Month: May 2021

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

May 28, 2021

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

  1. Sydney Osmar at Hull & Hull LLP (in Ontario) discusses a recent Ontario case estate which applied the public policy doctrine that a person who has committed murder cannot benefit from his or her crime (including from the estate of the person they have murdered): https://hullandhull.com/2021/05/the-criminal-forfeiture-rule-and-the-doctrine-of-acceleration/.  Stan Rule at Sabey Rule LLP (Kelowna) also commented upon this case: http://rulelaw.blogspot.com/2021/05/the-bank-of-nova-scotia-trust-company-v.html
  2. Debra Curcio Lister and Jordon Magico at Miller Thomson discuss the importance of obtaining competent legal advice, with reference to recent decisions of the courts in Alberta: https://www.millerthomson.com/en/blog/mt-estate-litigation-blog/why-competent-legal-advice-is-fundamental/
  3. Lauren Liang and Polly Storey at Clark Wilson discuss rectification of a will when it does not appear to accomplish the intentions of the deceased’s person: https://www.cwilson.com/rectifying-wills-under-s-59-jamt-estate/
  4. Kira Domratchev at Hull & Hull LLP (in Ontario) writes about the doctrine of righteousness, the circumstances in which a concern arises where a person who is instrumental in drafting a will also is to receive a benefit under that will: https://hullandhull.com/2021/05/the-doctrine-of-righteousness-and-its-place-in-estate-litigation/
  5. Janis Ko at Onyx Law wrote about entitlement to costs in contested committeeship proceedings under the Patients Property Act, in the context of a recent decision of the B.C. Supreme Court: https://onyxlaw.ca/punitive-special-costs-in-bc-committeeship-proceedings/

Happy reading!

Disputes Between Co-Trustees: Adding a Trustee to Break the Deadlock

May 21, 2021

I am often contacted by one co-executor or co-trustee, who is frustrated with the conduct of the other co-executor or co-trustee. The client feels strongly that they cannot continue to work with the other person. These concerns commonly arise when siblings are asked to work together to administer a trust or estate, most often when there are two co-trustees or co-executors. In those circumstances, if there is a disagreement then there is no majority, resulting in a deadlock.

The concerning conduct expressed by the client falls on a spectrum. There may be concerns about misappropriation of trust assets, which would fall at the more serious end of the spectrum. The co-trustees may simply not like each other and not enjoy working together, which would be at the less serious end of the spectrum.

Usually a client’s concerns fall somewhere in the middle. Often the co-trustees will be critical of one another. They may each have a laundry list of concerns and criticisms. When making recommendations to a client as to how to proceed, the same considerations usually arise.  Has the conduct in a given case reached the point that removal and/or replacement of a co-trustee or co-executor is necessary? Or are the disagreements so trivial that the parties are expected to resolve matters and work together without the assistance of the court? There is also the question of remedy.  Should a trustee be removed (and if so, which one), or should an additional trustee be added to break the deadlock?

The B.C. Supreme Court recently considered these issues in In The Matter of The Estate of Jean Maureen Dahle, Deceased 2021 BCSC 718. The Court considered a dispute regarding the administration of an estate and a trust. In her will, the deceased named two of her six children, Tim and Martin, as co-executors. They were also named as co-trustees of a trust established in the will for the benefit of their brother with developmental disabilities (Nickey).

Tim and Martin both brought applications to have the other removed as executor of the will and trustee of the Nickey trust.

Before judgment (but after submissions), the brothers reached an agreement that a trust company would be appointed as a third trustee of the Nickey Trust, and that a majority of the three trustees will have decision making power. This would break the deadlock between the two brothers.

However, they were unable to reach a similar agreement with respect to administration of the estate. Neither of the brothers had sole decision-making power. They were required to act unanimously.  There was a “significant sense of distrust” between the brothers, which had continued for five years (since the deceased’s death) and had delayed administration of the estate.

Each brother provided a long list of complaints about the other. The Court observed that neither brother had conducted themselves completely appropriately, and they both were critical of the other for behavior that they themselves engaged in.

Much of the animosity between the brothers came from differences of opinion regarding what was in Nickey’s best interests, including living and care arrangements.  Other complaints included dealing with real property without unanimous agreement – dealing with rental monies, handling repairs and maintenance, and entering into tenancy agreements and collecting damage deposits.   There was also a criticism of the “tone” of certain communications. The Court agreed that they were “confrontational”, but did not warrant removal. There were other examples of stubbornness and refusal to communicate property. However, the Court also observed that the brothers were capable of agreeing on matters when required to do so.

The judgment includes a helpful discussion of the law on removal and replacement of executors and trustees. A testator is entitled to choose their executors and trustees. The court should not interfere lightly with this decision. Categories for removal of an executor include (1) endangerment of trust property, (2) want of honesty, (3) want of proper capacity to execute duties, and (4) want of reasonable fidelity. The welfare of the beneficiaries is a key consideration. Unreasonable delay and failure to distribute an estate may be grounds for removal. Executors are not expected to be perfect, and not all acts of misconduct will lead to removal. Animosity among co-executors may be relevant, but will not be determinative. This may be relevant to an ability to carry out their duties effectively and efficiently.

