McDonald Estate, 2012 ABQB 704

Court of Queen ’ s Bench of Alberta Citation: McDonald Estate, 2012 ABQB 704 Date: 20121116 Docket: ES01 094868, ES01 101320 Registry: Calgary In the Matter of the Estate of Albert Woodrow McDonald (a.k.a. Ab McDonald) And In the Matter of the Estate of Phyllis Florence McDonald Editorial Notice: On behalf of the Government of Alberta personal data identifiers have been removed from this unofficial electronic version of the judgment. _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice M. David Gates _______________________________________________________ I.

Introduction [ 1 ] The Applicant Michael McDonald ("the Applicant McDonald") and the Respondent Joan Gusa were the co-executors of the estates of both of their parents, Albert Woodrow McDonald ("Mr. McDonald"), and Phyllis Florence McDonald ("Mrs. McDonald"). They were also co-trustees of trusts established in both wills for the benefit of their sister, Arlene Mackintosh ("the Mackintosh Trusts"). [ 2 ] This is an application brought by the Applicant McDonald to determine whether the Respondent should be removed as one of the co-executors of the estates of Mr. and Mrs.

McDonald; whether the Applicant Cheryl Elizabeth Mackintosh ( “ the Applicant Mackintosh ” ) should be appointed as a trustee for the Mackintosh Trusts; and to determine an appropriate sanction for a previous finding of contempt made by Lutz J. relative to the Respondent. In addition, the Respondent applied to pass her accounts for the period during which she acted as trustee for her sister, Arlene Mackintosh ( “ Mrs. Mackintosh ” ), a represented adult. Finally, costs of these applications are also at issue.

[ 3 ] This matter has a lengthy history, having been the subject of at least 14 previous Orders of this Court. To the date of the hearing of this matter, none of those Orders had been appealed. The matter has been under case management by Mahoney J. since May 2011. [ 4 ] These applications were heard on October 17 and 18, 2010 as special applications and continued on November 18, 2010. At the conclusion of the hearing, I directed that the Respondent be discharged as co-executor of the estates of Mr. and Mrs.

McDonald and as co-trustee of the Mackintosh Trusts and that the Applicant Mackintosh be appointed as co-trustee of the Mackintosh Trusts with the Applicant McDonald, with written reasons on this issue and the other issues raised in these applications to follow. II. Background [ 5 ] As noted above, the Applicant McDonald and the Respondent were the co-executors of their parents' estates. Mr. McDonald died on December 17, 2002. Mrs. McDonald died on November 26, 2006. A Grant of Probate was issued by the Court of Queen's Bench for the estate of Mr.

McDonald on March 4, 2003 confirming the terms of his Last Will and Testament dated April 23, 2002. A Grant of Probate was issued by the Court of Queen's Bench for the estate of Mrs. McDonald on February 5, 2007, confirming the terms of her Last Will and Testament dated April 23, 2002. The residuary beneficiaries named in both Wills are their three children, the Respondent, the Applicant McDonald and Mrs. Mackintosh. The Respondent and the Applicant McDonald are each entitled to their equal one-third share outright and Mrs.

Mackintosh's equal one-third share is to be held in trust for her lifetime according to the following provision set forth in s. 6(d)(

i) of Mr. McDonald ’ s Will and s. 6(h)(

i) of Mrs. McDonald ’ s Will: To hold and keep invested one (1) of such equal parts for the benefit of my daughter, ARLENE PHYLLIS MACKINTOSH, and to pay or apply the net income derived therefore to or for her during her lifetime. Upon the death of the survivor of my said spouse, my said daughter and me, to divide such part among her children then alive in equal shares, or failing such children, among her issue then living in equal shares per stirpes; or failing such issue, between my issue then living, in equal shares." [ 6 ] Mrs.

Mackintosh, who was aged 69 at the time of this hearing, suffers from paranoia and schizophrenia. Mrs. McDonald acted as trustee for Mrs. Mackintosh pursuant to the Dependent Adults Act , RSA 2000, c. D-11, as amended. By Order of Coutu J. dated December 12, 2005, Mrs. McDonald was discharged as Mrs. Mackintosh ’ s trustee and the Respondent was appointed trustee in her place. This continued until September 23, 2010, when the Respondent was discharged as trustee by Order of Romaine J. and replaced by the Applicant McDonald and the Applicant Mackintosh (together, "the Applicants").

The Applicant Mackintosh is the daughter of Mrs. Mackintosh. [ 7 ] Thus, there exists here a sort of “ layering ” of trusts. Mrs. Mackintosh is the beneficiary of the Mackintosh Trusts during her lifetime. She is also subject to trusteeship pursuant to the Dependent Adults Act and the Orders referred to above. I will refer to Mrs.

Mackintosh ’ s assets that are under administration pursuant to the Dependent Adults Act and to the above Orders as the “ DAA Estate ” to distinguish them from the assets of the Mackintosh Trusts. [ 8 ] The Respondent served the Applicants on February 6, 2010 with an Application for a Review of Trusteeship Order and Application to Pass Accounts. A Notice of Objection was filed by the Applicants on February 11, 2010, citing three grounds:

a) The Respondent failed to provide Mrs. Mackintosh with sufficient funds to cover her ongoing expenses and her proper support;

b) The Respondent failed to cause the house owned by Mrs. Mackintosh and located at Silvercreek Close (the "Silvercreek Close Property") to be rented, thereby causing Mrs. Mackintosh to suffer an ongoing loss of income; and

c) The absence of information and ongoing concerns related to the accounting provided by the Respondent as Mrs. Mackintosh's trustee.

[ 9 ] On March 8, 2010, Sisson J. granted an Order that, inter alia , the Respondent ’ s Application to Review the Trusteeship Order and Pass Accounts be adjourned to a Special Application. As a result of subsequent developments and adjournments, Mahoney J. was appointed Case Management Judge in May 2011. As a result of five Case Management Hearings and Orders, the matter came before me by way of this Special Application. [ 10 ] The Case Management Orders of Mahoney J. of September 8 and 26, 2011 fixed the agenda for this Special Application as follows: Monday, October 17 a.

The Respondent's application to pass the accounts and whether an adverse inference should be drawn against her with respect to same for her failure to deliver documents and responses to undertakings; b. The determination of a sanction for the previous finding of contempt by Lutz J.; and c. Costs. Tuesday, October 18 a. Determination of the Dependants ’ Relief Act claims of Mrs. Macintosh, including:

i) whether Mrs. Mackintosh is a “ dependant ” as defined in the Dependants ’ Relief Act , RSA 2000, c. D-10.5; ii) whether the Mackintosh Trusts should be varied to permit encroachments on capital; iii) whether the Respondent should be replaced by the Applicant Mackintosh as trustee of the Mackintosh Trust; b. Proposal to complete the administration of the Estates of Mrs. McDonald and Mr. McDonald, including:

i) the application to remove the Respondent as one of the co-executors of the Estates. [ 11 ] The Dependants ’ Relief Act matters (para. a(

i) and (ii), above) were not opposed and, as such, were to be addressed by the Case Management Judge as a separate matter. I note that both the Dependent Adults Act and the Dependants ’ Relief Act have now been superseded by new legislation; however, those are the statutes that were in force at the times relevant to this application and will be referred to herein. [ 12 ] It will be most expeditious to deal with the remaining matters in the order set out above. III. The Passing of the Dependent Adult Accounts

[ 13 ] As noted above, the Respondent was appointed trustee for Mrs. Mackintosh under the Dependent Adults Act by Order of Coutu J. on December 12, 2005 and discharged as trustee by Order of Romaine J. dated September 23, 2010. Therefore, the period for which the Respondent sought to pass accounts pursuant to the Dependent Adults Act is January 1, 2005 to September 23, 2010. [ 14 ] As the Respondent ’ s written submissions in respect of this passing of accounts are brief, it will be convenient to set them out in toto . Her brief states as follows: 19.

It is respectfully submitted that the DA Trust accounts for the period January 1, 2005 to September 23, 2010 should be passed based upon the application filed in February, 2010 and based upon the affidavit of Joan Gusa, affirmed October 4, 2011. 20. In the alternative, despite the order that the hearing of the passing of accounts is pre-emptory, this matter should be adjourned to another date. The matter is not ready to be properly adjudicated. Ms. Gusa now has legal counsel who can assist her with this process. In the context of an incomplete record, and under the circumstances, any adverse decision against Ms.

