Fraudulent Conveyance Found

Financial abuse

Patrick (Trustee) v Patrick 2019 BCSC 1329 found in favour of a trustee in bankruptcy that a transfer of property done by a co borrower on a mortage that gave him a true joint tenancy with his mother in the property , made completely gratuitously from him to her, was a fraudulent conveyance as it was done with the intent of putting property out of reach of the transferor‘s creditors.

The transfer was done without consideration just one day before an application for judgement was made against the transferor.

The court found the transfer to be void and of no legal effect and ordered that the one half of the property that was transferred be instead transferred to the trustee in bankruptcy.

The Law

Pursuant to S.1 of the Fraudulent Conveyance act ( FCA) a  disposition of property, if made to delay, hinder or defraud creditors or others of their just and lawful remedies, be void and of no effect against those persons.

The legislation is to be given a fair, large and liberal interpretation. Vancouver Coastal Health Authority v Moscipan 2019 BCCA 17 at par. 98.

In order to meet the intent requirements of the FCA, it must be shown that the transferor intended to put assets out of the reach of his or her creditors. No further dishonest or morally blameworthy intent is required. Botham Holdings Ltd. V Braydon Investments Ltd. 2009 BCCA 521 at para. 73.

The intent to defeat creditors and others  must be proven as a matter of fact. This often involves drawing an inference from the surrounding circumstances. Mawdsley v Meshen 2012 BCCA 91 at para. 7

In Ocean Construction Supplies Ltd v Creative Prosperity Capital Corp. (1995) 34 CBR (3d) BCSC the court stated:

“In essence, a fraudulent conveyance is a transfer of an interest in property which is made with the intention, and which has the effect, of hindering or impairing the right of a creditor or other person to satisfy a claim against the transferor.  It is not necessary for the person seeking relief to show that the transferor was insolvent at the time the transfer was made, and the applicant need not establish that he or she was a creditor, or an unsecured creditor at the time the transfer was made.  Re Skinner (1960) 27 DLR (2d) 74 BCSC

Joint Bank Accounts

Joint Bank Accounts

Joint bank accounts are frequently the subject of estate litigation , the battle line being whether the joint account holder  is to personally receive the funds by way of right of survivorship or whether the funds are not truly a joint asset but instead are held on a resulting trust and thus properly belong to the estate.

Kolic v Kolic 2019 BCSC 1463 reviews many of the leading cases on the presumption of resulting trust that can apply to joint bank accounts and found  that the bank account was not gifted to the defendant  by the deceased who contributed all the funds to the account , and since the rebuttable presumption of resulting trust was not rebutted , the bank account belonged to the estate.

Most of the assets in Kolic were comprised of  joint bank accounts. The deceased was a simple woman with poor English reading and writing skills, was frugal, used only one bank account and was unsophisticated.

The court found that there was no evidence that the deceased intended to benefit the defendant anymore than she did in her will, and the bank accounts were found to properly be an estate asset based on a resulting trust.

The presumption where funds are held jointly by a testator with an adult child is there is a resulting trust in favour of the testator, and the onus of proof is on the adult child to prove that the bank account funds were intended as a gift .

In Pecore  v Pecore 2007 SCC 17 at para 53 stated:

” The presumption of resulting trust means it will fall to the surviving joint account holder to prove that the transferor intended to gift the right of survivorship to whatever assets are left in the account to the survivor. Otherwise, the assets will be treated as part of the transferor’s estate to be distributed according to the transferor’s will.”

In Kolic the plaintiff  had commenced a wills variation action that was adjourned pending a hearing on what actual assets formed part of the estate of the deceased.

The value of the estate as of the time of death of the deceased must be determined before a testator’s moral duty can be assessed for the purposes of a wills variation claim. Sim v Sim Estate 2016 BCSC 1222 at para.  74.

That assessment also includes consideration of inter vivos dispositions and assets passing by right of survivorship. Inch v Battie 2007 BCSC 1249.

Intention of the Transferor

Pecore stated that the process for determining the intention of the transfer or begins with determining the proper presumption to be applied and then weigh all the evidence relating to the actual intention of the transferor ( to determine whether the presumption of resulting trust has been rebutted).

