Saturday, September 19, 2015

BH v. JH

In a wills variation claim in British Columbia, the Supreme Court of British Columbia is called upon to decide whether a will has made adequate provision for a spouse or child, and if not, what provision is adequate, just and equitable in the circumstances. There are so many circumstances that vary considerably from case to case, such as the size of the estate, financial circumstances of the parties, relationships between the parties and the will-maker, the will-maker’s reasons for making the will he or she did (to name a few), it is difficult to predict the outcome of any particular case.

While there is a virtually limitless variation in the facts, the courts apply certain principles in deciding these cases. For example, when a claim is asserted by or on behalf of the will-maker’s spouse, the courts will look at what the spouse would have received under family law, if instead of the will-maker dying, there had been a breakdown of the spousal relationship. This analysis appears mandated by the Supreme Court of Canada, in Tataryn v. TatarynEstate, [1994] 2 S.C.R. 807, in which the court said that the legal obligations that the will-maker had to a spouse or child are given priority over competing moral claims in determining whether to vary a will, and the extent of any variation. This analysis does not necessarily create certainty—there are plenty of disputes about the entitlement of the parties on a breakdown of a marriage or marriage-like relationship—but does offer some measure.

But when a spouse makes a wills variation claim is the court always required to vary the will to such an extent that the spouse will receive at least as much as he or she would have received in a family law claim? Or may the court award less in some circumstances. I ask this question in light of the decision  in a recent Supreme Court of British Columbia decision, BH v. JH, 2015 BCSC 1551. In that case, the Court awarded the surviving spouse less than what the Court found she might have received on a breakdown of the marriage.

KH and DH married in 1956 (the reported decision uses initials only). They had two sons, BH and NH, and a daughter, JH. KH, the husband, bought a residential property in Langley in 1962 and built the family home on it.

Sadly, DH suffered from paranoid Schizophrenia, was hospitalized on and off from 1964 to 1975, when she moved into a group home due to her illness. Thereafter, she visited with her family, primarily to have contact with her children, but lived apart from her husband. However, neither ever started a family law claim against the other, and the children acknowledged that they never heard their father speak of getting divorced.

KH died on September 13, 2009. In his will, apart from some of his personal effects left to his sons, he left his entire estate to his daughter, JH.

The two sons applied to vary the will, and the Public Guardian and Trustee of British Columbia also asserted a claim on behalf of DH.

The estate consisted primarily of the residence in Langley, which had an assessed value at the time of his death of just under $475,000. The Court found that the net value of the estate at the date of death, taking into account a mortgage on the property, and other debts and expenses was $370,000 (the amount that was realized on the sale of the property a few years later, was higher).

At the time of KH’s death, his wife received pension income of $1200 per month, and her expenses were just under that. She had about $8000 in savings.

KH’s daughter JH had lived with him until his death. She assisted him with household chores, and her assistance increased during the last years of his life, when he was ill. She continued to live in the house, until it was sold in a foreclosure in 2012. She does not have a strong employment history, and was earning minimum wage as a casual working at the time of trial, while living in a woman’s shelter. She had no savings.

Each of the sons had careers and families, although their means are described by the Court as modest.

The Court considered KH’s legal obligations to his wife, followed by his moral obligations. With respect to the legal obligations, the Court considered what she would have received in a breakdown of the relationship as at the date of death under the Family Relations Act, which was the applicable law in 2009 (this law has since been changed and replaced by a different property division under the Family Law Act).

While KH and DH were physically separated since 1975, they remained spouses until KH’s death. The Court found that if DH had brought a Family Relations Act claim for an equal division of assets in 2009, the court would likely have reapportioned KH’s assets in his favour, taking into account the long separation, and the fact that he paid the mortgage and other expenses. The Court found that she would have received “no more than one third of the value of the Property.”
The Court found that it was unlikely that she would have received spousal support. She had made little contribution to raising the children after she was hospitalized, and KH had limited pension income when he died.

In awarding DH $60,000, the Court also considered the following:

[92]         At the time of the testator’s death, DH was 80 years old.  While her basic needs were met at the group home, it was foreseeable that with the contingencies of aging she may require more care than the group home is able to provide, and the funds to pay for that care.  Society’s reasonable expectation would be that a judicious spouse would provide some financial protection against the contingencies of his wife’s old age, to the extent that his means and the other claims upon his estate permitted.  In my view, the deceased’s moral duty was enhanced where his spouse was incapable of managing her own financial or legal affairs.

In contrast to his obligation to DH, KH had no legal obligation to his two sons. The Court found that he did have a moral obligation to make provision for them, and KH did not make adequate provision for them. But their moral claims were not as strong as their sisters in light of her “companionship for her father, her contributions through taking him on trips, sharing housekeeping expenses and caring for her father as he aged and his health declined....”  KH also had the greatest need.

The Court awarded each of the two sons $50,000.

The aspect of this decision that may prove controversial is the award of $60,000 to DH. If DH as a spouse would have been entitled to one third of the value of the family assets (I appreciate that the Court said “no more than” ), and in view of the fact that she had little or none of the family assets in her own name, should she have received at least that portion of the estate? Based on a net value of $370,000, that would have entitled her to just over $123,000. The other question that may be asked about the outcome is whether the amount should have been determined on the basis of the assessed value of the house at the date of death, without reference to the proceeds that were ultimately received on the sale of the house. The difference may reflect both that the assessed value for property tax is not always accurate, and inflation. It may be preferable for the court to award a portion instead of a fixed amount to allow for fluctuations in value of assets between the date of death, the trial and the actual distribution (see Graham v. Chalmers, 2010 BCCA 13 at paragraph 42, which I wrote about here). 

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