Court File and Parties
COURT FILE NO.: CV-18-0204 DATE: 20190708 SUPERIOR COURT OF JUSTICE - ONTARIO
In the Estate of Norman Roman Zock, deceased
RE: Norma Lynn Pierce and Gary Zock, in their capacities as Estate Trustees of the Estate of Norman Zock and Trustees of the Henson Trust in favour of Stephen Wayne Zock, Applicants AND: Stephen Wayne Zock, Respondent
BEFORE: Justice R. Raikes
COUNSEL: Stephanie Marentette Di Battista, Counsel for the Applicants James E. S. Allin, Counsel for the Respondent
HEARD: June 10, 2019
Endorsement
[1] Norman Zock (“Norman”) died April 14, 2014. His wife predeceased him. Norman is survived by his four children: Gary Zock, Norma Pierce, Stephen Zock and Philip Zock. For ease of reference I will refer to family members in this decision by their first names.
[2] Norman had a primary and secondary Will. The primary Will disposed of most of Norman’s assets and established the Stephen Wayne Zock Discretionary Trust (hereafter “the Discretionary Trust”). The secondary Will deals with the family farm property located at 8436 Seventh Line East, RR #6 Chatham and established the Norman Zock Farm Trust (hereafter “the Farm Trust”).
[3] The Discretionary Trust is what is called a “Henson Trust” for Stephen’s benefit. Stephen was diagnosed with paranoid schizophrenia when he was a teenager. He manages this illness by medication that he takes daily. Stephen is now 57 years old. He has never married and resided with Norman at the family farm until Norman’s death.
[4] Stephen receives financial assistance from the Ontario Disability Support Program (“ODSP”). A Henson Trust permits trustees to advance monies to and for the benefit of beneficiaries in their discretion as and when they deem it appropriate to do so. Because there is no definite entitlement to payment of a particular amount at any specific point in time under the trust, Stephen’s ODSP eligibility is not affected. Clearly, Norman received legal and/or tax advice when he created his estate plan.
[5] In both the primary and secondary Wills, Norman appointed Gary and Norma to act as trustees of the two trusts. Gary and Norma accepted the appointments and have acted as trustees under both the Discretionary Trust and Farm Trust since shortly after Norman died.
[6] There has been a breakdown in the relationship between Gary and Norma on the one hand, and Stephen on the other. Gary and Norma wish to be removed as trustees of the Discretionary Trust. They seek an order removing them and ancillary relief related to that removal.
[7] In addition, Gary and Norma seek direction from the court that they be permitted to sell the family farm in accordance with the Farm Trust; that the preconditions necessary to trigger the power to sell the property are met.
[8] Stephen is content that Gary be removed as trustee of the Discretionary Trust, but wants Norma to continue. He asks that both Gary and Norma be required to pass their accounts for both trusts before either is removed. He disputes that the farm property should be sold at this time. He believes that farm prices have been rising and he wants to wait until they plateau.
[9] Gary and Norma agree to passing their accounts.
Terms of Farm Trust
[10] Paragraph 3(b) of the secondary Will establishes the Farm Trust. Paragraph 3(b) states:
(b) To set aside and hold the Farm, upon the following terms and trusts…
(i) in their absolute discretion, to manage or supervise the management of farm operations as they consider advisable, including, without limitation, the management of all income and expenses such as property taxes and assessments, reasonable heat and hydro, property and automobile insurance, reasonable equipment, vehicle and tool repair, and appropriate reserves, with power to my Trustees to lease the farm operations on terms acceptable to them in their absolute discretion if they consider it advisable;
(ii) to use the net annual income (calculated before any distributions to my son STEPHEN WAYNE ZOCK ) from the operations of the farm, for the benefit of my said son Stephen, by way of salary, bonus, dividend, or trust income allocation, in accordance with the terms of THE STEPHEN WAYNE ZOCK DISCRETIONARY TRUST set forth in clause 4 of this my Secondary Will, for the payment of property tax, heat and hydro, telephone and television service in my home, for so long as he is able to maintain my home to a habitable and acceptable standard, and is capable of managing his personal care, particularly, his health, hygiene, nutrition and food preparation, clothing and laundry , and to pay any remaining annual net income from the operations of the farm equally, by way of salary, bonus, dividend, or trust income allocation, to my other three children, namely my said daughter Norma, my said son Gary and my son, PHILIP KEITH ZOCK , if alive at the date of any such payment, failing which, to their respective issue, in equal shares per stirpes; and
(iii) upon my said son Stephen becoming incapable of so managing his personal care , to sell the Farm, and to distribute the net proceeds of the sale by way of return of capital, dividend, or trust income or capital allocation, to or for the benefit of my issue, alive at the time of such sale, in equal shares per stirpes, the share of my said son Stephen being set aside and administered as part of THE STEPHEN WAYNE ZOCK DISCRETIONARY TRUST, described in clause 4 of this my Secondary Will, in the interest of any person entitled to a share of the proceeds who has not attained the age of twenty-five (25) years being administered in accordance with the trust described in paragraphs i) through vii), both inclusive, of clause 3(e) below.
