COURT FILE NO.: CV-16-68173

DATE: 2021/08/31

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

DANIEL STEPHEN CLAYTON

Applicant

– and –

SHIRLEY VIOLET CLAYTON, KAREN ELIZABETH DAVIES and PATRICIA ANNE LEWINGTON in their capacity as TRUSTEES OF THE CLAYTON FAMILY TRUST

Respondents

Kathleen McDormand and Calvin Hancock, for the Applicant

Douglas D. Buchmayer and Joel Reinhardt, for the Respondents

HEARD: January 14-15, 20, 22 and 29, 2021, by ZOOM

RULING on APPLICATION

Introduction

[1] Gerald Joseph Clayton, the patriarch of the Clayton family, died in June 2002. He is survived by his wife, Shirley Violet Clayton, and their three children, Karen Elizabeth Davies, Patricia Anne Lewington, and the applicant, Daniel Stephen Clayton.[^1]

[2] The assets in Gerald’s estate totalled in excess of $8,230,000 (“the Estate”). Those assets were distributed pursuant to the provisions of a Primary Will, under which a family trust (“the Family Trust”) was established, and a Secondary Will, under which a trust for Gerald’s widow (“the Wife’s Trust”) was established. The two trusts are collectively referred to as “the Trusts”.

[3] Gerald appointed Shirley, Karen, and Patricia as the estate trustees under the Primary and Secondary Wills and as trustees of the Trusts (“the Trustees”).

[4] The largest asset in the Estate was Gerald’s interest in a personal holding company he incorporated in 1988 – Ardmay Capital Corporation Limited (“Ardmay”). The financial statements for Ardmay show a total shareholder’s equity of $8,231,725 as of 2002.

[5] As permitted under the terms of the Secondary Will, the Trustees allocated $6,493,546 from Ardmay to the Family Trust, to be administered in accordance with the terms of the Primary Will. That allocation is identified as a “Note receivable” in the financial statements for the Family Trust for the 2003 year-end. In summary, approximately 25 per cent of the shareholder’s equity in Ardmay was allocated to the Wife’s Trust and 75 per cent to the Family Trust.

[6] Another Estate asset held in the Family Trust is a home in Florida at which Gerald and Shirley spent several months each winter and, at least until 2019, Shirley continued to spend several months each winter. The Estate included other assets, such as Gerald’s personal belongings and vehicle – all of which Shirley inherited under the Secondary Will.

[7] On Shirley’s death, the Wife’s Trust will be collapsed and the undistributed income and capital remaining in it will be added to the Family Trust; thereafter the Estate is to be distributed equally among Dan, Karen, and Patricia – if they are still living at the time of Shirley’s death. In the event that any one of Dan, Karen, or Patricia predeceases Shirley, then that individual’s share of the Estate is to be distributed to their children and, where applicable, their spouse as addressed in detail in the Primary Will.

[8] At issue on this application is the conduct of the Trustees in their administration of the Estate. The focus of Dan’s concerns is the administration of the Family Trust. Given the nature of his concerns, however, Dan seeks an order that the Trustees be removed from their roles with respect to both the Family Trust and the Wife’s Trust. Dan asks that the Trustees be replaced by BMO.

[9] Dan asserts that the removal of the Trustees is required for one or more of the following reasons:

a) The Trustees failed both to maintain adequate records and to provide an accounting of their management of the Estate when asked to do so by Dan;

b) The Trustees acted in bad faith by the manner in which they attempted to address the passing of their accounts for the ten-year period from 2004 to 2014;

c) The Trustees acted outside the scope of their authority in 2015 by attempting to dictate the terms of Dan’s will and to obtain Dan’s agreement to the Trustees having free rein over the management of the Trusts;

d) Karen and Patricia were negligent by reason of their failure to address the impact of the decline in Shirley’s cognitive function upon Shirley’s ability to fulfil her role as a trustee. Although Shirley is one of three trustees, the Trusts require that Shirley be one of two trustees by whom any decision is made;

e) The Trustees made unsecured and undocumented loans or advances from the Family Trust, totalling in excess of $3,000,000, to Karen, Patricia, and their respective adult children (“the Loans”); and

f) There has been and remains such a degree of hostility between the Trustees and Dan that it will, in the future, be impossible for the Trustees to fulfil their duties and treat Dan fairly.

[10] Dan acknowledges that, pursuant to the terms of the Primary Will, the Trustees are granted a significant amount of discretion – described at times as “absolute” and at others as “unfettered”. Dan emphasizes that there are, however, limits to the exercise of such absolute discretion. Dan acknowledges that the threshold to be met in establishing that the Trustees’ conduct warrants their removal is a high one. He submits that the high threshold is met in this case.

[11] The Trustees respond that the Primary Will gives them absolute and unfettered discretion in the exercise of their duties as Trustees with respect to the Family Trust. The Trustees assert that their interests are the same as Dan’s (i.e., the preservation of the Estate).

[12] In particular, the Trustees highlight Gerald’s use, throughout the Primary Will, of the terms “absolute discretion” and “unfettered discretion”. The Trustees say that those terms constitute exculpatory language which serves to eliminate what would otherwise be their common law duty to maintain an even hand in the management of the Family Trust. The Trustees’ position is that they have, in any event, (a) acted with an even hand, and (b) done nothing to jeopardize the assets in the Trusts and the Estate.

[13] The Trustees describe Dan’s allegations of bad faith conduct and breach of the Trust terms as “largely untethered” from the terms of the Primary Will and from the evidence.

[14] The Trustees submit that for Dan to successfully challenge the exercise of the Trustees’ absolute discretion on the basis of bad faith, Dan must establish that bad faith was the Trustees’ sole or, at a minimum, overriding motive.

[15] The Trustees describe the removal of a Trustee as an extreme remedy, and one that should only be granted where there is no other option available. The Trustees ask the court to (a) conclude that Dan has fallen short of the high threshold to be met, and (b) dismiss the application.

The Issues

[16] The primary substantive issue is whether the Trustees’ conduct warrants their removal and replacement. To determine that issue, the court must, amongst other factors, consider the totality of the language of the Primary Will, the conduct of the Trustees in exercising their powers and fulfilling their duties, Shirley’s cognitive decline in recent years, and whether the non-removal of the Trustees will prevent the proper administration of the Trusts and the Estate in the future.

[17] Before addressing the substantive issue, I provide background information about the Clayton family and the administration of the Trusts. I then review the terms of the Primary Will and Secondary Will, followed by a review of the law with respect to the removal of trustees.

[18] My analysis of Dan’s request for removal of the Trustees follows thereafter. The analysis proceeds by considering (1) whether the Trustees’ conduct was so unreasonable that no honest or fair-dealing trustee would have acted in that way, and (2) in the alternative, whether the factors set out in Virk v. Brar Estate, 2014 ONSC 4611, 1 E.T.R. (4th) 241, militate in favour of the removal of the Trustees.

Background

a) The Clayton Family

[19] Gerald died in 2002 and is survived by Shirley, the couple’s three children, and several grandchildren. Shirley was born in August 1929 and is now 92 years old.

[20] During his working life, Gerald became a shareholder in Ranger Metal Products Limited (“Ranger”). It was, at least in part, through his involvement in Ranger that Gerald amassed his fortune. Gerald’s financial management included incorporating Ardmay in 1988, to serve as a personal holding company.

[21] Dan, Karen, and Patricia are each married and have children. Karen and Patricia have each been married once. Dan has been married three times. Dan has three children, in total, from his marriages. Over time, one of Dan’s children became estranged from the family. All of Gerald and Shirley’s grandchildren are now adults.

[22] Gerald and Shirley resided in or near Guelph, Ontario. Shirley continues to reside in that area.

[23] Patricia resides in Bayfield, Ontario, with her husband. Her home is located approximately two hours by car from Shirley’s home. Karen has a Ph.D. in clinical psychology and is self-employed as a clinical psychologist in Ottawa, where she resides with her husband.

[24] With one exception, Karen’s children and Patricia’s children reside in Ontario; one of their children resides in the United States.

[25] Dan resided in the United States from the early 1990s to the early 2000s. Since approximately 2003, Dan has been residing in Ottawa with his wife, Lori de Laplante.

[26] Set out below is a list of the individuals who have been involved with the Clayton family over time, whose names appear in this ruling, and who have each provided evidence (affidavit and through cross-examination) on this application:

• Accountant, Dennis Weiler,
• Accountant, Lisa Bursey, and
• Lawyer, Bennett Shostack.

[27] Mr. Weiler was Gerald’s accountant for years. He was retained by the Trustees with respect to the administration of the Trusts. Ms. Bursey is an associate of Mr. Weiler’s. She assisted with the preparation of documents for, and provided notetaking at, a meeting between Mr. Weiler, Dan, and Lori, in November 2014 (“the 2014 Meeting”).

[28] Mr. Shostack was Gerald’s lawyer. His areas of practise include business tax and estate planning. Mr. Shostack first met Gerald in 1979. Mr. Shostack drafted the Primary Will and Secondary Will in approximately 2001. Those wills replaced a will which Mr. Shostack had prepared for Gerald 20 years earlier.

[29] The Trustees met with Mr. Shostack following Gerald’s death. They also consulted with him from time to time in the years prior to this application. Those consultations were in the form of phone calls and, to a lesser extent, meetings. On at least one occasion, Mr. Weiler was present for such a meeting. Mr. Shostack also had occasional telephone communication with Mr. Weiler.

b) Administration of the Trusts

[30] As set out in the introductory section of this ruling, the Trustees allocated approximately $6,500,000 of the shareholder’s equity in Ardmay to the Family Trust. In the years since that allocation was made, the Trustees have utilized the assets in the Family Trust in several ways, including the following:

• In 2004, the Trustees began to make payments of $5,000 per month to Dan (“the Monthly Payments”). The Trustees ceased making the Monthly Payments in 2015. After Dan commenced this application in 2016, the Trustees resumed making the Monthly Payments, and they issued a retroactive payment for the period in 2015-16 during which the payments had not been made;
• The Trustees have, at times, loaned money to Dan to assist him with (a) the purchase and/or renovation of a home, and (b) a mortgage registered against the subject property;
• Loans and advances have been made to each of Karen, Patricia, and their respective children. None of the loans made were or are subject to a mortgage, even when the funds loaned or advanced were applied towards the purchase of real property; and
• The terms of the loans and advances made to each of Karen, Patricia, and their respective children were not reduced to writing in any way. The Trustees rely on oral agreements with each of Karen, Patricia, their respective spouses, their respective children, and their children’s spouses.

