Encroachment of a Spousal Trust

Encroachment of a Spousal Trust

Toigo Estate 2018 BCSC 936 reviewed the law of the court’s jurisdiction to grant an order approving a resolution of the trustees discretionary power to encroach upon the capital of a spousal trust created by the deceased in favor of his wife.

Pursuant to the spousal trust the spouse was to receive the net income from the estate during her lifetime, and the trustees having uncontrolled discretion to encroach on the capital of the residue of the estate in favor of the spouse during her lifetime.

The amount of the estate was substantial and the trustee approved a resolution allowing the spouse to encroach upon the capital of the estate in the amount of 50% so as to allow her to distribute the estate in accordance with her own estate planning.

The court reviewed the law and allowed the encroachment as recommended by the trustee.

Given the magnitude of the estate and the proposed encroachment, the trustee sought approval of the court prior to proceeding with the encroachment.

S. 86 (1) the Trustee act, RSBC governs the courts exercise of powers in relation to a trust. That section permits an executor or administrator to seek the following by way of petition:

“A trustee, executor or administrator may, without commencing any other proceeding, apply by petition to the court or by summons on a written statement to a Supreme Court judge in chambers, for any opinion, advice or direction of the court on a question respecting the management or administration of the trust property or the assets of the will maker or intestate.”

The court also retains inherent jurisdiction to supervise trust despite statutory enactments on the matter.

In Public Guardian and Trustee v Colwell 2004 BCSC 1622 qt para. 32 . The court stated:

“Donovan Waters Law of Trusts in Canada notes that courts have retained their inherent jurisdiction to supervise trusts – none of this legislation is taken away the inherent powers, so that the courts can fall back upon them should the statutory powers prove inadequate.

The key principle governing the courts inherent jurisdiction is the welfare of the beneficiaries of the trust.

In Mansbridge and Roulston 2004 BCSC 1605 , the court discussed section 86 of the Trustee act, and at paragraph 51 stated “ on an application for directions under section 86 of the Trustee act, the court should not exercise the trustee’s powers, but rather confine itself to advice on any legal issues that arise in connection with the trustees obligations. The principle is enunciated In re Fulford (1913) 29 )LR 375 at 382.

In Tomlinson Estate 2016 BCSC 1223 at paragraph 53-54, the court quoted Waters Law of Trusts in Canada, stating” the issue of management or administration as a limitation upon the trust the act power of the court to give his advice, opinion, or direction as being more particularly raised in connection with motions which turned out to involved a conflict as the ownership of the assets. The courts refused to give such assistance when there is essentially a conflict between interested parties, and this is not merely because the court has not necessary evidence before it, because it is felt that a fight whether or not it is patent, is not a matter of management or administration”

The court relied upon the inherent jurisdiction of the court to permit the substantial encroachment sought by the petitioner, as the encroachment would affect the residual beneficiaries being the grandchildren of the deceased in and to the substantial estate.

In Courage estate 1975 10 NFLD & PEIR 511 the court stated that the law is long settled that were trustees are given the right to encroach on capital, coupled with broad discretionary powers, the courts will not interfere with the exercise of these powers unless they are exercised unfairly and there are no mala fides with regard to their exercise.

“It is the noted that in this case, the trustees are given power to encroach on the capital of the whole residuary estate, not just a portion thereof, and I can find nothing in the will to support the contention that the amounts to be divided amongst the children after the way staff, are to be placed in any special category during her lifetime.”

Essentially, the court is in effect making a declaration that the trustees proposed exercise of the power is lawful, in other words, that the proposed exercises within the proper ambit of the power, but the trustees are acting honestly, as in reaching their decision.

The trustees have taken into account all relevant matters, have taken into account no irrelevant matters, and have not reached a decision that no reasonable body of trustees could have reached. The effect is to protect the trustees from any challenge to the decision by persons interested in the trust, and to make clear that the trustees are entitled to indemnity from the trust assets in respect of the costs or other financial consequences of their decision. It is immaterial that the court had it been exercising a discretion of its own, would’ve exercised it in a way different from that proposed by the trustees.
The court, however, should exercise caution, and not act as a rubberstamp or take a lax approach.

The court found that all of the above-noted legal considerations are consistent with section 86 (1) of the Trustee act

The court found that the trustee’s decision was made in good faith, that he did not stand to gain from the encroachment in any way, and the proposed division, that is equal shares between each of the deceased children and equal shares between the grandchildren, is a desirable and proper encroachment by the spouse of the deceased in order to more equitably distribute the estate amongst the grandchildren of the deceased.

