Which Legal Capacity Are You Acting In? It Matters!
Many times in life, we play more than one role at the same time. For example, we may be spouse, parent, employee and citizen simultaneously. The overlap is usually free from problems because we intuitively know that the role of parenting is would be inappropriate when dealing with a boss. (Just imagine ordering your boss to eat her vegetables or go to his room).
Similarly, legal capacity, or which role we are in, does matter. Problems can occur, however, when an individual is acting in more than one role such as both an estate beneficiary and estate trustee. A recent Ontario Court of Appeal decision illustrates how one woman lost the right to purchase land because she neglected to consider which role had the right to do so.
Four brothers inherited a parcel of land which they severed into four parcels allowing each to have full ownership over his respective parcel. As part of the agreement to sever the land, they entered into an agreement granting a right of first refusal to the remaining brothers prior to any sale to a third party. Time passed and two of the brothers died. The first brother Don was survived by his wife Darlene. The second brother who passed was survived by his wife Joyce and two sons. Joyce decided that she wanted to sell her land and entered into an agreement with a third party. Appropriately, the Agreement of Purchase and Sale referenced the right of first refusal as a condition to the transfer of the land.
The two remaining brothers decided they did not want the land and communicated that they would not be exercising the right of first refusal. Darlene however, wanted the land and communicated that she would take the land. Her communication referenced her right as a family member of Don. The third party purchaser objected and the matter ended up in court.
The judge dismissed Darlene's assertion that she was entitled to the land. In her capacity as a "family member" she had no right to exercise the right of first refusal. Rather, that right belonged solely to Don. After Don passed, the right belonged to Don's estate and could only be exercised by the estate trustee. It is unclear whether Darlene was estate trustee as she led no evidence on this point. Because Darlene attempted to exercise the right of first refusal in her personal capacity, she failed to get the land. Had she acted as estate trustee, or had the actual estate trustee act on her behalf, she would have likely succeeded.
The Lesson: Legal capacity matters and which role you are acting in could determine the matter in a way that you do not want. It is important to check who has the authority to act in a certain matter. If you are not sure, seek legal advice.
Bennett v Bennett Estate, 2018 ONCA 45 (ONCA) https://www.canlii.org/en/on/onca/doc/2018/2018onca45/2018onca45.pdf
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