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.

What I’m Reading: Interesting Estate Litigation Articles for December 2022

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

  1. Sara Moledina at Hull & Hull LLP (Ontario) writes about a recent Ontario decision which discusses challenges to the validity of powers of attorney: https://hullandhull.com/Knowledge/2022/12/challenging-a-power-of-attorney-for-lack-of-capacity/
  2. Brett Brock at WEL Partners (Toronto) writes about a recent Ontario Court of Appeal decision regarding interpretation of a clause in a will and the application of the “armchair rule”: Revisiting the “Armchair Rule” in Jonas v. Jonas | WEL Partners Blog
  3. Onyx Law Group published a useful primer on alter ego trusts: What is an Alter Ego Trust? (2023) | Onyx Law Group
  4. James Steele at Robertson Stromberg LLP discusses a recent Saskatchewan case in which the executors of the estate were removed due to extreme delay in administering the estate: Saskatchewan Estate Litigation Update: Nagy v. Graves, 2022 CarswellSask 590, 2022 SKKB 257 | Saskatchewan Estate Law Blog (skestatelaw.ca)
  5. Sara Moledina also discusses an interesting case where one of the witnesses to a will (who was an employee of the deceased) later refused to sign an affidavit confirming that she witnessed the deceased’s signature until her complaint regarding severance was resolved:  https://hullandhull.com/Knowledge/2022/12/witness-to-a-will-refuses-to-provide-affidavit-based-on-contentious-severance-pay/
  6. Albert Oosterhoff (also at WEL Partners) provides a detailed analysis of a United Kingdom Supreme Court case which discusses proprietary estoppel: Proprietary Estoppel: Guest v Guest | WEL Partners Blog

Happy reading and Happy New Year!

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.

What I’m Reading: Interesting Estate Litigation Articles for November 2022

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

  1. Stan Rule at Sabey Rule (Kelowna) writes about when a promise to leave someone property in your will is enforceable, with reference to an English case.  This can be compared to the recent B.C. Supreme Court case that I discussed in a post on expectations to inherit and equitable remedies found here. Stan’s post can be found here: Rule of Law: The Taciturn and Undemonstrative Men of Somerset (rulelaw.blogspot.com)
  2. Suzana Popovic-Montag at Hull & Hull LLP (Ontario) writes about the dangers of distributing an estate before obtaining a tax clearance certificate: H&H | Beware the Dangers of Distributing an Estate Without a Tax Clearance Certificate (hullandhull.com)
  3. Suzana and Geoffrey Sculthorpe (again at Hull & Hull LLP) post about how to prove a lost will: H&H | Revisiting the Rebuttable Presumption: Proving a Lost Will (hullandhull.com)
  4. Albert Oosterhoff at WEL Partners (Toronto) posts about the effect of delusions on testamentary capacity, with reference to an English case: Delusions and Testamentary Capacity | WEL Partners Blog
  5. While not an estates case, a recent B.C. Supreme Court decision made the news, in which the court cancelled a marriage annulment, after finding that the women who appeared at the original hearing (which was conducted remotely, in this case it appears by telephone) was an imposter.  The true spouse did not find out until sometime later that her marriage had been annulled by the court: https://www.cbc.ca/news/canada/british-columbia/imposter-wife-court-marriage-1.6660517

Happy reading!

Spousal Status in Estate Litigation: Who is a “Spouse” and Why Does it Matter?

A few weeks ago, I had an opportunity to speak to an audience of accountants about the issue of spousal status, and why it matters in estate litigation.  The following is a summary of my speaking notes from that presentation.

Spousal Status – Why Does it Matter?

A spouse has certain rights:

Wills Variation Rights:

Section 60 of the Wills, Estates and Succession Act (WESA“) provides that if a will-maker dies leaving a will that does not, in the court’s opinion, make adequate provision for the proper maintenance and support of the will-maker’s spouse or children, the court may, in a proceeding by or on behalf of the spouse or children, order that the provision that it thinks adequate, just and equitable in the circumstances be made out of the will-maker’s estate for the spouse or children.

While most wills variation cases in the past focused on whether a will was fair, and what variation would be just and adequate, there are now many cases which deal with the issue of standing – you must be able to establish that you are a spouse, or you cannot make a wills variation claim.

Right to receive on intestacy:

If there is no will, then WESA sets out how an estate is to be distributed on an intestacy.  If there is a spouse and no descendants, then everything goes to the spouse.  If there is a spouse and descendants, then the spouse gets the preferred share ($300,000 if all children common to both, $150,000 if not), then half to spouse, half between descendants.  If there is no spouse, then the estate goes to the descendants, or the next closest relative(s).

Clearly, whether or not a person is a “spouse” will have significant consequences on the distribution of an intestate estate.

Other Potential Claims:

“Spouses” have attempted to make other claims which seek to challenge estate plans which move assets out of the estate to avoid wills variation claims:

  • Breach of fiduciary duty – arguing that there is a duty to notify your spouse that you have not made provision in your estate plan, so they can decide whether to initiate family law proceedings – Volovsek v Donaldson, 2019 BCSC 182;
  • Good conscience constructive trust – equitable remedy.

