COURT OF APPEAL FOR ONTARIO
Rouleau, van Rensburg and Miller JJ.A.
BETWEEN
Arnold J. Messmer
Applicant (Respondent in appeal)
and
Karl Pilz
Respondent (Respondent in appeal)
and
Karl Peter Pilz
Attorney for Property (Appellant in appeal)
Application under section 22 of the Substitute Decisions Act, 1992, S.O. 1992, c. 30
Patrick E. Hurley, for the appellant
Lulama M. Kotze, for the respondent Arnold J. Messmer
Nammarra Dokken George and Zach Flemming-Gianotti, for the respondent Karl Pilz
Heard: October 27, 2016
On appeal from the judgments and orders of Justice Timothy Minnema of the Superior Court of Justice, dated June 24, 2015 and July 24, 2015.
1The appellant, Karl Peter Pilz (“Peter”) appeals from the judgment declaring valid the continuing power of attorney for property executed by Karl Pilz (“Karl”), appointing Arnold J. Messmer (“Arnold”) as his attorney for property.
2Peter also sought leave of the Divisional Court to appeal the dismissal of his motion to consolidate Arnold’s application (referenced above) with a pending application Peter brought against Karl and Erna and Franz Messmer (the “Messmers”), bearing Court File No. CV-10-0051-00. Leave to appeal was granted by the Divisional Court and the appeal was transferred to this court to be heard together with Peter’s appeal of the declaration of the validity of Arnold’s appointment as Karl’s attorney for property.
3Peter also appeals from the costs awards made against him.
A. facts
(1) Background
4Peter is the son of Karl and Cacilie Pilz. Cacilie died in 1997, after which Peter became the sole beneficiary in Karl’s will as it existed at the time.
5After Cacilie’s death, Karl developed a relationship with a neighbour, Judy Lutynski—a woman about 30 years younger than Karl—and Ms. Lutynski’s spouse Jim Green. Mr. Green died in 2005.
6Karl suffered a severe stroke in December 2006, after which Peter closed his business and went to Belleville from Toronto to care for his father. At that time, Peter began exercising the power of attorney his father had executed in 1993. Upon reviewing Karl’s finances, Peter discovered that, commencing in 2004, Karl had advanced substantial sums of money to Ms. Lutynski and Mr. Green. As a result, Peter became quite vigilant with respect to Karl’s financial affairs.
7When Karl was discharged from hospital in Belleville in April 2007, Peter moved Karl into a Toronto nursing home that was nearer to where Peter and his family lived.
8Ms. Lutynski complained about Peter’s treatment of Karl and about his having moved Karl away from Belleville. Following several exchanges, as well as the involvement of the Advocacy Centre for the Elderly, Peter agreed that Karl could move out of the Toronto nursing home to live with and be cared for by Ms. Lutynski in her home, which is located in Tweed. Ms. Lutynski was paid $550 per month for this and an account was opened from which funds could be withdrawn by her to cover Karl’s living expenses. In February 2014, Ms. Lutynski and Karl were married.
(2) The pending proceedings
9Peter discovered that, in the years following Karl’s stroke in late 2006, Karl had executed various powers of attorney, including two in favour of the Messmers who were Karl’s sister and brother-in-law. These powers of attorney also named the Messmers’ son Arnold and his wife as substitute attorneys, should the Messmers choose not to exercise their power of attorney.
10As a result, Peter determined that he ought to commence an application under the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (the “SDA”) to be appointed guardian of the person and property for Karl and for a declaration that the only valid power of attorney for property was the one granted to him in 1993. That application was brought in June 2009 and named Karl and the Messmers as respondents.
11By agreement of Peter and the Messmers, Karl underwent an assessment by a psychologist in August 2009. In two reports dated August 31, 2009, the psychologist concluded that Karl was capable of giving a power of attorney and of making a will, but incapable of managing his finances.
12It quickly became clear that there were disputed issues and that the matter could not be resolved by way of application. Following Peter’s motion for directions, the application was converted to an action. The issues to be tried are as follows:
The validity of the powers of attorney made out to the Messmers including whether they were executed with the knowledge, understanding and approval of Karl and whether they should be set aside under the doctrines of undue influence or suspicious circumstances;
Whether Karl is incapable of personal care under s. 45 of the SDA;
Whether Karl is incapable of managing property under s. 6 of the SDA; and
Whether Peter should be appointed guardian of property of Karl or guardian of the person of Karl.
