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Mulholland v. BMO Trust Co- Succession Law Reform Act, Equitable Remedy

Mulholland v. BMO Trust Co- Succession Law Reform Act, Equitable Remedy

*Mulholland v. BMO Trust Co.2019 ONSC 5785

Civil procedure — Costs — Full indemnity — Substantial indemnity — Estoppel — Proprietary estoppel — Elements — Representation element — Reliance element — Detriment element —  Trusts and trustees — Trustees — Duties — Trusts and trustees — Trustees — Liability — Wills and estates — Dependants’ relief — Entitlement —Succession Law Reform Act, R.S.O. 1990, c. S.26.

The respondent and her husband had nine children. In 1983, one of the children left school due to health problems and returned to live with his parents on a horse farm property his father had recently purchased. The son began managing the daily workings of the farm and by 1996 had completed numerous betterment projects. The father died in 2007. His will created three trusts, one of which was a marital trust into which the trustees transferred the farm property. The respondent continued to live at the property, which had considerable maintenance costs that quickly depleted the funds of the marital trust. She refused to sell and in 2010 terminated the son’s employment and evicted him. He applied for equitable relief, claiming that he provided work and services for the farm for 27 years and instead of receiving a regular wage was promised by his father an ownership interest in the farm. He also claimed to be entitled as a disabled person to dependent support under the Succession Law Reform Act, to the return of personal property remaining at the farm, and damages against the estate trustees for negligence or breach of fiduciary duty. The estate trustees applied for directions as to whether their power to sell assets was restricted by the respondent’s right under the will to occupy the farm and whether they could borrow from the educational trust established by the will.

Held, the son’s application should be allowed in part; the trustees’ application should be allowed in part.

The son proved that he worked the property for years living on diminished wages pursuant to assurances from his father that he would receive a house and a parcel of land. He made out all the elements of proprietary estoppel and was granted a trust in respect of a one-third interest in the farm property.

The son would have qualified as a dependant but for his one-third interest in the farm property, so he was not entitled to any dependants’ relief.

The son was entitled to recover his personal effects from the property but had no remedy available for any losses in relation to such property occurring in the nine years since he moved out.

The claim against the estate trustees was dismissed as there was no evidence of the breach of fiduciary duty or negligence. The respondent’s eviction of the son was in her personal capacity and not binding on the trustees.

The estate trustees were not only authorized to sell the property but were required to take immediate steps to do so. The respondent had failed to satisfy a condition precedent in the will that she pay all charges incident to maintain the property, and as such she had lost her right to occupy. The right of the trustees to lend money between trusts was clear on the face of the will but the decision as to whether such a loan should be made and on what terms were for the trustees themselves to decide and not the court.

There was a substantial link between the testator’s actions and the need for litigation so the costs of the son, his mother and the Children’s Lawyer on behalf of the minor, unborn and unascertained beneficiaries were to be paid on a substantial indemnity basis. The costs of the estate trustees were to be paid on a complete indemnity basis.

WOODLEY J.: —

Overview

[1] Few proceedings are as complicated, contentious, or costly, as an estate dispute amongst family members. This proceeding is no exception.

[2] The within proceeding concerns two applications regarding the administration and distribution of the estate of William David Mulholland, the former president and chairman of the Bank of Montreal, who died on September 8, 2007, survived by his wife of over 50 years, Nancy Mulholland, and their nine children, including the Applicant James Mulholland.

[3] Despite the numerous parties cited in the title of proceedings — the only parties who Appeared were the Applicant James Mulholland (“James”), the respondent Estate Trustees BMO Trust Company and Maurice A. Hudon (the “Estate Trustees”), the respondent Nancy Mulholland (“Nancy”) and the Children’s Lawyer, on behalf of the minor, unborn and unascertained beneficiaries.

[4] The litigation primarily concerns a claim for equitable relief related to the Deceased’s 100-acre horse farm known as Windswept Farm (the “Property”). One application is commenced by James and the other is commenced by the Estate Trustees in response to James’ application seeking directions.

[5] By James’ application he seeks relief in equity regarding work and services provided to the Property for which he was not compensated. James alleges that he performed the services for the betterment of the Property pursuant to an agreement with the Deceased that he (James) would receive a home and a proprietary interest in the property. James asserts that he fulfilled his part of the agreement and believed that the agreement would be satisfied by the Deceased. However, three years following the Deceased’s death, James was summarily evicted from the Property by Nancy leaving him homeless and destitute.

[6] James seeks reparation for his losses, including: a declaration that he is a dependant of the Deceased and entitled to dependants’ support pursuant to the Succession Law Reform Act, R.S.O. 1990, c. S.26; equitable relief in the form of a declaration of trust relating to the ownership of the Property; return of his personal property left at the Property; and damages for breach of fiduciary duty and negligence.

[7] In response to James’ application and in response a financial crisis created by the continued occupation of the Property and the expenses arising therefrom — the Estate Trustees seek directions from the court.

Issues: James Mulholland’s Application (Court File No. 95681/16)

[8] The outstanding issues relating to James Mulholland’s application are as follows:

(1) Is James entitled to equitable relief including a declaration of trust relating to the Property or any part thereof?

(2) If the answer to 1 is yes, what part or percentage interest of the Property is held in trust for James and does the relief require that the Property be sold?

(3) Is James a dependant of the Deceased, William D. Mulholland, pursuant to Part V of the Succession Law Reform Act?

