COURT FILE NO.: 23037/03
DATE: 20140901
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Donald Edward Foley
Plaintiff
– and –
Dorothy Eileen McIntyre
Defendant
Gregory M. Sidlofsky, for the Plaintiff
Barry L. Evans, for the Defendant
HEARD: November 18, 19, 20, 21 and 25th 2013.
REASONS FOR JUDGMENT
MULLINS j.:
Background Finding of Facts
[1] The plaintiff and defendant are siblings. Donald Foley is 69 years old. Dorothy McIntyre is 70. They were raised on a dairy farm owned by their father Edward Foley. Donald worked hard as a farm hand through high school. Dorothy helped her mother, Eileen Foley, in the domestic aspects of farm life. After completing grade 12, Donald began working full time on the family farm. At first he earned a wage. He joined his father in a partnership after a few years. Eventually they became equal partners. Dorothy left home at age 18 to attend Teacher’s College after completing grade 13. She taught school for 33 years in Oshawa and is now retired. Donald and Dorothy each married and had children. Donald and his wife, Virginia, also known as Ginny, lived in the farm house with his parents, Eileen and Edward, for the first 14 years of their marriage. Virginia continued to work at General Motors as an assistant until their first child was born, in 1975. Thereafter she committed her full time endeavours to raising a family and tending to farm chores.
[2] During the time Donald and his father operated the farm together, Donald and Ginny worked hard and saved. They built their own home on the farm parcel with their savings. They had a barn and silo built. Donald purchased substantial adjacent acreage. A significant portion of the original farm was sold by Edward to Hydro. This land was leased back to Edward Foley from Hydro such that the entire property continued to be used in the dairy business operated by him and his son.
[3] In 1987, the farm was transferred from Edward Foley to his only son, Donald. In exchange for the receipt of the farm, Donald was obliged to cover certain expenses, notably the real property taxes and hydro. The taxes and hydro for the entire farm were on one account. A document entitled “Disposition of Partnership Interest, Edward Foley to son Donald Foley” was tendered in evidence. This document was prepared by Farm Business Consultants. These accountants had prepared all of the income tax documents for Edward and Donald Foley for many years. According to it, assets consisting of cattle were valued at $72,000 and Donald was to pay Edward $36,000 at the rate of $6,000 per year for these. One dollar consideration was payable by Donald for a milk quota declared to have a 1971 value of $22,271 and for equipment. The dairy operation, described as 45 acres with two houses and barns and vacant land of 10 acres, were conveyed to Donald for one dollar. Donald, it may be noted, had not paid his father for the acquisition of his own partnership interest, having contributed instead the sweat equity of his adolescence and early adulthood.
[4] Edward Foley was slight of build and light of weight, at barely five feet tall and little more than 100 pounds. He had had a heart attack in early middle age and was markedly stooped due to osteoporosis in his spine. Donald gradually took over most of the hard labour of the dairy operation.
[5] Dorothy and her family visited the farm every Sunday for family dinners. Dorothy spoke with her mother every day on the telephone. The family celebrated Christmas and New Year’s together. Until the event of this litigation, Dorothy and Donald were cordial, if not close.
[6] From about 1990 onward, Edward and Eileen’s health began to fail. Eileen developed dementia. At first Edward was able to care for his wife. In 1992, Edward suffered a serious stroke. He recovered enough to continue to drive his car and care somewhat for his wife. Certainly, he continued to handle his own financial affairs. With the assistance of a crochet mallet as a mobility aid, he still went to the barn every day. Donald’s wife, Ginny, in particular, was selfless in the care she provided to her in-laws. This allowed them to remain in their home on the farm, even as their heath failed.
[7] Edward Foley had lived through the depression. There was ample evidence, from his investment records, his family and his banker, that he was a cautious and inveterate saver. In addition to carrying on the dairy farming operation, Edward and Eileen kept a large garden. They went to church on Sundays. Edward occasionally read a farming magazine. They watched television. Rarely, did anyone living on the farm take time away from the farming operation. Eileen and Edward did not travel. They rarely spent money on one another. Modest cash gifts might have been given to the children or grandchildren on birthdays and at Christmas. Each family member was treated equally, according to the evidence of Donald.
[8] The evidence at trial proved that a loan of $15,000.00 was made by Edward to Dorothy’s daughter. This loan was to allow her to buy a car. Edward kept a green account book for this loan and therein recorded the repayments as and when they were made. The evidence also reflected a notional loan of $100,000 made from Edward to his wife, in circumstances from which it might be inferred was to allow her to make investments in her name.
[9] In late August and early September of 1990, Dorothy McIntyre was appointed Power of Attorney for Property by each of her parents with respect to the CIBC and by her father for the Bank of Montreal. Edward and Eileen had wills prepared by Mr. Alan Strike. Donald was unaware of the appointment of his sister as power of attorney. Neither Donald nor Dorothy had any involvement in their parents’ banking affairs at this time.
[10] By her will, Eileen gave equal legacies to her children and grandchildren, respectively, and granted the residue of her estate to her husband, with a gift over to her children in the event he predeceased her. The assets of her estate included Canada Savings Bonds.
[11] Donald identified a 1988 document as bearing his father’s handwriting. This was a handwritten summary of Edward and Eileen’s assets, given as part of their instructions to their lawyer, Mr. Strike, in order for him to prepare their wills. The assets of Edward disclosed in this document consisted of deposits at Canada Trust, National Trust, CIBC Mortgage Corporation, CIBC and Bank of Montreal. Canada Savings Bonds are noted and there is reference made to insurance policies and shares in the Co-Op and Silverwoods listed. Eileen Foley’s assets were listed as CIBC Mortgage Corporation investments and CIBC deposits. Land and Canada Savings Bonds were owned by her as were shares in the Co-Op.
[12] By his will, Edward appointed his son Donald and his daughter Dorothy as executors and trustees.
[13] The last will and testament of Edward Walter Foley, among other things, made the following bequests,
(c) to transfer and deliver to my daughter, Dorothy Eileen McIntyre, all Canada Savings Bonds registered in my name only at the time of my death, together with all unpaid and accrued interest thereon. (emphasis added)
(d) to pay a legacy of $20,000 to each of my son, Donald Edward Foley, and my daughter, Dorothy Eileen McIntyre.
(e) to pay a legacy of $10,000 to each grandchild of mine living at the time of my death.
[14] In the event that his wife predeceased him, as she did, the will of Edward Foley directed that the residue of his estate was to be transferred in equal shares to each of his son and his daughter.
[15] By letter from Strike, Salmers and Furlong, Barristers and Solicitors, dated December 11th, 1992, the CIBC was notified that the power of attorney in favour of Dorothy McIntyre on behalf of Edward Foley was activated.
[16] Most of the banking and other records from the various financial institutions at which Edward and Eileen Foley had accounts, for the period from 1994-1996, were no longer available at the time their relevance became important to the dispute that Donald eventually raised with his sister Dorothy.
[17] Eileen Foley died on November 19, 1995. Edward Foley administered her estate. He continued to live in their home on the farm
[18] In March of 1996, Edward Foley had a bad spell while driving his car and his vehicle left the roadway. He was forbidden from driving. In another incident, his absence from the barn one morning caused his son to investigate and Edward was found in his home unable to rise from the floor of his bedroom. These incidents were interpreted to have been transient ischemic attacks by medical professionals.
[19] During this period, Donald became concerned about his father, he testified, when he observed a contractor spraying silicon on the side of his father’s house. Donald believed that this was a useless endeavour and represented a lapse in his father’s otherwise parsimonious and good judgment. Another incident occurred whereby Donald came to understand that a neighbour attempted to borrow $2,000 from his father. To consider giving such a loan was completely out of character, in Donald’s estimation. Donald became concerned that his father was getting to the stage where he could be easily influenced by people.
[20] In April of 1996, through his investment advisor, Margaret Conway, Edward Foley established an Investor’s Edge account at the CIBC. The account application reflects a selection of ‘Joint Account with Right of Survivorship’ from among the types of registration offered. Edward, Dorothy and Donald’s names were named to the account as joint tenants. (Curiously, the application reports the value of Edward’s investments including those held at other institutions as $400,000). Notwithstanding the suspicions latterly invested by Donald Foley in the conduct of his sister Dorothy, the Investor’s Edge account documents clearly reflect that the account information forms were signed by all three within a few days, this being between April 22 and 24, 1996.
[21] It was in early 1996, Donald recalls, that his father stopped doing his own banking. Edward was hospitalized on April 10, 1996. He was discharged home, only to return to hospital on April 22. He was discharged to the retirement section of Marnwood Nursing Home on June 19, 2006.
[22] According to Donald, Edward Foley had kept his financial records in an antique desk in the basement of his house. Donald did not investigate these records. Donald did exercise access to his father’s mail, however, since all of the mail came to one mail box on the farm. He insinuated in his evidence at trial, as did his wife, that his sister Dorothy took his father’s financial records from the desk. He claims she told him she burned them.
The Pleadings
[23] In the statement of claim, Donald Foley seeks reimbursement to the estates of his father and mother for monies he contends were improperly removed prior to and following their death by Dorothy McIntyre. Orders are sought setting aside all transactions that resulted in transfers of any parental assets to Dorothy. He asks that Dorothy be ordered to pay the sum of $801,935.68, this being the funds that Donald would have received had wrongful transactions not taken place. General damages and an accounting are claimed.
[24] The plaintiff was obliged to particularize the claims made against the defendant and eventually did so in paragraph 10 of an amended statement of claim. It is alleged therein, that in breach of her fiduciary duties, Dorothy McIntyre facilitated the wrongful transfer of bonds and monies from her father to herself, including,
(a) On November 2nd, 1994, a GIC with a value of $98,616 originating in Edward’s CIBC account number 816035;
(b) November 10th, 1995, a withdrawal of $450,000 from Edward’s CIBC account number 5065437;
(c) September 1996, a withdrawal of $220,000 from Edward’s BMO bank account;
(d) Monies removed from a term deposit at National Trust of a value of $7,000;
(e) On October 31st, 1997, the receipt by Dorothy of $80,704, this having originated from her mother’s CIBC account number 5065437;
(f) October 31st, 1997, the receipt of $53,062.62 originating as Canada Savings Bonds series 42;
(g) As of November 14th, 1997, $80,704.27 of her mother’s assets (this claim is, I consider, duplicative of that referred to as item (e) above);
(h) March 26th, 1998, (the date of death of Edward Foley), the receipt of the equivalent of Canada Savings Bonds series 43 of a value of $126,359.73 originating in an Investor’s Edge investment account at CIBC;
(i) Also on the date of death $45,515.40 being the equivalent of the Canada Savings Bond series 44 held by their father;
(j) Also on the date of death the value of Canada Savings Bond series 45 also held in the Investor’s Edge account, and
(k) As of the date of death, Canada Savings Bond series 46.
[25] The amended statement of claim also alleges that accounts filed by Dorothy McIntyre as power of attorney for her father were incomplete, failed to include all assets, did not accurately reflect all transactions, and reflected amounts improperly claimed had been gifted to her while an attorney under power of attorney for her father. It is specifically alleged that transfer of assets from Edward Foley to his daughter between 1992 and 1996 were made without Edward’s knowledge or consent or without him having received independent legal advice and in contravention of his daughter’s fiduciary duties.
[26] The plaintiff alleges that following hospitalization on November 30, 1996, Edward Foley did not have a capacity to give gifts and that any gifts were made without his knowledge, without him receiving independent legal advice, and in contravention of his daughter’s fiduciary duties to him.
[27] Dorothy, in addition to breaching her fiduciary duties to provide a complete and correct accounting, claims Donald, failed to meet the standard of care requisite of her, misappropriated assets and failed to disclose all of the assets.
[28] By way of counterclaim, the defendant asks that this court approve the passing of accounts pursuant to the power of attorney exercised and with respect to the estate of Edward Foley. BDO Dunwoody was retained and has prepared accounts. The defendant says that any exercise of her power of attorney for her father Edward was utilized only at his request. No cheques or payments were made without the specific direction of her father during times he was competent.
[29] The defendant denies she wrongfully facilitated any transfer of funds to herself and that any such funds she received were gifts.
[30] The defendant raises a number of legal defences to the action including the Limitations Act as it stood 2002 and thereafter.
