Aquilina v. Aquilina et al.*

[Indexed as: Aquilina v. Aquilina]

Ontario Reports

Ontario Superior Court of Justice,

Dunphy J.

8, 2018

Family law -- Property -- Equalization of net family property -- Election -- Surviving spouse applying to extend time for electing between [page628] equalization payment under Family Law Act and entitlement under Succession Law Reform Act -- Application allowed -- Administration of complex international estate being difficult -- Applicant requiring additional time to assemble reasonable knowledge base from which to make informed choice -- Delay explainable and incurred in good faith -- Extension of time causing minimal prejudice to estate -- One-year extension granted -- Family Law Act, R.S.O. 1990, c. F.3 -- Succession Law Reform Act, R.S.O. 1990, c. S.26.

141 O.R. (3d) 627 | 2018 ONSC 3607

Case Summary

The applicant's husband died intestate shortly after receiving a cancer diagnosis. The deceased's complex international estate would not be an easy one to administer. As yet, the estate had no administrator. The applicant brought an application to extend the six-month deadline under s. 6 of the Family Law Act ("FLA") for electing to receive an equalization payment under the FLA in lieu of her entitlement under the Succession Law Reform Act.

Held, the application should be allowed.

Any time prescribed by the FLA can be extended pursuant to s. 2(8) of the FLA if there are apparent grounds for relief, relief is unavailable because of delay that has been incurred in good faith, and no person would suffer substantial prejudice by reason of the delay. There are grounds for relief when the electing spouse has not been able to assemble a reasonable knowledge base from which an informed choice might fairly be expected to be made. That was the case here; the complex and international nature of the deceased's business interests would take more time to understand and evaluate. The delay, such as there had been, was explainable and incurred in good faith. The delay would cause minimal prejudice to the estate. A one-year extension was granted.

Statutes referred to

Family Law Act, R.S.O. 1990, c. F.3, ss. 2(8), 5, (2), 6 [as am.], (1), (10) [as am.], (11), (14)

Succession Law Reform Act, R.S.O. 1990, c. S.26, Part II [as am.], ss. 45 [as am.], 46(2)

APPLICATION to extend time for making an election under s. 6 of the Family Law Act.

Arieh Bloom, for applicant.

No one appearing for respondents.

[1] DUNPHY J.: -- When is it appropriate to extend the time granted by statute for a surviving spouse to elect in favour of equalization under the Family Law Act, R.S.O. 1990, c. F.3 ("FLA") in lieu of the regime applicable under the Succession Law Reform Act, R.S.O. 1990, c. S.26 ("SLRA")?

[2] These applications are regularly brought before judges sitting on the Commercial List (who hear estates as well as commercial matters). I am advised by counsel that there is a dearth of published jurisprudence considering the matter, decisions on such matters ordinarily being dealt with in short, handwritten endorsements. [page629]

[3] Following the hearing of this application, I advised the applicant that I would be granting the relief requested subject to minor modifications with reasons to follow. These are those reasons.

Background Facts

[4] The applicant is the widow of Mr. Anthony George Aquilina. Mr. Aquilina passed away in December 2017 at the age of 69, leaving his wife of almost 47 years and three adult children.

[5] The applicant and the deceased were both immigrants from Malta. Happily, they were successful in their adopted country and managed to earn and save a considerable fortune while raising a family. The applicant was somewhat involved in the family's finances, but was primarily a homemaker. Her level of information regarding the family's financial affairs is imprecise.

[6] Mr. Aquilina was struck down by cancer a very short while after his diagnosis. Unfortunately, the deceased did not prepare a will (or at least none has yet been found). His estate will not be a simple one to administer. Among other reasons for this, he had a number of business interests in Malta held through various corporations that the applicant is only beginning to understand even if she too is a shareholder in some of them. In addition to real estate holdings, there is an active business in Malta as well.

[7] At this point, the estate has no administrator. It is expected that that situation will soon be remedied. Now that it seems clear that no will exists, steps to appoint an administrator will be undertaken.

