Foreseeability of daughter's dire finances added to moral obligation owed by wealthy mother - awarded $5.5 million

Wilson v. Lougheed Estate, 2010 BCSC 1868

Debra Wilson, the adopted daughter of Mr. Lougheed, brought an action under the Wills Variation Act against her adoptive father in his personal capacity and as executor of her late mother’s estate. 

Her mother, Norma, had given birth to her during a previous marriage which ended in divorce.  Norma began a relationship with Lougheed and they lead a fortunate lifestyle with significant wealth.  Lougheed formally adopted Wilson and she enjoyed the benefits of an affluent lifestyle.  Wilson was given, among other things, vehicles, use of apartments, her own horse, and the privilege of attending private schools. 

Under her mother’s will, which was drafted in 1989, Wilson was to receive a great number of assets which included cars, boats, jewellery, all bank accounts, and 4 parcels of land with the balance being left to Lougheed.  Unfortunately, the day before she died, Norma informed her lawyer that she did not have any boats or the 4 parcels of land that were to go to Wilson, but that Wilson was still to receive the vehicles, jewellery, and bank accounts.  This left much of Norma’s assets to Lougheed and Wilson only received a relatively small portion of her mother’s multi-million dollar estate. 

At the time of her mother’s death, Wilson was in financial trouble as her restaurant business had failed.  She brought a claim to vary her mother’s will as her mother breached her moral duty by failing to make adequate just and equitable provision for her.

Lougheed opposed the claim detailing that Norma had no legal duty to Wilson and any moral duty that may have been owed was satisfied through the gifts that had been given previously, the benefits which she received throughout her life, and the bequests that had been made under the 1989 will.  Lougheed also brought action against Wilson claiming for unpaid loans that she received from her mother for real property. 

DECISION:

The court found in favour of Wilson and varied the 1989 will to allow for a bequest in the amount of $5.5 million.  As for the unpaid loans, the court found in Lougheed’s favour that Wilson was to repay $350,000 to the estate and Lougheed for a loan on the Whistler property and $461,000 on a loan for the Roberts Creek property. 

At the time of her death, Norma knew that Wilson was facing dire financial trouble.  She also knew that she lacked the education, training and experience necessary to enter the workforce and that she would have relied on Norma to pay the education costs for their children.  She would have also known Lougheed had significant assets apart from hers, his income was nearly double hers, and that Lougheed would have more than enough in his own right to maintain his standard of living for the remainder of his life.  Although he had adopted her, Norma knew that Wilson was not a beneficiary of Lougheed’s estate. 

Wilson did not make any financial contribution to her mother’s estate, but she was a dutiful daughter who enhanced her mother’s life and well-being.  Nothing disentitled Wilson from relief under the Act. 

The moral obligation that was owed to her daughter did not overtake and was not near the intense duty that she owed to her husband, but was a strong moral duty nonetheless.

The inter vivos gifts and financial advantages did not negate the duty and the testamentary provisions in the 1989 will (amounting to only 1.41% of the estate) fell below the moral obligation of a contemporary judicious parent.

Generally, an independent child’s moral claim is more tenuous than a spouse or dependent child.  The court revisited the point that, where the size of the estate permits, some provision for independent children should be made, unless circumstances would negate such an obligation. 

As for the loans, Wilson had attempted to defend the claim for unpaid loans on the basis that it was her understanding that her mother had forgiven them during a conversation in October of 2006.  The court found that there was no evidence that Norma forgave such loans. 

Lougheed’s net worth at the time of his wife’s death was approximately $25,933,059. 

Foreseeable circumstances

330     The assessment of whether Norma has made adequate testamentary provision for Kelly is based on the circumstances that existed at Norma's death, as that was her last opportunity to make a just and proper will. Circumstances that were reasonably foreseeable to Norma will also be relevant: Landy v. Landy Estate (1991), 60 B.C.L.R. (2d) 282 (B.C.C.A.) [Landy]; Graham v. Chalmers, 2010 BCCA 13; Wilson v. Lougheed, 2009 BCSC 1841.

331     In Landy, the Court of Appeal also held that a substantial change in the circumstances of a claimant or beneficiary occurring in the intervening period between the date of death and the date of trial may also be relevant. There, it was determined that the death of a primary beneficiary constituted a substantial change; however, the Court of Appeal did not purport to lay down any hard and fast rules.

332     In the case at hand there is controversy about the extent of Norma's knowledge of the Wilsons' deteriorating financial situation and what she could have reasonably foreseen at the time of her death.

333     There can be no question that Norma was intimately involved in the Wilsons' financial life. In my view, it is more probable than not that when she and Blair were discussing the affordability of the Whistler loan payments in 2003, Norma would have been aware of the existence of the mortgage charging the Lawson Avenue property. Even in the absence of that discussion, I find that she would have appreciated that the Wilsons had borrowed funds in order to construct their new home. While I accept that Norma did not have specific knowledge of the mortgages registered against the Whistler Property or Pemberton Valley, or the collateral mortgage granted in 2006, I find that she nonetheless understood that the Wilsons had relied on bank financing to bring the Steakhouse into operation and accept Blair's evidence that through his discussions with Norma, she was aware that it had cost in the neighbourhood of between $800,000 and $1.0 million to construct.

