What is a Discretionary Trust?

What is a Discretionary Trust?

The BC Court of Appeal in Putzki v Saunders 2016 BCCA 344 examined the nature of a family property trust and discussed what is a discretionary trust.

A discretionary trust is commonly used in estate planning often  when dealing with infants, disabled people on a government pension, spendthrifts and mentally challenged people of all sorts. The simple idea is that someone else who is neutral and competent manages the assets/ monies held in the trust for the benefit of the beneficiary, typically by paying the interest and some capital from time to time when necessary.

Underhill and Hayton: Law of Trusts and Trustees, 18th ed. (London: LexisNexis, 2010) at 98, describe the nature of a discretionary trust as follows:

Where a beneficiary has no such absolute current right to direct the trustees to pay him an ascertainable part of the net income or capital he has ‘no interest in possession’, only being interested under a discretionary trust. Typically, this is the case where a beneficiary will receive income only if the trustees positively decide to carry out their duty to distribute income by favouring him rather than another member of the class of potential beneficiaries. There is also the atypical case where a beneficiary must receive the income unless the trustees exercise distributive (or dispositive) powers to divert the income elsewhere … or to withhold it …: the discretion-conferring distributive powers prevent an interest in possession arising (eg where B is a life tenant subject to dispositive powers).
66      A discretionary trust is distinct from a fixed trust. The authors of Underhill and Hayton at 98, describe a fixed trust as follows:
Where a beneficiary has a current fixed entitlement to an ascertainable part of the net income or net capital, if any, of the trust fund after deduction of sums paid by the trustees in the exercise of their administrative powers of management, the beneficiary has a fixed interest which ranks as ‘an interest in possession’ under the trust.
67      Unlike a fixed trust, the beneficiaries of a fully discretionary trust and their entitlements (distinct from the potential beneficiaries and their potential entitlements) cannot be ascertained at the time of settlement. A discretionary trust may also come in a variety of forms. Under an “exhaustive” discretionary trust, the trustee must distribute the whole of the income or capital, or both, but retains the power to choose who among the potential beneficiaries should receive distributions, and in what amount. Under a “non-exhaustive” discretionary trust, the trustee has the added power to choose whether or not to make any distribution at all.

What Is a Trust?

What Is a Trust?

Society of Notaries Public Bc v The Law Society BC 2016 BCSC 1558 provides a definition of what is a trust that has been approved by innumerable courts.

What Is a Trust?

In Waters’ Law of Trusts in Canada (4th ed. Waters, Gillen and Smith, Carswell: Toronto 2012), the authors write the definition of trust emerges from principles in equity:

Another familiar definition, and one that has been cited with judicial approval, is:

A trust is an equitable obligation, binding a person (called a trustee) to deal with property owned by him (called trust property) as a separate fund, distinct from his own private property, for the benefit of persons (called beneficiaries, or, in old cases, cestuis que trust), of whom he may himself be one, and any one of whom may enforce the obligation.

Approved by Romer L.J. in Green v. Russell, [1959] 2 Q.B. 226, [1959] 2 All E.R. 525 (Eng. C.A.) at 226 [Q.B.], by Cohen J. in Re Marshall’s Will Trusts, [1945] Ch.217, [1945] 1 All E.R. 550 at 219 [Ch.], and approved in Canada in several decisions such as Tobin Tractor (1957) Ltd. v. Western Surety Co. (1963), 42 W.W.R. 532, 40 D.L.R. (2d) 231 (Sask. Q.B.) at 542 [W.W.R.]; Zeidler v. Campbell (1988), 88 A.R. 321, 29 E.T.R. 113 (Alta. Q.B.), affirmed (1998), 91 A.R. 394, 53 D.L.R. (4th) 350 (Alta. C.A.); Ford v. Laidlaw Carriers Inc. (1993), 1 E.T.R. (2d) 117 (Ont. Gen.Div.), varied on other grounds (1994), 12 C.C.P.B. 179 (Ont. C.A.), leave to appeal to S.C.C. refused (1995), [1995] S.C.C.A. No. 34, 191 N.R. 400 (note) (S.C.C.); Boulos v. Boulos (1986), 57 Nfld. & P.E.I.R. 181, 24 E.T.R. 56 (Nfld. T.D.); and by both the trial judge and LeDain J. in the Federal Court of Appeal in Guerin v. R. (1981), [1982] 2 F.C. 385 (Fed. T.D.), reversed (1982), [1983] 2 F.C. 656, 143 D.L.R. (3d) 416 (Fed. C.A.), reversed [1984] 2 S.C.R. 335, 20 E.T.R. 6 (S.C.C.); Goreki v. Canada (Attorney General), 2005 CarswellOnt. 3683, [2005] O.T.C. 712 (Ont. S.C.J.) at para. 56, reversed 2006 CarswellOnt. 1745, 265 D.L.R. (4th) 206 (Ont. C.A.); Alessandro v. R., 2007 CarswellNat. 2019, 2007 CarswellNat 6036, [2007] 5 C.T.C. 2172, 2007 D.T.C. 1373 (T.C.C. [General Procedure]) at para. 62; General Motors of Canada Ltd. v. R., 2008 T.C.C. 117, 2008 Carswellnat 3153, 2008 CarswellNat 454 (T.C.C. [General Procedure]), at para. 39, (affirmed 2009 FCA 114, 2009 CarswellNat 880, 2009 CarswellNat 3282 (F.C.A.); VanDenBussche, supra, note 3, at para. 8.