[31] The Trustees have not yet passed their accounts for the administration of the Trusts to date. It was not until more than a dozen years after they assumed their respective roles that the Trustees took any steps towards obtaining an order for the passing of their accounts. The Trustees have commenced the requisite application; it has not yet been heard.

[32] Pursuant to the terms of the Secondary Will, the Trustees have been paying Shirley the income derived from the shareholder’s equity in Ardmay allocated to the Wife’s Trust.

[33] It is undisputed that, beginning in approximately 2018, Shirley’s family members, personal support staff, and healthcare professionals noticed elements of cognitive decline in Shirley. That decline is one of the factors on which Dan relies in support of his request for the removal of the Trustees; it is discussed in greater detail below.

[34] I turn next to the terms of the Primary Will and Secondary Will.

The Primary Will and Secondary Will

a) The Primary Will

[35] In the Primary Will, Gerald specified that during Shirley’s lifetime, any decision of the Trustees requires the agreement of (a) Shirley and (b) only one of the sisters, either Karen or Patricia. Gerald did not provide for any alternate trustee in the event that one of Shirley, Karen, or Patricia was or became unable to act.

[36] In paras. 5(a)-(c), Gerald set out the general terms pursuant to which the Trustees are to administer the Estate:

I GIVE AND BEQUEATH, subject to the following exceptions all the rest, residue and remainder of my property, wherever situate, both real and personal, including any property over which I may have a general power of appointment, to my Trustees upon the following trusts, subject to the powers, authorities, discretions and immunities set forth in paragraph 6 of this my Will.

(a) My Trustees shall invest and keep invested the residue of my estate in a trust (hereinafter called the “Family Trust”) and shall pay the income derived therefrom or such portion thereof as my Trustees deem to be appropriate to or for the benefit of any one or more of my Wife, my children, spouses of my children, or my grandchildren, or such one or more of them as my Trustees in their absolute discretion deem to be necessary or advisable for the care, maintenance, education, advancement in life, well-being or other benefit of the person to whom such income is paid;

(b) My Trustees may in their uncontrolled discretion advance to or for the benefit of any one or more of my Wife, my children, spouses of my children, or my grandchildren, or such one or more of them as my Trustees, in their absolute discretion, deem to be appropriate such portion of the capital of the Family Trust as from time to time my Trustees in their discretion deem to be necessary or advisable for the care, maintenance, education, advancement in life, well-being or other benefit of the person to whom such capital is paid;

(c) Upon the death of my Wife, my Trustees shall divide the residue of my estate then remaining into such number of equal shares as there are children of mine then alive, provided that, if any child of mine is not then alive but has left surviving children, such child shall be considered alive for the purposes of such division. The shares so set aside (each of which is hereinafter called a “Child’s Share”) shall be dealt with in the manner set forth in the following subparagraphs 5(d) to (g) inclusive. Notwithstanding the foregoing, for the ease of administration of my estate, my Trustees may but shall not be obliged to combine the assets comprised in the Family Trust created under this my Primary Will with the assets that, under the terms of my Secondary Will, are to be comprised in the Family Trust created thereunder. [Emphasis in original.]

[37] Paragraphs 5(d)-(f) address how the residue of the Estate1F[^2] is to be divided amongst Dan, Karen, and Patricia, in the event that they are alive when their mother dies. Those paragraphs also address the creation of funds for all but one of Gerald’s and Shirley’s grandchildren. Paragraphs 5(g)-(i) deal with how the share of a beneficiary who predeceases Shirley is to be distributed (i.e., to a spouse and/or children of the deceased beneficiary).

[38] In paragraphs 6(a)-(z) of the Primary Will, Gerald listed additional “powers, authorities and discretions” with which the Trustees are vested. Gerald provided that the Trustees could exercise those powers, authorities, and discretions “without obtaining the approval of any court of competent jurisdiction or of any person entitled” under the Primary Will. Examples of the matters addressed in paragraphs 6(a)-(z) include the following:

• Making investments, including in mortgages;
• Incorporating corporations;
• Renewing and keeping renewed any mortgage(s) upon assets that form part of the Estate;
• Purchasing, selling, or conveying real or personal property;
• Retaining professionals and others to provide expert, specialized, or other assistance; and
• Holding the Estate’s assets inside or outside Ontario.

[39] In defining the powers, authorities, and discretions with which the Trustees are vested in paragraphs 6(a)-(z), Gerald described the Trustees as having “uncontrolled discretion” and at other times as having “absolute discretion”.

b) The Secondary Will

[40] Gerald executed the Secondary Will and the Primary Will on the same date. In the Primary Will, Gerald excluded certain assets from the residue of the Estate – shares, notes, and debts in Ardmay and personal belongings such as clothing, jewellery, and automobiles.

[41] Assets excluded from the Primary Will are dealt with under the Secondary Will. For example, having survived Gerald for more than 30 days, under the Secondary Will, Shirley inherited Gerald’s personal belongings.

[42] In paragraphs 5(a)-(d) of the Secondary Will, Gerald established the Wife’s Trust, set out how it is to be administered, and provided that, upon Shirley’s death, the residue in the Wife’s Trust shall be added to the capital then remaining in the Family Trust.

[43] Pursuant to para. 5(a) of the Secondary Will, the Trustees have the discretion to allocate the Ardmay shares as between the Wife’s Trust and the Family Trust. During her lifetime, Shirley is entitled to the dividend income from the Ardmay shares allocated to the Wife’s Trust: Secondary Will, at para. 5(b). The Secondary Will also addresses Shirley’s entitlement in the event a capital gain is realized from any disposition of Ardmay Shares allocated to the Wife’s Trust: at para. 5(c).

[44] At paragraphs 6(a)-(i) of the Secondary Will, Gerald dealt with the notes and debts of Ardmay, placing them in the Family Trust. The language used to describe the powers, authorities, and discretions of the Trustees with respect to those notes and debts is similar and, at times, identical to the language in paragraphs 5(d)-(i) of the Primary Will. For example, the Trustees have absolute discretion with respect to the payment of income – from notes or debts of Ardmay – to any one or more of Shirley, the children, spouses of the children, and grandchildren: Secondary Will, at para. 6(a). Similarly, the Trustees have absolute discretion to make advances to those same individuals: Secondary Will, at para. 6(b).

[45] Paragraph 7 of the Secondary Will is similar to paragraph 6 of the Primary Will in setting out the additional powers, authorities, and discretions with which the Trustees are vested in managing the Wife’s Trust and the notes and debts which form part of the Family Trust. Once again, the terms “uncontrolled discretion” and “absolute discretion” appear several times.

[46] I turn next to the law with respect to the removal of trustees.

The Law

a) Removal of Trustees Generally

[47] This court’s inherent jurisdiction to remove a trustee is long recognized. In Gonder v. Gonder Estate, 2010 ONCA 172, 259 O.A.C. 295, at para. 26, the Court of Appeal for Ontario quoted from a decision of the Judicial Committee of the Privy Council dating from the 1880s:

In Letterstedt v. Broers (1881), 9 A.C. 371 (P.C.), Lord Blackburn stated, at pp. 386-87:

[I]f it appears clear that the continuance of the trustee would be detrimental to the execution of the trusts, even if for no other reason than human infirmity would prevent those beneficially interested, or those who act for them, from working in harmony with the trustee … it seems to their Lordships that the Court might think it proper to remove him.

In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyond the very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to lay down any more definite rule in a matter so essentially dependent on the details often of great nicety.

[48] The inherent jurisdiction of the court to remove a trustee exists in parallel with statutory provisions such as s. 37 of the Trustee Act, R.S.O. 1990, c. T.23: Gonder, at paras. 42 and 46 (citations omitted). Subsection 37(1) sets out the court’s power to remove a trustee. It provides that “[t]he Superior Court of Justice may remove a personal representative upon any ground upon which the court may remove any other trustee, and may appoint some other proper person or persons to act in the place of the executor or administrator so removed.”

[49] As a person interested in Gerald’s Estate, Dan is entitled to bring this application for the removal of the Trustees: Trustee Act, s. 37(3).

[50] In Virk, Ricchetti J. set out a non-exhaustive list of factors to be considered by the court on an application for removal of a trustee. Justice Ricchetti’s list is a combination of factors identified in Radford v. Radford Estate (2008), 2008 CanLII 45548 (ON SC), 43 E.T.R. (3d) 74 (Ont. S.C.), at paras. 97-107, and in Bergmann v. Amis Estate (2009), 54 E.T.R. (3d) 35 (Ont. S.C.), at para. 33, aff’d 2010 ONCA 377, 55 E.T.R. (3d) 173.

[51] At para. 48 of Virk, Ricchetti J. identified the following factors:

a) the court will not lightly interfere with the testator’s choice of estate trustee;

b) there must be a “clear necessity” to interfere with the discretion of the testator;

c) removal of an estate trustee should only occur in the clearest of evidence that there is no other course to follow;

d) the court’s main guide is the welfare of the beneficiaries;

e) it must be shown that the non-removal of the trustee will prevent the proper execution of the trust; and

f) the removal of an estate trustee is not intended to punish for past misconducts; rather it is only justified if past misconduct is likely to continue and the estate assets and interests of the beneficiaries must be protected.

