Moghadam v. Moghadam 2025 ONSC 4695
Estate planning often aims to simplify the administration of an estate and prevent conflict. But in Moghadam v. Moghadam, the Ontario Superior Court confronted a situation where an unusual estate structure did just the opposite, placing a daughter in multiple overlapping roles that ultimately created a conflict requiring her removal as trustee.
Background: A Family Business and a Growing Rift
Rafie and Zahra Moghadam built a successful airport luggage service business in Ottawa, jointly holding all corporate shares. Their four children included:
- Saied, who ran day-to-day operations, and
- Soraya, a physician and high-ranking officer in the Canadian Armed Forces.
In 2022, Soraya became involved in the company due to concerns about Saied’s financial management. By 2023, after discovering irregularities, including off-book payments, unauthorized loans, and misuse of company vehicles, Soraya was appointed sole director, and Saied was removed from management. When Saied refused to comply with her directions and continued unauthorized transactions, she terminated his employment.
Despite internal turmoil, Soraya ensured Zahra continued to receive monthly dividend income, even though Soraya herself did not take compensation.
The Estate Plan: Well-Intentioned but Problematic
In 2021, Rafie and Zahra executed mirror wills with an intricate trust for Rafie’s shares:
- Soraya was appointed executor and trustee.
- Rafie’s 50% shareholding was to be held in trust for Zahra during her life.
- After Zahra’s death, Soraya was to hold the shares to ensure the business was run “prudently and successfully.”
- Upon sale, or after 20 years, sale proceeds would be distributed primarily to Saied, with the remainder split among the other three children.
This structure gave Soraya significant control, particularly when combined with her role as the corporation’s only director.
Caregiving and the Insurance Dispute
As Rafie’s health declined, he moved in with Soraya, who took responsibility for most of his care costs. The family repeatedly assured her, and later confirmed in writing, that she would be reimbursed from his life insurance proceeds. When Rafie died in 2024, Soraya brought a claim for repayment.
Zahra, meanwhile, sought Soraya’s removal as trustee, executor, and corporate director.
The Court’s Findings
Justice MacLeod addressed two main issues: reimbursement and removal.
1. Reimbursement for Care Expenses
The court found that:
- Soraya was given clear assurances of reimbursement,
- she relied on those assurances to her detriment, and
- the promise was intended to be binding.
Whether analyzed as contract law or detrimental reliance/unjust enrichment, the result was the same: Soraya was entitled to repayment.
2. Validity of the Will and Trust
Challenges to the Will and trust failed.
- Rafie had capacity and independent legal advice.
- The trust, although containing vague language (“primarily” benefiting Saied), satisfied the three certainties and was therefore valid.
3. Removal of Soraya from Various Roles
- As director: Soraya had acted in the company’s best interests, rectifying financial and legal non-compliance. The court rejected claims of oppression or unfair prejudice.
- As executor: No grounds for removal existed.
- As trustee: This was different.
Soraya’s dual roles placed her in a direct conflict of interest. She controlled trust shares needed to make key decisions, yet failed to pay dividends owed to Zahra and used her voting control to prevent her own removal as director. Even without bad faith, the conflict made her position untenable.
The court ordered that she must be replaced as trustee, either by agreement or further court direction.
Considerations
- Estate plans involving active businesses require careful structuring to avoid conflicts.
- Trustees who also hold corporate control risk breaching fiduciary duties through structural, not intentional, conflicts.
- Clear family agreements, especially around caregiving costs, should be formalized early to prevent later disputes.
Brian Madigan LL.B., Broker
www.OntarioRealEstateSource.com