COURT FILE NO.: CV-21-127 DATE: 2023/12/08
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
Catherine Philbin, Applicant – and – Marie Orford – and – Lynwood Orford, Mark Orford, and Noelle Papak (in default), Respondents
COUNSEL: Scott McMahon, for the Applicant Respondent, Self-Represented
HEARD: August 1, 2023 (Belleville)
REASONS FOR DECISION
Somji J.
Introduction
1The Applicant Catherine Philbin seeks a finding that her Respondent sister Marie Orford breached her fiduciary duty as co-attorney for property of their late mother Octavia Helene Wylie by spending their mother’s money for her personal benefit between the years 2004 to 2020. As co-trustee of her mother’s estate (“Estate”) and on behalf of her brother, Ms. Philbin requests that upon finding a breach fiduciary duty, this court order Ms. Orford be removed as co-trustee of her mother’s estate and that Ms. Orford either lose her beneficial entitlement under the Estate or, alternatively, pay restitution and damages for her unauthorized expenditures.
2The matter proceeded as a two-day hearing. In addition to affidavit evidence, both Ms. Philbin and Ms. Orford testified. Ms. Orford admits that she took $280,154.32 from her mother’s accounts between 2004 to 2020 to pay for personal expenses or to loan/gift to others, including her son, Mark Orford. Ms. Orford also admits she cannot fully account for monies she took from her mother’s accounts between 2004 and 2010, that she kept no records, and that those bank statements are unavailable. Ms. Orford’s only dispute is with (1) the figure proposed by her sister for loss of principal and interest on her mother’s investments, and (2) the appropriate remedy to be imposed for her misconduct.
3Ms. Orford takes the view that this matter can be resolved by way of a simple accounting between the two sisters following which she should be entitled to her half share of the Estate. Her explanation for her misconduct is that she was spending what she believed would be her inheritance and that she got carried away. Ms. Orford points out that she gave her sister $10,000 annually from her mother’s funds, for a total of $115,000 between 2008 to 2020, as an advancement to her inheritance. Rather than pay herself the equivalent amount in $10,000 lump sums, she took what she viewed as her equal share through various withdrawals which, it turns out, exceeded the $115,000 given to her sister.
4Ms. Philbin acknowledges she received $115,000, but explains that she only accepted the money because Ms. Orford told her that she had received financial and legal advice that advanced distribution of funds from their mother’s account was permissible. However, Ms. Philbin placed the funds she received in an account in the event that her mother or brother might need the funds. It is her intention to return the funds, now valued at $130,000, to the Estate.
5The other Respondents Lynwood Orford (Ms. Orford’s husband), Mark Orford (Ms. Orford’s son), and Noelle Papak (Ms. Orford’s daughter) did not file defences and were noted by Hurley J. to be in default on June 22, 2022. Ms. Philbin seeks that these defendants pay restitution to the Estate or lose their beneficial interests in the Estate.
6The Respondent Thomas John Wylie is the disabled brother of Ms. Philbin and Ms. Orford. He lives full-time in a residential care facility. All his expenses are covered by government disability payments. While Ms. Philbin and Ms. Orford are the two primary beneficiaries of the Estate, their mother directed in her will that the estate trustee invest a sum of $20,000 and to use these funds to pay him or to spend on his behalf in their discretion so that he may have extra comforts and amenities of life without impairing the benefits he might receive from other sources. Ms. Philbin seeks an order to immediately place that amount in a trust for the benefit of her brother.
7The issues to be decided are:
i. Did Ms. Orford breach her fiduciary duty as co-attorney for property? ii. If so, what is the amount owed to the Estate? iii. If so, what is the appropriate remedy for breach of fiduciary duty? iv. Should Ms. Orford be removed as co-trustee of the Estate? v. Should Mark Orford be denied any entitlement under his grandmother’s will? vi. Should Noelle Papak be denied any entitlement under her grandmother’s will? vii. Should there be an order for Ms. Philbin to hold in trust the amount of $20,000 from the Estate for her brother Thomas Wylie?
Background
8Ms. Philbin and Ms. Orford are sisters. Both Ms. Philbin and Ms. Orford were named co-attorneys for property and personal care by their mother in accordance with the Substitute Decisions Act, 1992, S.O. 1992, c. 30 (“SDA”), on March 12, 1997.
9In her last will and testament dated March 12, 1997, Ms. Wylie named her daughters as co-trustees of her Estate. In addition to some specific legacies discussed below, Ms. Wylie named Ms. Philbin and Ms. Orford as equal beneficiaries of her Estate.
10Ms. Wylie, passed away on October 3, 2020. At the time of her passing, Ms. Wylie was living at the Revera Riverside Place Long-Term Care facility in Windsor, Ontario. She moved there in 2007 following her diagnosis of Alzheimer’s disease in 2004. She lived to the age of 98.
11Ms. Wylie was a seamstress and previously worked for Chrysler Canada, as a result of which she received a generous pension until her death. Ms. Wylie’s care costs at Revera were approximately $2,071/month, of which $1,725/month was covered by Greenshield Canada, the pension manager. The shortfall was about $300/month, which Revera automatically debited from Ms. Wylie’s account. Because of her Alzheimer’s disease, Ms. Wylie was unable to use a credit card, conduct an ATM withdrawal, or travel. Her daily needs, including hairdressing, were taken care of inside Revera. Hence, other than the amounts debited by Revera, there was no need to withdraw funds to meet Ms. Wylie’s daily needs.
12Ms. Philbin has lived all her adult life in Belleville, Ontario, while Ms. Orford has remained in Windsor, Ontario. Consequently, Ms. Orford made the substitute decisions that her mother needed, managed her mother’s finances, and attended to her mother’s day-to-day needs. Ms. Philbin agreed to this arrangement given her sister’s geographic proximity to her mother. Ms. Philbin knew her sister was added as a joint account holder to her mother’s bank account in 2004, presumably to assist with bills, and she had no objection to this at the time.
13Ms. Philbin had little involvement with her mother’s financial affairs prior to her passing. She had little reason to inquire about her mother’s assets and finances. Ms. Philbin would visit her mother and her sister’s family on various weekends and holidays. She believed her mother was well cared for at Revera and that her sister was properly overseeing that care. Ms. Philbin had a positive relationship with her sister. Ms. Philbin testified that her sister is 15 years older, and she trusted her with decisions concerning their mother, including financial ones.
14When their mother died in October 2020, Ms. Philbin told her sister that she would administer their mother’s estate as co-trustee. She requested access to the bank and investment accounts. Upon examining her mother’s bank statements, she was shocked to see the large number of withdrawals her sister had made for her and her family’s benefit. Ms. Philbin was only able to obtain bank records from January 2011 to October 2020. While her sister had become a joint account holder in 2004, she was unable to retrieve bank records for 2004 to 2010.
15Ms. Philbin observed that, in addition to using her mother’s account to fund her residency, Ms. Orford made expenditures between 2011 to 2020 for the following: loans/gifts to her son; foreign currency purchases likely related to family vacations; retail, restaurant, alcohol, and hairdresser costs; dental expenses; and other miscellaneous items which are not easily discernible. As discussed below, Ms. Orford does not dispute these expenses.
16Ms. Philbin also learned that Ms. Orford withdrew funds from their mother’s investments at CIBC Wood Gundy where they would have earned interest, and that in 2017, Ms. Orford transferred these investments into a joint CIBC bank account she held with their mother.
