COBOURG

COURT FILE NO.: 0126/08

DATE: 2015-11-27

SUPERIOR COURT OF JUSTICE – ONTARIO

RE: Estate of Annie Maxwell Reid MacKay

AND:

Dawn MacKay also known as Dawn Evans

BEFORE: Woodley, J.

COUNSEL: Shawn McNamara for Plaintiff

Alexander McLeod for Defendant

HEARD: November 17 and 18, 2015

reasons for judgment

woodley j.:

Overview

[1] This trial seeks to determine whether Dawn Evans, a non-contributing joint bank account holder with her mother in law Annie MacKay, acted as a fiduciary in the operation of the joint account and breached her fiduciary duty when she paid herself compensation from the account.

Issues and Determination

[2] The Statement of Claim raised several issues for determination. However, at the conclusion of the trial, I was asked to determine the following discrete issues:

i. Did Dawn as joint account holder owe a fiduciary duty to Annie in the management and operation of the joint bank account?

ii. If yes, did Dawn breach her fiduciary duty by making payments to herself from the joint account?

iii. Is Dawn liable to repay Annie’s Estate any or all of the funds Dawn paid to herself during the period January 2, 2002 to June 30, 2008?

[3] For the reasons detailed below I find as follows:

i. Dawn was in a fiduciary relationship and did owe a fiduciary duty to Annie in the management and operation of the joint bank account.

ii. Dawn did not breach her fiduciary duty to Annie by making payments to herself from the joint account.

iii. Dawn is entitled to compensation for services rendered to Annie including the period following Annie’s incapacity. The total amount paid was justifiable and reasonable in the circumstances and no amount is required to be repaid.

Factual Background

[4] Annie was born in 1913 and died on July 20, 2010 at 97 years of age.

[5] During her lifetime Annie had three sons, Tom, Harold and David.

[6] Annie’s son Tom married Dawn in 1981. Dawn was a registered nurse and Tom was a mechanic. Dawn and Annie shared a very close relationship. Dawn referred to Annie as “Mom” and Annie considered Dawn to be her daughter.

[7] In 1998 Annie’s son David ran away with Harold’s wife. Dawn was Annie’s only daughter in law following this date and relied heavily on Dawn for support and companionship.

[8] Annie moved in with Dawn and Tom in the fall of 1998.

[9] In January of 1999 Annie executed a power of attorney in favour of Tom. Annie also named Tom as her executor. Tom was present at the lawyer’s office. The lawyer explained that Tom was not entitled to receive any compensation for acting (a term of the document) and otherwise was to follow Annie’s instructions and act in her best interests.

[10] Shortly following execution of her power of attorney, Annie consolidated her two bank accounts into one account and named Dawn as her joint account holder by right of survivorship. Tom attended at the bank and assisted with the set-up of the account. Tom confirmed that he was not placed on the account but as power of attorney had authority over the account.

[11] As for Dawn’s appointment as joint holder, Dawn advised that Annie requested that Dawn assist with her banking and her care and asked Dawn to agree to look after her so that she wouldn’t be alone or die alone. Annie promised to compensate Dawn for her services. Dawn agreed to act. No specific terms were agreed upon at that time.

[12] In the fall of 1999 Annie moved into a retirement residence located close to Dawn and Tom’s home. Dawn attended upon Annie on average 5 days per week (excepting the winter months when Dawn was in Florida). Dawn took Annie shopping, on outings, to any doctor, optician or podiatrist appointments, was her contact for the retirement home, and her confident.

[13] Harold and Tom left Annie’s stewardship to Dawn. Each advised that that they visited Annie “every other week” or “once a month”. Harold would visit more often when Dawn was in Florida and would take Annie for car rides in the early days (prior to 2005). Tom would sometimes visit on Friday afternoon “pub days”. There were periods when one or both would not visit Annie for months at a time.

[14] In about 2002 Dawn assumed management of the joint account and paid Annie’s expenses from the account. Dawn also purchased luxury items for Annie on Dawn’s VISA which items were not paid from the account or repaid to Dawn. Annie wrote cheques on the account until Christmas of 2003 and reviewed all banking statements and approved all transactions in the account with Dawn on a weekly basis from 2002 to the spring of 2005.

