Bank of Nova Scotia Trust Company v. Charles, 2021 ONSC 1361
Court File and Parties
COURT FILE NO.: CV-21-00656472-00ES DATE: 20210223 SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF THE GUARDIANSHIOP OF ELIZABETH DOROTHY CHARLES
RE: Bank of Nova Scotia Trust Company in its capacity as Estate Trustee for Elizabeth Charles, Applicant AND: Nicholas Andrew Charles and Robert Wilson Charles, Respondents
BEFORE: C. Gilmore, J.
COUNSEL: Ewa Krajewska, Counsel for the Applicant Benjamin Arkin, Counsel for the Respondent Nicholas Charles Dorothy Hagel, Counsel for the Respondent Robert Charles
HEARD: February 16, 2021
Judgment on Application
Overview and Agreed Facts
The Bank of Nova Scotia Trust Company (“BNS Trust”) brings this Application for advice and directions from the Court in relation to four questions related to the Will of Elizabeth Charles dated February 25, 2016:
a. Question 1: Is Robert Charles, a residual beneficiary of the estate of Elizabeth Charles (“the Estate”) entitled to use all or part of his interest in the residue of the Estate towards the purchase of 1155 Kingsholm Drive, Mississauga (“the Property”)?;
b. Question 2: If the answer to Question 1 is yes, is Robert Charles able to do so given the outstanding issues about the value of the reside of the Estate including but not limited to, (1) an outstanding passing of accounts; and (2) the application of the hotchpot clause?;
c. Question 3: If the answer to Question 1 or 2 is no, and Robert Charles has not entered into an Agreement of Purchase and Sale of the Property with BNS Trust to purchase the Property, is the Applicant, in its capacity as Estate Trustee entitled to list and sell the Property without further notice to Robert Charles?
d. Question 4: If the time period providing Robert Charles with the option to purchase the Property under the Will has expired, is BNS Trust entitled to charge Robert Charles occupancy rent pending the sale of the Property?
The Agreed Facts in this matter are set out below:
a. Elizabeth Charles (“Betty”) passed away on August 31, 2020.
b. Betty had a last will and testament dated February 25, 2016.
c. The residual beneficiaries of Betty’s Will are her sons Nicholas Charles and Robert Charles and her grandchildren Jared Charles and Nicole Charles
d. BNS Trust was appointed by Court Order as estate trustee of Betty’s Estate.
e. Betty’s last will and testament contains the following provisions which are at issue in this Application:
If my son, ROBERT WILSON CHARLES survives me, as soon as possible following my death, my Trustees shall obtain from a certified independent real estate appraiser an appraisal for the fair market value of my property at 1155 Kingsholm Drive, Mississauga, Ontario (the “Property”). The cost of the appraisal shall be borne by my general estate.
Upon receipt of the appraisal, my Trustees are to notify my son, ROBERT WILSON CHARLES, that he has 90 days to enter into an enforceable agreement to purchase the Property at fair market value as determined in the manner set out above and on any further terms and conditions set out in the notice as determined by my Trustees in their absolute discretion. Failing agreement within 90 days, the option to my son, ROBERT WILSON CHARLES, shall expire.
If my son ROBERT WILSON CHARLES does not purchase the Property as above provided, the Property shall fall into residue of my estate.
To clarify, if my son, ROBERT WILSON CHARLES, accepts the option to purchase he shall be responsible for the payment of his own solicitor’s fees, disbursements incurred in connection with the transfer [and payment of the land transfer tax], and any other taxes and expenditures which are usually the responsibility of a purchaser. The purchase price, subject to the usual adjustments, shall be added to the residue of my estate to be dealt with as an original part thereof. For greater certainty, the amount of real estate commission that otherwise would be payable had the Property been placed on the open market shall be taken into consideration to reduce the purchase price of the Property accordingly.
f. Betty was the sole owner of the Property at the date of her death.
g. The Property is unencumbered by any mortgage.
h. BNS Trust obtained two appraisals of the Property. The first appraisal was done on September 3, 2020 and values the Property at $770,000 as at August 31, 2020. BNS Trust commissioned a second appraisal on October 15, 2020 and values the Property at $785,500 as at August 31, 2020.
