When lawyers talk about the importance of creating an estate plan, it’s usually in regards to taking steps to ensure your family is not confused or litigious about your wishes when it comes to your assets. But of course, our lives involve many people outside of family, and estate disputes can also lead to conflict in those areas. This was the case in a recent decision issued by the Court of Appeal for Ontario.

The business venture

The deceased and the plaintiff operated a jewelry store together starting in July 2014. As part of their business arrangement, they each took out a life insurance policy on the other’s life, with the company as the party responsible for paying the premium. In this case, the deceased’s life was insured for $250,000, naming the plaintiff as the sole beneficiary.

The deceased passed away in November 2015, a little more than year after starting the business.

A dispute emerges

The deceased’s wife was named the trustee of the estate. Both her and the plaintiff agreed to place the proceeds from the insurance policy in an escrow account. However, the plaintiff soon commenced an action seeking relief against the estate. In addition to seeking the proceeds of the insurance policy, the plaintiff also sought judgment on a $42,000 promissory note that he said the deceased executed in respect of a balance owed for shares of the company. The plaintiff explained that the money owed was the result of an error made in the purchase of shares, where the plaintiff received less than what was originally intended.

The estate’s position was that the plaintiff would be unjustly enriched if he were to receive the insurance proceeds, stating there was an agreement made between the deceased and the plaintiff that any insurance payouts were to go to the estate of the shareholder who died rather than the other shareholder. It was their position that the plaintiff be required to purchase the deceased’s shares for $250,000.

Summary judgment and appeal

During the original hearing, a motions judge sided with the plaintiff in regards to the insurance payout. However, a trial was ordered for the issue of the promissory note.

The estate of the deceased appealed this ruling, arguing the motion judge erred in ruling in favour of the plaintiff.

The court heard the estate’s argument that a buy/sell agreement had been put into place, but without any evidence of such an agreement, the court was unable to enforce such an order. The court wrote, “The onus lay on the appellants to demonstrate the existence of some circumstance that justified departing from the clear beneficiary designation in the Policy. They were required to put their “best foot forward” on that issue.” Having failed to do so, the court sided with the plaintiff on this matter.

The court also agreed with the motion judge’s decision to send the promissory note matter to trial, though urging the parties to resolve the matter out of court in order to avoid spending more on litigation than the note is worth.

Derfel Estate Law is a boutique estate litigation law firm. Our practice focuses on all aspects of estate disputes, as well as estate administration and probate. We act for beneficiaries, guardians, executors, trustees, and others. Our estate lawyers can help with a wide range of estate litigation matters, including: