Civil Forfeiture Smack Down: B.C. (Director of Civil Forfeiture) v. Wolff

Posted by Peter Roberts on May 03, 2012

In earlier blogs, I noted the financial success of the Office of the Director of Civil Forfeiture in recovering funds by seeking forfeiture of assets from people who are alleged to have been involved in “unlawful activity”.  As the Director frequently argues, the purpose is to take the profit out of criminal activity, to prevent the use of specific assets to unlawfully acquire wealth, to compensate victims of crime and to fund crime prevention and remediation.  Laudable goals in principle. 

The problem is that the Director frequently overreaches and seeks forfeiture in unjustified circumstances.  In such cases, the owner or interest holder is faced with a lengthy, costly and potentially embarrassing court process to defend their entitlement to retain that asset.  Often the asset being fought over, though significant to its owner, is modest.  More often than is fair, the owner is compelled to make a deal with the Director to avoid a costly trip to court.  This effectively amounts to a second form of punishment for involvement in a criminal offence.  Such settlements with the Director do not benefit from either public disclosure or the scrutiny of the judiciary.  They are often entirely unfair.  This does nothing to enhance respect for the law or the justice system.

However, as more and more cases under the Civil Forfeiture Act (the “CFA”) come before the courts, perhaps the pendulum will swing in favour of those facing a claim of forfeiture.  Judges do not seem to take as expansive a view of the Director’s entitlement to forfeiture as the Director claims.  A recent case, B.C. (Director of Civil Forfeiture) v. Wolff is a refreshing example.

Mr. Wolff, a retired firefighter, did a silly thing.  On one of his regular trips to Williams Lake to go hunting in 2005, he agreed to deliver a duffle bag to a “Mr. Y”.  When he was pulled over in his 2003 Dodge Ram for speeding, the arresting officers smelled marijuana which then led to their discovery of 4 pounds of it in the duffle bag.  In June 2007, Mr. Wolff pled guilty to possession for the purposes of trafficking.  He was given a conditional discharge as he had no prior criminal record. 

In December 2007, the Director commenced a claim seeking forfeiture of Mr. Wolff’s truck, alleging it had been used “as an instrument of unlawful activity” contrary to the CFA.  By this point, Mr. Wolff had paid out the lease on his truck.  In all, he paid some $52,000 to buy the vehicle.  The Director argued that Mr. Wolff should lose his truck or, in the alternative, should pay part of its value to the Director.  The Director said this was required as it was likely Mr. Wolff would use his truck to commit similar offences in future. 

Mr. Wolff’s only defence (as he had been convicted of a criminal offence) was to seek to avoid forfeiture under section 6 of the CFA.  That provision gives the court a discretion to refuse to grant a forfeiture order, to limit its application or to put conditions on it where forfeiture of the property “is clearly not in the interests of justice”.  Mr. Wolff bore the onus of establishing forfeiture was not in the interests of justice.

The Court set out a variety of considerations it would take into account when weighing the interests of justice and pointed out that a forfeiture order is not intended to be punitive.  There was no evidence Mr. Wolff had used the proceeds of any unlawful activity to purchase his truck.  Despite the Director’s assertions, there was also no evidence that Mr. Wolff otherwise used or intended to use his truck to commit similar offences.  The Court was also sceptical of the Director’s delay in seeking forfeiture of the truck.  The claim was not started until over two years after Mr. Wolff’s arrest and after he had paid out his truck lease. 

In denying the Director’s claim for forfeiture, the Court said:

I do not agree that forfeiture would be preventative in this case. The trafficking occurred nearly four years ago.  There is no evidence that Mr. Wolff has engaged in any further unlawful activity.  Even if I order the Truck forfeited, there is nothing stopping Mr. Wolff from borrowing or renting a vehicle should he choose to engage in similar activities in the future.

Furthermore, I do not agree that prevention should be elevated above the dominant considerations of proportionality and fairness.  If the Director’s true motive was to prevent prospective unlawful activity, then the Director would have moved in a timelier manner to initiate the proceedings.  Instead, the Director waited until December 2007, after Mr. Wolff had been convicted, sentenced, and had legitimately bought out the lease on the Truck, before commencing these proceedings.  While I recognize that the CFA does not impose a limitation period in which to commence an action, I do not agree that it is in the interests of justice for the Director to wait an inordinate amount of time and then rest his case on the goal of prevention.

If Mr. Wolff had a history of trafficking or if there was some evidence, rather than mere speculation, that he would have engaged in trafficking using the Truck again, my decision in this regard would have been different.  In those events, it would not be clearly unjust to order forfeiture as a preventative measure.

