In Ontario, after the death of a married spouse, the surviving spouse has a choice to make. He or she must decide within six months of the death of the spouse whether he or she wishes (1) to inherit pursuant to the deceased spouse's Will (or, if the deceased has no Will, pursuant to the laws of intestacy set out in the Succession Law Reform Act (Ontario) (the "SLRA")), or (2) to receive an equalization of net family property under the Family Law Act (Ontario) (the "FLA"). If the surviving spouse does not file an election within the six month period, subsection 6(11) of the FLA provides that he or she is deemed to have elected to take under the Will or to receive the entitlement under the SLRA, as the case may be, unless the court, on application, orders otherwise.
Recently, in the case of Aquilina v. Aquilina, 2018 ONSC 3607 ("Aquilina"), the Ontario Superior Court of Justice considered when it is "appropriate to extend the time granted by statute for a surviving spouse to elect in favour of equalization under the [FLA] in lieu of the regime applicable under the [SLRA]." While confirming that extensions are intended to be the exception and not the rule, Justice Dunphy granted an extension in this case.
In Aquilina, the deceased, Anthony George Aquilina ("Mr. Aquilina") and his wife, Maria Aquilina ("Mrs. Aquilina"), emigrated from Malta, earned and saved a "considerable fortune" and raised a family together (the deceased left behind three children in addition to Mrs. Aquilina). Mr. Aquilina passed away without a Will shortly after being diagnosed with cancer. At the time of the application, no administrator had been appointed, but steps were to be taken to have one appointed.
Mrs. Aquilina had only been somewhat involved in the family's finances, and therefore, her level of information regarding the family's financial affairs was described as imprecise. The court was satisfied that the fact gathering process required to understand the value of the estate and the "applicant's intersecting interests within it" would take some time. At paragraph 8 of the Aquilina decision, Justice Dunphy explains:
I am fully satisfied that it is going to take a period of time – very likely a year or more – to permit the gathering of the facts necessary to understand the value of this estate and the applicant's intersecting interests within it. By "intersecting" interests I refer to the consequences flowing from her different roles as shareholder, widow and spouse. Valuations of a number of properties in Canada and in Malta will need to be undertaken. Legal advice will be needed to consider the various holding companies and the shareholdings in each. Based upon all of that information, more time will be needed to consider the rights of a surviving spouse under the SLRA as compared to those of a spouse under the FLA.
The six-month time period can be extended by the court on motion pursuant to subsection 2(8) of the FLA if the court is satisfied that there are apparent grounds for relief, relief is unavailable because of delay that has been incurred in good faith, and no person will suffer substantial prejudice by reason of the delay.
In Aquilina, Justice Dunphy considered sections 5 and 6 of the FLA in the context of the SLRA, suggested a few conclusions and further concluded that:
[26] ... there are grounds for relief when the electing spouse has not been able to assemble a reasonable knowledge base from which an informed choice might fairly be expected to be made. By granting time to make an election, the Legislature intended that there be a fair opportunity to ensure that the election is a reasonably informed one. The concept of "reasonable" means that there are no absolutes – reasonable is measured having regard to the nature of the information needed, its materiality to the choice to be made and the interests of other stakeholders in the process.
[27] I therefore conclude that there are some grounds for relief in the present circumstances. The complex and international nature of the business interests of the deceased will take more time to understand and evaluate. It would be irresponsible for the applicant to make an election with the limited information regarding value presently available.
Further, Justice Dunphy found that in this case the delay was explainable and incurred in good faith. In coming to this conclusion, Justice Dunphy acknowledged that the application was brought very close to the end of the six-month period but considered that Mr. Aquilina's death was sudden and unexpected. In addition to the time taken to grieve, time was needed to look for a Will and make inquiries of Mr. Aquilina's lawyer. Justice Dunphy also took note of the complexities of the estate.
Finally, Justice Dunphy considered whether anyone would be substantially prejudiced by the delay. Confirming that the prejudice to be considered in this context is the prejudice inherent in time, Justice Dunphy explained that the following types of prejudice must be weighed:
Deferring the time to make an election has consequences. Beneficiaries will be delayed in receiving some or all of their entitlements. The estate will either be prohibited from distributing or will have to reserve assets sufficient to enable it to account for either election. Estate administration is a complex enough affair without having the road map of knowing who is intended to get what effectively taken out of the administrators' hands for an extended period of time. Some asset values may change over time. Having all or a substantial portion of the estate effectively frozen is a burden on the estate and upon its beneficiaries the materiality of which is a function of its duration.
In this case, if the extension was not granted, the estate would be distributed in accordance with the laws of intestacy. This would mean that Mrs. Aquilina would be entitled to a preferential share of the estate (currently equaling $200,000); and the remainder would be divided so that one-third of the estate would be distributed to Mrs. Aquilina, and two-thirds of the estate would be divided between Mr. Aquilina's three adult children. Mr. Aquilina's three children confirmed they did not oppose the motion. In light of such confirmation from the adult children, the fact that the estate did not yet have an administrator, and that it would likely be months before the estate would be in a position to consider first steps, Justice Dunphy concluded the prejudice to the estate would be very slight.
Mrs. Aquilina had requested a two-year extension. In the end, Justice Dunphy granted an extension of one year without prejudice to Mrs. Aquilina applying for a further extension should circumstances warrant, which extension applied to: "(i) the time to make an election; (ii) the time for the deemed election to apply; (iii) the time to commence an equalization application; and (iv) the time during which the distribution of the Estate is suspended."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
