Court Costs in Estate Litigation

Court Costs in Estate Litigation

Re Singh Estate 2019 BCSC 1114 reviewed the law of court costs in estate litigation, and held that in this particular case both parties were entitled to full indemnity of costs from the estate of the deceased.

It has long been held that costs are borne by the estate where it was the deceased’s action that necessitated consideration of the validity of a will by the court. Mitchell v Gard (1863) 164 ER 1280 at 1281.

The public policy behind the traditional approach of payment of court costs from the estate is that where a will is ambiguous, and subsequent litigation ensues, which is partially are largely caused by the testator, his or her estate ought to bear the costs of the litigation. Moore v Drummond 2012 BCSC 1702.

In Steernberg v Steernberg 2007 BCSC 953 the court explained the traditional approach as follows:

21. “ In estate cases where the validity of a will or the capacity of the testator to make a will or the meaning of a will is an issue, it is sometimes the case that the costs of all parties are ordered to be paid out of the estate. This is upon the principle that where such an issue must be litigated to remove all doubts, then all interested parties must be joined in are entitled to be heard and should not be out-of-pocket if in the result the litigation does not conclude in their favour. The estate must bear the cost of settling disputes as a cost of administration. The question to be asked in such cases is whether the parties were forced in the litigation by the conduct of the testator or the conduct of the main beneficiaries.”

Jung v HSBC Company 2007 BCSC 1740 at para. 106 summarized the current approach to court costs in estate litigation as follows:

1. The costs of an incidental to a proceeding will follow the event unless the court otherwise orders.

2. If the cause of the litigation originated from the conduct or errors of the testator ( for example, unclear wording or validity of the will) then the costs of all parties will generally be paid from the estate on a full indemnity basis.

3. If there were circumstances which provided reasonable insufficient grounds to have brought the action relating to questions of capacity or allege undue influence or fraud, the court will not normally make an order for costs against the unsuccessful party.

4. In an action under dependent relief legislation ( wills variation) where the proceedings are adversarial in nature and are not brought about by the actions of the testator, costs will follow the event.

5. All costs awards are subject to the court’s discretion and an overriding test of reasonableness.

Where the validity of the will has been called into question, it is the duty of the executor to prove the will in solemn form of law. Fuller v Fuller 2014 BCCA 218 at 43.

However, where a party advances, but fails to prove a claim of undue influence or fraud, that party is responsible for the cost of the entire action. Bates v Finley Estate 2002 BCSC 159 at 119-129.

Punitive Damages in Estate Litigation?

Punitive Damages in Estate Litigation?

It is rare to see a claim advanced in estate litigation for punitive damages, but consideration should perhaps be given to making such a claim where “ malicious, oppressive and high-handed misconduct that offends the court’s sense of decency exists,” as it occasionally does in estate litigation. Hill v. Church of Scientology of Toronto (1995) to SCR 1130, at paragraph 196.

Although an award of punitive damages will only be made in exceptional cases, I have certainly seen fact patterns in estate litigation cases where a defendant has acted in such an offensive manner that it might very well qualify for an award of punitive damages, especially if there has been a breach of fiduciary duty.

McKnight v . Hutchinson 2019 BCSC 944 involved long-running litigation between two former law partners. The McKnight decision found that the conduct of the personal defendant before and after dissolution of the partnership had been so reprehensible, that the court found it hard to envisage how one partner could take such advantage of another, plus the scope of large secret profits withheld could not be overstated.

The court found the conduct so nefarious that an award of $150,000 was made for punitive damages.

The objective of punitive damages is to punish the defendant rather than compensate a plaintiff, whose just compensation will be separately assessed.

Punitive damages straddle the civil law of compensation and criminal punishment.

The objectives of such damages were described in the Church of Scientology of Toronto decision to be “retribution, deterrence, and denunciation.”

The award of punitive damages must be proportionate to blameworthiness of the defendant’s conduct, the degree of vulnerability of the plaintiff, the potential harm directed specifically at the plaintiff and the need for deterrence.

In Huff v Price 25 BCLR (2s) 364, affirmed 76 SLT (4th) 138 BCCA the court gave a substantial punitive damage award in addition to the award for losses experienced by investors due to the breach of fiduciary duty by a chartered accountant and engaged in stock promotion.

There were two defendants and the plaintiffs recovered $150,000 in punitive damages from one defendant, and a further $100,000 from the other defendant.

The court found that there were gross breaches of trust of the plaintiffs funds, the defendant encouraged them to make expenditures they would not otherwise have made, and because no other penalty appears to have resulted from his conduct, or has he sought to explain, nor did he make amends for it, the case is one of which substantial punitive damages are warranted.

BC Contested Estates-Power of Attorney Must Account

Trevor Todd and Jackson Todd have practiced contested estate law for over sixty combined years, including financial abuse by a power of attorney.

This blog is about forcing a power of attorney who subsequently becomes the executor and trustee of an estate to account to the estate for monies handled during the course of acting as power of attorney.

The problem arises in  a common scenario when the power of attorney is the same person as the executor trustee.

The courts have held that there cannot be a true accounting as between the attorney and the estate trustee, as they are one and the same person.

In Brown v. Brown , 2011 BCSC 649 at paragraphs 114 – 116 sets out the following:

114) . In Harris v. Rudolph 2004 OJ No.2754 at paragraph 33 summarize the attorney’s duty to account as follows:

Following the grant of a power of attorney, the attorney has a duty to account for all transactions which he or she undertakes for the grantor. The attorney is the one who has the information. An estate trustee stands in the shoes of the grantor for the enforcement of the duty owed by the attorney as agent to the deceased as principal. There is a duty on the attorney to keep accounts and be ready upon request to produce those accounts. It is an ongoing obligation and should not be considered an imposition on the attorney if he or she has failed in that duty over a long period of time.

Also see Roger Estate v . Leung 2001 0J No. 2171 at paragraph 10.

In Ontario, there is a line of jurisprudence, holding that following the death of the grantor, and were the attorney in the estate trustee are one of the same person, there can be no true accounting as between the attorney in the estate trustee. As a result, courts in Ontario have permitted beneficiaries and others in the circumstances to seek leave as any other person under their rules, to apply to the court for a passing of the attorneys accounts for the period the attorney acted prior to the grantor’s death. De Zorzi Estate v Read 2008 ETR (3d) 318 Ont. S.C.

Trust Re: Land Requires Transfer of Title

Trust Re: Land Requires Transfer of Title | Disinherited Estate Litigation

Mehmal v Mehmal 2018 BCSC 2057 discussed an alleged family agreement that certain siblings held property in trust for other siblings, but because the legal and beneficial title was never divided and no property was ever transferred, the court held that without a transfer of title no trust can result and the presumption ( of resulting trust) is not engaged.

The court held that at some point title has to pass from one party to another and relied upon Fuller v Harper 2010 BCCA 421 in which the BC Court of Appeal referred to Pecore v Pecore (2007) 1 SCR 795 said the presumption arises when entitled the property is in one party’s name, but that party, because he or she is a fiduciary, or gave no value for the property, is under an obligation to return it to the original title over.

Without a transfer of title no trust can result in the presumption is not engaged. This point was expressly made by the BC Court of Appeal in Elsen v Elsen 2011 BCCA 313

Elsen stated at paragraph 19:

“first, and most obviously, the principal as stated by Waters regarding the “transfer”of a legal or equitable interest is literally inapplicable because there was no transfer owned in equity. The properties were received by her as trustee for the beneficiaries-she never owned the beneficial interests and never transfer them.

The court noted that one of the key features of a resulting trust is that the claimant must have provided the property or equitable interest vested in the person bound by the trust ie the beneficiaries. Waters cited Baird v Columbia Trust Company (1915) 22 DLR 150 BCSC.

The court found that on the facts that a none of the siblings behaved as if they had any obligations to the trust. No one returned to the ranch or participated in any way and activities of the ranch once they left home. There were no papers drawn to reflect trust. The court found that it made sense for the siblings would all remove the way to begin on their own, to give up their interests in order to ensure that their mother continued to have a place to live along with the two siblings who remained on the ranch. It was a small sacrifice for them, and ensured that the ranch did not need to be broken up and sold to pay their inheritance. For some of the siblings it was no sacrifice at all.

