COURT FILE NO.: 12-53276
DATE: 2013/01/29
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: IAN HAWKINS, Plaintiff
AND:
THE ESTATE OF JOHN PATTERSON HAWKINS, Defendant
BEFORE: Master MacLeod
COUNSEL: E. Jane Murray, for the Plaintiff, Ian Hawkins
Russell MacCrimmon, for the Defendant by Counterclaim and Plaintiff by Counterclaim, Kent Hawkins
Andrew J.F. Lenz, for the Defendant, Estate and Limerick Farms Ltd.
J. P. Zubec, for Carl Hawkins & Garry Kingsley, Defendants to 2d counterclaim
HEARD: November 29th, 2012
REASONS FOR DECISION
[1] This is a motion to remove the estate trustees appointed under the will of the late John Patterson Hawkins and to appoint a litigation administrator on the basis that the appointed trustees are in a conflict of interest. For the reasons that follow I have determined that the relief sought is too extreme and the motion to remove the trustees will not be granted.
[2] There is however considerable justification for close supervision of this proceeding. Currently it appears there are sufficient tools available to accomplish this with the estate trustees remaining responsible for the litigation but the court reserves the power to require third party supervision should circumstances subsequently require it. The specific aspect of the current litigation which gave rise to this motion, access to documents in the hands of John Hawkins’ former lawyer, should for the moment be dealt with under the rules of civil procedure.
The Issue
[3] For most of his life John Hawkins operated a family farm on Highway 16 in the southern outskirts of Nepean. When he died, Highway 16 had become Prince of Wales Drive, the land was in the City of Ottawa and encroaching development meant the land was worth millions of dollars. At issue in the litigation is ownership of three parcels of land between Barrhaven and Manotick lying between Greenbank Rd. and Rideau Valley Drive.
[4] The deceased and his late wife (who predeceased him in May, 2009) had seven children. I will refer to them as they are referred in the materials as Diane, Carl, Sally, Nancy, Ian, Kent and Blaine. Sally is also deceased and Garry Kingsley (“Garry”) was her husband.
[5] The testator died on October 28th, 2011 leaving a will dated November 25th, 2010 that named his son Carl and son-in-law, Garry as his executors and trustees. Subsequently the will was probated and a Certificate of Appointment of Estate Trustee With a Will was issued (Court file no. 25187/11). The validity of the will itself is not contested and no proceedings were taken under Rule 75 (the rule for contested estate proceedings).
[6] Claims against the estate have been brought by two of the sons, Ian and Kent. The estate has advanced claims against each of those claimants and the two claimants have each advanced personal rights of action against the estate trustees. Thus, Carl, Garry, Ian and Kent are directly involved in the litigation. Diane, Nancy and Blaine are beneficiaries and each has sworn affidavits setting out their views on the requested relief but they are not formal parties.
[7] In the motion before the court, the claimants, Ian and Kent move to have Garry and Carl removed as estate trustees for the duration of the court proceedings. The pertinent inquiry is to determine whether the litigation renders it inappropriate for the estate trustees named in the will to continue in control of the estate because of the court proceedings. As I will describe momentarily, the claims by Ian and Kent threaten to gut the estate. Since both trustees are also beneficiaries under the will, Carl and Garry have a personal stake in the outcome and would be opposed in interest to Ian and to Kent even if they were not sued personally.
[8] In addition to being opposed in interest by the nature of the litigation, there is also evidence of longstanding personal animosity between Ian and Carl and Kent and Carl. All of this has been known since the will was probated and before the litigation commenced but the claimants took no steps prior to this motion to remove the trustees. The triggering concern has been the question of documentary production. This concern will be addressed below. It is first necessary to understand the litigation and the nature of the dispute.
The basis of the conflict
[9] The main assets of the estate appear to be parcels of land owned by the deceased either directly or through the farm corporation controlled by him. The details of land ownership, both past and present, set out in the affidavits are not precise. There is room for confusion because the lands and premises are variously referred to by legal description, municipal address or colloquial names and parcels have been subdivided, added to sold and acquired over the years. There are also various houses and other buildings including at least one multi-unit building.
[10] Fortunately it is not necessary to explore all of the family history touched upon in the affidavits or to identify the lands with precision at this point in time. The focus of the court’s attention for purposes of the motion is simply to understand the nature of the dispute as framed by the litigation.
