COURT FILE NO.: CV-12-400-00ES

DATE: 20140808

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Komal Virk

Plaintiff

AND:

Hakam Singh Brar, personally and as Estate Trustee for the Estate of Navneet Singh Brar, and Shamsher Kaur Brar

Defendants

BEFORE: Ricchetti, J.

COUNSEL: R. Klotz, for the Plaintiff

M. J. Sweatman, for the Defendants

HEARD: July 21, 2014

ENDORSEMENT

THE MOTION

[1] This is a motion by Komal Virk (“Komal”) to replace Hakam Singh Brar (“Hakam”) as the Estate Trustee of her late husband, Navneet Singh Brar (“Navneet”), who died on December 14, 2011. Komal’s motion seeks extensive relief but the only relief argued by counsel was the motion for the removal of Hakam as the Estate Trustee for Navneet.

[2] The Office of the Children’s Lawyer takes no position on this motion.

[3] Hakam is the father of Navneet.

[4] Shamsher Kaur Brar (“Shamsher”) is Hakam’s wife and mother of Navneet.

THE BACKGROUND

[5] Komal and Navneet were married on June 16, 1995.

[6] There are two children of the marriage -- Mannat, age 13, and Pavit, age 11 ("Children").

[7] Navneet was a dentist. Komal is a dental hygienist.

[8] On August 5, 2009, without telling Komal and, likely just prior to an impending matrimonial breakdown, Navneet, being the owner of the shares in Brar Dentistry Professional Corporation ("Brar") sold his 50% interest in Springdale Dental Centre ("Springdale Clinic") to Dr. Sandhu, Navneet's partner for $1,000,000.

[9] Komal and Navneet separated on September 8, 2009.

[10] Matrimonial litigation between Komal and Navneet ensued. Komal’s family law claims include claims for support and a claim for equalization and unequal division of family property and trust claims over various assets held solely in the name of Navneet, including the Springdale Clinic and another dental clinic.

[11] At the time of separation, the parties jointly owned the matrimonial home. The remaining family assets was held in Navneet’s name alone including:

a) Springdale Clinic: It should be noted that, while Navneet’s interest had been sold prior to separation, the sale had not yet closed at the date of separation;

b) Paras Dental Clinic: 100% owned by Navneet through Brar. (“Paras” or “Paras Dental”);

c) Unit #301 at 22550 Bovaird Drive, Brampton: Navneet owned 50% through 2206968 Ontario. Inc., with his partner, Dr. S. Sandhu (“the Medical Unit”);

d) Four units in the Mount Everest plaza at 25 Sunny Meadow Blvd., Brampton: Navneet owned 20% through 2074422 Ontario Inc., with his colleague, Dr. Bandahl (“Mount Everest”);

e) RRSP: approximately $170,000; and

f) 2162928 Ontario Inc.: owned the land/building where Springdale Clinic was situated (“Springdale Land”).

[12] After the separation, Komal remained in the matrimonial home with the children.

[13] On October 22, 2009 Justice Mackenzie made an order:

a) that Navneet and Komal "preserve all of their assets" subject to agreement or a further order of this Court;

b) Komal was granted leave to file certificates of pending litigation against title to Paras Dental, the Medical Unit, and Mount Everest; and

c) Navneet was ordered to pay into court $1,000,000 from the proceeds of sale of Springdale Clinic.

[14] On November 10, 2009 Navneet sold his shares in the Sprindale Land to Dr. Sandhu.

[15] Navneet only paid into court $650,000 of the $1,000,000 proceeds of sale of Springdale Clinic. An accounting of the $350,000 reduction was subsequently ordered by this court. However, there are issues with respect to whether the adjustments and deductions made by Navneet were proper or appropriate.

[16] Interim child and spousal support orders were made in September 2010 requiring Navneet to pay support to Komal.

[17] On October 20, 2010, Navneet prepared a new Will. Hakam was named Navneet's executor and estate trustee.

[18] On December 21, 2010, the parties were divorced.

