COURT FILE NO.: 452/10
DATE: 20180605
SUPERIOR COURT OF JUSTICE – ONTARIO (COMMERCIAL LIST)
RE: SALVATORE SABETTI, MARY LOUISE SABETTI, LISA ANN SABETTI, AND FRANCESCO ANTONIO SABETTI, Applicants
AND: LUIS FRANCISCO SILVA JIMENEZ and MAURA GABRIELA SILVA JIMENEZ, Respondents
BEFORE: S.F. Dunphy J.
COUNSEL: Andrew Sheremeta, for the Applicants Michael Kerr, for the Respondents
HEARD at Toronto: May 17, 2018
REASONS FOR DECISION
[1] This applicant brought this application seeking directions regarding the interpretation of his deceased wife’s will, to remove the executors of the Estate designated in her will and to seek an immediate payment from her Estate.
[2] The will created a trust in favour of the applicant husband of the income to be derived from one of four equal shares of the residue during his lifetime and directed the remainder of that share, if any, to form part of the residue of her estate upon his death. The other three shares of the residue were vested in her children from a prior marriage.
[3] The intention of the testatrix is clear on the face of the will and does not result, as the applicant contends, in a partial intestacy arising upon his own death. The applicant’s interpretation is a strained one at odds with the plain meaning of the words employed by the testatrix and a contextual reading of the will.
[4] The balance of the applicant’s complaints arise directly or indirectly from his frustration at the rate of receipt of income by the estate from its interest in the estate of the testatrix’ mother administered in Mexico. The respondent trustees do not control that estate which is under the supervision of courts in Mexico. There has been no conduct of the trustees that would warrant the remedy of removal as sought by the application.
[5] For the more detailed reasons that follow, I am dismissing this application.
Factual background
(a) Procedural History
[6] The application was originally commenced by Mr. Sabetti and his three children on September 30, 2015. Mr. Sabetti’s three children (step-children of the testatrix) were named in their capacity as potential beneficiaries of the intestacy that might arise were Mr. Sabetti’s claimed interpretation to be sustained.
[7] The arduous process by which this application has managed finally to come to a hearing has not been a simple one. I shall review the procedural history for 2017 and 2018 only.
[8] On January 31, 2017, Conway J. ordered the removal of Mr. Sabetti’s children as applicants but dismissed the respondents’ request to dismiss other claims made in the Application. Conway J. ordered a scheduling hearing to set a timetable for the hearing of the Application.
[9] On February 28, 2017, that scheduling hearing was held before Conway J. and a one day hearing was booked for September 12, 2017. The hearing date was changed on consent to September 21, 2017 to accommodate the schedule of counsel by order of Wilton-Siegel J. dated March 13, 2017.
[10] The September 21, 2017 hearing did not proceed as scheduled. While the respondents were prepared to proceed and filed their responding evidence and a factum as required, Mr. Sabetti (self-represented to that point) requested an adjournment. He was accompanied by counsel (Mr. DeVries) who had not yet been retained but would be reviewing the matter with a view to deciding whether or not to accept the mandate.
[11] Favreau J. adjourned the matter to be spoken to at a 9:30 hearing on September 29, 2017 (one week later) to allow time for Mr. De Vries to decide if he would be coming on the record or, if not, to fix a date for Mr. Sabetti to argue the matter.
[12] In her endorsement, Favreau J. noted:
Counsel for the respondents request costs thrown away on a substantial indemnity basis. This is certainly a case for which this request should be considered and it is to be decided by the judge hearing the application.
[13] Favreau J. did proceed to hear and decide the separate but related application of the Executors to pass their accounts on that day.
[14] There is no explanation on the record before me as to why nobody appeared on September 29th as scheduled. At all events, the matter came back before Conway J. on October 16, 2017. At that hearing, she ordered the parties to return before her on October 31, 2017 for a scheduling appointment. Her endorsement of October 31, 2017 reads as follows:
Mr. Sheremeta has just come on for the App. Timetable has been worked out as per attached. Hearing date now scheduled for a full day on April 20, 2018 (confirmed w. CL office), peremptory on the App. (emphasis added).
[15] On consent, the April 20, 2018 hearing date was changed to May 17, 2018 by Conway J. on December 15, 2017.
[16] The approved timetable required the respondents to file any further evidence by November 30, 2017, the applicant to file any further evidence by December 15, 2017, cross-examinations if necessary to be completed by February 28, 2018.
[17] It does not appear that much if anything was done by the applicant after the adjournment was first granted by Favreau J. on September 21, 2017. If the applicant filed any additional material, he has not troubled himself to file it or place it before the court. No cross-examinations were scheduled by the February 28, 2018 deadline.
[18] Mr. Sheremeta advises me that it was agreed that he would be permitted to conduct his cross-examination on May 10, 2018. How he expected to have enough time to conduct that examination, obtain a transcript and file his factum in the time required by the Rules of Civil Procedure in advance of a May 17 hearing one can only wonder.
[19] At all events, the respondent Executors delivered an affidavit containing documentation obtained from the Mexican Estate in the afternoon of May 9, 2018. Mr. Sheremeta protested and announced that he would not proceed with the cross-examination he had scheduled for May 10, 2018. Mr. Kerr withdrew the affidavit and urged Mr. Sheremeta to proceed. Mr. Sheremeta declined and indicated that he would be filing further Reply evidence.
[20] That same day Mr. Sheremeta filed a confirmation form with the court office indicating “Adjournment Required”. He followed that up on May 16, 2018 with an affidavit of the applicant, a “Factum re Adjournment” and a case book all three addressing only the issue of the applicant’s request for an adjournment. He did not file a factum regarding his own application scheduled to be heard the next day nor identify via a confirmation form the evidence he would be relying upon were the application to proceed notwithstanding his request for an adjournment.
[21] The respondent executors advised that they did not consent to the adjournment of the hearing and had a clerk ensure that all the evidence they intended to rely upon was pulled from the file for the judge hearing the matter. The May 9, 2018 affidavit was not filed and, indeed, the respondent have rested upon the record as it existed at the time of the first adjournment. The factum they relied upon before me was the one filed in September.
[22] On May 17, 2018, I heard the applicant’s motion for an adjournment of the hearing. In the course of that hearing, it emerged that the never-filed May 9, 2018 affidavit to which Mr. Sheremeta took exception contained copies of reports and other materials generated by the Mexican Estate. These reports, I am advised, are also a matter of public record in Mexico.
[23] Beyond attaching the cover page of the offending May 9, 2018 affidavit to the adjournment application and referring to the size of the affidavit, the applicant provided me with no evidence permitting me to evaluate his claim that the interests of justice required an adjournment of the hearing that had been scheduled on a peremptory basis in consequence of this never-fiiled affidavit. There was simply no evidence that the applicant could not proceed with a hearing of his own application unless he were first permitted to reply and cross-examine on an affidavit of the respondents that was not being relied upon and had not been filed with the court. The fact that cross-examination on the respondents’ affidavits – some almost two years old - had been left to the last second (even if on consent) and then unilaterally cancelled did not improve the chances of a favourable response to the applicant’s request for yet another indulgence. I had no reason to believe that cross-examination was necessary for a fair hearing and the applicant gave me no evidentiary basis to conclude otherwise.
[24] I declined to grant the applicant’s request for an adjournment. My short handwritten endorsement (missing words inserted in square brackets; contractions spelled in full) was as follows:
Both parties allowed the agreed, court-ordered timetable to slide. No evidence has been filed since the last adjournment. It does not appear that any cross-examinations of anybody have been done in the past two years. The issues in this case are not particularly complex. The Applicant has had every chance to help himself but has sought or [has] been the cause of multiple adjournments. The Respondents delivered a fresh affidavit the day before a scheduled cross-examination which has been withdrawn and was not filed. The applicant could have (i) gone ahead and cross-examined and taken the position that the out-of-time affidavit was inadmissible; (ii) proceeded with cross-examination including [on] the [new] affidavit; or (iii) come in for a 9:30 hearing immediately for directions. It was not open to him to choose unilaterally (iv) to assume he is entitled as of right to yet another adjournment of a full day hearing booked months in advance – particularly when it is peremptory upon him – and fail to file evidence delivered months ago or his factum. We shall proceed with the application this morning. Application to adjourn and reschedule is dismissed.