After considering and taking into account proportionality and fairness, as well as Mr. Wolff’s degree of culpability demonstrated by the evidence, the need for compensation in the circumstances and, finally, the need to prevent future harm and deterrence, I am satisfied that the forfeiture of the whole of the Truck is clearly not in the interests of justice.

This case is a good precedent for those who face forfeiture claims.  Based on this decision, the Director will need to present far more cogent evidence establishing that the property owner will use the given asset for further “unlawful activity” or that the asset was purchased with the proceeds of such activity.  Without such evidence, it will likely not be in the interests of justice to order forfeiture.

The case is also interesting for another reason.  One of the Director’s submissions was that the court ought to consider the costs to society of the type of crime in issue.  In this case, the Director argued that the annual societal costs of marijuana use were over $140 million.  That fact ought to count in favour of forfeiture as the value of the asset was small compared to this harm and would be used to ameliorate it.  The Court disagreed saying it offended the principles of fairness and proportionality to make Mr. Wolff responsible for the total social costs of marijuana use.  Such a result would be “capricious and unfair”.

The Long Arm of Canadian Courts - Supreme Court of Canada Clarifies the Test for Jurisdiction over Foreign Defendants

Posted by Craig Ferris on April 26, 2012

In a recent case, Club Resorts Ltd. v. Van Breda, the Supreme Court of Canada elaborated on the “real and substantial connection” test, bringing greater clarity and predictability to the determination of whether a court is entitled to assume jurisdiction over a case which also has ties to a foreign jurisdiction.  In doing so, the Supreme Court of Canada has greatly expanded the range of cases over which Canadian courts are now likely to assume jurisdiction.

In Van Breda, the Court heard appeals of two separate cases in which individuals were injured while on vacation in Cuba. The actions were brought in Ontario against several parties, including Club Resorts Ltd., a company incorporated in the Cayman Islands that managed the two hotels where the individuals were staying. Club Resorts challenged the court’s jurisdiction. In both cases, the motion judges held that the Ontario courts had jurisdiction and that Ontario was a more appropriate forum. The two cases were heard together before the Ontario Court of Appeal, where both appeals were dismissed.

In one of the cases, Morgan Van Breda suffered catastrophic injuries while on a beach in Cuba. Ms. Van Breda’s spouse, Mr. Berg had made arrangements for a trip to Cuba with an Ottawa-based travel agent whereby he would provide squash lessons to resort members in exchange for free accommodation. In the other case, Claude Charron drowned while scuba diving in Cuba. Dr. Charron and his wife had booked an all-inclusive vacation package that featured scuba diving.

The Supreme Court of Canada ruled the Ontario courts had jurisdiction.  In doing so, they set out a non-exhaustive list of presumptive connecting factors for tort cases which tie the legal situation to the forum. If the party arguing that the court should assume jurisdiction establishes any one connecting factor, a presumption of jurisdiction arises. The party challenging the assumption of jurisdiction then has the burden of rebutting that presumption by showing that the connecting factor either does not indicate a relationship between the subject matter of the litigation and the forum, or that it indicates only a weak relationship. If the presumption of jurisdiction is not rebutted, the court must hold that it has jurisdiction; unless it determines to decline jurisdiction based on the principles of forum non conveniens.

In an increasingly interconnected world, Van Breda represents an attempt by the Supreme Court of Canada to make more certain the rules which permit litigants to seek the assistance of Canadian courts.  In doing so, the Court appears to have stretched the long arm of Canadian courts.

B.C. Courts Consider Changes to Retiree Health Care Benefits

Posted by Ron Skolrood on April 18, 2012

Retirement benefits have been much in the news recently with the announcement by the federal government that the eligibility age for public Old Age Security benefits will rise from 65-67 beginning in 2023.  Concerns about the affordability of retiree benefits is particularly acute in the private sector where factors such as the aging population, economic uncertainty, government offloading of public services and escalating health care costs are causing employers to examine their ability to continue to provide post-retirement benefits to their retirees.

It is generally accepted that employers can make changes to their benefit plans prospectively including changes to the health and welfare benefits that will be available to their employees in the future when they retire (health and welfare benefits must be distinguished from pension benefits that are subject to different rules and have a measure of statutory protection under pension standards legislation).  Less clear is whether employers can change the benefits provided to those people who are already retired.  Two recent British Columbia cases deal with this situation.

In Lacy et. al. v. Weyerhaeuser Company Limited, 2012 BCSC 353, five former MacMillan Bloedel employees sued Weyerhaeuser for changes made to Weyerhaeuser’s retiree benefit plan (Weyerhaeuser had purchased MacBlo in 1999 and had assumed responsibility for the retiree plan).  Up until 2010, retirees were eligible to have 100% of the cost of the premiums for the provincial Medical Services Plan and an extended health care plan paid by the company.  In October 2009 however, Weyerhaeuser advised retirees that due to concerns about the viability and affordability of the benefit plans, the company was freezing its contribution at 50% of the cost in place as of January 1, 2010 and that any future increases would be borne by retirees.

In his decision dated March 9, 2012, Mr. Justice Saunders of the B.C. Supreme Court found in favour of the Plaintiff retirees and held that Weyerhaeuser was not entitled to make the change.  He concluded that while the benefits were originally extended to retirees as a matter of company policy, over time they had evolved into a contractual obligation and had become a form of deferred compensation.  The Judge found that the promise of premium-free benefits in retirement had been communicated to the Plaintiffs throughout much of their working lives and, as such, was binding upon Weyerhaeuser.  The benefits vested upon retirement and accordingly the Plaintiffs were entitled to the level of benefits in place as of the date each of them retired.

Shortly after the Lacey decision was released, the B.C. Court of Appeal rendered its decision in Bennett v. British Columbia, 2012 BCCA 115.  Bennett involved an appeal from the dismissal of a class action brought by former B.C. public servants challenging changes made to their retiree benefits provided through the B.C. Public Service Pension Plan.  The changes in issue were similar to those considered in the Lacey case in that retirees were required for the first time to contribute to the cost of the benefits.  The Plaintiffs’ claims were similar as well in that they alleged that they had been promised premium-free retiree benefits as part of their contracts of employment with the provincial government.  Unlike in Lacey however, the Court disagreed.

In Bennett, the Court held that the statements relied upon by the Plaintiffs were not contractual promises but rather were merely descriptions of the retirement benefits available from time to time.  The Court distinguished between representations and promises and found that the various statements about the future benefits fell short of having contractual force.  The Court further found that many of the statements were made well after the Plaintiffs were hired and often when they were close to retirement.  As such, the Plaintiffs’ continued employment and service did not provide any new or good consideration for the “promise” of benefits in retirement.

The Lacey decision is currently under appeal and it remains to be seen whether the Court of Appeal will apply a similar analysis as that employed in Bennett and overturn the decision.  In the meantime, notwithstanding the different result in the two decisions, certain common lessons can be drawn for employers who are considering the future of their retiree benefit programs:

  • If retiree benefits vest or become guaranteed, they do so at the date of retirement so employers are generally free to make changes prospectively to the benefits for future retirees (subject to any employment law concerns about alteration of existing employment contracts); and
  • The ability to change benefits for current retirees will depend in large part about how the benefits have been implemented and communicated to employees and retirees over time.  Employers will be in a stronger position if they have made it clear in relevant communications that they reserve the right to change the benefits.

One issue that forms an undercurrent to both the Lacey and Bennett decisions, but is not addressed by the courts in any detail, is the significantly changed circumstances that exist today from when many of the retirement promises in issue were made.  For example, all of the Plaintiffs in Lacey worked in and retired from the forest industry at a time when that industry was flourishing and when companies operating in the industry were well able to afford generous benefit packages for their retirees.  At the same time, the cost of those benefit packages was relatively small.  Those days are long gone.  Today, the B.C. forest industry has been ravaged by the economy and many companies in the industry simply cannot afford to maintain the existing retiree benefit plans.  If they are held to promises or representations made in the past (often by predecessor companies) under very different circumstances, their economic viability may be threatened.

Because retiree health benefits are not paid out of accumulated assets like pension benefits, but rather are funded by current operating revenues, any threat to the viability of the employer company is in effect also a threat to the long term viability and security of the benefits.  Accordingly, in many instances, retirees would be better served by working with their former employers to achieve some form of compromise that would permit the employer to realize some cost savings while at the same time maintaining a reasonable level of benefit coverage.  If retirees insist however on compelling the employer to maintain historical benefit levels, they do so to the prejudice of current employees and ultimately to their potential prejudice as well.

Materially Altered Cheques: Who Bears the Loss?

Posted by Peter Roberts on April 18, 2012

You just met a nice foreign gentleman.  He asks you to assist him in facilitating a transfer of funds overseas.  You agree because he offers a 5% commission.  He produces a cheque payable to you, for a large sum, and asks you to deposit it into your bank account.  After retaining your commission, you wire the rest overseas as instructed.  Easy money!  Now, several weeks later, your bank wants you to pay back the entire amount of the cheque.  What a surprise: the cheque was a fraud. 

