Mental Capacity and Marriage: What’s Required?

Mental Capacity And Marriage

The law is currently in error with respect to this area, stating that only a low level of capacity is required for marriage.

I question in light of that, why about one quarter of lawyers earn their keep trying to get people out of the supposedly simple contract that they entered.

Most of us have heard of the infamous case of playboy playmate Anna Nicole Smith who laid claim to the estate of her 90 year old husband. This odd couple met at a topless bar where Smith earned her living. He was 89 and she was 26. Their marriage lasted just over one year before the husband died leaving an estate of $475 million. He died in 1995 and the litigation is still before the courts.

From time to time newspapers report similar situations involving a lonely, enfeebled old man who marries a much younger waitress or care worker. Increased longevity will undoubtedly give rise to yet more disputes about the validity of such marriages.

Some courts have made apparently contradictory findings that a deceased senior, who is not mentally capable of executing a will, is still mentally capable of marrying thereby revoking his or her existing will. Banton vs. Banton 164 D.L.R. (4th) 176 is just such a case.

This was an Ontario decision involving an 86-year-old man who formed a friendship with a 31 year old waitress from the restaurant of his retirement home. She persuaded him to secretly marry and to prepare two wills in her favor. At the time of the marriage and the execution of the wills, the court found that the deceased suffered from terminal cancer, serious hearing problems, restrictions of physical mobility, incontinence and depression. They found he was cognitively impaired and enfeebled.

The court concluded that Mr. Banton did not have testamentary capacity when he signed his wills in this woman’s favour, and that it was her undue influence which procured the wills. Nevertheless the court found that he had sufficient mental capacity to enter into his marriage and thus the marriage was valid.

The court ruled that although the test for testamentary capacity is quite stringent, the test for capacity to marry is not. Capacity to marry requires only that the person understand the nature of the relationship and its responsibilities. In this case, the testator had some experience in that he had been married twice before. The court concluded that he had sufficient capacity to enter into the marriage and was not coerced into doing so.

In fact cases as far back as Durham v. Durham (1885) 1 T.L.R.338 have ruled that it does not require a high degree of intelligence to comprehend the significance of entering into a marriage.

Hart v. Cooper 2 E.T.R. (2d) 168 (B.C.S.C.) is a good example of the extent of evidence required to set aside a questionable marriage. In this case the deceased drew a will in 1988 naming his three children as his beneficiaries. In 1990 he was widowed and 1991 he married the younger plaintiff. He was her sixth husband.

The deceased did not tell his children of his plans to marry and the marriage was witnessed by acquaintances of the plaintiff, wife. Indeed he disappeared from hospital and married 2 days before his scheduled examination by a psychiatrist to determine his mental capacity. Following the marriage, the plaintiff effectively isolated the husband, refusing to allow his children or doctor to contact him. This ultimately lead to police intervention. When they spoke to the husband he told them that he had been kidnapped and that he wanted to return to the hospital. He died in hospital within one month of the suspect marriage.

After the death of the husband, the plaintiff wife sought a declaration that 1988 will had been revoked as a result of their marriage. The deceased’s children challenged the validity of the marriage.

The family doctor testified that in his opinion the plaintiff was manipulating the deceased to derive a benefit from his estate. He further stated that the deceased’s mental state was impaired to such a degree that he was incapable of comprehending the importance of any issues before him and would not have had the mental capacity to comprehend the contract of marriage.

Justice Lowry did not accept this uncontroverted medical evidence and found that the children had not proven lack of mental capacity. He was not satisfied that the husband could not understand the simple nature of the contract of marriage and as a result he ruled the marriage valid. Thus, the prior will was revoked by operation of law pursuant to the terms of the Wills Act.

This case illustrates the lengths to which the courts may go to uphold what appears to be a questionable marriage by a vulnerable older person.

Evidence Required to Set a Marriage Aside

The Alberta decision of Barrett Estate v. Dexter 34 E.T.R. (2d) 1, is another good example of the extent of evidence required to set a marriage aside based on lack of mental capacity. A 93 year-old man married his 54-year-old housekeeper and died a short time later. His estate brought an action to have the marriage declared a nullity.

Three medical specialists had examined the deceased shortly before and after the date of the marriage. All three testified that he suffered advanced dementia. Their evidence was near unanimous that the deceased was ” quite significantly deteriorated in cognitive function and certainly not aware of legal and financial matters and that his judgment is impaired along with his other cognitive and intellectual factors.”

The court cited the reasoning of their appellate court in Chertkow vs. Feinstein (1929) 24 Alta.L.R.188 holding “that the capacity to enter into a valid contract of marriage is a capacity to understand the nature of the contract, and the duties and responsibilities which it creates.” The court here ruled that the plaintiff impugning the validity of the marriage had met the burden of proof required and satisfied the court the marriage ought to be ruled invalid.

Similarly the Ontario Court of Appeal upheld the trial decision in Re Sung Estate 11 E.T.R. (3d) 169. Once more this case involved an enfeebled and depressed elderly man who secretly married his younger housekeeper. When the deceased’s five children learned of the marriage the wife assured them that their father had protected their position financially with a prenuptial agreement. In fact a prenuptial agreement was prepared but never signed.

The medical evidence indicated that the time of the marriage, the groom required full-time assistance from a caregiver, suffered from Parkinson’s disease and needed a respirator to breathe and a wheelchair for transport. Further he was rapidly succumbing to lung cancer and was taking massive amounts of medication. The family doctor testified that the deceased was unable to think clearly and logically at the time of the marriage.

The trial judge found that the deceased lacked sufficient capacity to enter into a form of marriage. The Court of Appeal upheld this decision in what they described, notably, as a close case.

Conclusion

The act of marriage gives rise to significant legal ramifications in both matrimonial law and estate/ inheritance law. Indeed many people do not even know that marriage automatically revokes a will. Whatever the historical basis may have been in holding that marriage is a simple contract not requiring a high degree of mental capacity, that ought not to be the case in modern times.

Today many seniors may marry for the second or third time. Modern matrimonial law includes many presumptions of entitlement to share in family assets and spousal maintenance law can be complicated. Needless to say marriages in blended family situations may create a great amount of uncertainty with respect to the various claims of the children. Unfortunately disputes often arise involving the distribution of wealth following the death of one of the spouses.

Savvy seniors will wish to enter into prenuptial agreements that will require independent legal advice to be enforceable. Surely a significant mental capacity is required to understand the legal consequences.

The common law courts have traditionally ruled it should not be too difficult to enter into marriage. Marriage, however, automatically entails important consequences to the testator’s financial affairs and estate planning. For example the very act of marrying automatically revokes the spouses’ previous wills and gives any surviving spouse significant rights under our modern legislation.

Surely it is paradoxal that person, who is not mentally capable of executing a will, may nevertheless be mentally capable of marrying and thus effectively revoke his or her existing will and estate plan. It seems inappropriate our Wills Act should prescribe an automatic will revocation in the event of marriage, even when a spouse does not have the mental capacity to execute a new will. Surely if there is to be a statutory revocation of a will upon marriage, it should be limited to those cases where a spouse has full testamentary capacity at the time of that marriage.

The Pitfalls of Joint Tenancy

Happy to open Joint account

The Pitfalls of Joint Tenancy

For many years estate planners have advised their clients to transfer their assets into joint tenancy ownership with loved ones so they may inherit by right of survivorship and avoid paying legal and probate fees.

The rationale has been that the surviving joint owner, by right of survivorship automatically becomes sole owner of the entire property including the deceased’s share. Thus the asset does not fall into the deceased’s estate but instead passes to the surviving joint owner. As a result, legal costs and probate fees are avoided. The thinking has been: No muss, no fuss and, what is more, no delays!

Indeed for many years, joint tenancy arrangements have been used by families and very close friends. Most often they are used for home ownership or for financial assets such as bank accounts and investment accounts. Indeed, other than a will, this type of arrangement is probably the commonest form of estate planning.

It is very important to understand, however, that such ownership can lead to hotly contested legal disputes. This is particularly the case where only one of the joint owners has contributed most or all of the funds to the investment account or to the purchase of the property.

Fortunately such disputes rarely arise in cases where both of the joint owners have made substantial contributions to the acquisition of the assets for example in the case of joint ownership by spouses who have been long married.

A relatively common fact pattern, however, involves an elderly parent, let us suppose a mother, who transfers her home into joint tenancy with only one of her children. She may well think that she is being prudent in avoiding the payment of probate fees upon her death and believe that the one “favoured” child will do the right thing and share the home with the other siblings.

By the time this mother dies, however, the favoured child has convinced himself or herself that the other siblings have no claim to the home because mother intended to leave it for him or her alone.

Almost invariably the elderly parent does not document their intention in writing. Thus the question remains: What was the deceased’s intention? Did she intend to gift the property outright to one child alone? Or did she intend that one child to hold the property in trust for her estate after her death?

Predictably the disappointed siblings commence a court action claiming the surviving owner holds the property in trust for the estate of their mother. The defendant child denies there was a trust and instead claims that “Mom intended to give me the house outright” (reading “because she loved me more than you”)

These estate disputes involving the question of gifts versus resulting trusts are becoming unfortunately all too common.

What is a Resulting Trust as opposed to a Gift?

Most of us are familiar with gifts, but what is a resulting trust?

A resulting trust is a historic legal doctrine developed by the courts of equity. It provides that where one person (the “transferor”) transfers an interest in property gratuitously to another person (the “transferee”) In such a case, the transferee will be presumed to hold it in trust for the transferor. The transferee is said to hold the property on a resulting trust because he or she remains under an obligation to return it to the original owner, the transferor. Although the transferee may have legal title to the property, the transferor remains the real owner or equitable owner.

Thus where a gratuitous transfer of property is made, equity does not assume a gift to the transferee, rather it assumes that the property has been transfer to be held in trust for the transferor. In order to establish that there has been outright gift of the property, equity requires the transferee to prove that there was an intention to gift both the legal title and the equitable interest in the property (true ownership includes both the legal and equitable interest)

If the transferee cannot prove the transferor intended to gift the property (whether home, bank account or other asset) then he or she will be presumed to hold the asset in trust for the transferor. In other words, the transferor (or upon death, the transferor’s estate) will remain the real owner of the property. Even if it is no longer in the transferor’s legal name, he or she continues to have an equitable interest in the property.

A historical exception to this presumption of resulting trust involved transfers by a husband to a wife or by a father to his children. In these cases, the opposite presumption applied. That is, the courts presumed that the transfer was meant to be an outright gift of both legal and equitable interest, unless and until it was proven otherwise. This presumption was called the presumption of advancement.

The question of whether a transfer was meant as a gift or a resulting trust generally arises in cases where the transferor did not properly document his or her intention at the time of the transfer. So for example, where the transferor signs a deed of gift together with the transfer, his or her intention will be clear.

Unfortunately however such clear declarations of intention are rare. Often joint ownership may continue for years before the transferor dies and the litigation begins.

The courts are then left with the difficult task of determining the deceased’s original intention, at the time of the transfer many years before.

Two recent decisions of the Supreme Court of Canada have helped to clarify some of the legal principles the courts apply in deciding these questions. Reasons for judgment were issued in Pecore v Pecore 2007 SCC 17 and Madsen Estate v. Saylor 2007 SCC 18 in May 2007.

Pecore v. Pecore

On the advice of his financial adviser a father transferred most of his wealth into joint bank and investment accounts with his daughter. The adviser told him that by doing so, he would ultimately save probate fees. This father also gave his daughter a power of attorney allowing her to manage his finances.

In this case, the father had three children. This daughter, however, was the only one with significant financial challenges. She worked at low paying jobs, was married to a quadriplegic and often benefited from the financial assistance of her father during his lifetime.

After the transfers, the father’s accountant made him aware the transfers of the investments could trigger capital gains tax. Thus the father wrote to the financial institutions to advise them that he continued to own the accounts and they had not been gifted to his daughter.

The father continued to pay the income tax on all of the income from the investments and used the accounts as his own for the rest of his lifetime. His daughter, Paula, made a few withdrawals but she was required by her father to notify him before doing so, in other words, he maintained control of the accounts until his death.

Some time after these transfers, the father drew up a new will leaving the residue of his estate to this daughter and her husband Michael. In discussing his assets with the lawyer preparing the will, the father discussed a number of his assets but did not mention the joint accounts.

Further there was evidence that the father had told a number of people, that he intended to look after his daughter Paula after his death but that “the system” would take care of her husband, Michael who was severely disabled.

At the time of death, the joint accounts worth $1 million passed to Paula. The issue of their ownership was raised later in divorce proceedings between Paula and Michael. Michael argued that the accounts had been held in trust for the estate and as a beneficiary of the residue, he was entitled to a share in those monies.

In this case the Supreme Court of Canada upheld the decision by the trial judge that the father had intended to gift the accounts to Paula and those monies now belonged to her.

2. Madsen Estate v. Brooks

The facts in this case may seem similar to those in Pecore, yet the court reached a contrary conclusion as to ownership.

In this case, Mr. Madsen had three children. He transferred his bank and investment accounts into joint names with his daughter, Patricia Brooks. He alone had contributed all of the funds in these accounts and he alone continued to have control of the accounts and pay income tax on the accounts during his lifetime.

There were no statements or declarations by Mr. Madsen as to what his intention was in transferring the accounts into joint names with his daughter. The value of the accounts was $185,000 when he died.

Patricia claimed the monies as her own as a surviving joint tenant. She alleged that her father had given her these monies as a gift because he preferred her to her two siblings. Not surprisingly these siblings disagreed and argued that the monies formed part of their father’s estate.

The Supreme Court of Canada upheld the decision by the trial judge that the daughter held the monies in trust for her father’s estate.

The different results in these cases is explained by the difference in the evidence in one case, the father had made it clear he intended to gift the monies to his daughter. In the other case, he had not done so. It is these different findings of fact that led to the different results.

These two contrary decisions serve to highlight the continuing challenge for the courts to find the intention of the deceased, in the absence of a clear statement of intention being made at the time of the transfer.

The Supreme Court of Canada did assist by enunciating a number principles of law that apply in these cases:

1. When there is a gratuitous transfer from either a father or mother to their infant child, the law presumes that the transfer was a gift. In other words, there is a presumption of advancement or gift which applies. No such presumption applies in the case of an adult child.