A History of Constructive Trust

A History of Constructive Trust

The BC Court of Appeal in BNSF Railway v Teck Metals Ltd 2016 BCSC 350 the court delivered the following brief summary of the history of constructive trust as an equitable remedy:

Constructive trust. Academic writers seem to agree that this type of trust developed in an ad hoc fashion from the 17th century. D.W.M. Waters, M.K. Gillen and L.D. Smith, the authors of Waters’ Law of Trusts (4th ed., 2012), note that the types of obligations enforced by means of this trust “reflected the whole spectrum of remedies that were available in the equity jurisdiction”, although they were mainly concerned with what we would call fraud (very broadly defined), mistake and fiduciary relationships. (At 480.) Such trusts were invoked, for example, where necessary to preclude employees from retaining secret profits made by abusing their positions; to prevent the Statute of Frauds from being used to effect a fraud; or for ensuring that a stranger who intermeddled with a trust or assisted in a breach of trust would be required to account for any profits so obtained. The authors go on to state:

Effectively … English courts did not seriously examine what the constructive trust as a concept was for, and, without the direction that this inquiry would have given, they fell into describing what the position of a person is like, who is vested with property the benefit of which he is obligated to hold for another. It was like the express trust; there was a trustee and a beneficiary, there was trust property and duties with regard to that property which fell upon the trustee. The name, constructive trust, described the existence of an independent obligation; it neither created that obligation, nor was it itself a remedy. This was the approach taken to the constructive trust and it has survived to the present day in the more traditional common law jurisdictions of the Commonwealth. [At 481.]
25      In the twentieth century, however, courts in the U.K. began to take notice of the American trend, sparked by the publication of the 1937 Restatement on Restitution, towards the recognition of a “new head of restitutionary obligation”. (Waters’, at 484.) Beginning in the 1960s, the English Court of Appeal invoked the constructive trust in new situations to redress unconscionable or inequitable conduct. These cases culminated in Hussey v. Palmer, [1972] 3 All E.R. 744 (C.A.), to which I will return below.
26      In Canada, the development of the remedy of “constructive trust” began when the Supreme Court first turned to it as a proprietary device that could resolve, at least in some cases, the injustice inherent in the common law of matrimonial property. (See, e.g., Pettitt v. Pettitt, [1970] A.C. 777 (H.L.), Gissing v. Gissing, [1971] A.C. 886 (H.L), and the dissenting judgment in Murdoch v. Murdoch, [1975] S.C.R. 423.) Again, I do not propose to embark on an exposition of the voluminous academic and judicial writing on this subject in the 1980s and 1990s. I refer the reader to D.W.M. Waters, “The Constructive Trust in Evolution: Substantive and Remedial”, (1990-91) 10 Est. & Tr. J. 334; Waters’ Law of Trusts, supra, at ch. 11; Maddaugh and McCamus, supra, at §5:200; a case comment by Professor A.J. McClean on Pettkus v. Becker in (1982) 16 U.B.C. L. Rev. 155; M.M. Litman, “The Emergence of Unjust Enrichment as a Cause of Action and a Remedy of Constructive Trust”, (1988) 26 Alta. L. Rev. 407; David M. Paciocco, “The Remedial Constructive Trust: A Principled Basis for Priorities Over Creditors”, (1989) 68 Can. B. Rev. 315; John L. Dewar, “The Development of the Remedial Constructive Trust”, (1982-4) 6 Est. & Tr. Q. 312; Leonard I. Rotman, “Deconstructing the Constructive Trust”, (1999) 37 Alta. L. Rev. 133; Stuart Hoegner, “How Many Rights (or Wrongs) Make a Remedy? Substantive and Unified Constructive Trusts”, (1997) 42 McGill L.J. 437; and more recently, John Greiss, “Causes of Actions Supporting a Constructive Trust”, (2011) 38 Advoc. Q. 249.
27      The process began in earnest when Laskin J. (as he then was) dissented in Murdoch, forsaking “the often unconvincing search for a mythical common intention” to create property rights justifying an in rem remedy to Mrs. Murdoch. His approach was adopted by two others in Rathwell v. Rathwell, [1978] 2 S.C.R. 436. There, Dickson J. (as he then was), with Chief Justice Laskin and Spence J. concurring, reasoned:
The constructive trust, as so envisaged, comprehends the imposition of trust machinery by the court in order to achieve a result consonant with good conscience. As a matter of principle, the court will not allow any man unjustly to appropriate to himself the value earned by the labours of another. That principle is not defeated by the existence of a matrimonial relationship between the parties; but, for the principle to succeed, the facts must display an enrichment, a corresponding deprivation, and the absence of any juristic reason — such as a contract or disposition of law — for the enrichment … [At 455.]
28      Dickson J. also observed that in cases of this kind, the plaintiff must demonstrate a “causal connection” between his or her contributions (whether financial or otherwise) and the acquisition or existence of the disputed assets. That requirement had been met in Rathwell:
Analyzing the facts from the remedial perspective of constructive trust, it is clear that only through the efforts of Mrs. Rathwell was Mr. Rathwell able to acquire the lands in question. Assuming, arguendo, that Mrs. Rathwell had made no capital contribution to the acquisitions, it would be unjust, in all of the circumstances, to allow Mr. Rathwell to retain the benefits of his wife’s labours. His acquisition of legal title was made possible only through “joint effort” and “team work” as he himself testified; he cannot now deny his wife’s beneficial entitlement. [At 461.]
29      Finally, in Pettkus v. Becker, [1980] 2 S.C.R. 834, the minority view became that of the majority and the availability of a constructive trust as a remedy for unjust enrichment was put beyond doubt. I need quote only this paragraph from Dickson J.’s reasons:
The principle of unjust enrichment lies at the heart of the constructive trust. “Unjust enrichment” has played a role in Anglo-American legal writing for centuries. Lord Mansfield, in the case of Moses v. Macferlan put the matter in these words: “… the gist of this kind of action is, that the defendant, upon the circumstances of the case, is obliged by the ties of natural justice and equity to refund the money”. It would be undesirable, and indeed impossible, to attempt to define all the circumstances in which an unjust enrichment might arise …. The great advantage of ancient principles of equity is their flexibility: the judiciary is thus able to shape these malleable principles so as to accommodate the change in needs and mores of society, in order to achieve justice. The constructive trust has proven to be a useful tool in the judicial armory …. [At 847-8.]
(See also Sorochan v. Sorochan, [1986] 2 S.C.R. 38 at 47-50.)

