Courts Scrutinize Claims Against Estates

Claims Against Estates To Be ScrutinizedCOurt scrutiny

 

Miller v Miller ( 1987) 14 BCLR (2d) 42 at pa 451, and approved by other cases such as Friak v Pilon 2012 BCSC 528 state that claims against deceased persons must be approached by the courts ” with the most careful scrutiny and indeed at the outset with some suspicion”. This was most recently applied in Wharton v McMinigal Estate 2014 BCCA 434

Miller at page 451 states:

Despite the repeal, it seems reasonable that a court should require a high standard of proof from a person who claims he is owed a sum of money by way of a debt due him from a deceased individual. This is because the deceased cannot, of course, appear in court and present his or her side of the argument.

The only evidence that can be introduced in most instances is the evidence of the survivor. Support for the idea that a court must view this kind of evidence with care comes from a decision of Rae J. in Kong v. Kong, 14 B.C.L.R. 357, [1979] 6 W.W.R. 673, 5 E.T.R. 67 (S.C.). He describes the requirement of adequate proof as a rule of practice which a court should follow as a consequence of the repeal of s. 11 of the Evidence Act. At pp. 361-62 His Lordship said this:

In the absence of the statutory provision, one must at least examine the evidence with the most careful scrutiny and indeed, at the outset, with some suspicion: see Re Garnett: Gandy v. Macaulay (1885), 31 Ch. D. 1 (C.A.). One should also give consideration to whether corroborative evidence of a material nature exists and, if it does not, then whether in the particular circumstances it is necessary in order to render the other evidence believable. Under the rule of practice referred to, it was not in variably necessary to have corroboration of the nature indicated before the evidence could be acted upon: Re Garnett, supra; and Re Hodgson; Beckett v. Ramsale (1885), 31 Ch. D. 177 (C.A.), as cited in Bayley v. Trusts & Guar. Co. Ltd., 66 O.L.R. 254, [1931] 1 D.L.R. 500 at 504, per Middleton J.A.
35      More recent authority argues that the common law rule of practice demanding corroboration was not revived by the repeal of s. 11 of the Evidence Act in 1976: McLeod v. MacLeod; McLeod v. Deighton (1980), 22 B.C.L.R. 51 at 55 (Cowan L.J.S.C.):
In light of the decisions above referred to and the provisions of s. 30 of the Interpretation Act, I hold that the repeal of s. 11 of the Evidence Act did not have the effect of reviving the former common law rule regarding corroboration in cases involving claims by or against a deceased person in respect of matters occurring before the death of the deceased.
37      Therefore, while corroboration is no longer necessary, it still seems to me the evidence of a claimant in these types of situations should be examined with “the most careful scrutiny and indeed at the outset with some suspicion”.

disinherited.com Likes Contingency Fee Cases

 

Contingency feeA contingency fee basis agreement is a fee arrangement between a lawyer and client were typically the lawyer only receives a fee from the successful monies collected from a court action, with the usual motto being” no collection, no fees”.

Such an arrangement is typically satisfactory to the client who bears little risk in the litigation other than losing the case and having to pay the other party’s costs. The client is saved the often inordinate regular buildings that litigation lawyers send on a regular basis that are expected to be paid promptly should work be expected to continue.

In a contingency fee arrangement it can often be many years before the lawyer realizes his or her fee, even after the trial or settlement.

Contingency fees are often referred to as the poor man’s key to the courtroom, and the reality is is that many larger law firms do not allow their lawyers to handle fees on a contingency basis as they are simply risky and thus hard to account for in budgeting.

disinherited.com on the other hand typically ask for those who have been disinherited and more often than not, is prepared to accept a case on the basis of a contingency fee arrangement.

Court disputes on occasion occur over the terms of a contingency fee, particularly where the success has been substantial and thus the fee accordingly may be deemed excessively high.

There has been a great number of cases litigated simply on the terms of the contingency fee itself, with the latest best-known Court of Appeal case in British Columbia being Mide-WIlson v Hungerford Tomyn 2013 BCCA 559, which is required reading for all lawyers performing legal services under contingency fee agreements. The plaintiff was the granddaughter of the deceased, Jack Cewe, who was a very successful gravel operator and road Paver, who died within estate worth perhaps $100 million.

After a long discussion with the client as to the possibility of potential fees being as high as $2 million if the case went to the Supreme Court of Canada, the client and the law firm settled on the basis that the firm’s fees would be 20% of any settlement entered into within the first year of the agreement being signed, and 25% settlement entered into within the second year or third year of any settlement or judgment obtained thereafter.

The law firm claimed a fee of $17 million based on the contingency fee

 

The registrar and a decision found in  2011 BCSC 1440 awarded $9 million to the law firm. Both parties called very senior lawyers to give expert evidence as to their opinion as to the proper quantum of the fee.

