KRISTINA CONWAY Applicant And: MELINDA CONWAY Respondent - v. -, 2020 NLSC 132

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : Conway (Re) , 2020 NLSC 132 Date : October 6, 2020 Docket : 201801E17032 In The Matter of the Estate of Kristina Conway, a minor Between: KRISTINA CONWAY Applicant And: MELINDA CONWAY Respondent - AND - Docket: 202001G0532 Between: KRISTINA CONWAY Applicant And: MELINDA CONWAY Respondent Before: Justice Deborah J. Paquette Place of Hearing: St. John’s, Newfoundland and Labrador

Date of Hearing: September 14, 2020 Appearances: Michael H. Duffy Appearing on behalf of the Applicant Gregory B. Stack Appearing on behalf of the Respondent Authorities Cited: CASES CONSIDERED: Wicks v. Duffett (1983), 41 Nfld. & P.E.I.R. 58, 119 A.P.R. 58 (Nfld. S.C.(T.D.)); Murphy v. Murphy (1990), (NL SC), 84 Nfld. & P.E.I.R. 116, 262 A.P.R. 116 (Nfld. T.D.); Fraser (Guardian ad litem of) v. Fraser, 2000 BCSC211; Garland v. Clarke (1982), 41 Nfld. & P.E.I.R. 75, 119 A.P.R. 75 (Nfld. D.C.); Ryan v. Sleigh, 2007 NSSC 191; Fink v.

BritishColumbia (Public Guardian & Trustee), 2002 BCSC 438 STATUTES CONSIDERED: Judgment Enforcement Act, S.N.L. 1996, c. J-1.1; Children’s Law Act, R.S.N.L. 1990, c. C-13; TrusteeAct, R.S.N.L. 1990, c. T-10 OTHER: “Best GIC’s of 2018”, online: Ratehub <http://www.ratehub.ca> REASONS FOR JUDGMENT Paquette, J.: INTRODUCTION [1] In 2011 the applicant, then eleven years old, was injured in a motor vehicle accident. Seven years later, this Court approved acompromise infant settlement in the amount of $53,000, less sanctioned disbursements.

The order specified that the funds were to beplaced in a locked-in Guaranteed Investment Certificate (“GIC”) for a period of no fewer than 18 months. The respondent, her motherand court-appointed guardian of her settlement funds, did not invest the monies as ordered by the Court and over the course of sixmonths, her daughter’s trust funds were gone. [2] The applicant, now an adult, seeks an order that the respondent provide her with her personal injury settlement plus interest.

The respondent admits that she has breached her obligations as guardian of the funds, but maintains that all but $10,143.43 of the trustfunds was spent on the applicant, which amount she is prepared to repay. ISSUE [3] At issue in this proceeding is the responsibility and accountability of a guardian of a minor’s trust funds. The applicant seeksorders of enforcement to compel adherence to Letters of Guardianship, Minor and the Oath of Guardian and direction to pay the sum of$39,605.25 together with interest in the amount of $1,752.51.

BACKGROUND [4] The applicant, as a minor, was represented by then legal counsel, Ms. Shelley L. Bryant, in the initiation of her personal injuryCourt action, with her mother as guardian ad litem. A compromise settlement was achieved and on 2 March 2018, the respondent filed(

i) an Interlocutory Application seeking approval of the minor’s settlement terms and (ii) a Petition for Letters of Guardianship forpurposes of protecting her daughter’s money. [5] Ms. Bryant presented the application in Court and the compromise settlement was approved and an order filed on 6 March2018 in the amount of $55,000 upon the following terms: 1. The compromise settlement of Fifty-Five Thousand, Five Hundred Dollars ($55,500.00) be sanctioned and approved; 2. The said sum of Fifty-Five Thousand, Five Hundred Dollars ($55,500.00) in full and final settlement of the claim of

