COURT FILE NO.: CV-19-79791 DATE: 2020/05/11

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

PALMINA SANTELLA Applicant – and – MICHAEL JOHN BRUNEAU, by his Litigation Guardian, The Children’s Lawyer Respondent

Counsel: Charlotte Watson, for the Applicant Grace Cheng, for the Respondent

HEARD: In writing

REASONS FOR DECISION

(Application Heard in Writing with Leave)

Corthorn J.

Introduction

[1] John Bruneau (“the Deceased”) died intestate in July 2018. The applicant is the Deceased’s widow. The respondent is the couple’s only child. Michael was born in March 2008 and was 10 years old when his father passed away. In July 2018, the Santella-Bruneau family was living in Barrhaven, Ontario. Ms. Santella and Michael continue to live in Barrhaven.

[2] Ms. Santella and Michael are the only beneficiaries of the Deceased’s estate (“Estate”). In December 2018, Ms. Santella was appointed as the Estate Trustee. Ms. Santella is entitled to the full amount of the Deceased’s Ontario assets as her preferential share under the Family Law Act, R.S.O. 1990, c. F.8.

[3] The Deceased’s only asset in which both Ms. Santella and Michael will share is a residential condominium in Montreal, Quebec which the Deceased owned as of the date of his death (“the Condominium”). The Condominium cannot be sold until a guardian of property is appointed for Michael, with authority to participate on his behalf in its sale (“the Sale”).

[4] The relief sought on this application includes a) the appointment of the Children’s Lawyer as the litigation guardian for Michael, and b) the appointment of Ms. Santella as Michael’s guardian of property for both the purpose of the Sale and the management of Michael’s property until he reaches age 18.

[5] After being adjourned at least twice in 2019, the application came before me on January 7, 2020. Pursuant to a handwritten endorsement on that date, the Children’s Lawyer was appointed as Michael’s litigation guardian. The balance of the application was adjourned to permit the parties to file additional materials with respect to the management of Michael’s property.

[6] Subsequent to the January 2020 endorsement, Ms. Santella delivered (a) an affidavit from a Quebec-based lawyer, providing evidence with respect to the law of that province, and (b) her third supporting affidavit. In that affidavit, Ms. Santella outlined how, if appointed as Michael’s guardian of property she would manage Michael’s inheritance. The Children’s Lawyer delivered a factum and book of authorities setting out its position with respect to both the Sale and the management of Michael’s share of the proceeds from the Sale (i.e., the “Inheritance”).

[7] Ms. Santella and the Children’s Lawyer agree that Ms. Santella be appointed as Michael’s guardian of property for the purpose of the Sale. They do not agree as to whether a guardian of property for any other purpose is required or as to how the Inheritance is to be managed until he reaches age 18 and becomes responsible for the management of it.

[8] It is appropriate that Ms. Santella is appointed as Michael’s guardian of property for the purpose of the Sale. What remains to be determined is how the Inheritance will be managed and by whom.

Guardianship of Property – Sale of the Condominium

[9] The Sale is governed by the law of Quebec. The parties rely on the evidence of Quebec-based lawyer, Isabelle Pelletier. In her affidavit, sworn on March 12, 2020, Ms. Pelletier summarizes the law of that province with respect to guardianship of the property of a minor, the sale of real property, and the division of property on an intestacy.

[10] I accept Ms. Pelletier’s evidence in that regard and am satisfied that (a) Michael requires a guardian of property to represent him with respect to the Sale, and (b) Ms. Santella is entitled to one-third of the proceeds and Michael, two-thirds, of the proceeds of Sale.

[11] Ms. Santella is appointed as Michael’s guardian of property for the purpose of the Sale.

Guardianship of Property – Generally

a) Positions of the Parties

[12] Ms. Santella seeks to be appointed as Michael’s guardian of property, including with respect to the management of the Inheritance. She proposes to place the Inheritance in GICs. She may, over time, place some of the funds in a Registered Education Savings Plan (“RESP”). Ms. Santella’s evidence is that she is able to provide for Michael without resort to the Inheritance. The Inheritance, in its entirety, would remain invested for Michael until he reaches age 18.

