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BRITISH COLUMBIA EDITION EDITION

INSIDE THIS ISSUE:

Family Law; Division of Assets; Constructive Trusts - With Counsel Comments

Constitutional Law; Charter; Solicitor-Client Privilege; Money Laundering - With 2 Counsel Comments

Wills and Estates; Trusts; Powers of Attorney - With 2 Counsel Comments

Administrative Law; Standard of Review; Residential Tenancy

Real Property; Foreclosure; Limitation Periods - With Counsel Comments

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Prepare to Win.

O N P O I N TLEGAL RESEARCH

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May 2013

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Featured Cases:

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Joint family ventures are a relatively new approach in the division of

assets in family law cases dealing with unjust enrichment. Developed by the Supreme Court of Canada in Kerr v. Baranow, 2011 SCC 10 (“Kerr”), this concept replaced the previous use of “common intention resulting trusts” to achieve an equitable apportionment of jointly earned assets, based on the final value of the asset rather than on the value of a party’s contributions. In this case, the Court of Appeal limited the application of this approach to situations where a constructive trust was not appropriate because there was no clear link to any specific asset.

The plaintiff in this case brought the concept of a joint family venture to bear on the division of a single asset: the family home. This was based on Kerr’s characterisation of joint family ventures as assets which were produced through mutual effort, economic integration, actual intent, and priority of the family (Kerr at paragraph 100). The plaintiff argued that these were all present in the family’s dealings with their residence, and that therefore she was entitled to a percentage of its present value, rather than

reimbursement of her contributions.

Although the Court of Appeal supported the result, it did not support the broad application of joint family ventures, seeing them as limited to divisions of general assets and other situations “where the contributions of the parties may not be attributable readily to specific assets or where it may be inappropriate to attempt such an attribution” (at paragraph 89).

The Court held that Kerr had not changed the law of remedial constructive trusts as set out in Pettkus v. Becker, [1980] S.C.R. 834. Constructive trusts could be awarded where monetary remedies were insufficient and the claimant could demonstrate “a link or causal connection between his or her contributions and the acquisition, preservation, maintenance or improvement of the disputed property” (Kerr at paragraph 50).

In fact, the result of the two approaches was practically the same, with the exception that a constructive trust applied to a particular asset and granted property rights. Where a disagreement over apportionment was centred on one asset, the established principles of constructive trust applied and the Court held there was no need to resort to a joint family

Ibbotson v. Fung, 2013 BCCA 171Areas of Law: Family Law; Division of Assets; Constructive Trusts

~Joint family ventures limited to situations where no clear link established between party’s contribution and specific family assets~

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http://www.courts.gov.bc.ca/jdb-txt/CA/13/01/2013BCCA0171.htm


OnPoint Legal Research | Take Five


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Ibbotson v. Fung, (cont.)

venture (at paragraph 106).

In a lengthy dissent, Madam Justice Garson held that although both approaches remained open, “taking a unified approach to this area of the law would be a beneficial development rather than continuing to characterize some remedial orders as being a constructive trust and others a joint family venture” (at paragraph 29). In her view, nothing in Kerr limited joint family ventures to general assets of the estate, and such a limitation ignored the reality of family arrangements which could involve very specific financial integration.

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“There is nothing like

doing final preparation for an upcoming week long trial when you become alert to the fact that the Supreme Court of Canada has just released a decision that may (or may not) substantively alter your legal arguments or in the least cause some additional reconsideration and drafting of your legal position.

The decision of Kerr v. Baranow came down the weekend before the commencement of our B.C. Supreme Court trial of Ibbotson v. Fung . We were presented with this new test and concept of the “joint family venture”. [Which we soon determined were not so new concepts at all.]

Do we need to apply this new test? Does this change our legal arguments? Are constructive trust claims out the window? Are Wilson v. Fotsch and Pettkus v. Becker and Peter v. Beblow still “good law”? Note up, highlight, read, re-read and push on – that was our first engagement with the joint

family venture test and Kerr.

The Court in the BCCA decision of Ibbotson v. Fung took the opportunity to address in length

the scope and interpretation of the joint family venture test as articulated in Kerr v. Baranow. In addition, the Court also provided some greater clarity on the analysis of remedies in Kerr.

