Court File and Parties
COURT FILE NO.: 17-62309 DATE: 2019-03-18 ONTARIO SUPERIOR COURT OF JUSTICE HAMILTON
IN THE ESTATE OF SHARON ROSE FLOREK, deceased
BETWEEN:
William John Florek, Applicant – and – Janet Alexis Vandenbroek, Respondent
Counsel: Michael Stanton, Counsel for the Applicant Mary Grosso, Counsel for the Respondent
HEARD: June 13 and December 13, 2018
REASONS FOR DECISION
Justice L. SHEARD
[1] The applicant, William John Florek (“Bill”), seeks to pass his accounts with respect to the administration of the estate of the parties’ late mother, Sharon Florek (“Sharon”). Sharon, predeceased in 1998 by her husband, Alexander Florek (“Alexander”), died on September 22, 2009, intestate. Sharon’s children, Bill, and the respondent, Janet Vandenbroek (“Janet”), are her intestate beneficiaries, and entitled to share equally in Sharon’s estate (the “Estate”).
[2] Janet raised a number of objections to Bill’s Estate accounts and asserted throughout that a trial would be required given the conflicting evidence on the main issues. Bill disagreed. Bill took the position that r. 74.18 (13.1) [1] provides that a trial should be ordered only after the passing of accounts hearing and only if the judge determines a trial is required.
[3] Rule 74.18 (13.1) states:
Trial may be Directed
(13.1) On the hearing of the application, the court may order that the application or any issue proceed to trial and give such directions as are just, including directions,
(a) respecting the issues to be tried and each party’s position on each issue;
(b) respecting the timing and scope of any applicable disclosure;
(c) respecting the witnesses each party intends to call, the issues to be addressed by each witness and the length of each witness’ testimony; and
(d) respecting the procedure to be followed at the trial, including methods of adducing evidence. O. Reg. 193/15, s. 12 (17).
[4] For the reasons set out below, given the many factual disputes and the incomplete and/or unavailable documentary record, I find that it would never have been possible to fairly decide this matter on a paper record: a trial was inevitable.
Overview
[5] The issues arise in large measure from the intertwining of Bill’s finances with that of his late parents. A potentially significant claim concerns the ownership the family firewood business (the “Business”). Bill did not include the Business in his Estate accounting and says that it was gifted to him by Alexander in the 1990’s. Janet disputes that. She says the Business belonged to Sharon, who intended it to be distributed among Bill, Janet and Janet’s children and grandchildren.
[6] Janet also takes issue with Bill’s use of and failure to maintain the family home, its contents and the lands at 761 Brock Road (the “Property”). Following Sharon’s death, Bill remained living on the Property for well over a year and ran the Business from the Property for a year or so beyond that. Although Bill was appointed Estate trustee in 2013, he did not sell the Property for another two years. Janet asserts that Bill’s delay in selling the Property and his failure to maintain it and its contents resulted in losses to the Estate.
[7] The parties also disagree on who owns a Bank of Montreal account of approximately $74,276.27 registered in Bill’s name (the “BMO Account”). Bill did not include the BMO Account in his Estate accounting because he says that Sharon gave the money to him in the late 1990’s. Janet says that Bill held the BMO Account in trust for Sharon.
[8] Finally, Janet objects to certain expenses for which Bill seeks reimbursement from the Estate or to be borne by the Estate.
[9] Based on Bill’s Estate accounting, the Property was the only significant Estate asset. Its net proceeds of sale of $339,075.90 are held in trust. Bill submits that if Janet’s objections were allowed, it would increase the value of the Estate by $1,025,000 with the result that even if all the money in trust were paid to Janet, she would still be owed money. That argument is not persuasive: if, as Janet asserts, Bill has failed to include Estate assets, he must do so and the value of those assets must be divided.
[10] Bill’s position is that Janet’s valuation figures make no sense given the apparent financial situation of this family: Alexander retired from truck driving in his early fifties, and died at 54. Sharon was supported by ODSP benefits, supplemented by Bill’s contribution toward the family’s living expenses.
