Genova v. Giroday

 

William Genova, Chantal Genova, Bruno Genova and Cecile Ewaskiw, Applicants and E. Philip Giroday, Respondent

 

Ontario Superior Court of Justice

 

Greer J.

 

Heard: July 5, 2000

Judgment: September 13, 2000

Docket: 99-CV-163784

 

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Counsel: Howard W. Reininger, for Applicants, other than Cecile Ewaskiw.

 

L. Keown, for Cecile Ewaskiw.

 

Diana Jubb, for Chantal and Bruno Genova.

 

Sean Dewart, for Respondent.

 

Subject: Estates and Trusts

 

Trusts and trustees — Nature of trustee’s office — Removal of trustee

 

Deceased named his accountant as trustee of estate — One part of estate to be paid to deceased’s wife — One part of estate to be paid to deceased’s son and upon son’s death, son’s children — Son wished to become trustee and to wind up trust — Son signed release and waiver of life interest in estate — At behest of son, all sui juris beneficiaries applied to substitute trustee with son — Application dismissed — Trustee had done nothing to warrant his removal — Irrelevant that all sui juris beneficiaries agreed that trustee should follow their directions — Trustees may be removed but may not be substituted — Children’s lawyer not served on behalf of unascertained and unborn children — Arrangement between sui juris beneficiaries did not take into account interests of unascertained and unborn children — Effect of release was to extinguish son’s right to income from trust — Release could not be revoked — Deceased did not wish son to be trustee of estate.

 

Trusts and trustees — Powers and duties of trustees — Duties

 

Deceased named his accountant as trustee of estate — One part of estate to be paid to deceased’s wife — One part of estate to be paid to deceased’s son and upon son’s death, son’s children — Son wished to become trustee and to wind up trust — Son signed release and waiver of life interest in estate — At behest of son, all sui juris beneficiaries applied to substitute trustee with son — Application dismissed — Trustee had done nothing to warrant his removal — Irrelevant that all sui juris beneficiaries agreed that trustee should follow their directions — Trustees may be removed but may not be substituted — Children’s lawyer not served on behalf of unascertained and unborn children — Arrangement between sui juris beneficiaries did not take into account interests of unascertained and unborn children — Effect of release was to extinguish son’s right to income from trust — Release could not be revoked — Deceased did not wish son to be trustee of estate.

 

Estates — Legacies and devises — Vested or contingent gifts — Nature of interest — Contingent interests (conditions precedent)

 

Deceased named his accountant as trustee of estate — One part of estate to be paid to deceased’s wife — One part of estate to be paid to deceased’s son and upon son’s death, son’s children — Son wished to become trustee and to wind up trust — Son signed release and waiver of life interest in estate — At behest of son, all sui juris beneficiaries applied to substitute trustee with son — Application dismissed — Trustee had done nothing to warrant his removal — Irrelevant that all sui juris beneficiaries agreed that trustee should follow their directions — Trustees may be removed but may not be substituted — Children’s lawyer not served on behalf of unascertained and unborn children — Arrangement between sui juris beneficiaries did not take into account interests of unascertained and unborn children — Effect of release was to extinguish son’s right to income from trust — Release could not be revoked — Deceased did not wish son to be trustee of estate.

 

Cases considered by Greer J.:

 

Brannan v. British Columbia (Public Trustee) (1990), 37 E.T.R. 209 (B.C. S.C.) — applied

 

Kist Estate, Re, [1993] 8 W.W.R. 107, 114 Sask. R. 53 (Sask. Surr. Ct.) — applied

 

McGavin v. National Trust Co. (1998), 158 D.L.R. (4th) 364, 22 E.T.R. (2d) 36, 106 B.C.A.C. 199, 172 W.A.C. 199, 49 B.C.L.R. (3d) 253 (B.C. C.A.) — referred to

 

Statutes considered:

 

Income Tax Act, R.S.C. 1985, c. 1 (5th Supp.)

 

s. 248(9) “disclaimer” — referred to

 

s. 248(9) “release or surrender” — referred to

 

APPLICATION by beneficiaries to substitute trustee of deceased’s estate.

 

Greer J.:

 

1        Joseph Genova (“the deceased”) died on or about January 22, 1999 leaving, surviving him, his second wife Cecile (“Cecile”) to whom he had been married for 5 years, and one child, William Genova (“William”). William has two adult children who are also litigants in this proceeding, Chantal Genova, age 27 years, (“Chantal”) and Bruno Genova, age 29 years, (“Bruno”), neither of whom has children. The deceased’s Will is dated August 6, 1997. In that Will, the deceased names his Accountant, E. Philip F. Giroday (“Giroday”), as his Estate Trustee. He then directs his Estate Trustee to deliver his personal belongings and household furnishings to his wife, and to divide the residue of his estate into two equal parts. One such equal part is to be paid to Cecile, if she survives her husband by 10 days, with the other such equal part to be held in trust for the benefit of the deceased’s son, William, on the following trusts:

 

If my son, WILLIAM GENOVA, shall survive for (sic) period of ten days, TO INVEST AND KEEP INVESTE the remaining such equal share of the residue of my estate, and TO PAY the net income therefrom, together with such amount or amounts out of the capital of such share of the residue as my Trustees shall deem necessary or advisable, to my son, WILLIAM GENOVA, during his lifetime. It is my wish however, without imposing any legal obligation on my Trustees, that the power to encroach hereinafter be exercised in such manner and to the extent that my son, WILLIAM GENOVA, shall enjoy a standard of living comparable with that which he enjoyed during my lifetime.

 

On William’s death, the capital of his trust is to be divided into as many equal parts as William has children, with one such equal part to be held for such child until he or she attains the age of 21 years. If such child dies before attaining the said age or is not alive at William’s death, that part is to be divided in equal shares among his or her children then alive, on the same trusts. As I have already noted, William had two adult children and their unborn and unascertained children or children in being, have a contingent interest in the capital of William’s trust.

 

2        The only real asset of the estate was the matrimonial home, which has now been sold. It had been subject to a reverse mortgage, so that the equity in it was rapidly depleting. The house sale closed on December 10, 1999, for a price of $330,000. The mortgage, however, was $226,269.86. After all other debts attaching to the house were paid, there was a net balance payable to the estate in the amount of $72,117.95. Under the provisions of the Will, this balance was to be divided into the two equal parts as stipulated under the Will.

 

The Application

 

3        William was not happy about his father’s Will and the trust which was set up under it for William’s benefit. He, instead, wanted to act as Estate Trustee in the place of Giroday, the person so named by his late father. Further, he wanted to wind-up the trust, without having given any thought to the interests of the unborn and unascertained children of his two children who also had a contingent capital interests in the trust. William, his two children Chantal and Bruno, and Cecile therefore moved on February 12, 1999, by Application, asking the Court for the following relief:

 

a) An order substituting William Genova as Estate Trustee for the Estate of Joseph Genova instead of and in place of the Respondent.

 

b) An Order requiring the delivery of the original Last Will and Testament to the Applicants.

 

The Application states in the grounds in support of it, that it is being brought on because of the refusal of the Executor to follow the direction of all the beneficiaries to do what they wanted, as set out in the Application. When it came time for the Application to be heard, all Applicants ended up being represented by separate counsel.

 

4        The Application, however, is fraught with problems, including the fact that the style of cause is incorrect. The Application should not be in Giroday’s name personally, but in his name in his capacity as the Estate Trustee named in the Will. Secondly, the Children’s Lawyer was not served on behalf of the unborn and unascertained beneficiaries. Further, one cannot move to “substitute” a person for the named Estate Trustee in the Will. The Application must be to remove the Estate Trustee or to accept his or her resignation. It is only then, that a Court will replace that person. Finally, the grounds set out for the removal are not grounds on which an Estate Trustee will be removed by the Court. It matters not that all of the beneficiaries who are sui juris agree to the removal.

 

My Endorsement on the Record

 

5        At the end of the Application, I endorsed on the Record that the Application was dismissed for written reasons to be delivered. Counsel then agreed to certain steps to be followed on the dismissal and I endorsed those terms on the Record as follows:

 

The parties have agreed to the following:

 

(1) Philip Giroday remains the Estate Trustee for purposes of administration & distribution as the parties have agreed. Mr. Keown’s firm shall forthwith pay to Mr. Giroday, as Trustee the monies held in trust to the credit of the Estate together with accrued interest.

 

(2) Mr. Giroday, from the Estate funds shall pay the following amounts:

 

(a) Turner & Porter funeral account of $6,752.42 plus interest from May 31/2000

 

(b) Revenue Canada-personal income taxes owing of deceased — $3,368.36 plus interest from Nov. 18/99

 

(c) Giroday & Giroday (C.A.)-$107 for preparation of 1996 personal tax return of deceased

 

(d) Humber Hospital — $45 for ambulance charge.

 

(3) Mr. Giroday shall prepare all additional tax returns required for the deceased and the Estate to determine what additional tax liabilities are owing & shall attempt to have any stale-dated cheques owing to the estate, replaced.

 

(4) The parties are agreeable, after the Final Income Tax Clearance Certificates are received for the deceased & for the Estate, and whatever legal costs & Trustee’s compensation are awarded by the Court, to be paid out of the estate, that the balance then remaining be paid out:

 

(a) 50% to Cecile, the widow

 

(b) 40% to be divided equally between Chantal and Bruno Genova (William Genova having released his interest in the Estate)

 

(c) 10% to be paid to the Accountant of the Superior Court of Justice to the credit of the Estate, to be held until the death of William Genova, to the credit of the unborn children and unascertained issue pursuant to the terms of paragraph 3(d)(ii) of the deceased’s Will dated August 6, 1997.

 

The issue of Costs and Trustee’s Compensation will be dealt with in my written Reasons. The Children’s Lawyer has waived her right to Costs, given the small value of the Estate.

 

Facts Presented on the Application

 

6        It is the position of William, Chantal and Bruno, (and by Cecile under pressure from them), that Giroday should not administer the estate. I have no confidence that if this were to happen, that the estate would be properly administered. The Applicants were simply unaware that anyone, other than themselves, had a legal interest in the estate. The Children’s Lawyer was brought in by counsel for Giroday. William, without giving any thought to the legal and tax consequences, signed what his counsel said was a “release of his interest” in the estate. The Children’s Lawyer properly pointed out to that counsel that if a life interest is to be released in an estate, a Variation of Trusts Application must be brought on to determine the legal effect on the estate. There was no intention on the part of the Applicants to do so. They got together and reached a settlement among themselves, which did not take into account the interest of the contingent unborn and unascertained beneficiaries, and the terms of which they refused to reveal to the others. William then tried to get them to agree that the account of Kilvington Brothers for supplying the tombstone for the deceased’s first wife (William’s mother), should be paid out of the estate. It was not a debt of the deceased, as William had signed the agreement for its purchase. William is therefore legally responsible for the payments to be made on account of the tombstone.

 

7        On January 28, 2000, counsel for William, Chantal and Bruno wrote to the other counsel and said:

 

…William Genova, will be signing a release of his life interest in the Estate to Chantal and Bruno Genova, as a result of which there is no need for any further participation by the Office of the Children’s Lawyer in this matter.

 

Nothing counsel wrote could have been more legally incorrect than that statement. Firstly, a life tenant who signs a “release” or a “disclaimer” of a life interest cannot simply choose who is to receive the benefit of the release or disclaimer. Secondly, to say the Children’s Lawyer would no longer have a right to participate in the matter is simply ignoring the terms of the Will. Further, when the “release” was finally filed with the Court at my request at the hearing of the Application, it states that William “waives and releases” his interest in the estate. Black’s Law Dictionary, 4th ed., states that a “disclaimer” is the refusal or rejection of an estate, which relieves a beneficiary of the trust. It states that a “release” is a relinquishment of some right or benefit to a person who has already some interest in the tenement. A “waiver” is the intentional or voluntary relinquishment of a known right. S248(9) of the Income tax Act makes this clear where it defines both the term “disclaimer” and “release or surrender”. Each makes it clear that neither a disclaimer nor a release can be “made in favour of any person”. When such a document is signed, the terms of the Will in question continue to govern the administration. Therefore, the release and waiver signed by William only served to relieve him of his interest in the estate. It did not distinguish the other terms of the Will. Therefore, Chantal and Bruno were still in the position of having to somehow extinguish the rights of the unborn and unascertained. The release simply serves to extinguish William’s right, and the income from his trust would accumulate in the trust. Now, of course, that William has so released his interest in the trust, he cannot revoke that release and waiver.

 

8        It is clear that what should have taken place was a Variation of Trusts Application whereby the beneficiaries who are sui juris and the Children’s Lawyer, on behalf of the unborn and unascertained who have rights under the Will, agree to a variation to effectively wind-up the estate on terms. One of those terms is to arrange to have some part of the trust capital paid into Court to the credit of those beneficiaries who are not sui juris. This is effectively what happened when all of the parties reached an agreement after I dismissed the Application.

 

Analysis

 

9        Although the Applicants sought the removal of Giroday as Estate Trustee on the grounds that he failed to follow the beneficiaries’ direction, there were no facts or case law, which supported their position. Giroday had done nothing in his capacity as the Estate Trustee to given them cause to remove him. The correspondence among counsel filed with the Court indicates that Giroday was more than co-operative in trying to settle the matter. It was, however, the stubborn refusal of William and his children to believe what was being told to them by counsel for Giroday and the Children’s Lawyer, which forced the Application on. In a letter of November 16, 1998 from Giroday’s counsel to the counsel representing other parties, he said:

 

I am instructed that the deceased was apparently very anxious that Mr. Giroday should act as estate trustee, and reposed trust and confidence in Mr. Giroday for this purpose, precisely because he foresaw a situation such as that which has presented itself.

 

This is confirmed by the facts, which Giroday sets out in his Affidavit sworn March 9, 1999, filed in opposition to the Application. Paragraph 5, in particular, points out the deceased’s concerns about a dispute arising between William and Cecile and that he could trust neither to act fairly and responsibility insofar as the other was concerned. Therefore, the deceased did not want his son to act, despite what he and other contingent beneficiaries thought. I am satisfied that Cecile only went along with the Application because of the issue which arose between her and William regarding the proceeds from an insurance policy, the full facts of which are not before me and have nothing to do with this Application.

 

10        Giroday was agreeable to renouncing as Estate Trustee, if an order was made by the Court declaring that the Applicant shall be jointly and severally liable to indemnify him in full for his solicitor and client costs. In addition he sought an Order that William be ordered to post security if he was to replace Giroday, and that all creditors would be paid in full. There are other terms, as set out in Part IV of the Respondent’s Factum, which would attach to the removal Order sought if Giroday was to renounce. In any event, this appears to have been unacceptable to William.

 

11        The Children’s Lawyer tried to show the Applicants’ that their position was wrong at law, and that a Variation of Trusts Application was the appropriate route to take. I am satisfied that the law on this issue is as is set out in Kist Estate, Re, [1993] 8 W.W.R. 107 (Sask. Surr. Ct.). The Variation of Trusts Act in Saskatchewan rebuts the principle of acceleration that operated in Re Brannan; Brannan v. British Columbia (Public Trustee) (1990), 37 E.T.R. 209 (B.C. S.C.), whereby a husband lost his life interest in his late wife’s estate if he remarried. By waiving his interest, the principle of acceleration applied, but this is quite different from the case at bar where death operates to terminate the trust. In Kist Estate, supra, it is pointed out the remarriage clause in Brannan was significant in determining the deceased’s intentions as to when she wished the three sons to take, which was firstly if he remarried, and if he did not, on his death. If the deceased, in that instance, had not wanted the sons to take immediately if their father remarried, she could have directed that the capital remain in trust until some other event as set out in the Will, occurred. At the conclusion of Kist Estate , the Court said:

 

The common law must give way to the statutory provision. A disclaimer is possible, but even if there is a valid disclaimer resulting in acceleration it must still be shown that a benefit will accrue to the infants with a contingent interest if the approval of the court is to be granted and the contingent interest determined.

 

See also: McGavin v. National Trust Co. (1998), 49 B.C.L.R. (3d) 253 (B.C. C.A.), where the interest of the life tenant could be determined not only by death but by remarriage. In that instance, the life tenant had the unilateral ability to end her interest in the estate and thereby determine for whose benefit the residue would pass.

 

Costs

 

12        The Costs which have been accumulated by the parties in this matter are considerable. Counsel made submissions on the issue of Costs after they agreed on the distribution as I have noted in my earlier endorsement on the Record. The Children’s Lawyer has kindly agreed to ask for no costs, given the small value of the estate after the payment of debts. On the other hand, it was the Children’s Lawyer who protected the rights of those unborn and unascertained beneficiaries, that the beneficiaries in being chose to ignore.

 

13        I am satisfied that the Estate Trustee is entitled to all of his costs on a solicitor/client basis, to be paid by the Applicants William, Bruno and Chantal, personally and both jointly and severally by them. The Applicants should have quickly realized, when the Children’s Lawyer was brought in, that their position was untenable. They did not and must bear the consequences of their position. Those Costs total $21,234.32 inclusive of disbursements and GST, including the legal bill of Giroday’s wife, who is a solicitor, and was acting in general as the estate solicitor. I fix those Costs at $19,500 inclusive of disbursements and GST. I am not prepared to award $2,000 for the appearance before me on the day the Application was heard. In addition, I am of the view that there was some duplication of effort on counsel’s behalf when he changed law firms while the litigation was on-going. Given the small value of the estate, after the mortgage was deducted, and despite all of the time expended by Giroday, I award him $6,000 in compensation for his role as the Estate Trustee, plus GST.

 

14        It is the position of Cecile that most of her legal fees should be borne out of the trust, rather than out of her own portion of the residue of the estate. She believes that she has been unwillingly dragged into the litigation since 1998 and was prepared to settle the matter on the basis of what I would have ordered. Cecile’s costs are estimated at approximately $18,000 but she is prepared to accept just those costs which relate to the period October 1998, when the Children’s Lawyer became involved, to today. These she says are $8,966. The other Applicants oppose having any of Cecile’s costs paid out of the residue of the Estate since I am told that she entered into an Agreement respecting the costs of the proceedings and this was dealt with in the settlement between her and William. I am unsure if this settlement also was entered into by Bruno and Chantal, as it was never tendered to the Court. In my view, however, whatever the settlement was, it in no way relates to these proceedings. The proceeding before me was an Application which included Cecile as one of the Applicants. Even though I have not ordered her to pay any of the Estate Trustee’s costs, I am of the view that she must pay her own costs personally, and I so order her to do so. Cecile should have taken a neutral position in the Application and done nothing. She had no personal interest in the trust set up for William’s benefit and should not have been a part of the Application.

 

15        William, Bruno and Chantal shall all bear their own legal costs personally. The position taken by William throughout the proceedings was untenable, right down to his insistence that the Kilvington Brothers account for his late mother’s tombstone was a debt of his father’s estate. William knew that the account was in his name personally, and if he had wanted to dispose of it, could have claimed it as his debt when he declared or was petitioned into bankruptcy several years ago. I am told by counsel that this debt was not listed by William in his bankruptcy and that he continued to make the payments on it. Bruno and Chantal took the position that they would take the corpus of their father’s trust when he signed the release. Had they simply read the terms of the deceased’s Will, they would have known otherwise. They shall therefore bear their own costs.

 

16        Orders to go accordingly.

 

Application dismissed.