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What are the legal obligations of the survivor where there is a mutual wills agreement? When a Constructive Trust May be Imposed

Neilson v. Trottier 2019 ONSC 1657

Husband and wife were married for 24 years. It was a second marriage and there were no children from the marriage but the wife had two biological and eight adopted children from her first marriage and the husband had three children of his own (who were the applicants in the proceeding).

The spouses entered into Mutual Wills, and an Agreement whereby they agreed to the following:

  1. The husband and wife agree not to revoke or amend our Will.
  2. The husband and wife agree that the terms of our Will include all property presently owned as well as after acquired property.
  3. Any cohabitation agreement entered into prior to the signing of this Will is revoked.

They also signed an Acknowledgement and Direction. The acknowledgement included that they acknowledged they have discussed and fully understand and accept the consequences of mutual wills including that they cannot be revoked without the other party’s consent; and if one of them were to breach the agreement “a constructive trust would arise in favour of all our respective children with respect to the property.” (para 15)

The Acknowledgement also provided that the survivor would be given all the property absolutely and could deal with it as absolute owners including the ability to make gifts. “…[H]owever, that the survivor will not defeat this agreement by disposing of substantial portions of the assets by gifts or otherwise during his or her lifetime.” (para 16)

After the husband passed away, the widow donated $200,000 to a college in the deceased husband’s honour for the establishment of a technology centre in his name. The husband had been actively involved with the college during his lifetime.

Did the widow breached a constructive trust by providing a $200,000 gift to the college?

Justice Pattillo, citing the decision of Justice Cullity in Edell v Sitzer[1],  and Professor Robert Chambers in his article, Constructive Trusts in Canada[2], explains when equity will invoke the mechanism of a constructive trust. Equity will invoke a constructive trust when it is necessary to enforce an agreement between the parties to the mutual will, in order to enforce the survivor’s promise to the deceased to confer a benefit on the beneficiaries of the mutual will. (para 27)

At what point in time does the constructive trust arise? Citing Professor Albert H. Oosterhoff in his article Mutual Wills[3]:

“The date the constructive trust arises depends in the first instance on the terms of the agreement. However, the agreement is usually silent on the point, so resort must be had to basic principles and precedent. There are three possibilities: the date of the agreement, the date of the first to die, and the death of the survivor.” (para 31)

The mutual wills agreement consisted of the three documents: (i) the wills; (ii) the Agreement they signed; and (iii) the Acknowledgement and Direction.

In light of the existing authorities, the answer was not clear. He then determined:

“In circumstances where one of the parties to a mutual wills agreement has died, however, and based on the nature of a mutual wills agreement and the purpose of imposing a constructive trust in respect of such agreement, it is my view that a constructive trust does not arise until either the survivor dies or earlier, in the event there has been a breach of the agreement by the survivor.” (para 47)

In the case at bar, he found that the gift’s purpose was not to defeat the mutual wills agreement but to honour the memory of the deceased. As a result, the widow had not breached the terms of the mutual wills agreement by making the $200,000 gift to the college and, as such, there was no requirement for a constructive trust to be imposed.

[1] [2001] O.J. No. 2909

[2] (1999), 37 Alta L Rev 173

[3] (2008), 27 ETPJ 135 at pp 145 – 146

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