Author: Trevor Todd

Assets From Parents to Child

A large amount of estate litigation can often be based on whether monies or assets advanced from a parent to a child are a gift or a resulting trust.

It is important to remember that the law of resulting trusts applies to such situations.

Tam v Li 2022 BCSC 1412 reviewed the law relating to same:

When an owner of property gratuitously transfers property to another, a resulting trust is presumed to arise and can defeat the presumption of indefeasibility of title of real property: Freeland v. Farrell, 2022 BCCA 99 at para. 45, citing Donovan W.M. Waters, Mark R. Gillen & Lionel D. Smith, eds., Waters’ Law of Trusts in Canada, 5th ed. (Toronto: Thomson Reuters, 2021) at 414.

When assets are transferred gratuitously from one person to another, including from a parent to child, the law generally presumes that the person who made the transfer of property intended a trust, not a gift: Pecore v. Pecore, 2007 SCC 17 at para. 20; Kerr v. Baranow, 2011 SCC 10 at para. 19.

In Kerr, Justice Cromwell explained the concept of a resulting trust:

… [I]t is widely accepted that the underlying notion of the resulting trust is that it is imposed “to return property to the person who gave it and is entitled to it beneficially, from someone else who has title to it. Thus, the beneficial interest ‘results’ (jumps back) to the true owner”: Oosterhoff, at p. 25.

The presumption of a resulting trust can be rebutted through evidence that the person transferring the property intended a gift. If no gift was intended, a resulting trust is established and the person who gave no value holds the property in trust for the person who transferred the property. The actual intention of the person transferring the property at the time of the transfer governs: Kerr at paras. 18-19, citing Pecore at paras. 43-44.

In Hsieh v. Lui, 2017 BCCA 51 at para. 56, citing V.J.F. v. S.K.W., 2016 BCCA 186, the Court of Appeal described a gift as “a gratuitous transfer of property for which the donor expects no remuneration”. Citing Beaverstock v. Beaverstock 2011 BCCA 413 and Pecore, the Court in Hsieh affirmed that the transferor’s intentions are paramount in this examination.

In Beaverstock, at para. 10, the Court of Appeal identified seven factors first set out in Locke v. Locke, 2000 BCSC 1300, to determine whether there was a gift or a gratuitous transfer giving rise to a resulting trust:

a)whether there were any contemporaneous documents evidencing a loan;

b)whether the manner for repayment is specified;

c)whether there is security held for the loan;

d)whether there are advances to one child and not others, or advances of unequal amounts to various children;

e)whether there has been any demand for payment

f)whether there has been any partial repayment, and

g)whether there was any expectation, or likelihood, of repayment.

The Court of Appeal in Beaverstock explained that these factors are not substantive elements for which the party asserting that the gratuitous transfer gives rise to a resulting trust bears the burden of proof. The court must start with the presumption of a resulting trust and then determine the intention of the transferor. It is an error to collapse the analysis into a consideration of these factors because they are merely non-exhaustive items of circumstantial evidence relevant to the transferor’s actual intention.

Non Disclosure Leads to Adverse Inference

Sarzynick v Skwarchuk 2021 BCSC 443 held that the defendant who was found to have strategically refused to disclose and produce financial documents could be held to an adverse inference that he had in fact siphoned off monies from his parent’s assets over several years as alleged by the plaintiffs.

The court stated that strategic non disclosure is a risky strategy which typically attracts adverse consequences to the non disclosing party

The court followed the BCCA case of Weintz v Weintz 2014 BCCA 118 in that regard.

Weinst stated:

Non-disclosure of relevant information that is in the possession and control of a party, and is necessary for the determination of an issue in the litigation, is a risky strategy. It has typically attracted adverse consequences to that party. In Kowalewich, Huddart J.A. stated that a trial judge must fix the amount of the compensation order based on the evidence before him when he orders a division in specie of family assets (at para. 21). He cannot ignore evidence because it may be difficult to assess. I would add that he cannot avoid making a necessary order to finalize the litigation because of a lack of evidence in the possession and control of a party that the party may choose not to tender. The making of a compensation order must also be distinguished from an order regarding its terms of payment. The latter is an ancillary order that may be addressed, through terms and conditions, after the compensation order is made.