i. BNS Trust notified the residual beneficiaries on October 19, 2020 that if Mr. Robert Charles wishes to exercise his right of first refusal under the Will to purchase the property, BNS Trust is setting the purchase price as the average of the two appraisals being $775,250 less the 5 percent real estate commission (as per paragraph 14 of the Will) for a purchase price of $736,487.50.
j. Robert Charles indicated that he wishes to purchase the Property.
k. Robert Charles later confirmed that he requires his interest in his share of the residue in order to contribute to the purchase of the Property.
l. Robert Charles has not tendered a formal offer to purchase the Property; i.e. an offer that if accepted by the estate trustee would become binding.
m. Nicholas Charles objects to Robert Charles applying his beneficial share of the estate to the purchase of the Property.
n. Nicholas Charles has brought an application for Robert Charles to account for the actions he took pursuant to a power of attorney for property of Elizabeth Charles. The final value of Robert Charles’ share of the estate is not known until the issues brought by his brother’s application are resolved.
o. Nicholas Charles agreed to extend the deadline in paragraph 12 of Betty’s will to purchase the Property to January 7, 2021. That deadline has now expired.
p. BNS Trust has informed Robert Charles that it will be charging rent of $2,900 per month plus utilities of approximately $570 per month for occupying the Property starting January 1, 2021. Robert Charles objects to paying rent on the Property.
q. BNS Trust has not declared or made any distributions from Betty’s Estate.
r. BNS Trust has not made a division or allocation of Betty’s Estate under paragraph 16(g) of Betty’s will.
s. The value of the loans, gifts, or benefits made by Betty to Robert Charles and Nicholas Charles that are to be brought back into hotchpot in accordance with paragraph 10 of Betty’s Will have not been determined.
t. The following information with respect to the assets and liabilities of the estate is being provided for context for the hearing of the motion.
(a) the assets of the Estate include:
(i) A Scotia trust Money Market account valued at approximately $679,000;
(ii) Cash in the amount of approximately $4,000;
(iii) A RRIF account in the amount of $53,280.65;
(iv) The Property valued at $736,487.50;
From the total value of the estate of $1,472,768.15 the following is to be deducted:
(b) Robert Charles owes the Estate $20,000 with respect to a previous costs order.
(c) The Estate has liabilities including BNS Trust’s estate fees, Guardianship fees, taxes, legal fees and household expenses. BNS Trust estimates these liabilities to be $120,000.
(d) These assets and liabilities do not include the as of yet unascertained amount that may be owing to the estate as a result of the passing of account proceedings.
(e) The value of the loans, gifts, or benefits made by Betty to Robert Charles and Nicholas Charles that are to be brought back into hotchpot in accordance with paragraph 10 of Betty’s Will have not been determined.
(f) The following information with respect to the assets and liabilities of the Estate is being provided for context for the hearing of the motion. However, none of the parties agree that these numbers are final and binding.
Issue One: Is Robert Required to Pay Cash for the Property or Can he Use his Residual Share?
The Positions of the Parties
Robert submits that the Will contemplates that his purchase of the Property is to be made with a combination of his inheritance funds and bank financing. This is because his mother was well aware that he would never be able to buy the Property with only his own funds. His mother knew at the time she made her Will that he was going through a difficult financial period in his life and had to enter into a debt consolidation agreement with a Credit Counselling company in order to restructure his financial affairs.
Robert argues that the 90-day expiry period should be stayed or extended pending a determination of the outstanding litigation and his actual share of the Estate. As his mother was unaware that litigation would interfere with the determination of his exact share of the Estate, she could never have intended that the 90-day deadline would apply in such circumstances. He would have gladly submitted an Offer to Purchase in accordance with the terms of his mother’s Will but for his brother Nicholas opposing his use of Estate funds.
Robert reminds the Court that he has lived in the Property his entire life and it has sentimental value to him. The Property is also a significant connection for him to his late mother for whom he cared during her entire life and particularly when she became unable to care for herself.
Nicholas submits that Robert cannot use his share of the residue of the Estate to buy the Property because it does not belong to him yet. He cannot compel the BNS Trust to distribute his share of the residue to him and the Will should not be interpreted as requiring a cash purchase.
Nicholas argues that his mother was well aware of Robert’s financial situation when she made her Will in 2016. Betty learned in 2015 that Robert had been spending her money on gambling, alcohol and other personal expenses. This prompted her to appoint BMO Trust Company as her Attorney for Property in June 2015 to remove Robert’s control over her property. The financial abuse by Robert also led to Betty making a new Will in 2016.
Betty knew that Nicholas and Robert did not get along and that there was a likelihood of a dispute between them over her Estate. Nicholas submits this is why Betty drafted the Will the way she did; to ensure a quick distribution of funds and a clean break between her sons after her death. If Robert was unable to buy the Property within the 90 day period, the Property was to be sold.
The provision in Betty’s Will was intended as a gesture to Robert to allow him to buy the home if his financial circumstances had improved by 2016. If they had not, it was not intended that Robert’s personal circumstances should hold up the administration of the Estate.
Robert has provided a copy of a mortgage commitment for the balance of the purchase price. Nicholas submits that there is no evidence that Robert can meet the 20 conditions in that commitment including having a credit score of 680 and clearing his existing payday loan and credit card debts. There is no evidence that Robert is currently employed, yet confirmation of this is required for the mortgage loan.
Finally, and most importantly, it is uncertain whether Robert’s share of the Estate would be sufficient to purchase the Property. The passing of accounts in relation to his management of Betty’s financial affairs while she was alive has not been completed. Nicholas submits that because of this it is possible that there may be little or nothing left of Robert’s share.
Legal Analysis
The difficulty that Robert faces is that several legal principles interfere with his request to use his beneficial share to purchase the Property. First, the law of assent does not permit distribution of a beneficiary’s share until the personal representative gives its assent (in this case BNS trust). BNS Trust does not consent to such a distribution at this point.
Second, a beneficiary cannot demand a distribution from the estate. Further, a court is not able to substitute its own discretion for that of the estate trustee in such matters. See Parson v. McGovern, 2014 ONSC 1785 at para 42 where the Court held that it could not substitute its discretion for that of the trustee where the beneficiary sought an interim distribution of a substantial portion of his share of the estate prior to a contested passing of accounts.
There is also the fact that Robert’s share of the Estate is currently unknown and may not be known for some time. First, Robert has yet to pass his accounts with respect to amounts he expended while acting as Attorney for Property for his mother. There are significant allegations about funds used for personal expenses during that time. Those issues appear to be far from resolved.
Next there is the issue of what Robert will owe Betty’s estate for gifts and loans made by Betty to him during her lifetime in accordance with the hotchpot provision in her will (para 10). Nicholas concedes that he received a gift of money from his mother during her lifetime and recognizes that will have to form part of the hotchpot accounting. To date, it is unclear what amounts may be owing by Robert after a passing of accounts and after the hotchpot accounting. Nicholas submits that Robert’s residue may be entirely depleted by these amounts and, as such, it would be entirely inappropriate to designate any amount from the residue to Robert at this time. I agree.
Moving to interpretation issues, I find that Betty’s Will was clear in its wording on this issue. Betty specifically used the word “purchase” in her Will. If she had not intended a cash purchase, she had the option of specifying that Robert was entitled to purchase the home using his share of the estate “in kind” or by way of set-off or adjustment. No such wording is present in the Will. Further, Betty’s Will sets out that the purchase price of the home is to be added to the residue of estate. There can be no other meaning for this than that Betty intended the cash used to buy the home to be added to the residue. There is no reason to derogate from the plain meaning of the words used in the will. See Kaptyn v. Kaptyn, 2010 ONSC 4293 at paras 30-36.
It cannot be the case that Betty intended the purchase or sale of the Property to languish when she set such a tight timeline (90 days) for Robert to purchase the home. This is at odds with what is known as an “executor’s year”, a time frame generally agreed to be the amount of time an estate trustee will need to administer the estate. The 90-day deadline imposed by Betty cannot mean that the estate was to be administered within 90 days of her death such that Robert’s share would be known and could be applied to his share of the purchase price. Rather, it supports Nicholas’ argument that the intention was a quick cash sale following her death and before the administration of the estate was completed as the sale proceeds were to form part of the residue.
