Month: March 2020

COVID-19: B.C. court closures and estate litigation

March 31, 2020

On March 30, 2020, the B.C. Supreme Court posted an updated notice regarding suspension of court operations. A copy of the notice can be found here.

Effective March 19, 2020 and until further notice, regular operations of the Supreme Court of British Columbia at all of its locations have been suspended. All civil and family matters scheduled for hearing between March 19, 2020 and May 1, 2020 have been adjourned, unless the court otherwise directs. Courthouses are still open, but all persons are strongly discouraged from attending at the courthouse unless absolutely necessary or ordered by the court. In person registry services have been suspended.

It remains the case that limitation periods have been suspended, as discussed in a previous post found here.

The court will now hear only essential and urgent matters. The notice outlines the procedure to request a hearing of an essential or urgent matter. Certain listed matters are presumed to be “essential” or “urgent”, and the court has discretion to hear other matters not listed (or decline to hear a matter presumed to be essential or urgent). A judge will decide whether a matter is essential or urgent and is to be heard.

Some elder law and estate litigation matters may fall within certain of the “essential” or “urgent” categories, which include:

  1. Refusal of treatment and end of life matters;
  2. Emergency adult guardianship and committeeship orders, including under the Adult Guardianship Act and Patients Property Act. A substitute decision maker may need to be appointed to manage the financial and personal affairs of an incapacitated person on an urgent basis; and
  3. Urgent injunction applications or preservation orders. While these are relatively rare in the estate litigation context, as an example there may be a real likelihood that a personal representative or other person intends to cause irreparable harm by disposing of or destroying estate assets.

In certain circumstances, a beneficiary may seek the urgent removal of an executor, to protect the welfare of the beneficiaries. However, there must be a strong case for urgency if the matter is to be set for hearing at this time.

Most estate litigation matters will not be considered urgent or essential, and so any court hearings will have to wait until the court resumes regular operations.  In the meantime, parties can take other steps in the litigation, such as filing and serving pleadings, exchanging documents, and conducting examinations for discovery, so that legal proceedings continue to move forward and are ready to go to a hearing when the courts reopen to all matters. Parties are also still free to negotiate or mediate (including by video) to attempt to resolve matters.

These circumstances are quickly changing (and the state of emergency will eventually be cancelled), and so any affected party should regularly check the B.C. Supreme Court website.

COVID-19: B.C. Suspends Time Limits for Commencing Legal Proceedings

March 30, 2020

On March 26, 2020, the Minister of Public Safety and Solicitor General took the exceptional step of suspending limitation periods to commence court proceedings in British Columbia. Ministerial Order no. M086 can be found here.

The Order was made in response to the COVID-19 pandemic and the declaration of a state of emergency throughout the Province of British Columbia on March 18, 2020.  This has affected access to the courts.  Supreme Court registries are not currently providing in-person registry services (which includes the filing of pleadings) while the Court’s regular operations are suspended. Electronic filing is still available, as are other means which do not require in-person interaction with the registry (the B.C. Supreme Court announcement can be found here).

The Order provides that every mandatory limitation period and any other mandatory time period that is established in an enactment or law of British Columbia within which a civil or family action, proceeding, claim or appeal must be commenced in the Provincial Court, Supreme Court or Court of Appeal is suspended.  The Order applies from the date of the Order (not from the March 18, 2020 declaration of a state of emergency) until the declaration of emergency (or any extension) expires or is cancelled.

This is an extraordinary measure.  Limitation periods provide for a deadline for bringing a claim.  Failure to commence a claim within the limitation period will usually result in dismissal of the claim as statute-barred.  Limitation periods are intended to encourage the timely pursuit of claims, and reduce prejudice to the administration of justice.  If a plaintiff is allowed to delay the commencement of a claim, the defendant may be put in the unfair position of having to disprove a claim when key evidence and witnesses have been lost due to the passage of time.

Persons with potential claims should be aware of the Order.  They now have more time to bring claims, and should not be concerned if they are unable to file pleadings during the state of emergency due to court closures.

