Jared Epp Receives the Chapter Award of Merit from Construction Specifications Canada (CSC)

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Congratulations to Jared Epp on receiving the Chapter Award of Merit from Construction Specifications Canada (CSC).

Jared received this honour in recognition of his work to advance the goals of the organization and for the betterment of the design and construction community. For more information about CSC click here.

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Saskatchewan Estate Litigation Update: Kaushik v Kaushik, 2022 SKQB 135

The recent Saskatchewan Queen’s Bench decision in Kaushik v Kaushik, 2022 SKQB 135, offers an overview of a situation in which multiple persons concurrently seek to be appointed as the sole administrator of an Estate. 

Overview:
  1. Sadhna Kaushik applied for appointment as the administratrix of the estate of Daya Chand Kaushik [Daya], her late father;
  2. Daya died on June 7, 2019;
  3. Daya’s last will and testament dated September 22, 1987, named his wife, Vimla Devi Kauchik [Vimla] as executrix. It directed further that in the event she predeceased him, Rakesh Kaushik [Rakesh], Sadhna’s brother, and one of the respondents on this application, should serve as executor of his estate;
  4. Vimla predeceased Daya;
  5. To date, no application to have Daya’s will probated had been made, as the original will had been lost;
  6. Rakesh, brother of Sadhna, argued that he himself should be appointed as administrator. Rakesh relied on the below facts:
  1. On or about August 30, 2016, Daya executed an Enduring Power of Attorney naming Rakesh as his personal and property attorney. Rakesh acted in this capacity until Daya’s death in 2019;
  2. However, on or about September 20, 2016, Daya purportedly executed a Revocation of Enduring Power of Attorney setting aside the previous document. However, Rakesh only learned of this after Daya’s death;
  1. The six beneficiaries were divided as to their choice of the appropriate administrator of Daya’s estate. Three beneficiaries, Douglas, Sheila, and Hazel signalled their support of Rakesh, and each formally renounced her right to letters of administration in favour of Rakesh.
  2. The last two beneficiaries – Elizabeth and Neil – adamantly reject the appointment of either Sadhna or Rakesh to be administrator of Daya’s estate. Instead, they proposed that the parties be directed to attend mediation in an attempt to resolve this dispute.
  1. Elizabeth and Neil opposed appointing Sadhna because she allegedly mismanaged the affairs of Vimla’s estate when Sadhna served as her mother’s executrix; and
  2. Elizabeth and Neil opposed appointing Rakesh because of his alleged continuing failure to account adequately for monies transferred from Daya’s accounts during the latter years of Daya’s life, even in the face of an order of the court dated August 13, 2020.
  1. As for Sadhna, only Sadhna supports an order appointing herself to be the administratrix of Daya’s estate.
Who had priority to apply to administer?

Subsection 13(1) of the Administration of Estates Act stipulated that no letters of administration shall be granted to any person unless:

  1. all persons with a prior or equal right have renounced their right to administration; or

  2. a judge has made an order dispensing with the requirement to obtain the renunciation of the right to administration of persons mentioned in clause (a)

In the context of this application, this meant Sadhna was not entitled to be appointed administratrix because Rakesh has not renounced his right to administration, and vice versa. Thus, the court had to intervene to break the deadlock between the two siblings.  

The court ultimately appointed Rakesh as administrator:

As the only surviving children of Daya and Vimla, both Sadhna and Rakesh were potentially entitled to apply to be appointed as administrator of Daya’s estate. The question was which of them, if either, is the most appropriate person to serve in that capacity.

The court ultimately found that Rakesh was the preferable person to administer the Estate. The three main factors could be summarized below:

  1. Reason 1: First, Daya decided in 1987 to appoint Rakesh as the alternate executor of his estate should Vimla predecease him. Despite Vimla’s death in 2016, at no time prior to his death in 2019 is there any evidence to show that Daya revised his will, let alone executed a new one. This consideration weighed heavily in favour of appointing Rakesh as administrator, by showing the intention of Daya as to who would administer his estate;
  2. Reason 2: Rakesh was opposed by some beneficiaries, but he ultimately did have the consent of a majority of the beneficiaries. In addition to himself, Rakesh had the consent of Sheila, Hazel, Douglas, all of whom have formally renounced their rights;
  3. Reason 3: The evidence discloses that Rakesh maintained a closer relationship with Daya than did Sadhna;
  4. Reason 4: Rakesh purported to act as Daya’s attorney pursuant to the terms of an Enduring Power of Attorney dated August 30, 2016. It is true that there is evidence that Daya revoked this, but no one appeared to learn of this until after Daya’s death. The fact that Rakesh did look after Daya’s affairs for a time, would support a finding that Rakesh was well placed to “convert [Daya’s estate] to the advantage of those who have claims against it, either by paying the creditors or by making the appropriate necessary distributions”.

The one aspect which gave the court pause, was about the allegation that Rakesh had refused to provide an accounting of his handling of Daya’s estate from September 1, 2016 – the approximate date when the enduring power of attorney took effect – to June 7, 2019, the date of Daya’s death.

However, the court found that Rakesh in his affidavit had spoken to the steps he took to comply with the order to account. The court took comfort from the fact that Rakesh had retained local counsel, who would direct Rakesh on how to carry out his responsibilities as administrator in an appropriate and lawful manner.  

Moreover, the court found that, while Rakesh has been slow to provide an accounting of his management of Daya’s affairs, he had now provided one in the requisite form prescribed by The Queen’s Bench Rules. Additionally, his affidavit provides further information respecting his dealings with Daya’s estate while he acted as his father’s attorney.

Moreover, the court was not ultimately swayed by  two findings of profession misconduct made against Rakesh by the discipline committee of his professional regulatory body, the Chartered Professional Accountants of Saskatchewan. While these were stain on a professional’s reputation, they were not enough on its own to disqualify him or her from acting as the administrator or testator of a deceased’s estate.

Outcome and costs order:

The court in Kaushik ultimately appointed Rakesh as administrator, but did require that he obtain a bond. Interestingly, despite the success of Rakesh in this application, the court ordered that each side bear its own costs:

63      I am satisfied that considering all the circumstances, this application was necessary in order to settle the question of who should be appointed administrator of Daya’s estate. A stalemate had occurred between the two people legally authorized to apply for letters of administration. It so happens that it was Sadhna who initiated the application. In my view in the unusual circumstances of this case Daya’s estate should not be burdened with the costs of this application. Rather, I have determined that each party should bear his or her own costs of this application, and I so order.

The reasoning above – that “Daya’s estate should not be burdened with the costs of this application”  – is unusual.

In this situation, the Estate benefited from the clarity of this court order, which finally appointed someone to administer the Estate, and which took the estate out of the administrative limbo it had fallen into. Thus, it would have been entirely customary for the Estate to bear some or all of the legal costs incurred by a newly appointed administrator in his successful application.

Lessons learned:

Kaushik reminds us of the some of the factors which a court will rely on, in a situation of competing applicants for administrator. These factors include:

  1. Are there any clues, showing whom the deceased themself had wanted to appoint?
  2. Was there a majority among the beneficiaries, as to whom they want to administer the Estate?
  3. Had one of the potential applicants ever acted as attorney for the deceased before, thus placing them in a better position to now convert the estate to the advantage of the beneficiaries?

Contacting a Lawyer on this Subject

James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

Read more on our blog.

The Saskatchewan Estate Law blog is dedicated to providing practical, real-world information on Estate Law issues that affect Saskatchewan residents. The blog is written by RS lawyer, James Steele, whose practice focuses on estate litigation.

Jennifer Pereira, Q.C. presented Community Service Award

Congratulations to Jennifer Pereira, Q.C. on her recognition by The Canadian Bar Association (Saskatchewan Branch) with the Community Service Award.

The Community Service Award recognizes lawyers for their outstanding dedication, service and commitment to the community. It has been presented annually since 1999 to members of the Canadian Bar Association who have made exceptional contributions to our province. For more information about the award, click here.

