Qualified Disability Trusts in B.C.

Qualified Disability Trusts in B.C.

Reprinted with the kind permission of the following presenters who are experts in Disability law.

PRESENTED BY: KEN M. KRAMER, Q.C., PRINCIPAL & SENIOR ASSOCIATE COUNSEL KMK LAW CORPORATION & HALLDOR K. BJARNASON, BARRISTER & SOLICITOR ACCESS LAW GROUP

TRENDS IN BC’S DISABILITY LANDSCAPE

As of August 2015, there were approximately 96,000 people receiving disability assistance in BC.

The Ministry (SDSI) will provide about $976 million in disability assistance in 2015-16, an increase of 162% since 2001–02.

Funding of more than $5 billion a year is being allocated towards programs and services for people with disabilities.

Government has set a goal of making B.C. the most progressive place in Canada for people with disabilities with the Accessibility 2024 plan.

DISABILITY AND ESTATE PLANNING

  • When an estate plan needs to include a beneficiary with a disability, many practical, tax and disability benefit issues must be considered.
  •  SDSI provides disability assistance to Persons with Disabilities (PWD) who require financial or health support and are unable to fully participate in the workforce.
  • Proper planning will ensure that beneficiaries with disabilities continue to receive disability assistance

TRUSTS AND DISABILITY

  • To achieve a greater level of certainty, estate planning will often involve the use of Trusts.
  • Notwithstanding recent legislative and policy changes, Trusts continue to be a very effective vehicle in planning for individuals with disabilities.
  • In particular, they offer great value where the person with a disability is unable to manage money for themselves due to capacity issues and/or has a higher level of susceptibility to exploitation
  • Trusts also preserve access to provincial disability benefits.

WHY A DISABILITY TRUST?

  • Funds in a trust are not treated as an asset of a person receiving disability assistance. The beneficiary continues to qualify for assistance.
  • Trusts provide a way for a person on PWD or their family to transfer and safeguard assets. The trust can cover disability-related costs now and in the future while the beneficiary remains eligible for disability assistance

QUALIFIED DISABILITY TRUSTS

Changes in Federal Income Tax Act (effective January 1st, 2016)• Bill C-43, which received Royal Assent on December 16, 2014, introduced a new type of trust to benefit individuals with disabilities: the Qualified Disability Trusts (“QDT”).

•      QDT: one of two exceptions where a testamentary trust, during its lifetime, will be taxed at a graduated rate instead of at the highest marginal rate (47%) on income generated in the trust.

•      The other exception is known as a “Graduated Rate Estate” (GRE) which only have graduated tax rates for a maximum of 36 months

QDT CRITERIA

  • “Electing Beneficiary”
  • Defined in subsection 122 (3) as a beneficiary of the trust that qualifies for the disability tax credit in their taxation year that ends within the trust’s taxation year; and
  • Does not make a QDT election with any other trust.
  • Electing beneficiaries must be a “named” beneficiaries

FURTHER QDT QUALIFICATIONS

  • The trust must be resident in Canada for the tax year.
  • The trust must make a joint election with a “qualifying beneficiary” to be a QDT.
  • At the end of the taxation year, the trust must have arisen on, and as a consequence of, a particular individual’s death.

OTHER PLANNING NOTES FOR QDT

Late Filled Election

  • One of the pitfalls of the QDT election is that there is no relief for a late filed election. This means that if your client does not elect to have the trust treated as a QDT on time, the trust will be taxed at the highest marginal rate for the year.

Must be named beneficiaries

  • The QDT definition specifically requires that electing beneficiaries be named beneficiaries in the instrument under which the trust was created. This may not always be true with a testamentary trust.

Recovery Tax

  • A QDT may be subject to a recovery tax under subsection 122(2) of the ITA in respect to a previous year.
  • A QDT recovery tax will be triggered if any of the following occur:

a)      None of the beneficiaries at year- end is an electing beneficiary for the previous year.

b)      The trust ceases to be resident in Canada.

A capital distribution is made to a non-electing beneficiary.

When a trust does not qualify as a QDT tax-efficient investing becomes important.

Strategies to consider when planning for the use of a QDT:

Have the person with the disability as the only beneficiary to ensure the recovery tax will not apply.

Be mindful that an electing beneficiary may only make the election with one trust for each taxation year. As examples, planning can be done to benefit from the QDT election by:

  • Having the insurance proceeds paid to the estate instead of a trust.
  • With multiple trusts, choosing the trust with the highest income the QDT.
  • Ensure that an electing beneficiary has the capacity to make a joint election to be QDT.
  • Such in election may be difficult to make in the case where an electing beneficiary does not have the capacity to make such an election. In such a case, a court appointed guardian may be required in order to successfully make the election.
  • Life insurance trusts may be QDTs. As proceeds of life insurance may be significant, it would be prudent to consider whether such trust should be designated as the QDT.
  • If a spouse is eligible for the DTC, it is possible for a testamentary spousal trust to qualify as a QDT.

