Saturday, June 12, 2021

Nova Scotia Court of Appeal Allows Appeal in Lawen Estate

Both Nova Scotia and British Columbia allow independent adult children to apply to court to vary their parents’ wills. Although other provinces in Canada have legislation allowing spouses, minor and dependent children to apply for dependant’s relief on the death of a spouse or parent who has provided little or no inheritance, the provisions allowing independent adult children to apply are not common.

British Columbia has had this legislation under various titles for over 100 years now. The Supreme Court of Canada has decided cases and outlined principles that are to applied to claims made under British Columbia’s legislation, including claims by independent adult children. The most recent Supreme Court of Canada decision is Tataryn v. Tataryn Estate, [1994] 2 SCR 807. I was a bit surprised when Justice Bodurtha of the Supreme Court of Nova Scotia held in Lawen Estate v. Nova Scotia (Attorney General), 2019 NSSC 162 (CanLii) that Nova Scotia’s Testator Family Maintenance Act offends section 7 of the Charter of Rights and Freedoms insofar as it permits non-dependant adult children to apply of vary their parents’ wills. Section 7 of the Charter says:

Everyone has the right to life, liberty and security of the person and the right not to be deprived thereof except in accordance with the principles of fundamental justice.

The court found that to the extent that the legislation interfered with the testamentary autonomy of the will-maker in respect of independent adult children, it violates the constitutional right to liberty. The Court read down the legislation so that it would not apply to non-dependant adult children.

The Nova Scotia Court of Appeal in Nova Scotia (Attorney General) v. Lawen Estate, 2021 NSCA 39 (CanLii) disagreed. On appeal by the Attorney General of Nova Scotia, the Court allowed the appeal. Justice Farrar, writing for the Court, held that there was an insufficient evidentiary basis to find that the legislation violated section 7 of the Charter:

[52]         In this case, there was no evidence put before the application judge to establish an engagement with matters critical to a testator’s dignity and autonomy.  Nor was there any evidence indicating why – from a public interest perspective – testamentary capacity was a pressing issue, that testators’ wishes were being arbitrarily ignored, or that testamentary autonomy to preclude a non-dependent adult child engaged the liberty interests of an individual.  There was no consideration of whether s. 5 of the Act, which outlines the factors to be taken into account when considering a claim of a dependent, safeguarded a testator’s autonomy.

[53]         The application judge did not consider, even if a breach of s. 7 was made out, whether it was in accordance with principles of fundamental justice.  He inferred that the AGNS accepted if a violation of the liberty interest was found it would not be in accordance with principles of fundamental justice (¶62).  The AGNS did not make any such concession.  It was incumbent upon the application judge to undertake this crucial aspect of the constitutional analysis.

[54]         The application judge did refer to Tataryn Estate, supra, where McLachlin, J., explained that the purpose of the Act was to ameliorate circumstances of women and children at the time when men held most of the property, to ensure that women and children would receive an adequate, just and equitable share of the family wealth on the death of the person who held it, even in circumstances where they were not able to demonstrate need (Tataryn Estate, ¶ 16, cited at ¶ 19 herein).  However, he did no analysis nor did he make any finding as to whether the objects of the Act were in compliance with the principles of fundamental justice.

[55]         There was no finding that the impugned provisions caused harm, that they were arbitrary, overbroad or grossly disproportionate to the objectives of the legislation.  All of which would have been necessary to anchor a breach of s. 7.

There are no reported decisions in British Columbia at the time of writing this post that have ruled on the question of whether our legislation is constitutional. Nor has the Supreme Court of Canada considered this issue. Neither the Supreme Court of Nova Scotia decision or the Nova Scotia Court of Appeal decision is technically binding on a British Columbia court, but a judge in B.C. could find the reasoning persuasive and apply it here.

Sunday, May 16, 2021

The Bank of Nova Scotia Trust Company v. Rogers


A murderer may not inherit from his victim. This much is clear. But the implications on the rest of a will are not always so straightforward. This is illustrated by an Ontario case earlier this year: TheBank of Nova Scotia Trust Company v. Rogers, 2021 ONSC 1747 (CanLii).

Cameron Scott Rogers was convicted of the murder of both of his parents, Merrill Gleddie Rogers and David Blair Rogers. He was their only child. He was their only child. There is some indication that he suffered from a disability, but I stress that this is not a case where he was found not guilty by reason of insanity, which would likely have affected the outcome of the case.

