COURT OF APPEAL FOR ONTARIO

CITATION:  Reisman v. Reisman, 2014 ONCA 109

DATE: 20140211

DOCKET: C55669

Hoy A.C.J.O., Laskin and Tulloch JJ.A.

BETWEEN

Linda Joy Reisman

Applicant (Appellant)

and

Howard Jonathan Reisman

Respondent (Respondent in Appeal)

Gary S. Joseph and Serena Lein, for the appellant

Nancy Iadeluca, for the respondent

Heard:  October 11, 2013

On appeal from the order of Justice Darla A. Wilson of
    the Superior Court of Justice, dated May 31, 2012, with reasons reported at
    2012 ONSC 3148, 22 R.F.L. (7th) 423.

Laskin J.A.:

A.

INTRODUCTION

[1]

Linda and Howard Reisman were married for 20 years.  They separated in
    October 2006, though they remained in their matrimonial home until it was sold
    in April 2008.  At the start of trial in September 2011, Linda was 46 and
    Howard was 48.

[2]

The Reismans have four children:  a daughter, 22 at the time of trial,
    and three sons, who were 20, 18 and 15.  The two older children lived away from
    home; the two younger children lived alternatively with both their parents,
    though at the time of trial, Max, the 18 year old, was living with his mother.

[3]

In December 2007, the parties entered into an interim domestic contract
    under which Howard paid monthly spousal support and made an equalization
    payment to Linda on a without prejudice basis pending trial.  Then, in
    November 2010, Linda and Howard settled all issues relating to their children,
    and agreed that neither would pay child support to the other.

[4]

The parties litigated two main issues:  first, whether an estate freeze
    undertaken by Howards father Fred Reisman in 1998 amounted to a fraudulent
    conveyance; and second, the amount and duration of spousal support.  After a
    nine day trial, the trial judge, in comprehensive reasons for judgment, dismissed
    Lindas claim that the estate freeze was a fraudulent conveyance.  She ordered
    Howard to pay Linda monthly spousal support of $4,500 for 10 years and lump sum
    support of $119,956.34,
[1]
but awarded costs against Linda in the amount of $250,000.

[5]

Linda Reisman raises five issues on her appeal:

(1)

The trial judge denied Linda a
    fair trial by (a) permitting Howard to rely on his fathers affidavit as
    evidence of the intent of the estate freeze; and (b) refusing to permit Linda
    to withdraw an admission that common shares Howard received on the estate
    freeze were a gift and thus excluded from his net family property.

(2)

The trial judge erred in making
    a time-limited support order, and erred in awarding an amount at the low end of
    the Spousal Support Advisory Guidelines (Ottawa: Department of Justice, 2008).

(3)

The trial judge erred by
    accepting that the common shares Howard received in the estate freeze were a
    gift and consequently erred by awarding Linda an equalization payment that was
    far too low.

(4)

The trial judge erred by failing
    to hold that the estate freeze amounted to a fraudulent conveyance.

(5)

The trial judges costs award
    was excessive.

[6]

The first issue, whether Linda was denied a fair trial, concerns matters
    bearing on the effect and intent of the estate freeze.  I will deal with these
    matters when I discuss whether the common shares Howard received in the estate
    freeze were a gift and whether the estate freeze was a fraudulent conveyance.

B.

ANALYSIS

(1)

Did the Trial Judge Err in her Award of Spousal Support?

[7]

Howard acknowledged that Linda was entitled to spousal support.  Their
    dispute centred on the amount and duration of that support.

(a)

The Interim Agreement and the Trial Judges Award

[8]

Under the interim domestic contract, which the parties signed in
    December 2007, Howard agreed to pay Linda spousal support of $5,750 per month
    pending trial, and without prejudice to his right to seek to pay a lower
    amount.  He also paid Linda an advance equalization payment of $226,538.

[9]

The trial judge awarded Linda an equalization payment of only $106,581.66,
    leaving an overpayment of $119,956.34.  Howard agreed to forego the overpayment
    in return for paying less monthly support.  The trial judge ordered that $119,956.34
    be treated as lump sum spousal support.  That amount is equivalent to $1,500
    per month for 10 years.

[10]

In
    addition, the trial judge ordered monthly spousal support of $4,500 for 10
    years (unless there is an earlier material change in circumstances).  In
    arriving at this amount, she took Howards 2011 income for support purposes to
    be $192,000, and she imputed to Linda annual income of $30,000.  Under a no
    child support scenario with a payor earning $192,000 and a recipient earning
    $30,000, the Spousal Support Advisory Guidelines yield a monthly support
    payment of $4,050 at the low end and $5,400 at the high end.