[8] I am fully satisfied that it is going to take a period of time -- very likely a year or more -- to permit the gathering of the facts necessary to understand the value of this estate and the applicant's intersecting interests within it. By "intersecting" interests I refer to the consequences flowing from her different roles as shareholder, widow and spouse. Valuations of a number of properties in Canada and in Malta will need to be undertaken. Legal advice will be needed to consider the various holding companies and the shareholdings in each. Based upon all of that information, more time will be needed to consider the rights of a surviving spouse under the SLRA as compared to those of a spouse under the FLA.

Issue to be Decided

[9] The issue in this case is whether the facts warrant extending the time conferred by the SLRA upon a surviving spouse to elect to have his or her property rights determined under the FLA equalization regime or under the SLRA regime (i.e., will, intestacy or combination of both). [page630]

Discussion and Analysis

(i) Statutory regime on intestacy

[10] In the event of an intestacy (as appears to be the case here thus far), the beneficiaries of Mr. Aquilina's estate will be his surviving spouse and their three children. The three children -- all adults now -- have been served with this application and indicated that they were not opposed.

[11] The FLA and the SLRA prescribe two different regimes with potentially different outcomes for dealing with the property rights of a surviving spouse.

[12] Part II of the SLRA prescribes the regime applicable in the event of an intestacy or a partial intestacy. Under s. 46(2) of the SLRA, where there is no will and more than one child of the deceased, the surviving spouse is entitled to one-third of the estate plus the "preferential share" prescribed under s. 45 thereof.

[13] By contrast, s. 5(2) of the FLA provides that the surviving spouse will receive one-half of the difference between the value of the net family property of each of the spouses where the deceased had the higher of the two amounts.

[14] Clearly, these two regimes cannot be applied simultaneously. Section 6 of the FLA thus provides that the surviving spouse must elect whether to receive equalization under s. 5 of the FLA or his or her entitlements under the will or Part II of the SLRA as the case may be.

[15] The surviving spouse is given a period of six months to make the election: FLA s. 6(10). Absent an election, the surviving spouse takes under the scheme of Part II of the SLRA (in the case of an intestacy): FLA s. 6(11). During the six-month election period, the estate is prohibited from making distributions subject to certain exceptions so as to ensure the election is not defeated before it can be made: FLA s. 6(14).

(ii) Criteria for extending time to elect

[16] The applicant requested that I (i) extend the time to make an election until May 1, 2020 (two years from the date of the application); (ii) extend the time for the deemed election to the same date; and (iii) extend the time during which distributions from the estate are suspended until the same date.

[17] Any time prescribed by the FLA, including the six-month time lines prescribed by s. 6(1) and (14) can be extended by me pursuant to s. 2(8) of the FLA if there are apparent grounds for relief, if relief is unavailable because of delay that has been incurred in good faith and no person will suffer substantial prejudice by reason of the delay. [page631]

[18] I shall address each of these criteria in turn.

[19] Are there apparent grounds for relief?

[20] A consideration of the provisions of s. 5 and s. 6 of the FLA in the context of the SLRA suggests a few straightforward conclusions.

[21] First, the two acts are intended to be read and considered together as part of a comprehensive scheme. This is so not only in terms of division of property of spouses upon the death of one of them but also in terms of dependent support obligations.

[22] Second, the spouse is intended to have a period of time to consider his or her election. This is required not only because of the period of grief that naturally follows as traumatic an event as the death of a spouse but also because it takes time to gather information and be in a position to make an informed election in his or her best interest.

[23] Third, the requirement that the election be made within six months recognizes that a balancing of interests is required as between the imperative of ensuring that the surviving spouse is able to make the choice that is in his or her best interests on the one hand and the imperative of allowing an estate to be properly administered on the other. The spouse is an important stakeholder in the estate administration process, but not the only one.

[24] There are a number of formal and informal deadlines or expectations applicable to executors and administrators that are premised on the concept of the "executor's year". The fact that the legislature fixed the deadline for making an election at six months or halfway through the "executor's year" says something about the type of balancing expected when an extension is requested. In the normal course and in most cases, an extension should not be required. This too is informative as to the manner in which the legislature intends that the balancing of interests is to be undertaken.

