Caregiver Found Liable

CaregiverA caregiver was found liable in the amount of $136,000 in favour of a handicapped patient who could not manage money, as the caregiver breached her fiduciary duty owed to the plaintiff, and was unjustly enriched. see  Reeves v Dean 2012 BCSC 1425.

The care giver was paid by the provincial government and was found to have misappropriated $136,000 from a joint bank account to which the plaintiff had contributed  all of the funds

 

The plaintiff, through her litigation guardian claimed relief on two grounds;

(1) there was a fiduciary relationship between her and Ms. Dean that was violated when monies were withdrawn from the joint accounts and appropriated by Ms. Dean and Ms. Blackwell; and

(2) Ms. Dean and Ms. Blackwell were unjustly enriched by the appropriation to their own use of $136,000 of Ms. Reeves’ money from the joint accounts.

 

The plaintiff won judgement 0n both grounds against the caregiver.

22      Turning to the first question, I find there was a fiduciary relationship between Ms. Dean and Ms. Reeves in regard to the administration of the monies in the joint accounts. Ms. Dean was accorded full access to Ms. Reeves’ monies in the joint accounts for the express purpose of assisting her to manage her finances. Ms. Dean took on this responsibility in her capacity as Ms. Reeves’ caregiver pursuant to a contract for services with the Ministry. Ms. Reeves was a vulnerable, mentally challenged young woman who, to Ms. Dean’s knowledge, was incapable of handling money and managing the joint accounts. Ms. Dean took charge of the bank card and in this regard had sole control of and access to the funds in the joint accounts. Ms. Dean decided how much money to give Ms. Reeves for personal expenditures and otherwise made all decisions regarding the funds in the joint accounts.
23      As articulated by the Supreme Court of Canada in International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574 (S.C.C.) at para. 130, the three general characteristics of a fiduciary relationship are:
(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.
(3) The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
24      It is the vulnerability of the beneficiary that is essential to a finding of a fiduciary relationship or obligation. This position of disadvantage or vulnerability causes the beneficiary to place reliance on the fiduciary and equity imposes corresponding duties on the fiduciary to act properly in accordance with the interests of the beneficiary.
25      On the facts of this case, there can be no doubt that Ms. Reeves was in a position of disadvantage regarding the administration of the joint account monies. As a mentally challenged adult, she, by necessity, placed her trust in Ms. Dean and depended upon her to properly manage the monies in the joint account. Ms. Reeves was particularly lacking in skills related to the management of her money and, indeed, it was the recognition of this frailty by Ms. Dean that led to the arrangement regarding the joint accounts. It is also clear that Ms. Dean had an unrestricted discretionary authority over the money in the joint accounts that was not supervised in any manner by the Ministry or Ms. Reeves’ family. Lastly, Ms. Dean was able to exercise her authority over the joint accounts to the financial prejudice of Ms. Reeves.
26      I am also satisfied that Ms. Dean violated the duties imposed upon her as a fiduciary regarding the management of Ms. Reeves’ monies. From 1997 to 2007, Ms. Dean essentially stole $136,000 from Ms. Reeves. Ms. Dean systematically emptied the joint accounts of funds each month by transferring the money to her accounts, or to accounts held jointly with Ms. Blackwell, by withdrawing funds in cash, and by paying for her own goods and services directly from the joint accounts. I reject Ms. Dean’s evidence that the Ministry authorized her to remove monies from the joint accounts for her own purposes. There is no evidence to support her assertion that the Ministry approved of the appropriation of monies from Ms. Reeves. Further, the Ministry had no authority over Ms. Reeves’ monies and thus could not have authorized Ms. Dean to appropriate these funds. While the Ministry may have been lawfully entitled to claim monies from Ms. Reeves directly as a contribution towards the cost of her care, it could not do so indirectly by authorizing Ms. Dean to seize the funds and use them for her own purposes, particularly without any accounting as to what was taken.
27      The remedies available for breach of fiduciary duty include constructive trust, accounting of profits and equitable compensation to restore to the plaintiff what was lost due to the breach of duty: Frame v. Smith, [1987] 2 S.C.R. 99 (S.C.C.) at para. 61. In this case Ms. Reeves seeks judgment for the amount taken by Ms. Dean in breach of her fiduciary duties. Although there was a delay in bringing this action, I find there can be no finding of laches. Ms. Dean’s misappropriation of funds took place from 1997 until 2007 without the knowledge of Ms. Reeves’ family. Ms. Reeves was not mentally able to understand or challenge Ms. Dean in regard to her handling of the monies. Soon after Ms. Reeves left Ms. Dean’s home this action was commenced. Thus I find there is no basis upon which to deny relief to Ms. Reeves.
28      While the remedies for breach of fiduciary duty are not affected by the good faith of the fiduciary, it is important to add that Ms. Dean was a well educated and experienced social worker who was very familiar with the obligations placed upon her as Ms. Reeves’ caregiver. I have no doubt that she was fully cognizant of the wrongful nature of her actions and the breach of trust that she was committing while Ms. Reeves was in her care. While Ms. Dean may have regarded the monies taken as a well earned bonus for services rendered, what occurred here was a blatant theft of Ms. Reeves’ monies for a period of over ten years.
29      Turning to the second question, I am satisfied that Ms. Dean and Ms. Blackwell were unjustly enriched by the appropriation of $136,000 from Ms. Reeves. All of the essential elements of unjust enrichment are present in this case. First, Ms. Dean and Ms. Blackwell received a benefit in the form of monies belonging to Ms. Reeves. Second, Ms. Reeves suffered a corresponding detriment by the loss of her monies. Third, there was no juristic reason for the enrichment. Ms. Dean acknowledged that the Ministry paid the entire fee for Ms. Reeves’ care pursuant to the proprietary care contract and, further, she performed no additional services for Ms. Reeves in consideration of the monies taken from the joint accounts. There was no contract, no disposition of law or donative intent to justify the benefit. The benefit was not conferred by any valid common law, equitable or statutory obligation. The defendants have not established any public policy reason to retain the benefit or any legitimate expectations as between them and Ms. Reeves that would justify the benefit. As described above, this is a simple case of theft.

Equitable Fraud

 

Betrayal2Fraik v Pilon 2012 BCSC 528  discusses the concept of equitable fraud which does not arise perhaps as often as it should in reported case law.

 

Equitable Fraud

[37]           In the context of mistake of contract as presented by the plaintiff here, equitable fraud is equivalent to fraud but takes an “elastic approach” by attempting to do justice and relieve against hardship caused by transactions in which “it is unconscientious for a person to avail himself of the legal advantage which he has obtained” (Windjammer Homes Inc. v. Generation Enterprises 1989 2872 (BC SC), (1989), 43 B.L.R. 315 at 320 (B.C.S.C.)).

[38]           The concept arose before the Supreme Court of Canada in the case of Performance Industries Ltd. v. Sylvan Golf & Tennis Club Ltd., 2002 SCC 19 , 2002 SCC 19, [2002] 1 S.C.R. 678 (Performance Industries).

In that case, the plaintiff had been mistaken about the description of a development property that was purchased and alleged that the defendant knew of the plaintiff’s mistake when the plaintiff signed the agreement. For rectification of the contract to occur, the Court said that there had to exist a prior oral contract whose terms were definite and ascertainable, the plaintiff had to prove that the oral terms were not written down properly, the defendant must be shown to have known or ought to have known of the plaintiff’s error at the time of execution of the agreement, and the attempt of the defendant to rely upon the agreement must amount to “fraud or the equivalent of fraud” (Performance Industries at para. 31).

