B.C. Case Comment: Lost or Misplaced Will – Presumption of Revocation Rebutted

A will-maker can revoke a will.  There are a number of ways to do so, and there is also a presumption that a will-maker revoked their will if the will was last in the will-maker’s possession and cannot be located.  If the presumption is rebutted by evidence to the contrary, a copy of the will may be submitted for probate instead of the missing original.

First, the ways to revoke a will (other than an electronic will) are set out at section 55(1) of the Wills, Estates and Succession Act [“WESA”]:

  1. By another will made by the will-maker made in accordance with WESA;
  2. By a written declaration of the will-maker that revokes all or part of a will made in accordance with WESA;
  3. By the will-maker, or a person in the presence of the will-maker and by the will-maker’s direction, burning, tearing or destroying all or part of the will in some manner with the intention of revoking all or part of it; or
  4. By any other act of the will-maker, or another person in the presence of the will-maker and by the will-maker’s direction, if the court determines under s. 58 that (a) the consequence of the act of the will-maker or the other person is apparent on the face of the will; and (b) the act was done with the intent of the will-maker to revoke the will in whole or in part.

#3 above has two elements:

  1. The will must be physically burned, torn or destroyed; and
  2. The will-maker must have intended to revoke by that destruction.

In addition to taking one of the active steps above to revoke a will, there is a common law presumption of revocation that may apply in certain circumstances, which has been described as follows:

If a Will last known to be in custody of testator is not found at his death, the presumption is that the testator destroyed it with the intention of revoking it (“animo revocandi”). However, that presumption may be rebutted by evidence, written or oral, of the facts. The strength of the presumption will depend on the character of the custody which the testator had over the Will.

Proof that the will-maker was last in possession and the Will cannot be located leads to the presumed facts of destruction and intention.  The presumption is based upon an assumption that people their important documents safe, and so if an important document like a Will is missing it is more likely than not that the testator intentionally destroyed it.

However, the presumption can be rebutted by evidence.  For example, it could be shown that the will was lost or misplaced.

This issue was recently considered by the B.C. Supreme Court in Galloway Estate (Re) 2023 BCSC 1204.

In Galloway, the deceased made a Will.  He was given the original Will and his law firm retained a copy.  The deceased had no children and no spouse at the time of his death.  Both his parents were deceased and he had one sister.  If there was no will and his estate passed on an intestacy, it would go to his sister.  The Will left his estate to his mother’s god-daughter (who was also named as executor).

The god-daughter argued that the Will was valid (so that she would receive the entire estate).  The sister relied upon the common law presumption of revocation, and argued that the deceased revoked the Will and died intestate (so that she would receive the entire estate).

The god-daughter performed a diligent search of all reasonable places, and no Will was located.

The Court observed that all relevant facts in a case must be considered, and they referred to the following non-exhaustive list of factors from another B.C. Supreme Court case:

  • whether the terms of the will are reasonable;
  • whether the deceased continued to have good relationships with the beneficiaries under the will up to the date of death;
  • whether personal effects of the deceased were destroyed prior to the search for the will being carried out;
  • the nature and character of the deceased in terms of taking care of their personal effects;
  • whether there were any dispositions of property that support or contradict the terms of the will;
  • statements made by the testator confirming or contradicting the terms of distribution set out in the will;
  • whether the deceased was of the character to store valuable papers and whether the deceased had a safe place to store papers;
  • whether there is evidence that the deceased understood the consequences of not having a will, and the effect of an intestacy; and
  • whether the deceased made statements indicating the deceased had a will.

The Court in Galloway held that the presumption of revocation was rebutted.  It was more likely than not that the Will was lost or misplaced by the Deceased, or accidently disposed of by the specialty trauma cleaning company that cleaned the deceased’s property to make it safe to access after death (the deceased having been discovered approximately six weeks after his death).

The Court considered the various facts, but a key factor was that the family had been in previous litigation, in which the deceased was “against” his sister.  If the deceased died without a will, this would give his sister the very property that the litigation was conducted to reclaim.  If he died intestate, then his sister would be relieved of her obligation to pay special costs in that prior litigation, but the deceased had been actively pursuing payment of the cost awards by his sister at his death.

The Court pronounced the force and validity of the Will in solemn form, and ordered that a copy of the Will be admitted to probate.

This case illustrates the complications that may arise if the original will cannot be located.  Of course this would have been avoided if the deceased had kept his original in a safe place, and had advised someone of the location of the original will.

B.C. Case Comment: Court Varies Will that Makes Equal Provision for Will-maker’s Children

You cannot assume that if you leave your estate to your children in equal shares, then the court cannot or will not vary it.  Making equal provision for your children in your will does not mean that the will is immune from a successful wills variation action.  There may be good reason to make greater provision for one child over the other(s), and the child who claims they ought to have received more may successfully bring an action to vary your will to receive a larger share of the estate than their siblings.

