Court File and Parties

COURT FILE NO.: 05-162/16 DATE: 20170606 SUPERIOR COURT OF JUSTICE – ONTARIO (ESTATES LIST)

IN THE MATTER OF THE ESTATE OF JOHANN RUBIN, also known as JAY RUBIN, Deceased

BETWEEN:

ANNIE MAYER in her capacity as an Estate Trustee of the Estate of JOHANN RUBIN and in her personal capacity Applicant

• and -

MORRIS ERIC RUBIN in his capacity as an estate trustee of the Estate of Johann Rubin and in his personal capacity, IDA RUBIN in her capacity as an estate trustee of the Estate of Johann Rubin and in her personal capacity, SARAH WERNER in her capacity as an estate trustee of the Estate of Johann Rubin and in her personal capacity, Arsandco Investments Limited in its capacity as trustee for the Estate of Johann Rubin and in its personal capacity, Faigy Esther Hammer and THE OFFICE OF THE CHILDREN’S LAWYER, Respondents

BEFORE: F.L. Myers J.

COUNSEL: Peter Griffin and Arieh A. Bloom, counsel for the applicant. Nancy J. Tourgis, as Agent for Henry Juroviesky, Symon Zucker and Henry Juroviesky, counsel for the Respondents, other than the Office of the Children's Lawyer and Arsandco Investments Limited in its capacity as an Estate Trustee of Johann Rubin and in its personal capacity. Clare E. Burns and Bianca V. La Neve, counsel for Anne Rubin and Ray Rubin in their capacities as estate trustees for the Estate of Joseph Rubin and Eric Rappaport and Sharon Slansky in their capacities as estate trustees for the Estate of Abraham Rappaport. Valerie A. Edwards, counsel for Robins Appleby LLP

HEARD: May 29, 2017

Endorsement

The Motion

[1] The applicant moves to appoint an estate trustee during litigation to manage her father’s estate pending the resolution of this litigation. The applicant is one of four estate trustees of the estate of Johann (Jay) Rubin. The other three estate trustees are the applicant’s mother Ida Rubin, and the applicant’s siblings Morris Rubin and Sarah Werner. The respondent Faigy Hammer is also a sibling but she renounced her role as estate trustee. The responding estate trustees and Ms. Hammer all oppose the motion.

[2] For the reasons that follow, appointing temporarily an institutional, professional estate trustee to bring independent, transparent, and accountable stewardship to this very substantial estate while the questions raised between the parties are being resolved in this litigation is prudent and necessary to protect the estate and the interests of the beneficiaries. The Bank of Nova Scotia Trust Company is therefore appointed as estate trustee during litigation in the place and stead of all of the other estate trustees pending further order of the court. [1]

Ida Rubin

[3] It seems apparent that Ida Rubin likely lacks capacity to manage her affairs and has for many years to the knowledge of all of the other parties. They have all been content with Morris putting cheques before Ida for signature and dealing with her funds as if it was Ida actually making informed investment and gifting decisions. There is much pretense at play.

[4] The estate trustees are empowered to act by majority. Without the applicant, obtaining a majority requires all three of the others. Just the two of Morris and Sarah are not a majority of the four. Yet many acts, including both very substantial commercial transactions as well as distributions to the trustees of very substantial amounts of the trust funds held by the trustees for Ida, have been conducted ostensibly by Morris and Sarah with Ida having no real involvement beyond signing cheques that Morris puts in front of her.

[5] In 2014, the respondents’ lawyer, Mr. Juroviesky, wrote that Ida Rubin lacked capacity and he doubted that she had capacity as long ago as 2004 when she purportedly signed a power of attorney in favour of Morris. While Mr. Juroviesky is not a capacity assessor, as counsel to the respondents, his words are admissible as statements of a party which is an exception to the hearsay rule. The respondents submitted at the hearing that Ida Rubin supports their position. I told counsel’s agent at the hearing that if the respondents wished to rely on Ida’s evidence, she could be brought to court to testify that afternoon. Not surprisingly, she did not testify.

[6] One wonders whether Ida ought to be represented by a litigation guardian and how Mr. Juroviesky takes instructions from her given his view.

[7] On these bases alone, it is obvious that interim professional management is required while the administration of the estate is regularized.

The Alleged Transfer of the Estate’s Assets

[8] The applicant objects principally to a transaction undertaken in 2010 by which the assets of the father’s estate were retroactively characterized as having been held jointly by Johann Rubin, his brother, and their most trusted friend (whom all likened to a third brother). The three “brothers” each held undivided, one-third interests in many of the same assets. In 2010, well after Johann had died, the estate declared that Johann had always held his assets in joint tenancy with his brothers. The estate went from owning its assets to the assets having passed by operation of law to Johann’s two surviving brothers. This saved the estate probate fees. It also deprived the estate of ownership of its assets. In order to protect the estate’s beneficial title to its assets, although ostensibly having received beneficial title to Johann’s assets by successorship, the deceased’s brothers agreed to actually hold his one-third share of the assets in trust for the estate in the respondent Arsandco Investments Limited.

[9] Arsandco does not dispute that it holds one-third of its assets in trust for the estate of the Johann Rubin.

[10] Under the terms of Johann Rubin’s will, a spousal trust was established for Ida Rubin. All of the assets of the estate, being its one-third interest in Arsandco’s assets, are currently held in or for the spousal trust. One-third of all funds from Arsandco therefore are to go to Ida Rubin for her lifetime. The children have no rights to receive any money at all under the will or the spousal trust while Ida Rubin is alive.

[11] The spousal trust has no bank account. For reasons that are not clear, monies payable by Arsandco on account of the estate’s one-third interest are paid into a bank account held in the name of Jay Rubin Holdings Limited. That corporation acknowledges that it holds its funds on behalf of the spousal trust. Apparently, for tax reasons, all income passes through the Jay Rubin Holdings corporate account but is attributable to Ida Rubin.

[12] Ida Rubin signs cheques on the Jay Rubin Holdings corporate account. Morris and Sarah manage the payment of Ida’s expenses. Ida also signs cheques that Morris puts before her to make very large gifts of her trust funds to each of the children. Morris does not sign the cheques as Ida’s attorney. Apart from holding back sufficient funds to pay taxes, the bank account of Jay Rubin Holdings is routinely depleted.

[13] The taking of gifts of trust funds by trustees who have an unfit beneficiary sign her funds over to them and leave the trust account depleted would seem to raise some rather rudimentary issues of conflict of interest and breach of fiduciary duty. The depletion of Ida’s funds by gifts to her trustees who have no legal right to the funds seems to be acceptable to the children however, as they know that they do not intend to leave their mother at risk. Such is the insidiousness of conflict of interest that people with no doubt as to their own bona fides can allow themselves to commit significant wrongdoing without thinking that they are doing anything wrong.

[14] While the 2010 transaction and the structure adopted thereafter have many questionable characteristics, it all arose from tax planning efforts with professionals that were seemingly agreed upon by all of the parties at the time (perhaps other than Ida). The degree of the applicant’s involvement in understanding and acquiescing to the existing structure is a contested, triable issue. By itself however, the fact that the parties have adopted a structure of questionable legality in order to save taxes does not necessarily raise any current, practical risks requiring the appointment of an estate trustee pending litigation. An argument among members of a closely held family structure designed with legal and accounting advice may raise many technically valid legal points. However, practically speaking, they have all lived under the structure for many years. There is no urgency for change driven by the structure itself. If the tax man becomes concerned, it can fend for itself. The family has apparently taken care of their mother. At one level, it seems rather precious of the applicant to complain about the structure when she has participated in it and benefited from it for years as well.

The Litigation

[15] It is not the questions about the legality of the basic structure, but the respondents’ more recent responses to their sister’s questions, that raise the bulk of the issues on this motion.

[16] The applicant has called upon the estate trustee to pass their accounts. No one denies her right to do so. In fact the respondents concede that they will pass their accounts and they ask for at least six months to fulfil their obligations. This might have been a reasonable request four years ago when the issue was first raised by the applicant. The estate trustees’ accounts ought to have been compiled and passed years ago had the respondents been acting first as fiduciaries rather than as litigation combatants. Their willingness to volunteer once the matter finally reached court raises but a whisper when compared to the volume spoken by their refusal to take required action for three or four years.

[17] Commencing in 2014, the applicant retained counsel Mr. Jules Kronis. Mr. Kronis sent six letters seeking financial information about the estate and its assets. Rather than providing the information to which the applicant was entitled as an estate trustee and beneficiary, Mr. Juroviesky, on behalf of the respondents, demanded to see written evidence of Mr. Kronis’s retainer and then questioned scope of his colleague’s brief. While some information was provided, it fell far short of what was requested or required to allow the applicant’s professionals to properly advise her. This litigation ensued.

[18] Johann Rubin’s will also provided for the establishment of a separate testamentary family trust to be optionally funded by the estate trustees. Unlike the spousal trust, the children are beneficiaries under the family trust. There are some documentary references to the testamentary family trust existing separate from the spousal trust. On cross-examination, Sarah Werner refused to answer questions as to whether the family trust was set up and funded. She equally refused to advise whether any accounts had been kept for the testamentary family trust. If the family trust exists, the applicant is a beneficiary. There is no bona fide basis under which Sarah can refuse to tell the applicant if she and Morris are holding funds in trust for her.