Executors should also consider the effect of the Order on estate administration matters, most notably distribution of estate assets to beneficiaries.  The Wills, Estates and Succession Act [SBC 2009] Chapter 13 provides that the personal representative of a deceased person must not distribute the estate of the deceased person within 210 days following the date of the grant of probate or administration, absent a court order or the consent of the beneficiaries.  This is so that potential claimants can bring claims before estate assets have been distributed, some of which must brought within 180 days of the issuance of the grant (most notably wills variation claims).  Executors should obtain advice before distributing assets even after 210 days, if the 180 day deadlines have been suspended.

These circumstances are quickly changing (and the state of emergency will eventually be cancelled, ending the suspension), and so any affected party, or party seeking to rely upon the suspension to delay filing a claim, should regularly check the websites of the B.C. Courts and the B.C. Attorney General.

Passing over the Executor: What BC Law Says About Executor or Administrator Conflicts of Interest

March 27, 2020

What if you are a beneficiary under a will, and you have concerns about the person named as executor in that will? Maybe you believe the named executor is in a conflict of interest or may not treat the beneficiaries with an even hand (especially if the will allows for the exercise of some discretion by the executor). Maybe you suspect that the named executor will engage in impropriety or misconduct once they obtain a grant of probate. Maybe you simply do not get along with the named executor. At what point is it appropriate to ask that the court pass over a person as executor or administrator of an estate?

The Wills, Estates and Succession Act, S.B.C. 2009, Chapter 13 [“WESA”] allows for a person having an interest in an estate to apply to remove or pass over a personal representative. To “pass over” means to grant probate or administration to a person who has less priority than another person to become a personal representative. This means passing over a named executor where there is a will, or passing over the person entitled to become administrator if there is an intestacy (no will).

The court may pass over a person entitled to become the personal representative if the court considers that the person should not be granted probate or administration. Section 158 of WESA includes a non-exhaustive list of circumstances that the court may consider. Some of them are clear, such as if the person refuses to accept the position, or is incapable of managing his or her own affairs, or has been convicted of an offence involving dishonesty.

Subsection 158(3)(f) is more general, and allows the court to consider whether the person is (1) unable to make the decisions necessary to discharge the office of personal representative, (2) not responsive, or (3) otherwise unwilling or unable to or unreasonably refuses to carry out the duties of a personal representative, to an extent that the conduct of the personal representative hampers the efficient administration of the estate.

The court will consider the following principles when deciding whether to pass over an executor named in a will:

  1. Recognize that the testator’s choice of estate trustee should not be lightly disregarded. A deceased’s right to nominate his executors is not to be lightly interfered with;
  2. Require clear evidence of necessity;
  3. Focus on the main consideration of the welfare of the beneficiaries; and
  4. Require proof that the executor’s acts or omissions are of such a nature as to endanger the administration of the estate.

In the recent case of Gawdun v. Lord 2020 BCSC 266, the court considered an application to pass over the person named as executor of the deceased’s will. The deceased and the proposed executor (“Ms. Lord”) were in a common law relationship at the date of death. The applicants were the deceased’s children from a previous marriage.

The plaintiffs argued that Ms. Lord should be passed over for the following reasons:

  1. The plaintiffs doubted that Ms. Lord would maintain an even hand between her own children and the plaintiffs, all of whom were residuary beneficiaries;
  2. The plaintiffs alleged that Ms. Lord had continually demonstrated hostility and animosity towards them and the deceased’s sister (who was named as co-executor);
  3. The plaintiffs alleged that Ms. Lord was involved in the deceased’s estate planning in 2010 and 2011, which resulted in the execution of the will providing the majority of the estate to Ms. Lord and her children, which conduct was at issue in an underlying wills variation application;
  4. The plaintiffs alleged that Ms. Lord offered to pay the deceased’s sister $50,000 from the estate during the course of the action which the plaintiffs found suspicious;
  5. Foreclosure proceedings had been initiated to recover funds owing to the estate, which was being funded entirely by the plaintiffs, and Ms. Lord had refused to assist in collecting the debt owing; and
  6. The plaintiffs alleged Ms. Lord entered into a share exchange agreement as attorney for the deceased. The terms of the share exchange agreement were alleged to have conferred an improper benefit on Ms. Lord.