The firm appealed to the soup bream court and the Supreme Court judge reduce the fee to $5 million, calling the $9 million award excessive and one that would question the integrity of the profession.

The Court of Appeal reviewed the matter at 2013 BCCA 559 and upheld the award of $5 million

The Court of Appeals summary includes the following passage:

 

“Lawyers are not venture capitalists, and there exists a risk that the amount payable under a contingency fee agreement will be arbitrarily high, particularly where the underlying assets recoverable and therefore the fee payable may fluctuate greatly. In this case to come of the value is not a function of the work done by the firm. If the estate had been worth $200 million the firm would under the agreement be entitled to a fee of 40 million. There was an aspect of arbitrariness to such a result.

 

 

Appeal Test For Reviewing Trials By Affidavit (Summary Trial)

Three JudgesAppeal Test For Reviewing a Summary trial

 

Lorintt v Boda 2014 BCCA 354 deals inter alia with the appeal test, the court uses when reviewing a trial where no oral evidence was give, but instead it was a summary trial based on affidavits.

One of the risks of summary trial is  the Chambers Judge has no or little opportunity to watch people on the witness stand and get a sense of their “true character”, which is often the most important aspect of estate litigation and allegations of undue influence, such as was alleged. Instead, the evidence is all presented in affidavit form. A Judge will usually decline to hear a summary trial where there are issues such as credibility-ie who to believe or disbelieve.

The Facts:

In February 2000 a father transferred his residence from himself to himself and his son in joint tenancy. After the father’s death in 2008, his executor sought a declaration that the son held the property in trust for the father’s estate. The chambers judge dismissed the executor’s claim. He held that the father intended to gift the property to the son. He found that the relationship between the parties was such that the presumption of undue influence did not apply. The executor now appeals. He submits that the chambers judge erred in determining that the presumption of resulting trust had been rebutted and further, and in the alternative, he erred in failing to find the transaction should be set aside because of undue influence.

Held: Appeal dismissed. It was open to the chambers judge on the evidence to find that the father had a donative intent. There was no basis to interfere with the chambers judge’s findings that the relationship between the parties did not give rise to the potential domination of one party by another.

 A. Standard of Review

[72]         The parties are in agreement that the question of the intention of a party who transfers property to another for no consideration is a question of fact reviewable on a palpable and overriding error standard. The parties also agree that findings concerning undue influence are questions of fact and subject to a differential standard of review absent palpable and overriding error.

[73]         In this case there was no oral testimony. All of the evidence was by way of affidavit. The general rule in this Court when dealing with affidavit evidence is where evidence consists entirely of affidavits rather than viva voce evidence, the standard of review is that findings of fact should only be set aside if the finding was clearly wrong or was not reasonably supported by the evidence: Tangerine Financial Products Limited v. Sutherland, 2013 BCCA 283 at para. 46; Icahn Partners LP v. Lions Gate Entertainment Corp., 2011 BCCA 228 at para. 73; Orangeville Raceway Ltd. v. Wood Gundy Inc. (1995), 6 B.C.L.R. (3d) 391 (C.A.).

Removal of a Notice of Intention to Dispute Under WESA

Re Richardson Estate 2014 BCSC 2162 also dealt with the new WESA rules relating to the removal of a Notice of Intention to Dispute ( the former probate caveat), finding that the test is whether it is in the best interests of the estate to do so.

 

In Re Richardson, the Judge found that between the contesting parties, the wife was a common law spouse who would inherit the entire estate, then it was only to follow that the Notice of Intention to Dispute would be removed as the matter in issue had been resoled.

 

Best interests of the estate

[54]         New Supreme Court Rules came into force with WESA. The applicant seeks the removal of the disputant’s notice of dispute pursuant to the new Rule 25-14(1)(h). Rule 25-10(11) sets out the grounds for removal:

Grounds on which notice of dispute may be removed

(11) On an application under subrule (10), the court may, by order in Form P31, remove a notice of dispute if the court determines that the filing is not in the best interests of the estate.

As with WESA itself, counsel advise that there are as yet no cases interpreting these Rules.

[55]         As a first point it is useful to return to the July 21, 2014 notice of dispute. The basis of the dispute is that the disputant “… disputes that [the applicant], who is applying by Letters of Administration and claiming to be the sole beneficiary, is a spouse of the deceased.” As above, I have found that the applicant was the spouse of Mr. Richardson and that his intestate estate must be distributed to her, pursuant to ss. 2(1) and  20 of WESA, respectively. Those findings are, in my view, conclusive as to the dispute in this case and I can find no basis for proceeding further. Put another way, I conclude that it would not be in the best interests of the estate to leave a spent dispute lying over the estate.

