COURT FILE NO.: CV-21-86009 DATE: 10/01/2022 ONTARIO SUPERIOR COURT OF JUSTICE
IN THE MATTER OF THE ESTATE OF ALFONSO SARTARELLI
BETWEEN:
ELKE KASANDA, in her capacity as Estate Trustee of the Estate of Alfonso Sartarelli Applicant – and – HELMUT SARTARELLI, in his personal capacity, in his capacity as Attorney for Property of Alfonso Sartarelli, and in his capacity as Estate Trustee of the Estate of Alfonso Sartarelli, and D. SCOTT MURRAY, in his capacity as Estate Trustee of the Estate of Alfonso Sartarelli Respondents
Counsel: Miriam Vale Peters for the Applicant J.P. Zubec for the Respondent Helmut Sartarelli Calvin Hancock and Kathleen McDormand for the Respondent D. Scott Murray
HEARD: September 21, 2021
DECISION ON MOTION FOR DIRECTIONS
Justice Sally Gomery
[1] In her capacity as Estate Trustee for the Estate of her late father, Alfonso Sartarelli, Elke Kasanda seeks directions for a trial of various issues, the disclosure of records relating to legal advice and services provided to her father prior to his death, and various procedural orders. Most of this relief is opposed by the two other Estate trustees, Elke’s brother Helmut Sartarelli, and Alfonso’s long-time lawyer, Scott Murray. [1]
[2] For the reasons that follow, the motion for disclosure of Murray’s record of legal advice and services to Alfonso is dismissed. The balance of the motion for directions and this application are adjourned, to permit the parties to participate in mediation and, if necessary, for Elke to bring a motion to remove Helmut and Murray as Estate trustees. I remain seized. Costs are reserved until the removal motion is argued or otherwise resolved.
Facts giving rise to the application
[3] Alfonso died on May 24, 2018. Helmut and Elke were his only children.
[4] Alfonso had a close relationship with Helmut and his wife, Caroline, and lived with them from 2007 until his death. He and Helmut were also in business together. In 1995, Alfonso sold his garden ornament business to Helmut, but continued to run it until he died. They had a joint bank account for about 30 years. Alfonso did not have a close relationship with Elke.
[5] Helmut and Elke were the only two beneficiaries in Alfonso’s September 23, 2016 will. He left each of them specific bequests. Elke got a rental property in Stittsville, which realized $280,000 on its sale. [2] Helmut got the contents of his joint bank account with Alfonso, which held approximately $30,000 at Alfonso’s death. [3] Any residual assets, after the payment of the Estate’s debts, were to be split equally between Helmut and Elke. There was, however, nothing left in the Estate once various expenses and taxes were accounted for. In fact, taking into account hospital and funeral expenses, taxes owed, and other expenses already incurred, Helmut and Elke will be required to assume debts of over $60,000. This does not include all legal fees that have been and will be incurred on the Estate’s behalf.
[6] All three parties were appointed Estate trustees in Alfonso’s will. A certificate of appointment was issued on September 21, 2018. The administration of the Estate proceeded without incident until Murray suggested how the Estate’s debts should be apportioned between Elke and Helmut. Based on the value of the specific bequests each of them received in Alfonso’s will, Murray proposed that Elke’s share of the debt would be almost 90%. She objected to this.
[7] Elke began this application in March 2021. She alleges that Helmut owed Alfonso money when he died because he never fully paid the purchase price for the garden ornament business that he acquired from Alfonso in 1995. She also alleges that Helmut improperly removed over $250,000 from his joint account with Alfonso in the months preceding their father’s death, and that he mismanaged Alfonso’s financial affairs, resulting in taxes payable on the Stittsville house when he died. She says that he and Murray, as trustees, are duty-bound to take steps to recover the amounts owed to the Estate by Helmut, but have refused to do so. She therefore seeks to remove Helmut and Murray as Estate trustees and to require Helmut to pass his accounts as Alfonso’s attorney for property prior to his death. She also seeks a determination as to whether Helmut breached his duties as Estate trustee or as Alfonso’s power of attorney for property prior to his death and, if so, whether he owes the estate money, and how much.
