1. Introduction
Re Assaly[1] is an interesting case because it addresses the need for an assent before property that is the subject matter of a testamentary gift, or of an interest in an intestate estate, vests in the beneficiary. This is not a topic that is discussed very much in our law, but it is important, and so the case is worth discussing.
2. Facts
Thomas C Assaly (‘Tom Sr’) died intestate om 2007, survived by his wife Gloria and three children, including Thomas G Assaly (‘Tom’), and Robert, Tom Sr’s estate trustee without a will (i.e., administrator). Tom was an undischarged bankrupt and Baker Tilly Ottawa Ltd was the trustee in bankruptcy. In 2007 and 2008 Tom brought proceedings against his father’s estate. They were settled and Tom executed minutes of settlement that required him to sign a deed of indemnity to indemnify Robert for all debts, liabilities, and obligations of the estate and of Robert’s action as administrator. The deed also required Tom to provide Robert with security. He failed to do so, so the parties entered into another settlement under which the estate would pay two sums of money to Tom immediately. The settlement also required the estate to pay a further $380,000 to Tom, but only if Tom provided an irrevocable letter of credit in favour of the estate. The estate made the first two payments, but not the third. The estate paid it Tom’s law firm in trust on condition that the firm and the partner involved held it in escrow and would not release the funds unless the letter of credit was delivered within three days. Tom failed to provide the letter of credit. His law firm brought an interpleader application and paid the moneys into court.
Tom then brought several proceedings against the estate, all of which were dismissed with costs. In 2015 Robert and Gloria brought an action against Tom for damages resulting from those proceedings. Tom attempted to evade the consequences of the action by: (a) making a Chapter 11 bankruptcy filing in Florida; (b) making a consumer proposal; and (c) filing for bankruptcy. Robert and Gloria sought and obtained a partial automatic stay of proceedings resulting from Tom’s bankruptcy.
In 2021 the court refused Tom’s application to discharge him from bankruptcy for his failure to disclose various matters in the bankruptcy, including the US bankruptcy proceedings and all his creditors in the consumer proposal. Meanwhile, Tom alleged that he had assigned the funds in court to ‘the Thomas C Assaly Charitable Foundation’, which had been set up for his children.[2]
Robert and the Trustee in Bankruptcy for Tom brought motions for payment of the moneys held in court. The motions were served on Tom and the Charitable Foundation. They sought an adjournment that was granted on condition that the Foundation pay $15,000 as security for costs. It failed to pay the moneys.
The proceedings raised three issues:
- Whether the Charitable Foundation or Tom had any standing on the motion?
- Whether the funds should be paid to Robert as administrator because he never assented to the transfer of the funds to Tom?
- Whether Tom’s purported assignment of the funds to the Charitable Foundation was a reviewable transaction?
3. Analysis
3.1 Standing
The court held that, as an undischarged bankrupt, Tom lacked standing on the motion and the moneys he purported to assign to the Foundation vested in the Trustee in Bankruptcy. The Foundation did not appear on the motion and thus had no standing, although Tom moved for leave to appeal the decision to grant the adjournment on conditions.
This meant that the legal issues raised by the Charitable Foundation with regard to the funds did not have to be dealt with. However, the court nonetheless did so and its discussion on the matter is welcome since the law of assent is not raised very often.
3.2 Should the funds be paid to the Estate or to the Foundation?
The Foundation argued that the funds should be paid to it because on 23 January 2013 Tom sent an email to his lawyer in which he said that he intended to assign his right, title, and interest in the funds to an entity that was yet to be established. Further, on 31 January 2014 Tom executed an assignment agreement personally and on behalf of the Foundation in which he assigned his interest in the funds to the Foundation.
However, Robert Smith J agreed with the estate that Tom had no interest in the Funds because the administrator had never assented to the transfer of the funds to him. His Honour quoted from my article,[3] and from Dushinsky Estate v Minister of National Revenue,[4] in which the court cited and relied on Halsbury’s Laws of England,[5] to hold that an executor’s assent is necessary to render a bequest or a legacy complete.
