December 2008 Exam - Discussion
Question 2 (a) Issues – Rocky Racoon’s will contains contradictory elements – an apparent fee simple interest to Martha Mydear and a gift over to his children. The gift over is impossible unless the gift to Martha was of a life estate. Which gift is to be favoured? Rule – The Wills Act s. 24 indicates that unless a contrary intention appears in the will, if real property is devised without words of limitation, the devise transfers the fee simple or whole of the estate. Where the terms of the will are unclear or contain contradictory signals – the grant of an interest to one party and then to another party – the courts turn to the intention of the testator to resolve the ambiguity. That intention is to be found in the specific clauses, the will as a whole, or in the surrounding circumstances (Christensen v. Martini Estates). The courts have also indicated that they will consider three principal options when determining the testator’s intentions: 1. fee simple to first named beneficiary 2. life estate to first named beneficiary with remainder to second named. 3. life estate to first named beneficiary with power to encroach, remainder to second named. In Walker the Ontario Court of Appeal canvassed these options before holding that the first named beneficiary held a fee simple interest on the basis that this best reflected the testator’s intention. In Re Taylor the court held that the first named beneficiary held a life estate with the power to encroach. According to the court, there was clear language in the will that the testator intended to benefit both the first and second named beneficiaries. It differentiated Walker on the grounds that the first clause of the will in Re Taylor included language – “to have and to hold during her lifetime” – that seemed to indicate the first grant was only of a life estate. The life estate included power to encroach for the purposes of the beneficiary’s maintenance and support. A life estate includes the right to income from the property, but not a right to the capital.
Application – Rocky’s will contains contradictory elements. The initial language suggests that he intended that Martha receive his entire estate. Moreover, there is no language in the initial grant to Martha that qualifies or limits it. Following Re Walker, this might suggest that Martha held a fee simple, although in Re Walker the language of “should any portion of my estate still remain” appeared to qualify the gift over in a manner that is not apparent in Rocky’s will. There is also clear evidence in the will of an intention to benefit the children, including a direction to raise the family and a suggestion that Martha’s claim to “everything” will end when the last child turns 21. Moreover, the final sentence indicates that every child is to get his or her share when Martha dies. The court in Re Taylor suggested that where there is a clear intention to benefit both parties the courts should give effect to that intention. If Martha holds a life estate, does she hold the power to encroach? Following Christensen, the larger context is relevant. In this case, the store and restaurant provided the sole means of support for the family. In his statement directing Martha to “raise (their) family” Rocky appears to be intending to provide Martha with the means to do so, at least until the children have all turned 21. The raising of the family seems of paramount intention, and therefore if Martha holds a life estate, she also holds the power to encroach, but this power is limited by the statement that “everything is to belong to my wife until the last child is 21 years old.” At that point the power to encroach would appear to end and Martha would hold a life estate. Conclusion – The unqualified language of the first grant presents a significant hurdle to the gift over to the children, but the testator exhibits a strong intention in following clauses (stronger than the evidence of intention in Re Walker) to make a gift over. In this case, therefore, it seems that the best interpretation is that Martha holds a life estate, with the remainder to their children. That life estate comes with the power to encroach to support herself and her family until the last child turns 21, at which point she only holds a life estate. The children hold the remainder interest in fee simple. As a result, Martha is entitled to the income from the property during her lifetime, but not the capital and the children could prevent her from diminishing the capital. However, I would caution the children that this outcome is far from certain and, given that Martha holds the fee simple, the onus would be on them to disrupt what appears to have been the accepted state of affairs, with Martha holding the fee simple interest, since their father died.
Question 2(b) Issue – Is the freezer a fixture, and therefore part of the property included in the devise of real property, or is it chattel. If a chattel, then it would fall under the clause of the will stipulating that “Everything will belong to my wife until the last child is 21 years old” where it is more clear that Martha only holds a life estate than if it were to fall under the clause devising real property.
Rule – The BCCA in La Salle Recreations outline a two-part test in determining whether something is a fixture or chattel: 1. degree of annexation – If the object is attached to the property, the courts presume that the object is a fixture. The greater the degree of attachment, the greater the presumption. 2. object of annexation – The presumption may be rebutted if the purpose of the attachment is to enhance the land (and therefore a fixture), or for the better use of the chattel as chattel (and therefore chattel). The test is one of objective intention: would a third party looking at the building understand the item as part of the building or a chattel? On the basis of this two-part test, the court concluded that carpets in a hotel were fixtures. They were essential to the use of the building as a hotel and therefore had been installed for the better use of the building. However, even with this two-part test, the cases seem to revolve around the particular facts. In Re Davis the court held that bowling alleys, which were attached to a building with bolts and clips, were chattel. They were attached for the better use of the alleys, not the building. In the case of tenants, a tenant may remove items that might otherwise be considered fixtures if they do so in a timely manner and if removing the items can occur without damage to the property. Application – The freezer is attached to the building with bolts on the walls and ceiling. This gives rise to a presumption that the freezer is a fixture. Given that the bolts could be removed in a few short minutes, it appears that the attachment is relatively slight and therefore that the presumption is relatively weak. One might consider the difficulty in removing the freezer from the building as increasing the degree of attachment and therefore strengthening the presumption. However, because the difficulty in removing the freezer does not relate to its physical attachment to the building, this issue is better dealt with as part of the object of annexation. The presumption that the freezer is a fixture may be rebutted if the object of its attachment was for the better use of the freezer, not the better use of the building. Here the question becomes whether the building is characterized as just a building or as a convenience store and café. If just a building, then the stronger argument is that the freezer was attached for the better use of the freezer and the building simply provided the space within which the freezer could operate. If characterized as a convenience store and café, then the freezer becomes an integral part of the building, just as the carpets were considered an integral part of the hotel in LaSalle.
The fact that a door would have to be removed and the opening enlarged, suggests that the owners installed the freezer as an integral part of the building. A third party viewing the building would come to the same conclusion. Although this case does not involve a tenant, the rule limiting the tenant’s capacity to remove an item if the removal would cause damage to the property, seems to provide some guidance here. In this case, the freezer can only be removed by enlarging an opening – by causing some damage to the existing structure. The building, therefore, has been modified for the particular purpose of its use as a convenience store and café. Conclusion –The freezer was installed for the better use of the building as a convenience store and café, just as the carpets were installed for the better use of the building as a hotel in LaSalle. Applying a standard of objective intention, the freezer is a fixture and part of the devise of real property in the will.