334     Norma was also aware that Mountainside had suffered a significant financial setback and that William was working on rehabilitating that situation. She knew too that Mountainside was the sole source of her daughter's income and that the dividend payments to Mountainside would cease on December 31, 2009. Based on the foregoing and the discussions between Norma and Kelly in October 2006 which resulted in Norma suspending monthly payments on the Whistler Property loan for an indefinite time; Norma's awareness that Kelly was dipping into Mountainside to cover some of the Steakhouse's operational expenses; Blair's frank disclosure to Norma in December 2006 and her knowledge of the closure and receivership of the Steakhouse, I find that as of the time of her death, Norma knew that the Wilsons were facing serious financial trouble.

335     Additionally, and among the other things, Norma would have known that after twenty years as a stay-at-home mother, Kelly lacked the education, training and experience necessary to enter the workforce; that the Wilsons were relying on Norma to pay the education costs of their children and that Cara would likely attend an expensive U.S. college and/or university to obtain at least one post-secondary degree. She would have known further that William had a significant net worth independent of her assets, that his Norbill income was nearly double hers, that their respective incomes would increase significantly when the LHL settlement payments came to an end in December 2009, and that William would have more than enough in his own right to maintain his standard of living for the rest of his life. She was also aware that Kelly was not a beneficiary of William's estate.

336     Kelly's counsel submits that Norma would have been attuned to her husband's habitual complaints of Blair over the years, and points out that she would have witnessed him cutting ties with his brother, mother, and even his own children whom he left to fend for themselves in times of need. Her counsel asserts that, therefore, it was reasonably foreseeable to Norma that William might banish Kelly and her family from his life and refuse all financial assistance.

337     Norma had observed a positive relationship between her husband and daughter with no conflict for more than 35 years. Although she may have regarded it as theoretically possible that William could become displeased with Kelly and estrange himself from her, I do not agree that Norma would have reasonably foreseen the likelihood of the collapse of their relationship.

338     Counsel for Kelly also contends that the substantial negative change in Kelly's financial status after her mother's death ought to be taken into account in determining whether she has been adequately provided for. These changes include the diminishment of her asset base caused by the requirement to pay off the debts connected to the Steakhouse; the dramatic drop in the Wilsons' household income that has resulted, in part, by Blair losing the re-election in 2008; and the cessation of the payments of dividends to Mountainside at the end of 2009. Her counsel further asserts that an integral component of Kelly's declining financial picture is the result of William's vindictive treatment of her to her financial detriment. Kelly's position is that William's post-death conduct in this regard includes his declaration to grind the Wilsons into the ground; secretly removing money from Mountainside in the aftermath of his unilateral estrangement from her; wrongfully retaining the Lexus; refusing to pay her the proceeds of the RIF; cutting off financial support to Cara and Bo; bringing manifestly unfounded claims in debt relative to Kelly's acquisition of Jefferson Avenue, Gordon Avenue, Pemberton Valley and Lawson Avenue; and generally refusing to contribute financial support at a time of Kelly's greatest need.

339     In my opinion, Kelly's financial situation did not substantially worsen after Norma's death. She and Blair were already in deep trouble before Norma died. The Steakhouse had failed, Mountainside was indebted for the loans made to trade up its investment portfolio, the collateral mortgages had been granted, and it had been established in 1989 that the LHL dividends would end on December 31, 2009. Exposure to those financial risks and realities did not change in any substantial way after Norma's death - they merely played out to conclusion.

340     Having said that, however, certain steps taken by William after Norma's death aggravated the Wilsons' financial predicament and those steps, in combination with his withdrawal of all financial support to the Wilson household, could arguably amount to a substantial change in Kelly's life. It seems to me, however, that the proper focus of the inquiry must be on the effect, if any, that the substantial change has produced.

341     It is undeniable that the breakdown of the father and daughter relationship after Norma's death has caused Kelly immense emotional turmoil and distress. I expect it has probably been trying for William as well. However, the entailing financial aftermath has not been significant. Except for William's refusal to make good on the Lougheeds' longstanding arrangement to cover the education costs of the Wilson children, this element of change has only caused Kelly a temporary financial detriment for the most part. She had never relied on her father for financial support to the same extent or in the same way as she had on her mother. It was well known that she was not a beneficiary under William's will, and that from his standpoint, she and his other children had already received their full inheritance by way of the settlement of the LHL litigation. There was no evidence that William had ever softened his view on that point prior to Norma's death, or had considered amending his will to include Kelly. Consequently, although the post-death termination of the father and daughter relationship may qualify as a substantial change in the sense that it is a profound emotional change in the life circumstances of both Kelly and William, I find that it did not cause financial peril to Kelly in an appreciable way, and has no influence in the determination of the pivotal issue.