What was particularly significant, from our perspective as counsel for Ms. Ibbotson was the recognition and affirmation of the nature and diversity of domestic partnerships and the ability of such relationships to engage the joint family venture test.

The narrow definition of an “all or nothing “ framework for the application of the joint family venture test was specifically rejected by Justice Garson writing for the majority. The analysis of the joint family venture test was expanded by the following reasons of Justice Garson:

COUNSEL COMMENTS

Comments provided by Mark Slay and Zara Suleman, Counsel for the Respondent, Lindsay Y. Ibbotson

Zara Suleman

Ibbotson v. Fung

Mark Slay




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COUNSEL COMMENTS“First a rule stating that a joint family venture is limited to an across-the-board financially integrated relationship seems inconsistent with the notion that that the remedy for unjust enrichment should reflect the unique and varying nature of many domestic partnerships common in society.” [para. 57] and

“Limiting the doctrine of a joint family venture to a division of all the couple’s assets ignores the reality of many couples, many of who have much more targeted and specific financial integration.” [para. 58]

The reality as contemplated in BCCA decision is that parties may, as they did in Ibbotson v. Fung, have both jointly held assets subject to division and unjust enrichment claims at the same time having separately held assets not subject to such claims.

The Court was also clear that the remedy of a traditional constructive trust remains unchanged and where applicable to the facts parties do not need to engage the joint family venture test.

Furthermore the Court, we say, properly rejected the notion that the joint family venture test is somehow “inexorably coupled” to a proprietary remedy.

Since Kerr, there had somehow been the perception in family case law and commentary that the joint family venture test was “the” test for the determination of the remedy of unjust enrichment claims. Ibbotson v. Fung at the BCCA reaffirmed that the foundational cases and test of unjust enrichment remain the same as do the remedy of constructive trust. Where the facts do not easily fit into the existing basis for unjust enrichment claims, joint family venture provides an additional analysis for such remedies.

Both at trial and at the BCCA the issue of entitlement of Ms. Ibbotson to the inflationary increase in value of the family residence, was determined to be appropriate on the basis that the remedy was awarded on a value survived approach . The notion that Ms. Ibbotson should not benefit from this increase was rejected.

The Majority’s comprehensive reasons and even the lengthy dissent by Justice Chiasson, have further clarified the parameters of the joint family venture test, and more significantly from our perspective have affirmed the existing case law and analysis of unjust enrichment and constructive trusts.”


May 2013


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Federation of Law Societies of Canada v. Canada (Attorney General), 2013 BCCA 147Areas of Law: Constitutional Law; Charter of Rights and Freedoms; Solicitor-Client Privilege; Independence of the Bar; Money Laundering

~Independence of Bar recognised as principle of fundamental justice under Charter~


Since 1989, Canada has brought in a series of statutes and regulations

intended to combat money laundering. Beginning with the 2001 Anti-Terrorism Act, S.C. 2001, c. 41, these laws have attempted to impose record keeping and disclosure requirements on lawyers in respect of possible money laundering activities. This case arose out of the 2007 Regulations Amending Certain Regulations Made Under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, SOR/2007-293, which required lawyers to keep records of clients’ identifying information, and the details and purpose of their financial transactions. These records were subject to search without

warrant by “an independent agency that collects, analyses, assesses and discloses information in order to assist in the detection, prevention and deterrence of money laundering and of the financing of terrorist activities”. Canadian law societies, through the Federation of Law Societies of Canada, objected to these requirements as interfering with the solicitor-client relationship, and as fundamentally affecting the role of lawyers with respect to the state.

Sitting in a five-judge panel, the Court of Appeal ruled in favour of the Law Societies in a decision that has broad implications beyond the application of money-laundering legislation. The


http://www.tvsbarristers.com

http://www.courts.gov.bc.ca/jdb-txt/CA/13/01/2013BCCA0147cor2.htm

http://www.courts.gov.bc.ca/jdb-txt/CA/13/01/2013BCCA0147cor2.htm

May 2013


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decision was based on section 7 of the Canadian Charter of Rights and Freedoms (the “Charter”), which prohibits the deprivation of life, liberty or security of the person, except in accordance with the principles of fundamental justice. The Court held that the legislation clearly affected the section 7 rights of lawyers, since they were subject to imprisonment for non-compliance. However, the Court split 3-2 on the question of whether the section 7 rights of clients were also affected. The majority held that the legislation facilitated state access to confidential information, which was directly relevant to the prosecution of criminal charges. This potential for prosecution and imprisonment due to the mandatory collection of self-incriminatory information indirectly triggered section 7: see Canada (Attorney General) v. PHS Community Services Society, 2011 SCC 44. The dissent held that the connection between a lawyer’s

