B.C. Case Comment: Person Occupying Estate Property May be Required to Pay Occupational Rent

I am often asked by clients (whether they are the executor of an estate or a beneficiary) whether a person occupying real property which was owned by the deceased and has become an estate asset must pay rent for staying in that property.

Where an estate holds real property, there will usually be a period of time before the executor or administrator is ready or able to deal with the property, whether they intend to transfer the property to the beneficiary(ies) or sell the property and distribute the sales proceeds.

This issue is straightforward where, for example, one spouse dies, and the surviving spouse is the sole beneficiary of the estate and sole occupier of the property. The surviving spouse would not pay rent to occupy the property, because any rent would ultimately go back to that spouse as the beneficiary of the estate.

However, matters are usually not that straightforward. For example, a common scenario is the death of a parent, and one of their children resides in their property (or seeks to move into the property after the parent’s death). The property will eventually be sold so that the proceeds can be distributed between the deceased’s children, but in the meantime one of the children gets the additional benefit of getting to live in the property.

Another example is where the deceased was the sole occupier of the property, and rather than leave the property vacant someone moves in. This may be one of the beneficiaries, or even the executor.

The issue may be further complicated if the person occupying the property is paying expenses relating to the property (which would otherwise be payable by the estate), or if they allege that they are occupying the property for the benefit of the estate (so that it doesn’t remain vacant).

Where someone occupies and has the benefit of property belonging to the estate, they may be required to pay occupational rent to the estate. This may take the form of a debt payable to the estate, or a set-off from their share of the estate.  The concept of occupation rent is tied to unjust enrichment, as well as trespass. To permit someone to use estate assets results in an enrichment, to the detriment of the estate. Occupational rent will be considered where there is a claim of unjust enrichment and it is just and equitable to impose the remedy.

The issue of occupational rent was recently considered by the B.C. Supreme Court in In the Matter of the Estate of Euphemia Reagh, Deceased, 2021 BCSC 1807.  In Reagh, the deceased made a will dividing her estate equally amongst her four children. One of the children (“Randy”) was named as executor.

Randy and his family lived in the basement suite of the Deceased’s residence in Burnaby for 12 years prior to the Deceased’s death. The year before her death, the Deceased moved into a care facility, but returned to the Burnaby property after a short period of time. Upon her return, Randy and his family were now occupying the main floor. Randy claimed he paid his mother $1,000 per month in rent while she was alive, and he paid this amount for the first 12 months after her death.

After her death, there was a dispute concerning the appropriate rent to be paid. For a period of time (until the property was sold), Randy increased the amount paid for rent to $2,150 per month. Randy maintained the property, and claimed it as his principal residence, saving the estate $50,000 in taxes after its sale.

The Court agreed that $1,000/month in rent was too little. While there was an email discussing rent of $3,000, there was no confirmation that this was agreed to, and so no agreement was established. While the evidence of market rent before the court was “less than perfect”, the court was satisfied that $2,000/month in rent was more appropriate. Although the court was flexible in this case, a party who is making a claim for occupational rent should bring evidence as to the appropriate amount of occupational rent (i.e. market value).

It was just and equitable in this case that the executor pay occupational rent at market value. The executor was ordered to pay $12,000 (the difference between the $1,000 paid and the $2,000 rent which was appropriate, for 12 months).

This case serves as a reminder that executors (or others) cannot expect to occupy estate property rent-free, or for below market rent. If they try to do so, then the remedy of occupational rent may be available.

B.C. Case Comment: Court Resolves Dispute Over Sentimental Item to Avoid Further Estate Litigation

When an estate is being distributed, it is not uncommon for disputes to arise over sentimental objects that belonged to the deceased, often of low or no monetary value.  On occasion, a dispute over a sentimental family heirloom may be the only truly contentious issue between the beneficiaries.  Parties may agree on the distribution of the majority of the estate (i.e. the monies, real estate, etc…), but refuse to budge on certain of the deceased’s personal possessions.  In some cases, parties may become entrenched in their positions on the distribution of a sentimental object, and that hostility may result in a much larger (more expensive) dispute over the estate.

This could have been the case in the recent B.C. Supreme Court decision in Rhodes v. Myers 2021 BCSC 2043.  In Rhodes, a will-maker made a will dividing her estate into four equal shares, with each share to be given to one of her four adult children. Two of the children were named as co-executors of the estate.