Surprisingly, many people are taken in by such a ruse.  Is it greed, wilful blindness or just stupidity?  While cheque use in Canada is on the decline, cheque fraud is reported to cost Canadian business $1 to $2 billion each year.  Naturally, when your bank has to return funds credited to your account to the drawee bank, they are going to come looking for you to repay them.  The law entitles them to do this.

The Supreme Court of Canada recently confirmed this by dismissing an appeal from the Ontario Court of Appeal in a case involving a materially altered cheque.  Mr. Grenville-Wood met a man from Taiwan who asked him to help with a fund transfer overseas.  Mr. Grenville-Wood agreed and deposited into his account a cheque payable to him in the amount of $57,000.13.  His bank credited the account.  Mr. Grenville-Wood kept $2,850 and wired the rest to Japan. 

Some weeks later, the drawee bank returned the cheque and reclaimed the funds from Mr. Grenville-Wood’s bank who, in turn, charged back the debt to Mr. Grenville-Wood’s account.  Turns out the cheque had originally been issued to another payee in the amount of only $355.12.  It had been materially altered to change both the payee and the amount.  Mr. Grenville-Wood claimed ignorance of this alteration (Really!). 

In the result, Mr. Grenville-Wood had over $12,000 scooped from his account by his bank.  The bank then sued him to recover the shortfall.  Mr. Grenville-Wood defended the claim.  He argued that because his account had originally been credited with the funds, and he had since spent or disbursed them (thus changing his position), he should not be required to pay the money back. 

The court dismissed Mr. Grenville-Wood’s defence.  At common law (and generally in a bank’s account agreement), the bank has a right to reverse a credit made to a customer’s account where there is a defect in the bill of exchange (the cheque) that was deposited.  The fact the collecting bank received payment from the drawee bank is no defence to a charge back of the customer’s account once the material alteration to the cheque is ultimately discovered.  While a chargeback like this should be made within a reasonable time, the law imposes no actual deadline.  If a cheque is worthless, the passage of time will not change that fact.

Interestingly, Mr. Grenville-Wood also tried on the argument that because he had told his bank about the circumstances surrounding the deposit of the cheque (including the transfer of most of the funds overseas), the bank owed him a duty to warn him the credit to his account was only provisional and might later be reversed if the cheque was dishonoured.  The court rejected this argument, noting that the bank had no duty to warn Mr. Grenville-Wood.  The bank could not give any meaningful assurance about the validity of the cheque, nor could it reasonably know whether it might later be dishonoured.  Mr. Grenville-Wood was the person best placed to prevent the loss and to make inquiries about the validity of the cheque.

As is often the case, if someone presents you with a proposal that is “too good to be true”, there is likely more to it than you are being told.  You deal with these people at your peril and may well unwittingly be risking considerable financial loss.

What is the Role of an Executor?

Posted by Peter Roberts on April 02, 2012

People are often asked, and frequently agree, to act as the executor of another’s estate.  This decision is generally made without an appreciation of what the executor’s role really is, particularly where there is a dispute over the Will.  Ordinarily, an executor is supposed to preserve the estate’s assets, pay the debts and distribute the balance to the beneficiaries entitled under the Will.  However, what is the executor to do when the beneficiaries have competing claims or the Will itself directs the executor to take an adversarial position?  The short answer is that the executor must remain neutral.  A recent B.C. case provides a sad example.

In Ketchum v. Walton 2012 BCSC 175, the court was asked to give directions to an executor on what he should do in a conflict between the disinherited children and the executor over the terms of the deceased’s Will.  Mr. Ketchum was estranged from his three children.  Two years before his death, he signed a Will that gave his entire estate to various friends and charities.  This was done intentionally so the children would inherit nothing.  The Will explained why this was so and specifically directed the executor to take an active role in defending any wills variation claim by the children.  The executor was authorized to deplete the entire estate, if necessary, to defend such a claim and ensure Mr. Ketchum’s intentions were carried out.

Following Mr. Ketchum’s death, his children commenced a wills variation claim challenging their father’s Will.  The named beneficiaries under the Will did not defend the claim.  This is understandable given that the bequests were either small (to friends) or to charities that are not in the business of fighting litigation over gratuitous bequests.  It looks bad.  As a result, the executor defended the claim but (wisely) sought a direction from the court with respect to the exact nature of his role in the wills variation claim.  This was prudent because an executor’s duty to specified and potential beneficiaries is neutrality.  In the eyes of the law, “it is a matter of indifference to the executor as to how the estate should be divided.”