[52] This list of factors is non-exhaustive; it is also not cumulative. The list does, however, serve to emphasize that the threshold to be met on an application for removal of a trustee is high: Virk, at para. 49, quoting from Chambers Estate v. Chambers, 2013 ONCA 511, 367 D.L.R. (4th) 151, at paras. 95 and 96.

[53] The Trustees submit that the removal of a trustee is an “extreme remedy”. I find that the Trustees overstate the significance of the cases upon which they rely in attempting to identify support for that submission. For example, the Trustees rely on para. 95 of Chambers Estate. The use therein of the descriptor “extreme” is not with respect to the removal of a trustee, but rather to the passing over of a trustee otherwise named in the relevant instrument.[^3]

[54] The Trustees do not rely on Gonder to support their submission that removal is an extreme remedy. I note, however, that at para. 68, the Court of Appeal for Ontario refers to “[t]he removal of a sole trustee without appointment of a replacement [a]s an extreme remedy, and [as] inappropriate in most cases.” The issues on appeal included the decision of the application judge – who had ordered the removal of a sole trustee – not to appoint a replacement trustee or otherwise provide for the administration of the estate: Gonder, at para. 20.

[55] The relief sought on this application is for the removal of all named trustees and for an order replacing them with BMO. I find that the relief sought does not fall into the categories of “extreme” remedy described in either Chambers Estate or Gonder.

b) Trustees with Absolute and/or Unfettered Discretion

[56] The question of the degree of control which this court can and should exercise over trustees who hold absolute and/or unfettered discretion is filled with difficulty: Fox v. Fox Estate (1996), 1996 CanLII 779 (ON CA), 28 O.R. (3d) 496 (C.A.), at p. 500, leave to appeal refused, [1996] S.C.C.A. No. 241. Gisborne v. Gisborne is frequently referred to as the leading case on this issue: (1877), 2 App. Cas. 300 (H.L.). That decision stands for the proposition that as long as the trustee has acted without mala fides (i.e., bad faith) when exercising their absolute discretion, the court should not intervene: Fox Estate, at p. 500.

[57] Nevertheless, conferring a trustee with absolute discretion does not, without something more, eliminate the trustee’s common law duties. For example, if the testator intends that the trustee is not required to fulfill the common law duty to act with an even hand, then the testator must say so: Martin v. Banting (2001), 37 E.T.R. (2d) 270 (Ont. S.C.), at para. 25, quoting D.W.M. Waters, The Law of Trusts in Canada, 2nd ed. (Toronto: Carswell, 1984), at p. 760, aff’d (2002), 46 E.T.R. (2d) 93 (C.A.).

[58] Even if it can be said that the language of the relevant instrument either explicitly or implicitly relieves a trustee of one or more of their common law duties, the court will intervene in the following circumstances:

• If the decision of the trustee is “so unreasonable that no honest or fair-dealing trustee” could have come to the same decision: Martin, at para. 25, quoting The Law of Trusts in Canada, at p. 760;
• The trustee ignored relevant factors or took into account factors which are irrelevant to the exercise of their discretion in making the specific decision: Banton v. Banton (1998), 1998 CanLII 14926 (ON SC), 164 D.L.R. (4th) 176 (Ont. Gen. Div.), at p. 234, citing Fox Estate; or
• The trustee did nothing and, having failed to act, is unable to demonstrate that they properly considered whether or not they should have acted: Martin, at para. 25, quoting The Law of Trusts in Canada, at p. 760.

[59] The three sets of circumstances listed above are in the alternative; the list is not conjunctive.

[60] In the next section of this ruling, I review the conduct of the Trustees to determine whether their removal is warranted.

Analysis

[61] I consider the conduct of the Trustees under the following headings:

a) Financial Management, Including Passing of Accounts;

b) The Trustees’ Conduct in 2015 – Dan’s Will and the Demand for Free Rein Over the Trusts;

c) Decline in Shirley’s Cognitive Abilities;

d) The Loans;

e) Other Conduct; and

f) The “Virk factors”.

[62] The evidence is addressed as it relates to each of the categories of conduct rather than in an overview or chronology.

[63] The Trustees’ position, at least with respect to the Loans, is that the Primary Will includes exculpatory language as a result of which they are relieved of their common law duties to act impartially and with an even hand. As will be seen from the discussion below with respect to the Loans, I reject that submission.

[64] Regardless, I approach the analysis of the Trustees’ conduct from the perspective that even if they are relieved of their common law duties, they must not act so unreasonably as to act in a manner in which no honest or fair-dealing trustee would act. In summary, I find that the Trustees have engaged in unreasonable conduct and acted in a manner in which no honest or fair-dealing trustee would act.

[65] I also consider the Trustees’ conduct from something other than the de minimis requirement addressed immediately above. In that regard, I find that (a) the Trustees failed to act impartially and with an even hand, and (b) when their conduct is considered in the context of the Virk factors, court intervention is warranted.

[66] The evidence is clear that the cumulative effect of the Trustees’ conduct is such that there is no course to follow but to remove the Trustees.

a) Financial Management, Including the Passing of Accounts

[67] It is not in dispute that at no time between 2002 and late 2014 did the Trustees provide Dan with any documents as evidence of their administration of the Trusts in that 12-year period. It is also not in dispute that at no time prior to the fall of 2014 did the Trustees take any steps to pass their accounts for either of the Trusts.

[68] Dan’s first opportunity to review and consider financial documents related to the administration of the Family Trusts was not until the 2014 Meeting.

[69] Mr. Weiler’s uncontradicted evidence, which I accept, is that as of the fall of 2014, the Trustees, together with Mr. Weiler and Mr. Shostack, decided that “it would be best” if the financial status of the Family Trust was disclosed to Dan and Lori.[^4]

[70] The Trustees did not attend the 2014 Meeting. There is contradictory evidence as to whether it was the Trustees or Dan who requested that the Trustees not attend that meeting. For the purpose of this ruling, it is not necessary to resolve that factual issue. It is, however, important and I find that Mr. Weiler was the Trustees’ representative for the purpose of the 2014 Meeting.

[71] On November 21, 2014, Dan and his wife, Lori, met with Mr. Weiler at his office in Guelph, Ontario. The four people present for the meeting were Dan, Lori, Mr. Weiler, and Ms. Bursey.

i) The November 2014 Meeting

[72] Based on the evidence of one or both of Mr. Weiler and Ms. Bursey, I make the following findings:

• The 2014 Meeting was arranged with Dan during a telephone conversation which he had with Mr. Weiler on September 15, 2014;
• As of September 2014, it was Mr. Weiler’s intention to send Dan a package of financial information for him to review prior to the 2014 Meeting;
• Ms. Bursey became aware of the meeting “sometime close after” September 15, 2014. At the same time, she became aware that she was to compile a package of information to send to Dan and Lori for their review prior to the 2014 Meeting;
• The documents to be included in that package were in existence as of September 15, 2014. It was not until shortly before the 2014 Meeting that Ms. Bursey began to assemble the documents to be (a) sent by email to Dan and Lori, and (b) provided in hard copy at the meeting. Organizing the documents took approximately a week;
• The package consisted of the unaudited financial statements for the Family Trust and for Ardmay for the years ending 2004 through 2014. The package did not include any documents related to the Wife’s Trust. The most recent of the documents had been completed in August 2014;
• Ms. Bursey sent the package to Lori by email on November 16, 2014 and to Dan by email on November 17, 2014. That was the first time that any financial information was provided by Mr. Weiler, personally or on his behalf, to Dan; and
• All of the financial statements provided to Dan and Lori were “Notice to Reader” financial statements, both for the Family Trust and with respect to Ardmay. As such, the documents were at the lowest level of review provided by accountants. The documents contained no assurances that the contents had been vetted in any way. In any event, the documents were not vetted when they were prepared.

[73] Dan’s uncontradicted evidence is that the package consisted of approximately 90 pages related to the Family Trust and 60 pages related to Ardmay.

[74] There is contradictory evidence as to what transpired at the 2014 Meeting. On cross-examination, Mr. Weiler acknowledged that he did not take notes during the meeting and that he did not otherwise document the meeting in some way, such as with a memo to file and/or to those in attendance at the meeting. Regardless of his lack of notes or follow-up document, Mr. Weiler’s evidence on cross-examination was that he has an independent recollection of the 2014 meeting.

[75] Ms. Bursey’s notes of the meeting were produced and transcribed for the purpose of this application (“the Bursey Notes”). When cross-examined, Ms. Bursey testified that Mr. Weiler did the talking during the meeting; she was there primarily to take notes. When cross-examined, Mr. Weiler acknowledged that he had reviewed the transcript of the Bursey Notes. Mr. Weiler believes that the Bursey Notes accurately reflect what transpired at the 2014 meeting. For those reasons, where Mr. Weiler’s evidence conflicts with Ms. Bursey’s, I prefer the evidence of Ms. Bursey.

[76] Based on the evidence of Dan, Lori, Mr. Weiler, and Ms. Bursey, I make the following findings with respect to what transpired at the 2014 Meeting:

• Although the package included financial information for each of the 11 years from 2004 to 2014, Mr. Weiler reviewed with Dan only the documents for the years ending in 2004 and in 2014;
• The meeting lasted 2.5 hours;
• During the meeting, Mr. Weiler told Dan and Lori that the Trustees did not have to give Dan any information – and that it could have been a much longer wait before he received financial information; and
• It was made clear to Dan and Lori that if Dan had any questions about the financial matters related to the Trusts or Ardmay, he was to communicate with either Mr. Weiler or Ms. Bursey. He was not to communicate with any of the Trustees in that regard.

