2007 BCSC 289 Doucette v. McInnes et al

Before: The Honourable Madam Justice Dorgan

Reasons for Judgment
(in Chambers)

Counsel for the Plaintiff:	M. J. Hargreaves
Counsel for the Defendants and Third Party Executors:	J. M. Hutchison, Q.C.
Counsel for the Defendant, Joslin Clarke:	J. Campbell
Date and Place of Trial/Hearing:	December 8, 2006
	Victoria, B.C.

[1] This is an appeal from a November 8, 2006 decision of a Master, refusing the application of the plaintiff to amend his statement of claim in an action commenced under the Wills Variation Act, R.S.B.C. 1996, c. 490. For reasons set out below, I have approached this appeal as a rehearing on its merits and have concluded the appeal should be allowed.

Background

[2] Mildred Doucette ("Mildred") died on April 24, 2004. She left four adult children, all of whom are parties to this litigation. Her daughter, Diane McInnes ("Diane") and her son, Sidney Doucette ("Sidney") are defendants and the executors of her will. Her son, Wayne Doucette ("Wayne") is the plaintiff in this action. Her daughter, Joslin Clarke ("Joslin") is a defendant. Letters probate were granted on December 24, 2004.

[3] At the time of her death, Mildred held several bank accounts jointly with her children Diane, Sidney and Joslin. Upon her death, each account passed by survivorship to the surviving tenant. On April 13, 2005, Diane and Sidney, as executors of their mother's estate, commenced an action against Joslin, claiming that the account held by Mildred and Joslin jointly, with a balance of $158,855.01 at death, was an investment account held in trust for and on behalf of the estate. An additional claim that Joslin return the sum of $50,000 to the estate of Mildred Doucette was advanced. The Master ordered that this action and the plaintiff's action be heard together, subject to the directions of the trial judge. Here, the plaintiff has taken no appeal from that order.

[4] On February 11, 2005, Wayne commenced this wills variation action in which he claimed an order varying the terms of his mother's will so as to make adequate, just and equitable arrangements for him. Mildred's estate, according to the executor's disclosure statement, consists primarily of her family home valued at $248,500, which under the will, was left to Sidney. The residue of the estate of minimal value was left to Diane. Each of Wayne and Joslin were given bequests of $5,000. The joint accounts held by Mildred and Diane; Mildred and Sidney; and Mildred and Joslin, together amount to approximately $425,000.

[5] In the application before the Master, Wayne applied to amend his statement of claim to include a declaration that these joint accounts were held in trust by the surviving tenants rather than constituting inter vivos gifts. In rejecting the application, the Master concluded that the proposed amendments did not disclose a reasonable cause of action, were not necessary to decide the real issue between the parties, namely, whether his mother made adequate provision for Wayne in her will, and that the proposed pleading was bound to fail because the executors have exclusive authority to act on behalf of the estate. In finding that Wayne was not an executor under the will, and therefore had no standing to bring such a claim, the Master based his decision largely on s. 14 of the Estate Administration Act, R.S.B.C. 1996, c. 122, which states that:

After a grant of administration until the grant has been revoked, no person other than the person to whom administration is granted may institute an action or otherwise act as executor of the deceased, as to the estate comprised in or affected by the grant.

Standard of Review

[6] On the authority of Abermin Corporation v. Granges Exploration Ltd. (1990), 45 B.C.L.R. (2d) 188 (S.C.), where the ruling of a Master raises questions vital to the final issue in the case, or results in a final order which a Master is entitled to make, or is decided on a point of law, the review, that is, this appeal, is by way of a rehearing, unfettered by any deference to the order under appeal. See also Northland Properties Ltd. v. Equitable Trust Co. (1992), 71 B.C.L.R. (2d) 124 (S.C.).

