Jurisdiction Disputes in Estate Litigation

Jurisdiction Disputes in Estate Litigation

Amy Francis[1]

As an increasing number of wealthy people in BC own assets in other jurisdictions, it has become critical for estate litigators to understand the conflicts of laws issues that arise in multi-jurisdictional disputes. Because our wills variation legislation is more generous than many other jurisdictions, it is common for plaintiffs to want to bring disputes under BC law, and to have them determined in BC courts, rather than in other jurisdictions that may afford them fewer rights. [2] The choice of law and the choice of forum in these cases can have a very significant impact on the case and indeed can sometimes be the most significant issue in a proceeding.

In this paper I will review some of the issues that can arise in jurisdictional disputes in estate litigation, both in terms of the substantive law and procedure.

A.  Attornment

The rules governing attornment require counsel to be alive to jurisdictional issues very early in the proceeding. The consequences for not doing so can be very significant.

If a party wishes to resist jurisdiction on the basis that the BC Supreme Court does not have territorial competence over the subject matter of the dispute, it is of critical import that the party does nothing to attorn to the jurisdiction of the BC Courts. If a response to civil claim is filed in BC, for example, this will likely be held to be a submission to the jurisdiction of the BC courts that precludes the ability of that party to argue that the BC Court lacks jurisdiction simpliciter over the subject matter of the dispute.[3]

Rule 21-8(1)(c) of the Supreme Court Civil Rules allows a defendant to file a jurisdictional response. This has the effect of keeping the jurisdiction issue alive without the defendant attorning to the jurisdiction. This is very helpful as bringing an application to dismiss, stay or strike the notice of civil claim on the ground of lack of jurisdiction under Rule 21-8(1)(a) or (b) is not something that is usually practically possible within the timelines under the Rules for filing a response to civil claim.

B.  Territorial Competence

The Court Jurisdiction And Proceedings Transfer Act, S.C.B.C. 2003, ch.28 (the “CJPTA”) codifies the common law and is a complete code with respect to jurisdictional issues in British Columbia.  The CJPTA sets up a two part test for whether or not the BC Court will assert jurisdiction over a matter. First, the Court must determine whether it has territorial competence  or jurisdiction simpliciter over the dispute.  Second, the Court must determine whether BC is the most convenient forum for the proceeding to be heard.

A Court will only have territorial competence over a person if there is a real and substantial connection between British Columbia and the facts on which the proceeding against that person is based. The “real and substantial connection” test is intended to create stability in the law across Canada by having Courts looks to a set of specific factors that link the subject matter of a dispute to a particular jurisdiction. In BC, those factors are set out in section 10 of the CJPTA. The burden of establishing territorial competence rests with the party that seeks to establish its existence. [4]

Section 10 of the CJPTA sets out the factors that will give rise to a presumption that a real and substantial connection exists between British Columbia and a proceeding. These “connecting factors” are a non exhaustive list of those factors that may cause a court to assert jurisdiction over a claim.  If no recognized connecting factor exists, the Court should not assume jurisdiction. [5] If one or more of the recognized factors exists, a presumption arises that the Court has jurisdiction.

Below are those portions of section 10 that are most applicable to estate disputes. A real and substantial connection will be presumed when the proceeding:

  1. is brought to enforce, assert, declare or determine proprietary or possessory rights or a security interest in property in British Columbia that is immovable or movable property,
  2. concerns the administration of the estate of a deceased person in relation to
      1. immovable property in British Columbia of the deceased person, or
      2. movable property anywhere of the deceased person if at the time of death he or she was ordinarily resident in British Columbia,
  3. is brought to interpret, rectify, set aside or enforce any deed, will, contract or other instrument in relation to
    1. property in British Columbia that is immovable or movable property, or
    2. movable property anywhere of a deceased person who at the time of death was ordinarily resident in British Columbia,
  4. is brought against a trustee in relation to the carrying out of a trust in any of the following circumstances:
    1. the trust assets include property in British Columbia that is immovable or movable property and the relief claimed is only as to that property;
    2. that trustee is ordinarily resident in British Columbia;
    3. the administration of the trust is principally carried on in British Columbia;
    4. by the express terms of a trust document, the trust is governed by the law of British Columbia.

