What are a Spouse’s Rights upon Foreclosure?

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When a home falls into foreclosure the property is sold to satisfy the owner’s creditors. The sale proceeds first go to the mortgagee, and then to other creditors in order of priority. Priority is generally determined based on various factors such as the type of creditor and the date of registration of the debt. In general, a judgment creditor cannot claim an interest in property beyond that held by the judgment debtor. The Court Order Enforcement Act (CEA) confirms this common law principle, and clarifies in s. 86(3)(a) that a judgment creditor’s interest is subject to any equitable interests that may have existed prior to the registration of the judgment.

In a recent decision, Chichak v Chichak, 2021 BCCA 286 the court had to determine priority between a judgment creditor with a registered judgment, and the unregistered equitable interest of a spouse.

In this case, Mr. Chichak was the sole registered owner of the property subject to a mortgage. Ms. Chichak had transferred her interest in title to him several years earlier. In 2014, Cardero Capital and First West Credit Union both obtained judgments against Mr. Chichak and registered them against the title of the property. The property was foreclosed and sold in 2016, and $312,830.83 of the sale proceeds remained after satisfying the debts owed to the highest ranking creditors. Cardero and First West applied to the courts for access to the remaining proceeds. At the same time, Ms. Chichak applied to have a 50% equitable interest in the property declared in her favour and argued that this interest should outrank the judgment creditors in priority. The chambers judge found in favour of Cardero and First West by applying the statutory presumption of indefeasibility (meaning the only valid interests in reference to the land are those that are registered against the title) and by looking at case law where transfers of title between family members had been considered gifts which extinguished the equitable interests of the giftor.

On appeal, the Court ruled that the chambers judge had mistakenly applied the principal of indefeasibility, stating that while a genuine purchaser for value would take priority over an unregistered equitable interest, a judgment creditor is not a genuine purchaser and therefore does not have the same priority. To allow the judgment creditors to take priority over the equitable interest would be to grant an interest in the property beyond what was held by the debtor, which would be contrary to the CEA. The Court allowed the appeal and sent the case back to the Supreme Court of B.C for redetermination.

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Can I be Required to Produce my Computer Hard Drive in Disclosure/Discovery?

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Disclosure is a material issue in many family law cases. Without a clear idea of each party’s assets, a fair division of property is nearly impossible. However, there are clear limits to what the courts are willing to grant in an order for disclosure. In general, an applicant must specify which individual documents or category of documents they are requesting, link their request to a live issue in the proceedings, and justify the need for the disclosure of these documents (Mossey v. Argue, 2013 BCSC 2078).

In a recent case, Etemadi v Maali, 2021 BCSC 1003, one of the parties applied for an order to force disclosure of a hard drive. A hard drive was found to have the same legal status as a bookshelf or a filing cabinet; to grant an application for disclosure of a hard drive would amount to an authorization to search, which is not in keeping with the purpose of the disclosure rules. The court, therefore, declined to grant the order for production, stating that the interest of protecting privacy and privilege outweighed the desirability of absolute disclosure in this case.

 

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Is an Unsigned Will Valid in British Columbia?

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There is often a delay between a lawyer completing a client’s will, and that client being available to execute (sign) it. The Covid-19 Pandemic has only lengthened these delays, which can be problematic if the will-maker happens to pass away prior to executing the new will.

The Wills, Estates, and Succession Act, S.B.C. 2009, c. 13 (WESA) lays out the requirements for a valid will, including that the will must be duly executed by the will-maker. If a new will is found to be invalid, the pre-existing valid will governs the distribution of assets. However, s.58 of WESA provides that the court may choose to cure a formally invalid will. In order to use s.58, the court must first be satisfied that the will is authentic and that it represents the will-maker’s deliberate, fixed, and final intensions regarding the disposal of their property upon death.

In a recent case, Bishop Estate v. Sheardown, 2021 BCSC 1571, the will of 76-year-old Marilyn Bishop was brought before the court. A charity had been listed as a beneficiary in Ms. Bishop’s previous will made in 2014. In early 2020, Ms. Bishop instructed her lawyer to draft a new will that removed the charity and added new gifts to family members. Ms. Bishop had an appointment to execute the will on March 20, 2020. Unfortunately, Ms. Bishop was unable to meet in person with her lawyer due to the pandemic and passed away four months later without having executed her will.

The charity argued that Ms. Bishop’s failure to execute the will was evidence that she had changed her mind and that the new will did not represent her final intentions. The court rejected that argument, noting that Ms. Bishop had become closer to her family in the years leading up to her death thereby explaining the new gifts, that she had reviewed and filled in the blanks in the new will, and that Ms. Bishop’s failure to execute the will remotely was not evidence of a change of heart. Therefore, the court found that the new will satisfied the test in s.58 and ordered that it be fully effective.

