COURT FILE NO.: CV-23-00001225-0000 DATE: 20240924 SUPERIOR COURT OF JUSTICE - ONTARIO
RE: SANDRA DEZIEL, Applicant AND: DEBRA DEZIEL and BRYAN DEZIEL in their capacities as Estate Trustees for the Estate of Elizabeth Deziel, DEBRA DEZIEL and BRYAN DEZIEL, Respondents
BEFORE: MacFarlane, B.A. J.
COUNSEL: Eric M. Katzman, for the Applicant Paul Courey and Owen Thomas, for the Respondents
HEARD: JULY 8, 2024
ENDORSEMENT
OVERVIEW
1This matter involves a dispute relating to the disposition of an estate asset of the late Elizabeth Deziel by the Trustees, namely the selling of the Deceased’s real estate property at 40 Stewart Avenue, Tilbury, Ontario (the “Home”) to the named trustee Bryan Deziel (also named as a beneficiary). This matter also involves the transfer of most of the bank account proceeds to the named trustee, Debra Deziel (also a named beneficiary), which the Respondents say was gifted by the Deceased before death.
2The applicant Sandra Deziel (“Sandra”) and the Respondents Debra Deziel (“Debra”) and Bryan Deziel (“Bryan”) are siblings. A non-party, Norman Deziel, Jr. (“Norman, Jr.”) is their sibling. These siblings are the only beneficiaries of the estate of their mother (Elizabeth Deziel). To make it easier to follow, I will refer to the siblings by their first names.
3The applicant seeks an order for the following: removing the trustees, reversing the sale of the home, vacant possession of the home, public listing of the Home for sale, the return to the Estate of $40,000 by Debra Deziel, an accounting by the trustees, and damages for negligence and breach of fiduciary duty of the Respondents. The Trustees have provided some accounting so that relief was not pursued at the hearing.
4There are four main issues in this Application:
a. Whether the Trustees breached their fiduciary duties and/or were negligent in their dealings with the Home by extending the time for Bryan Deziel to purchase the Home, for lower than fair market value, using some proceeds of the sale to fund the purchase, and for not resigning as Trustee for the purposes of buying estate property;
b. Remedies in the circumstances;
c. Whether the Respondents should be removed as Trustees and replaced with the Applicant as sole Trustee; and
d. Whether the $40,000 cheque received by Debra Deziel from her mother before death, but cashed after death, constituted a gift or a resulting trust.
DECISION
5I start by saying that I think the trustees, who lacked experience, were attempting to manage the estate in a way they believed their mother would have wanted. Family tensions can make it challenging to determine everyone’s best interests. However, Trustees must act with utmost fairness. For the reasons outlined below, I find that by selling the Home below market value, Bryan’s interests were favoured, which is in breach of the trustees’ fiduciary obligations. The appropriate remedy is for Bryan to reimburse the estate. Further damages are not warranted in the circumstances. Title to the Home will be remedied. The cheque is not a valid gift because it was not cashed before the donor’s death, according to appellant authority. Debra was responsible for informing the bank of her mother’s death, and the law cannot allow for such a delay to validate a gift. Debra must repay the money she received.
BACKGROUND FACTS
6After a period of declining health, Elizabeth Deziel died on April 14, 2023, at the age of 79 (the “Deceased”). Her husband Norman pre-deceased her in 2006 and she is survived by her five children, except for Jaqueline.
7The Deceased’s Last Will and Testament dated August 22, 2008 (the “Will”) is not disputed in this Application. The Will names the four surviving children as equal beneficiaries of the residue of the estate. It also names the Respondents as the Trustees of the Estate.
8The Applicant and Respondents are the Deceased’s independent adult children. Norman Jr. is not a party to this litigation but is impacted due to a beneficial interest in the proceeds of the Estate as a sibling beneficiary named in the Will.
9Prior to her death, the Deceased’s physical health significantly declined, for which she required ongoing daily care. Her daughters, Sandra and Debra, each provided care to their mother, with Sandra providing care for approximately 8 months in 2022, after which Debra was the primary caregiver until Elizabeth’s death on April 14, 2023. There was disagreement between the daughters on the level of care and attention their mother required. Sandra acknowledged in her affidavit that their mother preferred the care provided by Debra.
10Debra had moved her mother into her own home and provided substantial care to her prior to the date of death. Debra was the Deceased’s Power of Attorney for Personal Care and for Property. Caring for her mother led to missed work and financial costs to Debra.
11At the time of death, the Deceased’s main assets were a bank account and her Home. The bank account with The Canadian Imperial Bank of Commerce (CIBC), bearing account number 74-84135, had a balance of $43,054.69. The Home was an unencumbered 1.5-story, 3-bedroom, 1-bathroom detached house with no garage. The Home has been valued between $290,000 and $350,000, the particulars of which will be set out in more detail below.