Claim Dismissed For No Standing

Claim Dismissed For No Standing

Re Tomlinson Estate 2016 BCSC 1223 dealt with a nephew contesting his aunt’s will when he was neither a named beneficiary under the will or an intestate heir had his claim dismissed for lack of standing.

Standing is a pre-requisite to advancing claims regarding a will. Standing, in this context, means having a legal interest in the outcome of the action. 

Or in other words, that the legal rights of the person asserting a claim or position will be affected by the result of the proceeding.

 

[23]         In Neumann v. Chudjak Estate, 2001 BCSC 957 (chambers), the deceased left the residue of his estate to the defendants, his neighbours.  The plaintiff was the stepson of the deceased.  The plaintiff made claims in trust.  He also sought a declaration that the deceased’s will was invalid by reason of lack of capacity and undue influence.  The defendants applied under then Rule 18(6) to dismiss the validity claims.

[24]         The court struck the challenges to the will finding the plaintiff had no standing to raise the challenge.  At paras. 8–12 Master Horn wrote: 

[8]        It is agreed that the deceased has no living blood relatives.  Helmut Neumann [the plaintiff], not being a blood relative of the deceased, will not inherit upon an intestacy.  It is not alleged that there is an earlier will under the terms of which the plaintiff Helmut Neumann would have inherited.

[9]        Accordingly, if the will were to be set aside on either of the grounds pleaded, Helmut Neumann will not benefit.  The entire estate will, if he does not succeed in his trust claim, escheat to the Crown.

[10]      The question now raised by the defendant’s application, is whether Helmut Neumann has any standing to contest the validity of the will.

[11]      A plaintiff must, to have standing in an action, be legally interested in the outcome of an issue in the action.  A person is legally interested in the outcome if it will affect him by advancing or curtailing his legal rights.  (See Amon v. Raphael Tuck & Sons Ltd. (1955), [1956] 1 Q.B. 357 (Eng. Q.B.)at pages 381 and 386.)  As Professor Hogg has said, (Constitutional Law of Canada, 4thEdition, s. 56.2)

The question whether a person has “standing” (or locus standi) to bring legal proceedings is a question about whether the person has a sufficient stake in the outcome to invoke the judicial process.  The question of standing focuses on the position of the party seeking to sue, not on the issues that the lawsuit is intended to resolve.

[12]      I take it as a given that no stranger has any standing to contest the validity of a transaction such as a contract, gift or testamentary disposition of property.  In relation to this will, the plaintiff is a stranger.

[25]         In British Columbia (Public Guardian and Trustee) v. Sheaffer, 2015 BCSC 1306, the defendants asserted that an unsigned document dated September 20, 2011, should stand as the deceased’s last will and testament rather than a properly executed will from 1974.  Madam Justice Dardi denied the relief sought, stating at para. 48 that, “Mr. Thurston is not a beneficiary of the Deceased’s estate.  He has no standing to pursue any allegation of wrongful conduct against the PGT with respect to her office’s administration of the Deceased’s estate”.

[26]         The Kamms are not beneficiaries under the will, nor would they inherit upon intestacy.  They are strangers to the will.  Their only interest in the estate is that of a creditor who alleges that the deceased owed them money for services rendered.

Settlement Offers and Court Costs

Settlement Offers and Court Costs

Norris v Burgess 2016 BCSC 1451 deals with settlement offers and court costs, that is how courts adjust cost upwards or downwards either in favour of one party or against the other party depending on the parties conduct and the terms of any formal offers to settle made in accordance with the rules.

Costs are increasingly being awarded against unsuccessful estate litigants on a personal basis and the amount of them has escalated over the years almost like property prices in the lower mainland.

In writing for our Court of Appeal in C.P. v. RBC Life Insurance Company, 2015 BCCA 30, leave to appeal ref’d [2015] S.C.C.A. No. 136, Justice Goepel, in considering a trial award of double costs, sets forth generally the purpose of the costs rules related to settlement offers:

[94]      The underlying purpose of the offer to settle rule was set out in Hartshorne:

[25] An award of double costs is a punitive measure against a litigant for that party’s failure, in all of the circumstances, to have accepted an offer to settle that should have been accepted. Litigants are to be reminded that costs rules are in place “to encourage the early settlement of disputes by rewarding the party who makes a reasonable settlement offer and penalizing the party who declines to accept such an offer” (A.E. v. D.W.J., 2009 BCSC 505, 91 B.C.L.R. (4th) 372 at para. 61, citing MacKenzie v. Brooks, 1999 BCCA 623, Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 (C.A.), Radke v. Parry, 2008 BCSC 1397). In this regard, Mr. Justice Frankel’s comments in Giles are apposite:

[74] The purposes for which costs rules exist must be kept in mind in determining whether appellate intervention is warranted. In addition to indemnifying a successful litigant, those purposes have been described as follows by this Court:

  • “[D]eterring frivolous actions or defences”: Houweling Nurseries Ltd. v. Fisons Western Corp. (1988), 37 B.C.L.R. (2d) 2 at 25 (C.A.), leave ref’d, [1988] 1 S.C.R. ix;
  • “[T]o encourage conduct that reduces the duration and expense of litigation and to discourage conduct that has the opposite effect”: Skidmore v. Blackmore (1995), 2 B.C.L.R. (3d) 201 at para. 28 (C.A.);
  • “[E]ncouraging litigants to settle whenever possible, thus freeing up judicial resources for other cases: Bedwell v. McGill, 2008 BCCA 526, 86 B.C.L.R. (4th) 343 at para. 33;
  • “[T]o have a winnowing function in the litigation process” by “requir[ing] litigants to make a careful assessment of the strength or lack thereof of their cases at the commencement and throughout the course of the litigation”, and by “discourag[ing] the continuance of doubtful cases or defences”: Catalyst Paper Corporation v. Companhia de Navegaçao Norsul, 2009 BCCA 16, 88 B.C.L.R. (4th) 17 at para. 16.

