Kerr v. Baranow

On the breakdown of an unmarried couple’s relationship in British Columbia, disputes about property are often decided on the basis of unjust enrichment. One party may make a claim that she enriched the other through labour or money, that she suffered a corresponding deprivation, and that there is no juristic reason that the other should retain the benefits. Sometimes each party makes a claim against the other in unjust enrichment.

For most couples, each person benefits the other. How should a court deal with mutual benefits? How can each person’s contributions be quantified, especially in a long-term relationship where one may contribute more money to the relationship, but the other may contribute more to managing the household or raising the children? What if the contributions are roughly equal, but one person accumulates more wealth as a result during the relationship than the other?

The courts may make a monetary award for unjust enrichment, in other words require the person who has benefit to make a payment to other. Or if the person making the claim shows a sufficient connection between his or her contributions and specific property, or if for some other reason a monetary award is not adequate compensation, the court may give the claimant an interest (referred to as a remedial constructive trust) in specific property the title to which was or is owned by the person who has benefited from the claimant’s contributions.

If the court makes a monetary award, must the court calculate the award on the basis of what the claimant’s contributions would cost (value received)? Or may the court consider how the person benefiting from the claimant’s contributions wealth has been enhanced (value survived). For example, in a marriage-like relationship, one person may stay at home, focusing her efforts on maintaining the household and raising the children, while the other may focus on building a successful business, perhaps worth millions of dollars. On the breakdown of the relationship, if the person who has expended her efforts on the home and the family makes a claim in unjust enrichment, and the court grants her a monetary award, is the award based on the cost of hiring a nanny and a housekeeper? Or may the award reflect the fact that her efforts allowed her domestic partner to focus on building a multi-million dollar business, in which case she may be entitled to a portion of the value of the business?

In the recent Supreme Court of Canada decision in Kerr v. Baranow, 2011 SCC 10, Mr. Justice Cromwell for the Court set out an analytical framework for determining unjust enrichment cases in the context of a joint family venture. If the couple were engaged in a joint family venture, the court may find that one party has been unjustly enriched on the basis that he or she has retained a disproportionate share of the accumulated wealth. A disproportionate share means a share that is disproportionate to that person’s contributions when compared to the other’s contributions.

Mr. Justice Cromwell identified several factors that the courts should consider when deciding if the couple was engaged in a joint family venture. These are whether the couple made mutual efforts, working collaboratively towards common goals, the extent to which their financial affairs were integrated, their actual intentions to share (or not to share) and the priority they gave to the family in their decisions.

A monetary award is not limited to the calculation of the cost of services or other contributions made by the person making the claim in unjust enrichment. Where the court finds that there was a joint family venture, it is appropriate to consider the enhancement to the other person’s wealth (the value-survived approach). Mr. Justice Cromwell wrote at paragraph 100:

1. The monetary remedy for unjust enrichment is not restricted to an award based on a fee-for-services approach.

2. Where the unjust enrichment is most realistically characterized as one party retaining a disproportionate share of assets resulting from a joint family venture, and a monetary award is appropriate, it should be calculated on the basis of the share of those assets proportionate to the claimant’s contributions.

3. To be entitled to a monetary remedy of this nature, the claimant must show both (a) that there was, in fact, a joint family venture, and (b) that there is a link between his or her contributions to it and the accumulation of assets and/or wealth.

4. Whether there was a joint family venture is a question of fact and may be assessed by having regard to all of the relevant circumstances, including factors relating to (a) mutual effort, (b) economic integration, (c) actual intent and (d) priority of the family.

The fact that there are mutual or reciprocal benefits will not be considered when determining whether the claimant enriched the other person and suffered a corresponding deprivation. It may be considered on the question of whether there is a juristic reason for the enrichment, but will usually be considered in determining the remedy, or the extent of the remedy. The defendant in an unjust enrichment claim will be entitled to a set off benefits received by the claimant when the court assesses the amount of any award to the claimant. The Supreme Court of Canada endorsed the approach taken by Madam Justice Huddart in the British Columbia Court of Appeal in Wilson v. Fotsch, 2010 BCCA 226, which I discussed in an earlier post.