2 . When there is a gratuitous transfer from either a father or mother to their adult child, the law presumes that the transfer was a a resulting trust and that the child holds the property in trust for the parent or the estate of the parent upon death. In other words, there is a presumption of resulting trust which applies.

3. Both of these presumptions are rebuttable presumptions of law. As such, they “provide a guide for the courts in resolving disputes over transfers where evidence of the transferor’s intent in making the transfer is unavailable or unpersuasive”

4. A transfer into joint tenancy, whether it be by way of a gift or a resulting trust, immediately vests the right of survivorship. Thus the transfer is an inter vivos transfer and does not attract probate fees or succession duties.

Conclusion

Every day people transfer significant assets into joint names with others. Frequently they do so without properly documenting their intention.

Thus the question remains : Is the transfer a gift of the property or is the property to be held in trust? So, for example, did the parent transfer over that bank account simply for convenience to permit the child to help the parent with their banking or did the parent intend to gift the account to this one child to the exclusion of the others?

The Supreme Court has limited the presumption of gift or advancement to cases involving transfers to minor children. Thus in the case of transfers to adult children, the child will be presumed to hold that asset in trust for the estate of the deceased parent. The child will thus bear the burden of proving that the transfer was meant as a gift.

In spite of this recent clarification by the courts, these disputes will continue. Indeed we believe the courts will see more and more litigation involving jointly owned assets. Judges will continue to be called upon to second guess the deceased’s intention long after the initial transfers.

A word to the wise

We conclude with two last cautionary notes:

1) It is crucial to document the transferor’s intention in writing.

Where a gratuitous transfer is made it is essential for a legal professional to enquire and document in writing the transferor’s intention does he or she intend an outright gift or does he or she intend the transferee to hold the property in trust?

Failure to make these enquiries and keep such notes may well result in potential liability on the part of the legal professional to a disappointed beneficiary.

2) Be sure to consider estate planning tools other than joint ownership, as we have seen that the latter can be risky.

Other estate planning tools such as a trust, may be preferable to joint ownership to ensure an orderly succession upon death.

As well there may be unintended income tax ramifications to a disposition of property by way of a transfer into joint tenancy to oneself and another.

Other related legal problems that may arise include severance of the joint tenancy whether under The Family Relations Act or by a severance by the other joint tenant who then claims an interest in the property even before the death of the transferor.

Vancouver Estate Claims – Have You Been Disinherited?

Keep on DisinheritingHave You Been Disinherited?

1. MENTAL CAPACITY

Legal test for capacity:
Banks v. Goodfellow 1870

must understand that a will is being made and that it disposes property on death;
must know the nature and extent of his property;

must understand who has an appropriate claim upon his property;
must be free of delusions that affect his decisions, ie, be of sound mind, memory and understanding;
Lager v. Poirier SCC

“the mind must be able to comprehend of its own initiative and volition” at the time that instructions to the lawyer are given;

However:
a will was recently upheld where the testator thought he was being poisoned by gases into his apartment, as he knew what he owned and what he wanted to do with his estate, and who he had to provide for;

Problems encountered:
– no standard method of assessing capacity
– variety of testing and types of causes of dementia
– problems testing due to language, customs, hearing or sight losses
– medical history/records important
– Dementia not well recognized even by doctors/health professionals or professionals
– people good at covering up, or having things done for them
– most people, including health care, underestimate degree of cognitive impairment
– well settled that a proper assessment cannot be done from superficial discussions – must be “probing of the mind”
– typical indications – short term memory loss, paranoid ideas to family, confusion, difficulty with self care/finances
– disorientation to time/person/place, problems recognizing, easily swayed in opinion

2. UNDUE INFLUENCE

This is an influence that is exerted over the mind of another that amounts to coercion of the other’s free will so as to control the other’s mind, ie, an extreme example is a cult leader.

– demented people are very vulnerable to mental pressure
– hard to prove, look for “suspicious circumstances” – a recent article listed 64 examples of such “suspicious circumstances”
– the propounder of a will has to prove proper execution of the will, knowledge and approval of its contents, and mental capacity where there are circumstances that are suspicious, rather than it being presumed that the testator knew and approved of the contents of the will
– individuals are frequently taken advantage of by care-givers, family, acquaintances, salespeople or power of attorney holders
– where there is a special relationship such as a doctor/patient, lawyer/client, care-giver, parent, child, etc., the B.C. Court of Appeal did in May 1998 rule that there is then a presumption of undue influence that shifts the burden to the defendant to disprove it.

3. WILLS ISSUES

Requirements of a valid will:

must be in writing
must be signed at the end by the testator, and witnessed by 2 or more individuals, all 3 signing in the presence of each of other
must purport to deal with the property of the testator

Common mistakes:
beneficiaries or spouses of beneficiaries cannot witness the will or the bequest is invalid
– marriage after the will is executed will revoke the will
– the witnessing procedures are frequently not properly carried out
– a failure to dispose of the estate or part of the estate
– using incorrect/vague/contradictory language
– using precise words such as “issue” or words such as “per stirpes” which have been interpreted by the Courts to have different meanings

4. WILLS VARIATION ACT

Under British Columbia law spouses and children of a deceased have the right to contest an estate on the basis that the deceased parent or spouse failed to “make adequate provision for their proper maintenance and support”.

In the near future a Court challenge will be made to the Wills Variation Act by a common-law spouse, who currently does not have the right to bring such an action.

There has been a hugh increase in the number of these claims, especially by adult children who have been disinherited.

Applies to any assets owned by the deceased that pass under a valid will and form part of the deceased’s estate – it does not apply to property that passes by right of survivorship such as a joint tenancy, insurance, or pensions where there are named beneficiaries and so forth.

The Court has a wide discretion to vary a will in any manner that it thinks just.

The Court may also take into account evidence of the testator’s reasons for not making adequate provision for the spouse or child that is contained in a statement in writing signed by the testator.

The action must be brought within 6 months from the date of the granting of Letters Probate.

The test with respect to a testator and his adult children is that of the “judicious parent”, and a parent has a moral obligation to provide for his or her children. If the children have estranged themselves, then the testator may not have to provide for the children. The test is that of the judicious parent or spouse, not necessarily a kindly one, as to what he or she should have to provide in order to discharge the marital or parental duty, having regard to both economic and moral considerations.

In a Supreme Court of Canada land mark decision Tataryn v. Tataryn 1994, a wife of 43 years was not adequately provided for in the deceased’s will. One son was provided for generously and another son was disinherited.

The Court found that it should search for “contemporary justice”. It held that a testator has a legal obligation to provide for his or her spouse, and only a moral obligation to provide for adult children. Legal obligations take priority over moral obligations. If there are sufficient assets, then both legal and moral obligations should be met.

The Courts acknowledge that a testator should be free to dispose of his or her assets as he or she sees fit, but the Court will interfere to vary a will where it is appropriate.

In Tataryn the Court held that as a minimum, the widow should get what she would have received had the parties separated, as well as some extra monies in the form of maintenance for her twilight years.

