Court File and Parties
COURT FILE NO.: 05-132/18 DATE: 20190612 ONTARIO SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE ESTATE OF WILLIAM ALEXANDER NELSON
BETWEEN:
STEPHEN NELSON, DEBORAH NELSON, and DAVID NELSON Applicants – and – HUGUETTE TROTTIER in her capacity as executor and trustee of the ESTATE OF WILLIAM ALEXANDER NELSON Respondent
Counsel: Danielle Joel and Ashley Thomassen, for the Applicants David Lobl and Josh Shneer, for the Respondent
HEARD: March 13, 2019
L. A. PATTILLO:
Introduction
[1] This Application concerns the legal obligations of the survivor in circumstances where there is a mutual wills agreement.
[2] The applicants, Stephen Nelson (“Stephen”), Deborah Nelson (“Deborah”) and David Nelson (“David”) (collectively the “Applicants) are the children of William Alexander Nelson (“Bill”) who died on November 3, 2016.
[3] The respondent Huguette Trottier (“Huguette”), was Bill’s wife. Together they had a mutual wills agreement which was in place at the time of Bill’s death.
[4] The Applicants seek various declarations and orders against Huguette, both personally and in her capacity as Estate Trustee of Bill’s Estate based on the mutual wills agreement. In particular, they seek declarations that they have a constructive trust over Huguette’s assets and that a payment by Huguette of $200,000 from assets she inherited from Bill’s Estate is a breach of that trust. They further seek orders requiring, among other things, that Huguette repay the $200,000 gift from her personal funds; restraining her from further gifting of her assets until further order of the court or agreement of the Applicants; and providing them with information concerning Bill’s Estate and her dealings with the matrimonial home.
Background
[5] Bill was 79 when he died. He and Huguette were married for 24 years and lived together for five years before they were married. It was a second marriage for both. There were no children from the marriage. Huguette has two biological and eight adopted children from her first marriage and the Applicants are Bill’s children.
[6] Following Bill’s retirement from a successful career in Information Technology and Communications, Bill and Huguette moved to the Niagara Region in approximately December 1999. At the time of Bill’s death, they lived at 3269 Niagara Parkway, Stevensville, Ontario (the “House”). The House was in both their names in joint tenancy and Huguette has continued to reside there.
[7] On October 13, 2010, Bill and Huguette executed a Will and together they executed an Agreement and an Acknowledgement and Direction addressed to their solicitors.
I. The Wills
a) Bill’s Will
[8] Paragraph 3(f) of Bill’s Will provides:
I declare that HUGUETTE MARIE TROTTIER and I have each agreed the one with the other of us contemporaneously to execute our Wills mutatis mutandis and in consideration thereof not without the written consent of the other to revoke or amend the same both while we are living and also during the lifetime of the survivor of us AND NOW THEREFORE this Will of mine with all its terms is made and executed pursuant to the said agreement.
[9] Bill’s Will further provides that Huguette was to be the Executor and Trustee of his Estate and in the event he pre-deceased Huguette, leaves all of his assets to Huguette. In that regard, paragraph 3(d) provides:
(d) To pay or transfer the residue of my estate to my wife, HUGUETTE ESTELLE MARIE TROTTIER, if she survives me for a period of ten days for her own use absolutely.
b) Huguette’s Will
[10] Paragraph 3(f) of Huguette’s Will is identical to paragraph 3(f) in Bill’s Will except that Bill’s name is inserted where Huguette’s was.
[11] Huguette’s Will provides that Bill is to be the Trustee of her Estate and in the event he predeceases her, her daughter Catherine McGrath and Stephen are to be the Estate Trustees.
[12] Huguette’s Will further provides (similar to Bill’s) that, in the event she survives Bill and owns the House at the time she dies, it is to be sold and the net proceeds are to be divided equally between the Applicants and her two biological children or their issue if any of them predecease her. In the event the House has been sold prior to her death, the Estate Trustees are to determine the net proceeds of the sale and pay an amount equivalent to that as above. Further, in the event she sells the House and owns a successor house and property when she dies, it is to be sold and the net proceeds distributed as above. If the net proceeds from the sale of the successor house and property are less than the net proceeds from the sale of the House, the Applicants and her biological children are to receive an amount equivalent to the net proceeds from the sale of the House.
