Wills Variation- The Legal Obligation to Provide For Infants

The Legal Obligation to Provide For Infants

Heatherfield ( Litigation Guardian of) v Heatherfield Estate 2015 BCSC 505    is one of the few reported cases as to of what constitutes adequate provision for a minor, dependent child beyond the decision in Cameron (Public Trustee of) v. Cameron Estate (1991), 41 E.T.R. 30 (B.C.S.C.) [Cameron].

The deceased died suddenly at age 53 leaving to infant children, and a will leaving his entire estate of approximately $1.2 million to a former common-law partner.

The will obviously did not adequately provide for the two infant children, and as the introductory sentence stated, there has been very little judicial interpretation of just how much is required to satisfy the claims of a minor and dependent child, as opposed to the many decisions relating to the adequacy of an adult independent child that have been decided.

The court held that the deceased failed to fulfil the legal or moral obligations of the contemporary judicious parent by leaving the entirety of his substantial estate to his former spouse to whom he owed no legal or moral duty, on whom he was not relying, and with whom he did not have an agreement as to how she would subsequently provide for the children.

Only the children had the standing to bring the claim under the wills variation act, which the Public Guardian and trustee did on their behalf.

The mother  strongly objected to the Public Guardian and Trustee being the continuing trustee for the children, and asked that she herself the appointed in that capacity.

Mdm. Justice Ballance varied the entire will to divided equally between the two minor children and allowed the mother to be the appropriate trustee.

[68]         In the course of his reasons, the trial judge described Cameron as the first of its kind.  While it is accurate to say that it was a test case, the issue of launching a will variation claim on behalf of minor children where the estate was bequeathed to the surviving parent, had been briefly canvassed in the earlier decision of Re Malat (B.C.S.C., Vancouver Registry No. X8945/75, Meredith J. 18 August 1975, Unreported) [Malat].

[69]          In Malat, the Public Trustee applied under the now repealed Equal Guardianship of Infants Act to be appointed guardian of the deceased’s two minor daughters for the limited purpose of bringing an application under the predecessor legislation to the WVA.  The application was dismissed on a technical ground.  Although the court was not required to confront the variation issue on the merits, in dismissing the application, Meredith J. remarked unfavourably, in obiter dicta, about the prospect of such proceedings pitting the children against their mother, triggering unwanted legal costs and the risk of family discord.  Commenting that the possible disruption might be more harmful to the children than any benefit they might receive from the estate, Meredith J. continued at p. 2:

I have not the slightest reason to suppose that Mrs. Malat would do other than the best for all her children during her lifetime, nor should I speculate that she will do other than make adequate provision for her children out of what may remain of her assets, including those inherited from her husband on her death.

Accordingly, as I am inclined to the view that the order sought would detract from rather than advance the interest of the two children, the order is refused.

[70]         Although Malat does not appear to have been drawn to the attention of the trial judge in Cameron, he echoed many of the sentiments expressed by Meredith J.

[71]         In the end, Mr. Cameron was awarded his costs against the Public Trustee.  The Public Trustee sought leave to appeal the judgment with respect to costs only.  Leave was granted on the condition that the Public Trustee undertake to pay the special costs “of the estate” no matter what the outcome of the appeal and, failing that, the application for leave would be dismissed.  The leave application was abandoned.

ANALYSIS

[72]         In my opinion, Cameron is neither binding nor persuasive authority in determining whether the Deceased adequately provided for his two minor children.

[73]         In the first place, the facts in Cameron are readily distinguishable in a meaningful way from the case at hand.  More crucially, Cameron was decided before Tataryn clarified and refined the analytical approach.  In my respectful view, the teachings of Tataryn have affected the validity of Cameron insofar as it purports to be authoritative for the broad proposition that a variation claim brought by a minor child is doomed to fail where the surviving parent is the sole or primary beneficiary and has cared for that child, in factual situations of the kind present here.

[74]         Only Zachary and Shanon, ages 12 and 9 respectively at the time of trial, have standing to bring a claim under the WVA with respect to the Will.  That the Deceased owed them a legal duty is undisputed and is underscored by the fact that, at the time of his death, he was obligated by court order to pay child support and contribute toward their special and extraordinary expenses.  Similarly, there can be no question but that he also owed his minor and financially dependent children a moral duty.

Negligence Standard Same For Lawyers and Notaries

Negligence Standard Same For Lawyers and Notaries

I recently advised an inquiry that the negligence standard for a lawyer/solicitor is the same as that for a notary public.

The authority for that proposition was initially pronounced in British Columbia in the decision Flandro v Mitha (1992) 93 DLR (4th) 222 at paragraph 232.

The Flandro case was followed and unreported decision from new Westminster registry 19980325

SO 847, Crowe and Killeen v Bollong of Mr. Justice Boyle who after a brief review of the standard of care, determined that the standard of care towards the client is the same for lawyers as it is for Notary Publics.

The test he or she must meet is that set out in Tracy and Morin v. Atkins (1980) 16 B.C.L.R. 223 at 227 (B.C.C.A.):

… one has to ask whether, as between the alleged wrongdoer and the person who has suffered damage there is a sufficient relationship of proximity or neighbourhood such that, in the reasonable contemplation of the former, carelessness on his (her) part may be likely to cause damage to the latter – in which case a prima facie duty of care arises.

The notary had failed to advise the clients to have a discretionary trust included in their will so that their disabled child would not lose state medical benefits after their passing. In passing the judge also noted that notaries are not allowed to prepare such discretionary trusts and that the notary should have referred the matter to a solicitor.

“I did not conclude it was necessary that the precise consequences of ineligibility for G.A.I.N. need have been foreseeable in order to bring home to the Defendant in negligence the injury and damage suffered by Sherry Ann.  It is enough that it was foreseeable – as I find it was – that a failure to create a discretionary trust would not preserve the body, management and distribution of the funds and would put the wellbeing of Sherry Ann at risk of harm.

[34] The Defendant is to be judged as a reasonably competent notary. He owed the same duty as a solicitor.  (Flandro v. Mitha (1992) 93 D.L.R. (4th) 222 at 232).