[95]      A plaintiff who rejects a reasonable offer to settle should usually face some sanction in costs. To do otherwise would undermine the importance of certainty and consequences in applying the Rule: Wafler v. Trinh, 2014 BCCA 95 at para. 81. The importance of those principles was emphasized by this Court in A.E. Appeal at para. 41:

[41] This conclusion is consistent with the importance the Legislature has placed on the role of settlement offers in encouraging the determination of disputes in a cost-efficient and expeditious manner. It has placed a premium on certainty of result as a key factor which parties consider in determining whether to make or accept an offer to settle. If the parties know in advance the consequences of their decision to make or accept an offer, whether by way of reward or punishment, they are in a better position to make a reasoned decision. If they think they may be excused from the otherwise punitive effect of a costs rule in relation to an offer to settle, they will be more inclined to take their chances in refusing to accept an offer. If they know they will have to live with the consequences set forth in the Rule, they are more likely to avoid the risk.

[40]         With respect to the first factor in R. 9-1(6), whether the offer ought reasonably to have been accepted, Goepel J.A. in C.P. states:

[97]      Whether an offer to settle is one that ought reasonably have been accepted, is assessed not by reference to the award that was ultimately made, but under the circumstances existing when an offer was open for acceptance: Bailey v. Jane, 2008 BCSC 1372 at para. 24 and Hartshorne at para. 27. This factor is considered from the perspective of the person receiving the offer. It has both a subjective and objective component. The court is entitled to take into account the reasons why a party declined to accept an offer to settle. The court must consider whether those reasons are objectively reasonable.

[41]         I emphasize that R. 9-6(1)(a) uses the word, ought. “Ought” is defined in The Oxford English Dictionary, 2d ed. as follows:

b. In present sense: = Am (is, are) bound or under obligation: you ought to do it = it is your duty to do it; it ought to be done = it is right that it should be done, it is a duty (or some one’s duty) to do it. (The most frequent use throughout. Formerly expressed by the pres. t., OWE v. 5.)

[42]         The use of the word “ought” in R. 9-6(1)(a) evinces a legislative intent that the court may consider whether the offer was one that the offeree should have accepted. Where the offeror is the plaintiff, this wording encourages an offer that falls at the low end of the range of potential trial awards the plaintiff is anticipating. Where the offeror is the defendant, it encourages an offer that falls at the high end of the range of potential trial awards the defendant is anticipating. In short, the word “ought” brings the respective positions of the parties closer, with the object of reaching an agreement and conserving judicial and other resources.

Severance of Court Actions

Severance of Court Actions

Severance of Court actions joined together may occur in civil litigation.

The Public Guardian and Trustee for BC v Johnston 2016 BCSC 1388 has an excellent review of the law as to when the courts will order that court actions be severed from the other and heard separately.

This decision was upheld by the BCCA in 2017 BCCA 59.

In that action there were claims that the will was invalid and alternatively in the same action , that if the will was valid, that it should then be varied as per wills variation provisions.

The application was to sever the two claims from the other and the court ordered that the trial firstly be held on  whether the will is valid, and then after that trial, if necessary, the wills variation claim would be tried.

[67]        Rules 22-5(6) and (7) state:

Separation

(6)        If a joinder of several claims or parties in a proceeding may unduly complicate or delay the trial or hearing of the proceeding or is otherwise inconvenient, the court may order separate trials or hearings or make any other order it considers will further the object of these Supreme Court Civil Rules.

Separating counterclaim or third party claims

(7)        If a counterclaim or a third party proceeding ought to be disposed of by a separate proceeding, the court may so order.

[68]        The key factors engaged in a general sense on an application to sever were canvassed in Schaper v. Sears Canada, 2000 BCSC 1575 (CanLII) [Schaper] at para. 19:

  1. …the party making the request must show that hearing the claims together would unduly complicate, delay the hearing, or otherwise be inconvenient. If a party applying does not meet this threshold, the court need not go further in any analysis and the application should be dismissed.
  2. Have the actions of any party in the proceeding been unreasonable and have they contributed to the complication, the delay, or the inconvenience alleged by the party applying? If this found, that would strengthen the argument to sever.
  3. Are the issues between the plaintiff and defendant and the issues between the defendant and the third party sufficiently distinct so as to allow them to be tried separately? If so, that strengthens the argument to sever off third party proceeding.
  4. Is the relief claimed by, or the potential obligation of, any party best determined by hearing the evidence of all parties at one hearing? If so, that weakens an application to sever.
  5. Does the prejudice to the party applying, prejudice based on undue complication, delay or inconvenience, outweigh any benefit of matters being heard together, or outweigh any considerations related to the overall objective of the rules to ensure a just, speedy and inexpensive determination of every proceeding on its merits, including the avoidance of a multiplicity of proceedings for the benefits of litigants and having concern to congestion in the courts generally?

[69]        Guidelines that focused attention more keenly on the efficacy of the trial process were helpfully laid out in O’Mara v. Son, Kim et al., 2007 BCSC 871 (CanLII) [O’Mara] at para. 23:

  1. whether the order sought will create a saving in pre-trial procedures;
  2. whether there will be a real reduction in the number of trial days taken up by the trial being heard at the same trial;
  3. whether a party may be seriously inconvenienced by being required to attend a trial in which the party may have a marginal interest;
  4. whether there will be a real saving in expert’s time and witness fees;
  5. whether one of the actions is at a more advanced stage than the other;
  6. whether the order sought will result in delay of the trial of any one of the actions and, if so, whether any prejudice which a party might suffer as a result of that delay outweighs the potential benefits which a consolidated trial might otherwise have;
  7. the possibility of inconsistent findings and common issues resulting from separate trials.