As mentioned above, the administrator transferred the remainder of Tom’s interest in his father’s estate on the condition that Tom provide a letter of credit within three days as security for a potential claim against the estate and undertook to release the funds on receipt of the letter of credit. Tom never provided the letter of credit. It followed that the administrator never assented to the transfer of the funds to Tom and they remained the property of the estate. That meant that Tom was unable to assign the funds to the Foundation.
3.3 Was Tom’s Purported Assignment of His Interest in the Funds to the Foundation a Reviewable Transaction?
The court held that assignment was void as against the Trustee in Bankruptcy. It was made on 31 January 2014, whereas the bankruptcy occurred on 20 June 2018. Thus it was made within five years of the bankruptcy. Moreover, the transfer was grossly undervalued, and it was a non-arms-length transaction. Hence, it was made with the intent to defraud, defeat, or delay a creditor.[6]
Further Tom’s earlier email in which he stated that he intended to transfer his interest in the funds did not constitute a valid assignment to the Foundation because the Foundation had not yet been formed. Although Tom intended to make a gift to the Foundation, there was no evidence of delivery or acceptance when the email was sent. That only happened when the assignment agreement was executed in 2014 and the purported assignment was then a reviewable transaction by the Trustee in Bankruptcy.
4. Order
Accordingly, the court ordered the Accountant of the Superior Court of Justice to pay $50,000 to the Trustee in Bankruptcy, and to pay the remainder to the administrator of the estate of the father, for the benefit of the estate’s creditors.
5. Can an Administrator Give an Assent?
The court did not ask this question but perhaps it should have. Authors who have written on the law of assent have stated that at common law only an executor could give an assent, an administrator could not.[7] There are two things to note about these statements. First, at common law an executor could only give an assent of personal property, not of real property unless it was the subject of a devise. If it was not, the property descended to the heir-at-law. Second, the authors give no reason why administrators cannot give an assent. Is it because a testator has carefully chosen her executor and trusts him to administer her estate carefully, whereas an administrator is appointed by the court? That may have been a valid reason years ago when testators chose their executors with care but today, as estate lawyers readily acknowledge, the choice of an executor tends to be a last minute and hasty decision. So even if this was formerly a valid reason to entrust the granting of an assent only to an executor, it is no longer a valid one. Or is the distinction made because the executor gains title to the testator’s property from the will at the moment of the testator’s death, whereas an administrator only gains title when appointed by the court, so that there is a gap in title? Actually, in the case of administration, it is likely that until the grant in made, the title vests in the court, which then transfers it to the administrator.[8] In any event the administrator’s title then relates back to the intestate’s death.
In The Law and Practice of Intestate Succession, the authors do not mention the distinction, but point out that an assent in relation to personalty does not, apart from certain forms of personalty, such as shares, require a formal assent but it can often be implied.[9] Thus, they seem to assume that administrators could grant an assent in the past and can still do so today.
On the other hand, a written assent for real property by both executors and administrators has been required in England since 1926. Section 36(1) of the Administration of Estates Act 1925[10] provides:
A personal representative[11] may assent to the vesting, in any person who (whether be devise, bequest, devolution, appropriation or otherwise) who may be entitled thereto … of any estate or interest in real estate to which the testator or intestate was entitled or over which he exercised a general power of appointment … and which devolved upon the personal representative.
Subsection (4) requires that the assent of a legal estate be in writing, signed by the personal representative. And subsection (10) enables the personal representative to require security as a condition for giving an assent.
When we then turn to Canadian law we do not have legislation that speaks specifically about assents.[12] However, we do have devolution legislation that I submit has a similar effect. Section 2(1) of the Estates Administration Act[13] provides:
- (1) All real and personal property that is vested in a person without a right in any other person to take by survivorship, on the person’s death, whether testate or intestate and despite any testamentary disposition, devolves to and becomes vested in his or her personal representative from time to time as trustee for the persons by law beneficially entitled thereto, and, subject to the payment of the person’s debts and so far as such property is not disposed of by deed, will, contract or other effectual disposition, it shall be administered, dealt with and distributed as if it were personal property not so disposed of.[14]
Thus, the property (real and personal) of a deceased person (who dies testate or intestate) in Canada is also vested in the personal representative (executor or administrator). Therefore, in my opinion, both an executor and an administrator can grant an assent of personal and real property in Canadian common law jurisdictions. And an assent is required in many cases, as the court in Assaly assumed, and as I argued in the article mentioned above.[15]
I note, however, that in Ontario the requirement of an assent of real property is probably superseded by a quaint provision in the Estates Administration Act.[16] Section 9 provides that real estate not disposed of or distributed to the persons entitled by the personal representative within three years after the death of the deceased vests in the persons beneficially entitled to it, unless the personal representative has registered a caution in the land registry office. However, s. 17(8) provides that if the property does vest in the beneficiaries, they take subject to the debts of the deceased.
