BARRIE COURT FILE NO.: CV-17-975
DATE: 20190913
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GILBERT DOBSON
Applicant
– and –
JOANNE TINNEY and MABEL DOBSON and HEATHER DOBSON by their Litigation Guardian, THE PUBLIC GUARDIAN AND TRUSTEE
Respondents
Tracey Rynard, for the Applicant
Holly LeValliant and Shael Eisen, for the Respondent
Yeon-Tae Kim, for the Litigation Guardian, The Public Guardian and Trustee
HEARD: June 14, 2019
REASONS FOR DECISION
CASULLO J.:
[1] The matter involves a power of attorney dispute and the concomitant disposition of two properties, a family farm (“Farm Property”) and a vacant plot of land (“Vacant Property”), both located in Coldwater. The value of the Farm Property far exceeds that of the Vacant Property.
General Background
[2] Mabel Jean Dobson (“Jean”) has three children: the Applicant, Gilbert Dobson (“Bert”), the Respondent, Joanne Tinney (“Joanne”), and Heather Dobson (“Heather”).
[3] Jean and Heather suffer from Alzheimer’s dementia and reside in the same long-term care home. Jean, 98, has lived there since 2005; Heather, 72, since 2016. Joanne is attorney of property for both Jean and Heather.
[4] Heather never married, and she has no dependents.
[5] The main application was commenced by Bert on June 29, 2017. By court order dated April 3, 2018, Jean and Heather were added as parties to this action. On May 8, 2018, Jean and Heather were found to be parties under disability and the Public Guardian and Trustee (“PGT”) was appointed as their Litigation Guardian.
[6] Funding for Jean’s long-term care is supported by pensions and tax benefits. Heather’s long-term care funding is supported by Old Age Security, pensions, and tax benefits. Each has only a small monthly surplus once expenses are paid.
Description of the Farm Property
[7] The Farm Property consists of a main house and a barn.
[8] Bert operates a storage business out of the barn. Pursuant to his agreement with Jean, Bert would manage the administration of the storage business, and in return he would receive 50% of the profits, with Jean receiving the remaining 50%.
[9] Jean received storage profits in 2005 and 2006, but has not received them from 2007 onward, although it appears the storage company is still operational.
[10] Bert’s grandson lives in the house on the Farm Property and pays Bert $1,000 per month in rent. Joanne commenced a small claims court action on Jean’s behalf to recover rents up until August 31, 2018, less hydro, insurance and property tax paid by Bert.
[11] The value of the Farm Property is unclear. Valuations obtained by Bert range from $375,000 to $425,000. A valuation obtained by Joanne estimates the fair market value to range from $600,000 to $620,000. The 2018 MPAC assessment is $436,000.
Description of the Vacant Property
[12] The Vacant Property is undeveloped and unused. As with the Farm Property, none of the owners lives on the Vacant Property.
[13] Valuations obtained by Bert range from $85,000 to $125,000.
Matters Leading to Litigation
[14] Jean’s 1994 last will and testament left the Farm Property to Bert and Heather, and the Vacant Property to Jean. Before her death, Jean gave effect to these transfers to avoid estate taxes. Thus, the Farm Property was placed into joint tenancy among Jean, Bert, and Heather, and the Vacant Property was placed into joint tenancy between Jean and Joanne.
[15] In 2015, Joanne and Bert began discussing funding for Jean and Heather’s continued long-term care and expenses, but they did not reach a consensus. In 2016, Joanne severed the joint tenancy on the Farm Property, resulting in Jean, Bert and Heather becoming tenants in common. Joanne’s goal was to sell the Farm Property and invest the sale proceeds for the benefit of Jean and Heather.
[16] Bert took exception to this plan. His opposition appears to have been two-fold. First, if the doctrine of ademption applied, Joanne could expect to inherit a portion of the proceeds of sale of the Farm Property upon Jean’s passing, which is more than she was bequeathed under Jean’s will.
[17] Bert was further troubled by the fact that Joanne was only proposing to sell one asset – the Farm Property – thereby protecting her financial interest in the Vacant Property.
[18] Bert thought the fair thing to do would be to sell both the Farm Property and the Vacant Property, which Joanne did not agree to.