[11]

The
    trial judges support order was thus at the lower end of the Guidelines.  She
    also time-limited support for 10 years because this is an appropriate period
    of time to recognize any economic disadvantage that was suffered by the Applicant
    by reason of the marriage and it promotes the economic self-sufficiency of the Applicant
    within a reasonable period of time (para. 41).  The trial judge did not,
    however, require Linda to pay back the difference between the support she had
    been receiving under the interim agreement and the support ordered at trial.

(b)

Positions of the Parties

[12]

Linda
    submits that the trial judge erred by focusing on the goal of self-sufficiency
    and did not take account of all the considerations that go into an appropriate
    support order.  She contends that after a largely traditional marriage of 20
    years during which she never held a full-time job outside the home, she is
    entitled to a higher amount of support payable indefinitely.

[13]

Howard
    submits that in making a time-limited order at the lower end of the Guidelines,
    the trial judge exercised her discretion reasonably.  Even if we might be
    inclined to make a different order, we are not justified in interfering with
    the trial judges award.

(c)

The Parties Backgrounds

(i)

Howard

[14]

During
    the marriage, Howard worked mainly for his fathers real estate company, Fred
    Reisman and Associates.  His salary increased over the years, and by the time
    of trial he was earning nearly $200,000 annually.  Although Linda took on more
    of the responsibilities for maintaining the household and raising the children,
    Howard also assisted in household chores and childcare.

(ii)

Linda

[15]

Before
    marriage, Linda earned a diploma in Early Childhood Education.  However, she
    has not worked in that field for over 20 years.  During marriage, she had a
    series of part-time jobs in retail, event planning and design.  For a time, she
    also ran her own gift basket business.  She earned between $4,000 and $24,000
    annually.

[16]

Linda
    testified that she could not have taken on a full-time job outside the home
    because she assumed most of the responsibility for raising the children two of
    whom have learning disabilities  and for maintaining the household.  She said
    that now, even though the children are grown up, she has to be available for
    Max, who is living with her and suffers episodes of severe depression.

(iii)

Howards
    Parents

[17]

While
    they did not live extravagantly during their marriage, Linda and Howard lived
    well.  That they did so was partly attributable to the generosity of Howards
    parents, Fred and Marian Reisman.  Mr. and Mrs. Reisman gave their son and
    daughter-in-law a loan to assist them in buying their first home, eventually
    paid off the mortgage on the home and purchased RRSPs for each of them.  At the
    date of separation, Linda had almost $243,000 in her RRSP.

[18]

In
    addition, Fred and Marian Reisman arranged for each of their 16 grandchildren,
    including Howards and Lindas four children, to have their own income.  Linda
    and Howard used this income  approximately $70,000 annually  to fund their
    living expenses.  However, once they settled issues relating to their children,
    that income was no longer available to them.

(iv)

After Separation

[19]

After
    separating from Howard in 2006, Linda significantly changed her lifestyle.  She
    quit her part-time job and for three years made no effort to find other work.
    Eventually, in 2010, she took a part-time retail position with Swarovski
    Crystal, working 26 hours per week at $13 an hour.  She admitted, however, that
    she could earn more money working as an event planner, something she had done
    for several years.

[20]

Linda
    also began to live extravagantly.  She took 10 trips to Amsterdam.  She
    renovated and furnished her new home. And she paid her boyfriend $4,000 per
    month to help her decorate the home.  Overall she spent nearly $900,000,
    depleted her capital and went into debt.  The trial judge justifiably found
    that Linda is in debt because of the choices she made.

(d)

Discussion

[21]

Linda
    challenges both the amount and duration of the trial judges support order.  I
    will deal first with the amount.

[22]

In
    fixing the amount, as I have said, the trial judge imputed annual income of
    $30,000 to Linda.  Linda had asked to impute only $20,000, but I would not
    interfere with the trial judges figure.

[23]

The
    trial judge then considered the range stipulated by the Spousal Support
    Advisory Guidelines  between $4,050 and $5,400  and selected an amount at the
    lower end of the range, $4,500.  She noted that the children have their own
    income and the Applicant is capable of working.

[24]

Linda
    agrees that, though obviously not binding, the Spousal Support Advisory
    Guidelines are a useful benchmark for determining spousal support: see
Fisher
    v. Fisher
, 2008 ONCA 11, 232 O.A.C. 213.  But she argues that the trial
    judge erred by ordering an amount at the lower end of the range rather than the
    higher end of the range.  In support of her argument, she points to the following
    passage from the Guidelines:

Long marriages will generate generous spousal support awards on
    an indefinite basis that will provide the spouse with something approaching
    equivalent standards of living after marriage breakdown.

Alternatively, Linda asked for an equal division of net
    disposable income, which would yield monthly spousal support of approximately
    $7,700.

[25]

I
    would not interfere with the amount of spousal support ordered by the trial
    judge.  She did not err by looking to the Guidelines to arrive at a fair figure
    for support.  Even though I am inclined to agree that an award at the higher
    end would be appropriate, the monthly figure ordered by the trial judge cannot
    be considered alone.  It must be considered together with the lump sum support
    order of $119,956.34, the equalization amount that Howard overpaid in the
    interim domestic contract and agreed to forego in return for paying lower
    monthly support.  $119,000 is equivalent to monthly payments of $1,500 for 10
    years.  Thus, at least for 10 years, Lindas effective monthly spousal support
    is $6,000.  That figure is above the high end of the range established by the
    Guidelines for a without child support scenario and for a couple with the
    income or imputed income of Howard and Linda.  Accordingly, this court has no
    basis to adjust the amount of support ordered by the trial judge.

[26]

The
    duration of support raises a more difficult issue.  At various points in her
    analysis, the trial judge emphasized that Linda had not done enough to become
    self-sufficient.  At para. 29, the trial judge said:

I am not persuaded that the Applicant is working at her
    capacity or that duties associated with her children prevent her from working
    more hours than she currently is or at a higher level of employment.

At para. 31, the trial judge noted that [t]he demands
    from the children are less than they were seven years ago.  And, at para. 36,
    she said:

In this case, the Applicant has enjoyed the benefit of
    significant payments of spousal support; yet, she has not taken the opportunity
    to upgrade her skills, retrain or pursue other employment opportunities.  She
    has evinced an attitude of entitlement to a certain lifestyle and there is no
    basis for this.  The Applicant is young, in good health and is certainly able
    to take steps to move into becoming self sufficient or, if she chooses not to
    do so, she must adjust her lifestyle accordingly.

[27]

The
    trial judge concluded at para. 41 that time-limited support of 10 years was
    warranted:

If there is no material change in circumstances, after the
    expiry of 10 years, the Respondents obligation to pay spousal support shall
    terminate.  In my opinion, this is an appropriate period of time to recognize
    any economic disadvantage that was suffered by the Applicant by reason of the
    marriage and it promotes the economic self-sufficiency of the Applicant within
    a reasonable period of time, which is one of the primary purposes of any
    spousal support order.

In making this order, I am mindful of the fact that given the
    quantum of spousal support that the Respondent has been paying on a regular
    basis since April 2008, there is an argument that there has been an overpayment
    of spousal support.  My order has taken this into consideration and there shall
    be no issue taken by the Respondent with respect to past support payments.

[28]

In
    so far as is practicable, promoting the economic self-sufficiency of each
    spouse within a reasonable period of time is one of the four statutory
    objectives of a spousal support order: see
the
Divorce Act
, R.S.C. 1985 c. 3 (2
nd
Supp.), s. 15.2(6).  The
    trial judge was right to emphasize its importance in this case.  However,
    promoting self-sufficiency cannot be the only consideration that determines the
    duration of a support order.  The court also has to take into account the recipient
    spouses age, skills, education, opportunities for retraining and, importantly,
    her realistic prospects of being able to find a job that enables her to become
    self-sufficient: see
Tedham v. Tedham
, 2005 BCCA 502, 261 D.L.R. (4th)
    332, at para. 33.  Also, as this court noted in
Allaire v. Allaire
(2003), 170 O.A.C. 72, at para. 21, self-sufficiency is not a free-standing
    concept.  It must be seen in the context of the standard of living previously
    enjoyed by the parties.: see also
Fisher,
at para. 73.

[29]

Here,
    five undeniable facts stand out.  First, this was a long marriage:  it lasted
    20 years.  Second, during the marriage Linda was the one mostly responsible for
    maintaining the household and raising the children.  Third, Linda has not had a
    full-time job outside the home since the children were born.  Fourth, Howard
    and Linda lived well during their marriage:  they never had to worry about
    income.  Fifth, when the time-limited support order by the trial judge ends,
    Linda will be 56 years old.  In the light of these five facts, it seems to me
    unrealistic to impose a time limit on spousal support.

[30]

The
    Guidelines support this view.  They state that for long marriages  defined as
    marriages of 20 years or more  spousal support awards should be indefinite.
    By indefinite support, the Guidelines do not mean permanent support or even
    support that will continue indefinitely at the level set by the formula, but
    instead support that is subject to the normal process of variation and review.
    Through this process, the amount of support may be varied and support may even
    be terminated if the incomes of the parties change.  Also, and importantly for
    this appeal, the Guidelines caution at p. 61 that to ignore duration is to
    misapply the without child support formula:

Amount and duration are interrelated parts of the formula  they
    are a package deal.  Using one part of the formula without the other undermines
    its integrity and coherence.

[31]

Thus,
    I would follow the recommendation in the Guidelines.  Instead of imposing a 10
    year limit on spousal support for Linda, I would order that support be
    indefinite.  In addition, I would make the order subject to variation or
    termination on a material change in circumstances.