record-keeping and client’s incarceration was simply too tenuous; the dissent could not “accept that a liberty interest is engaged by the creation of a document which has only the potential of being used in an investigation or as evidence should a charge be laid” (at paragraph 166). For the dissent, it was untenable that section 7 should be engaged in every legally required record-keeping activity. The disagreement regarding clients’ section 7 interests had no effect on the result, since the lawyers’ rights were sufficient to found the decision.The furthest reaching aspect of this case arose in the Court’s consideration of whether the breach of section 7 was in accordance with the principles of fundamental justice. The Court identified three aspects of the solicitor-client relationship which were affected by the legislation: solicitor-client privilege, the independence of the Bar from the state, and the duty of undivided loyalty (at

FLSC v. Canada (Attorney General), (cont.)

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paragraph 102). The chambers judge’s decision was based on the principle of solicitor-client privilege, which was recognised as a principle of fundamental justice in Descôteaux v. Mierzwinski, [1982] 1 S.C.R. 860 at 875. The Court of Appeal held that for the most part, the legislation sufficiently protected solicitor-client privilege by allowing for court applications to protect privileged materials. The Court focussed instead on the independence of the Bar from the state, which it identified as a precisely defined legal principle which was fundamental to the way the legal system ought fairly to operate. This met the test to be recognised as a principle of fundamental justice, as set out in R. v. Malmo-Levine, 2003 SCC 74. The legislation threatened to make lawyers “a resource to be used in the criminal prosecution of their clients”, their “offices turned into archives for the use of the prosecution”: Maranda v. Richer, 2003 SCC 67 (at paragraphs 205 and 216). It created an unacceptable conflict between lawyers’ duty to their clients, and the duty to the state imposed in the legislation. This conflict eroded lawyers’ independence from the state and therefore undermined the fair administration of justice.The law societies’ creation of parallel anti-money laundering rules was a significant factor in the Court’s decision that the legislation was not saved by section 1 of the Charter. The law societies’ steps were less drastic means of achieving the goal of the legislation in a real and substantial manner (at paragraph 140). For this reason, the legislation did not minimally impair lawyers’ and clients’ section 7 rights.

FLSC v. Canada (Attorney General), (cont.)


May 2013


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“This case has undergone an interesting evolution over the past twelve years. It started

in 2001 when the federal government brought into force regulations that would have required lawyers to report “suspicious transactions” involving their clients. The Law Society of BC, supported by the Federation of Law Societies of Canada, challenged the provisions as an interference with the independence of the bar. The petitioners characterized the independence of the bar as an unwritten constitutional principle, which back in 2001 was a more viable argument than it would be today. On an interlocutory application, Justice Allan of the BC Supreme Court agreed, and suspended the operation of the suspicious transaction reporting regulations as against lawyers.

The government repealed those regulations, and later brought in the “client identification” regulations that were then subject to a renewed challenge. At the BC Supreme Court, Justice Gerow held the regulations to be unconstitutional by virtue of infringing solicitor-client privilege. Privilege is a long-established principle of fundamental justice under s. 7 of the Charter, so it was a somewhat “safer” route to unconstitutionality. However,

Justice Gerow considered the impact to be on more than simply privilege; at least in part she was concerned about the impact on the solicitor-client relationship.

At the Court of Appeal, the panel - prompted, it appeared, by a mid-hearing question from the Chief Justice - returned the focus explicitly to the independence of the bar. Prior to the Court of Appeal decision, there had been numerous cases espousing the importance of the independence of the bar, but none that had found it was a principle of fundamental justice under section 7. If this case goes further, one issue will likely be the scope of s. 7 principles of fundamental justice.