The Principles of Interpreting Contracts

The Principles of Interpreting a Contract

Dusanjh v Wright Estate 2017 BCSC 340 sets out the law relating to interpreting contracts when there is an ambiguity as to it’s meaning.

The children of the deceased brought a petition that argued the deceased had established a trust in their favour and the court in dismissing their petition set out the principles for the interpretation of the documents that were before the court. The children argued that the documents established a trust in their favour but the court disagreed , found no trust was established and dismissed the petition.

THE PRINCIPLES OF CONTRACTUAL INTERPRETATION

38      The most current law in British Columbia on the principles of contractual interpretation is British Columbia (Minister of Technology Innovation and Citizens’ Services) v. Columbus Real Estate Inc., 2016 BCCA 283 at paras. 41-47 citing Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 [Sattva]:

[41] The goal of interpreting an agreement is to discover the objective intent of the parties at the time the contract was made. In Sattva, the Supreme Court of Canada affirmed the “modern approach” to contractual interpretation. It held that the interpretive process involves reading the agreement in question “as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract” Paras. 47, 50 [emphasis added in British Columbia (Minister of Technology Innovation and Citizens’ Services)].

[42] Sattva confirmed that the surrounding circumstances are relevant to contractual interpretation regardless of whether there is ambiguity in the contract. In this regard, Whitmore J.A.’s observations in Directcash Management Inc. v. Seven Oaks Inn Partnership, 2014 SKCA 106 at para. 13 are apposite:

Prior to the Supreme Court’s decision in Sattva, it was not clear that the surrounding circumstances or the “factual matrix” of the contract had to be taken into account when interpreting a contract. The Supreme Court had earlier suggested in Eli Lilly & Co. v. Novopharm Ltd. [1998] 2 S.C.R. 129at para 55 — 56 that the surrounding circumstances only had to be considered when the contract was ambiguous. Sattva has made it clear that the surrounding circumstances are relevant, whether or not there is an ambiguity in the contract.

[43] The principle that surrounding circumstances must be considered represents the longstanding law in British Columbia: see 0930032 B.C. Ltd. v. 3 Oaks Dairy Farms Ltd. 2015 BCCA 332 at paras. 3 — 5 [Oaks Dairy]. In Oaks Dairy, Newbury J.A., writing for the court, commented that, “[i]t may be that the Supreme Court in Sattva was only encouraging courts to be even more receptive to considering evidence of “factual matrix” to elucidate the interpretation of contracts” (Emphasis in original; para. 6). See also the decision of Lambert J.A. in Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 49 B.C.L.R. (3d) 317 (C.A.) at paras. 19-20.

[44] I would add that in Sattva, the Court discussed the difficulty of discerning objective intentions by reading the bare words of a contract in absence of a consideration of the surrounding circumstances, and that consideration of them is part of the interpretive process at paras. 47-48:

[47] . . . the interpretation of contracts has evolved towards a practical, common-sense approach not dominated by technical rules of construction. The overriding concern is to determine “the intent of the parties and the scope of their understanding” (Jesuit Fathers of Upper Canada v. Guardian Insurance Co. of Canada, 2006 SCC 21, [2006] 1 S.C.R. 744, at para. 27, per LeBel J.; see also Tercon Contractors Ltd. v. British Columbia (Transportation and Highways), 2010 SCC 4, [2010] 1 S.C.R. 69, at paras. 64-65, per Cromwell J.). To do so, a decision-maker must read the contract as a whole, giving the words used their ordinary and grammatical meaning, consistent with the surrounding circumstances known to the parties at the time of formation of the contract. Consideration of the surrounding circumstances recognizes that ascertaining contractual intention can be difficult when looking at words on their own, because words alone do not have an immutable or absolute meaning:

No contracts are made in a vacuum: there is always a setting in which they have to be placed . . . In a commercial contract it is certainly right that the court should know the commercial purpose of the contract and this in turn presupposes knowledge of the genesis of the transaction, the background, the context, the market in which the parties are operating.

(Reardon Smith Line, at p. 574, per Lord Wilberforce)

[48] The meaning of words is often derived from a number of contextual factors, including the purpose of the agreement and the nature of the relationship created by the agreement . . . .