(2)

Were the Common Shares Howard received in the Estate Freeze a Gift?

[32]

The
    other highly contested issue between the parties was the intent and effect of
    the estate freeze undertaken in 1998 by Howards father Fred Reisman.  At
    trial, Lindas principal claim was that the estate freeze amounted to a
    fraudulent conveyance, a claim that the trial judge dismissed.  Although Linda
    maintains this claim on appeal, her main submission in this court is that the
    common shares given to Howard on the estate freeze were improperly excluded
    from his net family property as a gift.  If Linda succeeds in showing that the
    estate freeze was a fraudulent conveyance or that the common shares were not a
    gift, her equalization entitlement increases dramatically from the amount
    ordered by the trial judge, $106,581.66, to an amount in excess of $2,000,000.

[33]

In
    this section, I will consider Lindas submission that the common shares Howard
    received were not a gift.  In doing so, I will discuss Lindas admission that
    they were a gift, which the trial judge refused to permit her to withdraw  and
    which is one aspect of her argument that she was denied a fair trial.  In the
    next section of my reasons, I will consider Lindas fraudulent conveyance
    argument.  In doing so, I will consider the trial judges ruling that Howard
    could rely on his fathers affidavit, which is the other aspect of Lindas
    argument that she was denied a fair trial.

(a)

The Howard R. Trust

[34]

On
    the date of marriage, Howard was the beneficiary of the Howard R. Trust, which
    was settled by Fred Reisman in 1965.  Through its ownership of certain
    preference shares, the Trust held a 13.89% interest in the equity of MRL, a
    real estate holding company, which held income producing properties and land.  MRL
    was named for Howards mother Marian, but both it and the Trust were controlled
    by Howards father Fred.  Howard never personally received any distribution
    from his interest in the Trust.

[35]

Howards
    valuation expert, Bonnie Prussky, valued the Trusts 13.89% interest in MRL at
    $1,048,000.  The trial judge accepted that valuation.  Accordingly, that amount
    was appropriately deducted on Howards net family property statement as a date
    of marriage asset.

(b)

The 1998 Estate Freeze

[36]

In
    1998, on the recommendation of his financial advisors, Fred Reisman undertook a
    complicated reorganization and estate freeze of MRL. The purpose and mechanics of
    the estate freeze are concisely and admirably summarized by the trial judge at
    paragraphs 49-52 of her reasons.  I have reproduced her summary at Appendix A
    to these reasons.

[37]

The
    trial judge found, at para. 53, that the reorganization and estate freeze had
    three objectives:

·

(1) to freeze the value of the equity shares in MRL;

·

(2) to cause a distribution of trust to the children and
    grandchildren; and

·

(3) to protect the future growth in MRL in order to take
    advantage of exclusions under the [
Family Law Act,
R.S.O. 1990, c. F.3]
for gifted
    property.

[38]

This
    third objective is central to Lindas submission that the estate freeze was a
    fraudulent conveyance.  I will address this submission in the next section of
    these reasons.

[39]

For
    Howard, the estate freeze had two important consequences.  First, the
    preference shares of MRL held by his Trust were exchanged for frozen shares of MRL.
    Through a series of transactions, these frozen shares were converted into
    24,500 fixed value Class A common shares in Howardco., a holding company
    incorporated in the corporate reorganization.  The Howard R. Trust, along with
    five other Trusts, was then wound up.

[40]

Howard
    included these Class A common shares in his net family property.  Both Howards
    expert, Ms. Prussky, and Lindas expert, Neil Maisel, valued these shares at
    the date of separation.  The trial judge preferred Ms. Prusskys valuation,
    which was $1,193,000, and used that amount in calculating Howards net family
    property.  Linda does not challenge that valuation on appeal.

[41]

The
    second important consequence of the estate freeze was that Howard received from
    Fred Reisman 50 Class D common shares of MRL, which represented 25% of the
    future growth of MRL.
[2]
Howard then rolled these 50 Class D common shares into Howardco. in exchange
    for one Class B common share in Howardco.  Howards treatment of this one Class
    B common share in his net family property statement became a contentious issue
    at trial and remains so on appeal.

[42]

Howard
    took the position that this Class B common share was a gift from his father and
    thus was excluded from his net family property.  Linda initially agreed that it
    was a gift, but then sought to retract her position and argue that only the
    value of the share representing 11.11% of MRL was a gift and that the remainder
    ought to be included in Howards net family property  a position she reiterates
    on appeal.

[43]

In
    essence, Linda contends that Howard, through his Trust, went from owning a 13.89%
    interest in MRL at the date of marriage to owning a 25% interest after the
    estate freeze.  As the 13.89% was deducted from his net family property as a date
    of marriage asset, only 11.11% (25% less 13.89%) should be deducted as a gift.
    To permit Howard to deduct the entire 25% as a gift would amount to double
    counting.