[70]        Severance may well be appropriate where the determination of one issue will render another one moot: Lawrence v. ICBC, 2001 BCSC 1530 (CanLII) [Lawrence].

[71]        The judicial discretion to sever trials or hearings is to be exercised sparingly: Morrison‑Knudsen Co. v. British Columbia Hydro & Power Authority, 1972 Carswell B.C. 62, 24 D.L.R. (3d) 579 (S.C.); Lawrence at para. 43. The test for severance is not applied in a vacuum; it is to be considered against the backdrop of the nature of the particular case at hand: Wirtz v. Constantini, 1982 CanLII 282 (BC SC), 137 D.L.R. (3d) 393, 1982 CarswellBC 588 (S.C.).  Because the determination involves an individualized assessment of the unique case before the Court, there is no closed list of uniformly applied considerations that inform the exercise of the Court’s discretion.

Court Pleadings

Court Pleadings

Court pleadings must briefly limit the issues of fact and law with certain clarity so as to give the opposing party sufficient notice of the case to be met at trial.

The law relating to pleadings was reviewed in the Public Guardian and Trustee BC v Johnston 2016 BCSC 1388 in an application to strike out the combined pleadings of the plaintiff who had claimed in the same court action that  the will was invalid, and alternatively if it was invalid, then the two claims should be heard separately.

The court ordered that the validity of the will be determined before the wills variation action.

[39]        The applicants rely on Rule 9–5(1) of the SCCR. It provides that, at any stage of the proceeding, the Court may order that the whole or any part of the pleading or other document be struck or amended on the ground that:

a)            it discloses no reasonable claim or defence, as the case may be;

b)            it is unnecessary, scandalous, frivolous or vexatious;

c)            it may prejudice, embarrass or delay the fair trial of the proceeding; or

d)            it is otherwise an abuse of the process of the court.

[40]        Where one or more of the grounds enumerated in Rule 9-5(1) are made out, the Court may pronounce judgment or order that the proceeding be stayed or dismissed, and that the costs of the application be paid as special costs.

[41]        The raison d’être of Rule 9-5(1) is as a mechanism to enforce the rules of pleadings: Doyle Construction Co. v. Carling O’Keefe Breweries of Canada Ltd., 1988 CanLII 2843 (BC CA), [1988] B.C.J. No. 831, 27 B.C.L.R (2d) 81 (C.A.) [Doyle].

[42]        The paramount function of pleadings is to define the issues of fact and law with clarity and precision, in order to give the opposing party fair notice of the case to be met at trial.  Equally important is that by defining the essential contours of the case, pleadings facilitate useful pretrial case management, establish the parameters of pretrial discovery and disclosure, and determine the necessity and scope of expert opinions: Keene v. British Columbia (Ministry of Children and Family Development) & Others, 2003 BCSC 1544 (CanLII); Sahyoun v. Ho, 2013 BCSC 1143 (CanLII) [Sahyoun].

[43]        Pleadings are not a vehicle to outline a detailed narrative of the facts and events that may have bearing upon the case.  Evidence is not to be included: Sahyoun at para. 29; Rule 3-7(1).  Rather, pleadings must be summary in nature, setting out a concise and orderly statement of the material facts that give rise to the claim (or counterclaim), establish a defence, or relate to matters raised by the claim: Doerksen v. First Open Heart Society of British Columbia, 2010 BCSC 1291 (CanLII).

[44]        Material facts are the facts that are essential to formulate each cause of action or defence; no averment crucial to success should be omitted: Pyke v. Price Waterhouse Ltd. , 40 C.P.C. (3d) 7, 1995 CarswellBC 907 (S.C.); Delaney & Friends Cartoon Productions Ltd. v. Radical Entertainment Inc. et al, 2005 BCSC 371 (CanLII); Skybridge Investments Ltd. v. Metro Motors Ltd., 2006 BCCA 500 (CanLII); Young v. Borzoni et al, 2007 BCCA 16 (CanLII) at para. 20.

[45]        It is the expectation that material facts will be stated succinctly and with precision, and also be organized in a way that informs the Court of the issues of fact and law it is being called upon to decide: Homalko Indian Band v. British Columbia, [1998] B.C.J. No. 2703, 25 C.P.C. (4th) 107 (S.C.); Glenayre Manufacturing v. Pilot Pacific Properties, et al, 2003 BCSC 303 (CanLII).

[46]         Particulars and material facts are different in their character and purpose.  Broadly speaking, particulars are intended to limit the generality of the pleadings and the issues to be tried; enable the other side to properly prepare for trial; tie the hands of the party supplying the particulars; and inform the opposing party what the pleader intends to prove, as distinct from the mode in which the case is to be proved: Cansulex Ltd. v. Perry, 1982 CarswellBC 836 (C.A.).  They should follow the material facts and be identified as such.  Although particulars must supply sufficient detail of the case to be met, they are not to include the evidence that is  anticipated will be adduced at trial to prove the pleaded facts.  

[47]        The distinctions between evidence and material facts, and between evidence and particulars can be difficult to draw in practice.  Despite the challenges, the integrity of those lines must be maintained as stringently as is reasonably possible.

[48]        Where a party pleads a legal conclusion such as, for example, the existence of a duty of care or of a fiduciary duty, sufficient material facts must be pleaded to support that conclusion: Ferstay v. Dywidag Systems International, 2008 BCSC 793 (CanLII); Rule 3‑7(9).

[49]        Where, as in the case at hand, there are allegations of fraud, breach of trust, undue influence and misrepresentation, inclusion of full particulars, including the dates and items as they are known at the time of the pleading, are mandatory: Rule 3‑7(18).