The Cheque
12On April 1, 2023, about two weeks prior to her mother’s death, Bryan witnessed his mother tell Debra to write a cheque to herself in the amount of $40,000, which his mother signed in the presence of Bryan.
13A copy of the cheque was filed as an exhibit to the materials filed on this Application. On the cheque there is a handwritten note that states “GIFT.” On April 17, 2023, three days after her mother’s death, cheque #134 in the amount of $40,000 was posted against the CIBC account (i.e., cashed), leaving a balance of $3,054.69.
14Bryan’s evidence is that he was present when his mother gifted Debra the sum of $40,000 to compensate Debra for her “sacrifices” of unpaid time off work and expenses incurred while caring for her. It was apparent that this conversation occurred while their mother’s health was significantly declining. According to Bryan, Debra expressed concern to their mother about accepting the money in case it was needed for her care.
15Debra did not provide evidence on the hearing of this matter. The inference is that there was an understanding that the money was not intended to be gifted except in the event of the mother’s death. The Deceased is obviously not here to speak for herself and tell the Court her intentions regarding the $40,000.00.
16Sandra and Norman, Jr. say that they were unaware of any intentions by their mother to gift Debra any money prior to her death. They are suspicious as to whether it is the Deceased’s signature on the cheque. Sandra also states that the Deceased had memory issues. There was no evidence from a handwriting analysis expert on the validity of the signature, or medical evidence about the competency of Elizabeth Deziel.
17It is undisputed that Debra cashed the cheque after her mother’s death. It is also undisputed that Debra did not advise CIBC of her mother’s death prior to cashing the cheque, which allowed it to “clear” the bank (i.e., be negotiable).
The Will
18As noted above, the validity of the Will is not in dispute. It was filed as an exhibit in this matter.
19The Will supersedes a previous Will, in which the Applicant was named as the sole Trustee, which means that Sandra was specifically excluded as a Trustee from the current and valid Will. She remained an equal beneficiary with her siblings.
20Paragraph 8 of the Will provides power and discretion to the Trustees to realize the estate and the power to sell, call in and convert any assets on such terms as they see fit, or postpone any such conversion, among other powers.
21Paragraph 10 of the Will provides authority to the Trustees to do such things in the care and management of the assets as the Deceased could have done while alive.
22Paragraph 12 of the Will provides authority of the Trustees “to fix the value of the assets” and “to transfer assets in the form received and that decision will be final.”
23Paragraph 13 of the Will requires the Trustees to administer the estate and “exercise their authority and discretion in the best interest of the beneficiaries, whether or not that results in the appearance of maintaining an even hand among the beneficiaries.” This paragraph also provides that the Trustees shall not be liable to anyone for the consequences of any action taken or not taken in connection with the bona fide exercise of the Trustees’ authority or discretion.
24The Will specifically states, at paragraph 5(b), that any of the Deceased’s children can buy any house owned at the time of death at “fair market value; such sale to be completed not more than ninety (90) days after” death.
25Shortly after their mother’s death, the Respondents retained a lawyer to assist with the administration of the Estate.
26Sandra stated that she had not seen a copy of the Will at the time of her mother’s death. She was aware that Debra and Bryan were named as the Trustees and that the children would inherit the Estate equally. She was also aware that the only assets of the Estate were the Home and the bank account, which she understood had a balance of about $40,000.
27Although the evidence is not clear on when they asked (June 2022 [1] or June 2023), the Applicant and Norman say that they were denied a copy of the Will after their mother’s death by both the Respondents and the estate’s lawyer. Sandra and Norman, Jr. did receive a copy of the Will in July 2023.
The Home
28At the time of death, the Home was unencumbered.
29Bryan described it as a “wartime” home. According to the appraisals, it is a 1.5-story house with 3 bedrooms, 1 bathroom, and a gravel driveway but no garage. The evidence is that the Home underwent some renovations three to five years earlier but that some walls and trim remained unfinished. Sandra was involved in the renovations, but they were paid for by the Deceased at the time they were done.
30After their mother’s death, the Respondents obtained two appraisals of the Home. One appraisal was from Sarah Moysiuk of Re/Max dated April 14, 2023, which involved her personal inspection of the home and a market comparison. In her appraisal, comparable properties sold from as low as $265,000 and as high as $330,000. Ms. Moysiuk’s opinion to the Trustees was that the market value of the Home (if exposed for sale in the open market) was between $290,000 and $310,000. The other opinion was from Sales Representative Pamela Agiuar of Century 21 Realty, who advised that the Home’s estimated market value was $295,000 as at April 2023. The appraisals were filed as exhibits to the Respondents’ materials.
31Sandra was aware in June 2023 that Bryan had been living in the Home since their mother’s death. Norman, Jr. was aware in May 2023 that Bryan was living at the Home.