[44] A similar reasoning may be found in Hausmann v. Klukas, 2009 BCCA 32, 91 B.C.L.R. (4th) 201 at paras. 51-52, leave to appeal ref’d 2009 S.C.C.A. No. 135, where this Court held that the onus was on the payor of child support to provide the necessary evidence that his corporation’s pre-tax income was not available for that purpose. In that case, the payor’s failure to meet that onus resulted in a presumption that the corporation’s pre-tax income was available to the payor for child support.

The Judge in Sarzynick v Skwarchuk followed Le v Milburn (1987) BCJ 2690 at para 2:

“When a litigant practices to deceive, whether by deliberate falsehood or gross exaggeration, the court has much difficulty in disentangling the truth from the web of deceit and exaggeration. If, in the course of the disentangling of the web, the court casts aside as untrue something that was indeed true, the litigant has only himself or herself to blame.”

Insane Delusions

I am sure most estate litigators have had a deceased parent accuse various family members of stealing cups, teaspoons and usually other minor things.

If so the dispirited and disinherited children of the deceased may have a good argument that the will should be set aside on the basis of insane delusions.

Delusions

Irrational beliefs, falling short of producing general insanity, and which have no relation either to the testator’s property or to the persons that might be expected to benefit, have no bearing on the question of testamentary capacity.!

Accordingly, a delusion which affects testamentary capacity must be one of “insanity”. It cannot be attributed to misinterpretation, capricious whims or idiosyncrasies.

A delusion is more than getting the facts wrong- it is a persistent belief in facts that no rational person would hold to be true , and thus exists as real only in the mind of the believer.

Banks. v. Goodfellow (1870), L.R. 5 Q.B. 549 at 560 (C.A.). It was beyond doubt that the testator
was at times of unsound mind, as he had spent time in an insane asylum. He was always subject
to certain fixed delusions that he was molested by evil spirits, but he managed his own affairs
and arranged for making the will himself. The court upheld the will because of the absence of
any reasonable connection between the delusions and the dispositions made by the testator

A delusion must have influenced the testator’s will in disposing of his or her
property or brought about a disposal that would not have been made absent thedelusion. Thorndycraft v McCully 1994 OJ 1857

Examples include persistently mistaking one person for another, harboring paranoid
suspicions toward a potential beneficiary, or falsely believing that potential beneficiaries are
already well provided for when the testator knew or should have known that this was not the
case.

In Wilson v Churchmack 1998 OJ 3733 the delusional belief of the testator that her family was stealing from her was sufficient to vitiate capacity.

Lucid interval.

Delusions that at times produce general insanity and incapacity to make a will
may be latent at another time, so that a good will may be made during a lucid interval. The fact
that the will is of a rational character (particularly if it was prepared by the testator him or
herself) is evidence that it was made during a lucid interval.

The time in question is the time at which the will or other testamentary document is executed. Re Marshall (1920) 1 CH 284.1

Aversion to Family Members.

An aversion to a spouse, children, or other relatives that the testator might be expected to benefit may indicate a lack of sufficient capacity, and wills are often attacked on this basis by disappointed relatives.

However, a blood relationship alone does not give a family member the right to object to a gift to a stranger, and it must be shown that the testator’s false beliefs about the family amounted to delusional insanity that affected the actual dispositions.

In Re Barter (1939) NBJ No.1 ( NBCA) a will was refused because of the delusion that the daughter had wired the testator’s chair to give him electric shocks.

If the aversion can be explained, or if it is found that the testator was merely
feigning some belief in order to rationalize his or her failure to provide for his or her family, then there is no delusion.

