) ) SIMON MARIA KAPTYN, Co-executor v. Trustee of the Estate of John, 2013 ONSC 4908

CITATION : Kaptyn Estate (Re), 2013 ONSC 4908 COURT FILE NO.: 05-40/70 DATE: July 23, 2013 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: ) ) SIMON MARIA KAPTYN, Co-executor and Trustee of the Estate of John Johannes Jacobus Kaptyn Applicant – and – HENRY WILLHELM KAPTYN, Co-executor and Trustee of the Estate of John Johannes Jacobus Kaptyn, HENRY WILLHELM KAPTYN, personally, SIMON MARIA KAPTYN, personally, JASON KAPTYN, JONATHAN KAPTYN, SAMANTHA KAPTYN, ROBERT KAPTYN, ALEXANDER KAPTYN, MARY KAPTYN, DOREEN KAPTYN, MARKTUR LIMITED, 1171757 ONTARIO LIMITED, WEST BEAVER CREEK MANAGEMENT INC., CAPTAIN INVESTMENTS INC., 9005 LESLIE STREET INC., 9011 LESLIE STREET INC., ELGIN COMMERCIAL DEVELOPMENTS INC., JUBILEE COMMERCIAL HOLDINGS INC., PARKWAY HOTELS AND CONVENTION CENTRE INC., 698380 ALBERTA LTD., PARKWAY HOTELS AND CONVENTION CENTRE PARTNERSHIP, PARKWAY RACQUET AND FITNESS CLUB LIMITED, CAPTAIN GENERATION-MALL LIMITED 9120 LESLIE STREET INC.

Respondents ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) )) ) ) R.P. Bohm for the Applicant Alexander Kaptyn

) ) J.D. Oelbaum and R. Levesque for the Respondent and Cross-Applicant Simon Kaptyn M.W. Kerr and K.A. Charlebois for the Respondents Jason Kaptyn and Jonathon Kaptyn M. Furrow for the Children’s Lawyer Henry Kaptyn, Respondent, self-represented ) HEARD : July 19, 2013 PERELL, J. REASONS FOR DECISION A. INTRODUCTION AND OVERVIEW [ 1 ] Before the court are a motion and a cross-motion seeking directions with respect to the administration of the estate of the late John Kaptyn. The motion is brought by Alexander Kaptyn on his own behalf and on behalf of his siblings Samantha and Robert.

Alexander’s motion is supported by his father, Henry Kaptyn. [ 2 ] The cross-motion is brought by Simon Kaptyn, who is Henry’s brother, and the cross-motion is supported by Jason and Jonathan Kaptyn, who are Simon’s sons. [ 3 ] At the hearing of the motions, the parties came to an agreement about several issues, and I adjourned several issues to be heard on September 11, 2013. I endorsed the record accordingly. [ 4 ] I reserved judgment on three issues that were raised in Alexander’s motion; namely:

(1) Captain Investment’s claim for $1,083,061 for a lost tax benefit;

(2) Captain Investment’s claim for reimbursement for the tax on a foreign exchange gain; and

(3) Samantha, Alexander, and Robert’s claim that the Estate Trustees be ordered to execute an indemnity with respect to the potential

liabilities of Marktur Limited. [5] For the reasons that follow, I allow both of Captain Investments’ claims, but I dismiss the claim for an indemnity withrespect to Marktur. B. JURISDICTION [6] In resisting Alexander’s motion, Simon, Jason, and Jonathan took the position that the court does not have the jurisdiction toresolve the three outstanding issues and that these issues should be decided as an aspect of the eventual passing of the accounts of theKaptny Estate. Further, they argued that a trial of an issue might be required.

And, in any event, they argued that the claims of CaptainInvestments are res judicata. [7] I disagree with these submissions. [8] The Kaptyn Estate has been much before the court, and until this motion, no party has disputed the court’s jurisdiction tomake orders and directions to implement the administration of the Estate. As I will describe below, when the Estate Trustees have shownthemselves to be at an impasse, all the parties have turned to the court to break up the logjam.

