in England, Spain and Canada. She had wills made in Spain and in Canada. In her Spanish will, which she made in 2002, she gave her companion, Dr. Rondel, a life interest in her flat in London England, and provided that subject to the life interest, her property in Spain and England would go to her sisters. The terms of the Spanish will were clear that it governed only the assets in Europe, and her Canadian will governed her assets in Canada.

In 2005, she instructed her lawyer to make changes to her will in Canada. He did so. The Canadian will had provisions for a number of different beneficiaries, including step-children, business associates, her brother-in-law, two nieces and one of her sisters. She later revised her Canadian Will again to provide a gift of $1 million to her companion.

Unfortunately, when she made a new Canadian Will in 2005, she did not tell her lawyer about the Spanish Will. He included fairly standard clauses in the Canadian Will revoking all previous wills, and providing that all of her assets “wheresoever situate” would go to her estate trustee to be distributed in accordance with the Canadian Will. The lawyer went through the new Canadian Will with her clause by clause, and she signed it.

The estate trustee applied for and received a grant of probate of the Canadian Will in Ontario before he found out about the Spanish Will. He then applied to court for directions as to whether the Canadian Will could be rectified delete the revocation clause.

Mr. Justice Belobaba found that Blanca Robinson probably did not intend to revoke the Spanish Will. But he held that the court did not have the authority under Ontario law to rectify the will in these circumstances, where the solicitor had not made a drafting error, and Ms. Robinson knew of and approved the clause, but was mistaken as to the legal effect of the clause.

Ms. Robinson had accidentally revoked her Spanish Will, eliminating the gifts of the English and Spanish properties to her companion and her sisters.

The lessons are that it is important to tell you lawyer if you have wills in other jurisdictions. Lawyers, in turn, need to pay close attention to the wording of wills that they draw when the wills are not intended to revoke wills dealing with property in other jurisdictions, or to affect property in other jurisdictions.

The Continuing Saga of Top Line

2010-10-24T18:29:00.006-07:00

I live and work in the Okanagan Valley, in British Columbia. There are orchards up and down the valley: apples, pears, peaches and grapes among other fruits. Most of the orchards are small. People buy houses on orchards. Many don’t want to actually farm the orchards. They have jobs in town, or are retired. But they want the rural or semi-rural lifestyle of living among the fruit trees.

What do you do if you want to live on an orchard property, but don’t want to actually farm it? One solution is to lease the orchard portion of your land to someone else to farm it. You can enjoy living on an orchard, while someone who has the knowledge and ability to productively farm the land may do so. The lease will likely need to be long-term to make it worthwhile for the tenant to make the investments required to operate an orchard.

Sounds like a win-win solution, right? I don’t know how many leases of the orchard portion of land there are in the Okanagan, but I am guessing that there are quite a few. I have certainly seen some. It is hard to imagine anything illegal about it.

Now, let’s go from farming to recycling, the business that a company called International Paper Industries Ltd. was in. International Paper Industries Ltd. leased a building and a portion of a parcel of land from Top Line Industries Inc. The lease was for a five year term, and the tenant had the option to renew the lease. A dispute arose between International Paper Industries Ltd and Top Line Industries Inc. The landlord took the position that the lease was invalid, and the case ultimately ended up in the British Columbia Court of Appeal.

In Top Line Industries Ltd. v. International Paper Industries Ltd.(1996), 20 B.C.L.R. (3d) 41 (C.A.), the Court of Appeal held that the lease was invalid. The reason that it was invalid is that it contravened s. 73 of the Land Title Act, the relevant portions of which read as follows:

(1) Except on compliance with this Part, no person shall subdivide land into smaller parcels than those of which he is the owner for the purpose of

(a) transferring it; or

(b) leasing it, or agreeing to lease it for a life, or for a term exceeding three years.

. . . . .

(4) No instrument executed by a person in contravention of this section confers on the party claiming under it a right to registration of the instrument or a part of it.

In other words, you can’t subdivide a property by leasing a portion of it. You have to go through the subdivision process set out in the Land Title Act, getting all of the necessary government approvals, and registering a subdivision plan in the Land Title Office.

The Court of Appeal held that the lease in the Top Line case was void because it purported to lease a portion of the land, thereby subdividing it without complying with the Land Title Act. The Court further held—and this to my mind does not necessarily follow—that the lease could not create contractual rights as between the landlord and the tenant.

It should be noted that Top Line cut both ways. In a subsequent ruling, the British Columbia Court of Appeal held that Top Line Industries Ltd. could not collect rent it claimed was owing to it from International Paper Industries Ltd. under a void lease.