[35] It is not in itself fatal but the Defendant had no authority under the Notaries Act to draw a Will which included trust provisions (see s. 15). The weight of that exception as it applies in this case is that the testator’s instructions should have triggered the duty to refer her to a solicitor coupetent to draft a Will including the provision she sought which was to establish a discretionary trust. She probably would not have known the phrase “discretionary trust” but she knew what she wanted.

Fiduciary Cannot Avoid Liability By Delegating

The Sas Law Society reasons for judgment re unprofessional solicitor conduct, repeated a basic rule of trusts-( 2015 LSBC 19, April 20,2015  at paragraph 220)- a trustee cannot avoid liability by using the defence of having delegated core authority  to an employee.

The exception would only be if the employee was fraudulent where it couldn’t be reasonably for-seen or determined by the employer using proper Supervision.

The judgment cited as authority for the proposition a one line reference at paragraph 140 of  Rowland v. Vancouver College Ltd., 2001 BCCA 527  at paragraph  140 that states” Nor is delegation of core authority permissible under trust law.

Lawyer Privilege: What is Included and What isn’t?

Privilege-of-Privilege

FACTS OF CASE: reviews in detail the types of documents and information that are covered by solicitor client privilege, those that are not, and the legal reasoning.

The respondents were appointed trustees in foreign bankruptcy proceedings of the appellant bankrupt. They sought an order requiring the appellant law firm to disclose accounting information relating to the bankrupt. The chambers judge found the law firm’s trust ledgers were not presumptively privileged nor did they arise out of communication for the purposes of obtaining legal advice. Disclosure was ordered with the exception of any notes relating to legal advice or communications for the purpose of legal advice.

The Appeal Court held the Chambers Judge  was correct in concluding the trust ledger was not presumptively privileged and disclosure would not violate the client’s right to communicate in confidence with his legal advisor.

The chambers judge succinctly described the principles of solicitor-client privilege established in the jurisprudence and reiterated by the Supreme Court of Canada in Maranda v. Richer, 2003 SCC 67, [2003] 3 S.C.R. 193. Following Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860, 141 D.L.R. (3d) 590, and Donell v. GJB Enterprises Inc., 2012 BCCA 135, he proceeded on the basis that:

a)     Solicitor-client privilege is a fundamental substantive right of the client founded upon the unique relationship of solicitor and client;

b)     At a minimum, Maranda establishes that lawyers’ bills, in the criminal law context, are presumptively subject to solicitor-client privilege;

c)     This presumption flows from the connection between lawyers’ bills and the nature of the relationship between lawyers and clients; the account reflects work done on behalf of the client which involves communications that are privileged;

d)     The presumption may be rebutted if it is established that there is no reasonable possibility that disclosure will directly or indirectly reveal any communications protected by privilege;

e)     Maranda did not do away with the distinction between evidence of communications, which is privileged, and evidence of facts, which is not;

f)     Financial records of lawyers other than records of bills are not presumptively subject to solicitor-client privilege insofar as they merely represent records of actions or facts, but they should not be produced automatically solely for that reason;

g)     Maranda mandates that it is necessary to consider such records in order to determine whether they arise out of the solicitor-client relationship and what transpires within it, that is, communications to obtain legal advice;

h)     If it is concluded that the records do arise out of that relationship and what transpires within it, they are presumed to be privileged, but the privilege can be rebutted and the document produced if it is established that production will not permit the deduction or acquisition of communications protected by solicitor-client privilege.

[17]         The chambers judge concluded that most of the information sought by the Trustees was evidence with respect to the objective state of affairs: the value of funds held in trust for Mr. Luu; the record of funds provided to the firm by Mr. Luu or received by the firm to his credit; and records relating to activities in the trust account. He concluded this information was not presumptively privileged.

[18]         Having decided that those specific records were not presumptively privileged, the chambers judge went on to consider whether the information recorded might nevertheless be said to arise out of communications for the purposes of obtaining legal advice. The records had not been produced for examination

Discussion

[32]         The chambers judge properly noted that the right to communicate in confidence with one’s legal advisor is a fundamental civil and legal right, founded upon the unique relationship of solicitor and client: Solosky v. The Queen (1979), [1980] 1 S.C.R. 821, 105 D.L.R. (3d) 745; and Descôteaux.

[33]         That right is not lost to a bankrupt and cannot be waived by a trustee in bankruptcy, even where doing so might reveal the whereabouts of some of the bankrupt’s property: Re Chilcott and Clarkson Co. Ltd. (1984), 48 O.R. (2d) 545, 13 D.L.R. (4th) 481 (C.A.); and Bre‑X Minerals Ltd. (Trustee of) v. Verchere, 2001 ABCA 255.

[34]         While Chilcott stands for the proposition that a trustee cannot waive the privilege that attaches to communication between the bankrupt and his solicitors, it does not stand for the broad proposition that any and all information in the hands of the bankrupt’s solicitors, with respect to the bankrupt’s affairs, is privileged. To the contrary, the solicitors were ordered to make significant disclosure in Chilcott. The Alberta Court of Appeal in Bre‑X described the issues in Chilcott as follows:

[37]      … [I]n that case, a solicitor acted on behalf of the bankrupt prior to the bankruptcy and advised the bankrupt on financial and other corporate matters. The trustee sought to examine the solicitor regarding privileged communications with the bankrupt. Although the court accepted that the solicitor could be compelled to disclose information about the bankrupt’s property, affairs and transactions, the court held that information on any topic necessarily involving disclosure of communications made between the solicitor and the bankrupt for the purpose of giving legal advice could not be disclosed. Ultimately, the court refused to speculate on circumstances in which a trustee might properly waive a bankrupt’s privilege, but it concluded that the goal of protecting creditors’ rights, standing alone, could not defeat solicitor-client privilege.

[Emphasis added.]

