Usher Estate v. Ferguson, 2015 ONSC 3632
OSHAWA COURT FILE NO.: 75125/11 and 80987/12
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE ESTATE OF JOAN BARBARA USHER, Deceased
BETWEEN:
Gail Maureen Usher, in her Personal Capacity and as Estate Trustee of the Estate of Joan Barbara Usher and Sandra Lynn DeGeer Applicants in the Accounting Application
– and –
Carol Ferguson, Nancy Joan Ryan, Hayley Ryan, Joshua Ryan and Krystal Ferguson Respondents in the Accounting Application
COUNSEL:
Romeo D’Ambrosio, for the Applicants
Carol Ferguson and Nancy Ryan appeared on their own behalf. Hayley Ryan, Joshua Ryan and Krystal Ferguson did not participate in the trial.
HEARD: November 20, 21, 24-28, 2014 and May 20-22, 2015
JUDGMENT
gilmore J.:
Overview and Factual Background
1The late Joan Barbara Usher (“Mrs. Usher” or “the deceased”) died on December 1, 2010. It was likely never her intention that the administration of her estate would forever alter the relationship between her four daughters. However, the evidence heard on this trial demonstrated that after several years of litigation and a ten day trial, the Usher sisters, who were once close and well bonded, are now irreparably fractured and distant.
2These proceedings involve a passing of accounts for the deceased, being court file no. 80987/12 (the “Accounting Application”). The Accounting Application arose out of another application bearing court file no. 75125-11. That application (the “Removal Application”) was brought to remove Gail Usher (“Gail”) as the executor of her late mother’s estate. There is also a motion brought by Gail for repayment to the estate from the beneficiaries a sufficient portion of their interim distributions to cover the outstanding income tax and accounting bills including interest and penalties. All of these proceedings were consolidated by an Order Giving Directions, dated February 1, 2013.
3The applicants in the Removal Application, Carol Ferguson (“Carol”) and Nancy Ryan (“Nancy”) (jointly the “Objectors” or the “Respondents”) are two of the four children of the deceased. The remaining applicants in the Removal Application; Hayley Ryan, Joshua Ryan and Krystal Ferguson are the grandchildren of the deceased. The respondents in the removal application, Gail and Sandra Degeer (“Sandra”) are the remaining two children of the deceased. Neither the grandchildren nor Sandra participated in the trial.
4By court order, dated November 15, 2011, Murray Stroud (a lawyer) was appointed as Estate Trustee during Litigation. His role was restricted to completing the sale of the deceased’s property and holding the net proceeds of sale pending further agreement or court order.
5Prior to her death, Mrs. Usher changed the beneficiary designation on her RRIF and excluded Nancy. After Mrs. Usher’s death, the sisters (other than Nancy) each received a one-third share of the RRIF in the amount of $48,725.79. Prior to death, the deceased had also changed her will to remove Nancy as a beneficiary and left Nancy’s share to her children, Hayley and Joshua Ryan.
6The Order of O’Connell J., dated December 9, 2011, was based on Minutes of Settlement in which the parties agreed to an equal distribution of the estate, notwithstanding the provisions of the will or the RRIF beneficiary designation. Further, Gail was to prepare an accounting for the period of August 23, 2003 to the date of death (the “Attorney Accounts”) and from the date of death to September 30, 2012 (the “Estate Accounting”). This accounting was to be prepared within 45 days of December 9, 2011. A $20,000 holdback was retained by Mr. Stroud to pay for taxes, the accounting and his fees.
7The Minutes of Settlement also required that Gail was to attend to the preparation and filing of the deceased’s tax and estate returns, as well as the returns for the deceased’s corporation, Usher Insulation Limited, within 45 days of December 9, 2011.
8The income tax returns and accounting were completed and provided to the respondents on February 2, 2012. On the same date, Gail advised her sisters that there were insufficient funds to pay the deceased’s outstanding tax liability which at that time was approximately $83,000. The deceased had not filed her 2008, 2009 and 2010 tax returns, nor the corporate returns for Usher Insulation for the same period. The tax liability, penalties and interest resulted from the non-filing of those returns as well as the income of $142,800.28 from the RRIF.
9Once the tax liability had been crystallized, Gail requested that she and her sisters share any remaining estate tax liability by dividing it into four parts and repaying the estate. Nancy and Carol refused. Their position was that their mother had loaned money to both Gail and her husband for their home and their vehicles. Nancy and Carol insisted that the loans be repaid to the estate, at which time the tax liability could be satisfied. Gail provided an affidavit from Rob Gilroy who had prepared the income tax returns for the estate and for Usher Insulation. He confirmed that all loans to Gail and her husband had been repaid to the estate with interest. He audited the bank statements of the deceased and of Usher Insulation to satisfy himself that this was the case. Nancy and Carol, however, were not satisfied and a rift arose, which resulted in Gail also demanding that Nancy and Carol prove that they had repaid money loaned to them by their mother years before.
10Nancy and Carol knew that Gail had received money for a new furnace from their mother in the amount of $16,125 and insisted it be treated as a loan and repaid to the estate. Gail’s evidence was that her mother insisted a new heat pump be installed in Gail’s home as her mother intended to move in with her so Gail could care for her during her illness. Carol provided contradictory evidence that her mother told her the money for the furnace was a loan and that Gail had made two payments on the loan.
11On March 1, 2012 Gail paid the remaining estate funds ($52,563.33) to the Canada Revenue Agency as a credit towards the outstanding taxes. Nancy and Carol disputed this payment and insisted that they had not received sufficient disclosure of the estate assets. Their view was that a payment towards taxes should not have been made until all assets were properly gathered in.
12Knowing her sisters’ position on the tax liability issue, Gail brought a motion for directions requesting an order that the beneficiaries repay the estate for the outstanding taxes. The motion was dismissed on the grounds that it was premature to require such a payment when Carol and Nancy were adamant that Gail had not provided proper disclosure and that she owed money to the estate. Costs of that motion were reserved to the judge hearing the Accounting Application.
13Between March and November 2012, the parties unsuccessfully attempted to resolve the outstanding issues between them. Gail requested that Carol and Nancy set out their objections by way of a formal Notice of Objections. When no formal notice was forthcoming, Gail commenced the Accounting Application on November 21, 2012.
14In February 2013, the parties consented to an order that the trial would proceed with the issues for trial to be the objections set out in the formal Notice of Objection. The Notice of Objection was issued on March 12, 2013. At the commencement of trial, the respondents filed a document brief in which they claimed objections which were not part of the formal Notice of Objection. On consent, evidence on all of the outstanding objections was heard at trial. In total, the respondent’s objections amounted to $319,283.66, which they claimed ought to be paid by Gail to the estate.
15At the February 2013 motion, Gail sought to have the $10,000 held by Mr. Stroud paid to Canada Revenue to reduce the estate’s tax liability. Carol and Nancy opposed this motion. The court agreed with Gail and the money was forwarded to Canada Revenue Agency. The costs of that motion were also reserved to the judge hearing the Accounting Application.
16There was no evidence that Gail had a Power or Attorney for Property for Mrs. Usher during her lifetime. There was general agreement during the course of the evidence that Mrs. Usher was competent to make her financial and personal decisions during her lifetime.
17After ten days of trial, the remaining outstanding issues were narrowed considerably, such that this court is required to rule only on the passing of accounts and a few remaining outstanding objections. As the central issue is the passing of accounts, Gail was the applicant at trial and the objectors were the respondents Nancy and Carol.
18It should be noted that there was palpable animosity between Gail and her respondent sisters. Nancy and Carol were bewildered as to why their mother would make Gail the beneficiary of two life insurance policies totalling $32,500 and an annuity totalling $4,446. They inferred that Gail had influenced their mother to change the beneficiaries of these policies/investments from all four sisters to Gail alone. There was, however, no evidence to support this nor was there any evidence that Mrs. Usher was other than completely competent at the time of designating the beneficiaries of those policies or any subsequent changes to those designations.
19Carol and Nancy complained that Gail should have resigned as estate trustee from the beginning as she was not competent to undertake the task. She moved money around between their mother’s accounts improperly, refused to provide timely disclosure or accounting, and hid the fact that she and her husband had outstanding loans to their mother when she died.
20Although the issue of the distribution of personal property was settled by way of minutes of settlement, Carol and Nancy were still dissatisfied with what they received. They were resentful and accusatory, claiming that Gail had retained the most valuable jewellery and clothing from their mother’s estate and then claimed that such items did not exist.
21All of these accusations and mistrust created a great deal of resentment about what, in the end, were a small number of legal issues.
The Objections
Overview
22The most efficient way of dealing with the outstanding issues in this matter is to rule on each remaining objection individually. At the start of trial, or shortly before trial, the respondents withdrew a number of their objections or advised the court that the objection had been satisfied. Therefore, the objections ruled on in this judgment are the only ones which remain outstanding.
Outstanding Objections - The Attorney Accounts
Notice of Objection: Paragraph 2a
23The fourth (4th) entry for $25,000, dated June 22, 2001, for “TD Canada Trust Acct # 0235-3102670 – Maritime Life annuity” in the Capital Receipts Section on Page 3 of the Accounting for Joan Usher for the period from August 23, 2003 to December 1, 2010 is in issue. The Objectors have not been provided with a statement of the pay down of the original investment, showing monthly payments of the annuity from commencement of Annuity to the end of this period.
24Exhibit 3 at trial was a policy statement of the deceased’s Maritime Life investment account for the period of August 21, 2003 to November 30, 2010. The policy statement showed a partial withdrawal on June 21, 2004 of $25,000, which was transferred electronically to Usher Insulation.
25Gail takes the position that the matter has properly been accounted for by way of supporting documentation and that her mother was competent at all times prior to the date of her death, and the objection has been satisfied.
26Nancy gave evidence1 that this objection had been satisfied; however, she noted that the money should not have gone into Usher Insulation, but into her mother’s personal account. Further, she objected to the amount of time that it took for disclosure of the policy summary to be provided to her. If the disclosure had been provided to her in a timely fashion the objection may not have been necessary.
Notice of Objection: Paragraph 2b
27The fourth (4th) entry for $44,612.36, dated August 3, 2007, for “Manulife Investment Contract #10408325 – rec’d funds loaned” in the Capital Disbursements Section on Page 4 of the Accounting for Joan Usher for the period from August 23, 2003 to December 1, 2010 is in issue. The Objectors have not been provided with a statement of account, maturity and particulars and transaction details associated with this payment.
28Gail gave evidence that this objection had been satisfied. The account statement for Usher Insulation for the period of July 31, 2007 to August 31, 2007 was provided. It showed a deposit to Usher Insulation, account number 0235-030306827, of $44,612.36 on August 7, 2007.
29In addition, a copy of the Manulife Investments statement addressed to Usher Insulation for the period of July 1, 2007 to December 31, 2007 was also provided. That statement showed a withdrawal during that period of $44,612.36. A handwritten notation beside that amount read as follows: “fund lent to numbered company on loan.” Gail’s evidence was that this amount, plus additional amounts in Usher Insulation’s account, being a total of $54,275 were transferred out on August 16, 2007, by way of a loan to her husband Steve Parker. There was further evidence on this loan later in the trial.
30Nancy agreed that this objection had been satisfied, but she once again expressed frustration at the amount of time it took to obtain the bank statements from Usher Insulation and the statements from her mother’s Maritime Life investment account. She also expressed frustration as to why her sister did not inform her that the funds from Maritime Life formed part of a loan to Gail’s husband, Steve Parker.
Ruling on Objections 2a and b
31These objections have been satisfied as per Nancy’s evidence at trial.
32Nancy maintained her complaint that had timely disclosure in relation to these objections been received, the objections may not have been necessary.
Notice of Objection: Paragraph 2f
33The sixty-third (63rd) entry for $4,000, dated November 20, 2003, for “Can. Trust Account # 0235-3102670” in the Revenue Receipts Section on Page 6 of the Accounting for Joan Usher for the period from August 23, 2003 to December 1, 2010 is in issue. The Objectors have not been provided with the bank tracing receipt, the type of payment and the payee name.
34Gail’s evidence was that this objection has been satisfied. A deposit account history for Joan Usher’s personal account, being Canada Trust account # 0235-3102670 has been provided for the relevant period. It shows a deposit into her mother’s account of $4,000. Gail was not able to advise where the money had come from or why the deposit was made. She referred once again to the fact that her mother was competent and handled her own affairs at the relevant time and that she did not have a power of attorney for property for her mother.
35Alternatively, Gail argues that these funds form a deposit to her mother’s account and thereby increased the size of the estate. Finally, the standard which should be applied to her with respect to the accounting during the period when her mother was alive is not a high one. Her mother was handling her own banking affairs at the time and Gail has done the best she could to reconstruct those accounts.
36Nancy maintains her objection that the $4,000 deposit should be traced and that Gail should have provided a cheque tracing the deposit. Nancy felt that the accounts in their current form were unpassable, were mixed up and that it was unrealistic that her mother should make a $4,000 deposit to her personal account when she was unemployed as of November 20, 2003.
Notice of Objection: Paragraph 2g
37The seventy-fifth (75th) entry for $5,000, dated January 23, 2004, for “TD Can. Trust Acct# 0235-3102670 – transfer from Usher Insulation Ltd. Acct # 0235-0306827” in the Revenue Receipts Section on Page 6 of the Accounting for Joan Usher for the period from August 23, 2003 to December 1, 2010 is in issue. The Objectors have not been provided with the invoice transfer and cheque posting.
38For similar reasons as given above with respect to Objection 2f, Gail maintains that the objection has been satisfied. She has produced a statement of account for her mother’s TD personal account, being 0235-0306827, for the period of December 31, 2003 to January 30, 2004. The account shows a transfer into her mother’s account of $5,000 on January 23, 2004.
39The basis for Nancy’s objection is the same as in Objection 2f. There is no information as to where this money came from and documentation should have been provided to verify it. Further, the disclosure was provided at a late date and, had it been provided earlier, many of the objections in the notice of objection would not have been required.
Ruling on Objections 2f and 2g
40These objections are similar, in that they both relate to deposits into the late Joan Usher’s account. The objection by Nancy centers on a lack of tracing as to where the money came from given that her mother was unemployed at the time.
41Given that the late Joan Usher was competent at the time these transfers were made, the standard of accounting that would apply to Gail in the circumstances is lower than in a situation where she may have had a power of attorney for property and her mother was incapable of managing her affairs. Given that Joan Usher was competent at the time these transfers were made I do not find that tracing is necessary. The accounts have been explained and documented, and I find that that these objections have been satisfied.
Notice of Objection: Paragraph 2h
42The one hundred and fifty second (152nd) entry for $7,176.49, which is undated, for “TD Canada Trust Acct# 0235-3102670 – deposit” in the Revenue Receipts Section on Page 12 of the Accounting for Joan Usher for the period from August 23, 2003 to December 1, 2010 is in issue. The Objectors have not been provided with the March 2007 bank statement.
43There was considerable confusion with respect to this objection. This is because a copy of the March 2007 bank statement for account number 0235-3102670 was given as part of the disclosure and supporting documentation provided by Gail. This statement does not reference any amount of $7,176.49 by way of transfer in or deposit to the deceased’s personal account.
44Nancy ultimately agreed that there was an error in this objection, such that she was no longer pursing it.
Ruling on Objection 2h
45This objection was made in error and does not make sense based on the documents referred to. The objection is therefore struck from the Notice of Objections.
Notice of Objection: Paragraph 2i
46The one hundred and seventieth (170th) entry for $15,000, dated July 21, 2005, for “TD Canada Trust Acct# 0235-3102670 – transfer” in the Revenue Receipts Section on Page 13 of the Accounting for Joan Usher for the period from August 23, 2003 to December 1, 2010 is in issue. The Objectors have not been provided with the identity of the issuer of this money transfer.
47Gail’s evidence was that this objection has been satisfied. A copy of the relevant account statement has been provided for the relevant period showing a transfer of $15,000 from Usher Insulation on July 21, 2005. A copy of the statement for account number 0235-3102670, being Joan Usher’s personal account, for the statement period of June 30, 2005 to July 29, 2005, was also provided. It showed the incoming transfer to her account from July 21, 2005 of $15,000.
48Nancy agreed that this objection had been satisfied, but again complained about the timeliness of this disclosure. Her position at trial was always that had this type of disclosure been provided by her sister, Gail, upfront and in a timely manner, many of these objections would not have been necessary.
Ruling on Objection 2i
49This objection has been satisfied as per Nancy’s evidence at trial.
Notice of Objection: Paragraph 2x
50Although the Estate Trustee has claimed there is a large tax liability owing, the 2010 Notice of Assessment and the Estate’s Notice of Assessment by Canada Revenue Agency (“CRA”) have not been provided.
51Nancy advised at trial that she has received these documents.
Ruling on Objection 2x
52This objection has been satisfied based on Nancy’s evidence at trial.
Miscellaneous Objections
Notice of Objection: Paragraph 2y.i
53Following the death of Joan Barbara Usher, Gail received a RRIF payment due to the Estate totalling $11,600.06. The RRIF payment has not been repaid to date and Gail is required to pay this amount to the Estate.
54The history of this payment is somewhat convoluted and a great deal of time was spent at trial in relation to this particular objection. Gail’s evidence was that she had paid it back to the estate. The court was directed to page 5 of the estate accounts and Gail gave evidence that she deposited money into the deceased’s account on three separate occasions in order to avoid the bank account going in to a negative balance. On one occasion, she deposited the sum of $2,000; however, she owed her mother $1,600 for windows, and therefore credited herself only $400 from the RRIF amount owed. On another occasion, she deposited $2,000 into her mother’s account and on a final occasion, she deposited $4,000 into her mother’s account for a total of $6,400 repaid to the estate.
55All of these monies were transferred from the joint account, being 6291420, which Gail testified was the account in which she deposited the money her mother paid her for providing personal support work. All of the objections in relation to payments for personal support work services have been withdrawn by the objectors.
56At the time the estate accounts were prepared, Gail’s evidence was she was owed $2,141.56 for estate related expenses. Therefore, when she deducted the $6,400 she had deposited into her mother’s account, and the $2,141.56 she was owed for estate expenses, the amount remaining owing to the estate was $3,138.50, which she repaid. Proof of repayment was provided showing a transfer to her mother’s account on April 2, 2012. Gail’s evidence was that she continued to incur expenses in relation to the administration of the estate, and that the current total of her expenses is $2,353.26, which she seeks to have repaid to her by the beneficiaries.
57Nancy’s position on this objection was that the RRIF amount was improperly deposited into the joint account. It should have been paid to her mother’s account and she alleged on numerous occasions in her evidence that Gail improperly managed her mother’s accounts after her death. Nancy’s position was that all of the money deposited into the joint account belongs to her mother and that it would be impossible for Gail to be owed any amount for estate administration at the time of the deposit of the RRIF payment, as Gail had only been administering the estate for a matter of weeks. It was improper for Gail to take these monies for her own use when they should have immediately formed part of the estate assets.
Ruling on Objection 2y.i
58I agree with the respondents that the manner in which Gail handled the deposit of the RRIF and the repayment of monies owed to the estate as a result, was not done in a proper form. If it had been done properly and explained promptly, this objection might never have arisen. I agree with Nancy that an estate account should have been opened immediately following Joan Usher’s death and the RIFF payment deposited directly into that account.
59I accept Gail’s explanation as to how the monies were repaid to the estate and her accounting for same. It cannot be ignored, however, that it took some time for her to make the entire repayment. In the interim, these monies were not available to the estate and should have been.
60The real issue appears to be Gail’s claim that she was owed $2,141.56 at the time the estate accounts were prepared and that she included this credit when reconciling the repayment for the RIFF payment of $11,600.06. It should be noted that the minutes of settlement specifically provided for Gail to be reimbursed for her proper disbursements and expenses incurred in administering the estate. Gail provided a list of her personal estate administration expenses totalling $4,414.76. After the amount credited to the repayment of the RIFF, she claims she is owed a further $2,353.26.
61These expenses include food and alcohol for her mother’s wake, flowers for the funeral, staples and photocopying, carpet cleaning, stamps, boxes, travel expenses, cat food and long distance calling. She has provided receipts for these expenses, kept a handwritten account of the driving that she did in relation to various tasks relating to her mother’s estate, including but not limited to maintaining her mother’s home, feeding her mother’s pets, driving to various appointments and making a significant number of long distance calls.
62Nancy and Carol objected to these expenses. Their view was that they also participated in the estate administration by helping to ready their mother’s home for sale by cleaning and painting it. However, they did not claim any expense from the estate for those services.
63While I recognize that expenses related to the deceased’s wake and some amount of time dealing with her pets and the sale of the home is compensable, it is unrealistic that for an estate of this size the travel expense would be $1,376.80 and the cost of long distance $500. In today’s society, surely a cell phone with a long distance plan is the norm rather than the exception. In all the circumstances, I find that the objection in paragraph 2y.i is satisfied, but that Gail is not entitled to be paid a further $2,353.26 from the estate and her expenses in relation to the estate administration are fully satisfied by way of the credit she applied to the repayment of the RRIF to the estate.
Notice of Objection: Paragraph 2y.ii
64There is a debt owed to the estate of $110,488 for a big rig truck which Gail’s husband, Steve Parker, bought for his company.
65There was no dispute that funds had been loaned to Steve Parker for his business. On June 16, 2004, Usher Insulation loaned Steve Parker’s company, 1136227 Ontario Inc., the sum of $12,266.50. On November 21, 2005, $100,000 was added to the loan amount.
66As of December 29, 2005, 1136227 Ontario Inc. began paying $3,623.61 per month to Usher Insulation. The terms of the repayment were interest at 10% for the first year and 9% thereafter. Payments were initially $3,623.61 per month. On August 16, 2007, the loan was again increased by $54,275. On November 30, 2007, payments were reduced to $3,539.73. On March 9, 2009, the loan was increased by $8,037.25, and on May 12, 2009, the loan was increased by $4,000.
67Payments continued to be made and on February 2012, Mr. Gilroy, the accountant for Usher Insulation, audited the loan for estate purposes. He determined that the sum of $7,397.49 was due and payable by 1136227 Ontario Inc. to retire the debt. That amount was paid by Mr. Parker, and Mr. Gilroy swore an affidavit indicating that this loan had been repaid in full.
68Mr. Gilroy gave evidence at trial with respect to the Steve Parker loan. He told the court that he advised Joan Usher during her lifetime with respect to loaning money to her family. He told her it was important that she charge a fair interest rate and that the money be paid back on a monthly basis. He would then account for the monthly payments on Excel spreadsheets for Usher Insulation. Interest and principal were also broken down. Mr. Gilroy testified that the loan to Mr. Parker’s company was paid in full after Joan Usher died.
69Mr. Gilroy further testified that, although he is not a chartered accountant, he works in accounting for the firm of Norton McMullen, who were the accountants for Joan Usher from approximately 1989 until a couple of years before her death. The last personal income tax return he prepared for Joan Usher was in 2007. Mr. Gilroy’s evidence was that his client told him that her daughter, Gail, would be taking over the preparation and filing of her personal returns in order to save money.
70Initially, Nancy’s position was that when adding up the payments made by Steve Parker to Usher Insulation for his loans, there were still two payments outstanding which were required to be repaid to the estate. Nancy provided an adding machine tape to verify her accounting of the alleged error. However, further investigation into the statements provided by Steve Parker showed that inadvertently, two of the account entries showing payments of the loan had been redacted or covered up. Once the proper accounting was provided to Nancy, she advised that the objection had been satisfied.
Notice of Objection: Paragraph 2y.iii
71Particulars of the loan of $12,266.50 for a pick-up truck purchased by Steve Parker, is questioned by the objectors.
72Nancy advised that this objection had been satisfied as a result of the explanation in relation to objection 2y.ii, in that she was satisfied that the $12,266.50 advanced to 113227 Ontario Inc. on June 16, 2004, formed part of the final loan which was paid out by Mr. Parker on February 14, 2012.
Notice of Objection: Paragraph 2y.iv
73Particulars of the loan of $42,383 to Gail, which was used to purchase a Ford SUV.
74Mr. Gilroy gave evidence that funds for a vehicle purchase were loaned from Usher Insulation to Gail. He then verified that Gail made all the loan payments to Usher Insulation and that the loan had been paid off in full. Mr. Gilroy’s evidence was that at the time of death, he calculated what was owed to the estate for the car loan and that the final two payments were made to the estate in 2012, thereby paying off the loan in full. He confirmed all of this with Nancy and Carol at a meeting he had with them at their request in 2012.
75Nancy and Carol did not dispute Mr. Gilroy’s evidence with respect to repayment of the car loan. Their concern related to a corporation, namely General Maintenance Limited, formerly owned by their father and subsequently transferred to Gail after his death. Gail’s evidence was that she was the sole owner of General Maintenance and that it was used by her as an investment company when she began selling insurance.
76Nancy alleged that General Maintenance was actually still owned by her mother and that the payments for Gail’s car loan were paid from General Maintenance to Usher Insulation. Nancy described these as “cross-payments”, that is, payments from one of her mother’s companies to another and not from Gail at all. Gail denied this and insisted that General Maintenance had been transferred to her in its entirety and her mother had no controlling interest in it.
Ruling on Objections 2y.ii, 2y.iii and 2y.iv
77These objections have been satisfied as per the evidence of Nancy at trial. With respect to objection 2y.iv, I accept Gail’s evidence, and that of Mr. Gilroy, that she is the sole owner of General Maintenance and that payments made on the car loan to her mother, whether they came from General Maintenance or her personal account were from her own resources and were not “cross-payments” as alleged by Nancy.
Notice of Objection: Paragraph 2y.v
78Particulars of a loan in the amount of $16,125 for a new furnace in Gail’s home are sought by the Objectors. Gail has made two payments in respect of this loan, but the Objectors have not been provided with the date and quantum of these payments.
79It was Gail’s evidence that prior to her mother’s death, she and her mother had discussed her moving into Gail’s home so that Gail could care for her. Gail had already been providing caregiving services to her mother. Mrs. Usher insisted on providing Gail with the money for a new heat pump. Gail’s home had, to that point, been heated solely by a pellet stove. Gail testified that her mother was concerned this would be insufficient, as she always kept her own home heated to a fairly high level. Gail’s evidence was that there was no loan agreement nor were there payments made because the heat pump was required for her mother’s comfort.
80Gail testified that other family members were well aware that Gail had been encouraged to accept the money from her mother so that she could accommodate her mother as her health continued to fail. None of the family members were called as witnesses to corroborate this evidence or any of Gail’s evidence with respect to the heat pump.
81Carol gave evidence that in August or September 2010, she went to her mother’s home for dinner. Her mother told her that she had lent money to Gail for a new furnace. She did not mention anything about selling her house or moving into Gail’s home. She simply said that Gail’s home was always cold, especially in the basement and Gail needed a new furnace. When Carol expressed surprise that her mother had done this, her mother responded that she was not to worry because Gail had already made two payments her.
82Carol was cross-examined on this point and was shown her mother’s joint account and personal account. Carol agreed in cross-examination that there was no evidence of any loan payments going into her mother’s account during the relevant period. Carol maintained that her mother loved cash and could have received the payments in cash.
83Nancy’s submission was that she had been led to believe it was a furnace and that, at some point, she had had a document with a notation in the Usher Insulation account ledgers that this was noted as a shareholder loan. Unfortunately, Nancy was unable to produce that document. Nancy pointed out that her mother had never done anything to indicate she intended to sell or move from her home or even put it on the market. Nancy did not dispute that having a new furnace may have been a necessity for her sister, Gail, but, as in all previous cases, her mother would have loaned her the money with a repayment schedule and interest, as she had done on every other occasion when she advanced money to her children.
84Nancy’s position is, therefore, that the full amount of the heat pump/furnace should be repaid to the estate.
Ruling on Objection 2y.v
85This is a difficult objection because of the lack of corroboration for the evidence given at trial. Gail claims that her mother was going to move into her home and wanted Gail to have a proper heating system because her declining health required that she live in a properly heated environment. The deceased therefore wrote a cheque to Gail for $16,125 for a heat pump. Gail’s evidence was that family members encouraged her to accept the money and she was grateful for it. Gail had been caring for her mother for some time prior to death. Gail received weekly payments from her mother for her caregiving services and for helping with household and outdoor tasks. Originally there was objection about those payments in the Notice of Objection. However, that objection was withdrawn prior to trial.
86No family members were called to corroborate Gail’s evidence about the heat pump.
87Carol’s evidence was that her mother told her in the fall of 2010 that she had loaned money to Gail for a furnace. Carol was reassured by her mother not to worry about this as Gail had already made two loan payments to her. Carol, in cross-examination, was shown the deceased’s joint account and personal account for the period of August 2010 to the date of death. She conceded that those accounts did not appear to contain any entries related to deposits for loan payments.
88Carol’s evidence was that her mother never told her that she planned to sell her house or that she planned to live with her sister, Gail. Further, Carol contended that her mother loved to keep cash and that it would not be unreasonable to assume that Gail paid her mother payments for the furnace in cash. There were no witnesses to Carol’s conversation with her mother about the loan or the loan payments. There was also no corroboration of any evidence with respect to whether Mrs. Usher intended to sell her home and move in with Gail.
89Historically, the deceased never gave her children gifts of money. Rather, she loaned each of her daughters’ money to buy a home, all which were secured by a mortgage, repaid and subsequently discharged. She also loaned money to Gail and her husband, Steve Parker, for vehicles. That money was also repaid and carefully tracked in the ledgers. She loaned money to Nancy for her travel business. That money was also repaid.
90Section 13 of the Evidence Act, R.S.O. 1990, c. E.23 sets out as follows;
In an action by or against the heirs, next of kin, executors, administrators or assigns of a deceased person, an opposite or interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter, occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.
91As there is no corroboration of the evidence given by Gail, Nancy or Carol with respect to the furnace advance, their evidence on this point cannot be considered.
92According to the Supreme Court of Canada in Pecore v. Pecore, 2007 SCC 17, when a gratuitous transfer is being challenged, a trial judge must begin by determining the proper presumption to apply, whether a presumption of advancement or a presumption of resulting trust, and then weigh all the evidence to determine whether the presumption has been rebutted (para 55).
93A presumption of advancement is the presumption that a gratuitous transfer was meant to be a gift. Historically, a presumption of advancement has been found for gifts between a husband and wife, and for gifts between parents and a child. However, in Pecore, supra, at paras. 34-36, the Supreme Court determined that a presumption of advancement does not apply between parents and their adult independent children. Therefore, given that Gail was an adult when she received this money, the presumption of advancement cannot apply.
94Since the presumption of advancement does not apply, the presumption of resulting trust will apply. According to the Supreme Court of Canada in Pecore, supra, at para. 24 where a transfer is made for no consideration, the onus is placed on the transferee to demonstrate that a gift was intended, since equity presumes bargains and not gifts. A presumption of resulting trust therefore arises for gratuitous transfers where the presumption of advancement does not arise (para. 27).
95In the current case, Gail’s sisters are alleging that the funds advanced to Gail were a loan and not a gift and that therefore the funds should be repaid to the estate. The onus is on Gail to rebut the presumption that the advance is presumed to be a loan in equity and according to the case law.
96The principal case applied to decide whether a transfer of money is a gift or a loan is the British Columbia Supreme Court case of Locke v. Locke, 2000 BCSC 1300. In that case Wilson J. summarized the case law on this issue and identified seven factors that are commonly applied to determine whether monies advanced are loans:
(a) whether there were any contemporaneous documents evidencing a loan;
(b) whether the manner for repayment is specified;
(c) whether there is security held for the loan;
(d) whether there are advances to one child and not others, or advances of unequal amounts to various children;
(e) whether there has been any demand for payment before the separation of the parties;
(f) whether there has been any partial repayment; and
(g) whether there was any expectation, or likelihood, of repayment.
97In Lundy v. Lundy, 2010 BCSC 1004, two joint-executors (a brother and sister) were unable to agree on whether $50,000 provided to their foster sister, before their mother’s death, was a gift or a loan. The Court referred to the Locke factors at paras 27 and 33, and found that there was nothing on the facts to indicate that the $50,000 advance was consistent with any of the factors that typically characterize a loan.
98In applying the Locke factors to this case, I find that there is little if any evidence to indicate that the funds advanced for the furnace were a loan and not a gift:
(a) there was no contemporaneous document evidencing a loan;
(b) there was no manner of repayment specified. Evidence indicates it was the practice of the sisters to pay back loans monthly with interest, but there is no evidence going to payments for this specific advance;
(c) there was no security held for the loan; evidence indicates it was the practice of Mrs. Usher to secure a loan by a mortgage or promissory note;
(d) this was an advance to the one child, Gail, and not the other children. However, there is evidence that historically she had lent Gail money for a car and had lent money to Gail’s husband for his business. She also lent them money by way of a mortgage for their home. Of all the sisters, the most money was lent (and paid back) by Gail. If Mrs. Usher intended this to be a loan, based on the historical evidence she would have required some security, likely in the form of a promissory note.
(e) there is no corroborated evidence of partial repayment. Carol testified that her mother told her that Gail had already made two payments, but this is uncorroborated and therefore cannot be considered as per s. 13 of the Evidence Act; and,
(f) there is no evidence of an expectation, or likelihood, of repayment. Again there is only the uncorroborated evidence of Carol of a conversation with her mother that indicates she expected to be repaid.
99Due to the lack of any reliable factors indicating that this amount advanced was a loan, I find that it was meant as a gift. The funds are not required to be repaid to the estate by Gail and the objection is satisfied.
Notice of Objection: Paragraph 2y.vi
100Particulars of the 2011 window payment from the deceased’s account for Gail in the amount of $1,632.30.
101Gail’s evidence was that she had purchased windows and needed a deposit. Unfortunately, she did not have any cheques of her own, so used one of her mother’s. She later transferred $2,000 into her mother’s account to repay her. This issue was addressed earlier in objection 2y.i with respect to the repayment of the RRIF monies which were deposited into the joint account held by Gail and her mother. Gail told the court that she in fact overpaid what she owed for the windows and therefore credited herself the $400 difference when calculating what she had to repay the estate for the RRIF payment she withdrew.
102Nancy’s position on this objection is that the $2,000 was not deposited into her mother’s account for the purpose of repayment in relation to the windows. The full amount of the window deposit should be refunded to the estate.
Ruling on Objection 2y.vi
103As I have already ruled that the objection in paragraph 2y.i has been satisfied, the objection in 2y.vi relates to the accounting of the repayment for the RIFF and reconciled the deposit for the windows into Joan Usher’s personal account. This objection has therefore been satisfied.
Notice of Objection: Paragraph 2z
104Gail, the estate trustee, took $52,000 on April 2, 2012 to pay the CRA from the estate, in spite of Justice O’Connell’s Order, dated March 23, 2012, that doing so was premature.
105Carol and Nancy complained that these funds should not have been paid to CRA until all of the assets of the estate had been gathered in and until full disclosure had been provided. Gail did not have the authority to make such a payment pursuant to the minutes of settlement.
Ruling on Objection 2z
106In February 2012, Gail was informed by Mr. Gilroy that the tax liability of the estate, Usher Insulation and Joan Usher personally, was far more than originally anticipated. Pursuant to the terms of the minutes of settlement Gail was to arrange for the preparation of all of the outstanding tax returns and pay any taxes owing.
107I find that Gail did not act outside of her authority pursuant to the minutes of settlement. Indeed, if this payment had not been made the taxes, penalties and interest owing would be significantly more than the current outstanding balance.
108This objection is therefore satisfied.
Notice of Objection: Paragraph 2.aa
109Gail has mixed estate monies and her own personal money, making it difficult to determine what the assets of the estate are.
110Nancy submits that Gail should have opened an estate account immediately. She should never have moved money between her and her mother’s joint account and her mother’s personal account. An assumption must be made that at least some of the money in the joint account belongs to her mother. Putting the RRIF payment into the joint account incurred tax liability and her handling of these accounts was inappropriate.
111Gail’s position is that she repaid the estate for the RRIF payment and deposited her own personal funds into her mother’s account in order to keep the estate liquid. She has provided proper explanations and accounted for everything.
Ruling on Objection 2.aa
112This objection relates in some part to Gail paying herself from her mother’s account for estate administration related expenses. I have dealt with this in the context of objection in paragraph 2y.i and this objection is therefore satisfied.
Notice of Objection: Paragraph 2.bb
113Neither Gail, nor her counsel, have answered any of the objections raised by James Allen in his letter, dated March 15, 2012. James Allen is an accountant retained by the Objectors.
114Gail’s position is that she fully responded to Mr. Allen’s letter and that, in his own evidence, Mr. Allen testified that the respondents never gave him further information or asked him to update his letter. In any event, the further disclosure provided by Gail has answered this objections.
115Nancy’s position is that the issues raised in Mr. Allen’s letter were never addressed. If they had been addressed, it is unlikely that a formal passing of accounts would have been required. The applicant, by acting as she did, has incurred unnecessary costs to the estate, for which she should be responsible.
Ruling on Objection 2.bb
116This is a matter better dealt with in terms of costs with respect to the timing of disclosure and the parties are encouraged to review the timing and provision of disclosure in their submissions on costs.
Notice of Objection: Paragraph 2.cc
117The Objectors have not been provided with copies of all of the cheques or credit card statements.
118In responding to this objection, Gail’s counsel set out a chronology of events with respect to disclosure. In the minutes of settlement, signed in November 2011, which arose out of the removal application, it was agreed that Gail was to provide an accounting. On February 2, 2012, Gail’s counsel sent a letter to the objectors’ then counsel, Susan Woodley, providing that accounting as well as the related vouchers. At the same time, Gail’s counsel requested that each beneficiary return $15,000 from the monies they had received by way of interim distribution because the tax liability had been crystalized at $83,000, plus $17,000 in interest and penalties and $10,000 in taxes associated with Usher Insulation.
119Mr. D’Ambrosio then requested that the respondents provide a formal list of objections to the accounts which had been provided to them pursuant to the minutes of settlement. A further request for the objections was made in April 2012. On May 8, 2012, Ms. Woodley wrote to Mr. D’Ambrosio and provided an offer to settle and advised that if the offer to settle was not accepted, the respondents would provide a full and detailed notice of objection. The offer to settle was not accepted and Mr. D’Ambrosio advised on May 17, 2012 that a full and detailed notice of objection should therefore be provided.
120A further letter was sent by Mr. D’Ambrosio on August 3, 2012 advising that he had still not received a formal notice of objection. As no response was received, an application to pass accounts was issued by the applicants on November 5, 2012. An initial notice of objection was then provided by the respondents and, in an email dated January 8, 2013, Mr. D’Ambrosio attempted to deal with many of the issues raised in that notice of objection. A formal notice of objection was issued on March 12, 2013.
121In his final submissions, counsel for Gail noted that on many occasions that authorizations had been signed by Gail allowing the respondents to obtain documents from various financial institutions. Initially the respondents refused to accept this and insisted that Gail obtain all of the documents they were seeking. They then complained that the authorizations were not accepted by the financial institutions as sufficient authority. Authorizations were given in March and September 2013 and in May 2014 the respondents brought a motion to adjourn the trial that was set for the May 2014 sittings based on an allegation that they still required disclosure. Gail consented to the adjournment and signed a further authorization prepared by the respondents’ counsel.
122Gail’s position, therefore, is that there has been no delay in providing disclosure and, where requested, authorizations were given in order to allow the respondents to obtain disclosure.
123Nancy’s position is that the disclosure was never received in a timely way, and if it had been, many of her objections would not have been necessary. The authorizations provided by Gail were often insufficient and not recognized by the financial institution. Gail failed to make attempts to obtain the requested information herself, and should have done so, given the respondents’ dissatisfaction with the authorizations.
Ruling on Objection 2.cc
124The cheques and credit card statements were provided prior to trial. Issues related to the timing of the receipt of disclosure may dealt with by way of costs.
Additional Issues Not Raised in the Notice of Objection to Accounts, but Contained in the Respondent’s Document Brief
125While these objections did not form part of the formal Notice of Objection to Accounts, Gail’s counsel consented to them being dealt with at trial.
Manulife Investment
126On the date of her death, Joan Usher owned a Manulife investment which designated Gail as the beneficiary. She received the sum of $4,446.74. Nancy’s objection stated that these funds must be returned to the estate.
127Gail’s position is that the documentation provided clearly shows that she is the beneficiary of this investment, which falls outside of the estate.
128Nancy is no longer making an objection to this payment, only to the amount of time that it took to obtain the disclosure with respect this investment.
129Gail’s response is that a copy of the documentation from Manulife was provided to Nancy on December 15, 2012, confirming that Gail was the beneficiary.
London Life Insurance Policy
130The respondents allege that the applicant improperly received a London Life insurance policy which designated Gail as the beneficiary in the amount of $37,000. This amount should be returned to the estate.
131Gail submits that not only is she the beneficiary of this policy, but the minutes of settlement specifically set out that she is to receive the life insurance proceeds from this specific policy.
132Nancy was concerned that proper documentation had not been received with respect to the history of this life insurance policy. While she does not dispute that Gail was the beneficiary at the date of death, she maintains that she and her three sisters were originally equal beneficiaries and that inadequate information was provided with respect to when and why the beneficiary designation was changed to Gail alone.
Ruling on Manulife Investment and London Life Insurance
133There was no evidence that the beneficiary designations for these investments were interfered with in any way. The evidence is consistent that Joan Usher was competent and capable to make financial decisions up to the date of her death. This objection is satisfied.
$120,000 Mortgage from the Deceased to Gail
134The respondents allege that a mortgage given by their mother to the applicant in 1998 in the amount of $120,000 and registered on title to the applicant’s home remains outstanding, and the full amount, without deduction, is payable to the estate.
135Documents were introduced at trial, which showed that in fact the mortgage had been discharged as of June 12, 2002.
136Gail submits that not only is this transaction outside of the period of the accounting, it is beyond the statute of limitations.
Ruling on $120,000 Mortgage
137This issue has been dealt with and Nancy agreed during her evidence that the $120,000 mortgage has been repaid and discharged. The objection is satisfied.
Passing of Accounts
138The jurisdiction of the estate trustee under a will to pass accounts arises from section 23(1) of the Trustee Act, RSO 1990. The estate trustee is given a choice as to whether to move for a passing of accounts.
139Nancy objected to the preparation of accounts and the passing of accounts procedure, saying that only an informal accounting procedure was agreed to and that a formal passing of accounts was not necessary in this case.
140Gail submits that not only was the passing of accounts required as per Justice O’Connell’s order, but that by November 2012, it was clear that the parties could not agree on the tax liability and who should pay for it. A passing of accounts was clearly required.
141Gail submits that the standard of accounting required of her is lower that what it might otherwise be, as this is a somewhat exceptional accounting. The Attorney Accounts (the accounts prepared for the period prior to the date of death) were not prepared in the context of Gail having a power of attorney. Further, there was no allegation that the deceased was incapable of managing her financial affairs during the Attorney Accounting period.
142Gail submits that the objections have been adequately dealt with and that the accounts should be passed. Further, the beneficiaries should be required to share Mr. Gilroy’s account and the outstanding tax liability, interest and penalties in a one-third to two-third proportion, whereby Gail and her sister, Sandra, would pay one-third and her sisters, Nancy and Carol, would pay two-thirds. There should be no requirement that Gail return any monies to the estate as all monies have been properly accounted for in the formal accounting required by the minutes of settlement. Gail is owed the balance of her out of pocket expenses for the administration of the estate being $2353.26.
Ruling on Passing of Accounts
143It is clear from the caselaw that where a person is required to account who does not have a power of attorney, and where the subject person was fully competent, the imposition of a high standard of accounting may cast an impossible burden on the attorney by putting him or her in the position of having to account for decisions over which he or she had no influence, and for transactions that he or she did not implement in whole or in part2.
144Further, in the Mikichak Estate3, an objection was made with respect to money that the deceased had loaned to all three of her sons during her lifetime. In that case, as in this one, the deceased was competent until the date of her death. On an application to pass accounts, the court held that all funds and loans had been fully accounted for and that there was no impropriety in the manner in which the funds of the estate were held, having regard to the right of the deceased to manage her funds as she saw fit during her lifetime and the accounting after her death4.
145In the case at bar, given my findings with respect to the objections and the standard of accounting imposed on Gail, I find that all documents have been disclosed, objections satisfied and that the accounts should be passed as being in a satisfactory form.
Motion for Repayment of Interim Distribution by Beneficiaries for Taxes and Mr. Gilroy’s Account
146Statements of accounts from CRA were provided at trial. An income tax account statement for the estate of Joan B. Usher, dated March 5, 2014, indicated that the outstanding taxes, interest and penalties for the estate as of March 18, 2014 were $5,065.50.
147The outstanding personal taxes, interest and penalties for Joan B. Usher, as of March 3, 2014, were $33,563.95. This amount was net of the $52,563.33 installment applied and paid by Gail on September 17, 2012 and net of the February 23, 2013 payment of $10,248.22 (from Mr. Stroud’s office). Clearly, interest and penalties continue to accrue on these outstanding amounts.
148Gail was to prepare and file Usher Insulation’s outstanding tax returns and her mother’s tax returns within forty-five days of December 9, 2011. In accordance with her obligations under the minutes of settlement, Gail hired Mr. Gilroy to prepare her mother’s personal and corporate income tax returns. Once the tax liability was determined, Gail took the remaining estate funds and paid the taxes in accordance with the minutes of settlement.
149Mr. Gilroy prepared all the required tax returns. Nancy’s position is that Gail should be personally responsible for Mr. Gilroy’s bill, which was invoiced at $7,000 and has increased to over $10,000 with interest. Nancy’s submission was that there was an agreement to pay up to $5,000 for an estate accounting, but at no time was she or her sisters advised that there were so many years of outstanding personal taxes for her mother. Nancy felt that a more reasonable price could have been sought and that all of the $20,000 holdback from Mr. Stroud should have gone to CRA.
150Gail’s position is that Mr. Gilroy’s bill is reasonably divisible between her and her sisters, but that Carol and Nancy should pay two-thirds of the accumulated interest on the account. She was not aware that her mother’s tax liability was so high. Indeed no one was. Even Nancy conceded that her lawyer told her that she expected the tax liability to be between $5,000 and $6,000 and a subsequent lawyer told her that the taxes were nil. Everyone was misinformed as to the tax liability of the estate. Gail’s evidence was that she was not able to do such returns herself and that it was reasonable for her in carrying out the terms of the minutes of settlement to hire Mr. Gilroy to complete the returns in a professional manner.
151Nancy alleges that when her sister, Gail, initially hired Mr. Gilroy in December 2010, she did not provide him with the documents she should have. That is, if she had provided him with all the documents relating to her mother’s outstanding income tax returns, the tax liability of the estate would have been known much earlier. Further, Gail should have done the corporate returns and personal returns for her mother for 2008 and 2009 as she undertook to do.
152Nancy submitted that everyone, including her counsel, was under the impression that the $20,000 holdback would be sufficient to pay for the accounting, Mr. Stroud, and any taxes owed to CRA. Had the RRIF payment taken by Gail and the loans she and her husband owed had been paid back into the estate, there would have been sufficient money to pay all of the outstanding accounts.
153With respect to the outstanding tax liabilities, penalties and interest, Gail takes the position that she and her sister, Sandra, should pay one-third of this amount and that Nancy and Carol should pay two-thirds. Her position is that much of this ten-day trial was as a result of Carol and Nancy’s refusal to be reasonable about the documentation provided in relation to the objections and the loans made to her and her husband by her mother, which were fully repaid.
154Gail submits that she has provided a proper accounting of the estate and fulfilled all of her obligations pursuant to the minutes of settlement. Nancy and Carol’s refusal to allow the balance of funds in Mr. Stroud’s account to be paid to CRA and their further objection to the $52,000 remaining in the estate being paid to CRA, are evidence of their complete lack of cooperation and their role in increasing the costs for all concerned.
155The respondents’ position is that all of the estate tax liability, including penalties and interest, as well as Mr. Gilroy’s bill, should be paid by Gail. If Gail had acted promptly and provided Mr. Gilroy with information he needed, the tax liability would have been known sooner. In the event that the court does not agree with the respondents’ position and the beneficiaries are required to repay any part of their interim distribution to the estate, Mr. Gilroy’s account, inclusive of interest, and the tax liability, penalties and interest should be divided equally.
Ruling on Repayment of Tax Liability and Mr. Gilroy’s Account
156The evidence at trial was that all parties were surprised by the amount of taxes owing by the deceased on the date of her death. This was the result of a number of things, including the fact that the deceased had not filed her tax returns for two years prior to the date of her death and that the tax owing on the RRIF was included in the 2010 income of Joan Usher. In fact, the liability for the estate tax was contemplated by the parties as being in the range of $5,000 or $6,000.
157Nancy blames her sister, Gail, for not providing income tax documentation to Mr. Gilroy soon enough, such that he could have discovered the excessive tax liability and passed that information on before any distributions took place. Nancy also submitted that by not depositing the December 2010 RRIF payment in an estate account, Gail incurred additional taxes for which she should be responsible. No breakdown was provided as to how much additional tax this would have represented, if any.
158Mr. Gilroy testified that he was contacted by Gail in order to prepare the deceased’s tax returns. He recalls that he prepared a T1 personal tax return to the date of death and a T3 trust return after the date of death. He testified that he filed the 2008 return, which showed $3,000 in tax owing; the 2009 return, which showed $1,200 in tax owing; and the 2010 return, which showed $72,000 in tax owing. In his opinion, the reason for the high tax in 2010, was the RRIF payment of $165,000 which triggered the top tax rate. There was also a claw-back for old age security because Joan Usher’s income exceeded $70,000. Further, Mrs. Usher had taken more money out of Usher Insulation than she was entitled to, and this withdrawal was put onto the T3 trust return in order to save tax.
