Court File and Parties
COURT FILE NO.: 22-10 DATE: 2022-04-27 SUPERIOR COURT OF JUSTICE – ONTARIO
IN THE MATTER OF THE ESTATE OF PETER BROWN KINNEAR
RE: KENNETH PETER KINNEAR and KATHERINE LYNN KINNEAR, Applicants AND: ARLENE WHITE, Respondent
BEFORE: The Honourable J. Dawe
COUNSEL: Judith L. Turner, Counsel, for the Applicants Arelene White, self-represented
HEARD: April 12, 2022 (by Zoom videoconference)
Endorsement
Background
1Peter Brown Kinnear (“Mr. Kinnear”) died in September 2019 at the age of 85. He had been a successful businessman and owned a company, Kinnear Leasing Ltd., that he used as his personal holding company.
2Mr. Kinnear made a will in 1999 in which he named his long-time common law spouse, the respondent Arlene White, as his executor and principal beneficiary. She stands to inherit 51% of the shares of Kinnear Leasing, as well as the residue of the deceased’s estate. His two children, the applicants Kenneth and Katherine Kinnear, stand to inherit the remaining 49% of the Kinnear Leasing in equal proportions of 24.5% each.
3Since Mr. Kinnear’s death Ms. White has not taken any steps to deal with administering his estate, including applying for a certificate of appointment as estate trustee.
4In September 2020 the Kinnear children commenced the within application, in which they seek various forms of relief. On October 7, 2020 my colleague Casullo J. granted a motion brought by the applicants and made an order in which, among other things, she directed Ms. White to provide the applicants’ counsel with a statement of the estate’s assets, bring an application to pass accounts in relation to her management of the deceased’s assets before and after his death by the end of November 2020, and attend an examination for discovery.
5Ms. White has not complied with most of the terms of this order. She did attend an examination for discovery in September 2021, but left part-way through after stating that she would not answer any more questions until she had a lawyer. Since then she has not retained counsel.
6The applicants seek an order passing over Ms. White as the trustee of the deceased’s estate and naming Katherine Kinnear as estate trustee during litigation.
Passing Over the Named Trustee
7Mr. Kinnear’s express wish to have Ms. White be the trustee of his estate should not be lightly interfered with: Re Weil, at para. 6. Passing over her and appointing a different person is a remedy of last resort that “should only occur on the clearest of evidence [when] there is no other course to follow”: Radford v. Wilkins, at para. 41; Walsh v. Whitford, 2017 ONSC 4532, at para. 19; Ford v. Mazman, 2019 ONSC 542, at para. 20. “[S]uch an interference with the discretion and choice of a person in preparing his last will and testament must be not only well justified but … must amount to a case of clear necessity”: Weil, supra at para. 6. The party proposing this extreme remedy must demonstrate that if it is not granted it “will likely prevent the trust from being properly executed”: Radford v. Wilkins, supra, at para. 104.
8I am satisfied that the applicants in this case have met this heavy burden. Mr. Kinnear died more than 2½ years ago. Since his death Ms. White has not applied for a certificate of appointment as the trustee of his estate, or done anything else to move the administration of the estate forward, apart from consulting with one lawyer and briefly retaining another lawyer in the fall and winter of 2020.
9Ms. White has failed to take most of the steps that Justice Casullo ordered her to take more than a year and a half ago, in October 2020. She did eventually attend an examination for discovery but walked out, stating that she would not answer any more questions without a lawyer. She also said that she would be retaining counsel, but she has not followed through with this.
10Her comments during the Zoom hearing before me gave me no reason to believe that she has formed any plan for how she will start to administer the estate. Put simply, I have no confidence that the situation will improve if I do not intervene.
11When deciding whether to remove or pass over an estate trustee who was named by the deceased in his or her will, “the court's main guide should be the welfare of the beneficiaries”: Crawford v. Jardine, [1997] O.J. No. 5041 (Gen. Div.), at para. 18. In this case Ms. White is herself the main beneficiary of Mr. Kinnear’s estate. She stands to inherit both a majority of the shares in Kinnear Leasing Ltd. and the residue of his personal estate.
12The other beneficiaries are the applicants, Mr. Kinnear’s children, who stand to inherit a minority stake in Kinnear Leasing Ltd. They have been unable to determine whether these shares have any real value, in large part because of Ms. White’s failures to comply with Casullo J.’s order.
13The corporation appears to have been involuntarily dissolved in 2017, two years before Mr. Kinnear died. A lawyer who Ms. White consulted but did not retain advised the applicants in October 2020 that the company’s assets were transferred to Mr. Kinnear personally at that time. If so, they would now form part of Mr. Kinnear’s personal estate, which Ms. White stands to inherit.
14However, the applicants allege that their father had shown signs of cognitive impairment since 2010, and maintain that he was later diagnosed with dementia. This raises questions about whether he was capable of managing his property at the time of the alleged transfers. The applicants, who were both largely estranged from their father during the last decade of his life and had minimal contact with him, need further and better information about his medical condition during this time and about his estate’s affairs so that they can make an informed decision about how to proceed.
15In my view, Ms. White’s past 2½ years of inaction and her non-compliance with Justice Casullo’s order shows that she cannot be counted on to properly administer Mr. Kinnear’s estate. The applicants deserve to know whether they have inherited anything of value from their father and, if they have, to receive their bequests without further delay. I am satisfied that this will not happen unless Ms. White is passed over and some other person is appointed to act as the trustee of Mr. Kinnear’s estate.
Appointment of Estate Trustee During Litigation
16Katherine Kinnear proposes that this person be her, seeking to be appointed as her father’s estate trustee during litigation.
17I should note that in his will Mr. Kinnear named his son Kenneth rather than his daughter Katherine as his alternate estate trustee if Ms. White was unwilling or unable to act. However, Kenneth Kinnear supports the proposal to have his sister and co-applicant named estate trustee during litigation.
18I am satisfied that someone needs to be appointed to administer Mr. Kinnear’s estate. The more difficult question is whether Katherine Kinnear is a suitable person for this job.
19As Braid J. explained in Class v. Smith, 2018 ONSC 623, at paras. 38-40:
The court has broad and inherent powers to supervise the management of estates and to control its own processes. The court may draw upon its inherent jurisdiction, where appropriate, to ensure fairness to the parties so that justice can be done in the proceeding. The court's inherent jurisdiction exists in parallel with the court's statutory powers to ensure fairness and practicality are maintained while litigation proceeds: see Mayer v. Rubin, 2017 ONSC 3498, 30 E.T.R. (4th) 239.
The general rule is that the court does not appoint a party litigant as Estate Trustee during Litigation. Where there is conflict, impropriety is alleged and/or where the moving party has a significant interest in the outcome of the litigation, it would not be appropriate to appoint a party as Estate Trustee. Even when the interim administration of an estate requires minimal services and is straightforward, potential conflict necessitates the appointment of a neutral Trustee: see Sherbourne v. Shanks, [2005] O.J. No. 2622 (S.C.). The court must maintain a level playing field. The fiduciary duties of an executor or trustee can be inconsistent with a party’s ongoing litigation interests. Neither side should be able to use their control over the estate to benefit themselves or to prejudice the other. The estate should be neutral to the positions of the parties in the litigation. The estate assets should be administered to the maximum advantage of the beneficiaries. A trustee who is in an adversarial position towards a beneficiary should not normally be left in charge of trust property: see Mayer; Dempster v. Dempster Estate (2008), 45 E.T.R. (3d) 139 (S.C.).
20In this case, Katherine Kinnear and Ms. White are plainly in an adversarial position. Ms. Kinnear and her brother have commenced estates litigation against Ms. White. All of the specific factors that Braid J. listed in the above quote exist:
(i) Conflict: Ms. Kinnear acknowledges that she and her brother never “enjoy[ed] a good relationship with Ms. White”, even during their father’s lifetime;
(ii) Impropriety is alleged: In her affidavit Ms. Kinnear accuses Ms. White of “controlling” their father and alienating him from her and her brother, and of breaching her fiduciary duties as a co-director of Kinnear Leasing and as the estate trustee named in the will;
(iii) The moving party has a significant interest in the outcome of the litigation: the terms of Mr. Kinnear’s will create a clear conflict of interest between the applicants and Ms. White when it comes to identifying whether property forms part of Mr. Kinnear’s personal estate or is owned by Kinnear Leasing. The former property will pass entirely to Ms. White, while the shares in the company will be divided between her and the applicants.
21To expand on this last point, it is reasonable to anticipate that there will likely be disputes between the litigants about whether Mr. Kinnear transferred assets from his holding company to himself during his lifetime and, if he did, whether he was capable of managing his property at the time, or whether the transfers were really carried out by Ms. White.
22These factors strongly weigh against Katherine Kinnear being appointed as the estate trustee during litigation. It would be far preferable for this role to be carried out by a neutral third party, ideally a professional with experience in estate administration.
23However, as Ms. Turner points out, professional estate trustees, understandably enough, will not work for free. They are ordinarily compensated out of the estate. The problem here is that it is unclear whether the estate has sufficient assets to pay for a professional trustee. This uncertainty is largely due to Ms. White’s failure to provide the applicants with a statement of the estate’s assets, even after she was ordered to do so by Justice Casullo.
24The general rule that an interested party should not be appointed as estate trustee during litigation is not absolute. In Re Bazos, 1964), Gale J.A. (as he then was) adopted the following statement from Tristam and Coote's Probate Practice, 21st ed., at p. 549 (emphasis added):
A party unconnected with the suit is the most proper person to be appointed administrator pendente lite. A party to the suit is not as a rule appointed unless all other parties consent, but where circumstances make it desirable, the court may appoint a party in the absence of such consents.
25In my view, the circumstances of this case make it “desirable” for Katherine Kinnear to be appointed estate trustee during litigation, even though she and Ms. White, the primary estate beneficiary, are in adversarial positions. I reach this conclusion for two main reasons.
