Binding Oral Contracts

While it is obviously more advantageous for the enforceability of a contract to be in writing, an oral contract can be just as valid as written contract if the necessary criteria are met.

In Oswald v. Start Up SRL, 2021 BCCA 352 at para. 34 , the court set out the legal test for the formation of a binding and enforceable contract:

(a) there must be an intention to contract;

(b) the essential terms must be agreed to [by] the parties;

(c) the essential terms must be sufficiently certain;

(d) whether the requirements of a binding contract are met must be determined from the perspective of an objective reasonable bystander, not the subjective intentions of the parties; and

(e) the determination is contextual and must take into account all material facts, including the communications between the parties and the conduct of the parties both before and after the agreement is made.

Part (d) of the Oswald test summarizes “what has been called the objective principle of contract formation”: Summers v. Sawyer, 2005 CanLII 30880, 2005 CarswellOnt 4001 (S.C.) at para. 15 [Summers]. In Summers, the court adopted the following passage from S. M. Waddams, The Law of Contracts, 5th ed. (Toronto: Canada Law Book, 2005) at 103, which elaborates on this principle:

The principle function of the law of contracts is to protect reasonable expectations engendered by promises.
…
Every definition of contract, whether based on agreement or on promise, includes a consensual element. But the test of whether a promise is made, or of whether assent is manifested to a bargain, does not and should not depend on an inquiry into the actual state of mind of the promisor, but on how the promisor’s conduct would strike a reasonable person in the position of the promisee.

The Summers court also cited the following passage from Smith v. Hughes (1871), L.R. 6 Q.B. 597 at 607, which states the objective principle of contract formation another way:

If, whatever a man’s real intention may be, he so conducts himself that a reasonable man would believe that he was assenting to the terms proposed by the other party, and that other party upon that belief enters into a contract with him, the man thus conducting himself would be equally bound as if he had intended to agree to the other party’s terms.
See also Hucul v. GN Ventures Ltd., 2022 BCSC 144 at para. 136.

In Summers, the court concluded there was an oral agreement between the three shareholders of a trucking company that was unable to start a business due to a lack of financing. As a result, the shareholders were each responsible for one-third of the company’s start-up expenses.
Reeves v. Russell, 82 R.P.R. (4th) 137, 2009 CanLII 11437 (Ont. S.C.) Is a good example of a case where a court found an enforceable oral agreement had been formed in the context of the formation of a business.

Committeeship Criteria ( Patients Property Act)

Mok v Wom 2022 BCCA 418 confirmed the criteria for appointing a committee of a mentally  infirmed patient’s estate and/or person.

 

An application for appointment of committee of the person invokes the parens patriae jurisdiction of the court. It is an inherently discretionary and fact specific assessment, governed by the overriding concern of who will serve the patient’s best interests.

Section 18(1) of the Patients Property Act ( PPA) states:

A committee must exercise the committee’s powers for the benefit of the patient and the patient’s family, having regard to the nature and value of the property of the patient and the circumstances and needs of the patient and the patient’s family.

Though the PPA does not provide a specific test to be used in determining who should be a committee, the courts have developed criteria to guide the exercise of discretion in making such an appointment. The court in Stewart (Re) summarized some of these considerations as follows at para. 29:

[29]      … However, cases have identified various considerations; see for example: Vranic (Re), 2007 BCSC 1949; Bowman (Re), 2009 BCSC 523; Palamarek (Re), 2011 BCSC 563; Re Matthews, 2013 BCSC 1045; and Sangha (Re), 2013 BCSC 1965. They include:

(a)  whether the appointment reflects the patient’s wishes, obviously when he or she was capable of forming such a wish;

(b)  whether immediate family members are in agreement with the appointment;

(c)  whether there is any conflict between family members or between the family and the patient, and whether the proposed committee would be likely to consult with immediate family members about the appropriate care of the patient;

