Tag: trusts

Ad Hoc “Casual” Fiduciary Relationships

Sedin Estate v Rusin 2011 BCSC 1207 is an excellent example of financial abuse of an elderly person by a trusted financial advisor who was found to be in a casual and ” ad hoc “fiduciary relationships with the deceased.

The deceased and her husband became friends with the defendant financial advisor when the deceased was 69 years of age and the defendant was 32 years old. The deceased remained friends with the defendant after her husband’s death and in fact became dependent on the defendant for management of her finances as her health deteriorated.

The deceased was a modest woman and an unsophisticated investor who is the trial judge found, placed unwavering trust and reliance in the defendant and his abilities to manage her finances.

The deceased sold her house to the defendant’s company when she was 92 years old for $270,000.

The company issued a debenture as security but never made payments thus causing a significant loss to the deceased and her estate.

The executor brought action for damages arising from breach of fiduciary duty and the action was allowed.

The court found that an ad hoc fiduciary relationship existed between the testator and the defendant who had undertaken to look after the deceased financial well-being and to act in her best interests, and he accepted this role answer financial manager.

The defendant had power over the deceased finances, which he unilaterally exercised in a way that directly affected the deceased’s interests.

The deceased was exceptionally vulnerable to the defendant’s control, and the defendant was found to have breached his fiduciary obligation when he took advantage of the deceased by arranging for the sale of her house to his limited company.

In particular the defendant breached his fiduciary duty by providing worthless security for funds advanced by the deceased, and for failing to repay the principal amounts that the deceased invested with him.

The following exerpt of law is from the Sledin case:
Fiduciary Relationships

64 Certain relationships on account of their very nature result in fiduciary obligations for one of
the parties. For example, a lawyer has a fiduciary obligation to his or her client and a trustee has a
similar duty to his or her beneficiary. These types of relationships are generally referred to as per

se fiduciary relationships.

An ad hoc fiduciary relationship is one that does not fall within the traditional categories of fiduciary relationships. Instead, it is one that arises out of the specific circumstances and dynamics of the particular relationship.
In dissenting reasons in Frame v. Smith, [1987] 2 S.C.R. 99 (S.C.C.) at para. 60, Wilson J. described what she considered to be the general characteristics of a fiduciary obligation as follows:

The fiduciary has scope for the exercise of some discretion or power.
1. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests.
2. The beneficiary is peculiarly vulnerable to or at the mercy of the fiduciary holding the discretion or power.

These observations of Madam Justice Wilson were later endorsed in International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574 (S.C.C).
The Supreme Court of Canada revisited the issue of fiduciary obligations and the constituent elements of such relationships in Hodgkinson v. Simms, [1994] 3 S.C.R. 377 (S.C.C), and Perez v. Galambos, 2009 SCC 48 (S.C.C).
While the characteristics of a fiduciary relationship articulated in Frame continue to be relevant in determining whether such a relationship exists, the more recent case authorities have recast those characteristics and added to them.
It is now clear that for an ad hoc fiduciary relationship to exist, the court must be satisfied that one party undertook, either expressly or by implication, to act for the benefit and best interest of another party: Galambos, at para. 66.
Moreover, a relationship whose distinguishing feature is only the vulnerability or power imbalance of one party vis a vis another will not, without any additional features, meet the threshold of a fiduciary relationship: Galambos, at paras. 67 and 74.

Tracing and Accounting For Assets

Tracing & Accounting For Assets

It is very common in estate litigation that the form of an asset may change substantially over a period of time.

For example a bank account of cash can be converted into a stock portfolio, which in turn can be used to buy a house that is subsequently sold and put into long-term bonds.

As long as those funds can be identified, they can be traced and accounted for, and where appropriate and ordered by the court, transferred into the name of a rightful heir.