[77] Some of the circumstances leading up to the 2014 meeting are troubling – for example, the delay in delivering the package to Dan and Lori. Those circumstances, while troubling, pale in comparison to Mr. Weiler’s approach to a release that Dan was sent prior to the 2014 Meeting and which was discussed with him at the meeting (“the Release”).

ii) The Release

[78] On November 16, 2014 Ms. Bursey sent a series of emails to Lori. Two of those emails are included in the record.[^5] The emails are addressed to Lori and Dan. It is undisputed that only Lori received the emails on November 16; Ms. Bursey did not forward the emails to Dan until the next day – on November 17, 2014.

[79] In the first of the emails sent to Lori on November 16, Ms. Bursey described the documents attached to that email and to be attached to emails to immediately follow. The Release was to follow as an attachment to the next email. Ms. Bursey addressed the Release in the first email: “The second email will contain various loan and interest schedules along with a release. … After we have gone over all of the information and answered any questions you may have on Friday, we would like to have the release signed.”[^6]

[80] The Release includes an introductory paragraph and a single substantive paragraph, with the latter stating as follows:

And therefore, the said Daniel Clayton does by these present[s], accept this passing of accounts and release, remise, quit claim and forever discharge the said Shirley Clayton, Karen Davies, and Patricia Lewington from any claim I may have with respect to the Clayton Family Trust, and I do hereby agree to hold harmless the said trustees and to indemnify them with respect to any claims which may be made against the Clayton Family Trust for which they may be held liable to the extent of the value of the estate received by me.

[81] Neither Ms. Bursey nor Mr. Weiler are able to confirm (a) who drafted the Release or (b) why it was sent to Dan by email as part of the package. Karen’s evidence on cross-examination was that she did not give Mr. Weiler instructions to present the Release to Dan. She also has no idea who drafted the Release.

[82] As of the fall of 2014, the Trustees had retained Mr. Shostack as their lawyer. They had consulted with him from time to time. An affidavit from Mr. Shostack is included in the respondents’ record.

[83] When cross-examined, Mr. Shostack could not recall whether he prepared a release for Dan’s signature at the 2014 Meeting. Mr. Shostack acknowledged that the Release looked familiar to him. He could not, however, be certain that he had drafted the Release because it was written in a more formal style than he routinely uses.

[84] It is both perplexing and concerning that neither of the professionals upon whom the Trustees relied is able to identify the source of a document as significant as the Release.

[85] Equally as concerning is Mr. Weiler’s treatment of the Release and his approach with Dan, to that document, at the 2014 Meeting.

[86] At para. 22 of his affidavit, Mr. Weiler says, “In my opinion [Dan] was fully advised about what he had been asked to sign”. When cross-examined, Mr. Weiler,

• admitted that his explanation to Dan as to the significance of the terms of the Release was limited to it being an acknowledgment from Dan that Mr. Weiler had reviewed the Notice to Reader financial statements to the year ending in 2014;
• acknowledged that the Release does not indicate that Dan was given the opportunity to obtain independent legal advice (“ILA”) before he signed the document; and
• admitted that he never told Dan that he should seek ILA before he signed the Release.

[87] The Release is, however, much more significant in content than as described by Mr. Weiler to Dan. For example, the Release relates to a formal passing of accounts. An application for an order for the passing of the Trustees’ accounts had not been commenced as of the date of the 2014 Meeting.

[88] 4The Release purports to release each of Shirley, Karen, and Patricia from any claims that Dan might have against them with respect to the Trusts. In addition, the Release includes an element of indemnity from Dan to the Trustees in the event of a claim related to the Family Trust.

[89] Both Mr. Weiler and Ms. Bursey acknowledge that at the time of the 2014 Meeting, they did not appreciate that there was a difference between documents required for a passing of accounts and the Notice to Reader level documents provided to Dan. I have some difficulty believing that an accountant as experienced as Mr. Weiler did not appreciate the difference between the two types of documents. In any event, I need not make any finding in that regard.

[90] Significant for the purpose of this ruling is my finding that the Trustees, through their representative, and in the circumstances of the 2014 Meeting, attempted to secure from Dan a release with respect the passing of accounts for a period of in excess of a decade. The Trustees, through their representative, attempted to do so without having presented Dan with the requisite supporting documents. I find that the Trustees’ conduct in that regard is so unreasonable as to amount to conduct in which no honest or fair-dealing trustee would have engaged.

[91] Mr. Weiler had a longstanding working relationship with Gerald and Ardmay. I appreciate that he was trusted by Gerald and, subsequently, the Trustees. The trust that Mr. Weiler earned historically did not, however, qualify him to represent the Trustees in their dealings with Dan with respect to the management of and passing of accounts for the Trusts. Based on Mr. Weiler’s evidence, I find that he was out of his depth when doing anything other than the bookkeeping and financial statements for the Trusts and Ardmay.

iii) The Trustees Did Not Understand Their Obligations

[92] It is also important to consider what the Trustees understood as of 2014 – more than 10 years after the inception of the Trusts – about their obligations and about what was being presented to Dan at the 2014 Meeting. More accurately stated, it is important to consider what the Trustees did not know and/or did not understand as of 2014. It is also important to remember that the Trustees were responsible for the management of assets which, at least at the outset, exceeded a value of $8,230,000.

[93] Based on Karen’s evidence on cross-examination, I make the following findings with respect to her lack of knowledge and understanding about the Trustees’ obligations:

• She was not aware that Notice to Reader financial statements, such as those presented to Dan at the 2014 Meeting, are the lowest level of review conducted by an accountant; and
• She did not understand what was meant by a passing of accounts. Karen believed that the Notice to Reader financial statements presented to Dan at the 2014 Meeting would constitute a passing of accounts. Karen had not sought advice from Mr. Shostack with respect to passing the accounts for the Trusts.

[94] The only Trustees whose evidence is before the court on this application are Shirley and Karen. For the reasons set out in a subsequent section of this ruling, I do not rely on Shirley’s evidence. Karen’s evidence is that the Trustees made decisions through telephone conversations and meetings in which they all participated. There is no evidence to suggest that either Patricia or Shirley had any greater understanding of the Trustees’ obligations than did Karen. If anything, the evidence is to the effect that, of the Trustees, Karen had the most interaction with Mr. Weiler and Mr. Shostack.

[95] I find that neither of Shirley nor Patricia had any greater understanding of the Trustees’ obligations than did Karen.

[96] The Trustees had and continue to have access to Mr. Shostack’s services. That access started with Mr. Shostack’s meeting with the Trustees shortly after Gerald’s death. That meeting took place at Shirley’s home. I accept Mr. Shostack’s evidence and find that Mr. Weiler was also present at this meeting. Not only did the Trustees have the benefit of access to a lawyer from the outset, but they also had the benefit of access to an accountant to assist them in the management of the Estate and the Trusts.

[97] Mr. Shostack does not have a specific recollection of his initial meeting with the Trustees. Regardless, I accept his evidence and find that during this initial meeting he followed his usual practice for a meeting of that kind and, in doing so, addressed the subject matters identified in the paragraph that follows immediately below. When cross-examined, Karen acknowledged that Mr. Shostack reviewed with them the obligations that she, Patricia, and Shirley had as Trustees.

[98] Based on Mr. Shostack’s evidence, I make the following findings with respect to what transpired at his initial meeting with the Trustees:

• It was a lengthy meeting, during which Mr. Shostack reviewed with the Trustees what their responsibilities would be, how to obtain probate of the Wills, and how the administration of the Estate would proceed; and
• The subject matters covered during the meeting included the fiduciary obligations of trustees, the duty to act in good faith, the duty to act with an even hand in relation to all beneficiaries, and the importance of making prudent investments.

[99] Based on one or both of Mr. Shostack’s evidence and Karen’s evidence, I find that the Trustees did not engage Mr. Shostack in what he describes as “an overall general retainer”.[^7]

[100] Karen’s evidence is that, as of January 2020, when she was cross-examined, the Trustees had only met with Mr. Shostack in person on two or three occasions. It is also Karen’s evidence that, as the primary contact for the Trustees with Mr. Shostack, she spoke with him by telephone once or twice a year. I find that the Trustees consulted with Mr. Shostack from time to time, both by telephone and through in-person meetings involving one or more of the Trustees.

[101] It is difficult to understand how, after more than a decade of managing the Trusts, the Trustees had little, if any, understanding of their obligations with respect to the management of the Trusts.

iv) Summary

[102] I find that for the Trustees to have been so lacking in knowledge – including with respect to the events of the 2014 Meeting – after more than a decade in their respective roles, amounts to unreasonable conduct in which no honest or fair-dealing trustee would engage.

[103] The Trustees relied on Mr. Weiler, as their representative, for the purpose of the 2014 Meeting. As a result, the Trustees bear the consequences that flow from Mr. Weiler’s conduct during that meeting. I find that the Trustees’ conduct, including that of Mr. Weiler, with respect to the 2014 Meeting was unreasonable and conduct in which no honest or fair-dealing trustee would engage.

b) The Trustees’ Conduct in 2015 – Dan’s Will and Free Rein Over Trusts

[104] The conduct of the Trustees in this regard arose in the context of their negotiations with Dan as to the terms pursuant to which the Trustees were prepared, as of 2015, to continue to make the Monthly Payments to Dan.

i) Overview of the Monthly Payments

[105] It is uncontroverted that, in or around 2004, the Trustees began making the Monthly Payments. It is also uncontroverted that the Trustees stopped making the Monthly Payments in October 2015 and did not resume making them until 18 months later. The Trustees resumed making the Monthly Payments in 2016, after Dan commenced this application. When they did so, the Trustees provided Dan with a lump sum to make up for the 18 months in which the payments were not made.

▪ Are the Monthly Payments an Advance or a Loan?

[106] The Trustees acknowledge, and I find that, from the outset, their communication with Dan as to how the Monthly Payments would be treated – as an advance against or as a loan from his one-third share of the residue of the Estate – was not clear. I make no finding of a deliberate attempt to mislead Dan.

[107] Dan and the Trustees disagree as to whether the court is required on this application, as opposed to in the companion passing of accounts proceeding, to make a finding as to whether the Monthly Payments are a loan or an advance. Dan submits that such a finding is necessary. The Trustees’ position is that a finding in that regard should only be made in the companion proceeding, by the judge presiding over the passing of accounts. The Trustees submit that their approach negates the risk of inconsistent findings on the issue.

[108] I agree with the Trustees. At issue on this application is the Trustees’ conduct in the administration of the Trusts. For the purpose of this ruling, including with respect to the Monthly Payments, it is not necessary to make a finding as to whether the Monthly Payments are a loan or an advance.

ii) The Terms Proposed by the Trustees in 2015

[109] The issue of how the Monthly Payments would be treated came to a head in 2015. As of the fall of 2015, the Trustees were prepared to continue the Monthly Payments – without interest – only if Dan acceded to certain requests made by the Trustees. On instruction from the Trustees, Mr. Weiler communicated the Trustees’ position to Dan.5F[^8] One of the Trustees’ requests was that Dan would enter into a written agreement with the Trustees.

▪ The Trustees Seek Free Rein in the Administration of the Trusts

[110] The terms of the agreement proposed by the Trustees included that Dan would “sign the ‘Passing of Accounts’ for the Family Trust financial statements, each year, in the presence of [Mr. Weiler], a lawyer, and one of the Trustees”.6F[^9] In essence, the Trustees were telling Dan that he would continue to receive the Monthly Payments only if he was prepared to give them free rein over the management of the Family Trust, waive any rights he might have based on the terms of the Primary Will, and waive any statutory or common law rights he might otherwise have as a beneficiary of the Family Trust.

[111] In cross-examination, Mr. Weiler acknowledged that terms of this kind were not based on the terms of the Primary Will.7F[^10] Both Karen and Mr. Weiler acknowledged that none of the other beneficiaries under the Primary Will were ever faced with a demand to accede to conditions, of the kind described immediately above, in order to receive the payments to which they were entitled at the discretion of the Trustees.8F[^11]

[112] I find that, in proposing such terms to Dan, the Trustees acted so unreasonably as to engage in conduct in which no honest or fair-dealing trustee would engage.

▪ The Trustees Attempt to Dictate the Terms of Dan’s Will

[113] The terms of the proposed agreement also included that Dan would prepare a Will – with some terms of the Will dictated by the Trustees. In addition, the proposed agreement provided that Dan could not subsequently change the terms of his Will without the consent of the Trustees.

[114] I find that, when prescribing the terms of Dan’s Will, the Trustees acted outside the scope of their powers and duties – as provided in the Primary Will. Nothing in the Primary Will gave the Trustees the authority to dictate the terms of a beneficiary’s will in the way that the Trustees were attempting to do with Dan.[^12] The Trustees not only failed to understand their obligations – as discussed above and elsewhere – but they also failed to understand the limits of their powers and duties.

[115] I find that the Trustees’ conduct with respect to Dan’s Will is unreasonable and conduct in which no honest or fair-dealing trustee would engage.

c) The Decline in Shirley’s Cognitive Abilities

[116] Dan submits that, in their respective roles as Trustees, Karen and Patricia had an obligation to be pro-active in addressing the decline in Shirley’s cognitive abilities, first observed in 2018 and 2019. Dan submits that Karen and Patricia were negligent because they failed to take steps in that regard in a timely manner. He also submits that Karen and Patricia breached their obligations as Trustees because they failed to inform Dan, in a timely manner, of the concerns with respect to the decline in Shirley’s cognitive abilities.

[117] The decline in Shirley’s cognitive abilities was addressed in my ruling on Dan’s motion for an order striking Shirley’s Affidavit. At para. 13 of that ruling, the following findings were made with respect to Shirley’s cognitive condition in 2018 and in 2019:

• From the Spring of 2018 to the Fall of 2018, Shirley was observed to suffer a decline in her memory of day-to-day events and from minor confusion. As an example of the latter, Shirley was at times confused about how to turn the television on and off and how to adjust its volume;
• The concerns about a decline in Shirley’s memory and cognitive abilities and an increase in Shirley’s level of confusion persisted in the Winter of 2018-19. Further decline in Shirley’s overall cognitive abilities was evident by the Spring of 2019, when Shirley returned to Canada from Florida; and
• By the Fall of 2019, Shirley’s cognitive decline was of concern to Shirley’s family physician of 27 years. He referred Shirley for a geriatric assessment.

[118] In 2019, with the assistance of Shirley’s family physician, Karen and Patricia began an investigation of Shirley’s perceived cognitive decline. As of the date of the ruling on the motion to strike Shirley’s Affidavit, the geriatric assessment for which Shirley was referred had not been conducted. There is no evidence before the court on this application as to whether the geriatric assessment has now been carried out and, if so, the results of the assessment.

[119] Dan submits that when considering Karen’s and Patricia’s respective conduct with respect to Shirley’s decline and her role as a trustee, the court should not look at their conduct in terms of two daughters navigating the cognitive decline of their elderly mother. Dan submits that the court must instead look at their conduct through the lens of two trustees who are navigating the cognitive decline of (a) the third of three trustees and (b) the only trustee who must be a decision-maker with respect to all decisions regarding the administration of the Estate and the Trusts.

[120] In later sections of this ruling I find that the Trustees’ reliance on the “family nature” of the Trusts is not a sufficient answer for their conduct. With respect to the concerns about Shirley’s cognitive decline, however, I find that it would be virtually impossible for Karen and Patricia to set aside the fact that the trustee whose cognitive capabilities are of concern is their mother. I find that, when considered in that light, Karen’s and Patricia’s conduct (in their capacity as trustees) does not rise to the level of being so unreasonable that no honest or fair-dealing trustee would have handled the matter as they did.

[121] Dan is critical of Karen and Patricia for turning down a December 2019 appointment offered for the geriatric assessment. Karen has provided two reasons why they turned down that assessment. First, when cross-examined, Karen explained that they did so because Shirley had plans to travel to Florida for the winter. Karen’s evidence is that she and Patricia were reluctant for Shirley to travel to Florida. It was, however, the last winter that she would have been able to do so given her mobility issues and the concerns about her cognitive decline. Karen and Patricia were satisfied that, with support in place, Shirley would be able to manage in Florida.

[122] Second, Karen and Patricia each had plans to be away in December 2019 and the individual conducting the assessment wanted them present to receive the feedback from it.

[123] As of early January 2020, when Karen was cross-examined, a geriatric assessment was scheduled for May 15, 2020. The May 2020 assessment was cancelled due to COVID-19. But for COVID-19, the delay caused by turning down the December 2019 appointment would have been only six months.

[124] As an aside to the issue of Shirley’s cognitive abilities, but relevant to the home in Florida, Karen’s evidence is that the Trustees attribute a value of $1,500,000 to that home. There is, however, no evidence as to the extent to which the Trustees have considered whether that home is to be sold prior to or following Shirley’s death, the tax implications associated with the disposition of that home (i.e., based on the laws of Florida and depending when the home is sold), and what the net amount payable to the Estate will ultimately be. I make this point because the Trustees rely on the value of the Florida home in attempting to minimize the risks created by reason of the Loans and their failure to document the various agreements with respect to the Loans.

[125] Returning to the issue of Shirley’s cognitive abilities, I deal next with the chronology of this application and of Shirley’s application for an order removing her as a trustee. Dan commenced this application in 2016. Shirley’s Affidavit in response to the application was sworn in June 2017. There is no evidence of any concerns about cognitive decline as of 2017.

[126] In 2020, Shirley commenced her application for an order removing her as a trustee. She is represented in that proceeding by the same counsel who represents the Trustees in their capacity as respondents to Dan’s application. For the purpose of her application, Shirley is the client; she does not have a litigation guardian.

[127] Shirley’s counsel has an obligation to address concerns, if any, about the capacity of their client to provide instructions. Given that Shirley does not have a litigation guardian, I draw an inference and find that, for the purpose of the application, Shirley’s counsel does not have a concern about her capacity to provide instructions with respect to Shirley’s application.

[128] I appreciate that there is a distinction between the capacity to provide instructions to counsel for litigation and the capacity to manage property (whether personal or trust property). Regardless, the fact that Shirley’s counsel did not, as of 2020, have a concern about her capacity to provide instructions contributes to my finding that Karen’s and Patricia’s conduct with respect to Shirley’s cognitive condition was not unreasonable and was not conduct in which no honest or fair-dealing trustee would engage.

d) The Loans

[129] The Trustees do not dispute that they have made loans and advances, totalling in excess of $3,000,000, to each of Karen, Patricia, and their respective children (i.e., the Loans).

[130] The financial statement for the Family Trust for the 2014 year-end shows a total equity of $5,549,731. That is the most current information before the court as to the assets in the Family Trust. One of the assets listed therein is “Mortgages and loans receivable” in the amount of $3,598,649. The Loans represent more than 50 per cent of the value of the Family Trust as of 2014.9F[^13]

[131] As will be seen from the discussion that follows, none of the Loans is a “mortgage”. The Trustees have never treated the Loans as such. The Loans are addressed in three subsections below:

• Loans and Advances Made to the Grandchildren;
• Loans and Advances Made to Karen and Patricia; and
• The Trustees’ Conduct Generally with Respect to the Loans.

i) Loans and Advances Made to the Grandchildren

[132] The Trustees rely on Karen’s evidence with respect to the Loans. In her responding affidavit sworn in June 2017 (“Karen’s Affidavit”), Karen addresses the Loans in five paragraphs.[^14] Karen’s evidence is that, as of 2005, Shirley said that she wanted to help her grandchildren by assisting them with the purchase of their respective first homes.

