2006 BCSC 1830 Schoennagel v. Schoennagel and Gateway Automotive

Before: The Honourable Mr. Justice Truscott

Reasons for Judgment

Counsel for the plaintiff:	C.C. McLeod
Counsel for the defendant:	N. S. Steinman
Date and Place of Trial/Hearing:	October 3-5, 2006
	New Westminster, B.C.
Submissions:	November 24, 2006

[1] The plaintiff in this action is the mother of the defendant and the central issue between the two of them is the mother’s claim that her daughter took a joint interest in her residential property through acts of duress and/or undue influence on her or through an unconscionable transaction with her.

[2] In her pleadings the plaintiff claims that she transferred this joint interest to her daughter to be held in trust for her and seeks restitution of that interest to herself.

[3] However, at trial the plaintiff abandoned her trust claim and in substitution raised the claims of duress, undue influence and unconscionable transaction. This amendment was not opposed by her daughter, the defendant.

[4] In addition the plaintiff claims from her daughter an accounting of her handling of the financial affairs of the estate of the plaintiff’s deceased husband, of his company Gateway Automotive Ltd., and of the plaintiff’s financial affairs as well.

[5] This accounting was consented to by the defendant at trial and accordingly I ordered that the accounting be referred to the registrar under Rule 32 for a report and recommendation to the court. The accounting with respect to the estate assets will include the assets of Gateway Automotive Ltd. The accounting for both the estate assets and the plaintiff’s assets will be from January 8, 1996 to date.

[6] The defendant counterclaims against Gateway Automotive Ltd. for damages for unjust enrichment, claiming that the compensation that she has received from Gateway for her services was below market rates and Gateway has accordingly been unjustly enriched while she has suffered a corresponding deprivation.

[7] The plaintiff is the widow of Siegfried Schoennagel who passed away on January 8, 1996 at 100 Mile House in British Columbia. When he passed away he left no will and by law all of his estate passed to his wife, the plaintiff.

[8] The defendant is the natural daughter of the plaintiff but the deceased was not her natural father. She and her mother had come to Canada from England in 1960 when she was a young child. Her mother met Mr. Schoennagel in northern B.C. and they were married on July 7, 1961 in Williams Lake.

[9] Mr. Schoennagel raised the defendant as his daughter but did not officially adopt her. By law, in the absence of a will, she was not entitled to share in his estate upon his death because she did not meet the definition of “issue” in the Estate Administration Act, R.S.B.C. 1996 ch. 79 or its predecessor statute.

[10] Following Mr. Schoennagel’s death, the mother and daughter visited Mr. Schoennagel’s lawyer, Mr. Foster, and found out that the defendant was not entitled to receive any of Mr. Schoennagel’s estate by law. They both agree in their evidence at trial that in this meeting with the lawyer the plaintiff said that it was awful that the defendant was ineligible to share in the deceased’s estate, and he would not have wanted that. The plaintiff agrees that she might have even said that “Julia should have her share” but she cannot now recall. She does agree that she did express concern at that time for the defendant.

[11] By agreement with the plaintiff, the defendant became the administrator of the deceased’s estate and she began the process of dealing with the estate assets. The main asset that the deceased owned was shares in Gateway Automotive Ltd., his umbrella company covering his many business interests. Once the defendant had determined all the assets and addressed them, she began the process of selling off the assets and converting them to monies. Ultimately over the years from 1996 to 2002 she had sold off all of the estate assets and was left with monies in the name of Gateway Automotive Ltd. From this source of monies she administered the financial affairs of her mother to ensure that she could meet her monthly expenses and live comfortably enough.

[12] The plaintiff moved down from 100 Mile House to the Lower Mainland shortly after her husband’s death in 1996. She purchased a house in New Westminster on Nanaimo Street on October 31, 1996 for $241,000 using some estate monies and mortgage financing. She registered the property in her own name.

[13] The plaintiff had already executed her own will and in that will had left everything to her daughter the defendant.

[14] The plaintiff does not recall any discussion involving the defendant and the realtor at the time of her purchase of her property on Nanaimo Street in 1996, concerning putting the property in her name and the name of defendant, jointly. However the defendant recalls in her evidence that the realtor asked the plaintiff if she wanted to put her residence in joint title because it was a good time to do so, but the plaintiff declined to do so at that time.

[15] The plaintiff agrees that she received a letter from her accountant, Mr. Holland, of September 5, 1997 providing advice on how to avoid probate fees by transferring one half of her residence to her daughter, thereby saving the estate thousands of dollars in future probate fees.

[16] Mr. Holland in his evidence says that following this letter to the plaintiff of September 5, 1997 he had a follow up telephone conversation with the plaintiff and another one with the defendant. When asked whether he saw any sign of undue influence on the plaintiff by her daughter he says that he did not and he had discussed his letter with the plaintiff.

[17] The issue of probate fees on her mother’s estate was a big issue for the defendant. She knew that she was the sole beneficiary under her mother’s will and she was seriously concerned about not being able to pay the probate fees if her mother’s residence in particular was in her mother’s estate upon her death.

