With the most successful Toronto Blue Jays season in recent memory now over, another Major League Baseball team was in the news for less fortunate reasons. According to an article in the Philadelphia Inquirer, Philadelphia Phillies co-owner John Middleton is in litigation involving a claim by his sister, Anna Nupson. Both Nupson and Middleton are two of the three children (a third child has remained neutral) of Herbert Middleton, a wealthy cigar magnate, who died in 1998.
Back in 1995, Nupson followed her brother and father’s advice to sign an agreement that renounced her right to access the capital of her trust to protect them in case she divorced and was forced to give up the assets in a divorce proceeding. The deed also prevents her from leaving an inheritance to an adopted child, and instead must leave the money to her nieces and nephews. In 2001, she also agreed to a deal that would see her receive $250,000 every 3 months in exchange for Nupson visiting a psychiatrist and taking antidepressants. Nupson, who battled alcohol addiction, says she finally became sober in 2007.
In 2003, Nupson, along with other family members, sold her shares in the cigar company to her brother, then the trustee of Nupson’s trust, for around $200 million. Middleton himself sold the company altogether in 2007 for $2.9 billion to the parent company of Phillip Morris. Nupson now claims that her brother breached his fiduciary duty by failing to disclose information about the value of a family firm that held shares in the Phillies, a hotel chain, and the cigar company. Middleton’s lawyers dispute the allegation, saying the value was set by two appraisals of the company, and that the cigar manufacturer was facing since resolved class-action lawsuits that lowered its value at the time. Nupson also asked the court to remove various amendments made to family trusts she held beneficial ownership in. The allegations have not been proved in court.
Nupson’s trustees cannot vary the trust, even if they believed it would be in her best interests, unless all beneficiaries agree to its termination, which is known as the rule in Saunders v. Vautier (it appears that legally Nupson is not the sole beneficiary of the trust). In Ontario, a court has the power to vary or rectify a trust under the Variation of Trusts Act, which allows the court to give consent on behalf of beneficiaries otherwise unable to do so.
There are other ways that Nupson could succeed in varying her trust if it were governed by Ontario law. For one, she could claim she was there was fraud or she was unduly influenced by her family. She may also allege she made a fundamental mistake when she signed the renunciation of her rights in the trust, and that it was contrary to her true intent when she signed it.
There is a presumption of undue influence in cases where the parties are unequal and one party is susceptible to domination by the other – in such a case, the onus may be on the presumed wrongdoer to rebut the presumption. Certainly the fact that the parties are related, and that Nupson may have been suffering from depression and alcoholism at the time she signed the renunciation agreement, would be relevant and could show she was manipulated or coerced into signing. Less clear are her claims about the sale of the family company – the consideration she received for the deal appears more apparent, and if she received independent legal advice, as Middleton alleges, it may rebut the presumption of undue influence.