Saturday, May 21, 2016

What Happens to Funds Inherited by a Spouse on the Breakdown of the Marriage?

Some of my estate-planning clients have asked me what would happen to the money they intend to leave to their children if one of their children’s marriages breaks down.  In some cases, there may be concern that a marriage breakdown is imminent, while in others it’s a more general, “what if?” question.

When family law was reformed a few years ago in British Columbia, I thought that my answers would be a little more straightforward than they had been in the past. The Family Law Act, which came into effect in March 2013, overhauled the law governing divisions of property in a marriage breakdown. The basic rule is that family property and family debt is shared equally. The parties may agree on a different division, or if an equal division would be “significantly unfair” the court may order a different division, but the basic rule is a 50/50 split. One key aspect of the new property-division regime is that some property is excluded from the divisible family property. The “excluded property” includes inheritances or gifts received by one of the spouses.

At first glance, the answer to the question what happens to my child’s inheritance if her marriage breaks down appears simple:  “don’t worry; it is excluded from the property that she would have to divide equally with her former spouse.”

Alas, if the law were that simple, I might be out of a job.

Section 84 (2) of the Family Law Act includes among the divisible family property,
“(g) 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.”

Still, this probably conforms to most people’s sense of what is fair. If I (the hypothetical  me) leave an inheritance to my daughter of say $400,000, she invests it and it grows to $500,000 during her marriage, then on the breakdown of the marriage, she keeps the full $400,000 on the breakdown of her marriage, and shares the $100,000 growth with her former spouse.

But it gets murkier (otherwise this would be a much shorter post). Supposing my daughter inherits $400,000 from me, but then uses the funds to purchase a house with her spouse, with the title registered in the spouse’s sole name. On a subsequent breakdown of the marriage, is the house (or at $400,000 of the value of it) remain excluded property that my daughter retains? Or is the full value of the house now equally divided between my daughter and her spouse?

The British Columbia Court of Appeal considered this issue in V.J.F v. S.K.W., 2016 BCCA 186. Mr. F. Inherited $2 million (it was not from parents or other family, but nothing turns on that). He used most of it to purchase land in Vancouver on which he and Ms. W planned to build a new family home. The title was registered in Ms. W’s sole name. The trial judge found that he did this for creditor protection. It should be noted that there was no finding that he acted fraudulently to defeat current creditors, but rather that he did this because of risks of claims associated with his business. At trial, the trail judge found that Mr. F conferred a gift on Ms. W when he used the funds to buy the property in her name, and held that when he did so, the funds were no longer excluded property. Accordingly, the funds land was equally divided between Mr. F. and Ms. W.

Madam Justice Newbury, writing for the Court of Appeal, in upholding the trial judge’s decision, held that the trial judge did not err in finding that Mr. F conferred a gift on Ms. W. He could not protect the property from potential future creditors without conferring an absolute interest in Ms. W. She also held that the presumption of advancement—that is the presumption that when a married spouse transfers property to the other spouse gratuitously, he or she intends to make a gift—continues to apply to transfers between married spouse in the province of British Columbia (in some provinces in has been abolished). In this case the onus was on Mr. F to rebut the presumption that he made a gift, and he did not meet the onus.

Madam Justice Newbury also rejected the view expressed in some of the Supreme Court of British Columbia cases that the Family Law Act regime is a complete code, which supersedes common law property rights. In this view, property that was excluded remains excluded despite the fact that title may be transferred between the spouses. She wrote at paragraphs 74 and 75,

[74]         With all due respect to the contrary view, I conclude that the new FLA scheme does not constitute a “complete code” that “descends as between the spouses” and eliminates common law and equitable principles relating to property. Rather, the scheme builds on those principles, preserving concepts such as gifts and trusts, and evidentiary presumptions such as the presumption of advancement between spouses. Thus I find that the gift of (slightly less than) $2 million made by Mr. F. to Ms. W. became her property and was “property owned by at least one spouse” under s. 84, as opposed to “property derived from the disposition of [excluded] property” within the meaning of s. 85. At the time the definitions are applied – the date of separation – the fact Mr. F. had originally received the $2 million as a gift was no longer relevant. He lost the exclusion when he voluntarily and unreservedly directed that the West 33rd property be transferred to Ms. W. and ‘derived’ no property from that disposition.
[75]         I do not interpret the FLA as reversing the gift or requiring that it be ignored because of the spouses’ separation. Nor do I agree that the FLA effectively ‘prohibits’ gifts between spouses, as Mr. F. suggested. (See para. 56.) Gifts between spouses can continue as they have through the ages. It would take much clearer wording to render them suddenly revocable or null or illegal. (See the comments of Chief Justice Farris in a slightly different context in Duncan v. Duncan (No. 2) [1950] B.C.J. No. 50 at para. 13 (S.C.),aff’d [1950] B.C.J. No. 41. (C.A.).)

This case raises a couple of questions.

First, does this mean that whenever a spouse transfers funds from an inheritance to the other spouse, those funds lose their status as “excluded property?” I suggest that the answer is “not necessarily.” In V.J.F. the trial judge found that Mr. F intended to make a gift, and that the presumption of advancement had not been rebutted. In other cases, the courts may find that a spouse did not intend to confer a gift, and there may be evidence rebutting the presumption of advancement. In such a case, the spouse to whom title is transferred may hold the property as a trustee for the spouse who inherited the funds. In that event, the funds should still be excluded.

Secondly, what about a case where the spouse who receives the inheritance buys a house and the title is held in both names as joint tenants. This is likely a more common event. The beneficiary of the inheritance may want her spouse on title as a joint tenant for estate planning so that if she dies first, her spouse will receive the house by right of survivorship. Although the concept of joint tenancy is nuanced, arguably in that case half of the beneficiary of the inheritance should be able to exclude one half of the funds, and the other half divided equally, on the basis that each spouse has a notional half-interest.

If this is correct, then in my example of my daughter receiving a $400,000 inheritance, if she uses the funds to buy a house to be held in a joint tenancy with her spouse, $200,000 would remain excluded, and $200,000 divided equally between her and her spouse on the breakdown of the marriage. She ends up with $300,000, and he with $100,000 from the inherited funds.

Sunday, May 15, 2016

British Columbia Court Services Branch Plans to Collect Hearing Fees Again

In a letter to the Trial Lawyers Association of British Columbia, the Assistant Deputy Minister, Court Services Branch, Ministry of Justice has advised that Court Services Branch intends to begin collecting hearing fees for civil matters set down for dates on or after August 1, 2016.  For the time being, the Court Services Branch will not collect fees for family matters.

As I wrote before, the majority of the Supreme Court of Canada held that the hearing fees in British Columbia were an unconstitutional impediment to access to the courts in Trial Lawyers Association of British Columbia v. British Columbia (Attorney General)2014 SCC 59. Although the Supreme Court of Canada said that a province could charge hearing fees, the majority found British Columbia's regime unconstitutional, by exempting only those who are impoverished. The exemptions did not exempt those for whom the fees created undue hardship, but were not impoverished.

I have some doubts as to whether the changes the Government has made to the exemptions will pass constitutional muster, but the only prediction I will make is that there will be further litigation on this issue.

Irrespective of whether the Government of British Columbia can legally collect hearing fees, there remains the public policy issue of whether this is the right thing to do. I wish those making this decision would read and take to heart Mr. Justice McEwan's eloquent discussion about access to the courts in the Supreme Court of British Columbia's decision in this case, Vilardell v. Dunham, 2012 BCSC 748.

In making this decision, the Government of British Columbia does not appear to be taking access to justice seriously.

Saturday, May 07, 2016

The Sidney and North Saanich Memorial Park Society v. British Columbia (Attorney General)

A good thing about charitable purpose trusts is that they can last forever. A bad thing about charitable purpose trusts is that they can last forever. When creating a charitable purpose trusts, or any long-term trust for that matter, it is difficult to predict what the future holds, and build sufficient flexibility into the trust documents to meet the needs of those who are intended to benefit as circumstances change. Fortunately, as illustrated by a recent decision of the Supreme Court of British Columbia in The Sidney and North Saanich Memorial Park Society v. British Columbia (Attorney General), 2016 BCSC 589, superior courts in common law provinces in Canada do have tools to amend charitable trusts.

The Sidney and North Saanich War Memorial Park Society settled a charitable trust (which I will refer to simply as the “Trust”) in 1965 to hold certain lands (the “Lands”) now in the Town of Sidney. In 1965 the Lands included a park, playing fields and tennis courts, a community hall, called Sanscha Hall, and a Cenotaph. The Sidney and North Saanich War Memorial Park Society transferred the Lands to the trustee of the Trust to hold for the residents of the Electoral District of Saanich (the “Residents”) for “community, cultural, athletic and recreational purposes.”