(d)  the level of previous involvement of the proposed committee with the patient, usually family members are preferred;

(e)  the level of understanding of the proposed committee with the patient’s current situation, and will that person be able to cope with future changes of the patient;

(f)   whether the proposed committee will provide love and support to the patient;

(g)  whether the proposed committee is the best person to deal with the financial affairs and ensure the income and estate are used for the patient’s benefit;

(h)  whether a proposed committee has breached a fiduciary duty owed to the patient, or engaged in activity which diminishes confidence in that person’s abilities to properly handle the patient’s affairs;

(i)    who is best to advocate for the patient’s medical needs;

(j)    whether the proposed committee has an appropriate plan of care and management for the patient and his or her affairs and is best able to carry it out; and

(k)  whether a division of responsibilities such as between the patient’s estate and the patient’s person to different persons would serve the best interests of the patient, or would such a division be less than optimal for the patient.

A judge’s discretion in this assessment is broad; there is no formula that must be rigidly applied. A judge’s decision will often be exercised against a complex set of facts, and will typically have to weigh and balance multiple considerations, some of which may be in tension, and may support, standing alone, different outcomes. Moreover, these kinds of decisions often have to respond to exigent circumstances. Courts need to be able to act decisively to protect the interests of patients. There is a powerful imperative to achieve certainty and finality.

 

 

BC Lawyer- Loan or Gift From Mom/ Dad To Newly Weds

Trevor Todd and Jackson Todd have over sixty years combined experience in handling contested estates including whether monies advanced from parents to a child and his/her spouse  is a gift or a loan

 

I previously wrote on the “bank of mom and dad” and how they had an almost %100 failed collection rate when the wedding “gift” suddenly turns into a loan after the  marriage fails.

 

Whether the advancement of funds from one party to another is a loan or a gift is a common theme in estate litigation and more so when it involves families and money.

 

The courts have more frequently than not found that the out of luck parents intended a gift when the monies were advanced and not a loan.

 

Typically since it is family, the details are not documented and signed . The parents attitude is often that it is a gift so long s the marriage holds and if not, we want our money back.

 

In Zucker v Zucker 2022 BCSC 2025 the parents did the usual thing of advancing monies to a child and his spouse for them to buy a home. There was a mortgage and a signed promissory note.

The child of the parents agreed with them at trial that the monies were advanced as a loan but the spouse argued that it was a gift.

Based on some unique evidence the court held that the parents intended a loan.

 

At para. 43, the court noted that in Kuo v. Chu, 2009 BCCA 405 (B.C. C.A.) at para. 9, the Court of Appeal adopted the following factors from Locke v. Locke, 2000 BCSC 1300 (B.C. S.C.), as applicable to the question of whether a loan or a gift was intended:

(a) Whether there were any contemporaneous documents evidencing a loan;

(b) Whether the manner for repayment is specified;

(c) Whether there is security held for the loan;

(d) Whether there are advances to one child and not others, or advances of unequal amounts to various children;

(e) Whether there has been any demand for payment before the separation of the parties;

(f) Whether there has been any partial repayment; and,

(g) Whether there was any expectation, or likelihood, of repayment.
The court firstly attempted to determine the actual intention of the transferors on the balance of probabilities.
The court starts with the presumption of a resulting trust, and weighs the evidence in an attempt to ascertain the transferors actual intention .
The presumption of resulting trust only applies where there is insufficient evidence to rebut it on a balance of probabilities ( Pecore v Pecore 2007 SCC 44.
Since the inquiry focuses on the intention of the transferors the state of knowledge of the opposing spouse about the transaction is not determinative ( Tobias v Tobias 2016 BCSC 125 at 42)
The court seized on the unusual fact that the defendants at one point transferred the title to one of the parents finding that such an act was persuasive reliable circumstantial evidence that the plaintiffs did not intend the monies to be a gift.
The defendants also partially repaid the monies and a partial repayment can be evidence that a loan was intended.  Kuo v Cho 2009 BCCA 405 at para.9
The court found that the defendants were liable to the plaintiffs on the basis of a resulting trust.