[35]         The dispute in the case at bar required the chambers judge to follow both the line of cases, including this Court’s recent decision in Donell, requiring solicitors to disclose records of trust transactions, and the line of cases including Descôteaux and Maranda, that extend solicitor-client privilege to information concerning lawyers’ bills including the client’s ability to pay the lawyer and any other information which a lawyer is reasonably entitled to require before accepting the retainer. The appellants say the judge erred in striking a balance between competing interests in the case at bar. The amount paid for legal fees may be deduced from the information the firm has been ordered to disclose; that being the case, the order intrudes upon privileged communications. The appellants say the courts have recently and strongly reaffirmed the rule that solicitor-client privilege must be rigorously protected. It should not be balanced against competing interests in disclosure.

[36]         In my view, the chambers judge was correct to say there is no presumption that the information in a solicitor’s trust ledger is privileged. Making such a presumption would be inconsistent with this Court’s decision in Donell. The chambers judge cited extensively from the majority judgment in Donell and rightly, in my opinion, found in that judgment an answer to the appellant’s objections to production of the ledger.

[37]         In that case, the court-appointed receiver’s application for production of a law firm’s records of the business, affairs or property of the respondents was dismissed. The chambers judge found solicitor-client privilege attached to all of the files and documents in the possession of the firm. On appeal, the majority noted that in R. v. Joubert (1992), 7 B.C.A.C. 31, 69 C.C.C. (3d) 553, this Court, at 569, concluded that a record of money paid into and out of a lawyer’s trust account was not subject to solicitor-client privilege. In response to the argument that trust accounts had historically been disclosed because they were considered to record facts, rather than communications, and the argument such a distinction had been done away with in Maranda, Chiasson J.A. noted in Donell:

[43]      Much has been made of LeBel J.’s treatment in Maranda of the distinction between communications and actions or facts. In this province there has been debate as to whether Maranda did away with the distinction. In my view, it did not.

[44]      It is important to remember that the issue before the Supreme Court concerned the production of a lawyer’s bill for fees and disbursements. This was the issue that was placed into the context of the distinction between communications and facts.

[38]         A lawyer’s bills are presumptively privileged because they are ordinarily descriptive; by recording the work done by the solicitor, they disclose the client’s instructions, which the client cannot be compelled to divulge and the confidentiality of which the solicitor is obliged to protect. Chiasson J.A. noted:

[49]      I see nothing in Maranda that erodes generally or does away with the distinction between facts and communications. The case concerned a specific type of document ‒ a lawyer’s fee account ‒ which is intrinsically connected to the solicitor-client relationship and the communications inherent to it; to repeat LeBel J.’s formulation, “[t]he existence of the fact consisting of the bill and its payment arises out of the solicitor-client relationship and what transpires within it”. As noted by LeBel J., what transpires within that relationship is communication for the purpose of enabling clients to obtain legal advice; it is that communication that is protected by solicitor-client privilege.

[39]         The privilege extends to administrative facts tending to reveal the nature or extent of legal assistance sought and received. However, there is good reason not to extend the presumed privilege to the trust ledger. The entries in a trust account record the possession of and movement of funds which the client may be compelled to disclose. Insofar as the entries record the payment of funds to parties who do not owe a duty of confidence to the client, the client cannot have expected the fact of payment to remain confidential as between himself and his counsel.

[40]         After concluding that the trust leger was not presumptively privileged, the chambers judge correctly engaged in the exercise described in Donell by considering whether the entries on the trust ledger would contain information ancillary to the provision of legal advice. In Donell, the Court noted:

[51]      In the present case, we are not concerned with a lawyer’s bill. The Receiver seeks production of trust ledgers. Generally, such documents record facts, not communications, and are not subject to solicitor-client privilege, but I would not favour a blanket endorsement of the automatic production of such records. In my view, while the analysis in Maranda did not dispose of the distinction between facts and communications, it requires the court to ensure that entries on a trust ledger do not contain information that is ancillary to the provision of legal advice.

[41]         In other words, Maranda restates the importance of ensuring that disclosing factual information, such as administrative facts recorded in the lawyer’s file, does not give the recipient insight into protected communications he is not entitled to receive. The determination that the information sought is factual does not bring an end to the analysis.

[42]         In the case at bar, in my opinion, the chambers judge rightly held that disclosure of a redacted trust ledger would not violate the client’s right to communicate in confidence with his legal advisor. That is precisely the exercise endorsed by Chiasson J.A. for this Court in Donell, where he wrote:

[55]          I adopt the reasoning of the Alberta Court of Appeal [in Wyoming Machinery Co. v. Roch, 2008 ABCA 433, [2009] 3 W.W.R. 433]. In my view, whether the financial records of a lawyer are subject to solicitor-client privilege depends on an assessment of the connection between the record in issue and “the nature of the relationship in question” (Maranda at para. 32). As was held in Maranda, a lawyer’s bill arises out of the solicitor-client relationship and generally will be protected. This is because bills flow out of communications between the solicitor and the client seeking legal advice. In Greymac, the court held that generally evidence of deposits to and transfers from a lawyer’s trust account is evidence of facts, not of communications. The court held that such records are not privileged, adding the caveat that the “advice and communications from the client relating to advice” must be expunged (para. 22).

[43]         While in some cases knowing the amount spent on legal services in relation to a particular matter or issue will give the recipient of that information some insight into the solicitor-client relationship, no significant insight is gained by the disclosure ordered in this case. It cannot be said that deductive reasoning will permit the recipient of the records of trust transactions in the period from August 1, 2011 to July 31, 2013 to learn anything of value with respect to the solicitor-client relationship. The solicitors were first retained in 2007. They had opened an undetermined number of litigation files. The order requires disclosure of records for a discrete period. The recipient of the records may be able to determine, by deduction, how much was paid, in total, for legal services from trust in the relevant period but will not be able to determine what amount was paid for services actually provided to Mr. Luu by the firm during the period from August 1, 2011 to the July 31, 2013, because the records will disclose only payment of accounts, not when the work was done. Some payments may be for work performed before the August 1, 2011. Some of the work performed in the period may have been billed or paid after July 31, 2013. Disclosure of the trust records will not even permit the recipient to determine what fees were billed for legal work during the period because the recipient will learn only what accounts were paid from the trust account. Last, the recipient will not be able to determine which of the litigation files handled by the firm were billed and paid from trust during the period covered by the order.