[133] Shirley’s responding affidavit was sworn in June 2017 (“Shirley’s Affidavit”). In her affidavit, Shirley addresses the loans and advances to the grandchildren in a general way. At para. 16 of her affidavit, Shirley says the following:

I have been very happy in general to see some of Gerry’s and my money go out to the children, grandchildren, and great grandchildren while I am still alive. Gerry and I wanted to contribute to the wellbeing of the next generations and it has been so gratifying for me to watch the children, grandchildren, and great grandchildren grow and thrive and to use the money wisely that we have provided or loaned to them.

[134] There are two issues with respect to the evidence as to why loans and advances were made to the grandchildren. First, Karen’s evidence on that issue is based on a statement made by Shirley – meaning evidence based on information and belief.[^15] When such evidence relates to a non-contentious matter, it is admissible on an application: r. 39.01(5) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194. That exception to the best evidence rule does not, however, apply to evidence with respect to the contentious issue of the Loans.

[135] Second, Shirley was not cross-examined on her affidavit. As a result, the parties disagree as to the weight, if any, to be given to Shirley’s evidence. It is not necessary to resolve that issue for the purpose of this section of the ruling. That issue is addressed below in another section of this ruling.

[136] It is also not necessary, for the purpose of this section of the ruling, to consider the reason or reasons why loans and advances were made to the grandchildren. The Trustees’ conduct in deciding to make the Loans is not the issue. Rather, the conduct in issue is the manner in which the Loans were made.

[137] Karen was cross-examined extensively with respect to the grandchildren’s portions of the Loans. Based on Karen’s evidence on cross-examination, I make the following findings:

• Loans in the following amounts were made to Karen’s children and to Patricia’s children, to assist them with the purchase of a home: Adam Davies - $285,000 Ryan Davies - $269,240 Sarah Davies - $286,230 Trevor Lewington - $314,500 Meghan Lewington10F[^16] - $261,000
• In addition, each of the grandchildren listed above received what the Trustees describe as an advance in the amount of $50,000;
• Some of the grandchildren sold the home for which they were initially given a loan. For example, Meghan is living in the second home which she has purchased. Both of the homes which Meghan has purchased are located in Stratford, Ontario. As another example, Adam has renovated and sold several homes. As of January 2020, when Karen was cross-examined, Adam was living in the fourth home he has purchased;
• The grandchildren have been making interest-only payments, based on an interest rate of three per cent per year;
• Adam repaid some of the principal owing with respect to the loan made to him when he first purchased a property. Otherwise, the grandchildren who are no longer living in the home purchased when the monies were initially loaned to them have not repaid any of the principal amount of the loan they received; and
• There is no written agreement between any of the grandchildren and the Family Trust setting out the terms of the loans.

[138] The lack of a written agreement is of particular concern because some of the grandchildren are married and applied their respective loans towards the purchase of a matrimonial home. Karen’s evidence is that the grandchildren who were married when the loans were first made remain married to the individuals to whom they were married at that time.

[139] There is no documentation to the effect that (a) the loans were made exclusively to each grandchild and not to their respective spouses, and/or (b) the spouses each agree that regardless of the application of the loan towards the purchase of a matrimonial home, the spouse does not share at all in the equity derived from that loan. In the absence of such documentation, the loans have in effect been made to the grandchildren and their respective spouses jointly.

[140] I find that the Trustees, knowing that some of the loans would be applied towards the purchase of a matrimonial home, failed to consider the implications with respect to the assets in the Family Trust. I also find that the Trustees failed to take the steps necessary to maximize the ability of the Family Trust to successfully recover the full amount of the loans from the grandchildren who were married when the loans were first made.

[141] The lack of a written agreement is also of concern because Ryan applied his loan towards the purchase of a home in the United States. Ryan continues to reside in the United States. Karen acknowledges that, prior to lending money to Ryan, the Trustees did not seek the advice of a lawyer in the United States with respect to loans for the purchase of real property.

[142] I find that the Trustees failed to consider the implications with respect to the preservation of the assets in the Family Trust in the context of the potential, if it became necessary, to enforce a loan (a) as against an individual who resides in the United States, and (b) which is not secured against property located in the United States.

[143] When asked whether a loan to a specific grandchild was evidenced in writing in one way or another, Karen repeatedly responded by referring to a “legal verbal agreement”, a “legal and verbal commitment”, or a “formal verbal legal agreement” made by the parents of the grandchild.11F[^17] The agreement to which Karen refers is that if one of the grandchildren is unable to repay the loan, then the parents of that individual are responsible to the Family Trust for the amount outstanding on the loan. There is no evidence that any one of Karen, Patricia, and their respective spouses ever reduced to writing their agreement to act, in essence, as guarantors in the manner described by Karen.

[144] Karen’s explanations as to why the Trustees chose not to require mortgages from the grandchildren include the following:

• The grandchildren to whom the loans were made were working at the time the loans were made;
• The parents of the individuals to whom the monies were loaned verbally agreed to “cover the funds”; and
• “This was a family trust and this was money that was being used to support family members who were in a position to safeguard that money well” – referring to the “financial health” of Karen’s and Patricia’s respective families.12F[^18]

[145] By my calculation, over $1,600,000 of the Estate’s assets are at risk because of the Trustees’ conduct with respect to loans to the grandchildren. I find that the Trustees were not guided by the welfare of the beneficiaries named in the Primary Will.

[146] I also find that the family nature of the trust, upon which Karen relied in her explanations, is not an answer to the concerns Dan raises regarding the Trustees’ conduct with respect to the loans to the grandchildren. In particular, the family nature of the trust did not negate the requirement to document (a) the loans to the grandchildren and (b) the parents’ agreements to essentially act as guarantors. By their conduct in that regard the Trustees have acted unreasonably and engaged in conduct in which no honest or fair-dealing trustee would engage.

▪ Exculpatory Language Does Not Apply to the Loans

[147] I agree with the Trustees that they have “uncontrolled discretion” to advance funds to any one or more of Shirley, the children, spouses of the children, and the grandchildren. I note, however, that the Trustees do not have the discretion, under para. 5(b) of the Primary Will, to make advances to spouses of the grandchildren.

[148] The power, authority, or discretion to make an advance to someone other than the individuals listed in para. 5(b) is found in para. 6(m) of the Primary Will. I agree with the Trustees that, under para. 6(m), they have “absolute discretion” to make advances or loans to any person and to do so without security.

[149] I find that there is nothing in the language of either of paras. 5(b) or 6(m) of the Primary Will which explicitly or implicitly relieves the Trustees of their common law duties, such as acting impartially or with an even hand.

[150] The type of exculpatory language required to relieve the Trustees of their common law duties, including to act impartially and with an even hand, is found in para. 6(c) of the Primary Will. That paragraph sets out the powers, authorities, and discretions of the Trustees to, amongst other things, invest in mortgages. Once again, I highlight that the Trustees acknowledge that they do not treat any of the Loans as a mortgage.

[151] Regardless, the Trustees submit that the exculpatory language in para. 6(c) applies to relieve them of their common law duties with respect to the exercise of their powers, authorities, and discretions under one or both of paras. 5(b) and 6(m). Paragraph 6(c) of the Primary Will reads as follows:

To retain, invest or reinvest any cash funds or property constituting the whole or any part of my estate in any investments, including, without limiting the generality of the foregoing, any shares, stocks, bonds, debentures, notes, mortgages, real or personal property, or securities, which my Trustees shall, in their uncontrolled discretion, determine to be advisable, without being limited to investments authorized by law for trustees, and any or all of such investments may, in the uncontrolled discretion of my Trustees, be low or non-income producing property, whether or not such property is likely in the opinion of my Trustees to undergo capital appreciation, and whether or not such would have the effect of conferring an advantage on any one or more of the beneficiaries at the expense of any one or more of the other beneficiaries or could otherwise be considered but for the foregoing as not being an impartial exercise by my Trustees of their duties hereunder or as not being the maintaining of an even hand among the beneficiaries (without being liable for any loss occasioned thereby).

[152] For the following reasons, I find that the exculpatory language found in para. 6(c) does not relieve the Trustees of the common law duties of acting impartially or with an even hand when exercising their powers, authorities, and discretions under either of paras. 5(b) and 6(m) of the Primary Will.

[153] First, by their own admission, when making the Loans, the Trustees were not exercising their powers, authorities, and discretions under para. 6(c) to invest part of the Estate in mortgages.

[154] Second, the Trustees ask the court to consider the detailed approach taken by Gerald to his estate planning, as evidenced by (a) the 23-page Primary Will, (b) the specificity with which he therein addressed both his children and his grandchildren as potential beneficiaries, (c) the 24-page Secondary Will, and (d) the repeated use throughout both documents of the phrases “absolute discretion” and “unfettered discretion”. I agree that Gerald’s approach to estate planning was detailed. That detail, however, includes the use of clear, exculpatory language which relieves the Trustees of their common law duties such as acting impartially or with an even hand in only one paragraph of either the Primary Will and the Secondary Will.

[155] As a result, I find that when the totality of the language of the Primary Will is considered, Gerald intended for the exculpatory language in para. 6(c) to apply only to the powers, authorities, and discretions set out in that paragraph.

[156] I find that the cumulative effect of the decisions made by the Trustees to make the loans and advances to Karen’s and Patricia’s children, in the manner described above, is that they have favoured those children and the spouses of those children over the other potential beneficiaries under the Primary Will. The Trustees did not act impartially and with an even hand.

▪ Summary – Loans and Advances Made to the Grandchildren

[157] For the reasons set out above, I find that in making the loans to the grandchildren as they did, the Trustees (a) engaged in unreasonable conduct in which no honest or fair-dealing trustee would engage, and (b) failed to fulfil their common law duties to act impartially or with an even hand.

ii) Loans and Advances Made to Karen and Patricia

[158] Based on Karen’s evidence on cross-examination, I make the following findings with respect to the loans and advances made to her:

• The Trustees made loans to Karen in the total amount of $838,360. One loan ($460,360) was for the purchase of property in Mont-Tremblant, Quebec. The title to that property is held by Karen and her husband, each with a 50 per cent interest. They do not own the property jointly;
• Neither Karen nor her husband signed any document – including a mortgage – to evidence the loan with respect to the Mont-Tremblant property. The Trustees did not seek advice from a lawyer or notary qualified to practise in Quebec about the significance of the property being in Quebec;
• The Trustees also made a series of smaller loans to Karen, in the total amount of $378,000. Those loans were made over time and for miscellaneous purposes. Karen refers to these smaller amounts as falling in the category of “monies that were advanced”[^19] to her (i.e., not as monies loaned to her); and
• There is no documentation as evidence of the terms of any of the loans made to Karen.