[11] As will be seen below, Janet’s high values of the Business and the household contents appears to be based on her personal estimation of value and were not supported by any independent evidence. A significant difficulty in determining proper values is the absence of records: Bill did not take an inventory of the household contents and has not provided full disclosure, with values, of the Business’s income and assets.
Background
[12] Sharon and Alexander Florek bought the Property in 1974 and lived there until their deaths. The Property included a home, a large outbuilding, and approximately one acre of land. Bill remained at home while his parents were alive and remained living on the Property until sometime after Sharon’s death.
[13] Janet left home, married, and had children. There is conflicting evidence concerning Janet’s relationship with Sharon: Janet asserts that for the 10 years prior to Sharon’s death, Janet had a room at her parent’s home, where Janet stayed with increasing frequency as Sharon’s care needs increased. Bill disputes that Janet stayed over at the Property until a few months prior to Sharon’s death. There does appear to be relative agreement that, a few months after Sharon’s death, Bill changed the locks on the house, which prevented entry to Janet and/or members of her family.
[14] After Sharon’s death, Janet and Bill could not reach an agreement respecting the administration and distribution of Sharon’s Estate. Neither sought to be appointed as estate trustee until December 2012 when Bill brought an application to be appointed as sole estate trustee. Bill was appointed Estate trustee on March 21, 2013.
[15] At the time of Bill’s application, Janet was in the hospital, having suffered a serious back injury. Janet has since been confined to a wheelchair and spent many years at St. Peter’s Nursing Home, where she remained at the time these proceedings began.
[16] Bill brought this application to pass his Estate accounts in July 2017. His application was amended on February 22, 2018. Janet has filed an Objection to Bill’s Estate accounts. Some of the objections were resolved prior to hearing and at the hearing, including Bill’s withdrawal of a claim for reimbursement from the Estate of certain expenses. However, the main issues remain unresolved.
Applicable Law:
Can the issues be decided on the paper record or should the Court direct a trial of the application or an issue in the application?
[17] The parties agree that the law as set out at paragraphs 41 to 43 of the applicant’s factum accurately summarizes the law on the court’s jurisdiction on a passing of accounts. That jurisdiction has its source in the Estates Act, R.S.O. 1990 c. E. 21. Section 49(4) specifically authorizes the court to direct a trial as well as r. 74.18(13.1).
Unresolved Objections
[18] The three main areas of dispute are:
(i) What assets should be included in the Estate? (ii) What compensation should be paid to Bill as Estate trustee? and (iii) What expenses should be reimbursed to Bill or paid by the Estate?
[19] On the record before me there was conflicting evidence on the discrete questions that underlie the three areas of dispute including:
- Does the Business belong to Bill or to the Estate?
- If the Business belongs to the Estate, what is its fair market value as at September 22, 2009?
- What is the fair market value of the contents of the home as at September 22, 2009?
- Did Bill effectively exclude Janet from the Property? If so, from and after what date?
- Is Bill by his conduct (such as changing the locks and thereby excluding Janet’s entry and/or living at the Property but failing to maintain it and/or pay carrying costs when he knew that it would cause harm to the Property or its contents, etc.), liable to the Estate for any losses suffered by reason of the deterioration of the Property and/or its contents from and after September 22, 2009, and for any interest or penalties paid because of late payment? If so, in what amount?
- Are there any other Estate chattels for which Bill has not accounted (ie. bakery equipment, vehicles etc.)?
- Does the BMO Account belong to Bill or to the Estate?
- Did Bill unreasonably delay in the sale of the Property and, if so, did the Estate suffer a loss as a result? If yes, in what amount? and
- Is Bill liable to the Estate for occupation rent for his or the Business’s use and/or occupation of the Property from September 22, 2009 to the date he and/or the Business vacated the Property? If yes, in what amount?
[20] A trial is required to resolve the conflicting evidence found in the paper record before me. I therefore direct a trial before me, on the issues, and with the directions, as set out below.
The Issues to be tried and Directions given:
A. Ownership, Value and claim to post-death profit of the Business:
[21] Bill says the Business was given to him by Alexander in the late 1980’s or early 1990’s, but acknowledges that he does not have anything in writing to support his assertion. Evidence of Bill’s ownership of the vehicles used in the Business appears to post-date Sharon’s death. Bill also acknowledges that some of the income from the Business was used to pay the expenses related to living on the Property.