[19] As the balance of this decision will show, Bert and Joanne were motivated by their own financial interests, not the best interests of Jean or Heather.
The Litigation
[20] Bert brought an application seeking an order that Joanne formally pass her accounts, from January 1, 2005 to date, the date upon which the Respondent first acted as Power of Attorney for property for Jean, and from January 1, 2007 to date, the date upon which the Respondent first acted as Attorney for Property for Heather. He also sought an order setting aside the severance of the Farm Property.
[21] At a mediation held August 9, 2017, Bert and Joanne entered into Minutes of Settlement. Each were represented by independent counsel. Note that this date is prior to Jean and Heather being added as parties. Counsel before me could not explain why the PGT had not been put on notice earlier than it was, despite the fact decisions were being made regarding property owned by Jean and Heather.
[22] The failure of counsel for both Bert and Joanne to instruct their clients in a timely matter concerning the need for court approval and putting the PGT on notice, unnecessarily lengthened the duration of the litigation.
[23] While Bert and Joanne reached an agreement at the mediation, many of the terms of settlement were not complied with. Each blames the other for these failures.
[24] Joanne brought a motion, heard on March 20, 2018, to enforce the Minutes of Settlement. Bert brought a cross-motion seeking similar relief to that sought in the initial application, an order that Joanne pass her accounts, and a reversal of the severance of the joint tenancy.
[25] Ultimately Bert put the PGT on notice, and on May 8, 2018, the PGT was appointed Litigation Guardian for Jean and Heather.
Position of the Applicant
[26] Bert seeks the following orders:
- That the parties return to mediation to finalize the terms of settlement;
- That Joanne pass her accounts for the period she acted as power of attorney for property for Jean and Heather;
- That the severance of the Farm Property be reversed until final determination of the issues or, in the alternative, an order that Joanne is not entitled to any proceeds through the doctrine of ademption; and
- That Joanne pay his costs of the motion on a full indemnity basis.
[27] Bert also sought leave to amend his cross-motion to include claims for both constructive trust and proprietary estoppel. Joanne and the PGT opposed this relief.
Position of the Respondent
[28] Joanne seeks the following orders:
- Judgment in accordance with the Minutes of Settlement or, in the alternative, an order that the Farm Property and Vacant Property be sold, with the proceeds being placed in trust for the long-term care needs of Jean and Heather;
- That Bert pay the costs incurred due to the failure to implement the mediated settlement; and
- That Bert pay her costs on a substantial indemnity basis.
Position of the PGT
[29] The PGT seeks the following orders:
- Directions regarding the informal accounting provided to it by Joanne;
- That the joint tenancy of the Vacant Property be severed;
- That both properties be sold and distributed between the tenants in common; and
- that Bert and Joanne pay a portion of its costs, with the balance to be paid by Jean and Heather.
Discussion
[30] The issues before the court are neither novel nor complex. The best interests of Jean and Heather are at the forefront, and the court is to ensure they are financially protected for the balance of their lives.
A Mediation
[31] Despite seeking enforcement of the Minutes of Settlement in their written material, both Bert and Joanne advised at the outset of the hearing that any efforts to enforce the Minutes of Settlement were misplaced. I agree. While the resolution reached at the mediation may have been couched in concern for their mother and sister, both Bert and Joanne stood to benefit from the agreement. That they were playing fast and loose with Jean and Heather’s financial future can be found in the following terms of the Minutes of Settlement:
- Bert would have paid $80,000 each to Jean and Heather for their interest in the Farm Property, less than fair market value;
- Joanne would have paid Jean $10,000 for Jean’s interest in the Vacant Property, less than fair market value;
- Joanne would not have to pass her accounts;
- Jean and Heather would be responsible for the real estate conveyancing fees;
- Jean and Heather would be responsible for their equal share of the mediator’s fees (including the cost of the rental facilities); and
- Jean and Heather would be responsible for their equal share of the $30,000 in legal fees.
[32] The value of the Farm Property in 2017 was $375,000, if we are to use the lowest end of the range of valuations obtained by Bert. One-third of that is $125,000. Had Jean and Heather received $80,000 for their one-third share, each of them would have sustained a $45,000 loss.
[33] The value of the Vacant Property in 2017 was in the vicinity of $90,000. One-half of that is $45,000. Had Jean received $10,000, she would have sustained a $35,000 loss.