In respect of section 1 of the Charter, in the court below, the government had placed some emphasis on the fact that some foreign governments had enacted similar provisions, to the effect that Canada needed to “keep up with the Joneses”. This argument got no traction in the Court of Appeal. By contrast, both the chambers

COUNSEL COMMENTS

Comments provided by Roy Millen, Counsel for the Respondent, The Federation of Law Societies of Canada

Roy Millen

FLSC v. Canada (Attorney General)




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COUNSEL COMMENTSjudge and the Court of Appeal accepted that there now exist law society rules across Canada that ensure appropriate record-keeping by lawyers without turning lawyers into state agents.A final argument that received no analysis in either court thus far concerned s. 8 of the Charter. Having found the regulations inconsistent with s. 7, both courts saw no need to address s. 8.It remains to be seen whether the Supreme Court of Canada will be asked to weigh in. In 2002, as part of an agreement that the BC proceedings would have national effect, the Federation of Law Societies of Canada and the Attorney General agreed that the successful party at the Court of Appeal would not oppose an application by the unsuccessful party for leave to appeal to the Supreme Court of Canada. The government’s deadline to apply for leave is shortly.”

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“The decision of the BC Court of Appeal in Federation of Law Societies of Canada v. Canada

(Attorney General) is the latest development in a long-running legal saga that dates back to 2001 when the federal government first took steps to bring lawyers under the anti-money laundering regime. At that time, lawyers were made subject to the Suspicious Transaction Regulations enacted under the Proceeds of Crime (Money Laundering) and Terrorist Financing Act, S.C. 2000, c. 17 (the “Act”). Those regulations would have required lawyers to report to a federal agency whenever they had a suspicion that their clients were engaged in money laundering activities. The legal profession, represented both by the regulators, in the form of the Law Society of BC and the Federation of Law Societies of Canada, and by the Canadian Bar Association, as the representative of practising lawyers, opposed the measures as an undue interference with the solicitor-client relationship. The legal bodies challenged the measures in court and obtained an interim injunction in the Supreme Court of British Columbia (2001 BCSC 1593) which was subsequently upheld by the BC Court of Appeal (2002 BCCA 49). Similar orders were granted in numerous other provinces which ultimately caused

the federal government to back away from its attempts to have the legislation apply to lawyers.

That is where matters stood until 2008 when the federal government amended the regulations under the Act to require lawyers to collect and maintain certain information about their clients and the clients’ activities. While these measures may not be as obviously offensive on their face as the previous suspicious transaction reporting requirements, the various legal bodies nonetheless opposed the measures again on the basis that they undermine the solicitor-client relationship.

One of the principal objections raised by the legal profession from the outset has been a concern about the lack of adequate protection for solicitor-client privilege and solicitor-client confidentiality given the potential under the Act and regulations for information held by lawyers to be shared with state agencies. As noted in the case summary, it was this concern about solicitor-client privilege that formed the

COUNSEL COMMENTS

Counsel Comments providing by Ron A. Skolrood, QC, Counsel for the Intervenor, Canadian Bar Association

Ron A. Skolrood

FLSC v. Canada (Attorney General)




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COUNSEL COMMENTS

basis for the Chambers Judge’s decision that the measures violate section 7 of the Charter.

The Court of Appeal, while upholding the Chambers judge’s decision, took a somewhat different approach. Mr. Justice Hinkson, writing for the majority, found that in fact there were adequate provisions in the Act for protecting privilege. However, he found that the legislation interferes with the solicitor-client relationship to such a degree as to undermine the independence of the Bar, which he found to be a principle of fundamental justice under section 7 of the Charter. This is arguably the most interesting and far-reaching aspect of the Court’s decision in that it essentially accords constitutional protection to the role played by lawyers in the administration of justice. While this is of importance to the legal profession, it is even more significant for the clients who require legal services and who must have confidence that their lawyers are acting independently and in their best interests. The Court of Appeal’s findings validate the efforts of the legal profession over the past many years to oppose the application of the Act to lawyers and to uphold the integrity of the solicitor-client relationship.

At the time of writing, the federal government had not yet decided whether to seek leave to appeal further to the Supreme Court of Canada.”

OnPoint Success Story:Trial 911Our client requested research assistance on substantive breach of trust issues in advance of trial. As the trial proceeded, we provided additional research on evidentiary, damages and costs issues when they arose. Because we were requested in advance to remain available that week, we were able to provide answers to questions posed after a day of trial before the next day’s hearing began. While our client was arguing in court, we were able to work behind the scenes to prepare the trial brief on all issues raised during trial. Our client succeeded in obtaining both a punitive damages award and special costs for his client.


