Court File and Parties

COURT FILE NO.: CV-14-0310-ES DATE: 2023-01-18

ONTARIO SUPERIOR COURT OF JUSTICE

IN THE MATTER OF THE ESTATE OF Clyde Roy Swearengen, deceased:

B E T W E E N:

Lee Swearengen and Linda Arp Applicants

Counsel: Morris Holervich, for the Applicants

- and -

Patricia Aho and Jerry Swearengen Respondents

Counsel: Representing themselves

HEARD: September 4, 2018, August 30, 2019, August 10, 2022 and August 18, 2022 at Thunder Bay, Ontario

Mr. Justice W.D. Newton

Decision On Application

Overview

[1] This is the final stage of a highly contentious estate dispute.

[2] The final stage is for orders passing the accounts of the estate, discharging the applicants as estate trustees, and dividing the estate proceeds unequally among the beneficiaries.

Procedural History to Date

[3] Clyde Swearengen died on December 16, 2014. He was survived by seven children: Lee Swearengen (“Lee”), Linda Arps (“Linda”), Patricia Aho (“Patricia”), Lee-Ann Swearengen (“Lee-Ann”), Valerie Seifert (“Valerie”), Janie Swearengen (“Janie”) and Jerry Swearengen (“Jerry”). Clyde Swearengen’s former wife, from whom he was divorced, had died in 2007.

[4] For the ease of reference, the first names of the family members will be used in these reasons.

[5] Within two months of Clyde Swearengen’s passing, the parties were in court. The applicants, Lee and Linda, brought an application for appointment as Estate Trustees Without a Will. Jerry opposed the application asserting that there was a will that named him as the sole beneficiary. No will has ever been produced but Jerry has continued to assert that there is a will and that he is the sole beneficiary of his father’s estate.

[6] The estate assets consisted of rural real estate, personal property and equipment located on the real estate, and shares in Resolute Forest Products.

[7] After several adjournments, On May 21, 2015, an order was made under section 29 of the Estates Act appointing Lee and Linda as administrators of the estate for a limited duration with authority to secure and preserve the property. That order has been extended to allow for the administration of the estate. The order also provided that Jerry could have limited access to the property to remove his personal property.

[8] By June 2015 the dispute between the parties became more complex with Jerry asserting that the law firm retained by Lee and Linda was in a conflict of interest and that the judge who made the May 21, 2015 order was biased. A timetable was set for the delivery of materials and argument of these two issues. On September 1, 2015, I dismissed Jerry’s motions on these two issues, finding that both were without merit and ordered that Jerry pay the costs of those motions.

[9] In December 2015 I dealt with several outstanding issues. Jerry claimed that he owned the Resolute shares. I concluded that there was no basis to support that claim. I directed that the shares be sold, the proceeds used to pay debts of the estate and the balance be held in trust. I also ordered that the real property was to be sold on conditions and that the remaining items of personal property be inventoried. Any disputes over ownership of the personal property were to be brought before me if not resolved.

[10] On February 18, 2016, I dealt with a number of outstanding issues including estate assets alleged to be missing [1]. My endorsement stated:

On consent of the parties, my order of December 8, 2015 is amended to include a term that if any party believes that an estate asset, as at the date of death of the deceased, is missing from the list prepared by the applicants then that party must provide a list of said assets together with all supporting documentation they allege prove the existence of that property is an estate asset on the death of the date of the deceased all parties within 45 days. After that date, no further documentation with respect to assets or ownership is to be produced or alleged. The purpose of that deadline is to ensure that this process moves along and that finality is achieved in an action which is not advanced within one year.

Thereafter, 120 days from today, if the parties have not resolved the issue of a missing estate assets, then either party, on notice to the others, may secure a date for the trial of that issue before me from the trial coordinator. [Underline added.]

[11] That endorsement also set out the same timetable and procedure for dealing with assets allegedly owned solely by Jerry.