The Trust deed setting out the powers and duties of the trustee contained certain restrictions including:
  1. A portion of the Lands and Premises (the” Cenotaph Area”) had to be used solely for a memorial cairn;
  2. The trustee had the power to lease the remaining Lands and Premises,  or a part of them, for  a term of up to 5 years with an option to renew for 5 years, provided that the tenant permits and encourages the Lands and Premises to be used by the Residents for community, cultural, athletic and recreational purposes and maintains the Cenotaph Area in good repair;
  3. If any part of the Lands and Premises are expropriated  then the funds received for the expropriation would have to be used to purchase, maintain and improve other lands and premises;
  4. The Residents were given a number of powers including the power to require that the trustee terminate any lease on giving the tenant 30 days notice.

There were a number of changes that occurred over the years, including the following:

  1. In 1969, the Province of British Columbia expropriated part of the Lands on which the Cenotaph was located, and the Cenotaph was moved;
  2. In 1983, the Town of Sidney expropriated a portion of the lands and paid approximately $500,000 in compensation;
  3. In 1987, the trustee used some of the proceeds from the expropriation to purchase land and developed a community sports facility known as Blue Heron Park;
  4. The trustee developed a new multi-purpose arts facility, now known as the Mary Winspear Centre, which opened in 2001 and replaced Sanscha Hall.
Some of the provisions in the Trust deed create significant difficulties for the trustees in light of the changes that have occurred since 1965. For example, the current trustee, the Sidney and North Saanich Memorial Park Society, holds approximately $380,000 from the expropriation compensation, which under the terms of the Trust deed must be used to maintain and improve the Blue Heron Park, but the Blue Heron Park does not require the funds, which could be better used to maintain the Mary Winspear Centre. The restrictions on the length of leases and the provision allowing the Residents to require the trustee to terminate any lease to a Tenant on giving a Tenant 30 days notice, prevent the trustee from attracting tenants and entering into long-term profitable leases.

The Sidney and North Saanich Memorial Park Society asked the court to interpret certain provisions of the Trust deed (which I won’t deal with in this post), and to amend the Trust deed as follows:

a.               Removal of the restrictions on the lease term;
b.               Removal of the power granted to the Residents by which they can require the trustee to terminate a lease on 30 days’ notice without cause;
c.               The trustee be permitted to use any Expropriation Funds to maintain and improve all Trust Property, thereby removing the restriction that such funds only be used for the land purchased in substitution;
d.               Inclusion of a specific provision empowering the trustee to carry on business activities on the Trust Property and to permit uses of or activities on the Trust Property, including business use and the earning of rental income, subject to the terms and conditions of the Trust, and requiring that all such activities and use conform to the community, cultural, athletic and recreational purposes of the Trust; and
e.               Inclusion of a provision that the trustee preserve and maintain a memorial cenotaph, sculpture or other structure, on a place on the Trust Property that is prominent and accessible to the public.
In her reasons for judgement, Madam Justice Dardi considered the Court’s jurisdiction to amend a charitable trust. The first is the cy-pres jurisdiction (which I have written about before). The second is the courts inherent jurisdiction for administrative scheme-making. As I read this case, the circumstances in which the cy-pres jurisdiction may be invoked are relatively narrow, that the terms of the trust have are impossible or impracticable to carry out, but once invoked the Court has broad powers to amend the trust. In contrast, the threshold for invoking the administrative scheme-making power is lower, but the Courts powers are narrower.

Madam Justice Dardi neatly summarized the cy-pres jurisdiction as follows:
[47]         Cy-près is a significant doctrine in the law of charities. It determines what happens when property that has been dedicated to charitable purposes cannot be applied in the manner intended by the donor: Haley & McMurtry, Equity and Trusts, 3d ed (London: Sweet & Maxwell, 2011) at 261. Where the purposes or objects of a charitable trust have become impossible or impracticable to achieve, the court, relying on its inherent jurisdiction, may intervene and alter the purposes of the trust, and in doing so, depart from the stated intention of the settlor. The courts may implement modernized or modified objects that are “as near as possible” (cy-près) to the original purposes: Toronto Aged Men’s and Women’s Homes v. Loyal True Blue and Orange Home, [2003] O.J. No. 5381, 68 O.R. (3d) 777 at para. 50 (S.C.J.) [Stillman].
[48]         A cy-près order “must depart from the intentions of the [settlor] only to the extent required to remove the problem that has caused the future administration of the Trust to become impracticable.” It is also imperative that the relative efficiency of the proposed amendments be considered: Stillman at para. 28.
[49]         The threshold requirement for invoking the cy-près doctrine is a finding that carrying out the existing trust terms is either impossible or impracticable. In the absence of such a determination, the court must refuse to exercise its cy-près scheme-making jurisdiction. Despite the narrow ambit of the doctrine, courts have, at times, interpreted impossibility and impracticability broadly: Waters [Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012)] at 683. “Impracticability” is not to be construed as “absolutely impracticable”: In re Dominion Students’ Hall Trust, [1947] Ch. 183 at 186.
[50]         Earlier lines of authority endorsed the notion that cy-près orders should be restricted to cases where there has been a failure of the purposes or objects of a charitable trust as distinct from the malfunction of the directions from the settlor for implementing those objects.
[51]         However, the modern Canadian jurisprudence, as articulated by Mr. Justice Cullity in Stillman at paras. 31-33 and subsequently applied by the court in Fenton Estate, 2014 BCSC 39, establishes that the doctrine extends beyond remedying the failure of objects. It goes further and empowers the court, without amending the purposes, to introduce or adjust administrative trust machinery to accommodate contemporary conditions, so that the charitable purposes can be sustained. The rationale is found in the judicial recognition that the charitable objects should not be frustrated by the trust’s administrative provisions.
Madam Justice Dardi adopted the modern approach to cy-près as set out in Stillman.