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The Court of Appeal’s relatively recent decision in Mawdsley v.

Meshen, 2012 BCCA 91, settled that the creation of an inter vivos trust and the transfer of a testator’s assets into the trust was not, without more, a fraudulent conveyance. Family members had no claim to break the trust solely because they no longer had access to the assets, including by remedy under the Wills Variation Act, R.S.B.C. 1996, c. 490.

This case applied this principle with respect to persons acting under a power of attorney. Here, the attorneys took a number of major estate planning steps, including setting up a trust which essentially replaced the donor’s will and significantly diminished the estate. The terms of the trust very closely replicated the terms of the will. The donor’s wife challenged these actions, arguing that the power of attorney did not authorise the creation of a trust, and that the trust was testamentary, and therefore beyond the capacity of an attorney.

The Court of Appeal first confirmed that, subject to the terms of the grant of power of attorney, an attorney could

Easingwood v. Cockroft, 2013 BCCA 182Areas of Law: Wills and Estates; Trusts; Powers of Attorney~Persons acting under a power of attorneys are able to transfer the donor’s assets into an inter vivos trust on same terms as his or her will.~


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A CompanyAnother way to do business is through a company. A company is a separate legal entity that can undertake to do business and own property in its own name. A company has its own requirements to file tax returns, pay taxes, and meet other obligations. A company pays tax at different rates than does an individual proprietor.

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52 The Society of Notaries Public of British Columbia Volume 19 Number 2 Summer 2010

do anything on behalf of the donor, that the donor could lawfully do by attorney: “[i]n general terms, unless there is an external impediment to the creation of the trust, it was within the attorneys’ power to create an inter vivos trust because it was within [the donor’s] power to do so” (at paragraph 37). So long as there was no rule of law or statute that prohibited the action, it was valid.




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Easingwood v. Cockroft, (cont.)

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The Court noted that one such rule arose out of the relationship between the attorney and principal:

“Where, for example, a trust created by an attorney has the effect of adding beneficiaries not named in a will, or avoiding a gift established by a will, or disposing of assets where the principal has chosen not to make a will and the estate would be divided as provided in an intestacy, the trust may well be challenged, e.g. under the rubric of the attorney’s duty to conform to the intentions of the principal. That is, the issue of breach of fiduciary duty would loom large.”(at paragraph 54)

In this case, settling the trust benefited the attorneys by sheltering the estate from any claim under the Wills Variation Act. However, the Court found that there was no breach of fiduciary duty because the terms of the trust conformed to the demonstrated intentions of the donor.


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May 2013


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Easingwood v. Cockroft, (cont.)

Another rule of law which could prohibit the attorneys action was raised by the donor’s wife: the rule against an attorney making a testamentary disposition. This common-law rule was explained in Chichester Diocesian Fund v. Simpson, [1944] A.C. 341:

“a man may not delegate his testamentary power. To him the law gives the right to dispose of his estate in favour of ascertained or ascertainable persons. He does not exercise that right if in effect he empowers his executors to say what persons or objects are to be his beneficiaries.”

The question here was whether a trust which essentially implemented the testator’s will was testamentary in nature. A testamentary disposition was“dependent on death for its vigour and effect” (at paragraph 51). A trust which was not triggered on death, but which rather took effect immediately, did not depend on the testator’s death and so was not testamentary in nature: Wonnacott v. Loewen (1990), 44 B.C.L.R. (2d) 23. The Court contrasted this with Desharnais v. Toronto Dominion Bank, 2001 BCSC 1695, where it was ruled that a change of beneficiary in an RSP account was testamentary, and beyond the capability of an attorney.

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“Easingwood was a test case in British Columbia, because it was the first case in the province where the courts found that a person holding a general

power of attorney had the power to settle an inter vivos trust for the donor as a valid estate planning measure, transferring all of the donor’s assets to the trust. The only other case litigated in Canada under similar circumstances was the Ontario Supreme Court case of Banton v. Banton, 1998 CanLII 14926, where the court found that the attorneys were not justified in settling the trust that they did, but that a trust which designated the estate as the beneficiary “would have done far less violence to [the donor’s] rights” at para. 192 of the judgment. Therefore, British Columbia law is now in line with Ontario law in that the courts of both jurisdictions have found that an attorney can settle an inter vivos trust for a donor as long as the terms of the trust are in accordance with the demonstrated intentions of the donor: in the case of Easingwood, the terms of the trust were in accordance with the will and marriage agreement in place, and in Banton, the court ruled in obiter dicta that designating the trust beneficiary as the estate would have been a proper measure.

