COURT OF APPEAL FOR ONTARIO
CITATION: Cowderoy v. Sorkos Estate, 2014 ONCA 618
DATE: 20140903
DOCKET: C55673 & C55709
Blair, Watt and Lauwers JJ.A.
BETWEEN
C55673
Paul Cowderoy and Mark Cowderoy
Plaintiffs (Respondents/
Appellants by way of cross-appeal)
and
The Estate of Kostas Sorkos, by its Estate Trustee, Tehemton Mirza
Defendant (Appellant/
Respondent by way of cross-appeal)
AND BETWEEN
C55709
Eirene Sorkos
Applicant (Appellant)
and
Tom Mirza, in his capacity as Trustee of the Estate of Kostas Sorkos
Respondent (Respondent)
Kirk F. Stevens and Rivka Birkan-Bradley, for the appellant, Eirene Sorkos
Tracy L. Wynne and Christine Muir, for the respondent, Tehemton Mirza, Estate Trustee of the Estate of Kostas Sorkos
James D. Virtue and Dagmara W. Wozniak, for the respondents, Paul and Mark Cowderoy
Heard: January 21, 2014
These two appeals are from the judgments of Justice Wolfram Tausendfreund of the Superior Court of Justice, dated June 4, 2012 with reasons reported at 2012 ONSC 1921 (Cowderoy v. Sorkos Estate) and reported at 2012 ONSC 3196 (Sorkos v. Sorkos Estate).
Lauwers J.A.:
A. Overview
[1] Kostas (“Gus”) Sorkos was a short-order cook in a London restaurant, where he met Victoria Cowderoy, a waitress. They were in a common law relationship from 1960 until Victoria died in January 2001.
[2] Paul and Mark Cowderoy are Victoria’s natural grandchildren. Gus treated them as his grandchildren and they treated him as their grandfather.
[3] Shortly before Victoria’s death, Gus renewed a friendship with Eirene (“Rena”), a childhood friend from Greece. In 2002 she moved to Canada and married Gus, who had been disabled by a stroke. They lived together on Gus’s farm. Rena took care of Gus until she took ill in 2005, after which her ability to care for Gus was limited. Her medical condition stabilized in 2008 after three major surgeries.
[4] Gus died in September 2008. In his 2003 will, Gus left Rena $250,000, a car, the contents of their residence, and the right to occupy it for six months after his death. He had also named her the beneficiary of his Registered Retirement Income Fund, valued at $287,185. The residue of his estate was left to his siblings.
[5] These appeals are about claims made against Gus’s estate by Paul and Mark Cowderoy for the transfer of real property and cash (the “Cowderoy action”), and by Rena for dependant’s relief under the Succession Law Reform Act, R.S.O. 1990, c. S. 26 (“Rena’s application”). I use first names throughout for clarity.
[6] The trial judge declined to consolidate the cases for trial. Instead he heard the Cowderoy action and then Rena’s application.
[7] The trial judge found that the Cowderoys were entitled to the farm and cottage properties and ordered that they be transferred to them with all transfer costs and related tax expenses to be paid from the Estate. He dismissed their claim that Gus promised them $350,000 each.
[8] The Estate Trustee appeals, arguing that the order that the Estate convey its two most valuable assets to the Cowderoys was a legal error. The Cowderoy brothers cross-appeal, seeking an order for the payment of $350,000 to each of them from the Estate. Rena seeks leave to intervene in the Cowderoy appeal under Rule 13 of the Rules of Civil Procedure, R.R.O. 1990, Regulation 194.
[9] The trial judge gave some dependant’s relief to Rena under the SLRA. In her appeal, Rena seeks a new trial in which the Cowderoy action and Rena’s application are consolidated, on the basis that such a trial would allow for a proper assessment of the priority between the claims, and potentially result in a higher value for the Estate against which Rena’s support claim would be calculated.
[10] The Estate Trustee and Rena brought fresh evidence motions intended to show that the Estate will not have sufficient funds to secure the payments to Rena if the transfer of the properties to the Cowderoys is upheld. The valuation of the Estate, which was tendered by the Estate Trustee, shows that the Estate’s value is much smaller than the trial judge thought. The Estate Trustee also seeks a new consolidated trial.
