Citation: Walsh v. Whitford, 2017 ONSC 4532

COURT FILE NO.: CV-16-2867 DATE: 20170726

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MICHAEL JOSEPH WALSH, Applicant AND: STEVEN DAVID WHITFORD and CLARK RANDALL WHITFORD, Respondents

BEFORE: Shaw J.

COUNSEL: R. Dean Allison counsel for the Applicant Gurpreet Jassal, counsel for Steven Whitford No one appearing on behalf Clark Whitford

HEARD: July 19, 2017

ENDORSEMENT

[1] The applicant, Michael Joseph Walsh (“Mr. Walsh”), seeks to remove the appointment of the respondents, Steven David Whitford (“Steve”) and Clark Randall Whitford (“Randy”) as estate trustees of the estate of David Alexander Whitford, (“Mr. Whitford”) pursuant to s. 5 and 37 of the Trustee Act, R.S.O 1990, c. T.23. Randy has not filed a Notice of Appearance or any responding materials to this application.

Background

[2] On December 8, 2008 Mr. Whitford made a Last Will and Testament (the “Will”). The three equal beneficiaries of his estate are his sons Steve, Randy and Kent Whitford (“Kent”). Mr. Whitford appointed Steve, Randy and Mr. Walsh to be his Estate Trustees. Mr. Walsh was the lawyer who drafted the Will and had been Mr. Whitford’s lawyer for many years.

[3] Paragraph 4 of the Will states as follows:

I DIRECT that should any difference of opinion at any time exist between my trustees in the administration of my Estate or the execution of the trusts of my Will or any Codicil thereto, the opinion of two Trustees shall prevail as so long as one of the two is Michael Joseph Walsh. I make this direction notwithstanding that any one or more of such Trustees may be personally interested or concerned in the matter is dispute or question.

[4] The Will established a trust for Kent so that his equal share does not vest in him. The only interest he will receive are payments made to him in the absolute discretion of the trustees. Kent, who resides in Nanaimo, British Columbia, is in receipt of a disability pension as he suffers from mental health issues and from addictions to alcohol and other substances. There is no evidence before the court with respect to whether or not he is a person under a disability.

[5] Mr. Whitford passed away on May 1, 2012. A Certificate of Appointment of Estate Trustee with a Will was granted on August 16, 2013. Unfortunately, close to four years later, there has been little progress made in the administration of the estate.

[6] At the hearing of the motion, Mr. Walsh filed updated estate accounts for the period of May 1, 2012 to June 3, 2017. According to the accounts, at this time, the estate consists of an investment account at TD Waterhouse and a home located at 23 Anne Court, Brampton, Ontario (“the property”). This was Mr. Whitford’s home at the time of his death. Randy has been residing at the property since 2000 and Steve since January 2013. Although they pay the carrying costs for the property, they do not pay any rent to the estate. Of particular concern is that the home is currently uninsured and has been for a number of years. This has placed the estate’s largest asset at risk.

[7] Mr. Walsh, Steve and Randy met on November 6, 2013 at the property. Following that meeting, Mr. Walsh wrote to Steve and Randy addressing a number of concerns including the following:

1. the poor condition of the property;
2. whether or not there was any insurance on the property; and
3. a request to provide documentation so that income tax returns could be filed.

[8] In that correspondence, Mr. Walsh also raised concerns about carrying out his obligations as an estate trustee and as a lawyer given the lack of cooperation from Steve and Randy.

[9] In a subsequent meeting in February 2014 a number of issues were discussed, including monthly payments to be made to Steve, Randy and Kent. Mr. Walsh again raised an issue of receiving statements from TD Waterhouse with respect to an investment account. There were also discussions with respect to the transfer or sale of the property. Mr. Walsh followed up with correspondence to Steve and Randy on February 14, 2014 and November 19, 2014. In the latter correspondence, Mr. Walsh again discussed options in dealing with the property.

[10] At a further meeting on October 15, 2015, Steve informed Mr. Walsh that in his view, Mr. Walsh’s role was limited to making a decision as estate trustee in the event that he and Randy did not agree. This is in contravention of paragraph 4 of the Will. Steve also told Mr. Walsh that he had no business or concern with the value of the estate. At that meeting, Mr. Walsh suggested that Steve and Randy retain their own lawyer.

[11] Mr. Walsh again wrote to Steve and Randy on March 11, 2016 requesting documentation to complete income tax returns for the estate.

[12] Counsel for Steve was retained in January 2017. He informed the court that as a result of discussions he had with his client, his “sentiments” towards Mr. Walsh had changed. He confirmed that Steve had not been agreeable to sign documentation so that taxes could be completed but would now do so. It was acknowledged that the 2012, 2013 and 2014 income tax returns were filed late and the estate was charged late filing fees of $7,500. Counsel for Steve also confirmed that the home was not uninsured. Furthermore, he confirmed that documentation had not been provided to Mr. Walsh to file income tax returns for 2015 and 2016.