[25] Fourth, the fact that a balancing of interests must be undertaken implies that neither is an absolute. The mere fact that the person seeking the extension -- the surviving spouse -- has not yet got full information is not dispositive of the matter. There is a difference between having precise and accurate information and having sufficient information to make an informed choice. Assessing whether the electing spouse has assembled perfect knowledge is not the standard to be applied in assessing whether there are grounds for relief. There will always be some piece of information missing that might better fill in the picture, even in the average or run-of-the-mill case. Extensions are intended to be the exception and not the rule. [page632]

[26] Combining these considerations, I conclude that there are grounds for relief when the electing spouse has not been able to assemble a reasonable knowledge base from which an informed choice might fairly be expected to be made. By granting time to make an election, the legislature intended that there be a fair opportunity to ensure that the election is a reasonably informed one. The concept of "reasonable" means that there are no absolutes -- reasonable is measured having regard to the nature of the information needed, its materiality to the choice to be made and the interests of other stakeholders in the process.

[27] I therefore conclude that there are some grounds for relief in the present circumstances. The complex and international nature of the business interests of the deceased will take more time to understand and evaluate. It would be irresponsible for the applicant to make an election with the limited information regarding value presently available.

[28] Has any delay been incurred in good faith?

[29] This criterion asks me to consider whether the electing spouse, while perhaps lacking the information to make an informed choice, has been acting in good faith in pursuing the information necessary to make the election.

[30] This application was brought very close to the six-month anniversary of the passing of Mr. Aquilina. That event was a relatively sudden, unexpected and shocking one. Apart from the time necessary to grieve and process the loss of a long-time spouse, time was also needed to look for a will and make inquiries of Mr. Aquilina's lawyer. The complexities associated with Mr. Aquilina having private corporate holdings in Malta, the process of obtaining appraisals -- all of this has been a lot to deal with. Mrs. Aquilina has now retained counsel and is in the process of getting matters in hand. I find that the delay, such as there has been, is both explainable and was incurred in good faith.

[31] Will anyone be substantially prejudiced by the delay?

[32] If no extension were granted, the default answer under the FLA is that the SLRA regime would govern. The only other known beneficiaries of the estate are Mr. Aquilina's three adult children. They have confirmed that they do not oppose this motion. That acquiescence, while not rising to the level of active consent, nevertheless argues against there being substantial prejudice.

[33] Superficially, it can be supposed than any extension of the time to elect is prejudicial to the interests of other beneficiaries since it can confidently be assumed that any election ultimately made would be to accept the more favourable regime thereby leaving less for the remaining beneficiaries. The prejudice s. 2(8) of the FLA asks me to consider is not the prejudice of losing the [page633] benefit of the random chance of a bad choice by the surviving spouse for that is all that an uninformed election would produce. Neither the applicant nor the court can say at this point which regime (FLA or SLRA) would be more favourable to the property expectations of the other beneficiaries.

[34] In this context, the prejudice that I must consider is the prejudice inherent in time. Deferring the time to make an election has consequences. Beneficiaries will be delayed in receiving some or all of their entitlements. The estate will either be prohibited from distributing or will have to reserve assets sufficient to enable it to account for either election. Estate administration is a complex enough affair without having the road map of knowing who is intended to get what effectively taken out of the administrators' hands for an extended period of time. Some asset values may change over time. Having all or a substantial portion of the estate effectively frozen is a burden on the estate and upon its beneficiaries the materiality of which is a function of its duration. It is this type of prejudice that I must weigh in the balance.

[35] In light of the non-opposition of the other beneficiaries and the fact that the estate does not yet have an administrator, I conclude that the prejudice to the estate in extending the time for Mrs. Aquilina to make her election is very slight. It will be many months before the estate will likely be in a position to consider its first steps, let alone a distribution.

Disposition

[36] In the result, I granted the application but reduced the extension from the two years requested to one year. I did so without prejudice to Mrs. Aquilina applying for a further extension should circumstances warrant.

[37] The extension granted applied to (i) the time to make an election; (ii) the time for the deemed election to apply; (iii) the time to commence an equalization application; and (iv) the time during which the distribution of the estate is suspended.

[38] At this point, I simply cannot predict in advance when the prejudice to the estate and the other beneficiaries will weigh heavier in the balance than the understandable desire of the applicant to make an informed choice.

[39] When the estate has an administrator and there has been a period of time to gather information about the international interests in particular, a more informed assessment by both the applicant and the court can be made than is possible now.

Application allowed.

• Vous trouverez la traduction française à la p. 634, post.

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