This was the case in the recent B.C. Supreme Court decision of Rawlins v. Rawlins 2023 BCSC 466.  In Rawlins, the deceased had three sons.  Her will provided that if she survived her husband (which she did), her estate was to be divided equally between her three sons.  The estate was worth approximately $2.5M.

The plaintiff (one of the sons) brought an action to vary his mother’s will, so that he received a larger share of the estate than his brothers.

In B.C., a spouse or child of a will-maker may bring an action to vary a will if it does not make just and adequate provision for them.  When deciding a wills variation claim, the court must consider (1) whether the will properly accounts for the legal duties owed to the spouse and children during the will-maker’s lifetime, and (2) the moral duties toward the will-maker’s spouse and children.

Legal obligations include spousal support and spousal property rights, child support obligations, and, in some cases, unjust enrichment claims.  Moral obligations are society’s reasonable expectations of what a judicious spouse or parent would do in the circumstances, with regard to contemporary community standards.  The court has a wide discretion to vary a will to make proper provision, and it is a fact specific inquiry.

In Rawlins, the plaintiff argued that he had a legal claim based on unjust enrichment, and a greater moral claim.  He relied on the following grounds in support of his position that he should receive a greater share of his mother’s estate: (1) his role in contributing to and maintaining the deceased’s home; (2) his role in looking after both of his parents in their final years, and (3) his expectation of receiving the home and certain investments upon the passing of his parents, based on statements allegedly made by his parents.

With respect to legal obligations, the plaintiff argued that the deceased’s estate was unjustly enriched by (1) the care that he provided to his parents in their final years, and (2) his alleged contributions to their home.

With respect to the home, the Court held that the plaintiff failed to show that his alleged contributions to the property involved any appreciable material benefit to the estate or materially increased the value of the property.  The plaintiff paid nothing towards the acquisition of the property, or the maintenance of the property (including property taxes or insurance).  The labour that he provided was merely to (1) assist his father with renovations, or (2) provide routine upkeep.  “The most that can be said is that [the plaintiff] contributed toward the Maintenace of the property where he lived, rent free.”

However, the care that the plaintiff provided for his parents did provide a material benefit to the estate.  The plaintiff was the primary caregiver for both of his parents during their final years, and cases have recognized that services by an adult for their parent have a legally recognizable value.  If the plaintiff had not been available to provide care, his parents would have paid for these services, which would have come out of what ultimately became estate funds.  The Court held that the deceased’s estate had a legal duty toward the plaintiff, in the form of an unjust enrichment claim, based upon the care provided.

With respect to moral obligations, the plaintiff’s contributions to the property were minimal, and were not a factor in his favor.  The care that he provided for his parents formed the basis of a legal obligation (the unjust enrichment discussed above), and so the Court did not consider this factor as a separate, independent basis for a moral claim by the plaintiff.  Finally, the Court did not find a moral claim based upon the plaintiff’s alleged expectation that he would inherit a greater share based upon statements made by his parents.  The Court held that his “expectation” of inheriting certain assets was “largely the product of [the plaintiff’s] subjectively-held beliefs and sense of entitlement.”  There was no independent reliable evidence that the plaintiff was given any reason to expect that he would receive a greater share of the estate.

The defendant brothers also pointed out that the plaintiff continued to live in his parents’ house, rent free, after their deaths, and so since his mother died in 2018, the estate has paid the plaintiff’s housing costs.

The Court weighed all of the circumstances, and concluded that apart from the unjust enrichment claim, the plaintiff failed to establish that his mother’s will did not make adequate provision for him.  The Court varied the will to provide that the plaintiff would receive a gift of $115,000, less two thirds of all property taxes paid or payable by the estate for the property from 2018 to 2022.  The rest of the estate was to be divided equally as between the three sons, as provided for in the will.

This case serves as a reminder that just because you provide equally for your children in your will, there may still be a successful wills variation claim.  It is also noteworthy that this relatively modest variation was only obtained after the time and expense to the parties of an eleven-day trial.

Admitting to Probate a Document that does not meet the Formal Requirements of a Will – New B.C. Case

In B.C., there are formal requirements for making a will.  These include requirements that the will be in writing, signed at the end by the will-maker in the presence of two or more witnesses who are present at the same time, and signed by two or more of the witnesses in the presence of the will-maker (see s. 37 of the Wills, Estates and Succession Act (“WESA”).

However, the court may make an order a document be fully effective as though it was the will or part of the will of the deceased person even though it does not comply with WESA, if the court is satisfied that the document represents the testamentary intentions of the deceased person (see s. 58 of WESA).

I have previously posted about s. 58 cases here.