26First, there is no realistic alternative. There is no evidence that there is any other neutral person who would be willing and able to act as estate trustee during litigation, without having any assurance that they would be compensated for their work out of the property of the estate. Kenneth Kinnear was named as the alternate estate trustee in his father’s will, but he has the same conflict of interest as his sister, and evidently prefers that she be appointed. As I have already noted, there is real doubt about the estate has sufficient assets to pay for a professional administrator to act as trustee during litigation.
27While my strong preference would be to appoint a professional administrator, I am persuaded that this is simply not feasible. Determining whether the estate is solvent requires that someone be given the authority to obtain the necessary information and records. It is a task that is likely to take considerable time and effort. There does not seem to be any other realistic way to have this work done other than by appointing Ms. Kinnear to do it.
28Second, Ms. White is largely responsible for creating this unfortunate situation. If she had responded to the applicants’ initial inquiries seeking information about their father’s estate, they might not have brought their application. If she had given them this information when she was ordered to do so by Casullo J., this might conceivably have led to their ending the litigation. At the very least, it might have given them evidence that the estate had sufficient assets to allow for the appointment of a professional estate administrator as trustee rather than an interested party.
29In my view, Ms. White cannot legitimately complain about the unfairness of appointing an adversarial party to administer the estate when she is largely responsible for creating the state of affairs that leaves this as the only seemingly realistic option.
30I should also emphasize that as estate trustee during litigation Ms. Kinnear will have a fiduciary obligation to Ms. White as the principal beneficiary of the estate, and her administration of the estate will ultimately be subject to the control of the court. While it would be better to avoid any appearance of impropriety by appointing a neutral third party, I am satisfied that there are adequate safeguards that will prevent Ms. Kinnear’s conflict of interest from causing any substantial unfairness to Ms. White.
Ancillary Orders
31The applicants also seek various ancillary orders, including orders that will authorize the estate trustee during litigation to obtain relevant information from Ms. White and third parties, and an order restraining Ms. White from dealing with estate property.
32For the most part, I am satisfied that the proposed orders are reasonable and justified in the circumstances. However, there are two exceptions.
33First, I think the applicants’ request for a “tracing order” is premature. The proposed tracing order would compel:
Any person, corporation or financial institution, in possession of legal or financial records of Peter Brown Kinnear, the estate of Peter Brown Kinnear and Kinnear Leasing Ltd and any person, corporation or financial institution, in possession of such legal or financial records shall provide to the Estate Trustee details of to whom, when and in what form the assets have been dissipated or transferred including account numbers, branch numbers or any other identifier of the assets being traced.
34The applicants also request a separate order that would authorize the estate trustee to obtain financial records from 2005 onwards, to the same extent that Mr. Kinnear would have been able to do if he were still alive. I am prepared to make this latter order.
35To the extent that the proposed tracing order goes further, I am not satisfied that it is justified on the existing evidential record. The applicants do not presently have any solid evidence that any estate property has been improperly dissipated or transferred to third parties. Once the estate trustee has obtained the financial records that she will be entitled to obtain under the narrower order that I will be making, the applicants will be able to provide better evidence to justify any further tracing order they consider necessary. They will also potentially be able to give proper notice to at least some of the third parties who would be affected by it.
36Second, I think the restraining order in relation to Ms. White is overly broad as it has been framed. The proposed order would restrain her:
… from dissipating, selling, transferring, disposing of or encumbering any real or personal property that forms or did form part of the estate of Peter Brown Kinnear, including Kinnear Leasing Ltd., or any property that can be traced from property which was originally or previously part of the assets of Peter Brown Kinnear, the estate of Peter Brown Kinnear or Kinnear Leasing Ltd.
37Since Ms. White and Mr. Kinnear were in a conjugal relationship for more than thirty years, and since Mr. Kinnear apparently used Kinnear Leasing as a holding company for much of this time, Ms. White very likely has legitimate ownership claims over a great deal of property that “can be traced from property which was originally or previously part of the assets of Peter Brown Kinnear … or Kinnear Leasing Ltd.”
38On the record before me, I am only prepared to make a narrower order that will restrain Ms. White:
… from dissipating, selling, transferring, disposing of or encumbering any real or personal property that forms or did form part of the estate of Peter Brown Kinnear, including property owned by Kinnear Leasing Ltd. at the time of Peter Brown Kinnear’s death, or any property that can be traced from property which was originally or previously part of the assets the estate of Peter Brown Kinnear.
39I note that this modified language does not capture property that was transferred from Kinnear Leasing to Ms. White before Mr. Kinnear’s death. While I recognize that the applicants may seek to challenge the legitimacy of any such transfers on the grounds that Mr. Kinnear lacked capacity to make decisions about his property, I am not satisfied that the existing evidentiary record supports extending the restraining order to capture any such property. The applicants are free to seek a further order if they can present better evidence to support it.
40An order will issue accordingly. The balance of the application is adjourned sine die.
Costs
41With respect to costs of this motion, if the parties cannot agree on costs they may file brief written submissions of no more than 2 pages. The applicants’ submissions should be served within two weeks of the date of the release of this judgment, and may be filed with proof of service by email through my judicial assistant. Ms. White’s responding submissions should be served and filed within a further two weeks.
The Honourable J. Dawe
Date: April 27, 2022