COURT FILE NO.: CV-20-82699
DATE: 2020/11/05
SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF The Estate of Bote Johannes Viertelhausen
RE: Teresa Viertelhausen, Applicant
AND
William Viertelhausen in his personal capacity and in his capacity as the Estate Trustee of the Estate of Bote Johannes Viertelhausen, Respondent
BEFORE: Justice R. Ryan Bell
COUNSEL: Dorota Turlejski, for the Applicant
Ken Dunham, for the Respondent
HEARD: September 29, 2020
ENDORSEMENT
Overview
[1] On September 20, 2019, Bote Johannes Viertelhausen (“Bote”) died unexpectedly at the nursing home in Ottawa where he resided. In December 2019, Bote’s brother, the respondent William Viertelhausen (“Bill”), obtained a certificate of appointment of estate trustee without a will. In January 2020, the applicant Teresa Viertelhausen (“Teresa”) – one of Bill and Bote’s nieces – commenced this application to remove Bill as estate trustee. On February 14, 2020, without notice to Bill, Teresa obtained an order that required Bill to return his certificate to the registrar.
[2] Teresa seeks orders a) replacing Bill as estate trustee, and b) requiring Bill to pass the accounts of the estate. Teresa says the certificate of appointment was issued in error as “key information” was not made known to the court. She maintains that Bill is in a conflict of interest which precludes him from administering Bote’s estate even-handedly and impartially.
[3] Bill opposes Teresa’s application and seeks the immediate return of his certificate of appointment. He maintains that he was properly appointed estate trustee and that there is no conflict of interest. He is prepared to consent to an order requiring a formal passing of accounts of the estate, reserving his right to seek compensation and costs.
[4] The application to remove Bill as estate trustee is dismissed. There is no conflict of interest. Bill shall be required to commence an application to pass his accounts as estate trustee within three months.
Background and Procedural Chronology
[5] In May 2016, Bote suffered a stroke. His health declined precipitously. His driver’s license was suspended for medical reasons. Further psychiatric and other medical issues followed with repeated hospitalizations in 2017.
[6] In September 2017, Bill found Bote living on the streets of Toronto. Bill persuaded Bote to return to Aurora.
[7] In January 2018, Bote was found to be incapable of managing his property and his personal care.
[8] Bote suffered another medical crisis in March 2018. He was discharged from hospital on May 1, 2018 into long-term care. On several occasions while he was a patient at his nursing home, Bote was taken to hospital for psychiatric evaluation.
[9] In December 2018, Bill was appointed Bote’s guardian for property and for personal care.
[10] In January 2019, Teresa attended at the offices of Bill’s lawyers. She said that she had just learned that in May 2017, Bote had granted her powers of attorney for property and personal care. Teresa was told that Bill had recently been appointed Bote’s guardian.
[11] In May 2019, Teresa moved to challenge Bill’s appointment as Bote’s guardian on the basis that she had not been given notice of Bill’s application to be appointed. Teresa’s motion was scheduled to be heard in September 2019. The parties agreed on a timetable. However, the motion date was vacated because Teresa did not provide any motion materials other than an amended notice of motion.
[12] Six days after the original return date for her motion, Teresa served a motion record. Four days after that, on September 20, 2019, Bote died unexpectedly.
[13] Bill was appointed estate trustee on December 4, 2019, after serving his notice of application on all beneficiaries in October 2019.
[14] Teresa initiated this application in January 2020. The parties agreed on a procedural timetable. The application was scheduled to proceed to a hearing in June.
[15] Immediately after Teresa obtained the February 14, 2020 order requiring Bill to return his certificate of appointment to the registrar, Bill’s counsel scheduled a case conference. The case conference did not proceed as scheduled because of the COVID-19 pandemic.
[16] The parties proceeded to cross-examinations in May 2020. On Teresa’s cross-examination, her counsel refused to permit any questions concerning Teresa’s February 10, 2020 affidavit filed in support of her motion for an order requiring Bill to return his certificate to the registrar. After her cross-examination, Teresa served a reply affidavit, in which she purported to explain her statement in her February affidavit that she was not served with Bill’s notice of application.
[17] The application was not heard in June 2020 as scheduled because of the COVID-19 pandemic. At a case conference in June, Teresa withdrew the affidavits of two non-parties, leaving the court with her affidavits of September 15, 2019, February 10, 2020, March 10, 2020, and May 25, 2020. At a case conference in July, the hearing was scheduled for September 29, 2020.