[22] Janet asserts that Sharon considered herself to be the owner of the Business and told Janet that she intended that it be distributed among Bill, Janet and Janet’s five children. Janet also says that she and some of her children worked in the Business. Bill acknowledges that Janet and her children did work for the Business but disputes that the fact that family members occasionally worked for the Business creates or is evidence of an ownership interest.
[23] A trial is required to determine ownership of the Business.
[24] The value of the Business is also contentious. Janet asserts that Bill has not provided sufficient records to determine the value of the Business. Janet has provided her own evaluation of the Business, which Bill disputes.
[25] The documentary evidence on the value of the Business is not sufficient or sufficiently clear to allow the Court to determine from it the value of the Business as at the date of Sharon’s death.
Direction #1: The parties are to jointly retain a business valuator to provide an independent appraisal or valuation of the fair market value of the Business as at September 22, 2009, for use at trial. The parties are to co-operate fully with the valuator and to provide information as may be requested by him or her. The cost of this valuation is to be paid at the first instance by the Estate, without prejudice to the right of either party to seek that the other person reimburse the Estate for that cost.
If the parties cannot agree on a valuator, they may seek further directions from the Court.
[26] In the event the business is found to be an Estate asset, Janet also seeks to include the profit earned since Sharon’s death as an Estate asset.
Direction #2: There is no dispute that Bill alone ran the Business after Sharon’s death. However, I conclude that it would be impractical and disproportionately costly to direct an accounting of the post-death profits, if any, earned on the Business. Therefore, I direct that, if the Business is found to be an Estate asset, its value as at September 22, 2009, will be credited toward Bill’s distributive share of the Estate. Janet is free to make a claim for interest from September 22, 2009 on the portion of her distributive share of the Estate in an amount equal to the (September 22, 2009) value of the Business.
Janet is to put Bill on notice of any claim she intends to seek for interest, the date from which interest is to run and the rate of interest claimed.
B. Amounts payable to the Estate:
[27] Bill’s treatment of expenses incurred after Sharon’s death conflicts somewhat with his assertion that he owns the Business. For example, he initially claimed that the Estate should pay the commercial fire insurance premium on the Property. He has since withdrawn that claim but that evidence somewhat undermined Bill’s assertion that the Business was owned by him.
[28] Janet asks that Bill be held responsible for all the expenses related to the Property until he and the Business relocated. Janet also asserts that Bill should pay rent for his personal and the Business’s use and occupation of the Property after Sharon’s death. Although not agreed to, there is some evidence as to dates on which Bill and the Business vacated the Property. However, absent in the material put before me was opinion evidence as to market rents.
[29] As Estate trustee, Bill should have considered payment to the Estate of rent and in what amount.
Direction #3: Unless the parties otherwise agree on the amount of rent, the parties are to jointly retain a valuator to provide an opinion respecting market rent that could have been charged for Bill’s use of the home and for the Business’s use of the Property. This opinion is to be used at trial. The parties are to co-operate fully with the valuator and to provide information as may be requested by him or her. The cost of that opinion shall be borne by the Estate as a proper estate expense.
[30] The Court recognizes the unrecoverable costs incurred in complying with Direction #2, and encourages the parties to agree on the amounts that would or should be payable, for the use of the Property.
C. Inventory and valuation of Bakery Equipment and Household Contents:
[31] Janet claims that her parents purchased bakery equipment “two or so years” prior to Alexander’s death in 1998. The bakery equipment was not included in Bill’s Estate accounts. Janet asserts that the equipment was worth $20,500 but, on cross-examination, acknowledged that her estimate was the amount she believes her parents paid for the equipment. It is unclear whether this equipment still existed as at Sharon’s death and, if so, what it was worth at that time. Janet asserts that, as Estate trustee, Bill had a duty to take an inventory of the contents on the Property, and failed to do so.
[32] Bill did not take any inventory of the chattels on the Property despite that he saw fit to empty the contents of the house into two storage pods, pay to store the pods, and then to empty the contents of the pods into the two garages on the Property before ultimately paying to have it all thrown away. Each time the contents were moved, there was an easy opportunity for Bill to have inventoried or photographed the contents. He chose not to do so.