342     There was evidence that under William's management, Norbill had suffered a reduction in value after Norma's death, possibly as much as a few million dollars. Neither he nor Kelly submitted that such a reduction in value qualified as a substantial change of circumstances to be taken into account on the key issue. In light of the poor state of the evidence on the point and absence of submissions, it has not been taken in account.

Size of the Estate

346     The position of a testator's independent adult child under the WVA has been controversial since the inception of the statute. In directing her mind to the moral claims of such children, McLachlin J. noted in Tataryn that while they may be more tenuous than that of a spouse or dependent child, where the size of the estate permits, some provision for such children should be made unless circumstances would negate such an obligation: Tataryn at 822.

347     The post-Tataryn jurisprudence establishes that a relatively small estate will not necessarily preclude a variation; by the same token, a large estate will not guarantee a variation in favour of an otherwise undeserving child. Although it cannot be confidently stated that the authorities endorse a linear correspondence between the size of an estate and the size of an award, the reality is that where the estate is very large and able to fairly accommodate all competing interests, a claimant's moral claim may not need to be as strong or compelling in order for the court to invoke its revisionary powers, as would be the case where the estate is modest.

351     On my assessment of the evidence, the moment before Norma's death, the aggregate value of her assets was approximately $26,204,032. Of that amount, the sum of approximately $6,657,830 became distributable on her death outside her estate, leaving the date of death value of her estate at $19,546,202, plus her share of the monies owed by Mountainside.

352     A breakdown of Norma's assets that passed outside of her estate as a result of her death and hence not subject to her 1989 Will, are set out below. I note that the Lougheeds' Pender Harbour mansion was jointly owned by William and Norma at her death. William estimated its value at between $5.0 million and $7.0 million. In light of his evidence that it cost approximately $6.5 million to construct that home several years ago, I find that its value at Norma's death was at least $7 million.

i) Joint assets passing to William:

Pender Harbour property -  $7,000,000 (50%) : $3,500,000

Belmont home - $2,381,000(50%) :  $1,190,500

Shares of Interlude - $1,127,043 (50%) :  $563,521

Fast Norma boat - $250,000 (50%) :  $125,000

2006 Lexus Hybrid - $40,000 (50%) :  $20,000

Joint account with Scotia McLeod - $1,673,117 (50%) :  $836,558

(ii)  RIF designated to Kelly

$ 422,251

 TOTAL:  $ 6,657,830

 353     The main asset of Norma's estate are her shares in Norbill. Kelly accepts William's midpoint valuation of them at $15,978,250. I am satisfied that the amount of Norma's shareholder's loan was $2,677,475, for a total interest in Norbill at death of $18,655,725. In addition to the Norbill assets and Norma's share of the debt owed by Mountainside, the assets comprising her estate are broken down as follows:

* jewellery $ 273,025

* funds in bank account $ 500

* shareholder's loan in Interlude Projects Ltd. ("Interlude") $ 25,600

* Laura Carver mortgage receivable $ 400,000

* 50% of the unpaid principal on the Whistler Property loan $ 175,351.92

* loan for down payment of Roberts Creek payable on the sale of Pemberton Valley $ 16,000

354     Under the terms of Norma's 1989 Will, William's proportionate share of Norma's estate works out to be approximately 98.59% and Kelly's entitlement is the remaining 1.41%. William also received approximately 93.6% of Norma's significant non-estate assets distributable as a result of her death.

 

406     In weighing the totality of the relevant circumstances and based the foregoing, including (stated in abbreviated form) the abundance of Norma's wealth and her lavish standard of living, the value of the assets passing to William outside of the estate and his independent wealth; what Norma knew about Kelly and Blair's comparatively inferior financial circumstances, the significant financial setback brought on by the demise of the Steakhouse and that Kelly would not inherit from William; Norma's promise to pay for the Wilson grandchildren's education; Kelly's bona fide expectations that she would be securely provided for by her mother engendered by her mother; the devotion and love showed by Kelly to her mother; the value of the testamentary gifts to Kelly as well as the RIF, I find that Kelly's moral claim is by no means tenuous. Although Norma's moral obligation to Kelly does not overtake and is not on par with the intense duty that she owed her husband, it is my opinion that Norma owed her daughter a strong moral duty. I find that duty was not negated by the gifts and financial advantages bestowed on Kelly by her mother over the years or by any other factor.

407     In my opinion, the testamentary provision made for Kelly under the 1989 Will falls below the moral obligation of a contemporary judicious parent in all of the objectively assessed circumstances. Although by no means conclusive, it is not without relevance that William himself believed that Norma ought to make greater testamentary provision for Kelly.

408     It is incumbent on this Court to exercise its discretion so as to vary 1989 Will only to the extent required to provide the justice to Kelly that the 1989 Will failed to achieve, commensurate with Norma's moral obligation.

409     In the circumstances, and having regard to the incompatibility of Kelly and William, varying Norma's 1989 Will so as to give Kelly a share of the residue would invite further strife. I exercise my discretion to vary paragraph 3.3.1 of the 1989 Will so as to add a specific legacy to Kelly in the amount of $5.5 million.