Heir asked for an advance of his inheritance and to have his sisters declared unworthy
The Quebec Superior Court has affirmed the liquidators' refusal to pay an advance share of a single heir's inheritance to prevent a "judicial guerilla" among all the heirs.
In Gallaman c. Gallaman Schwartz, 2023 QCCS 1607, Michael Gallaman signed a notarized will in 2015. He has three children—Joel, Helene, and Aliza. Michael passed away in 2017. In his will, he gifted to his three children, in equal shares, his shareholdings in an investment company and his undivided 10 percent personal right, title, and interest in Place Kensington. He also made his three children the residual universal heirs of his estate.
In the will, Michael appointed his two daughters as liquidators. However, Michael later executed a codicil, removing his daughters as liquidators and replacing them with three independent liquidators. The codicil states that appointing independent liquidators was necessary to avoid controversy and friction among the three siblings. His two daughters started a campaign of questioning Michael about the change in his behaviour.
Declaration of unworthiness
After Michael's death, Joel Gallaman commenced an action to have his sisters, Helene and Aliza, declared unworthy to inherit because of their allegedly serious reprehensible conduct. He also sought a safeguard order to prevent the liquidators from distributing the proceeds of his father's estate to his two siblings. Still, the court refused to grant this order because Joel had not shown an urgency or a strong appearance of right. The judge noted that Michael knew of his daughters' behaviour for over 18 months and still chose not to disinherit them.
Action for advance payment
Joel then commenced a proceeding to receive an advance payment of his share of his father's inheritance. The estate’s liquidators and Joel’s two sisters, Helene and Aliza opposed his decision. To support their objection, the liquidators argued that the five conditions for distribution mandated in a resolution they had adopted in 2018 had yet to be met. They asserted that the parties had not resolved the will's contestation and had yet to obtain the distribution certificates from the tax authorities. In addition, Helene and Aliza argued that there needs to be more evidence of Joel's immediate need for money.
Joel argued that the estate is solvent, having over $19 million in liquid assets and no debt. He also claimed that this share of the estate was not contested and that the liquidators were unreasonably withholding his inheritance.
The Quebec Superior Court noted that the liquidators' 2018 resolution requires the distribution to the heirs to occur as soon as possible after the parties have eliminated or resolved any disputes to the will. The court pointed out that the heirs still have an ongoing dispute concerning Joel's action to have his siblings declared unworthy.
Liquidators’ authority to make an advance payment
The court explained that the liquidator may make an advance payment to the heirs when the succession extends beyond 12 months, and the estate is solvent. However, if the liquidator refuses to act, the heirs may apply to the court.
The court acknowledged that it is responsible for giving effect to the will and the codicil. The court found that Michael drafted the codicil after expressing his desire to replace his two daughters as liquidators to ensure a harmonious liquidation and distribution of his estate. He did not remove them as heirs despite his conflict with them.
The court further noted that the will provides that the liquidators may act at their sole discretion and that Joel is presumed to have consented to this condition. The court said it might examine the reasonableness or otherwise of the decision of the liquidators to wait for the settlement of the dispute before undertaking the distribution. Still, it must always remember that Michael granted them complete discretion in exercising their function.
The court said that when Joel began his legal proceedings for a declaration of unworthiness, he knew full well that his proceedings would delay the distribution to the heirs. The court also noted that Joel delayed the progress of his legal proceedings by requesting a stay of the proceedings and then by asking for and obtaining various extensions. These delays postponed the settlement of the dispute and, consequently, the distribution of the estate's assets.
The court acknowledged that the liquidators offered to advance payments to all three heirs, but Joel refused based on his challenge to his sisters' status as heiresses. The court accordingly concluded that the liquidators, decision to hold any advance payment to treat the three heirs of equal rank evenly is reasonable.
"Without admitting it openly, the liquidators also seem to want to avoid financing a judicial guerrilla," the court wrote in its decision. "By handing over a share of the inheritance only to Joel, the legal dispute between the parties is therefore only likely to worsen. This would also have the undesirable effect of delaying the liquidators' discharge while the legal battle continues and create an imbalance between the parties."
The court ultimately ruled that the liquidators did not act unreasonably by refusing to distribute an advance payment which would benefit only one of the heirs.