Hidden Tendering Terms

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In Triton Hardware Limited v. Torngat Regional Housing Association, 2020 NLSC 72, the owners of a construction project (“Torngat”) sought to rely on a privilege clause in the project’s tendering documents to select its preferred bidder, not the lowest bidder. This case serves as a cautionary tale to owners that a general privilege clause does not afford them absolute discretion.

In the case, the plaintiff (“Triton”) made a material supplier bid to Torngat for the construction of a housing project. Triton’s bid was the lowest. Yet, Torngat selected another bidder with whom it had previously worked and preferred. In making this preferential selection, Triton relied on the following clause: The awarding of the contract will be based on the lowest average price for quality material. *The Lowest of Any Quotes Will Not necessarily Be Accepted.

At trial, Knickle J. interpreted the impugned privilege clause as allowing the owner to either select the lowest bidder or to select no bidder at all. The asterisk-qualification did not permit the owner to select from any of the bidders according to undisclosed criteria (para. 63). As a result, Triton was awarded $126,852.14 for its lost profits.

If general privilege causes were not read strictly but, instead, granted owners complete discretion when selecting bidders, the tendering process would be rendered meaningless. As the Supreme Court of Canada established in Martel Building Ltd., v. R., 2000 SCC 60, the tendering process must treat all bidders fairly and equally.

As such, there must be reasonable certainty regarding the terms of selection. If otherwise, all bidders would be prejudiced. That is, the losing bidders would expend resources in producing a hopeless tender, and the winning bidder’s tender would be arbitrarily reduced by fictional market competition.

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Signing a Will in British Columbia by Video Conference

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Due to COVID-19, the Wills, Estates, Succession Act of BC (WESA) was amended in August 2020 to permit a Will-maker to sign a Will in the electronic presence of witnesses and the Will-maker and witnesses to sign by electronic signature.

Section 35.1 of WESA defines “electronic presence” or “electronically present” to mean the circumstances in which two or more persons in different locations communicate simultaneously to an extent that is similar to communication that would occur if all the persons were physically present in the same location. We believe this means that the Will-maker and the witnesses may sign by way of videoconference.

When witnessing a Will by videoconference, each of the Will-maker and the two witnesses must sign an identical Will, and those two (or three, if none of them are in the same place) documents compiled together form the Will. As a result, the Will could be two or three times as long because slipping in signature pages is not permitted. A copy of a Will is considered identical even if there are minor, non-material differences in the format between the copies.

We recommend that a Will signed electronically include a statement that the Will was signed in counterpart in the electronic presence of two witnesses while connected by Audio and Video Conference.

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Engineers’ Liability

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Engineers have specialized skill and knowledge on which their clients rely. When engineers are found to be professionally negligent, this relationship of reliance limits an engineer’s ability to shield themselves from liability by operating their business as a corporation. To consider why this is the case, we review several key decisions that create a duty of care between engineers and their firm’s clients.

Employee’s Liability

In London Drugs Ltd. v. Kuehne & Nagel International Ltd., 1992 CanLII 41 (SCC), the Supreme Court of Canada found that employees of a company, who performed the services for which their company has been hired to complete, may owe a duty of care to the company’s customer. That is, the individual employee may be liable for any damages arising from services they negligently perform on behalf of their employer. In the case, warehouse workers were found to have negligently handled the Plaintiff’s machinery resulting in significant damages. Because the Plaintiff’s contract with the Warehouse owner contained a limitation of liability clause which restricted recovery to $40, the Plaintiff sued the owner’s employees personally. The Supreme Court of Canada found that, although the employees owed a duty of care to the owner’s customers, the contract’s limitation of liability clause logically extended to the Owner’s employees, for they were the ones performing all of the contract’s enumerated tasks.

In the construction context, this principle of an employee’s liability arose in Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd., 1993 CanLII 67 (SCC). In the case, Edgeworth, the plaintiff company, was the successful tenderer on a provincial highway contract. Edgeworth claimed that it lost money on the project due to errors in the specifications and construction drawings prepared by the defendant engineers, N. D. Lea. Consequently, Edgeworth sued N.D. Lea and its individual engineers for negligent misrepresentation.