[45] The Court then discussed the role and nature of the “surrounding circumstances” in contractual interpretation at para. 57:

While the surrounding circumstances will be considered in interpreting the terms of a contract, they must never be allowed to overwhelm the words of that agreement (Hayes Forest Services, at para. 14; and Hall, at p. 30). The goal of examining such evidence is to deepen a decision-maker’s understanding of the mutual and objective intentions of the parties as expressed in the words of the contract. The interpretation of a written contractual provision must always be grounded in the text and read in light of the entire contract (Hall, at pp. 15 and 30-32). While the surrounding circumstances are relied upon in the interpretive process, courts cannot use them to deviate from the text such that the court effectively creates a new agreement (Glaswegian Enterprises Inc. v. B.C. Tel Mobility Cellular Inc. (1997), 101 B.C.A.C. 62).

[46] The Court discussed what kind of evidence may be considered under the “rubric” of surrounding circumstances at para. 58:

The nature of the evidence that can be relied upon under the rubric of “surrounding circumstances” will necessarily vary from case to case. It does, however, have its limits. It should consist only of objective evidence of the background facts at the time of the execution of the contract (King, at paras. 66 and 70), that is, knowledge that was or reasonably ought to have been within the knowledge of both parties at or before the date of contracting. Subject to these requirements and the parol evidence rule discussed below, this includes, in the words of Lord Hoffmann, “absolutely anything which would have affected the way in which the language of the document would have been understood by a reasonable man” (Investors Compensation Scheme, at p. 114). Whether something was or reasonably ought to have been within the common knowledge of the parties at the time of execution of the contract is a question of fact.

39      Any determination of whether the Articles are ambiguous cannot be determined unless the factual matrix is first considered. It is therefore necessary to determine whether the two letters of September 21, 2005 are included in the factual matrix, or, as Randy argues, are inadmissible.

40      In Sattva at paras. 59 to 61, Rothstein J. stated:

[59] It is necessary to say a word about consideration of the surrounding circumstances and the parol evidence rule. The parol evidence rule precludes admission of evidence outside the words of the written contract that would add to, subtract from, vary, or contradict a contract that has been wholly reduced to writing (King, at para. 35; and Hall, at p. 53). To this end, the rule precludes, among other things, evidence of the subjective intentions of the parties (Hall, at pp. 64-65; and Eli Lilly & Co. v. Novopharm Ltd., [1998] 2 S.C.R. 129, at paras. 54-59, per Iacobucci J. [Eli Lilly]). The purpose of the parol evidence rule is primarily to achieve finality and certainty in contractual obligations, and secondarily to hamper a party’s ability to use fabricated or unreliable evidence to attack a written contract (United Brotherhood of Carpenters and Joiners of America, Local 579 v. Bradco Construction Ltd., [1993] 2 S.C.R. 316, at pp. 341-42, per Sopinka J.).

[60] The parol evidence rule does not apply to preclude evidence of the surrounding circumstances. Such evidence is consistent with the objectives of finality and certainty because it is used as an interpretive aid for determining the meaning of the written words chosen by the parties, not to change or overrule the meaning of those words. The surrounding circumstances are facts known or facts that reasonably ought to have been known to both parties at or before the date of contracting; therefore, the concern of unreliability does not arise.

[61] Some authorities and commentators suggest that the parol evidence rule is an anachronism, or, at the very least, of limited application in view of the myriad of exceptions to it (see for example Gutierrez v. Tropic International Ltd. (2002), 63 O.R. (3d) 63 (C.A.), at paras. 19-20; and Hall, at pp. 53-64). For the purposes of this appeal, it is sufficient to say that the parol evidence rule does not apply to preclude evidence of surrounding circumstances when interpreting the words of a written contract.

The Various Types of Trusts

The Various Types of Trusts

Warde v Slater 2017 BCSC 274 contains a discussion about the various types of trusts in deciding who owned the beneficial interest in the shares of a family business.

The decision quotes extensively from Waters on Trusts In Canada.

It is helpful to refer to the definition of a trust adopted as “one of the best” in Waters, Gillen and Smith: Waters’ Law of Trusts in Canada, 4th ed. 2012 (“Waters“) at p 3:

“A trust is the relationship which arises whenever a person (called the trustee) is compelled in equity to hold property, whether real or personal, and whether by legal or equitable title, for the benefit of some persons (of whom he may be one, and who are termed beneficiaries) or for some object permitted by law, in such a way that the real benefit of the property accrues, not to the trustees, but to the beneficiaries or other objects of the trust.”

The following passage from Waters at pp 394-395 is a useful comparison of the different kinds of trusts alleged.

The courts and the various legislatures of the common law world have sometimes used interchangeably the terms “implied trust”, “resulting trust” and “constructive trust”, and the terminology is therefore somewhat confusing

But essentially, while express trusts are those which come into existence because settlors have expressed their intention to that effect, constructive trusts arise not because of anyone’s expression of trust intent but because B ought to surrender property to A and this is the machinery the court employs in order to get B to do that. In between the express trust, a product of the settlor’s intention, and the constructive trust, a machinery imposed by law, are the implied trust and the resulting trust.