Rectification is not a substitute for failure of due diligence. The crucial question of what amounts to equitable fraud was described by Binnie J. as follows at para. 39:

39   What amounts to “fraud or the equivalent of fraud” is, of course, a crucial question. In First City Capital Ltd. v. British Columbia Building Corp. 1989 2868 (BC SC), (1989), 43 B.L.R. 29 (B.C.S.C.), McLachlin C.J.S.C. (as she then was) observed that “in this context ‘fraud or the equivalent of fraud’ refers not to the tort of deceit or strict fraud in the legal sense, but rather to the broader category of equitable fraud or constructive fraud …. Fraud in this wider sense refers to transactions falling short of deceit but where the Court is of the opinion that it is unconscientious for a person to avail himself of the advantage obtained” (p. 37). Fraud in the “wider sense” of a ground for equitable relief “is so infinite in its varieties that the Courts have not attempted to define it”, but “all kinds of unfair dealing and unconscionable conduct in matters of contract come within its ken”: McMaster University v. Wilchar Construction Ltd. (1971), 22 D.L.R. (3d) 9 (Ont. H.C.), at p. 19. See also Montreal Trust Co. v. Maley reflex, (1992), 99 D.L.R. (4th) 257 (Sask. C.A.), per Wakeling J.A.; Alampi v. Swartz (1964), 43 D.L.R. (2d) 11 (Ont. C.A.); Stepps Investments Ltd. v. Security Capital Corp. (1976), 73 D.L.R. (3d) 351 (Ont. H.C.), per Grange J. (as he then was), at pp. 362-63; and Waddams, supra, at para. 342.

See also Sun-Rype Products Ltd. v. Archer Daniels Midland Company, 2008 BCCA 278 , at para. 94, leave to appeal to SCC refused, (2009), 395 N.R. 388 (note).

[39]           The Court emphasized in Performance Industries at para. 40 that it will only put into words that which the parties orally agreed to, and not impose what in hindsight might appear to be a sensible arrangement that the parties might have made but did not. Also, the proof required is at the high standard of convincing proof, which is higher than the normal civil standard (Performance Industries at paras. 41-42). Evidence of the party seeking rectification must be corroborated in some way (Performance Industries at para. 43).

[40]           The first response to this argument is that the plaintiff did not plead rectification or mistake, but breach of contract. She did, however, seek restoration of the 1999 joint tenancy agreement by declaration which would necessarily have a term implied that the joint tenancy could not be severed. In this case, an agreement not to sever the joint tenancy has not been found, nor can such a term be implied. The court will uphold an implied bargain only where the terms can be ascertained with a reasonable level of comfort, hence convincing proof (Performance Industries at para. 47). There is no such convincing proof here. The plaintiff testified on discovery that there was no discussion and certainly no oral agreement about inability to sever. The plaintiff knew that Bernard could sever as it had been done before relative to this property and to these parties. There is no basis upon which to imply such a term.

[41]           Also, the evidence is only circumstantial that Bernard knew of any mistake. Everything had been arranged by Fraik. Bernard remained silent on some of the arrangements that Fraik offered. Although her conduct in severing the joint tenancy days afterwards could be considered as indicative of scheming on her part, many circumstances suggest otherwise and do not cumulate in the degree of proof required. Bernard was taken to a lawyer that she did not know to execute a document prepared by the plaintiff and that was executed by Bernard without legal advice. It would have been exceptional for a joint tenancy to include a term forbidding severance and the burden was upon the plaintiff to prove that there had been an oral agreement for same. The plaintiff did not suggest that the agreement was defective in any way until years later after Bernard had died. The plaintiff failed to prove that there was an oral agreement that did not correspond to the written joint tenancy agreement. Finally, it cannot be said in the circumstances here that Bernard received an advantage that calls for intervention. Bernard gave Fraik an increased interest in the property in the nature of an inter vivos gift, quite apart from her will. Fraik did not establish that her renovations increased the value of the property to half of the present value of the property, especially when she paid no occupation rent and established only minor contribution to expenses and the increase in equity after 1977.

Abusive Cargivers

when caregivers become abusive

My first realization of such a notion as a cruel caregiver was as a child watching the movie “Whatever Happened to Baby Jane” when Joan Crawford  is served a rat on a silver tray for lunch by her caregiving sister played by Bette Davis.

This article has been reproduce from The Atlantic:

Yolanda Farrell lay mostly paralyzed in a nursing home, unable to feed or dress herself, when her homeless daughter persuaded her to move out.

Linda Maureen Raye, who relatives say had been living in her car with her dog, used her mother’s Social Security to pay for a one-bedroom Riverside, California, apartment and took over as Farrell’s sole caregiver in 2010.

Over the next two years, according to police and court records, Raye took her elderly mother to the doctor once. As her mother’s health declined, Raye stopped cooperating with a nurse sent to advise her on preventing bedsores.

Yet in 2012, Raye was hired officially: She began collecting about $900 a month from taxpayers under the state’s in-home care program for poor people, according to law-enforcement authorities.

By the end of that year, Farrell, an 85-year-old former real-estate underwriter who loved to travel, had died of septic shock resulting from severe bedsore infections. Originally charged with murder, Raye, 60, pleaded guilty to elder abuse in September and was sentenced to 11 years in prison.

“She essentially neglected her to death,” said Riverside Police Detective Christian Vaughan, who investigated the case.

California’s frail elderly and disabled residents increasingly are receiving care in their own homes, an arrangement that saves the government money and offers many people a greater sense of comfort and autonomy than life in an institution. Yet caregivers are largely untrained and unsupervised, even when paid by the state, leaving thousands of residents at risk of possible abuse, neglect and poor treatment.

The move from nursing-home to in-home care is part of a massive shift across the nation, driven by cost-cutting and patient preference. In California, at least four times more elderly and disabled residents receive in-home care than live in nursing facilities—a rate that is only expected to rise as baby boomers age.

Many families either provide care for relatives without compensation or pay out of pocket for caregivers they find through word of mouth, referral agencies, or private companies. But a growing number of elderly and disabled people have incomes low enough to qualify for state-funded care under the In-Home Supportive Services program, or IHSS—the same one that paid Raye to care for her mother.

California’s $7.3 billion IHSS program is the largest publicly funded caregiver program in the nation. The caseload has more than doubled since 2001 and now serves about 490,000 low-income clients throughout the state.

Working behind closed doors for an average of about $10 an hour, these caregivers carry immense responsibility but are subject to little scrutiny, according to law-enforcement officials, elder-abuse investigators, senior-care experts, and court records. Their lapses sometimes lead to preventable injuries and death.

Many clients are too feeble or afraid to complain or ask for assistance. “We don’t know how many times Yolanda cried for help,” Detective Vaughan said. “She didn’t have a voice. She was deprived of that.”

An investigation into the IHSS program found that:

  • Training for caregivers is minimal and mostly optional. California doesn’t require training for everyone—even in CPR, first aid, or preventing injuries. By design, IHSS is not a medical program and caregivers are supposed to confine themselves to tasks such as feeding, dressing, or bathing. But some become ad-hoc nursing aides, helping to dress wounds and manage medications. The state requires caregivers receive training and authorization from physicians in these cases, but only about one in nine caregivers receives it, officials say.
  • Most clients in California, 73 percent, are related to their caregivers, up from 43 percent in 2000. The arrangements assume an inherent trust between client and caretaker—a trust that can go awry when the relationships are dysfunctional, abusive, or financially driven. While many states allow some paid family caregiving, most prohibit spouses from taking the job and some bar relatives entirely. California has no such restrictions.
  • Screening, though improved in recent years, has potentially dangerous gaps. State law requires criminal background checks and bars people from becoming caregivers if they have been convicted of certain crimes, such as elder and child abuse. But the IHSS program leaves the hiring to clients and gives them wide latitude. Felons convicted of robbery, rape, or assault can be paid caregivers if their clients get a waiver from the state. In the past four years, more than 830 people have received such waivers for caregivers convicted of serious offenses. “They can have criminal records, they can have drug addiction,” said Susan Strick, a prosecutor with the Los Angeles City Attorney’s office. “That’s a problem.”
  • Few incidents of abuse and neglect by IHSS workers are documented because authorities aren’t looking for them. County social-services workers are supposed to check on the clients once a year on the state’s behalf but are not primarily focused on the quality of care provided. Their main job is to determine whether clients are receiving the proper number of hours of care and whether their needs have changed. And because social workers are assigned hundreds of clients each, their visits are frequently brief—as short as 30 minutes a year.

Counties are also supposed to report to the state “critical incidents”—potential neglect, abuse, or self-harm requiring immediate action. But reporting practices vary widely, yielding puzzling results. In fiscal year 2012-2013, for instance, not a single critical incident was reported among the 235,000 clients in Los Angeles, Orange, and San Diego counties, the three largest in the state. That same year, smaller Sacramento County reported 1,688 incidents—accounting for most of the problems reported statewide.

“There is no evidence indicating that Sacramento County has a disproportionately higher number of critical incidents than other counties,” a Sacramento county spokeswoman said.

Beyond statistics such as these, nearly all records of IHSS are confidential. So unless a caregiver is criminally prosecuted, the details of any alleged mistreatment are unavailable to the public. Prosecutors and experts on elder abuse say only a small fraction of problems come to light. When they do, it is sometimes too late.

Neglect and abuse by paid home caregivers happens “far more regularly than we know,” said Paul Greenwood, a national expert in elder abuse and a prosecutor with the San Diego County District Attorney’s office. “We are still scratching the surface.”

Eileen Carroll, the deputy director of the California Department of Social Services, which runs IHSS, said the program “works very well for people who are capable and able to self-direct.” She acknowledged that more problems can arise when clients are older than 85, for instance, or have dementia.

In general, she said, the state tries to ensure that clients are receiving the services they need safely in their homes without compromising their independence.

The state recently has made improvements to its quality-assurance program and has clarified reporting standards for critical incidents, she said. But mandating training or increasing oversight further could fundamentally change IHSS from a program based on the consumers’ social needs to one based on their medical needs, she said.

“It’s a slippery slope,” she said. “I don’t think it is in our interest to force recipients and providers to do anything.”

 

***

The In-Home Supportive Services program has its roots in the 1950s, when a small group of polio patients was moved out of Rancho Los Amigos Hospital, a rehabilitation center in Downey, California. Officials recognized that it would be less expensive for people to be taken care of in their homes, and the March of Dimes began to pay for domestic help.

The current in-home care program, created by the California state legislature in 1973, retained the historical emphasis on supporting clients’ autonomy. The state pays the bills, but the elderly or disabled resident is the boss—responsible for hiring, firing, supervising, and training the caregiver.

To be eligible, most clients must qualify for Medi-Cal, the state insurance program for the poor, and be over 65, blind, or disabled. They also must show a need for help in the home.

Many swear by the program.

“I get to continue making choices,” said Margaret Belton, 82, who receives help seven days a week from IHSS caregivers at her Pasadena apartment. “When you go into a nursing home, you lose your ability to make decisions.”

Belton, a former nurse with arthritis, diabetes, thyroid problems, hip and knee replacements, and a history of falls, said she appreciates being able to train her own providers.

But for others, supervising a caregiver can be a struggle. That is especially true when clients are very old, severely physically or mentally impaired, or when the employees are family members with whom clients have difficult relationships.

The IHSS program can be a “perfect scenario for elder or dependent abuse,” said Julie Batz, a staff attorney at Legal Assistance for Seniors in Oakland. The clients may trust the providers because they share a history or because they assume that the government has screened and trained them, she said, but “that is not necessarily true.”

Toni Giusto, 54, said she trusted Yvonne Belanger, her domestic partner of many years, with her life. The Oakland woman hired Belanger as her IHSS caregiver in 2000, after an abscess in her neck left her paralyzed from the waist down. Giusto said she needed help with everything—eating, bathing, sitting up.

Instead, Giusto said Belanger locked her in a room. “She wouldn’t give me water or nothing,” she said. Belanger didn’t take her to the doctor, even when she developed bed sores that attracted maggots, Giusto said. Belanger sprayed bug poison on her to get rid of them, according to court papers.

Responding to a call from Giusto’s sister, police came to the house in 2010 and found Giusto with 23 open sores and an abdomen swollen from waste backed up in her bowels, according to court papers. Belanger was convicted of elder abuse and sentenced to county jail. She died last year.

“I was so trusting,” said Giusto, who now lives in a rehabilitation facility in Alameda. “I never thought she could do this to me.”

For some clients, choosing a caregiver is less about trust than about mutual need. The parents of Erica Aguirre, now 29, knew she had a drug problem. But they needed help and she needed money, so they applied to IHSS and hired her.

For about two years, Aguirre said, IHSS paid her to care for her 72-year-old mother, Guadalupe, who has asthma, diabetes, high blood pressure, and depression, and her father, Jesus, 69, who has heart problems, diabetes, and early dementia.

Guadalupe Aguirre said she and her daughter soon had arguments that ended in yelling and hitting. “I thought she was going to be different than she was,” the mother said in Spanish.

In 2012, Erica Aguirre was charged with physically and verbally abusing her mother. She was convicted and sentenced to 60 days in county jail and drug treatment, according to court documents.

In an interview at the family’s home in South Los Angeles, Erica Aguirre said she is a recovering drug addict and also suffers from depression and anxiety. Despite that, Aguirre said she followed doctors’ instructions and tried to help her parents. She said she quit working as an IHSS caregiver before her criminal case began.

“I tried my best as a caregiver,” she said. But “I wasn’t the appropriate one.”

Deborah Doctor, a legislative advocate at Disability Rights California, said there is nothing to suggest that the IHSS program fosters abuse or that people are less safe at home than they would be in an institution. The best way to ensure a high quality workforce is to pay caregivers better—not to increase regulation, she said.

“I am sure there are some bad actors but the efforts to quantify that have never come up with anything more than a minuscule perspective,” Doctor said.

* * *

Martin Hernandez, an IHSS social worker in Los Angeles County, has a tough job.

He has about 440 active cases, including people with multiple sclerosis, diabetes, mental illness, and a history of strokes. He is generally expected to visit each client once a year, though occasionally he sees someone who hasn’t been visited in two years.

Even once a year is “not enough to tell who is being harmed and who is not being harmed,” he said. “It’s very hard unless a neighbor calls or you see some kind of physical evidence.”

His colleague, Gloria Daniels, said she has an even higher caseload—493 clients. “The program is so big that it appears nobody knows what to do,” she said. “We are being told it’s quantity, not quality.”

In Los Angeles County, the most populous county in the nation, social workers have an average of 265 clients each. Under their union contract, their caseloads aren’t supposed to exceed 249. Above that, workers can’t be held to the usual disciplinary standards. But other counties have even higher ratios—in Riverside County, case workers average about 500 clients each.

There are no statewide standards for how many cases a social worker can carry. Carroll said in some smaller counties workers have caseloads as low as seven. In the areas with high caseloads, she said, the state has been urging counties to hire.

“We do want to see cases become better balanced,” she said. “We do want to see [clients] assessed every year.”

During their visits, county workers focus much more on possible fraud than on quality of care, statistics suggest. From 2008 through 2012, workers in the five most populous California counties—Los Angeles, San Diego, Orange, Riverside, and San Bernardino—reported 960 cases of fraudulent overpayment to caregivers. During that same period, the workers reported a total of 32 “critical events”—potential neglect, abuse or self-harm.

