In the recent decision of Unger Estate (Re) 2022 BCSC 189, the B.C. Supreme Court considered what happens to a beneficiary’s share of an estate when that beneficiary is convicted of murdering the deceased.  Fortunately, these are extremely rare circumstances (rare enough to be reported in the media).  However, the case did give the Court an opportunity to discuss what happens when a gift cannot take effect for any reason, which is not as rare (for example, a beneficiary dies before the will-maker).

In Unger, the deceased had two sons. She made a will leaving her estate to her sons in equal shares. The will further provided that if a child predeceased her but left children their own, then those children (i.e. the deceased’s grandchildren) shall receive their parent’s share. In the alternative, any part of the estate that did not pass to one of the deceased’s children or grandchildren was to be divided equally between two charities.  At the time of her death, the deceased’s estate was worth approximately $860,000.

One of the deceased’s sons entered a guilty plea to the charge of second degree murder of his mother. He admitted to his role in causing her death, and was sentenced to life imprisonment with eligibility for parole after ten years.

In Canada, there is a rule of public policy which excludes the person responsible for another person’s death of taking any benefit. The son presumably was aware of this and agreed to voluntarily disclaim any entitlement to his mother’s estate.  There are case authorities which suggest that this rule extends to those who claim through the criminal’s estate.

The son who could no longer inherit has a daughter, who was born eleven days after his mother’s death.

The issue for the court was who would receive the son’s share of the estate: his daughter, or the two charities who were named as alternate beneficiaries? The trustees sought advice and direction from the court.

There was some evidence that the Deceased’s relationships was both sons had “eroded”, and she was considering changing her will to provide for her grandchildren. However, this was irrelevant to the issue before the Court because she did not actually change her will.  The Court looked at the deceased’s intentions in making the will.

The Court concluded that the son’s portion of the residue passed to his daughter. The clear intent of the deceased in the will was that if one of the deceased’s children predecease her, any children of that child were to receive the deceased child’s share.  In this case, the son’s daughter was an “alternative beneficiary” of the gift to the son as contemplated by s. 46 of the Wills, Estates and Succession Act which provides as follows:

When gifts cannot take effect

46   (1) If a gift in a will cannot take effect for any reason, including because a beneficiary dies before the will-maker, the property that is the subject of the gift must, subject to a contrary intention appearing in the will, be distributed according to the following priorities:

(a) to the alternative beneficiary of the gift, if any, named or described by the will-maker, whether the gift fails for a reason specifically contemplated by the will-maker or for any other reason;

(b) if the beneficiary was the brother, sister or a descendant of the will-maker, to their descendants, determined at the date of the will-maker’s death, in accordance with section 42 (4) [meaning of particular words in a will];

(c) to the surviving residuary beneficiaries, if any, named in the will, in proportion to their interests.

(2) If a gift cannot take effect because a beneficiary dies before the will-maker, subsection (1) applies whether the beneficiary’s death occurs before or after the will is made.

As a result, the granddaughter was first in priority for distribution of her father’s share.  The headline from the Vancouver Sun article summarizes a concern with this: “Court grants half of murdered Chilliwack woman’s estate to her killer son’s daughter.”

There were also accounts with direct beneficiary designations made in favor of the deceased’s two sons (i.e. which would pass outside of the estate and not be dealt with in the will). The benefits which otherwise would have been designated to the son who caused the deceased’s death were instead to be paid to the other son.

A person may enter into a testamentary contract, whereby they agree to leave their estate to another person in exchange for some consideration, for example services that the other person had provided or would subsequently provide.  This creates a binding agreement, and the party no longer has the ability to change the named beneficiary in their estate plan without breaching the agreement.

These agreements can be difficult to prove.  Testamentary autonomy is “a deeply entrenched common law principle,” and this type of agreement deprives a person of their testamentary autonomy (albeit for consideration).

The B.C. Supreme Court recently considered the existence of a testamentary contract in Angelis v. Siermy 2022 BCSC 31.  In Angelis, the court considered whether a childless aunt was obligated to leave her estate to one of her nieces.  In 2002, the aunt executed estate documents that would leave most of her substantial estate to the niece (the plaintiff).  In 2011, the aunt executed a subsequent will changing her main beneficiary to a different niece.

The plaintiff claimed that she had an oral contract with her aunt, whereby her aunt promised to leave the bulk of her estate to the plaintiff in exchange for the plaintiff providing years of unpaid service to the aunt and her company.  She alleged that the changes to the estate plan in 2011 resulted in a breach of that agreement.