5. INTESTACY ISSUES

Since changed after WESA April 1,2014

See attached Glossary for the formula for the distribution of assets when a person dies without a will.

Separation of spouses for one year prior to death disqualifies the surviving spouse from taking deceased’s spouse estate on an intestacy.

6. GIFTS/RESULTING TRUSTS

This area of the law usually deals with a purported gift of an asset by one individual to another.

Resulting trusts arise in 3 instances:

where the individual gratuitously transfers the assets;
where the individual supplies all or substantially all of the purchase price;
where the individual puts his/her property into another’s name and the other person gave no consideration (ie, paid no monies);

The lack of consideration is the common element – the individual must therefore have intended the recipient to hold the asset in trust and that at some point it will go back to the transferor, as the law of equity assumes bargains not gifts. This presumption can be rebutted on a balance of probabilities but the onus rests on the volunteer to show that it was a gift. If the transferor and the transferee have a close relationship at the time of the transfer, the presumption is weakened and slight evidence will be required to rebut it. The evidence will be confined in time to the date of the transfer and may be written, verbal or circumstantial.

A resulting trust will not be presumed if the transfer was to a wife or child, then the onus will remain on the person who asserts the trust or was from a common-law husband to a common-law wife, or was from a father to a child (and presumably will include mother to child) or was from a step-parent to a step-child.

7. JOINT BANK ACCOUNTS

Generally when an account is opened in the name of 2 or more persons, if the holders are joint tenants, then the survivor has the right to the whole amount. However, in equity the beneficial title is the issue:

who has the right to the income and capital while both joint tenants are alive;
is there a right of survivorship;

Typically when both joint tenants have deposited monies into account, then the survivor is entitled to the proportionate deposits. Where only one of the joint tenants deposits money into the account, then a presumption of resulting trusts arise.

There are a number of decisions that have held that the bank document giving right to the purported right of survivorship is merely for a matter of convenience and it is always a question of intention, that must be proved by evidence. The Supreme Court of Canada has held that the bank form giving rise to the purported right of survivorship does not necessarily evidence a depositor’s intention to make a gift of the account.

8. UNJUST ENRICHMENT

This also is a very big growth area in estate law. The situation typically applies to common-law spouses, same sex spouses, or any one who has been in a “relationship” with another and there has been:

an enrichment enjoyed by one party;
a corresponding deprivation suffered by the other party;
an absence of any juristic reason for the deprivation/enrichment;

There have been a number of Supreme Court of Canada decisions such as Peter v. Beblow that have extended the claim for unjust enrichment to include contributions of homemaking and child care services, rather than the traditional test of financial contribution. The Supreme Court of Canada recently in Soulos held that the test for constructive trust is now “good conscience.”

This law has in recent years been applied to same sex relationships.

Constructive trust claims have been and will continue to be more prevalent.

Constructive trusts may also arise in other circumstances than common-law or same sex relationships, such as mutual wills. A constructive trust may be imposed on the survivor of the parties if it can be shown that there was an agreement between the parties not to revoke their wills and to dispose of their property in a particular way if the survivor has broken the agreement and has made another will.

9. BREACH OF FIDUCIARY DUTY

A fiduciary relationship is one in which there is a duty to one person, the fiduciary, to act on behalf of another person with respect to property which is the subject of the relationship. Where there is a fiduciary relationship, then the fiduciary must act honestly, impartially and cannot personally benefit other than for prescribed fees for services. The fiduciary is bound to protect the interests of the beneficiary, and cannot act in a conflict of interest, nor personally benefit. Fiduciaries are typically lawyers, bankers, directors, or any other person in a high position of trust.

A person using a power of attorney cannot use that document to personally benefit him or herself, or this will be a breach of fiduciary duty.

There is an onus on the fiduciary to prove that he or she acted properly when called into question.

10. LAWYER’S NEGLIGENCE

A lawyer is under a duty of care to carefully consider a client’s mental capacity and the thoroughness required is proportionate to the gravity of the transaction:

A lawyer owes a duty to his client to draft a will in accordance with the instructions, and to provide all required advice and attend to the execution of the will expeditiously given the circumstances – the responsibility to carry the client’s wishes extends to an intended beneficiary ( the disappointed beneficiary) who may be foreseeably deprived of a inheritance by the lawyer’s negligence.

A lawyer may breach his duty by failing to enquire, if appropriate, into:
obtaining a medical certificate;
probing the client’s mind;
properly recording notes;
looking for suspicious circumstances;
allowing interested parties to be present during the interview;
failing to take steps to test for capacity;
taking instructions from a beneficiary and not confirming same with the testator;
a common area of lawyer negligence is missing a limitation date, ie, failing to commence a Wills Variation action within 6 months from the date of probate.

Severance of Joint Tenancies

Severance of Joint Tenancies

The severance of joint tenancies is an increasingly important issue in estate litigation. It can occur without the registered joint owners even when knowing it if their conduct is inconsistent with joint ownership.

We often assume that property, registered in joint tenancy, will automatically pass to the surviving joint tenant(s) upon the death of another joint tenant.

This is, however, not always the case. As demonstrated in the recent Pecore and Madsen cases from the Supreme Court of Canada, one possibility is that the surviving joint tenant actually holds the property in trust for the estate of the estate of the deceased.

A second option, which we will examine in this paper, is the possibility where joint tenancies have been somehow terminated prior to the death of one co-owner.

Legal practitioners should always consider the question of whether property, apparently held in joint tenancy, indeed remained in joint tenancy at the time of death.

Subject always to the principles set out in Pecore, where a joint tenancy has not been terminated prior to a joint tenant’s death, then the property will automatically pass to the surviving joint tenant.

On the other hand, if the joint tenancy has been somehow terminated, then the deceased’s share in the property will be included in his or her estate and distributed accordingly.

Severance of Joint Tenancies

The legal process of converting a joint tenancy arrangement into a tenancy in common, is referred to as “severance”. The distinction is important because of the right of survivorship which attaches to a joint tenancy but not to tenants in common.

It is possible to sever a joint tenancy either intentionally or inadvertently. Where a tenancy in common has been created prior to the death of one owner, the deceased’s property interest will not pass the other owners, but rather will form part of the deceased’s estate.

The severance of the joint tenancy can have a very significant effect on the outcome of both matrimonial and estate litigation. Recently this is especially so because real property increasingly represents the major asset owned by the Deceased.

Requirements of Joint Tenancies

Our law presumes joint owners to hold as tenants in common, rather than as joint tenants unless the title of the property specifically describes the owners as “joint tenants”.

In addition to the form of registration, there are four essential pre-conditions of ownership in joint tenancy. These are known legally as the “four unities” . In the absence of any of these four unities, the law presumes the owners to be tenants in common, and not joint tenants.

Briefly, the four unities are the following;

1) Unity of Interest

The interest of all joint tenants must be identical in duration, extent, and nature. For example , two joint owners would each have 50% , or four joint owners would each have a 25% interest. (Thus a 30/70 per cent ownership can exist only as for tenants in common.)