Rebutting the Presumption of Resulting Trust For Gratuitous Transfers

Rebutting the Presumption of Resulting Trust For Gratuitous Transfers

Rebutting the presumption of a resulting trust for the gratuitous transfer of property was discussed in Wong v Huang 2012 BCSC 975 and Frischnecht v Nowak 2018 BCSC 1430. In both cases the court reviewed the relevant authorities and found that the transfers of property in both cases had rebutted the presumption of a resulting trust.

The presumption of a resulting trust is rebuttable by proof on a balance of probabilities, given that were a transfer of property has been made for no payment, the onus is on the transferee to prove that a gift was intended.

Wong v Huang cited the leading case of Pecore v Pecore 2007 SCC 17 at para. 24. – Only the intention of the transferor is relevant, and intention is determined at the time of the transfer.

Pecore is the leading case on the presumption of resulting trust with respect to gratuitous transfers of property from one individual to another, and the legal decision as to whether the property should be treated as a gift or whether the property is subject to return or repayment as it is held in trust.

Pecore discussed two presumptions namely the presumption of a resulting trust and the presumption of advancement. The court described the nature of these competing presumptions at paragraph 24, and 27 – 28 respectively:

24. The presumption of resulting trust as a rebuttable presumption of law and general rule that applies to gratuitous transfers. When a transfer is challenged the presumption allocates the legal burden of proof. Thus where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended- this is so because equity presumes bargains, not gifts.

27. The presumption of resulting trust is the general rule for gratuitous transfers. However, depending on the nature of the relationship between the transferor of the transferee, the presumption of resulting trust will not arise and there will be a presumption of advancement instead. If the presumption of advancement applies, it will fall on the party challenging the transfer to rebut the presumption of a gift.

28. Historically, the presumption of advancement has been applied in two situations. The first is where at the transfer is a husband and the transfer is his wife ( Hyman v Hyman (1934) 4 DLR 532 (SCC) at para. 538. The second is where the transfer is a father in the transferee as his child, which is at issue in this appeal.

Regardless of which presumption applies, either presumption may be rebutted by evidence on the ordinary civil standard of a balance of probabilities.

Pecore limited the rebuttable presumption of advancement with regard to gratuitous transfers from parent to child and be limited in application to transfers by mothers and fathers to minor children.

In the Wong decision, the transfer was made to the defendant minor child, but the plaintiff was not his mother or father. Thus the presumption of advancement did not apply.

Since the transfer was made without consideration, the presumption of resulting trust applied unless that presumption is rebutted on the balance of probabilities. Therefore the onus of proof was on the minor defendant to prove on a balance of probabilities that the plaintiff’s intention in making the transfer was to complete a gift of a one half interest in the property to the defendant.

It is only the intention of the plaintiff transferor that governs, not the intention or understanding of the transferee or anyone else- Rascal Trucking : Kerr v Baranow 2011 SCC 10.

It is only the transferor’s intention at the time of the transfer that matters. Thus if a transfer later regrets the transfer or changed his mind about his intentions, that does not change the nature of the transaction.

In the Wong decision the plaintiff was an 86-year-old man who transferred a one half interest in his property to his six-year-old great-nephew. At the time of trial the nephew was 12 years old.

The plaintiff and the infant defendant had a close relationship at the time of the transfer of the property, and the plaintiff was estranged from his own children.

The court concluded in Wong that on the balance of probabilities the plaintiff’s intention when he made the transfer six years before the trial date, was to make an unconditional gift to the defendant of the one half interest in the plaintiff’s home.

The court viewed several aspects to the circumstances relating to the transfer, and found that it was not an isolated event, but instead must be viewed in the context of the plaintiffs expressed intentions going back to 2000 when the defendant was born. At that time the plaintiff wrote letters that he signed to transfer to change the ownership of the home to himself of the defendant as co-owners, indicating he would be leaving the remainder of his estate to the defendant as well.

The plaintiff wrote letters indicating that the transfer had been completed, and that the ownership certificate indicated that he and the defendant were co-owners. The plaintiff’s lawyer created a joint tenancy, and not a tenancy in common, with the effect that so long as the joint tenancy was not severed, the entire legal interest in the property would best of the defendant, outside of his will, upon the plaintiff’s death.

