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

September 2, 2022

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

  1. I was asked to provide comments for a recent article in Investment Executive: Disinherited children win big in Alberta and B.C. courts  | Investment Executive
  2. This month, the lawyers at Hull & Hull LLP (in Ontario) posted several articles on settlement in the estate litigation context, including these two articles on the requisite elements of a settlement agreement, and enforcement of settlement agreements: H&H | The Requisite Elements of a Binding Settlement (hullandhull.com) and H&H | A Deal is a Deal: Enforcing a Settlement Agreement (hullandhull.com)
  3. Brett Book at WEL Partners (Toronto) wrote on the capacity to marry: Capacity to Marry – Tanti v. Tanti | WEL Partners Blog
  4. CBC News recently published an investigative report on a case of elder abuse: ‘Who can you trust?’ (cbc.ca)

Happy reading!

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

August 19, 2022

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

August 12, 2022

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

Executor Relies Upon Presumption of Due Execution to Prove Validity of Will

August 5, 2022

When there is a challenge to the validity of a will on the basis that (1) the will-maker lacked testamentary capacity, or (2) the will-maker did not have knowledge and approval of the contents of the will, the person seeking to prove the validity of the will (the “propounder”) is assisted by the presumption of due execution.

The presumption of due execution provides that if a will is properly executed in compliance with the Wills, Estates and Succession Act (“WESA“), then it is presumed that the will-maker had knowledge and approval and testamentary capacity, subject to evidence of suspicious circumstances.  It then falls on the person challenging the validity of the will to rebut the presumption.

Section 37(1) of WESA sets out the formalities for making a will:

How to make a valid will

37   (1) To be valid, a will must be

(a) in writing,

(b) signed at its end by the will-maker, or the signature at the end must be acknowledged by the will-maker as the will-maker’s signature, in the presence of 2 or more witnesses present at the same time, and

(c) signed by 2 or more of the witnesses in the presence of the will-maker…

If the will has been validly executed, then the propounder can seek to rely upon the presumption.

The importance of the presumption of due exectuion is illustrated by the recent decision of the B.C. Supreme Court in Grace Estate (Re) 2022 BCSC 1283.

In Grace, the deceased’s father was named as executor in the will.  The deceased’s mother challenged the validity of the will, arguing that the deceased (her daughter) did not read or know the contents of the will before signing it, that she signed the will under suspicious circumstances, and that she may have lacked capacity.

At the first hearing, the court held that there was not sufficient evidence to prove that the will was read by or to the deceased.  That meant there was no presumption of testamentary capacity (another presumption available to the propounder of a will), and the father must prove both that the deceased had capacity, and that she knew and approved of the contents of the will.  The father had failed to prove the will in solemn form by way of application (on affidavit evidence), and the matter was referred to the trial list for proof in solemn form.

However, neither counsel at the first hearing advised the court of the cases discussing the presumption of due execution.  In light of those cases, the father applied for a reconsideration of the original decision.  The order arising from the original decision had not yet been entered, which meant that the original judge could hear further submissions.  The father argued (and the court agreed) that had case authorities on the presumption of due execution been brought to the court’s attention, they would have substantially altered the result.

The court exercised its discretion to reconsider its decision, and concluded that the father has the benefit of the presumption of due execution, and has proven the will in solemn form.  The will had been validly executed in compliance with WESA, and so the facts gave rise to a rebuttable presumption that the deceased knew and approved the contents of the will.  There were no suspicious circumstances.  The mother swore in her affidavit that she asked her daughter whether she had read the will, and her daughter had said “no”.  However, this was not sufficient to rebut the presumption (and was inconsistent with all of the other evidence surrounding the deceased’s intentions)

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

July 29, 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 LLP (Kelowna) and Albert Oosterhoff at WEL Partners (Toronto) both discuss a recent Supreme Court of Canada decision which concluded that taxpayers could not rely upon equitable rescission of transactions to avoid unintended tax consequences: Rule of Law: Collins Family Trust (rulelaw.blogspot.com) and Rescission Not Possible to Avoid Adverse Tax Consequences | WEL Partners Blog
  2. This month, lawyers at at Hull & Hull LLP (Ontario) posted various articles about digital assets and death, including: https://hullandhull.com/Knowledge/2022/07/digital-assets-planning-considerations-for-the-drafting-solicitor/, https://hullandhull.com/Knowledge/2022/07/digital-assets-are-we-keeping-pace/ and https://hullandhull.com/Knowledge/2022/07/apple-digital-legacy/
  3. James Steele at Robertson Stromberg (Saskatchewan) discusses a recent decision of the Saskatchewan Court of Appeal which serves as yet another reminder to put something in writing when you add a family member on title to your property (in this case, a parent adding a child to title), so that your intentions are clear: Saskatchewan Estate Litigation Update: Martin v Martin, 2022 SKCA 79 | Saskatchewan Estate Law Blog (skestatelaw.ca)

Happy reading!

B.C. Case Comment: Will Varied to give Disinherited Adult Child 30% of Father’s Estate

July 15, 2022

The B.C. Supreme Court recently considered a classic wills variation scenario:  an adult independent child from a deceased’s earlier relationship seeks to vary their parent’s will, which makes no provision for them, and instead provides for their second spouse.  It is very common to see wills variation claims in blended families.

In Pascuzzi v. Pascuzzi 2022 BCSC 907, the plaintiff was 32 years old when her father died.  Her parents had a short relationship, which ended before the plaintiff was born.  A few years later, the deceased met the person who would later become his wife, and he remained married to her until his death.  He had two children with her, and she had two children from a prior relationship.

The deceased left a will that was signed back in 1996, when the plaintiff was only nine years old.  The will provided for a trust that paid $450/month until the plaintiff turned 19 years old.  The remainder of the estate passed to the deceased’s wife.  In effect, the plaintiff was completely disinherited.  She brought a claim to vary her father’s will.

The Court went through the test for variation of a will by an adult independent child.

Wills variation claims must balance two fundamental interests: adequate, just and equitable provision for the will-maker’s spouse and children, and the will-maker’s decision to dispose of their estate as they see fit (testamentary autonomy).  In B.C., testamentary autonomy must yield to what is adequate, just and equitable.

To determine what is adequate, just and equitable, the court must look at the will maker’s legal and moral obligations.  When a wills variation claim is brought by a self-sufficient adult child with full capacity:

  1. There will usually be no legal obligation owed by the will-maker; and
  2. The moral claim will usually be more tenuous than that of a spouse or dependent child, but if the size of the estate permits, some provision for the child should be made, unless there are circumstances that would negate such an obligation.

The following circumstances are relevant when determining whether there is a moral obligation owed to an adult independent child (and the strength of that obligation):

  1. relationship between the will-maker and claimant, including abandonment, neglect, and estrangement by one or the other;
  2. size of the estate;
  3. contributions by the claimant;
  4. reasonably held expectations of the claimant;
  5. standard of living of the will-maker and claimant;
  6. gifts and benefits made by the testator outside the will;
  7. will-maker’s reasons for disinheriting;
  8. financial need and other personal circumstances, including disability, of the claimant;
  9. misconduct or poor character of the claimant; and
  10. competing claimants and other beneficiaries.

The Court in Pascuzzi went through each factor, and concluded that the deceased owed a moral obligation to the plaintiff.  Of particular relevance was the evidence that the deceased was in the course of ensuring that the plaintiff benefited from his estate.  For two or three years prior to the deceased’s death, he discussed estate planning with his wife, and agreed that the plaintiff “should get something”, although it was not clear what this would be, and of course he didn’t take steps to make a new will or otherwise benefit the plaintiff before his death.

The deceased’s wife pled that the deceased was not the plaintiff’s biological father.  However, she conceded at trial that she had no evidence to support this allegation.

In Pascuzzi, the Court did not fully accept either of the parties positions: on the one hand, that the deceased effectively abandoned the plaintiff as a child and never made an adequate effort to reconcile, and on the other hand that the deceased was a loving and caring father and any difficulties were caused by the plaintiff’s mother.  The deceased made a “terrible error in judgment” in the plaintiff’s early childhood, but over the course of time and reflection knew that he had made that error.