The Law of Set -Off

Blacks Law dictionary defines set-off as a counterclaim demand which a defendant holds against the plaintiff, arising out of the transaction extrinsic of the plaintiff’s cause of action. The defendant seeks to cancel the amount due from him or to recover a mountain in excess of the plaintiff’s claim against him.

Coba Industries Ltd. v. Millie’s Holdings (Canada) Ltd., 1985 CanLII 144 correctly summarizes the applicable principles for a valid claim of set-off:

1. The party relying on a set-off must show some equitable ground for being protected against his adversary’s demands.
2. The equitable ground must go to the very root of the plaintiff’s claim before a set-off will be allowed.
3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim.
4. The plaintiff’s claim and the cross-claim need not arise out of the same contract.
5. Unliquidated claims are on the same footing as liquidated claims.
[citations omitted]

Similarly the Court of appeal in Wilson v. Fotsch, 2010 BCCA 22 described law of equitable set

off as being available provided that there is a relationship between the cross-obligations such that

it would be unfair or inequitable to permit one to proceed without taking the opposing claim into account.

The requirements for a claim of equitable set-off are as follows:

1. The party relying on a set-off must show some equitable ground for being protected against his adversary’s demands;

2. The equitable ground must go to the very root of the plaintiff’s claim before a set-off will be allowed;

3. A cross-claim must be so clearly connected with the demand of the plaintiff that it would be manifestly unjust to allow the plaintiff to enforce payment without taking into consideration the cross-claim;

4. The plaintiff’s claim and the cross-claim need not arise out of the same contract; and

5. Unliquidated claims are on the same footing as liquidated claims.

Breach of Confidentiality Agreements

A breach of a confidentiality agreement may occasionally arise in estate litigation, particularly on behalf of the executor.

In order to found an action for breach of a confidentiality clause, the information in question must have the necessary quality of confidence.

A list of the factors to be considered confidential quality  is found in Foreman v. Chambers et al, 2006 BCSC 1244 at para. 61, citing Pharand Ski Corp. v. Alberta (1991), 80 Alta. L.R. (2d) 216 (Q.B.):

a) the extent to which the information is known outside the owner’s business;
b) the extent to which it is known by employees and other involved in the owner’s business;
c) the extent of measures taken by the owner to guard the secrecy of the information;
d) the value of the information to the owner and his competitors;
e) the amount of money or effort expended by the owner in developing the information; and
f) the ease or difficulty with which the information could be properly acquired or duplicated by others by their independent endeavours.

The mere assembly of publicly available facts by itself does not render the information confidential. Rather, the information must be difficult to assemble, assembled in an innovative manner or analysed in an innovative manner: Foreman at para. 65.

Chattel or Fixture?

Executors occasionally when selling estate assets run into the “age-old” issue of whether the asset a chattel or a fixture to the land.

The legal test for determining whether an item is a fixture or chattel is set out in the oft followed 1902 decision of Stack v. T. Eaton Co., [1902] 4 O.L.R. 335 at 338, which was followed by our Court of Appeal in La Salle Recreations Ltd. v. Canadian Camdex Investments Ltd., (1969), 4 D.L.R.(3d) 549 (BC CA) [La Salle] at para. 16:

A study of these and other authorities has led me to the conclusion that the principles to be applied are stated accurately by Meredith, C.J., speaking for a Divisional Court in Stack v. T. Eaton Co., [1902] 4 O.L.R. 335 at p. 338 as follows:

I take it to be settled law

(1)That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land.

(2)That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels.

(3)That the circumstances necessary to be shewn to alter the primâ facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see.

(4)That the intention of the person affixing the article to the soil is material only so far as it can be presumed from the degree and object of the annexation.

