All About Estates

Challenging Will Challenges – Can they be estopped?

Will challenges are the cornerstone of estate litigation; indeed, they define the practice area. The reasons for launching a will challenge are relatively fixed: lack of testamentary capacity and undue influence being the most common. Another way of challenging a will is to have it “proved in solemn form.” By seeking to have a will “proved,” the propounder of the will, usually the estate trustee, must demonstrate to the court that the will was properly executed, the testator had testamentary capacity, and the testator knew and approved of the contents of the will. Failure to prove the will in solemn form means the will is declared invalid. Proving a will in solemn form may be a lengthy process, with shifting burdens of proof. However, it can also be an effective means of overturning a will.

The Ontario Court of Appeal recently considered in Neuberger v York, 2016 ONCA 191 whether the equitable doctrine of estoppel could apply as a defence to a will challenge. In short, the answer was no.

Chaim Neuberger was a Holocaust survivor and moved to Canada in the 1940s. He found financial success through a real estate business he operated with his brother-in-law. It was generally accepted by the Court that Mr. Neuberger intended to leave his estate, valued at over $100 million, equally to his two daughters, Edie and Myra, on his death. In 2004, Mr. Neuberger performed a “butterfly” transaction, which essentially split his assets equally between two corporations, “N&D” and “#179.” At the same, Mr. Neuberger drafted primary and secondary wills leaving #179 to Edie and N&D to Myra. In 2010, Mr. Neuberger performed an estate freeze (for more about estate freezes and refreezes, see Steven Frye’s blog). He then executed a new set of wills, once again leaving #179 to Edie and N&D to Myra. Myra and Edie were named as co-estate trustees in both the 2004 and 2010 wills. The significant difference between the two sets of wills was that the 2004 wills contained an “equalization” clause, which essentially guaranteed that Edie and Myra would receive the same value from his estate regardless of whether N&D and #179 were of different values at the time of his death. In contrast, the 2010 wills left out the equalization clause. As a result, Edie alleged that she would receive approximately $13 million less than Myra due to the difference in values of shareholder loans in each corporation.

After taking some preliminary steps towards administering the estate, Edie brought an application to challenge the validity of the 2010 wills. Myra argued that Edie, by acting as co-estate trustee and not raising concerns about the validity of the 2010 wills sooner, led Myra to believe that the 2010 wills were valid. As a result, Myra argued that the equitable doctrine of “estoppel” applied to bar Edie from pursuing her will challenge.

At trial, the lower court agreed that estoppel applied to prevent Edie from continuing her will challenge. On appeal, the trial judge’s decision was overturned. The Court of Appeal found that there was no existing judicial authority showing that the equitable doctrine of estoppel may be applied to will challenges. In addition, the Court held that policy considerations weighed against permitting the doctrine of estoppel to be extended in this manner. The Court held that it has a responsibility to ensure that only valid wills are admitted to probate. The Court’s duty extended to more than just the parties to the litigation – a determination about the validity of a will impacts all persons with an actual, or potential, interest in the estate. If the doctrine of estoppel was available to stop a party from challenging the validity of a will, the court’s ability to discharge its duty would be improperly limited. Also, allowing a party to argue the doctrine of estoppel as a defence may have the effect of preventing legitimate will challenges from moving forward.

In addition, the Court of Appeal held that trial judges already have a means of weeding out improper will challenges. As set out above, a party with an interest in the estate may apply to have a will proved in solemn form under Rule 75.06 of the Rules of Civil Procedure. However, Rule 75.06 is permissive – the court has the discretion to decide whether the will must be proved, and if so, in what manner. An attempt to challenge a will without providing some minimal evidence that the will is invalid would likely be dismissed. Given the court’s ability to throw out groundless will challenges under Rule 75.06, the Court held that there was no reason to extend the doctrine of estoppel as a defence against will challenges.

The Court of Appeal’s decision in Neuberger v York is important for determining that the doctrine of estoppel does not apply as a defence in will challenges. However, it will be remembered equally for its its finding that there is no automatic right to have a will proved in solemn form. The Court of Appeal left open the question of whether the Limitation Act applies as a valid defence – while the Court referenced Leibel v Leibel, 2014 ONSC 4516, a earlier decision by the same trial judge, Edie had avoided a limitations argument by starting her will challenge within two years of her father’s death.

 

About Gillian Fournie
Gillian is a lawyer with de VRIES LITIGATION LLP. Her practice focuses on the area of trusts and estates litigation. gfournie@devrieslitigation.com