Counter Claims Not Allowed in Petition Proceedings

The BC Appeal court in Edward Chapman Ltd v FS Property Inc 2022 BCCA 213 in a foreclosure proceeding ruled that the current rules do not provide for the filing of a counter claim to a petition. The matter must first be converted to an action.

Rule 16-1 provides for the type of pleadings that can be filed in a petition proceeding.

[17] Further, R. 16-1(18) provides:

(18) Without limiting the court’s right under Rule 22-1 (7) (d) to transfer the proceeding referred to in this rule to the trial list, the court may, whether or not on the application of a party, apply any other of these Supreme Court Civil Rules to a proceeding referred to in this rule.

[18] Rule 16-1(18) acknowledges the ability, under R. 22-1(7), to refer a petition proceeding to the trial list. This would involve converting the proceeding to an action, and giving directions for the filing of pleadings and any other necessary directions, as contemplated by R. 22-1(7).

[19] But R. 16-1(18) also provides flexibility for a petition proceeding to employ some of the tools of an action for determination of issues within the petition proceeding itself, such as limited discovery. These tools can be borrowed and used selectively, while preserving the summary nature of the petition proceeding: see L’Association des parents de l’école Rose-des-Vents v. Conseil scolaire francophone de la Colombie-Britannique, 2011 BCSC 89 at para. 30.

[20] In my view, R. 16-1(18) does not permit the filing of a counterclaim within a petition proceeding.

[21] A counterclaim is provided for in R. 3-4. It is a form of pleading a claim, delivered within an action after a notice of civil claim has been filed. Rule 3-4(1) provides:
(1) A defendant in an action who wishes to pursue a claim within that action against the plaintiff must, within the time set out for the filing of a response to civil claim under Rule 3-3 (3), file a counterclaim in Form 3 that accords with Rule 3-7.

[22] The form of a counterclaim is a prescribed form under the Rules, Form 3. The beginning of the form itself incorporates the words:

This action has been brought by the plaintiff(s) against the defendant(s) for the relief set out in the notice of civil claim filed in this action.

[23] The logic of the Rules and Forms as a whole, make it clear that a counterclaim can only be advanced within an action. In my view, the decision of 1076586 Alberta Ltd. v. Stoneset Equities Ltd., 2015 BCCA 182, still applies, including the holding, at para. 60, that there would have to be an action (either by notice of civil claim or by order that the petition stand as a notice of civil claim), not a petition proceeding, in order for there to be a counterclaim.

The Doctrine of Illegality In Estates

The doctrine of illegality was expressed in the Latin phrase ex turpi causa non oritur actio that was founded on public policy that one should not profit from an illegal act, contract or tort.
“No court will lend its seed to a man who found his action upon in a moral or an illegal act” stated the court in Holman v .Johnson (1775) 98 E.R. 1120.
The modern approach to illegality however recognizes the unfairness that could result from strict adherence to the classical model, and has developed means of providing relief in appropriate situations.
The modern approach is that contractual or statutory illegality does not create an absolute bar to a claimant’s equitable relief. There is often a close legal relationship between the doctrines of illegality and public policy.
This approach was paraphrased In Berne Development LTD v Haviland (1983) , 40 O.R. 238, as one that “balanced the need to preserve public policy by not enforcing illegal agreements against the need to prevent unjust enrichment by denying recovery.”

MURDER

While not the only act of illegality in estate law, the best known and obvious is that if one person murders another then the murderer should not be able to profit from his/her crime, including an inheritance from the person that was killed. Other criminal acts such as fraud or theft would also be relatively common examples of illegality in estates.

1. Re Fenotti Estate 2014 BCSC 1533 reviewed the law and held that a son who murdered his mother may not inherit from her as a result of public policy that prevents a wrong doer from benefiting from his or her own crime and firmly stated no he could not.
The court cited and Garbe v. Alberta (Public Trustee), [1999] 5 W.W.R. 696, 64 Alta. L.R. (3d) 103 (Surr. Ct.), held:
The rule of public policy which excludes the criminal has also been applied to exclude all claiming under the criminal, unless they have alternative or independent rights. In order to take under these independent or alternative rights, the person exercising the right must have clean hands.

2. The rule was discussed at length in the Supreme Court of Canada decision Oldfield v . Transamerica Life Insurance Co of Canada , 2002 SCC 22 at paragraphs 14 – 15.

The Supreme Court of Canada stated that the rule of public policy which precludes a person from benefiting from his or her own crime is an integral part of our system of law.

3. The Supreme Court of Canada in Baumann v Nordstrom 1962 SCR 147 restored the decision of the trial judge where a woman had set fire to the house and killed her husband but was allowed to inherit as she was insane at the time.

The Court stated that if her crime whether murder or arson, killed her husband she cannot inherit and the rule is the same on an intestacy as it would be if the property had been willed to her. See In re Sigsworth; Bedford v. Bedford [1935] 1 Ch 89, 104 LJ Ch 46.

If at the time she set the fire she was insane within the meaning of the M’Naghten rules ( to determine insanity in criminal la is the w) there was no crime and she may inherit.

The Court held that the defendant wife, when she set the fire, “did not then appreciate the nature and quality of her act or know that it was wrong.” Accordingly, she was entitled to inherit.