—
[1] 2022 ONSC 2219.
[2] I assume, without more, that such a foundation can be created as a charity in Florida. In my view it would be impossible to do so in common law Canada because of the personal relationship between the settlor and the beneficiaries. See, e.g., Re Compton, Power v Compton, [1945] Ch 123 (CA); Oppenheim v Tobacco Securities Trust Co, [1951] AC 297.
[3] Albert H Oosterhoff, ‘Locus of Title in an Unadministered Estate and the Law of Assent’ (2018), 49 Adv Q 41, pp 42 and 64.
[4] 1990 CarswellNat 387, para 9.
[5] 4th ed, vol 17, paras 1345 and 1347.
[6] Bankruptcy and Insolvency Act, RSC 1985, c B-3, s 96.
[7] See, e.g., Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 20th ed. by John Ross Martyn and Nicholas Caddick, general eds. (London: Thomson Reuters/Sweet & Maxwell, 2013), §81-12; W.J. Williams, The Law Relating to Assent (London: Butterworth & Co (Publishers), Ltd., 1947), pp 95-96. Indeed, in the latter text, the author doubted whether an administrator with will annexed could grant an assent, even though such an administrator in effect exercises the power of an executor, ibid, p. 96. See also Halsbury’s Laws of England, 5th ed, vol 103 (London: REL X (UK) Ltd, trading as LexisNexis, 2021), §1142. The court quoted this source in Reznick v Matty, 2013 BCSC 1346, para 38. However, the section number given there is incorrect, and it also incorrectly gives the location of the publisher as Markham. The court seems to have confused the English publication with Halsbury’s Laws of Canada, 5th ed, which was published in Markham in 2010, but it does not contain anything on assents.
[8] See Macdonell, Sheard and Hull on Probate Practice, 5th ed by Ian M Hull and Suzana Popovic-Montag (Toronto: Thomson Reuters, 2016). p 314-318; Oosterhoff on Wills, 9th ed. by Albert H. Oosterhoff, C. David Freedman, Mitchell McInnes, and Adam Parachin (Toronto: Thomson Reuters, 2021), §2.4.2. Legislation in British Columbia and Yukon provides that the deceased’s estate vests in the court until the administrator is appointed: Wills, Estates and Succession Act, SBC 2009, c. 13, s 102; Estate Administration Act, RSY 2002, c 77, s 3.
[9] 3rd ed by CH Sherrin and RC Bonehill (London: Thomson/Sweet & Maxwell), §§8-012, 8-013.
[10] 15 & 16 Geo 5, c 23.
[11] Which of course includes both an executor and an administrator.
[12] The former British Columbia Estates Administration Act, RSBC 1996, c 122, s 79 did contain legislation similar to the English legislation. However, it was not carried forward into the Wills, Estates and Succession Act, SBC 2009, c 13.
[13] RSO 1990, c E.22.
[14] For similar legislation see Administration of Estates Act, S.S. 1998, c. A-4.1, Part XI, s. 50.3; Chattels Real Act, R.S.N.L. 1990, c. C-11, s. 2; Devolution of Estates Act, R.S.N.B. 1973, c. D-9, s. 3; Devolution of Real Property Act, R.S.A. 2000, c. D-12, ss. 2, 3; R.S.N.W.T. 1988, c. D-5, ss. 3-4; R.S.N.W.T. (Nu.) 1988, c. D-5, ss. 3-4; R.S.Y. 2002, c. 57, ss. 2-3; Law of Property Act, C.C.S.M., c. L90, s. 17.3(1)-(5); Probate Act, S.N.S. 2000, c. 31, ss. 44-47; R.S.P.E.I. 1988, c. P-21, ss. 103-4; Wills, Estates and Succession Act, S.B.C. 2009, c. 13, s. 162.
