North Vancouver, The Windermere: Death, Taxes and Leaks: Estate must pay to fix leaky condo

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Re: Estate of Lynn Louise Hawkins, Deceased,


2006 BCSC 1374

Date: 20060912
Docket: L-053048
Registry: Vancouver

Re: Estate of Lynn Louise Hawkins, Deceased

Before: The Honourable Mr. Justice Ralph

Reasons for Judgment
(In Chambers)

Counsel for the Applicant Norma Marier, Executrix of the Estate of Lynn Louise Hawkins, Deceased

Hugh S. McLellan

Counsel for the Respondent Douglas Henderson

Andrew S. MacKay

Counsel for the Respondent Marjorie Craig

A. John Lakes

Date and Place of Trial/Hearing:

July 27, 2006


Vancouver, B.C.

[1] The petitioner, Ms. Marier, is the executrix of the estate of the late Lynn Louise Hawkins who died on August 27, 1997. Pursuant to s. 86 of the Trustee Act, R.S.B.C. 1996, c. 464, Ms. Marier has applied for directions concerning a condominium at #15 – 1925 Indian River Crescent, North Vancouver. The condominium was Ms. Hawkins’ residence prior to her death and is the main asset of Ms. Hawkins’ estate. Its assessed value in 2005 for tax purposes was $392,800.

[2] The condominium is part of a strata property and the property in time became a “leaky condominium” requiring substantial repairs to its building envelope. The estimated cost of repairs is $3,200,000. Under s. 72 of the Strata Property Act, S.B.C. 1998, c. 43, the strata corporation must repair and maintain common property and common assets. On September 19, 2005, the strata corporation made a special levy assessment on each strata lot. The amount of the assessment levied against the Hawkins strata lot was $71,650. In addition the strata lot was assessed $4,478 as a portion of the legal fees anticipated to be incurred in taking legal action to recover the cost of the repairs. Central to this application for directions is a determination of whether responsibility for payment of these special levies is that of the present life tenant, Ms. Craig, or of the estate.

Background

[3] In her will of July 18, 1997, Ms. Hawkins gave certain directions with respect to her residence. The property was to be held in trust to permit Ms. Hawkins’ mother, Ms. Rosalie Cameron, to occupy it as her residence until there was a “Triggering Event” as defined in the will. Following a triggering event in respect of Ms. Cameron’s occupancy, the property was then to be made available to Ms. Hawkins’ mother’s friend, Ms. Marjorie Craig, to use as her residence until there was a triggering event affecting her residence there. Following a triggering event in respect of Ms. Craig’s occupancy, the property is then to be made available to Mr. Douglas Henderson as his residence until there is a triggering event affecting his occupancy.

[4] Following a triggering event in respect of Mr. Henderson’s residency, the property is to be sold and the proceeds are to be divided into two equal shares, one share going to Mr. Henderson and the other share to be divided among a list of organizations and associations set out in the will.

[5] The “Triggering Event” is defined as:

…the first to happen of the following events:

(1) the death of the person permitted to reside in my Residential Premises;

(2) the receipt by my Trustee of notice in writing that the person herein permitted to reside in my Residential Premises does not wish to reside in my Residential Premises; or

(3) the ceasing of the person herein permitted to reside in my Residential Premises to reside in my Residential Premises for a period of six (6) consecutive months.

[6] The will further provides that any of the three persons who might in turn be permitted to reside in the premises until a triggering event are to be bound by three obligations while they remain residents. The residents must:

(1) maintain and keep my Residential Premises covered by insurance against damage or destruction as well as public liability indemnity insurance in an amount and to an extent reasonable in the opinion of my Trustee;

(2) pay all maintenance costs and repairs that appear to my Trustee to be reasonable and necessary; and

(3) pay oil and fuel and gas and electricity consumed by her at my Residential Premises.

