Author: Trevor Todd

BC Estate Lawyer-Marriage Like Relationships

Trevor Todd and Jackson Todd have been practicing law in the area of contested estates for over sixty combined years, including the enormous range in what are now considered to be marriage like relationships.

Mother 1 v Solus Trust et al 2021 BCCA 461 reviewed the law on marriage like relationships and concluded that Mother 1 was not a spouse within the meaning of WESA.

Mother 1 was not married to the deceased and thus had to prove on a civil standard that she lived with him in marriage like relationship for at least 2 years.

The trial judge instructed himself on the definition of a marriage like relationship and described it as an “elastic” concept and one that engages a multi faceted analysis .

He enumerated various factors for consideration, citing the often-referred to case of Molodowich v. Penttinen, [1980] O.J. No. 1904, 1980 CanLII 1537 (Dist. Ct.). He noted that the list of factors delineated in Molodowich “cover virtually every aspect of life a couple could engage in together”

Relying on Weber v. Leclerc, 2015 BCCA 492, he cautioned himself against taking a “checklist approach” to the issue before him. Instead, it was his obligation to consider the matter “holistically” and to examine all relevant factors in deciding whether there was a marriage like relationship of at least two years between Mother 1 and the deceased.

The judge specifically noted that a legal capacity to marry is not a prerequisite to finding a marriage like relationship . Nor is financial dependence .
The parties do not have to co reside .

Their subjective intentions are considered; however, one party’s denial of an intention to enter into or remain in a marriage like relationship is not fatal to the analysis. Instead, the credibility of that denial will be tested against objective indicators and may not be believed if “all of the surrounding circumstances strongly imply the contrary” (at paras. 140–42, citing Dey v. Blackett, 2018 BCSC 244 at para. 235 and other cases).

The determination of a marriage like relationship (or not) is a question of mixed fact and law that requires a broad approach- ( Weber v Leclerc)

After the judge rendered his verdict, this Court released its decision in Robledano v. Queano, 2019 BCCA 150, in which it held that the requisite two years of a marriage like relationship need not immediately precede the intestate’s death:

[40] Paragraph 2(1)(b) of the statute uses the past perfect tense (“had lived together”) rather than the past continuous tense (“were living together”). The ordinary grammatical meaning of paragraph 2(1)(b) is that in order for a person who was not married to the deceased to be their spouse, the two must have lived together in a marriage like relationship for two years, but not necessarily for the two years immediately preceding the deceased’s death. In contrast to paragraph 2(1)(b), paragraph 2(1)(a) uses the past continuous tense (“were married”) rather than the past perfect tense (“had been married”). The statute is professionally drafted and the use of these different tenses should be presumed to be deliberate.

However, a WESA claimant and the intestate must remain spouses at the time of the death in order to advance a claim: Robledano at para. 43.
If the parties ceased to be spouses before the intestate’s death because their 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 (s. 2(2)(b)).

According to Robledano, in deciding whether a party has terminated the marriage like relationship, a judge must:

[55] … consider the expressed and implicit intentions of each spouse, as well as the objective evidence concerning the subsistence of the relationship. The determination is a “judgment call” for the trial judge – the application of a broad legal standard to the factual circumstances of an individual case. It is a question of mixed fact and law. Where a trial judge has correctly identified the standard, and has not made any palpable and overriding error in applying it, deference to the trial judge’s decision is required: Housen v. Nikolaisen, 2002 SCC 33.

The intention of the parties is a factor that must be considered” in deciding whether a relationship was marriage like (at para. 141). Evidence of “mutual intent” to be in a relationship of an indeterminate or lengthy duration is likely to carry significant weight in the analysis (at paras. 141–42). However a finding of mutual intent is not a prerequisite to finding that a marriage like relationship existed at law. It was explained this way in Weber:

[23] 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.

[24] The question of whether a relationship is “marriage like” will also typically depend on more than just their intentions. Objective evidence of the parties’ lifestyle and interactions will also provide direct guidance on the question of whether the relationship was “marriage like”.

Court Approval of a Sale

The test to be established by a party seeking approval of sale is whether the sale is provident and the sale was conducted in a business-like manner, as noted in Mission Creek Mortgage Ltd. v. Angleland Holdings Inc., 2013 BCCA 281, at paras. 40 and 41:

In Woods Lake Development Ltd. v. Renascence Enterprises (Woods Lake) Corp., 2011 BCSC 849, there is no clear case law in British Columbia as to the duties of a mortgagee who has conduct of sale by court order. Nor is there any case in this jurisdiction that organizes factors that govern the court on an application for approval of a proposed sale. The several cases I have read involve various issues and, of course, a variety of circumstances. What I take from them is that the mortgagee must go about finding a buyer in a businesslike manner and the court must be satisfied that the proposed sale is provident in all the circumstances.

Approval by the court is discretionary.

This was confirmed by the court in Paradigm Quest Inc. v. Pacific Pasnak Holdings Ltd., 2021 BCSC 1455, at para. 8.

In Kokanee Mortgage MIC Ltd. v. 669655 B.C. Ltd., 2014 BCSC 458 at para. 27, Justice Gaul defined “provident” as whether “the marketing and sales process has been a fair and proper one for all, and that the proposed price reflects the fair market value for the property”.