Haggert v. Town of Brampton (1897), 28 S.C.R. 174, was a dispute between mortgagor and mortgagee where the mortgage charged [p. 179] “‘… all the real estate of them the mortgagors, including all the machinery there was or might thereafter be annexed to the freehold, and which should be known in law as part of the freehold’”. Delivering the judgment of the Supreme Court of Canada King, J., after referring to certain authorities, commented on the object of annexation as follows at p. 182:

In passing upon the object of the annexation, the purposes to which the premises are applied may be regarded; and if the object of setting up the articles is to enhance the value of the premises or improve its usefulness for the purposes for which it is used, and if they are affixed to the freehold even in a slight way, but such as is appropriate to the use of the articles, and showing an intention not of occasional but of permanent affixing, then, both as to the degree of annexation and as to the object of it, it may very well be concluded that the articles are become part of the realty, at least in questions as between mortgagor and mortgagee.

The court in La Salle went on to analyze whether, regardless of the slight degree of annexation of the carpets in question, the goods were affixed to the building for the better use of the goods or for the better use of the building as a building. I quote paras. 23 and 24 of La Salle:

[23] Turning to the object of annexation, the question is whether the goods were affixed to the building, though slightly, for the better use of the goods as goods, or for the better use of the building as a hotel building. Counsel for the respondent pointed out quite correctly, that the question is not whether carpeting is useful or necessary to a hotel, but whether the annexation of the carpets was for the better use and enjoyment of the carpets as such or for the better use of the building as a hotel building. The factors in this case, in addition to others already mentioned, bearing on this question appear to me to be:

1. The unfinished plywood flooring was entirely unsuitable and could not be expected to be used as a floor in a hotel with the character of the Villa Motor Hotel.
2. The under matting and carpeting, if left resting on the plywood by their own weight, would not provide proper floors in such a hotel for reasons of both appearance and utility.
3. The annexation was reasonably required for the completion of the floors as such, having regard to the character and intended use of the areas involved.
4. The evidence shows that in comparable hotels carpeting is quite commonly replaced at intervals of three to five years.
5. It is also established that a ready market exists for used carpeting after its removal.
[24] Weighing all these circumstances, I am of the opinion that the object of the annexation was the better and more effectual use of the building as a hotel and not the better use of the goods as goods. It follows that in my opinion, the carpeting and accessories were annexed to the land in such a manner and under such circumstances as to constitute fixtures within the meaning of s. 12 of the Act.

Royal Bank of Canada v. Maple Ridge Farmers Market Ltd., 1995 CanLII 896 (BC SC) [RBC] at para. 12, in which Mr. Justice Maczko articulated six rules to aid in the application of La Salle:

1) Any item which is unattached to the property, except by its own weight, and can be removed without damage or alterations to the fixtures or land that will need repair, is a chattel.
…
2) Any item which is plugged in and can be removed without any damage or alteration is a chattel.
…
3) Any item which is attached even minimally (i.e. it cannot simply be unplugged) is a fixture.
…
4) If a piece of equipment is attached to a structure, a part of which could be removed but which would be useless without the attached part, then the entire piece of equipment is a fixture. In other words, the item will be a fixture if it losses its essential character because it is of no use unless attached to a permanent and substantial improvement to the premises of which it formed part. The converse is also true. If an item can be detached without damage or alteration, and if the item retains its essential character without the attached part, then it will be a chattel.
…
5) Where an item is determined to be a fixture, it may nevertheless be removed if it can be shown that it is a tenant’s fixture. A tenant’s fixture may be removed from the premises during the currency of the tenancy provided that the tenant leaves the premises in exactly the same condition as he or she received them.
6) In very exceptional circumstances not covered by these rules the court should have resort to the purpose test. For example, a mobile home may be resting on the land by its own weight but it may be clearly established that it was intended to be a fixture. These circumstances should only arise rarely and in relation to very large or expensive items.

