Michael Ford (post until Oct. 31/18)
Estates & Wills & Trusts

OCA enforces rule of convenience

Estate trustees should address interest on delayed legacies in settlements with will challengers after a recent decision enforcing the common law “rule of convenience," says Toronto-area estates litigator and mediator Charles B. Ticker.

In its decision, a unanimous panel of the Ontario Court of Appeal ruled that two sisters were entitled to more than $100,000 in interest on legacies paid three years after their father died, even though it was their will challenge that caused the delayed payment.

“Going forward, estate trustees should make sure that the issue of interest is addressed in the settlement when a dispute results in a delay in payment of more than a year,” Ticker tells AdvocateDaily.com

“Typically, minutes of the settlement would say that the amount is inclusive of pre-judgment interest, but maybe they will have to go further and say it’s inclusive of any type of interest payable by statute or common law,” he says.

“If the challenge has any merit, Ontario law now dictates that the challenger’s legacy will attract interest after a year. Even if the challenge is frivolous, this decision doesn’t close the door on the entitlement to interest,” adds Ticker, who practises estates litigation and mediation at Charles B. Ticker Law Office.

The appeal court case dates back to the 2013 death of a farmer whose final will, executed just months before, left his significant land holdings to his only son, and split just over $1 million between his two daughters. The final will revoked a previous version which had split the land equally among all three children.  

The daughters launched a challenge of the second will, alleging undue influence, but settled in 2016 on terms that included a finding that the father’s will was valid. However, months later, when the sisters received their legacies, they claimed interest was due based on the rule of convenience, which traditionally gives executors one year to wrap up estates.

An application judge sided with the brother, denying interest to the sisters, in part, because their challenge had delayed the distribution of the estate.

However, the Court of Appeal overturned the decision and awarded them each $53,000 in interest, representing the common law rate of five per cent for each of the two years the settlement was delayed beyond the executor’s year.   

Ticker says the appeal judgment will feel counter-intuitive to many observers.

“It’s an odd result because, if you think about it, it makes sense that the estate shouldn’t have to pay the person who caused the delay,” he says. “But the good thing about the appeal decision is that it gives some clarity and direction to estate trustees as to what their duties are in terms of administering an estate.”

The appeal court wrote that the rule of convenience is meant to be blunt; exacting “rough justice” in the interest of convenience and predictability. Even if the application judge had the discretion to deny interest to the sisters, the court concluded that it was wrongly exercised on the facts of the case before him.  

“It is my view that the application judge erred in principle by linking the entitlement of the sisters to interest to the reasonableness of the expectation that the estate could be distributed within a year; in giving undue weight to the role that an appropriately conducted, non-frivolous will challenge played in the delay; in considering the payment of interest to be a reward or a penalty; and in relying on the sisters’ statuses as estate trustees,” the decision states.

“Given the importance of certainty and predictability, if there is a discretion available to deny interest to legatees, it must apply only in the clearest of cases. A case in which distribution is delayed because legatees bring an appropriately conducted, non-frivolous challenge to a will, and where the residuary beneficiary ultimately receives the key estate asset along with any appreciation in its value, is not one of the clearest of cases, let alone the kind of case that warrants recognizing a discretion that has not yet found support in the law,” it continues.

To Read More Charles Ticker Posts Click Here
Lawyer Directory
BridgePoint Financial Services (post to 5.31.19)Toronto Lawyers Association (post to 6.30.19)MKD International (post until Sept. 30/18)Feldstein Family Law (post until May 31/19)Lexop Larson Lawyers Koster Consulting & AssociatesGelman & Associates