She then summarized the administrative scheme-making jurisdiction,

[56]         The jurisprudence establishes that, even absent a finding of impracticability or impossibility, the court retains the inherent jurisdiction for administrative scheme-making with respect to charitable trusts. An administrative scheme addresses the inadequacy of the administrative terms of a trust to achieve its charitable objects: Waters at 807-08. Pursuant to this jurisdiction, the court has the power to supply administrative terms or to alter the administrative machinery of a charitable trust when necessary for the effective operation of the trust. The court directs a scheme in order to secure a more complete attainment of the charitable purposes. This is in keeping with a long-standing recognition by the courts that the dedication of property to charity through a trust involves special rules. The jurisdiction to regulate the administration of charitable trusts should be exercised sparingly.
[57]         Historically, the courts in England have relied on their inherent jurisdiction to  supply administrative terms when the trust instrument is silent, or to vary administrative terms including trustee powers, such as the investment power, when those terms have become obsolete: In re Royal Society’s Charitable Trusts, [1956] Ch. 87.
Madam Justice Dardi considered conflicting case authorities in other provinces, but found that although there are conflicting judicial opinions on the extent of the court’s powers, the jurisdiction is accepted in Canadian law. (Although I will not deal with the conflicting cases in this post, the discussion is quite interesting, and perhaps fodder for a future blog post.)

She wrote,

[76]         I conclude that I have inherent jurisdiction for administrative scheme-making for charitable trusts. In cases where it cannot be said that the requirements to achieve the purposes of a charitable trust have become sufficiently impracticable or impossible so as to engage the cy-press doctrine, the courts may nonetheless, pursuant to this administrative scheme-making jurisdiction, vary the administrative terms of a trust for the furtherance of charitable purposes. 
She found that she had jurisdiction to grant the amendments requested by the Sidney and North Saanich Memorial Park Society under both the cy-près jurisdiction and the administrative scheme-making jurisdiction, and that it was appropriate to grant the orders amending the Trust deed.

With respect to the cy-près jurisdiction she wrote,

[108]     Counsel for the Trustee submits that without these administrative amendments, the Trust will in all likelihood fail because there are insufficient funds held in trust and/or generated by the Trust Property, and available to the Trustee to adequately maintain and preserve the Trust Property in perpetuity. I agree.
[109]     I am satisfied that, in all the circumstances, the purposes of the Trust have become impracticable as a result of the restrictions upon the Trustee to enter into short-term leases, the Resident Oversight Clause, and the restriction placed on the use of the Expropriation Funds. I am satisfied that the Trustee has established economic impracticability of the continuation of strict adherence to these administrative terms. While these administrative terms may have been practical when the Trust was settled, subsequent events have rendered adherence to the strict terms impracticable, such that the court’s cy-près jurisdiction is engaged
[110]     Accordingly, I approve the amendments to the Trust Deed as sought by the Trustee. The Trustee has proposed removing the provisions limiting leases to five- year terms. As an added protection, the Trustee has proposed the inclusion of a clause which requires the Trustee to take steps at least once every five years to satisfy itself that the tenant is not in breach of the terms and conditions of the Trust, including its objects and purposes. I endorse the inclusion of that safeguard.
Madam Justice Dardi wrote in respect of the administrative scheme-making jurisdiction,