[7] On the authority of Burlington Northern Railroad Co. v. Canadian National Railway Co. (1994), 10 B.C.L.R. (3d) (C.A.), a final order is one which finally disposes of the rights of the parties. The defendants responding to this appeal argued that the Master's order was purely interlocutory because the plaintiff's claim may be considered in another judicial forum, specifically at the estate's passing of accounts. Mr. Hutchison argued that the proper way for this case to move forward is for the plaintiff to first demonstrate his right to a variation at trial. If such a right is found, and assuming the court awards the plaintiff some percentage of the estate, then the executors will have a duty to account to the plaintiff as a residuary beneficiary. The plaintiff, it is submitted, could then bring his challenge to the jointures at the passing of accounts. Re Scott Estate, 2005 NSCA 135, is cited as authority for this argument.

[8] This argument suffers from two major shortcomings. First, proceeding in this manner would involve two proceedings rather than one. Second, bringing a successful action under the Wills Variation Act involves a process whereby the plaintiff must demonstrate that he was not adequately provided for. Then the court must assess the appropriate quantum for relief. Regardless of whether inadequate provision was found on legal or moral grounds, the court must consider the overall size of the estate in determining the proper award; see Walker v. McDermott, [1931] S.C.R. 94 at 96; Tataryn v. Tataryn Estate, [1994] 2 S.C.R. 807 at para. 31; and Leopold Amighetti, The Law of Defendants' Relief in British Columbia (Scarborough, Ont.: Carswell, 1991) at 107-108.

[9] Re Scott Estate may be distinguished from the facts at bar because that action was not brought under dependents’ relief legislation. In Re Scott Estate, the appellant and respondent had been appointed by the court as co-administrators of their mother’s estate on her intestacy. As in the case at bar, the parties disagreed concerning the status of two bank accounts held jointly between the deceased and two of her ten children. The appellant argued that they were held in trust; the respondent argued that they were gifts that passed through survivorship. The respondent successfully applied to the court to have the appellant removed as co-administrator. The respondent then passed the accounts (with the jointures passing to the surviving tenants) and received a discharge as the personal representative.

[10] The court found that, on these facts, the probate judge should have resolved the trust/gift issue at the passing of accounts. The respondent should have been required to bring evidence supporting the fact that the jointures were inter vivos gifts rather than resulting trusts. The court’s finding regarding the proper procedure to be followed seems appropriate, as the appellant there was a residuary beneficiary (in accord with legislation regarding intestacy) and thus the remaining administrator had a duty to account to him that he could properly exercise at the passing of accounts; see Re Scott Estate at para. 24.

[11] In contrast, this action has been brought under the Wills Variation Act. The most appropriate time to handle the trust/gift issue must surely be during the main action, as this would obviate the need for a second application at the passing of accounts. Wayne’s action for variation may be denied at trial. But if it is not, the court cannot determine the proper award without being able to determine the true size of his mother's estate.

[12] The final issue in this action is whether Mildred Doucette's will should be varied in Wayne's favour because it did not make adequate provision for him. As noted by the Master at para. 15, this question may be answered absent Wayne’s proposed amendments to the statement of claim. However, even on the issue of adequacy, the size of the estate can be relevant. Furthermore, assuming that Wayne succeeds on this main issue, the court will have to consider the appropriate quantum for variation. Again, the size of the estate is relevant if not integral to that determination; see Tataryn v. Tataryn Estate, supra, at para. 31. And, the size of the estate will obviously be affected by the court's determination of whether each jointure is a gift or a resulting trust. The proposed amendment brings this question to the fore. In my view, the size of the estate is vital to the final issue.

[13] Alternatively, the Master’s decision appears to have been decided, at least implicitly, on a legal finding rather than a finding of fact.

[14] Wayne’s ability to amend his pleading depended on whether or not he, as a beneficiary but not an executor, had standing to challenge the jointures. This is a question of law. Although the Master did not expressly analyze the amended statement of claim in terms of Wayne’s standing, it is clear that he understood the law to allow only executors to bring such a claim. The Master concluded that as Wayne was not an executor, or even a residuary beneficiary, he could not bring a claim to expand the estate.