It appears that the estate was worth approximately $1.8 million.  The Court varied the will to provide that the plaintiff will receive 30% of the net value of the estate.

This case also serves as a useful reminder of the highly intrusive nature of wills variation litigation, especially if the matter proceeds to a trial.  The Court went through the history of the relationship between the plaintiff and her father in great detail.  The Court went so far as to quote from “an ill-advised and inappropriate letter” sent by the deceased to the plaintiff’s mother in 1992 (when the plaintiff was four years old), indicating that he would not be having the plaintiff to visit anymore.  When the Court is asked to consider the nature of the relationship between the will-maker and the person making the claim (including where there is estrangement), this often requires the Court to hear evidence on very personal and private matters, which becomes a matter of private record.

B.C. Case Comment: B.C. Court of Appeal Again Considers Whether a Claimant has Standing as a “Spouse”

July 8, 2022

When a person dies without a will and has no descendants, their spouse inherits their estate.  In order to benefit, a claimant must establish that they are indeed a “spouse.”  I continue to frequently see cases in which a person’s standing as a “spouse” is in dispute and is one of the key issues in the litigation.  This is relevant on an intestacy (dying with no will), and also for wills variation claims, which can only be brought by children and “spouses.”  This was one of the first issues that I wrote about when I started this blog, found here.  I have also wrote about it here.

The B.C. Court of Appeal recently considered this issue again in Coad v. Lariviere 2022 BCCA 222.

In Coad, the Court considered an appeal by a “spouse” from an order that the deceased died intestate and without a spouse, leaving her mother as the sole beneficiary.  The plaintiff was living in the same home as the deceased when she died, and he claimed to be in a marriage-like relationship with her at the time of her death.  The deceased’s ex-husband obtained a grant of administration with respect to a will dated August 11, 2011, while the plaintiff received a grant of administration based on an intestacy (on the assumption that he was a spouse).  The orders were in conflict.

The trial judge concluded that the deceased died intestate, but that the plaintiff was not in a marriage-like relationship with the deceased.  As a result, the deceased’s mother was the sole beneficiary of the deceased’s estate.  The plaintiff appealed the order.

A “spouse” is defined in s. 2 of the WIlls, Estates and Succession Act as follows:

2 (1) Unless subsection (2) applies, 2 persons are spouses of each other for the purposes of this Act if they were both alive immediately before a relevant time and

(a) they were married to each other, or

(b) they had lived with each other in a marriage-like relationship for at least 2 years.

(2) Two persons cease being spouses of each other for the purposes of this Act if,

(a) in the case of a 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, or

(b) in the case of a marriage-like relationship, one or both persons terminate the relationship.

(2.1) For the purposes of this Act, spouses are not considered to have separated if, within one year after separation,

(a) they begin to live together again and the primary purpose for doing so is to reconcile, and

(b) they continue to live together for one or more periods, totalling at least 90 days.

(3) A relevant time for the purposes of subsection (1) is the date of death of one of the persons unless this Act specifies another time as the relevant time.

There is no specific definition of when a marriage-like relationship exists.  The presence or absence of any particular factor cannot be determinative of whether a relationship is “marriage-like.”  There is no checklist of characteristics that will invariably be found in all marriages .  While the parties’ intentions may be important, objective evidence will also provide guidance as to whether a relationship was “marriage-like”.  Spousal relationships are many and varied.

Whether people are in a marriage-like relationship is a question of mixed fact and law, and the decision of a trial judge is entitled to deference.

The Court of Appeal held that the trial judge did not take a contextual and holistic approach, and instead applied a “checklist.”  He also placed undue emphasis on the fact that the plaintiff and the deceased did not engage in sexual relations.  The Court of Appeal allowed the appeal, and made an order that the plaintiff was in a marriage-like relationship with the deceased (i.e. was a “spouse”) and therefore received the estate.

As these claims are so fact-specific, and the result is “all or nothing” depending upon whether the claimant is a “spouse”, we can expect to continue to see this issue making its way before the courts.

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

June 30, 2022

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

  1. Albert Oosterhoff at WEL Partneres (Toronto) discusses the presumption of resulting trust in the context of beneficiary designations: https://welpartners.com/blog/2022/06/designation-of-beneficiaries-and-the-presumption-of-resulting-trust/
  2. Mohena Singh at Hull & Hull LLP (Ontario) writes about a recent Ontario case which considers trustee discretion: https://hullandhull.com/Knowledge/2022/06/when-may-a-court-interfere-with-a-trustees-absolute-discretion/
  3. Joanna Lindenberg at de Vries Litigation LLP (Ontario) discusses retrospective capacity assessments – obtaining an expert opinion after death on the issue of whether the deceased had testamentary capacity at the time they made their will: https://devrieslitigation.com/retrospective-capacity-assessments/
  4. Mohena Singh at Hull & Hull also discusses the issue of the appropriate jurisdiction when there is a global estate: https://hullandhull.com/Knowledge/2022/06/france-monaco-ontario-where-to-seek-relief-in-a-dependant-support-claim-involving-a-global-estate/
  5. Stan Rule at Sabey Rule LLP (Kelowna) identifies a great resource for issues relating to elder abuse and neglect: http://rulelaw.blogspot.com/2022/06/practical-guide-to-elder-abuse-and.html for the post, and http://ccelderlaw.ca/ for the resource

Happy reading!

Mareva Injunctions and Freezing Orders in Estate Litigation

June 24, 2022

Often there is a concern that a defendant will dissipate assets or put them out of reach of the court if they become aware of a claim against them.   A person who intends to bring a claim wants to make sure that (1) the property that is the subject of the claim is protected until a determination of the claim, and/or (2) the defendant will still have sufficient assets to satisfy the claim.

A Mareva injunction is an order which freezes the defendant’s assets, so that they cannot be disposed of or removed to a place beyond the court’s reach while proceedings are ongoing.  Preservation orders are also available to freeze and preserve the property that is the subject of a claim.

A Mareva injunction is an extraordinary remedy, because it provides the plaintiff with enforcement rights and prejudices the defendant before the court has actually determined the merits of the claim.

These orders are usually obtained ex parte, or without notice to the other party.  Otherwise, there is the risk that the defendant will removal or deal with the assets after they are served and made aware of the application but before the order is made.

Once the party against whom the order is made is served with the order, they may apply to set it aside.

There is a two-part test for granting a Mareva injunction:

  1. The existence of a strong prima facie case or a good arguable case.  This does not mean that the applicant must demonstrate that they are “bound to succeed” with their claim.  The test is satisfied if “either side might win”; and
  2. Having regard to all relevant factors in the case, whether granting an injunction would be just and convenient (the balance of convenience).

For a restraining order over property at issue in the proceeding, there is a lower threshold for #1: whether there is a substantial question to be tried.

The B.C. Supreme Court in Shakeri-Salah (discussed further below) set out the relevant factors which may be considered on the balance of convenience analysis (which factors are relevant will depend upon the case, and this is not a closed list):

  1. the residency of the defendant;
  2. enforcement rights of judgment creditors in the jurisdiction where the defendant’s assets are located;
  3. evidence showing the existence of assets within British Columbia or outside;
  4. evidence showing a real risk of the disposal or dissipation of assets to render a judgment nugatory;
  5. evidence of irreparable harm;
  6. the strength of the plaintiff’s case;
  7. the nature of the transaction giving rise to the action;
  8. the risks inherent in the transaction;
  9. the amount of the claim;
  10. the defendant’s assets;
  11. evidence that the injunction would have a material adverse effect on an innocent third party; and
  12. the history of the defendant’s conduct.

The B.C. Supreme Court recently considered Mareva injunctions and preservation orders in in the context of estate and trust litigation in Shakeri-Salah v. Estate of Ahmadi-Niri 2022 BCSC 700.