[11] At the outset of oral argument, this court gave Rena leave to intervene in the Cowderoy appeal. This court also admitted the fresh evidence.
[12] For the reasons that follow, I would allow the appeals of the Estate Trustee and Rena, and dismiss the Cowderoys’ appeal.
B. The Decisions Below
[13] There are three decisions to be considered.
1.The Refusal to Consolidate the Action and the Application
[14] Rena asked for an order from the trial judge fully consolidating the Cowderoyaction and her application for dependant’s relief. The Cowderoys argued that they were effectively business creditors of the Estate, and that a claim for support under the SLRA could only be made against the net value of the Estate after payment of creditors. The trial judge dismissed the motion orally and ruled, without additional reasons:
In my view, the claim by the widow for support is based to a very large degree on the size of the estate. I’m left with a considerable doubt as to whether or not the widow would have had the standing to cross – examine, as is alleged by her counsel, the grandchildren, the two Cowderoy boys, with respect to their arrangement that they allege existed between them and the late Mr. Sorkos.
I am left with the finding that the claim by the widow, related as it is to the size of the estate, must await the outcome of the claim advanced by the Cowderoy boys, and for that reason these two actions will not be tried together but will be tried one after the other with the application by the Cowderoy boys to take precedence to the action by the widow and we will proceed in that order.
2.The Cowderoy Action
[15] The trial judge largely accepted the evidence of Paul and Mark Cowderoy, as he noted at para. 48. He found that there was a valid “1985 Breakfast Agreement,” which he described, at para. 10:
Both plaintiffs recall a breakfast meeting with Gus in 1985. Paul was then 17 and Mark 13 years of age. Both say that they have vivid and clear memories of that discussion which Gus initiated with them. Gus told them that he would be asking a lot of them in the future and that he expected that they assist him with the farm and the cottage properties. They were to be available when needed and when asked. They would not receive any pay for these services. In return, he would leave them in his will both the farm and the cottage and $350,000 each to maintain these properties. The boys agreed. All three shook hands. Both plaintiffs indicated that they did not then grasp the importance of the proposal they had accepted. Nevertheless, they immediately and continuously lived up to their end of the agreement (the "1985 breakfast agreement").
[16] The trial judge stated, at para. 13, that: “They remained true to their commitment to Gus until his death in 2009.” He described, at paras. 14 to 16, the work that the Cowderoy brothers did for Gus over the years.
[17] The trial judge noted, at paras. 42 to 43, that, to be enforceable, the Breakfast Agreement required corroboration according to s. 13 of the Evidence Act, R.S.O. 1990, c. E.23. He found that the Breakfast Agreement was corroborated by evidence from numerous witnesses and by the terms of a 2001 Will drafted by Gus that was ultimately superseded.
[18] The trial judge also found, at paras. 60-61, that there was sufficient part performance of the Breakfast Agreement to take it outside of the application of s. 4 of the Statute of Frauds, R.S.O. 1990, c.S.19. In his analysis he adopted the test used by Hoy J., as she then was, in Palkowski v. Ivancic, 150 A.C.W.S. (3d) 735, [2006] O.J. No. 3322 at para.16, which the trial judge summarized, at para.55:
a) the performance must be referable to the alleged contract which deals with the subject lands;
b) the acts of part performance relied upon must have been performed by the Plaintiff(s);
c) the contract must be one which, if it were properly evidenced by writing, would have been specifically enforceable; and
d) there must be clear and proper evidence, either oral or written, of the existence of the contract.
[19] The trial judge found that all the elements of the test were satisfied, but focussed at length on the third element. He asked himself: “If the contract were in writing, would it have been enforceable?” The trial judge plainly thought, though he did not explain why, that the invocation of the doctrine of promissory estoppel was necessary to answer that question positively, in order for the Cowderoys to be successful.
[20] The trial judge concluded, at paras. 96-99, that the Cowderoy brothers had made out promissory estoppel on the evidence. He found that: Gus’s representation that the Cowderoy boys would receive the farm and cottage properties was clear and unequivocal; it was given to third parties in relatively unambiguous language; and the Cowderoy brothers relied on the promise “to their detriment subordinating their lives to the wishes and demands Gus put to them” (at para. 98). It would be, the trial judge found, “unconscionable” not to enforce Gus’s promise.
