Month: August 2022

BC Case Comment – UPDATE: On Appeal, Surviving Business Owner Still not Entitled to Receive Partnership Property by Right of Survivorship

August 19, 2022

Estate litigation issues do not just arise as between family members of the deceased (although that is most common).  A death may also result in disputes with respect to the deceased’s business dealings and partnership holdings.  This is why a fulsome estate plan that addresses all interests, personal and business, is key.

In a previous post found here, I discussed what happens when your business partner dies, in particular when the assets of the business are held jointly.  I considered this in the context of the decision of the B.C. Supreme Court in Garland v. Newhouse 2021 BCSC 2021.

A fundamental characteristic of joint tenancy (i.e. registering assets in joint names) is the right of survivorship. When one joint tenant dies, their interest is extinguished, and the surviving joint tenant(s) take full ownership. For example, spouses often register title to their property in joint tenancy, so that the surviving spouse will receive the entirety of the property upon the other spouse’s death. This is accepted as a permissible estate planning tool.

However, where the property at issue is partnership property, there is a presumption that there is no right of survivorship as between partners. The death of a partner in a two-person partnership dissolves the partnership, and on dissolution each partner (including the estate of the deceased’s partner) is entitled to a proportionate share of the partnership assets after payment of debts.

In Garland, the deceased and the spouse of his close friend (“Ms. Newhouse”) purchased an apartment building together in 2003, with the intention of earning a profit from the rental income. They also opened an account to manage the finances associated with the apartment building. The building and the account were both registered in their joint names.

When the deceased died, Ms. Newhouse took the position that the deceased intended for her to receive the apartment building and account through right of survivorship. The deceased’s estate took the position that the deceased intended for the beneficiaries of his estate (his children) to receive his share of the business assets.

The matter proceeded to court by way of summary trial, in which there are no live witnesses, and the court determines the matter based only on affidavit evidence and argument by the parties.   The B.C. Supreme Court stated that in order for the right of survivorship to apply to partnership assets, “there must be evidence of a contrary agreement between the parties that is sufficiently clear and compelling to overcome the presumption that beneficial interest in partnership property does not transfer through the right of survivorship.”  The Court held that Ms. Newhouse was unable to provide this evidence.  The Court concluded that the parties did not intend and agree that on the death of one partner, the partnership property would transfer to the surviving partner for their personal benefit.

Ms. Newhouse failed to rebut the presumption against the right of survivorship in relation to the partnership property, and as a result she held legal title of the apartment building and the bank account in trust for herself and the deceased’s estate.

Ms. Newhouse appealed, and the B.C. Court of Appeal recently provided its decision, which can be found at Newhouse v. Garland 2022 BCCA 276.

A majority of the B.C. Court of Appeal dismissed the appeal, finding that:

  1. The lower court judge did not apply an incorrect legal test.  Ms. Newhouse argued that the lower court judge applied a higher legal burden, but the Court of Appeal disagreed.  They held that the lower court judge properly assessed whether the presumption had been rebutted, on a balance of probabilities, which was the appropriate standard;
  2. The lower court judge did not make a clear and overriding factual error, such as misapprehending the evidence, ignoring material evidence, or drawing inferences unsupported by primary facts.  While some judges may have made different findings, it is not the role of the Court of Appeal to reweigh the evidence and substitute their own findings; and
  3. The lower court judge did not err in exercising her discretion to proceed by way of summary trial instead of requiring a full trial with live witnesses.

The result reflects the role of the Court of Appeal.  The Court of Appeal does not simply re-hear cases and substitute their own decision.  The Court of Appeal may only interfere if there is a legal error, a clear and material factual error, or an error in the exercise of discretion.

One of the three-judge panel would have allowed the appeal, and delivered lengthy dissent reasons.  The judge would have referred the matter back to the B.C. Supreme Court for a full trial.  In the dissenting reasons, the judge notes the difficulties in determining these claims.  The dispute arises after the death of one of the partners, and so one of the parties to the original agreement will always be unavailable to give first-hand evidence.  The surviving partner will have an interest in the result, and so their evidence must be viewed with some caution.

It remains the case (as I noted in my previous post) that it is important to keep in mind business and partnership interests when making your estate plan.  Again, this this dispute likely could have been avoided if there was a written agreement reflecting the terms of the arrangement between the parties.