[33] The evidence on the hearing before me concerning what was in the house, and its market value, was entirely unsatisfactory. The photographs that were put before the Court do not support Bill’s assertion that Sharon was a hoarder and that the household contents were worthless. By the same token, Janet’s estimate of the value of the contents is entirely unrealistic, given the date of purchase of some of the contents, the nature of the contents – ordinary furniture – and the overall evidence about the wherewithal of the Florek family.
[34] While the onus is on Bill, as Estate trustee, to provide a proper inventory [2], the absence of that inventory does not mean that the Court simply adopt the values suggested by Janet. Based solely on Janet’s list of household contents, I cannot conclude that they were worth anywhere near her estimate of $159,180. However, I also cannot reasonably conclude that the household contents were worth nothing, as alleged by Bill. Faced with those two alternatives, I reluctantly conclude that a trial is required to determine this issue.
[35] Despite reaching that conclusion, my reluctance comes from the recognition that using a trial to determine the value of household contents will likely be out of proportion to the value of the contents, and the cost could well exceed the value of the items themselves.
[36] A more reasonable and proportionate approach, and one that I would urge upon the parties, would be for the parties to agree on what might have been in the house as at September 2009 and for the list of items to be submitted to an agreed-upon estate liquidator who could provide an estimate of value. When determining the value of an estate, the court does not take into account the value to a family member of any given item of personalty but, rather, must consider evidence of the fair market value of the item, less any cost of disposition. Respecting the latter, it is to be expected that even on an estate auction, some items would not be sold and, in determining the fair market value of the household contents, the court would also take into account the cost of disposing of the unsold items.
[37] A further issue relates to the condition of the household contents at the time of disposition as compared to the condition they were in at death or even in March 2013, when Bill was appointed as Estate Trustee.
[38] It may well be that after Bill was appointed, the contents may have been damaged by the weather, or other elements in the home, caused by lack of proper roof repair or maintenance of the home. Bill’s evidence was that when he disposed of household contents, they were worth nothing because they had been damaged by weather and vermin, related to the non-repair or maintenance of the home. Therefore, the contents are to be valued as at September 22, 2009.
Direction #4: No later than 120 days before trial, Bill is to provide Janet with his list of what he says are the contents of Sharon’s house (excluding bakery equipment and personal use vehicles) (hereinafter the “Contents”). Janet shall have 15 days following service upon her of Bill’s list of the Contents to advise Bill whether she accepts his list. If Janet does not so advise Bill within 15 days, Janet will be deemed to dispute Bill’s list of the Contents;
Direction #5: If the parties can agree on a list of the Contents, then they shall jointly retain an estate appraiser or valuator, agreed-upon by the parties or, if they cannot agree, as agreed-upon by their counsel, to provide an opinion as to the estimated fair market value of the Contents as at September 22, 2009. The cost of that estimate shall be paid by the Estate at the first instance, without prejudice to the right of either party to seek an order that the other party bear that cost. The estimate shall be conclusive proof of the value of the Contents as at September 22, 2009.
Direction #6: If the parties cannot agree on a list of the Contents, then each party will compile his and her own list and shall separately retain an estate appraiser/valuator to provide an opinion as to the estimated the fair market value of that party’s list of the Contents as at September 22, 2009. In that event, each party shall pay the cost of that valuation at first instance, without prejudice to his or her right to seek repayment of that expense from the Estate or from the other. The estimates may be tendered as evidence at trial, subject to the rules of evidence and the Rules of Civil Procedure with respect to the admissibility of opinion evidence.
Direction #7: Unless Bill asserts and, prior to trial, advises Janet otherwise, it will be assumed that it is Bill’s position that the Contents had a nil value as at the date of his appointment as Estate trustee.
Direction #8: Who, if anyone, is liable for any diminution in the value of the Contents from September 22, 2009 to the date of Bill’s appointment as Estate trustee, will be determined at trial.
