Wednesday, October 29, 2014

Dempsey v. British Columbia

British Columbia's Property Transfer Tax Act is an incoherent, and at times absurd, taxation statute. Apart from the dubious economic and social policy of a tax that adds to the cost of housing in the province with the least affordable housing in Canada, there is little rhyme or reason to the types of transactions that are taxed, and those that are exempt.

In very broad strokes, the Property Transfer Tax Act taxes transfers of real estate based on the value of the property, with the first $200,000 of the fair market value taxed at one per cent and the value above $200,000 at two per cent. In many cases the tax will reflect the sale price of real estate between a buyer and seller of a piece of real estate.

But title to real estate may also be changed in circumstances other than a sale, for example as a gift between family members, or to a trustee as part of an estate plan. The Property Transfer Tax Act does have a variety of exemptions from the tax, including some that facilitate transfers between family members either as gifts or for estate planning. The problem is that these exemptions are tightly pigeon holed, and unless a transfer falls squarely within a pigeon hole, the transferee in a non-market transaction may be caught by a significant tax. The narrowness of the exemptions demonstrates little understanding of the nuances of estate planning on the part of the legislators.

The provisions considered in the recent decision of the Supreme Court of British Columbia in Dempsey v. British Columbia, 2014 BCSC 1977, illustrate my point. I should say at the outset that I do not take issue with the reasoning of the Court in this decision, but rather with the absurdity of the legislation when viewed in light of the facts of this case.

Ms. Rita Dempsey settled a trust, which held title to her residence in Victoria. She was also the trustee and a beneficiary of the trust. She later resigned as trustee, replaced by her daughter. She transferred title to the residence from her name to her daughter’s name as trustee. The transfer was exempt under section 14(4) (q) as a transfer from one trustee to another without a change of beneficiaries. 

Later Ms. Dempsey’s daughter as trustee transferred the residence into Ms. Dempsey’s name as beneficiary of the trust. The decision does not set out the reasons for the transfer, but there are many good reasons why a trustee might transfer the title out of the trust to a beneficiary including perhaps to facilitate a change in the estate plan or to allow the residence to qualify for a deferral of property taxes. Whatever the reason for the transfer in this case, no funds change hands, and Ms. Dempsey continues to live in the residence that is now again in her name, but no longer in trust.

Unfortunately, and unfairly, the Government of British Columbia seized the opportunity to charge Ms. Dempsey $7300 in property transfer tax.

Ms. Dempsey through her lawyer argues that this transaction falls within an exemption, section 14(3)(b) which says:

14 (3) If a taxable transaction entitles the transferee, on compliance with the Land Title Act, to registration in a land title office, that transferee is exempt from the payment of tax if the taxable transaction is a transfer within any of the following descriptions:

(b) a transfer from a transferor who is not a trustee referred to in paragraph (c), (d) or (e), to a transferee who is a related individual, if the land transferred has been the principal residence of either the transferor for a continuous period of at least 6 months immediately before the date of transfer or of the transferee for that period;
If the section appears to you to be confusing, that is because it is.

If the trust had not been registered, and the transfer had simply been from Ms. Dempsey’s daughter to Ms. Dempsey, the transfer would have been exempt as a transfer of a principal residence to a related individual. (As an aside, be careful with these terms, as a principal residence under this statute is not the same thing as a principal residence under the Income Tax Act, Canada.)

But Ms. Dempsey was on title as a trustee, so the question was how to interpret the phrase “not a trustee referred to in paragraph (c), (d) or (e)….” Those subsections are themselves exemptions, with (c) an exemption for certain transfers of property from the trust of an estate or trust to beneficiary who is a related individual to the will maker, (d) an exemption for certain transfers of property from a trustee to a beneficiary if the beneficiary is a related individual to the settlor of the trust, and (e) another exemption for certain transfers from a trustee to a beneficiary of a trust who is a related individual of the settlor.

