A recent decision of the Ontario Court of Appeal sets out the pitfalls of litigating estate disputes.

This case involved a dispute between a brother and sister over their late parents’ farm.

Gary and Louanne Mountain are the son and daughter of the late John “Jack”  and Helen Mountain.

Jack and Helen owned and operated a Holstein dairy farm in Caledon, Ontario. The farm had been in the Mountain family since 1830. Gary worked the farm as his full-time occupation together with his late father for 24 years. He was the fifth-generation of Mountains to operate the farm.
Jack suddenly died of cancer on November 28, 2001. While he always mentioned that the farm and most of the farm assets would be transferred to Gary, he did not make specific provisions for this in his will.

Jack and Helen had identical wills. Each left all of his/her estate to the other absolutely or if either spouse died first, the estate would go to Gary and Louanne to share equally. Gary and Louanne were also named as co-executors under both wills.

After his father died, Gary commenced a lawsuit seeking a declaration that he was beneficially entitled to the farm property and dairy farm business. He named his father’s estate, his mother and his sister Louanne as defendants.  TD Canada Trust Company was appointed Estate Trustee During Litigation.

Helen died on December 28, 2009.

Gary’s action came on for trial in May 2010. The trial took 11 days. The trial judge found that Gary had not proven his oral contract with his parents and dismissed his claim.

The trial judge awarded costs to Louanne on a substantial indemnity basis fixed at $275,000 payable by Gary and not by the estate. This amount of course did not include the amount of legal fees that Gary had to pay to his own lawyer.

The Court of Appeal heard the appeal on May 25, 2012 and released its reasons on November 22, 2012 almost 11 years after Jack’s death.  In a unanimous decision written by Chief Justice Winkler, the Court  held that the trial judge made many errors in both applying the law and making findings of fact based on a misapprehension of the evidence.

The  Court held that the trial judge did not properly consider the evidence that was adduced that could support Gary’s contention that there was a legally binding oral agreement between him and his father . The Court also alluded to the issue of detrimental reliance that could form the basis of a remedy in Gary’s favour.

The trial judge found that the Statute of Frauds requires that a claim for land must be based on a written contract. The trial judge also held that Gary could not rely on the equitable exception to this rule; that is specific performance of an oral contract. The trial judge held that Gary had not satisfied the test of proving the oral contract which the trial judge set out as follows:

1. The plaintiff must adduce evidence either of his own or that of others which would establish the contract with sufficient particularity to permit the decree for specific performance ;
2. The plaintiff must adduce evidence that would meet the requirement of corroboration required by what is now section 13 of the Ontario Evidence Act ; and
3. The plaintiff must adduce evidence of acts of part performance on his
(emphasis added)
part as will enable the Court to grant a decree of specific performance and result in the contract being held enforceable notwithstanding the provisions of section 4 of the Statute of Frauds.

The trial judge concluded that Gary had not proven the alleged contract.

The Court of Appeal disagreed. The Court held that the trial judge had applied the wrong test for part performance and that the Court could rely on acts of part performance by persons other than Gary. This included the evidence that Jack had asked for a lawyer to put the transfer of the farm into effect and signed a document transferring a milk quota to Gary (which document was interestingly witnessed by Louanne-albeit a day later).

As well, several witnesses, including a priest testified that Jack told them that Gary was to receive the farm. The Court of Appeal held that in essence Gary and his father were partners in the farming operation.

Unfortunately for Gary, the Appeal Court was not prepared to grant him judgment based on the transcript but rather ordered a new trial. The Court also set aside the trial judge’s cost award of $ 275,000 and left the issue of costs from the first trial to be determined by the trial judge conducting the new trial.   Gary was awarded costs of the appeal fixed at $40,000.00 .

Chief Justice Winkler stressed that a new trial was in neither side’s interest. He wrote that the “case cries out for a mediated, consensual resolution.” The Court of Appeal directed that mediation be conducted prior to any new trial.

This case underscores the importance of having an up-to-date estate plan including wills and powers of attorney.

Hopefully, the siblings will be able to resolve their differences without spending hundreds of thousands of dollars on a new trial. The full reasons for judgment in Mountain v. TD Canada Trust Company et al. can be found here.