In the Frischknecht decision the plaintiff and the defendant were unrelated but had a relationship akin to that of mother and son. The plaintiff signed over her share of the property to the defendant at a time when she was suffering from diminishing mental capacity.

Her biological children who lived in Europe challenged the transfer.

In May 2001, the plaintiff and the defendant executed a co- ownership agreement, which when read by the court, was evidence of an intention by the plaintiff to transfer the property as a gratuitous gift to the defendant.

Despite the plaintiffs diminishing mental capacity, the lawyer who handled the transfer testified that the plaintiff clearly understood what she was doing and wanted to gift her half of the property to the defendant.

The court was impressed with the evidence of the experienced, careful and diligent solicitor, who testified that there were no issues relating to undue influence or mental competency.

The court concluded that the gift was unconditional and that the plaintiff intended to gift her interest in the property without any conditions attached, and specifically without any conditions relating to the repayment of mortgage funds. The plaintiff intended that the property be transferred to the defendant without consideration.

In both cases the court found evidence sufficient to rebut the presumption of resulting trust.

Wills Variation: Second Long Marriage

Wills Variation: Second Long Marriage

Unger v Unger 2017 BCSC 1946 involves a wills variation claim brought by an 80-year-old surviving spouse against the estate of her 82-year-old deceased husband, after a second marriage that lasted 34 years.

The husband’s will left the residue of his estate to his four children equally.

The will had a clause stating that he was not providing for the plaintiff widow as during his lifetime he caused to be transferred to his wife title to 50% of the matrimonial property without any contribution from her to the acquisition or preservation of that property.

The main asset of his estate was 50% of the net sale proceeds from the matrimonial home. His estate was valued at approximately $600,000.

  • The plaintiff received his TFSA of $20,000 after he died.
  • Her expenses were minimal as she lived with her son.
  • She had her own assets of approximately $540,000.

The court reviewed the moral duty that was owed by the husband to the plaintiff and referred to the decision JR v JDM 2016 BCSC 2265 , where the court set out the factors to be considered in assessing the moral claim in a second marriage at paragraph 92:

in assessing the strength of the legal and moral obligations owed by a testator to a second spouse, the court will consider factors such as:

1) The length of the marriage

2) when and how the testator’s assets were acquired;

3) the contribution of the second spouse;

4) how family assets would be divided under the applicable family legislation upon marriage breakdown;

5) financial circumstances of the spouse;

6) the size of the estate; and

7) the magnitude of assets passing to the spouse outside of the estate, in consequence of other pre-death transactions undertaken by the testator.

The court also referred to Wong v Soo 2015 BCSC 174 at paras 73-82.

The court found that the deceased purported rationale for excluding the plaintiff from his will was not valid. The clause suggested that the deceased cause 50% of the matrimonial home to be transferred to the plaintiff without any contribution by her to the acquisition or preservation of the property. The matrimonial home was in fact initially registered in joint tenancy at the time of its purchase in 1981. It was only as a result of the order of a master in the family law action when they briefly separated, that the joint tenancy was severed. Furthermore, although the plaintiff did not financially assist in the payment of the purchase of the home. She did make contributions to the preservation and enhancement of the matrimonial home, and the 30+ years of ownership.

The court awarded the plaintiff 30% of the residue of the estate with the other 70% to be equally distributed between the defendant adult children.

Unsent Text Message Valid Will In Australia

Unsent Text Message Valid Will In Australia

A court in Australia in Nichol v Nichol (2017) QSC 220 determined that a non-sent text message on a mobile phone from the deceased Mark Nichol, leaving everything to his brother and nephew was valid as his last will. The will, excluded Mark’s wife and estranged son.

The phone was found near his body after he committed suicide with the unsent message on his phone reading:

“Dave Nic and Jack keep all that I have house and superannuation, put my ashes in the back garden with Trish Julie will take her stuff only she’s okay gone back to her ex AGAIN , I’m beaten. A bit of cash behind the TV and a bit in the bank cash card pin (_)
MRN 1901162Q

My Will”

The evidence accepted by the court concluded that the name Dave Nic was an abbreviation for his brother’s name and that Jack was his nephew. Trish was Mark’s deceased first wife and Julie one of the parties to the court action was Mark’s wife . The initials and numbers were Mark’s initials and date of birth.