[25] Parties run a risk when they put things off to the last possible second or as here, considerably beyond the last possible second. Hearings once booked should proceed unless the interests of justice require otherwise. Self-inflicted impediments to a timely hearing will not often rise to that standard. After dismissing the adjournment application, I rose for 20 minutes to permit the applicant time to prepare to proceed with the hearing of his own application.
[26] Not every litigant is satisfied with every ruling every time. Mr. Sheremeta immediately announced that he would be appealing my ruling refusing him an adjournment. So much was his right. Where I took issue with his approach was his announcement that he would not proceed with the hearing of his client’s application.
[27] I advised Mr. Sheremeta that the hearing would proceed and that he cannot reasonably have assumed that the motion for an adjournment would be successful without being prepared for a different outcome. That assumption was all the more unwise given the known opposition to an adjournment expressed by the respondents who have been ready for a hearing for eight months.
[28] Mr. Sheremeta began to make some of his arguments and shared with me his two draft facta (85 pages in total length). After a short time, he declined to proceed any further and took his draft facta back (he brought no copies with him), announcing that his client had instructed him to participate in the hearing no further.
[29] Before hearing from the respondents, I advised Mr. Sheremeta that I would nevertheless extend to him the indulgence of being permitted to file his facta and case books at any time until the close of business the next day. He took me up on that offer and filed three volumes of case books and two facta (totaling 87 pages). I have reviewed these in considering my judgment.
[30] The respondents were served with this additional material as well and have not applied for leave to respond. I heard their argument in court and Mr. Sheremeta remained present to hear it as well. I am satisfied that both sides have had a full and fair opportunity to place before me the evidence and legal arguments they judged necessary to permit me fairly to decide the issues raised by the Application and I am accordingly rendering my decision.
[31] It should be clear to all that the applicant claiming as he did here the right to dictate to the court whether it may proceed with a scheduled hearing was quite inappropriate and unacceptable. The lawyer's duty to treat the tribunal with candour, fairness, courtesy and respect and in a way that promotes the parties' right to a fair hearing requires, at a minimum, that counsel be ready to proceed with a scheduled hearing even if the lawyer is seeking an adjournment. This is particularly true where it is known that the adjournment request is opposed.
(b) The Canadian Estate
[32] The facts necessary to understand this application are few in number.
[33] The testatrix, Vitoria Jimenez Valdes died in June 2010 shortly after her 68th birthday after a brief illness.
[34] She married her first husband in 1964 and had three children with him (two daughters and a son), the last of whom was born in 1971. The family resided in Mexico City.
[35] The testatrix was divorced from her first husband in 1979.
[36] In 1999, she married the applicant Francesco Sabetti. At the time of her second marriage, the testatrix had three adult children (the youngest then being 28 years of age). Mr. Sabetti too had three adult children (also two daughters and a son) of a similar age range. The half-siblings did not have a close relationship with each other. At the time of her death, she lived with her husband in an Oakville condominium.
[37] At the time of her death, the testatrix was one of the beneficiaries of her mother’s estate. Her mother’s estate is administered out of Mexico under the supervision of courts in Mexico City. The Canadian Estate has a 1/12th interest in the residue of the Mexican Estate while the testatrix’ three children each have their own 1/36th interest in the Mexican Estate of their grandmother.
[38] None of the executors of the Canadian Estate are executors of the Mexican Estate. The Canadian Estate neither controls nor administers the Mexican Estate, directly or indirectly. The interest of the Canadian Estate in the Mexican Estate, such as it is, is a passive one. As assets are sold and proceeds received, the Mexican Estate makes distributions and the Canadian Estate receives a 1/12th share of them.
[39] Mr. Jimenez described the process in Mexico as a slow one – the Mexican Estate has ten remaining properties that are clearly taking some time to be converted to money. There is also evidence of litigation by and against the Mexican Estate that has further complicated (and slowed) the realization process. The Mexican Estate is a considerable one, although the precise amount and timing of future distributions cannot be established with confidence.
[40] The testatrix opened an account with Stonegate Private Counsel to assist her in managing her savings and the distributions she was receiving from her mother’s estate. Her executors have retained Stonegate in their turn to invest and administer the assets of the Canadian Estate.
[41] The will of the testatrix is dated January 29, 2010. In the will, she appointed her son Luis and her daughter Maura Gabriela as executors. After certain specific bequests, the will disposed of the residue of her estate as follows:
(g) I direct my Trustee to divide the residue of my estate into equal shares and to transfer such shares as follows:
(1) If my husband SALVATORE SABETTI, survives me, my Trustee shall hold one share in trust during the lifetime of the said SALVATORE SABETTI and shall pay the annual net income to him, in such monthly, quarterly or other periodic payments as my Trustees in their absolute discretion consider advisable. Upon the death of my husband, SALVATORE SABETTI, such share or the amount any income thereon remaining shall fall into and form part of the residue of my estate.
[42] Three other shares of the residue were left to the testatrix’ three children.
[43] Mr. Sabetti survived his wife as did her three children.
Issues to be decided
[44] Does the will create a partial intestacy in respect of the remainder of the first share of the residue after the applicant’s death?
[45] Is the applicant entitled to an additional distribution as claimed by him of $652,705.35?
[46] Should the respondents’ Certificate of Appointment be revoked and an intuitional trustee be appointed in their stead?
Analysis and discussion
(i) Does the will create a partial intestacy
[47] The applicant contends that the will has not fully disposed of the first of the four shares of the residue because “there can be no residue of a residue”. He submits that by providing that the residue of the first share falls into the residue, the will does not name the beneficiaries of the first share of the residue with sufficient certainty and a partial intestacy must result to that extent.
[48] The applicant relied upon the decision of the Court of Appeal in Re Martin, 24 O.R. (2d) 408 and Chan Estate v. Chan, 1996 CarswellOnt 3405 (Gen Div.) where Molloy J. found that where a “gift which forms all or part of the residue fails, it does not fall back into the residue but rather is distributed as an intestacy”.
[49] Neither Martin nor Chan is of assistance to the applicant. The premise of those cases is a bequest that has failed for some reason. This simply begs the question of whether or not the first share of the residue has been completely disposed of by the will.
[50] The effect of the applicant’s argument is that the will requires the remainder of the first share of the residue effectively to travel in a circle to be re-allocated in equal amounts to each of the four shares of the residue created by the will because the applicant husband was alive at the time the will came into effect.
[51] It should be noted that even on this interpretation, four equal shares of residue would be created, only one fourth being re-allocated to the first share (again) and, following that logic, there is no reason why the process would not be repeated in an endless circle until a fraction of a cent remained to be allocated to the first share.
[52] The argument is absurd and wrong.
[53] The testatrix clearly intended to dispose of the residue of the first share after her husband’s death. At least on its face, the language used fully disposes of the first share. The issue before me is whether that gift fails for uncertainty despite her intent.
[54] The first task in the construction of any document – be it a contract, a will or a statute – is to consider the language used in the context in which it is used. Two rules follow naturally from this. Firstly, where two possible interpretations present themselves one of which produces an absurdity and one of which is conforms to the apparent intention of the maker of the document as suggested by a reading of the entire document in its context, the latter is to be preferred. Secondly, in the estates context, the “golden rule” of construction requires a will to be read as to lead to a testacy rather than intestacy if this can be done without straining the language of the will or violating the intention of the testator: Chan at para. 12 and Re Harrison Estate, (1885), 30 Ch. D. 390. The second rule is in reality no more than a corollary of the first in the specific context of wills.
[55] In my view, the applicant’s strained and technical interpretation of the will would operate to defeat the plain and common-sense intention of the testatrix as expressed by her.
[56] The fallacy in the applicant’s argument stems from his failure properly to analyse the trusts created by the will in their chronological order.
[57] The will creates a subsidiary trust over the first share of the residue within the larger testamentary trust disposing of the entire estate. Both the larger trust and the subsidiary trust are born at the same time – upon the death of the testatrix. The subsidiary trust in turn created two interests: a life interest in favour of the applicant and a remainder interest. While the remainder interest is created at inception, the concrete subject-matter is not finally ascertained until the life interest is exhausted with the death of Mr. Sabetti.
[58] There is no dispute here that the intention to create a life interest in favour of Mr. Sabetti is clear and unambiguous. The question of whether the will results in a partial intestacy is restricted to the remainder of the first share as it will exist at that future point in time: Stoor v. Stoor Estate, 2014 ONSC 5684.
[59] The corpus of the trust under consideration is thus the remainder of the first share considered at a future date long after the four shares of the residue of the have already been created. The testatrix cannot be taken to have intended to create a life interest for her husband in the remainder of a life estate for her husband after his death. At the point where the remainder of the first share comes to be distributed the intended beneficiaries of that trust are clearly the three other shares of the residue of the will initially created.
[60] The applicant suggests that an intention to benefit his estate can be inferred from the will as a result of the bequests made by the testatrix to her step-children (his own children). The suggestion bears no scrutiny. The limited bequests to her step-children were made payable from the proceeds of “her” share of the family home and created at a time when she held title to it as tenant in common along with her husband. Shortly afterwards, the title to the property was transferred to a joint tenancy. Since the testatrix pre-deceased her husband, the full value of the home passed to Mr. Sabetti outside the will and the bequests to her own children and her step-children from the proceeds of that home fell away.
[61] Inferring from this will the intention to make Mr. Sabetti or his estate a capital beneficiary would be to stand the will on its head.
[62] My task is not to consider whether there are technical arguments that might be deployed to defeat the evident intent of the testatrix. I find no difficulty whatsoever in discerning the intention of the testatrix or in applying it. It is possible to read this will so as to avoid an intestacy and I shall do so.
[63] I find that the language of the will has disposed entirely of the first share of the residue and that, upon the expiry of the life interest created, the remainder of the first share is to be divided equally among the other shares of the residue initially created.
(ii) Additional distribution claimed by applicant
[64] The applicant claims that the estate has been mal-administered and that he is entitled to an immediate distribution of $652,705.35. The Notice of Application sought an order for the payment of $365,538.92. The factum of the applicant – filed after oral argument was completed – claims $652,705.35. Neither claim can be sustained. I find the applicant’s arguments to be without merit.
[65] The applicant’s reasoning in advancing this claim works backwards from his own estimate of the fair market value of 1/12th of the Mexican Estate (“around $5.6 million”). His position is that one-quarter of that amount ought immediately to have been allocated to his trust for investment in income producing assets. He seeks to impute 7.5% interest per annum as the rate of return he ought to have received had this allegedly required step been undertaken immediately.
[66] The applicant’s submissions owe more to fantasy than to the terms of the will or the nature of the assets actually administered by the executors.
[67] The starting point of the applicant’s argument is the assumed “fair market value” of the Mexican Estate. The evidence for this is almost entirely lacking. In his affidavit of May 19, 2015, for example, the applicant stated that he “believed” the 1/12th share “has a value of about $3.33 million”.
[68] Any valuation of the Mexican Estate would require expert evidence accounting for, among other factors:
a. The value of the Mexican real estate held by the Mexican Estate;
b. The time frame in which that real estate is expected to be sold;
c. The risks to value over that time frame and the risk that the time estimate is inaccurate;
d. Currency fluctuations;
e. Mexican litigation;
f. Appropriate discount rate
Each of these matters would pose complex and difficult problems for an expert to address. The evidence of the applicant does not scratch the surface of these issues.
[69] The applicant submits that valuation of the Mexican Estate is not his problem. He argues that the executors were responsible for arriving at a fair market value of the entire estate at the beginning and his income trust ought to have been established at the outset with investible assets valued at one-quarter of that value from whatever source necessary.