[12] On February 18, 2016, the estate also sought security for costs against Jerry because of unpaid costs awards and, what the estate described as frivolous and vexatious claims advanced by Jerry. At that time, there were five judgments from other actions against Jerry totaling over $140,000. I ordered that the outstanding costs were to be paid within 21 days and further ordered that Jerry was to pay $5,000 as security for costs, also within 21 days [2]. The orders sought by Jerry included orders that Lee and Linda be charged criminally, that Lee and Linda committed fraud in the handling of their mother’s estate, and that Lee and Linda had stolen their father’s will. No material was filed in support of those requests.

[13] On June 6, 2016, the estate and some of the beneficiaries sought an order to list the real property for sale. Jerry opposed, asserting, as before, that there was a will that named him as sole beneficiary. I directed that the property be listed for sale and ordered costs against Jerry again.

[14] In July 2016 I made further orders respecting disposition of some of the personal property, gave directions to allow Jerry and others to retrieve property that the estate had no interest in, and directed that a trial of an issue proceed with respect to the ownership of two skidders. That trial proceeded on October 12, 2016, and I determined that one of the skidders had been gifted to Jerry [3].

[15] On October 13, 2016, I ordered that Jerry was to take no further steps in these proceedings pending payment of the outstanding costs and security for costs as ordered by me and the Court of Appeal [4]. I also directed that the estate hire an accountant to file the terminal tax return and that one seventh of the sale proceeds be held in trust for the benefit of Jerry.

[16] On December 6, 2017, the estate trustees brought a motion to discharge the estate trustees, and for an unequal division of the estate proceeds, that is, denying Jerry his full share of the estate based on his conduct in these proceedings and the outstanding costs awards against him. I set a timetable for responding material and set the hearing for February 27, 2018.

[17] On that date, Jerry, Patricia, and Lee-Ann appeared and requested an accounting. Patricia and Lee-Ann, who had previously been represented by Mr. Christopher Watkins, raised issues about their representation by Mr. Watkins.

[18] The date for the passing of accounts was to be September 4, 2018, but Jerry sought to have the proceeding adjourned. On September 4, 2018, Patricia stated that she wished to have the legal accounts of the estate assessed notwithstanding her prior written consent and release dated November 11, 2016, to those accounts and prior distributions to her. She stated that she had revoked that consent but acknowledged receiving the preliminary distribution from the estate. Jerry brought a motion seeking that I recuse myself based on vague allegations of bias and alleged errors of law. I dismissed that motion. Lee’s evidence on the passing of accounts was completed and the proceedings adjourned. The balance of the estate’s evidence was completed on August 30, 2019.

[19] As both Jerry and Patricia indicated that they wished to call evidence on the passing of accounts, I asked for written submissions as to what witnesses they would be calling as it was apparent that Jerry and Patricia did not always understand the issues that were relevant to the passing of accounts. After considering the submissions, I allowed Jerry and Patricia three hours to present their evidence on the passing of accounts.

[20] Because of issues arising from the COVID-19 pandemic, the courthouse fire, and illness of the various parties, the hearing did not continue until August 10, 2022, with submissions on August 18, 2022.

Evidence and Argument on Passing of Accounts

[21] The evidence on the passing of accounts, exceeding 500 pages of transcripts, consisted of the testimony of Lee, Linda, Jerry, and Patricia. No other witnesses testified. Certain documents were entered as exhibits.

[22] Evidence and argument are dealt with together because both Jerry and Patricia did not appreciate the distinction and their questions and testimony often took the form of argument.

[23] The trustees, Lee and Linda, gave evidence about the administration of the estate. Initially, there was agreement among all the beneficiaries, except Jerry, that Lee and Linda would be the trustees.

[24] The initial agreement was that Lee and Linda would perform their role as trustees without compensation. However, Lee and Linda made this agreement on the assumption that the distribution of the estate would proceed smoothly, and with no litigation.

