2006 BCSC 1839 Saugestad v. Saugestad

Before: The Honourable Madam Justice Russell

Reasons for Judgment

Counsel for Plaintiff:	D.J. Manson
Counsel for Defendants:	H.H. Low
Date and Place of Trial:	December 5-9, 2005 January 24, 2006 June 29, 30, 2006
	Vancouver, B.C.

[1] In this action, the plaintiff, Joan Saugestad, seeks to vary the will of her deceased husband pursuant to section 2 of the Wills Variation Act, R.S.B.C. 1996, c. 490. The plaintiff seeks variation of the will to provide that 80% of the testator’s estate go to her, while the defendants contend that the plaintiff has been adequately provided for by other benefits conferred on her by the testator. The parties have provided a statement of agreed facts, while other facts are in dispute. Below, I discuss the agreed facts, and then go on to discuss the evidence at trial.

Facts Agreed Upon by the Parties

[2] Ragnar Saugestad (the “Deceased”) died on March 26, 2003 at the age of 63 years. He was survived by: his second wife, the plaintiff Joan Saugestad, then aged 56; his sons from his first marriage, Carl Nicholas Saugestad (“Nick Saugestad”), then aged 30, and Stephen Saugestad, then aged 29.

[3] The Deceased was born and raised in Norway. He lived in Japan from 1968 to 1990 and worked for Oriental Chartering Ltd. (“Oriental”), a subsidiary of Tokai Shipping Ltd. (“Tokai”). He married Toshiowati “Joy” Umezu in 1970. Their son Nick was born in 1972 and their son Stephen was born in 1974. In 1986, the Deceased sent Nick and Stephen to boarding school in Hawaii, at ages 14 and 13, respectively. In 1987, Joy was diagnosed with breast cancer. Her cancer recurred in 1989 and she died on June 30, 1989.

[4] In 1990, Tokai transferred the Deceased to work in Vancouver. He received a retirement allowance from Oriental at the time. The plaintiff and the Deceased met in 1990. The plaintiff was separated from her first husband and working as a realtor. The plaintiff was divorced from her first husband in February 1991.

[5] The plaintiff and the Deceased were married on March 5, 1992, after living together for approximately one year. The plaintiff stopped working as a realtor in February 1997, and was then reliant on the Deceased for support.

[6] The Deceased worked in Vancouver for Tokai as a ship broker from 1990 until 2001 when Tokai went into receivership and the Deceased retired. Tokai paid the Deceased a salary of $10,000 per month from 1990 until his retirement in 2001.

The Will

[7] The Deceased made his last will and testament on March 31, 1998 (the “Will”). The Will named Nick and Stephen as executors, and left the Deceased’s entire estate to them. The Will does not make any provision for the plaintiff, stating:

I LOVE MY WIFE, JOAN IRENE SAUGESTAD, but I have not made her the beneficiary of my Will, as I have provided for her with other means so she does not require a bequest from me. I have provided for her as follows:

a. She is a joint tenant of our home located at 401-1500 Ostler Court, North Vancouver, although I provided all of the purchase funds as well as funds for upgrading and furnishing;

b. She is the named recipient of my Japanese pension.

[8] Nick and Stephen obtained a grant of probate of the Will in B.C. on June 30, 2003 and Ancillary Letters of Administration in Florida on December 12, 2003.

The Estate of the Deceased

[9] Immediately before his death, the Deceased was receiving pension income from Japan of approximately $1,952 per month (net—income tax was deducted at source in Japan), as well as Canada Pension Plan benefits of approximately $230 per month. He also had several major assets.

(1) Real Property

[10] The deceased held several pieces of real estate. These included a condo on Ostler Court that the Deceased purchased for $425,000 in 1993 (the “Ostler Court Condo”). He transferred title into joint tenancy with the plaintiff, and it passed to her by right of survivorship. The Ostler Court Condo had an assessed value of $335,000 as of July 1, 2003, according to the 2004 property assessment prepared by the B.C. Assessment Authority.

[11] The Deceased and his first wife had purchased a condo in Boca Raton for $128,000 in 1981 (the “Boca Raton Condo”). Title to the property was held in the Deceased’s name alone, although both mortgages on the property were guaranteed by his first wife. Both mortgages were paid off by October 1990. The deceased and the plaintiff made regular use of the Boca Raton Condo, particularly after the Deceased’s retirement. At the time of the Deceased’s death, this property was valued at CA$255,715, and it was sold by the Estate on December 7, 2004 for net proceeds of US$235,998.13 (CA$285,203.74). The Estate incurred expenses of CA$39,261.12 and the plaintiff incurred expenses of CA$11,540.32 in relation to the Boca Raton Condo between the date of the Deceased’s death and its sale. The net proceeds from the sale pass under the Will to Stephen and Nick.

[12] The Deceased and the plaintiff purchased a condo on Lorimer Road in Whistler in January 1994 as tenants in common for $156,083.14. They contributed approximately equally to the purchase price, and the property was used primarily for its intended purpose as a rental property. This property was sold in April 1997 for $230,000.

[13] In May 1997, the Deceased and the plaintiff purchased another condo on Blackcomb Way in Whistler as tenants in common for their own personal use (the “Whistler Condo”). The purchase price was $349,000. Each contributed approximately equally to the cash portion of the purchase price, and then two mortgages totalling $213,000 were used to pay the remainder. The proceeds from the sale of the Lorimer Road property were used to repay the $100,000 open mortgage on the Whistler Condo, while the balance of the proceeds was used for the couple’s living expenses. The Whistler Condo was regularly used by the Deceased and the plaintiff from May 1997 to October 2001, and Stephen and Nick also used the condo.

[14] Commencing in October 2001, the Deceased and the plaintiff rented out the Whistler Condo to support the mortgage payments. The Deceased, plaintiff, Nick and Stephen continued to use the Whistler Condo when it was not rented. At the date of the Deceased’s death, the property was valued at $596,000 according to the 2004 property assessment by the B.C. Assessment Authority, with $92,955 owing on the mortgage. Thus, the value of the Deceased’s half-interest in the Whistler Condo was $251,522.50 at the time of his death. Under the Will, the Deceased’s one-half interest passes to Stephen and Nick.

[15] The plaintiff continues to rent out the Whistler Condo, and collects rent and pays the expenses. From March 27, 2003 to October 5, 2005, the principal amount of the mortgage was reduced by $14,811.31. The Whistler Condo has generated net rental income ranging from -$5,000 to $4,000 per year from 2001-2005. The current appraised value of the Whistler Condo is $805,000 with $78,143.75 owing on the mortgage. The net value of the Estate’s one-half interest in the Whistler Condo is $363,428.13. Capital gains tax will have to be paid if either the plaintiff or the Estate disposes of its one-half interest in the property. The Estate has already paid capital gains tax of $34,076 on account of the Deceased’s deemed disposition on death of his interest in the property, based on a $375,000 date of death value for his half-interest and an adjusted cost base of $180,500.

[16] In April 1995, the Deceased and the plaintiff purchased a condo on Nelson Street as tenants in common for $117,900 (the “Electra Condo”). Each contributed approximately the same amount to the down payment, and they obtained a mortgage of $81,999.45 to pay for the balance of the purchase price. The Electra Condo has been rented out except for two months, when it was occupied by Nick and/or Stephen. The plaintiff acted as the property manager for this purpose until the plaintiff retired and she and the Deceased entered a long term lease of the Condo. As at the Deceased’s death, the assessed value of the Electra Condo was $142,000, based on the 2004 property assessment by the B.C. Assessment Authority, and $62,384.54 was owing on the mortgage. Thus, the net value of the Estate’s half interest was $39,807.73. The Estate’s half interest passes to Nick and Stephen under the Will.

[17] The plaintiff continues to rent out the Electra condo, collecting rent and paying expenses. The principal amount of the mortgage was reduced by $11,199.54 between March 27, 2003 and October 5, 2005. The property has generated net rental income ranging between $1,800 in 2000 and $4,000 in 2004. The current appraised value of the Electra Condo is $195,000 with $51,185 owing on the mortgage. Thus, the net value of the Estate’s one-half interest is $71,907.50. The Estate has already paid capital gains tax of $603.47 on account of the Deceased’s deemed disposition on death, based on a date of death value of $62,400 for the Deceased’s half interest, and an adjusted cost base of $58,950.

(2) Nistera/Jyske Bank

[18] In 1994, the Deceased initiated discussions with Jyske Bank of Copenhagen, Denmark, regarding planning for inheritance. By 1995 he had established a bank account at Jyske Bank in his own name. In or about February 1997, the Deceased, in consultation with Jyske Bank, instructed the incorporation of Nistera Ltd. as a private investment holding company. The name comes from the first letters of the names of the Deceased and his sons. Nistera was incorporated in Gibraltar on May 14, 1997. Its nominal shareholders are Jyske Bank (Gibraltar) Management Limited (“Jyske Management”) with one share and Jyske Bank (Gibraltar) Nominees Limited (“Jyske Nominees”) with 99 shares with each share having a nominal value of one pound. The Deceased paid for the incorporation of the company and the issuance of its shares. At all times prior to the Deceased’s death, Jyske Management and Jyske Nominees held the shares of Nistera Ltd. in trust for the Deceased, Stephen and Nick as joint tenants. On the Deceased’s death all beneficial interest in the shares of Nistera Ltd. passed to Stephen and Nick by right of survivorship.

[19] By August 1997 the Deceased had deposited $415,000.00 of his own money into accounts belonging to Nistera Ltd. at Jyske Bank (collectively the “Nistera Account”). In 2000, the Deceased deposited the equivalent of $720,000 of his money into the Nistera Account. The genesis of the Deceased’s deposit of that money into the Nistera Account in 2000 is as follows:

(a) in 1990, the Deceased transferred monies belonging to him to certain bank accounts in Norway, as follows:

(i) 28 June 1990: $200,000 US, or $233,980 Cdn, from Citibank Singapore;

(ii) 5 September 1990: 20,000,000 yen, or $162,748 Cdn, which was part of his retirement allowance from Oriental, from Citibank Tokyo;

(b) the Deceased’s mother, Hjordis Saugestad, then managed these funds together with her own monies in a mixed fund for approximately two years;

(c) in 1993 the Deceased separated his monies from his mother’s monies and transferred his monies together with his share of accrued gains to bank accounts in Norway in his own name;

(d) in 2000 Nistera’s accounts at Jyske Bank were credited with monies belonging to the Deceased which he transferred from his Norwegian bank account to the Nistera Account totalling CA$720,456.98.

