This blog has been written by Darren Lund, Partner at Fasken LLP

In a previous blog, I wrote about the Ontario Superior Court of Justice decision in Lang-Newlands v Newlands, 2024 ONSC 6285.

To briefly summarize, the Newlands case considered a number of issues, but the key issue of interest for estate planners is the court’s analysis of an “estate freeze” transaction that occurred during the parties’ marriage. Barbara and Ian were married in 1987. At the time of their marriage, Barbara was the beneficiary of trust known as the “BJL” Trust that held common shares in a family holding company. The shares held by the BJL Trust were distributed to Barbara in 1993. In 2001, Barbara’s father engaged in further succession planning for the family business. As part of the planning, Barbara implemented a freeze of the common shares she then owned that were traceable to BJL Trust, exchanging them for fixed-value preference shares. Barbara’s father settled a new family trust, the “NFT” Trust, and gifted funds to the trust, which the trustees used to subscribe for new common shares.

At trial, Sharma J. held that Barbara’s interest in the NFT Trust was excluded property for purposes of the Family Law Act, being a gift received during marriage, on the basis that the Court of Appeal decision in Shinder v Shinder, 2018 ONCA 717 was binding authority. In Shinder, a trust settled in similar circumstances was treated as excluded property. However, Sharma J. went on to provide his own analysis of the 2001 freeze in Newlands, in the event an appeals court found that Shinder was not binding authority.

In the alternative analysis, Sharma J. found that Barbara’s interest in the NFT was not excluded property for equalization purposes. He rejected the argument that Barbara acquired her interest in the NFT Trust by way of a gift from the settlor. Rather, Sharma J. found that it was Barbara who had made a gratuitous act, in that she had gifted the value of the future growth of the common shares she owned prior to the freeze to the NFT Trust.

As I noted in my original blog, the Newlands case is currently under appeal. While the appeal has not yet been heard, a motion was heard in April concerning certain payments that were ordered to be paid by Sharma J. One of the issues in the motion was whether the Court of Appeal should lift the automatic stay of payments owed by Ian that applied when the appeal was filed. For present purposes, what is interesting is that one the factors the Court considers in analysing such a request is the “merits of the appeal”. In considering that factor, the Court had reason to comment on the trial judge’s analysis of Shinder.

In the appeal, Ian is arguing that Sharma J. misapprehended the holding in Shinder and accordingly he wrongly concluded that Barbara’s interest in the NFT Trust is excluded property. In the Court’s written reasons on the motion, 2025 ONCA 328, it notes that Shinder was concerned with allegations of non-disclosure. Specifically, the Court wrote that the issue was “non-disclosure of any additional benefits that he [the husband] might have received under the trust established by his father that would constitute a gift or inheritance that would be excluded property” (at par. 34). The Court then accepted that “there is an arguable case that the trial judge misapprehended the Shinder decision” (at par 34.). The Court was of course careful to clarify that the trial decision was lengthy and argued over 32 days, such that its assessments of the merits on the basis of the limited motion record was necessarily limited.

In Shinder, the husband engaged in an estate freeze two years prior to the date of separation. Similar to Newlands, the father of the freezor-spouse settled a new family trust which subscribed for new common shares. Also like Newlands, the shares that were frozen were owned by the spouse on the date of marriage (directly as opposed to through a trust). However, it is also true that there is no analysis in Shinder of whether the husband’s interest in the new family trust was excluded property – it is simply stated to be the case, but presumably because it was not argued or at issue on the appeal, which did indeed concern allegations of non-disclosure, not the status of the trust for equalization purposes.

If Ian is successful on appeal in arguing that Shinder is not binding authority, this does not necessarily mean that the Court of Appeal will adopt Sharma J.’s alternative reasoning, which held that the freezor-spouse (Barbara) gifted the future growth in her common shares to the new family trust. The Court of Appeal could decide that Shinder is not binding authority but nevertheless accept Barbara’s argument that, since the trust subscribed for the new common shares with funds that were gifted to the NFT Trust by the settlor, Barbara’s interest in the NFT Trust is excluded property. It will indeed be interesting to see how the Court of Appeal analyses the issue. Stay tuned.