[31] The estate of Edward Foley was distributed by both the parties, as executors, and the defendant relies upon principles of estoppel and latches.
Brief Summary of the Evidence Given by the Witnesses
[32] Donald Foley and his wife Virginia testified, as did Dorothy McIntyre. Mr. Erle Sexsmith, C.A., of BDO Dunwoody LLP testified and identified and explained the accounts prepared by his firm in account with Dorothy McIntyre, power of attorney, for the period January 1, 1994 to March 25, 1998 and in account with Dorothy McIntyre and Donald Foley, executors, for the period following their father’s death, March 26, 1998 to June 30, 2003. Ms. Carrie Thompson, C.G.A. of KPMG gave evidence on behalf of the plaintiff theory that Dorothy must have taken income and or assets from her father. Each of the parties called a medical expert, on behalf of the plaintiff Dr. Michel Silberfeld and for the defendant, Dr. Richard Shulman. These gentlemen gave their opinions as to the mental capacity of Edward Foley and his susceptibility to undue influence, based on their respective retrospective analyses. Edward Foley’s family physician testified, and Margaret Conway, who was Edward Foley’s personal banker, also testified.
Donald Foley’s Evidence
[33] Donald complains that his sister Dorothy did not want his father to see his own bank account records during the time he was in the retirement home. While he can identify his father’s signature on two documents which give directions to make certain gifts to his sister, he contends that his father was not the directing mind of either. Neither he, nor his wife or children, had ever received any money gifts from his father. As co-executor with his sister he was aware, having signed the distribution cheques, that his sister received $275,390.53 originating from Canada Savings Bonds. He didn’t find out until later, though, that these funds had come out of the jointly held Investor’s Edge account at the CIBC. Donald has no knowledge of anyone having contacted the issuer of the Canada Savings Bonds after his father’s death. In his view, once the Canada Savings Bonds were deposited into the Investor’s Edge account they became cash or street bonds, even though, he acknowledges, they were not actually cashed.
[34] Donald Foley acknowledges that he consulted with many lawyers over the many years following his father’s death in 1998 and the start of a legal proceeding in 2003. He agreed that Mr. Irwin Hamilton wrote a letter raising his concerns regarding his father’s estate, after which Donald and his sister signed the necessary documents to convey real estate to him and to make other distributions. He claims that Mr. Hamilton made a deal and he, Donald, just went through with it. There was always an issue in Donald’s mind over the distribution of Canada Savings Bonds to his sister. Four years later, he acknowledges, he started an application to seek a passing of accounts. He acknowledged that over the years he had consulted more than a dozen legal and financial advisors in connection with his evolving grievances over what his sister received by way of gifts and estate distribution from his parents.
[35] Donald Foley’s understanding insofar as the Investor’s Edge account at the CIBC was that all of his father’s assets were to go into this one account. The purpose was to allow for the flow of assets to both children.
[36] The specific transactions about which Donald Foley complained at trial were:
(a) November 2, 1994 - transfer from Edward to Dorothy.
(b) November 10th, 1997 - $53,062.62 transfer from Edward to Dorothy.
(c) November 14th, 1997 - $80,704, constituted from investments previously held by Eileen Foley was transferred to Dorothy.
(d) December 22nd, 1998 - receipt by Dorothy of a distribution from her father’s estate constituted from proceeds of Canada Savings Bonds in the amount of $275,390.53.
[37] Donald Foley says that his father was incapable of giving instructions to make gifts at the time he purportedly did, though he acknowledges that at least as of April 1996, his father was competent and continued to handle all of his own financial affairs.
[38] As to the other transactions about which he complains at page 6, paragraph 10, of his amended statement of claim, Donald Foley has no knowledge.
[39] Donald acknowledged that as of April 2000 he knew about some of the gifts to his sister and others he learned of in 1998. He agrees that as of the original statement of claim, prepared in 2009, he had made no allegation of undue influence, he was only alleging that his sister had taken money wrongfully.
[40] Donald Foley believes that the banking document he signed together with his sister and father (the Investor’s Edge Account) required two signatures to authorize transactions. He agrees he cannot point to any documents that confirm this.
[41] When the farm was transferred to him, Donald Foley acknowledges, he received 40 plus 10 acres and the milk quota. On the 45 acre parcel there were two houses. As of 1987 onward he was receiving 100 per cent of the farming income.
Virginia (Ginny) Foley’s Evidence
[42] Virginia Foley has a grade 12 education. She says that Edward Foley was always frail, with a stooped back. Following his severe stroke in 1992, he was not the same person. None of the Foley farming family travelled or spent much money on themselves or one another. It was not Edward’s inclination to give gifts other than equitably and his gifts were not large. Like her husband, she recalled the peculiar circumstance of silicon spraying on the house as an event that marked Edward’s mental decline. Like her husband, she accuses Dorothy McIntyre of being responsible of emptying the desk in the basement where Edward kept his banking documents.
[43] Ginny marks the spring of 1996, after the incident wherein Edward Foley drove off the road, as the point in time he needed assistance with meals and housework. That year he appeared to suffer two minor strokes and in July of 1996, as she recalls, he began living in the retirement section of the Marnwood Nursing Home. While Edward Foley was in the Marnwood Nursing Home, she tried to visit him about once a week, and other times if she happened to be in town, she would drop in.
[44] After Edward’s admission to the nursing home, he was not able to leave without assistance. As Mrs. Foley recalls, Edward expressed concern about not having his little green book, that being the book in which his loan account with his granddaughter was referenced.
[45] Ginny Foley told of a time in late 1996, when Edward recounted that he had, that morning, been out digging potatoes. This was, as she recalls with remarkable clarity, October, 31, 1996. He also said he was going to get his driver’s license back. He claimed that his Cordova, a vehicle she knew to have been owned by him many years before, was in the parking lot.
[46] The date she recalls hearing this account of digging potatoes and of having parked his car coincides exactly with the date Mrs. Margaret Conway took Edward Foley’s instructions to withdraw the funds generated on maturity of Canada Savings Bonds series 42 from his Investor’s Edge account number 570-08483, following which the funds were to be transferred to Dorothy McIntyre. Mrs. Foley recalls that that very day she herself went to the CIBC, encountered Margaret Conway and was advised by Mrs. Conway that she was having Edward sign some papers that day. Mrs. Foley says that she told Mrs. Conway about Edward telling her about digging potatoes. She says she expressed shock that anyone would have him sign papers. Margaret Conway was not asked, I note, about this potato-digging delusion being recounted to her by Ginny, when cross-examined by counsel for the plaintiff.
[47] After Edward’s death, Mrs. Foley got a notice from the Canada Revenue Agency with respect to money owing. This raised concerns, she says and was the catalyst for their investigation of missing assets.
[48] Mrs. Foley acknowledged that she was the author of documents that accused Dorothy of taking money from a dying man in a nursing home. She wrote a letter to Mr. Strike (the lawyer who prepared the will and administered Edward Foley’s estate). Though she was reluctant to agree that this letter must have been in 1998 or 1999, given its reference to lawyer Hamilton, she agreed that in it she remarked:
I would think Dorothy would be glad her brother stayed on the farm with their parents and enabled Ted to sell half the farm and make so many investments that he was able to give bonds even before he died, and the only place the money came from was the farm.
[49] No suggestion that her father-in-law lacked capacity to give or had been subjected to pernicious influences at the time of transfers to Dorothy were raised in these letters, admits Virginia Foley.
[50] Ginny Foley, like her husband, expressed ignorance as to what money they received when they sold the milk quota they had acquired from Edward Foley. She resisted the suggestion put to her in cross-examination that it sold for $400,000.00. She declined to agree that based on the capital gain she reported upon its sale of $100,000.00, that it must have had such a value.
Margaret Conway
[51] Margaret Conway retired from the CIBC as a certified financial planner in 2004. She began working for the Bank of Montreal in 1972, and then moved in 1976 to the CIBC. She worked as a teller, then a personal banker, and become a certified financial planner in 1990. She became acquainted with Edward Foley in the early 1990’s. He was a high value client and she was assigned to provide him with one-on-one service. Edward Foley’s investment strategy was ‘no risk’. He only invested in 100 percent guaranteed products such as GICs and Canada Savings Bonds. In her role as a financial advisor, she would offer him options, but he made all of the decisions as to the terms and interest rates for his investments. She never made these choices for him. He knew what he wanted and was well versed in investments. She never observed any change in his choices.
[52] Insofar as the Investor’s Edge account, she assisted in the preparation of the forms to set it up. As she recalls, she went to the hospital expecting to meet Edward, his daughter Dorothy and his son Donald. Only Dorothy and Edward were there. Edward was content that he and Dorothy sign. As she recalls, arrangements were made for her to go to the farm and get Donald’s signature on the account as well.
[53] As and when any of Edward Foley’s investments matured, Margaret Conway would initiate a meeting with him to get his instructions. On rare occasions, she concedes, Dorothy McIntyre might tell her that her father wished to see her. Dorothy McIntyre was never present when Margaret Conway went to see Edward Foley at the Marnwood Nursing Home. When she met with Edward Foley, Margaret would take print-outs of his investment portfolio with her for him.
[54] Margaret Conway was made aware, as she recalls, by Edward, that Dorothy was to receive his Canada Savings Bonds and Donald the farm. She never saw Edward Foley’s will.
[55] There is a typewritten note dated October 31, 1997 to the CIBC bearing the signature of Edward Foley. That note authorizes the withdrawal of funds generated by maturity of Canada Savings Bonds series 42 from Edward’s Investor’s Edge account, such to be deposited to another account and then transferred to Dorothy McIntyre. Ms. Conway believes that she probably prepared that typewritten note, thus reflecting Edward’s decision and instructions (there is no dispute that this note bears Edward Foley’s signature).
[56] There is also a note, in handwriting, dated November 6, 1997, also to the CIBC. This authorized Mrs. Conway to debit account 5002036, consisting of the proceeds of Canada Savings Bonds that once belonged to Eileen Foley, and deposit them to Dorothy McIntyre.
[57] Margaret Conway does not have a clear, independent, recollection of the events surrounding the signing of the typewritten and handwritten authorizations that resulted in gifts from Edward Foley to his daughter Dorothy McIntyre. To this extent, there is a slight difference between what she testified to at trial and what she said at her examination for discovery. At discovery she remembered but one gift, the October 31 transfer. At trial she found that the notes refreshed her memory somewhat as to there being two meetings.
[58] Eileen Foley had had some health problems, explained Margaret Conway, and that is why she wanted written evidence of Edward Foley’s instructions. She resisted the suggestion put to her in cross-examination that she dealt regularly with Dorothy McIntyre. She was not Dorothy’s personal banker. She did but some of Dorothy’s banking. At Edward’s insistence, she accepted an invitation to dine with Dorothy McIntyre at his expense, as a gesture of thanks for her service to him. She has no specific recollections of any discussions with Edward Foley about his estate or what his assets may have been in late 1997.
[59] Ms. Conway says that the Investor’s Edge account was set up in the manner it was because Edward Foley was looking to avoid probate costs. He expressed confidence to her, that his children would know how to divide the assets. She did not ask Edward Foley, she agrees, as to whether or not he intended to give his son any similar amounts when transfers were made to his daughter. She did not discuss his monthly expenses with him, nor advise him that he would not be able to get the transferred money back. She did not feel this was necessary. She did not ask Edward Foley if anyone had pressured him into making any gifts. She had no discussions with Dorothy McIntyre about the transfers before they were made. She acknowledges a memory of meeting Virginia Foley at the bank on October 31, 1997.
Carrie Thompson
[60] Carrie Thompson was engaged on behalf of Donald Foley to provide evidence in support of the plaintiff’s claims that there are assets missing from the estates of Edward and Eileen Foley. Ms. Thompson is a certified general accountant, a designation she received in 1997. She has 19 years of accounting experience through her employment with KPMG. She was a fund accounting manager for mutual funds for about 10 years. She has worked as an accountant for about 33 years and now advises clients in estate matters. She is a senior member of the estates and trusts practice group at KPMG. She has, on occasion, had to trace estate assets using methods similar to those she employed in her work on this matter. She primarily uses tax returns to trace what assets might be owned by an individual or an estate. When dealing with elderly clients, she explained, it is important to make sure that income is as reported and a comparative exercise can be undertaken to determine if the income matches up with source assets. She is, she agrees, not an expert in the tracing of missing assets.
