COURT FILE AND PARTIES
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: CALVIN GASTLE, Applicant
AND:
ROBERT GASTLE, in his capacity as Estate Trustee for the Estate of Arthur Robert Gastle, Respondent
BEFORE: The Honourable Justice D.A. Broad
COUNSEL:
Lisa S. Toner, for the Applicant
Mark S. Radulescu, for the Respondent
HEARD: December 1, 2014
ENDORSEMENT
Nature of the Application
1The applicant Calvin Gastle (“Calvin”) and the respondent Robert Gastle (“Robert”) are brothers. They are also the estate trustees and equal residuary beneficiaries of the estate of their father Arthur Robert Gastle (“Arthur”) under his will. Arthur died on October 17, 2009. Arthur had named Robert as his attorney for property pursuant to a General Power of Attorney (the “POA”) dated January 15, 2009, some nine months prior to his death.
2Calvin has brought an application for an order directing Robert to pass his accounts as attorney for Arthur under the POA, and to pass his accounts as estate trustee of Arthur’s estate (the “Estate”). In his Notice of Application, Calvin seeks leave to bring the application directing Robert to pass his accounts as attorney for property pursuant to section 42(4) 6 of the Substitute Decisions Act, 1992 S.O. 1992, c. 30 (the “SDA”).
3That portion of the application which deals with the proceeds of bank accounts held jointly by Arthur and Robert did not form part of the argument, as the parties are agreed that that issue will be dealt with at a future date, following cross examinations on the parties’ affidavits.
Background
4Calvin submits that, in the years leading up to his death, Arthur became increasingly incapacitated due to illness which led to the appointment of Robert as attorney under the POA. He asserts that, following his appointment as Arthur’s attorney, Robert assumed primary control of Arthur’s finances. He also states that, although Robert and he were named co-trustees pursuant to Arthur’s will, Robert assumed principal responsibility for the administration of the estate and excluded him from meaningful involvement in it.
5For his part, Robert states that he did not immediately assume control of Arthur’s finances following the execution of the POA, and that Arthur largely managed his own finances throughout the first half of 2009. He says that in the latter part of 2009 he began carrying out a number of financial transactions on Arthur’s behalf pursuant to his instructions.
6Following Arthur’s death, Calvin and Robert retained a lawyer, Rob Sutherland, as the estate solicitor, and a Certificate of Appointment of Estate Trustee with a Will was obtained on December 3, 2009 naming Calvin and Robert as estate trustees. Mr. Sutherland acted as estate solicitor until he rendered his final account on March 7, 2014. Robert states that the administration of the estate was carried out by both him and Calvin under the guidance of Mr. Sutherland.
7Calvin states that there are a number of transactions or series of transactions carried out by Robert involving Arthur’s accounts and property, both prior to and following Arthur’s death, which are questionable, and in respect of which Robert has failed or neglected to provide proper explanations. The total amount of the questionable transactions, on the affidavit of Calvin sworn April 10, 2014, is the sum of $145,285.21. In his affidavit sworn September 19, 2014 Robert places the transactions disputed by Calvin into four categories, as follows:
(a) $55,581.40 in withdrawals from Arthur’s bank accounts prior to death, largely comprised of one transfer of $50,000 to Robert;
(b) $1653.60 payments for auto insurance in respect of Arthur’s vehicle following his death and before the sale of the vehicle;
(c) $85,785.77 in the disputed joint accounts Robert held with Arthur at the time of his death; and
(d) $2264.44 deposited into accounts of Robert following Arthur’s death.
8Robert submits that he has provided detailed explanations for all of the questioned transactions by means of his responding affidavits and that he is agreeable to broaden the scope of his planned cross-examination on the joint account issue to include all of the transactions questioned by Calvin. As such, a formal passing of accounts is not required. Moreover, Robert submits that, prior to his death, Arthur was sui juris and accordingly, he never did become the decision-maker in respect of Arthur’s property and financial affairs. His only involvement was to carry out Arthur’s directions. It is noted that there was no medical evidence led by Calvin to indicate that Arthur was incapable of managing his affairs at any time prior to his death.
9Calvin argues that the information that has been produced by Robert has been piecemeal and is no substitute for a formal accounting of his dealings with the accounts and assets of Arthur, firstly as attorney under the POA and also as the controlling estate trustee. He points to the fact that Robert commenced an action in the Small Claims Court against the Estate (later discontinued) claiming compensation for acting as attorney under the POA as undermining Robert’s assertion that he did never assumed control of Arthur’s financial affairs.
Analysis
(a) Passing of Accounts under the Power of Attorney
10Subsection 42(1) of the SDA provides that the court may, on application, order that all or a specified part of the accounts of an attorney or guardian of property be passed. Subsection 42(4) sets forth a list of persons who may apply for a passing of accounts. The parties are agreed that Calvin, as a beneficiary of the Estate, falls under paragraph 6 as “any other person” and as such, must obtain leave of the court to apply.
11Subsection 32(6) of the SDA requires a guardian to keep accounts of all transactions involving the property in accordance with the regulations and, pursuant to subsection 38(1), section 32 is stated to apply, with necessary modifications, to an attorney acting under a continuing power of attorney if the grantor is incapable of managing property or the attorney has reasonable grounds to believe that the grantor is incapable of managing property.
12In the case of De Zorzi Estate v. Read [2008] O.J. No. 944 (S.C.J.) Herman, J. held, at para. 13, that an attorney could be compelled to pass her accounts for period during which the grantor had been competent and, where the attorney and the estate trustee were one and the same person, it was appropriate that the attorney be required to account to someone other than the estate trustee, on the basis that disclosure is an essential part of that obligation.