The B.C. Supreme Court recently set out a succinct summary of the principles to be considered on a s. 58 application in Re: Clarke Estate 2023 BCSC 103:

[39]       From the foregoing authorities, I derive the following principles:

a)  The onus in this matter is on the petitioner to prove, on a balance of probabilities, that:

i)  the document is authentic; and

ii) the document embodies the fixed and final, as opposed to irrevocable, testamentary intentions of the deceased.

b)  The factors to take into account in determining whether the document contains the testamentary intentions of the deceased include:

i)  the presence of the deceased’s signature,

ii)  the deceased’s handwriting,

iii)  witness signatures,

iv)  revocation of previous wills,

v)  funeral arrangements,

vi)  specific bequests,

vii)  the title of the documentation,

viii)  such other factors as may be relevant given the context, and

c)  the material time for determining the testamentary intentions can vary depending on the circumstances, but in many if not most cases the material time is when the document was prepared and executed.

In Clarke, the Court was presented with two documents:

  1. A document that was prepared by a lawyer or notary and dated December 22, 1994, which was properly witnessed.  This document left the residue of the deceased’s estate to the deceased’s stepdaughter; and
  2. A document that was handwritten and had only one witness, dated April 25, 2013.  This document left the residue to the deceased’s brother.

The Court concluded that the handwritten will represented the fixed and final testamentary intentions of the deceased and that it was fully effective as the will of the deceased.

The types of documents that parties seek to have declared to be effective as wills vary, as does the extent to which these documents have the characteristics you would expect to find in a “proper” will.

The handwritten document at issue in Clarke had had many of the characteristics of a will although it did not meet all formal requirements. The document was in the deceased’s handwriting, it described itself three times as the last will and testament of the deceased, and it revoked all former wills.  It was also signed by the deceased and signed by one witness.  In the circumstances, the Court was prepared to order that the handwritten document was fully effective as the will of the deceased.

It should be noted that both parties were entitled to their full costs and expenses to be paid from the estate.

B.C. Case Comment: Attorney Transfers Donor’s Assets into Trust which Mirrors Donor’s Will

A person acting under a power of attorney (the “attorney”) cannot make or change a will for the adult for whom the person is acting (the “donor”).  However, in certain circumstances, the attorney may settle a trust which mirrors the terms of the donor’s will, and then transfer the donor’s assets into the trust.  This may be done to avoid probate fees which would be payable if the assets formed part of the donor’s estate.  There may also be other advantages in administering and distributing the assets through a trust instead of an estate.

There is a further advantage, whether it is intended or unintended:  if the assets form part of the estate, then they are available for a wills variation claim.  If the assets are settled into a trust then they are not available for a wills variation claim.

A disappointed beneficiary attempted to set aside such an arrangement in the recent B.C. Supreme Court decision of Kramer v. Kramer 2023 BCSC 116.

In Kramer, Clara died leaving two children, Karen and Leanne.  Karen and Leanne were the executors of her estate, and the beneficiaries of the estate.  However, Karen was not happy with what she was to receive under the terms of Clara’s will and codicil.

Leanne held a power of attorney over Clara’s affairs.  Clara died in 2017.  In 2015, Leanne used the power of attorney to authorize the creation of an alter ego trust, transferring the majority of Clara’s assets into the trust, and appointing herself and two solicitors as trustees.  The distribution of the trust assets was to precisely mirror the terms of the will and codicil.  Karen learned of the trust after the Clara’s death.

Karen sought a variation of the deceased’s will.  However, most of the assets of the deceased were transferred during her lifetime into the Trust.  This meant that Karen must first succeed in obtaining a declaration that the trust was void, and an order transferring the assets back into the estate.  Karen brought an action to vary the will, and for an order that the disposition of property to the trust was a fraudulent conveyance, and an order that the property put into the trust is part of Clara’s estate.

The Fraudulent Conveyance Act provides that a disposition of property, if made to delay, hinder or defraud creditors and others of their just and lawful remedies, is void and of no effect against a person whose rights and obligations are or might be disturbed, hindered, delayed or defrauded.

The issue to be determined in Kramer was whether the disposition of property to the trust constituted a fraudulent conveyance.  The defendants argued that the Karen had no standing under the Fraudulent Conveyance Act, because she was not a creditor and had no rights or obligations that had been disturbed, hindered, delayed or defrauded.

A wills variation claim does not create standing as a creditor or other within the meaning of the Fraudulent Conveyance Act.  Karen accepted this, but argued that she was a creditor as a result of a loan that she made to the deceased.  Karen argued that the trust was created to avoid paying her money that was owed to her.

