COURT FILE NO.: CV-22-92
DATE.: 2024-08-28
SUPERIOR COURT OF JUSTICE – ONTARIO
611 Ninth Avenue East, Owen Sound ON N4K 6Z4
RE:
Leith v Eccles
BEFORE:
Justice C. Wilkinson
COUNSEL:
Emma Forbes and Tetyana Ivanina for the Applicant
Corwin Leifso, for the Estate
Julia Fischer, for Respondent Melissa Leith
Ross H. Thomson for Respondent Jason Leith
HEARD:
May 16, 2024, by Justice C. Wilkinson, in person
rULING ON mOTION
[1] The Applicant, Linda Leith, brings this motion to receive an equalization payment from the Estate of her deceased husband, William Gordon Alexander Leith. She further seeks to apply that equalization payment towards the purchase of the matrimonial home, which is currently owned by the Estate. As Ms. Leith filed a signed Election of Surviving Spouse with the Estate Registrar for Ontario, there is no dispute that she is permitted to make a claim for equalization from the Estate pursuant to section 5(2) of the Family Law Act, R.S.O. 1990, c. F.3, rather than receiving the gifts specified for her under the Will. There is also no dispute that an equalization payment to Linda has priority over gifts made to any other beneficiaries under the Will: Family Law Act, s. 6(12). As Linda has elected to receive an equalization payment from the Estate, any gifts made to her under the Will are revoked: Family Law Act, s. 5(8).
[2] For the reasons that follow, I find that the properties owned by the Estate must all be sold to determine the exact quantum of the equalization payment owed to Linda Leith. I further find that the net proceeds of the sale of the properties individually bequeathed to the three children of the deceased shall be divided between the children on a prorated basis based upon the sale price of each property once all debts of the Estate have been paid. The balance of the Estate shall be divided equally between the children as per the terms of the Will.
Background
[3] Mr. William Leith died on December 29, 2021, with a Will. In his Will, Mr. Leith directed that his wife be paid half of the amounts in his bank accounts, pension, and RRSP accounts, but has not otherwise provided for her in his estate. At the time of his death, Ms. Leith and Mr. Leith had been married for 46 years, and continued to live together at a farm property located at 553048 Grey Road 23, R.S. #4, in Durham, Ontario (the “Home Farm”). Mr. Leith purchased the Home Farm from his parents prior to marrying Ms. Leith. The Home Farm was owned in title by Mr. Leith only. Ms. Leith continues to live at the Home Farm at the present time, along with her daughter, Melissa Leith, and Melissa’s fiancé and child. Linda Leith has obtained an appraisal for the Home Farm which assesses its value at $2,400,000.
[4] Since Mr. Leith’s death, Linda Leith has been paying the insurance and property taxes for the Home Farm, and shares the utility costs with Melissa. Neither Linda nor Melissa have paid rent to the Estate for use of the Home Farm.
[5] At the time of his death, Mr. Leith also owned an additional five properties, all of which were acquired during the course of the marriage. Linda Leith is not on title for any of these properties, except for a 60-acre lot, which was owned by the deceased and Linda Leith as equal tenants in common. This lot has now been sold, and Linda Leith has received her share of the net proceeds of sale. The deceased’s 50% portion of the 60-acre lot was specifically bequeathed to son Jason, along with the Home Farm, and its contents, appliances, livestock, and equipment. Jason Leith’s portion of the proceeds of sale of the lot, totalling $498,702.37, has been used to pay taxes for the Estate, with the balance being held in trust.
[6] Counsel for Jason Leith states that for the purposes of this motion the livestock and home contents are not being valued. However, the farm equipment has been appraised with a value of $124,800.
[7] The Will also specifies that son Scott and daughter Melissa were each to receive a specific property. Linda Leith has obtained appraisals for these properties, along with appraisals for two vacant lots owned by the Estate. The value of these appraisals is not being disputed for the purposes of this motion, as follows:
Southgate Farm – bequeathed to Scott: $ 1,600,000
Durham House – bequeathed to Melissa: $ 350,000
Glenelg Building Lot – bequeathed to all three children equally:
$ 225,000
- Non-Building Lot – bequeathed to all three children equally:
$ 200,000
[8] Apart from the specific properties bequeathed to each child, the Will provides that the balance of the Estate is to be divided between the three children in equal shares.