[50]        Rule 9‑5(2) confirms that no evidence is admissible on an application brought to strike a pleading on the ground that it does not disclose a reasonable claim or defence.  The facts are to be taken as pleaded.  Evidence is admissible, however, in relation to the other grounds.

[51]        In Citizens for Foreign Aid Reform Inc. v. Canadian Jewish Congress, 1999 CanLII 5860 (BC SC), 36 C.P.C. (4th) 266, 1999 CarswellBC 2111 (S.C.), Romilly J. provided an overview of the key principles that inform the analysis of whether a pleading ought to be struck under the predecessor to sub-rules 9-5(1)(b) and (c) at para. 47:

[47]      Irrelevancy and embarrassment are both established when pleadings are so confusing that it is difficult to understand what is being pleaded: Gittings v. Caneco Audio-Publishers Inc. (1987), 1987 CanLII 2561 (BC SC), 17 B.C.L.R. (2d) 38 (B.C.S.C.). An “embarrassing” and “scandalous” pleading is one that is so irrelevant that it will involve the parties in useless expense and will prejudice the trial of the action by involving them in a dispute apart from the issues: Keddie v. Dumas Hotels Ltd. (1985), 1985 CanLII 417 (BC CA), 62 B.C.L.R. 145 at 147 (B.C.C.A.).  An allegation which is scandalous will not be struck if it is relevant to the proceedings.  It will only be struck if irrelevant as well as scandalous: College of Dental Surgeons of B.C. v. Cleland, (1968), 66 W.W.R. 499 (B.C.C.A.).  A pleading is “unnecessary” or “vexatious” if it does not go to establishing the plaintiff’s cause of action or does not advance any claim known in law: Strauts v. Harrigan, [1992] B.C.J. No. 86 (Q.L.) (B.C.S.C.).  A pleading that is superfluous will not be struck out if it is not necessarily unnecessary or otherwise objectionable: Lutz v. Canadian Puget Sound Lumber and Timber Co. (1920), 28 B.C.R 39 (C.A.).  A pleading is “frivolous” if it is obviously unsustainable, not in the sense that it lacks an evidentiary basis, but because of the doctrine of estoppel: Chrisgian v. B.C. Rail Ltd. et al. (6 July 1992), Prince George Registry 20714 (B.C.S.C.).

[52]        A pleading may be embarrassing or scandalous within the contemplation of the Rule where it: does not state the real issues in an intelligible form; is overly prolix; includes irrelevant facts; is calculated to confuse the opposing party and make it difficult, and perhaps impossible, to answer; or contains arguments or evidence: Kuhn v. American Credit Indemnity Co., [1992] B.C.J. No. 953 (S.C.); McNutt v. A.G. Canada et al., 2004 BCSC 1113 (CanLII) at para. 41; B.C./Yukon Association of Drug War Survivors v. Abbotsford (City), 2014 BCSC 1817 (CanLII) at paras. 93-94; Spillane v. United Parcel Service Canada Ltd. et al, 2006 BCSC 687 (CanLII) at para. 22; Budgell v. British Columbia, 2007 BCSC 991 (CanLII) at para. 20.

[53]        That being said, so long as the pleadings do not confuse the opposing party or make it difficult for that party to understand the case that must be met, sheer verbosity does not ordinarily provide sufficient justification for striking a claim: Doyle at para. 4; 347202 B.C. Ltd. v. Canadian Imperial Bank of Commerce, [1995] B.C.J. No. 449 (S.C.); Stanley v. KCL West Holdings Inc. et al, 2004 BCSC 1555 (CanLII).

[54]        A crucial consideration in determining whether to strike a pleading under Rule 9‑5(1)(a) is whether it can be preserved by amendment: International Taoist Church Canada v. Ching Chung Taoist Association of Hong Kong Limited, 2011 BCCA 149 (CanLII).  The prospect of rectifying deficient pleadings by way of amendment is also a factor in considering whether the pleading ought to be struck on the other grounds: Ahmed v. Assu, 2014 BCSC 1768 (CanLII); Willow v. Chong, 2013 BCSC 1083 (CanLII) at para. 23.

Standing In Public Interest Concerns

Standing In Public Interest Concerns

The issue of public interest concerns standing, being the capacity through proper connection  to bring a court action, was canvassed in Trial Lawyers of BC v BC Attorney general 2016 BCSC 1391 by Hinkson CJBC:

[8] The defendants assert that the plaintiff  ( Trial Lawyers)  lacks standing to bring its challenge either as a private interest litigant or on public interest grounds. The plaintiff does not assert a private interest standing, instead asserting that I should exercise my discretion to grant it public interest standing.
[9] Ordinarily, a plaintiff with private interest standing is given preference over a plaintiff who asserts public interest standing. However, in some circumstances, it may be appropriate for the Court to grant public interest standing to a plaintiff so that an issue can be adjudicated upon.

In Canada (Attorney General) v. Downtown Eastside Sex Workers United Against Violence Society, 2012 SCC 45 at para. 37 [DTESW], Mr. Justice Cromwell, for the Court, set out the following three factors for courts to consider in determining whether to grant public interest standing to a party:

a) Whether a serious justiciable issue has been raised;

b) Whether the party has a real stake or genuine interest in that issue;

c) Whether the proposed suit is a reasonable and effective way to bring the issue before the courts.
[10] In Vilardell v. Dunham, 2012 BCSC 748 [Vilardell], Mr. Justice McEwan struck down the hearing fees charged by the Province of British Columbia (the “Province in Supreme Court civil trials as unconstitutional in that they “materially hindered” access to the courts. The Province appealed, and in reasons indexed at 2013 BCCA65 the British Columbia Court of Appeal allowed the appeal in part, and set aside the decision of McEwan J. as it related to persons other than Ms. Vilardell.