17Upon discovering the unauthorized expenditures, Ms. Philbin immediately raised the issue with her sister. She recalls their first conversation on Thanksgiving weekend 2020 where she asked her sister “Why are you using our mom’s account?” According to Ms. Philbin, her sister’s initial response were words to the effect of “Are you going to report me?” Ms. Orford went on to explain that she was simply spending her inheritance. According to Ms. Philbin, there were back and forth discussions where Ms. Orford suggested she would reimburse the amounts she spent from her mother’s account. On December 15, 2020, Ms. Philbin’s counsel sent Ms. Orford a letter setting out the misappropriated funds and encouraging her to hire a lawyer.
18On January 19, 2021, Ms. Orford sent an email to Ms. Philbin acknowledging her mistake and attributing her misconduct to mere carelessness. Ms. Orford stated as follows:
You are right Cathy, I am screwed. Just spoke to a lawyer. You can take me to court and sue me. All I have is the inheritance and half the condo. There is nothing else. I know I made a big mistake but was never out to hurt you, just was really careless. I am hoping you can reconsider and we can come up with a solution. I can’t sleep nights worrying about this. Scared shitless.
19Ms. Orford was served with a Request to Admit on June 29, 2021, and did not respond. In this respect, she has admitted most of the facts in support of her liability for breach of fiduciary duty as co-attorney for property.
20Ms. Philbin acknowledges in her affidavit that had the amounts taken by her sister not been in the hundreds of thousands of dollars, she would not have litigated the matter. However, her sister’s conduct has significantly depleted the Estate. As co-trustee of the Estate, she believes her sister’s misconduct warrants the attention of the law and that as Estate co-trustee, there should be transparency as to the steps that have been taken to make the Estate whole.
Analysis
Issue 1: Did Ms. Orford breach her fiduciary duty as co-attorney for property?
21Powers of Attorney (“POA”) have a fiduciary obligation to make decisions in the best interest of the person for whom they are caring. As per s. 32(1) of the SDA, a POA for property “is a fiduciary whose powers and duties shall be exercised and performed diligently, with honesty and integrity and in good faith, for the incapable person’s benefit.”
22Where a POA does not receive compensation for their role, as is the case here, the standard of care is “the degree of care, diligence and skill that a person of ordinary prudence would exercise in the conduct of his or her own affairs”: SDA, s. 32(7).
23I find that Ms. Orford failed to exercise her POA powers diligently, honestly, and in good faith for her mother’s benefit for the following reasons.
24First, Ms. Orford treated Ms. Wylie’s assets as her own. She made cash withdrawals and incurred expenses for her personal benefit rather than the benefit of her mother. Ms. Orford does not deny that she made such personal expenditures or that her sister was unaware of them. She does not offer any explanation for her misconduct other than to suggest that she became careless. A POA’s misappropriation of funds entrusted to them for their own personal benefit constitutes a breach of fiduciary duty: Testa v. Testa, 2015 ONSC 2381, 10 E.T.R. (4th) 192, at para. 93.
25Second, a POA is expected to keep accounts of all transactions in accordance with the regulations: SDA, s. 32(6). In this case, Ms. Orford became a joint owner to her mother’s bank account in November 2004. Ms. Orford admits she withdrew funds from her mother’s account between 2004 and 2011, but has not produced any records for such transactions.
26Third, Ms. Orford resided at her mother’s condominium without paying rent and in this regard used a potential source of her mother’s income, i.e., rental income, for her own benefit. Irrespective of whether Ms. Philbin consented to Ms. Orford living in the condo rent-free, Ms. Orford’s obligation as a POA was to her mother: Testa, at para. 78.
27In addition to living rent-free, Ms. Orford depleted her mother’s funds to pay for the maintenance, fees, and property taxes to finance her own residency. Ms. Orford would have known those maintenance fees and taxes were approximately $7,500/year. Even if she was of the mistaken view that she was entitled to an advancement of her inheritance of $10,000 a year, which I do not accept was the case, she certainly did not limit herself to additional annuals withdrawals of $2,500 a year. Rather, she appeared to treat her mother’s bank account as her own and with no accounting of what she was taking for her personal benefit, and in doing so, breached her fiduciary duty to exercise her power as a POA with honesty and integrity: 32(1) SDA; see also Palichuk v. Palichuk, 2023 ONCA 116, 84 E.T.R. (4th) 199, at paras. 77-78.
28Fourth, Ms. Orford failed to manage her mother’s investment funds diligently and honestly. According to John Kelloway, a former bank employee who managed Ms. Wylie’s accounts, Ms. Orford approached him after he moved to CIBC Wood Gundy about transferring her mother’s investments over, which they did in late 2006. Mr. Kelloway recalls there being about $250,000 at the time of the transfer. Mr. Kelloway confirmed that it was a joint investment account with Ms. Wylie and Ms. Orford, and he had discussed this with Ms. Wylie personally and she had agreed to it. He also confirmed that his dealings were entirely with Ms. Orford, and he never spoke to Ms. Philbin about withdrawals or transactions from the investment account.
29According to Mr. Kelloway, starting in 2007 and thereafter, Ms. Orford made withdrawals of anywhere between $5,000 and $10,000. He understood from Ms. Orford that these were for Ms. Wylie’s living expenses. Ms. Orford disputes this. She testified that she informed Mr. Kelloway that the funds were to make payments for her and her sister.
30In late May/June 2017, Mr. Kelloway suggested to Ms. Orford that they transition the funds back to CIBC Riverside Bank due to banking changes, which they did. Mr. Kelloway retired on June 1, 2019. In contrast, Ms. Orford testified that they returned the investments to CIBC Riverside Bank because (1) the investments were not doing well at CIBC Wood Gundy; (2) Mr. Kelloway was retiring; and (3) she was not happy with Mr. Kelloway’s replacement. At the time of transfer back to CIBC Riverside Bank, the funds had decreased to $152,683, which Ms. Orford then placed in a GIC. Ms. Orford was of the view that the decrease in the investments was due to a downturn in the economy. When asked whether the decrease was also because of her withdrawals, Ms. Orford replied “probably”.
31I do not accept Ms. Orford’s evidence that she disclosed to Mr. Kelloway she was withdrawing funds for herself and her sister as an advancement to their inheritance. Mr. Kelloway would have had no reason to fabricate that Ms. Orford told him the funds were for her mother’s care. Mr. Kelloway was a former investment manager with a reputable investment company. If Ms. Orford had informed him that she was withdrawing Ms. Wylie’s investments for gifts to be distributed without her consent to beneficiaries such as herself and her sister before Ms. Wylie’s death, it is very likely that Mr. Kelloway, as an investment manager, would have remembered the discussion and queried her about the legality of her conduct.
32Furthermore, Ms. Orford was surreptitious about her transactions with CIBC Wood Gundy. She never told her sister that she was withdrawing funds from their mother’s investments or that these funds were the source of the annual $10,000 payments. When asked why she failed to tell her sister the source of the payments, Ms. Orford replied “what would be the reason for telling her?” When asked whether she was concerned that she was hurting her mother’s investments, Ms.Orford replied that “it did not cross [her] mind.” Ms. Orford’s answer to this question demonstrates her lack of diligence in managing her mother’s investments which was clearly not aimed at protecting her mother’s investments as required by POA.