[56]         A related matter is I have decided above that there should not be an adjournment of the applicant’s application so that a full or summary trial can take place. The evidence in this case is by affidavit. While there are clear differences between affidavit evidence and viva voce evidence, the former are entirely adequate for the issues in this case.

[57]         I was directed by the disputant to the approach prior to WESA under the then Rule 19(24). Different language was used and the issue was whether to strike a caveat under the then Rule 19(24). It provided that a caveat could be struck if it “discloses no reasonable claim or defence as the case may be”, among other reasons. Before a caveat was struck out it had to be “plain and obvious” that it did not disclose a reasonable claim (or defence). As well, it was to be assumed that the facts plead were true and any doubt was to be resolved in letting the pleading stand (Chang Estate v. Chang, 2010 BCCA 111 at para 39; citing Hunt v. Carey Canada Inc., [1990] 2 SCR 959).

[58]         As can be seen above, the new language in Rule 25-10(11) describes removing a notice of dispute and whether that would be in the “best interests of the estate.” In my view this is broad language and with a substantially different objective than the previous Rule. Instead of a focus on the nature of the pleadings under the previous Rule, the focus now is on the estate and what is in its best interest.

[59]         It is submitted on behalf of the disputant that the test to be applied to this new language is a three stage test: does the disputant have standing to challenge the will or appointment of an administrator without a will; is there a reasonable claim or a legitimate issue to be contested; and is the removal of the notice of dispute consistent with protecting the integrity of the probate and administration process? There is considerable overlap between this approach and the approach under the former Rule 19(24) inasmuch as both focus on the merits of the dispute and the process of probate and administration. Those matters may in some circumstances be relevant to determining the best interests of the estate. However, the best interests of the estate is broader language and capable of including other issues.

[60]         Another aspect of the submission of the disputant is to say that it “will always” be in the best interests of the estate to challenge the appointment of an executor or administrator thus making valid any challenge. As a very general proposition I accept that valid disputes should not be discouraged. However, making it a final legal conclusion as a matter of interpreting WESA and the new Rules would, in my view, make Rule 25-10(11) essentially a dead letter because no notice of dispute could be removed.

[61]         There is a previous case which provides some assistance in the interpretation of the phrase “best interests of the estate” (Re: Estate of Fannie Cleverley, 2000 BCSC 1454 at paras. 24-26). In that case a beneficiarysaid that an executor was not protecting the beneficiaries because he was not pursuing litigation on behalf of the estate. The executor, appearing on his own, said that the litigation in question would involve substantial costs for a nominal value to the estate of not more than $20,000. The executor submitted to the court that it would not be in the best interests of the estate to pursue the litigation. Master Joyce (as he then was) concluded that he was in no better position than the executor with whom he agreed.

[62]         Looked at in this light, the best interests of the estate are an economic issue, one requiring the weighing of the value of a decision or issue in dispute with the overall value of the estate. I conclude that this approach has some merit in interpreting Rule 25-10(11) in this case. I hasten to add that non-economic issues can be important to the best interests of the estate such as, for example, situations involving personal items or even real property that has unique value. Those circumstances are not a concern here.

[63]         In this case the potential estate of Mr. Richardson includes about $105,000 in term deposits and cash. I note that this is an imprecise estimate in as much as it is based on what Mr. Richardson told Ms. Weiser in 2010. I presume that the imprecise estimate of the estate arises from the fact that there is no administrator who has authority to itemize or value the estate.

[64]         In reaching the estimate of $105,000, I have excluded an RRSP and investment account, as described by Ms. Weiser, because the applicant is the named beneficiary. With respect to land, as discussed above, there are State of Title Certificates indicating that Mr. Richardson is the owner of the property at 837 West Bay Road and another property.

[65]         The potential estate of Mr. Richardson includes the $105,000 in cash and term deposits as well as the value of his interest in the properties on Gambier Island. I acknowledge the importance of this estate to the applicant and the disputant but it is also appropriate to point out that it is not a large estate as measured by its value. Nor is it a large amount when compared with the cost of litigation, litigation that has essentially been answered by the finding above that the applicant was the spouse of Mr. Richardson.

[66]         On this basis I conclude that it is in the best interests of the estate to remove the notice of dispute in this case.

Party v Party Court Costs

Rocky partyParty v Party Court Costs

 

Semenoff Estate v Bridgeman 2014 BCSC 1845 involves the Court’s approach to assessing costs against a plaintiff who acted for himself personally in a nine day trial that was dismissed with costs for part of the trial and double costs for a portion thereafter.