[20] The only other funds entering the Nistera account were investment returns on these funds. At the time of the Deceased’s death, the value of various investments held by Jyske Bank in the Nistera Account totalled CA$1,014,758.12.

[21] There are no contemporaneous documents which describe the basis on which the Deceased deposited monies into the Nistera Account. In particular, there are no shareholder loan documents which say that the monies which the Deceased transferred into the Nistera Account were a loan from the Deceased to Nistera Ltd.; there is no deed of gift with respect to the monies which the Deceased transferred into the Nistera Account; and there is no trust document which refers to the money which the Deceased transferred into the Nistera Account. Thus, the characterization of these transfers is in dispute between the parties. There are trust documents that refer to the ownership of the shares of Nistera Ltd.

[22] Funds were transferred out of the Nistera Account pursuant to the Deceased’s instructions, either to his accounts or his and the plaintiff’s joint accounts, but never to an account belonging solely to the plaintiff. These funds were used to pay for the couple’s living, travel, entertainment and other expenses, and some funds were used to support Nick and Stephen’s educational expenses periodically. Between January 1, 2000 and the Deceased’s death, $116,260.99 was transferred to North American accounts. During that time, the Deceased also drew cheques on the Nistera Account totalling $33,745.28. Additionally, a Visa card was issued by Jyske Bank, and was used to pay for the Deceased’s and plaintiff’s expenses. Funds from the Nistera Account were used to pay for these charges, and totalled $94,975.60 between 2000 and 2003. Thus, a total of $244,981.87 was withdrawn from the Nistera Account by the Deceased. The Deceased did not report his receipt of any of these funds, nor any gain made on the funds, on any income tax return prior to his death.

[23] After the Deceased’s retirement, the couple’s expenses were all paid for out of the Deceased’s pension income, monies drawn on the Nistera Account, and a portion of the money the Deceased received from his mother’s estate. The Deceased retained control over all activities of Nistera Ltd., including the investment and use of monies.

(3) Inheritance from Hjordis Saugestad

[24] The Deceased was a beneficiary of the estate of his mother, Hjordis Saugestad, who died on November 6, 2002. Her estate devolved 50% to the Deceased, 25% each to her grandsons Jan Erik Saugestad and Kjetil Saugestad the sons of the Deceased’s brother, and Stephen and Nick’s cousins.

[25] One of her assets was money in a bank account registered in the Deceased’s name but containing only her money (the “Nordea Account”). In January 2003, the Deceased transferred approximately one-half of the funds in that account, CA $178,332.59 to his Royal Bank account in North Vancouver, leaving the remaining monies for Jan Erik and Kjetil Saugestad. Approximately $53,000 of the funds taken by the Deceased were used to pay for some of his and the plaintiff’s living, travel, and entertainment expenses, and to repay several school-related loans for Nick and Stephen. $125,364.78 of those funds remained on deposit in the Deceased’s Royal Bank account at the time of his death.

[26] Beyond these funds, the Deceased was also entitled to a further $374,084.77 from his mother’s estate, although it had not been received by the Deceased at the time of his death.

(4) Other Assets

[27] After the death of the Deceased, the plaintiff transferred from the Deceased’s RBC account to their joint Royal Bank Account $65,000, plus $5,440 which was used to pay the balance owing on their joint Visa account, plus $299.48 which was used to pay other bills.

[28] There are also several assets which passed to the plaintiff outside the Deceased’s estate, including an RRSP in the amount of $52,633, three motor vehicles worth $24,476, and three bank accounts totalling $12,672.09.

The Parties

(1) Joan Saugestad

[29] The plaintiff is presently 58 years of age, and worked as a realtor from 1982 to 1997. She owns numerous assets, although the value of these is in dispute. She currently receives the Deceased’s Japanese pension of approximately $1,350 per month, and CPP survivor’s benefit of $270.13 per month as a result of the Deceased’s death. Upon reaching age 60, the plaintiff will also be entitled to CPP in the amount of $400 per month, or $570 per month if she defers receipt of the benefit until reaching age 65.

[30] In May 2005, the plaintiff began working part-time as a greeter for a cruise ship line. She is paid $8.25 per hour for this work, and worked approximately 400 hours from May to October, 2005, earning approximately $3,300. She intended to resume work once the new cruise ship season began in 2006.

[31] The plaintiff has paid a total of $4,641.06 in Estate expenses, from the $65,000 she had withdrawn from the Deceased’s RBC Account. She also paid two remaining $4,438.86 instalment payments owing on her Seymour Golf Club membership from those funds.

(2) Stephen Saugestad

[32] Stephen is 31 years of age, is single, and has no dependents. He has completed a BA in political science at the University of Hawaii and a one-year Information Technology Professional Program at BCIT. He did not work while attending the University of Hawaii due to the student visa he carried, and his school and living expenses, as well as the cost of his travel to Vancouver, was paid by the Deceased.

[33] Stephen owns and operates his own web design business, which is in its first year of operation. He anticipates earning approximately $35,000 per year from this. Previously, he worked as a web developer for VK Ad Studios, earning approximately $21,000 per year. He does not own any real estate, except for his interest in the Deceased’s estate.

(3) Nick Saugestad

[34] Nick is 32 years of age, single, with no dependents. He completed a Bachelor of Arts at Florida Atlantic University from 1997 to 1999. The Deceased supported Nick while he was at school, paying tuition, allowing him to live in the Boca Raton condo, and paying his living and travel expenses. Nick did not work while attending school again, because of his immigration status in the U.S.

[35] In 1999, Nick began work with a shipping company, and is currently working as a sales representative earning $60,000 per year. Nick also does not own any real estate, apart from his interest in the Deceased’s estate.

Facts Established at Trial

(1) Joan Saugestad

[36] The plaintiff has a Grade 12 education, and was working as a licensed Real Estate Salesperson when she met the Deceased. She brought into the marriage a property settlement of $145,000 from her first husband, a house in Coquitlam that was sold for $76,000, some furniture, an automobile, and some savings. She also testified that her will as drafted at the time of the Deceased’s death made no provision for her husband or his sons, and that she had seen the Deceased’s will prior to his death and knew it made no provision for her.

[37] The plaintiff began working as a hostess at Milborne Real Estate Corp. in 1992, and then worked as a sales associate after the sales manager left. By 1996, she was working as a real estate manager. The Deceased was semi-retired, and did not want the plaintiff to work as much because he wanted to travel. In early 1997, they agreed that she would no longer work as well. She earned $81,000 in 1996, and a further $30,000 in 1997 for deals written in 1996. The plaintiff relied on the Deceased’s statements that he had enough money to support them in their retirement. Her real estate license expired in 2002, and she testified that she does not feel able to return to a real estate career at this point in time, because of the stress and time commitment involved.

[38] The plaintiff asserted that she has a heart condition that affects her health, and had to undergo minor heart surgery in 1993 and 2003, shortly after the Deceased’s death. However, no medical evidence was led to demonstrate the effect that this condition has on the plaintiff, and therefore I have not considered the plaintiff’s health to be a significant factor in this case (see e.g. Stott v. Cook (1960), 33 A.L.J.R. 447 at 450 (Aust H.C.) (giving little weight to the plaintiff’s assertions of ill health in the absence of medical evidence in a case under the Testator’s Family Maintenance and Guardianship of Infants Act 1916-1954)).

[39] The Deceased’s Japanese pension received by the plaintiff appears to be declining slightly in amount over time. The evidence does not clearly establish the reason for this decline – the plaintiff testified she thinks it is related to the increasing cost of living in Japan, while the defendants contend that it may be due to decreases in the value of the yen against the dollar.

(2) The Deceased’s Intentions

[40] The evidence of Mr. Lakes, an estate solicitor who was helping the deceased with estate planning, establishes that the deceased received his first wife’s estate on her death. However, the amount of that estate is not known. Additionally, Mr. Lakes testified that the Deceased did not want the plaintiff’s heirs to benefit from any benefits he might confer on her.

[41] The intentions of the Deceased are also revealed by the testimony of Jan Erik Saugestad, who testified that the Deceased’s intention in setting up Nistera Ltd. was to protect the financial interests of the Deceased and his sons. He also testified that the intention of Hjordis Saugestad, the Deceased’s mother, was that her estate would be passed on to the Deceased’s sons, and not to his spouse.

[42] Nick Saugestad testified that his father had told him that there would be money coming for him and Stephen out of the estate of Hjordis Saugestad, although he did not say how much; that the plaintiff would be receiving the Ostler Court Condo; that he did not want the plaintiff’s nephew and niece to receive any part of his estate; and that Nick and Stephen would receive the Blackcomb Way Condo.

[43] Stephen Saugestad also testified that his father had told them about Nistera Ltd., and that they had signing authority for the company and were joint owners with a right of survivorship. The Deceased told Stephen where the Nistera papers were hidden in the house, and that they were to contact Jan Erik if anything were to happen to him.

[44] While it is clear that the Deceased intended to provide a legacy for his sons, he also intended to provide for the plaintiff during her lifetime. The plaintiff testified that they had discussed setting up a trust to ensure that she would be looked after, while the defendants would ultimately receive the benefit of the Deceased’s estate. However, she testified that she was afraid that the Deceased would be able to take the property away from her, and therefore she preferred to remain on title as a tenant in common to protect her interest in their two properties, the Whistler condo and the Electra condo.

(3) The Ostler Court Condo

[45] The plaintiff alleges that the Ostler Court Condo is a leaky condo, and that it will require significant expense to keep it up. However, the condo still has significant value, being appraised at $381,000 as at March 26, 2003 and $560,000 at the time of trial. Additionally, the testimony of Mr. Lakes confirms that he was aware of the problems with the Ostler Court Condo at the time he was assisting the Deceased with estate planning, and that the condo still had considerable value despite those problems.

(4) The Relationship Between the Parties and the Deceased

[46] The relationship between all of the parties and the Deceased appears to have been strained at times. The plaintiff and the Deceased appear to have had a bumpy relationship, to the point of spending short periods apart. The Deceased had some problems with excessive drinking. Additionally, the couple kept their finances relatively separate, holding their real estate investments as tenants in common and contributing equally to the purchase price. Neither of them provided for the other in their wills.

