One of the first steps following the death of a loved one is to go through their paperwork. You never know what you will find – handwritten wills, love letters, bank statements, or written agreements confirming that the deceased is owed money. If the estate is owed funds, it is up to the estate trustee to collect. That may mean jumping into ongoing litigation to protect the estate’s interest in assets whose ownership is already in dispute. Such was the case in Abrahamovitz v Berens.
By way of background, the parties to the proceeding purchased a rental property as an investment in 1982. The property was owned by a holding company incorporated for that purpose. The four shareholders of the holding company each received the rental income in proportion to their shares.
Mr. Zimmerman was hired as the property manager and was paid for his services. From 2002 to 2009, Mr. Zimmerman received an additional “special fee” pursuant to acknowledgments signed by two of the holding company’s shareholders, Ms. Abrahamovitz and Ms. Spiro. The special fee was equal to 25% of their respective shares of the rental income. The signed acknowledgments also gave Mr. Zimmerman the right to purchase 25% of their respective interests in the property for $1 if it were to be sold. (It is worth mentioning here that Ms. Spiro and Mr. Zimmerman were siblings and Ms. Abrahamovitz is married to Mr. Zimmerman’s cousin).
In 2009, Mr. Zimmerman fell ill and was unable to continue managing the property. At that time, Megapro Property Management Ltd. stepped in as property manager.
Mr. Zimmerman passed away in the fall of 2010. At that time, his wife (and estate trustee) found the signed acknowledgments and brought the documents to the attention of Megapro. The estate trustee claimed an ongoing interest in the shares of the rental income. Based on the acknowledgements, Megapro began redirecting a portion of the rental income to Mr. Zimmerman’s estate.
In December 2010, Ms. Abrahamovitz and Ms. Spiro hired a lawyer who demanded that no further funds be paid to Mr. Zimmerman’s estate. In response, Megapro advised that it would hold the funds in trust until the parties resolved the matter between them. In September 2011, Ms. Abrahamovitz and Ms. Spiro commenced an action against Megapro (among others) for payment of their full shares of the rental income. Mr. Zimmerman’s estate was not named as a defendant in the action.
In Megapro’s statement of defence, it explained that it withheld the rents because of the acknowledgments. Megapro offered to pay the disputed funds into court until the matter was resolved.
In their reply, Ms. Abrahamovitz and Ms. Spiro denied signing the acknowledgments or, in the alternative, they asserted that the acknowledgments were void.
In April 2016, Megapro’s counsel wrote to the estate trustee suggesting that she be added as a party to the litigation. While the estate trustee agreed, Ms. Abrahamovitz and Ms. Spiro refused to provide their consent. As a result, Megapro brought a motion in June 2016 to add Mr. Zimmerman’s estate as a necessary party pursuant to r. 5.03 of the Rules of Civil Procedure.
The motion judge found that the estate trustee was out of time to be added to the action pursuant to s. 4 (which sets out the basic two-year limitation period to commence a claim) and s. 21(1) (which prevents a person from being added as a party to an existing proceeding as a means of getting around a limitation period) of the Limitations Act, 2002. The motion judge found that the estate trustee discovered the claim in 2010 when she found the sign acknowledgements and gave them to Megapro. As a result, the motion judge held that she could not join the action six years later.
The estate trustee appealed the motion judge’s decision.
The Court of Appeal allowed the appeal. In its reasons, the Court held that Ms. Abrahamovitz and Ms. Spiro had no standing to assert the limitations period as a defence; neither Ms. Abrahamovitz nor Ms. Spiro had any claim against Mr. Zimmerman’s estate. Rather, their claim was against Megapro, who was holding the funds they sought to recover. Likewise, Mr. Zimmerman’s estate had no claim against Ms. Abrahamovitz and Ms. Spiro; the estate’s claim was also against Megapro for the funds it held in trust.
Megapro was the only party who could advance the limitation period as a defence and chose not to do so. In fact, it was Megapro who urged the estate trustee to become involved. As set out at s. 22 of the Limitations Act, 2002, a limitation period may be suspended or extended by agreement, which was clearly the case here.
As a result, the Court reversed the motion judge’s decision and added the estate trustee as a party to the action. The estate was also awarded its costs of the appeal and of the motion below.