The British Columbia Law Institute (“BCLI”) is currently undertaking an examination of judge-made laws that are used in legal cases to determine whether a person has the mental capacity to enter into certain relationships or carry out certain transactions. Principles or tests set out by judges in deciding the cases before them are known as the “common law.” The common law can be contrasted with statute laws, which are written laws that are enacted by the various levels of government. This examination by the BCLI is highly relevant to lawyers who practice in the area of estate litigation and to individuals who have an estate dispute that involve transactions such as the making of a will or gifts made during the lifetime of a now deceased person where the mental capacity of that person at the time of making the will or granting the gift is in issue.
So what is the BCLI? The BCLI performs legal research, analysis and writing to promote law reform so that the laws adapt to and meet modern social needs. It does so in collaboration with the provincial government and other knowledgeable persons. For example, the BCLI’s examination of common law tests of mental capacity is being performed with the assistance of a Project Committee that includes members from private law firms, the provincial Ministry of Justice, the Office of the Public Guardian and Trustee of B.C., the Alzheimer Society of B.C. and Community Living B.C.
In late February, 2013 the BCLI published a Consultation Paper on the Common Law Tests of Capacity. The Consultation Paper considers whether any legislative reforms should be made in respect to the various common law tests governing mental capacity and sets out tentative recommendations for reform in some areas. The BCLI has invited comments on its tentative recommendations for the Project Committee’s consideration before its Final Report is issued in September, 2013.
Mental capacity is a concept used in law to describe whether a person has the required level of awareness and understanding to make a decision, enter into a transaction or enter into a relationship with another person. There are two important aspects of mental capacity that must be understood at the outset. The first is that a mental disability, illness or impairment does not, in and of itself, make a person incapable at law. As explained in the BCLI’s Consultation Paper, it is a matter of degree:
“The law’s focus is on the degree of mental disability, illness or impairment. If a person’s mental disability, illness or impairment exceeds in degree a legal threshold, then that person will be considered incapable in the eyes of the law. This legal threshold is commonly called a test of capacity.”
The second important thing that must be understood is that there is no single, universal test for mental capacity. Rather, the common law has developed different tests of capacity to be able to legally enter into different types of transactions or relationships. Thus, for example the common law test for whether a person has the mental capacity to make a valid will is different than the test for capacity required for that person to enter into a commercial contract, which is different again from the test for that person’s ability to get married.
The BCLI’s Project Committee considered and has made tentative recommendations in respect of nine common-law tests of mental capacity, namely the tests of capacity to:
- make a will;
- make an inter vivos (during lifetime) gift;
- make a beneficiary designation (such as in a life insurance policy, RRSP or a RRIF);
- nominate a committee (nominate a person to manage your affairs or person under the Patients Property Act);
- enter into a contract;
- retain legal counsel;
- get married;
- form the intention to live separate and apart from a spouse; and
- enter into an unmarried spousal relationship.
All nine of these tests are relevant in varying degrees to estate disputes. Any will made at a time when the will-maker lacks the mental capacity to make a will is invalid. A gift made during the lifetime of a person who has passed away, for example, of an expensive piece of jewellery, when the gift-maker lacked capacity to make that gift renders the gift invalid and that piece of jewellery will form part of the deceased’s estate. In a similar fashion, an invalid beneficiary designation on a life insurance policy will result in the policy proceeds forming part of the deceased’s estate. The ability to marry, to enter into a marriage-like relationship and the ability to decide to live separate and apart from a spouse, including a common law spouse, all have significance in relation to the validity of a will, gifts made under a will and Wills Variation Act claims.
It is beyond the scope of this paper to discuss the various tentative recommendations made by the BCLI Project Committee in its Consultation Paper. Of note, however, is that one of the recommendations is that there be legislation that would allow the Supreme Court of British Columbia, on application, to order that a will be made for a person who lacks the mental capacity to make a will. Any such legislation would mark a significant change to the current law that only an individual can make a will in respect of his or her estate.
Estate litigation lawyers and other interested persons will view with great interest the BCLI’s Final Report on common law tests of capacity and in particular, its recommendations for legislative change in respect of some or all of the tests. In the meantime, if you would like to read more about this BCLI Project, you can go to its website www.bcli.org .