[47] The Deceased and Stephen had a troubled relationship at times. Stephen also did not have a very good relationship with the plaintiff from the outset, although by the time of the Deceased’s death, the evidence establishes that they were getting along. The death of the Deceased’s first wife was particularly difficult for Stephen, who was a young teenager at the time, and he testified that the fact that the plaintiff was assuming a certain role within his father’s life within a year of his mother’s death was difficult for him to accept. He also testified that his mother had been the primary caregiver in their home, as their father was often away.

[48] Despite any difficulties in their relationship, the Deceased continued to provide financially for his children, paying $10,000 for Stephen’s tuition at BCIT, and co-signing a line of credit loan for $25,000, which was repaid with the monies he transferred from the estate of Hjordis Saugestad.

(5) Valuation of Assets

[49] The parties disagree on what value should be used for the Whistler and Electra condos. A property appraisal as at the date of the Deceased’s death was only done on the Ostler Court Condo ($381,000), although all properties were appraised as of the date of trial. The plaintiff seeks to rely on the assessed value of the properties for tax purposes, while the defendants seek to rely on the fair market value of the properties, as established by the admissions of the plaintiff. In this case, I find that the best indication of the fair market value of the properties is the value used in calculating the capital gains tax payable by the estate on the Deceased’s final tax return, as set out in the agreed statement of facts. This provides a value as at the date of death of $750,000 for the Whistler Condo and $170,000 for the Electra Condo.

[50] The parties also disagree on the value of one of the cars at issue, a 2000 Maxima. The parties roughly agree on values for a 1992 Maxima of approximately $2,000 and a 1994 Lexus of $12,000. I find that the value for the 2000 Maxima of $10,400 as set out in the agreed statement of facts is an appropriate value in this case. Thus, as I have stated, the plaintiff received automobiles with a total value of $24,000 by survivorship on the death of the Deceased.

[51] The value of certain items of artwork and jewellery was also in dispute. The plaintiff has provided estimated values of $20,000 for each of these. For the purposes of this decision, I accept those estimates.

(6) Use of Funds from the Inheritance of Hjordis Saugestad

[52] The evidence establishes that approximately $45,000 of the initial $178,000 received by the Deceased from the estate of Hjordis Saugestad was used to pay for school-related loans for Nick and Stephen. There was approximately $125,000 remaining in the account at the time of the Deceased’s death, and there is no evidence as to how the remainder of the funds were spent.

(7) Expenses Claimed by the Plaintiff

Expenses Claimed by the Plaintiff

Funeral Reception	$1,986
Deceased's American Express Bill	$151
Deceased's Golf Club Dues	$249.68
Cremation Costs	$2,254.44
Plaintiff's Seymour Golf Club Membership	$8,876.72
Boca Raton Expenses	$11,540.32
Car Phone Bill	$22.66
Remuneration for Whistler Management	$11,120

Total Expenses		$36,201

Expenses not Allowed:
Ostler Leaky Condo Costs	$6,151.58
Remuneration for Electra Management	$5,400

[53] The plaintiff claims, by way of set-off against the $65,000 she took from the Deceased’s RBC account containing the inheritance from Hjordis Saugestad, certain expenses and remuneration for her work in managing the Electra and Whistler properties. I find that she is entitled to claim the estate expenses, which total $4,641.06. Additionally, she is entitled to claim the two payments of $4,438.86 for her Seymour Golf Club Membership, which was a gift from the Deceased. However, she is not entitled to claim the $6,151.58 sought for leaky condo repairs to the Ostler Court Condo in 2004, as by that time the property belonged solely to her. The plaintiff is also entitled to $11,540.32 in expenses relating to the Boca Raton property.

[54] With respect to remuneration for her property management services, the plaintiff seeks to have the estate pay half of what it would cost to have someone else manage the properties, or $200 per month for the Electra Condo and 20% of gross revenues for the Whistler Condo. In light of my conclusion with respect to the variation of the Will, as detailed below, I have concluded that it is not appropriate to award the plaintiff any management fees for the Electra Condo. However, she is entitled to be paid a reasonable fee from the estate for her work in managing the Whistler Condo. Her evidence is that it would cost 40% of gross revenues to have a third party do so, and she therefore seeks 20% of gross revenues, or $11,120 (total) for 2003, 2004 and 2005, and this evidence is uncontradicted. Therefore, I find that the plaintiff is entitled to claim this amount from the estate. Thus, from the $65,000 the plaintiff took from the estate, I find that she still owes the estate approximately $29,000.

ISSUES

[55] The main issues to be determined in this case are:

1. What assets comprise the Deceased’s estate, and what is their value?

2. Does the Will make adequate provision for the plaintiff?

3. If not, what is the plaintiff entitled to pursuant to section 2 of the Wills Variation Act?

DECISION

1. What assets comprise the Deceased’s estate?

[56] It is not disputed that certain assets are part of the Deceased’s estate. In particular, the Defendants agree that the following are included in the Deceased’s estate:

(a) the half-interest in the Blackcomb Condo,

(b) the half-interest in the Electra Condo,

(d) the Deceased’s interest in the estate of Hjordis Saugestad,

(e) the CPP death benefit, and

(f) the Royal Bank Account.

[57] There is, however, a dispute as to whether some items from the plaintiff’s and Deceased’s home and the funds held by Nistera Ltd. form part of the Deceased’s estate.

The Personal Items

[58] The ownership of certain household furnishings and items is in dispute. The plaintiff asserts that the household furnishings were held in joint tenancy, and therefore passed to her on the death of the Deceased. The defendants contend that these items came from the family home in Japan, and pass to them as specific bequests under the Will. The plaintiff has agreed to give up many of these items, but resists with respect to certain items that she states were purchased by herself or the Deceased during their marriage. She acknowledges that these are family assets, but claims they were held in joint tenancy.

[59] Still in dispute are 2 large green metal lamps, 2 white lamps with a floral pattern, 4 piece copper pots, an orange and white cloth, and specific items passing under the Will: a Buddha figure, an antique wedding chest, Imari porcelain and paintings, woodblock prints from Japan, Oriental carpets, and three Graciela Rodo Boulanger prints.

[60] I find that the plaintiff has not established that the personal items were held with the Deceased as joint tenants. Further, the fact that the Deceased sought to have these items pass under his will indicates that he did not view them as being held in joint tenancy. Thus, they do not pass directly to the plaintiff by survivorship.

The Nistera Ltd. Account

(i) Does Nistera Ltd. hold the funds on resulting trust for the Deceased?

[61] The plaintiff argues that the funds held by Nistera Ltd. form part of the Deceased’s estate, on the ground that a resulting trust was created by the Deceased’s transfer of the funds without consideration. The plaintiff further submits that the funds held by Nistera Ltd. constitute a family asset, because some of these funds, both income and capital, were used to pay some expenses of the plaintiff and the Deceased.

[62] The defendants counter that the presumption of advancement applies here because the funds were transferred into the control of the Deceased’s sons, thereby rebutting the presumption of resulting trust. Further, the defendants submit that the sole purpose of the creation of Nistera Ltd. was to transfer assets of the Deceased to his sons, and that there was a clear intention that the entire beneficial interest in the funds would pass outright to the sons.

[63] Despite the plaintiff’s submissions with respect to the formation of a resulting trust, the transfer of funds by the Deceased to Nistera Ltd. cannot be characterized as a gratuitous transfer that would create a resulting trust. Rather, these contributions are better characterized as equity contributions by a shareholder. As the parties appear to agree, there is no evidence to support the characterization of the contribution of funds to Nistera Ltd. as a shareholder loan. However, there is also no basis for characterizing the transfer as a gratuitous contribution. The Deceased maintained a beneficial interest in the shares of Nistera Ltd., which were held on trust for himself and his two sons as joint tenants. Thus, he would have received the benefit of the enhanced value of his beneficial interest in those shares, along with expected further increases in value as the capital generated income for Nistera Ltd. This is no different from any other contribution of shareholder equity into a corporation in expectation of future returns. Further, the funds were given to Nistera Ltd. absolutely: although the deceased maintained control of the company and could cause it to pay money to him, as the plaintiff points out, the Deceased is considered to be a separate legal personality from the company.

[64] What the Deceased did give gratuitously to his sons was a beneficial interest in the shares of Nistera Ltd. These shares are held by Jyske Management and Jyske Nominees in trust for the Deceased, Nick Saugestad and Stephen Saugestad as joint tenants. This gratuitous transfer raises the presumption of resulting trust, and the Defendants bear the onus of proving that the transfer was a gift: see Goodfriend v. Goodfriend, [1972] S.C.R. 640 at 646, 22 D.L.R. (3d) 699, Spence J. However, the presumption of resulting trust can be rebutted in two ways: by evidence that a benefit to others was intended, or by the presumption of advancement when the person in whom the property was vested was the child of the purchaser: see Niles v. Lake, [1947] S.C.R. 291 at 302, [1947] 2 D.L.R. 248, Taschereau J.; D. Waters, Law of Trusts in Canada, 2nd ed. (Toronto: Carswell, 1984) at 310-319.

[65] In this case, there is clear evidence in the form of a letter from the Deceased to Jyske Bank dated February 20, 1997 that the Deceased placed the shares in trust. Further, he intended that the shares be held between them as joint tenants, indicating that his sons would have a right of survivorship. This is an inter vivos transfer to his sons of the beneficial interest in the shares. He also provided his sons with the legal right to control the funds held by the company by giving them signing authority over the Nistera Ltd. account. Although they agreed they would not interfere during the lifetime of the Deceased, this does not alter the fact that they could legally withdraw funds. As the intent of the Deceased to transfer the beneficial interest to his sons absolutely is clear on the evidence, the presumption of resulting trust is rebutted. Further, even if such evidence were not clear, the plaintiff has not pointed to sufficient evidence with respect to the share transfer to rebut the presumption of advancement. On either line of reasoning, the beneficial interest in the shares in Nistera Ltd. was given to Deceased’s sons during his lifetime. On his death, they received the entire beneficial interest in those shares by virtue of the right of survivorship. Consequently, the defendants do not hold the shares on a resulting trust for the estate.

(ii) Based on the above characterization of the Deceased’s contributions to Nistera Ltd., what is the potential tax liability of the estate?