The courts prefer evidence of intention to be contemporaneous or nearly so, but evidence of intention that arises subsequent to a transfer should not automatically be excluded , but must be relevant to the intention of the transferor at the time the transfer is made. The court must assess the reliability of the evidence and determine what weight it should be given , guarding against evidence that is self serving or tends to reflect a change in intention.

Control and Use of the Bank Account Funds

Evidence that the transferee controlled the funds does not necessarily mean that the transferee took a beneficial interest as aging parents may set up joint bank accounts for the sole purpose of having an adult child manage their funds for their own benefit.

Conversely the fact that a transferor controlled or used the funds during his or her life is not necessarily inconsistent with an intention at the time of the transfer that the transferee would acquire the balance of the account on the transferor’s death through the gift of right of survivorship.

In Bergen v Bergen 2013 BCCA 492 the court of appeal emphasized “ the actual intention of the grantor is the governing consideration.”

Thus the onus of proof was on the joint bank holder to establish that the funds she received, either jointly or in her sole name, were a gift from the deceased.

Unger v Unger 2017 BCSC 1946 followed Pecore and held that transfers to adult children, including joint assets with a right of survivorship give rise to the presumption of resulting trust , which places the burden on the adult child alleging that the transfer was a gift.

Where the Defendant alleges that the intent of the transfer or is to grant a right of survivorship only, the gift is not the specific amount in the bank account as of the time of the transfer, but rather whatever the account balance is at the time of death.

A bank document that simply marks that an account is to be joint or with a right of survivorship , even together with evidence that this was explained by a bank representative , does not necessarily rebut the presumption of resulting trust on its own.

In Slade  Estate 2017 BCSC 2354 the court was critical that there was no supporting or additional evidence other than bank employees and lawyers told her that “a right of survivorship meant I would get the money in the account when she died”.

There was no specifics of who gave the advice and the advice was vague and there was no evidence of why a lawyer would be involved in setting up a bank account.

In Kyle Estate v Kyle 2017 BCCA 329 the appeal court upheld the trial court decision that the presumption of resulting trusts had not been rebutted, noting that the bank documents are not necessarily sufficient to rebut the presumption of resulting trust.

In Shkuratoff v Shkuratoff 2007 BCSC 1061 , purchasing a GIC solely with the deceased’s funds was sufficient to create a  presumption of resulting trust. A signature card on the investment portfolio did not overcome the presumption because “ it was not sufficiently detailed to indicate the intention of the deceased upon her death”

S.46 WESA: When Gifts Cannot Take Effect

S.46 WESA: When Gifts Cannot Take Effect

S.46 WESA applied to the following simple fact pattern that I recently met:

A will left everything to my children in equal shares, share and share alike. One child had predeceased the will-maker, leaving two children.

Applying the provisions of S46 WESA effected that the predeceased child’s share went to his two children, ie the grandchildren of the deceased.

S.46 WESA states:

46.(1) if a gift in a will cannot take effect for any reason, including because a beneficiary dies before the will-maker, the property that is the subject of the gift must, subject to a contrary intention appearing in the will be distributed according to the following priorities:

A) to the alternative beneficiary of the gift, if any, named or described by the will-maker, whether the gift fails for a reason specifically contemplated by the will-maker or for any other reason;

B) if the beneficiary was the brother, sister or a descendant of the will-maker, to their descendants, determined at the date of the will-maker’s death, in accordance with section 42(4) ( meaning of particular words in a will)

C) to the surviving residuary beneficiaries, if any, named in the will, in proportion to their interests.

(2) If a gift cannot take effect because a beneficiary dies before the will-maker, subsection 1 applies whether the beneficiary’s death occurs before or after the will is made.

Terezakis Estate 2018 BCSC 805 discusses section 46 of WESA relating to an interpretation of the residue of a will that dealt with its interpretation with respect to two of five children who had predeceased the will maker.

The two children who had predeceased the will maker also left children.

The residue clause of the will was confusing as to whether it was the intention of the will maker to leave the share of any child who might have predeceased the testator to the children of the predeceased children ie to the grandchildren of the deceased.