[8] This matter came before me in the form of a motion for directions under r. 75.06. On the motion, Elke seeks directions for a hearing with respect to the issues raised in her application, including Helmut and Murray’s removal as Estate trustees. In addition, she asks the Court to order Murray produce his legal files on advice and services given to Alfonso on estate planning and the execution of any power of attorney, and his files with respect to the sale of his business to Helmut in 1995. She also seeks other procedural orders.
[9] Helmut and Murray deny that Elke is entitled to any of the orders she seeks on this motion. They say that Elke has failed to meet the minimal evidentiary threshold to support her allegations, as required to in the context of a motion for directions under r. 75.06. They contend that Elke’s allegations about money owed by Helmut to the Estate are baseless, and deny that there is any valid ground for their removal as Estate trustees, or that Elke should be entitled to disclosure of Murray’s records of legal advice given to Alfonso. As a result, Helmut and Murray ask the court to dismiss the application in its entirety.
Should the court order Murray to disclose his records?
[10] I will deal with this issue first, as it is straight-forward, and the parties agree that it should be resolved on the record before me.
[11] On the motion, Elke asks the court to order Murray to produce his records, notes and files relating to:
(i) The preparation of Alfonso’s September 2016 will, and any advice provided to him about estate planning; (ii) The preparation of any powers of attorney executed by Alfonso and any advice provided in relation to them; and (iii) Alfonso’s garden ornament business, its sale, any mortgages, or promissory notes executed in relation to the sale, and the payment of the proceeds of sale.
[12] Elke also seeks a declaration that any privilege or confidentiality attached to these records is waived. By doing so, she implicitly concedes that the records sought are subject to solicitor-client privilege. I would make this finding in any event, as the records clearly relate to communications between Alfonso and Murray in his capacity as Alfonso’s lawyer.
[13] The request for records with respect to the sale of the garden ornament business is easily disposed of. The court cannot order Murray to produce records that he does not have. In his affidavit on this motion, Murray denies that he still has any such records, given that the sale took place over 25 years ago. Elke did not cross-examine Murray on his evidence and has not produced anything to contradict it.
[14] This leaves the documents relating to Murray’s legal advice and services in relation to Alfonso’s estate planning and any powers of attorneys granted.
[15] The solicitor-client privilege that attaches to these records belonged to Alfonso. There is no evidence that he ever waived it. The privilege survives Alfonso’s death, and Murray therefore has the duty to claim it on behalf of his client: Hawkins v. Hawkins, 2013 ONSC 661, at para. 48; and Canada (Attorney-General) v. Chambre des notaires du Québec, 2016 SCC 20, at para. 45.
[16] The Estate trustees could waive the privilege: Hicks Estate v. Hicks, [1987] OJ No 1426, at para. 15; Morassut v Jaczynski Estate, 2015 ONSC 502 (Div. Ct.), at para. 29. It is not clear whether this waiver would have to be unanimous. I do not need to resolve this question given that a majority of the current trustees (Helmut and Murray) do not agree that the privilege should be waived.
[17] A court may compel disclosure of lawyer’s records, absent a waiver of privilege, in certain circumstances. In the context of estates litigation, an order could be issued where a deceased person’s capacity to execute a will was at issue. Elke is not, however, alleging that Alfonso lacked capacity when he executed his will in 2016, nor does she attack the will for any other reason. There is therefore no basis to order disclosure of Murray’s file regarding Alfonso’s estate planning.
[18] A court may likewise compel disclosure of lawyer’s records with respect to a power of attorney, if an applicant or plaintiff alleges that the giver of the power of attorney lacked capacity when they executed it. Nothing in the record on this motion, however, reveals when Alfonso might have executed a power of attorney for property generally allowing Helmut to act on his behalf. According to Helmut’s affidavit, he never took control of his father’s finances and assets prior to his passing, and only once acted under power of attorney for Alfonso for the purpose of renewing his car registration in 2008, when Alfonso was in Italy. Murray has indicated there was never any question of Alfonso’s ability to manage his own affairs when he dealt with him. I accordingly infer that, if Murray has records of advice and services relating to the preparation and execution of a power of attorney, they would indicate any absence of capacity or relate in any way to the issues raised in Elke’s application.