As I understand the analysis in Kerr, if over a twenty-year relationship, each person makes roughly equal contributions to the joint family venture, but one of them retains 90 percent of the wealth they accumulate as a result of their joint efforts during that period, and the other only 10 percent, then the person with only 10 percent will be entitled to be compensated so that he or she ends up receiving half of the accumulated wealth. If the contributions are unequal, then the award will reflect the unequal contributions.

As a lawyer who practices estate litigation, I am naturally interested in how this decision may apply to my practice. Although Kerr deals with the breakdown of a marriage-like relationship, that analysis should apply where one domestic partner dies without making provision for the other. The survivor could bring a claim in unjust enrichment against the personal representative of the deceased’s estate for a monetary award out of that estate, or where assets flow to beneficiaries outside of the estate against those beneficiaries, in which case the survivor would seek a remedial constructive trust. The claimant could assert a claim to a share of the wealth the deceased had retained on his or her death that was generated by the joint family venture. If the survivor brings a claim under the Wills Variation Act to vary the deceased's will, the court may apply the analysis in Kerr when determining the deceased's legal obligations to the claimant as part of the court's analaysis of what provision would be adequate, just and equitable in the circumstances.

This analysis may also apply to relationships other than marriage-like relationships, if the hallmarks of a joint family venture exist. For example, in some circumstances family members such as siblings or parents and children might integrate their financial affairs and work collaboratively toward common goals, with an intention of sharing the wealth they accumulate.

Common Intention Resulting Trust

In British Columbia, a resulting trust usually arises in a couple of different circumstances. First, where one person gratuitously transfers an asset to another, or purchases an asset but puts the title in someone else’s name, there is a presumption of that the recipient of the asset holds it in trust for the benefit of the person who transferred or purchased the asset. The asset “results” back to the person who transferred or purchased the asset. This is a presumption only, and may be rebutted if the recipient of the title to the asset proves that it was a gift. I have written several posts, including this one, on the presumption of resulting trust.

Second, a resulting trust may arise when someone transfers assets to a trust, but the trust is invalid or fails. Perhaps it is too uncertain whom the trust is intended to benefit. In that case, the assets result back to the person who originally transferred the assets into the trust.

There is a third situation where the courts have occasionally found a resulting trust. This is the “common intention” resulting trust, and it has been applied to give a spouse, or partner in a spousal relationship, an interest in assets owned by the other spouse or partner after a breakdown in the relationship. Although title to the asset was only owned by one spouse or partner, the courts have on occasion either found or implied that there was a common intention by both spouses or partners to share the asset. The court could then hold that the party with the title held it on a resulting trust for both parties, even if the person making the claim did not contribute to the asset.

The common intention resulting trust has not been very common in recent years. Claims by married spouses on the break down of a relationship are generally dealt with under family property legislation such as the Family Relations Act.

Since the Supreme Court of Canada decision in Pettkus v. Becker, [1980] 2 S.C.R. 834,  the courts have generally considered property claims on the breakdown of an unmarried couple's relationship in accordance with the principles of unjust enrichment. The partner without title is required to prove that his or her contributions have enriched the other party, that he or she as suffered a corresponding deprivation, and that there is no juristic reason for the enrichment.

The common intention resulting trust doesn't made a lot of sense to me. For one thing, in a resulting trust, assets “result” back to the person who contributed or purchased the assets. But in the common intention resulting trust, the asset may never have been owned by the claimant, and the claimant might not have even contributed to the acquisition or preservation of the asset. The asset doesn’t result back to anyone. If the spouse or partner who had the title intended to hold it in trust for both parties, that is an express trust. But in most of the common intention resulting trust cases, the evidence would fall short of establishing an express trust.

It turns out that on this issue, I am in good company. On February 18, 2011, the Supreme Court of Canada, in two cases decided at the same time, Kerr v. Baranow, and Vanasse v. Seguin, 2011 SCC 10, expressly held that the common intention resulting trust has no further role to play in resolving property disputes in domestic cases. Mr. Justice Cromwell wrote at paragraphs 23 through 29:

[23] The Court’s development of the common intention resulting trust ended with Pettkus, in which Dickson J. (as he then was) noted the “many difficulties, chronicled in the cases and in the legal literature” as well as the “artificiality of the common intention approach” to resulting trusts: at pp. 842-3. He also clearly rejected the notion that the requisite common intention could be attributed to the parties where such an intention was negated by the evidence: p. 847. The import of Pettkus was that the law of unjust enrichment, coupled with the remedial constructive trust, became the more flexible and appropriate lens through which to view property and financial disputes in domestic situations. As Ms. Kerr stated in her factum, the “approach enunciated in Pettkus v. Becker has become the dominant legal paradigm for the resolution of property disputes between common law spouses” (para. 100).  