[61] Ms. Thompson examined a number of tax returns that had been prepared by Farm Business Consultants. She summarized the income from the Foley owned investments to determine whether the income was consistent with the assets, whether there were discrepancies and, if so, what they were. She has used this method, in somewhat less formal circumstances, a couple of times before. She is not qualified to, nor does she, conduct audits. The scope of her assignment was to determine if any assets were missing, not to trace any specific assets.
[62] Ms. Thompson examined 12 volumes of financial productions that were provided to her by counsel.
[63] Eileen Foley’s income tax return of 1995 was considered by Ms. Thompson. She determined that income from Bank of Montreal assets of $14,869.11 had been reported. According to the statement of original assets relating to the estate, the only amount on deposit in the Bank of Montreal was $5,507. Ms. Thompson had been given to understand that Mrs. Foley had invested in Canada Savings Bonds and Guaranteed Investment Certificates. As such, it was expected by her that Mrs. Foley mainly reported investment income. The investment income thus reported did not, in Ms. Thompson’s view, correspond to the value of the asset identified on date of death.
[64] Ms. Thompson discovered that an amount had been deposited into a CIBC account in an account in the names of Foley/McIntyre. $80,704.27 was deposited on November 10th, 1995. Ms. Thompson also noticed a cheque dated October 25th, 1995 in the amount of $311,104.87 described in the documents as having been made out incorrectly. It was re-issued payable to Eileen Foley.
[65] Ms. Thompson observed that Eileen Foley regularly reported interest income of $12,000 and concluded that there had been a failure to account for a GIC in the amount of $185,000. She assumed that the interest rate necessary to produce the reported income was 6.5 per cent, the prevailing rate of interest. The fact that Mrs. Foley’s assets were, generally, GICs and bonds helped inform this analysis.
[66] Following Eileen Foley’s death in 1995, her assets passed to her husband Edward.
[67] As reflected in Schedule I to the report prepared by Ms. Thompson, she analyzed the income reported by Edward Foley in his personal income tax returns for the years from 1987 through 1997. She includes in her analysis his terminal T1 return for 1998, and the T3 income for 1999 and year 2000.
[68] A significant amount of income was earned by Edward Foley in interest from Canada Savings Bonds, GICs and bank accounts. Ms. Thompson adjusted Edward Foley’s income to account for the accumulated interest that would be received on maturity. She assumed that, following his wife’s death in 1995, the income his wife had earned would thereafter be earned by him. She applied interest rates that would accord to those payable on daily interest savings balances over $100,000 and the average interest on six-month Treasury Bills. She derived the interest rate information from the Statistics Canada website.
[69] Edward Foley did not, observed Ms. Thompson, appear to need his annual income to meet his day-to-day expenses. She expects he would have continued to accumulate savings.
[70] Having analyzed Edward Foley’s income as she did, Ms. Thompson did not find the income or assets that were to be expected.
[71] For the period from January 1st, 1996 through to March 25th, 1998, Ms. Conway analyzed revenue receipts; information she derived from the accounts prepared by BDO Dunwoody. From that figure, she deducted the annuity payments and pension income that were included in the revenue received to isolate the investment income. She examined the income reported for 1996, 1997 and 1998 and adjusted for compound interest received for Canada Savings Bonds in 1998. Allowing for two other adjustments, she concluded that the total investment income as reported on Edward’s personal tax returns was $309,079.54. Making an assumption as to the interest rate to be expected, she calculates that there was a shortfall of $106,097.39. She concluded that there may be as much as $725,452.24 to $3,264,535.08 missing from the accounting of Edward Foley’s estate.
[72] Making the further assumption that to the extent the income of Edward Foley was excess to his needs and there would be a corresponding accumulation of assets, Ms. Thompson reasoned that there ought to have been an increase in assets for the period from January 1, 1996 through to March 25, 1988 of $133,081.54. Rather than the original assets as reported on the estate accounting of $1,866,461.63, she would have expected to see the figure of $1,999,543.17. The actual value of the assets reported, adjusted for accrued interest on Canada Savings Bonds and other adjustments was $1,799,048.61, leaving a difference of $200,494.54.
[73] Ms. Conway was also of the view that there were discrepancies in income, suggesting to her that assets had gone missing for the period between 1993 and 1995. She drew this conclusion by assuming interest earnings in keeping with the trend of Edward’s income from 1987 until 1992, then comparing this to the income reported between 1993 and 1994. She concluded that between 1993 and 1995 something between $200,000 and $650,000 might be considered to be missing.
[74] Ms. Thompson agreed that had she been aware that Edward Foley continued to look after his own financial affairs until 1996 and handled his wife’s estate upon her death in 1995, she might have been slow to conclude that someone took money.
[75] Ms. Thompson also agreed that her mandate was to try to support the theory of the plaintiff’s case, that there was missing money and she had not been asked to give an expert accounting report. She agreed with a series of calculations put to her in cross-examination. These calculations started with a premise that the value of the assets of Edward Foley were as reflected in the will instructions he reportedly gave to Mr. Strike in 1988, a figure of $1,607,175. According to the statement of original assets prepared by BDO Dunwoody in the passing of accounts, the value of the estate was $1,957,672. Assuming that Ms. Thompson’s analysis was correct, as much as $3,264,535 was missing. The arithmetical conclusion this leads to, she agreed, was that the total value of the estate could have been as much as $5,221,207. The average annual increase in the value of the estate, she agreed, after taxes and expenses were taken into account, from the time Edward had given his will instructions until his death would therefore be 28.12 per cent per year.
[76] Applying one of the more modest conclusions drawn by Ms. Thompson, namely that the missing assets had a value of only $725,452, she agreed that this would represent an increase of 8.37 per cent per year. Taking the 1988 asset value from the will instructions Edward Foley apparently gave in 1988, the value at death from the BDO statement of original assets, then allowing for a distribution to Edward Foley of his wife’s estate of $100,000 and gifts to his daughter of a total of $213,766, Ms. Thompson agreed that the increase in value of the estate over the eight-year period, annualized, would be about 5.17 per cent.
[77] Looked at another way, Ms. Thompson agreed, that for every $1,000 of discrepancy she identified, this could, on her analysis, be calculated to correspond to an asset worth between $6,837 and $30,769. The Canada Savings Bonds proceeds received by Dorothy McIntyre in November of 1997 had a face amount of $24,600. The interest that had accrued was $28,462.62. Had Ms. Conway’s method of valuation been applied to this same Canada Savings Bonds, she conceded, it would be expected to have a value of many hundreds of thousands of dollars and not the more modest reality of $53,042.62.
Medical Records
[78] The plaintiff tendered a brief of medical records at trial. The defendant asked at trial that all of the medical records be received, in a compact disk form. Curiously, the plaintiff opposed the defendant’s request, even though the documents in the productions originated with the plaintiff. In consequence, the only medical records in evidence were those selected by the plaintiff.
[79] The medical documents, limited though they are, disclose that Edward Foley, as he aged, developed a marked prominence of his mid-dorsal spine, though he did not complain of pain. As of May 1986 he was feeling generally well. Mr. Foley had suffered a myocardial infarction at the age of 41 but was not, at that time, taking any medications. He was a slight man of modest height. A note of February 1987 indicates a history of chronic anaemia, congestive heart failure and, at that time, an acute chest infection. Evidently, according to a note of November 1988, Mr. Foley was well enough to undergo cataract surgery.
[80] On June 25, 1992, Mr. Foley was brought to hospital by ambulance. He was then age 81 years of age and had fallen in the kitchen striking his head. The final diagnosis relating to that event was that he had sustained a transient ischemic attack and suffered from chronic atrial fibrillation. He was described during his hospitalization to have been alert, aware of his surroundings and to have remained well-oriented. It was noted that he was fibrillating, which was the case for many years. By the time of his release from hospital on the 3rd of July, 1992, he was considered to be doing reasonably well and appropriately discharged home.
[81] On December 2, 1992, Mr. Foley was again admitted to hospital. On this occasion, he gave a history of left-sided weakness, an inability to coordinate his movements such that he could not get out of bed. His final diagnosis was a cerebral vascular accident, with left hemiparesis. At the time of his admission, he was not noted to be in any acute distress, was awake, talking and alert. Upon release, it was noted that he could walk with a walker, was independent and expected to manage reasonably comfortably at home.
[82] On the 10th of April 1996, Mr. Foley was admitted to the Bowmanville Memorial Hospital, again as a result of a fall. It was reported that when the family had checked on him mid-day he was found lying face down on the floor in his bedroom. He had fallen and could not get up. It was reported that until two weeks previously he had been driving, despite the cerebral vascular accident in the past, which had left him partially paralyzed down the right side. It was reported that he was coping fine until two weeks previously when he had driven into a ditch. Mr. Foley had no complaints other than having fallen and being stiff from lying on the floor. Though his family stated that he was confused, the physician noted that he answered questions appropriately. Diagnostic imaging noted pneumonia. The discharge note reports that Mr. Foley was then 84 and had been admitted with a transient ischemic attack that had resolved “totally”. He was discharged to continuing care. Note is made that there was a do-not-resuscitate order discussed with family and with Mr. Foley himself.
[83] Edward Foley was again admitted to hospital on the June 29th, 1996. The history given was that he had fallen while trying to move a coffee table. It was at his family’s insistence that he came to the emergency room. Mr. Foley was described as pleasant and cooperative and indicated he did not wish to stay in hospital. He was observed to be frail, having difficulty moving, and to be a little vague on some of the details of his history. He gave an inaccurate account of why he had spent so long in the hospital recently.
[84] The admission to hospital in July of 1996 was, according to the medical record, for social reasons. Family concerns were reflected about Edward Foley remaining at home because of the risk of falls. As a result of the hospitalization, a trial stay at Marnwood Retirement Home was arranged.
[85] Mr. Foley was admitted on the 30th of November 1996 to the Bowmanville Memorial Hospital. A note described his mental status as lethargic though not confused. He had developed a fever and shortness of breath according to the admitting diagnosis. When observed by a Dr. Jefferson, he was alert and talking. His cognitive function was reported by a nurse in relation to discharge planning. According to her note, he was disorientated as to time, place, recent memory, remote memory, and was forgetful. His mental capacity was impaired. He was hard to understand.
[86] A series of evaluator questions upon admission are reflected in a document dated the 13th of December, 1996. Mr. Foley was considered to be incapable. Though there is no indication that he was informed of a finding of incapacity or given an incapable applicant’s rights information sheet. The final diagnosis was pneumonia and he was discharged with a requirement for home oxygen due to hypoxia. At this time he was transferred from the retirement section in Marnwood to the nursing care portion of the facility.
[87] A patient observation note was prepared by the supplier of oxygen to Mr. Foley, Medigas, on January 9th, 1997. Mr. Foley’s compliance with the administration of oxygen was noted as excellent. He was described as difficult to understand. A note was made that he was in bed for most of the day.
[88] An assessment note, which appears to be prepared by a registered nurse, is in the materials and is dated January 6th, 1997. Insofar as short-term memory and the three object test, both were noted to be a problem.
[89] A Medigas technician’s note of December 12th, 1997 reflects that Mr. Foley reported needing help with all activities and that he did not participate very much in planned activities offered to him. He said he was feeling reasonably good but his oxygen level was slow to achieve a desirable result and his pulse was faint and irregular.
Dr. Michel Silberfeld
[90] Dr. Silberfeld is a psychiatrist. He is the founder and, until recently, was the coordinator of the Competency Clinic at The Baycrest Centre for Geriatric Care. He is an Adjunct Professor of Psychiatry at the University of Toronto. For many years he was a roster member of capacity assessors at the Office of the Public Guardian and Trustee of Ontario. He teaches and is an author on the subject of capacity. His expertise on the subject of mental capacity is unquestionable.
[91] Dr. Silberfeld was retained by the plaintiff to conduct a retrospective of Mr. Edward Foley’s capacity and propensity to be influenced unduly. In his view, Mr. Foley had a number of health problems including hemiplegic stroke, transient ischemic attack, chronic atrial fibrillation and recurrent pneumonia. After his admission to hospital in January of 1997, according to Dr. Silberfeld’s opinion, Mr. Foley did not have capacity to make a gift. He was, in Dr. Silberfeld’s assessment, totally dependent upon others, and did not have control of his property. He would not have been capable of holding the necessary considerations in mind sufficiently to make a gift.