The Court held that Karen was a creditor of Clara in 1998 when Karen loaned money to Clara.  However, it appeared that this amount was repaid in 2012, before the trust was settled in 2015.  At the time the Trust was entered into, Karen had not provided any proof she was owed more than the monies she received in 2012, and after that she never demanded further payment for the loan or took any steps to collect any balance owing.    The Court held that Karen had been repaid, and so she was not a creditor of the deceased at the time of the transfer of assets into the trust.  Since she was not a creditor, she did not have standing under the Fraudulent Conveyance Act.

In the alternative, the Court also found there was no fraudulent intention in creating the trust.  The party claiming a fraudulent conveyance must establish that the person making the transfer of assets did so with the intent to put their assets out of the reach of creditors.  The Court in Kramer held that the trust was created for honest purposes.  It was recommended by the deceased’s tax lawyer and prepared with the assistance of counsel.  At no time during the planning and settlement of the trust did anyone discuss an outstanding debt owing to Karen.  The stated purpose of the trust (which was accepted by the Court) was to facilitate estate planning by avoiding substantial probate fees and to affect an efficient and non-confrontational administration of Clara’s estate.  Again, the distribution of the trust assets was to precisely mirror the terms of the Will and Codicil.

However, the Court declined to rule on the validity of the trust or any suggestion that Leanne acted outside her powers under the power of attorney, because that issue was not raised in the pleadings and before the Court.  Karen may seek to argue that Leanne settling the trust was outside her powers as attorney.  However, there is authority to support the position that an attorney can settle a trust on behalf of a donor when the terms of the trust mirror the terms of the donor’s will (see Easingwood v. Cockroft 2011 BCSC 1154, aff’d at 2013 BCCA 182).

B.C. Case Comment: Court Finds No Enforceable Agreement between Father and Son

I have previously written about the importance of documenting transactions between family members (for example, here and here).  Often, transactions between family members (loans, gifts, property transfers, etc…) are not documented.  This is a common occurrence in transactions between parents and children.  There are numerous cases which illustrate the importance of reducing intentions to writing.

However, the parties must also take care to properly document the agreement, and to make sure the agreement as documented is valid and enforceable.  There must be certainty of terms to create a binding agreement.  The agreement must also not be invalid as a result of the circumstances surrounding its creation.  For example, the agreement must not be unconscionable or procured by undue influence.

In the recent decision of Woods v. Woods 2022 BCSC 2269, the B.C. Supreme Court considered the enforceability of an alleged agreement whereby a son would receive his father’s property in return for the right to remain on the property, as well as a share of his son’s business.  There were some attempts made to document the agreement, but the question was whether there was an enforceable agreement.

The Facts

In Woods, the father owned a 20 acre property in Golden B.C.  He lived a manufactured home on the property, and also used the property as a junk yard.

The son developed a plan to open a tourism business on the property using Volkswagen vehicles, called “Camping in the Woods.”  He took steps to clean up the property, and made improvements to set it up for his business, in which visitors would be able to sleep in converted VW busses on the property.

The father fell behind on his mortgage payments, and the property was in danger of foreclosure.

The father and son began to discuss an arrangement whereby the son would buy the property (saving it from foreclosure) and further develop his business.

There was a meeting between the father, the son and a second son (not a party to the agreement) to formalize the plan.  The son alleged that there was a cocktail napkin agreement, which was actually written on a cocktail napkin.  The Court included a photo of the agreement in the reasons for judgment:

The father denied ever seeing a copy of the napkin agreement before the litigation, and also denied that certain writing was in his handwriting.  He said that they discussed that he would receive a 40% interest in the property, not a 10% interest.  He also said that the business was to be restricted to an acre or less of the property.

There was a subsequent draft agreement prepared for the transfer of the property.  The agreement did not discuss the father getting a share in the business.  The lawyer who prepared the agreement recommended that the father obtain independent legal advice.

The father and son both signed the agreement on a bench following the meeting with the lawyer. The father did not get independent legal advice.  The son conceded that he “urged” his father to sign, but said this was because the property was going to be foreclosed upon the next day.  In hindsight, the son said that he should have forced this father to get independent legal advice, but that his father said he didn’t have the money to pay a lawyer.

The lawyer subsequently wrote to raise concerns that the proposed transaction was unfair, or worse fraudulent, as it did not appear to address the equity in the property, for which the father ought to receive some compensation.

After signing the agreement, the father refused to transfer the property.

Relations between the father and son deteriorated.  The son attended to remove his belongings from the property, the father called the police, the son was arrested for mischief, and a no-contact order was put in place.

The son concluded that there was no way the father was going to proceed with the transfer, and did not take any steps to close the deal.

The son rented an alternative location for his business (which he says was not as attractive a location), and incurred additional expenses.  He also claimed that some of his items were still on the property, and that some of them were damaged.

The son commenced an action claiming specific performance, damages, malicious prosecution and conversion.