Similarly In Dynna v Grant (1980) SJ No. 84 Sask. R. 135, ( Saks C.A.) mere dislike of a person of a particular ethnic group is an eccentricity and does not constitute an insane delusion

As there must be a reasonable connection between the delusions and the bequests in the will, a bequest to a stranger may be good if the will-maker, apart from any delusions, had no intention to provide for the family in any event.

In Lorenzo v Molinari 33 ETR (2d) 136 made a deliberate decision to exclude certain potential beneficiaries , and the exclusion was not based upon mistaken beliefs about previous gifts to them.

In such cases, the will stands, and aside from legislative provisions for the support of dependents or for a division of matrimonial assets on death the family has no redress.

The Doctrine of Mootness

Zucchiatti v. The College of Dental Surgeons of British Columbia, 2013 BCSC 1736 discussed the doctrine of mootness:

The doctrine of mootness was described in a unanimous SCC in Borowski v. Canada (Attorney General), [1989] 1 S.C.R. 342 at 353 as follows:

The doctrine of mootness is an aspect of a general policy or practice that a court may decline to decide a case which raises merely a hypothetical or abstract question. The general principle applies when the decision of the court will not have the effect of resolving some controversy which affects or may affect the rights of the parties. If the decision of the court will have no practical effect on such rights, the court will decline to decide the case. This essential ingredient must be present not only when the action or proceeding is commenced but at the time when the court is called upon to reach a decision.

Speculation on the potential for future events is not enough to create an ongoing adversarial dispute between the parties. The possibility that the present issue may arise again between the parties in the future is considered too remote to render the present question a live controversy (Lockhart v. Provincial Planning Appeal Board, 1990 CanLII 3896 (N.B. CA); International Assn. of Bridge, Structural, Ornamental and Reinforcing Iron Workers v. Labourers’ International Union of North America, 2001 NBCA 64).

Under special circumstances, a court may exercise its discretion to hear a moot case.

In Borowski, the Court identified the following factors to consider in deciding whether to hear a moot case (at 358-363):

1. The need for a full adversarial context between the parties;

2. The concern for judicial economy, having regard to any practical effects on the rights of the parties, the importance of addressing issues that are of a recurring nature but brief duration, and any issues of public importance of which a resolution is in the public interest; and

3. The need for courts to be sensitive to their adjudicative role and avoid intrusions into the legislative role by pronouncing judgments in the absence of a dispute affecting the rights of the parties.

[17] The party seeking to have a moot question decided bears the onus of convincing the court to make an exception (Payne v. Wilson, 2002 CanLII 45002 ONCA at para. 18).

Medical Records Admissibility and the Remoteness of Time

Re Gibb estate 2021 BCSC 2461 involved inter alia the admissibility of medical records in S. 58 WESA application to remedy a will that a lawyer prepared, reviewed by telephone with the deceased but not signed before his death.

The court ultimately found that the unsigned will was a valid will and was admitted into probate.

Admissibility of Medical Records

One of the respondent’s objections to the admissibility of hospital medial records was their lack of relevance due to the remoteness of time.

In Laszlo v. Lawton, 2013 BCSC 305 [Laszlo], that evidence of symptoms exhibited by a will-maker before and after making a will can support an inference of capacity at the time the will was made:

[190] The diminishment of mental capacity, particularly in the elderly, will frequently emerge and worsen over time. In light of that, evidence of symptoms exhibited by a testatrix both before and after the making of the will may support an inference relevant to the determination of the presence or absence of testamentary capacity at the material time: see generally, Smith v. Tebbett (1867), L.R. 1 P.& D. 354 at 398; Kri v. Patterson, [1989] O.J. No. 1817 (Surr. Ct.); Fawson Estate (Re), 2012 NSSC 55; Moore v. Drummond, 2012 BCSC 170 at para. 47 [Moore]; Coleman v. Coleman, 2008 NSSC 396 [Coleman].

