Public Guardian and Trustee v. Cherneyko et al.
[Indexed as: Public Guardian and Trustee v. Cherneyko]
Ontario Superior Court of Justice
Fitzpatrick J.
January 5, 2021
154 O.R. (3d) 388 | 2021 ONSC 107
APPLICATION by Public Guardian and Trustee for a repayment of an alleged gift.
Counsel: S. Jones, for applicant. J. Lester, for respondent Cherneyko. S. Crowe, for respondent Munson.
[1] FITZPATRICK J.: — The Public Guardian and Trustee ("PGT") applies to displace Kristina Munson as guardian for property of Jean Cherneyko and for other relief. On November 30, 2020 at the close of argument of this application, I granted certain relief to the PGT. I made the following findings which will be incorporated into the final order following this judgment:
(a) the respondent, Jean Cherneyko, is not capable of managing her property and that, as a result, it is necessary for decisions to be made on her behalf by a person authorized to do so;
(b) the Continuing Power of Attorney for Property dated August 15, 2019 in favour of the respondent Kristina Munson is hereby terminated;
(c) the Public Guardian and Trustee is appointed now as permanent guardian of property for Jean Cherneyko;
(d) any restrictions concerning the manner in which the Public Guardian and Trustee was acting pursuant to the interim order of August 7, 2020 are terminated. For greater clarity, the Public Guardian and Trustee is now free to take any all steps consistent with their duties to Ms. Cherneyko with regard to her real property located at 270 Otto Street Thunder Bay including taking possession of said property and listing the property for sale.
[2] The only remaining issue to be decided on the application was the relief requested by the PGT that the respondent Kristina Munson be required to pay back to Jean Cherneyko the sum of $346,771.84.
Agreed Facts
[3] Counsel cooperated to prepare an agreed statement of facts. The agreed facts are as follows.
[4] Ms. Jean Cherneyko ("Jean") is a 90-year-old senior with cognitive impairments and a diagnosis of dementia. Jean has no known children. Jean's niece, Ms. Marie McCammon, lives in the United States of America.
[5] Prior to admission to long-term care, Jean was living alone in her home which is known municipally as 270 Otto Street, Thunder Bay, ON P7A 2T6 (the "Residence"). Jean and the respondent Kristina Munson ("Tina") grew close in their relationship.
[6] On August 15, 2019, Jean and Tina attended the law office of Nicole Rea, where Jean appointed Tina her attorney for property and personal care. Under a new will, Jean made Tina her estate trustee and a residual beneficiary of her estate.
[7] On August 27, 2019, Tina and Jean appeared at a CIBC branch in Thunder Bay and transferred $250,000 to Tina and $195,329.50 to Ms. McCammon.
[8] Mr. Ken Barber, the General Manager of the Thunder Bay branch of CIBC where Jean and Tina went on August 27, 2019, spoke with Jean on that day about the transaction.
[9] In March 2020, CIBC froze Jean's bank accounts.
[10] On August 31, 2019, Jean was admitted to Thunder Bay Regional Health Sciences Centre due to acute delirium and progressive cognitive decline. Tina was present at the hospital and noted that Jean had become increasingly confused over the last few months. Tina further noted that Jean had exhibited lethargic behaviour and complained of bodily soreness.
[11] Jean was admitted to a Thunder Bay long-term care facility on October 1, 2019. She currently resides in a private room. Tina signed the Accommodation Agreement with the long-term care facility on behalf of Jean.
[12] Shortly after Jean moved to long-term care, Tina's adult son moved into the Residence. In August 2020, the adult son paid retroactive rent of $6,750, equivalent of $750 a month, for the months of January 2020 to September 2020.
[13] Through the period Tina was attorney for property, Jean paid, according to Tina's accounting: $907.30 in gas, $537.36 in water, $648.12 to Synergy North, $456.52 to Shaw, $201.40 to Tbaytel. In addition, Jean paid $3,338.84 in property taxes in respect of her home. In total, $6,089.54 was spent maintaining the Residence.
The Evidence on this Application
[14] I am prepared to resolve the remaining issue on this application, namely whether Tina will be required to repay Jean any moneys, on the basis of the written material filed. The evidence on this application consisted of four affidavits. The PGT filed one affidavit, Tina filed three. An investigator in the offices of the PGT swore the affidavit on behalf of the PGT. Tina filed an affidavit as well as providing one from Ms. McCammon and one from a neighbour of both Tina and Jean.
[15] The affidavit from the neighbour was not of assistance to the issues that are now required to be resolved on this hearing. It gave evidence about Tina and Jean having a close relationship. This is an admitted fact.
[16] The affidavit evidence from Ms. McCammon was not of assistance to the resolution of the remaining issue. Ms. McCammon is a 69-year-old woman living in Maine. She is not related through blood to Jean although she was identified as her "niece" by the parties. She did visit her occasionally in recent years. She is the beneficiary of the payment of $195,329.50 from Jean which was done at the same time as the transaction, which is now central to a determination of this application. The funds were paid while Tina was Jean's power of attorney. Tina participated and facilitated the moneys going to Ms. McCammon.
[17] I therefore did not see Ms. McCammon as being an unbiased participant in matters at issue. I will discuss what I find to be the circumstances surrounding the gift to her later in this judgment. In my view, Ms. McCammon's evidence was entirely self-serving and not persuasive as to the essential remaining issue on this application. I give Ms. McCammon's evidence no weight.
[18] I am left with the evidence of the investigator for the PGT and Tina. Both affiants provided a great deal of hearsay evidence in their materials. No objection was taken to this hearsay evidence on the application.
Discussion and Analysis
[19] In my view, events critical to the resolution of the remaining issue on this application occurred between August 15, 2019 and September 1, 2019.
[20] It is clear from the agreed facts that Jean was a person who was careful with her money during her lifetime. At age 89, she had accumulated cash or easily cashable assets of over $1 million exclusive of her real property.
[21] In 2019, Jean was hard of hearing. She was having difficulty with her personal care. She was having disputes with people who had cared for her previously. There is no issue in this application that Jean was dependent on Tina and Tina's family for daily support of her financial and personal affairs.
[22] The PGT became interested in the affairs of Jean after the CIBC froze her bank accounts in March 2020. I appreciate that in this matter the PGT was acting in an investigative capacity. As such it was required for purposes of efficiency to place hearsay evidence before the court.
[23] The investigation of the PGT led back to events of August 2020.
[24] Tina, as noted above, had known Jean for about five years as of August 2020. They were neighbours and had grown close. Tina became Jean's power of attorney for property on August 15, 2019. On August 31, 2019, Jean was admitted to the Thunder Bay regional hospital.
[25] On September 1, 2019, Dr. Trevor Bon prepared a geriatrics consultation note after examining Jean. This note said, among other things, that "she has established dementia consistent with a neurodegenerative process such as Alzheimer disease".
[26] This diagnosis is significant in my view. The timing of the diagnosis is also significant. I say this because an important event that, among other issues, led the PGT to bring this application, occurred on August 27, 2019. As noted in the agreed facts, on that day Jean attended a CIBC branch in Thunder Bay and transferred $250,000 to Tina and $195,329.50 to Ms. McCammon. Tina claims the amounts given to her were a gift. The PGT says it was not a gift.
Not a Gift
[27] The leading Canadian case on the law of gifts, the Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17, at paras. 24-26 established that where a gratuitous transfer of property is found, there is a presumption of a resulting trust. The onus falls to the recipient to rebut the presumption.
[28] In my view, based on the evidence placed before me on this application, Tina has failed to rebut the presumption of a resulting trust with respect to the alleged gift to her.
[29] Tina argues that the gift was "approved" as an independent representative of the bank who met with Jean on August 27, 2019 and allowed the transaction to proceed. I note there is no direct evidence on this application from this person. In fairness, there was a great deal of hearsay evidence led by both parties on this application. Nevertheless, according to Tina, the bank representative formed the opinion that Jean understood the transfer and the consequences to her finances. I note the two transfers roughly equated to half of Jean's net worth.
[30] Tina deposes the banker told Jean even after making these alleged gifts to Tina and Ms. McCammon, Jean would be able to cover her future expenses. Tina does not depose if the banker was aware that Jean was about to be moved into long-term care. This would be a significant financial event in the life of any senior.
[31] Whatever opinion was expressed by the banker who was involved with this transfer, I do not agree that person's opinion, given by way of hearsay evidence, is helpful to the argument that the gift was freely given by Jean in light of all the other evidence I have on this application. In particular, Tina deposes that in late August 2019, Jean was having "moments of delirium and irrationality, her condition fluctuated between lucidity and confusion". There is no evidence the representative of the bank was aware of this fact. Tina also deposes that during the August 27, 2019 meeting, Jean was made aware by the banker of a dormant account belonging to her that had a large sum of money. This new-found money would give someone pause to be concerned that the person who was about to give away large amounts of their net worth, really understood what was going on with their financial situation. Nevertheless, Tina comes before the court to argue that the transfer of $250,000 was "what Jean wanted".
[32] Jean's power of attorney for property is instructive as to what Jean "really wanted" in August 2019. Under the heading "Compensation of Attorney", para. 9 notes "no individual acting as one of my attorneys for property shall be entitled to, charge, or be paid any compensation for serving as my attorney". Despite this direction, Tina deposes that Jean told her to start taking $2,000 per month as compensation for her acting as her attorney. Tina also deposes that Jean told her she had spent very little in her life to that point.
[33] I agree with the submissions of counsel for the PGT that $2,000 a month is a lot of money for a person to pay a person who is acting as a power of attorney. The long-term care facility where Jean now lives charges her $2,701.61 a month.
[34] In my view, this alleged direction from Jean to pay Tina $2,000 per month is expressly contrary to the terms of the power of attorney. Yet Tina deposes this is what Jean was directing her to do in the middle of August 2019.
[35] This evidence was of assistance in determining Jean did not really know what she was doing in August 2019. This makes suspicious her action of giving away almost half her net worth at that time to two people. This calls in to question the assertion by Tina that when Jean transferred $250,000 to her, Jean was acting in the course of full, free and informed thought.
[36] At the very least, Tina's observations of Jean's condition, verified on September 1, 2019 by a diagnosis by a doctor that Jean was cognitively impaired should have raised "alarm bells" for Tina. This diagnosis of September 1, 2019 was a plain and obvious signal to Tina to proceed cautiously and put Jean's needs first. Putting Jean's needs first in that circumstance would have included segregating the "gift" funds recently made to herself. I also think it would have been incumbent on Tina to put Ms. McCammon on notice that Jean's "gift" to her may have not been in fact "what Jean wanted". There was no evidence put before the court by Tina that indicated she has preserved these funds in any way.
[37] I disagree with Tina's assertion that a gift of a quarter of an elderly and frail person's net worth in proximity to a time when that person is exhibiting serious signs of mental incapacity could be said to be "what Jean wanted". On the basis of Jean's physical condition in August 2019, I find she was a vulnerable person at that time. I further find she lacked capacity to gift the substantial sum of $250,000 to Tina at that time. Tina has not placed any evidence before the court which could lead to a finding that the gift was a "righteous one". On the balance of probabilities, I find the evidence on this application does not support a finding that Jean made a $250,000 gift to Tina in August 2019. I find Tina received these funds impressed with a resulting trust in favour of Jean.
[38] As I noted previously, Ms. McCammon was the beneficiary of a gift of $195,329.50 on August 27, 2019. I make no express findings with respect to the gift to Ms. McCammon. I do observe that the gift was suspicious for the same reasons that I say Tina has not rebutted the presumption of a resulting trust. However, the PGT chose on this application not to make the gift to Ms. McCammon an issue. It may well become one in future court proceedings.
