ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LADAN JAVID as estate trustee of the estate of AGHDAS JAVID
Applicant
– and –
RICHARD KEITH WATSON, RICHARD K. WATSON PROFESSIONAL CORPORATION
Respondents
Counsel:
Marshall Swadron and Matías Contreras León, for the Applicant
Richard K. Watson, for Richard K. Watson Professional Corporation
Richard Watson, representing himself
HEARD: September 23, 2022
REASONS FOR DECISION
DIETRICH J.
1The late Aghdas Javid (the “Deceased”) died on September 28, 2018. She was survived by three adult daughters: Ladan Javid (the “applicant”), Sussan Javid (“Sussan”) and Jasmine Javid (“Jasmine”). The Deceased’s three daughters are equal residual beneficiaries under her Will dated November 23, 1999 (the “Will”). In the Will, the Deceased appointed the applicant as Executrix and Trustee (the “Estate Trustee”) of her estate (the “Estate”).
2The applicant retained the respondents, Richard Keith Watson (“Mr. Watson”) and Richard K. Watson Professional Corporation (“RKWPC”) to assist her in the administration of the Estate.
3During the course of that retainer, Mr. Watson befriended Jasmine. Jasmine is described by the applicant as someone who suffers from anxiety and related emotional disorders that make it difficult to maintain employment. Jasmine is a recipient of Ontario Disability Support Program (“ODSP”) benefits.
4As part of the legal services Mr. Watson provided, he prepared documentation to establish The Jasmine Javid Trust (the “Jasmine Trust”), in which Jasmine would have a life interest in the property held by the Jasmine Trust. The purpose of the Jasmine Trust was to hold for Jasmine’s benefit, during her lifetime, the property to which she was entitled from the Estate. It would be a Henson trust, and therefore, potentially, allow Jasmine to continue to receive ODSP benefits despite her inheritance from the Deceased.
5Mr. Watson prepared a Declaration of Trust, bearing the date July 17, 2020, in which “The Estate of Aghdas Javid” is described as the Settlor, and “Richard K. Watson Professional Corporation” is described as the Trustee (the “Declaration of Trust”). Pursuant to the Declaration of Trust, Jasmine is entitled to income and capital from the Jasmine Trust only in the Trustee’s discretion. On Jasmine’s death, the Declaration of Trust provides that the remaining property vests in the persons as Mr. Watson may direct in writing, and in the absence of such direction, in accordance with Mr. Watson’s will.
6Around the same time, but prior to creating the Jasmine Trust, Mr. Watson prepared a power of attorney for property and a power of attorney for personal care for Jasmine, in each of which he was named as her attorney. He also prepared a will for Jasmine, in which he was named as sole executor and trustee, and the sole beneficiary.
7The applicant, the alleged Settlor of the Jasmine Trust, submits that she had no intention of settling the Jasmine Trust and no knowledge of an alleged transfer of assets to the Jasmine Trust. She seeks a declaration that the Jasmine Trust is void and of no force and effect. She also seeks an order for the remittance and conveyance to the Estate of all assets of the Jasmine Trust, which were owned legally or beneficially by the Deceased or the Estate, or to which the Estate is entitled.
8For the reasons that follow, I find that the Jasmine Trust is void, and of no force and effect. The Jasmine Trust fails for lack of certainty of intention and objects, and possibly for lack of certainty of subject matter. Further, the Trustee did not demonstrate that it has capacity to provide trust services. As such, an order shall issue requiring RKWPC, as the registered or legal owner of the assets of the Jasmine Trust, to convey those trust assets to the applicant, as Estate Trustee of the Estate.1
Background Facts
9Under the Will, the Deceased directed that the residue of her estate be divided among her children equally, provided that if any child predeceased her, that child’s share would be divided in equal shares per stirpes among the issue of such deceased child.
10All three of the Deceased’s children survived her. Accordingly, each of Ladan, Sussan and Jasmine became entitled to a one-third share of the Estate, outright. The Will did not include any trusts for the Deceased’s daughters, including any Henson trust terms for Jasmine.
11According to the applicant’s evidence, at the time of the Deceased’s death, the Estate held investments of approximately $193,500 and three real properties: a) the Deceased’s residence at 132 Hillcrest Avenue, Dundas, Ontario (the “Dundas House”); b) a condominium unit at 555 Yonge Street, Suite 408 in the City of Toronto, where Jasmine was living at the time of the Deceased’s death (the “Yonge St. Condo”); and c) a condominium unit at 7 King Street East, Suite 1709 in the City of Toronto (the “King St. Condo”), which was tenanted and produced rental income. There was also an outstanding loan to a family friend, Gordon Naylor.
12It is undisputed that on August 21, 2018, shortly before her death, the Deceased transferred each of the three real properties from herself to herself and one of her daughters as joint tenants with right of survivorship. At that time, each signed a Declaration of Trust and a Resulting Trust Agreement (Statement of Intention) whereby the transferee daughter agreed that she would, if she survived the Deceased, hold the transferred property, on resulting trust for the Estate. The Dundas House was held jointly between the Deceased and Sussan; the Yonge St. Condo was held jointly between the Deceased and the applicant; and the King St. Condo was held jointly between the Deceased and Jasmine.