His parents made wills leaving their estates to each other. In each case, the will said that if the other had died first, most of their estate was to be used to set up a trust for their son during his lifetime. The trustee would have discretion to make payments out of the income or capital to or for his benefit, with any income accumulated for 21 years to be paid to charities. On his death, or if he died before his parents, on the last of them to die, the remaining funds were to go to his children (or remoter descendants), but if he did not have descendants, then the remainder was to be used to buy annuities for Merrill Rogers’ three brothers.

Justice Labrosse of the Superior Court of Justice held that, because he was convicted of murdering his parents, Cameron Rogers was not entitled to the benefits under their wills. This is not surprising. The more interesting question is: what would happen to their estates?   the estates go to the parents next of kin as if thy died without wills? Under the wills, if he had died before them their estates would go to Cameron’s children, but he did not then have any children. Should the funds be held in trust in case some day he had children? He would be eligible for parole 20 years after his conviction, and it was possible he could then have children. Or should the estates be used to buy annuities for Merrill Rogers’ brothers?

Justice Labrosse identified three approaches to what happens to a beneficiary’s share of the estate of his murder victim. One approach is to deem that the beneficiary died before the will-maker, and the will is read as if the murder had died first. A second approach is a literal reading of the will. Under the second approach, if the will does not provide for the possibility that the beneficiary murders the will-maker, the gift fails and a gift of residue would under Ontario law go on an intestacy as if there were no will (in my view the law of British Columbia differs because of section 46 of our Wills, Estates and Succession Act). The third approach, which Justice Labrosse adopted, is the implied-intention approach. The court strives to determine what the will-maker would have wanted if the will-maker had contemplated what in fact occurred.

Applying the implied-intention approach, Justice Labrosse found that Merrill and David Rogers would not have wanted their estates to go by an intestacy, but would likely have wanted it to go to the other beneficiaries named in their wills. This leaves the question of whether the estates should be held to see if Cameron Rogers had children, or if the estates should be used to purchase annuities for Merrill Rogers’ brothers as if Cameron had died without descendants.

In considering this question, Justice Labrosse looked at the public policy implications. In his words:

[52]           This analysis also includes a requirement that the Court apply the “armchair rule” whereby the Court asks itself:  if David and Merrill could have been aware of the possibility of Cameron’s disentitlement and the reasons for it, would they nevertheless have wanted to benefit their future grandchildren?  If they had living grandchildren at the time of their death, that question would be easier to answer.

[53]           In considering the “armchair approach”, the Court must also add to the picture the reality of Cameron leaving prison at some point during his life sentence.  He could be in his mid-forties and have the knowledge that a two-million-dollar trust lies available to any children he may have.  In the context of the public policy issues surrounding the criminal forfeiture rule, there is a distinct possibility that this could lead to some type of misfeasance.  This is a distinctive element of applying the “armchair approach” in these circumstances.  If David and Merrill could have been aware of Cameron’s disentitlement (and the exact basis for it), would they have wanted for their estates to wait for Cameron’s release from prison and possibly fuel a decision to have children?  It is my view that this would fly in the face of the original public policy reasons for disentitlement and would not have been an outcome that either David or Merrill would have preferred.

Justice Labrosse treated the murder as a triggering event that accelerated the trust for Cameron, as though Cameron Rogers had died before his parents without descendants. He found that this approach most closely reflected the will-makers’ likely intentions:

[63]           In returning to the armchair intentions of David and Merrill, I conclude that their intention was to leave a life interest to Cameron and if he could not benefit from it as a result of a triggering event such as his death, it should pass to his children if he had any living at the relevant time.  The wills are structured around providing contingencies or “gifts-over” to account for a series of triggering events. The first of these events is the spouse predeceasing, the second is Cameron predeceasing, the third is Cameron predeceasing or dying leaving no issue then living and the fourth is one of the brothers either predeceasing or dying before the annuities have been fully distributed.  Cameron’s disentitlement is a similar triggering event which leads to the gift-over provisions of the wills. 

[64]           In this context, I conclude that Cameron is disentitled and that his disentitlement crystalizes at a time where he has no living issue. The criminal forfeiture rule plays a role in guiding the Court to accelerate the bequeath to Cameron and also to his unborn children.  If the true intent of the structure of these wills is to be respected, the estates should be kept in the family.  The intent of the testators was to ensure that upon the triggering events, the estates should pass to the next level of lineal descendant.  The triggering event in question is that Cameron is disentitled and has no issue surviving.  As such, the next level of lineal descendants are Merrill’s three brothers, subject to the annuities.  