As is evident from section 10, the “real and substantial connection” presumption is not particularly difficult to trigger in the context of an estate dispute. However, the presumption is not irrebuttable. The challenging party can overcome the presumption by establishing facts that demonstrates that presumptive connecting factor does not point to any real relationship between the subject matter of the litigation and the forum or points to only a weak relationship between them. [6]  There are two recent cases where the real and substantial connection was not found in the context of trust and estate disputes.

Cresswell v. Cresswell Estate[7] involved a wills variation claim. The surviving spouse of the Deceased sought to bring a claim in BC to vary the Deceased’s last will. The couple had resided in Alberta all their lives until they moved to BC in 2014 where they purchased, in joint tenancy, a property in Westbank. The couple lived in BC for about a year, and then, after the Deceased was diagnosed with terminal cancer, the Deceased moved to Alberta in November 2015 and stayed there until her death in January 2016.  The husband brought an action to vary the will under the BC legislation. The defendants took the position that the BC court did not have territorial competence over the issues raised by the plaintiff in his action.

In order to determine whether section 10 of the CJPTA applied to give rise to a presumption of a real and substantial connection with BC, the Court considered whether the Deceased was “ordinarily resident” in BC at the time of her death.[8]  Because in this case the Deceased appeared to have a settled intention to move to Alberta (she had moved into her sister’s home and applied for Alberta health coverage) she could not be said to be ordinarily resident in BC. The Court further held that the Deceased had no real and substantial connection to BC at the time of her death. The Court went on to find that even if territorial competence were established, the Court would decline to exercise its territorial competence in accordance with section 11 of the CJPTA (discussed below).

Another recent case where the BC Supreme Court declined jurisdiction, albeit more in the family law context than estate law, is Carlson v. Phelan.[9] In that case, Ms. Carlson had, in the course of a family law action brought in BC, made a number of trust claims against the Edward J. Phelan Family Trust, a California trust of which her husband was trustee and primary beneficiary. The couple had lived their entire marriage in California, owned most of their property in California and their only real connection to BC was a vacation property in Kitwanga, B.C. which they used over the years, title to which was held by the Edward J. Phelan Family Trust.  On marriage breakdown, parallel litigation was brought in BC and in California. The husband, Mr. Phelan, died of ALS shortly after the litigation was commenced. His executor and the successor trustee of the family trust brought an application to have the BC proceeding dismissed or stayed on the basis that the BC Supreme Court had no jurisdiction over the dispute between the parties.

Ms. Carlson had initially argued that her case was properly brought in BC under BC law pursuant to both the jurisdiction provisions of the Family Law Act, S.B.C. 2011 c.25 (the “FLA”) and the CJPTA. It was conceded by her counsel at the hearing that the matter fell to be determined entirely under the jurisdiction provisions of the FLA, notwithstanding the claims of resulting trust, express trust and constructive trust that were made against the family trust and its beneficiaries. Division 6 Part 5 of the FLA sets out a scheme for dealing with jurisdiction disputes in division of property cases under that Act. It is important to note that while the jurisdiction provisions of the FLA are in many ways similar to the CJPTA, they are not the same and indeed the intent behind their inclusion in the new FLA was based on the fact that family property principles require a unique approach to jurisdictional disputes.[10]

Similar to the CJPTA, under the FLA analysis for territorial competence, the Court was required to determine whether there was a real and substantial connection between BC and the facts on which the claim was based. Despite the fact that the presence of real property in BC likely made the case fall under section 10(a) or 10(c)(i) of the CJPTA, the Court declined to find a real and substantial connection in this case. The fact that one of the properties in dispute, the Kitwanga property, was real property located in BC was not enough. In light of the numerous other real property and personal property assets located in California, and the other connecting factors to California (and absence of connecting factors to BC), the court found that “the presumptive connecting factor points to only a weak relationship with British Columbia.”[11]

As in Cresswell, the Court determined that the court did not have jurisdiction over the claims against the respondents and that, in any event, the court would have declined to exercise jurisdiction if territorial competence had been found.