32The Applicant obtained her own property appraisal from Laura Tourangeau of Re/Max dated June 25, 2023, showing a market value of $340,000 to $355,000, which considered two comparable properties each sold for $310,000 and one property sold at $352,000. This appraisal was considered a “drive-by” appraisal and based upon a description and photos from Sandra. There was no interior inspection of the Home for analysis purposes. The appraisal was filed as an exhibit.
33There is no evidence that the Applicant provided the appraisal she obtained in June 2023 to the Trustees prior to the sale of the Home.
34Bryan offered to purchase the home on July 13, 2023, within 90 days of his mother’s death, with a closing date of August 23, 2023, approximately 40 days later and therefore more than 90 days after her death. The Agreement of Purchase and Sale was an exhibit to the Application Record. The sale price agreed to by the Trustees was $280,000. The estate was represented by a different lawyer than Bryan for the purposes of the real estate transaction.
35Bryan’s evidence is that he and Debra, as Trustees, chose the sale price using a property value of $295,000, less $15,000 for the value of real estate commission that would otherwise be payable. The Trustees agreed on $280,000 as the sale price.
36On this Application, Sandra filed an expert report from Jocelyn Duley of FK Mitchell Appraisals Inc. dated December 12, 2023, with a market valuation opinion of the Home (as of April 14, 2023) in the range of $340,000 to $350,000. This opinion is based upon a limited “drive-by only” with photos and video supplied by Sandra and not an interior inspection. Ms. Duley acknowledges in her opinion that an interior inspection and more-in-depth investigation could result in a different conclusion.
37The Respondents filed an expert report from Jeff Derochie of Bower Appraisal dated March 2024 with a market valuation opinion as of April 14, 2023, being $310,000. His opinion is based upon a personal inspection of the Home and a market comparison. It contains photographs taken of the exterior and interior of the Home.
38The Transfer of the Property was made on August 23, 2023, noted as document CK225635 on August 23, 2023 at 14:56 with PIN#00805-0071 LT from the land titles office. The Transfer document was filed as an exhibit to the Applicant’s supplementary record.
39Bryan’s evidence is that the Trustees planned to make an interim distribution of $65,000 to each of the named surviving beneficiaries from the proceeds of the sale of the Home. It was his intention to use his distribution portion and, on agreement, Debra’s distribution amount, to partially fund the purchase of the Home (i.e., $130,000). The remainder of the purchase price for the Home (i.e., $150,000) was funded by Bryan.
40After the sale of the Home in August 2023, the sum of $147,855.81 was deposited and remains in the Estate’s lawyer’s trust account. The Statement of Adjustments for the purchase of the Home was filed as an exhibit.
41The documents to transfer the title of the Home, marked as exhibits to this matter, were filed at the Land Title’s office and stated a purchase price from Bryan to the Estate of $280,000. The documents included covenants signed by the Trustees relating to the transfer of the property by the Trustees, because it was a transfer without the need for probate and estate taxes payable. The covenant document was rejected as not properly signed and the title has not been formally registered.
42Sandra and Norman, Jr. say that they did not know of the sale of the Home to Bryan or the provision in the Will permitting the siblings to purchase the Home, until after 90 days from their mother’s death. They became aware of the purchase agreement in July 2023 but prior to the closing date for the transfer of the Home, August 23, 2023.
43Bryan says that he had discussions with Sandra regarding the terms of the Will and that she was aware of the provision that any of the siblings could purchase the Home. There is no evidence that Sandra or Norman, Jr. were or are interested in purchasing the Home.
44This Application was issued on October 4, 2023. The Applicant registered a Caution on the title to the Home and an Order for non-dissipation of assets, limiting the ability to remedy title on the property. They remain in place pending a decision on the matters in issue in this application.
POSITIONS OF THE PARTIES
45The Appellant raised four main issues in their Argument:
a. Whether the Respondent Trustees breached their duties by permitting the sale of the Home to Bryan when:
i. it was outside the 90-day time period within which to complete the sale as stated in the Will;
ii. it was sold for lower than fair market value and at a further discounted price representing the value of real estate fees;
iii. it was not fully funded, such that they permitted the use of Estate funds to purchase the home, being the share of Bryan and Debra’s share of the residue of the estate without providing corresponding distributions to the remaining beneficiaries;
iv. Bryan acted in conflict and failed to resign as Trustee for the purposes of purchasing the Home; and
v. they failed to advise the other beneficiaries of their right to purchase the home prior to the expiry of the 90-day time period.
b. The Applicant seeks damages against the Respondents personally and to nullify the Sale of the Home and an order for vacant possession. She also takes the position that title was not formally transferred to Bryan in any event due to a technical non-compliance with the filing at the Land Titles office.
c. That the Respondents be removed as Estate Trustees and replaced with the Applicant as the sole Trustee.
d. Whether the $40,000 cheque received by Debra Deziel constituted a gift from her mother or whether there is a resulting trust to the Estate. The Applicant’s position is that the $40,000 does not meet the test for a gift because Debra failed to cash the cheque before death.