13When the applicant retained the respondents to advise her in her role as Estate Trustee of the Estate, there was no engagement or retainer letter. In an invoice Mr. Watson rendered to the applicant, he described the services provided as “advice in connection with all aspects of the management and administration of the estate”, and “its joint tenancy/survivorship/trust structures.”
14Mr. Watson assisted the applicant to apply for a Certificate of Appointment of Estate Trustee with a Will. The court issued the Certificate to her on November 19, 2019, in respect of the Will.
15Once the Certificate was issued, Mr. Watson directed the financial institutions at which the Deceased had investments to liquidate the investments and pay the funds to RKWPC in trust. Mr. Watson also received $110,559.12, in trust, from Mr. Naylor for the benefit of the Estate.
16At the request of Jasmine, who wanted a larger condominium, the applicant sold the Yonge St. Condo, and the proceeds were used to purchase a condominium at 5 Concorde Place, in North York. Jasmine moved to the 5 Concorde Place condominium in August 2019. The respondents were not involved in this transaction.
17On June 16, 2020, Mr. Watson registered a survivorship application in respect of the King St. Condo with the result that Jasmine became the legal owner of the property.
18RKWPC, on behalf of the Estate, retained Blaney McMurtry LLP to prepare the documents to convey the King St. Condo to RKWPC as Trustee.
19Blaney McMurtry LLP prepared a Property Transfer Agreement dated the 17th day of July, 2020 in respect of the transfer of the King St. Condo from Jasmine Javid to RKWPC as Trustee (the “Property Transfer Agreement”). The Property Transfer Agreement refers to the transfers of each of the legal and the beneficial interest in the King St. Condo.
20The Property Transfer Agreement states that “by separate instrument of even date the Estate is transferring beneficial ownership of the Property to the Transferee [RKWPC] as trustee of the Jasmine Javid Trust (the “Trust”) and on the instruction and direction of the Estate the Transferor [Jasmine] is transferring legal title to the Trust on the terms and subject to the conditions set out herein.”
21The Declaration of Trust is dated the 17th day of July 2020.
22The parcel register for the King St. Condo shows the transfer of legal title from Jasmine to RKWPC on July 30, 2020.
23Blaney McMurtry LLP billed RKWPC for this work, and their fees were paid by the Estate. There is no evidence to suggest that Jasmine had any independent legal advice in respect of the transfer of the King St. Condo.
24The Land Transfer Tax Affidavit, sworn July 30, 2020, by Mr. Watson, on behalf of the Transferee RKWPC stated that the consideration on the transfer was nominal because the transfer was from beneficial owner to trustee. There is no evidence to suggest that the Estate Trustee, as beneficial owner received any legal advice in respect of the King St. Condo. The applicant’s evidence is that she was unaware of the transfer, and she never received any advice on it, or even a reporting letter.
25On September 14, 2020, Mr. Watson, on behalf of RKWPC, encumbered the King St. Condo with a mortgage in the principal amount of $300,000. The mortgage had a 351-day term, and interest was calculated at a rate of 7.5 per cent. The “consultant fee” was $9,000. The mortgagees were three private lenders. Mr. Watson guaranteed the mortgage.
26Jasmine deposed that the loan proceeds were used to earn income so she could pay her expected legal bills. On January 11, 2021, Jasmine wrote to Mr. Watson to ask him to “undo” this mortgage. The mortgage has not been discharged.
27Mr. Watson lent the borrowed funds to a long-time client, Curtis Petersen, for a one-year term ending September 15, 2021. He secured that loan with a fourth mortgage on a property that had been held by another of Mr. Watson’s clients. At the time of the hearing, Mr. Petersen had not repaid the loan.
28In late September 2020, the Estate Trustee instructed Mr. Watson on her plan for dividing and distributing the Estate assets. Her plan included registration of the King St. Condo in the names of the applicant, Sussan and Jasmine. On September 27, 2020, the applicant wrote to Mr. Watson to follow up on her earlier instructions and stated that she was expecting to see the requested change in title to the King St. Condo the next day. In the same email, the applicant directed Mr. Watson to transfer to her, immediately, all the remaining funds of the Estate in the trust account, and she confirmed that she would deal with his fees at a later date.
29The applicant got no reply to her September 27, 2020 email. She wrote to Mr. Watson’s assistant, Ms. Panek, on September 28, 2020 to follow up. She explained that she had been waiting several days for Mr. Watson to act on her instructions. She also asked that a detailed, itemized account of Estate expenses and fund receipts from all sources be emailed to all of the beneficiaries. The applicant also asked that all original and other documents pertaining to the Estate be assembled for her to pick up after work that day. The applicant specifically requested that the documents reflecting the ownership of the King St. Condo in the names of the applicant, Sussan, and Jasmine be included in the materials to be picked up. Getting no reply, the applicant wrote to Ms. Panek again in the afternoon on September 28, 2020.