[34] There was also no justification for requiring Jean and Heather to contribute to either the mediation or legal fees, as they were not involved in the litigation in 2017.
[35] As the parties have agreed, the resolution reached at the mediation should have no force or effect.
B Passing of Accounts
[36] Pursuant to sections 32(1) and 38(1) of the Substitute Decisions Act, 1992, S.O. c. 30 (“SDA”), an attorney for property is a fiduciary whose powers and duties shall be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.
[37] Section 42 of the SDA confirms that the court may, on application, order the accounts of an attorney be passed.
[38] Upon its appointment, the PGT investigated Joanne’s management of Jean and Heather’s property. A significant amount of information was requested of, and provided by, Joanne. The PGT has a number of outstanding concerns about the records provided by Joanne, including the following:
a. Heather paid approximately $17,217.96 in car-related expenses after her driver’s license was suspended in March 2015 and before she went into long-term care in 2016;
b. Legal fees, assessment fees, and mediation fees totalling $7,597.96 were paid from Heather’s account;
c. Loans appear to have been made by Joanne on Jean’s behalf to Heather, Nancy (as PSW), and Joanne herself;
d. Jean paid for some house expenses while she and Heather were in long-term care;
e. Jean’s financial records for the period of 1994-2004 could not be found; and
f. There were no receipts from the five PSWs who had been paid over the years to provide care to Jean and Heather, although there were letters from three of them stating they agreed with Joanne’s records.
[39] The PGT submits that despite having concerns regarding the sufficiency of the accounting provided by Joanne, and her apparent breach of her fiduciary duties to Jean and Heather, a formal passing of accounts may not be beneficial in the circumstances.
[40] There is at least $25,000 in questionable expenditures, possibly more. It may cost upwards of $25,000 to conduct a thorough passing of accounts. Jean and Heather have limited funds available to them, and a passing of accounts would only serve to reduce the monies that would ultimately benefit them.
[41] Furthermore, Joanne has not sought compensation from either Jean or Heather for her duties as power of attorney. I have not performed a calculation as to what she might be entitled to, but I anticipate that her total compensation (past and future) may equate to the amounts the PGT has identified as being questionable in the accounting.
[42] Joanne will not be ordered to pass her accounts. However, Joanne is equally not entitled to past or future compensation for carrying out her duties as Jean and Heather’s powers of attorney.
C Constructive Trust/Proprietary Estoppel
[43] Bert sought leave to amend his Notice of Motion to include a claim for constructive trust and proprietary estoppel. He submits that between 1999-2018, he expended over $145,000 in money and labour maintaining the Farm Property.
[44] Leave was being sought more than two years following the inception of the litigation, and the only documentation provided in support of this claim were six pieces of paper prepared by Bert himself.
[45] I declined to grant leave on June 14, 2019. Following the hearing I asked that counsel provide additional written submissions on whether leave should have been granted.
[46] Rule 26.01 of the Rules of Civil Procedure provides that on a motion at any stage of a proceeding, the court shall grant leave to amend a pleading unless prejudice would result which could not be compensated for by a costs award or an adjournment.
[47] The amendment Bert seeks to make raises an entirely new cause of action, based as it is on facts not originally pleaded. Further, the new cause of action is distinct to the issues before the court in this Application, namely Joanne’s actions as power of attorney for both Jean and Heather, and efforts to enforce the Minutes of Settlement.
[48] The PGT submits that Bert’s motion to amend would cause non-compensable prejudice to Jean and Heather. If leave was granted, further time and expense would be required to conduct examinations for discovery, necessary to explore the new issues of constructive trust and proprietary estoppel. Additionally, Heather should be moved to a private room as soon as practicable, which cannot be affected until the properties are sold. Finally, given Jean’s advanced age, it is entirely possible she might not survive to see the outcome of these additional claims.
[49] I appreciate Bert’s submission that he did not advance his claim earlier because the initial focus had been on the passing of accounts, and that it was only upon proof of the need to sell the Farm Property and contemplation of that sale that the estoppel trust claim would become necessary. However sound, Bert’s rationale does not trump the significant prejudice to Jean and Heather if leave were to be granted.
[50] Accordingly, I remain of the view that leave was properly denied.
