Claims Against an Estate – Part 2

On September 6, 2012, I posted an item about claims against an estate for unjust enrichment.  The post described circumstances under which a claim for unjust enrichment might still be available to someone who feels short changed by a deceased. 

The Ontario Court of Appeal has very recently issued a decision in the case of Mountain v. TD Canada Trust Company and others on a related topic.  In this case, a claim was made against an estate on the basis of an alleged contract between the Plaintiff and his deceased parents.  The Plaintiff claimed that the terms of the contract were breached by his late parents’ will and asked the court to order that he be given what he felt that he had been promised. 

This case provides a good illustration of the circumstances in which the terms of a contract, even if unwritten, can prevail over a will that is not consistent with it.

Jack and Helen Mountain owned a dairy farm in Caledon which had been in the Mountain family since 1830.  They had two children, Gary and Louanne.  Gary worked on the farm full time for 24 years.  Louanne was not involved in running the farming operation. 

Jack and Helen had identical wills, each leaving all of his/her estate to the other. 

Helen was diagnosed with Alzheimer’s disease in 1999.  She died 10 years later.  Jack died suddenly in late 2001. 

In 2004, three years after Jack’s death but while Helen was still alive, Gary sued Jack’s estate, Helen and Louanne for an Order declaring that he was beneficially entitled to the farm property and the farm business.  The basis of his lawsuit was what he claimed to have been an oral agreement with his parents that if he stayed on the farm and farmed with them, and the farming was his main occupation, he would receive the farm land and the farm business after his parents retired.

Louanne responded by denying her brother’s entitlement to the farm and asking for an Order requiring Gary to account to the estate for his use of the farm property and its business since Jack’s death.

Helen died in 2009.  The trial took place a few months later. 

At trial, the judge determined that Gary had not proven the alleged contract with his parents.  He also awarded costs to Louanne payable by Gary in the amount of $275,000. 

Gary appealed from that judgment. 

In this case, Gary was seeking specific performance, which is a court order requiring that parties to a contract complete the contract.  It is possible for a party to an oral contract with a deceased to obtain specific performance of that contract, but three hurdles have to be overcome:

  1. there has to be evidence of the terms of the contract with enough detail to permit the court to order its performance;
  2. the evidence has to be corroborated by some material evidence other than the evidence of the party seeking specific performance; and
  3. there must be evidence of acts by which the contract has been at least partially performed.  In other words, the claim of an oral contract has to be supported by evidence that a party to that contract did something that showed an intention to fulfill the contract.  The acts of part performance have to be sufficient to indicate the existence of an oral contract

The Court of Appeal made it clear that each of these tests is to be considered in the context or circumstances of each case.  The Court of Appeal decided that the trial judge had failed to take into account the fact that Gary and his father had operated this farm as partners, and that there was an abundance of evidence showing that they were viewed by everyone concerned as equals in their operation of the farm.  Gary’s work managing the farm allowed Jack to pursue his career as a cattle buyer which involved significant travel away from the farm.  Before his death, Jack transferred a very significant asset of the farm business to Gary.  Prior to her death, Helen signed a deed of land transferring a part of the farm with a house located on it to Gary and his wife for free.  All of these acts, according to the Court of Appeal, represented both part performance and evidence corroborative of Gary’s claim. 

Unfortunately, the Court of Appeal did not feel comfortable deciding the factual issues based on trial transcripts.  As a result, it set aside the trial judge’s Order but, rather than substituting its own decision, ordered a new trial on all issues.  The substantial costs award was set aside as well.

Wisely, the Court of Appeal pointed out that since a new trial would not be in the interests of either side, and as the case “cries out for a mediated, consensual resolution”, the court took the rare step of directing a mediation to be conducted before any new trial. 

Whether or not Gary and Louanne Mountain can settle their dispute at mediation remains to be seen.  In the meantime, this case provides a good illustration of the circumstances in which the terms of a contract, even if unwritten, can prevail over a will that is not consistent with it. 

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