Spencer v Hutchings, 2022 ONSC 1555

COURT FILE NO.: CV-19-0328-00 DATE: 2022-03-10 ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE ESTATE OF JEFFREY HUTCHINGS

B E T W E E N:

SHIRLEY-ANNE SPENCER Applicant

Natalie J. Gerry, Ericksons LLP, for the Applicant

• and -

JEFFREY HUTCHINGS Respondent

Samuel W. Crowe, Buset LLP, for the Respondent

HEARD: November 8, 2021 with additional written submissions thereafter

Regional Senior Justice B. R. Warkentin

Reasons on Application

1This is an application by Shirley-Anne Spencer (“Ms. Spencer”) under Rule 14.05 (3)(a) and (h) of the Rules of Civil Procedure and section 58 of the Succession Law Reform Act, R.S.O. 1990, c.S.26 (the “SLRA”). Ms. Spencer seeks relief in the form of dependent support from the estate; a constructive trust with respect to certain assets of her late spouse, Jeffrey Hutchings (the deceased) and claims that the deceased, the respondent, Jeffrey Hutchings (“Mr. Hutchings”) and she had an oral agreement that all the deceased’s assets would be divided equally between Mr. Hutchings and her.

Background of the Estate and Assets

2Ms. Spencer and the deceased were common law spouses from 1996 until the deceased’s death on May 21, 2018. The deceased had one son from a prior relationship, the respondent, Jeffrey Hutchings.

3The deceased died intestate. His total assets immediately prior to his death were $1,159,398.49 together with 185,000 stock options in Wesdome Gold Mines Ltd. (Wesdome) where the deceased had been a long-time employee. Of these assets, $1,061,898.49 were distributed to Ms. Spencer and Mr. Hutchings through beneficiary designations and did not fall into the estate. Of the $1,061,898.49, Ms. Spencer received $643,191.14 and Mr. Hutchings received $418,279.35.

4The estate of the deceased therefore consisted of approximately $97,500.00 together with the 185,000 stock options in Wesdome before expenses. Included in the $97,500.00 was the deceased’s home, valued at $90,000.00 (although it may be worth more) and various personal possessions. Ms. Spencer paid off a line of credit owed by the deceased in the amount of $10,215.08. This was an estate expense for which Ms. Spencer seeks reimbursement.

5Because Ms. Spencer and the deceased were common law spouses, without a will, the sole beneficiary of the estate is Mr. Hutchings; subject to the claims of Ms. Spencer as set out above. Mr. Hutchings was therefore appointed the Estate Trustee Without a Will.

6As Estate Trustee, Mr. Hutchings decided to exercise the estate’s stock options in Wesdome. Mr. Hutchings used his personal funds to exercise the first 55,000 in stock options at a cost of $92,428.00. This cost included both the cost of exercising the options and the tax owing. Mr. Hutchings then sold those shares and used the profit from them to exercise the purchase of the remaining 130,000 stock options at a cost of $258,300.00.

7The initial 55,000 shares were sold for $742,493.00, with a net profit after the cost of exercising the stock options and capital gains taxes on the sale of the shares of $650,065.00. The 130,000 shares were sold for $1,353,300.00 with a net profit after the cost of exercising the stock options and capital gains taxes on the sale of the shares of $801,926.18. (Note, the profit amounts may vary once all related expenses, in particular capital gains and other taxes are verified.)

8Ms. Spencer claims she is entitled to share equally with Mr. Hutchings in all the deceased’s assets, both by beneficiary designation and those that fell into his estate. By her calculation she should receive an additional $656,968.16 from the estate. When added to the monies she already received by way of beneficiary designation of $643,619.14, this would provide her a total sum of $1,300,587.30.

9Ms. Spencer claimed she was entitled to an equal sharing of the deceased’s net estate assets on both moral and equitable grounds. She claims shortly before his death the deceased held a family meeting with Mr. Hutchings and her in which he informed them that it was his intention to divide all his assets equally between them on his death. Notwithstanding her other claims, she also asserts that she has a moral right to one half of the estate because of this verbal communication.

10Mr. Hutchings is prepared to distribute the net estate equally with Ms. Spencer except for the net proceeds of the sale of the 55,000 share-purchase. He also seeks executor’s compensation. Mr. Hutchings asserts that because he used his own funds to finance the purchase of the 55,000 shares prior to the expiry of the option at a time when the estate did not have the funds to make that purchase, the entire net proceeds of the sale of those shares should belong to him solely.

11Mr. Hutchings also denies that it was the deceased’s intention to ensure the entire estate was divided exactly on a 50/50 basis. In support of this he pointed to the significant discrepancy between the assets already distributed to Ms. Spencer and himself by way of beneficiary designation where Ms. Spencer received approximately $230,000.00 more than his share.

Should the 55,000 Share Purchase be Excluded from Division with the Applicant?