The Top Line decision is not a popular one. In her introduction to the British Columbia Law Institute’s Report on Leases of Unsudivided Land and the Top Line Case, Ann McLean, Chair, wrote of the Top Line decision:

This ruling surprised real estate lawyers. It has also proved to be a continuing source of frustration to persons involved in commercial leasing and agriculture. The Top Line case has imposed additional costs on these persons. In addition, by giving persons a means to escape from their contractual obligations, it has added uncertainty to the law and raised the volume of itigation.

The British Columbia Legislative Assembly tried to fix the problems created by the Top Line decision by amending the Land Title Act in May 2007. The new provision is section 73.1, which says:

73.1 (1) A lease or an agreement for lease of a part of a parcel of land is not unenforceable between the parties to the lease or agreement for lease by reason only that
(a) the lease or agreement for lease does not comply with this Part, or
(b) an application for the registration of the lease or agreement for lease may be refused or rejected.
(2) This section does not apply to an airport lease, as defined in section 41 of the Municipalities Enabling and Validating Act (No. 2).

In other words, you can now lease a portion of your land for more than three years.

I suspect that when the legislators passed 73.1 of the Land Title Act, they thought they had fixed the problems created by the Top Line decision, protecting those who had in good faith entered into long-term leases of portions of land, including orchard properties. But did they?

In a decision released last week, Idle-O Apartments Inc. v. Charlyn Investments Ltd., 2010 BCCA 460, the Court of Appeal held that section 73.1 of the Land Title Act does not apply retrospectively to leases signed before section 73.1 came into effect. In that case the tenant entered into a 99 year lease with Idle-O Apartments Inc. of land near Osoyoos Lake. The lease was of .62 acres of a 3.49 acre lot. The lease was later extended to 998 years. The principals of Charlyn Investments Ltd. used the land for their personal and family use. A dispute arose between the landlord and tenant, and in May 2004, the landlord started a court proceeding asking the court to declare the lease void.

In the Supreme Court of British Columbia, Madam Justice Morrison held that section 73.1 of the Land Title Act (which was passed after the landlord began the lawsuit, but before the date of judgment) applied to the lease, and held that it was valid. She wrote:

[111] In my view, s. 73.1 is clearly remedial legislation. It was passed to bring fairness and equity to a situation like this. The mischief or hardship caused by the Top Line case was so apparent that the BCLI as well as the provincial legislature drafted legislation to ensure that the unfairness would not continue.
[112] This is a situation where the intention of the legislature is before us; the mischief must be corrected.
[113] The rules of statute construction allow the courts to go beyond strict literal interpretation, given certain circumstances. Namely, to avoid unfairness, observe the rule of law, and give full meaning to the intention of the legislature.

Her decision is reported at 2008 BCSC 849.

The Court of Appeal overturned the Supreme Court decision. Madam Justice Levine held that s. 73.1 did not expressly state that it applied retrospectively, nor was it necessary to apply it retrospectively “by necessary implication required by the language of the Act…” She wrote:

[36] The trial judge’s conclusion that s. 73.1 must be given retrospective effect on the basis that it is remedial legislation is not supported by the well-established legal principles that govern the interpretation of statutes and their applicability. It follows that the lease is invalid and unenforceable, as dictated by the decision in Top Line.

[37] There is no question that this result creates what the BCLI referred to in its report on the implications of Top Line: “A Declaration that an agreement is void ab initio can cause a disaster for one party and a windfall for the other.” These parties carried on for 26 years on the basis that they had entered into a valid lease. However, unless and until this Court decides that Top Line was wrongly decided, or the Legislature makes it clear that s. 73.1 is to be given retrospective effect, leases entered into before the enactment of s. 73.1 on May 31, 2007 are invalid and unenforceable.

The other possibility is that one of these cases will go to the Supreme Court of Canada (although unlikely), which could also hold that Top Line was wrongly decided. In the meantime, the validity of possibly thousands of long-term leases covering portions of lots is in doubt, including many leases of orchards, some perhaps in my neighbourhood.

Court of Appeal Decision in Gould v. Royal Trust

2010-10-23T18:34:00.003-07:00

The British Columbia Court of Appeal dismissed the plaintiff's appeal in Gould v. Royal Trust Corp. of Canada, 2010 BCCA 424.

As I wrote here, the Supreme Court of British Columbia dismissed Barbara Gould's claim to vary her mother's will under the Wills Variation Act. Ms. Gould's mother, Sylvia Gould, had left the most of her estate to her, Sylvia Gould's, three sons to the exclusion of her daughter. Mr. Justice Pearlman found that Sylvia Gould's reason for leaving most of her estate to her other children -- that she had already given her daughter a cottage property in Ontario--were rational and valid. Accordingly, he dismissed Barbara Gould's claim under the Wills Variation Act, but did award her $75,000 for unjust enrichment to compensate her for her expenditures and labour in providing her mother care.

Barbara Gould appealed the decision to the British Columbia Court of Appeal, which upheld Mr. Justice Pearlman's decision.

Yee v. Yu

2010-10-22T23:20:00.000-07:00

Although in British Columbia, the Wills Variation Act allows an independent adult child to apply to vary his or her parent’s will on the grounds that the parent did not make adequate provision for the child, this does not mean that the adult child always succeeds. If the parent leaves his estate to the child’s other parent, the adult child may have an uphill battle convincing the court to vary the will.

This is illustrated by a decision released earlier in the week, Yee v. Yu, 2010 BCSC 1464.

Yung Yu died in January 2007. He had an estate worth almost $1.2 million. In his will, he left his estate to his wife. If she had died before him, his will said that his real estate would go to two of his three sons, and the balance of the estate would be equally among four of his five children. The plaintiff, Tom Yee, did not receive anything under the will, and would not have received anything even if his mother had died before his father.

Tom Yee applied to vary the will under the Wills Variation Act. In his reasons for judgment, Mr. Justice Myers noted that Tom Yee was likely motivated to bring the claim by the provisions in the will leaving gifts to his siblings if his mother had died before his father. But because Tom Yee’s mother survived and was the sole beneficiary, Mr. Justice Myers held that the relative moral claims of the children were not relevant. In dismissing Tom Yee’s claim, Mr. Justice Myers said at paragraphs 17 and 18:

As I have said, the unequal treatment of the children in the gift-over is not an issue in this case because Mrs. Yu survived the father. Likewise, the validity or rationality of the reasons the father gave for that preference is not germane to the case. I therefore do not propose to address the evidence with respect to those issues, particularly since - depending on what Mrs. Yu does with her estate - the matter may be back before the courts in the future.

[18] The question before me is whether this will should be varied when it left everything to the father’s first and only spouse (80 years old at the time of the father’s death) and the child contesting the will is adult, financially secure and thriving, with no special claim against the estate arising from contributions to it. Counsel for the parties have found no case where a will has been varied in similar circumstances. I think the answer to that question is in the negative.

Summary Trials and Wills Variation Act Claims

2010-10-11T17:14:00.011-07:00

Not all civil trials in British Columbia are conventional trials in which each of the witnesses testify in person. Rule 9-7 of the Supreme Court Civil Rules (formerly Rule 18A of the Supreme Court Rules) allows the court to hear a case on the basis of affidavit evidence.

Any party can apply to have the trial proceed summarily on affidavit evidence. If an application for a summary trial is made, the court may make a decision based on affidavit and other written evidence such as excerpts from examination for discovery transcripts, but only if the court may make sufficient findings of facts on the evidence to decide the issues of fact and law. The court must also be of the opinion that it is just to make a decision on the basis of the summary trial evidence.

If the court is unable to make sufficient findings of facts, or considers it unjust to decide on the basis of the materials filed, then the judge may dismiss the summary trial application, in which case the parties will have to have the case determined by a full trial. The summary trial rules also permit a judge to order that the witnesses or some of them be cross examined on the affidavits before making a decision. This can result in a hybrid procedure that requires witnesses to testify in court, but is not a full trial.

Summary trials are most effective when many of the facts are not in dispute, or where those facts that are in dispute can be determined by independent evidence such as documents, or evidence of neutral witnesses. A summary trial may reduce court time in costs when used in the right case.

On the other hand, where the case turns on the credibility of certain witnesses, a summary trial may not be effective.

I have noticed that quite a few Wills Variation Act cases are being decided on the basis of affidavit evidence at summary trials. Some Wills Variation Act cases seem to lend themselves well to summary trials.

I was curious as to how often summary trial are used in Wills Variation Act cases. I searched the B.C. Superior Court websites for cases decided in the Supreme Court of British Columbia for 2008, 2009, 2010. I found 27 cases. 12 were summary trials, and 15 were conventional trials (two of which were heard together).

I have listed the cases, and the number of days of trial for each below:

Wills Variation Act cases determined by summary trials during 2008 - 2010:

Hutchison v. Weidman Estate 2010 BCSC 1356 (1 day);
Haegedorn v. Haegedorn, 2010 BCSC 836 (1day);
Smith v. Smith, 2009 BCSC 1737 (1 day);
Gould v. Royal Trust Corp. of Canada, 2009 BCSC 1528 (4 days);
Martinson v. Anniko, 2009 BCSC 1104 (1 day);
Waldman v. Blumes, 2009 BCSC 1012 (4days);
Viberg v. Viberg, 2009 BCSC 27 (2 days);
MacKinlay v. MacKinlay Estate 2008 BCSC 994 (2 days);
Tomlyn v. Kennedy, 2008 BCSC 331 (1 day);
Crowley v. Walkhouse, 2008 BCSC 319 (1 day);
Graham v. Chalmers, 2008 BCSC 1246 (1 day);
Fuller v. Fuller Estate, 2008 BCSC 702 (1 day).

Wills Variation Act determined by conventional trials during 2008-2010:

Atwal v. Atwal , 2010 BCSC 1261 (20 days);
Nightingale v. Hepting, 2010 BCSC 1214 (3 days);
Mawdsley v. Meshen, 2010 BCSC 1099 (8 days);
Schipper v. De Lange, 2010 BCSC 1067 (4 days);
Hall v. Dow, 2010 BCSC 529 and Hall v. Hall, 2010 BCSC 528 (6 days heard together);
McBride v. Voth, 2010 BCSC 443 (6 days);
Rose v. Bloomfield, 2010 BCSC 315 (3 days);
Mazur v. Berg, 2009 BCSC 1770 (5 days);
Lamoureaux v. Kalyk, 2009 BCSC 584 (8 days);
Todd v. Walker, 2009 BCSC 677 (4 days);
Sikora v. Sikora Estate, 2009 BCSC 195 (5 days);
Petrie v. Burnett, 2008 BCSC 1503 (6 days);
K.D.M.B. v. Taylor, 2008 BCSC 1498 (5 days);
Stone v. Campbell, 2008 BCSC 1518 (5 days).

It should be noted that some of these decision involved other issues in addition to a Wills Variation Act claim, which will tend to lengthen the trial.

White Paper on Family Relations Act Reform

2010-10-04T21:51:00.003-07:00

The British Columbia Ministry has published a White Paper on Family Relations Act Reform. The White Paper proposes some significant changes to British Columbia’s family law legislation.

A number of proposed changes will, if implemented, have an impact on wills, estates and trusts practices. I will summarize a few of them in this post.

Testamentary and Standby Guardianship

Currently, if you are the parent of a child, you may appoint a guardian in your will. But if you are a guardian, who is not the child’s parent, there is no provision allowing you to appoint a guardian in your will in case you die before the child becomes an adult. Nor is there any provision allowing you as a parent or guardian to appoint a person as the child’s guardian in case you become ill. The proposed new legislation will allow a child’s guardian (including a guardian who is not the child's parent) to appoint a guardian in a will, or to appoint a standby guardian in case he or she becomes unable to continue his or her parental responsibilities. This proposal would implement changes recommended by the British Columbia Law Institute. I wrote about this issue in a previous post here.

Exclusions of Inheritances and Assets held in Trust

The proposed legislation would exclude assets one spouse inherits or receives as a gift from the property divided between the spouses on the breakdown of the marriage or relationship. It would also exclude “property held in trust for the benefit of a spouse, unless the spouse has an immediate and absolute interest in the trust property or has the power to terminate the trust.”

It should be noted that the exclusions would not be absolute. The court would have discretion to divide excluded property if:

“(a) one of more items of family property are not available to effect the division of family property under section 80 [equal division of family property and family debt] or section 81 [unequal division of family property and family debt]; or
(b) it would be clearly unfair not to do so having regard to
(i) the duration of the spousal relationship, or
(ii) a spouse’s direct or indirect contribution to the preservation, maintenance,
improvement, operation, or management of excluded property.”

Division of Property on Breakdown of Common Law Relationships

The White Paper recommends giving common law spouses similar rights to a division of property on a marriage breakdown as married spouses. I note that the definition of spouse in the proposed legislation differs from the definitions in the Estate Administration Act, Wills Variation Act, and the new Wills, Estates and Succession Act (which as at the date of this post is not in effect.) The definition of spouse in the proposed legislation includes a person who:

“(b) lived with another person:
(i) in a marriage-like relationship for a continuous period of at least 2 years, or
(ii) in a marriage-like relationship of some permanence if the persons are together the parents of a child
and, for the purposes of this Act, the marriage-like relationship may be between persons of the same gender, ….”

In contrast, the new Wills, Estates and Succession Act will not treat a person who lived with another “in a marriage-like relationship of some permanence if the persons are together the parents of a child,” as a spouse unless they lived with each other in a marriage-like relationship for at least 2 years. This means that in some cases a person may be considered a spouse of another and have all of the rights of a spouse on separation under the proposed new legislation if they are parents of a child, but have less rights to property on the death of the other parent.