[44]         The subsequent decisions of this Court and the Supreme Court of Canada in Federation of Law Societies of Canada v. Canada (Attorney General), 2013 BCCA 147, varied 2015 SCC 7, and the recent decision of the Québec Court of Appeal in Canada (Procureur général) c. Chambre des notaires du Québec, 2014 QCCA 552, leave to appeal granted February 9, 2015, [2014] S.C.C.A. No. 234, restate the fundamental importance of solicitor-client privilege as a substantive rule of law, as established in Solosky; Descôteaux; Smith v. Jones, [1999] 1 S.C.R. 455 at 474‑476; Lavallee; Pritchard v. Ontario (Human Rights Commission), 2004 SCC 31 at paras. 14 to 21; Goodis v. Ontario (Ministry of Correctional Services), 2006 SCC 31 at paras. 12 to 25; and Canada (Privacy Commissioner) v. Blood Tribe Department of Health, 2008 SCC 44 at paras. 9 to 11. In my view, however, the decisions do not detract from the approach described in Donell to determining what information, with respect to financial transactions in the hands of solicitors, is privileged.

[45]         As the Québec Court of Appeal noted in Chambre des notaires du Québec, after discussing the “quasi-absolute privilege” described by the Supreme Court of Canada:

[50]      That said—and it is also borne out by the aforementioned case law—not all information that passes between a client and his or her legal adviser is subject to professional secrecy, of course. So, what is subject to it must be distinguished from what is not. How can this be done? Per LeBel J. in Foster Wheeler [2004 SCC 18], we must “use an analytical method that upholds professional secrecy while allowing us to resolve difficulties of this sort”.

[Unofficial English translation provided by Société québécoise d’information juridique (SOQUIJ).]

Failing to Consider Alternate Remedies

[46]         The appellants say the chambers judge erred by ordering production of documents from the records of the solicitors when there was another source of the same information: Mr. Luu himself. In my view, there is no merit to this submission. While evidence should not routinely be sought in a client’s lawyer’s office and all reasonable alternatives to doing so must be canvassed, the application before the chambers judge in this case was not an end-run around a more appropriate procedure. The solicitors were not being used as a shortcut to evidence better sought elsewhere.

[47]         Mr. Luu is a party to these proceedings. Murray Jamieson continues to act for Mr. Luu in his personal capacity. He is not separately represented on this appeal, nor was he separately represented before the chambers judge. In effect, it is Mr. Luu advancing the claim for privilege and resisting the production of the information now in the hands of his solicitors. It is fair to presume he would oppose production of the information sought by asserting the same privilege if an application were brought in Hong Kong. The claim is properly determined here.

The Usual Rules For Costs In Trusts

Costs

The Usual  Rules For Costs In Trusts

In matters of trust administration, the “usual rule” is for the court to award special costs to all parties, payable out of the estate or trust: Collett Estate, Re, 2005 BCCA 291 (B.C. C.A.), at paras. 5-6, Miles v. Vince, 2014 BCCA 418 (B.C. C.A.), at paras. 6-7.

 

Collett stated:

Thus, the Public Trustee is correct that it is “not uncommon” for the court to award special costs to all parties payable out of the estate.  That usual rule, which applies in most cases, will not apply only where there is good reason for a different order.

[7]                The general principles that guide the exercise of the discretion to award costs in proceedings in the Supreme Court involving executors and trustees are set out in Turner v. Andrews (1999), 23 C.C.P.B. 84, 30 E.T.R. (2d) 126 (B.C.S.C.), aff’d 85 B.C.L.R. (3d) 53, 2001 BCCA 76.  That case concerned an application by a plaintiff for an order that his reasonable legal costs be paid prospectively out of the trust fund in issue in his representative action against the trustees of his pension fund.  In dismissing the application, Allan J. summarized the relevant principles as follows:

[8]     Section 86 of the Trustee Act, R.S.B.C. 1996, c. 464, reflects the historic statutory authority which permits a trustee to seek the opinion, advice or direction of the Court on a question respecting the management or administration of trust property. In such circumstances, the Court may order the costs of the parties to be paid out of the estate. That principle was expanded in Re Buckton, [1907] Ch. 406 (Eng. Ch. Div.) which held that, in litigation against a trustee, the legal fees of a plaintiff beneficiary may be paid out of the trust fund on an indemnity basis where the issue concerns the interpretation of the trustee’s powers. Buckton considered the beneficiary’s entitlement to costs in three classes of cases:

(1) An application made by trustees of a will or settlement, asking the Court to construe the trust instrument for their guidance; to ascertain the interests of the beneficiaries; or to answer a question which arises in the administration of the trusts. In such instances, the costs of all parties, which are necessarily incurred for the benefit of the estate, should be taxed as between solicitor and client and paid out of the estate.

(2) An application made by the beneficiaries as a result of difficulty of construction or administration of the trust which would have justified an application by the trustees. Again the application is necessary for the administration of the trust and the costs of all parties, which are necessarily incurred for the benefit of the estate, are paid out of the estate.

(3) An application made by the beneficiaries who make claims adverse to other beneficiaries. Such litigation is adversarial in nature and, subject to the Court’s discretion, the unsuccessful party bears the costs of those whom he or she brings to Court.

 

However, the “usual rule” applies only where “an executor or trustee is required to seek the court’s guidance in interpretation of a will or there are difficulties with construction or administration of a trust,” and is not available in relation to an application “made by the beneficiaries who make claims adverse to other beneficiaries”: Eckford v. Van Der Woude Estate, 2013 BCSC 1729 (B.C. S.C.), at para. 60.

Application of this criteria means that the “usual rule” applies to some but not all of the proceedings at issue in this case.

The Court stated at p. 415:

It is often difficult to discriminate between cases of the second and third classes, but when once convinced that I am determining rights between adverse litigants I apply the rule which ought, I think, to be rigidly enforced in adverse litigation, and order the unsuccessful party to pay the costs.