[15] See footnote 3, supra.
[16] Footnote 13, supra.
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Written by: Albert Oosterhoff
Posted on: October 3, 2022
Categories: Commentary, WEL Newsletter
1. Introduction
Re Assaly[1] is an interesting case because it addresses the need for an assent before property that is the subject matter of a testamentary gift, or of an interest in an intestate estate, vests in the beneficiary. This is not a topic that is discussed very much in our law, but it is important, and so the case is worth discussing.
2. Facts
Thomas C Assaly (‘Tom Sr’) died intestate om 2007, survived by his wife Gloria and three children, including Thomas G Assaly (‘Tom’), and Robert, Tom Sr’s estate trustee without a will (i.e., administrator). Tom was an undischarged bankrupt and Baker Tilly Ottawa Ltd was the trustee in bankruptcy. In 2007 and 2008 Tom brought proceedings against his father’s estate. They were settled and Tom executed minutes of settlement that required him to sign a deed of indemnity to indemnify Robert for all debts, liabilities, and obligations of the estate and of Robert’s action as administrator. The deed also required Tom to provide Robert with security. He failed to do so, so the parties entered into another settlement under which the estate would pay two sums of money to Tom immediately. The settlement also required the estate to pay a further $380,000 to Tom, but only if Tom provided an irrevocable letter of credit in favour of the estate. The estate made the first two payments, but not the third. The estate paid it Tom’s law firm in trust on condition that the firm and the partner involved held it in escrow and would not release the funds unless the letter of credit was delivered within three days. Tom failed to provide the letter of credit. His law firm brought an interpleader application and paid the moneys into court.
Tom then brought several proceedings against the estate, all of which were dismissed with costs. In 2015 Robert and Gloria brought an action against Tom for damages resulting from those proceedings. Tom attempted to evade the consequences of the action by: (a) making a Chapter 11 bankruptcy filing in Florida; (b) making a consumer proposal; and (c) filing for bankruptcy. Robert and Gloria sought and obtained a partial automatic stay of proceedings resulting from Tom’s bankruptcy.
In 2021 the court refused Tom’s application to discharge him from bankruptcy for his failure to disclose various matters in the bankruptcy, including the US bankruptcy proceedings and all his creditors in the consumer proposal. Meanwhile, Tom alleged that he had assigned the funds in court to ‘the Thomas C Assaly Charitable Foundation’, which had been set up for his children.[2]
Robert and the Trustee in Bankruptcy for Tom brought motions for payment of the moneys held in court. The motions were served on Tom and the Charitable Foundation. They sought an adjournment that was granted on condition that the Foundation pay $15,000 as security for costs. It failed to pay the moneys.
The proceedings raised three issues:
3. Analysis
3.1 Standing
The court held that, as an undischarged bankrupt, Tom lacked standing on the motion and the moneys he purported to assign to the Foundation vested in the Trustee in Bankruptcy. The Foundation did not appear on the motion and thus had no standing, although Tom moved for leave to appeal the decision to grant the adjournment on conditions.
This meant that the legal issues raised by the Charitable Foundation with regard to the funds did not have to be dealt with. However, the court nonetheless did so and its discussion on the matter is welcome since the law of assent is not raised very often.
3.2 Should the funds be paid to the Estate or to the Foundation?
The Foundation argued that the funds should be paid to it because on 23 January 2013 Tom sent an email to his lawyer in which he said that he intended to assign his right, title, and interest in the funds to an entity that was yet to be established. Further, on 31 January 2014 Tom executed an assignment agreement personally and on behalf of the Foundation in which he assigned his interest in the funds to the Foundation.
However, Robert Smith J agreed with the estate that Tom had no interest in the Funds because the administrator had never assented to the transfer of the funds to him. His Honour quoted from my article,[3] and from Dushinsky Estate v Minister of National Revenue,[4] in which the court cited and relied on Halsbury’s Laws of England,[5] to hold that an executor’s assent is necessary to render a bequest or a legacy complete.