Spousal and Child Support

If the White Paper is implemented the obligation to pay spousal or child support will continue after the payer’s death. Payments would then have to come out of his or her estate. The parties may, however, agree that they will not bind the payer’s estate. The payer’s personal representative would also be able to apply to court to reduce or terminate support.

If you wish to make comments on the White Paper, you only have a few days left. The consultation ends on October 8, 2010.

Comments may be mailed, faxed or emailed to:

FAMILY LAW WHITE PAPER
Civil Policy and Legislation Office
Justice Services Branch
British Columbia Ministry of Attorney General
PO Box 9222 Stn Prov Govt
Victoria, British Columbia V8W 9J1
Facsimile: (250) 387-4525
Email: CPLOFamilyLaw@gov.bc.ca

Court of Appeal Decision in Fuller v. Harper

2010-10-03T14:40:00.003-07:00

In an earlier post, I wrote about the decision of the Supreme Court of British Columbia in Fuller v. Fuller Estate, 2008 BCSC 702, in which the court held that the presumption of resulting trust applied to land. Frederick Fuller had gratuitously transferred land into a joint tenancy with his friend Geramy Harper. He also made a will in which he disinherited his only son, Steven Fuller. After Frederick Fuller’s death, Steven Fuller sued claiming that Geramy Harper held the land in a resulting trust for the estate. He also applied to vary his father’s will pursuant to the Wills Variation Act. Steven Fuller was successful at trial.

On appeal, the British Columbia Court of Appeal, in Fuller v. Harper, 2010 BCCA 421, overturned the trial judge’s decision that Mr. Harper held the land in a resulting trust for the estate. In reaching that decision the Court of Appeal did not disturb the trial judge’s holding that resulting trusts applied to land in British Columbia. The appeal proceeded on the assumption that resulting trusts apply to land.

The Court of Appeal held that on the evidence rebutted the presumption of resulting trust. Frederick Fuller intended to make a gift of the right of survivorship to Mr. Harper when he transferred the title into a joint tenancy. The Court of Appeal considered the following:

1. Frederick Fuller was estranged from his son when he made the transfer, and it was not disputed that he did so to keep the land from falling into his son’s hands after his death.
2. Frederick Fuller first wanted to transfer the land solely into Mr. Harper’s name, but the notary who assisted with the transfer advised him to hold it in a joint tenancy incase Mr. Harper died before Frederick Fuller.
3. Frederick Fuller knew that if he kept the land in his name, it would be available to satisfy a Wills Variation Act claim by his son.
4. Frederick Fuller knew he was dying, and would not be able to benefit from the sale of the land during his lifetime.

The Court of Appeal inferred from this evidence that Frederick Fuller intended to make a gift. The presumption of resulting trust only applies if the court is unable to find the transferor’s actual intention.

Hutchison v. Weidman Estate

2010-09-28T22:26:00.002-07:00

In British Columbia, the Wills Variation Act allows a child to apply to court to vary his or her parent's will if the parent did not make adequate provision for the child in the will. This does not mean that parents have to treat their children equally. The judge hearing the case may consider the parent’s reasons for favouring one child over others. If a child has greater need than the others, a parent may have good reason to leave a larger share to that child.

A recent case, Hutchison v. Weidman Estate, 2010 BCSC 1356, illustrates this point.

In his will, Bernard Walter Weidman left his entire estate, worth a little over $1 million to his daughter Sharon Weidman. He had three other children, but did not leave anything to them. He died in January 2007.

One of the other children, his daughter Cheryl Hutchison, brought a claim under the Wills Variation Act to vary her father’s will. She was a registered nurse, but has some health problems, and has been out of work. She owns her own home worth about $700,000, and has built up a registered retirement savings plan. She is 53.

Sharon Weidman has had significant health problems throughout her life, including epileptic seizures. She has cognitive difficulties, and has held low paying jobs. She was unemployed when the case came to trial. She owns her own apartment, in an older building, that may have a major roof problem. The court heard medical, vocational and actuarial expert evidence, indicating that she was severely limited in her employment prospects, and may require expensive care in the future. She is 51.

Neither of the other two children made any claim to a share of their father’s estate. One of them, Carol Cunniff, gave evidence in support of Sharon Weidman.

Cheryl Hutchison’s position at trial was that she should be awarded 45 % of the estate, with 55% left to Ms. Weidman.

