Thorne Estate (Re), 2018 BCSC 934

IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Thorne Estate (Re), 2018 BCSC 934 Date: 20180607 Docket: S184897 Registry: Vancouver The Estate of William Currie Thorne, Deceased Before: The Honourable Madam Justice MacNaughton Reasons for Judgment Counsel for the Petitioners: C. Selby C. MacDonell Counsel for the Respondent Bruce Gamble: B. Soloway Place and Date of Trial/Hearing: Vancouver, B.C. May 30, 2018 Place and Date of Judgment: Vancouver, B.C.

June 7, 2018 Table of Contents Introduction .. 3 The Parties’ Positions .. 4 The Factual Basis for the Petition .. 4 The Legal Framework and Its Application to This Case .. 7 Conclusion .. 13 Costs .. 14 Introduction [ 1 ] The petitioners, John Keenlyside and Robert McGuinness, are the former Attorneys for William Currie Thorne pursuant to a Power of Attorney Mr. Thorne executed on October 2, 1997. They are also the Executors of Mr. Thorne’s estate pursuant to the terms of his Last Will and Testament signed on the same day (the “Will”).

In this decision, I will refer to the petitioners as the “Attorneys” prior to Mr. Thorne’s death and as the “Executors” thereafter. [ 2 ] The Executors seek

interpretation or construction of clause 3(

j) of Mr. Thorne’s Will, which provides: TO GIVE to my goddaughter, DANUTA NATALIA ZASLAWSKA, the proceeds of the sale of my residential home, presently located at 4827 Water Lane, West Vancouver, BC, after deduction of the balance owing under a reverse mortgage presently registered against the title to my residence, and after deduction of the real estate commission and all other direct costs of the sale of this same property, for her own use and benefit absolutely, provided that she survives me for thirty (30) days.

ALWAYS PROVIDED THAT if my goddaughter, DANUTA NATALIA ZASLAWSKA, so wishes, she shall have the right to retain title to my home as aforesaid in which case it shall be her responsibility to pay out the existing reverse mortgage or to refinance the property in order to retain ownership.

AND ALSO ALWAYS PROVIDED THAT should my goddaughter, DANUTA NATALIA ZASLAWSKA fail to survive me for a period of thirty (30) days, then in such event to GIVE the aforesaid rights, title and interest to her issue, in equal shares per stirpes. [ 3 ] It is not disputed that Mr. Thorne did not own a residential home when he died.

His Attorneys had sold his home prior to his death. [ 4 ] The Executors seek the court’s opinion as to the following specific question: Where the Deceased’s residential home at 4827 Water Lane, West Vancouver, BC (the “Residence”) was sold prior to his death, and the net proceeds of the sale of the Residence (the “Sale Proceeds”) are kept separate and apart from other funds belonging to the Deceased until his death, does the gift of the Sale Proceeds of the Residence to Ms.

Zaslawska fail and fall into the residue of the Deceased’s estate? [ 5 ] In addition, the Executors seek indemnity, on a solicitor and client basis, from Mr. Thorne’s estate in respect of this petition and their Scale B party and party costs of this petition, payable by Edward Gamble, the only beneficiary who objected to the Executors’ proposed disposition of the estate. The Parties’ Positions [ 6 ] The Executors submit that the clause expresses Mr. Thorne’s intent that Ms. Zaslawska receive the proceeds of sale of his Residence and that because the remaining proceeds of sale are traceable and identifiable, Ms.

Zaslawska is entitled to the remaining proceeds. The gift intended by Mr. Thorne was the proceeds of sale, not the property itself. They submit that the gift was a general or demonstrative legacy that is not subject to ademption. [ 7 ] Alternatively, the Executors submit that, if the gift to Ms. Zaslawska is determined to be a specific gift of the proceeds of sale or retained ownership of the Residence, the gift changed in form only and was still part of Mr. Thorne’s property on his death. [ 8 ] Mr. Gamble submits that the clause expresses Mr. Thorne’s intent that Ms.

Zaslawska be gifted his Residence and that, because Mr. Thorne did not own the Residence on the date of his death, the specific gift to Ms. Zaslawska has adeemed, and the remaining proceeds fall to be dealt with under the residual clause of the Will. Alternatively, he submits that the Executors have not maintained the proceeds of the sale of Mr. Thorne’s residence in a traceable and identifiable account and that, as a result, the gift to Ms. Zaslawska has adeemed. [ 9 ] If Mr. Gamble’s argument is successful, pursuant to the terms of the residual clause, he will receive 44% of the remaining Sale Proceeds.

The Factual Basis for the Petition [ 10 ] With minor exceptions, the facts are not seriously in dispute. [ 11 ] Mr. Thorne died in North Vancouver, BC on October 29, 2009. Mr. Thorne had no surviving family. The primary beneficiaries under the Will are Mr. Thorne’s goddaughter, Ms. Zaslawska; her son, Jan Zaslawski; his cousin’s son, Mr. Gamble; his stepmother’s niece, Catherine Symonds; and his goddaughter, Beverley Evans. [ 12 ] On May 24, 2011, probate of the Will was granted to the Executors.

The gross value of the Deceased’s estate was set out in a Statement of Assets, Liabilities and Distribution, filed by the Executors with the court’s estate registry. The gross value of the estate’s assets was $250,744.68. The estate’s debts and liabilities were $5,454.15. [ 13 ] Before his death, Mr. Thorne became ill, and had to leave the Residence for a care home. [ 14 ] In his May 9, 2018 affidavit, Mr. Keenlyside swore that, as a result of Mr. Thorne’s move into care and pursuant to the terms of a 1993 reverse mortgage entered into by Mr.

Thorne and Co-operators Life Insurance Company, the Attorneys were required to sell the Residence and discharge the reverse mortgage. [ 15 ] A copy of the reverse mortgage, a mortgage discharge statement as at November 30, 2007, and a

summary of some of the mortgage terms was provided to Mr. Keenlyside in a November 15, 2007 letter from Co-operators Investment Counselling Limited. As at November 30, 2007, the payout to discharge the reverse mortgage was $639,551.08, including a three-month interest charge for prepayment of the mortgage. The letter provided: Please note clause 4.2 [of the mortgage] which states that the mortgage becomes due and payable upon

a) the death of the borrower or

b) the inability of the borrower to reside at the property due to health reasons verified in writing from the borrower’s physician. I do not know the status of Mr. Thorne’s health, however should he not be able to reside at the property due to health reasons and we are provided with a letter from him (sic) physician, we will remove the 3 month interest charge on the discharge statement … [ 16 ] The Residence was sold in late June 2008 for a sale price of $994,832.34.

After payment of real estate commission, adjustments for taxes and utilities, discharge of the reverse mortgage, payment of outstanding income taxes, and legal fees, the balance of the Sale Proceeds was $290,873.55. [ 17 ] The Sale Proceeds were initially held in trust by counsel who acted for the Attorneys on the sale and, on July 7, 2008, deposited into Mr. Thorne’s RBC Bank Account. On the same day, the Attorneys purchased a Guaranteed Investment Certificate (the “GIC”), for $240,873.55. They retained the remaining balance of $50,000 for Mr. Thorne’s ongoing care and expenses.

[18] As Mr. Keenlyside explained in an email providing requested information to the beneficiaries of the estate, prior to completingthe house sale, the combined available cash on hand in Mr. Thorne’s bank accounts was $2,300. He said: [Mr. Thorne] had advancing dementia, and the cost of the special care facility for the cognitively impaired was $8,000 per month, risingto over $8,400 in early 2009 (approximately $100,000 per year). . . . [19] On February 27, 2009, the Attorneys withdrew $40,739.64 from the GIC to fund Mr. Thorne’s ongoing care. [20] The records of Mr.