When Did Spouses Separate

Sometimes it is necessary in estate litigation to determine when spouses ceased to be in a spousal/marriage like relationship.

The case of CC v SPR 2022 BCSC 1817 reviewed the law relating to the date when parties have separated.

Spouses can separate even if they continue to inhabit the same dwelling. The seminal case of Rushton v. Rushton (1968), 2 D.L.R. (3d) 25, 1968 CanLII 606 (B.C.S.C.) articulated this principle as follows (at 27):

The words “separate and apart” are disjunctive. They mean, in my view, that there must be a withdrawal from the matrimonial obligation with the intent of destroying the matrimonial consortium, as well as physical separation. The two conditions must be met. I hold that they are met here. The mere fact that the parties are under one roof does not mean that they are not living separate and apart within the meaning of the Act. There can be, and I hold that here there has been, a physical separation within the one suite of rooms.
In Nearing v. Sauer, 2015 BCSC 58 [Nearing], the court further clarified that a disagreement between the parties as to their separation does not preclude a judicial finding of separation. Instead, where there is no meeting of the minds on the intention to separate, courts will generally examine whether one party intended to live separate and apart and took “action consistent with that intention”: at para. 54. The court explained that, in practice:

[56] … when the parties dispute the date of separation, the court’s analysis focuses on the generally accepted characteristics of marriage including the intention to remain married, having sexual involvement, carrying on activities in public, sharing financial resources and sharing significant family events … The court will also consider a range of other factors, including a clear statement by one of the parties of his or her desire to terminate the relationship. Sexual involvement, or lack thereof, is not conclusive …
Building on Nearing, the court in H.S.S. v. S.H.D., 2016 BCSC 1300, rev’d on other grounds 2018 BCCA 199 [H.S.S.], reframed the approach to dates of separation as follows:
[40] … The legal framework for determining that spouses have lived separate and apart requires that the Court find, first, an intention of one spouse to repudiate or end the marital relationship and, second, action consistent with that intention. The parties disagree on whether that action must include an unambiguous verbal expression of his or her settled intention.
…
[42] … The Court’s task is to assess objectively, on the totality of the evidence, whether one spouse held a settled intention to separate and communicated that intention through his or her conduct to the other spouse. An express statement is only one of the factors for consideration in what is necessarily a contextual analysis.
The framework articulated in H.S.S. largely mirrors the conclusions of the court in Charen v. Charen, [2018] B.C.J. No. 3152:
[45] In S.A.H. v. I.B.L., 2018 BCSC 544 at paras. 49-54, I reviewed the various authorities respecting the determination of the date of separation. Based on my reading of the authorities, I concluded at para. 55 that this was a fact driven exercise which could be aided by answering the following questions:
1. Did at least one spouse have the intention to separate?
2. Was the intention to separate communicated to the other spouse?
3. Was the intention to separate acted upon? In other words, using generally accepted characteristics of marriage, did one or both spouses take action that is consistent with the separation, such as:
a. changing how they behaved with each other in public; and
b. changing how they behaved with each other in private.
The authorities caution that while the parties’ subjective intentions are relevant, they are not necessarily determinative: O.C. v. K.C., 2016 BCSC 72 at para. 18.

In Bartch at para. 94, the court helpfully summarized a non-exhaustive list of factors to be considered in determining spousal separation, referencing Coupar v. Roh, 2014 BCSC 1392:
• the lack of changes to distinguish the relationship before moving into separate residences and after moving into separate residences: para. 73;
• regular interaction between the parties including occasional dining out or attending events together: para. 74;
• continuing to perform domestic services, cooking, cleaning and laundry: para. 83;
• continuing to attend social functions together: para. 84;
• making gifts to one another: para. 85;
• taking vacations together: para. 86;
• neither party becoming involved in another relationship: para. 87;
• continuing to share the common use of assets: para. 88; and
• whether one party told the other party of the intention to permanently end the relationship: para. 90.