The court applied the armchair rule of construction that requires the court to put itself in the position of the testator at the time when the will was made and to construe the language from the vantage point in order to determine the actual or subjective intent of the testator –Re Burke (1960) O.R. 26 (C.A.).

The court noted that the will information sheet reflected that the testator presumed wishes to ensure that her grandchildren receive a share of the residue of her estate in the event that any of her children predeceased her. This was the expressed intention of the testator at the time the will was drafted, and the court applying the rule armchair rule, stated that it was the best evidence upon which the will should be interpreted by the court.

The court referred to both sections 42 and 46 of WESA.

Section 42 WESA states:

42. This section is subject to a contrary intention appearing in a will.

42(4)  gifts of property to a class of persons that:

a) is described as a will makers issue or descendants, or by a similar word and
b) b) encompasses more than one generation of beneficiaries, must be distributed as if it were part of an intestate estate to be distributed to descendants.

The court was also mindful of the presumption that a testator does not intend to create an intestacy- Milwarde-Yates v Sipila 2009 BCSC 277 at para. 49.

S.46 WESA states:

1) if gifts in a will cannot take effect for any reason, including, because of beneficiary dies before the will maker, the property that is subject of the gifts must, subject to a contrary intention appearing in the will, be distributed to the following priorities:

a) to the alternative beneficiary of the gifts, if any, named are described by the will maker, whether the gifts fail for a reason specifically contemplated by the will maker, or for any other reason;

b) if the beneficiary was the brother, sister, or a descendent of the will maker, to their descendants, determined that the date of the will maker’s death, in accordance with section 42(4) WESA (that refers to the particular words in a will);

S 46(2) states:

2) if gifts cannot take effect because of beneficiary dies before the will maker, subsection(1) applies whether the beneficiary’s death occurs before or after the will is made.

The court accordingly ordered that the distribution of the estate be made equally among her children and grandchildren, being the grandchildren of the predeceased children.

Document Production: Rule 7-1

Document Production: Rule 7-1

Rule 7-1(21) of the Supreme Court Rules states that unless the court orders otherwise, if a party fails to make discovery of or produce for inspection or copying a document as required by this rule, the party may not put the document in evidence in the proceeding or use it for the purpose of examination or cross examination.

In Tran v Kim Le Holdings Ltd 2011 BCSC 1463 at para. 19 the court stated that even  if a document has not been  listed, the court may exercise discretion to admit a document in evidence based upon the exercise of the following principles:

1) whether there is prejudice to the party that is being cross examined ;

2) whether a reasonable explanation for the party’s failure to disclose has been provided;

3) and whether excluding the document would prevent determination on the merits.

Privileged documents must still be disclosed in the lists of documents.

In Edwards v Ganzer 2012 BCSC 138 the principles of document production were summarized:

1) the initial production obligation of Rule 7-1 is limited to what is required to prove or disprove a material fact;

2) Rule 7-1(10) allows the opposing party to issue a written demand requiring the listing party to amend the list of documents and produce documents that should have been disclosed ;

3) Rule 7-1(11) allows the opposing party to issue a written demand requiring the sling party to amend the list and produce documents which ought to be disclosed under a test “close to” that known as the Guano test (1882) 11 QBD 55 at 63

4) the distinction between the two types of disclosure provided for in Rule 7-1 is stated as :

“the question is whether a document can properly be said to contain information which may enable the party requiring a document either to advance his own case or damage the case of his adversary, if it is a document which may fairly lead him to a train of inquiry, or if it may have either of those two consequences. Therefore it is acknowledged that the initial disclose under Rule 7-1(1) relates to a materiality requirement , but that the party can apply to the court , as the defendant did here , for broader disclosure pursuant to Rule 7-1 (14)

5) Both the demand by the requesting party and the response of the opposing party should set out in writing addressing the terms and criteria used under Rule  7-1. Whether the demand and response provide sufficient particularity is a mater of the court’s discretion;

6) If an application is brought under Rule 7-1(13) for the listing or production of documents , the court may either order compliance with the demand, excuse full compliance , or order partial compliance  Rule 7-1 ( 14)

