Court of Appeal for Ontario

COURT OF APPEAL FOR ONTARIO DATE: 20210322 DOCKET: C67890

Lauwers, Trotter and Zarnett JJ.A.

BETWEEN

Leslie Ann Hayward, as Estate Trustee and The Estate of Jeanne Hayward also known as Jean Hayward Applicants (Respondents)

and

Alexander William Keith Hayward, Shawn Hayward, David Hayward, Kelly Hayward and Lori Hayward Respondents (Appellants)

Counsel: Robert J. De Toni, for the appellants Robert A. Lewis, for the respondents

Heard: March 16, 2021 by video conference

On appeal from the judgment of Justice Stanley J. Kershman of the Superior Court of Justice, dated December 12, 2019, with reasons reported at 2019 ONSC 7083, and from the costs order, dated March 6, 2020, with reasons reported at 2020 ONSC 1458.

Reasons for Decision

[1] This appeal concerns the estate of Jeanne Hayward. She is survived by her former husband, Alexander [Alex] Hayward, and their five adult children, Leslie, Shawn, David, Kelly, and Lori. (In these reasons we use first names to distinguish among them, not out of disrespect.) All five siblings were named as beneficiaries in Jeanne’s will, but Alex was not. Leslie is the estate trustee. Shawn, David, and Lori, but not Kelly, supported their father’s claims to various estate assets and estate funds.

[2] Alex appeals the disposition of his claims to repayment of a loan he made to Jeanne with which she bought a Chevrolet Malibu and to ownership of a Montana tractor, and seeks leave to appeal the costs award. Shawn, David and Lori join him only in the appeal of the costs award.

The Chevrolet Malibu

[3] Alex had claimed that although the Malibu was in Jeanne’s name, he had provided, as a loan, the cash with which it was purchased. The estate argued that Alex did not pay for the Malibu. The trial judge found that Alex had paid for Jeanne’s Malibu, but when he did so he was making a gift, not a loan. However, the estate had not argued that the money paid by Alex for the Malibu was a gift.

[4] We agree with the appellant that it was not open to the trial judge to find that the funds Alex paid for the Malibu were a gift and not a loan. As Doherty J.A. noted in Rodaro v. Royal Bank of Canada (2002), 59 O.R. (3d) 74, at paras. 61-63, a trial judge’s reliance on a ground that was not argued is fundamentally unfair and potentially unreliable because it was not tested through the adversarial process. The law prescribes tests for determining when the payment of funds is a gift, but the trial judge did not apply or allow the parties to address those tests before determining that Alex’s payment for the Malibu was a gift, not a loan. The appeal on this ground is allowed, and we remit the issue to the Superior Court for trial.

The Montana Tractor

[5] Alex purchased the Montana tractor and the bill of sale was in his name. He paid the $1,000 down payment in cash. The balance of $12,560 was paid with a cheque in Leslie’s name. Leslie argued that the cheque came from her, and, since Alex never paid her back, the tractor was hers. Alex argued that the money actually came from Jeanne, and, because the tractor was in his name, he owned it. He said Jeanne probably borrowed the money from Leslie, but he was not sure.

[6] The trial judge found that Alex had paid the initial deposit and owned the tractor. However, he found that Leslie had paid the balance of $12,560, which was most of the purchase price. Because there was no evidence Alex ever repaid her, the trial judge found that Alex owed Leslie $12,560.

[7] The appellant argues that the trial judge erred in failing to find that repayment of the loan was time-barred under the Limitations Act, 2002, S.O. 2002, c. 24. This proceeding was started as an application and did not have full pleadings, but it was open to counsel to raise the application of the Limitations Act as a defence to Leslie’s claim. The trial judge cannot be criticized for failing to respond to a defence that was not raised by counsel. This ground of appeal is dismissed.

The Costs Award

[8] The major issue in this appeal is the trial judge’s award of substantial indemnity costs against the appellants.

[9] The appellants make three arguments. They argue, first, that the trial judge’s discretionary award of substantial indemnity costs against Alex, Shawn, David and Lori was wrong in principle. We agree with the trial judge that the behaviour of the appellants warranted substantial indemnity costs in light of Alex’s misconduct. That misconduct was worthy of sanction under the principles in Davies v. Clarington (Municipality), 2009 ONCA 722, 100 O.R. (3d) 66, at paras. 28-31 and 40. This misconduct was supported by the sibling appellants.

[10] The trial judge noted that Alex disputed the authenticity of a document, signed by Jeanne and Alex as a supplement to their separation agreement, disposing of some assets. Its authenticity was a significant issue at trial and consumed time and resources. Each appellant contributed to the allegation that the agreement was not authentic. The trial judge noted, in his costs award:

[Alex] was fully supported in this position by Shawn, David and Lori Hayward. In addition to giving evidence in support of it being not authentic they also provided their own evidence claiming that it was fraudulent. At one point in the trial, Shawn Hayward testified that Leslie Hayward could have tampered with her mother's computer. Leslie Hayward claimed that she could not have manipulated some of the emails.

[11] Alex and the siblings supporting him brought a motion on short notice to introduce an expert report regarding the authenticity of this document. This forced the estate to hire an expert to prove that the agreement was authentic. The trial judge relied on the estate’s expert evidence and Kelly’s testimony to find that the agreement was authentic. The implication is that Alex had advanced an argument that he knew to be false, which is surely good evidence of egregious misconduct.

[12] The trial judge also found that Alex was “tenacious and intransigent”; that he signed the agreement, even though he claimed otherwise; and that he denied that Leslie paid for the Montana tractor, even though the cheque proved she did.

[13] The appellants’ second costs argument is that the siblings should have been considered by the trial judge to be “non-parties” without any responsibility for costs. We reject this argument.

[14] There is no error in the trial judge’s disposition of this issue. He found:

The Court finds that Shawn, David and Lori Hayward were in this together with Alex Hayward.… The Court rejects [their] argument that the costs should be only as against Alex Hayward. The Court finds that Shawn, David and Lori Hayward actively participated with their father in these proceedings and costs consequences should apply to all of them.

On this basis, the Court finds that the interests of Alex Hayward are not separate from Shawn, David and Lori Hayward.

[15] The appellants’ third costs argument is that the trial judge erred in finding that Leslie, as trustee, was entitled to recover her full indemnity costs out of the estate, including those costs related to disputes over items solely between her and Alex. Counsel for the estate agrees. The parties concurred in suggesting that the range of costs attributable to Leslie’s personal disputes warrant a reduction of between $5,000 and $10,000 from the total award to her. We fix the amount of the deduction at $7,500.

[16] Accordingly, we vary the trial judge’s costs award by reducing the remainder of costs he ordered to be paid by the estate to the estate trustee of $16,030.23 by $7,500. We leave the disposition of costs on the Malibu loan/gift issue remitted to trial including the original trial to the trial judge hearing the re-trial; we recognize that doing so benefits Leslie and the estate somewhat since the trial judge’s costs disposition includes an amount on account of this issue but it appears most efficient to proceed in this manner. The costs appeal is otherwise dismissed and the respective obligations to pay forthwith come into force.

[17] The costs of this appeal are payable forthwith by the appellants to the respondents in the reduced amount of $15,000 inclusive of costs and disbursements, to reflect the appellants’ partial success.

“P. Lauwers J.A.”

“Gary Trotter J.A.”

“B. Zarnett J.A.”