Anonymization and Publication Ban Orders

Anonymization orders and publication bans are exceptional orders and that several competing interests must be balanced by the judge hearing such an application.

These competing interests were considered at length in the leading case of Sherman Estate v. Donovan, 2021 SCC 25. Sherman Estate 

In the Supreme Court of Canada decision of Sherman Estate, the court considered whether a sealing order should be granted with respect to a probate file on grounds of privacy.

 

The Reasons for judgement stated:

[1) This Court has been resolute in recognizing that the open court principle is protected by the constitutionally entrenched right of freedom of expression and, as such, it represents a central feature of a liberal democracy. As a general rule, the public can attend hearings and consult court files and the press — the eyes and ears of the public — is left free to inquire and comment on the workings of the courts, all of which helps make the justice system fair and accountable.

[2] Accordingly, there is a strong presumption in favour of open courts. It is understood that this allows for public scrutiny which can be the source of inconvenience and even embarrassment to those who feel that their engagement in the justice system brings intrusion into their private lives. But this discomfort is not, as a general matter, enough to overturn the strong presumption that the public can attend hearings and that court files can be consulted and reported upon by the free press.

[3] Notwithstanding this presumption, exceptional circumstances do arise where competing interests justify a restriction on the open court principle. …

[7] With respect to limitations on court openness, as stated at para. 38:

[38] The test for discretionary limits on presumptive court openness has been expressed as a two step inquiry involving the necessity and proportionality of the proposed order (Sierra Club, at para. 53). Upon examination, however, this test rests upon three core prerequisites that a person seeking such a limit must show. Recasting the test around these three prerequisites, without altering its essence, helps to clarify the burden on an applicant seeking an exception to the open court principle.

In order to succeed, the person asking a court to exercise discretion in a way that limits the open court presumption must establish that:

(1) court openness poses a serious risk to an important public interest;
(2) the order sought is necessary to prevent this serious risk to the identified interest because reasonably alternative measures will not prevent this risk; and,
(3) as a matter of proportionality, the benefits of the order outweigh its negative effects.

Only where all three of these prerequisites have been met can a discretionary limit on openness — for example, a sealing order, a publication ban, an order excluding the public from a hearing, or a redaction order — properly be ordered. This test applies to all discretionary limits on court openness, subject only to valid legislative enactments …

[8] As the court noted at para. 31, privacy can in some circumstances ground an exception to the openness principle. However, some degree of privacy loss resulting in inconvenience and even upset or embarrassment is inherent in any court proceeding open to the public. The question of when a privacy interest is sufficient to give rise to an exception to court openness is discussed at para. 33:

[33] Personal information disseminated in open court can be more than a source of discomfort and may result in an affront to a person’s dignity. … Dignity in this sense is a related but narrower concern than privacy generally; it transcends the interests of the individual and, like other important public interests, is a matter that concerns the society at large. A court can make an exception to the open court principle, notwithstanding the strong presumption in its favour, if the interest in protecting core aspects of individuals’ personal lives that bear on their dignity is at serious risk by reason of the dissemination of sufficiently sensitive information. The question is not whether the information is “personal” to the individual concerned, but whether, because of its highly sensitive character, its dissemination would occasion an affront to their dignity that society as a whole has a stake in protecting.