[70] The applicant’s argument, if adopted, would retroactively appropriate to the first share of the residue almost half of the liquid assets in the Canadian Estate and leave the other three supposedly equal shares of the residue to wait upon the Mexican Estate for their share, if any, bearing all of the risks recited above. That is not what the will provides.
[71] After payment of the (limited) specific bequests, the will directed the executors to divide the residue into “equal shares” the first such “equal share” being dedicated to the creation of the spousal trust from which Mr. Sabetti was to receive the income. The will also vested in the executors the discretion as to the manner and timing of converting assets into money.
[72] The applicant’s argument would create four quite unequal shares from the outset with the bulk of investible assets being allocated to the first share to create his income trust while the virtually all contingent and future “assets” would be relegated to the other three “equal” shares. This is the precise inverse of what the executors were required to do under the will. The other shares would have neither income nor the greater part of capital available to them until an unknown future date.
[73] The Mexican Estate is not administered by or under the control of the executors of the Canadian Estate. It is not in fact generating income at present. Whatever the value of the Mexican Estate, the executors possess no asset they can actually invest or distribute arising from it at present.
[74] The arguments of the applicant are simply devoid of merit. There is no obligation to treat the four shares of the residue differently as regards the allocation and distribution of assets as received by the executors. There is no obligation upon the executors as trustee of the first share of the residue of the Canadian Estate to invest or pay income to the income beneficiary monies that have not actually been received from the Mexican Estate.
[75] The respondents have separately passed their accounts regarding the investment and distribution of the assets that have come into their control, including those distributions actually received from the Mexican Estate.
[76] I cannot find that the applicant is entitled to an immediate distribution of anything.
(iii) Removal of Executors
[77] The applicant alleges that the respondent executors have failed in their duties and ought to be removed. Among the complaints levelled:
a. Failure to maintain an even hand;
b. Failure to communicate; and
c. “failure to invest ¼ of the value of the estate residue in a manner which would produce a reasonable income for the Applicant”
[78] The applicant also submits that the executors have shown animus against him by commencing litigation against him and be defending this application regarding the interpretation of the will.
[79] The litigation he references was a notice of action commenced by the estate against him but ultimately not proceeded with. That notice of action complained of two steps taken by the applicant while his wife was in palliative care immediately prior to her death. It alleged (and he has not denied) that he used his power of attorney to transfer to himself an automobile that the will specifically excluded from the bequests made to him only a few months earlier and that he emptied a bank account containing the funds of the testatrix in the same time frame. None of these allegations have been pursued and I will not comment upon their merits beyond stating that they appeared to be of sufficient merit that an executor advised of the facts could not be faulted for investigating further (the Notice of Action preserved limitation periods). I cannot find in this claim ultimately abandoned any reason to fault the executors.
[80] All or substantially all of the applicant’s complaints about the executors arise directly or indirectly from his mistaken view of their duties in relation to the value of the Mexican Estate prior to receipt of proceeds from it or from issues that have been resolved at the passing of accounts that has already taken place.
[81] The executors have retained qualified professionals to assist them. They have sought and received competent advice. Notwithstanding the applicant’s self-centred view of what an even hand looks like, there is no evidence before me from which I might conclude that they have failed to be even handed as that duty is properly understood. The facts of this case do not approach the “clear case of necessity” required for the court to interfere with the discretion of the testatrix in choosing the persons to act as her executors: Re Weil, [1961] O.R. 888 (C.A.) at para. 5; Johnston v. Lanka Estate, 2010 ONSC 4124 at para. 15.
Disposition
[82] The application is accordingly dismissed. The respondents are entitled to their costs. I shall receive written submissions regarding the amount, scale and manner of payment of such costs. The respondents are to provide me with their written submissions (limited to ten pages) by June 30, 2018 and the applicant shall provide me with his response (same size limitation) by July 31, 2018. In each case, case books are not required unless cases referenced are not readily available electronically. A list of cases is sufficient. Submissions may be sent electronically via my assistant or delivered to Judges’ Administration at 361 University Avenue.
S.F. Dunphy J.
Date: June 5, 2018