Brown v. Laurie
[Indexed as: Brown v. Laurie]
Ontario Reports Court of Appeal for Ontario Simmons, Tulloch and D.M. Brown JJ.A. March 6, 2019
145 O.R. (3d) 154 | 2019 ONCA 175
Case Summary
Civil procedure — Summary judgment — Evidence
Plaintiff and deceased naming each other as beneficiary of life insurance policy as part of business arrangement. Estate alleging that plaintiff and deceased entered into buy-sell agreement under which proceeds from insurance policy on one partner's life would be used to purchase his share in company from his estate. Motion judge's finding that no buy-sell agreement existed being fully supported by evidence. Motion judge not erring in granting plaintiff summary judgment declaring that he was entitled to proceeds of deceased's life insurance policy and dismissing estate's claim to proceeds.
Civil procedure — Summary judgment — Partial summary judgment
Plaintiff and deceased naming each other as beneficiary of life insurance policy as part of business arrangement. Plaintiff bringing action against deceased's estate for declaration that he was entitled to proceeds of deceased's life insurance policy and for judgment on promissory note executed by deceased. Motion judge granting plaintiff requested declaration on motion for summary judgment and directing trial of claim on promissory note. Motion judge not erring in granting partial summary judgment. Estate's defences to claim on promissory note not connected to grounds advanced for estate's claim to proceeds of insurance policy.
Facts
The plaintiff and the deceased had operated a jewellery store through their company. As part of their business arrangement, each was named as the sole beneficiary of the other's life insurance policy. After the deceased's death, the plaintiff brought an action against his widow and his estate for a declaration that he was entitled to the proceeds of the policy and for judgment on a promissory note that he alleged the deceased had executed. The defendants alleged that the plaintiff and the deceased had entered into a buy-sell agreement under which the proceeds from the insurance policy on one partner's life would be used to purchase his shares in the company from his estate. On a motion by the plaintiff for summary judgment, the motion judge granted the requested declaration and directed a trial of the claim on the promissory note. The defendants appealed.
Held
The appeal should be dismissed.
The evidence fully supported the motion judge's finding that no buy-sell agreement existed. In the absence of a buy-sell agreement, there was no basis for the defendants' claim that the proceeds of the insurance policy were impressed with a constructive trust in their favour.
The motion judge did not err in granting partial summary judgment. As the defences advanced by the defendants to resist payment of the promissory note were not connected to the grounds they advanced for their claim to the proceeds of the insurance policy, the dangers of duplicative or inconsistent verdicts did not arise.
Cases Referred To
Rules and Regulations Referred To
Appeal
APPEAL from the order of M.D. McArthur J., [2018] O.J. No. 3380, 2018 ONSC 3071 (S.C.J.).
Counsel:
- David B. Williams and Rob Danter, for appellants
- John A. Nicholson, for respondent
Decision
BY THE COURT:
Overview
[1] The respondent, Brad Brown, and Lachlan Laurie operated a jewellery store in London, Ontario through their company, 1079597 Ontario Limited. Their business venture started in July 2014. As part of their business arrangement, they each took out a life insurance policy on the other's life, with the company paying the premium. One policy insured Mr. Laurie's life for $250,000 (the "policy"); it named Mr. Brown as the sole beneficiary.
[2] Unfortunately, Mr. Laurie became ill less than a year after the business venture started. Mr. Laurie died on November 12, 2015.
[3] Disputes then arose between Mr. Brown and Mr. Laurie's estate. His widow, the appellant Donna Laurie, acts as estate trustee of the estate. The parties agreed to place the proceeds from the policy in an escrow account (the "proceeds").
[4] Mr. Brown commenced this action against the appellants seeking two forms of relief. First, he sought a declaration that he was entitled to the proceeds as the named beneficiary under the policy. Second, Mr. Brown sought judgment on a $42,000 promissory note that he alleged Mr. Laurie had executed in respect of the balance of the subscription price owed for Mr. Laurie's shares in the company. Mr. Brown alleged that a share purchase agreement he, 1079597 Ontario Limited and Mr. Laurie entered (the "share purchase agreement") misstated the purchase price for Mr. Laurie's share and that Mr. Laurie gave him the promissory note on account of the balance owing for his shares.
[5] In their fresh as amended statement of defence and counterclaim, the appellants deny any liability on the promissory note and plead that Mr. Brown would be unjustly enriched if he were to receive the proceeds. The appellants also counterclaim seeking (i) an order that they are entitled to the proceeds (a) by virtue of an agreement made by Mr. Lachlan and Mr. Brown that the proceeds of the insurance policies were to go to the estate of the deceased shareholder or (b) by virtue of a constructive trust; and (ii) a mandatory order requiring Mr. Brown to purchase the estate's shares in the company for $250,000.
[6] Mr. Brown moved for summary judgment on his claims in respect of the proceeds and the promissory note. He also sought summary judgment dismissing the counterclaims.
[7] The motion judge granted summary judgment declaring Mr. Brown entitled to the escrowed proceeds and he dismissed the appellants' counterclaim that they are entitled to the proceeds. However, the motion judge did not grant Mr. Brown summary judgment on the promissory note. Instead, he directed a trial of that claim.
[8] The appellants argue that the motion judge made two main errors: (i) granting judgment in respect of the proceeds based solely on the documentary evidence without hearing oral evidence; and (ii) granting judgment on the proceeds claim while directing a trial on the promissory note claim when the two matters are interconnected and not separable.
[9] We are not persuaded by either submission.
First Issue: Whether a Genuine Issue Requiring a Trial Exists Regarding Entitlement to the Insurance Proceeds
[10] There is no dispute that Mr. Brown was designated as the sole beneficiary of the policy. Notwithstanding that designation, the appellants claim a genuine issue requiring a trial exists that they are entitled to the proceeds on two main grounds.
(1) The Buy-Sell Agreement
[11] First, the appellants submit that the record discloses a triable dispute as to whether Mr. Brown and Mr. Laurie had entered into a buy-sell agreement under which the proceeds from the insurance policy on one partner's life would be used to purchase his shares in the company from his estate.
[12] The appellants point to several pieces of evidence in support of the existence of a buy-sell agreement: a notation on the application for the insurance policy that its purpose was for "Buy Sell"; a handwritten note apparently made by an insurance broker, Mr. Mike Smolders, memorializing a discussion with the two business partners about a "buy/sell"; and Ms. Laurie's evidence that her husband had told her that all of the insurance proceeds were to be paid to her. They submit this evidence discloses a genuine issue requiring a trial as to the existence of a buy-sell agreement.
[13] The motion judge held that Mr. Brown and Mr. Laurie had not entered into a buy-sell agreement. First, he observed that the share purchase agreement made no mention of a buy-sell agreement. Next, he concluded that Ms. Laurie's evidence about her discussions with her husband constituted inadmissible hearsay. We see no error in that ruling.
[14] Further, the motion judge viewed the note by the insurance broker as only supporting an inference that a buy-sell agreement never advanced beyond initial discussions between the business partners. We see no palpable and overriding error in that finding.
[15] Finally, the motion judge placed great weight on a May 31, 2015 e-mail sent by Mr. Laurie to Mr. Brown, about six months before Mr. Laurie's death, in which he urged Mr. Brown to consider directing $100,000 of the insurance proceeds to his family following his death. At para. 42 of his reasons, the motion judge wrote that the clear and obvious inference from this e-mail was that "Mr. Laurie did not have a subjective belief that there was a buy-sell agreement requiring payment of the insurance proceeds for the shares". We see no palpable and overriding error in that inference; it was clearly open for the motion judge to make given the clear language of the e-mail.
[16] After considering the entirety of the evidence, the motion judge concluded, at paras. 48 and 49:
The evidentiary burden is on the Estate to show a genuine issue requiring a trial on the issue of whether there was a contract governing the payment of life insurance proceeds. When considering the note of Mr. Smolders in the context of the totality of the evidence, this court finds that there is no genuine issue requiring a trial in relation to entitlement to the proceeds. Neither have the defendants raised a genuine issue respecting the existence of a buy-sell agreement. The evidentiary record does not demonstrate that the proceeds of insurance were to fund the purchase of the shares or that either party was otherwise contractually obligated to do so. On this evidence the Estate has not led evidence to show a genuine issue.
I find there was term life insurance on the other personally and nothing more. There was also no agreement or contract between the plaintiff and Mr. Laurie that the proceeds of life insurance were to go to the Laurie Estate.
[17] Those conclusions were fully supported by the evidence.