[24] This, in my view, is as it should be, and the time has come to say that the common intention resulting trust has no further role to play in the resolution of domestic cases. I say this for four reasons.

[25] First, as the abundant scholarly criticism demonstrates, the common intention resulting trust is doctrinally unsound. It is inconsistent with the underlying principles of resulting trust law. Where the issue of intention is relevant to the finding of resulting trust, it is the intention of the grantor or contributor alone that counts. As Professor Waters puts it, “In imposing a resulting trust upon the recipient, Equity is never concerned with [common] intention (Waters’, at p. 431).” The underlying principles of resulting trust law also make it hard to accommodate situations in which the contribution made by the claimant was not in the form of property or closely linked to its acquisition. The point of the resulting trust is that the claimant is asking for his or her own property back, or for the recognition of his or her proportionate interest in the asset which the other has acquired with that property. This thinking extends artificially to claims that are based on contributions that are not clearly associated with the acquisition of an interest in property; in such cases there is not, in any meaningful sense, a “resulting” back of the transferred property: Waters’, at p. 432. It follows that a resulting trust based solely on intention without a transfer of property is, as Oosterhoff puts it, a doctrinal impossibility: “. . . a resulting trust can arise only when one person has transferred assets to, or purchased assets for, another person and did not intend to make a gift of the property”: p. 642. The final doctrinal problem is that the relevant time for ascertaining intention is the time of acquisition of the property. As a result, it is hard to see how a resulting trust can arise from contributions made over time to the improvement of an existing asset, or contributions in kind over time for its maintenance. As Oosterhoff succinctly puts it at p. 652, a resulting trust is inappropriate in these circumstances because its imposition, in effect, forces one party to give up beneficial ownership which he or she enjoyed before the improvement or maintenance occurred.

[26] There are problems beyond these doctrinal issues. A second difficulty with the common intention resulting trust is that the notion of common intention may be highly artificial, particularly in domestic cases. The search for common intention may easily become “a mere vehicle or formula” for giving a share of an asset, divorced from any realistic assessment of the actual intention of the parties. Dickson J. in Pettkus noted the artificiality and undue malleability of the common intention approach: at pp. 843-44.

[27] Third, the “common intention” resulting trust in Canada evolved from a misreading of some imprecise language in early authorities from the House of Lords. While much has been written on this topic, it is sufficient for my purposes to note, as did Dickson J. in Pettkus, at p. 842, that the principles upon which the common intention resulting trust jurisprudence developed are found in the House of Lords decisions in Pettitt v. Pettitt, [1970] A.C. 777, and Gissing. However, no clear majority opinion emerged in those cases and four of the five Law Lords in Gissing spoke of “resulting, implied or constructive trusts” without distinction. The passages that have been most influential in Canada on this point, those authored by Lord Diplock, in fact relate to constructive rather than resulting trusts: see, e.g., Waters’, at pp. 430-35; Oosterhoff, at pp. 642-43. I find persuasive Professor Waters’ comments, specifically approved by Dickson J. in Pettkus, that where the search for common intention becomes simply a vehicle for reaching what the court perceives to be a just result, “[i]t is in fact a constructive trust approach masquerading as a resulting trust approach”: D. Waters, Comment (1975), 53 Can. Bar Rev. 366, at p. 368.

[28] Finally, as the development of the law since Pettkus has shown, the principles of unjust enrichment, coupled with the possible remedy of a constructive trust, provide a much less artificial, more comprehensive and more principled basis to address the wide variety of circumstances that lead to claims arising out of domestic partnerships. There is no need for any artificial inquiry into common intent. Claims for compensation as well as for property interests may be addressed. Contributions of all kinds and made at all times may be justly considered. The equities of the particular case are considered transparently and according to principle, rather than masquerading behind often artificial attempts to find common intent to support what the court thinks for unstated reasons is a just result.

