COURT FILE NO.: CV-08-342
DATE: 2012-03-02
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: KELLEY SCIME
- and -
MICHAEL RICHARD FINES, in his capacity as Estate Trustee of the Estate of Mildred Eileen Murphy, MICHAEL RICHARD FINES, in his personal capacity, STEPHEN BRUCE FINES, LYNN EILEEN MACASKILL, RANDY MURPHY, TD WATERHOUSE CANADA INC., THE TORONTO-DOMINION BANK, c.o.b. as TD CANADA TRUST and HEYDARY HAMILTON PC
BEFORE: M.J. Donohue J.
COUNSEL: Frank J. Tkach, for the Applicant
Liza C. Sheard, for the Respondent Heydary Hamilton PC
Michael Fines, self-represented
E N D O R S E M E NT
M. J. Donohue, J.
In the Matter of the Estate of Mildred Irene Murphy, deceased
Introduction
[1] This dispute arose between the late Mrs. Murphy's natural children and her step-children as to the disposition of her estate. Mrs. Murphy preferred two of her natural children in her will. Rather than litigate, the parties attempted to contract privately to deal with the estate assets. Nonetheless, the matter proceeded to litigation because Mrs. Murphy had designated two of her sons to be beneficiaries to the main asset, a RRIF.
Issues
[2] The court has been asked to deal with 4 issues in this application:
(1) Whether the RRIF is an asset to be included in the estate;
(2) Whether the executor Michael Fines should return the monies he spent from the estate;
(3) Whether Heydary Hamilton PC should pay back to the estate the fees they charged; and
(4) Whether Michael Fines should be removed as Estate Trustee and replaced by Kelley Scime.
FACTS
[3] The late Mildred Murphy had three natural children, Michael Fines, Stephen Fines and Lynn MacAskill. Her late husband Frederick Murphy had two natural children, Kelley Scime (the applicant) and Randy Murphy.
[4] On February 21, 1995, Mildred and Fred signed wills naming each other as executor and leaving their estate and residue to the other. If one spouse predeceased the other, the residue of the estate was to be divided in equal shares to the five children named above.
[5] Frederick Murphy died in September 1999. Mildred Murphy succeeded to his estate.
[6] Mildred Murphy then appears to have made several testamentary instruments:
(a) March 15, 2000, a will was made appointing Michael Fines as executor; giving gifts of $5,000.00 each to her step children; and giving the residue of her estate to her own three children;
(b) an undated will has the residue of the estate divided only between Michael and Stephen Fines.
(c) August 24, 2001, a codicil to the March 15, 2000 will revoked paragraph 3(c) and (d) of the March 15, 2000 will regarding the gifts of $5,000.00 to each Kelley Scime and Randy Murphy.
[7] Mildred Murphy held a RRIF account with TD Waterhouse in her name. She designated her sons Michael and Stephen Fines as beneficiaries. There is no evidence how long she held that RRIF account and whether it predates even the 1995 spousal will. There is no evidence how long Michael and Stephen Fines have been designated beneficiaries.
[8] On March 1, 2006 Mildred Murphy died.
Analysis
[9] Michael Fines retained solicitor Douglas Green of Heydary Hamilton PC to handle the estate. Initially, the valid will they located was that of March 15, 2000 wherein Kelley Scime and her brother were each to receive $5,000.00.
[10] Kelley Scime retained solicitor Frank Tkach who produced the 1995 wills and argued that the late Mr. and Mrs. Murphy formed a binding contract to divide their estate equally among the five children. Apart from the rather generic spousal wills, there is no other evidence in this application of whether they intended a binding contract or not.
[11] Rather quickly in the months that followed, the lawyers for each family sought and received instructions to agree that the residue of the estate would be divided equally among the five children; that Michael Fines would be the executor; and that legal costs for both counsel would be borne by the estate.
[12] The purpose of this agreement was to avoid litigation.
[13] The agreement was made at a time when only a preliminary investigation had been made of the estate’s assets and the estate’s liabilities. It was thought that the estate had assets estimated at $266,282.29 as set out in solicitor Green's pro forma statement attached to his letter of January 30, 2007.
[14] This was premised on the TD Waterhouse RRIF account of approximately $150,000.00 being an estate asset. No one was aware at the time that the RRIF had designated beneficiaries and was not payable to the estate (Whether any of the parties would have contracted by way of the deed of arrangement had this information been known is hard to say.)
[15] As well, the preliminary investigation of the estate did not consider the estate’s liabilities. Ultimately, the estate was found to owe $70,000 to Revenue Canada.
[16] A deed of arrangement was signed by all five children and dated February 20, 2007. The deed, in effect, divided the residue of the estate among the five children and confirmed Michael Fines as executor.
[17] Sometime in August 2007, Michael Fines was informed by TD Waterhouse that the RRIF valued at over $150,000.00 was not payable to the estate but rather to two beneficiaries being himself and his brother Stephen.