In Ketchum, the executor argued that because none of the named beneficiaries were defending against the children’s claim, it was appropriate for him to do so, particularly where the Will gave a specific direction to that effect.  The court disagreed.  It held that the executor was to remain neutral and was to participate in the litigation only in a non-adversarial role as an amicus to assist the court in determining the merits of the wills variation claims.  The court went further to state that the clause in Mr. Ketchum’s Will directing the executor to fight the kids was void as contrary to public policy.  This was so because it purported to deny the children their lawful recourse to the courts under the Wills Variation Act. 

While it is always sad to find yourself in a position that leads to disinheriting a child, the take away from this case is that instructing your executor to take up the fight against disinherited family members puts the executor in an untenable position and will not be allowed by the courts. 

Thrill Seekers Are Bound By Releases When Things Go Wrong

Posted by Peter Roberts on March 20, 2012

The B.C. Court of Appeal recently upheld, and arguably extended, the enforceability of liability waivers and releases signed by customers of commercial enterprises.  The decision, Loychuk v. Cougar Mountain Adventures Ltd., is a strong affirmation that participants in inherently risky recreational adventures who sign releases will not be able to sue if they are injured, even where the injury was solely as a result of the negligence of the operator.

In Loychuk, two women were zip lining in Whistler and were injured when they collided.  Ms. Loychuk had become stuck part way down and, as a result solely of miscommunication by the operators, Ms Westgeest was sent down the same line and collided with Ms. Loychuk.  They sued the operator.  However, both had signed a release prior to, and as a condition of, taking part in the zip-lining.  The operator admitted negligence but sought dismissal of the case relying on the terms of the releases.  The trial court dismissed the claim and the Court of appeal upheld the decision.

In doing so, the Court of Appeal reviewed the judicial history of releases and waivers in the context of inherently dangerous activities such as skiing, white-water rafting and ski-doing.  In seeking to distinguish their claim from earlier decisions, the plaintiffs argued that in the case of zip-lining, all the risk in the activity was controlled by the operator.  The participants could not be contributorily liable.  If there ever was such a distinction, the Court of Appeal has erased it.  The court reasoned that releases are not contrary to public policy, even where the activity in issue is controlled completely by the operator.  If the law is to change for such activities, it is for the Legislature to do, not the courts. 

The court also addressed the argument that the participants had no meaningful ability to negotiate the release terms.  The operator simply presented what was effectively a contract of adhesion.  In dismissing this submission, the court noted that there is no power imbalance where a person wishes to engage in inherently risky recreational activity that is controlled or operated by another.  It is not unfair for an operator to require a release or waiver as a condition of participating.   If a person does not want to participate on that basis, he or she is free not to engage in the activity. 

That is not to say that adventure companies will always escape liability.  Liability can be established where it can be shown that the party seeking to rely on an exclusion clause knew it was putting the public in danger by providing a substandard product or service, or was reckless as to whether it was doing so.  In other words, that party engaged in conduct that is so reprehensible that it would be contrary to the public interest to allow it to avoid liability.  In such cases, any release signed will not protect the operator.

The court also considered whether waivers or releases were “unconscionable” and in contravention of the Business Practices and Consumer Protection Act (“BPCPA”).  The court found the test for unconscionability under the BPCPA was the same as the test at common law.  The court also noted that under the BPCPA, proof of unconscionability was only one of a number of enumerated factors that must be proven before a consumer transaction could be set aside.  In any event, the requirement to sign the waiver in order to go zip-lining was not unconscionable.  There was nothing in the conduct or advertising of the zip-line operator that misled its customers.

For those wishing to partake in dangerous adventures offered by commercial operators, this decision is a warning that you must truly appreciate the potential risks before taking part.  This includes the possibility of the operator’s negligence.  If you are injured, the courts are unlikely to provide you with any recovery.

Production of Confidential Settlement Documents - the Continuing Saga of Todd Bertuzzi and Steve Moore

Posted by Craig Ferris on March 12, 2012

As a lifelong Canucks fan, I will never forget the video footage of Todd Bertuzzi tackling Steve Moore and the subsequent North American wide television coverage.  This incident was back in the news recently because Master Dash of the Ontario Superior Court of Justice ordered production of the Minutes of Settlement among Todd Bertuzzi, Marc Crawford (the former coach of the Vancouver Canucks) and Orca Bay, the company that owns the Vancouver Canucks, arising from their claims against each other relating to the Steve Moore incident.

