Trust Imposed On Insurance Proceeds For Non-Payment of Child

Trust Imposed On Insurance Proceeds For Non-Payment of Child

Telfer v Henry Estate 2013 ONSC 303, involves a situation where the court imposed a constructive trust on the insurance proceeds of the deceased, who had entered into a separation agreement with his former spouse agreeing to pay child maintenance, but failed to do so.

The insurance policy was the security for same.

The separation agreement between the applicant mother and the deceased father provided for child support until their two children ceased to reside with the mother. The deceased was to designate the mother as the beneficiary of $90,000 of proceeds of and insurance from his employer.

The deceased changed employers and in breach of the agreement, named his common-law spouse as the beneficiary of a new insurance policy.

The deceased left a will leaving everything to his common-law wife, who in turn paid no child maintenance for the children support.

The mother succeeded in her application to have a constructive trust imposed upon the insurance proceeds, in lieu of payment of the child maintenance. The estate of the deceased was judgment proof.

The court followed a decision Britton v Britton 1995 Carswell Ont 892, which essentially held that if the insurance proceeds were not made available by the imposition of a constructive trust, it would result in an inconsistent result with equity and good conscience.

Rebutting Presumption of Indefeasibility of Title

Frame v Rai 2012 BCSC 1876 is a good illustration of how the law of unjust enrichment pertains rebutting the presumption of indefeasible title at the land title office. The case involved a multifamily cooperative use of property where the property was registered in the names of 3 family members equally as tenants in common, and one of the parties claimed a greater beneficial ownership.

The deceased and his plaintiff sister, along with his wife decided to purchase a property for the entire family to live in. The sister and her husband contributed much more to purchase the property that did the deceased and his defendant wife, but the property was registered in the names of the four them equally. Both parties live in the house at various times, and pulled together financial resources to pay expenses.

The wife claimed that she was the sole or alternatively two thirds beneficial owner of the property after the death of her husband.

His sister brought a court action for a declaration of equitable one half interest in the property, and that action was allowed.

The court held that the statutory presumption of indefeasibility of title was rebutted by the sister, as there would be unjust enrichment if the title were upheld.

If the state of title were upheld, the wife would be enriched and the sister would suffer a corresponding deprivation.

There was no juristic reason for any enrichment.

The court held that it was the parties intention to own the house in equal shares by the sister on one hand and the deceased and wife on the other, based on an agreement among family members to purchase the home.

The remedy of a remedial constructive trust was an appropriate remedy, and a constructive trust entitled the sister to have her 50% interest registered on title.

THE LAW

On this basis, it is my view that the rejection of the common intention resulting trust in Kerr, as applied in Dhalhval(2012), requires that Skender be read to permit a displacement of the s.23 (2) statutory presumption in cases where unjust enrichment would otherwise result. In the case of resulting trust, all that needs to be established is that there was no gift, and that the funds were not intended by the donor to be a loan. In the case of a constructive trust, evidence of an agreement is considered, albeit in a limited sense. Put another way, these recent cases explain that a party can no longer rely solely on the common intention resulting trust, which was relied upon in DhaliwaL as the basis for rebutting the statutory presumption in cases where individuals enter into joint equity or co-investment ven­tures.
Furthermore, it would appear that the equitable principles set out in Skender are in fact not an exhaustive list, but are subject to adaptation as the doctrinal development of trust principles necessitates. This is a logical conclusion given the recognition in recent years of the presumption of resulting trust as a third equitable principle that can be used to displace the statutory presumption: see Chuang v. Wong. 2012 BCSC 233 (B.C. S.C.) at para 9, citing Bajwa v. Pannu. 2007 BCCA 260(B.C. C.A.); Dhaliwal (2012), at para 40.

If I am wrong in finding that the common intention resulting trust is not discredited as it pertains to the rela­tionship between these parties, and in the related conclusion that Skender must be modified, it does not impact my ultimate conclusion in this case, as I have decided that there was an agreement between Harjinder and Jaswinder that they were contributing to the purchase of the property as co-owners.

While the common intention resulting trust has fallen out of favour, application of the doctrine of unjust enrichment (and the associated monetary award or remedial constructive trust remedy), as clarified in Kerr, has emerged as the appropriate vehicle to use in instances where the operation of the traditional resulting trust would be inadequate to balance the equities between the parties. As Cromwell J. stated in Kerr, “at the heart of the doctrine of unjust enrichment lies the notion of restoring a benefit which justice does not permit one to retain”: at para 31.

Applied to this case, the question is whether the evidence supports displacing the statutory presumption of the discussed above.

The two equitable concepts that could potentially bear on the resolution of this dispute include the common law doctrine of unjust enrichment and the remedial resulting trust (sometimes referred to as a “purchase money re­sulting trust”). In my view, the former is the appropriate route to the applicable remedy in this case given the facts as I have found them and context of the parties’ financial dealings.

The facts of the Dhaliwal case bear some resemblance to the circumstances of the present case, but for one important point. In DhalhvaL the property was first and foremost an investment property; a third party renter provided the funds to pay the mortgage every month and it was possible to determine the post-purchase contributions made by the Olleks.

