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

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

  1. Sanaya Mistry at Hull & Hull LLP (in Ontario) writes about a recent Ontario decision involving guardianship of an elderly person and validity of powers of attorney in a pair of posts, one of which has a useful discussion on the admissibility of audio recordings: https://hullandhull.com/2021/08/are-audio-recordings-admissible/ and https://hullandhull.com/2021/08/considerations-for-determining-the-validity-of-powers-of-attorney-and-appointing-guardians-for-property-and-personal-care/
  2. James Steele at Robertson Stromberg (Saskatchewan) notes that every irregularity in a will does not amount to lack of capacity or undue influence of the will-maker, in the context of a recent Saskatchewan decision: https://skestatelaw.ca/2021/08/25/saskatchewan-estate-litigation-update-fraser-v-mountstephen-2021-skqb-192/
  3. Stephen Mulrain at Miller Thomson discusses what happens when there is a dispute over how to handle a deceased’s remains: https://www.millerthomson.com/en/blog/mt-estate-litigation-blog/thoughts-on-final-resting-places/
  4. Arielle Di Iulio (also at Hull & Hull LLP, Toronto) discusses an interesting Federal Court decision, in which a claimant sought to claim the CPP survivor’s pension on two separate occasions, and argued that the inability to due so would infringe upon her charter rights: https://hullandhull.com/2021/08/survivors-pension-rights-of-the-twice-widowed-woman/

Happy reading!

Repost: B.C. Court upholds $1.4M bequest to SPCA

My colleague, Georgia Barnard, (bio found here) posted on our firm blog about a recent estate litigation case.  The post can be found here.

In Henderson v. Myler 2012 BCSC 1649 (reasons for judgment found here), the B.C. Supreme Court considered whether a handwritten note was effective and changed the distribution of an estate as set out in a prior will.  The prior will provided that the SPCA would receive the residue of the estate (approximately $1.4 million).  The note provided that the SPCA would only receive $100,000.  The Court concluded that the note was not effective, and so the SPCA received the $1.4 million residue pursuant to the prior will.

A CBC news article on this decision can be found here.

As Georgia notes in her post, it is important to immediately prepare a new will or codicil if your wishes for your estate change.

B.C. Case Comment: Court Admits Unsigned Will After Will-Maker Dies Before Signing Document

It is not uncommon for people to make changes to their estate plan in the final stages of their life, whether they are ill or elderly.  Sometimes there is urgency – death may be imminent.  On occasion, someone may start to make these changes, but may die before the changes have been finalized.  What happens when it is known that someone wants to make certain changes to their estate plan, starts the process to make those changes, but does not complete the changes (for example by taking the final step of signing a new will)?

This was the case in the recent B.C. Supreme Court decision of Bishop Estate v. Sheardown 2021 BCSC 1571. In Bishop Estate, the deceased had given instructions to a lawyer to prepare her will, she reviewed the draft will, and she made a few minor clarifications.  All that remained was to have the will signed and witnessed.  Unfortunately, as a result of the COVID-19 pandemic, the deceased cancelled her appointment with her lawyer to execute her new will.  She then died without ever signing her new will.

The deceased had a previous will, which named her now-deceased husband as beneficiary, or in the alternative the Kelowna General Hospital Foundation.  Under the new, unsigned will, the primary beneficiaries were the deceased’s nephew and niece-in-law.

A will must meet certain requirements to be valid, including the requirement that the will be in writing, signed by the will-maker in the presence of at least two witnesses.

However, in B.C. a court may cure deficiencies in an otherwise invalid will, and order it to be effective.  It must be established that the invalid document is (1) authentic, and (2) represents the deceased’s deliberate or fixed and final intentions regarding the disposal of her property upon death.  This is a fact specific inquiry.  I have previously discussed other cases that apply the test here.

In Bishop Estate, the Court considered the background as to why the the deceased was making changes to her estate plan in 2020.  Since the prior will was made in 2014, the deceased’s husband had died, and her nephew and his wife (the new beneficiaries) had moved to Kamloops and had become a regular part of her life.  The deceased gave detailed and specific instructions to her lawyer that she wanted to name her nephew and his wife as beneficiaries and remove the Kelowna General Hospital Foundation.

The Court concluded that the unsigned will represented the deceased’s fixed and final intentions.  The Deceased cancelled her appointment with her lawyer to sign her will because she could not leave her care facility and attend at the lawyer’s office in person as a result of the pandemic.  The Hospital Foundation argued that the deceased could have signed her will remotely, which will-makers were allowed to do as a result of the COVID-19 pandemic.  They argued that the deceased did not proceed with this option because she may have changed her mind about making a new will.  The Court did not accept this argument.  There was no evidence that the deceased was aware of this option, and the failure to execute the will remotely did not undermine her new testamentary intentions.

The Court ordered that the unsigned will was fully effective and determined how the deceased’s estate would be distributed.

B.C. Case Comment: No Claim in Unjust Enrichment Arising from Contribution to Family Business

I am often contacted by the child of a deceased parent who strongly believes that they have not been treated fairly in that parent’s will (or one of their siblings is making this claim against them).  The death of a parent often brings up long-held perceptions of favoritism, unfairness and lack of appreciation. It is not unusual for a child to seek to revisit events going back years or even decades. This commonly results in wills variation claims and other estate litigation.

One “historical” claim that is sometimes brought is a claim relating to unpaid contributions to a family business. Children are often expected to contribute time and efforts to a family business with no remuneration (but they receive room and board). When those children are not treated fairly under their parents’ wills, they seek to go back and revisit the issue of the unpaid services that they provided.

This was the case in the recent B.C. Supreme Court decision of Tang v. Tom 2021 BCSC 1399. In Tang, the plaintiffs sought a variation of their mother’s will, which failed to treat her five children equally.

One of the plaintiffs (Linda) also brought a claim in unjust enrichment with respect to her work at her parents’ grocery store between 1971 and 1981. She described her assistance to her parents as “extraordinary efforts.”

The family came to Vancouver in the 1960s, when the children ranged in age from eight to 17. The family (parents and children) worked extremely hard to improve their standard of life. The Court described their work ethic as “remarkable”. The parents purchased a small grocery store with an attached home and the family moved there in 1971. All of the children except one worked part-time at the store until it was sold in 1981. None of them were paid for their work. The children also worked various other jobs, and contributed their paycheques to the “family pot” of income to pay expenses. The children received pocket money, vehicles to commute to school, and payment of most of their living and school expenses.

Linda argued that she was a pivotal figure in the success of the grocery store business. The Court held that while Linda may have made significant contribution to the store (which at times may have been greater than the contribution of her younger siblings), she tended to exaggerate the scope and scale of her contribution, while minimizing the contributions of her siblings.

The Court had to consider whether Linda’s historic contributions to the family business constituted unjust enrichment. In order to satisfy the requirements for a claim in unjust enrichment, a plaintiff must show: (1) an enrichment of the defendant (in this case her mother/her mother’s estate), (2) a corresponding deprivation of the plaintiff, and (3) an absence of juristic reason for the enrichment.

A claim in unjust enrichment can be difficult to establish in the context of a family business, as there will often be mutual benefits to family members as they function as a common unit. This was the case in Tang. The Court concluded that while the contributions by the children (and in particular Linda) may have been significant (i.e. there was enrichment), the benefits to the children (housing, food, other amenities, etc…) were also significant. As a result, Linda failed to establish a legal claim against her mother’s estate for unjust enrichment.

Linda did have a moral claim to a portion of the estate, as did her siblings, as a result of their contributions to the family business and the common family unit. However, she did not have a legal claim in unjust enrichment distinct from that of her siblings.

The deceased left an estate which included real property assessed at approximately $1.7M, and personal property (bank and investment accounts) worth approximately $775,000. Her will left her real property to two of her children (neither of which was Linda) who provided a greater degree of care in the last three years of her life. The will divided her personal property equally between her five children.

The Court varied the Will to order specific gifts of $300,000 to each of the children who provided care in the three years of the deceased’s life, with the remainder of be divided equally between the five children. This would recognize the contributions of the children when the family was a joint economic unit (which included the acquisition of the real property), but also take into account the “significant sacrifices” made by the of the two children who provided end of life care.

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

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

  1. Suzana Popovic-Montag at Hull & Hull LLP (in Ontario) discusses the considerations for a beneficiary if they are asked to sign a release before they receive a distribution from the estate: https://hullandhull.com/2021/07/if-you-have-valid-concerns-dont-sign-a-beneficiary-release/
  2. Janis Ko at Onyx Law discusses an important case in which the B.C. Courts recognized a third legal parent in polyamorous relationships: https://onyxlaw.ca/bc-court-recognizes-third-legal-parent-in-polyamorous-relationship/
  3. James Jacuta at Hull & Hull LLP (in Ontario) writes about the British Columbia Unclaimed Property Society, which returns unclaimed funds to individuals in B.C.: https://hullandhull.com/2021/07/thousands-have-unclaimed-funds-waiting-for-them/
  4. Trevor Todd at Disinherited.com discusses the test for a beneficiary to obtain standing to bring a claim on behalf of an estate, in the context of a reason B.C. Supreme Court decision: https://disinherited.com/uncategorized/s-151-wesa-leave-to-bring-action-on-behalf-of-estate/

Happy reading!

B.C. Case Comment: Surviving Business Partner not Entitled to Receive Partnership Property by Right of Survivorship

What happens when your business partner dies, in particular when the assets of the business are held by you and your partner jointly? Do you receive your deceased partner’s “half” of the business, or does it go to their estate?

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.

This issue was recently considered by the B.C. Supreme Court in Garland v. Newhouse 2021 BCSC 1291. 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 first question for the court was whether a partnership existed between the parties. The court held that there was a partnership. The deceased and Ms. Newhouse were not spouses, they each equally contributed to the purchase of the building and shared in the expenses and the rental income, with a goal to earn profit over time. This was clearly a business partnership.

Next, the court had to determine whether the presumption of right of survivorship was rebutted. As noted above, where the property in issue is partnership property, there is no presumption of right of survivorship between partners. In essence, the right of survivorship is inconsistent with the rules regarding treatment of partnership assets upon dissolution (including the death of a partner). 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.”

Ms. Newhouse was unable to provide this evidence. The court was unable to determine why the deceased and Ms. Newhouse chose to register the apartment building in joint tenancy, and there was no credible evidence that they turned their minds to the significance of registering the property in joint tenancy. 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.

It is important to keep in mind business and partnership interests when making your estate plan. Of course this dispute likely could have been avoided if there was a written agreement reflecting the terms of the arrangement between the parties.

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

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

  1. Stan Rule at Sabey Rule comments on a case from the Nova Scotia Court of Appeal which held that allowing independent adult children to apply to vary their parents’ wills (which you can do in British Columbia) does not offend the s. 7 of the Charter of Rights and Freedoms (overturning the lower court’s decision): http://rulelaw.blogspot.com/2021/06/nova-scotia-court-of-appeal-allows.html
  2. Suzana Popovic-Montag at Hull & Hull LLP (in Ontario) identifies the dangers of using an online will kit to write your will: https://hullandhull.com/2021/06/the-simplicity-of-online-will-kits-is-their-biggest-shortcoming/
  3. Janis Ko at Onyx Law discusses when the court may order an interim distribution to a beneficiary from an estate where there is an ongoing wills variation proceeding: https://onyxlaw.ca/can-beneficiaries-receive-interim-distribution-pending-wills-variation-claim/
  4. Kimberley A. Whaley at WEL Partners (Toronto) posts a link to a paper that she co-authored on the role of the medical expert in estate litigation, with a focus on claims of undue influence. A link to the blog post can be found here: https://welpartners.com/blog/2021/06/published-paper-susceptibility-to-undue-influence-the-role-of-the-medical-expert-in-estate-litigation/ The paper can be found here: https://journals.sagepub.com/doi/10.1177/07067437211020616
  5. Joanna Lindenberg at de Vries Litigation LLP (Ontario) considers an Ontario case where beneficiaries acted unreasonably by raising over 300 objections to a trustee’s accounts, and as a result the trustee was awarded $325,000 in costs: https://devrieslitigation.com/cost-consequences-of-conduct/

Happy reading!

B.C. Case Comment: Creditor Entitled to Shares that Deceased tried to Settle into a Trust

A creditors may make a claim against a debtor’s estate. However, a creditor is sometimes disappointed to find that the debtor’s estate is insolvent or has insufficient assets to satisfy their claim. The creditor may look at other steps taken by the deceased debtor to strip their estate of assets. While the courts have recognized alter ego trusts, transfers into joint tenancy, etc.. as valid estate planning tools, creditors still have remedies available if the deceased has taken steps to defeat the claims of their creditors.

In the recent case of Lau v. McDonald 2021 BCSC 1207, the B.C. Supreme Court was asked to determine who owned shares of 319344 B.C. Ltd. (“319344”) which were previously held by the deceased. A creditor of the deceased wanted to execute against the shares to satisfy a debt owed by the deceased.

The deceased’s spouse argued that she was entitled to receive the shares. She said that she was the beneficiary of an alter ego trust settled by the deceased, and that the shares were settled into the trust pursuant to a deed of gift. However, the deed did not on its face transfer shares in 319344 to the trust. Instead, the deed referred to the transfer of shares in Noramco Capital Corp. (“Noramco”), a subsidiary of 319344. The Deceased did not own any shares in Noramco, only in 319344.