[15] Ehrcke J. concluded that the plaintiff’s claim should not be struck out under Rule 19(24)(a) simply on the basis that it was unlikely to succeed. He ruled, however, that the plaintiff organization should not be granted either public or private interest standing to pursue their challenge.
His decision was reversed by the British Columbia Court of Appeal, who granted public interest standing to both the society whose objects included improving conditions for female sex workers in the Downtown Eastside of Vancouver and to one of the former sex workers. The judgment of the British Columbia Court of Appeal is indexed at 2010 BCCA 439.

Unconscionable

Unconscionable

In the course of a complex almost month long matrimonial trial, the argument was raised with respect to the marriage agreement that it was unconscionable in its terms.

The court concluded that it was not unconscionable.

S. ( H.S.) v D. ( S.H.) 2016 BCSC 1300 discussed the law re unconscionable contracts:

178 The doctrine of unconscionability, which was developed in the courts of equity in England, is intended to provide relief to parties, in the form of rescission, from bargains that are “contrary to good conscience”: Gindis v. Brisbourne, 2000 BCCA 73 at para. 19. In Canada, the remedy has been imposed in a broad spectrum of relationships and circumstances.

179 Although the precise formulation of the judicial test has varied over the years, the appellate authorities in this province establish that the requisite elements that ground a claim in unconscionability are: (i) proof of inequality in the position of the parties arising out of ignorance, need, or distress of the weaker, which leave him or her in the power of the stronger; and (ii) proof of substantial unfairness in the bargain obtained by the stronger party. If these requirements are proven, a presumption of fraud is established. It then becomes the obligation of the stronger party to rebut the presumption by showing that the bargain was fair, just, and reasonable: Morrison v. Coast Finance Ltd., [1965] B.C.J. No. 178 (C.A.); Klassen v. Klassen, 2001 BCCA 445 at paras. 56-57; Do v. Nichols, 2016 BCCA 128 at para. 26.

180 Newbury J.A., at para. 22 of Gindis, expressed the view that the question of who bears the onus of proof was not entirely clear, but ultimately found it unnecessary to decide the matter. The Court of Appeal in Do recently clarified that the onus lies on the party seeking to establish that a bargain was unconscionable: at para. 26.

181 Crucially, the Court’s inquiry under unconscionability is limited to the circumstances existing at the time of the execution of the agreement: Gindis at para. 32. An agreement cannot become unconscionable on account of its consequences over time.

182 The authorities establish that matrimonial negotiations occur in a unique environment and, therefore, unconscionability in the matrimonial context is not equivalent to that in a commercial context: Toscano v. Toscano, 2015 ONSC 487at para. 64. In Miglin v. Miglin, 2003 SCC 24and subsequently in Rick v. Brandsema, 2009 SCC 10, the Supreme Court of Canada reformulated the common law test for unconscionability to reflect the uniqueness of the negotiating environment for matrimonial bargains. Judicial intervention is justified where agreements are found to be “procedurally and substantively flawed”. The Court in Rick stated:

[40] There is no doubt that separation agreements are negotiated between spouses on the fault line of one of the most emotionally charged junctures of their relationship — when it unravels. The majority in Miglin concluded that because of the uniqueness of this negotiating environment, bargains entered into between spouses on marriage breakdown are not, and should not be seen to be, subject to the same rules as those applicable to commercial contracts negotiated between two parties of equal strength:

The test should ultimately recognize the particular ways in which separation agreements generally and spousal support arrangements specifically are vulnerable to a risk of inequitable sharing at the time of negotiation and in the future…
Negotiations in the family law context of separation or divorce are conducted in a unique environment … [at] a time of intense personal and emotional turmoil, in which one or both of the parties may be particularly vulnerable. [Paras. 73-74]

183 The Court went on to summarize the animating principles:

[44] Where, therefore, “there were any circumstances of oppression, pressure, or other vulnerabilities”, and if one party’s exploitation of such vulnerabilities during the negotiation process resulted in a separation agreement that deviated substantially from the legislation, the Court in Miglin concluded that the agreement need not be enforced (paras. 81-83).

184 Notably, the Court in Rick emphasized the importance of respecting “the parties’ right to decide for themselves what constitutes for them, in the circumstances of their marriage, mutually acceptable equitable sharing”: Rick at para. 45, Miglin at para. 73. The Court endorsed the notion that parties should generally be free to decide for themselves what bargains they are prepared to make. The Court underscored that this contractual autonomy “depends on the integrity of the bargaining process”: Rick at para. 46.

185 I next address whether the jurisprudence draws any distinction between the enforceability of pre-nuptial and separation agreements. The FRA defines “marriage agreements” in s. 61. Both pre-nuptial and separation agreements fall within the definition of marriage agreements under s. 61. Notably, however, both Miglin and Rick addressed family law agreements in the context of separation and divorce.

186 The distinction in the nature and effect of pre-nuptial and separation agreements was addressed by the Supreme Court of Canada in Hartshorne v. Hartshorne, 2004 SCC 22. The majority recognized the distinction but rejected the notion of establishing a “hard and fast” rule that applies a different standard of review to pre-nuptial and separation agreements. The Court stated as follows:

[39] This Court has not established, and in my opinion should not establish, a “hard and fast” rule regarding the deference to be afforded to marriage agreements as compared to separation agreements. In some cases, marriage agreements ought to be accorded a greater degree of deference than separation agreements. Marriage agreements define the parties’ expectations from the outset, usually before any rights are vested and before any entitlement arises. Often, perhaps most often, a desire to protect pre-acquired assets or an anticipated inheritance for children of a previous marriage will be the impetus for such an agreement. Separation agreements, by contrast, purport to deal with existing or vested rights and obligations, with the aggrieved party claiming he or she had given up something to which he or she was already entitled with an unfair result. In other cases, however, marriage agreements may be accorded less deference than separation agreements. The reason for this is that marriage agreements are anticipatory and may not fairly take into account the financial means, needs or other circumstances of the parties at the time of marriage breakdown. [Citations omitted]

193 There must be cogent evidence to warrant a finding that an agreement should not stand on the basis of a fundamental flaw in the negotiation process: Miglin at para. 82. The evidence in support of Ms. D.’s contention that the Marriage Agreement was unconscionable falls significantly “short of the mark”: Dilley at para. 42. I have concluded that the evidence does not support the assertion that Mr. S. exerted overbearance or any inequality of bargaining power over Ms. D. or took any knowing advantage of any vulnerability of Ms. D.’s in the negotiation or execution of the Marriage Agreement.