[13] The Children’s Lawyer does not question Ms. Santella’s ability to manage Michael’s property. The position of the Children’s Lawyer is, however, that a guardian of property is not required other than for the purpose of the Sale.

[14] The Children’s Lawyer requests that the Inheritance be paid to the Accountant for the Superior Court of Justice (“Accountant”), with whom it would remain until Michael turns 18. If the Inheritance is paid to the Accountant, then a guardian of property is not needed to manage it.

[15] The Children’s Lawyer opposes placing any of the Inheritance in an RESP. Its opposition in that regard is based on the historical treatment of RESP’s in the context of both family law and bankruptcy proceedings. The Children’s Lawyer submits that any portion of the Inheritance placed in an RESP is at risk because of cases in which an RESP has been found to be an asset of the adult subscriber and not that of the child for whose benefit the RESP is intended.

[16] Ms. Santella did not deliver any materials in reply to the factum and book of authorities delivered by the Children’s Lawyer.

b) Disposition

[17] For the reasons that follow, I agree with the Children’s Lawyer and order that the Inheritance be paid to the Accountant.

c) The Evidence

[18] This disposition is in no way a reflection of Ms. Santella’s ability to manage Michael’s property or her abilities as a parent. From Ms. Santella’s evidence with respect to her career progression at Costco, it is clear that she is a very capable, highly-regarded, and much-valued employee. Her understanding of financial matters and the detail required with respect to the management of property is reflected in the contents of her affidavits. The financial records attached as exhibits to Ms. Santella’s affidavits are thorough and easily understood.

[19] Ms. Santella’s career choices demonstrate that, together, Ms. Santella and her late husband put Michael’s well-being at the forefront of their day-to-day lives. Ms. Santella worked at Costco for 20 years before Michael was born. In that period, she rose from a position as a part-time membership clerk, to that of a Human Resource/Administrative Manager in Montreal. Once in Ottawa, Ms. Santella worked as an Assistant Buyer in Training and as a Payroll Analyst. In 2013, approximately five years after Michael was born, Ms. Santella chose to work as a Receptionist at Costco so that she would be able to provide Michael with the care that he needed.

[20] Ms. Santella’s evidence is that Michael was very ill when he was born. Initially, he had many appointments at The Children’s Hospital of Eastern Ontario and at the Montreal Children’s Hospital. He subsequently required both speech therapy and occupational therapy. In her most recent affidavit (the third of three affidavits), Ms. Santella describes Michael’s learning disabilities and the impact they have on his education potential. Her evidence is that Michael has difficulties with his memory. Michael currently works with two tutors.

[21] Ms. Santella is supportive of Michael pursuing post-secondary education. She acknowledges, however, that it is not certain that he will be able to do so. If appointed as guardian of Michael’s property, other than for the purpose of the Sale, Ms. Santella proposes to place approximately $20,000 to $30,000 of the Inheritance in an RESP in Michael’s name over the next several years.

[22] The most recent appraisal of value of the Condominium is from 2017. The fair market value of the Condominium, as of that year, is $335,000. Since July 2018, the expenses for the Condominium have been paid from the Estate or by Ms. Santella from the monies received as her preferential share. Ms. Santella’s evidence is that single-purpose lump sum payments continue to be demanded of the unit owners for various repairs to be made to the building. For example, Ms. Santella recently paid $20,000 for the purchase of new windows. Another five-figure payment is required with respect to repairs to the roof and terrace.

[23] Ms. Santella’s evidence is that she will not make any adjustments for a contribution from Michael towards payment of expenses incurred, since 2018, for the ownership and management of the Condominium. There is no way of knowing the impact that the COVID-19 pandemic will have on the sale price and on the time frame within which the Condominium may be sold. Even without any negative impact because of the pandemic, taking into consideration legal expenses associated with the sale, and real estate commission, it appears that Michael’s inheritance will be two-thirds of an amount on either side of $300,000.

d) The Law

[24] Payment of a minor’s inheritance to the Accountant is available under s. 36(6) of the Trustee Act, R.S.O. 1990, c. T.23, as an alternative to the appointment of a guardian of property under s. 47 of the Children’s Law Reform Act, R.S.O. 1990, c. C.12 (“CLRA”). If the minor’s inheritance is paid to the Accountant, no guardian of property need be appointed.

