The recent decision of Fletcher’s Fields Limited v Estate of Samuel Harrison Ball, 2018 ONSC 2433 considered whether an appointment of trust funds for a particular purpose created an interest in land.
Fletcher’s Fields is a not-for-profit Ontario corporation which owns land that is predominantly used as a sports facility for rugby football union (the “Land”). Mr. Jenkins was the trustee of the estate of Samuel Harrison Ball. He was also a lawyer, and over the years had been actively involved with Fletcher’s Fields, as General Counsel, and as a member of the board of directors. In Jenkins’ role as trustee of Mr. Ball’s estate, he had the power to appoint money forming part of the estate as he saw fit.
In 1994, Jenkins exercised his power to provide Fletcher’s Fields with $100,000.00 pursuant to a “Deed of Appointment”. The Deed of Appointment provided that (a) the money must be used solely for the purpose of improving the sports facility on the Land; (b) the trustee had the right to revoke any or all of the money if the Land was not kept in good condition suitable for playing the sport; and (c) if revoked, Fletcher’s Fields was required to transfer the fund to the trustee, with interest.
In 2015, a new board of directors for Fletcher’s Fields was elected, which did not include Jenkins. It seems that Jenkins may not have been pleased with this development. The following year, Fletcher’s Fields discovered that a notice had been registered on title to the Land by Jenkins, under s. 71 of the Land Titles Act, R.S.O. 1990, c. L.5. It appears that the notice had been registered after Jenkins had ceased to be a member of the board.
Fletcher’s Fields took the position that the funds provided pursuant to the Deed of Appointment were a gift or, alternatively, trust funds. Jenkins took the position that the Deed of Appointment was not a trust, but rather that it was a loan that was to be repaid if certain conditions crystallized. He characterized it as an equitable mortgage.
The Court noted that the terms of the Deed of Appointment were key to determining whether or not an interest in land had been created. There was no indication of an express intent to create an interest in the Land, or provide that failure to repay the funds would result in a charge over the Land. Without such an express intent, the notice should not remain on title to the land. The Court also held that the parties’ conduct supported the position that there was never any intention to create an interest in the Land.
The Court ordered that the notice that had been registered by Jenkins on title to the Land be removed. The result of this case seems correct, as one would expect that an interest in land should not be created unilaterally and without notice. There are significant differences between types of financial arrangements such as loans, mortgages, gifts, and appointments of trust funds. It is reassuring that the Court in this situation upheld the integrity of the parties’ intentions in crafting their financial arrangement and did not impose a charge-type interest in the Land where none existed.
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An Ontario Court of Appeal decision released yesterday provides clarity regarding the situations in which beneficiaries of legacies will be entitled to interest on the sum payable to them under a Last Will and Testament.
In Rivard v Morris, the testator had held farmland of significant value. A prior Will left a farm of comparable value to each of his daughters (as the testator had previously gifted a farm property to his son), and divided the residue of the estate equally between the three children. In the months preceding his death, however, the deceased amended his estate plan to provide for a greater benefit to his son, leaving him the residue of his estate (inclusive of the farm properties) after distributions to each daughter in the amount of $530,000.00.
After the testator died, the daughters challenged his Last Will on the basis of alleged undue influence. The will challenge was unsuccessful. The daughters subsequently commenced another proceeding after their brother (the sole remaining estate trustee after their previous resignations) refused to pay to the sisters interest with respect to the legacies of $530,000.00. They argued that they were entitled to interest commencing one year after the date of their father’s death, notwithstanding that the payment had been delayed in part because of the will challenge initiated by the daughters. Any interest would have been payable out of the assets to which their brother was otherwise entitled as sole residuary beneficiary of the estate.
