Month: April 2021

What I’m Reading: Interesting Estate Litigation Articles for April 2021

April 30, 2021

The following is a roundup of noteworthy articles published this month on estate litigation and related issues:

  1. Trevor Todd at Disinherited.com discussed a recent case in which the B.C. Supreme Court varied a will to make provision for two twins who were abandoned by their father and were explicitly disinherited in his will.  The twins were awarded 70% of the residue of the estate (which was valued at approximately $880,000):  https://disinherited.com/wills-variation/wills-variation-abandoned-twins-awarded-70-estate/
  2. Janis Ko at Onyx Law wrote about elder abuse and financial predators, with reference to a recent B.C. Supreme Court decision on these issues: https://onyxlaw.ca/family-of-bc-senior-with-dementia-sues-alleged-financial-predator/
  3. James Steele at Robertson Stromberg in Saskatchewan discussed an article and case comment on the issue of liability of an executor for failing to supervise their co-executor: https://skestatelaw.ca/2021/04/07/can-someone-be-held-liable-for-the-misdeeds-of-a-co-executor/
  4. Gillian Fournie at de Vries Litigation LLP (Ontario) discussed the issue of occupational rent – whether an estate can charge rent to the occupant of an estate asset until it is sold or otherwise distributed: https://devrieslitigation.com/occupation-rent/
  5. Ian Hull at Hull & Hull LLP (in Ontario) wrote about potential liabilities that you may assume when you agree to be an executor or trustee:  https://hullandhull.com/2021/04/an-estate-trustee-executor-role-comes-with-some-liability/

Happy Reading!

Limitation Periods: When was the Claim “Discovered”?

April 23, 2021

I am often contacted when a loved one has died, and a family member has concerns about what happened to the deceased’s assets, which ought to have formed part of their estate. There may be much less than expected, or a particular asset may be missing or may no longer be in the deceased’s name. Monies may have been misappropriated using a power of attorney, or procured by undue influence. The family member may have understood that property transferred during the deceased’s lifetime was to be held in trust for certain beneficiaries, but the recipient/transferee now takes the position that the transfer was a gift and they are entitled to keep it.

Sometimes these transactions and transfers have taken place years or even decades before the deceased’s death, but they are not discovered until after the deceased’s death. Sometimes everyone is aware of the transfer itself, but only discover later that the recipient intends to argue that the property belongs to them and is not held in trust. Clients want to know whether it is too late to go back and challenge transfers if they happened many years ago.

This issue was recently considered by the B.C. Supreme Court in Maussion v. Maussion 2021 BCSC 530. Maussion involved a dispute between children with respect to their parents’ estates.  The parents died in 2012 and 2016. The plaintiff son alleged that his sister improperly received assets from the parents during their lifetimes, which were to form part of the estate. She allegedly used a power of attorney granted to her to sell property or transfer it to herself (in 2004, 2005 and 2016). The action was not commenced until January 31, 2019.

The defendant denied the claims on the basis that all transfers were gifts to her. She also applied for dismissal of the claims on the basis that they were statute-barred, i.e. that the action was commenced after the expiration of the limitation period.

The matter was governed by s. 6 of the Limitation Act, SBC 2012, c. 13, which provides that a court proceeding in respect of a claim must not be commenced more than two years after the date on which the claim is discovered. A claim is “discovered” on the first day on which the person knew or reasonably ought to have known:

  1. that injury, loss or damage had occurred;
  2. that the injury, loss or damage was caused by or contributed to by an act or omission;
  3. that the act or omission was that of the person against whom the claim is or may be made; and
  4. that, having regard to the nature of the injury, loss or damage, a court proceeding would be an appropriate means to seek to remedy the injury, loss or damage.

There are specific provisions relating to the discovery of fraud or trust claims. These claims are “discovered” only when the beneficiary becomes fully aware of certain matters. An action to recover trust property from a trustee (for example a party who holds property in resulting trust) does not begin to run until the beneficiary becomes fully aware of the fraud, fraudulent breach of trust, conversion or other act of the trustee on which the action is based.

The defendant in Maussion argued that a letter from the plaintiff’s lawyer in 2011 expressing concern about her conduct showed that the plaintiff “discovered” a potential claim by at least 2011. However, the court concluded that the 2011 letter addressed a completely different issue. Instead, a February 2017 letter from the defendant’s lawyer, in which it was stated that the transfer of certain property was a gift, was the date at which that the plaintiff should have been aware that she had a claim. As a result, the claim was commenced within the limitation period, and the application to dismiss the claim as statute-barred was dismissed.

If you become aware of concerning conduct many years after the suspicious transfer or other event occurred, you may still have a potential claim that has not expired. It will depend upon when you discovered the claim.

Case Comment: Estate Recovers Assets Misappropriated by Power of Attorney

April 16, 2021

Clients often contact us following the death of a family member, when they are surprised to discover how little is left in the deceased’s estate. While a capable independent adult is entitled to deplete their estate during their lifetime as they see fit, there may be concerns with elderly, incapable or otherwise vulnerable persons and “missing” assets. In the most egregious cases, there may be misappropriation of funds by a person in a position of trust, such as a person named in a power of attorney or committeeship order. After death, an estate can recover assets that are misappropriated from the deceased during their lifetime.

