Parveen Shergill Joins Sabey Rule LLP

I am pleased to announce that Parveen Shergill has joined our firm. Parveen was called to the bar in 2015, after having served as a judicial law clerk for the Saskatchewan Court of Queen's Bench. She has extensive litigation experience with a leading regional full-service firm, and then with a leading insurance defense firm. She now practices primarily in estate planning and administration, estate litigation and dispute resolution. 

Parveen is also fluent in Panjabi. 

Zaleschuk Estate

Victor Stephen Zaleschuk died on January 2, 2022, leaving his spouse, Wendy Chen, and two children, Shane Zaleschuk and Christian Zaleschuk. Most of his wealth was in California, and was held in two trusts. This case considers the interpretation of a Will he made on January 12, 2020, governing his British Columbia assets, which consisted of a residence in Victoria, and a handful of assets of significantly less value, and no funds. His son Shane was living in a suite in the residence.

The Will appointed Ms. Chen has his executor and included the following:

a).        I DISTRIBUTE MY ASSETS AS FOLLOWS:

i).         Residence at 750 Pears Road, Victoria, British Columbia, Canada, V9C 3Z8 to Wendy Xin Hong Chen. All Farm equipment and implements included.

ii).        2016 Ford Flex to Wendy Xin Hong Chen.

iii).        2011 Ford F-150 to Shane Zaleschuk.

iv).       All shop tools, Nikon Camera, Gold Bracelet with Lapis & Diamonds to Shane Zaleschuk.

b).        I DISTRIBUTE ANY RESIDUE OF MY ESTATE AS FOLLOWS:

To both Wendy Xin Hong Chen and Shane Zaleschuk all Art & Jewelry and personal belongings as they see fit.

5).        I give my Executrix the following POWERS:

Power of sale, realization, employ agents, and power of dispute resolution.

***When and if the property is sold: Shane Zaleschuk to receive $150,000 CAD. Steve Whitner (a minor) to receive $25,000 CAD invested towards a[n] Educational Trust Fund.

6).        This Will was executed in Canada for Canadian Assets ONLY. My updated (01-01-2020) USA Children’s Trust takes precedent of ALL MY ASSETS OUTSIDE OF CANADA.

There was an error in the description of the beneficiary Steve Whitner, whose last name is Widner.

In a letter to his lawyer in California seeking advice concerning his U.S. estate planning, he described his plans for his residence in Victoria:

This property to be gifted (***) to Wendy Xin Hong Chen with the following caveats

i).         Suite will remain as Shane Zaleschuk residence. If the property is sold Shane to receive $150,000 CAD. A $25,000 Education Fund gifted to Steve Whitner.

A Canadian Trust does not work as I am not a full time resident of Canada. A Canada Will is included to clarify Canadian assets only.

ii).        As the mortgage renewal will be due April - 2020.....Wendy will be added to the title.

***After which Wendy will automatically inherent by Canada Law. But the Will must be adhered to regarding the sale of the property.

It should be noted that Wendy Chen was not in fact added to the title of the residence and it formed part of the British Columbia estate.

In her reasons for judgment, in Zaleschuk Estate, 2023 BCSC 523, Madam Justice Young first dealt with a challenge by Shane to his father’s capacity to make a will, and found that he did have capacity and that the Will is valid.

The more interesting aspects of the decision involve the interpretation of the will in light of reforms made in 2014 to British Columbia’s succession laws when the Wills, Estates and Succession Act came into effect. The reforms liberalized the types of evidence admissible when construing a will, permitted the court to rectify mistakes in a will, and also permitted the court to give effect to a document or other record that does not comply with the formal signing and witnessing requirements of a will.

Wendy Chen argued that she was entitled to the residence, and that the payments of $150,000 and $25,000 were void because they are inconsistent with the gift of the residence to her.

Shane Zaleschuk argued that the gift of the residence was subject to a trust requiring her to pay those cash gifts when she sold the residence. He also argued that the letter to the California lawyer, referred to in the decision as the “Record,” gave him the right to occupy the suite in the residence.

The most relevant provisions of the Wills, Estates and Succession Act are: 4(2), 58 (1) through (3), 59 (1) and (2):

4(2)        Extrinsic evidence of testamentary intent, including a statement made by the will-maker, is not admissible to assist in the construction of a testamentary instrument unless

(a)        a provision of the will is meaningless,

(b)        a provision of the testamentary instrument is ambiguous

(i)         on its face, or

(ii)        in light of evidence, other than evidence of the will‑maker's intention, demonstrating that the language used in the testamentary instrument is ambiguous having regard to surrounding circumstances, or

(c)        extrinsic evidence is expressly permitted by this Act.