While these claims have not yet been met with a high degree of success, the first hurdle is proving spousal status.

Who is a Spouse – Importance for Executors:

One of the tasks for an executor is to determine if a person qualifies as a “spouse” and if notice under s. 121 of the WESA must be given to that person.  This is important to start the wills variation limitation period, and to protect an executor who seeks to distribute estate assets.

Who is a Spouse?

How is a “spouse” defined in WESA:

  • Section 2 – “when a person is a spouse under this act”
    • Two persons are spouses of each other if they were both alive immediately before a relevant time (usually the date of death of one of them), and
      • They were married; or
      • They had lived with each other in a marriage-like relationship for at least two years.
    • Two persons cease being spouses of each other for the purposes of the act if:
      • In the case of marriage, an event occurs that causes an interest in family property, as defined in Part 5 [Property Division] of the Family Law Act, to arise;
      • in the case of a marriage-like relationship, one or both persons terminate the relationship.
        • This is a determination that requires the court to consider both the expressed and implied intentions of each spouse and any available objective evidence.  The courts have interpreted this section broadly.
      • Two persons are not considered to have separated if, within one year after separation:
        • they begin to live together again and the primary purpose for doing so is to reconcile, and
        • they continue to live together for one or more periods, totaling at least 90 days.

So, there are number of potential issues when considering whether someone is a “spouse”:

  1. Whether there was a marriage-like relationship at all;
  2. If there was, whether it started more than two years before death;
  3. Whether someone terminated the relationship; and
  4. Whether there was a reconciliation, and if so whether it was long enough

There is also the potential for someone to have multiple spouses under the definition of “spouse.”

Whether a Marriage-Like Relationship Exists

There is no specific definition of whether a marriage-like relationship exists.  The precise definitions of the past are no longer valid in our changing world.  Such relationships are no longer defined by financial dependence, sexual relationships or the mingling of property and finances.  There is no “checklist” of characteristics that will invariably be found in all marriages.

The Courts in British Columbia often refer to the following passage from Yakiwchuk v. Oaks 2003 SKQB 124:

Spousal relationships are many and varied. Individuals in spousal relationships, whether they are married or not, structure their relationships differently. In some relationships there is a complete blending of finances and property- in others, spouses keep their property and finances totally separate and in still others one spouse may totally control those aspects of the relationship with the other spouse having little or no knowledge or input. For some couples, sexual relations are very important – for others, that aspect may take a back seat to companionship. Some spouses do not share the same bed. There may be a variety of reasons for this such as health or personal choice. Some people are affectionate and demonstrative. They show their feelings for their “spouse” by holding hands, touching and kissing in public. Other individuals are not demonstrative and do not engage in public displays of affection. Some “spouses” do everything together – others do nothing together. Some “spouses” vacation together and some spend their holidays apart. Some “spouses” have children – others do not. It is this variation in the way human beings structure their relationships that make the determination of when a “spousal relationship” exists difficult to determine. With married couples, the relationship is easy to establish. The marriage ceremony is a public declaration of their commitment and intent. Relationships outside marriage are much more difficult to ascertain. Rarely is there any type of “public” declaration of intent. Often people begin cohabiting with little forethought or planning. Their motivation is often nothing more than wanting to “be together”. Some individuals have chosen to enter relationships outside marriage because they did not want the legal obligations imposed by that status. Some individuals have simply given no thought as to how their relationship would operate. Often the date when the cohabitation actually began is blurred because people “ease into” situations, spending more and more time together. Agreements between people verifying when their relationship began and how it will operate often do not exist.

The parties’ intentions – particularly the expectation that the relationship will be of lengthy, indeterminate duration – may be of importance in determining whether a relationship is “marriage-like”. While the court will consider the evidence expressly describing the parties’ intentions during the relationship, it will also test that evidence by considering whether the objective evidence is consonant with those intentions.

When considering whether two persons are “spouses” the court will consider:

  • The parties’ intentions, particularly their expectation of whether the relationship would be lengthy and of indeterminate duration:
  • Objective evidence of the parties’ lifestyle and interactions supporting a finding that their interactions “closely resembled those typical of married couples;
  • Whether the parties treat themselves as a family unit;
  • Whether cohabitation was coupled with romantic and sexual relations;
  • Evidence of emotional interdependence, mutual commitment, and attachment;
  • Whether the parties co-mingled assets and shared expenses; and
  • Whether the parties treated themselves as single or cohabiting for income tax purposes 

Application of Spousal Status Considerations:

Very often, we are looking at cases where the deceased’s children (or siblings, or other family members) are denying that someone was a spouse.  We see wildly different versions of events.  The claimant says they were a spouse.  The children or other persons opposing may say that the alleged “spouse” was, in fact:

  • Previously in a relationship with the deceased, but the parties broke up, an ex-partner;
  • Casually dating, may have been one of several non-exclusive partners (the deceased said “would never marry again”);
  • Roommate;
  • Caregiver;
  • Friend; or
  • Complete stranger.