[13] Paragraph 3(e) of Hugette’s will provides:
In the event my husband, the said WILLIAM ALEXANDER NELSON, predeceases me I instruct my Trustees to identify any assets I inherited from my husband, including but not limited to investments, bank accounts, registered retirement funds, registered retirement income funds and any assets which we jointly held upon his death and any successor assets, and to pay these assets equally among my husband’s children, namely, DEBORAH KATHLEEN NELSON, STEPHEN WILLIAM NELSON and DAVID ANDREW NELSON, or the survivors or survivor of them, provided that if any of my said husband’s children shall predecease me or surviving me should die within a period of ten days after my death and shall leave issue surviving and alive at my death, such issue shall take in equal shares per stirpes the share of the residue of my estate to which such deceased child of my said husband, namely DEBORAH KATHLEEN NELSON, STEPHEN WILLIAM NELSON and DAVID ANDREW NELSON, would have been entitled if he or she has survived me.
II. The Agreement
[14] The Agreement signed by Bill and Huguette identifies Bill as “the Husband” and Huguette as “the Wife” in the heading and contains the following three paragraphs:
- The Husband and the Wife agree not to revoke or amend our Will dated the 13th day of October, 2010.
- The Husband and Wife agree that the terms of our Will include all property presently owned as well as after acquired property.
- Any cohabitation agreement entered into prior to the signing of this Will is revoked.
III. The Acknowledgement and Direction
[15] The Acknowledgment and Direction is addressed to the firm of lawyers who drafted the Wills and other documents and is signed by Bill and Huguette. It acknowledges that they have discussed and fully understand and accept the consequences of mutual wills including that they can’t be revoked without the other party’s consent; the agreement not to revoke applies to automatic revocation by marriage; and if one of them were to breach the agreement “a constructive trust would arise in favour of all our respective children with respect to the property.”
[16] The last three paragraphs of the Acknowledgment and Direction provide:
We confirm our intention that we are each giving to the survivor all property absolutely. The survivor may deal with the properties as absolute owners while alive. This would include the ability to make gifts from the property. It is our mutual expectation and understanding however, that the survivor will not defeat this agreement by disposing of substantial portions of the assets by gifts or otherwise during his or her lifetime.
We confirm our intention that the agreement not to revoke, and our Will, be interpreted to include after-acquired property as well as property that we currently own.
We recognize the warning given by Justice Callinon in Barns v. Barnes that: the “fact that the surviving contracting party, who is the beneficiary under the Will of the first of the two to die, may use, and indeed even ultimately use up in their entirety the assets passing under the first Will, provides a reminder that in human affairs, even n[sic] legal affairs, perfection, and the complete effectuation of intention are sometimes not possible.”
[17] At the time of Bill’s death, the House had a value of approximately $1,200,000 and the value of Bill and Huguette’s joint investments together with Bill’s investments totaled close to $4 million.
[18] On March 30, 2017, after obtaining legal advice, Huguette donated $200,000 to the Niagara Christian College (the “College”) in Bill’s honour for the establishment of a technology centre in his name. Bill was actively involved with the College. He joined its Board in 2011 and in 2012 he became Chair of its IT Committee. Following his death, the College published a “Farewell Tribute” to Bill in its magazine.
[19] After Bill’s death the Applicants had difficulty obtaining any information from Huguette about Bill’s Estate. Inquiries to her were not responded to. Eventually, through counsel, Huguette disclosed that she had made the $200,000 gift to the College.
The Position of the Parties
[20] The Applicants submit that as a result of the Mutual Wills Agreement between Bill and Huguette, a constructive trust was imposed over Bill’s assets from the moment he died to protect the agreement and the beneficiaries interests. As a result, they submit that Huguette, as the trustee, has a duty to report on the assets and any transactions to demonstrate that she is using them in a manner that is consistent with Bill’s wishes.
[21] The Applicants further submit that Huguette has breached the trust by providing the $200,000 gift to the College and in failing to provide information concerning the assets, including an accounting of Bill’s assets, when requested by them.
[22] Huguette submits that there is no basis to impose a constructive trust. There is no evidence that she is in breach of the Mutual Wills Agreement. Bill left his assets to her absolutely entitling her to deal with them as she sees fit. In the alternative, the $200,000 gift to the College was not substantial given the value of Bill’s Estate and that it was made for a proper purpose and not to defeat the Agreement. Finally, Huguette submits she has no obligation to advise the Applicants with respect to Bill’s Estate or his assets as they are not beneficiaries under Bill’s Will.
Mutual Wills
[23] The doctrine of mutual wills was first enunciated by Lord Camden L.C. in [Dufour v. Pereira (1796), 1 Dick. 419, 21 E.R. 332]. It permits two or more people to enter into an agreement to preserve a will or specified provisions of a will against inconsistent future will making. Justice Cullity described the doctrine in Edell v. Sitzer, [2001] O.J. No. 2909 (S.C.J.) at para. 57 as follows:
The doctrine of mutual wills has traditionally been applied in cases where individuals have made separate wills pursuant to an agreement with respect to their terms. Most commonly, they have agreed that each will obtain a benefit under the other’s will and that other specified individuals will receive property of each of them on the death of the survivor. In some cases of this sort, the benefit obtained by the survivor under the other’s will has been a life interest; in other cases, it takes the form of an outright gift. Where the requirements for the application of the doctrine are satisfied, the survivor will not be permitted to defeat the agreement by revoking his or her will after the death of the other. This result is achieved by the imposition of a constructive trust on the survivor’s estate for the benefit of those who intended to benefit under the agreement.
[24] The requirements for the application of the doctrine are three-fold: (a) there must be an agreement between the individuals who made the wills, which amounts to a contract at law; (b) the agreement must be proven by clear and satisfactory evidence; and (c) it must include an agreement not to revoke wills: Edell at para. 58; Brynelsen Estate v. Verdeck, 2002 BCCA 187 at para. 29.
[25] Most mutual wills cases concern the question of whether there is an agreement. There is no such issue in this case. Paragraph 3(f) of Bill and Huguette’s Wills together with the provisions of other two documents they signed on October 13, 2010 clearly establish the above requirements for a mutual wills agreement.
[26] Rather, the issue to be determined as framed by the Applicants is whether, in light of Bill and Huguette’s Mutual Wills Agreement, a constructive trust exists overs the assets of Bill’s Estate and if so, whether there has been a breach of the trust by Huguette.
Constructive Trust
[27] As noted, a mutual wills agreement provides that neither party will alter their will without the knowledge of the other. Where, however, one of the parties dies without altering his or her will, the survivor is bound thereafter not to revoke his or her will. In the event it becomes necessary to enforce the agreement, as referred to by Justice Cullity in the above extract from Edell, equity has invoked the mechanism of a constructive trust. The purpose of equity intervening to impose a constructive trust is to enforce the survivor’s promise to the deceased to confer a benefit on the beneficiaries of the mutual will: Edell at para. 62.
[28] As stated by Professor Robert Chambers in his article Constructive Trusts in Canada (1999), 37 Alta L Rev 173 at p. 193-4:
The constructive trust is used to perfect the survivor’s promise to the deceased to confer a benefit on the beneficiaries of the mutual will. In most cases, the survivor promised to leave his or her estate, whatever it may be, to those beneficiaries. This is a promise to make a testamentary disposition. The subject matter of that promise is not known until the death of the survivor, which is when the constructive trust arises. There are a few cases in which the survivor promised to transfer a specific asset to the beneficiaries. In these, the constructive trust of that asset arises during the survivor’s life, with the beneficial ownership of that asset belonging to the survivor for life and the remainder to the beneficiaries.
[29] The Applicants submit that where a mutual wills agreement exists, a constructive trust is imposed by operation of law on the death of the first party such that the survivor becomes a constructive trustee and is obligated to carry out the terms of the mutual will agreement which he or she promised to undertake to the deceased testator.
[30] In response, Huguette submits that a constructive trust does not arise by operation of law on Bill’s death. Rather, it arises only in circumstances where it is required to enforce the terms of the Mutual Wills Agreement and there is no evidence here of any breach of that agreement.
[31] In discussing when a constructive trust arises, Professor Albert H. Oosterhoff, in his article Mutual Wills (2008), 27 ETPJ 135 at pp. 145 – 146, states:
The date the constructive trust arises depends in the first instance on the terms of the agreement. However, the agreement is usually silent on the point, so resort must be had to basic principles and precedent. There are three possibilities: the date of the agreement, the date of the first to die, and the death of the survivor.
See too: The Mutual Wills Doctrine by T.G. Youdan, (1979), 29 University of Toronto Law Journal 390 at pp. 410 -411.
[32] What then are the terms of Bill and Huguette’s Mutual Wills Agreement?
[33] The Applicants submit that the terms of the Mutual Wills Agreement are set out in the three documents executed by them on October 13, 2010, that is their Wills, the Agreement and the Acknowledgement and Direction.
[34] Huguette on the other hand submits that the terms of her Mutual Wills Agreement with Bill are contained solely in the Agreement. That is that she would not revoke her Will; the terms of the Will included all after acquired property and any cohabitation agreement entered into before the Will was revoked. She submits that the provisions of the Acknowledgement and Direction, being addressed to the solicitors, forms no part of the Mutual Wills Agreement.
[35] In my view, the terms of the Mutual Wills Agreement between Bill and Huguette are not restricted to the terms set out in the Agreement. Rather, as submitted by the Applicants, they are all contained within the provisions of the three documents signed by them on October 13, 2010. Apart from the fact that the Agreement contains no exclusionary clause restricting it to its terms, it is clear from reading the Wills and the other two documents that they all relate to and form part of the Mutual Wills Agreement.
[36] The Wills, by their terms, reflect the Bill and Huguette’s agreement. That agreement is expanded by the terms in both the Agreement and the Acknowledgement and Direction.
[37] Specifically, when the Acknowledgement and Direction is read on its own and in conjunction with both the Wills and the Agreement, it is clear that it refers to and is part of the Mutual Wills Agreement. The fact of its title and that it is addressed to the solicitors, does not alter the provisions of the document which clearly evidence the intention of both Bill and Huguette that certain of the items raised therein form part of their agreement. On more than one occasion they refer to “this agreement” and use the terms “confirm our intention” and “our mutual expectation and understanding” to speak about various provisions of their agreement.
[38] Having regard therefore to the three documents, and apart from the agreement not to revoke or amend the Wills (which extends to automatic revocation on remarriage), I find that the Mutual Wills Agreement between Bill and Huguette provides, among other things, that both Bill and Huguette would give the survivor all their property absolutely; the property includes both property owned by each of them at the time of the agreement as well as after-acquired property; the survivor can deal with the property as absolute owner while alive which includes the ability to make gifts; however, the survivor cannot dispose of substantial portions of the property received during his or her lifetime in order to defeat the agreement.
[39] Even if I am wrong that Huguette’s right to deal with Bill’s property gifted to her absolutely is subject to the restriction that she cannot deal with it in order to defeat the agreement is an express term of the Mutual Wills Agreement, equity imposes such a term on the survivor in such circumstances. See: Edell, para. 62; Powell v. Glover, 2008 ABQB 532 at paras. 20 & 26.
[40] Although the Acknowledgement and Direction provides that both Bill and Huguette “fully understand and accept” that if one of them breaches the terms of the agreement, “a constructive trust would arise in favour of all of our respective children with respect to the property”, I do not consider that provision to be a term of their Mutual Wills Agreement. Rather, it reflects their understanding of how their Mutual Wills Agreement would be enforced in the event of a breach by the survivor.
[41] Turning next to the authorities, it is not clear when a constructive trust will arise in respect of a mutual wills agreement.
[42] There is authority where there is a mutual wills agreement and the survivor is left a life interest in the assets with a remainder to another, that a constructive trust arises when the first party dies. See: [Dufour v. Pereira]; Re Gillespie, [1969] 1 O.R. 585 (C.A.); Re Grisor (1979), 26 O.R. (2d) 57 (Ont. H.C.); Edell at para. 57.
[43] There is also some authority to support the Applicants’ position, holding that in circumstances where the survivor receives the assets of the first party to die as an outright gift that the constructive trust arises at the time of the first testator’s death. See: [Birmingham v. Renfrew (1937), 57 CLR 666 (High Court of Australia) at p. 683]; [Hall v. McLaughlin Estate, [2006] O.J. No. 2848].
[44] In Birmingham v. Renfrew, at p. 689, Dixon J. refers to the trust as a “floating obligation, suspended, so to speak, during the lifetime of the survivor” which descends upon the assets at the survivor’s death and crystallizes into a trust. See too: Julie Cassidy, Mutual Wills, (Sidney: The Federation Press, 2000) at p. Para. 7.4 at p. 60.
[45] A mutual wills agreement is a contract. As noted, the purpose of imposing a constructive trust is to enforce the terms of the contract in circumstances where one of the parties to the agreement has died and cannot do so.
[46] One thing is clear. Given the parties to a mutual wills agreement can revoke their wills by mutual agreement or independently, provided they give notice to the other party [[Dufour v. Pereira]; [Pratt v. Johnson, [1959] S.C.R 102]](https://www.canlii.org/en/ca/scc/doc/1958/1958canlii79/1958canlii79.html), there is no need for equity to impose a constructive trust to enforce the agreement while both parties are living. They have contractual remedies to enforce the agreement if one of them breaches it.
[47] In circumstances where one of the parties to a mutual wills agreement has died, however, and based on the nature of a mutual wills agreement and the purpose of imposing a constructive trust in respect of such agreement, it is my view that a constructive trust does not arise until either the survivor dies or earlier, in the event there has been a breach of the agreement by the survivor.
[48] Based on the above discussion, therefore, I conclude that a constructive trust would only arise in this case in the event of a breach of the Mutual Wills Agreement by Huguette.
