Once an estate trustee is appointed, one of the many tasks which falls on their shoulders is determining the extent of the deceased’s estate. If the deceased disposed of their property using inter vivos transfers under questionable circumstances, it may be appropriate for the estate trustee to commence litigation to recover the funds transferred. However, before starting an action, important questions to ask include which limitation period (or periods) will apply, and whether the claim is out of time.

A number of different limitation periods could apply to the recovery of inter vivos transfers. For example, many inter vivos transfers will be subject to the Limitations Act, 2002, SO 2002, c 24, Sch B, which has both a standard two-year limitation period, plus an ultimate 15-year limitation period. For inter vivos transfers involving real property, however, the ten-year limitation period in the Real Property Limitations Act, RSO 1990, c L.15 (the RPLA) may apply.

Besides determining which limitation period applies, it is also important to ask whether the limitation period commenced when the deceased was still alive. Since alimitation period will begin to run when a party knows or ought to have known they have a claim, a claim premised on an inter vivos transfer may be statute-barred if the deceased understood prior to their death that they had a proprietary or equitable right in the transferred property.

The limitation periods applicable to inter vivos transfersand when they will begin to run was recently explored in The Estate of William Robert Waters v. Gillian Henry et al., 2024 ONSC 4190, a case that our managing partner, Suzana Popovic-Montag, blogged about last week: see Equity Conquers All: Estate of husband and Paramour Ordered to Repay Money Wrongfully Taken From Wife via Power of Attorney. In this case, the deceased’s estate commenced litigation against the deceased’s former intimate partner, a personal support worker named Gillian.Over a 10-year period, the deceased had given a fortune of $30 million to Gillian, plus at least $2.85 million from his wife’s accounts, and the estate sought the return of those funds. Given that the transfers stopped in December of 2019, more than two years before the estate commenced its claim against Gillian, the application of limitation periods was a hotly contested issue. 

In light of the deceased’s knowledge, the court found that the estate was out of time to recover a number of the transfers. The evidence established that the deceased was personally aware of all of the money that he had transferred to Gillian over the years, and that he was alsoaware of the concept of resulting trust, having referred to it in a prior will. When the deceased was still alive, a number of lawyers had also recommended that he demand the return of his property from Gillian. Given these cirumstances, the estate could not pursue any monetary transfers subject to the two-year limitation period under the Limitations Act, 2002. If the deceased had not intended those advancements to be gifts, Justice Callaghan recognized that the deceased “had all the knowledge required to start this action in his lifetime.”

However, a number of transfers that were subject to the RPLA were not statute-barred. Of the $30 million that Gillian had received from the deceased, she used $12 million to purchase real property. Those transfers were subject to the 10-year limitation period in section 4 of the RPLA, since the RPLA applies to “money to be laid out in the purchase of land”.  Justice Callaghan also noted that the courts have applied section 4 of the RPLA to claims for the recovery of land (see McConnell v. Huxtable, 2014 ONCA 86) and when money “stands in the stead of land” (see Bank of Montreal v. Iskendorov, 2023 ONCA 528).

In addition to the money transferred to purchase real property Justice Callaghan also found that money which the deceased had advanced to Gillian to renovate buildings was subject to the 10-year limitation period in the RPLA.

The limitation periods under the RPLA also began to run while the deceased was still alive, as the deceased was aware that Gillian used the money to purchase property.The estate’s argument that the 10-year limitation period did not begin to run until after the estate demanded the return of the property, after the deceased had passed away, was not accepted by the court. Justice Callaghan confirmed that the limitation period did not begin anew simply because of the death of the deceased. Accordingly, the estate could not pursue claims for property bought more than a decade before the estate commenced its claim, with the exception of a property which the deceased paid to have renovated within 10 years of his death.   

At the end of the day, of the $12 million that the deceased transferred to Gillian for property purchases, the estate was only able to recover an 80% interest in a horse stable that Gillian purchased and renovated with the deceased’s money and also operated as a business. Gillian was able to keep the bulk of the money that the deceased had given to her since the court found that most of the funds transferred were intended to be gifts.

Thank you for reading, and have a great day! 

Ian.