While the Supreme Court of Canada found that N.D. Lea was liable for negligent misrepresentation, it held that the firm’s individual engineers were not liable because they only affixed their professional seals to the impugned designs. Therefore, the Court found that the tenderers in the bidding process did not rely on any individual engineer’s representations because the seal merely represented that the designs were prepared by a qualified engineer, not that the designs were accurate. Since no representations were made by an individual engineer, there was no basis for finding that the engineers had a duty of care to the tenderers (viz. Edgeworth).

The British Columbia Court of Appeal considered the Edgeworth decision in British Columbia v. R.B.O. Architecture Inc., 1994 CanLII 1740 (BC CA) and in Boss Developments Ltd. v. Quality Air Maintenance Ltd., 1995 CanLII 3213 (BC CA). In Boss, Gibbs J.A. distinguished the case from Edgeworth on the grounds that the engineer did more than simply affix their seal to a design. Instead, the engineer signed a report indicating that an aircraft was properly maintained when it was not. Despite the fact that the engineer’s employer had the inspection contract with the customer, the engineer was found personally liable. Gibbs J.A. justified his finding by writing: “only an individual can be qualified as an aircraft maintenance engineer in this field of special skill and knowledge, … it is the individual mechanic who certifies [and] whose skill is being relied upon.”

Boss was applied and extended to a firm’s engineering employees generally in Maritime Steel and Founderies Ltd. v. Whitman Benn and Associates Ltd., 1996 CanLII 5415 (NS SC) and Strata Plan No. VR 1720 (Owners) v. Bart Developments Ltd., 1999 CanLII 5428 (BC SC). In both cases, the engineers did not simply attach their seals to tendering materials –as in Edgeworth—but rather, they provided negligent services to the plaintiffs directly.

Concerning an engineer’s personal liability, Edwards, J. wrote in Bart:
It cannot be plausibly argued that a limited company purporting to offer professional services of “consulting engineers” and indicating that its employees have special skill and experience is not inducing its clients to rely on those individuals’ expertise. It is immaterial whether the client can identify that expertise with individual employees of the firm.
In other words, engineering firms cannot perform engineering services without qualified employees. As such, the firm’s employees must know that their specialized skill and knowledge is being relied upon by the customer, and therefore, they owe a duty of care to their firm’s customers generally.

In conclusion, individual engineers working for an incorporated engineering firm are not shielded from liability by virtue of their employer’s corporate structure. Likewise, engineering firms may be held vicariously liable for the negligence of an employed engineer.

To limit their liability, engineers have four options:

First, they may contractually limit their liability for damages, e.g. to the amount of fees paid. Second, they may place disclaimers on their designs to prevent other parties from unreasonably relying on them. Third, engineers can increase their professional liability insurance coverage. And fourth, engineers can supervise the construction process to ensure their designs are properly constructed.

 

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British Columbia’s New Arbitration Act

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On September 1, 2020, British Columbia’s Arbitration Act, S.B.C. 2020, c. 2 (the “New Act”) came into force. The New Act introduces important amendments that aim to improve the efficiency of the Province’s arbitral process. This will improve commercial dealings by clarifying ambiguities in the previous legislation and creating greater uniformity in arbitrations laws nationally. To that end, the New Act closely resembles The Uniform Law Conference of Canada’s Uniform Act. In turn, the Uniform Act is a national project that strives to harmonize Canada’s arbitration laws with the United Nations’ UNCITRAL Model Law. Generally, these national and international model laws seek to limit judicial intervention in arbitral proceedings, and, thereby, create greater certainty in private dispute resolutions. The New Act strives towards this end as well.

The New Act introduces several important changes worth highlighting. First, Sections 21 and 22 impose a duty on the arbitrator and parties, respectively, to seek a “just, speedy, and economical determination of the proceeding based on its merits.” This explicit focus on the timely and economic resolution of disputes is the principle that underpins all of the New Act’s reforms. Appeals, for instance, are sent directly to British Columbia’s Court of Appeal on questions of law (s.59). Likewise, the time period for appealing an arbitral award or setting it aside due to an apprehension of bias has been shortened from 60 to 30 days (s.60).