The principals relating to orders for tracing and accounting were articulated by Pitfield J. in Ruwenzori Enterprises Ltd. v. Walji, 2004 BCSC 741 at paras. 240-242 and 245, aff’d 2006 BCCA 448:

1] Neither tracing nor an accounting is a remedy. Each is a process designed to assist in the perfection of a remedy…

2] It follows that tracing is the process employed to identify and particularize the manner in which funds have been applied. The results of the tracing permit a claimant to determine whether it will opt for a proprietary remedy in respect of funds derived from it, or a monetary judgment in respect thereof.

3] An accounting is directed at the determination of profit, gain or loss derived from assets in respect of which tracing has identified a right to, and the claimant has opted to assert, a proprietary interest.

4] Upon termination of any part of the tracing process at their option or otherwise, [the plaintiffs] will be entitled to elect to apply to confirm a proprietary interest in respect of assets other than those in respect of which the election to do so has already been made and by virtue of my reasons granted, or to enter judgment for the amounts I have enumerated and to apply for judgment in respect of any additional funds identified by the tracing process.

Administrator Removed For Misconduct With Special Costs

Sahota v Sandhu 2012 BCSC 552 is an example of a very straight forward court application to remove and replace a court appointed estate administrator who flagrantly acted in breach of his duties.

His actions were clearly so egregious that there was little surprise or discussion in the courts removal of him as administrator.

The parties father died in 2008 intestate ( without a will).

The Court appointed the administrator who then breached his duties by transferring title to certain real properties initially to himself.

He then transferred title to his 6 siblings contrary to the terms of a court order.

The Court had little difficulty in ordering the removal of the son as administrator, transferring title to the properties into the petitioners’ names as administrator of the estate, requiring the removed son to pass his accounts , and ordering special costs against him.

Special costs typically means that the losing party must pay the winning side’s entire legal costs, and not just a portion of them, typically around 1/3 of the actual legal fees charged, as most orders for “costs” provide.

Special costs are usually reserved for situations where one parties conduct is so reprehensible that the court’s need to sanction that form of egregious behavior.

Mother’s Advancement to Son Found to Be Loan and Not Gift On Appeal

Mother's Advancement of ,000 to Son , Found to Be Loan and Not Gift

Mother’s Advancement of $50,000 to Son Who Died Found to Be a Loan and Not a Gift By Appeal Court

It is often difficult to determine the intention of the grantor when monies are advanced for no consideration from one party to another and it is not properly.

This is often the case where one parent for exaple advances significant monnies to a child without stipulataing properly whether the moneis were a GIFT or a LOAN.

This was the situation in the Beaverstock appeal decision Beaverstock v Beaverstock 2011 BCCA 413

In May, 2005, the appellant advanced $50,000 to her son Dan Beaverstock which he applied to refinancing the purchase of some property in Alberta. Dan Beaverstock subsequently died in December 2007. The respondent is his widow and is the executrix and sole beneficiary of his estate.

The appellant pleaded the $50,000 was a loan to her son and the respondent jointly, repayable on demand. Alternatively, she pleaded it was a loan to her son and that the respondent, as executrix, had improperly distributed the proceeds of the estate to herself without first paying this debt from the estate. She sought judgment for $50,000 against the respondent personally and in her capacity as executrix and a declaration that the respondent held all sums received from the estate in trust for her pending satisfaction of her claim. The respondent denied the advance was a loan to her and her husband and pleaded it was a gift to him. It was common ground that the appellant had demanded payment before action and that the respondent had refused to pay.

The parties agreed the action should be resolved on a summary trial pursuant to Rule 18A, summary trial

The appellant deposed that her son asked to borrow $50,000 to help him refinance the purchase of property that he had purchased in Alberta, since he was having difficulty meeting the mortgage payments. She said he “was very clear that he wanted to ‘borrow’ the money from me and that he was seeking a ‘loan’.” She said she agreed to lend him the money and that she caused it to be deposited in the joint account of her son and the respondent. She said she did not discuss the loan again with him until a few weeks before his death when he told her he was going into business with a friend and was optimistic that he “should be able to repay the loan very soon.” The appellant also filed affidavits of three persons who said her son had told them he had borrowed the money from the appellant and that he owed her the money.

