Court File and Parties
COURT FILE NO.: CV-13-3145-00ES DATE: 20160729 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Rocco Furfari AND: Tony Furfari as Attorney for Property of Erminia Furfari
BEFORE: Mr. Justice H.J. Wilton-Siegel
COUNSEL: R. Delagran, for the plaintiff J. Kaufman, for the defendant
HEARD: June 29, 2016
Endorsement
1The applicant Rocco Furfari (the “applicant” or “Rocco”) brings a motion to enforce terms of minutes of settlement dated October 13, 2015 (the “Minutes”) between himself and his brother, the respondent Tony Furfari (“Tony”). Tony is the estate trustee for the estate of their late mother, Erminia Furfari (“Erminia”), and the parties are the sole and equal residual beneficiaries under her will. The principal issue is whether Tony is required to adjust the distributions from Erminia’s estate to account for $102,215 of Tony’s legal fees that were paid from Erminia’s assets prior to her death when Tony was her attorney for property. Rocco also seeks an order of directions from the Court regarding the remaining administration of the estate, principally including a further interim distribution of $350,000. I will address each issue in turn.
Requested Relief Regarding Legal Fees of Tony
Background
2The Minutes settled a collection action commenced by Tony, a passing of accounts application commenced by Rocco, and a will challenge proceeding commenced by their two brothers. The Minutes provided in paragraph 3 that “[t]he Parties shall bear their own legal costs, in the Proceedings to date”. For this purpose, “Proceedings” was defined to mean all outstanding legal proceedings, including the passing of accounts application, the debt collection action and any issues between the parties in the will challenge proceeding.
3Subsequently, the parties obtained an order of Penny J. dated October 21, 2015 dismissing the passing of accounts proceeding (the “Penny Order”). The Penny Order provided, among other things, that the “the attorney for property [Tony] shall not be entitled to any further compensation or legal fees other than as set out in the accounts delivered or paid to date .” [italics added] The Penny Order was granted on the consent of both parties.
4Later, the parties also signed mutual releases, as contemplated by the Minutes, which released all claims arising in respect of the debt collection action, the passing of accounts application and Tony’s actions and decisions as the attorney for property and attorney for personal care of Erminia prior to her death. The release signed by Rocco (the “Release”) further provided for greater certainty that:
…neither party shall be required to make any contribution or reimbursement for any amount which was received or may have been received from Erminia Furfari, including any compensation as attorney for property, legal fees or gifts.
The Issue
5Rocco accepts that the Release provides that Tony was not obligated to reimburse the estate for the legal fees. However, he argues that, by agreeing in the Minutes that each party was to bear his own legal costs in the Proceedings to the date of the Minutes, the parties agreed that Tony was required to adjust the distributions from Erminia’s estate to make Rocco whole for the legal fees that were paid on Tony’s behalf out of Erminia’s assets.
6The language of the Penny Order is contrary to this position insofar as it provides that Tony was entitled to the legal fees “paid to date”, which it is agreed would include the legal fees at issue. In other words, it is Rocco’s position that the Penny Order contradicted the agreement in the Minutes that Tony was not entitled to these legal fees and was instead required to adjust the distributions from the estate.
7Rocco says that this provision of the Penny Order was intended to give effect to paragraph 4 of the Minutes, which provided that “Tony will administer the estate and no executor’s compensation shall be payable.” He says that the phrase “other than as set out in the accounts delivered or paid to date” in the Penny Order goes beyond, and is inconsistent with, paragraph 4 of the Minutes.
8Rocco therefore seeks an amendment to the Penny Order pursuant to the provisions of Rule 59.06(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 which provides as follows:
An order that contains an error arising from an accidental slip or omission or requires amendment in any particular on which the court did not adjudicate may be amended on a motion in the proceeding.
9Rocco says that inclusion of the words “or paid to date” in the Penny Order constitutes “an error arising from an accidental slip or omission.” As the Penny Order was granted on consent, it is clear that Penny J. did not adjudicate on this issue.
Rocco’s Position
10Rocco submits that the language in the Penny Order was “occasioned by tight timelines and convoluted wording”, being the words “or paid to date”. The motion materials contain an affidavit sworn May 16, 2016 of Rocco, rather than of his legal counsel, which sets out certain facts pertaining to the finalization of the terms of the Penny Order. While the draft Judgment was emailed by Tony’s counsel the day before the hearing before Penny J., Rocco’s counsel was only able to review it on the morning of the hearing. At that time, Rocco’s counsel approved the form of order subject to inclusion of one matter in a schedule. Tony’s counsel emailed back shortly thereafter with a revised form of order and it was apparently agreed that the parties would exchange consents at the hearing.