During a NHL game on March 8, 2004, Todd Bertuzzi, then of the Vancouver Canucks, struck Steve Moore, then of the Colorado Avalanche, from behind.  It is alleged in Moore et al v. Bertuzzi et al that the force of the blow caused Moore a significant injury and ended his NHL career.  The lawsuit was commenced on February 14, 2006 against Bertuzzi, and Orca Bay.  Bertuzzi subsequently issued a Third Party Claim against Marc Crawford.  Orca Bay filed a cross claim against Bertuzzi.

In July of 2011, Orca Bay, Bertuzzi and Crawford settled the claims amongst themselves.  The Plaintiff sought production of the Minutes of Settlement.  The Defendants resisted on the basis of settlement privilege.  Master Dash ordered the Minutes of Settlement be produced.

He found that the settlement had changed the landscape of the litigation because it has altered the relationship among the parties as set out in the pleadings.  The main ground for this finding was that the settlement apportioned liability among Orca Bay, Bertuzzi and Crawford in a way that could influence their testimony at trial.  Master Dash was particularly troubled that the trial judge could be left with the impression that Orca Bay, Bertuzzi and Crawford were adverse to each other when in fact they were not.  Master Dash found that the interests of fairness and justice overrode the public policy interest of fostering settlements by keeping them confidential. 

In the end, Master Dash limited the applicability of his decision to settlement agreements that “change the landscape of the litigation” and affect both pre-trial and trial procedures as being worthy of disclosure.  He also issued further reasons in which he stated the conduct of counsel was above reproach and he did not intend to suggest that any of them mislead the court.

Where does this leave Defendants who wish to settle among themselves and fight only with the Plaintiff?  “At risk” is the answer.  Given the case by case analysis utilized, in part, by Master Dash, Defendants will need to show in each case that the settlement does not fundamentally alter the case in order to ensure their settlement agreement will be protected from disclosure.

Mutual Wills: Are they Enforceable? A Recent Example: Re Wright Estate, 2012 BCSC 119

Posted by Peter Roberts on February 24, 2012

Mutual wills are a common estate planning tool.  Typically, a couple agrees to leave all or most of their estate to the surviving spouse, who then agrees to provide irrevocable gifts over to children.  Mutual wills are premised on an agreement between the spouses that following the death of one of them, the other won’t change their will to defeat their current joint intention.  The courts explain the doctrine of mutual wills af follows:

“Where the requirements for the application of the doctrine are satisfied, the survivor will not be permitted to defeat the agreement by revoking his or her will after the death of the other.  This result is achieved by the imposition of a constructive trust on the survivor’s estate for the benefit of those who were intended to benefit under the agreement.

The most fundamental prerequisite for an application of the doctrine is that there be an agreement between the individuals who made the wills.  It has been repeatedly insisted in the cases that:

(a) the agreement must satisfy the requirements for a binding contract and not be “just some loose understanding or sense of moral obligation;

(b) it must be proven by clear and satisfactory evidence; and

(c) it must include an agreement not to revoke the wills.”

This irrevocable aspect of mutual wills clashes with the general proposition that, if a testator is mentally competent, they are able to revoke their will.  Ordinarily, if one spouse dies leaving all to the other, then the remaining spouse is entitled to change their will to leave their estate, for example, to a second spouse instead of the couple’s children (subject to a probable Wills Variation Act claim). 

The problem of enforcing mutual wills arises most frequently where there are second marriages and children from the prior marriages.  In such cases, can a second spouse, who inherits all of their deceased spouse’s estate, then change their will to favour, for example, their own children over the deceased’s children?

If done properly, this type of scenario can be prevented and all the unpleasantness it brings avoided.  The recent decision in Re Wright Estate is a good example. 

In this case, Mr. Wright, a widower, brought considerably more wealth into his second marriage than his impecunious bride.  Both had children from earlier marriages.  Following their wedding, they retained a lawyer to assist with their estate planning.  Mr. Wright wished to provide for his second wife during her lifetime but leave the remainder of his estate to his children.  The second Mrs. Wright wanted the security of an income and a place to live during her lifetime, to leave her own children a small bequest and to have the remainder of Mr. Wright’s estate go to his children on her death.  

Following a number of well-documented meetings with their lawyer, the Wrights executed mutual wills which, among other things, committed each of them to irrevocably do certain things in reliance on the other’s promise to do the same.  In particular, Mr. Wright irrevocably agreed to register a life estate on his property in favour of his second wife, transfer certain RRIFs to her and grant her a life estate on his other assets.  The second Mrs. Wright executed a will which provided that the residue of her estate, after small bequests to her children, would go to her husband or his children if he predeceased her.  This bequest was expressly stated to be irrevocable and made in consideration for the transfer to Mrs. Wright of the life estate and RRIFs.

Mr. Wright later died.  The second Mrs. Wright changed her will to provide that her estate was to be divided equally between her children.  Mr. Wright’s children were to get nothing. 

Mr. Wright’s children then sought to enforce the irrevocable aspect of their step-mother’s previous will.  After commending the Wright’s solicitor for the detailed notes he took and the comprehensive advice given, the Court went on to enforce the irrevocable aspects of Mrs. Wright’s previous will.  Relying on his spouse’s promise to include in her will the irrevocably bequest to his children, Mr. Wright had transferred various assets and rights to Mrs. Wright during her lifetime.  This constituted evidence that there was an enforceable agreement between the Wrights which included a promise not to revoke her will.  In such cases:

“equity considers it a fraud upon the deceased, who has acted upon and relied upon the mutually binding nature of the agreement, for the survivor to change the will and break the agreement.  As the deceased cannot intervene to enforce the obligation, equity will enforce the survivor’s obligation, despite the survivor’s subsequent intentions.”

In many other cases, the courts have been unable to find the “clear and unequivocal” evidence needed to enforce the promise not to revoke a mutual will.  In this case however, largely because of the detailed notes of their lawyer, the Wrights were found to have gone “beyond trusting each would do the right thing or that each would provide fairly for the other’s children”: they were found to have entered into a binding, irrevocable agreement that the court would enforce.

If there is a cautionary note to be sounded, it is that a competent solicitor ought to be retained where the enforceability of mutual wills is an important consideration for a couple in their estate planning.  The evidence of that solicitor in subsequent legal proceedings may carry the day on whether the mutual will is enforceable or not.

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What To Do if You Think a Relative is Unable to Manage their Affairs

Posted by Peter Roberts on February 02, 2012

It is increasingly common for clients to ask what legal steps are available to help them care for aging parents or relatives.  Generally, they have a relative who is slowly slipping into dementia or some other incapacitating state.  In recent years, the law has done much to remodel the legal landscape to better address these types of situations.  There are new or revised statutes that govern things such as powers of attorney, representation agreements, adult guardianship, living wills and the like.  These are all tools that can help families and patients cope with difficult health care and capacity issues.

One of those tools, provided for in the Patients Property Act (the “PPA”), is the ability to apply to court to be appointed as a “committee” for an individual who has become incapable of looking after themselves or managing their financial affairs.  A committee has the full legal authority to look after the person and their financial affairs.  In order to obtain such an order, there must be written opinions from two doctors setting out their opinion that the patient suffers a mental incapacity that prevents them from looking after themselves or managing their financial affairs. 

However, problems can arise if, for some reason, the patient cannot to be examined by a doctor in order to determine capacity.  For example, the patient may refuse to go to a doctor or they may be under the influence of another who is preventing this from happening.  The PPA is very specific: without two medical opinions that the person is incapable, the court is legally unable to appoint a committee.  This can be very frustrating for family members.  In such a case, how can you compel a medical examination in order to determine capacity? 

One of those tools, provided for in the Patients Property Act (the “PPA”), is the ability to apply to court to be appointed as a “committee” for an individual who has become incapable of looking after themselves or managing their financial affairs. A committee has the full legal authority to look after the person and their financial affairs. In order to obtain such an order, there must be written opinions from two doctors setting out their opinion that the patient suffers a mental incapacity that prevents them from looking after themselves or managing their financial affairs.

However, problems can arise if, for some reason, the patient cannot to be examined by a doctor in order to determine capacity. For example, the patient may refuse to go to a doctor or they may be under the influence of another who is preventing this from happening. The PPA is very specific: without two medical opinions that the person is incapable, the court is legally unable to appoint a committee. This can be very frustrating for family members. In such a case, how can you compel a medical examination in order to determine capacity?

This was a problem faced recently by Lynn Temoin who had reason to believe her elderly father, Mr. Martin, was incapable and in need of protection. Her father, a man of considerable wealth, had remarried. His second wife persuaded Mr. Martin to revise his estate planning such that she and her children would benefit generously. Mrs. Temoin took the view that, at the time this was done, her father did not have the required mental capacity. Her problem was that she could not persuade her father to see a physician to get an opinion on his mental capacity. Without medical opinions, the court could not appoint a committee for Mr. Martin.