Section (d), for example, exempts,

(d) a transfer from a transferor who is a trustee of a trust that is settled during the lifetime of the settlor and who is registered in that capacity under the Land Title Act as the trustee of the land transferred, if
(i)     the transferee is a beneficiary of the trust,
(ii)    the transferee beneficiary is a related individual of the settlor of the trust, and
(iii)  the land transferred is a recreational residence or was the principal residence of either the settlor for a continuous period of at least 6 months immediately before the date of transfer or of the transferee beneficiary for that period;

Ms. Dempsey argued that because the transaction did not meet all of the criteria in any of the three subsections (c ), (d) or (e), her daughter was not a trustee referred to in those subsections, and accordingly, the trustee exception to the exemption did not apply. The Province argued that only words in each of those sections describing a trustee applied. For example, in (d) the words “a trustee of a trust that is settled during the lifetime of the settlor and who is registered in that capacity under the Land Title Act as the trustee of the land transferred” are to be read into the definition of trustee in 14(3)(b), but not the rest of the subsection set out in (i), (ii) and (iii).

Madam Justice Gray held that the Province of British Columbia’s interpretation is correct, and accordingly, the transaction is subject to the property transfer tax. 

She wrote at paragraph 46:

[46]         I am left with the lingering question of why this kind of transaction would be taxed, but in my view I must apply the words of the statute if they are clear and unambiguous. In my view, they are clear and unambiguous.
Ms. Dempsey was both the settlor of the trust, and the beneficiary. You might wonder why this transfer is not exempt under subsection 14(3)(d). Very simply, under the Property Transfer Tax Act, Ms. Dempsey is not related to herself.

Thursday, October 16, 2014

Continuing Legal Education Society Presentation on "Reining in the Rogue Trustee/Executor"

I am going to be speaking at the Continuing Legal Education Society course, Estate Litigation Update - 2014, next week on Thursday, October 23, 2014 at the Pan Pacific Hotel, 999 Canada Place, Vancouver, B.C. the course goes from 9:00 am to 4:00 pm, and is part of a two-day wills, estates and trusts conference beginning Wednesday. My topic will be "Reining in the Rogue Trustee/Executor."

Registration is through the Continuing Legal Education Society of British Columbia.

The agenda is as follows:

Welcome and Introduction
Wills Variation Update
  • recent cases
  • recent trends related to awards of costs
  • WESA transition
  • abatement of settlement
Hugh S. McLellan — McLellan Herbert, Vancouver
When Good Planning is not Enough
  • when is a good estate plan no longer “bullet proof”
  • strategies to set aside estate plans to disinherit
  • Mordo, Mawdsley and Easingwood  issues
Peter J. Glowacki — Borden Ladner Gervais LLP, Vancouver  
M. Scott Kerwin — Borden Ladner Gervais LLP, Vancouver
Networking Break
Mediation/Arbitration/Settlement Conferences
  • using the best process in the appropriate case
  • preparation for the proceeding
  • promoting a consent resolution—what works
  • documenting the settlement
The Honourable Marion J. Allan — Clark Wilson LLP, Vancouver
Roger D. Lee — Davis LLP, Vancouver
Solicitor-Client Privilege—What Does that Mean in Estate Litigation
  • how to secure a lawyer’s file in estate litigation
  • who holds the privilege and who can waive it
  • what attack can be made when the file is released
Scott Cordell — Killam Cordell Murray, Vancouver
Networking Lunch 
Rectification of Trusts and Wills
  • how can applications for rectification be made
  • the applicable law—when it works and when it doesn’t
  • other options
Amy D. Francis — Legacy Tax + Trust Lawyers, Vancouver
Ian Worland — Legacy Tax + Trust Lawyers, Vancouver
Reining in the Rogue Trustee/Executor
  • what conduct warrants removal or other relief
Stanley T. Rule — Sabey Rule LLP, Kelowna
Using Unjust Enrichment as a Remedy in Estate Litigation
  • current state of the law
  • when is this remedy most effective to plead
  • elements of unjust enrichment
  • joint family ventures after Kerr v. Baronow 2011 SCC 10
Andrew S. MacKay — Alexander Holburn Beaudin + Lang LLP, Vancouver
Networking Break
The Family Law Act in Trust and Estate Litigation
  • the interplay between the FLA and WESA
    • loss of estate rights upon spousal separation
    • what constitutes separation
  • “family violence” under the FLA: a new tool in relation to vulnerable adults?
Anna Laing — Fasken Martineau DuMoulin LLP, Vancouver
Protecting Vulnerable Adults
  • the PGT’s role
  • the new provisions under the Adult Guardianship Act
  • available community resources
Leanne Dospital — Regional Manager, Services to Adults, Public Guardian and Trustee of BC, Vancouver
Sarah Watson — Solicitor to the Public Guardian and Trustee, Services to Adults, Public Guardian and Trustee of BC, Vancouver

Monday, October 13, 2014

John Poyser’s Capacity and Undue Influence

John E. S. Poyser has written a remarkable textbook, Capacity and Undue Influence, published this year by Thomas Reuters Canada Limited. The book is about gratuitous wealth transfers including by will, beneficiary designations, through jointures, inter vivos trusts and gifts directly to beneficiaries. Mr. Poyser does not deal with (or purport to deal with) capacity for other legal transactions, such as contracts, except peripherally to assist in explaining capacity to make testamentary and inter vivos gifts.