In Institutional Mortgage Capital Canada Inc. v. Plaza 500 Hotels Ltd., 2020 BCSC 888, Justice Fitzpatrick summarized the meaning of provident as follows:

IMC refers to certain authorities on the meaning of “provident”. As the authorities cited below indicate, a “provident” price in these circumstances (foreclosure) does not mean certainty that the “best price” obtainable in the market was achieved had the mortgagor sold the property itself. It is inevitable that the market recognizes the “forced sale” nature of the circumstances under a CSO.

In J & W Investments Ltd. v. Black (1963), 1963 CanLII 471 (BC CA), 38 D.L.R. (2d) 251 (C.A.), the court stated at 262:

… the mortgagee has an interest and the right to protect that interest by selling to realize the moneys due, notwithstanding such sale may be at an undervalue, provided always that he exercises such power of sale “in good faith, without any intention of dealing unfairly by his mortgagor” … That is so stated in Farrar v. Farrars Ltd., [(1888) 40 Ch. D. 395] by Lindley, L.J., at pp. 410-1, as follows:

A mortgagee is under obligations to the mortgagor, but he has rights of his own which he is entitled to exercise adversely to the mortgagor. A trustee for sale has no business to place himself in such a position as to give rise to a conflict of interest and duty. But every mortgage confers upon the mortgagee the right to realize his security and to find a purchaser if he can, and if in exercise of his power he acts bona fide and takes reasonable precautions to obtain a proper price, the mortgagor has no redress, even although more might have been obtained for the property if the sale had been postponed

Mental Capacity to Make a Will

Jung Estate v Jung Estate 2022 BCSC 1298 reviewed the law on mental ( testamentary) capacity to make a will and found the will invalid.

The most frequently quoted test for testamentary capacity is the English decision of Banks v. Goodfellow (1870), L.R. 5 Q.B. 549 (Eng. Q.B.) at 567, which remains relevant today.

To prove that a will-maker had testamentary capacity, the proponent of the will must lead evidence that establishes that the will-maker:

a) understood the nature of the act of making a will and its effects;
b) understood the extent of the property of which he or she is disposing;
c) was able to comprehend and appreciate the claims to which he or she ought to give effect; and
d) had no disorder of the mind or insane delusion that influenced his or her making of the will.

Laszlo v Lawton 2013 BCSC 305 at para. 188; Halliday v haklliday Estate 2019 BCCA 554 at para. 26.

This test was restated in modern times in Schwartz v. Schwartz (1970), 10 D.L.R. (3d) 15 at 32 (Ont. C.A.) ,aff’d [1972] S.C.R. 150 [Schwartz] as the will-maker must be sufficiently clear in his or her understanding and memory to know, on their own: the nature and extent of their property; the persons who are the natural objects of their bounty; the testamentary provisions they are making; and they must be capable of appreciating those factors in relation to each other and forming an orderly desire as to the disposition of their property: Laszlo at para. 188.

While will-makers are not expected to know the composition of their estate assets and their respective values in an exact manner “with the metronomic precision of an accountant”, they must have an appreciation of the general nature of their assets and an understanding of their extent. An appreciation of the value of their assets, expressed either in terms of dollars or quantitatively, will suffice: Laszlo at paras. 242 – 249; Henderson v. Myler, 2021 BCSC 1649 at para. 107.

Testamentary capacity is neither a medical concept nor a diagnosis, but rather is a legal construct. While medical evidence may be relevant it is not conclusive in determining the existence of testamentary capacity at the critical times: Laszlo at para. 198; Halliday at para. 29. Whether a will-maker possessed testamentary capacity at the necessary times is a question of fact, to be determined from all of the circumstances: Laszlo at para. 197. A critical and meaningful analysis is required to determine testamentary capacity: Halliday at para. 29. The authorities establish that in assessing testamentary capacity, the evidence of the drafting solicitor, who took instructions and prepared the will, is often given considerable weight, particularly where that person is an experienced wills and estates lawyer: Benekritis v. Gilbert Estate, [1998] B.C.J. No. 171at paras. 41 – 43.

Testamentary capacity requires a “disposing mind and memory” which is described as “one able to comprehend, of its own initiative and volition, the essential elements of will-making, property, objects, just claims to consideration, revocation of existing disposition, and the like …”: Laszlo at para. 194, quoting from Leger v. Poirier, [1944] S.C.R. 152 at 161 [Leger]. Merely being able to provide rational responses is not sufficient or conclusive of capacity; rather, “there must be a power to hold the essential field of the mind in some degree of appreciation as a whole”: Leger at 162.

Bull Estate v. Bull, 2015 BCSC 136 at para. 114 [Bull] held that the test for testamentary capacity is not “overly onerous” and that the presence of cognitive deterioration may not preclude testamentary capacity. Testamentary capacity may be present even if the will-maker is incapable of managing other aspects of his or her life: Halliday at para. 28. However, a disposing mind and memory is “one able to comprehend, of its own initiative and volition, the essential elements of will making, property, objects, just claims to consideration, revoking dispositions and the like”: Moore v. Drummond, 2012 BCSC 1702 at para. 34, citing Leger at 161; Bull at para. 115.