[29] I would hold that the resulting trust arising solely from the common intention of the parties, as described by the Court in Murdoch and Rathwell, no longer has a useful role to play in resolving property and financial disputes in domestic cases. I emphasize that I am speaking here only of the common intention resulting trust. I am not addressing other aspects of the law relating to resulting trusts, nor am I suggesting that a resulting trust that would otherwise validly arise is defeated by the existence in fact of common intention.

Sections of the Adult Guardianship and Planning Statutes Amendment Act, 2007 come into effect September 1, 2010

Portions of the Adult Guardianship and Planning Statutes Amendment Act, 2007 will come into force effective September 1, 2011. The Courthouse Libraries B.C. website sets out the proclamation here as follows:

IN FORCE DATE: Sep 1, 2011


Sections IN FORCE:section 1 (k) as it enacts the definitions of “attorney”, “enduring power of attorney”, “financial affairs” and “power of attorney”; the rest of the Act EXCEPT the following: the remainder of section 1 (k); sections 1 (b) and (c), 4, 5, 15, 18, 31 (b), 33, 67, 73, 82, 94 to 97, 100 to 103, 105 (a), and 110 (b) and (c); section 17 as it repeals section 62 of the Adult Guardianship Act; section 17 as it enacts sections 62, 62.1, 62.2 (2), 62.3 and 63 (2) (a) to (r) and (3) to (6) of the Adult Guardianship Act; section 29 as it enacts section 19.92 of the Health Care (Consent) and Care Facility (Admission) Act; section 31 (a) as it enacts section 34 (2) (n) of the Health Care (Consent) and Care Facility (Admission) Act; section 91 as it amends section 282 (2) of the Land Title Act, and section 99 as it enacts section 9 (1) (b) and (c) of the Partition of Property Act

It's a bit confusing trying to figure out exactly what sections are in force, but it appears that the amendments to the Power of Attorney Act and the Representation Agreement Act are being brought into force. The repeal of the Patients Property Act, and its replacement with new legislation is not being brought into effect.

Adequacy of Legal Advice and the Presumption of Undue Influence

Last week I wrote here about the evidentiary issues in Modonese v. Delac Estate, 2011 BCSC 82, concerning the admissibility of out-of-court statements made Regina Delac. The case was a dispute between her two children about whether her son was entitled to keep his mother’s house as the surviving joint tenant or whether the house formed part of her estate to be dividing equally between her son and daughter in accordance with her will. A couple of years before her death, Regina Delac had signed a transfer which when registered at the Land Title Office, transferred the title to her house from her sole name into a joint tenancy with her son, Marko Delac. Mr. Justice Groves declared that the house is an estate asset.

Today I am writing about a different aspect of this decision: Mr. Justice Groves’ discussion of independent legal advice.

In Modonese, Mr. Justice Groves found that the nature of the relationship between Regina Delac and her son was such that her son was in a position to dominate his mother. There was evidence that he had been violent with her, that she was afraid of him and did not want to upset him, and that she wasn’t sure what she had signed. Because of the dominating nature of their relationship, the court applied a presumption that Marko Delac had obtained an interest in the title to the house by undue influence.

The presumption of undue influence is only a presumption. It may be rebutted, but the burden is on the person who benefited from the transaction, in this case Marko Delac, to show that the transfer was made voluntarily, without undue influence.

One way to rebut the presumption of undue influence is to show that the person who made the transfer received independent legal advice.

Regina Delac signed the transfer document in front of a notary public. Mr. Justice Groves summarized the notary public’s evidence as follows:

[39] Michael Tin, a notary public, gave evidence for the defence. He indicates that on the 23rd of May 2003, following instructions received, he arranged for the signing of a transfer for the Royal Oak property, which was previously in the name of Regina Delac alone, to be transferred into the name of Regina Delac and Marko Delac, as joint tenants. He testified that Marko Delac is a long time client of his and that Marko approached him about doing the transfer. He indicated that he would have had to receive instructions from Regina to effect the transfer; he further indicated that between the 19th of May 2003 and the 23rd of May 2003, he spoke to Regina two or three times.

[40] He testified that he arranged with Marko to have his mother brought to his office. Marko drove Regina and called from downstairs. Michael Tin was clear that he asked Marko to wait outside and that she spoke to Regina alone with just himself in the car. He indicated that he went over joint tenancy and tenancy-in-common with Regina and explained the difference between the two. He said that Regina had indicated that she wanted a joint tenancy arrangement.