The outcome is that the funds in the estates will be used to purchase annuities for Merrill Rogers’ three brothers.

Sunday, April 11, 2021

Shahdin Farsai Joins Sabey Rule LLP

I am pleased to post that Shahdin Farsai has joined our firm as an associate lawyer. She was a judicial clerk to six judges at the Supreme Court of British Columbia in 2015-2016. She articled and then was as an associate lawyer in Vancouver at a large national firm, where she practiced in civil litigation. She plans to focus her practice with us primarily in the areas of estate planning, estate administration and estate litigation. 

Most recently,  she spent a year in Finland.  

She speaks Farsi fluently, and can converse in French and Finnish. 

Sunday, April 04, 2021

Petrick (Trustee) v. Petrick


I have always urged caution in using joint tenancies as an estate-planning tool for the transfer of wealth from a parent to a child. One of my earliest blog posts, from September 17, 2005 is entitled “Six PotentialPitfalls Parents Should Consider Before Transferring Real Estate Into a JointTenancy with Their Children.” Jointures, including joint bank accounts, appear to be deceptively simple. On the death of a joint owner, the title to the asset passes by right-of-survivorship to the other joint co-owner (or owners). But it is not really that simple. In many cases, there is a question about whether the survivor is really entitled to keep the property or whether it is held in trust for the now deceased co-owner. There may also be unintended consequences of owning property in a joint tenancy. The nuances and risks are illustrated in the case I am about to discuss.

Dena Chilton and her son Rock Petrick purchased a condominium in New Westminster, British Columbia. Ms. Chilton contributed the down payment for the purchase and she lived in the condominium. Mr. Petrick did not live with her. They were both on the mortgage. There was conflicting evidence as to whether Mr. Petrick made any mortgage payments, but Ms. Chilton paid the bulk of the mortgage payments and other expenses associated with the condominium. Mr. Petrick later had financial problems, and Ms. Chilton asked him to transfer his interest in the title to her. He did so in July 2014.

Mr. Petrick went bankrupt, and following his bankruptcy, his trustee in bankruptcy applied to court to set aside the transfer of his half interest to his mother. The trustee in bankruptcy argued that the transfer was a fraudulent conveyance intended to defeat Mr. Petrick’s creditors.

Both Ms. Chilton and Mr. Petrick argued that he never had a beneficial interest in the condominium. That is, although he had an interest in the title, he held it in trust for his mother. There is a presumption of law, referred to as a resulting trust, that if someone pays the purchase price for property, but puts it in the name of another, who did not contribute to the purchase, the other person who received the tittle gratuitously, holds in trust for the person who paid the purchase price. This presumption applies to the interest in the title of a joint tenant who has received his interest gratuitously. Ms. Chilton’s evidence was that she had her son’s name on the condominium as a joint tenant so that on her death, the condominium would pass to him, without the requirement that he obtain a grant of probate of her will.

If in fact Mr. Petrick held his interest in the title in trust for his mother, then the transfer of title to his mother was not a fraudulent conveyance. His creditors would not have been entitled to a half-interest in the condominium if he did not have a beneficial interest in it.

Madam Justice Francis, in Petrick (Trustee) v. Petrick, 2019 BCSC 1319, held that Mr. Petrick did have a beneficial interest in the condominium and set aside the transfer to his mother as a fraudulent conveyance.

In her reasons for judgement, Madam Justice Francis nicely summarized three alternative possible ownership interests that joint tenants may have in property. She wrote at paragraph 40:

[40]         Not all jointly owned property is subject to a true joint tenancy. Pursuant to the Supreme Court of Canada’s decision in Pecore v. Pecore, 2007 SCC 17 [Pecore], property that is held in joint tenancy can give rise to three potential scenarios in terms of the beneficial interests of the title holders:

a)    A true joint tenancy, in which the joint tenants are each owner of the whole. Each enjoys the full benefit of property ownership and the ultimate survivor will enjoy the whole title for him or herself.

b)    A resulting trust, wherein only one joint tenant has any beneficial interest in the property and the other joint tenant, usually a gratuitous transferee, holds title in trust for the other and has no beneficial interest in the property.

c)     A scenario which is sometimes referred to as a “gift of the right of survivorship,” wherein a joint tenant is gratuitously placed on title and has no beneficial entitlement to the property during the lifetime of the donor, but if the donee survives the donor, the donee will receive the entire property by right of survivorship.  In Bergen v. Bergen, 2013 BCCA 492 at para. 37 [Bergen], Newbury J.A. described a gift of the right of survivorship in a joint account as “an immediate gift of a joint interest consisting of whatever balance exists in the account on the transferor’s death, assuming he or she dies first.”