Removing Certificates of Pending Litigation (CPL’s)

Caution
Jacobs v Yehia 2015 BCSC 267 contains an excellent summary on the law removing certificates of pending litigation.
Such a document is typically filed by a plaintiff who claims an interest in the lands in question, and the certificate is notice to the world under our Torrens land title system that litigation is ongoing concerning the ownership of the property, and in effect ties up the property.
21      Section 215(1) of the Land Title Act, R.S.B.C. 1996, c. 250 (the “Act“) permits a party to a proceeding who is claiming “an estate or interest in land” to register a CPL against the land. The CPL will be cancelled, however, if the party fails to demonstrate an arguable or prima facie case for an interest in land: 0861695 B.C. Ltd. v. Meola, 2013 BCSC 121, paras. 7-8.
22      Where there is no arguable case to be tried respecting a claim to an interest in land, the landowner should be free to deal with his or her land unburdened by a CPL even though a trial has yet to be conducted. This is so because the nuisance value of CPLs should not be permitted to override the legitimate exercise of the rights of landowners. In addition, a certificate of pending litigation should not be used as a tool to gain an advantage in litigation: Buchan v. Rome, 2011 BCSC 1206, paras. 78-79; Seville Properties Inc. v. Coutre, 2006 BCSC 1105.
23      Pursuant to s. 254 of the Act, a CPL will also be cancelled if the action in respect of which it is registered has been dismissed and no appeal from the dismissal has been filed. In the usual course, where an action claiming an interest in land is dismissed at trial an order cancelling the CPLs forms part of the trial order: DJ Estates Ltd. v. Rota, 2008 BCSC 223; Gadsby v. Barlow, 2008 BCSC 1313.
24      “An estate or interest in land” may include both legal and equitable interests. The test is not to be narrowly defined, but the mere fact that a claim relates to land does not convert it into a claim for a proprietary interest: Montgomery v. Klaassen, [1996] B.C.J. No. 1739, para. 22; Seville Properties Ltd. v. Coutre et al., 2005 BCSC 1105.
25      Where funds are obtained through wrongful means and can be traced to the acquisition or improvement of land, the court may impose a remedial constructive trust sufficient to sustain a CPL. In addition, the claim for tracing may, in and of itself, justify an equitable charge on land for purposes of supporting a CPL: Meola, para. 9; Drucker, Inc. v. Hong, 2011 BCSC 905, paras. 19, 22 and 36; Samji (Trustee) v. Chatur, 2013 BCSC 1915, paras. 60-64; Lament v. Constantini, [1985] B.C.J. No. 2988.
26      Constructive trusts are equitable remedies available for acts such as fraud and unjust enrichment. In Ibbotson v. Fung, 2013 BCCA 171, Garson J.A. commented that the distinction between a value survived monetary remedy and a constructive trust largely dissipates in some unjust enrichment claims, except to the extent that a constructive trust encompasses additional property rights over an asset until it is sold. Remedies for unjust enrichment retain a large measure of remedial flexibility to deal with differing circumstances according to principles rooted in fairness and good conscience. However, a plaintiff must establish that a monetary award would be an insufficient remedy before a constructive trust will be imposed. One of the factors for consideration is whether a monetary award will be paid: Drucker, para. 30; Ibbotson, para. 28; Kerr v. Baranow, 2011 SCC 10, paras. 53 and 72; Wilson v. Fotsch, 2010 BCCA 226, at para. 47.
27      Where an interest in land is claimed based on a constructive trust, the question on an application to cancel a CPL is not whether the plaintiff will be successful in proving entitlement to a constructive trust. It is enough to establish that a constructive trust is a possible remedy to sustain the CPL: Samji, para. 61.
28      In Tracy v. Instaloans Financial Solutions Centres (B.C.) Ltd., 2010 BCCA 357, the Court of Appeal considered the propriety of a constructive trust granted as a restitutionary remedy in a class action brought against the operators of a “payday loan” business. In doing so, the court reviewed the development of the remedy and some of the challenges associated with its application in the context of a commercial case. One such challenge relates to the timing of a plaintiff’s election as between a monetary remedy or restitution in the form of a proprietary remedy, given the rule that a party cannot obtain both remedies.
29      The court in Tracy noted that a plaintiff need not elect between a potential monetary or proprietary remedy until the time of final judgment. After referring to the English practice of split trials in which liability is determined before a plaintiff is required to elect between the alternative remedies of damages or an accounting of profits, Newbury J.A. stated, at para. 49:
In my opinion, the same reasoning should apply in cases where damages and constructive trusts are sought as alternative remedies. I see no error in the trial judge’s conclusion that the plaintiffs need not elect between the two until they are able to make an informed choice… As long as the plaintiffs make their election before final judgment is issued – and the order appealed from is obviously not a final order – it seems to me the defendants can have no objection. I need not decide whether, if the plaintiffs do not succeed in obtaining complete restitution by means of tracing, they may then revert to seeking damages. I do note Professor Smith’s suggestion in The Law of Tracing, supra, that only full recovery by one route (in personam or in rem relief) will eliminate the other…
30      Funds may be traced before or after legal or equitable rights have been established. As Masuhara J. explained in Drucker, tracing is a process, not a claim or a remedy. He went on to describe the nature of the tracing process in the context of an application to cancel a certificate of pending litigation in an action involving funds that were allegedly misappropriated. At paras. 37-39, he stated:
Hence, if the plaintiff successfully establishes a proprietary entitlement to the misappropriated funds in the hands of the defendant, it may trace or follow those funds from there into other property. The question is then whether or not the Property held by the defendant is sufficiently connected to those misappropriated funds to satisfy the requirements for a constructive trust. If it is, the plaintiff will then be entitled to assert a constructive trust against that property without the exercise of any further discretion by the court (Tracy at para. 33).

Security For Costs

Security for costs

An application for security for court costs may occur in case one party here in BC  has a strong case  and may win, while  the other party typically is out of the jurisdiction, or lacks assets to pay costs if he/she/it loses the case.