In summary, the medical records are admissible as business records for the fact that the statements therein were made. The direct observations of the various medical practitioners are admissible and relevant to the issue of suspicious circumstances. The respondents’ concerns regarding remoteness go to the weight of the records rather than their admissibility.

The medical records from the time of the deceased’s heart attack to his death are admissible except for any opinions they contain. They are relevant to the determination of the presence or absence of testamentary capacity at the material time.

However, the selected medical records from prior years that the respondent tendered are not admissible for any purpose. While a court considering a s. 58 application will “benefit from learning as much as possible about all that could illuminate the deceased’s state of mind, understanding and intention regarding the document” (Hadley Estate (Re), 2017 BCCA 311, at para. 40) these medical records illuminate nothing. They are not relevant, not authenticated, not complete and not admissible under the business records exception to hearsay. Nor have I considered the other portions of the respondent’s affidavit that are hearsay, irrelevant or inflammatory.

Striking Out Claims, Pleadings, Petitions or Other Documents

Parmar v Sidhu 2022 BCSC 1359 reviewed the law relating to striking out claims, pleadings, petitions or other documents.

Rule 9-5(1) states:

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,(c) it may prejudice, embarrass or delay the fair trial or hearing of the proceeding, or
(d) it is otherwise an abuse of the process of the court,
…
Under subrule 9-5(2), no evidence is admissible on an application under subrule 9-5(1)(a).

It is well established that the test for determining whether to strike out a claim or not is set out in R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42 at para. 17 in which the Court was applying the predecessor to Rule 9-5(1):

[17] The parties agree on the test applicable on a motion to strike for not disclosing a reasonable cause of action under r. 19(24)(a) of the B.C. Supreme Court Rules. This Court has reiterated the test on many occasions. A claim will only be struck if it is plain and obvious, assuming the facts pleaded to be true, that the pleading discloses no reasonable cause of action: Odhavji Estate v. Woodhouse, 2003 SCC 69, at para. 15; Hunt v. Carey Canada Inc., [1990] 2 S.C.R. 959, at p. 980. Another way of putting the test is that the claim has no reasonable prospect of success. Where a reasonable prospect of success exists, the matter should be allowed to proceed to trial: see, generally, Syl Apps Secure Treatment Centre v. B.D., 2007 SCC 38; Odhavhi Estate; Hunt; Attorney General of Canada v. Inuit Tapirisat of Canada, [1980] 2 S.C.R. 735.

The next issue to be considered is whether allegations based on assumptions and speculation, or allegations that are manifestly incapable of being proven, can be taken as true.

Operation Dismantle Inc. v. The Queen, [1985] 1 S.C.R. 441, 1985 CanLII 74 (S.C.C.), a case which involved an attempt to stop the Canadian government from testing cruise missiles, addressed the issue at para. 27:

We are not, in my opinion, required by the principle enunciated in Inuit Tapirisat, supra, to take as true the appellants’ allegations concerning the possible consequences of the testing of the cruise missile. The rule that the material facts in a statement of claim must be taken as true for the purpose of determining whether it discloses a reasonable cause of action does not require that allegations based on assumptions and speculations be taken as true. The very nature of such an allegation is that it cannot be proven to be true by the adduction of evidence. It would, therefore, be improper to accept that such an allegation is true. No violence is done to the rule where allegations, incapable of proof, are not taken as proven.

In more simple terms, the Court was saying that allegations of fact based upon assumptions and speculations cannot be taken as true.
Later, at para 78, the Court in Operation Dismantle stated:

[78] It has been suggested, however, that the plaintiffs’ claim should be struck out because some of the allegations contained in it are not matters of fact but matters of opinion and that matters of opinion, being to some extent speculative, do not fall within the principle that the allegations of fact in the statement of claim must be taken as proved. I cannot accept this proposition since it appears to me to imply that a matter of opinion is not subject to proof. What we are concerned with for purposes of the application of the principle is, it seems to me, “evidentiary” facts. These may be either real or intangible. Real facts are susceptible of proof by direct evidence. Intangible facts, on the other hand, may be proved by inference from real facts or through the testimony of experts. Intangible facts are frequently the subject of opinion.
…
The Court of Appeal, in my opinion, later clarified this issue in H.M.B. Holdings Limited v. Replay Resorts Inc., 2021 BCCA 142 [H.M.B.] at para. 54:

[54] The respondents submit that some of the facts as pleaded are incapable of proof, and that the pleadings cannot be taken as true. As noted above, the test on whether to strike a claim includes an assumption that the facts pleaded by the plaintiff are to be taken as true. This, however, is not an absolute rule – there are exceptions. The rule does not require that allegations based on assumptions and speculation, or allegations that are “manifestly incapable of being proven”, be taken as true: Operation Dismantle at p. 455; Imperial Tobacco at para. 22.

General Cost Assessment Principles 2022

Sherwood v The Owners of Strata Lot 1549 2022 BCSC 1349 provides an excellent and thorough review of hos cost assessment and disbursements .

Rule 14-1 deals with cost assessment.

Sub-section (1) addresses cost assessment generally:

If costs are payable to a party under these Supreme Court Civil Rules or by order, those costs must be assessed as party and party costs in accordance with Appendix B …

Sub-section (2) sets out the test for fees under Appendix “B”:

Cost Assessment of party and party costs

(2) On an assessment of party and party costs under Appendix B, a registrar must

(a) allow those fees under Appendix B that were proper or reasonably necessary to conduct the proceeding, and
(b) consider Rule 1-3 and any case plan order.

Sub-section (5) addresses the test for disbursements:

Disbursements

(5) Cost assessment under subrule (2) or (3) of this rule, a registrar must

(a) determine which disbursements have been necessarily or properly incurred in the conduct of the proceeding, and
(b) allow a reasonable amount for those disbursements.

Rule 1-3 is as follows:

Object

(1) The object of these Supreme Court Civil Rules is to secure the just, speedy and inexpensive determination of every proceeding on its merits.
Proportionality

(2) Securing the just, speedy and inexpensive determination of a proceeding on its merits includes, so far as is practicable, conducting the proceeding in ways that are proportionate to

(a) the amount involved in the proceeding,
(b) the importance of the issues in dispute, and
(c) the complexity of the proceeding.

There is a summary of applicable principles for cost assessment in CLE-BC’s loose-leaf publication, Practice Before the Registrar, General Principles of Cost Assessment, at para. 2.25.

Some relevant points for purposes of this assessment include:

a) Whether fees claimed or disbursements claimed should be allowed is determined objectively.
b) A step is “necessary” if it was indispensable to the conduct of the proceeding. It is “proper” if it was not necessary but was nonetheless reasonably taken or incurred for the purpose of the proceeding.
c) If fees or disbursements were incurred or increased through extravagance, negligence, mistake or by reason of payment of unjustified charges or expenses, they should be disallowed.
d) The registrar has a duty to consider counsel’s obligation to prepare a client’s case thoroughly and with care, and not to second-guess counsel’s views of what steps or expenses were required.
e) Whether a disbursement was necessarily and properly incurred must be assessed based on the circumstances existing at that time.
f) One way that reasonableness can be assessed is in relation to the amount at stake in the proceeding in which costs are claimed.

In Carreiro v. Smith, 2015 BCSC 2379 at paras. 13-15, Registrar Nielsen summarized the general principles as follows:

Whether work for which fees are claimed should be allowed must be determined objectively. A step was necessary if it was indispensable to the conduct of the proceeding. A step was proper if it was not necessary, but was nevertheless reasonably taken or incurred for the purpose of the proceeding. In fixing the number of units for items where a minimum and a maximum number of units is allowed, the Registrar is to allow the minimum amount of units for matters upon which little time should ordinarily have been spent; and the maximum amount of units for matters upon which a great deal of time should ordinarily have been spent.