Both cases speak to the fact that the test under section 10 of the CJPTA will not be applied rotely by the Court. If the connection is weak, even if one of the connecting factors is present, the Court may still find it lacks jurisdiction.

C.  Forum Non Conveniens

If a Court has jurisdiction over a claim on the basis of jurisdiction simpliciter, the Court must also be satisfied that British Columbia is the appropriate forum pursuant to section 11 of the CJPTA which is a codification of the common law test for forum non conveniens.[12] This is the second step in the jurisdictional analysis.

The Court may decline to exercise its territorial competence on the ground that a Court of another state is a more appropriate form in which to hear the proceeding. Pursuant to subsection 11(2), the circumstances which the Court must consider include:

  1. The comparative convenience and expense for the parties to the proceeding and for their witnesses, in litigating in the Court or in any alternative form;
  2. The law to be applied to the issues in the proceeding;
  3. The desirability of avoiding multiplicity of legal proceedings;
  4. The desirability of avoiding conflicting decisions in different Courts;
  5. The enforcement of an eventual judgment; and
  6. The fair and efficient working of the Canadian legal system as a whole.

In addition to the factors stated above, the Court of Appeal in JTG Management Services Ltd. v. Bank of Nanjing Co., 2015 BCCA 200 at paras. 22-23 noted that the Court may consider the following factors:

  1. Where each party resides;
  2. Where each party carries on business;
  3. Where the cause of action arose;
  4. Where the loss or damage occurred;
  5. Any juridical advantage to the plaintiff in this jurisdiction;
  6. Any juridical disadvantage to the defendant in this jurisdiction;
  7. The convenience or inconvenience to potential witness;
  8. The cost of conducting the proceeding in this jurisdiction;
  9. The applicable substantive law;
  10. The difficulty in cost of providing foreign law if necessary; and
  11. Whether there are parallel proceedings in any other jurisdiction.

As can be seen, there are a number of different factors that may be considered at the forum non conveniens stage of the analysis. One of the most significant ones, and certainly the most complex, is choice of law. The remainder of this paper will be devoted to the choice of law analysis.

D.  Choice of Law

While the BC Court can and will apply foreign law where appropriate if a foreign law is the proper law of a claim, this will be a significant factor mitigating against the Court finding BC to be the most convenient forum. Determining the proper law of a claim is not always straightforward, particularly in cases where the pleadings are vague or general and the basis of the “trust” claim is not clear. The common trend of family and estate lawyers claiming “express, resulting or constructive trust” without further particulars in a claim exacerbates this challenge.

As a general rule, determination of the proper law of a claim requires the court to first characterize the claim and then to identify the choice of law rules that apply to it.  Then, the Court considers the evidence to determine what law to apply based upon the applicable choice of law rules.[13] Characterization is significant as different choice of law rules may apply depending on how the matter is characterized.

Below are some common estate litigation claims and the choice of law rules that apply to them.

  1. Validity of Wills Claims

Choice of law with respect to essential validity[14] is not dealt with by WESA and the common law rules of essential validity govern in BC. The choice of law rules for essential validity are different for immovable property (land) and moveable property. With respect to essential validity as it applies to movable property, the common law choice of law rule is governed by the domicile of the will maker at the time of death. [17] So a dispute about the testamentary capacity of a person who was domiciled in Manitoba but held bank accounts in BC is going to be governed by the law of Manitoba.

With respect to essential validity as it applies to immovable property, the common law choice of law rule is governed by the lex situs, the law of the place where the land is located.[15] This means that, for example, an undue influence claim about a will that disposes of a piece of real property in Vancouver will be governed by BC law, even if the will-maker was domiciled[16] somewhere else.

Section 80 of the Wills, Estates and Succession Act, S.B.C. 2009, c.13 (“WESA”) sets out new choice of law rules for formal validity which are very broad and generous. Under section 80(1), a will is going to be formally valid if made in accordance with the law of just about any jurisdiction with a connection to the will-maker or the will-making. This means that choice of law issues about formal validity are unlikely to often arise in the post-WESA landscape.

