



COURT OF APPEAL FOR ONTARIO

CITATION: Fray v. Evans, 2013 ONCA 776

DATE: 20131220

DOCKET: C56889

MacPherson, Watt and Pepall JJ.A.

In the Estate of Gail Mildred Evans (a.k.a. Gail
    Mildred Fray), deceased

BETWEEN

Carlton Eugene Fray
, personally and in his capacity

as
    administrator of the Estate of Gail Mildred Evans

Applicant
    (Respondent)

and

Richard Evans
and
    Donald Evans

Respondents
    (Appellant)

George F. Brant, for the appellant

Shawn M. Philbert, for the respondent

Heard: October 8, 2013

On appeal from the judgment of Justice David L. Edwards of
    the Superior Court of Justice, dated March 4, 2013 and his costs order dated
    March 27, 2013.

Pepall J.A.:

INTRODUCTION

[1]

This appeal concerns the
    distribution of a residual interest that has passed on an intestacy.

[2]

In his judgment dated March
    4, 2013, the application judge held that each of the appellant Richard Evans
    and his brother, Donald Evans (Donald), was entitled to a one-third interest
    in the residue of the estate of their mother who died intestate.  The
    application judge also resolved a dispute which arose between the respondent
    administrator and the two brothers as to the extent of the brothers interest
    in real property which was the estates largest asset, and whether the value of
    their interest in the estate was fixed as at the date of their mothers death
    or the date of distribution of the estate.  For the reasons that follow, I am of
    the view that the application judge erred in ruling that it was the former and
    therefore would allow the appeal.

FACTS

[3]

Gail Evans (Gail) died
    intestate on July 30, 1992.  She was survived by her two sons from a first
    marriage, the appellant and Donald, and by her second husband, the respondent
    Carlton Eugene Fray.

[4]

The respondent, a real
    estate agent, was the administrator of her estate.

[5]

The largest asset in the
    estate was a residential property (the residence).  It had previously been
    owned by Gail and her first husband and was the childhood home of their two
    sons.  For financial reasons, Gail had been forced to sell the residence after
    her first husband left the marriage but she subsequently repurchased it in 1982
    as a tenant in common with the respondent.  She held a 90 percent interest in
    the residence and the respondent a 10 percent interest.  She and the respondent
    lived there.

[6]

Since Gails death, the
    respondent has occupied the residence, paid the taxes and other expenses and
    also caused the mortgage to be discharged in 2012.  He paid no occupation rent
    to the estate.

[7]

At the date of Gails death
    in 1992, based on the respondents estimate of value, the residence was worth $200,000. 
    As of the date when the application was heard in March 2013, it had a value of
    approximately $650,000.

[8]

In 1992, the net value of
    the estate was found by the application judge to be $95,745.61.

[9]

In 1992, the respondent as
    administrator paid $1,763.89 to each of the sons.  He then paid nothing more to
    the appellant until 15 years later when in August 2007, he paid him $2,000. 
    Between 2007 and October 2011, the respondent paid $27,850 to the appellant and
    between November 1999 and October 2011, he paid $22,250 to Donald.  The
    receipts for payment stated:

Received from Carl E. Fray [amount] toward the yet to be
    determined amount of [my] inheritance from the estate of Gail M. Fray.

[10]

In
    addressing these payments, the application judge found at para. 18 of his
    reasons that:

Clearly, the parties were treating the situation as if Richard
    and Donald held an interest in the estate which was appreciating in value.

The parties conducted their affairs as if Donald and Richard
    held a specific interest in the real property and the payments by Carlton to
    them reflected the increased value of their share as a result of the
    appreciation of the real property.

[11]

In
    November 2011, the appellant retained counsel who wrote to the respondents
    counsel and broached the subject of the completion of the administration of
    Gails estate.  The respondent took the position that the appellant had been
    paid in full.

[12]

Unable
    to agree, on October 3, 2012, the appellant caused a transmission of interest
    to be registered on title to the residence.  The ownership interest was
    described as 30 percent in favour of each of the appellant and his brother and
    40 percent in favour of the respondent.

[13]

The
    respondent then commenced an application in December 2012 requesting a declaration
    that he was the sole owner of the residence and that the brothers entitlement
    had been satisfied.  He sought repayment of $11,108.24 from the appellant and
    $5,508.24 from Donald.

[14]

The
    parties agreed that pursuant to the
Succession Law Reform Act
, R.S.O.
    1990, c. S.26, the respondent was entitled to a preferential share of $75,000
    and one third of the residue of Gails property.  The two sons were also each
    entitled to one third of the residue.

[15]

The
    respondent as administrator never passed his accounts. There was no evidence of
    any release signed by the beneficiaries, and there was no court order of
    discharge.