The assessment of discretionary tariff items is an objective exercise. In determining the proper number of units to award in respect of each item, the Registrar is to compare the case that is before him or her with all other cases that come before the court, and decide where it fits within the spectrum. Certain objective factors are to be considered, such as whether the litigation was simple or straightforward, if the litigation involved numerous parties, extensive legal issues, numerous experts, large sums of money, or any other factors which may have impacted upon the case’s difficulty.

Registrars are to have regard to the particular circumstances of the proceeding in which costs are claimed when deciding how many units within the prescribed range should be allowed.

In Wheeldon v. Magee, 2010 BCSC 491 at para. 21, Master Bouck commented regarding assessment of tariff items:

With respect to the tariff items, where the minimum number of units are provided for an item, the assessing officer must consider this question: “How much time, on a scale of 1 to X (where X is the maximum units the tariff provides) should a reasonably competent lawyer have spent on the work for which the costs are claimed?”: See Practice Before the Registrar (CLE) at p. 2-22.

[ In Dhillon v. Bowering, 2013 BCSC 1178 at paras. 15-16, Registrar Sainty summarized the process of assessing disbursements:

The test for determining the recoverability of a disbursement is set out in Van Daele v. Van Daele (1983), 56 B.C.L.R. 178 (C.A.), where Mr. Justice Macfarlane said at paragraph 11:

The proper test, it seems to me, from a number of authorities referred to us this morning is whether at the time the disbursement or expense was incurred, it was a proper disbursement in the sense of not being extravagant, negligent, mistaken, or a result of excessive caution or excessive zeal, judged by the situation at the time when the disbursement or expense was incurred.
16 In deciding these issues, a registrar has a wide discretion. That discretion was explained in Bell v. Fantini (1981), 32 B.C.L.R. 322 (S.C.), at paragraphs 23 and 24, in the following manner:

I consider that Rule 57(4) entitles the registrar to exercise a wide discretion to disallow disbursements in whole or in part where the disbursements appear to him to have been incurred or increased through extravagance, negligence, or mistake, or by payment of unjustified charges or expenses. The registrar must consider all of the circumstances of each case and determine whether the disbursements were reasonably incurred and were justified. He must be careful to balance his duty to disallow expenses incurred due to negligence or mistake, or which are extravagant, with his duty to recognize that a carefully prepared case requires that counsel use care in the choice of expert witnesses and examine all sources of information and possible evidence which may be of advantage to his client.

The registrar is not bound to accept an affidavit of counsel that in counsel’s opinion the employment of the expert or the incurring of the expense was justified or that it was necessary for the attainment of justice when the registrar is considering allowing or disallowing the disbursement under this rule. He should give careful consideration to any such affidavit and he must weigh what is deposed to against any affidavit that deposes to the opposite effect. His duty under the rule is to determine whether the expense is a reasonable and justifiable expense which should be borne by the unsuccessful litigant.

And at para. 23 of her reasons, Registrar Sainty said the following regarding proportionality:

23 I must also consider “proportionality” in making my decision. But proportionality is, in my view, a two-way street. The amount of money at issue in an action (large or small) may have a bearing on both the necessity and propriety of a disbursement and whether it is reasonable in the circumstances. … In my view (and I agree with Ms. Dewar’s submissions on this point), proportionality (which I must consider in assessing costs per Rule 14-1(2)(b)) refers to the significance of the claim; either small or large.
Analysis

Alter Ego Trusts

Mong Alter Ego Trust No. 1 v Yip 2022 BCSC 1327 involved a dispute amongst three siblings over two assets transferred into their late mother’s alter ego trust about 8 years before she died.

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

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.

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:

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.

Alter Ego 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

Testamentary Capacity, Knowledge & Approval

Jung estate v Jung estate 2022 BCSC 1298 found a will invalid and discussed the difference between testamentary capacity and knowledge and approval.

There is a distinction between capacity to make a will and knowledge and approval of the contents of a will.