4. Re Unger 2022 BCSC 189 involved an application by the executors of the estate for advice and direction as authorized by Section 86 of the Trustee act regarding the disposition of the deceased’s estate, given that her own son had murdered her, the issue became who was entitled to his share of the estate.
The deceased was survived by two sons, Clayton and Logan, who were each 50% beneficiaries of her will.

As Clayton murdered his mother, all parties agreed there is a rule of public policy which excludes the person responsible for another person’s death from taking any benefit because of their criminal act.

Prior to his mother’s death, Clayton was found to have conceived a child ( Adeline) who was born approximately 11 days after his mother’s death. His mother knew of the child.
The court found that the child was “en ventre sa mere” and could inherit.

Under the rule of public policy, Clayton was not entitled to what would have been his portion of Ms. Unger’s estate, Ms. Unger having died as a result of Clayton’s actions.
However the clear intent in the Will was that should either of Ms. Unger’s children predecease her, under para. 7(b)(ii) of the Will, any children of her children who are alive at her death or are en ventre sa mere should receive the deceased child’s share.

The infant was an “alternate beneficiary” of the gift to Clayton as contemplated by s. 46(1)(a) of the WESA, and is therefore the first priority for distribution of Clayton’s share.

 

Other Acts of Illegality

1. Fraudulent Commercial Transaction

In Youyi Group Holdings Ltd v Brentwood Lanes Canada Ltd 2020 BCCA 130 the appeal court confirmed that the documents evidencing the commercial transaction had been prepared to facilitate the commission of a fraud , the illegality of such was neither trivial nor unintentional. The courts refused to enforce the agreements due to their illegality.

Realtor Commission-

In Lindsay v Ambrosi 2019 BCCA 442 a realtor’s claim for quantum meruit was dimissed on the basis that since he was not licensed under the Real Estate Services Act (RESA), he was statute barred from any remuneration in relation to real estate services.

The realtor unsuccessfully argued that he was entitled to compensation based on quantum meruit for the real estate services he provided at the request of the appellants, and that the appellants benefited from. He contended that, in spite of the statutory prohibition in section 3 of the RESA, it remained open to the court to determine the consequences of his statutory breach based on equitable principles in order to avoid the appellants been unjustly enriched by his services.

The appeal court held that the trial judge erred in following the realtor’s argument, and that there was a statutory prohibition that could not be waived or altered by the courts stating that the realtor was not entitled to remuneration if he was not licensed to practice real estate.

The court found that the realtor services were illegal and followed the precedent King v. Rosenberry 1972 BCJ 357 which held that services performed under an illegal contract cannot form the basis of the claim for quantum meruit ( a reasonable fee for services rendered).

Conclusion

Kim v Choi 2019 BCSC 437 is an example of the more “ relaxed” approach taken by the courts on occasion in response to an illegal act or contract than they did historically.

Kim v Choi involved a plaintiff seeking the equitable remedy of restitution against unscrupulous immigration consultants and discussed the necessity of coming to court with clean hands based on the legal doctrine of” ex turpi causa”.

Despite her involvement in an illegal contract the court awarded her $300,000 in restitution .

Traditionally, ex turpi causa had been applied rigidly. However, that approach has been relaxed and the public policy analysis now requires a balancing test. That is not to say that the court will lightly provide relief for an aggrieved party to an illegal agreement.

In J.T.L. v. R.G.L., 2010 BCSC 1233 at paras. 113-16 the court posed the practical question as to “whether it be manifestly unacceptable to fair-minded or right-thinking people that a court should lend assistance to the plaintiff who has defied the law.”

Court Again Refuses to Remove Executor

Fitzgerald v Hill 2022 BCSC 968 is one of many examples where disgruntled beneficiaries with hostility towards the executor failed in court to have the executor/trustee removed and replaced.

The court listed off the many things that the executor had performed in carrying out his duties and saw no endangerment to the estate assets so refused to remove and substitute the executor.

THE LAW

An executor may be removed and replaced under ss. 158 and 159 of Wills, Estates and Succession Act, S.B.C. 2009, c. 13 [WESA], and a trustee under s. 30 of the Trustee Act, R.S.B.C. 1996, c. 464. Both may also be removed and replaced under the inherent jurisdiction of the court.

If the court removes a personal representative under WESA, it must appoint another person who consents to act as a substitute personal representative, unless the administration of the Estate is complete or the court considers it unnecessary.

The guiding principles are well-established for the exercise of judicial discretion to remove an executor and trustee. As stated by Butler J., as he then was, in Levi-Bandel v. McKeen, 2011 BCSC 247:

[19] The test for removal of an executrix or trustee is not contentious. The leading authority in British Columbia remains the decision in Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C.C.A.). In Conroy, the Court of Appeal considered whether it was expedient to remove one trustee and appoint a replacement when some of the beneficiaries were dissatisfied with the way the trustee was handling the estate. The court confirmed at 126-127 that the main test for removal of a trustee is the welfare of the beneficiaries:

In Letterstedt v. Broers (1884), 9 App. Cas. 371, their Lordships of the Judicial Committee held that the main principle upon which the jurisdiction of Courts of Equity has been exercised to remove old trustees and substitute new ones in cases requiring such a remedy, is the welfare of the beneficiaries of the trust estate.