As mentioned above, the administrator transferred the remainder of Tom’s interest in his father’s estate on the condition that Tom provide a letter of credit within three days as security for a potential claim against the estate and undertook to release the funds on receipt of the letter of credit. Tom never provided the letter of credit. It followed that the administrator never assented to the transfer of the funds to Tom and they remained the property of the estate. That meant that Tom was unable to assign the funds to the Foundation.
3.3 Was Tom’s Purported Assignment of His Interest in the Funds to the Foundation a Reviewable Transaction?
The court held that assignment was void as against the Trustee in Bankruptcy. It was made on 31 January 2014, whereas the bankruptcy occurred on 20 June 2018. Thus it was made within five years of the bankruptcy. Moreover, the transfer was grossly undervalued, and it was a non-arms-length transaction. Hence, it was made with the intent to defraud, defeat, or delay a creditor.[6]
Further Tom’s earlier email in which he stated that he intended to transfer his interest in the funds did not constitute a valid assignment to the Foundation because the Foundation had not yet been formed. Although Tom intended to make a gift to the Foundation, there was no evidence of delivery or acceptance when the email was sent. That only happened when the assignment agreement was executed in 2014 and the purported assignment was then a reviewable transaction by the Trustee in Bankruptcy.
4. Order
Accordingly, the court ordered the Accountant of the Superior Court of Justice to pay $50,000 to the Trustee in Bankruptcy, and to pay the remainder to the administrator of the estate of the father, for the benefit of the estate’s creditors.
5. Can an Administrator Give an Assent?
The court did not ask this question but perhaps it should have. Authors who have written on the law of assent have stated that at common law only an executor could give an assent, an administrator could not.[7] There are two things to note about these statements. First, at common law an executor could only give an assent of personal property, not of real property unless it was the subject of a devise. If it was not, the property descended to the heir-at-law. Second, the authors give no reason why administrators cannot give an assent. Is it because a testator has carefully chosen her executor and trusts him to administer her estate carefully, whereas an administrator is appointed by the court? That may have been a valid reason years ago when testators chose their executors with care but today, as estate lawyers readily acknowledge, the choice of an executor tends to be a last minute and hasty decision. So even if this was formerly a valid reason to entrust the granting of an assent only to an executor, it is no longer a valid one. Or is the distinction made because the executor gains title to the testator’s property from the will at the moment of the testator’s death, whereas an administrator only gains title when appointed by the court, so that there is a gap in title? Actually, in the case of administration, it is likely that until the grant in made, the title vests in the court, which then transfers it to the administrator.[8] In any event the administrator’s title then relates back to the intestate’s death.
In The Law and Practice of Intestate Succession, the authors do not mention the distinction, but point out that an assent in relation to personalty does not, apart from certain forms of personalty, such as shares, require a formal assent but it can often be implied.[9] Thus, they seem to assume that administrators could grant an assent in the past and can still do so today.
On the other hand, a written assent for real property by both executors and administrators has been required in England since 1926. Section 36(1) of the Administration of Estates Act 1925[10] provides:
A personal representative[11] may assent to the vesting, in any person who (whether be devise, bequest, devolution, appropriation or otherwise) who may be entitled thereto … of any estate or interest in real estate to which the testator or intestate was entitled or over which he exercised a general power of appointment … and which devolved upon the personal representative.
Subsection (4) requires that the assent of a legal estate be in writing, signed by the personal representative. And subsection (10) enables the personal representative to require security as a condition for giving an assent.
When we then turn to Canadian law we do not have legislation that speaks specifically about assents.[12] However, we do have devolution legislation that I submit has a similar effect. Section 2(1) of the Estates Administration Act[13] provides:
Thus, the property (real and personal) of a deceased person (who dies testate or intestate) in Canada is also vested in the personal representative (executor or administrator). Therefore, in my opinion, both an executor and an administrator can grant an assent of personal and real property in Canadian common law jurisdictions. And an assent is required in many cases, as the court in Assaly assumed, and as I argued in the article mentioned above.[15]
I note, however, that in Ontario the requirement of an assent of real property is probably superseded by a quaint provision in the Estates Administration Act.[16] Section 9 provides that real estate not disposed of or distributed to the persons entitled by the personal representative within three years after the death of the deceased vests in the persons beneficially entitled to it, unless the personal representative has registered a caution in the land registry office. However, s. 17(8) provides that if the property does vest in the beneficiaries, they take subject to the debts of the deceased.
