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Privilege

Parties to a lawsuit are generally required to produce all documents in their possession or control that are relevant to the matters at issue in the lawsuit. However, there are exceptions to this general rule. Documents that are properly subject to some form of “privilege” can be withheld from production. The three common types of privilege are:

  1. Lawyer-client privilege;
  2. Litigation privilege; and
  3. Settlement privilege.

Lawyer-client privilege protects communications between a lawyer and their client. This type of privilege exists in recognition of the fact that communications between a lawyer and their client are absolutely essential to the integrity and functioning of the legal system. Without it, clients may be hesitant to be forthright with their lawyer resulting in the lawyer not being able to give the client proper advice. For lawyer-client privilege to attach to a communication:

  1. The communication must be between the lawyer and their client;
  2. The communication must be made in the course of seeking legal advice; and
  3. The communication must be made in confidence.

Litigation privilege protects documents made in anticipation of or for the purpose of litigation. This type of privilege exists to allow the parties to a prospective or existing lawsuit to prepare their case without fear that those preparations will be made known to the opposing party. For litigation privilege to attach to a document:

  1. Litigation must have been a reasonable prospect when the document was created; and
  2. The dominant purpose of the document was for the litigation.

Settlement privilege protects communications between opposing parties made for the purpose of trying to resolve their dispute. Without it, the parties would be unlikely to have frank discussions about the strengths and weaknesses of each other’s case or make concessions necessary for the matter to be resolved. For settlement privilege to attach to a communication:

  1. There must be a legal dispute;
  2. The communication must be made in an attempt to settle the dispute; and
  3. The communication was not intended to be disclosed in the event the attempt to settle failed.

If privilege attaches to a communication or document, that privilege can be waived:

  1. Voluntary waiver occurs when the party who has the benefit of the privilege agrees to waive it thus voluntarily making the communication or document known to the opposing party.
  2. Implied waiver occurs when the party who has the benefit of the privilege does something that, in fairness, requires that the communication or document be disclosed to the opposing party.
  3. Inadvertent waiver occurs when the party who has the benefit of the privilege accidentally discloses the communication or document to the opposing party. On an application to have that privilege re-attach, the Court will consider if:
    1. The error in disclosing the communication or document is excusable;
    2. The party immediately tried to get the communication or document back;
    3. It would be unfair to the other party to preserve the privilege.

Carroll v. Allen

Even though a property is rented to tenants, that property can be sold. Sometimes the buyer is willing to accept the current tenant and become their new landlord. Sometimes, however, the buyer wants to move into the property and, thus, requires that the tenant vacate the property. Section 49(5) of the Residential Tenancy Act allows this where the buyer has a good faith intention of occupying the property. The onus of removing the tenant, however, is put on the seller. This is accomplished by including a clause in the contract between the buyer and seller that the latter will provide “vacant possession” of the property on the closing date. But what happens if the tenant does not vacate the property on the closing date? This is what happened in the case of Carroll v. Allen, 2022 BCCRT 1021.

In Carroll, the parties entered into a contract of purchase and sale with respect to a residential home. At the time of the sale, the home had two sets of tenants; one living upstairs and the other living downstairs. A term of the contract was that the sellers would provide the buyers with vacant possession of the entire property on closing. 

Unfortunately for the sellers, neither tenant had moved out by the closing date. This meant that the buyers were not able to take possession of the property as expected causing them to incur a number of expenses. While the upstairs tenants moved out within a week of closing, the basement tenants didn’t move out for 4 months!

The buyers sued the sellers to recover the expenses they incurred as a result of not being able to take possession of the entire property on the closing date. 

The sellers admitted that they had breached the contract by not providing the buyers with vacant possession, but argued that the matter was not within their control. Rather, they blamed the housing crisis on their tenants not moving out when they were supposed to.