As a result, Mrs. Temoin applied to court for an order compelling her father to be assessed by two geriatric physicians for the purposes of providing opinions on whether he was competent. While this seems a sensible step, it is not one the courts are authorized by statue to take and one that the courts have always been very reluctant to order.

In deciding to grant this order, the court in Mrs. Temoin’s case provided a judicial precedent that will make it easier in future to seek such orders. The court relied on its inherent or parens patriae jurisdiction which provides it with the ability “to protect those who are unable to make decisions or to care for themselves.” That jurisdiction can only be exercised where there is no legislation governing the area. If there is a legislative gap, the jurisdiction can only be exercised in the best interests of the incompetent person.

Relying on these principles, the court found that there was a legislative gap in the PPA. The PPA does not authorize a court to order a medical examination where the person affected is uncooperative and it is impossible to obtain the necessary medical affidavits. Indeed, to order a medical examination conflicts with the fundamental principal of personal autonomy and the presumption of capacity. For example, the Adult Guardianship Act creates a legal presumption that every adult is capable unless shown otherwise. As the court noted, “given the presumption of competence, an individual should not be forced to undergo a medical examination that seeks to establish incapacity absent his or her consent.” “. . . [C]ompelling a person to submit to a medical examination is intrusive to personal autonomy and any order doing so would have to respect the values of the Canadian Charter of Rights and Freedoms.”

With this as the starting point, the court found that although there was insufficient “medical evidence” about Mr. Martin’s capacity, there was other evidence that did establish, at least at first instance, that he was incapable and at some risk. That evidence was from individuals who testified about Mr. Martin’s declining mental acuity and cognitive ability. It was compelling enough that the court found the “legislative gap” needed to exercise its parens patriae jurisdiction and order Mr. Martin to be examined. The “gap” existed between situations where the two required medical opinions were present (governed by the PPA) and situations where there was non-medical “‘proof of incompetence’ and where there is a compelling need for protection” (a situation the PPA does not address).

This is a very helpful decision to those who seek a committeeship order in the face of uncooperativeness or opposition. If medical evidence cannot be obtained, then other evidence of incapacity and the need for protection can be used as a means to obtaining the required medical evidence. This type of evidence can come from care-givers, relatives and family friends. If that evidence establishes that “the person who is the subject of the application is prima facie incompetent” and in need of protection, then the court may order medical examinations by two physicians to determine the medical question of capacity. Once that is done, the application for a committeeship under the PPA can be made. If appropriate, a committeeship order will be made.

REDMA Update - Early Completion of Condominium Does Not Allow Rescission

Posted by Craig Ferris on January 30, 2012

Last summer, I blogged on the ever expanding body of jurisprudence arising from purchasers of “pre-built” condominiums attempting to use their rescission rights provided under the Real Estate Development Marketing Act (British Columbia) (“REDMA”) to avoid completing their condominium purchases.  In particular, my blog related to the more developer friendly decision in Sharbern Holding Inc. v. Vancouver Airport Centre Ltd.

On January 24, 2012, Associate Chief Justice Cullen of the British Columbia Supreme Court released Bosa Properties (Edgemont) Inc. v. Ban (“Bosa”).  This is a further decision regarding REDMA and, in particular, it adds to the line of cases relating to the legal effect of an inaccurate estimated completion date included in the Disclosure Statement for the project.  The twist in this case is that the purchaser alleged a right to rescind because the development was completed early.

Associate Chief Justice Cullen attempted to reconcile the previous case law and concluded that an incorrect estimated completion date does not, without more, provide the purchaser with a right to rescind the purchase agreement.  Rather, he held that the “key concept, however, is materiality which, in the context of REDMA, is a function of the value, price and use of the condominium. Delay manifestly affects those criteria and would be in the mind of a reasonable person as such; acceleration is qualitatively different than delay and would not similarly influence the mind of a reasonable person.”

At the end of the day, Bosa stands for the concept that each time an estimated completion date is found to be an inaccurate, the court will need to consider whether the inaccuracy was “material”.  In doing so, the court will need to consider whether the delay has affected the “value, price and use” of the condominium.  Accordingly, a purchaser looking at his or her options will not be able to simply point to a missed completion date and say it is “material”.  Instead, evidence will need to be led concerning how the “value, price and use” were affected in the particular circumstance of the case.  Bosa represents a tougher road ahead for would be defaulting purchasers.