Court File and Parties

COURT FILE NO.: CV-21-00671932 DATE: 20230414 SUPERIOR COURT OF JUSTICE - ONTARIO

RE: MATTHEW MICHAEL HEADLAND, AIMEE JENNIFER HEADLAND, and CHLOE ANNABELLE HEADLAND, Plaintiffs – and – FRANCIS JOSEPH PATRICK MORRIS also known as FRANCIS PATRICK JOSEPH MORRIS, also known as FRANK MORRIS in his capacity as Executor and Trustee of the Estate of Michelle Jennifer Morris and in his capacity as Trustee of the Ageas Protect Limited Life Insurance Policy issued on the life of Michelle Headland, and in his personal capacity, and TRACY BANKEY, Defendants

BEFORE: Justice E.M. Morgan

COUNSEL: Gordon Mieklejohn, for the Plaintiffs Miriam Vale Peters and Stéphane McLean, for the Defendants Sean Dewart, for the Intervenor, Bradley Phillips

HEARD: April 11, 2023

Motion to Vary

[1] On May 20, 2022, I issued an interlocutory injunction at the request of the Plaintiffs: Headland v. Morris, 2022 ONSC 3054. The Defendants bring the present motion pursuant to Rule 59.06(2)(a) of the Rules of Civil Procedure. They seek to vary – in effect, to reverse – my ruling. The motion is brought on the basis of new evidence that was not previously before the court.

[2] The injunction froze certain funds paid to the Defendant, Frank Morris, in his capacity as a trustee under a life insurance policy purchased by his now deceased spouse, Michelle Jennifer Morris. My order also authorized certificates of pending litigation to be registered against certain properties purchased with the insurance funds and registered in the names of Mr. Morris and his current spouse, the Defendant, Tracy Bankey.

[3] The injunction motion was on notice and fully defended by Defendants, who were represented by counsel, Bradley Phillips. I indicated in my endorsement that Mr. Morris had conceded in a sworn affidavit, and that Mr. Phillips had submitted, that Mr. Morris is a trustee – in fact, one of the two trustees – but not a beneficiary of the insurance funds that he received upon the death of Michelle Morris. In my ruling, I indicated that Mr. Morris stated that he had come to understand that it is the three Plaintiffs – i.e. Michelle Morris’ children, all of whom are now adults – who are the beneficiaries, and that paying the insurance funds to himself was a mistake.

[4] In her factum, the new counsel for the Defendants sets out the well accepted test for the admission of new evidence after a matter has been argued or, as here, argued and decided. The test comes from Becker Milk Co. v. Consumers’ Gas Co. (1974), 2 OR (2d) 554 (Ont CA), and is explained by Defendants’ counsel as a two-part test:

a) the evidence might probably have altered the judgment, and b) the evidence ‘could not with reasonable diligence have been discovered sooner’.

[5] Counsel for the Plaintiffs takes no issue with this statement as a principle of law; nor do I. It mirrors the explanation provided by Estey JA (as he then was) in Becker. New evidence is admissible if “the matters in question had come to the knowledge of a party after the trial, could not with reasonable diligence have been discovered sooner, and, if the evidence, as is the case here, were of such a character that it might probably have altered the judgment”: Id., at para 10.

[6] The specific new evidence in question is set out most succinctly by Mr. Phillips himself. Mr. Phillips, presumably via LawPro, has retained counsel, who appeared before me at the new hearing as Intervenor, making both written and oral submissions. The new matter at issue is described in paragraph 3 of Intervenor counsel’s factum:

Mr. Phillips has conceded that he could have advanced an alternative argument when he appeared for the defendants on the May 2022 motion, as follows:

a) The trust in issue in this action is fully discretionary. The trust deed does not name any beneficiaries, but rather, names ‘potential beneficiaries’. …

[7] Intervenor’s counsel then goes on in his factum to detail the ways in which, as an alternative reading to that presented by Mr. Phillips at the motion, the potential beneficiaries could be taken to include Mr. Morris. It is this “alternative argument” of the beneficiary clause, as Intervenor’s counsel describes it, that is now embraced by the Defendants’ new lawyer.

[8] This previously left-out alternative, in turn, is said to constitute “new evidence” on which this entire motion to vary is based. As Intervenor’s counsel puts it at paragraph 5 of his factum: “If the Court is persuaded that there is merit to the alternative argument set out above, this would be relevant to the remedy, if any, to be afforded to the defendants on this motion to vary.”

[9] During the hearing I commented to Defendants’ counsel that identifying an alternative legal argument that counsel could have, but had not put forward at the first hearing did not seem like the discovery of “new evidence” to me. However, both Defendants’ counsel and Intervenor’s counsel were emphatic that this circumstance is entirely different than one in which a lawyer simply thinks of different legal approaches after the fact.

[10] They each asserted that what they now view as the mistaken admission by Mr. Morris – i.e. his statement that he was previously mistaken about himself not being a beneficiary, which he now views as itself having been a mistake – was so central to the result of the case that it must now be taken into account. Mr. Morris deposed in the first motion that he had come to his conclusion based on legal advice, and he deposes this time around that he has come to a different conclusion based on new legal advice.

[11] To be clear, Mr. Phillips does not exactly say that he made a mistake. What he says is that the question of who is a beneficiary under the trust documentation for the insurance proceeds is a matter of interpretation and can potentially be read in several ways. He now says that, having thought about it more, he could have included an alternative interpretation as part of his legal argument. In Mr. Phillips’ own words:

8. After [initially] reviewing this [trust] document, I formed the view that the pre-printed categories of ‘potential beneficiaries’ was a list of suggestions, from which the settlor would select the actual, intended beneficiaries, by writing in their names. My view was that the reference in the pre-printed list to ‘any widow’ of the settlor did not automatically operate to make the defendant, Mr. Morris, a beneficiary of the trust.
9. My original conclusions, as set out above, led to Mr. Morris’s concession in his affidavit that he was not a beneficiary of the trust.
10. In July 2022, the defendant sent an email to the firm in which he suggested that I should not have conceded that he was not a potential beneficiary under the trust.
11. On July 18, 2022, upon further review of the trust document, I responded to the defendant by email. I wrote that I could have argued that he was a beneficiary of the insurance funds because the language on the face of the trust document may be viewed as ambiguous. I also recommended that the defendants seek independent legal advice.
12. I remain of the view that the form is ambiguous; however, I acknowledge that for the purpose of the interim injunction before His Honour, it was arguable that the defendant Mr. Morris could be a beneficiary. This argument may have affected the result of the interim injunction.

[12] With the greatest of respect, this is not a description of something that, to use the Court of Appeal’s words in Becker, “could not with reasonable diligence have been discovered sooner”. It is the exact opposite.

[13] Mr. Phillips does not say that he failed to argue the “alternative argument” (as his counsel put it) because he could not do so; rather, he specifically says that he could have argued the point at the injunction hearing, but that he did not do so. Needless to say, if he could have argued it, it could have been discovered. An overlooked legal argument, or an alternative legal interpretation of a document, is the quintessential kind of thing that could have been discovered with reasonable diligence. The new lawyer has “discovered” it, and the old lawyer concedes that he could have as well.

[14] The lawyers having identified an alternative argument that was not advanced during the motion, and Mr. Miller having now embraced this alternative, is not new evidence of the type that can re-open a case or vary a judgment. The question is one of diligence, not negligence: Degroote v. Canadian Imperial Bank of Commerce, at para 14. The situation before me simply does not meet the test.

[15] Defendants’ counsel submits as another consideration that the courts ought not visit the errors of the lawyer on the client and thereby allow an injustice to be done. I do not see the matter quite that way. The “mistake” may now have been owned by the lawyer, who is willing to fall on his sword for his (former) client, but there is no substantive injustice in the result. This is not analogous to cases where a consent judgment was entered on the advice of a lawyer but the client had no desire to consent, or where a lawyer missed a filing deadline that the client did not want to miss: see Royal Bank v. Korman, 2010 ONCA 63; 1307347 Ontario Inc. v. 1243058 Ontario Inc., 2001 CarswellOnt 221 (SCJ).

[16] It is somewhat difficult to pin down what Mr. Miller himself thought of the insurance payout and whose benefit it was for. As indicated, he piles mistake on mistake, the first time conceding his mistaken idea that the money was his own and the second time pleading his mistaken idea that it was not his own – both times apparently on the advice of others. I find it hard to determine what his real thoughts are once the multiple “mistakes”, are peeled away.