58 (1)   In this section, “record” includes data that

(a)        is recorded or stored electronically,

(b)        can be read by a person, and

(c)        is capable of reproduction in a visible form.

(2)        On application, the court may make an order under subsection (3) if the court determines that a record, document or writing or marking on a will or document represents

(a)        the testamentary intentions of a deceased person,

(b)        the intention of a deceased person to revoke, alter or revive a will or testamentary disposition of the deceased person, or

(c)        the intention of a deceased person to revoke, alter or revive a testamentary disposition contained in a document other than a will.

(3)        Even though the making, revocation, alteration or revival of a will does not comply with this Act, the court may, as the circumstances require, order that a record or document or writing or marking on a will or document be fully effective as though it had been made

(a)        as the will or part of the will of the deceased person,

(b)        as a revocation, alteration or revival of a will of the deceased person, or

(c)        as the testamentary intention of the deceased person.

 

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).

Ms. Chen argued that there was no ambiguity in the will permitting extrinsic evidence, but rather two inconsistent gifts, and the absolute gift to her prevails over the inconsistent cash gifts. Madam Justice Young wrote:

[58]       The executor here submits that it is not appropriate to consider extraneous evidence when constructing a will which needs no clarification. Extraneous evidence is only considered when there is a need for clarification of a will. She cites ElliottEstate v. Elliott, 1998 Can LII 4471 which has some similarities to the present case. Of note, that case predated the enactment of the WESA, and so deals with the stricter common law rules of construction. The WESA came into force in 2014. Prior to that, the court had no power to rectify a will (Simpson v. Simpson Estate, 2022 BCCA 208 at para. 70).

[59]       In Elliott the will provided the petitioner with an absolute bequest of the testator’s estate. The respondents who had lived on the property for many years submitted that it was most probable that the testator intended to bequeath his property in trust to the petitioner subject to the life estate of the respondents.

[60]       The central issue in the case was what interest under the testator’s will did the respondents have in the house that they occupied. Justice Edwards found that this was not a case of a patent omission or even of ambiguity. It was a case where unambiguous but contradictory bequests were found in the same will. If the initial bequest to the executor of the property stood alone in the will it could only be interpreted as an absolute gift of the entire estate to her. If the other bequests stood alone they could not be said to be ambiguous as to the intention to create life estates or specific bequests of modest sums. The two gifts were inconsistent (Elliott at para. 19).

[61]       Justice Edwards found that the case before him was not a case of ambiguity which would permit the court to entertain evidence of surrounding circumstances in order to determine the testator’s intention or supply some omission (para. 20). He found that it was a case of a will containing incompatible bequests which were governed by the Blackburn and Cox v. McMillan (1902), 33 S.C.R. 65 line of authority (para. 21).

Citing Theimer Estate, 2012 BCSC 629, Justice Young held that the proper approach is to consider the Will as a whole in light of properly admissible extrinsic evidence.

She held that she could consider the letter to the California lawyer to assist in determining Victor Zaleschuk’s intentions. She found that it supported the view that he intended to impose a trust on the residence requiring payment of the cash gifts if and when it is sold.

In contrast, Madam Justice Young did not give effect to the statement in the letter permitting Shane to continue to live in the suite in the residence. The letter, though authentic, did not represent Victor Zaleschuk’s final testamentary intention.

Justice Young wrote:

[97]       I conclude that the Record is a working paper prepared to obtain advice from Mr. Watt and possibly from Shelsey Robertson as to whether the deceased’s overall estate plan is “doable”. It does not set out the deceased’s fixed and final expression of intention as to the disposal of the deceased’s property on death. I am influenced by his statement that “this is the second draft that I mailed to Mr Watts after he made a few changes”.

[98]       The gift to Shane of a life estate to the suite in the Residence is inconsistent with the gift of the property to Wendy. It is not provided for in the Will.

….

[100]    The cash legacies to Shane and to Steve Widner are repeated in the Will and although inconsistent with an absolute gift, I am satisfied that the deceased did intend that these cash legacies be paid. I find that the cash legacy clause should be read in as a trust imposed on Ms. Chen to pay if she sells the Residence.