A will-maker must have testamentary capacity when they give instructions for their will, and when they review and execute the will. However, as mental capacity can fluctuate, the case law permits a variation of the degree required at these two key times; for example, if a will-maker is competent to give instructions, but not competent at the time the will is executed, it may nonetheless be valid so long as at the time of execution the will-maker was capable of comprehending she was executing a will drawn in accordance with her prior instructions: Laszlo at para. 189.

The Obligations of a Trustee

Chung v Chung 2022 BCSC 1592 examined the legal obligations of trustees and held that their principle obligation is to preserve the assets subject to the trust.

The primary obligation of a trustee is to preserve the property of the trust on behalf of the beneficiaries. Trustees must strictly avoid self-interest wherever their interest could conflict with the interests of those they are bound to protect: Clock Holdings Ltd. v. Braich, 2008 BCSC 1697 at para. 183.

Trustees are bound by both the “no conflict” rule and the “no profit” rule, which were explained by the Court of Appeal in Louie v. Louie, 2015 BCCA 247 at para. 23:

The two most fundamental and long standing obligations of fiduciaries – the “no conflict” rule and the “no profit” rule. These have been stated on many occasions over several centuries, but this passage from the judgment of the High Court of Australia in Chan v. Zacharia (1984) 154 C.L.R. 178, summarizes the historic approach succinctly:

The first is that which appropriates for the benefit of the person to whom the fiduciary is owed any benefit or gain obtained or received by the fiduciary in circumstances where there existed a conflict of personal interest and fiduciary duty or a significant possibility of such conflict: the objective is to preclude the fiduciary from being swayed by considerations of personal interest. The second is that which requires the fiduciary to account for any benefit or gain obtained or received by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it: the objective is to preclude the fiduciary from actually misusing his position for his personal advantage. … [T]he two themes, while overlapping, are distinct. Neither theme fully comprehends the other and a formulation of the principle by reference to one only of them will be incomplete. [At 198-9.]

Bray v. Ford [1896] AC 44 (H.L.) stated at 51: “It is an inflexible rule of a Court of Equity that a person in a fiduciary position … is not, unless otherwise expressly provided, entitled to make a profit; he is not allowed to put himself in a position where his interest and duty conflict.”

The Court of Appeal in Meng Estate v. Liem, 2019 BCCA 127 explained at para. 35 that a breach of a trustee’s duty of loyalty can arise in “circumstances in which there is a breach of the duty of loyalty owed by the fiduciary and includes circumstances involving acting in the face of a conflict, preferring a personal interest, taking a secret profit, acting dishonestly or in bad faith, or a variety of similar or related circumstances.” In this case, the first three of these circumstances were clearly established at trial. In addition, Won’s failure to disclose his secret profit for years and the misinformation he provided when pressed by Jae did not in my view meet the requisite standards for honesty and good faith.

In 0731431 B.C. Ltd. v. Panorama Parkview Homes Ltd., 2021 BCSC 607 [Panorama], Justice Sewell affirmed the existence of a fiduciary relationship between a bare trustee and the trust’s beneficiary, and rejected the argument that a bare trustee could treat the subject matter of the trust as its own property:

[243] The Trustee relied on the fact that 690174 was a bare trustee of Lot 1 and cited a number of cases in support of the proposition that a bare trustee owes only a limited fiduciary duty to the beneficiaries of the trust. However, those cases do not stand for the proposition that the bare trustee may treat the subject matter of the trust as its own property. As pointed out in one of the Trustee’s authorities, Scoretz v. Kensam Enterprises Inc., 2018 BCCA 66 at paras. 21-30, at a minimum a bare trustee has the obligation to transfer legal title to the beneficiaries of the trust upon request.

[244] Despite arguing that 690174 owed only limited fiduciary duties as a bare trustee, the Trustee argues that 690174 had full authority to subdivide Lot 1 and transfer title to the subdivided lots to purchasers. These submissions are inconsistent. More importantly, they ignore the fact that 690174 used its registered title to take steps that profoundly affected the beneficial ownership rights of the 2007 Joint Venturers.

[245] 690174 not only held title to Lot 1 in trust but also undertook the responsibility to apply for all necessary permits required for the development and subdivision of Lot 1. It is clear that by virtue of holding legal title to Lot 1, 690174 had the ability to affect the rights of all of the 2007 Joint Venturers. This made them vulnerable to the actions of 690174. The elements necessary to establish both an ad hoc fiduciary duty (as set out in more detail at para. 474 of these reasons) and a per se fiduciary duty on 690174 were therefore present in this case.

[Emphasis added.]

In Panorama, Justice Sewell also found that the director and principal of a corporate trustee pursuant to a bare trust agreement owes the beneficiary a fiduciary duty:

[241] In this case 690174 held title to Lot 1 in trust for the 2007 Joint Venturers. 690174 agreed that as bare trustee of Lot 1 it was responsible for applying for all necessary permits required for the development and subdivision of Lot 1. The development and subdivision of Lot 1 was the very object of the 2007 Joint Venture. In addition, Jaswant was personally appointed manager of the 2007 Joint Venture project and was the sole director and directing mind of 690174. In my view this gave rise to a per se fiduciary duty on 690174 and Jaswant.

A trustee’s duty of loyalty demands that in the absence of authorization, a trustee is accountable for any right, profit or benefit acquired “by reason of or by use of his fiduciary position or of opportunity or knowledge resulting from it”: Donovan Waters, Waters’ Law of Trusts in Canada, (2021 Online Edition), Ch. 18 “Duties of Loyalty” at 18.II. A trustee also has a fundamental duty to account for trust property and to report on how it has been dealt with: N-Krypt International Corp. v. LeVasseur, 2016 BCSC 1539 at paras. 38-39; rev’d on other grounds 2018 BCCA 20.

Withdrawl of an Admission

Generally speaking in litigation it is a safe measure to initially deny everything and admit little until absolutely sure about making the admission, as it is difficult to withdraw it once made

Rule 7-7(5) of the Supreme Court Civil Rules [SCCR] addresses withdrawal of admissions:

Withdrawal of admission

(5) A party is not entitled to withdraw

(a) an admission made in response to a notice to admit,

(b) a deemed admission under subrule (2), or

except by consent or with leave of the court.

The test for withdrawal of an admission is summarized by Master Horn in Hamilton v. Ahmed, [1999] B.C.J. No. 311 (S.C.), as whether there is a triable issue which, in the interest of justice, should be determined on the merits and not disposed of by an admission of fact. In applying that test, all of the circumstances should be taken into account.

He listed six such cirumstances, which were later reframed by the court of appeal in Sidhu v. Hothi, 2014 BCCA 510 [Sidhu] at para. 25:

(a) whether the admission was made inadvertently, hastily, or without knowledge of the facts;

(b) whether the “fact” admitted was or was not within the knowledge of the party making the admission;

(d) whether and to what extent the withdrawal of the admission would prejudice a party; and

(e) whether there has been delay in the application to withdraw the admission and any reason offered for such delay.

The discretion to grant leave to withdraw an admission is broad and unfettered, subject to the discretion being exercised judicially. The court is required to balance the prejudice which would flow from either refusing or granting leave. See Nagra v. Cruz, 2016 BCSC 2469, aff’d 2017 BCSC 347, at para. 5.

Where a deemed admission has been caused by a failure on the part of counsel and party cannot be faulted for the oversight, an order permitting withdrawal normally follows, while allowing the other party costs and accommodations. See Piso v. Thompson, 2010 BCSC 1746 at paras. 23 and 25.

Conduct of a Court sale

In Kainth v Brar 2022 BCSC 1552 the petitioner in a partition action brought an application for sole conduct of the sale of the property.

The Court reviewed firstly it’s jurisdiction to grant such an order under both the partition of Property act as well as Rule 13-5(4) (a) of the Supreme Court Rules.

s. 6 of the Partition of Property Act, R.S.B.C. 1996, c. 347 [PPA], which provides:

6 In a proceeding for partition where, if this Act had not been passed, an order for partition might have been made, and if the party or parties interested, individually or collectively, to the extent of 1/2 or upwards in the property involved request the court to direct a sale of the property and a distribution of the proceeds instead of a division of the property, the court must, unless it sees good reason to the contrary, order a sale of the property and may give directions.

There is also authority to direct a person to have sole conduct of sale under Rule 13-5(4)(a) of the Supreme Court Civil Rules, which provide that when the court orders the sale of a property:

(4) The court may give directions for the purpose of effecting a sale, including directions:
(a) appointing the person who is to have conduct of sale.

In Durrani v. Lehal, 2018 BCSC 2489 [Durrani], Justice Fitzpatrick set out the following factors for consideration when deciding who should have conduct of sale:

[48] In Dhillon v. Kumar, 2014 BCSC 2366, Master Keighley sets out common sense considerations in terms of deciding who should have conduct of sale:

As to whether the claimant should be given sole conduct of sale, while there is no singular test for granting sole conduct of sale, the Court should consider all factors including the willingness of a party to facilitate sale, the inability of the parties to agree on routine aspects of sale and the inability of the parties to cooperate: McLachlan v. McLachlan, 2013 BCSC 1733.

Durrani sets out three factors the court may consider when determining whether to award one party sole conduct of sale:

• willingness of the party to facilitate a sale;
• inability of the parties to agree on routine aspects of the sale; and
• inability of the parties to cooperate.

A brief summary of the considerations is as follows:

1) Sole conduct of sale has been awarded when the other party has caused unnecessary delay: Dunford v. Sale, 2007 BCSC 1422;
2) Sole conduct of sale has been awarded where the other party is not adversely affected: Lashman v. Spencer, 2022 BCSC 96;
3) Sole conduct of sale has been awarded to a party based on concerns that the other party may thwart the marketing and sale process on the basis that they live at the property: Dixon v. Morgan, 2020 BCSC 1329;
4) Sole conduct of sale has been awarded to a party where the other party would merely suffer financial or personal inconvenience: Tseng v. Tseng, 2021 BCSC 27; Eckhart v. Ball, 2019 BCSC 1530; and
5) It is common practice for trial courts to make orders of joint conduct of sale since both parties have a profound interest in the terms of any sale, even where there is evidence that the parties have difficulty in cooperating: Etemadi v. Maali, 2021 BCSC 395.

