Pelletier v. Pelletier

The case of Pelletier v. Pelletier, 2025 BCSC 43, is about allegations of financial abuse by a granddaughter of her grandfather’s wealth at a time when he was vulnerable and had been diagnosed by both a physician and a geriatric psychiatrist with dementia. The physiatrist wrote a letter in November 2018 opining that he was “no longer capable of making his legal and financial decision.” One of the interesting features of this case is that when this case went to trial about 5 and a half years after the diagnosis of dementia, and the grandfather gave evidence, the trial judge, Madam Justice Whately, found that he “displayed no outward signs of cognitive decline, nor any of the behaviours or symptoms associated with dementia or other mental disorders that featured so prominently in the evidence.”  What happened?

Dora and Claude had three children, two of whom had died. They were close to their granddaughter Brittany Adcock, who was married to Darryl Adcock.

Dora and Claude owned a 48-acre farm as well as a residential property at Graham Road near the farm. By 2018 there was tension between them over whether to continue to farm. Claude wanted to continue. Dora didn’t. They had both retired from their main employments. She was born in 1944 and he in 1938. She wanted to move into the Graham Road property, closer to Brittany and her family. He was buying new equipment for the farm, including a tractor for $45,000, a Power Harrow for $13,000 and an SUV for $40,000, and Dora didn’t think they could afford it.

In 2018, they sold the Graham Road property to Brittany and Darryl for less than fair market value. No claim was made in respect of this sale, nor was there any suggestion that Brittany and Darryl did anything improper in buying the property for the price they paid.

Claude’s mental functioning deteriorated. According to Justice Whately:

[11]         It is true that Claude suffered from serious health issues requiring medication. This medication led to catastrophic effects: his behaviour and personality changed, and I accept that he became cantankerous, less rational, and generally difficult to be around. Claude suffered from symptoms that mimic dementia, such as temporary cognitive and functional impairments, and he also likely suffered from increased impulsivity and paranoia.

In diagnosing Claude with dementia, his doctors and nurses relied in part on collateral reports from his granddaughter Brittany and Dora, which were inaccurate. Justice Whately wrote:

[175]     Brittany made various statements to Claude’s medical professionals later shown to be untrue, exaggerated, or misleading. Some of these include:

a)    As of November 2018, Brittany variously told different health care providers that Claude had spent $300,000, $350,000, or $400,000–$500,000 on farm equipment. She informed one doctor that she had “tallied” the spending, which totalled at least $300,000.

b)    As of November 2018, Claude had gone through all his and Dora’s savings and was starting to dip into their retirement fund. In fact, in November 2018, Dora and Claude were in a financially positive position.

c)     Claude had continued an affair for 37 years with a woman in Ontario.

d)    Claude was making paranoid and obsessive demands about accounting of his money and demanded $30,000 from the family to hire a lawyer to revoke the POA.

Claude had previously made an enduring power of attorney in 2011, appointing Dora as his attorney and Brittany as his alternate. After the diagnosis of dementia, Dora and Brittany effectively took over his affairs, and he lost access to his bank account. He did sell farm equipment and livestock, which he testified totaled over $240,000, and which he gave to Dora.

Dora reactivated a line of credit, which she used for the construction of a house for herself on the Graham Road property. She used the power of attorney to sell the farm in July, 2020, for $999,999. Out of those proceeds, she paid $335,000 owing on the line of credit and transferred $401,611 from her joint account with Claude to a joint account Claude held with Brittany. The same amount was then transferred into Brittany and Darryl’s joint account. Brittany and Dora testified that the funds represented a $200,000 payment to compensate Brittany and Darryl for building a guest suite on their property for Claude’s use and $200,000 was a gift from Claude and Dora for the benefit of the great-grandchildren’s education. Further funds were later transferred from Claude to Brittany and Darryl for further work on the guest suite.

Claude lived in the guest suite for approximately 20 months from April 2020 until October 14, 2021.

In October, 2021, after a dispute in which Claude demanded an accounting of his finances, he was apprehended under the Mental Health Act. While hospitalized, his medication was changed, and following further tests, another psychiatrist, “Dr. Schovanek found that Claude was capable of managing his basic finances, balancing a check book, and making simple meals safely. Dr. Schovanek concluded that “Claude is believed to be capable of re-designating a power of attorney.” Claude was released, and moved in with his son.

Claude signed a revocation of his power of attorney, which he mailed on December 20, 2021 to Brittany, and delivered to Dora on December 23, 2021.

Between October and December 2021, Dora negotiated a separation agreement with Brittany purporting to negotiate on Claude’s behalf as his alternate attorney, on the basis that Dora no longer had authority to act by virtue of their separation. The agreement was signed on December 29, 2021, and contained a provision recognizing a gift of $200,000 to Brittany and Darryl for the guest suite, and another $200,000 to them for their children’s education. Claude did not participate in the negotiations, and Brittany signed on his behalf.

Dora brought a family law claim against her Claude. They had been married for 60 years.  Claude brought a counterclaim in the family law proceeding against their granddaughter, Brittany and her husband Darryl.

The parties agreed that the separation date was November 3, 2021.

In the proceeding, Claude tendered a report by Dr. Passmore, who opined on his capacity to instruct counsel and did a retrospectively to December 2021. As set out in the reasons for judgment:

[90]         Dr. Passmore opined that, as of the date of his examination of him, Claude was capable of managing his financial affairs, instructing legal counsel, making a will, making a POA, and making a representation agreement.

[91]         Dr. Passmore also opined that Claude’s cognitive impairment and below normal MoCa (Montreal Cognitive Assessment) scores which led, in part, to his diagnosis of dementia, were primarily due to the side effects of medication.