Madam Justice Francis found that Ms. Chilton and Mr. Petrick were true joint tenants. She found that he did not receive his interest gratuitously. Because he was a co-borrower under the mortgage, he took a financial risk if the mortgage went into default. The presumption of resulting trust only applies when someone on title has acquired his interest gratuitously. The contributions of the co-owners for property do not have to be equal to avoid the presumption of resulting trust. Pledging credit is a contribution, even if Ms. Chilton could have qualified for a mortgage without Mr. Petrick being a co-borrower. As set out in Madam Justice Francis' reasons:

[65]         Ms. Chilton deposed that Mr. Petrick was not required to pledge his credit in order for her to obtain mortgage financing on the Property and that “he was added on the mortgage simply because he was going to be registered on title.”

[66]         I am not persuaded that simply because Ms. Chilton may have been able to purchase the property without Mr. Petrick pledging his credit, Mr. Petrick did not give up something of value when he became a co-borrower. The pledging of credit exposed Mr. Petrick to risk. Irrespective of Ms. Chilton’s means, Mr. Petrick remained jointly and severally liable on the mortgage debt. Further, it appears that from 2006 to 2011, Mr. Petrick may have been in better financial circumstances than his mother. In his affidavit evidence, he deposed that during that period he made cash gifts in the range of $2,000 to $5,000 to his mother, not exceeding $10,000 a year. Therefore, while it may not have been necessary for Mr. Petrick to have been named on the mortgage, he certainly had the means to service the mortgage and indeed, I find it more likely than not that he did make some payments on the mortgage over the years.

[67]         Therefore, I find that Mr. Petrick gave value for his interest in the Property and Ms. Chilton did not gratuitously make Mr. Petrick a joint tenant. As this was not a gratuitous transfer, the presumption of resulting trust does not apply.

Madam Justice Francis also found that Ms. Chilton did intend for her son to have a beneficial interest in the condominium. Ms. Chilton’s argument that she intended for Mr. Petrick to hold his interest in trust for her, and following her death, for her estate, was inconsistent with her evidence that she did not want the condominium to be subject to probate on her death.

Madam Justice Francis did provide some relief to Ms. Chilton from the potential hardship of having the condominium sold while she resides in it. Madam justice Francis ordered that Ms. Chilton could continue to reside in the condominium for her life, but if she ceased to occupy the condominium, or on her death, the condominium would be sold, and the trustee in bankruptcy would be entitled to half of the net sale proceeds.   

Sunday, March 28, 2021

B.C. Supreme Court Civil Rules for Contested Wills Should be Changed


Seven years ago, the British Columbia probate rules were overhauled when the Wills, Estates and Succession Act came into effect on March 31, 2014. The changes to the Supreme Court Civil Rules were intended to reduce the complexity and costs of proceeding related to wills and estates. In my experience some of the changes, particularly related to litigation concerning the validity of wills, has had the opposite effect, making litigation more complex and expensive. It is time for a review of the rules.

Most wills in British Columbia are not contested, and the process for probating (in other words proving) a will is not particularly complex. It involves the executor providing notice to beneficiaries and certain relatives of the deceased, and then filing the original will, a submission and affidavits.

But when someone argues that the will is invalid, then it is usually necessary to follow a different process referred to as “proving the will in solemn form.” This is a contested proceeding in which the Supreme Court of British Columbia determines whether the will is valid. These disputes often center around questions about whether the will-maker knew and approved of the contents of the will, had the mental capacity to make the will, and whether she was acting freely and voluntarily, as opposed to being pressured to make her will. Although many of these cases do settle, when they don’t it is usually necessary for each party to conduct a full investigation of the case, including examining the opposing party before trial, obtaining the file from the lawyer who prepared the will, and if capacity is in question getting the medical files and obtaining expert medical and psychological opinions. The facts may be hotly contested. Ultimately, the court may need to determine the validity of a will after a full trial, in which witnesses testify and are cross examined.