If, by focusing on gratuitous wealth transfers, the topic is narrower than the book’s title might imply, it is also much richer. In addition to discussing the criteria for capacity to make a will, Mr. Poyser also discusses the requirements of knowledge of approval of the contents of a will, including the doctrine of righteousness, in considerable depth. Estate litigators will be familiar with challenges to inter vivos gifts on the basis of undue influence, including claims founded on relationships of dependence or potential dominance, but how about challenges based on unconscionable bargains and unconscionable procurement? Although unconscionable bargains may be more closely associated with contracts, Mr. Poyser explains the principles and their applicability to gratuitous gifts. Unconscionable procurement? I had never heard of it before. Although perhaps the doctrine is a bit dusty, Mr. Poyser makes a good case that unconscionable procurement is applicable in modern times.

Estate disputes are chock-full of presumptions: of capacity, of knowledge and approval, of undue influence. What are they really, and what are their implications? Mr. Poyser offers common-sense explanations that they are usually evidentiary in nature, that they do not change the legal burden, and that they are indeed founded on common sense (I think the expression “common sense” appears more often in the book than any other). To paraphrase, the presumption that a person has capacity to make a will reflects that most people do in fact have that capacity. It is only if there is other evidence that comes to light of suspicious circumstances, such as that the will maker was diagnosed with dementia, that the court needs to look further.

Mr. Poyser articulates a coherent analysis of capacity to make gratuitous wealth transfers, whether by will, beneficiary designation, or inter vivos transfer. In its broadest the test is as set out in Ball v. Mannin, (1829) 4 E.R. 1241, that a person must be “ capable of understanding what he did by executing the deed in question when its general purport was fully explain to him.”

The courts have developed more detailed criteria for making a will, following the famous words of Chief Justice Cockburn, in Banks v. Goodfellow, (1870), L.R. 5 Q.B. 549 at 565:  

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.

Mr. Poyser neatly dissects the criteria set out in the above-quoted passage. He also makes the case that the level of capacity to make a will or codicil may vary depending on the specific document. A very complex will may require a higher level of functioning than a simple one. Making a codicil that only changes the executors, or that makes a small gift relative to the will-maker’s wealth, might not require that the will maker fully meet the criteria in Banks v. Goodfellow.

In reading the cases, I have always found it difficult to find a clear articulation of the criteria for capacity to make inter vivos gifts. Some courts have said that the level of capacity is lower than the capacity to make a will, which I have never found very satisfactory.

Mr. Poyser’s makes an overwhelming case that the requisite capacity is not related to whether a gift is inter vivos or by will, but rather capacity is transaction specific. Someone who wishes to make a gift of all or most of his assets during his lifetime, effectively depriving the beneficiaries of his will of his estate, needs to meet the full Banks v. Goodfellow criteria. Indeed, the donor would also have to appreciate the effect of giving away his property on his own future financial security to have capacity to make the gift. On the other hand, someone making a trifling gift need only have a limited capacity to understand that she was giving something of small value to the beneficiary. Because of the small impact on the donor and her estate plan, she would not have to have the same level of comprehension as making a will disposing of everything. Intermediate gifts require intermediate levels of mental functioning.

In light of the recent change in legislation in British Columbia affecting challenges to wills in which undue influence is alleged, by creating a presumption of undue influence if it is shown that the person alleged to have exercised undue influence was in a position where the potential for dependence or domination of the will maker was present, I was particularly interested in Mr. Poyser’s discussion of the difference between undue influence in will challenges and undue influence in respect of inter vivos gifts.

Mr. Poyser considers inter vivos undue influence as a separate doctrine from testamentary undue influence. The presumption, which was recently changed in British Columbia, is but one of the differences between challenging a will and challenging an inter vivos gift on the basis of undue influence.