The term “implied trust” is commonly used for two situations. The first occurs where the intention to create a trust is not clearly expressed, but has to be discovered from indirect and ambiguous language. This is all that distinguishes such an implied trust from the express trust. A second common use is where one person has gratuitously transferred his property to another, or paid for property and had the property put into another’s name. The intention of the transferor or purchaser is implied to be that the transferee is to hold the property on trust for the transferor or purchaser. The implication arises out of the fact that Equity assumes bargains, not gifts, and requires the donee to prove that a gift was intended.

The term “resulting trust”, on the other hand, does not allude in any way to intention; it describes what happens to the property in question. It results or goes back to the person who, for reasons we shall examine, is entitled to call for the property. For example, because Equity does not assume gifts, the transferee holds title for the transferor or the one who provided the purchase money. In other words, in this “implied trust” situation the beneficial interest results, or goes back, to the transferor or purchaser. . . .

Distinguishing the resulting trust from the constructive trust is also not easy because the lines have been blurred. Sometimes the same facts allow both a constructive trust theory and a resulting trust theory to be deployed. . . .

There is even more overlap between resulting trusts and those constructive trusts which arise to reverse unjust enrichment. The reason is that both kinds of trusts typically perform the same function: they return property to the person from whom it came.

In Fulton v. Gunn [2008 BCSC 1159] for example, an interest in land was acquired by a son using purchase money that came from his mother. It was held that this created a resulting trust for the benefit of the mother; and it was also held in the alternative that the son had been unjustly enriched at the expense of the mother, and so held the property on constructive trust for her. To the extent that resulting trusts are seen as arising by operation of law, they are really just a sub- species of constructive trust. The distinction between resulting and constructive trusts is perhaps best put in this way – while constructive trusts have nothing to do with intention, express or implied, resulting trusts can be explained either on the basis of intention or imposition of law. . . .

10      As Waters makes clear (see also pp. 19-21), the terms “express” and “implied” refer to the intention of the alleged settlor. Intention may also be relevant to a resulting trust, but is irrelevant to a constructive trust. A constructive trust is one constructed by the law to enforce an obligation. It arises out of unjust enrichment and “good conscience”: Waters at p 23; Petkus v Becker, [1980] 2 SCR 834.

Thus, there can be only two sources of a trust obligation: the intention of a property owner to create a trust; or the imposition by the law of a trust obligation upon persons: Waters at p 478.

11      In my view, a resulting trust can be quickly eliminated from contention in this case. An essential characteristic is that the claimant, the would-be beneficiary, must have provided the property or equitable interest vested in the person bound by the trust: Waters at p 399. Neither Elaine nor Brian provided the property here in issue, the shares of (or proprietary interest in) Slatter Holdings, to Fern. If Fern holds that property in trust for either or both of Elaine or Brian, it must be because of an express or implied trust (intention), or because in the absence of such a trust, unjust enrichment and good conscience require that the law constructs a trust in order to enforce an obligation.

12      To demonstrate the creation of an intentional trust, the evidence must establish three certainties: certainty of intention to create the trust, certainty of the subject of the trust, and certainty of the trust object: Waters at p 140 and following; Tozer v Bank of Nova Scotia, 2012 NBCA 57 at paras 10-12. It is not necessary that the trust be set out fully in a document. It may be construed from conduct, or from documents and conduct taken together. See, for instance, Elliott (Litigation Guardian of) v Elliott Estate, [2008] OJ No 4941 (SCJ):

[30] This Court must consider all of the circumstances, including the words and conduct of Robert Elliott and Jean Elliott [the alleged settlors] to determine if certainty of intention exists.

13      Technical words are not required. As Waters put it at p 141:

There is no need for any technical words or expressions for the creation of the trust. Equity is concerned with discovering the intention to create a trust; provided it can be established that the transferor had such an intention, a trust is set up.

14      This is so whether the intentional trust is created by the settlement of property upon a trustee, or by declaration by the owner of property of an intention to constitute himself or herself a trustee of that property. Again, it is not necessary that the donor use the words, “I declare myself a trustee”. Words of any kind and even conduct are sufficient provided it is satisfactorily shown that the donor did in fact intend to constitute himself or herself a trustee: Waters at p 204.

Discretionary Trusts

Discretionary Trusts

A (S) v Metro Vancouver Housing Corp. 2017 BCCA 2 was a case involving how much information was required to be provided by the recipient of discretionary trusts in order to qualify for subsidized housing.

The case included an excellent discussion of what a discretionary trust is and how they are extensively used amongst various disabled persons in such matters as government involvement in their finances and expenses  re housing, medical and the like.