Chief Justice Hinkson quoted from John Poyser’s book Capacity and Undue Influence (Toronto: Carswell, 2014) at page 235 in Halliday (para. 178) in distinguishing between testamentary capacity and knowledge and approval:

Lord Justice Moore-Bick went on to comment on the distinction between testamentary capacity, on the one hand, and knowledge and approval on the other, giving an elegant formulation to distinguish between them (emphasis added):

The use of the expression “knowledge and approval” is liable to give the impression that the court is concerned with whether at the time he executed the will the testator must be able to reconsider all the dispositions he has made. That would require testamentary capacity, but that is not what is meant by the convenient expression “knowledge and approval”. Modern authorities recognise that a clear distinction is to be drawn between testamentary capacity and knowledge and approval. As the judge observed in this case …, testamentary capacity includes the ability to make choices, whereas knowledge and approval requires no more than the ability to understand and approve the choices that have already been made.

Paraphrasing a different comment elsewhere in the reasons for decision, the twin requirements of knowledge and approval in testamentary capacity ensure that the will is the product of the conscious intention of a sound mind. Knowledge and approval is the “conscious intention” in that formula.

Justice Francis explained that knowledge and approval requires more than the will-maker “simply knowing the contents of the will” but requires that the will-maker is “aware of the magnitude of the residue of her estate and must ‘appreciate the effect’ of the disposition of her estate”: Geluch v. Geluch Estate, 2019 BCSC 2203 at para. 127; citing Russell v. Fraser (1980), 118 D.L.R. (3d) 733 (B.C.C.A.) at para. 12.

Partition, Distribution of Proceeds, Occupational Rent

Marziale v Adam 2022 BCSC 1308 dealt with the accounting and apportionment between two tenants in common who for a number of reasons including occupational rent could not agree on how to divide the sale proceeds.

Many of the cases relating to partition and distribution of the sale proceeds come down to arguments over occupational rent- ie one owner living in the subject premises to the exclusion of the other co owner.

Adjusting Accounts:

At para. 53 of Hedrick v. Graham, 2012 BCSC 1760, the Court states:

Next, I must determine if and how I should adjust accounts between the co‑owners in order to achieve an equitable sharing of expenses and revenues in accordance with the applicable law as set out above. The law is clear that on sale in lieu of partition, the court may “make all just allowances and give such directions as will do complete equity between the parties” (Dacyshyn v. Semeniuk, 2007 BCSC 71 at para. 43, citing Baker v. Baker, [1976] 3 W.W.R. 492 at p. 495).

Occupation Rent

A useful discussion of the background to a claim for occupation rent is found in Baker v. Baker [1976] 3 W.W.R. 492:

Baker was a case of partition and sale of a property held in joint tenancy. It concerned the break-up of a marriage where the parties ahd lived in the same home.

The discussion of occupation rent in the Baker case arose in circumstances of “constructive ouster.”

However, the court adopted as a general principle that “‘occupation rent’ is not necessarily measured by either the rental value of the property or the rent which an ousted owner may have to pay for accommodation elsewhere. It is, simply, a form of compensation” (at 501).

The first point I draw from Baker is that upon termination of the joint tenancy by court order for partition, the court may “in such proceedings make all just allowances and should give such directions as will do complete equity between the parties ”

The court in Baker goes on to refer to a series of quotations from old cases in equity at 495-496:

What is just and equitable depends on the circumstances of each case. For instance, if the tenant in occupation claims for upkeep and repairs, the Court, as a term of such allowance, usually requires that the claimant shall submit to an allowance for use and occupation.

…if one tenant has made improvements which have increased the selling value of the property, the other tenant cannot take the advantage of increased price without submitting to an allowance for the improvements

…when…one tenant has paid more than his share of encumbrances, he is entitled to an allowance for such surplus…

…a co-owner in occupation should be permitted to deduct only payments on account of principal, but she would be able to deduct payments on account of mortgage interest, taxes and repairs during her period of occupation if she agreed to submit to an allowance for use and occupation.