To sell or not to sell in a will challenge
Tuesday, November 23, 2021 @ 9:17 AM | By Rebecca Studin
The deceased died on Dec. 6, 2019, leaving a last will and testament dated Nov. 12, 2018, (the 2018 will). In the 2018 will, the deceased appointed a solicitor, Antoine-René Fabris, as estate trustee, and left his entire estate to his late wife’s daughter, Victoria Elund. The deceased’s son, Josef Lugarich, challenged the validity of the 2018 will on the basis that the deceased lacked testamentary capacity and was unduly influenced when he signed the 2018 will. Lugarich filed a Notice of Objection in December 2019, which prevented a Certificate of Appointment of Estate Trustee (probate) from being issued to Fabris. Lugarich had standing to challenge the 2019 will as he was a 50 per cent beneficiary of the estate under the deceased’s prior will.
On June 7, 2020, (six months after Lugarich filed a Notice of Objection), Fabris signed an agreement of purchase and sale with Rudy Langeballe and Bernadette Langeballe (the buyers) to sell the deceased’s property at 10 McCully St. in Toronto (the property). Lugarich objected to Fabris acting as estate trustee in completing the transaction and administering any estate assets because Fabris was a party named in the will challenge, and because Fabris was in an adversarial position to Lugarich in the litigation, which placed Fabris in a conflict of interest. Lugarich argued that the will challenge called into question Fabris’ very authority to administer the estate. As such, Fabris committed a breach of trust by entering into the agreement of purchase and sale, which caused damages to the estate as the value of the property had increased since June 2020. Lugarich therefore argued that an estate trustee during litigation should close the sale of the property, and not Fabris.
Fabris and Elund brought a motion to the court for an order authorizing Fabris to complete the sale of the property.
The motion was granted and all of Lugarich’s arguments were rejected by the court. The 2018 will was presumed valid until Lugarich proved otherwise. Lugarich was not a beneficiary under the 2018 will. As such, Fabris owed no fiduciary duties to him, such that Lugarich could have no claim against Fabris for breach of trust.
In addition, Lugarich failed to identify any reason why Fabris should be replaced in order to close the sale of the property, and replacing Fabris would only delay the sale. The buyers were a young couple with young children who had been left with uncertainty for over a year. The buyers were at risk of suing the estate for breach of contract and damages. Without an estate trustee, the sale could not close, and a motion would still be necessary to resolve the issue of whether an estate trustee during litigation should be appointed.
Notwithstanding the will challenge and the lack of a Certificate of Appointment of Estate Trustee, Fabris was named as estate trustee in the 2018 will and had fiduciary obligations to the estate. Fabris himself had no financial interest in the estate, but he was a lawyer who was subject to strict rules of professional conduct and was liable to account for his estate administration.
The court therefore ordered that: Fabris should act as estate trustee to close the sale; he was to retain an independent real estate lawyer to act for the estate on the closing; Lugarich was to receive all closing documents and any concerns raised could be addressed in the will challenge; the net proceeds of sale were to be held in trust by Fabris’ firm pending written agreement or court order; and Lugarich could have the property appraised for fair market value to be used in the will challenge. The motion for the appointment of an estate trustee during litigation was also scheduled to be heard at a later date.
This case has been the subject of much discussion in the estates bar as possibly showing that a court will no longer tolerate a frozen estate administration pending the outcome of a will challenge. Moreover, a court will not lightly permit an estate to be exposed to claims (such as for breach of contract by disappointed buyers) simply because of a will challenge. Interestingly, the court did not criticize the estate trustee for entering into an agreement of purchase and sale on behalf of the estate in the face of a Notice of Objection, a move which in and of itself exposed the estate to a potential claim in the event the sale could not close. All told, parties should consider the appointment of an estate trustee during litigation early on in a will challenge, to ensure the estate administration proceeds (and that property can be sold if necessary) as the litigation unfolds.
Rebecca Studin is a lawyer with de VRIES LITIGATION LLP who practises estates and commercial litigation. Her estates experience includes will interpretation applications, will rectification applications, solicitor’s negligence actions and other estates and trusts matters.
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