 

Sunshine Holdings V Vancouver Pacific Devopments Corp. 2015 BCSC 261 summarized the law on security for costs :

The legal principles concerning an application for security for costs are conveniently summarized by Madam Justice Gerow in Culp Investments LLC v. KPMG Inc. (sub nom IC Creative Homes Inc. (Trustee of) v. KPMG Inc.), 2007 BCSC 451at paras. 3-7:

[3] The court has authority to make an order for security for costs against a foreign corporation either under s. 236 of the Business Corporation[s] Act, S.B.C. 2002, c. 75, or under its inherent jurisdiction: International Container Terminal Services Inc. v. British Columbia Railway Co., 2003 BCSC 863; Shiell v. Coach House Hotel Ltd. (1982), 37 B.C.L.R. 254 (C.A.).
[4] Section 236 of the Business Corporations Act provides:
If a corporation is the plaintiff in a legal proceeding brought before the court, and if it appears that the corporation will be unable to pay the costs of the defendant if the defendant is successful in the defence, the court may require security to be given by the corporation for those costs, and may stay all legal proceedings until the security is given.
[5] The making of an order for security for costs either under the court’s inherent jurisdiction or s. 236 is discretionary: Shiell, supra; Kropp (c.o.b. Canadian Resort Development Corp.) v. Swaneset Bay Golf Course Ltd., 4 W.W.R. 306 (B.C.C.A.).
[6] The principles considered by the courts in determining whether an award for security for costs are summarized in Kropp, supra, at [para.] 17:
1 The court has a complete discretion whether to order security, and will act in light of all the relevant circumstances;
2 The possibility or probability that the plaintiff company will be deterred from pursuing its claim is not without more sufficient reason for not ordering security;
3 The court must attempt to balance injustices arising from use of security as an instrument of oppression to stifle a legitimate claim on the one hand, and use of impecuniosity as a means of putting unfair pressure on a defendant on the other;
4 The court may have regard to the merits of the action, but should avoid going into detail on the merits unless success or failure appears obvious;
5 The court can order any amount of security up to the full amount claimed, as long as the amount is more than nominal;
6 Before the court refuses to order security on the ground that it would unfairly stifle a valid claim, the court must be satisfied that, in all the circumstances, it is probable that the claim would be stifled; and
7 The lateness of the application for security is a circumstance which can properly be taken into account.
[7] The courts have always drawn a distinction between corporate and individual plaintiffs for the purposes of determining whether an order for security for costs should be made. The courts do not treat corporate defendants with the same flexibility and generosity as individual plaintiffs: Fat Mel’s Restaurant Ltd. v. Canadian Northern Shield Insurance Co. (1993), 76 B.C.L.R. (2d) 231 at [para.] 27 (C.A.).
22      A profitable business with a positive cash position whose funds are available to the plaintiff is sufficient to establish that it will have the funds to satisfy an order of costs: WestCorp Solutions Ltd. v. Collins, 2014 BCSC 1606.
B: The Parties’ Positions
23      Darwin’s position includes:
• while the granting of such an order is discretionary once the applicant who seeks security has shown that the plaintiff will not be able to pay costs should the claim fail, security is generally ordered unless the court is satisfied that there is no arguable defence: Fat Mel’s Restaurant Ltd. v. Canadian Northern Shield Insurance Co. (1993), 76 B.C.L.R. (2d) 231 at 235 (C.A.);
• the plaintiffs concede that Darwin has an arguable defence;
• if there is no duty on a trustee to commence an action, but only the power to litigate, the normal rules of costs apply, including an order for security for costs if appropriate: Culp Investments at para. 17;
• the plaintiffs lack sufficient assets to pay a costs award since neither Sunstone Marine nor SRAI own any real property in British Columbia. In fact, the Trust is not a legal entity that can own property. Rather, it is a relationship in which the trustee holds property for the benefit of the beneficiaries;
• if an award of costs was made against SRAI, it has the discretion not to seek indemnification from the Trust. Darwin is thus at risk in having an unsatisfied costs judgment;
• SRAI is a defendant by counterclaim in unrelated proceedings where a judgment for rent due and owing in the amount of $146,764.37 is sought, along with damages for other heads of damage;
• in so far as the quantum of security is concerned, projections of anticipated costs and disbursements are often uncertain and the court is in no better position to make projections than the parties as to the potential costs and quantum of security to be awarded: Culp Investments at para. 26; and
• in this case, estimating a trial length of 30 days, Darwin estimates its total taxable costs to be $116,974.20. As a result, it seeks security for costs in the amount of $115,000 as a reasonable estimate of its anticipated costs and disbursements.
24      Sunstone Marine and SRAI concede that the defendants have an arguable case. Sunstone Marine also concedes that it has no assets with which to pay a costs award were one to be made against it.
25      SRAI’s position includes:
• the Trust has assets of approximately $22 million;
• SRAI has the ability, pursuant to the trust declaration, to seek indemnification for any costs award which could be made against it. The trust declaration specifically governs such a situation;
• while a trust can only commence and maintain proceedings in the name of the trustee, the estate or trust assets are a relevant consideration which can be taken into account by the court in the exercise of its discretion; and
• if the court is disposed to ordering security, an amount of approximately $50,000 is more appropriate in the circumstances of this case taking into account the value of the Trust’s assets and the cash that SRAI regularly has at its disposal.
C: Discussion
26      The threshold issue on an application for security for costs is whether the applicant/defendant(s) have established that the plaintiff corporation(s) will be unable to pay the defendants’ costs if it is successful in its defence.
27      I have concluded that Darwin has failed to meet this initial threshold and that its claim for security for costs against SRAI should be dismissed.
28      In the particular circumstances of this case, notwithstanding the fact it has no assets, I have also concluded that the application with respect to Sunstone Marine should be dismissed.
29      It is evident from Ms. Adams’ affidavit that SRAI, in its capacity as trustee, will have the funds to pay any award of costs that could be made against it. The Trust has more than sufficient assets to pay the costs sought by Darwin. These assets are available to SRAI for that purpose in that the Declaration of Trust explicitly provides that SRAI is to be indemnified from the Trust for all costs, including legal expenses and judgments against it.
30      I agree with SRAI’s argument as set out in its response that the authorities relating to an order regarding security for costs governing trustees in bankruptcy are of assistance on this application.
31      In particular, security may be ordered against trustees in bankruptcy where that trustee has no duty to sue and where the trust has no assets. That is not the case in this proceeding.
32      In a bankruptcy proceeding, the bankrupt estate’s assets are properly considered in determining whether the trustee will be able to satisfy a cost order: Vancouver Trade Mart Inc. (Trustee of) v. Creative Prosperity Capital Corp., [1999] 7 C.B.R. (4th) 3 (B.C.S.C.); Mancini Estate (Trustee of) v. Falconi (sub nom Clarkson, Gordon Inc. v. Falconi), [1990] 70 O.R. (2d) 171 (H.C.).
33      A trust’s assets can also be considered on an application for security for costs against a trustee who sues for the benefit of the trust. That is because, at law, a trustee is entitled to indemnification from the trust funds which it holds for all costs, including legal costs, which the trustee reasonably incurs for the trust’s benefit. See Geffen v. Goodman Estate, [1991] 2 S.C.R. 353 at 390; Royal Trust Corp. of Canada v. Clarke (1989), 35 B.C.L.R. (2d) 82 at 86 (C.A.); Blueberry Interim Trust (Re), 2012 BCSC 254 at para. 26.
34      In any event, as I have noted, the Declaration of Trust in this case contains a specific provision to this effect.
35      In addition, were Darwin to become SRAI’s creditor to an award of costs in its favour then it would be subrogated to SRAI’s right to charge and lien Trust assets. See DeLorenzo v. Beresh, 2010 ONSC 5655; McLennan v. McLennan (2000), [2000] O.J. No. 3286, 36 E.T.R. (2d) 145 (S.C.J.); G. Solway & Sons Ltd. v. Pearlman and Ezrin, [1964] 1 O.R. 1 (H.C.J.); Re Johnson (1880), 15 Ch. D. 548.
36      While it is the case that Sunstone Marine has no assets, that does not necessarily result in an order for security being made against it.
37      As I have noted, while security for costs will “generally” be ordered against a plaintiff that has no exigible assets, the court retains the discretion not to make such an order in appropriate circumstances.
38      Taking into account the principles to which I have referred, I am of the view that an order for security for costs as against Sunstone Marine is not required in this case.
39      That is because the claims of both plaintiffs against Darwin are based on identical allegations. The plaintiffs also seek the same relief against Darwin.
40      Darwin, for its part, has not yet filed a response to the Amended NOCC. In its response filed July 22, 2011, it denies owing a duty of care to SRAI. It also raises as a defence that Sunstone Marine waived and released Darwin from any claims arising from the project.
41      However, Darwin has not established on this application that there is any real likelihood that Sunstone Marine’s claims against it could be dismissed, but not those of SRAI. In light of the relationship between Sunstone Marine and SRAI, even if that were to be the result following a trial, the court would have a broad discretion to take this into account in making an appropriate award of costs based on which of the parties were successful or not.
42      Quite apart from my conclusion that Darwin has failed to establish that SRAI does not have the ability to pay an award of costs made against it, I am of the view, based on Ms. Adams’ affidavit, that SRAI, in fact, does have the financial means to do so.
43      That being the case, Darwin should have the ability to collect the entirety of its costs from SRAI in the event the action brought against it is dismissed. That would include those costs arising from a successful defence to Sunstone Marine’s claims.

