All About Estates

Domestic Contracts After Death

Interesting things happen when family law and estates collide. Battles over domestic contracts and houses lead to discussions of past mistakes, life experience, and occupation rent. Such was the case in Psarros Estate v Cook. As with many estates litigation cases, the Court was asked to determine a broad range of issues. Three issues in particular should be of interest to estate litigators.

The Marriage Contract

Mr. Psarros and Ms. Cook married in 1992. This was Ms. Cook’s first marriage and Mr. Psarros’s fourth. Mr. Psarros had three children from each of his previous marriages; Ms. Cook had none. Mr. Psarros and Ms. Cook were married for 20 years until Mr. Psarros’s death.

Ms. Cook and Mr. Psarros signed a marriage contract at the outset of their marriage. Among other things, Ms. Cook released her claims under the Succession Law Reform Act (the “SLRA”) to Mr. Psarros’s estate on death.

Six weeks before their wedding, Ms. Cook and Mr. Psarros bought a house as tenants in common. However, their marriage contract mistakenly referred to their ownership of the house as “joint tenants.” When Mr. Psarros died, Ms. Cook pointed to this error as reason to invalidate the marriage contract or, in the alternative, to void the SLRA release provision.

Ms. Cook argued that the SLRA release was linked to the mutually mistaken belief that she would inherit the house on Mr. Psarros’s death (which she would have done had the house been owned in joint tenancy). As a result of this mistake, Ms. Cook argued that either the entire agreement should be set aside, or the SLRA release should be severed from the contract.

The estate trustees agreed that there was a drafting error in the marriage contract, but not that there was a mutually mistaken belief at the time the marriage contract was signed. As a result, they argued that the SLRA release provision should be enforced. The Court agreed with the estate trustees.

The Court held that it had the discretion to set aside a provision of a domestic contract pursuant to s. 56(4)(c) of the Family Law Act. However, the Court refused to exercise its discretion in this case. Among other reasons, the Court found that Ms. Cook was not in fact under the mistaken impression that she owned the entire house on Mr. Psarros’s death – Ms. Cook had offered to buy the estate’s 50% interest in the house shortly after his death. The Court also held that Mr. Psarros knew at the time the marriage contract was signed that the house was held as tenants in common. Mr. Psarros had experience selling real estate earlier in life and thus would have understood the difference between joint tenancy and tenants in common. The Court also accepted that the deceased had conversations with his daughter where he told her that his share of the house would pass to his children (in part) on death. Finally, the Court held that Ms. Cook failed to establish that Mr. Psarros intended for her to have the house on his death. Even if she had, Ms. Cook was seeking to rectify the agreement, which is not the role of the court.

Determination of FMV

This led to the second issue – the sale price for the house. The marriage contract set out the mechanism for determining the sale price (namely, the parties would each obtain an appraisal and use the average of the two prices). The estate trustees had initially offered to sell Ms. Cook the estate’s interest in the house in late 2013, at which time Ms. Cook agreed to buy it. In 2014, each party obtained an appraisal of the property. However, the parties could not agree on the price and commenced litigation. The trial was not heard until 2017, at which time the house had significantly increased in value. Ms. Cook argued that the 2014 appraisals should be used to determine the sale price. The estate trustees argued that updated appraisals (as of 2017) were to be preferred.

The Court held that it was an implied term of the marriage contract that the appraisals be carried out within a reasonable time of the decision to sell the house. Since the decision to sell was made in 2014, the 2014 appraisals were to be relied upon.

Occupation Rent

Finally, the estate trustees advanced a claim for occupation rent from Ms. Cook. The Court agreed that Ms. Cook owed rent. However, the Court also found that the estate trustees bore the burden of proving what the rental rate should be, which it failed to do (the Court held that the real estate agent’s “report” submitted by the estate trustees was not an expert report and accordingly attached no weight to it). The estate trustees also failed to show to what degree Ms. Cook’s payment of the property taxes and insurance offset occupation rent owing. Given the paucity of evidence produced by counsel, and the importance of finality in litigation, the Court held that the occupation rent owing was wholly offset by the estate’s share of property expenses (which Ms. Cook paid).

Psarros Estate v Cook is a concise decision which serves as a good reminder of the type of evidence needed to support a claim at trial.

About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation. gfournie@devrieslitigation.com

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