COURT FILE NO.: 02-219
DATE: 20180403
SUPERIOR COURT OF JUSTICE - ONTARIO
RE: Shannon Louise Gilmour, Applicant
AND:
Estate of Charles Wayne West, Respondent
BEFORE: Petersen, J.
COUNSEL: R. Thomson, for the Applicant
D. Mayo, for the Respondent
HEARD: December 1, 2017
ENDORSEMENT
INTRODUCTION
[1] This Application involves a request for an order to discharge a mortgage. There are two motions before me.
[2] The Respondent’s motion seeks the following orders: (i) that the Application be dismissed, (ii) that funds held in court to the credit of the Application (“the Funds”) -- estimated to be approximately $43,000 -- be paid out to the Respondent, and (iii) that the Applicant pay the Respondent $10,000, plus pre-judgment and post-judgment interest.
[3] The Applicant argues that the Respondent’s claim to the Funds (and to the additional $10,000) is statute-barred and/or should be dismissed for delay. The Applicant brings a cross-motion seeking an order that the Funds be paid out to her.
[4] Both parties also each seek an order for their respective costs.
Background
[5] The Application was commenced more than 15 years ago, on August 8, 2002. The original Applicants were Darren Gilmour and Joan Gilmour (“the Gilmours”), both of whom are now deceased. Their daughter, Shannon Gilmour (hereafter “Shannon”), obtained an order from Justice Seppi on April 28, 2017, appointing her to represent their estates for the purpose of this litigation, and an order to continue the proceeding in her name.
[6] The Gilmours brought the Application to obtain an order requiring the discharge of a mortgage on their jointly owned home in Owen Sound. They had obtained a $30,000 mortgage from Royal Bank of Canada (“RBC”) in July 1992, with a variable interest rate, initially set at 10.5% annually. The mortgage was registered as a charge on title to the Property in favour of RBC.
[7] On August 29, 1997, an Assignment of the RBC mortgage charge was registered on title to the Gilmours’ property in favour of an individual named Charles “Wayne” West. Correspondence in the file suggests that RBC assigned the mortgage to Mr. West in exchange for a lump sum payment of $15,000.[^1] However, there is no formal documentation in the file confirming this transaction. The only relevant document in evidence is a copy of the Assignment that was registered on title. It appears to bear the signatures of Wayne West and Jeff Buckley, an Assistant Bank Manager at RBC. The Assignment stipulates that $24,268.79 was still outstanding on the mortgage. It does not specify the amount paid by Mr. West.
[8] Mr. West died intestate in June 1999. The Respondent Estate acquired his interest in the charge registered on title to the Gilmours’ property.
[9] Years later, in an affidavit sworn on August 8, 2002, the Gilmours claimed that the mortgage Assignment was done without their knowledge. RBC did not require their consent to assign the mortgage. The validity of the Assignment is not conditional on notice to them. However, according to their version of the events (which is disputed by the Respondent), they retired the mortgage in early September 1997[^2] with a negotiated lump sum payment of $15,000 to RBC, just a few days after the mortgage was purportedly assigned to Mr. West. The Gilmours deposed that any “other monies that may have been due or were due under the said assignment were forgiven” by RBC.
[10] RBC would not have had the authority to “forgive” any part of the balance owing to Mr. West after the Assignment was made, but the Gilmours’ evidence raises questions about the authenticity of the Assignment. The Applicant Shannon argues that the Assignment was fraudulent.
[11] In their August 2002 affidavit, the Gilmours produced a copy of a “history of the assignment” that they claimed to have obtained from RBC, ostensibly indicating that “$15,000.00 was paid out” by them in September 1997. The document in question is a photocopy of such poor quality that much of the text is illegible. There is nothing to indicate that it is a statement from RBC. The figure “15,000.000” appears in one of the columns next to the date “09/04/07”, but it is unclear what the figure represents.
[12] The Gilmours deposed that they borrowed the $15,000 to pay off their mortgage “through” a man named John Harvey, who was handling their company’s financial affairs. They stated that they repaid Mr. Harvey in three $5,000 installments, the last payment being made in December 1998. They deposed that the first installment was paid by cheque but that Mr. Harvey insisted that the remaining payments be made in cash because he was “going through a divorce and could not accept cheques”. There is no documentation in the record relating to this loan.