[66] One further issue that arises with respect to Nistera Ltd. is the potential tax liability of the estate for the Deceased’s failure to properly declare his withdrawals from the corporation as income. The exact tax liability was not known at trial, and will ultimately depend on how the Canada Customs and Revenue Agency (“CCRA”) characterizes the Deceased’s contributions and withdrawals. However, an accountant prepared a report estimating the tax liability for the estate, depending on whether the Deceased’s contributions to Nistera Ltd. were characterized by the CCRA as being a shareholder loan or an equity injection. In light of my conclusions above, Scenario C described in the tax calculations is applicable in these circumstances: the financial contributions to Nistera Ltd. were an equity injection, and the Deceased and his two sons were the joint beneficial owners of the shares of Nistera Ltd. The funds were contributed for the benefit of the Deceased and his sons jointly, while the withdrawal of monies from Nistera was for the benefit of the deceased only.

[67] Under this scenario, the estimated tax liability of the estate is $137,461. This tax calculation includes the income tax owing by the Deceased, as well as a 10% penalty for omitting an amount from a tax return. In reality, the tax liability of the estate may be much higher: if the omission is characterized as wilful or due to gross negligence, an additional penalty equal to 50% of the additional tax payable may be assessed, and an additional penalty of up to $24,000 per return may be assessed for failing to file the foreign reporting forms relating to Nistera Ltd. Additionally, further tax could be payable on account of the funds held in the Norwegian accounts prior to the transfer of those funds to Nistera Ltd. However, for the purposes of this decision, the $137,461 figure will be used.

[68] One additional factor arising from this conclusion is that the defendants will have to pay tax on the income of Nistera Ltd., based on their beneficial ownership of the shares. However, no evidence was presented to estimate the amount of tax they will be liable for, and I have not taken this into consideration.

2. Does the Will make adequate provision for the plaintiff?

[69] The relevant provision governing the variation of a will is section 2 of the Wills Variation Act. That section provides:

Maintenance from estate

2 Despite any law or statute to the contrary, if a testator dies leaving a will that does not, in the court's opinion, make adequate provision for the proper maintenance and support of the testator's spouse or children, the court may, in its discretion, in an action by or on behalf of the spouse or children, order that the provision that it thinks adequate, just and equitable in the circumstances be made out of the testator's estate for the spouse or children.

[70] The leading case on the application of section 2 is Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807, 93 B.C.L.R. (2d) 145. In that case, the Supreme Court of Canada set out the analysis to be followed when a claim is brought to vary a will on the ground that it does not make adequate provision for the testator’s spouse or children. In the analysis, the court must ask itself whether the will makes adequate provision and if not, order what is adequate, just and equitable (Tataryn at para. 13). There are two interests protected by the Wills Variation Act: its main aim is to ensure adequate, just and equitable provision for the spouses and children of testators, while the other interest protected is testamentary autonomy (Tataryn at paras. 16-17). The language of the statute confers a broad discretion on the court, which permits the courts to make orders that are just in the specific circumstances and in light of contemporary standards (Tataryn at para. 15).

[71] Determining whether the will makes adequate provision for a testator’s spouse or child is not limited to provision for basic needs. Rather, two types of current societal norms, both legal and moral, must be evaluated to determine whether adequate, just and equitable provision has been made by the testator (Tataryn at paras. 24-28). I will examine each of these norms in turn.

The Testator’s Legal Obligations

[72] A summary of the approach to evaluating the testator’s legal obligations is provided in Tataryn at para. 30:

The legal obligations on a testator during his or her lifetime reflect a clear and unequivocal social expectation, expressed through society's elected representatives and the judicial doctrine of its courts. Where provision for a spouse is in issue, the testator's legal obligations while alive may be found in the Divorce Act, R.S.C., 1985, c. 3 (2nd Supp.), family property legislation and the law of constructive trust: Pettkus v. Becker, [1980] 2 S.C.R. 834; Sorochan v. Sorochan, [1986] 2 S.C.R. 38; Peter v. Beblow, [1993] 1 S.C.R. 980. Maintenance and provision for basic needs may be sufficient to meet this legal obligation. On the other hand, they may not. Statute and case law accepts that, depending on the length of the relationship, the contribution of the claimant spouse and the desirability of independence, each spouse is entitled to a share of the estate. Spouses are regarded as partners. [Emphasis added.]

[73] Subsequent cases have interpreted Tataryn as meaning that a determination of whether the legal obligations of the testator to a spouse have been satisfied can be carried out by analyzing the spouse’s entitlement in a notional separation immediately prior to the testator’s death: see Glanville v. Glanville (1998), 58 B.C.L.R. (3d) 240, 168 D.L.R. (4th) 332 at paras. 14, 50; Erlichman v. Erlichman Estate (2002), 99 B.C.L.R. (3d) 26, 2002 BCCA 160 at paras. 17, 49; Bridger v. Bridger Estate (2006), 53 B.C.L.R. (4th) 235, 2006 BCCA 230 at para. 20;. Allchorne v. Allchorne Estate (2005), 13 E.T.R. (3d) 306, 2005 BCSC 104 at para. 23. The legal obligation defines the minimum acceptable level of what is adequate, just and equitable: Glanville, supra, at para. 19, Esson J.A., dissenting, cited in Erlichman, supra, at para. 44, Saunders J.A.; More v. More Estate (2002), 46 E.T.R. (2d) 96, 2002 BCSC 920 at para. 24; As I have emphasized in the above paragraph, and consistent with the family law decisions that establish the legal obligations of the testator, the length of the relationship and the contribution of the claimant spouse are relevant factors to a determination of what share of the estate a spouse will be entitled to.

[74] The relevant time to consider the variation of the will is immediately before the death of the testator, considering the circumstances existing and reasonably foreseeable to the testator at that date: see Landy v. Landy Estate (1991), 60 B.C.L.R. (2d) 282, 44 E.T.R. 1 at para. 30 (C.A.); Crear v. Crear Estate (1998), 61 B.C.L.R. (3d) 55, 24 E.T.R. (2d) 1 at para. 68 )C.A.);

[75] Thus, for the purposes of determining whether the Deceased met his legal obligation to provide for the plaintiff, a court must engage in a determination of the notional entitlement of the spouses immediately before the death of the testator. For our purposes, the relevant legislation would be the Family Relations Act, R.S.B.C. 1996, c. 128, and the Divorce Act, R.S.C. 1985, c. 3 (2nd Supp.).

Division of Family Assets

[76] Family assets are subject to prima facie equal division upon the occurrence of a triggering event pursuant to section 56 of the Family Relations Act. An equal division of the family assets is to be effected, unless equal division would be unfair having regard to the factors set out in sub-section 65(1). That sub-section provides:

Judicial reapportionment on basis of fairness

65 (1) If the provisions for division of property between spouses under section 56, Part 6 or their marriage agreement, as the case may be, would be unfair having regard to

(a) the duration of the marriage,

(b) the duration of the period during which the spouses have lived separate and apart,

(d) the extent to which property was acquired by one spouse through inheritance or gift,

(e) the needs of each spouse to become or remain economically independent and self sufficient, or

(f) any other circumstances relating to the acquisition, preservation, maintenance, improvement or use of property or the capacity or liabilities of a spouse,

the Supreme Court, on application, may order that the property covered by section 56, Part 6 or the marriage agreement, as the case may be, be divided into shares fixed by the court.

[77] In this case, the majority of the assets of the Deceased and the plaintiff should be divided equally between them, in recognition of the fact that this was a marriage of moderate length. However, the Deceased brought significant assets into the relationship, and I have concluded that the interests in Nistera Ltd. and the proceeds from the sale of the Boca Raton property are family assets, but should be reapportioned for the reasons detailed below. Also as detailed below, I have concluded that the inheritance received from Hjordis Saugestad is not a family asset.

(1) Inheritance from Hjordis Saugestad – Funds Received During the Deceased’s Lifetime

[78] The plaintiff submits that the first portion of the Deceased’s inheritance from Hjordis Saugestad, which consisted of approximately one-half the funds held in the Nordea Account ($178,332.59), was a family asset, because a portion of it was used to pay for the couple’s living, travel, entertainment and other expenses, and to repay several school-related loans for the children totalling approximately $45,000. The defendants counter that this portion of the inheritance was held on trust for them, based on an email sent from the Deceased to Jan Erik Saugestad.

[79] The relevant portions of the Deceased’s letter to Jan Erik Saugestad dated December 17, 2002 are as follows:

While awaiting the bureaucratic processing of Hjordis’ will I see no need to delay the division of monies put in Kreditkassen (believe account #... which pls confirm). The account is in my name but appreciate mother wanted the account to be split equally between her four grandchildren. Accordingly, I suggest you give me full address of the bank, possibly including name of contact person, and I will then write to have the account closed and funds transferred to the four parties… I can of course arrange to have the funds transferred directly to your and/or Kjetil’s account(s) in Norway or I can arrange subsequent transfer of your parts from Jyske Bank to wherever you want…

[80] Thus, the Deceased expressed his understanding that these funds were to pass to the four grandchildren, including Stephen and Nick, although the account was held in his name. This amounts to the Deceased declaring himself to be a trustee of the funds in that account for the four grandchildren. I find that this letter is admissible pursuant to the declarations against pecuniary interest exception to the hearsay rule. As stated in Sopinka, Lederman and Bryant, The Law of Evidence in Canada, 2nd ed. (Toronto: Butterworths, 1998) at 201, the requirements for this exception are as follows:

The written or oral declarations of a person, since deceased, which were against his pecuniary or proprietary interest at the time that he made them are admissible as evidence of the facts contained in the declarations, provided that he had complete knowledge of the facts he stated.

[81] The traditional exceptions to the hearsay rule remain presumptively in place: R. v. Mapara, [2005] 1 S.C.R. 358, 2005 SCC 23 at para. 15. Here, the Deceased’s statement clearly goes against his pecuniary interest, as it indicates he accepts that the funds do not belong to him, he had full knowledge of the facts he stated, and he is now deceased. Thus, this statement constitutes admissible evidence.

[82] I also find that the Deceased’s declaration is sufficient to create a valid trust. The requirements for the creation of an express trust include the three certainties: the language of the settlor must be imperative, the subject matter or trust property must be certain, and the objects of the trust must be certain: see Waters, Law of Trusts in Canada, supra, at 85, citing Knight v. Knight (1840), 3 Beav. 148, 49 E.R. 58. A self-declaration of trust can validly constitute a trust, provided there is clear evidence of the intention to do so; specific language declaring oneself a trustee is not required: see Waters, supra at 150-151; Watt v. Watt Estate, (1987) 49 Man.R. (2d) 317, [1988] 1 W.W.R. 534 (C.A.); Paul v. Constance, [1977] 1 W.L.R. 527, [1977] 1 All E.R. 195 (C.A.).