This decision under somewhat similar legislation in Australia that allows defective wills to be ”cured” may well be followed and applied in British Columbia if the necessary requirements of sections 58 and 59 WESA are met.

The application to prove the unsent draft text message as a valid will was opposed by the deceased wife, but the court found that the unsent text message, ending with the words “my will” showed that the man intended it to act as his will.

Expert evidence was presented following a forensic examination of the deceased’s mobile phone and the report confirmed:

1) the text message had not been sent;
2) that its content indicated that it was created on October 10, 2016;
3) that the unsent text message was likely to be saved by someone pressing the back arrow in the message editing views;
4) when the draft message is open for editing, a paperclip symbol is visible, which when pressed, enables the attachment of a picture or other to the message.
5) The report confirmed that there was no other document on the mobile phone that might be relevant to the deceased’s testamentary intention in the days immediately prior to and including October 10, 2016

The Australian court followed a decision Lindsay v . McGrath (2016) 2 Qd R 160 at 55 , a decision of the Queensland Court of Appeal that adopted three conditions for the execution requirements of the will to be dispensed with, namely:

1) Was there a document;

2) did that document purport to embody the testamentary intentions of the relevant deceased;

3) did the evidence satisfy the court that, either, at the time of the subject document being brought into being, or at some later time, the relevant deceased, by some act or words, demonstrated that it was his or her then intention that the subject document should, without more on her or his part operate as his or her will?

The court enumerated several facts that the court found stated the deceased testamentary intentions:

1) The text message says at the bottom that was “my will “

2) the message identifies the house and superannuation which are his principal assets, about which he also says” keep all that I have”

3) he refers to “Julie will take her stuff only she’s okay gone back to her ex AGAIN, I’m beaten “

4) he identifies that he has cash in the bank and provides the pin number

5) he identified where he wanted his ashes placed

The court held that the informal nature of the text did not exclude from being sufficient to represent the deceased’s testamentary intentions. The court referred to another decision in Australia where the deceased had written “my will” on a DVD, had discussed his intentions to suicide of the DVD and then was at pains to define what property he owned. Although very informal, the court accepted that the document purported to dispose of that property after his death, and made a declaration under the Australian legislation section 18 of the Succession act ( Mellino v WIlkins (2013) QSC 74.

The court further held that the suicide of the proposed testator does not raise a presumption against testamentary capacity Re Estate of Hodges (1988) 14 NSWLR 698 at 707 and Melino v Wilkins (2013) QS

What to Look For in Independent Legal Advice

What to Look For in Independent Legal Advice

In the practice of estate litigation one of the most important aspects of each claim is to determine whether or not independent legal advice was provided where the transaction is suspect.

One of the leading decisions on independent legal advice is Gold v. Rosenberg (1997) 3 SCR with the Supreme Court of Canada stated the following at paragraphs 84-86:

“One can explain the necessity for independent legal advice in that case, by noting that Mrs. Bertolo was incapable without such advice of understanding any aspect of the transaction.

I need only quote from the Court of Appeal’s description of her at paragraph 579:

She has no business experience a little formal education. She is not fluent in English and is unable to read and discern such documents as promissory notes, collateral mortgages and financial statements.

Whether or not someone requires independent legal advice will depend on two principal concerns:

Whether they understand what is proposed to them, and whether they are free to decide according to their own will

The first is a function of information and intellect, while the second will depend amongst other things, and whether there is undue influence.

The court upheld the Ontario Court of Appeal decision that found that Mrs. Bertolo could not possibly have understood what she was agreeing to. The Ontario Court of Appeal held that she ought to have had independent legal advice and that she did not get it, first, because the lawyer she met work for the same firm that represented her son and the bank, and second because the nature and consequences of the transaction were not explained to her.”