[63] Specifically, in order to preserve the integrity of the open court principle, an important public interest concerned with the protection of dignity should be understood to be seriously at risk only in limited cases. Nothing here displaces the principle that covertness in court proceedings must be exceptional. Neither the sensibilities of individuals nor the fact that openness is disadvantageous, embarrassing or distressing to certain individuals will generally on their own warrant interference with court openness … These principles do not preclude recognizing the public character of a privacy interest as important when it is related to the protection of dignity. They merely require that a serious risk be shown to exist in respect of this interest in order to justify, exceptionally, a limit on openness, as is the case with any important public interest under Sierra Club. As Professors Sylvette Guillemard and Séverine Menétrey explain, [translation] “[t]he confidentiality of the proceedings may be justified, in particular, in order to protect the parties’ privacy . . . . However, the jurisprudence indicates that embarrassment or shame is not a sufficient reason to order that proceedings be held in camera or to impose a publication ban” (Comprendre la procédure civile québécoise (2nd ed. 2017), at p. 57).
[11] At paras. 73-76, Justice Kasirer concluded that:
[73] I am accordingly of the view that protecting individuals from the threat to their dignity that arises when information revealing core aspects of their private lives is disseminated through open court proceedings is an important public interest for the purposes of the test.
[74] Focusing on the underlying value of privacy in protecting individual dignity from the exposure of private information in open court overcomes the criticisms that privacy will always be at risk in open court proceedings and is theoretically complex. Openness brings intrusions on personal privacy in virtually all cases, but dignity as a public interest in protecting an individual’s core sensibility is more rarely in play. Specifically, and consistent with the cautious approach to the recognition of important public interests, this privacy interest, while determined in reference to the broader factual setting, will be at serious risk only where the sensitivity of the information strikes at the subject’s more intimate self.

[75] If the interest is ultimately about safeguarding a person’s dignity, that interest will be undermined when the information reveals something sensitive about them as an individual, as opposed to generic information that reveals little if anything about who they are as a person. Therefore the information that will be revealed by court openness must consist of intimate or personal details about an individual …

[76] The test for discretionary limits on court openness imposes on the applicant the burden to show that the important public interest is at serious risk. Recognizing that privacy, understood in reference to dignity, is only at serious risk where the information in the court file is sufficiently sensitive erects a threshold consistent with the presumption of openness. This threshold is fact specific. …

[12] The question of whether a serious risk to a privacy interest, sufficiently sensitive to strike at an individual’s biographical core, is made out is a case specific matter to be determined in the full factual context of the case: Sherman Estate at para. 79.
Issue

Standing in Partition – Possessory Interest Required

Pallot v Douglas 2017 BCCA 254 dismissed an appeal and held that the appellant did not have standing to apply for partition of a leasehold interest in trust property owned by the Convention of Baptist Churches of British Columbia as the applicant did not have the right to a possessory interest in the lands.

To have standing under the Partition of Property Act a petitioner must have a possessory interest in land.

A possessory interest is:
The present right to control property, including the right to exclude others, by a person who is not necessarily the owner … A present or future right to the exclusive use and possession of property.
Black’s Law Dictionary, 8th ed, sub verbo “possessory interest”.

The possessory interest requirement has been characterized as requiring the petition to have an immediate right to possession of the land:

Although the statutory language in the Ontario Partition Act, R.S.O. 1990, c. P.4, differs, it has been held in Ontario that only persons entitled to immediate possession of an estate in property may make application for partition and sale: Di Michele v. Di Michele, 2014 ONCA 261 at paras. 75 80; Morrison v. Morrison (1917), 39 O.L.R. 163 at 168, 171 72, 34 D.L.R. 677 (Ont. C.A.); and Ferrier v. Civiero (2001), 147 O.A.C. 196 at paras. 6 and 8, 42 R.P.R. (3d) 12 (C.A.)

One of the essential features of a trust is that one or more parties hold title to property and manage it for the benefit of one or more parties who have a right to enjoy the property. The beneficiaries under the trust enjoy the property subject to the terms of the trust.

Professor Waters describes the principle as follows:

The trust is, perhaps, better described by isolating its essential features. The hallmarks, the essential characteristics of the common law trust, are heavily reflective of a particular legal history. The foremost of these is the fiduciary relationship which exists between trustee and beneficiary. One party holds the title to property, and manages it, for the benefit of another who has exclusive enjoyment of the property. As we have seen, it is possible to have a variation on this basic framework, for the trustee may himself be a beneficiary. In that case he will have a share in the enjoyment….