After the action was commenced, the father entered into an agreement to sell the property for $350,000 to another party, with the understanding that the father could continue to live in the home on the property for as long as he wishes.

There was no certainty of terms, and therefore no enforceable agreement

The first issue was whether there was certainty of terms sufficient to establish the existence of a contract.

The test that governs whether the parties have formed an enforceable contract involves answering two questions:

  1. whether the parties objectively intended to enter contractual relations; and
  2. whether they had reached agreement on essential terms that are sufficiently certain to enforce.

The court will look at whether a reasonably third-party observer would conclude from all the circumstances, including the document itself, the circumstances underlying execution, and the parties’ subsequent conduct, that the parties intended to enter into binding legal relations.  This is a fact-specific inquiry.

The Court referred to the following recent summary of the law on certainty of terms:

When [parties] agree on all of the essential provisions to be incorporated in a formal document with the intention that their agreement shall thereupon become binding, they will have fulfilled all the requisites for the formation of a contract. The fact that a formal written document to the same effect is to be thereafter prepared and signed does not alter the binding validity of the original contract.

However, when the original contract is incomplete because essential provisions intended to govern the contractual relationship have not been settled or agreed upon; or the contract is too general or uncertain to be valid in itself and is dependent on the making of a formal contract; or the understanding or intention of the parties, even if there is no uncertainty as to the terms of their agreement, is that their legal obligations are to be deferred until a formal contract has been approved and executed, the original or preliminary agreement cannot constitute an enforceable contract.

Where there is an intention to contract, the court will make a significant effort to give meaning to that agreement. However, a court cannot create an agreement on essential terms where none exists.  The fact that parties may wish to contract, or believe they have entered into a binding contract, does not make it so.

What constitutes an “essential” term will depend upon the nature of the agreement and the circumstances of the case.  The key question is whether the parties have agreed on all matters that are “vital and fundamental” to the arrangement.

In Woods, the son argued that the cocktail napkin agreement and the subsequent document prepared by the lawyer formed the contract.

However, the Court observed that there were uncertainties in the agreement, including but not limited to:

  1. If the father was entitled to a 10% stake in the son’s business, what did this mean? i.e. ownership, gross rental income, profits net of expenses, etc…
  2. Was the father actually only entitled to 10%, or was it 40% as asserted by the father?
  3. Was the son entitled to pay himself a salary before calculating the 10% (or 40%)?
  4. What remedy would the father have if the son simply abandoned his business after getting the property?
  5. What were the implications of the father not remaining sober, and what was the test for sobriety?

The Court also observed that there were contradictions between the two documents, making it impossible to read the two documents together as a single contract.  For example, the signed agreement requires that the father give up vacant possession, but he was supposed to be allowed to remain in the home on the property.

The Court concluded that that the uncertainties and the inconsistencies related to terms that were consequential, vital and fundamental.  No enforceable contract was created, and the claim in contract must be dismissed on this basis alone.

The father argued that he did not sign the cocktail napkin agreement, and that he was never given the entire other agreement before signing it.  The Court held that the father signed both documents (relying upon the evidence of his other son, a disinterested party).  However, the fact that he signed the documents did not address the issue that there was no certainty of terms  and therefore no enforcable agreement.

In the alternative, the agreement was invalid due to undue influence and was unconscionable

The father also argued that any agreement was invalid due to undue influence or unconscionability.

With respect to undue influence, there is a presumption of undue influence where there is the potential for domination inherent in the relationship itself.  Equity recognizes certain relationships that may give rise to the presumption, including parent and child.  Where the presumption applies, the party must be shown to have entered into the transaction as a result of his own “full, free and informed thought.”  This may entail showing that no actual influence was exercised in the particular transaction, that the plaintiff had independent advice, etc…

The test for unconscionability is as follows:

  1. there must be an inequality of bargaining power between the parties; and
  2. there must be an improvident bargain.

With respect to the first element, an inequality of bargaining power exists when one party cannot adequately protect their interests in the contracting process.  With respect to the second element, a bargain is improvident if it unduly advantages the stronger party or unduly disadvantages the more vulnerable party.

In Woods, the Court noted:

  1. The contracts that the son was pressuring his father to sign involved the father’s only major asset;
  2. This was a parent-child relationship, and the father was heavily reliant on his son’s advice;
  3. The father was placed under “substantial pressure and influence” from the son to sell the property to him;
  4. There was a material inequality in bargaining power.  The father was not in good health and was in a very tenuous financial position.  He was vulnerable and this created a dependency;
  5. The proposed transaction was unfair.  There was no financial analysis offered to show that the proposed terms were fair and reasonable.  There was no effort to obtain an appraisal, even though this was recommended by the lawyer;
  6. The Court did not accept that the agreement was explained to the father by the lawyer, or that it was read aloud to the father three times; and
  7. The father did not obtain independent legal advice, despite being advised to do so by the lawyer.  This was identified as a “key issue”.  The Court was confident that any independent legal advice would have resulted in a modification or clarification of the terms.