There were disputes and disagreements between the children prior to their mother’s death, which only intensified after her death.  One of the co-executors sought the removal of the other co-executor (“Donald”).  Donald consented to the relief sought, including his removal, on the condition that his brother (“Allan”) receive the deceased’s bolt ring.

The ring was made by the deceased’s husband out of a bolt. The deceased never took it off. The Court observed that it clearly had “tremendous sentimental value to the children, but no monetary value”. The bolt ring was identified by the Court as the “sticking point” in the children being able to resolve the estate issues.

The petitioner (the other co-executor, “Patti”) claimed that the deceased gave her the ring sometime in the last months of her life.

The Court held that since the ring was an asset of the estate, they had jurisdiction to deal with it, and dealing with it now may enable the court to move forward with concluding the estate without further litigation. This is consistent with the object of the Supreme Court Civil Rules of securing the just, speedy and inexpensive determination of every proceeding on its merits. The bolt ring, which has no monetary value, should be dealt with now, if it will avoid further proceedings later.

The Court considered the circumstances of the ring in detail, and concluded that the deceased intended the ring to go to Allan, and that this was well-known to all four siblings. The deceased lacked the capacity to gift the ring in the last months of her life. In this regard, the Court held that a geriatric consultation assessment was compelling. As a result, the ring was an asset of the estate, and Patti was directed to distribute it to Allan in accordance with the Deceased’s wishes.

In settling the issue of who was to receive the ring at this early stage, the Court likely assisted the parties in avoiding further time consuming and expensive estate litigation.

B.C. Case Comment: Court Refuses to Remove Sister as Trustee of Brother’s Trust

What can you do when you want to provide for your children equally, but you are concerned that one or more of your children may not be able to handle their share of your estate? If a parent has these concerns, they may decide to put a share of their estate in trust (often in a trust set out in the will itself). However, the parent must decide who will act as trustee and manage that money on behalf of their child.

One option which may seem attractive initially is to make another child the trustee. However, the result is that one sibling is in control of the other sibling’s share of the estate.   This often leads to tension, disputes, and ultimately litigation.

This was the case in the recent B.C. Supreme Court decision of Parsons v. Zaranski 2021 BCSC 2092. In Parsons, the Deceased had three children. He left his estate to his three children in equal shares, but he left one son’s share in a trust. His daughter was named as trustee of this trust. The trust was discretionary, with so much of the income and capital to be paid as the trustee decides is advisable for the care, maintenance, and education and benefit of the beneficiary during his lifetime.

Unsurprisingly, disputes arose. The beneficiary sought to remove and replace his sister as trustee. His complaints fell within the following categories;

  1. Failure to report on the activities of the trust;
  2. Failure to provide adequate funds during the beneficiary’s times of need; and
  3. Making an improper investment with trust funds from which she may derive a personal gain

The overarching concern for the court on an application to remove a trustee is whether the trustee’s conduct is putting the assets of the trust or the purposes of the trust in jeopardy. Conflict or friction between the trustee and the beneficiaries, without more, is insufficient to justify removal. The decision to remove a trustee must not be undertaken lightly, and should only be done in the clearest of cases and when it is necessary to protect the beneficiaries or the purpose of the trust.

The Court dismissed the application to remove the sister as trustee.

First, the Court found that the sister provided regular and complete reporting to her brother.

Second, the Court held that the sister responded appropriately to her brother’s requests for assistance. The case is a reminder that the exercise of discretion by a trustee pursuant to the terms of a trust is entitled to deference. In Parsons, the Court put it this way (at para. 78): “I am satisfied that Tammy could, in exercising her discretion, have paid more to William through the years, but I am also satisfied that she could have paid less.”

Finally, while the Court had some concerns about an investment made by the trustee with trust funds (it was an “error in judgment”), it was made in good faith and the trust was never at risk because the trustee would have reimbursed the trust if the investment had failed.

This case is a cautionary tale of the animosity, resentment and tension which you may create by putting one child in charge of another child’s trust. However, it also serves as a reminder to beneficiaries that animosity, resentment and tension is usually not enough, on its own, to remove a sibling as your trustee.

B.C. to Allow Electronic Wills and Remote Witnessing of Wills

The Wills, Estates and Amendment Act, 2020 will significantly change how a person may make a will in British Columbia, effective December 1, 2021.

Previously, a will had to meet all of the following requirements in order to be valid in British Columbia:

  1. It had to be in writing;
  2. It had to be signed at the end by the will-maker, or the signature at the end had be acknowledged by the will-maker as his or hers, in the presence of two or more witnesses present at the same time, and
  3. It had to be signed by two or more of the witnesses in the presence of the will-maker.

