2004 BCSC 186 Khan v. Khan

Before: The Honourable Mr. Justice Groberman

Reasons for Judgment

Counsel for the Petitioner	Robert A. Kasting
Counsel for the Defendant	No one appearing
Date and Place of Hearing:	December 23, 2003
	Vancouver, B.C.
Additional Written Submissions	January 30, 2003

[1] This application concerns the interpretation of section 96 of the Estate Administration Act, R.S.B.C. 1996, c. 122, and its application to property located on Boundary Road in Vancouver, which I will refer to as “the house”.

[2] The petitioner argues that, notwithstanding that her deceased husband owned only a 50% tenancy in common interest in the house, she became entitled to a life interest in the entire house upon his death. She seeks an order for partition and sale. Given that the petitioner is fairly young, the actuarial value of an estate for her life is almost equal to the value of the fee simple and arguably accounts for all of the equity in the house.

Ownership and Occupancy of the House

[3] The house consists of two units, each self-contained, with a small common laundry area. The petitioner and her husband commenced living in the upper suite of the house in 1989, and it remained their home until his death.

[4] The members of the petitioner’s immediate family were never the sole occupants of the house. Initially, the petitioner and her husband shared the upper suite with his mother and one of his brothers, while the lower suite was rented. In 1994, when the petitioner’s third child was born, the petitioner’s brother-in-law moved to the lower suite. The petitioner’s mother continued to live with the petitioner and her husband until her death in 1998.

[5] Today, the upper suite is occupied by the petitioner and her three children, while the lower suite is occupied by the petitioner’s brothers-in-law, his common law spouse, his common law spouse’s adult daughter, and the daughter’s boyfriend.

[6] In an earlier judgment of this court, it was determined that the house is beneficially owned by the estate of Mubin Mohammed Khan (the petitioner’s deceased husband) and the estate of Jainab Khan (the petitioner’s deceased mother-in-law) equally, as tenants in common: Khan v. Khan, 2002 BCSC 1223, 47 E.T.R. (2d) 69.

The Petitioner’s Position

[7] Section 96 of the Estate Administration Act reads as follows:

96 (1) In this section …:

"spousal home" means

(a) a parcel of land that is

(i) shown as a separate taxable parcel … on an assessment roll used for the levying of taxes in a municipality, and

(ii) has as improvements situated on it a building assessed and taxed in the current year as an improvement, in which the deceased and his or her spouse were ordinarily resident, owned or jointly owned by the deceased, and not leased to another person ….

(2) …[I}n an intestacy,

(a) except where it would otherwise go under this Part to a surviving spouse, the spousal home devolves to and becomes vested in those persons by law beneficially entitled to it and, subject to the liability of the land comprising the spousal home for foreclosure or the payments of debts, those persons must hold the spousal home in trust for an estate for the life of the surviving spouse, or so long as the surviving spouse wishes to retain the estate for life.

[8] The petitioner contends that she is entitled, pursuant to these provisions, to a beneficial life estate in the house. The petitioner is only 38 years old. From an actuarial standpoint, she argues that her life interest in the house represents more than 94% of the value of the fee simple. The evidence indicates that the market value of the house is about $310,000, and that a life estate is worth about $292,000.

[9] The petitioner seeks to have the property sold. She takes the position that her life estate ranks immediately after the mortgage on the house (which is approximately $40,000). After payment of the outstanding mortgage and the costs of the sale, therefore, all proceeds would go to the petitioner.

Analysis

[10] I am unable to accept the proposition put forward by the petitioner. The language of a statute must be examined in context, and with the statutory purpose in mind: Bell ExpressVu Limited Partnership v. Rex, 2002 SCC 42. The Estate Administration Act is concerned with the devolution of property owned by a deceased when he or she dies intestate. Its purpose is to create a default scheme for the passing of property upon death – it is not, in general, a statute designed to provide for the spouse or children of an intestate deceased from property that did not belong to the deceased.

