DIVISIONAL COURT FILE NO.: DC-18-019
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
LAFRENIERE, MYERS, AND WILLIAMS, JJ.
BETWEEN:
Darlene Mary Foisey, also known as Darline Mary Foisey, by her Litigation Guardian, The Public Gardian and Trustee
Applicant
(Respondent)
– and –
Joyce Green, Estate Trustee for the Estate of William Joseph Green
Respondent
(Appellant)
Jordan R. D. Lester, Counsel for the Applicant (Respondent)
Brian N. Radnoff, Counsel for the Respondent (Appellant)
HEARD at Thunder Bay: June 25, 2019
the court:
REASONS FOR DECISION
1Darlene Mary Foisey and Joyce Green were sisters and co-beneficiaries of the estate of their brother, who died intestate.
2Ms. Green acted as the estate trustee of the brother’s estate. When Ms. Foisey accepted the last instalment of her entitlement under the estate, she signed a release in favour of Ms. Green as estate trustee.
3Several months later, Ms. Foisey was declared to be incapable of managing her property.
4Ontario’s Public Guardian and Trustee, on behalf of Ms. Foisey, brought an application to require Ms. Green to pass the accounts of the brother’s estate.
5The application judge ordered Ms. Green to pass the accounts.
6Ms. Green appealed.
The Substitute Decisions Act, 1992, S.O. 1992, s. 30
7The provisions of the Substitute Decisions Act, 1992, S.O. 1992, c. 30 that are relevant to this appeal are the following:
- Incapable means mentally incapable and incapacity has a corresponding meaning. (Section 1(1).)
- A person who is 18 or more is presumed to be capable of entering into a contract. (Section 2(1).)
- A person is entitled to rely on the presumption of capacity with respect to another person unless he or she has reasonable grounds to believe that the other person is incapable of entering into the contract. (Section 2(3).)
- If a person enters into a contract either while the person’s property is under guardianship or within one year before the guardianship is established, “the onus of proof that the other person who entered into the contract or received the gift did not have reasonable grounds to believe the person incapable is on that other person.” (Section 2(4).)
- A person is incapable of managing property if the person is not able to understand information that is relevant to making a decision in the management of his or her property, or is not able to appreciate the reasonable foreseeable consequences of a decision or lack of a decision. (Section 6.)
Background facts
8William Green died without a will on March 7, 2014.
9Mr. Green was survived by his two sisters, Ms. Green1 and Ms. Foisey.
10Ms. Green, who lived in Thunder Bay, had lost touch with Ms. Foisey but located her following their brother’s death with the assistance of a private investigator.
11Ms. Foisey, who was in her mid-70s at the time, was found living in a retirement home in Hamilton.
12In June, 2014, Ms. Foisey met with a Hamilton lawyer, Douglas I. Smith, and signed a document renouncing her right to be an estate trustee of the brother’s estate. This left Ms. Green to be appointed as the only estate trustee.
13Ms. Green initially concluded that the brother’s estate was worth approximately $830,000.00.
14Ms. Green’s evidence was that after taxes and expenses, she and her sister were each entitled to receive $291,432.70 from the estate.
15On August 21, 2015, the estate’s lawyer, Walter Wieckowski, met with Ms. Foisey at the retirement home in Hamilton. Also present were Mr. Wieckowski’s wife, the Hamilton lawyer, Mr. Smith, an administrator of the home, Danica Kozar and Ed Kotinen, who was a friend of Ms. Foisey.
16At the August 21, 2015 meeting, Ms. Foisey received the balance of her $291,432.70 entitlement and signed the release in favour of Ms. Green as estate trustee.
17On November 10, 2015, a capacity assessor concluded that Ms. Foisey did not have the capacity to manage her property.
18The Public Guardian and Trustee became Ms. Foisey’s statutory guardian for property.
19The PGT became concerned when it realized that Ms. Foisey’s $291,432.70 share of her brother’s estate was significantly less than 50 per cent of Ms. Green’s estimate of the estate’s $830,000.00 value.
