Upon the death of a testator, one of the tasks of the estate trustee is to ascertain what contracts the testator was party to during his or her lifetime.

A recent decision of the Court of Appeal of Ontario reaffirms the importance of ensuring that contractual rights that devolve to the testator’s estate are properly and effectively exercised.

The Facts

In Bennett v Bennett Estate, 2018 ONCA 45, four brothers divided a parcel of land into separate properties. The properties were encumbered with a right of first refusal in the event of a sale.

The agreement between the brothers granted a right of first refusal to the “other parties” to the agreement, with the right to be exercised within twenty-one business days of receiving written notice. The agreement also permitted the parties to transfer their share of the land to a “family member” without observing this requirement.

One of the brothers, Donald, died in 2006 and was survived by his wife, Darlene. When Darlene received notice of a proposed sale of one of the properties to Miron Topsoil Ltd. (“Miron”), she provided notice that she was exercising the right to purchase the property.

Neither sale closed, and Darlene brought a motion for summary judgment seeking an order granting her the right to purchase the property. Miron brought a cross-motion on the basis that Darlene was not entitled to exercise the right of first refusal.

At first instance, the motion judge concluded that Darlene did not have the right of first refusal. Although the parties agreed that Donald’s Estate had a right of first refusal, Darlene had brought her claim based on her status as Donald’s family member rather than on behalf of Donald’s Estate. Summary judgment was granted in Miron’s favour.

The Appeal

On appeal, Darlene asserted that she exercised the right of first refusal on behalf of the Estate. Her authority and ability to act on behalf of the Estate was not established on the evidence before the lower court. Notwithstanding this fact, Darlene argued that her inclusion amongst the parties with a right of first refusal who received notice of Miron’s offer established her right.

Miron asserted that Darlene’s entitlement to exercise the right was put in issue before the lower court, and that there was no evidentiary basis for her authority as Estate Trustee. Miron also noted that Darlene had refused to provide proof that she was acting in the capacity as the Estate Trustee of Donald’s Estate.

Writing on behalf of a unanimous Court, Justice Huscroft noted that Darlene had been provided with numerous opportunities to tender evidence of her right to act on behalf of the Estate. Instead, she asserted her claim on the basis that she was a “family member.”

The Court of Appeal concluded that the mere extension of the offer to Darlene did not establish her legal entitlement to act on behalf of the Estate, and held that the motion judge did not err in determining her entitlement on the basis that she was a “family member.” In the result, Darlene’s appeal was dismissed.

Key Takeaways for Estate Trustees

For estate trustees, the Court of Appeal’s decision in Bennett reiterates the importance of carefully reviewing contracts entered into by the testator to understand the rights conferred upon the estate.

The decision is also a reminder that estate trustees may be required to provide some proof of their authority, such as a copy of the Last Will and Testament or probate, when exercising contractual rights on behalf of the estate.

Thank you for reading,

Umair Abdul Qadir