[9] The Applicant, Linda Leith, seeks to purchase the Home Farm from the Estate by determining the fair market value for the Home Farm, and then applying the equalization payment owed to her from the Estate to the purchase price. The parties estimate the equalization payment owed to Linda to be in the range of $2,100,000 to $2,400,000, depending upon the sale price of the properties, and the disposition costs to be considered resulting from the sales. As it is anticipated that Linda Leith’s equalization payment will be less than the fair market value for the Home Farm, she proposes to pay directly to the Estate whatever amount is owed above her equalization payment to take over title of the Home Farm.
[10] Linda Leith also argues that it will save the Estate money to have the Home Farm transferred to her, as an anticipated 5% real estate commission fee plus HST, estimated to be $120,000 based on the appraised value of the property of $2,400,000, will have to be paid by the Estate if the Home Farm is sold on the open market.
[11] The Respondent, Jason Leith, opposes Linda Leith’s request to purchase the Home Farm from the Estate. He takes the position it is premature to calculate the equalization payment owed to Linda Leith prior to the properties being sold. He submits that to treat all the beneficiaries of the Will equally, all property owned by the Estate should be sold, and the debts of the Estate, including the equalization payment to Linda Leith, be paid.
[12] Jason Leith also argues that selling the properties is the only way to accurately calculate Linda Leith’s equalization payment, as the precise disposition costs relating to the sale of the properties is presently unknown. He further submits that after all the debts of the Estate are paid, the residual amount left over from the sale of the real properties designated for the children under the Will should be divided between them on a prorated basis. This basis should be consistent with the sale price of each of the properties bequeathed to each child, with the balance of the Estate to be divided equally between the three children, as per the terms of the Will. He argues that proceeding in this fashion is the only fair way to attempt to honour the wishes of the deceased, while also paying an equalization payment to his mother.
[13] Jason Leith also submits that the various properties owned by the Estate may sell for higher amounts than currently appraised, which he says supports his position that the Home Farm must be sold on the open market to ensure that the beneficiaries in the Will receive the highest payment for the Home Farm.
[14] Melissa Leith does not agree with a prorated division of Estate assets. Her counsel submits that since the property given to her in the Will is valued at a substantially lower amount than the value of the properties given to her brothers, she will only recover 7% of the total value of the Estate, or approximately $186,000, when the value of the property bequeathed to her is $350,000. If the properties are all sold, she states she will be homeless, with insufficient funds from her inheritance to purchase a new home. She argues that I should fashion an equitable remedy to protect her interests, as the testator had intended for her to inherit a property. Melissa is supportive of Linda Leith’s proposal to apply the equalization payment owed to her by the Estate towards the purchase of the Home Farm.
[15] The main issues for me to determine on this motion are:
a) Has the Estate been unjustly enriched by Linda Leith’s contributions to the Home Farm, and if so, is a constructive trust the appropriate remedy?
b) Can Linda Leith obtain relief under the Succession Law Reform Act?
c) Can Linda Leith’s equalization payment be determined and paid without selling all the properties owned by the Estate?
d) Is Ms. Leith permitted to buy the Home Farm from the Estate in lieu of receiving a monetary equalization payment?
e) What disposition costs, if any, should be deducted from the Net Family Property of the Estate?
f) How should the remainder of the Estate be divided between the three children?
Has the Estate been unjustly enriched by Linda Leith’s contributions to the Home Farm, and if so, is a constructive trust the appropriate remedy?
[16] Ms. Leith argues that she is entitled to a constructive trust claim in the Home Farm, and that this fact should be considered when determining if a sale of the Home Farm should be ordered prior to calculating the equalization payment owed to Linda Leith. This relief was not pleaded in the Application. Counsel for Melissa Leith joins her in this submission, arguing that the court’s inherent ability to order equitable relief provides sufficient authority for me to find that Linda Leith should be granted a constructive trust in the Farm Home, even if this issue was not pleaded.
[17] Ms. Leith provides affidavit evidence of the contributions she has made to the family over the years, including helping with the running and upkeep of the farm.
[18] Counsel for Jason Leith argues that no claims for ownership of the property were made in any of the pleadings, and that it is inappropriate for me to consider this argument at such a late stage in the middle of the proceeding, when facta and all pleadings have already been exchanged. Jason Leith also provides affidavit evidence that his parents lived separate lives, and were not involved in a joint venture.
[19] In making my determination on this motion, I will not be considering Linda Leith’s claim for a constructive trust. If Ms. Leith wished to claim a constructive trust in the Home Farm, her Application ought to have been amended to claim that relief long before this motion was argued. Ms. Leith’s claim that she has a constructive trust in the Home Farm will therefore have no impact on my decision.