[18] The defendant says she brought up the issue of joint ownership with her mother again in January 2000 and at this time her mother agreed. The defendant prepared a letter to Mr. Foster of September 3, 2000 instructing him to prepare the necessary documents for a transfer of an interest in her mother’s house to her, and had her mother sign the letter. She says she talked to her mother about the reason behind the letter and she assumed her mother understood and agreed.

[19] The plaintiff says that one day her daughter suggested to her the transferring of her residential property into their joint names and when she asked her daughter why she was told by her daughter that as sole beneficiary of her estate she would inherit the house on the death of her mother and would have trouble paying the taxes on the transfer. Her daughter told her if the property was in the joint names she would not have to pay the taxes. The plaintiff says she agreed to this without consulting anyone and soon after her daughter brought in to her the papers to sign.

[20] The plaintiff says she wanted to save her daughter the trouble of the taxes but she did not expect anything to change. She says she did not intend to give her daughter any ownership in the house at that time.

[21] The plaintiff does not remember signing the letter of September 3, 2000 to Mr. Foster instructing him to change the title to her property into joint names but she says that she trusted her daughter when her daughter approached her about joint tenancy and she accepted her daughter’s explanation and agreed with the reasons her daughter gave to her. She agrees it was her signature on the letter and she says that her daughter told her it was just a formality because her daughter knew she was the sole beneficiary under her will and if the property was not transferred into joint tenancy she would not have the monies to pay the taxes on her death.

[22] The plaintiff says she thought there would be no changes until her death and when she died it would help her daughter. She says she must have read the September 3, 2000 letter to Mr. Foster but she does not remember now.

[23] Mr. Foster sent the documents to the plaintiff for execution by letter of November 1, 2000. Again the plaintiff does not remember getting the letter but she says it sounds reasonable to her and she says she would have read the letter when it was received.

[24] The plaintiff attended on a notary public on November 30, 2000 to execute the transfer and the document was sent back to Mr. Foster for registration.

[25] The plaintiff says she understood the document was to make her daughter a joint owner in the Nanaimo Street property and she thought that would be the end of the matter until she passed away at which time as sole beneficiary her daughter would not have to pay any taxes.

[26] She says she did not look at it as giving up one half ownership of her house. She says she did it to save her daughter after her death. She says she was aware she was transferring ownership to her daughter and she agrees that her daughter never threatened nor demanded this from her. Her daughter gave her the reason and she trusted her daughter. She says she chose to do this because she loved her daughter and she trusted her.

[27] She agrees with the evidence she gave on her examination for discovery as follows:

Q Now, at some point after October 31, 1996 you decided to transfer one-half interest in the house to Julia.

A Yes

Q Why did you do that?

A I did not decide to do that right away. That was Julia’s idea, not mine. I hadn’t thought of doing that.

Q Can you tell me how it comes about, then, that you end up transferring one-half interest?

A Julia – yes, Julia came to me and she said that as things were it was my house. I was paying for it, I bought it and was paying for it, and I made a will making Julia my sole beneficiary, which meant that when I died I assumed she would get the house and anything else I happened to have at the time. And Julia said to me, she said, “When you die, if you die before me –“ well, I don’t know the exact words she said, but what she said was that, “When you die, then the house will be there, but there will be a lot of trouble and government papers to fill in and taxes and goodness knows what,” and she said, “It would be much better if you signed to give me joint ownership with you, because if you died and I got the house I wouldn’t have to pay so much in –“ I don’t know any of this stuff, and it sounded all right to me, and I trusted her, so I said, “All right, I’ll sign the papers,” and I did. So now we’re joint owners of the house. And I thought it was a formality to help Julia, so that she would have less trouble after I died. That was the only reason why I did it.

[28] The defendant agrees that the whole point of the transfer was to use it on her mother’s death. She says she continued thereafter to recognize it as her mother’s home and not her own home as she had her own residence. She expected that her mother would use it as her home until her death.

[29] Unfortunately, in November 2002 mother and daughter had a falling out and the defendant ceased handling the financial affairs for her mother and for Gateway Automotive Ltd.

[30] The plaintiff commenced this action on March 28, 2003 and in 2005 changed her will to remove her daughter as beneficiary.

[31] On the issue of the counterclaim the defendant says that she has been handling the affairs of Gateway since 1996 and has invested and administered its monies. Initially she administered and invested the estate’s monies as administrator and as well throughout the time to 2002 invested and administered the monies of her mother.

[32] She says that in 1996 she put in ten hour days looking after the interests of the estate and Gateway. In 1997 and 1998 the time required was reduced down to 20 hours per week and then further down to ten hours per week. By 1999 it was down to four to six hours per week and by the year 2001-2002 down to two to three hours per week.

[33] She says that when she and her mother had their falling out in November 2002 she decided that she had to look after herself so she paid herself a wage from Gateway of $200 per month for 12 months for a total of $2,400.