The state has another limited quality-assurance program that aims to ensure clients are safe and that county workers are following proper procedures. Inspectors conduct “desk reviews” of case files and other documents, along with a very small number of home visits. In 2013, just 3.8 percent of IHSS cases were reviewed under the program.

Since last summer, more desk reviews and unannounced visits are taking place, Carroll said.

Case workers—and caregivers—are required by law to report suspected abuse or neglect. But IHSS officials and family members mostly depend on another state agency, Adult Protective Services, to investigate those concerns.

This agency is also spread thin and has limited powers, according to state records and interviews. Even if workers suspect abuse or neglect, they generally can’t remove an adult from the home without his or her permission.

“We cannot force anybody to accept our services,” said Stacey Lindberg, the program manager of Adult Protective Services in Orange County. “It is heartbreaking.”

* * *

The result, in some cases, is prolonged abuse and neglect by IHSS caregivers. Examples can be found in court records throughout the state.

In Fresno, a 26-year-old woman, disabled by a severe spine condition, hired her brother and his wife as IHSS caregivers. Police and prosecutors say the couple, Joe and Denise Roman, didn’t turn her in bed, and her tissue broke down so much that metal rods in her spine became exposed. She died and the caregivers were convicted in 2011 of abusing her.

In Lake Isabella, Kern County, Joseph McCoy was a paid caregiver over many years for his 90-year-old grandmother, who raised him. McCoy left her unattended, and officials discovered her stuck to her sheets with gruesome bedsores in a fly-infested room, according to prosecutors. She died shortly afterward. McCoy was convicted in 2012 of elder abuse.

“This was a really, really horrible case,” said Michelle Domino, the Kern County deputy district attorney. “She had clearly been left neglected for some time.”

In Yolanda Farrell’s case, relatives say they are stunned that Linda Maureen Raye even was able to become a paid caregiver for her mother. Farrell was unable to walk and had very limited use of her arms as a result of a bout with polio years earlier. Linda Maureen Raye had longstanding emotional problems, her brother Terrence Raye said. She’d tried to take care of her mother in the past but always found herself overwhelmed. “My mom would always try to believe that she was better,” he said.

Linda Maureen Raye “went behind our backs and convinced my mom that she would be better off being taken care of in a private residence with her,” Terrence Raye said. Later, he said, she told him that she needed the IHSS funds as well as Farrell’s Social Security money.

Terrence Raye said she wouldn’t allow him to visit his mom, or even talk to her, so he called police and adult-protection authorities. They interviewed Farrell in Linda Maureen Raye’s presence, he said, and told him they found nothing wrong.

The last time he saw Farrell was at Riverside Community Hospital, where she had arrived sickened from ulcers that went to the bone.

“My mom was old enough and in bad [enough] health never to recover,” he said.

Beneficiary of Life Insurance Policy Wins

Insurance

Milne Estate v Milne 2014 BCSC 2112 relates to a successful claim for the full value of an insurance policy that the deceased failed to maintain in favour of the beneficiary contrary to a court order.

The Court reviews the principles of contract interpretation from the Athwal v Black Top Cabs 2012 BCCA 107

 

Sherrie and Scott Milne began a 20 year relationship in 1991. Their only child Scottie was born in 1994. In or about 2002, Mr. Milne took out a life insurance policy with a death benefit of $500,000 (the “Policy”), naming Mrs. Milne as the beneficiary. Mr. and Mrs. Milne separated in April 2011. A family law proceeding was commenced.

A term of the Court  Order  obligated Mr. Milne to maintain “the Policy”, with Mrs. Milne as the beneficiary, for as long as he was required to pay child and or spousal support.

[3]             On March 15, 2013, in breach of the Order, Mr. Milne changed the beneficiary of the Policy from Mrs. Milne to Albertina Vicente, his new partner. He died on August 4, 2013. His will, executed on March 22, 2012, provides for a distribution of $50,000 to his parents and $20,000 to Scottie. The balance of his estate is left to Ms. Vicente.

The girlfriend’s defence was basically she was owed the monies for arrears of spousal support .

 

The wife claimed a number of various claims to recover the breach of the contract that he was to keep her ass a paid up beneficiary of a policy of insurance of $500,000, and that he breached that agreement by naming another.

The wife’s claim that he owed her a fiduciary duty that could allow the court to order a constructive trust upon the funds was dismissed.

 

The Court referred to inter alia:

41. The trial judge in Wolfson had relied upon Soulos, as well as the Court of Appeal’s earlier decision in Roberts. v. Martindale, [1998] B.C.J. No 1509 where a good conscience constructive trust was imposed over insurance proceeds in the absence of a fiduciary relationship. In that case the husband had expressly surrendered all rights he might have had in the wife’s property in their separation agreement. The wife owned a life insurance policy which designated the husband as the beneficiary. They separated when she developed terminal breast cancer. After that, she intended for her sister to be the beneficiary of her life insurance in place of the husband and honestly but mistakenly believed she had taken the steps necessary to change the designation. Madam Justice Southin found it would be against good conscience for the husband to keep the insurance proceeds because to do so would be to breach the separation agreement sufficient to “call in aid the doctrine of remedial constructive trust”.

[42]         Roberts made no reference to Soulos and its four conditions. The trial judge in Ladner v. Wolfson, 2010 BCSC 1408 interpreted Roberts as extending the analysis in Soulos:

[59] Although the relationship between former spouses is not a fiduciary one, the decision of the Court of Appeal in Roberts indicates equal importance must be attached to the enforcement of obligations incurred upon the break-up of a marriage. The relationship is, or may be, “trust-like” in the sense that the economic well-being of one former spouse is dependent on the extent to which the other honours those obligations and the dependent spouse may be highly vulnerable to the use and disposition of assets and income over which he or she has no control. Mr. Ladner flagrantly disregarded those important obligations, to the benefit of his estate. That is conduct which the court must condemn and, where possible, deter.

[43]         The Court of Appeal distinguished Roberts, and expressly declined to comment on its appropriateness in light of Soulos (para. 59). I note that more recently in Love v. Love, 2013 SKCA 31the Saskatchewan Court of Appeal went somewhat further observing that Roberts had not been followed by any other appellate level court and commenting on the absence of any reference in Roberts to Soulos as a “difficulty”.

[50]         I do not interpret Wolfson as foreclosing a finding of fiduciary duty as between separated or divorced spouses. The existence of a fiduciary obligation is primarily a question of fact to be determined by examining the specific facts and circumstances of the case (Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574 at p. 648 as cited in Wolfson at para. 45). Mrs. Milne’s submissions however do not persuade me that Wolfson is properly distinguishable. Therefore, I conclude neither Mr. Milne nor Ms. Vicente owed Mrs. Milne a fiduciary obligation to Mrs. Milne and there is no basis upon which to declare a constructive trust over the proceeds of the policy in her favour.

The Claim For Breach of Contract

[53]         There is no disagreement that a consent order is a matter of contract between the parties to the order. S. (M.C.) v. S. (J.H.), 2003 BCCA 252.

The Court embarked on a long detailed analysis of contract law and concluded that the wife was owed $500,000, the value of the contract in damages for breach of contract. Her claim to tie the monies to spousal support was dismissed.

[70]         The principles of contractual interpretation were clearly articulated by the Court of Appeal in Athwal v. Black Top Cabs Ltd., 2012 BCCA 107:

[42] The contractual intent of parties to a written contract is objectively determined by construing the plain and ordinary meaning of the words of the contract in the context of the contract as a whole and the surrounding circumstances (or factual matrix) that existed at the time the contract was made, unless to do so would result in an absurdity. Where the language of a contract is not ambiguous (that is, when viewed objectively it raises only one reasonable interpretation), the words of the written contract are presumed to reflect the parties’ intention. An interpretation that renders one or more of the contract’s provisions ineffective will be rejected.