Before the Rules were changed in 2014, proving a will in solemn form was usually commenced by a notice of civil claim. This is the method most lawsuits involving contested facts are commence in British Columbia, from personal injury claims to wills variation proceedings. The notice of civil claim sets out the claim, the material facts alleged in support of the claim, and a summary of the legal basis for the claim. The defendants may file responses. Then each party is required to list all of the documents in their possession or control that may prove or disprove a material fact, and each party may examine the adverse parties under oath before trial. There are also rules intended to facilitate obtaining information form third parties. Ultimately, the issues are determined by a trial, although in some cases the trial may proceed on the basis of affidavit evidence, particularly where the conflicts in the evidence may be resolved without live testimony.

When the Rules were revised in 2014, they required that a proof-in-solemn form proceeding must be commenced either by an application in an existing lawsuit, or by petition. This is set out in Rule 25-14.  here is no provision allowing someone to begin the process by a notice of civil claim. Although the old rules did provide for a petition in some cases, these were rare and claims were commenced for the most part by a notice of civil claim.

A petition is a useful process for certain types of clams. For example, Rule 2-1 (2) (c) provides that a proceeding may be commenced by a petition if “the sole or principal question at issue is alleged to be one of construction of an enactment, will, deed, oral or written contract or other document.” A proceeding to interpret a will, where there is no question of its validity, can usually be resolved on the basis of the will itself, and affidavit evidence setting out the surrounding circumstances, such as the relationships between the will-maker and the beneficiaries. The contest is usually about how to interpret the will and facts, as opposed to a dispute about what the facts are (there are of course exceptions). Examinations for discovery and oral testimony are usually not required for the court to resolve the dispute. Petition proceedings are generally less expensive than a trial.

The problem is that petitions do not lend themselves to deciding the types of issues that arise when the validity of a will is contested. Fortunately, there are other rules that allow the court to change the process from a petition-type of proceeding to an action, or do give further directions on the process. These rules are set out in 22-1 (7) and 25-14 (8).

In practice what often happens is that the person wishing to commence a proof in solemn form proceeding will have to prepare, file and serve a petition together with supporting affidavits. Then either the petitioner or one of the respondents makes an application to convert the process into an action, or in other words, the type of process that is brought by notice of civil claim. Often, the order requires a notice of civil claim to be filed and served. The end result is that both time and money have been consumed by beginning the process with a petition and affidavits and then proceeding with a notice of civil claim. I have not kept track of the additional expense, but I suspect this process probably adds between $10,000 and $20,000 to most contested wills proceedings, and it takes additional court time because a judge or court master will often hear the application to change the process.

The other thing I have noticed is that some lawyers are ignoring the Rules altogether and beginning a proof in solemn form proceeding by a notice of civil claim.

I am not aware of any planned reviews of the probate rules, but it is time that the Supreme Court Civil Rules Committee did so.

Sunday, February 28, 2021

West Vancouver (District) v. British Columbia (Attorney General)


You might own a unique piece of land that you want preserved for the public well after your death. Perhaps there is a heritage building on the land, or perhaps you value the land because of its natural beauty. You could look at leaving the land the municipality or regional district in which the land is located. If so, I am guessing you probably don’t want the municipality to sell the land to the highest bidder to use the land for the construction of massive buildings. Accordingly, you might but conditions on the use of the land through imposing a trust.  In contrast to most trusts, a charitable trust can continue forever. Think about it: if the municipality accepts the land, you may be able to require that as trustee the municipality must preserver it in natural state a thousand years from now.

It is good policy to allow people to create trusts imposing conditions on the use of the land when leaving it to a municipality. By allowing people to impose conditions on the use of the land, people are encouraged to gift land to the public for worthwhile activities. The municipality does not have to accept the gift of land if the conditions are too onerous, but if it does accept the land, then it should honour the terms of the trust.

The difficulty is that something that makes good sense now, might be less beneficial in changing circumstances in even twenty years from now, let alone a hundred or a thousand. Municipalities are governed by elected councils who try to carry out the interests of the community in changing circumstances. They may consider, for example, that it would be better to sell the land, and use the funds to purchase other lands as a park, or perhaps something quite different such as providing low-cost housing.  How does the law balance the competing interests of honouring commitments to the person who gave the land to the municipality and the changing needs of the community?

Charitable trust law in British Columbia employs a couple of different methods that allow some flexibility in limited circumstances. One is called “cy-près,” which means as near as possible. If the purpose of the trust has become impossible or impracticable, the trustees of a charitable trust may apply to court to allow the trust to be varied so that it may be used for some other, but similar, purpose. For example, if trust were created solely to fund research to prevent small pox, and there are still funds left after small pox was eradicated, the trustee could apply to court to vary the trust so that the funds could be used for research to eradicate some other infectious disease.