[11] For purposes of the narrative, it appears there are three parcels of land in dispute. In general terms these may be described as follows:
a. Property located at 4160 Prince of Wales Drive which includes a home and farm property and is located on Lots 3 & 4, Concession 2, Rideau Front. (Pin No. 04591-0042 (LT)) (“The Prince of Wales Property”) This lies between Prince of Wales and Greenbank. According to Ian’s evidence it can in turn be considered to be two parcels, “the Megassin land” on which the house is built and the “McCullough land” immediately to the north. The title to this property is currently held by the estate.
b. Property located at 4018 Rideau Valley Drive which is located on Lot 5, Concession 2, Rideau Front and contains the home where the testator lived at his death. (Parts 1 & 2, Plan 4R-18849, Pin No. 04591-0068 (LT)) (“The Rideau Valley Property”) The legal title to this property is currently in the name of Kent.
c. Land on Prince of Wales Drive owned by Limerick Farms Ltd. located on Lot 5, Concession 2, Rideau Front. (Pin No. 04591-0069) (“The Limerick Farms Property”) If I understand it correctly this is land from which the Rideau Valley Property was severed and appears to be the “development land” referred to in the will although the will refers to Lot 4. The title to this property is currently held by the corporation and 75% of the shares of the corporation are held by the estate with the balance owned by Carl.
[12] As noted earlier in this decision, there is a history of family conflict. It is dealt with extensively in the affidavit material in support of the motion. It appears that much of the conflict between the three brothers, Carl, Ian and Kent relates to the management of the family farming operation, Limerick Farms Ltd. During his lifetime the deceased involved his sons in management roles at various points in time. The evidence reveals that this was a major source of sibling conflict.
[13] Until 2005 or 2006 it was Carl who was the son primarily involved and then it appears this role was taken over by Kent. Subsequently the deceased decided to repose his confidence in Carl and Garry jointly though by that time it seems the value of the land was no longer in its use for farming but rather its development potential.
[14] Ian and Kent both allege that the reason Carl ceased managing the farm in 2006 was because he improperly sold a farm property given to him by his father, sold some of the Limerick Farms milk quota and misappropriated revenue from billboards. In fact Ian deposes that John Hawkins considered suing Carl but states that Ian talked him out of it.
[15] At some point in 2010, for reasons that are not readily apparent (though Kent thinks it is because Carl led John to believe Kent was stealing from the corporation) John decided that his affairs were better entrusted to Carl and Garry jointly. He signed a power of attorney designating Carl and Garry in October of 2010. Kent ceased any management role in Limerick Farms at around the same time.
[16] These allegations of wrongdoing really have nothing to do with the merits of the current litigation but they demonstrate a history of animosity and distrust between the brothers. Whatever the truth of the matter, by 2010 John Hawkins had decided that Carl could be trusted to co-manage his affairs with Garry and that the two of them should be his attorneys-in-fact and his executors.
[17] Another conflict dealt with in the evidence is a serious dispute that arose between Ian and Carl in the 1980s. This apparently arose over Carl acquiring ownership of the “Dunn Farm” and over Ian or his family occupying the original farm house. Carl claims that Ian lived on the farm rent free. Ian claims he paid rent to his father and the change in ownership to Carl was not disclosed to him. Carl deposes that he built a new house on the Dunn farm and that he found it was purposely damaged. He believed and continues to believe that this was done by Ian; something Ian denies. What is important for purposes of the motion is the fact that the deceased was well aware of this incident. Again it has little to do with the merits of the litigation but it does show 30 years of animosity between the brothers.
[18] According to Carl, when John Hawkins changed the management of the farm and his power of attorney in 2010, Ian responded with considerable anger. He delivered a document to his father entitled “these are the people you now trust” which contained extremely disparaging remarks about Carl, Carl’s wife and his other brother Blaine. Subsequently, in November of 2010, John made his current will.
[19] The will was signed on November 25th, 2010. The deceased passed away on October 28th, 2011. By that time the relationship between the brothers was so fractious that Ian was prevented from delivering a eulogy, security guards were hired for the funeral and Kent allegedly was not even told about the death. The funeral was barely over before the litigation was begun.