[83] In this case, the Deceased’s declaration that “the account is in my name but appreciate mother wanted the account to be split equally between her four grandchildren” and that he would have the “funds transferred to the four parties” demonstrates that he considered himself to hold these funds on trust. The defendants also presented significant evidence that Hjordis Saugestad intended that her funds benefit her grandchildren, and not the plaintiff. That evidence, combined with the Deceased’s subsequent actions in transferring approximately half of the funds out of the account, demonstrates that he considered himself a trustee of the funds for the four grandchildren. The subject matter and objects of the trust are clearly established by that email communication. Thus, the requirements for the creation of an express trust are met, and the Deceased held the funds on trust for the defendants. The majority of funds were applied towards the children’s educational expenses, and any funds that the Deceased used for other purposes would be subject to an accounting by him or his estate.

[84] Given my conclusion that the Deceased held these funds on trust for Nick and Stephen, the funds from the Nordea Account cannot be considered to be “property owned by one or both spouses,” and consequently cannot be considered to be a family asset.

(2) Inheritance from Hjordis Saugestad – Funds Received After the Deceased’s Death

[85] With respect to the second portion of funds received by the Deceased’s estate from the estate of Hjordis Saugestad, totalling $374,084.77, there is no clear evidence that the Deceased held these funds in trust for his sons. The plaintiff submits that these funds constitute a family asset, because the couple intended to take a world cruise, buy the plaintiff a new car and diamond earrings, and use the inheritance to pay for their living expenses during retirement. The defendants counter that this future inheritance of the Deceased would not have been classified as a family asset, as simply talking about the use of an asset is not sufficient to constitute it a family asset.

[86] A prospective inheritance to which a spouse might become entitled is not an asset within the meaning of the Family Relations Act: see Graham v. Graham (1983), 48 B.C.L.R. 134, 21 A.C.W.S. (2d) 67 at para. 9 (S.C.), aff’d (1984), 59 B.C.L.R. 27, 28 A.C.W.S. (2d) 67 (C.A.); Murfitt v. Murfitt, 2004 BCSC 989 at para. 18; McWatters v. Auger, [1999] B.C.J. No. 60 at paras. 33-35 (S.C.) (QL). However, where the inheritance exists before the triggering event, the property may still be a family asset, even though the will is not settled and possession of the funds is only received after the triggering event: see Caldwell v. Caldwell (1999), 1 R.F.L. (5th) 284, 1999 BCCA 389 at para. 16 (holding that the husband became the beneficial owner of an undivided one-half interest in his mother’s estate upon her will being admitted into probate).

[87] In this case, the administration of Hjordis Saugestad’s estate appears to have been underway by the time of the Deceased’s death. Therefore, as in Caldwell, the deceased was the beneficial owner of those funds at the time of his death, and they may be considered to be “property owned by one or both spouses.” However, in order to qualify as a family asset, the funds must also have been ordinarily used for a family purpose within the meaning of sub-section 58(2) of the Family Relations Act.

[88] Funds such as an inheritance may or may not be ordinarily used for family purposes, depending on the circumstances of the case. An asset may be considered to be a family asset if it was relied on for the future financial security of the parties: see Evetts v. Evetts (1996), 85 B.C.A.C. 19, 68 A.C.W.S. (3d) 128 at para. 23; Hefti v. Hefti (1998), 57 B.C.L.R. (3d) 171, 40 R.F.L. (4th) 1 at paras. 25-27 (C.A.) and authorities cited therein. In this analysis, I note that the intention of Hjordis Saugestad that her inheritance not be used to benefit the plaintiff, but rather her grandsons, is not relevant to the determination of whether the funds are a family asset: see Hefti, supra, at para. 28, Finch J.A. (stating that the husband’s mother’s intention to benefit only him with the inheritance was not relevant to the determination of whether or not it was a family asset).

[89] In Hefti, supra, a majority of the Court of Appeal held that thinking and talking about inherited money as a potential source of future retirement income was not sufficient to render the inheritance a family asset (at para. 40). The case involved a 28-year marriage in which the wife was out of the workforce to care for the parties’ three children, and the inheritance, received approximately four years before the parties separated, was held by a majority of the Court not to be a family asset.

[90] Similarly, the mere fact that funds might be available for retirement does not suffice to make them a family asset. For example, in Todd v. Freeman (2005), 46 B.C.L.R. (4th) 207, 2005 BCCA 519, the wife’s remainder interest in a trust fund was held not to be a family asset, in part because there was no evidence of specific discussions with respect to how finances would be arranged on retirement, and also because the parties had other sources of wealth available to them, including other assets and their substantial earning capacities. As a result, the parties had not arranged their affairs so that the inheritance would provide them with financial security (at para. 48). These facts, combined with certain aspects of the trust that restricted the wife’s use of the funds while her mother was alive, meant that the trust was not a family asset.

[91] Even specific plans to use the funds for a family purpose may not suffice to make an asset ordinarily used for a family purpose. In Crocker v. Crocker (1993), 44 A.C.W.S. (3d) 126 (B.C.S.C.), proceeds of sale from an inherited apartment received approximately six months before the parties separated were held not to be a family asset, even though the trial judge concluded that the intention of the parties was probably to use the proceeds of the sale of the apartment to buy a house for themselves. Sinclair-Prowse J. held that “an intended or probable future use does not convert an asset into a family asset” (at para. 20).

[92] Also relevant to the case at bar is the decision in Yamniuk v. Yamniuk (1991), 33 R.F.L. (3d) 86, 26 A.C.W.S. (3d) 697 (B.C.S.C.). In that case, a bank account containing proceeds from the husband’s father’s estate, which were received prior to the parties’ 20-year marriage, was held not to be a family asset: he had intended it to provide a bequest for the parties’ son and had not used it during the marriage. The husband would have used it to provide for the family’s financial security, but he had other resources which he would have exhausted first.

[93] A consideration of these authorities suggests that in order for a fund to be considered a family asset because of a future use, the future use should relate to providing for the financial security of the family. Merely planning to acquire a specific asset or the mere fact an asset could have been available to satisfy the family’s financial needs is not sufficient to make funds a family asset.

[94] In the case at bar, I cannot find that the discussions relating to planned expenditures amounted to reliance on the future inheritance to provide for the couple’s future financial security. The nature of the expenditures intended to be incurred in respect of the inheritance are more along the lines of thinking and talking about inherited money as a potential source of future retirement income, or planning an intended use of the funds. It does not amount to reliance on those funds to provide for the couple’s future financial security.

[95] In this case, the couple had other significant assets: the funds held by Nistera Ltd., the Deceased’s pension, and their real estate investments, which would have supported them through retirement. The purpose for which the plaintiff alleges the funds might have been used amount to the purchase of luxury items: a new car for the plaintiff, diamond earrings for the plaintiff, a six-month world cruise. These items do not relate to using the funds to provide for the future financial security of the couple.

[96] In the event that I am wrong, and the inheritance is a family asset, I would nonetheless have reapportioned the inheritance 80% in favour of the deceased. In this regard, see Borrill v. Borrill (1999), 88 A.C.W.S. (3d) 426 at paras. 33-38 (B.C.S.C.) (28-year marriage, interest in family cottage received by husband two years prior to separation reapportioned 75% in his favour); Ferguson v. Ferguson (2004), 132 A.C.W.S. (3d) 943, 2004 BCSC 803 at para. 54 (10-year marriage, term deposits brought into the relationship and acquired by husband from inheritance and pre-marital savings by husband reapportioned 75% in his favour); Green v. Hendershot (2000), 32 E.T.R. (2d) 71, 2000 BCSC 129 (a Wills Variation Act claim in which the husband received $100,000 from his mother’s estate in the year before his death, in which the court held that “no legal and very little moral claim arises in favour of the plaintiff in respect of that amount” (at para. 21)).

(3) Nistera Ltd.

[97] The plaintiff argues that the funds held by Nistera Ltd. are a family asset, on the ground that the resulting trust is a chose in action (a submission I rejected above), which may be a family asset. The plaintiff further submits that the funds, both income and capital, were regularly used to support the couple, and that they were intended to provide for the couple’s future financial security. The defendants counter that even if the funds are construed as family assets, they should nevertheless be reapportioned on the ground that they were primarily acquired before the marriage. The defendants agree that the value of Nistera Ltd. should be included in determining whether the Will makes adequate provision for the plaintiff, but assert, correctly, that these funds are not available in making any award under the Wills Variation Act. The court only has jurisdiction to make an award out of the estate: see section 2 of the Wills Variation Act.

[98] In view of my finding that Nistera Ltd. does not hold the funds on resulting trust for the estate, these funds remain absolutely with Nistera Ltd. The Deceased’s sons, by virtue of their control of the entire beneficial interest in Nistera Ltd., therefore receive the entirety of those funds. However, if these funds were a family asset, then the value of that family asset should be taken into account in determining whether the Will made adequate provision for the plaintiff: see e.g. Bridger, supra, at para. 19 (gifts made by the wife of the testator to her children during his lifetime were included in the notional family assets to be divided).

[99] First, to clarify, sub-section 58(3) of the Family Relations Act, R.S.B.C. 1996, c. 128 states:

[w]ithout restricting subsection (2), the definition of family asset includes the following:

(a) if a corporation or trust owns property that would be a family asset if owned by a spouse,

(i) a share in the corporation, or

(ii) an interest in the trust

owned by the spouse;

[100] Thus, it would be the Deceased’s beneficial interest in the shares of Nistera Ltd., and not the actual funds themselves, that would be considered to be the family asset. I take the value of the shares to be equal to the value of the funds held by Nistera Ltd.

[101] Sub-section 58(2) of the Family Relations Act defines a family asset as follows:

(2) Property owned by one or both spouses and ordinarily used by a spouse or a minor child of either spouse for a family purpose is a family asset.