How to Defeat a Testamentary Gift: Beneficiary Fraud

How to Defeat a Testamentary Gift- Beneficiary Fraud - Disinherited

“Fraudulent beneficiaries”  has arisen in a claim that I am aware of currently before the courts, where it is alleged that the deceased was fooled to leave his entire estate to someone who he believed was his natural son from a long-ago relationship, but the son actually knew he was not the progeny of the deceased, yet played along with the deceased to allow him to believe that he was.

The estate has been challenged on the basis that the testamentary gift to the purported son should be invalidated as a result of the beneficiary perpetrating a fraud on the testator in obtaining the legacy by virtue of that fraud.

The facts are contentious yet there is a long established principle in law that “ where a legacy is given to a person under a particular character which he has falsely assumed for the purposes obtaining the bounty, and which alone is shown or is inferred to have deceived the testator, and to have been the motive of the bounty, the law on the ground of fraud does not permit the donee to avail himself of the legacy; but a false reason given for the legacy is not in itself sufficient to destroy it.”

Halsbury’s Laws of England , fourth edition, volume 17(2) at 326:

Kennell v Abbott (1799) 4 Ves.802, ER 416 is a leading case on the treatment of legacies obtained through fraud. In this decision, a woman died, leaving a legacy to my husband. The two were allegedly married but unknown to the woman, the man when she assumed was her husband was married to another woman. The master of the rules ruled that the husband was not entitled to his legacy by reason of the fraud that he had perpetrated.

How to defeat a testamentary gift:

In order to defeat a testamentary gift in these circumstances, the following must be shown:

1) A legacy given to a person of a character which the legatee does not fill and

2) There was a fraudulent assumption of that character, and

3) The testator must have been deceived by that fraud


Posner v Miller (1953) 1 All E.R. 1123

A testamentary gift to a purported son would only be invalid if there is proof of fraudulent and intentional misrepresentations that motivated the deceased to dispose of property in a manner contrary to his true intention. It is not sufficient to show innocent misrepresentation. Even if fraud is proven, the law requires proof that the false character was the sole motive for the bounty Kennell, Re Isaacs (1954) OR 942 C.A.

If there is evidence that the testator may have been motivated by other factors, then the gift is valid, despite the fraud. For example, the bequest to illegitimate children that the testator thinks are his own should stand, because it can be said that the love and affection must also have affected the testator’s intention to provide for the children and the fraud was not the sole motive or inducement for the legacy. Feeney, The Canadian Law of Wills at 3.18

The subsequent English case of Re Boddington: (1883) 22 Ch.D 597 at 112 applied the authority in the Kennell decision and held:

“where a legacy is given to a person under a particular character which she has falsely assume, and which alone can be presumed to be the motive of the bounty, the law will not permit him to avail himself of it, and therefore he cannot demand his legacy. In order, therefore, that the rule from Kennell may come into operation. There must be two things (1) there must be of the false assumption of the character of the legatee, and secondly, there must be evidence that the false character was the motive of the bounty, or a presumption or inference to that effect.

A misrepresentation can be made by silence in the following circumstances, as adopted by the Court of Appeal in Sidhu estate v. Bains (1996)  25 BCLR (3d) 41 BCCA at 101:

“A misrepresentation may be made by silence, when either the represented , or a third person in his presence, or to his knowledge, state something false, which indicates to the represented that the represented either as being, or will be, misled, unless the necessary correction be made. Silence under such circumstances is either a tacit adoption by the party of another’s misrepresentation as his own, or tacit confirmation of another’s error as truth“

Contesting Estate Legal Fees

Contesting Estate Legal Fees

Beneficiaries of an estate ordinarily have standing to contest legal bills if an executor seeks to be indemnified for the lawyer’s bill from the estate. See Chute Estate 2014 BCSC 344.

The decision Re Sangha 2018 BCSC 54 was such a situation, and the registrar of the court applied what is known as a “global approach” in assessing the appropriate amount of legal fees that were rendered pursuant to a total of nine invoices.

The jurisdiction of the registrar to take such a global approach was confirmed by the court in Hutchison v. Victoria Golf Club 2009 BCSC 644 where the court stated:

While the reasons do not provide a mathematical roadmap to the amount allowed, they provide a sound foundation upon which to understand the basis of the registrar’s decision.

In the BC Court of Appeal decision Walker v. Schober 2008 BCCA 19 the court reviewed the decision of the Supreme Court, and overturned a decision of the registrar that had reduced a bill from $21,000-$6000.