[19] Despite the preservation order, Navneet made a number of gifts to Hakam and Shamsher of approximately $65,000. These monies were used in July 2011 to purchase a home (Keeleview Property). The balance of the purchase price was paid by way of a mortgage. Navneet was the registered owner of 1% interest of the Keeleview Property and the balance in his parent’s name. Komal submits this was a fraudulent conveyance given that only Navneet's monies were used to buy Keeleview Property. The gifts ignored the preservation order. Given Hakam’s receipt of these monies and his position as Estate Trustee, he has done nothing to deal with the “gifts” or the property bought with the “gifts”.

[20] In April-June 2011 Navneet decided to sell the Medical Unit. On November 16, 2011 the court approved the sale of Navneet’s interest in the Medical Unit for $471,000 with the proceeds of sale to be held in trust by Komal’s counsel. The court also approved the use of some of the proceeds from the sale of Springdale Clinic to pay the outstanding tax liability of Navneet’s corporation, Brar. It is suggested that by the time this motion was brought for approval of the sale of the Medical Unit, Navneet was seriously ill and Hakam was already acting under a power of attorney for Navneet. Komal was not aware until recently that this transaction did not close until June 15, 2012. On June 15, 2012 Hakam completed the sale of the Medical Unit. Hakam’s position as to why this was done without Komal's involvement is set out in para. 10 of the factum:

Dr. Brar’s 20% share interest in 2074422 Ontario Inc. was sold by Hakam in order to preserve the value of the interest. Hakam was not required to consult with Komal or disclose the sale to her as a creditor of the Estate. If Komal was an interested purchaser, as she claims she was, she made no formal offers to purchase the 20% interest. No CPL order was breached as the underlying real property was not sold.

This position deliberately and flagrantly ignores the fact there was an outstanding preservation order with respect to Navneet's assets and ignores the fact that Komal had made trust claims to this asset which claims have not been adjudicated. It also ignores that the Certificate of Pending Litigation was granted to specifically preserve this asset but the CPL only encumbered the underlying real estate. To make matters worse, after various questionable adjustments and deductions, the closing price for the Medical Unit was $0. I agree that the bona fides of certain adjustments and deductions permitted by Hakam are questionable. Komal has a reasonable basis to question Hakam’s actions and decisions with respect to the completion of the sale of this asset in a manner which appears designed to defeat Komal’s claims.

[21] On December 14, 2011, while the matrimonial litigation and Komal's claims remained outstanding, Navneet died. By the terms of his Will, Navneet gave all of his estate to his estate trustee upon certain trusts. Those trusts were to pay his debts and all taxes and to deliver the rest to the Children. As Navneet’s Estate Trustee, Hakam took control of Navneet’s assets.

[22] Inexplicably, for a period of time, Hakam refused to provide Komal with a copy of Navneet’s will or to advise that he was the executor under Navneet’s will.

[23] The disposition of Navneet’s personal property has not been accounted for to date by Hakam. Hakam's response, 2 1/2 years after Navneet's death, is: “Hakam has only a few of [Navneet’s] personal possessions. He has not been asked to give them to the children. Some items such as the pool table and ping pong table were disposed of when the house was sold as Hakam considered them to be property of him and his wife as they came with the house.” This explanation is unsatisfactory and still does not explain why Komal and the children would not have had an opportunity to receive any of Navneet’s personal property or why Hakam would not have enquired of them as to the disposition of Navneet's personal property. This is indicative of the manner which Hakam had dealt with the Estate’s assets to the exclusion of Komal and the many implausible and unsatisfactory explanations offered by Hakam of his actions.

[24] Shortly after Navneet's death, Hakam paid the mortgage on the Keeleview Property for approximately 4 months from Navneet’s bank account – Estate money. Hakam acknowledged in this motion to have been improperly expensed to the Estate by Hakam. What is surprising is that this money has not yet been returned by Hakam to the Estate. There was no explanation for this failure to do so in light of Hakam’s serious breach of his fiduciary obligations.