Justice Strathy went so far as to refer tohimself as the third trustee. [9] The procedural history reveals that after a trial before Justice Lederer and an

interpretation motion before Justice DavidBrown, Justice Strathy, was appointed to case manage the estate litigation, and until his elevation to the Court of Appeal, he wasfrequently called on to make decisions to implement the administration of the Kaptyn Estate. Justices Lederer, Brown, and Czutrin werealso involved in providing

interpretations and directions. In his judgment in April 2011, Kaptyn Estate (Re), 2011 ONSC 2212, JusticeStrathy stated at para. 17: 17. The parties acknowledge that the court has inherent jurisdiction over the activities of trustees and that where the trustees areunwilling or unable to exercise their discretion, or where a disagreement makes it impossible to exercise their discretion, the court isentitled to direct the trustees to take appropriate action: see Haasz Estate (Re) (1959), (ON CA), 21 D.L.R. (2d) 12,[1959] O.J. No. 354, (C.A.); Re Billes (1983), (ON SC), 42 O.R. (2d) 62, [1983] O.J.

No. 3057 (H.C.J.). While theremoval of deadlocked trustees is one option, the court can intervene and resolve the impasse between the trustees by, in effect, makingthe "casting vote:" Re Blow (1977), (ON SC), 82 D.L.R. (3d) 721, [1977] O.J. No. 2510 (H.C.J.). [10] It has been convenient for Simon, Jason, and Jonathan to rely on the court’s jurisdiction to have the court direct thecompletion of several bequests for them, and it does not lie in their mouth to challenge this jurisdiction now. To speak colloquially, whatwas good for the goose is good for the gander.

As a matter of jurisdiction, the motion and the cross-motion just continue the work startedbut not completed by Justice Strathy and other judges of this court.

I agree with Justice Strathy that the court has the jurisdiction todecide these matters. [11] Moreover, ironically, Simon, Jason and Jonathan must concede that the court has the jurisdiction that they now challenge inorder to advance their argument that res judicata bars Alexander from making his claims at this juncture. [12] However, Alexander’s claims with respect to Captain Investments are not res judicata, and for present purposes, it is notnecessary for me to say much about the law of res judicata. [13] Although in their respective factums, Simon, and Jason and Jonathan set out the law about res judicata, they disregard theimportant principle that there is an element of judicial discretion to the determination of whether there is an issue estoppel.

See Danylukv. Ainsworth Technologies Inc., 2001 SCC 44 , [2001] 2 S.C.R. 460. [14] In Danyluk, the Supreme Court of Canada held that where a party establishes the pre-conditions for an issue estoppel, a courtmust still determine whether, as a matter of discretion, an estoppel ought to be applied. The court should stand back, and taking intoaccount the entirety of the circumstances, the court should consider whether application of issue estoppel in the particular case wouldwork an injustice.

The factors that the court may consider include the purpose of the first proceeding compared to the purpose of thesubsequent proceeding, the stake or interest of the parties in the first proceeding, the comparative expertise of the decision makers, thecomparative nature of the procedures associated with the proceedings, the extent of the party’s participation in the prior proceeding, andthe presence or absence of a right of appeal. See: Penner v. Niagara (Police Services Board), 2011 ONCA 616; Metropolitan TorontoCondominium Corp. No. 1352 v.

Newport Beach Development Inc., 2012 ONCA 850. [15] Standing back from the case at bar, even if all the conditions for res judicata were satisfied, of which I have some doubt, Iwould not invoke res judicata in the circumstances of this case. Taking into account the history of this litigation and all thecircumstances, in my opinion, it would be unfair and not in the interests of justice to refuse to resolve Alexander’s and his sibling’sclaims on their merits. [16] Further, in my opinion, there is no need to wait for the passing of the accounts and the record is more than adequate to decidethe various issues now.

The quality of the evidence is similar to the evidence on the various attendances before Justice Strathy. C. GENERAL FACTUAL AND PROCEDURALBACKGROUND [17] The late John Kaptyn disposed of his property by two wills, a Primary Will and a Secondary Will, both executed on April 5,2007. On April 25, 2007, he executed one codicil to each of those wills. In both wills, John Kaptyn named his two sons, Simon and

Henry, as co-executors. [18] On May 8, 2007, a few weeks after making his testamentary dispositions, John Kaptyn died, and he left a substantial estatevalued at about $75 million. [19] John Kaptyn was survived by: his wife, Doreen Kaptyn; his ex-wife, Mary Kaptyn, recently deceased, who is the mother ofSimon and Henry, and by five grandchildren. Simon has two children, Jason and Jonathan. Henry, has three children, Samantha, Robertand Alexander. [20] At the time of his death: • John Kaptyn absolutely owned: o Elgin Commercial Developments Inc., an inactive corporation ; o 9011 Leslie St.