Preliminary Issues
(i) Bill’s Motion to Strike Portions of Teresa’s March 10, 2020 Affidavit
[18] Bill moves to strike paras. 9, 32-34, exhibits “R” and “S”, and the letter found at exhibit “W” of Teresa’s March 10, 2020 affidavit on the basis that they are hearsay. He moves to strike exhibit “U” on the basis that it is both hearsay and scandalous.
[19] Rule 39.01(5) of the Rules of Civil Procedure provides that an affidavit for use on an application may contain statements of the deponent’s information and belief with respect to facts that are not contentious, if the source of the information and the fact of the belief are specified in the affidavit.
[20] In para. 9, Teresa states that Rita Pozzebon was evicted from Bote’s property at 2 Holman Court, Aurora. This is a contentious fact and, in any event, Teresa does not state the basis for her information and belief. Para. 9 is struck from Teresa’s affidavit.
[21] Teresa’s sister Susan did not file an objection to Bill’s appointment as Estate Trustee. In paras. 32-34 of her affidavit, Teresa purports to recount Susan’s objections to Bill’s appointment and why she, Susan, did not file an objection. Exhibits “R” and “S” are documents from Susan. These facts are contentious. These paragraphs and exhibits are hearsay. Susan did not file an affidavit in support of Teresa’s application. Paras. 32-34 and exhibits “R” and “S” are therefore struck from Teresa’s affidavit.
[22] Exhibit “W” is a settlement agreement and release relating to Bill’s administration of his mother’s estate (Teresa’s grandmother). The exhibit also includes a letter Susan “provided from Susan’s lawyer” regarding trustee compensation for that estate. The letter is double hearsay. It is struck from Teresa’s affidavit.
[23] Exhibit “U” consists of documents that purport to relate to Bill’s administration of his mother’s estate. The exhibit appears to have been included in an attempt to paint Bill in a negative light. It is also hearsay. Exhibit “U” is struck from Teresa’s affidavit.
(ii) The Admissibility of Ms. Den Haan’s Reply Affidavit
[24] Bill seeks to have admitted in evidence Ms. Den Haan’s reply affidavit sworn August 7, 2020. Teresa opposes the affidavit’s admission because no notice of motion was served.
[25] Ms. Den Haan is a law clerk at Chiarelli Cramer Witteveen LLP, counsel for Bill. Ms. Den Haan’s affidavit attaches as exhibits the responses to undertakings given on Teresa’s cross-examination on May 19 and July 10, 2020. The affidavit also attaches correspondence between counsel relating to Teresa’s cross-examination.
[26] Given the affidavit’s contents, its admissibility ought not to have been in issue. No notice of motion was required because the July case conference endorsement specifically provided that Bill could deliver the affidavit and seek leave before the application judge. Leave is granted.
(iii) Teresa’s Reply Factum
[27] The timetable order made at the July case conference required that any reply factum be served by September 25, 2020. I was advised that the reply factum was served on September 26, a Saturday.
[28] Given the history of these proceedings, and, in particular, the without notice order obtained by Teresa in February, the fact that the application did not proceed in June due to the COVID-19 pandemic, and the timetable order made at the case conference, the late service of the reply factum cannot be excused. Teresa’s confirmation of application form did not identify a reply factum – indeed, her confirmation form did not identify any materials to which the court would be referred on the hearing of the application. This is not acceptable. The court was not provided with a copy of the reply factum.
No Conflict of Interest
[29] The central issue I must determine is whether Bill is in a conflict of interest position rendering him incapable of administering Bote’s estate even-handedly and impartially.
[30] In support of her position that Bill is in a conflict of interest, Teresa says that Bill engaged in prior litigation against Bote and there is a “clear animosity” between Bill and Teresa, as well as her sister, Susan.
[31] Rule 75.04 of the Rules of Civil Procedure provides that on the application of a person appearing to have a financial interest in an estate, the court may revoke the certificate of appointment of the estate trustee where the court is satisfied that the certificate was issued in error or as a result of a fraud on the court. Section 37(1) of the Trustee Act, R.S.O. 1990, c. T.23, provides that the court may remove a personal representative upon any ground upon which the court may remove any other trustee, and may appoint another proper person to act in the pace of the executor or administrator so removed.
[32] The beneficiaries on Bote’s intestacy are Bill (one third), Michelle Forbes (Bote and Bill’s niece, one third), Teresa (one sixth) and Susan (one sixth). There is no dispute that Teresa has a financial interest in Bote’s estate.[^1]
[33] There is also no dispute about the applicable law. An estate trustee may be removed if it is in the best interests of the trust and its beneficiaries to do so. The main guideline is the welfare of the beneficiaries: Crawford v. Jardine, [1997] O.J. No. 5041 (Ont. Ct. (Gen. Div.)), at para. 18, citing Letterstedt v. Broers (1884), 9 App. Cas. 371 (P.C.), at 385-387. Actual incidents of alleged misconduct are generally provided but actual misconduct is not a prerequisite to removal:
…if it appears that the continuance of the trustee would be detrimental to the execution of the trusts…[because it] would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee…the trustee is always advised by his own counsel to resign, and does so. If, without any reasonable ground, he refused to do so, [then]… the Court might think it proper to remove him: Letterstedt, at 386.