20The PGT made inquiries of Mr. Wieckowski. Mr. Wieckowski initially responded by saying that Ms. Foisey had signed a release. He then said that he did not have an accounting to offer and later provided conflicting information about the value of the estate.
21Unsatisfied with Mr. Wieckowski’s responses, the PGT brought an application for an order requiring Ms. Green to pass accounts.
22Ms. Green raised the August 21, 2015 release to oppose the PGT’s application.
The decision of the application judge
23The application judge granted the PGT’s application and ordered Ms. Green to pass the estate’s accounts.
24The application judge concluded that because of certain “red flags”, Ms. Green had not satisfied him that she did not have reasonable grounds to believe that Ms. Foisey was incapable when she signed the release. The application judge found that Ms. Foisey was suffering from a long-standing mental illness. He noted that Ms. Green had not had contact with Ms. Foisey for many years and did not, therefore, know as much about Ms. Foisey as she otherwise might have. He found that the facts that Ms. Foisey lived in an assisted living arrangement and that she participated in a trusteeship program “should have alerted all involved to take additional steps to satisfy themselves with respect to Ms. Foisey’s capacity.”
25The application judge identified the issue on the application before him as being whether the release signed by Ms. Foisey stood to block the requirement for an accounting. He did not expressly set aside the release; he said that although it may have been expedient and less costly for Ms. Green to have requested a release from Ms. Foisey instead of passing accounts or obtaining a capacity assessment, because of the “red flags” he had identified, it was not appropriate to have done so.
26The application judge was obviously concerned that the PGT had asked the estate’s lawyer for information on several occasions and had not received it. The application judge suggested that Ms. Green might be able to satisfy the PGT by producing certain information without a formal passing of accounts and said that, in that event, the parties could file a consent order dispensing with the passing of accounts. The application judges also offered to make himself available if the parties required further directions.
The issues
27The issues are:
#1: Did the application judge apply the correct test under s. 2(4) of the SDA when determining whether Ms. Green had reasonable grounds to believe that Ms. Foisey was incapable of entering into a contract?
#2: Did the application judge err by ordering a passing of accounts in the absence of a specific request that he find the release signed by Ms. Foisey to be unenforceable and a finding that the release was unenforceable?
Jurisdiction
28Before appealing to this court, Ms. Green appealed this matter to the Court of Appeal for Ontario which determined that the application judge’s order is interlocutory. (Foisey v. Green Estate, 2018 ONCA 514.)
29An appeal of an interlocutory order of a Superior Court judge lies to this court with leave under s. 19(1) of the Courts of Justice Act, R.S.O. 1990, c. C. 43.
30Ms. Green was granted leave to appeal to this court on September 21, 2018.
Standard of review
31The two issues on this appeal raise questions of law.
32The standard of review on a question of law is one of correctness. (Housen v. Nikolaisen, 2002 SCR 33, para. 8.)
Issue #1: Did the application judge apply the correct test under s. 2(4) of the SDA?
33The parties agree that in order to rely on the presumption that Ms. Foisey had capacity under s.2(1) of the SDA the onus was on Ms. Green to prove that she did not have reasonable grounds to believe that Ms. Foisey was incapable at the time Ms. Foisey signed the release.
34The parties also agree that the appropriate test to be applied under s. 2(4) of the SDA is for the court to consider the facts that were known to the person who is seeking to uphold a contract, in this case, Ms. Green, and then to consider whether a reasonable person with the same knowledge as Ms. Green would have had reason to believe that the other party to the contract, in this case, Ms. Foisey, was incapable of entering into the contract.
35The PGT argues that the application judge applied the correct test because the “red flag” test the application judge applied “flowed into” the reasonable person test set out above. The PGT argues that Ms. Green’s knowledge that Ms. Foisey was living in a retirement home and that her funds were being managed by a voluntary trusteeship program was sufficient to establish that Ms. Green had reasonable grounds to believe that Ms. Foisey was incapable of signing the release.
36For the reasons below, we disagree with the PGT and find that the application judge did not apply the correct test under s. 2(4) of the SDA.