Gusa regarding the passing of accounts is unfair and unjust. [ 15 ] With respect to the latter point, Mr. Holloway, counsel for Ms. Gusa in respect of the Dependent Adult matter, indicated at the hearing that he was not proceeding with the request for an adjournment. Therefore, I did not need to consider it. However, I will say in passing that I would not have been prepared to adjourn this matter any further. The evidence before me, including the various Case Management Orders made by Mahoney J., made it clear that Ms. Gusa was aware of her obligation to pass her accounts.

More than a year had elapsed between the end of her trusteeship and the date of this Special Application. It is true that there had been issues regarding Ms. Gusa ’ s retention of counsel and, indeed, that issue had to be canvassed in some detail at the start of this proceeding. I am not insensitive to the difficulties experienced by counsel who are retained very shortly before a hearing. Nevertheless, I was satisfied that the record before the Court was sufficient to allow the accounts to be addressed and I would not, as previously stated, have allowed Ms.

Gusa ’ s decisions regarding the retention and discharge of counsel to postpone the matter further. [ 16 ] Turning to the accounts themselves, the Applicants raise several concerns that fall into two broad categories. They assert that these concerns justify an order requiring the Respondent to reimburse the DAA Estate for certain amounts, as discussed below. They ask that the accounts be passed, subject to such an order. A. Allegations of Mismanagement [ 17 ] The first category of the Applicants ’ concerns pertains to the Respondent ’ s alleged mismanagement of the DAA Estate.

In their brief, the Applicants itemize the following concerns respecting the Respondent ’ s accounts: (

a) While acting as trustee, [the Respondent] failed to rent the Silvercreek Close Property which caused financial losses to the DAA Estate. Furthermore, funds from the DAA Estate paid for house check-in services, yard maintenance and snow-removal services which expenses would not have been necessary if such house was properly rented; (

b) Failing to pursue the insurance claim following the water and mould damage at the Silvercreek Close Property; (

c) Allowing [the Respondent ’ s] son, Chris Gusa, to stay at the Silvercreek Close Property without charging him proper rent or utilities; (

d) Failing to provide Mrs. Mackintosh with sufficient funds for the necessities of life, including money for food, clothing and basic living expenses. As a result, Mrs. Mackintosh was under severe mental strain and she felt it necessary to obtain additional funds by using credit cards she obtained and also she applied for jobs, as well as social assistance in November of 2008;

(

e) Directing that Mrs. Mackintosh ’ s mail be re-directed to a post-office box in 2008, without her knowledge or that of her guardians, the Applicants, for a six month period when Mrs. Mackintosh was only hospitalized for a six week period that year; (

f) Failing to agree to have funds released to Mrs. Mackintosh in 2010 from the family ’ s investment holding company, McWest Investments Ltd., so that there would be funds to pay for her ongoing expenses and outstanding debts. Further, providing inaccurate information to banks about the authority to approve McWest Investment Ltd. payments which caused delays in banking transactions and additional legal costs to access funds for Mrs. Mackintosh from McWest Investments Ltd.; (

g) Failing to provide Mrs. Mackintosh with support of $750.00 per month as was provided for in the Order dated March 8, 2010; (

h) Failing to comply with Sisson J. ’ s Order dated March 8, 2010 and listing the Silvercreek Close Property for sale without the prior written agreement of Mrs. Mackintosh ’ s guardians, [the Applicants], or Mrs. Mackintosh. [ 18 ] The Applicants seek an Order requiring the Respondent to reimburse the DAA Estate for losses suffered as a result of these failings and rely upon s. 54 of the Dependent Adults Act which, at the relevant time, provided as follows: 54(1) The Court, on passing the accounts of a trustee, on review of a trusteeship order or during an application to remove a trustee, may (

a) inquire into and adjudicate on a complaint or claim by an interested person of misconduct, neglect or default on the part of the trustee, and (

b) order that the trustee reimburse the estate to the extent of the loss suffered.

(2) The Court may order the trial of an issue of a complaint or claim under subsection (1) and may make all necessary directions with respect to it. [ 19 ] Clearly, not all of the concerns enumerated above could lead to reimbursement. For instance, there is no suggestion that there was any pecuniary loss to Mrs. Mackintosh as a result of the redirected mail. Most of the items in respect of which the Applicants seek reimbursement pertain to the Silvercreek Close Property. They seek reimbursement in the amount of $60,538.35, broken down as follows: (

a) Lost rental income for the Silvercreek Close Property of $995.00 per month for the period July 2006 - September 2010 (excepting June - August 2007, when Chris Gusa was living there), totalling $47,760.00; (

b) Costs for Enmax utility bills during the vacancy period, totalling $3,139.00; (

c) Costs for Direct Energy energy bills during the vacancy period, totalling $5,659.00; (

d) Costs for house check-in services paid to Pet Au Pair, totalling $3,008.00; (

e) Costs for yard and snow maintenance totalling $861.00; (

f) Costs associated with the Respondent having changed the locks on the Silvercreek Close Property after she was discharged as trustee, totalling $111.35.

[ 20 ] The Respondent ’ s position is that the Silvercreek Close Property was unrentable during her trusteeship as a result of water damage, mould and furnace problems that rendered it unsafe. When questioned as to why she would permit her son to live there if the house were unsafe, she responded that it was her son who discovered the problems. The Respondent also asserts that there were not sufficient funds in the DAA Estate to allow the necessary repairs to be made. [ 21 ] I find the Respondent ’ s arguments unconvincing in several respects.

First, if her son discovered the problems with the Silvercreek Close Property during his residence there, that would indicate that those problems were unknown prior to June 2007. But it is common ground that the house was vacant from July 2006. Why was it not rented at that time? The Respondent ’ s explanation fails to address this. [ 22 ] Further, the Respondent asserts that the Silvercreek Close Property could not be brought into rentable condition because there were insufficient funds available in the DAA Estate.

But as co-executor of her parents ’ estates and co-trustee of the Mackintosh Trusts, the Respondent was well aware that Mrs. Mackintosh is the beneficiary of significant assets. She could, and should, have made arrangements to have funds from the Mackintosh Trusts made available to complete the repairs. There is nothing in the evidence to indicate that her co-executor and co-trustee, the Applicant McDonald, did anything to preclude the Respondent from taking this step.

Indeed, there is no evidence that the Respondent made any attempt to draw upon the assets of the Mackintosh Trusts to deal with the damage to the Silvercreek Close Property. [ 23 ] Finally, the Respondent ’ s assertion that she did not rent the Silvercreek Close Property because it was unsafe is inconsistent with her responses at her December 21, 2010 cross-examination on affidavit. Those responses include the following: ... it ’ s not a wise thing to do with somebody ’ s house to bring in renters because it ’ s impossible to get them out. They can do a lot of damage.

And I ’ m not wise with dependent adult ’ s estate. Better to simplify. Better to keep everything simple rather than complicate things with insurance. To rent a house, especially with a management company you really don ’ t make a lot of money and the liability is huge. ... My choice as trustee was to not rent the house because of liability. [ 24 ] I find it significant that the Applicants, upon being appointed trustees for Mrs.

Mackintosh on September 23, 2010, were able to access the necessary funds and to have the necessary repairs completed in time to rent the Silvercreek Close Property effective December 1, 2010. It is also noteworthy, in my view, that the evidence of the Applicants is that the repairs cost approximately $7,500, a rather modest sum in the context of home repair. [ 25 ] Counsel for the Respondent argues that not effecting the repairs and renting the house was a matter of judgment and that a trustee is not to be held liable for errors in judgment made in good faith.

While there is some merit to this argument, I am of the view that it cannot be used to justify the Respondent ’ s inaction in this instance. If effecting the necessary repairs had involved significantly greater cost, the Respondent might have been justified in deciding that the Silvercreek Close Property was not worth such an investment. However, that was not the case. Trustees are obliged to act a in a reasonable and prudent fashion in managing the assets of beneficiaries.

It was neither reasonable nor prudent to allow a valuable, potentially revenue-generating asset to sit idle for some four years for the sake of a modest amount of repair. [ 26 ] Counsel for the Respondent also argues that the Respondent had no motive for doing what she did and derived no personal benefit from her failure to rent the Silvercreek Close Property. In my view, even assuming it to be the case, this is not relevant to the issues under consideration.

While it is clear that a trustee may not derive personal benefit from trust property, it does not follow that any dereliction of the trustee ’ s duty may be excused if there is no personal benefit from it. [ 27 ] In the result, I am satisfied that, to use the language of s. 54 of the Dependent Adults Act , the DAA Estate suffered a loss due to the neglect or default, if not misconduct, of the Respondent.

Accordingly, I am prepared to order that the Respondent reimburse the DAA Estate for that loss. [ 28 ] With respect to quantum , the evidence before me indicates that the Silvercreek Close Property is rented for $1,000.00 per

month. Therefore, the Applicants ’ claim for lost rental income of $995.00 per month is reasonable. The Applicants are not claiming lost rental income for the period during which Chris Gusa lived in the Silvercreek Close Property; that issue is addressed infra . Therefore, the Respondent must reimburse the DAA Estate for lost rental income for the period July 2006 - September 2010 (excepting June - August 2007), being 48 months at $995.00 per month for a total of $47,760.00. [ 29 ] The Applicants also claim costs for utilities during the vacancy period, being $3,139.00 for Enmax and $5,659.00 for Direct Energy.

However, I have been unable to find evidence that these costs ought to have been paid by the tenant of the Silvercreek Close Property. For instance, the Applicant McDonald ’ s Affidavit dated October 11, 2011 states only that “ we found a tenant who moved in on December 1, 2010, and pays $1,000 in rent per month ” without reference to who pays the utilities. While I have no doubt that tenants of rental properties sometimes pay the cost of utilities on top of their rent, there is no evidence before me to indicate that such is always the case or that it is so here.

In the absence of evidence to indicate that these costs would have been paid by a tenant had the house been rented, I decline to order reimbursement for them. [ 30 ] Next, the Applicants claim reimbursement for $3,008.00 paid to Pet Au Pair for house-check services. I agree that, had the Silvercreek Close Property been rented, such services would not have been necessary. The Respondent will be required to reimburse those costs as well. [ 31 ] However, with respect to the Applicants ’ claim for the cost of yard and snow maintenance in the amount of $861.00, I have the same difficulty as with the utility costs.

I do not have evidence before me that such tasks are the responsibility of the tenant of the Silvercreek Close Property and I cannot conclude that it must necessarily be the case. Therefore, I decline to order reimbursement of this amount. [ 32 ] I am satisfied, however, that the Respondent ’ s having changed the locks on the Silvercreek Close Property after she was discharged as Mrs.

Mackintosh ’ s trustee, resulted in a cost of $111.35 which ought not to have been incurred and which she will be obliged to reimburse. [ 33 ] Therefore, I conclude that the Respondent must reimburse the DAA Estate in the amount of $50,879.35. [ 34 ] There was considerable discussion at the hearing as to the Respondent ’ s personal financial situation. Her counsel contends that she is a person of limited means and that payment of the various amounts claimed against her would be a hardship.

However, the Applicants rightly point out that the Respondent will be entitled to considerable funds once the administration of her parents ’ estates is complete and funds are distributed. The Applicants suggest that the hardship to the Respondent could be alleviated by having payment of any amounts assessed against her come from those funds. I agree that this provides a practical solution that ensures proper reimbursement to the DAA Estate without unduly impoverishing the Respondent. However, as I am anxious that there be no hardship to Mrs.

Mackintosh in the near term, I order that the amount of this reimbursement be paid forthwith from the estates of Mr. and/or Mrs. McDonald, with that amount to be deducted from the share of the Respondent upon final distribution. B. Adverse Inference [ 35 ] The Applicants also argue that numerous questions remain unanswered in respect of the Respondent ’ s accounts. They assert that the Respondent failed to answer undertakings and to answer questions arising from questioning, notwithstanding five separate Case Management Orders requiring her to do so.

Their position is that the following information in respect of the accounts is missing or otherwise incomplete: (

a) Was the cheque #253 from [the Respondent] to Mrs. Mackintosh dated 01/02/2006 in the amount of $700.00 marked void and if so why? (

b) Undertaking 8, Estate Account Entry #500 - provide the Affordable Locks Invoice that was paid by cash on or around December 12, 2008.

(

c) Why were locks on the Galbraith Residence changed on the following dates? (

i) On or about November 8, 2006 - Affordable Locks Invoice #4615, November 8, 2006 - $77.38; (ii) On or about June 28, 2008 - Affordable Locks Invoice #009919/149, June 28, 2008 - $126.00; (iii) On or about December 6, 2008 - Affordable Locks Invoice #004397, December 6, 2008 - $94.50; and (iv) On or about December 12, 2008. (

d) Regarding the water damage that occurred at the Silvercreek Close Property on or about June 15, 2007; (

i) Provide all correspondence from and to ING after July 3, 2007, related to ING claim #[...]5790; (ii) What work was completed at Silvercreek Close Property to repair the water damage and provide copies of all documentation related to such repairs; (iii) In total, how much was spent in fixing the water damage; and (iv) How much was received from ING as compensation for the water damage? (

e) Undertakings 17 and 18 - no response provided: (

i) Undertaking 17: Advise when Chris Gusa and Torie Ougton lived in the Silvercreek Close Property; (ii) Undertaking 18: Provide all documentation with respect to Gil Management for the line entries 283, 295, and 316. (

f) Regarding the $4,500.00 deposit into the Scotiabank Account #[...] on June 27, 2007, who paid this amount and what was it for? (

g) Undertaking 22 - no response provided - Provide the property assessment evaluation from TR Moore and Associates. (

h) Undertakings 26 and 27 - no response provided: (

i) Undertaking 26: Provide copies of all the letters sent to credit card companies with respect to your request for information; (ii) Undertaking 27: Provide all of the records with respect to negotiations with the credit card companies as to which credit cards were paid off.

(

i) To provide Mrs. Mackintosh ’ s SIN card and birth certificate and any other identification cards; (

j) To provide a photocopy of the Respondent ’ s current driver ’ s license as requested by Larry Henderson of TD Canada Trust to set up the bank account for McWest Investments Ltd.; (

k) To provide a written report outlining the location of all of Mrs. McDonald ’ s jewellery and to deliver to Borden Ladner Gervais LLP the emerald ring (and band), diamond ring and opal ring that were located in a closet in a briefcase for Cheryl Mackintosh and Susan Mackintosh; (

l) A written report outlining where Mrs. Mackintosh ’ s November 2010 OAS and CPP payments were deposited, whether such amounts have been reimbursed to the Canada Revenue Agency and all related correspondence with Canada Revenue Agency related to such payment and reimbursement. [ 36 ] The Applicants ’ position is that the Respondent ’ s failure to provide this information warrants this Court drawing an adverse inference against her. In support of this argument, they cite Udaipaul v.

Kissoon , [2005] OJ No. 5535 (SCJ) , in which the Court, at para. 28, referred to the following excerpt from Sopinka et al., The Law of Evidence in Canada , 2d ed., para. 6.321: In civil cases an unfavourable inference can be drawn when, in the absence of an explanation, a party litigant does not testify, or fails to provide affidavit evidence on an application. ...

Such failure amounts to an implied admission that the evidence of the absent witness would be contrary to the party ’ s case, or at least would not support it. [ 37 ] Essentially, the Applicants would have this Court draw the inference that the Respondent improperly charged certain expenses to the DAA Estate and failed to deposit to the DAA Estate certain amounts belonging to it.

Those amounts, in the Applicants ’ submission, total $14,082.81 and are as follows: (a) $297.88 - Affordable Locks expenses; (b) $7,581.00 - expenses associated with water damage as per Boyd Plumbing and Heating Invoice; (c) $2,700.00 - rental income relating to Chris Gusa ’ s three-month occupancy of the Silvercreek Close Property; (d) $399.00 - utility and gas expenses relating to Chris Gusa ’ s three-month occupancy of the Silvercreek Close Property; (e) $1,604.50 - charges relating to overdue interest and administration fees for Mrs. Mackintosh ’ s credit cards; (f) $891.02 - reimbursement for Mrs.

Mackintosh ’ s November 2010 OAS payment; (g) $609.41 - reimbursement for Mrs. Mackintosh ’ s November 2010 CPP payment. [ 38 ] I must address each of these in turn. First, the Applicants appear to suggest that, in the absence of an explanation from the Respondent as to why the locks on the Galbraith Residence were changed, the amounts paid to Affordable Locks should be reimbursed. I agree.

It is well known that trustees are allowed to claim as expenses of a trust only those amounts which are reasonably and properly incurred in the administration of the trust; see, for example, the recent decision of Clark J. in Re Anderson Estate , 2012 ABQB 517 . To the extent that the Respondent failed to provide an explanation for what appear to be frequent lock changes, an adverse inference may be

drawn against her that these expenses were not reasonably and properly incurred in the administration of the DAA Estate. Therefore, the Respondent will be required to reimburse the DAA Estate for $297.88. [ 39 ] Next, the Applicants claim reimbursement of the $7,581.00 they paid to Boyd Plumbing and Heating to effect repairs to the Silvercreek Close Property. The basis for this claim is the suggestion that the Respondent received an insurance payment in respect of the Silvercreek Close Property that was directed toward the damage necessitating these repairs.

There are some indications in the evidence before me that the Respondent made a claim to ING Insurance and she has failed to provide documentation in respect thereof. There are passing references to an insurance claim in the Respondent ’ s Affidavits dated March 8, 2010 and October 4, 2011. However, the only direct evidence of an insurance claim is a letter dated July 3, 2007 from ING Insurance to Mrs. Mackintosh and the Respondent. The letter is generic, but attaches a “ Proof of Loss ” form with some details as to a loss stated to be caused by water on June 15, 2007.

No dollar amounts are listed either in the letter or on the form. [ 40 ] Therefore, there is no evidence before me to show that the Respondent received any payment from the insurance company. It is clear, however, that a claim was made. If that claim was rejected by the insurance company or abandoned by the Respondent, it would have been a simple matter for the Respondent to make this clear. She did not. Her Affidavits refer to the claim without giving any indication of its status. She has repeatedly failed to fulfill her undertaking to provide information about this claim.

As the information about the claim is peculiarly in her control, I find that it is appropriate to draw an adverse inference against the Respondent on this point. The inference is that she received payment from the insurance company and failed to deposit it into the DAA Estate. Accordingly, she will be required to reimburse the DAA Estate for $7,581.00, being the amount necessary to effect repairs, which amount would otherwise have been paid from insurance proceeds. [ 41 ] Next, the Applicants seek payment to the DAA Estate of $2,700.00 in respect of Chris Gusa ’ s residence in the Silvercreek Close Property.

The evidence on this point is very confusing. It is unclear whether Chris Gusa paid rent for his occupation of the Silvercreek Close Property or not. There is some reference to rent that may or may not have been deposited to the DAA Estate or paid to Gil Management. In her affidavit sworn October 4, 2011, the Respondent stated “ my son, Chris Gusa, rented this property for 3 months during which time rent of $900 and utilities were paid by him. ” Other times, the suggestion is that Chris Gusa was living in the Silvercreek Close Property rent-free.

In her December 21, 2010 cross-examination on affidavit, the Respondent stated, “ It shouldn ’ t have been put down as rental. It was more caretaking. ” [ 42 ] The real question here is whether there has been a loss to the DAA Estate in respect of Chris Gusa ’ s occupation of the Silvercreek Close Property. While it is not clear whether he did or did not pay rent, it is clear that he occupied the house for the period June through September, 2007.

In the absence of cogent evidence from the Respondent, I am prepared to draw the adverse inference that either Chris Gusa paid rent which was not deposited to the DAA Estate or the Respondent permitted him to live in the Silvercreek Close Property without paying rent. In either event, there has been a loss of rental income to the DAA Estate.

Accordingly, the Respondent will be required to reimburse the DAA Estate in the amount of $2,700.00 in respect of this time period. [ 43 ] In the same vein, the Applicants seek repayment of $399.00 for utility and gas expenses relating to Chris Gusa ’ s occupancy of the Silvercreek Close Property. In the absence of further evidence, I would be concerned, as with the similar claim for utilities addressed above, about whether these expenses were actually the responsibility of Chris Gusa and whether he, in fact, paid them. However, among the documents the Respondent did provide to the Applicants is a one-page

summary entitled “ Chris/Torie Owing to Mackintosh Estate Silvercreek Close June-Aug. 2007" amounts for each month for each of Enmax and Direct Energy. Attached to that document are corresponding bills from each of those two companies. Further, the Respondent ’ s October 4, 2011 affidavit states that utilities were paid by Chris Gusa. Thus, there is evidence to indicate that these bills were his responsibility.

The evidence as to whether these amounts were deposited to the DAA Estate is unclear and there is a very confusing exchange on the subject in the Respondent ’ s December 21, 2010 cross-examination on affidavit. As with the rental payments, the Respondent could have clarified the situation, but did not do so. Therefore, I am prepared to draw an adverse inference against her in this respect as well. The total of the amounts set out in the document referred to above is $464.18. It is not clear to me why the Applicants are seeking reimbursement of only $399.00.

That being the case, however, I order that the Respondent reimburse the DAA Estate for $399.00 for this item. [ 44 ] The Applicants ’ next claim for reimbursement is for $1,604.50 for overdue interest and administration fees for Mrs. Mackintosh ’ s credit cards. The evidence is clear that Mrs. Mackintosh used credit cards for living expenses at certain points when funds for such expenses should have been provided to her by the Respondent. Thus, this was a problem of the Respondent ’ s making. The problem was exacerbated by the Respondent ’ s failure to monitor Mrs. Mackintosh ’ s affairs.

She either was unaware that Mrs. Mackintosh was obtaining and using credit cards or was aware of it and failed to take appropriate steps to deal with it. [ 45 ] There was some discussion of the credit card issue at the Respondent ’ s December 21, 2010 cross-examination on affidavit.

She indicated at that point that she did not become aware of the credit cards until 2009.

It appears that she then had some discussion with the Office of the Public Trustee because she says the following: So now when my communication with the public trustee ’ s office at the time, when I found out that there was a credit card problem they said what they usually do is they will contact the credit card people and negotiate back and forth as to how much of that debt should be paid and it ’ s usually about a half or less because they have to go into the records as to why a person with mental illness is able to actually obtain a credit card. So they have to go into those records.

So that was the communication that I got from the public trustee ’ s office in regards to credit cards. [ 46 ] However, there is no suggestion in the evidence before me that the Respondent took any such steps or, if she did, what the outcome was. Given the Respondent ’ s failure to provide such evidence, I am prepared to draw the adverse inference that she took no steps to negotiate a reduction in the amounts owing on Mrs. Mackintosh ’ s credit cards. It is clear from the above that the Respondent was aware that she could make this attempt.

It is not clear, however, that the creditors would have been willing to forgo the full amount owing. I am willing to accept at face value the Respondent ’ s information that a reduction by half was available and I therefore order the Respondent to reimburse the DAA Estate for half of this claimed amount, being $802.25. [ 47 ] Finally, the evidence indicates that Mrs. Mackintosh ’ s November 2010 OAS and CPP payments, in the amounts of $891.02 and $609.41 respectively, were made to the Respondent and deposited by her into her own bank account.

The Respondent failed to provide information pertaining to any reimbursement of those amounts to the Canada Revenue Agency and the Applicants ask me to draw an adverse inference that the Respondent has simply retained those funds. The Applicants point out that the Respondent ’ s only response to questions on this issue is that the amounts “ will be accounted for ” . The Applicants ’ position is that there is no further accounting to be done and that the Respondent should simply return the funds. I agree. There can be no justification for the Respondent retaining these funds belonging to Mrs.

Mackintosh and, as she has provided no evidence to indicate that she returned them to the CRA, I am prepared to draw the adverse inference that she still has them. Therefore, the Respondent must reimburse the DAA Estate for these amounts as well. [ 48 ] In the result, the Respondent is ordered to reimburse the DAA Estate for the amounts discussed in paragraphs 38 - 47 above, totalling $13,280.56. As with the reimbursement amounts addressed earlier, I direct that these amounts be paid forthwith to the DAA Estate from the estates of Mr. and/or Mrs.

McDonald and that the amounts so paid be deducted from the Respondent ’ s share of the estates upon final distribution. C. Passing of Accounts [ 49 ] This canvasses all of the concerns raised by the Applicants in respect of the passing of accounts and they consent to the passing of the accounts subject to reimbursement of the amounts discussed above. Therefore, the Respondent ’ s accounts are passed, subject to the foregoing. IV.

Sanction for Contempt of Court [ 50 ] The next issue requiring resolution is the appropriate sanction to be imposed upon the Respondent in respect of Lutz J. ’ s finding on November 9, 2010 that she was in contempt of Court. This finding pertained to Ms. Gusa ’ s failure to appear on September 15, 2010 for cross-examination on her trust accounts and to her failure to comply with Romaine J. ’ s Order dated September 23, 2010. [ 51 ] In addressing this portion of the matter, it is important to remember that the question before me is not whether Ms. Gusa is or is not in contempt of Court.

That determination has already been made by Lutz J. My role is limited to determining the appropriate sanction for such contempt. While attempts on Ms. Gusa ’ s part to purge the contempt or otherwise make good her defaults may be relevant to the determination of the proper sanction, they do not affect the underlying finding of contempt. [ 52 ] Both sides refer to Rule 10.53 of the Alberta Rules of Court , which provides, in part:

10.53(1) Every person declare to be in civil contempt of Court is liable to any one or more of the following penalties or sanctions in thediscretion of a judge: (

a) imprisonment until the person has purged the person’s contempt; (

b) imprisonment for not more than 2 years; (

c) a fine and, in default of paying the fine, imprisonment for not more than 6 months; (

d) if the person is a party to an action, application or proceeding, an order that (

i) all or part of a commencement document, affidavit or pleading be struck out; (ii) an action or an application be stayed; (iii) a claim, action, defence, application or proceeding be dismissed, or judgment be entered or an order be made, or (iv) a record or evidence be prohibited from being used or entered in an application, proceeding or at trial. [53] The Applicants ask that this Court order the following sanctions against the Respondent: (

a) That the Respondent not receive any compensation for her role as Mrs. Mackintosh’s trustee and that the Respondent pay all ofher legal costs associated with these proceedings personally; (

b) That the Respondent pay a fine in an amount to be determined by this Court to be deposited into the DAA Estate account; and (

c) That the Respondent be removed as co-executor and co-trustee of the Estates. [54] Though, with the exception of the proposed fine, these penalties do not appear to be expressly contemplated by Rule 10.53, itseems that the Court has authority to impose a broader range of sanctions than the Rule might seem to imply.

This is briefly stated in theAlberta Civil Procedure Handbook at p. 10-87: “The penalty for contempt is not limited to what is listed in R. 10.53.” [55] The Respondent refers to Michael v Lafrentz, 1998 ABCA 231 , 1998 CarswellAlta 657 (CA) at paras. 31 and 32and to Dreco Energy Services Ltd. v Wenzel, 2005 CarswellAlta 739 (CA) at para. 12 for this list of factors to be taken into considerationin determining the penalty for contempt: 1. Whether there was deliberate defiance of a Court order or whether there was an inadvertent failure to comply with the Courtorder; 2. The role of legal counsel;

3. Where there has been a failure to give discovery, the object of the exercise is more to secure the discovery rather than to punish; 4. Attempts to purge contempt or to apologize are relevant; 5. The entire context in the history of the litigation; 6. The amount of reasonable thrown-away costs properly incurred; 7. The nature of the contempt; and 8. The degree of culpability of the contemnor. [ 56 ] The Applicants do not take issue with this list of factors.

Thus, only the application thereof is at issue. [ 57 ] The Respondent asserts that she has purged her contempt in respect of the failure to attend cross-examinations and to pay costs. She also states that she has apologized. She states that she was unrepresented by counsel during most of these proceedings. Finally, she notes that she is a part-time substitute teacher with limited income and argues that an order requiring her to pay costs or a fine is “ neither just nor desirable ” . [ 58 ] The Applicants, however, argue that the Respondent has neither purged her contempt nor apologized.

They point out that she continues to be in violation of other Court orders, including those requiring the provision of certain information, as detailed above. While they acknowledge that the Respondent has been self-represented for a considerable time, they assert that the orders granted were carefully explained to the Respondent by the presiding Justices. [ 59 ] It is significant, in my view, that the Respondent has breached Case Management Orders made by Mahoney J. in the time subsequent to Lutz J. ’ s finding that she was in contempt of Court.

While I hasten to note that the issue of possible contempt arising from breaches of Mahoney J. ’ s Orders is not before me, it seems to me to show a pattern of disregard for Court orders that negates Ms. Gusa ’ s professions of contrition. It is also noteworthy that on the same date that he found her in contempt, Lutz J. also ordered the Respondent to appear for cross-examination on December 7, 2010, but she did not do so.

Therefore, it does not appear that the Respondent altered her behaviour as a result of the contempt finding. [ 60 ] Much was made in these proceedings of the fact that the Respondent was unrepresented for a considerable time. The assertion is that she did not understand the various Court orders, was unaware of her obligations and so on. I have some difficulty with this. First, the Respondent seems to have a pattern of retaining and then discharging counsel. Indeed, there was some concern at the start of these proceedings that both counsel for Ms.

Gusa were no longer acting, despite having been retained not long before the hearing. I hasten to add that both appeared to feel an obligation to continue, both did their best despite the circumstances and both are to be commended. The fact remains, however, that Ms. Gusa ’ s unrepresented status appears to have been of her own making. Counsel for the Applicants indicated that, during the year and a half prior to this proceeding, her office had been contacted by nine different lawyers on behalf of the Respondent. As I suggested during the hearing, if Ms.

Gusa discharges successive counsel retained to provide legal assistance, she cannot then throw herself on the mercy of the Court because she is unrepresented. [ 61 ] Further, I do not see how Ms. Gusa can claim to not understand the Order requiring her to appear for cross-examination on September 15, 2010. The meaning of such an Order seems to me reasonably self-evident and, indeed, Ms. Gusa does not say that she did not understand it. She merely states that she could not attend on that date because of a medical appointment.

But she gives no explanation for her failure to advise counsel for the Applicants of that appointment until it was too late to make alternative arrangements. There is no evidence to indicate that this was an emergency that could not have been made known to the Applicants ahead of time. For this reason, too, I have difficulty accepting the Respondent ’ s assertion that she did not deliberately flout the Court ’ s Order.

[ 62 ] I conclude, therefore, that Ms. Gusa ’ s contempt of Court was neither trifling nor easily excused. It warrants a significant sanction. As noted above, the Applicants propose three penalties. At the hearing of this matter, I removed Ms. Gusa as co-executor of her parents ’ estates and as co-trustee of the Mackintosh Trusts. My reasons for doing so are detailed below.

While I took the Respondent ’ s conduct, including her contempt of Court, into account in making my decision, the grounds therefor were not limited to the contempt and, conversely, her removal as co-executor and co-trustee does not fully address the need for an appropriate punishment for the contempt. [ 63 ] The Applicants also propose that the Respondent be denied compensation for acting as Mrs. Mackintosh ’ s trustee. The Respondent ’ s counsel indicates that she was not a paid trustee and referred to her as a “ volunteer ” .

However, the Applicants ’ counsel indicates that the Respondent ’ s accounts include a claim for compensation. The Respondent ’ s Application for Review of Trusteeship Order and Application to Pass Accounts filed February 1, 2010 indicates that the Respondent will be asking the Court, inter alia , “ to set compensation for the trustee for the accounting period and approve the taking of compensation for the accounting period ” . An Affidavit sworn by the Respondent on October 18, 2010 states that “ Proposed compensation for the trustee(

s) is shown on the compensation

schedule attached to the financial statements. ” However, a second affidavit, also sworn by the Respondent on October 18, 2010 and attaching financial statements, contains no compensation schedule. Therefore, it appears that the Respondent does intend to seek compensation, though it is not clear in what amount. [ 64 ] Normally, of course, a trustee is entitled to claim reasonable compensation for his or her efforts. Section 44(1) of the Trustee Act , RSA 2000, c.

T-8 provides that a trustee “ is entitled to any fair and reasonable allowance for the trustee ’ s care, pains and trouble and the trustee ’ s time expended in and about the trust estate ” . However, there certainly have been cases in which a trustee has been denied compensation for various reasons. [ 65 ] I am satisfied that denying the Respondent compensation for acting as Mrs. Mackintosh ’ s trustee is a reasonable sanction for her contempt of Court in these circumstances. Though I have ordered reimbursement to the DAA Estate of certain amounts, I remain concerned that Mrs.

Mackintosh has been deprived of funds through the Respondent ’ s actions or lack thereof. I am disinclined to see the DAA Estate reduced by awarding compensation to a trustee who has, in my view, clearly acted improperly. Therefore, I consider this sanction a fitting expression of the Court ’ s disapprobation of the Respondent ’ s conduct. [ 66 ] Having decided on this penalty, I decline to consider imposing a fine. The question of costs will be addressed separately. V.

Costs of the Passing of Accounts [ 67 ] The Applicants ask that the Respondent be required to pay most of the costs for the passing of her accounts. They rely on

section 67 (

b) of the Dependent Adults Act , which provides: 67 The Court of Queen's Bench or the Court of Appeal may order that the costs of any application or report made to it under this Act ... (

b) be paid by a trustee if the trustee has been ordered to reimburse the estate under

section 54; ... [ 68 ] The Applicants also refer to Re Overbo (Dependent Adult) , 2003 ABQB 270 , in which Moen J., quoting Orkin ’ s Law of Costs , 2nd ed. 1997, Statement #219.3.1 page 2-192 (at para. 17), provided a useful

summary of the law of costs in relation to a trusteeship matter: An administrator who refused to provide documents on request, did not pass accounts and managed the estate badly, although such conduct did not amount to negligence, was ordered to pay the costs on a solicitor-client basis of the lengthy trial of an issue as to his negligence. An executor who paid funds out of the estate without authority of the beneficiary was ordered to pay complete indemnification costs, given the serious breach of trust, as was an estate trustee whose conduct was reprehensible and scandalous and added to the length of the hearing or the passing of accounts.

[ 69 ] In Re Overbo , the Court held that a trustee was not entitled to any reimbursement for his legal fees from the estate due to his mismanagement of the estate and of the litigation surrounding the trustee ’ s application relating to the passing of accounts. The Court did, however, allow for reasonable costs for the accounting in the amount of $3,000.00, an amount conceded by the estate as being reasonable in all of the circumstances. [ 70 ] The Applicants concede that the Respondent ’ s costs for preparing the initial application should be paid for by the DAA Estate.

However, they submit that the costs of all steps taken after their Notice of Objection was filed should be paid by the Respondent personally as a result of her delays and outright refusals to attend the cross-examination on her accounts, to answer undertaking responses and to answer questions arising therefrom. Their position is that the Respondent ’ s conduct in these proceedings led to significant delays and necessitated numerous Court applications that would not otherwise have been required.

The Applicants also point out that if the Respondent is not required to pay these costs, they will be paid from the DAA Estate; the Applicants submit that this is neither fair nor appropriate in the circumstances. [ 71 ] In my view, this case is similar in many respects to Re Overbo . I also take guidance from Clark J. ’ s decision on costs in Re Anderson Estate , already referred to. In that case, the executors of an estate sought payment from that estate for substantial legal costs associated with their application for compensation.

Clark J. repeatedly stressed that trustees may be reimbursed from trust property only for those expenses which are reasonably and properly incurred in the administration of the trust. While certain tasks forming part of trust administration, such as the passing of accounts, must necessarily be brought before the Court, trustees who engage in protracted and unnecessary litigation do so at the risk of being required to pay the legal costs personally. [ 72 ] In this case, it is clear that the Respondent ’ s actions have resulted in unnecessary litigation.

During the hearing, I expressed surprise at the time spent on this matter and the volume of documentation produced, given that the issues appeared to be relatively straightforward. A review of the documentation shows that much of the time and effort was spent in trying to extract from the Respondent information that she ought to have offered freely. In my view, it is clear that she must bear the brunt of these costs. [ 73 ] The Applicants broke down the costs they seek into several categories.

First, they ask for thrown-away costs in respect of the Respondent ’ s failures to attend for cross-examination on September 15, 2010, December 7, 2010 and September 14, 2011. The Applicants estimate those costs at $2,400, being 2 hours per instance at $400 per hour. This amount appears to be reasonable and is awarded. [ 74 ] The Applicants also seek costs for three appearances before this Court that they say should not have been necessary: March 8, 2010 before Sisson J.; November 9, 2010 before Lutz J.; and December 14, 2010 before Martin J.

The Orders granted at those applications satisfy me that they were brought to force the Respondent to do what she was required to do in any event. Therefore, the Respondent will be responsible for those costs as well. The Applicants ask for $1,500, based on the $500 tariff in the Rules of Court for each application. That amount is granted. [ 75 ] Next, the Applicants seek solicitor-client costs against the Respondent in respect of that portion of this application to determine the sanction for civil contempt.

They note that in Dreco Energy Services , the Court of Appeal stated as follows at para. 11: Requiring those in contempt to pay a part only of thrown-away costs related directly to the contempt does not bring home to the contemnors the seriousness of their actions and their responsibilities for the consequences attributable to that contempt. There is a public policy aspect to this entire issue. Generally, in principle, those who are found in civil contempt ought, at a minimum, to be required to accept responsibility for a substantial portion of the costs directly related to that contempt.

It may be that a judge would also consider it appropriate to impose further monetary penalties or other sanctions, whether including striking of pleadings, drawing of adverse inferences, etc. [ 76 ] The Applicants also refer to Koerner v Capital Health Authority , 2011 ABQB 191 , 506 AR 113 , where the Court, at para. 64, stated that “ ...solicitor-client costs are routinely awarded in civil contempt proceedings but are not punishment for the contempt ” . [ 77 ] In the circumstances, it is reasonable for the Respondent to pay the solicitor-client costs associated with the determination of the sanction for her civil contempt.

It would be unreasonable to allow the cost of determining the Respondent ’ s punishment for contempt

to be paid from the DAA Estate. [ 78 ] Finally, as noted above, the Applicants ask that the Respondent pay the solicitor-client costs of the passing of accounts for all steps subsequent to the filing of the Notice of Objection. I am satisfied, based on the evidence before me and on the authority of cases such as Re Overbo and Re Anderson Estate , that this is appropriate.

The Respondent greatly and unnecessarily extended the length and cost of these proceedings and she cannot be allowed to do so with impunity. [ 79 ] As with the reimbursement awards discussed above, these costs may be paid from the estates of Mr. and/or Mrs. McDonald and deducted from the Respondent ’ s share thereof. VI. Removal of Respondent as Executor of Estates and Trustee of Mackintosh Trusts A. The Law [ 80 ] The Applicants also seek to have the Respondent removed as a co-executor of her parents ’ estates and as co-trustee of the Mackintosh Trusts.

The Court ’ s authority to remove a trustee and the grounds for doing so are canvassed extensively in the authorities. [ 81 ] To begin with, the Applicants say that this Court has statutory authority to remove the Respondent as executor of the estates and as trustee of the Mackintosh Trusts based on the following: (

a) Section 24 of the Administration of Estates Act , RSA 2000, c. A-2: 24. When it appears to the court by reason of special circumstances that it is necessary that (

a) the property of a deceased person be forthwith administered, or (

b) someone other than the executor or next of kin be appointed to administer the property of a deceased person, the court may, on application and on the notice, if any, that it may direct, issue a grant of administration to the Public Trustee or some other person it thinks fit and impose any limitations and restrictions on the grant that it sees fit. (b) Section 16(1) (

b) of the Trustee Act , RSA 2000, c. T-8: 16(1) When it is expedient to appoint a new trustee and it is found inexpedient, difficult or impractical to do so without the assistance of the court, the Court of Queen ’ s Bench may make an order appointing a new trustee ... (

b) in substitution for or in addition to any existing trustee. (

c) Section 5 of the Dependants Relief Act :

5(1) The judge in any order making provision for maintenance and support of a dependant may impose any conditions and restrictionsthe judge sees fit. ...

(4) When a transfer or assignment of property is ordered, the judge (

a) may give all necessary directions for the execution of the transfer or assignment by the executor or administrator or any otherperson that the judge may direct, or (

b) may grant a vesting order. (d) Section 64(1)(b),(

d) and (

i) of the Surrogate Rules: 64(1) The court, on hearing an application, may ... (

b) dispose of the issues arising out of the application as it considers appropriate; ... (

d) grant any relief to which the applicant is entitled because of a breach of trust, wilful default or other misconduct of therespondent; ... (

i) make any order that the court considers necessary in the circumstances; ... (

e) Section 4 of the Judicature Act, RSA 2000, c. J-2: 4 The judges of the Court have and shall use, exercise and enjoy all the powers, rights, incidents, privileges and immunities of a judge . . .of the following courts: (

a) the Superior Courts of Law or Equity; ... (

c) the Court of Probate; ... (f) Section 5(3) of the Judicature Act: 5(3) For the purpose of removing any doubt . . . it is declared that the Court has the like jurisdiction and powers . . .in respect of ... (

b) all matters relating to trusts, executors and administrators, partnerships and accounts, mortgages and awards, or to infants, idiotsor lunatics and to the estates of infants, idiots and lunatics, ... [82] The Respondent, in her brief, asserts that the above-cited

section of the Trustee Act cannot be used to remove a trustee wherethere are factual matters in dispute. She cites Popoff v. Actus Management Ltd. (SK KB), [1985] 5 W.W.R. 660 (Sask.Q.B.) in support of this proposition.

[83] The Applicants, however, respond by saying that the powers of the Court set out in the Surrogate Rules, along with theCourt's inherent jurisdiction as a Court of Equity and the powers of the Court outlined in the Dependants’ Relief Act grant the Court ofQueen's Bench of Alberta the power to remove an executor and trustee. They submit that this was confirmed in Scott v. Scott (SK KB), [1991] 5 W.W.R. 185 (Sask Q.B.) at para. 10: As a Court of Equity, the Queen's Bench court has an inherent jurisdiction to remove a trustee: see ss. 12, 44(1) and 45(1) of the Queen'sBench Act, R.S.S. 1978 c.

Q-1; Re Dickinson (1892), 2 B.C.R. 262; Re Wrightson; Wrightson v. Cooke, [1908] 1 Ch. 789; MacLaren v.Grant (1894), 1894 CanLII 93 (SCC), 23 S.C.R. 310 (N.B.]. Finch J. in Mardesic v. Vukovich Estate (1988), (BC SC),30 B.C.L.R. (2d) 170 at 174 (S.C.), states: Apart from this statutory power there is also, in my view, an inherent power in the court to remove and replaces trustees. In his text onthe Law of Trusts in Canada, 2nd ed. (1984), Professor D.W.M. Waters says at p. 682: Private trusts, that is inter vivos and testamentary trusts, seldom include an express power to remove a trustee.

For long the courts havebeen prepared under their inherent jurisdiction to remove a trustee as part of the process of administering the trust, and the settlors arenormally content to reply upon an appeal to the court should the need of removal arise. Numerous textbooks acknowledge this inherent jurisdiction of the court and rely on Letterstedt v. Broers (1884), 9 App Cas. 371 (P.C.),as authority for this principle. . . .

I am accordingly satisfied that notwithstanding the restricted authority in the Trustee Act, I have aninherent jurisdiction to remove a trustee without appointing a replacement. [84] Both sides refer to Letterstedt as the case which outlines the guiding principles for removal of trustees. In the text Widdifields on Executors and Trustees, 6th ed. (C.S.

Theriault, ed.) (Toronto: Thomson Canada Limited, 2002) ("Widdifields") at p.15-11, the following is quoted from Lord Blackburn’s judgment in Letterstedt reviewing the factors to be considered on an applicationfor removal: But in cases of positive misconduct, Courts of Equity have no difficulty in interposing to remove trustees who have abused their trust; itis not indeed every mistake or neglect of duty, or inaccuracy of conduct of trustees, which will induce Courts of Equity to adopt such acourse.

But the acts and omissions must be such as to endanger the trust property or to shew a want of honesty, or a want of propercapacity to execute the duties, or a want of reasonable fidelity. ... In exercising so delicate a jurisdiction as that of removing trustees, their Lordships do not venture to lay down any general rule beyondthe very broad principle above enunciated, that their main guide must be the welfare of the beneficiaries. Probably it is not possible to laydown any more definite rule in a matter so essentially dependent on the details often of great nicety.

But they proceed to look carefullyinto the circumstances of the case... [85] Widdifields also sets out at pp. 10-1 - 10-2 the following “canons of trusteeship”:

(1) The trustee shall obey the directions of the settlement or trust instrument unless the Court authorizes changes or the beneficiariesconsent to them ...

(2) The trustee shall act impartially between beneficiaries ...

(3) The trustee must exercise ordinary care and prudence ...

(4) The trustee shall be loyal to her trust by not trafficking with her trust and shall not profit by her administration or permit herinterest to conflict with that of the trust ...

(5) The trustee shall be ready with her accounts ... If the trustee fails to meet the standard of care referred to above, he or she will generally be held accountable and liable for any lossresulting from the breach, and must place the trust estate in the same position as it would have been in if no breach had been committed. ... If the assets of an estate have been damaged or wasted, the beneficiary's remedy is against the executor in the context of an action forbreach of fiduciary duty or a challenge to the executor at the passing of accounts. [86] Further guidance may be found in Brian A.

Schnurr’s text Estate Litigation, 2nd ed. (Toronto: Thomson Reuters CanadaLimited, 1994) at pp. 13-5 - 13-6: Historically, the courts in dealing with removal applications have given great deference to the testator's choice of executor and trustee,and have not removed a trustee unless there were serious allegations of maladministration.

However it would appear that the courts are now placing great emphasis on whether “...the continuance of the trustee would bedetrimental to the execution of the trust. ...” and will intervene and remove a trustee when it appears that the relationship betweenco-trustees or the trustees and beneficiaries is so rancorous so as to impair the welfare of either the trust property or the beneficiaries ofthe estate. It is no longer necessary that the court find evidence of wrongdoing or negligence on the part of the trustee before granting anorder for his removal.

The following circumstances are those most often cited in applications requesting removal of a trustee:

a) the trustee has failed to administer the estate in a prudent or timely manner;

b) the actions or omissions of the trustee have resulted in a deterioration or wasting of the estate assets;

c) the trustee cannot or refuses to provide a proper accounting of the estate;

d) the trustee has committed a breach of trust;

e) there is friction or hostility between co-trustees;

f) there is a conflict between the trustee's personal interests and his fiduciary obligations to the estate;

g) the trustee is not motivated solely by concern for the interests of the beneficiaries (in particular in the exercise of his discretion);

h) there is the potential threat of or actual litigation, either by or against the trustee;

i) there is so much friction or rancour that there is no longer a constructive relationship between the estate and a beneficiary orbeneficiaries. [87] Both sides provided authority for the proposition that a finding of misconduct is not a necessary precondition to removal of atrustee. The Applicants refer to Re Consiglio (No. 1) (ON CA), [1973] 3 O.R. 326 (C.A.), wherein the Court held atpara. 6:

It is our view that misconduct on the part of a trust is not a necessary requirement for the Court to act and that the Court is justified ininterfering, and indeed required, to interfere, when the continued administration of the trust with due regard for the interests of the cestuique trust has by virtue of the situation arising between the trustees become impossible or improbable. [88] For her part, the Respondent points to Rose v Rose (2006), (ON SC), 24 ETR (3d) 217 (Ont SCJ), a casecited in Widdifields for the following comments at para. 70: Although misconduct of the trustee is not a prerequisite to removal, something more than mere friction is normally necessary.

Forexample, before making an order for removal of a trustee because of friction with co-trustees, the court must be satisfied that thecontinued administration of the trust is impossible or improbable. [89] The issue of friction, hostility or distrust among trustees that hampers the administration of the trust has been canvassed in anumber of cases to which the Applicants refer, including Re Ocean Man Trust (1992), 46 ETR 224 (Sask QB) and Libman v Feldberg(2002) CarswellOnt 4289 (SCJ). In another example, Re Walter S.

Owen Family Trust (1989), 33 ETR 213 (BCSC), the Court held thatone trustee should be removed because the ill-feeling between co-trustees was detrimental to the beneficiaries and because the removedtrustee’s failure to pay the trust debts on a timely basis placed the trust property in some danger. [90] Similarly, in Mailing v. Conrad (2003), 48 ETR (2d) 238 (Ont SCJ), the Court removed one of three co-executors because ofhostility, suspicion and lack of cooperation on his part. The Court found that the friction among the executors had led to delay and topotential costs to the beneficiaries of the estate.

Although the terms of the trust required agreement only of the majority of trustees, theCourt held at para. 17 that the removed trustee’s conduct made the job of the others “difficult if not impossible”. [91] Further, the Applicants assert that a trustee must not co-mingle estate or trust property with his or her personal property andcited the following passage from Widdifields at p. 10-21: Sir John Stuart V.C. in Cook v. Addison

(1869) L.R. 7 Eq. 466, said “It is a well-established doctrine in this Court, that if a trustee oragent mixes and confuses the property which he holds in a fiduciary character with his own property, so as that they cannot be separatedwith perfect accuracy, he is liable for the whole.” [92] Finally, the Respondent cites Matiko v Matiko Estate (2002), 2002 SKQB 273 , 46 ETR (2d) 220 (Sask QB) for theproposition that “the standard of proof in a proceeding to remove an executor is the balance of probabilities”. The Applicants do notappear to take issue with that proposition. B.

Application of the Principles [93] The Applicants provided a lengthy and detailed list of examples of alleged misconduct, neglect and default in support of theirapplication for removal of the Respondent. These allegations are largely, if not wholly, refuted by the Respondent. In her brief, theRespondent asserts that most of the evidence upon which the Applicants rely is in the form of affidavits and went untested by her as aresult of her being unrepresented.

While it is true that counsel are trained to cross-examine affiants while lay litigants are not, it is alsotrue that, as discussed above, the Respondent had different counsel at various times but did not continue the retainers. The Respondentdoes not point to any evidence indicating an intention or, indeed, a desire to cross-examine any of the affiants on any of the affidavitsrelied upon by the Applicants. Similarly, the Respondent made no such application in these proceedings. [94] The Applicants take the position that the Respondent’s conduct in her capacity as trustee for Mrs.

Mackintosh under theDependent Adults Act is relevant to the question of whether she should be removed as trustee of the Mackintosh Trusts. They point to thevarious issues discussed above, in particular, the Respondent’s failure or refusal to have her accounts ready to be presented to theinterested parties. [95] The Respondent asserts that her conduct as Mrs. Mackintosh’s trustee under the Dependent Adults Act “has little bearing on

or relation to ” her role as trustee of the Mackintosh Trusts. I cannot agree. While it is true that these are separate trusteeships, it is clear that they are interrelated and, as I said earlier, “ layered ” . [ 96 ] I find that the Respondent ’ s conduct in her capacity as Mrs. Mackintosh ’ s trustee showed a lack of the “ ordinary care and prudence ” so critical to that role. If that conduct had been the only factor at issue here, there might be some question as to whether the Respondent should be removed as trustee of one trust based solely on her conduct as trustee of another.

However, I need not answer that question as there are other allegations in this case that pertain specifically to the administration of the Mackintosh Trusts. [ 97 ] First, the Applicants allege that the Respondent has, in contravention of the terms of the Wills and in some cases of Case Management Orders, taken unilateral steps without the knowledge and approval of her co-executor, the Applicant McDonald. Specifically, they contend that she obtained bank drafts from Mr. McDonald ’ s estate, including payments to herself personally.

The Applicants also assert that the Respondent unilaterally directed the sale of Boeing shares having a value in excess of US$120,000. While the Respondent attempts to explain her actions, those explanations are unsatisfying. [ 98 ] Second, the Applicants ’ position is that the Respondent has not acted with care and prudence in the administration of the estates. They contend that she has failed to comply with a process put in place by Case Management Order for paying estate bills, with the result that certain invoices were not paid in a timely fashion.

The Applicants point out that, notwithstanding a Case Management Order requiring the Respondent to deliver up all estate jewellery to Borden Ladner Gervais LLP, the Respondent admits to retaining one ring. Indeed, she admitted it during the hearing. As well, the Applicants argue that the Respondent refused to respond to inquiries from her co-executor about selling two estate properties, with the result that a Case Management Order had to be made to permit the sale. [ 99 ] Again, the Respondent ’ s explanations for these matters are unsatisfying.

With respect to the bills, she takes the position that her co-executor did not understand the process. She also swore in her Affidavit dated October 28, 2011 that the process had not been followed because the bank was unaware of the Case Management Order and was awaiting instructions. Her position with respect to the ring is that it was her mother ’ s ring that was specifically left to her in Mrs. McDonald ’ s Will and that she is entitled to keep it.

That, however, is not a decision that, as co-executor, she is permitted to make unilaterally, particularly in the face of a Case Management Order requiring otherwise.

Further, I find it troubling that the Respondent swore in her Affidavit dated October 4, 2011 that “ the estate jewellery is currently in the possession of John Armstrong of Bennett Jones LLP, the former solicitors for the Estates ” when she knew that she was in possession of this ring. [ 100 ] Third, the Applicants allege that the Respondent profited personally from her role as co-executor in that she received and retained a payment from the strata corporation that belonged to the estates. The Applicants also assert that the Respondent comingled this payment with her personal funds.

The Applicants ’ position is that the Respondent ’ s explanations for this matter have been inconsistent. They contend that she initially said the payment was estate funds and would be returned, but later argued that the payment was to her for work she had done for the strata corporation. Later, she said that she would return the funds to the strata corporation in any event. [ 101 ] Finally, and perhaps most significantly, there is the issue of discord between the Applicant McDonald and the Respondent in carrying out their duties as co-executors and co-trustees.

Both sides acknowledge that there have been disagreements, but the Respondent argues, citing Rose , that it is not sufficient to warrant her removal as trustee. I note, however, that the Respondent, in an Affidavit sworn on March 8, 2010, stated that she was seeking to have the Applicant McDonald discharged as alternate trustee for Mrs.

Mackintosh under the Dependent Adults Act on the grounds that he was not “ capable of competently managing Arlene ’ s financial affairs ” , was “ not good with money ” and had “ consistently proved to be neglectful of his duties ” . [ 102 ] The Applicants assert that the administration of the estates and of the Mackintosh Trusts is effectively at a standstill in the sense that the co-executors and co-trustees cannot agree on anything and no steps can be taken without a Case Management Order, some of which have already been breached by the Respondent in any event. [ 103 ] It is clear to me that there is great animosity among the parties.

As such, I have come to the conclusion that it is unlikely that the administration of the estates and of the Mackintosh Trusts can be carried out effectively if the Applicant McDonald and the Respondent continue to be co-executors and co-trustees.

[ 104 ] An additional point bears mentioning. The Respondent submits that the courts have in general been loathe to interfere with a testator ’ s choice of trustee under his or her Will. The reference above in Schurr to deference to the choice made by the settlor speaks to this. This is significant in this case because both Mr. and Mrs. McDonald in their Wills named the Applicant McDonald and the Respondent as co-executors and co-trustees of the Mackintosh Trusts. That decision should not lightly be disturbed.

The Respondent points to the decision in Ulmer Estate v Ulmer Estate , 2000 SKQB 209 , where the Court held at para. 2: To override a testator ’ s choice of an executor is a sensitive exercise not to be lightly undertaken. Presumably, the testator has appointed those in whom he has confidence to give effect to his wishes and a court should interfere only where it is clear that the confidence was misplaced. [ 105 ] Sadly, I have come to the conclusion that the confidence was, indeed, misplaced in this instance.

By the terms of the Wills, the Applicant McDonald and the Respondent, as executors and trustees of the Estates, have to make all decisions unanimously. Clearly, Mr. and Mrs. McDonald did not foresee the level of discord that arose between their children. I accept the position of the Applicants that if one of the executors disagrees with or refuses to respond to a decision that needs to be made, a situation of deadlock can arise so as to require the assistance of the Court. Indeed, the evidence shows that this is what has occurred.

While the Rose case cited by the Respondent indicates that friction between trustees is not, in itself, sufficient grounds for removal, the weight of authority is that removal will be justified when that friction rises to the level where the proper administration of the trust is impaired. In my view, this threshold has been reached in this instance. [ 106 ] Some argument was devoted at the hearing to the distinction between the roles of the executor and the trustee. Counsel submitted at the hearing that the administration of the estates of Mr. and Mrs. McDonald was almost complete at that time.

Arguably, there is little left for the Respondent to do in that capacity and her discharge may make little difference in that respect. [ 107 ] However, the Mackintosh Trusts may continue for several years yet. While Mrs. Mackintosh is not young, there is nothing before me to indicate that she may not survive for some considerable period of time. Particularly given her status as a represented adult, it is imperative that the administration of the Mackintosh Trusts function smoothly.

It is clear from the evidence that this has not been the case in the past and I have no confidence that it would be so in the future so long as the Respondent remains as co-trustee. It is necessary that she be removed. [ 108 ] Notwithstanding this distinction, there would seem to be little point in discharging the Respondent as co-trustee of the Mackintosh Trusts while leaving her in place as co-executor of the estates.

The sensible course in the circumstances is to remove her from both capacities and this is what was done, for the reasons set forth above. [ 109 ] In the result, the Applicant McDonald is now the sole executor of the estates of Mr. and Mrs. McDonald. The Applicant McDonald and the Applicant Mackintosh are now the co-trustees of the Mackintosh Trusts. VII. Costs of the Removal Application [ 110 ] As a final matter, the Applicants ask that the Respondent pay their solicitor-client costs of the application to have her removed as co-executor and co-trustee.

Alternatively, they ask that these costs be paid out of the estates of Mr. and Mrs. McDonald. [ 111 ] The Applicants submit that the case law indicates that when an executor and/or trustee is removed by order rather than by consent, such that time and expense are required to achieve the removal, solicitor-client costs should be awarded. [ 112 ] Respondent ’ s counsel argued at the hearing that the issues leading to the Respondent ’ s removal are not sufficiently severe to justify solicitor-client costs being awarded against her personally. The Respondent ’ s p

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