12Ms. Spencer’s claims rest on her entitlement as a dependent of the deceased (not disputed), pursuant to s. 62(1) of the SLRA; a constructive trust based upon the length of her cohabitation with the deceased and her contribution to the accumulation of family assets as well as the alleged oral promise made by the deceased that his assets should be divided equally between Ms. Spencer and Mr. Hutchings.

Dependent Support Claim

13As indicated, Ms. Spencer’s entitlement to relief as a dependent under s. 62(1) of the SLRA is not in dispute. The quantum of the amount required to satisfy Ms. Spencer’s claim is disputed.

14Counsel for Ms. Spencer referenced the Ontario Court of Appeal case in Cummings v. Cummings in which the court noted that utilizing the Spousal Support Advisory Guidelines (the “SSAG”) are one method for assessing the appropriate quantum of a dependent relief claim.

15Ms. Spencer submitted that her dependent relief claim should be viewed in a similar fashion as the payment of spousal support calculated under the SSAG, as if the parties had separated. Based upon her calculations, Ms. Spencer claims she would be entitled to spousal support for 10 years in the amount of $9,423.00 per month for a total of $1,130,760.00 over that 10-year period. She asserts therefore that her dependent relief claim alone would entitle her to at least $1.1 million dollars. Ms. Spencer has based her calculation for monthly spousal support on income that would have been earned by the deceased both in his employment and through income from having exercised his stock options.

16While I question whether Ms. Spencer would be entitled to spousal support that includes income from unrealized stock options, the amount claimed, even if correct, is overstated. The SSAG calculation of spousal support in the case of separation is quite different than a lump sum calculation for a dependent spouse on death.

17Monthly spousal support payments after a separation are taxable to the recipient and tax deductible to the payor. The payments are spread over the period of the support obligation (10 years in this scenario). A lump sum payment, however, is received at the outset of the 10 years period, is tax free and would generate income. Similarly, the death of a support payor would be a material change in circumstances and may result in a reduction of spousal support payable.

18There are various other factors that are considered in the calculation of spousal support on a separation, such as need, lifestyle and the ability to pay. While these factors are not the main focus of a dependent relief claim, the calculation of support payable under the SSAG must be adjusted to assess the present value of the tax-free, lump sum dependent relief amount.

19The deceased ensured that Ms. Spencer was provided for through various beneficiary designations and jointly held assets. She received close to $650,000.00 from those assets. While the calculation is not necessary for the purpose of this finding, this amount is likely higher than the present, after-tax value of the 1.1 million that Ms. Spencer claims would likely have been paid to her in spousal support under the SSAG over 10 years.

20Ms. Spencer has been adequately compensated as a dependent by the assets left to her by the deceased through beneficiary designations. I therefore find that Ms. Spencer’s claim for dependent relief has been met and satisfies the requirements set out in section 62(1) of the SLRA.

Constructive Trust Claim

21Ms. Spencer alleges that her contributions during the relationship have unjustly enriched the estate of the deceased and the only means to compensate her for this is an equal split of all the estate assets, including those provided by way of beneficiary designation.

22Ms. Spencer claims that she provided housekeeping and other domestic services to the deceased that enabled him to advance in his employment, including the ability to accrue the various stock options.

23Mr. Hutchings notes that all estate assets, except the net proceeds of the 55,000 shares, after estate trustee compensation and other expenses, will be distributed equally. He also commented that there has been no consideration of Ms. Spencer’s personal assets as part of her claims, even though Ms. Spencer has personal assets that include two properties, personal savings, and pension income.

24Mr. Hutchings also alleges that Ms. Spencer benefited from a lifestyle with the deceased that wholly offsets any deprivation that Ms. Spencer may have incurred by not receiving half of the net proceeds of the 55,000 Wesdome stock options. He therefore disputes that Ms. Spencer has a claim to a constructive trust to 50% of all the deceased’s assets.

[25] For Ms. Spencer to succeed in her claim for a constructive trust against the estate of the deceased, this court must find that there has been an unjust enrichment, in this case to Mr. Hutching as the sole beneficiary of the estate of the deceased. Unjust enrichment requires three elements: a) an enrichment of or benefit to the defendant; b) a corresponding deprivation of the plaintiff; and, c) the absence of a juristic reason for the enrichment. (Kerr v. Baranow, 2011 SCC 10 at para 32.)

26Without including the net sale proceeds of the 55,000 shares, Ms. Spencer will receive additional funds from the estate in the range of another $400,000.00 to 500,000.00. (This amount is an estimate based upon the figures provided by the parties in their materials and includes half of the net sale proceeds of the 130,000 shares, half of the proceeds of the sale of other assets of the estate and an equalizing of the assets already received by both parties through beneficiary designations, etc.; less various estate expenses yet to be ascertained.)