[21] The trial judge ordered, at para. 100, the Estate to convey the farm and the cottage properties to the Cowderoy brothers, “based on the doctrine of proprietary estoppel”. He refused, however, to enforce the promised bequest of $350,000 to each of the Cowderoy brothers on the basis that this promise “lacked the necessary corroboration”.
3.Rena’s Application
[22] Rena was born in 1943 in Greece and does not speak English well. She is unable to work for health reasons. As noted, in his will, Gus left Rena the sum of $250,000, a car, the contents of his residence and the right to occupy it for six months after his death. He had also named her to be the beneficiary of his RRIF, valued at $287,185, which, according to the trial judge, pays her $1,200 per month.
[23] The trial judge found, at para. 12, that Rena is a dependant within the meaning of the SLRA. He took into account the size of the Estate, at para. 14:
As a result of a concurrent claim brought against the estate by third parties, the value of the Canadian assets of the estate are reduced to about $1,300,000.00. Taking into account the assumed minimum value of $1,000,000.00 for the assets owned by the estate in Greece, I will proceed on the assumption that the total net value of the Respondent Estate for these purposes is $2,300,000.00.
[24] The trial judge recognized that Rena came to Canada late in life to marry Gus, knowing that he had suffered from a debilitating stroke. He found, at para. 16, that: “the obligation of the estate to support the spouse of the late Gus Sorkos trumps the right of the Testator to bequeath the residue of his estate to his siblings”.
[25] As a result, the trial judge reduced the will’s lump sum payment to Rena of $250,000 to $150,000, but obliged the Estate to pay Rena $3,000 per month in dependant’s relief support. He required the Estate to provide security, at para. 18:
This spousal support to the Applicant is to be funded by the estate by the purchase of a lifetime annuity for the Applicant in the amount of $3,000.00 per month. The annuity will be owned by the Estate with a reversionary interest, if any, to the Estate upon the death of the Applicant.
C. The Implications of the Fresh Evidence
[26] At the oral hearing, this court permitted Rena and the Estate to file fresh evidence. It shows that the Estate’s Greek properties ought to be valued at zero, not at the approximately $1 million dollars that the trial judge assumed in deciding Rena’s application. Removing the farm and the two cottage properties from the Estate, as required by the Cowderoy judgment, reduced the Estate’s assets by $1.3 million. In the factum on the motion to adduce fresh evidence, the Estate asserts that:
[O]ngoing expenses related to the Farm and the Cottage, for items such as insurance, utilities, property taxes and property maintenance, legal fees, as well as Ms. Sorkos’ ongoing interim support award of $3,000 per month, have reduced the Estate’s cash and liquid assets by about $235,000 (from approximately $950,000 to approximately $715,000).
[27] Rena’s fresh evidence establishes that the cost of the annuity ordered by the trial judge is slightly more than $1 million dollars. The Estate Trustee’s updated quotation “for the purchase price of a lifetime annuity to fund the support payment award of $3,000 per month, with indexation [at 2%] and without the purchase of a 10-year guarantee, is valued at $546,536.78” Without indexation, the cost would be $457,307.69.
[28] As noted, the trial judge ordered that the transfer-related expenses of the farm and cottage properties be borne by the Estate. The Estate Trustee “presently estimates the transfer-related fees at about $50,000 or more, representing additional income tax liability accrued primarily with respect to the Farm since the filing of the Estate’s “T1” Income Tax Return in 2009”
[29] Taking the financial information together, the Estate Trustee states that if the farm and cottage properties are transferred to the Cowderoy brothers, then the Estate’s liabilities will exceed its assets by about $500,000, making it impossible to provide Rena with the dependant’s relief support awarded by the trial judge.
[30] This evidence was plainly not available to the trial judge. On the basis of Sengmueller v. Sengmueller (1994), 1994 CanLII 8711 (ON CA), 17 O.R. (3d) 208 (C.A.), it is admissible in this court.
D. The Issues
[31] The following issues emerge:
Did the trial judge’s refusal to consolidate the Cowderoy action and Rena’s application for dependant’s relief under the SLRA lead to errors of law?