The Court concluded that there was a presumption of undue influence, that undue influence was exercised by the son over his father, and that the transaction was unconscionable.

The Court also held that if it were necessary, the son failed to satisfy or waive the condition to obtain financing, which was a fundamental term, and constituted a repudiation of the agreement.

The Court also considered claims in malicious prosecution and conversion

There were two further separate claims considered by the Court.

First, the son alleged that the father’s report of him to the RCMP when he attended at the property to pick up his items qualified as malicious prosecution.  To succeed on this claim, the son was required to prove that the prosecution was:

  1. initiated by the defendant;
  2. terminated in favour of the plaintiff;
  3.  undertaken without reasonable and probable cause; and
  4. motivated by malice or a primary purpose other than that of carrying the law into effect.

The Court held that the son failed to establish #3 and #4.  The father held title to the property and had the right to insist that the son leave the property, and the son failed to do so.

Second, the son sued for conversion of certain of his items that remained on the property.  The father did not contest that his son was entitled to attend at the property to collect certain items.  The Court did not award damages to reflect any degradation of items while they were on the property, as there was no agreement that the father would maintain or secure the son’s property.

Conclusion – the importance of properly entering into and documenting agreements between family members

This case serves as yet another example of the importance of properly documenting agreements between family members, and the importance of taking appropriate steps, including obtaining independent legal advice, to create binding and enforceable contracts.  This case would have been further complicated had the father died and then the son brought proceedings, which is often what happens in estate litigation.

BC Case Comment: Court of Appeal Affirms No Binding Agreement to Leave Estate to Niece

I previously wrote about a case in which the B.C Supreme Court found that there was no binding agreement by an aunt to leave her estate to her niece.  The case was Angelis v. Siermy 2022 BCSC 31, and the post can be found here.  The B.C. Court of Appeal has now dismissed an appeal of that decision.

A person may enter into a contract, whereby they agree to leave their estate to another person in exchange for some consideration.  However, the court in Angelis found that no such agreement existed in that case.  The case was unusual because the aunt (the will-maker) was still alive, denied the existence of any agreement, and defended against the claim.

At summary trial in the court below, the niece claimed that in exchange for providing services to her aunt, her aunt agreed to leave the bulk of her estate to the niece.  The agreement was allegedly formalized in 2002 when the aunt executed estate documents to this effect.  The niece said that the aunt also confirmed the agreement in three letters written by the aunt which explained her wills.  The judge had found that the second and third letters were prepared by the niece, and she had either forged her aunt’s signature or obtained the signature surreptitiously.

Then, in 2011, the aunt changed her will to leave most of her estate to the niece’s cousin (unbeknownst to the niece plaintiff/appellant).

The judge dismissed the claim that there was a testamentary contract requiring the aunt to leave the estate to her niece.  The judge also dismissed a claim by the niece in unjust enrichment on the basis that (1) the niece did not come to court with clean hands (because she forged the letters), and (2) there was juristic reason for the services that she provided (she was compensated and received benefit, and also had donative intent).

The plaintiff niece appealed the judgment, which perhaps is not surprising because the claim was that her aunt was bound to leave the bulk of her $30 million estate to her.  The appellant argued that the judge erred in failing to find a binding testamentary agreement.  She also argued that the judge erred in dismissing her unjust enrichment claim.

The appeal was dismissed.  The reasons of the B.C. Court of Appeal can be found at Angelis v. Siermy 2022 BCCA 401.

The Court of Appeal concluded that it was open to the judge in the court below to find that the two letters were not authentic.   The Court of Appeal concluded that there was no error in the judge’s reasoning or his conclusion that the parties had not entered into a testamentary contract.

The Court of Appeal did hold that the judge erred in his application of the “clean hands doctrine.”  A person who seeks an equitable remedy (such as compensation for unjust enrichment) must come to court with clean hands.  However, the clean hands doctrine is limited, and applies only in respect of misconduct “which has immediate and necessary relation to the equity sued for.”  The doctrine does not apply to all aspects of the party’s behavior known to the court.

In Angelis, the niece did not technically need to rely upon her misconduct (the forged letters) to establish a claim in unjust enrichment.  The letters related to a separate issue (whether there was a testamentary contract).  Accordingly, the clean hands doctrine did not apply as a defence to the unjust enrichment claim.

However, the claim in unjust enrichment still failed.

