Henriksen Estate

 

The Wills, Estates and Succession Act allows the court to give effect to a document or other record as a will even though the will does not comply with the formal signing and witnessing requirements for making a valid will in British Columbia. Section 58 has been used to non-compliant documents if the court finds that the document is authentic and represents a deliberate or fixed final intention of a deceased person.

But what if the document is created after the death of that person?

This is what occurred in Henriksen Estate, 2026 BCSC 1058. Krista Henriksen and Awad Mohamed met with a lawyer to make wills, powers of attorney and representation agreements. Their instructions to the lawyer were that they wanted to make wills that were like each other, or mirror wills, except for a gift of jewelry in Ms. Henriksen’s will. Each was going to name the other as executor and leave the residue of their estates to each other, with the same contingent beneficiaries named on the death of the last of them to die.

The lawyer initially drafted Mr. Mohamed’s will. Similarly, the lawyer drafted a power of attorney and representation agreement in Ms. Henriksen’s name. She sent the drafts to them by email, explaining that because they would be mirror documents, she would finalize the draft for one person before creating the final version of the other.

They asked for some revisions, and a revised draft of Mr. Mohamed’s will was completed in June 2025, and was sent to them. Before a meeting was scheduled to sign the documents, Ms. Henriksen died suddenly on July 4, 2025, without her will having been drafted.

The lawyer’s office drafted the will after she passed, and Mr. Mohamed asked the court to give effect to the will.

Justice Morley reviewed the jurisprudence, noting that a broad purpose of s. 58 was to be “more flexible in realizing testator intent, although it also includes the sometimes competing purposes of ensuring authenticity and guarding against fraud. “

However, Justice Morley held that the flexibility of purpose did not extend to giving effect to a document that did not exist before death.

[40]         But notice that s. 58 does not permit a court simply to give effect to what it finds to be the fixed and final testamentary intentions of the deceased. Rather, the court must find a record, document, writing or marking that is to be given effect. If all that mattered was intention, then this would be unnecessary. The court could simply draft the will that best represents the best evidence of what the testator wanted. Section 58 does not allow that.

[41]         This reflects a theme that is also present in the BCLI Report [British Columbia Law Institute: Wills, Estates and Succession: A Modern Legal Framework], namely that the traditional formalities of will making fulfilled important functions, even though they sometimes created injustices. The purpose of the legislation was not just to throw away the vestiges of the past, but to do so in a way that maintained the benefits of the older system.

[42]         The most fundamental formality of all was — and remains — that a will must be in writing or at least recorded. This dates back to the very introduction of wills into the English legal system. Even if a court could be morally certain of what the deceased’s intentions were, if they were merely orally expressed, they could not be given effect by a court. That principle was not changed by s. 58, since it does not permit a court to author a will but just to give effect to a record, document or writing.

[43]         In my view, there is no real difference between a court creating a will after death from what it knows of the deceased’s testamentary intentions and a solicitor doing so and then asking for the court to bless the result. If a solicitor could simply, after death, draft a will based on instructions, then all that would matter would be the deceased’s intentions. As a result, in my view, a draft created after death out of the oral instructions of the deceased would not, in the relevant sense, be a record, document, writing or marking.

But this was not the end of the analysis.

Section 59(1) of the Wills, Estates and Succession Act provides:

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.

Justice Morley applied s. 59 to rectify the will in Mr. Mohamed’s name, which was drafted before Ms. Henriksen’s death, so that it was treated as Ms. Henriksen’s will and the appointment of Ms. Henriksen as executor and beneficiary was rectified so Mr. Mohamed was the executor and beneficiary.

Justice Morley wrote:

[52]        “Failure to carry out the will-maker’s instructions” need not mean a culpable failure. In my view, this is a relatively easy case for rectification under s. 59(1)(c). The June Draft failed to carry out the will-maker’s intentions because of firm policy in the context of mirror wills still in development. This fits within the meaning of s. 59(1)(c).

Is Someone Named in a Lawsuit as both an Executor and Personally Separate Persons?