[43] Extrinsic evidence to explain the meaning of an unambiguous contractual provision is not admissible. Evidence of a party’s subjective intention in executing the contract, or of their understanding of the meaning of the words used in the contract, is not admissible to vary, modify, add to or contradict the express words of the written contract. This is particularly so where a contract contains an “entire agreement” clause. …

[71]         The Court of Appeal in Atwal referred at some length to its earlier decision in Water Street Pictures Ltd. v. Forefront Releasing Inc., 2006 BCCA 459 in describing how and when extrinsic evidence  may be considered to aid the interpretation of an agreement which provided:

[23] Recourse to extrinsic evidence to aid in the interpretation of an agreement is the court’s last resort. It is only when the intentions of the parties cannot be objectively determined from the words they have chosen to employ, such that there is ambiguity, that the law permits consideration to be given to evidence of their conduct in making their agreement and in fulfilling their obligations. …

[24] Thus, the court looks first to the words of the agreement, read as a whole, aided, if necessary, by evidence of the circumstances or what is referred to as the factual matrix existing when the agreement was made. Such evidence is generally restricted to circumstances known to both parties that illuminate the meaning a reasonable person would give to the words employed…

[25] If, after undertaking the first step of the analysis, the text is ambiguous, extrinsic evidence becomes admissible for the purpose of resolving the ambiguity and determining what was actually agreed. But there must be a true ambiguity before recourse can be had to evidence of the way in which the parties conducted themselves. It is well recognized that a court is not to search for ambiguity. …

[27] Where an ambiguity exists, a court in this province (unlike an English court) may consider not only evidence of the parties’ conduct in making their agreement, such as the course of their negotiations, but also the conduct of the parties in performing their agreement. It is, however, clear that evidence of that kind must be approached with caution.

[72]         The Executor argues, based on the wording of the Order, the evidence of Mrs. Milne and the surrounding circumstances that the purpose of the policy was to secure payment for Mr. Milne’s support obligations. The Executor submits it is particularly important to consider the factual matrix here because the Order does not contain multiple terms that allow for the sort of contextual analysis that occurred in Turner.

[73]         Bearing in mind the principles of contractual interpretation set out above, Mrs. Milne’s evidence about her own understanding of the purpose of the life insurance term is extrinsic evidence and not admissible to vary, modify, add to or contradict the express words used in the Order. Other extrinsic evidence in this case would include the perhaps conflicting hearsay evidence of Mr. Milne’s statements to both Ms. Vicente and Mrs. Milne about his work plans and his views about Mrs. Milne’s spousal support claim. Extrinsic evidence as distinct from the factual matrix may only be considered as an aid to interpretation after finding the insurance term ambiguous, meaning it gives rise to more than one reasonable interpretation. The objective of contractual interpretation is to protect the reasonable expectations of the parties, as set out in the language of their agreement (Turner).

[74]         Neither the Executor nor Mrs. Milne suggests however the meaning of the insurance term is ambiguous. In fact, both urge upon me an interpretation they see as arising from the plain meaning of the words. The Executor’s position is the factual matrix supports that interpretation.

[75]         The Executor argues the language of the insurance term clearly provides that Mr. Milne’s obligation to maintain Mrs. Milne as a beneficiary stands or falls with his support obligation(s). I agree, to the extent that the language of the term creates an express temporal link between Mr. Milne’s life insurance obligation and his support obligations. I do not agree however that connecting the duration of his policy obligation to that of his support obligations means that the parties objectively intended to also limit his policy obligation to the amount of those support obligations. I note, as did the Ontario Court of Appeal in Turner, the marked absence of any language providing for the Policy to stand as security in this way. The words used here requiring Mr. Milne to maintain and pay the premiums for a specific policy he already held, for the benefit of the wife, until he was no longer obligated to pay support, stand in sharp contrast to those used in Ladner, where the husband’s obligation was expressly limited to maintaining unspecified life insurance policies in an amount sufficient to cover his indebtedness and his support obligation which was also clearly defined and circumscribed in the agreement. That agreement also contemplated excess proceeds from the life insurance policies, after payment of Mr. Ladner’s outstanding obligation to the wife, in the event of his death, confirming the parties objectively intended for the insurance to provide security to the extent of his support obligation. Here, although the insurance term contemplated Mr. Milne paying spousal support, the Order adjourned Mrs. Milne’s claim, obligating Mr. Milne to pay specified child support only.

[76]           As noted above the Executor has urged me to consider the surrounding circumstances in interpreting the insurance term. To clarify, the factual matrix includes the background facts the parties must be taken to have known and had in mind when they entered into their agreement. They can be considered to clarify the meaning of the words chosen (Glaswegian Enterprises Inc. v. BC Tel Mobility Cellular Inc., [1997] B.C.J. No. 2946 at para. 18). The words of the agreement however must not be overwhelmed by the factual matrix (Swan Gold Mines Ltd. v. Goldbelt Resources Ltd. (1996), 25 B.C.L.R. (3d) 285 (C.A.) at para. 18).

[77]         With that framework in mind, I turn to consider the factual matrix here. According to the Executor, the surrounding circumstances include the parties’ acrimonious relationship, Mr. Milne’s accusations against Mrs. Milne regarding misuse of company funds, and the reality that Mr. Milne’s obligation to pay child support was not long lived, given that Scottie was 18 at the time the Order was granted. I do not regard the parties’ acrimonious relationship and Mr. Milne’s accusations against Mrs. Milne as aiding the interpretative process. One inference to be drawn is that in those circumstances, Mr. Milne would have intended that his insurance obligation under the Order to be as narrow as possible. However the same evidence would also lead to the opposite inference with respect to Mrs. Milne’s intentions. Clearly she would have wanted and negotiated for the benefit of an independent insurance obligation.

[78]         The factual matrix proposed by the Executor does not include some other important circumstances. In the Order the parties agreed each could continue to draw a significant annual salary from Far-Ko pending its sale. Given the agreement to sell the company and its subsidiaries which Mr. Milne was operating, it was apparent when the Order was granted, his source and amount of future income was uncertain and Mrs. Milne would stop receiving a salary. The Order permitted Mr. Milne to either remain with Far-Ko and its subsidiaries or establish another competing business, allowing him considerable flexibility. The surrounding circumstances therefore include financial uncertainty for the parties, although given the appraised value of Far-Ko and the subsidiaries, they would have reasonably expected to receive significant proceeds. Given the length of the parties’ relationship, Mrs. Milne’s extended absence from the work force, her role during the marriage and Mr. Milne’s apparent financial success to date, the potential size of his spousal support obligation was significant. At the same time, his child support obligation was not likely to continue for a great deal longer given that Scottie was 18 at the time of the Order. In all of those circumstances, it makes little sense that the parties would have reasonably intended for the insurance obligation to stand as security for what was only child support at the time of the Order.

[79]         In my view the only reasonable interpretation of the insurance term, based on the words used, and not used, in the context of the other terms, and the surrounding circumstances is that parties clearly intended Mr. Milne’s insurance obligation to be independent and not stand only as security for his outstanding support obligation.

[80]         Accordingly, I award Mrs. Milne damages in the amount equal to the face value of the policy – $500,000 for Mr. Milne’s breach of the Order payable from the estate. s

 

Deceit Can Shift Burden of Proof

Deceit

The BCCA in Roy v Kretshmer 2014 BCCA 429 reviewed the law of deceit and held it can shift the burden of proof.

It was  a vendor purchase case involving an exclusion clause that the plaintiff wished to overcome, and did so partially based on deceit.

The headnote summary of the facts and outcome of the case are as follows, with a more detailed explanation of the tort of deceit to follow it.