159Mr. Gilroy testified that the last personal tax return he had prepared for the deceased was in 2007. He testified that Gail told him she would be taking over the preparation of her mother’s tax returns, at that point, in order to minimize costs. This included preparing the taxes for Usher Insulation.
160Mr. Gilroy also testified that his account for the preparation for all of the returns and the time he spent on meeting with family members was outstanding. This account was $10,268 as of November 30, 2014 and continues to accumulate interest.
161Mr. Gilroy’s evidence was that he was not contacted by Gail about preparing the personal and corporate returns until mid-20105. This was either a mistake on the part of Mr. Gilroy or a mis-transcription of the evidence. Clearly, Gail would not have contacted Mr. Gilroy six months prior to her mother’s death about the estate returns. As well, she would not have contacted him in mid-2012, as the income tax returns were prepared and filed by then. I infer that Mr. Gilroy meant that he was contacted by Gail in mid-2011. He does not say when he actually received the tax documentation, but I infer it was some time after that. Gail did not testify as to exactly when she gave the income tax documentation to Mr. Gilroy.
162Once the documentation was received, it was clear that no personal or corporate returns had been done for Mrs. Usher for 2008, 2009 or 2010.
163This court must determine the issue of what obligation, if any, beneficiaries may have with respect to returning an interim distribution where subsequent information is received that there are insufficient funds to pay an outstanding tax liability.
164In Raeburn Estate, 2009 Carswell Ont 6431 (SCJ), the court dealt with the issue of costs payable to the corporate trustee, Royal Trust, and two other estate trustees. Costs were awarded in the amount of $43,547.51, but there were insufficient funds left in the estate to pay costs after the interim distributions. In that case, the court ordered that the main beneficiary should be responsible for reimbursing the estate for costs, most of which were incurred as a result of the main beneficiary’s objections, which were resolved.
165In Cronan Estate v. Hughes, 2000 CarswellOnt 4587 (SCJ), the estate trustee redeemed a RIFF for $186,428.70 and mistakenly thought that the bank had held back appropriate income tax. The estate trustee held back $30,000 for income tax liabilities and expenses and made an interim distribution of $75,000 to each defendant. The amount owing for income tax at the time of trial was $95,411.06, with interest and penalties continuing to run.
166The court held that the interim distribution was made on a mistake of fact and that the estate trustee was not aware that there was income tax liability which had not been taken care of by deduction from the proceeds of the RIFF and that the estate trustee was therefore an innocent party in making the interim distribution payments. The court held that the monies ought to be repaid by the beneficiaries equally, unless they were able to show a “counter-veiling equity” to make it unjust to order the return of the monies.
167In this case, I find that repayment of the income tax liability penalties and interest should be borne equally by all four sisters, namely, Gail, Nancy Ryan, Carol Ferguson and Sandra DeGeer. Further, I find that Gail shall be responsible for half of Mr. Gilroy’s account, and that payment the balance of the account is to be divided equally between all four siblings. I make these findings based on the following:
(a) I accept Mr. Gilroy’s evidence that Gail told him she would be taking care of her mother’s personal and corporate income tax returns in order to save money. Gail did not follow through with that undertaking. She failed to complete her mother’s income tax returns after 2007 and failed to provide the tax information to Mr. Gilroy for the estate in a timely manner. Had Gail delivered the tax documentation to Mr. Gilroy immediately after her mother’s death, rather than waiting for months, it is likely that the tax liability issue would have surfaced before the minutes of settlement were signed and before any interim distribution was made.
(b) I do not find Mr. Gilroy’s accounts to be unreasonable, nor should Gail’s decision to hire him to do the tax work be criticized. Indeed, giving the work to someone who was not already familiar with Usher Insulation and Mrs. Usher’s personal circumstances could have resulted in increased accounting fees. Finally, Gail was given the authority to deal with the tax returns in the minutes of settlement. It is not reasonable to expect that Gail could have done all of this accounting on her own, given that it included corporate returns and an estate return.
(c) Although the objection was found to be satisfied, Gail’s retention of her mother’s RRIF payment and her convoluted method of paying it back, created concern for her sisters and some potential tax consequences for the estate. Although this liability was never crystallized, I find that Gail’s handling of her mother’s funds and estate funds just before and after Joan Usher’s death were problematic. Although this court has found that the estate did not suffer a loss as a result of these transactions, they were unusual and should have been disclosed to the beneficiaries immediately.
(d) There seemed to be an impression by the parties that RRIF payments were already net of tax and that such tax had somehow been deducted at source or there was no tax payable at all. There was a misunderstanding or miscommunication about that tax liability by Gail and all of the sisters.
(e) All parties were under the mistaken impression that the tax liability would be between $5,000 and $6,000. This was their view at the time of signing the minutes of settlement in November 2011.
(f) All of the parties are equally to blame for this unfortunate outcome. Had satisfactory disclosure been provided earlier, it is likely the number of objections could have been reduced. In turn, Carol and Nancy should have withdrawn the majority of their objections prior to trial many of which were either already satisfied or were not really objections to the accounting but objections to the manner in which they received the backup documentation to the accounting.
168While the personal property issues have been resolved by way of minutes of settlement, there remains a question in my mind as to whether such distribution was really fair. Nancy did not get the sable coat that she expected. Somehow, Joan Usher’s most valuable rings disappeared and only the less valuable and costume jewellery was available for division. The majority of crystal figurines that were to go to Carol Ferguson’s daughter were missing by the time she came to pick them up. There were many other things that went missing or were unavailable when Gail was in charge of this distribution. While nothing can be done about these items now, given the status of the minutes of settlement, Gail’s protests about being the wronged party in this litigation were received by this court with some degree of suspicion.
169Nancy and Carol’s complaints about Gail’s actions also rang hollow at times. Their continued objections to paying down the income tax debt even in February 2013 were unreasonable in my view. Their resistance to such payments increased both interest and penalties.
170Therefore, given all of the above, the orders following trial can be summarized as follows:
(a) The draft judgment on passing of accounts provided by Mr. D’Ambrosio shall issue as the objections of the respondents have now been satisfied.
(b) In addition, Gail, Carol, Nancy and Sandra shall each repay 25% of the outstanding tax liability inclusive of interest and penalties. The total tax liability shall be obtained from CRA and paid immediately by all four sisters once known.
(c) Gail shall pay 50% of Mr. Gilroy’s account owing (inclusive of interest) as of the date of judgment. The balance of Mr. Gilroy’s account (inclusive of interest) shall be shared by all four sisters and paid immediately.
(d) Gail is not entitled to receive any further reimbursement for her costs related to the administration of the estate nor any compensation as estate trustee.
171If the parties cannot agree on costs, I will receive written submissions on a seven day turnaround, commencing with the moving party, followed by responding submissions, then reply submissions, if any, commencing June 22, 2015. Cost submissions shall be no more than two pages in length, exclusive of any costs outline or offers to settle. All costs submissions shall be delivered via email through my assistant at jennifer.beattie@ontario.ca. If no submissions are received by July 10, 2015, the issue of costs will be deemed to have been settled as between the parties.
Madam Justice C.A. Gilmore
Released: June 5, 2015