Inc.; o West Beaver Creek Management Limited, a company which owned two properties: (i) 611 Wonderland Road (also known as the Hensim property); and (ii) 650 Highway 7 East; and, o 1171757 Ontario Limited, which had an 80% interest in the Parkway Hotel and Convention Centre. • John Kaptyn had an 80% interest in: o 9005 Leslie St. Inc.; and, o Jubilee Commercial Holidays Inc. • He owned: o 100% of the common shares and preference shares in Marktur Limited, a company in which the Kaptyn Family Trust indirectlyowned certain Class X shares.

Marktur was itself a holding company, and it made loans and received loans from the other Kaptyncompanies. Marktur owned Captain Investments Inc., which, in turn, owned a commercial plaza and a residential beach house in Florida.Captain Investments was the means used by John Kaptyn to purchase real estate in the United States. [21] The history of John Kaptyn’s testamentary dispositions are set out in the Reasons for Decision of Justice Lederer in acontested probate application in 2008; see: Re Kaptyn Estate, (ON SC), [2008] O.J.

NO. 4032 and in the Reasons forDecision of Justice David Brown on a motion for advice and directions in 2010; see: Kaptyn Estate v. Kaptyn Estate, 2010 ONSC 4293. [22] As a matter of testamentary intent, the wills of John Kaptyn indicate an intention to distribute his real estate assets to hisgrandchildren free of corporate tax liabilities. [23] In his Primary Will, John Kaptyn transferred all his property except for his “secondary estate”. Under the Primary Will, hisdebts were to be paid, various gifts, legacies, and charitable donations were made, and residences were transferred to his wife and his ex-wife.

The residue was divided into five shares with one share (20%) to Simon and four shares (80%) to Henry. [24] In his Secondary Will, the Trustees were directed: • to liquidate Marktur and use the proceeds to repay certain intercompany loans and certain taxes (clause 4(d.1)); • to "take such steps as are reasonably necessary to maximize the net benefit to each of his grandchildren" (clause 4(d.2)); • to convey to Jason and Jonathan (Simon’s children): (1) 1171757 Ontario Limited, which owned an 80% interest in the SheratonParkway Hotel; (2) 9005 Leslie Street Inc., which owned a commercial building; and (3) 650 Highway 7 East, a commercial building inRichmond Hill, which, as noted above, is owned by West Beaver Creek Management Inc. (clause 4(e)); and, • to convey to Samantha, Alexander, and Robert (Henry's children): (1) 9011 Leslie Street Inc.; (2) 611 Wonderland Road (theHensim Property), which, as noted above, is the other property owned by West Beaver Creek Management Inc.; and

(3) CaptainInvestments, Inc. (clause 4(f)). [25] Under the Secondary Will, the residue was divided into five shares, with one share to be distributed to Simon and four sharesto Henry. [26] Under the Secondary Will, the bequests to Simon’s children are direct conveyances. However, the conveyances to Henry’schildren are routed through a testamentary trust. The property for Henry’s children is to be held in trust until each child attains the age of35. Samantha is now 28 years old.

Alexander is now 26 years, and Robert is currently 24 years old. [27] The implementation of the Secondary Will presented at least two major problems. One problem is associated with WestBeaver Creek Management Inc. The difficulty was that it owned two properties, one of which was destined for Simon’s children and theother to Henry’s children. A method needed to be developed to accomplish these conveyances. Ultimately, it was decided that a butterflytransaction involving the transfer of shares and assets to two new corporations was the way to proceed.

The idea behind the butterflytransaction is that two new companies would be incorporated, one of which would own for Simon’s children 650 Highway 7 Easttogether with the associated cash and liabilities and the second of which would own for Henry’s children the 611 Wonderland Roadproperty together with the associated cash and liabilities, including a loan payable from Marktur. Implementing the transfer of the WestBeaver Creek properties via the “butterfly” transaction would save the Estate approximately $2,000,000 in taxes.

[ 28 ] The second problem is associated with Captain Investments, which was to be conveyed to Henry’s children. Captain Investments was owned by Marktur, a corporation that under the wills was to be used to repay inter-company loans and corporate taxes. The difficulty was if Marktur was wound up and Captain Investments conveyed in accordance with the will as literally written, then the Kaptyn Estate would incur a substantial tax liability of around $7 million.

To solve the second problem, adopting a recommendation from KPMG, the Es t a t e Trus t ees eventually agreed to a “pipe l ine” strategy to t ransfer Captain Investments. [ 29 ] After the release of Justice Brown’s decision, Henry and Simon engaged KPMG to advise them of the steps required to effect the distribution of the gifted companies and the real property to the grandchildren. KPMG delivered three memoranda, dated October 15, 2010, January 31, 2011, and February 5, 2011, setting out its recommendations.

KPMG outlined the tax consequences of various methods of distributing the common shares of Captain Investment to the beneficiaries.

As Justice Strathy noted in his reasons for decision ( Kaptyn Estate (Re) , 2011 ONSC 2212 at para. 19 ), in the least palatable alternative, taxes of some $7 million could be payable by the estate and in the most palatable alternative, there would be no immediate tax consequences, but the marketability of Captain Investment’s common shares might be compromised because they would carry a significant tax liability. [ 30 ] On January 18, 2011, Justice Strathy directed the trustees to prepare a distribution plan for consideration by the court and the beneficiaries. [ 31 ] Simon, but not Henry, proposed a plan of distribution based on the recommendations of KPMG, the accountants retained to advise the Estate Trustees.

On April 5, 2011, Justice Strathy considered the plan of distribution. See Kaptyn Estate (Re) , 2011 ONSC 2212 . [ 32 ] To repeat, the plan of distribution involved a “butterfly transaction” to address the problem of West Beaver Creek Management Inc. owning two properties with different designated grantees, and the plan involved a “pipeline” strategy to address the problem that Captain Investments was owned by Marktur and that the Estate was exposed to a substantial tax liability.

At the April case conference, Simon conceded that there might be some merit in a proposal from Henry that his children be compensated for the loss of marketability of the shares in Captain Investments. Justice Strathy ordered further discussion and consultation with KPMG. [ 33 ] By reasons dated May 20, 2011, Justice Strathy addressed several outstanding issues and amended the distribution plan with the modification that a compensation payment was to be paid to the testamentary trust bequeathed to Henry’s children in the amount of $1 million to be paid out of the Estate.

This compensation was to be paid for the use of the pipeline strategy to transfer the shares of Captain Investments to the testamentary trust. See Kaptyn Estate (Re) , 2011 ONSC 3491 . Justice Strathy accepted the pipeline strategy adversely affected the marketability of the shares of Captain Investment. [ 34 ] After Justice Strathy’s orders: (

a) the taxes of the various corporations bequeathed to the grandchildren to the date of death were paid by the Estate; (

b) the inter-company loans were paid by the Estate; (

c) the preferred shares of Captain Investments required to allow for the disposition of Marktur were redeemed.

However, as discussed further below, Captain Investments’ taxes on a foreign exchange gain were not paid, and the transfers of property themselves were not completed. [ 35 ] In April 2012, Jonathan and Jason moved before Justice Strathy to compel Henry and Simon to complete the distribution of their properties. [ 36 ] By endorsement dated April 16, 2012, Justice Strathy set out the principles for the completion of the documentation for the distribution of properties; see Kaptyn Estate (Re) , 2012 ONSC 2299 . [ 37 ] On May 31, 2012, the shares of 1171757 Ontario Limited and of 9005 Leslie Street Inc. were transferred to Jason and Jonathan.

However, they have yet to receive the conveyance of the building at 650 Highway 7 East, which has been tied up by a now resolved dispute about the completion of the butterfly transaction. None of the conveyances to the testamentary trust for Samantha, Alexander, and Robert have been completed, but progress is now being made on this front as well. [ 38 ] The recent progress seems to have been precipitated by the motions now before the court.

Those motions began in in January 2013, when Alexander brought a motion on his own behalf and for his siblings for, among other things, a completion of the plan of distribution. [ 39 ] Alexander submitted that there were eight discrete issues interfering with the distribution of the assets. Three of those issues are the matters I am now deciding. D. DISCUSSION: CAPTAIN INVESTMENTS CLAIM FOR A LOST TAX BENEFIT [ 40 ] In the course of implementing the pipeline strategy, the Estate Trustees decided to use Captain Investment’s accumulated earnings and profits (AEP).

Under United States tax law, AEP may be used to pay tax free dividends out of the corporation, and the Estate paid itself a benefit $1,083,061.00 and reduced its tax liability for the pipeline strategy. However, the AEP was now depleted and it could not be transferred out to the new owners of Captain Investments. The beneficiaries of Captain Investments lost a tax benefit worth $1,083,061.00. [ 41 ] Henry Kaptyn says that he did not appreciate this consequence when he agreed to the pipeline strategy, and he thinks that the Estate should compensate Samantha, Alexander, and Robert for this loss.

Simon Kaptny disagrees, and he says that while Henry’s children’s suffered this loss from the pipeline transaction, they also received the unanticipated benefit of receiving Marktur, which has a capital dividend account that could similarly be used for tax free dividends. Simon, Jason and Jonathan also argue that this claim is res judicata because it was or it ought to have been resolved when Justice Strathy approved the plan of distribution.

[ 42 ] Simon and Alexander deny that there is any corresponding benefit to offset the lost AEP, and they say that if there was such a benefit, they would not use it, because their long term plans are not to use Marktur’s capital dividend account and rather their plan is to retain the funds to make investments, and so they say that they would not declare any dividends. [ 43 ] In my opinion, the matter of a payment to Alexander and his siblings as compensation for the lost AEP was not decided and ought not to have been decided by Justice Strathy, and in any event, as explained above, I would not treat this issue as res judicata and will rather decide it on its merits. [ 44 ] I regard this claim for compensation as conceptually similar to the issue that Justice Strathy resolved with respect to the $1 million compensatory payment to Alexander and his siblings for the impairment to the marketability of the shares of Captain Investments.

That payment was made to compensate them for an adverse consequence arising from the Estate’s decision to implement the pipeline strategy. [ 45 ] The Estate’s use of the AEP is another adverse consequence, and the Estate should once again compensate the siblings for this adverse consequence. It would have been no answer to the $1 million loss in marketability to offset potential or inchoate benefits from the pipeline strategy, and it is no answer to the $1,083,061.00 loss to offset notional inchoate gains that might be available in the future.

If it happens that Alexander and his siblings receive benefits from the pipeline strategy, which strategy also benefited the Estate, I do not see why they should have to set off those benefits against losses associated with the pipeline transaction.

As I see it, Alexander and his siblings were entitled to the full worth of Captain Investments, and they did not get it and, therefore, the Estate should restore $1,083,061.00 to Captain Investments. [ 46 ] I appreciate that a purposive factor in deciding whether to adopt the pipeline strategy was the Estate Trustees’ laudable desire to avoid any abatement to the bequests to Simon’s and to Henry’s children that might occur if the Estate had to take an enormous tax hit to implement the conveyance of Captain Investments to Henry’s children, but the main purposive factor would appear to have been to avoid the adverse tax consequences of proceeding with the wills as written. [ 47 ] In any event, in granting compensation for the impairment to the marketability of the shares of Captain Investments, Justice Strathy was approving a course that would decrease the assets of the Estate and increase the likelihood of an abatement of the bequests, but he obvious thought that this was the fair and proper thing to do, because it would have been unfair and inequitable to have only Alexander and his siblings bear the brunt of any adverse consequence from the pipeline.

The current situation is similar because it does not seem fair that only the value of Alexander and his siblings’ bequests should abate by a value of $1,083,061.00 taken by the Estate while implementing the pipeline strategy. [ 48 ] Accordingly, the Estates should restore $1,083,061.00 to Captain Investments. E. DISCUSSION: CAPTAIN INVESTMENTS’ CLAIM FOR THE TAX ON A FOREIGN EXCHANGE GAIN [ 49 ] Before John Kaptyn’s death, Captain Investments had made inter-company loans for which it was earning interest income. As noted above, under his will, the inter-company loans were to be repaid.

However, as noted in Justice Strathy’s reasons, the repayment of the loans was delayed by a rejected proposal of Simon that certain loans be forgiven rather than repaid; thus, the loans from Captain Investments were not repaid until four years after Mr.

Kaptyn’s death, at which time Captain Investments incurred a foreign exchange gain tax liability of $232,964.00 (which it has paid to the tax authorities). [ 50 ] Had the inter-company loan been repaid at around the time of John Kaptyn’s death, the tax liability would have been $146,681.00. [ 51 ] There is now a dispute between Henry and Simon about whether the Estate should pay the taxes on the foreign exchange gain.

Henry’s position is that Captain Investments should be reimbursed $232,964.00, but by the time of the hearing of the motions, he altered his position and requested that only the notional amount of tax liability at the time of death ($146,681.00) be paid. Simon’s position is that the taxes were actually incurred after the date of death and were income earned after that date and should not be paid by the Estate. [ 52 ] In his April 2011 Reasons ( Kaptyn Estate (Re), 2011 ONSC 2212 ), Justice Strathy discussed the payment of taxes at paras. 37-45 as follows: 37.

I have set out above the clear intention of the Testator, as confirmed by both Lederer J. and Brown J., that the gifts to the grandchildren would be free of taxes (see also paras. 201 to 204 of the Reasons). As of the date of the Testator's death, those taxes have been calculated at roughly $1.57 million. The taxes have been paid by the various companies, without prejudice to their right to reimbursement from the estate. 38. There appears to be no dispute that the taxes should be paid up to the date of John Kaptyn's death. 39. There are, apparently, two contentious issues.

First, there is an issue of whether 1171757 Ontario Ltd. ("757") is entitled to be reimbursed for taxes paid on income earned between May 1, 2005 to April 30, 2006, which was reported on its tax return for the year ended March 31, 2007. This amount, $792,503.32, is confirmed by Simon's affidavit and by notices of assessment attached thereto. As well, 757 owed taxes of $366,109.00 for the year ended March 31, 2008. 40.

Simon's affidavit explains that because John Kaptyn diverted all of 757's profits from its interest in Parkway Hotels and Convention Centre Partnership to Marktur, there was no money in 757 to pay its taxes and accordingly those taxes were paid by Parkway Hotel and Convention Centre Inc.

41. Second, there is an issue as to whether corporate taxes should also be paid up to the date that the shares are actually distributed to the grandchildren, or for some lesser period after death. 42. The issue of taxes, and the

interpretation of clauses 4(d.1) and (d.2) was addressed under a separate heading at paras. 200-204 of the Reasons. Henry had objected to an

interpretation of the Will that would make the estate responsible for any tax liability of the corporations. Brown J. gave detailed reasons for rejecting this submission. I will not repeat them, but in

summary, Brown J. held that it was the Testator's clear intent that the gift to the grandchildren would be "free and clear of any Canadian or American taxes imposed on the corporations he was gifting to them ..." [para. 200]. It seems to me that this is a complete answer to the first contentious issue. The taxes owing by 757 were a liability of the corporation at the date of the Testator's death and that liability had to be discharged to pass the corporation to the grandchildren "free and clear".

The fact that, because of 757's unique business structure, the liability related to income earned in a year that was different from the reporting years of other corporations in the Testator's holdings is irrelevant. 43. The second question was raised before Brown J. by Jason and Jonathan, who argued that the date of transfer of the gifts should be the date for calculating the tax liability to be paid by the estate because their grandfather wanted the assets to be transferred "free and clear" of the liability.

Brown J. decided, however, at para. 204, that it would not be appropriate for him to give opinion, advice or direction based on the limited record before him. 44. For the same reason, it is not appropriate for me to decide this important issue on this record and without further evidence and submissions from all interested parties. Unless the parties agree on a more expedited procedure, I direct the Trustees to forthwith bring the necessary application for opinion, advice or direction. 45.

The Trustees are therefore directed to forthwith take such steps as are necessary to reimburse the corporations gifted to the grandchildren for any tax liabilities owing by those corporations as of the date of death of John Kaptyn. [ 53 ] As appears from this discussion, the issue of whether the Estate should reimburse corporations for taxes incurred up to the date of the transfer of the corporation out of the Estate was not resolved by Justices Brown or Strathy.

It remains an outstanding issue, and as I view the matter of the reimbursement for the taxes on the foreign exchange gain, it will remain an unanswered question. In my opinion, it is not necessary to answer this question, but, nevertheless, Captain Investments should be reimbursed $146,681.00. [ 54 ] As I view this matter, two principles govern. The first principle is the venerable principle that equity deems duties to be performed when they ought to have been performed. Equity deems done that ought to have been done: Pieter Vos

(2001) Ltd. v. Freure Developments Ltd. , [2004] O.J. No. 1200 (S.C.J.) ; Bark v. Ciotucha , [2002] O.J. No. 3534 (S.C.J.) ; Dearden Estate v. Pittman , [1987] M.J. No. 166 (Q.B.) . The second principle is the uncontested principle that for the Kaptyn Estate taxes should be paid up to the date of John Kaptyn's death. Thus, the inter-company loans ought to have been paid at the time of death. [ 55 ] Had the Estate Trustee’s done what they ought to have done and are now deemed to have done, the Estate would have reimbursed Captain Investments for $146,681.00. [ 56 ] I direct that this payment be made now. F.

DISCUSSION: THE CLAIM FOR AN INDEMNITY FOR THE PIPELINE STRATEGY [ 57 ] Alexander and his siblings have requested the Estate Trustees to sign an indemnity with respect to any latent liabilities associated with Marktur and SARK Holdings Ltd. which are corporations that they would not have received under their grandfather’s will but which have been added and given to them in order to implement that pipeline strategy. [ 58 ] They say that this request was made when Justice Strathy was case managing the litigation but overlooked. [ 59 ] Due to the Estate Trustees undertaking the pipeline strategy, Alexander and his siblings are receiving Marktur Limited and SARK Holdings Ltd.

They submit that any risks associated with this transaction or with actions undertaken by Marktur in the past should accordingly be the responsibility of the Estate. [ 60 ] Simon Kaptyn is agreeable to this indemnity as long as his children receive the same indemnity for any latent liabilities associated with their acquisitions.

Henry and Alexander submit that this misses the point that the pipeline strategy is unique and none of the other conveyances are connected to the pipeline strategy. [ 61 ] Putting the pipeline strategy to the side for the moment, under the will there is no basis for imposing indemnity obligations on the Estate with request to the transfer of assets to the beneficiaries. The beneficiaries take their bequests free of tax liabilities, but assume the burden of any inchoate or future liabilities.

Thus, there is no basis for Simon’s demand for indemnities, which if granted might forestall the Estate ever being wound up and the Estate Trustees ever being discharged. [ 62 ] In my opinion, there is no reason to treat the superadded bequest of Marktur or SARK Holdings differently. The testator did not make risk free conveyances of his real estate and corporate holdings. This request by Alexander and his siblings should be rejected. G. CONCLUSION [ 63 ] Orders accordingly. [ 64 ] If the parties cannot agree about costs, then they make submissions in writing within 30 days of the release of these reasons

for Decision. [ 65 ] As it may assist the parties, I note that my tentative view is that given the outcome of the issues that the parties resolved at the hearing of the motion and the outcome of the issues that I have just resolved, the appropriate costs award would be either no order as to costs or costs in the cause with an exception for the Children’s Lawyer who should receive costs on a partial indemnity basis forthwith. _____________________ Perell, J.

Released: July 23, 2013 CITATION : Kaptyn Estate (Re), 2013 ONSC 4908 COURT FILE NO.: 05-40/70 DATE: July 23, 2013 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: SIMON MARIA KAPTYN, Co-executor and Trustee of the Estate of John Johannes Jacobus Kaptyn Applicant - and - HENRY WILLHELM KAPTYN, Co-executor and Trustee of the Estate of John Johannes Jacobus Kaptyn, HENRY WILLHELM KAPTYN, personally, SIMON MARIA KAPTYN, personally, JASON KAPTYN, JONATHAN KAPTYN, SAMANTHA KAPTYN, ROBERT KAPTYN, ALEXANDER KAPTYN, MARY KAPTYN, DOREEN KAPTYN, MARKTUR LIMITED, 1171757 ONTARIO LIMITED, WEST BEAVER CREEK MANAGEMENT INC., CAPTAIN INVESTMENTS INC., 9005 LESLIE STREET INC., 9011 LESLIE STREET INC., ELGIN COMMERCIAL DEVELOPMENTS INC., JUBILEE COMMERCIAL HOLDINGS INC., PARKWAY HOTELS AND CONVENTION CENTRE INC., 698380 ALBERTA LTD., PARKWAY HOTELS AND CONVENTION CENTRE PARTNERSHIP, PARKWAY RACQUET AND FITNESS CLUB LIMITED, CAPTAIN GENERATION-MALL LIMITED 9120 LESLIE STREET INC.

Respondents ________________________________________ REASONS FOR DECISION ________________________________________ Perell, J. Released: July 23, 2013.