7) The objectives of the Supreme Court Rules including proportionality , may be taken into account by the court when exercising its discretion under Rule 7-(14) The proportionality rule can be applied to either expand or restrict the required production of documents ( Whitcombe v Avec Insurance Managers Inc 2011 BCSC 204)

Rules 7-1(10) and (11) as discussed in Imperial Parking Canada Corp. v Anderson 2014 BCSC 989 provide for the second tier of the new document discovery process.they allow a party to demand the listing and production of additional documents beyond what has already been disclosed, but there is a major difference between the two subsections, namely :

-a demand under Rule 7-1(10) is for additional documents that should have been disclosed under Rule (1) -documents that are probative evidence of a material fact or any other document to which the party intends to refer to at trial, whereas the additional documents that may be demanded under Rule 7-1(11) are for such other documents within  the listing party’s “possession, power or control” and which relate to any or all matters in questions in the action

Rule 7-1(11) requires that a written demand for additional  documents or classes of documents under the broader definition of relevancy identify them with “reasonable specificity” or the application will fail Lit v Hare 2012 BCSC 191 at para. 68.

These same principles also govern applications pursuant to Rule 7-1(18) for production of documents from non parties as explained in Kaladjian v Jose 2012 BCSC 357

Wills Variation: Will Varied In Favour of Indo-Canadian Daughters

B.C. judge overturns Indo-Canadian farmer’s will

This article was originally posted on the National Post. Written by Cheryl Chan.

 A wills variation claim involving four Indo-Canadian daughters was varied from  $150,000 each to %60 of the estate — the two sons were slated to collect $4.2 million

Nahar and Nihal Litt were farmers from India who came to B.C. and achieved the Canadian dream, building a future for their six children and accumulating a family fortune worth $9 million.

When the couple died in 2016, their will stipulated that their four daughters — Jasbinder Grewal, Mohinder Litt-Grewal, Amarjit Litt, and Inderjit Sidhu — receive $150,000 each, collectively less than seven per cent of the estate, while sons Terry Litt and Kasar Litt receive 93 per cent, or $4.2 million each.

Last week, the will was overturned in B.C. Supreme Court, a case that is notable because of the glaring disparity between the amounts given to the daughters compared to sons, and the overall value of the estate, said Trevor Todd, the plaintiffs’ lawyer.

Nahar and Nihal Litt were farmers from India who came to B.C. and achieved the Canadian dream, building a future for their six children and accumulating a family fortune worth $9 million.

When the couple died in 2016, their will stipulated that their four daughters — Jasbinder Grewal, Mohinder Litt-Grewal, Amarjit Litt, and Inderjit Sidhu — receive $150,000 each, collectively less than seven per cent of the estate, while sons Terry Litt and Kasar Litt receive 93 per cent, or $4.2 million each.

Last week, the will was overturned in B.C. Supreme Court, a case that is notable because of the glaring disparity between the amounts given to the daughters compared to sons, and the overall value of the estate, said Trevor Todd, the plaintiffs’ lawyer.

“All of my sisters and I are happy with the judge’s findings,” said Amar Litt.

She and her sisters challenged the will on the grounds they were discriminated against based on their parents’ traditional Indo-Canadian values that favoured sons over daughters — a belief they argued falls short of the moral standards of Canadian society.

The Litts arrived in B.C. in 1964. At the time, the children ranged in age from three to 14.

Father Nahar worked at a sawmill. The family eventually purchased residential properties and farmland in Vancouver, Richmond and Abbotsford. At the time of the Litts’ deaths, the bulk of their estate came from two properties, the family house in Vancouver and a 73-acre property in Richmond.

The Litt family farm on Cambie Road in Richmond. The property has since been sold. (Submitted photo: Amar Litt) PNG

Throughout their childhood, the sisters felt they were considered less valuable, especially by their mother, because of their gender, court heard during the 15-day trial.

“The sting and the hurt of those memories were apparent as they gave their evidence at trial,” noted Justice Elaine Adair in her reasons for judgment.

“Most of our lives we had not been treated fairly,” said Amar Litt. “My brothers received all the praise because they were boys. We had to fight a lot harder.”