Impossibility or impracticability is a fairly tough threshold to meet, and rightly so. There is another tool for varying charitable trust, and this the court’s power to make an administrative scheme. The court may vary the trust to provide a better means to achieving the purposes of the trust. On the one hand the threshold is not as high as for cy-près, but on the other it must be consistent with the purposes of the settlor or will-maker who created the trust. I previously wrote about The Sidney and North SaanichMemorial Park Society v. British Columbia (Attorney General) in which Madam Justice Dardi applied the administrative scheme-making power to allow the Park Society to change the terms of the trust to provide more flexibility in leasing land it owned, in generating revenue form the lands, and in the application of funds from expropriated lands, in order to better carry out the purposes of the trust.

The cy-près and administrative scheme-making powers are common law tools to provide some flexibility. Additionally, British Columbia has legislation allowing municipalities, regional districts and certain other organizations to apply to court to vary trusts, ant it is to the legislation to which I will turn.

In her will, Clara Brissenden left 2.4 acres of land with a house on it to the District of West Vancouver (the “District”) “to be used and maintained by it for public park purposes and I express the wish that in developing the said Amended Lots as a public park the trees and natural growth be preserved as far as may be practical.” Ms. Brissenden died in 1990, and the District accepted the land. The District rented out the house to a caretaker and named it Brissenden Park, but did not develop any of the land as a park until 2018. The park was a neighbourhood park with a fairly small amount of traffic. A trail counter at one entrance in 2019 indicated an average amount of visitors of 6 per day.

In 2017 the Council of the District resolved to try to change the terms of the trust for the property to allow it to subdivide the property and keep the northern half as a park, and to sell the southern half, and then use the sale proceeds to purchase waterfront properties to add to another busier park on the waterfront. The plan the District Council ultimately adopted would see the sale of 43 percent of the land, which would be subdivided into three residential lots, each with a covenant protecting the trees on the northern 10 feet. The District would name the two properties it intended to purchase with the sale proceeds “Brissenden Waterfront Park.”

The District petitioned the court to allow it to vary the trust to facilitate its plan to sell a portion of the Brissenden Park to allow the purchase of waterfront land. Carrying out the terms of the trust clearly did not meet the threshold of impossibility or impracticability in order to apply cy-près. The District sought to vary the trust by asking the court to apply its administrative scheme power and it also relied on section 184(2) and (3) of the Community Charter which says:

(2) If, in the opinion of a council, the terms or trusts imposed by a donor, settlor, transferor or will-maker are no longer in the best interests of the municipality, the council may apply to the Supreme Court for an order under subsection (3).

(3) On an application under subsection (2), the Supreme Court may vary the terms or trusts as the court considers will better further both the intention of the donor, settlor, transferor or will-maker and the best interests of the municipality.

The Attorney General of British Columbia was named as the respondent in the petition. The Attorney General, who has a responsibility to enforce charitable purpose trusts, opposed the application.

Justice Edelmann, in West Vancouver (District), v. British Columbia (Attorney General), declined to apply the scheme-making power to this trust. He found that Ms. Brissenden’s specific intention was to preserve the specific property Ms. Brissenden left to the District rather than a broader purpose of contributing to public parks. The District’s proposal would alter the purpose of the trust. He wrote:

[54]       The District’s application before me turns on the characterization of the plan and whether the very specific directions from Ms. Brissenden in her will should be considered the object or charitable purpose of the trust, or whether they are merely administrative in nature.

[55]       As set out above, in my view both the will itself as well as the context of its drafting indicate that the purpose of the trust was to preserve the Brissenden Property, with its trees and natural growth if practical, for use by the community as a park. It is clear from the terms of Ms. Brissenden’s will that she felt the Brissenden Property itself, and in particular the mature trees on the Brissenden Property, had an inherent value for the community that warranted protection. The representatives of the District around the time of the gift appear to have explicitly agreed with that assessment. The proposed plan would be contrary to this direction from Ms. Brissenden, as a significant portion of the trees and natural growth would be removed for development, and the proposed “Brissenden Waterfront Park” would appear to have neither mature trees nor substantial natural growth. I do not find that the direction to preserve the trees and natural growth is a mere administrative matter, and in my view, it is much more appropriately characterized as part of the charitable purpose of the trust.