In further regards to time limits, section 11 of the New Act reads: “the law with respect to limitation periods for commencing court proceedings applies to commencing arbitral proceedings.” This provision was absent from the previous legislation, creating an ambiguity because British Columbia’s Limitation Act, SBC 2012, c 13, does not specify that it applies to arbitrations and it contains court-centric language. Consequently, it is now clear that parties to an arbitration agreement will have two years from the date that they knew or ought to of known they have a potential claim against another party to pursue arbitration or their claim will be statute barred.

Arbitrators now have expanded authority.  Section 23 of the New Act empowers arbitrators to rule on their own jurisdiction. Where this power is exercised as a preliminary matter, either party may refer the issue to the Supreme Court of British Columbia within 30 days of receiving notice of the arbitrator’s ruling for a re-determination. In exercising their jurisdiction, arbitrators are now permitted under section 25 of the New Act to apply equitable principles, whereas the previous legislation limited their authority to the application of statutory law.

Turning to procedures, the New Act no longer specifies default rules. The British Columbia International Commercial Arbitration Centre’s rules (“BCICA”) previously applied by default, unless the parties agreed otherwise. While the New Act removes any reference to the BCICA’s rules, it has incorporated some of their key elements. For example, section 29 allows arbitrators to subpoena non-party witnesses. Where parties have not specified and cannot agree on the applicable rules, arbitrators appear to have discretion under section 32 to make procedural orders that could include the selection of arbitral rules.

Where the parties cannot agree on an arbitrator, the selection is made by the legislation’s designated appointing authority. Under section 2 of the New Act’s attendant Arbitration Regulation, BC Reg. 160/2020, this appointing authority is the Vancouver International Arbitration Centre (“VIAC”).[1] Previously, such appointment disputes were resolved by application to the British Columbia Supreme Court. By creating the VIAC, the New Act increases efficiency by reducing arbitrations’ reliance on the courts. In addition, the VICA can set arbitrators fees and impose terms on awards whenever an arbitrator’s fees remain unpaid.

Finally, the New Act introduces three other significant changes that were previously absent from the legislation. First, a witness’s evidence is to be written, unless otherwise agreed to by the parties. Oral evidence is limited to cross-examinations. Second, section 68 requires confidentiality. The parties may not disclose information about the proceeding or its outcome. Third, arbitrators may grant interim orders, even on an ex parte basis. However, these orders do not constitute an arbitral award, nor are they enforceable in the courts.

The New Act applies to all arbitral proceedings commenced on or after September 1, 2020. However, it does not apply to proceedings that fall within the jurisdiction of the International Commercial Arbitration Act, RSBC 1996, c 233, nor does it apply to family law matters.

[1] The BCICA was re-branded as the VIAC.

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Conspiracy By Family Members

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In Leitch v. Novac (2020 ONCA 257) the Ontario Court of Appeal held that “invisible litigants” cannot impede family law proceedings with impunity. Writing for the Court, Houringan J. described these invisible litigants as the parties’ extended relatives who insert themselves into family law proceedings far beyond the permissible grounds of providing emotional support. Rather, invisible litigants exacerbate litigation by encouraging the parties to advance needlessly adversarial positions and by helping to shield a party’s income and assets from the courts.

The Parties
The parties in this case were married for 17 years. They have teenage twin daughters. The Applicant-appellant (“Leitch”) is a law professor and mother of the children. The respondents are the children’s father (“Novac”), his casino management company (“Sonco”), members of the Novac family, two family trusts, and directors of Sonco.

Background
This case arose when Leitch filed for divorce and corollary relief from Novac. She subsequently amended her pleadings to include a claim of conspiracy against the above-noted respondents. On application by the non-family respondents, Justice Cory Gilmore of Ontario’s Superior Court held that Leitch’s conspiracy claim was appropriate for partial summary judgement.