The court dismissed the application, concluding that passing over Ms. Lord was not justified. There was no evidence demonstrating misconduct by Ms. Lord that was capable of supporting a decision to pass her over. Even if the court accepted there was misconduct as alleged, it is past misconduct and was not done in her capacity as executor.

If may be difficult to convince a judge that a person will endanger the welfare of the beneficiaries or commit misconduct as executor or administrator before they have even been appointed. If you have concerns about the person who is entitled to be personal representative, but don’t believe that you can succeed with an application to pass over, you may also bring an application remove and replace a personal representative if those concerns become a reality. This will be discussed in an upcoming post.

You are permitted to arrange your affairs to avoid wills variation claims

March 20, 2020

Under the Wills, Estates and Succession Act [SBC 2009] Chapter 13, a spouse or child of a deceased person may bring an action to vary that deceased person’s will, if the will does not make adequate provision for the proper maintenance and support of the spouse or child. This is often a source of frustration for a will-maker, who seeks to have testamentary autonomy and final decision-making power over how their assets will be distributed after their death.

However, wills variation claims only relate to assets that form part of the deceased’s estate. If assets pass outside of the deceased’s estate, then they are not available to be re-distributed as part of a wills variation action. Assets can pass outside of an estate in a variety of ways, including joint registration of property (so that the asset passes to the surviving joint owner), designation of direct beneficiaries, or settling assets into a trust. If there are no assets held in an estate, then there is no benefit to a disappointed beneficiary in varying a will. In response to this situation, beneficiaries have attempted to challenge steps taken to avoid wills variation claims.

In British Columbia, the Fraudulent Conveyance Act [RSBC 1996] Chapter 163 provides that a disposition of property is void and of no effect if made to delay, hinder, or defraud creditors and others of their just and lawful remedies. In other words, you cannot take steps to hide assets and avoid claims.  However, B.C. courts have repeatedly held that a person may arrange their affairs to avoid possible wills variation claims. A wills variation claim, which arises upon the death of the will-maker, does not qualify a claimant as a “creditor or other” within the meaning of the Fraudulent Conveyance Act.

In 2006, the British Columbia Law Institute proposed that an anti-avoidance provision be added to the legislation, which would provide that a transaction conferring a benefit on a second person would be voidable against an eligible claimant if it was made by the deceased for the purpose of defeating rights under the dependents relief legislation.

The legislature declined to act on the recommendation. The legislature has not seen fit to pass legislation or amend existing legislation to prevent the avoidance of wills variation claims. Will-makers are still permitted to arrange their affairs to avoid possible wills variation claims, most commonly by stripping their estate of any assets.

A disappointed beneficiary of a stripped estate may still have a remedy. For example, there may a claim that certain assets which appear to pass outside of the estate should actually be considered part of the estate and available for a wills variation claim.

Executors and Trustees May Seek Advice From the Court

March 13, 2020

Executors and trustees may be hesitant or indecisive when administering estates and trusts, especially when the will or trust deed gives them some discretion in carrying out their duties or when they are concerned about balancing the interests of competing beneficiaries – keeping everyone happy.

The Trustee Act permits a trustee, executor or administrator to apply “for the opinion, advice or direction of the court on a question respecting the management or administration of the trust property or the assets of a will-maker or intestate.”  The court also has the inherent jurisdiction to supervise trusts, to protect the welfare of the beneficiaries.

It may be tempting for an executor or trustee to seek court approval for any decision or exercise of discretion.  It would be comforting to have a judge give his or her blessing to a proposed course of action.  However, it is not the court’s job to consider and approve every decision of an executor or trustee.  When is it appropriate to involve the court in decisions that should be made by executors and trustees?

Prior court decisions suggested that section 86 of the Trustee Act allowed an executor or trustee to seek the advice, opinion or directions of the court on a legal question, and then act on that advice.  The section was not intended for the court give advice, for example, in a situation where there was a conflict between interested parties, such as competing beneficiaries.

