CITATION: Frye v. Frye Estate, 2008 ONCA 606 |
DATE: 20080909 |
DOCKET: C45611 |
COURT OF APPEAL FOR ONTARIO |
SIMMONS, JURIANSZ and ROULEAU JJ.A. |
BETWEEN: |
JOHN ARTHUR FRYE |
Plaintiff (Respondent)
|
and |
CHERYL VANESSA SYLVESTRE and TODD BURNS as the Estate Trustees During Litigation of the Estate of CAMERON EDWARD FRYE, deceased, CHERYL VANESSA SYLVESTRE in her personal capacity, GEORGE H. FRYE, and ELDON DONALD FRYE, by his Litigation Guardian GEORGE H. FRYE. |
Defendants |
Myron W. Shulgan, Q.C. and Crista L. Rea for the appellant/respondent by way of cross-appeal, Cheryl Vanessa Sylvestre in her personal capacity |
Harvey T. Strosberg, Q.C. and Sharon R. Strosberg for the respondent/appellant by way of cross-appeal, John Arthur Frye Mason Greenaway for the respondent by way of appeal and cross-appeal Eldon Donald Frye, by his litigation guardian George H. Frye Matthew Todd and James Renaud for the respondents by way of cross-appeal Cheryl Vanessa Sylvestre and Todd Burns as the Estate Trustees During Litigation of the Estate of Cameron Edward Frye, deceased |
Heard: April 30, 2008 |
On appeal from the judgment of Justice Terry Patterson of the Superior Court of Justice, dated August 2, 2006. |
JURIANSZ J.A.: |
[1] This is another saga of siblings struggling for control of the family business after the death of their father. In the words of the trial judge, “[t]he Frye siblings … feuded constantly over the years, aligning with each other at various times having regard to disputes between them.”
Parties
[2] Cheryl
Vanessa Sylvestre, John Arthur Frye (“Jack”), Eldon Donald Frye (“Donny”),
George H. Frye (“Bing”), and Cameron Edward Frye (“
[3] This
case arises out of an action brought by Jack contesting the validity of a
provision in
[4] The
elder George H. Frye died in November 1991. His will divided his company,
George H. Frye Holdings Ltd. (“the company”), equally among his five children—with
Donny’s interest held in the two trusts mentioned above. In 1994, Bing sold
all of his shares back to the company, increasing the interest held by
[5] The letters patent under which the company was incorporated in 1968 contains the following provision:
The right to transfer shares of the Company shall be restricted in that no share shall be transferred without the express sanction of the board of directors, to be signified by a resolution passed by the board of directors. …
[6] All of the Frye siblings entered into a shareholders’ agreement in June 1991. At that time, their father was still alive and held shares in the company, but he was incompetent and Canada Trust had been appointed to act on his behalf. One of the agreement’s purposes was to remove Canada Trust, and Canada Trust declined to sign this agreement on the elder Frye’s behalf. At the end of February 1994, after the Frye siblings had inherited all of their father’s shares, they signed a unanimous agreement that amended and confirmed the June 1991 shareholders’ agreement. The shareholders’ agreement contains the following provisions relevant to the transfer of shares:
Part I, para. 7
APPROVALS REQUIRED
The following matters, in addition to the approval required by the by-laws of the Corporation and the Business Corporations Act, shall require the approval of at least three (3) of Bing, Cam, Cheryl and Jack:
…
(m) Any transfer of shares otherwise as provided in this Agreement. …
Part I, para. 11
TRANSFER RESTRICTED
Each of the Signator Shareholders agrees that he will not sell, assign, transfer, grant options in respect of or otherwise deal with any of his shares in the capital of the Corporation, except in accordance with the provisions of this Agreement. …
[7] Part I, para. 12 of the shareholders’ agreement also requires that any shareholder wishing to sell his or her shares must first offer the shares to the company, and then to the other shareholders on a pro rata basis. The prospective seller is only permitted to sell to a non-shareholder after these offers have been declined.
[8] The siblings’ shareholders’ agreement lastly includes, under the heading “Family Consensus”, the following declaration as to their father’s intentions:
Part II, para. 1
1. Bing,
…
(b) The fixed purpose and intent of George was and is to preserve the Frye Group as a family business, and for all of his children to share equally therein. …
[9] The Will at paragraph 4(nn) directs the estate trustees as follows:
to transfer and deliver to my sister CHERYL VANESSA SYLVESTRE, if she outlives me, all of the shares I own at the time of my death in George H. Frye Holdings, Ltd., a Canadian Corporation.
[10] Jack challenged the validity of this gift through an action alleging that: Cam lacked domicile in Ontario at the time he made the Will; Cam lacked testamentary capacity at the time he made the Will; Cheryl asserted or should have been presumed to have asserted undue influence over Cam when he made his Will; the shareholders’ agreement prohibited Cam from transferring his shares to Cheryl through his Will.