[20] In Letterstedt, the court noted that it is not every act of misconduct that should result in removal of a trustee, only acts or omissions which endanger the trust property or show “a want of honesty or a want of proper capacity to execute the duties, or a want of reasonable fidelity.”

Out of respect for the will-maker’s choice of executor, the court should interfere only for good reason: Re Blitz Estate, 2000 BCSC 1596, at para. 20; Tomlinson Estate (Re), 2016 BCSC 1223, at para. 43. This test has been put even higher in some cases, for example in Veitch Estate, 2007 BCSC 952, at para. 19, citing Re Weil, [1961] O.R. 888 (ONCA):
It seems to me that such an interference with the discretion and choice of a person in preparing his last will and testament must be not only well justified but, as has been said before, must amount to a case of clear necessity.

The court’s discretion in deciding whether to remove a trustee should be guided by the following principles, set out in Parker v. Thompson (Trustee), 2014 BCSC 1916, at para. 37:

[37] I accept the principles pertaining to the removal of an estate trustee set out by Madam Justice Nolan in Haines v. Haines, 2012 ONSC 1816 at para. 10 as equally applicable to the removal of the trustee:

In Johnson v. Lanka, 2010 ONSC 4124, (2010), 103 O.R. (3d) 258 at para. 15, Pattillo J. summarized the principles that should guide the court’s discretion in deciding whether to remove estate trustees:

(1) the court will not lightly interfere with the testator’s choice of estate trustee;
(2) clear evidence of necessity is required;
(3) the court’s main consideration is the welfare of the beneficiaries; and
(4) the estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the trust.

To remove an executor on the basis of misconduct, the evidence must show they endangered the estate property, acted dishonestly and without proper care, without capacity to execute the duties, or without reasonable fidelity: Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C.C.A.). In all cases, the fundamental guide must be the welfare of the beneficiaries: Letterstedt v. Broers (1884), 9 App. Cas. 371 (South Africa P.C.).

Mere friction between the trustee and one or more beneficiaries is usually insufficient to justify removal of the trustee. As stated in Miles v. Vince, 2014 BCCA 289:

[84] What circumstances justify the removal of a trustee? In Letterstedt v. Broers (1884), L.R. App. Cas. 371 (J.C.P.C.), the court established guidelines justifying the removal of a trustee (at 385-389):

1. If the Court is satisfied that the continuance of the trustee would prevent the trusts being properly executed, the trustee might be removed. It must always be borne in mind that trustees exist for the benefit of those to whom the creator of the trust has given the trust estate.

2. The acts or omissions must be such as to endanger the trust property or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.

3. In exercising the delicate jurisdiction of removing trustees, the Court’s main guide must be the welfare of the beneficiaries. It is not possible to lay down any more definite rule in a matter that is so “essentially dependent on details often of great nicety.” The Court must proceed to look carefully into the circumstances of the case.

4. Where a trustee is asked to resign, and if it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than that human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee, and if there is no reason to the contrary from the intentions of the framer of the trust to give this trustee a benefit or otherwise, the trustee is always advised by his own counsel to resign.

5. 5. The lack of jurisprudence in respect of the removal of a trustee reflects that a trustee when asked to do so, will resign.

6. If, without any reasonable ground, the trustee refuses to do so the court might think it proper to remove him.

7. Friction or hostility between trustees and the beneficiary is not of itself a reason for the removal of the truste

es. But where the hostility is grounded on the mode in which the trust has been administered, where it has been caused wholly or partially by substantial overcharges against the trust estate, it is not to be disregarded.

The Hill Beneficiaries rely on Sheppe v. Harlingten, 2018 BCSC 1460, regarding dismissal of a trustee due to hostility to the beneficiaries. In that case, the trustee was the grantor’s former husband, and the disputing beneficiaries her children from a subsequent relationship. The trustee wished to sell their family home in which they lived, to use the proceeds in his real estate project. He listed it for sale and they filed a CPL. The trustee then sent them scathing, insulting correspondence (see para .16).

[27] Not every neglect of duty or mistake will result in removal of the trustee. The key question is whether there is or has been endangerment of trust property, whether through a lack of honesty, lack of capacity or lack of reasonable fidelity: Conroy v. Stokes, [1952] 4 D.L.R. 124 (B.C.C.A.); Miles at para. 85.

[28] In Parker v. Thompson (Trustee), 2014 BCSC 1916 at para. 37, Chief Justice Hinkson said at para. 37:

[37] I accept the principles pertaining to the removal of an estate trustee set out by Madam Justice Nolan in Haines v. Haines, 2012 ONSC 1816 at para. 10 as equally applicable to the removal of a trustee:

In Johnson v. Lanka, (2010), 103 O.R. (3d) 258 at para. 15, Pattillo J. summarized the principles that should guide the court’s discretion in deciding whether to remove estate trustees:

(1) the court will not lightly interfere with the testator’s choice of estate trustee;
(2) clear evidence of necessity is required;
(3) the court’s main consideration is the welfare of the beneficiaries; and
(4) the estate trustee’s acts or omissions must be of such a nature as to endanger the administration of the trust.

[39] I also cannot ignore the hostility that Mr. Harlingten expressed to the beneficiaries when they took what they considered to be necessary steps to protect their interests.
[40] Dissension between a trustee and beneficiaries is not necessarily a reason to remove the trustee: Conroy at p. 126. The questions is whether it would become difficult for the trustee to act with impartiality or whether the friction is of a nature or degree that it prevents, or is likely to prevent, the proper administration of the trust: Radford v. Radford Estate (2008), 169 A.C.W.S. (3d) 688 (Ont. S. Ct. J) at paras. 112 and 113.