The amendments will allow for the execution of electronic wills, which are wills that:

  1. Are recorded or stored electronically, which means in a digital or other intangible form by electronic, magnetic, or optical means or by any other similar means;
  2. Can be read by a person; and
  3. Are capable of being reproduced in a visible form.

This means that as of December 1, 2021, a person can prepare and electronically sign a will, with no physical paper copy having to exist.  The amendments allow for the use of an electronic signature, and for the execution of the will to be witnessed electronically (i.e. remotely, by video).

In order to amend an electronic will, a new will must be made.

The amendments reflect some of the temporary measures implemented during the Covid-19 pandemic by way of ministerial orders, to allow for remote execution of wills. According to the Canadian Bar Association (B.C. Branch), these new changes are intended to respond to concerns raised by the public and the legal profession about a lack of flexibility in the rules regarding wills.

These changes certainly will provide greater flexibility and ability to the public to make wills, both during and outside of a pandemic.  However, as electronic wills become more common, problems may arise.

The possible existence of an electronic will creates uncertainty as to what document is actually the last will of a deceased person. Is there a more recent will stored on the deceased’s phone, tablet or laptop? Is there a document found somewhere in the deceased’s email inbox or in the cloud? Hopefully one of the witnesses to an electronic will would come forward and notify others of the existence of the document, but this may not always happen.   Moving forward, what will the expectation be on personal representatives or others to conduct searches of the deceased’s electronic devices, email inboxes, etc… for possible electronic wills?

We currently have a voluntary wills registry in B.C., which allows a will-maker to register a record of where to find the original copy of their will upon death. When dealing with an electronic will, there is no original physical copy of the document. In any event, the registry is not mandatory. This may create further uncertainty, especially when there is a physical will registered with the wills registry, but the possibility of a subsequent electronic will somewhere in the digital world that has not been registered.

If you choose to make an electronic will, you should at minimum make clear to the named executor that the document exists, and where it can be found (and ideally provide them with a copy).

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.

Recent B.C. Case Illustrates Importance of Documenting Transactions Between Family Members

All too often, transactions between family members (loans, gifts, property transfers, etc…) are not properly documented or are not documented at all. I see this repeatedly in transactions between parents and children.  The other children (i.e. the transferees’ siblings) seek to challenge the transaction after the parents’ deaths, so that the transferred asset forms part of the parents’ estates, causing fractures within the family.

This was the case in the recent B.C. Supreme Court decision in Cadwell Estate v. Martin 2021 BCSC 1089.   The Court observed:

[1] As this case shows, when a significant financial transaction is casually entered into between parents and their adult children, tragic consequences may occur, if the terms of the transaction are not clear to the members of the family at the outset, or are not properly, legally documented

In 2004, Bill and Ruth Cadwell (the parents) paid $170,000 to their daughter and her husband (the defendants). The payment was used to assist with the purchase and construction of a new house by the defendants. The house was modified to include a suite suitable for the parents.

The house was built, and the defendants and the parents moved into the house in 2005. No agreement was put in writing. Bill Cadwell died in 2007. Ruth Cadwell lived in the suite for 12 more years until she died in 2019.

The $170,000 payment lead to “considerable friction over the years” between various family members, and eventually lead to this litigation.

The plaintiff (the executor of Ruth Cadwell’s estate) claimed that the payment was an equity investment in the property, or that a resulting trust in the property was created. In the alternative, the plaintiff claimed in unjust enrichment, or for repayment of the amount as a loan, with interest.

The defendants said that the payment was a loan, which was paid off by notional payments of rent applied against the loan over the years. In the alternative, they argued that the loan claim was statute barred because the limitation period had expired.  The defendants relied upon a loan repayment schedule document initialed by Bill Cadwell. The plaintiff argued that this document was a forgery, created for the purpose of the litigation.

The Court concluded that there was no equity investment. While Ruth may have referred to the payment as an “investment”, that was not sufficient to establish that the parents were investing the $170,000 to acquire a beneficial interest in the property. The Cadwells had some business experience. They knew they were not going to be registered on title. There was no evidence of any discussions regarding proportionate ownership shares, sharing of expenses, etc…  On the evidence, the parents did not expect to have an ownership interest in the property. Instead, they expected to remain in the suite, free of charge, for some period of time, and the parents would be able to rely upon the defendants for help as needed.