[7] The current resident, Ms. Craig, is 86 years old and has resided there since 1997. While the executrix has taken the position that the special levy was a reasonable and necessary repair, she takes a neutral position in this application. Ms. Craig has paid the $71,650 special levy assessment to the strata council under protest as she is of the opinion that the levy does not constitute “maintenance costs and repairs” as contemplated under the will. As a result she says that the estate should be responsible for the payment of the assessment.

[8] The estate administration has not been completed, but, other than the condominium, there is only approximately $34,000 remaining in the estate. There is no power to borrow set out in the will.

[9] Ms. Craig has proposed that the estate grant her an interest free mortgage over the residential premises to secure payment of the funds she has paid out. She proposes that there be no payments during the term of the mortgage and that the mortgage become due and payable upon the earliest of:

(1) the sale of the residential premises;

(2) the death of Marjorie Craig;

(3) Marjorie Craig ceasing to reside in the residential premises for a period of six consecutive months; or

(4) notice in writing by Marjorie Craig that she no longer wishes to reside in the residential premises.

[10] In her submission Ms. Craig presented a current market appraisal of the strata lot in the amount of $515,000 on an “as is” basis reflecting the ongoing building repair program. The appraiser valued the property on an “as repaired” basis at $575,000.

Issues

[11] The petitioner’s application for directions is framed in a series of questions set out in the petition. I have summarized them as follows:

1. Do the special levy assessments for the repairs to the building envelope and for the anticipated litigation expense constitute “maintenance costs and repairs” within the meaning of the will?

2. If the answer to question 1 is “No”, from what part of the estate are the levies to be paid?

3. If the levies are to be borne by the estate, does the estate have the authority to borrow funds to pay the assessments?

4. If the answer to question 3 is “Yes”, does the estate have the authority to grant Ms. Craig a mortgage over the residential premises in the terms she has proposed?

The position of the parties

[12] Mr. Henderson submits that the inclusion of the word “all” in the reference to “maintenance costs and repairs” requires that the term “repairs” be applied broadly. He referred to a number of definitions of “repair” found in a number of dictionaries including the Canadian Oxford Dictionary, 2nd Edition and Black’s Law Dictionary, 5th Edition. It was further argued that there is nothing in the evidence which suggests that the special assessment was for anything other than the repair of the building envelope. The levies do not include additional work such as the addition of a pool or tennis court that might be viewed as an “improvement” rather than a “repair”.

[13] Mr. Henderson also says that references by Ms. Craig to the treatment of repairs under the law of landlord/tenant and income tax law have no application in the construction of the terms of the will. As a result he says that the special levies are an expense to be met by Ms. Craig as a condition of her residency.

[14] Ms. Craig says that the special levies represent a capital improvement to the strata property to remedy it beyond its original defective condition. She says that it is a “once and for all” expenditure that cannot be reasonably characterized as “maintenance and repair costs”. It is her position that it is not reasonable to conclude that the testator intended that a life tenant be held responsible for major reconstruction befalling the entire strata property. Ms. Craig says that the special levy is an extraordinary expense not contemplated by the testator and creates an enduring benefit for the residence and the estate. In her submissions, this is demonstrated by the appraisal of the property comparing its “as is” and “as repaired” values.

Analysis

[15] In Re Waters (1978), 21 O.R. (2d) 124, 89 D.L.R. (3d) 742 (Ont. H.C.), the testator had made a will in contemplation of marriage. In the will he granted the use of a residence to his wife “for as long as she lives, or until she re-marries, or gives to my executors and trustees a written notice that she no longer needs and desires the use of the property”. Upon the occurrence of any of the described events, the property was to become part of the residue of the estate. The will required that she pay “taxes, insurance, repairs and other upkeep expenses.” One of the questions before the court was whether the wife was responsible for the cost of remedying a list of items set out in a work order relating to the property.

[16] In Re Waters Pennell J. stated:

The question comes down to this – What is the meaning of the word “repair”? The key to the sense in which the word is used in this clause, is to be found in the words immediately following, namely, “and other upkeep expenses”. To repeat, the material words of the sentence, “Taxes, insurance, repairs and other upkeep expenses shall be paid by Mrs. Ellen Jones”.

