All About Estates

Summary Judgment Motions and Fraudulent Concealment

Justice Newbould wrote an interesting and comprehensive decision regarding the two year limitation period under section 38 of the Ontario Trustee Act.  It seems that the two-year limitation period may not be as infallible as estate litigators think.

Nancy Wagg had three children – Anita, Yvonne and John.  Nancy was a woman of modest means and limited education.  However, lady luck smiled on her and she won the lottery.  Unfortunately, she invested a portion of her winnings in First Associates where her son-in-law, Todd (married to Anita), was a registered investment advisor, not to mention a company officer, director and shareholder.  Todd invested Nancy’s money in a speculative penny stock and when Nancy died, her $800,000 investment was worth $60,000.

Anita was Nancy’s estate trustee.  Her siblings told her to sue her husband and First Associates; Anita refused.  As a result, the court removed Anita as estate trustee and appointed a neutral third party to administer the estate.  This estate trustee then commenced an action against Todd and First Associates.

When served with the estate’s claim, First Associates brought a motion for summary judgment claiming that the two year limitation period under section 38 of the Trustee Act had expired such that the estate’s claim could not proceed.  As Justice Newbould noted: “this limitation period is a strict one and the discoverability rule has no application”.

First, a quick word about summary judgment motions.  Summary judgment motions are brought where no genuine issue exists in a lawsuit that requires the “forensic machinery of the trial”.  In other words, the court can consider the evidence presented in affidavits and tested on cross-examinations outside of the courtroom and decide whether the disputed issue(s) can be summarily decided (i.e. a trial is not required to make a decision and dispense justice).  Summary judgment motions generally involves less time and expense and may be issued on the merits of the entire lawsuit or discrete claims within the lawsuit.  As Justice Newbould succinctly framed the question: would a trial “…not improve the evidence” such that a matter could be decided on a summary judgment motion.  However, proceed with caution: summary judgment motions are powerful albeit unpredictable tools in a litigator’s tool belt.

Section 38 is the statutory provision in Ontario permitting an action for injuries in torts, contract and breach of fiduciary duty against the estate of a deceased person and limiting the period during which such actions may be commenced.  In section 38, the limitation period runs from death unlike other cases where the wording of the limitation period permits the time to run, for example, from when the damage was sustained or the claim arose.  The principle underpinning a “hard” two year limitation period is that estate matters should be dealt with in a relatively timely manner and with finality (death is, after all, final).

The claim by Nancy’s estate was for economic loss (an investment that turned sour).  After carefully considering the matter, Justice Newbould held that the estate’s claim was captured by section 38 of the Trustee Act and statue barred (i.e. out of time).  However, the estate trustee pressed on.  He argued that there had been fraudulent concealment by First Associates such that section 38 of the Trustee Act could not and should not be relied on by First Associates to bar the estate’s claim.

Without getting overly technical, fraudulent concealment is aimed at preventing a limitation period from operating as an “instrument of injustice”.  Justice Newbould quoted the Court of Appeal’s summary of fraudulent concealment: “Essentially, it involves some form of unconscionable conduct on the part of a wrongdoer who stands in a special relationship with another party, where the conduct conceals the existence of a claim by that party against the wrongdoer and is considered by equity [the legal doctrine of fairness] to be sufficient to precluded the wrongdoer from relying on a limitation period”.

According to Justice Newbould, there was a genuine issue requiring a trial as to whether fraudulent concealment had been made out, such that the motion for summary judgment could not succeed.  Justice Newbould flagged several other trialable issues including: (1) whether Todd’s actions towards his mother-in-law were unconscionable; (2) whether First Associates was vicariously (i.e. indirectly) liable for Todd’s actions; and (3) whether there was concealment of critical and complete information regarding the dealings in Nancy’s account at First Associates.  Given the above, the court held that there was a genuine issue as to whether section 38 of the Trustee Act and the two year limitation period from Nancy’s death applied.  First Associates’ motion for summary judgment was therefore dismissed.  Moreover, leave to appeal Justice Newbould’s decision to the Ontario Divisional Court was refused.  Nancy’s story is not over.

As always… happy litigating.

Justin

About Justin de Vries
Justin has been consistently named as one of the Best Lawyers in Canada/Trusts & Estates. He is an accomplished litigator who has appeared before all levels of the Ontario Court & the Federal Court of Canada. Justin's areas of expertise include: estate, trust, and capacity litigation, as well as probate applications and estate administration. He regularly speaks on estate, trust and capacity issues. Email: jdevries@devrieslitigation.com

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