Executor/Trustees Fees

Executor/Trustees Fees

Zadra v Cortese 2016 BCSC 390 dealt with a passing of executor’s accounts before a registrar to determine the amount of executor/trustees fees for handling a complex estate for ten years but delegating most of the work to professionals.

The value of the estate increased from $800,000 to $4.8 million over this time due to the rise in the real estate market.

The registrar allowed fees of %3 of the gross estate, plus %3 of the estate’s income and a management fee of $12,000.

The executor had pre- taken fees of $70,000 but was not admonished for it as it was done in the belief that the executor was entitled to it.

The Court Stated:

41 Sections 88 and 89 of the Trustee Act, R.S.B.C. 1996, c. 464, provide as follows:

88 (1) A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

(2) The court or a registrar of the court if so directed by the court, may make an order under subsection (1) from time to time, and the amount of remuneration must be allowed to an executor, trustee, guardian or administrator, in passing his or her accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(3) A person entitled to an allowance under subsection (1) may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding 0.4% of the average market value of the assets.

89 The court may, on application to it for the purpose, settle or direct the registrar to settle the amount of the compensation, although the estate is not before the court in an action.

42 The administrator is entitled to remuneration for his work on the estate to a maximum of 5% of the gross aggregate value, including capital and income of all the assets of the estate at the date of passing, pursuant to s. 88(1) of the Trustee Act. The criteria to be considered in determining the amount of remuneration which should be awarded are set out in the much cited case of Toronto General Trusts Corp. v. Central Ontario Railway (1905), 6 O.W.R. 350 (Ont. H.C.) at para. 23wherein the Court states:

[23] From the American and Canadian precedents, based upon statutory provision for compensation to trustees, the following circumstances appear proper to be taken into consideration in fixing the amount of compensation:
(1) the magnitude of the trust;

(2) the care and responsibility springing therefrom;

(3) the time occupied in performing its duties;

(4) the skill and ability displayed;

(5) the success which has attended its administration.

43 It is not required that remuneration be fixed at a specific percentage of the gross value of the estate, it can be calculated as a lump sum provided it does not exceed 5%. In Turley, Re (1955), 16 W.W.R. 72 (B.C. S.C.) at para. 11 the Court stated:

[11] As to grounds 1 and 2 of this application, I think the principles to be applied are well settled. I adopt the statement of the principles as given in, I think, all the cases and found in Re Atkinson Estate [1952] OR 688, that the compensation allowed an executor is to be a fair and reasonable allowance for his care, pains and trouble and his time expended in or about the estate. Both responsibility and actual work done are matters for consideration and, while there should not be a rigid adherence to fixed percentages, they are to be used as a guide. I think that the factors I mentioned in my judgment on the previous motion are found here. It is not only the presence of continuing trusts that makes the realization and administration of estates difficult. It is submitted that the capital fee should be charged only on the amount realized, excluding those assets that go over in specie. While the fact that considerable portions of the estate are transferred in specie is a factor the registrar may consider in settling the percentage he allows, I think it would be quite inappropriate as a rule to exclude these in the computation of aggregate value. There appears to be evidence here of extensive work. It is the duty of the executor to administer the whole of the estate. His work in some things might not be compensated sufficiently by a percentage much in excess of the maximum allowed.

44 Maximum remuneration is not awarded as a matter of routine. Appropriate remuneration is a matter of what is fair and reasonable in all the circumstances. As stated by the B.C.C.A, in Kanee Estate, Re [1991 CarswellBC 654 (B.C. C.A.)] (19 September 1991), Vancouver Registry CA014168:

Maximum remuneration does not go as a matter of course and it is to be expected that there will be disputes over the quantum of remuneration. Section 90(1) does not prescribe an adversarial process. There are no plaintiffs, no defendants, no pleadings, no discoveries, no provisions for offers of settlement or payment into Court, and no other trappings of an adversarial nature, All interested parties are entitled to be heard but in the end the officers of the Court must decide what is fair and reasonable in all of the circumstances.

45 The amount of remuneration to be paid to the administrator is determined on a quantum merit basis which reflects the reasonable value of the services rendered, which is subject to a 5% maximum.

46 In this regard, evidence is required concerning the administrator’s experience in estate matters, the nature of the estate, the tasks undertaken, the time spent, unusual problems arising during the administration of the estate, the skill employed by the administrator, and the results achieved which were directly attributable to the administrator’s efforts. Documentary evidence and time records should be provided where they exist. The administrator provided this evidence over the course of days of testimony. In addition, extensive documentary evidence was provided by both the administrator and the beneficiaries. However, no time records were provided, as the administrator did not keep a record in this regard.

47 An inference may be drawn against an administrator for failure to provide time records in appropriate circumstances. See Lowe Estate, Re, 2002 BCSC 813 (B.C. S.C.) at para. 33.

48 A negative inference in this regard will be appropriate where criticisms in the administrator’s administration of the estate are found to be valid. In these circumstances, the administrator’s remuneration may be substantially reduced. See Lowe Estate, Re , supra, at paras. 27, 28, 41 and 42.