[20] The testator was well aware of the friction between his sons and apparently wished to balance distribution of property against the right to share in the estate. The will contains a number of somewhat complex contingent bequests. The meaning of these provisions and their legal effect was not argued before me but the testator’s general intention appears clear.[^1] The will was designed to permit Ian and Kent to make elections in respect of ownership of land. The important provisions of the will may be summarized as follows:
a. The majority interest in Limerick Farms Limited is to go partly to Carl and partly to the residue of the estate depending on whether or not the “development lands” had been sold. In certain circumstances Carl would receive all of the shares but would have to pay funds to the estate and in other circumstances Carl would receive all of the shares belonging to the deceased free and clear. It appears to have been the expectation of the testator that what he called the “development lands” would be sold and half of the proceeds would be shared amongst his other children. The will appears to provide that Carl would receive the equivalent of 50% of the value of the development lands plus the value of “the apartment” but would not share in the residue of the estate. Carl would however wind up as the sole owner or the majority shareholder of the farm corporation.
b. The Rideau Valley Drive property was acknowledged in the will as being owned in joint tenancy with Kent. The testator appears to have understood that this property would pass to Kent by operation of survivorship. Kent was therefore given the option of relinquishing his ownership in this property to the estate and sharing in the residue or taking the property by operation of the joint tenancy. In the latter case he would not be entitled to any share in the estate. This provision appears to have been intended to let Kent opt in to an equal share of the estate if he surrendered the property.
c. Ian was given an option to take ownership of the Prince of Wales home and one acre surrounding it and not to share in the estate or, depending on the value of the lands, to take the lands as part of his share. Alternatively he could surrender any interest in the lands and share equally in the residue. The intention appears to have been that Ian have an equal share of the estate which at his option could include the house and surrounding land.
d. Blaine was given property in Florida as well as a share in the estate.
e. The residue of the estate was to be divided into four portions, or if Ian or Kent or both elected to take shares, into five or six portions. Of the remaining portions, Garry Kingsley and his sons were to have one share, Diane was to have a life interest in one share with the reversion to her daughter, one portion was to go to Nancy and one was to go to Blaine. One portion was to go to Ian should he elect and one portion was to go to Kent should he elect to surrender the Rideau Valley property. Carl has no share in the residue.
[21] After the will was made there was a meeting between Ian, Garry and Carl on December of 2010 at the home of the testator. Under circumstances that are in dispute an agreement was drawn up purporting to be an agreement to amend the will. That agreement states that Ian’s inheritance is to be the “Megasins” land which is to be valued and considered part of his share of the estate while the “McCullough” lands are to be included in the estate (but subject to a right of first refusal to Ian to buy them). This agreement was not signed by the testator.
[22] The Megasin or Megasson land is apparently the land where the house is located and in that regard the agreement is consistent with the will but I presume the Megasin land is more than one acre. In any event Carl and Garry state that the document, dated December 8th, 2010 was signed simply to stop Ian from making a scene and to get him out of the house. Subsequently Garry and Carl called the police about this incident. The agreement was not signed by John Hawkins and in fact the agreement is not the basis of Ian’s claim against the estate. The incident is described in the affidavits. Carl and Garry refer to it to show that Ian is simply motivated by hostility whereas Ian refers to it to show that Carl cannot be trusted to be objective towards him.
[23] About six months after this incident, the testator apparently decided to sell the whole of the Prince of Wales property though he did not change his will. He entered into an agreement of purchase and sale on June 9th, 2011 to sell the land (said to be 65 acres) for $1.95 million. Although Ian’s pleading alleges this agreement was signed by Carl under the power of attorney the document purports to bear the signature of John Hawkins himself. That was four months prior to his death and the transaction would have closed in early 2012. It would have had the effect of alienating the land to which Ian had an election under the will but presumably Ian would then have shared equally in the estate.
[24] In any event the sale did not close because by the time of the planned closing, Ian had registered a caution against the land and commenced this litigation. In April of 2012 there was also a fire which largely destroyed the farm house. Whether it will be repaired by the estate or will have to be demolished was still unresolved when the motion was argued.