2.  Wills Variation Claims

If a will maker at death was domiciled[18] outside BC, the will-maker’s real property in BC is subject to a wills variation claim, but not the will-maker’s personal property.[19] This is consistent with the choice of law rules that govern essential validity of wills. If the will-maker was domiciled in BC, then the BC Court can consider both movable and immovable property located outside of BC, although in determining a claim the BC court is unlikely to make a variation order that pertains to real property in a foreign jurisdiction as such an order may not be enforceable.

3.  Express Trust Claims

The common law is not well developed regarding choice of laws issues with respect to trust claims. There are few decisions in this area. [20]

The Hague Convention on the Law Applicable to Trusts and on their Recognition has been brought into force in British Columbia by s. 2 of the International Trusts Act, R.S.B.C. 1996, c. 237, and codifies the choice of laws rules in British Columbia as they apply to trusts. However, Article 4 of the Convention provides that the Convention does not apply to “preliminary issues”, which includes whether a trust has been brought into being, and accordingly the Convention is inapplicable to dispute involves whether a trust was created, which is the basis of many trust claims.

If a claim is brought with respect to an express trust document, a settlor is able to determine which choice of law applies to the trust.[21] Many trusts contain a forum selection clause that sets out the governing law of the trust.

4.  Constructive Trust

The use of constructive trust to remedy unjust enrichment is a relatively new invention. On account of that fact, it is difficult to articulate the current choice of laws rule with a high degree of confidence:  see Stephen Pitel and Nicholas Rafferty, Conflict of Laws (Toronto: Irwin Law, 2010) at 288-290; see also Waters’ at 1472.

One approach is that claims for unjust enrichment are governed by the proper law of the obligation. This approach would suggest that in the case of (a) a transaction involving an immoveable, the proper law of the obligation is determined by the law of the lex situs, and (b) in any other circumstances, the proper law is the law of the country where the enrichment occurs.

The British Columbia Court of Appeal has adopted this approach in Christopher v. Zimmerman.[22] In that case, the court held that the appropriate choice of law was the law of the place where the enrichment occurred because that was the law that had “the closest and most real connection” with the obligation in question.  The case involved a dispute between common law partners who were resident in various states in the U.S. as well as in British Columbia over the course of their spousal relationship.  The parties separated while living in British Columbia and Ms. Christopher sought a constructive trust based on unjust enrichment over moveable property located in Hawaii.

The proper law rule was adopted by the BC Supreme Court in Minera Aquiline Argentina SA v. IMA Exploration Inc.[23] Minera was a commercial case of unjust enrichment arising from breach of confidence.  When determining the choice of law the Court held that the choice of law for an unjust enrichment claim is the proper law of the obligation, and held that this was the legal system with the closest and most real connection to the obligation.[24]

Christopher and Minera show an acceptance in British Columbia of a “proper law” approach with respect to choice of law in the context of unjust enrichment/constructive trust claims.  Under this analysis, the factors that would be relevant to show a connection between the enrichment and the competing jurisdictions should be assessed to determine which choice of laws applies.

5.  Resulting Trust Claims

Even less attention has been given to the choice of law rules with respect to resulting trusts than constructive trust, with the result that the conflict of laws aspect of resulting trusts are largely uncharted territory.[25]

Since the test for choice of law is determined not by the remedy sought but by the cause of action giving rise to the claim or the issue at stake, the basis for the resulting trust must be considered when deciding which choice of law would apply.[26]  If the resulting trust arises because the settlor intended that the property would be held in trust, then presumably the choice of laws rules that ordinarily apply to express trusts would apply,[27] but this is by no means clear in the case law.

In Frey v. Heintzl Estate (1988), 24 B.C.L.R. (2d) 25 (S.C.), the court applied the choice of laws rules relating to the succession of property (i.e. the law of the domicile of the deceased in the case of moveable property, and the law of the lex situs in the case of immovable property), to resolve a claim in resulting trust by a person who held a long-term relationship with the deceased.  The issue in that case was the devolution of a Swiss account and British Columbian real property on the intestacy of a German resident.