[102] An asset may be considered to be a family asset if it was relied on for the future financial security of the parties: see Hefti, supra, at para. 25. With respect to capital assets, a further issue may arise as to whether only the income from the asset, or the capital asset itself, is a family asset. The issue of when a capital asset will be considered to be a family asset was analyzed by Lambert J.A. for a majority of the Court of Appeal in Evetts, supra, as follows at para. 23:

I think it would be unwise to try to establish any rules for the determination of whether a capital asset will be considered to be a family asset. However one or two guidelines are readily revealed from the cases. The fact that income from a capital asset is used occasionally for a family purpose does not of itself make the capital asset a family asset (Stuart v. Stuart). The fact that capital from the asset is used from time to time, when required, for a family purpose may be an indication that the asset is a family asset (Brainerd v. Brainerd). But the distinction between income being used for a family purpose and capital being used for a family purpose is not, in itself, determinative (Starko v. Starko). So the fact that only income is used for family purposes does not necessarily mean that the capital asset itself is not used for a family purpose. The use of the asset to provide financial security and protection against erosion of income or other family misadventure in the future may constitute a present ordinary use for a family purpose (Tezcan v. Tezcan; Folk v. Folk). The fact that the words "ordinarily used...for a family purpose" are the governing words in the statute means that the use pattern must be examined in each case to determine whether, in the ordinary course, the present use commitment to meet a present or future need includes a use for a family purpose. Ordinary use for a family purpose is not inconsistent with ordinary use for other purposes.

[103] See also Todd v. Freeman, supra, at para. 44; Delesalle v. Delesalle (2005), 21 R.F.L. (6th) 261, 2005 BCSC 1631 at para. 31.

[104] In this case, it is reasonably clear that the Deceased’s interest in Nistera Ltd. was a family asset: the withdrawals following the year 2000 ranged from $43,000 to $77,000, and these monies were used to pay for the expenses of the plaintiff and the Deceased, including expenses incurred on their many holidays. Additionally, both capital and income from the fund were regularly used, as the withdrawals exceeded the income on the fund in each year. Finally, the evidence suggests that the plaintiff’s understanding was that these funds were available to finance the couple’s retirement, which supports their characterization as a family asset.

[105] Thus, although the shares of Nistera Ltd. pass to the Deceased’s sons outside the Will, and therefore the value of the funds held by the corporation cannot be used to satisfy a claim under the Wills Variation Act, the value of the funds must nonetheless be taken into consideration in assessing whether the Will makes adequate provision for the plaintiff.

Reapportionment of the Nistera Ltd. funds

[106] As I have concluded that the funds held by Nistera Ltd. are a family asset, pursuant to section 56 of the Family Relations Act, they are subject to prima facie equal division in a notional property division. However, I have also concluded that this asset would have been reapportioned, primarily on the ground that it was acquired before the marriage. For example, in Brainerd v. Brainerd (1989), 22 R.F.L. (3d) 113 at 121, 16 A.C.W.S. (3d) 131 (B.C.C.A.), an investment fund from which both income and capital were used to support the parties and their son throughout their eight year marriage was reapportioned 80% in the husband’s favour. The husband inherited those funds and wanted to preserve them for the parties’ son, and the wife had made no contribution to the acquisition of those funds.

[107] In the case at bar, the marriage was of moderate duration, and the funds held by Nistera Ltd. were brought into the marriage by the Deceased. Some unknown portion of these funds may have been inherited by the Deceased on the death of his first wife, and her contributions to raising the Deceased’s children no doubt contributed to his income and earning capacity. Although the plaintiff would have a need to remain economically independent, she would have significant other assets that would enable her to provide for herself, as well as half of the Deceased’s pension. As the Deceased was retired, both spouses would have a need for additional income to support their lifestyles, which would have to be produced by their existing assets. The couple was already encroaching on the Deceased’s capital in order to sustain their expensive lifestyle. Additionally, the plaintiff did not contribute to the acquisition or preservation of the funds held by Nistera Ltd., and in fact contributed to their expenditure by virtue of the lifestyle she shared with the Deceased. Thus, an equal division would be unfair in these circumstances, and I would have reapportioned the fund 80% in the Deceased’s favour.

(4) Boca Raton Condo

[108] For the same reasons outlined above, I would find the funds from the Boca Raton Condo to be a family asset, and would have reapportioned those funds 80% in favour of the Deceased. The property was acquired entirely through the efforts of the testator and his first wife. While the plaintiff had the benefit of using the property, she did not contribute to its acquisition.

Theoretical and Actual Property Division
		Theoretical Division		Actual Division
Asset	Value	Deceased	Plaintiff	Deceased	Plaintiff
Ostler Condo	381,000	190,500	190,500	0	381,000
Blackcomb Condo	750,000	375,000	375,000	375,000	375,000
Electra	170,000	85,000	85,000	85,000	85,000
Boca Raton	255,715	204,572	51,143	255,715	0

Blackcomb Condo Mortgage	-92,956	-46,478	-46,478	-46,478	-46,478
Electra Condo Mortgage	-62,385	-31,192	-31,192	-31,192	-31,192

Nistera Investments	1,041,758
Less Taxes Payable	-137,461
Net Nistera Assets	904,297	723,438	180,859	904,297	0

RRSPs – Deceased	52,633	26,317	26,317	0	52,633
RRSPs – plaintiff	26,960	13,480	13,480	0	26,960
RBC joint	3,504	1,752	1,752	0	3,504
RBC joint	322	161	161	0	322
RBC joint	764	382	382	0	764
Citibank joint	8,848	4,424	4,424	0	8,848
Northshore Credit Union	15,064	7,532	7,532	0	15,064
1992 Maxima	2,000	1,000	1,000	0	2,000
2000 Maxima	11,400	5,700	5,700	0	11,400
1994 Lexus	12,000	6,000	6,000	0	12,000
Furniture – Ostler	10,000	5,000	5,000	0	10,000
Furniture - Boca Raton	8,000	4,000	4,000	0	8,000
Furniture – Blackcomb	3,000	1,500	1,500	0	3,000
Artwork	20,000	10,000	10,000	0	20,000

Other Assets
RBC Account – Deceased	125,365	125,365		125,365
Hjordis Inheritance – Deceased	374,085	374,085		374,085
Jewellery – plaintiff	20,000		20,000		20,000

Liabilities
Income Tax Paid	-56,399
Capital Gains Tax Paid	34,679
Tax Paid Less Capital Gains Tax -21,720		-21,720		-21,720

Visa, joint	-5,440	-2,720	-2,720	-5,440

Net Assets		2,063,098	909,360	2,014,632	957,825

Conclusion on Notional Division of Assets

[109] Based on the above equal division of the family assets, with an 80% reapportionment in the Deceased’s favour for the funds from Nistera Ltd. and the Boca Raton Condo, the Deceased would leave the marriage with approximately $2.1 million in assets, and the plaintiff with approximately $910,000 in assets. For the purposes of this division, I have included the income tax that was payable by the deceased in his final year as a liability to him, but have subtracted out the capital gains tax paid, as the capital gains would not generally be considered in a division of matrimonial property.

[110] Comparing this to the value of what the plaintiff actually received on the death of the Deceased, she has received approximately $50,000 more than she would have under a notional property division as at the date of the Deceased’s death.

Entitlement to Spousal Support

[111] Counsel for the plaintiff contends that any reapportionment of the family assets in favour of the Defendant should be offset by an award of lump sum compensatory spousal maintenance, citing Borgstrom v. Borgstrom (2004), 2 R.F.L. (6th) 1, 2004 BCSC 605 (18 year marriage in which the wife was primary caregiver for the parties’ children). In his submissions with respect to spousal support, he relies on several cases for the proposition that the plaintiff would be entitled to the marital standard of living, or the same standard of living as the Deceased: Nelson v. Nelson (2001), 23 R.F.L. (5th) 317, 2001 BCCA 682 (27 year marriage where wife was primary caregiver for the parties’ children); Dithurbide v. Dithurbide (1996), 23 R.F.L. (4th) 127, 63 A.C.W.S. (3d) 898 (B.C.S.C.) (25 year cohabitation with 18 years of marriage, during which wife was primary caregiver for the children); Touwslager v. Touwslager (1992), 63 B.C.L.R. (2d) 247, 9 B.C.A.C. 203 (23-year traditional marriage in which wife was the primary caregiver for the parties’ children); Anderson v. Anderson (1991), 7 B.C.A.C. 123, 37 R.F.L. (3d) 317 (a 31-year marriage in which the wife was the primary caregiver for the children).

[112] The defendants counter that the plaintiff is not entitled to spousal support, as she was advantaged by the marriage, entering with just over $200,000 in assets, and leaving with assets totalling more than $900,000, based on the notional division of property. Those significant assets could be invested to produce income for the plaintiff, in addition to (notionally) her share of the Deceased’s pension. Additionally, they assert that the plaintiff’s earnings in the last year of her real estate career were the exception, rather than the norm.

[113] The authorities relied on by the plaintiff do not provide much assistance on the facts of this case: they all involve long-term traditional marriages in which the wife was out of the workforce for many years raising the parties’ children. The marriages in these cases were considerably longer than in the case at bar, ranging from 18-27 years in length. Additionally, the wife remained out of the workforce to fulfill the role of primary caregiver, while the husband furthered his career.

[114] On the facts of this case, I do not think that the plaintiff would be entitled to compensatory spousal support: any disadvantage she may have suffered by reason of retiring early from her real estate career is offset by the significant increase to her asset base, which far exceed anything she could have achieved working as a realtor and paying for her own living expenses. The plaintiff has been significantly advantaged by this marriage, and would also have been advantaged by its breakdown.

[115] However, I do find it instructive for the purposes of considering the plaintiff’s entitlement under the Wills Variation Act to consider the amount of spousal support to which the plaintiff might have been entitled, had she been able to establish entitlement in a notional separation immediately prior to the deceased’s death. This amount helps to put in perspective the plaintiff’s assertions as to the magnitude of the Deceased’s moral obligations to her. The Spousal Support Advisory Guidelines, while not law in British Columbia, provide a useful tool for the court, and suggest a range within which most cases should fall, absent extraordinary considerations: see McEachern v. McEachern, 2006 BCCA 508 at para. 64; Redpath v. Redpath, 2006 BCCA 338 at para. 38; Yemchuk v. Yemchuk (2005), 44 B.C.L.R. (4th) 77, 2005 BCCA 406 at para. 64. These guidelines suffice for the purposes of our theoretical exercise.