[41] Michael Tin was clear that Marko was not present and not visible during this signing. Michael Tin indicated that he felt Regina was capable of providing instructions and that she knew what she was doing. In cross examination it became clear that Michael Tin had, for the most part, relied on information he received from Marko to draw up the transfer. It was further clear that the appointment with Regina was arranged through Marko that Marko had brought Regina to his office and that Marko had arranged for Michael Tin to go downstairs to meet them.

[42] In cross examination he confirmed that issues which never came up included a general discussion of assets, a discussion of debts, a discussion of estates, Regina’s level of health, other funds advanced by Regina, or any inquiry as to Regina and Marko’s personal relationship.

[43] The fee for services was also discussed in cross examination. The total bill was approximately $200, of which only $32.93 was for fees. Michael Tin indicated that that was the price he charged for a transfer at the time. Michael Tin confirmed that Marko paid the account.

[44] Michael Tin’s evidence stands alone in regards to who was present during the transfer.

Mr. Justice Groves found that Marko Delac was either in the car or close by when his mother signed the transfer.

What advice is required from a lawyer or notary public to rebut a presumption of undue influence? Did the notary public take sufficient steps to see that Regina Delac was acting voluntarily, free of any undue influence?

Mr. Justice Groves quoted from a Newfoundland Court of Appeal decision on the requirements for independent legal advice as follows:

[121] In Stewart [v. McLean, 2010 BCSC 64], Punnett J. followed Coish v. Walsh, 2001 NFCA 41, 203 Nfld. & P.E.I.R. 226 [Coish], where Wells C.J.N. addressed the issue of whether independent advice rebuts the presumption of undue influence as follows:

[23] The trial judge also correctly set forth the law respecting the manner in which such a presumption may be rebutted. In particular, he identified, from the comments of Green J., in [Fowler Estate], factors to be taken into account in considering whether or not evidence of legal advice given to the granting party is sufficient to rebut the presumption. At paragraph 24 of [Fowler Estate], Green J. identified factors which may affect the character of legal advice to be as follows:
1. Whether the party benefiting from the transaction is also present at the time the advice is given and/or at the time the documents are executed.
2. Whether, though technically acting for the grantor, the lawyer was engaged by and took instructions from the person alleged to be exercising the influence.
3. In a situation where the proposed transaction involves the transfer of all or substantially all of a person’s assets, whether the lawyer was aware of that fact and discussed the financial implications with the grantor.
4. Whether the lawyer enquired as to whether the donor discussed the proposed transaction with other family members who might otherwise have benefited if the transaction did not take place.
5. Whether the solicitor discussed with the grantor other options whereby she could achieve her objective with less risk to her.

What advice is adequate to rebut the presumption of undue influence will depend on the circumstances of the case. The lawyer or notary must give sufficient advice to be satisfied that the client understands the nature and effect of the transaction and is acting voluntarily. The lawyer or notary may also need to give advice on the merits of the transfer.

Mr. Justice Groves found that the advice the notary public gave to Regina Delac was inadequate to rebut the presumption of undue influence. He wrote:

[125] In this case, each of the 5 factors from Coish suggests that the advice Mr. Tin provided to Regina was completely inadequate and insufficient to rebut the presumption of undue influence. Marko was either nearby or in the car at the time the advice was given. He orchestrated and oversaw the entire process. Mr. Tin asked very few questions, did not know Regina had a daughter or a will, and provided no “objective advice” on the merits of the transaction. He did not inform himself of the circumstances in which the transaction was taking place nor of the motivations behind it.

Hearsay and Estate Litigation

If I testify in court that Jill told me that Jack fell down and broke his crown in order to prove that Jack did, in fact, fall down and broke his crown, then my evidence is hearsay. Testimony about an out of court statement by someone else to prove the truth of the matter asserted by that other person is hearsay. In British Columbia, hearsay is generally not admissible in court.

But my testimony about what Jill told me about Jack may be admissible in some circumstances. For example, I may be relating what Jill told me, not to prove that Jack fell down and broke his crown, but for the non-hearsay purpose of explaining why I called an ambulance. Or, the court might admit my testimony, even to prove that Jack fell down and broke his crown, if the court finds that the evidence is necessary and it is sufficiently reliable to consider despite the fact that it is hearsay.

