COURT FILE NO.: CV-24-00015-00 DATE: 2024-10-24

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

Joseph Allen Jolicouer and Joan Marie Jolicouer

Mr. D. Judson for the Applicants Applicants

- and -

Betty Scheibler, also known as Betty Westover, as representative of the estate of Milton Edwin Westover, deceased

Mr. M. Cupello, for the Respondent, Betty Scheibler (also known as Betty Westover), as Representative of the Estate of Milton Edwin Westover, deceased Respondent

HEARD: September 24, 2024, at Fort Frances, Ontario via Zoom

Madam Justice H. M Pierce

Reasons on Application

Introduction

[1] In the first instance, the applicants seek orders removing Ms. Scheibler as executor and estate trustee (“the trustee”) for the Estate of Milton Westover (“the estate”), revoking her certificate of appointment as estate trustee, and for ancillary directions relating to the appointment of a replacement trustee. It is this part of the application to which these reasons relate.

[2] In addition, the applicants claim injunctive and declaratory orders granting an equitable interest, resulting or constructive trust or lien on property owned by the estate of Milton Westover. However, these additional claims are not currently before the court.

[3] The applicants submit that the trustee:

1. delayed in administering the estate;
2. is significantly in conflict with the interests of the estate and its beneficiaries;
3. wasted and misappropriated estate assets;
4. failed to account for the estate;
5. disrespected the court, its orders and process; and
6. lacks capacity to administer the estate.

[4] The trustee argues that the applicants have no standing to apply for her removal and asks that their application be dismissed. In the alternative, if the applicants have standing, she disputes their contentions with respect to her handling of the estate and her capacity to further administer it.

Chronology

[5] The applicants are not beneficiaries of the estate. Joan Jolicouer is the daughter of the deceased, Milton Westover; Joseph Allen Jolicouer is her husband.

[6] The applicants farm several parcels of land in the Township of Chapple, near Fort Frances, Ontario, which the deceased transferred to them in 1994 and 1997. At issue is another parcel of land known as the “home property”, which the deceased transferred to the applicants as a joint tenancy between himself and them in 1997.

[7] In 2015, the deceased severed the joint tenancy in the home property, making it a tenancy-in-common. The deceased retained a one-third interest, and the applicants a two-thirds interest. Upon his death, the deceased’s one-third interest in the home property reverted to his estate. It is the estate’s major asset.

[8] The home property is the heart of the farm. It contains most of the farm buildings, as well as the deceased’s residence. The residence is now uninhabitable due to disrepair. The applicants live across the road from the home property, on their own parcel of land.

[9] The trustee moved into the deceased’s home in 2013 when her marriage broke down.

[10] The deceased made a final will on April 18, 2018. He named Betty Scheibler as the sole trustee of his estate, and listed Clifford Westover as the alternate trustee. The deceased died in August 2018. The estate beneficiaries in equal shares are Joan’s four siblings: Betty Scheibler, Clifford Westover, Debra Westover-Morriseau, and Richard Westover. Betty was appointed as estate trustee with a will on June 7, 2019.

[11] The trustee took no steps to leave the residence after the deceased’s death, and remained there until the court ordered her removed in June 2023.

[12] The deceased’s properties have been mired in litigation over the years. In 2017, while Milton Westover was still alive, he sought orders to invalidate the transfers of five farm properties that he made to the applicants and Debra 20 years earlier.

[13] Milton Westover died before the case came to trial however his trustee, Betty, elected to fight on. The trial judge dismissed the action in 2022, concluding that the allegations were without merit and the claims statute-barred. The applicants’ counterclaim seeking sole ownership of the home property was also dismissed.

[14] The trial judge concluded that Betty had continued the litigation to advance her personal interests. He ordered Betty to personally pay two-thirds of the costs ordered to the applicants and Debra.

[15] Subsequently, Debra moved for an order requiring the trustee to vacate the deceased’s residence, and for an accounting of the estate. On February 16, 2023, Justice Newton ordered the trustee to produce a statement of assets and liabilities for the estate within 30 days and to pass accounts within 60 days. The trustee did not comply with the timelines in the order.

[16] On June 14, 2023, I ordered the trustee to vacate the deceased’s residence within 30 days. She ignored this order and did not vacate the premises until late August 2024.

[17] Meanwhile, the trustee appealed the 2022 trial judgment to the Court of Appeal. In 2024 her appeal was dismissed, and she was ordered to pay further personal costs to the applicants and Debra.

[18] In March 2024, Debra brought an application seeking Betty’s removal as estate trustee. Since the Jolicouers were not beneficiaries of the estate, they were not parties to this application. Debra subsequently withdrew her application as settled.

[19] There is no dispute that the applicants are the logical purchasers of the estate’s one-third interest in the home property. In the spring of 2024, the Jolicouers and the estate trustee began negotiations to purchase the estate’s interest in the home property; however, they could not agree on a price. This seems to be the nub of the conflict.

[20] The applicants contend that they should have credit for the improvements they made to the property since 1997, without contribution from the deceased or the estate, and for payment of property taxes and expenses they covered for the home property. They commenced the within application on July 30, 2024.

[21] As well, the applicants sued the trustee personally in Small Claims Court in July 2024, claiming five years of occupation rent in the deceased’s residence after his death, and damages for removal of the furnace. Ms. Scheibler has been noted in default in that proceeding, a finding which she now seeks to set aside.

[22] The applicants also garnished funds payable by the estate to the trustee to satisfy their outstanding costs orders in the amount of $29,517.18.

[23] The applicants served the trustee with a notice of a judgment debtor examination in August 2024. When she did not attend, Justice Nieckarz ordered her to attend, with costs against her personally fixed at $2,500.00.

Standing

[24] It is helpful to consider the nature and extent of the application before the court when considering the parties’ arguments concerning standing. The applicants’ claims can be summarized as follows:

1. pursuant to Rules 5.04(2), 14.05(2), 3(c) and 75.04 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194, and ss. 5 and 37 of the Trustee Act, R.S.O. 1990, c. T.23, orders removing the trustee, revoking her certificate of appointment, substituting a new trustee; and directing the conclusion of the administration of the estate, especially with respect to the home property;
2. injunctive relief preventing the estate from dealing with the property without the applicants’ consent or final disposition of the application;
3. a declaration pursuant to s. 37 of the Conveyancing and Law of Property Act, R.S.O. 1990, c. C.34, granting the applicants the estate’s interest in the home property or to a lien on the property;
4. a determination of the nature and extent of the applicants’ interest in the estate property pursuant to Rule 14.05(e), whether as an equitable interest or a resulting or constructive trust; and
5. an order vesting the home property pursuant to s. 100 of the Courts of Justice Act, R.S.O. 1990, c. C.43.

[25] As a preliminary matter, the court must determine whether the applicants have standing to bring this application. The question of standing must be determined based on the evidentiary record before the court: see Moses v. Moses, 2021 ONSC 587, 64 E.T.R. (4th) 246, at para. 35.

[26] Because the home property was held as tenants-in-common at the time of Milton Westover’s death, the applicants’ two-thirds interest did not merge with the deceased’s one-third interest on his death, as they may have otherwise expected. In other words, when Milton Westover died, the estate acquired his one-third interest in the home property while the applicants retained their two-thirds interest in the parcel.

[27] The trustee argues that the applicants have no financial interest in the estate, relying on the decision in Magnotta v. Magnotta, 2020 ONSC 316, 55 E.T.R. (4th) 251, at para. 39. She submits that the only persons with a financial interest in the estate are the beneficiaries.

[28] The applicants submit they have a financial interest in the estate that gives them standing.

[29] The court derives its jurisdiction to remove an estate trustee from ss. 5 and 37 of the Trustee Act.

[30] Section 5(1) describes the power of the court to appoint new trustees:

5(1) The Superior Court of Justice may make an order for the appointment of a new trustee or new trustees, either in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee.

[31] Section 37 provides for removal of personal representatives:

37(1) The Superior Court of Justice 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.

(2) Every person so appointed shall, unless the court otherwise orders, give such security as would be required to be given if letters of administration were granted to the person under the Estates Act.

(3) The order may be made upon the application of any executor or administrator desiring to be relieved from the duties of the office, or of any executor or administrator complaining of the conduct of a co-executor or co-administrator, or of any person interested in the estate of the deceased.

[32] As well, the Rules of Civil Procedure set out the parameters for bringing applications. For example, Rule 14.05(2) stipulates that an application under statute may be made to the Superior Court of Justice or a judge of that court if authorized by statute.

[33] Rule 14.05(3) includes the following provisions for applications brought under the Rules:

(3) A proceeding may be brought by application where these rules authorize the commencement of a proceeding by application or where the relief claimed is,

(a) the opinion, advice or direction of the court on a question affecting the rights of a person in respect of the administration of the estate of a deceased person or the execution of a trust;

(b) an order directing executors, administrators or trustees to do or abstain from doing any particular act in respect of an estate or trust for which they are responsible;

(c) the removal or replacement of one or more executors, administrators or trustees, or the fixing of their compensation;

(d) the determination of rights that depend on the interpretation of a deed, will, contract or other instrument, or on the interpretation of a statute, order in council, regulation or municipal by-law or resolution;

(e) the declaration of an interest in or charge on land, including the nature and extent of the interest or charge or the boundaries of the land, or the settling of the priority of interests or charges;

(h) in respect of any matter where it is unlikely that there will be any material facts in dispute requiring a trial.

[34] These rules are procedural in nature. They do not create substantive rights. The applicants must still establish their standing to bring an application: see HSBC Bank Canada v. Capponi Estate, at para. 23.

[35] Rule 74 deals with non-contentious estates and has no application in this case. The applicants instead rely on Rule 75.04, which deals with contentious estates. It authorizes the court to revoke a certificate of appointment on the following terms:

75.04 On the application of any person appearing to have a financial interest in an estate, the court may revoke the certificate of appointment of estate trustee where the court is satisfied that,

(a) the certificate was issued in error or as a result of a fraud on the court;

(b) the appointment is no longer effective; or

(c) the certificate should be revoked for any other reason.

[36] How have the courts interpreted the term “financial interest” in the context of estate litigation?

[37] The trustee relies on HSBC for an interpretation of “financial interest”. The court in HSBC adopted the reasoning in the seminal case of Belz v. Mernick Estate (2000), 31 E.T.R. (2d) 27 (Ont. S.C.), which was decided after the Haley Committee recommended that the Surrogate Court Rules be incorporated into the Rules of Civil Procedure.

[38] In HSBC, the deceased had guaranteed the debts of two corporations to the bank. The bank then sued the estate, claiming judgment on the guarantees and seeking to replace the estate trustee under Rules 74 and 75.

[39] The court held that since HSBC had not obtained judgment on the guarantee, its interest had not crystallized. It therefore had no “financial interest” under Rules 74 or 75, as neither rule was intended to allow creditors to secure recovery of assets within an estate, or to secure assets of the deceased in advance of obtaining judgment. It dismissed the application.

[40] In Belz, a judgment was obtained against a residuary beneficiary under a will. The judgment creditor then sought directions from the court to determine the beneficiary’s entitlement under the will, invoking Rules 74 and 75.

[41] The scope, purpose, and limitations of Rules 74 and 75 were discussed in HSBC, at paras. 16 and 17, and the court adopted the observations of Madam Justice Haley in Belz as follows:

[16] Access to both Rule 74.15 and to Rule 75.06 [application or motion for directions by a person with a financial interest in an estate] is limited to persons either appearing to have or having a financial interest in the estate.

[17] Justice Haley went on to state further:

While it is true that the applicant as a judgment creditor may have a “financial interest” in the estate of Belle Mernick I think that interest can be more precisely expressed as an interest in the beneficial interest which Stephen Mernick has in the estate of Belle Mernick. It is a derivative interest arising out of the judgment debt but is not an interest in the estate in any sense similar to the “financial interest” referred to in Rule 75.06(1).

When one examines the structure of Rule 74 and 75 which pertain to estates one sees that Rule 74 is concerned with application for probate of wills and estate administration where there is no will and to that end provides for a person having, or appearing to have, a financial interest in an estate to, inter alia, oblige an executor to probate or renounce probate of a will, produce information about estate assets and to account. There is nothing which allows the court to interfere and make directions about the administration of the estate until there is a passing of accounts. Rule 75 is directed at attacks on the validity of a will or a probate document put forward as a last will. It does not deal with the administration of the estate by the estate trustee. The issues which are referred to under rule 75.06 relate to issue concerning the validity of the will and not to determination of financial interests under the will.

[42] Justice Haley warned of the “complexities, if not chaos” that would be introduced into estate procedures if judgment creditors had standing under Rules 74 and 75.

[43] The trend in case law has been to narrowly construe what constitutes a financial interest in an estate: see Magnotta, at para. 39; L.A.W. v. Children’s Aid Society of the District of Rainy River (2005), 254 D.L.R. (4th) 179 (Ont. S.C.).

[44] In Weidenfeld v. Parikh-Shah, 2016 ONSC 7330, 27 E.T.R. (4th) 155, at paras. 17 and 18, the court concluded that the term, “appears to have a financial interest in an estate … does not include persons who are creditors of estate beneficiaries or persons who have separate lawsuits against the estate.”

[45] At para. 20 of Weidenfeld, the court adopted the following quotation from p. 38 of MacDonnell Sheard and Hull Probate Practice, Fifth Edition:

Rule 75.06(2) requires that the application for directions and the motion for directions must be served on all persons appearing to have a financial interest in the estate or as the court directs…. It would seem that unless the court otherwise directs, “persons having a financial interest in the estate” would be those persons named as beneficiaries in the will in question and all previous wills and those entitled on an intestacy.

[46] In Polten & Associates v. Resch, 2015 ONSC 3930, 11 E.T.R. (4th) 254, at paras. 58–60, the court determined that, to meet the Rule 75 criteria of a financial interest, the applicant must have a financial interest that has “crystallized” and is not “contingent”. In Polten, the court concluded that the applicant’s interest had not crystallized because the applicants did not have a judgment against the deceased or his estate.

[47] At para. 42 of McKee v. Vlasiu, 2023 ONSC 3942, the court cites with approval the decision in Magnotta, in which Dietrich J. held:

[41] Rule 75 is not intended to be used by creditors to secure recovery of assets within an estate: Weidenfield, at para. 19. Granting creditors, who have a variety of means to enforce their rights against the estate of a deceased person, standing pursuant to Rule 75 introduces unnecessary complexity into estate procedures: Belz v. Mernick Estate, [2000] O.J. No. 542, at para. 16.

[48] The court in McKee concluded, at para. 46 of the decision, that:

Anyone who has a cause of action or a right to make a claim against another person is a creditor whether voluntarily or involuntarily so. For the purposes of Rule 75, the important distinction is that Ms. Vlasiu is not claiming as a person who has any rights under the will of the deceased or to share in the distribution of the estate according to the will. Ms. Vlasiu’s rights, if any, are as someone who might make claims against the estate whether for title to land that the estate claims to own or for money. That her claims have arisen involuntarily, even if true, is quite beside the point for the purposes of this proceeding and the assessment of a “financial interest” under Rule 75.01.

[49] The applicants submit that they are entitled to a financial interest in the estate’s ownership of the home property because:

a) they operate a “going concern” farm on the property that will be affected by the property’s disposition; b) they have claims for unjust enrichment, set-off, constructive or resulting trust, lien or other claims; and c) they are the logical purchasers of the home property.

[50] These are not financial interests of the applicants that have crystallized, as described in Polten. Rather, they are potential claims.

[51] The reasoning of the Superior Court over the last 24 years has been consistent in applying a narrow interpretation of who has “financial interest” in an estate, and who may apply to remove a trustee. This is for good reason. The courts have recognized that mixing claims of judgment creditors, or potential judgment creditors, with estate administration would produce chaos.

[52] The case at bar is a case in point: the applicants’ claims as non-beneficiaries against the estate trustee personally – such as for collection of costs ordered to be paid by the trustee personally, and for occupation rent – in addition to claims against the estate itself, have confused the administration of the estate and led to delay and acrimony. It is not an answer that the beneficiaries of the estate have tolerated the trustee’s delay in administering the estate and wasting its assets.

[53] I am not persuaded that the applicants have standing to remove the estate trustee as part of this application. In my view, they are judgment creditors, or potential judgment creditors, against the estate or its trustee, rather than beneficiaries as defined by the jurisprudence. In view of this conclusion, it is not necessary to deal with the applicants’ alternative arguments.

[54] The application to remove the estate trustee, revoking her certificate of appointment and appointing a new trustee, is therefore dismissed.

[55] However, this order does not preclude the applicants from pursuing alternate remedies pleaded in the application. The parties are ordered to arrange an early resolution conference to discuss the remaining claims. Costs of this application are reserved to the disposing judge.

“original signed by”

The Hon. Madam Justice H.M. Pierce

Released: October 24, 2024