The plaintiff’s actions were deemed excessive and wasteful by the Court, who awarded $53,000 in costs, plus taxes and disbursements, all totalling $74,000.:

8      The cause of action alleged that the defendant was negligent in allowing the property owned by Bill to pass to his siblings, thereby depriving the plaintiff of his alleged inheritance. Despite the underlying simplicity of the case, the plaintiff filed four sets of pleadings: the first on October 30, 2007; the second on November 4, 2011; the third on March 23, 2012 and; the last on February 6, 2013. In describing the pleadings, in Semenoff Estate v. Bridgeman, 2013 BCSC 1022 (B.C. S.C.), Mr. Justice McKinnon stated:
 
[25] The plaintiff’s pleadings go on for pages making all sorts of claims, including claims in contract. The trial management judge described them as “prolix”. I agree and go further to label them, for the most part, incomprehensible, vexatious and frivolous.
[26] The plaintiff seems incapable of making simple claims which would be appropriate to his perceived view of the facts. When one wades through the prolix pleadings and considers the evidence proffered, the essence of his complaint is the failure of Mr. Bridgeman to investigate the state of title which, if done, ought to have prompted him to sever the joint tenancy and thereby protect the “estate” of Bill Semenoff. If that had been done, on Bill’s death, his interest would have passed to his estate whose heirs are Robert and his brother Howard.
9      The trial had been scheduled for four days but ended up taking nine days, almost all of which was entirely devoted to the plaintiff’s case. The trial judge characterized the plaintiff as being “preoccupied with conspiracy theories” (Semenoff Estate v. Bridgeman, 2013 BCSC 1022 (B.C. S.C.) at para. 37) and included requests from the plaintiff to “examine all the defendant’s closed files for the past 30 or 40 years to see if he could find
The Court awarded

 

                   THE  LAW of Party v Party Costs

Supreme Court Civil Rule 14-1(2) provides:

Assessment of party and party costs
(2) On an assessment of party and party costs under Appendix B, a registrar must
(a) allow those fees under Appendix B that were proper or reasonably necessary to conduct the proceeding, and
(b) consider Rule 1-3 and any case plan order.
16      In approaching the issue of whether work for which costs are claimed and claimed outlays should be allowed, an objective standard is to be applied. A step or expense was “necessary” if it was indispensable to the conduct of the proceeding (McKenzie v. Darke, 2003 BCSC 138 (B.C. S.C.)) (Registrar); Van Daele v. Van Daele (1983), 56 B.C.L.R. 178 (B.C. C.A.).
17      A step was “proper” if it was not necessary but was nevertheless reasonably taken or incurred for the purpose of the proceeding: McKenzie v. Darke, supra; McKenna v. Anderson, 2005 BCSC 84 (B.C. S.C.) (Registrar).
18      Registrars are to disallow costs proved to have been incurred or increased through extravagance, negligence or mistake, or by reason of the payment of unjustified charges or expenses (Bell v. Fantini (1981), 32 B.C.L.R. 322 (B.C. S.C.)). The defendant alleges the proceeding was unnecessarily and unreasonably lengthened and complicated by the actions of the plaintiff.
19      The defendant relies upon Kemp v. Wittenberg, 2001 BCSC 273 (B.C. S.C.) at para. 9, wherein the court stated:
[9] …. A sense of fairness and understanding granted to unrepresented parties ought never to extend to the degree where courts do not give effect to the existing law, or where the issue of fairness to an unrepresented litigant is permitted to override the rights of a defendant party.
Disbursements
Applicable Principles
77      The applicable legal principles which must be applied with respect to disbursements are summarized in Turner v. Whittaker, 2013 BCSC 712 (B.C. S.C.) at para. 5, wherein Master MacNaughton stated:
[5] Counsel were also able to agree on the following legal principles which are applicable on an assessment of disbursements:
1. Rule 14-1(5) requires an assessing officer to determine which disbursements were necessarily or properly incurred in the conduct of a proceeding and to allow a reasonable amount for those disbursements.
2. The consideration of whether a disbursement was necessarily or properly incurred is case-and circumstance-specific and must take into account proportionality under Rule 1-3. (Fairchild v. British Columbia (Vancouver Coastal Health Authority), 2012 BCSC 1207).
3. The time for assessing whether a disbursement was necessarily or properly incurred is when the disbursement was incurred not with the benefit of hindsight. (Van Daele v. Van Daele, 56 B.C.L.R. 176 (SC) rev’d 56 B.C.L.R. 178 at para. 4 (CA))
4. A necessary disbursement is one which is essential to conduct litigation; a proper one is one which is not necessary but is reasonably incurred for the purposes of the proceeding. (McKenzie v. Darke, 2003 BCSC 138, para. 17-18)
5. The role of an assessing officer is not to second guess a competent counsel doing a competent job solely because other counsel might have handled the matter differently. (McKenzie v. Darke, 2003 BCSC 138, para. 21)

The Standard of Review By Appeal Courts of Lower Court’s Decisions

The BCCA in Re Korol 2014 BCCA 380 recently examined the standard of review of an appellate court of a lower court’s decision in light of the following  SCC case of Penner v Niagara Regional

 

An Appeal Court’s standard of review of discretionary decisions was recently restated by the Supreme Court of Canada in Penner v. Niagara Regional Police Services Board, 2013 SCC 19 (S.C.C.):

[27] A discretionary decision of a lower court will be reversible where that court misdirected itself or came to a decision that is so clearly wrong that it amounts to an injustice: Elsom v. Elsom, [1989] 1 S.C.R. 1367, at p. 1375.