[25] All but Jerry signed a consent and release in November 2016 for a distribution of the sale proceeds from the real estate. The proceeds were approximately $325,000. One seventh of those proceeds, or approximately $46,000, was held in trust as Jerry’s share. The remaining balance of approximately $278,000 was to be used to pay the estate debts and liabilities and an initial distribution of $7,500 each to the six other beneficiaries. The debts and liabilities agreed to were miscellaneous funeral expenses, legal costs of approximately $25,000 to the Watkins Law firm (the former lawyer for Patricia and Lee-Ann), legal costs of approximately $117,000 to Erickson & Partners, solicitors for the estate trustees, other anticipated expenses, and out-of-pocket expenses for Lee and Linda of about $4,500, plus $10,000 each to Lee and Linda in compensation for estate trustee’s work. The beneficiaries all agreed that they would also seek an order from the court so that Jerry’s share of the estate should be reduced by him bearing 1/7th of the estate expenses (approximately $30,990.38) and costs caused by Jerry’s conduct in the proceedings.

[26] The trustee compensation was agreed to by the beneficiaries (except Jerry) because of the work undertaken by Lee and Linda to prepare the property for sale which included disposition of the personal property, substantial work involving removing garbage from the property, and the extra work required in the administration of the estate in responding to Jerry’s claims in this litigation.

[27] Patricia claimed that she and Lee-Ann revoked their consent to the November 2016 distribution. She first raised this on September 4, 2018, almost 2 years after the consent and release was signed. Lee-Ann did not testify. No documentation was presented confirming the revocation of this consent. Patricia indicated that she had advised her former lawyer, Mr. Watkins, of her wish to revoke the consent. Mr. Watkins is a suspended lawyer and Patricia was unable to retrieve any document from Mr. Watkins or the Law Society and so there was no documentary proof of this revocation. Patricia acknowledged that she had received the distribution, and subsequent distributions, as had the other beneficiaries, except Jerry.

[28] Both Jerry and Patricia raised a number of issues about the handling of the estate. A recurrent theme was that both Lee and Linda had acted inappropriately in the handling of their mother’s estate and that they and other beneficiaries had been unjustly enriched by the gifting of certain properties to them by their father prior to his death. Patricia testified that her father had prepared a letter setting out his wishes as to what was to be done with his property after his death. She could not locate that document and stated that it had been stolen in a break-in from her father’s property. I ruled that what happened with their mother’s estate and what the father’s wishes might have been were irrelevant to my task in passing the accounts on an intestacy.

[29] Other issues raised by Jerry and Patricia were that the best price was not obtained for the real estate, that personal property owned by the estate and Jerry had disappeared and was not properly accounted for, that the proceeds from the yard sale ($567.55) were insufficient and not properly accounted for, and that the expenses claimed by Lee and Linda were excessive and falsified.

Ruling on the Passing of Accounts

[30] The relevant criticisms raised by Jerry and Patricia on the passing of accounts relate to the disposition of the real estate, the accuracy of the inventory and disposal of the personal property, trustee compensation, and the legal fees paid by the estate.

[31] I note that Lee and Linda were also beneficiaries, who would benefit or be harmed from the management of the estate in the same manner as Jerry, Patricia, and the other siblings.

The Real Estate

[32] The real estate was appraised, an order was made that it be listed for $325,000, and the sale at $345,000 was approved by the court. A real estate agent was not retained to save the estate commission. Both Jerry and Patricia gave hearsay evidence that certain individuals, including the ultimate purchaser, were prepared to pay more, in the range of $400,000. These alleged other potential purchasers did not testify. No other written offers from other parties were put into evidence.

[33] Jerry and Patricia also argued that the property should have been subdivided before sale to secure a better price. The estate accounts disclose insufficient cash assets to undertake such a process. I note also that the property was in a deteriorating condition due to mold and water damage.