[15] In arriving at this legal finding, the correctness of which is the subject of this review, the Master acceded to the respondent’s arguments regarding s. 14 of the Estate Administration Act. Unfortunately, it seems that no party put the most recent case law before the Master regarding the ability of third parties to bring actions challenging jointures. The authorities brought before this court demonstrate that British Columbia courts have allowed non-executors to bring actions challenging jointures. It appears that the Master did not have the proper authorities before him to adequately consider this somewhat unusual question.

Analysis

[16] Does Wayne have standing to challenge the joint tenancies? The general rule regarding estate assets seems to be, in accord with s. 14 of the Estate Administration Act, that only the personal representative of a testator may commence an action to recover assets on behalf of the estate; see Hayman Estate v. Gordon, 2001 BCSC 1753 (Master). However, three recent judgments in this province have allowed non-executors to bring such claims, at least in certain situations.

[17] The appellant’s counsel referred to Neufeld v. Neufeld, 2004 BCSC 25, and Cooke v. Miller, 2005 BCCA 263. In both of these cases, the plaintiffs were beneficiaries, but not executors, under the respective wills. Both plaintiffs applied to the court for a declaration that bank accounts jointly held by the testator and executor at the testator’s death were resulting trusts rather than inter vivos gifts. The plaintiff in Neufeld was successful; the plaintiff is Cooke was not. Regardless of the outcomes, the important point is simply that the court in both instances allowed such challenges to be heard.

[18] In both Neufeld and Cooke, the plaintiffs were residuary beneficiaries rather than legatees, as is Wayne Doucette. This distinction is important, because the plaintiffs in Cooke applied for an accounting of all assets, as well as a declaration that the jointures were held in trust. Boyd J. did not consider the question of whether the plaintiffs had standing, presumably because the plaintiffs based their claim on the defendant executor’s duty to account to them. As the plaintiffs were residuary beneficiaries, this duty to account included an accounting for the size of the estate. Although it is unclear whether the plaintiff in Neufeld also applied for an accounting of all assets, he would have been entitled to make such a claim as a residuary beneficiary.

[19] A second important distinction between these two cases and that at bar is that the latter is brought under the Wills Variation Act. In that light, Wedge J.’s recent judgment in Mordo v. Nitting, 2006 BCSC 1761, a Wills Variation Act action, must be considered. Released on November 30, 2006, it was not available to the Master when he made his decision. In Mordo, the plaintiff was not a beneficiary; he was cut out of the will entirely. The testator held all of the assets of her $1.8 million estate in jointure with her daughter. Accordingly, upon the testator’s death, all of her assets passed to her daughter through survivorship, leaving no estate whatsoever. As the plaintiff’s action could only be maintained if there were estate assets from which to grant a variation, the plaintiff pleaded that the jointures were resulting trusts rather than inter vivos gifts.

[20] Wedge J. allowed the plaintiff’s arguments regarding the joint tenancies to go forward. There was no question of the plaintiff's standing to so argue. In the result, the court found that all of the jointures were gifts rather than assets held in trust for the estate. Wedge J. went on to state that even had she found the jointures to result back to the estate, she would not have varied the will.

[21] It seems to me that if only executors are allowed to bring claims to challenge joint tenancies, potential challenges may be compromised. An obvious conflict of interest exists where the executor and testator hold an asset in joint tenancy, as the executor would have little reason to treat the asset as a resulting trust rather than as a gift. Arguably, this conflict is not as significant where another person is a residuary beneficiary, because the executor would have a duty to account to that person for the whole of the estate. However, if a legatee’s challenge could be set aside even where brought under the Wills Variation Act, then an executor, rather than the courts, would effectively have the final word on whether a particular jointure was a gift rather than a trust.

Conclusion

[22] The question on this appeal is that which was before the Master: Do the proposed amendments disclose a cause of action? The Master correctly articulated the test; amendments ought to be allowed if they "disclose a reasonable cause of action and they will not contribute to undue prejudice or delay" (para. 9). No suggestion of prejudice or delay was made.

[23] The recent authorities show that non-executors (and, in fact, non-beneficiaries) have been allowed to challenge joint tenancies before the courts. The amendments sought do disclose a reasonable cause of action. The appeal is allowed. Costs follow the event.

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