[19] Elke points out that, after Helmut was served with this application, it was his lawyer, Mr. Zubec, who first asked Murray to disclose his records with respect to services and legal advice provided to Alfonso in connection to the sale of the garden ornament business and the preparation and execution of his will. Murray responded by providing some information in response but said that he would need a court order to disclose his file. About a month later, having spent some further time considering Elke’s application, Mr. Zubec resiled from his earlier position on disclosure. Elke argues that Mr. Zubec’s initial request for Murray’s records shows that they are necessary to a fair adjudication of the issues.
[20] I do not accept this argument. Based on Helmut’s affidavit, Mr. Zubec requested the records very shortly after he was retained, under pressure from Elke’s lawyer to set a date for a hearing, and before he had time to fully review the file or see Elke’s evidence in support of an order for directions. In light of this, I do not find that his letter to Murray in April 2016 constitutes a binding waiver of privilege or an admission that disclosure of the records is required to fairly adjudicate Elke’s claims.
[21] If Elke succeeds in her attempt to remove Helmut and Murray as Estate trustees, she may either be able to waive the privilege unilaterally or convince replacement trustees (if there are any) to waive it. As matters stand, however, she has not established any basis for the disclosure of Murray’s records. Her motion for disclosure is therefore denied.
Is Elke entitled to an order directing issues to be tried?
[22] Elke seeks an order directing that the following issues be tried:
(i) whether Helmut or Murray should be removed as Estate trustees; (ii) whether Helmut is in breach of his duties as Estate trustee and, if so, if he is personally liable for any losses suffered by the Estate as a result; (iii) the value of the Estate at the date of Alfonso’s death; and (iv) whether Helmut should pass his accounts as attorney for property.
Legal principles on a motion for directions
[23] Courts play an important gate-keeping role on motions for directions. Pursuant to r. 75.06(3), on such a motion, a court may direct the issues to be decided in a contentious estate proceeding, the parties to be involved, and the procedure to be followed. As stated in Neuberger v. York, 2016 ONCA 191:
Rule 75.06(3) is permissive. It says that the court "may" direct certain things. It does not say that the court "must" or "shall" grant the application or motion.
[24] By exercising this discretion, a judge ensures that the assets of an estate are not dissipated through litigation with no apparent merit.
[25] In Neuberger, at para. 88, the Court of Appeal held that a party seeking directions for the purpose of challenging a will must provide the court with a minimal evidentiary basis in support of the order ultimately sought. Applying these principles in Seepa v. Seepa, 2017 ONSC 5368, at para. 27, Justice Myers observed that:
The Court of Appeal recognized that it is simple for a disgruntled relative to make an allegation. If that were enough to cause an estate to go through formal proof in solemn form, smaller estates could be wiped out just by the process alone. That outcome might well serve the goals of the disgruntled relative who can thereby scorch the earth for all of the real beneficiaries. But it is hardly just.
[26] Both Neuberger and Seepa involved challenges to wills. In Martin v. Martin, 2018 ONSC 1840, Justice Patillo applied the minimal evidentiary threshold requirement to a motion for directions in the context of a challenge to the appointment of an estate trustee. He held that the principles set out in Neuberger applied because the central issue was the deceased testator’s capacity, even though no formal challenge to the will at issue had been brought. He further noted that the permissive language in r. 75.06(3) governs any motion or application for directions, and that the need to avoid costly and unnecessary estate litigation applies equally to proceedings based on notices of objection: Martin, at paras. 30, 32.
[27] The judges in Seepa and Martin both concluded that the threshold requirement on a motion for directions is low. The evidence supporting the validity of the objection must simply be more than the “suspicion of the objector”; Martin, at para. 35. In the words of Myers J., at para. 35 of Seepa: “At this preliminary stage, the issue is not whether the applicant has proven his or her case but whether he or she ought to be given the tools, such as documentary discovery, that are ordinarily available to a litigant before he or she is subjected to a requirement to put a best foot forward on the merits.”