Whereas here, the facts as I have found them demonstrate that both parties resided at the property at various times, and due to the financial integration of the family unit it is extremely difficult, if not impossible, to tell what portion of the mortgage payments were comprised of rent monies contributed by other family members. The parties’ relationship, even considering the Rai family as a whole, is not akin to the “joint family venture” as described in Kerr. however, the way that the property was used (as an extended family home) and the means through which both parties contributed to the purchase price, as well as the ongoing maintenance of the Surrey Property, leads me to conclude that it would be inappropriate to settle the interests of the parties through the vehicle of the “purchase money resulting trust”. Use of the doctrine of unjust enrichment is supported by the plaintiffs pleadings and evidence surrounding the financial transactions and makes sense in light of the cultural and family milieu that was evidenced at trial.
Unjust Enrichment

135 The requirements for unjust enrichment are well established. To prove unjust enrichment the party claiming unjust enrichment must advance evidence to demonstrate:

i. an enrichment;

ii. a corresponding deprivation; and

iii. the absence of any juristic reason for the enrichment.

(See: Becker v. Pettkus. T19801 2 S.C.R. 834 (S.C.C.))

136 Here, I will consider contributions made to the purchase of the property and its maintenance up to an in­cluding the date that the first mortgage was paid off. I find on the balance of probabilities that the plaintiff contributed $55,321.25 (-66%) towards the purchase price of the Surrey Property, whereas the contribution of defendant and her
late husband amounted to $28,321.25 (-34%). These figures represent the respective initial cash contributions which relate directly to the acquisition of the property. The plaintiffs greater contribution, coupled with

(a) the risk the plaintiff took by using her credit to apply for and be named on the mortgage

(b) my acceptance of the plaintiffs evidence that she and Alex assumed sole responsibility for the mortgage payments for the period of October 1995 to March 2003, and

(c) her contribution to the preservation and maintenance of the property through payments made by her or her husband, Alex Frame, I have no trouble finding that if the state of the title were upheld, the defendant would be enriched, and the plaintiff would suffer a corresponding deprivation.

As to whether there is a juristic reason for the enrichment, I must be satisfied “that there is no reason in law or justice for the defendant’s retention of the benefit conferred by the plaintiff: Kerr at para 40. It is here that the plaintiffs assertion as to an agreement amongst the family members, and in particular as between her and the de­fendants, comes into play.

The plaintiffs position throughout these proceedings was that it was the intention of Jaswinder and Harjinder, prior to the purchase of the Surrey Property, that Harjinder would be a half owner of the property. In light of this agreement, it would be contrary to the legitimate expectations of the parties that Harjinder could now be entitled to the greater share that would result if the presumption of resulting trust were to operate to apportion their respective shares at the time the property was acquired.

I conclude that the statutory presumption of the Land Title Act has been successfully rebutted by the plaintiff, as there would be an unjust enrichment if the title were upheld. The plaintiff is entitled to an equitable 50% interest in the Surrey Property.

As to the issue of the second mortgage, I find that there would be a further unjust enrichment to the defendants if Harjinder’s 50% interest were to be reduced through the repayment of the amount owing.

Appropriate Remedy

I find that the remedial constructive trust is the appropriate remedy in this case as a monetary award would be inappropriate in these circumstances. The plaintiff has demonstrated a causal connection between her contributions and the acquisition, preservation and maintenance of the property (see: Kerr at para 50). This entitles her to have her 50% interest registered on title.

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The Remedial Constructive Trust

1. INTRODUCTION

Constructive trusts have been evolving for more than two centuries. However, it has only been in the last several years that it is now developed to the point where it is almost impossible to predict and define all the circumstances in which its equitable principles might apply .

As Chief Justice McEachern stated only a few years ago in Clarkson v McCrossen Estate (1995) 13 R.F.L. (4th) 237 (BCCA):

“I wish to mention that the law of unjust enrichment is in its early formative stages; it will continue to mature incrementally. The few cases that have been decided cannot be taken as the final word on any of these matters. They point the direction the law is taking, but not the many contours that must be traversed along the way.”

The purpose of this article is to briefly review the development of the law of constructive trusts, and to then focus on three significant recent decisions that reflect where this important area of the law has now reached.

2. WHAT IS A CONSTRUCTIVE TRUST ?

“A constructive trust comes into existence, regardless of any party’s intent, when the law imposes upon a party an obligation to holds specific property for another. The person obligated becomes by force of law a constructive trustee towards the person to whom he owes performance of the obligation.”

Law of Trusts on Canada – Donovan Waters, page 378

Lord Denning in Hussey v Palmer (1972) 3 All E.R. 70 (CA) described a constructive trust as:

“by whatever name it is described, it is a trust imposed by law whenever justice and good conscience require it. It is a liberal process, founded upon large principles of equity, to be applied in cases where the defendant cannot conscientiously keep the property for himself alone, but ought to allow another to have the property or a share in it. It is an equitable remedy where the court can enable an aggrieved party to obtain restitution”.

The principle of “unjust enrichment” lies at the heart of the constructive trust. The principle of “unjust enrichment” has played a significant role in the development of this equitable remedy.

Lord Mansfield in Moses v Macferlan (1760) , 2 Burr. 1005, 97 E.R. 676, stated:

“the gist of this kind of action is the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money”.

One of the earliest situations that a constructive trust was imposed concerned the acquisition of a secret profit by persons who were employed to act for others. Since then, it has been applied to countless different fact patterns, though it is perhaps best known for its application in matrimonial and cohabitation property cases.