Mr. Justice Williams held that Bernard Weidman had a moral obligation to make provision in his will to the plaintiff, Cheryl Hutchison. But Mr. Justice Williams also balanced that moral obligation with Bernard Weidman’s moral obligation to Sharon Weidman, and Mr. Weidman’s reasons for leaving his estate to her. Mr. Justice Williams found that Mr. Weidman’s reason for leaving his estate to only one child was his concern about her circumstances.

Mr. Justice Williams compared Sharon Weidman’s circumstances to those of the plaintiff:

[90] Earlier in these reasons, I made reference to Sharon Weidman’s circumstances with respect to her income and assets. In a nutshell, she is unemployed and effectively unemployable. Her home could hardly be described as adequate; in fact, her lifestyle is anything but that. On all of the evidence, I am quite satisfied that her situation is decidedly and distressingly substandard.

[91] Evidence has been filed on behalf of the defendant, setting out an actuarial assessment of the present cost of the future care requirements that have been identified for Sharon Weidman. The actuary has provided a present value for these three different categories of needs which were identified in the report of Ms. Quastel. He estimates that, for all the present and ongoing needs, the value is in the order of $144,400. As for the other three categories of costs, that is, where homemaker service might be required and where assisted living would be required (contingent costs). He estimates the current value of those costs to range between $625,211.82 and $1,472,201.

[92] In my view, the needs of Sharon Weidman are substantial and compelling. There is no doubt that she is a person who is dealing with a constellation of challenges, difficulties and limitations. I accept the evidence which has been adduced as to her circumstances. In my view, the concerns that the testator recognized many years ago have not in any way abated. She is a person of substantial need.

[93] The circumstances of the plaintiff are quite different. I accept on the evidence that she will experience some difficulty from a vocational perspective going forward and that she will not be able to earn a robust income into the future. At the same time, she has advantages which place her in a vastly different situation than that of the defendant Sharon Weidman. I have averted to those earlier.

Mr. Justice Williams awarded Cheryl Hutchison $75,000. The balance of the estate will go to Sharon Weidman.

White Paper on Limitation Act Reform

2010-09-26T12:31:00.003-07:00

The B.C. Ministry of the Attorney General has published its “White Paper on Limitation Act Reform.”

The White Paper proposes significant changes to British Columbia’s Limitation Act. I will summarize a few of the highlights of the recommendations in this post. (I have written about our current Limitation Act here.)

If adopted the most of the basic limitation periods will be two years. This stands in contrast with the current legislation which sets out two years, six years or ten years, depending on the type of claim. Some claims would continue under the proposals to have longer basic limitation periods including claims on a judgment (ten years), or claims made by the government.

The basic limitation period would continue to start to run from the date the claimant discovered that he or she had a claim (or should have reasonably discovered the claim), but the language of this section will be simplified.

The ultimate limitation period would be changed to either ten or fifteen years. Currently, it is thirty years for most types of claims, but there is a six year limitation period for medical malpractice claims against hospitals and medical practitioners. The ultimate limitation period applies even if the claim is not discovered until later.

The ultimate limitation period will begin to run from the time of an act or omission giving rise to the claim, rather than when all of the elements of the claim are present. Currently, in the case of a claim in negligence the limitation period does not begin to run until the claimant has suffered damage. For example, if a building is negligently designed, put the damage to the building occurs years after the building is built, the ultimate limitation period does not begin to run until after the damage occurs. Under the proposed changes, the ultimate limitation period will begin to run from the date of the design, even though the damage may occur say fifteen years later.

If someone under the age of 19 has a claim, the running of both the basic limitation period and the ultimate limitation period would be postponed until the minor attains the age of 19, unless notice is given to the minor’s guardian and to the Public Guardian and Trustee to commence a claim earlier, in which case the basic limitation period will begin to run from the date notice is given.

Similarly, the basic limitation period would not begin to run against an adult person while he or she is under a legal disability. But the ultimate limitation period would not be affected by the disability, and would run from date of the act or omission.

The White Paper also includes a proposal to postpone the running of both the basic and ultimate limitation periods for fraud and fraudulent breach of trust, including claims against a trustee who willfully conceals the loss or damage, until the beneficiary becomes fully aware of his or her claim.

Currently, the limitation period for loans payable on demand begins to run from the date a loan is made, rather than from the date of demand. This can create problems for loans made within families. Parents will sometimes make loans to children on demand, without realizing that they may not be able to collect after six years (see my posts on this topic here and here). The White Paper contains a proposal that the basic and ultimate limitation periods would not begin to run until the borrower fails to pay after the lender demands payment.

Certain types of claims, such as claims based on sexual assault would continue to have no limitation period.

Some claims would continue to be governed by other legislation. For example, the limitation period for Wills Variation Act claims is governed by the Wills Variation Act, rather than by the Limitation Act. The White Paper proposes that other limitation periods be listed on a Schedule to the reformed Limitation Act.