46The Respondents say that this was a simple estate with the main asset, apart from the small bank account, being the Deceased’s Home. They take the position that they acted reasonably and even-handed in accordance with their mother’s wishes. In particular, they retained a lawyer, obtained legitimate appraisals, set a fair price, and appropriately deducted the amount the estate would have paid for real estate fees.
47The Respondents say the administrative title issue does not nullify the sale of the Home, which was signed, sealed and delivered on a reasonable closing date, chosen to permit a real estate deal to be completed. There was no significant delay in selling the Home. Additionally, the Trustees’ plan to make an interim distribution to all the beneficiaries at the time of the sale of the Home was reasonable, but that this Application intervened such that there has not yet been a distribution to Sandra or Norman, Jr.
48The Respondents’ position on the “gift” is that the clearing of the cheque at the bank is the primary consideration for whether it was a gift, despite it being cashed after Elizabeth’s death.
ISSUES
(1) Was there a breach of trust/fiduciary duty on the part of the Trustees in their dealings with the sale of the Home to the Respondent Bryan Deziel?
(2) If there was a breach of trust/breach of fiduciary duty, what is the remedy? Are other remedies appropriate on this application?
(3) Should the Respondents be removed as Trustees for the Estate of the Deceased? If so, should the Applicant replace them, or should there be a different Trustee?
(4) Does the $40,000 cheque written before death but cleared after death constitute a gift such that it is outside the Estate, or is there a resulting trust such that Debra Deziel should return the funds to the Estate?
ANALYSIS
Breach of Trust and Fiduciary Duties
49There is no dispute that the Respondents, as Trustees, owed fiduciary duties to the Applicant and the other beneficiaries under the Will. As confirmed by the Supreme Court of Canada, the duty to beneficiaries “betokens loyalty, good faith and avoidance of conflict of duty and self-interest.” [2] The Supreme Court has further noted:
The duties of trust are special, confined to the exceptional case where one person assumes the power which would normally reside with the other and undertakes to exercise that power solely for the other's benefit. It is as though the fiduciary has taken the power which rightfully belongs to the beneficiary on the condition that the fiduciary exercise the power entrusted exclusively for the good of the beneficiary. Thus the trustee of an estate takes the financial power that would normally reside with the beneficiaries and must exercise those powers in their stead and for their exclusive benefit. [3]
50The standard of care owed by a trustee is one of ordinary prudence as if managing one’s own affairs, which includes obtaining fair market value for property. [4] The trustee is also bound by the duty to act impartially between the beneficiaries and hold an “even-hand” when carrying out the terms of the trust; They must ensure that, in the administration of the trust, they do not give advantage or impose burden which other beneficiaries do not share. [5]
51The Will states that the Trustees must “exercise their authority and discretion in the best interest of the beneficiaries, whether or not that results in the appearance of maintaining an even hand among the beneficiaries.” [6]
52Selling an estate asset for significantly below its fair market value or acting in furtherance of a personal preference that disproportionately benefits a beneficiary can amount to a breach of fiduciary duty by the trustee. [7]
53In this case, paragraph 5(b) of the Will expressly states that the children of the Deceased are permitted to purchase the Home at “fair market value; such sale to be completed not more than ninety (90) days after” death. There is no doubt that the Deceased intended for any of her children, including the trustees, to be able to buy the house. There was no impropriety in Bryan purchasing the Home as a Trustee; rather, it is the way he purchased the Home that is in dispute.
54The Applicant argues that the Will should be strictly interpreted in a way that would nullify Bryan’s purchase of the Home because the closing date was more than 90 days after death. He relies on the case of Jochem v. MacPherson to stand for the proposition that a provision in a will that grants the trustee the power to purchase estate property will be strictly construed and does not relieve the trustee of his fiduciary duty. [8] In that case, the Will permitted a Trustee to purchase the Estate’s corporate shares, where the court questioned the reliability of the only valuator sought, including relying on information supplied by the Trustee/purchaser. That case was about the sale price, not any time-limits in the Will.
55I agree that Trustees must prioritize the beneficiaries’ interests over their own. A Trustee’s fiduciary duty to the beneficiaries remains, even when the Will permits self-dealing. [9]
56Interpreting the Will as the Applicant suggests would imply that the Deceased intended to prevent her children from buying the Home if the closing date was even one day past the 90-day period. A strict reading of that provision in the Will may be problematic given the context.
57As noted in the recent Ontario Court of Appeal decision of Walters v. Walters: “A testator’s intention is ascertained from a consideration of the will and the surrounding circumstances. The court puts itself in the position of the testator at the time the will was made…This is known as the armchair principle.” [10]
58In my view, there are two questions to ask to determine the intention of the Deceased with respect to the 90-day period set out in the Will:
(1) What inference can be drawn about the purpose of the 90-day period; and
(2) Would the Deceased have permitted one of her children/beneficiaries to delay the purchase for approximately 40 days, as Bryan did?
59In my view, the 90-day period was intended to ensure timely estate management and to put the Home on the market if one of the Deceased’s children did not to buy it. I do not find that it was intended to be a strict deadline.
60I believe that the Deceased envisioned a child purchasing the Home and would not have insisted on a literal interpretation of the word “complete” to mean the property transfer must be done within 90 days. Considering the Will as a whole, the granting of broad power to the trustees, including the power to postpone a sale, indicates that the Deceased contemplated a reasonable delay.
61In this case, Bryan signed a purchase agreement for the Home within 90 days of his mother’s death. Bryan had to have substantial funds to purchase the Home and ensure the transfer complied with real estate law, with the assistance of a lawyer. The closing date was delayed beyond the 90-day period but a 40-day closing is not an unusual timeframe for real estate transactions. I note that the comparable ‘homes sold’ analysis done by the Applicant’s valuators reveal a similar timeframe.
62I do not find that the trustees breached their trust by allowing the closing date after the 90-day period. Therefore, I am not prepared to set aside the agreement on that basis.
63As trustee, however, Bryan had a conflict of interest when determining the sale price for the Home. The main question is whether the property was sold to him at a below-market price due to a preference for him over the other beneficiaries.
64The Trustees acted appropriately by hiring a lawyer and seeking out valuations of the Home. The valuations established the fair market value between $290,000 and $310,000. The evidence is that both Trustees discussed what the purchase price would be and settled on $295,000 but reduced it to $280,000 for the value of the real estate commission that they decided would have been payable if the Home was sold on the open market.
65In my view, fair market value is meant to be the price that is expected if the item is for sale on the open market. Based on the appraisals obtained by the Trustees, the highest value was $310,000. The sale price at $295,000 was less than the even the average of the valuations obtained.
66I turn to what would be considered fair market value of the Home. The Respondent’s expert report (filed on this application) valued the property at $310,000 as of April 2023, being the higher end of the valuations obtained by the Trustees.
67The Applicant’s valuations are less accurate due to their acknowledged limitations as a “drive-by” assessment and due to the use of information supplied by the Applicant, including photographs that were dated. I find that the valuation of the Home at $350,000 is not reasonable. Reliance on the lawyer’s comments regarding the valuation is also not reasonable. In any event, the appraisal of Ms. Tourangeau dated June 25, 2023, did refer to two comparable homes which sold for $310,000.
68I find that the fair market value of the Home as of April 2023 was $310,000 and not $280,000 set by the Trustees.
69The Will is silent on whether real estate commission is to be deducted from the fair market value of the Home. I do not infer that the Deceased intended for a lower than fair market value for potential real estate commissions. In any event, no evidence was presented to show the actual real estate commission that would have been payable if the Home sold on the open market. I decline to reduce the price for real estate commission when determining a fair-market value intended under the Will.
70By setting a below-market purchase price, Bryan prioritized his own interests over those of the other beneficiaries. Debra was complicit in this conduct and failed to act loyally towards all beneficiaries. Bryan should have recused himself, and Debra should have sought advice from the estate lawyer when determining the purchase price for sale of the Home to Bryan.
71For these reasons, I find that the Respondents breached their duties as Trustees under the Will. I do not find that the trustees deliberately withheld the Will to enable Bryan to purchase the Home to the exclusion of the other beneficiaries. The Will was produced prior to the closing date but no other beneficiary sought to purchase the Home. I find no breach in relation to this issue.
72The Applicant also claims that Bryan did not fully fund the purchase of the Home with his own money and instead used funds from an improper interim distribution of the proceeds of the estate. Therefore, she wants the transfer of the Home to Bryan to be declared a nullity.
73In the circumstances, since the Deceased permitted one of her children/beneficiaries to purchase the Home, it is likely that she anticipated that the purchase may be funded by an interim distribution. I do not find that it was a breach of trust of the Trustees to permit the interim distribution funding. I am not prepared to set aside the transfer of the Home on this basis.
Remedies for Breach of Trust
74Damages must be a flexible remedy of equity, including equitable compensation for fairness and justice in the specific situations. The Supreme Court of Canada has stated that “[w]here new remedies are required, equity will recognize them.” [11] The principles of assessment in contract and tort may be of some assistance in that regard. The goal should be to restore the aggrieved person(s) as fully as possible to the position they would have been in had the breach not occurred. There are times when traditional remedies may not be available or appropriate. [12]
75As noted by the Ontario Court of Appeal in Mady Development Corp. v. Rossetto, the remedies for breach of fiduciary duty are aimed at two goals: restitution and deterrence. [13] Returning the beneficiary to the position they would have been in but for the breach is aligned with the principles outlined in Norberg. Deterrence is designed to address not only the fairness between the parties but the public concerns about maintaining the integrity of the fiduciary relationship. It is, however, dependent on all the circumstances of the case.
76Here there is an identifiable loss of $30,000 to the estate by failing to sell the property at fair market value. Bryan is the one who benefitted from the breach of trust. As such, I find that Bryan is to make restitution to the Estate in the amount of $30,000. I find this is fair and reasonable in the circumstance of this case.
77I do not find that the Trustees acted maliciously, but rather believing that they were carrying out their mother’s wishes. Their actions were not egregious nor excessive. Bryan and Debra do not appear to be experienced trustees and are administering a simple estate. In the circumstances, I do not find that deterrence is necessary, and I decline to award any further damages.
Removal of the Trustees
78The Applicant seeks removal of the Trustees, and for herself to be substituted as the sole Trustee of the Estate.
79Pursuant to 37(1) of the Trustee Act, a Court may remove a personal representative upon any ground upon which the court may remove any other trustee and may appoint some other proper person or persons to act in the place of the executor or administrator so removed: R.S.O. 1990, c. T.23, s. 37 (1); 2000, c. 26, Sched. A, s. 15 (2).
80The Ontario Court of Appeal in the case of Chambers Estate v. Chambers confirmed that “the court should not lightly interfere with a testator’s choice of the person to act as his or her estate trustee.” [14] Dietrich, J. in Henderson v. Sands summarized the guiding principles in removing an estate trustee as follows: [15]
a. The court should not interfere lightly with the testator’s choice of estate trustee;
b. Such interference must be not only well justified but must amount to a case of clear necessity;
c. Removal of an estate trustee should only occur on the clearest of evidence that there is no other course to follow;
d. The court’s main guide is the welfare of the beneficiaries;
e. It is not every mistake or neglect of duty that will lead to removal. It must be shown that non-removal will likely prevent the trust from being properly executed. The acts or omissions must be such as to endanger the trust property or to show a want of honesty, capacity or reasonable fidelity;
f. Removal is not intended to punish past misconduct but to protect the assets of the trust and the interests of the beneficiaries; past conduct that is likely to continue will often be sufficient to justify removal; and
g. Friction alone is not itself a reason for removal. The question is whether it would be difficult for the trustee to act with impartiality. The friction must be of such a nature or degree that it prevents, or is likely to prevent, the proper administration of the trust.
81Having regard to these guiding principles, I am not satisfied that it is appropriate to remove the Trustees. I do not find that the past conduct of the Respondents warrants their removal. Further, the apparent animosity amongst the siblings is not enough to justify the Respondents’ removal as trustees.
82This is a straightforward estate involving simple assets. The main asset (the Home) has been sold and the proceeds remain in the estate lawyer’s trust account. There is no need for long-term investments or an ongoing trustee relationship in this matter. Although I found a breach of fiduciary duty, the trustees’ actions are not severe enough to warrant their removal.
83I am satisfied that the Trustees will be able to properly administer the remainder of the estate.
Inter Vivos Gift / donatio mortis causa and Resulting Trust
84Under common law there are generally two categories of gifts: donatio inter vivos and donatio mortis causa. The main difference being that a gift while alive is expected to be immediate and irrevocable whereas a gift made where death is imminent is contingent upon the death of the donor.
85Unlike a contractual agreement exchanging mutual obligations, a gift is generally the voluntary transfer of property to another without consideration. [16] A central element to a gift is the “intentional giving to another without expectation of remuneration.” [17]
86The Supreme Court of Canada has confirmed that when a parent gratuitously transfers property to their independent adult child, there is a rebuttable presumption that the property is not a gift; rather, it is held in trust for the parent. [18] The onus is on the adult child to proffer clear, convincing and cogent evidence that it was a gift. Once a transferor is deceased, they are unable to speak to their intention and by reversing the onus it provides a measure of certainty and predictability. [19]
Inter Vivos Gift – between living people
87It is well established that there are three essential elements for a legally valid inter vivos gift: [20]
a. An intention to make a gift on the part of the donor, without consideration or expectation of remuneration;
b. An acceptance of the gift by the donee; and
c. A sufficient act of delivery or transfer of the property to complete the transaction.