The respondent deposed that she was Dan Beaverstock’s wife at the material times and that they had separated about two weeks before his death. She said she had no knowledge, at the time, of the transaction between her husband and his mother and did not know that $50,000 had been deposited in their joint account. She said, as well, that her husband told her prior to their separation that the appellant had given him $50,000 and that he believed this amount to be an advance on his inheritance and that he would never have to repay it. She also asserted facts calculated to cast doubt on the reliability of the evidence of the witnesses who deposed that Dan Beaverstock told them he had borrowed the money from his mother. The respondent also filed the affidavit of her mother, who deposed that the appellant told her “on numerous occasions” that Dan Beaverstock and the respondent “owed her $50,000 relating to money provided to assist with the Alberta property.” She said she told the appellant to talk to Dan Beaverstock about it and leave her out of it.

There was also conflicting evidence concerning whether the respondent had acknowledged to the appellant and others that the advance was a loan and had admitted an obligation to repay it.

The correct approach to the resolution of this dispute is not in dispute. It is set out in Pecore v. Pecore, 2007 SCC 17, [2007] 1 S.C.R. 795. Whether the transfer was a loan or a gift depends on the actual intention of the appellant when she made the advance, which is a question of fact. As the advance was gratuitous, the onus was on the respondent to demonstrate that the appellant intended a gift, since equity presumes bargains, not gifts (para. 24). This equitable principle gives rise to a presumption the son received the money on a resulting trust, which is a rebuttable presumption of law. The trial judge was therefore required to presume the advance was not a gift and to determine whether the respondent had satisfied the burden of rebutting the presumption of resulting trust on a balance of probabilities (para. 44).

The trial judge made no mention of the presumption. Further, he made no finding of fact as to the appellant’s actual intention. Indeed, it appears he did not consider that question. Rather, it appears he considered the burden was on the appellant to establish certain specified things and that, since she failed to do so, her claim was unsustainable as a matter of law

The factors to which the trial judge referred are not substantive elements of a claim that a gratuitous transfer was a loan and not a gift. Rather, they are items of circumstantial evidence relevant to the transferor’s actual intention. Moreover, they are not exhaustive of the evidence that may be considered in determining the transferor’s intention. They are to be weighed by the trial judge along with all of the other evidence in determining the transferor’s actual intention as a matter of fact, which is the pivotal fact on which the action turned. It is not evident from the trial judge’s reasons that he turned his mind to this question.

In failing to begin his analysis with the presumption of resulting trust and in failing to make a finding as to the critical fact – the appellant’s actual intention – the trial judge erred in law.

Appeal Allowed- Mother Wins back the $50,000.

Estate Planning Gift or Estate Asset Resulting Gift resulting trusts Trust Issues trusts wills variation act BC

Presumption of Resulting Trust Applies to Transfer of Land

Until recently there had been some questions in BC estate litigation as to whether or not the presumption of resulting trust applies to gratuitous transfers of real property, in light of the provisions of the Land Title Act, section 31 that provides that under the torrens system, the indefeasible title is conclusive evidence in law and in equity, that the person named in the title is entitled to an estate in fee simple in the land.

The court in Aujula v Kaila 2010 BCSC 1739, held that the conclusive evidence of title found under the Land Title act can be rebutted in some circumstances

as such the operation of the presumption of resulting trust where there is an agreement between the parties that is contrary to the registered title, or to take into

account the underlying equitable interests between the parties.

In Fuller v. Harper, 2010 BCCA 421 at para. 43, (sub nom Fuller v. Fuller Estate)[2010] B.C.J. No. 1901 [Fuller], the Court of Appeal noted the existence of

appellant authority that appears to support the view that a presumption of resulting trust could be applied to a gratuitous transfer of real property. Smith D. J.A.