2) Unity of Possession

Each joint tenant must have an undivided share of the property at the same time as the other joint tenants. No joint tenant can have the exclusive right to possess the whole property. ( Possession in this context refers to the actual ownership of the property, and not actual physical occupancy.) The concept of an undivided share means that there is no actual division of any kind in the property. From a legal perspective, there is only the whole property, there is no such thing as a division of the whole;

3) Unity of Time

The interest of all joint tenants must be created at the same time and for the same period. Each joint tenant must receive his or her interest at the same time and the interest must be of the same duration.

4) Unity of Title

Each joint tenant must have an equal title to the property, created by the same legal document. The document creating the title may be a transfer document, a will, a trust declaration, a deed of gift, or contract. What is crucial, however, is that it be the same legal document which creates each of the respective interests as joint tenants.

Should any of these four unities fail, this may cause the severance of the joint tenancy, and create a tenancy in common.

Acts Severing a Joint Tenancy

The leading English case is Williams v. Hensman ( 1861) 70 E.R. 862. Here the court held that a joint tenancy may be severed in three different ways.

1) By an act of one person acting on his or her own share; ( i.e. Mr. Smith registers a transfer from himself to himself at the land title office).

In other words, one joint tenant, without the consent of or even notice to the other tenants, may deal with his interest in such a way as to destroy one of the unities. In British Columbia our Land Title Act, s 18 permits such a transfer to sever a joint tenancy;

2) By mutual agreement

This typically occurs when all of the joint tenants enter into an agreement which expressly purports to sever the joint tenancy. Most often this occurs during a marriage breakup. It may be set out in a separation agreement or court order. Where, however, an agreement does not specifically address the severance of the joint tenancy, our courts often require that the parties establish severance by mutual course of conduct. McKee v. National Trust (1975) 56 D.L.R. (3d) 190)-;

3) By any course of dealing that intimates that the interests of all were mutually treated as constituting a tenancy in common.

Many acts can cause the severance of the joint tenancy, sometimes unwittingly. For severance by conduct, however, there must be mutuality of intention to treat the ownership as a tenancy in common. Both joint tenants must openly and mutually treat the tenancy as a tenancy in common. For example, a declaration of irreconcilability under the Family Relations Act, RSBC, will sever any joint tenancy ownerships of property held by the couple.

Case Discussion: Joint Tenancies

Most reported cases seem to involve the question of “mutual treatment” as tenants in common i.e. whether or no the parties carried out a course of conduct sufficient to enable the court to find their interests as constituting a tenancy in common.

Commonly the courts seem to focus on negotiations or actual agreements between the parties in respect of the property in question. These have been found to be evidence of an intention to treat the ownership interests as a tenancy in common.

In Schofield V. Graham (1969) 6 D.L.R. (3d) 88, a husband and wife had purchased property initially as joint tenants. Years later, when their marriage was dissolved, a dispute arose regarding the ownership of the property. The wife commenced an action for a declaration that each owned an undivided one half interest as joint tenants. That action settled prior to trial on the basis that the property would be listed for sale, and the proceeds divided equally. Prior to final sale, however, the husband died and the wife claimed full ownership of the property as a surviving joint tenant.

The wife’s claim was denied. The court held there was sufficient evidence to conclude that the parties intended to destroy their unity of possession. Therefore it ruled the joint tenancy had been severed.

Perry v Perry Estate

This decision was followed in Perry v. Perry Estate 39 E.T.R. (2d) 115, an Alberta decision. Here a couple divorced but no court order was made with respect to the family home registered in their names as joint tenants. The home was sold, however the husband died before the sale proceeds were distributed.

Once again, the court ruled that the joint tenancy had been severed. The court found that the finalization of the divorce and the decision to sell the home indicated that the parties intended to terminate the unity of possession. They said the agreement to sever was implicit in the parties’ actions. Accordingly the wife was only entitled to one half of the proceeds of the sale, with the other falling into the husband’s estate.

Feinstein v. Ashford

Feinstein v. Ashford, 2005 BCSC 1379 is an example of the importance of careful analysis of various ownership interests. In this case one joint tenant, unbeknownst to the other joint tenant, signed a land transfer at his lawyer’s office to reregister title to their joint property as a tenancy in common. A few hours later he died.

A legal dispute thus arose as to whether this unregistered transfer was effective to sever the joint tenancy. The court held that, upon execution, the transfer was effective to sever the joint tenancy.

Walker v. Dubard

A leading British Columbia case is Walker v. Dubard 45 E.T.R. 209 (BCCA) This case involved a couple who owned several assets jointly. Shortly before her death due to cancer, the wife was apparently upset with her husband’s lack of sensitivity to her illness and wanted to avoid her estate passing to his relatives. Accordingly she both changed her will and transferred several assets out of joint tenancy. The husband made a claim under the Wills Variation Act and also sought declarations with respect to ownership of some of the joint assets.

One question was the effectiveness of some letters to the Deceased’s bank which had been drafted by the Deceased’s lawyer and signed by the Deceased. These letters spoke of her intention to sever the joint tenancy in respect of some investment certificates and bonds. They did not however specifically direct the bank to transfer these assets.

The appeal court upheld the trial judge’s finding that the joint tenancy had not been severed. The bank investments therefore passed to the husband by way of right of survivorship.

The court ruled that it is insufficient to sever a joint tenancy where there is merely a unilateral declaration of intent to sever, and nothing more, regardless of whether notice of that intent is given to the other joint tenant(s).

Zuk v. Zuk

The case Zuk v. Zuk 2007 BCSC 300 involved the untimely death of a wife in the midst of matrimonial proceedings against her husband. At the time of death, there had not yet been any declaration of irreconcilability made under the Family Relations Act.

The wife’s daughter continued the action as her personal representative and sought reapportionment of the former matrimonial should be made in favour of the estate. The husband argued that the matrimonial home was his alone as surviving joint tenant.

The court found there had been no severance. In doing so they cited Tompkins Estate v. Tompkins (1993) 76 B.C. LR (2d) (BCCA) in which Southin, J.A. stated in Para (9) she is “not wholly in accord with the learned trial judge’s conclusion that severance requires either alienation or agreement. I prefer to say that it requires either alienation or agreement or facts which preclude one of the parties from asserting that there was no agreement.”

Conclusion

It is not entirely clear what the courts may require in order to find where joint tenancies have been severed. Nevertheless it is safe to predict that in future there will likely be court challenges to estate plans using joint tenancies, on the basis that the conduct of the parties has resulted in a severance of the joint tenancy.

For example, we recently reviewed a file where a transfer of property had been made to a father and son as joint tenants. Simultaneously they signed a trust agreement wherein the son acknowledged that he actually held his interest in trust for both himself and his sister. This in fact occurred in Public Trustee v Mee (1972) 2W.W.R. 424.The court held that when the bare trust declaration was signed, the property was transferred to the trustee, and thus the joint tenancy severed. This lack of basic understanding of the 4 unities, defeated the joint ownership arrangement from the outset.

There seems to an unfortunate lack of consideration by some legal professionals of the effects of some legal documents on the nature of ownership of the property.

Further posts on Joint Tenancies include

The Nature of Joint Tenancy

Using Joint Tenancy for Estate Planning

Joint Tenancy & Property

 

Wrongful Death Damages Fail To Provide For Grief

GriefWrongful Death Damages Fail To Provide For Grief and Emotional Injury in BC

One of the glaring inequities in wrongful death claims in British Columbia is the failure of our legislation to provide authorization for the courts to make an award for compensation for individual grief suffering as a result of the loss of a close family member.

