Court File and Parties
Citation: SALLER v. FERGUSON, 2017 ONSC 4077 Divisional Court File No.: DC991/16 Date: 2017-06-30 Superior Court of Justice – Ontario Divisional Court
Re: Gunther Fred Saller, Estate Trustee of the Estate of James John Dravis, Applicant/Appellant And: Velma Ferguson, Respondent/Respondent in Appeal
Before: Kiteley, Wilton-Siegel, Broad JJ.
Counsel: B. Yellin, for the Applicant/Appellant L. Aitchison, for the Respondent
Heard at Oshawa: June 29, 2017
Endorsement
Introduction and Background
1The appellant appeals an order of Salmers, J., dated August 22, 2016, reasons reported at 2016 ONSC 5315, (the "Order") regarding an application of the appellant, Gunther Fred Saller to pass the accounts of the Estate of James John Dravis. The appellant brought the application in his capacity as the Estate Trustee in compliance with the Order of Glass, J. dated December 31, 2013.
2The respondent, Velma Ferguson (the "Objector"), a beneficiary of the Estate, filed a Notice of Objection. The appellant also filed a Response to the Notice of Objection.
3Pursuant to the Order, the appellant was removed as Estate Trustee. The appellant was required to pay the Estate the amount of $402,321.02 on account of damages for breach of fiduciary duty and negligence and to repay the amount of $46,997.68 for pre-taken executor's compensation. In addition, the Appellant and the Estate were ordered to pay to the Objector, jointly and severally, the sum of $75,000.
4The appellant submits that the order should be set aside and that a trial be ordered with respect to the issues of negligence and breach of fiduciary duty raised by the Objector at the hearing of the application.
Jurisdiction
5The court's jurisdiction to hear this appeal is grounded in sections 49 (3) and 10 of the Estates Act, R.S.O. 1990 c.E. 21.
6Given that the substantive issues before the application judge were claims for negligence and breach of fiduciary duty and that the amount awarded exceeded $50,000, a preliminary issue of the jurisdiction of the Divisional Court was raised.
7We are satisfied that the court has jurisdiction based on the fact that the proceeding before the application judge was an application to pass accounts and therefore constituted a "proceeding" for the purposes of section 10 of the Estates Act, notwithstanding that, in the end result, the application judge did not pass the accounts.
Standard of Review
8There is no standard of review in respect of appeals based on allegations of denial of natural justice and procedural fairness.
Analysis
9In this case the application judge had before him, at the outset of the hearing, no more than the Application to Pass Accounts, the Notice of Objection and the Response to the Notice of Objection. He proceeded first to hear the submissions of counsel for the Objector, in the course of which evidence was introduced in an informal way. He then heard the submissions of the appellant, who was unrepresented, during which further evidence was also introduced in an informal way. At the end of the process the application judge then requested that the appellant swear that everything he had said was true and he complied.
10As in many instances, the hearing on the passing of accounts was conducted informally. Given the limited nature of the materials before him, the application judge could not have appreciated the specific claims being asserted against the appellant until he heard and understood the Objector's submissions. Moreover, as discussed below, counsel for the Objector did not make mention of two significant matters that the application judge could have considered.
11In these circumstances the application judge was hampered in his ability to conduct the hearing.
12We conclude, notwithstanding the efforts of the application judge, the appellant was not afforded procedural fairness in this proceeding for the following four reasons.
First Reason: Complexity of the Issues
13First, and most significantly, the issues in this proceeding were complex as the application judge noted. The issues included whether the appellant had knowledge that he did not have the authority under the will to carry on the business of the deceased's corporation indefinitely; the extent of the loss, if any, from his carrying on of the business relative to the shutting down of the business and liquidation of the assets in their state in 1999; and the applicability of section 35 (1) of the Trustee Act R.S.O. 1990 c. T. 23. Moreover, the claims asserted against the appellant were serious and the damages substantial.
14At a minimum, the application judge was required to raise with the parties whether a trial of the issues was required. This was not raised by the Objector's counsel and it is clear that the application judge did not consider the issue.
15In our view, for the reasons developed further below, the procedural issues required that such a trial be ordered to determine the claims against the appellant in a procedurally fair manner.
Second Reason: Lack of Notice and Explicit Allegations
16Second, notwithstanding the reference in the Notice of Objection to the appellant having "improperly" pre-taken compensation from the Estate, there was no express allegation of impropriety with respect to the management fees taken by the appellant. More importantly, there were no explicit allegations in the Notice of Objection respecting breach of trust, breach of fiduciary duty or negligence. No Factum was filed by the Objector, which would have alerted the appellant to the fact that such claims would be advanced and there was no Record setting out all of the evidence on which the Objector would be relying. Moreover, there was no notice given to the appellant with respect to the relief which the respondent would be seeking at the application hearing.
17On the record, in the absence of a Factum from the respondent, there is no basis to suggest that the appellant would not have been justified in believing that his Response to the Notice of Objection adequately addressed all of the Objector's objections.
Third Reason: Failure to Consider Defences
18Third, the application judge did not consider whether, in the circumstances, the appellant was entitled to the benefit of the common-law defence of "innocent mistake, in good faith" or the benefit of the provisions of section 35(1) of the Trustee Act.
19It is agreed that no submissions were made to the application judge regarding these possible defences. In addition, the application judge made no finding of facts that would be relevant to the application of such defences.
20In our view, the failure to consider these defences by the application judge, also constituted a denial of procedural fairness.
Fourth Reason: Conduct of the Hearing
21Fourth, the manner in which the hearing was conducted also constituted a denial of procedural fairness. The application judge did not review the process to be followed with the parties, a step which was necessary in light of the fact that the appellant was unrepresented. He also reversed the customary order of presentation without seeking input from the parties or explaining to the appellant that the normal order was being reversed. After counsel for the Objector advised that no evidence would be presented, counsel was permitted to effectively introduce evidence from the counsel table, which made cross-examination not feasible. When it came time for the appellant to present his case, he was given no direction by the application judge on the process to be followed or on the issues that he should address. Following submissions by the appellant, counsel for the respondent was permitted to introduce further evidence, again in an informal manner, and this evidence not subjected to cross-examination.
22In summary, the admitted complexity of the issues, as stated by the application judge, called for a trial and the process that was adopted was wholly inadequate in providing procedural fairness to the appellant.
Conclusion and Disposition
23For these reasons the appeal must be allowed and the claims of the Objector against the Appellant be referred for trial.
24Counsel may contact the trial coordinator at Oshawa to arrange an appointment before a Superior Court judge for directions on the conduct of the trial of the Objector's claims.
Broad, J.
I agree Kiteley, J.
I agree Wilton-Siegel, J.
Date: June 30, 2017