The Civil Resolutions Tribunal (CRT), which heard the claim, did not accept the seller’s excuse, stating that:

[15] The problem for the respondents is that they agreed to provide the applicants with vacant possession on September 1, 2021 and failed to do so. The respondents breached the CPS, which they admit, and a community housing crisis does not relieve them of their responsibilities under the parties’ contract.

As a result, the CRT awarded the buyers damages of over $2,500.

This case serves as a warning for sellers of tenanted property who agree to provide vacant possession on closing. Just because a tenant is supposed to move out by a particular date doesn’t mean that they will. 

Newhouse v. Garland, 2022 BCCA 276

Two people can hold title to real estate in one of two ways. The first is as tenants in common. Where two people hold real estate as tenants in common, when one dies, their share is distributed as per their will or, if they don’t have a will, in accordance with intestacy laws. The second is as joint tenants. Where two people hold real estate as joint tenants, when one dies, their share goes to the surviving owner. This is called the right of survivorship and is one of the hallmarks of joint tenancy. However, just because two people hold property as joint tenants, the right of survivorship will not always apply. The case of Newhouse v. Garland, 2022 BCCA 276 is an example of that.

In Newhouse, two friends, Bob and Barry, contemplated buying a rental property together. Barry, however, was always out of work and in debt, and didn’t have the money for his share of the down-payment. Barry’s spouse, Patricia, was in a much better financial position. While she did not have a problem partnering with Bob, she was concerned about what would happen if he were do die. Specifically, she expressed reluctance with having to deal with Bob’s children who she thought were dysfunctional.

To assuage her concerns, Patricia said Bob agreed that, if he were to die, his share would go to her so that she would not have to deal with his children if he died before her.

In keeping with what Patricia said Bob agreed to, the pair bought a rental property together as joint tenants.

Years later, Bob died and his children began the process of administering his Estate. Based on what Bob had told them, they were under the impression that Bob’s share of the property would go to them. However, when they contacted Barry, who they thought owned the property with Bob, they were told that Patricia was actually the other owner and that Bob’s share would go to her by virtue of the joint tenancy.

In response, Bob’s son and executor sued Patricia to get Bob’s share the property back and a summary trial (where witnesses give their evidence by written affidavits as opposed to in-person) proceeded in BC Supreme Court.

The trial judge noted that, where two business partners, own legal title to a property as joint tenants, there is a presumption that, on the death of one, the survivor holds the deceased’s interest in trust for their Estate. That presumption can be rebutted by the survivor by evidence that the partners intended the survivor to receive the entire property on the death of one of them.

In this case, the trial judge found that Patricia had not rebutted this presumption. The judge did not believe her story that Bob would agree that his share would go to her instead of his children. She also did not find the documentary evidence that Patricia pointed to in support of her argument to be persuasive.

Patricia appealed the trial judge’s decision to the BC Court of Appeal. As previously discussed, the Court of Appeal sits as a panel consisting of 3 to 5 judges. While sometimes the court is unanimous, sometimes the judges disagree. This was one such instance of a split-decision.

Before getting into the reasons for the split-decision, the decision helpfully describes the rebuttable presumption at play in this case:

[1]            There is a legal presumption that partners hold partnership property as tenants in common and accordingly there is no right of survivorship as between partners. Partners, however, can agree otherwise: Bathurst v. Scarborow, [2004], EWCA Civ. 411 [Bathurst]; Partnership Act, R.S.B.C. 1996 c. 348 s. 21. If the evidence, on a balance of probabilities, leads to a finding that the parties intended to hold the property as joint tenants with a right of survivorship, the presumption will be rebutted.

[54]         A rebuttable presumption of law is a legal assumption that a court will make if insufficient evidence is adduced to displace the presumption. The presumption shifts the burden of persuasion to the opposing party who must rebut the presumption. The presumption will only determine the result where there is insufficient evidence to rebut it on a balance of probabilities: Pecore v. Pecore, 2007 SCC 17 at paras. 22, 44 [Pecore].

