Wrestling over Wills and Wealth in Neuberger v York
Nothing riles a family up more than a good ‘ol contested probate of will. This is especially true if there are millions to be had. This month, the Court of Appeal for Ontario (“ONCA”) issued a ruling in Neuberger v York, 2016 ONCA 191 that allows one faction of a family to challenge a will where the other faction of that family is set to receive substantially more from the will.
The warring clan is that of the now deceased Sarah and Chaim Neuberger, prominent Toronto philanthropists and real estate giants. A holocaust survivor, Mr. Neuberger came to Canada in the 1940s to start a new life. He built a successful enterprise and wisely developed a plan in his old age for the distribution of his assets. This plan included securing a financial future for his children and grandchildren.
The two daughters of the Neubergers, each with their own grown children, are the two sides engulfed in the dispute over the Neuberger wealth. Mr. Neuberger created a will in 2004 and a second will in 2010. The second will became the point of contention with Mr. Neuberger’s death in 2012.
In the 2004 will, the daughters were treated relatively equal. Mr. Neuberger had split the assets of his business into two parts. One was retained within the original business, Nuberg & Dale Construction Limited, and the other was transferred to a newly created numbered corporation. Mr. Neuberger’s intention was that upon his death each daughter would inherit one of his two companies. Clearly, this will indicated his desire to treat each daughter equally. The residual of any inequity in the stock capital of either business would be set aside, divided into two equal shares and then redistributed to the companies now owned by his daughters.
In 2010, however, the new will did not go through this balancing process but instead the capital stock of each company were to be distributed directly to each of the sisters and their families. The problem here is that Mr. Neuberger lent his income back to one of the businesses prior to his death and thus upon his death it meant that one company had substantially more assets than the other. The result is that one sister had ownership of a company worth nearly $13 million more than the company owed by the other sister.
Needless to say, this difference in inheritance generated a rift between the siblings and it eventually made its way into the courts.
Edie, the Neuberger daughter that stood to inherit almost $13 million less than her sister Myra, challenged the 2010 will on the basis that her father lacked capacity at the time the will was made. A report by a geriatric psychiatrist submitted as evidence to the court indicated that Mr. Neurberger in fact was not capable of making complex business decisions and appreciating the consequences of certain actions.
Edie further claimed that the 2010 will was created under suspicious circumstances where it was unclear whether his accountant or lawyer had explained the effects of the change in the will to Mr. Neuberger or had even received direct instructions from him to make these changes.
At the lower court, the motion judge denied Edie’s ability to challenge the will citing Edie’s late challenge to Mr. Neuberger’s capacity even though she suspected issues well before his death. Also, the judge was sceptical of Edie’s credibility given the fact that Edie took advantage of the benefits of the 2010 will even though she was set to challenge it in court. It gave the appearance that she used aspects of the 2010 will that served her interest when it was convenient to do so.
Not to be deterred, Edie proceeded to the ONCA to plead her case. The ONCA agreed with the applicant (Edie) and overturned the lower court’s decisions on several bases. Writing for the court, Justice Gillese agreed with Edie’s position that to deny a challenge to a will because the applicant did not file their claim in less than two years can set a troubling precedent. If such a ruling stands it would mean that a person would have to bring a premature challenge that was not yet fully informed or take no steps to administer an estate while they were challenging the validity of a will. Justice Gillese also made the key point that it would be unfair to deny a challenge because in some situations it can take a long time before questionable aspects of a will are discovered.
As it stands, Edie is now able to go forward with her challenge to the will and reverse the effects of the 2010 will if she is successful.
This case is a common example of how wealth distribution in a will can lead to the deterioration of familial relationships. Susan and Chaim Neuberger are recognized in Toronto as strong supporters of holocaust education and they worked to establish a centre dedicated to this cause. It is unfortunate that their legacy is being marred in such a public fashion where those that should be focused on continuing the Neubergers’ work are distracted by the allure of winning a legal battle.