COURT FILE NO.: CV-24-34128-00-ES DATE: 20241216 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ROGER EARL FRENCH and LYNETTE MARIE SHAW, Estate Trustees for the Estate of Ronald Louis French, deceased Applicants – and – PHILIP HOWARD FRENCH, ANITA MARIE OUELLETTE, VINCENT PAUL FRENCH, RHONDA LOUISE PURDY and JULIETTE ANNE DELMORE Respondents

Counsel: Owen Thomas, for the Applicants Nour Jomaa, for the Respondents

HEARD: December 10, 2024

RULING ON APPLICATION

Kalajdzic J.

[1] This is an application under s. 60 of the Trustee Act, RSO 1990, c. T-23 and rr. 14.05(3) and 75.06 of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 for the court’s advice and direction in connection with the sale of a family cottage bequeathed by Ronald French to his seven adult children. The Estate Trustees are two of the deceased’s children. The remaining five children are all beneficiaries of the Estate and the named Respondents in this application.

[2] In July 2024, the Estate Trustees determined that the cottage had to be sold to pay the debts of the Estate. Before listing the cottage for sale, they asked their siblings, the Respondents, if anyone wished to buy it. Two siblings, Philip French and Anita Ouellette, [1] expressed interest and subsequently made three identical offers to purchase well below the fair market value of the cottage. The Estate Trustees rejected those offers and listed the cottage on MLS. They ultimately negotiated a sale to an arm’s length purchaser for significantly more than Philip and Anita had offered to pay. When Philip and Anita learned of the accepted offer, they immediately made another formal offer to purchase, this time for $10,000 more than the arm’s length purchaser’s offer. The Estate Trustees fear litigation by both proposed buyers, and therefore seek direction from the court as to which offer they ought to accept.

[3] For the reasons that follow, I find that the offer to purchase made by Philip and Anita is the superior offer.

Background

[4] Ronald Louis French died on August 7, 2023. His wife predeceased him. Ronald died with a Will dated April 7, 2023.

[5] Ronald had seven adult children. He named his son, Roger Earl French, and his daughter, Lynette Marie Shaw, Estate Trustees. Roger and Lynette were appointed Estate Trustees by Certificate of Appointment dated March 1, 2024.

[6] Ronald divided his modest estate among his children as follows:

a. A cottage described as 85 Red Cedar Road, Temagami, Ontario was bequeathed to all seven children equally as tenants-in-common; and

b. The residue was bequeathed equally to Ronald’s four daughters.

[7] The Estate’s lawyer and accountant estimate the value of the estate before debts and expenses and not including the cottage to be $37,778. The debts of the estate are approximately $40,000, before taking into account capital gains tax on the cottage. As will be discussed further below, Philip and Anita dispute that any debts are owed by the Estate.

[8] Ronald inherited the cottage from his late mother in 1983. The cottage is located in Temagami, Ontario, which is approximately eight hours by car from Amherstburg, Ontario, where Ronald and his children have long resided. In 1994, Ronald designated the cottage as his primary residence for tax purposes.

[9] The estate accountant has prepared an opinion regarding the potential capital gains tax that might be payable on the cottage. If the Canada Revenue Agency (CRA) does not accept the primary residence designation of the cottage, the tax liability and penalties will be approximately $80,000. Even if CRA accepts the designation, there is still a tax liability of approximately $21,000 as not all of the capital gains are sheltered under the principal residence designation. Until the Estate seeks a clearance certificate, it will not know for certain whether CRA will issue a notice of reassessment.

[10] In July 2024, with the advice of the Estate lawyer, Roger and Lynette determined that there were insufficient assets to pay the liabilities of the Estate without a sale of the cottage. Accordingly, they obtained three letters of opinion from two realtors in Temagami which put the value of the cottage at either $435,000 or $450,000.

[11] On July 30, 2024, Roger and Lynette wrote to their siblings and advised of the three letters of opinion. They then asked that anyone interested in purchasing the cottage should let them know by August 6, 2024. The Respondents all received copies of the letters of opinion on August 8, 2024.

[12] Philip and Anita immediately expressed interest in buying the cottage. On August 30, 2024, they submitted an offer of $250,000, with conditions including financing and home inspection. The Estate Trustees counteroffered at $450,000, which offer was not accepted.

[13] On September 6, 2024, Philip and Anita submitted a second offer to purchase of $250,000. It was not accepted.

[14] On September 11, 2024, the Estate Trustees listed the cottage for sale on MLS at a list price of $450,000.

[15] Philip and Anita, through their real estate agent, submitted a third offer on September 13, 2024. This offer was also for $250,000 and included a number of other conditions, including that the “Seller [the Estate] agrees to winterize any and all buildings on the property, prior to completion” or “shall be responsible for any costs or expenses incurred by the Buyer if the property is not properly winterized”. The offer also contained a non-disclosure clause which prevented the Estate Trustees from disclosing any part of Philip and Anita’s offer. The Estate’s realtor rejected the offer.

[16] The Estate Trustees eventually received an offer to purchase from Filagro Gemignani through his numbered company 2586248 Ontario Inc (“258”). The offer was too low but after seven counteroffers, they arrived at an agreed sale price of $430,000. The Agreement of Purchase and Sale dated October 13, 2024 contained the following important condition: “The parties acknowledge that a Court Order is required in order to close the subject transaction. In the event that the Court Order is not received within the 30-day extension period, the Buyer shall have the opportunity to be released from this Agreement of Purchase and Sale and the deposit shall be returned to the Buyer in full without deduction.”

[17] On October 30, 2024, the Estate Trustees commenced this application for an order approving the sale of the cottage to 258, returnable on November 12, 2024, two days before the scheduled closing date.

[18] Upon receipt of the application, Philip and Anita submitted a revised offer to purchase the cottage. This offer, dated November 6, 2024, was without conditions and for $440,000, or $10,000 more than the accepted offer by 258.

[19] Philip and Anita filed a Responding Record on November 8, 2024, alleging that the Estate Trustees have not acted transparently or in good faith. They seek an order approving the sale of the cottage to them. They also seek orders for a full accounting of the Estate assets and liabilities and holding the proceeds of any sale in trust pending further court order.

[20] The application was adjourned to December 10, 2024 to permit cross-examinations and further material to be filed. In their supplementary application record and as confirmed by their counsel at the outset of the hearing, the Estate Trustees now seek advice and direction from the court, not an order approving the sale of the cottage to 258.

Issues

[21] The issues to be decided on this application are as follows:

a. What is the jurisdiction of the court to provide direction on the sale of an estate asset?

b. Do the Estate Trustees have the power to sell the cottage?

c. Have the Estate Trustees acted in good faith to sell the cottage?

d. Have the Estate Trustees acted fairly as between the beneficiaries and in their best interests?

e. If the answer to (c) and (d) is yes, should the court direct the Estate Trustees to complete the sale of the cottage to 258 or to Philip and Anita?

Law and Analysis

a. Jurisdiction

[22] An Estate Trustee may make an application under s. 60 of the Trustee Act and rule 14.05(3)(a), (d) and (f) of the Rules of Civil Procedure for approval of a sale as set out in an accepted agreement of purchase and sale when the sale agreement provides that it is conditional upon the Estate Trustee obtaining approval of the court: McKay Estate v Love (1992), 6 O.R. (3d) 511 (S.C.), aff’d (1992), 6 O.R. (3d) 519 (C.A.).

[23] Rule 14.05(3)(f) allows the estate trustees to apply to the court for approval of their decision to sell assets of the estate before their decision is acted upon, so that subsequent litigation can be avoided: McKay at 515.

[24] This court has previously heard and determined motions for directions brought by an estate trustee regarding a pending sale of an asset in respect of which the beneficiaries disagreed (see, for example, Brass v. Berkley Estate et al, 2020 ONSC 6615 and Eisenstein v. Joel, 2022 ONSC 4104).

[25] A court will generally not interfere with the management of an estate, make business decisions for the trustees or provide advice on a proposed sale, because that is the responsibility of the trustee. “It is not for the court to interject its opinion as to who is right, but only to look at bad faith or unfairness”: McKay at 513.

[26] As set out by the court in McKay, the Estate Trustees must satisfy the Court that:

a. it has the power to sell the property;

b. it has acted in good faith in its efforts to sell the property; and

c. it has acted fairly between the affected beneficiaries and in their best interests.

[27] If the estate trustees have the discretionary power to sell estate assets, and the evidence shows on balance that they have acted in good faith and fairly, then the court will not interfere in their decisions or business judgment.

b. Power to Sell the Cottage

[28] The deceased by his Will vested all of his property in the Estate Trustees in trust. He bequeathed the cottage to his seven adult children as joint tenants-in-common. The deceased in his Will obligated the Estate Trustees to first satisfy the estate’s liabilities.

[29] Section 6 of the Will further provides that the Estate Trustees have the following powers:

My Trustee may use his or her discretion in the realization of my Estate with power to my Trustee to sell, call in and convert into money any part of my Estate not consisting of money at such time or times, in such manner and upon such terms […] as he or she may think best …

[30] The language of s. 6 of the Will accords with s. 17 of the Trustee Act, which provides that a trustee with a power of sale can sell property on terms it thinks fit, without being answerable for any loss.

[31] Section 17 of the Estate Administration Act, R.S.O. 1990, c. E.22 further provides that property automatically vests in the personal representative, and the powers of sale conferred on them can be exercised for paying debts or distributing the estate among beneficiaries. Notably, the consent of the beneficiaries to effect the sale is not required unless the proceeds are for the purposes of distribution only.

[32] In a factum filed on the day of the hearing of the application, Philip and Anita raised for the first time that a sale of the cottage was premature because the estate had no debts and there remained approximately $7000 in cash in the Estate as of November 21, 2024. The prematurity argument was not made in the Responding Record. In his affidavit sworn November 8, 2024, Philip sought an order approving the sale to him and Anita, not an order that the cottage be transferred to the beneficiaries as joint tenants. Since August 2024, all of the siblings have proceeded on the basis that a sale was needed.

[33] The evidence establishes that the Estate will have further expenses to pay. Although Respondent’s counsel was dismissive of the Estate accountant’s letter regarding the capital gains tax, no competing evidence by a tax expert or accountant was offered. Until a clearance certificate is sought, the extent of the capital gains tax is not certain, but there is a minimum tax liability of $21,000. The cash on hand is insufficient to pay even this lower amount of capital gains tax.

[34] Moreover, counsel for the Estate Trustees stated that Roger and Lynette will be seeking trustee compensation, and there will continue to be legal fees payable to the Estate lawyer, if not also to litigation counsel. These are all debts of the Estate. By selling the cottage, the Estate Trustees have acted prudently to ensure the Estate can meet its liabilities.

[35] In any event, as counsel for the Respondents acknowledged, under the Partition Act, RSO 1990, c. P.4, a tenant in common may compel partition or sale. There is no evidence that the seven siblings intend to share the cottage, including its upkeep and expenses. Given the animosity that has sadly developed between the siblings, peaceful coexistence is unlikely. To defer the sale of the cottage is to delay the inevitable.

[36] I am satisfied that the Estate Trustees have the power to exercise their discretion to sell the cottage rather than retain it for a further period of time.

c. Good Faith Efforts to Sell the Cottage

[37] Roger and Lynette obtained three letters of opinion from two realtors before listing or negotiating the sale of the cottage. Two letters of opinion valued the property at $450,000 and the third recommended listing the property at $435,000 to attract the best selling price. Roger and Lynette gave the beneficiaries the opportunity to buy the cottage well in advance of listing it on MLS. The beneficiaries were given the letters of opinion. The cottage was listed for sale publicly only after Philip and Anita had made their offer of $250,000 and had rejected the counteroffer of $450,000.

[38] The Respondents knew that the cottage had been listed. Text messages between the seven siblings in September 2024 referred to the cottage being ‘listed’. Philip and Anita’s third offer of purchase and sale was made by their real estate agent in response to the MLS listing.

[39] While there is no evidence that the Estate Trustees immediately told the beneficiaries that the Estate had received and accepted the offer to purchase by 258, I am not persuaded that this conduct evidences bad faith. As Estate Trustees, they have the power and the responsibility to effect the sale. There were no pending offers to purchase by Philip and Anita at the time and there was no reason for the Estate Trustees to believe that any were forthcoming. In addition, s. 17 of the Estate Administration Act does not require the beneficiaries’ consent where the purpose of the sale is to satisfy the Estate’s debts and to make a distribution.

[40] Some of the Respondents criticize the Estate Trustees for not having gotten certified appraisals or allowing them access to the cottage so that they could commission their own appraisals. I find this criticism misplaced. By September 13, 2024, Philip and Anita had retained a real estate agent; he did not request a viewing.

[41] More importantly, there is nothing to suggest the arms’ length opinions of value were deficient. Indeed, 258’s offer to purchase the cottage for $430,000 is perhaps the best proof that the opinions of value accurately estimated the market value of the cottage. As observed by the court in Ballard Estate (Re) (1994), 20 O.R. (3d) 189 (S.C.), at para. 50, the traditional method of arriving at fair market value (of an asset in an estate) is to expose the asset for sale in the marketplace.

[42] The cottage was listed with an asking price of $450,000. The MLS listing was active for 49 days and attracted 3,968 views. The Estate Trustees and 258 exchanged seven counteroffers before the sale price of $430,000 was accepted. The accepted price is within range of the values in the three letters of opinion and clearly superior to the first three offers made by Philip and Anita.

[43] The Estate Trustees inserted in 258’s agreement of purchase and sale a requirement for court approval and promptly brought an application. There was no secrecy as the Respondents allege.

[44] Based on all of the evidence, I find that the Estate Trustees acted in good faith in their decision to sell, and in the manner in which they conducted the sale.

d. Have the Estate Trustees Acted Fairly?

[45] The Estate Trustees informed the Respondents that the cottage needed to be sold to pay the Estate’s debts and offered them the opportunity to buy it before listing it publicly. Their consistent objective was to sell the cottage at fair market value and distribute the proceeds equally among the beneficiaries, after the Estate’s debts had been paid.

[46] Philip and Anita’s allegations of unfairness stem from their distrust of Roger and Lynette. They allege that Roger and Lynette have not cooperated with the Respondents, have withheld information and failed to provide adequate disclosures. Two siblings, Rhonda and Juliette, share these concerns. Another sibling, Vincent, does not.

[47] The Estate Trustees did the following shortly after the death of their father:

a. They collected, took possession of and valued the Estate;

b. They retained counsel and sought tax advice from an accountant;

c. They created an avenue of communication with all beneficiaries by way of meetings and a family chat through text messaging;

d. They advised the beneficiaries that they had taken possession of the cottage and secured it;

e. Within two months of Ronald’s death, they advised the beneficiaries of the nature and value of the estate and provide a financial accounting of the value of the estate, with records dating back one year prior to death;

f. Five months after Ronald’s death, they advised the beneficiaries that the cottage will attract capital gains tax and that a sale of the cottage might become necessary;

g. They gave the beneficiaries the realtors’ letters of opinion and offered them the opportunity to purchase the cottage before listing it publicly;

h. They rejected the offers made by Philip and Anita which were for $250,000 and significantly below fair market value;

i. They listed the cottage on MLS and the listing was active for 49 days;

j. They received an offer from 258 and negotiated the sale price with multiple counteroffers for the sale of the cottage at fair market value;

k. They submitted 258’s offer for court approval;

l. Upon receiving Philip and Anita’s fourth offer at a price higher than 258’s offer, they sought the court’s opinion, advice and direction; and

m. They provided the beneficiaries a detailed accounting of money received and spent by the Estate.

[48] The steps taken by the Estate Trustees have been reasonable. Specifically as to the sale of the cottage, I find that they acted prudently and with a view to maximizing the sale price and thereby maximizing the distribution to each beneficiary.

[49] Had the Estate Trustees accepted Philip and Anita’s first three offers, the Estate would have been justifiably exposed to litigation by the remaining beneficiaries. A sale of the cottage for $250,000 would have been improvident. A sale of the cottage for $250,000 that also required the Estate to pay to winterize it and then to keep the offer secret from the other beneficiaries would have been an egregious violation of the Estate Trustees’ fiduciary duties.

[50] The Respondents are not satisfied with the pre-death financial disclosure provided by the Estate Trustees. For example, through their lawyer, Philip and Anita asked for Ronald’s monthly bank statements for two years prior to death. The Estate lawyer provided one year of such records but declined to provide the rest on the basis that there is no evidence anyone but Ronald controlled those bank accounts or that he lacked capacity at the time.

[51] It is unclear whether the Respondents claim these disputes around disclosure are proof of unfairness for the purposes of the test in McKay or evidence justifying an order under the Estates Act for a full accounting, or both.

[52] The financial disclosure dispute is not proof of unfairness. Rarely, if ever, will the court order an investigation into a competent testator’s private pre-death financial affairs without an evidentiary threshold that raises a “significant concern” that there has been some potential abuse that needs to be investigated further, and then, only after considering a testator’s privacy rights: see the discussions in Seepa v. Seepa, 2017 ONSC 5368, at para. 28; Robertson v. Harding, 2018 MBCA 67, at paras. 44 and 45; Tinline v. Tinline Estate, 2013 SKQB 167; Fair v. Campbell Estate (2002), 3 E.T.R. (3d) 67 (Ont. S.C.); and Gastle v. Gastle Estate, 2014 ONSC 7099, 6 E.T.R. (4th) 120.

[53] There is also no nexus between the pre-death financial disclosure dispute and the question of whether the Estate Trustees have treated the beneficiaries fairly in respect of the sale of the cottage. At best, the complaint may be that there should be more money in the estate and that it would be sufficient to pay the Estate’s debts, obviating the need to sell the cottage. If that is the theory, the Respondents did not meet their burden to establish an evidential basis of impropriety.

[54] I find no basis for concluding that the Estate Trustees have acted unfairly, let alone that they had violated their fiduciary duties.

e. The Court’s Advice and Direction

[55] Having found that the Estate Trustees have the power to sell the cottage, that they acted in good faith in listing and negotiating the offer with 258, and that they were fair as between the beneficiaries, I must now consider what opinion, advice or direction to give to the Estate regarding the sale of the cottage.

[56] Neither counsel could point me to a decision with a factual matrix similar to the one at bar.

[57] McKay involved an application by the trustee for court approval of the sale of certain property. The sale was supported by two of three residual beneficiaries of the estate, but opposed by the third. Steele J. ultimately approved the sale.

[58] The point of contention in McKay was that one beneficiary objected to the price negotiated by the estate trustees as too low. It was not a case, like the one at bar, involving competing offers to purchase where one offer was made by the objecting beneficiaries. This distinction is important insofar as I am being asked not only whether the sale to 258 has been conducted fairly and in the beneficiaries’ best interests, but also which of the competing offers should be accepted.

[59] In approving the sale of land in McKay, Steele J. said at p. 515: “The court should not look at whether or not the sale is the most advantageous sale. If it did so, it would be interjecting its view into the decision-making process. However, the court should look at the evidence before it to determine whether the sale is so improper that it infringes on the issue of good faith or fairness.” On appeal, the Court of Appeal confirmed that courts should generally not give an executor advice as to how to exercise their discretion respecting a proposed sale (at p. 519). However, given the impasse and the agreement of the parties that the Court should address the merits of the proposed sale, the Court of Appeal found that the sale price was the best that could be obtained.

[60] Having found that the Estate Trustees acted fairly and in good faith in listing the cottage for sale and accepting the 258 offer, I could order that the Estate may exercise its discretion to complete the sale to 258 or, if in its business judgment, the sale to Philip and Anita is the better offer, accept and complete it. In other words, I would heed the words of the Court of Appeal in McKay and “decline to intervene and give an executor advice as to how he should exercise his discretion respecting a proposed sale” (at 519).

[61] As was the case in McKay, however, I will, with some reservations, address the two offers to purchase on their merits. Since both 258 and Philip and Anita have intimated that litigation may flow from a decision to sell to one purchaser over the other, the Estate is correct to seek direction under s. 60 of the Trustee Act and r. 14.05(3) of the Rules of Civil Procedure in order to avoid subsequent litigation.

[62] The competing offers are virtually identical on their terms. Both are for cash and without conditions other than the requirement to get court approval. The only salient difference is that 258’s accepted offer is $430,000 while Philip and Anita have offered $440,000.

[63] Respondent’s counsel also submitted that the sale to his clients would be more in keeping with the deceased’s wishes that the cottage remain in the family.

[64] Although 258 had notice and its counsel attended the hearing of the application, he did not make submissions. Significantly, 258 did not take a position on the application and did not object to the sale to Philip and Anita. Had it done so, I might view the imminent risk of litigation against the estate by 258 as a consideration favouring the 258 purchase in light of the costs of litigation and the resulting depletion of the Estate’s assets. Not having contested the sale to Philip and Anita, 258 cannot reasonably complain after the fact, and certainly not in light of my conclusion that the Estate Trustees have acted fairly and in good faith.

[65] In the result, I find that the offer to purchase dated November 6, 2024 made by Philip and Anita is the better offer.

Other Relief Sought by Respondents

[66] In their Responding Record, Philip and Anita seek an order requiring a full accounting of the Estate.

[67] Rule 74.15(1)(h) of the Rules of Civil Procedure provides that any person who appears to have a financial interest in the estate may move for an order requiring an estate trustee to pass accounts.

[68] Although the Respondents have the right to apply for an order requiring the Estate Trustees to pass accounts, whether such an order should be made is a matter of discretion. In Widdifield on Executors and Trustees, 6th ed., at para. 14.2.2, it is stated that “the right to compel an accounting is not an absolute right regardless of the circumstances, but is within the sound discretion of the court.” (See also Gastle v. Gastle Estate at para 20.)

[69] Cause needs to be shown before ordering a passing of accounts. The principal basis for the request is that pre-financial disclosure of the deceased’s assets and expenses going back more than one year prior to death has not been provided. Based on the law cited in Seepa v Seepa, that is not a reasonable request and does not constitute cause for the purposes of an order for a full accounting. The disclosure made to date by the Estate Trustees and their advisors has been reasonable.

[70] Once the Estate has completed the sale of the cottage and obtained a clearance certificate, further disclosure will need to be made to the beneficiaries. If at that time the Respondents believe that disclosure has not been complete, they are free to bring a motion for an order under r. 74.15(1)(h).

Conclusion

[71] I find that the Estate Trustees have the power to sell the cottage and have acted in good faith in selling it in a manner that would treat the beneficiaries fairly. The Estate Trustees have asked for advice as to which offer to purchase to accept. Based on all of the circumstances, the Court’s advice is to accept the offer made by Philip and Anita on November 6, 2024. I decline to approve the sale to 258, and direct the Estate Trustees to accept the offer made by Philip and Anita.

[72] If the parties cannot agree on costs, they may submit cost outlines and brief submissions of no more than five pages by January 10, 2025.

Jasminka Kalajdzic Justice

Released: December 16, 2024

COURT FILE NO.: CV-24-34128-00-ES ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ROGER EARL FRENCH and LYNETTE MARIE SHAW, Estate Trustees for the Estate of Ronald Louis French, deceased And PHILIP HOWARD FRENCH, ANITA MARIE OUELLETTE, VINCENT PAUL FRENCH, RHONDA LOUISE PURDY and JULIETTE ANNE DELMORE Ruling on application Kalajdzic J.

Released: December 16, 2024

[1] I will refer to each Applicant and Respondent by their first names to avoid confusion with other parties having the same surname. No disrespect is intended.