You may comment on the White Paper until November 15, 2010 by sending your comments as follows:

Civil Policy and Legislation Office
Justice Services Branch
Ministry of Attorney General
PO Box 9222 Stn Prov Govt
Victoria, B.C. V8W 9J1
Facsimile: 250 387-4525
Email: CPLO_Limitation@gov.bc.ca

2010 Canadian Conference on Elder Law

2010-09-20T21:14:00.006-07:00

The Canadian Centre for Elder Law and the Law Commission of Ontario, with the support of the Advocacy Centre for the Elderly, are presenting the 5th annual Canadian (International) Conference on Elder Law.

This years conference will be held on October 28-30, 2010, at the Delta Chelsea Hotel in Toronto, Ontario, Canada.

The Canadian Centre for Elder Law website has the following information:

The conference will bring together Canadian and international experts, academics, lawyers and advocates to promote and advance the discussion of elder law issues.

The theme of this year's conference is "Developing an Anti-Ageist Approach to the Law". The conference will explore issues of elder rights, ageism and the law, access to justice, and law reform for older persons. The Advocacy Centre for the Elderly, a pioneer in promoting and protecting access to justice for older persons, will bring its unique expertise and perspective to the conference, developing a stream of conference programming.

The conference pre-day for the World Study Group on Elder Law will be held on October 28th, and will provide an opportunity for scholars in this area to present research updates and new work in this important field.

...

Registration for the 2010 Canadian Conference on Elder Law is now available! Attendees can register online or can download the registration brochure here. The brochure can be submitted either by fax to 1 (604) 822-0144 or by mail to the Canadian Centre for Elder Law at the following address:

Canadian Centre for Elder Law
1822 East Mall, UBC
Vancouver, BC V6T 1Z1
Canada

Regular registrants will receive a discounted Early Bird Rate of $599.00 until September 30, 2010. Registration for 2010 CCEL ends October 20th, 2010, so submit yours today!

Continuing Legal Education: Estate Litigation Basics 2010

2010-09-10T22:32:00.004-07:00

The Continuing Legal Education Society of British Columbia is presenting a course for lawyers on Estate Litigation Basics at the Pan Pacific Hotel in Vancouver, B.C. on October 8, 2010 from 9:00 am to 4:00 pm.

I am going to be speaking on "Challenging Inter Vivos Transfers and Beneficiary Designations."

The course agenda is as follows:

Welcome and Introduction
Amy D. Francis — Legacy Tax +Trusts Lawyers, Vancouver

View From the Bench
The Honourable Madam Justice N. Victoria Gray — Supreme Court of British Columbia, Vancouver
Contested Committeeships
•medical evidence
•views of the proposed patient
•costs
•Adult Guardianship Act
Chelsea D. Wilson — Ramsay Lampman Rhodes, Nanaimo
Networking Break

Challenging Inter Vivos Transfers and Beneficiary Designations
•incapacity
•undue influence
•resulting trusts
•secret trusts
•constructive trusts
•fraudulent conveyance
Stanley T. Rule — Sabey Rule LLP, Kelowna
Construction of Wills
•armchair rule
•Doctrine of Cy-pres
•unborn contingent beneficiaries
•costs
Edward F. Macaulay — Edward F. Macaulay Law Corporation, Vancouver
Lunch (on your own)

Wills Variation Act
•history and overview of the Wills Variation Act
•balancing competing claims between spouses and children
•costs awards in Wills Variation Act cases
Amy A. Mortimore — Clark Wilson LLP, Vancouver
Practicing Estate Litigation: Expert Panel
•managing estate clients and their expectations
•organizing an estate case to avoid conflicts and negligence
•addressing practice challenges unique to estate litigation
Roger D. Lee — Davis LLP, Vancouver
Helen H. Low — Fasken Martineau DuMoulin LLP, Vancouver
Megan Swail — Lawyers Insurance Fund, Law Society of BC, Vancouver
Networking Break

Probate Actions and the Rules of Court
•challenges to the validity of a will
•impact of the new Civil Rules
•costs in probate actions
M. Scott Kerwin — Borden Ladner Gervais LLP, Vancouver
Dealing With the Problem Executor
•duties of executors—accounting requirements
•strategies to resolve disputes without a hearing
•the Registrar’s hearing—what to expect
Kimberly-Anne Kuntz — Bull, Housser & Tupper LLP, Vancouver

The course is being presented both live and by webnar. There will be video repeats throughout the province. For information on registration, check the CLE website here.