[101]    I am not satisfied that the words “Suite will remain as Shane Zaleschuk residence” should be added to the Will. The Record is not a testamentary document. It sets out a plan for the U.S. and Canadian assets but some of it was not implemented, and the note changed on a few occasions, although the orphan signature page remains the same.

Justice Young declared:

      iii.        the subclause in clause 5 of the Will as corrected is valid:

 ***When and if the property is sold: Shane Zaleschuk to receive $150,000 CAD. Steve Widner (a minor) to receive $25,000 CAD invested towards a[n] Educational Trust Fund.

Tom v. Tang

In Tom v. Tang, 2023 BCCA 221, released in June, 2023, the British Columbia Court of Appeal clarified that in a wills variation proceeding the Court applies an objective standard when considering a will maker’s reasons for disinheriting a child or treating children unequally. Earlier Court of Appeal decisions have often been interpreted as applying a more subjective approach to a will-maker’s reasons, allowing a court to uphold disinheritances or significantly unequal treatments of adult children if the will-maker provided reasons that were valid (in that they were based on true fact) and rational (in that they were logically connected with the parent’s treatment of their child), even if those reasons were not objectively justifiable.

Before I get to the legal issues, the story in Tom is that of a couple and their five children, working together to build successful lives in Vancouver, after having immigrated to Canada in the 1960s. The will-maker, Bo Kam Tom, and her husband, with the assistance of their children, bought and operated a grocery store. They later bought a family home. All of the children obtained university educations.

Mr. Tom died before Mrs. Tom. Her health declined after she was hurt in a car accident and diagnosed with cancer. All of the children were described as “dutiful and devoted to their mother, visiting or calling regularly, taking her to appointments, dim sum and social activities, staying with her when she needed support and visiting her when she was at the hospital and later the hospice.“ They were “devoted and loving children.”

Two of the children, Rose Tsai and Samsun Tom, provided significantly greater care for their mother in her last few years. In recognition of their care, she changed her will to leave her house to those two children, with the rest of her estate divided among all five children. Her house was worth approximately $1.7 million and the remaining assets about $700,000. The effect of the will was that two of her five children would receive about 85 per cent of her estate, and the other three, Linda Tang, Faye Wong and Jack Tom, would share about 15 per cent.

The three children receiving a lesser share brought a wills variation claim asking the court to provide them with a larger share.

Section 60 of the Wills, Estates and Succession Act provides that the Court may vary a will if the will maker does not make adequate provision for a spouse or child. If adequate provision is not made the court may vary the will to provide such provision as the court considers “adequate, just and equitable in the circumstances.” Section 62 provides that the court may consider evidence of the will-maker’s reasons for making the provision they made. These legislative provisions were formally in the Wills Variation Act, which is referred to in many of the cases.

The trial judge varied the will to increase the provision for the three children who were left less in the will. The will was varied by giving an additional $300,000 to each of Rose Tsai and Samsun Tom, and dividing the rest of the wealth equally among all five children. The decision of the trial judge reduced the discrepancy among the children, while giving some effect to the will-maker’s decision to favour two of her children.

Rose Tsai and Samsun Tom appealed. One of their arguments was that the trial judge should have upheld the will on the basis that their mother had rational and valid reasons for making the provisions she made in view of the additional care they provided to her.

This raises an important issue. The will-maker’s reasons in this case, that two of her children had provided her with greater assistance, were factually accurate. Her decision to provide those two children with greater shares is logically connected to her reasons. Yet the overall distribution in her will is arguably disproportionate. She may have good reasons for favouring two of her children, but leaving them with 85 per cent seems a bit much in the context of her good relationships with all of her children.

Some would argue--including me--that there has been a tension in the cases between an objective standard in assessing whether a will-maker has made adequate provision for a child, and some of the cases in which the courts have upheld distributions on the basis of the will-maker’s reasons.

The Supreme Court of Canada has articulated an objective approach to wills variation cases. In a case decided in 1931, Walker v. McDermott, [1931] S.C.R. 94, the Supreme Court of Canada said that in applying the legislation the court “would naturally proceed from the point of view of the judicious father of a family seeking to discharge both his marital and his parental duty; and would of course (looking at the matter from that point of view), consider the situation of the child, wife or husband, and the standard of living to which, having regard to this and the other circumstances, reference ought to be had.”