30On September 29, 2020, the applicant was able to reach Mr. Watson by phone. Subsequently, the applicant confirmed in an email dated September 30, 2020 that the documents pertaining to the Estate would be ready for pick up on October 1, 2020. The applicant also confirmed that she would deal with the remaining administration of the Estate and would open an Estate bank account. In these emails, the applicant makes no mention of the Jasmine Trust.
31On October 1, 2020, the applicant received an envelope of documents from Ms. Panek. Those documents included a copy of the Jasmine Trust.
32On October 5, 2020, the applicant wrote to Mr. Watson to advise that a) she did not agree with the contents of the Jasmine Trust document; b) she did not recall receiving any advice from him (her lawyer) regarding the Jasmine Trust; and c) she was instructing him to prepare a new document revoking the contents of the Jasmine Trust.
33On October 6, 2020, Mr. Watson responded stating that he was preparing “a complete and detailed treatment of each issue you raise, as well as other issues that have come to my attention.” He added that “your Mother’s complete Will expressly states that the King condo is bequeathed to Jasmine.”
34The comment relating to the “complete Will” was a reference to a codicil to the Deceased’s Will, which Mr. Watson said Jasmine had given him. He stated that, in the codicil, the Deceased left both the Yonge St. Condo and the King St. Condo, as well as a one-third interest in the Dundas House to Jasmine.
35Around the time when the existence of the codicil was disclosed to the applicant, Mr. Watson appeared to align with Jasmine. He alleged that the applicant, and the applicant’s former husband had borrowed money from the Deceased, which they had not repaid. He also alleged, without producing a copy of the codicil, that the applicant had withheld the Deceased’s codicil from Jasmine. The applicant’s evidence is that she knew nothing of a codicil until Mr. Watson brought it to her attention. Mr. Watson only provided the applicant with a copy of the codicil a month and a half later, by which time he had been discharged as her lawyer.
36In the October 6, 2020 email, Mr. Watson also stated that he had discussed the Declaration of Trust with the applicant before she signed it, that she accepted it, and she was given a copy at the time it was signed.
37The applicant does not deny that it appears to be her signature on the Declaration of Trust. However, she denies having been available to sign any document on July 17, 2020, which is the date on the document. She also denies having given Mr. Watson any instructions regarding the Jasmine Trust, having received any advice on the Jasmine Trust, and having been given a copy of the Jasmine Trust prior to October 1, 2020.
38Mr. Watson has no correspondence, drafts, notes, calendar or time entries confirming that the applicant signed the Declaration of Trust on July 17, 2020, or that he sent her a copy.
39The applicant retained new counsel, Mr. Swadron, late in September 2020. Mr. Swadron asked Mr. Watson to release the Estate funds to the applicant and to account for his dealings, but Mr. Watson refused.
40On December 8, 2020, Conway J. ordered the respondents to pay all Estate funds and the King St. Condo mortgage proceeds into court by December 23, 2020. Mr. Watson breached the terms of that order and a subsequent order. Eventually, he paid some funds into court, he paid $49,902.58 to the Jasmine Trust, and he paid himself $45,359.06 for legal fees.
The Declaration of Trust Terms
41The Declaration of Trust begins with a statement that the Settlor (The Estate of Aghdas Javid) desires to establish a trust for the benefit of Jasmine Javid.
42Paragraph 1 states that the Settlor transfers to the Trustee “all property, rights and entitlements arising from the death of Aghdas Javid for the benefit of Jasmine, including all real estate interests, money, loans, and securities, and directs the Trustee to hold and administer the Property for the benefit of JASMINE during her lifetime, PROVIDED HOWEVER that if JASMINE shall die, then the Trust Property shall vest as the Settlor may direct in writing… The Trustee shall keep the same invested during the lifetime of JASMINE, upon the trusts hereinafter provided.”
43Paragraph 2 gives the Trustee absolute discretion to pay income or capital to or for the benefit of Jasmine in his absolute and unfettered discretion, other than for basic necessaries of life, and permits the Trustee to take into account other sources of income or government assistance to which Jasmine may be or become entitled, and insofar as possible not to impair such income or entitlement to government assistance. This paragraph also provides that “[n]o interest in the trust fund, nor in any of the income thereon, shall vest in Jasmine unless actually paid to or for her by the Trustee.”
44Paragraph 3 provides that upon Jasmine’s death: “the Trustee shall pay [Jasmine’s] funeral expenses and related costs, and so much of the trust fund as may then remain undistributed by the Trustee shall vest in such person or persons as Richard Keith Watson may direct in writing, and in the absence of a direction, then in accordance with Richard Keith Watson’s last will and testament.”
45Schedule A sets out additional trust terms, including broad powers for the Trustee; it contains a statement that the trust is irrevocable, and it provides for the Trustee to charge fees. It also provides that no part of the trust fund shall in any event revert to the Settlor.