[Bold in original; italics added]
[11] Pursuant to paragraph 3(e) of the secondary Will, the residue of the estate is divided into equal shares between Norman’s four children. Paragraph 4 provides that Stephen’s share of the residue is to be administered as part of the Discretionary Trust.
Use of Farm Property
[12] Since Norman’s death, Stephen has continued to reside on his own at the farm. He occupies the house and lands adjacent to the house. Most of the farm property is leased to a neighbouring farmer under a share-crop arrangement. This arrangement generates roughly $30,000 per year in income depending on yield and commodity prices.
[13] Gary and Norma have used the lease income to provide money to Stephen to pay various expenses for the property including property taxes, utilities, telephone and television service. According to Gary and Norma, their dealings with Stephen have been marked by conflict. Stephen has been belligerent. He demands money. He has physically assaulted Gary. He is intimidating such that they do not feel safe with him.
[14] Moreover, they depose that Stephen does nothing to maintain the house and property. They have hired Molly Maid to provide cleaning services. They and other family members have attended the property to cut the grass and do other chores because Stephen is unable or unwilling to do them. Stephen will not do even basic maintenance in the house. Gary and Norma’s efforts to help or guide Stephen are met with anger, mistrust and aggression.
[15] For his part, Stephen denies any physical confrontation. He disputes his siblings’ characterization that he is mentally ill. He indicates that he has maintained the farmhouse and surrounding grounds. He points to an appraisal obtained by Gary and Norma in August 2016 which described the condition of the house in the following terms:
“The residential dwelling is a 2 story home that was reported constructed in the 1880’s. The dwelling offers a brick foundation, wood framing, and an asphalt shingle roof replaced approximately 10 years ago and appears to be in average condition… .
Overall, the residential building is in dated but average condition. The front covered porch area does require some maintenance as there is a hole in the ceiling (see picture). Some areas of the rear exterior of the home also require a brick re-pointment. Otherwise no other serious items of deferred maintenance were noted at the time of inspection. The site improvements are typical of a rural residential farm property with a gravel driveway, parking area, and farm landscaping.” [Italics added.]
[16] The appraisal has a number of photographs of the interior and exterior of the house and outbuildings. There is certainly maintenance work required to the exterior of the house which is typical of an older home. It is undisputed that there are no outstanding work orders against the property.
[17] No expert evidence was filed on this application. There is not, for example, a home inspection report. Likewise there is no capacity assessment of Stephen that indicates that he is incapable of managing his personal care.
Sale of Farm Property
[18] Gary, Norma, Stephen and Philip met in December 2016 at the farm. The purpose of the meeting was to discuss moving Stephen to a house or apartment in Chatham that required less maintenance and would be at a lower cost, and sale of the farm. Stephen was advised that he could take whatever possessions he wanted from the farm with him. According to Gary, Stephen agreed so long as the farm was not sold at a discounted price. The appraisal obtained in August 2016 estimated the value of the property including the farmhouse at $1,540,500.
[19] The four siblings agreed that the property would be listed for sale at $20,000 an acre inclusive of the house and outbuildings. They agreed that the house and outbuildings would be cleaned and in early 2017, Gary and Norma with the assistance of extended family cleaned out the house. In April 2017, they cleaned out the two-car garage and some of the outbuildings.
[20] The farm land portion of the property was listed for sale on November 9, 2017 for $1.6 million. Gary and Norma decided that the land on which the house was situate would be severed and sold separately. Stephen disagreed with the decision to list the property.
[21] In March 2018, an offer was received to purchase both the farmland and house for $1,750,000. Stephen refused to consent to the transaction. According to Gary, the offer contemplated that Stephen could remain in the house, rent free, for five years. Stephen advised through counsel that he was not prepared to consent to sale of the property. Gary and Norma then negotiated an extension to April 9, 2018. They were advised by Stephen that he would not accept any offer less than $2 million.
[22] Stephen’s siblings were willing to contribute additional money to Stephen from their share of the sale proceeds if he would consent to the sale of the property. A written proposal was made to him which included his consent to sale which Stephen signed. Unfortunately, the deal to sell the property fell through when the purchaser could not obtain financing. No other offers have been received.