The 319344 shares were valued at almost $1,900,000 at the deceased’s date of death.

The creditor of the estate took the position that the 319344 shares formed part of the estate (as opposed to the trust), so that she could claim against them to satisfy the debt owed to her by the deceased.

There was a good argument that the deed contained a drafting error, and the issue became whether there was some legal basis to fix the error, and whether the spouse was able to keep the shares and avoid execution against them by the creditor.

First, the spouse argued that the deed should be interpreted to include the 319344 shares. However, the deed stated that it transferred “all of the issued shares of Noramco Capital Corp. which are beneficially held by [the deceased] as of the date hereof.” The Court was not willing to interpret this to include shares in 319344 when the deed clearly only referred to Noramco.

Next, the spouse asked that the deed be rectified, to give effect to the true agreement of the parties. Where a written instrument does not accord with the true agreement between the parties, equity has the power to rectify the document so that it reflects the true agreement. The mistake is not in the transaction itself, but the way that the transaction has been expressed in writing. This is a discretionary remedy.

In Lau, the Court held that there was sufficient evidence to establish an agreement by the deceased to transfer “all of his known material assets” into the trust.   The deed clearly failed to reflect this agreement, since it left out the 319344 shares and instead purported to transfer Noramco shares that the deceased did not even own.

As a result, the court concluded that rectification was available. If the discrepancy was pointed out to the deceased at the time of the transaction, the deceased would have obviously agreed to the necessary revision. It was ultimately an error by the deceased’s professional advisor (lawyer) who drafted the documents. In the end, the court characterized this as a “simple drafting mistake in inserting the name of a subsidiary rather than the parent company.” Equity ought to step in and fix this mistake.

However, this was not the end of the matter. The creditor made other arguments. She sought to argue that the shares were not properly transferred, and that the court may not generally assist a claimant in enforcing an imperfect gift. However, the court held that the transfer of the 319344 shares was properly completed. She sought to argue that the transfer of the shares to the trust was a fraudulent conveyance under the Fraudulent Conveyance Act, intended to defeat her claims. The court held that the deceased did not have this intention, and so there was no fraudulent conveyance.

The creditor’s last argument was that the transfer was contrary to s. 96 of the Bankruptcy and Insolvency Act, which provides that a transfer at undervalue is void as against the trustee if it occurred within a specified period of time (which is set out in the section), and if the debtor was insolvent at the time of transfer or was rendered insolvent by it, or intended to defeat creditors. The Court in Lau held that the creditor established the test for s. 96.  The transfer of the shares rendered the deceased insolvent, even though he may not have intended to defeat his creditors.

Success on this one argument was enough for the creditor to be entitled to the shares.

B.C. Case Comment: Alleged Victim of Elder Abuse Not Forced to Undergo Further Mental Capacity Assessment

In B.C., a proceeding brought by a person under legal disability must be started by his or her litigation guardian. This often arises in the context of alleged elder abuse. A loved one may seek to remedy an incident of elder abuse (for example, undue influence), by bringing an action on behalf of the victim. However, what if the alleged victim of elder abuse denies the undue influence or other abuse, and does not want a claim to be brought on their behalf? This can be further complicated when the loved one bringing the claim on behalf of the victim ultimately benefits if that claim is successful (for example, by receiving part of the victim’s estate upon their death).

If the alleged victim insists that they have capacity to decide whether they want/need to bring a claim, and the loved one insists that they lack capacity, can the court order a medical assessment?

This was recently considered by the B.C. Supreme Court in Hambleton (Litigation Guardian of) v. Hambleton 2021 BCSC 1155.  In Hambleton, a daughter took the position that her mother suffered from severe dementia, and that she lacked capacity to make decisions regarding her financial affairs and was subject to undue influence by her other daughter (Alice).

The mother transferred title to her property to herself and Alice, and took out a reverse mortgage. Her daughter started an action, on behalf of her mother, seeking to challenge and set aside the transfer. The mother said she was capable of making her own decisions, and said that the transfer was consistent with the terms of her will made back in 2010 (where there was no suggestion of lack of capacity). The mother retained her own lawyer and applied to strike the action which was brought in her name by her daughter (and to remove her daughter as litigation guardian).

The Court had previously ordered that the mother attend a mental capacity examination at a time and place to be arranged by her care center, before any further steps were taken in the litigation. While there is a presumption that a person is capable, there was some medical evidence from 2015-2016, which indicated that the mother suffered a mental health event and was involuntarily committed to a facility. There was a gap in the evidence as to whether the mother was capable, which needed to be addressed with a medical assessment.