[19] Mr. Juroviesky objected to so many other proper questions in the cross-examination of Sarah Werner that his agent at the hearing conceded that his interference was improper. Sarah Werner refused to even answer whether she was an estate trustee of her father’s estate. She declined to answer what happened to $1.9 million that she and Morris removed from the bank account of Jay Rubin Holdings recently, well after this litigation commenced. [2] She refused to answer a question asking the rate of return on a GIC in which $20 million of estate funds are held. Full and proper cross-examination was thwarted by Mr. Juroviesky continuing the respondents’ refusal to voluntarily disclose information that they are duty-bound to provide to the applicant.

[20] Once the cross-examination was completed, subject to undertakings, Mr. Juroviesky suddenly produced a raft of documents and purported to ask Sarah questions about the previously unproduced documents by way of re-direct examination. This was not proper redirect examination. It proves yet again that all relevant documents were not produced years ago in response to Mr. Kronis’s requests despite the respondents’ protestations to the contrary.

[21] Here, instead of taking the high road by making early and full disclosure, passing their accounts, and demonstrating to the court why there was no wrongdoing on their side and much entitled, ungrateful, late 20-20 hindsight emanating from the applicant, the respondents have done the opposite. They have failed to make full disclosure. They have failed to take any steps to pass their accounts. They have had to be forced to make disclosure, slowly, grudgingly, after first stalling, then making improper refusals, after late and improper disclosure of documents in reply, then in answering undertakings close in time to the hearing only after tens of thousands of dollars and more than a year of litigation has ensued.

[22] The fact that the two operating trustees would have the temerity to remove $1.9 million from the mother’s corporate trust account while the pre-hearing motion steps were playing out is surprising. The fact that they then took their “shares” of the money while making good on their threat to refuse distributions to the applicant while the litigation is ongoing, establishes beyond doubt that the trustees are incapable of maintaining even hands during the litigation. They are using their control over their mother’s cheque writing and their control over the estate’s assets to favour themselves while punishing the plaintiff for suing them. Morris was clear as to his intention in this regard in his affidavit filed in a prior motion.

[23] While it did not have to be so, the respondents have chosen by their conduct to put the estate and the spousal trust in need of neutral stewardship to immunize the assets from the parties’ adversity and animosity while they fight out their battles.

The Law

[24] Section 28 of the Estates Act, RSO 1990, c E.21, authorizes the court to appoint an administrator over the property of a deceased person in an action in which the will or the grant of probate or administration is in issue. There is no issue as to the validity of Johann Rubin’s will or probate in this action. Therefore s. 28 is not applicable to this motion.

[25] I disagree with the submission of the respondents and Ms. Burns that s. 28 provides the sole and exclusive source of authority for the court to appoint an officer of the court to serve as estate trustee during litigation. The section does not even use that generic phrase. It speaks to the appointment of a particular type of officer, an administrator, in particular circumstances.

[26] The court has broad and inherent powers to supervise the management of estates and to control its own processes. The court may draw upon its inherent jurisdiction where appropriate to protect parties before the court so that justice can be done in the proceeding.

[27] In Stelco Inc. (Bankruptcy), Re, Blair J.A. adopted the following description of the court’s inherent jurisdiction as set out in Halsbury's Laws of England, 4th ed. (London: LexisNexis UK, 1973 -- ), vol. 37, at para. 14:

In sum, it may be said that the inherent jurisdiction of the court is a virile and viable doctrine, and has been defined as being the reserve or fund of powers, a residual source of powers, which the court may draw upon as necessary whenever it is just or equitable to do so, in particularly to ensure the observation of the due process of law, to prevent improper vexation or oppression, to do justice between the parties and to secure a fair trial between them.

[28] The inherent jurisdiction of the court most readily deals with issues concerning the court’s own processes. It is used to fill gaps where the legislature has not provided an answer such as when is it appropriate to appoint an officer of the court to preserve and protect the assets of an estate which may be at risk during litigation.

[29] There is no doubt that the court has the power to add or remove trustees under s. 5 of the Trustees Act. It can remove executors under s. 37 of the statute. These acts are all final. It is not surprising that the applicable tests governing adding, substituting, and removing trustees and executors requires proof of significant wrongdoing or risk of wrongdoing to overcome permanently the testator’s wishes as to the administration of his or her estate.

[30] In dealing with estate trustees pending litigation however, something much less intrusive is involved. Executors and trustees may need to stand aside for a period of time so as to allow them to exercise full throated adversarialism. The parties’ duties as fiduciaries can be inconsistent with their ongoing litigation interests. They often cannot be loyal and selfless to each other while they are adverse in interest in litigation. Looked at from the estate’s perspective, the estate should be neutral as between the participants in the litigation. Properly instructed, the estate should want to be left alone. Its assets should be administered to maximally benefit the interests of the beneficiaries and to be neutral in regard to positions of the parties in the litigation.