[159] Based on Karen’s evidence on cross-examination, I make the following findings with respect to the loans and advances made to Patricia:

• The Trustees made loans to Patricia totalling $968,000.13F[^20] One loan was for $488,950. Patricia applied the funds towards the purchase of an investment property. Karen was uncertain as to the manner in which title to this property was or is held, but believed that Patricia jointly owned the property with her husband;[^21]
• The Trustees also made a series of smaller loans to Patricia over the years, for miscellaneous reasons, and totalling $399,850;
• The Trustees made what is described as a “bridge loan” to Patricia, in the amount of $80,000, to assist her as she was selling one home and purchasing another; and
• There is no documentation to evidence the loans made to Patricia.

[160] Karen’s explanation for the Trustees’ approach to the monies loaned to her and to Patricia is the same as her explanation for the approach to the loans to the grandchildren. Karen summarized the Trustees’ reasons as to why they did not exercise prudence in the form of a mortgage. First, she explained that the Trustees did not believe that it was necessary to do so “because of the financial health of our respective families, and they were family trust funds being loaned to family members”.14F[^22]

[161] Second, Karen once again relied on the views that the Trustees held collectively of both Karen’s and Patricia’s families. In answering a question with respect to the lack of documentation of the Loans, Karen said the following: “Again, I think there was sort of an understanding that with the honesty and ethics and the financial responsibility in our families that we would honour any of the monies that were loaned to us or advanced to us from the family trust, and that’s exactly what has been done.”15F[^23]

[162] Under para. 5(b) of the Primary Will, the Trustees have the power to make advances to each of Karen, Patricia, their respective spouses, and their grandchildren and to do so with uncontrolled discretion. Similarly, the Trustees have absolute discretion under para. 6(m) to make advances or loans to any person and to do so without security.

[163] By their own evidence, the intention of the Trustees, including with respect to the loans and advances made to Karen and Patricia, was to preserve the assets in the Estate so that, following Shirley’s death, the assets in the Family Trust are distributed in accordance with the terms of the Primary Will. I find, however, that the Trustees have, with respect to the loans made to Karen and to Patricia, failed to take the steps necessary to preserve those assets for ultimate distribution. I make that finding for the same reasons as set out above with respect to the loans made to the grandchildren.

[164] Once again, I find that the Trustees’ reliance on the family nature of the trust and the exculpatory language in para. 6(c) of the Primary Will are not sufficient answers for their conduct.

▪ Summary – Loans and Advances Made to Karen and Patricia

[165] For the reasons set out above, I find that in making the loans to Karen and to Patricia as they did, the Trustees (a) engaged in unreasonable conduct in which no honest or fair-dealing trustee would engage, and (b) failed to fulfil their common law duties to act impartially or with an even hand.

iii) Conduct Generally re the Loans

[166] There are other aspects of the Trustees’ conduct with respect to the Loans upon which I base my findings that they engaged in unreasonable conduct in which no honest or fair-dealing trustee would engage. First, the Trustees ignored advice received from professionals with respect to the Loans. Second, the Trustees failed to consider the possibility that the status quo upon which they rely for fulfilment of the terms of the various oral agreements may not exist as of the date of Shirley’s death.

▪ The Trustees Ignored the Advice of Professionals

[167] I find that the Trustees received and ignored advice given by their accountant, Mr. Weiler, and by their lawyer, Mr. Shostack.

[168] For example, Karen’s evidence is, and I find, that when Karen requested a loan to purchase the Mont-Tremblant property, Mr. Weiler recommended that Karen sign (a) a promissory note, and (b) a letter committing not to encumber the property without prior approval of the Trust. Neither Karen nor her husband signed either type of document.

[169] Similarly, none of Patricia nor any of the grandchildren to whom money was loaned ever signed a promissory note or a letter committing not to encumber their respective properties.

[170] Lastly, and based on Mr. Shostack’s evidence on cross-examination, I find that the Trustees ignored the advice that he provided – at a minimum to Mr. Weiler if not to the Trustees directly – when the Trustees began to make loans to the grandchildren. Mr. Shostack’s evidence is, and I find, that his advice to the Trustees was to “ensure that [the loans] were documented so that there was evidence of [them]”.[^24]

▪ The Trustees Failed to Consider Potential Changes Within the Family

[171] Based on Karen’s evidence, including on cross-examination, I find that (a) the Trustees discussed and agreed as between themselves that the loans to the grandchildren would be considered as an advance of the respective parent’s one-third share of the Estate payable to the parent on Shirley’s death, and (b) this discussion as between the Trustees was never reduced to writing, regardless of whether it is characterized as an agreement, an acknowledgement, or an understanding.

[172] That purported agreement, acknowledgement, or understanding is premised on the status quo being maintained within the family and/or each of the potential beneficiaries under the Primary Will being willing to be bound by it. There is no room for family discord; for the breakdown of a marriage or – short of the breakdown of a marriage – a lack of co-operation from the spouse of any one or more of the individuals who benefits from the Loans; or for financial difficulties, such as bankruptcy, for any one or more of the individuals who benefitted from the Loans.

[173] I find that the potential exists for the status quo to change and for one or more of the individuals involved to fail to honour the terms of the undocumented loans and agreements.

▪ Summary – Conduct Generally re Loans

[174] I find that by ignoring the advice of professionals and failing to consider the potential for the status quo to change, the Trustees engaged in unreasonable conduct in which no honest or fair-dealing trustee would engage.

e) Other Conduct

[175] By their own admission, by 2014 or 2015, the Trustees were no longer able to communicate with Dan about the Family Trust. Regardless of whether Dan acceded to the Trustees’ terms with respect to the Monthly Payments, as of the fall of 2015, the Trustees required that:

Any future requests for monies from the Family Trust, or questions about the functioning of the Family Trust will have to be made in writing, addressed to the Trustees, and sent to the Trustees by registered mail via the office of Dennis Weiler. Responses will be provided in writing.[^25]

[176] It is not unreasonable for the Trustees to designate someone to be their representative for the purpose of communication with respect to the financial statements. I find, however, that the Trustees’ choice of Mr. Weiler to fill that role reflects both their lack of understanding of their obligation to account for their management of the Trusts and their lack of appreciation for Mr. Weiler’s shortcomings in that regard.

[177] Even if the choice of Mr. Weiler to fill that role was reasonable, the requirement that Dan communicate only in writing, and by registered mail, was not. There is no evidence that Mr. Weiler experienced any difficulties regarding Dan’s communication with him – whether by email, by telephone, or in person.

[178] I find that the Trustees’ conduct with respect to the proposed restrictions on communication is an example of their inability to act impartially and with an even hand.

f) The “Virk Factors”

[179] To this point in the ruling, the removal of the Trustees is premised on the conclusion that even if they are relieved of their common law duties (which, with the exception found in para. 6(c) of the Primary Will, I find they are not), they engaged in unreasonable conduct in which no honest or fair-dealing trustee would engage.

[180] In the event I am wrong in that regard, and the Trustees’ conduct cannot be said to fall within that category, then I rely on the Trustees’ conduct as described in sections (a)-(e), above, and find that the removal of the Trustees is warranted based on the factors set out in Virk (see para. 51 above).

[181] I find that (a) it is clearly necessary to interfere with Gerald’s discretion, (b) the Trustees have not taken into consideration the welfare of the beneficiaries, and (c) the non-removal of the Trustees will prevent the proper execution of the Trusts. I find that the evidence is clear that there is no course to follow other than to order the removal of the Trustees.

[182] I find that from the outset, the Trustees failed to appreciate the significance of their obligations and what was required of them to fulfil their respective roles as Trustees. I also find that the Trustees continue to fail to appreciate the impact of their conduct on their ability to fulfil the terms of the Primary Will – specifically, distribution of the Family Trust following Shirley’s death.

[183] For example, with respect to the Loans, the Trustees say that to ensure fairness and equality, interest will continue to accrue on the Loans until Shirley’s death. The Trustees submit that they have maintained the real dollar value of the Family Trust. The Trustees’ position is that upon Shirley’s passing, the final equal distribution will reflect not only a division of the capital then remaining; there will essentially be an equal distribution of the value of the estate since inception. In summary, they believe that an even-handed and equal distribution amongst each of Dan, Karen, and Patricia will ultimately be made from the Family Trust.

[184] In taking that position, the Trustees overlook the possibility that the status quo may not be maintained; as a result, they may be precluded from distributing the Estate in accordance with the terms of the Primary Will. Several potential changes to the status quo have already been discussed. They include that one or more of Karen and Patricia predeceases Shirley, that one or both of Karen and Patricia divorce their respective spouse or goes bankrupt, and that a grandchild to whom a loan was made divorces or goes bankrupt. Another potential change to the status quo is that any one of Karen, Patricia, and their respective children becomes incapable of managing their property.

[185] At present, millions of dollars of indebtedness to the Family Trust is undocumented and potentially unenforceable. The difficulties of enforcing the undocumented agreements may increase if the status quo is not maintained.

[186] As the last of the Virk factors considered, I turn to the friction as between the Trustees and Dan. I find that the friction in that relationship is such that the non-removal of the Trustees will prevent the proper execution of the Trusts.