[92] Dr. Silberfeld explained that Edward Foley was under a significant burden of physical illnesses. He required oxygen to support his health. Oxygen is essential to maintain and boost brain function. Physical illnesses, for example, congestive heart failure, have an impact on mental function. Mr. Foley would have been increasingly weakened by the lack of sufficient oxygen. This may have made it difficult for him to exercise executive mental functions. Strokes, for example those sustained in December of 1992, cause brain damage. Recovery is never complete. Transient ischemic attacks are episodes where blood vessels shut down. These manifest themselves as if a stroke but the effects reverse and there is no permanent damage. Atrial fibrillation is a disorder of the upper chamber of the heart. An irregular rhythm of the upper chamber causes it not to clear itself, which can lead to clotting and possibly lead to stroke.
[93] It is Dr. Silberfeld’s belief that as of January 1997 the cumulative effects of these illnesses were such that Mr. Foley could not live independently and would have had a difficult time doing an abstract task. It was known that Edward Foley needed assistance with the activities of daily living, was prone to falls, and required repeated hospitalizations with a short interval between them. On the first admission Mr. Foley was noted to be confused, and on the second he was both confused and confabulating.
[94] Mr. Foley was susceptible to undue influence, says Dr. Silberfeld, because he was frail and probably had no control over the information given to him as he could not go out and seek it himself.
[95] The four factors for determining capacity to make a gift, that informed Dr. Silberfeld’s analysis, are:
(a) an understanding of the nature and effect of the transaction;
(b) an understanding of the claims of all potential donees;
(c) the extent of the property disposed of; and
(d) an appreciation of the implications of the action on the donor’s life.
[96] According to Dr. Silberfeld’s view, by the time Mr. Foley was re-admitted to the nursing home portion of Marnwood in January of 1997, he was impaired. He probably could not have understood the nature and effect of the transaction, probably could not have kept in his mind the claims of potential donees and he may, but likely did not, understand the extent of the property he disposed of, nor appreciate the impact on his own life. He considers that as of April to June 1996 onward, Edward was vulnerable to undue influence.
[97] In cross-examination Dr. Silberfeld conceded that the report he had prepared did not explicitly say that Edward Foley was incompetent. He says this is implied. Although he recovered completely from the stroke, Dr. Silberfeld explained that this does not mean that Edward Foley was rendered whole. He acknowledged that his opinion was limited by the documents available to him which were relatively poor, and typically so, he explained. It would have been helpful to him to have had the nursing home records and the input of Mr. Foley’s family physician Dr. Osbourne. Similarly, he was without any input from Margaret Conway, Mr. Foley’s financial advisor. He was not aware, for example, that there had been written instructions prepared by her to give effect to transfers made to Dorothy McIntyre.
Norman Erle Sexsmith
[98] Mr. Sexsmith qualified as a chartered accountant in 1973 and worked at BDO Dunwoody LLP, Chartered Accountants and Advisors, until he retired in 2009.
[99] BDO Dunwoody was retained to prepare the estate accounts in account with Dorothy McIntyre, Power of Attorney, from January 1st, 1994 to March 25th, 1998; the estate of Vera Eileen Pearl Foley in account with Dorothy McIntyre and Donald Foley executors, for the period from November 19th, 1995 to May 17th, 1996; and the estate accounts of Edward Walter Foley in account with Dorothy McIntyre and Donald Foley, executors, for the period from March 26th, 1998 to June 30th, 2003.
[100] As Mr. Sexsmith understood his duty, he was to assemble the accounts and present them with the accounting firm’s findings. In order to prepare the accounts, BDO Dunwoody communicated with all known banks to confirm the existence and balances of accounts. They reviewed correspondence, invoices, investment reports, and cheques. With respect to the period from January 1st, 1994 through 1995, information was extremely difficult to locate. Many of the banks could not provide records. He considered that there was insufficient information available for the period 1994 to the end of 1995, and therefore, the accounts began effective January 1st, 1996.
[101] The witness was asked to address himself to certain documents. The documents reflect that on October 21st, 1994, Dorothy McIntyre, as power of attorney, wrote a cheque to a service centre for $494.90. After that date, there were a number of cheques, written in February, March, April of 1996, all bearing Edward Foley’s signature. After April of 1996 the various cheques bear the signature of Dorothy McIntyre as power of attorney.
[102] In respect of the estate of Eileen Foley, Mr. Sexsmith says that the BDO report is a complete and accurate statement of all accounts. All items were located and reconciled. By reconciliation he means, by example, that the bank records of cheques and deposits agree. The statement of original assets, according to the document Mr. Sexsmith prepared identify bank accounts at the Bank of Montreal and the CIBC; Guaranteed Investment Certificates at the CIBC; a piece of real estate at Part Lot 19, Concession 2, Clarington, Ontario; and shares in Co-Operators. The assets were stated to have a value of $300,596.40. Then Eileen Foley’s estate was then distributed to Edward Foley.
[103] The estate accounts for the period relating to Dorothy McIntyre’s exercise of power of attorney, explained Mr. Sexsmith, reflect original assets consisting of bank deposits at the National Trust, Bank of Montreal, Canadian Imperial Bank of Commerce, Durham Farmer’s Co-operative, Canada Savings Bonds and Guaranteed Investment Certificates. Mr. Foley’s personal property was identified as including a 1969 automobile, a balance owing on a promissory note from Brenda Hancock for a car loan of $10,300, the real estate he had received through his wife’s estate and shares in Silcorp Limited and Co-operator’s General Insurance Company, as well as term deposits with Canada Trust and National Trust. There were term deposits with the CIBC. The total original assets reported to be extant were $1,866,461.63.
[104] Notes are made to the accounts at the end of the report. These say as follows,
The list of original assets is at January 1, 1996 and all transactions are for the period January 1, 1996 to March 25, 1998. All available records were for the period from January 1, 1996 to March 25, 1998. The information or the period January 1, 1994 to December 31, 1994 could not be provided by the financial institutions.
[105] A total of $579.12 in transactions in bank account CIBC Number 816035 were described as unknown, because no back-up for them could be located. There are some 24 of such transactions. The largest amount paid was $300 and the largest amount received was $342.39. The least amount paid was $6.00 and the least received $10.35.
[106] The estate accounts for the period March 26, 1998 reflect assets consisting of a CIBC Investor’s Edge account, accounts with the Bank of Montreal, the CIBC, the Durham Farmer’s Cooperative, a personal loan receivable from Brenda Hancock, Bank of Canada Savings Bonds, Guaranteed Investment Certificates with the Bank of Montreal and the Canadian Imperial Bank of Commerce, real estate consisting of the lot received from his wife’s estate, shares with Silcorp Limited and Co-operator’s General Insurance, as well as term deposits with Canada Trust, National Trust, and the CIBC. The grand total of original assets was $1,957,672.36.
[107] In the notes to the estate accounting there is reference to the promissory note between Mr. Foley and his granddaughter. Brenda Hancock’s records show repayment of $8,500 whereas Edward Foley’s showed repayments of $8,200. Accordingly, Mr. Foley’s record was used to determine the balance of the loan. An overpayment to Dorothy McIntyre with reference to one of the Canada Savings Bonds was noted in the sum of $1,597.51.
[108] Mr. Sexsmith explained that the difference between the methodology he employed and an audit was that the reconciliation he performed is but one procedure one would carry out and an audit would have been a complete review of all of the business affairs of Mr. Foley. He explained that he had no difficulty in the preparation of the accounts and was entirely confident in their accuracy.
[109] Access to the BDO report was given to Carrie Thompson, the accountant engaged on behalf of the plaintiff, and to the plaintiff himself.
[110] The accounts prepared by BDO were pursuant to court order. Mr. Sexsmith reported to both parties. He does not consider himself to have been retained by the defendant.
[111] In cross-examination, Mr. Sexsmith was closely questioned about a capital disbursement recorded in the accounts of $98,032.88. Mr. Sexsmith explained that the documents he examined satisfied him that this was a deposit error and had been appropriately corrected.
Dorothy McIntyre
[112] Dorothy McIntyre grew up on the farm owned by her parents with her brother. She completed grade 13 and then attended Teacher’s College in Peterborough. While growing up, her primary role on the farm was to help her mother in the house as well as with gardening. After marrying Mr. Paul McIntyre in 1964, she taught in Oshawa for a period of 33 years until her retirement in June of 1998. She visited her parents at the farm every Sunday for dinner. As well, her mother was a caregiver for her daughter Brenda throughout the early years of Brenda’s education. She spoke with her mother by telephone every evening.
[113] Mrs. McIntyre became aware after her father had signed his will that he intended that the farm go to her brother Donald and that she would receive Canada Savings Bonds.
[114] In the spring of 1996 Dorothy McIntyre began using the power of attorney that had been granted to her by her father. She provided post-dated cheques for his residential cost. She paid for his television. She paid the taxes and the heating bill for her parents’ home on the farm.
[115] Dorothy McIntyre did not receive any of her father’s financial mail. Her brother got the mail at the farm and it was not given to her by her brother. She never discussed her father’s financial affairs with Margaret Conway. She had no idea of the extent of her father’s investments before his death.
[116] In late 1994, she did receive money from her father. She understood that there was a bond that matured and he wanted her to have the proceeds. This she invested in a GIC. She did not take any steps to arrange for, or give effect to, the transfer of the funds from her father to herself. Her father did that himself. As of this time in late 1994, her father needed a cane to get around but still drove and did all of his own banking.
[117] In April of 1996 Edward Foley went into the hospital, where he stayed through June. She visited him every day. He was very quiet during the first few days of that hospitalization. He improved and regained strength and became himself again. Upon discharge he had a walker. He was home for only one week when he fell and was readmitted to the hospital. To her observation, following her father’s stroke in 1992, there was no real change in his mental functioning. Even after the fall in his home he was the same in terms of his mental functioning.
[118] She visited her father when he was hospitalized in July and then again in December of 1996 through early 1997. She observed a slight bit of disorientation but that cleared up. Her father never was a man of many words so it was difficult to assess his quality of speech, but he appeared to acknowledge what she said to him. She never saw her father during any incidents of a transient ischemic attack.
[119] When her father was living at Marnwood, Dorothy McIntyre visited him every day, unless she had to lead one of her choir performances. At no time did she deny her father any access to his bank records. She says he saw them and he understood them.
[120] In 1997, Ms. McIntyre acknowledges that she received gifts from her father in the amounts of $80,704 and $53,614. She learned of these gifts, she says, when she went in to see her father and he told her he had made the arrangements.
[121] Dorothy McIntyre testified that she had no involvement in retaining Mr. Sexsmith at BDO Dunwoody. After her father had passed away, she and her brother as executors took everything to the estate lawyer’s office, Mr. Alan Strike. Mr. Strike never acted for Mrs. McIntyre personally. When a question arose with respect to her father’s Investor’s Edge account, though she didn’t have a good appreciation of what the problem was, she remembers that her brother went to see Mr. Irwin Hamilton. Following that, she received a distribution of approximately $275,000 and there was a distribution to each of her and her brother of $375,000. It was agreed, she recollects, that her share from the estate distribution would be reduced to reflect the balance of the loan owed by her daughter. Other than the gifts she acknowledges receiving from her father, Dorothy McIntyre denies that she ever received any other benefit and she did not, she says, take any money from her father while acting as his power of attorney.
[122] Dorothy McIntyre acknowledges that she did all of her father’s banking but denies she had anything to do with his investments. She knew that he had Canada Savings Bonds, but was not aware of any Guaranteed Investment Certificates. She did not receive any documents from Mrs. Conway. She does not recollect the letter written by Mr. Strike to the CIBC in 1992 activating the power of attorney, nor attending at the bank to sign any card giving effect to that. The cheques she wrote were on one main account for her father.