—
[1] 2022 ONSC 2219.
[2] I assume, without more, that such a foundation can be created as a charity in Florida. In my view it would be impossible to do so in common law Canada because of the personal relationship between the settlor and the beneficiaries. See, e.g., Re Compton, Power v Compton, [1945] Ch 123 (CA); Oppenheim v Tobacco Securities Trust Co, [1951] AC 297.
[3] Albert H Oosterhoff, ‘Locus of Title in an Unadministered Estate and the Law of Assent’ (2018), 49 Adv Q 41, pp 42 and 64.
[4] 1990 CarswellNat 387, para 9.
[5] 4th ed, vol 17, paras 1345 and 1347.
[6] Bankruptcy and Insolvency Act, RSC 1985, c B-3, s 96.
[7] See, e.g., Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, 20th ed. by John Ross Martyn and Nicholas Caddick, general eds. (London: Thomson Reuters/Sweet & Maxwell, 2013), §81-12; W.J. Williams, The Law Relating to Assent (London: Butterworth & Co (Publishers), Ltd., 1947), pp 95-96. Indeed, in the latter text, the author doubted whether an administrator with will annexed could grant an assent, even though such an administrator in effect exercises the power of an executor, ibid, p. 96. See also Halsbury’s Laws of England, 5th ed, vol 103 (London: REL X (UK) Ltd, trading as LexisNexis, 2021), §1142. The court quoted this source in Reznick v Matty, 2013 BCSC 1346, para 38. However, the section number given there is incorrect, and it also incorrectly gives the location of the publisher as Markham. The court seems to have confused the English publication with Halsbury’s Laws of Canada, 5th ed, which was published in Markham in 2010, but it does not contain anything on assents.
[8] See Macdonell, Sheard and Hull on Probate Practice, 5th ed by Ian M Hull and Suzana Popovic-Montag (Toronto: Thomson Reuters, 2016). p 314-318; Oosterhoff on Wills, 9th ed. by Albert H. Oosterhoff, C. David Freedman, Mitchell McInnes, and Adam Parachin (Toronto: Thomson Reuters, 2021), §2.4.2. Legislation in British Columbia and Yukon provides that the deceased’s estate vests in the court until the administrator is appointed: Wills, Estates and Succession Act, SBC 2009, c. 13, s 102; Estate Administration Act, RSY 2002, c 77, s 3.
[9] 3rd ed by CH Sherrin and RC Bonehill (London: Thomson/Sweet & Maxwell), §§8-012, 8-013.
[10] 15 & 16 Geo 5, c 23.
[11] Which of course includes both an executor and an administrator.
[12] The former British Columbia Estates Administration Act, RSBC 1996, c 122, s 79 did contain legislation similar to the English legislation. However, it was not carried forward into the Wills, Estates and Succession Act, SBC 2009, c 13.
[13] RSO 1990, c E.22.
[14] For similar legislation see Administration of Estates Act, S.S. 1998, c. A-4.1, Part XI, s. 50.3; Chattels Real Act, R.S.N.L. 1990, c. C-11, s. 2; Devolution of Estates Act, R.S.N.B. 1973, c. D-9, s. 3; Devolution of Real Property Act, R.S.A. 2000, c. D-12, ss. 2, 3; R.S.N.W.T. 1988, c. D-5, ss. 3-4; R.S.N.W.T. (Nu.) 1988, c. D-5, ss. 3-4; R.S.Y. 2002, c. 57, ss. 2-3; Law of Property Act, C.C.S.M., c. L90, s. 17.3(1)-(5); Probate Act, S.N.S. 2000, c. 31, ss. 44-47; R.S.P.E.I. 1988, c. P-21, ss. 103-4; Wills, Estates and Succession Act, S.B.C. 2009, c. 13, s. 162.
[15] See footnote 3, supra.
[16] Footnote 13, supra.
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