7 Factors to Look For In Independent Legal Advice

1. The person taking advantage of the wealth transfer is present at the time, the advice is given or the time the documents are signed;

2. Some or all of the instructions of come from the person taking advantage from the transaction;

3. The lawyer does not have a full understanding of the client’s overall asset picture, and is unable to assess her to discuss the extent to which it will impoverish them;

4. The lawyer has any prior professional relationship with the person taking advantage;

5. The lawyer has a past or current personal relationship with the person taking advantage ( for example childhood friend, best friend her employer’s wife, etc.);

6. The lawyer is upon close scrutiny really acting for someone other than the client, or is acting in a joint retainer with the person taking advantage;

7. Any part of the fees are being paid by the person taking advantage under relationship rather than the client himself or herself

Transfer of Property Registered After Death Valid

Transfer of Property Registered After Death Valid

Chung estate v. Chan 1995 BCJ 2195 was a decision of the BC Court of Appeal that held that a transfer of real property from a deceased person to himself and another person as joint tenant, was valid despite the fact it was registered at the land title office after the deceased’s death.

This decision was subsequently followed in the Supreme Court of British Columbia in Plecas v Plecas 2015 BCSC 464 , which stated that the form A transfers were effective as against her, upon execution, and were intended to do so, and the transfers carried with them the right to apply for registration even after death.

In Plecas the plaintiff sought to set aside various transfers from the deceased to her son, that were registered after the death of the deceased.

The court allowed the validity of those transfers.

The Supreme Court of Canada had considered the effect of section 20 of the Land Title act RSBC in the decision Davidson V. Davidson 1946 SCR 115.

In the Davidson case, the defendant was the registered owner of the lands.

He executed and delivered a transfer of the lands. The transfer was neither registered no was an application made to register.

The plaintiff registered judgments against the registered title of the defendant.

The majority of the Supreme Court of Canada held that the instrument was bona fide and validly executed, and was entitled to priority over the judgment creditor under the circumstances.

The court followed the common law rule with respect to the rights of judgment creditors, that stated the execution creditor can only attach that interest which exists in the execution debtor. In Davidson the respondent had disposed of his entire interest before the registration of the judgment, and the judgment could not attached to the lands and questions even though the transfer was registered after death.

In Feinstein fee. Ashford 2005 BC SC 1379, the court considered section 20 of the Land Title act in the context of a joint tenancy.

A joint tenant executed, but did not register a form a transfer, which purported to sever the joint tenancy at Institute instead a tenancy in common.

The petitioner argued that the severance of the joint tenancy was not binding, as it failed to meet the common-law requirement of delivery.

The court rejected that argument, ruling instead that ”the application for reregistration that was executed by the respondent was effective as against himself on the date that it was signed”.

In other words, the application did indeed sever the joint tenancy on the date it was signed, even though it was not registered until after the respondent’s death .

In the decision Mordo v. Nitting 2006 BCSC 1761 the court found that the grantor had done everything necessary to create a valid trust by completing a form a transfer and declaration of trust.

The declaration of trust confirmed that although the executed for me was not registered, the grantor thereafter held legal title as trustee only. The documents were then left with the grantor’s solicitor.
The court found that section 20 of the Land Title act was engaged, rendering the transfer effective against the person making it, even before it was registered.

Rights to Purchase vs. Rights of First Refusal

Rights to Purchase vs. Rights of First Refusal | Disinherited

The distinction between a right to purchase as opposed to a right of first refusal was addressed in the Ontario decision of 2284064 Ontario Inc. v. Shunock 2017 ONSC 7146, which followed the Ontario Court of Appeal decision of 2123201 Ontario Inc. v. Israel Estate 2016 ONCA 641.

Both terms are frequently used in property law, although there is a distinct difference between the two concepts.

The essence of an option to purchase is that forthwith upon the granting of the option, the optionee upon the occurrence of certain events solely within his or her control can compel a conveyance of the property to him or her.

A right of first refusal on the other hand, is an agreement on the part of the owner to allow the right holder the first opportunity to acquire the land should the owner decide to sell.

The jurisprudence establishes that options to purchase create an immediate interest in land, while rights of first refusal do not.

Options to purchase are specifically enforceable, whereas rights of first refusal do not.

Options to purchase are subject to the rule against perpetuities, but rights of first refusal are not.

Options to purchase give the option holder control over the decision to affect a conveyance, while rights of first refusal give the landowner control over the decision to convey.