(4) If the answer to question 3 is yes, what is the quantum of dependant support to which James is entitled?

(5) Is James Mulholland entitled to the return of his personal property located at Windswept Farms?

(6) Did BMO Trust Company, Maurice Hudon and Nancy Mulholland in their capacity as Estate Trustees of the Estate of William D. Mulholland (the “Estate Trustees”) breach their fiduciary duties or engage in breach of trust or negligence in respect of administering the Estate, and specifically James Mulholland’s eviction without notice from the property municipally known as 14145 Eighth Line, R.R. 1, Georgetown, Ontario, Part Lot 31, Concession 9, Town of Halton Hills, Regional Municipality of Halton (“Windswept Farms” or “the farm”) on June 24, 2010, and by failing to provide him with assistance in the aftermath of this action? If the answer to question 6 is yes, what are the quantum of damages to which James Mulholland is entitled?

Facts and Analysis: James Mulholland’s Application (95681/16)

[9] The Deceased, William David Mulholland (the “Deceased”) was an executive and the former president, chief executive officer and chairman of the board of the Bank of Montreal (1975-1990).

[10] During his lifetime the Deceased was married to the respondent Nancy Mulholland (“Nancy”) for approximately 50 years and together they had nine children, including the Applicant James Andrew Mulholland (“James”) who is the third eldest child.

[11] The Deceased and his family resided in Montreal, Quebec until April 15, 1983, when the Deceased purchased a 100-acre farm located in Georgetown, Ontario, known as Windswept Farm (the “Property”).

[12] Upon purchase, the Property was registered solely in the Deceased’s name and was occupied by himself, his wife Nancy and their minor son Bruce (who was then eight).

[13] At the date of purchase in 1983, James was attending postsecondary school but suffering from health issues. In the fall of 1983, James left school and moved home to the Property.

[14] With the support, approval and encouragement of the Deceased, James became the farm manager at the Property while the Deceased continued to work full-time as an executive with the Bank of Montreal and commuted to Toronto throughout the week.

[15] From the fall of 1983 onwards, James resided at the Property with his parents and younger brother Bruce and ran the day to day operation of the farm vastly expanding the horse operation and buildings.

[16] According to James’ evidence which is supported by his brothers Bruce and David through sworn affidavits (and in part supported by his mother Nancy), in addition to the general farm management, James also completed the following betterment projects at the Property:

(1) designed and built a Quarantine Barn in 1986;

(2) designed and built a Farm Office (1,600 sq. ft.) in 1987;

(3) designed and built a Machinery Shed (1,248 sq. ft.) in 1987;

(4) designed and built a Broodmare Barn (8,448 sq. ft.) in 1988;

(5) designed and built a Lab and Breeding Facility (1,800 sq. ft.) in 1988;

(6) designed and built a Training Barn (6,192 sq. ft.) in 1989;

(7) designed and built a Second Farm Office in 1993;

(8) designed and built a Stable (1,664 sq. ft.) in 1994;

(9) designed and rebuilt a Stable (1,800 sq. ft.) in 1995; and

(10) designed and renovated an Arena (6,000 sq. ft.) in 1996.

[17] Fulsome details of James’ contributions to the betterment of the Property are found throughout the volumes of materials filed on the application, including materials contained in the Applicant’s Application Record, Book 1 of 2, Tab 2 (Sweat Equity Contributions 1983 – 2010), Tab 6 (Windswept Farm planning Maps), Exhibit 7 (Windswept Farm Building Permits), Tab 8 (Windswept Farm Virtual Model Imagery), Tab 9 (Photos and construction quotes) and Tab 10 (Equity Participation in Windswept Farm 1987 – 2010).

[18] James’ evidence is that he arrived on the farm in the fall of 1983 and began working to build the farm and infrastructure as directed by his father. James swore that his father did not pay him regular wages but instead promised James that he would receive an ownership interest in the farm that would include severance of a portion of the property (1.4 acres) and the building of a family home at no costs to James. James’ evidence relating to this agreement is supported by his brothers Bruce and David. Interestingly, Nancy does not specifically dispute that the Deceased made such promises to James. Instead Nancy swears that “she” never contemplated giving a lot to James and “to her knowledge” neither did the Deceased.

[19] James’ further evidence is that he (James) provided work and services to the betterment of the Property from 1983 to 2010 (for a period of 27 years). James asserted that his sweat equity built the Property into one of the largest Hanoverian Breeding Farms in North America.

[20] James’ evidence that he provided work and services for the betterment of the Property with the assurance that he would receive a proprietary interest in the Property is supported by his brothers Bruce and David. James’ evidence relating to the amount of work and services that he provided over the 27 years is also supported, in part, by his mother Nancy.

[21] James’ evidence is that he was wholly financially supported by his father from 1983 to the Deceased’s death in September 2007. However, that the level of support provided to him was close to poverty based on very minimum wages. James’ evidence is that the depressed wages were accepted by him as he was building a business with his father and it was agreed between them that James would receive a parcel of land and home built on the Property at his father’s expense.

[22] James’ claim is that he and his father were partners in a business venture and he (James) was not an employee. Support of James’ claim that he was involved in a family venture is found in the Deceased’s obituary published in the Montreal Gazette on September 10, 2007 that read “On his retirement Bill was able to realize a lifelong passion, working with his wife Nancy and his son James to build one of the premier Hanoverian stud farms in the world, Windswept Farm.”