Furthermore, given the court’s trend to not acknowledge a potential Wills Variation Act claim as a legal claim prior to a testator’s death, the effect of Mawdsley and Easingwood provides that persons appointed with a general and enduring power of attorney can now go the extra step to circumvent a Wills Variation Act claim against a donor’s estate by settling an inter vivos trust on behalf of the donor, as long as the terms of the trust are the same as an existing will. This could have far-reaching effects on limiting the commencement of Wills Variation Act litigation in the future.”

COUNSEL COMMENTS

Comments provided by Candace Cho, Counsel for the Appellant, Kathleen Lillian Easingwood

Candace Cho

Easingwood v. Cockroft


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COUNSEL COMMENTS

Comments provided by Duncan J. Manson, counsel for the Respondent trustees in Easingwood v. Cockroft, 2013 BCCA 182, and for the Plaintiff in Mawdsley v. Meshen,

2012 BCCA 192

Easingwood v. Cockroft

“Easingwood v. Cockroft and Mawdsley v. Meshen have important implications for

estate planning in British Columbia. In Mawdsley, a common law spouse settled an inter vivos trust and transferred her estate to the trust shortly before she died, knowing that this would deprive her spouse of his Wills Variation Act claims against her estate after she died (she had not provided for him in her will). The Court of Appeal held that the surviving spouse did not have standing to attack the trust under the Fraudulent Conveyance Act because he could not establish that he had had a valid legal or equitable claim against the settlor during her lifetime. A potential WVA claim was not enough because such claims do not arise until the death of the testator. Thus, as long as there are no existing legal or equitable claims to be concerned about, a person may settle an inter vivos trust, knowing that it will frustrate potential WVA claims in the future, without being concerned that the settlement will later be set aside as a fraudulent conveyance. Mawdsley was applied in Easingwood which reiterates the courts view (also stated in Mordo v Nitting, 2006 BCSC 1761) that

inter vivos trusts are valid estate planning tools notwithstanding that potential WVA claims may be adversely affected.

In Easingwood the second wife of the deceased attacked an inter vivos trust settled for her husband by his attorneys after he had become incompetent. Prior to marriage the parties had entered into a marriage agreement whereby the wife waived her WVA rights and the deceased made some financial arrangements for her. After marriage the deceased made a will consistent with the marriage agreement and he granted a power of attorney to his son and daughter from his first marriage. The power of attorney was an enduring instrument, unlimited on its face, which required both attorneys to act together. After the donor became incompetent, it was discovered that one of the attorneys had cancer and would likely die before his father. The attorneys then settled an alter ego trust and transferred most of

Duncan J. Manson




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their father’s assets to the trust to ensure the continuous management of his estate in case the son died first (which happened) without the need for potentially contested committee-ship proceedings. They took care to ensure that the trust mirrored the terms of the father’s will, appointed themselves as trustees and provided for the appointment of a replacement trustee if the son died first. The effect of settling the trust was to shield 4/5ths of the estate from the plaintiff’s WVA claim which was commenced shortly after her husband’s death (notwithstanding a waiver of WVA rights, the court retains discretionary jurisdiction to vary a will in appropriate circumstances).

In Easingwood the Court of Appeal accepted that Mawdsley had put to rest the plaintiff’s ability to attack the trust under the Fraudulent Conveyance Act (she didn’t have a legal or equitable claim against him during his lifetime). The appellant argued that settlement of the trust was beyond the powers granted to the attorneys or was otherwise improper. The court held that it was within the power of the attorneys to create an inter vivos trust because it had been within the donor’s power to do so when he was competent. This general principle is subject to the attorneys not straying into territory prohibited by other principles of law. The appellant argued that because the trust deed mirrored the will it was testamentary in nature and therefore invalid because no man can delegate his power of testamentary disposition. This argument was dismissed on the basis that the trust was “immediately effective” and not contingent on the death of the deceased for its vigour.