In estate litigation, the courts often consider statements about what the deceased person had said. Often the court receives such evidence without objection. On what basis are these statements admitted? Most reported estate litigation judgments in British Columbia do not contain discussions about the admissibility of statements about what the deceased said. Mr. Justice Groves’ decision in the recent case of Modonese v. Delac Estate, 2011 BCSC 82, is an exception.

Regina Delac died on August 20, 2005. She had two children: a son, Marko Delac, and a daughter, Helena Modonese. With the exception of a three-year period beginning in 1989, Marko Delac lived with his mother in her home on Royal Oak Avenue in Burnaby. His wife and, while they were growing up, his children, also lived in the Royal Oak Avenue home.

A couple of years before she died, Regina Delac signed a transfer form, transferring her house into a joint tenancy with her son. She signed the transfer in front of a notary public, whom her son had contacted, while sitting in Marko Delac’s car. Mr. Delac was either in the car or standing nearby when she signed the transfer.

On Regina Delac’s death, title to the house at Royal Oak Avenue passed to her son by right of survivorship. Her only other financially valuable asset was her bank account which held about $35,000.

In her will, Regina Delac said that her estate was to be divided equally between her son and daughter. But if the house passes to Marko Delac by right of survivorship, there would only be $35,000 less estate liabilities to be divided between Regina Delac’s two children.

Helena Modonese challenged the transfer of her mother’s house into a joint tenancy with her brother on the grounds of undue influence and resulting trust.

To establish undue influence, Ms. Modonese relied on a presumption that arises when the nature of the relationship between the person who makes a gratuitous transfer (in this case Regina Delac) and the recipient (her son) is such that the recipient s in a position to dominate the transferor. When the presumption arises, then the recipient must prove that he did not exercise any undue influence, often by showing that the transferor acted spontaneously and received independent advice.

A resulting trust is a presumption that arises when one person gratuitously transfers property to another. The presumption is that the transferor did not make a gift, but rather that the recipient holds the property in trust for the transferor, and after the transferor’s death, for his or her estate. The recipient may rebut the presumption of resulting trust by proving that the transferor intended to make a gift of the property.

Ms. Modonese relied on statements her mother made to her, to daughter Linda Modonese, and to Regina Delac’s sister Helen Uzelak, to challenge the transfer of the house into a joint tenancy with her brother. For example, Regina Delac told her sister that Marko Delac had slapped and choked her in 1989 or 1990. After this incident the police came, and Marko Delac and his family moved out of the home for three years. Mr. Justice Groves summarized the evidence objected as hearsay at paragraphs 73 and 74:

[73] In their written submissions, the parties highlight a number of statements made by the deceased, which the defendant asserts are inadmissible hearsay. The most important of these for the present purposes appear to be:
(a) A statement to Linda Modonese regarding a physical altercation between Marko and Regina;
(b) A statement to Helena and Linda Modonese to the effect that it was Regina’s intention for Helena and Marko to share equally in the estate and more specifically in the house;
(c) A statement to Helen and Helena wherein Regina told them that she was afraid of upsetting Marko;
(d) A statement to Helen and Helena wherein Regina told them that she was afraid of Marko;
(e) Most importantly, Helen’s evidence that prior to her death, Regina told her that she had signed something and that she did not know what she signed. The defendant had told her to sign. She did not like this. She wondered how the defendant’s name was on the municipal tax notice.  

[74] An out of court statement tendered for the truth of its contents is presumptively inadmissible. The hearsay rule has been traditionally regarded as an absolute rule, and acts as an exception to the general principle that all relevant evidence is admissible.

Mr. Justice Groves considered whether the evidence fell within a tradition category of hearsay exceptions. These are certain categories of out-of-court statements that the courts have developed over many years. He then considered whether those statements that do not fall within a traditional category should be admitted under the principled approach of considering the necessity and reliability of the evidence.