The sons also received “significantly more” gifts and benefits during their parents’ lifetimes than any of the sisters, said the judgement.

All the siblings worked on the farm, but the girls testified they were also responsible for household chores.

With the exception of one brother, the unmarried children were expected to plow their wages back to the farming operations. The exception was Kasar Litt, whose wage was held back even after he was married.

One sister, Inderjit, was working outside the farm, but was expected to make her employment income available to the family business, said the judgment.

The daughters argued their work and wage sacrifice were the “backbone of the farm operations,” it said.

“Throughout our childhood, teen years, and young adult lives, we worked on that farm alongside our brothers,” said Amar Litt. “We helped build our parents’ estate.”

When the elder Litts’ health deteriorated, it was the daughters, particularly the two older sisters, who took care of their parents.

Learning the contents of the will was disheartening, said Amar Litt. “We were anticipating that my parents would recognize us at this point, but it ended up we weren’t. It was very difficult and emotionally painful.”

Their brother Terry, who was executor of the will, testified that between 2006 and 2012, he tried to convince his parents to change the will. His father was open to the idea, but his mother was not.

Both brothers agreed their parents failed to meet their “moral obligations” to their daughters, but the parties could not agree on how the estate was to be divided, despite mediation.

The judge ruled an increase to the daughters’ share was warranted based on factors including the gifts and benefits the sons had received, the influence of outdated cultural values on the parents, and the daughters’ contribution to their parents’ care.

Adair ruled that the daughters be granted $1.35 million and the sons $1.8 million each.

“The judge had to take into consideration what the will said,” said Litt. “We are still able to honour our parents wishes that the sons get more, but there’s more fairness now.”

The B.C. Wills Variation Act allows judges to change a will to make sure it is “adequate, just and equitable” to the testator’s spouse and children.

B.C. is the only province in Canada to have this legislation, adopting it from New Zealand in 1920.

It can be a controversial legislation, said Todd, but argues it doesn’t mean British Columbians don’t have a say in what happens to their assets upon death. Parents can still disinherit a child, for example, but there has to be valid and rational reasons for doing so.

Todd said that over the course of his 45-year practice, he has had met many Indo-Canadian women consult with him over wills they believe to be unfair. But none proceeded with a claim.

“The social pressures, family pressures, and pressure from their community at large prevented some of them from going ahead,” he said.

Contesting her parents’ will was not easy, said Amar Litt, especially for her two older sisters.

“We did it because it was the right thing to do,” she said, adding she hopes their case will “inspire other women in the same situation to stand up for themselves.”

BC Estate Lawyer-Wills Variation: Asian Values are No Excuse for Disinheriting Daughters

Asian Values are No Excuse for Disinheriting Daughters

This article was originally published by the South China Morning Post. Written by Ian Young.

Canadian court rules, Asian values are no excuse for disinheriting daughters, as Vancouver sisters win multimillion-dollar case.

A British Columbia law, unique in Canada, forces parents’ wills to fairly provide for all non-dependent adult children, regardless of cultural bias towards sons The rules are highlighted by a recent victory for four sisters, who were each originally left with just 1.7 per cent of their parents’ US$6.8 million estate.

Asian values are no excuse for disinheriting daughters, Canadian court rules, as Vancouver sisters win multimillion-dollar case A British Columbia law, unique in Canada, forces parents’ wills to fairly provide for all non-dependent adult children, regardless of cultural bias towards sons The rules are highlighted by a recent victory for four sisters, who were each originally left with just 1.7 per cent of their parents’ US$6.8 million estate.

 

See Litt estate blogs

Read full article…

Wills Variation: Contesting a Will

Can You Successfully Contest A Will?

By The Jon McComb Show.

When their parents passed away, their six children stood to benefit from assets worth over $9-million dollars. However, Nahar and Nihal Litt willed 93% of that wealth to their two sons, leaving their four daughters with $1-hundred and 50-thousand dollars each.  Wills that seem unfair are not uncommon, however this one is gaining media attention for a few reasons.

Trevor Todd was interviewed. Listen to the full episode here.