Sawdon Estate v. Sawdon,

• Jurisdiction: Ontario
• Judge: Hoy, A.C.J.O., Gillese and Strathy, JJ.A.
• Neutral Citation: 2014 ONCA 101
• Date: 20 December 2013
• Court: Court of Appeal (Ontario)

Sawdon Estate v. Watch Tower Bible (2014), 315 O.A.C. 129 (CA)

MLB headnote and full text

Temp. Cite: [2014] O.A.C. TBEd. FE.006

Wayne Robert Sawdon, in his capacity as Trustee of the Estate of Arthur O. Sawdon, deceased, and Wayne Robert Sawdon, in his own right (applicant/respondent/appellant by way of cross appeal) and Stephen Peter Sawdon (applicant/respondent/appellant by way of cross appeal) v. Watch Tower Bible and Tract Society of Canada (respondent/appellant/respondent by way of cross appeal) and Public Guardian and Trustee, in its capacity as litigation guardian for James Sawdon, an incapable person (respondent/respondent/respondent by way of cross appeal)

(C55964; 2014 ONCA 101)

Indexed As: Sawdon Estate v. Watch Tower Bible and Tract Society of Canada et al.

Ontario Court of Appeal

Hoy, A.C.J.O., Gillese and Strathy, JJ.A.

February 5, 2014.

Summary:

Sawdon transferred several bank accounts into joint accounts, with a right of survivorship, to himself and two of his five children (Wayne and Stephen). Sawdon's will did not mention the accounts. The will contained a clause entitling each of the children to the greater of $100,000 or the largest amount owing on mortgages that he held on Wayne and Stephen's homes. It also provided that Watch Tower Bible and Tract Society of Canada was to receive the share of any child who died without issue, as well as the residue of the estate. Sawdon died. When the trustee of the estate (Wayne) sought to pass accounts, Watch Tower claimed that the funds in the bank accounts formed part of the estate by way of a resulting trust. Wayne (in his capacity as trustee and in his own right) and Stephen applied for a determination of the issue, asserting that Sawdon had instructed them to distribute the funds in the account equally among all of his children, on his death.

The Ontario Superior Court, in a decision reported at [2012] O.T.C. Uned. 4042, held that the presumption of a resulting trust in favour of the Sawdon's estate had been rebutted and the funds in the accounts were not part of the estate. The parties made submissions on costs.

The Ontario Superior Court ordered Watch Tower to pay the trial costs incurred by Wayne on a partial indemnity basis. The court refused Wayne's request that the estate indemnify him for the balance of his costs. Watch Tower appealed, asserting that the judge applied the wrong principles and that the estate was entitled to the funds in the bank accounts. Wayne, in his capacity as trustee, applied for leave to appeal the costs order and, if leave was granted, sought to cross-appeal, asserting that he was entitled to indemnification from the estate for his legal costs not recovered from Watch Tower.

The Ontario Court of Appeal dismissed Watch Tower's appeal and allowed Wayne's cross-appeal.

Banks and Banking - Topic 2723

Bank accounts - Joint accounts - Title - Sawdon transferred several bank accounts into joint accounts, with a right of survivorship, to himself and two of his five children (Wayne and Stephen), advising them that on his death the funds in the accounts were to be distributed equally between the five children - On Sawdon's death, an issue arose as to the ownership of the funds - The trial judge concluded that the presumption of resulting trust had been rebutted on the basis that Sawdon had made a gift of the beneficial interest in the accounts to the children, with Wayne and Stephen being used to facilitate the transfer of that beneficial interest - Alternatively, he made a gift of the legal and beneficial interest to Wayne and Stephen, but they were to hold whatever money they ultimately received in trust for all the children - The Ontario Court of Appeal stated that if the judge was suggesting that the children were beneficially entitled to the contents of the accounts from the date that the accounts were open, it disagreed - With respect to the alternative finding, once the judge found that Wayne and Stephen held the beneficial right of survivorship in trust, a gift analysis was no longer available - However, the court was satisfied the presumption had been rebutted - When the accounts were open, Sawdon made an immediate inter vivos gift of the beneficial right of survivorship to the children and those holding the legal title to the accounts held that beneficial right in trust for all the children - See paragraphs 60 to 72.

Banks and Banking - Topic 2733

Bank accounts - Joint accounts - Title to account - Resulting trust in favour of original owner of funds - [See Banks and Banking - Topic 2723 ].