Kristina Conway, a Minor, less the deductible of Two Thousand, Five Hundred Dollars ($2,500.00) for a net settlement of Fifty-Three Thousand Dollars ($53,000.00), be paid to Melinda Conway, as Guardian of the Estate and Effects of Kristina Conway, to be administered for the benefit of the said Minor; 3. The Guardian is hereby authorized: (

a) To pay the reasonable legal fees and disbursements of the Solicitors for the Minor, incidental to this proceeding; (

b) To pay all other reasonable expenses and fees incidental to the proceeding; (

c) To execute and deliver to the Defendants a receipt, release and discharge in such form as may be approved by the Guardian as appropriate to release the claims of the Minor against the Defendants relating to this proceeding; (

d) To immediately place the net settlement proceeds, less the sum of $1,000.00 to cover costs of massage and gym sessions for the Infant, Kristina Conway, into a locked-in, non-cashable, Guaranteed Investment Certificate (GIC) with a financial institution which carries deposit insurance through the Canadian Deposit Insurance Corporation (CDIC) for a period of no fewer than 18 months, until the infant attains the age of 19 years ; (

e) To pay to or for the benefit of the Minor the balance of the funds upon the Minor’s attainment of the age of majority. [Emphasis added.] [ 6 ] The Court also awarded Letters of Guardianship, Minor, of the Estate and Effects of Kristina Conway to the respondent on 06 March 2018 ordering as follows: IT IS FURTHER ORDERED that Melinda Conway, as Guardian of the Estate and Effects of Kristina Conway, a minor, shall forthwith upon receiving the settlement funds, place the net settlement funds, after payment of legal fees and disbursements and less the sum of $1,000.00 to cover costs of massage and gym sessions for the Infant, Kristina Conway, into a locked-in, non-cashable, Guaranteed Investment Certificate (GIC) with a financial institution which carries deposit insurance through the Canadian Deposit Insurance [Corporation] (CDIC) for a period of no fewer than 18 months. [ 7 ] Indeed the respondent herself had petitioned the Court to have the settlement funds placed in this very vehicle, a locked-in, non-cashable GIC, instead of being secured with the Office of the Public Trustee.

This is evidenced by her application for Letters of Guardianship, Minor, dated 28 February 2018 at paragraphs 10 and 11: 10. Your Petitioner believes it would be in the best interests of the infant, Kristina Conway, that she be appointed Guardian of the Estate and Effects of Kristina Conway, an Infant. Her rationale for her belief is based on the fact that the Infant will attain the age of 19 years in July 2019, and therefore if Letters of Guardianship were granted to the Public Trustee, that office would have care of the estate for only approximately 17 months.

Moreover, the Public Trustee would charge the Estate 5% of the settlement amount, Plus HST, for administering the estate for 17 months, resulting in a charge to the estate in the amount of $3,047.50. 11.

Your Petitioner proposes that she will, forthwith upon receiving the settlement funds, place the net settlement funds, after payment of legal fees and disbursements and less the sum of $1,000.00 to cover costs of massage and gym sessions for the Infant, Kristina Conway, into a locked-in, non-cashable, Guaranteed Investment Certificate (GIC) with a financial institution which carries deposit insurance through the Canadian Deposit Insurance [Corporation] (CDIC) for a period of no fewer than 18 months, until the Infant attains the age of 19 years.

This proposal ensured that the Infant’s estate will be secured until she attains the age of majority, the estate will generate interest, and will save the estate the $3,047.50 charge that the Public Trustee would be obliged to make against it . [Emphasis added.] [ 8 ] The respondent swore an Oath of Guardian committing to “well and truly perform and discharge all the duties which belong to me as Guardian of the said estate according to the laws of this Province; that I will render a just and true account thereof to the Supreme Court when thereunto lawfully required, or to the said minor when Kristina Conway shall become of age; and that the gross value of the said estate is $53,000.00 dollars …”.

[ 9 ] The Letters of Guardianship, Minor provided that the guardian was to “dispose of such Estate in such a manner as the Court shall direct, and well and truly to perform and discharge all the duties which belong to her as guardian of the Estate of the said minor according to the laws of this Province, and to render a just and true account thereof to the Court when thereunto lawfully required, or to the said minor when she shall become of age”. [ 10 ] The applicant turned 19 in the summer of 2019.

She filed an affidavit with the Court on 17 March 2020 explaining that she had requested payment of her trust funds and was told by her mother that the money had been spent. On 30 June 2020, an order was made by Marshall J. pursuant to the Judgment Enforcement Act, S.N.L. 1996, c.

J-1.1 , granting the applicant a pre-judgment attachment order over all exigible property of the respondent in the amount of $47,526.30, representing the principal sum of $39,605.25 plus twenty percent of that amount for costs ($7,921.05). [ 11 ] The applicant stated that until she saw the file at her current lawyer’s office, she did not know the amount of money she had been awarded as part of the compromise infant settlement or of the stipulations of the trust imposed on those monies in the Court orders (paragraph 10, applicant’s Affidavit).

She submits that after Court-approved deductions from the gross total amount, including $13,394.75 for legal fees and disbursements, she should have received a balance in the trust account of $ 39,605.25 plus interest. [ 12 ] While the applicant acknowledged that she was aware that some expenditures were made on her behalf from the trust funds prior to her attaining the age of majority, including the purchase of a new car, car insurance, and a lap top, she stated that she was a dependent minor and had “little understanding of debt and no proper advice or full competency to make such financial decisions and I would not make those decisions now” (paragraph 7, applicant’s Affidavit). [ 13 ] The applicant was asked about clothing purchases in the amount of $1,000 made by the respondent for her in the summer of 2018, and she stated that as a minor she did not understand why she was paying for her own clothing.

A new car was also purchased in the summer of 2018, and she explained that she was working part-time then and paid for one-half of the car insurance, being $820.90, and that there were also payments for an extended warranty on the car, which was eventually cancelled. She said that her mother’s car broke down around then and that her mother drove the new car “all the time”. She recounted that the vehicle’s mileage was so high (103,000 km) that the transmission warranty no longer applied.

The applicant stated that she did not drive the car often. [ 14 ] She explained: “I would not, as a 19 year old, purchase a new car. With the maturity of age I know I would not spend so frivolously, especially without knowing how much I actually had.” (paragraph 8, applicant’s Affidavit). “As a result of those payments I am now in possession of a car that has been parked since November, 2019 as I am unable to afford insurance. It is actually a liability and causes me no benefit.” (paragraph 9, applicant’s Affidavit).

The applicant clarified at the hearing that she is currently using this car, but takes the position that it should not be her responsibility to assume the cost associated with its purchase, which had never been sanctioned by the Court. [ 15 ] The respondent admits that she did not adhere to the Court orders in fulfillment of her duties as a guardian. Her evidence in this proceeding demonstrated that she still fails to accept the gravity of her actions.

In her reply to her daughter’s application for the return of her trust funds with interest, the respondent places sole blame for the commencement of this litigation on a dispute over a family cat (paragraph 8): 8. The Defendant/Respondent states that this entire matter is predicated on the anger exhibited by the Plaintiff/Applicant after the Defendant/Respondent had moved out of the family home in 2019 to live with her boyfriend after she had turned 19.

The Plaintiff/Applicant would not listen to reason, that reason being that the 2-year-old Lomez was attacking the 12-year-old house cat (Mittens) causing various claw marks and the like on the skin of Mittens. The Defendant/Respondent had repeatedly asked for the Plaintiff/Applicant to take Lomez with her before the Defendant/Respondent was finally forced to give Lomez away to another home. [ 16 ] The respondent stated that Ms.

Bryant had given her the settlement funds’ cheque and that she went to her bank where an official advised her that the bank “had no such thing” as a locked-in GIC and she was advised to open a Tax-Free Savings Account because it was “as close as possible to her requirements”. She stated that she assumed that this would meet the obligations of her guardianship.

She could not recall in whose name the cheque was made out by the law firm and stated that she was never advised that she was required to go back to the Court in order to have any expenditures, such as an automobile made on her daughter’s behalf, sanctioned. [ 17 ] The respondent provided no independent evidence from the bank to support her claim that they did not offer a GIC. I find the respondent’s evidence that a major chartered bank could not offer a locked-in GIC, the very GIC she had, through legal counsel, asked the judge to order, devoid of credibility.

It would have been readily open to her to provide the Court with independent evidence from the bank substantiating this claim.

Even if substantiated, however, this would not have authorized her to proceed with an investment that was not approved by the Court. [ 18 ] The respondent acknowledged that she had prior experience with a compromise minor settlement and in that instance, the monies were placed in the care of the Public Trustee. [ 19 ] The respondent explained that she advanced various sums to her daughter “upon request” out of the trust fund, starting with $4,605.25 for a laptop computer and thereafter, an additional $24,856.57.

There were no invoices supporting the cost of the laptop or any of the other items alleged to be spent on her daughter, other than the returned cheque for the new car. [ 20 ] The respondent blamed her daughter for “demanding” payment of all the money, including the new car, and said that she had explained to her daughter that the car would deplete one-half of her settlement. She said that her daughter had part-time jobs and wanted a car for transportation. [ 21 ] The respondent filed the Tax Free Saving Account (“TFSA”) records, her personal banking statements, and e-transfer summaries.

The TFSA account revealed that over the course of some 20 withdrawals, commencing with a balance of $35,000 on 28 June 2018 and ending on 31 December 2018, her daughter’s trust funds were spent. A comparison of the TFSA withdrawals and the respondent’s personal banking account revealed a telling pattern. When the respondent’s personal account was nearing depletion, she

would transfer money over from her daughter’s account and use it for her own expenses. The amount of $18,000 on 2 August 2018 waswithdrawn for the purchase of a car. The respondent acknowledged that she drove her daughter’s car with her permission because she“lost” her vehicle. [22] Transfers in the amount of $1,000 to $3,000 were made by the respondent in the months of June, July, August, September,October, November and December of 2018, and the balance of withdrawals by the respondent were in the range of $100 to $800 withinthe same time period.

The pattern established that the rate at which the respondent took money from her daughter’s trust funds increasedbased on her personal financial need, including using it for household renovations and household expenses. [23] Her records revealed a withdrawal of $2,000 which she attributed to a graduation party for her daughter. She stated that while itwas her intention to personally pay for this celebration and put the funds back in her daughter’s account once she received her income taxrefund, she was unable to do this after sustaining an injury.

A leak in her bathroom was another reason to spend her daughter’s moneyand large sums of money were paid to contractors for these renovations. A withdrawal of $230 for a Spa visit, which she said includedthe applicant, was made, as was an expenditure of $429 for glasses for someone other than her daughter. The transfers were replete withminor withdrawals as well for sundry items in amounts as low as $10 including coffee shops and fast food outlets, several of which shealleges were spent on her daughter and that she should not be responsible for their repayment.

ANALYSIS [24] The respondent does not dispute spending her daughter’s money in her failure to comply with the Court orders. She defends heractions, however, in stating that the bulk of these expenditures were made on her daughter’s behalf, totaling $29,461.82, leaving only abalance of $10,143.43 owing to the applicant, an amount which she has offered to pay.

It is her position that it is unjust enrichment and“double-dipping” for her daughter to now request the full amount of her trust funds with interest. [25] The protection and supervision of the estates of minors is a fundamental and time-honoured role of the courts, flowing from itsinherent jurisdiction to protect the vulnerable. This significant public interest is acknowledged in modern legislation. Steele J. (as hethen was) in Wicks v. Duffett (1983), 41 Nfld. & P.E.I.R. 58, 119 A.P.R. 58 (Nfld. S.C.(T.D.)), addressed the important supervisory roleplayed by the courts in protecting a minor’s trust fund.

In Wicks, he declined a parent’s request to withdraw money from a court-orderedminor’s settlement to assist with the financing of a family home, to be secured by a first mortgage on the property. Steele J. wrote atparagraphs 8 - 11: 8 In my opinion, this is an application that ought not to be granted. 9 In matters of this nature the interest of the child is the first and paramount consideration. 10 There is no direct financial benefit to the child in loaning his money to his mother in this manner.

There may be an indirect benefitto the child in that the dwelling at Mount Pearl will become his home but there is no direct financial benefit in the investment. 11 I should also observe that it is contrary to the policy of the registrar of the Supreme Court to loan a child’s money to his or herparent — regardless of the value or method of security. In this respect, I am conscious of the fact that the registrar is guardian and trusteefor hundreds of infant estates and I am not aware of any case where money has been loaned, by way of mortgage, by a child to his or herparents.

In my view, this would set an unfortunate precedent and establish a practice that would be very unwise. [26] Court decisions consistently uphold the protection of trust property and maintenance of a trustee’s duties. In Murphy v. Murphy(1990), (NL SC), 84 Nfld. & P.E.I.R. 116, 262 A.P.R. 116 (Nfld. T.D.), the plaintiff’s brother had agreed to invest hissister’s funds and was given a general power of attorney for this purpose. He lost all her money in a bad investment.

The court foundthat the defendant was in breach of his fiduciary duty to the plaintiff and was obliged in law to invest her funds in interest-bearingaccounts. He was liable not only for the principal fund but also for the interest. The court ordered as follows with respect to interestpayable at paragraph 17: 17 Accordingly I find that the Defendant is to account to the Plaintiff for the interest on the funds based on the interest rateapplicable for the most common savings account for each month that the Defendant had the funds.

In this regard I accept the calculationmade by Janice Gray, an accountant with Touche Ross who, in making this calculation, allocated one-twelfth of the total yearly paymentsmade by the Defendant on behalf of the Plaintiff to each month. In accepting this calculation I find that the Defendant owes the Plaintiffthe sum of $5,587.66 as of August 31, 1989. See also Fraser (Guardian ad litem of) v. Fraser, 2000 BCSC 211. [27] In Garland v. Clarke (1982), 41 Nfld. & P.E.I.R. 75, 119 A.P.R. 75 (Nfld. D.C.), the defendant had assumed a fiduciary duty inrelation to the management of the plaintiffs’ money.

He used this money to create an apartment, thereby enhancing the value of his ownreal property. As fiduciary, he was held accountable for expenditures of the money received (at paragraph 25). The court further foundthe defendant to be in breach of the trust for failing to obtain direction from the court in advance of making the expenditures (paragraphs39-40). [28] The Supreme Court of Nova Scotia in Ryan v. Sleigh, 2007 NSSC 191, had occasion to consider a case similar to thisproceeding.

In Ryan, a minor’s court-appointed guardian failed to invest her trust monies, instead co-mingling them with her ownpersonal bank account and spending the total amount. The defendants were the minor’s older sister and brother-in-law who had takenlegal custody of the ten-year-old following the tragic death of their parents in a motor vehicle accident. There were two older brothers as

well and each received $35,000 in an equal sharing of their parents’ life insurance policy. [ 29 ] The insurer would not pay the child’s monies to her sister until there was a guardianship order in place. The defendants were appointed guardians of the plaintiff’s monies and ordered to post a bond with the court to secure their obligations under the guardianship order. Contrary to their duties as guardians, they deposited the child’s trust monies into their personal account and depleted the full sum within two years and four months.

As advanced by the respondent here, the defendants maintained that they had spent the money for the benefit of the plaintiff while being cared for in their home. They constructed a list of expenses claimed to have been made on the child’s behalf, including the cost of every gift they ever gave to her, food, treats, clothing, and recess money. The evidence disclosed that they were in receipt of a monthly pension for her care and that her brothers had also offered to help, as needed.

Her guardians also claimed the additional costs of purchasing a family van to accommodate their two children and the plaintiff. [ 30 ] The Nova Scotia Supreme Court in Ryan found the list of expenses inappropriate because a parent has a legal responsibility to care for their child, citing Fink v. British Columbia (Public Guardian & Trustee ), 2002 BCSC 438 , at paragraph 41 .

The court looked to the guardianship order which confirmed their guardianship duties: “Its language is clear that the guardian’s duty is to keep safe and secure for the benefit of the infant the monies she was entitled to and to manage these funds for her benefit and to render a true account when the child reaches the age of 19.” ( Ryan , paragraph 45 ). [ 31 ] The defendants in Ryan were found to have breached the order in co-mingling the child’s money with their own, asking the court to sanction expenditures only after the fact (at paragraph 53): 53 Clearly, Kenneth and Lorna Sleigh were Guardians and Trustees and were therefore required to meet the statutory obligations imposed by the Guardianship Act and the Trustee Act .

They had an express duty to deliver to Crystal Ryan when she attained the age of 19, the fund they held for her. They had a duty to invest and preserve the fund and not waste it, deducting only a reasonable sum for expenses and charges as a guardian.

They abysmally failed in this duty. [ 32 ] Their attempt to justify monies spent from the minor’s trust fund is criticized by the court in Ryan at paragraphs 66 and 67 : 66 I cannot except that every gift given should be the subject of an accounting at this date, along with the supposed value of other items, such as used furniture given to Crystal when she finally went to live on her own, or the full cost of two modest shared family vacations.

This is repugnant to me and actually imposes greater hurt on a young woman who all the time believed her sister had welcomed her as a member of her own young family. 67 I do not wish to severely penalize the Sleighs for their mistakes, but at the same time the Court must ensure that the responsibilities of Guardians and Trustees are taken seriously.

Crystal Ryan must receive the modest insurance proceeds that are rightfully hers. [ 33 ] An order for recovery of the funds with interest was awarded to the plaintiff, with a deduction of $8,000 for a contribution only to the “extraordinary” cost of a van purchase to accommodate the fact that the defendants’ car was suited to their family of two children but was not sufficient for the addition of the plaintiff ( Ryan , paragraph 68 ). [ 34 ] In this case, the respondent breached orders of this Court in failing to honour the very investment vehicle she herself had requested to protect her daughter’s settlement funds.

Despite advising the Court that her proposal would enhance her daughter’s investment by avoiding the administrative expense associated with the Office of the Public Trustee, she proceeded to immediately co- mingle the trust funds with her own personal account and spend those monies with abandonment. She further denigrates her role as guardian by characterizing her daughter’s access to this Court to uphold Court orders for her protection, as

an act of revenge related to a dispute over a cat. [ 35 ] I do not accept that she did not understand her responsibility to protect these funds. She was responsible to parent her daughter while a minor and cannot seek retroactive approval for monies which she claims have benefited the applicant. The lavish expenditure of a new car without Court approval cannot be condoned. It is noteworthy that its purchase coincided in time with the respondent’s personal need to replace her own vehicle.

The law as embodied in orders of this Court and this Court’s significant role in their supervision and enforceablility as articulated by Steele J. in Wicks affords the applicant the redress she seeks in upholding the integrity of her guardian’s duty to protect her funds during the period that she was a minor. This duty is further set out in

section 56 of the Children’s Law Act , R.S.N.L. 1990, c. C-13 . See also Trustee Act , R.S.N.L. 1990, c. T-10 . [ 36 ] The applicant seeks interest on the trust funds on the basis that the investment approved by the Court would have yielded between 2.8% - 3.1% interest according to the average rate of return for GIC investments for that timeframe, being between $1,663.40 and $1841.62, or $1,752.51 relying upon the online source: www.ratehub.ca, “Best GIC’s of 2018”.

I am satisfied that the respondent is responsible for interest both in terms of the orders of this Court and in accordance with her duties as trustee and guardian. [ 37 ] The applicant shall have the relief requested in this proceeding. [ 38 ] The respondent shall forthwith pay to the applicant the sum of $39,605.25 plus interest in the amount of $1,752.51. [ 39 ] The applicant has the possession of and is currently using the vehicle purchased in 2018.

The evidence satisfies me that the applicant and respondent shared this car and that the applicant contributed to its insurance from her part-time salary, in addition to monies taken from her trust account. Upon the payment in full to the applicant by the respondent of her trust funds in the amount of $39,605.25 plus interest in the amount of $1,752.51 and Court costs, the applicant shall have the vehicle appraised at its then current value. From this amount she shall deduct the full cost of its appraisal and all sums which she has expended on insurance, maintenance and registration fees.

She shall account to the respondent for one-half of this amount only, given the extensive use of the car by the respondent which benefited her for the period in which she used the vehicle. If the applicant decides at that time that she does not wish to keep the car, she may sell it and retain one-half of the proceeds, subject to the same deductions as referred to above. In any event, there shall be no accounting to the respondent for one-half the value of the vehicle, less the deductions until the trust funds in the amount

of $39,605.25 plus interest in the amount of $1,752.51 and Court costs are fully repaid by the respondent to the applicant. [ 40 ] Given the unfortunate circumstances resulting in the applicant being forced to initiate court proceedings against her mother in order to recover trust funds secured by orders of this Court, she shall have her costs in accordance with Column 5 of the Scale of Costs in the Appendix to Rule 55 of the Rules of the Supreme Court, 1986 , S.N.L. 1986, c. 42, Sch. D . Order accordingly . _____________________________ Deborah J. Paquette Justice