Tag: fraudulent concealment

13 Jan

Court of Appeal Upholds Tolling of a Limitation Period due to Fraudulent Concealment

Natalia R. Angelini Ethical Issues, Executors and Trustees, RRSPs/Insurance Policies Tags: , , 0 Comments

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:

  1. In finding that a special relationship existed between the estate trustee and Ms. McKenny.
  2. 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:

  1. 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.
  2. 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.

Thanks for reading and have a great weekend!

Natalia Angelini

You may also be interested in the following blog-posts:

 

Fraudulent Concealment and Statutory Limitation Periods

 

Fraudulent Concealment

 

Limitation Periods and the Power of Fraudulent Concealment

 

 

01 Nov

Fraudulent Concealment and Statutory Limitation Periods

Umair Estate & Trust, Executors and Trustees, General Interest, Litigation Tags: , , , 0 Comments

Section 38 of the Ontario Trustee Act sets out a two-year limitation period from the date of death for actions by or against executors and administrators. However, as illustrated by a recent decision of the Ontario Superior Court of Justice, the equitable doctrine of fraudulent concealment can operate to toll this statutory limitation period.

Fraudulent concealment can affect estate limitation periods
“The equitable doctrine of fraudulent concealment can operate to toll this statutory limitation period”

In Roulston v McKenny, 2016 ONSC 2377, the Estate Trustee of the Deceased’s Estate brought an Application for the directions of the Court as to whether an action against the Estate was statute-barred. The Deceased died on March 20, 2013, and the claim against the Estate was not commenced until September 18, 2015.

The Deceased and his former wife (the “Respondent”) had entered into a separation agreement that required the Deceased to maintain $150,000.00 in life insurance, with the Respondent as the designated beneficiary.

Shortly after the Deceased’s death in March 2013, the Estate Trustee discovered that the Deceased’s life insurance policies had lapsed due to non-payment. However, the Court found that the Estate Trustee initially suggested that the insurance had not lapsed, and then delayed bringing an application for the advice and direction of the Court on the issue until more than two years after the Deceased’s death. The Estate Trustee’s counsel did not advise the Respondent’s counsel of the lapse until September 2013.

In September 2015, less than two years after the Respondent was first advised that the insurance policies may have lapsed, the Respondent sued the Estate to recover the $150,000.00 debt under the separation agreement.

The Respondent argued that the doctrine of fraudulent concealment should apply to toll the limitation period. As set out in the Court of Appeal’s decision in Giroux Estate v Trillium Health Centre, the doctrine of fraudulent concealment operates to forbid a party in a special relationship with a party from using a limitation period for a fraudulent purpose.

In Giroux Estate, the Court of Appeal set out the three criteria to be met for the doctrine to be applied:

  • the parties must be engaged in a relationship of a special nature;
  • due to the special nature of the relationship, the defendant’s conduct is unconscionable; and
  • the defendant conceals the plaintiff’s right of action.

In the present case, given that the insurer would only release information about the Deceased’s insurance policies to the Estate Trustee and the Estate Trustee had “exclusive possession” of the information, the Court concluded that the parties were in a special relationship. The Court also concluded that the Estate Trustee’s conduct was unconscionable, given the special relationship between the parties.

Finally, the Court held that the Estate Trustee’s failure to advise the Respondent of the lapse of the policies had the effect of concealing that the Respondent had a claim against the Estate.

In the result, the Court found that the doctrine of fraudulent concealment applied to toll the limitation period until September 2013, and the Respondent’s claim was thus not statute-barred.

Thank you for reading,

Umair Abdul Qadir

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