11In his affidavit, Rocco says that he was advised by his legal counsel that:
… as a result of the time available to review the draft Judgment, and the fact that it was not anticipated that the Judgment would address any other term of the Minutes of Settlement other than the passing of accounts, he did not detect the error made by counsel for Tony in the draft and did not delete the last 4 words of paragraph 2 of the Judgment, namely the words “or paid to date”.
Applicable Legal Standard
12The test for an amendment under Rule 59.06(1) is set out in Monarch Construction Ltd v. Buildevco Ltd. (1998), 26 C.P.C. (2d) 164, at pp. 165-166:
A consent judgment is final and binding and can only be amended when it does not express the real intention of the parties or where there is fraud. In other words, a consent judgment can only be rectified on the same grounds on which a contract can be rectified.
13In this case, therefore, Rocco must establish that the Penny Order does not express the real intention of the parties in the Minutes.
Analysis and Conclusions
14The language of the Minutes is ambiguous. It could be interpreted as meaning either that the parties must bear all of their outstanding legal expenses of the Proceedings as of the date of the Minutes, or it could mean that the parties intend that they will bear all of their legal expenses from the commencement of the Proceedings, including previously paid legal expenses.
15Rocco says that the parties agreed that they would bear all of their respective legal expenses from the commencement of the Proceedings including, in the case of Tony, any expenses previously paid on his behalf out of Erminia’s assets when he was acting as her power of attorney.
16On Rocco’s interpretation, it would be necessary to take some action to implement the agreement, which could take the form of either: (1) Tony’s reimbursement of the estate; or (2) an adjustment on a future distribution from the estate. The Minutes are completely silent with respect to any action to be taken to implement the alleged agreement. Moreover, it is not disputed that the Release evidences the fact that the parties did not agree to a reimbursement by Tony. Rocco says, however, that the parties agreed specifically on (2), that is, that he would be entitled to a larger distribution in the future to make him whole.
17On this application, the onus rests with Rocco. I find, on the evidence before the Court, that Rocco has failed to satisfy this onus in that it is at least as likely, for the following four reasons, that the agreement reached in the Minutes was limited to payment of outstanding expenses.
18First, there was a considerable amount of hostility between the parties and, in particular, a high level of distrust on the part of Rocco. If there had been an agreement that Tony was to bear the previously paid legal expenses, Rocco would also have specified a mechanism in the Minutes for verification of the amount of the legal expenses for which he was entitled to an adjustment. The absence of any verification procedure in the Minutes suggests the absence of any agreement that Tony would bear these legal expenses.
19Second, as mentioned, Rocco says that the parties not only agreed that each party would bear his legal expenses from the commencement of the legal proceedings but also agreed upon the means by which this would be implemented. There are at least two reasons why, in the circumstances, I think the parties would have expressly stated the means of implementing this agreement if they had reached such an agreement.
20The most obvious way of achieving the alleged agreement would have been to require Tony to reimburse the estate, which would have included this amount in the estate accounts. If the parties had agreed on the more indirect and complicated process, and given the distrust on Rocco’s part, I think Rocco would have insisted upon an express statement in the Minutes spelling out how he was going to receive this adjustment to ensure that he received a larger distribution. This consideration is reinforced by the evidence discussed below to the extent it is admissible. Accordingly, I consider the silence of the Minutes regarding the manner in which the agreement was to be implemented to be significant in the present circumstances.
21Third, the factual background to the negotiations also supports this conclusion in three respects.
22First, at the time of the settlement, Tony had personally incurred legal fees in the debt collection action and Rocco had outstanding legal fees in the passing of accounts action. Accordingly, the interpretation that each party would bear their outstanding legal fees was consistent with the factual circumstances of both parties.
23Further, in the negotiations leading up to the Minutes, Rocco raised the fact that approximately $100,000 of legal fees of Tony had been paid out of Erminia’s property and contemplated an adjustment in his favour. Insofar as it is admissible, the correspondence between the parties in these negotiations specifically raised the mechanism for payment that Rocco says was agreed. In these circumstances, the absence in the Minutes of the provision that Rocco says was agreed upon – an adjustment on distributions from the estate – is significant. It indicates that the parties did not reach an agreement on such an adjustment.