 

Reversing a lower court’s discretionary decision is also appropriate where the lower court gives no or insufficient weight to relevant considerations: Friends of the Oldman River Society v. Canada (Minister of Transport), [1992] 1 S.C.R. 3, at pp. 76-77.

 

However, a discretion exists in superior courts to grant relief from the effect of issue estoppel. ( the finding of facts made by a lower court)

Obviously such discretion should be exercised where the first proceedings were actually unfair, but relief may be granted from issue estoppel in fair proceedings where a clear legislative distinction exists between the purposes of the first and second proceedings.

What is relevant is the parties’ reasonable expectations of the stakes of each proceeding.

Certificates of Pending Litigation (CPL’s) To Tie Up land

Certificates of Pending Litigation

REPRINTED FROM CARSWELLS NOTES AND RELATING TO ONTARIO LAW ( SIMILAR  BUT NOT IDENTICAL TO BC LAW)

 

“Certificates of pending litigation (or lis pendens) (“CPL”) are often-used tool in order to preserve real property and unregistered interests in such property. The test to obtain a CPL is that there must be an interest in land in question and there must be a reasonable claim to that interest in land.[

 

Although there have been cases that discuss the equitable discretion of a judge on a motion to grant or discharge a CPL, in order for the motion to be granted or the CPL to be maintained, there must be a reasonable claim to the interest in land. The judge does exercise his or her discretion in equity and looks at all of the relevant matters between the parties in determining whether or not the certificate should be vacated. However, a claim to an interest in land is required.

 

The threshold in respect of the “interest in land” issue in a motion seeking a CPL is whether there is a triable issue as to such interest, not whether the plaintiff will likely succeed. A claim of the merits is not to be conducted. The onus is on the party opposing the CPL to demonstrate that there is no triable issue in respect to whether the party seeking the CPL has “a reasonable claim to the interest in the land claimed”.

 

Therefore, if a party is claiming an interest in an estate and the value of the estate is in a house, litigators must assess the appropriateness of obtaining a CPL in such circumstances. A situation where a mortgage or lien is put on the property or the house is sold, before a judgment is rendered and executed on or before a settlement is obtained, will be a highly undesirable outcome.

 

The merits of the CPL motion depend on the shape of the claim (for example, is there an articulated claim against the property or a claim against the residue of the estate? Is there any trust claims being made against the property?). Courts will likely grant a CPL in the estate context where allegations are made that a portion of the proceeds of sale of property or portions of the estate were used to buy the real property in question.[FN7]However, where a claim is made against the estate (articulated in general terms) or the residue of the estate, a CPL will not likely be granted.

 

If a CPL is not available in the circumstances, there are other options to ensure property in an estate is preserved. These options include, but are not limited to:

 

• 1. Obtain an order for directions setting out that certain property (not necessarily the real property) will be preserved pending a further court order or that it can only be disposed of or dissipated on the consent of all parties;

 

• 2. Appoint an estate trustee during litigation who will determine when it is appropriate to dissipate assets (for example, to pay taxes) on behalf of the estate. However, this option might not be helpful where fraudulent conduct was involved (i.e. you need to preserve property that is not held in the estate but was an asset of the estate);

 

• 3. Continue with the executor that was appointed by the will as an estate trustee during litigation but put stringent rules or limits on his or her powers;

 

• 4. Appoint a receiver if one of the estate assets is a business;

 

• 5. Pay or have funds paid into Court; and

 

• 6. Put a caution or notice on title to the property if certain requirements are met.

 

  1. Traitses v. Traitses Estate (2014), 2014 ONSC 2102, 2014 CarswellOnt 4185, 97 E.T.R. (3d) 127 (Ont. S.C.J.).

 

  1. Todd Family Trust v. Barefoot Science Technologies Inc. (2013), 2013 ONSC 523, 303 O.A.C. 327, 2013 CarswellOnt 1173 (Ont. Div. Ct.) at paras. 13 and 16. It is not necessarily the case that the party whose instance is requesting the CPL have an interest in land; rather, it must be that an interest in the land be asserted in the proceedings. See Chilian v. Augdome Corp. (1991), 78 D.L.R. (4th) 129, 44 O.A.C. 263, 2 O.R. (3d) 696, 49 C.P.C. (2d) 1, 1991 CarswellOnt 422 (Ont. C.A.) at para. 55, where a claim was made that, if substantiated, would adversely affect the defendant’s interest in the land.