In Dahle, the Court concluded that it was in the best interests of the beneficiaries to add a third party professional trust company as an additional executor of the estate. The Court observed that adding a third trustee, and not removing either of the other two trustees, would respect the deceased’s wish to have her two children involved in decisions relating to admisntration of her estate. This arrangement would also encourage the brothers to act reasonably, failing which the unreasonable brother will be overruled by majority.

Case Comment: A Party who Transfers Property to Avoid Creditors May Not Later Reclaim It

May 14, 2021

If you transfer property to family members or other persons to avoid your creditors, you cannot assume that you are entitled to demand the return of the property at a later date.

The B.C. Supreme Court recently considered this issue in Pattinson v. MacDonald 2021 BCSC 652.

In 1986, Ms. Pattinson transferred a 160 acre farm property to her children, the defendants. She now sought an order that the property was held by the defendants in trust for her.  She sought the return of the property, along with an accounting of rents, profits and income received by the defendants in respect of the property.  She also claimed that her children were unjustly enriched by her upkeep of the property.

Her children claimed that they owned the property as a result of the 1986 transfer. They claimed that (1) they paid consideration for the transfer, and (2) the transfer to them was a fraudulent conveyance and/or intended to avoid claims by her creditors.

Ms. Pattinson claimed that the property was transferred upon legal advice “to protect the lands from frivolous claims … and to ensure the land stayed in control of the family.” She had been named as a defendant in family law proceedings commenced against her common law spouse (by his ex-spouse).

The children asserted that the property was transferred into their names (1) under an agreement with Ms. Pattinson’s mother involving the exchange of gold wafers, and (2) to avoid various creditors. They claimed that they had knowledge of the transfer in 1986 when it was made. They did not ask for the property to be transferred into their names.  They were not asked to hold the property in trust and did not agree to hold it in trust.

Ms. Pattinson denied that gold wafers were provided in exchange for the transfer. She claimed that her mother gifted the gold wafers to her. The issue of whether consideration was paid for the transfer was relevant to the issue of whether the property was held in resulting trust. Where a transfer is made for no consideration, the onus is on the recipient (in this case the children) to prove that a gift was intended. In Pattinson, the defendants had not met the onus required to prove that consideration was paid.

However, the court held that even where no consideration is paid for the transfer, a party who transfers land to avoid creditors may not reclaim it.

It was clear that the purpose of the 1986 transfer was to avoid claims. The court held that it was likely that the children were named by their middle names on the transfer document to avoid creditors knowing that she transferred property to her children. She also failed to refer to owning property in bankruptcy proceedings.

Ms. Pattinson was successful in protecting her property from creditors, but she could not now seek the return of the property 35 years later. She also failed to show the elements of unjust enrichment, and even if she had, her claim would have been dismissed on the basis that she delayed in making her claim until 33 years after the transfer.

Transferring assets for the purpose of avoiding creditors carries significant risk. Creditors may have certain remedies against the assets despite the transfer, but there is the additional risk that transferee will refuse to return the property once the creditors are no longer a concern.

Appeal of B.C. Wills Variation Judgment Results in Equal Treatment of Children

May 7, 2021

Just over a year ago, I wrote about the decision of the B.C. Supreme Court in Scurek v Scurek 2020 BCSC 450.  In that case, the Court considered whether a testator could discharge his moral obligation to his adult daughter by benefiting her sons instead of her. In other words, can you “skip” a generation, and leave your estate (or some part of it) to your grandchildren instead of your children?  My previous post can be found here:  https://www.bcestatelitigation.ca/wills-variation/skipping-your-children-and-leaving-your-estate-to-your-grandchildren-the-court-may-vary-your-will/

In Scurek, the deceased had two adult children, a son and a daughter. His daughter (the plaintiff) had two sons, the deceased’s grandchildren.  Rather than dividing his estate equally between his two children, the deceased decided to leave one half of his estate to his son, and the other half of his estate to his daughter and her two sons in equal shares.  As a result, the daughter received a 1/6 share instead of a 1/2 share

The trial judge varied the will to provide as follows: ½ to the plaintiff, 2/6 to the brother, and 1/12 to each grandchild.

Last week, the B.C. Court of Appeal allowed the brother’s appeal of this decision, in Scurek v. Scurek 2021 BCCA 178.

The Court of Appeal observed that while wills variation claims by adult independent children are challenging, they had no difficulty concluding that the will did not provide adequately for the plaintiff.  Some variation was required.  However, the Court held that the trial judge should not have varied the will such that the plaintiff would receive more than her brother.  This would impinge upon the testator’s autonomy to an unnecessary degree.

Instead, each of the grandchildren was to receive a 1/12 share (as awarded by the trial judge), and then the plaintiff and her brother were to receive equal shares of the remainder (i.e. 5/12 each).  This result is consistent with a reasonable expectation that children ought to share equally in a parent’s estate.  However, it should be kept in mind that there is no requirement that children be treated equally.  A court will not necessarily vary a will to remedy unequal treatment of children.  Again, every wills variation case must be decided on its own unique set of facts.