3. WHAT IS A REMEDIAL CONSTRUCTIVE TRUST?

A remedial constructive trust is a trust imposed by court order as a remedy for a wrong. The entitlement to that remedy may be a matter of substantive law, but the trust itself is not created by the acts of the parties, or even by the obligation to make restitution, but by the order of the court. As with other court orders, the trust will come into being when the order is pronounced, unless, in an appropriate case, the order is made retroactive or its coming into force is deferred. It may be that in many cases where a remedial constructive trust is imposed, the court will order that it be imposed with effect from the time when the situation arose which gave rise to the unjust enrichment.

There must, of course, be a causal connection between the property in question and the unjust enrichment. See Sorochan v. Sorochan, supra, and Rosenfeldt v. Olson, 1 B.C.L.R. (2d) 108, [1986] 3 W.W.R. 403, 25 D.L.R. (4th) 472 (C.A.).

The remedial constructive trust must be distinguished from the substantive constructive trust which the court declares to have arisen, as a result of the conduct of the parties, and by the force of that conduct alone, at the earlier time when the relevant conduct occurred. If a substantive constructive trust is found to have arisen in that way, then there is no discretion remaining in the court to refuse to declare the existence of the trust.

The ordering of a remedial constructive trust is only one of the remedies which may be ordered as a result of a wrong committed by one person against another that is properly categorized as unjust enrichment. The available remedies include an order to pay money, as damages, and they include other remedies stemming either from legal origins or equity origins, as the circumstances of the case may require.

“It must be emphasized that the constructive trust is remedial in nature. If the court is asked to grant such a remedy and determines that a declaration of constructive trust is warranted, then the proprietary interest awarded pursuant to that remedy will be deemed to have arisen at the time when the unjust enrichment first occurred.” LeClair v Leclair Estate, May 1998, B.C.C.A

4. THE RESURRECTION OF “GOOD CONSCIENCE”

Prior to the Supreme Court of Canada’s decision in Soulos v Korkontzilas (1997) SCR 217, it had become trite law that to support a finding of a constructive trust one had to prove an unjust enrichment comprised of :

1) an enrichment,

2) a corresponding deprivation,

3) no juristic reason for the enrichment

( see inter alia Pettkus v Bekker (1980) 19 RFL (2d) 165, Sorochan v Sorochan (1986) 2 SCR 39 and Peter v Beblow (1993) 1SCR 980.)

The decision in Soulos has radically changed what had been trite law by holding that despite the absence of an enrichment and a corresponding deprivation, the doctrine of constructive trust may still be imposed “to hold persons in different situations to high standards of trust and probity and prevent them from retaining property which in “good conscience” they should not be permitted to retain.”

In Soulos, a realtor Korkontzilas had negotiated a commercial building for his client, but then decided to purchase the property for himself, which he did. He lied to his client that the deal had fallen through, but three years later his client found out what had really occurred.

The client sued Korkontzilas and alleged a breach of fiduciary duty that gave rise to a constructive trust. The problem for the plaintiff however, was that property values had fallen from the time of the purchase, so that the plaintiff could not prove actual damages. At trial, the court found a breach of fiduciary duty, but declined to order a constructive trust because since the property value had fallen, Korkontzilas had not been enriched. The Ontario Court of Appeal reversed this decision, and the Supreme Court upheld the reversal.

McLaughlin J. reviewed the history of the remedy of constructive trust in detail, and found that the principle of “good conscience” has always been at the center of the doctrine of constructive trust, and lies at the very foundation of equitable jurisdiction.

By applying the principle of “good conscience”, the court found that it applies to constructive trusts where the defendant has not obtained a benefit or where the plaintiff has not suffered a loss.

Justice McLaughlin boldly stated that “It thus emerges that a constructive trust may be imposed where good conscience so requires. I conclude that in Canada, under the broad umbrella of good conscience, constructive trusts are recognized both for wrongful acts like fraud and breach of duty of loyalty, as well as to remedy unjust enrichment and corresponding deprivation.”

The court found four conditions that should be present for a constructive trust to be applied based on wrongful conduct, namely:

(1) The defendant must have been under an equitable obligation, that is, an obligation of the type that courts of equity have enforced, in relation to the activities giving rise to the assets in his hands;

(2) The assets in the hands of the defendant must be shown to have resulted from deemed or actual agency activities of the defendant in breach of his equitable obligation to the plaintiff;

(3) The plaintiff must show a legitimate reason for seeking a proprietary remedy, either personal or related to the need to ensure that others like the defendant remain faithful to their duties and;

(4) There must be no factors which would render imposition of a constructive trust unjust in all the circumstances of the case; e.g., the interests of intervening creditors must be protected.

The doctrine of “good conscience” was subsequently applied by the B.C.C.A in the 1998 decision of Roberts v Martindale 21 ETR (4th) 475.

The reasoning of Roberts v Martindale is in my view, a good example of a fact pattern where the application of a remedial constructive trust will increasingly be applied by the courts.

FACTS : The deceased and the defendant were formerly husband and wife. The deceased named the husband as the beneficiary of a group life insurance policy, and later divorced him due to his infidelity. The divorce was marked by great bitterness .The deceased intended that the plaintiff would be the beneficiary of the policy. Both the plaintiff and the deceased believed that steps had been taken to revoke the designation in favour of the husband and appoint the plaintiff as beneficiary in his place. The husband remained beneficiary, and the plaintiff claimed recovery of money paid to the husband .