D.  Other Factors

In terms of the remaining factors under section 11 of the CJPTA, there is no question that resisting a claim being heard in BC will be easier if there are other proceedings started elsewhere, and/or if the bulk of the witnesses reside in the other jurisdiction. Most cases of “forum shopping” are obvious on their face as most cases have a real and substantial connection to only one jurisdiction. Even if there is more than one jurisdiction with connecting factors, the balance of convenience generally points quite clearly in one direction. Carlson and Cresswell are both cases where the courts had little tolerance for plaintiffs trying to maintain a tenuous connection to BC to avail themselves of our more generous family and estate law.

 

This paper was originally published as part of the Trial Lawyers Association of BC’s Essentials in Estate Litigation 2017 Seminar.

 

[1] With thanks to Jeff Bichard who provided the research and analysis on the choice of law portion of this paper

[2] Arguably, other sections of the Wills, Estates and Succession Act will also make our jurisdiction a more attractive forum shopping destination, such as section 52 (presumption of undue influence) and section 58 (curative power), but to date, the majority of jurisdictional disputes in the context of estates have surrounded variation claims.

[3] See McIntyre v. Richardson, 2012 BCSC 1347 at para 53

[4] Aleong v. Aleong, 2013 BCSC 1428 at para.80

[5] Club Resorts v. Van Breda [2012] 1 S.C.R. 572 at para. 93 (“Club Resorts”)

[6] Club Resorts supra at para 95

[7] 2017 BCSC 178

[8] The plaintiff likely did not rely on section 10(b)(i) of the CJPTA because the real property in BC, the Westbank condo, passed to him by right of survivorship  and not through the Deceased’s estate. Therefore his primary argument for “real and substantial connection” appeared to be under section 10(b)(ii) of the CJPTA

[9] 2016 BCSC 1256 (“Carlson”)

[10] Family Law Act Transition Guide, as cited in Carlson, supra at para 72

[11] Carlson, supra at para 98

[12] Teck Cominco Metals Ltd. v. Lloyds Underwriters, 2009 SCC 11 at para. 22

[13] Christopher v. Zimmerman, 2000 BCCA 532, citing Tezcan v. Tezcan (1992), 62 B.C.L.R. (2d) 344 (C.A.).

[14]Essential validity includes considerations of whether a will is the validly expressed will of the will-maker, who had testamentary capacity, was free from undue influence and knew and approved of the contents of the will. Essential validity also includes issues such as whether a bequest contravenes the rule against perpetuities or against accumulations, whether gifts to charities are valid and whether a power to assign part of the estate is valid.

[15] Keung v. Wong, 2000 BCSC 528

[16] Domicile is a concept sufficiently complex to deserve its own paper. For a helpful explanation, see the section on “Domicile and Residence” in Chapter 21: Conflicts of Law in Estate in the BC Probate & Estate Administration Practice Manual (Looseleaf, CLE BC)

[17] Gillespie v. Grant, [1992] 6 W.W.R. 599

[18] Domicile is a concept sufficiently complex to deserve its own paper. For a helpful explanation, see the section on “Domicile and Residence” in Chapter 21: Conflicts of Law in Estate in the BC Probate & Estate Administration Practice Manual (Looseleaf, CLE BC)

[19] Re Rattenbury Estate, [1936] 2 W.W.R. 554 (B.C.S.C.), Re Herron Estate, [1941] 4 D.L.R. 203 (B.C.C.A.)

[20] Donavan Waters, Lionel Smith and Mark Gillen, eds., Waters’ Law of Trusts in Canada, 4th ed. (Toronto: Carswell, 2012) at 1451

[21] see Dicey, Morris and Collins on the Conflict of Laws, 15th ed., vol. 2 (London: Sweet & Maxwell, 2012) at §29-018

[22] 2000 BCCA 532

[23] 2006 BCSC 1102, affirmed 2007 BCCA, 319, leave to appeal refused [2007] 3 S.C.R. x (note)

[24] Minera, supra at para. 198

[25] A. Chong “The Common Law Choice of Law Rules for Resulting and Constructive Trusts” (2005) 54 I.C.L.Q. 855; Waters’ at 1474

[26] Waters’ at 1474; Chong at 859-862

[27] Waters’ at 1474