[116] With the assets as divided, I have estimate that the Deceased could have earned investment income of $97,000 per year from investments (assuming the entire capital sum was invested at 5% and imputing that as income), plus approximately $10,000 per year from his half of his pension. The plaintiff could have earned approximately $45,000 per year from her imputed investment income on her share of the assets, plus $10,000 per year from her share of the pension (and not including the pension to which she becomes entitled when she reaches the age of 60). She would also have roughly $5,200 per year for the Deceased’s half of her management fees (as claimed in this proceeding) for the Whistler and Electra properties, plus $3,300 income for her work as a greeter. Based on the concept of merger over time, the Spousal Support Advisory Guidelines suggest sharing the income difference between the parties in the range of 18-24% in favour of the dependent spouse, or support in the amount of $700-$900 per month, in rounded figures.

[117] Also instructive in this case are the decisions in Hefti, supra, and Borgstrom, supra. In Hefti, discussed above, lump sum maintenance of $100,000 was awarded in the context of a 28-year marriage where the wife had been the primary caregiver for the parties’ three children and was unable to return to work as a nurse. The wife’s income was approximately $24,000 per year and the husband’s $90,000 per year. Borgstrom involved an 18-year marriage where the wife was a primary caregiver for the parties’ four children. In that case, the property was divided equally, although the wife did not claim an interest in the husband’s $67,000 inheritance. The Court awarded $50,000 in compensatory lump sum spousal support. These amounts help to put the adequate, just and equitable provision for the plaintiff into perspective.

The Testator’s Moral Obligations

[118] Moral obligations are found in society’s reasonable expectations of what a judicious person would do in the circumstances, by reference to contemporary community standards: Tataryn at para. 28. Guidance as to the content of the testator’s moral obligations was provided by McLachlin J. in Tataryn at paras. 31-32:

For further guidance in determining what is "adequate, just and equitable", the court should next turn to the testator's moral duties toward spouse and children. It is to the determination of these moral duties that the concerns about uncertainty are usually addressed. There being no clear legal standard by which to judge moral duties, these obligations are admittedly more susceptible of being viewed differently by different people. Nevertheless, the uncertainty, even in this area, may not be so great as has been sometimes thought. For example, most people would agree that although the law may not require a supporting spouse to make provision for a dependent spouse after his death, a strong moral obligation to do so exists if the size of the estate permits. Similarly, most people would agree that an adult dependent child is entitled to such consideration as the size of the estate and the testator's other obligations may allow. While the moral claim of independent adult children may be more tenuous, a large body of case law exists suggesting that, if the size of the estate permits and in the absence of circumstances which negate the existence of such an obligation, some provision for such children should be made…

[119] How are conflicting claims to be balanced against each other? Where the estate permits, all should be met. Where priorities must be considered, it seems to me that claims which would have been recognized during the testator's life -- i.e., claims based upon not only moral obligation but legal obligations -- should generally take precedence over moral claims. As between moral claims, some may be stronger than others. It falls to the court to weigh the strength of each claim and assign to each its proper priority. In doing this, one should take into account the important changes consequent upon the death of the testator. There is no longer any need to provide for the deceased and reasonable expectations following upon death may not be the same as in the event of a separation during lifetime. A will may provide a framework for the protection of the beneficiaries and future generations and the carrying out of legitimate social purposes. Any moral duty should be assessed in the light of the deceased's legitimate concerns which, where the assets of the estate permit, may go beyond providing for the surviving spouse and children.

[120] At this point, I stress that I interpret McLachlin J.’s statement that legal claims are to take precedence over moral claims as meaning that, where there are insufficient resources in the estate to meet all competing claims, the legal claims should be satisfied first. I do not read her statement to mean that the size of the legal obligation is enlarged by its precedence over the moral claims.

(a) The Moral Obligation of the Testator in a Second Marriage

[121] Counsel for the plaintiff argues that the fact this is a second marriage is a “red herring” in this case, and that the plaintiff’s entitlement is to be assessed in the same manner as it would be for a first marriage. He relies on Tataryn for the proposition that the sons of the Deceased have at best a tenuous claim. He also relies on the fact that the Act draws no distinction between first and second spouses in making this assertion.

[122] I am unable to agree with these assertions. Cases involving second marriages present unique difficulties in assessing the moral obligations of the testator. Some of the potential difficulties raised by cases like the one at bar were distinguished by Saunders J.A. for a majority of the Court of Appeal in Erlichman, supra, at para. 47:

The case at bar does not engage the many conflicting interests that are sometimes present in wills variation cases, for example, cases of short term marriages, dependent adult children or multiple families. Nor is it a case in which the parties, at one time, concurred on the disposition of the estate set out in the will which is subsequently challenged. And it is not a case in which both parties held substantial assets in their own names, or conducted their financial affairs, in some measure, independent of the other.

[123] Many of these difficulties are found in the case at bar: this is a second marriage of moderate length; the testator has children from a previous marriage and much of his estate was accumulated during that first marriage; each party has their own assets and is largely financially independent; and the testator made clear his intention that he wanted his estate to benefit his children, and not the plaintiff’s heirs. Society’s reasonable expectations of what a judicious husband and father would do in such circumstances may vary much more widely than they might in the case of a life-long marriage in which neither party entered the relationship with significant assets, as was the case in Tataryn.

[124] Guidance as to the scope and content of moral duties in respect of second marriages may be found in some of the decided cases. For example, in Landy, supra, the testator’s son from his first marriage sought to receive a greater portion of his father’s estate, when the entire residue of the estate had been left to the testator’s wife. Although this case was decided before the Tataryn decision, it does help illustrate some of the factors that are relevant to defining the testator’s moral obligations towards a second wife when there are competing claims by the testator’s children from a previous marriage.

[125] In Landy, the factors that Hinds J.A. listed as relevant to the decision of the Court included (at para. 36): the child’s extensive contributions to the estate without remuneration; the child’s expectation of inheritance based on assurances from his father; the fact that most of the testator’s estate was accumulated before he married his second wife, including an inheritance from his first wife; the fact that the testator’s second wife had an estate of considerable size; and the fact that the children of the testator’s second wife would benefit from the inheritance, while she was unlikely to leave any legacy to the testator’s son of his first marriage. The fact that the testator’s second wife died after the death of her husband but before the date of trial was also taken into account by the court in increasing the size of the bequest to the testator’s son.

[126] The more limited moral claim of a second wife where the bulk of the testator’s estate was acquired during a first marriage was also considered as a relevant factor in Howard v. Howard Estate (1997), 32 B.C.L.R. (3d) 1, 16 E.T.R. (2d) 161 (C.A.) at para. 5 (although there was also a prenuptial agreement in that case). Along a similar line of reasoning, in Price v. Lypchuk Estate (1987), 11 B.C.L.R. (2d) 371, 26 E.T.R. 259 (C.A.), the fact that the testator’s estate had been built up by the joint efforts of the testator and his second wife was a factor considered by Lambert J.A. in the majority’s decision not to vary the will in favour of the children of the testator’s first marriage (at 382 B.C.L.R.). Thus, the contribution of a spouse to the estate is an important factor in determining the moral entitlement of that spouse. Here, the plaintiff has not made a significant contribution to the Deceased’s estate, and she retains the full benefit of the capital gains accrued in their real estate investments by virtue of her half-interest in those properties.

[127] A final point with respect to assessing the testator’s moral obligation to the plaintiff in this context is the size of his legal obligations to her. She leaves an eleven-year marriage with assets valued at over $900,000, including a valuable condominium entirely paid for by the Deceased, when she brought only $200,000 into the relationship. Although she argues that she has been disadvantaged by giving up her career, and has enriched the Deceased’s estate through her real estate acumen, the fact remains that without the Deceased’s capital contributions, as well as the fact that he paid for the bulk of the couple’s expenses, the plaintiff would never have achieved the gains that she did by marrying the Deceased had she continued working as a realtor and paying her own living expenses. I note that in Bridger, supra, a case in which the wife was primarily responsible for the couple’s real estate investments, MacKenzie J.A. noted that Mrs. Bridger’s moral claim was primarily supported by the 38-year length of the marriage and the fact that she cared for her husband for several years as his health declined (at para. 25).

[128] Further, this case is unlike cases in which one spouse has remained at home as the primary caregiver to enable the other spouse to work. Thus, there is not the same difficulty in valuing intangible contributions to the marriage through household management and childcare as is present in traditional marriages. The case of Sahrmann v. Otto (1995), 17 R.F.L. (4th) 324, 58 A.C.W.S. (3d) 443 (B.C.C.A.) cited by the plaintiff does not assist us on these facts (see para. 5, urging a common sense analysis of evidence of a general nature to assess the loss to a spouse who was the primary caregiver). For much of this marriage, both spouses were retired, and simply enjoyed each other’s company in an expensive lifestyle, which was paid for by the Deceased.

[129] An example of a case in which marriage was found to have advantaged the wife is Lobe v. Lobe Estate (1996), 13 E.T.R. (2d) 126 (B.C.S.C.), aff’d (1997), 37 B.C.L.R. (3d) 138, 17 E.T.R. (2d) 275 (C.A.). In that case, a marriage agreement precluded any legal obligation of the testator, and the will left the bulk of his estate to his children from a previous marriage. However, no moral obligation was found for the testator to provide for his wife where she was left with significant assets (including assets valued at approximately $400,000 passing to her by survivorship), and she was aware that her husband’s intention was that his children would inherit his estate. In the case at bar, there was no marriage agreement. However, the plaintiff has received substantial assets as a result of the marriage, and she knew that the Deceased wanted his children to inherit his estate, rather than the plaintiff’s niece and nephew.

[130] In the case at bar, the Court is faced with a situation in which a large portion of the testator’s estate was acquired before his marriage to the plaintiff or by inheritance shortly before his death, where the testator inherited his wife’s estate (although the size of this estate is unknown), where the plaintiff and the defendants all expected to share in the Deceased’s estate, the plaintiff and the defendants were all supported by the Deceased during his lifetime, and where none of the parties requires a share of the testator’s large estate in order to meet his or her basic needs. The latter fact distinguishes the case of Tweedale v. Tweedale Estate (1995), 1 B.C.L.R. (3d) 151, 54 B.C.A.C. 301, in which the surviving husband was awarded the entire estate of his late wife (valued at $18,000), which she had left to her daughters from a previous marriage on the ground that he required additional funds to meet his basic expenses.