Simply put the court does not compensate or have authority to award compensation for injuries that may have been suffered as a result of a nerve a shock or grief or other psychological or emotional injury caused by, the negligence of the defendant. The court does not compensate for the indirect results or reaction to the death or injury of a loved one.

 

This can have disastrous results for parents who lose a child to the neglect or fault of another and are then informed there is no pecuniary award for grief-just financial loss.

In Devji v Burnaby 1999 BCCA 599 followed previous complicated case law as follows;

It must be remembered, however, that the claim must be for actual psychiatric or emotional injury caused by (not just resulting from) the actionable conduct of the defendant. Because of the dichotomy between principle and policy, in many cases there have been several sets of reasons for judgments and many significant dissents. This makes the law exceedingly difficult to rationalize. As will be seen, the divergence of opinion has been settled in the United Kingdom by policy decisions of the House of Lords in Alcock v. Chief Constable of the South Yorkshire Police, [1991] 4 All E.R. 907 and White and Others v. Chief Constable of South Yorkshire and Others, [1999] 1 All E.R. 1 (H.L.). In White, at 41, Lord Hoffman formulated the circumstances in which recovery for psychological injury will be permitted:

(1). The plaintiff must have close ties of love and affection with the victim. Such ties may be presumed in some cases (e.g. spouses, parent and child) but must otherwise be established by evidence. (2) The plaintiff must have been present at the accident or its immediate aftermath. (3) The psychiatric injury must have been caused by direct perception of the accident or its immediate aftermath and not upon hearing about it from someone else. (Emphasis added)

 

[5] The foregoing, however, does not state the law of this Province. The Supreme Court of Canada, in a number of cases, has adopted the approach to liability enunciated in Anns v. Merton London Borough Council, [1977] 2 All E.R. 492 (H.L.)which has since been overruled in the United Kingdom, and there is a previous nervous shock decision of a five-judge panel of this Court which is binding upon us to the extent of that which it actually decides. One of the questions to be decided in the case at bar is whether that case, Rhodes v. C.N.R. (1990), 50 B.C.L.R. (2d) 273, precludes recovery by the plaintiffs.

The Evolution of the Law Relating to Psychiatric or Psychological Injury Cases

 

[15] The first test for liability on the part of a defendant is reasonable foreseeability of particular harm as a consequence of his conduct. Thus, as was stated by Lord Denning in King v. Phillips, [1953] 1 All E.R. 617 (C.A.) at 623, “… there can be no doubt since Hay (or Bourhill) v. Young, [1942] 2 All E.R. 396 (H.L.), that the test of liability for shock is foreseeability of injury by shock.” As the cases show, however, this general proposition is directed not to the world at large, but only to that class of persons which might reasonably be within the contemplation of the alleged wrongdoer. It also seems clear that while foreseeability is one test for liability, it must be reasonable foreseeability, and that every foreseeable injury does not create a duty of care. This is confirmed by numerous judicial pronouncements, including a passage from the opinion of Lord Wilberforce in McLoughlin v. O’Brian, [1982] 2 All E.R. 298 (H.L.) to which I shall return later in these Reasons. At 303, that learned judge said:

That foreseeability does not of itself, and automatically, lead to a duty of care is, I think, clear. I gave some examples in Anns v. Merton London Borough [1977] 2 All E.R. 492 at 498…, Anns itself being one. I may add what Lord Reid said in McKew v. Holland & Hannen & Cubitts (Scotland) Ltd. [1969] 3 All E.R. 1621 at 1623: ‘A defender is not liable for a consequence of a kind which is not foreseeable. But it does not follow that he is liable for every consequence which a reasonable man could foresee.’

[16] One of the difficulties arising from the simple test of foreseeability is to determine how it is to be applied in particular circumstances. As already mentioned, some eminent judges believe nervous shock cases can be decided solely by reference to the principle of foreseeability. Other courts have taken the view that the application of the foreseeability principle is too open-ended and that “control mechanisms” are required. This is illustrated by a comment of Lord Bridge in McLoughlin (supra), at 313, that it is readily foreseeable that a significant number of mothers exposed suddenly to a casualty or the consequences of a casualty that causes the death of their children might break down under the shock of the event and suffer psychiatric illness. I note, however, that this comment includes a “control mechanism” by limiting its operation to the defendant’s foreseeability of harm by nervous shock not to the world at large, but only to mothers. This, of course, was only an example within the context of the case under consideration but it illustrates the two points of view.

[17] As already stated, in the U.K. the contest between pure foreseeability and “control mechanisms” has already been decided in favour of the latter in the opinions in Alcock and White, which I shall discuss below. In Canada, the Supreme Court of Canada in Kamloops v. Nielsen, [1984]2 S.C.R. 2, included a caveat about public policy negating a duty of care not to cause reasonably foreseeable injury. More directly, “control mechanisms” in nervous shock cases were actually imposed in Rhodes. Nevertheless, it may be useful to record briefly how the law has evolved incrementally in the United Kingdom and elsewhere.

Wrongful Death Claims – Loss of Financial Support

Wrongful Death Claims

Yesterday I blogged about the Family Compensation Act of British Columbia which allows a spouse, parent, or child of a person whose death has been caused by the wrongful act negligence or default of another, to sue for compensation.

There are several heads of damages, and probably the largest in terms of pecuniary amount is that of loss of financial support.

The following cases are a brief summary of this head of damage:

In the decision Johnson v. Carter, 2007 BCSC 622, the court referred to some of the principles in the following paragraphs:

Here, the claim is for loss of financial support.

In Keizerv. Hanna, [1978] 2 S.C.R. 342, Dickson J. said the following at 351-52:

… The appellant is entitled to an award of such amount as will assure her the comforts and station in life which she would have enjoyed but for the untimely death of her husband. If one is speaking of contingencies, I think it is not unreasonable to give primary attention to the contingencies, and they are many, the occurrence of which would result in making the award, in the light of events, entirely inadequate. An assessment must be neither punitive nor influenced by sentimentality. It is largely an exercise of business judgment. The question is whether a stated amount of capital will provide, during the period in question, having regard to contingencies tending to increase or decrease the award, a monthly sum at least equal to that which might reasonably have been expected during the continued life of the deceased.

The conventional approach to determining an award for loss of future earnings is as follows:

1. A calculation is made of the income

which has been lost up to the date of the trial.

2. A calculation is made of the loss of

future earnings.

3. A reduction is then made for personal

consumption of the deceased.

4. Contingencies are reviewed to

determine if a further reduction is required.

[Cogar Estate v. Central Mountain Air Services Ltd.

(1992), 72 B.C.L.R. (2d) 292 (C.A.)]

 

Loss of support, like loss of future earning capacity, involves an inquiry into the unknowable:

Because damage awards are made as lump sums, an award for loss of future earning capacity must deal to some extent with the unknowable. The standard of proof to be applied when evaluating hypothetical events that may affect an award is simple probability, not the balance of probabilities: Athey v. Leonati, [1996] 3 S.C.R. 458. Possibilities and probabilities, chances, opportunities, and risks must all be

considered, so long as they are a real and substantial possibility and not mere speculation. These possibilities are to be given weight according to the percentage chance they would have happened or will happen.