33In addition, Ms. Orford refused to cooperate with Ms. Philbin’s attempt to obtain additional information from CIBC Wood Gundy in July 2022. A representative from CIBC Wood Gundy informed Ms. Philbin that because she was not an account holder, they could not release information to her about her mother’s investments without her sister’s authority. The representative indicated that a colleague had received a voicemail from Ms. Orford that they should not release the information requested. In cross-examination, Ms. Orford did not deny that she had provided that instruction, but claimed it was because she believed Kyle Haig had given her sister all the information she needed. When asked why she would not have agreed to the release of more information, Ms. Orford had no answer.
34Ms. Orford initially attested that she and her sister had agreed to annual withdrawals as an advancement to their inheritance. She later admitted in cross-examination that her affidavit was incorrect and that Ms. Philbin was not involved in the decision to withdraw funds or the calculation of the amounts to be distributed.
35Ms. Orford did not plead that her sister breached her fiduciary duty as a co-attorney for property. Ms. Orford did not bring any counterclaim. In fact, the only documents filed in this action by Ms. Orford are her affidavit dated July 29, 2021, and a one-page document entitled “Estate Distribution”. If Ms. Orford was seeking to find that Ms. Philbin was equally complicit in taking advancements from their mother’s accounts in breach of her fiduciary duty, it was incumbent upon on her to file such a claim so that Ms. Philbin could respond accordingly.
36Moreover, I do not find the evidence supports such a claim. Ms. Philbin does not deny that from 2008 until her mother’s death, she did indeed accept the payments of $10,000/year. However, she did so because her sister told her that she had been advised by a financial planner and a lawyer that such payments were permissible. Consequently, Ms. Philbin felt confident in receiving the money. Nonetheless, Ms. Philbin was concerned her mother and brother would have insufficient funds for their care and so she placed the total of the funds received ($115,113) in an interest-bearing account where it is now valued at approximately $130,000.
37Ms. Philbin attested that at the time of the initial $10,000 transfer in 2008, she wanted to cooperate with her sister and did not want her to feel as if she was “challenging or second guessing her” on the advice that she had told her [Ms. Philbin] that she received. She testified that looking back, she deeply regrets that she did not make the necessary legal inquiries about the advancements. Ms. Philbin understands the money she received properly belongs to the Estate and should be returned to it with interest. In contrast, the over $250,000 of withdrawals made by Ms. Orford, as per the bank statements from 2011 to 2020, are all spent.
38I find Ms. Philbin’s version of events to be credible for the following reasons.
39First, Ms. Orford denied at trial that she told her sister that she had received legal or financial advice on the advancements. She testified that she told her sister she was advised by a “friend” who had received such investment advice. I find that if there was any truth to her claim that she told her sister a “friend” told me it was okay to take the money as an advanced inheritance, Ms. Philbin would have inquired further.
40Furthermore, Ms. Orford provided no evidence at trial as to the identity of the friend who provided her such advice, when she received such advice, or the specific nature of this advice. I find, based on Ms. Orford’s own testimony, the email she sent to her sister January 9, 2021, and the evidence of Mr. Kelloway, that Ms. Orford knew she was not entitled to any such advancements or, alternatively, was reckless or willfully blind in this regard.
41Second, as already noted, Ms. Orford was surreptitious in her dealings. She never told her sister about her withdrawals from her mother’s accounts or investments knowing full well that her sister would not likely have approved of them. Ms. Orford never forwarded her sister the electronic bank statements which she received. She knew her sister had no access to the account.
42Third, it is clear from the totality of the evidence that Ms. Philbin had little involvement in her mother’s financial affairs and trusted her sister entirely. For example, Ms. Orford sent her sister the paperwork to put their names jointly on title for their mother’s condominium and Ms. Philbin simply signed it. As per Mr. Kelloway’s testimony, Ms. Philbin was not involved in the investment discussions. Ms. Philbin had no access to the bank accounts. In short, she did not suspect any foul play until she was provided her mother’s banking information upon her death.
43While it might be said that Ms. Philbin should have been less passive as a co-power of attorney and sought confirmation about the $10,000 payments, I do not find that this is a situation where Ms. Philbin deliberately stuck her head in the sand so she could obtain an advancement of her inheritance. Indeed, if that were the case, she would not have secured the money in an interest-bearing savings account. Rather, I find Ms. Philbin genuinely trusted her sister and had no reason to suspect she was engaged in any dishonest conduct with respect to the management of their mother’s financial affairs.
44In conclusion, I find that Ms. Orford breached her fiduciary duty as a co-attorney for property by misappropriating her mother’s funds for her personal benefit and mismanaging her mother’s investments to the detriment of the Estate.
Issue 2: What is the amount owed by Ms. Orford to the Estate?
45Remedies for breach of fiduciary duty are discretionary and based in equity: Angeloni v. Estate of Francesco Angeloni, 2021 ONSC 3084, at para. 44. The remedies are generally aimed at the two following things: restitution and deterrence: Angeloni, at para. 44; Mady Development Corp. v. Rossetto, 2012 ONCA 31, 344 D.L.R. (4th) 706, at para. 19.
46Where there has been a breach of fiduciary duty, a plaintiff is entitled to be put in the same position they would have been in had the breach not occurred. However, the plaintiff must establish that the defendant’s breach of fiduciary duty caused the plaintiff’s damage: Stirrett v. Cheema, 2020 ONCA 288, 150 O.R. (3d) 561, at paras. 65, 68.
i. Ms. Orford’s unauthorized bank account withdrawals from 2011 to 2020
47Ms. Orford agrees that she made unauthorized withdrawals from her mother’s bank account between 2011 to 2020 for her personal benefit and the benefit of her family members. She agrees these amounts are owed to the Estate. Table 1 sets out these amounts.
Table 1: Bank Withdrawals by Ms. Orford from 2011 to 2020
| Expenditures | Amount |
|---|---|
| 1. E-Transfers | $5,695.00 |
| 2. E-Transfers to Mark Orford | $25,850.00 |
| 3. Withdrawals (ATM, debit memo, etc.) | $57,227.18 |
| 4. Foreign Currency Purchases/Withdrawals | $11,154.96 |
| 5. Bank Charges/Fees | $327.50 |
| 6. Retail Expenditures/Purchases | $23,935.76 |
| 7. Cheques | $4,018.91 |
| 8. Dental Expenses | $110.00 |
| 9. Restaurants | $953.52 |
| 10. Hairdresser - Antoine Greige | $921.00 |
| 11. LCBO | $377.85 |
| TOTAL | $130,571.68 |
ii. Ms. Orford’s unauthorized bank account withdrawals from 2004 to 2010
48Ms. Orford was made a joint account holder with her mother’s CIBC Riverside account on November 10, 2004. When asked at trial if she took money from her mother’s account prior to 2011, Ms. Orford acknowledged she did, but does not have any recollection or records of the amounts. Ms. Orford has not produced any documents since the litigation commenced in 2021 to assist in determining what those pre-2011 expenditures were. In fact, all the accounting presented at this litigation was the result of Ms. Philbin’s own tracing efforts.
49Some expenditures between 2004 to 2010, such as the condominium costs, have been estimated by Ms. Philbin based on the cost of these same expenditures between 2011 to 2020, and, as discussed below, are accounted for. Any additional expenditures for this period are difficult to accurately discern without banking records. Given Ms. Orford’s passivity to date regarding disclosure, I agree with counsel for Ms. Philbin that ordering Ms. Orford to provide a further accounting for her 2004 to 2010 unauthorized withdrawals at this stage is fruitless and would only result in further delays in completing the administration of the Estate.
iii. Ms. Orford’s unauthorized withdrawals for condominium fees and taxes
50When Ms. Orford indicated in 2007 that she and her husband would like to move into their mother’s condominium after their mother relocated to Revera, Ms. Philbin agreed. Ms. Orford used her co-attorney for property to transfer title to the condominium to the sisters and their mother jointly in 2008. Ms. Philbin did not request her sister pay any fair market value rent for the use of this two-bedroom condominium overlooking the Detroit River.
51While Ms. Philbin did not mind her sister and her husband living at the condominium rent-free, she was surprised to discover upon her mother’s death in 2020 that for 13 years, between mid-2007 and October 1, 2020, Ms. Orford had been using their mother’s accounts to pay approximately $7,500/year for condo fees, maintenance, and property taxes (“condo costs”).
52Ms. Philbin was able to estimate from the bank records obtained between 2011 and 2020 that Ms. Orford spent on average $7,000 to 7,500/year for condo costs. Since she does not have bank records for before 2011, Ms. Philbin attributed another $25,500 for those three and a half years between mid-2007 to 2010. Ms. Philbin claims that Ms. Orford withdrew a total of $107,510.10 from her mother’s bank account to pay for condo costs between mid-2007 and 2020. Ms. Orford does not dispute that calculation as owing to the Estate.
53While Ms. Orford should, as a co-attorney for property, reimburse the Estate for rental income that could have been earned on the condominium over the 13 years, the plaintiff has not made such a request nor am I in a position to make such an order for restitution in the absence of any evidence on the fair market value rental income of the condominium for that period.
iv. Ms. Orford’s unauthorized withdrawals from CIBC Wood Gundy investments and the loss of growth on those investments
54Ms. Philbin’s counsel argues that, according to Kyle Haig, Ms. Wylie’s initial deposit of $259,526.36 earned about $106,310.00 of interest over its life cycle at CIBC Wood Gundy, which would bring it to a total of $365,836. However, when Ms. Orford returned the funds to CIBC Riverside, it was down to $152,683.65 suggesting that $213,153.71 was spent from that investment without any approval from Ms. Wylie herself, and certainly without the knowledge of Ms. Philbin. If one accounts for the fact that Ms. Orford states she gave Ms. Philbin $115,000 from the CIBC Wood Gundy account, counsel argues there remains an additional $98,153.71 of investment funds that Ms. Orford has not accounted for.
55Ms. Orford disputes the $98,153.71 as being attributable to her conduct, arguing that the loss was due to a downturn in the economy. However, Ms. Orford presented no evidence to support such an argument. As the joint account holder and co-POA, Ms. Orford was in a position of trust with respect to the investment account and had a duty to account for those investments: Deacon v. Deacon, 2004 BCSC 497, 7 E.T.R. (3d) 254, at paras. 10-11. Ms. Orford failed to keep records of the uses to which the monies taken from CIBC Wood Gundy were put. She also refused to facilitate Ms. Philbin’s access to the information from CIBC Wood Gundy.
56While I do not accept Ms. Orford’s explanation that the investment losses were due to an economic downturn, I do not agree that the email of Kyle Haig establishes that $98,153.71 is unaccounted for by Ms. Orford. Mr. Haig’s precise email to Ms. Philbin states the following:
Your calculation is a bit simple, but accurate to what you are looking for. The $106,310.52 figure is what the book cost of their investments were from the time they joined WG. (They invested $106,310.52, probably starting with Imperial Service but that book value gets carried over when they transferred) The market value of the funds at the time they came to WG was $259,526.36.
The last value WG has on file before they transferred back out was $152,682.65 in May of 2017.
57Mr. Haig’s reference to the “book cost” of the CIBC Wood Gundy investments of $106,310.52 refers to the initial value of the investments when they were made at Imperial Service and not to the return on the CIBC Wood Gundy investments from 2007 to 2017, as suggested by Ms. Philbin’s counsel.
58I find a more accurate account of the money taken from the CIBC Wood Gundy investments is set out in the summary of deposits from CIBC Wood Gundy into the mother’s CIBC Riverside Bank account at Tab 14, p. 86 of the Remedies Brief. This summary indicates that between April 2007 and July 14, 2010, Ms. Orford arranged to have $72,072.45 taken out of CIBC Wood Gundy and deposited into the CIBC Riverside Bank account. From those amounts, Ms. Orford paid her sister $30,000, leaving Ms. Orford to account for $42,072.45. Ms. Orford has not produced the CIBC bank records for the period of 2007 to 2010 to determine what happened to the funds. What we do know, however, is that as of December 2010, which is the date from which Ms. Philbin was able to get the CIBC Riverside Bank records, the opening balance on the account was reduced to approximately $4,000 and those funds have disappeared.
59Between August 5, 2011, and April 21, 2017, Ms. Orford withdrew another $80,000 from CIBC Wood Gundy and deposited it into the CIBC Riverside account. Of that $80,000, she proceeded to pay Ms. Philbin another $60,113 from the CIBC Riverside account, leaving Ms. Orford to account for $19,887. However, Ms. Orford was engaged in personal expenditures and withdrawals in the categories listed in Table 1 from that same CIBC Riverside account during this period, which have already been accounted for as owing by her to the Estate. To count them again would result in double counting.
60On June 30, 2017, Ms. Orford transferred her mother’s investments entirely out of CIBC Wood Gundy and purchased a $120,000 GIC in her mother’s name. She also placed $30,000 in her mother’s TFSA. Between August 2017 and October 9, 2020, Ms. Orford made withdrawals from her mother’s TFSA and deposited them into the CIBC Riverside account in the amount of $18,000. In this same period, she made payments totalling $25,000 to Ms. Philbin. Hence, in these last three years, Ms. Orford was paying Ms. Philbin not out of the CIBC Wood Gundy investments as she had suggested, but from her mother’s TFSA and GIC held at CIBC Riverside.
61In sum, I find that Ms. Orford has failed to account for $42,072.45 in withdrawals from the CIBC Wood Gundy investments between April 4, 2007, and July 14, 2010. All the remaining funds taken from CIBC Wood Gundy or the TFSA were given to Ms. Philbin in the total amount of $115,113.11 and are accounted for. I find Ms. Orford owes the Estate an additional $42,072.45 from the CIBC Wood Gundy investments.
62In conclusion, based on the records that are available, I find that Ms. Orford owes the Estate $280,154.23 for her unauthorized withdrawals between mid-2007 and 2020 as follows:
Table 2: Total amount taken by Ms. Orford 2007 to 2020
| Expenditures | Amount |
|---|---|
| 1. Bank account withdrawals from 2011 to 2020 | $130,571.68 |
| 2. Condo costs mid-2007 to October 2020 | $107,510.10 |
| 3. Unaccounted withdrawals from CIBC Wood Gundy investments | $42,072.45 |
| Total | $280,154.23 |
v. Loss of growth to the Estate from the unauthorized withdrawals
63The matter does not end here. This is because the amounts Ms. Orford owes to the Estate does not reflect the loss of growth to the Estate had the funds remained invested. The question which arises is what is an appropriate measure for calculating the loss of growth to the Estate?
64The interest rate under the Courts of Justice Act, R.S.O. 1990, c. C.43, averaged over the period between 2007 to 2020 is about 1.7 percent. The interest rate at CIBC Wood Gundy would likely have been considerably higher, but Ms. Philbin has not been able to obtain those interest figures. I find that a court order to obtain those calculations would only result in further delays. For this reason, I find that the application of a modest rate of two percent interest would be fair and reasonable.
65It would also be unfair to apply a flat interest rate of two percent on the total amount taken of $280.154.23 because the interest would have accrued gradually on the funds as they grew. If one averages the expenditures from 2011 to 2020, as set out in Table 1, Ms. Orford spent approximately $13,500 to $14,000 for her personal and family expenses per year. If one adds the $7,500/year for condominium costs, it appears that Ms. Orford spent a total of approximately $20,000/year from her mother’s funds between 2011 to 2020.
66Ms. Orford appears to have similarly spent just over $20,000/year between 2007 to 2010. Ms. Orford moved into her mother’s condominium in mid-2007. Between 2008 and 2010, Ms. Orford spent $22,500 for three and a half years on condominium costs. She also received $42,000 in funds from CIBC Wood Gundy in that same period. If averaged over three years, it is approximately $20,000/year.
67For this reason, I calculate that Ms. Orford spent approximately $20,000 of her mother’s funds per year between 2007 to 2022. If one applies a two percent interest rate compounded annually since 2007, the loss of growth to the Estate from her misappropriation of funds is approximately $40,000 which I find Ms. Orford owes to the Estate.
68In conclusion, I find that Ms. Orford owes the Estate restitution in the amount of $320,154.23, which encompasses her unauthorized withdrawals of $280,154.23 and loss of growth to the Estate in the amount of $40,000 resulting from those withdrawals. As discussed below, this does not include pre- and post-judgment interest or the costs incurred by Ms. Philbin in recovering these amounts.
Issue 3: What is the appropriate remedy?
69Ms. Orford’s conduct in making unauthorized withdrawals from her mother’s bank accounts and investments to the detriment of the Estate was egregious. This conduct, along with her complete lack of cooperation in the accounting and tracing of those funds back to 2004 warrants not only remedy by way of restitution in the amount of $320,154.23, but also deterrence. The question is what is an appropriate remedy that properly accounts for deterrence in this case.
i. Current condition of the Estate
70Before addressing the available remedies, it is necessary to understand the present condition of the Estate. Ms. Philbin estimates the present value of the Estate to be $626,904.13. This includes the following:
i. $136,522.32 of monies in the CIBC bank account including the GIC; ii. $12,000 in a TFSA at CIBC; iii. $348,381.81 held by a real estate lawyer in Windsor from the proceeds of sale of the condominium; and iv. $130,000, which is the money advanced to Ms. Philbin with interest.
71With respect to her mother’s condominium, Ms. Philbin forced Ms. Orford and her husband off the property so that it could be sold. Ms. Philbin paid from her own personal funds $4,196.79 to do repairs to the home and $9,230.59 for the carrying costs between the time Ms. Orford left the condo and its sale. The proceeds of sale of $348,381.81 are presently held by the real estate lawyer in Windsor. Ms. Philbin takes the position that had she not incurred the costs of these repairs, the value of the condominium would have been less. Ms. Orford testified that had her sister allowed her to use a friend who would not have charged real estate fees as their agent to sell the house, the condominium would have sold for more. Nonetheless, Ms. Orford does not dispute that Ms. Philbin should be reimbursed $13,427.38 for her expenses.
72Ms. Philbin took it upon herself to ensure her mother’s taxes were up to date. She engaged an accounting firm in her capacity as co-trustee and awaits the Clearance Certificate from Canada Revenue Agency. With the cooperation of the bank manager at CIBC, Ms. Philbin paid for any outstanding taxes directly through her mother’s bank account and also placed a hold on the GIC that Ms. Orford purchased with CIBC Wood Gundy monies. With respect to the general funds in the CIBC Riverside Bank account, she trusts Ms. Orford has not withdrawn further from the account. Ms. Philbin understands from the bank manager that pending litigation, any further transactions on the CIBC account would have to go through her.
73While Ms. Philbin does not expect there to be any other creditors, she is unable to advertise for same until she has authority to act.
ii. Plaintiff’s position on remedy
74Ms. Philbin argues that a monetary damages award achieves neither restitution nor deterrence. She requests that Ms. Orford be disentitled to her beneficial interest in the Estate.
75Ms. Philbin argues that Ms. Orford took a large amount of money and is effectively judgment-proof. By her own admission, Ms. Orford has no assets other than her share in the condominium and her inheritance from the Estate. Any damages award would have to be taken from her share in the residue of the Estate. Counsel for Ms. Philbin argues that if one divides the residue of the Estate presently valued at $626,904.13 in two, Ms. Orford has already taken $320,154 which is more than her half share of the Estate ($306,749).
76Furthermore, the residue of the Estate would likely be lower after one accounts for the brother’s trust of $20,000, monies owed to Ms. Philbin for repairs and carrying costs on the condominium of $13,427.38, legacies to the grandchildren of $10,000, and any other fees or taxes for the administration of the estate. If these additional items are subtracted (except the unknown administration fees), the residue of the Estate would be $583,476.75. If this amount is divided by two, Ms. Orford’s share is $291,738.37, and she owes the Estate $320,154.23.
77Ms. Philbin argues that if the ultimate purpose of a remedy is to make the injured party whole its loss, then disgorging Ms. Orford of her beneficial entitlement has the same practical effect as those cases in which the courts have ordered monetary damages.
iii. Defendant’s position on remedy
78Counsel for Ms. Orford argues that because the two sisters are the only principle beneficiaries, the appropriate remedy is for the court to engage in an accounting exercise where (1) each sister returns the advancements they received from the Estate; (2) Ms. Philbin is reimbursed her expenses on the condominium; (3) Thomas Wylie’s trust is deducted; and (4) an order is made to divide the residue of the Estate equally to the sisters.
79Ms. Orford provided a one-page document entitled “Estate Distribution” setting out the calculations by which the Estate would be reimbursed. Ms. Orford’s calculations and proposed remedy would result in this court making an order for distribution from the Estate to Ms. Philbin of $314,315.54 and to Ms. Orford of $149,161.21.
iv. Analysis on the appropriate remedy
80I have considered both the proposed remedies and find neither would lead to a just result.
81I find there is no merit to Ms. Orford’s proposed remedy for the following reasons.
82First, as already noted, Ms. Orford did not file a counterclaim for breach of fiduciary duty as against Ms. Philbin. Ms. Philbin has already indicated her intent to return to the Estate the advancements she received with the interest they earned.
83Second, Ms. Orford’s proposed remedy does not take into account the need for both restitution and deterrence for breach of fiduciary duty. Where there has been a breach of fiduciary duty, and in this case there have been multiple breaches, the court has to try not only to put the estate back into the position it would have been in but for the breaches, i.e., restitution, but to also deter others from doing as Ms. Orford has done: Mady, at paras. 19-20. If the only remedy is an accounting exercise as proposed by Ms. Orford, POAs would be incentivized to take the risk of withdrawing funds of others for their own benefit and then when exposed, conveniently reimbursing the accounts or the Estate exactly what they took with no real accountability for their misconduct and unjust enrichment.
84Third, Ms. Orford’s proposal requires the court to engage in the administration of the Estate and calculate what each beneficiary should receive as opposed to imposing a remedy that tries to make the Estate whole and letting the estate trustee administer the Estate in accordance with the testator’s will. Counsel could not provide jurisprudence supporting such an approach.
85Finally, I find the numbers proposed by Ms. Orford do not accurately reflect the entirety of the losses to the Estate. Ms. Orford’s calculations do not take into account the following:
a. the full loss of principal on the CIBC Wood Gundy account which I have calculated to be at least $47,000; b. any minimal interest the unauthorized withdrawals could have earned between 2007 and 2020 which I have calculated to be at least $40,000; c. pre-judgment interest on the amount owing to the Estate ($320,154.23) which I have calculated as $4,041.29 based on the Statement of Claim filed May 5, 2021, in accordance with s. 128 of the Courts of Justice Act; d. other legacies in the will totalling $10,000 for the four grandchildren; e. other creditors which the Estate may owe and which have to be advertised for; f. legal fees for the lawyer holding the proceeds of sale, probate fees, or any other administration fees of the Estate; and g. the time and costs to Ms. Philbin as co-trustee and beneficiary, in trying to make the Estate whole in the absence of records and full cooperation by Ms. Orford. The Bill of Costs filed by Ms. Philbin’s counsel requests full recovery costs as $60,430.11 (inclusive of fees and disbursements).
86For all these reasons, I decline to impose the remedy suggested by Ms. Orford.
87I also find the remedy proposed by Ms. Philbin that Ms. Orford be disentitled to her beneficial share in the Estate is unprecedented in law and would not result in a just remedy.
88As stated in Mady, fiduciary relief is equitable in nature, and the remedies for breach of fiduciary duty are discretionary: at para. 18. Counsel for Ms. Philbin filed a number of cases involving remedies where in addition to restitution to the Estate, courts have ordered disgorgement of profits (Deacon) or punitive damages for breach of fiduciary duty (Dhillon v. Dhillon, 2006 BCCA 524, 232 B.C.A.C. 249). I have considered these cases, but do not find them applicable. There is no evidence that Ms. Orford further invested the monies she received to allow for an order of disgorgement of profits. Ms. Philbin has also not sought or quantified a punitive damages award.
89Counsel for Ms. Philbin could not identify any cases in which the court ordered a person to be disentitled from their beneficial interest in an estate for breach of fiduciary duty. This remedy was canvassed in Deacon, at para. 29, but not granted as precedents were equally unavailable at that time:
With regard to Matthew, both counsel advised that after an extensive search they were unable to find any case precluding a beneficiary’s entitlement to his or her share of an Estate pursuant to a Will, once that beneficiary had made restitution to the Estate. Plaintiff’s counsel, however, cited Lavigne v. Robern (1984), 51 O.R. (2d) 60, 18 D.L.R. (4th) 759 (Ont. C.A.), as an example where a court precluded a shareholder, who had negotiated on behalf of himself and his two co-shareholders the sale of their company, from participating in the profit from a personal consulting agreement he had secretly negotiated with the purchasers. The court held that to permit him to participate in the secret profit would provide no disincentive as “the fiduciary could breach his trust hoping to hide the breach and retain the secret profit, and if he failed to do so, he could still retain his 50% (or whatever his percentage interest in the company was) of the secret profit.” It is clear that the operative principle is to eliminate the economic incentive for parties to commit a breach of fiduciary duty and yet remain neutral as to the outcome upon successful prosecution. However, I note that while the court deprived the defendant of his share of the secret profit, it did not deprive the defendant of his share, according to the shareholders agreement, of the proceeds of the sale of the company. [Emphasis mine.]
90Ms. Philbin’s proposed remedy can also result in an unjust remedy. Depending on the value of an estate, there can be a significant difference between ordering monetary damages and disentitling a person from their beneficial interest in an estate. If, for example, an estate were valued at $2 million and there were only two beneficiaries, then ordering a person to be disentitled from their beneficial share for having taken $320,154, could result in a windfall for the other co-beneficiary of $1,680,000 as opposed to perhaps one million. Where the amount misappropriated by the defendant approximates or exceeds the amount the defendant would have been entitled to under the estate, I agree that an order for monetary damages may yield the same result as disinheritance. However, these final calculations are difficult for the court to make until the completion of the administration of the estate.
91I appreciate that based on the current value of the Estate, a monetary award of damages may in this case effectively result in Ms. Orford not receiving any of her beneficial interest in the Estate. Nonetheless, I find that an appropriate equitable remedy in this case is a monetary award for damages for restitution, loss of growth to the Estate, pre and post-judgment interest, along with full recovery costs for this litigation. I find that this remedy allows for the Estate to become whole to the extent possible based on available records and for Ms. Philbin to be fairly compensated for her efforts in making the Estate whole without the court interfering in the administration of the Estate and the will of the testator. I find that a full recovery costs award constitutes sufficient deterrence in the particular circumstances of this case.
v. Conclusion on remedy
92There will be an order that Ms. Orford shall pay the Estate on account of damages the amount of $320,154.23 together with pre and post-judgment interest under ss. 128 and 129, respectively, of the Courts of Justice Act. I have calculated pre-judgment interest on $320,195.23 from the date the application was filed on May 5, 2021, to be $4,041.29.
93There will be a judgment against Ms. Orford for $324,195.52 plus post-judgment interest. After the payment of all debts and bequests, Ms. Orford’s distributive share will be set off against the judgment and she will be entitled to any excess amount remaining.
94If there are insufficient funds to satisfy the judgment from Ms. Orford’s distributive share, then there will be an order that any shortfall is satisfied by judgments issued against Ms. Orford’s son and daughter. In other words, it would be unfair for Ms. Philbin to receive less than her distributive share while Ms. Orford’s children, who have already financially benefited from their mother’s misconduct, receive their bequests.
95In addition, I find the condominium is an Estate asset and the sale proceeds should be turned over to the estate trustee. In accordance with accepted principles, Ms. Philbin as co-trustee should not be out of pocket for managing the Estate’s assets. Ms. Orford does not dispute that Ms. Philbin incurred expenses to sell the home. Consequently, there will be an order that Ms. Philbin be reimbursed directly from the proceeds of sale for her costs of $13,427.38 and the balance of the proceeds, after legal fees and taxes are paid, are to be distributed to the Estate.
Issue 4: Should Ms. Orford be removed as co-trustee of the Estate?
96Ms. Orford has preferred her own interests over her fiduciary duty to her mother. Therefore, I am not satisfied that she can act honestly and diligently in her role as co-trustee for the Estate and that her continued role as co-trustee risks hampering the administration of the Estate. Kasanda v. Sartarelli, 2023 ONSC 4400 at para 77. Radford v. Radford Estate, 43 E.T.R. (3d) 74, at paras. 97-121. Consequently, there will be an order that Ms. Philbin be named sole trustee of the Estate upon filing an application to be so appointed and any objection by the Defendants is dispensed with.
97As sole trustee of the Estate, Ms. Philbin will need to access all joint accounts held by the Ms. Orford and the deceased. Consequently, there will be an order that any joint accounts held by Ms. Orford and the deceased shall be delivered to the Estate.
98There will also be an order that any assets that have passed outside the Estate be returned to the Estate after any fees and taxes have been accounted for.
Issue 5: Should Mark Orford be denied any entitlement under his grandmother’s will?
99In reviewing her mother’s bank statements, Ms. Philbin found $39,395 in e-transfers to Mark Orford between November 2013 and October 2020.
100Ms. Orford testified that she viewed the payments to her son as loans and distributed the funds to him as part of her annual $10,000 advancement of her inheritance. According to her testimony, her son did not know the source of the money and only learned it was taken from his grandmother’s account in the fall of 2020, after her death. Ms. Orford states in her affidavit that her son paid back half the loan prior to her mother’s death and the balance to her after her death. However, at trial, Ms. Orford testified that her son had made “periodic payments” before the litigation started. It is unclear what version is accurate. Ms. Orford did not append any records related to these reimbursements to her affidavit or at trial. Moreover, if Ms. Orford was reimbursed personally by her son the entirety of the loan, she certainly has not identified any such funds for reimbursement to the Estate.
101Ms. Philbin’s own review of the CIBC bank account statements indicates that Mark Orford did return $13,545 to the CIBC account. Ms. Philbin has credited him that amount accordingly. Therefore, Mark Orford owes the Estate $25,850.
102In her Notice of Application, Ms. Philbin sought an order for general damages against Mark Orford in the amount of $50,000 for unjust enrichment and breach of fiduciary duty. At the hearing, Ms. Philbin agreed that any judgment against Ms. Orford that takes into account the $25,850 owing should not be counted twice. However, Mark Orford is a beneficiary under Ms. Wylie’s will. Like the other three grandchildren, Ms. Wylie bequeathed him $2,000. Ms. Philbin argues that in addition to damages, he should be disentitled from this $2,000 bequest given he has already financially benefited.
103Mark Orford did not file a defence and was found in default. There is no evidence that Mark Orford has reimbursed the entire amount taken or that he contacted Ms. Philbin upon receiving the Notice of Application in May 2021 to indicate any intention to return the monies in full. If he wished to properly account for what he received and what he returned, he could have filed an affidavit as part of his own or even his mother’s case. Furthermore, it is unknown what Mr. Orford did with the monies, i.e., whether he invested them in funds or property, and what interest or profit was made on those funds. Consequently, the court is not in a position to order the disgorgement of profits as was done in Deacon.
104Even though Mark Orford benefited financially from his grandmother’s accounts, those monies came to him from Ms. Orford. Those amounts have been accounted for in Table 1 and form part of the judgment against Ms. Orford. They cannot be counted twice. Furthermore, Mark Orford did not owe his grandmother a fiduciary duty. The evidence is also mixed as to what knowledge he had, if any, about the source of those loans. Therefore, the request to disentitle Mark Orford to the $2,000 bequest by his grandmother is denied.
105Having said this, it would be unfair for Ms. Philbin to be financially harmed because the judgment against Ms. Orford cannot be entirely set off against her distributive share of the Estate. Therefore, there will be a judgment against Mark Orford in the amount of $25,850 which will be payable to the Estate for Ms. Philbin’s benefit only if at the time of distribution, the judgment against Ms. Orford exceeds her own 50 percent distributive share such that the Estate has insufficient funds to satisfy Ms. Philbin’s 50 percent distributive share.
Issue 6: Should Noelle Papak be denied any entitlement under her grandmother’s will?
106According to Ms. Philbin, Ms. Orford made several e-transfers in November 2017 and again in May 2018 to her daughter Noelle Papak totalling $1,500. These are included in the e-transfers row in Table 1.
107Ms. Orford testifies that the reason for these transfers was that her daughter was helping her schedule personal support workers (“PSW”) for their brother Thomas Wylie while in hospital because he needed additional supervision. When asked why the payments were not made directly to the PSWs, Ms. Orford stated that it was because they were largely cash payments to PSWs which her daughter would schedule. Ms. Orford has not provided any receipts of the expenses incurred for their brother nor was Ms. Philbin made aware that monies were being taken from their mother’s account for this purpose. The matter only came to Ms. Philbin’s attention when Ms. Orford produced the handwritten note discussed below.
108Noelle Papak also failed to respond to this action. She was found in default and is deemed by law to admit the truth of the allegations made by Ms. Philbin. Ms. Papak did not file an affidavit in support of her own mother’s case to suggest she had no knowledge of the source of the monies or to corroborate her mother’s claim that the monies she received were indeed used to retain PSWs. Had she done so, it is unlikely that Ms. Philbin would have required reimbursement of those funds.
109Even though Noelle Papak benefited financially from her grandmother’s accounts, those monies came to her from Ms. Orford. There is no evidence that she knew the source of those payments or of her mother’s misconduct. Furthermore, like her brother, she did not owe her grandmother a fiduciary duty. Therefore, the request that Noelle Papak not receive the $2,000 bequest by her grandmother is denied.
110Having said this, it would be unfair for Ms. Philbin to be financially harmed because the judgment against Ms. Orford cannot not be entirely set off against her own distributive share of the Estate. Therefore, as with Mark Orford, there will be a judgment against Ms. Papak in the amount of $1500 which will be payable to the Estate for Ms. Philbin’s benefit only if at the time of distribution, the judgment against Ms. Orford exceeds her own 50 percent distributive share such that the Estate has insufficient funds to satisfy Ms. Philbin’s 50 percent distributive share.
111Finally, I note that while Ms. Orford’s husband was also found in default and therefore deemed to admit the facts set out against him in the Notice of Application, there is insufficient evidence that he had any direct knowledge of Ms. Orford’s conduct so as to warrant a damages award against him.
Issue 7: Should there be an order for Ms. Philbin to hold in trust the amount of $20,000 for her brother Thomas Wylie?
112As already noted, Respondent Thomas Wylie is a party under disability. He is a beneficiary of a $20,000 discretionary trust which Ms. Philbin has agreed will not be contested or impacted irrespective of the outcome of this application. Therefore, on September 23, 2021, Justice Hurley ordered that Thomas Wylie need not participate in this proceeding via a Litigation Guardian. The office of the Public Guardian and Trustee was accordingly notified.
113Ms. Philbin seeks an order that she receive and hold in trust the amount of $20,000 for her brother’s benefit pending her appointment as Guardian of his Property and Person, failing which the matter would be returned to this Court for further direction on what should happen to his discretionary trust. Ms. Philbin has filed a separate application to be appointed her brother’s Guardian of Property and Person and awaits a decision of this court.
114Ms. Philbin testified that after their mother’s funeral but prior to the commencement of the litigation, Ms. Orford contacted her to propose that Thomas Wylie’s discretionary trust be reduced by $15,580 on the grounds that Ms. Orford had incurred $8,000 in hospitalization expenses for their brother in 2012-2013 and $1,580 in 2017. In addition, Ms. Orford suggested that funeral expenses of $6,000 should also be deducted. It is unclear what funeral expenses are being referred to. Ms. Philbin refused. She attested that she does not believe this is what their mother would have wanted and, moreover, found the idea repugnant. These alleged amounts were set out in notes made by Ms. Orford in 2013 and 2017, but only sent to Ms. Philbin in 2020. Ms. Philbin testified that it was her understanding that all the costs for her brother, including hospitalization, are covered by the Ontario Disability Support Program.
115Ironically, these hospital expenses for her brother were the only accounting records that Ms. Orford appears to have kept. Furthermore, the record is simply a handwritten note that states “staff expense during hospital stay $1580” and “payment of staff for his surgeries from May 2012 to June 27, 2013”. When asked why she only produced these notes in the fall of 2020 for Ms. Philbin and why she proposed their brother’s legacy be reduced, Ms. Orford replied that it was because she was concerned that if their brother were to receive the full $20,000 at the time of their mother’s passing, it could affect his disability payments. When pressed further on this issue, Ms. Orford acknowledged she had never actually made any inquiries with the relevant authorities that this was indeed the case. Furthermore, I note that Ms. Wylie had already taken this issue into consideration. Her instructions in the will are not to gift her son $20,000, but for the estate trustee to invest the funds in an account and to dispense them so that her son could have “extra comforts and amenities of life” without impairing his income from other sources.
116I find that Ms. Orford cannot, as suggested by her sister, be trusted to be a substitute decision maker for her brother. Her conduct to date in misappropriating funds from her mother’s accounts and her most recent proposal in 2020 to reduce her brother’s legacy without having made proper inquiries demonstrates that she cannot be relied on to make decisions diligently and honestly with respect to her brother’s best interests. There will be an order allowing Ms. Philbin to immediately hold in trust $20,000 from the Estate for her incapable brother pending her appointment of guardianship.
Costs
117Ms. Philbin is the successful party on the application and presumptively entitled to costs. As her counsel pointed out at trial, this has been a long, hard-fought battle for Ms. Philbin. Ms. Orford did not provide any accounting records and obstructed Ms. Philbin’s ability to access the investment accounts. Any accounting that has been presented is the result of Ms. Philbin’s own painstaking tracing efforts. Even upon the completion of some accounting by Ms. Philbin, Ms. Orford provided no documentation to assist Ms. Philbin or this court in understanding the full extent of the withdrawals or any interest or profits earned on them.
118Ms. Philbin seeks full recovery costs in the amount of $60,430.11. The request for costs is supported by a costs outline.
119The modern approach to fixing costs in estate litigation is to carefully examine the litigation and, unless the court finds there are public policy considerations at play, to follow the costs rules that apply in civil litigation. This approach, which replaces the traditional approach of having costs paid by the estate, protects estates from being depleted by litigation: McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435 (Ont. C.A.), at paras. 80, 85.
120Entitlement and quantum of costs is in the discretion of the judge: Courts of Justice Act, s. 131(1).
121In exercising their discretion, judges may consider the factors set out in Rule 57.01(1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and governing jurisprudence. These factors include the following: the experience of counsel and rates charged, the amount an unsuccessful party could reasonably expect to pay, amounts claimed, amount recovered, apportionment of liability, importance of issues, complexity of the proceedings, and the conduct of the parties.
122In Zimmerman v. McMichael Estate, 2010 ONSC 3855, 57 E.T.R. (3d) 241, at para. 4, the court summarized the applicable principles to assessing costs in estate litigation as follows:
(a) the costs of a proceeding are in the discretion of the court and the court may determine by whom and to what extent costs should be paid: Courts of Justice Act, R.S.O. 1990, c. C43, s. 131(1); (b) estate litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime: McDougland Estate v. Gooderham (2005), 255 D.L.R. (4th) 435, [2005] O.J. No. 2432 (C.A.); (c) as a general proposition, the principle that the “loser pays” applies to estate litigation: Bilek v. Salter Estate, [2009] O.J. No. 2328; (d) in the determination of costs, the court must have regard to the factors set out in Rule 57 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, but, at the end of the day, the court’s responsibility is to make an award that is fair and reasonable, having regard to all the circumstances, including the reasonable expectations of the parties; (e) the court’s discretion to award costs on a full-indemnity basis is preserved by rule 57.01(4)(d); (f) full-indemnity costs are reserved for those exceptional circumstances where justice can only be done by complete indemnity: Mark M. Orkin, The Law of Costs, Vol. 1, 2nd ed., looseleaf, (Aurora, Ontario: Canada Law Book, 2010).
123While in Zimmerman the court was dealing with an estate trustee’s conduct, courts have found that costs incurred by a beneficiary of an estate that are necessary or of benefit to the estate can be claimed in same manner as costs claimed against a trustee. However, the ultimate test in assessing costs is one of reasonableness: Owen Estate v. Owen, 2017 ONSC 5673, at para. 30.
124Ms. Philbin seeks full recovery costs of $60,430.11. The request for costs is supported by a detailed costs outline. Lead counsel with 15 years experience billed at a rate of $350 to $450/hour over the course of the litigation with contributions from senior and junior counsel. Work was performed at the intake stage, for interlocutory steps, and for the two-day hearing. I find the rates charged and the billings commensurate with the work performed: r. 57.01(1)(0.a).
125I note that Ms. Orford’s own legal fees inclusive of HST and disbursements were $40,588.83. However, in contrast to the extensive evidentiary record and legal materials filed by Ms. Philbin, Ms. Orford filed just a single affidavit and less than a handful of exhibits.
126In this case, Ms. Philbin has incurred $60,430.11 in her efforts to make the Estate whole with no cooperation from Ms. Orford even though her sister stood to benefit as a co-beneficiary of the Estate. Ms. Orford would have known that as the unsuccessful party she would be expected to pay costs if the “loser pays” principle applies: r. 57.01(1)(0.b).
127The proceeding was unnecessarily complicated as a result of Ms. Orford’s failure to present proper accounts: r. 57.01(1)(c).
128The issues were important to the estate trustee and beneficiaries, including Thomas Wylie, given the depletion of funds resulting from Ms. Orford’s misconduct: r. 57.01(d).
129Ms. Orford admitted to many of her unauthorized withdrawals. However, her failure to make admissions with respect to the loss of interest on the CIBC Wood Gundy investments, and moreover, to refuse the release of such records that would have facilitated a more accurate accounting of any losses was unreasonable: r. 57.01(1)(g).
130The courts may consider full recovery costs where there has been a finding of a breach of fiduciary duty, but the final cost award can be reduced should the amount be unreasonable: Baca v. Tiberi, 2018 ONSC 7282 at para 128-134. Volchuk Estate v. Kotsis, at paras. 7-9, 12ff; Daley v. Daley, 2017 ONSC 2365, at para. 13.
131In this case, I have found that Ms. Orford breached her fiduciary duty as a co-attorney for property by misappropriating her mother’s funds for her personal benefit. I find these are exceptional circumstances warranting costs on a full-indemnity basis. Full-indemnity costs compensate Ms. Philbin for the costs personally incurred by her to restore the Estate and also reflect a fair value for deterrence in the remedy against Ms. Orford for breach of fiduciary duty. Finally, I do not find there is anything unreasonable in the Bill of Costs or the plaintiff’s litigation conduct that militates against full indemnity. I find full-indemnity award is fair and reasonable.
132There will be an order that Ms. Orford pay full recovery costs to Ms. Philbin in the amount of $60,430.11 forthwith. Any amount not paid shall be set off against Ms. Orford’s distributive share of the Estate after the Estate’s payment of all debts and bequests.
Somji J.
Released: December 8, 2023