The BC Appeal Court in Purtzki v. Saunders, 2016 BCCA 344described discretionary trusts as follows:

[64] Strictly speaking, the object of a discretionary trust may lack a “proprietary” or “possessory” interest in the property of a trust. In M. (H.R.), the court referred to the decision of the House of Lords in Gartside v. I.R.C., [1968] 1 All E.R. 121. Gartside concerned the meaning of the term “interest in possession” under the Finance Act. Lord Wilberforce said this of a beneficiary’s interest in a discretionary trust (at 134):

No doubt in a certain sense a beneficiary under a discretionary trust has an “interest”: the nature of it may, sufficiently for the purpose, be spelt out by saying that he has a right to be considered as a potential recipient of benefit by the trustees and a right to have his interest protected by a court of equity. … But that does not mean that he has an interest which is capable of being taxed by reference to its extent in the trust fund’s income: it may be a right with some degree of concreteness or solidity, one which attracts the protection of the court of equity, yet it may still lack the necessary equality of definable extent which must exist before it can be taxed.

[65] Similarly, the authors of Underhill and Hayton: Law of Trusts and Trustees, 18th ed. (London: LexisNexis, 2010) at 98, describe the nature of a discretionary trust as follows:

Where a beneficiary has no such absolute current right to direct the trustees to pay him an ascertainable part of the net income or capital he has ‘no interest in possession’, only being interested under a discretionary trust. Typically, this is the case where a beneficiary will receive income only if the trustees positively decide to carry out their duty to distribute income by favouring him rather than another member of the class of potential beneficiaries. There is also the atypical case where a beneficiary must receive the income unless the trustees exercise distributive (or dispositive) powers to divert the income elsewhere … or to withhold it …: the discretion-conferring distributive powers prevent an interest in possession arising (eg where B is a life tenant subject to dispositive powers).

[66] A discretionary trust is distinct from a fixed trust. The authors of Underhill and Hayton at 98, describe a fixed trust as follows:

Where a beneficiary has a current fixed entitlement to an ascertainable part of the net income or net capital, if any, of the trust fund after deduction of sums paid by the trustees in the exercise of their administrative powers of management, the beneficiary has a fixed interest which ranks as ‘an interest in possession’ under the trust.

[67] Unlike a fixed trust, the beneficiaries of a fully discretionary trust and their entitlements (distinct from the potential beneficiaries and their potential entitlements) cannot be ascertained at the time of settlement. A discretionary trust may also come in a variety of forms. Under an “exhaustive” discretionary trust, the trustee must distribute the whole of the income or capital, or both, but retains the power to choose who among the potential beneficiaries should receive distributions, and in what amount. Under a “non-exhaustive” discretionary trust, the trustee has the added power to choose whether or not to make any distribution at all.

Gift of House Upheld Trust

Gift of House Upheld Trust

Franklin v Cooper 2016 BCCA 447 upheld a decision of the Supreme Court that the presumption of resulting trust applied and that the defendant daughter who received gift of house by her mother in joint tenancy, instead held the house in trust for the estate of their mother.

The facts found by the court of appeal were:

In 1989, the deceased transferred title to her home to herself and Ms. Cooper as joint tenants. The deceased died on June 30, 2012, and Ms. Cooper took sole title to the property by survivorship. Ms. Cooper took the position that the 1989 transfer was under an agreement. She claimed that it was in consideration of expenses Ms. Cooper had paid for in the past, and also in consideration of a promise to pay for expenses in the future. Ms. Cooper says that she agreed to support her mother, and to ensure that she was never placed in a nursing home.

[3] Ms. Franklin denied the existence of any such agreement. She contended that her mother’s decision to place the property in joint title was primarily to prevent her mother from being defrauded into transferring title away to a third party. She gave evidence to the effect that she had been offered the opportunity to go on title, herself, but that the offer was contingent upon her dissolving her marriage, as her mother also wanted to ensure that Ms. Franklin’s husband would not gain any matrimonial interest in the property.

[4] There were a number of issues at trial. The trial judge ultimately found that the 1989 agreement contended for by Ms. Cooper did not exist. She found the transfer of the home into joint tenancy to be a gratuitous transfer, and applied Pecore v. Pecore, [2007] 1 S.C.R. 795, holding that there was a presumption that the transfer was not a gift, and that Ms. Cooper held her interest in trust for her mother during her mother’s life, and now holds it in trust for her mother’s estate.

[5] The judge recognized that the issues before her turned largely on findings of credibility:

[6] The evidence of Ms. Franklin and Ms. Cooper is conflicting in virtually every aspect. Both present diametrically opposing pictures of their mother’s life, her needs and wants, and their relationships with their mother and each other. Accordingly, the resolution of this case will depend largely on findings of credibility.