“Reasonable grounds to believe”
37In Flynn v. Flynn, 2007 CarswellOnt 10220 (Ont. S.C.J.), Patillo J. considered whether there were reasonable grounds to believe that a person was incapable under s. 79(1) of the SDA, which permits a court to order a capacity assessment if it is satisfied that such grounds exist. The person had been diagnosed with dementia and was also suspected of having had a stroke. Although she had hallucinations and delusions and was disoriented from time to time, Patillo J. concluded that there were no reasonable grounds to believe that the woman was incapable. He held that there must be some direct connection between the person’s behaviour and the capacity issue and found no such connection.
38Most of the cases which have considered the meaning of “reasonable grounds” or “reasonable grounds to believe” are in the criminal law context and deal with the justification for searches by police and government agencies.
39In R. v. Debot, 1989 13 (SCC), [1989] 2 S.C.R. 1140 at para. 54, Wilson J. held that the standard is one of "reasonable probability" rather than "proof beyond a reasonable doubt" or "prima facie case" and that the phrase "reasonable belief" also approximates the requisite standard.
40In Hunter v. Southam, 1984 33 (SCC), [1984] 2 S.C.R. 145 at p. 167, Dickson J. (as he was then) described “reasonable grounds to believe” as “the point where credibly-based probability replace suspicion.”
41In the immigration context, the standard of “reasonable grounds to believe” in s. 33 of the Immigration and Refugee Protection Act, S.C. 2001, c. 27, “requires the judge to consider whether ‘there is an objective basis [for the belief]...which is based on compelling and credible information’.” (Charkaoui v. Canada, 2007 SCC 9 (Charkaoui I) at para. 39, citing Mugesera v. Canada (Minister of Employment and Immigration), 2005 SCC 40 at para. 114.)
42The Dictionary of Canadian Law2 also defines “reasonable grounds” as “reasonable probability.”
“Incapable of entering into the contract”
43Section 6 of the SDA provides that a person is incapable of managing property if she is not able to understand information that is relevant to making a decision in the management of her property, or is not able to appreciate the reasonably foreseeable consequences of a decision or lack of a decision.
44Sections 2(3) and 2(4) of the SDA deal specifically with a person’s capacity to enter into a contract.
45Whether a person has capacity to enter into a contract requires consideration of whether, at the time the person entered into the contract, the person was incapable of managing property under s. 6.
46The first question that must be asked is whether, at the time the person entered into the contract, she was able to understand information relevant to deciding whether to enter into the contract. If the answer is no, the person is not capable of entering into the contract. If the answer is yes, a further question must be asked: At the time the person entered into the contract, was the person able to appreciate the reasonably foreseeable consequences both of entering into the contract and of not entering into the contract.
47There is a temporal component to the analysis; what is relevant is the person’s capacity at the time she entered into, or signed, the contract.
Analysis
48The application judge said that certain “red flags” precluded him from finding that Ms. Green had satisfied him that she did not have reasonable grounds to believe that Ms. Foisey was incapable.
49We find that the application judge erred in failing to consider: (1) the extent to which the red flags he identified were known to Ms. Green; and (2) whether Ms. Green had reasonable grounds to believe that, at the time Ms. Foisey entering into the contract, Ms. Foisey was incapable of entering into it.
What did Ms. Green know about the “red flags”?
Red flag #1
50The first of the red flags identified by the application judge was that Ms. Foisey was suffering from a long-standing mental illness.
51However, although the application judge found that Ms. Green “did not know as much about her sister as she should have” he did not find that Ms. Green knew about her sister’s mental illness. The uncontested evidence was to the contrary.
52There was, in fact, no evidence that Ms. Green knew about her sister’s mental illness.
53Ms. Green’s evidence was that she did not know about it; Ms. Green said when she spoke with Ms. Foisey over the telephone and visited her for three days in September, 2015, she did not notice any mental health difficulties. Ms. Green said that whenever she spoke with Ms. Foisey, Ms. Foisey knew who she was and what she was talking about.
