This week on Hull on Estates, David Smith and Megan Connolly reference the case Belvedere v. Brittain Estate to discuss constructive trust claims made against an estate by a non-married spouse.

Trust Claims and Non-Married Spouses - Hull on Estates Podcast #84

Posted on November 6^th, 2007 by Hull & Hull LLP

David Smith:  Hi.  Welcome to Hull on Estates.  You’re listening to Episode #84 on November 6^th, 2007.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

David Smith: Hi, my name is David Smith.  I’m one of the partners at Hull & Hull LLP.  And with me is Megan Connolly, one of our associates.  Hi Megan.

Megan Connolly:  Hi David.

David Smith:  Megan, I thought today we would talk about constructive trust claims made against an estate by a non-married spouse.  And this was an issue that I recently wrote a blog on and noted that there is a fairly interesting case called Belvedere and Brittain Estate of the Ontario Superior Court of Justice.  Now before we get talking about the case, I just wanted to point out at the beginning the case is under appeal apparently, more as to the quantum of damages than anything else.  But it does provide a very interesting fact situation to discuss.

Megan Connolly:  The case involves an unmarried couple who had met in 2000 and had apparently moved in together in June, 2000 although that was under dispute in the case.  Now, on the deceased’s death, he didn’t provide for Laura, his common-law spouse, at all in his Will and made no other provision for her on his death.

David Smith:  That’s right, Megan.  And the claim made against the estate by Laura was based on several arguments.  She argued proprietary estoppel, basically saying that she entered into the relationship in reliance upon receiving certain gifts from the deceased’s estate.  But the primary basis upon which the Court ordered a constructive…awarded damages, was on the basis that there was found to exist a constructive trust in the estate for her benefit.

Megan Connolly:  Right.  Now she said that it was always her partner’s intention that on his death, she receive his RRSPs, the use of his house or alternatively, funds to purchase a new house, as well as a new car.  And in support of that, I guess she pointed out that in moving in with him, she had sold her home for I think less than its market value.  She had given up her car.  She hadn’t kept any of her possessions and she’d also I guess reduced her…she reduced the amount of time she spent working.

David Smith:  That’s right.  And so what the Court did, in terms of analyzing her claim, was looked at the various components of constructive trust and there is a three-fold test, which is an enrichment of the estate to the detriment of the claimant in the absence of any juristic reason.  Megan, what was it about the fact situation that made the Court think that she was enriched?  Or sorry, rather that the deceased was enriched?

Megan Connolly:  Well, as I said, when she moved in with him, she first of all had given everything up.  But she’d also spent a lot of time looking after his home.  He had a young child which she cared for.  She provided clerical support in his office.  She’d worked for Air Canada and she, I think, received heavily discounted flights for her friends and family as well as herself.  And both the deceased and his son, I guess, benefited from this.  Her family also had a condo in Florida that they would visit frequently and that they’d stay at.

David Smith:  When we talked about such an enrichment of the deceased, Megan, is it an enrichment of the estate, or is it, what do we mean exactly by enrichment?

Megan Connolly:  Well I guess basically it’s sort of the idea of getting something for nothing.  Here, the Court was saying that she’d provided, I guess, different services for him, whether it was through childcare, through maintenance to his property, to assistance with his business, etc., that she’d also been deprived as a result in that she’d given up income from her job, she’d sold her home and her car and I guess a Court’s interest is making sure that he didn’t receive anything without her also receiving a corresponding benefit.

David Smith:  It strikes me that the Court’s always interested to look at the relationship between her deprivation and his enrichment in the sense that there’s a trade-off there, isn’t there, between her loss and his gain.  And I guess that’s really what they’re talking about when they say that it’s got to be corresponding.  One thing I didn’t understand about the decision, quite frankly, was the fact that the Court considered the fact that apparently his death was unexpected and that she reacted very badly to this and caused her great emotional upset.  And the Court considered that as a factor to consider when looking at the phrase corresponding deprivation.  I mean, what do you think of that?  Because, to my mind, it’s not corresponding to any of the enrichment he gained…what do you think about that?

Megan Connolly:  No, it seemed like the Court was saying that, well he died, and it was really, really upsetting to her.  She’d apparently also been bipolar for a long time and I think this just worsened it.  She wasn’t working after his death.  And I think it seemed if not doubtful, at least questionable, whether she’d ever be able to work again.  And part of may be just, I guess, equity in a way, that the Court saw that, because of the situation, she was going to be severely I guess harmed in a sense, and wanted to correct that.  I’m not sure how solidly that’s grounded in legal principles.  I think it’s also worth mentioning that his estate was worth about $6,000,000.  So there seemed to be a lot of money to be spread around here.  And I think that was probably also a consideration.