Summary Judgement
In the summary judgment proceeding, Leitch argued that the respondents conspired to withhold business income from Novac until his divorce proceedings were completed. This allegation principally arose with regards to a buy-out of Sonco’s five-year management agreement with an Alberta Casino. Under that agreement, Novac was to receive 40% of the contract price as management fees. Consequently, Novac was entitled to 40% of Sonco’s $5.75 million buy-out as income (i.e. $2.3 million). Instead, the respondents diverted this income away from Novac by arranging a loan between Novac and his father. Memos and emails between Sonco’s Chief Financial Officer, Novac, and Sonco’s accountant suggested that this loan was structured with the purpose of shielding Novac’s share of the buy-out proceeds from Leitch’s corollary support claims.

In her decision, Justice Gilmore, as the motion judge, dismissed Leitch’s conspiracy claim on two grounds. First, she found that Leitch’s evidence failed to prove that Novac had the requisite knowledge to have committed the tort. Furthermore, the summary judgment appears to have been decided, in part, because no funds were actually transferred between the defendants.
Second, Judge Gilmore dismissed the claim on policy grounds. She held that the circumstances were analogous to Frame v. Smith, 1987 CanLII 74 (SCC), wherein the Supreme Court of Canada restricted conspiracy claims with regards to custody and child support. If conspiracy claims were not so restricted, Judge Gilmore reasoned that they would “become the new norm” in any family law case where a “payor spouse, in conjunction with a new spouse/relative/business partner, did not fully disclose income, unreasonably deducted expenses, or received income in the form of cash or goods” (para. 41). In effect, she surmised that conspiracy claims would become a form of punitive damages” (ibid.). Instead, she held that the existing legislation and its associated guidelines constitute a complete code from which Leitch could have sought an imputation of income against the father.

In her summary judgment, Justice Gilmore dismissed Leitch’s conspiracy claim and awarded a total of $1.2 million in costs against her for the proceedings.

The Appeal
The Court of Appeal found that Justice Gilmore made palpable and overriding errors of fact and law. Taken in turn, she misunderstood critical email evidence relating to the alleged conspiracy that was sent between Sonco’s Chief Financial Officer, accountant, and Novac. Next, the Court of Appeal also suggested that Justice Gilmore may have erred in law by accepting the argument that the tort of conspiracy requires an actual transaction, when, in fact, a temporary withholding of funds to impede another party’s entitlement can constitute an “act in furtherance to a conspiracy” (para 51).

On the public policy basis for dismissing Leitch’s claim, the Court of Appeal rejected Justice Gilmore’s reasoning because limiting the tort of conspiracy from family law proceedings would enable invisible litigants to interlope in court proceedings with impunity. While Justice Gilmore was correct in holding that an imputation of income claim would enable a claimant to get access to otherwise withheld funds, this remedy does not address the subsequent enforcement problem that arises when a payor has made themselves creditor-proof by conspiring with invisible litigants (para. 47).

Finally, the Court of Appeal made two further procedural comments. First, it held that this case should not have been bifurcated because the factual basis for Leitch’s conspiracy and support claims were indistinguishable. Contrary to the principle established in Hryniak v. Mauldin, 2014 SCC 7, this created the “substantial risk of inconsistent outcomes” between the summary judgement and the subsequent trial. Second, the Court of Appeal found the motion judge’s costs award “troubling.” Citing Yaiguaje v. Chevron Corporation, 2017 ONCA 827, the Court of Appeal reaffirmed the courts’ obligation to ensure that protection orders, such as security for costs, are not misused as litigation tactics. In this case, the motion judge should have considered the order holistically, assessing whether the overriding interests of justice are served by the order sought. In other words, the motion judge’s costs awards were excessive because they would have impeded Leitch’s ability to proceed with the subsequent trial.

Due to Justice Gilmore’s errors of fact and law, the Ontario Court of Appeal remitted this case back to the Superior Court for a re-determination at trial. The $1.3 million dollars in costs were set aside, and Leitch was awarded costs on the appeal.

For our readers, the principle provided by Leitch v. Novac is that family members acting as invisible litigants are not immune from liability.