Statements Regina Delac made to others that she was afraid of her son, and that she intended for her children to share her house and bank accounts equally, fall within the traditional hearsay exceptions for statements made to prove a person’s intention, mental or emotional state. Mr. Justice Groves wrote at paragraphs 82 through 86:

[82] In Pasko v. Pasko, 2002 BCSC 435, 100 B.C.L.R. (3d) 354 [Pasko], a dispute arose as to the admissibility of statements made by deceased parents to their children in connection with a dispute over whether property had been gifted to certain of the children. Halfyard J. noted at para. 10 that there is an “exception to the hearsay rule which permits evidence to be given of statements made by deceased persons as to their present state of mind (including intention), which statements need not be against interest, provided that the deceased person's state of mind is relevant to an issue in the case.” 

[83] Pursuant to this exception, Mr. Justice Halfyard admitted statements relating to the deceased parents’ intentions to confer a gift, made before and at the time of the two transactions in question.

[84] Following Pasko, if I am wrong in concluding that the statements concerning Regina’s intention to divide her assets equally are not admissible pursuant to s. 5 of the WVA, they ought to be admitted pursuant to this exception to the hearsay rule.

[85] Declarations of mental or emotional state are also an established exception to the rule against hearsay. In R. v. Smith, [1992] 2 S.C.R. 915, 94 D.L.R. (4th) 590 [Smith cited to S.C.R.], the Court held that the state of mind exception to the hearsay rule permits reception of evidence to prove the declarant’s state of mind, but not the truth of the factual assertion which may be contained in it. Statements attributed to a deceased declarant tending to show her state of mind, namely a fear of the defendant, are admissible under this exception to the hearsay rule: R. v. Evans, 2002 BCSC 1674 at para. 35, [2002] B.C.J. No. 3100. 

[86] Accordingly, the statements attributed to Regina concerning her fear of the defendant and her fear of upsetting him are admissible pursuant to this exception.

Mr. Justice Groves admitted Regina Delac’s statements of physical violence, and that she signed something her son told her to sign but did not know what she signed under the principled exception, which he explained as follows:

[88] The statements referred to above under headings “a” and “e” (the physical altercation and the evidence that Regina did not know what Marko had asked her to sign) do not appear to neatly fit under any of the established exceptions to the hearsay rule. I now turn to a consideration of the “principled approach” to hearsay.

(i) Necessity

[89] The principle of necessity does not mean that the hearsay evidence must be necessary in order for a party to prove his or her case. As described by the Court in Smith at 933, the criterion of “necessity” refers to the necessity of the hearsay evidence to prove a fact in issue. To satisfy necessity, the party adducing the evidence must prove that hearsay is the only available means of putting that evidence before the court. Necessity is obviously made out in this case. If Regina’s statements are to be adduced at all, they can only be presented in hearsay form because of her death.

(ii) Reliability

[90] When assessing the reliability of a hearsay statement, the court should adopt a functional approach. Starting from the premise that hearsay statements are presumptively inadmissible, it should then search for indicia of trustworthiness sufficient to displace the general exclusionary rule. In each case, the focus of the inquiry must be on the particular dangers arising from the hearsay nature of the evidence: R. v. Blackman, 2008 SCC 37 at para. 42, [2008] 2 S.C.R. 298. 

[91] This requirement can be satisfied in one of two ways: First, where there is an absence of any real concern about the truth of the statement because of the circumstances in which the statement was made; and second, where the truth and accuracy of the evidence can be sufficiently tested by means other than contemporaneous cross examination: Khelawon at paras. 62-63.

[92] All relevant factors and the context should be considered, including the presence of supporting or contradictory evidence in appropriate cases.

[93] In Anderson v. Anderson, 2010 BCSC 911, 58 E.T.R. (3d) 291 [Anderson], the pivotal issue in the trial was similar to that raised in the present case: Did the deceased gift the defendant the legal and beneficial interest in property absolutely through an inter vivos transfer? Accordingly, the actual intention of the deceased at the time of the transfer was of fundamental importance. On the issue of hearsay pertaining to this issue, Dardi J. held:

57 The reporting of some of the Deceased's statements by interested parties raises a concern regarding the reliability of those statements. This evidence must be carefully scrutinized. Adopting the approach in Stephens v. Austin, 2003 BCSC 341, I have nevertheless determined that the Deceased's statements adduced in evidence meet the threshold requirement of reliability. I conclude that the fact that some of the witnesses relating the statements are interested parties may be adequately dealt with in the determination of the weight to be attributed to any particular statement.