The litigation
[25] It is now necessary to turn to the litigation and to describe briefly the claims that have been asserted between the parties. Ian is the plaintiff. He claims that he is already the owner of 100% of the Prince of Wales property. It is his position that the entire property was sold to him by his parents under an agreement of purchase and sale executed by Kent on their behalf acting under power of attorney in November of 2007. He sues the estate for a declaration that he has a legal and beneficial interest in the land.
[26] It should be noted that Kent supports Ian’s claim. He asserts that he had a valid power of attorney and executed the agreement in accordance with the wishes of his parents. Notwithstanding the purported agreement, ownership in the land was never transferred to Ian. To the contrary, in 2009 the land was transferred from Mr. & Mrs. Hawkins to John Hawkins alone and he continued to hold the title at the time of his death.
[27] The statement of claim was issued on December 21, 2011. On January 30th, 2012 the estate defended. In the defence the validity of the agreement of purchase and sale is contested on various grounds including the fact that it was never disclosed to the deceased and despite demand no copy of a power of attorney has been produced. Moreover the agreement required a number of payments and assumption of obligations that may not have been fulfilled. The agreement was not registered on title.
[28] The estate also launched a counterclaim against Ian for slander of title and against Ian and Kent for conspiracy. The counterclaim also seeks damages from Kent for fraudulent or negligently misrepresenting that he held a power of attorney or for breach of fiduciary duty in misusing a power of attorney when he purported to sell the land to Ian for less than market value. For good measure the estate also asserts that Kent’s joint tenancy in the Rideau Valley lands should be set aside and alleges that his interest is in fact held in trust for the estate. This claim is based on the presumption of resulting trust established by the Supreme Court of Canada in Pecore v. Pecore[^2] but as argued by counsel for Kent, it is a presumption that appears to be contrary to the terms of the will. Ian and Kent allege that this counterclaim is frivolous and an example of malicious intent by the estate trustees.
[29] Ian of course defended against the counterclaim and continues to assert that the agreement of purchase and sale allegedly signed by Kent in 2007 is valid. He also commenced a third party claim (to the counterclaim) against Carl for inducing breach of contract (that is breach of the 2007 agreement of purchase and sale by inducing the testator to enter into the 2011 agreement to sell the lands) or for conspiracy with the deceased to defeat Ian’s legitimate claim to the land. That third party claim was issued in February of 2012.
[30] For his part, Kent responded to the counterclaim with his own. He counterclaims against the estate, Limerick Farms Inc. and Carl and Garry in their personal capacities. Kent disputes any presumption of trust and takes the position that he assumed the ownership of the Rideau Valley lands under a valid joint tenancy and is absolute owner. Though he therefore would not be a beneficiary under the will, he claims that he is the rightful owner of the entire interest of the deceased in the shares of Limerick Farms Inc. This claim is based on an alleged agreement by the deceased to transfer the shares to him in exchange for running Limerick Farms for 5 years without compensation. Alternatively he claims the estate has been unjustly enriched. In any event he claims $7.5 million dollars which he estimates to be the value of 75% of the Limerick Farm lands.
[31] Kent also sues Garry and Carl in their personal capacities for inducing John Hawkins to breach his contract (to give him the shares) by modifying his will or for conspiracy. He also asserts that the executors breached their fiduciary duty to the estate when they issued the claim against him frivolously challenging his ownership of the Rideau Valley lands.
[32] The consequence of the above is that the parties are now fully “lawyered up”, to use a popular phrase, with four sets of counsel involved in multi million dollar litigation. If Ian and Kent successfully assert their claims the estate will lose the value of the three parcels of land leaving little to be divided between the beneficiaries. Furthermore if the estate does not own the 75% interest in Limerick Farms then the bequest to Carl appears to fail and he inherits nothing under the will. Garry and his sons are residual beneficiaries. So both estate trustees have a personal interest in defeating the claims of Ian and Kent. That by itself is not grounds for removal. The evidence must persuade the court that they cannot properly carry out their duties to the estate.
Analysis
[33] The authority to remove an estate trustee is found in the Trustee Act, R.S.O. 1990, c. T.23. Section 37 of the act provides that a personal representative may be removed upon proper grounds and section 5 of the act provides that the court may make an order appointing a new trustee either in substitution for or in addition to an existing trustee. There is therefore jurisdiction to remove estate trustees in appropriate circumstances. Alternatively the court may add an additional trustee and vest that trustee with specific authority.
[34] The cases establish that there is a heavy onus on the party seeking to remove a trustee. It is not enough that the moving party does not like the trustee or trust him or her. The duty of the trustee is not to beneficiaries or claimants individually but to the objectives of the trust. The statutory authority given to the court is grounded in the historical responsibility of courts of equity to see that trusts are properly executed.[^3] So it is only if the issues raised by the party seeking removal of a trustee are of such magnitude that proper administration of the trust will be imperilled that the court should grant the relief.[^4]
[35] There is authority that trustees who for reasons of personal animosity refuse to carry out their lawful duties towards a creditor or beneficiary may be found to fall into this category.[^5] Proper administration of a testamentary trust includes payment of the debts of the estate, resolution of claims against the estate, preservation of the assets and timely distribution. Does the evidence establish that the involvement of the trustees in this litigation will inevitably prevent them from discharging their duties?
[36] The courts have enumerated a series of principles to be applied in determining whether or not to grant this kind of relief. These include the following[^6]:
a. The testator’s choice of estate trustee must not be lightly interfered with and is to be done only in cases of clear necessity.
b. If the conflict between the estate trustee and a beneficiary is of long standing then it must be presumed that the testator knew about it when he made the will so such antipathy alone will not justify overriding the wishes of the deceased.
c. The evidence must be clear that removal is justified and there is no other course to follow.
d. The main concern of the court should be the welfare of the beneficiaries.
e. The onus is on the moving party to show that in the absence of removal and replacement of the trustee it is likely the trust will not be properly executed.
f. Mere friction with a beneficiary is insufficient. The evidence must demonstrate that the antipathy towards the beneficiary is such that it will prevent the proper administration of the estate.
[37] In short it is the duty of the court to ensure the purpose of the trust is carried out and the testator’s choice of trustees should not be lightly disturbed. Removal is essentially a last resort in cases where it can be shown that continuation in office will inevitably impede proper administration. There is no evidence before the court at the moment that any aspect of the day to day administration of the estate has been mishandled or neglected. All of the evidence focuses on the litigation.
[38] The conduct of the litigation is currently the major preoccupation of the estate. This is not surprizing because unless it is resolved in favour of the estate, there will be little estate to administer. The question then is whether Garry and Carl can be allowed to instruct counsel and to make the decisions about litigation and settlement when they are personal defendants, have a personal stake in the outcome of the litigation and when there is longstanding animosity between Carl and the two brothers who are attacking the assets of the estate?
[39] I have no difficulty with the proposition that an estate trustee engaging in frivolous or protracted litigation or giving unreasonable instructions to counsel that magnify cost and delay could be found to be impeding the proper administration of the estate. I am not however able to find that is the case simply based on the pleadings or on the conduct of the litigation to date.
[40] One of the arguments advanced by Ms. Murray and Mr. MacCrimmon is that the counterclaim launched by the estate on the instructions of the executors is disproportionate and unreasonable. It is difficult to assess this without wading into the merits. Moreover the order of the pleadings does not tell the whole story. Reading the pleadings it appears that a straightforward claim by Ian was met not just with a defence but with an attack on both Ian and Kent. Then it appears Kent launched a claim to the Limerick Farms shares in retaliation and Ian and Kent added personal claims against the executors. This is misleading.
[41] Little can be surmised from the order of the pleadings. Lawyers for Kent had written to the estate in November of 2011 indicating that he would be retaining the joint tenancy but also indicating that he was considering a number of claims against the estate. The estate was also made aware of Ian’s claim around the same time. On December 8th, 2011 litigation appeared inevitable and the solicitor for the estate, Richmond Wilson advised Mr. MacCrimmon the estate would immediately be retaining litigation counsel. On December 21, 2011 Ian issued his claim. In these circumstances, notwithstanding each brother expressing surprize and hurt at the allegations made in the pleadings, it is difficult to draw any conclusion or assign fault from who fired the first shot or the order of the pleadings.
[42] The claim against the Rideau Valley land by the estate is said to be an example of a frivolous claim. On the face of it the will appears to answer the Pecore presumption with respect to Kent’s joint tenancy but the will makes no mention of a claim by Kent to the Limerick Farm shares. That claim by Kent may or may not have merit and to the extent that it involves the enforceability of a paternal promise and a claim based on unjust enrichment it is inextricably bound up with the history of the severed Rideau Valley land, the construction of the home on that land and the arrangements between John and Kent resulting in his joint tenancy.
