A Faulty Settlement and Some Buyer's Remorse

The recent decision of the Superior Court of Justice in the Murphy Estate considers what happens when parties to a proceeding settle a matter on the basis of faulty facts and one of the parties suffers from “buyer’s remorse”. 

Murphy Estate involved a dispute between the Deceased’s step-children and biological children after she died leaving in a will preferring her own children and leaving her step children with only nominal gifts.  Rather than litigating, the children and step-children reached an agreement that they would all split the estate equally and signed minutes of settlement to this effect.

When the settlement was reached, it was assumed the value of the estate was approximately $270,000 (and included a RRIF of $150,000).  This was based on a schedule prepared by the estate solicitor which listed the RRIF as an estate asset. However, the minutes of settlement themselves did not include any reference to the assets of the estate but instead simply contemplated the division of the residue.  

After the minutes of settlement had been signed, it was discovered that the beneficiary on the RRIF was not the Deceased’s estate, but was the Deceased’s two children.  The bank holding the RRIF then paid the proceeds to the children on the basis of the beneficiary designation. 

One of the step-children brought a court application seeking the repayment of the RRIF to the estate and arguing that, notwithstanding the fact that the biological children were the designated beneficiaries, the proceeds of the RRIF were to be distributed as per the terms of the settlement.  She argued that because the RRIF had been included on the statement of assets she had relied upon in reaching the settlement, a mistake had occurred and the RRIF should be included in the estate. 

The court found that in order to rely on the doctrine of mistake to set aside the agreement, the applicant would have to establish that the deceased’s children (who were the beneficiaries of the RRIF) had also been aware of the mistake when the settlement was reached.  Here, the court held that this wasn’t the case – all parties had believed that the estate was the beneficiary of the RRIF and it was only after the minutes of settlement had been signed did they learn the truth. 

Ultimately, the court decided that while step-daughter may have made a “bad bargain” by signing the minutes of settlement she was bound by them and the RRIF did not need to be repaid to the estate.