David Smith:  And of course the third branch of the test is absence of juristic reason.  And again, this is a concept I wrestle with in the sense that I don’t think it’s always clear what a juristic reason could possibly be and what is an example of a juristic reason.  Do you have any thoughts on that?

Megan Connolly:  Well here, the defendants, the trust company, argued that her lifestyle had improved as a result of being with him.  So even if she was deprived and he was enriched, she too was also enriched by the fact that she went from, if not a low-paying job, a financial situation that wasn’t as comfortable as what she had when she was with the deceased.  And they sort of argued that that was a reason for his enrichment and her deprivation.  Now the Court didn’t accept that.  They said that, first of all, the improvement in her lifestyle was arguable, although I’m not sure if it is or not.  And that in any event, it didn’t constitute a juristic reason.  The Court also found that a lot of what she was doing was stuff she would have done even without him.  For example, the travel that they did a lot, was a result of her job at Air Canada.  And the Court found that well, she would have done that anyway.

David Smith:  That’s an interesting point, isn’t it?  So I guess really the Court’s got to look at all the circumstances.  And what struck me about this case to a large extent was, and maybe I’m being a bit cynical, but it seemed to me that the Court saw that she could not fit within the parameters of a support claim and under the SLRA, and looked for…well maybe looked for a way or looking at the facts, decided that there must be a way to benefit this woman, who had clearly given a great deal of herself to the benefit of this gentleman before he died.  And I guess, really, that’s what Courts of equity are there to do.

Megan Connolly:  And I think it’s also interesting that there was a lot of discussion in the decision about his intent.  The fact that even though he never made a Will, there was a lot of evidence that he’d intended to make one and that he’d intended to name her as the beneficiary of his RRSPs, which I think were worth about $2,500,000 at his death.  And there was also surrounding evidence from his friends and financial advisors that he’d always intended to do this.  And I think, just going back to the idea that he died in an accidental way, I think the Court was convinced that, well had he not died all of a sudden, he would have gone ahead and made these changes and that she would have become a beneficiary of the RRSPs and probably received some other money on his death.  So I think that was another, I guess, motivating reason for the Court to make the decision that it did.

David Smith:  Well that’s right.  I mean, as I understood the facts, the Court found that or considered evidence that he intended to marry her.  I think they’d even fixed a date.  And, of course, had he married her, that marriage would have revoked the Will, in which case she would have had all of the entitlements of a wife on an intestacy or under any Will that he would have made after that marriage, because of course the marriage would have revoked the pre-existing Will.

I guess to wrap it up, Megan, what I’d like to just touch on, or discuss, is the whole issue of damages here.  As I understand the nature of the appeal of this case, is primarily concerned with the quantum of damages.  The argument being that the value of the RRSP on a rollover was what she was entitled to receive. And I should point out the RRSP, as I understand it, no longer was in existence at the time of the judgment.  And so we’ve got a cash judgment payable by the estate in an amount equal to the RRSP on a rollover, even though the RRSP no longer exists.

Megan Connolly:  And I think that in this decision, the Court had also said that she wasn’t going to have to pay taxes on any of this, that to the extent taxes were payable, they’d be paid by the estate.

David Smith:  Which again is certainly a better result than would be the case had she made a support claim, in which case her support and entitlement, were it to be an income stream, would be taxable in her hands.

Megan Connolly:  And so I think this is another situation where, I mean, in the discussion of the case about constructive trusts, it was very interesting.  But I think it’s a situation where the Court sort of looked at a situation that seemed patently unfair and wanted to, I guess, manoeuvre the law in such a way as that she would get what she otherwise would have received from him.

David Smith:  Well that’s right and I mean, equitable principles are such that the law is always a flexible enough instrument and especially equity, which is again, we have to remember that estate courts historically were surrogate courts and courts of equity, rather than courts of law.  And so in that sense, the Court would be looking to make a fair decision all around.  And so in that sense, I think, you know, subject to any reversal on appeal, this is another interesting decision to consider any time as counsel we may be retained by a common-law spouse to consider a claim against an estate.

Megan Connolly:  Um, hmm, it is, so we’ll have to see what the Court of Appeal says.

David Smith:  Right.  Okay, well thanks Megan.

Megan Connolly:  Thank you, David.

David Smith:  Bye-bye.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

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