To my mind, it was intended that Mrs. Ellen Jones should do such ordinary and necessary repairs, having regard to the age, character and locality of the property as a reasonably minded tenant would do to keep them reasonably fit for occupation.

[17] In Powers v. Powers Estate (1998), 182 Nfld, & P.E.I.R. 341, [1999] N.J. No. 196 (Q.L.) (Nfld S.C.) the court considered an application relating in part to a life estate held by the applicant and his obligations with respect to the repair of the property. The court recognized a “general principle” relating to life estates. Cameron J.A. (ex officio) stated at ¶4:

In Re Dwyer, [1930] 2 D.L.R. 897 (N.S.S.C.) the court held that repairs necessary for the proper preservation of the building should be paid out of capital. Those of a recurrent or “periodical” nature were to be paid from income. In Re Woods, [1971] 1 D.L.R. 63 (Ont. Surr. Ct.) a similar division of costs was made. In Woods the restoration of the heating apparatus and painting, which was sworn to be a pressing need, was to be paid by the capital. These two cases are illustrative of the general principle. However, the principle is often difficult to apply, particularly for the trustee who has a duty to act impartially between the beneficiaries.

[18] Although not referred to by counsel, Waters’ Law of Trusts in Canada, Third Edition, (Toronto: Thomson Carswell, 2005) states at p.1050-51:

Unless the settler has given the life tenant an interest free of the cost of repairs, the generally followed rule is that the tenant must meet ordinary or day-to-day repairs out of income, while repairs to the structure are the responsibility of the capital. This makes perfectly good sense, given the nature of each successive beneficiary’s interest. Unfortunately, the authorities are by no means as clear, and the trustees could be faced with difficult problems in allocating responsibility for outgoings of this sort.

[19] In my opinion the words “maintenance and repairs” in Ms. Hawkins’ will are not materially different from the phrase “repairs and other upkeep expenses” considered in Re Waters and ought not to lead to a different interpretation. In the absence of a more detailed statement in her will of the repair duty of the life tenants, the language of the repair obligation as set out in Ms. Hawkins’ will should also be read in the context of the “general principle” or the “generally followed rule” referred to above. I conclude, therefore, that the language of the repair clause is not sufficiently explicit to constitute the special levy as a “repair” obligation which Ms. Craig is obliged to pay. It is an expense of a capital nature and an obligation of the estate.

[20] In my opinion, it would also be unfair to hold that, by the “luck of the draw”, the special levy assessed against owners for the substantial structural repair to the strata property should be borne solely by the present tenant, Ms. Craig. This conclusion is all the more compelling where the repair will create a substantial increase in the value of the property that will benefit the ultimate beneficiaries.

[21] This analysis gives rise to the following answers to the questions raised in the petition as summarized above:

1. The special levy assessments for the repairs to the building envelope and for the anticipated litigation expense do not constitute “maintenance costs and repairs” within the meaning of the will.

2. The levies are therefore to be borne by the estate.

3. While the estate does not have express authority to borrow funds, it is appropriate to authorize the executrix to borrow or raise money by way of mortgage to pay the levies assessed against the condominium as provided for under section 11 of the Trustee Act.

4. Provided the executrix is satisfied that the terms of the mortgage over the residential premises proposed by Ms. Craig are in the interests of the estate and are offered freely and with the benefit of legal advice by Ms. Craig, I conclude that the authorization made pursuant to s. 11 of the Trustee Act extends to the proposed mortgage.

[22] I accept the submission of counsel for the petitioner that the appropriate order relating to costs in this application is that the parties be entitled to recover their costs as special costs against the estate.

“Bryan F. Ralph, J.”
The Honourable Mr. Justice Bryan F. Ralph

 

EDITOR'S NOTE:

HERE'S A PHOTO OF 20 (NOT 15)

1925 INDIAN RIVER CRESCENT

http://www.dawnwilliamson.com/listings/1925indianriver/1.jpg