The appellant, Dennis Kretschmer, represented 1216393 Ontario Inc. (the “vendor”) in the sale to the respondents of a lot in a project on a lake near Vernon, B.C. in the summer of 2005.  The sale was to complete after a subdivision plan for the project was approved and registered in the Land Title Office.  The contract contained a provision limiting any damages payable by the vendor to the return of the respondents’ deposit.  The lot previously had been sold to other purchasers, the Adams, but in July 2004, the vendor cancelled that transaction.  The Adams advised that they did not agree the vendor had that right and in January 2005 noted on the cheque returning their deposit that it was cashed under protest.  Mr. Kretschmer did not tell the respondents about the Adams’ position.  In January 2006, the subdivision plan was registered, but the respondents were not told that this had occurred and were not told the Adams had filed a certificate of pending litigation against the lot.  Mr. Kretschmer advised them that the vendor was still having difficulty obtaining subdivision approval.  The respondents learned the true facts in January 2007.  

The court ordered specific performance of the Adams’ contract.  The vendor could not complete the sale to the respondents.  

They sued the vendor for breach of contract and Mr. Kretschmer for deceit.  The trial judge found Mr. Kretschmer liable in deceit and dismissed the claim against the vendor based on the limitation of liability provision.  

She awarded damages against Mr. Kretschmer of the difference in the value of the lot from August 2005 to January 2007.  Mr. Kretschmer appealed and the respondents cross appealed.

Held: cross appeal allowed and the case remitted to the Supreme Court to assess damages based on the value of the lot as of the end of January 2007.  The operative time for both the breach of contract and deceit claims was January 2006.  The breach and tort were ongoing.  In January 2007, the respondents were entitled to the lot or its value.  In this case, damages for the vendor’s breach and Mr. Kretschmer are the same.  The conduct of Mr. Kretschmer on behalf of the vendor was egregious and went directly to the contractual obligations of the vendor.  The exclusion clause should not be enforced.

Deceit

 

[47]         In tort, the respondents are entitled to be put into the same position they would have been in had the tort not been committed.  Mr. Kretschmer’s deceit deprived the respondents of the option of requiring the vendor to complete the contract or electing to treat the contract as at an end and suing for damages.

]         The trial judge’s consideration of the law of reliance was correct: the onus shifted to Mr. Kretschmer, who failed to establish non-reliance.  Much was said in argument about the onus of proof of reliance.  At paras. 113‑114, the judge stated:

[113]    In an action for deceit it is well established that the plaintiffs must prove on a balance of probabilities that Mr. Kretschmer made a false representation knowing that it was false; that he intended to deceive the plaintiffs by making the false statement; and that the false statement induced the plaintiffs to act to their detriment.

 

In regard to the last element of the tort, the Court of Appeal concluded in Sidhu Estate at paras. 36 and 42, that the plaintiff is not required to prove the false statements were the sole inducement but only a material factor; and, further, once the intentional nature of the false statements, materiality and causation of the loss are proven, the burden of proof regarding non-reliance shifts to the defendant. Shift burden of proof in these circumstances was confirmed by the Court of Appeal in this action: Roy at paras. 38‑39.

[114]    I have found that Mr. Kretschmer made false representations to the plaintiffs knowing that they were untrue at the time. Further, it is apparent that due to the nature of the false statements concerning the reason for the delay in the completion of the plaintiffs’ contract, Mr. Kretschmer intended to deceive the plaintiffs as to the true state of affairs concerning title to Lot 33.

[59]         Having reviewed both Sidhu Estate v. Bains, [1996] 10 W.W.R. 590, 25 B.C.L.R. (3d) 41 (C.A.),and Roy v. 1216393 Ontario Inc., 2011 BCCA 500, I agree with the trial judge and am satisfied that the burden of proof shifted to Mr. Kretschmer.  Having been told falsely that the subdivision plan had not been registered, the respondents believed that they had no legal basis on which to require completion in January 2006.  The statement was false, it was material and induced the respondents to act to their detriment (that is, not to insist on their right to completion) and loss was occasioned, in that the respondents could do nothing until they learned of the true facts.

Court Determines Rights Between Two Competing Powers of Attorney Spouse vs Daughter

Powers of Attorney Spouse vs Daughter

 

Sommerville v Sommerville 2014 BCSC 1848 involved a court application wherein the deceased gave both his surviving widow and his daughter separate powers of attorney that could be used individually.

The facts are somewhat complicated given that the husband and wife entered into a marriage agreement whereby they would each maintain separate bank account investments and property, together with separate liabilities.

The problem arose later in life when the male deceased, who had always had a substantially higher income, begin to develop dementia with increasing concurrent monthly expenses.

Legal issues  before the court included should his personal health care expenses be paid firstly from his monthly pensions, .and  which attorney should be the sole attorney responsible for managing his financial affairs and insuring his bills are paid in a timely fashion, along with other family type issues and dynamics.

The court examined the provisions primarily of sections 18, 19 and 20 of the new Power of Attorney act, starting with the duties of attorney as set out in section 19.

 

The duties of an attorney

[32]     An attorney acting under a power of attorney is bound by the duties set out in the instrument. In this case, the Power of Attorney allows both attorneys to act separately to do on Craig’s behalf anything that he can lawfully do by an attorney and to transact business with any financial institution or investment dealer. The Power of Attorney is enduring, as it remains exercisable during periods of mental infirmity, and it is not subject to any conditions.

[33]   A power of attorney is a type of agency and the relationship between the attorney and the donor is a fiduciary one. This stems not only from the agent-principal relationship but also from the indicators of a fiduciary relationship described in cases such as Frame v Smith, [1987] 2 SCR 99; Egli v Egli, 2004 BCSC 529, aff d 2005 BCCA 627; McMullen v Webber, 2006 BCSC 1656; Houston v Houston, 2012 BCCA 300.

[34]     In Egli, Garson J (as she then was) discussed the attorney’s duty to use the powers granted only for the benefit of the donor:

[82] It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage {Chapman). The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor (Robertson, Mental Disability and the Law in Canada at 183). I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members.

[37]     While the duties of a committee and an attorney may be similar, I do not agree that the jurisprudence regarding a committee’s duties under the Patients Property Act are applicable to an attorney’s duties under a power of attorney.

[38]     Prior to the enactment of the Power of Attorney Act in 2011, the duties of an attorney were founded at common law and equity. As stated in Egli, an attorney’s duty is to use the power only for the benefit of the donor, which is consistent with the characterization of the relationship as a fiduciary one.

[39]   An attorney’s duties are now enunciated in s. 19 of the Power of Attorney Act. Section 19 (1) essentially codifies the duties of a fiduciary to act honestly and in good faith, to exercise reasonable care, and to account to the donor, within the authority granted in the power of attorney.

Section 19(2) specifies that an attorney making decisions about the donor’s financial affairs must act in the donor’s best interests, taking into account the donor’s “current wishes, known beliefs and values” and any directions contained in the instrument, and s. 19(3) requires an attorney to give priority “to the extent reasonable” to meeting the personal care and health needs of the donor.

[40]     I would not equate the power of an attorney under s. 20 to make or receive gifts with s. 18 of the Patients Property Act. Section 20 is quite specific. If permitted in the power of attorney, the attorney may only make a gift if all three conditions in subsection (1) are met:

  1. the adult will have sufficient property remaining to meet the personal care and health care needs of the adult and the adult’s dependants, and to satisfy the adult’s other legal obligations, if any,
  2. the adult, when capable, made gifts or loans, or charitable gifts, of that nature, and
  3. the total value of all gifts, loans and charitable gifts in a year is equal to or less than a prescribed value ( currently $5000), and is prepared to use funds from his cash investment account for special expenses such as capital improvements

Section 19(4) of the Power of Attorney Act requires an attorney to keep the donor’s property separate from his or her own property. Under s. 19(5), this does not apply to property that is jointly owned by the donor and the attorney as joint tenants, unless the power of attorney states otherwise. While Craig’s pensions, as assets, are his own property, it is not clear to me that the monthly income from those pensions that he directed to be paid into the joint bank account retains the same character. However, whether those funds are deposited into the joint account or into a separate account for Craig is not the primary issue here.