Thorne’s bank account, attached as Exhibits B and C to Mr. Keenlyside’s affidavit, confirm thatMr. Thorne’s bank balance was $2,300 prior to the sale. They also confirm that Mr. Thorne’s other income, which consisted of Old AgeSecurity, Canada Pension Plan, an annuity he purchased from Co-Operators, and a Teacher’s Pension, was insufficient to meet theongoing costs of his care. Finally, they confirm the deposit of the Sale Proceeds, the purchase of the GIC, and the $50,000 that theAttorneys retained. [21] On Mr.

Thorne’s October 29, 2009 death, the balance of the GIC was $206,642.64 plus accrued interest of $137.76, for a totalof $206,780.40. The Executors recorded this figure on the Statement of Assets, Liabilities and Distribution. The funds remained investedin the GIC until December 24, 2013, when the Executors redeemed the GIC and transferred the funds, then in the amount of$212,958.78, to the estate account. [22] Mr. Thorne’s estate is modest. After its administration, there is $275,527.22 remaining. Out of this sum, if the gift toMs.

Zaslawska of the Sale Proceeds of the Residence is valid, there is only $62,568.44 to be divided among the residual beneficiaries.That sum will be further depleted by the payment of the Executors’ fee in the amount of $4,068.56, the legal expenses incurred inpreparing, distributing, and having the beneficiaries approve the Administration Accounts and, depending on the outcome, the legalcosts of this proceeding. [23] All beneficiaries of the Deceased’s estate (the “Beneficiaries”) except for Mr.

Gamble, who is entitled to a 44% residual share,have consented to the Administration Accounts & Plan of Distribution that they received from counsel for the Executors on October 18,2017. [24] Mr. Gamble has advised that he will approve the Administration Accounts but maintains that the gift of the Sale Proceeds of theResidence to Ms. Zaslawska has adeemed (failed) entirely because Mr. Thorne did not own the Residence at the date of his death. In hisresponse to this petition, Mr. Gamble says that the proceeds of the sale of the Residence were not retained separately by the Attorneysbut were used by Mr.

Thorne on an ongoing basis until his death. [25] Mr. Gamble says that the Executors have unnecessarily exceeded their obligations to the estate by advocating for one potentialbeneficiary over others in bringing this petition and arguing for a position which would benefit Ms. Zaslawska. [26] The Executors acknowledge that the $50,000 of the Sale Proceeds, which was not invested in the GIC but retained to fund theDeceased’s care and other costs, and the $40,739.64 subsequently withdrawn from the GIC for the same purpose, have adeemed. As aresult, they acknowledge that those amounts, or what remained of them on Mr.

Thorne’s death, form part of the residue of Mr. Thorne’sestate. The Executors submit that the final traceable amount of the Sale Proceeds is $212,958.78 and, as per the legal opinion, theyobtained and provided to the Beneficiaries, this amount should be transferred to Ms. Zaslawska. The Legal Framework and Its Application to This Case [27] The Executors bring this application by way of a petition pursuant to R. 2-1(2) of the Supreme Court Civil Rules. I agree thatthis is an appropriate manner of proceeding. The facts are not seriously in dispute. A decision about whether the gift to Ms.

Zaslawskahas adeemed will resolve the issue of the distribution of Mr.

Thorne’s estate and is a discrete question of law concerning theinterpretation of the Will. [28] It is a deceased’s personal representative who usually seeks the court’s assistance with respect to questions arising from theadministration of an estate, by petition or application, since it is their function to ensure that they are acting in strict accordance with thedispositive and administrative provisions of the will-maker’s will. [29] There is nothing inappropriate in counsel for the Executors putting the legal issues before the court and arguing that, in theirview, one outcome is preferable over another. [30] The basic principle governing the

interpretation of wills was set out in National Trust Co. Ltd. v. Fleury et al., (SCC), [1965] S.C.R. 817 at 829: In the construction of wills, the primary purpose is to determine the intention of the testator and it is only when such intention cannot bearrived at with reasonable certainty by giving the natural and ordinary meaning to the words which he has used that resort is to be had tothe rules of construction which have been developed by the Courts in the

interpretation of other wills. It is to be remembered that suchrules of construction are not rules of law and that if their application results in attributing to the testator an intention which appearsinconsistent with the scheme of the will as a whole, then they are not to prevail. [31] That principle was cited by the BC Court of Appeal in TLC The Land Conservancy of British Columbia v. The University ofBritish Columbia, 2014 BCCA 473 at para. 45. [32] In my view, considering the Deceased’s will as a whole, Mr. Thorne’s intentions were clear. The natural and ordinary meaningof the words in clause 3(

j) is that the Deceased intended to gift to Ms. Zaslawska the Sale Proceeds of his Residence which he describedas being “presently located at 4827 Water Lane, West Vancouver, BC”. He gave her the option of retaining ownership of the Residenceunder certain conditions. The first sentence of the clause is the gift, the second the option.

[33] Mr. Gamble’s

interpretation, that clause 3(

j) was a specific grant of the Residence, would require a reordering of the sentencesin the clause: a gift of the Residence with a right to sell. Any ambiguity arises only because the Residence was sold prior to Mr. Thorne’sdeath. [34] Clause 3(

j) of the Will also included a gift over to Ms. Zaslawska’s issue in the event that she predeceased Mr. Thorne. In myview, this further evidences his intention to provide Ms.

Zaslawska or her issue with the benefit derivable from his Residence. [35] Thus, the question is whether the doctrine of ademption has the result of frustrating the Deceased’s intention due tocircumstances beyond his control. [36] As explained in Wood (Estate), Re, 2004 BCCA 556 at para. 1, the doctrine of ademption by conversion is: … a rule of the law of wills whereby a specific bequest “adeems", or fails, if at the testator’s death the specified property is not foundamong his or her assets - either because the testator has parted with it, or because the property has “ceased to conform to the descriptionof it in the will”, or because the property has been wholly or partially destroyed. … The doctrine applies as a matter of law, irrespectiveof the testator's intentions in the matter, although his or her intentions are clearly relevant to the anterior question of whether the gift inquestion is a "specific" legacy (and therefore subject to ademption), or a general one (not subject to ademption).The doctrine is alsosubject to the qualification that even if the gift in question is a specific legacy, it may be saved in some circumstances if the property haschanged "in name or form only", and still forms part of the testator's property at the date of death. … [37] In Wood (Estate), Re, the Court of Appeal set out in some detail the three classes of legacies: specific, general anddemonstrative.

Citing text and other references, the court described a specific legacy as being of some thing or interest forming part of atestator’s estate, identifiable by a sufficient description and separated from the general mass of the estate in favour of a particular legatee. [38] The court described a general legacy as a gift of something, which, if the testator leaves sufficient assets, must be raised by theexecutors out of his general estate. [39] The court described demonstrative legacies as a kind of hybrid between specific and general legacies.

By their nature, they are ageneral legacy, usually pecuniary, directed to be satisfied primarily, but not solely, out of a specified fund or a specified part of thetestator’s property. [40] In Wood (Estate), Re at paras. 19 and 21, the Court of Appeal also cited and accepted the reasoning of Justice McQuaid in RoddEstate (Re), (PE SCTD), [1981] P.E.I.J.

No. 4 (S.C.), a case in which the facts were similar to those in this case. [41] In Rodd Estate (Re), the deceased’s will directed her executrix “…to sell my real estate … and to divide the proceeds as follows:two-thirds of the proceeds to my son Vernon Rodd, and one-third to be divided equally between my other children.” [42] Prior to Ms. Rodd’s death, she became incompetent and her committee had to sell her real estate and use some of the proceedsfor her care and for the care of her property. Part of the proceeds was retained as a debenture, and a smaller portion was intermingled inother accounts.

The executrix applied for directions as to the distribution of the proceeds of sale. The question addressed by the courtwas whether the special legacy to Ms. Rodd’s children, which was to be paid out of the proceeds of the sale of Ms. Rodd’s real estate,adeemed when her committee sold the property during Ms. Rodd’s lifetime. If the legacy adeemed, the proceeds would be distributed inaccordance with the residual clause in Ms.