If you have concerns about the validity of your will or other questions, please call Heath Law LLP to book a consultation.

 

 

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Varying Custody or Access Orders in Family Law

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Custody and access to children are complex issues requiring consideration of which circumstances would best benefit the interests of the child. Often, one or both parents may desire a change in custody or access. This can be accommodated so long as they can prove that a material change in circumstances has occurred since the last order was made.

A change can be said to be “material” if the situation presently in force would have resulted in a different order originally being made. Requests for variation are resolved entirely based on what will benefit the child, rather than what either of the parents want (Gordon v. Goertz, 1996 CanLII 191 (SCC)).

Variation is permitted under section 17 of the Divorce Act, which further stipulates that a parent’s newly developed terminal illness or critical condition qualifies as a change of circumstance. A child’s increased age and expressed wishes to spend less time with a parent can also constitute a material change ( M. (S.M.) v. H. (J.P.), 2016 BCCA 284). Intensified and more frequent conflict, if egregious enough, can also serve as a material change (Friedlander v. Claman, 2016 BCCA 434).

Section 47 of the Family Law Act also gives authority for a court to change an order of custody or access. Section 216 of the Family Law Act allows the court to address interim orders (K. (B.) v. B. (J.), 2015 BCSC 1481). Again, the parent desiring the order’s variation must prove a material change in circumstances. The change cannot be one that was contemplated and addressed in the prior order (Gordon v. Goertz, 1996 CanLII 191 (SCC)), such as a foreseen adjustment to a child’s extra-curricular soccer schedule. Material change can be shown through, for example, a parent becoming mentally ill, a child desiring to have less or more time with a parent, or a parent successfully completing counseling and improving their ability to be a guardian.

Although less frequently invoked, the court also has jurisdiction to change an interim order even if there has neither been a change in circumstances or new evidence. The court may only do so if a change would be in the best interests of the child (R. (R.) v. L. (S.), 2016 BCSC 1230. If you have concerns about your family matters, please contact Heath Law LLP to book a consultation.

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Required Mediation in Family Law Disputes

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Through the Notice to Mediate (Family) Regulation, BC Reg 296/2007, a party to a family law proceeding may require the other spouse to participate in mediation with them. Mediation, if successful, can have many benefits including a shorter timeline, decreased cost, and lower conflict. It’s also much less formal than court, and private.

A notice to mediate can be served on the other party at any point that is 90 days’ time after the first response to the family claim is filed, and 90 days’ time before the date of the trial. The parties must agree on which mediator to select, and if they cannot, any party may apply to a roster organization that maintains a list of experienced mediators who would be sufficient. The roster organization will provide a list of options, and the Regulation then requires parties to eliminate certain mediators to which they object. The roster organization will make the final call on who the mediator will be, taking into account the parties’ indicated preferences, the mediator’s qualifications and fee, and scheduling availability.

The mediator is required to hold separate pre-mediation appointments with each party, where they’ll screen for potential power imbalance or abuse. If this appointment leads the mediator to believe that the process would be inappropriate or unproductive, they can conclude the mediation at that point and the parties will need to go through with litigation. Parties are not obligated to settle all or any of their issues at mediation but must attend and participate in good faith. Mediation requires parties to be reasonable, relatively calm, and open to negotiation. Considering how emotionally charged separation is for many individuals, mediation certainly isn’t the answer for everyone, but it may be worth an attempt.

 

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When can Spousal Support be Varied?

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Both the Divorce Act and the Family Law Act give authority to change the amount of spousal support that must be paid, and although worded differently, both acts require a change in circumstances before the variation is warranted. It’s important to bring the variation application under the Act which the support order was originally made under; the Family Law Act cannot be invoked to change a support order made under the Divorce Act (Malbon v. Malbon, 2017 BCCA 427), and vice versa.

The factors for the court to consider when asked to change spousal support are set out in section 17 (4.1) of the Divorce Act and Section 167 of the Family Law Act. In case law, a substantial change of circumstances has been constituted by multiple scenarios including:

• A change in income;
• A change in expenses;
• Retirement;
• Re-partnering; and
• A change of residence for the child.

If parties presume the payor’s income will somewhat fluctuate, but instead it increases significantly, the situation will likely meet the requirement of a substantial change in circumstances (Jennens v. Jennens, 2020 BCCA 59). Purposeful, voluntary changes made to one’s life, such as taking a larger mortgage for a shorter amortization, will not lead to a change of support (Poon v. Poon, 2005 BCCA 60).

A foundational principle of the spousal support obligation is that payor’s must compensate their spouses when that spouse’s contributions to the family allowed the payor to obtain the high income they later benefit from (Judd v. Judd, 2010 BCSC 153).