Alter Ego Trusts

Alter ego trusts are increasingly being used an an estate planning tool for those over 65 years of age.

From the perspective of staging-disinherited-staging.kinsta.cloud they are typically used by parents to disinherit a child(ren) so that the child(ren) has no recourse under wills variation proceedings( S. 60 WESA)

In Larochelle v. Soucie Estate, 2019 BCSC 1329 at paras. 174-175, Donegan J. (quoting from Donovan Waters On Trusts ) summarized the nature and function of alter ego trusts:

[174] The particular type of trust at issue in this case is referred to as an “alter ego trust”. This type of trust is defined by its tax consequences. Under the ITA, individuals over the age of 65 are allowed to transfer assets to this special type of inter vivos trust, set up exclusively for that individual’s own benefit in their lifetime. At creation, the same person is generally settlor, trustee, and beneficiary. In Waters Law of Trusts, an alter-ego trust is explained concisely at 633:

An “alter-ego trust” allows a person of the age of 65 or over to settle property upon an inter vivos trust with the right to roll the property into the trust free of capital gains as long as the settlor is entitled to receive all of the income of the trust that arises before his or her death and as long as no person except the settlor may obtain the use of any of the income or capital of the trust before the settlor’s death. This allows settlors to make inter vivos disposition of their property that might otherwise have been made under a will.

[175] As both parties point out, inter vivos trusts in general, and alter-ego trusts specifically, have been recognized as legitimate estate-planning tools.

In Mawdsley v. Meshen, 2012 BCCA 91, Newbury J.A. described the legitimate “protective” functions of corporations and trusts, including alter ego trusts, in the estate planning context this way:

[2] Corporations and trusts also serve “protective” functions in the realm of estate planning. For example, individuals wishing to “freeze” the value of their estates may “roll over” their existing shares to new corporations, or exchange their appreciating shares for fixed-value shares, on a tax-deferred basis. The future appreciation of the corporation may then accrue to the benefit of the next generation, either directly or through trusts.

In recent years, the “alter ego trust” has also been recognized in the Income Tax Act as an estate planning tool. Provided the settlor is age 65 or older, he or she may ‘roll’ assets to a trust that is for his or her sole benefit during his or her lifetime and then for the benefit of his or her chosen beneficiaries. Such trusts have several advantages: they are used to minimize or eliminate probate fees; they permit the control and management of assets located in various jurisdictions to be centralized and to ‘carry on’ after the settlor’s death without the need for court approvals or probate; they obviate the risk of asset diminution due to incapacity or diminished capacity on the part of the settlor; and where beneficial interests are subject to the exercise of the trustee’s discretion, they offer some protection from spendthrift family members, their spouses and others claiming through them: s

Choosing The Executor

Careful thought should be put into choosing the right executor for each will maker.

Some of the preliminary considerations are as follows.

A. The Nature of the Client’s Affairs

· Are there any active business interests?
· Are the business interests to be carried on after the testator’s death or liquidated?
• Are there any assets sited in a foreign jurisdiction?
· Does the testator have any business dealings with the beneficiaries and/or potential
executors?

· Have loans/gifts been made to any one or more of the testator’s children?

· Is there any personal property requiring special expertise (e.g., copyright, valuable art,
etc.)?

· How large is the estate and how complex are its investments?

B. What is the Will Plan

· Is there an outright distribution?
· If grandchildren take by substitution are there contingent infant shares to be held in trust
to age 19, 25, 30?
· Is there a trust for a surviving spouse or handicapped child? How long might it run?
· Is there a discretion to encroach on capital?

C. Who are the Players

Testators often avoid talking about the needs and capacities of their family members making it
the solicitor’s job to tactfully elicit this information. The spouse may be particularly ill equipped
to deal with even the simplest of estates or there may be a “black sheep” in the family that the
parents are reluctant to disclose.

Often a child will be singled out by the parents as the proposed executor on the death of the
remaining parent. If you ask, “is he or she the most capable” there will often be a resounding
affirmation. If you ask, “is he or she somewhat resented by his or her siblings” you will receive
a grudging admission. If you then ask the parents to speculate as to how the dynamic will
change when they are not there to “keep the peace” you may find your clients reconsidering their
decision. Similarly, you should give your clients pause for reflection by pointing out that the
number of players is not confined to their children, but includes for all practical purposes the
children’s spouses.

D. What are the Conflicts of Interest

It is important to note that the question is not, “are there any conflicts of interest?” but, “what are
the conflicts of interest?” The reason for the emphasis is that unless you have an executor who is
also the sole beneficiary or one who is disinterested and proposes to charge no fee, there will be,
to a greater or lesser extent, a conflict of interest arising in the course of the administration.
Two of the more obvious conflicts of interest involve the appointment of a business partner as
executor and the appointment of either the life tenant or capital beneficiary as trustee empowered
to make capital encroachments. Consider whether appointing the life tenant and a remainderman
to act as co-trustees is really a solution or simply an invitation to disaster. Also consider the
position of the executor/beneficiaries who have received financial assistance from their parents

under an arrangement that they “pay us if and when you can.” To the recipient this may have
been perceived as a nice way of making a gift, but to the donor (and the other children) may
simply have been a tactful way of settling the terms for repayment of the loan. Particularly
insidious are the problems presented by in specie distributions of “sentimental” property. Who
gets the family cottage and on what terms? If the potential executor is, as is often the case, the
one closest to home with the most extensive connection to the cottage should he or she be
potentially disqualified from receiving it without the consent of the siblings?*

E. Making the Choice

Once you have canvassed the foregoing matters with your client you will be in a much better
position to advise on the appropriate choice for the role of executor and trustee.