, relying on Pecore, described how the burden of proof is affected by the presumption of resulting trust by placing the onus on the transferee to lead evidence of

the transferor’s contrary intention in order to rebut the presumption on a balance of probabilities: Fuller at paras. 44-47.

The relationship between the statutory presumption found in the Land Title Act and the presumption of resulting trust was addressed in Aujla. Under the

statutory presumption, the party challenging the state of title has the onus of displacing the presumption that title, as currently registered, is conclusive of legal

and beneficial ownership. However, at para. 37, Harris J. found that this burden could be discharged through the operation of the presumption of resulting trust

if the transfer was gratuitous. If no consideration was exchanged, the onus shifts to the transferee to prove on a balance of probabilities that the transfer was

intended as a gift.

Estate Planning Gift or Estate Asset Resulting Gift resulting trust or gift resulting trusts Trust Issues trusts wills variation act BC

Executor Must Remain Neutral In Estate Litigation

Estate Litigation

Ketcham v Walton 2012 BCSC 175 involved an application by the executor for directions pursuant to section 86 of the Trustee act for an order authorizing the executor to follow the provisions of the deceased’s last will to defend any wills variation action and gifts as vigorously as possible, even to the extent of depleting the assets of the estate in the defense and appeal of such attack on the will.

In effect the executor was asking the court for directions on how he should govern himself in the face of the disinherited three adult children’s claim for relief under the wills variation act.

The deceased left his estate to friends and charities, and disinherited his three adult children entirely.

It was a most unusual directive to his executor to fight any contests brought against his will by the children, to the extent of depleting the entire assets of the estate.

The judge in fact had no difficulty in dismissing the executors application, and restated the law that the primary duty of an executor is to preserve the assets of the

estate, pay the debts and distribute the balance of the to the beneficiaries entitled under the will, or, in accordance with any order made under wills variation act.

An executor should not take sides between the beneficiaries or use estate funds to finance litigation on their behalf under the wills variation act.

The law anticipates that the executor will remain impartial between the opposing beneficiaries.

The decision in Quirico v Pepper estate (1999) 22 BCTC 32 was followed, as was Doucette v Doucette Estate 2008 BCSC 506, at paragraph 16 where Justice

Metzger states ” The law requires an executor to remain neutral.

How to Calculate the Value of Life Estate Land

Life estates, also known as life interests, are a well-established part of estate planning. The owner of a life estate (“the life tenant”) has the right to occupy, use and deal with real and/or personal property for his or her lifetime. Determining the value of life estate land can be done with the help of a professional, but this post will help you get an idea for yourself.

How Life Estates Work

When the life tenant dies, the remaining interest in the property then passes to the next person entitled, historically named the “remainder man”. The interest remaining after the death of the life tenant is called the “remainder interest”. After the death of the life tenant, the remainder man enjoys full ownership of the life estate land or property.

A life interest in property has a value that can be determined by an actuarial calculation done by a professional actuary.

Calculating the Value of Life Estate Land

The purpose of this commentary is to simply give an overview of the process as well as an example. It should not be followed as any sort of professional opinion as to how to calculate such interests.

The formula consists of taking the date of birth of the life tenant as at the date of the creation of the life estate, rounded off to the nearest year, then comparing the age to an actuarial table to determine the”life tenant factor”. Then multiplying that number by the market value of the life estate land in which the subject life interest is being created to calculate the value of the life interest.

That figure in turn is subtracted from the market value of the land to calculate the value of the remainder interest (The life interest plus the remainder interest must equal the total market value of the land being transferred).

Here’s an example of calculating life estate land value:

Pam aged 77 is the sole registered owner of land valued at $185,000.

Pam decides to transfer this land to her son for $80,000, subject to a reservation of a life interest in it for herself.