[123] The defendant was aware that her father and brother were partners in the farm operation. She was also aware that her brother had purchased land adjoining the family farm. She understood from her father that her brother was to get all of the farm, the cattle, the milk quota, the equipment and improvements, but did not know what value these may have had. She was also aware that her brother was paying expenses in relation to the farm. In the years 1994 through 1995, although she was not visiting as often, there being no more Sunday dinners, she still visited her parents frequently and took her mother out. Her father was providing most of the care needed for her mother and he was still capable of doing things in the house. As to the arrangements insofar as the Investor’s Edge account, she was aware that all three were named on the document and understood that if her father died, the account would go to her and her brother. She was not aware that the account was first opened with her name and that of her father and denies that she ever suggested her brother’s name not be put on the account. She was not aware the Canada Savings Bonds had been rolled into the Investor’s Edge account.
[124] Mrs. McIntyre was aware of the functional assessment report that described her father as incapable when hospitalized in December of 1996. Throughout 1997, she did not consider that he had any difficulty communicating with her. She denies that her father had any difficulty recognizing family members. She was usually alone with her father when she visited. She agrees she did not discuss her duties as a power of attorney with her brother. The only occasion she remembers dealing with Mrs. Conway was with respect to a gift made to her when she attended at the bank with her father. She only saw Ms. Conway when she attended at the bank to make arrangements for the payment of taxes, approximately once per month or less. At her father’s request, since he was unable to do so, she did take Ms. Conway out for dinner. She had little involvement in making arrangements for meetings between her father and Mrs. Conway.
[125] Mrs. McIntyre was not able to obtain any bank records and accounts could not be prepared for the period going back to 1994. She does not know where her father may have kept any records in his home. The antique desk that she removed from the basement was empty. She certainly denies that she ever told her brother that she had burned banking records.
[126] The typed letter of authorization transferring a gift of money could not have been typewritten by her father. Her father told her about the gift when she visited with him that evening. She explains that the deposit of $98,032.88 that was described as mistakenly deposited to her father’s account was an amount gifted from her father to her. She accompanied her father to the bank. The $80,704 she received on November 14th, 1997 was traceable to Canada Savings Bonds that had been her mother’s. The note written to give Dorothy McIntyre instructions, dated November 6, 1997 is not Dorothy’s handwriting. She had no knowledge that this gift was to be made and was told by her father of it.
[127] The $275,390.53 distribution to her following her father’s death was cash, Mrs. McIntyre agrees, not bonds. She did receive a copy of her father’s will, when it was requested through her lawyers before she received the transfer of money in November of 1997. She denies that she ever discussed the will with Ms. Conway but did tell her what was in it. Ms. Conway knew, therefore, that Dorothy was to get the Canada Savings Bonds. She denies, however, ever telling Ms. Conway to transfer to her any funds on the basis she was going to get it anyway.
Dr. Edward Osbourne
[128] Dr. Edward Osbourne was Edward Foley’s family doctor. He received his medical degree from the University of Toronto in 1995. Edward Foley was his patient from February 1996 onward. Dr. Osborne was completely reliant on his clinical notes and records and has no independent recollection of Edward Foley. Any concerns that the doctor may have developed would have been documented and there are no notes, he observes, of any mental problems. Although he has an understanding of the legal principles that apply to assessments of capacity, he is not trained, he agrees, in assessments and never did make such of Edward Foley. Had he noted any problems with Edward Foley’s cognitive functioning he would have asked for an assessment.
Dr. Richard Schulman
[129] Dr. Richard Schulman operates Psychotropics Consulting Inc. He is a geriatric psychiatrist. He received his medical degree in 1989 from McGill. Like the plaintiff’s medical expert, this physician is eminently well qualified to offer opinion evidence. The issue raised in the proceedings, as he was given to understand it, was whether or not Edward Foley had the capacity to make inter vivos gifts. In essence, he described his mandate as a psychological autopsy. The legal test, as he understands it, is that there be an intention to gift, an acceptance of a gift, and delivery of a gift. The key issue is to determine whether the person understood the nature of his conduct. Age is not particularly relevant, he says. Physical condition can also be irrelevant. The question is whether or not there is cognitive impairment. Capacity, explains Dr. Schulman, is not based on a clinical cognitive test. It is a legal test.
[130] Dr. Schulman reviewed the medical documentation. He observed that there was no diagnosis ever made of dementia. Mr. Foley was considered to have suffered transient delirium. There was no diagnosis made of any cognitive impairment on discharge from hospitals. Had there been mental or cognitive diagnoses, Dr. Schulman would have expected records to exist of occupational therapists and social work. There was no evidence in the medical records of any concern of a dementing illness. Very importantly, there was no evidence in the medical material of any substitute decisions ever being given for treatment. Edward Foley, notes Dr. Schulman, consented, on his own behalf, to the advance directive of a do-not-resuscitate order. This is a decision that has life and death consequences.
[131] Dr. Schulman was of the view, therefore, that there would be no reason to suspect that Edward Foley did not understand the making of a gift or fail to appreciate the consequences.
[132] The question of undue influence is a separate issue. Undue influence takes place when there is a psychological, emotional and social pressure that overbears the will of the donor. Any person, explains Dr. Schulman, in long-term care may well be vulnerable. The living circumstances in long-term care are as isolating as those of people who may be living at home and, practically speaking, those at home may be more socially isolated and emotionally dependent.
[133] Among the materials Dr. Schulman reviewed he paid particular attention to the transcript of evidence given by Mrs. Conway. The evidence of Mrs. Conway was that she had met independently with Edward Foley. While there was no evidence in the testimony of Ms. Conway as to how long she and Edward Foley may have interacted, Dr. Schulman got the impression that their interactions were more than perfunctory. There was no evidence of Dorothy McIntyre taking her father to his banker or being present while arrangements with respect to gifts were being made. There were no suspicious circumstances, in other words, that are the hallmarks of influence being exercised. In another example that drew his attention, when being discharged from hospital, Edward Foley was making strong arguments to go home and was, therefore, demonstrating independence in his thinking.
[134] In conclusion, Dr. Schulman testified that in his opinion, Edward Foley did not lack capacity and he did not consider Edward Foley to be especially vulnerable to undue influence. Dr. Schulman emphasized that capacity is task specific and there is no global determination of capacity. He observes that family physicians tend to discuss incapacity globally which is not the correct approach. Capacity, as, for example, to consent to treatment, is task specific. He notes that the observations of delirium and transient confusion are by definition not the same thing as a diagnosis of either at the defining moments of discharge from hospital. There was no evidence of any diagnosis of mentally impairing conditions in these circumstances, where all relevant diagnosis should be made, particularly upon discharge to long-term care facilities. Even subsequent to his hospitalizations, notes Dr. Schulman, Edward Foley was still able to give an advanced directive. This informs Dr. Schulman’s view of Edward Foley’s perceived and actual capacities.
[135] Oxygen support means, explained Dr. Schulman, that Edward Foley needed therapy. He points out, though, that one cannot be discharged from acute care when in a condition of hypoxia. Transient ischemic attacks may not cause permanent sequelae and one must look for continuing effect. The oxygen therapy received by Edward Foley was signed for by Edward, notes Dr. Schulman.
[136] Dr. Schulman acknowledges that Edward Foley was found to be incompetent to consent to long-term care, but he observes that there were no psychotropic medications ever prescribed for Edward Foley. These are medications prescribed for brain function. A do-not-resuscitate order is a very serious matter, contends Dr. Schulman. He assumes that Dr. Osbourne must have discussed it with Edward Foley because such an order constitutes a medical consent and must be reviewed with the patient. He observed as well, that management of oxygen therapy requires a certain level of cognitive functioning. There were no notes of the difficulties typical of confused patients in the management of Edward’s oxygen therapy. As well, a Medigas form dated December 12th, 1997, indicated Mr. Foley was able to communicate effectively.
Documents
[137] The evidentiary record of this trial includes a significant number of documents, only some of which will be identified in any detail in these reasons, even though some were the subject of close scrutiny at trial, many were not.
[138] Among the documents are photocopies of the Canada Savings Bonds that were owned by Edward Foley. These were redeemed following his death and their cash value distributed, as outlined above, to Dorothy. There was no evidence about the formal requirements there may be as between the issuer of the bonds and the bond owner to redeem these. The evidence shows that the bonds remained in the name of Edward Foley only, throughout. The Canada Savings Bonds were, by teller’s stamp, endorsed for deposit to the Investor’s Edge account.
[139] The accounts prepared by BDO are very detailed. These confirm that the bulk of the assets of Edward and Eileen Foley, as revealed and confirmed through the accounting process, taken together with the instructions apparently given in 1988 for will preparations, were, in the main, bank deposits, Guaranteed Investment Certificates and Canada Savings Bonds.
The Issues
[140] The issues raised by the pleadings, in the evidence and in argument, may be analysed as responses to the following questions:
(a) Did Edward Foley have the capacity to make gifts to his daughter Dorothy McIntyre in 1994 and 1997, respectively?
(b) Does a presumption of undue influence arise in respect of the gifts?
(c) Is the standard of proof to be met by the defendant one that approaches beyond a reasonable doubt, or is it a balance of probabilities?
(d) Has Dorothy McIntyre established that the sums she received from her father were gifts and are not held by her in trust for her father?
(e) Has Dorothy McIntyre met the burden of proof to rebut any presumption of undue influence?
(f) Is there corroboration as required under the Evidence Act that any transfers were gifts to Dorothy?
(g) Was Dorothy McIntyre entitled to have received the monetary equivalent of the Canada Savings Bonds that were held in the Investor’s Edge Account at the CIBC in the joint names of herself, her brother Donald Foley, and her father Edward Foley, given the designation of that account as one of joint tenancy with right of survivorship, or ought those funds to have passed to her and her brother as survivors?
(h) Looked at another way, is that Investor’s Edge Account subject to a resulting trust such that it forms part of Edward’s estate and should have been distributed equally between the parties?
(i) Did the testamentary disposition by Edward of the Canada Savings Bonds to his daughter adeem when the bonds were endorsed for deposit to the jointly held Investor’s Edge account?
(j) Did Dorothy McIntyre fail to discharge her duty as a power of attorney for her father in not making and or keeping records of all transactions from the date of activation in 1992, or between 1994 and 1996? If so, is the estate or her brother entitled to damages?
(k) Is the measure of damages to be premised on, at the least, the unknowable consequences of her failings or, should it be assessed in accordance with the opinion evidence of Carrie Thompson?
(l) Has Dorothy McIntyre, other than failing to maintain accounts, wrongfully deprived her father’s estate of assets or income?
(m) Are any of the plaintiff’s claims defeated by the lapse of a limitation period or, by operation of the equitable doctrine of laches?
The Law
[141] The plaintiff relies upon the following case law.
[142] In McNamee v. McNamee, 2011 ONCA 533, the issue was whether Mr. McNamee’s 500 common shares in his father’s concrete trucking company had been received by way of gift or whether they were received in some other fashion. At paragraph 24 it stated the essential ingredients of a valid gift,
(1) there must be an intention to make a gift on the part of the donor, without consideration or expectation of remuneration,
(2) an acceptance of the gift by the donee; and
(3) a sufficient act of delivery or transfer of the property to complete the transaction.
[143] In Robertson v. Hayton (2003), 4 E.T.R. (3d) 115 (Sup. Ct. Ont.), the question was whether money transferred out of the bank accounts of the defendant’s parents were actually gifts or not. The case, at paragraph 30, reiterates the test given in McNamee but it also adds that in order for there to be an inter vivos gift, the onus is on the donee to establish the test stated in McNamee. The standard of proof for an intention to donate is high and the donee must show that the transaction was a gift by proving a clear and unmistakable intention on the part of the donor to make a gift to the donee. If there is conflicting evidence, it is not sufficient that the preponderance of evidence turn the scale slightly in favour of the gift. The preponderance must be such as to leave no reasonable room for doubt of the donor’s intention. It should be inconsistent with any other intention or purpose. If it falls short of going this far then the intention of the gift fails. This case also elaborates on the capacity one needs to have in order to make a gift, at paragraph 33. There needs to be a capacity to understand the nature and effect of the transaction. The test is the same as used in the law of contracts. However, depending on the size of the gift the test for determining capacity shifts. If the gift is significant then the test shifts towards that used to judge testamentary capacity.
[144] Goodman Estate v. Geffen (1991), 80 Alta. L.R. (2d) 293 (S.C.C.), concerned a grandmother who left property which had been her home to one daughter, Mrs. Goodman, and also left the residue of her estate to be held in trust for Mrs. Goodman during her lifetime. Mrs. Goodman had a history of mental illness. The other children, Mrs. Goodman’s brother and sisters, were very surprised and unhappy in the way that their mother had disposed of her estate. They were concerned that Mrs. Goodman might sell the assets for her own support. At her brother’s instigation the residence was put in trust for her life, with her brothers as trustees, and she retained the right to dispose of the property by will.