[34] There is nothing in the record that would support Teresa’s contention that Bill should be removed as estate trustee.
[35] On her cross-examination, Teresa confirmed that she was alleging Bill had committed a fraud upon the court by obtaining the original certificate of appointment; Teresa alleged that she was not served with a notice of application and was therefore deprived of the opportunity to file an objection to Bill’s appointment. In her affidavit in support of her without notice motion in February 2020, Teresa stated that Bill proceeded with his application to be appointed estate trustee without serving Teresa.
[36] This statement was not true. Like all other beneficiaries, Teresa was served with Bill’s notice of application in October 2019. She signed for the registered mail envelope. She contacted her lawyer who, in turn, requested a copy of the materials which were provided on November 4, 2019. One month later, the court granted Bill’s certificate of appointment.
[37] On Teresa’s cross-examination, her counsel refused to permit any questions concerning Teresa’s affidavit filed in support of her February motion. Teresa then filed another affidavit to explain her statement that she had not been served. In that affidavit, Teresa admits she was served and her lawyer was provided with the materials upon request, but claims that she did not file an objection due to inadvertence. I agree with Bill’s submission that the claim of inadvertence is a bald allegation. There is no evidence to support the allegation, just as there is no evidence to support Teresa’s allegation that Bill has, in some manner, prevented Teresa from filing an objection.
[38] Teresa claims that her objection to Bill’s appointment was implied in her motion challenging his guardianship of Bote and her requests for fiduciary accounts for Bill’s period of guardianship before Bill was granted the certificate of appointment.
[39] I reject this submission. Teresa claims that she should have been served with Bill’s guardianship application because she was Bote’s power of attorney. But, by her own admission, Teresa was not aware that Bote had allegedly appointed her as power of attorney in May 2017 until December 2018, after Bill’s appointment as guardian. Hospital records subsequent to May 2017 state that Bote did not have any power of attorney. There is no evidence from either of the two witnesses to the powers of attorney relied upon by Teresa; indeed, on her cross-examination, Teresa said that she had never met the second of the two witnesses. Teresa was unable to explain a note attached to the powers of attorney, signed by the second witness, claiming that the powers of attorney were made at Teresa’s request. The first witness was named alternate power of attorney in both documents, rendering them invalid on their face.
[40] On this application, I need not determine the validity of these powers of attorney. However, the record surrounding their creation and discovery is far from clear. I am not prepared to infer, based on these documents and Teresa’s motion to challenge the guardianship, that Teresa objected to Bill’s appointment as estate trustee.
[41] Teresa alleges that Bill is in a conflict of interest because of prior litigation against Bote. This allegation is without merit.
[42] The factual context of this prior litigation can be summarized briefly. Bill and his late brother Chris were business partners in a corporation. When Chris died, his shares were inherited by Teresa’s mother. Some financing for the corporation had been provided by way of a mortgage from Bill’s late mother. Following her death, the mortgage was repaid to the estate. When the corporation required additional funding, Bote wanted to be the lender. Bill and Teresa’s mother agreed. A mortgage was granted in favour of Bote. When the corporation needed to refinance in 2017, the corporation advised Bote that it wished to pay off the existing mortgage. Bote refused to respond to correspondence. On application by the corporation, the court agreed that the corporation was entitled to pay off the mortgage and was satisfied as to the amount owing. The outstanding balance on the mortgage was then paid into court.
[43] The funds were subsequently paid out to Bill – in his capacity as Bote’s guardian – in trust for Bote. Bill then deposited the funds into one of Bote’s investment accounts. There was nothing improper in the steps taken by Bill. There is nothing in Bill’s conduct in relation to the corporation or the mortgage that gives rise to a conflict of interest warranting his removal as estate trustee.