In a more modern case, Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, the Supreme Court of Canada set out a framework focused on the will-maker’s legal and moral obligations to a spouse or children. Legal obligations refer to obligations such s division of property obligations to a spouse under family law, while moral obligations are based on society’s reasonable expectations of what a judicious person would do in the circumstances.

In three cases, Bell v. Roy, (1993) 75 B.C.L.R. (2d) 213, Kelly v. Baker (1996), 15 E.T.R. (2d) 219, and Hall v. Hall, 2011 BCCA 354, the Court of Appeal has used language implying a more subjective standard if the will-maker provides reasons that are valid and rational, even if not objectively sufficient.

In Bell, Justice Goldie wrote at paragraph 38,

…that the weight to be given evidence of the testator's reasons is affected by its accuracy and not by morally acceptable or unacceptable content. I do not say the legislature swept away any objectively determined moral duty. I do say, however, that the actual intentions of the testator are to be given an effect which is largely denied by reliance upon the notionally objective reasonable testator.

In Kelly, Justice Finch (later Chief Justice) wrote,

The law does not require that the reason expressed by the testator in her will, or elsewhere, for disinheriting the appellant be justifiable.  It is sufficient if there were valid and rational reasons at the time of her death - valid in the sense of being based on fact; rational in the sense that there is a logical connection between the reasons and the act of disinheritance.

As I wrote in 2015 in a blog post entitled “It’s Time forthe Court of Appeal to Revisit its Formulation of ‘Rational and Valid Reasons’in Wills Variation Cases,” these cases have been criticized in other court decisions as being inconsistent with the objective standard in Tataryn.

In the Court of Appeal in Tom, Madam Justice Fenlon considered Bell, Kelly and Hall in the context of the facts and issues in dispute in each of those cases, and found that the Court of Appeal in each of those cases did apply an objective approach and was not advocating a more subjective approach to a will-maker’s reasons. For example, in Kelly, the claimant submitted that at the time the will was made, four years after the claimant left home, the reasons did not provide a sound basis for disinheriting him. Those reasons included that he had abandoned his family and lived a life morally unacceptable to the will-maker. However, the will was made 16 years before the will-maker died. Justice Finch was addressing the timing of the reasons: they did not have to be justifiable at the time the will was made, if they were consistent with the “discharge of a good parent of her duties to her family,” at the time of her death.

After considering all three cases, Justice Fenlon wrote,

[51]         In summary, Bell CA, Kelly and Hall do not stand for the principle that a testator’s unequal treatment of adult children must be deferred to, without regard to the objective standard of the reasonable testator and current social norms, as long as the subjective reasons given for the unequal distribution are valid and rational. These cases recognize instead that a testator’s moral duty to adult children must be assessed from the viewpoint of a reasonable testator, and that the moral duty may be negated where there is just cause.

The Court of Appeal in Tom went some distance in re-interpreting it’s earlier decisions, but the result is to bring the jurisprudence in line with the objective framework of Tataryn.

This ground of appeal was dismissed. The Court of Appeal did vary the trial judge’s decision a little, by awarding each of Rose Tsai and Samsun Tom 30 per cent of the estate with the other three sharing 40 per cent. 

 

Amendment to Family Law Act Enhances Protection for Inheritances

 

A recent change to British Columbia’s Family Law Act provides greater protection for inheritances from claims of spouses on the breakdown of a marriage or marriage-like relationship. The basic structure of our Family Law Act provides that some assets are “included property” in the division of property and other assets are “excluded property.” In most cases, included assets are divided equally between spouses following the breakdown of the marriage or marriage-like relationship, and excluded property is, well, generally excluded from the division. The court may in some circumstances deviate from this scheme of division, but for the purpose of this blog, lets keep it simple.

When one spouse receives and inheritance or gift, that property is excluded. However, if the property appreciates in value during the marriage or relationship, then the gain is included, and divided equally. Say, for example, one spouse inherits a house worth $800,000 from her mother (probably not in Vancouver), and on separation from her spouse, the house is worth $1 million, then she keeps $800,000, but shares the $200,000 gain with her ex-spouse.

This seems simple enough, and strikes me as fair. The mother intended to benefit her daughter, rather than her daughter’s spouse, but on the other hand, the appreciation in value occurred during the marriage. Where things get murkier is if the daughter transfers the house into her spouse’s name during the marriage. Perhaps she transfers title into a joint tenancy with her spouse, so that if she dies before him, he will receive the house by right-of-survivorship. In that case, does the house remain excluded property? 