54Ms. Green also said that no one had ever told her that Ms. Foisey was suffering from any kind of mental incapacity.
55The application judge acknowledged that no one from the residence where Ms. Foisey lived had suggested that Ms. Foisey was incapable of signing legal documents and also that Ms. Foisey presented as normal at times.
Red flag #2
56The application judge identified Ms. Foisey’s assisted living arrangement as a red flag.
57Ms. Green was aware that Ms. Foisey was living in a retirement residence.
58Ms. Green also would have been aware of Ms. Foisey’s age, which was 75 at the time their brother died and 77 when the release was signed.
Red flag #3
59The third red flag identified by the application judge was Ms. Foisey’s participation in a trusteeship program.
60Ms. Green’s evidence was that she had spoken with Ms. Foisey’s trusteeship program case manager and had not been told that Ms. Foisey had severe mental health difficulties.
61The case manager’s evidence was that the program is for clients “who need assistance with managing their finances.” There was no evidence that the program was for clients who are incapable of managing their finances or that anyone from the trusteeship program had ever recommended that Ms. Foisey undergo a capacity assessment. Counsel for the PGT acknowledged during the hearing that trusteeship programs are frequently made available at shelters and other publicly available assistance programs that carry no inference or any indication of users being incapacitated.
Did Ms. Green have reasonable grounds to believe that Ms. Foisey was incapable of signing the contract at the time she signed it?
62Although Ms. Green was unaware of it, there was evidence that Ms. Foisey had been diagnosed with a schizoaffective disorder that caused symptoms such as hallucinations or delusions and that she had symptoms of a bipolar or depressive mood disorder.
63A person who suffers from a cognitive impairment is competent with respect to a specific act as long as the act in question takes place during a lucid interval. (Ontario Guardianship Law, (Carswell: Toronto, 2014) at p. 23, citing Banks v. Goodfellow (1870), L.R. 5 Q.B. 549 (Eng Q.B.)
64The application judge accepted that Mr. Wieckowski, the lawyer for the estate of the brother of Ms. Foisey and Ms. Green, had properly explained the release to Ms. Foisey. However, the application judge failed to consider the following evidence relevant to whether Ms. Green had reasonable grounds to believe that Ms. Foisey was incapable of signing the release the day she signed it:
- Ms. Green was represented by a lawyer at the August 21, 2015 meeting, the Hamilton lawyer, Mr. Smith, who had previously represented Ms. Foisey when she signed a renunciation of her right to act as co-trustee of the brother’s estate. There was no evidence from Mr. Smith before the application judge. The evidence of Mr. Wieckowski was that, at the meeting, Mr. Smith explained to Ms. Foisey what Mr. Wieckowski told her about her entitlement under the estate and the effect of the release. Mr. Wieckowski also said that Mr. Smith did not stop the meeting and that he believed that Mr. Smith was satisfied that Ms. Foisey understood what was said and signed the release voluntarily.
- There was evidence that Mr. Smith was attuned to capacity issues. In September, 2015, Ms. Foisey met with him to arrange for a will and powers of attorney but Mr. Smith told the supervisor of her retirement residence, who had accompanied Ms. Foisey to Mr. Smith’s office, that Ms. Foisey would be required to make another appointment because she was confused and needed time to consider her options.
- Mr. Wieckowski said that he himself saw no indication that Ms. Foisey did not understand what was being said or that she was suffering from any mental illness or malady. Mr. Wieckowski said that he never suspected that Ms. Foisey was suffering from any mental illness or malady.
- Mr. Wieckowski said that the supervisor of the residence where Ms. Foisey lived attended the meeting and did not stop the meeting or mention that Ms. Foisey had a mental illness.
- Mr. Wieckowski also said that when, at the meeting, the suggestion was made that Ms. Foisey should make arrangements for a will and powers of attorney, the residence supervisor did not raise any concerns about Ms. Foisey’s capacity to sign a will or a power of attorney and, in fact, suggested that Ms. Foisey might think about leaving something to the residence in her will as a show of gratitude.