Did the Trial judge err in ordering the Estate Trustee to convey the farm and cottage properties to the Cowderoys?
Are the farm and cottage properties available to satisfy an order for dependant’s relief under the SLRA?
I address each issue in turn.
E. Analysis
1. Did the trial judge’s refusal to consolidate the Cowderoy action and Rena’s application for dependant’s relief under the SLRA lead to errors of law?
[32] An exercise of a trial judge’s discretion to refuse to consolidate proceedings under rule 6.01 of the Rules of Civil Procedure attracts deference on appellate review, unless the trial judge makes a decision that is clearly wrong. The balance of these reasons lays out the interrelationship between the action and the application, and shows why the decision not to consolidate the trials led to errors of law. The trial judge did not conduct a proper analysis of the priority between the claims made by the Cowderoy brothers and Rena. This failure was an error of law.
2. Did the Trial judge err in ordering the Estate Trustee to convey the farm and cottage properties to the Cowderoys?
[33] The contest in these appeals is between the Cowderoy brothers, who seek to uphold the trial judge’s order to the Estate to convey the farm and cottage properties to them, and Rena’s claim to dependant’s relief under the SLRA.
[34] The trial judge found that there was sufficient evidence of the Breakfast Agreement, and part-performance, to justify specific performance of Gus’s agreement to bequeath the farm and cottage properties to them. The trial judge’s factual findings are entitled to deference and I see no basis on which to interfere with them.
[35] The Estate Trustee argues that the trial judge was wrong to rely on the doctrine of proprietary estoppel to reach that result. That may be, but it is of no assistance to the Estate. His finding of part performance of the Breakfast Agreement was enough to warrant imposition of the remedy of specific performance.
[36] However, in my view, the trial judge erred in requiring the Estate to convey the properties to the Cowderoys as a remedy for Gus’s failure to bequeath them as he had promised. He found a promise to bequeath, but turned it into an obligation to convey. The promise that the trial judge found to be enforceable was that Gus would bequeath the farm and cottage properties to the Cowderoys. The trial judge ought to have ordered that the promise was to be enforced, and the bequest deemed to have been in Gus’s will. Consequently, the properties are in the Estate, albeit now subject to the term that they are to go to the Cowderoys.
3. Are the farm and cottage properties available to satisfy an order for dependant’s relief under the SLRA?
[37] The Cowderoy brothers argue that they should take free of Rena’s claim under the SLRA because the trial judge ordered the Estate to convey the farm and cottage properties, recognizing them as creditors entitled to specific performance, while Rena’s claim was only against the net estate.
[38] But the trial judge erred in characterizing them as creditors of the Estate. As I explained above, they were no more than beneficiaries by specific bequest, and their entitlement is subject to the application of the SLRA.
[39] The trial judge properly instructed himself on the principles applicable to Rena’s application for dependant’s relief under the SLRA. He noted, at para. 13:
In determining whether a deceased made adequate and proper provision for the support of a dependant, I must be guided by the statutory factors detailed in section 62(1) of the SLRA. In weighing these factors, I must not undertake a strictly needs-based economic analysis, as the deceased's moral duty towards his dependant is also a relevant consideration: see Tataryn v. Tataryn Estate, 1994 CanLII 51 (SCC), [1994] 2 S.C.R. 807 and Cummings v. Cummings Estate, 2004 CanLII 9339 (ON CA), [2004] O.J. No. 90 (ON CA) at para.40. I also remind myself that proper and adequate support should be measured over the course of the dependant's anticipated lifetime: see LaPierre v. LaPierre Estate, [2002] O.J. No. 1275 at para.25.
[40] There are four problems with the trial judge’s application of the SLRA. First, the fresh evidence shows that the trial judge relied on a greatly overestimated value of the Estate when determining the quantum of dependant’s relief. Second, he disposed of the Estate’s most valuable assets in the farm and cottage properties before making the dependant’s relief order.