[55]         A presumption is not a legal standard. A presumption is not strong or weak. It is a guide post that designates the legal burden. In this case the presumption placed the burden of proof on Ms. Newhouse to prove on a balance of probabilities the Rental Property and the BMO account passed to her by right of survivorship.

Two judges found that the trial judge made no reviewable errors, relying to a considerable degree on the applicable standard of review, which essentially means the degree to which a lower court must have gotten things wrong for an appellate court to intervene.

The dissenting judge thought otherwise and his reasons make up the bulk of the decision. In particular, the dissenting judge found that the trial judge had erred by:

  • imposing a higher standard of proof on Patricia than was appropriate;
  • not finding evidence as to Bob and Patricia’s intentions when they agreed to buy the property; and
  • proceeding by way of summary trial when credibility was at issue.

In the end, while the dissenting judge would have ordered a full trial, the majority of the court dismissed the appeal.

Certificates of Pending Litigation

When a person files a lawsuit that claims an interest in a piece of real property, they are entitled to file a Certificate of Pending Litigation (CPL) with the Land Title Office against title to that property. A plaintiff may also file a CPL against title to a property if permitted to do so under another enactment. One such example would be a person who files a wills variation claim. These rules are provided for under section 215 of the Land Title Act. 

The primary use and effect of the CPL is to prevent the property being sold pending the outcome of the lawsuit.

A person whose property is subject to a CPL may apply under section 252 of the Land Title Act to have it canceled if no step has been taken in the lawsuit for a year.

CPLs can be problematic when the property is about to be or needs to be sold. In those cases, the parties to the lawsuit are often able to agree that the CPL will be discharged in exchange for the proceeds of sale being held in trust pending resolution of the lawsuit or order of the court.

Management Fees

Damages awards should compensate a person for all their losses arising out of an injury. Losses suffered up to the date of a trial are often much easier to determine than losses the injured person is projected to suffer in the future. For instance, the injured person might be able to establish that they will lose $10,000 in wages per year for the next 10 years, or that they will require $10,000 in treatment per year for the next ten years. In such a case, one might assume that the injured person would simply be awarded $100,000 ($10,000 x 10 years), but that is not how it works. The law presumes that an injured person will invest the damages they are awarded for future wage loss or care and see a return on that investment. On that basis, if the Court were simply to give the injured person $100,000, that person would be overcompensated by virtue of the return on that investment. The law has accounted for that through the application of discount rates which range from 1.5% to 2%. In our example, then, instead of $100,000, the injured person would get slightly less. We call that the “present value”. But what if the injured person doesn’t have the financial wherewithal to properly invest their award and get the full benefit of their compensation? 

Management fees compensate an injured person for the cost of managing the money they are awarded for future wage loss and future care. They ensure that these awards are not eroded by the cost of professional management fees or injured person’s inability to invest those funds wisely.

Management fees are not awarded as a matter of course. To be entitled to a management fee, the injured person must establish that they are unable to manage their affairs or lack the knowledge to invest the funds awarded to them to produce the requisite rate of return. They must establish that investment management assistance is necessary and the cost of that assistance necessary to obtain a rate of return equal to the above-noted discount rates. 

While not legislated into law, the Law Reform Commission of BC, as cited in Lester v. Alley, 2022 BCSC 121, recommends a four-level classification system for management fees:

Level 1

The plaintiff requires only a single session of investment advice and the preparation of an investment plan at the beginning of the period the award is to cover.

Level 2

The plaintiff will require an initial investment plan and a review of the investment plan approximately every five years throughout the duration of the award.

Level 3

The plaintiff will need management services in relation to custody of the fund and accounting for investments on a continuous basis.

Level 4

The plaintiff will require full investment management services on a continuous basis, including custody of the fund, accounting and discretionary responsibility for making and carrying out investment decisions. Such a plaintiff is likely to be mentally incapacitated or otherwise incapable of managing personal financial affairs.

Jones v. Davidson, 2022 BCCA 31

Whether two people were spouses is becoming an increasingly common issue in estate litigation in BC. The BC Court of Appeal decision in Jones v. Davidson, 2022 BCCA 31 is yet another example.