[115]     For completeness and if the cy-près doctrine is not engaged, I approve the proposed amendments pursuant to the court’s jurisdiction to regulate the administration of the Trust.
....
[117]     The amendments that I have approved in this case relate to the Trustee’s power to lease. The directions in the Trust Deed regarding the term of the lease and the Resident Oversight Clause are incidental to the power to lease. These directions are not essential to carry out the paramount intention of the settlor, namely that the Trustee be granted the power to lease. I am satisfied that these particular provisions have become inadequate for contemporary needs and that the proposed amendments will effectively modernize the Trust’s administrative machinery.
[118]     Similarly, the settlor conferred upon the Trustee the power to use the compensation payments it has received for the maintenance and improvements of certain prescribed lands. I conclude that the proposed amendment – to expand the parameters of the use of the Expropriation Funds – updates and enhances the efficacy of that administrative term of the Trust.
[119]     In light of the foregoing, the amendments to the administrative directions of the Trust that I have approved do not subvert the donor’s intentions. Rather, the proposed amendments would allow the settlor’s intentions to be more effectively fulfilled.
[120]     In summary on this issue, I am satisfied that the amendments sought fall within the court’s jurisdiction to regulate the administration of the Trust. I conclude that the amendments to the administrative machinery of the Trust will enhance and facilitate, in light of the altered circumstances, the economic feasibility of carrying out of the settlor’s paramount objective, namely that the Trust Property continue to be used by the Residents for community, cultural, athletic and recreational purposes. The amendments secure the more complete attainment of the charitable objects and ensure that the settlor’s intentions and the charitable purposes of the Trust can be carried out more effectively.

Wednesday, May 04, 2016

Becker v. Becker Case Comment -- by Kimberly Wallis

[The following guest post was written by Kimberly Wallis also of Sabey Rule LLP.]

In the recent British Columbia Supreme Court case of Becker v Becker, 2016 BCSC 487, the executor of the will of Ann Andrews sought to prove her will in solemn form after its validity was formally challenged by those who would benefit under a previous will. 

There were a number of red flags raised surrounding the circumstances of the execution of Ms. Andrews last will and testament.  These were:

·         She made not one but two new wills in the last six weeks of her life;
·         She had been diagnosed with an inoperable brain tumor at the time;
·         Her long time companion gave instructions directly to her lawyer, indicating that the first new will had errors in it that had to be corrected;
·         The ultimate residuary beneficiaries departed from an estate plan that Ms. Andrews had in place for at least a decade.

Despite these red flags, Mr. Justice Smith found that the last will executed by Ms. Andrews (“the Final Will”)  was valid and the will would thus govern the ultimate distribution of her estate.

Ms. Andrews emigrated from the UK to Canada in 1974, with her husband Mr. Andrews, who died a few years later.  Ms. Andrews met and lived with Hendrik Becker for 27 years prior to her death, but neither relationship led to children and she died without issue.  Mr. Becker, however, had three sons from a previous relationship.

Accordingly, Ms. Andrews was survived by her common-law husband, his children and Mr. Becker’s four grandchildren who were Ms. Andrews step-grandchildren (‘the grandchildren”) in Canada.
Ms. Andrews was also survived by an assortment of six nieces and godchildren in England (“the godchildren”).

Under earlier wills, the residue of Ms. Andrews estate, (after a life interest for Hendrick in her West Vancouver condominium) would have been divided among the godchildren, whereas under the final will, the residue would be divided ten ways among the grandchildren as well as the godchildren.

After being admitted to Lions Gate hospital on December 28th, 2011, Ms. Andrews was told of the inoperable brain tumor and she remained in the hospital in palliative care until her death some six weeks later.  On her behalf, Hendrick contacted the law firm that had drawn up her previous will, and shortly thereafter a solicitor from that firm attended upon Ms. Andrews.

Ms. Andrews gave instructions on January 10th and executed a new will on January 13th.  Like her old will, the first new will provided that the godchildren would be the residuary beneficiaries.

However, Mr. Becker contacted the solicitor, one Ms. Rockandel, on January 12th, indicating that he believed his own grandchildren were the residuary beneficiaries.  On the 16th of January, he told her that his grandchildren were to be included, along with the godchildren as residuary beneficiaries.  On the 17th Ms. Rockandel took instructions from Ms. Andrews to that effect, and on the 18th Ms. Andrews executed the Final Will, which did indeed provide for ten way distribution of the residue and included both the godchildren and the grandchildren.

In coming to the conclusion that Ms. Andrews had mental capacity to execute her will and further that Mr. Becker did not exert undue influence upon her, Mr. Justice Smith looked at the following factors:

WARMTH AND CLOSENESS OF RELATIONSHIP WITH BENEFICIARIES

·         Although close to her godchildren, the court also considered that Ms. Andrews had known the grandchildren their whole lives, and as such, that while not blood relatives they were natural objects of her bounty. 
·         Although the godchildren attempted to portray Ms. Andrew’s relationship with Mr. Becker as one of convenience, the fact remains that they spent three decades together and were together at her death.