[11] I note that the interpretation of section 96 proffered by the petitioner presents the following anomalies:

1) it would result in the transfer of vested property rights from a third party to the estate without compensation;

2) it would discourage people from making wills, since the estate could be increased by opting for intestacy;

3) it could result in competing multiple undivided life estates over the same piece of property

The existence of these anomalies does not mean that the interpretation proposed by the petitioner should not be adopted, but it does suggest that the court ought to be cautious before accepting the petitioner’s argument.

[12] The first issue is whether the house comes within the definition of “spousal home”. The only issue concerning the definition of “spousal home” that raises any difficulties is the use of the words “jointly owned by the deceased.” That phrase might be thought to mean “owned in joint tenancy”, as opposed to “owned in tenancy in common”. “Jointly owned” can, in its generic sense, refer to a tenancy in common: Kidson (Inspector of Taxes) v. McDonald, [1974] 1 All E.R. 849 (Ch), Re White (1987), 38 D.L.R.(4^th) 631 (Ont. HC). I accept that such a generic meaning is more in keeping with the scheme of the Estate Administration Act. In the result, the house comes within the definition of a “spousal home”.

[13] The next issue is whether section 96(2)(a) grants the petitioner a life interest over the entire house, or whether the life interest extends over only the undivided one-half tenancy in common interest that the deceased held.

[14] In my opinion, the life interest of the petitioner is an interest that applies only to the interest held by the deceased before his death. In other words, the petitioner has a life interest in the undivided one-half tenancy in common.

[15] I draw this conclusion from the use of the words “devolves to and becomes vested in those persons by law beneficially entitled to it”. In my view, it cannot be said that the house “devolved to” or “became vested in” the estate of the petitioner’s mother-in-law on the death of her husband; the mother-in-law’s estate was already the owner of an undivided one-half interest in the house as a tenant in common. As I read section 96(2)(a), the life interest extends only over any interest in the spousal home that devolves as a result of the administration of the estate.

[16] In the result, the petitioner’s life interest extends only over the interest in the house that was held by the petitioner’s husband at the time of his death.

[17] The statute contains a rather curious proviso in section 96(2)(a): the life estate is said to exist for “so long as the surviving spouse wishes to retain the estate for life.” This language is inconsistent with the idea that the beneficiary of the life estate may choose to sell it.

[18] In Aho v. Kelly (1988), 25 B.C.L.R. (2d) 373 (SC), Wood J. held that the life interest of a surviving spouse does not survive the sale of the home. He was of the view that the life estate was extinguished when the spouse decided not to reside in the home. In Kwasnycki v. Kwasnycki Estate (1990), 43 B.C.L.R. (2d) 148, B.D. Macdonald J. disagreed with that proposition, holding that the interest created by section 96(2) is a true life estate.

[19] In my view, Aho v. Kelly and Kwasnycki v. Kwasnycki Estate can stand together. The sale of the spousal home does terminate the life estate, if the sale is to pay off debt or is voluntarily undertaken by the beneficiary. A decision to sell the home is inconsistent with the “wish to retain the estate for life”. On the other hand, a decision to rent the home (as occurred in Kwasnycki) is not inconsistent with a desire to retain the life estate.

[20] In the result, it is my view that the petitioner’s application for partition and sale is inconsistent with any “wish to retain the estate for life”. The petitioner’s life estate is not entitled to priority on a sale; indeed, it is extinguished upon sale, and has no value.

Conclusion

[21] In the result, the petitioner is not entitled, on a sale of the home at her behest, to be paid any amount in respect of her life estate.

[22] I am satisfied, however, that the petitioner, as the administratrix of the estate, is entitled to an order for partition and sale, at least if she wishes to go ahead with such a sale knowing that her life estate will vanish, without compensation, when it occurs. I understand that the petitioner does wish to proceed with a sale, even in such circumstances.

[23] In the result, I am granting a declaration that the petitioner has a life interest in the property, which interest will be extinguished if she does not wish to retain it.

[24] There will be an order for partition and sale. The proceeds of sale, after payment of any outstanding property taxes, the mortgage, and commissions and costs of sale, will be split equally between the two estates.

“H.M. Groberman, J.”
The Honourable Mr. Justice H.M. Groberman