1. Family Members

The limitations inherent in choosing the executor within the family are often offset in the client’s
mind with the notion that there will be significant cost saving. When the client realizes that the
executor may in fact delegate substantially all of the work to solicitors (and accountants) this
will no longer be a substantial advantage outweighing the pitfalls alluded to earlier. The client
may want to consider a co-appointment of one or more family members with a professional
advisor or trust company. Where there could be ongoing conflicts of interest, such as a
discretion to encroach on capital in favour of a second spouse, it is often a useful compromise to
arrive at a co-appointment with only the “independent trustee” empowered to make the
discretionary decision in which the “family trustee” has a personal interest. In a discretionary
trust for a handicapped child consider whether the Public Trustee might challenge (under the
Wills Variation Act) the appointment of a sibling as trustee where that person also has a
remainder interest in the trust.

2. Trust Companies

While individual trust companies have received some deserved criticism for the handling of
particular estates, it is the writer’s view that they do not deserve much of the “bad press” that
they seem to enjoy with the testamentary public. If you were to inquire into a testator’s aversion
to the corporate executor you would find that he is often relying on a second or third-hand story
involving a penurious widow left at the mercy of an unfeeling trustee under a will that has
unfortunately been overtaken by inflation. This is usually not the fault of the executor and
trustee, but rather a reflection of the testator’s values, the mores of his time, and 20th Century
economic realities.

Even if an in specie clause would permit executors to appropriate specific assets to their share of residue,
valuation of the asset can often be a divisive issue.

(a) Corporate Trustees Bring Advantages to the Administration

(I) Permanence

Notwithstanding the recent spate of mergers and acquisitions few practical difficulties are
occasioned as one corporate entity segues into another on the strength of an authorizing order in
counsel or regulation. For trusts having a lengthy anticipated duration a corporate presence is
usually desirable.

(ii) Impartiality

The corporate fiduciary has no axe to grind with either a life tenant or a remainderman.
Discretionary decisions involving the application of the even-handed rule are usually ratified at a
committee level providing an additional buffer against any individual differences or personality
difficulties that may arise with particular trust officers. On the other hand, the spectre of an
infant beneficiary attaining the age of majority and suing the trustee for diminution of the capital
usually dictates that the trustee be provided some direction in the instrument as to the extent to
which it is to exercise its discretion or encroach on capital, often by confirming the displacement
of the even-hand rule.

(iii) Conservatism

Most corporate fiduciaries will delight in telling you that they were already “well into cash”
when Black Monday finally arrived in October 1987. Of course, they will be less likely to tell
you that they have not realized the spectacular gains seen recently in the market at large, but
your testator may prefer that their focus be on the preservation of capital. There is also the
added advantage in smaller trusts of diversification through the use of unit or pool trusts in
which individual estates may be invested across a broad range of securities which would not be
practical if the shares were individually held in each estate. Individual trustees, it appears, may
well be precluded from attaining this same sort of diversification by investing in mutual funds as
this may be construed as an improper delegation of their duties. See comments on page 14
and 15.

(iv) Deep Pockets

The prospect of, say, a grandchild suing his uncle on attaining the age of majority for
maladministration of his trust fund can often be an unpleasant one for the client. A similar
concern is seldom, if ever, expressed at the thought of a trust company accounting to a
beneficiary for its negligence. Particularly where the estate is large and its assets are complex it
may simply be unfair for the testator to burden any one or more of his family members with the
sole stewardship of such an estate. Bad investment advice or a failing real estate market can
quickly create personal rifts, if not destructive litigation, between the executor and his fellow
family members.

(v) Higher Standard of Care?

Although the Fates case (1977), 2 S.C.R 302 (S.C.C.) concludes there is no difference in the
standard of care required of a professional trustee over that of a lay trustee, it would seem that a
professional trustee may not be as readily excused for its breaches as its lay counterpart. Some
English authority (Bartlett v. Barclays Bank Trust, [1980] 1 ALL ER 139 Ch.D.) suggest,
however, that because a professional trustee holds itself out as having special knowledge and
expertise it will also be held to a higher standard of care. Such a higher duty has also been
adopted in the United States in the uniform Probate Code. All of which suggest to Professor
Waters that in determining whether “the conduct of the particular Trustee was lacking in
ordinary care and prudence . .. it is possible for the Court to expect more out of the professional
Trustee then of lay Trustees.” (Waters: Law of Trusts in Canada, 2nd edition, at 753).