[43] There may well be other evidence to which I am not privy. The claim by the estate to the Rideau Valley property may superficially appear to be contrary to the expectations of the testator but I cannot conclude that it is frivolous or that advancing it in the overall context of the litigation is adverse to the interests of the estate.
[44] I am also not persuaded that claims advanced against Ian or Kent by the estate or advanced against Carl and Garry by Ian or Kent create a divergence in interest between the estate and the trustees. These additional personal claims for inducing breach of contract or conspiracy may strictly speaking be unnecessary but for the most part they stand or fall on the principal allegations. There can be no success by Ian for example if he never had an enforceable agreement with his parents. And the estate has the same interest as Garry and Carl in defeating the claim by Kent. In fact there are circumstances in which Ian and Kent could be adverse to each other since their claims are not interdependent and in some scenarios one or both of them will be beneficiaries.
[45] Simply because a beneficiary or potential beneficiary sues the estate and joins the trustees in their personal capacity is not a sufficient basis to appoint an estate trustee during litigation. Were that the case this relief would be required in almost every case.
[46] I conclude that neither the historical distrust and animosity to which Ian and Kent depose nor the structure of the litigation itself nor the conduct of the litigation to date support the conclusion that the estate trustees must be removed. To the contrary the evidence suggests that the interests of Carl and Garry are aligned with the interests of the estate and with the residual beneficiaries. Both are best served by maximizing the value in the estate and by ensuring it is not eroded by the cost of the litigation itself.
Control of the Documents
[47] One of the matters that has brought this issue to a head is the question of access to the documents held in the file of Kenneth Young. Mr. Young was for many years the solicitor to the deceased. His file may contain evidence that will be relevant to the question as to whether or not there were any legally enforceable promises made to Ian and Kent. Theoretically of course it could also contain evidence of the conspiracy alleged by the claimants or proof that Carl induced John to breach his obligations to Ian and Kent. Quite likely those files also contain other information which is not relevant to the litigation as currently framed but could be information of interest to one or more of the siblings. Of course much of the information in the lawyer’s file may be protected by solicitor client privilege.
[48] There is no doubt that solicitor client privilege – or legal advice privilege to give it a more precise label - belonging to John Hawkins survives his death and there is also no doubt that such privilege is an asset or power of the estate that vests in the personal representatives. This is the focus of alarm and unease on the part of Ian and Kent. It is their contention that Carl and Garry should not be permitted to determine whether the estate should assert or waive privilege over documents to which they have access and to which the other parties do not. That they be permitted to do this in their capacity as estate trustees while also being personal defendants they feel is fundamentally unfair in the context of this litigation. It is clear from the affidavits that this question of access to the documents is the major concern motivating the motion.
[49] There was a previous motion on this point in August of 2012. On behalf of the estate, Mr. Lenz brought a motion to have Mr. Young deliver his files to him. The order was sought for the protection of Mr. Young who was on notice of the litigation and it was opposed by counsel for Ian and Kent on the basis of potential injustice that would arise if Carl and Garry gained control of the documents. Ultimately I ordered that the documents be released to Mr. Lenz but in anticipation of this motion I directed that they could not be disclosed to, or discussed with, Garry or Carl until the motion to remove them was disposed of.
[50] In a sense this motion is the second part of the original motion. Having decided that the mere existence of the litigation and of some level of animosity does not support removal of the estate trustees, I must now consider whether control of these documents is a specific issue that requires intervention under the Trustee Act as distinct from the ordinary application of the rules of civil procedure.
[51] As noted earlier, the power under the Act is concerned with administration of the trust and one aspect of such administration is fairness to beneficiaries and creditors of the estate. But in any litigation the court has an obligation to administer the rules of production and discovery in accordance with the primary objective of the rules.[^7] The rules are to be applied in a manner that is fair to both parties and facilitates efficient determination of every proceeding on its merits. The question then arises as to whether fairness to all parties in the litigation can be achieved by application of the rules or whether it is necessary to also grant extraordinary relief under the Act? It would be possible to appoint an additional estate trustee to take control of the former solicitor’s file and to hold those documents in trust under the direction of the court. I have concluded that it is not necessary to do so.