88The delivery requirement is a key distinguishing feature between gifts and other property transfers, such as those by contract. Delivery requires a would-be donor to confirm their intention to make a gift, and it provides tangible evidence of the gift. For a gift to be valid, the donor must have taken all necessary steps to transfer the property. [21]
Gift in contemplation of death – Death Bed Gift
89A donatio mortis causa, also known as a death-bed gift, differs slightly from an inter vivos gift. A death-bed gift is made in contemplation of death and takes effect only upon the donor’s death, while a general gift takes effect immediately.
90Donatio mortis causa must have a liberal intent and three conditions must be met for it to be considered valid: [22]
a. The gift or donation must have been made in contemplation, though not necessarily in expectation of death;
b. There must have been delivery to the donee of the subject-matter of the gift; and
c. The gift must be made under such circumstances as shew that the thing is to revert to the donor in case he should recover.
91The imminence of this death should be what motivates the donor to give. Therefore, this type of gift is only valid at the time of death. If the donee recovers, the donation is automatically revoked. [23] A death-bed gift can be made, but if the donor survives, the funds or property may revert to them via a resulting trust.
92In this case, it was approximately 14 days before her death that the Deceased gave Debra a cheque for $40,000, noted to be a “GIFT.” The uncontroverted and corroborating evidence from Bryan is that he witnessed the conversation between Debra and their mother surrounding the cheque. He states that their mother wanted to give most of her remaining money to Debra because of the sacrifices that Debra made for her, during the time Debra was caring for her. Debra had taken time off work and spent her own money to take care of the Deceased. The cheque was given to Debra when the Deceased likely knew that she would not be alive much longer. Debra was reluctant to cash the cheque, particularly because her mother may need the money for something unexpected. The inference was that there was an understanding that Debra would not cash the cheque unless or until her mother died.
93On this evidence, I find that the cheque was given in contemplation of death but revocable in the event her mother recovered or required the money before death. These facts meet the first and third element of a death-bed gift.
94However, the delivery is a key factor in completing a gift, regardless of whether it is inter vivos or mortis causa.
Gift by cheque
95Proof of a gift of money by cheque can be problematic because it is not actually money or a direct transfer of property: It is simply an instruction from the bank customer to the bank to exchange the cheque for cash. The instruction can be changed or revoked at any time before the cheque is cashed (e.g., by a stop payment). Also, it can only be cashed if there are sufficient funds in the account to cover the amount of the cheque. The cheque must be negotiable at the bank. For these reasons, a gift by cheque has been held not be “complete” until the cheque has been cashed (i.e., has cleared the donor’s bank account). [24]
96Upon their customer’s death, the donor’s bank can no longer negotiate a cheque. Section 167 of the Bills of Exchange Act [25] states that the duty and authority of a bank to pay a cheque is determined by countermand of payment or notice of the customer’s death. As such, if there is revocation/stop payment of the cheque or notice of the death of the customer, the bank can no longer cash the cheque.
97A cheque cashed and cleared before death has been held to be a valid gift inter vivos. In Teixera v. Markgraf Estate, the Ontario Court of Appeal held that a gift by way of cheque given inter vivos is only a valid gift if it is cashed before the donor dies. [26] As noted in Teixeira, death terminates the bank’s authority to pay on a cheque, unless the bank certified the cheque. [27] Unlike a regular cheque, a certified cheque is guaranteed by the bank, making it essentially equivalent to cash. A certified cheque is a valid gift after death, but a non-certified cheque presented to the bank after death is not a valid gift. [28]
98In Teixeira, prior to her death, the Deceased wrote a cheque for $100,000 to her neighbour because he had assisted her with chores and errands. The donor died 6 days later, her estate trustee notified the bank of her death, and her account was frozen. The neighbour could no longer cash the cheque. The Court of Appeal in Teixeira concluded that the purported gift of $100,000 by way of cheque failed because it was not delivered” before the account was frozen. [29]
99The Respondents’ position in the present case is that the cheque is a valid gift because it was cashed and cleared before the bank account was frozen. They take the position that Teixeira does not apply to the circumstances of this case. Support for this position – namely, that a cheque cashed after death, but before notice to the bank, is a valid gift – is seen in a case from more than a century ago.
100In Kendrick v. Dominion Bank and Bownas, [30] the majority of the appellate court agreed with the finding of Meredith, C.J.O. that no error was made in determining that a cheque cashed after death but before the bank had notice of the death was a valid donatio mortis causa. In so doing, Meredith, C.J.O. stated:
I share the doubt of my brother Latchford, having regard to the provisions of the Bills of Exchange Act, as to the direction to the banker being revoked by the death of the drawer before payment of the cheque, and agree with him that it is at least open to serious question whether the revocation occurs until the banker has notice of the death of his customer. [31]
101Although Kendrick raises a valid question, I do not consider it a binding precedent for permitting a gift in this case. Notably, the appellate court in that case chose not to intervene in the lower court’s decision because the issue of revocation was open to interpretation. Furthermore, the bank depends on trustees to report the death of their customer, and unlike the present case, the donee in Kendrick was not a trustee of the estate.