Given all of the above, I do not find that the deadline for Robert to buy the Property should be extended nor should he be entitled to use his share of the residue to purchase the Property for the following reasons:
a. The clear meaning of the Will does not permit a set off or adjustment that would allow Robert to use his share of the residue for the purchase unless the residue had already been determined. Robert’s share of the residue has not yet been determined and may not be for some time.
b. The law is clear that Robert cannot demand his share of the residue unless the estate trustee is in a position to make a distribution. BNS Trust does not agree to such a distribution nor can the Court substitute its own discretion for that of the trustee.
c. Robert did not bring a motion during the currency of the 90-day period asking for an extension or consideration of his personal circumstances. The 90-day option period formally expired on January 7, 2021.
d. Robert is unable to complete a cash purchase based on the record before this Court. There was no evidence presented that Robert would be able to meet the 20 conditions (some of which were quite stringent) set out in the financing commitment in evidence.
e. Robert has only himself to blame for this situation. The passing of accounts in relation to funds expended during his mother’s life is a contentious matter rife with allegations that Robert indiscriminately spent his mother’s money on personal indulgences such as gambling and alcohol. The passing of accounts process has barely begun.
f. The issue of the hotchpot clause cannot be ignored. There was no evidence that Robert had provided information concerning his position on the gifts and loans he had received during his mother’s lifetime. These may be different amounts than those he could notionally be required to pay back on the contested passing of accounts. All of these amounts could significantly affect Robert’s share of the residue.
g. Robert urges upon the Court an interpretation that the relevant clauses of the Will were intended for Robert’s benefit. As Betty could not have known of the litigation that would arise after her death with respect to the Property, failing to permit Robert to purchase the Property will interfere with this intended benefit. I disagree. The “armchair rule” as described in Love v. Wheeler, 2019 ONSC 4427 requires me to put myself in the position of the testator at the time the Will was made, consider the circumstances that existed at the time and those which might reasonably be expected to have influenced the testator at the time of making her Will. In looking at those circumstances, it is undisputed that when Betty became aware that Robert had been using her money for gambling in 2015, she changed her Will and appointed an institutional estate trustee. Therefore, sitting in the place of the testator, nothing could be clearer than that Betty was well aware of Robert’s frailties and designed her Will accordingly. That is, if Robert was unable to buy the Property because he did not qualify for financing or his residue was unable to be used for it, then the Property was to be sold on the open market after the expiry of the 90 day deadline. Robert’s personal circumstances were not to hold up the estate just as they did not prevent Betty from taking steps to change her Will.
h. Betty was fair to both of her sons in her Will. It would be unfair to Nicholas to have the estate held up for months (and subject to Robert’s cooperation with the Passing of Accounts and any further disputes about the hotchpot clause) while Robert’s share of the residue was determined and he continued to remain in the Property.
Issue Two: Should Robert be Required to Pay Occupation Rent to the Estate
Robert continues to reside at the Property. He has not paid rent since his mother’s death. The purchase option expired on January 7, 2021.
BNS Trust did not take a position on the issue of the interpretation of the purchase option for the Property contained in the Will. However, in the event that the Court found that the option had expired, BNS Trust seeks to charge Robert occupation rent after the expiration of the option in accordance with its duty to act in the interests of the Estate. BNS Trust seeks occupation rent of $2,900 per month plus utilities of approximately $570 per month. Its position is that there is no juristic reason for Robert to remain in the home and not pay rent.
Nicholas agrees that Robert must pay occupation rent. He does not agree that Robert’s share of rent should be charged against his share of the Estate, but if it is, interest should accrue to the benefit of the Estate.
Robert submits that it was never his mother’s intention that he should be required to move out pending his ability to exercise the option to buy the Property. His ability to do so has been hampered solely due to the litigation initiated by Nicholas. The assets of the Estate are being tied up because of the litigation and not because Robert is living at the property.
Since Robert’s intention is to purchase the Property, there is no reason for him to pay rent in the interim since the Property will belong to him in any event. If it is found that Robert has misappropriated funds from his mother, the penalty will be interest and costs. Those circumstances should not deprive him of the ability to live in and eventually purchase the Property.
Robert relies on Calmusky v. Calmusky, 2020 ONSC 1506. In that case, the deceased’s son resided in the subject property for four years after his father’s death. The estate claimed $66,000 in occupation rent. The son was a 50% beneficiary of the estate and had paid all property related expenses during the four years. The Court found that no occupancy rent was payable. The Court based its reasoning on the son’s early intention to purchase the property, his entitlement under the estate, the fact there was no evidence that the estate intended to rent the property and the increase in market value of the property over the four years ($110,000). Of importance is that there was a Court Order permitting the son to reside in the property without prejudice to the estate’s potential claim for occupation rent.
The facts here are quite different. In the case at Bar, Robert was given notice that he would be charged rent from January 1, 2021 onwards as a result of the expiry of the option and there is no court Order permitting Robert to reside there once the option has expired.
Analysis
Occupation rent is an equitable and discretionary remedy. Many estates cases such as Cormpilas v. Ioannidis, 2020 ONSC 4831 have found that the occupation of a property to the detriment of the other beneficiaries is sufficient to require the payment of occupation rent.
To establish the entitlement in the context of damages for unjust enrichment, BNS Trust must show;
a. An enrichment of the occupant;
b. A corresponding deprivation; and
c. The absence of a juristic reason for the enrichment.
There is no doubt that Robert is occupying the Property without paying rent to the detriment of the other beneficiaries. Robert is thereby enriched. Given the expiry of the option, there is no juristic reason for his occupancy of the Property.
In summary, I find that Robert must pay occupation rent given the legal principles and the factual circumstances of this case. His share of the rent cannot be charged against his share of the Estate, since that share is not known and it could be substantially less after the passing of accounts and the hotchpotch accounting.
Orders
Given all of the above, I make the following Orders:
a. The option to purchase the subject Property under the Will shall not be stayed or extended.
b. Given that the option to purchase under the Will has expired and the amount of Robert’s residue is unknown, he shall not be permitted to use his share of residue to purchase the Property.
c. Given the circumstances of this case and Robert’s own personal circumstances, he shall not be required to pay occupation rent from the date of his mother’s death to May 1, 2021 and any closing of the sale of the Property shall not take place before that date.
d. Thereafter, he shall pay occupation rent to the estate of $2,900 per month plus utilities as determined by BNS Trust and pending sale.
e. Robert shall be given notice of any sale by BNS Trust and he shall cooperate with the sale if still residing there.
f. Further, if Robert decides to stay in the Property and pay rent after May 1, 2021, he must cooperate with BNS Trust with respect to any repairs, showings, or staging which may be required for sale.
g. Once the property is sold with a closing after May 1, 2021, Robert must vacate in accordance with any notice provided by BNS Trust.
Costs
BNS Trust seeks full indemnity costs of $9,421.94 to be paid from the Estate.
Nicholas seeks his full indemnity costs of $14,000 and that those costs as well as the costs of BNS Trust be paid by Robert personally. Nicholas submits that the Will is clear and the motion was entirely unnecessary.
Ms. Hagel on behalf of Robert seeks partial indemnity costs of $14,000. She submits that a motion was necessary for these issues and that her client demonstrated that he had the ability to purchase the Property with financing on top of his residual share.
While Robert was not successful, I agree with Ms. Hagel that given the history of this litigation (with which I have been involved for over a year) and the animosity between the brothers it is unlikely these issues could have been resolved without court intervention.
That said, Robert has not had success and the costs should be proportionate in the circumstances. Robert shall pay BNS Trust and Nicholas the sum of $10,000 each from his share of the Estate. If Robert is not entitled to any share of the Estate after the passing of accounts and the hotchpot accounting, the costs are to be paid by Robert personally.
C. Gilmore, J.
Date: February 23, 2021