Executor Removed By All Beneficiaries

Re Kara Estate 2022 BCSC 923 ordered an executor removed, or passed over since probate had not been started, where all of the beneficiaries sought such an order.

 

There were allegations of executor delay and favourtism to one party.

 

The LAW

Section 158 of the Wills, Successions and Estate Act, S.B.C. 2009, c.13, provides that:

158 .

(2) A person having an interest in an estate may apply to the court to remove or pass over a person otherwise entitled to be or to become a personal representative.

(3) […] the court […] may remove or pass over a person entitled to be or to become a personal representative if the court considers that the personal representative or person entitled to become the personal representative should not continue in office or be granted probate […] if the person entitled to become the personal representative […]:

(f)         is:

(ii)        not responsive, or

(iii)       otherwise unwilling or unable to or unreasonably refuses to carry out the duties of a personal representative,

to an extent that the conduct of the personal representative hampers the efficient administration of the estate.

 

The Court of Appeal in Conroy v Stokes, [1952] 4 DLR 124 (BCCA), set out the types of conduct that could warrant removal of an executor, which include:

(a)  Endangerment of the trust property;

(b)  Want of honesty;

(c)   Want of proper capacity to execute the duties; and

(d)  Want of reasonable fidelity.

Butler J., as he then was, noted in Levi-Bandel v. McKeen, 2011 BCSC 247 at para. 21 that “it is not only an act of misconduct that can be grounds for removal of a trustee. A failure to act can amount to grounds for removal.” In Dirnberger Estate, 2016 BCSC 439, Kelleher J. confirmed that unreasonable delay and failure to act to distribute an estate may be grounds for the removal of an executor.

In Ching Estate (Re), 2016 BCSC 1111 at para. 22, Affleck J. noted:

The authorities indicate that even a “perceived” conflict of interest between an executor’s personal interests and her obligation to administer the trusts in the will in the interests of the beneficiaries may cause this court to intervene to appoint a new executor or an administrator to avoid even the appearance of conflict.

 

The bottom line was stated in Nieweler Estate (Re), 2019 BCSC 401

” The main guide in exercising the Court’s discretion to remove trustees is the welfare of the beneficiaries: Letterstedt at 387. It is not the interests of a particular beneficiary that are to be considered, but rather the benefit of the beneficiaries collectively: Conroy v. Stokes, at 128; Re Winter Estate, at para. 22.”

Recognizing Dementia

I was told by a geriatric psychiatrist that many people have a dementia for two years before it is noted to be a concern.

Many times family members are simply oblivious to the obvious decline in mental capacity of a parent by simply thinking that is the aging process.

It should be noted that the terms Alzheimer’s and dementia are often thrown around interchangeably, but refer to two different things:

Dementia is a syndrome of a group of symptoms that often doesn’t lead to a specific diagnosis, while Alzheimer’s is a progressive disease.

Many symptoms such a short term memory loss and confusion can occur in demented diseases as well as Alzheimer’s, but there are differences, as well as overlap.

Complicating the issue is that one can have more than one type of dementia, and that other diseases can trigger dementia.

The disease of Alzheimer’s is degenerative, increasingly common with our aging population and incurable at this time.

The average life expectancy of a patient following a diagnosis of Alzheimer’s is approximately 8 to 10 years.

No matter what the cause of the demented you may be, it is important to realize that recognizing the disease early can help the patient and family prepared to deal with it, and to properly prepare an estate plan.

SYMPTOMS TO WATCH FOR

1. Short Term Memory Loss

The hallmark of all demented is is short term memory loss. This can result in everything from missed appointments to repeatedly asking for the same information or telling the same stories over and over.

2. Trouble with Instructions

This often shows up when a person suddenly has problems doing routine matters such as banking, or cooking a favorite recipe from memory. The more problem-solving or following of written instructions, the more amplified the problem is noted.

3. Hiding and Hoarding

This phenomena can be as a result of a person attempting to remain in control of their situation, or alternatively being paranoid that people are stealing their items.

4. Trouble Communicating

Verbal communication can become very difficult for people experiencing dementia, ranging from forgetting the right word to use or describe, calling objects by the wrong name, to a total loss of the ability to communicate.

5. Behavioral Changes

Depression is a common factor amongst the elderly as well as the demented and complicates the diagnosis. The person may be more prone to wander and get lost, change their personality in a radical way, engage in unsafe behaviors and many other ways.

6. Decision Making

As the brain disintegrates through dementia the person becomes much more vulnerable to the power of suggestion, telemarketers, door-to-door salesman and other predators. Left to their own decision-making many demented people cannot make even simple decisions.

7. Decline in Personal Hygiene

People with dementia frequently display a total lack of regard to brushing their teeth and washing their body and their clothing. They often do not wash their hair or clip their nails and their household may be a germ and mold infested area.

8. Skipping Meals

Persons experiencing dementia may start to lose interest in food and skip meals altogether, or alternatively may forget that they just ate and eat multiple times. Left to their own devices, they will not eat a healthy diet and will resort to easy to access junk food.