[44]

I
    do not agree with Lindas contention both because she admitted in an agreed statement
    of facts that the Class B common share was a gift, and because the evidence
    shows that it was a gift and treating it as one does not amount to double
    counting.

(c)

Lindas Admission that the Class B Common Share was a Gift

[45]

In
    October 2010, nearly a year before trial, the parties signed an agreed
    statement of facts.  The agreed statement included a joint net family property
    statement signed by both parties.  In this statement, Linda agreed that Howards
    1 Class B share was acquired by gift and was excluded from his net family
    property.
[3]
On a later net family property statement filled out by Linda alone, she again
    showed the Class B share as a gift to Howard and therefore excluded it from
    Howards net family property.

[46]

Not
    only did Linda admit that the Class B share was a gift, she did not allege
    otherwise in her pleadings.  In her Amended Statement of Claim, she attacked
    Howards receipt of the share as a fraudulent conveyance but did not claim that
    it was not a gift.

[47]

However,
    toward the end of the trial and in closing argument, Linda sought to withdraw
    her admission.  The trial judge refused to permit Linda to do so.  At para. 81
    of her reasons, she explained why:

In order to withdraw an admission, which is what changing the
    Agreed Statement of Facts would result in, there requires an explanation and
    well [
sic
] as demonstrating to the Court that any prejudice to the other
    party caused by the withdrawal can be compensated for in costs:
Forget v.
    Forget
.  In this case, there is no satisfactory explanation that has been
    put forward.  Further, it was during the course of trial that the issue was
    raised and in my view, the prejudice to the Respondent at that point could not
    have been compensated for by costs or an adjournment.

[48]

Linda
    now says that Ms. Prussky could have been asked to value Howards interest in
    the one Class B share of Howardco. and the court could have compensated Howard
    in costs by ordering Linda to pay for the valuation.  It seems to me that this
    would have been an unrealistic option in the middle of the trial, and it was an
    option that was never put to the trial judge.  I agree with the trial judges
    refusal to permit Linda to withdraw her admission, and I agree with the reasons
    for her refusal.

(d)

No Double Counting

[49]

Moreover,
    permitting Linda to withdraw her admission that the Class B share was a gift
    would not assist her.

[50]

Howard
    did not, as Linda claims, go from having an excluded 13.89% interest in MRL to
    having an excluded 25% interest in MRL.  At the date of marriage, he did not
    own  either legally or beneficially  an interest in MRL.  Rather, he had a
    beneficial interest in a trust, which had an interest in MRL, but which was
    entirely controlled by his father as Trustee.  Linda conceded that the value of
    this 13.89% interest in the trust was properly excluded from Howards net
    family property as a date of marriage asset.

[51]

On
    the estate freeze, the trust interest in MRL was converted into frozen shares
    of MRL and then converted again into fixed value Class A common shares in Howardco.,
    all at Fred Reismans sole discretion.  The difference between the value of the
    trusts interest in MRL at the date of marriage and the value of these Class A common
    shares at separation was appropriately included in Howards net family
    property.

[52]

In
    separate transactions, Fred Reisman gifted to each of his four children 50 Class
    D common shares of MRL, representing the future growth of the company.  In
    Howards case, his 50 Class D shares were converted into one Class B share in Howardco.
    That one Class B share represented 25% of the increase in value of MRL since
    the estate freeze in 1998, not 25% of the value of MRL.  It was properly
    excluded on Howards net family property statement as a gift.

[53]

A
    gift is a voluntary transfer of property to another without consideration.  Typically,
    a gift has three elements:  an intention to donate, an acceptance and a
    sufficient act of delivery: see
Serra v. Serra,
2009 ONCA 105, 93 O.R. (3d) 161
.  On the
    evidence led at trial, all three elements were made out.  Fred intended to
    donate the 50 Class D shares to his son Howard and his other children; Howard
    accepted the donation, which was eventually converted into one Class B share in
    Howardco.; and the shares were actually delivered to Howard and his holding
    company.

[54]

Thus,
    Lindas double counting argument must fail.  There is simply no basis in the
    evidence to treat only part of the value of the Class B share as a gift.

(3)

Was the Estate Freeze a Fraudulent Conveyance?

[55]

Section
    2 of the
Fraudulent Conveyances Act
, R.S.O. 1990, c. F.29 gives
    creditors or others standing to set aside a conveyance of property made with
    a fraudulent intent:

Every conveyance of real property or personal property and
    every bond, suit, judgment and execution heretofore or hereafter made with
    intent to defeat, hinder, delay or defraud creditors or others of their just
    and lawful actions, suits, debts, accounts, damages, penalties or forfeitures
    are void as against such persons and their assigns.

[56]

Linda
    claimed that the estate freeze was a fraudulent conveyance contrary to s. 2
    because it was designed to intentionally reduce Howards net family property
    in the event of a breakdown of the marriage, and thus deprive her of the
    equalization payment to which she would otherwise be entitled.