[31] Rule 75.06 (3)(f) of the Rules of Civil Procedure provides for the appointment of an estate trustee during litigation. It does not point however to any specific source of the court’s authority to make the appointment. In my view, the power to appoint an estate trustee during litigation is an exercise of the court’s inherent jurisdiction to do justice among the parties before the court.

[32] The purpose of an estate trustee during litigation is to ensure that the playing field is kept level. Dempster v Dempster at para. 24 (ON SC).

[33] When dealing with trusts and estates, the court is primarily concerned with ensuring fairness to the participants. Section 37 of the Trustees Act is not a complete code. The court’s inherent jurisdiction exists in parallel with the court’s statutory powers to ensure fairness and practicality are maintained while litigation proceeds. Gonder v Gonder Estate, 2010 ONCA 172, at paras 21, 24, 41 and 42.

[34] In appointing an estate trustee during litigation, the court will consider the balance of convenience. Marilyn Dietrich et al. v. Matthew Playfair et al., unreported decision of the Ontario Superior Court of Justice dated June 24, 2013, Court File No.2012-272, per Greer J. Recently, the court appointed an estate trustee to protect the estate from the trustees’ animosity in Henia Gefen v. Arie Gaertner et al., unreported decision of the Ontario Superior Court of Justice dated January 27, 2017. Court File No. CV-13-486451, per Newbould J.

[35] In McColl v McColl et al., 2013 ONSC 5816, Greer J. made the point that the appointment of an estate trustee pending litigation whether under s. 28 of the Estates Act or Rule 75.06 (3)(f) is not extraordinary. In fact, she approved the suggestion in Estate Litigation, B. Schnurr, 2nd ed., (Thomson Reuters, looseleaf) at c.24.2 that “[a] decision to refuse the appointment should only be exercised in the clearest of cases”. She adopted the author’s further suggestion that the court will favour appointment in the vast majority of cases unless the administration of the estate involved is particularly straightforward or simple.

[36] I agree. It is in the interests of all beneficiaries that the assets of the estate be immunized from the tactics employed by litigating parties. The court must protect the level playing field. Neither side should be able to use their control over the estate to benefit themselves or to prejudice the other. It is a simple inference that a trustee who is in an adversarial position towards a co-trustee or a beneficiary should not normally be left in charge of trust property. Simple prudence calls for the temporary replacement of a trustee who is in an adversarial position with a co-trustee or a beneficiary. It is not an insult to anyone’s integrity to understand that conflicts of interest are insidious. Conflicts of interest play havoc with peoples’ judgment of their own capacity to maintain neutrality and a fiduciary stance. The facts of this case make the truth of that proposition clear.

Result

[37] Accordingly, Scotiatrust is appointed estate trustee pending litigation. All of the estate trustees of the Johann Rubin estate and the trustees of its testamentary spousal trust are temporarily enjoined from exercising any and all powers associated with their positions as estate trustee and trustee respectively. The environmental protection contained in para. 16 of the Commercial List Model Receivership Order Form is to be contained in the appointment order mutatis mutandis. It may be found at: http://www.ontariocourts.ca/scj/practice/practice-directions/toronto/#Commercial_List_Forms_including_Model_Orders.

[38] The respondent estate trustees are required to pass their accounts within 90 days. They have had more than ample time to collect and prepare their accounts.

Costs and Publication

[39] The applicant may deliver no more than five pages in total of costs submissions and submissions regarding publication of these reasons by June 16, 2017. The respondents may deliver no more than five pages of costs and publication submissions by June 30, 2017. All parties shall deliver costs outlines regardless of whether they seek costs. Anyone who relies on one or more offers to settle may also deliver a copy of such offer(s). All documents to be delivered shall be attached to an email to my Assistant in searchable PDF format. No case law or statutory materials are to be delivered. References to case law or statutory materials, if any, are to be made by hyperlinks to another publicly available source embedded in the party’s submissions.

F.L. Myers J. Date: June 6, 2017

Footnotes

[1] I note that the respondents expressed concern as to whether an institutional trustee can be as flexible and nimble as may be required of the estate trustees of this estate. There is no evidence that this estate needs particularly quick, flexible, or nimble management. It owns substantial real estate interests and holds substantial cash or cash equivalents. There is little apparently requiring immediacy or particular nimbleness. With access to the court being available on a very short notice in cases of urgency, I see no basis for concern with the quality of services likely to be provided by a very experienced, capable firm like Scotiatrust.

[2] It appears that the money was taken at Morris’s instance and was divided between the three respondent siblings Morris, Sarah, and Faigy. The respondents now say that the applicant’s “share” of $500,000 is ostensibly being held for her until the litigation ends.