[13] Mr. Harvey was also managing Wayne West’s investments, including private loans in the form of mortgages and promissory notes. The evidence in the record establishes that Mr. West’s money was loaned to third parties through “John Harvey in Trust” and Mr. Harvey collected payments from the borrowers made out to “John Harvey in Trust”. The borrowers may not have been aware that Mr. West was their lender.
[14] Mr. Harvey was a colleague of Jeff Buckley, the individual who executed the mortgage Assignment on behalf of RBC. Evidence in the record establishes that Mr. Harvey was a RBC Bank Manager, who took a disability-related leave from his employment. It appears that Mr. Harvey was managing the Gilmours’ business finances and Mr. West’s investments while simultaneously receiving disability insurance benefits on the basis of his ostensible inability to work.
[15] Mr. Harvey had authorization to conduct financial transactions on his clients’ behalf. Evidence in the record[^3] suggests that he negotiated with RBC to assign the Gilmours’ mortgage to Mr. West in late August 1997 and, according to the Gilmours, Mr. Harvey also arranged for a $15,000 loan so that they could pay off their mortgage indebtedness in a lump sum payment to RBC just a few days later.
[16] These “strange dealings” (to borrow a phrase from the Gilmours’ lawyer[^4]) came to light in or about July 2002, when the Gilmours were in the process of closing a real estate transaction to sell their home. A title search on the property revealed a charge in favour of Wayne West based on the mortgage Assignment registered in August 1997.
[17] By that time, Mr. West was deceased. The Gilmours asked the Respondent Estate to discharge the mortgage so that they could proceed with the sale of their home. The Respondent Estate demanded payment of the outstanding balance on the mortgage, which it claimed was (principal and interest) in the amount of $39,180.85. The Gilmours refused to pay on the basis that they had years earlier retired the mortgage with a $15,000 lump sum payment to RBC. They asserted that they no longer owed any money in respect of the mortgage and claimed to have no knowledge of the Assignment of the mortgage to Mr. West.
[18] The Respondent Estate did not believe the Gilmours. It communicated with Mr. Harvey, whose lawyer, Douglas Grace, then wrote to the Gilmours’ counsel on July 23, 2002. Mr. Grace asserted that the Gilmours had been notified of the Assignment of their RBC mortgage by letter dated October 27, 1997 from Mr. Harvey’s former solicitor, Herbert Boyce. The letter from Mr. Boyce confirms that the Gilmours’ indebtedness to RBC has been “assigned as per Mr. Harvey’s agreement with the Royal Bank and his instructions”, effective August 29, 1997. The letter does not mention Wayne West. It directs the Gilmours to make all future payments in respect of the debt to Mr. Harvey.
[19] In their affidavit, the Gilmours denied receiving Herbert Boyce’s letter.
[20] Mr. Grace’s July 23, 2002 correspondence conveyed Mr. Harvey’s claim that, between 1997 and 1999, he provided “regular” loan statements to the Gilmours, confirming their indebtedness to Mr. West (including both the assigned mortgage and promissory notes) and the payments that they were making toward those debts. However, Mr. Grace enclosed only one sample loan statement. It was dated July 22, 2002 and set out the balance purportedly owing by the Gilmours to Mr. West’s Estate as of that date.
[21] The Gilmours deposed that the July 22, 2002 loan statement was the first statement they had ever received from Mr. Harvey. They maintained that they had no prior awareness of the Assignment of their mortgage to Mr. West and denied making any payments on the mortgage after the $15,000 payment to RBC in September 1997.
[22] The motion record includes a portfolio statement dated December 31, 1998, setting out Mr. West’s investments as of that date. The statement lists several debtors who owed money to Mr. West. It shows “Gilmour” owing Mr. West two outstanding debts, one in the amount of $22,221.26 (possibly the balance on the assigned mortgage) and another relating to several promissory notes, in the total amount of $32,756.86. The origin of this statement is unknown but it was likely produced by Mr. Harvey, who was managing Mr. West’s investment portfolio.
[23] Mr. Harvey did not swear an affidavit in this proceeding. His assertions are set out in the July 2002 correspondence from his lawyer. The veracity of his statements and the accuracy of the documents he produced are dubious, given his questionable integrity, as demonstrated by his potentially fraudulent misconduct in this matter and his alleged inappropriate conduct in respect of other matters that arose in the course of the administration of Mr. West’s estate.[^5]
[24] There is compelling evidence that Mr. Harvey was untrustworthy. He could have been covering his tracks with false statements in July 2002 to minimize his personal exposure to liability after his “strange dealings” came to light. I therefore hesitate to give weight to the documents produced by him in the summer of 2002, purporting to show that the Gilmours were notified of the mortgage assignment and had been making payments on the assigned mortgage between 1997 and 1999.