 

Accordingly the court held  that the pension income of the deceased be deposited in joint account with the stepmother/ widow  him  him him him and used for the husband’s expenses, and any surplus could be used by the stepmother for her own expenses, based on their the evidence that this was an arrangement that the husband had in place both pursuant to the marriage contract, and their marital behavior, before he became mentally incapable.

The court further gave directions as to what roles competing  powers of attorney can do in relation to spouses assets.

One In Ten Seniors Suffer From Financial Abuse

Scam

The Vancouver Sun today reported that one in ten seniors will suffer from Elder Financial abuse, often at the hands of their closest loved ones.

 

“While a B.C. man was in hospital having brain surgery, his daughter was busy taking over his bank accounts and his home, thinking he wouldn’t make it.

When he got out, he had to fight to get his assets back, said Richmond MP and minister of state for seniors Alice Wong. In another case, a woman in Ontario was moved to a garage with no heat while a live-in caregiver and her family took over her house and wallet.

“These are sad stories,” Wong said to a small group of people at Multicultural Helping House Society in Vancouver Saturday. “We are facing a growing population of seniors. As that number increases so does the potential for elder abuse.”

Wong was speaking ahead of World Elder Abuse Awareness Day on Sunday, which aims to help people become more aware of what is considered a “hidden issue” that can take many forms, including physical, emotional and financial abuse. Wong announced more than $24,500 in New Horizons for Seniors Program funding to support its project entitled Breaking the Silence of Abuses: Empowering Elders.

Seniors will play a leading role in the project by helping to produce video recordings of testimonials from elderly people who have experienced abuse. They will also compile resources on elder abuse, including financial abuse, for use in awareness sessions that will encourage peer sharing, mentoring and networking.

Wong estimates four to 10 per cent of seniors face some sort of abuse, but others suggest the number is way higher. The problem is that many victims of elder abuse don’t report it. Some may be ashamed that they were bilked by scammers, while others don’t want to get their children in trouble. Some may not even realize what constitutes abuse or neglect.

In many cases, it may be a family member who continually borrows money but does not repay it, a caregiver over-medicating a senior in their care, or a contractor who over-charges for home repairs or maintenance.

“It’s been there for a long time and it’s been hidden,” said Sherry Baker, executive director of the B.C. Association of Community Response Networks. “It’s like domestic violence. What we’re doing right now is raising awareness and helping the communities to realize they have a role in this … not necessarily intervening but at least slowing it down.”

Baker noted there is no way to measure the problem because nobody has kept track or documented the cases, although this has started to be done by police and health authorities. She said while communities aren’t asked to intervene in abuse cases, neighbours who notice something amiss can help just by inviting a senior over for a cup of tea and a chat.

“It’s coming more to the fore because organizations and the government are realizing this is a health issue, a financial issue and sometimes a criminal issue,” she said. “It’s a societal issue that needs to be dealt with.”

Wong said the federal government is working on ways to penalize those who abuse seniors but the hands of police are tied because seniors are not willing to come forward.

The federal government is also working on a plan to work with banks to alert the authorities if they notice anomalies with a senior’s bank account that could be consistent with financial abuse, she added, but this will take some time because it affects privacy laws.

“Financial abuses are growing faster than physical abuses but neither is acceptable,” she said.

The provincial government, meanwhile, earlier this month launched a month-long elder abuse awareness social media campaign with the goal of educating all British Columbians on how to recognize and how to respond and take action against elder abuse and ageism. It also developed a provincial elder abuse prevention strategy in March last year that is supported by nearly $1 million in funding, and provides a foundation for better collaboration and integration to improve prevention, recognition and response services around the province.”

ksinoski@vancouversun.com

 

The “Badges of Fraud”

fraud-2

Fraud is a deception deliberately practiced in order to secure unfair or unlawful gain (adjectival form fraudulent; to defraud is the verb, and the Badges of Fraud are used by the court s as rough gauge as to whether Fraud exists in the situation or not..

As a legal construct, fraud is both a civil wrong (i.e., a fraud victim may sue the fraud perpetrator to avoid the fraud and/or recover monetary compensation) and a criminal wrong (i.e., a fraud perpetrator may be prosecuted and imprisoned by governmental authorities).

Defrauding people or organizations of money or valuables is the usual purpose of fraud, but it sometimes instead involves obtaining benefits without actually depriving anyone of money or valuables, such as obtaining a drivers license by way of false statements made in an application for the same.

There are a number of articles relating to fraud on this website, most of which deal with Fraudulent Transactions or conveyances to try and hinder creditors such as beneficiaries.

 

Undue influence is also a civil form of fraud and yesterdays blog discusses in some detail the fraudulent aspect involved in undue influence

 

The Badges of Fraud

Suspicious circumstances which our courts may characterize as “badges of fraud” include the following:
1) Secrecy surrounding the transaction
2) Cash payments were made
3) No change of possession occurred after the conveyance;
4) Transfer to non-arm’s-length person;
5) The transferor has few remaining assets;
6) The transfer was effected with unusual haste;
7) Grossly inadequate consideration was paid;
8) A benefit was retained by the transferor under the settlement;
9) The transfer was made in the face of potential litigation;
10) Lack of accurate documentation supporting the transaction.

These “badges of fraud” are enumerated in Bank of Montreal v. Vandine (1953) 1 D.L.R. 456;

Prodigy Graphics Group Inc. V. Fitz- Andrews, (2000) O.J. No. 1203 ( Ont. S. C. J.);

and Ferguson v. Lastewka et al ( 1946 ) O. R. 577

 

Seniors-Avoid Joint Bank Accounts

Seniors avoid joint accountsI have seen many seniors financially abused by setting up a joint bank account with a child/caregiver/neighbour/friend  who takes advantage to the point where I advise seniors to avoid their use.

I recently came across a Maclean’s magazine article dated April 4, 2011 entitled “Signing Away Your Savings”, and went on into some details as to how joint bank accounts have recently blossomed in use, and are more and more being used to defraud seniors.

The joint turviror gets the funds irresepctive of what the will says, subject to claims such as resulting trusts.

Investment dealers and bankers generate much of the ongoing problems as easy Business /estate planning.

Inexperienced bank tellers for example make it dangerously easy for their senior clients to add others as joint owners to their bank accounts, wihtout really testing the mental faculties and why and what is going on firstly, and in detail..

In fact many financial advisors go so far as to encourage JTROS, so as to “avoid probate fees and even worse legal fees to probate the estate.

The accounts that I am talking about in this article are those called joint accounts with a right of survivorship  ( JTROS)

Based on the wording of the actual bank form,if one of the account holder dies, the other automatically obtains ownership of the account irrespective of whether the deceased’s will said otherwise.

Not surprisingly in the rougue” surviving joint bank older often keeps such financial details to him or herself and to the exclusion of other siblings for years.

In general I think it is just not a good idea for seniors to mix their personal funds with a personal funds of strangers, relatives or even children.

A limited form of power of attorney specifically spelling out your intentions and limiting the attorney to certain duties and limits of expenditures I think is a far safer estate planning tool than the overused and now frequently litigated joint bank account with right of survivorship

Understanding the Fraudulent Conveyance Act

Understanding the Fraudulent Conveyance Act - Disinherited
A person giving money to another.
A person giving money to another.

