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BC Supreme Court awards CAD350,000 to siblings bequeathed preference shares in secret will

Wednesday, 10 June, 2015

STEP Lead

The Supreme Court of British Columbia has awarded three siblings CAD350,000 each for their work on the family farm after their parents' secret will endowed them with preference shares which "have restrictions on their redemption and, upon redemption, will attract tax consequences" [para7].

Samuel McDonald (now deceased) and his wife Sylvia made wills in 1996 under which their eldest son, Robert, was to inherit the common shares of the historical family farm while their other three children, Julie, Brian and Dean were to receive preference shares to be equally divided among them. The 1996 wills were revised in 2000 – Samuel and Sylvia made an inter vivos gift of the common shares to Robert (thus eliminating him as a beneficiary) and retained the preference shares with the intention that the surviving spouse would bequeath them in equal parts to the other three children (who were not aware of the existence of either the original or amended wills) [paras 9, 72].

After a family dispute, Julie, Brian and Dean (the three plaintiffs) found out about the wills and claimed that Samuel, Sylvia and Robert (the defendants) "were unjustly enriched" through their "unpaid or underpaid work" and claimed equitable relief in the form of a constructive trust or monetary award.

The plaintiffs argued that their father’s remarks – that they would one day receive "a share in the farm" – meant that they were entitled to a quarter of the farm’s worth and the court held that "it was not unreasonable" that they anticipated to receive a share of the farm [paras 43, 286, 347]. However, the size of the shares was never considered [para 339].

The court also held that while the work of the four children allowed the farm to expand its operations quicker (than if help had been hired) and increased its value [paras 297, 283, 480] only the parents had been enriched from their work [para 464], not Robert [para 301] and therefore his siblings’ actions against him were dismissed [paras 529, 533, 534].

The court also held that Samuel and Sylvia had "properly" recognised the plaintiffs' contribution to the farm through their will [para 466] and that it was "the timing of the payment; not the amount" [paras 500, 493] which was unjust as Samuel and Sylvia's retention of the preference shares "effectively eroded their value" [para 496].

The court denied a proprietary interest or the imposition of a constructive trust over any portion of the farm assets as a remedy [para 347] but awarded the three plaintiffs CAD350,000 each, taking into account their parents’ calculation of each of their "shares" and their proportional contributions to the farm [paras 476, 499, 500].

(McDonald v McDonald, 2015 BCSC 951)

Sources