(b) Considerations Militating Against the Choice of a Trust Company

(i) Expense

It is a fact that trust companies are activiely seeking to be the trsuees of their cleint’s affairs, but it ash to be noted that the trsut companies reuire a minimum amount of wealth before theya re preared to do so

As businesses, corporate fiduciaries account to their shareholders and are expected to produce a
good return. Over the last few years there has been a trend on the part of most trust companies
to push the fee envelope upwards to claim at or near the maximum fee available in estates (under
$300,000). Nevertheless, cost conscious consumers of fiduciary services are often able to
negotiate fee agreements, particularly in larger estates, at percentages considerably lower than
the trust company might otherwise charge.

(ii) Inflexibility

It must be remembered that trust companies are essentially bureaucracies “with all the drawbacks
of bureaucracies — impersonality, unwillingness of personnel to make imaginative decisions, and
the presence of considerable red tape” (Canadian Tax Journal, Volume XXII (2) at 157). While
the conservatism inherent in such a bureaucratic organization may well afford a degree of
protection as discussed above, it has also led to the criticism that long-term trusts have suffered
an erosion of capital value by an excessive reliance on fixed income securities. Again, specific
enabling language in the investment provisions of the will as well as an expression of wishes as
to the exercise of trustee discretion (perhaps outside the will) can somewhat ameliorate these
concerns.

Lawyers, and increasingly accountants, are often appointed by testators because of their
familiarity with the testator’s affairs. Consider the following:

(1) Is it proper for the solicitor to recommend his or her own appointment?
(2) Does the accountant or legal firm have the necessary infrastructure to conduct a timely
and efficient estate administration?

0) Does the professional have relationships with other family members which could create
difficulties? On a request for an encroachment, how does the “family solicitor” tell the
widow, whom he has also known for many years, that her spending is out of line?
(1) If the accountant’s firm audits the deceased’s company, should the accountant also
serve
( as the deceased’s executor?

(2) Are there efficiencies and/or economies if the legal and executor’s work are performed
under the same roof.

F. How Many Executors Should be Appointed

Obviously, the various permutations and combinations are endless and will depend on a close
analysis of the testator’s family and financial circumstances as discussed above. The following
factors will come into play.

It is strongly recommend that if more than one executor then have an odd number such as three be chosen with a provision that two may out vote the third if there is a dispute.

1. Efficiency of Administration

While face time, email , conference calls etc. have obviously aided
communication, there is still an element of unworkability in having a number of executors
scattered throughout the world. If there are ongoing trusts and it is intended that the trust be
resident for Canadian tax purposes, Thibideau v. The Queen, [1978] C.T.C. 539 suggests that the
residence of the majority of the trustees will be largely determinative of this issue.

If there are assets in foreign jurisdictions, consider whether or not there should be multiple wills appointing executors in the various jurisdictions allowing for parallel and localized administrations.

It is recommended that there be a separate will for each foreign jurisdiction with careful drafting so that one foreign will doesn’t revoke wills in other jurisdictions.

2. What are the Dynamics of a Majority Rule Provision?

If there are two family members and a professional trustee, should the professional trustee
always be a part of the majority? Consider restricting discretionary decisions to the “non-
interested trustee.”

3. To What Extent Should the Testator Choose Substitute Trustees as Opposed to
Leaving that Choice to the Surviving or Remaining Trustees?

As the testator only gets “one kick at the can” consider encouraging him to choose as many
capable people as possible to serve over the anticipated duration of the trust. The “first” choice
of trustee should not necessarily be discarded for reasons of age where it is important to set the
right tone for the administration and provide an opportunity to “train” future trustees.

Debts Owed By Beneficiary Must Be Accounted For

Re Kolic Estate 2022 BCSC 1527 reviewed an equitable principle in the distribution of an estate , that an indebted beneficiary of the estate must first bring his or her debt back into the estate so as to ensure fairness, even if the debt is statute barred. The equitable principle is known as the rule in Cherry v Boultbee.

In Kolic a sister who was heavily indebted to the estate petitioned to have her 1/6th interest in land registered while a cross petition sought directions under S. 86 Trustee act and obtained an order that the other siblings could sell the property and not register her 1/6th interest because of the set-off between the inheritance and the debt owing by her to the estate.

The equitable principle in Cherry v. Boultbee (1939), 4 My. & C. 442 (Eng. Ch. Div.) was considered by Church J. in Johnston Estate (Re), 2017 BCSC 272, who summarized the law in this area:

28 The applicant relies on what is commonly referred to as the rule in Cherry v. Boultbee which provides that where a legatee of a share of the residue is a debtor of the estate, he or she is not entitled to receive his or her legacy without bringing his or her debt into account. The rule derives from the case of Cherry v. Boultbee (1839), 4 My. & Cr. 442. It is an equitable principle designed to ensure fairness. The purpose of the rule was to prevent a beneficiary who owed money to an estate from receiving more than his or her fair share of the estate. In the case of Re: Akerman, Akerman v. Akerman, [1891] 3 Ch. 212, Kekewich J. stated:
A person who owes an estate money, that is to say, who is bound to increase the general mass of the estate by contribution of his own, cannot claim an aliquot share given to him out of that mass without first making the contribution which completes it. Nothing is in truth retained by the representative of the estate; nothing is in strict language set off; but the contributor is paid by holding in his own hand a part of the mass, which, if the mass were completed, he would receive back.