In Shakeri-Salah, the defendants sought to set aside a Merva injunction and freezing order.  The plaintiff was the widow of the deceased.  She brought an action against her husband’s estate, the trustees of a trust, corporate entities relating to her husband’s business enterprises, her two older sons, and her husband’s personal advisors.  The plaintiff alleged that as the deceased’s spouse she was entitled to a share in the assets accumulated through a joint family venture.  In the five months prior to his death, the deceased took certain steps to purportedly put assets outside the reach of the plaintiff.  He transferred assets into a trust, the beneficiaries of which were his children but not his spouse (the plaintiff).  He severed joint tenancies, commenced a family claim seeking a divorce from the plaintiff, and made a will in which the plaintiff was not a beneficiary.  All of this was done while the deceased’s health was deteriorating and he had a reduced ability to communicate.

The deceased travelled to Dubai and then Iran, where he died several weeks later.  The plaintiff alleged that her sons took their father to these countries to remove him from her and to exercise undue influence over him.  The sons said they were helping their father “escape an unhappy marriage”, and did so at his request.

The plaintiff alleged there was an unwritten trust arrangement and unwritten agreement between her and the deceased.  She claimed a constructive trust over the assets that her husband amassed during the time that they were married.

The plaintiff applied ex parte and obtained a Mareva injunction and freezing order.  The Court ordered that the assets that were the subject of the claim be frozen.  There was also an order requiring the sons and the corporate defendants to set out their respective assets.

The defendants applied to set aside the order.

One of the grounds to set aside a Mareva injunction is material non-disclosure by the applicant.  If there has been material non-disclosure by the applicant, the court may set aide the order without regard to the merits of the application.  The standard is high when a litigant comes to court on an ex parte basis.  The applicant must disclose all important aspects of the evidence because the other side is not their to make their case.  However, not every omission necessarily results in the order being set aside.

The Court in Shakeri-Salah did not agree that there was material non-disclosure.

If there has not been material non-disclosure, the court proceeds with a new hearing (a “hearing de novo”) on the merits of the application.  The applicant must again meet the test for obtaining the injunction.

In Shakeri-Salah, the defendants argued that there was no evidence of dissipation of assets.  The plaintiff argued that while there was no evidence of active dissipation, there was evidence of pre-existing intentions and steps taken by the deceased to deprive her of assets that would have been received by her as spouse and joint tenant.  The court agreed – the deceased, with the defendants’ knowledge and sometimes with their “loyal support” structured his affairs to remove assets from the plaintiff’s reach.  The court relied upon the commencement of family law proceedings, the severance of the joint tenancies, and the will excluding the plaintiff as evidence of the deceased’s intention to put assets out of the reach of the plaintiff.

The Court varied the injunction to remove the sons from the freezing order.  “Considerations of fairness and justice” did not support continuing the interlocutory relief against them personally.  The order remained in place as against the other defendants, i.e. the trustee and the corporations.

The case also includes an interesting discussion of claims for unjust enrichment brought by one spouse against the other.  A spouse who claims unjust enrichment based on a family venture need not have played an active role in a business venture that is alleged to be the product of the family venture.  The deceased’s business efforts built the family’s wealth, but the plaintiff made that possible through her role in the family, entitling her to a remedy for a proportionate share of the wealth built.

B.C. Case Comment: Applications for Standing to Bring Claims on Behalf of Estate Against Executor

June 10, 2022

What happens if you are a beneficiary and you believe that the estate ought to make a claim against the person who happens to be the executor of the estate?  This is a common scenario.  Often, the person that a will-maker chooses to be their executor is a person who was involved in their affairs during their lifetime, for example under a power of attorney.  This presents opportunity for undue influence, or for the person who later becomes executor to otherwise benefit from their position of control.  In such a case, the beneficiary will want “the estate” to investigate or pursue claims against the executor, but the executor has no incentive to investigate themselves (and is in a conflict of interest).

This is what happened in the recent B.C. Court of Appeal decision of Hoggan v. Silvey 2022 BCCA 176.

In Hoggan, the deceased divided her estate equally among her three daughters.  Two of the sister beneficiaries had concerns about cheques for substantial amounts ($150,000+) that had been made from the deceased during her lifetime to the third sister (“Lorna”) and her husband (“Ray”).  Lorna and Ray had some control over the Deceased’s finances when the cheques were written.  The matter was complicated by the fact that Ray was the executor of the estate (and Lorna was named as alternate executor).

If beneficiaries want a claim to be made on behalf of the estate against the person who is the executor or administrator of the estate, they have two options:

  1. Seek removal and replacement of the executor, with the expectation that the replacement executor will bring the claim on behalf of the estate against the removed executor; or
  2. Apply for standing to bring a claim on behalf of the estate against the executor.  This is because the executor cannot be expected to sue themselves.

I have previously written about the issue of applying for standing to bring an action on behalf of an estate here.

In Hoggan, the two sisters pursued both remedies: they applied to remove Ray as executor, and they sought standing to bring a claim against Ray (and Lorna) on behalf of the estate.

At the B.C. Supreme Court level, the chambers judge dismissed both applications.

The chambers judge refused to remove Ray as executor because the deceased had a close and trusting relationship with him and wanted him to be executor, and the estate funds were held in trust.

With respect to the application for leave to bring proceedings on behalf of an estate, the test is set out at s. 151 of the Wills, Estates and Succession Act.  If the executor will not commence proceedings on behalf of the estate, a “specified person” may apply for leave to commence proceedings on behalf of the estate.  The test is set out at s. 151(3):

(3) The court may grant leave under this section if

(a)   the court determines the specified person seeking leave

(i)    has made reasonable efforts to cause the personal representative to commence or defend the proceeding,

(ii)    has given notice of the application for leave to

(A)   the personal representative,

(B)   any other specified persons, and

(C)  any additional person the court directs that notice is to be given, and

(iii)   is acting in good faith, and

(b)   it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a specified person for the proceeding to be brought or defended.

The chambers judge held that the requirement at s. 151(3)(b) was not met, which requires that the proceedings be necessary or expedient for the protection of the estate.  To meet this requirement, three elements had to be established (as will be seen below, the Court of Appeal took a different view as to the elements required):

  1. There is an arguable case;
  2. The potential relief outweighs the inconvenience caused to the estate; and
  3. The proceeding is in the best interests of the estate.

The chambers judge held that:

  1. There was no arguable case.  There was no evidence of undue influence, only “mere allegations and suspicion”;
  2. The relief sought was outweighed by the prejudice, in light of the limited value of the estate, the lawyers’ fees to litigation the claim, and the cost and delay if the claim was pursued; and
  3. Given the substantial cost of the litigation and the weak case, it was not in the estate’s best interest to grant leave.

The two sisters appealed the dismissal of both applications.

The Court of Appeal dismissed the appeal of the dismissal of the application to removal Ray as executor.  The chambers judge did not err in the exercise of her discretion to not remove Ray at this junction.  Ray was to remain as executor.

However, the Court of Appeal allowed the appeal from the dismissal of the leave application.  The two sisters were granted leave to commence a proceeding on behalf of the estate against Lorna and Ray.

The Court of Appeal looked at the actual language of s. 151(b)(3):

(b)   it appears to the court that it is necessary or expedient for the protection of the estate or the interests of a specified person for the proceeding to be brought or defended.

The Court focused on the disjunctive “or”, which means that the section is to be read as follows:

(b)        it appears to the court that it is necessary or expedient for the protection of the estate

or

that it is necessary or expedient for the protection of the interests of a specified person for the proceeding to be brought or defended.

This means that while the best interests of the estate may be considered, they are not necessarily a factor when the interests of a specified person are raised.

With this in mind, the Court of Appeal concluded that:

  • The chambers judge erred when she concluded there was no arguable case.  Whether there is an “arguable case” is a very low threshold, and the two sisters met it in this case;
  • The chambers judge placed too much emphasis on the best interests of the estate, when the application was brought to protect the interests of a specified person, not those of the estate.
  • Ray refused to make inquiries as to the cheques (and would be in a conflict of interest if he did), and so the only way to protect the interests of a specified person (in this case, the two sisters), was to grant them leave to commence proceedings.

This case confirms that beneficiaries ought to be given the opportunity to bring claims that they wish to pursue if the claims are in their interests, even if the claims may not necessarily be in the interests of the estate as a whole.