 

  1. Ibid. The Court commented that it may be that “arriving at this finding [whether there is a reasonable claim to an interest in land] includes the exercise of discretion, but such discretion is circumscribed by the need to comply with that requirement.”

 

  1. Clock Investments Ltd. v. Hardwood Estates Ltd. (1977), 16 O.R. (2d) 671, 79 D.L.R. (3d) 129, 1977 CarswellOnt 1026 (Ont. Div. Ct.) at para. 9.

 

  1. Hupka v. Aarts Estate (2003), 49 E.T.R. (2d) 198, 2003 CarswellOnt 737 (Ont. S.C.J.) [“Hupka“] at para. 79 citing 572383 Ontario Inc. v. Dhunna (1987), 1987 CarswellOnt 551, 24 C.P.C. (2d) 287 (Ont. Master).

 

  1. Hupka, supra, at para. 50.

 

  1. Jordan v. Jordan (2013), 2013 CarswellOnt 15430, 2013 ONSC 6948 (Ont. S.C.J.) at para. 8.

 

  1. Dempster v. Dempster Estate (2008), 2008 CarswellOnt 6878, 45 E.T.R. (3d) 139 (Ont. S.C.J.).

 

  1. This was done in Moskalev v. Fraev Estate (2012), 2012 CarswellOnt 15056, 2012 ONSC 6669 (Ont. S.C.J.) where the plaintiff wanted a CPL vacated as a result of a pending sale of property. The Court only allowed the CPL to be vacated if the fair market value of the property (less fees and mortgage) was paid into Court. See also Leung Estate v. Leung (2004), 2004 CarswellOnt 1366, 7 E.T.R. (3d) 290 (Ont. S.C.J.).”

 

 

Appeal Court Allows Trusts to Be Interpreted re Their Meaning

BC Appeal Court have jurisdiction to construe a Trust Deed. See Donovan W.M. Waters, Mark R. Gillen and Lionel D. Smith, Waters’ Law of Trusts in Canada, 4th Ed. (Toronto: Thompson Reuters, 2012) at 1165-66.

See also Engelman v. Engelman (1986), 23 E.T.R. 30 (B.C.C.A.) at 5, that reversed the trial decision and found the court had both inherent jurisdiction as well as s 88 Trustee Act to interpret and vary if necessary a Trust Indenture.

The will of the deceased made his two brothers co-executors and sole beneficiaries.
A major asset of the estate was a farm on which the respondent brother resided.
The will empowered the executors to sell and convert property of the estate into money.
The petitioner wished to accept a third party’s offer to purchase the farm. The respondent wished to reject this offer and was himself prepared to offer to purchase the petitioner’s interest in the farm for an amount that equalled the proceeds the petitioner would receive from the third party purchaser.
The petitioner sought the direction of the Court pursuant to s. 88(1) of the Trustee Act (British Columbia).
The respondent originally took the position that the Court had no jurisdiction under s. 88(1) to make an order directing the sale of the farm since that provision could not be used to decide a question affecting the rights of the parties to property. During the course of the argument, however, the respondent argued that the Court should direct the petitioner to accept the respondent’s offer to purchase his share.
At first instance it was held that the Court should direct the respondent to accept the third party’s offer since the result of the ensuing sale would be to give each party his legal entitlement under the will: this direction would, consequently, give effect to the parties’ rights. However, the Court did not have jurisdiction to require the petitioner to accept the respondent’s offer to purchase his interest: such a direction would alter the petitioner’s right under the will to require that the property be sold and converted into cash.
The respondent appealed, and the appeal was allowed.
The Judge at first instance incorrectly interpreted the will as containing a direction to sell the property rather than a discretionary power to do so.
The executors were not bound to sell the estate and divide the proceeds in cash. It was open to them to distribute the estate in specie. Accordingly, a sale of the farm to one brother could not be said to frustrate the intention of the testator.
Moreover, the Judge was not restricted to the exercise of jurisdiction pursuant to s. 88 of the Trustee Act. In the circumstances that there was a deadlock, the Court had an inherent equitable jurisdiction to intervene to break the deadlock.
The proper order to make was to direct the sale of the farm to the respondent at the same price as the third party had offered.
This was just and equitable since the respondent had a particular and long-lasting connection with the property and he had a personal interest in being able to continue to reside on it. Such an order would not, moreover, cause any prejudice to the petitioner since it was established that the price offered was the proper market price and the sale would give to the petitioner his proper share of the value of that part of the estate.