[15] Dawn received her first payment by way of a transfer from the account on February 6, 2003 totaling $1,000. Dawn advised the transfer was made with Annie’s knowledge and consent based loosely on $250 per week for services provided. Payments were made sporadically following February 6, 2003 through to June 30, 2008 and are reflected in the bank statements as “transfers”. Dawn advised that Annie approved all transfers made prior to the spring of 2005.

[16] In 2004 or 2005, Dawn advised Tom that Annie’s expenses exceeded her income. Annie requested that Tom and his brothers contribute on a monthly basis. Tom advised Harold of Dawn’s concerns and in response Harold requested an accounting.

[17] Dawn prepared an accounting and delivered the accounting to Tom. Harold denied ever receiving an accounting. Tom initially denied receiving an accounting but later admitted that he found three copies of the accounting in his personal papers with his brother’s names on the top following Dawn’s separation from him in 2008. Tom’s evidence was that he did not know how the accounting came to be with his papers.

[18] With respect to resolving the inconsistencies in the evidence on this point I note that Tom acknowledged he was an alcoholic throughout his marriage to Dawn and his drinking got “quite bad” during the last eight years of his marriage (2000 – 2008). Harold advised that he had trouble discussing matters as Tom was often “in the bag”. In these circumstances I am able to accept all parties’ evidence on this point. Dawn prepared and delivered the accounting and Tom (although he received the accounts) has no recollection of the event and never provided the accounting to Harold.

[19] From the spring of 2005 onward Dawn no longer reviewed the bank records with Annie. Dawn felt Annie’s abilities had declined and further review with her would be meaningless. Dawn’s evidence was that she continued to inform Tom of the payments which continued to the end of June 2008 and totaled $37,850.

[20] On June 6, 2008 Dawn separated from Tom and commenced family law proceedings.

[21] On September 11, 2008 Tom commenced the within action as Annie’s litigation guardian seeking an accounting with respect to all transactions, payment of monies found due, damages for breach of trust in the amount of $100,000 and punitive damages in the amount of $100,000.

[22] Annie died on July 20, 2010.

[23] On February 13, 2012, Tom, as Estate Trustee continued the action on behalf of the Estate.

[24] The trial was heard on November 17 and 18, 2015.

[25] Tom, Harold and Tom and Dawn’s (former) investment advisor, John O’Donohue provided evidence on behalf of the Plaintiff Estate. Counsel for the Estate introduced as an Exhibit in the proceedings the transcripts taken at the examination for discovery of Dawn held on November 21, 2008, and read various excerpts from the transcripts into the record.

[26] Dawn provided evidence through the transcripts filed and by viva voce evidence at trial.

Evidence of Annie’s Capacity

[27] Tom, Harold and Dawn all provided their personal views as to when Annie became incapable. However, no medical evidence was introduced by any party to assist with any determination of capacity.

[28] Tom initially acknowledged that Annie was capable to 2003 and then retracted stating that Annie “was not the woman I knew” by 2001. Harold’s evidence was that Annie was in a gradual decline from 1999 onwards and was not capable from 2003 onwards. Harold and Tom’s further evidence that Annie loved to play the piano and sing and continued to play the piano the entire time that she was at 140 William Street (until 2006). Tom noted the residence was a “retirement residence” for able bodied seniors. Tom noted that Annie regularly attended pub night. Both sons noted that Annie had her hair done and took great care with her clothing, makeup and appearance. Harold arranged for the Avon lady to attend Annie at the residence. No concern was raised about Annie’s health or safety at the retirement residence until the latter part of 2005 when Annie was moved to a semi-private room and it was Dawn who initiated the move and raised the concern - not Harold or Tom.

[29] Dawn’s evidence was that she was a registered nurse with 30 years of experience working with the elderly. She saw Annie regularly and discussed financial matters with her weekly. Although Annie was declining the decline was gradual. Dawn stated that in her opinion, Annie was capable of making financial decisions until 2005 but that after 2005 any further review by Annie of the bank records was meaningless.

[30] It was submitted that Dawn’s evidence on this issue was self-serving. I disagree. Dawn did not have to concede incapacity. No medical evidence of incapacity was presented and Dawn paid the bulk of the compensation to herself following 2005. Dawn’s evidence that Annie was incapable from the spring of 2005 onwards is actually a statement made by Dawn against self-interest.

[31] While it is impossible to determine an exact date that Annie became incapable of managing or directing management of the joint bank account I find that the evidence established that Annie was capable in 1999 when the account was established and on February 6, 2003 when Dawn began receiving compensation.