[39] I agree with the submissions of counsel for the PGT that Tina should be ordered to return the sum of $250,000 to Jean forthwith on the basis of a resulting trust.
Breach of Fiduciary Duty
[40] I also agree with the submissions of counsel for the PGT that there is a second basis for an order requiring Tina to return the $250,000 to Jean. It is because Tina was Jean's power of attorney for property on August 27, 2019. I agree with the submissions of the PGT that Tina has breached her duty of care to Jean while acting in that capacity for reasons I will now explain.
[41] An attorney for property is a fiduciary, whose powers and duties must be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person's benefit. Tina was in a fiduciary relationship with Jean as of August 27, 2019.
[42] In my view, a person acting in a fiduciary capacity for a person actively demonstrating moments of irrationality should be very cautious about any big financial moves that person claims they want to make in and around such periods of demonstrated incapacity. Even if Jean was clearly acting in a competent manner during the few hours she attended the CIBC with Tina on August 27, 2019, I agree with the submissions of the PGT it is no answer to an accusation of breach of duty to assert that an attorney was simply acting in accordance with the wishes of the grantor of the attorney. Tina should have proceeded with caution at that time. I find she did not exercise the appropriate degree of caution and good judgment given the circumstances about which she knew.
[43] In the decision Ontario (Public Guardian and Trustee) v. Harkins, [2011] O.J. No. 3313 (S.C.J.), Penny J. stated at para. 27 that a fiduciary's first duty is to see to the best interests of the beneficiary regardless of their stated wishes. In this matter, Tina has failed to demonstrate how the gift to her of $250,000 was in Jean's best interests. For example, there was no evidence led as to why Tina did not actively consider using Jean's considerable resources to see to it that Jean could remain in the Residence. It seems reasonable to me that Jean would have "wanted this" having lived in the same house since 1969. Tina deposed that Jean did not want to sell the Residence.
[44] Tina deposes that in September 2019, Jean made the decision to move into long-term care on a "more permanent basis". I do not understand the provision of long-term care in places like the one to which Jean has moved to be ones where persons can be "more permanent" as opposed to "permanent". My understanding of placements in long-term care homes is that they are typically permanent placements.
[45] In my view, Tina was acting in her capacity as both guardian for property and attorney for personal care when she put Jean in a permanent placement. Long-term care homes are not like vacation properties or camps. People do not easily or readily move in and out of these places back to their original homes. It is why they are called "long-term care" homes. People go in there for a "long term". Usually there is only one way people leave long term care. Normally it is not a happy experience.
[46] At the same time, Tina did not take steps to list the Residence for sale so as to maximize or at least preserve the marked value at a time when Jean would no longer be able to use it. Instead, she allowed her adult son to move into the Residence. Rent free. Or at least rent free until August 2020, when Tina decided to retroactively collect $750 per month in rent from her son. Tina deposes this was done so home owners insurance could be maintained on the property. In my view, the only legitimate reason for taking such steps was because there was a realistic plan to return Jean to her home. There was no evidence of any such plans put forward on this application. Again, Jean's stated desire not to sell the Residence arguably was not in her best interests. However, it was in Tina's families' best interest as it allowed her son to live relatively inexpensively for what may have been a long period of time but for the intervention of the PGT and my findings to terminate Tina's power of attorney for property.
[47] The effects of the pandemic particularly on long-term care residents in this province have been dire. It seems to me that since March 2020 more than at any time in the past, any genuinely concerned person charged with caring for an elderly person in long-term care would have at least considered the issue of taking whatever steps could be taken to remove the person from this situation if it was in any way possible. I have no such evidence from Tina of such efforts on this application.