The British Columbia Court of Appeal, answered that if excluded property is gifted by one spouse to the other, it is no longer excluded. I wrote about the case of V.J.F v. S.K.W., 2016 BCCA 186 here. In that case, the husband inherited $2 million from his employer, and used most of the funds to buy land, the title to which he and his wife registered in her sole name. On the breakdown of the relationship, both the trial judge and the Court of Appeal held that the residence was no longer excluded property.

The British Columbia Government published a discussion paper in August 2016 discussing this issue and invited comments for potential legislative change.

Now, the legislation has been changed, effective May 11, 2023. The following provision has been added to section 85:

(3)          If property is excluded from family property under subsection (1), the exclusion applies despite any transfer of legal or beneficial ownership of the property from a spouse to the other spouse.

85 (1) excludes from family property inheritances as well as certain other categories of property such as assets brought into the relationship, and any property derived from the sale of excluded property.

If this new subsection 85(3) had been in effect when the proceeding in  V.J.F. was commenced, it is likely that the $2 million would have been excluded, rather than shared between the spouses.  

Estates Disputes in British Columbia: A Litigator's Guide

The Continue Legal Education Society of British Columbia has published a new manual entitled Estates Disputes in British Columbia: A Litigator's Guide. The Chapters are:

1.  Initial Considerations in Estate Disputes

2.  Conflict of Laws in Estate Disputes

3.  Resolving Estate Disputes through Mediation

4.  Proceeding with Estate Litigation

5.  Validity of Wills Disputes

6.  Interpretation, Rectification, and Construction of Wills Disputes

7.  Curing a Defective Will

8.  Wills Variation Claims

9.  Disputes Regarding Attorneys

10.  Disputes Regarding Personal Representatives and Trustees

11.  Committeeship Applications and Claims Against Committees

12.  Inter Vivos Trust Disputes

13.  Inter Vivos Transfer Disputes

14.  Life Insurance, Registered Account, and Benefit Plan Beneficiary Designation Disputes

15.  Resulting Trusts, Unjust Enrichment, Constructive Trusts, and Secret Trusts

16.  Issues of Spousal Status in Estate Disputes

17.  Administration of Intestate Estates Disputes

18.  Passing of Accounts and Trustee Remuneration Disputes

Shahdin Farsai of our firm authored the chapter, Passing Accounts and Trustee Remuneration Disputes. I am one of the co-editors of the book. 

 

Canfield v. Bronze Wines Ltd.

 

Madam Justice Horsman’s decision in Canfield v. Bronze Wines Ltd., 2022 BCSC 546, additional reasons at 2022 BCSC 1435, illustrates the application of unconscionability to improvident transfers of wealth. The doctrine may apply where value is given for the transfer, it does not require a finding that the transferor did not have capacity, nor evidence of undue influence.

This case also illustrates the responsibilities of lawyers and notaries public in witnessing transfer documents. On this point, the trial judge’s finding of liability of the notary public was overturned in Engman v.Canfield, 2023 BCCA 56, although the Court Appel agreed with her analysis of the notary’s responsibilities.

Jean Canfield signed an agreement to sell her home on an acreage in Grand Forks B.C. in January, 2012, to Bronze Wines Ltd. for 465,000. Pursuant to the agreement, Bronze Wines was not required to make a down payment or any payments for two years, after which Bronze Wines was required to make monthly payment to her of $2,500 until she was paid in full. Bronze Wines was required to pay interest at the “Bank of Canada Prime rate + 1%.” The agreement provided that she could foreclose and reclaim the property if Bronze Wines missed three consecutive payments. 

When she made the agreement, she was in her 70s, recovering in an assisted-living residence in Langley, B.C. from hip surgery. In 2010, she found it too difficult to manage the acreage and she moved in with one of her children in Langley, and then into the assisted living residence. She listed the property in 2010 and then in 2011, but had no success in selling.

The principal of Bronze Wines was Scot Stewart, who was a friend of Mrs. Canfield’s son-in-law Max Bottoni. Mr. Stewart wanted to start a winery. He had no training or experience making wines, was unemployed, and did not have substantial assets. Mr. Bottoni negotiated the agreement with Mr. Stewart, who wrote up the agreement using a self-counsel precedent. Mrs. Canfield met Mr. Stewart for the first time when he took the agreement to her residence, and they both signed it. She did not request any changes and did not receive any legal advice before signing. It should also be noted that the trial judge found that Mr. Bottoni had an interest in Bronze Wines, and was not acting as an agent for his mother-in-law.