[145] The issue was whether there was undue influence in this trust agreement. There are three sets of reasons given by the Supreme Court. The justices agreed as to the result but disagreed about whether the presumption of undue influence arose.
[146] In the reasons given by Justice Wilson, she addresses the factors that establish whether a presumption of undue influence arises or not. Equity recognizes that certain transactions between persons standing in certain relationships with one another will be presumed to be relationships of influence until the contrary is shown. This relationship includes the relationship between a trustee and a beneficiary. The presumption will apply when the transaction has been affected between parties in a fiduciary relationship to one another. Influence is about the ability of one person to dominate the will of another, whether through manipulation, coercion, or outright but subtle abuse of power. The ability to dominate the will of another means the ability to exercise a persuasive influence over him or her and the ability to exercise such influence may arise from a relationship of trust or confidence but it also might arise from other relationships as well.
[147] In order to determine whether there is a presumption of undue influence, the court must start by examining the relationship between the parties and ask whether there is a potential of domination that lies in the nature of the relationship itself. These relationships include relationships which equity has already recognized as giving a rise to the presumption, for example, solicitor and client, parent and child, guardian and ward; and also other relationships of dependency. The next question involves an examination of the nature of the transaction. It needs to be shown that the contract worked unfairness either in the sense that he or she was unduly disadvantaged by it or that the defendant unduly benefited by it. Courts must award some degree of deference to the principle of freedom of contract and inviolability of bargain. It’s assumed that the vast majority of commercial transactions are for the pursuit of their own self interest. So, therefore, the mere fact that the plaintiff seems to be giving more than what he is getting is insufficient to trigger the presumption. In a situation where consideration is not at issue, for example, a gift or bequest, then the concern of the court is that such acts of beneficence are not tainted. It’s enough to establish the presence of a dominant relationship.
[148] Once the plaintiff establishes the presumption of undue influence the onus moves to the defendant to rebut it. In order to rebut this presumption the plaintiff must be shown to have entered into the transaction as a result of full, free and informed thought. This might substantially result in showing no actual influence was deployed in the transaction, that the plaintiff had independent advice, and so on. The magnitude of the disadvantage or benefit is also evidence that goes to the issue of whether influence was exercised.
[149] Justice La Forest agreed with Justice Wilson that the requirement of a manifest disadvantage does not make sense in the context of a gift because a gift is by nature inherently disadvantageous, at least in the material sense, so the requirement is superfluous.
[150] Dmyterko Estates v. Kulikowski (1992), 47 E.T.R. 66, (Ont. Ct. J. (Gen. Div.)), involved a Ukrainian immigrant who came to Canada in 1930. He spoke little English and worked mostly with Ukrainian speaking people. He could not read English and needed his three daughters to assist him whenever he was dealing with English speaking people. The deceased was close with all his three daughters. When his health started to fail he went to live with his oldest daughter who is the defendant in this case. A will in 1973 left equal shares to his daughters. The challenged will, left only $5,000 to each of them and the residue of the estate was left to the defendant. He also made an inter vivos transfer of his house and his cottage property to her. Meetings with the lawyer who executed the will were arranged by the defendant and she was present throughout the meetings and also acted as a translator.
[151] The court acknowledged that the Supreme Court of Canada in Geffen re-evaluated the doctrine of undue influence. Here, the deceased was dependent on the defendant, both physically and emotionally, because his personal home was with her and because of her strong personality coupled with their long-standing interdependent relationship. She was clearly in a position to exert influence over her father and also to dominate him. The court found that the presumption of undue influence arose.
[152] Dmyterko Estates cites another case of the Privy Council, Inche Noriah v. Shaik Allie Bin Omar, [1929] A.C. 127, to the effect that it’s necessary for the donee to prove that the gift was a result of free exercise of independent will. The most obvious way to prove this is to prove that the gift was made after the nature and effect of the transaction had been fully explained to the donor by an independent and qualified person and that the donor was acting independently of any influence of the donee. The court concluded that here, the lawyer did not take objective precautions to ensure that the deceased was acting independently. Such precautions would have included a meeting with the deceased without the daughter, with an independent translator, explaining the full consequences of the deed as well as alternative courses of action open to the deceased. It would have also been prudent for the lawyer to inquire the reasons why the donor wanted to make this transaction and emphasize the consequences of the transfer. Also, it should have been explained that the gift in the deceased’s position where someone is transferring assets to someone in position of influence is subject to later court challenge and therefore a lot of precautions must be taken to ensure that a donor is free and independent. Also that it is a good idea for the donor to advise somebody else, an independent party, of the steps that he has taken. Also, in the context of a presumption of undue influence the court cannot rely on the donee of the gift to assure the mental capacity of the donor. Also because of important public policy many courts are unable to find that the presumption of undue influence has been rebutted even when a donor has been advised by a solicitor.
[153] As to a transfer of the $17,000 in Canada Savings Bonds, the court goes on to address principles applicable to powers of attorney. The power of attorney is an agent of the donor and owes a fiduciary duty to the donor. An attempt to acquire title of a donor’s property is a fraud unless it is the donor’s intention that the conveyance be made. Where property is transferred without consideration, there is a presumption of resulting trust in favour of the transferor unless a transferee can rebut that presumption. And a power of attorney is liable to account for the transactions involving an exercise of the power of attorney during the incapacity of the donor. During the relevant time period of the two gifts the relationship between the defendant and the father was one of dependency and, therefore, in the context of the Canada Savings Bond, the presumption of undue influence arose and there was no evidence to rebut it.
[154] In the circumstances of Shipp v. Tremblay (1998), 22 E.T.R. (2d) 161 (B.C. Sup. Ct.), Mr. Shipp was suffering from moderate to severe Alzheimer’s dementia. He was elderly and his physical health was failing by early 1994. He had limited education and understanding as to the extent of his assets and all these factors made him vulnerable physically, mentally and emotionally. Mr. Tremblay, the court found, was trying to keep Mr. Shipp isolated from his family. Mr. Tremblay prepared numerous documents, all of which appeared to have Mr. Shipp’s signature on them, although it was not clear whether Mr. Shipp signed them or not.
[155] The court found that gifts to Mr. Tremblay took place directly as a result of Mr. Tremblay’s improper exercise of influence over Mr. Shipp. Mr. Tremblay was also the power of attorney for Mr. Shipp and the court found that the vulnerable relationship as well as the creation of a fiduciary duty through the granting of power of attorney arose to a presumption of undue influence. It was not established that Mr. Shipp was acting spontaneously or that he had free will in any of these transfers and, therefore, the presumption was not rebutted. The court was not satisfied that Mr. Shipp received independent advice in relation to any of the transfers, advice that would have to be given with regard to all of the material circumstances for it to have been meaningful.
[156] Dell’Aquila Estate v. Mellof, [1996] 6 W.W.R. 445 (Sask. Q.B.), discusses the most obvious way to rebut a presumption of undue influence, which is to establish that the transaction was explained to the donor by an independent and qualified person to ensure that the donor was free from influence and had a full appreciation of what he or she would have been doing. In this case, it was established that it would have been easy for the defendant to have arranged for independent advice for Mr. Dell’Aquila as the defendant was also the power of attorney of the plaintiff. It was his obligation to do so if he wished to accept the gifts given to him by the plaintiff while standing in a fiduciary relationship.
[157] Re Davis Estate, [1963] 2 O.R. 666 (Ont. C.A.), and Scott v. Cousins (2001), 37 E.T.R. (2d) 113 (Ont. Sup. Ct.), are relied upon by the plaintiff to illustrate that the fact that an elderly person suffers from dementia or a lost capacity may not be immediately apparent to those who are not closely associated and, as in the case of Leger et al v. Poirier, [1944] SCR 152, that there might be testamentary incapacity where someone is also able to answer questions of ordinary and usual matters, but in order to have a “disposing mind and memory”, one needs to be able to comprehend out of their own initiative and volition the essential elements of will making, property, objects, just claim to considerations, revocation of existing dispositions and the like. To be able to merely make a rationale response is not enough. There must be a power to hold the essential field of the mind in some degree of appreciation to the whole of the circumstances.
[158] Nguyen (ph) Estate v. Leun (2001), 38 E.T.R. (2d) 226 (Ont. Sup. Ct.), addresses the duty on a power of attorney to account for his dealings with the assets of the deceased from when the power of attorney was signed to the date of death. The court concludes at paragraph 10 that there is a duty to account for all transactions that he undertook from the date of power of attorney to the date of death. Disclosure is essential for trustees to be able to ascertain the assets at the time of death. There was a duty on Robert to keep accounts and be ready upon request to produce those accounts. This is an ongoing obligation.
[159] Likewise, Zimmerman v. McMichael Estate, 2010 ONSC 2947 (Ont. Sup. Ct.), holds that a trustee has an obligation to keep proper accounts. The trustee must keep a complete record of their activities and be in a position at all times to prove that they administered the trust prudently and honestly. They must have the accounts ready and give full information whenever required. An attorney for property has the same obligations in accordance with regulations established pursuant to the Substitute Decisions Act, 1992, S.O. 1992, c. 30, section 32(6). An attorney must, in accordance with the regulations, establish pursuant to section 32(6) of the Substitute Decisions Act keep account of all transactions involving the grantor’s property. Also section 2(1) of the Accounts of Records of Attorneys and Guardians, O. Reg. 100/96 provides that accounts maintained by an attorney have to include:
(a) a list of the incapable person’s assets as of the date of the first transaction by the attorney on the incapable person’s behalf;
(b) an ongoing list of assets acquired and disposed of on behalf of the incapable person, including the date and reason for the acquisition or disposition and from or to whom the asset is acquired or disposed;
(c) an ongoing list of all money received on behalf of the incapable person, including amount, date, from whom it was received, the reason for payment and particulars of the account into which it was deposited;
(d) an ongoing list of all monies paid out on behalf of the incapable person, including amount, date, purpose of the payment and to whom it was paid; and
(h) an ongoing list of all compensation taken by an attorney or guardian, including the amount, date, and method of calculation.
[160] Then section 6(1) of that Regulation provides that an attorney shall retain the accounts and records required by the Regulation until she ceases to have authority and the attorney is discharged by the court on a passing of accounts under section 42 of the Substitute Decisions Act, paragraph 33. Also at paragraph 89 of this judgment, if a trustee mixes her own funds with the funds being held for another, all of the property must be taken to be the other’s property until the trustee is able to prove what part of it is his or her own.
[161] In Re Mulville (1996), 25 E.T.R. (2d) 92 (Ont. Ct. J. (Gen. Div.)) objection was raised to the passing of accounts. Power of attorney had been given to a husband with little financial experience or formal education. He testified that he had no appreciation of formal requirements imposed by the law and that had kept no records. He acknowledged that for a number of years he deposited disability and CPP payments of his wife into joint bank accounts and continued to conduct himself as the couple had done throughout the marriage. He used all of the money in the account to pay for bills for living expenses and improvements on a new home. Accounts were prepared by Mr. Mulville’s solicitor based on Mr. Mulville’s recollection and very meagre documentation. In his cross-examination he was unable to answer many relevant questions.
[162] There were no accounts or banking records at the trial. The court found that the husband misappropriated funds from the wife’s estate in contravention of his duties as power of attorney. It was irrelevant that he did not know of his obligations as a power of attorney and damages were awarded in the amount of $25,000 to credit to the wife.
[163] The facts of Weidman Brothers Limited v. Guarantee Trust Company, [1955] O.R. 644, (Ont. S.C. C.A.), concern an action in which the plaintiff claims recovery of possession of certain Dominion of Canada Bearer Bonds which were in the possession of the plaintiff and were stolen from a building by burglars. The bonds had been pledged as a security for debt. On the facts of the case, it was recognized that bonds and debentures are fully negotiable.
