Frye v. Frye Estate
Earlier this week I blogged on how estates disputes can take on layers of complexity when principles of Family Law and Contract Law are brought into the process. The recent decision of the Ontario Court of Appeal in Frye v. Frye Estate demonstrates an instance of complexity arising out of the relationship between a shareholder's agreement and a Will. At issue was a simple question: can the terms of a shareholder's agreement restrict the testamentary freedom of a shareholder insofar as the shares are concerned? The Court found as follows:
- Contractual obligations do not constrain a person's ability to bequeath property by means of a will. Rather such obligations may give rise to an action for breach of contract but do not affect the validity of the Will itself.
- Legal title to the shares is transmitted by the Will to the estate trustees, who hold them in trust for the beneficiary of the shareholder's Will...However, the estate trustees are bound by the shareholder's agreement and cannot distribute the shares out of the estate without complying with the shareholder's agreement. The estate trustees' inability to transfer the shares immediately does not, however, render the bequest void.
- A further complication was the fact that the intended beneficiary of the shares and the estate trustee of the deceased shareholder's estate were the same person.
Frye will no doubt be the subject of further commentary in the estates bar in the weeks ahead.
David M. Smith