[34] It appears from documents that the defendant has been paying herself a form of salary from Gateway through the years from 1996 and the total salary that she has received for six years leading up to 2002, exclusive of expenses, was approximately $12,000 for an average of $2,000 per year.

[35] On this issue the plaintiff agrees that when her husband passed away in 1996 her daughter travelled back and forth from the Lower Mainland to 100 Mile House to administer the estate including Gateway and she thinks that her daughter might have spent 60% of her time in 100 Mile House in 1996.

[36] She says she did not consider ever paying her daughter for her efforts as she thought her daughter was doing it out of love for her and she thought she was thanking her daughter by taking her out to dinner and buying things for her from time to time. She says she does not recall ever agreeing to pay her daughter a salary for looking after Gateway. Generally she always thought of it as one family member helping the other.

Disposition

[37] On the evidence at trial there was certainly no duress exerted by the defendant on the plaintiff to obtain her consent to transfer a joint interest to her.

[38] On the issue of undue influence the defendant concedes that undue influence should be presumed because she was her mother’s financial advisor and her mother obviously had absolutely no ability to manage her own affairs. However, her counsel submits that she has rebutted this presumption because the evidence clearly indicates that a transfer of a joint interest was a pure gift from mother to daughter made completely voluntarily by mother.

[39] In my opinion the plaintiff clearly gifted the joint interest to her daughter, absolutely, at the time of transfer. At that time mother and daughter had a good relationship, mother considered that her daughter should have been able to share in her husband’s estate, her daughter was the sole beneficiary under her own will, and she had every reason in the world to assist her daughter to avoid probate fees and taxes by putting her property in joint tenancy prior to her death.

[40] I have no doubt that the plaintiff did not intend that her daughter actually use her joint interest in the property before her death and intended that it would always remain her home as long as she wanted. The defendant agrees that this was the intention of both.

[41] However, in my view that does not detract from the clear evidence that the mother intended a present gift to the daughter of a joint interest in her property.

[42] The plaintiff agrees in her evidence that it was the falling apart of her relationship with her daughter in November 2002 that precipitated her bringing this lawsuit and changing her will to remove her daughter as beneficiary.

[43] I reject any suggestion by the plaintiff that she did not intend to provide a present gift to her daughter at the time of the transfer of title into their names jointly. Any suggestion of such a delayed intention is only an afterthought by the plaintiff, after the falling apart of the relationship with her daughter in November 2002.

[44] Save for the accounting I have ordered, the plaintiff’s claim for return of the interest now in the name of her daughter is dismissed.

[45] On the counterclaim defence counsel seeks a further $15,000 for unjust enrichment in addition to the monies that the defendant has already received. He averages that out to $2,500 per year for six years. He provides no authority for a claim of unjust enrichment where a party has already received a form of salary, albeit perhaps of a minor amount, where the party has paid herself out of the monies of the company.

[46] It is obvious to me that this counterclaim never would have been brought if the plaintiff had not brought her claim. Still, if the defendant is entitled to damages for unjust enrichment then they must be awarded.

[47] It is my conclusion that the services that the defendant performed were not only for Gateway, but were also for her mother and also as administrator of the estate. She compensated herself from time to time out of the estate monies or Gateway monies, albeit to minor amounts, but in my opinion she had no expectation that she would otherwise be compensated for her services, and neither did her mother. There is no evidence of any such expectation of Gateway itself if it should be considered separate from the plaintiff.

[48] It is only now with the change in her mother’s will and the lawsuit that the defendant seeks compensation beyond what she has already paid herself.

[49] In Procter v. Procter Estate (1984), 56 B.C.L.R. 111 (BCCA) the court was dealing with a claim of a son against his father’s estate on the basis of quantum meruit for work done by the son on the farm.

[50] The court said that the principle governing recovery there was stated in Walker v. Boughner (1889), 18 O.R. 448 at 457:

The rule, however, seems to be that where a party renders services to another in the expectation of a legacy and in sole reliance on the testator’s generosity, without any contract express or implied that compensation shall be provided for him by will, and the party for whom such services are rendered dies without making such provision, no action lies; but where from the circumstances of the case it is manifest that it was understood by both parties that compensation should be made by will, and none is made, an action lies to recover the value of such services.

[51] Here there was no evidence of any understanding by both parties that compensation would be made to the defendant for her services to Gateway through the will of the plaintiff. The defendant may have performed services for Gateway in the expectation of a legacy and in sole reliance on her mother’s generosity but without any contract express or implied that compensation would be provided to her by her mother’s will.

[52] The counterclaim is dismissed.

[53] The matter of costs will await a report and recommendation from the registrar on the accounting. For the amount of money that is potentially involved and the legal fees that will necessarily be associated with an accounting, it is my fervent hope that the parties can resolve the accounting issue without further recourse to the registrar and can consider renewing their relationship as mother and daughter.

“J. Truscott, J.”
The Honourable Mr. Justice J. Truscott

Citation:	*Schoennagel v. Schoennagel and Gateway Automotive,*
	2006 BCSC 1830