[18] The estate solicitor Green wrote TD Waterhouse on August 27, 2007 advising that he assumed the remaining heirs would be disputing the designation and to withhold payment.
[19] Nonetheless, TD Waterhouse proceeded to pay out the RRIF account equally to Michael and Stephen Fines.
[20] The estate was taxed on the RRIF payment and that accounted, in part, why over $70,000 was owed to Revenue Canada. There were also back taxes owed for 2005.
[21] A new solicitor, David Thwaites, took over the handling of the estate. His office by court order obtained the balance of the estate funds to pay the taxes which left the estate bank account empty.
[22] On the evidence before me, the deed of arrangement makes no reference to any specific assets or liabilities that comprise the estate. It speaks only to the residue of the estate being divided equally. It has no schedules or attachments and stands alone.
[23] This application was brought in 2008 and included TD Waterhouse Canada Inc. Counsel for the applicant advised they did not pursue TD Waterhouse in this application because counsel advised that they agreed TD Waterhouse properly paid out the RRIF according to its terms to Michael Fines and Stephen Fines.
[24] Clearly, none of the parties had made a clear inquiry as to what the exact assets and liabilities of the estate would be. Simply by relying on the pro forma statement by counsel as to what the assets appeared to be is not enough to change a non estate asset into an estate asset.
[25] The late Mildred Murphy excluded the RRIF from her estate by naming the two beneficiaries. She might have named her friend Freda Little (noted in one of the wills) and ultimately this RRIF would not be an estate asset.
[26] The late Mrs. Murphy showed a clear intention since at least 2001 that she was preferring to leave her estate largely to Michael and Stephen Fines so this result in not inconsistent with her intention.
[27] Counsel for the applicant argued that, without the RRIF, the deed of arrangement would not make sense. This is because all that is now potentially available in the estate for distribution is the debt owed by Michael Fines of $21,592.72 which, divided five ways, works out to less than the $5,000.00 bequest left to Ms. Scime and her brother in the March 15, 2000 will. This argument, however, ignores the tax liability that reduced the estate's value and the legal accounts that have had to be paid from the estate to both the applicant and the respondents throughout this litigation.
[28] Counsel for the applicant relied on case law setting out the basis for unilateral mistake. It was argued that Michael Fines made a mistake in including the RRIF on the pro forma statement and should have to now include it in the shared estate. Counsel referred to the Law on Contracts in Canada, 5th ed., Fridman, p 252-256:
It is not necessary for the party seeking to avoid the contract on the ground of mistake to prove that the other party caused or induced the mistake (although if such causation is established it might lead to rescission for fraud, or for innocent misrepresentation). As long as the unmistaken party knows of the mistake, without having caused it, that party cannot resist a suit for rectification on the grounds of mistake. The same will apply if the other party had good reason to know of the mistake and to know what was intended. The converse of the proposition as to knowledge of the other party's mistake is that if the unmistaken party is ignorant of the other's mistake the contract will be valid and neither rescission nor rectification will be possible.
Such was the case in Commercial Credit Corporation v. Newall Agencies Ltd. The lessor of an automobile, at the lessee's request, indicated the price at which the lessee could purchase the vehicle. The price was erroneously understated. The fact was unknown to the lessee, who paid the stipulated amount and took transfer of title to the vehicle. It was held that the lessor who sold the vehicle was not entitled to rely on the doctrine of mistake and claim the difference between the sale price and the correct price.
[29] I find the above law confirms that even if the applicant made a bad bargain by signing the deed of arrangement she is bound by it.
[30] Counsel argued on the basis that Mr. Fines made a mistake in this contract. On the facts above, however, I find that all the parties were mistaken in the value of the estate net of liabilities.
[31] On the evidence provided and a plain reading of the deed of arrangement, I do not find the TD Waterhouse RRIF to be as asset of the estate and is not required to be paid back to the estate.
[32] Michael Fines, as executor and beneficiary, spent personally $21,592.72 of the estate’s funds between March 1, 2006 and June 13, 2006. It has not been repaid to the estate to date. The evidence in the accounting records shows the $21,592.72 attributed to Michael Fines personally. Mr. Fines admits that he owes this to the estate.
[33] Accordingly, he owes the money back to the estate with interest from June 13, 2006 (the last withdrawal noted) at 5% per annum.
[34] I note the Deed of Arrangement of February 20, 2007 specifically confirmed that legal costs for both counsel would be borne by the estate and paid in accordance with the Solicitor’s Act. The administration of the estate was largely to be conducted by the firm of Heydary Hamilton PC and those administration costs were to be paid by the estate. It was agreed that the firm of Heydary Hamilton PC would be doing “the bulk of the administration” of the estate.
[35] A review of the accounts shows a fair amount of work done to satisfy the accounting demands of the applicant.
[36] I was not directed to any evidence of abuse to warrant repayment to the estate.
[37] Criticism of legal bills is more properly done through an assessment officer.