D Sale of the Properties
[51] While an attorney for property is not permitted to dispose of assets the attorney knows is subject to a specific testamentary gift (SDA, s. 35.1(1)), the attorney may dispose of the property if said disposal is necessary to comply with the attorney’s duties (SDA, s. 35.1(3)).
[52] As noted earlier, an attorney for property is to act for the incapable person’s benefit. Thus, it is Joanne’s duty to ensure Jean and Heather have the funds available to continue living in the manner to which they have become accustomed.
[53] In 2018, Jean’s total income was $33,005.04. With expenses of $32,172.70, Jean’s surplus in 2018 was only $832.34. Heather’s situation is similar: her income in 2018 was $25,894.74, and after expenses of $25,449.13, her surplus was minimal at $445.61.
[54] Should either of them require additional care services, there would not be sufficient funding to allow for it.
[55] There was evidence that Jean and Heather face rising care costs, including wheelchairs for each of them, and the previously noted move to a private room for Heather.
[56] In McDougald Estate v. Gooderham, 2005 CanLII 21091 (ON CA), 255 DLR (4th) 435, the Court of Appeal held that the language in the SDA is “broad enough to encompass prudent dispositions of specifically bequeathed property,” at para. 39. In McDougald, the sale of the property was not necessary to fund the incapable person’s care. However, the Court of Appeal found that selling the property was prudent because the maintenance costs were high, and the incapable person was no longer able to travel to use it.
[57] Beyond the documentation provided by Bert, which has not been subject to cross-examination, there is no evidence as to the maintenance costs for either property. Given that neither Jean nor Heather enjoy these properties any longer, eliminating liabilities that are of no benefit to them is a prudent step. This will ensure that adequate funding is available if and when it is needed.
[58] Accordingly, both properties are to be sold to ensure Jean and Heather’s future well being. To facilitate this, the joint tenancy on the Vacant Property shall be severed, and Jean and Joanne shall hold title as tenants in common.
[59] The funds shall be distributed to the respective tenants in common as follows:
- Jean to receive one-third of the proceeds of sale of the Farm Property
- Heather to receive one-third of the proceeds of sale of the Farm Property
- Bert to receive one-third of the proceeds of sale of the Farm Property
- Jean to receive one-half of the proceeds of sale of the Vacant Property
- Joanne to receive one-half of the proceeds of sale of the Vacant Property
[60] The funds received by Jean are to be put into two separate trusts, one concerning the Farm Property (“Jean Farm Property Trust”), and the other concerning the Vacant Property (“Vacant Property Trust”). These funds are for Jean’s sole benefit for her remaining lifetime. To ensure fairness, Jean’s care needs are to be paid 50% from the Farm Property Trust and 50% from the Vacant Property Trust.
[61] The funds received by Heather are to be placed in a separate trust for her sole benefit for her remaining lifetime (Heather Farm Property Trust).
E Ademption
[62] At common law, when a specific item of property is bequeathed in a will, and that item is not available at the testator’s death, ademption is said to occur. In other words, the gift is forfeited.
[63] However, s. 36(1) of the SDA provides what has been referred to as an “anti-ademption” clause:
The doctrine of ademption does not apply to property that is subject to a specific testamentary gift and that a guardian of property disposes of under this Act, and anyone who would have acquired a right to the property on the death of the incapable person is entitled to receive from the residue of the estate the equivalent of a corresponding right in the proceeds of the disposition of the property, without interest.
[64] Jean’s intentions were clear from her will. Upon her death, Bert and Heather were to jointly share ownership of the Farm Property, and Joanne was to own the Vacant Property.
[65] To give effect to Jean’s wishes, Bert and Heather alone are to benefit from the sale of the Farm Property, and Joanne alone is to benefit from the sale of the Vacant Property. Accordingly, and relying on s. 36(1) of the SDA, upon Jean’s passing one-half of what remains in the Jean Farm Property Trust shall devolve to Bert. The remaining one-half shall devolve to Heather and be added to the Heather Farm Property Trust.
[66] In addition, upon Jean’s passing, 100% of what remains in the Vacant Property Trust shall devolve to Joanne.
F Secondary Issues
[67] Bert expressed an interest in having the right of first refusal should the court order the Farm Property be sold. This is a reasonable request and is hereby granted. The procedure regarding the trusts shall remain in place should Bert exercise this option.
