Court of Appeal Upholds Tolling of a Limitation Period due to Fraudulent Concealment
The first instance decision in Roulston v McKenny was recently upheld on appeal. In this case, the deceased, Mr. Penner, and his ex-wife, Ms. McKenny, entered into a separation agreement requiring Mr. Penner to maintain $150,000.00 in life insurance, with Ms. McKenny as the designated beneficiary. Mr. Penner failed to pay the premiums on the life insurance policy, which lapsed prior to his death.
Mr. Penner died in March 2013. Shortly thereafter, the estate trustee (the deceased’s sister, also a beneficiary of the estate) discovered that Mr. Penner’s life insurance policy had lapsed. However, her lawyer did not advise Ms. McKenny’s lawyer until September 2013.
Ms. McKenny commenced her claim against the estate in September 2015, before the two-year expiration after learning of the lapse, but after the expiration of the two-year limitation period from the date of death. The estate trustee sought the court’s directions as to whether the claim was statute-barred.
The application judge held that Ms. McKenny’s claim was not statute-barred, applying the doctrine of fraudulent concealment to toll the limitation period. On appeal, the appellant submitted that the judge made the following errors:
- In finding that a special relationship existed between the estate trustee and Ms. McKenny.
- In finding that the conduct of the estate trustee was unconscionable, such as to attract the operation of the doctrine of fraudulent concealment.
The Court of Appeal for Ontario denied the appeal, reasoning that:
- The special relationship between the estate trustee and Ms. McKenny did exist, arising from a combination of: (i) duties owed at law by an estate trustee to creditors; and (ii) the estate trustee’s exclusive control over information – the insurer would only release information to her.
- By withholding material facts, the estate trustee concealed from Ms. McKenny that she was a legitimate creditor of the estate. It was unconscionable for the estate trustee to initially suggest that insurance was in place, then delay matters and then later take the position (that would benefit the estate trustee as a beneficiary) that the limitation period had expired.
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