NEWMARKET COURT FILE NO.: CV-14-28389
DATE: 20150714
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE ESTATE OF NGOC GIAU (“RICHARD”) NGUYEN, deceased
BETWEEN:
TRAN THI NGOC NGUYEN and THI THANH NGUYET (“KELLY”) NGUYEN
Applicants
– and –
THU MINH PHAM
Respondent
Warren S. Rapoport, for the Applicants
Richard J. Worsfold, for the Respondent
Rick Bickhram, for Trang Nguyen, Beneficiary
HEARD: June 26, 2015
DOUGLAS J.
[1] The Respondent Thu Minh Pham (“the Respondent”) moves for an order removing the Applicant Tran Thi Ngoc Nguyen (“the Applicant”) as Estate Trustee in relation to the within Estate.
[2] The Applicant similarly moves for an order removing the Respondent as Estate Trustee. Both seek directions regarding disposition of the Estate’s shares in Nice One Nails Ltd., (“NONL”) the major Estate asset. Each wishes to purchase the shares but they cannot agree upon terms.
[3] The Respondent was the wife of the deceased and the Applicant is his daughter by a prior relationship. By my order dated December 18, 2014 both were appointed as Estate Trustees, despite obvious difficulties between the parties at that time.
[4] The Respondent argues inter alia:
(a) The Applicant is hampering the operation of NONL, thus endangering its continued operations.
(b) The Applicant is in a conflict of interest as her family has a competing nail salon business, and because the Estate has potential claims against the Applicant’s mother.
(c) The Respondent has the largest beneficial interest in the Estate.
(d) The Respondent was involved in the practice of Nice One Nails for two years prior to death of the deceased.
[5] The Applicant argues inter alia:
(a) The Respondent has acted with mala fides in her diversion of Estate assets of $89,000 to her own use ($80,000 paid by two Nice One Nails franchisees in partial payment for purchase of Nice One Nails franchises during the last two weeks of the deceased’s life when he was clearly seriously ill, and $9,000 in cash collected after her appointment as Estate Trustee and contrary to protocol agreed to by the parties.
(b) The Respondent conducts herself secretly, preferring her own interests to those of other beneficiaries.
(c) The deceased’s children, en masse, represent the largest beneficial interest in the Estate.
[6] Regarding disposition of the shares in NONL and directions regarding moving forward in this proceeding, the parties are not opposing an order including the following terms:
The Estate shall cause either the assets of Nice One Nails Ltd. or the shares of the Estate in Nice One Nails Ltd. to be sold and the Estate shall employ a business broker (mutually agreeable to the Estate Trustees) for the purposes of receiving advice regarding the appropriate method of sale, including issues, listing price and any other issues related to the sale.
The Estate Trustee shall cause the accountant to complete the Income Tax Returns for Richard Nguyen, Nice One Nails Ltd. and 1858150 Ontario Limited for 2014 within ten (10) days and shall pay any income taxes owing from the Estate. The Estate Trustee shall further pay any other just debts of Richard Nguyen from the Estate.
There shall be a trial of the following issues:
a. Does the Estate have a claim as against Linh Nguyen arising from the ownership of Linh Nguyen of 111 Windrose Court, Woodbridge, Ontario or with respect to any other matter arising from a Separation Agreement dated January 7, 2013 made as between Richard Nguyen and Linh Nguyen?
b. Does the Estate and 1858150 Ontario Limited have claims as against LD Global Transport Service Inc. with respect to monies advanced to LD Global Transport Service Inc. in 2014?
c. Does the Estate have a claim as against Thu Minh Pham and her companies 2383805 Ontario Inc. and Nice One Nails Spa Inc. with respect to any assets in the possession of Thu Minh Pham and her said companies belonging to Richard Nguyen and his companies including but not limited to a claim to any jewellery or watches owned by Richard Nguyen?; and
d. Any other matters raised by way of Statement of Claim herein or Counterclaim.
In the trial of the issues, Thu Minh Pham shall be the Plaintiff and the Applicant, Tran Thi Ngoc Nguyen, shall be the Defendant.
Thu Minh Pham shall issue a Statement of Claim within thirty days from the date of this Order and shall be at liberty to add Linh Nguyen as a Defendant to the Statement of Claim, and that the Defendants shall deliver a Statement of Defence and Counterclaim raising any additional issues which they seek to have adjudicated within thirty (30) days of service of the Statement of Claim, and that they are at liberty to pursue claims against 2383805 Ontario Inc., Nice One Nails Spa Inc. and LD Global Transport Service by way of Third Party Claims or as Defendants by Counterclaim, as the case may be.
Within thirty (30) days of delivery of any Statement of Defence and Counterclaim, the Plaintiff may deliver a Reply.
Following the close of pleadings within thirty days, the parties shall exchange Affidavits of Documents, with copies of all documents to be sent to each party.
Cross-examinations that have taken place herein shall serve as discovery but that all parties shall have the right to further discovery to take place within sixty (60) days following the exchange of Affidavits of Documents, or such further or other time as counsel may agree.
Following discovery, the matter shall be set down for trial and a pre-trial conference shall be held.
Further directions regarding trial shall be made at the pre-trial conference.
Costs of this motion are reserved to the Judge hearing the final adjudication of this matter.
All parties are granted leave to move for such further directions as may be advisable and necessary in the event of any dispute.
[7] This order is also consistent with the position taken by Trang Nguyen (one of the Estate beneficiaries) through counsel upon argument of these motions.
[8] Therefore, order to go in the terms set out in para 6 above.
[9] Regarding removal of either the Applicant or Respondent as Estate Trustee, or both, a review of the applicable law is instructive.
[10] A trustee should be removed in circumstances in which that trustee prevents the estate from being properly executed [see Mailing v. Conrad (2003) 48 E.T.R. (2d) 238 (Ont. S.C.)].
[11] In determining whether to remove a trustee, clear evidence of necessity is required. The main consideration is the welfare of the beneficiaries. The trustee’s acts or omissions must be of such a nature as to endanger administration of the estate [see Johnson v. Lanka 2010 ONSC 4124].
[12] In Miles v. Vince, 2014 BCCA 289, 2014 B.C.C.A 289 the court reiterated the focus upon the welfare of the beneficiaries. Friction or hostility between trustees and beneficiaries is not of itself reason for removal unless the hostility is grounded in the manner of administration of the estate. The act or omissions must be such as to endanger the estate property or to show a want of honesty.
[13] An inability to act impartially may be a sufficient basis for removal of a trustee [see Re Commonwealth Investors Syndicate Ltd. (1986) 69 B.C.L.R. 346 and Re Shaw Co. Ltd. 1922 97 (SKQB)].
[14] In Radford v. Radford Estate 2008 45548 (ONSC) the court identified a number of considerations in relation to an application for removal of a trustee:
(a) removal must be the only course to follow
(b) the main guide should be welfare of the beneficiaries
(c) non-removal must be likely to prevent proper execution of the trust
(d) removal is not intended to punish trustees for past misconduct.
[15] In considering the removal issue, I note that, or contemplated by the orders above, the parties will be proceeding to trial regarding certain identified issues, both in this proceeding and in a companion action to be commenced imminently. In these contexts the parties’ allegations against one another regarding acts of dishonesty, mala fides and so on can be tested and findings of credibility made. On these motions it is not possible to make such findings based upon contradictory affidavit evidence alone.
[16] It is clear that the primary source of friction between the Trustees is NONL and the disposition of the Estate’s shares in that business. With the issue of disposition largely addressed by the orders referred to above, it is reasonable to expect that the friction between the Trustees will be reduced. I do not realistically expect the parties to like one another, however, so long as they are trustees they have a positive legal duty to faithfully and diligently administer the affairs of the Estate, being mindful at all times of the welfare of all of the Estate’s beneficiaries.
[17] Neither Trustee fully trusts the other. As a result, each is carefully scrutinizing the conduct of the other, both before and after assuming their roles as Trustees. Taking the competing allegations at face value, there is reason to question the conduct of both parties in relation to discharge of their fiduciary duties to the Estate and the beneficiaries. However, so long as each party is watchful over the actions of the other, I believe it unlikely that administration of the Estate will be endangered although it will undoubtedly proceed imperfectly.
[18] Given the contradictory affidavit evidence I cannot conclude that there is “clear evidence” that the removal of either Trustee is necessary (see Johnson v. Lanka). The level of scrutiny each party is bringing to bear upon the other is also such that it is unlikely that removal is necessary in order to ensure proper execution of the trust.
[19] With the issue of disposition of the Estate’s shares in NONL addressed, I am optimistic that the Trustees can focus on finalizing the administration of the Estate for the benefit of the beneficiaries. That remains their joint obligation and duty. Failure to faithfully discharge these duties and obligations may well be sanctioned with costs in due course. I strongly urge the parties to avoid this potentially expensive consequence of their actions.
[20] For the foregoing reasons, order to go in terms set out above at para. 6 and additionally as follows:
This Order is without prejudice to the rights of any added parties pursuant to the Rules of Civil Procedure, and without prejudice to the rights of the Estate beneficiaries who are not parties to this proceeding.
The proceeding to be case managed by Douglas J. to the extent reasonably possible, including motions for directions by way of teleconference or solely in writing if necessary and on consent.
The parties’ respective motions to remove the other as Trustee are hereby dismissed.
If unable to agree on costs, the parties may make written submissions (restricted to three pages plus Bill of Costs) within 30 days.
DOUGLAS J.
Released: July 14, 2015