[34] I am satisfied that the sale of the real estate by Lee and Linda was appropriate and, in the circumstances, the most efficient and least costly method to secure the best price for the property. I am not satisfied that there were better written offers put to the estate, or expected to be put to the estate. I am not satisfied that the property should have been subdivided.

Personal Property

[35] My endorsement of February 18, 2016, set out the steps to be taken with respect to items alleged to be missing from the estate or property included in the estate that Jerry claims as his own. The purpose of that endorsement, as noted, was to achieve finality. The only trial of an issue that was brought before me related to two skidders and I concluded that one was an estate asset and the other had been gifted to Jerry. As no other party brought any other application for a trial of an issue in accordance with that endorsement, these issues cannot be brought forward on the passing of accounts.

[36] Jerry challenged the price obtained by the estate, $5,800, on the sale of the skidder owned by the estate. He claimed that he was an expert in the price of skidders. No evidence was offered from any other source. In the absence of any other information as to value, I am satisfied that Lee and Linda acted in the best interests of the estate on the sale of this asset.

[37] Jerry and Patricia also claim that the proceeds of the yard sale, $567.55, were inadequate and further claim that, as no record of the sales were made, Lee and Linda did not adequately discharge their duties as trustees. I accept the evidence of Lee and Linda that there was little of value after the siblings, including Jerry and Patricia, took what they wanted and that much of the personal property, five dump trucks full, was taken to the dump. I do not find that the proceeds from the yard sale were inadequate based on the evidence before me nor do I conclude that it was necessary to keep records of what was sold, and at what price, at the yard sale.

Trustee Compensation

[38] The trustee compensation consisted of payment for out-of-pocket expenses ($2,072.63 for Linda and $2,628.87 for Lee) and trustee or executor fees of $10,000 each for Lee and Linda.

[39] As noted previously, In November 2016, the six beneficiaries, excluding Jerry, but including Patricia, signed a consent and release to a proposed distribution of the estate which consisted primarily of the sale proceeds from the real estate. The proposed distribution covered past and future legal fees, taxes, and the out-of-pocket expenses and executor’s fees of Lee and Linda. Forty-five thousand dollars was to be distributed to the six beneficiaries, excluding Jerry.

[40] Patricia admitted that she and Lee-Ann signed the consent and release in front of their lawyer, Mr. Watkins, on November 11, 2016, and that she received the distribution. However, she also testified that she revoked: “[I]n a matter of a couple of hours it was revoked, sent to him to revoke. Me and Lee-Ann revoked.” The estate received no notice of the purported revocation until the commencement of the passing of accounts hearing on September 4, 2018, almost two years after the purported revocation. Lee-Ann never appeared to testify at the continuation of the passing of accounts on September 4, 2018, August 30, 2019, or August 10, 2022. Another sibling, Valerie signed the consent and release on November 16, 2016, after the purported revocation. All siblings, except Jerry but including Patricia, received subsequent distributions from the estate on December 21, 2017, and January 12, 2018, but no notice of a revocation was received from any beneficiary in response to either of these additional distributions.

[41] In these circumstances, I am not satisfied that there was a revocation as alleged. Notwithstanding this finding, Jerry is entitled to contest these payments to Lee and Linda.

[42] The claim for out-of-pocket expenses for Lee in the amount of $2,628.87 (Exhibit 4) relates to reimbursement for mileage and other miscellaneous expenses relating to checking on the property, preparing the property for sale and attending court. In argument, Jerry suggested that the claim for mileage was overinflated. However, the mileage claim for checking on the property is for 6.5 km per day. The amount claimed is $0.40 per km. These out-of-pocket expenses are approved.

[43] The claim for out-of-pocket expenses for Linda in the amount of $2,072.63 (Exhibit 15) relates primarily to the purchase of gas for her travel from Matheson, Ontario to Thunder Bay, the purchase of food and other miscellaneous expenses related to cleanup of the property, and other expenditures related to the estate administration. For the most part, the expenses are supported by receipts. These out-of-pocket expenses are reasonable and approved.

[44] The affidavit material filed on the passing of accounts contains an estimate of executors’ compensation (Exhibit 3A) of $17,939.24 based on 2.5% of capital receipts and capital disbursements and a management fee of 0.004% of the average market value of the estate. Given the work required of Lee and Linda in inventorying the property, removing garbage and other unwanted items, otherwise readying the property for sale, and having carriage of these proceedings, the amount claimed for executors’ compensation is not excessive. I note that Lee was present at almost every court appearance and that Linda had to travel approximately 800 km, one way, to assist in estate administration and on the passing of accounts. I note the many calls to Lee and Linda as documented in the Erickson and Partners accounts. The trustee compensation is approved.

Legal Fees Paid by the Estate

[45] Legal fees paid by the estate, as approved in the consent and release of November 2016, consisted of payments to the Watkins Law Firm, who represented Patricia and Lee-Ann, of $25,486.74 and payments to the Erickson and Partners Firm who represented the Estate of $117,469.76 (account dated November 17, 2016) and $20,000, the amount estimated to conclude the estate (account dated December 6, 2017).

[46] As noted above, the consent and release was signed by all beneficiaries, except Jerry, but including Patricia and Lee-Ann, in November 2016. All beneficiaries who signed, including Patricia and Lee-Ann received three distributions after signing between November 2016 and January 2018 but no hint of a revocation was received until the commencement of this passing of accounts application in September 2018.

[47] As I concluded above, in these circumstances, I am not satisfied that there was a revocation as alleged. Notwithstanding this conclusion, Jerry is entitled to challenge these payments.

[48] The Watkins’ account is found at Exhibit F to the affidavit of Lee Swearengen sworn February 20, 2018. That “bill of costs” dated September 1, 2016, is based on Mr. Watkins’ representation of Lee-Ann, Patricia, and Valerie. It covers over 100 services or activities between September 21, 2015, and September 1, 2016. The hourly rate claimed is $350 which, for a 20 year call, is within the acceptable range. A review of this account reveals no fee or service that, on its face, appear inappropriate for the representation of the beneficiaries. This account is approved.

[49] With respect to the amounts paid to Erickson and Partners, very detailed accounts were provided which allow me to undertake an assessment of those accounts. To summarize, the November 17, 2016, account of $117,469.76 was comprised of $99,025 for fees plus disbursements of $5,045.32 plus HST of $13,399.44. The consent and release specified that the additional fees would be $20,000. The account dated December 6, 2017 was rendered for $15,087.89 for fees plus $2,677.26 for disbursements and HST of $2,234.85 for a total of $20,000. The actual fees to November 30, 2017, were $58,827.50 and a discount of $43,739.61 was given to come within the $20,000 estimate given in November. The total fees recorded by Erickson and Partners was $114,112.89 for fees, $7,722.58 for disbursements, and $15,634.29 for HST.

[50] I reviewed the disbursements and am satisfied that all disbursements claimed on the accounts were proper.

[51] The fees claimed by Erickson and Partners present a challenge. On the November 2016 account, $23,662.50 was claimed for support staff. While work performed by a law clerk, that would otherwise be the work of a lawyer, is a proper charge, secretarial and administrative work is part of the lawyer’s hourly rate. I have reviewed the support staff time docketed on both accounts and conclude that much, although not all, is not clerk work but secretarial work and, as such, the fees charged for support staff were excessive.

[52] However, when viewed globally with the discount given on the second account, the total fees (lawyer time excluding support staff time) are acceptable given the many court appearances (over 40) and motions on this file. I was involved with many of the early court appearances and appointed a case management judge on October 9, 2015. I am very aware of the challenges faced by the applicants and their counsel on this estate. The lawyer fees on the November 2016 account were $69,160 and the lawyer fees on the December 2017 account were $39,900. The total lawyer fees were $109,060. The total fees charged to the estate were $114,112.89. That would allow clerk time of $5,052.89 which is reasonable in light of the work required. Therefore, the total fees charged by Erickson and Partners to the estate were reasonable. These accounts are approved.