46The Declaration of Trust appears to be signed by Ladan Javid as Estate Trustee, for the Estate of Aghdas Javid, and by Richard Watson, for the Trustee, each in the presence of Mr. Watson’s assistant, Mary Panek.
47On the signature page, there is also an “Acknowledgment” by Jasmine in which she “acknowledges and agrees to the foregoing this 17th day of July, 2020.” Apart from this date, the Declaration is undated.
Positions of the Parties
48The applicant asserts that the Jasmine Trust is fatally flawed. Her reasons include Mr. Watson’s alleged deception and conflicts of interest in its creation, the lack of certainty of intention to create a trust, including the fact that it is a sham trust that cannot accomplish what it was purportedly established to do, which was to preserve Jasmine’s ODSP eligibility.
49The respondents submit that the Jasmine Trust is a valid trust, and they committed no actionable wrong against the Estate or any other person.
Law
50Rules 14.05(3) (a) and (b) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 permit an application where the relief claimed is the opinion, advice or direction of the court on a question affecting the rights of a person in respect of the administration of the estate of a deceased person or the execution of a trust; or an order directing executors, administrators or trustees to do or abstain from doing any particular act in respect of an estate for which they are responsible.
51Courts assumed inherent jurisdiction to supervise and administer trusts so that trusts could be given legal force. The enforcement of trusts was not achieved by empowering courts to act as roving commissions of inquiry into their proper performance, but by empowering courts to assist those with an interest in trusts in enforcing and compelling the performance of those trusts: Carroll v. Toronto-Dominion Bank, 2021 ONCA 38, 153 O.R. (3d) 385, at para. 18.
52As set out by Lauwers J. (as he then was), in Elliott (Litigation Guardian of) v. Elliott Estate (2008), 2008 CanLII 63993 (ON SC), 45 E.T.R. (3d) 84 (Ont. S.C.), at para. 24, with reference to A.H. Oosterhoff et al., Oosterhoff on Trusts: Text, Commentary and Materials, 6th ed. (Toronto: Thomson Canada Limited, 2004), at 161:
As a matter of law, the creation of a valid express trust requires the following:
the person creating the trust (the settlor) and the trustee must have capacity;
the three certainties must be met:
a. certainty of intention to create a trust;
b. certainty of subject matter; and
c. certainty of objects;
the trust must be constituted, that is, the trust property must be transferred to the trustee; and
any necessary formal requirements must be met.
Is the Jasmine Trust a valid express trust?
53The Jasmine Trust is not a valid express trust for a number of reasons. They include the fact that the purported Settlor of the Jasmine Trust had no intention of settling the Jasmine Trust, she did not settle the King St. Condo on the Jasmine Trust, and there is no certainty of objects with respect to the remainder beneficiaries of the Jasmine Trust on Jasmine’s death. In addition, the purported Trustee of the Jasmine Trust does not have capacity to act as Trustee.
The Three Certainties
Certainty of Intention
54The Declaration of Trust states that the Settlor of the Trust is “The Estate of Aghdas Javid.” Technically, this in and of itself is problematic in that the Estate is not a legal entity capable of entering into a contract or trust arrangement. The legal representative of the Estate may do so. Even if the Settlor was incorrectly described as the Estate, but it intended to be the applicant, on behalf of the Estate, the Jasmine Trust would still fail. The applicant’s evidence is that she had no intention of creating the Jasmine Trust, the purpose of which was to permit Jasmine to exclude from her assets used to determine her eligibility for ODSP benefits the property she inherited from the Deceased. The applicant deposed that while she does not deny that it could be her signature on the Declaration of Trust, as “Settlor”, she could not have signed the Declaration of Trust on July 17, 2020, when the transfer of the beneficial interest in the King St. Condo is said to have occurred, because her phone records show that she was not in the City of Toronto on that day. The applicant further submits that she had no idea of the existence of the Jasmine Trust until she received a copy of it at the time she was ending her retainer with Mr. Watson. She submits that Mr. Watson gave her no advice on the creation of the Jasmine Trust, and she never received a reporting letter on its establishment, or any information regarding purported transfers of property to the Jasmine Trust, including the King St. Condo.
55Mr. Watson submits that the applicant is wrong when she states that she was unaware of the creation of the Jasmine Trust. He submits that the applicant was aware that the Jasmine Trust was being created, as a Henson trust, to hold the property that Jasmine would inherit from the Estate so that Jasmine could continue to collect ODSP benefits.
56Given that there is no documentary evidence to show that the applicant a) received advice on the settlement of the Jasmine Trust; b) received any reporting regarding its establishment; c) was asked to direct the transfer of property from the Estate to the Jasmine Trust, or to sign any transfer documents to convey property from the Estate to the Jasmine Trust; or d) received a copy of the Jasmine Trust until October 2020, I accept the applicant’s evidence that the existence of the Jasmine Trust only truly came to her attention when she got a copy of it in October 2020.
57The applicant’s evidence is that Jasmine told her that Jasmine was considering setting up a Henson trust and was talking to Mr. Watson about it. The record includes an email message sent on February 21, 2019 in which Jasmine mentions a Henson trust. She sent the email message to Mr. Naylor and stated that she had met with a lawyer regarding a “hensen fund” of which Mr. Naylor and Ladan would be trustees. The applicant does not appear to have been copied on this email.
58On a balance of probabilities, I accept the applicant’s explanation that if it is her signature on the Declaration of Trust, she likely signed it when Mr. Watson asked her to sign a number of documents relating to the Estate administration, and that this document was not explained to her. Mr. Watson conceded under cross-examination that he did not advise the applicant of any adverse consequences of signing the Declaration of Trust and that the applicant was not referred for independent legal advice.
59Irrespective of whether the applicant had some knowledge of the existence of a Henson trust for Jasmine’s benefit before October 2020, the evidence strongly supports her position that she had no intention to create the Jasmine Trust.
60Based on the record, there is no documentation in support of any transfers of property from the applicant to the Jasmine Trust, including, the King St. Condo. Mr. Watson registered the transfer of the survivorship application on June 16, 2020, with the result that Jasmine became the legal owner of the King St. Condo. However, pursuant to the August 21, 2018 agreement between Jasmine and the Deceased, Jasmine continued to hold the beneficial ownership of the King St. Condo on resulting trust for the Estate.
61The Property Transfer Agreement, prepared by Blaney McMurtry LLP, referred to the transfer of the beneficial interest and the legal interest in the King St. Condo. The Agreement stated that “by separate instrument of even date the Estate is transferring beneficial ownership of the Property to the Transferee [RKWPC] as trustee of the Jasmine Javid Trust (the “Trust”) and on the instruction and direction of the Estate the Transferor [Jasmine] is transferring legal title to the Trust on the terms and subject to the conditions set out herein.” [emphasis added].
62There is no evidence that the applicant, on behalf of the Estate, provided “instruction and direction” to Jasmine to transfer legal title to the Trust. On the contrary, the applicant’s evidence is that she had no knowledge of the transfer of the legal title to the Jasmine Trust until October 2020, and therefore could not have directed it. The transfer of legal title of the King St. Condo was, therefore, not made in accordance with the Property Transfer Agreement.
63In his affidavit sworn June 15, 2021, Mr. Watson deposed that “Jasmine as nominee and bare trustee executed an agreement to convey legal title to the King Condo to the Jasmine Javid Trust…; and shortly afterwards, the Trustee was registered on title as owner of the King Condo.”
64Regarding the beneficial ownership, pursuant to the Property Transfer Agreement, the “Estate” was required, by separate instrument of even date [July 17, 2020] to transfer beneficial ownership of the Property to the Transferee [RKWPC] as trustee of the Jasmine Trust.
65The respondents submit that the transfer of the beneficial interest took place when the applicant executed the Declaration of Trust, being the “separate instrument of even date.” However, the applicant’s evidence is that she could not have signed the Declaration of Trust on July 17, 2020 as she was in Dundas, Ontario that day. There is no evidence from Ms. Panek, who witnessed the signatures on the Declaration of Trust, that it was executed on July 17, 2020. More importantly, there is no evidence to show that, on whatever date the applicant signed the Declaration of Trust (assuming it is her signature), the applicant had the beneficial interest in the King St. Condo to convey to RKWPC. The record does not include any evidence of a transfer of the beneficial interest in the King St. Condo from Jasmine, who was holding it on resulting trust for the Estate, to the applicant as Estate Trustee. Until Jasmine transferred the beneficial interest in the King St. Condo to the Estate Trustee, the Estate Trustee could not settle that interest on the Jasmine Trust. Accordingly, I find that the applicant did not intend to settle and did not, in fact, settle the beneficial interest in the King St. Condo on the Jasmine Trust.
66The applicant’s evidence is that she had no knowledge of the transfer of the King St. Condo to the Jasmine Trust and the transfer was never discussed with her or reported to her. In an email to Mr. Watson dated September 23, 2020, in which the applicant is contemplating a distribution of the Estate among the Deceased’s three daughters equally, she estimates the total Estate value to be $1.3 million to $1.4 million of which “Jasmine Javid has $700,000 to $725,000”, as represented by the proceeds of sale from the Yonge St. Condo and the value of the King St. Condo. In that email, the applicant makes no mention of the Jasmine Trust.
67As further evidence that the applicant Trustee had no intention of settling the Jasmine Trust, I note that the applicant, as the purported Settlor, had no hand in determining who the Trustee of the Jasmine Trust would be, or who the beneficiaries of the Jasmine Trust would be. Mr. Watson does not deny this. He submits that it was Jasmine, and not the applicant, who instructed him on who the Trustee and the beneficiaries of the Jasmine Trust would be.