Executor’s Obligation to Disclose Documents In Estate Litigation

 Executor’s Obligation to Disclose Documents In Estate Litigation

 

Wang v Christie Estate 2014 BCSC 1574 confirms and discusses what I would have considered to be trite law in that once an executor named as a respondent in a civil wills variation claim is served with the claim, he or she becomes subject to disclose documents obligation imposed on all parties of record under rule 7-1

The  Plaintiff had brought an action alleging he was spouse of deceased and that deceased’s will did not make adequate provision for his maintenance and support .

The  Executor was named as defendant.

The  Master dismissed the plaintiff’s application for an order requiring executor to file and deliver list of documents and the  Plaintiff successfully appealed.

Master’s interpretation and application of Rules of Court was held to be  in error , as since the  Executor  delivered a Response to the  claim, he  became subject to document disclosure obligations imposed on parties of record.

 

The Law

20      But this court has held, in Callender v. Callender Estate (1999), 178 D.L.R. (4th) 269 (B.C. S.C.), that the Rules of Court have the force of statute and legislative effect. It has also held in Smith v. Knudsen (2002), 17 C.P.C. (5th) 169 (B.C. S.C.), that the Rules are subordinate legislation, and subject to other provincial statutes in the event of inconsistency.
21      I see no inconsistency between the Wills Variation Act requirement that an executor be served with notice of a claim and the Supreme Court Civil Rules requirement that an executor be made a party to an action under the Act.
22      The executor relies on Quirico v. Pepper Estate [1999 CarswellBC 2177 (B.C. S.C.)], where, in an action under the Wills Variation Act, Bouck J. said at paras. 15 and 16:
15. An executor should not pick sides between the beneficiaries and use estate funds to finance litigation on their behalf under the Wills Variation Act. It is a matter of indifference to the executor as to how the estate should be divided. He or she need only comply with the terms of the will or any variation of it made by a court.
16. For all these reasons, the law anticipates the executor will remain impartial between the opposing beneficiaries. Where proceedings are taken under the Act, all the executor need do is appear at the trial if required, and deliver to the court the Letters Probate and financial documents showing the value of the estate.
23      This statement of the law was adopted by Wong J. in Ketcham v. Walton, 2012 BCSC 175 (B.C. S.C.) at paras. 10 to 12.
24      The executor’s position is that a requirement to list documents is inconsistent with the impartiality and neutrality required of the position, and places him in the arena with the litigants.
25      Further, to impose an obligation to list documents in a variation proceeding will require an executor to inventory the documents of a deceased, an additional burden, or, if delegated to the estate solicitor, additional expense.
26      It seems to me that the executor is in a position to control that risk, or avoid the burden simply by not filing and delivering a Response to Civil Claim. That is the step, if taken, that triggers the obligation to list documents under Rule 7-1, because that is the step that converts the executor from being a named party as required by Rule 21-6(2) to a “party of record,” as defined in Rule 1-1, and it is as a “party of record,” rather than named defendant or mere party, that the obligation to list documents attaches.
27      The Master did not have the benefit of the fuller exploration of the Supreme Court Civil Rules, and their relationship with the Wills Variation Act, that was provided to me by counsel.
28      That fuller exploration of the rules may have led to the same result, however, as the Master’s reasons suggest that she may well have exercised the discretion conferred on her by Rule 7-1(14)(a) to excuse the executor from compliance with subrule (1).
29      The executor is willing to make the contents of the computer available to the parties: the parties are properly concerned to avoid infringing upon solicitor-client privilege. No one can know if there is anything in the computer to which the privilege might attach until someone examines its contents. I see no reason why counsel for the interested parties cannot examine the computer contents sufficiently to identify any documents that might contain privileged material and set those aside to be considered by counsel for the executor, who may or may not assert privilege.
30      The documents are not inaccessible to the interested parties; they simply have to devise a means of reviewing them with an eye to preservation of any privilege that may attach to an individual document or portion of document: see Bell v. Smith, [1968] S.C.R. 664, 68 D.L.R. (2d) 751 (S.C.C.), for the obligation to protect the privilege: see No. 151 Cathedral Ventures Ltd. v. Gartrell, 2002 BCSC 888 (B.C. Master), for an approach to partial redaction for privilege.
31      The Master’s interpretation and application of the Rules was in error: the executor having delivered a Response to Civil Claim became subject to the document disclosure obligations imposed on parties of record. The executor also became entitled to seek relief under Rule 7-1(14)(a), and because that was not argued before the Master, nor before me, the appropriate order is to remit the matter to the Master for argument on that point, if it is necessary, given my suggestions as to how to deal with the potential privilege issues that might arise if the interested beneficiaries take up the executor’s offer to examine the computer contents.