There are three elements to establish unjust enrichment:

  1. An enrichment;
  2. A corresponding deprivation; and
  3. The absence of a juristic reason for the enrichment.

The judge had concluded that there was a juristic reason for the services that the niece provided.  The Court of Appeal had some issues with the analysis of the juristic reason element by the judge in the court below, but ultimately refused to interfere with the judge’s finding that the niece provided services on the basis that “everyone contributes and everyone gains” from the family enterprise.

B.C. Case Comment: Vagueness in Will Invites (Unsuccessful) Challenge to Charitable Bequest

When making a will, you must take care to make sure that your intentions are clearly expressed and not left open for interpretation.  When a will is unclear or uncertain, this provides an opportunity for a disappointed beneficiary to (1) argue an interpretation which favors them over another party, or (2) argue that the will or some part of it is fatally uncertain and therefore void.

The more complicated that you make a will, the more likely these issues may arise.  These arguments tend to occur more in certain circumstances including:

  1. When a deceased decides to include a power of appointment – a power given to a person to select who shall receive an interest in property (instead of deciding who will receive the property and simply making a bequest to that person in your will); or
  2. When there is uncertainty with respect to a charitable bequest.

Both of these circumstances were present in the recent B.C. Supreme Court decision in Royal Trust Corporation Of Canada v. The Welfare Institution Of The Jews Of Athens 2022 BCSC 1454.

In her 1985 will, the deceased set up a trust for her daughter, to pay her the interest “as long as she shall live.”  The deceased further provided in her will:

If my daughter shall by her Last Will and Testament appoint sum [sic] reasonable charity within the country of Greece for such funds they shall be delivered in accordance with the directions made in such Last Will and Testament of my said daughter.

And further:

If my said daughter shall fail to so designate and appoint by her Last Will and Testament then such money shall be paid to the President for the time being of Estia of Constaninopolis, Artistiduu 7, Kolonike, Ahtens, Greece.

“Estia of Constantinipolis” is a non-profit association in Greece that operates nursing homes near Athens, Greece.

In other words, the deceased’s daughter could decide what charity she wanted to receive the rest of her trust fund after she died (the power of appointment), or the default would be Estia of Constantinipolis.

The daughter made a will in Greece in 2017, in which she explicitly exercised the power of appointment, by appointing The Welfare Institution of the Jews of Athens, dab Reston Elderly Care Centre as the beneficiary.  Then, the daughter made a will in Switzerland in 2018, in which she revoked the 2017 will, and left her entire estate to one person.  She failed to appoint a charity in Greece as the beneficiary of the trust property (i.e. she failed to exercise the power of appointment).

The trust property was approximately $500,000, and the issue was who receives it.

First, it was argued that the power of appointment was invalid.  The Court held that it was valid.  The Court then held that the 2017 will (which appointed a charity) was revoked by the 2018 Will (which didn’t appoint a charity).  As a result, the power of appointment had not been exercised, and so the default “Estia of Constantinipolis” would, on its face, receive the monies.

Next, it was argued that the Estia charity could not receive the gift because:

  1. The gift is to the President of Estia personally, or to his office on behalf of Estia;
  2. If the gift is to the President personally, it was unclear whether it was to the President in office at the time of the 1985 will (who was now dead – so the gift would have failed), or the president currently in office; or
  3. If the gift is to the current President by virtue of his office, and such is held in trust on behalf of the charity, the gift also fails because Greek law does not recognize trusts.

The Court did not accept any of these arguments.  The Court had “no hesitation” concluding that the deceased intended to make the gift to the charity.  There was no evidence that she had any relationship with the individual who was the president of Estia.  It logically followed that it was the charity, not the person, who was the intended beneficiary.

While the Court did not appear to have any difficulty interpreting the will, it is likely that the proceedings could have been avoided had the will and the power of appointment been more clearly drafted (or perhaps if no power of appointment had been included at all, and the deceased had simply named the charitable beneficiary in her will).

By drafting the will in the manner that she did, it permitted a disappointed beneficiary the opportunity to argue for an interpretation that would benefit them.  While the arguments were ultimately unsuccessful in this particular case, in some cases this may result in an interpretation that is not consistent with the deceased’s intentions, and in all cases will result in unnecessary expense to the estate.

Equitable Claims: Remedies when you expected to inherit but you didn’t

What if you expect to inherit something from someone’s estate, and when they die you discover that you were mistaken? What if you have acted to your detriment based on this expectation?

This seems to occur frequently in the case of farm properties. Someone works on a farm for little or no compensation, with an expectation that they will inherit the farm upon the owner’s death. Then, the owner leaves the farm to someone else.

