I was recently given the opportunity to author a post for Slaw.ca on trends in estate litigation for 2022. I identified 12 of the top trends and recurring themes in estate litigation going into the New Year. I encourage you to read it here: http://www.slaw.ca/2022/01/24/12-trends-in-estate-litigation-for-2022/
Happy reading!
A person may enter into a testamentary contract, whereby they agree to leave their estate to another person in exchange for some consideration, for example services that the other person had provided or would subsequently provide. This creates a binding agreement, and the party no longer has the ability to change the named beneficiary in their estate plan without breaching the agreement.
These agreements can be difficult to prove. Testamentary autonomy is “a deeply entrenched common law principle,” and this type of agreement deprives a person of their testamentary autonomy (albeit for consideration).
The B.C. Supreme Court recently considered the existence of a testamentary contract in Angelis v. Siermy 2022 BCSC 31. In Angelis, the court considered whether a childless aunt was obligated to leave her estate to one of her nieces. In 2002, the aunt executed estate documents that would leave most of her substantial estate to the niece (the plaintiff). In 2011, the aunt executed a subsequent will changing her main beneficiary to a different niece.
The plaintiff claimed that she had an oral contract with her aunt, whereby her aunt promised to leave the bulk of her estate to the plaintiff in exchange for the plaintiff providing years of unpaid service to the aunt and her company. She alleged that the changes to the estate plan in 2011 resulted in a breach of that agreement.
The Court observed that this was an unusual case because the will-maker was still alive and in a position to defend the litigation. She denied the existence of any agreement to leave her estate to the plaintiff.
The plaintiff was the only person who claimed that the agreement existed. There were no collateral witnesses to confirm her position.
The plaintiff relied upon three letters, allegedly written by the aunt, which allegedly explained the aunt’s reasons for her estate planning decisions. The aunt admitted that she wrote the first letter (which does not mention any agreement), but denied drafting or signing the second and third letter.
The court found no evidence that supported the existence of a testamentary contract in this case. Instead, the evidence suggested that no such agreement existed.
The court considered the three letters in great detail (including expert evidence on ink and handwriting analysis). The court focused on the content of the letters, and concluded that the plaintiff forged the second and third letters. The plaintiff’s claim in breach of contract was dismissed.
The plaintiff also brought a claim in unjust enrichment, in the event there was no contract. However, unjust enrichment is an equitable remedy, and a party who seeks a equitable remedy must come to court with clean hands. In this case, the plaintiff’s claim in unjust enrichment was barred as a result of her forgery of the two letters. In the alternative, the plaintiff provided any services with donative intent, and further she was compensated for her services.
Under the B.C. Trustee Act, an executor is entitled to remuneration for the administration of an estate, unless the Will states otherwise.
Section 88 of the Trustee Act provides that the court may allow an executor or administrator or trustee a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, of all of the assets of the estate. Determining the appropriate fee in any given case is a fact specific inquiry. The criteria for determining an appropriate fee includes: the magnitude of the trust, the care and responsibility involved, the time occupied administering the trust, the skill and ability displayed, and the success achieved in the final result. The Court must exercise its discretion to determine a reasonable fee in any given case.
However, section 90 of the Trustee Act provides that s. 88 does not apply in any case in which the allowance is set by the instrument creating the trust. In other words, a will maker or settlor may purport to take away the discretion of the Court by expressly stating the amount of remuneration payable to the executor or trustee in the Will or Trust Deed.
Will-makers and trustees must take care when drafting remuneration clauses, as ambiguities or drafting errors may result in confusion and ultimately legal proceedings. This was the case in the recent decision of the B.C. Supreme Court in Zaradic Estate (Re) 2021 BCSC 2478.
In Zaradic, the Will contained the following provision:
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 Trustee Fee’s.
This was the appeal of a registrar’s decision. I previously wrote about the registrar’s decision here. The registrar held that this language meant that the executors were allowed to make a claim for remuneration, but the amount was not fixed. The 10% was a ceiling, not an entitlement as a matter of right.
The registrar went on to hold that the executors’ efforts were a “dismal failure” and their actions “were an egregious breach of their fiduciary duty,” and as a result they were not entitled to any fee. I discuss the particulars of the egregious conduct in my previous post.
On appeal, the executors argued that the remuneration was fixed in the will at 10%. Since the remuneration was fixed, the registrar had no discretion to determine remuneration (and so should not have even considered their conduct as executors).