In order to transfer title to the acreage, Mrs., Canfield need to sign a Form A transfer in the presence of an “Officer,” under the Land Title Act, which include a lawyer or notary public. Mr. Stewart scheduled an appointment for Mrs. Canfield with a notary public, Mr. Engman, in New Westminster. Mr. Stewart and Mr. Bottoni attended the notary’s office with her. Mr. Stewart brought a Form A transfer document with him and the notary witnessed Mrs. Canfield’s signature, and gave the Form A transfer back to Mr. Stewart, who later arranged for registration of the change in title to Bronze Wines.

The meeting between Mrs. Canfield and the notary took about 10 to 15 minutes, for which the notary charged $50. Mr. Stewart paid the fee. Madam Justice Horseman found that the notary did not take any steps to ensure that Mrs. Canfield understood the document, had capacity to sign it and was not subject to undue influence. Mrs. Canfield did not receive and legal advice nor did she confirm to the notary that she had received legal advice in respect of the transfer.

Mr. Stewart and Bronze Wines needed to arrange financing to carry out repairs and renovations to the property. Bronze Wines granted mortgages of the property to secure the financing, and at trial there were tow mortgages: one for the principal amount of $335,000 and the other for $69,440. Sadly, Bronze Wines’ business failed, and the property went into foreclosure. It was sold sale proceeds of $338,000 were paid into court.

Mrs. Canfield never received a payment for the sale of her home. At the time of trial, she was living in a subsidized residence in Nelson, B.C. She has no significant assets.

Several claims were advanced on Mrs. Canfield’s behalf, including:

1.     A claim seeking rescission of the agreement with Bronze Wines and damages on the  basis of unconscionability;

2.      A claim for damages against Mr. Stewart personally;

3.      A claim that the limitation period for one of the lenders to enforce its mortgage had expired;

4.      A claim for damages against the notary for negligence.

Mrs. Canfield had settled with one of the lenders. Madam Justice Horsman dismissed the claim that the other creditor’s right to enforce its mortgage was out of time, and also dismissed the claim against Mr. Stewart personally. I will focus on unconscionability and the claim against the notary.

The leading recent case on unconscionability is the Supreme Court of Canada decision in Uber Technologies Inc. v. Heller, 2020 SCC 16, decided in the very different context of the enforceability of an arbitration clause in Uber contracts (the Court held that it was not).

Unconscionability provides an equitable exception to the enforceability of contracts when the agreement is both unfair and resulted from an inequality of bargaining power between the parties to the agreement. As set out in Madam Justice Horsman’s reasons in paragraph 72:

Through the doctrine of unconscionability, equity provides relief where the traditional presumptions underlying freedom of contract—the “freely negotiated bargain or exchange” between “autonomous and self-interested parties”—lose their justificatory authority due to the vulnerability of one party to the contracting process: Uber at paras. 56-60. Courts will not ignore serious flaws in the contracting process where those flaws challenge the traditional paradigms of the common law of contract. As explained by the Supreme Court of Canada in Uber:

[58]      …The elderly person with cognitive impairment who sells assets for a fraction of their value (Ayres v. Hazelgrove, Q.B. England, February 9, 1984); the ship captain stranded at sea who pays an extortionate price for rescue (The Mark Lane (1890), 15 P.D. 135); the vulnerable couple who signs an improvident mortgage with no understanding of its terms or financial implications (Commercial Bank of Australia Ltd. v. Amadio, [1983] HCA 14, 151 C.L.R. 447) — these and similar scenarios bear little resemblance to the operative assumptions on which the classic contract model is constructed.

To succeed in an allegation that the agreement is unconscionable, the weaker party must by “unduly disadvantaged.” But it is not necessary to show that the stronger party knowingly took advantage of the weaker party.