9. Time and Location

Is common for demented people to mix night and day, and to forget where they are or how they got there and how do get home.

11. Delusions or Paranoia

Many demented people, particularly those suffering from Alzheimer’s disease can become extremely suspicious or paranoid of others to the extent that they fear someone is trying to kill them, harm or steal from them. These people often phone the police and report things like people stealing from their ATM only to shown the film that it a themselves who withdrew the money.

12. Social and Family Withdrawal

A demented person may start to remove themselves from hobbies, social activities, sports and family engagements. The changes they are experiencing can be frightening and overwhelming and may drive them away from spending time with other people.

Unconscionable Procurement

Sandwell v Sayers 2022 BCSC 605 discussed at length the legal construct referred to as unconscionable procurement, however dismissed the plaintiff’s claim that the defendant held her interest in the property in trust for the plaintiff, or that she be removed from title, and that the property vest with the plaintiff.

The plaintiff was the 91-year-old father of the defendant, and had recently transferred an interest in his home to the defendant, making them joint tenants. He signed a Deed of Gift at the time of the transfer.

The primary dispute focused on whether the doctrine of unconscionable procurement exists in British Columbia.

The court initially looked that the law of resulting trusts and followed Pecore v Pecore 2007 SCC 17 that transfers between parents and adult children are presumed to be bargains and not gifts. As a result in the absence of proof that the transferor intended to make a gift, the transferee holds the title in trust for the transferor.
Where there is evidence of a gift, the presumption of resulting trust me would be rebutted, and the court found that the deed of gift was evidence of the plaintiff’s intention to make a gift.

Unconscionable Procurement

The doctrine appears to have its foundation as far back as 1851 in the Chancery Court of England. It was popular in the 1800s and the early 1900s and then fell from vogue.
Generally speaking, the doctrine indicates that where there is a transfer of significant benefit that the recipient actively caused to occur, there must be proof of the donors full comprehension and understanding of the effects of the transfer for it to be upheld.

Fichera v. McAllister, 2021 ONSC 2685 [Fichera], provides a useful summary of the doctrine of unconscionable procurement:

31 The doctrine of unconscionable procurement renders an inter vivos gift voidable; at issue is the “donor’s necessary understanding to make a transaction conscionable when it takes place in circumstances that suggest, on a prima facie basis, the contrary”: Gefen v. Gaertner, 2019 ONSC 6015, at para. 158, citing John E.S. Poyser, Capacity and Undue Influence (Toronto: Thomson Reuters Canada, 2014), at p. 571.

32 The onus rests on the party attacking the transaction to prove, on a balance of probabilities, that it was unconscionably procured. Once the party challenging the transaction has established a significant benefit and the active involvement on the part of the person obtaining the benefit in the procurement or arrangement of the transfer, then there is a presumption that the donor of the gift did not truly understand what she was doing in making the transaction: Gefen, at para. 159. This presumption is not determinative. Both parties must adduce evidence about the donor’s understanding of what she was doing; the “issue turns on whether the donor appreciated the effect, nature and consequence of the transaction in a manner sufficient to render it fair, just and reasonable”: Gefen, at paras. 161-162, citing Poyser, at pp. 570 and 574.

The court referred to Pinsonneault v Courtney 2022 BCSC 120 that also dealt with the transfer of property by the plaintiff to the defendants without consideration and was accompanied by a deed of gift. The plaintiff subsequently wish to avoid the transfer.

The court in that decision focused on whether the plaintiff understood the effect of the documents that were signed, and did he or she intend to transfer an outright gift to the defendants.
The BC Court stated:

187] The doctrine of wrongful (or unconscionable) procurement is derived from the principle that where a donee obtains a benefit from a donor that in turn disadvantages that donor, the donee must prove that the donor had the “necessary level of understanding to make a transaction conscionable”: John E.S. Poyser, Capacity and Undue Influence 2nd ed (Toronto: Carswell, 2019) at 629 in Gefen v. Gaertner, 2019 ONSC 6015 at para.158. It is an equitable principle: Poyser at 628. A finding of wrongful procurement renders a transfer voidable by the court: Gefen at para. 158.

[188] The Court in Gefen provided that the onus is on the party attacking the transaction to prove on a balance of probabilities that: (1) a significant benefit was provided; and (2) active involvement by the person obtaining the benefit of the procurement: at para. 159. Once these two elements are established, it is presumed that the donor “did not truly understand what they were doing when they made the transaction.” Gefen at para. 159.

[189] Once the presumption is established, the transaction is voidable and the Court must determine whether it would be unconscionable to let the transaction stand. As stated in Gefen at para. 161, at this stage,

[161] …Both parties must adduce evidence about the donor’s actual understanding of what she was doing. If the evidence does not come down on either side, the attacker will have failed to meet the onus and the transaction will stand: Poyser, at p. 570.

[162] The attacker must ensure that there is enough evidence before the court in the final weighing to allow the court to conclude, as a finding of fact, that the donor failed to have a conscionable understanding of what she was doing when completing the transaction. This issue turns on whether the donor appreciated the effect, nature, and consequence of the transaction in a manner sufficient to render it fair, just, and reasonable: Poyser, at p. 574.

