Mutual wills must be proven by 'sufficiently clear, persuasive and cogent' evidence: court

The Ontario Court of Appeal has dismissed the claims of two brothers who were deprived of their shares in their father’s estate after finding that no mutual wills agreement or secret trust existed.

In Gefen Estate v. Gefen, 2022 ONCA 174, Elias and Henia Gefen were Holocaust survivors from Poland who immigrated to Canada in 1951. They had three sons — Harvey, Harry, and Yehuda. Over the years, the couple accumulated wealth by investing in real estate. When Elias died in 2011, his entire estate passed to Henia under mirror wills which granted the surviving spouse the residue of the deceased spouse’s estate for his or her own use absolutely. The inheritance significantly increased the value of Henia’s assets to approximately $30 million.

The Gefen family dynamics was described by the court as “discordant and characterized by conflict.” Henia wanted to exclude Harry and Yehuda from her husband’s money, so immediately after Elias’ death, Henia made several donations to Harvey and his children which depleted her total net worth by at least 50 percent. Harry and Yehuda then sought a proportionate one-third share of the collective wealth and assets accumulated by Elias and Henia over their lifetimes, consisting of cash, cash equivalents, holdings in commercial real estate, and a joint tenancy in a condominium in North York. In 2016, Yehuda died, so his estate was represented in the litigation by his partner, Lucia Saunders.

Harry and Yehuda’s claims were anchored on a document allegedly signed by Elias shortly before he died, which evidenced a mutual wills agreement that operated to divide Elias’ estate into three equal shares for the three sons on Henia’s death. They further alleged that Elias and Harvey entered into a secret trust agreement, under which all assets received by Harvey from Elias were to be held by Harvey in trust for his brothers. In the alternative, Harry and Yehuda raised the principle of unconscionable procurement to hold Harvey accountable for assets he and his children received from Henia.

Mutual wills

A mutual wills agreement between two testators is designed to prevent either from changing their will without the other’s consent. The document containing the contested mutual wills agreement allegedly showed Elias and Henia’s irrevocable intentions to divide their estate equally among their three sons.

The trial judge ruled that no mutual wills agreement existed between Elias and Henia. Harry argued that the judge improperly elevated the burden of proof required to establish a mutual wills agreement to something more than a balance of probabilities.

On appeal, however, the court said that there is only one civil standard of proof and to meet that standard, the quality of evidence had to be sufficiently clear, persuasive and cogent to convince the judge of the merits of the mutual wills agreement claim on a balance of probabilities. The court agreed with the findings of the trial judge, that the evidence clearly favoured a dismissal of the mutual wills claim. The court found that Henia did not sign, nor was she even present, when the document allegedly containing the mutual wills agreement was signed.

Secret trust

There is a secret trust when the testator leaves property to a person and that person secretly agrees with the testator to hold the property for the benefit of another person. The brothers alleged that a secret trust existed between Elias and Harvey to the effect that Harvey would hold Elias’ assets in trust for his brothers, Harry and Yehuda.

The court agreed with the trial judge’s finding that there was no secret trust established between Elias and Harvey. The trial judge noted that the alleged breach of the secret trust was due to the fact that Harvey facilitated Henia’s breach of the mutual wills agreement. However, since no mutual wills agreement existed, it followed that the argument had to be rejected. The court concluded, based on the evidence, that no transfer or grant from Elias to Harvey ever occurred.

Unconscionable procurement

The court agreed with the trial judge that Harvey had unconscionably procured from Henia assets of approximately $8.66 million after Elias died. Such unconscionable procurement, coupled with the absence of both a mutual wills agreement and a secret trust, would have the effect of reverting those assets to Henia to deal with as she pleased.