[41] Third, the trial judge reduced the specific bequest to Rena from $250,000 to $150,000, without explanation. A testator’s intentions are to be respected, and courts may interfere with provisions in a will only in restricted circumstances, none of which are readily apparent in this case. In determining the amount and duration of support in a dependant’s relief claim, courts must consider the factors listed under s. 62(1) of the SLRA. One of the factors listed is the dependant’s current assets and means. Rather than reducing the bequest to Rena, the trial judge ought to have considered it when assessing the quantum of support that was reasonable on her dependant’s relief claim. In this case, I would not vary the bequest made to Rena.
[42] Fourth, the trial judge did not advert to s. 71 of the SLRA in his reasons in either the Cowderoy action or in Rena’s application. It provides:
71. Where a deceased,
(a) has, in his or her lifetime, in good faith and for valuable consideration, entered into a contract to devise or bequeath any property; and
(b) has by his or her will devised or bequeathed that property in accordance with the provisions of the contract,
the property is not liable to the provisions of an order made under this Part except to the extent that the value of the property in the opinion of the court exceeds the consideration therefor. R.S.O. 1990, c. S.26, s. 71.
[43] The legislative history of s. 71 is discussed by Professor Albert H. Oosterhoff in his text, Oosterhoff on Wills and Succession, 7th ed. (Toronto: Carswell, 2011), at p. 13. The SLRA, which combined earlier legislation including the Dependants’ Relief Act, R.S.O. 1970, c. 126, came into force along with the Family Law Reform Act, 1978. Section 71 was completely new in 1977.
[44] In policy terms, s. 71 of the SLRA occupies a halfway house between two more extreme outcomes of the contest between the dependant’s relief applicant and the intended recipient of a bequest. The first is that dependants’ relief legislation should entirely override any contrary contractual obligations; this was the outcome in Dillon v. Public Trustee of New Zealand, 1941 CanLII 383 (UK JCPC), [1941] A.C. 294 (P.C.). The second is that valid contracts cannot be overridden by the dependants’ relief legislation; this was the outcome in Schaeffer v. Schuhmann, [1972] A.C. 572 (P.C.).
[45] The halfway house reached by s. 71 of the SLRA is that when a contract results in the transfer of property by will, dependant’s relief claims can attach to any value of the property in excess of the consideration given under the contract.
[46] The trial judge found that Gus and the Cowderoys made an agreement that Gus would bequeath the properties to them. As I have explained, there is no basis for disturbing that finding. The bequest of the properties is deemed to have been made in Gus’s will. Consequently, on the trial judge’s findings, s. 71 ought to have been considered: Gus entered into a contract to devise property and, on the basis that equity deems to be done that which ought to be done, he made the devise in accordance with the provisions of that contract. The consequence of the trial judge not considering s. 71 in these circumstances, is that the Cowderoy brothers were left better off than if Gus had fulfilled his promise and bequeathed the farm and cottage properties under the will.
[47] Given s.71, the trial judge ought to have considered whether there was any excess value in the farm and cottage properties over the consideration provided to Gus by the Cowderoy brothers. That is, he was obliged to determine whether “the value of the property in the opinion of the court exceeds the consideration therefor.” The trial judge did not make that determination.
[48] In his decision in Rena’s application, the trial judge found, at para. 14 that the value of the Estate was reduced to about $1.3 million because of the transfer of the farm and cottage properties. The trial judge did not value the “consideration” provided by the Cowderoy brothers for the farm and cottage properties.
[49] In my view, the evidence given to support the quantum meruit claim, coupled with the parties’ submissions as to the value of the services provided by the Cowderoys, provide a sufficient proxy to conclude that the value of the farm and cottage properties exceeds the value of the work performed by the Cowderoy brothers.
[50] The Cowderoy brothers made an alternative claim in the Statement of Claim for payment on a quantum meruit base for the work they did for Gus, but did not quantify it there. Their written submissions to the trial judge asserted that the plaintiffs’ had each spent a total of 10,000 hours working on the farm property, and that a fair and reasonable hourly rate would be $25.00. This would put the value of the work, at its highest, at $500,000, for a share of $250,000 each.
[51] The Estate took the same position as it did in its written submissions at trial: The Cowderoy brothers should be compensated for 14,000 hours of work multiplied by $5.55 (the average minimum wage from 1985-2003) or $77,000 each. In the alternative, the Estate Trustee submits in its factum that this court could award compensation in the amount of $250,000 each to the Cowderoy brothers as requested by them.