SOLICITOR’S INSTRUCTIONS

·         The solicitor spent a significant amount of time taking instructions, although Mr. Hendrick was there for the first two thirds on January 10th.
·         Ms. Rockandel was quite properly “keenly aware” when Mr. Hendrick told her to include his grandchildren as residuary beneficiaries that she had to hear this from Ms. Andrews directly.
·         Ms. Rockandel was blunt and told Ms. Andrews flatly that she did not have to change her will; Ms. Andrews told her she had seen the grandchildren grow up and did not wish to leave them out. 

MEDICAL EVIDENCE
·         Ms. Andrew’s doctor testified she was “bright and alert” on the 13th, the day she executed the first new will.  While he testified she was emotional about her diagnosis, the judge emphasizes that one should not confuse the disturbed emotions that are to be expected of one who learns “that death is imminent, with the question of mental capacity” [66].

With respect to the involvement of Mr. Becker in the creation of Ms. Andrews estate plan, Mr. Justice Smith cited Madam Justice Dardi in Chang Estate vChang, 2013 BCSC 976, for the proposition that merely making one’s wishes known does not amount to undue influence:

…The undue influence must constitute coercion which could not be resisted by the will-maker and which destroyed his or her free agency.  It is well-established on the authorities that if the will-maker remains able to act freely, the exercise of significant advice or persuasion on the will-maker or an attempt to appeal to the will-maker to gratify the wishes of another, will not amount to undue influence….[35]
Historically, in British Columbia, it has fallen on a person alleging undue influence to prove it.  However, one of the changes brought in by the new Wills, Estates and Successions Act ("WESA") is a switch to this burden of proof – going forward, for those wills adjudicated under WESA, the burden of proof will fall upon the person who is in a position of trust and who benefits in the will to prove that they did NOT unduly influence the will-maker.

Interestingly, Mr. Justice Smith states that while in this case the will-maker died before that provision became law, even if the burden of proof had rested upon Mr. Becker to refute, the evidence would have fallen short of establishing a case of undue influence.

With regard to Ms. Rockandel’s actions, the judge stated that while it is of some concern that Hendrick was present for part of the January 10th meeting, he was not present on the 13th, 17th, or 18th of January.  Further, Ms. Rockandel took the time to talk with Ms. Andrews at length and comfort herself that Ms. Andrews was acting freely, albeit possibly with some coaxing from her husband of 30 years.  As Mr. Justice Smith states, “Nothing in the case law prevents suggestions or persuasion by a spouse, provided that there is no coercion and the testator remains free to make his or her own decision” [70].

Also important is the fact that the Becker grandchildren had been part of Ms. Andrew’s life for decades and she had watched them grow up.  Mr. Justice Smith contrasts this with those wills made at the end of a life to benefit someone “who had only recently come into the testator’s life” [60].  Presumably the courts may regard such a change with more suspicion.


This case, like many before, establishes that very solid evidence must be available in order to succeed in a claim of undue influence in the courts of British Columbia, and that this will possibly remain the case even with the new reversal of the burden of proof.

Sunday, April 17, 2016

Prince Edward County District Court-House and Gaol, Picton, Ontario

I took these photographs last fall while visiting Prince Edward County in Ontario. The courthouse was the site of Sir John A. Macdonald's first trial, apparently defending himself on an assault charge. Here is a photograph of Sir John A. and me, also taken in Picton:
There are some differences. If I recall correctly, my first trial was in small claims court in Vancouver, and I was not defending myself. I also never became the first Prime Minister of any country.

Saturday, April 09, 2016

Kish v. Sobchak Estate: Application of Family Law to Wills Variation Cases

Wills variation cases in British Columbia and family law are related. The Family Law Act deals with division of property and support on the breakdown of marriages and common law relationships, while Part 4, Division 6 of the Wills, Estates and Succession Act deals with obligations of a deceased spouse to make adequate provision for the surviving spouse. With changes to legislation governing both family law and succession law in recent years, it will be interesting to see how the courts adapt and apply principles from one to the other.