13In the case of McAllister v. Hudgin (2008) E.T.R. (3d) 313 (S.C.J.) Patillo, J., citing De Zorzi, held, at para. 12, that section 42 of the SDA is broad enough, in circumstances where the grantor is deceased and the attorney and the estate trustee are one and the same, to require an attorney to pass all or part of the accounts. Justice Patillo, at para. 13, observed that section 42 is discretionary and, in exercising such discretion in circumstances where the power of attorney has been utilized in the absence of a requirement under the SDA for the attorney to keep accounts, the court should consider two main questions: first, the extent of the attorney’s involvement in the grantor’s financial affairs and second, whether the applicant has raised a significant concern in respect of the management of the grantor’s affairs to warrant an accounting.
14Justice Patillo held that the attorney should be required to account in the circumstances of the McAllister case, however, he was of the view that formal accounts were not required and it was sufficient that the attorney produce copies of the financial records relating to her assistance with the grantor’s financial affairs. An important factor in this respect was a desire not to establish procedures which would formalize matters and increase costs (see paras. 16 and 18).
15In my view, it is not necessary in the present case to order a formal passing of accounts, at least at this stage, in order to provide an appropriate means for Robert to respond to Calvin’s concerns relating to the disputed transactions during the existence of the POA. Robert has provided detailed responses to each of the concerns raised by Calvin in his affidavit material and has agreed to submit himself to cross examination with respect to those matters. If Robert is not forthcoming with reasonably necessary information and clarification on his cross-examination, Calvin can apply for further directions, including a direction that Robert provide a formal accounting of all or any part of his dealing with Arthur’s property prior to his death under the POA. It is likely that Robert’s cross-examination will be sufficient to provide information which Calvin may reasonably and legitimately require, or at the very least will serve to scope down those portions of the accounts for which a formal accounting may be necessary.
(b) Passing of Accounts of the Estate
16Section 50 of the Estates Act, R.S.O. 1990, c. E.21 provides as follows:
An executor or an administrator shall not be required by any court to render an account of the property of the deceased, otherwise than by an inventory thereof, unless at the instance or on behalf of some person interested in such property or of a creditor of the deceased, nor is an executor or administrator otherwise compellable to account before any judge.
17Rule 74.15(1) (h) of the Rules of Civil Procedure provides that any person who appears to have a financial interest in the estate may move for an order requiring an estate trustee to pass accounts.
18In my view, the fact that Calvin is also an estate trustee does not disentitle him to apply to require Robert to pass accounts of the estate. His counsel cited a very old case Paul v. Nettleford, (1824) 2 Add. 237 (Prerogative Court) in support of the proposition that a co-executor who is also a residuary beneficiary of an estate may require his or her co-executor to pass accounts, notwithstanding that he or she is also an executor of the estate.
19It is stated in Widdifield on Executors and Trustees, 6th ed., at para. 14.2.2 that “an executor may be interested in the accounts without being interested in the property, where he or she is not a beneficiary, and there seems to be no reason why he or she could not compel a co-executor to proceed to an audit.”
20Although Calvin has the right to apply for an order requiring Robert to pass accounts, whether such an order should be made is a matter of discretion. In Widdifield it is stated, again at para. 14.2.2, that “the right to compel an accounting is not an absolute right regardless of the circumstances, but is within the sound discretion of the court.”
21In the case of Tinline v. Tinline Estate 2013 CarswellSask 291 (Sask. Q.B.) Barrington-Foote J. stated, at para. 22 “although it is my view that it is not always necessary to prove that there has been a default by the trustee before an accounting is ordered, an accounting should not be ordered if no cause is shown.”
22In my view, the same considerations apply to the question of whether Robert should be compelled, at this stage, to pass accounts of his dealings with the estate assets as apply to the question of his accounts under the POA. Robert has provided responses to the concerns raised by Calvin by means of his affidavits filed in response to this application and has advised that he is prepared to subject himself to cross-examination on those affidavits.
23Similar to the issues relating to the period prior to Arthur’s death under the POA, if Robert is not forthcoming on his cross-examination related to his dealings with the estate assets, Calvin may apply for further directions, including a direction that Robert provide a formal accounting of all or any part of his dealing with the assets of the estate. In my view, cross-examination will serve to scope down or resolve the issues, which may eliminate or reduce the need for provision of a formal accounting.
24It is not necessary for me to rule, at this juncture, on whether Calvin is barred from seeking an accounting by Robert as estate trustee by his execution of a Release and Indemnity dated March 17, 2011. As indicated, Robert has undertaken to submit to cross-examination with respect to his administration of the estate. It is only if Calvin is not satisfied with Robert’s responses on cross-examination and he thereafter moves for a formal accounting that the issue of the effect of the Release and Indemnity will need to be addressed.
Disposition
25It is therefore ordered as follows:
(a) Robert Gastle shall submit to cross-examination on his Affidavits filed in response to the Application, including with respect his dealings with the assets and property of Arthur Robert Gastle pursuant to the General Power of Attorney dated January 15, 2009 and with the assets of property of the Estate of Arthur Robert Gastle;
(b) The application of Calvin Gastle for an order requiring Robert Gastle to pass his accounts as attorney under the POA and as estate trustee of the Estate is dismissed, without prejudice to his right to bring the application for that relief back on for hearing following completion of the said cross-examination.
Costs
26If the parties cannot agree on costs, the respondent may make brief written submissions as to costs within 30 days of the release of this endorsement. The applicant has 14 days after receipt of the respondent’s submissions to respond. The submissions shall not exceed three double-spaced pages exclusive of Bills of Costs and any Offers to Settle. All such written submissions are to be forwarded to me at my chambers at 85 Frederick Street, 7th Floor, Kitchener, Ontario N2H 0A7. If no submissions are received within this timeframe, the parties will be deemed to have settled the issue of costs as between themselves.
D.A. Broad
Date: December 11, 2014