In this case, the Deceased, Larry Jones, died without a will on March 18, 2014. At the time of his death, he had been living together with a woman named Tracey Davidson. The two were not married. Larry died leaving one child, a son named Eric.

Shortly after Larry’s death, Tracey applied for a grant of letters of administration and, in so doing, swore a statutory declaration stating that she was Larry’s spouse. Eric challenged the issuance of a grant on the basis that Larry and Tracey had not been in a relationship long enough to qualify them as spouses at law.

The issue was important given that Larry died without a will. If Tracey was found to be his spouse, she would stand to inherit his Estate. Conversely, if she wasn’t, Eric would inherit

At trial, the Court agreed with Eric that Tracey was not Larry’s spouse. Tracey then appealed that decision to the Court of Appeal.

The Court of Appeal cited the applicable definition of spouse under the Estate Administration Act, which stated that:

“common law spouse” means either

(a) a person who is united to another person by a marriage that, although not a legal marriage, is valid by common law, or

(b) a person who has lived and cohabited with another person in a marriage-like relationship for a period of at least 2 years immediately before the other person’s death;

“spouse” includes a common law spouse;

The Court then addressed the evidence at trial. Tracey’s statutory declaration stated that she and Larry lived and cohabited together for roughly 3.5 years before his death. Following the testimony of several witnesses including Eric and Tracey, the trial judge had found that Tracey and Larry had been in a romantic relationship since February 2012, but did not have a marriage-like relationship until April 30, 2013; less than 2 years before his death. In coming to this conclusion, the trial judge found it important that:

  • after April 30, 2013, Larry was listed as Tracey’s daughter’s step-father at the latter’s school.
  • In October 2013, Larry added Tracey as his common law spouse on his health and life insurance policies.
  • In early 2014, Tracey noted her marital status on her 2013 income taxes as common law.

On this basis, the trial judge found that Tracey had not established that she and Larry have been living together in a marriage-like relationship for 2 years prior to his death.

After canvassing the applicable law and the evidence presented at trial, the Court of Appeal determined it would not disturb the trial judge’s finding. Whether two people are spouses is a highly fact-specific determination requiring a judge to consider both subjective and objective evidence. In this case, the trial judge considered the intentions of Larry and Tracey, and numerous objective indicia of whether a spousal relationship exists as identified by previous cases. These include, but are not limited to:

  • The blending of finances and property;
  • Sexual relations;
  • Sharing the same bed;
  • Physical displays of affection;
  • Doing activities including taking vacations and spending holidays together;
  • Having children; and
  • Presenting themselves publicly as a couple.

Dog Attacks

Most personal injury claims are based on negligence. Essentially, the law of negligence provides that where one person fails to take reasonable care and injures another person as a result, the first person is responsible for any injuries and consequent losses suffered by the other person. 

Dog bite claims are unique in that they can be based not only on negligence, but also on an old legal doctrine known as scienter. In order to successfully establish scienter, the person injured by a dog must establish that:

  • The defendant was the owner of the dog;
  • The dog had manifested a propensity to cause the type of harm occasioned to the injured person; and
  • The defendant owner knew of that propensity.

Proving ownership of the dog is often the easy part. Establishing the second two elements if often where the difficulty lies. With respect to the second element, it is not enough for the dog to have injured other animals in the past. The dog must have injured a person in the past.

Scienter is not terribly different from negligence, and people injured by dogs almost always allege that the dog’s owner is guilty of both. To establish negligence in such cases, the injured person must prove that:

  • The defendant (usually the dog’s owner, but not always) knew or ought to have known that the dog was likely to create a risk of injury to third persons including the plaintiff; and
  • The defendant failed to take reasonable care to prevent such injury.

It is important to note that the injury caused by a dog does not have to be a bite. An attack of any kind is sufficient so long as the elements of scienter or negligence are established.