58 In my view, the real issue with some of the evidence and the weight to be accorded to it is whether the statements were in fact made by the Deceased. The Court must first find on a balance of probabilities that the statement was made before it goes on to determine the treatment and weight of such evidence: Creutz v. Winther Estate, 2007 BCSC 1463. In essence, this assessment turns on the reliability of the various witnesses: Halfpenny v. Holien (1997), 37 B.C.L.R. (3d) 186 (S.C.).

[94] Regina had no motive to fabricate the two statements attributed to her. They were not self-serving. The statements at issue were made in the context of everyday intimate conversations between close relatives and friends, which is an accepted indicator of reliability: R. v. Pasqualino, 2008 ONCA 554 at para. 43, 233 C.C.C. (3d) 319. The defendant has pointed to no evidence that would contradict these statements. Accordingly, the statements possess sufficient hallmarks of threshold reliability to justify admission under the principled exception.

[95] As Dardi J. noted in Anderson, the real issue in this case is whether or not Regina actually made the alleged statements at issue to Helen and Linda Modonese, which requires an assessment of these witnesses’ credibility. I find them both to be credible witnesses.

(I think that the statement that Regina Delac did not know what she signed could also have been admitted under the state of mind exception.)

Mr Justice Groves found that the presumption of undue influence applied because there was a potential for domination in the relationship between Marko Delac and Regina Delac. In making that finding, he considered:

1. Regina’s statements that she feared Marko and did not want to upset him;
2. Marko’s physical abuse of his mother;
3. Regina’s statement to Helen that she signed documents at Marko’s direction and that she did not appreciate the nature and consequences of these documents;
4. Marko was granted an enduring power of attorney, which he used over the plaintiff’s assets, granting him control over her affairs and subjecting him to fiduciary obligations (On the fiduciary relationship between an attorney and donor, see Egli v. Egli, 2004 BCSC 529 at paras. 76-79, 28 B.C.L.R. (4th) 375, aff'd 2005 BCCA 627, 48 B.C.L.R. (4th) 90.);
5. Marko’s attempts to prevent his mother from having contact with the plaintiff, isolating her from other family members;
6. Regina’s reliance upon Marko for companionship, help around her home, and in dealing with her general affairs.

Marko Delac did not rebut the presumption of undue influence. The notary did not provide any independent advice to Regina Delac.

Furthermore, the transfer into a joint tenancy was subject to the presumption of resulting trust, and Marko Delac was unable to prove that his mother intended to make a gift of the house to him.

In the result, Helena Modonese was successful, and the house will be divided equally between Regina Delac’s two children under her will.

I should note that although I have focused this post on the hearsay issues, Mr. Justice Groves’ reasons for judgment in Modonese v. Delac Estate also contain thorough analyses of the law of undue influence, the requirements for independent legal advice, and the presumption of undue influence in British Columbia.

Clara Shortridge Foltz Criminal Justice Center, Los Angeles, California

I took this photograph of the Clara Shortridge Foltz Criminal Justice Center in August 2009.

A Practical Guide to Elder Abuse and Neglect Law in Canada

The Canadian Centre for for Elder Law has published A Practical Guide to Elder Abuse and Neglect Law in Canada. The content and purpose of the guide is summarized in the Canadian Centre for Elder Law's media release as follows:

This comprehensive resource includes snapshots of the law in each of the thirteen provinces and territories,a comparative table that allows for quick reference, a set of guiding principles for working with vulnerable adults, and sections that discuss mandatory reporting of abuse
and neglect, rules around confidentiality of personal and health information, and the relationship between mental capacity and elder abuse. The guide also contains a lengthy list of resource agencies.

“Circumstances of abuse, neglect and risk present practitioners from every discipline with ethical dilemmas and challenging questions about how to respond pppropriately in order to protect clients without over-stepping oundaries,” says Staff Lawyer Krista James. “Elder abuse is a complex area of practice that involves many areas of law and rules that vary depending on the province in which you are practicing. It is hard for even a specialist to appreciate their obligations. This tool is a practical resource that will help lawyers, social workers and health professionals to enhance their practice in this area.”

You can also read A Practical Guide to Elder Abuse and Neglect Law in Canada in French here.