Voluntary retirement is typically more carefully analyzed by the courts than forced retirement. When considering if retirement justifies changing support obligations, the courts will look at age, background, employment opportunities, and the objectives of the support order (Brouwer v. Brouwer, 2019 BCSC 274). In Cramer v. Cramer, 2000 BCCA 272, the payor was forced to retire due to a health condition, the estate had been split equally originally, and the payee spouse had failed to follow through with educational plans that would have led to financial self-sufficiency. The payor’s retirement constituted a change in circumstances and the spousal support was terminated entirely.

Remarriage or re-partnering alone is not sufficient to trigger a material change in circumstances (Morigeau v. Moorey, 2013 BCSC 1923). But when combined with other factors such as an increase in the payee’s workplace earnings, the requirement can be met (Clarke v. Clarke, 2014 BCSC 824). A change in the children’s residence, meaning an increase in expenses for the parent who is primarily caring for them, can constitute a change in circumstances sufficient to vary spousal support (Aspe v. Aspe, 2010 BCCA 508). . If you’d like assistance with resolving any family matters, please contact Heath Law LLP to book a consultation.

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Steps to Preserve Property in Family Law Disputes

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When relationships dissolve, parties often become concerned that their property will be disposed of or encumbered against their wishes. Property division will be addressed and ultimately resolved as separations move forward, but until agreements are finalized, it may be beneficial for spouses to take certain interim measures. The three types of entries often registered against the title of a property with the Land Title Office are:

• A certificate of pending litigation;
• A Land (Spouse Protection) Act entry; and
• A caveat.

While a certificate of pending litigation (“CPL”) does not create rights to the property which the party did not have before, it does provide notice to would-be creditors or buyers that an interest in the property is being claimed. This dissuades the vast majority of creditors or buyers, with the affect that the property is protected from disposition or encumbrance. The CPL is registered against the title of the property and can be filed against property owned by either or both spouses. A CPL may only be registered once the family law proceedings have begun.

If the property is held in the sole name of one spouse, the other spouse may make a Land (Spouse Protection) Act entry against it. Entries may not be made if the property is held in joint tenancy. The entry will prevent the property from being disposed of without consent. Entries can be made before court action has been commenced but must be made within one year of the spouses residing together in the home. The Land (Spouse Protection) Act has specific forms for the entry application and affidavit. Spouses must have been married or have been in a marriage-like relationship of at least two years.

Finally, if it’s not possible to apply for a CPL or Land (Spouse Protection) Act entry, a caveat may be used. A caveat is a temporary measure registered against the title of property owned by the other spouse. Caveats must be applied for through the correct form offered by the Land Title and Survey Authority, and lapse two months after their registration.
Not anyone can apply for the entries listed above; only people who are spouses or parties to the family law case may apply. If you have concerns about your property or family matters, please contact Heath Law LLP to book a consultation.

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Trademark Infringement and The Tort of Passing Off

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In Royal Pacific Real Estate Group Ltd. v. Dong, 2020 BCCA 323, the British Columbia Court of Appeal made it clear that unauthorized use of a trademark carries legal consequences. The Court found that the Defendant, Mr. Dong, had committed the tort of passing off, despite his arguments that he had proper consent from the Plaintiff, Royal Pacific Real Estate Group Ltd., to use the Royal Pacific trademark. Mr. Dong had signed an agreement with the Plaintiff whereby he would work under the real estate group as an independently contracted real estate representative. The agreement allowed and even encouraged Mr. Dong to use the Royal Pacific trademark in this capacity, because the group is well-known for success in the Vancouver area, having arranged billions of dollars of sales. But Mr. Dong could only properly use the trademark for his work under the real estate group; he was not authorized to use the trademark for his other private businesses. One of these included his business named Bliip Box, which he’d hoped to have as a supplier of real estate websites.

Mr. Dong took several actions which constituted trademark infringement including making available the contact information of the Royal Pacific group on his personal website, such that the public would consider Royal Pacific to be endorsing or associated with Mr. Dong’s personal site. The Defendant also sent solicitation emails to various real estate agents, saying that Royal Pacific was seeking to endorse local businesses through his personal Bliip Box company, while Royal Pacific had no intent of this. Even after Royal Pacific lawfully terminated their agreement with the Defendant, and as such he no longer had authority to use the trademark whatsoever, he continued to do so. Bliip Box continued to display Royal Pacific’s trademark, and in launching this business relied on the Royal Pacific online domain name. The Court of Appeal upheld the trial judgement that Mr. Dong had committed the tort of passing off outlined under section 7 of the Trademark Act. The Court recognized that the three elements of passing off were present, being: The existence of reputation or goodwill, a misrepresentation leading the public to believe an association between the parties, and damage or potential damage to the Plaintiff, as outlined in Vancouver Community College v. Vancouver Career College (Burnaby) Inc., 2017 BCCA 41.