[25] It is undisputed that, after 1999, no payments were made by the Gilmours to the Respondent Estate. It is also undisputed that, between January 1999 and July 2002, no efforts were made by the Respondent Estate to collect on any debts purportedly owed by the Gilmours, including the outstanding mortgage balance. It is possible that the Respondent Estate was not aware of these debts at the time because Mr. Harvey was unwilling to turn over any of the assets in his possession and control unless the Respondent Estate indemnified him from all claims or causes of action relating to his management of Mr. West’s assets.[^6]
the application
[26] The Gilmours commenced the within Application on August 8, 2002, a week before the closing of their real estate deal, seeking to have the registered mortgage on title to their home discharged on an urgent basis. A hearing was scheduled for the next day.
[27] The Respondent Estate filed a notice of intent to respond. It advised the Gilmours that it would be requesting an adjournment of the hearing. It filed a responding affidavit, sworn by its lawyer’s legal assistant, attaching relevant correspondence and stating that the information in the Gilmour’s affidavit would be challenged by a forthcoming affidavit of John Harvey, which it required time to obtain.
[28] The parties subsequently agreed to adjourn the Application hearing on condition that the mortgage be discharged and the Gilmours pay $33,000 into court from the net proceeds of sale of the property and sign a Guarantee that they would pay to the Respondent, if ordered, the sum of $10,000 plus interest.
[29] The mortgage was discharged and the property was sold. The Gilmours signed the requisite Guarantee on August 28, 2002.
[30] The parties appeared in court on October 23, 2002. Justice Thompson issued a consent order confirming the discharge of the mortgage on the terms negotiated by the parties, except that the amount to be paid into court was specified to be $30,000 instead of $33,000.[^7] He also adjourned the Application to “a date to be set by the Trial Coordinator for a trial of the issues raised in the Application to allow the Respondent to file responding Affidavit(s) in view of the short service of this Application, and [to] allow cross-examinations (discoveries) to take place.” Although Justice Thompson referred to “discoveries” and a “trial” in his endorsement, he did not order a conversion of the Application to an action (nor was that requested by either party).
[31] At that time, the Respondent intended to file an affidavit sworn by Mr. Harvey. The record shows that the Respondent subsequently came to doubt Mr. Harvey’s credibility based on his conduct in connection with issues that arose in the course of administering Wayne West’s estate.
[32] The Gilmours paid $30,000 into court on November 19, 2002, pursuant to Justice Thompson’s order.
[33] The Respondent did not file any further responding materials in the Application. No cross-examinations of any witnesses (including the Gilmours) were ever conducted. No hearing date was ever set.
[34] The Application was dormant until the Respondent brought its motion to dismiss in November 2016. The Applicant then brought its cross-motion in March 2017. Both motions were heard by me on December 1, 2017, with follow-up written submissions on December 11, 2017.
motions before me
Applicant’s Motion
(i) Limitation Period
[35] The Applicant submits that the Respondent’s claims are barred by the Limitations Act, 2002, S.O. 2002, c.24.
[36] The Respondent’s requested relief in the motion (i.e., an order for release of the Funds and payment of $10,000 plus interest) is effectively a claim to collect the money purportedly owed by the Gilmours pursuant to the 1997 mortgage Assignment. It is unclear from the record when the last payment was made on the mortgage. The Gilmours deposed that no payments were ever made after the Assignment, other than the lump sum payment of $15,000 to RBC in September 1997. The Respondent asserts that payments were made through Mr. Harvey in 1997 and 1998. The Respondent further asserts that the Gilmours’ alleged subsequent default on the mortgage payments did not come to its attention until the Gilmours sought to have the Assignment discharged in July 2002.
[37] Even on the version of the events that is most favourable to the Respondent, more than fifteen years have elapsed since the Respondent’s claim against the Gilmours was discoverable. The Respondent was aware of the Gilmours’ position in this Application (commenced in August 2002), namely that no money was owed to the Estate of Wayne West pursuant to the Assignment, yet it did not pursue payment of the balance of the mortgage loan until it brought the within motion in November 2016. No separate action for payment of the mortgage balance was ever initiated by the Respondent. The Applicant argues that it is now too late.
[38] The Respondent has not commenced a separate action to collect the Gilmours’ alleged outstanding mortgage indebtedness. I agree with the Applicant that the Limitations Act would bar the initiation of such an action now. However, the Limitations Act applies only to the commencement of proceedings; it does not impede the Respondent’s ability to bring a motion to have the within Application dismissed. Nor, in my view, does it preclude the Respondent’s requested relief in this case.
[39] The parties agreed to a consent order in October 2002, discharging the mortgage at issue, on condition that the net proceeds of sale be paid into court to the credit of the Application. At that point, the only issue remaining for the court to determine was whether the Respondent Estate had a legitimate counter-claim to payment of an outstanding balance on the assigned mortgage. It was understood by all that the money paid into court was security for the Respondent’s claim. In these circumstances, it is unnecessary for the Respondent to commence a duplicate action within the statutory limitation period in order to pursue its desired remedial relief.
[40] An issue remains as to whether or not the Respondent’s claim to the Funds, though not statute barred, should be dismissed for lack of prosecution. I will address that issue below.
Respondent’s Motion
[41] There are several grounds upon which the Respondent seeks an order to dismiss the Application.
(i) Standing Issue
[42] First, the Respondent submits that Shannon Gilmour does not have standing to continue this litigation.
[43] On March 31, 2017, the parties appeared before Justice Daley. Shannon attempted to file responding motion materials. Justice Daley ordered that she was required first to seek an appointment as Estate Trustee in respect of her mother’s Estate and obtain an order to continue the litigation by April 28, 2017.
[44] Instead of seeking to be appointed as Estate Trustee under her mother’s will, Shannon obtained an order from Justice Seppi on April 28, 2017, appointing her to represent her parents’ Estates for the purposes of this proceeding, and continuing the litigation in her name.
[45] The Respondent argues that Justice Seppi erred in ordering that Shannon could represent her parents’ estates. I will not review the Respondent’s arguments on this point because I have no jurisdiction to consider the correctness of, or to set aside, Justice Seppi’s representation order. In any event, the Respondent does not challenge the validity of Joan Gilmour’s will. Shannon is listed as Executor of her mother’s estate in the will and could have obtained a certificate of appointment as Estate Trustee under the will, as well as a representation order pursuant thereto. The outcome would have been the same.
(ii) Delay
[46] The Respondent argues that the Application should be dismissed for delay, pursuant to either Rule 24.1 of the Rules of Civil Procedure or the “common law of delay”.
[47] Rule 24.01 allows a defendant who is not in default to move to dismiss an action for delay where the plaintiff has failed to prosecute the action in a timely fashion. Rule 24.01 applies only to actions, not to proceedings commenced by way of application. See Michie v. Turalinski, 2015 ONSC 5491, at para.40. This Application cannot be dismissed pursuant to Rule 24.01.
[48] I may nevertheless consider the Respondent’s motion based on the Court’s inherent jurisdiction to control its own process, which includes the discretionary power to dismiss an application for delay. See Marche D’Alimentation Denis Theriault Lte. v. Giant Tiger Stores Ltd. (2007), 2007 ONCA 695, 87 O.R. (3d) 660 (C.A.), at para.24.
[49] In order to succeed on a motion to dismiss an application for delay, the moving party must establish (1) that the delay has been unreasonable in the sense that it is inordinate and inexcusable and (2) that there is a likelihood of prejudice to the moving party, giving rise to a substantial risk that a fair hearing will not be possible if the application proceeds. See Belanger v. Southwestern Insulation Contractors Ltd. (1993), 1993 CanLII 5503 (ON SC), 16 O.R. (3d) 457 (Gen.Div.). The Court must consider all relevant factors to determine what is just in the circumstances of each particular case. See Michie v. Turalinski, supra, at para.44.
[50] The Applicant submits that it does not lie in the Respondent’s mouth to seek relief from the Court based on the Applicant’s delay, since the Respondent has done nothing to advance the litigation. See Michie v. Turalinski, supra, at para.49. Indeed, the Applicant brings a cross-motion seeking to dismiss the Respondent’s counter-claim for want of prosecution. The Applicant submits that it was incumbent on the Respondent to take steps to advance the litigation after Justice Thompson adjourned the Application in October 2002 to permit the Respondent to file additional responding materials.
[51] The Respondent argues that primary responsibility for advancing the litigation rests with the Gilmours because they commenced the Application. The Respondent submits that the adjournment granted by Justice Thompson did not shift that responsibility to the Respondent.
[52] I agree that the Gilmours should have taken steps to advance the litigation. They could have brought a motion for summary judgment. They could have obtained a court-imposed timetable, establishing a deadline for the Respondent to file its materials, failing which the Funds would be paid out to them.
[53] However, this is not a case in which the initiating party should shoulder the sole onus of advancing the litigation. The relief sought by the Gilmours (namely, the discharge of the mortgage on title to their property) was granted by Justice Thompson’s order in October 2002. Thereafter, it was the Respondent’s counter-claim against the Gilmours for payment of the outstanding balance of the assigned mortgage (approximately $39,000) that became the central issue in dispute. The Respondent therefore shares responsibility for advancing the litigation in a timely way.
[54] Both parties have been extremely dilatory. There is no question that the delay is inordinate. The file sat dormant for over 14 years.
[55] The parties have each proffered explanations for the delay. The Applicant Shannon learned about the existence of the Funds at some point prior to her mother’s death in February 2010. She had been appointed as Joan Gilmour’s power of attorney for property on January 18, 2009. She deposed that she was “advised of funds still in Court to be dealt with” when she was at her mother’s “death bed”. She further deposed that she was unable to take steps to address the issue of having the Funds released until the spring of 2012 because of the emotional stress of losing her mother, preparing for her mother’s funeral, and getting her mother’s affairs in order.
[56] At the time when Shannon was advised by her mother that there was money held in court to the credit of this Application, she was her mother’s power of attorney, yet she took no steps to have the issue addressed. While it is understandable that she would have been pre-occupied by her mother’s illness, as power of attorney, she had a responsibility to act to protect her mother’s claimed interest in the Funds.
[57] After her mother’s passing, Shannon took no immediate steps to seek payment of the Funds, despite being named as Executor and Trustee, as well as a beneficiary, in her mother’s will. She deposed that she was overwhelmed by grief and other responsibilities arising from her mother’s death. While that too is understandable, it is not an acceptable explanation for more than two additional years of delay.
[58] Shannon eventually retained a lawyer by the name of Ruby Garcha in May 2012 to assist with the release of the Funds. Ms. Garcha retrieved and reviewed the court file, then made efforts to contact the lawyers who had been representing the parties when the Application was commenced in August 2002. The former lawyer for the Respondent Estate, Brian Barrie, responded to Ms. Garcha’s correspondence in September 2013, advising that he was no longer involved in the file and that Wayne West’s son, Andrew West had assumed carriage of the administration of Mr. West’s Estate.
[59] Ms. Garcha then wrote to Andrew West, informing him that the within Application remained outstanding. Her initial correspondence did not specifically mention the Funds. Andrew responded that the court file should simply be closed for delay. In subsequent communications between them, Ms. Garcha made it clear that Funds were being held in court to the credit of the Application and that her client wished to have those Funds released to the Estate of Joan Gilmour. Andrew did not consent to this proposed manner of proceeding.
[60] No motion was brought by Shannon to seek release of the funds until March 28, 2017. This delay is explained, in part, by the fact that Shannon incurred catastrophic injuries in a car accident in late 2012. She deposed that she continues to suffer chronic pain relating to the accident. She is on an indefinite disability-related leave from her work. Her health and financial situation are precarious.
[61] I accept that the accident and its aftermath contributed to Shannon’s delay in pursuing the release of the Funds from 2013 until 2017. While this may be a reasonable explanation for the last four years of delay, the prior delay from 2002 to 2012 is either entirely unexplained or inexcusable. There is no evidence about why the Gilmours took no action to pursue release of the funds in the decade preceding Darren Gilmour’s death.
[62] The Respondent’s explanation for its inaction relates to complications in the administration of Wayne West’s estate. Mr. West died intestate in June 1999. His brother Bradley was initially appointed Estate Trustee without a Will. There was much confusion and conflict in the administration of the estate, which culminated in litigation. An order was made on May 2, 2011 to remove Bradley and appoint Mr. West’s sons, Andrew and Joe, as co-Estate Trustees. Andrew thereafter assumed primary responsibility for the administration of the estate, but he experienced difficulties in obtaining the relevant files from the lawyer who had been acting for the Estate during Bradley West’s time as Estate Trustee.