However, the Court went beyond merely advising on legal questions in Toigo Estate (Re) 2018 BCSC 936.  In Toigo, the deceased created a spousal trust which provided that the net income of his estate would be paid to his wife during her lifetime.  The will also permitted the trustees to encroach on the capital of the estate in favour of his wife, in the trustees’ uncontrolled discretion.  The residue of the estate was to be divided between the deceased’s children and grandchildren after his wife’s death, but in a manner which would provide that that there would not be an equal distribution amongst the grandchildren.

The wife asked the trustees for a significant encroachment into the capital (tens of millions of dollars), in order the engage in her own estate planning, which would provide for a more equal distribution of the deceased’s estate amongst the grandchildren.

The trustees were clearly permitted to make the encroachment (and had uncontrolled discretion to do so).  However, they still wanted the court’s “opinion, advice or direction” as to whether they should proceed.

The court held that it had the jurisdiction to approve the encroachment under s. 86 of the Act or the inherent jurisdiction of the court to supervise trusts, and they approved the encroachment.  The court held that because of the magnitude of the encroachment, the court could provide advice on this “momentous decision”.

In making the decision, the court asked the following questions:

  1. Does the trustee have the power under the trust instrument and the relevant law to make the “momentous decision”?
  2. Has the trustee formed the opinion to do so in good faith and is it desirable and proper to do so?
  3. Is the opinion formed by the trustee one that a reasonable trustee in its position, properly instructed, could have arrived at?
  4. Is the Court certain that the decision has not been vitiated by any actual or potential conflicts of interest?

Executors and trustees should consider whether they ought to apply to the court for a stamp of approval when taking drastic or “momentous” action in relation to the administration of estates or trusts.  There are other options to protect executors and trustees, such as requiring that all beneficiaries sign release and consent documents before taking the proposed course of action.  However, this may not always be practical or possible, especially if some beneficiaries refuse to sign such a document.

Beneficiary Holds Estate in Trust for a Third Party

March 6, 2020

Where a deceased person leaves a will, a disappointed party may seek to vary the will, or argue that the will is invalid on a number of grounds.  If a deceased dies without a will, the disappointed party has fewer remedies.  If there is no will, the estate passes on an intestacy, and the Wills, Estates and Succession Act sets out who will receive the estate.  There is no discretion for the court to stray from what is provided for in the Act.

In limited cases, this may not be in the end of the matter.  Bergler v. Odenthal 2019 BCSC 1882 was such a case.  In Bergler, the deceased died after the rapid onset of pancreatic cancer.  She did not have any children.  Her common law spouse, Mr. Odenthal, survived her.   She did not make a will.  As a result, her entire estate passed to Mr. Odenthal on an intestacy.

However, she gave Mr. Odenthal specific instructions about her estate.  She told him that she wanted her assets to be given to her niece.  All instructions were verbal – there was nothing in writing.  The issue was whether a trust was created by the deceased, wherein Mr. Odenthal held her assets solely for the benefit of the niece.

It is risky for a testator to deliberately forego preparing a will, and instead trust that the person who receives the estate under an intestacy will distribute assets in accordance with their instructions, especially when there is nothing in writing to confirm these instructions.  There may be no witnesses and/or the person who received the instructions may deny ever receiving such instructions.

Mr. Odenthal refused to transfer the assets to the niece after the deceased’s death.

Fortunately for the niece, the deceased made statements in the presence of third parties about her wishes, and Mr. Odenthal had a conversation with the niece and a third person (a second niece) about these wishes.  He also made certain admissions during his examination for discovery and at trial that these were the deceased’s wishes.

A secret trust arises where a person gives property to another (the “donee”), communicating to that person an intention that the property be dealt with in a specific way upon the happening of an event, and the donee accepts the obligation. The essential elements are the intention of the donor, a communication of the intention to the donee and acceptance of the obligation by the donee.  The court in Bergler held that the requirements of a secret trust were satisfied, and ordered judgment against Mr. Odenthal for the value of the assets that formed the deceased’s estate.