The goodwill associated with familiar trademarks has commercial value, and companies such as Royal Pacific will not stand silent in the face of passing off. The Defendant passing off his goods and services as being endorsed by and associated with the trademarked name can be viewed as the unauthorized use of goodwill, and wrongful confusion of the public. While the trial judge only awarded nominal damages of $6,000 to the Plaintiff, an injunction restraining Mr. Dong from continued trademark infringement was also granted. The Court held that the Plaintiffs underwent considerable inconvenience, but that Mr. Dong hadn’t financially benefited from his conduct.

 

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Minority Shareholder Oppression Rights In British Columbia

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In the recent case of Canex Investment Corporation v. 0799701 B.C. Ltd., 2020 BCCA 231, the British Columbia Court of Appeal showed its flexibility in offering oppression remedies for wronged minority shareholders. The case involved exceptionally high-handed conduct by the two directors of Canex Investment Corporation (“Canex”), leading to their personal financial gain at the expense of the minority shareholder Plaintiffs. Neither Canex nor its minority shareholders benefited from the $500,000 loan taken out and secured by Canex’s properties, rather, the loan was used to finance a related company (Flame Engineering & Construction) controlled by the Defendants. Further, the Defendants falsified financial records related to the Flame Engineering loan, manipulated Canex’s records to reduce the Plaintiffs’ investment through charging excessively high interest and management fees, and advanced arguments which Justice Harris termed as “bogus”.

Section 227 of the Business Corporations Act allows shareholders to apply for remedies when they’ve suffered harm that is typically, but not necessarily, separate from the harm suffered by the corporation as a whole. The remedy granted in this case was the return of the minority shareholders’ initial investment plus interest. In addition, the Court of Appeal found that punitive damages of $100,000 were appropriate, considering the egregious conduct of the Defendants. While the Defendants tried to assert that a derivative rather than an oppression action ought to have been brought by the shareholders, meaning that the Plaintiffs would have additional hurdles in order to obtain financial relief, the Court held that the oppression action was supported. Typically, if harm has been done to the company itself, a derivative action is appropriate. Oppression actions are brought when harm has been done to individual shareholders. But the Court held that the remedy of oppression will not be limited by mere corporate structure, and that the substantive reality of how a company is operated, instead of the legal from, is what matters.

On appeal, the Defendants argued that the trial judge had failed to recognize the formalities of corporate governance when imposing personal liability on the Defendants as directors. But based on the Defendants’ wrongful conduct and taking financial advantage, personal liability had to be imposed despite the separate legal personality of Canex as a corporation. Further, one of the Defendant’s personal liability survived beyond her declaration of bankruptcy because the fraud was committed while acting in a fiduciary capacity. While directors typically only owe fiduciary duties to a company itself rather than individual shareholders, the Court recognized the reality of this closely held corporation. Here, the two shareholders were in a special relationship of trust and dependency with the directors; the directors were expected to manage the company’s financial records honestly and in good faith, yet breached those duties. The Court brought home its disapproval of the Defendant’s oppressive conduct by imposing punitive damages. These types of damages are appropriate when conduct is so high-handed or malicious that it offends the Court’s sense of dignity. Particularly relevant for closely held corporations such as Canex, this case highlights the Court’s willingness to offer expanded remedies to minority shareholders based on the substantive conduct that occurred, and to turn down arguments based on technical corporate structure.

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Is a Strata Corporation Able to Disallow Residents Under a Certain Age?

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Strata corporations (“stratas”) are legal entities with all the powers of natural persons at full capacity. They’re often created to divide buildings and/or parcels of land into individually owned pieces, while the common land and amenities are owned together. Stratas have certain responsibilities under the Strata Property Act and Regulations, including being responsible for common expenses and disclosing Rules and Bylaws which apply to occupiers. Stratas also have the power to provide Bylaws for the management and use of the lots, including prohibiting occupants under certain ages.

Age is not a protected ground of discrimination under the Human Rights Code in the context of property purchases, but race and gender, among other factors, are included. Stratas have the power to disallow would-be owners who are not of a certain age. The Human Rights Code gives broader protection covering age-based discrimination to tenants, as opposed to owners. Stratas may only require that tenants be at least 55 years of age. They cannot require, for example, that tenants be at least 19 years of age, but the strata could require that owners be at least 19 years of age. Individuals who resided within the strata before the time that an age restriction bylaw was passed are considered ‘grandfathered’ in and may continue residing despite the new provision.

Age-based requirements can occasionally make it challenging for young families to find housing for purchase, but the Condominium Homeowners Association of BC reported that buildings with 19-plus age restrictions represented only a small portion of the overall market. Affordable and accessible housing is a developing area and age-based provisions may undergo further legislative reform in the future.

 

 

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