[11] Jack
withdrew his claim concerning domicile in
[12] The
trial judge found that the meaning of the shareholders’ agreement was clear
and that it was unnecessary to resort to extrinsic evidence. After a careful
reading of the agreement as a whole, he concluded that the words referring
to the transfer of shares were broad enough to apply to a transfer by testamentary
disposition. He found that
[13] After
finding the bequest void and severable from the remainder of the Will, the
trial judge ordered the estate to sell the shares in accordance with the
shareholders’ agreement. If the trial judge’s decision stands, the proceeds
from this sale will fall into the estate’s residue, which
[14] The trial judge ordered that the costs of the estate solicitor should be paid on a substantial indemnity scale from the estate. Then, because the trial judge viewed the results as mixed, he ordered the other parties to bear their own costs.
[15] Cheryl,
in her personal capacity, brings the appeal. The appeal raises the single
issue of whether the trial judge erred in voiding
[16] Jack
seeks leave to cross-appeal the trial judge’s costs decision, and requests
that his costs of the trial be paid out of
[17] The
trial judge interpreted the share transfer restrictions in the shareholders’ agreement
and the company’s letters patent as broad enough to apply to a transfer by
testamentary disposition. The trial judge then reasoned that to give effect
to
[18] I
agree that the shareholders’ agreement and the letters patent apply to a
share transfer by testamentary disposition. However, it does not follow that
[19] First,
on a conceptual level, contractual obligations do not constrain a person’s
ability to bequeath property by means of a will. For example, a contractual
obligation to make or to refrain from revoking a will gives rise to an action
for breach of contract and does not affect the validity of the will itself:
see A.H. Oosterhoff, Oosterhoff on Wills and Succession, 6th ed. (Toronto:
Thomson
[20] Second,
the trial judge was not made aware of s. 67(2) of the Business Corporations
Act, R.S.O. 1990, c. B.16, and did not consider its effect. Section 67(2)
expressly contemplates corporate articles and shareholders’ agreements that
restrict the transfer of shares. It provides that a corporation shall treat “the
executor, administrator, estate trustee, heir[1] or legal representative of the heirs, of the estate
of a deceased security holder” “as a registered security holder entitled
to exercise all the rights of the security holder that the person represents”. Pursuant
to s. 67(2),
[21] Nor was s. 67(7) of the Business Corporations Act brought to the attention of the trial judge. As the parties did not address the import of s. 67(7), I would leave it to them to consider whether it overrides the requirement of the letters patent that a resolution of the board of directors is required to approve the registration of the transfer of shares to the estate trustees.
[22] In any event, there is no basis for finding the specific bequest to be null and void. Legal title to the shares is transmitted by the Will to the estate trustees, who hold them in trust for Cheryl. However, the estate trustees are bound by the shareholders’ agreement and cannot distribute the shares out of the estate to Cheryl without complying with the requirements of the shareholders’ agreement and the letters patent. The estate trustees’ inability to transfer the shares to Cheryl immediately does not, however, render the bequest void.
[23] Whether
the anti-ademption provision in s. 20(2) of the Succession Law
Reform Act applies or not, the shares vested in the estate trustees
in trust for Cheryl when
[24] Jack
argues that Cheryl, by taking the position that
[25] I
do not accept this argument. It conflates two very different matters. Cheryl
is both an individual and a trustee. As an individual, she is entitled to
receive gifts, including a gift of shares from
[26] I would allow the appeal.
[27] Jack seeks leave to cross-appeal the costs order of the trial judge and requests an order that his trial costs be paid from the estate on a substantial indemnity basis. The force of Jack’s application for leave to cross-appeal the costs order is considerably undermined by the result on the main appeal. The results are no longer mixed. All of the substantive issues at trial have been decided against Jack. I would refuse leave to cross-appeal the trial judge’s costs decision.
[28] I would allow the appeal, set aside the trial judge’s declaration that Cameron Edward Frye’s specific bequest of his shares to Cheryl Vanessa Sylvestre is null and void, as well as his order that the shares be sold by the estate, and substitute a judgment dismissing the action of John Arthur Frye in this regard.
[29] I would dismiss the application for leave to bring a cross-appeal against the trial judge’s costs order.
[30] I would fix the costs of the estate solicitor of Cameron Edward Frye on the appeal and the motion for cross-appeal on a substantial indemnity scale in the amount of $20,802.17 to be paid out of the estate. I would fix the costs, both on the appeal and motion for cross-appeal, of the other parties on a partial indemnity scale to be paid by John Arthur Frye to Cheryl Vanessa Sylvestre in the amount of $45,000, and to Eldon Donald Frye in the amount of $15,000, all inclusive of disbursements and GST.
“R.G. Juriansz J.A.”
“I agree J.M. Simmons J.A.”
“I agree Paul Rouleau J.A.”
RELEASED: September 9, 2008
[1] We are not concerned with the interpretation of the word “heir”, as s. 27 of the Succession Law Reform Act, R.S.O. 1990, c. S.26, stipulates that, unless a contrary intention is apparent in a will, “heir” means “the person to whom the beneficial interest in the property would have gone under the law of Ontario if the testator or the other person died intestate.”