[18] The appellants submit that the motion judge required viva voce evidence from Ms. Laurie and Mr. Smolders before determining that no buy-sell agreement existed. We disagree. Ms. Laurie's affidavit disclosed that her only evidence on the issue was the hearsay statement from her husband. As to the evidence of Mr. Smolders, the onus lay on the appellants to demonstrate the existence of some circumstance that justified departing from the clear beneficiary designation in the policy. They were required to put their "best foot forward" on that issue. Yet, they did not file an affidavit from Mr. Smolders or examine him under rule 39.03 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. The motion judge did not err by granting summary judgment in the absence of such evidence.
[19] Finally, the appellants argue that the motion judge erred in ruling that there was no genuine issue requiring a trial in relation to its argument that Mr. Brown's failure to keep the company's minute book up-to-date meant that he never had a legal interest in the shares of the company, with the result that the parties' share purchase agreement was void. We see no need to deal with the details of this argument because we agree with the motion judge's conclusion, in para. 71 of his reasons, that:
Even if the share purchase agreement was void, the plaintiff and Mr. Laurie would have still have had a pecuniary and insurable interest in one another. The entitlements under the insurance policy are unaffected.
(2) Constructive Trust
[20] The appellants also argue that a genuine issue requiring a trial exists as to whether the proceeds are impressed with a constructive trust in their favour. The motion judge rejected that argument, stating, at paras. 52-54:
To establish a constructive trust, the defendants must prove that the Mr. Laurie was wrongfully deprived of his rights that Mr. Brown should not possess due to unjust enrichment, interference or due to a breach of a fiduciary duty by the plaintiff.
I find that the there is no deprivation to the Laurie estate nor did Mr. Brown possess trust monies due to unjust enrichment, interference or breach of fiduciary duty. Mr. Brown received insurance funds as the parties jointly anticipated from the outset.
Furthermore, there is no basis to find any wrongful conduct by the plaintiff that could give rise to a juristic reason supporting a finding of unjust enrichment. On the totality of the evidence, I find that the plaintiff's conduct does not provide the basis for any trust claim by the defendants to the insurance proceeds.
[21] We see no error in that conclusion. Once the motion judge had found that Mr. Brown and Mr. Laurie never entered into a buy-sell agreement, no basis existed on the evidence to challenge the payment of the proceeds to Mr. Brown.
Second Issue: The Suitability of Granting Partial Summary Judgment
[22] The appellants further submit that the motion judge erred in granting summary judgment on the proceeds claim but directing a trial for the promissory note claim. They contend that both claims involve intertwined issues, rendering it inappropriate to grant partial summary judgment.
[23] We disagree. Mr. Brown moved for summary judgment on his entire claim. The motion judge was alive to the risks of granting summary judgment on only part of the claim. He canvassed the factors discussed by this court in Butera v. Chown, Cairns LLP (2017), 137 O.R. (3d) 561, [2017] O.J. No. 5267, 2017 ONCA 783, at paras. 26 to 35. He concluded that the dangers of duplicative or inconsistent findings did not arise in the circumstances: at para. 63. As a result, he granted partial summary judgment in respect of the proceeds and directed the claim as to the validity and enforceability of the promissory note to proceed to trial: at para. 72.
[24] We see no error in principle in that exercise of discretion by the motion judge. The appellants advanced two defences to resist payment of the promissory note: Mr. Laurie never signed a promissory note; alternatively, if he did, the note was discharged through the payment of $50,000 on July 28, 2014 under the share purchase agreement. Those defences are not connected to the grounds the appellants advanced for their claim to the proceeds. In the circumstances, it was open to the motion judge to grant summary judgment only on the claim regarding the proceeds.
[25] That said, we would observe that the summary judgment motion was argued one year ago, with judgment rendered eight months ago. The appellants were entitled to appeal the judgment, which they did. In the meantime, the trial of the promissory note claim is on hold. When the scheduling dust settles, it may well be that the trial of the promissory note claim does not take place until almost two years after the summary judgment motion was argued. That is a most unfortunate delay for an action involving a claim of only about $300,000. Before scheduling a summary judgment motion for a claim of that size, we would encourage both counsel and the motions bench to consider faster and cheaper alternatives for conducting a final adjudication on the merits of the claim. This action required no more than three days for trial. Had that trial taken place a year ago, the parties would not be facing the prospect of further litigation costs following this decision.
Disposition
[26] For the reasons set out above, we dismiss the appeal.
[27] The appellants shall pay Mr. Brown his costs of the appeal fixed in the amount of $8,500, inclusive of disbursements and HST.
Appeal dismissed.
End of Document