[25] Without prior court approval and contrary to the preservation order, on April 18, 2012, Hakam entered into an agreement to sell Paras Dental for $700,000 with a closing date of May 30, 2012. Komal had wanted to retain the Paras Dental given its alleged cash income and that she is a dental hygienist. She was not given an opportunity to do so by Hakam. Komal did not find out about the sale of Paras Dental until after Hakam had entered into an agreement for its sale and had sent a notice to Paras Dental's employees about the sale. On May 24, 2012, Hakam was formally appointed as the Estate Trustee and on the same date, and after the fact, the court also approved the sale of Paras Dental, permitting certain identified expenses to be deducted from the proceeds, and the balance to be held in trust. Hakam suggests that his actions were appropriate since, he alleges, Paras Dental was not profitable and he was required to sell the dental clinic as Komal was not a dentist (of which there are regulations requiring a dentist to be the owner of a dental clinic). Komal submits that her trust claim for a 50% interest in Paras Dental has now been defeated by Hakam by virtue of the sale; Hakam had no authority to sell Paras Dental as Navneet’s will had not yet been probated when the sale agreement had been entered into; and the sale of Paras Dental was contrary to the preservation order made by Justice Mackenzie in October 2009. There are questions regarding how Hakam sold this asset to Navneet’s partner and how he permitted various deductions and expenses to be applied against the sale price.

[26] Navneet had a life insurance policy in the amount of $1,500,000. Hakam was the beneficiary of 20% and the Children were the beneficiary of 80%. The Children’s proceeds of insurance are being administered by the Children’s Lawyer pursuant to a court order. Given the claims by Komal, Hakam agreed and the court ordered that his portion of the life insurance proceeds, $300,000, be held in trust by his counsel’s firm. Komal makes a claim against the insurance proceeds under s. 72 of the Succession Law Reform Act, R.S.O. 1990, c S.26 (SLRA). This is yet another claim which clearly puts Komal and Hakam in a direct financial conflict.

[27] Komal alleges that during the period February 1 to July 23, 2012, Hakam wrote cheques to himself and Shamsher totalling $29,000.38, with a further $16,000 to undisclosed recipients. Given the outstanding claims of Komal and the disclosure orders, I would have expected that full information and financial disclosure would have been available to Komal in these circumstances. However, that has not been the case. Disclosure continues to be an issue in this case despite a looming trial date.

[28] On July 13, 2012 Hakam completed the sale of Paras Dental. In addition to the issues regarding adjustments and deductions to the sale price, once again, all of the net proceeds have been disbursed by Hakam.

[29] On November 30, 3012, Hakam sold the Keeleview Property and bought a new home at Totten Drive (Totten Property). Komal obtained a CPL against the Totten Property and seeks to trace Navneet's monies to this property. Clearly, this also puts Komal and Hakam in a position of direct conflict with respect to this claim by Komal.

[30] On October 25, 2013, Hakam sold the Mount Everest property. The value of the property had been valued at $2,600,000 making Navneet’s 20% interest in this asset valued at approximately $520,000. Komal was not told that this sale had taken place until after it had been completed. There is no satisfactory explanation as to why Komal was not advised of this sale or court approval obtained. Komal’s family law and trust claims were ignored even though the trial was scheduled for January 2014, the preservation order was ignored and the CPL registered against the underlying property was ignored (except for a very small holdback of $10,000 as a result of the CPL). However, the issues involving Hakam do not end there. Again, there were questionable adjustments and deductions from the sale price leaving net proceeds of sale of $66,822. These proceeds were shortly after receipt fully disbursed by Hakam. As in many of the other asset sales by Hakam, there is now no asset and no proceeds of sale of the asset.

[31] On November 12, 2013, Hakam transferred title to the Totten Property to 1% for himself and 99% to Shamsher. The timing suggests this was done for asset protection given the claims Komal was advancing against Hakam and Hakam's impending bankruptcy application for Navneet's Estate.

[32] Komal alleges that Hakam did not give her information regarding the status of Navneet’s RRSP until June 2014. As a result, Komal did not know that Navneet's RRSP had been cashed out in March and May 2011 (i.e. before Navneet’s death but after the preservation order was made and without court approval). It is alleged that, from these proceeds, Hakam and Shamsher received “gifts” which were used for the purchase of Keeleview property and eventually into the Totten Property. This collapse of Navneet’s RRSP was done despite the preservation order and without court approval. Obviously, Hakam has no interest in the Estate pursuing any fraudulent conveyance claim with respect to the monies received by himself or his wife contrary to the preservation order.

[33] As a result of Hakam's actions, all of Navneet's Estate assets have been realized.

[34] By November 2013, all monies received by the Estate from the receipt of funds or realization of assets had been disbursed by Hakam. Komal has no assets or monies to recover should her trust claims or family law claims be successful.

[35] Some of the disbursements by Hakam in November 2013 (shortly before a bankruptcy application by Hakam) were done in a very suspicious manner. For example, six days before Hakam had sworn in his Affidavit of November 5, 2013 that the Estate was insolvent, the Estate paid out over $100,000 to certain selected creditors: Sweatman Law $72,412.30; Dhillon Law (the Estate’s matrimonial counsel) $17,550.03; and Mr. Saggu (the estate’s accountant) $10,000 on invoices going back years of alleged unpaid service.

[36] A trial management conference was held on November 15, 2013 for the scheduled trial of January 2014. However, there was no mention by Hakam or his counsel that he had instituted proceedings to place the Estate into bankruptcy. The trial remained scheduled for January 2014.

[37] In November 2013, Hakam proceeded to assign the Estate into bankruptcy. Hakam filed an affidavit of November 5, 2013. The bankruptcy application was brought ex parte! The court ordered Hakam to serve Komal. The bankruptcy motion was adjourned, causing the January 2014 trial in this matter to be adjourned. There are several responses by Hakam in the Statement of Affairs which appear to be wrong and require explanation. In March, 2014 the court refused to grant Hakam leave to proceed to place the Estate into bankruptcy.

[38] The answers to the questions and debts shown in the Statement raise questions. For example, the first Statement prepared by Hakam showed a debt to Navneet’s sister (Hakam’s daughter) of $59,000 USD but the latter Statement shows an additional debt of $15,458 USD. Both debts were accepted by Hakam. Another example is the failure of Hakam to make any reference to disposition of properties or the payments to creditors of over $100,000 just 6 days before he completed the bankruptcy Statement. Hakam’s response to questionable entries in the Statement was: “That there may be other ways to complete the statement of affairs is recognized but is not grounds for removal in this particular case.”

[39] Hakam has not provided any reasonable explanation why he would have tried to obtain the bankruptcy order on an ex parte basis in light of the circumstances known to him, and in particular, the outstanding claims of Komal that were to be adjudicated within two months of the bankruptcy application.

[40] Komal has sought dependents’ relief claims against Navneet's Estate and has made claims with respect to Navneet's insurance policy proceeds including the insurance proceeds paid to Hakam which monies are held in trust.

[41] Komal has also commenced a Fraudulent Conveyance action against Hakam and Shamsher with respect to the July 2011 Keeleview home bought with the monies provided from Navneet, with a subsequent tracing claim to the Totten home.

[42] There is no doubt that there is a strong animosity between Komal and Hakam. There are claims that Hakam has carried out Navneet’s desire to ensure that Komal not receive any of Navneet or Navneet's estate monies by selling assets and disposing of the proceeds. Hakam alleges that Komal has refused to permit Hakam and Shamsher from seeing their grandchildren.

[43] Komal alleges a deliberate failure by Hakam to make relevant disclosure. The claims and defences have changed a number of times. Questioning and examinations have not proceeded smoothly, nor have the answers to undertakings been dealt with despite court orders.

[44] There are also allegations that the purchaser of Navneet’s assets to his partners and the use of Navneet’s long-time accountant raise further questions as to the bona fides of the transactions and the amounts paid for the assets sold resulting, in many cases, nominal or no proceeds.

[45] There are also issues that Hakam has incurred legal fees to deal with his and Shamsher’s access to the children, which legal fees have been paid by the Estate. As well, there may be some legal fees incurred to deal with Komal’s dependant’s claim under s. 72 of the SLRA against Hakam which may have been paid from the Estate funds. This was not disputed. Hakam states: “Legal fees have been expended to defend and deal with the administration of the estate and Komal’s claims and allegations which required response. Hakam has acknowledge there have been minor instances where estate assets should not have been used and has agreed, if necessary, to replenish the estate.” He has not done so to date. When asked for the production of his counsel’s dockets to determine the quantum of the legal fees expensed to the Estate for personal matters, the response to the undertaking was that the documentation would be produced when available. The cross-examination was months ago and the documentation would be readily available from counsel. The failure to produce this documentation is troubling.

[46] Finally, Komal complains and questions why Hakam has incurred legal fees of over $250,000 to date, when the only potential beneficiaries are the Children and herself.

STATUS OF THE LITIGATION

[47] The trial is scheduled for November 2014. This will include:

a) The matrimonial litigation (CV12-40000ES) which includes the SLRA Part V dependent support claim by Komal;

b) The passing of the Estate accounts by Hakam (CV-14-2480-00); and

c) The fraudulent conveyance claim by Komal against Hakam and Shamsher;

THE ANALYSIS

[48] The principles guiding a court in deciding whether to remove a trustee are set out in the decisions of Radford v. Radford Estate [2008] O. J. No. 3528 at paras. 97-107and Bergman v. Amos Estate [2009] 54 E.T.R. (3d) 35 at para. 33, which provide that each case must be decided on its own merits, considering relevant factors including:

a) the court will not lightly interfere with the testator's choice of estate trustee;

b) there must be a “clear necessity” to interfere with the discretion of the testator;

c) removal of an estate trustee should only occur in the clearest of evidence that there is no other course to follow;

d) the court's main guide is the welfare of the beneficiaries;

e) it must be shown that the non-removal of the trustee will prevent the proper execution of the trust; and

f) the removal of an estate trustee is not intended to punish for past misconducts; rather it is only justified if past misconduct is likely to continue and the estate assets and interests of the beneficiaries must be protected.

[49] In Chambers Estate v. Chambers, 2013 ONCA 511 the Court of Appeal recently set out the high threshold required to remove an Estate Trustee:

[95] The applications judge was fully alive to the legal principle that the court should not lightly interfere with a testator’s choice of the person to act as his or her estate trustee: Re Weil, 1961 157 (ON CA), [1961] O.R. 888 (C.A.), at p. 889. Just as a court should remove an estate trustee only on the “clearest of evidence”, so too they should be reluctant to pass over a named executor unless “there is no other course to follow”: Windsor, at para. 41, citing Crawford v. Jardine (1997), 20 E.T.R. (2d) 182 (Ont. C.J. (Gen. Div.)), at para. 18. As Wright L.J. explained, “passing over of an executor and granting administration to other parties is an unusual and extreme course, though it is within the discretion of the Probate Court”: Re Leguia (No. 2) (1936), 155 L.T.R. 270 (C.A.), at p. 276.

[96] Thus, the wishes of the testator will generally be honoured, “even if the person chosen is of bad character”: Carmichael Estate (Re), (2000), 2000 22320 (ON SC), 46 O.R. (3d) 630 (S.C.), at para. 17. In fact, an executor named in a will should not be passed over simply because he or she is of bad character or bankrupt, or there is likely to be friction between co-executors: see Harris v. Gallimore (1925), 1925 451 (ON CA), 57 O.L.R. 673 (C.A.), at p. 678; Re Agnew, 1941 160 (SK CA), [1941] 4 D.L.R. 653 (Sask. C.A.), at p. 657; Re Wolfe (1957), 1957 294 (BC CA), 7 D.L.R. (2d) 215 (B.C.C.A.), at p. 221; and Crompton v. Williams, 1938 66 (ON SC), [1938] O.R. 543 (H.C.), at pp. 586-87. That being said, courts have passed over an executor because he was in a conflict of interest with the estate (e.g. Re Becker (1986), 1986 2596 (ON SC), 57 O.R. (2d) 495 (Surr. Ct.), at pp. 498-99; Thomasson Estate (Re), 2011 BCSC 481, [2011] B.C.W.L.D. 4763, at paras. 29-30) or because she had a conflict and was in poor health (e.g. Re Bowerman

[50] I reject the suggestion that Hakam’s conduct and animosity do not rise to the level where the Court should intervene to remove Hakam as Estate Trustee. The following paragraph from Hakam’s counsel’s factum sets out the attitude and approach of Hakam to his duty as the Estate Trustee:

Bankruptcy was not an abusive process. It was a legitimate option in the face of all Komal’s claims. Komal’s allegations center around her interests as a creditor of the estate and on the actions of her deceased ex-husband. Hakam is committed to finishing what his son asked him to do in the interest of the beneficiaries. A new Trustee at this time will not change anything.

[51] Let me state that there are sufficient facts in this case that removal of Hakam would be justified despite the high threshold that must be shown before an Estate Trustee of choice is removed and replaced by this court. On the facts set out above:

a) There is considerable animosity between Hakam and Komal. Komal has alleged fraud by Hakam;

b) Hakam has taken steps to deliberately prejudice Komal and her claims. For example, Hakam’s attempt to bankrupt the Estate without notice to Komal, which bankruptcy would have been extremely prejudicial to Komal and her claims;

c) Hakam has repeatedly ignored Komal’s claims and proceeded to do as he wished without letting Komal know his intended actions until it was too late. This includes the sale of some Estate assets without the knowledge of Komal despite her claims to be an owner of those assets;

d) Hakam has a clear conflict of interest with Komal as his own personal assets are at risk to Komal. Komal seeks to recover the $300,000, the value of the Totten home and other claims against Hakam and his wife;

e) Hakam has breached his duty to the Estate. For example, he paid his mortgage and some of his legal fees from Estate funds;

f) Hakam’s actions, as an Estate Trustee, have not been bona fide towards Komal, a potential owner of the assets which Hakam doggedly proceeded to liquidate, the proceeds of which have been distributed as Hakam saw fit. In some cases, this was done despite a preservation order which was ignored by Hakam. Counsel’s submission that this was not a breach by Hakam is not accepted. Some of Hakam’s actions could be characterized as a deliberate and flagrant breach of the preservation order which he knew about and, as Estate Trustee, was bound by such order; and

g) Hakam had attempted to bankrupt the Estate, submitting to the court that he wanted to end his involvement as trustee. However, when Komal brings this motion to have him removed and replaced, Hakam, at considerable expense to the Estate, vigorously defends this motion, filing an 85 page, 286 paragraph responding affidavit. It is unclear why Hakam so vigorously defends this motion.

[52] The question remains whether I should grant the motion revoking Hakam’s certificate of appointment as Estate Trustee for Navneet.

[53] Rule 75.04 of the Rules of Civil Procedure, R.S.O. 1990, c C.43 provides:

On the application of any person appearing to have a financial interest in an estate, the court may revoke the certificate of appointment of the estate trustee where the court is satisfied that,

(c) the certificate should be revoked for any other reason.

[54] Section 5 of the Trustee Act, R.S.O. 1990, c T.23 provides as follows:

5. (1) The Superior Court of Justice may make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

[55] Both provisions use the word “may”. Clearly, the use of the word “may” connotes discretion to revoke a certificate of appointment and appoint a new trustee.

[56] I decline to exercise my discretion to remove Hakam at this time. There are a number of factors which, in my view, justify exercising my discretion not to make the order sought:

a) All the assets of the Estate have now been sold;

b) There will be no further prejudice to Komal or the children if Hakam continues to be the Estate Trustee;

c) The Estate does not have any money to pay further expenses. There is no money to pay a third party estate trustee or new counsel;

d) A new estate trustee would require considerable time to review the documentation and be ready for trial in November 2014. In essence, appointment of a new trustee would result in the adjournment of the trial;

e) The real person at financial risk of Komal’s claims is Hakam. He is presently before the court in numerous capacities: Estate Trustee to justify his actions over the past several years, Passing of Accounts to deal with all the financial questions raised by Komal, a personal respondent in a fraudulent conveyance proceeding, a personal claim to the $300,000 insurance proceeds presently held in trust and finally as the Estate Trustee in the matrimonial litigation. Clearly, Hakam will have to continue to be involved in the upcoming trial. It will be easiest for the trial judge to deal with all these issues with Hakam personally present in his various capacities to respond to Komal’s allegations; and

f) Disclosure remains an issue. Hakam presently has the Estate Trustee documentation. Disclosure can more easily be accomplished while Hakam remains involved.

[57] I see no benefit to Komal or the Children to remove Hakam and I see no further prejudice if Hakam is allowed to remain as Estate Trustee. There is simply no good reason to remove and replace Hakam in these circumstances and this stage of the proceedings.

CONCLUSION

[58] The motion is dismissed.

[59] I am recommending that a judge be assigned to ensure that disclosure is completed and that all trial management issues are dealt with in advance of trial in November 2014.

COSTS

[60] I thank counsel for their Cost Outlines. However, given the above reasons and my disposition of the motion, it is best that costs be left to the trial judge’s discretion.

Ricchetti, J.

Date: August 8, 2014