Justice Edelmann then considered whether he should vary the trust under section 184 of the Community Charter. He found that the legislation was intended to modify the common law and “allow greater flexibility in varying trusts for which the municipality is the trustee.” The wording of the legislation implies that there must also be a change in circumstances since the trust came into effect.

The legislation balances the intention of the settlor or will-maker on the one hand, and the best interests of the municipality. Justice Edelmann wrote:

[99]       I agree with the District’s submission that the clause read in context implies a conflict between the intention of the settlor and the best interests of the municipality. There are at least two indications of this. First, if the variation independently furthered the “intention of the settlor”, there would not appear to be any impediment to its implementation by the municipality as trustee under existing trust mechanisms. Secondly, an application can come before the court only in circumstances where the municipality is of the opinion there is a conflict between the “terms or trusts” and the best interests of the municipality.

[100]    The question of whether the variation is one “the court considers will better further both” the intention of the settlor and the best interests of the municipality would therefore indicate an assessment of both elements together rather than independently. Ultimately, this Court must consider the impact of the proposed variation for both the intention of the settlor and the interests of the municipality. 

Mr. Justice Edelmann held that it was appropriate to vary the terms of the trust to allow the District to sell part of the property and use the proceeds to purchase the waterfront property for parkland. Although the plan did not reflect Ms. Brissenden’s specific intention for the property to become a park, her “intentions can be framed more broadly in terms of development of park space in which residents of the District will have access to more natural environment.” The plan was consistent with her broader charitable purpose.

He also agreed that the plan was in the best interests of the District.

[112]    A substantial amount of documentation was placed before the Court indicating that the current proposal was developed following extensive consideration and consultation by the District. There is no dispute that the waterfront parks surrounding the Argyle properties are regularly used by many thousands of residents of the District. The parks in question are a destination for visitors from the surrounding region and beyond. As noted earlier in these reasons, I accept that the proposed plan takes into consideration the multiple factors that converge in managing a park system for a large urban community. It is a well-documented plan that has been subject to extensive study and consultation, taking into consideration the other park space available to residents in the various parts of the District. I accept that the proposed plan is in the best interests of the District and its residents.

Circumstances had changed since Ms. Brissenden and her husband Pearly Brissenden (who died before her) had discussed leaving the property to the District. Justice Edelmann noted:

[117]    I accept that there have been relevant changes in the circumstances since the time when the District had discussions with the Brissendens about donating their property. In addition to the substantial increase in the cost of acquiring waterfront property, which has limited the ability of the District to pursue the Argyle Acquisition Policy, there have also been significant changes in the population of the District that would inevitably impact the usage of the park system. It is in the context of the current circumstances that the District is of the opinion that strict adherence to the terms of the trust are no longer in its best interest.

Justice Edelmann was alive to the risk that allowing trusts to be varied could discourage gifts of property to municipalities. He noted a distinction between a chilling effect for a specific municipality if it does not abide by the terms of trusts set out by those gifting property to it, and a broader chilling effect if the court allows the trusts to be varied too readily. He wrote:

[120]    In my view there is an important distinction to be made between the broader chilling effects of a low threshold for s. 184(3) variation, such that it would discourage charitable gifts to any municipality in trust, and the chilling effect in relation to the specific municipality before the court. In my view, the petitioning municipality is in a position to consider the chilling effect of the variation it is seeking on the future gifts it might receive in trust, and deference should be afforded to that assessment.

[121]    With regard to the broader chilling effect, there is presumably some risk inherent in varying the terms of a trust in a manner that deviates from settled law such that potential donors may consider the terms of their gifts less secure. However, if the legislature’s intention to expand the scope of possible variations is to be given effect, that inherent risk cannot be an impediment to any variation outside of existing trust law principles. The court should seek to strike an appropriate balance in demonstrating respect for the terms and trusts established by the settlor in the context of an expanded scope for variation.  

Saturday, February 20, 2021

Using Two Wills to Minimize British Columbia Probate Tax

 In British Columbia when a will is probated, or in other words proved, the personal representative is required to pay probate tax. The legislation imposing this tax is called the Probate Fee Act, but the fees are really a tax. The tax is calculated on the value of the estate, at a rate of approximately 1.4 percent (I am simplifying a little). If the will maker was ordinarily resident in British Columbia at his death, then the tax applies to real estate and tangible property in British Columbia (such as cars, furniture and art), and his worldwide intangible assets (such as money, stocks and bonds).

