All About Estates

Preservation Orders in Estate Litigation

Estate litigators are very familiar with unique and interesting fact patterns and it is helpful to be reminded that unusual circumstances may warrant the use of somewhat uncommon remedies. Rule 45 of the Rules of Civil Procedure is one such remedy, which provides for the interim preservation of property and can be utilized in an estate proceeding to preserve and even seize property.

Rule 45 reads as follows:

45.01 (1) The court may make an interim order for the custody or preservation of any property in question in a proceeding or relevant to an issue in a proceeding, and for that purpose may authorize entry on or into any property in the possession of a party or of a person not a party. (2) Where the property is of a perishable nature or likely to deteriorate or for any other reason ought to be sold, the court may order its sale in such manner and on such terms as are just.

SPECIFIC FUNDS

45.02 Where the right of a party to a specific fund is in question, the court may order the fund to be paid into court or otherwise secured on such terms as are just.[1]

A prime example of the application of rule 45.02 in the estates context is Carfagnini v. White Estate (“Carfagnini”).[2] In Carfagnini, residual beneficiaries of two estates sought an order for directions, including seeking a preservation order for both estates.

Ida Carfagnini died on December 5, 2013, at the age of 95 and her husband, Enrico, died in 1976. At his death, Enrico’s major assets were four income earning apartments in Toronto. The couples’ only son, Anthony, died on January 5, 2008. He was the father of the applicants, Raymond and Rosemary. On Anthony’s death, a management company took over operation of the apartments, which ultimately had to be sold by Enrico’s estate. Ida was the income beneficiary of Enrico’s estate, which was worth approximately $16,000,000. From 2008-2011, Ida received large income payments from Enrico’s estate, totaling approximately $2,000,000. She owned a condominium in Florida and it was sold for over $250,000 before her death. When Ida died, she had an estate worth less than $100,000.

Justice Greer ultimately preserved the assets and property in both estates. With respect to the request for a preservation order, Justice Greer stated at paragraph 14:

“The Respondents oppose such an Order with respect to Enrico’s Estate, saying it is unnecessary in these circumstances.  In my view it is a necessary procedure, given that there are documents which affect both Estates…which deal with income from Enrico’s Estate that would have benefited the surviving 3 daughters. Secondly, there is some evidence that the 3 daughters were instructing the property management company about the assets of the Enrico Estate, although they were not Trustees. There is no harm to the Enrico Estate making this Order out of an abundance of caution…”[3]

Her Honour applied the test outlined by the Court of Appeal in Sadie Moranis Realty Corporation v. 1667038 Ontario Inc. with respect to rule 45.02. That test is: (a) the plaintiff claims a right to a specific fund; (b) there is a serious issue to be tried regarding the plaintiff’s claim to that fund; (c) the balance of convenience favours granting the relief sought by the plaintiff.[4]

In particular, Justice Greer found that the moving parties were residuary beneficiaries of the estate, apparently satisfying the requirement of having a right to a specific fund. The ‘specific fund’ that is the focus of rule 45.02 must be “earmarked to the litigation” and the moving party must demonstrate that it has a legal right to the fund (a claim for damages generally does not suffice).[5] However, a beneficiary of an estate does not have to show that he or she actually owns the asset (here, the asset actually belongs to the estate). The beneficiary can show that he or she has a legal right to the assets by the fact that he or she is a beneficiary of the estate, i.e. an indirect, legal right to the asset. Her Honour further held that the issues to be tried were serious. Justice Greer also found that the balance of convenience favoured granting the relief; all beneficiaries could consent to a distribution of income and/or capital and the estate trustees could return to court for directions if they wanted to distribute capital.

In our line of work, it is helpful to keep unique remedies such as rule 45.02 in mind, as parties must be cognizant of the possibility of depleting an estate while family members are engaged in ongoing litigation.

Today, Justin de Vries will be presenting at the Law Society of Ontario’s 21st Annual Estates and Trusts Summit and will address Rule 45 preservation orders, among other issues.

[1] Ontario Rules of Civil Procedure., R.R.O. 1990, REGULATION 194, at r. 45.

[2] 2014 ONSC 3575, 2014 CarswellOnt8786 [Carfagnini].

[3] Ibid., at para. 14.

[4] Sadie Moranis Realty Corporation v. 1667038 Ontario Inc., at para. 19. Nothing turns on the fact that Justice Greer referred to the RJR-MacDonald test, as the test applied was from Sadie Moranis.

[5] Ibid., at para 27.

About Joanna Lindenberg

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