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Saskatchewan Estate Litigation Update: McCabe v Kowalyshyn, 2022 SKCA 56

The recent Court of Appeal decision in McCabe v Kowalyshyn, 2022 SKCA 56, offers various lessons to Estate litigators. These include:

  1. The reality that court approvals of Estate land sales, under s. 50.5 of The Administration of Estates Act, SS 1998, c A-4.1, do not simply focus solely on market value. The court can also look at other considerations, such as whether the sale will reasonably reduce future litigation, wasted effort, or delay in the Estate.
  2. The reality that if parties agree in advance to a certain specified sale process, but do not later like the result, the court may not let them later challenge the outcome of that sale process.
Background:

McCabe arose out of a sale of farmland owned by an Estate. The background of McCabe informs some of the issues addressed by the Court. The background is summarized as follows:

  1. The deceased, Mike Kowalyshyn, died on July 1, 1996, ostensibly leaving a life interest in his estate to his wife and the remainder of it to their 12 adult children. The Estate owned, inter alia, eight quarter sections of farmland (“Farmland”), which had been leased to Nicky (a beneficiary of the Estate) and his wife, Debbie since the 1990s;
  2. Joseph Kowalyshyn was the executor of the Estate and was also one of its beneficiaries;
  3. There were a total of 12 adult siblings involved, who were the children and beneficiaries of their father’s estate, the estate of Mike Kowalyshyn;
  4. In 2017, certain of the Estate’s beneficiaries (the “Objecting Beneficiaries”) commenced proceedings against Joseph and the Estate, as well as against Nicky and Debbie, asserting that the Farmland had been leased at less than fair market rent (thus failing to maximize the Estate value);
  5. The focus of the parties turned to the sale of the Farmland. A variety of purchase offers were made:
  1. Nicky and Debbie offered to buy the Farmland for $987,121, which Joseph “conditionally accepted” as executor of the Estate (Queen’s Bench decision, McCabe v Kowalyshyn, 2021 SKQB 144, at para 8);
  2. This caused rancor amongst the Objecting Beneficiaries because they believed the Farmland was worth more than this price;
  3. On December 9, 2020, the Objecting Beneficiaries advised Joseph Kowalyshyn that some or all of them would be making an offer to purchase the land on more favourable terms, namely a purchase price of $1,000,000.00 (Queen’s Bench decision at para 8);
  4. On January 3, 2021, Nicky and Debbie Kowalyshyn increased their offer to purchase to $1,010,000.00  (Queen’s Bench decision at para 8);

The closed auction process:

  1. The parties could not agree, and the matter went to a court hearing on January 5, 2021, as well as various later conference calls with the Court. As a result of discussions, the parties agreed to a closed, inter-family auction. The process was reduced to writing, and set out a time-sensitive, process-detailed procedure whereby the land would be exposed to offers from the Kowalyshyn family;
  2. In accordance with the proposed method of sale, two groups (Nicky and Debbie Kowalyshyn on one hand, and Joyce Kowalyshyn, Walter Kowalyshyn, Eugene Kowalyshyn and Michael Kowalyshyn on the other hand) presented various back and forth offers on the Farmland;
  3. Nicky and Debbie Kowalyshyn presented the last and highest bid on February 8, 2021 in the amount of $1,325,000.00.
  4. No higher counter offer was received from Joyce Kowalyshyn, Walter Kowalyshyn, Eugene Kowalyshyn and Michael Kowalyshyn;
  5. However, the Objecting Beneficiaries then objected to any sale for $1,325,000.00. They asserted that they had gained evidence that the Land was worth more. For example, on February 24, 2021, Joyce Kowalyshyn contacted SAMA and learned that the Farmland had been newly assessed at $1,422,700.00, an increase from the former assessment of $1,150,681.50;
  6. Further, Joyce Kowalyshyn also contacted Wayne Berlinic, a realtor, and asked him to prepare a marketing plan for the estate land. Mr. Berlinic stated his belief that the most likely sale price for the land would be between $1,448,100.00 and $1,544,800.00 given recent market trends. Counsel for the Objecting Beneficiaries, in correspondence directed to the court, advised that later on March 26, 2021 he was advised that Mr. Berlinic had sold 120 acres of farmland near Buchanan, Saskatchewan for $2,083.00 per acre. If an equivalent price was received for the estate land, the total value of the land would approach $1,778,882.00;
  7. In reply,  the executor, Joseph Kowalyshyn, responded by commissioning a formal appraisal of the land by Robin Johnson, a member of the Appraisal Institute of Canada. He appraised the land using a .86 multiple of the new SAMA assessments and provided a value of $1,209,000.00, including buildings on the home quarter.
Queen’s Bench Ruling in McCabe v Kowalyshyn:

The Objecting Beneficiaries refused to consent to the sale of the land for $1,325,000.00.

The issue for the Queen’s Bench court (“Chambers judge”) was whether to approve the sale for $1,325,000.00, or to send it a future auction on the open market.

For context, s. 50.5(1) of The Administration of Estates Act, SS 1998, c A-4.1  holds that  an executor shall not sell land in an Estate, for the sole purpose of distributing the estate among the beneficiaries, unless those persons concur in the sale. Thus, the executor either needed unanimous agreement of the beneficiaries to the $1,325,000 sale, or, he needed a court order to override the non-consent of certain beneficiaries.

The Chambers judge approved the sale by the Estate of the Farmland to the respondents, Nicky and Debbie Kowalyshyn, for $1,325,000. The Court largely relied on the below grounds:

  1. The Objecting Beneficiaries were reneging (in the view of the Court at least) on a method of sale that they had agreed to, and in which they actively participated;
  2. The Objecting Beneficiaries had changed their position on what was the appropriate value of the Farmland. The Objecting Beneficiaries all agreed in writing that the offer of $1,000,000.00 was “deemed to be in the interest and to the advantage of the Estate.” Notably, that price was not only $325,000.00 below the price offered just weeks later by Nicky and Debbie Kowalyshyn but, more significantly, below the SAMA assessment then in currency ($1,150,681.50);
  3. The sale for $1,325,000 was in the best interest of the Estate. True, such sum may not maximize total market value, but s. 50.5 did not focus solely on market value. It instead allows the Court to look at other facts as well, such as:
  1. What sale would avoid further legal fees and dispute;
  2. What sale would avoid further delay or limbo, for the Estate;
  3. What would avoid having the Farmland sit fallow and unused in 2021.
  1. The Court preferred the appraisal evidence of Mr. Johnson. He used approved methods of appraisal, including comparable land sales as late as April 2021. He had provided topographical photographs of the Farmland. The court said that it would always favour an appraiser’s report over an opinion of value offered by a realtor, particularly a realtor who proposes to be engaged in the sale of the land.
Issue at the Court of Appeal:

The Objecting Beneficiaries appealed to the Court of Appeal. They asked the Court of Appeal to overturn the Chamber judge’s approval of the sale for $1.325 million. They asked instead for the Court of Appeal to direct the Estate to sell the Farmland at public auction.

Court of Appeal decision in McCabe v Kowalyshyn:

The Court of Appeal held that the Objecting Beneficiaries were bound by the process they had helped negotiate, and agreed to. That is, the bidding process had been negotiated and agreed upon by all parties, it had been conducted fairly, and it had established a closed market restricted to Estate beneficiaries and their spouses. Its object was not to achieve a sale at fair market value; it was to resolve the dispute over the sale of the Farmland fairly and finally (Court of Appeal decision at para 35).

Nothing about the new evidence of market value, had impugned the agreed-upon bidding process or how that process had been managed by Joseph.