[38] It is acknowledged that there was an inadvertent overpayment of their accounts in the amount of $579.34. The Respondent, Heydary Hamilton PC, seeks an order authorizing them to pay this overpayment into Court to the credit of the estate.
[39] I order this payment made directly to the estate forthwith.
[40] The applicant seeks this order pursuant to section 37(1) of the Trustee Act.
[41] In support of this, counsel noted, among other things:
a) Michael Fines admits removing $21,592.72 from the estate account which has not been repaid;
b) he failed to do an appraisal of the trailer;
c) the estate shows a mobile phone use with bills of $536.57; and
d) he failed to account by documents the City Mastercard bill of $5,090.61.
[42] Other complaints are made and shown to be explained in the correspondence and accounts set out in the estate file and administration done by Solicitor Green of Heydary Hamilton, PC.
[43] The applicant is critical of Mr. Fines collecting the proceeds of the RRIF pursuant to his being named as a beneficiary when he was advised there may well be a dispute over this matter.
[44] Mr. Fines did not argue that he should be allowed to continue as estate trustee.
[45] The court has the inherent jurisdiction to remove trustees: see St. Joseph's Health Center v. Dzwiekowski, 2007 51347 (ON SC), [2007] O.J. No. 4641 (S.C.J.); Radford v. Radford Estate, 2008 45548 (ON SC), [2008] O.J. No. 3526 (S.C.J.).
[46] Pursuant to section 37(3) of the Trustee Act, R.S.O. 1990, c. T.23, an application to remove an executor or trustee may be made by a “person interested in the estate of the deceased.”
[47] The court may also appoint a new estate trustee and make such consequential vesting orders as may be appropriate to the circumstances in accordance with sections 5, 6, and 10 of the Trustee Act, supra.
[48] The removal of estate trustees was considered by the leading authors, Donovan W.M. Waters, Mark R. Gillen, and Lionel D. Smith in their text Waters' Law of Trusts in Canada, 3rd ed., (Toronto: Thomson Carswell, 2005), where they state at page 845:
If persons having an express or statutory power to appoint new trustees purport to replace a trustee on the grounds that he refuses to act, is unfit to act, or is incapable of acting, and the trustee disputes that he falls into the category alleged, the court can be asked to determine what constitutes unfitness or incapability. The court will have to make a similar decision if it is asked to remove a trustee, whether or not it is also asked to make a new appointment. The question therefore arises as to what circumstances justify this removal.
Canadian courts have consistently followed the general guidelines set out by Lord Blackburn in Letterstedt v Broers where he said that the courts' “main guide must be the welfare of the beneficiaries.” If it is clear that the continuance of the trustee would be detrimental to the execution of the trust, and on request he refuses to retire without any reasonable ground for his refusal, the court might then consider it proper to remove him. He went on to quote from Story that “the acts or omissions must be such as to endanger the trust property, or to show a want of honesty, or a want of proper capacity to execute the duties, or a want of reasonable fidelity.
[49] I am satisfied that, as Michael Richard Fines has not repaid the estate funds of $21,592.72, this demonstrates his indifference to the interests of the beneficiaries and warrants him being removed as estate trustee. I am satisfied that Kelley Scime, as a named beneficiary in the deed of arrangement, should be appointed the estate trustee in place of Michael Fines. Posting of security by Ms. Scime is dispensed with.
Conclusion
[50] Counsel also requested directions on proceeding with remaining issues in the application record.
[51] I did not hear submissions on what other matters they wished to pursue in the application. I invite counsel to return to do so. Such further attendance should be arranged through my judicial legal assistant.
[52] It is ordered that Michael Richard Fines repay to the estate the sum of $21,592.72 plus interest at 5% from June 13, 2006.
[53] It is ordered that Heydary Hamilton PC repay the sum of $579.34 to the estate forthwith.
[54] It is ordered that Michael Richard Fines is removed as estate trustee.
[55] It is ordered that Kelley Scime is appointed estate trustee in place of Mr. Fines.
[56] I invite submissions on costs from the parties within 14 days. Submissions are to be no longer than two pages, plus a cost outline.
M.J. Donohue J.
DATE: March 2, 2012
COURT FILE NO.: CV-08-342
DATE: 2012-03-02
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: KELLEY SCIME
- and -
MICHAEL RICHARD FINES, in his capacity as Estate Trustee of the Estate of Mildred Eileen Murphy, MICHAEL RICHARD FINES, in his personal capacity, STEPHEN BRUCE FINES, LYNN EILEEN MACASKILL, RANDY MURPHY, TD WATERHOUSE CANADA INC., THE TORONTO-DOMINION BANK, c.o.b. as TD CANADA TRUST and HEYDARY HAMILTON PC
BEFORE: M.J. Donohue J.
COUNSEL: Frank J. Tkach, for the Applicant
Liza C. Sheard, for the Respondent Heydary Hamilton PC
ENDORSEMENT
M.J. Donohue J.
DATE: March 2, 2012