Applying the analysis in Uber to the facts, Madam Justice Horsman found that Mrs. Canfield established that she was in a position of an inequality of bargaining power:

[92]         There was an inequality of bargaining power as a result of Mrs. Canfield’s inability to adequately protect her own interests. I accept the defendants’ submission that there is no basis in the evidence for a finding that Mrs. Canfield lacked capacity to contract. However, as Uber makes clear, the doctrine of unconscionability is not restricted to cases where a party lacks capacity. In this case, Mrs. Canfield had situational vulnerability as a result of the circumstances she found herself in at the time of the Agreement. She was an elderly widow with health problems who felt pressure to sell a Property she could no longer manage. She was deprived of information that was critical to her exercise of autonomous decision-making in the contracting process. She did not know that Mr. Bottoni had aligned himself with Bronze Wines, and thus could not be relied on to protect her interests. She had no information about Mr. Stewart’s limited income and assets, nor was she told of his lack of experience in the wine-making business. She did not know of Mr. Stewart’s plan to mortgage the Property as soon as it was transferred to Bronze Wines. She was not provided with full information about the nature of the risks inherent in the Agreement that Mr. Bottoni and Mr. Stewart wished her to sign.

[93]         This contracting process did not take place on a level playing field. As a practical matter, only Mr. Stewart and Mr. Bottoni could understand and appreciate the full import of the contractual terms, as well as the extent to which the bargain imperilled Mrs. Canfield’s interests. Unbeknownst to her, she was agreeing to transfer her only asset of any significant value to Bronze Wines in return for an unsecured stream of future income that was dependent on the financial success of a wine-making business operated by someone with no income, assets, or wine-making experience.

Madam Justice Horsman agreed with Mr. Stewart that there was no evidence that Bronze Wines deliberately took advantage of Mrs. Canfield, but it is not necessary to show that he intended to do so for unconscionability to apply.

Madam Justice Horsman also found that Mrs. Canfield met the criteria of an improvident transaction:

[98]          Turning to the second requirement for a finding of unconscionability, I have no difficulty in concluding that this was an improvident transaction. A substantively improvident bargain was struck as a result of Mrs. Canfield’s inequality of bargaining power. The terms of the Agreement, which are more favourable to Bronze Wines than to Mrs. Canfield, offered Bronze Wines, a corporation with no assets, a generous two-year payment holiday as well as a 20 to 40-year amortization period to repay the purchase price without providing any real security or an agreed interest rate. In the context of Mrs. Canfield’s situational vulnerability and the informational asymmetry that characterized this contracting process, she could not have understood or appreciated the meaning or significance of the contractual terms, as well as how they unduly disadvantaged her position.

Ideally, when an agreement is set aside as unconscionable, the weaker party is restored to the position they were in before the agreement was made. The contract is rescinded. In this case, because the acreage was mortgaged and sold, Mrs. Canfield could not have the acreage, nor the full proceeds of sale, returned to her. Madam Justice Horsman ordered rescission, but it was limited to restoring the portion of sale proceeds remaining after the lender was paid. She also ordered that Bronze Wines compensate Mrs. Canfield for the difference between the fair market value of the acreage of $465,000 less the amount she receives from the proceeds of sale.

In view of the fact that the sale price does not appear to be significantly higher than the amount of the loans, and that Bronze Wines has no assets, Mrs. Canfield would likely receive little or no compensation, unless she succeeded in her claim against the notary in negligence. 

In determining the standard of care required of the notary, Madam Justice Horsman considered the requirements of the Land Title Act for an officer witnessing a transfer, and the standards set in the Notaries Guideline form the Society of Notaries Public of British Columbia. The Land Title Act provides that the signature of a transferor is proof that they know the contents of the document, has signed it voluntarily and has capacity to execute it. Accordingly, it is necessary that the notary witnessing the signature establish those facts. The Notaries Guideline also contained the following provision:

2-G6  Unrepresented Persons – A Member should not advise an unrepresented person in a transaction, but should urge such a person to obtain independent advice and, if the unrepresented person does not do so, the Member should take care to see that such person is not proceeding under the impression that his or her interests will be protected by the Member.

Madam Justice Horsman found the standard of care to be as follows:

[215]     For these reasons, I conclude that the standard of conduct expected of Mr. Engman as a reasonable and prudent notary witnessing Mrs. Canfield’s execution of a Form A included:

(1)  Confirming Mrs. Canfield’s identity;

(2)  Advising Mrs. Canfield that Mr. Engman was not providing her with legal advice on the transaction;

(3)  Confirming that Mrs. Canfield had received independent legal advice, or at least that she had made an informed decision not to seek legal advice;

(4)  Making inquiries that were sufficient to satisfy himself that Mrs. Canfield had the capacity to sign the Form A; and

(5)  Making inquiries that were sufficient to satisfy himself that Mrs. Canfield understood the content and legal effect of the Form A, and was signing it voluntarily.