13There was also a term in the order that Karl’s assets were not to be expended, dissipated or otherwise dealt with, except with the prior written consent of all parties or by order of the court. This did not affect an order previously agreed to by the parties that $2,250 be placed into Karl’s bank account monthly and that the Messmers were to provide an accounting of the expenditure of these funds. It does not appear that the Messmers have provided any such accounting.
14Following the referral of that application to a trial of an action, Karl commenced an action in his own name against Peter and the CIBC, in which he sought an accounting from Peter of his exercise of the power of attorney for property and damages from the CIBC. On February 2, 2011, the court ordered that the action be consolidated with Peter’s application. These combined proceedings are Court File No. CV-10-0051-00 (the “pending proceedings”)
(3) The current application
15In October 2014, Arnold, the Messmers’ son, commenced an application (the “current application”) seeking a declaration that a power of attorney granted to him on April 16, 2014 was the only valid power of attorney and that all prior powers of attorney were revoked. He also sought an order appointing him guardian of property for Karl.
16In response to Arnold’s application, Peter brought a motion to consolidate that application with the pending proceedings.
17In support of his motion to consolidate the current application with the pending proceedings, Peter filed an affidavit to which was appended considerable relevant materials from the pending proceedings. These materials set out the substance of the dispute among Peter, the Messmers and Karl, including the issue of guardianship and the allegation that the powers of attorney granted to the Messmers—and in which their son Arnold is named as a substitute attorney—should be set aside under the doctrines of undue influence or suspicious circumstances.
18For his part, Arnold filed two affidavits in support of his application: one in his own name and a second sworn by Karl.
(4) The application judge’s decision
19The application judge allowed Arnold’s application and dismissed Peter’s motion for consolidation. The judge also ordered Peter to pay substantial indemnity costs fixed at $18,000 for Arnold and $13,500 for Karl.
20In his reasons, the application judge criticized the way Peter had handled Karl’s funds when exercising his power of attorney finding, among other things, that transfers of funds effected by Peter were “highly inappropriate”.
21The application judge went on to find that the record disclosed that Karl had legal capacity to appoint a new power of attorney and to terminate previous ones. As a result, he saw no good reason not to grant Arnold’s application.
22After reaching this conclusion, the application judge turned to Peter’s motion to consolidate. In his view, if he were to consolidate Arnold’s application with the pending proceedings, it would cause substantial delay in resolving Arnold’s application. Arnold had the prima facie right to proceed by application and the application judge saw no “good reason to deny him on these facts, the salient points of which are not seriously challenged.”
B. issues
23Peter argues that the application judge erred in:
a. Dismissing the motion for consolidation;
b. Granting a final judgment in the application; and
c. Awarding costs on a substantial indemnity basis.
C. discussion
24I would allow the appeal. The application judge’s decision is based on two broad premises, both of which are incorrect.
25Specifically, in the application judge’s view:
Arnold’s application was separate and unrelated to the pending proceedings; and
The only issue to be determined was Karl’s legal capacity which, on the record before him, was clearly established by a report from an assessor.
26As for the first premise, the record filed discloses that Arnold is not, in fact, a stranger to the pending proceedings. Not only is he the son of the respondents in the pending proceedings, he is the substitute attorney in the two powers of attorney granted to the Messmers that are at the heart of those proceedings.
27With respect to the second premise, it is clear from the materials Peter filed from the pending proceedings that Peter’s concern with the current application is not, strictly speaking, Karl’s capacity to grant a power of attorney. Rather, Peter raises the same issues as were raised in the pending proceedings, that is, whether the power of attorney and will executed by Karl and put before the court by Arnold have been the product of undue influence or were signed in suspicious circumstances. Additionally, Peter raises the issue of whether he and not Arnold should be appointed guardian of property and of the person of Karl.
28As the same critical issues are raised in both proceedings, there is clear overlap favouring consolidation.
29On the consolidation motion, Peter chose to file an affidavit to which were appended materials from the pending proceedings, rather than filing fresh and new evidence setting out in detail why and how these same concerns apply to Arnold’s power of attorney and Arnold’s request to be appointed Karl’s guardian of property in the current application. In my view, this was an appropriate and efficient way to proceed and Peter ought not to be faulted for doing so.
30Peter did not file fresh affidavits repeating the concerns raised in the pending proceedings. Such affidavits would have made the obvious point that these concerns apply equally to the Messmers’ son being given a power of attorney by Karl and being appointed his guardian of property. Because of Peter’s failure to provide fresh evidence, and because he did not cross-examine Arnold and Karl on their affidavits, the application judge essentially ignored the materials Peter did file and viewed Arnold’s materials as being unchallenged. On this basis, he determined the current application as though there was no evidence before the court of undue influence, suspicious circumstances or an application by Peter to be appointed guardian of property and of the person of Karl.
31This was an error.
32To have required Peter to, in effect, litigate these issues in parallel proceedings would risk inconsistent decisions by the court in the two matters. Further, it would be a terrible waste of the resources of both the parties and the court. Consolidating the proceedings, to be followed by the imposition by the court of timelines, was clearly the appropriate route to follow.
33Moreover, even in the material filed on the application there were discrepancies that provided support for Peter’s concern that Arnold’s power of attorney may be the product of undue influence and suspicious circumstances. In Karl’s affidavit in support of the application, Karl explains that he considered Arnold to be an appropriate, unbiased and objective attorney for property because Arnold “is a financial planner by occupation” and “is neither a beneficiary to my Estate, nor does he have a pecuniary interest in my ongoing finances”.
34Both these statements are incorrect. Arnold is an I.T. hardware specialist and not a financial planner. Although he is employed by a bank, his title is “Hardware Specialist I.T. Asset Management”. Further, although Arnold is not a direct beneficiary of Karl’s estate, he is in fact listed as a beneficiary in the event that the direct beneficiaries, including Arnold’s parents, predecease Karl.
35Although the rules provide that Arnold had a prima facie right to proceed by application, this does not mean that he had a right to have the matter determined at the application hearing. On an application, the court may direct a trial of an issue or convert the proceeding to an action, especially where there are facts in dispute. In the present case there were clearly facts in dispute and the most efficient disposition would have been to consolidate Arnold’s application with the pending proceedings.
36In addition, the record before us demonstrates the validity of Peter’s concern that allowing parallel proceedings may lead to conflicting decisions. As noted above, in his reasons, the application judge found that the transfers of funds carried out by Peter when he exercised the power of attorney over Karl’s funds were “highly inappropriate”. This finding, although relevant to deciding whether Karl had good reason to change his power of attorney from Peter to Arnold, was an issue raised squarely in the pending proceedings. Subsequent to the application judge’s decision in this matter, the court in the pending proceedings dealt with a motion raising that very issue. After reviewing the record of Peter’s exercise of the power of attorney and the various charges and transfers of funds and after noting the application judge’s criticism of Peter, the court found that Peter had, in fact, done a proper job as power of attorney. The court found that the monies Peter charged as compensation were “more than fair and reasonable” and that the transfers of Karl’s money could not be criticized at the time they were made.
37Before concluding, I make one further observation. It is not clear to me what impact the order confirming Arnold’s power of attorney in the current application was intended to have, or indeed could have, on the previous order in the pending proceedings that Karl’s assets were not to be expended, dissipated or otherwise dealt with except with the prior written consent of all parties or by order of the court. As this point was not raised by the parties on this appeal, and as it is moot given the disposition I propose, I simply raise the issue without further comment.
D. conclusion
38In conclusion, therefore, I would allow the appeal, set aside the application judge’s decision and substitute therefor an order converting the application to an action, directing a trial of the issues and consolidating it with the pending proceedings.
39I would also award Peter his costs fixed at $12,000, inclusive of disbursements and applicable taxes. Finally, I would set aside the costs order in the court below and substitute therefor an award of costs to Peter in any event of the cause.
Released: “P.R.” November 25, 2016
“Paul Rouleau J.A.”
“I agree K. van Rensburg J.A.”
“I agree B.W. Miller J.A.”