Costs of the Passing of Accounts

[53] A Bill of Costs on the passing of accounts was submitted and dated October 22, 2021. This was for work performed after December 2017 but did not include fees for the two court appearances in 2022. The costs presented were $22,585 plus HST. That included both lawyer fees and fees charged for support staff. I have reviewed the itemized time entries and I am satisfied that the lawyer time is appropriate. However, since it does not account for the 2022 court appearances which were approximately 1.5 days, I also add 10 hours at $400 an hour for preparation and attendance on those two days. I have reviewed the time claimed for support staff and allow one half of the amount claimed. The total amount therefore claimed on the passing of accounts is $24,735 plus HST of $3,215.55 or a total of $27,950.55.

[54] The opposition to the passing of accounts was without merit and unduly protracted by repetitive and irrelevant arguments. These costs should not be borne by the estate but by the objectors, Jerry and Patricia, who shall be jointly and severally liable to the estate for these costs which I fix in the amount of $27,950.55.

Unequal Division of Proceeds – Jerry’s Share

[55] Jerry’s 1/7th share of the estate, net of expenses, is currently $50,389.37 and is held in trust by Erickson and Partners.

[56] The estate argues that Jerry’s share should be reduced by the unpaid costs ordered against Jerry, his share of estate expenses paid in full by the other beneficiaries, his share of legal expenses paid by the other beneficiaries, and the costs of the passing of accounts.

[57] The total of unpaid costs ordered against Jerry is $7,600. The estate argues that Jerry should only have to pay 6/7 of that amount since he is a 1/7th beneficiary. These unpaid costs are a debt due to the estate and therefore Jerry’s share shall be reduced by $6,514.29.

[58] The estate expenses paid in full by the other beneficiaries, but not Jerry, total $32,422.33. These expenses include headstone expenses, accounting and income tax expenses, and the expenses and compensation paid to the executors. It is argued that Jerry should be responsible for 1/7th of that expense or $4,631.76. I agree. Jerry’s share of the estate expenses is $4,631.76.

[59] The legal expenses paid by the other beneficiaries total $162,956.50. The estate seeks 1/7th of that amount, or $23,279.50. However, Jerry had costs awards against him totaling $6,514.29 which have been deducted already and therefore the amount for legal expenses should be reduced to $16,765.21. Jerry’s share is reduced by that amount.

[60] Costs claimed on the motion for an unequal distribution of the proceeds were $3,996.35 including disbursements and HST. As the estate was successful, Jerry should pay these costs which are reasonable based on my review of the dockets.

[61] Jerry and Patricia are jointly and severally liable for the costs of the passing of accounts which I fixed in the amount of $27,950.55. Jerry’s share is reduced by one half of that amount or $13,975.27.

[62] Jerry’s entitlement to estate proceeds is therefore calculated as follows:

1/7 share of estate $50,389.37 less outstanding costs 6,514.29 less estate expenses 4,631.76 less legal expenses 16,765.21 less costs of motion for unequal 3996.35 division less 1/2 costs passing accounts 13,975.27 Jerry’s net share $4,506.49

Conclusion

[63] Judgement shall issue approving the passing of accounts, discharging the applicants as estate trustees and dividing the estate proceeds unequally in accordance with these reasons.

[64] Counsel for the estate may submit a draft judgement in accordance with these reasons for my review. I dispense with the requirement that the draft judgment be approved as to form and content by the respondents, in view of their past conduct in this proceeding.

“Original signed by” The Hon. Mr. Justice W.D. Newton

Released: January 18, 2023

Footnotes:

[1] 2016 ONSC 1256. [2] 2016 ONSC 1341. [3] 2016 ONSC 7052. [4] Jerry had appealed prior orders to the Court of Appeal but apparently these appeals did not proceed.