Rodd’s will. [43] Justice McQuaid relied on what he described as the well-established principle that, in construing a will, the courts lean quitestrongly against specific legacies and, if there is any doubt, the more probable view is that the legacy is not specific. [44] The court said that to answer the question before it, it was necessary to determine whether the pecuniary legacies to Ms. Rodd’schildren were specific or demonstrative.

A specific legacy, being a gift of a particular thing, is subject to the doctrine of ademption suchthat if the particular thing does not form part of the testator’s estate at the date of the death, the gift fails. The court determined that thelegacies were not specific. [45] In the result, Justice McQuaid held that the sale of the property prior to the will-maker’s death did not affect her disposition ofthe proceeds of that sale so long as the proceeds were traceable and identifiable.

If the proceeds were not traceable and identifiable, theprinciple of ademption would apply and the proceeds would pass to the residuary legatees named in the will: Rodd Estate (Re) atpara. 11. [46] At para. 15 of the decision, Justice McQuaid said that he was satisfied that the fund from which the debenture was purchasedwas clearly traceable to and could be identified as a portion of the proceeds of the sale of Ms. Rodd’s real estate. He concluded that thedebenture should be distributed to her children in accordance with her intentions and the applicable clause in her will.

The balance of theproceeds of sale had been intermingled in her other accounts and, as a result, were not traceable and identifiable, and the gift of thatportion had adeemed and was therefore available to the residual beneficiaries. [47] Counsel for Mr. Gamble argued that Rodd Estate (Re) was distinguishable on the basis that, in that case, there was clearevidence of the incapacity of the deceased requiring the sale of the real estate. He submitted that incapacity was a precondition to thecourt’s analysis.

He submitted that, in this case, the evidence was insufficient to meet the burden of proof on the Executors todemonstrate that Mr. Thorne was incapacitated when the Residence was sold. In the absence of such evidence, he submitted that thedecision to sell the Residence, and deal with the proceeds, had to be attributed to Mr. Thorne. [48] I do not agree that the deceased’s incapacity in Rodd Estate (Re) was central to Justice McQuaid’s analysis. In his reasons,Justice McQuaid considered two earlier decisions of the Supreme Court of Canada, Church v. Hill, (SCC), [1923]S.C.R. 642 and Hicks v.

McClure, (1922) (SCC), 64 S.C.R. 361.

[ 49 ] In Church , in reasons written by Justice Mignault and concurred in by the other judges of the Court, the will-maker divided his real and personal property amongst his four children but specifically devised a lot that he owned to his daughter. Prior to his death, the will-maker entered into an agreement to sell the lot and, at the date of his death, there remained outstanding a substantial amount of the purchase price. The Court’s unanimous opinion was that the daughter was not entitled to the balance due under the sale agreement and that it passed to the residuary legatees.

Justice Mignault concluded that what the will-maker “devised to the [daughter] was the property itself. What he had at his death, and it is then that the will speaks, was the right to the price and not the property.

The devise therefore fails because its subject matter no longer existed”: 1051. [ 50 ] Justice McQuaid distinguished the facts in Rodd Estate (Re) from those in Church because the gift in Rodd Estate (Re) was of the proceeds of sale of the property and not the property itself: Rodd Estate (Re) at para. 8 . [ 51 ] In Hicks , a clause in the will under consideration directed the executors to sell a farm and divide “the proceeds” between the two sons of the will-maker. After execution of the will, and before he died, the will-maker sold the farm and took back a mortgage as part payment.

Justice Duff framed the question being addressed by the Supreme Court of Canada as: Has the testator manifested his intention that his gift is not of the particular property but of the proceeds of the property so long as the proceeds retain a form by which they can be identified as such? [ 52 ] The unanimous opinion of the Supreme Court was that the gift in the will was not a gift of specific property and that, because the proceeds could be identified in the form of the mortgage, the proceeds of the mortgage passed to the two sons: see Rodd Estate (Re) at paras. 8-9 . [ 53 ] Incapacity of the will-maker was not a central issue in either Church or Hicks , and counsel for Mr.