[190] The question the court must ask is whether the donor “fully appreciate[d] [the] effect, nature and, and consequence” of providing gift: Kinsella v. Pask, 28 O.L.R. 393 at 400, 12 D.L.R. 522
The court concluded that at a minimum, if the doctrine does exist in British Columbia, there must be limits imposed on the scope of the doctrine, as failing to do so would entirely displace the law of resulting trust in many cases, when that law is an effective and reasoned approach to determine when the transaction may be set aside.

Testamentary Capacity- A Legal Test and Construct

Nassim v Healey 2022 BCSC 402 was a dispute over the validity of two testamentary documents –a formal one prepared by lawyers and a hand written will made by the deceased.

The issue of testamentary capacity largely came down to the weight of evidence that the court gave in favour of the lawyers testimony that the deceased was mentally competent to prepare both wills, versus medical evidence that the deceased was demented and incapable of managing his finances.

The case is a good review of the awl of testamentary capacity, knowledge and approval, suspicious circumstances and shifting onus of proof.

The medical diagnosis was a suspicious circumstance that shifted the onus of proof and the evidence of the two lawyers was found to be sufficient to rebut the presumption . The court found that all of the elements necessary for testamentary capacity were present as per the testimony of the lawyers.

The relevant times for assessing mental capacity are when the will-maker gave his or her instructions and when the will-maker executes the will.

TESTAMENTARY CAPACITY

(A LEGAL CONSTRUCT & NOT MEDICAL CONCEPT)

While such medical opinions are undoubtedly relevant, it is well established that the court is not obliged to accept them in the face of other more compelling evidence regarding testamentary capacity.

As Ballance J. wrote in Laszlo v Lawton 2013 BCSC 305 at para. 198:

“Testamentary capacity is not a medical concept or diagnosis; it is a legal construct. Accordingly, scientific or medical evidence – while important and relevant – is neither essential nor conclusive in determining its presence or absence. Indeed, the evidence of lay witnesses often figures prominently in the analysis. Where both categories of evidence are adduced, it is open to the court to accord greater weight to the lay evidence than to the medical evidence, or reject the medical evidence altogether: Baker Estate v. Myhre (1995), 1995 CanLII 9056 (AB QB), 28 Alta. L.R. (3d) 428 at para. 39 (Q.B.); O’Neil v. Brown Estate, [1946] S.C.R. 622 [O’Neil]; Spence v. Price (1945), [1946] 2 D.L.R. 592 at 595-96 (Ont. C.A.); James at para. 77; Miliwat v. Gagné, 2009 BCSC 1447, aff’d 2010 BCCA 323 [Miliwat].

Implicit and explicit in the jurisprudence is an acknowledgement of the complexity and subtleties of diminished cognitive functioning and the way in which we perceive, present to and interact with the world around us.

For example, although it is recognized that dementia can impair a testator’s mental powers such that he is not capable of making a will, a diagnosis of dementia, standing alone, does not automatically correspond to testamentary incapacity: Royal Trust Corp. of Canada v. Ritchie, 2007 SKCA 64 at para. 13; Otto v. Kapacila Estate, 2010 SKCA 85 at para. 36 [Otto]; Moore at para. 36.
Similarly, a person who is judicially declared incapable of managing his or her affairs pursuant to adult guardianship legislation or suffers a chronic psychotic illness such as schizophrenia may still have the capacity to make a valid will: Otto at para. 36; Royal Trust Co. v. Rampone, [1974] B.C.J. No. 612 (S.C.); Moore at para. 36; Hoffman v. Heinrichs, 2012 MBQB 133. [Emphasis added, not in original.]”

Family Law Re Property and Debt

Family Property and Debt was discussed in Williams v Williams 2022 BCSC 517.

Although Family law and estate law have historically been very different, there has been a gradual trend in recent years to incorporate more family law principles into certain aspects of estate litigation such as wills variation.

Section 85 of the Family Law Act, S.B.C. 2011, c. 25 [FLA] provides a broad definition of family property which includes real property, business interests, investments, money, pensions, and increases in value of any excluded property during the course of a relationship.

Per s. 87 of the FLA, valuation of family property must be based on market value and determined as of the date of an agreement dividing family property and debt, or at the court hearing to determine those matters. In the family property scheme, the FLA allows for property to be identified as excluded and not subject to equal division. Property may be excluded from equal division under s. 85 if it is acquired by a spouse before the relationship between the spouses began, is an inheritance, or a gift to a spouse from a third party. The spouse claiming that property is excluded is responsible for demonstrating how that exclusion occurs.

The Court of Appeal in Shih v. Shih, 2017 BCCA 37 [Shih] set out the legal test for excluded property under s. 85 of the FLA. The party seeking property to be excluded must establish, on a balance of probabilities, that the property should be excluded. The Court rejected a legal standard demanding mathematical certainty or precision, finding this improperly tips the standard closer to a criminal standard of proof beyond a reasonable doubt. The Court stated “…in many relationships of any significant length, documents will have been destroyed and memories dimmed. A legal standard that demands mathematical certainty or precisions risks defeating legitimate claims”: at paras. 41-42.