Gifts In Contemplation of Marriage

Gifts In Contemplation of Marriage

Gifts In Contemplation of Marriage. P.S. v H.R. 2016 BCSC 2071 involves a claim for the return of a gift ( a $17,000  engagement ring) made in contemplation of marriage arising from a whirlwind relationship of three months that abruptly ended due to the plaintiff’s abusive behaviour.

During the brief relationship, the plaintiff was a wealthy man and also paid down the defendant’s mortgage in the amount of $85,000 in November without any prompting by the defendant .

The plaintiff alleged that the gifts were conditional gifts, in contemplation of marriage and should be repaid. The defendant said the gifts were absolute and not conditional and that she is entitled to retain them. The ring was purchased on October 30,2013 and they became engaged on Christmas day that same year.

The defendant later returned the ring to the jewellery store and exchanged it for several pieces of jewellery.

The Court held that the gifts were absolute and that the defendant may keep them as there were several reasons why the plaintiff paid the debts and gave her the ring, and that marriage was probably the least important of the several reasons.

The court found they were not firmly committed to marriage when the debts were paid off , not did the purchase of the ring in October signify a firm commitment to marry.

The Engagement Ring

[69]          In British Columbia, the law relating to engagement rings is reasonably well-settled.

In Hitchcox v. Harper, [1996] B.C.J. No. 1861, the court pondered competing lines of authority, one which treated engagement rings as absolute gifts not returnable upon a termination of the engagement, and another which treated the gift of an engagement ring as being conditional on marriage and therefore returnable upon the failure of the condition. The court followed the latter line of authority.

[70]          Hitchcox was followed in Sperling v. Grouwstra, 2004 BCSC 330 [Sperling] and Zimmerman v. Lazare, 2007 BCSC 626 [Zimmerman]. For this reason I consider the law on this point to be settled in this jurisdiction.

[71 ] Fault for the termination of the engagement does not enter into the analysis: Sperling, at para. 24, and Zimmerman, at para. 9. Parenthetically, I note that in other jurisdictions the issue has been dealt with by way of legislation, such that fault for a termination of an engagement is not relevant there either: Manitoba – Equality of Status Act, C.C.S.M., c. E130, s. 5; Ontario – Marriage Act, R.S.O. 1990, c. M.3, s. 33; and Alberta – Family Law Act, S.A. 2003, c. F-4.5, s. 102.

[72]          The general approach in British Columbia to the question of the return of engagement rings, which I have described above, is still subject to evidence of a contrary intention on the part of the donor. This is the real issue here because Ms. R. maintains that Mr. S. gave her the engagement ring as an absolute gift at their final meeting.

[73]          For his part, Mr. S. emphasizes that the onus is on the recipient to prove the transferor intended the transfer to be a gift and that the evidence of gift must be very clear, citing Bath v. Bath, 2002 NLCA 21 [Bath] and Veitch v. Rankin, [1997] O.J. No. 4642 (Ont. C.J.) [Veitch].

Gifts in Contemplations of Marriage

[87]        In Fediuk v. Gluck (1990), 26 R.F.L.(3d) 454 (Man. Q.B.), aff’d [1991] M.J. No. 354 [Fediuk], the court suggested that a transfer of property cannot be considered to have been made in contemplation of marriage unless the parties “have agreed on, or committed themselves to, marriage and where the transfer or gift can be said to have been made in that context”: Fediuk, at para. 19. However, I consider it unwise to rely on that fact alone and instead find it preferable to consider the degree to which the parties had committed to marry as being part of the context from which the donor’s intent may be ascertained or inferred.

[96]          Although Robinson v. Cumming has been cited in modern cases and in at least one modern textbook (J. Crossley Vaines, Personal Property, 4th ed. (London: Butterworths, 1967), which itself is cited in Lummer v. Frohlich, 2007 ABQB 295), I prefer to analyse the issue using more contemporary sources. Courting behaviour and relationships between men and women are vastly different today than in the days of Mrs. Robinson and Mr. Cumming, whose case came to court nearly 70 years prior to the publication of Jane Austen’s first novel, itself a study in quaint (and outdated) manners and customs.

[97]          One of those contemporary sources is Voglerv. Matzick (1988), 33 B.C.L.R. (2d) 82 (C.A.) at 84-85, where the court said:

I add this comment about gifts made “in contemplation of marriage”. Any gift may be made conditional, or subject to revocation. A term to that effect may be expressed or it may be implied. If it is implied, the factual matrix that gives rise to the implication must make the implication obvious, in accordance with the requirements of the officious bystander test. Where a household item is given by one prospective marriage partner to another, at a time when they are engaged but not sharing a household, the implication of a term that the gift was intended to be revocable if the marriage did not take place and the household never came into being, without any change of heart on the part of the donor, would be straightforward. As a form of shorthand, such a gift could be said to be “in contemplation of marriage”. But if the household is already in being, and if, as in this case, the donor may have had some motive for making the gift other than, or as well as, a prospective marriage, then the implication of a term that the gift is intended to be revocable if the marriage does not take place becomes much more problematical. A gift made “in contemplation of marriage” is not merely a gift between an engaged couple, with a marriage clearly in the offing. Nor is it a gift for use by both parties in a joint household. At the very least it requires that the gift would not have been made but for the impending marriage itself.

[Emphasis added.]

[98]          Although the passage just quoted is obiter dicta (because the case turned on relief granted by the trial judge that had not been claimed in the pleadings), the discussion of the law relating to gifts in contemplation of marriage is instructive and carries weight.

Importantly, the Court of Appeal noted that a motive or motives for making a gift other than, or as well as, a prospective marriage would make an implied term of revocability “problematical”. Indeed, that is the very situation presented in this case.

Tracing Converted Assets

Tracing Converted Assets

Converted assets can be traced and reclaimed under certain circumstances if they can be identified.

For example a bank account of cash can be converted into a stock portfolio which in turn is used to buy a house that is subsequently sold and put into bonds. As long as the funds can be identified , they can be traced and accounted for and where appropriate by the court, re transferred into the name of the rightful owner.

The law on tracing funds was discussed inter alia in Jasmur Holdings Ltd.v Taynton Developments Inc. 2016 BCSC 1902.

169      With respect to tracing funds , In Tracy (Guardian ad litem of) v. Instaloans Financial Solution Centres (B.C.) Ltd., 2010 BCCA 357 (B.C. C.A.), the Court of Appeal stated

[41] . . . Although tracing is available both at law and in Equity (see Maddaugh and McCamus, supra, at chapters 6 and 7), the right which the plaintiffs are entitled to trace in this case is the constructive trust, an equitable property right. I agree with Professor Lionel Smith (The Law of Tracing (1997)) that the establishment of this proprietary right, which he refers to as the “proprietary base”, is sufficient to establish an entitlement to trace. It is not necessary, as was once argued, to demonstrate a pre-existing fiduciary relationship: see Citadel General Assurance Co. v. Lloyds Bank Canada, [1997] 3 S.C.R. 805 at para. 57.

[42] Of course, it may be difficult to identify the funds or other property into which the claimed Charges have been transformed or with which they have been mingled; and the process will come to a halt in certain conditions, including where the balance in an account has fallen below the amount being traced. (See generally Maddaugh and McCamus, supra, at Chapter 7, and Smith, supra, at Chapter 8.) As the Court stated in McTaggart v. Boffo (1975) 64 D.L.R. (3d) 441 (Ont. H.C.J.):

Tracing is only possible so long as the funds can be followed in a true sense, i.e., so long as, whether mixed or unmixed, it can be located and identified. It presupposes the continued existence of the money either as a separate fund or as part of a mixed fund or as latent in property acquired by the means of such a fund.

Two things will absolutely prevent the tracing of trust monies:

  1. If, on the fact of any individual case, such continued existence of the identifiable trust fund is not established, equity is helpless to trace it;
  2. the chain for tracing is also broken where the trust fund either in its initial form or a converted

Baby Could Inherit Millions if Proved to be Daughter of Slain Vancouver Man

Baby Could Inherit Millions if Proved to be Daughter of Slain Vancouver Man

A Chinese woman trying to prove her baby daughter has sole claim to the fortune of a slain West Vancouver millionaire has won her bid for a paternity test. Baby could inherit millions.

A new British Columbia law says the child stands to inherit everything if the results match.

The B.C. Supreme Court has ordered DNA testing on the remains of Gang Yuan, whose body was found chopped into more than 100 pieces. A man has been charged with second-degree murder.

Contending she is Mr. Gang’s former lover and the mother of his child, Xuan Yuan argues her child is legally entitled to inherit the man’s estimated $50-million estate.

The latest development in the saga worthy of a soap opera occurred on July 14, when a judge approved the woman’s application for the independent genetics investigation.

A DNA laboratory has now been authorized to obtain a sample of remains stored by the B.C. coroner, with testing to be completed by Aug. 26.

The court ordered the results be provided to the administrators of Mr. Gang’s estate. The DNA sample must also be preserved and made available for testing by any other possible children of the dead man.

“To the knowledge of the petitioner, the deceased had no other children with any claim to his estate when he passed away,” court documents say, although the claim of Mr. Gang fathering only one child has not been proven.

Requests for comment to lawyers representing the administrators were not returned.

Trevor Todd, a Vancouver based litigation estate lawyer with 42 years of experience, said a positive paternity test would entitle the child to her father’s fortune.

“That’s going to be pretty darn conclusive. You can have all sorts of other circumstantial evidence, but it comes down to blood. It’s 100 per cent,” he said.

“It’s automatic, nothing to contest. That little rich kid’s going to need a bodyguard,” he joked.

– Globe and Mail

British Columbia Backs Baby’s Bid for Bigbucks

British Columbia Backs Baby's Bid for Bigbucks

BC Court orders DNA test for child who may inherit Bigbucks $50M

A Chinese woman trying to prove her baby daughter has sole claim to the fortune of a murdered West Vancouver millionaire has won her bid for a paternity test.

A new British Columbia law says the child stands to inherit everything if the results match.

The B.C. Supreme Court has ordered DNA testing on the remains of Gang Yuan, who was murdered May 2 and whose body was found chopped into more than 100 pieces. A man has been charged with second-degree murder.

Contending she is Gang’s former lover and the mother of his child, Xuan Yang argues her child is legally entitled to inherit the man’s estimated $50-million estate.

The latest development in the saga occurred on July 14, when a judge approved the woman’s application for the independent genetics investigation.

A DNA laboratory has now been authorized to obtain a sample of remains stored by the B.C. coroner, with testing to be completed by Aug. 26.

Trevor Todd, a Vancouver-based estate litigation lawyer with 42 years experience, said a positive paternity test would entitle the child to her father’s fortune.

“That’s going to be pretty darn conclusive. You can have all sorts of other circumstantial evidence, but it comes to down to blood. “It’s 100 percent,” he said.

“It’s just automatic, nothing to contest. That little rich kid’s going to need a bodyguard,” he joked.

A positive result would mean the case is clear-cut based on the law that came into force in March 2014, called the Wills and Estate Succession Act, added Victoria lawyer, Charlotte Salomon, whose been practising in the field nearly two decades.

The law defines what happens to a person’s estate if they have no will, as was the situation when Gang was killed on May 2.

If the baby is prove to be his offspring, the court would appoint a guardian to hold the money in trust. The remaining money would flow to the child at age 19.

– Vancouver Metro

Joint Tenancy Severed By Trust

Joint Tenancy Severed By Trust

A  joint tenancy of co owned property was severed by the signing of a trust agreement by one of the co owners held the BC Court of Appeal in  Public Guardian BC v Mee 1972 WWR 424 .

The respondent was the joint tenant with her former husband of real property.

Following divorce proceedings the husband executed a declaration of trust which was not registered at the Land Registry Office but was left with a solicitor.

By the document he constituted himself a trustee of his undivided one-half interest in the property for his infant son “until the sale or other disposition, or until the said William Donald Mee attains the full age of twenty-one (21) years, in trust for the said William Donald Mee to permit the said lands and premises to be used as a residence for himself, his mother and sisters.”

Further provision was made that if the property were sold one-half of the proceeds of sale were to be held in trust for the son, to be used for his education, and given to him on his becoming 21. The husband died some 5 years later and the wife made an application, which was successful, for a declaration that the property vested in her by right of survivorship.

The Public Trustee, on behalf of the infant appealed and the appeal was allowed.

The execution of the trust agreement was not consistent with unity of title and the joint tenancy was therefore severed and became a tenancy in common..

THE  LAW

A declaration of trust had the same binding effect as a transfer to a trustee and could as effectively sever a joint tenancy as a transfer made to a trustee; the trust created by the father in the case at bar was completely constituted and was binding on his heirs, executors, administrators and assigns.

It followed that a severance of the joint tenancy was effected: Milroy v. Lord (1862), 4 De G.F. & J. 264, 45 E.R. 1185; Stonehouse v. Attorney General of British Columbia, 33 W.W.R. 625, 26 D.L.R. (2d) 391, affirmed [1962] S.C.R. 103, 37 W.W.R. 62, 31 D.L.R. (2d) 118 applied.

6       There is no doubt, and it was conceded by the respondent in the Court below as well as in this Court, that a vaid declaration of trust (although not registered in the appropriate Land Registry Office) could effectively sever a joint tenancy to the same extent as a transfer made to a trustee would do. The principle that a declaration of trust has the same binding effect as a transfer to a trustee has been long the law and is set out in the oft-cited case of Milroy v. Lord (1862), 4 De G.F. & J. 264, 45 E.R. 1185, wherein Turner L.J. at p. 1189 said:

… in order to render a voluntary settlement valid and effectual, the settlor must have done everything which, according to the nature of the property comprised in the settlement, was necessary to be done in order to transfer the property and render the settlement binding upon him. He may of course do this by actually transferring the property to the persons for whom he intends to provide, and the provision will then be effectual, and it will be equally effectual if he transfers the property to a trustee for the purposes of the settlement, or declares that he himself holds it in trust for those purposes … but, in order to render the settlement binding, one or other of these modes must, as I understand the law of this Court, be resorted to, for there is no equity in this Court to perfect an imperfect gift.