The Court concluded that the parents intended the $170,000 payment to be a loan. The next issue was whether there had been repayment. The Court concluded there was no agreement for repayment by way of notional rent.

The Court held that the repayment schedule document was a forgery: “it represents the agreement that the defendants wish they had made with the Cadwells, but did not make.” It’s existence did not make sense in the circumstances, which included a conversation that Ruth surreptitiously recorded between her and one of the defendants, in which she asked for the return of her money.  The plaintiff went so far as to call an expert in computer fonts, who testified that the font used for the repayment schedule document did not reach public use until January 2007 (the defendants claimed the document was prepared in 2004).

However, the defendants were fortunate because the Court held that the claim was statute barred. The former Limitation Act applied to the claim, and so the six-year limitation period for the demand loan began to run on the day the loan was made. It should be noted that the current Limitation Period provides for a two year limitation period, which starts on the date that a demand is made.

As a result, the defendants did not have to repay the $170,000 amount due to the passage of time, even though they attempted to rely upon a forged document at trial (although they were not awarded their costs at trial due to their conduct).

There is a lesson here.  As observed by the Court:

[11]         As I am confident that everyone involved now recognizes, it would have been quite easy to document an agreement about the payment at the outset, thereby avoiding years of conflict.

Case Comment: No Executor’s Fee for Executor who Breached Fiduciary Duty

Under the B.C. Trustee Act, an executor is entitled to remuneration for administration of an estate, unless the Will states otherwise. However, executors should not expect to receive a fee regardless of their conduct. Executor misconduct, for example breach of fiduciary duty, may disentitle the executor to any fees, despite their efforts and time spent to administer the estate.

The B.C. Supreme Court recently considered executor misconduct in the context a passing of accounts and approval of executors’ fees in Zaradic Estate (Re) 2021 BCSC 1037. In Zaradic, The sole beneficiary was a friend of the deceased. The joint executors were a husband and wife, who were also friends of the deceased.  The executors sought to pass their accounts, which included payment of an executors’ fee.

The Trustee Act provides that an executor is entitled to remuneration of up to a maximum of 5% of the gross aggregate value of the estate (including all capital and income) unless the will provides otherwise. In Zaradic, the Will allowed for the executors to claim a fee up to 10%.

The criteria for determining an appropriate fee includes:

  1. The magnitude of the trust;
  2. The care and responsibility involved;
  3. The time occupied administering the trust;
  4. The skill and ability displayed; and
  5. The success achieved in the final result.

The beneficiary argued that the executors ought to be denied any fees for administering the estate by reason of their alleged breach of trust in attempting to sell the deceased’s house to their daughter for roughly 50% of its market value. The beneficiary had to commence a legal action and obtain a certificate of pending litigation to prevent the sale of the deceased’s home. The executors had also loaned their daughter $13,000 of estate monies to ensure she had enough money to complete the sale.

The executors tried to place the blame on (1) their experience with property ownership generally, and (2) a notary who allegedly advised them to take this course of action. The property eventually sold for fair market value, but the beneficiary incurred legal costs in order to make sure that this happened.

The Will provided as follows with respect to remuneration:

. . . My trustees may claim remuneration for acting as Trustees in the amount of Ten Percent (10%) of the net value of the residue of my estate to be shared equally between them, in lieu of any Executor or Trustees Fee’s.

The executors argued that this wording meant that they were entitled to a 10% fee regardless of their conduct. The Court did not agree. The Will said that the executors may “claim” for remuneration, but the amount of the fee was not fixed and had to be approved by the court if the beneficiary did not agree.

In terms of the amount of the fee, the Court concluded that the actions of the executors in relation to the attempted sale for less than market value to their daughter were “an egregious breach of their fiduciary duty,” which disentitled them to any fee.

The executors were denied any fee for their time spent administering the estate.  While there was a measure of care and responsibility involved in handling the estate, the executors’ efforts were a “dismal failure” when it came to the skill and ability displayed and the success achieved.  In other words,  all of their time and effort spent on the estate was eclipsed by their breach of fiduciary duty.

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

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

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

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

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

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

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

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

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

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

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

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

Case Comment: Estate Recovers Assets Misappropriated by Power of Attorney

Clients often contact us following the death of a family member, when they are surprised to discover how little is left in the deceased’s estate. While a capable independent adult is entitled to deplete their estate during their lifetime as they see fit, there may be concerns with elderly, incapable or otherwise vulnerable persons and “missing” assets. In the most egregious cases, there may be misappropriation of funds by a person in a position of trust, such as a person named in a power of attorney or committeeship order. After death, an estate can recover assets that are misappropriated from the deceased during their lifetime.

