The Ontario Court of Appeal recently issued a decision concerning a business partner who claimed proceeds from a life insurance policy from the estate of his deceased business partner.
Two business partners operated a jewellery store in London, Ontario. Their business venture started in July, 2014. One of the business partners (the “deceased”) became ill less than a year after the business venture started. He died on November 12, 2015.
Prior to the deceased’s death, as part of their business arrangement, each business partner had taken out a life insurance policy on the other’s life, with the company paying the premium. One policy insured the deceased’s life for $250,000 (the “Policy”) and it named the other business partner as the sole beneficiary.
After the deceased’s death, disputes then arose between the remaining business partner and the deceased’s estate. The deceased’s widow acted as trustee of the estate.
The remaining business partner commenced an action against the estate. First, the business partner sought a declaration that he was entitled to the proceeds as the named beneficiary under the Policy. Second, he sought judgment on a $42,000 promissory note that he alleged the deceased had executed in respect of the balance of the subscription price owed for the deceased’s shares in the company. The business partner alleged that a share purchase agreement he, the company and the deceased had entered into misstated the purchase price for the deceased’s share and that the deceased gave him the promissory on account of the balance owing for his shares.
The widow denied any liability on the promissory note and argued that the business partner would be unjustly enriched if he were to receive the proceeds of the Policy. Additionally, the widow counterclaimed, stating that the business partner and the deceased had an agreement that the proceeds of the insurance policies were to go to the estate of the deceased shareholder. She also sought a mandatory order requiring the business partner to purchase the estate’s shares in the company for $250,000.
The motion judge granted summary judgment declaring the business partner entitled to the Policy proceeds. However, the motion judge did not grant the business partner summary judgment on the promissory note. Instead, he directed a trial of that claim.
The widow appealed, arguing that the motion judge erred in granting judgment in respect of the Policy proceeds based solely on the documentary evidence without hearing oral evidence. She also claimed the judge erred in granting judgment on the Policy proceeds claim while directing a trial on the promissory note claim when the two matters were interconnected and not separable.
Court of Appeal Decision
At the outset, the court stated that there was no dispute that the business partner was designated as the sole beneficiary of the Policy.
Despite the widow’s argument that there was a triable dispute as to whether the business partner and the deceased had entered into a buy-sell agreement under which the proceeds from the insurance policy on one partner’s life would be used to purchase his shares in the company from his estate, the court found no such evidence had been presented.
As a result, the court found no evidence to challenge the payment of the Policy proceeds to the business partner.
The court also rejected the widow’s argument that the motion judge should not have directed a separate trial for the promissory note claim. While she contended that both claims involved intertwined issues, rendering it inappropriate to grant partial summary judgment, the court disagreed, finding no error in principle in the exercise of discretion by the motion judge. The court found that the defences advanced to resist payment of the promissory notewere not connected to the grounds advanced for the claim to the Policy proceeds. In such circumstances, it was open to the motion judge to grant summary judgment only on the claim regarding the Policy proceeds.
As a result, the court dismissed the appeal.
The highly-experienced and strategic Calgary estate lawyers at DBH Law can help you draft or update your will to reflect the needs of your family and your estate, no matter its size or complexity. Our responsive and concise approach to our work makes the process of will and estate planning easy for our clients.
We take pride in the relationships we have built with our clients, and the opportunities we have to represent their legal needs as they grow and evolve. We understand your need to provide for your family and loved ones while also minimizing the taxation and chances of litigation your estate may face. We can be reached by phone at 403.252.9937 or online and look forward to the chance to learn about what is important to you, and how we can help you achieve that.