2012 QCCQ 5767, 2012 QCCQ 5767

Whitney c. Houle (Heenan Blaikie) 2012 QCCQ 5767 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL TOWN OF MONTREAL Civil Division 500-32-118854-092 DATE: June 1 st , 2012 ______________________________________________________________________ BY THE HONOURABLE SUZANNE HANDMAN, J.C.Q. ______________________________________________________________________ DAVID WHITNEY [...], Whitby (Ontario) [...] Plaintiff vs. LOUISE HOULE Heenan Blaikie, 1250, boul.

René-Lévesque O., s. 2500, Montréal (Québec) H3B 4Y1 Defendant ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Mr. Whitney filed two actions, the present one against Me. Louise Houle as well as an action against Spiegel Sohmer inc. (500- 32-118222-092). The actions involve the same evidence and were heard on the same day. Both cases concern Mr. Whitney’s assertion that Court approval is required in order for a trustee’s resignation to be valid. [ 2 ] In the action against Spiegel Sohmer, Mr.

Whitney claimed the reimbursement of a portion of the legal fees, he paid, for services rendered. He maintained that Spiegel Sohmer mishandled its mandate, by failing to obtain the Court's approval with respect to his resignation and the appointment of his replacement as a trustee, to ensure that he has no further liabilities. [ 3 ] In this action, Mr. Whitney is suing Me. Houle for $999. He requests that Me. Houle, who had acted on behalf of the capital beneficiary of a Trust, pay him this sum so that he can hire counsel to obtain Court approval of his resignation. [ 4 ] Me.

Houle denies the action instituted against her. The questions in litigation: 1. Was the resignation of Mr. Whitney, as a trustee, valid or did it require the approval of the Court in order to come into effect? 2. Is it necessary to obtain the Court's approval of his resignation and of the appointment of his replacement to relieve Mr. Whitney of any liability for his role as a trustee? The action against Spiegel Sohmer: [ 5 ] In order to understand this case, it is necessary to relate the facts and the conclusion the Court reached in the file regarding Spiegel Sohmer, which is reproduced below.

The evidence: “[3] This case stems from Mr. Whitney's appointment, as a trustee of the Estate Louise Edwards and his desire to be released from his obligations, without liability. The background is as follows: [4] A testamentary Trust was created in virtue of the Will and Codicil of the late Mary Louise Edwards [1] , in 1979 and varied in 2000 by a Superior Court judgment [2] . It was known as the Estate Louise Edwards-Eric Hoguet Investment Fund. As a result, Eric Peter Hoguet was appointed as a trustee of this Trust. David Whitney was appointed as a third trustee, in addition to Mr. Hoguet and the other

trustee, Alan Edwards. [5] Given that Mr. Hoguet and Mr. Edwards were beneficiaries, Mr. Whitney fulfilled the position of a trustee who is neither a settlor nor a beneficiary, as required by

article 1275 of the Civil code of Quebec (C.C.Q.). [6] Mr. Whitney was concerned about certain tax matters, involving the Trust, and alleged trustee fraud. He considered there to be serious trustee errors and omissions, which he claims could affect the heirs. He maintains that he was asked by the beneficiaries not to divulge his concerns to anyone. [7] Mr. Whitney, uncomfortable in this position, decided he no longer wished to act as a trustee. He also wished to protect himself with respect to any liabilities that could arise [3] .

He consulted legal counsel with respect to resigning as a trustee. [8] After dealing with two different law firms, in 2007, he mandated Me. Martin Daniel Boily, of the firm Spiegel Sohmer, to act on his behalf, in obtaining his release as a trustee. Me. Boily provided Mr. Whitney with various legal opinions to confirm the absence of any liability on his part, as long as he did not participate in a decision of the trustees. [9] After receiving explanations regarding his lack of liability, Mr.

Whitney withdrew his request to resign. [10] However, he then changed his mind and, in October 2007, again requested that Speigel Sohmer proceed to obtain his resignation as a trustee. [11] In the interim, Mr. Edwards, who had been a trustee, passed away in March 2007. It was foreseen that upon his death, the capital beneficiary would be a foundation. The Louise and Alan Edwards Foundation became that beneficiary. [12] On October 25, 2007, in order to have a replacement for Mr. Edwards, Ms. Tracey Briscoe, a foundation employee, was appointed as a trustee. [13] Immediately after the appointment of Ms.

Briscoe, a special meeting of the Board of Directors of the Louise and Alan Edwards Foundation was called (the Foundation being a contingent capital beneficiary of the Estate Louise Edwards-Eric Hoguet Investment Fund [4] ). [14] The Board, advised as to Mr. Whitney's desire to resign as trustee of the Estate Louise Edwards-Eric Hoguet Investment Fund and his wish to be indemnified in the event of a lawsuit or tax assessment for the years during which he was acting as trustee, approved that a mutual release and indemnity agreement be executed. [15] On October 25, 2007, at a meeting attended by Mr.

Whitney as well as the “Fund Related Parties” [5] , negotiations took place concerning the applicable conditions concerning Mr. Whitney's resignation. [16] Mr. Whitney sought the payment of $50,000 to resign. He accepted an offer of $18,546.25 and submitted his letter of resignation to the Estate Louise Edwards-Eric Hoguet Investment Fund. His letter, dated October 25, 2007, was kept in escrow until payment was made to Mr. Whitney. Spiegel Sohmer retained an amount for its legal fees; Mr. Whitney received the difference. [17] After reaching agreement with respect to his compensation, Mr.

Whitney and the “Fund Related Parties” signed a Mutual Release and Indemnity Agreement, which discharges Mr. Whitney from all past, present or future obligations and liabilities. [18] However, subsequently, after considering the matter further, Mr. Whitney concluded that he is still a trustee, since Ms. Briscoe, who he says replaced him, is employed by a beneficiary. [19] Mr. Whitney submits that he cannot be replaced, without contravening

article 1275 C.C.Q., since one of the heirs (Mr. Hoguet) and Ms. Briscoe, an employee of a beneficiary, namely the Foundation, are the sole trustees. He describes the situation as follows in one of his many e-mails to Spiegel Sohmer: “This conflicts with their fiduciary duty. That is why CC 1275 states that they can't act “alone” without me. One is an heir & both act via a foundation for another heir.” [20] According to Mr. Whitney, his replacement does not have the same independent status as he had. [21] Mr.

Whitney fears that, since his resignation and the appointment of a new trustee have not been approved by the Court, he remains liable for any accounting problems related to the Trust and any misdeeds the Trust committed. He considers that, without the Court's intervention, his resignation is void. He is also concerned by the fact he never provided his replacement with an accounting. [22] He sought answers regarding his concerns, sending a letter to one of the Foundation directors as well as various e-mails to Spiegel Sohmer, without any resolution. [23] Me. Boily disputes Mr. Whitney's position.

Throughout the negotiation process, Mr. Whitney's brother was present to provide counsel and Mr. Whitney accepted the monetary settlement offered him. The sum paid represents compensation for expenses incurred by Mr. Whitney with respect to his involvement with the Estate Louise Edwards-Eric Hoguet Investment Fund. [24] Me. Boily maintains Mr. Whitney was not coerced to resign and there is no evidence to suggest that the legal advice Mr. Whitney received from Spiegel Sohmer was incorrect. Me. Boily submits Mr.

Whitney was diligently served and the law firm's fees were reasonable. [25] As for the appointment of Ms. Briscoe, as an independent trustee, Me. Boily contends that it was done in accordance with the terms of the will. She met all the conditions of the Civil code of Quebec , to act as a trustee, and there was no reason to believe that she would not fulfill her mandate in good faith.

[26] In addition, Spiegel Sohmer received confirmation from RBC Dexia Investor Services confirming that the funds held in the name of the Fund exceed $1.5 million. Accordingly, the capital of the Trust had not decreased at the time of Mr. Whitney's resignation, which substantiates the absence of mismanagement of the Trust. [27] Subsequent to his resignation, Mr. Whitney continued to inundate Spiegel Sohmer with faxes and e-mails despite the fact that the firm assured him that his resignation was in keeping with the law.

The firm considered that the discharge was signed by the trustees and its mandate had ended. [28] According to Me. Boily, Mr. Whitney had no liabilities stemming from his appointment as a trustee and his resignation was effected in accordance with the Estate, the Trust and the Civil code . When Mr. Whitney wished to pursue the matter, the law firm requested a $5,000 retainer, which it never received. [29] Mr. Whitney, however, pursued his complaints with other bodies such that Speigel Sohmer had to report to its insurers and to the Quebec Bar Association. Me. Boily maintains that Mr.

Whitney has not met his burden of establishing any misdeed with respect to the services rendered by Spiegel Sohmer. Analysis: [30] Mr. Whitney is seeking the reimbursement of $2,876.67, which he paid to Spiegel Sohmer. He submits that Me. Boily, of that firm, deceived him by arranging for his resignation as a trustee, without petitioning the Court. Mr.

Whitney maintains that since his resignation is not valid in the absence of Court approval, he remains a trustee and therefore, has paid Spiegel Sohmer needlessly. [31] In light of the evidence and the provisions of the Civil code of Quebec , the Court concludes that there are no grounds for Mr. Whitney's action. [32] Mr. Whitney was appointed a trustee in virtue of a Court judgment and assumed the role of an independent trustee, namely one who was neither a settlor nor a beneficiary (

article 1275 C.C.Q.). [33] However, once he assumed this role, there is no requirement for Court approval for his resignation to come into effect.

Article 1277 of the Civil code of Quebec stipulates: “The court may , at the request of an interested person and after notice has been given to the persons it indicates, appoint a trustee where the settlor has failed to do so or where it is impossible to appoint or replace a trustee.” (the underlining is ours) [34] Accordingly, the Court intervenes for the purposes of appointing a trustee only when it is requested to do so and in cases where no one has been named by the settlor or when it is impossible to appoint or replace a trustee. [35] None of these situations applies in the present case.

The Trust Documents [6] provide that, should there be less than three trustees in place, the remaining trustees shall appoint the necessary replacement. This was effectively carried out. [36] While Mr. Whitney testified that he was replaced by Ms. Briscoe, without Court authorization, the documents on file indicate that Ms. Briscoe was appointed to replace Mr. Edwards, who had passed away; she was not appointed to replace Mr. Whitney. [37] Mr. Whitney was subsequently replaced on April 24, 2008 by Ms. Jane Edwards, as the third trustee. Both the appointment of Ms. Briscoe and that of Ms.

Edwards were effected in accordance with the Trust Documents. [38] As for Mr. Whitney's role, in accordance with

article 1355 C.C.Q., his duties, as a trustee and administrator, end upon his resignation. He may resign by giving written notice to the beneficiary and where applicable to his co-administrators [7] . [39] In this case, his resignation as a trustee of the Estate Louise Edwards-Eric Hoguet Investment Fund went into effect on October 25, 2007. As stipulated in his resignation letter, dated October 27, 2007, “such resignation is to be effective immediately.” [40] Mr.

Whitney is concerned about his potential liability for errors or omissions in the administration of the Fund and incorrect reporting and accounting by his co-trustees, which he alleges occurred during the time he was a trustee. [41] However, an unconditional release and discharge was provided by the Estate Louise Edwards-Eric Hoguet Investment Fund, Eric Peter Hoguet and the other Fund parties, such that Mr.

Whitney cannot be held responsible for any past, present or future actions, costs, expenses, liabilities, obligations, losses, etc. relating to his duties as a trustee of the Estate Louise Edwards-Eric Hoguet Investment Fund. [42] The Mutual Release and Indemnity Agreement ensures that Mr. Whitney is protected from any and all claims that may be made against him with respect to his involvement as a trustee of the Estate Louise Edwards-Eric Hoguet Investment Fund. [43] In sum, Mr. Whitney's resignation is valid and there is no need to have same confirmed by a Court.

He has been validly discharged and is no longer a trustee. [44] Mr. Whitney is concerned that he did not provide an accounting to the other trustees and particularly to Ms. Briscoe, as foreseen by

section 1363 C.C.Q.. However, the parties who have interest under the Code have discharged Mr. Whitney from any liability that may arise in this regard. [45] The same applies with respect to Mr. Whitney's contention that Ms. Briscoe does not meet the requirement of having an independent status and that her appointment was not approved by the Court. As already indicated, the Trust Documents provide that a trustee is replaced by the remaining trustees, not by the Court. In addition, Mr. Whitney assumes no responsibility for any liability,

should it be determined that Ms. Briscoe's appointment does not meet the requirements of the Code. [46] Finally, Mr. Whitney's numerous e-mails to Spiegel Sohmer allude to errors and omissions, trustee fraud and laundering, including the operation of a fake trust for tax evasion purposes. However, the Court is not seized with this issue and it makes no comment on the allegations. [47] The present action before the Court solely concerns Mr.

Whitney's request for reimbursement of a portion of the legal fees he paid, to Spiegel Sohmer, on the ground that the firm failed to respect its mandate and obtain Court approval for his resignation as a trustee and for the appointment of his replacement, leaving him vulnerable to potential lawsuits. [48] There is no evidence that Mr. Whitney asked Spiegel Sohmer to obtain Court recognition of his resignation as a trustee or its approval of the appointment of his replacement. Mr. Boily denies that the mandate the firm received from Mr.

Whitney involved obtaining Court approval and, as already indicated, such approval is not required. Accordingly, Mr. Whitney, who has the burden of proof, has not satisfied the Court, by preponderant evidence, that his action is well founded. FOR THESE REASONS, THE COURT: DISMISSES David Whitney's action against Spiegel Sohmer inc.; THE WHOLE , with costs.” Analysis of the present action concerning Me. Houle: [ 6 ] In this action, Mr. Whitney is claiming the sum of $999 from Me. Louise Houle, who represented the Louise and Alan Edwards Foundation.

He believes that Court recognition of his resignation and the appointment of his replacement is required. He considers this amount will provide him with the funds needed to engage counsel to obtain the requisite approval by the Court. [ 7 ] It should be noted that Mr. Whitney recognized that the outcome of this action was dependent upon the conclusion reached in his action against Spiegel Sohmer. However, the Court had not yet rendered judgment in the Spiegel Sohmer case and, therefore, this case proceeded, as scheduled. [ 8 ] Me. Houle argues that since October 25, 2007, Mr.

Whitney is no longer a trustee; his duties have ended. Although he alludes to irregularities, there are no outstanding taxes payable by the Trust known as the Estate Louise Edwards-Eric Hoguet Investment Fund. [ 9 ] She points to the fact that since the accounts for the Estate Louise Edwards-Eric Hoguet Investment Fund have increased, there is no evidence that the Trust has been mismanaged. Finally, Me. Houle submits that Mr. Whitney has no legal interest today with respect to the issues raised. [ 10 ] There is no need to deal with the parties' representations.

In light of the conclusion reached in the file of Whitney vs Spiegel Sohmer, reproduced above, namely that Court approval is not required for either Mr. Whitney's resignation or for the appointment of his replacement, there is no basis for this action against Me. Houle. FOR THESE REASONS, THE COURT: DISMISSES David Whitney's action against Louise Houle; THE WHOLE , with costs. __________________________________ SUZANNE HANDMAN, J.C.Q. Date of hearing: May 15, 2012