[57]

The
    trial judge correctly recognized that the
Fraudulent Conveyances Act
can apply to equalization proceedings under the
Family Law Act
.
    Nonetheless, she dismissed Lindas claim for two reasons.  First, relying on
    this courts decision in
Stone v. Stone
(2001), 55 O.R. (3d) 491
    (C.A.), the trial judge held that Linda was not a creditor of Howard at the
    relevant time, 1998, when the conveyance she challenges took place.  Second,
    the trial judge held that the estate freeze was not undertaken with an intent
    to defeat an equalization claim by Linda.  In finding the absence of a
    fraudulent intent, the trial judge relied on the affidavit of Fred Reisman,
    which set out the objectives of the estate freeze.  She concluded at para. 66
    of her reasons:

When the reorganization and estate freeze was done in 1998,
    there were legitimate purposes for undertaking the work, and there was no
    evidence to suggest one of the motives was to defeat the Applicants
    entitlement under the
FLA
.

[58]

Linda
    submits that in dismissing her s. 2 claim, the trial judge made three errors.
    First, she ought to have found that Linda had standing to assert a claim under
    s. 2 as an other person.  Second, she ought not to have admitted or relied on
    Fred Reismans affidavit.  Third, on the question of Freds intent, she failed
    to take into account that one of the reasons for the estate freeze was to take
    advantage of the
Family Law Act
exclusions.  I would not give effect
    to any of these three submissions.

(a)

Creditors or others

[59]

In
Stone
, Feldman J.A. extensively canvassed the meaning of creditor
    and of creditors or others under s. 2 of the
Fraudulent Conveyances Act
.
    She rejected the proposition that spouses are in a constant debtor-creditor relationship.
    Instead, she held that the debtor-creditor relationship between married spouses
    arises only when one spouse has the right to claim an equalization payment from
    the other; in other words, a debtor-creditor relationship arises when one of
    the events triggering an equalization claim under the
Family Law Act
occurs: for example, on death, on divorce or on separation with no real
    prospect of the resumption of cohabitation.  Unquestionably, in 1998, Linda was
    not a creditor of Howard.  Back then she had no entitlement to an equalization
    payment.

[60]

Feldman
    J.A. also considered the long line of decisions interpreting creditors or
    others.  She noted that others includes persons who, though not judgment
    creditors at the time of the challenged conveyance, nonetheless have a claim
    for unliquidated damages.  Feldman J.A. concluded, at para. 25, that in the
    family law context:

In order for a spouse to qualify as a person who is intended to
    be protected from conveyances of property made with intent to defeat her interest,
    she must have had an existing claim against her husband at the time of the
    impugned conveyance that is a right which she could have asserted in an action.

[61]

Linda
    testified that she did not know about the reorganization and the estate freeze
    when it took place.  However, her lack of knowledge does not help her.  The claim
    Linda asserts is a claim to an equalization payment.  But she had no claim for
    equalization in 1998.  She does not claim, for example, that she would have
    even contemplated separation had she known about the estate freeze.  Thus, she
    was not an other person with standing to assert a claim under s. 2 of the
Fraudulent
    Conveyances Act
.

(b)

Admissibility of Fred Reismans Affidavit

[62]

At
    the beginning of the trial, Howard brought a motion to introduce the affidavit
    of his father Fred Reisman, sworn in November 2008, nearly three years before
    trial.  The affidavit had been filed in one of the several rectification
    proceedings needed to correct errors in the documents for the estate freeze.
    In the affidavit, Fred described the estate freeze and said that it was
    undertaken at his sole discretion for legitimate tax, estate planning and
    family law purposes.

[63]

In
    his affidavit in support of his motion, Howard said that his father was 86
    years old, suffered from Alzheimers disease and serious memory loss, and could
    not give
viva voce
evidence at trial.

[64]

Howard
    attached to his affidavit a letter from Fred Reismans doctor who said that it
    would be pointless for Fred to give evidence at trial as his ability to
    recall past events and details was severely compromised.  The trial judge
    admitted the affidavit of Fred Reisman and then relied on it in finding that
    the estate freeze was not undertaken with a fraudulent intent.

[65]

Linda
    submits that the trial judge erred in admitting Fred Reismans affidavit. She
    makes the corollary submission that the trial judge ought not to have
    considered the letter from Freds doctor, as it was unsworn and he did not have
    any expertise on a persons fitness to testify.  Lindas overall contention is
    that the trial judges ruling prejudiced her and deprived her of a fair trial
    because she could not cross-examine Fred Reisman, the architect of the estate
    freeze.

[66]

This
    contention cannot succeed for three reasons.  First, Linda had several
    opportunities to cross-examine Fred Reisman and did not avail herself of any of
    them.  She had notice of the rectification application in which Fred Reismans
    affidavit was filed.  Indeed, Goodmans LLP, the law firm that acted for Fred
    Reisman, agreed to Lindas request to adjourn the rectification application so
    that she could put in responding material and cross-examine her father-in-law.
    She did neither.  In addition, at no time in the matrimonial proceedings did
    Linda seek to add Fred Reisman as a party and examine him.  Finally, two months
    before trial, Howards lawyer put Linda on notice that she was not going to
    call Fred Reisman as a witness at trial.  Again, Linda did not subpoena Fred
    Reisman or ask to examine him.

[67]

Second,
    Linda filed no evidence to contradict the opinion of Howard and of Freds
    doctor that Fred was incapable of testifying.

[68]

Third,
    I do not think that Freds unavailability to testify at trial prejudiced
    Linda.  The Goodmans lawyer who dealt with the rectification application did
    testify at trial and gave evidence about the objectives of the estate freeze,
    which corroborated Freds affidavit evidence.  Those objectives were hardly
    controversial.

[69]

Accordingly,
    I conclude that the trial judge did not err in exercising her discretion to
    admit Fred Reismans affidavit and rely on it.

(c)

Intent

[70]

Linda
    argues that in finding no fraudulent intent, the trial judge erred because she
    did not consider that one of the objectives of the estate freeze was to take
    advantage of the exclusions for gifted property under the
Family Law Act
.
    I do not accept this argument.

[71]

The
    trial judge was well aware that taking advantage of the exclusions was one of
    the objectives of the estate freeze.  She said so explicitly at para. 53 of her
    reasons.  However, she found that estate planning and tax considerations mainly
    prompted Fred Reisman to undertake the estate freeze.  That finding is entitled
    to appellate deference and I see no basis to interfere with it.

[72]

The
    estate freeze took place in 1998, nine years before Linda and Howard separated.
    Linda did not testify about any marital discord at the time or suggest that she
    would have considered separating from Howard had she known about the estate
    freeze.  Moreover, Linda maintained that she had an excellent relationship with
    Fred Reisman.  And she has made no complaint about the portion of the estate
    freeze that benefitted Fred Reismans 13 grandchildren, including her own four
    children.

[73]

The
    facts of this case differ significantly from the facts in
Stone
.  In
Stone
,
    the husband, with his death imminent, conveyed virtually all of his property to
    the children of his former marriage.  He did so without telling his wife and
    with the obvious intent to deprive her of a fair equalization payment.  The
    trial judge found that the husbands dispositions amounted to fraudulent
    conveyances and this court upheld his finding.

[74]

On
    the facts of the case before us, no fraudulent intent lay behind the estate
    freeze.  It was a legitimate transaction undertaken by Fred Reisman to preserve
    his familys wealth.  The trial judge was therefore correct in dismissing
    Lindas claim under s. 2 of the
Fraudulent Conveyances Act
.

(4)

Did the Trial Judge Err in her Costs Award?

[75]

The
    trial judge awarded Howard costs of $250,000, payable by Linda over 10 years,
    in equal monthly installments of $2,083.33, unless Howards obligation to pay
    spousal support ends earlier, in which case the entire amount remaining would
    become due and payable.  The trial judge also ordered that the costs award be
    enforced as a support order under the
Family Responsibility and Support Arrears
    Enforcement Act, 1996
, S.O. 1996, c. 31.  Linda challenges both the amount
    of costs ordered and the schedule of payments.

(a)     Amount

[76]

Howard
    made three offers to settle, each on terms more favourable to Linda than she
    obtained at trial.  Thus, the $250,000 order reflects partial indemnity costs
    to the date of the first offer in February 2010, and full indemnity costs after
    that date.  Linda does not contest the scale of costs.

[77]

Linda
    does, however, submit that the amount of costs is excessive.  I do not see any
    basis to interfere with the amount ordered.  The trial judge applied the proper
    principles:  she took into account the cost factors in Rule 24 of the
Family
    Law Rules
and arrived at a figure that she considered fair and
    reasonable.  In doing so, she concluded that the substantial disbursements for
    expert fees were reasonable because of the importance and complexity of the
    issues arising out of the estate freeze, but that the hours charged by Howards
    lawyers were excessive.  As the trial judge exercised her discretion reasonably
    and gave reasonable explanations for her award, I would uphold the amount she
    ordered.

(b)     Schedule
    of Payments

[78]

The
    trial judge tied Lindas obligation to pay the costs award to her receipt of
    spousal support.  The net result under the trial judges order is that for the
    period Linda receives spousal support, she will receive only $2,416.67 monthly
    ($4,500 - $2,083.33).

