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WILLS - Construction and interpretation - Testamentary intention

Thursday, February 06, 2020 @ 7:07 AM  

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Appeal by the Estate of Ellery Muchmaker from the directions of the application judge regarding the purchase of a business. Muchmaker owned Master Auto Supply Co. Limited (Master Auto). The respondent, Larry Weissmann was a long-term Master Auto employee. Weissmann was granted the option to purchase Master Auto in a secondary will. The purchase price was to be lesser of $1.75 million or the price determined by multiplying the earnings of Master Auto, averaged over the last three fiscal periods, by a factor of 5.5. The purchase price was to be delivered by way of a promissory note, with interest payable at five per cent per annum. A gross annual payment to the Estate of not less than $180,000, to be made in monthly payments, was required. The promissory note was to be secured by a general security agreement against Master Auto's assets as well as the registration of a collateral mortgage against Weissmann's residence. After Muchmaker died, Weissmann and the Estate Trustee came into conflict over the proper interpretation of the sale price provision. The parties appeared before the application judge for directions. The judge found that the purchase price was to be $529,611, being $716,921 calculated in accordance with the formula in the will, less $187,310, representing support payments for Muchmaker’s common law spouse improperly made out of Master Auto to the Estate after Muchmaker’s death. The judge further ruled that Weissmann was not obligated to provide a collateral mortgage. The Estate appealed, arguing that the judge erred in treating Weissmann as a beneficiary instead of a favoured purchaser, dispensing with the requirement of a collateral mortgage, accepting Weissmann’s evidence regarding the amount to be credited for Muchmaker's salary, and deducting from the purchase price monies paid out of the company to the Estate.

HELD: Appeal dismissed. The provision in the will regarding the sale of Master Auto was not detailed, and it fell to the judge to give directions that furthered Muchmaker's intentions. In doing so, the judge treated Weissman as a potential purchaser only, and not as beneficiary who had an absolute right to purchase Master Auto. Given that the will's mortgage requirement was so vague that it provided no security to the Estate, the judge did not err in dispensing with that requirement. The judge's finding was made as part of his discretion to provide directions regarding a commercially reasonable transaction and was owed deference. As the judge noted, the Estate's report did not explain its assessment of Muchmaker’s salary figure. The decision to prefer Weissmann's valuator's position over that of the Estate was entitled to deference. The support payments were properly deducted from the purchase price. While a dividend could have been declared, and support payments paid from the dividend, that was not what happened. The judge drew a distinction between dividends and gratuitous payments from Master Auto’s cash reserves. That decision was within his discretion.

Weissmann v. Loran, [2019] O.J. No. 6190, Ontario Court of Appeal, D. Watt, C.W. Hourigan and G.T. Trotter JJ.A., December 6, 2019. Digest No. TLD-February32020008