68In affidavit evidence adduced by the respondents, Jasmine agrees that the applicant did not establish the Jasmine Trust or intend to establish the Jasmine Trust. Jasmine deposed, in her affidavit sworn January 6, 2021: “There was never anything in the formation of the Trust that was the business of the Estate or Ladan. I set up my Trust, not Ladan and not the Estate. All of the operative terms of my Trust were directed completely by me, including the selection of the Trustee and the designation of beneficiaries.” In the same affidavit, in an apparent contradiction, Jasmine stated: “The only role the Estate had, and the only thing it ever did, was simply to settle my Trust by transferring to my trust the assets I was inheriting from our Mother.”
69Jasmine’s evidence further supports the applicant’s submission that the applicant, as the purported Settlor had no intention to settle the Jasmine Trust. I find that the Jasmine Trust fails for lack of certainty of intention.
Certainty of Subject Matter
70Absent the transfer of the beneficial interest in the King St. Condo to the Jasmine Trust, query whether the Jasmine Trust had certainty of subject matter. While there is evidence to show that Mr. Watson transferred certain funds to the Jasmine Trust from the Estate assets he had gathered in on behalf of the Estate Trustee, there is no documentary evidence in support of a direction by the applicant to Mr. Watson to make that transfer of Estate funds to the Jasmine Trust.
71In her affidavit sworn January 6, 2021, Jasmine deposed: “I directed Richard Watson not to pay [funds related to the Estate] to me personally but to place the funds in my Trust.”
72Based on the evidentiary record, there is no documentary evidence in support of the transfer of any property from the applicant to the Jasmine Trust. If the applicant did not authorize and direct the transfer of any Estate assets to the Trustee, then the Jasmine Trust would also fail for lack of certainty of subject matter.
Certainty of Objects
73In addition to the lack of certainty of intention, the Jasmine Trust fails for lack of certainty of objects or beneficiaries. The Declaration of Trust is clear that the only person intended to benefit from the Jasmine Trust during Jasmine’s lifetime is Jasmine. However, based on the language of the Declaration of Trust, there is no certainty respecting who the beneficiaries of the Jasmine Trust would be on Jasmine’s death. In paragraph 1, the Declaration of Trust states that if Jasmine should die, the Trust property vests “as the Settlor may direct in writing.” This provision appears to give the Settlor a power to appoint the residual beneficiaries of the Jasmine Trust. However, in paragraph 3, the Declaration of Trust provides that upon the death of Jasmine, after the payment of funeral expenses and related costs, the trust fund remaining undistributed by the Trustee “shall vest in such person or persons as Richard Keith Watson may direct in writing, and in the absence of a direction, then in accordance with Richard Keith Watson’s last will and testament.” This language appears to give Mr. Watson a power to appoint the residual beneficiaries, and in default of the exercise of that power, directs the trust fund remaining to be distributed in accordance with the terms of his will.
74The conflicting powers of appointment, as between the Settlor and Mr. Watson are sufficient to conclude that there is no certainty of objects with respect to the Jasmine Trust following Jasmine’s death. But the matter is further complicated by the fact that Mr. Watson submits, and Jasmine deposed, that as an accommodation to allow the Jasmine Trust to be formed, Mr. Watson allowed his name to be used “strictly as a nominee and with no true beneficial interest, pending Jasmine’s decision on a residual beneficiary.” In addition to the ambiguity regarding who has the power to appoint residual beneficiaries, the choice of Mr. Watson, as a placeholder, with no beneficial interest, further underscores that there was no certainty of objects when the Jasmine Trust was created. Jasmine deposed that, in February 2021, she decided that she wanted the National Spiritual Assembly of the Baha’is of Canada to be the residual beneficiary of the Jasmine Trust, and that this wish was documented and has not changed.
75This purported change in the residual beneficiary of the Jasmine Trust is also flawed. Nothing in the Declaration of Trust gives Jasmine a power to appoint beneficiaries of the Jasmine Trust at any time. Further, in accordance with its terms, the Declaration of Trust may only be amended for limited purposes (e.g., to correct typographical mistakes, to remove conflicts or inconsistencies, to ensure continuing compliance with applicable laws). The Declaration of Trust does not permit an amendment that would alter beneficial entitlements.
76For these reasons, I find that the Jasmine Trust also fails for lack of certainty of objects.
Was the Jasmine Trust created for an improper purpose?
77The applicant further submits that the Jasmine Trust should be found to be void because it was established for an improper purpose, and unfairly exposed the applicant and the Estate to potential liability.
78The ODSP is created by the Ontario Disability Support Program Act, 1997, S.O. 1997, c. 25, Sched. B (the “ODSPA”). Section 5 of the ODSPA identifies the eligibility criteria for income support, and s. 27(1) of O. Reg. 222/98: General, prescribes asset limits for ODSP recipients. For example, the asset limit for a single adult with no dependents and no spouse is $40,000. Section 28(1) prescribes the manner by which assets are determined and creates exemptions for certain assets.
79One such exemption is a trust as set out in s. 28(1)(19) of the Regulation, which allows an ODSP recipient to establish a trust for their maintenance if the trust capital is derived from an inheritance or the proceeds of a life insurance policy, and the trust capital does not exceed $100,000.