Claude’s claims included breach of fiduciary duties, unjust enrichment, and knowing receipt of funds in breach of trust. He also sought to set aside the separation agreement.

Justice Whately found that both Dora and Brittany had fiduciary duties to Claude, and that they breached those duties. In addition to having fiduciary duties by virtue of holding a power of attorney, Brittany was also in an ad hoc fiduciary before she stepped into the role of an attorney following Dora’s separation from Claude.

Justice Whately’s decision includes a useful summary of ad hoc fiduciary relationships:

[200]     An ad hoc fiduciary relationship is one that arises out of the specific circumstances and dynamics of the particular relationship: Sledin Estate v. Rusin, 2011 BCSC 1207 at para. 65.

[201]     In Frame v. Smith, [1987] 2 S.C.R. 99, Justice Wilson (in dissent), identified three characteristics that are common to most relationships in which fiduciary obligations have been imposed:

1.     The fiduciary has scope for the exercise of some discretion or power;

2.     The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interests; and

3.     The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power

(the “Frame Factors”).

[202]     The Frame Factors are still widely cited in the case law as “indicia” of an ad hoc fiduciary relationship. However, they are no longer considered to be the complete test for establishment of a fiduciary relationship. In Alberta v. Elder Advocates of Alberta Society, 2011 SCC 24, the Supreme Court of Canada restated the test for the existence of an ad hoc fiduciary relationship as follows:

…[F]or an ad hoc fiduciary duty to arise, the claimant must show, in addition to the vulnerability arising from the relationship as described by Wilson J. in Frame:

an undertaking by the alleged fiduciary to act in the best interests of the alleged beneficiary or beneficiaries;

a defined person or class of persons vulnerable to a fiduciary's control (the beneficiary or beneficiaries); and

a legal or substantial practical interest of the beneficiary or beneficiaries that stands to be adversely affected by the alleged fiduciary's exercise of discretion or control.

[203]     Fiduciary duties can arise without formal appointment as attorney, where an individual takes on the role of managing the financial affairs of a relative. For example, the addition of an adult child to an elderly parent’s bank account for the purpose of assisting with their finances may be sufficient to trigger fiduciary duties, regardless of the parent’s capacity and regardless of whether the child was actually acting as power of attorney for their parent: see e.g. Wedemire v. Wedemire, 2017 ONSC 6891, and Miller v. Miller, 2011 ONSC 7239.

Justice Whately found that both Dora and Brittany breached their fiduciary duties, but Dora did not benefit. Both Brittany and Darryl were unjustly enriched by the depletion of Claude’s funds from the sale of the farm and there was no juristic reason for them to retain a benefit.

The Court also held Brittany and Darryl liable for knowing receipt, the principles of which are summarized in the following passage:

[231]     The elements of a claim for knowing receipt have been set out in Citadel General Assurance Co. v. Lloyds Bank of Canada, [1997] 3 SCR 805 [Citadel], as follows:

a.              receipt of trust property for one’s own benefit (as opposed to as an agent for someone else); and

b.              knowledge or constructive knowledge that the property was transferred in breach of trust or fiduciary duty.

[232]     The threshold of knowledge required to satisfy the second element of the test is low. In Citadel, at para. 49, La Forest J. described the knowledge standard as follows:

…relief will be granted where a stranger to the trust, having received trust property for his or her own benefit and having knowledge of facts which would put a reasonable person on inquiry, actually fails to inquire as to the possible misapplication of trust property.

[233]     Liability for knowing assistance is imposed where a third party (1) assists in a breach of fiduciary duty with (2) actual knowledge that the fiduciary is in breach: Air Canada v. M&L Travel Ltd., [1993] 3 S.C.R. 787.

[234]     Brittany and Darryl knowingly received and personally benefitted from Dora’s breach of fiduciary duty.

[235]     Brittany knew, or ought to have known that the property was transferred in breach of Dora’s fiduciary duty. The evidence establishes that Brittany knew that Dora had a fiduciary obligation to Claude pursuant to the POA. Brittany knew, or ought to have known, that a gift of Claude’s money by Dora to Brittany and Darryl was not in not in Claude’s best interest and that he was either not aware or did not consent to such a gift. Alternatively, even if Claude did consent to some form of gift being made during the period of his incapacity, there are safeguards in place to prevent incapable persons from making gifts that are contrary to their best interests. (see s. 60.2 of the Adult Guardianship Act, R.S.B.C. 1996, c. 6 and s. 20 of the PAA and Regulations). Claude’s best interests, specifically with respect to his financial security, were entirely ignored by his fiduciaries in this case.

The separation agreement was set aside, and Justice Whately ordered Brttany and Darryl to pay damages as follows:

[242]     I order that Brittany and Darryl pay damages to Claude in the amount of $437,535.00. For clarity, I notionally base this amount on:

·                 50% of the 200,000 gift for the education fund ($100,000)

·                 50% of the 200,000 gift for the guest suite ($100,000)

·                 50% of the amount paid against Dora and Claude’s LOC from the Farm Sale proceeds,     which was ostensibly used to pay for the construction of Dora’s House on the Graham Road Property ($167,535)

·                 $70,000 to approximate the various amounts taken or used by Brittany during the period of incapacity, including the “extras” or other unexplained withdrawals from Claude’s funds.

Megan Vu Joins Sabey Rule as an Articling Student

I am pleased to announce that Megan Vu has joined our firm as an articling student. She has been with us since last fall. Megan is originally from Yellowknife and is a recent law graduate at Thompson Rivers University, where she was on the Dean's List. 

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.