[164] Trebett v. Arlotti-Wood, 2004 BCCA 556 and Re Brekken (1997), 4 B.C.L.R. 211 (BC SC), address the concept of ademption. A gift under by testamentary disposition deems, meaning it fails, if at the testator’s death the specified property is not found among his or her assets either because the testator parted with it or because the property has seized to conform to the description of it in the will. There are two classes of legacies: one is specific and the other is general. A specific legacy, according Halsbury’s Laws of England, must be of some thing or of some nature legal or equitable, forming part of the testator’s estate. It must be a part as distinguished from the whole of his personal property or from the whole of the general residue of his personal estate. It must be identified by sufficient description and separated in favour of the particular legatee from the general mass of the testator’s personal estate. A specific legacy is a gift of a severed or a distinguished part of the testator’s property, thus showing an intention that the property shall pass to the legatee in specie.
[165] K.M. v. H.M (1996), 96 D.L.R. (4th) 289 (S.C.C.), alludes to the proposition that the relationship of child to parent is a fiduciary one. The obligation has been mostly determined in the context of contractual relations between a parent and a child where it gives rise to a presumption of undue influence. The application of laches is discussed and the secondary source by Meagher, Gummow and Lehane is cited for the proposition that laches is a defence whereby a defendant can successfully resist an equitable, although not illegal, claim made against him if he can demonstrate that the plaintiff, by delaying the institution or prosecution of his case, has either (a) acquiesced in the defendant’s conduct; or (b) has caused the defendant to alter his position in reasonable reliance of the plaintiff’s acceptance of the status quo or otherwise permitted a situation to arise which it would be unjust to disturb. These are two distinct branches of the laches doctrine and either will be sufficient as a defence to a claim in equity. A mere delay is insufficient to trigger the doctrine under either of the two branches.
[166] Burns Estate v. Mellon (2000), 48 O.R. (3d) 641 (Ont. C.A.), concerned a transfer of $195,000 to the respondent. The appellant in the case is one of the deceased’s daughters and also the administrator of the estate, who submitted that the money was held as a resulting trust for the deceased’s estate. The court held that it was a gift. They also stated that the transfer raised a rebuttable presumption of a resulting trust in favour of the deceased’s estate. Section 13 of the Evidence Act applied and required that the transfer had to be corroborated by some other material evidence. The gift had to be established in compliance with section 13 and the presumption of resulting trust could be rebutted on a balance of probabilities. The will was a strong piece of evidence as to whether the deceased intended the transfer as a gift and the absence of any reference in the will to the transfer and the explicit reference to loans of the deceased’s daughter, taken together, was held to have corroborated the respondent’s evidence that the transfer was a gift.
[167] In Pecore v. Pecore, 2007 SCC 17, the Supreme Court of Canada held that when a gratuitous transfer is made by a parent to an adult child, the presumption of resulting trust is to be applied, not a presumption of advancement. The onus shifts to the adult child donee to rebut the presumption by proving, on the civil standard of the balance of probabilities, that the donor’s intention was to make a gift. Quoting the decision, the defendant submits:
The trial judge will commence his or her inquiry with the applicable presumption and will weigh all of the evidence in an attempt to ascertain, on a balance of probabilities, the transferor’s actual intention.
[168] The Supreme Court has held in the context of gratuitous gifts that certain relationships including that of parent and child have the potential of undue influence, thus, automatically triggering the presumption. The defence cites Geffen. Once this has been established, the defence says, quoting the decision, the next step is for the trial judge to conduct a “meticulous examination of the facts” in order to decide whether or not the defendant has successfully rebutted this presumption. The test is for the defendant to prove, on the civil balance of probabilities, that the donor entered into the transaction as a result of his own “full, free and informed thought”.
[169] “Laches” was defined by the Supreme Court of Canada in the decision of M.(K.) v. M.(H.), [1992] 3 S.C.R. 6. Either two branches of the laches doctrine will suffice as a defence to a claim in equity. A mere delay is insufficient to trigger laches under either branch. The doctrine considers whether the delay of the plaintiff constitutes acquiescence or results in circumstances that make the prosecution of the action unreasonable. Ultimately, laches must be resolved as matter of justice between the parties as is the case with any equitable doctrine.
[170] Citing the decision Jacques v. Hipel Estates (Trustee of), 2011 ONSC 5259, the court, submits the defendant, held that in order to successfully invoke the doctrine of laches the defendant must demonstrate that the plaintiff, by delaying the commencement of an action, either
(a) acquiesced in the defendant’s conduct; or
(b) (i) caused the defendant to alter its position in reasonable reliance or acceptance of the status quo, or
(ii) otherwise permitted a situation to arise in which it would be unjust to disturb. Knowledge by the plaintiff of his right is critical to determine whether or not he has acquiesced. An objective standard applies. The question is whether it is reasonable for the plaintiff to have been ignorant of his legal rights given his knowledge of the underlying facts relevant to the possible claim.
[171] The second branch addresses the prejudice to the defendant. In the Jacques v. Hipel Estate case, both branches were considered to apply, although either would have afforded a defence.
Analysis and Disposition
[172] Medical records establish that Edward Foley’s health was compromised by a history of heart disease and stroke, the latter of which occurred in 1992. In 1996, Edward’s health began to fail rather precipitously. He suffered from heart failure, transient ischemic attacks and pneumonia. He became dependent on oxygen therapy. He was hospitalized in 1996 repeatedly. While in hospital, he was reported to have diminished mental functioning. For discharge purposes, he was found to be incompetent to return home, rather than a nursing home. These circumstances are particularly relevant, given the necessity set out in the jurisprudence that a donor of a sizeable financial gift have memory sufficient to know, to intend, and to execute the act of gift. The giver has to have an abiding ability to hold in the mind all of the factors the law deems necessary to gift.
[173] Donald and Virginia Foley say they had long since noticed events indicative of failing judgment that caused them concern about Edward’s mental functioning. Donald concedes and rightly so, that his father was fully capable when he made the first of his gifts to Dorothy, this on November 2, 1994. By 1996, when Edward was discharged to the retirement wing at Marnwood, Edward lacked capacity in his son’s estimation. Dorothy disagrees with this. She agrees that her father could not have physically written either of the instructions purportedly taken by Margaret Conway to give effect to gifts, but thinks he was fully capable of making his own decisions. The physicians who offered their opinion evidence in this trial disagreed as to whether Edward had lost the capacity to gift before he died and, in particular, before the gifts made in late 1997 to his daughter.
[174] Margaret Conway was confident that Edward Foley was fully in charge of his faculties when giving her instructions, which were in writing and signed by him, to make gifts to his daughter. She met with him, alone, and brought statements of his investments for his consideration when he, and he alone, made investment decisions and his decisions to gift.
[175] I prefer and accept the evidence offered by the defendant in this case, where it conflicts with that of the plaintiff as to Edward Foley’s mental functioning, his capacity and whether he was subjected to the undue influence of Dorothy McIntyre. In particular, I prefer and accept the opinion evidence of Dr. Schulman. I accept his evidence that capacity is task specific. I consider that his approach in assessing Edward Foley’s capacity was more nuanced and appropriately premised on a review of all of the available evidence, rather than the approach of the plaintiff’s expert, which was premised much more so on inferences drawn from what he described as the burden of Edward’s physical illness.
[176] Edward Foley amassed his tidy fortune, it would seem and I so find, from hard work, a frugal lifestyle, careful saving, and conservative investments yielding modest but wholly reliable returns. He closely tracked a loan to his granddaughter. He made the investment decisions. Neither Dorothy nor Donald had any involvement in his investment choices or management. Even his investment advisor did not need to offer him advice. This must be borne in mind when considering his capacity to gift his wealth or his vulnerability to influence by others. Whether Donald or more importantly his wife Ginny were of the view that the farm was an unqualified benefit, rather than a burden, I infer that Edward Foley considered, when he conveyed the farm operation and property to his son, that he was making a gift to his son of significant value.
[177] I accept the evidence of Margaret Conway that Edward was kept informed of his investment portfolio when she visited. I find that Edward Foley, by dint of a lifetime of so doing, made his own investment decisions and was well aware of his wealth, and those who had a natural claim upon his affections and were his chosen beneficiaries throughout his life and until his death. I do not consider that Margaret Conway was obliged to discuss the obvious with Edward Foley, which was that the gifts he instructed be made in no way imperilled his ability to support himself. I accept the evidence of Dorothy McIntyre that the gifts she received were at her father’s initiative. His gifts to his daughter were in keeping with the intentions expressed in his will, which was that she would have the benefit of Canada Savings Bonds. I reject entirely the evidence of Virginia Foley that Edward Foley gave a delusional account of activity to her on October 31, 2007 and that she told Margaret Conway of this. I prefer and accept the evidence of Dorothy, rather than that of Donald or his wife, as to the state of Edward Foley’s mental capacities between 1996 and his death. There was no evidence given that any substitute decision was made for any of the personal care or health choices made, in circumstances where this evidence could readily have been solicited from Donald, his wife, or by way of medical witnesses. I reject the evidence of Donald and his wife that Edward failed to recognize any family member. I accept Dorothy’s evidence that her father always knew who she was.
[178] I find that Edward knew his donee daughter, was well aware of his investment portfolio, and himself initiated and executed an intention to gift, thus demonstrating his capacity to do so. I find, therefore, that at no time material to the claims before the court, that Edward Foley lacked capacity to make gifts.
[179] Dorothy McIntyre was, of course, Edward’s daughter and assumed responsibility as his power of attorney of property to tend to his financial affairs. The evidence establishes, I find, that Dorothy became actively engaged in assisting her father in discharging his financial obligations after he became confined to the retirement home. I find that her involvement was limited to carrying out his routine banking and had nothing to do with his investments. As the accounting of BMO confirms, by the time Edward was confined to the nursing home his financial activities were routine and transparent. At no time, I find, did Dorothy McIntyre ever make any real changes to Edward’s long established banking arrangements. There is no evidence, and plenty to the contrary, that she had any involvement whatsoever in Edward’s investment arrangements.
[180] Edward was unable to leave the retirement home on his own and did not have a phone. He did not participate in the home’s activities and became bedridden. As Margaret Conway told us, however, it was she who initiated the meetings with Edward, as and when his investments would mature. Perhaps Dorothy might tell her that her father wished to see her. There is however, little and no compelling evidence upon which to find that Edward was in any real sense, emotionally, physically or financially dependent upon Dorothy McIntyre.
[181] Given that Dorothy McIntyre was, strictly speaking, in a fiduciary relationship to her father from at least 1996 forward, a presumption of undue influence should be applied to the circumstances under which she received significant financial gifts from her father for the purpose of this analysis. There is authority for the proposition that a significant burden of proof passes to Dorothy, to discharge the presumption that may be considered to have arisen. Based on the modern authorities by which I am bound, I am satisfied nonetheless that this onus is to be met on the usual civil standard of a balance of probabilities.
[182] I consider, for the reasons I have, I think, already articulated, that the evidence does establish, on any standard, that Edward Foley was not under the undue influence of Dorothy. For the gifts received in 1997, a time when Edward was at his most vulnerable, if ever, Margaret Conway attended upon him and received his signature to written instructions to make the gifts. I accept Dorothy’s evidence that she only learned of her father’s gifts when he told her of them. I accept Margaret Conway’s evidence that Dorothy had no involvement in the arrangements, insofar as she was aware. Edward did have the benefit of an independent advisor in Margaret Conway, who, I am satisfied in all of the circumstances, would neither have been unaware nor have overlooked exploitive conduct of others that was serving to subvert Edward’s will and cause him to make gifts he would not otherwise have freely chosen to make.
[183] I conclude, therefore, that the gifts received by Dorothy were not realized through undue influence and that she has met the burden of proof that may apply, by any standard.
[184] In these proceedings, there must, I accept, be evidence of corroboration of the gifts Dorothy received. I accept the submissions of the defendant that corroboration may be found in the will of Edward Foley, wherein he gifted the Canada Savings Bonds in his name to his daughter. The gifts to Dorothy in 1997 were the proceeds of matured Canada Savings Bonds. Edward Foley was, I find, careful to track loans he made to his granddaughter and wife. Had the sums he transferred to Dorothy been loans and not gifts, Edward would have taken care, I am satisfied, and to have signified this and he did not.