 It is common for a person to be named in an estate lawsuit to be named personally and as an executor or administrator. For example, in British Columbia, in a wills variation claim, it is necessary for the plaintiff to name the executor of a will as well as all the beneficiaries (and anyone else who is entitled to apply to vary the will). If the same person is both the executor and a beneficiary, their name may appear twice: once as executor and once as a beneficiary. The claim may say “Jane Smith v. John Smith as executor of the will of Mary Smith and John Smith in his personal capacity.” (Someday I need to come up with cleverer names for my examples.)

John Smith may be represented by two different law firms, so that one may look after his personal interests as a beneficiary, and the other in respect of his duties as executor. But is John Smith, the executor a different person in law than John Smith, the beneficiary?

The answer is “no, he is not.”

This is succinctly explained by Madam Justice Francis in the Court of Appeal in Rasner v. Berger, 2026 BCCA 166. Laurie Rasner, in her capacity as executor of her stepmother, Adele Hurtig’s will brought a claim asserting that Ms. Hurtig’s son, Richard Berger, held a condominium on a resulting trust for Ms. Hurtig’s estate. She was not successful, and the trial judge ordered that she personally pay costs to Mr. Berger.

Ms. Rasner wanted to appeal against the order that she personally pay costs to the Court of Appeal. Because a party does not have an automatic right to appeal a cost order, she applied for leave to appeal. Her argument was that she was not personally a party to the suit (having brought the claim as executor), and costs should only be awarded against a non-party in exceptional circumstances.

Madam Justice Francis, who heard the application for leave to appeal, did not grant leave, holding that the application did not meet the tests for leave to appeal, which she set out in paragraphs 13 and 14 as follows:

[13]         In these circumstances, the test is:

1)    whether the proposed appeal raises questions of principle that extend beyond the parameters of the particular case;

2)    whether the questions of principle are of significance to the practice; and

3)    whether the proposed grounds of appeal are arguable.

Singh v. Singh, 2025 BCCA 309 at paras. 23–25.

[14]         Given the limited scope of appellate review of cost orders, leave will generally not be granted unless a question of principle is involved: Yung v. Jade Flower Investments Ltd., 2012 BCCA 168 at paras. 18–20 (Chambers). This Court will not interfere with a trial judge’s exercise of discretion on the issue of costs “unless persuaded that the trial judge misdirected him or herself on a matter of legal principle, or that the trial judge’s decision is so clearly wrong as to amount to an injustice”: Seminoff v. Seminoff, 2007 BCCA 403 at para. 2 (Chambers).

Ms. Rasner argued that the principle involved was “whether a judge is prohibited from ordering costs against an executor in their personal capacity, absent special circumstances, on the basis that an executor is, if not named personally as a party to the litigation, a non-party.” (Paragraph 15)

Justice Francis rejected this argument on the basis that Ms. Rasner was a party, even though Ms. Rasner was named in her capacity as executor. She wrote,

[16]         With respect, I find the applicant’s statement of principle to be premised on a misunderstanding of the nature of an estate. Trusts and estates are not juridical persons capable of suing and being sued. A trust is a type of relationship, namely, the fiduciary relationship that exists between trustee and beneficiary. When a personal representative commences litigation on behalf of an estate, they are not asserting a separate legal personhood. The often-used analogy is that they are the same person, wearing a different hat. Because the executor who commences a lawsuit in their capacity as executor is not a different legal person than the executor in their personal capacity, they are not a non-party in the latter capacity.

Boisvert Estate

 The British Columbia Wills, Estates and Succession Act (the “WESA”) allows the spouse of someone who dies without a will to retain the deceased’s interest in the spousal home as part of the spouse’s share of the estate. This will apply when the residence is in British Columbia.

