Case Comments 1998

9. Choice of Law in Succession

Vak Estate (Re)

20 OR (3d) 378 (Gen Div)

KINSMAN J.: -- The applicant (trustee) applies to this court for its opinion, advice and directions as to the appropriate distribution of estate assets of the late Sally Vak, having regard to the fact that they consist of liquid assets situate in the Province of Manitoba, and real estate in the Province of Ontario.

Sally Vak died intestate at the City of Winnipeg, in the Province of Manitoba, on January 7, 1989. At the time of her death, she had total assets of $173,000, $131,000 of which is cash, situate in Manitoba, and real estate valued at $42,000 in the Province of Ontario.

She was survived by Herbert Dukelow, a son from a prior marriage and her husband, Samuel Vak, who resided in Ontario, from whom she had separated.

The Public Trustee of Manitoba was appointed personal representative of her estate by letters of administration issued by the Court of Queen's Bench, and these were subsequently resealed by the local registrar of the court in Kenora.

Prior to the estate being wound up, Samuel Vak died intestate, on October 21, 1992, in Sioux Lookout, Ontario, his habitual residence. Samuel Vak's only living relatives are a brother, Mitchell Vak, and a sister, Mary Spooner, two of the respondents in this application.

Samuel Vak did not file an election under s. 6(9) of the Family Law Act, R.S.O. 1990, c. F.3, of Ontario to take an equalization of net family property pursuant to s. 5 of that Act.

On July 15, 1992, Mary Spooner was granted letters of administration of her late brother's estate.

The Issues

The legal issue posed by the applicant is whether the law of the Province of Ontario (lex situs), or the law of the Province of Manitoba (law of Sally Vak's habitual residence at death), governs the distribution of the real property situate in Ontario.

The relevant Manitoba legislation is the Devolution of Estates Act, R.S.M. 1987, c. D70.

Section 6(1) of that Act provides as follows:

The effect of the section is to give the surviving spouse of an intestate, where there are issue, a preferential share of $50,000, in addition to one-half the residue, the son, Herbert Dukelow, being entitled to the remaining one-half.

The Manitoba assets should, therefore, be distributed as follows:

Manitoba assets $131,000.00

Surviving spouse 50,000.00

(Samuel Vak, preferential share)

one-half residue to Samuel Vak 40,500.00

one-half residue to surviving child 40,500.00

(Herbert Dukelow)

$131,000.00

Therefore, estate of Samuel Vak receives $90,500.00

(Mary Spooner and Mitchell Vak)

Surviving child receives $40,500.00

(Herbert Dukelow)

TOTAL $131,000.00

The thorny problem to be addressed is that regarding the disposition of the Ontario real estate, having regard to the fact that the surviving spouse, Samuel Vak's estate, has already received a preferential share of his wife's estate in the sum of $50,000.00.

If Ontario law governs, ss. 45 and 46 of the Succession Law Reform Act, R.S.O. 1990, c. S.26, come into play. Those sections make similar provision to those of the Manitoba statute, for the distribution of assets on an intestacy, subject, however, to the surviving spouse receiving a preferential share of $75,000, rather than $50,000.

If Ontario law applies to the real estate situate in Ontario, valued at $42,000, the estate of Samuel Vak would therefore be entitled to the full amount of its value by way of its preferential share therein.

This allocation would result in the following distribution:

Estate of Samuel Vak

Share of Manitoba Assets $90,500.00

Preferential share of Ontario Assets $42,000.00

$132,500.00

Surviving child

(Herbert Dukelow) $40,500.00

$173,000.00

The traditional position of the common law, including the courts of this Province, has been that movable property is governed by the law of the domicile, while the rule of lex situs applies to immovables, and, therefore, the law of the jurisdiction where the real property is situate governs the distribution of the real property.

This position is summarized in Cheshire and North's Private International Law (10th ed.), at p. 511, as follows:

That principle has been consistently followed by the English courts: see Rea v. Rea, [1902] 1 I.R. 451 (Ch. D.).

It has also been so applied by Canadian jurisprudence: see Palmer v. Palmer, [1980] 2 W.W.R. 557, 13 R.F.L. (2d) 40 (Sask. C.A.); Morgan v. Altman (1961), 34 W.W.R. 452 (Man. Q.B.); Page Estate v. Sachs (1990), 72 O.R. (2d) 409, 37 E.T.R. 226 (Ont. S.C.).

In Re Thom Estate (1987), 27 E.T.R. 185, 40 D.L.R. (4th) 184 (Man. Q.B.), however, Oliphant J. approached the issue differently, applying a contrary view to what had until then been the accepted approach.