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Executor’s Fees

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Can the executor of a will receive remuneration for their work? At common law, an executor could only receive payment for their services if authorized under the will. However, this presumption against payment has been superseded by section 88 of British Columbia’s Trustee Act. Accordingly, executors may receive payment from three sources, including:

  1. up to 5% of the gross aggregate value of the estate’s capital;
  2. up to 5% of the income generated by the estate’s assets during the period of administration; and
  3. 4% of the average market value of the assets per annum as a “care and management fee.”

These percentages are the statutory maximums that a court or registrar may grant to an executor.  When determining the executor’s remuneration, the court or registrar will consider the following five factors:

  1. the estate’s size,
  2. the degree of care and responsibility required,
  3. the amount of time required,
  4. the degree of skill and ability demonstrated, and
  5. the level of success achieved in administering the estate.

Section 88 of the Trustee Act applies whenever the will is silent with regards to the executor’s remuneration. It also applies to the administrators of intestacies (persons managing the assets of a deceased person who died without a will).

However, the Trustee Act’s remuneration percentages can be superseded whenever a will includes a renumeration clause for the executor. This provision can be implied. For example, at common law, there is a presumption that any gift to an executor is intended to be compensation for the person’s services as an executor, in lieu of a fee.

 

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Enforcing Child Support Orders

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If your child’s co-parent has claimed that they cannot afford to pay their child support obligations, what are your options? Under these circumstances, it is important to remember that child support is the right of the child, not the receiving parent. This means that parents cannot negotiate a lower monthly rate than the minimums prescribed by the Federal Child Support Guidelines. Any such agreement would be considered invalid by the courts.  Instead, there are two primary avenues for enforcing a child support order.

First, the recipient parent’s best avenue to enforce a support order is to register their separation agreement or court order with the Family Maintenance Enforcement Program (FMEP). This is a public organization that assists parents with enforcing both child and spousal support orders. The FMEP can enforce the orders by “attaching” it to the debtor’s income, including wages, tax returns, rental revenues, etcetera. The organization’s Director may also seek a court order to direct the payment of security for future support obligations from larger sources of funds, e.g. an inheritance. If the debtor parent refuses to pay, the FMEP Director may, among other remedies, report them to the credit bureau, seek a seize-and-sell court order, or instruct ICBC to refuse their license and vehicle registration issuance or renewal.

To enroll in the FMEP, you must submit an application which provides details about the paying parent and a copy of your support agreement or court order. The application can be found here. Upon completion, the EMEP will provide a Notice of Enrollment to the paying parent. The key advantage of the FMEP is that it is free. The disadvantage is that the receiving parent cannot undertake any enforcement proceedings themselves while they are registered in the program.

The recipient parent’s second enforcement avenue is to privately seek court enforcement remedies under section 230 of the Family Law Act. Specifically, they may request that the debtor parent pay security for future support obligations, plus legal expenses, up to $5,000 dollars in damages for the delayed payments, and a fine of up to $5,000.  If the debtor further fails to comply with these payments, the court may make an order for their imprisonment for up to 30 days. Importantly, this imprisonment will not discharge the debtor’s support obligations; it is simply an enforcement mechanism. Of course, this is a draconian option that the courts will rarely apply.

For debtor parents experiencing genuine financial difficulty that is impeding their ability to meet their support obligations, they may respond to enforcement action by applying to the courts for a variation order under section 152 of the Family Law Act or section 17 of the Divorce Act. On proof of a material change that renders the original order inappropriate, the court may vary the obligation amount, suspend enforcement proceedings, or make an order it deems otherwise appropriate.

For more information regard child support and their enforcement, please contract our office at (250) 753-2202.

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The Prudent Investor Standard For Trustees In British Columbia

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The Covid-19 pandemic has generated significant market volatility. Investors must assess risk and consider whether the investment portfolio should be diversified to reduce risk exposure in an unpredictable market. Trustees who have Trust Property invested in the market are faced with additional obligations that can make protecting Trust Property challenging. Trustees must comply with the terms of the Trust Property as well as the legislation governing trusts. In BC, the legislation governing trusts is the Trustee Act (the “Act”).

 

Pursuant to section 15 of the Act, a Trustee may invest property in any form of property or security in which a Prudent Investor might invest. The Trustee is under an obligation when investing Trust Property to exercise the care, skill, diligence and judgment that a Prudent Investor would exercise in making investments. The Trustee is not liable for a loss to the trust arising from the investment of Trust Property if the Trustee reasonably assessed the risk and return and acted as a Prudent Investor.

 

Unlike other provinces, BC does not expressly impose an obligation to diversify investments. However, the Prudent Investor standard implicitly requires the Trustee to assess whether diversification is necessary to reduce risk exposure. The Prudent Investor standard was considered in Miles v Vince, 2014 BCCA 289 [Miles]. The issue on appeal was whether the Trustee was under an obligation to diversify the investment portfolio.

 

In Miles, the Beneficiary claimed the Trustee should have diversified the Insurance Trust’s assets. The Trustee argued she was under no statutory obligation to diversify the investment portfolio. The Court concluded that the Trustee had breached her statutory duty to prudently invest Trust Property pursuant to section 15.2 of the Act. A Prudent Investor must consider the investment portfolio’s risk and whether diversification in necessary to protect the assets. To the contrary, the Trustee had invested the Insurance Trust’s assets into one illiquid asset that put the Trust’s assets at risk. The Trustee had failed to protect the interests of all the beneficiaries of the trust. As a result, she was removed as Trustee. Pursuant to section 31 of the Act, the Court has power to remove and appoint a new Trustee.

 

In another case, Pestano v Wong, 2019 BCCA 141, the Court stated the definition of a Prudent Investor has evolved to mean:

 

  • Making necessary investments that a Prudent Investor would make to protect capital and provide income;
  • Developing risk and return objectives that are reasonable and suitable, given the size of the overall portfolio, and the circumstances of the investor;
  • Ensuring reasonable diversification of the type and class of investments;
  • Acting with prudence when delegating investment authority to an agent;
  • Incurring only reasonable and appropriate costs; and
  • Adopting a balanced approach to management investments

 

Trustees have significant responsibility when investing Trust Property. With the current level of market volatility, it is important to consider whether an investment portfolio should be diversified to reduce the Trust Property’s risk exposure. Heath Law LLP can help you with any questions concerning Trust Property and the Prudent Investor Standard.

 

 

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Neglect In Long-Term Care Homes And Assisted Living Residences

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British Columbia offers various home and community care services to individuals requiring assistance with day-to-day life due to health issues or illness. Individuals living in Long-Term Care Homes and Assisted Living Residences are some of British Columbia’s most vulnerable members of society. Long-Term Care Homes provide 24-hour care to elderly residents. Residents in Long-Term Care Homes often have mobility issues or dementia or require palliative care. Assisted Living Residences provide housing units to residents who require daily assistance but can live independently. Residents can be assisted with eating, dressing, bathing, and managing medication, among other things. Assisted Living Residences do not provide 24-hour care.

BC offers private and publicly subsidized Long-Term Care Homes and Assisted Living Residences. In publicly subsidized Long-Term Care Homes, residents pay a monthly charge of 80% of their after-tax income. In publicly subsidized Assisted Living Residences, residents pay a monthly charge of 70% of their after-tax income. The majority of Long-Term Care Homes and Assisted Living Residences in BC are run by private for-profit companies. In 2016, only 2.4% of the Assisted Living Residences were owned by public health authorities, while 53.1% were owned by for-profit companies and 44.5% were owned by non-profit organizations. In private for-profit Long-Term Care Homes and Assisted Living Residences, residents pay the full cost. If residents require additional services, they must pay an additional fee. Unfortunately, many residents cannot afford to pay for additional services to suit their individual needs.