There are various techniques used to avoid or minimize probate fees, some of which are well thought out, and some of which are ill advised. Many of these techniques centre around minimizing the wealth that is dealt with under a will, so that the value of the estate is small. For example, spouses may hold their house, bank accounts and investment accounts jointly with a right of survivorship, so that on the death of one, the survivor becomes the sole owner, and the will of the first to die either does not need to be probated, or if the will is probated, the jointly held assets do not need to be listed as part of the estate, and may be excluded form the calculation of probate tax. Trusts are also employed to minimize probate tax.

One technique that has become more popular in British Columbia since changes in our succession legislation in 2014 is the use of two wills dealing with British Columbia. The idea is for the will maker to have two wills, one governing assets for which a grant of probate is necessary for the will-maker’s executor to deal the assets, and the other governing assets for which no grant of probate is required.

For example, supposing the will-maker’s main assets are a house owned solely by the will-maker, which is worth $2 million, and shares in a company that are worth $10 million. If he has a will dealing with all of the assets, on his death when the will is probated, the probate tax will be approximately $168,000. The executor will need to probate the will in order to obtain title to the house to either transfer it to a beneficiary or sell it to pay debts and expenses, and distribute the balance of the proceeds to the beneficiaries. But it might not be necessary to obtain probate to deal with the shares of the company if the will-maker is the only shareholder, or if there is a small group of shareholders and the company’s directors will agree to transfer the shares to the executor without a grant of probate. I am assuming that the shares are not traded on a stock exchange. The difficulty is that the executor cannot pick and choose which assets to disclose when applying for probate: the executor must swear an affidavit setting out all of the assets that pass to her as the executor.

The two-will strategy involves making a separate will that deals only with the shares of the company, or perhaps including some other assets which can be dealt with by the executor without a grant of probate. The other will deals with the other assets, for which a grant of probate is or may be required. Different terminology may be used, such as “primary will” and “secondary will,” or “general will” and “restricted will,” but for simplicity I will refer to the will dealing with shares as the “corporate will,” and the other will I refer to as the “general will.” In this example, if the shares are dealt with in the corporate will, and only the general will needs to be probated, the probate fees will be approximately $28,000, a saving of $140,000.

This two-will technique has been popular in Ontario longer than in British Columbia. In British Columbia we rely on the wording of section 122 of the Wills, Estates and Succession Actwhich says that an applicant for a grant of probate or administration must disclose information about the property of the deceased person and the value of the property “that passes to the applicant in his or her capacity as the deceased person’s personal representative….” The probate tax is then calculated on the basis of the value of those assets. For this to work, the executor of the general will must be a different person from the executor of the corporate will, so that the executor of the general will may swear an affidavit that excludes the shares in the corporate will. Otherwise, the property in the corporate will also pass to the same personal representative, and she will have to list the shares of the company, which defeats the purpose.

One downside is that the will-maker needs to name more people to act as executors and alternate executors to ensure that the same person is not the executor of both wills.

I find drafting two wills to be challenging, and there are a number of pitfalls that need to be avoided.

First, the order in which the wills are signed is important. The corporate will should be signed first and this needs to be documented either in the will or a memorandum, or better yet both. This is because the executor of the probated will need to swear that it is the last will.

Second, the standard revocation clause in the general will must be modified so that it does not revoke the corporate will.

Third, the assets in each will must be carefully defined so that it is apparent which assets are governed by which will, and that assets for which a grant of probate is required are clearly excluded from the corporate will so that it does not become necessary to also probate the corporate will.

Fourth, consideration should be given to which debts are to be paid out of the assets governed by the general will, and which debts are to be paid out of the corporate will. This is less tricky if the beneficiaries of each will are identical, but is more complex if there are different beneficiaries in each will. For example, if the will-maker wishes for one child who is expected to take over the business to receive all or most of the assets in the corporate will, while other children receive more under the general will, the will-maker will likely want to ensure that taxes and other expenses attributable to the property governed by the corporate will is ultimately borne by the beneficiary or beneficiaries of the corporate will, and not the beneficiaries of the general will.

Fifth, while the executors of the two wills must be different persons, they must also be able to work well together to deal with such issues as filing tax returns.

There are not many reported cases in British Columba dealing with the use of two wills to minimize probate tax at the time I am writing this post, but in one case Master Wilson (now Mr. Justice Wilson) held that it is permissible to apply to probate only one of two wills, which lends support to this strategy. The case is Berkner (Estate), 2017 BCSC 619.