The court then turned to the key issue in the case, namely whether the trust in fact mirrored the will. This was critical because the court held that the trust could be attacked if the actions of the attorneys did not conform to the intentions of their principal. There were few cases on point. The Court of Appeal referred to Banton v Banton [1998] Q. J. No. 3528 in which the Ontario Court of Justice (General Division) held that although the attorneys had the power to settle an inter vivos trust, the trust should be set aside because the trust deed had gone beyond the intentions of the donor by adding beneficiaries not contemplated by his will. Other examples include avoiding a gift established by the donor’s will or disposing of assets in a manner inconsistent with the Estate Administration Act when the principal has decided not to make a will and rely instead on the intestacy provisions of the legislation. In the result, the Court of Appeal found that the trust deed did not diverge from the deceased’s known intentions as set out in the marriage agreement and the will and it conformed to general business prudence. In the words of the court, “It would be a fiction to say that the attorneys were acting in


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breach of their duties to their principal in the creation of the trust, when it conforms to all the arrangements the principal had made.”

In summary, based on Mawdsley and Easingwood, we see that inter vivos trusts continue to be effective estate planning tools which may be used for numerous purposes, including protection against future WVA claims. They may also be used by attorneys after the principal has become incompetent. In such cases the key practice points are to ensure that the provisions of the trust are consistent with the known intentions of the principal which are likely to be found in a will, marriage agreement or other estate planning document created while the principal was competent, and that the trust is immediately effective and not dependant on the death of the principal for its vigour.”




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Jestadt v. Performing Arts Lodge Vancouver, 2013 BCCA 183Areas of Law: Administrative Law; Standard of Review; Residential Tenancy~ The privative clause in Residential Tenancy Act included issues of common law. Dispute resolution officer decisions on common law issues to be reviewed on standard of patent unreasonableness~

The Court of Appeal endorsed a very broad

deference for decisions of dispute resolution officers (“DRO’s”) of the Residential Tenancy Branch. DRO’s were required to make decisions regarding tenancy disputes, and common law issues were often raised. In this case, the Appellant claimed that duress vitiated the terms of the rental agreement. The Appellant argued that the application of the common law did

not fall within the privative clause in the Act, and that therefore the standard of review was correctness.The privative clause in the Residential Tenancy Act, S.B.C. 2002, c. 78 (the “Act”), applied to all issues necessary for the determination of matters brought to the Residential Tenancy Branch. DRO’s could hardly resolve tenancy disputes without considering matters of common law in addition to

the provisions of the Act. It was improper to “hive off a particular aspect of contract law”, such as duress, “in order to place it outside the exclusive jurisdiction of the director” (at paragraph 43).The privative clause in the Act stated that “the director has exclusive jurisdiction to inquire into, hear and determine all those matters and questions of fact, law and discretion arising or required to be determined in a dispute


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Jestadt v. Performing Arts Lodge Vancouver, (cont.)

resolution proceeding” (section 84.1). The Administrative Tribunals Act, S.B.C. 2004, c. 45, at section 58(2)(a) stated that “a finding of fact or law or an exercise of discretion by the tribunal in respect of a matter over which it has exclusive jurisdiction under a privative clause must not be interfered with unless it is patently unreasonable”. The result was that every decision of a DRO on any matter of fact, law or discretion required to resolve a dispute regarding residential tenancy

matters, was reviewable on a standard of patent unreasonableness. In an interesting aside, the Court seemed to consider that the lack of any precedential value to decisions of dispute resolution officers strengthened the case for applying the privative clause to decisions of common law, as there was no need to worry that dispute resolution officers might affect the development of law.