[Rosvoldv. Dunlop (2001), 84 B.C.L.R. (3d) 158, 2001 BCCA 1 at [paragraph] 9]

[6] Our Court of Appeal in Brown v. Finch, 42 B.C.L.R. (3d) 116 also said at 1J3:

3. The basis upon which damages must be assessed is that stated by McFarlane J.A. in Cox v. Takahashi (1977), 5 B.C.L.R. 162 (B.C.C.A.) at 164:

It is well established that the measure of damages under the statute as interpreted by the Privy Council in Nance v. B.C. Bee. Ry., [1951] A.C. 601, 2 W.W.R. (N.S.) 665, [1951] 3 D.L.R. 705, is the pecuniary loss suffered by the dependants as a consequence of the death. That pecuniary loss is the actual financial benefit of which they have been deprived and includes financial benefit which might reasonably be expected to accrue in the future if the death had not occurred

Wrongful Death Claims and The Family Compensation Act

Tegemann v. Pasemko 2007 BCSC 1062 is a good case example of the principles for compensation under the Family Compensation act of British Columbia.

In this particular case the deceased was a 50-year-old mother, who is survived by her husband aged 49 at the time of the accident, and two young children aged six and three at the same time.

The plaintiff based his claim under the following sections of the Family Compensation act:

Action for death by wrongful act, neglect or default

2 If the death of a person is caused by wrongful act, neglect or default, and
the act, neglect or default is such as would, if death had not resulted, have
entitled the party injured to maintain an action and recover damages for it, any
person, partnership or corporation which would have been liable if death had
not resulted is liable in an action for damages, despite the death of the person
injured, and although the death has been caused under circumstances that
amount in law to an indictable offence.

Procedures for bringing action

3 (1) The action must be for the benefit of the spouse, parent or child of the
person whose death has been caused, and must be brought by and in the
name of the personal representative of the deceased.

The court or jury may give damages proportioned to the injury resulting from the death to the parties respectively for whose benefit the action has been brought.
The amount recovered, after deducting any costs not recovered from the defendant, must be divided among the parties in shares as the court or jury by their judgment or verdict directs.

In assessing damages any money paid or payable on the death of the deceased under any contract of assurance or insurance must not be taken into account.
In an action brought under this Act, damages may also be awarded for any of the following expenses if the expenses have been incurred by any of the parties for whom and for whose benefit the action is brought:

any medical or hospital expenses which would have been recoverable as damages by the person injured if death had not ensued;
reasonable expenses of the funeral and the disposal of the remains of the deceased person.

It is most noteworthy that the action may only be brought for the benefit of the spouse parent or child of the person whose death has been caused, and that it must be brought in the name of the personal representative of the deceased.

 

There are a number of heads of damages that can be claimed such as:

Loss of care, guidance and affection;
Loss of inheritance;
Loss of dependency;
Loss of household and childcare services;
Special damages.
Loss of financial support (usually the largest monetary claim)
loss of future earnings

Many of the heads of damages such as financial loss, are calculated with the assistance of actuaries and/or economists based on financial analysis of past income tax returns etc.

Needless to say it can be very complex to determine.

 

CONTINGENCIES OF LIFE

 

Once a judge reaches the various numbers of the heads of damages the judge often then takes into account the various contingencies of life such as the husband’s statistical chances for divorce and/or remarriage that should be deducted from such an award.

In this particular case the court deducted 20% of his calculation for loss of dependency, based on the reasonable expectation that the husband will remarry.

Capacity To Make a Will

Capacity To Make a Will

 

A person making a Will must understand:

 

The nature of the act of making a Will:

a. That he will die;

b. That the Will will come into operation on his death, but not before; and

c. That he can change or revoke the Will at any time.

 

2. The effects of the Will:

 

a. Who the executor is, and possibly why he or she is being chosen as
executor;

b. Who gets what under the Will;

c. Whether a beneficiary’s gift is absolute, or whether it is limited or
conditional in some way (for example a life interest, or a legacy
contingent on attaining a particular age);

d. Whether he has already made a Will and, if so, how and why the new one
differs from the old one.

 

The extent of the property being disposed of:

a. The extent of the property being disposed of;

b. The fact that any jointly owned property might automatically pass to the
other joint owner, regardless of anything the will says;

c. Whether there’are benefits payable on his death which would be
unaffected by the terms of the will: for example, the proceeds of an
insurance policy, or pension rights;

d. Whether he has any debts, and how they are to be paid

 

A person making a Will should be able to comprehend and appreciate the claims
to which he ought to give effect. Why are some beneficiaries preferred and others
possibly excluded? For example:

a. Some may be better provided for than others;

b. Some may be more deserving than others because they have been kind to
the testator;

c. Some may have upset, offended or disregarded him;

d. Some may be in greater need than others because of, say, their age or state
of health.

e. It is essential that no delusions should influence the testator and bring
about a disposal of his property which would not have been made if he
was not mentally disordered.

 

5. The testator should not be regarded as lacking testamentary capacity merely because he makes a will which would not be made by a person of ordinary prudence.

Do NOT Put Your Kids On Title Of Your Home

No Children OMonopolyn the Title Of Your Home

After witnessing parents putting their children on title to their home as joint tenants for over 40 years, I have emphatically concluded that in almost every instance is a bad idea.

While it sounds so simple that the parents simply add a child as a joint tenant to their title, this type of simple do-it-yourself estate planning remedy is typically very misunderstood and often abused.

The parent is often under the illusion that doing so is a cost-effective and simple remedy of avoiding probate fees, and given that probate fees are only 1.4% of the value of an estate over $25,000, it is a high price to pay in terms of risk given the minimal reward.

More worrisome to the estate litigator is the tendency of parents to see their children through rose-colored glasses.

They seem to want to believe that if they put the house in joint tenancy with one child, that the child will do the right thing and share the proceeds equally with siblings.

In my experience this rarely happens.

The other siblings will in such circumstances attack the gratuitous transfer of the title between the parent and a sibling, on the basis that it was not a true gift, and that the child owns the house in trust for the estate.(see Pecore v Pecore SCC 17) .

One of the biggest risks in areas such as Vancouver where there has been dramatic increases in property values, is that at the time of the transfer there is a deemed tax disposition and a loss of the principal residence exemption on the portion of the property subsequently held by the child. The child could find themselves owing a significant capital gains tax after the passing of the parent who share will remain his or her principal residence and be tax-free.

Other downside risks is that each owner on title has a right to possession of the property and this can result in stress and possible litigation such as a forced sale of the property under the partition act.

Another major concern these days is that the child spouse could have a strong claim for an interest in the property on separation or divorce if it was used for a family purpose.

Summary the child could be attacked by creditors or bankruptcy or encumber their at half of the property and thus put the parents household at risk.

My advice would be to have any practitioner who upon being requested to put children on title to delve very deeply into the family history and motivations of the client. It is necessary to point out the risk such as the possible loss of control, wrists of potential income tax consequences, please note that the probate fees saving is minimal, and that there are a number of risks that far outweigh any such simplistic estate planning tool.