The Court observed that this was an unusual case because the will-maker was still alive and in a position to defend the litigation.  She denied the existence of any agreement to leave her estate to the plaintiff.

The plaintiff was the only person who claimed that the agreement existed.  There were no collateral witnesses to confirm her position.

The plaintiff relied upon three letters, allegedly written by the aunt, which allegedly explained the aunt’s reasons for her estate planning decisions.  The aunt admitted that she wrote the first letter (which does not mention any agreement), but denied drafting or signing the second and third letter.

The court found no evidence that supported the existence of a testamentary contract in this case.  Instead, the evidence suggested that no such agreement existed.

The court considered the three letters in great detail (including expert evidence on ink and handwriting analysis).  The court focused on the content of the letters, and concluded that the plaintiff forged the second and third letters.  The plaintiff’s claim in breach of contract was dismissed.

The plaintiff also brought a claim in unjust enrichment, in the event there was no contract.    However, unjust enrichment is an equitable remedy, and a party who seeks a equitable remedy must come to court with clean hands.  In this case, the plaintiff’s claim in unjust enrichment was barred as a result of her forgery of the two letters.  In the alternative, the plaintiff provided any services with donative intent, and further she was compensated for her services.

In estate litigation, spouses have certain rights and available remedies. If there is a will, the spouse of the deceased is entitled to bring a claim to vary the will if it does not make adequate provision for the surviving spouse. If there is no will (i.e. an intestacy), then the spouse is entitled to a preferential share of the estate.

It is increasingly common to see the issue of standing, i.e. whether a person is actually a “spouse,” make its way before the B.C. Courts. I have previously written on this issue here.

The B.C. Court of Appeal considered this issue again in the recent decision of Mother 1 v. Solus Trust Company Limited 2021 BCCA  461.  “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.

The deceased died in 2015 without a will. His Canadian estate was estimated to be worth up to $21 million. In British Columbia, if someone dies without a will and leaves a spouse and surviving descendants, then the spouse will receive the household furnishings, and a preferential share of the estate. If all of the descendants are descendants of the deceased and the spouse, then the spouse gets the first $300,000. If the descendants are not also the descendants of the spouse, then the spouse gets the first $150,000. The residue of the estate is then divided (1) one half to the spouse, and (2) one half to the deceased’s descendants.

In this case, the deceased had five children with five different women. He did not marry any of the women. He spent time with all of them, and provided them with various levels of financial support and expensive gifts. There was overlap between the relationships. He was described by the court as living a “playboy” lifestyle. As a result of the somewhat sensational facts, this decision did attract some media attention.

Mother 1 did not know about the other four women until after the deceased’s death.  The trial judge observed that there was no evidence of sexual intimacy between Mother 1 and the deceased for years before his death.  While they referred to each other as “husband” and “wife”, the deceased used these terms with two of the other women with whom he had children.  While the deceased supported Mother 1, he did the same with the other women.  The deceased had no intention to live in a marriage-like relationship with Mother 1.

The B.C. Supreme Court concluded that there was no marriage-like relationship between Mother 1 and the deceased. In the alternative, if such a relationship did exist, it was terminated by the deceased.

Mother 1 appealed this decision.

Two persons are spouses of each other for the purpose of the Wills, Estates and Succession Act if they were married to each other, or had lived with each other in a marriage-like relationship for at least two years. Two persons cease to be spouses of each other if, in the case of a marriage-like relationship, one or both persons terminate the relationship.

The Court of Appeal confirmed that the requisite two years of a marriage-like relationship need not immediately precede the intestate’s death.   However, the persons must remain spouses at the time of the death in order to advance a claim. If the parties ceased to be spouses before one party’s death because the marriage-like relationship was “terminated” by one of them, there will be no legal entitlement to advance a claim against the estate as a “spouse”.

This is useful general guidance from the Court of Appeal for persons seeking to bring claims on the basis that they were a “spouse” at the date of death, but it was of no use to Mother 1 because the Court of Appeal was satisfied that Mother 1 and the deceased were never in a marriage-like relationship.

The decision also shows the uphill battle in appealing a finding by a trial judge about spousal status. The trial judge has heard all of the evidence and is in the best position to assess credibility and make the necessary findings to determine whether a spousal relationship exists. The findings are entitled to a considerable degree of deference, and that is what happened in Mother 1.