[63] Justice Thompson presided over the litigation relating to Wayne West’s estate. He conducted case management conferences in 2003, 2006 and 2009. The agendas for those conferences include references to the Gilmours’ outstanding Application as an estate issue that needed to be resolved, as well as the $30,000 paid into court, and the Gilmours’ $10,000 Guarantee.
[64] The Applicant relies on these agendas as evidence that Andrew West, who was a party to the estate litigation, must have known about the Gilmours’ outstanding Application and about the funds held in court at least as early as 2006, yet he took no steps to seek payment of the monies until the Respondent’s motion was commenced in November 2016.
[65] Andrew West does not deny knowledge of the existence of the litigation as early as 2006. However, he was not the Estate Trustee until May 2011. He swore an affidavit deposing that he “did not realize from the former estate lawyer or trustee that the within application was still outstanding” (emphasis added) at the point when he assumed carriage of the administration of his father’s Estate. He further deposed that he was “unaware there was money still sitting in court” until he was contacted by Ruby Garcha in September 2013.
[66] The Applicant disputes these statements, but did not cross examine Andrew West. Based on the totality of the evidence before me, including Andrew’s initial response to Ms. Garcha, I accept that Andrew was not aware that Funds were still being held in court to the credit of this Application in May 2011, when he was appointed co-Trustee of his father’s estate. I find that that he did not discover that fact until he was contacted by Ms. Garcha in the fall of 2013. I further accept that Andrew was unable to act promptly once the matter came to his attention, because he did not have access to the relevant files.
[67] This does not, however, detract from the fact that the Respondent Estate, formerly represented by Bradley West, did nothing to bring closure to the litigation between October 2002 and May 2011. No supplementary responding material was filed and the Gilmours were not cross examined, notwithstanding that Justice Thompson adjourned the proceeding specifically to afford the Respondent time to do these things.
[68] Neither party has established a satisfactory explanation for the prolonged hiatus in the litigation. The Applicant asserts that the Respondent’s delay is particularly unreasonable because it arose from a deliberate decision not to proceed with the litigation. The record includes documents that refer to a desire on the part of both Andrew West and the Estate of Wayne West to settle the Application in 2006 and again in 2010. The Respondent’s impetus to pursue settlement negotiations was apparently sparked by a concern about Mr. Harvey’s credibility, as well as a realization that the expense of litigating the Application might exceed the Estate’s potential recovery.
[69] I do not view this evidence as probative of the Applicant’s claim that the Respondent made a deliberate decision to abandon its claim to the Funds. The evidence simply establishes that a decision was made by the Respondent to pursue settlement negotiations, which unfortunately did not achieve a resolution. The record shows that the Respondent made attempts to resolve the issues in dispute without resort to litigation; it does not establish that the Respondent intended to abandon the litigation.
[70] There is no question that both parties have been dilatory in respect of the litigation. In that regard, they share blame for the failure to bring this matter to a conclusion in a timely fashion. Both parties are prejudiced by the delay. The Gilmours are now deceased and therefore cannot provide further evidence and cannot be cross-examined on their affidavit. The whereabouts of Mr. Buckley and Mr. Harvey are unknown. The recollection of these witnesses is key to interpreting the documents in the record, such as they are. Even if the witnesses could be located, their memories will have faded over time. The documentary record is incomplete and the likelihood of either party locating relevant materials to fill the gaps, at this late date, is remote.
[71] Although it will be challenging for the parties to proceed after such a prolonged period of time, I find that it would not be just in the circumstances to grant either parties’ motion to dismiss based on delay.
(iii) Operation of Law
[72] The Respondent submits that it is unnecessary for this court to determine the merits of the Applicant’s claim to the Funds because any entitlement that the Gilmours may have had (which is disputed) was extinguished by operation of law. Specifically, the Respondent argues that, if the Gilmours were entitled to the Funds, then Joan’s 50% interest transferred to Darren by right of survivorship upon her death in February 2010 and Darren’s 100% interest was subsequently extinguished by his bankruptcy in May 2012. The Respondent’s position is that neither the estates of Joan and Darren Gilmour, nor their daughter Shannon (beneficiary under Joan’s will and heir of Darren’s estate) can have any remaining claim to an interest in the Funds.
[73] There is some merit to this argument. The Gilmours owned their home as joint tenants, each enjoying a right of survivorship in the event of the other’s death. When they sold the home in August 2002, they continued to own the proceeds of sale jointly. It is well established in Canadian jurisprudence that an agreement for sale entered into by joint tenants of real property does not in itself, absent evidence of intention to sever, operate as a severance of the joint tenancy in the proceeds of sale. See Flannigan v. Wotherspoon, 1952 CanLII 208 (BC SC), at para.21; Tessier Estate v. Tessier, 2001 SKQB 399, at paras. 11-12; Perry v. Perry Estate, 2001 ABQB 339, at para.8; Royal Bank v. Bisset, 2005 ABQB 700, at paras.24-25; Corbett Estate v. Corbett Estate, 2015 MBQB 181, at para.50; Zeligs Estate v. Janes, 2016 BCCA 280, at para.77. There is no evidence that the Gilmours divided the proceeds of sale between them or otherwise conducted themselves in a manner to suggest a mutual intention to sever their joint ownership of the proceeds. Consequently, when the Funds were paid into court, the Gilmours maintained a right of survivorship in respect of each other’s claimed 50% share.
[74] Joan Gilmour executed a will in January 2008, bequeathing all of her property equally to her two daughters, Shannon and Jennifer (without specifically mentioning the Funds). The Applicant Shannon argues that this bequest effected a severance of her parent’s joint claimed interest in the Funds, such that her mother’s 50% share did not pass to her father upon her mother’s death, but rather devolved to the beneficiaries of her estate pursuant to her will.
[75] A joint tenancy may be severed in three ways. First, severance may be effected by a unilateral act of any one of the joint tenants upon his or her own share, such as selling or encumbering it. Second, a joint tenancy may be severed by mutual agreement of the joint tenants. Third, severance may be effected by any course of dealing that is sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. See Williams v. Hensman (1861), 70 E.R. 862 (Eng. V.-C.), at p.867 and Hansen Estate v. Hansen, 2012 ONCA 112 at paras.32-34.
[76] Joan Gilmour’s testamentary bequest did not constitute a unilateral act of severance. The Ontario Court of Appeal has clearly stated that “testamentary disposition cannot, in itself, sever a joint tenancy.” Hansen Estate, supra, at para.63. Neither Joan nor Darren performed any other unilateral act to sever their joint interest. There is no evidence that they agreed to severance, nor did they engage in a course of dealing that mutually treated their interests in the Funds as being held in common. I conclude that Joan’s claimed 50% interest in the Funds therefore passed to Darren, by right of survivorship, when she died in February 2010. The Applicant Shannon has no claim to the Funds in her capacity as Estate Trustee for her mother’s Estate or as beneficiary under her mother’s will.
[77] Shannon may, however, have a claim to the Funds as representative of and heir to her father’s estate. Darren Gilmour died intestate in June 2012. Shannon and her sister are his only surviving hers. They have therefore inherited whatever interest he held in the Funds at the time of his death. A determination of his interest must be made in light of the fact that he filed for bankruptcy (for the second time) on May 23, 2012, approximately one month prior to his death. An additional wrinkle in this complex factual matrix is that Darren did not declare any interest in the Funds when he filed his Statement of Affairs pursuant to the Bankruptcy and Insolvency Act, R.S.C. 1985, c.B-3, as amended (“BIA”). He received a posthumous automatic discharge from bankruptcy in May 2014.
[78] The Respondent argues that, if Darren had a 100% interest in the Funds, it did not vest in his Trustee in bankruptcy because of the non-disclosure, and it was subsequently extinguished “by operation of law” when Darren died an undischarged bankrupt. This is incorrect. All of Darren’s property (regardless of whether or not an asset was disclosed) passed to and vested in the Trustee in bankruptcy pursuant to s.71 of the BIA.
[79] The Applicant Shannon argues that any creditors’ claims to a share of the Funds have expired. She submits that Darren’s original interest in the Funds therefore “flows down to his daughters” through intestate succession. This too is incorrect. A bankrupt individual cannot preserve assets for his or her heirs by concealing them from the Trustee in bankruptcy, thereby thwarting creditors’ legitimate claims. Neither Darren’s death nor his posthumous automatic discharge terminated the Trustee’s duty to realize and distribute Darren’s property among his creditors. While s.40(1) of the BIA requires the Trustee, prior to her or his application for discharge, to return to the bankrupt individual any property found incapable of realization, it is unknown whether the Trustee would view Darren's claimed interest in the Funds as incapable of realization. It is also unknown whether the Trustee has been discharged in this case. It is likely that the Trustee was discharged, given the passage of time, but the Trustee may wish to apply for reappointment pursuant to s.41(11) of the BIA.