Issues and Analysis

i. Did Dawn owe a fiduciary duty to Annie in the management and operation of the joint bank account?

[32] Tom acknowledged that he was the sole attorney appointed for Annie, that Dawn was not named as attorney or alternate attorney, and that he had no power to delegate his authority to Dawn.

[33] The fact that Dawn was not an attorney is not determinative of the issue. It is well established that a party need not be an attorney to be a fiduciary. Fiduciary duties can arise without formal appointment as attorney, executor or trustee.[1]

[34] Fiduciary relationships may arise depending on the nature and evolution of the relationship and the tasks undertaken in furtherance of that relationship.[2] As noted by Justice Wilson of the Supreme Court of Canada in Frame v. Smith[3], the following indicia has been accepted as a “rough and ready” guide to assist with the determination of whether a fiduciary relationship exists:

i. The fiduciary has scope for the exercise of some discretion or power;

ii. The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary’s legal or practical interests;

iii. The beneficiary is vulnerable to or at the mercy of the fiduciary holding the discretion or power.

[35] In the present case the evidence established that in or about 1998 Annie requested that Dawn be added as a joint holder and that Dawn agreed to be added as joint holder. Annie continued to write cheques on the account to 2003. It appears that Dawn assumed primary management of the account in or about 2002 to 2003. Dawn regularly reviewed the joint account statements with Annie and Dawn’s evidence was that Annie was aware of and approved all transactions (including payments made to Dawn) in the account until the spring of 2005. Based on this evidence it is clear that Annie relied upon Dawn for assistance and Dawn voluntarily assumed duties generally recognized as being fiduciary in nature including the duty to account.

[36] In 2005, Dawn advised that Annie could no longer understand her banking transactions and further review with Annie was meaningless. At this point, the evidence establishes vulnerability on Annie’s part and a recognition of vulnerability by Dawn.

[37] From the evidence and utilizing the SCC’s “rough and ready” guide it is clear that Dawn assumed a fiduciary role in the management of the joint bank account. Dawn had discretion in the exercise of the account. Dawn could unilaterally write cheques and transfer funds from the account which affected Annie’s interests and over time Annie’s physical and mental health began to fail rendering her vulnerable.

[38] In the circumstances I find that Dawn was Annie’s fiduciary and owed fiduciary duties to Annie in the operation of the joint bank account. In particular I find that Dawn acted as a trustee de son tort throughout the period January 2, 2002 to June 30, 2008and is treated as if she were a properly appointed trustee. [4]

ii. Did Dawn breach her fiduciary duty by making payments to herself from the joint account?

[39] Fiduciaries are burdened with responsibilities including the duty to act in the best interests of the person to whom they are bound to protect. Fiduciaries are required to vigilantly avoid any conflict between their own personal interests and their duties as fiduciaries.

[40] At common law and in equity the general rule is that fiduciaries are not entitled to benefit from their appointment.[5] However, this rule is not an absolute prohibition on activities that present a conflict of interest and duty. In the present case Annie had the right to request that Dawn provide care and companionship to her in exchange for compensation. Annie was entitled to organize her finances and personal services as she saw fit. The application of the rule of equity arises as follows: once the court has found a conflict between personal interest and duty the question arises as to whether there was consent to the activity. In this case the question is whether Annie or her attorney provided consent to the payments for personal services.

[41] The agreement between Annie and Dawn was a verbal agreement commonly known as a “family agreement” for personal service.[6] Family agreements do have legal consequences and the court is often called upon to determine the true nature of the relationship resulting from the agreement. The court must determine whether any promise or agreement existed and whether there is sufficient intention for enforceability.[7] Further, as Annie is deceased, there must be corroborative evidence to support any finding that there was consent or agreement that Dawn would be paid for personal services provided to Annie.[8]

[42] Dawn’s evidence was that Annie requested that Dawn care for her as she aged so she would not be alone or die alone and offered to compensate her for her care. Although no specific calculations were agreed upon at this time Dawn advises that an agreement in principle was reached when Dawn agreed to be added as a joint account holder in or about 1999. Tom’s evidence supported the general principle that Annie requested Dawn to act as joint holder as she would be the party who would assist Annie and it was “most convenient” that Dawn be appointed. Harold knew that Dawn was on the account and that she assisted Annie regularly.

[43] Dawn’s further evidence is that the quantum payable for the services provided was agreed upon by February of 2003 when payments commenced. Dawn detailed the basis for the amount of compensation payable at her examination and provided evidence that Annie reviewed and approved her bank statements including the compensation paid to 2005. Harold advised that he was aware that Dawn was managing Annie’s bank account and that Dawn was Annie’s primary contact at the retirement home and that Dawn regularly attended Annie (when she was not in Florida). Harold stated that he was not aware that Dawn received compensation. I accept Harold’s evidence in this regard.

[44] Dawn advised that she informed Tom (poa) of her agreement with Annie and provided Tom with an accounting of her dealings which was delivered to him in 2004 or 2005. Tom was aware of the care, companionship and services Dawn provided to Annie. Although Tom acknowledged Dawn managed the account and tended to Annie’s personal needs he denied knowledge that Dawn was being paid for her services and denied being provided with bank statements or Dawn’s accounting. Tom later admitted that he received a copy of Dawn’s accounting which was prepared in 2004 or 2005 but denied knowledge of how the documents came into his possession. To the extent that Dawn’s evidence differs from Tom’s on this point I accept Dawn’s evidence.

[45] I find that Tom was provided with a copy of Dawn’s accounting, had access to the bank statements and otherwise had full authority over the account as power of attorney. I find that Tom had knowledge that Annie intended to benefit Dawn and Dawn was paid from the account. Blank denial by Tom does not thwart a finding that Annie consented to the agreement and a family agreement existed.

[46] Alternatively, I find that Tom as attorney for Annie had authority to enter into an agreement with Dawn and that his actions constituted tacit consent and agreement to the payments.

[47] In either case I find that Dawn did not breach her fiduciary duty by making payments to herself from the joint account.

iii. Is Dawn liable to repay Annie’s Estate any or all of the funds Dawn paid to herself during the period January 2, 2002 to June 30, 2008?

Reasonableness of Agreement

[48] Although there was no breach of duty, as Dawn was a fiduciary it remains necessary to determine whether the payments made were reasonable in the circumstances.

[49] Dawn’s evidence (read in from the transcripts on her discovery) was that she provided services to Annie from 1999 to 2008. The payments made to Dawn commenced on February 6, 2003, and the total amount paid over the period was $37,850.

[50] Dawns evidence was that it was her habit as a nurse to keep a journal that recorded her daily activities. Upon review of her journal Dawn was able to advise with certainty that she spent 76 months providing care and companionship for Annie (excluding the 32 months she spent time in Florida). During the 76 months Dawn regularly attended upon Annie 5 to 7 days per week, took Annie for walks, driving trips and shopping. Dawn looked after Annie’s financial affairs, attended to her bill payments, ensured Annies tax returns were completed and filed, acted as Annies contact at the retirement home, managed Annies health care, beauty treatments, took Annie to the doctor, optician, podiatrist and anywhere else Annie desired. Although Annie lived in a retirement home she relied upon Dawn to provide companionship and connect her to the outside world. For these services Annie paid Dawn a total of $37,850 over a 76 month period or $119 per week.

[51] Dawn’s evidence was that her pay was based on an estimated rate of $250 per week loosely reflecting the amount of hours spent attending Annie applied to an hourly rate. Although it may have been the intention to pay Dawn $250 per week the amount actually paid for services provide over the 76 month time period was $119 per week.

[52] Dawn’s contributions to Annie’s welfare were deserving of compensation. The continued attendances, consideration, comfort, care and companionship provided by Dawn to Annie cannot be underrated or undervalued. In the circumstances, I find that the total compensation paid to be reasonable in the circumstances and I find a nexus between the care provided and the cost of the services sufficient to justify the payments. In particular I find that Dawn’s calculations and estimates provided at her examination for discovery as read into the record to be persuasive with respect to the proper and adequate compensation that could be considered reasonable in the circumstances.

[53] Further I find the sporadic nature of the payments to be reflective of Dawn`s concern that Annie be cared for and her expenses be met before any payments be made to Dawn and does not affect the legitimacy or reasonableness of the amounts paid.

[54] Having found that the compensation reasonable in the circumstances I find that Dawn is not liable to repay any amount to Annie’s Estate.

Disposition

[55] In view of the evidence tendered I hereby dismiss the claim as against the Defendant.

[56] If the parties are unable to agree on costs they shall file costs submissions of not more than 5 pages within 30 days of today’s date failing which no costs shall be payable.

Woodley, J.

Date: November 27, 2015