[44] Teresa alleges that Bill has an animus toward her and that, as a result, he is unable to administer Bote’s estate impartially. Teresa suggests that she and Bill came into conflict as a result of Bill’s administration of his mother’s estate. Teresa’s veiled allegation that Bill acted improperly in the administration of his mother’s estate is utterly without foundation. All beneficiaries, including Teresa, signed a comprehensive release in which the beneficiaries confirmed the approved accounts, supported Bill’s plan for the remainder of the estate administration, and acknowledged that Bill had agreed to accept only $20,000 as trustee compensation, even though he was entitled to more. Full accounts were prepared and served on all beneficiaries and the Public Guardian and Trustee. The Public Guardian and Trustee provided a “notice of no objection.” No other beneficiary objected. The court signed off on the accounts in November 2018 and a final distribution was made in August 2019. Teresa raised no objection to the quantum and asked no questions about the accounts. It was not until May 2020, several months after these proceedings were initiated, that Teresa, through counsel, demanded final accounts be produced for Bill’s mother’s estate – this, notwithstanding prior agreements that further accounts were not required. Informal accounts were compiled and provided to Teresa’s counsel.
[45] Teresa also alleges an animus arising from Bill’s care of Bote. Again, there is nothing in the evidentiary record to support the suggestion that Bill acted in any way contrary to his duties as Bote’s guardian. Teresa also points to the “service issue” and her challenge to Bill’s appointment as Bote’s guardian as a source of animus. Teresa’s false statement that Bill failed to provide her with notice cannot ground Bill’s removal as estate trustee. There was no misconduct on Bill’s part.
[46] Teresa relies on Borisko v. Borisko, 2010 ONSC 2670, where Belobaba J. ordered the executor and trustee of the estate removed. In Borisko, the beneficiaries pointed to a number of incidents, supported with evidence, that suggested actual breaches of duty or conflicts of interest. While noting that actual incidents of alleged misconduct are not a necessary prerequisite to removal, Belobaba J. concluded, at para. 10, that, “this is a case where the estate trustee should have stepped aside as soon as he lost the trust and confidence of the beneficiaries. Instead, the trustee prolonged the dispute and caused needless and costly litigation.”
[47] Borisko does not assist Teresa. In Borsiko, the relationship breakdown was between the executor and all the beneficiaries. It is where a trustee’s competence or conduct is unanimously impugned by the beneficiaries that a trustee should step aside because the welfare of the beneficiaries is primary: Borisko, at para. 5. In the case before me, one of the beneficiaries, Ms. Forbes, filed an affidavit in support of Bill continuing as estate trustee. Susan did not file an objection to Bill’s appointment and has not filed an affidavit on this application. Teresa is the only one who has impugned Bill’s conduct. As I have discussed, her allegations are baseless.
[48] The certificate of appointment of estate trustee without a will shall be returned to Bill immediately.
Passing of Accounts
[49] Bill has produced his accounts through to February 14, 2020 when he was required to return his certificate of appointment. Given the attacks levelled against Bill by Teresa, a formal passing of accounts is warranted. As estate trustee, Bill shall be entitled to seek compensation and costs in connection with the passing of accounts.
Consent Order
[50] At the conclusion of the hearing, Mr. Dunham raised an urgent issue regarding the payment of taxes on behalf of the estate. I was advised that if the taxes were not paid by September 30, 2020, the estate would incur a financial penalty. Bill had been unable to file the prepared tax return because of the order requiring him to return his certificate of appointment. Although this issue was raised with Teresa’s counsel several days in advance of the hearing, counsel was unable to advise at the hearing whether Teresa would consent to an order.
[51] The day after the hearing, September 30, 2020, I signed a consent order requiring Bill to file the prepared tax return.
Disposition
[52] Teresa’s application is dismissed. The certificate of appointment of estate trustee without a will shall be returned to Bill immediately. Bill shall commence an application to pass his accounts as estate trustee within three months, and thereafter, pursuant to further court order.
[53] Bill is the successful party on the application and is presumptively entitled to his costs. If the parties are unable to agree on costs, they may make written submissions, not to exceed three pages. Submissions are to be made within 30 days.
Justice R. Ryan Bell
Date: November 5, 2020
COURT FILE NO.: CV-20-82699
DATE: 2020/11/05
ONTARIO
SUPERIOR COURT OF JUSTICE
IN THE MATTER OF The Estate of Bote Johannes Viertelhausen
RE: Teresa Viertelhausen, Applicant
AND
William Viertelhausen in his personal capacity and in his capacity as the Estate Trustee of the Estate of Bote Johannes Viertelhausen, Respondent
BEFORE: Justice R. Ryan Bell
COUNSEL: Dorota Turlejski, for the Applicant
Ken Dunham, for the Respondent
ENDORSEMENT
Ryan Bell J.
Released: November 5, 2020
[^1]: In her factum, Teresa raises a concern that Bote might have made a will and suggests that Bill made no searches for a will other than to make inquiries of Teresa. This suggestion ignores the uncontradicted evidence of the estate’s solicitor.