The mother did not arrange with her care facility to attend a medical assessment as ordered. Eventually, she was discharged from that facility. Instead, the mother unilaterally attended an assessment with a geriatric psychiatrist. The doctor concluded that the mother had mild cognitive impairment but was capable of personal financial decision making, and had testamentary capacity to sign legal documents.

The daughter took the position that the doctor’s assessment was inadequate, and sought an order that her mother undergo a more extensive medical capacity evaluation.

The Court was satisfied that the assessment was adequate. It is an invasion of an individual’s rights to require them to undergo a mental capacity assessment, and the court should not make such an order without sufficient evidentiary basis for doing so. In this case, the mother had obtained an assessment to address the Court’s concern about capacity, and requiring her to undergo a further mental capacity assessment would not be appropriate. It would be stretching the court’s parens patriae jurisdiction (the Court’s powers to make orders protecting persons under disability or potential disability) too far.

As a result, the mother had established that she had the requisite capacity, and she could proceed with her application to remove her daughter as litigation guardian (and presumably with her application to strike the claim that her daughter brought on her behalf).

A competent adult can deal with their assets during their lifetime as they see fit, and there is a presumption of competency. A court will only order a mental capacity assessment in extraordinary circumstances. A court will certainly not order an assessment as a matter of course when there are allegations of undue influence or elder abuse. This case also serves as a reminder that care needs to be taken to ensure someone is actually under a legal disability before a claim is brought on their behalf (especially when they are opposed to taking the action).

Bernard and Honey Sherman Estates Update: Supreme Court of Canada Releases Decision Allowing Public Access to Estate Files

This morning the Supreme Court of Canada released its decision on the sealing of the court files relating to the estates of Bernard and Honey Sherman, the wealthy victims of murders that remain unsolved, and that were widely reported in the media. I previous wrote about the case here, after the Supreme Court of Canada heard submissions on whether the media ought to have access to the court files.

The Supreme of Canada dismissed the appeal brought by the trustees of the estates. The Court held that the sealing orders should not have been issued by the lower court, and the files were open to the public. The decision of the Supreme Court of Canada can be found here: Sherman Estate v. Donovan 2021 SCC 25

There is a strong presumption in favor of open courts. Court openness is a constitutional guarantee. Public scrutiny can cause inconvenience and even embarrassment to those who feel that the court system has intruded on their private lives. However, the Court confirmed that this discomfort is not enough to overturn “the strong presumption that the public can attend hearings and that court files can be consulted and reported upon by the free press.”

The court confirmed that there may be exceptional circumstances which justify a restriction on the open court principle.  An applicant for a sealing order or similar relief must demonstrate that openness presents a serious risk to a competing interest of public importance. This is a high bar.  Next, the applicant must show that the order is necessary to prevent the risk, and that the benefits of the order restricting openness outweigh its negative effect.

The estate trustees in the Sherman case argued that the concerns for (1) privacy, and (2) public safety were important public interests that are at such serious risk that the files should be sealed.

With respect to privacy concerns, the respondents to the appeal argued that virtually every court proceeding requires some intrusion on privacy.  The Court held that proceedings in open court can lead to the dissemination of highly sensitive personal information, that could result in discomfort or embarrassment, or even an affront to dignify. In the latter case, an exception to the open court principle may be necessary.

However, the Court was not convinced that there was such a risk in these circumstances. The Court is not concerned with the mere fact of the dissemination of sensitive personal information – this happens in almost every court proceeding. The focus must be on the impact of the dissemination. The trustees failed to show how the lifting of the sealing order engages the dignity of the affected individuals. The Court observed that “the information in the court files about which the Trustees are concerned must be sufficiently sensitive in that it strikes at the biographical core of the affected individuals.” The trustees also failed to establish that there was serious risk of physical harm to the affected individuals.

The court did not accept that the matters in a probate file are quintessentially private or fundamentally administrative.  The information contained in the files did not reveal anything particularly private about the affected individuals. It was acknowledged that there was near certainty that the media would publish at least parts of the estate files. Again, the risk of inconvenience and embarrassment resulting from publication is not enough.

In the end, the estate files will show the type of information found in any probate file. They may shed light on the relationship between the deceased and the affected individuals, in that we will see who they named as beneficiaries of their estate, and who they trusted to administer their estate. The only difference between this case and any other probate application is the high profile murders and intense media interest which will result in a larger audience for what are, in the normal course, publicly available documents. In those circumstances, a sealing order was not appropriate.