The daughters were unsuccessful at the hearing of their application and appealed. The Court of Appeal found in their favour. Justice Paciocco ordered the payment to each daughter interest in the amount of $53,000.00 out of the residue of the estate. In doing so, Justice Paciocco relied upon the “executor’s year” and the “rule of convenience”. In describing the rule of convenience, Justice Paciocco stated as follows (at paragraphs 24, 25):
The “rule of convenience” can be easily explained, in my view. One of the maxims of equity is that it presumes as being done that which ought to be done. Since the beneficiaries should be enjoying the earning power of their legacies by at least the anniversary date of the testator’s death, where that enjoyment is postponed and the testator has not provided an alternative date for payment of the legacy, interest is to be paid…This general rule has been adopted in Ontario.
The rule of convenience was considered by the Court of Appeal to promote certainty and predictability, and the lower court’s decision to deny the daughters’ interest on the basis that they had commenced litigation against the estate was said to be contrary to principle, as this would have the impact of discouraging “even meritorious litigation”. While the Court of Appeal did neither confirmed nor denied whether judges are able to exercise discretion to deny interest to beneficiaries of legacies, it found that it had been inappropriate for the application judge to do so in this case.
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Recently, I was looking over some of the leading cases in life estates. One of the questions that stood out in my mind was whether or not a life estate has a quantifiable value.
Aho v. Kelly, was heard in British Columbia in 1998, but remains a leading Canadian case that is often referred to when the valuation of life estates are being considered.
In Aho v. Kelly the wife and two children of the deceased were each left a 1/3 interest in the matrimonial home of the deceased. The court confirmed that the wife of the Deceased also held a life interest in the same matrimonial home, as per the jurisprudence in British Columbia. The wife commenced an application seeking a court order that the property be sold and the proceeds be unequally divided amongst the three owners of the property.
The wife argued that the proceeds should be unequally divided because she was entitled to further compensation as she had to be paid out for her life interest.
The Court held that a life estate is a property interest that has “some value”. The Honourable Justice Bauman stated that at common law a life estate is alienable, and that upon its transfer to another party it becomes an “estate pur autre vie” (that other life being the original life tenant). The Court concluded that the life interest has a value capable of capitalization, and that this value should be paid out of the proceeds from the sale of the house.
Aho v. Kelly is not binding in Ontario, however it goes a very far way in establishing the framework by which the value of the life interest can be calculated.
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Rick Bickhram – Click here for more information on Rick Bickhram.
As I am sipping on my coffee this morning, I am thinking to myself, who can commence a will challenge?
A will challenge can be commenced pursuant to 75.06(1) of the Rules of Civil Procedure. Rule 75.06(1) is a procedural remedy that permits any person who appears to have a financial interest in an estate to apply for directions or move for directions in another proceeding. This begs the question, who is considered to have a financial interest in an estate? This issue was addressed in the Ontario Superior Court (Divisional Court) decision of Smith v. Vance.
In Smith, the Deceased died on October 27, 1995, leaving a will dated January 5, 1994 which named the applicants as the estate trustees. A notice of objection was filed by three individuals who were cousins of the deceased through marriage. The objection was subsequently struck by the Honourable Justice Perras during the motion for directions on the grounds that the objectors did not have a financial interest in the subject-Estate. In this hearing, the objectors appealed this decision.
The objectors asserted their financial interest in the Estate based on their close relationship with and their physical and financial assistance for the deceased. There was also an earlier destroyed will in which the objectors were named beneficiaries. Finally a letter was allegedly written by the deceased wherein she acknowledged that the objector will have an interest in her estate.
The court acknowledged that a financial interest is not defined in the Rules of Civil Procedure. In such cases, words should be taken by its natural meaning. Black’s legal dictionary defines financial interest as an interest equated with money or its equivalent. The court held that claimants must do more than simply assert an interest. They must present sufficient evidence of a genuine interest and meet a threshold test to justify inclusion as a party. The interest need not be conclusive evidence at that stage but must be evidence capable of supporting an inference that the claim is one that should be heard.
If the evidence offered by an objector is capable of supporting an inference that the claim raises a genuine issue, and thus is one that should be heard, the objector is entitled to standing and should be granted permission to be added as a party. The appeal was allowed and the order by the Honourable Justice Perras was set aside.
I hope you had fun reading today’s blog. Until tomorrow,
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