In the leading modern case on wills variation, Tataryn v.Tataryn Estate, [1994] 2 SCR 807, the Supreme Court of Canada  said that when determining whether a will maker has made adequate provision for his or her spouse or children in a will, the courts should consider whether the will-maker met his or her legal and moral obligations. In determining whether the legal obligations to a spouse are met, the courts are to consider what the spouse would have received if the relationship had broken down. Madam Justice McLachlin (now Chief Justice) wrote,
The legal obligations on a testator during his or her lifetime reflect a clear and unequivocal social expectation, expressed through society's elected representatives and the judicial doctrine of its courts.  Where provision for a spouse is in issue, the testator's legal obligations while alive may be found in the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp ), family property legislation and the law of constructive trust: Pettkus v. Becker, [1980] 2 S.C.R. 834; Sorochan v. Sorochan, [1986] 2 S.C.R. 38; Peter v. Beblow, [1993] 1 S.C.R. 980.  

The rationale for looking at family law is to provide symmetry between obligations between spouses during their lifetimes, and on the death of one.

In some wills variation cases, the courts have done a fairly detailed analysis of how property would have been divided on a notional breakdown of the marriage or common law relationship, while in others this appears to be less central to the decisions (which may reflect the evidence and how the lawyers presented each case).

I have written two posts on the recent Court of Appeal decision in Kish v. Sobchak Estate, 2015 BCCA 65, one dealing with the facts and decision, and the other with the amount of deference to be given by the Court of Appeal to a judge’s findings of facts in a wills variation summary trial.

Although not central to the reasons for judgment, a couple of paragraphs in the Kish decision caught my eye.  The court appears to me to be placing less emphasis on family law. Madam Justice Newbury for the Court wrote:
[48]        The Court in Tataryn (which was on appeal from this province) suggested that where provision for a spouse is in issue, guidance concerning the testator’s legal obligations while he or she was alive may be found in the Divorce Act, family property legislation, or the law of constructive trusts. The Court, however, did not carry out a detailed examination, or make specific findings, concerning what property or how much support Mrs. Tataryn would have been entitled to in the event of a separation. The Court awarded her certain real estate and the residue of her husband’s estate after allowing for gifts to the testator’s sons.
[49]        I infer that the analysis of legal obligation need not be a detailed or exact one, given the difficulty of drawing a direct analogy between the consequences of a marriage breakdown – which leaves both spouses with needs and obligations – and the death of a spouse. McLachlin J. stated that “there will be a wide range of options, any of which might be considered appropriate in the circumstances.” (Tataryn at 824.) An action under the WVA should not normally become a proxy for divorce proceedings, complete with the elaborate features and special rules applicable to a family law trial.

Sunday, April 03, 2016

Kish v. Sobchak Estate: Standard of Appellate Review of Findings of Fact in Wills Variation Summary Trial

In the recent decision in Kish v. Sobchak Estate, 2016 BCCA 65, a five-judge panel of the British Columbia Court of Appeal considered how much deference the Court of Appeal is required to give a Supreme Court Judge’s finding of facts in a wills variation case decided on the basis of affidavit evidence, as opposed to a conventional trial where witnesses testify in person.  (This is my second post on this case. I reviewed the facts and the judgement in my previous post. )

An appeal is different from a trial. It is not a rehearing. Rather the appellant has to persuade the appellate court that the trial judge made an error, and that the error was of a nature such that the appellate court should interfere by either changing the decision or ordering a retrial.

The amount of deference the appellate court is required to give the trail judge’s decision may vary depending on the nature of the alleged error. It may be one of a question of law, a finding of fact, an inference of fact or it may involve the exercise of discretion. Some findings are said to be a mixed questions of law and fact.

An appellate court is not required to defer to a trial judge’s rulings on pure questions of law. If the appellate court holds that the judge has made an error of law, the appellate court will substitute its decision.

But generally greater deference is required for findings of fact. The leading case in Canada is a decision of the Supreme Court of Canada in Housen v. Nikolaisen, in which the Supreme Court of Canada reaffirmed that an appellate court may only interfere with a finding of fact if the court finds that the trial judge made a “palpable and overriding error.” Another formulation of the test is that the trial judge’s finding of facts will be upheld if there is some evidence to support it.

The reasons for this degree of deference on findings of fact were set out by Justices Iacobucci and Major in the majority judgment as follows:

15                               In our view, the numerous bases for deferring to the findings of fact of the trial judge which are discussed in the above authorities can be grouped into the following three basic principles.
 