Thus, the Court of Appeal upheld the Chambers judge’s reliance on factors, which were not limited to market value. For example, the Chambers judge had considered such factors as:

  1. The reality that the Estate faced mounting legal fees due to sharp divisions amongst the beneficiaries and the continuing litigation;
  2. The Estate’s principal asset — the Farmland — would be left fallow in 2021 if not sold, producing neither rent nor crops, until the dispute was resolved;
  3. The Objecting Beneficiaries had not satisfied their burden of proving that the $1.325 million was under value;
  4. Moreover, even if $1.325 million was not the highest possible value, the price was not the sole consideration when giving approval under s. 50.5. Had the Legislature intended for s. 50.5 to solely hinge on market value, when approving a sale, the legislature could have said just that. 
Lessons learned:

First, if beneficiaries agree to the method of sale and, participate in that method of sale, they will have a difficult time in later challenging the outcome.

Second, the criteria of highest “fair market value” is not the only consideration that the Court will consider, when approving a sale under s. 50.5.

Contacting a Lawyer on this Subject

James Steele’s preferred practise area is estate litigation, including will challenges, executor disputes, power of attorney issues, etc. Contact James Steele at 1-306-933-1338 or [email protected]. The above is for general information only, and not legal advice. Parties should always seek legal advice prior to taking action in specific situations.

Read more on our blog.

The Saskatchewan Estate Law blog is dedicated to providing practical, real-world information on Estate Law issues that affect Saskatchewan residents. The blog is written by RS lawyer, James Steele, whose practice focuses on estate litigation.

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My Contractor Doesn’t Exist, Can I Sue?

It is common for contractors and other service providers to incorporate prior to starting a business. A corporation can provide a certain level of insulation from liability for the people who operate it, and in addition, allows for other advantages such as tax planning. While it provides the operators with liability protection, it can leave an aggrieved customer with nowhere to turn. This is especially true where the issues are not evident at first instance. Many times a construction defect takes years to materialize.

Making this situation even worse for the customer is that by the time the construction defect materializes, the corporation that provided the service may no longer be in business. A corporation can, subject to certain requirements, dissolve and liquidate its assets at any time. If a corporation does so before it is sued, or even knows about the construction defects, any leftover assets can be paid out to its shareholders. At the first instance, the customer is left holding the bag, while the shareholders are left with a windfall.

Thankfully, The Business Corporations Act (Saskatchewan) (the “Act”) contemplated these issues. Section 219 specifically allows someone to sue an inactive corporation. However, even in that instance, you must act fast as you only get two years to do so. While not a perfect solution, it does provide an avenue for aggrieved customers to right the wrong.

In addition, the Act also allows you to attempt to recover the assets or at least their value, that were paid out to the shareholders. This prevents the corporation and its operators from side-stepping its liabilities.

That being said, deciding to sue a dissolved corporation will cost time and money. It may be that the corporation dissolved because it had no assets. In some situations, all of the assets of the corporation may have gone to other creditors such as a bank or someone else who sued the corporation. Therefore, any legal action is unlikely to provide meaningful results.

Before deciding to sue, some background work can be done to determine if legal action is worthwhile. These steps include:

  1. Pulling a corporate profile report from Information Services Corporation. A certificate of dissolution, and sometimes other supporting documents, may be filed online. Recovering a copy of these, for a small fee, may shed some light on the financial situation of the corporation; or
  2. Contact the Ministry of Finance. The Act specifically requires corporations with known creditors, who cannot be located, to payout a certain portion of their assets to the Ministry of Finance for future claims. There is no guarantee that the corporation will have done so, and if it did not know that the construction was faulty, the funds may not have been paid, but it is an inexpensive step that may lead to partial recovery.

At the end of the day, you should ask yourself whether you are ready to commit the time and financial resources to pursue an inactive corporation. In some instances, your first loss is your best loss, and throwing further money down the rabbit hole may only lead to frustration.

However, in others, meaningful recovery may be achieved. You should not simply give up because your contractor has gone out of business, especially where he or she has started a new business. They may have simply taken their assets to avoid their liabilities, and you can still recover.

This article is intended to provide legal information only, not legal advice. 

For further information, please contact:

Travis K. Kusch
Direct: 306-933-1373
Email: [email protected]

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