This was the case in the recent decision of the B.C. Supreme Court in Sarzynick v. Skwarchuk 2021 BCSC 443. In Sarzynick, the court considered a dispute between two siblings over the estate of their mother. In 2007, the mother and father made wills and also executed powers of attorney authorizing their son to act on their behalf. The father died first. When the mother died four years later, most of her assets had been depleted. The daughter argued that her brother had misappropriated large sums of money for his own use which belonged to his mother (and should form part of her estate).  The son denied this, but the court ultimately found that he was not a credible witness.

The court held that the son owed fiduciary duties as (1) executor of his father’s estate, and (2) his mother’s attorney. As attorney, he had an obligation to act in good faith in his mother’s best interests, to avoid personal gain from her property, and to account for all property.  The court held that he breached his fiduciary duties. He failed to keep (or disclose) financial records. This breach went to “the core” of the fiduciary relationship as attorney. He also breached his fiduciary duty of loyalty when he misappropriated funds for his own benefit.

The court went on to consider the appropriate remedies. This included a constructive trust over certain assets which properly belonged to the estate, and disgorgement of profits. Fortunately in this case many of the assets (monies) were held in trust, and so there was not the added complication of having to collect upon a judgment against an impecunious defendant who may have spent or hidden all of the assets that he took. The estate was entitled to recover over $440,000 from the son. The estate was also entitled to the appreciation in value of certain real property. Finally, the estate was entitled to special costs due to the son’s behavior during the litigation, which included a flagrant disregard for his disclosure obligations.

B.C. Court Intervenes to Uphold Bequest To Charity

It is common for will-makers to make bequests to charitable organizations in their wills. But what if the charity that is named as a beneficiary no longer exists at the date of the will-maker’s death? Over time, charities may be dissolved or cease to exist, change names or structures, or otherwise be replaced by successor organizations.  If a will-maker intends to make a charitable bequest, but the charity named in the will no longer exists at their death (or no longer exists in that name or form), what happens?

This issue was recently considered by the B.C. Supreme Court.  In Galloway Estate v. British Columbia Society for the Prevention of Cruelty to Animals 2021 BCSC 413, the deceased left shares of her estate to certain charitable organizations “that are in existence as at the date of [her] death,” including “Pacific Coast Public Television Association” (“PCPTA”).

PCPTA was registered as a Canadian charity so that persons could donate to the commercial-free educational channel, KCTS 9, or PBS Channel 9. The problem was that PCPTA (the beneficiary named in the will) was dissolved in 2018, and therefore that particular entity no longer existed at the deceased’s death.  KCTS also had changed its name to Cascade Public Media (“CPM”), and CPM continued to operate KCTS 9.

The executor needed directions from the court:

  1. Does the gift to benefit PBS/KCTS 9 fail because PCPTA no longer exists; or
  2. Can the PBS gift go to CPM instead?

The court applied the “cy-pres doctrine.”  The cy-pres doctrine determines what happens when property that has been dedicated to charitable purposes cannot be applied in the manner intended by the donor. Where the purposes or objects of a charitable trust have become impossible or impracticable to accomplish, the court may intervene and alter the purposes of the trust. The courts may implement modernized or modified objects that are “as near as possible” to the original purposes. The order must depart from the intentions of the settlor only to the extent required to remove the problem.

If it is not impossible or impractical (which the courts interpret broadly) to accomplish the purpose of the charitable trust, then the court cannot intervene.

In Galloway, the court concluded that the gift would go to CPM. The deceased intended to benefit the PBS channel, and CPM was now the entity that performed that role. CPM assumed responsibility for PCPTA’s obligations.

The court distinguished another case, Re Eberwein Estate 2012 BCSC 250. In that case, the deceased made a gift to a charity called “Aid to Animals in Distress,” which she donated to during her lifetime. The charity ceased to exist prior to the deceased making her will and her death. That gift was not subject to the cy-pres document (and the gift failed) because the court was unable to determine an alternative charity to which the gift should go.

If it appears that a specific charitable bequest may fail because the named charity no longer exists, in certain circumstances the court may intervene and give effect to the will-maker’s charitable intention by modifying the will to, for example, make the bequest to a successor charity, or a nearly identical charity.