Court of Appeal for Ontario

Date: 20211214 Docket: C68992

Before: Fairburn A.C.J.O, Roberts J.A. and Van Melle J. (ad hoc)

Between: Crystal McTavish, Tracy Ardis and Janice Ardis, as Trustees for the Estate of Walter Ardis Applicants (Respondents)

And: Susan Reed, as Trustee for the Estate of Margaret Ardis Respondent (Appellant)

Counsel: David M. Sundin, for the appellant Douglas A. Sulman, for the respondent

Heard: November 9, 2021 by video conference

On appeal from the order of Justice Maria V. Carroccia of the Superior Court of Justice dated December 15, 2020, with reasons at 2020 ONSC 7795.

Reasons for Decision

Overview

[1] The appellant appeals the order that insurance proceeds in the amount of $314,237.50 be paid out of court to the respondents as Estate Trustees for Walter Ardis. She submits that the application judge erred in two ways: (1) in failing to adjourn the respondents’ application to be heard at the same time as the appellant’s application contesting the validity of a subsequent will of Walter Ardis, and (2) in her determination of insurable interest under an insurance contract.

Factual Background

[2] Walter and Margaret Ardis were married for 27 years. They owned a house together as joint tenants. They were close to his son, Trevor Ardis, and her daughter, Susan Reed, who were beneficiaries under Mrs. Ardis’s will and purportedly under Mr. Ardis’s mirror will made in 2012. Toward the end of his life, Mr. Ardis suffered from severe dementia, paranoia, and hallucinations, which resulted in him killing his wife and setting fire to their house on March 24, 2016. On July 31, 2017, Mr. Ardis was found not criminally responsible on account of mental disorder (“NCRMD”) in the death of his wife. Pursuant to s. 672.54(c) of the Criminal Code, R.S.C., 1985, c. C-46, the Ontario Review Board (“ORB”) ordered Mr. Ardis to be detained in custody in a psychiatric hospital. He remained there until his death on March 19, 2018.

[3] While detained in the psychiatric hospital, Mr. Ardis purportedly made a new will in which it is said that he removed the appellant in her personal capacity as a beneficiary and named as Estate Trustees three of Mr. Ardis’s children from whom he had been estranged for many years until after his NCRMD designation. We say “purportedly” because that will does not form part of the record in this case. While the appellant has made repeated requests to see the will purportedly made while Mr. Ardis was detained in the psychiatric hospital, the respondents have not provided a copy to her.

[4] On March 1, 2018, one of the respondents, Crystal McTavish, as power of attorney for Mr. Ardis, submitted to the insurer a proof of loss claim arising out of the fire damage to the house and its contents. While there exists a public policy rule that a person who kills another should not profit from that crime, there are some exceptions to the rule, including where the killing arises out of a mental disorder: Dhingra v. Dhingra, 2012 ONCA 261, 109 O.R. (3d) 641, at para. 22. Therefore, the appellant does not dispute that a person found NCRMD is not prevented from taking under an insurance policy or by right of survivorship. The question on appeal is whether the Estate of Mrs. Ardis was also entitled to take under the policy.

The Litigation

[5] On March 9, 2018, an action was commenced in Mr. Ardis’s name, without a litigation guardian, against the insurer for payment of the insurance proceeds for the fire damage caused to the house and its contents. Following Mr. Ardis’s death, an order to continue the action in the names of the respondents was obtained. On June 7, 2019, in settlement of the action, the insurer agreed to pay the amount of $314,237.50 into court. The settlement funds were broken down as follows: $186,400 for the building; $114,900 for contents; and $12,937.50 for demolition costs. The appellant was named as a respondent on Verbeem J.’s order, dated August 13, 2019, that the funds be paid into court. On February 3, 2020, the respondents commenced an application to have the funds paid to them out of court.

[6] On March 16, 2020, just as the province of Ontario was locking down because of the pandemic, the appellant commenced an application in Windsor, Ontario as Estate Trustee of Margaret Ardis for directions on whether Mr. Ardis was without the requisite capacity to make his subsequent will (the “will application”). If the appellant succeeds on the will application, the 2012 will shall remain the last will and testament of Mr. Ardis, which would leave the appellant in her personal capacity as a beneficiary under both Mrs. and Mr. Ardis’s wills.

[7] Due to complications caused by the physical closing of the court offices during the pandemic, the appellant asserts she was not able to serve the application or transfer it to Chatham, Ontario in time to be heard with the respondents’ application, which was heard on August 18, 2020. Therefore, the appellant requested an adjournment of the respondents’ application requesting the release of the insurance funds to the Estate of Walter Ardis. Included in the appellant’s responding application record was a copy of the will application that had not yet been successfully transferred to Chatham. The appellant argued that both applications should be heard together.

[8] The application judge dismissed the appellant’s request that the respondents’ application be adjourned to be heard with the will application on the basis that the will application had not yet been served. The application judge also noted that there was no formal application filed to join the applications, nor had the appellant taken any other steps to bring such an application before the court. Therefore, the application judge dismissed the appellant’s adjournment request and went on to decide the application brought by the respondents for the release of the insurance funds held in court to them.

[9] The application judge rejected the appellant’s submission that the Estate of Mrs. Ardis was entitled to a 50 percent share of the insurance proceeds held in court because any interest that Mrs. Ardis may have had in the parties’ home passed on her death to the joint tenant, Mr. Ardis. She allowed the respondents’ application and ordered that the funds held in court be paid to the Estate of Mr. Ardis.

Analysis

[10] We agree that the application judge erred in refusing the requested adjournment and in ordering that the insurance proceeds be paid out of court to the respondents.

[11] First, by refusing the adjournment and determining the respondents’ application for the release of the insurance funds to them as the Estate Trustees, the application judge decided the respondents’ application under a will that remained in dispute. In our view, the application judge erred in doing so.

[12] The appellant’s request for an adjournment of the respondents’ application so that it could be heard together with the appellant’s will application was not only reasonable, but to proceed otherwise was unreasonable in these circumstances. Normally, decisions regarding adjournment requests attract a high degree of deference. In this case, though, the application judge’s approach to resolving the adjournment request was overly technical and not in keeping with the general principles set out in r. 1.04 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. Those principles call for “the just, most expeditious and least expensive determination” of applications, “proportionate to the importance and complexity of the issues, and to the amount involved” in the proceedings: see also Finlay v. Paassen, 2010 ONCA 204, 101 O.R. (3d) 390, at para. 14; Wood v. Farr Ford Ltd., at para. 23.

[13] The will application raises very serious issues regarding Mr. Ardis’s capacity to make a new will in light of the fact that, at that time, he had been found NCRMD and was the subject of an ORB detention order. If the appellant’s will application were to be successful, it would render the respondents’ application to receive the insurance proceeds entirely moot because the appellant in her personal capacity and Trevor Ardis, who are the beneficiaries under Mrs. Ardis’s will, would be the beneficiaries under Mr. Ardis’s first will. In these circumstances, the application judge should have granted the adjournment request so that the applications could be heard together.

[14] Second, even if the will application fails one day and the respondents in their personal capacities are the rightful beneficiaries of the Estate of Mr. Ardis, the application judge erred in how she approached the issue involving who should receive the insurance proceeds currently held in court. Specifically, the application judge erred when arriving at the conclusion that, following Mrs. Ardis’s death, only Mr. Ardis had an interest in the insurance proceeds because he had sole legal ownership of the house insured under the policy by right of survivorship.

[15] The right of survivorship applies only to interests in property held in a joint tenancy: Hansen Estate v. Hansen, 2012 ONCA 112, 109 O.R. (3d) 241, at paras. 30-31. Section 2(1) of the Estate Administration Act, R.S.O. 1990, c. E. 22, provides that real or personal property, vested in a person without a right in any other person to take by survivorship, devolves to the person’s personal representative on his/her death to be administered as part of the estate.

[16] Here, the application judge failed to consider whether Mrs. Ardis (and following her death, her Estate), had an interest in the insurance proceeds in issue, as opposed to an interest in the house itself that was held in a joint tenancy and subject to a right of survivorship on Mrs. Ardis’s death. As a result, she failed to determine two material issues that had to be resolved before the insurance proceeds held in court could be disbursed. First, she failed to resolve the timing of Mrs. Ardis’s death relative to the fire, which may give rise to an interest in the insurance proceeds. Second, she failed to appreciate that, even if the Estate of Mrs. Ardis did not have an interest in the insurance proceeds related to the home, the Estate may nevertheless have an interest in the insurance proceeds related to its contents.

[17] First, regarding the timing issue, the application judge erred in failing to determine when Mrs. Ardis died. The determination of this issue may affect whether Mrs. Ardis or her Estate has an interest in the insurance proceeds related to the house that was destroyed in the fire. If Mrs. Ardis is found to have died after the partial or complete destruction of the home, there is a triable issue as to whether she had an interest in the insurance proceeds that arose before her death.

[18] Second, the application judge erred by focusing solely on the competing interests in the parties’ house and related insurance proceeds. As a result, she failed to consider the house’s contents to which the right of survivorship may not have attached. There is a triable issue, which the application judge did not address, as to whether the Estate of Mrs. Ardis has an interest in the house’s contents and therefore an interest in the $114,900 of insurance proceeds that were designated and paid in the settlement for the contents.

[19] It was incumbent on the application judge to address the triable issues that we have just reviewed before releasing the insurance funds from court. She erred in failing to do so. The respondents’ application is remitted for hearing with the will application.

Disposition

[20] The appeal is allowed, and the order is set aside.

[21] While nothing precludes the parties from settling this matter, should it proceed to litigation, the will application and the respondents’ application shall be heard together. Before releasing the insurance proceeds to anyone, the court must first resolve which will is operative, the answer to which shall inform who are the rightful beneficiaries.

[22] The insurance proceeds shall remain in court pending the disposition of the applications or further order.

[23] As agreed, the appellant is entitled to costs of the appeal in the amount of $7,500, inclusive of disbursements and applicable taxes. The disposition of the costs below is reserved to the judge disposing of the applications.

"Fairburn A.C.J.O."

"L.B. Roberts J.A."

"Van Melle, J. (ad hoc)"