In British Columbia, when someone dies without a will, referred to as an intestacy, then the provisions of the WESA sets out how the estate is to be divided. If the deceased’s left a spouse, but no descendants, then all the estate goes to the spouse, but if there the deceased had descendants (children, grandchildren and/or great-grandchildren etc.), then the estate is allocated between the spouse, on the one hand, and the descendants on the other. The share of the spouse depends in part on whether all of the descendants are descendants of both the deceased and the spouse, or whether the deceased had descendants from a previous relationship. If all the descendants are shared, then the spouse receives the first $300,000 of the estate, but if the deceased also had descendants who are not descendants of the spouse, then the spouse receives the first $150,000 out of the estate. The spouse also receives one-half of the rest of the estate.

The law used to be that the spouse also received a life interest in the estate in the spousal home, which allowed the spouse to live in the home for the rest of the spouse’s life. But this changed in 2014 when the WESA came into effect.

Now, the spouse can choose to retain the house as part of their share, the effect being that the spouse receives less funds from the estate. This is straightforward when the value of the estate is significantly greater than the value of the deceased’s interest in the home. For example, if the home, owned solely by the deceased is worth $700,000, and the total value after debts and expenses of the estate is $2 million, then there are sufficient funds to allocate the home to the spouse. In this example, let’s say that the deceased and the spouse have two children together, and the deceased did not have any children from another relationship. The spouse would be entitled to $1,150,000 ($300,000 plus half of $1,700,000) of the estate. The spouse could then elect to receive the home plus an additional $450,000.

But what if the value of the estate is not large enough for the spouse to receive the spousal home without infringing on the descendants’ share of the estate? This is what happened in a recent case, Re Boisvert Estate, 2026 BCSC 195, the only reported decision of which I am aware (at the time of writing this post).

Kathryn Anne Boisvert died May 14, 2022. She did not have a will. Ralph Amies was her common-law spouse and lived with her in a home owned by her for 25 years. She had two children from a previous relationship. The home was worth about $600,000 and she had no other significant assets. On the basis that the estate was worth $600,000, he was entitled to $375,000 (the first $150,000 in this case plus $225,000 representing half of the remaining $450,000). Ms. Boisvert’s two children were each entitled to $112,500 (half of $225,000).

If he received the home, then the children would not receive their share. On the other hand, in the circumstances of this case, Mr. Armies had limited means to buy out the children’s interest. He was 62 years old, with an income of about $20,000 annually, and about $100,000 in a Registered Retirement Savings Plan. The home was his longtime residence, and he contributed to the home and the household expenses. It would have been, the court found, a hardship to him to require him to buy out the children’s interest or to leave immediately.

 

The WESA does have provisions for this type of circumstance, providing a judge with a broad discretion to balance the interest of a surviving spouse and the descendants. Section 33 reads as follows:

33   (1) On application by a surviving spouse, the court may make an order under subsection (2) if

(a)the surviving spouse is ordinarily resident in the spousal home at the time of the deceased person's death,

(b)assets in the estate are not sufficient to satisfy the interests of all descendants entitled to share in the intestate estate or that part of the estate that is to be treated as an intestate estate without disposing of the spousal home,

(c)the court is satisfied that purchasing the spousal home under section 31 would impose a significant financial hardship on the surviving spouse,

(d)the court is satisfied that, in all the circumstances, a greater prejudice would be imposed on the surviving spouse by being unable to continue to reside in the spousal home than would be imposed on the descendants entitled to share in the intestate estate or that part of the estate that is to be treated as an intestate estate by having to wait an indeterminate period of time to receive all or part of their share of the intestate estate, and

(e)either

(i)the surviving spouse has resided in the spousal home for a sufficient period of time to have established a connection to the spousal home, or

(ii)the surviving spouse has a sufficient connection with the community or members of the community in the vicinity of the spousal home to warrant an order under subsection (2).

(2) The court may, subject to any terms or conditions the court considers appropriate, make an order doing one or more of the following:

(a)vesting the same interest in the spousal home in the surviving spouse that the deceased person had;

(b)specifying the amount of money the surviving spouse must pay to the descendants towards satisfaction of their interest in the estate;

(c)converting the remaining unpaid interest of the descendants in the intestate estate into a registrable charge against the title to the surviving spouse's interest in the spousal home;

(d)determining an interest rate, as that term is defined in section 7 [interest rate] of the Court Order Interest Act, or at any other rate the court considers appropriate, for the amount the descendants are entitled to under paragraph (c) of this subsection;

(e)determining the value of the registrable charge referred to in paragraph (c) to include the principal amount owing to the descendants entitled to share in the intestate estate or that part of the estate that is to be treated as an intestate estate and the expected value of the future interest that will be earned under paragraph (d).