[25] If a guardian of property is appointed, that individual will be required to post a bond unless the court orders otherwise: CLRA, s. 55. The guardian of property (a) would be required to keep records and submit periodic accounts to the Children’s Lawyer, and (b) may also be required to pass accounts from time to time: s. 52. A detailed management plan must be filed with the court for approval.

[26] If, instead, the minor’s inheritance is paid to the Accountant, the funds are managed and invested by the Accountant pursuant to the Public Guardian and Trustee Act, R.S.O. 1990, c. P.51, s. 3. If funds are required for the direct benefit of the minor before they reach age 18, then, such funds can be made available through the Minors’ Fund program of the Office of the Children’s Lawyer: r. 72.03(10) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194.

[27] The Accountant charges fees as follows: on investment income credited to the minor’s account every month (3 per cent); on payments out of court, including the final distribution to the minor at age 18 or the age of entitlement (3 per cent); and annually on the average annual value of the funds under management (0.6 per cent). If, however, the fees and applicable HST exceed income credited to the account, fees are reduced for the month. As a result, capital is never diminished due to fees. For example, the 3 per cent fee charged on final distribution, cannot exceed the interest earned in that month. Invested capital increases or decreases with market changes that occur while the money remains with the Accountant.

[28] For several reasons, there is a risk that a minor, upon reaching age 18, will not receive monies invested in an RESP. Those reasons include the conflicting case law as to whether monies so invested are protected in the same way as are funds held in trust for a minor.

[29] The conflicting case law arises in family law and bankruptcy law, with the outcomes varying from province to province. In family law, see McConnell v. McConnell, 2015 ONSC 2243 at para. 123 and Vetrici v. Vetrici, 2015 BCCA 146 at paras. 36, 39. In bankruptcy law, see Re Payne, 2011 ABQB 894 at paras. 13-14 and Re Vienneau, 2007 NBQB 332 at para. 11. Each of those cases, either by reason of the discussion therein or the determination made, highlights that an RESP will not always be treated by the courts as an asset of the child for whose benefit the plan is opened. The decisions also highlight the potential for the subscriber parent to withdraw money from the plan before the minor requires funding for post-secondary education.

[30] In raising these matters, I do not suggest that there is any evidence that Ms. Santella is likely to do anything other than act in Michael’s best interests.

e) Analysis

[31] In paragraph 26 of her first affidavit, Ms. Santella says “I manage my own money modestly in secure investments and will do the same with Michael’s money.” Payment of the Inheritance to the Accountant is a secure investment of the funds, in keeping with Ms. Santella’s proposed management. The Accountant will invest the funds in accordance with directions received from Ms. Santella.

[32] In addition, payment to the Accountant avoids Ms. Santella having to post a bond. There is no evidence before the court as to (a) the cost to Ms. Santella of posting a bond, and (b) why the court should exercise its discretion and dispense with that requirement. Given the lack of evidence in that regard and the six-figure amount that appears to be involved, I would not dispense with the requirement to post a bond.

[33] With the Inheritance paid to the Accountant, Ms. Santella will not be required to provide accounts to the Children’s Lawyer or to pass her accounts from time-to-time. There will be a saving to both Michael and Ms. Santella because the expenses (i.e., legal fees and disbursements) associated with those tasks will not be incurred.

[34] In setting out her proposed management of the Inheritance, at paragraph 26 of her first affidavit, Ms. Santella says “I may also start [an RESP] for Michael to fund his education.” There is nothing preventing Ms. Santella from starting an RESP even if she is not appointed as Michael’s guardian of property.

[35] It appears that Ms. Santella does not require funds from the Inheritance to start an RESP. At paragraph 23 of the same affidavit, Ms. Santella states that it is her intention to treat all of the money that she receives from the Estate “as money I am holding for Michael”. In the same paragraph, she adds that she is self-sufficient with the money she earns; she intends to use her share of the Estate to assist with raising Michael to the best of her ability; and the leftover will be held for Michael as her only child. I find that payment of the Inheritance to the Accountant does not deprive Ms. Santella of the ability to invest in an RESP on Michael’s behalf.