Gamble did not point to any case in support of his proposition. [ 54 ] The cases are clear that what determines the outcome of the analysis is whether the converted proceeds of the intended gift can be traced and identified. [ 55 ] The Executors acknowledge that the funds first retained from the Sale Proceeds for Mr. Thorne’s benefit, and the funds subsequently withdrawn for that purpose, are not traceable and identifiable and, as a result, have adeemed. [ 56 ] Counsel for Mr. Gamble also submitted that the use of some of the Sale Proceeds for Mr.

Thorne’s needs and to pay his debts meant that the whole of the Sale Proceeds adeemed. As I understood Mr. Gamble’s submission, he was suggesting that partial ademption is not possible. Based on the cases, I do not agree. [ 57 ] In both Rodd Estate (Re) and Hicks , part of the proceeds of sale of the property in question was used for other purposes. In Rodd Estate (Re) , the will-maker’s committee used some of the proceeds to reimburse herself for expenditures she had incurred with respect to the sale of the property.

That portion was determined not to be traceable and fell to be dealt with by the residual clause in the will. [ 58 ] In Hicks , the mortgage only represented part of the purchase price. Presumably, the balance of the purchase price was used by the will-maker or was otherwise dealt with as a part of the residue of the estate. In both cases, the court was able to trace only a part of the sale proceeds into an identifiable fund (the debenture in Rodd Estate (Re) and the mortgage in Hicks ), and it was only the amounts in the identifiable fund which had not adeemed . Conclusion [ 59 ] I am satisfied that Mr.

Thorne’s gift to Ms. Zaslawska was not a specific legacy. It was a gift of the Sale Proceeds of his Residence as he then described it and not a gift of the Residence itself. Mr. Thorne indicated the source from which Ms. Zaslawska’s legacy was to be paid and, by reference to the Sale Proceeds, indicated the amount of the legacy. As such, it was a demonstrative legacy and not subject to ademption so long as the Sale Proceeds are traceable and identifiable. However, even if I had concluded that Mr.

Thorne’s gift was a specific legacy, as set out in Wood (Estate), Re at para. 15 , ademption will not occur where the specific property in question has been changed “in name or form only” so that it “exists as substantially the same thing, although in a different shape.” [ 60 ] I am also satisfied that the Deceased’s illness before his death, his relocation into a care home, and the subsequent forced sale of the Residence by his Attorneys did not subvert his stated intention that the Sale Proceeds of his Residence should go to Ms. Zaslawska.

The doctrine of ademption has not frustrated that stated intention, as the remaining funds resulting from the sale of the Residence are clearly traceable and identifiable. [ 61 ] In specific response to the question asked in the petition, I conclude that the gift of the Sale Proceeds to Ms. Zaslawska does not fail, and that she is entitled to the remaining Sale Proceeds which do not fall into the residue of the Deceased’s estate. Costs [ 62 ] The Executors have incurred additional estate costs as a result of the need to bring this petition. The Executors submit that Mr.

Gamble’s opposition to the proposed distribution of the estate was unreasonable and directly the cause of the additional costs which, in turn, have decreased the residue available to all other residual beneficiaries who were not opposed. [ 63 ] The Executors have been successful in the petition, and the

interpretation they provided to Mr. Gamble was confirmed. In the circumstances, it is appropriate that they be indemnified for their costs of this petition out of the Deceased’s estate on an indemnity basis. [ 64 ] I have also concluded that Mr. Gamble’s opposition was unreasonable and he was, in effect, the unsuccessful litigant. In

accordance with the reasoning in Woodward v. Grant , 2007 BCSC 1549 , costs should follow the event and Mr. Gamble should pay the Executors’ costs on a party and party basis. In my view, it would work an unfairness to the other residual beneficiaries, all of whom consented to the Executors’ proposed distribution, if they were required to share in the costs of Mr. Gamble’s challenge without a specific contribution from him. “MacNaughton J.”