To successfully challenge a will, or gift in a will, on the basis of undue influence, the attacker must prove on a balance of probabilities that someone exercised undue influence over the will maker, the result of which was that the will maker made a will or gift in the will against his or her own true wishes. Undue influence in this context is a form of coercion. It may be proven by circumstantial evidence, but actual undue influence must be shown. If proven, the will or gift in the will is void. 

Mr. Poyser traces the development of inter vivos undue influence, which, in contrast, to undue influence in the wills context, flows out of equity. Where the person who has received a significant inter vivos gift was in a relationship with the donor where he or she was in a position to dominate the donor, then a presumption of undue influence arises. Furthermore, where such a relationship is present, the type of pressure required to set aside the gift on the basis of undue influence may be milder, particularly if the donor is vulnerable.  The underlying premise of inter vivos undue influence is to protect donors from victimization. If the person attacking the transfer succeeds on the basis of equitable undue influence, the transfer is voidable, rather than void, and the person benefiting may raise equitable defences to the claim such as those based on unreasonable delay in pursing a claim.

This may have implications for British Columbia’s new provision in section 52 of the Wills, Estates, and Succession Act, mentioned above, which imports the burden of proof in will challenges from inter vivos undue influence where there is a potential for dependence or domination. However, section 52 does not expressly import the full equitable doctrine. Apart from the burden on the person found to be in a special relationship to show that he or she did not exercise undue influence over the will maker, what relevance will the principles of inter vivos undue influence have in British Columbia to will challenges based on undue influence? Section 52 just came into effect this spring, but perhaps there will be cases considering section 52 to provide fodder for Mr. Poyser’s next edition.

Mr. Poyser thoroughly canvasses the Canadian cases on wealth transfers, including leading appellate and illustrative trial decisions. He also has included analysis of leading English cases, including fairly recent decisions, as well as some leading cases from other common law jurisdictions, particularly Australia and New Zealand. For estate litigation lawyers, the book provides an easy source for broadening research beyond their own jurisdictions.

For solicitors, I particularly recommend Chapters 12 and 13, “Controlling for Capacity During Planning,” and “Controlling for Other Types of Challenges.”  These chapters offer analysis of a solicitor’s role when capacity may be in doubt or there are concerns about possible undue influence or other challenges. Mr. Poyser offers some interesting ideas about what a solicitor ought to do when there may be doubts about capacity. Of course, conduct a thorough interview, without potential beneficiaries present, and make good notes. But Mr. Poyser’s suggestions go well beyond that. He has some suggested questions. Consider a separate retainer to assess capacity. He provides some sample letters to physicians, some of which are quite extensive, requesting opinions on capacity. 

Mr. Poyser has an insightful and provocative discussion about whether the solicitor should go ahead with a will for a client whose capacity is in a grey area, and what further steps the solicitor might take to identify any concerns about capacity.

Great legal textbooks both reflect the law and affect its development. Capacity and Undue Influence reflects the law well. In time it seems quite likely that it will, as my other favourite legal textbook, Waters’ Law of Trusts in Canada (now in its fourth edition) has done, affect the future development of the law as well.

John Poyser is both a partner in the Winnipeg law firm Tradition Law LLP and a principal of the Wealth and Estate Law Group in Calgary. He is also a co-author with Larry H. Frostiak and Grace Chow of Taxation of Trusts and Estates: APractitioner's Guide 2014, Carswell.

Thursday, October 02, 2014

Supreme Court of Canada Strikes down British Columbia’s Court Hearing Fees!

I don’t use exclamation marks often. This may be the first one in my blog. But I am very pleased with the decision of the Supreme Court of Canada released this morning in The Trial Lawyers Association of BritishColumbia v. British Columbia (Attorney General), 2014 SCC 59, holding that British Columbia’s court hearing fees are unconstitutional by effectively denying access to people to superior courts, contrary to section 96 of the Constitution Act, 1867.