APPLICATION JUDGES DECISION

[16]

In
    a brief endorsement, the application judge identified three issues to be addressed:

-

Did the brothers continue to have an interest in the estate?

-

If so, did the estate owe the brothers money or did they have an
    interest in the residence?

-

If not, did the brothers owe the estate any money?

The application judge found that the appellant and his
    brother each held a one-third interest in the residue of the estate.  He
    applied s. 9(1) of the
Estates Administration Act
, R.S.O. 1990, c.
    E.22, which provides that if not distributed to the beneficiaries within three
    years after the death of the deceased, real property vests in the
    beneficiaries.  He concluded that while the brothers each had a specific
    interest in the real property, it did not amount to a one-third interest. 
    Rather, as the respondent argued, each had a 2.575655 percent interest in the
    real property. (The respondent arrived at this figure by following four steps.
    First, the estate residue was $20,745.61, the difference between the net value
    of the estate at the date of death, which was $95,745.61, and the respondents
    preferential share of $75,000. Second, the appellant was entitled to one third
    of the residue, or $6,915.20.  Third, the respondent paid the appellant
    $1,763.89 towards his share in October 1992, which reduced the share to
    $5,151.31. Fourthly, $5,151.31 is equal to 2.575655 percent of the value of the
    residence at the date of death, which was $200,000.)

[17]

Based
    on the residences value of $650,000, each brothers 2.575655 percent interest
    was worth $16,741.76.  It is implicit from his reasons that the application
    judge calculated their percentage interest based on a date of death valuation.

[18]

As
    the brothers had each been paid more than $16,741.76, they were required to pay
    the respondent the amounts requested by him.

PARTIES POSITIONS

(a)

The Appellant

[19]

The
    appellant submits that the respondent as administrator never concluded the
    administration of the estate.  He failed to liquidate the assets and make a
    distribution of the residue to the beneficiaries.

[20]

The
    application judge erred in calculating the value of the appellants entitlement
    based on the value of the residence and estate residue at the date of Gails
    death.

[21]

Furthermore,
    pursuant to s. 9 of the
Estates Administration Act
, on July 30, 1995,
    three years after Gails death, the property vested automatically in the three
    beneficiaries, one of whom was the appellant.  The appreciation in the value of
    the real property should accrue to the benefit of all of the residual
    beneficiaries and not just the respondent.

(b)

The Respondent

[22]

The respondent submits that the appellants interest in the estate was
    satisfied by the payments made.  He argues that s. 9 of the
Estates
    Administration Act
did not give the appellant a one-third interest in the
    residence but an interest amounting to 2.575655 percent based on a date of
    death valuation.  He relied on an Alberta case,
Re MacLellan Estate
,
    2011 CarswellAlta 1471 (Q.B.) in support of his position that
the correct date for determining value for distribution
    purposes is the date of death
.

ANALYSIS

(i)

Succession Law Reform Act

[23]

The
Succession Law Reform Act
addresses the devolution of an intestates
    estate.

(a)

preferential share

[24]

Section
    45(2) provides that when a person dies intestate and is survived by a spouse
    and issue, the spouse is entitled to a preferential share of the estate
    provided that the net value of the property exceeds the quantum of the
    preferential share.  If the net value is less than the preferential share, the
    spouse is entitled to the property absolutely.

[25]

The
    quantum of the preferential share is fixed by regulation, and the applicable
    regulation is that which was in force at the deceaseds date of death.  As
    agreed by the parties, given that Gail died in 1992, the preferential share
    amounted to $75,000.

[26]

The
    net value of the property is defined in s. 45 to mean the value of the
    property after payment of the charges thereon and the debts, funeral expenses
    and expenses of administration.

(b)

distribution of residue

[27]

Section
    46(2) of the
Succession Law Reform Act
provides:

Where a person dies intestate in respect of property and leaves
    a spouse and more than one child, the spouse is entitled to one-third of the
    residue of the property after payment [of the preferential share], if any.

[28]

Section
    47 provides that, subject to the rights of a spouse, the property is to be
    distributed equally among the deceaseds children (specifically, among his or
    her issue who are of the nearest degree in which there are issue surviving him
    or her).

(c)

statutory scheme

[29]

Accordingly,
    under this statutory scheme, an administrator must:

(1)

pay the
    charges on the property and the debts, funeral expenses and expenses of
    administration;

(2)

ascertain
    the net value of the property to determine whether the preferential share may
    be paid to the spouse or whether the property vests absolutely in the spouse;

(3)

collect and
    distribute the residue to the beneficiaries.