Can Linda Leith obtain relief under the [Succession Law Reform Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-s26/latest/rso-1990-c-s26.html)?
[20] Linda Leith also takes the position in her factum that at the time of the deceased’s death she was his only dependant, and she relies upon s. 62 of the Succession Law Reform Act, R.S.O. 1990, c. S.26, to seek payment of support from the Estate. Again, this issue is not pleaded in her Application. None of the counsel made any submissions with respect to this issue in oral argument, including counsel for Linda Leith.
[21] I do not have sufficient information before me to consider a support-based claim under the Succession Law Reform Act in the context of this motion.
Can Linda Leith’s equalization payment be determined and paid without selling all the properties owned by the Estate?
[22] The parties agree that the assets of the Estate that are not real properties are insufficient to provide the quantum of the equalization payment that is owed to Ms. Leith.
[23] Linda Leith relies upon s. 7(1) of the Family Law Act, which states that I may determine any matter respecting the spouse’s entitlement under s. 5. The Act further provides that, in considering an application under s. 7, I may order that a payment be made from one spouse to the other, and also, if appropriate, I may order that property be transferred to, or in trust for, or vested in a spouse, whether absolutely, for life or for a term of years: Family Law Act, ss. 9(1)(a) and (d)(i). To support her claim that the Home Farm be vested in her, Ms. Leith also relies upon the court's broad and general power to grant a vesting order found in s. 100 of the Courts of Justice Act, R.S.O. 1990, c. C.43.
[24] There is very little precedent in the case law addressing vesting orders being made against an estate. The Ontario Court of Appeal in Thibodeau v. Thibodeau, 2011 ONCA 110, 104 O.R. (3d) 161 at para. 42, however, has given direction as to the criteria that must be met prior to granting a vesting order:
The onus is on the party seeking such an order, and as a general rule the court's discretion will only be exercised in favour of a s. 9(1) order where it is established – based on the targeted spouse’s previous actions and reasonably anticipated future behaviour – that the equalization payment order granted will not likely be complied with in the absence of additional, more intrusive provisions.
[25] The remedy of a vesting order should not be imposed routinely or indiscriminately, and should be ordered only if there is a real need, after all relevant considerations have been taken into account. There must be a concern that payment of an ordered equalization payment will not be honoured before the court can order the transfer of property under s. 9(1): Thibodeau, at para. 40.
[26] The Court of Appeal has also confirmed that a vesting order is essentially an equitable remedy designed to work as an enforcement mechanism (Lynch v. Segal, 2006 CanLII 42240 (ON CA), 82 O.R. (3d) 641 (Ont. C.A.), at para. 56).
[27] As there are sufficient funds in the Estate to pay the equalization payment owed to Linda Leith once the properties are sold, there is no concern that at an equalization order will be ignored or not complied with that would require the transfer of property.
[28] The wishes of the testator also cannot be overlooked. For his own reasons, Mr. Leith specifically chose not to bequeath the Home Farm, or any other property, to Linda Leith. Vesting the Home Farm is not the only way to provide Ms. Leith with the equalization payment owed to her. Her ability to receive a full equalization payment is not prejudiced by the Estate selling properties owned by the Estate to generate sufficient funds to pay the equalization payment. The fact that Mr. Leith specifically chose not to bequeath a property to Ms. Leith is a significant factor that I must consider when determining the manner in which Ms. Leith will receive her equalization payment from the Estate.
[29] Although selling the Home Farm to Linda Leith may save the Estate $120,000 or more by avoiding a commission fee resulting from the sale of the property, this factor does not change the primary issue that I must consider, which is honouring the testator’s intentions while still providing Ms. Leith with the appropriate equalization payment owed to her by the Estate.
[30] The properties owned by the Estate must be sold to provide Ms. Leith with the equalization payment that is owed to her. Once the properties are sold, the Estate will have sufficient assets to pay the full equalization payment without requiring the property to be vested to satisfy the amounted owed.
What disposition costs, if any, should be deducted from the Net Family Property of the Estate?
[31] As I have determined that the properties owned by the Estate shall be sold, the disposition costs related to the sales will be known and considered prior to calculating the equalization payment owed to Ms. Leith.
How should the remainder of the Estate be divided between the three children?