Chief Justice McLachlin, writing for the majority, held that although the province may impose hearing fees under section 92 (14) of the Constitution Act, 1867, those fees must not impinge on the core jurisdiction of superior courts by effectively barring access. She wrote at paragraphs 35 and 36:

[35]                          Here, the legislation at issue bars access to the superior courts in yet another way ― by imposing hearing fees that prevent some individuals from having their private and public law disputes resolved by the courts of superior jurisdiction ― the hallmark of what superior courts exist to do. As in MacMillan Bloedel, a segment of society is effectively denied the ability to bring their matter before the superior court.
 [36]                          It follows that the province’s power to impose hearing fees cannot deny people the right to have their disputes resolved in the superior courts.  To do so would be to impermissibly impinge on s. 96  of the Constitution Act, 1867 .  Rather, the province’s powers under s. 92(14)  must be exercised in a manner that is consistent with the right of individuals to bring their cases to the superior courts and have them resolved there.

The Chief Justice of Canada also considered the underlying values implicit in our constitution of the rule of law:

[38]                          While this suffices to resolve the fundamental issue of principle in this appeal, the connection betweens. 96  and access to justice is further supported by considerations relating to the rule of law. This Court affirmed that access to the courts is essential to the rule of law in B.C.G.E.U. v. British Columbia (Attorney General), [1988] 2 S.C.R. 214.  As Dickson C.J. put it, “[t]here cannot be a rule of law without access, otherwise the rule of law is replaced by a rule of men and women who decide who shall and who shall not have access to justice” (p. 230).  The Court adopted, at p. 230, the B.C. Court of Appeal’s statement of the law ((1985), 20 D.L.R. (4th) 399, at p. 406):
   . . . access to the courts is under the rule of law one of the foundational pillars protecting the rights and freedoms of our citizens.  . . . Any action that interferes with such access by any person or groups of persons will rally the court’s powers to ensure the citizen of his or her day in court.  Here, the action causing interference happens to be picketing.  As we have already indicated, interference from whatever source falls into the same category.  [Emphasis added.]
As stated more recently in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, per Karakatsanis J., “without an accessible public forum for the adjudication of disputes, the rule of law is threatened and the development of the common law undermined” (para. 26). 
[39]                          The s. 96  judicial function and the rule of law are inextricably intertwined. As Lamer C.J. stated inMacMillan Bloedel, “[i]n the constitutional arrangements passed on to us by the British and recognized by the preamble to the Constitution Act, 1867 , the provincial superior courts are the foundation of the rule of law itself” (para. 37). The very rationale for the provision is said to be “the maintenance of the rule of law through the protection of the judicial role”: Provincial Judges Reference, at para. 88. As access to justice is fundamental to the rule of law, and the rule of law is fostered by the continued existence of the s. 96  courts, it is only natural that s. 96  provide some degree of constitutional protection for access to justice.
[40]                          In the context of legislation which effectively denies people the right to take their cases to court, concerns about the maintenance of the rule of law are not abstract or theoretical. If people cannot challenge government actions in court, individuals cannot hold the state to account ― the government will be, or be seen to be, above the law.  If people cannot bring legitimate issues to court, the creation and maintenance of positive laws will be hampered, as laws will not be given effect.  And the balance between the state’s power to make and enforce laws and the courts’ responsibility to rule on citizen challenges to them may be skewed: Christie v. British Columbia (Attorney General), 2005 BCCA 631, 262 D.L.R. (4th) 51, at paras. 68-9, per Newbury J.A.
The majority rejected the remedy of the British Columbia Court of Appeal to give discretion to the court to relieve those who are “in need” as well those who are “indigent” or “impoverished” from payment of the fees. The Chief Justice wrote:
[66]                          “Reading in” is a remedy sparingly used, and available only where it is clear that the legislature, faced with a ruling of unconstitutionality, would have made the change proposed:  Schachter v. Canada, [1992] 2 S.C.R. 679.  I am not satisfied that this condition is met here.  The legislature or Lieutenant Governor in Council has a number of options, from abandoning or modifying the hearing fee to changing the exemption provision.  Moreover, any expansion of the exemption provision will be at odds with the legislative objective of deterring use of the courts.  “Reading in” to cure the constitutional defect of the hearing fee scheme would defeat the purpose of the legislation.
[67]                          I would also note that modifying the exemption as suggested by the Court of Appeal might still not cure the problem; it is not clear that the term “or in need” will cover all litigants who cannot afford the hearing fee and other provisions might be required in order to avoid the onerous or undignified process of proving that one falls within the exception.
Mr. Justice Cromwell, while concurring in the result, did so on narrower grounds, holding that the fees exceeding the regulation powers of the Court Rules Act by defeating the common law rights of access to the courts.
Mr. Justice Rothstein dissented, and would have upheld the constitutionality of the fees.
The Supreme Court of Canada restored Mr. Justice McEwan’s decision in the Supreme Court of British Columbia, and the majority decision largely adopted his reasoning. His decision is an eloquent statement of the underlying principles of our democratic society. As I quoted in my previous post on his decision:
[346]     There are several fundamental concepts embedded in these observations. A society that is governed by democratic principles is a society governed by the rule of law, the principle that the law applies to every person including the government and its agents. The right to vote is an incident of citizenship, and the laws consequent upon the exercise of that franchise apply to everyone within the jurisdiction of Parliament or the pertinent legislature. The courts operate in “functional symbiosis” with the legislative branches of government in fulfilling the purposes of democracy. Self-government clearly implies a process that begins with the law as it is or as it has been made by legislatures and includes the elaborations of the courts. Those elaborations, even in mundane matters, inform and enrich the law. As Resnick and Curtis note, the court is a public forum in which individuals may call the powerful, including governments, to account, compelling them to meet as equals. In the courts, cases are determined without regard to the distributions of power or wealth and influence that otherwise prevail in society. For this reason each case must be given the attention it requires, however small it may appear to be. The law is replete with examples of apparently inconsequential disputes which led to major changes or developments in the law, the most famous of which is arguably Donoghue v. Stevenson, [1932] A.C. 562.
 [347]     Seen in this light, a court whose most frequent litigant controls and limits its availability to those who seek its assistance or protection is a court whose essence as a forum within the continuum of democratic lawmaking is compromised. The court is a forum in which minority rights, the values of inclusiveness, equality and citizen participation, and the constitutional commitment to the inherent worth and dignity of the individual, spoken of in SauvĂ©, are publicly advanced and vindicated. To the extent that government imposes limitations to deter or prevent litigants from seeking recourse to the courts, it undermines a fundamental premise of civil society: that there will be a place for everyone for the peaceful resolution of contentious issues according to law. To the extent the government imposes limitations on those who seek redress against government itself, it undermines its own accountability and legitimacy, and the rule of law itself. This is how the court is a core functional attribute of democracy. The Supreme Court’s observation in SauvĂ© that there is “no place” for the theory that elected representatives may disenfranchise a segment of the population in a democracy built on principle of inclusiveness, equality and citizen participation, must logically apply to legislation having the effect of depriving people of the means of vindicating their rights through the courts.