(1)   Limiting the Number, Length and Cost of Appeals
16                               Given the scarcity of judicial resources, setting limits on the scope of judicial review is to be encouraged.  Deferring to a trial judge’s findings of fact not only serves this end, but does so on a principled basis.  Substantial resources are allocated to trial courts for the purpose of assessing facts.  To allow for wide-ranging review of the trial judge’s factual findings results in needless duplication of judicial proceedings with little, if any improvement in the result.  In addition, lengthy appeals prejudice litigants with fewer resources, and frustrate the goal of providing an efficient and effective remedy for the parties.
(2)  Promoting the Autonomy and Integrity of Trial Proceedings
17                               The presumption underlying the structure of our court system is that a trial judge is competent to decide the case before him or her, and that a just and fair outcome will result from the trial process.  Frequent and unlimited appeals would undermine this presumption and weaken public confidence in the trial process.  An appeal is the exception rather than the rule. 
 (3)   Recognizing the Expertise of the Trial Judge and His or Her Advantageous Position
18                               The trial judge is better situated to make factual findings owing to his or her extensive exposure to the evidence, the advantage of hearing testimony viva voce, and the judge’s familiarity with the case as a whole.  Because the primary role of the trial judge is to weigh and assess voluminous quantities of evidence, the expertise and insight of the trial judge in this area should be respected.

In Kish, the Court of Appeal considered the application of the requirement in Housen that an appellate court defer to a trial judge’s finding of facts to a wills variation case that was decided on the basis of affidavit evidence rather than oral testimony. Although usually three judges hear an appeal in the Court of Appeal, the Court may sit as a five-judge panel if requested in order to reconsider prior decisions.

One rationale for deferring to a trial judge’s finding of facts is that the trial judge has the advantage of seeing and hearing the witnesses, and an appellate court does not. But it is fairly common for the Supreme Court of British Columbia to hear summary trials in which the evidence is put in by affidavits, and witnesses either do not testify in the presence of the judge at all, or there is more limited oral testimony. In a previous post, I reviewed the number of summary versus conventional trials in reported decisions over a three year period and found that just under half were summary trials. In a summary trial without oral testimony, it could be argued that the trial judge does not have an advantage in making findings of fact over an appellate court which may review all of the written evidence.

The Court of Appeal also considered the case authorities dealing with the standard of review of the exercise of the trial judge’s exercise of discretion when varying a will to make the provision he or she considers “adequate, just and equitable in the circumstances.” In a Supreme Court of Canada case, Swain v. Dennison [1967] S.C.R. 7, the Court held that the British Columbia Court of Appeal may “reach its own conclusion as to the discretion properly to be exercised.” Based on the Swain decision, there appears to be a lower standard of review of an exercise of a trial judge’s discretion when varying a will than when a judge exercises discretion in other areas of law.

Madam Justice Newbury, writing for the Court of Appeal, distinguished between a finding of fact and the exercise of discretion. The judge does not exercise discretion in finding facts. The judge may have discretion in choosing a course of action once he or she has made findings of fact.

She considered whether a lower standard should be applied in making findings of fact if the trial proceeded summarily based on affidavit evidence in a wills variation case than if the trial was a conventional trial based on oral testimony.  The Court of Appeal held that the same standard for findings of fact applies in both cases: palpable and overriding error. She wrote:

[43]        Drawing all of these threads together, there are two possible approaches to the relationship between Housen on the one hand, and Swain/Price on the other in appeals from summary trial judgments under the WVA:
(a)      All “findings” of a trial judge, including those that involve the exercise of judicial discretion, are reviewable by this court without deference, except findings based on oral testimony, which are subject to the Housen standard; or
(b)      A trial judge’s exercise of discretion may be reviewed without deference, but all findings of fact (whether based on oral or affidavit evidence) are subject to theHousen standard.
[44]        In my view, the second alternative is the preferable one. It is simpler than the first and does not require this court to determine in every case whether a trial judge’s findings were based on oral or affidavit evidence or both, whether the witness was cross-examined on the point, etc. More importantly, it reflects the trend to increased deference to trial judges that has characterized civil law in Canada in the last few decades. This is not to suggest that there is no principled reason for distinguishing between oral and affidavit evidence (the reason being that the trial judge sees the witness at trial and a court of appeal does not); but Housen and its predecessors did not make that distinction in formulating the current standards of review. (Indeed the Court observed at para. 25 of Housen that there were other reasons to defer to trial judges.) Further, as we have seen, the distinction was not made in Swain itself.
[45]        I propose to address the grounds of appeal and cross-appeal, then, on the basis that while this court must defer (i.e., apply the “palpable and overriding” or “no supporting evidence” standard) to findings of fact made by the trial judge, we are not bound to defer to her exercise of discretion – i.e., we are not bound to apply the standard described in Oldman River[v.Canada (Minister of Transport) [1992] 1 S.C.R. 3] and Penner, supra.