[52] The difference between the value of the farm and cottage properties of $1.3 million and the highest possible quantum meruit claim of $500,000 would leave excess value, within the meaning of s. 71, of $800,000.
[53] In conclusion, once the bequest is deemed to have been made, s. 71 of the SLRA ought to have been considered. It would be incongruous, and contrary to the purpose and intent of the SLRA, if the Cowderoy brothers were better off because of the testator’s failure to make the bequest of the properties, as he was obliged to do pursuant to the Breakfast Agreement, than they would be had he had kept his promise and made the bequest; since the value of the farm and cottage properties exceeds the value of the work performed by the Cowderoy brothers, as a bequest that excess value would have been amenable to a dependant’s relief order. This also disposes of the submission made by Rena’s counsel in oral argument that, because Gus had failed to bequeath the properties, s. 71 does not apply, and the properties fall into the estate completely free of the claims of the Cowderoy brothers.
[54] Rena argues that the trial judge’s refusal to consolidate the action and the application meant that her evidence about the relationship between Gus and the Cowderoys, and the work they did, was not heard. She wants, as her factum states, “an opportunity to test the Cowderoys’ evidence” in light of her position that there was no agreement between Gus and the Cowderoys. She was obviously not around when the 1985 Breakfast Meeting happened and for many years thereafter when part performance occurred. Her perspective was the same as that of the Estate Trustee. The expense of a full trial on all the merits could well deplete what is left of the Estate’s assets.
[55] The respondents propose giving the Cowderoys, at most, the value of their quantum meruit claim at $500,000 in total, out of the assets of the Estate. However, such an award would fail to implement, so far as possible, the agreement that the Cowderoys would get the farm and cottage properties by bequest. Any difference between the amount required to secure Rena’s claim and the actual value of the properties should accrue to the Cowderoys and not to the Estate; that would be more consistent with s. 71 of the SLRA and with specific performance of the agreement to bequeath the properties to them.
[56] Finally, I would dismiss the Cowderoys’ cross-appeal. The trial judge refused to enforce the promised bequest of $350,000 to each of the Cowderoy brothers on the basis that this promise “lacked the necessary corroboration”. This is a finding of fact and the Cowderoys have not shown that the trial judge made a palpable and overriding error.
F. Remedy
[57] It is open to this court, under s. 134 of the Courts of Justice Act, R.S.O. 1990, c. C.43, to make any order that could have been made by the trial judge, order a new trial, or make any other order that the court considers just.
[58] In light of the trial judge’s misapprehension as to the value of the Estate’s assets, by overstating the Greek assets, by excluding the farm and cottage properties in his analysis of the dependant’s relief claim, and by reducing the specific bequest of $250,000 to Rena, the trial judge’s determination of dependant’s relief cannot stand. This court does not have the evidence necessary to make the determination of Rena’s dependant’s relief fairly. I would therefor remit that matter to be decided afresh, in light of these reasons. Further, and in any event, in light of the foregoing reasons, the farm and cottage properties may be used to secure any order for such relief. That said, I reach the conclusion that a new focussed trial is necessary quite reluctantly, since saving the Estate the expense of more legal proceedings would be in everyone’s best interests.
G. Disposition
[59] I would allow the appeal by the Estate Trustee in the Cowderoy action, set aside the judgment, and require the parties to file a draft judgment that conforms to these reasons. I would set aside the judgment in Rena’s application, and remit it for a trial on the narrow issue of Rena’s entitlement to dependant’s relief, taking into account the value of the Estate including the farm and cottage properties, and determining the extent, if any, to which the properties are to be attached to secure such any dependant’s relief order. I would dismiss the cross-appeal by Paul and Mark Cowderoy.
[60] Since the problems with this Estate were caused by the testator, the costs of the parties on the appeal are to be paid by the Estate: Sawdon Estate v Sawdon, 2014 ONCA 101, 119 O.R. (3d) 81, at para. 86.
Released: September 3, 2014 (P.L.)
“P. Lauwers J.A.”
“I agree R.A. Blair J.A.”
“I agree David Watt J.A.”