(b) The moral obligations of the Deceased to his sons

[131] Also relevant to this case is the fact that a parent may have a moral obligation to an adult child if there is an assured expectation or implied expectation arising from the abundance of the estate, or from the adult child’s treatment during the testator’s lifetime: Landy at para. 34, citing Price v. Lypchuk Estate, supra, at 381 B.C.L.R. In the case at bar, the Deceased did support his sons during his lifetime by paying for their educational expenses and providing them with a relatively comfortable upbringing which included a large home in Japan, travel, and the use of properties in Boca Raton and Whistler. The defendants also had a legitimate expectation that they would receive the bulk of the Deceased’s estate, including the funds held by Nistera Ltd. by way of survivorship, and excepting the Ostler Court Condo, which the Deceased made clear would pass to the plaintiff. Thus, contrary to the plaintiff’s submissions, the two children of the Deceased’s first marriage do have a strong competing moral claim. In varying the Will, the moral claims of the plaintiff must be balanced against the moral claims of the Deceased’s sons: see Tataryn, supra at para. 32; More v. More Estate, supra, at para. 35.

[132] Further moral obligations on the part of the Deceased toward his sons arise because the Deceased benefited from the contributions of his first wife to his estate, through her contributions to childcare and household management and his inheritance of her estate. The defendants have never received the benefit of her estate, and the Deceased’s first wife presumably would have wanted her efforts to benefit her sons, rather than the Deceased’s new wife.

Testamentary Autonomy

[133] In addition to the competing moral claims in this case, the issue of respect for testamentary autonomy also arises. Tataryn provides that testamentary autonomy should be respected, insofar as it is consistent with the objectives of the Wills Variation Act (at para. 17). The testator is free to deal with his property as he sees fit, so long as he makes adequate, just and equitable provision for his spouse and children. If the plaintiff’s interpretation of the Wills Variation Act is correct and she is entitled to 80% of her late husband’s estate, despite the fact that she made effectively no contribution to that estate and has in fact profited significantly from the Deceased’s generosity during his lifetime, this would effectively sterilize the ability of a married person to freely dispose of the property to which he or she is legally entitled by will.

[134] In this regard, the words of McLachlin J. in Tataryn, supra, at para. 32 are apt:

As between moral claims, some may be stronger than others. It falls to the court to weigh the strength of each claim and assign to each its proper priority. In doing this, one should take into account the important changes consequent upon the death of the testator. There is no longer any need to provide for the deceased and reasonable expectations following upon death may not be the same as in the event of a separation during lifetime. A will may provide a framework for the protection of the beneficiaries and future generations and the carrying out of legitimate social purposes. Any moral duty should be assessed in the light of the deceased's legitimate concerns which, where the assets of the estate permit, may go beyond providing for the surviving spouse and children. [Emphasis added.]

[135] It is true that no provision needs to be made for the Deceased at this point, as he no longer has any need for funds. However, his desire to dispose of his property in a particular manner should be respected, insofar as possible. Here, the testator’s clear intention was that his children should benefit from his estate. That is why he arranged his affairs as he did, and why he provided for the plaintiff in other ways to ensure she would be adequately looked after for the remainder of her lifetime. He paid for the entirety of the Ostler Court Condo, which she receives by the right of survivorship. He was aware that she had significant assets, in the form of RRSPs and the couple’s investment properties, which would ensure she was provided for. He clearly wanted to provide for his sons, who themselves are only just starting out on their career paths and have no assets or real estate, and have not received the benefit of their mother’s estate. In these circumstances, the moral claim of the sons is stronger than the moral claim of the plaintiff, and I have taken that into account in reaching my decision.

Conclusion with Respect to the Adequacy of the Provision

Made Under the Will

[136] In this case, I have concluded that making no provision under the Will did not wholly meet the Deceased’s obligations to the plaintiff. Although the Deceased met the legal obligation in terms of the division of property, there was some obligation on the Deceased requiring him to make provision for the plaintiff on his death to ensure she was provided with adequate ongoing income for her lifetime.

3. What is the plaintiff entitled to under the Wills Variation Act?

[137] I have concluded that the Will should be varied to provide a bequest to the plaintiff in the amount equal to what she still owes the estate out of the $65,000 she took from it (or approximately $29,000), plus a life interest in the Deceased’s one-half interest in the Electra Condo. My reasons for awarding a life interest in the Electra Condo are detailed below. Additionally, with respect to the personal items that are in dispute, I only have jurisdiction to make an order varying the Will. The personal items are family assets, but they came from the Defendants’ family home in Japan. To the plaintiff’s credit, she has already agreed to give most of the items to the defendants. In my view, the most equitable solution in this case is to vary the Will to provide that the defendants are entitled to the remaining items in dispute and they are to have the choice of any items they want. However, they must compensate the plaintiff by paying her half the appraised value of the items that they do decide to take.

[138] Adequate, just and equitable provision accounting for any outstanding obligations of the testator not met during his lifetime is met in this case by the fact that the plaintiff has received property valued at approximately $50,000 more than what she would have received had there been a notional division of assets at the date of death, plus the additional value of the funds that she has already taken from the Deceased’s estate (approximately $29,000) and a life interest in the Deceased’s one-half interest in the Electra Condo (worth $55,000 at the time of the Deceased’s death). The plaintiff and the Deceased knew that their real estate investments were likely to succeed, and the life interest in the Deceased’s half-interest in the Electra Condo will ensure that the plaintiff has an ongoing source of revenue.

[139] I have concluded that the plaintiff should receive a life interest in the Deceased’s one-half interest in the Electra Condo, rather than an absolute interest, for several reasons. First, the value of the Electra Condo at the time of the Deceased’s death was approximately $55,000. This, in addition to the $29,000 I have found is owed to the estate by the plaintiff and the additional $50,000 she received of the family property, suffices to meet any remaining moral or legal obligation the Deceased may have had to provide for the plaintiff’s support past his death. Considering the Borgstrom ($50,000 lump sum maintenance) and Hefti ($100,000 lump sum maintenance) cases discussed above and the quantum of spousal support suggested by the Spousal Support Advisory Guidelines, this amount exceeds any amount of support the plaintiff could legally have claimed from the deceased, and ensures that she will be well provided for during her lifetime.

[140] Second, a life estate in the property best accords with the Deceased’s intentions to provide for the plaintiff’s needs during her lifetime, while ensuring that the capital remaining passes to his sons, rather than to the plaintiff’s niece and nephew. Provision of a life estate will provide a stream of income to the plaintiff, particularly as the amount of the mortgage on the property is reduced, and will therefore provide her with a measure of ongoing support that will offset any further declines in the value of the Deceased’s Japanese pension. As stated by Southin J.A. in Crear v. Crear Estate, supra, at para. 37:

It is the court's duty to respect the framework of the testator's testamentary dispositions while ensuring that the legal and moral obligations of the testator, as they are enunciated in Tataryn v. Tataryn Estate, supra, are fulfilled.

[141] Varying the will through the provision of a life estate in the Electra Condo comes as close as possible to respecting the testator’s intent to both provide for the plaintiff during her lifetime, and ensure that his children receive the benefit of his estate.

[142] To ensure that the plaintiff receives the full benefit of the life estate in the additional half interest, the Estate will pay out one-half of the remaining mortgage. The plaintiff will be responsible for her half of the mortgage payment out of the rental proceeds she will receive. All costs of rental management will be on the plaintiff’s account.

(a) The Appropriateness of a Life Interest in This Case

[143] Although there may be cases, such as Tataryn and Erlichman, supra, where a life estate, rather than an outright gift, is not an appropriate remedy, I conclude that in this case, a life estate is the appropriate remedy. For example, in Crear v. Crear Estate, supra, a life estate to the testator’s 90-year old widow in one-half the residue of the estate was held to be appropriate, as it respected the testator’s opinion that his widow ought not to be burdened with the management of a very large sum of money (at para. 38). In Glanville, supra, a case involving a 26-year second marriage where the testator had three children from a previous marriage, a life estate in the matrimonial home was found by a majority of the Court of Appeal to have value to provide the widow with an approximately equal share of the family assets (at para. 50, MacKenzie J.A.). Although in dissent, the comments of Esson J.A. in Glanville, supra, are instructive on when a life estate will be considered adequate, just and equitable in a Wills Variation Act claim. Discussing the outcome of the Tataryn case, he said (at para. 33):

… The major consideration of the court, I suggest, was that of making the widow independent in the broadest sense. The court recognized that her "deserved and desirable independence" could be achieved only by the matrimonial home becoming her home in every sense. The principle, in my view, is that once we are in the realm of moral duty, the widow's independence must embrace more than independence from financial want. That "more" might be described as independence of the spirit.

[144] Esson J.A. would have awarded the widow the entire interest in the matrimonial home in order to provide the widow with that element of independence. Similarly, in Erlichman, supra, a life estate in the income from one-half of the testator’s estate was held not to be sufficient on the ground that it did not meet the testator’s legal obligation in this very long marriage in which the parties had amassed their wealth together (at paras. 48-49). Erlichman involved a 53 year marriage, in which the couple accumulated an estate valued at $2 million. The testator’s will provided his widow with a life estate in the income of one-half of the estate because of his concern about her ability to manage money, while an earlier will had given one-half of the estate to his wife. Saunders J.A. for the majority noted that the widow would have been entitled to one-half the assets outright had the couple separated, and that the independence of spirit contemplated in the discussion of the moral obligation in Tataryn supported that distribution (at para. 50). As I have indicated above, notably, at para. 47 Saunders J.A. distinguished that case from other wills variation cases where there are conflicting interests due to short term marriages, multiple families, or cases where the parties held substantial assets in their own names or conducted their financial affairs independently.

[145] Thus, a portion of the moral obligation owed by a testator may be to allow the surviving spouse a degree of independence to determine how assets will be used, and not to be dependent upon another to determine what share of the asset she is entitled to encroach upon. With respect to second marriages, the principle of independence may be less important where it was the first wife who contributed substantially to the amassing of the testator’s estate: see Chan v. Lee Estate (2002), 47 E.T.R. (2d) 163, 2002 BCSC 678 at para. 200, varied (2004), 36 B.C.L.R. (4th) 37, 2004 BCCA 644.

[146] In this case, the plaintiff is able to provide for her own financial independence through her significant assets, and she already has clear title to the matrimonial home. Thus, the considerations relevant to independence that might militate in favour of an absolute interest rather than a life estate are not present in this case, and the value of the life estate to the plaintiff suffices to meet the Deceased’s obligations to her.

[147] The parties are at liberty to apply with respect to costs.

“L. Russell, J.”
The Honourable Madam Justice L. Russell

Citation:	*Saugestad v. Saugestad,*
	2006 BCSC 1839