Solicitor Client Privilege SCC

Solicitor Client Privilege Upheld By Highest Court

Attorney General of Canada v. Federation of Law Societies of Canada 2015 SCC 7 upholds the principle of solicitor client privilege in Canada.

The case dealt with parts of the Proceeds of Crime (Money Laundering) and Terrorist Financing Act and Regulations that sought to require legal counsel and law firms to collect confidential information about their clients that could be subject to search and seizure by the state.

In 2003, the legal profession mounted a constitutional challenge, resulting in an order exempting lawyers from the Act’s reporting scheme. The government undertook to redesign the rules to respect solicitor client privilege, in consultation with the legal profession.

Excluding lawyers from requirements under the money laundering legislation to divulge confidential communications with their clients is huge win for the rights of Canadians. No legislation should compromise lawyers’ confidential relationship with their clients.

The Court held:

Sections 62, 63 and 63.1 of the Act, to the extent that they apply to documents in the possession of legal counsel and legal firms, and s. 64 of the Act infringe s. 8  of the Charter . These provisions have a predominantly criminal law character rather than an administrative law character. They facilitate detecting and deterring criminal offences, and investigating and prosecuting criminal offences. There are penal sanctions for non-compliance. These provisions authorize sweeping searches of law offices which inherently risks breaching solicitor client privilege. The expectation of privacy in solicitor client privileged communications is invariably high regardless of the context and nothing about the regulatory context of the Act or the fact that a regulatory agency undertakes the searches diminishes that expectation. The principles governing searches of law offices set out in Lavallee, Rackel& Heintz v. Canada (Attorney General), 2002 SCC 61, [2002] 3 S.C.R. 209, apply and these provisions do not comply with those standards. Solicitor client privilege must remain as close to absolute as possible. There must be a stringent norm to ensure protection and legislative provisions must interfere with the privilege no more than absolutely necessary. These provisions wrongly transfer the burden of protecting solicitor client privilege to lawyers. Nothing requires notice to clients and a client may not be aware that his or her privilege is threatened. There is no protocol for independent legal intervention when it is not feasible to notify a client. A judge has no discretion to assess a claim of privilege on his or her own motion. Unless the search is of a lawyer’s home office, nothing requires prior judicial authorization. Searches are not contingent upon proof that there are no reasonable alternatives. The provisions allow warrantless searches, which are presumptively unreasonable. Examining and copying documents proceeds until privilege is asserted — an approach that greatly elevates the risk of a breach of privilege. Claiming privilege requires revealing a client’s name and address even though this information may be subject to privilege. The search powers in ss. 62 , 63  and 63.1  as applied to lawyers, along with the inadequate protection of solicitor client privilege provided by s. 64 , constitute a very significant limitation of the right to be free of unreasonable searches and seizures.