[187] In Radford, Quinn J. was required to consider familial feuding in the context of an application for the removal of estate trustees. At para. 113, Quinn J. concluded that whether the alleged friction is between co-trustees or the trustee(s) and a beneficiary, for the trustee to be removed “the friction must be of such a nature or degree that it prevents, or is likely to prevent, the proper administration of the trust.”

[188] Justice Quinn referred, at para. 112, to an early 20th century decision from Saskatchewan and a late 19th century decision from England: “The question is whether it would be difficult for the trustee to act with impartiality, not whether, in fact, [the trustee] would or would not do so”: see Walter W. Shaw Co., Re (1922), 1922 CanLII 97 (SK KB), 68 D.L.R. 616 (Sask. K.B.), citing In Lamb, Re, [1894] 2 Q.B. 805 (Eng. Q.B.), per Lord Esher, M.R.

[189] I find that the level of friction as between the Trustees and Dan is such that it has already prevented and is likely to continue to prevent the proper administration of the Trusts. I also find that it would be difficult for the Trustees to act with impartiality. In making those findings I have, amongst other factors, considered the following:

• The Trustees’ individual and collective inability, since the fall of 2014, to communicate with Dan about financial matters related to the Trusts;
• The attempted imposition of unnecessary restrictions on the method of communication to be used by Dan when communicating with Mr. Weiler;
• The attempt to dictate the terms of Dan’s will;
• The attempt to secure Dan’s signature on the Release; and
• The resumption of the Monthly Payments only after Dan commenced this application.

[190] The friction between the parties is also demonstrated by the contradictions in the evidence as it relates to Dan’s conduct. Those contradictions need not be resolved for the purpose of this ruling. They do, however, serve to highlight the disparate views which the Trustees and Dan have of his conduct over time. For example, Karen’s evidence is that she and Shirley became fearful of Dan over time because of what they consider to be his abusive behaviour. Dan denies that he behaved abusively towards any one of the Trustees.

[191] Important for the purpose of this ruling is how the Trustees felt, as of 2014, and continue to feel about dealing with Dan in their capacity as Trustees. Karen’s uncontradicted evidence is that,

• by the fall of 2014, Karen had become afraid of dealing with Dan with respect to money. Karen’s fear of Dan resulted in her no longer being willing to try to deal with Dan with respect to financial issues;
• as of January 2020, when she was cross-examined, Karen continued to be afraid of Dan in that regard; and
• in 2015, when the Trustees were dealing with Dan, through Mr. Weiler, regarding the Monthly Payments, both Shirley and Patricia felt uneasy in speaking with Dan about financial matters.[^26]

[192] Another source of friction between the parties is the views which the Trustees have taken over time of what they consider to be irresponsible financial behaviour on Dan’s part. Dan does not agree with the Trustees’ characterization of his behaviour in that regard. Most important, Dan does not agree that his financial situation in 2015 warranted the demands made of him in exchange for the resumption of the Monthly Payments. It is not necessary for the purpose of this ruling to determine what Dan’s financial circumstances were and whether the Trustees’ concerns about his financial management are valid.

[193] What is important, for the purpose of this ruling, is the extent to which the differences between the Trustees’ views and Dan’s views of conduct – be it his personal conduct or his financial situation – permeate and impact the Trustees’ dealings with Dan. I find that the Trustees’ views of Dan’s conduct are long-held and unlikely to be altered to the degree required to permit the Trustees to properly administer the Trusts. I also find that the Trustees’ views of Dan’s conduct continue to permeate and impact their dealings with Dan to such an extent that the non-removal of the Trustees will prevent the proper execution of the trust.

Summary of Analysis

[194] For the reasons set out above, I find that Dan has met the high threshold for the removal of the Trustees. Intervention by the court is warranted. The Trustees engaged in several forms of conduct that is so unreasonable as to amount to conduct in which no honest or fair-dealing trustee would engage. Even absent that conclusion, when considered in the context of the Virk factors, the Trustees’ conduct is such that their removal is warranted.

[195] Before concluding this ruling, I address an evidentiary issue with respect to Shirley’s Affidavit.

Shirley’s Affidavit

[196] Prior to the return of this application, Dan brought a motion for an order striking Shirley’s Affidavit in its entirety. The grounds upon which Dan relied in support of that motion included that Shirley had not been cross-examined on her affidavit. Dan was unsuccessful on the motion: Clayton v. Clayton et al., 2020 ONSC 7592. The order made included that the parties would, on the return of the application, make submissions with respect to the weight to be given to Shirley’s evidence; they have done so.

[197] The Trustees rely on Shirley’s evidence in support of their position that they have not acted in bad faith towards Dan. The Trustees’ position is that Shirley’s affidavit evidence should be given due weight because it is material to the issues on this application.

[198] Dan asks the court to give little or no weight to Shirley’s evidence because (a) Shirley was not cross-examined, and (b) her evidence is contradicted by the evidence of other affiants who were subject to cross-examination.

[199] Given the conclusions reached with respect to the Trustees’ conduct, it is not necessary for me to address the issue of bad faith; no findings are made in that regard. It is therefore unnecessary to resolve the issue of how much weight, if any, is to be given to Shirley’s affidavit evidence.

Disposition

[200] The Trustees are removed.

[201] On the return of the application, the Trustees’ position was that if they were ordered removed, then they consent to the appointment of BMO as the sole trustee of the Estate and the Trusts. Therefore, on the consent of the parties, BMO is appointed as the sole trustee of the Estate and of the Trusts.

[202] In 2020, Shirley commenced an application for an order permitting her to resign as a Trustee and for Karen and Patricia to continue as the Trustees: Court file no. CV-20-83884. The parties on Dan’s application agreed that if Dan is successful, then Shirley’s application is moot. The parties anticipate being able to agree upon the terms of an order bringing Shirley’s application to an end, save and except that they may wish to make submissions with respect to costs.

[203] In the event the parties are unable to agree upon the terms of the order that flows from this ruling, they may make an appointment to settle the terms of the order.

[204] The parties shall, in any event, contact the office of the Trial Co-ordinator to arrange a case conference to discuss the logistics for costs submissions in this application and, if necessary, settling the terms of the order that follows from this ruling, the terms of the order with respect to Shirley’s application, and costs of Shirley’s application.

[205] This application was heard over six, non-consecutive days and entirely in a virtual setting. The materials on the application are voluminous, taking up almost two banker’s boxes. The challenges of managing such a large record in a virtual setting are, by now, well-known. All counsel in this matter deserve acknowledgment for their respective diligence, thoroughness, professionalism, and civility in terms of both the quality of the written materials and the manner in which they conducted themselves during the hearing.

Madam Justice Sylvia Corthorn

Released: August 31, 2021

COURT FILE NO.: CV-16-68173

DATE: 2021/08/31

ONTARIO

SUPERIOR COURT OF JUSTICE

B E T W E E N:

DANIEL STEPHEN CLAYTON

Applicant

– and –

SHIRLEY VIOLET CLAYTON, KAREN ELIZABETH DAVIES and PATRICIA ANNE LEWINGTON in their capacity as TRUSTEES OF THE CLAYTON FAMILY TRUST

Respondents

RULING on application

Madam Justice Sylvia Corthorn

Released: August 31, 2021

[^1]: For ease of reference, the family patriarch, his widow, and his children are referred to by their respective first names.

[^2]: As explained in an earlier section of this ruling, on Shirley’s death, the undistributed income and capital from the Wife’s Trust is to be added to the Family Trust. The Estate is then distributed in accordance with the terms of the Primary Will.

[^3]: In Chambers Estate, the term used is “executor”. The distinction between an executor and a trustee, if any, is not significant for the purpose of this ruling.

[^4]: Affidavit of Denis Weiler, sworn on June 5, 2019 (“Weiler Affidavit”), at para. 19.

[^5]: The emails are exhibits to the affidavit sworn by Ms. Bursey (“the Bursey Affidavit”).

[^6]: Bursey Affidavit, Exhibit “A”.

[^7]: See Q. 70 from the transcript of Mr. Shostack’s cross-examination.

[^8]: See Q. 384 from the transcript of Mr. Weiler’s cross-examination and QQ. 647-648 from the transcript of Karen’s cross-examination.

[^9]: Dan’s affidavit sworn on March 23, 2016, Exhibit “S”.

[^10]: See QQ. 360 and 379 from the transcript of Mr. Weiler’s cross-examination.

[^11]: See QQ. 359 and 385 from the transcript of Mr. Weiler’s cross-examination and Q. 662 from the transcript of Karen’s cross-examination.

[^12]: On this point, I note that Mr. Shostack’s evidence on cross-examination is that the terms of the proposed agreement with respect to Dan’s will are not terms of the Trusts.

[^13]: Relying on a rough figure of $3,000,000 for the Loans, they represent 54 per cent of the value of the Family Trust as of 2014.

[^14]: See paras. 21-25 of Karen’s Affidavit.

[^15]: See paras. 1 and 2 of Karen’s Affidavit.

[^16]: For ease of reference, in the balance of this ruling the grandchildren are referred to by their respective first names.

[^17]: See, for example, QQ. 222, 225, 227, 278, 279, and 292 from the transcript of Karen’s cross-examination.

[^18]: See, for example, QQ. 347-348 from the transcript of Karen’s cross-examination.

[^19]: See QQ. 203 and 206 from the transcript of Karen’s cross-examination.

[^20]: This amount is taken from one of the parties’ facta. It has not been checked for accuracy. It is accepted as accurate for the purpose of this ruling.

[^21]: Even if the title to this property is in Patricia’s name only, that would not affect my ruling on the application.

[^22]: See Q. 348 from the transcript of Karen’s cross-examination.

[^23]: See Q. 368 from the transcript of Karen’s cross-examination.

[^24]: See Q. 121 from the transcript of Mr. Shostack’s cross-examination.

[^25]: See Dan’s affidavit from 23 March 2016, Exhibit “S”.

[^26]: See QQ. 536-537 and 569 from the transcript of Karen’s cross-examination.