Court File and Parties
COURT FILE NO.: CV-22-40 DATE: January 5, 2024 SUPERIOR COURT OF JUSTICE – ONTARIO
BETWEEN: Donald Hume, Applicant AND: Anne Windle and Heather Laronde, Respondents
BEFORE: Honourable Mr. Justice Martin James
COUNSEL: M. Peter Sammon, Counsel for the Applicant Shelbi Dippold, Counsel for the Respondents
Reasons for Decision
James J
1The applicant is one of six children, all of whom are residual beneficiaries of the Estate of Ruby Carlann Hume (sometimes hereinafter referred to as the “testator”) who died on November 13, 2019.
2The respondents are siblings of the applicant who were appointed as estate trustees in Ms. Hume’s will dated June 17, 2010.
3The estate consisted primarily of a house and a bank account but in addition, Ms. Hume had purchased a life insurance policy that provided for the payment of $20,000 when she died. Ms. Hume designated one of the respondents, Heather Laronde, as the beneficiary. Ms. Laronde says that Ms. Hume told her how she would like the insurance payout to be distributed after she died, which involved several payments of different sizes to mostly family members. The remaining funds of $3,800 were deposited by Ms. Laronde into an account at the Royal Bank of Canada which I will refer to later.
4Ms. Laronde and her husband sold their home in June, 2019 and moved in with Ms. Hume. It is not disputed that Ms. Hume was in poor health and that the respondents, particularly Ms. Laronde, were actively involved in her care. The Larondes continued to live in the home rent free until it was sold in the fall of 2021.
5The Larondes tended to spend the winter months in Florida. They were there from January, 2020 to March, 2020 and from January, 2021 to April, 2021.
6The respondents listed Ms. Hume’s home for sale in September, 2021. It was sold relatively quickly and the closing was on December 10, 2021. The respondents paid themselves the sum of $19,035.32 on account of their executors’ fees off the top of the sale proceeds after the closing expenses were paid and the balance of the funds was divided equally among the six residual beneficiaries. Each beneficiary received $60,025.74.
7Ms. Hume had an account at the Royal Bank of Canada. The respondents were added as joint account holders prior to her death. The presumption of resulting trust applies to this situation with the result that the money in the account continued to belong to Ms. Hume alone. I don’t think this point is contested by the respondents. The account balance in November, 2019 was $14,820.04. Additional receipts totaled $5,600.91. The respondents spent $21,482.43 on expenses incurred on Ms. Hume’s behalf, resulting in a shortfall of $1,061.48 which was paid by the respondents.
Position of the Applicant
8The applicant says that the respondents preferred their own interests over the interests of the other beneficiaries by allowing the Larondes to reside rent-free in the house, by failing to list the house for sale within a reasonable time and by taking their executor compensation without either obtaining the consent of all the beneficiaries or passing the estate accounts.
9Not included in the Notice of Application but later raised as issues by the applicant are the allegations of improper dealings with the joint RBC account and the life insurance policy which was paid out to Ms. Laronde. The applicant says that the insurance proceeds belonged to the estate through the doctrine of resulting trusts and ought to have been distributed to the residual beneficiaries.
10The applicant estimates the fair market rental value of the home is $1,700 per month. In the Notice of Application, the applicant said that the fair value of the free rent enjoyed by the Larondes was $35,700 ($1,700 X 21 months). In his factum he claimed $37,400 (an additional month).
Position of the Respondents
11The respondents say that all six siblings knew that it was Ms. Hume’s wish that Ms. Laronde and her husband be permitted to continue to live in her home until it was sold.
12They performed numerous services to increase the value of the house for which they say they were not compensated.
13They can substantially account for all the funds in and out of the RBC joint account. No money belonging to Ms. Hume was inappropriately diverted elsewhere.
14Ms. Laronde agrees that the life insurance proceeds were to be distributed in accordance with Ms. Hume’s wishes which she says she did. This arrangement was separate from the will.
Discussion
15Trustees have many responsibilities which they are bound to discharge competently. They must take care not to prefer anyone’s interests at the expense of others. They must act in good faith. They owe a duty of care to other interested parties. They are required to account for their handling of money and valuables. They are usually entitled to reasonable compensation for their efforts.
16The applicant contends that the joint RBC account and the life insurance proceeds were subject to a resulting trust. Broadly speaking, a resulting trust arises whenever ownership of property is in one party's name, but that party, because he is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner, or to the person from whom the property came. In certain situations there is a rebuttable presumption that the holder of the property is not the true owner but rather holds the property for the benefit of another.
The Delay in Selling the House
17The applicant complains that it was only after he initiated legal proceedings that the respondents took action to sell the house. He says he had to wait longer than necessary to get his share of the sale proceeds and when it was sold the respondents shouldn’t have taken their executors fees off the top.
