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The Doctrine of Illegality In Estates

The doctrine of illegality was expressed in the Latin phrase ex turpi causa non oritur actio that was founded on public policy that one should not profit from an illegal act, contract or tort.
“No court will lend its seed to a man who found his action upon in a moral or an illegal act” stated the court in Holman v .Johnson (1775) 98 E.R. 1120.
The modern approach to illegality however recognizes the unfairness that could result from strict adherence to the classical model, and has developed means of providing relief in appropriate situations.
The modern approach is that contractual or statutory illegality does not create an absolute bar to a claimant’s equitable relief. There is often a close legal relationship between the doctrines of illegality and public policy.
This approach was paraphrased In Berne Development LTD v Haviland (1983) , 40 O.R. 238, as one that “balanced the need to preserve public policy by not enforcing illegal agreements against the need to prevent unjust enrichment by denying recovery.”

MURDER

While not the only act of illegality in estate law, the best known and obvious is that if one person murders another then the murderer should not be able to profit from his/her crime, including an inheritance from the person that was killed. Other criminal acts such as fraud or theft would also be relatively common examples of illegality in estates.

1. Re Fenotti Estate 2014 BCSC 1533 reviewed the law and held that a son who murdered his mother may not inherit from her as a result of public policy that prevents a wrong doer from benefiting from his or her own crime and firmly stated no he could not.
The court cited and Garbe v. Alberta (Public Trustee), [1999] 5 W.W.R. 696, 64 Alta. L.R. (3d) 103 (Surr. Ct.), held:
The rule of public policy which excludes the criminal has also been applied to exclude all claiming under the criminal, unless they have alternative or independent rights. In order to take under these independent or alternative rights, the person exercising the right must have clean hands.

2. The rule was discussed at length in the Supreme Court of Canada decision Oldfield v . Transamerica Life Insurance Co of Canada , 2002 SCC 22 at paragraphs 14 – 15.

The Supreme Court of Canada stated that the rule of public policy which precludes a person from benefiting from his or her own crime is an integral part of our system of law.

3. The Supreme Court of Canada in Baumann v Nordstrom 1962 SCR 147 restored the decision of the trial judge where a woman had set fire to the house and killed her husband but was allowed to inherit as she was insane at the time.

The Court stated that if her crime whether murder or arson, killed her husband she cannot inherit and the rule is the same on an intestacy as it would be if the property had been willed to her. See In re Sigsworth; Bedford v. Bedford [1935] 1 Ch 89, 104 LJ Ch 46.

If at the time she set the fire she was insane within the meaning of the M’Naghten rules ( to determine insanity in criminal la is the w) there was no crime and she may inherit.

The Court held that the defendant wife, when she set the fire, “did not then appreciate the nature and quality of her act or know that it was wrong.” Accordingly, she was entitled to inherit.

4. Re Unger 2022 BCSC 189 involved an application by the executors of the estate for advice and direction as authorized by Section 86 of the Trustee act regarding the disposition of the deceased’s estate, given that her own son had murdered her, the issue became who was entitled to his share of the estate.
The deceased was survived by two sons, Clayton and Logan, who were each 50% beneficiaries of her will.

As Clayton murdered his mother, all parties agreed there is a rule of public policy which excludes the person responsible for another person’s death from taking any benefit because of their criminal act.

Prior to his mother’s death, Clayton was found to have conceived a child ( Adeline) who was born approximately 11 days after his mother’s death. His mother knew of the child.
The court found that the child was “en ventre sa mere” and could inherit.

Under the rule of public policy, Clayton was not entitled to what would have been his portion of Ms. Unger’s estate, Ms. Unger having died as a result of Clayton’s actions.
However the clear intent in the Will was that should either of Ms. Unger’s children predecease her, under para. 7(b)(ii) of the Will, any children of her children who are alive at her death or are en ventre sa mere should receive the deceased child’s share.

The infant was an “alternate beneficiary” of the gift to Clayton as contemplated by s. 46(1)(a) of the WESA, and is therefore the first priority for distribution of Clayton’s share.

 

Other Acts of Illegality

1. Fraudulent Commercial Transaction

In Youyi Group Holdings Ltd v Brentwood Lanes Canada Ltd 2020 BCCA 130 the appeal court confirmed that the documents evidencing the commercial transaction had been prepared to facilitate the commission of a fraud , the illegality of such was neither trivial nor unintentional. The courts refused to enforce the agreements due to their illegality.

Realtor Commission-

In Lindsay v Ambrosi 2019 BCCA 442 a realtor’s claim for quantum meruit was dimissed on the basis that since he was not licensed under the Real Estate Services Act (RESA), he was statute barred from any remuneration in relation to real estate services.

The realtor unsuccessfully argued that he was entitled to compensation based on quantum meruit for the real estate services he provided at the request of the appellants, and that the appellants benefited from. He contended that, in spite of the statutory prohibition in section 3 of the RESA, it remained open to the court to determine the consequences of his statutory breach based on equitable principles in order to avoid the appellants been unjustly enriched by his services.

The appeal court held that the trial judge erred in following the realtor’s argument, and that there was a statutory prohibition that could not be waived or altered by the courts stating that the realtor was not entitled to remuneration if he was not licensed to practice real estate.

The court found that the realtor services were illegal and followed the precedent King v. Rosenberry 1972 BCJ 357 which held that services performed under an illegal contract cannot form the basis of the claim for quantum meruit ( a reasonable fee for services rendered).

Conclusion

Kim v Choi 2019 BCSC 437 is an example of the more “ relaxed” approach taken by the courts on occasion in response to an illegal act or contract than they did historically.

Kim v Choi involved a plaintiff seeking the equitable remedy of restitution against unscrupulous immigration consultants and discussed the necessity of coming to court with clean hands based on the legal doctrine of” ex turpi causa”.

Despite her involvement in an illegal contract the court awarded her $300,000 in restitution .

Traditionally, ex turpi causa had been applied rigidly. However, that approach has been relaxed and the public policy analysis now requires a balancing test. That is not to say that the court will lightly provide relief for an aggrieved party to an illegal agreement.

In J.T.L. v. R.G.L., 2010 BCSC 1233 at paras. 113-16 the court posed the practical question as to “whether it be manifestly unacceptable to fair-minded or right-thinking people that a court should lend assistance to the plaintiff who has defied the law.”

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