The Ontario Court of Appeal (“ONCA”) decision in Gefen Estate v. Gefen is an interesting read which provides insight into a variety of topics including mutual wills and mutual will agreements, secret trusts, the doctrine of unconscionable procurement, and more!

By way of background, Elias and Henia Gefen were married for 65 years. They were Holocaust survivors who came to Canada in 1951. They had three sons: Harvey, Harry, and Yehuda. When Elias died in October 2011, Henia became the sole beneficiary and estate trustee of Elias’ estate (Elias and Henia had mirror wills). Henia’s assets after her husband’s death were worth approximately $30 million.

The crux of the litigation was the following: “Two months before he died, Elias signed a document…This document served as the anchor for Harry and Yehuda’s argument that there was a secret trust and a mutual wills agreement that operated to divide Elias’ Estate into equal shares for the three sons on Henia’s death.” The note is further described below.

A trial embroiling the family took place in 2018 and 2019. It was extensive and hard-fought, and involved various claims by Harry and Yehuda’s estate (Yehuda died in May 2016 leaving no issue) against Henia, and Harvey and his daughter, Ashley. The trial also concerned a claim by Henia relating to ownership of a condominium, 11 Townsgate Drive in North York (the “Condo”), against Yehuda’s estate.

By the time of trial, Henia had transferred a significant portion of her wealth to Harvey and Ashley, and her net worth had been depleted by at least 50%. In addition, she had purported to confirm indebtedness and granted security over all her remaining assets in favour of Harvey and his family. Assessments which confirmed Henia’s capacity to take some of the foregoing steps were conducted by Dr. Shulman in 2012 and 2014. Further, in October 2010, Elias and Henia transferred the Condo into their joint names and Yehuda’s name. When Elias died, Henia and Yehuda held the property as joint tenants. Questions ultimately arose as to whether Yehuda’s joint tenancy had been severed prior to his death, such that Henia and Lucia Saunders (as estate trustee of Yehuda’s estate) would hold the property as tenants in common (otherwise, it would be held by Henia alone).

On appeal, Harry challenged the lower court’s decision that he and Yehuda’s estate had failed to establish a mutual wills agreement or a secret trust, and failed to void certain inter vivos transfers by Henia in favour of Harvey.

Back to the note. On August 17, 2011, Elias and Harvey signed a document (i.e. the note) which, as stated, Harry maintained evidenced a mutual wills agreement between Elias and Henia. Henia did not sign it, but testified that it was consistent with her testamentary intention that her estate go to Elias and Elias’ estate to go to her, and that the residue be divided equally between their three sons after their deaths. It states:

“I, Elias Gefen direct my son Harvey & my wife Henia to immediately get rid of & revoke the Power of Attorney over Property given to Mr. Greenberg whom I do not know whatsoever. I understand that this took away my wife’s P of Attorney over Property given by myself to my wife & prepared by my own lawyer Noah Okell. I did not intend to do this in any way. Only Henia has had or will have Power of Attorney…I ask that my wife be given back the Power of Attorney over Property and only my wife as she and I both built up the estate and own it together jointly…Only Noah and Noah alone will represent myself and or my wife with respect to any will & estate work & our properties. I further confirm that my latest will…as prepared by Noah has not knowingly been changed by myself to date nor will it be changed during my life. My wife Henia has told me that she also will not change the will either & that our intentions that the estate be divided equally between our 3 sons after our death stands..”

The trial judge held, in part, that the note did not constitute clear and cogent evidence of an agreement between Elias and Henia not to ever change or revoke their 2007 wills and to equally distribute the family assets to their sons during the remainder of their lives and upon the death of the survivor of them. The note did not amount to a binding and enforceable agreement. There was also no mutual wills agreement or secret trust.

The trial judge granted in part Harry’s unconscionable procurement claim against Harvey, which resulted in an order that benefits transferred to Harvey, amounting to approximately $8.66 million, be held in trust for and returned to Henia or her estate.

With respect to Yehuda’s Estate’s claim to a 50% interest in the Condo, the trial judge concluded that the joint tenancy between Henia and Yehuda had been severed before his death and that they held their interests as tenants in common.

This blog focuses on part of Harry’s appeal[1] (Henia also appealed from the judgment). Harry argued that the trial judge erred: (1) by imposing too heavy a burden of proof on Harry and Yehuda to establish that a mutual wills agreement existed; (2) by not finding a secret trust between Elias and Harvey; and (3) by failing to void certain inter vivos transfers that Harvey had unconscionably procured from Henia.

The ONCA affirmed the following:

1. A mutual wills agreement is a binding contract not to revoke wills, pursuant to three criteria set out in Edell v. Sitzer (2001). The burden of proof is on a balance of probabilities and lies with the party alleging the existence of a mutual wills agreement. The onus is heavy in that there must be clear evidence of a mutual wills agreement and such a claim requires “evidence exhibiting a high degree of clarity, persuasiveness and cogency”. Among other things, Henia did not sign, nor was she present, when the August 17, 2011 note was signed. There was no evidence from which to infer that Elias and Henia agreed to restrict the ability of the survivor to deal freely with the estate assets during her lifetime;
2. A secret trust comes into existence when a testator leaves property to a person and that person secretly agrees with the testator to hold the property for the benefit of another person. The essential elements are the intention of the donor, a communication of the intention to the donee and acceptance of the obligation by the done (Sutherland Estate v. Nicoll Estate). The three certainties are also required. Significantly, there was no transfer or grant from Elias to Harvey. Elias did not give anything to Harvey. On Elias’ death, his assets vested in Henia; and
3. The trial judge laboriously went through each transaction and carefully considered whether the presumption of unconscionable procurement had been rebutted. “For example, the trial judge found that the presumption arose from Harvey’s active involvement in procuring large transfers from Henia. She found that the presumption had been rebutted with respect to Henia’s forgiveness of Harvey’s loans in 2012. Henia signed an acknowledgement describing the past advances as gifts and in Dr. Shulman’s report, he recorded that Henia had told him that she had forgiven these loans to compensate Harvey for his past property management services. Henia discussed with Dr. Shulman her forgiveness of Harvey’s debts and the discharge of security in the context of her bona fide desire to compensate him for his past property management services. Based on the evidence before her, it was open to the trial judge to determine that the presumption of unconscionable procurement had been rebutted.”

As noted, the findings of the ONCA on Henia’s appeals go beyond the scope of this blog, but readers are encouraged to read the full decision as it touches upon issues which frequently arise in estate litigation.

[1] Yehuda’s estate did not appeal the trial judge’s decision.