In Ontario, where the settlement of estate litigation may affect the interests of unborn and unascertained beneficiaries who may have a future, contingent, or unascertained interest in the estate, the settlement must be approved by the court under the Rules of Civil Procedure before it will be binding. Unfortunately, the extent to which an applicant must demonstrate that a settlement is beneficial to those beneficiaries in order to obtain the court’s approval is currently unclear.
The Application of Rule 10
Under the Rules, proceedings which affect unborn and unascertained beneficiaries are subject to rule 10. The court may appoint a representative “to represent any person or class of persons who are unborn or unascertained” pursuant to rule 10.01(1). When dealing with unborn estate beneficiaries, the Office of the Children’s Lawyer will typically assume representation of the class under rule 10: see, for example, The Bank of Nova Scotia Trust Company v. Rogers, 2021 ONSC 1747.
Settlements affecting unborn and unascertained persons are addressed in rule 10.01(3) – it provides that a judge may approve a settlement so long as they are “satisfied that the settlement will be for the benefit of the interested persons”. Rule 10.01(3) does not prescribe specific evidentiary requirements for obtaining approval of a settlement, nor does it explain what evidence is sufficient to demonstrate that a settlement is “for the benefit” of an unborn or unascertained person.
When Will a Settlement Be for the Benefit of Unborn or Unascertained Persons?
While rule 10.01(3) itself does not offer much insight as to when a settlement affecting an unborn or unascertained person can be approved, the Superior Court’s decisions in MacKinnon v. Ontario Municipal Employees Retirement Board, 2012 ONSC 4450 and Ironworkers Ontario Pension Fund v Research in Motion Ltd., 2007 CanLII 50277 provide some practical guidance. In both cases, the court approved the settlement of class proceedings under Rule 10, noting that the rule is “designed to encourage an expeditious means of resolving contentious issues”. Both cases also refer to a set of factors to consider when asked to approve a settlement of representative proceedings. Those factors include the likelihood of success; the evidence; the terms of the settlement; counsel’s recommendation and experience; and the anticipated cost and duration of the litigation.
The approach taken in these cases suggests that there ought to be a meaningful assessment of whether a proposed settlement will benefit a person or class of persons subject to rule 10. However, in the context of settling estate litigation that could affect unborn and unascertained beneficiaries, it is unclear whether the factors referenced in the above-noted cases ought to be utilized, or whether a different approach is merited. For example, it could be argued that analysis similar to that under rule 7.08, which applies when the court is asked to approve a settlement which affects minor beneficiaries, may also be appropriate.
To be clear, rule 7.08 does not apply when seeking court approval of a settlement that could impact an unborn or unascertained estate beneficiary, since such beneficiaries are not considered a party under disability. Rule 1.03 clearly indicates that the term “disability” refers to persons who are either a minor, mentally incapable, or an absentee.
The requirements articulated under rules 7.08 and 10.01(3) for obtaining the court’s approval of a settlement are also distinct. Whereas rule 10.01(3) does not prescribe any evidentiary requirements for obtaining court approval of a settlement, the evidentiary requirements articulated in rule 7.08(4) are robust. Affidavits from both the person’s litigation guardian and counsel are required, addressing the reasons for the proposed settlement and setting out each affiant’s respective position regarding the settlement.
A Judicial Perspective
In a recent unreported endorsement, Conquer et al. v Hill et al, Justice Myers was asked to approve a settlement which could impact the interests of estate beneficiaries who, as of the time of the settlement, were both unborn and unascertained. The endorsement provides some guidance regarding the extent to which a court must be satisfied that a proposed settlement benefits unborn and unascertained beneficiaries.
Justice Myers confirmed that he was “not necessarily required to assess the benefit of the deal to the unascertained or unborn in this case”. Nevertheless, he noted two important factors – the fact that the entire settlement could be consumed by encroachment by the current beneficiary, and that the beneficiary’s children, who would inherit if the beneficiary were to pass away, consented to the settlement.
Justice Myers ultimately declared the settlement binding on the unborn and unascertained heirs, even though the court had “no evidence concerning the adequacy of the quantum”, noting “a reflection of a fairly modest risk”.
Key Takeaways
Justice Myers’ decision seems to indicate that the court may not necessarily have to assess the benefit of a settlement to potential unascertained or unborn beneficiaries in order to declare that settlement binding under rule 10. However, given the lack of case law interpreting rule 10.01(3) in the context of wills and estates, addressing what would be necessary to satisfy the court that a proposed settlement “will be for the benefit of the interested persons”, the law at this time appears to be unsettled.
Until the courts provide more definitive guidance on the interpretation of rule 10.01(3), it would be prudent to file some evidence addressing both the fairness of a settlement and how it will benefit any unborn or unascertained beneficiaries when seeking approval of a settlement.
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