[17] I do note, however, that in the affidavit that Mr. Miller filed in the initial motion he indicated that while he had purchased a residential property in his own name with the insurance funds, he had done so as a non-formalized, but substantive fulfillment of Michelle’s wishes – so that the three children from her previous marriage would have “a roof over their heads”. If that was what he was thinking, it seems rather odd that a few short years later he would take it on himself to sell the house and buy two new properties in Alexandria, Ontario in the joint names of himself and his new spouse. With all of the “mistakes”, corrections, and seemingly strategic testimony, I really don’t know what to believe from Mr. Miller.

[18] What I also know is that Mr. Miller’s late wife, Michelle, went out of her way to handwrite in the beneficiary clause of the insurance trust document the names of the Plaintiffs – her three children. She otherwise left the entire pre-printed, standard-form list of “potential beneficiaries” untouched. The notion that she might have meant, and that Mr. Miller might genuinely have thought, that she had designated the unnamed Mr. Miller and, presumably, his future new spouse, as having beneficial ownership of the insurance proceeds, but had excluded her named children, is, to put it mildly, a stretch.

[19] This perspective is further supported by the evidence of the other trustee of the insurance proceeds: Michelle’s sister-in-law, Donna Law Hing Choy. Ms. Choy deposes that she agreed to Mr. Miller transferring the insurance proceeds to his own bank account not so that he could use the funds for himself, but so that he could more easily pay Michelle’s children’s expenses. She also states in her affidavit that he had told her he was purchasing a house with the insurance proceeds for the benefit of the three Plaintiffs. In her affidavit filed by Plaintiffs’ counsel in the present motion, she states:

…Frank told me he was going to buy the house he and Michelle rented and lived in with Matt, Aimee and Chloe [the Plaintiffs]. He did not tell me he was buying it in his name, nor did he tell me, when the children no longer resided in the house, that he was going to sell it and keep the proceeds of sale for himself. If he had told me this, I would not have agreed to transfer the proceeds to his Santander bank account in England.

[20] While I do not have to make any binding finding in that respect, I mention it because Defendants’ and Intervenors’ counsel have otherwise characterized my order protecting the children’s interest as working an injustice that should now be reversed. With respect, the documentation speaks differently.

[21] In my view, NOT protecting the three beneficiaries that Michelle specifically listed would threaten to work an injustice. By contrast, permitting Mr. Morris and his new spouse to appropriate Michelle’s insurance proceeds to the exclusion of her children would not bring this case closer to a substantively just conclusion.

[22] As a final matter, the Plaintiffs have brought a cross-motion against the Defendants for further and better production of financial documentation, and a more thorough tracing of the insurance funds. Plaintiffs’ counsel contends that the Defendants have failed to indicate whether any investment profits were made by them on the insurance funds. Counsel additionally contends that there are apparently properties owned by Michelle’s estate in Mauritius for which Mr. Miller, as her estate trustee, has not accounted.

[23] The evidence shows that of the $607,000 that Mr. Miller received as trustee of the insurance funds, $389,559.39 has been paid to Plaintiffs’ counsel in trust pending the final outcome of this case. Mr. Miller deposes that the balance was invested in the two Alexandria, Ontario properties over which I have already granted a certificate of pending litigation.

[24] Although there is no proper appraisal of those properties in the record, Mr. Miller states in his affidavit that the equity in them covers the balance of the insurance proceeds. I do not know if this is accurate, but for now I am willing to rest on the certificates of pending litigation as providing comfort for the Plaintiffs. After all, this is a matter of pre-judgment security, not post-judgment execution. The Defendants need not at this point answer for their assets in the fulsome way that one expects a judgment creditor to do.

[25] In addition, there is no evidence, or even any real hint, that Mr. Miller might have made any more than a de minimis investment profit from the funds in issue. Other than the two Alexandria properties covered by the CPL’s, there appear to be nothing but bank accounts for Mr. Miller to account for.

[26] And finally, the Mauritius property (or properties) reference by Plaintiffs’ counsel are not the subject of the injunction motion. Their existence is to be handled by the trustees of Michelle’s estate as a matter of estate administration, but they are unrelated to the insurance proceeds at issue here. As estate trustee, Mr. Miller, like any trustee, will have to eventually provide the beneficiaries of the estate with an accounting; but now is not the time.

[27] In the result, the Defendants’ motion is dismissed and the Plaintiffs’ cross-motion is likewise dismissed. There will be no costs for or against any party.

Date: April 14, 2023 Morgan J.