The parties’ positions on the motion
[28] Elke says that she has satisfied any minimal evidentiary threshold requirement, based on her detailed affidavit describing withdrawals from Helmut and Alfonso’s joint account in the six months prior to Alfonso’s death, the absence of any evidence that Helmut ever paid the mortgage or promissory note executed when he purchased their father’s business, and other arguably questionable conduct or decisions by Helmut over many years. She argues that Helmut is attempting to turn this motion for directions into a summary judgment motion.
[29] Helmut says that Elke has not met the threshold requirement. He contends that her affidavit consists largely of unsupported allegations and hearsay inadmissible either by virtue of s. 13 or s. 35 of the Evidence Act, RSO 1990, c. E.23. He argues that there is no basis for the Court to conclude that he and Murray have failed to comply with their duties as Estate trustees, nor any credible basis for Elke’s claims that he owes the Estate money.
[30] Murray points out that the only consequential relief that Elke seeks against him is his removal as Estate trustee. He contends that she has not advanced any misconduct that would warrant his removal based on the test set out in Radford v. Radford Estate, [2008] OJ no. 3525, at paras. 100-113. Elke does not allege that Murray has breached any statutory or common law duties, or that he is in a conflict of interest. Her only allegation is that he has refused to accede to her demands to act on her allegations against Helmut.
Application of the principles to this case
[31] Applying the principles in Neuberger, Seepa and Martin, I have discretion to determine what, if any, issues should be tried and how they should be tried. I agree with Helmut and Murray that this implies that I could order no issues should be tried, and that the application should therefore be dismissed in its entirety. To do this, however, I would have to conclude that Elke’s allegations amount to no more than suspicions unsupported by any plausible and admissible evidence, such that she ought not to be given the procedural tools to advance her claims.
[32] I conclude that Elke should be permitted to present a motion to remove Helmut and Murray as Estate trustees. I reach this conclusion because Elke could have sought their removal without obtaining leave of the court, and because a decision on this issue may be dispositive of all other issues, without the need for further litigation that will delay resolution of the Estate and add to the parties’ costs. Given this decision, the balance of the motion for directions is adjourned.
[33] I begin by observing that Elke did not need to bring a motion for directions under r. 75.06(1) to seek the removal of Helmut and Murray as trustees. She could have simply proceeded under r. 14.05(3)(c) or r. 75.04(c). Rule 14.05(3)(c) directs that a proceeding with respect to various estate matters, including the removal of a trustee, may be brought by application. Pursuant to r. 75.04, a person with a financial interest in an estate may ask the court to revoke a certificate of appointment of an estate trustee if it is satisfied that the certificate was issued in error or as a result of a fraud on the court, if the appointment is no longer effective, or for “any other reason”. Technically speaking, Elke cannot obtain an order under r. 75.04 (or r. 75.06, for that matter), because she has not brought her application as Alfonso’s beneficiary but as an Estate trustee. Given that she is a beneficiary, however, she could amend her pleading. Alternatively, she could simply proceed by application under r. 14.05(3)(c).
[34] Neither r. 14.05(3)(c) nor r. 75.04(c) require an applicant or moving party to seek leave to bring a motion or application to remove a trustee. The applicant therefore does not need to meet any minimal evidentiary threshold requirement.
[35] Elke relies on both r. 14 and r. 75 in her notice of application. It is unclear why she brought a motion for directions. It appears that she may be attempting to use the motion for a purpose that it is not intended to serve. The purpose of r. 75.06(1) is to provide case management of contentious estate matters involving beneficiaries or estate creditors. A person must have a financial interest in an estate to bring a motion or application for directions under r. 75.06(1). Exceptionally, pursuant to r. 75.01, an estate trustee may seek directions under r. 75.06(1), but this is for the limited purpose of proving a will. As already mentioned, there are other procedural vehicles to remove estate trustees.
[36] Elke cannot compel the Estate to take steps to recover alleged debts from Helmut so long as a majority of the Estate trustees oppose such steps. As a result, the logical next step is a motion to remove Helmut and Murray as trustees. If Elke obtains a removal order, she may very well need no further assistance from the court with respect to her remaining claims. If, on the other hand, the court concludes that there is no basis to remove Helmut and Murray, Elke cannot use a motion for directions as a vehicle to force them to administer the Estate as she would like it administered.