[52] Firstly, the question of privilege is nuanced and complex and it is somewhat futile to speculate about the fairness of claims of privilege in the abstract. Currently the concern about secret documents in the Young file producing unfair advantage in the litigation is a purely hypothetical problem. At this point none of the parties know what is in that file. Not everything in a solicitor’s file is privileged in the first place and relevant evidence which is not privileged will have to be produced. For example copies of contracts, deeds or powers of attorney or the record of funds processed through the trust account may not be privileged. Legal advice privilege primarily attaches to communication so it will protect such things as letters to and from the deceased and his lawyer, notes of telephone conversations and the lawyers notes taken during meetings. But in certain circumstances privilege will yield such as when the testator’s intention in a testamentary instrument is in issue. Privilege can also be waived and in fact it must be waived if the estate wishes to put documents from the file in evidence.
[53] Hypothetically there could be a relevant document in the file containing an admission which would be harmful to the interests of the estate or the estate trustees personally and which they might seek to suppress by continuing to assert privilege. Of course they would then be obliged to list the document in Schedule B of the affidavit of documents and thus to disclose it. So there can be no secret about “relevant” documents in the Young file. All such documents will have to be disclosed and under the rules of civil procedure Ian and Kent will know whether privilege is claimed and on what basis.
[54] The only unfairness to Ian and Kent would be if there are documents in the file which are not disclosed to them which would otherwise assist them in the litigation. Because there is ordinarily no obligation to disclose documents that are not relevant, this can sometimes occur if the parties have radically different views about the scope of necessary production. But there is still a safeguard in the rules. Questions can be asked about the existence of documents at the time of discoveries. There is in all probability very little chance of there being any probative evidence in the Young file which the estate could conceal and suppress.
[55] A simple solution to avoid suspicion and reduce the likelihood of protracted production disputes would just be to produce the entire file for inspection and to agree that the estate will not assert privilege against Ian or Kent. That may be appropriate but it is a decision that can only be made once the file has been reviewed. It is possible that there are documents in the Young file that are not relevant to the litigation as currently framed but would harm the interests of the estate if they were released. This might be a reason why the estate should choose not to simply release the file; an otherwise pragmatic solution to this aspect of the dispute.
[56] Another complicating factor is that it is not necessarily unjust for Carl and Garry to have access to privileged documents that are not available to Ian and Kent. They are after all co-defendants with the estate. If John Hawkins was alive and was being sued by Ian and Kent and if he then chose to allow Carl and Garry to have access to privileged documents, that might constitute a waiver of legal advice privilege. But if Garry and Carl were co-defendants sharing an identity of interest with John then under the doctrine of common interest privilege or joint privilege John could potentially share information with them without waiving his own privilege.[^8] So it may be quite legitimate for Garry and Carl to share in the estate’s claim for privilege.
[57] I suspect the instances in which there would be joint privilege between the estate and the trustees in their personal capacity would actually be quite narrow. There is, for example, authority that in trust relationships or in trustee-beneficiary relationships the trustee cannot assert privilege against the beneficiary as that relationship is covered by the common interest exception to privilege.[^9] This question is further complicated by the failure of some of the cases to properly distinguish between legal advice privilege and litigation privilege.[^10] In short it seems premature to anticipate problems until the estate has decided what position it is actually taking on the disclosure of documents.
[58] As mentioned above, I had considered the possibility of appointing an independent lawyer to review the Young files and to report to the court on their contents. By analogy with commercial cases when appointment of a receiver seems too extreme, the court may appoint a monitor. It appears to me however that sufficient safeguards exist under the rules of civil procedure. Those safeguards include the requirement for a production and discovery plan (Rule 24.1), the requirement for disclosure of all relevant documents (Rule 30.02 (1)), the requirement for an affidavit of documents (Rule 30.03), the right to discovery (Rule 31), the ability to cross examine on the affidavit of documents (Rule 31.06 (1) (c)) and in Ottawa, access to case management (Rule 77.05 (1)).