D. Ownership of the BMO account:
[39] There is conflicting evidence with respect to ownership of the $74,276.27 in the BMO Account. The parties agree that the source of these funds was Sharon, who inherited $125,000 from her mother. The parties also agree that Sharon put that money in Janet’s hands in or about 1993. Bill asserts that this was a loan to Janet and that in 1997 Sharon asked Janet to repay the loan. When Janet repaid the $125,000, Bill says that Sharon gifted that money to him for all the years Bill had taken care of Sharon and Alexander.
[40] Janet’s evidence is that the money was put into her name in a GIC at the Milton BMO branch, where it was not touched for a few years. In 1997, Sharon chose to move the money from the BMO GIC to the Dundas BMO branch. Part of the money was put into a new investment and part into an account that Sharon could access for her expenses. Janet asserts that the BMO Account was put in Bill’s name so he could assist Sharon with her bill paying, etc. Janet says she was present at the bank when Sharon made these changes.
[41] Janet denies that Sharon ever intended to gift the BMO Account to Bill and also disputes Bill’s assertion that he had provided care to his parents as at 1997 or 1999, when the BMO Account was opened.
[42] Janet also points to Bill having included the BMO Account in his initial statement of Estate assets as some evidence that he believed it to be an Estate account.
[43] There is a great deal of jurisprudence concerning presumptions that apply when a parent places money in the name of an adult, independent child [3]. However, there must be a factual basis upon which to apply the law. On the hearing, there was scant and conflicting evidence as to why and how the BMO Account came to be in Bill’s name. That issue requires a trial in order to provide the Court with fuller evidence on the events and to allow the Court to assess credibility. Once the facts are better understood, it will be possible to apply the law.
E. Other disputed Estate expenses:
[44] Any issues not specifically addressed in these reasons, may be may be raised by the parties at trial including damages claimed by Janet, Estate trustee compensation, and legal fees.
F. Janet’s Right to Buy the Estate Property:
[45] At paragraph 70 of her factum, Janet lists the relief sought. She does not seek an order respecting any claim that she ought to have been permitted the right to purchase the Property before it was listed for sale to the public. However, as that issue was raised in argument and in her materials, I deal with it now.
[46] Although she and Bill discussed buying out the other’s share in the Property, there is no evidence that Janet ever offered to buy out Bill’s interest in the Property. Further, neither party referred to any legal authority to support the existence of an obligation on an estate trustee to offer estate property to a beneficiary before offering it to the public for sale. Absent specific provisions in a contract or a Will, there is no such obligation.
Direction #9: I have determined that Janet’s claim, if any, relating to Bill’s failure to advise her that the Property was listed for sale or to allow her to purchase the Property before it was listed, is not to be included among the issues for trial.
G. Additional Directions:
[47] The Court issues the following additional directions:
Direction #10: The cross-examinations shall be treated as examinations for discovery;
Direction #11: The Applicant’s Compendium and Supplementary Compendiums shall form the pleadings and shall also be used as exhibits at the trial such that the parties may, at trial, refer to the documents contained in the Compendiums as exhibits to the affidavits.
Direction #12: If the parties seek to rely at trial on any documents not contained in the Applicant’s Compendiums, they shall serve a sworn affidavit of documents listing those new documents and, if requested, shall provide the other party with a copy of any new document. Nothing in this order shall make any document admissible as evidence at trial that would not otherwise be admissible in accordance with the rules of evidence and with the Rules of Civil Procedure.
Direction #13: If either party intends to call a witness(es) at trial, other than himself or herself, no later than 90 days before trial, he or she shall provide the other party with the identity of that witness and a summary of the evidence that witness is anticipated to give.
Direction #14: Except as otherwise ordered, if either party seeks to rely on any expert evidence, apart from the evidence that is found in the Applicant’s Compendiums, they shall serve their reports in accordance with the Rules of Civil Procedure.
Direction #15: No disbursements claimed shall be considered unless there is proof of payment either by way of a receipt or an invoice.
Direction #16: Either party may seek a motion on notice, to be heard by me for further directions respecting the trial.
Direction #16: Without prejudice to the right of the parties to agree on an earlier date, this matter shall be placed on the Trial Scheduling Court List of September 18, 2019 to schedule a pre-trial and a trial.
Costs
[48] The costs of the hearing of the passing of accounts are reserved to be determined at trial.
Sheard J.