Estoppel By Convention

estoppel

Estoppel By Convention.

The Supreme Court of Canada has set out the criteria as to what establishes estoppel by convention in Ryan v. Moore, 2005 SCC 38, [2005] 2 S.C.R. 53. In paragraphs 53 and 54, the Court sets out how the forms of estoppel have been established in law.

 

An estoppel by convention,  is an estoppel by representation of fact, a promissory estoppel or a proprietary estoppel, in which the relevant proposition is established, not by representation or promise by one party to another, but by mutual, express or implicit, assent. This form of estoppel is founded, not on a representation made by a representor and believed by a representee, but on an agreed statement of facts, or law, the truth of which has been assumed, by convention of the parties, as a basis of their relationship. When the parties have so acted in their relationship upon the agreed assumption that the given state of facts or law is to be accepted between them as true, that it would be unfair on one for the other to resile from the agreed assumption, then he will be entitled to relief against the other according to whether the estoppel is as to a matter of fact, or promissory, and/or proprietary.

 

57      The Court, then, in para. 59, said that the following criteria form the basis of the doctrine of estoppel by convention:

 

(1) The parties’ dealings must have been based on a shared assumption of fact or law: estoppel requires manifest representation by statement or conduct creating a mutual assumption. Nevertheless, estoppel can arise out of silence (impliedly).

(2) A party must have conducted itself, i.e. acted, in reliance on such shared assumption, its actions resulting in a change of its legal position.

(3) It must also be unjust or unfair to allow one of the parties to resile or depart from the common assumption. The party seeking to establish estoppel therefore has to prove that detriment will be suffered if the other party is allowed to resile from the assumption since there has been a change from the presumed position.

 

58      With respect to estoppel by representation, the Supreme Court of Canada’s decision in Canadian Superior Oil Ltd. v. Hambly, [1970] S.C.R. 932, [1970] S.C.J. No. 48, which set out in para. 19, the factors giving rise to estoppel.

They are:

(1) A representation or conduct amounting to a representation intended to induce a course of conduct on the part the person to whom the presentation is made;

(2) An act or omission resulting from the representation, whether actual or by conduct, by the person to whom the representation is made;

(3) Detriment to such person as a consequence of the act of omission.

 

59      It is to be noted, however, that estoppel by representation cannot arise from silence unless a legal duty is owed by the representor to the representee to make the disclosure. See: Ryan v. Moore, 2005 SCC 38at para. 76.

 

62      Blake therefore accepted the terms of the Wills and acted upon those terms, not just once but 4 times, when he sold the house, sold the California condo, took the art he wanted, and divided various household goods and personal effects, and signed the corporate documents. Thus, all the parties involved took steps based on the shared assumption that the Wills were valid. Their mutual conduct shows this. Blake was silent about litigating anything in connection with the Wills until September 2013, although his lawyer had contacted the Estate Trustees in early February 2012. The Estate Trustees acted in reliance of this shared assumption, paid the taxes, and did not apply for an Income Tax Clearance Certificate, as there were still unadministered corporate assets to be divided between Blake and Cody under the Wills.

 

63      Blake should not be allowed now to resile from all of the actions he took during the two-year period after Eleanor’s death. As Mr. Justice Brown said, in Lawless, supra, a prospective litigant cannot wait until he or she determines that a claim is winnable or viable.

 

64      Blake’s conduct, in my view, induced the Estate Trustees to continue the administration of the Estate, since they had no legal document to show that Blake was in any way objecting. They organized the payment to CRA to stop any penalties and interest from running on the amount owing. They placed themselves in a precarious position, not knowing that Blake would later want Orders removing them as Estate Trustees, accusing them of improper conduct and accusing Ms. Rintoul of negligence. They took a course of making distributions to Blake out of the Estate before receiving an Income Tax Clearance Certificate, for which they possibly could be personally liable.

65      In Hayes v. Montreal Trust Co., 1977 CarswellBC 69 (B.C.S.C.), the Court said in para.8, that a plaintiff:

… accepted what was done and co-operated with the executor for over a year in administering the estate in according with the will to the point where all legacies have been paid, the life interest has terminated and all that remains is distribution to the residual beneficiaries.

 

66      Blake took no steps until September 2013 to challenge the Will. He co-operated with the Estate Trustees in administering the Estate for over 2 years to the point where all that remains to be done is to divide the residue between him and Cody, which he now opposes.

 

67      In my view, whether one says that Blake is estopped from taking the position he now has by estoppel by convention or estoppel by representation, he falls within both categories, given the facts of this case. Blake had counsel in February 2012, who stated there was an issue regarding Eleanor’s capacity to make the 2011 Wills but never took the legal step to go forward with any challenge. Is this silence? Did Blake receive legal advice that he should or should not move forward? The fact remains that nothing happened and the administration of the Estate continued in legal silence until the Application was finally made.

 

Mutual Release

mutual release 2At the end of each court case, the lawyers generally have each party sign a Mutual release that in layman’s terms means they will never sue each other for the same matter again, it being a final settlement.

The mutual release signed by the parties as part of their all-inclusive settlement of the prolonged estate litigation is a valid contract.

Accordingly, like any other contract, the parties are bound by the terms to which they have agreed.

A valid mutual release typically releases the other parties to the agreement from any subsequent claims related to the claims that have been released in exchange for valuable consideration.

Such releases are executed by the parties when litigation claims are settled in order to give the parties peace from potential liability from the claims and to avoid any further proceedings that might flow from the claims released.

Such releases operate as a legal bar to the pursuit of any subsequent claim that purports to raise an issue that has already been extinguished by the release.

See: Browne v. McNeilly, [2001] O.J. No. 970 (Ont. S.C.J.), at paras. 9, 13; Sinclair-Cockburn Insurance Brokers Ltd. v. Richards (2002), 61 O.R. (3d) 105, [2002] O.J. No. 3288 (Ont. C.A.), at paras. 14-16; Marjadsingh v. Walia, 2012 ONSC 6659, [2012] O.J. No. 5788 (Ont. S.C.J.), at paras. 16-18.