HELD: The court held that the husband should not be allowed to keep the money because he had surrendered any right he might have had to property of the deceased in their separation agreement. The breach of their separation agreement by the husband was sufficient for the court to invoke the doctrine of remedial constructive trust, and the money was declared to be properly owing to the plaintiff.

Southin J. followed the maxim of equity that will not permit even an act of Parliament to be used as an instrument of fraud, and applied the notion of “good conscience” to impose a remedial constructive trust, because Mr. Martindale had, by the separation agreement surrendered any right he may have had to the property of the deceased.

5. MUTUAL WILLS

Mutual wills are wills made by two or more people, usually a husband and wife which are drawn on virtually identical terms. Frequently, the parties will leave everything to each other, with gifts over to their children, or to strangers.

A constructive trust may be imposed on the survivor of the parties or on his or her personal representative if it can be shown that there was an agreement between the parties not to revoke their wills, and to dispose of their property in a particular way if the survivor has subsequently broken the agreement and made another will. The personal representative of the survivor will then be required to hold the property on trust for the beneficiaries of the mutual wills.

The property that will be the subject of the constructive trust depends upon the agreement between the parties. It may include only the property of the first to fie, or the property of both until the death of the first, and it may include property acquired by the survivor after that date.

A recent example of the courts imposing a constructive trust on a mutual will situation was in the decision of the B.C.C. A. in University of Manitoba v Sanderson (1998) 155 D.L.R. (4th) 40.

FACTS: On 9 July 1970, Michael Daniel Sanderson and his wife, Katherine Velma Sanderson, executed an agreement under seal (the “Agreement”) and mutual wills. The Sandersons had no children.

The Agreement provided:

WITNESSETH that in consideration of the premises the Parties hereto agree as follows

1. That the Party of the First Part will execute a Will of even date in the form of the Will annexed as Schedule I to this Agreement.

2.That the Party of the Second Part will execute a Will of even date in the form of the Will annexed as Schedule II to this Agreement.

3. That during the joint lives of the Parties hereto neither of the said Wills will be revoked or altered without the written consent of both the Parties hereto.

4. That after the death of one of the Parties hereto the said Will of the survivor will not be altered or revoked.

5. That should either of the said Wills be revoked by operation of law the surviving Party hereto will execute a new Will leaving the residue of his or her estate to the University of Manitoba upon the same terms and conditions as are contained in the said Wills.

6. This Agreement shall enure to the benefit of and be binding upon the Parties hereto and their respective personal representatives and assigns.

Clause 1 of the mutual wills provided:

I DECLARE that my wife … [husband …] and I have agreed with one another to execute wills of even date and in similar terms and in consideration thereof we have agreed that such respective wills

shall not hereafter be revoked or altered either during our joint lives or by the survivor after the death of one of us AND I FURTHER DECLARE that the provisions of this my will are made in consideration of such agreement.

The mutual wills further provided that the estate of the first spouse was to be held in trust for the surviving spouse for his or her life, or until remarriage, and the trustees were granted discretion to employ income and capital for the benefit of the surviving spouse. The residue was left to the appellant, the University of Manitoba, in trust to establish a perpetual bursary fund “to assist talented prospective teacher-students who demonstrate ability in scholastic fields of study such as mathematics science foreign languages (including Ukrainian and Polish) worthy research work and in other worthy subjects pertaining to the teaching profession”.

The Sandersons executed codicils to the mutual wills on 20 July 1973. The codicils stated that their domicile was British Columbia and the reference to “teacher-students” was changed to “undergraduate student teachers”. They executed second codicils to the mutual wills on 13 July 1977 which substituted Montreal Trust Company for The Royal Trust Company as the co-executor of the mutual wills. Both the 1973 and 1977 codicils contained the statement: “In all other respects I confirm my said Will”.

On 29 March 1984, Montreal Trust wrote to the Sandersons suggesting a review of their wills. On 21 April 1984, Mr. Sanderson responded by endorsing the letter, “Keep the Will in force please”, and returned it to Montreal Trust.

On 18 July 1985, Mrs. Sanderson died and shortly thereafter Mr. Sanderson made a new will, the provisions of which were inconsistent with the terms and provisions of the mutual wills.

When Mrs. Sanderson died, almost all of her assets were held jointly with Mr. Sanderson. The trial judge found that Mr. Sanderson obtained ownership of all the assets by right of survivorship or “right of transfer”. The assets were transferred into his sole name on 30 August 1985. Montreal Trust renounced its right to probate Mrs. Sanderson’s estate, because “there was no estate to probate” and, as a result, Mrs. Sanderson’s will was never probated.

On 30 August 1985, Mr. Sanderson executed a new will (the “1985 will”), naming Montreal Trust Company of Canada as the sole executor and trustee. In his 1985 will, Mr. Sanderson divided the residue of his estate between the following beneficiaries: a one-quarter share to his sister-in-law, the

defendant, Julia Milne; a one eighth share to each of his nephew, the defendant, Michael Seneshen and the defendant, Victoria Scott; a one/twelfth share to each of the defendants, Jean Andruchuk and Mary Wus, and a one/twelfth share to Peter Seneshen, with the balance to the University on the identical trust to that contained in the mutual wills. Mr. Peter Seneshen’s gift lapsed as he predeceased Mr. Sanderson and the gifts to the beneficiaries were on condition that the beneficiary survive Mr. Sanderson.