It is always risky to provide services based upon an expectation, without setting the terms of the agreement or arrangement out in writing.  However, if the parties do not have a written agreement, the party who has provided services based upon an expectation to inherit, but has not ended up receiving the farm, may have potential remedies. A person in this situation may bring certain claims, including claims in:

  1. Proprietary estoppel;
  2. Unjust enrichment; and
  3. Breach of contract.

Proprietary Estoppel:

Proprietary estoppel is an equitable doctrine which enforces a promise that would not otherwise be enforced under the law. In order for proprietary estoppel to be available, the following three conditions must be present:

  1. A representation or assurance is made to the claimant, on the basis of which the claimant expects to enjoy some right or benefit over property;
  2. The claimant relies on that expectation by doing something, and that reliance is reasonable in all the circumstances; and
  3. The claimant suffers a detriment as a result of this reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on their word.

There must be a promise one might reasonably expect to be replied upon by the person to whom it was made.

If these conditions are met and there is an equity which needs to be recognized, then the court must craft a remedy to do justice between the parties.

Unjust Enrichment:

Unjust enrichment is another equitable doctrine. A claimant must establish three elements:

  1. The respondent was enriched;
  2. The claimant suffered a corresponding deprivation; and
  3. The respondent’s enrichment and the claimant’s corresponding deprivation occurred in the absence of a juristic reason.

Breach of Contract:

Parties may enter into an agreement with a term requiring one party to make a will to the other party.  As long as the other elements of a contract are present (i.e. offer, acceptance, consideration, etc…), this type of agreement is enforceable in B.C. Further, the party expecting to benefit from such an agreement does not have to wait until the other party’s death before commencing an action, if the beneficiary becomes aware that the other party no longer intends to abide by the terms of the agreement. I previously wrote about a recent B.C. case on this issue, found here.

Recent B.C. Case – Party Expecting to Inherit Farm does not Receive it:

The B.C. Supreme Court recently considered a claim to a farm on the basis of proprietary estoppel and unjust enrichment in Kennedy v Marcotte Estate 2022 BCSC 1486.

In Kennedy, the plaintiff thought he would inherit the deceased’s farm for much of his life. The plaintiff’s family had been friends with the deceased for many years (the deceased never married, and did not have any children of his own). The plaintiff was a commercial fisherman, but when he was not fishing he would assist the deceased at the farm.

The deceased made comments which the plaintiff understood to mean that the farm would be his after the deceased’s death. However, the deceased in fact left the will to a neighbour and close friend. The plaintiff found out about this while the deceased was still alive. He tried to convince the deceased to change his will, but this did not happen.

With respect to the claim in proprietary estoppel, the plaintiff relied upon various representations which he said gave him an expectation that he would inherit the farm:

  • In the 1970s, the plaintiff’s mother told him that the deceased put the farm in the names of the plaintiff and his three siblings;
  • From 1979-2004, annually, the deceased said that anybody who works on the deceased’s farm will get a piece one day;
  • From 1980-2000 (every two years), the deceased mentioned a man who inherited a farm from a woman who willed the property to him as an expression of gratitude for the work he did on the farm;
  • In 2004, the deceased said that he was changing his will to provide that one individual will inherit the farm (the plaintiff wrongly assumed that this person was him);
  • 2004-2018 (yearly), the deceased says that he hopes that the plaintiff is ready “to fight for the farm one day”; and
  • 2015 or 2018, Mr. Marcotte made a non-verbal gesture (pointing) with a friend which suggested that the plaintiff would inherit the farm.

The court accepted that the above representations were made, and that the plaintiff interpreted them to mean that the deceased would give the farm or part of it to the plaintiff in his will. The court also found that the plaintiff took action motivated partly upon his reliance on these representations, by working on the farm, and refraining from seeking formal paid employment when he was working on the farm.

However, the fundamental question was whether the plaintiff’s reliance on the representations was reasonable. The court held that his reliance was not reasonable. None of the representations were unambiguous or “clear enough” to communicate an assurance that if the plaintiff worked for the deceased while he was not fishing, he would inherit all or part of the farm. The court referred to several other cases of proprietary estoppel and inheriting farms, where the representations were much more unambiguous.

The claim in unjust enrichment also failed. The plaintiff established that his unpaid labor was a benefit to the deceased, and that the plaintiff suffered a corresponding deprivation. However, the claim failed on third element, in that the plaintiff failed to show a lack of juristic reason for the enrichment. The juristic reason was “[the plaintiff’s] donative intention to gift his labour to Mr. Marcotte as a long-time friend, just as his father and others had done over the years.” He did not expect to be paid, although he appreciated the payments and other benefits that were provided by the deceased to express his gratitude for the assistance.

This case is an important reminder of why you should always reduce agreements of this nature to writing. If you have expectations based on representations, the representations must be clear and unambiguous, and you must be reasonable in your reliance on them. The court in Kennedy accepted that from 1979 until 2018, during the months that the plaintiff was not away fishing, he was working on the farm approximately four to six days a week, for several hours each day. However, he was not entitled to anything for this.

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

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

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