[36] Ms. Santella is now a single parent. There is no evidence as to anyone who might step in to fulfil the role of guardian of property if Ms. Santella were appointed and subsequently became unable to fulfill that role. Michael is now 12 years old. There is no certainty that another individual would maintain the RESP, if opened, for Michael’s benefit.

[37] I have already taken judicial notice of the uncertainty of the impact of the COVID-19 pandemic on the time frame within which the Condominium will be sold. I also take judicial notice of the uncertainty of the impact of the pandemic on the economy, interest rates, and the return on investments. All of that uncertainty is a factor in my decision that it is in Michael’s best interests that the Inheritance be paid to the Accountant.

[38] In all of the circumstances, it is in Michael’s best interests that the Inheritance be paid to the Accountant for the Superior Court of Justice.

Procedural Relief

[39] In her notice of application, Ms. Santella requested leave to proceed with the application without delivering a factum. Ms. Santella had the opportunity to deliver a factum, had she wished to do so (a) prior to the return of the proceeding on January 7, 2020, and (b) in reply to the factum delivered by the Children’s Lawyer in March 2020.

[40] The Estate has continued to incur expenses for the Property since July 2018, including since March 2019, when this proceeding was commenced. Ms. Santella has incurred the fees associated with the original application record, two supplementary records, and her counsel’s appearance before the court on January 7, 2020. The evidence from Ms. Santella is detailed. The factum from the Children’s Lawyer is detailed and thorough. A factum from Ms. Santella is not required for the court to determine the issues raised with respect to the Inheritance.

[41] I am satisfied that it is reasonable to dispense with the requirement for Ms. Santella to deliver a factum in this matter.

[42] The January 7, 2020 handwritten endorsement in this matter includes the appointment of the Children’s Lawyer as the litigation guardian for Michael John Bruneau. It was an oversight on my part that I did not provide in the same endorsement for the requisite amendment to the title of proceeding.

[43] To rectify that oversight, I therefore order that the title of proceeding in all documents filed in this proceeding subsequent to the date of this endorsement shall identify the respondent as “Michael John Bruneau, by his Litigation Guardian, The Children’s Lawyer”. The order taken out pursuant to this endorsement shall be in the amended title of proceeding.

Summary

[44] As a result of the suspension of usual court operations, these reasons are being issued under my electronic signature. Once normal operations resume, a copy of these reasons shall be added to the court file.

[45] For the reasons set out above, I order as follows:

1. Palmina Santella is granted leave to proceed with this application without delivering a factum.
2. The title of proceeding is amended, including in this order, so that the respondent “Michael John Bruneau” is identified as “Michael John Bruneau, by his Litigation Guardian, The Children’s Lawyer”.
3. All documents filed in this proceeding subsequent to the date of this order shall reflect the amended title of proceeding.
4. Palmina Santella is appointed as the guardian of property of Michael John Bruneau (born on March 27, 2008) for the sole purpose of the sale of real property described municipally as 1473 Rue Amherst (now known as Rue Atakeken), Unit 6, Montreal, Quebec (the “Sale” and “the Property”, respectively).
5. Palmina Santella shall, within ten (10) days of the date on which the Sale closes, provide the Children’s Lawyer with an accounting of the proceeds from the Sale including copies of the Statement of Adjustments and a trust ledger.
6. Palmina Santella or the Notary representing the Estate of John Bruneau, Deceased, on the Sale shall, within fifteen (15) days of the date on which the Sale closes, deposit Michael John Bruneau’s share of the proceeds from the Sale with the Accountant for the Superior Court of Justice and, within a reasonable time thereafter, provide the Children’s Lawyer with a copy of the receipt for the deposit.
7. Because of the COVID-19 emergency, this order is being issued under my electronic signature. This order is effective, binding and enforceable without further formality at this time. Once normal operations resume, a copy of this order shall be filed with the Court.

[46] I remain seized in the event there is anything arising from the Sale or otherwise for which the parties require assistance from the court in this matter. If, however, my schedule is such that the parties are prevented from bringing any further matter before the court in a timely manner, they may proceed before any Judge sitting in Ottawa.

[47] If either party pursues and the parties are unable to resolve the issue of costs, then counsel shall arrange a telephone case conference before me to set a timetable for the delivery of costs submissions.

Madam Justice Sylvia Corthorn

Released: May 11, 2020