Irina Samborski, associate and Caroline Mercer, articling student, Gowling WLG (Canada) LLP

When an estate is litigated, a deceased person’s decision-making is forced into the public record. Sometimes, the court is asked to pass judgement and correct decisions that may seem unreasonable or unfair. However, some courts prefer to uphold the deceased’s freedom to decide—no matter what the living may think. This was the case in The Estate of William Robert Waters v Gillian Henry et al, 2024 ONSC 4190 (CanLII) (“Waters”).

The Waters Decision

William Waters was a wealthy Toronto businessman, academic, and philanthropist. He was born in 1932 and raised by a 51-year-old single mother who adopted him after he was orphaned. After high school, he saved up enough money to put himself through U of T. He earned an MBA and later a PhD in economics, eventually becoming a professor of finance and economics.

William was involved in various business ventures, including founding and selling companies that modeled computer programs—ventures that netted him roughly $50 million (para 10). He was a philanthropist and received an Order of Canada as well as an honourary degree from U of T (para 13).

After his death, William’s estate trustees discovered that he had given away almost all his money to Gillian Henry while he was alive. Gillian worked as a personal support worker for William’s wife, Phyliss Waters. William became romantically involved with Gillian during the last decade of his life and transferred more than $30 million to her through cash and property transactions. Meanwhile, upon his death, William’s wife of 53 years, Phyliss, was left “on the brink of being destitute” (para 334).

In Waters, William’s Estate sought the return of the money, claiming that William gave it to Gillian to invest. Gillian asserted that the money was hers to keep, and that it was intended to be a gift (para 3). Further, Gillian filed a counterclaim for sexual battery, alleging that she was assaulted by William at the beginning of their relationship, and that he had threatened to make her repay a substantial loan when she rejected his advances (at paras 402-404).

Their relationship was a secret. In his reasons, Justice Callaghan found that the most compelling evidence of the relationship arose from William’s medical records. A note from William’s family doctor was entered at trial, although it is not clear under which hearsay exception (i.e., sections 35 or 52 of the Ontario Evidence Act, RSO 1990, c E23). The note recorded a prescription for Cialis, an erectile dysfunction drug, and read “got a gf (he has one age 40 Nigerian-early days)”. Although Gillian is Guyanese, not Nigerian, she was 40 years old at the time (para 64).

The Unconscionable Procurement Claim

The Estate asserted numerous claims against Gillian. These included resulting trust, undue influence, fraud, ad hoc fiduciary duty, unjust enrichment, and “unconscionable procurement.” The latter is an equitable doctrine that has been largely dormant in Ontario, but was recently revived in Gefen v Gaertner, 2019 ONSC 6015 (CanLII).[1] Unconscionable procurement makes wealth transfers voidable if the donor lacked the “necessary level of understanding to make a transaction conscionable.”[2]

Applying the law of gifts, Justice Callaghan concluded that William did not intend to retain an interest in the majority of funds he transferred to Gillian that she then used to buy real property (with the exception of a horse stable business, in which William intended to retain an interest). Instead, he accepted that William bestowed his many gifts on Gillian because of their romantic relationship (para 312).

Accordingly, Justice Callaghan held that there was no unconscionable procurement at play. He acknowledged the recent application of the doctrine in Ontario, but noted that the Estate’s argument did not address whether it should be part of the law, or whether it conflicted with other legal doctrines (para 359). Waters therefore does not represent a major development in the unconscionable procurement caselaw. For now, it appears that the doctrine can still be relied upon, though its utility remains unclear.

An Emphasis on Autonomy

Many of William’s friends and advisors expressed concerns about the financial decisions he made in his last decade. However, Justice Callaghan made clear that those decisions were William’s to make:

To many, William providing this amount of money to Gillian is extraordinary. William had the right to do so. The equitable principle of resulting trust is not intended to oust a person’s autonomy; rather, it is intended to ensure that the money was truly gifted. In this case, over 10 years, William gave a substantial portion of his estate to an intimate partner [para 318, emphasis added].

Justice Callaghan’s conclusion is in line with “testamentary autonomy,” a common law principle underscoring a testator’s freedom to distribute their property as they please. This principle was recently explored in Spence v BMO Trust Company, 2016 ONCA 196 (CanLII), where a deceased’s will was held to be valid despite allegations of racial discrimination in its effect. The Ontario Court of Appeal held that the application judge was not entitled to set aside the will for offending public policy, therefore setting a highwater mark of testamentary freedom:

Absent valid legislative provision to the contrary, the common law principle of testamentary freedom thus protects a testator’s right to unconditionally dispose of her property and to choose her beneficiaries as she wishes, even on discriminatory grounds [para 75].

The Court in Spence relied on a quote from a Manitoba decision, Thorsnes v Ortigoza, 2003 MBQB 127 (CanLII), which calls to mind Justice Callaghan’s observations in Waters:

[A] person has the right, subject to fulfilling specific legal obligations to dependants, to dispose of his or her estate in an absurd or capricious manner, whatever others may think of the fairness or reasonableness of the dispositions [emphasis added].[3]

Justice Callaghan did, however, find that William and Gillian’s actions towards Phyliss were unconscionable. As Phyliss’s attorney for property, William owed a fiduciary duty to her. Nonetheless, William “managed to lose” $5.4 million of Phyliss’s money before his death, which the Estate conceded was owed to her [para 319]. While it was not clear exactly how the $5.4 million was spent, evidence at trial showed that $2.85 million was transferred to Gillian [para 321].

Justice Callaghan explained that Gillian also owed a fiduciary duty to Phyliss, as her caregiver, and held that in these circumstances, the doctrine of equitable fraud prevented the retention of the money [paras 329-330]. Phyliss was an “incapacitated recluse who was dependent on both of them, which left Phyliss completely vulnerable and exposed” [para 333]. As a result, Justice Callaghan held that Gilliam had to pay the $2.85 million back to Phyliss, which would be received by the Estate in trust and remitted to Phyliss [para 393].

There are several factors distinguishing Waters from Spence. First, there were no public policy arguments in Waters. Instead, William’s Estate asserted that Gillian had taken advantage of him, while Gillian alleged that William sexually exploited her. Second, Waters did not concern the decisions put down in a will, but rather the   decisions made by deceased’s individual during their lifetime.

Nonetheless, Waters suggests that courts may be reluctant to “correct” a deceased’s decision or salvage reputations post-mortem—even if the beneficiaries insist that the conduct was “out-of-character”. Instead, courts will consider all of the facts and circumstances surrounding the deceased’s decision-making process, and base their analysis on the evidence, rather than on reputational concerns.

It will be interesting to see how the case law develops on questions of testator’s autonomy, as the so-called “Great Wealth Transfer” brings an increasing number of estates into litigation.

 

[1] As Justice Callaghan outlined in his reasons at para 355, the doctrine apparently arises from Kinsella v Pask, 1913 CanLII 612 (ON CA)).

[2] Gefen v Gaertner, 2019 ONSC 6015 (CanLII) at para 158, citing John ES Poyser, Capacity and Undue Influence (Toronto: Carswell, 2014), at p 571. See previous case comment on this website: Joanna Lindenberg, “Gefen Estate v Gefen,” (17 May 2023), online: <https://www.allaboutestates.ca/gefen-estate-v-gefen/>.

[3] Spence v BMO Trust Company, 2016 ONCA 196 (CanLII) at para 111, citing Thorsnes v Ortigoza, 2003 MBQB 127 (CanLII) at para 14.