[23] James also relies upon a letter written by the Deceased dated October 21, 2004, titled “My Involvement with Saddle Horses” that references 1984 as the “build out and ramping decade onward to 1994”. James notes that as his father was employed as the chairman of the Bank of Montreal until his retirement in 1990 the “build out and ramping” was executed by him (James) in conjunction with his father’s vision. Further as the Deceased suffered from Parkinson’s Disease, diagnosed in 1987, from a practical point of view, aside from being the visionary — the Deceased was not capable of the physical effort and demands to execute the “build out and ramping” required to build the farm. James’ evidence is that he was both willing and able to manage and execute his father’s vision and this is in fact what he did from 1983 to the date of his father’s death on September 8, 2007.

[24] James provided details of the Deceased’s promises and assurances that James would receive a 1.44-acre severed parcel of land on which he would build a house for James. James detailed how he and his father drew plans that included the location of the house that James was promised. These plans included details of the portion of the Property that was allocated to James. James provided evidence that the Deceased purchased and planted cedar trees for the purpose of separating James’ parcel from the rest of the Property. This parcel was later fenced off for James’ exclusive use. Severance was sought but refused by the Niagara Escarpment Commission. James provided numerous documents to support his claim including farm planning maps and associated photos which are found at Applicant’s Application Record (Book 1 of 2), Tab 6.

[25] By her affidavit Nancy agrees that there was (and remains) a fenced off area on the farm that she describes as “an identifiable parcel of land” that had been the site of the original farm house but denies that there were “any discussion about James becoming entitled to this parcel of land”. Nancy claims that “we had this parcel of land cleared and put fencing around the perimeter, as it was our intention to make the area around it into paddocks for our horses” but then notes that there were bushes on the parcel that would make the horses ill if they ate them — presumably these bushes are her explanation why the area was not used as a paddock. Nancy further claims that “at one time I explored the possibility of creating a separate lot” because “I thought it would increase the value of the farm to have a separately — owned lot and the lot would have been useful as property where we could house a farm manager”. This is an interesting statement given that James was the farm manager at the time Nancy made the enquiries.

[26] Nancy claims that she “never contemplated giving this lot to James”. Nancy also claims that she “did not promise or represent” to James that “we” were going to give him this parcel of land. Nancy does not specifically say that the Deceased did not promise or represent to James that he was being gifted the parcel — instead she says “nor to my knowledge” did the Deceased make such promises.

[27] James’ brother Bruce, by his affidavit sworn April 14, 2016, supports James’ evidence regarding the gifting of the 1.4-acre parcel of land with promised house. Bruce swore that in the late 1980s, the Deceased gifted James a 1.4-acre parcel of land that was separated from the rest of the farm by a planted privacy hedge and fencing. Bruce swore that the Deceased had given the lot to James for the contributions that he made to building and improving the farm since 1983. Bruce further swore that the Deceased had promised James that he (the Deceased) would build James a home on the 1.4-acre parcel. Bruce noted that James had “exclusive occupancy” of the fenced of 1.4-acre parcel for the next 20 years and James planted a tree nursery and fruit trees.

[28] James’ brother David, by his affidavit sworn August 4, 2016, specifically addresses Nancy’s allegations relating to the gift of the 1.4-acre parcel to James. David swears that Nancy’s version of events is “not in accordance with the facts as I know them”. David details that it was James who kept the garden patch in the 1.4-acre lot (not Nancy), confirms that James was always the farm manager and to his knowledge the only user of the 1.4-acre lot. David further swears that it is “news to him” that his mother Nancy would state that she had any authority to override the Deceased’s wishes and notes that the Deceased had a “well defined and consistently autocratic bent”.

[29] Having considered the evidence filed with respect to this issue I find that on balance that Nancy’s evidence that the lot and home would be for a farm manager other than James to be completely disconnected to the reality of James’ position on the farm at the time in question as verified by James, Bruce, David and the Deceased’s obituary.

[30] Further evidence that James was not an employee but part of a family business venture is also found in Nancy’s own press release issued on November 1, 2008. By this press release which was issued after the Estate Trustees terminated all employees of Windswept Farm, Nancy announced Windswept Farm will continue as Windswept Farm II and will “continue as a family owned business carried on by Nancy Mulholland, along with her son and daughter-in-law, James and Elke Mulholland”.

[31] James’ evidence is that following his father’s death his mother invited James and his two children to re-occupy the matrimonial home and share the home with her with the view that he would have full possession of the home on his mother’s passing as compensation for his work and services and as compensation for the promised “severed lot and constructed house” promised in the late 1980s but deferred due to severance issues.

[32] By her materials Nancy claims that James was fully compensated for his work and services. Nancy points to the fact that James submitted invoices to the Deceased who compensated him for his work. Nancy criticizes James for his failure to produce proper accounting and records of his invoices and asks that I make an adverse inference for James’ failure to produce these documents. I note for the record that Nancy is the party who had possession of all papers and documents relating to James’ invoices. These documents were retained at the Property following James’ eviction. To the extent that any adverse inference is to be drawn from failure to produce the documents, I would draw such adverse inference in favour of Nancy, however, not James.

[33] Having reviewed Nancy’s evidence filed on the application, I find on balance that I prefer and accept the version of events as presented by James and as supported by Bruce and David as being an accurate representation of the events that occurred relating to the promise to gift a parcel of property and a house to James in exchange for his work and services in preference to that as presented by Nancy.

[34] As for the payment received for his services, James’ evidence is that he was never paid by Windswept Farm for his work and services. Instead, he would invoice his father (personally) on a periodic basis for work that he performed. James swore that he would not invoice the actual value of the work or the actual time spent working but was directed to artificially deflate the cost of his services in exchange for receiving compensation through a transfer of a portion of the property to be severed and a house to be constructed at his father’s expense.

[35] James swore that his agreement with his father was later modified once it was determined that the requisite approval for severance of a portion of the Property could not be obtained. Instead, the Deceased discussed the possibility of building a house within the “farm cluster”.

[36] In or about 2005, James advised that his agreement was further modified by his father due to his father’s failing health. At that time James stated that it was agreed upon by his father and himself that he would receive the main residence at the Property upon Nancy’s passing.

[37] Support for James’ version of events is found in the affidavits filed by his brothers, the Deceased’s previous Will dated November 4, 1989, and the fact that James was not paid as an employee until he was hired by his mother for Windswept Farm II.

[38] A review of the estate accounts verifies that following the Deceased’s death — while other employees appeared on the “books” of Windswept Farm as employees and received regular wages — James did not. I accept James’ assertion that he was a family member working with his father towards a family joint venture. James was not just “an employee” nor did James receive adequate compensation for his work and services.

[39] Although the bulk of the invoices submitted by James remained at the Property and/or in the possession of Nancy or somewhere on the Property, James did provide evidence of his average earnings over the 24-year period was $1,050 per month or approximately $6.56 per hour for a 40-hour week. James’ evidence is that he earned on average $15,000 per year (based on a 40-hour week). However, James’ evidence was that he worked well in excess of a 40-hour work week and had he been adequately paid as skilled labour he would have been earned approximately $50,000 per year more than he was paid. Based on Statistics Canada skilled wage data (Supplementary Application Record, Exhibit 14), James estimates that he was paid approximately $1 million less than what would have otherwise been paid to an non-arm’s length skilled employee. In other words, without taking into account the value added to the Property and buildings as a result of his effort — James’ benefitted the Estate by contributing $1 million worth of unpaid skilled labour over a 24- to 27-year period.

[40] Nancy takes the position that James was fully compensated for the work and services provided by him. She notes that he received free room and board and that his family also lived on the property. Nancy further alleges that the ever-changing nature of the “equity” agreement proves that no real agreement was ever in place. Nancy asserts that James was fully compensated and there was no agreement that he would receive an equity interest in the property. For these reasons, Nancy states that James’ claim must fail. Nancy further claims that James has failed to furnish evidence to establish “unjust enrichment” to the Estate at his own expense and loss and is not entitled to rely upon a lower evidence threshold just because he is unrepresented.

[41] Having reviewed the evidence filed on this application — I reject Nancy’s position for the following reasons:

(1) James faithfully provided work and services to the betterment of the Property for a 27-year period in exchange for depressed wages and an interest in the Property;

(2) James fulfilled his part of the agreement and in fact dedicated his entire working life to the Property and its betterment;

(3) James’ contributions to the Property and buildings are extensively documented throughout the materials filed on the application and are supported by the sworn evidence of his siblings, Bruce and David, and are supported in part by Nancy herself;

(4) James not only contributed the entirety of his working life to the Property he also sacrificed any alternative mode of earning a living including his competitive advantage and future prospects in exchange for an interest in the Property;

(5) The Deceased’s stated intention was to compensate James through a home and a parcel (1.4 acres) built on the Property. This agreement is supported by both Bruce and David. Neither James nor the Deceased contemplated that James would receive only monetary compensation. It was the continued ownership of the Property by James that was not just the aim but the goal of both the Deceased and James;

(6) The Deceased executed a Will on November 4, 1989, only six years following James’ contributions to the Property, which provides a gift of the farm together with the sum of $500,000 to the “one child” who wishes to take over the farm management. It is undisputed that in 1989 the “one child” referenced by the Will could only refer to James. This interpretation is fully supported through reference to the affidavits filed by Bruce and David in support of Bruce’s application;

(7) The laws of equity do not require a specific agreement or specific intent to be in place in order to find a trust interest in a property; and Where there is an intent to benefit through conveying an interest in certain property and a party works in furtherance of that intent and agreement — equity honours the intent through proprietary estoppel.

[42] In the circumstances of this case, and based on the evidence filed on the balance of probabilities, I hereby find as follows:

(1) during the Deceased’s lifetime the Deceased assured James that James would receive a home and a proprietary interest in a portion of the farm property;

(2) although the specific “assurances” changed over the years due to land severance issues — James was always assured that he would receive a home and property of some nature on the farm in exchange for his work and services;

(3) James reasonably relied on the expectation that he would be provided with a home and obtain a proprietary interest in the property and continued to dedicate his work and services to the betterment of the Property;

(4) James reliance was reasonable in that he knew the Deceased was an honourable man, he trusted his father’s assurances, his father took steps to separate a portion of property on the farm (through the building of a cedar hedge and fence), his father took steps to investigate the severance, and when severance appeared unavailable his father provided an alternate assurance such that James would receive a home and property on the farm regardless (he was to reside in the main home following Nancy’s passing); and

(5) because of the detriment that James suffered as a result of the reliance, it would be unfair and unjust in the circumstances to permit the Deceased (and his Estate) to resile from his assurances and the equitable relief of proprietary estoppel provides a remedy for James.