On 31 January 1994, Mr. Sanderson died. His estate, which was then made up almost entirely of treasury bills, investment certificates and cash, had a value of $1,733,855.88 as at 21 June 1996.

On the application of Montreal Trust, which was granted administration of the estate, letters probate were issued on 6 February 1995 in relation to the 1985 Will.

The University filed a Caveat on 22 July 1994 which read, in part:

The Caveator is the beneficiary under trust created under the terms of the Mutual Wills of the deceased Michael Daniel Sanderson and his deceased spouse, Katherine Velma Sanderson dated July 9, 1970. The Caveator claims to be entitled to the entire residue of the estate of Michael Daniel Sanderson under the said Mutual Will of July 9, 1970 ….

Montreal Trust declined to bring an application to resolve the conflicting claims of the University and the individual defendants and, as a result, the University commenced an action seeking a declaration that the defendant executor, Montreal Trust, holds all of the assets of the estate of Michael Daniel Sanderson as constructive trustee for the sole benefit of the University.

HELD :

“This is a case in which there was an express agreement made that the mutual wills would not be revoked or altered during the joint lives of the parties to the agreement and that after the death of the first, the will of the survivor would not be altered or revoked. There was an exchange of promises

and Mrs. Sanderson did not revoke her will, although she had the legal right to do so, before her death.

Equity considers it a fraud upon the deceased, who has acted upon and relied upon the mutually binding nature of the agreement, for the survivor to change the will and break the agreement. As the deceased cannot intervene to enforce the obligation, equity will enforce the survivor’s obligation, despite the survivor’s subsequent intentions.”

It is important to remember that just because a husband and wife have simultaneously made mutual wills, giving each to the other a life interest with similar provisions in remainder, is not in itself evidence of an agreement not to revoke the wills. In the absence of a definite agreement to that effect, there is no implied trust precluding the wife from making a fresh will inconsistent with her former will, even though her husband has died and she has taken the benefits conferred by his will. It is only where an agreement has been made, that equity will cause the court to enforce the contract and require the survivor to dispose of the property in a manner consistent with the terms of the will. The survivor will be precluded from making a subsequent will to deal with that property or to dispose of the property in a manner inconsistent with the trusts imposed.

6. CONCLUSION

The court will only intervene where the facts show that the judicious parent , acting in full knowledge of the true facts, would have made a different disposition of the estate among his adult children. Griffin v McCarthy 36 E.T.R. 129

In Chernecki v Vangolen 1997 3 W.W.R. 589 (C.A.), the Court of Appeal found that a will that left $1.16 million dollars equally to two children should not be interfered with, as the will had made adequate provision for each child.

In Cavadini v Mahaffey Estate ( 1995) B.C.A.C. 220 it was held that the law does not require a testator to treat all children equally.

Unpaid Contributions Earns Equitable Interest in Property

Unpaid Contributions Earns Equitable Interest in Property

Many children work literally as family slaves without reward, and then are not recognized in their expected inheritance .

Haigh v Kent  2012 BCSC 1361 is a good example of the application of the law of unjust enrichment in a  long time family venture that went sour.

The actions concern an informal, undocumented family business venture, a campground and beach resort situated on a large acreage.

The Property of approximately 95 acres   is now owned by the defendant  Kent and his son, the defendant Dee Kent.

From 1980 until 2004, the business — the Kent Beach Resort  was operated by Clive Kent and the plaintiff, Randy Haigh.

Over most of that time period, Mr Kent and Mr. Haigh were brothers-in-law, Mr. Kent then being married to Mr. Haigh’s sister, Penny Kent. Their business relationship was terminated unilaterally by Mr. Haigh in 2004, but Mr. Haigh and his wife Darlene continued to live on the property, in an A-frame house originally built as accommodation for the Resort’s manager.

After having helped operate the resort for 24 years, the plaintiff brought action seeking a declaration of beneficial ownership in the property on the basis of an express trust, or alternatively the imposition of a constructive trust as a remedy for unjust enrichment.

The court allowed the claim on the basis that a significant portion of the equity in the property was as a result of contributions made by the plaintiff, which included erecting structures, clearing land and managing cabins in the campground.

Accordingly an award of constructive trust was appropriate and necessary to do justice between the parties.

No value received award of restitutionary damages could hope to capture accurately the value of the plaintiffs contributions to the property. This was particularly because of the lengthy time period in which the plaintiff contribute to the property, the variety of his services, and the lack of records.

Moreover the common expectation between the plaintiff and the defendant was that they would share in the fruits of the resort and this was more consistent with the value survived approach in law.

In valuing the plaintiffs interest, consideration was given to factors including the current value of improvements to the property and the value of use of the one acre lot.

“As discussed in Peter v. Beblow, [1993] 1 S.C.R. 980 (S.C.C.) at para.3, once the right to claim relief for unjust enrichment has been made out:

… a second doctrinal concern arises: the nature of the remedy.