Partition and Sale Rejected-Hardship

Forced Sale of Jointly Owned Property

Forced Sale of Jointly Owned Property

In Mowat v Dudas 2012 BCSC 454, the court exercised its discretion to refuse an order for a forced-sale of the Cypress Gardens condo development of 177 units owned by 135 different owners.

Each was a co-owner of the entire stratified complex. Some owners wanted the property sold , while others vigorously opposed same.

The court basically examined each of the numerous respondents circumstances and declared that each case must be examined separately to determine whether good reason existed to refuse the sale.

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

Joint ownership of property whether it be in joint tenancy, tenants-in-common, or as a strata owner in a complex, is becoming increasingly common and more complex as time goes on.

It was only just over 40 years ago that we began to see strata lot ownership, which in itself has developed into a very complex area of law.

The following extract is a very good summary of the legal notions of serious hardship and the court’s discretion under the partition of property act of British Columbia

Discretion Under the Partition of Property Act

[141] All the parties to this petition agree that the Court has a discretion not to order a sale under the Partition of Property Act. The use of the word “may” in ss. 2, 7 and 8 has been held to create such a discretion: Evans v. Evans, [1951] 2 D.L.R. 221 (B.C.C.A.).

[142] Section 6 describes circumstances in which the Court “shall” order a sale, but with the limitation “unless it sees good reason to the contrary.” As set out above, s. 6 has no application in the present case, as it has not been shown that the owners of a 1/2 or upwards interest are in support of the petition.

[143] Counsel have referred me to a number of trial decisions in which the nature of the discretion not to order a sale has been considered, including Hayes v. Schimpf, 2004 BCSC 1408; Machin v. Rathbone, 2006 BCSC 252; Zackariuk Estate v. Chepsiuk, 2005 BCSC 919; Dunford v. Sale, 2007 BCSC 1422; Zimmerman v. Vega, 2011 BCSC 757; Richardson v. McGuinness, [1996] B.C.J. No. 2636 (S.C.); Riser v. Rawlings, 2008 BCSC 1050; and Jabs Construction Ltd. v. Callahan (1991), 61 B.C.L.R. (2d) 383 (S.C.). The most useful statements of principle, however, are found in the following decisions of our Court of Appeal.

[144] A useful starting point is Harmeling v. Harmeling (1978), 90 D.L.R. (3d) 208 (B.C.C.A.), a decision of our Court of Appeal sitting in a five-justice division. There the Court rejected any approach that would limit the discretion to cases where there was a want of good faith, or vexatious intent or conduct or malice in taking the proceedings. Rather, as Seaton J.A. wrote for the majority at p. 212:

In my view we should not limit the discretion in that manner. I think that we ought to accept without qualification the general statement that there is a prima facie right of a joint tenant to partition or sale and that the Court will compel such partition or sale unless justice requires that such an order should not be made.

[145] The nature of the discretion was further clarified in Bradwell v. Scott, 2000 BCCA 576. There, the section under consideration was s. 6, but the Court opined that the exercise of discretion under that section would not be significantly different from the discretion under the other sections of the Partition of Property Act. The Court held at paras. 43-45 that the exercise of discretion would depend on the particular facts of each case:

It does not appear from my reading of either the majority or minority reasons for judgment in Harmeling that the section then equivalent to our present s. 6 was under consideration. Rather, the section considered by both judges who wrote in Harmeling, as indicated above, was s. 3 (now s. 2), and in particular the words “may be compelled.” We are bound by the majority opinion that those words confer a discretion to refuse an order where “justice requires that such an order should not be made.”

This case, however, turns on the interpretation of s. 6, and the meaning to be given to the words “unless it sees good reason to the contrary.” Having said that, I am unable to see any real difference between the discretion conferred by this language and that described by Mr. Justice Seaton as arising under s. 3 (now s. 2).

To the extent that “serious hardship” was said in Dobell [Dobell v. Oman, [1998] B.C.J. No. 504, (6 March 1998), Vancouver Registry, A972782 (B.C.S.C.)] to be the test for “good reason to the contrary” I would respectfully disagree. Serious hardship to a respondent may be a proper ground for refusing an order for sale, as might lack of “good faith, vexatiousness or maliciousness” on the part of the petitioner. But these are not the exclusive measure of “good reason.” I agree with Mr. Justice Seaton that we should not limit the discretion by creating a general rule that might serve to justify refusal in any given case. The facts and circumstances of each case must be examined to determine whether a good reason, of whatever sort, exists for refusing the order.

[Emphasis added.]

[146] At paras. 34-35, the Court also addressed the question of onus or burden of proof:

In para. 9 of the chambers judge’s reasons (quoted above at para. 13) he said that it was not possible to determine who was at fault for the various confrontations and altercations which occurred between the parties. The Scotts contend that in leaving this issue unresolved, the chambers judge effectively placed upon them the onus of proving that the Bradwells were not entitled to equitable relief. They say this is an error because as the parties seeking equitable relief, it was for the Bradwells to establish their entitlement to same. As they failed to establish their entitlement, it is the Bradwells who should bear the risk of non-persuasion.

This argument is closely related to the Scotts’ jurisdictional argument, dealt with above, and in my respectful view it must fail for essentially the same reasons. There is no requirement under s. 6, either as a condition precedent to jurisdiction, or otherwise, for the petitioner to prove that he comes to court with “clean hands”, and is otherwise entitled to equitable relief. The section says the court must order sale of the property “…unless it sees good reason to the contrary”. This language is neutral in terms of onus. It is for the court to assess the evidence and to determine whether justice requires that such an order be denied. In practical terms, it would be for those opposing the application to put before the court evidence tending to establish a good reason for refusing it. In any event, I can see nothing in the statute or in the cases decided under it, to support the Scotts’ submission.

[Emphasis added.]

Serious Hardship

[147] As set out in Bradwell, serious hardship is one circumstance that may provide a proper ground for refusing an order for sale, although it is not the exclusive measure of when that discretion may be exercised.

[148] Phillips v. Phillips (1980), 24 B.C.L.R. 194 (C.A.) is an example of the kind of serious hardship that may justify the exercise of discretion to refuse partition or sale. The property in that case was jointly owned by a husband and wife. After separation, the wife continued to live in the property with the children, but the husband applied for partition and sale to raise money to pay off his loans. The trial judge found that the husband’s application was not vexatious, and granted the order. The Court of Appeal allowed the wife’s appeal and set aside the order for partition and sale on the basis that if the order were allowed to stand, the wife and children would be left without a home and would have to relocate. Although Phillips was a case involving a husband and wife, the Court of Appeal applied the general principles relating to partition and sale as set out in Harmeling.

[149] Similarly, in Bergen v. Bergen (1969), 68 W.W.R. 196 (B.C.S.C.), Seaton J. refused partition or sale because he held that the plaintiff husband’s conduct was economically oppressive. The premises were of a relatively low value, and if the property was sold, the wife would not have been able to provide adequate accommodation for herself and her children.

[150] In the present case, there is evidence that many of the respondents would suffer hardship if there were an order for sale of the Land.