[23] The property is not currently listed for sale pending the outcome of this application.
Removal of Trustees
[24] As mentioned above, Gary and Norma wish to be removed as trustees of the Discretionary Trust. Section 3(1) of the Trustee Act, R.S.O. 1990, c. T 23, as amended, permits the appointment of a substitute trustee where an existing trustee wishes to be discharged from the trust. It contemplates that the remaining trustee or another person authorized to appoint trustees may appoint another person as a trustee. Thus, if Gary wished to be discharged but Norma was prepared to continue, Norma could appoint someone else to take Gary’s place as trustee.
[25] Section 5(1) of the Trustee Act authorizes the Court to appoint a new trustee. It states:
The Superior Court of Justice may make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.
[26] A trustee cannot be forced to continue to serve as a trustee if he or she is no longer willing or able to continue: Mitchell v. Richey, 1867 CarswellOnt 84 at paras. 4-6. The inherent equitable jurisdiction of the Court includes the power to remove an estate trustee, even where such removal would leave the estate without a trustee, provided the court makes alternate provision for the proper administration of the estate: Evans v. Gonder, 2010 ONCA 172 at para. 24.
[27] In this case, both trustees wish to be discharged. They have not appointed substitute trustees nor do they put forward anyone willing to step into that role. They asked the Public Guardian & Trustee (“PGT”) to step in as trustee but it has declined. This court has no authority to order the PGT to take on this role: Potrzebowski v. Potrzebowski, 2016 ONSC 6981 at para. 9.
[28] Gary and Norma depose that the amount in the Discretionary Trust is so modest that an institutional trustee is not a viable option. Likewise, there is no individual willing to assume the role or at least no name has been put forward for that purpose. If their request is granted, the Discretionary Trust will be without any trustee.
[29] During oral argument, Gary indicated a willingness to continue as a trustee on a short-term basis but only if the farm property was listed for sale immediately and only until the farm property is sold and Steven’s share of the residue is deposited into the Discretionary Trust. At that point, it is expected that there would be sufficient funds to engage an institutional trustee. Unless I determine or Stephen consents to the sale of the property now, the conditions attached to Gary’s proposal to stay on as trustee are unsatisfied.
[30] In oral argument, counsel for Gary and Norma submitted that lease monies be paid to the Accountant of the Superior Court of Justice to be held for Stephen pending the appointment of a trustee for the Discretionary Trust or further order of the Court. In my view, that approach is unworkable. The secondary Will contemplates that the net annual income received from operation of the farm – the lease income – is to be used first in accordance with the terms of the Discretionary Trust to pay property taxes, heat, hydro, telephone and television service. If money is simply paid into the Accountant, those bills will not be paid on a monthly basis unless serial motions are brought for payment out of court. Leaving aside the inconvenience to Stephen and the Court, the cost of bringing such motions strikes me as prohibitive.
[31] If the lease income is paid into court, the monthly expenses for the farm property may not get paid. That puts the farm at risk. Property taxes may fall into arrears. Insurance may lapse. Utilities may be cut off. That is not a viable solution.
[32] Unless the property is ordered sold, Stephen could conceivably continue to reside at the farm indefinitely. While he has indicated a willingness to entertain sale of the property once farm prices have plateaued, there is no binding agreement in place to do so. He could change his mind. The fight would simply be pushed down the road. As a result, the Discretionary Trust could be without trustees for a considerable period.
[33] The underlying problem as I see it lies in the interactions between Stephen and the trustees. Stephen takes it as his due that his brother and sister must give him money as and when needed. He is belligerent and aggressive. He does not respect personal boundaries. He simply shows up whenever it suits him and makes demands upon them. It is no wonder that faced with such behaviour, Gary and Norma want out.
[34] Regrettably, there is no one willing to step up to assume the thankless role of trustee. In these unusual circumstances, I find that it is appropriate to remove Norma as trustee of the Discretionary Trust as soon as she and Gary have passed accounts for the Discretionary Trust and Farm Trust. They should do so within 60 days.
[35] With respect to Gary, I decline to remove him as a trustee at this time but provide the following directions for the administration of the Discretionary Trust:
- Stephen shall have no contact with Gary except through legal counsel;
- Gary may arrange to pay the monthly expenses contemplated by the secondary Will in respect of the farm property by automatic monthly withdrawal or by payment to Stephen’s counsel, in trust;
- Gary shall be entitled to inspect the farm property, including the residence and outbuildings once every three months. Such inspection includes the right to take photographs and the inspection may be done by a third party designated by Gary. Arrangements for the inspection shall be made in advance through Stephen’s legal counsel. Stephen shall not interfere and will not be present during the inspections; and
- The Discretionary Trust shall not be responsible to pay any legal fees associated with any services provided to Stephen by his legal counsel under this arrangement.