18The applicant says that the respondents were too slow to sell the house in circumstances where one of them was living there rent free. As a result of this delay, they ought to pay compensation to the other beneficiaries. His claim is based on what is sometimes referred to as occupation rent. Occupation rent is a flexible remedy used to offset the benefit of free accommodation where fairness calls for some sort of monetary adjustment. It is based on the doctrine of unjust enrichment.
19I think it is fair to say that the respondents were slow to bring the house to market but beyond that general statement, the issues get complicated and several points can be made for and against the competing positions.
20Assuming for the moment, without deciding, that it suited the respondents’ convenience to take longer than necessary to sell the house, there are two significant issues with the amount of compensation the applicant has claimed.
21First, the monthly rent. The applicant says that rent in the $1,500 to $1,800 range would be appropriate, and he settles on $1,700. He has no evidence to support this contention. He says that expert evidence of the value of the foregone rent is unnecessary and the court may rely upon “reasonable estimates or available evidence” in determining the equitable amount of occupation rent payable. He refers to the following three cases as authority for this proposition. In Filippelli Estate v. Filippelli, 2017 ONSC 4923, Spies J. determined that a reasonable amount for occupation rent could be based on evidence provided by a real estate broker who compared rental rates for similar properties in the same general area. In Bergmann v. McMahon, 2010 ONSC 993 Daley J. allowed evidence from the claimant regarding her research into similar rents in the area and a series of emails with a real estate agent on the same issue. In Dagarsho Holdings Ltd. v. Bluestone, aff’d (2005) 37 R.P.R. (4th) 53 (Ont. C.A.) the court was provided with rental comparisons to numerous similar properties in order to determine a fair amount.
22In this case the applicant has not provided evidence of comparable rents or authoritative evidence respecting an appropriate rental rate for this property. Maybe the amount of $1,700 per month is reasonable, maybe it’s not. It’s an issue for the applicant to prove because he has the burden of proof and he hasn’t.
23The applicant assumes that the gross rent paid by a tenant is all profit when usually it is not. Typically a landlord must pay realty taxes and fire insurance from the gross rent while the tenant pays for the utilities. The applicant does not make an allowance for how these expenses are going to be paid if the full $1,700 rent ought to go to the beneficiaries. Allowing for this omission means that there would be less net rent to distribute, further reducing his claim.
24Next, he says he is claiming occupation rent on behalf of the Estate. He has no status to make a claim for the Estate. He does not represent the Estate or the other beneficiaries who would share any occupation rent if the court ordered some amount to be paid. The other beneficiaries have not joined with the applicant in this claim or made a claim of their own. As the only claimant out of six beneficiaries, his entitlement is to a one sixth share of any rent recovered.
25Next, at what point did the delay become unreasonable? It seems reasonable to assume that some amount of time was required to make the house ready for sale. The respondents did a lot of work themselves rather than paying third parties to provide services. The respondents can also point to the pandemic as a reason why preparations did not proceed as quickly as might otherwise have been the case.
26Also, the will specifically empowered the respondents to postpone the conversion of assets to money for such length of time as they deemed appropriate although there is a question here whether this power included the right to obtain a benefit not available to the others, that is, free rent.
27I agree with the applicant that the time lost while Ms. Laronde was in Florida was contrary to her obligations to the other beneficiaries, about 7 or 8 months in all. If one assumes an arbitrary guideline of 12 months to administer the estate as suggested by Mr. Stewart in his correspondence dated March 15, 2021, then it is arguable that the undue delay could amount to about 12 months, that is, from the one year anniversary of Ms. Hume’s death to the date the sale closed.
28Mr. Sammon’s estimate of 3 months to make the house ready for sale does not allow for time on the market after listing the property nor the interval from the signing of the offer to the date of closing. This estimate also does not allow for the fact that starting in about April, 2020, concerns about COVID 19 were significant. In addition, the applicant does not address the rentability of a house which was destined to go on the market when he states, “The Estate lost the ability to collect rent or sell the property during this period.” On the rental point, who would choose to rent a house for what would likely be a relatively short period of time because the house was destined to be sold?
29I disagree with the applicant’s contention that Ms. Laronde’s occupation of the house was improper from the moment Ms. Hume died. The Larondes were living in the house taking care of Ms. Hume for several months before she passed away. I accept that there were many tasks to prepare the house for sale to get the best price possible. I think it is more likely than not that they did more than the minimum amount of work required to get the house ready to sell (which took longer) and that their efforts resulted in a higher sale price. Vendors are often faced with this choice- - sell quickly on an “as is” basis or take longer, do more to get it ready for sale, and get a higher price. The applicant can’t have it both ways. His claim for compensation of $37,400 is excessive and unrealistic.
30Assuming for the moment the applicant’s assertion that rent of $1,700 per month is reasonable, this amount multiplied by 12 months (December, 2020 to November, 2021) and divided by six (to determine the applicant’s share) is about $3,400. This calculation is simply an attempt to illustrate what might be argued to be the real value of the applicant’s claim regarding the delay in selling the house.