[49] The Applicants submissions regarding Huguette’s alleged breach are based on their position that the constructive trust arises on Bill’s death. In that regard, they submit that Huguette has breached the constructive trust in two ways. First, they submit that Huguette’s failure to respond to their inquiries for information constitutes an anticipatory breach. Further, they submit that Huguette’s payment to the College of $200,000 constitutes a breach of the trust.
[50] Based on the above discussion, however, it is my view that the proper question to ask is whether the above actions by Huguette are a breach of the Mutual Wills Agreement, requiring equity to intervene and impose a constructive trust.
[51] In answering that question, I am satisfied, based on the record that Huguette is not in breach of the terms of the Mutual Wills Agreement requiring a constructive trust to be imposed. There is no evidence that she has altered her October 13, 2010 Will. Further, I accept her evidence both as to the reason for her gift to the College and the value of Bill’s assets (both owned outright or jointly) at the time of his death. I do not consider the $200,000 to be “substantial” based on assets of approximately $4 million. I also do not consider that the purpose of the gift was to defeat the Mutual Wills Agreement. In my view, given Bill’s history and involvement with the College, it was a fitting way to honour his memory.
[52] Further, I do not consider that Huguette’s failure to respond to the Applicant’s requests for information concerning Bill’s assets and what she has done with them since his death amount to a breach by her of the Mutual Wills Agreement. Given that she received Bill’s assets absolutely and can deal with them as her own, apart from a breach of the Mutual Wills Agreement, she has no legal obligation to provide the Applicants with that information. Huguette also has no duty as Bill’s Estate Trustee to provide the Applicants, who are not beneficiaries under Bill’s Will, with information about his Estate.
[53] The Applicants submit that they are entitled to the relief they seek against Huguette, including repayment by her of the $200,000, preventing her from gifting her assets until further order of the court, and requiring her to provide monthly financial information, based on Huguette’s alleged breach of constructive trust. As I have found, however, in the circumstances of this case, a constructive trust only arises if there has been a breach of the Mutual Wills Agreement and Huguette is not in breach of it. Accordingly, there is no basis to impose a constructive trust or to grant the relief requested.
The House
[54] As part of the relief requested, the Applicants request an order requiring Huguette to obtain their consent in writing prior to making “a binding agreement to sell, transfer, assign, mortgage, lease, exchange, or make any other encumbrance on title to the House, and to provide reasonable notice of the particulars of the proposed transaction including any relevant documentation.”
[55] Upon Bill’s death, as the title to the House was in joint tenancy, Huguette became the owner of the House absolutely by right of survivorship. The Mutual Wills Agreement contains no restrictions on her use of the House, including its encumbrance or sale and purchase of another property if that is what she wishes to do. As noted, she continues to live in the House.
[56] Huguette’s Will provides that the Applicants (as well as her two bio-logical children) share in the net proceeds of any sale of the House, whether sold before or after her death. In the circumstances, I am hard-pressed to understand the basis upon which the Applicants would be entitled to information concerning any encumbrance or sale of the House by her, let alone requiring their consent to such action.
Other Relief Requested
[57] The Applicants also request orders requiring Huguette to pass the accounts of Bill’s Estate to date and that she account by way of application to pass accounts with respect to her assets, from November 3, 2016, the date of Bill’s death.
[58] The Applicants have no financial interest in Bill’s Estate and therefore are not entitled to an order requiring Huguette to pass her accounts as Bill’s Estate Trustee: Rule 74.15(1)(h). Their request for Huguette to pass her own accounts arises from their position that she is a trustee pursuant to a constructive trust, of which they are the beneficiaries. As I have found, however, there is no constructive trust. Accordingly, there is no basis to order that she pass accounts regarding her assets.
Conclusion
[59] For the above reasons, therefore, the application is dismissed in its entirety.
[60] The parties are urged to agree with respect to costs. In the absence of agreement, however, the parties shall provide brief cost submissions of no more than three pages together with a Costs Outline. Huguette shall file her submissions within 14 days and the Applicants shall file their submissions 10 days after receipt of Huguette’s.
L. A. Pattillo J.
Released: June 12, 2019
COURT FILE NO.: 05-132/18 DATE: 20190612 ONTARIO SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE ESTATE OF WILLIAM ALEXANDER NELSON
BETWEEN:
STEPHEN NELSON, DEBORAH NELSON, and DAVID NELSON Applicants – and – HUGUETTE TROTTIER in her capacity as executor and trustee of the ESTATE OF WILLIAM ALEXANDER NELSON Respondent
REASONS FOR JUDGMENT
PATTILLO J.