I recommend reading his complete decision here.
I wrote about the Supreme Court of British Columbia decision here, and the Court of Appeal decision here.

Sunday, September 28, 2014

B.C. Court of Appeal Overturns Trial Judgement in Sabey v. Rommel

The British Columbia Court of Appeal overturned the trial judge’s decision to award the plaintiff, Jesse Sabey, the horse farm that had been owned by his friends Kim and Dietrich von Hopffgarten, in Sabey v. Rommel, 2014 BCCA 360.

Jesse Sabey used to ride horses and work at the von Hopffgartens’ farm. He and the von Hopffgartens were all involved in dressage riding. The von Hopffgartens had promised Mr. Sabey that they would leave him the farm, and indeed had tried to make codicils to their wills to do just that, but the codicils were invalid because they were not witnessed by two witnesses. The trial judge held that because Mr. Sabey had relied on the promises they made to him by working for them for less than market value and by making career choices to his detriment, he was entitled to the farm on the basis of the doctrine of proprietary estoppel. I wrote a post about the trial judge’s decision in greater detail previously.

Burgi Rommel, who was the beneficiary of Mrs. von Hopffgarten’s will, appealed the decision to the Court of Appeal. Two of the three judges hearing the appeal allowed the appeal, holding that the award to Mr. Sabey of the entire farm was disproportionate to the detriment he suffered.

Madam Justice Bennett, writing for the majority, set out the legal test as follows:

[25]         The foundation of a claim in proprietary estoppel is an equitable right arising out of the conduct of the parties. In Crabb v. Arun District Council, [1976] Ch. 179 at 192-93, [1975] 3 All E.R. 865 (C.A.), Scarman L.J. stated the test in a claim for a proprietary right on the basis of equity:
1.               Is there an equity established?
2.               If so, what is the extent of the equity?
3.               What is the relief appropriate to satisfy the equity?

