When are promises made by one family member to another about eventual ownership of the ranch, enforceable?
That question is at the heart of the June, 2019 Supreme Court of British Columbia decision in the case of Linde v Linde (2019 BCSC 1586).
The dispute was between an 89-year-old father and his 60-year-old son and the son's wife and centred on the father's ranch, acquired in 1961, and associated Crown rights. When in 2016 the father, upset with the son, said he was going to gift the ranch to a third party, the son and his wife sued the father, claiming that the son and his wife were entitled to ownership of the ranch on the father's death and that the intended gift of the ranch to a third party was void. Their claims come under the legal headings of "proprietary estoppel" and "unjust enrichment".
The history of the parties as described by the judge was that the son had worked for his parents on the ranch his whole life, and the daughter-in-law had worked on the ranch since marrying the son in 1996. The decision says "They say they were paid little or no compensation for their labour, but were happy to work hard on the ranch on the understanding and on the expectation, based on assurances given by [the parents]…, that they would inherit the ranch on their death....They say that the promises [the parents]... made to them over the years that they would inherit the ranch on their death prompted them to give up alternative careers and deprived them of the ability to earn income elsewhere".
The father had supported the ranch over the years by working at sawmills in the region until his retirement, which allowed him to retire with Canada Pension and an industry pension also. The son and his wife worked full time on the ranch and on their smaller adjacent ranch property.
The son (and his brother, who unfortunately had died in 1982 at the age of 24) had been encouraged by their parents to make ranching life their careers. At the time of marriage, the wife had a career in early childhood education which she gave up to work on the ranch. Like her husband, she understood from the father and his wife that "with continued hard work and effort" she and her husband would inherit the ranch.
Ranch work included cattle operations, growing hay for sale, logging and operating a woodlot under a woodlot licence, processing timber, and operating and maintaining the usual suite of machinery and equipment. Both the son and his wife and a number of non-family members who knew the family gave evidence about how consistently and how hard the son and his wife worked.
In 2008, the father's wife died, a devastating event for the father. In 2009, he engaged a lawyer to prepare some estate planning documents. The documents included a transfer of the four parcels of land into joint tenancy with father and son, a bill of sale transferring equipment and other non-land assets from father to son.
At the same time, the father transferred two bank accounts and a safety deposit box with 28 troy ounces of gold into the name of father and son as joint owners with right of survivorship – so the surviving co-owner would become the sole owner of these assets on the death of the first to die, because of the right of survivorship.
One of the documents that was signed at the same time was a "trust declaration". This is a document stating that one person holds title to an asset in trust for another person who is the true owner. In this case, the trust declaration acknowledged that the son had no interest in the lands other than that of a bare trustee for the father, that all benefits flowing from the property belonged to the father and not to the son, and that the son would transfer his interest in the property to his father on demand.
A trust declaration is commonly used in a situation where the title to property is being transferred (often for ease of transfer upon the death of the person transferring the property), but the true ownership of the property is to remain with the original owner, in this case the father.
The father relied heavily on the trust declaration in court for his argument that the son and his wife were not entitled to inherit the property. The judge said that the son's "understanding when he signed the trust declaration was that it was part of what was required to put into effect a long-term plan that his parents and he had that he would inherit the ranch on [his father's]... death. He says it was not explained to him and he signed it without understanding what it meant. Specifically he said that: "I did not know that the document actually strips me of any legal rights I might have accumulated by working on the lands to that point and I would not have signed it had I known that." The son did not have independent legal advice on the documents and was not aware that the father's lawyer was acting only for the father and not for both father and son.
The son believed that his father said he could help himself to the money in the accounts if he needed it, and because of the hard work and effort he put into the ranch over decades, and because he had been woefully underpaid for those efforts and he was to take over the ranch in any event, he could use the money in the bank account and sell the gold as needed for personal living and ranch operations. Over the next five years, he withdrew $31,000 from the bank accounts and sold 17 of the 28 troy ounces of gold worth about $25,000.
He did not discuss the bank account withdrawals with his father, who became aware of them sometime before 2014 and who confronted the son, who offered to repay the money. The father decided to "let it go". However the father was disappointed by the son's withdrawals from the bank account.
The father then discovered that some of the gold was missing. For the father, "the missing gold was the final straw that destroyed his trust" in the son and his wife. The father felt betrayed, that the son "no longer had the sense of family" and neither the son nor his wife deserved to inherit the ranch. All three continued to work on the ranch as they had been doing, although under "strained conditions".
The father had a serious accident on the ranch in December 2015 and had to move into residential care. Son and his wife continued to operate the ranch but since 2017, did not account to the father for any profits. In 2016, the father sued the son for a court order that the son's interest in the ranch was held in trust for the father, and made his intentions clear that the son and his wife were not going to inherit the ranch and that he was going to gift it along with appurtenant Crown rights and equipment and machinery, to a neighbour. The son and his wife responded by starting a court action of their own as described at the beginning of this article.
The neighbour to whom the father wished to give the ranch was aware of the law suit between the father and son, but stood to one side and did not participate in the lawsuit.
The judge decided that the law of proprietary estoppel applied to this situation, to prevent the transfer of the ranch and associated assets to the third party, and to require the father to ensure that the son and his wife inherit the property on the death of the father.
The judge also decided that unjust enrichment was also proved, to the extent of the $780,000 appraised value of the ranch.
Proprietary estoppel (the legal ability to stop an action that would interfere with an earlier promise of an ownership right) arises when:
(1) A representation or assurance is made to the claimant on the basis of which the claimant expects that he will enjoy some right or benefit over property;
(2) The claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and
(3) The claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible for the representation or assurance to go back on his or her word – at that point, the party making the representation or assurance can no longer rely on that party's strict legal rights.
There must also be "proportionality", a balance, between the expectation and the detriment, so for example expecting to inherit a ranch with an occasional, modest contribution of help, is likely not proportionate.
If the judge finds that the assurance was made and the reliance and detriment are proved, the judge assesses whether or not the intended repudiation of the promise or assurance is unconscionable in all the circumstances of the case. In this case, the judge decided that the repudiation of the multiple assurances, made over a long time, relied on by the son and his wife to their detriment in spending their lives working on the ranch for low compensation, was unconscionable.
The judge paid attention to the following aspects of the evidence:
When the father decided he had changed his mind about the son and his wife inheriting the ranch, proprietary estoppel took effect so that the assurances he had earlier made to them could not be cancelled and the father was no longer legally able to dispose of the ranch as he then saw fit.
The reward for fifty years of ranch work contributed on the promise that ownership of the ranch will be the end result, cannot be erased by a relatively small problem between the parties.