102As a trustee, Debra had an obligation to advise the bank of her mother’s passing. If the bank knew of her death, it would have been unauthorized to cash the cheque. The cheque would have been non-negotiable on death, pursuant to s. 167 of the Bills of Exchange Act. The bank’s lack of awareness that her mother had died enabled Debra to cash the cheque from her mother.
103In my view, Teixeira holds that a drawer’s death revokes the bank’s authority to pay on a cheque, regardless of when the bank is notified. This is consistent with the Divisional Court’s finding in Re Bernard that death revoked the banker’s authority to pay the cheque. The Court stated at para. 9: “The authorities are quite clear that a cheque not paid either actually or constructively during the lifetime of the drawer, is not capable of being the subject of donation mortis causa.” [32]
104This finding is also consistent with the Bills of Exchange Act, which prohibits a bank from clearing cheques through a deceased’s account. Importantly, it would prevent people from intentionally withholding information about a deceased person’s death to cash a cheque.
105My findings are not, in any way, meant to suggest that Debra deliberately withheld information from the bank to allow her to cash the cheque. Rather, I believe that her actions were motivated by her care for her mother and her desire not to accept the money unless she died. It is commendable that she did not cash it before her mother passed away. Unfortunately, the cheque became non-negotiable on death.
106The cheque from her mother, although well-intended, fails to meet the test under the law for “delivery” of the gift.
107Considering my finding that the cheque was not a gift, Debra must repay the estate the $40,000.
CONCLUSION:
108I find that while the trustees may have had good intentions in trying to carry out the wishes of their mother, their inexperience resulted in a breach of trust through inappropriate conduct. Their actions, while wrong, were not egregious enough to warrant damages. The Home was sold to Bryan in accordance with the Will but for $30,000 below fair market value. Bryan must repay $30,000 to the estate.
109Upon payment of the $30,000, any caution or restriction on title shall be vacated and title should be rectified with a formalized transfer to Bryan Deziel.
110The cheque cashed after the death of her mother did not constitute a legally binding gift, and Debra is to repay the $40,000 to the estate.
COSTS
111If the parties are unable to agree on costs, they may make submissions to me that are no more than three pages, plus cost outlines to consider and such submissions should be provided to me no later than September 30, 2024.
“Justice B.A. MacFarlane”
Justice B.A. MacFarlane
Date: September 24, 2024
1See paragraph 12 of Sandra Deziel’s affidavit sworn August 28, 2023.
2Norberg v. Wynrib , [1992] 2 SCR 226 , at para. 67 .
4Valard Construction Ltd. V. Bird Construction Co. , 2018 SCC 8 , [2018] 1 S.C.R. 224 at paras. 17 , 18.
5In the Estate of Norma Baer, (deceased) , 2014 ONSC 4468 , at para. 18 , adopting the “even-hand rule” set out by Professor Waters in The Law of Trusts in Canada , 2 nd ed. (Toronto: Carswell, 1984).
6Paragraph 13 of the Will.
7In the Estate of Norma Baer, (deceased) , at paras. 19 –27 .
8Jochem v. MacPherson , 2010 ONSC 6391 , at p ara. 23 , relying on Ballard Estate (Re) , [1994] O.J. No. 1898.
9Ballard Estate (Re) , at paras. 23 –25 .
10Walters v. Walters , 2022 ONCA 38 , at para. 37 .
13Mady Development Corp. v. Rossetto , 2012 ONCA 31 , at paras. 18-20 .
14Chambers Estate v. Chambers , 2013 ONCA 511 , at para. 95 .
15Henderson v. Sands , 2023 ONSC 897 , at para. 8 .
16McNamee v. McNamee 2011 ONCA 533 , at para. 23 .
17Peter v. Beblow , [1993] 1 S.C.R. 980, at pp. 991–92.
18Pecore v. Pecore , 2007 SCC 17 , at para. 26 .
19Saylor v. Madsen Estate , [2005] O.J. No. 4662, at para. 81 .
21Teixera v. Markgraf Estate , 2017 ONCA 819 , at paras. 40–44 .
22Brown v. Rotenburg , [1946] O.R. 363, citing Cain v. Moon , [1896] 2 Q.B. 283 at 286 .
23Walker v. Foster (1990), 30 S.C.R. 299, at p. 302 .
25Bills of Exchange Act , R.S.C., 1985, c. B-4, s. 167.
27Teixeira , at para. 45 , citing McLellan v. McLellan (1911), 25 O.L.R. 214, [1911] O.J. No. 30 (Div. Ct.), at p. 216 .
30Kendrick v. Dominion Bank and Bownas , [1920] O.J. No. 81 .
32Re Bernard , [1911] O.J. No. 792, at para. 9 .