[37] Both Helmut and Murray have urged me to simply dismiss the application without giving Elke a further hearing. They argue that she has not provided any credible evidentiary basis for their removal. They point out that she could have sought to cross-examine their affiants prior to the hearing of the motion for directions but did not do so. They contend that I should decide on their removal based on the record before me, so that they are not obliged to incur any further costs.
[38] I agree that, on a preliminary review of the materials currently before me, the case for removing Helmut or Murray as Estate trustees does not appear to have much merit. I am also alive to the need to minimize legal costs to the Estate.
[39] Despite this, I conclude that the parties should have a full opportunity to argue the merits of Helmut and Murray’s removal, based on a complete record including transcripts of any cross-examination of parties or persons whose affidavit is filed as part of the motion record or the responding motion record. Elke’s lawyer stated at the hearing of the motion for directions that she assumed that I would not adjudicate the merits of the issues in respect of which she sought the court’s directions, and consequently did not take steps to cross-examine the respondents’ affiants prior to the hearing. This was a questionable assumption on Ms. Vale Peters’ part. Be that as it may, I do not think it would be just to adjudicate the merits of the respondents’ removal as trustees based on a limited record and argument, given the procedural rights that the parties would have enjoyed as of right, had Elke brought a motion for removal rather than a motion for directions.
[40] If Elke decides to proceed with the motion and it is dismissed, it will be open to Murray and Helmut to argue that she should be ordered to indemnify them for their legal costs both on this motion, and the motion to remove, on a partial, substantial or even full indemnity basis. If the court does not conclude that they are entitled to recover their full legal costs from Elke, it may opt to order the Estate to indemnify them for any shortfall. This would result in further costs payable by Elke, since the Estate is in a deficit position and she would be responsible, as its principal beneficiary, for covering its debts.
Should the court order mediation?
[41] Elke seeks an order requiring the parties to participate in mediation within the next 90 days. She proposes either Gail Nicholls or Rick Brooks as a mediator, and that the cost of mediation should be split equally between the parties unless they agree otherwise or the court orders otherwise.
[42] Helmut proposed mediation before Elke brought her motion for directions and neither he nor Murray oppose an order for mediation now. They maintain, however, that the cost should be paid by the Estate, for now, subject to further court order. They also object to the mediators that Elke has proposed.
[43] A mediation could be helpful, in my view. I am ordering that it take place before a mediator chosen by two of the three parties. The cost shall be assumed by the Estate absent an agreement between the parties for some other arrangement or a further order of the court.
Disposition
[44] I order as follows:
(i) The motion for disclosure of Murray’s records and waiver of the solicitor-client privilege that attaches to them is dismissed. (ii) The parties shall participate in mediation within 90 days of this decision. If they cannot all agree on a mediator, a mediator may be chosen by two of the parties. The costs of the mediation shall be borne by the Estate unless the parties agree otherwise or the court orders otherwise. (iii) If the parties’ dispute is not resolved at mediation, the applicant is granted leave to bring a motion to remove the respondents as Estate trustees within 90 days of the mediation. If she does so, the parties are granted leave to cross-examine any persons whose affidavits are served and filed on the motion. (iv) The motion for directions is adjourned pending the outcome of the mediation and the motion for removal. (v) I remain seized on this matter. In particular, I am seized to hear any motion to remove the respondents as Estate trustees, to issue any timetable order or other procedural order required to implement this decision, and to adjudicate the balance of the issues on this motion, should this be necessary.
[45] Murray is entitled to recover his costs on the production issue, whatever the outcome of a motion to remove him as a trustee or the outcome of this application as a whole. A decision fixing these and other costs that may be claimed on this motion, and directing their payment, shall be reserved until the motion to remove has been argued. If a motion is not presented but the parties are unable to resolve costs, they may ask me to adjudicate this issue.
Justice Sally Gomery Released: January 10, 2022
Footnotes
[1] To avoid confusion, I will refer to members of the Sartarelli family by their first names. I will refer to Scott Murray as “Murray”.
[2] According to Murray, Elke sold the property for $320,000 but incurred expenses of $40,000 in doing so.
[3] Alfonso actually bequeathed two bank accounts to Helmut, but the second account, a TFSA, had a zero balance.