In Venables v. Venables, 2018 BCSC 1736, Mr. Justice Marchand considered situations where funds of a family were comingled, for example where a spouse got an inheritance or gift and then brought that amount into what seemed to be pooled family property. At para. 64, Justice Marchand commented on the case of S.E.V. v. T.M.V., 2018 BCSC 30, concluded that the proper approach was to consider the transferor’s intention and to look at the transferor’s intention in the overall context of their actions:

In S.E.V. v. T.M.V., 2018 BCSC 30 at para. 96 concluded that, rather than apply a presumption, the proper approach was to consider the transferor’s intention. At paras. 100-101, conducted a fact-specific inquiry and determined that each party intended to give 50% of their property to the other. Even though certain funds could be traced to the sale of excluded property, considered all of the parties’ property to be family property and divided it equally. In the alternative, at para. 104 Abrioux J. found that it would be significantly unfair not to divide the funds at issue equally.

Similarly, in Pisarski v. Piesik, 2019 BCCA 129 [Pisarki], the Court of Appeal emphasized the principle that the onus rests on the person seeking the exemption to prove that property should be considered exempt. The Court in Pisarki adopted the Shih test for balance of probabilities, and noted that the party seeking to exclude property must do so with clear and cogent evidence. Further, the trial judge considering the exemption has to balance the evidence as a whole and can draw reasonable inferences from the evidence presented about what is the intention of the parties in the circumstances

Executor and Proving the Will In Solemn Form

When the validity of a will is in question, the propoundor of the will ( usually the executor) is often forced to prove the validity of the will in solemn form, by commencing a court action and having a judge determine the wills validity, as opposed to a non contentious probate where the will is approved by a court registrar in common form.

In Romans estate v. Tassone 2009  BCCA 421, the appeal court discussed the difference between proving a will in common form, and proving a will in solemn form as follows:

Often proof of a will in common form is all that is required for the administration of an estate where there is a will. Proof in common form, however, does not conclusively determine the will to be the valid last will of a person.

Proof of the will in solemn form provides some protection for the will, in that it will not later be set aside, unless obtained by fraud or a later will is found:  Tristam & Cootes Probate Practice (27th Edition, 1989, p. 572. As noted by the authors of the British Columbia Probate & Estate Administration Manual, 2nd Edition, 2008 Update, at p. 18-17, “[t]he safeguarding effect of a grant in solemn form is an application of the principle of res judicata to what is a judgment in rem”.

17 Halsbury’s Laws (4th) para. 866 says:

If there is any doubt as to the validity of a will or any apprehension that there may be opposition to it, it is open to the executor, or if there is no executor the person entitled to administration with the will annexed, to prove it in solemn form.

In Trites v. Johnson, [1945] B.C.J. No. 76, [1945] 3 W.W.R. 100 (B.C.S.C.) Macfarlane J., as he then was observed that “In a case of this kind where the validity of a will has once been called in question I think it is the duty of the executors to prove the will in solemn form of law….”

Proof in solemn form was required even where the party originally requesting such had withdrawn their objection.

If the will is proven in solemn form, or per testes, it must be proven in open court, upon notice to all interested persons, and will not be admitted to probate unless the court is satisfied of the due execution of the will, the testator’s knowledge and approval of its contents, his capacity and non-revocation: Osterhoff on Wills and Succession, 6th Edition, 2007, Thomson, Carswell, p. 44.

The Partition and Sale of Property ( 2022)

The Partition and Property Act (PPA) gives the court a broad discretion to order partition and sale of co-owned property.

Section 2 of the PPA provides in part:

(1) All joint tenants, tenants in common, . . . and all parties interested in any land may be compelled to partition or sell the land, or a part of it as provided in this Act.

(2) Subsection (1) applies whether the estate is legal or equitable or equitable only.

Under s. 7 of the PPA, the court has the discretion to order the sale of property, rather than partition.

Sections 2, 6 and 7 also give the court discretion not to order a sale.

“Partition” simply means the dividing of lands held in joint ownership into distinct portions so that they may be held individually. The usual purpose of a petition for partition and sale is to have the court order a sale of the property after firstly determining the respective equities of the owners.

Court Discretion

The court has a broad discretion to fashion a remedy that brings the parties dispute to an end in the fairest and most appropriate possible way.

The use of the word “ may” in S. 2, 7 and 8 has been held to create such a discretion. Evans v. Evans (1951) 2 DLR 221 ( BCCA).

Chief Justice Hinkson in Lashman v Spencer 2022 BCSC 96 stated that the court has a broad discretion to determine whether an order for sale of the property would be in the interests of justice.

He followed the decision of Haigh v Kent 2016 BCSC 333 and stated orders for partition or for sale are discretionary. The onus is on the parties who do not wish to suffer partition or sale to demonstrate to the court that the interests of justice are such that the order for partition or sale, should not be made. The fact remains that the discretion is broad and unfettered and will turn on whether justice requires that such an order not be made.

S.6 PPA describes circumstances in which the court “shall” order a sale but with the limitation “unless it sees good reason to the contrary.”

Standing to Bring the Claim
S. 2 states the types of co-ownership that are subject to the PPA, but in addition to this, anyone seeking partition or sale must have an immediate right to possession of the land. Thus owners of future interests, such as the remainder following a life estate, cannot claim these remedies.

Additionally, in order to have standing under the PPA, the owner must have a “possessory interest” in the land which Blacks law dictionary defines as “an immediate right to possession of the land.”

In Aho v Kelly 1998 CarswellBC 1285 the court held that a one third owner of a life estate in the property had the right to capitalize the life estate and force a sale of the property under the PPA. The other two co-owners could not have partitioned the property while the life estate was in place, but the holder of the life estate could do so.