“Unjust enrichment” in equity permitted a number of remedies, depending on the circumstances. One was a payment for services rendered on the basis of quantum meruit or quantum valebat. Another equitable remedy, available traditionally where one person was possessed of legal title to property in which another had an interest, was the constructive trust. While the first remedy to be considered was a monetary award, the Canadian jurisprudence recognized that in some cases it might be insufficient. This may occur, to quote La Forest J. in Lac Minerals Ltd. v. International Corona Resources Ltd., [1989] 2 S.C.R. 574, at p. 678, “if there is reason to grant to the plaintiff the additional rights that flow from recognition of a right of property”. Or to quote Dickson J., as he then was, in Pettkus v. Becker, [1980] 2 S.C.R. 834, at p. 852, where there is a “contribution [to the property] sufficiently substantial and direct as to entitle [the plaintiff] to a portion of the profits realized upon sale of [the property]”. In other words, the remedy of constructive trust arises, where monetary damages are inadequate and where there is a link between the contribution that founds the action and the property in which the constructive trust is claimed.

116     It has been recognized, more recently, that quantification of an award of restitutionary damages is not restricted to the “value received” — the quantum meruit or quantum valebat — but may also be determined, when the circumstances warrant, with respect to the “value survived”, e.g. the value of the property: Kerr v. Baranow, supra, at paras. 55, 70-74.

117     In my view, an award of a constructive trust is appropriate in the present case, and necessary to do justice between the parties. Given the lengthy time period over which Mr. Haigh contributed to the Property, the variety of his services, and the lack of records, no “value received” award of restitutionary damages could hope to capture accurately the value of his contributions. Moreover, the common expectation between Mr. Haigh and Mr. Kent that they would share in the fruits of the Resort, is more consistent with a “value survived approach”. Restitutionary damages might be quantified on a “value survived” basis; but Mr. Haigh has made contributions to the Property that have been so substantial and so direct as to entitle him to a portion of the profits, were the land to be sold. I have found that no transfer of ownership of an acre of the Property was intended or promised by Mr. Kent when he provided Mr. Haigh with the “certificate”, when he told Randy and Christina years ago that there would always be a place for them to live, nor later when he offered to them the use of Frankie’s Point. However, given the present relationship between the parties, a constructive trust appears to be an appropriate means of ensuring that Mr. Kent’s promises, which Mr. Haigh has relied upon, will be kept. However, wholly apart from the consequences of Mr. Kent’s promises, I find that Mr. Haigh’s efforts have earned him an ownership share in the Property.

– See more at: http://www.disinherited.com/blog/twenty-four-years-unpaid-contribution-earns-equitable-interest-real-property-unjust-enrichment#sthash.UGqNm9KZ.dpuf

Fraudulent Conveyance: Defeat of Future Creditor’s Claim

Fraudulent Conveyance: Defeat of Future Creditor's Claim

Mitchell Jenner v Saunders  2012 Carswell Ont 5299 is an Ontario Court of Appeal case that upholds a finding that the sale of a husband and wife’s property was a fraudulent conveyance intended to defeat creditors.

The married couple had purchased a house together but it was registered only in the wife’s name.

The property was subsequently put into joint names as a condition of obtaining a mortgage. After the mortgage proceeds were received the property was transferred back into only the wife’s name.

No consideration was paid by the wife to the husband for the transfer, and when the house was sold, the sale proceeds were put into a joint account.

Prior to the sale of the property, a plaintiff creditor brought action against the husband for unpaid commissions owed and obtained judgement after the sale.

The creditor successfully sued the wife at trial on the basis that the transaction was fraudulent and intended to defeat creditors.

The evidence of the couple was that the impugned transaction was to prevent the husbands’ creditors from having access against the matrimonial home.

The court found that the fact that couple intended to prejudice future creditors was contrary to the Fraudulent Conveyance act of Ontario, which is very similar in its wording to that of British Columbia’s

The appeal was dismissed but for also providing for pre judgement and post judgement interest.

The Court had little difficulty in holding that it was open for the trail judge to find that the intention of the debtor husband and his wife was to defeat existing and future creditors.

disinherited.com opines that the same legal result would likely also occur in British Columbia.

Passing of Accounts Hearing Reveals Executor’s Theft

Passing of Accounts Hearing Reveals Executor's Theft

Passing of Accounts Occur When the Executor Applies To Court to Approve the Estate Accounts- Guardian ordered to repay missing funds.

It presents a very familiar fact pattern to many estate litigants.

The Court followed  Zimmerman v. McMichael Estate (2010), 103 O.R. (3d) 25 (Ont. S.C.J.), in which Strathy J. awarded no compensation for a guardian of property, where significant amounts of money had disappeared from an estate without adequate explanation.

The applicant was the guardian of property for his mother . In Ontario, this is the same as a court appointed committee of a patient in British Columbia under the Patients Property Act of RSBC.

The  guardian of her property passed accounts in 2001 and not again until 2010 shortly after mother’s death.

The total revenue from 2001 to 2010 was $195,776.41 and total disbursements totaled $207,036.44 .

His mother’s investment account had value of $152,055.71 in 2001 and $46,562.91 in 2010 .

The guardian made cash withdrawals from investment account of $122,534.40 between 2001 and 2010, without explanation.

The guardian brought an application to passing of accounts and for his compensation for being guardian.

The guardian’s brother objected  and the  application was  dismissed.

Instead, the guardian was ordered to pay $132,628.33 and repay $12,699 to mother’s estate .

The guardian was not entitled to compensation as the guardian’s conduct was shocking, as he withdrew thousands of dollars from his mother’s estate for his own benefit.

The estate was not complicated.

The guardian adversely affected the estate leaving the  investment account  reduced to fraction of its original size with no explanation.