Executors and Administrators - Topic 5541

Actions by and against representatives - Costs - General - The Ontario Court of Appeal stated that "The historical approach to costs in estate litigation created the danger that estates would be unreasonably depleted because of unwarranted or needlessly protracted litigation. Consequently, it has been displaced by the modern approach set out by this court in McDougald Estate v. Gooderham [2005, Ont. C.A.]: the court is to carefully scrutinize the litigation and, unless it finds that one or more of the relevant public policy considerations apply, it shall follow the costs rules that apply in civil litigation. That is, the starting point is that estate litigation, like any other form of civil litigation, operates subject to the general civil litigation costs regime established by section 131 of the Courts of Justice Act ... and Rule 57 of the Rules of Civil Procedure ... except in those limited circumstances where public policy considerations apply. The public policy considerations at play in estate litigation are primarily of two sorts: (1) the need to give effect to valid wills that reflect the intention of competent testators; and (2) the need to ensure that estates are properly administered. In terms of the latter consideration, because the testator ... is no longer alive to rectify any difficulties or ambiguities created by his or her actions, it is desirable that the matter be resolved by the courts. Indeed, resort to the courts may be the only method to ensure that the estate is properly administered. ... In any event, where the problems giving rise to the litigation were caused by the testator, it is appropriate that the testator, through his or her estate, bear the cost of their resolution. In such situations, it ought not to fall to the Estate Trustee to pay the costs associated with having the court resolve the problems. ... if estate trustees were required to bear their legal costs in such situations, they might decline to accept appointments or be reluctant to bring the necessary legal proceedings to ensure the due administration of the estate." - See paragraphs 82 to 86.

Executors and Administrators - Topic 5548

Actions by and against representatives - Costs - Where payable out of estate - [See Executors and Administrators - Topic 5541 ].

Executors and Administrators - Topic 5548

Actions by and against representatives - Costs - Where payable out of estate - Sawdon transferred several bank accounts into joint accounts, with a right of survivorship, to himself and two of his five children (Wayne and Stephen) - Sawdon died - When the trustee of the estate (Wayne) sought to pass accounts, the residual beneficiary claimed that the funds in the bank accounts formed part of the estate by way of a resulting trust - Wayne (in his capacity as trustee and in his own right) and Stephen applied for a determination of the issue - The trial judge held that the presumption of a resulting trust had been rebutted and the funds were not part of the estate - The judge ordered the residual beneficiary to pay the costs incurred by Wayne on a partial indemnity basis, but refused Wayne's request for a blended order that required the estate to indemnify him for the balance of his costs - The Ontario Court of Appeal held that the trial judge erred in principle in denying Wayne a blended order - Wayne acted reasonably throughout and for the benefit of the estate and he was entitled to be indemnified from the estate for his trial costs not recovered from the residual beneficiary - Moreover, the difficulties and problems arising from the accounts were caused by Sawdon's failure to clearly spell out what he intended - Further, Wayne had personal knowledge of Sawdon's intentions and his fiduciary duty compelled him to participate in the proceedings to ensure that the court had the best evidence - The court had the power to make a blended order and it was appropriate to do so - Similarly, the court had the power to make a similar blended costs order for the appeal costs and it was appropriate to do so - See paragraphs 87 to 107.

Executors and Administrators - Topic 5550

Actions by and against representatives - Costs - Where payable by claimant - [See Executors and Administrators - Topic 5541 and second Executors and Administrators - Topic 5548 ].

Gifts - Topic 501

Gifts inter vivos - General principles - Gifts inter vivos - Defined - [See Banks and Banking - Topic 2723 ].

Gifts - Topic 527

Gifts inter vivos - Presumption against gift - Resulting trust - Rebuttal of presumption - [See Banks and Banking - Topic 2723 ].

Gifts - Topic 724

Gifts inter vivos - Transfers in joint tenancy - Transfers to joint bank accounts - [See Banks and Banking - Topic 2723 ].

Gifts - Topic 730

Gifts inter vivos - Transfers in joint tenancy - Survivorship - [See Bank and Banking - Topic 2723 ].

Practice - Topic 7032.1

Costs - Party and party costs - Entitlement to - Estate matters - [See Executors and Administrators - Topic 5541 and second Executors and Administrators - Topic 5548 ].

Practice - Topic 8298

Costs - Appeals - Appeals form order granting or denying costs - Requirement of leave to appeal - The Ontario Court of Appeal stated that "Leave to appeal a costs order requires strong grounds upon which an appellate court could find that the trial judge erred in the exercise of his or her discretion ... An appellate court should set aside a costs award only if the trial judge has made an error in principle or if the costs award is plainly wrong ..." - See paragraph 77.

Practice - Topic 8327.6

Costs - Appeals - Costs of appeal - Party and party or partial indemnity basis - [See second Executors and Administrators - Topic 5548 ].

Practice - Topic 8334.2

Costs - Appeals - Costs of appeals - Entitlement to multiple sets of costs - [See second Executors and Administrators - Topic 5548 ].

Practice - Topic 8425

Costs - Appeals - Grounds - Error in principle - [See second Executors and Administrators - Topic 5548 and Practice - Topic 8298 ].

Practice - Topic 9012

Appeals - Restrictions on argument on appeal - Issues or points not previously raised (incl. new theory of the case) - At issue at trial was whether funds held in a joint bank in the name of the deceased and two of his five children, were held in a resulting trust for the estate - The trial judge held that the presumption of a resulting trust had been rebutted - On appeal, the appellant asserted for the first time that the trial judge erred in applying the principles applicable to secret trusts - The Ontario Court of Appeal stated that "It is trite law that appellate courts are not to entertain new issues except in very limited circumstances ... As [the appellant] raises the secret trust issue for the first time before this court and none of the exceptional circumstances exist, it would be improper to decide the issue. To do so would be unfair to the Respondents, who may very well have adduced different evidence had they known that such an issue was before the court. Moreover, there is an obligation to raise the issue before the trial judge to allow for an appealable issue ... In any event, without deciding the matter, it seems to me that the secret trusts argument is doomed to fail. Even if the secret trusts doctrine could apply to a situation such as this, where a parent makes an inter vivos gratuitous transfer to an adult child, there can be no problem with the certainty of objects requirement because, on the findings of the trial judge, the objects of the 'secret trust' are indisputably the Children." - See paragraphs 75 and 76.

Trusts - Topic 1527

Secret trusts - Creation of secret trust - What constitutes a secret trust - [See Practice - Topic 9012 ].

Trusts - Topic 1906

Resulting trusts - General principles - Gifts - [See Banks and Banking - Topic 2723 ].

Trusts - Topic 1907

Resulting trusts - General principles - Circumstances when not imposed - [See Banks and Banking - Topic 2723 ].

Trusts - Topic 2044

Resulting trusts - Voluntary property transfers - Presumption of resulting trust - [See Banks and Banking - Topic 2723 ].

Cases Noticed:

Pecore v. Pecore, [2007] 1 S.C.R. 795; 361 N.R. 1; 224 O.A.C. 330; 2007 SCC 17, consd. [para. 2].

Perez et al. v. Salvation Army et al. (1998), 115 O.A.C. 328; 42 O.R.(3d) 229 (C.A.), refd to. [para. 75].

Clark v. BMO Nesbitt Burns Inc. (2008), 243 O.A.C. 235; 300 D.L.R.(4th) 313; 2008 ONCA 663, refd to. [para. 75].

Brad-Jay Investments Ltd. v. Village Developments Ltd. et al. (2006), 218 O.A.C. 315 (C.A.), refd to. [para. 77].

Hamilton v. Open Window Bakery Ltd. et al., [2004] 1 S.C.R. 303; 316 N.R. 265; 184 O.A.C. 209; 2004 SCC 9, refd to. [para. 77].

Goodman Estate v. Geffen, [1991] 2 S.C.R. 353; 127 N.R. 241; 125 A.R. 81; 14 W.A.C. 81, refd to. [para. 82].

Dallaway, Re, [1982] 3 All E.R. 118, refd to. [para. 82].

McDougald Estate, Re (2005), 199 O.A.C. 203; 255 D.L.R.(4th) 435 (C.A.), refd to. [para. 84].

Penney Estate v. Resetar (2011), 64 E.T.R.(3d) 316; 2011 ONSC 575, refd to. [para. 86].

Reid Estate, Re, [2010] O.T.C. Uned. 3800; 59 E.T.R.(3d) 312; 2010 ONSC 3800, refd to. [para. 94].

Salter Estate, Re, [2009] O.T.C. Uned. D35; 50 E.T.R.(3d) 227 (Sup. Ct.), refd to. [para. 96].

Primo Poloniato Grandchildren's Trust, Re (2012), 300 O.A.C. 71; 82 E.T.R.(3d) 165; 2012 ONCA 862, refd to. [para. 105].

Canada Trust Co. v. Browne - see Primo Poloniato Grandchildren's Trust, Re.

Michaels v. Bogun Estate et al., [2006] O.A.C. Uned. 14 (C.A.), refd to. [para. 105].

Counsel:

David Gnam and Sylvain Deschênes, for the appellant;

Lorne Silver, Lindsay Histrop and Colin Pendrith, for the respondent, Wayne Robert Sawdon.

This appeal was heard on December 20, 2013, by Hoy, A.C.J.O., Gillese and Strathy, JJ.A., of the Ontario Court of Appeal. Gillese, J.A., released the following judgment for the court on February 5, 2014.