27Based upon the distributions to be made, and even without taking into account Ms. Spencer’s personal assets, Ms. Spencer’s claim for a constructive trust to half of the entire estate must fail. She has not demonstrated that her contribution to the property of the deceased contains a sufficiently substantial and direct link or causal connection to half of the sale proceeds of the 55,000 shares (Kerr at para 51). Nor does her claim demonstrate that she has suffered a deprivation (Kerr at para 39).

28The deceased did not make a last will and testament that addressed the assets that fell into his estate. Under the law, Ms. Spencer, a common law spouse, cannot succeed in a claim against the estate absent an entitlement as a dependent or through a constructive trust claim.

29Considering what Ms. Spencer has and will still receive from the estate, she will inherit assets in the range of 1 million dollars. Mr. Hutchings will receive slightly more. Based on these facts, Ms. Spencer has not demonstrated that Mr. Hutchings has been unjustly enriched because of an unequal division of the estate of the deceased.

30Ms. Spencer’s claim for a constructive trust for one half of the entire net proceeds of the estate therefore fails.

Was there an Oral Agreement to Share the Estate on a 50/50 Basis?

31The parties agree that shortly before his death, the deceased held a family meeting with Mr. Hutchings and Ms. Spencer regarding his estate. It was Ms. Spencer’s view that the deceased always intended to ensure that his entire estate was divided equally between her and Mr. Hutchings. She claims this was an oral agreement or promise to her that should be honoured and it should include all of the Wesdome stock options and the net proceeds of their sale.

32Mr. Hutchings agreed that there had been discussion at the family meeting regarding which assets would go to whom, and how the deceased had set up certain beneficiary designations. However, Mr. Hutchings argued that the only reference to the Wesdome shares in the family meeting was that they should be sold in the fall. Mr. Hutching pointed to the fact that when the deceased was talking about how his estate would be distributed, he identified certain assets as going to each of them, the effect of which was not an equal distribution but one in which Ms. Spencer received substantially more through the beneficiary designations in her favour.

[33] For there to be an enforceable oral agreement, it is necessary for the three basic elements of contract formation to have been satisfied: a) there must be an offer; b) The offer must be accepted; and c) There must be consideration provided with the acceptance.

34When the agreement is oral, there must be additional factors present including certainty regarding the essential terms of the agreement and the intention to create a legally binding agreement. (IMG Canada Limited v. General Motors of Canada Limited, 2017 ONSC 3841, at para 9, citing Donovan Homes Ltd. v. Modern Paving Ltd., 2011 NLCA 39, 308 Nfld. & P.E.I.R. 180, at paras. 30, 32-33).

[35] When determining whether there was an intention to create a legally binding contract, the court must determine whether there was a “meeting of the minds” such that an agreement was formed. A meeting of the minds is established when the following is present: “… [T]he parties will be found to have reached a meeting of the minds, in other words be ad idem, where it is clear to the objective reasonable bystander, in light of all the material facts, that the parties intended to contract and the essential terms of that contract can be determined within a reasonable degree of certainty …” (UBS Securities Canada Inc. v. Sands Brothers Canada Ltd.; [2008] O.J. No. 1676, at para. 40 (Ont. S.C.J.), Pepall J.)

36In enforcing an oral agreement regarding the sale of shares in UBS Securities, Pepall J. found that the essential terms of the agreement – number of shares, price per share and settlement date – were settled. She held that an objective, reasonable bystander would conclude, in all the circumstances, that the parties had intended to contract. (paragraphs 47-50).

37Unlike UBS Securities, there was no discussion regarding the value of the Wesdome stock option or how they should be handled, beyond a comment by the deceased that they should be sold in the fall. There was no discussion about how to finance the purchase of the stock options or their value. It does not appear that beyond the suggestion that they be sold in the fall, no other discussion regarding the Wesdome stock options occurred.

38For this court to find there was a binding oral agreement regarding all the Wesdome stock options, there must have been some discussion of the value of the stock options, how the purchase of those options would be funded and how the proceeds would be divided.

39That is not the case. The evidence does not demonstrate a meeting of the minds sufficient to find a binding oral agreement between the parties for an equal division of the entire estate. Nor would an objective, reasonable bystander conclude, in all of the circumstances, that the parties had intended to contract.

40While I sympathize with Ms. Spencer regarding her understanding of what she was promised by the deceased, without more evidence supporting an oral agreement or contract, there was no “meeting of the minds”. The evidence before the court regarding the family meeting does not rise to the standard required to find an oral agreement.

41Ms. Spencer’s claim to entitlement to 50% of the net proceeds of the 55,000 shares after adjustments is therefore dismissed.

42If the parties are unable to agree on the final distribution of the estate after deductions for taxes, estate trustee compensation and other expenses, including the costs of this litigation, they may seek further direction from me. Any expenses relating to the purchase or sale of the 55,000 shares shall be excluded from the deductions when calculating Ms. Spencer’s share of the estate proceeds.

Madam Justice B. R. Warkentin, R.S.J.