A recent decision of the Alberta Court of Queen’s Bench highlights the importance of carefully reviewing settlement agreements prior to their execution.
In Anderson Estate (Re), 2020 ABQB 428, the Alberta Court of Queen’s Bench revisited a settlement that had been negotiated during a judicial mediation.
Mr. Anderson had left a Last Will and Testament executed roughly one month prior to his death that directed that the residue of his estate be distributed to his three children, who were the parties to the litigation. The Will addressed certain advances made to his children during his lifetime, the disposition of real property, and declared the testator’s intent that the parties be treated equally.
One son, who later brought the motion with respect to the interpretation of the agreement, had previously disclaimed real property gifted to him under the Will because the value assigned to the property in the Will itself was significantly higher than the appraised value of the property (with a discrepancy of $2 million), such that he would take a correspondingly lower distribution from the residue of the estate to reflect his acceptance of the gifted property. The judicial mediation process had been initiated with the intention of resolving interpretation issues in respect of the Will arising from the son’s disclaimer of the property. The terms of the Will and the settlement agreement were not straightforward, but the settlement provided in part that the son would receive at a value of $4 million a different property than that bequeathed to him under the Will that he had disclaimed.
Pursuant to the terms of the settlement agreement, the matter returned to the case management judge for the determination of its proper interpretation. The son sought an interpretation of the agreement that provided that he had substituted his receipt of one property for the other at a notional cost corresponding to advances tied to the first property.
Justice Jones reviewed the law in general relating to ambiguities appearing in contracts, such as the settlement agreement that the parties had executed (at paragraphs 35 through 40, briefly summarized below):
- true legal ambiguity arises where a phrase is reasonably susceptible on its face to more than one meaning;
- courts can consider surrounding circumstances that include everything that affected the language of the document from the perspective of a reasonable person;
- extrinsic evidence, however, is intended to serve “as an objective interpretative aid to determine the meaning of the words the parties used”, with limitations set out by the Alberta Court of Appeal in Hole v Hole, 2016 ABCA 34;
- the goal of the courts is to give effect to the objective intentions of the parties, rather than to “second-guess the contract”;
- even in the absence of ambiguity, a judge is to consider relevant surrounding circumstances in interpreting the contract.
The judge found that the settlement agreement was not susceptible to more than one meaning, stating as follows (at para 84):
A retrospective determination that one entered into an agreement on terms less commercially favourable that one now thinks should have prevailed does not evidence ambiguity.
This decision may serve as a reminder to take care in ensuring that the meaning of a settlement agreement is properly understood by all parties and clearly set out without room for ambiguity. Remaining silent on certain points that should properly be addressed during the dispute resolution process may limit the rights of the parties to pursue them, even where the settlement agreement will otherwise lead to the distribution of an estate that may be perceived as unfair.
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April 21, 2017 marked one year since the death of the beloved recording artist, Prince. We have previously blogged about the legal issues surrounding Prince’s Estate that have emerged since his death. Although more than a year has now passed, the Estate continues to be engaged in litigation.
According to media reports, producer George Ian Boxill tried to release an EP containing previously unreleased songs by Prince to coincide with the first anniversary of his death. Boxill asserted that he had the right to release the music. In a lawsuit commenced by Paisley Park Enterprises, Prince’s Estate disagreed and alleged that Boxill was in breach of the recording agreement that he had signed with Prince.
The Estate was initially successful in blocking Boxill’s attempts to release the EP of new music. However, according to a new report in TMZ, Boxill has now filed additional legal documents that state that the unreleased music was not the subject of a nondisclosure agreement.
Separately, as we have previously blogged, Prince died without a Will and any known children, resulting in claims from a number of possible heirs.
According to a recent news report, the Minnesota judge presiding over the proceedings had indicated that he would not make a declaration regarding the heirs of Prince’s Estate until appeals by other potential heirs whose claims had been rejected were allowed to run their course. Lawyers for Prince’s sister and half-siblings have now argued that this delay will unnecessarily increase costs and hinder the proper administration of the Estate.
We have previously blogged about the importance of carefully addressing issues regarding intellectual property and any possible rights the estate may have after the testator’s death in a testator’s estate plan. Deceased writers, musicians and other artists may be parties to agreements that bind their estates and affect the rights and control over their intellectual property.
It is generally advisable for drafting solicitors to ensure that such legal documents are reviewed as part of a creative professional’s estate planning. It may also be prudent to obtain the advice of a lawyer who specializes in intellectual property law, to ensure that the estate plan adequately addresses any possible rights the estate may have after the testator’s death. Disputes over the beneficial ownership and control of a testator’s intellectual property can result in protracted and expensive litigation.
The legal issues surrounding Prince’s Estate reiterate the importance of careful estate planning while the testator is still alive. Lack of certainty regarding the beneficiaries of the estate, the deceased’s intentions and the property/rights of the estate can significantly increase the risk that the estate will become embroiled in protracted litigation.
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An estate trustee may be bound to a contract previously entered into by the deceased. This duty is distinct from the duty of an estate trustee to discharge all debts of the deceased.
There are four main elements of a contract:
- Intention (consensus ad idem/meeting of the minds)
Prior to the formation of a contract, it is possible for an offer to be revoked by death, if the contract has not been accepted by the surviving party. If performance of a contract has already been initiated by the surviving party, the contract may not be able to be revoked. This is due to the fact that part-performance of a contract may validate a contract. The doctrine of part-performance has been upheld in cases such as Lensen v. Lensen, 1984 CanLII 2424 (Sask CA), and Thompson v Guaranty Trust Co.,  S.C.R. 1023.
In general, contracts often will have a clause stating that the terms are binding on the estate of a contracting party. Therefore, if a contract is found to be valid, the estate of a deceased may be bound by a contract entered into by the deceased. It is important to note that a contract need not be formally executed and signed in order to be considered enforceable by the court.
In Bayer Estate v. Blue Button Club, 2007 BCSC 517, the British Columbia Superior Court upheld a contract on the death of a party. In this case, the deceased, Bernard Bayer, and his employer, Blue Button Club, entered into an employment agreement for 10 years, with an annual base salary of $60,000.00 plus benefits. The contract provided that, upon the death of Bayer, the Club would pay into deceased’s estate an amount equal to the salary and benefits that the deceased would have earned. The amount paid into the estate was to be based on how much time was left in the employment contract. The contract also had a provision naming the Club as a beneficiary of the deceased’s insurance policy, so long as the Club was to maintain insurance on the life of Bernard. Upon the death of Bayer, the Club tried to submit that the employment contract was not enforceable. The Court rejected the Club’s submissions and upheld the contract, requiring the Club to pay the deceased’s salary into his estate.
Aside from part-performance of a contract or having a formally executed contract, it is possible to enter into a verbal contract prior to the formal contract being executed. Where a tentative agreement is reached from oral negotiations, the intentions of the parties are the key factor in determining if a contract is in existence. In attempting to enforce a contract in which one of the parties is deceased, the Court will look to the intention of the deceased in order to determine whether or not they intended for a contract to be formed.
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