80Another exemption arises if a testator creates an absolute discretionary trust or a Henson trust for a beneficiary who receives ODSP benefits. The Henson trust is not considered for the purposes of ODSP asset calculation.
81The Deceased did not include a Henson trust for Jasmine in the Will. Nor does the Will authorize the Estate Trustee to create such a trust for any beneficiary.
82Where there is no such Henson trust, Directive 4.7 of the Policy Guidelines of the Director of the ODSP provides:
Members of the benefit unit who receive an inheritance or are entitled to an inheritance cannot create or put that inheritance in an absolute discretionary trust in an attempt to have the trust not considered an asset. Moreover, members of a benefit unit cannot direct that other types of funds they have received or funds to which they are entitled be placed in an absolute discretionary trust.
83If an ODSP recipient of income is over the income limits or holds assets in excess of the asset limits, that person is no longer eligible for ODSP.
84It is an offence to knowingly obtain or receive money, goods or services to which one is not entitled under the ODSPA and to knowingly aid or abet another person to obtain or receive money, goods or services to which the other person is not entitled.
85By creating the Jasmine Trust and naming the Estate as Settlor, the respondents and Jasmine exposed the Estate to potential liability for abetting Jasmine to obtain ODSP benefits to which she may not be eligible given her entitlement to a share of the Estate. The applicant received no advice or warning from the respondents in respect of this risk associated with their attempt to create a means by which Jasmine could remove her inheritance from the calculation of her assets for the purposes of ODSP benefits.
86Under cross-examination, Mr. Watson confirmed that the purpose in creating the Henson trust was to create a structure whereby Jasmine would receive her entitlement under the Will and continue to receive ODSP benefits. Because the ODSP rules specifically preclude an ODSP benefit recipient from creating a discretionary trust in an attempt to have the assets of that trust not considered their own assets, the applicant submits that the Jasmine Trust was born out of legal errors or misrepresentations by Mr. Watson.
87On cross-examination, Mr. Watson deposed that he was familiar with the rules regarding ODSP eligibility and the criteria for trusts that are exempt from the calculation of a recipient’s income. He testified that he qualified his advice regarding the Jasmine Trust to say that he gave no guarantee that it would be effective to allow Jasmine to continue to collect ODSP benefits notwithstanding her entitlement under the Will. This advice, if given, does not appear to have been documented. Mr. Watson submitted that the ODSP administrators have had an opportunity to audit the Jasmine Trust, and they have not denied Jasmine ODSP benefits. In my view, the fact that the Jasmine Trust has not yet been identified by the ODSP administrators as one that does not satisfy the requirements of the ODSPA and the regulations does not take away from the fact that the Jasmine Trust was created in breach of the Policy Guidelines.
The Capacity of the Trustee
88Mr. Watson submits that RKWPC is his professional corporation in the business of providing legal services. In addition, it acts as Trustee of the Jasmine Trust. Subject to specific exceptions for trust corporations registered under the Loan and Trust Corporations Act, R.S.O. 1990, c. L.25 and the Trust and Loan Companies Act, S.C. 1991, c. 45, and subject to exceptions for nominee corporations acting as bare trustees, generally, a trustee must be an individual who accepts personal responsibility and liability. Mr. Watson could not provide the court with any authority that would permit his professional corporation, which is not a trust corporation, to carry on business as a trustee of an inter vivos trust. Based on the record, I find that RKWPC has not shown that it has capacity to serve as Trustee of the Jasmine Trust.
89The inability of RKWPC to act as a trustee means that in the Property Transfer Agreement, at paragraph 3.01, RKWPC misrepresented that the Transferee [RKWPC] had “good and sufficient power and authority and right to enter into and deliver this Agreement and consummate the transactions herein contemplated”, notwithstanding its acknowledgement that the Transferor [Jasmine] was relying upon such representation and warranty in connection with transfer. The breach of this warranty, in my view, would void the transfer of the legal title of the King St. Condo to RKWPC. The transfer was made on the representation RKWPC had the capacity to act as a Trustee, but it has not demonstrated that it had authority to do so.
90When all of the facts are considered, I find that legal ownership to the King St. Condo was not conveyed in accordance with the Property Transfer Agreement. Beneficial ownership was not conveyed through the Declaration of Trust because the beneficial ownership in the King St. Condo was never conveyed from Jasmine to the Estate, and the Jasmine Trust is not a valid trust. The Jasmine Trust fails for lack of certainty of intention and objects and may also fail for lack of subject matter. Further, I find that RKWPC did not have capacity to act as trustee of the Jasmine Trust. A valid express trust was therefore never created. As such, I do not need to consider whether it was created for an improper purpose.
The Remedy
91The applicant is entitled to the remedy she seeks in this case. The Jasmine Trust is void and of no force and effect. It fails to meet the three certainties, and RKWPC did not have capacity to act as Trustee.