This was the case in the recent decision of the B.C. Supreme Court in Sarzynick v. Skwarchuk 2021 BCSC 443. In Sarzynick, the court considered a dispute between two siblings over the estate of their mother. In 2007, the mother and father made wills and also executed powers of attorney authorizing their son to act on their behalf. The father died first. When the mother died four years later, most of her assets had been depleted. The daughter argued that her brother had misappropriated large sums of money for his own use which belonged to his mother (and should form part of her estate).  The son denied this, but the court ultimately found that he was not a credible witness.

The court held that the son owed fiduciary duties as (1) executor of his father’s estate, and (2) his mother’s attorney. As attorney, he had an obligation to act in good faith in his mother’s best interests, to avoid personal gain from her property, and to account for all property.  The court held that he breached his fiduciary duties. He failed to keep (or disclose) financial records. This breach went to “the core” of the fiduciary relationship as attorney. He also breached his fiduciary duty of loyalty when he misappropriated funds for his own benefit.

The court went on to consider the appropriate remedies. This included a constructive trust over certain assets which properly belonged to the estate, and disgorgement of profits. Fortunately in this case many of the assets (monies) were held in trust, and so there was not the added complication of having to collect upon a judgment against an impecunious defendant who may have spent or hidden all of the assets that he took. The estate was entitled to recover over $440,000 from the son. The estate was also entitled to the appreciation in value of certain real property. Finally, the estate was entitled to special costs due to the son’s behavior during the litigation, which included a flagrant disregard for his disclosure obligations.

Unjust Enrichment: Plaintiff must Prove Efforts Actually Resulted in Benefit to Estate Property

April 9, 2021

In order to prove a claim in unjust enrichment against an estate, the onus is on the plaintiff to prove on a balance of probabilities a benefit to the estate, a corresponding deprivation to her, and the absence of a juristic reason for the benefit and deprivation. With respect to the first requirement, it cannot be assumed that just because a person incurred time and/or expense that related in some way to estate property, that this actually benefitted the property. It may be that despite the plaintiff’s efforts or expense, they did not actually enhance or maintain the value of the property. If that is the case, there is no claim in unjust enrichment.

This was the case in the recent B.C. Supreme Court decision of Benson v. Power 2021 BCSC 409. In Benson, a mother and father operated a cattle ranch over ten parcels of land near Golden, B.C. until their deaths in 2013 and 2016. The father held nine of the parcels, and the mother held one of the parcels. Both parents left their estate to their four children in equal shares. One of the children died in 2018, but left four children of his own (who as a result would each receive 1/16 of each estate).

One of the daughters, Penny Benson, obtained probate of both estates. Following her father’s death and then her mother’s death, she continued to operate the ranch has her parents had done. In doing so, the court observed that she (1) comingled her personal funds with estate funds, (2) did not act promptly to administer her parents’ estate, and (3) was in a conflict of interest as a result of her stated wish to acquire estate property. She was removed as sole executor by court order, and replaced with a person who was not a beneficiary under the wills.

Ms. Benson discussed with the new executor her desire to purchase certain estate properties. They were unable to reach an agreement, and so the new executor entered into agreements to sell the properties to his half-sister, who was also one of the grandchild beneficiaries who would receive 1/16 of the estate. This included the main ranch property with the family home where the deceased parents had lived. Ms. Benson had resided on this parcel since 1996, and moved from a manufactured home on the parcel to the family home after her parents’ deaths.

To prevent the sale of the property to the grandchild, Ms. Benson started an action alleging a 10% interest the parcel, and filed a certificate of pending litigation against title. She argued unjust enrichment: that her many hours of labour and the contribution of her personal funds have benefitted her father’s estate, particularly the parcel at issue, to her detriment. She argued that from the time her father’s health began to fail, she and her family performed all or almost all of the maintenance work on the estate properties (which she estimates amounted to hundreds of hours). She also claimed to have paid various expenses from her own funds.

As noted above, the onus is on the plaintiff to establish a benefit to the estate, a corresponding deprivation to her, and the absence of a juristic reason for the benefit and deprivation. Ms. Benson argued that her labour and money to continue operating her parents’ ranch benefited her father’s estate (including the parcel at issue), to her detriment. However, the evidence actually established that she operated the ranch at a loss. It was also impossible to say what time and money was necessary or related to the ranch operations, how much was related to Ms. Benson’s own family (including their own cattle), and how much this enhanced the value of the estate parcel (if at all). The court also alluded to (but ultimately did not have to specifically address) the fact that Ms. Benson and her family lived on the parcel rent-free.

As a result, Ms. Benson was unable to establish a benefit to the estate, and therefore was unable to prove a claim in unjust enrichment. Her claim was dismissed, and the certificate of pending litigation was cancelled.

This case is a reminder that just because you are spending time and money in relation to assets or property belonging to an estate, the court will not assume that this is actually a benefit to the estate which entitles you to claim in unjust enrichment. You must actually prove that your work or expense contributed value to the estate property.  This may also be further complicated if you are also receiving a personal benefit form your efforts or expense.