[185] The evidence of Margaret Conway to which I have already alluded also offers corroboration of gifts. I am satisfied that the provisions of the Evidence Act, R.S.O. 1990, c. E.23, are here met. For much the same reasons I have already given, and in consideration of much the same evidence, I think it is clear that the sums received by Dorothy are not retrievable by the estate of Edward by operation of a resulting trust. Edward delivered his gifts, at least those in 1997, using language and in circumstances that adequately expressed they were for his daughter’s use absolutely. It would be incongruous to find that Edward’s earlier gift in November of 1994 was other than a gift, given all of the circumstances as I find them to have been even as late as 1997.
[186] Ms. Conway was certified as a financial planner. She was not asked about why Edward Foley’s financial planning was not addressed with more sophistication, so that, for example, the contents of his will were unambiguously consistent with the way he held his investment account. Neither Dorothy nor Edward was asked much about why their father set up the Investor’s Edge account with a right of survivorship. Neither had an intimate knowledge of their father’s affairs, it would seem. Neither contends that anyone other than Edward himself made any contributions to the account, or presumed to give any instructions or make any withdrawals. Margaret Conway said that Edward Foley would cross the street to pick up a nickel. It was her understanding from what Edward told her that the purpose to be served in having his investments, including the Canada Savings Bonds, organized into the one Investor’s Edge account jointly naming him and his two children was to save probate costs. Her evidence on this point was reliable, consistent with the other evidence, and to the extent it is necessary to understand why the arrangements were as they were, admissible.
[187] I conclude that Edward Foley remained the sole beneficial owner of all the assets in the Investor’s Edge account and at no time did he intend to make an inter vivos gift to his children of its contents. I accept the submissions of the plaintiff that when the Canada Savings Bonds were endorsed by teller’s stamp to be deposited in the Investor’s Edge account, that those bonds, technically speaking, then met the definition under the Bills of Exchange Act, R.S.C. 1985, c. B-4, as negotiable instruments. I do not find, however, that the endorsement or deposit served, when all of the circumstances are considered, to adeem the gift intended by Edward Foley by the explicit words in his will, that Dorothy was to receive the Canada Savings Bonds in his name. His name and only his name remained on those bonds. Their deposit into the Investor’s Edge account was, I find, only for the limited, if ill-guided purpose of saving probate costs.
[188] The sum distributed to Dorothy McIntyre by she and her brother as executors upon redemption of the Canada Savings Bonds following her father’s death, after Donald Foley had received advice on the matter, belongs, I find, to her. She does not have an obligation to return or account for those funds nor deliver them for distribution to herself and her brother as the residual beneficiaries of her father’s will.
[189] I accept the submissions of the plaintiff that as power of attorney, Dorothy McIntyre had a duty to keep accounts, a corollary to which is that the records necessary to do that must also be kept. Ignorance of these duties does not relieve the attorney from this duty, nor the consequences to be visited upon them should they fail.
[190] Accounts for the period from 1992 to 1994 could not be prepared, because the documents were not available from the banks. Whatever records Edward may have kept in his own home were not available either. I accept Dorothy McIntyre’s evidence that she did not destroy any records of her father’s. I reject Donald Foley’s evidence that she said she burned them. I reject, as well, any inference that Donald or Virginia Foley would have the court draw that Dorothy’s motives in taking the desk from her father’s home were nefarious and in service of destroying his banking records.
[191] The evidence is clear that until Edward was obliged by his declining health to live in a retirement home in July of 1996, he handled virtually all of his own banking. No one other than Edward acted in respect of the Investor’s Edge account. Mr. Strike’s letter in 1992 spoke of activating the power of attorney, but clearly this was prompted by Edward’s acute state after suffering from a stroke. He recovered from that event to return home, care for his wife and administer her estate after she died, all without Dorothy or anyone else’s involvement in his financial affairs. The accounts that have been prepared by BDO Dunwoody are, self evidently, when looked at carefully, thorough and detailed. The assets and income are reflected in exhaustive detail. The assets and income are in keeping with those Edward disclosed in his will instructions and his investment habits. I accept the evidence of Mr. Sexsmith that he had no difficulty in the preparation of the accounts and that they offer a reliable reconciliation of the financial affairs of Edward Foley during the period of actual and active discharge of Dorothy McIntyre’s duty as power of attorney. Most importantly, perhaps, I accept Mr. Sexsmith’s evidence that he was retained by the estate and acted independently of the litigants hereto. I find that he dispassionately discharged his duties as accountant, scrupulously prepared the accounts pursuant to court order and gave his evidence with complete independence of mind.
[192] I take from the evidence that Dorothy McIntyre ought not to be faulted for failing to intervene in her father’s affairs and to have insisted on collecting and keeping his records from 1992 to 1994, all in circumstances where her father’s mail went to a mailbox to which her father and brother had daily access and Edward continued to look after his own financial matters. To rule otherwise would force a legal construct upon each and every person granted power of attorney to thenceforth intrude upon the life of the grantor thereof and start keeping copies of their records. I accept that Dorothy McIntyre has properly passed her accounts as power of attorney in accordance with the BDO report.
[193] It follows, perhaps without necessarily having to say so, that I wholly reject the evidence of Carrie Thompson. Ms. Thompson as a certified general accountant does, undoubtedly, have accounting expertise. She has considerable experience in preparing estate income tax returns. She has had some practice in finding assets when the income of an aged person implies a source they appear to have forgotten. At the risk of being gratuitously critical, however, Carrie Thompson was neither independent nor, in my view, did she demonstrate that the methods she employed in making her analysis and from which she drew some damning conclusions, were grounded in generally accepted accounting principles or any other basis generally accepted in her profession. Certainly her evidence was not commensurate with that which might be deserving of acceptance in a court. A few deft extrapolations from her methods served up in cross-examination showed the absurdity of her assumptions, wherefore her conclusions. To her credit, Ms. Thompson admitted that she was asked to support the plaintiff’s theory that Dorothy McIntyre purloined her father’s assets and siphoned his income, and was not asked to conduct an examination of the accounts and draw her own independent conclusions. To have done what Ms. Thompson’s evidence implies she must have, Dorothy McIntyre would have to have insinuated herself invidiously into her father’s life and diverted from his scrutiny multiple hundreds of thousands, millions even, of dollars, which he necessarily had to have invested in places well outside of those usual to him for her conduct to have escaped detection.
[194] The claim of the plaintiff for an accounting is allowed. The counterclaim for passing of accounts is also allowed. The balance of the plaintiff’s claims are dismissed.
Limitations, Laches and Damages Assessment
[195] I conclude from the jurisprudence that the grantee of power of attorney bears duties that are subject to both legal and equitable governance, some of which apply concurrently, some of which perhaps do not, depending on the circumstances. Having found as I have that there was no breach by the defendant of any duty upon her, it is not necessary for the disposition of these proceedings that determinations of the defences of laches and/or limitations and I decline to do so. Having rejected the evidence of Carrie Thompson, there was little to no evidence before the court upon which to assess damages. Had it been necessary, I would, in any event, have granted relief under the Substitute Decisions Act to Dorothy McIntyre, thereby relieving her of any liability, in any event, on the basis of the finding of fact reflected above.
Costs submissions
[196] The plaintiff submits that if successful, he is entitled to costs payable by the defendant personally. The plaintiff submits that costs on a substantial indemnity basis are justified because a breach of fiduciary duty is reprehensible conduct.
[197] If the defendant is successful, costs should be payable to her from the estate on a partial indemnity basis. The plaintiff bases this argument on general estate litigation costs principles, and also the fact that the testator apparently precipitated the litigation by depositing Canada Savings Bonds in a joint account under both children’s names.
[198] The plaintiff attributes any delay in the proceeding to the complexity of the accounting issues, and submits that the defendant also contributed to the delay by failing to comply with deadlines. The plaintiff submits that if proven wrong, his suspicions were nonetheless grounded in genuine and reasonable concerns. The plaintiff seeks costs of $312,449.64 on a substantial indemnity basis.
[199] The defendant submits that if the plaintiff is successful, he should be denied costs. In her costs submissions, the defendant notes the plaintiff’s baseless allegations of misappropriation that were withdrawn during the reply to closing submissions of the plaintiff. The defendant further submits that the issue of the bonds following, and gifts prior to, Edward Foley’s death could have been resolved more expeditiously. Further, these issues were not raised until the amended statement of claim following a substantial delay caused by the plaintiff. The defendant submits that if she is successful, she is entitled to costs on a substantial indemnity basis. She seeks costs from the plaintiff, and not the estate, in order to impose the discipline of the general “loser pays” costs principles. The defendant further submits that the plaintiff was unreasonable throughout, seeking monies that he knew was untenable.
[200] With respect to the factors under Rule 57.01(1) of the Rules of Civil Procedure, the defendant submits that the amount recovered is substantial, the proceedings were complex, and the issues were important as the allegations impacted her integrity within the community. Further, the plaintiff was responsible for almost six years of significant delay, including delays setting up mediation, missing two trial dates, and changing lawyers. The defendant claims that the plaintiff also inappropriately brought a contempt motion. The defendant seeks costs of $202,906.33 on a substantial indemnity basis, and $180,543.03 on a partial indemnity basis, including taxes and disbursements.
[201] In his reply submissions, the defendant states that there were reasonable grounds on which to make the allegations of misappropriation. In reply to the allegation that the plaintiff waited until the reply closing submissions to argue that he was no longer seeking missing monies, the plaintiff argues that the difficulty quantifying missing assets was attributable to the defendant’s poor record keeping, which is a breach of her fiduciary duty.
[202] The plaintiff further argues that, contrary to what the defendant suggests, his pleadings were not the first time he raised issues of the defendant taking money. Rather, the plaintiff submits that his application to compel the defendant to pass accounts required her to account for monies that she took and was based on the grounds that she received money she was not entitled to. These allegations, the plaintiff argues, indeed formed part of the notice of application. The plaintiff further submits that the “loser pays” principles do not apply where there is fault attributable to the testator or those interested in the residue, or where there are reasonable grounds to question the capacity of the testator or the presence of undue influence. The plaintiff also argues that the defendant’s costs outline lacks particulars, and includes trial preparation for earlier trial dates even though the plaintiff was ordered to, and paid, the defendant $10,000 for costs thrown away. Further, according to the list of disbursements, the defendant seeks costs for steps that are properly paid out of the estate, including the application to pass accounts and the BDO fees totalling almost $20,000.
Disposition on Costs
[203] The defendant was entirely successful in this proceeding. The case was complex, in that it raised multiple issues of fact. As well, the parties disagreed as to the burden of proof that applied to the defendant, a legal issue, and one with respect to which the defendant’s submissions were accepted and the plaintiffs were not. The other legal principles were, though essential to appreciate, not vigorously contested but numerous. The defendant was accused of gross misconduct.
[204] Only one of the issues in this proceeding had its origin mostly in the conduct of the testator. This was the issue of whether the Canada Savings Bonds, the proceeds of which were distributed to Dorothy from her father’s estate, adeemed, or fell outside of the estate by operation of survivorship of the jointly held Investor’s Edge Account, or fell within the residue of the estate, all in circumstances where Donald distributed this benefit to his sister as co executor by and with independent legal advice from Mr. Hunter then sued for its recovery. This issue was not insignificant, given the amount in issue, but the evidence in respect of this one issue was relatively straightforward, was not significantly disputed nor, in and of itself, did it consume much trial time. The legal arguments concerning this issue consumed a rather larger proportion of time. I do not accept that Dorothy McIntyre is responsible for the time this case has taken to reach trial. The responsibility for this rests much more so upon the plaintiff.
[205] I accept that the costs reasonably attributable to the preparation of accounts should be paid by the estate. These consist of the disbursements for BDO related expenses listed by the defendant, which I allow at $19,367.81. As well, the costs of the defendant attributable to the issues relating to the Canada Savings Bond funds distributed by the estate ought to be paid from the estate. These I fix at $20,000.00, which I estimate to be a proportionate share of the total costs to which she is entitled that ought to be paid by the estate. I consider the same to be true for the plaintiff, such that he shall have costs paid from the estate of $20,000.00.
[206] The plaintiff shall have his costs of the application to pass accounts, which I fix at $14,555.13, payable from the estate, in accordance with the partial indemnity fees outlined in the bill of costs of the plaintiff for this step. He shall also have the disbursements for the filing and service of the application to pass accounts from the estate.
[207] The defendant shall have costs of this litigation fixed at $150,000.00, payable by the plaintiff.
Justice A.M. Mullins
Released: January 9, 2014