[80] Darren Gilmour was automatically discharged from bankruptcy in May 2014, but no steps were ever taken to have any of his property declared to be incapable of realization or to compel the Trustee in bankruptcy to return any of the property to his Estate. The BIA does not provide for the automatic return of any surplus property to a bankrupt following her or his discharge. A positive act is required to return the property to the bankrupt. See Deloitte & Touche LLP v. Marino (2004), 2004 CanLII 4324 (ON CA), 72 O.R. (3d) 274 (C.A.), at para.15; Green v. Green, 2015 ONCA 541, at para.41.
[81] I conclude that, if the Gilmours claim to the Funds has merit (an issue which has yet to be determined), Joan Gilmour’s 50% share passed to Darren Gilmour upon her death and Darren’s 100% interest may have subsequently been extinguished by his bankruptcy. The Applicant Shannon Gilmour may have no claim to the Funds. A final determination of this issue cannot, however, be made without first providing the Trustee in bankruptcy an opportunity to make submissions on the point.
[82] Even if I were to conclude that the Gilmours’ Estates and the Applicant Shannon Gilmour have no claim to the funds because of Darren Gilmour’s bankruptcy, that would not entitle the Respondent to payment of the Funds, nor to payment of an additional $10,000 from the Applicant, with interest.
[83] The Respondent’s counsel argued that an order for payment of the Funds to the Estate of Wayne West would be appropriate if I found that the Applicant had no interest in the Funds, on the theory that the Estate would be “the last party standing” in the litigation. I disagree. First, the Trustee in bankruptcy may still have a claim. Second, applications are not boxing matches, in which a pugilist can prevail despite losing every round simply by knocking out her or his opponent before the end of the fight. The Respondent must prove its claim on a balance of probabilities in order to obtain relief. It must establish its entitlement to payment of an outstanding balance on the Gilmour’s assigned mortgage, as well as an accounting of the precise amount owing, before any remedial order can be made in its favour.
[84] For all of the above reasons, both parties’ motions are denied. The Application must be heard on its merits and notice must be provided to the Trustee in bankruptcy, who may assert an interest in the Funds, to be disbursed to Darren’s creditors (who, ironically, may include the Respondent Estate).
[85] The individual named as Trustee in Darren Gilmour’s bankruptcy assignment must therefore be given notice of the Application. The Respondent is hereby directed to serve that individual with a copy of this Endorsement, as well as a copy of the Application Record.
[86] In light of the mixed outcome of these motions and lack of success on the part of both parties, I find that each party should be responsible for their own costs.
Petersen J.
Date: April 3, 2018
COURT FILE NO.: 02-219
DATE: 20180403
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
RE: Shannon Louise Gilmour, Applicant
AND:
Estate of Charles Wayne West, Respondent
ENDORSEMENT
Petersen J.
Released: April 3, 2018
[^1]: Correspondence dated July 23, 2002 from Douglas Grace to the Gilmours. [^2]: In their affidavit, the Gilmours stated that they retired the mortgage in September 1998, but that appears to be a typographical error. It is obvious from an exhibit attached to the affidavit (and from other evidence in the record) that they intended September 1997. [^3]: Letter from Herbert Boyce addressed to the Gilmours dated October 27, 1997. This letter has not been authenticated by Mr. Boyce. [^4]: As set out in a letter from Michael Forcier to Donald Greenfield dated July 26, 2002. [^5]: Some of John Harvey’s alleged misconduct is summarized in the Agendas for Case Management Conferences held in connection with court file no.5275-99, relating to the Estate of Wayne West. For example, it is noted that Mr. Harvey inappropriately paid himself executor fees in connection with a testamentary document without first obtaining the approval of the parties involved in the estate litigation or a court order, and he failed to provide an accounting of the fees he paid himself from the estate. It is also alleged that Mr. Harvey was concealing income that he earned managing Mr. West’s investments from his disability insurer. Such behaviour is consistent with the Gilmours’ allegation that Mr. Harvey concealed assets from his wife during their divorce proceeding (by insisting on cash payments from the Gilmours and not issuing receipts). [^6]: As recorded in the Case Management Conference Agenda notes relating to court file no.5275-99. [^7]: No explanation has been provided for why the amount to be paid into court was changed. It may have been a simple typographical error. The draft order approved as to form and content bv the parties included the $33,000 amount.