[36] I view the above as a temporary arrangement that can be revisited and reviewed by the court in 12 months or earlier if there is a material change in circumstances; for example, if someone is willing to act as a trustee or the property is sold and an institutional trustee is a viable option.
[37] I am mindful that the general rule is that trustees are entitled to withdraw; they are not to be forced to continue when they are unwilling or unable to do so. These are unusual circumstances. Gary’s offer to continue as a trustee on a temporary basis provided the property is sold signals a willingness to shoulder the burden for a little longer. The terms that I have imposed above are intended to make that burden less onerous and safer. Should Stephen breach the terms of this order, he risks a contempt order. I simply do not see nor did counsel put forward a reasonable plan for administration without trustees.
Preconditions to Sale of Farm Property
[38] The Farm Trust requires the net annual income from the operations of the farm to be used to pay certain expenses for Stephen’s benefit through the Discretionary Trust so long as Stephen is able to maintain the home “to a habitable and acceptable standard”, and he is capable of managing his personal care: see para. 3(b)(ii). Whatever is left over, is to be divided among the other three children.
[39] By contrast, sale of the property and distribution of the sale proceeds requires only that Stephen be incapable of managing his personal care: see para.3(b)(iii). There is no requirement that Stephen maintain the property in a habitable and acceptable condition. Is there a reason for the different language employed? What happens if Stephen cannot maintain the property but is capable of managing his personal care?
[40] Those questions need not be answered at this time because I am not satisfied on the evidence before me that Stephen is incapable of managing his personal care or that the home is not maintained by him in a habitable or acceptable condition.
[41] Dealing first with management of personal care, there is little or no evidence to support a conclusion that Stephen is incapable. He may behave badly to his siblings, but that does not equate to a lack of capacity for personal care. There is no evidence that he has gone off his medications and is not attending to his personal hygiene and grooming, or is not eating etc.
[42] With respect to maintaining the home, “habitable and acceptable standard” is not defined. I find that an objective standard should be applied – that of a reasonable homeowner. If Norman had intended that the standard be set by the trustees in their discretion, he could have said so in the Farm Trust; certainly, he gave great discretion to them in other respects.
[43] There is evidence that Stephen is untidy and does not do chores usually associated with keeping a property. His siblings and other family have aided him. There is no obligation on them to do so.
[44] There is also evidence that Molly Maid was hired to clean the home. Stephen’s supplementary affidavit indicates that he is a 57 year old bachelor who engages a cleaning service. His affidavit suggests that the use of a cleaner is not a one-time event. There is no obligation on the Farm Trust trustees to use the net income from the farm to pay for a cleaner to keep the home habitable. The expenses itemized in para. 3(b)(ii) do not extend to such costs. However, it is open to Stephen to engage a service and pay for it himself from his other monies. Nothing in the Farm Trust obligates Stephen to be the one to personally perform such work.
[45] In his affidavit, Gary refers to the old wiring in the home and the glass in the windows among other things that need to be replaced or updated. With respect, the wiring and windows are the same wiring and windows as existed when Norman lived there. There is no evidence that they alone or combined with the other items raised make the home uninhabitable.
[46] In my view, the evidence that Stephen is incapable of maintaining the home is wholly deficient. The appraisal is almost two years old, but it characterized the condition of the home as “average”. The photos do not show otherwise.
[47] There is no evidence that Stephen is incapable of maintaining the property because he suffers from an illness that prevents him from doing so. Likewise, there is insufficient evidence that left to his own devices, Stephen will not maintain the property. In that case, an inference that he is incapable of doing so might be drawn. Here, the evidence is simply too scant to draw the conclusion that Stephen is incapable of maintaining the home in a habitable and acceptable condition.
[48] It was suggested by counsel for Stephen that Gary and Norma were looking to cash in the value of the farm so that they could ride off comfortably into retirement. There is absolutely no evidence of such a motive. I find that suggestion to be a gross overreach.
[49] In summary, I decline to find that the prerequisites to sale exist and do not authorize the trustees to sell the farm property. If circumstances change and additional evidence is found, the trustees may re-apply then. Of course, if Stephen agrees to the sale of the property, they may sell it.
[50] If the parties cannot agree on costs, they may make written submission not exceeding 3 pages within 15 days hereof.