BC Case Comment – UPDATE: Plaintiff not a “Spouse” Entitled to Share of Estate – Denied Leave to Appeal to Supreme Court of Canada

August 12, 2022

I previously wrote about the B.C. Court of Appeal decision of Mother 1 v. Solus Trust Company Limited 2021 BCCA  461, in which “Mother 1” asked the Court of Appeal to overturn a decision by the B.C. Supreme Court that she was not a “spouse” of the deceased.  My post on the B.C. Court of Appeal decision can be found here.

The deceased died in 2015 without a will. His Canadian estate was estimated to be worth up to $21 million.  The B.C. Supreme Court held that Mother 1 was not a spouse, and so she was not entitled to a share of the deceased’s estate on an intestacy.  The B.C. Court of Appeal dismissed her appeal, concluding that the parties were never in a marriage-like relationship.

Mother 1 sought leave to appeal to the Supreme Court of Canada.

A party who is unsuccessful in the Court of Appeal does not have an automatic right to appeal to the Supreme Court of Canada.  The Supreme Court of Canada must agree to hear the appeal (it must grant leave).  The mandate of the Supreme Court of Canada is to deal with issues of law that are of public importance or of such a nature or significance as to warrant a decision from the Court.  They do not simply hear cases because one side believes that the Court of Appeal was wrong – there must be some national importance.

The Supreme Court of Canada recently dismissed Mother 1’s application for leave, which means that Mother 1 has exhausted her avenues of appeal with respect to this claim.  As is their usual practice, the Supreme Court of Canada did not give reasons for the dismissal.

Due to the salacious circumstances surrounding the death of the deceased, this decision to deny leave (and previous decisions in the case) resulted in some media attention, for example: https://www.cbc.ca/news/canada/british-columbia/supreme-court-murdered-multimillionaire-spouse-decision-1.6541276

Executor Relies Upon Presumption of Due Execution to Prove Validity of Will

August 5, 2022

When there is a challenge to the validity of a will on the basis that (1) the will-maker lacked testamentary capacity, or (2) the will-maker did not have knowledge and approval of the contents of the will, the person seeking to prove the validity of the will (the “propounder”) is assisted by the presumption of due execution.

The presumption of due execution provides that if a will is properly executed in compliance with the Wills, Estates and Succession Act (“WESA“), then it is presumed that the will-maker had knowledge and approval and testamentary capacity, subject to evidence of suspicious circumstances.  It then falls on the person challenging the validity of the will to rebut the presumption.

Section 37(1) of WESA sets out the formalities for making a will:

How to make a valid will

37   (1) To be valid, a will must be

(a) in writing,

(b) signed at its end by the will-maker, or the signature at the end must be acknowledged by the will-maker as the will-maker’s signature, in the presence of 2 or more witnesses present at the same time, and

(c) signed by 2 or more of the witnesses in the presence of the will-maker…

If the will has been validly executed, then the propounder can seek to rely upon the presumption.

The importance of the presumption of due exectuion is illustrated by the recent decision of the B.C. Supreme Court in Grace Estate (Re) 2022 BCSC 1283.

In Grace, the deceased’s father was named as executor in the will.  The deceased’s mother challenged the validity of the will, arguing that the deceased (her daughter) did not read or know the contents of the will before signing it, that she signed the will under suspicious circumstances, and that she may have lacked capacity.

At the first hearing, the court held that there was not sufficient evidence to prove that the will was read by or to the deceased.  That meant there was no presumption of testamentary capacity (another presumption available to the propounder of a will), and the father must prove both that the deceased had capacity, and that she knew and approved of the contents of the will.  The father had failed to prove the will in solemn form by way of application (on affidavit evidence), and the matter was referred to the trial list for proof in solemn form.

However, neither counsel at the first hearing advised the court of the cases discussing the presumption of due execution.  In light of those cases, the father applied for a reconsideration of the original decision.  The order arising from the original decision had not yet been entered, which meant that the original judge could hear further submissions.  The father argued (and the court agreed) that had case authorities on the presumption of due execution been brought to the court’s attention, they would have substantially altered the result.

The court exercised its discretion to reconsider its decision, and concluded that the father has the benefit of the presumption of due execution, and has proven the will in solemn form.  The will had been validly executed in compliance with WESA, and so the facts gave rise to a rebuttable presumption that the deceased knew and approved the contents of the will.  There were no suspicious circumstances.  The mother swore in her affidavit that she asked her daughter whether she had read the will, and her daughter had said “no”.  However, this was not sufficient to rebut the presumption (and was inconsistent with all of the other evidence surrounding the deceased’s intentions)