British Columbia has many laws governing the health, safety, and quality of care for seniors living in Long-Term Care Homes and Assisted Living Residences. The Community Care and Assisted Living Act provides a Bill of Rights to residents in Long-Term Care Homes and Assisted Living Residences. The Bill of Rights provides the resident with:

 

  • Commitment to a care plan developed specifically for the individual
  • Rights to health, safety and dignity
  • Rights to participation and freedom of expression
  • Rights to transparency and accountability

 

Last year, Island Health took over the emergency management of three private for-profit Long-Term Care Homes on Vancouver Island due to complaints of staffing shortages and neglect of the residents. Since Island Heath took over the Long-Term Care Homes, improvements have been made to training staff, creating new staff positions and to purchasing necessary equipment and supplies.

A class action on behalf of a group of residents from Long-Term Care Homes in BC has been brought against the company that owns the Long-Term Care Homes, an investment company, and BC’s Ministry of Health. The class of residents allege “abuse, neglect and mistreatment” (Huebner v PR Seniors Housing Management Ltd, DBA Retirement Concepts, 2020 BCSC 1037). The certification hearing is scheduled to take place no later than June 2021.

Heath Law LLP can help you if you or a loved one have experienced neglect in a Long-Term Care Home or Assisted Living Residence.

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Secret Trusts – Alive And Well In British Columbia

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This article concerns the recent British Columbia Court of Appeal decision in Bergler v Odenthal, 2020 BCCA 175 [“Bergler”] The appeal concerned the validity of a “secret trust” that Ms. Stuhff, now deceased, had allegedly imposed on her common-law partner, Mr. Odenthal. Secret trusts contain two essential features: “communication by the deceased person to his or her devisee, legatee or intestate heir, and an acceptance by that person of the request that he or she will hold the property in trust for the stated person or purposes.”[1] Acceptance may occur in the form of silence. The secret trust must also meet the usual trust requirements of certainty of intention, objects, and subject-matter.

 

The trial judge held that Mr. Odenthal had accepted Ms. Stuhff’s request that her estate would go to her niece, Susanne Bergler. The trial judge determined the acceptance occurred at the hospital shortly before Ms. Stuhff’s death. Ms. Stuhff’s niece and sister testified that in the days leading to Ms. Stuhff’s death, Mr. Odenthal had told them that Ms. Stuhff told him that she wanted her estate to go to her niece, Susanne. Susanne did not have a career or a home and wanted to go back to school. Ms. Stuhff’s sister testified that Ms. Stuhff told her that Mr. Odenthal was to transfer her estate to the Bergler family when he started a relationship with a new partner.

 

A conflict arose concerning when the estate was to be transferred to the Bergler family. Mr. Odenthal claimed he was to hold Ms. Stuhff’s assets until his death (he was 51 years old). After Ms. Stuhff’s death, Mr. Odenthal received the entire estate as heir on intestacy. He later married and removed Susanne as a beneficiary under his will, leaving nothing to the Bergler family. A relative of Ms. Stuhff testified that he overheard Ms. Stuhff tell Mr. Odenthal that when he ‘had a new chick’, she wanted ‘all her money’ to go back to her family.[2] The relative said he did not hear Mr. Odenthal object to the request. The trial judge found the relative’s evidence to be reliable. According to Mr. Odenthal’s testimony, he told Ms. Stuhff that he would abide by her wishes concerning the distribution of her estate. The trial judge held that this constituted the requisite acceptance for the creation of a secret trust.

 

On appeal, Mr. Odenthal claimed there was no evidence of his acceptance of the secret trust. The Court held that the trial judge did not err in finding that Mr. Odenthal had accepted the secret trust. He was required to transfer the assets either upon death or upon entering into a new relationship, whichever came first. A secondary issue on appeal concerned a property owned in joint tenancy by Ms. Stuhff and Mr. Odenthal. Mr. Odenthal claimed it passed to him automatically upon her death and, as a result, never became part of her estate. The Court held that the creation of the secret trust severed the joint tenancy and that once the secret trust came into existence, “nothing was left to pass by the intestacy to the defendant”.[3] The Court upheld the trial judge’s decision and dismissed the appeal.

[1] Bergler at para 2.

[2] Ibid at para 5.

[3] Ibid at para 40.

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