Donovan W.M. Waters, Mark Gillen & Lionel Smith, Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Thomson Reuters, 2012) at 9.

There are both personal and propriety aspects to a beneficiary’s rights under a trust. The proprietary aspect concerns a beneficiary’s rights to pursue trust property as against, for example, a buyer with actual or constructive notice of the trust. With respect to the personal aspect of a beneficiary’s right, Professor Oosterhoff says this:

If we consider first the personal aspect of the beneficiary’s right, it will be apparent that, since the management and control of the trust property is vested in the trustee, the beneficiary only has a personal right against the trustee that the latter perform the trusts that he is bound to perform. The beneficiary can never “go around” the trustee and assert a claim to the trust property directly. On the contrary, the beneficiary’s claim must always be against the trustee….

…only the trustee, and not the beneficiary, has the right and the duty to make claims against third parties who may have interfered with or damaged the trust property….
A.H. Oosterhoff, Robert Chambers & Mitchell McInnes, Oosterhoff on Trusts: Text, Commentary and Materials, 8th ed. (Toronto: Carswell, 2014) at 38.

The interest of the beneficiary under a trust is the right to claim that the trust be performed in accordance with its terms. It is not an immediate right to possession of the trust property.

This position was clearly shown in relation to a beneficiary’s equitable interest in Taylor v. Grange (1879), 13 Ch. D. 223, aff’d (1880), 15 Ch. D. 165 (C.A.). In Taylor, Fry J. held there was no jurisdiction to order partition at the request of a beneficiary with an equitable estate in the trust property, which was held under a trust for management of real property created by a will. Mr. Justice Fry reasoned at 227:

… For if I were to decree partition I should be putting an end to the active trusts which the testator has directed to be carried on during the lives of his daughters. The effect would be to stop the business of working the quarries and to divide the property in a manner inconsistent with the exercise of the powers given to the trustees.
No doubt an equitable owner may obtain a decree for partition if he be entitled to call for a legal estate, which would have entitled him to partition at common Law. But that is not this case, and I should be doing wrong here to make a decree for partition, the result of which, as no conveyances could be at present executed, would be to cause the trusts of the will to be administered separately as to the different persons entitled.

Fiduciary Obligations of Attorney Increase If Donor Incompetent

In Zeligs v Janes 2015 BCSC 525 the court examined the breach of fiduciary duty of two powers of attorney for a mentally incompetent donor who both personally financially profited with the use of the power of attorney by taking two mortgages out on jointly owned property with the donor, selling the property and keeping the net funds for themselves.

The fiduciary obligations of an attorney become elevated once the donor of the power becomes incapable.

This is described by the Ontario Court of Appeal as follows (Richardson Estate v. Mew, 2009 ONCA 403):

48. In Banton [Banton v. Banton (1998), 164 D.L.R. (4th) 176 (Ont. Sup. Ct.)], Cullity J. held that while an attorney acting under a continuing power of attorney is always a fiduciary, the scope of the attorney’s fiduciary duties depends on whether the donor of the power is incapable at the time of the transaction. If the donor is mentally incapable, the attorney’s position approaches that of a trustee. …

49. As a fiduciary, Ms. Ferguson was obliged to act only for the benefit of Mr. Richardson, putting her own interests aside: see Ermineskin Indian Band and Nation v. Canada, [2009] 1 S.C.R. 222, at para. 125.

In British Columbia (Public Guardian and Trustee of) v. Elgi, 2004 B.C.J. No. 796, 28 B.C.L.R. (4th) 375 (S.C.) aff’d [2005] B.C.J. No. 2741, 262 D.L.R. (4th) 208 (C.A.), Garson J. described the prohibition against using a power for the attorney’s profit, benefit or advantage, at para. 82, in the following way:

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. 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. I am not aware of any authority that detracts from this principle in circumstances where the benefit is conferred on family members.
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