The trial judge observed that the definition of a “marriage-like relationship” is an “elastic one”, which requires a multi-faceted analysis. There are numerous factors to consider. The Court of Appeal held that it would be inappropriate to re-weigh 14 days of trial evidence and substitute its view of the evidence. Credibility played an important role in the assessment of the evidence, and the trial judgeis in a far better position to make this assessment. The trial judge properly instructed himself on the legal test for a marriage-like relationship, and then considered and applied that test in a “fact-intensive case in which credibility played an important role.”

The decision also includes an interesting discussion about sealing orders and publication bans in estate litigation matters. The Court referred to the recent decision of the Supreme Court of Canada in Sherman Estate v. Donavan 2021 SCC 25, which I have previously discussed here. The Court held that the risks alleged in Mother 1 (as the basis for a sealing order) are risks faced by all individuals who find themselves and their children involved in appeals that proceed in open court and involve claims to substantial sums of money. A mere assertion of harm is not sufficient. The test for a sealing order requires the serious risk to be well grounded in the record or the circumstances of the particular case.   The Court dismissed the application for a permanent sealing order, but the parties were at liberty to replace unredacted materials in the court file with redacted copies, in a manner consistent with a publication ban.

The transfer of property into joint ownership, whether it be real property, bank accounts, or other assets, is a common estate planning tool.  Property is often transferred into joint ownership so that it passes to the surviving joint owner outside of the original owner’s estate.  In B.C., you are permitted to put your property into joint ownership to avoid probate fees and potential wills variation claims.  However, disputes still arise with respect to what a deceased person intended when they transferred their property into joint ownership.

The B.C. Supreme Court recently considered this issue in Di Giacomo v. Di Giacomo 2021 BCSC 2313.  In Di Giamoco, the will-maker had two sons.  In 2000, he made a will dividing his estate into three equal shares, one for each of his two sons, and one for his brother.  The evidence was that he did so because (1) he appreciated that his brother provided him with assistance, and (2) he was unhappy with certain behavior of his sons.

The deceased met with a lawyer to prepare and sign the will.  At this meeting, the lawyer explained that if the deceased transferred his real property into joint ownership with his sons and his brother, then (1) he would avoid paying probate fees on this asset, and (2) his sons could not challenge his will, insofar as the real property was concerned.  The deceased transferred title to the property to himself, his sons, and his brother in joint tenancy.

In 2003, the deceased changed his will.  Under the terms of the new will, except for a $500 bequest to his wife, his estate was to be divided equally between his two sons.  His brother would no longer receive anything under his will.

The issue was whether the deceased intended to irrevocably gift the real property in 2000 to his sons and brother in equal shares, or whether the property is held in resulting trust for the estate.

The Court identified the three possibilities when property is put into joint tenancy:

1. The creation of a true joint tenancy, in which each of the joint tenants is an owner of the whole, with each enjoying the full benefit of property ownership, and with the ultimate survivor enjoying the whole title;
2. The creation of a resulting trust, where only one joint tenant owns the beneficial interest and the other holding the title in trust for the other with no beneficial interest; and
3. A gift of the right of survivorship, where a joint tenant is gratuitously placed on title with no beneficial interest in the property until the death of the donor.

Where there is a gratuitous transfer of land to an independent adult child, the presumption of resulting trust applies.  The donee (in this case the brother) must establish, on a balance of possibilities, that the deceased intended to make an irrevocable gift at the time of the transfer.  It should be noted that the donor may intend to gift the right of survivorship, but continue to deal freely with the property throughout their lifetime.

In Di Giamoco, the Court held that the brother failed to prove that the deceased intended to irrevocably gift the right of survivorship.  The evidence regarding the deceased’s intention was “at best, indecisive.”  The court was not convinced that the deceased was fully informed of the consequences of transferring the property into joint tenancy.  The Court observed that the deceased’s English was limited, and he was relying upon a translation of the discussions into Italian.  There was no evidence that the lawyer specifically advised the deceased that the transfer would be irrevocable.  The Court also relied upon the fact that the deceased changed his will three years later to provide for his sons and not also his brother, and the evidence indicated that he believed this would include the real property.

This case serves as a reminder that there are pitfalls when using a transfer into joint ownership as an estate planning tool.  The donor/deceased’s intentions must be clear, and they must be fully informed and understand the effect of the transaction.

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.

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.

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.

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.