31Another approach for calculating the applicant’s loss would be to apply an interest rate to the delay in obtaining his share of the sale proceeds. If the applicant’s share of the funds should have been distributed 12 months sooner, the court-authorized interest rate in 2021 on court awards of damages was 0.5%. Even assuming an interest rate of 2%, a delay of 12 months would look like this-- $60,025.74 X 2% or $1,200.51.
32While it is open to debate whether these are the correct figures, the point remains that the applicant’s actual financial loss is minimal.
The RBC Joint Account Issue
33The applicant’s claims, like all applicants, are framed by the pleadings, in this case the Notice of Application. There is nothing in the Application advancing a claim about the joint bank account. As a general rule, if something isn’t pleaded, it’s difficult if not impossible to be compensated for it.
34It is true that good practice dictates that a specific estate account ought to be set up rather than blending funds together in an existing account, as was the case here. The respondents were under an obligation to be fully transparent about this account especially because it received funds payable to Ms. Hume after she died and estate expenses were paid from it.
35It is an important point, however, that the applicant’s initial affidavit does not refer to the joint account at all, let alone identify any transactions that the applicant says were improper. The applicant’s second affidavit, which was prepared after the applicant was given access to the relevant bank records, makes some general statements that Ms. Hume should have had more money but there is a lack of specific evidence that the respondents took money from the account belonging to Ms. Hume and used it for their own purposes. Proving fraud and theft requires more than suspicion and broad allegations of impropriety.
36Ms. Windle said that the account balance when Ms. Hume died was $14,820.04. Additional deposits brought the account to $20,420.95. Total expenses attributable to Ms. Hume were $21,482.43, resulting in a shortfall of $1,061.48.
The Life Insurance Issue
37Ms. Hume had a $20,000 life insurance policy and designated Ms. Laronde as the beneficiary. Life insurance payouts do not fall into the deceased’s estate unless the estate is the named beneficiary. Typically, the money belongs tax-free to the beneficiary unless the beneficiary received the funds as a trustee for another person or persons. Ms. Laronde said that Ms. Hume told her how to distribute the insurance proceeds which she says she did, otherwise the money would prima facie belong to Ms. Laronde, not the estate.
38The applicant relies upon the decision of Lococo J. in Calmusky Estate v. Calmusky, 2020 ONSC 1506 to the effect that the presumption of resulting trust ought to apply to life insurance proceeds where the beneficiary is also the named trustee of the policy holder’s estate. It is worth noting, however, that the Calmusky case was not about life insurance. It was focused on joint bank accounts and a Registered Retirement Income Fund.
39Another point--it is arguable that Ms. Laronde’s evidence about who was to benefit from the insurance payout was corroborated by Ms. Windle, thereby rebutting the presumption of a resulting trust in favour of the estate. Although she was also an estate trustee, she was not the beneficiary of the insurance payout. As a residual beneficiary, Ms. Windle would have benefitted if the insurance proceeds were part of the estate. Her evidence supported Ms. Laronde.
40I think it is important to keep in mind that Ms. Laronde didn’t contend that the money was hers which differentiates this case from most other disputes involving the application of the principles relating to resulting trusts. If Ms. Laronde was intent on obtaining an improper personal benefit, why did she deposit the undistributed portion of the insurance payout ($3,800) into the RBC account where it could be accounted for?
41This is another situation where the applicant did not address the issue in his Application initially and he did not amend his Application to put the life insurance issue properly before the court when he became aware of it.
42I am not prepared in the circumstances of this case to hold that the presumption of resulting trust applies to the insurance proceeds. Alternatively, if I am wrong in this view, I would hold that the presumption has been rebutted.
Prepayment of Compensation
43The issue here is not that the executors were compensated; it’s the amount of compensation and the timing of payment.
44It was unusual and irregular for the executors to take their compensation from the proceeds of the house sale. The respondents took the money that they thought they were entitled to without unanimous beneficiary consent or court approval. The proper amount of compensation will be determined as part of the process of passing the accounts. The prepayment will stand as a credit towards the amount determined to be appropriate or alternatively, some portion of the funds may have to be returned. I do not regard this as a situation where it is likely that the estate will ultimately be out of pocket any funds.
Disposition
45For the foregoing reasons, the Application is dismissed.
46The respondents shall proceed to pass the accounts and deliver a Notice of Application to Pass Accounts by the end of March, 2024. They shall schedule a hearing within 65 days after the service of the Notice of Application. If no Notices of Objection are delivered, the respondents may obtain a judgment without a hearing.
47On the issue of costs, the parties have provided preliminary costs submissions.
48I think it would be to the parties’ advantage to reach an agreement on costs, bearing in mind the lack of success on the part of the applicant and considering that the respondents’ execution of their responsibilities was not beyond reproach. If there is an agreement on costs, the trial coordinator should be notified.
49In the absence of an agreement, either party may deliver additional costs submissions on a schedule agreed to by counsel, not to exceed 25 days in all.
Justice M. James January 5, 2024