[68] Joanne seeks to be compensated for payments made to the lawyer she and Bert retained to carry out the terms of the Minutes of Settlement. This is a reasonable request and is hereby granted. Bert shall reimburse Joanne 50% of what she has paid this lawyer.
[69] I have not been asked to rule on either of the following. However, given the drawn-out nature of this dispute, I would encourage Bert to withdraw the criminal allegations of fraud and elder abuse against Joanne, and likewise encourage Joanne to dismiss the small claims court action for rental income brought against Bert. Both undertakings are vexatious, as the matters at issue should have been included in this proceeding.
Conclusion
[70] Joanne will not be required to pass her accounts.
[71] The joint tenancy in the Vacant Property shall be severed and placed under joint ownership between Jean and Joanne as tenants in common. Thereafter, the Farm Property and the Vacant Property shall be sold, with the proceeds being dispersed as set out above.
Costs
[72] At the end of the hearing I was provided with each party’s Bill of Costs. Offers to Settle were handed to the Registrar and placed in a sealed envelope until I had made my decision.
[73] As one might surmise from the tenor of the litigation, the issue of costs is complicated. I will begin with the more straightforward costs of the PGT.
[74] The PGT provided an invaluable service, both to its clients Jean and Heather, and to the court. The voluminous financial material was organized, parsed and packaged into a comprehensive summary. PGT counsel advised that because Jean and Heather had limited funds available, the file remained “in-house,” resulting in an exceedingly reasonable account of $16,900.
[75] The PGT has asked that Bert and Joanne personally pay $5,000 towards its costs, given its position that there was fault on both sides in this litigation. For example, the parties should have been aware that court approval was required. Further, Bert and Joanne benefited from the terms of the mediated settlement: Bert would have received the Farm Property under fair market value, and Joanne would have received the Vacant property under fair market value. Such a result was detrimental to the financial future of both Jean and Heather.
[76] I believe the PGT’s request is a valid one. Bert and Joanne shall each pay $5,000 towards the PGT’s fees; the balance of $6,900 is to be borne equally between Jean and Heather.
[77] Turning to Bert and Joanne, their success is equally divided with no discernable clear winner.
[78] For example, Bert sought an order that Joanne pass her accounts. Joanne would not do so without a court order. I have not ordered Joanne to pass her accounts, not because there are no questionable transactions, but because the expense to investigate further will encroach upon Jean and Heather’s limited funds.
[79] In terms of the sale of the properties, while the parties had disparate positions throughout the litigation, each agreed at the hearing that they should be sold.
[80] Finally, up to the hearing each was persisting in their efforts to enforce the Minutes of Settlement, which were not in the best interests of Jean or Heather.
[81] Neither Bert nor Joanne came to court with clean hands. Bert has not paid Jean 50% of the profits since 2006, and the PGT has concerns that Joanne mishandled Jean and Heather’s money.
[82] In Zimmerman v. McMichael Estate, 2010 ONSC 3855, Strathy J., as he then was, held that the following principles were appropriate in determining the issue of costs:
(a) pursuant to s. 131 of the Courts of Justice Act, the costs of a proceeding are in the discretion of the court and the court may determine by whom and to what extent costs should be paid;
(b) estate litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime;
(c) as a general proposition, the principle that the “loser pays” applies to estate litigation; and
(d) in the determination of costs, the court must have regard to the factors set out in Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, but, at the end of the day, the court’s responsibility is to make an award that is fair and reasonable, having regard to all the circumstances, including the reasonable expectations of the parties;
[83] For the entire application including the motion before me, Bert seeks costs on a full indemnity basis in the amount of $43,525; similarly, Joanne seeks costs on a full indemnity basis in the amount of $108,083.02, or substantial indemnity costs of $86,855.97.
[84] Having regard to all the circumstances, I find it is fair and reasonable to exercise my discretion and order that each party shall bear their own costs. At first blush this may appear to be a harsh result for Joanne. However, she put her own interests before those of Jean and Heather, and there remain questionable transactions from her past tenure as power of attorney for which she will not be required to account.
[85] I note that neither party beat their offer to settle.
CASULLO J.
Released: September 13, 2019