The notary did not meet that standard of care, Madam Justice Horsman finding that he did not take steps to determine Mrs. Canfield’s capacity, her understanding of the transaction, whether she received independent legal advise and whether she was acting voluntarily.

The next question in determining negligence is whether the notary’s conduct caused Mrs. Canfield loss. The first test Is cause in fact: but for his conduct, would she have gone ahead with the transfer? The second is cause in law :is the relationship between his conduct and the loss too remote?

Madam Justice Horsman found that Mrs. Canfield had established that the notary’s conduct caused her loss:

[229]     If Mr. Engman had insisted that Mrs. Canfield receive independent legal advice before he witnessed her signature on the Form A, then she would have had the opportunity to have the unconscionable Agreement rescinded before the transfer of the Property had occurred. But for Mr. Engman’s breach of duty, Mrs. Canfield would have avoided the loss of her Property to Bronze Wines. She could have sold it in the ordinary course for its full market value. I find, therefore, that the evidence establishes that Mr. Engman’s breach of his standard of care was a factual cause of Mrs. Canfield’s injury.

[230]     The loss for which Mrs. Canfield seeks compensation—the value of her Property at the time of its transfer to Bronze Wines—is not too remote to be recoverable. Mrs. Canfield’s actual loss is a reasonably foreseeable consequence of Mr. Engman’s breach of duty. It was reasonably foreseeable that if Mr. Engman failed in his duty to make the inquiries necessary to satisfy himself that the transfer was voluntary, its effect was understood by Mrs. Canfield, and that she had received legal advice about the transaction, then Mrs. Canfield risked losing the Property without adequate compensation. I find, therefore, that the evidence also establishes that Mr. Engman’s breach of his standard of care was a legal cause of Mrs. Canfield’s injury.

The Notary appealed the finding of liability against him to the B.C Court of Appeal.

The Court of Appeal agreed with Madam Justice Horseman’s analysis of the duty of care owed by the notary to Mrs. Canfield, rejecting the notary’s argument that his obligations in witnessing the transfer were more limited.

However, the Court of Appeal allowed the appeal on the basis that the Mrs. Canfield failed to prove that the notary’s negligence caused her loss. To establish causation, she would have had to show that if he had confirmed that she had legal advice or refused to proceed with witnessing the transfer that she would not have proceeded with the transfer. The evidence did not establish that she would not have proceeded with the transaction. There were too many unknowns and a finding that she would not have proceeded with the transfer was, in the Court of Appeal’s view, speculative.

Accordingly, although Mrs. Canfield established her case that the agreement to sell her acreage to Bronze Wines was unconscionable, her claim against the notary failed, and sadly she will not likely be compensated for her loss.

Remote Witnessing of Powers of Attorney

 

Recent amendments to the Power of Attorney Act and Power of Attorney Regulation permit remote witnessing of signatures in British Columbia. These amendments came into affect on January 1, 2023.

The donor (referred to as the “adult” in the legislation) may sign a power of attorney in the electronic presence of a witness who is a British Columbia lawyer or notary public. Similarly, the attorney may also sign in the electronic presence of the witness, provided that the witness is a British Columbia lawyer or notary public. Accordingly, it is no longer necessary for the donor or attorney to sign in front of a lawyer or notary public in person, but may be witnessed using audiovisual technology.

The Regulation includes the following definitions in 2.1(1):

“communicate” means communicate using audiovisual technology, including assistive technology for individuals who are hearing impaired or visually impaired, that enables individuals to communicate with each other by hearing and seeing each other;

“electronic presence” or “electronically present” means the circumstances in which 2 or more individuals in different locations communicate simultaneously to an extent that is similar to communication that would occur if all the individuals were physically present in the same location.

Both the donor (or attorney) and the lawyer or notary public acting as witness sign and date complete and identical copies of the power of attorney in counterparts. Although the copies must be substantively identical, a non-substantive formatting difference will not affect the validity of the power of attorney.

I continue to prefer witnessing and signing documents in person, but there are circumstances, such as isolation that occurred during Covid-19, as well as when the donor or attorney is in a remote location or outside of British Columbia, when the ability to witness remotely is welcome.