 

Court Determines Rights Between Two Competing Powers of Attorney Spouse vs Daughter

Powers of Attorney Spouse vs Daughter

 

Sommerville v Sommerville 2014 BCSC 1848 involved a court application wherein the deceased gave both his surviving widow and his daughter separate powers of attorney that could be used individually.

The facts are somewhat complicated given that the husband and wife entered into a marriage agreement whereby they would each maintain separate bank account investments and property, together with separate liabilities.

The problem arose later in life when the male deceased, who had always had a substantially higher income, begin to develop dementia with increasing concurrent monthly expenses.

Legal issues  before the court included should his personal health care expenses be paid firstly from his monthly pensions, .and  which attorney should be the sole attorney responsible for managing his financial affairs and insuring his bills are paid in a timely fashion, along with other family type issues and dynamics.

The court examined the provisions primarily of sections 18, 19 and 20 of the new Power of Attorney act, starting with the duties of attorney as set out in section 19.

 

The duties of an attorney

[32]     An attorney acting under a power of attorney is bound by the duties set out in the instrument. In this case, the Power of Attorney allows both attorneys to act separately to do on Craig’s behalf anything that he can lawfully do by an attorney and to transact business with any financial institution or investment dealer. The Power of Attorney is enduring, as it remains exercisable during periods of mental infirmity, and it is not subject to any conditions.

[33]   A power of attorney is a type of agency and the relationship between the attorney and the donor is a fiduciary one. This stems not only from the agent-principal relationship but also from the indicators of a fiduciary relationship described in cases such as Frame v Smith, [1987] 2 SCR 99; Egli v Egli, 2004 BCSC 529, aff d 2005 BCCA 627; McMullen v Webber, 2006 BCSC 1656; Houston v Houston, 2012 BCCA 300.

[34]     In Egli, Garson J (as she then was) discussed the attorney’s duty to use the powers granted only for the benefit of the donor:

[82] It is the attorney’s duty to use the power only for the benefit of the donor and not for the attorney’s own profit, benefit or advantage {Chapman). The attorney can only use the power for his or her own benefit when it is done with the full knowledge and consent of the donor (Robertson, Mental Disability and the Law in Canada at 183). I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members.

[37]     While the duties of a committee and an attorney may be similar, I do not agree that the jurisprudence regarding a committee’s duties under the Patients Property Act are applicable to an attorney’s duties under a power of attorney.

[38]     Prior to the enactment of the Power of Attorney Act in 2011, the duties of an attorney were founded at common law and equity. As stated in Egli, an attorney’s duty is to use the power only for the benefit of the donor, which is consistent with the characterization of the relationship as a fiduciary one.

[39]   An attorney’s duties are now enunciated in s. 19 of the Power of Attorney Act. Section 19 (1) essentially codifies the duties of a fiduciary to act honestly and in good faith, to exercise reasonable care, and to account to the donor, within the authority granted in the power of attorney.

Section 19(2) specifies that an attorney making decisions about the donor’s financial affairs must act in the donor’s best interests, taking into account the donor’s “current wishes, known beliefs and values” and any directions contained in the instrument, and s. 19(3) requires an attorney to give priority “to the extent reasonable” to meeting the personal care and health needs of the donor.

[40]     I would not equate the power of an attorney under s. 20 to make or receive gifts with s. 18 of the Patients Property Act. Section 20 is quite specific. If permitted in the power of attorney, the attorney may only make a gift if all three conditions in subsection (1) are met:

  1. the adult will have sufficient property remaining to meet the personal care and health care needs of the adult and the adult’s dependants, and to satisfy the adult’s other legal obligations, if any,
  2. the adult, when capable, made gifts or loans, or charitable gifts, of that nature, and
  3. the total value of all gifts, loans and charitable gifts in a year is equal to or less than a prescribed value ( currently $5000), and is prepared to use funds from his cash investment account for special expenses such as capital improvements

Section 19(4) of the Power of Attorney Act requires an attorney to keep the donor’s property separate from his or her own property. Under s. 19(5), this does not apply to property that is jointly owned by the donor and the attorney as joint tenants, unless the power of attorney states otherwise. While Craig’s pensions, as assets, are his own property, it is not clear to me that the monthly income from those pensions that he directed to be paid into the joint bank account retains the same character. However, whether those funds are deposited into the joint account or into a separate account for Craig is not the primary issue here.

 

Accordingly the court held  that the pension income of the deceased be deposited in joint account with the stepmother/ widow  him  him him him and used for the husband’s expenses, and any surplus could be used by the stepmother for her own expenses, based on their the evidence that this was an arrangement that the husband had in place both pursuant to the marriage contract, and their marital behavior, before he became mentally incapable.

The court further gave directions as to what roles competing  powers of attorney can do in relation to spouses assets.