The British Columbia  Fraudulent Conveyance Act is a  statute designed to give a remedy to creditors frustrated in collecting their debts by a debtor who has disposed of his/her assets.

The Fraudulent Conveyance act permits  a creditor to impugn or set aside a transfer of property, where that property has been transferred in an effort to defeat the legitimate claims of creditors.

Our law relating to fraudulent conveyances dates back to the English Middle Ages when England became a trading nation commercial laws were developed to resolve the trade disputes. Throughout history  debtors have been tempted to convey their property to friends or family, hoping to avoid their creditors by putting their property out of the reach.

As early as 1571, the Statute of Elizabeth, the first Fraudulent Conveyance Act, was passed. Since that time our courts have developed a large body of case law, which largely supports the claims of “creditors and others” to set aside fraudulent conveyances.

Our law requires a debtor to honour his or her legal obligations first before transferring property to others (usually family or friends) thus attempting to put it out of reach of legal claimants.
In Freeman v. Pope (1870), L.R. 5 Ch. App 538 this principle is stated as follows: “persons must be just before they are generous, and that debts must be paid before gifts can be made”.
What is a Fraudulent Conveyance?
A fraudulent conveyance is a transfer of an interest in property, in circumstances where:
a) the transfer hinders or impairs the rights of a creditor or other claimant to satisfy a claim against the transferor (debtor) of the property; and
b) the transferor intends such a purpose in making the transfer

Burden Of Proof

In an action to set aside a fraudulent conveyance, the plaintiff (creditor) has the burden of proving that the transfer was done with the intention of defrauding “creditors or others”.
Intention is a state of mind and a question of fact which must be proven in court. However because the defendant’s intention not usually directly known, the caselaw permits a plaintiff creditor to rely on circumstantial evidence to raise an inference of fraud which the defendant debtor must then rebut.
The courts have identified a number of suspicious circumstances, known as the “badges of fraud” which may raise this inference of fraud. The more suspicious the circumstances, the stronger the inference of fraudulent intent.
It is not necessary to prove numerous badges of fraud, as a single badge may be sufficient to give rise of an intent to defraud, deceit or delay creditors in the absence of an explanation from the defendant. Re Fancy (1984) 46 O.R. (2d) 153
The courts will examine all of the circumstances surrounding the conveyance of the property to determine if there are any “badges of fraud.”
The Supreme Court of Canada in Koop v. Smith (1915) 51 S.C.R. 355 held that the burden of establishing the bona fides ( good faith) of the transaction in such a situation shifts from a plaintiff (creditor) to the defendant ( debtor), and that care is required in scrutinizing the testimony of the parties to the transaction.
In examining transfers made between near relations under suspicious circumstances, the Supreme Court went on to rule that the principle of res ipsa loquitor applies, i.e. the facts speak for themselves. Thus, the court ruled, in such a situation the defendant must establish the transfer was bona fides by presenting corroborative evidence, independent of the testimony of interested parties.

Badges of Fraud

Suspicious circumstances which our courts may characterize as “badges of fraud” include the following:
1) Secrecy surrounding the transaction
2) Cash payments were made
3) No change of possession occurred after the conveyance;
4) Transfer to non-arm’s-length person;
5) The transferor has few remaining assets;
6) The transfer was effected with unusual haste;
7) Grossly inadequate consideration was paid;
8) A benefit was retained by the transferor under the settlement;
9) The transfer was made in the face of potential litigation;
10) Lack of accurate documentation supporting the transaction.

These “badges of fraud” are enumerated in Bank of Montreal v. Vandine (1953) 1 D.L.R. 456; Prodigy Graphics Group Inc. V. Fitz- Andrews, (2000) O.J. No. 1203 ( Ont. S. C. J.); and Ferguson v. Lastewka et al ( 1946 ) O. R. 577

Legal Or Equitable Claim Necessary

Both the original Statute of Elizabeth and our modern Fraudulent Conveyance Act provide a statutory remedy to “creditors and others” and these words have been broadly interpreted.
Specifically in Hossay v. Newman 22 E. T. R. (2d) 150 (BCCA) our court adopted the reasoning of the Alberta Supreme Court in Dower V. Alberta Public Trustee (1962) 35 D. L.R. (2d) 29. The court found that the words “creditors and others” in the Statute of Elizabeth should be given a broad interpretation, but should only include such persons who have “legal or equitable” claims against the grantor or settler.

In the Hossay decision the plaintiff was an adult son of the deceased. He was effectively disinherited when shortly before his death, the father placed his major assets in joint tenancy with one of the defendants. The result was that the deceased’s assets passed to the defendant by operation of law and did not form part of the testator’s estate.

The plaintiff argued that the transfer of the deceased’s assets into joint tenancy was a fraudulent conveyance made to defeat his claim under the Wills Variation Act. Since a WVA claim can only be maintained against the deceased’s estate, the plaintiff sought to set aside the transfer so as to bring the assets back into the estate of his late father.

The court dismissed the plaintiff’s claim on the basis that he did not have any legal or equitable claim against his father during his lifetime. The son’s claim arose solely on death under the provisions of the Wills Variation Act, and as a result the son did not come within the meaning of the words “creditors or others” under the Fraudulent Conveyance Act.

Presumably it would be otherwise for a claim brought by a spouse. In contrast to a child of a deceased, a spouse likely does have a legal or equitable claim against the other spouse, during his or her lifetime. For example, a spouse might have a an equitable claim of unjust enrichment or constructive trust, or a legal claim under the provisions of the Divorce Act, or under provincial family law.

Creditors Need Not Exist At Time of Conveyance
In Canadian Imperial Bank of Commerce v. Boukalis ( 1987( 34 D.L.R. (4th) 481 at page 487 (BCCA) the court stated “A conveyance can be set aside even if there were no creditors when it was made.”
The transfer may be set aside if the defendants simply foresaw potential creditors who might be defeated by the conveyance. Newlands Sawmills Ltd. v. Bateman 31 B.C.R. 351.
This is especially so where a potential debtor embarks on a risky business venture knowing that there might likely be future creditors should the business fail.

Dishonest Intention Not Required

In order for the Fraudulent Conveyance Act to apply it is not necessary to prove any dishonest intention on the part of the defendant. What is required is simply proof of an intention to move the property out of reach of potential creditors,. Royal Bank of Canada v. Clarke 2009 BCSC 481.

In a judgment released February 2, 2010, Abakhan & Associates Inc. Braydon Investments Ltd 2009 BCCA 521 the Court of Appeal upheld the trial judgment. At trial, the judge had set aside a conveyance as fraudulent in spite of finding that the debtor had no dishonest intent and had acted on professional advice to effect legitimate business purposes. Certainly there were bona fide business reasons for the transfer however nevertheless, once the debtor admitted an ancillary purpose was to shield the assets from potential creditors, the trial judge found the conveyance to be fraudulent.

Similarly in Chan v. Stanwood 2002 BCCA 474, the court upheld a finding of fraudulent conveyance where the defendants, on the advice of professionals, transferred their exigible (easily collectible) assets into shares in holding companies that were not “effectively exigible”. This exchange of exigible assets for preferred shares delayed, hindered, or defaulted the creditors, and the defendants did so by design. That design or purpose constituted the fraudulent intent required by the Act.

Conclusion

There are centuries of jurisprudence relating to fraudulent conveyances. Historically our courts have always interpreted the statute liberally and in favour of creditors. Most recently our courts have ruled there need not be a dishonest intention proven. Even a transfer made with advice for legitimate ends as limiting personal liability, may be set aside when a transfer is also intended to help to frustrate the claims of creditors.

We can expect that more and more “estate planning” type arrangements may be challenged as fraudulent conveyances by disappointed spouses who would otherwise have a substantial Wills Variation Act claim.