The beneficiary agreed that fixed fees may not be challenged, but said that the will in this case did not set a fixed fee. In the alternative, the beneficiary argued that even if the will set a fixed fee, the fee can be reduced.
The Court had to determine the intention of the testator, as expressed in the will, when read in light of any admissible extrinsic evidence. The Court held that this particular clause was “poorly drafted” and “internally inconsistent”.
The Court concluded that the better interpretation was that the remuneration was discretionary and nature, and to be set in accordance with the factors to be applied under s. 88 of the Trustee Act. The use of the words “may claim” implied the exercise of discretion and not an absolute entitlement. The burden of establishing a fixed fee was on the executors, and they failed to meet their burden of proof.
The court did not have to consider the beneficiary’s alternative argument – that a court has discretion to reduce a fixed fee (although they did observe that only a judge and not a registrar would have that jurisdiction if it existed). This is an interesting issue that may have to be considered in a future case where there is a proper fixed fee.
The appeal was dismissed. Since the clause did not create a fixed fee, the registrar was entitled to exercise discretion and order that no remuneration was payable as a result of the conduct of the executors.
Finally, the executors (not the estate) were ordered to bear the costs of the appeal, “as it was purely their own interests that they were pursuing.” This is another reminder that the Courts will not simply order that all parties are entitled to their costs payable by the estate.
Happy New Year!
I am pleased to announce that BCEstateLitigation.ca has received a 2021 Clawbie Award (Canadian Law Blog Award) for best blog!
Thank you to all of the readers of this blog for the support, and thank you to Steve Matthews and his team at Stem Legal for choosing BCEstateLitigation.ca for recognition.
A full list of the winners can be found here: https://www.clawbies.ca/2021-clawbies-canadian-law-blog-awards/ . There are a number of interesting reads and great resources on the list.
Happy reading!
The following is a roundup of noteworthy articles published this month on estate litigation and related issues:
Happy reading and Happy New Year!
In estate litigation, spouses have certain rights and available remedies. If there is a will, the spouse of the deceased is entitled to bring a claim to vary the will if it does not make adequate provision for the surviving spouse. If there is no will (i.e. an intestacy), then the spouse is entitled to a preferential share of the estate.
It is increasingly common to see the issue of standing, i.e. whether a person is actually a “spouse,” make its way before the B.C. Courts. I have previously written on this issue here.
The B.C. Court of Appeal considered this issue again in the recent decision of Mother 1 v. Solus Trust Company Limited 2021 BCCA 461. “Mother 1” asked the Court of Appeal to overturn a decision by the B.C. Supreme Court that she was not a “spouse” of the deceased.
The deceased died in 2015 without a will. His Canadian estate was estimated to be worth up to $21 million. In British Columbia, if someone dies without a will and leaves a spouse and surviving descendants, then the spouse will receive the household furnishings, and a preferential share of the estate. If all of the descendants are descendants of the deceased and the spouse, then the spouse gets the first $300,000. If the descendants are not also the descendants of the spouse, then the spouse gets the first $150,000. The residue of the estate is then divided (1) one half to the spouse, and (2) one half to the deceased’s descendants.
In this case, the deceased had five children with five different women. He did not marry any of the women. He spent time with all of them, and provided them with various levels of financial support and expensive gifts. There was overlap between the relationships. He was described by the court as living a “playboy” lifestyle. As a result of the somewhat sensational facts, this decision did attract some media attention.
Mother 1 did not know about the other four women until after the deceased’s death. The trial judge observed that there was no evidence of sexual intimacy between Mother 1 and the deceased for years before his death. While they referred to each other as “husband” and “wife”, the deceased used these terms with two of the other women with whom he had children. While the deceased supported Mother 1, he did the same with the other women. The deceased had no intention to live in a marriage-like relationship with Mother 1.
The B.C. Supreme Court concluded that there was no marriage-like relationship between Mother 1 and the deceased. In the alternative, if such a relationship did exist, it was terminated by the deceased.
Mother 1 appealed this decision.
Two persons are spouses of each other for the purpose of the Wills, Estates and Succession Act if they were married to each other, or had lived with each other in a marriage-like relationship for at least two years. Two persons cease to be spouses of each other if, in the case of a marriage-like relationship, one or both persons terminate the relationship.
The Court of Appeal confirmed that the requisite two years of a marriage-like relationship need not immediately precede the intestate’s death. However, the persons must remain spouses at the time of the death in order to advance a claim. If the parties ceased to be spouses before one party’s death because the marriage-like relationship was “terminated” by one of them, there will be no legal entitlement to advance a claim against the estate as a “spouse”.