29 The rule has been held to apply even where the debt is statute-barred: see Re: Akerman.

30 The applicant submits that the rule continues to apply in Canada and relies on the decision of the Supreme Court of Canada in Canada Trust Company v. Lloyd et al, [1968] S.C.R. 300. In that case, the Supreme Court applied the rule in Cherry v. Boultbee in finding that the contribution of three directors who had improperly withdrawn funds from the company some 43 years earlier, had to be taken into account in the distribution of the residue by the receiver.
The court noted that the situation was analogous to that of a “legatee who must bring into account even a statute barred debt before he can claim a legacy left to him in the testator’s will”.
31 The applicant also relies on a more recent decision of the Ontario Court of Appeal, Olympia & York Developments Ltd. v. Royal Trust Co. (1993), 103 D.L.R. (4th) 129, where the court confirmed that the rule in Cherry v. Boultbee has been accepted in Canadian decisions and, where appropriate, applied.
…
36 …The rule in Cherry v. Boultbee does not confer on the estate any right to recoup the amount owing but rather operates to ensure fairness in the distribution of an estate, recognizing that the relationship between a testator and his or her beneficiaries is typically not at arm’s length. The fundamental purpose of the rule is to ensure that beneficiaries are treated fairly and it embodies the principal [sic] that he who seeks equity must do equity. As the court noted in Re: Akerman, nothing is being retained by the representative and nothing is being set off but rather, the contributor is paid by what he is holding in his own hand. The court in Re: Goy & Co Ltd. [1900] 2 Ch. 149, also noted that the claimant has in his own hands that which is applicable to the payment and should pay himself out of that. The question of whether the testator or the estate can recover the debt or whether the debt is statute barred is therefore largely irrelevant to the application of the rule. In my view, the change in approach to limitation provisions by the Supreme Court of Canada in Tolofson does not affect the application of the rule in Cherry v. Boultbee.

Notice of Claim Struck for Tedious Length ( Prolixity)

Action4 Canada v BC Attorney General 2022 BCSC 1507 involved a 391 page Notice of Claim that was struck in it’s entirety for prolixity.

The notice of claim was mostly covid anti vaccination “propaganda”.

The Oxford English Dictionary defines “prolix” as writing that is “tediously lengthy”. At 391 pages, the NOCC is clearly prolix.

Prolixity can warrant striking a claim pursuant to R. 9-5(1), which reads:

Scandalous, frivolous or vexatious matters

(1) At any stage of a proceeding, the court may order to be struck out or amended the whole or any part of a pleading, petition or other document on the ground that

(a) it discloses no reasonable claim or defence, as the case may be,

(b) it is unnecessary, scandalous, frivolous or vexatious,

(d) it is otherwise an abuse of the process of the court,

and the court may pronounce judgment or order the proceeding to be stayed or dismissed and may order the costs of the application to be paid as special costs.

[34] The defendants submit the NOCC’s prolixity renders it scandalous within the meaning of subrule 9-5(1)(b). The defendants also submit that prolixity falls under subrule 9-5(1)(c) and constitutes a further basis to strike:

a) Pleadings are embarrassing where they are prolix, contain argument, or fail to state the real issue in an intelligible way: Sahyoun v. Ho, 2015 BCSC 392 at para. 62 [Sahyoun].

b) Regardless of the subrule, the law is clear that prolixity can be a basis for striking where the pleadings are prolix and confusing or they render it impossible for the opposing party to know the case they must meet: The Owners, Strata Plan LMS3259 v. Sze Hang Holding Inc., 2009 BCSC 473 at para. 36.

c) In certain cases, the pleadings are so overwhelmed with difficulties that it will not be possible to categorize them into specific subparagraphs of R. 9-5(1): see, for instance, Sahyoun at para. 64.

The defendants submit that, more important than the length of the NOCC is the unlimited scope of the document. It is not a piece of legal drafting that complies with the Rules, or basic tenets, of pleading. It is not a document that can be properly answered in a response to civil claim. The defendants submit that those problems arise, in part, because there are multiple allegations against the defendants individually and jointly.

It would be extremely difficult, if not impossible, for any individual defendant to determine whether it is required to respond to any particular allegation. Were the action to proceed in its current form, individual defendants would not be in a position to know whether they were tasked with a burden of disproving or countering the myriad allegations. They would not know what case they were required to meet.

In Mercantile Office Systems Private Limited v. Worldwide Warranty Life Services Inc., 2021 BCCA 362 [Mercantile] wherein Voith J.A. wrote, in relation to the requirements of pleadings:

” Nevertheless, none of a notice of claim, a response to civil claim, and a counterclaim is a story. Each pleading contemplates and requires a reasonably disciplined exercise that is governed, in many instances in mandatory terms, by the Rules and the relevant authorities. Each requires the drafting party to “concisely” set out the “material facts” that give rise to the claim or that relate to the matters raised by the claim. None of these pleadings are permitted to contain evidence or argument.”

The Mercantile claim was only 5 pages and the counter claim 12 pages.

The NOCC also breached other tenets of pleading. Among other problems: it pleads evidence, includes non-justiciable claims and alleges criminal conduct by the defendants.

These deficiencies fall largely within the scope of R. 9-5(1)(a), in that they disclose no reasonable claim.

…