[32] The Family Law Act provides no guidance as to how beneficiaries share liability for an equalization payment owed to a surviving spouse. However, s. 68 of the Succession Law Reform Act states that, subject to an order of the court, the responsibility to meet any support order falls rateably upon all beneficiaries of the estate. In Re Nalywayko, (1984) 17 E.T.R. 151, (Ont. Surr. Ct.), the court held that the support award made to the Applicant should fall rateably on the whole of the estate, as a reasonable testator would not have provided that any part of the estate, including specific legacies, should be exempt from bearing their share of the burden occasioned by the order.
[33] As the Home Farm must be sold to satisfy the equalization payment owed to Linda Leith, Jason Leith will be unable to receive the property intended for him under the Will. Professor Howard Black notes that an abatement of the gifts under the Will occurs when the assets of the estate are insufficient to satisfy payment of the debts and gifts in full. In this situation, some or all of the gifts will be “reduced proportionately to make up for the deficiency”: Wills and Estates: Cases, Texts and Materials, 4th ed. (Toronto: Emond, 2023), at p. 170. Professor Black also indicates that the general principle is that the gifts within each category abate rateably (p.170).
[34] Mr. Leith’s Will does not treat his children equally, and that is his right. Once the equalization payment and all other debts of the Estate are paid, the net proceeds of sale from the equipment and the four specifically bequeathed properties may be distributed to the children. It is appropriate that the net proceeds of sale be divided between the three children on a prorated basis based on the sale price of each property, including the final value for the equipment once it is sold.
[35] By way of example, the current appraised values for the specific properties bequeathed under the Will are $2,400,000 (Home Farm) + $498,702.37 (half of 60-acre lot) + $124,800 farm equipment = $3,023,502.37 (to Jason) + $1,600,000 (Southgate farm to Scott) + $350,000 (Durham property to Melissa) = $4,973,502.37. If the Home Farm, equipment from the Home Farm, Southgate property, and Durham property each sell for these amounts, and recognizing the value already realized for half of the 60 acre lot, Jason Leith’s share of the net proceeds of sale from these properties would be 60.79% of the total. Scott Leith’s share of the Estate would be 32.17% of the total, and Melissa Leith’s share would be 7.04% of the total.
[36] The Will specifies that other than the properties that Mr. Leith specifically designated to the individual children, the balance of the Estate is to be divided between the children in equal shares. Accordingly, the net proceeds of sale from the two vacant lot properties currently on the market to be sold will be divided equally between the three siblings. Similarly, any liquid assets of the Estate available once all the debts of the Estate have been paid shall be divided between the three siblings equally as per the terms of the Will.
Conclusion
[37] I acknowledge that it was Mr. Leith’s intention for each of his children to receive specific properties and gifts under his Will. Unfortunately, there are insufficient assets in the Estate apart from the real property holdings to satisfy the Estate’s debt of an equalization payment owed to Linda Leith.
[38] I further acknowledge that based on my ruling, Melissa Leith will likely receive a smaller inheritance from the Estate than the value of the property specifically bequeathed to her. This result is unfortunate. However, the failure of the testator to account for an equalization payment owing to Ms. Leith has created this situation, where the specific property bequests he made cannot be honoured.
[39] All property owned by the Estate shall be listed for sale. The net proceeds of sale from the Home Farm, the equipment on the Home Farm, the Southgate Farm and the Durham property shall be divided between the three children on a prorated basis based on the sale values of the properties and equipment once all of the debts of the Estate have been paid. Any residual liquid assets owed by the Estate shall be divided equally between the three children as per the terms of the Will.
Costs
[40] If the parties are unable to agree upon costs, Jason Leith may prepare a cost submission to be served and filed by September 11, 2024. Linda Leith and Melissa Leith may serve and file responding cost submissions by September 25, 2024. Cost submissions may be no longer than three pages double spaced, not including Offers to Settle or Bills of Costs. If I do not receive cost submissions by these deadlines, I make no order as to costs.
Wilkinson J.
Released: August 28, 2024
COURT FILE NO.: CV-22-92
DATE.: 2024-08-28
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Leith v. Eccles
BEFORE: Justice Wilkinson
COUNSEL: Emma Forbes and Tetyana Ivanina
for the Applicant
Corwin Leifso,
for the Estate
Julia Fischer,
for Respondent Melissa Leith
Ross H. Thomson
for Respondent Jason Leith
RULING ON MOTION
Wilkinson J.
Released: August 28, 2024