[48] I find it was a breach of the duty Tina owed to Jean for her to allow her son to move into the Residence and for her not to have actively attempted to sell the Residence once Jean was permanently placed in long-term care. Tina has placed the interests of her son ahead of Jean's. I also find that accepting a gift in the magnitude of one quarter of a vulnerable person's liquid assets at a time when they were demonstrating cognitive impairment was a breach of the duty of a fiduciary owed by Tina to Jean. This is because these funds still could be required to care for Jean or to allow her to stay in her own home. Tina did not consider this. She placed her own needs first. These actions cannot be justified by stating "it is what Jean wanted". Tina had many alternative opportunities to preserve Jean's assets. There is no evidence she actively did so.
[49] I also have evidence as to the manner Tina administered Jean's property from August 2019 to March 2020. For reasons that follow I find that Tina did not exercise skill, diligence or good judgment in the exercise of her powers under the attorney for property during this period. I find she was actively misusing Jean's assets for her own and her families' benefit. In that way, she further breached her duties as a fiduciary.
[50] Upon the commencement of this application, Tina provided an accounting of funds she had expended on Jean's behalf from August 2019 to March 2020. Tina's accounting indicates that Tina paid for $46,888.52 in expenses for Jean's benefit for that time frame. This included payments for Jean's property. Tina could not provide receipts for these expenditures.
[51] The failure to keep any receipts for such a significant degree of expenditures evidences lack of skill, diligence and good judgment on Tina's part.
[52] Tina's accounts show that $12,482.19 in withdrawals were made for "blended expenses". These included situations where, for example, Jean's funds were used to pay for dinner for both Tina and Jean or when they went shopping together. Tina's accounts also state there was $13,716.59 in "unexplained" expenses.
[53] Tina's accounts indicate she and her family received a further $70,573.06 in gifts and transfers from Jean from August 2019 to March 2020. In my view, that is a lot of money for one person to dole out in just eight months. Particularly for a person who allegedly spent very little before she became acquainted with Tina. There was no other evidence to demonstrate this was a continuation of a past pattern of activity for Jean. Tina justified these gifts by repeating what she had said about the $250,000. She claimed it was what Jean wanted. I do not agree the alleged gifts of over $70,000 were given on a free and fully informed basis. There is no evidence to show how these gifts were in Jean's best interest. There is no way to assess how Jean benefited.
[54] I agree with the submissions of the PGT that the evidence on this application demonstrates Tina failed to act for the exclusive benefit of Jean. Tina was in conflict as she received a huge benefit from her role. Tina benefitted by transfers of $250,000 and $70,878.10 in cash and for other transfers such as meals which she did not record. Tina was in a direct conflict as her son was living in the Residence without paying expenses and only paying rent after the PGT investigation had commenced.
[55] I am persuaded by the reasoning of Gunsolus J. in Hooper (Estate) v. Hooper, 2011 ONSC 4140, where he set out at para. 20 that breach of fiduciary relationship can give rise to a wide range of equitable remedies designed to address not only the fairness between the parties but also the public concern about the maintenance of the integrity of fiduciary relationship. In my view, equity requires Tina to pay back most of the funds she has received from Jean.
[56] I say this as I am concerned that Jean did directly benefit from some of the expenditures accounted for by Tina. This total was identified by Tina as $12,482.19. I will not be ordering Tina to repay these specific amounts.
[57] Accordingly, as the result of Tina's breach of fiduciary duty, her failure to prove amounts given to her and her family by Jean were gifts, and her failure to demonstrate skill, diligence and good judgment with respect to the management of a vulnerable person's assets which were under her care, Kristina Munson is hereby ordered to pay Jean Cherneyko the sum of $334,289.65 comprised of the following amounts:
(a) $250,000 not proven "gift"; (b) $70,573.06 not proven as "gifts"; (c) $13,716.59 unknown expenses.
[58] In light of the results on this application, the PGT would be entitled to costs on this application if requested. If the parties cannot resolve the matter of costs, they shall first schedule a brief teleconference with counsel only within 30 days of the release of reasons. If such a teleconference is not scheduled within that time the matter of costs will be treated as resolved.
Application allowed.
End of Document