A recent example of such a case is Garside v. Dougan, 2022 BCSC 799. In that case, the plaintiff and defendant were friends and both had dogs that, at times, played together. On this particular occasion, the plaintiff was bit by the defendant’s dog while trying to break-up a fight between that dog and her dog. She then sued the defendant for damages on the basis of scienter and negligence. 

While there were a number of background facts animating the case, the important ones salient to the Court’s decision were that:

  • While the dog had a propensity for attacking other dogs, it had never manifested a propensity for attacking humans. As a result of this finding, the plaintiff was unable to satisfy the test for liability under the doctrine of scienter. However, the Court noted that this did not prevent the plaintiff from succeeding in negligence;
  • The defendant had taken reasonable care to protect people such as the plaintiff from her dog, and therefore was not liable in negligence, by
    • Offering to muzzle her dog in advance;
    • Discussing with the plaintiff the logistics of having their dogs interact; and
    • Warning the plaintiff that her dog was not secured when the former approached.

Having failed to prove that the defendant was liable based on either scienter or negligence, the Court dismissed the plaintiff’s claim.

Partition of Property and Party Wall Agreements

Where a property is jointly owned and the owners cannot agree on whether to sell it or not, the Partition of Property Act allows the owner who wants to sell to apply to the Court for an order that the property be sold. Where the owner who wants to sell the property has at least a 50% interest in it, section 6 of the Act says that the Court must order the property sold unless there is a good reason not to do so.

Holman v. Brooke, 2022 BCSC 526 is an interesting case under section 6 and demonstrates what can constitute good reasons not to sell a property.

In Holman, two couples had bought a property in East Vancouver. The property comprised a single house situated on two lots and divided into two half-duplexes. The property line between the two lots ran right down the middle of the house. Both couples owned the property as tenants-in-common and each lived in their half of the duplex. Sadly, one member of each couple had died and, subsequently, the remaining owners had a falling-out. One, the petitioner, moved out of the property while the other, the respondent, continued to live in her half of the duplex.

The petitioner had financial difficulty maintaining her new residence as well as her share of the property. She asked the respondent to sell the property, but she disagreed. As such, the petitioner made an application under section 6 of the Partition of Property Act to have the property sold.

The respondent opposed the application. She argued that to force the sale of the property would have the effect of evicting her from the home she shared with her deceased spouse and the one in which she had always intended to live the rest of her life in. Furthermore, the respondent pointed to her inability to work and limited financial resources to find a comparable home, the comfort she found in the property and community, and the proximity of the property to her care providers as reasons why the Court should not order the sale.

After a detailed analysis, the Court sided with the respondent and did not order the sale of the property. In addition to accepting the reasons put forth by the respondent, the Court found that the property could be legally divided into two lots by way of a “party wall agreement”. A party wall agreement can be used to legally divide a property where stratification is not possible or feasible. Essentially, under a party wall agreement, each party would transfer their half-interest in the other’s lot to the other such that each would own their own lot in its entirety. At the same time, they would enter into an agreement setting out their respective rights and obligations regarding the property. The agreement would then be registered with the Land Title Office and either party would be free to sell their now wholly-owned lot to a third party. 

Despite the petitioner’s retort that a party wall agreement would devalue the property, the Court found that realizing the greatest possible value from the property was not a relevant consideration. A party wall agreement, in the Court’s view, was a feasible way to separate the interests of the parties, allowing the petitioner to sell her interest while also allowing the respondent to stay in her home. 

Although the Court could not impose a party wall agreement on the parties, it strongly encouraged them to enter into one. In dismissing the petition, the Court did note that, if the respondent unreasonably refused to enter into a party wall agreement, that could form the basis for another application by the petitioner that the property be sold.  

What is the Difference between a Director and a Shareholder?

A corporation is a completely separate legal entity from the shareholders who own the shares of the company and the directors who manage the affairs of the company. In many corporations, the shareholders and directors are often the same individuals and the distinction between the different roles can be lost.