Referring to actuarial tables, Pam’s life tenant factor is calculated as a female aged 77 years giving her a life tenant factor of .38603

The value of the life interest is $185,000 x .38603 = $71,415

Therefore, the value of the remainder interest is $185,000 – $71,415, = $113,585

Executors Fee Slashed By Court For Mis-Management of Estate

Executors Fee Slashed By Court

Re Stolarchuk Estate 2011 BCSC 1681 discusses the various principles involved in the calculation of an appropriate remuneration for an executor who mismanaged the estate assets.

The deceased died in October 2004 leaving his estate consisting primarily of her house and an adjacent lot.

Her will bequeathed her estate equally to her four children, one of whom was the executrix.

The executrix attempted unsuccessfully to negotiate with her siblings to purchase the property from the estate for several years, and finally ended up selling the property through a realtor in 2009 for $250,000.

The executrix submitted an account for her remuneration at $17,000.

The court fixture remuneration at only $3000.

The registrar found that the executrix failed to realize on the estate assets and to distribute them in a timely fashion. She also acted wastefully in maintaining the phone and cable service to the house.

The court relied upon the following legal principles in assessing executors remuneration:

In Bernhard v. Wist, 2011 BCSC 101, outlined the legal principles relevant to executors remuneration:

[100] Section 88 of the Trustee Act governs executor’s remuneration. The executor is entitled to:

a) a maximum of 5 per cent of the gross aggregrate value of the estate;

b) a maximum of 5 per cent of the income earned during the administration of the estate; and

c) an annual “care and management fee” of 0.4% of the average market value of the assets.

[101] However, the percentages stipulated in s. 88 are not necessarily to be applied in every calculation of remuneration. The percentages provide a rough guide to assist in appropriate computation of the executor’s remuneration: Re Turley Estate (1955), 16 W.W.R. 72 (B.C.S.C.). In the end, the court must be satisfied that the compensation claimed “bears some reasonable relationship to the work and responsibility involved”: Re La Chance, [1955] 15 W.W.R. 141 (B.C.S.C.).

[102] Various factors are to be considered when determining the appropriate executor’s fee. Those factors include the magnitude of the estate, the care and responsibility involved, the time occupied in the administration, the skill and ability displayed and the success (or lack thereof) achieved in the administration: Re McColl Estate (1967), 65 W.W.R. 110 (B.C.S.C.). Similar, but not the same, types of considerations apply with respect to a care and management fee: Re Pedlar (1982), 34 B.C.L.R. 185 (S.C.).

[103] In terms of calculating the capital fee, the gross aggregate value of the estate is the realized value of the original assets of the estate.

Co-Executor Trustee Removed for Lack of Co-operation

Levi- Bandel v Talesiesin Estate 2011 CarswellBC 384 is a good example of what disinherited.com perceives as an increased willingness by the courts to remove obstructive and uncooperative executors and trustees in the interests of the beneficiaries.

The deceased estate was managed by 2 co-executrixes who were also the co trustees.

The deceased made a bequest to pay $25,000 to one of the trustees for the care of the deceased’s 2 cats, with any residue of the sum going to an animal organization.

The petitioner who was a trustee but not a beneficiary, brought this application to have the co trustee removed as an estate manager, to have her pass accounts, for a declaration that she was not entitled to remuneration, as well as special costs.

All of that relief was granted by the court.

The co trustee had taken the cats to live with her, and the petitioner successfully argued that any expenses for the care of the cats had to be approved by the estate.

The court found it had jurisdiction to remove a trustee, and determined that the welfare of the beneficiaries was the major factor in possible removal.

The co trustees’ failure to act prevented the estate from being properly administered, so the co executor was removed.

It was not necessary to appoint a new trustee in place of the removed trustee.

$20 Million Lottery Jackpot Claim Dismissed Under Trust Law

$20 Million Lottery Jackpot Dismissed due to trust law.

It is not uncommon to hear about litigation claiming entitlement to share in lottery jackpots arising out of former friends or co- employees.

Invariably the claim is that for quite a long period of time, often years, a group of friends or co-workers contributed money to a lottery scheme with an intention to share the winningsContinue reading