Estate Litigation and Employment lawyer Reshma Kishnani's article "No ambiguity in ‘option to purchase’ clause in will" was published in The Lawyer's Daily. The article addresses how important discussing intention is when drafting a will.
The article was originally published on October 6, 2022. To read it in The Lawyer's Daily, part of LexisNexis Canada Inc., visit: https://www.thelawyersdaily.ca/articles/40200/no-ambiguity-in-option-to-purchase-clause-in-will (subscription required).
No ambiguity in ‘option to purchase’ clause in will
In VanSickle Estate v. VanSickle, 2022 ONCA 643, the Ontario Court of Appeal recently allowed an appeal on a will interpretation issue on the grounds that the application judge made an extricable error in law in failing to apply the presumption set out in s. 22 of the Succession Law Reform Act, R.S.O. 1990, c. S.26 (SLRA) to a specific “option to purchase” provision in the testator’s will.
The testator died at the age of 95 and was survived by her six children. The testator and her husband owned and operated a hobby farm as a secondary source of income during their lifetime. After the testator’s husband passed away, the testator began renting the farmland to their eldest son, the respondent/appellant in this case, to manage and operate the farming business. The eldest son managed the farming business and shared extra profit with the testator. The testator claimed farming income on her tax returns for at least the last three years of her life.
The testator had made a will in 1985, 34 years before she passed away. In her will, she directed her trustees to sell “the farming business carried on by [her]” to her eldest son, if he was living at the time of her death, for the price of $85,300 “or such lower price to be agreed upon by [her] trustees and [her] son.” Four of the beneficiaries, the testator’s other children, took the position that the language used by the testator in her will, specifically, “the farming business carried on by [her]” referred to the active farming business she and her husband had carried out together before they made their wills and not the rental of the farmland to her eldest son.
The eldest son, the beneficiary of the option to purchase the farming business, disagreed with their position and noted that it was always his mother’s intention for him to have the option to purchase the farming business which he had been managing at the time of her death, despite her lack of active involvement in the operations of the business due to her age and ailments.
The application judge, in interpreting the language used by the testator in her will, found that the phrase in the will: “the farming business carried on by me” referred to the active farming business she had carried on with her husband for many years before they had made their wills and did not intend for it to mean the simple rental of land to fall within the ambit of that phrase. The eldest son disagreed with the application judge’s decision and appealed.
Fortunately for the eldest son, the Court of Appeal allowed the appeal and found that the application judge failed to apply the presumption set out in s. 22 of the SLRA which states “[e]xcept when a contrary intention appears by the will, a will speaks and takes effect as if it had been made immediately before the death of the testator with respect to … the property of the testator.”
The court noted that there was no evidence about the surrounding circumstances to suggest it was the testator’s intention that the option to purchase the farming business was only on the condition that she was still involved in the day-to-day operations of the business. The will defined the term “farming business” to include “all assets, stock, plant, liabilities, in connection there with on the other (sic) and it shall include the estate in fee simple on the farm.” The court further noted that it was clear that the testator intended to benefit her eldest son differently from her other children as a result of his “lifelong commitment to the operation of the farm.” Had the testator intended otherwise she had over three decades to change her will, including with respect to the price of the farm, but she did not do so.
The Court of Appeal, in applying the presumption as set out in s. 22 of the SLRA, held that the phrase “farming business carried on by me” in the testator’s will referred to the business carried out in 2019 when the testator passed away and not exclusively the business carried out by the testator in 1985 when she made her will. There was no ambiguity in this regard. The court held that the appellant was “entitled to a declaration that the will provided him with the option of purchasing the farming business for $85,300, and that he exercised that option according to its terms.”
It is unclear as to whether the testator had discussions with her children (or her estate trustees) after her husband passed away and before her death as to what her intention was with respect to the option to purchase clause in her will, including that it remained her wish that her eldest son have the option to purchase the existing farming business at the value she had set out in her will. Had those discussions been had, expensive and time-consuming litigation may have been avoided.
Re-printed with permission from The Lawyer's Daily (www.thelawyersdaily.ca), part of LexisNexis Canada Inc. - originally published on October 6, 2022.
If you have any concerns or questions regarding estate litigation contact Reshma Kishnani at rkishnani@mindengross.com.