[13] In addition to a lack of cooperation in administering the estate, Mr. Walsh is also concerned about the welfare of Kent. It is his evidence, which is not disputed by Steve, that Steve told Mr. Walsh that he and Randy should get the property at a discount from its value as Kent had caused the family so much difficulty over the years and he should be prepared to take less for his “share”. That is not in accordance with Mr. Whitford’s wishes as set out in his Will.

[14] Steve does not dispute that there has been conflict with Mr. Walsh. He does not dispute that a lack of cooperation has resulted in late filing of income tax returns. He does not dispute that he did not have the property insured. His concern is that Mr. Walsh has been acting as estate trustee and solicitor for the estate and Steve alleges that this is a conflict of interest. He also takes issue with compensation paid to Mr. Walsh as estate trustee and as lawyer. He is concerned that there is double-dipping as it is not clear what work Mr. Walsh has done in his role as estate trustee versus lawyer. Steve points out that neither he nor Randy have received any compensation for their work as estate trustees.

[15] Steve’s position is that Mr. Walsh is preferring Kent as beneficiary pointing out that while Randy and he have received $14,000 from the estate, Kent has received $20,000. Steve is also concerned with sending Kent money as he says he is unstable.

[16] Steve’s position is that he is prepared to cooperate with Mr. Walsh provided the decision making for the administration of the estate can be made by the agreement of any two of the three trustees.

The Law

[17] The relevant sections of the Trustee Act, R.S.O. 1990, c. T. 23, as amended read:

Power of court to appoint new trustees

5. (1) The Superior Court of Justice may make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee. R.S.O. 1990, c. T.23, s. 5 (1); 2000, c. 26, Sched. A, s. 15 (2).

Removal of personal representatives

37. (1) The Superior Court of Justice may remove a personal representative upon any ground upon which the court may remove any other trustee, and may appoint some other proper person or persons to act in the place of the executor or administrator so removed. R.S.O. 1990, c. T.23, s. 37 (1); 2000, c. 26, Sched. A, s. 15 (2).

Who may apply

(3) The order may be made upon the application of any executor or administrator desiring to be relieved from the duties of the office, or of any executor or administrator complaining of the conduct of a co-executor or co-administrator, or of any person interested in the estate of the deceased. R.S.O. 1990, c. T.23, s. 37 (3).

[18] There is no dispute with respect to the legal principles that apply when there is an application to remove an estate trustee. In Chambers Estate v. Chambers, 2013 ONCA 511, the court found that a testator’s wishes as to who should act as trustee should only be interfered with in rare circumstances. The question in this case is whether this is a rare circumstance warranting the removal of Steve and Randy as estate trustees leaving Mr. Walsh to administer the estate.

[19] In Radford v. Wilkins, 2008 CanLII 45548 (ONSC), Quinn J. set out the legal principles that apply in an application to remove an estate trustee. These principles are summarized as follows:

• The Superior Court of Justice has inherent jurisdiction to remove trustees
• An application to remove an executor may be made by any person interested in the estate of the deceased
• The choice of estate trustee is not to be lightly interfered with
• There must be a clear necessity warranting the removal
• The removal of an estate trustee should only occur on the clearest of evidence and there is no other course to follow
• In deciding whether or not to remove an estate trustee, the court’s main guide should be the welfare of the beneficiaries
• The applicant must show that the non-removal of the trustee will likely prevent the trust from being property executed
• Removal is not intended to punish past misconduct
• Friction alone is not a reason for removal

Analysis

[20] Steve’s position is that there is no clear necessity to remove himself and his brother as estate trustee. Although he concedes he has not worked perfectly or ideally with Mr. Walsh, he submits that is not the test when considering removal of an estate trustee. He says that he is now prepared to cooperate with Mr. Walsh. Steve also points out that there is no endangerment of the assets. The main assets are the property and the investment account which remain intact.

[21] While the court should not lightly interfere with the discretion exercised by a testator in choosing the persons to act as executors and trustees, it is apparent that that there is a substantial degree of hostility that has and will likely continue to prevent the proper administration of the estate and will likely have an adverse impact on the welfare of the beneficiaries. I reach that conclusion based on the following findings:

• The conflict and lack of cooperation amongst the estate trustees has cost the estate $7,500 in unnecessary late filing fees to the Canada Revenue Agency as documentation was not provided to Mr. Walsh to file timely income tax returns, despite a number of requests from him.
• This is not a complicated estate and yet it had been four years since the Will was probated. The estate has not been administered in a timely manner which is attributable to the conflict and lack of cooperation amongst the estate trustees. In particular, despite a number of requests, neither Steve nor Randy have responded to Mr. Walsh’s request to deal with the property either by way of sale or transfer.
• The main estate asset, the property, has been and continues to be at serious risk as Steve and Randy have failed to obtain home insurance. If this asset were damaged or destroyed, that would have a significant adverse impact on the three beneficiaries.
• Steve and Randy have been living in the property without paying the Estate any rent. While residing in the property has been in their best interests, it is prejudicial to the interests of Kent. This suggests that Steve and Randy are preferring their interests over those of Kent, in breach of their fiduciary duties as estate trustees.
• The estate trustees will be required to administer an ongoing trust for Kent. Based upon Steve’s comments that Kent should be willing to take less than his share, there is justifiable concern that the trust will not be administered in good faith or in accordance with the testamentary wishes of Mr. Whitford.

[22] Steve’s position is that he is prepared to cooperate with Mr. Walsh based on a condition that is a direct contravention with paragraph 4 of the Will and a violation of Mr. Whitford’s wishes. The Will is very clear and specific that if there is any difference of opinion between the trustees, the opinion of two trustees shall prevail so long as Mr. Walsh is one of the two. What Steve is proposing, as a condition to his future cooperation, contravenes that provision. His intention to cooperate with Mr. Walsh in the administration of the estate going forward rings hollow given his unwillingness to comply with paragraph 4 of the Will.

[23] There is no basis to the allegation that Mr. Walsh has acted unilaterally in favouring Kent over Steve and Randy. There was a one-time payment for a special levy that was paid for Kent’s accommodations in the sum of $5,257. There is no other evidence of any other preferential treatment.

Conflict of Interest and Compensation

[24] Steve has alleged that there is a conflict of interest as Mr. Walsh is an estate trustee and also solicitor for the estate. This is not a conflict. In his role as lawyer and estate trustee, Mr Walsh’s duties are to act in the best interests of the beneficiaries.

[25] Steve raises issues with respect to the compensation paid to Mr. Walsh in his role as solicitor and as estate trustee. According to Steve, Mr. Walsh has paid himself $12,518.65 as executor compensation. There were invoices that total $1,596.38 for legal fees.

[26] The Will is silent with respect to the trustee’s right to compensation. Section 61(1) of the Trustee Act states that the compensation is based on the fair and reasonable allowance for the trustee’s care, pains and trouble and the time expended in or about the estate. Section 61(4) provides for circumstances where a solicitor is a trustee.

[27] Legal work and estate trustee work are compensated differently and the remedies to dispute those fees are different. If the beneficiaries do not agree on estate trustee compensation paid to date, then the estate trustees may pass their accounts pursuant to Rule 74.18 of the Rules of Civil Procedure. If there is a dispute over legal fees, then Mr. Walsh may be asked to have his legal accounts assessed.

[28] As stated by Dymond, J in Re Knoch, [1982] O.J. No. 2516, 12 E.T.R. 162, 1982 CarswellOnt 622 (Surr. Ct) pre-taking of compensation should be discouraged unless stipulated in the will or consented to by all of the beneficiaries.

Sale of the Property

[29] Mr. Walsh requested an order for the sale of the property. This issue was not addressed in submissions made by counsel nor was any plan or proposal presented regarding the sale. That issue shall be adjourned. In the event the parties cannot reach an agreement regarding the disposition of the property, the matter can be returned to the court for further directions.

Disposition

[30] An order is to issue as follows:

1. The respondents Steve and Randy are removed as estate trustees;
2. Within 60 days, the estate trustees shall apply to pass their accounts for the period ending with today’s date;
3. Mr. Walsh is appointed to act as sole estate trustee of the estate of Mr. Whitford;
4. A Certificate of Appointment of Succeeding Estate trustee with a Will in the Estate of Mr. Whitford, deceased, shall be issued to Mr. Walsh;
5. All the real and personal assets of the estate are hereby vested in Mr. Walsh as estate trustee;
6. The respondents shall forthwith deliver to Mr. Walsh all documents within their possession, custody, care and control relating to this estate;
7. The request for a sale of the property shall be adjourned to a date to be brought back before me if the parties cannot reach an agreement regarding its disposition;
8. If the parties cannot reach an agreement, any disputes regarding compensation paid to date and ongoing shall be dealt with by way of a passing of accounts;
9. A copy of this Order shall be served by the applicant on the office of the Public Guardian and Trustee in Ontario and British Columbia to determine if it is required or will take any position regarding Kent.

Costs

[31] If counsel are unable to agree on costs, I would ask that the applicant provide costs submissions within two weeks of these reasons. The respondent has two weeks to reply. The submissions shall be limited to two pages, single spaced, and attach Bill of Costs.

Shaw J.

Date: July 26, 2017

CITATION: Walsh v. Whitford, 2017 ONSC 4532 COURT FILE NO.: CV-16-2867 DATE: 20170726

ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: MICHAEL JOSEPH WALSH, Applicant AND: STEVEN DAVID WHITFORD, CLARK RANDALL WHITFORD and KENT RUSSELL WHITFORD Respondents

ENDORSEMENT

Shaw J.

Released: July 26, 2017