A person making a claim on the basis of proprietary estoppel needs to prove three elements: an assurance or representation was made to him, that he relied on it, and that he did so to his detriment.

The majority agreed that Mr. Sabey had proven that the von Hopffgartens had made assurances to him that they would leave him the farm. The also accepted that he relied on those assurances to his detriment by working for them for two and a half years with less than market pay, and for working for Mrs. von Hopffgartens without any pay after her husband’s death. But the majority did not agree that he relied on their assurances when he made his career choices, specifically choosing to become an accountant instead of a professional dressage rider, and then choosing a small firm so he could ride at their farm instead of working for a larger firm that would have provided higher pay, but more travel. Nor did the majority accept the argument that in becoming an accountant and working at a small firm Mr. Sabey had acted to his detriment.

Although, Mr. Sabey established an equity, the majority held that the extent of the equity was not sufficiently great to warrant an award of the whole farm to Mr. Sabey. Madam Justice Bennett wrote at paragraph 80:

[80]         In my view, no equity arises as a result of Mr. Sabey deciding not to pursue professional dressage or limiting his employment prospects to firms that were close to the farm. The extent of the equity that arises in this case is Mr. Sabey’s two and a half years of underpaid work after the assurances were made and his continued work on the farm without payment after Dietrich’s death. If Mr. Sabey had not expected to inherit the farm, then he may not have continued to work on the farm. The trial judge erred in concluding that there were other bases on which an equity arose, and in failing to assess proportionality. As a result, the remedy he crafted is not due deference, and is, with respect, clearly wrong.       

Accordingly, the majority ordered that the case be remitted to the trial judge to consider the alternate claims made by Mr. Sabey on the basis of unjust enrichment, and express or implied trust.

Madam Justice MacKenzie dissented. She would have dismissed the appeal on the basis that the trial judge’s findings were supported by the evidence and that the decision was within the trial judge’s broad discretion. 

Saturday, September 20, 2014

Termination of Statutory Property Guardianship

I have written two previous posts on British Columbia’s new statutory property guardianship legislation and regulation coming into effect on December 1, 2014, the first dealing with the procedures for issuing a certificate of incapacity pursuant to which the Public Guardian and Trustee becomes the statutory property guardian of a person incapable of managing his or her own finances, and the second dealing with the criteria to be applied in determining whether a person is incapable.

In this post, I will summarize how a statutory property guardianship may be terminated.

Section 34 of the Adult Guardianship Act provides that an adult who has a statutory property guardian must be reassessed if any of the following apply:

1.                  “the adult is receiving psychiatric treatment in a facility designated under the Mental Health Act and the adult is discharged,”

2.                  the statutory property guardian decides that a reassessment should occur,

3.                  “the adult requests a reassessment and has not been reassessed within the preceding 12 months,” or

4.                  the court orders a reassessment.

This section gives a person in respect of whom a certificate of incapability has been issued the right to have a reassessment annually.

Under section 37 (3), if as a result of the reassessment, a qualified health care provider determines that the adult is capable of managing the adult’s financial affairs, and the health authority designate accepts that determination, then the statutory property guardianship ends, and the adult may then manage his or her own finances.

A second way that a person in respect of whom a certificate of incapability has been issued may terminate the statutory property guardianship is by making a successful application to court.

If the Public Guardian and Trustee as the statutory property guardian is satisfied that the statutory property guardianship is no longer necessary, she may also end it on giving the patient notice.

Finally, if the court appoints a committee for the adult under the Patients Property Act, then the statutory property guardianship ends, but the effect is to transfer the management of the adult’s finances to the committee. Under this provision a relative or friend of the adult in respect of whom a certificate of incapability has been issued may take over management from the Public Guardian and Trustee, by making an application to court.

It should be noted that the provisions for terminating a statutory property guardianship will apply to certificates of incapability that were issued under the Mental Health Act, before the new legislation and regulation comes into effect. 

Sunday, September 14, 2014

Kimberly Wallis Speaking About Rectification at Okanagan Wills and Trusts CBA Section Meeting

My partner Kim Wallis will be speaking this Wednesday, September 17, 2014, on the topic of rectification including the new provision, section 59, in the Wills, Estates and Succession Act on rectification of wills, to the Okanagan Wills and Trusts section of the Canadian Bar Association. The meeting is open to members of the Canadian Bar Association, B.C. Branch.