The Court instead ordered the guardian to personally pay the brother’s  costs of the court application.

Resulting and Constructive Trust Claims Dismissed

Resulting and Constructive Trust Claims Dismissed

Both the plaintiff’s claims of resulting trust and constructive trust( unjust enrichment), were dismissed in Chambers v Chambers 2012 BCSC 88

The facts of Chambers were blogged yesterday, as was the younger brother’s claim for an express trust, also dismissed.

Todays blog centres around the plaintiff’s two other two arguments, that of resulting trust and constructive trust , and why each of those claims also failed.

After analysing all of the three trust claims brought by the plaintiff, the court had no difficulty in finding that the defendant intended to gift the younger brother only 1% of the equity in the house and to be irrevocably bound by that gift.

It was clear that the younger brother was only to have a minimal ownership stake in the house right from the outset, despite the older brother having initially having contemplated putting the property in joint tenancy, or letting the plaintiff claim the home owner grant.

The excerpts from the court with respect to the issues of resulting trust and constructive trust are as follows:

 

Resulting Trust

[29]    Fred argues that the equity in the house should be subject to a resulting trust on the basis of a common intention. The common intention resulting trust is somewhat different from the ordinary resulting trust. Normally a resulting trust arises where the objects of a trust fail to be exhausted or there is a gratuitous transfer that is not proven to be a gift. In these circumstances, the resulting trust operates to return the asset in question to its original owner, as equity presumes bargains rather than gifts.

[30]    The presumption of resulting trust is discussed in the recent Supreme Court of Canada case of Pecore. That case makes it clear that the court will begin with the applicable presumption and then on a balance of probabilities attempt to ascertain the transferor’s actual intention. This traditional type of resulting trust has no application here as Fred is not asking the court to return an asset to him that he transferred to Al.

[31]    Fred argues that the much less common type of resulting trust, the common intention resulting trust, applies. The common intention resulting trust arises where two parties share an intention that a property be jointly owned in light of joint contributions even though the property is held in the name of only one of the parties.

[32]    This trust was discussed in one of the cases submitted by Fred, Opperman v. Andersen,

2009 BCSC 992. However, the jurisprudence in this area had become confusing and

contradictory and the Supreme Court of Canada, in the recent case of Kerr v. Baranow, 2011

SCC 10 [Kerr], stated that the common intention resulting trust is “doctrinally unsound”,

elaborating at para. 25:

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

[33] While the Supreme Court of Canada in Kerr, which is a case involving a common-law relationship, was clear that the common intention resulting trust has no further role to play in domestic cases, arguably it is still applicable in the present case.

[34]    The burden to demonstrate that a common intention existed to share the property rested with Fred. He has not discharged it. It is not enough that Fred says that at one time Al may have considered registering the house 50% in his name. Al’s actions, in discussing the matter with his lawyer and in registering the house 99% in his own name, clearly evidence an intent to do exactly the opposite. If Al had shared a common intention with Fred that the two should be joint 50/50 owners of the house, then he could have easily accomplished this by registering the house 50% in each party’s name.

[35]    This is not a situation where a property was originally registered in the name of one party with an intention to share the property subsequently arising, as is often the case in domestic relationships. Here, Al made an affirmative decision as to what share he would give to Fred. As the Supreme Court of Canada said in an earlier case dealing with common intention resulting trusts, Pettkus v. Becker, [1980] 2 S.C.R. 834; a common intention cannot be attributed to the parties where such an intention was negated by the evidence (at p. 847). Here, on the evidence, no common intention to equally share ownership of the House existed.

Constructive Trust

[36]    Fred argues in the alternative that he is not found to be the beneficiary of an express trust or a resulting trust, that the court should impose a constructive trust on 50% of the equity in the house as Al has been unjustly enriched. In order to succeed in an unjust enrichment claim, Fred would need to prove that Al has been enriched, that he, Fred, has suffered a corresponding deprivation, and that there is no juristic reason for the enrichment and deprivation.

[37]     The Supreme Court of Canada in Kerr said the following with respect to the first stage of the analysis:

The Court has taken a straightforward economic approach to the first two elements -enrichment and corresponding deprivation. Accordingly, other considerations, such as moral and policy questions, are appropriately dealt with at the juristic reason stage of the analysis: see Peter, at p. 990, referring to Pettkus, Sorochan v. Sorochan, [1986] 2 S.C.R. 38, and Peel, affirmed in Garland v. Consumers’ Gas Co., 2004 SCC 25, [2004] 1 S.C.R. 629, at para. 31.

For the first requirement – enrichment – the plaintiff must show that he or she gave something to the defendant which the defendant received and retained. The benefit need not be retained permanently, but there must be a benefit which has enriched the defendant and which can be restored to the plaintiff in specie or by money. Moreover, the benefit must be tangible. It may be positive or negative, the latter in the sense that the benefit conferred on the defendant spares him or her an expense he or she would have had to undertake (Peel, at pp. 788 and 790; Garland, at paras. 31 and 37).

Turning to the second element – a corresponding deprivation – the plaintiffs loss is material only if the defendant has gained a benefit or been enriched (Peel, at pp. 789-90). That is why the second requirement obligates the plaintiff to establish not simply that the defendant has been enriched, but also that the enrichment corresponds to a deprivation which the plaintiff has suffered (Pettkus, at p. 852; Rathwell, at p. 455).

