When people think about estate disputes it is common to think about family members disagreeing about the distribution of an estate. However, estate litigation can also arise from business relationships. This was the case in a recent case heard before the Ontario Court of Appeal where the business partner of the deceased pursued an action.
The Business Relationship
The deceased and the plaintiff operated a jewelry store together. They started the business in July 2014. Upon doing so they each took out life insurance policies, naming the other as the sole beneficiary. In this case, the deceased’s policy was valued at $250,000. The deceased became ill and passed away in November 2015, a little over a year after the business was started.
The Original Action
The action was commenced by the plaintiff against the estate of the deceased after a disagreement arose about the proceeds of the life insurance policy. The action sought two forms of relief. The first was for the proceeds of the policy. The second saw the plaintiff seeking judgment on a $42,000 promissory note he alleged the deceased had made in respect of the balance of the subscription price owned for the deceased’s shares in the jewelry business. The estate denied any liability with respect to the promissory note, arguing the plaintiff would be unjustly enriched if he received the proceeds. They wanted all the money to remain in the estate and for the plaintiff to be required to purchase the deceased’s shares in the company in the amount of $250,000.
The motion judge granted summary judgment in favour of the plaintiff with respect to the proceeds of the insurance policy but ordered a trial for the matter concerning the promissory note.
The estate appealed, arguing the motion judge made two errors, the first in granting summary judgment in favour of the plaintiff, and the second in directing a trial only for the promissory note.
The estate argued that the deceased and the plaintiff had entered into a buy/sell agreement and that the deceased had told his wife that the proceeds of the policies were to be used for one partner to purchase the interest in the business from the other upon his death. However, neither the motion judge nor the court saw any evidence that a buy/sell agreement was put in place. In fact, the deceased had asked the plaintiff to consider directing $100,000 of the proceeds to his family following his death. Both the motion judge and the appeals court agreed this request was contrary to what someone who knew a buy/sell agreement was in place would do.
Regarding the motion judge’s decision to only require a trial for the issue of the promissory note, the court found no error in principle in the exercise of the motion judge’s discretion. However, the court did urge the parties to consider reaching an agreement prior to a trial, as doing so would be faster and less costly.
Eisen Law advocates for both estate trustees and beneficiaries in the event of estate and/or trust litigation of any type. Our team of experienced lawyers can help resolve even the most complex trust and estate disputes, helping our clients obtain the best possible outcome. Please call us at 416-591-9997 or reach us online to schedule a free initial consultation.