Madam Justice Hardwick heard the application and balanced the competing interests by allowing Mr. Amies to retain the home, but subject to a charge on the title in the amount of $225,000 for the benefit of the Ms. Boisvert’s children. She reasoned:

[54]         Section 33(1)(d) requires me to assess whether a greater prejudice would be imposed on Mr. Amies by reason of not being able to reside in the spousal home, than would be imposed on the Descendants by reason of having to wait to receive most of their share of the Estate.

[55]         I find that Mr. Amies would be significantly prejudiced by a decision requiring him to quickly vacate the Smithers Home. He has resided in the Smithers Home for almost 30 years. It sits on a large lot. While there are homes that are available in Smithers that Mr. Amies could purchase with his share of the Estate, I accept that none of them are as desirable to live in as the Smithers Home as they are generally smaller and less private.

[56]         The Descendants will be prejudiced by Mr. Amies remaining in the Smithers Home but less so. Their only significant inheritance is their share of the Smithers Home. The longer that Mr. Amies stays in the Smithers Home, the longer they must wait for their inheritance. I am mindful that the Descendants’ inheritance has already been delayed through this litigation and that Mr. Amies has lived in the Smithers Home for almost four years following Ms. Boisvert’s death. As I will outline below however, the Descendents do have options to dispose of their charge so they can receive a portion of their inheritance sooner.

However, Madam Justice Hardwick limited the period Mr. Amies could reside in the home to 24 more months, reflecting the fact that he had already been in the home for over three years since Ms. Boisvert's death.

 

In the decision of Paige v. Noel, 2025 BCCA 358, the British Columbia Court of Appeal has arguably narrowed the criteria for determining whether to give effect under section 58 of the Wills, Estates and Succession Act (the “WESA”) to a document or other record that does not comply with the formal signing requirements for a will. Traditionally, British Columbia had very strict requirements for signing a witnessing a will in order for the document to be effective, but when the WESA came into effect in 2014 the law gave the court the authority to give effect to a non-compliant record “if the court determines that a record, document or writing or marking on a will or document represents… the testamentary intentions of a deceased person.”

The general test that the courts have applied in B.C. is whether the document or other record reflects “a deliberate or fixed and final expression of intention.”

The Court of Appeal has added the requirement “that the document is intended to operate as a will or as an alteration or revocation to an existing will.” This is quoted from paragraph 50 of the decision.

In Paige, Barbara Kissel died on January 7, 2023. She had made a will dated August 7, 2014, in which she appointed Michelle Noel as her executor and left her estate to Jennifer Paige and Adrian Kissel. There was no issue as to the validity of the will. However, she later sent messages to Ms. Noel indicating that she wanted to take Ms. Paige out of her will. As described in the Court of Appeal decision, there were two messages:

[7]            The record in issue is comprised of two electronic messages sent by the deceased to Michelle in October 2022 (which I will refer to as the Messages, as did the chambers judge). The first was a text exchange sent on October 6, 2022:

The deceased:            On a completely different note ... I have an appointment with the notary on the 14th to redo my will ...

Michelle:                      Oh boy, a redo?

The deceased:            Yes ... redo … Jennifer is out ....

Michelle:                      Well I don’t blame you, that wasn’t an easy decision and one I know you didn’t make lightly

The deceased:            I agree ... Jennifer has cut off her nose to spite her face. Once the redo is done I will give you a copy and explain more ....

                                    …

                                    Oh jeez…I didn’t even ask you…will you continue to be my executrix?

Michelle:                      Oh absolutely

The deceased:            MERCI beaucoup

[Emphasis in original.]