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Gooch v. E.M.F. Holdings Ltd., 2013 BCCA 148Areas of Law: Real Property; Foreclosure; Limitation Periods

~No limitation period on enforcement of foreclosure after order nisi.~


This decision examined the nature of foreclosure proceedings, and the role

of the Limitation Act, R.S.B.C. 1996, c. 266, in restricting the enforcement of a foreclosure. In this case, the Respondent E.M.F. Holdings Ltd. had defaulted on several mortgages in 1997. In 1998 one of these properties was transferred to the Respondent Perreira, and shortly thereafter the mortgagee obtained an order nisi with a six-month redemption period. In 2002, the mortgagees agreed not to proceed in the action until the settlement of litigation with another chargeholder, which completed in 2009. In the result, no action was taken in the foreclosure until 2011. The Respondent applied to have the mortgagee’s charges

removed from title because the limitation period had expired. The Respondent argued that the order nisi was a final order, and at its issuance the six-year limitation period began to run on future steps to enforce it. The mortgagee for its part argued that its other dealings with the Respondent constituted confirmation of the claim and postponed the limitation period. The chambers judge held that the limitation period had expired and discharged the foreclosure charges. The appeal took a completely different approach and questioned whether the Limitation Act even applied. The Court of Appeal confirmed that an order nisi, despite




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Gooch v. E.M.F. Holdings Ltd., (cont.)

being final with respect to determining the enforceability of the mortgage, was not the end of the foreclosure proceedings. After an order nisi, the foreclosure proceeding continued as an ongoing action. Other steps were still open in the same proceeding, such as obtaining orders for sale, or orders absolute for possession of the land. In this case the proceeding remained ongoing for over fifteen years after it was filed, and twelve years without prosecution. Nonetheless, the Limitation

Act played no role in timely prosecution of ongoing proceedings and did not limit the time for taking further steps after an order nisi. So long as the original petition was filed within the six-year period, the proceedings were in time. The appropriate approach in this case would have been for the mortgagor to apply to dismiss the proceedings for want of prosecution.

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COUNSEL COMMENTS

Comments provided by Grant Morrison and Peter Schmidt, Counsel for the Appellants, Gordon Frederick William Gooch and Barbara Lynn Richardson

Gooch v. E.M.F. Holdings Ltd.

“This decision clarifies

the application of the Limitation Act to a mortgage default and foreclosure action in British Columbia. In general, when a lender is foreclosing against a property, there are two distinct claims – one with respect to the interest in the land (the in rem claim), and one with respect to the personal judgment against the borrowers or guarantors (the in personam claim). The BCCA decided in this case:

1. The Limitation Act applies to an in rem claim until the Petition has been filed. After that, the Act has no further application.

2. The Limitation Act applies to the in personam claim in two ways –first, until the petition has been filed, and second, once the order for payment of money has been pronounced.

The limitation period for a lender begins at the first default under the contract.

Currently the Limitation Period is six years, but with the new Limitation Act coming into force on June 1, 2013, there will be a two-year limitation period

for lenders to start an action from the date of default. If they do not start the action within two years, they will be barred from proceeding, and the mortgage charge will be struck from title. The same limitation period applies to a debt situation, and therefore applies to the in personam claim in a mortgage realization situation.

In this case, the Court of Appeal held there was a distinct difference between the application of the Limitation Act to the Order Nisi of Foreclosure (considered the final order in a foreclosure situation), and the personal judgment order for money within the same proceeding. The Act does not apply to an Order Nisi of Foreclosure, for the following reasons:

a.) The cause of action in the in rem matter arises at the first default;

b.) The further relief (selling the

Peter SchmidtGrant Morrison


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COUNSEL COMMENTS

property, taking title, etc.) set out in the initial Petition had not been dismissed or dealt with in any way by the Court;

c.) Although termed a “final order”, the Order Nisi is not the end of the proceeding, but simply a final order with respect to the validity of the mortgage;

With respect to a personal judgment for money, a new cause of action arises at the time the order is pronounced, for the following reasons:

a.) The Limitation Act explicitly sets a 10 year limitation period to enforce a judgment for money;

b.) A new proceeding must be started under the Court Order Enforcement Act; and,

c.) None of the relief sought by the holder of a judgment for money is set out in the initial debt proceeding, which means there is no further relief in the proceeding that has not been dismissed or dealt with by the Court.

Simply put, the in rem claim has one cause of action while there are two causes of action in the in personam claim.

Finally, the Court of Appeal addressed the potential concerns of a Respondent faced with inordinate delay by the Petitioner after the Order Nisi has been granted, or the action had been commenced. The Court held that the appropriate and available relief was to apply under Rule 22-7 for dismissal of the claim for want of prosecution. The availability of such relief essentially mirrors one of the main concerns of the Limitation Act, which is to ensure Respondents are not subject to prejudice by delay.”




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