Conclusion with respect to issue # 1
65We find that the judge erred in pointing to “red flags” without addressing what was actually known by Ms. Green and whether that knowledge would give a reasonable person grounds to believe that Ms. Foisey lacked capacity to enter into the release. Had the application judge applied the test articulated by the parties, had he considered the extent to which the red flags he identified were known to Ms. Green and had he given consideration to all of the evidence about the August 21, 2015 meeting, he would have concluded that Ms. Green had met the onus under s. 2(4) of the SDA to prove that she did not have reasonable grounds to believe that Ms. Foisey was incapable of signing the release on August 21, 2015. Ms. Foisey tracked down her sister with a private detective. She ensured that her sister had counsel appointed to protect her. Two lawyers attended the meeting and properly explained the release to Ms. Foisey without any indication of any concerns expressed by either of the lawyers or the representative of the retirement home in attendance.
66We allow the appeal in respect of issue #1.
Issue #2: Did the application judge err by ordering a passing of accounts be passed without finding that the release was unenforceable and in the absence of a request by the PGT that he find the release to be unenforceable?
67Having allowed the appeal in respect of issue #1, it is not necessary for us to deal with issue #2.
Conclusion
68The appeal is allowed.
69There is nothing unusual or sinister about an estate trustee requesting a release from a beneficiary and nothing improper about a payment to a beneficiary being accompanied by a release which the beneficiary is asked to sign and return. Releases have been commonly used in Ontario for decades by estate trustees seeking approval for and discharge from their administration. (Re Sheard Estate, 2013 ONVA 7729 at para. 26.)
70The most visible and alarming of the red flags in this case was not so much that Ms. Foisey was asked to sign a release but the failure of Ms. Green and her lawyer to respond in a satisfactory manner to the PGT’s numerous inquiries about Ms. Foisey’s entitlement under her brother’s estate. After Ms. Foisey was found to be incapable of manager her property in November, 2015, the PGT repeatedly requested an explanation as to why, given that the estate had only two beneficiaries, the amount Ms. Foisey received was significantly less than 50 per cent of the estate’s estimated gross value. Virtually no efforts were made by Ms. Green or her lawyer to alleviate the PGT’s concerns that Ms. Foisey may not have received her full entitlement. Ms. Green’s evidence on the application was simply that she had no information to offer because she had relied on the release and had not kept any records.
71Despite the application judge’s suggestion that the passing of accounts he ordered may be unnecessary if Ms. Green were to provide the PGT with some documents, Ms. Green appealed his decision.
72As concerning as the estate’s lack of cooperation undoubtedly was to the PGT, the conduct of Ms. Green and her lawyer were not relevant to the legal issue on the appeal, as it post-dated Ms. Foisey’s execution of the release by many months.
73The application judge reserved costs of the application to the judge who would hear the application to pass accounts.
74The purpose of the SDA is to protect the vulnerable (Abrams v. Abrams, 2008 67884 at para. 47). In Re Phelan, (1999), 29 E.T.R. (2d) 82, [1999] O.J. No. 2465 (S.C.J.), Kitely J. described the SDA as important legislative policy, without which incapable persons might be taken advantage of by unscrupulous persons, adding that the social values of protecting those who cannot protect themselves are of “superordinate importance.”
75In the circumstances, although the PGT was the unsuccessful party on this appeal, there shall be no costs of the application or of the appeal.
Lafrenière J.
I agree
Myers J.
I agree
Williams J.
Date of release: August 27, 2019
CITATION: Foisey v. Green, 2019 ONSC 4989
DIVISIONAL COURT FILE NO.: DC-18-019
DATE: 20190827
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
LAFRENIERE, MYERS, AND WILLIAMS, JJ.
BETWEEN:
Darlene Mary Foisey, also known as Darline Mary Foisey, by her Litigation Guardian, The Public Gardian and Trustee
Applicant
(Respondent)
– and –
Joyce Green, Estate Trustee for the Estate of William Joseph Green
Respondent
(Appellant)
REASONS FOR DECISION
THE COURT
Date of Release: August 27, 2019