In Thom, the deceased was domiciled in Saskatchewan at the time of his death. In addition to movables and land in that province, he left land in Manitoba worth $104,600.

Having obtained her preferential share of $40,000 plus one-third of the remaining Saskatchewan estate under that province's Intestate Succession Act, R.S.S. 1978, c. I-13, the widow applied for a preferential share of the Manitoba land as well, under that province's Devolution of Estates Act, amounting to a further $50,000.

She maintained that the Act governed the disposition of land in that province, and accordingly, in addition to the preferential share she had received in Saskatchewan, she was entitled to an additional $50,000 plus one-half the residue from the sale of the Manitoba realty. The three children opposed the application, taking the position that the Saskatchewan statute should govern the disposition of the Manitoba assets, and therefore the widow was entitled to only one-third of the sale proceeds.

Oliphant J. in rejecting the widow's claim for a full preferential share stated [at p. 192]:

He found that to accept the widow's position would result in an inequitable distribution to her, and rejected it, and as she had already received the sum of $40,000 by way of preferential share of the Saskatchewan assets, he allowed her a further $10,000 plus one-third of the residue of the Manitoba assets to conform with the statute of that province.

Oliphant J. made no reference to Rea v. Rea, supra, in arriving at his decision.

In Rea, a resident of Ireland died intestate leaving movables and immovables in that country. He also owned land in Victoria, Australia, which was sold and the proceeds remitted to the Irish administrator.

The trial judge acknowledged that if the land in Australia had been movable property the Irish law would govern exclusively. Since, however, the assets were land, he held the widow was entitled to two statutory legacies, one under the Irish statute, of 500 pounds and one of 1000 pounds under the law of Victoria. . . . .

I . . . agree with the result in Re Thom; however, . . . I am not prepared to project its application to the extent he recommends, as to do so would deprive the surviving spouse of the benefit of varying preferential shares in the intestate's assets, provided in legislation of different provinces and other countries where real estate is situate. In this case as Ontario provides a preferential share of $75,000, whereas Manitoba law provides only $50,000, the differential is $25,000.

Sections 45 and 46 of the Succession Law Reform Act set out that, "[w]here a person dies intestate in respect of property" a scheme of distribution is provided, presumably to give effect to what the legislature feels would constitute the presumed intentions of the average intestate of that jurisdiction.

Section 6(1) of the Manitoba Devolution of Estates Act refers to the "estate of the intestate". Property is not mentioned.

"Property" is defined in the Shorter Oxford English Dictionary as "[t]hat which one owns, a possession or possessions collectively, one's wealth or goods and the right to the possession, use or disposal of anything" (emphasis mine).

Section 10 of the Interpretation Act, R.S.O. 1990, c. I.11, provides:

It is appropriate therefore to address the purpose of the competing statutes.

They are obviously designed to provide monetary protection for the surviving spouse, presumably on the basis that he or she should receive a preferential share of the estate to enable him or her to adequately take care of any children of the marriage, having been deprived of the future income to be received from the departed spouse.

It is significant that s. 6(1) of the Manitoba statute refers to an "intestate who dies leaving a widow", presumably due to the fact that property in that province was traditionally in the name of the husband, subject to the wife's dower interest. The Act has recently been amended in the preamble to state that widow and widower are to be interchangeable.

Statistics have indicated that in the majority of cases the husband predeceases his wife.

If on the other hand, the children have reached the stage where they are self-supporting, the surviving spouse could use the preferential share to achieve a certain degree of financial independence.

The surviving spouse should therefore be entitled to the maximum share permitted under the respective statutes, to facilitate the raising of children or attaining a degree of financial independence.

In my view, the word "estate" in the Manitoba statute should be interpreted as the whole of the estate and "property" in the Ontario statute should include all assets owned "collectively" as property is defined above, wherever situate.

The assets irrespective of whether they are movables or immovables, should be assembled under the administrators umbrella, and after setting aside the highest preferential share permitted under the respective jurisdictions where the assets are located, the residue of the estate be divided by the applicable law of the deceased's usual or habitual place of residence.

This will serve to avoid time-consuming and expensive estate litigation which occurs in this and other jurisdictions where residents of Manitoba have elaborate summer homes on Lake of the Woods, Florida condominiums, as well as a transitory population in Canada whose places of employment and assets are scattered throughout North America and elsewhere.

It will also avoid inequitable "double dipping" on the part of the surviving spouse, which in smaller estates could well result in the children being disentitled to any share of their deceased parents' estate.

By using this approach it is unnecessary to decide whether the laws of Ontario or Manitoba govern the disposition of the Ontario real estate, except to ascertain which of the two

statutes provides for the higher preferential share to the surviving spouse, which should be the share allocated.

In the result, I hearby direct the trustee to: