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Automatic Vesting of Real Property

1. Introduction

Ontario courts have had to address the question whether real property owned by a deceased person vests automatically in the beneficiaries of the estate on a number of occasions. The question arises because of section 9(1) of the Estate Administration Act.[1] It provides in substance that real property not disposed of, conveyed to, or divided or distributed to the beneficiaries by the personal representative within three years of the deceased’s death vests automatically in the beneficiaries, whether or not probate or letters of administration have been issued. However, section 10 of the Act provides,

Nothing in section 9 derogates from any right possessed by an executor or administrator with the will annexed under a will or under the Trustee Act[2] from any right possessed by a trustee under a will.

Section 9(1) is subject to the provisions of the Land Titles Act,[3] and indeed, the provision conflicts with the latter Act since only the registered owner can transfer land. The regime seems to be unique to Ontario and also presents other problems. For that reason the Ontario Law Reform Commission recommended that it be repealed in its Report on Administration of Estates of Deceased Persons.[4] But just as in the case of many other excellent recommendations by the Commission, the Ontario government has not acted on it.

The court had to address the effect of the legislation again in Marcy v Marcy[5] and I think that it is a useful case to consider the legislation.[6]

2. Facts

The testator died in 2015, survived by two children, Brian and Gordon. She named Brian her executor and left the residue of her estate equally to her two sons. Brian took no steps under the will for the first seven years after his mother died to advance or preserve the estate’s rights over the mother’s house. However, he continued to occupy the house. Therefore, in 2022 Justice Dietrich removed Brian as executor and replaced him with an independent third person. Moreover, in May 2023 Justice Gilmore ordered Brian to give vacant possession to the new executor. The executor sold the mother’s house with the closing scheduled for 4 October 2023. But Brian registered a caution on title to prevent the closing. He removed it when the executor and Gordon objected. However, the executor brought this motion urgently on 29 September for (a) an order vacating the caution to ensure that any ‘no dealings indicator’ is also removed from title; (b) an order preventing Brian from interfering with the closing; and (c) an order for costs on a full indemnity basis.

Brian’s counsel argued that the house vested in the two brothers three years after their mother died and there therefore, in light of section 9(1) of the Estates Administration Act, the executor had no right to sell the house. Counsel also informed the court that he did not yet have instructions as to whether Brian intends to take further steps to prevent the sale from closing.

3. Analysis and Judgment

Justice Myers began his analysis be discussing the decision of Justice Gillese in Di Michele v Di Michele[7] in which she discussed the effect of sections 9(1) and 10 of the Act. He noted that Brian’s counsel failed to refer the court to Di Michele or section 10. Justice Gillese wrote that section 9 does not limit the powers given to an executor under a will. Instead, the section gives executors additional powers. However, they apply only to the extent that they do not conflict with the will, for the testator’s intention as expressed in the will is always paramount. She noted that this is clear from section 10 of the Act.

Moreover, Justice Meyers noted that the will gave the executor the power to sell property ‘at such times and in such manner as’ he might see fit. That being the case, section 9 of the Act did not have the effect of vesting the property in the beneficiaries three years after the testator’s death. Rather, it remained vested in the executor. This was confirmed also by the orders of Gilmore and Dietrich JJ. Further, the evidence disclosed that the executor has made extraordinary efforts to accommodate Brian. Thus, the balance of convenience favours getting the sale closed.

His Honour held that therefore this was a proper case for the court to grant an interlocutory injunction prohibiting Brian or anyone acting on his instructions or on his behalf who has knowledge of the order from taking any action that may interfere with the closing of the sale and they are expressly prohibited from registering any document or interest on title except with leave of the court and on notice to the executor and Gordon. His Honour granted an order to that effect. He also granted Brian one last opportunity to attend at the house to remove his own personal property on notice to the executor or his counsel and subject to supervision by the executor.

Finally, his Honour took the view that it would not be fair to saddle Gordon with his counsel’s costs as well as 50% of the executor’s costs (which he would bear as one of the two beneficiaries), all of which were caused by the vexatious conduct of Brian. The vexatious conduct consisted of failing to disclose the Di Michele case and section 10 of the Act to the court, and of registering a caution without a legal basis to prevent a lawful transaction from closing. Therefore, his Honour ordered Brian to pay the executor’s costs on a full indemnity basis.

In my view the case is another indication of how badly and urgently we need reform of the law of wills and of the administration of estates in Ontario.

[1]    RSO 1990, c E.22.

[2]    RSO 1990, c T.23.

[3]    RSO 1990, c L.5.

[4]    1991, p 254.

[5]    2023 ONSC 5499.

[6]    For another comment on the effect of the legislation, I refer the reader to the very helpful article of Nicole Cianci, ‘Tips for the Drafting Solicitor: The Automatic Vesting of Real Property Weighed Against the Testator’s Intentions’, STEP Connection, Toronto Branch Newsletter, December 2023, vol 11, No 1, pp 4-6. The article appears to have been written before the release of the Marcy case, since it makes no mention of the case but discusses several others on point.

[7]    2014 ONCA 261.

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