[59] Accordingly, I am not persuaded that the evidence before the court demonstrates the need to grant relief under the Trustee Act. The evidence does however demonstrate cause for concern sufficient to place the conduct of the litigation under close supervision. In essence if not in form this is a claim referred to in s. 44 of the Estates Act, R.S.O. 1990, c. E.21 and could have been brought under Rule 75.08. Whether under Rule 75 or under the general rules, the court has authority to give direction and to supervise the conduct of the litigation.
[60] The court has inherent duty and authority to supervise the administration of estates in addition to its duty and authority to supervise the conduct of litigation generally. In this regard it is appropriate to take steps to ensure the litigation does not become protracted or fabulously expensive and that the steps taken by the parties are focused on timely and prompt resolution. In addition, as both civil and estates matters in this jurisdiction are subject to mandatory mediation, the court has a mandate to ensure that the parties make appropriate use of alternative dispute resolution at an early date. Accordingly the action will be case managed. I will remain seized and the court reserves the power to reconsider whether appointment of a neutral third party to administer the litigation might be appropriate should circumstances subsequently demonstrate that is necessary.
[61] This is also a case that demands a prompt attempt at mediation. The court has the authority to determine the timing of mediation under Rule 24.1 or under Rule 75.1.05.
Conclusion
[62] In conclusion the motion to remove the estate trustees is dismissed subject to the residual discretion that follows. Mr Lenz may now review the contents of the Young file, give advice to his clients and take instructions.
[63] The action will be case managed under Rule 77. The court reserves the right to impose third party supervision in the event the need should subsequently arise.
[64] The estate is to proceed with preparation of an affidavit of documents giving careful consideration to the scope of relevance and the wisdom of asserting privilege. A catalogue is also to be prepared of the contents of the Young file deemed not to be relevant to the litigation and whether those documents are privileged or not. This catalogue need not be produced to the other side at this point in time but is to be available for the use of the court.
[65] Counsel are to immediately turn their attention to the matters covered by this order, to the issues in dispute in the litigation and to a production and discovery plan. They are also to seek agreement on a mediator and the timing of mediation.
[66] There will be a case conference on a date to be set by the Registrar for the purpose of giving further direction regarding production, discovery and the timing of mediation.
Costs
[67] Counsel will be aware that the modern practice in litigation involving estates is to apply the ordinary costs rules. On the other hand if it appears that the litigation is an integral part of the administration of the estate due for example to ambiguity in the will then the older practice may be applied and the estate may be ordered to bear the costs of both parties. Since it is premature to determine whether there is substance to the claims of Ian and Kent and accordingly to know the size of the estate and the impact of a costs award it is my preliminary view that this is an instance in which costs should be reserved to the trial judge.
[68] As always I encourage counsel to seek agreement on the question of costs. As I did not hear argument, I may be spoken to if necessary.
Master MacLeod
Date: January 29th, 2013
[^1]: I am not ruling definitively on the interpretation of the will as that is not an issue that is before the court on the motion nor on which I heard argument.
[^2]: 2007 SCC 17, [2007] 1 S.C.R. 795
[^3]: See Leasa v. Leasa (2005) 25 E.T.R. (3d) 31 (S.C.J.) citing Letterstedt v. Broers (1883-84) L.R. 9 App. Cas. 371 (P.C.)
[^4]: Venables v. Gordon Estate 2012 ONSC 956 (S.C.J.)
[^5]: Re: Welin Estate 2003 CarswellOnt 2869 (S.C.J.)
[^6]: See case law summarized in Radford v. Radford Estate (2008) 2008 CanLII 45548 (ON SC), 43 E.T.R. (3d) 74; 2008 CarswellOnt 5297 (S.C.J.)
[^7]: See Rule 1.04 requiring the court to apply the rules proportionately to secure the just determination of every matter on the merits as expeditiously and inexpensively as possible.
[^8]: See CC&L Dedicated Enterprise Fund v. Fisherman (2001) 6 C.P.C. (5th) 281 (S.C.J.) & Zeigler Estate v. Green Acres (pine Lake) Ltd. (2008) ABQB 552; (2009) 60 C.P.C. (6th) 2009 (Alta. Q.B.)
[^9]: See for example Pritchard v. Ontario Human Rights Commission 2004 SCC 31, [2004] 1 S.C.R. 809 @ para. 24
[^10]: R. v. Blank 2006 SCC 39, [2006] 2 S.C.R. 319