 

[8]            The second was an email sent on October 15, 2022:

… Just to have a paper trail … here is an update regarding my will. The notary I am using is Blandyna Skowronska …

I met with her yesterday and conveyed the changes I wanted. She said it would take about two weeks for the new will to be drawn up and registered. She said one option I had was to destroy all copies of my current will which would remove Jennifer immediately. However, should I pass away before the new will is registered, my estate, such as it is, would go to probate court and could be tied up for years. Going to probate also means that the governments have a say in distribution of assets. So, the current will that you have will stand until I get a new one.

In November, the deceased texted Ms. Noel indicating that she was going to go to a different Notary, and on January 3, 2023, she sent an email to neighbour who was a lawyer asking if her firm dealt with wills stating she wanted to “make a very minor change.” She died a few days later.

The Supreme Court of British Columbia judge found that the text message removing Ms. Paige represented her fixed and final intention and gave effect to the message pursuant to s. 58 of the WESA. Her reasons are set out in the Court of Appeal decision:

[25]         In concluding that the Messages represented the deceased’s fixed and final intention to alter the 2014 will to remove Jennifer as a beneficiary, the judge made the following findings (at para. 53):

·       the deceased did not waiver from her stated intention from October 6 up to her death;

·       her reasons for removing Jennifer were clear;

·       she was taking steps to accomplish this by seeking the assistance of two notaries and a lawyer; and

·       for reasons beyond her control, she was not able to complete a new will.

Ms. Paige appealed, and in allowing the appeal, the Madam Justice Fisher for the Court of Appeal described the criteria as follows:

[23]         The importance of the words “fixed and final at the material time” cannot be understated. As I explain further below, this is because s. 58(2) requires that the record, document or writing represents the testamentary intention of the deceased person, whether to make a will or to revoke or alter an existing will. A fixed and final intention must be grounded in the document itself, in that the document is intended to effect the testamentary intention.

Madam Justice Fisher reasoned:

[52]         The judge’s conclusion that the Messages reflected the deceased’s fixed and final intention cannot be reconciled with the content of the Messages themselves or with the surrounding circumstances. It is clear the deceased was unhappy with Jennifer and expressed an intention to alter her will to remove Jennifer as a beneficiary. But that intention cannot be considered fixed and final because it is equally clear that the deceased intended to effect that alteration by making a new will, and until she did so, the 2014 will was to remain operative.

….

[55]         The extrinsic evidence does not displace the words in the Messages. The deceased expressed the desire to remove Jennifer as a beneficiary to others in October 2022 and again in January 2023. She also set up but did not follow through with an appointment with a second notary in early November 2022 for reasons stated as health reasons. However, there is no evidence about the deceased’s state of health after early November that would explain why she did not take any steps to make a new will for almost two months. There is also no evidence that the deceased provided instructions to a notary or a lawyer after early November. The implications of the deceased’s email to her neighbour in January 2023 indicating that she wanted to make a “very minor change” to her will are at best unclear. In my view, the judge’s interpretation of this as not inconsistent with removing a beneficiary — that the required amendment could be minor despite the significant impact — is speculative.

[56]         The record also includes evidence from Jennifer about her positive interactions with the deceased in November 2022 — which was after the deceased’s communications with Michelle that were found to indicate an attempt to maintain a semblance of normalcy in her interactions with Jennifer. Moreover, while the judge was entitled to place less weight on Jennifer’s perceptions of the deceased’s state of mind, that evidence was not irrelevant.

In the result, Ms. Paige is entitled to a share of the estate.

Although the Court of Appeal’s decision is reasonable on the facts, I suggest that the court may have made the requirements a little too narrow.

I can conceive of circumstances in which the deceased makes a document that clearly demonstrates a deliberate or fixed and final intention without intending that document to be operative as a will. For example, the document may be a very clear instruction to a lawyer on what is to go in a will, but the deceased dies unexpectedly, shortly thereafter without have a reasonable opportunity to meet with the lawyer to sign the new will.

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. 

 

Canfield v. Bronze Wines Ltd.

 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

(1)  Confirming Mrs. Canfield’s identity;

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

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

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

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

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

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

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

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

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

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

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

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

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