All About Estates

To Forgive, or Not to Forgive, What Was the Intention?

In Middleton Estate v. Middleton, 2020 ONCA 552 (CanLII), the Court of Appeal for Ontario considered the appeal from a trial judge’s decision concluding that the first of two promissory notes reflected the deceased’s intention that a loan made to her daughter was repayable on the deceased’s death.

Facts:

Eva Middleton died on June 5, 2015. Following Eva’s death, her estate trustee received two promissory notes: the first dated July 16, 2014 for the sum of $142,000 in relation to a loan Eva provided to her daughter, Linda, to purchase a cottage property; the second dated July 22, 2014, which provided that the loan to Linda was to be forgiven upon Eva’s death.

Faced with two conflicting promissory notes, the estate trustee brought an application for the opinion of the court as to which of the promissory notes was valid. The issue was directed to proceed to trial.

Trial Decision:

Linda testified that she initially thought the loan was a gift. However, before advancing money to Linda, Eva brought Linda a draft promissory note prepared by her lawyer, Jacob Walinga, which provided for monthly payments of $600 with a maturity date. Linda testified that she and Eva discussed the terms, and Linda revised the draft to add that the debt would be forgiven upon Eva’s death, but this draft was then revised to include words that the loan “shall run for a term of five years”. Ultimately, the version that Linda signed on July 16, 2014 did not forgive the loan on death, but stated that it “may be re-negotiated under any Mutually Agreeable Terms”. Based on her conversation with her mother, Linda believed the loan would be forgiven in Eva’s Will. This was the first promissory note.

Linda testified that her mother later called her to advise that she was afraid of her sister’s reaction if the loan was forgiven in the Will, and instead wanted to include the loan forgiveness in the promissory note. Linda therefore prepared the second promissory note which forgave the loan upon death, which Linda signed on July 22, 2014. Linda testified that she gave the note to Eva on September 9, 2014. This was the second promissory note.

Following Eva’s death, her lawyer, Ken Menlove, provided her estate trustee with a copy of her Will and the first promissory note. In response, Linda provided the estate trustee with the second promissory note, which Linda said she found at Eva’s home, along with a copy of an email from Eva to Linda dated December 12, 2014 stating that the loan was “cleared up on [Eva’s] death”.

The trial judge concluded that only the first promissory note was valid and enforceable. He relied on the testimony of Eva’s two lawyers to find that Eva had never changed her mind about forgiving the loan, that she never received the second promissory note, and that she never sent the December 12, 2014 email to Linda (as any such email from Eva would have been sent from her iPad).

Appeal:

Linda appealed on the basis that the trial judge erred in assessing evidence that corroborated Linda’s accounts of Eva’s intentions, and in particular, in (1) rejecting the evidence of Joyce Willard (who witnessed Linda’s signature on both promissory notes) about what Eva had said to her about the second promissory note; and (2) in his assessment that Eva did not send the December 12, 2014 email. Linda submitted that these errors were central to the trial judge’s conclusion that the first promissory note was valid and enforceable. Linda sought to have the judgement set aside and a new trial ordered.

Regarding the evidence of Ms. Willard, although she witnessed the signing of the promissory notes, she did not read either of them. Even if the trial judge had accepted Ms. Willard’s evidence about her discussions with Eva, there was nothing Eva had said to Ms. Willard to indicate that Eva intended to forgive the loan on her death, or that the second promissory note contained a provision to this effect. Ms. Willard’s evidence could not overcome the direct evidence of Eva’s intention in delivering her Will and the first promissory note to Mr. Menlove, and confirming her intentions to him. There was no reversible error in the trial judge’s conclusion on this issue, and his assessment of the witnesses’ credibility and reliability was entitled to deference.

Another issue considered on appeal was Linda’s attempt to introduce new evidence to prove that an email produced at trial dated December 17, 2014 (which was used to show that Eva only sent emails from her iPad) must have been falsified, as Linda now had evidence that Eva was in the hospital that day and likely did not have her iPad with her. However, Linda failed to meet the requirements for admitting fresh evidence on appeal. Linda had been provided with copies of the December 17, 2014 email in advance of trial and was advised that it would be used to show that the December 12, 2014 email was fabricated by Linda. However, Linda nevertheless agreed to proceed in the face of this new allegation. Moreover, Eva’s hospitalization on December 17, 2014 was information available to Linda before and at trial, as Eva had been staying in Linda’s home, was ill, and in and out of hospital all of that month. The fact that Linda may not have turned her mind to the issue did not justify the admission of the proposed fresh evidence. In any event, the admission of the proposed fresh evidence would not have changed the trial outcome. Eva’s alleged sentiment expressed vaguely in the December 12, 2014 email did not displace the only direct evidence of Eva’s intention with respect to the loan and her estate, which was the fact that Eva had given the first promissory note with her Will to Mr. Menlove two weeks prior.

Regarding Linda’s contention at trial that Eva may have been confused or mistaken when she met with Mr. Menlove in December 2014, or had given him the wrong instructions, this argument was properly rejected by the trial judge. The evidence was that Eva had given the documents to Mr. Menlove for safekeeping so that her estate plan could be carried out. Mr. Menlove reviewed the contents of these documents with Eva and confirmed that her wishes were the same. Mr. Menlove gave no evidence that Eva had been confused when she met with him. The trial judge was entitled to conclude that Eva had accurately conveyed her wishes to Mr. Menlove when she met with him to discuss the first promissory note and her estate.

The appeal was dismissed.

Take Away

Middleton Estate v. Middleton demonstrates how an appellate court will show deference to a trier of fact’s assessment of a witness’ credibility and reliability. In addition, the court based its decision on the direct and independent evidence of third parties regarding the deceased’s intention in order to determine which of the promissory notes was valid.

 

About Rebecca Studin
Rebecca Studin was called to the Bar in 2009. Before joining de VRIES LITIGATION LLP, Rebecca practised estates and commercial litigation at a full-service international law firm in Toronto. Rebecca’s estates experience includes will interpretation applications, will rectification applications, solicitor’s negligence actions, and other estates and trusts matters. Rebecca obtained her law degree from Osgoode Hall Law School after earning her honours bachelor of arts degree from Glendon College, York University. Following her call to the Bar, Rebecca was selected as a Fox Scholar and spent a year training as a barrister at the Middle Temple, Inns of Court, in London, UK.

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