This is useful general guidance from the Court of Appeal for persons seeking to bring claims on the basis that they were a “spouse” at the date of death, but it was of no use to Mother 1 because the Court of Appeal was satisfied that Mother 1 and the deceased were never in a marriage-like relationship.
The decision also shows the uphill battle in appealing a finding by a trial judge about spousal status. The trial judge has heard all of the evidence and is in the best position to assess credibility and make the necessary findings to determine whether a spousal relationship exists. The findings are entitled to a considerable degree of deference, and that is what happened in Mother 1.
The trial judge observed that the definition of a “marriage-like relationship” is an “elastic one”, which requires a multi-faceted analysis. There are numerous factors to consider. The Court of Appeal held that it would be inappropriate to re-weigh 14 days of trial evidence and substitute its view of the evidence. Credibility played an important role in the assessment of the evidence, and the trial judgeis in a far better position to make this assessment. The trial judge properly instructed himself on the legal test for a marriage-like relationship, and then considered and applied that test in a “fact-intensive case in which credibility played an important role.”
The decision also includes an interesting discussion about sealing orders and publication bans in estate litigation matters. The Court referred to the recent decision of the Supreme Court of Canada in Sherman Estate v. Donavan 2021 SCC 25, which I have previously discussed here. The Court held that the risks alleged in Mother 1 (as the basis for a sealing order) are risks faced by all individuals who find themselves and their children involved in appeals that proceed in open court and involve claims to substantial sums of money. A mere assertion of harm is not sufficient. The test for a sealing order requires the serious risk to be well grounded in the record or the circumstances of the particular case. The Court dismissed the application for a permanent sealing order, but the parties were at liberty to replace unredacted materials in the court file with redacted copies, in a manner consistent with a publication ban.
The transfer of property into joint ownership, whether it be real property, bank accounts, or other assets, is a common estate planning tool. Property is often transferred into joint ownership so that it passes to the surviving joint owner outside of the original owner’s estate. In B.C., you are permitted to put your property into joint ownership to avoid probate fees and potential wills variation claims. However, disputes still arise with respect to what a deceased person intended when they transferred their property into joint ownership.
The B.C. Supreme Court recently considered this issue in Di Giacomo v. Di Giacomo 2021 BCSC 2313. In Di Giamoco, the will-maker had two sons. In 2000, he made a will dividing his estate into three equal shares, one for each of his two sons, and one for his brother. The evidence was that he did so because (1) he appreciated that his brother provided him with assistance, and (2) he was unhappy with certain behavior of his sons.
The deceased met with a lawyer to prepare and sign the will. At this meeting, the lawyer explained that if the deceased transferred his real property into joint ownership with his sons and his brother, then (1) he would avoid paying probate fees on this asset, and (2) his sons could not challenge his will, insofar as the real property was concerned. The deceased transferred title to the property to himself, his sons, and his brother in joint tenancy.
In 2003, the deceased changed his will. Under the terms of the new will, except for a $500 bequest to his wife, his estate was to be divided equally between his two sons. His brother would no longer receive anything under his will.
The issue was whether the deceased intended to irrevocably gift the real property in 2000 to his sons and brother in equal shares, or whether the property is held in resulting trust for the estate.
The Court identified the three possibilities when property is put into joint tenancy:
Where there is a gratuitous transfer of land to an independent adult child, the presumption of resulting trust applies. The donee (in this case the brother) must establish, on a balance of possibilities, that the deceased intended to make an irrevocable gift at the time of the transfer. It should be noted that the donor may intend to gift the right of survivorship, but continue to deal freely with the property throughout their lifetime.
In Di Giamoco, the Court held that the brother failed to prove that the deceased intended to irrevocably gift the right of survivorship. The evidence regarding the deceased’s intention was “at best, indecisive.” The court was not convinced that the deceased was fully informed of the consequences of transferring the property into joint tenancy. The Court observed that the deceased’s English was limited, and he was relying upon a translation of the discussions into Italian. There was no evidence that the lawyer specifically advised the deceased that the transfer would be irrevocable. The Court also relied upon the fact that the deceased changed his will three years later to provide for his sons and not also his brother, and the evidence indicated that he believed this would include the real property.
This case serves as a reminder that there are pitfalls when using a transfer into joint ownership as an estate planning tool. The donor/deceased’s intentions must be clear, and they must be fully informed and understand the effect of the transaction.
The following is a roundup of noteworthy articles published this month on estate litigation and related issues:
Happy reading!
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.
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.