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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Dog Bites In BC: One Bite Free?

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What happens if you have been bitten by a dog? What are the legal consequences for the dog owner? In British Columbia, a plaintiff who has been bitten by a dog can establish liability against the dog owner under the scienter doctrine, through negligence, or pursuant to the Occupiers Liability Act.

Under scienter, the law has developed to allow dogs “one bite free”. This is because it must be proven that the dog has a propensity for aggression. The law presumes that dogs are not naturally dangerous and that an owner should not be liable for the dog’s aggressive behaviour unless the owner was aware of such aggressive behaviour.

 Scienter places strict liability on the dog owner only if the plaintiff can establish the following three components:

  • the identity of the dog owner;
  • the dog had manifested a propensity to attack or bite mankind; and
  • the dog owner knew of their dog’s propensity.

The Court applied scienter in Prasad v Wepruk, 2004 BCSC 578 [Prasad]. In Prasad, a 77-year-old mailman was viciously attacked by a bouvier dog. The Court used the testimony of neighbours as evidence to determine that the dog had a propensity for aggression by appearing vicious while snarling and growling at the neighbours when they passed by. The Court concluded that the owner had knowledge of this propensity. As a result, the dog owner was liable.

If a plaintiff cannot establish the three requirements for scienter, the plaintiff can establish negligence on the part of the dog owner or the owner of the property where the injury took place if the plaintiff can prove:

  • the dog owner knew or ought to have known that the dog was likely to injure someone; and
  • the dog owner failed to take reasonable steps to prevent the injury.

In other words, was the dog attack reasonably foreseeable? In many cases, the courts determine the dog’s action was unexpected or that there was no evidence of the dog’s past aggression.

An action for damages may also be brought by a plaintiff pursuant to the Occupiers Liability Act. Similar to negligence, the plaintiff must establish that the dog owner or property owner knew or ought to have known that the dog was likely to be a risk, and that the owner failed to take reasonable steps to prevent such risk.

Other provinces have stricter laws respecting dog bites. In Ontario, once ownership of the dog is proven, the owner is liable for all injuries caused by the dog regardless of the owner’s knowledge of their dog’s aggressive propensity. In 2006, stricter laws were proposed in BC. The proposed laws would have removed the knowledge requirement, essentially making the scienter doctrine inapplicable. However, these laws were not passed. Thus, the “one bite free” principle prevails in BC.

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