Desbiens v. Smith Appeal

2010-09-04T13:40:00.002-07:00

When you apply for a grant of probate in British Columbia, you have to deliver a copy of the will and a notice of your intention to apply for the grant of probate to each of the beneficiaries of the will, and to those who may apply to vary the will under the Wills Variation Act, as well as to anyone who would receive a share of the estate if the deceased had died without a will. This is set out in section 112 of the Estate Administration Act.

The B.C. Court of Appeal has confirmed that these notice requirements are no mere formality. If the executor does not use reasonable diligence to find out the current addresses of those who are entitled to notice, the court may set aside a grant of probate. The case is Desbiens v. Smith, 2010 BCCA 394. I wrote about the trial decision here.

In his will, Charles Eldon Smith left everything to his widow. He had three adult children, with whom he had very limited contact. When he made his will, he did not tell his lawyer, whom he made his executor, about his children.

After his death, Charles Smith’s executor learned of the children. She found addresses in Mr. Smith’s address book. She sent the notice of her intent to apply for probate to these addresses, but the addresses were many years out of date. She did not make other efforts to find the children’s addresses.

Mr. Smith’s children found out about their father’s death three years after his death.

The three children then applied to vary their father’s will under the Wills Variation Act on the basis that he did not make adequate provision for them. But by the time they found out about their father’s death, the 6 month limitation period from the date of the grant of probate for bringing the claim had expired. The executor applied to have their claim dismissed on the grounds that the limitation period had expired.

The Supreme Court of British Columbia held that because the executor had not made reasonable efforts to give notice to the children, neither she nor Mr. Smith’s widow could rely on the limitation period.

The executor appealed. The Court of Appeal took a different approach from the Supreme Court Judge, but the effect is the same: the children may proceed with their Wills Variation Act claim. Mr. Justice Groberman for the Court of Appeal held that it was appropriate to revoke the grant of probate, and then issue a new grant to the executor. The limitation period would then begin to run from the date of the new grant of probate, with the effect that the children will be in time to pursue their claims.

In reaching his decision Mr. Justice Groberman discussed the notice requirements. He wrote at paragraph 28:

The notice requirement in s. 112 is a functional one – it is not a meaningless pro forma exercise. It is designed to ensure that the persons listed receive notice of probate. That function will not be fulfilled unless reasonable inquiries are made to ensure that the notices are sent to the correct addresses.

Then at paragraph 33:

[33] I do not suggest that executors and administrators face onerous requirements in determining the addresses of persons entitled to notice under s. 112 of the Estate Administration Act. All that is required is that the person giving notice exercise reasonable diligence in ascertaining the recipients’ addresses. In cases where, having exercised reasonable diligence, they still do not have confidence that they have obtained correct addresses, they must be fully candid in their affidavit in support of probate, and, in appropriate cases, should make application under s. 112(3) of the Act [which allows the court to dispense with notice on a person whose whereabouts are unknown].

Mr. Justice Groberman noted that one of the purposes of the requirement that notice be given is to ensure that anyone entitled to apply under the Wills Variation Act has notice that the estate is being administered. He wrote at paragraphs 66 through 68:

[66] With the enactment of dependent’s relief and wills variation legislation, a grant of probate (or of administration with will annexed) was given an ancillary purpose that was not present in ecclesiastical or common law: that of ensuring that all persons entitled to apply for relief under such legislation had notice that the estate was being administered. Where that purpose is not fulfilled, an important condition precedent for the grant is absent.

[67] The six-month limitation period under the Wills Variation Act is measured from the date that probate is granted for good reason. That is the date on which the court has signified that it is satisfied (by virtue of the requirements of s. 112 of the Estate Administration Act) that reasonable efforts have been made to notify persons having rights to apply under the Wills Variation Act.

[68] Where reasonable efforts to comply with s. 112 of the Estate Administration Act have not been made, probate should not issue. Where a grant of probate has issued notwithstanding a failure to comply with s. 112 of the Estate Administration Act, the Supreme Court has jurisdiction to revoke the grant, just as it would have if another condition precedent to the grant of probate had not been satisfied.

Mr. Justice Groberman held that it is appropriate in this case for the court to exercise its jurisdiction to revoke the probate, and issue a new grant to allow the Wills Variation Act claim to proceed. He noted that the children had brought their claims within six months of the date they found out that probate had been granted. Accordingly, they would not be unduly favoured by the revocation.

Santa Barbara County Courthouse

2010-08-18T20:50:00.010-07:00

I took these photographs of the Santa Barbara Historic County Courthouse last summer. The courthouse was completed in 1929. You can read more about it at the Superior Court of California website, and at the Official Website of the Santa Barbara Historic County Courthouse.