 

Most standard Articles of Incorporation grant the board of directors the power to manage the company free from interference from individual shareholders. Unless otherwise specified in the Articles, the directors do not have to be shareholders of the company and can be employees of the company. The directors are primarily responsible for the management of the company including such things as operational decisions to ensure the company meets its financial needs, asset management, and senior staff management. The limits of the directors’ authority will be governed by the Articles of the company. The board of directors is the voice and main representative of the company.

 

A director of a company owes certain fiduciary duties to the company itself. The duty of honesty requires a director to be truthful and open with fellow directors and prohibits any non-approved conflicts of interest. The duty of good faith requires a director to exercise their powers in the best interests of the company and not for their personal benefit.

 

A shareholder is an individual who owns the actual shares of the company. Shareholders are able to vote on resolutions for the company at meetings of the shareholders and it is the shareholders themselves who vote on who the directors of a company should be. Shareholders do not owe any fiduciary duties to the company itself and can act solely in their own best interest.

Unger Estate (Re), 2022 BCSC 189

Can a person who murdered another person inherit from the latter’s estate? If no, who stands to inherit in place of that person? Those were the questions in Unger Estate (Re).

In Unger Estate (Re), 2022 BCSC 189, the Deceased, Lois Unger, died on February 24, 2016. She was survived by her two sons, Clayton and Logan. Sadly, Lois had been killed by Clayton who pleaded guilty to second-degree murder in her death and was sentenced to life in prison.

Eleven days after Lois’s murder, Clayton’s girlfriend gave birth to his child and only heir; a daughter named Adeline.

Lois’s will divided her estate equally between Logan and Clayton. It further stipulated that, if Logan or Clayton died before her with children of their own, those children should inherit their father’s share. Finally, if the gifts to Logan or Clayton failed to vest (ie. because either son died before Lois without children of their own), his share was to be divided equally between two charities.

The executors of Lois’s estate sought the Court’s advice on whether Clayton could still inherit his share of Lois’s estate, or whether his share should go to his brother Logan, his daughter Adeline, or two charities named as alternate beneficiaries in Lois’s will.

The Court quickly concluded that Clayton, by murdering Lois, had disentitled himself to a share of his mother’s estate. The Court based this on a long-standing rule of public policy that prevents a person responsible for the death of another from taking any benefit because of their criminal act. 

The more difficult decision was what to do with Clayton’s share. On a strict interpretation of the will, as Adeline was born after Lois’s death, Clayton’s share would pass to the two charities.

Logan and the Public Guardian and Trustee, on behalf of Adeline, responded to the executors’ court application. Logan argued that he should receive Clayton’s share while the PGT argued that Adeline should receive it. The executors took the same position as the PGT.

In coming to its decision, the Court relied on section 46 of the Wills, Estates and Succession Act, which states:

46   (1)If a gift in a will cannot take effect for any reason, including because a beneficiary dies before the will-maker, the property that is the subject of the gift must, subject to a contrary intention appearing in the will, be distributed according to the following priorities:

(a)to the alternative beneficiary of the gift, if any, named or described by the will-maker, whether the gift fails for a reason specifically contemplated by the will-maker or for any other reason;

(b)if the beneficiary was the brother, sister or a descendant of the will-maker, to their descendants, determined at the date of the will-maker’s death, in accordance with section 42 (4) [meaning of particular words in a will];

(c)to the surviving residuary beneficiaries, if any, named in the will, in proportion to their interests.

(2)If a gift cannot take effect because a beneficiary dies before the will-maker, subsection (1) applies whether the beneficiary’s death occurs before or after the will is made.

In the end, the Court held that Clayton’s share of Lois’s Estate was to pass to Adeline. It did this because Lois clearly intended to benefit her sons and, in the case the one or both failed to survive her, to benefit their children. Further, Adeline, not Logan, was an alternate beneficiary of the gift to Clayton. 

Given that Adeline was a minor, the Court ordered that her share of the Estate was to be paid to the PGT in trust.