Where the Court Will Order Partition and Sale

S. 2 provides the gateway through which a party with an interest in land may have the court consider whether to order a partition or sale of the property. A party who does not wish to “suffer partition or sale” bears the onus of demonstrating to the court that justice requires that the sale for partition or sale not be made. Failing such a demonstration, the court must enforce the interested parties, prima facie right to partition or sale.

One of the leading decisions in British Columbia on PPA is Harmeling v Harmeling (1978) 5 WWR 688 (BCCA) that stated that the court should accept without qualification the general statement that there is a prima facie right of a joint tenant to partition or sale, and that the court will compel such partition or sale, unless justice requires that such an order should not be made.

In Bindley Estate v Quartermaine Holding Ltd. 2017 BCSC 672 the court ordered partition and sale of the property that was owned equally between two parties, where one party wished to sell and the other refused. They were unable to agree on a price, and the petitioner estate wished to sell in order to wind up the estate of the deceased owner in a residential apartment.
The court stated that it is a matter of discretion under section 6 PPA and in exercising the court’s discretion, the court must act judicially and fairly. One consideration will be whether an overriding fairness and similar result can be obtained by some other reasonable process.

Where the Court Will Refuse Partition and Sale

1. Hardship or Injustice

In Mowat v Dudas 2012 BCSC 454 the court exercised its discretion to refuse an order for sale of a major condo development of 177 units owned by 135 different owners. Some owners wanted the property sold, while others vigorously opposed same.

The court found that a sale would force many vulnerable people out of their homes, including young children, single parents, the elderly and the infirm. Many could not afford a comparable property nearby and would be forced to move far away.

There are several cases such as Bergen v Bergen ( 1969) 68 WWR 196 , where the court refused partition or sale because it was found that the plaintiffs husband’s conduct was economically oppressive. The premises were of a relatively low value, and if the property was sold, the wife would not have been able to provide adequate accommodation for herself and her children.
In Lou v Vesterinen 2017 BCSC 1556 the court refused an application for partition and sale by a trustee in bankruptcy due to the serious hardship that would have detrimentally affected two young children living in the home, one of whom was severely disabled.

2. Where the Beneficial Interest Is In Dispute

In Sedberg v Snyder 2017 BCJ 803 a 21 year marriage like relationship was litigated as to each joint tenants beneficial interest in the property. The parties agreed to list the home for sale as joint tenants and to share the proceeds.

The presumption that their interests were held equally however, was rebutted.

While the wife made significant contributions to the home, her contributions were considerably less than the husbands who owned the home outright when she was added as a joint owner. The wife made significant nonmonetary contributions, but also received rent-free accommodation. An equal division would have deprived the husband of his original investment and the benefit of his very large contribution throughout, with no juristic reason.

The sale proceeds were divided 70% to him, and 30% to her.

Partition proceedings often include claims such as resulting trust or unjust enrichment where the parties are both asking the court to determine the parties’ respective beneficial interests and to then order a sale of the property.

3. Minority Owners

As previously stated and generally speaking, if a party owns 50% of the property in co-ownership, and seeks the sale of the property, then the court must order a sale unless there’s a good reason not to do so.

The situation is quite different however when dealing with a minority owner.

S. 8(2) PPA states that the court may not make an order for partition if the other parties interested in the property, or some of them, undertake to purchase the share of the party requesting the sale.

S.8(3) states that if an undertaking is given, the court may order the valuation of the share of the property requesting the sale in the manner, as the court thinks fit, and may give directions.

In Haigh v Kent 2016 BCSC 333 the court found that a division of the property would not be just or practicable due to its unique nature and topography, its use, its history and factors such as subdivision approval and land-use, permitting and access issues. Sale and distribution would inflict on the defendants the serious hardship of ending seven decades and four generations of their families’ connection to the land.

In any event, an order for sale and distribution was prohibited since the defendants gave an undertaking to purchase the plaintiff’s interest.

In Lashman v Spencer 2022 BCSC 96 the court followed Rendle v Stanhope Dairy Farm Ltd. 2003 BCSC 1894 , which held that an undertaking given under section 8 PPA must be an unqualified undertaking followed by the determination of value. If the offer does not constitute an undertaking to purchase as contemplated by S. 8(2) of the act, then the court may order partition and sale.

In Kane v Hanslo 2017 BCSC 23293 , a claim for partition and sale of the property was referred to the trial list rather than being decided at a summary trial where the parties could not agree on the beneficial interest that each owned.

The court held that the pending trial of the action constituted “good reason”, within the meaning of S. 6 PPA not to order a partition and sale at that stage. It was therefore neither necessary nor expedient for the property to be sold at that time, and that the matter should proceed to trial to clarify the rights of the parties before it was determined what property should be sold and if so, on what terms.

CONCLUSION
Prior to the passing of the Partition Act in 1868, partition was a matter of right, and the court had no discretion to refuse partition or to order sale in lieu thereof. This state of the law produced numerous inconveniences and absurdities.
The Partition of Property act now provides that the court has broad and unfettered discretion whether or not to order partition or sale and each case will turn on whether justice requires that such an order not be made. Bradwell v Scott 2000 BCCA 576 at para 26-30.