24Lastly, the legal fees at issue related to the passing of accounts application commenced by Rocco against Tony in his capacity as the attorney for property of their mother, rather than in his personal capacity. There was no finding of liability on the part of Tony in the settlement, nor was there any other legal obligation identified that would require him to reimburse the estate for any amounts received while acting as Erminia’s attorney for property. There is, therefore, no necessary reason why Tony should reimburse the estate for his legal fees or otherwise adjust on a future distribution to make Rocco whole for these fees.
25Based on the foregoing, I conclude that the parties reached a global settlement of their outstanding issues that did not include an adjustment in Rocco’s favour on a future distribution from the estate to account for the legal fees totalling $102,215 previously paid on Tony’s behalf out of Erminia’s assets. Accordingly, the inclusion of the words “or paid to date” in the Penny Order did not constitute “an accidental slip or omission”. The motion seeking an amendment of the Penny Order is therefore dismissed.
26I note that the amended notice of motion also seeks, in the alternative, an order setting aside the Minutes on grounds that there was no meeting of minds of the parties. This issue was not argued at the hearing of the motion. In any event, there is no basis for such an order. In short, while Rocco may now assert that he only agreed to settle on the basis of an adjustment on a future distribution for Tony’s legal fees, the evidence is that he agreed to a global settlement that did not include such a provision. In addition, the notice of motion seeks an order requiring payment of interest in respect of the adjustment sought by Rocco. This issue is moot in view of the determination above that he is not entitled to any such adjustment.
Requested Relief Regarding Administration of the Estate
Background
27Erminia died in February 2015. As mentioned, the brothers of Tony and Rocco, Marco and Joey, commenced a will challenge which was settled by an agreement on October 20, 2015, although mutual releases were not exchanged and payment was not made until March 4, 2016. After this settlement was reached, Tony obtained a certificate of appointment of estate trustee with a will on November 6, 2015. The sale of Erminia’s house, the principal asset of the estate, closed on November 17, 2015.
28Tony says, and Rocco does not deny, that the parties agreed on an interim distribution of $250,000 to each of them in late November 2015. Tony made a $250,000 distribution to himself on November 26, 2015. However, it appears that the investment counsel holding the estate assets was not willing to distribute Rocco’s distribution to him for reasons that remain unexplained by such investment counsel and Rocco. In March 2016, Tony made a further distribution of $250,000. At this time, he arranged to pay Rocco the amount of $500,000, without the involvement of the investment counsel, thereby bringing the total distributions to that date to $1 million, that is, to $500,000 to each of the parties.
29Tony does not wish to distribute any further amounts pending receipt of a tax clearance from the Canada Revenue Agency, which he hopes to receive this summer. Throughout this period, he has been receiving advice from the accountant to the estate. In an email dated December 23, 2015, the accountant recommended against any further distribution beyond $250,000 to each of the parties pending the filing of final tax returns and receipt of the tax clearance certificate. Based on a letter of the accountant dated February 18, 2016, it would appear that, after the distributions to the parties to date, the estate holds assets having a market value of slightly more than $1 million after providing for estimated taxes, legal fees and other fees payable. Given these circumstances, for some time, Rocco has sought a further distribution of $1 million in total to each of himself and Tony.
The Issue
30There is no legal entitlement of a beneficiary to receive an interim distribution. A beneficiary is only entitled to expect that a trustee will discharge his or her duty with honesty, objectivity and care. Moreover, as the applicant recognizes in his factum, it is trite law that a court will not involve itself in an estate trustee’s exercise of discretion relating to the administration of an estate unless it finds that a trustee has failed to meet this standard of behaviour or has otherwise acted unfairly or in bad faith.
31The applicant suggests, however, that Tony has not been even-handed in his administration of the estate and submits that this behaviour calls for directions from the Court in the form of an interim distribution to each of the parties totalling $700,000. He bases his claim on three allegations described below.
Analysis and Conclusions
32Having reviewed the motion materials both before and after the hearing of the motion, I find no basis for such an order for the following two general reasons.
33The first general reason is that the evidence does not establish that Tony has failed to meet the standard required of an estate trustee in respect of the three matters raised by Rocco. I will address each of these three matters in turn.
34First, in his affidavit dated January 19, 2016, Rocco says that Tony would not confirm the gross value of the estate or the estimated liabilities of the estate. Rocco says that Tony “has demonstrated [a] continued and repeated intention to refuse to disclose relevant information to Rocco despite repeated requests.” Tony disputes this saying that he provided extensive disclosure. It is not possible to resolve this issue as a historical matter given the contradictory evidence before the Court. However, as of the present time, it is not clear that there is any outstanding information request from Rocco of any materiality. In any event, Rocco is not entitled to any particular disclosure at this stage of the administration of the estate. His entitlement takes the form of a passing of accounts at the time of the final distribution of assets of the estate. Insofar as his request was based on the language of the draft Release, this was addressed in early January 2016 by the insertion of language discussed below.
35Second, the history of the Release that was requested of Rocco does not support his allegation of a lack of even-handedness. The Release was required in connection with the settlement with their brothers. Unfortunately, the settlement of the form of the Release became intertwined with Rocco’s allegations of non-disclosure of the assets of the estate and then his demand for a larger distribution from the estate. Further, the acrimony between the parties was reflected in some misunderstanding between their counsel regarding the delivery of the Release which delayed a sensible resolution of the basis on which Rocco would execute and deliver the Release. Ultimately, however, as of early January 2015, it was agreed that the Release would state expressly that delivery of the Release would not affect Rocco’s right to require Tony to pass his accounts as estate trustee.
36Third, the evidence is that the distribution of $250,000 to Tony in November 2015 was intended to be accompanied by a distribution in the same amount to Rocco. The evidence further indicates that this did not occur by virtue of the unexplained concerns of the investment manager holding the estate assets, which Tony suggests was due to the existence of certain judgment creditors of Rocco, rather than by virtue of a decision of Tony to withhold Rocco’s portion of the distribution. In his materials, Rocco is silent with respect to Tony’s statement that the parties agreed to an interim distribution of $500,000 in total in November 2015, from which I infer that this did, indeed, occur. Rocco also does not deny or explain the unwillingness of the investment manager to pay his share to him at that time, from which I infer that he is aware of the circumstances, but has chosen not to provide an explanation.
37Given these circumstances, the affidavit of Phi Nguyen sworn March 21, 2016, and Rocco’s factum, which allege that Tony was not being even-handed in making distributions without addressing either of the foregoing circumstances, are not persuasive. In any event, Rocco was made whole with the March distribution after Tony found a means of working around the concerns of the investment manager.
38The second general reason for denying the requested relief is that the distribution sought is not rationally connected to the alleged breaches of Tony’s duties as the estate trustee. Even if the Court were to find that one or more of Rocco’s allegations had merit, the Court would not order a further distribution. The appropriate relief for Rocco’s allegation of a withholding of disclosure would be an order for more or better disclosure. The appropriate relief in respect of any unfairness in the language of the Release would be to address the enforceability of the impugned terms of the Release. The appropriate relief for his allegation of an unequal distribution would be an equalizing distribution but no more.
39The simple reality in this case is that Rocco wants or needs his entitlement under the estate now. However, there is no basis in the evidence for a finding that Tony is not acting in his capacity as estate trustee with honesty, objectivity and care. He has acted promptly in the administration of the estate. The principal asset has been sold and he has filed the necessary tax returns. He has also distributed, on an interim basis, approximately one-half of the residual estate. He is awaiting a tax clearance certificate before making a final distribution, given his personal liability if a distribution were made that left the estate unable to pay unanticipated liabilities. While a further interim distribution might not entail significant risk on the evidence before the Court, there is, as mentioned above, no right on Rocco’s part to an interim distribution. There is also no basis for the Court to substitute its own judgment regarding an appropriate withholding for potential liabilities, among other reasons, because the Court lacks a full understanding of the potential for unanticipated liabilities. If Rocco does indeed have a basis for his position, he has not put it forward on this motion. He must raise it in connection with any passing of accounts at the time of the final distribution from the estate.
40Accordingly, Rocco’s request for directions of the Court regarding the administration of the estate is denied.
Conclusion
41Based on the forgoing, the applicant’s motion is denied in its entirety. If the parties are unable to agree on costs, they shall have thirty days within which to provide costs submissions, not exceeding five pages in length, together with a costs outline in accordance with the Rules of Civil Procedure.
Wilton-Siegel, J
Date: July 29, 2016