(ii)

Estates

Administration

Act

[30]

Section
    9(1) of the
Estates Administration Act
provides that real property
    vests in beneficiaries within three years of the death of the deceased if it
    has not been disposed of, conveyed to, divided or distributed to the
    beneficiaries.  Specifically, s. 9(1) states:

Real property not disposed of, conveyed to, divided or
    distributed among the persons beneficially entitled thereto under s. 17 by the personal
    representative within three years after the death of the deceased is, subject
    to the
Land Titles Act
in the case of land registered under that Act
    and subject to subsections 53(3) and (5) of the
Registry Act
and
    subject as hereinafter provided, at the expiration of that period, whether
    probate or letters of administration have or have not been taken, henceforth
    vested in the persons beneficially entitled thereto under the will or upon the intestacy
    or their assigns without any conveyance by the personal representative, unless
    such personal representative, if any, has signed and registered, in the proper
    land registry office, a caution in Form 1, and, if a caution is so registered,
    the real property mentioned therein does not so vest for three years from the
    time of the registration of the caution or of the last caution if more than one
    was registered.

(iii)    Application of
    Statutory Schemes

[31]

Applying these statutory schemes to the facts of this case, it is
    conceded that the net value of the estate exceeded $75,000 and that each of the
    appellant, Donald and the respondent was entitled to one third of the residue
    of the property.  The property in this case consisted primarily of real
    property, that is, the residence in which the respondent resides.

[32]

The
    valuation date for purposes of calculating entitlement to a preferential share
    is the date of death.  In 1992, the net value of the property amounted to
    $95,745.61.  As such, it exceeded the $75,000 preferential share by
    approximately $20,000.  It was therefore evident that the respondent was
    entitled to a preferential share under s. 45(2) of the
Succession Law
    Reform Act
but was not entitled to Gails property absolutely.

[33]

However,
    this valuation based on date of death is for the purposes of calculating
    entitlement to a preferential share.  It does not determine the precise value
    of the residue as, absent agreement, this may only be ascertained on collection
    and conversion of Gails assets and distribution of the beneficiaries respective
    one-third shares. Although dealing with a different issue, the Nova Scotia
    Supreme Court, Appeal Division in
Re Estate of Joseph W. Rudderham
(1971), 21 D.L.R. (3d) 457, stated at p. 465:

The general rule of administration of estates requires
    valuation of assets to be distributed among beneficiaries to be made as of the
    date of distribution and not as of the date of the testator's death.

[34]

The
    appellant was entitled to one third of the residue of his mothers property. 
    In 1992, he received a payment of $1,764.89 and nothing more until 2007.

[35]

The
    application judge correctly found that the residue had not been distributed and
    that given the passage of three years since Gails death, the real property
    vested in the three beneficiaries without the necessity of a conveyance from
    the respondent as administrator.  Moreover, as the application judge found,
    this was consistent with the parties expectations.  They all believed that
    their respective interests were appreciating in value.  The dispute arose
    because, based on the respondents view of things, only his share of the
    residue was to reflect the full appreciation in the value of the residence. 
    Assuming reasonable expenses and costs of administration, and the absence of
    payment of any occupation rent, this would result in a considerable windfall
    for the respondent.

[36]

In
    supporting the respondents position, the application judge erred in valuing
    the appellants interest in the residue as of the date of death of his mother. 
    The residue of an estate is crystalized and determined after the deceaseds
    property has been collected and debts and expenses paid including those
    associated with the administration of the estate.

[37]

It
    is possible for beneficiaries to agree to the quantum of their entitlement but
    it is clear from the record and from the application judges findings that
    there was no such agreement here.

[38]

Furthermore,
    the decision of
Re MacLellan
does not assist the respondent.  The
    issue in that case revolved around whether the property exceeded the quantum of
    the preferential share.  The Alberta court used the date of death to determine
    that the spouse was entitled to the entirety of the estate because the value of
    the property was less than the quantum of the preferential share.

DISPOSITION

[39]

I
    would allow the appeal, set aside the judgment of the application judge and
    substitute an order: (i) that the appellant has a one-third interest in the
    residue of Gails estate; (ii) directing a reference to determine the residue
    of the estate and the appropriate quantum of the appellants share of his
    mothers estate.  This should include, but not be limited to, an identification
    of the charges paid for the residence, the debts and expenses of administration,
    any occupation rent due on account of the appellants interest in the residence;
    and (iii) that the respondent in his capacity as administrator is to pass his
    accounts.

[40]

The
    application judge fixed costs in the amount of $21,000 in favour of the
    respondent to be paid by the appellant.  I would set aside that costs order and
    substitute an order in favour of the appellant in the amount of $7,200
    inclusive of disbursements and applicable tax on account of the proceedings
    below.  In addition, I would order the respondent to pay costs of $7,800
    inclusive of disbursements and costs on account of the appeal.

Released:

JCM                                                S.E.
    Pepall J.A.

DEC 20 2013                          I agree J.C. MacPherson
    J.A.

I agree
    David Watt J.A.