92The King St. Condo shall vest in the applicant as Estate Trustee of the Estate, as intended by the Deceased, and in accordance with the agreement that the Deceased made with Jasmine whereby Jasmine agreed to hold the beneficial interest in the King St. Condo on resulting trust for the Estate. The respondents shall discharge the mortgage registered against the King St. Condo, at their expense, and they shall convey the King St. Condo to the Estate Trustee free of encumbrances. The respondents shall also remit to the Estate Trustee all funds held to the credit of the Jasmine Trust.
93The respondents shall restore clear title to the King St. Condo to the Estate. If Mr. Watson is unable or unwilling to enforce the loan to Mr. Petersen, which can be traced to the proceeds of the King St. Condo mortgage, then the applicant shall have the right to pursue this remedy, in his place.
94The applicant, as Estate Trustee, has a duty to account to all of the beneficiaries of the Estate for all of the Estate assets. The Estate assets include the King St. Condo.
95The issue of the validity of the alleged codicil to the Will has yet to be explored. The onus is on the applicant to determine the validity of the codicil. If the codicil is valid, it will need to be submitted to the probate process, and the Estate will need to be administered in accordance with the terms of the Will and the codicil.
96Until the validity of the codicil is determined, the applicant shall be prohibited from selling, encumbering or transferring the King St. Condo without the approval of this court, which approval shall be sought on notice to all beneficiaries of the Estate.
97A Judgment shall issue in the form attached hereto, as revised by me. Any outstanding issues respecting the settlement of the Judgment may be addressed at a 9:30 a.m. scheduling appointment.
Costs
98The applicant has succeeded in this application and is entitled to her costs. Each of the parties submitted a costs outline. The applicant seeks costs on a full indemnity basis of $168,286.72. These costs cover the period to September 22, 2022, including the attendances of December 8, 2020, January 7, 2021, January 20, 2021 and March 16, 2022, the costs of which were reserved to the application judge. Had the respondents succeeded, they would have sought costs on a full indemnity basis of $133,453, or $100,230 on a partial indemnity basis.
99The applicant submits that Mr. Watson’s conduct giving rise to the proceedings falls outside of established norms of the legal profession. The applicant submits that he has courted conflicts of interest, breached his duty of loyalty to the applicant, and has undertaken transactions that benefited other clients of his practice to the applicant’s detriment. I agree. Further, I find that Mr. Watson has continued to flout court orders setting timetables and his obligation to account. He has continued to withhold documents and information regarding the King St. Condo mortgage contrary to court orders. Mr. Watson attempted to bring a motion to remove the applicant as Estate Trustee, and then he tried to remove her counsel as lawyer of record. Justice Gilmore found the latter application to be completely without merit and an unjustifiable attack on the professional integrity of the applicant’s counsel.
100In Net Connect Installation Inc. v. Mobile Zone Inc., 2017 ONCA 766, 140 O.R. (3d) 77, at para. 8, the Court of Appeal observed that substantial indemnity costs are resorted to when the court wishes to express its disapproval of the conduct of a party to the litigation, and that it follows that conduct worthy of sanction would have to be especially egregious to justify the highest scale of full indemnity costs.
101In Net Connect, where the respondent dissipated assets despite a Mareva injunction and refused to move the matter forward until four orders had been issued, costs were awarded on a full indemnity basis.
102In my view, Net Connect sets an appropriate precedent to be followed in this case, in which the respondents’ conduct falls outside of the established norms of the legal profession. In encumbering the King St. Condo, Mr. Watson has used the Estate’s asset to benefit another of his clients to the detriment of the Estate. When ordered to pay the mortgage proceeds into court, he did not. Whether Mr. Watson has also benefited personally remains to be seen. Mr. Watson has not provided the requested information and documentation regarding the mortgage loan despite multiple court orders to produce that information and documentation. Mr. Watson persisted in his lack of cooperation throughout his cross-examination.
103I fix the applicant’s costs at $168,286.72 on a full indemnity basis, as set out in her costs outline. These costs are payable by the respondents on a joint and several basis within thirty days.
Dietrich J.
Released: December 7, 2022
COURT FILE NO.: CV-20-00652251-00ES
DATE: 20221207
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
LADAN JAVID as estate trustee of the estate of AGHDAS JAVID
Applicant
– and –
RICHARD KEITH WATSON, RICHARD K. WATSON PROFESSIONAL CORPORATION
Respondents
REASONS FOR DECISION
Dietrich J.
Released: December 7, 2022
Footnotes
- The respondents served and filed two affidavits, one sworn by Jasmine on August 23, 2022 and another sworn by Mr. Watson’s assistant, Mary Panek, on September 22, 2022. Though both affidavits were referred to in the respondents’ factum, which was late-filed, neither affidavit had been served on the applicant prior to the factum being served. No Supplementary Application Record was ever served by the respondents, and no motion was brought for leave to file additional supplementary material. Both affidavits were sworn following Jasmine’s cross-examination, and Ms. Panek’s affidavit was sworn and delivered the day before the hearing. Mr. Watson had no satisfactory explanation for his failure to comply with the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and orders respecting the serving and filing of documents and the timetables fixed by the court. At the request of the applicant, I did not admit these affidavits into evidence.