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Bid for Special Referee Denied; Draws Costs in BC Committeeship Application

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  • Bid for Special Referee Denied; Draws Costs in BC Committeeship Application

A special referee may be appointed within BC court proceeding to undertake factual investigations – often through the referee’s specialized expertise – that are necessary to the resolution of the issues between the parties. The court declined the request for appointment of a special referee in Klop (Re), 2021 BCSC 644 in the context of a committeeship application, finding that the parties seeking appointment of a special referee in that proceeding were using it as a “stalking horse” for estate litigation they intended to bring. Costs were ordered against the party who sought the appointment of the special referee.

Contested committeeship application

Our BC estate litigation team recently discussed the contested committeeship application concerning Niesje Klop, an 87 year old widow who was suffering from severe dementia and living in an assisted living facility in BC. Mrs. Klop’s children agreed she was not capable of managing her affairs, but could not agree on which of them should be appointed committee. Four of Mrs. Klop’s daughters petitioned the court to have one of them, Antonia, appointed committee of their mother’s person and estate under s. 6(1) of the Patients Property Act, R.S.B.C. 1996 c. 349 (“PPA”). Two of Mrs. Klop’s sons, Gerald and John, did not oppose Antonia being appointed committee of their mother’s person, but said they should be appointed to handle the estate.

Distrust among siblings leads to family dispute

Mrs. Klop had executed an enduring power of attorney (“POA”) in favour of Gerald and John in 2012. The daughters questioned the circumstances surrounding Mrs. Klop’s execution of the POA, taking the position that their mother lacked capacity when it was made. The daughters also questioned a number of transactions that brought about a change in ownership of the family farm business in 2013. The company was reorganized, and ownership of the equity transferred to Gerald and John. Mrs. Klop’s daughters were very suspicious of these transactions. They alleged that Gerald and John acted secretively, were uncooperative when asked for information, and should be disqualified from acting as committee due to conflict of interest.

Request for appointment of special referee

Within the committeeship proceedings, the daughters asked the BC Supreme Court to appoint a “special referee” at the cost of Mrs. Klop’s estate to investigate the propriety of Gerald and John’s conduct and prepare a report on the circumstances surrounding the POA, the business restructuring, assets held by their father’s estate (Mr. Klop had died in 2013), and their mother’s capacity to make a new will as she did in 2014. The daughters sought to have the special referee make a recommendation as to whether any person should be excluded from acting as Mrs. Klop’s committee by reason of conflict of interest or for any other reason. Gerald and John opposed the appointment of a special referee. The Public Guardian and Trustee (“PGT”) also had concerns, submitting that the benefit to Mrs. Klop of an inquiry by a special referee ought to be weighed against the cost of same, given the modest value of Mrs. Klop’s liquid estate.

Function of a special referee

A special referee can be appointed within a proceeding pursuant to Rule 18-1 of the Supreme Court Civil Rules, B.C. Reg. 168/2009. The function of a referee is to undertake factual investigations – often through the referee’s specialized expertise – that are necessary to resolve the lis between the parties. Here, the daughters were attempting to use uncertainty as to the propriety of Gerald and John serving as committees as a pretext for having an inquiry ordered. But it was apparent from the daughters’ submissions that their real concerns were with the circumstances of the 2013 corporate restructuring and its consequences for their rights as beneficiaries of their mother’s estate. Gerald and John submitted that the daughters request may properly be considered a stalking horse for estate litigation that they plan to bring in the future.

No basis for burdening Mrs. Klop’s estate

The court found that no need for an inquiry within the context of a PPA proceeding had been demonstrated. It was apparent that the chief focus of any inquiry by a special referee would be the gathering of evidence going to whether, ultimately, the 2013 corporate transactions and 2014 will should be set aside, reverting ownership of the shares back to Mrs. Klop. The predominant effect would simply delay transfer of ownership to Gerald and John, as Mrs. Klop’s 2012 will directed the passing of shares in the company to them. The daughters failed to demonstrate either that such result would advance the desires of Mrs. Klop or – apart from her regaining ownership of property she is no longer able to make use of – that it would be in Mrs. Klop’s best interests. Per Mr. Justice Saunders:

[57]         That is not to say that Mrs. Klop’s ownership rights are not worthy of consideration. But the questions at present are whether potentially re-establishing her ownership rights through an inquiry at this time would be worth the cost to her estate, whether it would have any practical benefit, and whether a PPA proceeding is the proper venue for an investigation of same.

[58]         As a patient, Mrs. Klop is being well cared for. There is no evidence of neglect or abuse, or that her person is at risk. There are adequate funds for her housing and living expenses. Setting aside the 2013 Transaction would not improve her situation. There are no concerns that engage the Court’s parens patriae jurisdiction. The petitioners submit the circumstances are so suspicious that an investigation is necessary at this time. That necessity has not been demonstrated.

There was no reasonable basis for burdening Mrs. Klop’s estate with the cost of an investigation by a special referee, and no justification for enabling the daughters to investigate their potential personal causes of action through a court inquiry in the context of the PPA proceeding. Mr. Justice Saunders appointed Antonia as committee of Mrs. Klop’s person and Gerald and John as committees of Mrs. Klop’s estate, finding no potential conflict of interest that should disqualify Gerald and John from acting as committees. For more on the analysis of factors for consideration in selecting a committee, see here.

Costs of BC committeeship application

BC courts have broad discretion with respect to the costs of an application for committeeship. The general rule is that a successful applicant will be entitled to special costs, payable out of the patient’s estate. However, the court may deviate from the general rule if the application is not found to be in the adult’s best interests or there are concerns about a party’s conduct or motives.

The daughters submitted that as the PPA application was brought for the sole purpose of protecting their mother and promoting her best interests, costs should be payable from Mrs. Klop’s estate. The court found no basis for concern as to Mrs. Klop’s best interests that have any relevance to committeeship under the PPA. The application for committeeship was necessary, but the hearing, including the supplemental written submissions, was unnecessary. The court ordered the daughters to pay Gerald and John their costs of the hearing and of the supplemental written submissions.

Legal advice on BC committeeship issues

Our estate planning lawyers regularly assist clients with committeeship matters, including contested committeeship applications and costs issues. If you have concerns that a family member or friend is being taken advantage of due to mental incapacity, or have questions about committeeship applications, claims for lack of capacity or undue influence, contact Onyx Law Group’s team of Vancouver family law and estate litigation lawyers for a 30-minute free consultation.

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