The registrar in that case, characterized his task as to include consideration in a global sense of the value of the services that have been rendered on the client’s behalf. The Court of Appeal took issue with there being a requirement on the registrar to address every item of evidence, and with this court. Failing to apply a deferential approach to the findings of the taxation officer at paragraph 36.

A review of the solicitors authority supports this global approach. Nathanson et al v. Inmet Mining Corporation 2007 BC SC 724. In that decision. The issue was whether the client should be premium build for a result beyond the amounts previously billed and paid. The court refused to allow a fee of an additional $10,000 as claimed by the law firm, and restricted restricted the fee to the amount already build and paid which included a premium of $5248. The appeal court found this was to be a fair fee.

There are many examples of registrars a pop applying such a global approach that have been affirmed on appeal see Davis and Co. v. Jiwan 2008 BCCA 658.

Section 71 of the Legal Professions act governs the amount executors and lawyers can charge for their legal fees and states that the matters to be considered by the registrar under review are as follows

S 71 (2) subject to the subsections four and five, the registrar must allow fees, charges and disbursements for the following services:

a) those reasonably necessary and proper to conduct the proceeding or business to which they relate;

b) those authorized by the client or subsequently approved by the client, whether or not the services were reasonably necessary and proper to conduct the proceeding or business to which they relate.

71(3) subject to subsection 4 and five, the registrar may allow fees, charges and disbursements for the following services, even if unnecessary for the proper conduct of the proceeding or business to which they relate:

a) those reasonably intended by the lawyer to advance the interests of the client at the time the services were provided;

b) those requested by the client. After being informed by the lawyer that they were unnecessary and not likely to advance the interests of the client.

71.(4) at a review of a lawyer’s bill, the registrar must consider all of the circumstances, including

a) The complexity, difficulty or novelty of the issues involved,

b) the skill, specialized knowledge and responsibility required of the lawyer,

c) the lawyer’s character and standing in the profession,

d) the amount involved,

e) the time reasonably spent,

f) if there has been an agreement that sets a fee rate that is based on an amount per unit of time spent by the lawyer, whether the rate was reasonable

g) the importance of the matter to the client was bill is being reviewed, and

h) the result obtained

7`(5) the discretion of the registrar under subsection 4 is not limited by the terms of an agreement between the lawyer and the lawyer’s client

S. 151 WESA: Beneficiary Can Sue on Behalf of Estate

S. 151 WESA: Beneficiary Can Sue on Behalf of Estate

Werner v McLean Estate is one of the first decisions under WESA to allow an intestate successor beneficiary to commence a court action in the name and on behalf of the personal representative of the estate if certain preconditions (i.e., reasonable efforts, notice, and good faith) are met. This is a new provision to WESA.

The Court utilzed S. 151 to allow the intestate successor to commence action when the acrimony was such between the parties that it met the criteria to allow the court to conclude that it was necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceedings to be brought or defended.

This section as a practical matter will likely be used when a personal representative refuses to carry out his or her duty to as viewed by the beneficiaries or intestate successors.

The application alternatively sought to remove and replace the trustee.

The court in addition to granting the relief un S. 151 WESA also ordered that the estate assets not be disposed or  transferred pending resolution of the case.

The Law

[13] Section 151 of the Wills, Estates and Succession Act provides, in relevant part, as follows:

(1) Despite section 136 [effect of representation grant], a beneficiary or an intestate successor may, with leave of the court, commence proceedings in the name and on behalf of the personal representative of the deceased person

(a) to recover property or to enforce a right, duty or obligation owed to the deceased person that could be recovered or enforced by the personal representative, or

(b) to obtain damages for breach of a right, duty or obligation owed to the deceased person.

(3) The court may grant leave under this section if

(a) the court determines the beneficiary or intestate successor seeking leave

(i) representative to commence or defend the proceeding, has made reasonable efforts to cause the personal

(ii) has given notice of the application for leave to

(A) the personal representative,

(B) any other beneficiaries or intestate successors, and

(C) any additional person the court directs that notice is to be given, and

(iii) is acting in good faith, and

(a) it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a beneficiary or an intestate successor for the proceeding to be brought or defended.

(3) On application by a beneficiary, an intestate successor or a personal representative, the court may authorize a person to control the conduct of a proceeding under this section or may give other directions for the conduct of the proceeding.

Accordingly, the court is empowered to grant leave to  an intestate successor to commence proceedings in the name and on behalf of the personal representative if certain preconditions (i.e., reasonable efforts, notice, and good faith) are met.