A person on the cusp of potentially being a “spouse” may take a shot at a claim, with the knowledge that most claims settle.

Evidence of Spousal Status:

The Courts want evidence of intentions AND objective evidence.  This may include:

  1. Evidence of the surviving “spouse” (concern it is self serving);
  2. Evidence of Opposing parties (again, concern it is self serving)
  3. Documents – tax returns, mail, next of kin, contact forms, direct beneficiary designations;
  4. Other third party witnesses – observed the relationship, statements made to them about relationship.  This may include friends, as well as professionals – solicitor/accountant/banker.

Available Claims if Not a “Spouse”

There are fewer available claims if a person is not a “spouse,” but there are still some remedies.  The claimant does not receive on an intestacy and has no wills variation rights.  However, there may be claims in unjust enrichment or promissory estoppel, claims based on ideas of unfairness and inequity.

What I’m Reading: Interesting Estate Litigation Articles for October 2022

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

  1. Stan Rule at Sabey Rule writes about a recent B.C. decision which considers whether an interest in a discretionary trust is “family property” that should be divided in a family law action: Rule of Law: Cottrell v. Cottrell (rulelaw.blogspot.com)
  2. Artur Adamian at Hull & Hull LLP (Ontario) posts about an Ontario case which awarded interest to a beneficiary when the administration of the estate took longer than the “executor’s year”: https://hullandhull.com/Knowledge/2022/10/interest-payable-when-the-executors-year-ends/
  3. Artur Adamian also posted about a recent Ontario decision in which a residual beneficiary was ordered to pay occupational rent for occupying estate property: H&H | No Such Thing as Free Rent (hullandhull.com)
  4. Oliver O’Brien at WEL Partners (Toronto) comments on an Ontario decision which held that BMO Nesbitt Burns did not have a duty to one spouse to disclose that the other spouse removed her as a designated beneficiary: https://welpartners.com/blog/2022/10/corroboration-and-material-facts-a-look-at-the-recent-case-of-fair-v-bmo-nesbitt-burns-inc/
  5. Elaine Yu at de Vries Litigation LLP (Ontario) writes about a case dealing with a familiar dispute: two siblings who cannot get along and act together for their parent pursuant to a power of attorney: https://welpartners.com/blog/2022/10/corroboration-and-material-facts-a-look-at-the-recent-case-of-fair-v-bmo-nesbitt-burns-inc/
  6. Robertson Stomberg (Saskatchewan) posts about a recent Saskatchewan court decision in which a challenge to the validity of a will (on the basis of lack of capacity or coercion) was summarily dismissed as there was no genuine issue raised: https://skestatelaw.ca/2022/11/01/saskatchewan-estate-litigation-update-bell-v-bell-2022-skqb-198/

Happy reading!

What I’m Reading: Interesting Estate Litigation Articles for September 2022

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

  1. Stan Rule at Sabey Rule comments on a recent B.C. decision on disgorgement – awarding profits to beneficiaries when a trustee or other fiduciary profits from a breach of their obligations: http://rulelaw.blogspot.com/2022/09/chung-v-chung.html
  2. Dairen Murray at Hull & Hull LLP (in Ontario) writes on making reasonable efforts to locate a will when a loved one has died: https://hullandhull.com/Knowledge/2022/09/where-to-look-for-a-will/
  3. Albert Oosterhoff at WEL Partners (Toronto) posts on the determination of whether a gift of real property for a limited time is a licence or a life estate: https://welpartners.com/blog/2022/10/life-estate-or-licence-a-continuing-conundrum/
  4. Karen Watters at de Vries Litigation LLP (in Ontario) writes on undue influence in inter vivos transfers: https://devrieslitigation.com/undue-influence-in-inter-vivos-transfers/
  5. Aanchal Bajaj, also at Hull & Hull LLP (in Ontario), comments on a recent Ontario decision on the issue of the treatment of a beneficiary designation for an RRSP when the account was converted to an RRIF (a reminder to update beneficiary designations if converting!): https://hullandhull.com/Knowledge/2022/09/what-is-the-requirement-for-the-designation-of-income-funds-to-beneficiaries/
  6. Of note to lawyers, James Steele at Robertson Stromberg (Saskatchewan) writes about a recent Saskatchewan decision which prohibits the practice of altering an affidavit (“slip-sheeting”) after it has been sworn.  The affidavit must be re-sworn: https://skestatelaw.ca/2022/09/08/saskatchewan-estate-litigation-update-peters-estate-re-2022-skqb-186/
  7. CBC reports on Western University asking the Ontario courts for permission to remove the name of a professor from six academic prizes funded by his estate, following criticism that he espoused radical, racist views: https://www.cbc.ca/news/canada/london/kenneth-hilborn-western-university-scholarship-1.6573668

Happy reading!

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.