[38]    Fred has not demonstrated either of these requirements. Al has been enriched only in the sense that a property that he bought himself has appreciated, but this appreciation has not come about as a result of any action taken by Fred. On the evidence, Fred has not made any monetary contribution to the maintenance of the house, aside from paying the property tax for a number of years. However, during this time, he also did not have to pay rent. Fred’s argument that by paying property taxes, which amounted to significantly less than normal rent would have been, he was somehow deprived and Al enriched is without merit.

[39]    If the payment of property tax amounted to an enrichment and corresponding deprivation, I would find that there to be a juristic reason. One of the established categories of juristic reason is contractual (Kerr at para. 41). It is clear on the evidence that Fred only paid the taxes as consideration for being allowed to live in the house rent-free. There was a contractual intent between the two brothers, with Fred receiving 1% of the house equity as well as sole occupancy privileges in exchange for paying property taxes.

disinherited.com is of the opinion that this case has been correctly decided and it should perhaps be pointed out that the plaintiff acted on his own behalf without counsel. I think it was simply an example of a somewhat ungrateful sibling reaching too far for something that he was never entitled to in the first place.

Spouse Not a Creditor Under Fraudulent Conveyance Act

Spouse Not A Creditor Under Fraudulent Conveyance Act Unless Separated At Death

Fraudulent Conveyance Act and Spouses

Mawdsley v Meshen 2012 BCCA 91 is a case where  the husband  contested the BC will of his wife under the Wills Variation act of British Columbia.

In particular, he attempted to have various estate planning steps taken by his deceased wife prior to her death, set aside as contrary to the Fraudulent Conveyance Act.

The Supreme Court found as a fact that the estate planning steps were taken with the knowledge of the husband, and were not done to defeat his potential claim

under the Wills Variation act, but rather for other, legitimate estate planning purposes.

The trial judge refused to allow the assets in the trust to become part of the estate and that decision was appealed.

On February 28, 2012 the Court of Appeal upheld the trial judge decision.

The BC  Court of Appeal held that transfers will be set aside under the Fraudulent Conveyance act only if they were made with the intention to defeat creditors, irrespective of the effect of the transaction, which is not in itself determinative.

The intention does not have to be of the fraudulent nature.

The court also considered whether the spouse is a “creditor or other” the same statute, and confirmed that unless the spouses are separated at the time of death, the spouse is not a creditor or other, and thus has no standing to claim under the Fraudulent Conveyance act.

Reduce Financial Abuse – 15 Good Suggestions

reduce Financial abusePart Two in a Series on Financial Abuse

Reduce Financial Abuse

The key to reducing financial abuse is to plan appropriately to avoid it. It is crucial to begin this planning while the elder person is still competent. It is essential to engage the advice of a legal professional with an expertise in that area.

Although there is no foolproof method of avoiding financial abuse, here are a few simple strategies that may reduce the risk. These are in addition to frequent contact and visits with the elder.

Engage a legal professional with expertise in estate planning and in minimizing elder abuse.

Help simplify the vulnerable person’s finances. Set up automatic deposits and bill payments to reduce the need for bank visits or Powers of Attorney.

Be very cautious in granting unlimited enduring Powers of Attorney to others.

Do a full inventory of the vulnerable person’s household belongings and property; a video record and photos will assist. Make multiple copies and keep one outside the home.

Whenever possible, hire a caregiver through a reputable agency.

Conduct a thorough background check; insist on having and checking multiple references.

Before any caregiver is engaged—friend, family, or stranger—agree in writing on the terms of engagement.

The terms should be fair to both sides. Thus, any caregiver should be properly recompensed, whether family or stranger.

An appropriate termination period should be included so that upon the death of the elder, for example, the caregiver is not left homeless and unemployed. A provision for 3 months further pay and lodging may well alleviate his or her fears and ensure the caregiver is fully focused on the elder until the end of the contract.

The caregiver should acknowledge in writing his or her understanding of the vulnerability of the elder and agree not to accept anything more than a token gift from his or her charge.

The contract should provide for mandatory weekly respite care for the caregiver and annual respite care of at least 2 weeks. Respite care is crucial for the mental health of the caregiver, to ensure independent input into the care of the elder and to ensure there can be no complete isolation of the vulnerable person.

The agreement should provide for impromptu visits with no notice.

Keep banking and financial records off the premises.

Provide for the semi-annual review of accounts by designated parties.

Designate “gatekeepers” that may include neighbours, banking staff, family physicians, and legal professionals. Make them aware of the arrangements and give them contact numbers for the family and the Public Guardian and Trustee.

Last, if all else fails, to report financial abuse in British Columbia, visit the Website of the Public Guardian and Trustee. www.trustee.bc.ca

BC Estate Lawyer- What Is Financial Abuse and How to Identify It?

Trevor Todd and Jackson Todd have handled contested estates for over sixty combined years and have experience in handling financial, abuse cases.
What Is Financial Abuse and How to Identify It?

At disinherited.com we frequently encounter estates depleted by financial abuse. Elders are by no means the only victims of this abuse. Less commonly we see the financial abuse of children or disabled adults who are the beneficiaries of trust funds, usually by a trustee in a conflict of interest.

With our aging population however, the potential for elder financial abuse is increasing greatly. This should be no surprise given that the elderly, often savers rather than spenders, apparently control over 70% of the nation’s wealth.Continue reading