[43] Proprietary estoppel arises when (1) a representation or assurance is made to the claimant, on the basis of which the claimant expects that he will enjoy some right or benefit over property; (2) the claimant relies on that expectation by doing or refraining from doing something, and his reliance is reasonable in all the circumstances; and (3) the claimant suffers a detriment as a result of his reasonable reliance, such that it would be unfair or unjust for the party responsible to go back on his word: see Cowper-Smith v. Morgan, [2017] 2 S.C.R. 754, [2017] S.C.J. No. 61 , at para. 15.

[44] The representation or assurance may be express or implied: see Cowper-Smith, supra, at para. 15.

[45] When the party responsible for the representation or assurance possesses an interest in the property sufficient to fulfill the claimant’s expectation, proprietary estoppel may give effect to the equity by making the representation or assurance binding: see Cowper-Smith, supra, at para. 15.

[46] Proprietary estoppel protects the equity, which in turn protects the claimant’s reasonable reliance. Like other estoppels, proprietary estoppel avoids the unfairness or injustice that would result to one party if the other were permitted to break their word and insist on their strict legal rights: see Cowper-Smith, supra, at para. 16.

[47] As Lord Denning M.R. noted in Amalgamated Investment & Property Co. (in Liquidation) v. Texas Commerce International Bank Ltd., [1982] Q.B. 84, [1981] 1 All E.R. 923 (C.A.), at p. 122 Q.B.:

“When the parties to a transaction proceed on the basis of an underlying assumption — either of fact or law — whether due to misrepresentation or mistake makes no difference — on which they have conducted the dealings between them — neither of them will be allowed to go back on that assumption when it would be unfair or unjust to allow him to do so. If one of them does seek to go back on it, the courts will give the other such remedy as the equity of the case demands.”

[48] Where the ingredients for a proprietary estoppel are present, the court must determine whether it is appropriate to satisfy the equity by recognizing the modification or creation of property rights “in situations where there is want of consideration or of writing”: Cowper-Smith, supra, at para. 17, quoting Anger & Honsberger Law of Real Property, 3rd ed. (looseleaf) (Toronto: Carswell, 2006), by A.W. La Forest, at p. 28-3.

[49] In the present case all of the elements of proprietary estoppel are made out. As such it is appropriate to satisfy the equity by recognizing the creation of property rights despite the “want of writing”. The doctrine of proprietary estoppel applies to the present situation and binds the Deceased (and his Estate) to his word. (See Cowper-Smith v. Morgan, supra.)

[50] Equity requires that the determination of James’ equitable interest in the Property subject to the claim of proprietary estoppel be fair and just. It is not necessary that such entitlement be calculated by experts and accountants. However, determination of the proprietary interest must be grounded in a review of the work and services provided and the assurances made.

[51] James toiled at the Property for 27 years living on diminished wages pursuant to assurances received from the Deceased that he would receive a house and parcel of land on the Property. James is entitled to receive that which was promised to him and is hereby granted a trust interest in the Property known as Windswept Farm as to a one-third interest in the Property determined by me as follows:

(1) James was promised a home and parcel on the Property. The size of the parcel was consistently held to be 1.44 acres.

(2) When it became apparent that the 1.44 acres could not be severed James was promised the residence on the property which necessarily would require a parcel of land to accompany the residence.

(3) While no appraisal is available for the 1.44 acres (with house to be built at the Deceased’s cost) appraisals relating to the property and the residence are available.

(4) On October 23, 2007, the Estate Trustees obtained an appraisal of the entire property (101.769 acres) and buildings from Moffatt Dunlap that valued the property at $2,300,000.

(5) On October 24, 2007, the Estate Trustees obtained an appraisal from S.W. Irvine that valued the entire property at $1,530,000 and valued the residence plus two acres at $860,000. This is the only appraisal obtained that values the house and two acres and presumably was obtained by the Estate Trustees in order to provide to CRA the value to be credited towards the Deceased’s principal residence exemption versus the value to be attributed to the (capital) gain that accrued between the 1983 purchase and the Deceased’s 2007 death (disposition date).

(6) On April 2, 2019, the Estate Trustee obtained an updated appraisal from S.W. Irvine that valued the property at $2,550,000 (but provided no breakdown value for the house and two acres).

[52] While it is possible that the value of the house and two acres has increased — it is also possible that the October 24, 2007 value was inflated to maximize the tax benefits that would accrue to the Estate. Considering these varying factors — and assuming the value of $860,000 for the house and two acres remains constant — the appropriate percentage for the promised proprietary interest equates to a current one-third proprietary interest in whole of the Property based on the current appraised value.

[53] If we look at James’ entitlement from the perspective of “unjust enrichment” the percentage interest due to him in the Property remains the same. Comparing the payments received for 27 years of work and service versus what James would be entitled to receive had he been fully compensated (based on the Stats Canada data provided) James was under-compensated by approximately $1 million over the 27-year period. If this amount is adjusted downward to reflect James’ receipt of the use of an apartment housed in an outbuilding on the farm or shared accommodations in the main house — and taking into account that his former spouse may have been entitled to housing as a result of her employment — the value of James’ loss remains at approximately $850,000 — $860,000 and equivalent to a one-third proprietary interest in the Property based on the current value of the property.

[54] In the end the result is the same.

[55] With respect to the issue of dependants’ relief — it is apparent from the evidence that James was dependant on the Deceased at his date of death. Since the Deceased’s death James’ health and finances have further deteriorated. At the date of hearing James had been determined to be permanently disabled and was receiving Ontario Disability Program Benefits. James’ dependency on the Deceased was caused in part, if not whole, by the Deceased’s actions. As a result, I would permit James’ application for dependants’ relief to proceed. However, I do not award any amount be paid to James on account of dependants’ relief for the following reasons:

(1) James is entitled to a one-third proprietary interest in the Property, and the Property is required to be sold to satisfy James’ entitlement. As a result of this ruling and James’ entitlement to a one-third interest in the Property and his right to receive one-third of the net sale proceeds arising from the sale, James is no longer dependant on the Estate; and

(2) had James not been entitled to a one-third proprietary interest in the Property and one-third the net sale proceeds arising therefrom — at the date his application was issued (2016) no Estate assets remained undistributed. As such no Estate assets remain available to pay any dependant claimant.

[56] With respect to the issue of James’ personal effects stored at the Property — James is entitled to receive and recover his personal effects and the Estate Trustees are required to provide James with an opportunity to access the property to gather and collect his property. However, given the length of time that has elapsed (2010 – 2019) there shall be no remedy available to James relating to any claim for losses of any such personal property.

[57] With respect to James’ claims for damages for breach of fiduciary duty and negligence, I find that BMO Trust Company and Maurice A. Hudon neither breached any duty owed to James nor were negligent in the administration of the estate as a result of James’ eviction and the events that followed. James was evicted by Nancy in her personal capacity and her actions were not binding on the Estate Trustees. James was not employed by the Estate at the date of the eviction and the Estate Trustees owed no fiduciary duty to him with respect to his occupation at the premises.

[58] As for allegations of breach of fiduciary duty and negligence against Nancy Mulholland, I find that when Nancy Mulholland evicted James from the premises she was acting in her personal capacity and not as Estate Trustee. The evidence establishes that the Estate did not employ James in 2010. Instead, James’ employment was with Windswept Farm II, owned solely by Nancy Mulholland. James employment was terminated by Nancy Mulholland in January of 2010 and subsequently evicted by Nancy in June of 2010. James’ claim relating to his dismissal and eviction would have been grounded in wrongful dismissal and subject to a limitation period. James did not commence his application until 2016 — and any limitation period relating to his dismissal and eviction had expired by the date of issuance his application.

A. Determination of Issues: James Mulholland’s Application (95681/16)

[59] For the reasons for decision contained herein, the outstanding issues relating to James Mulholland’s application are determined as follows:

(1) James is entitled to a declaration of trust over the property municipally known as 14145 Eight Line, R.R. 1, Georgetown, Ontario, Part Lot 31, Concession 9, Town of Halton Hills, Regional Municipality of Halton.

(2) James holds a one-third interest in the Property. As James’ right cannot be enjoyed without a remedy, and as there are no assets in the residuary Estate to pay out James’ interest to him, the Property must be sold.

(3) James is a dependant of the Deceased, William D. Mulholland, pursuant to Part V of the Succession Law Reform Act.

(4) James is not entitled to any quantum on account of dependant support as there were no undistributed assets in the estate at the date of the issuance of his application for support.

(5) James Mulholland is entitled to the return of his personal property remaining at Windswept Farms, but due to the passage of time is not entitled to damages for loss or damages suffered to the property.

(6) BMO Trust Company, Maurice Hudon and Nancy Mulholland in their capacity as Estate Trustees of the Estate of William D. Mulholland (the “Estate Trustees”) did not breach their fiduciary duties or engage in breach of trust or negligence in respect of administering the Estate, and specifically James Mulholland’s eviction without notice from the property municipally known as 14145 Eighth Line, R.R. 1, Georgetown, Ontario, Part Lot 31, Concession 9, Town of Halton Hills, Regional Municipality of Halton (“Windswept Farms” or the “farm”) on June 24, 2010, and by failing to provide him with assistance in the aftermath of this action.

(7) As no breaches or negligence was found relating to James’ eviction — no damages are payable. 

B. The Estate Trustees Application for Directions

Issues: Estate trustees’ application (court file no. 97664/16 ES)

[60] The outstanding issues relating to the Estate Trustees’ application are as follows:

(1) Are the powers of the Estate Trustees to “. . . sell, grant options with respect to, or dispose of, any property . . . on the terms that they may so determine”, granted pursuant to Article Seventh of the Last Will and Testament of William D. Mulholland dated August 1, 2007, (the “Will”) in particular under art. Seventh (B.) restricted by Nancy Mulholland’s right to “occupy any real property held in the [Marital] trust . . .” granted pursuant to art. Sixth (K.) of the Will?

(2) If the answer to 1 is in the affirmative, then may the Estate Trustees borrow from the child/grandchild trust established pursuant to art. Third (B.), which establishes the educational trust (the “Educational Trust”), such loan being secured by a mortgage against the Property on commercially reasonable terms, in light of the apparent conflict that would arise given that the Estate Trustees are trustees of both the Marital Trust and the Educational Trust?

(3) Directions regarding the determination of the Estate Trustees legal fees for estate administration.

Facts and analysis: Estate trustees’ application (95681/16)

[61] The Deceased, William David Mulholland (the “Deceased”) was an executive and the former President, Chief Executive Officer and Chairman of the Board of the Bank of Montreal (1975-1990).

[62] At the Deceased’s death on September 8, 2007, he left a Last Will and Testament dated August 1, 2007 (the “Will”).

[63] By the Will, BMO Trust Company, Maurice A. Hudon and Nancy Mulholland were names as Estate Trustees.

[64] The Estate Trustees were appointed pursuant to the Certificate of Appointment issued by the court on December 20, 2007. 

[65] In accordance with the Will, the Estate assets were distributed into three testamentary trusts as follows:

(1) the Marital Trust;

(2) the trust established for Josef Lewandowski;

(3) the Educational Trust established for the Deceased’s children and grandchildren.

[66] The Will directs that certain assets form the subject matter of the Marital Trust, including farm apparatus, equipment, implements, vehicles used in the farm business, machinery, supplies, crops and livestock (including horses) and gives the Trustees discretion as to other assets to be transferred to the trust with consideration to the applicable United States tax laws.

[67] Upon settlement of the Marital Trust, the Trustees transferred those assets directed to form part of the Marital Trust and also transferred the Deceased’s Property (Windswept Farm) into the Marital Trust.

[68] Outside of the benefits received by the Will — Nancy also received assets pursuant to beneficiary designations totaling approximately $4.7 million together with spousal pension benefits from the Deceased’s former employer.

[69] Following the Deceased’s death, Nancy continued to live at the Property and remained at the property at the hearing of this application in December of 2017.

[70] The expenses relating to Nancy’s continued residence at the Property were paid from funds held in the Marital Trust. However, as the maintenance, insurance and upkeep costs of the Property were considerable, the funds in the Marital Trust were quickly depleted.

[71] The Estate Trustees had expressed their concerns to Nancy over the diminishing funds in the Marital Trust since November 2015, including the expenses being incurred as a result of her continued residence at the Property. Despite the Trustees’ concerns Nancy refused to allow the Property to be sold.

[72] There is no residue remaining in the general Estate available to pay the debts of the Estate.

[73] As at April 11, 2019, the Estate held all of its assets in the Three Trusts which Trusts contained the following assets and liabilities:

(1) Marital Trust: $2,550,000 (being the value of the Property — which is now subject to a one-third proprietary interest owned by James Mulholland). The Marital Trust has an overdraft owing which exceeds $519,050.87 and property taxes owing which exceed $10,118.68;

(2) Lewandowski Trust: appears to have been fully distributed;

and

(3) Educational Trust: $1,321,137.70.

[74] At present there are no funds remaining in the Marital Trust to pay for any expenses relating to the Trust, including insurance, tax and maintenance costs for the property. Additionally, the Estate has invoices relating to the administration of the estate and the ongoing litigation that exceed $500,000, with no assets in the residuary estate available to pay the debts.

[75] The Marital Trust has gone into significant debt to pay the expenses of the Property. The ongoing expenses are diminishing the capital value of the Marital Trust’s two-thirds interest in the Property (Windswept Farm) held in the Trust.

[76] At the hearing of the Trustees’ application in December 2017, Nancy resided at the Property. However, the Estate Trustees have recently advised that they understood that Nancy had vacated the Property. On September 16, 2019, in response to the court’s query, counsel for Nancy advised that Nancy had purchased an alternative accommodation. Counsel did not, however, advise that Nancy had vacated the Property entirely. Nancy continues to resist the sale of the Property.

[77] Given the deficit that has evolved in the Marital Trust and the fact that there are no capital assets (other than the property) and income producing assets to provide funds to pay the ongoing expenses relating to the Property — it is apparent that the Property (Windswept Farm) held in the Marital Trust must be sold.

[78] The Trustees have asked for Directions with respect to the powers granted to them by the Will to determine if they are authorized to sell the Property.

[79] Having reviewed the terms of the Will, it is my view that the Trustees are not only authorized but are required to take immediate steps to sell the Property.

[80] Article SECOND of the Will establishes the Marital Trust.

[81] Pursuant to s. A. of art. SECOND, the Trustees are required to pay the entire net income to Nancy at least quarterly during her lifetime.

[82] Section B. of art. SECOND provides that the Trustees may distribute any part or all of the capital of the marital trust for health, maintenance or support in reasonable comfort as the Trustees determine in their sole discretion.

[83] This section (art. SECOND, s. B) answers James’ question as to whether Nancy is required to repay the Trust those amounts paid to her or on her behalf that exceeded the income earned in the trust. The answer is not necessarily. The Trustees are entitled to allow payment from the capital as the “Trustees determine in their sole discretion”. As is apparent — the answer to James’ question does not lie with the court as the court has no right to interfere in a decision that involves the Trustees’ discretion.

[84] Article SIXTH, s. I provides that if at any time the Trustees determine that it is uneconomic to continue any trust under this article, the Trustees may terminate the trust and distribute the trust assets, in the amounts and proportions that the Trustees may determine, to the person or persons to whom income may be distributed. No Trustee who is a person to whom income may be distributed may participate in any such decision to terminate a trust.

[85] Whether and to the extent that the Trustees may determine to exercise their discretion under this section lies with the Trustees and not with the court.

[86] Article SIXTH, Section art. K (upon which Nancy relies) provides:

If any residential real property or interest is held in the marital trust under Article. Second, the following provisions apply to that trust, notwithstanding anything in this Will to the contrary:

(1) My wife has the right to occupy any real property held in the trust rent-free, but while my wife is occupying the property rent-free, she must pay all charges incident to maintain the property that is customarily paid from the trust income;

(2) Subject to hereinbefore specifically provided, my Trustees must sell any real property held in the trust if so directed by my wife by a duly acknowledged instrument delivered to my Trustee; and

(3) On the sale of any real property held in the trust, my Trustees must reinvest any part or all the proceeds of sale in other real property for use by my wife as a residence, if so directed by my wife by a duly acknowledged instrument delivered to my Trustees.

[87] A quick review of the accounts of this Estate including the updated statement of assets and liabilities reveals that art. SIXTH, s. K, para. 1, has not been complied with by Nancy.

[88] Section K grants Nancy the right to occupy the real property subject to the condition that Nancy pays all charges incident to maintain the property that is customarily paid from the trust income. Not only has Nancy not paid the charges incident to maintaining the property thereby completely depleting the trust income — she has also incurred charges relating to the operation of her business that have required the Trustees to deplete the capital assets of the Trust through overdrawing the account.

[89] Nancy’s right to occupy the property is subject to a condition precedent that she pay all charges. Nancy has failed to satisfy the condition precedent and has breached the terms of her right to occupy.

[90] As Nancy has breached the terms of s. K — the Estate Trustees are entitled to sell the property pursuant to art. SEVENTH B. which provides as follows:

Except as this Will specifically provides otherwise, in addition to the powers conferred by law, my Executors and Trustees have complete discretion to exercise each of the following powers without authorization from any court, it being my intent that these powers be construed in the broadest possible manner:

B. To sell, grant options with respect to, or dispose of, any property real or personal, for cash or on credit, with or without security, on the terms that my Executors and Trustees may determine[.]

[91] With respect to the Trustees request to borrow funds from the Educational Fund to lend to the Marital Trust — I note that such a loan is contemplated within the terms of the Will at art. SEVENTH G. which provides as follows:

“To make loans from time to time, as my Trustees in their absolute discretion consider appropriate, of any part or all of any amount or fund held for a particular beneficiary or beneficiaries, or anyone or more of them, with or without interest, . . . and upon such terms as my Trustees in their absolute discretion consider appropriate.”

[92] The answer to this question is contained in the Will and is clear on the face of the Will. The Trustees have the right to lend money between trusts — however, the decision as to whether such a loan should be made and on what terms lies solely with the Trustees and is not a proper question to be answered by the court.

[93] Finally, with respect to the Trustees request for directions regarding the determination of the Estate Trustees legal fees for Estate administration — as noted by Nancy’s counsel this issue was not posed by the Trustees’ application. While I might otherwise consider the issue as part of the “such further and other matters” prayer for relief — it is not an issue that I am able to answer or provide directions. The answer to this question is entirely dependent upon the future decisions of the Trustees while exercising their powers and discretion: (i) during the sale, distribution and allocation of the net sale proceeds (one-third to James and two-thirds to be determined by the Trustees); and (ii) during the preparation of the estate accounts and allocation of payments as capital payments, income payments and/or loan advances. There are too many variables and the directions sought are too hypothetical for the court to answer. Determination of issues: Estate trustees’ application (court file no. 97664/16 ES)

[94] The outstanding issues relating to the Estate Trustees’ application are determined as follows:

(1) As Nancy’s rights to occupy the property pursuant to art. SIXTH (K.) are subject to a condition precedent that she failed to satisfy, the powers of the Estate Trustees to “. . . sell, grant options with respect to, or dispose of, any property . . . on the terms that they may so determine”, granted pursuant to art. Seventh of the Last Will and Testament of William D. Mulholland dated August 1, 2007, (the “Will”) are NOT restricted by art. SIXTH (K.) of the Will.2

(2) The Will speaks clearly about the Trustees ability to loan funds. However, the question as to whether and in what manner the Trustees should loan funds is an exercise of discretion that belongs solely to the Trustees and is not within the purview of the court.

(3) The court is unable to provide directions regarding the determination of the payment of the Estate Trustees’ legal fees for estate administration except as any such legal fees relate to these proceedings. The answer to this question is dependent upon accounting and allocation decisions to be made by the Trustees in the exercise of their discretion under the Will. The question is otherwise too hypothetical.

Costs

[95] The issues raised in the within applications fall squarely with the public policy considerations as described in McDougald Estate v. Gooderham, [2005] O.J. No. 2432, 17 E.T.R. (3d) 36 (C.A.). It is my view that the testator is at “fault” in causing or contributing to the proceedings and both applications were reasonably necessary in the circumstances. 

[96] In considering the question of the fault of the testator I find that there is a substantial link between the testator’s actions and the actual need for litigation. This includes but is not limited to the testator’s failure to compensate James for his work and services as promised, the circumstances surrounding the execution of the Will, and the extraordinarily complicated and inherently conflicting provisions relating to the administration of the Estate and Trusts contained within the Will. (See Macdonell, Sheard and Hull on Probate Practice, 5th ed., by Ian M. Hull and Suzana Popovic- Montag (Toronto: Carswell, 2016), Ch. 25 “Costs”, pp. 579-93.)

[97] For these reasons the costs of James Mulholland, Nancy Mulholland and the Children’s Lawyer, shall be paid on a substantial indemnity basis and the Estate Trustees’ costs shall be paid on a complete indemnity basis, as agreed and failing agreement after assessment thereof.

[98] As there are no assets in the residuary Estate available to pay costs — the subject matter of these applications being the net proceeds of the Marital Trust’s two-thirds interest in the Property shall form the fund to pay the costs of the proceedings.

Applications allowed in part.

*source: Ontario Reports

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