[79]

As
    I would set aside the 10 year upper limit on spousal support, I would correspondingly
    reduce the monthly amount Linda is required to pay to satisfy the costs award.
    I would order that she pay the costs award of $250,000 at the rate of $1,000
    per month.  That will leave her with net monthly spousal support of $3,500.

[80]

If
    Lindas entitlement to spousal support ends, she must then pay the outstanding
    amount of costs.  The trial judge ordered that the costs award be enforced
    under
the
Family
    Responsibility and Support Arrears Enforcement Act, 1996
.  Linda did not
    challenge this order on appeal.

C.

Conclusion

[81]

I
    would not interfere with the amount of spousal support ordered by the trial
    judge.  However, I would set aside the 10 year limit ordered by the trial
    judge, and in its place order that spousal support be paid to Linda indefinitely,
    but subject to variation or termination on a material change in circumstances.

[82]

I
    would not give effect to any of Lindas arguments arising out of the estate
    freeze.

[83]

I
    would vary Lindas obligation to pay the costs award from $2,083.33 monthly to
    $1,000 monthly.

[84]

The
    parties may make written submissions on the costs of the appeal within three
    weeks of the release of these reasons.

Released: February 11, 2014 (AH)

John Laskin J.A.

I agree  Alexandra Hoy
    A.C.J.O.

I agree  M. Tulloch J.A.

Appendix A

[49]    Since the existing trusts
    were approaching the deemed disposition date, in order to defer the taxes on
    future growth and provide some protection against family law issues, it was
    determined to do an estate freeze, which is a mechanism by which future growth
    in a company is transferred, and the freeze is usually intergenerational.  The
    objective of an estate freeze is to deal with the tax on the trust, because
    every trust is deemed to dispose of its assets every 21 years and is required
    to pay tax.

[50]    It was decided to wind up the trusts, freeze the value
    of the MRL shares they owned and transfer the frozen value to Fred and Marian,
    their children and grandchildren.  In addition, a new trust was created,
    F&M GrandKidsCo, for the 13 grandchildren of Fred and Marian and 26% of the
    frozen value was transferred to this new company.  The frozen share in MRL was
    replaced by new equity shares which were gifted to Freds children.  Exhibit 9,
    tab 60 contains a chart prepared by the lawyers who acted on this transaction,
    showing the steps related to the 1998 MRL freeze.  Since the passage of the
Family
    Law Act
in 1986, such gifted shares are considered excluded property.

[51]    To put it simply, the value of the MRL shares was
    frozen and new classes of shares were created.  Howard R. Trust received 24,500
    Class A Special Shares in exchange for the shares it owned in MRL.  Fred gifted
    50 Class D Common Shares of MRL to Howard.  1330650 Ontario Inc. [Howardco]
    was incorporated as a holding company and Howard subscribed for one Class D
    Common Share.  Howard R. Trust transferred its 24,500 frozen shares of MRL to
    Howardco in exchange for 24,500 Class A Common Shares.  Howard then rolled the
    50 Class D Common Shares of MRL which had been gifted to him by Fred into
    Howardco for one Class B Common share.  Howardco then sold 24,500 Class A
    Special Shares in MRL to MRL in exchange for 50 Class D Common Shares in MRL.
    There was a period of perhaps 10 days when Howardco had retractable shares.
    Each child of Fred was treated in the same manner in the estate freeze, as they
    each received 25% of the MRL shares.

[52]    The final allocation was that Howard had one Class D
    Common Share in Howardco and all of his siblings subscribed for one Class D
    share in their own holding company; 24,500 Class A Common Shares in Howardco;
    and one Class B Common Share in Howardco.  It is to be noted as well that
    Howardco had 100 Class D Common Shares in MRL which are neither redeemable nor
    retractable.  Howardco had no other material assets.  Following the
    reorganization, Fred continued to control MRL.

[1]
The trial judge awarded Linda an equalization payment that was $119,956.34 less
    than the amount Howard had paid under the interim domestic contract.  Howard
    agreed to waive repayment of this amount on the understanding that it would be
    treated as lump sum spousal support: see paras. 7 and 8 of these reasons.

[2]
Each of Howards three siblings similarly received 50 Class D common shares of MRL.

[3]
Neither party valued the Class B share, but in my opinion nothing turns on
    their failure to do so.


COURT OF APPEAL FOR ONTARIO

CITATION: Sawdon Estate v. Sawdon, 2014
    ONCA 101

DATE: 20140205

DOCKET: C55964

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

BETWEEN

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)

and

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)

David Gnam and Sylvain Deschênes, for the appellant

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

Heard: December 20, 2013

On appeal from the judgment of Justice Leonard Ricchetti
    of the Superior Court of Justice, dated July 23, 2012, with reasons reported at
    2012 ONSC 4042.

Gillese
    J.A.:

[1]

An aging father placed several bank accounts into joint names with two
    of his five children.  He told the two children that on his death the funds in
    the bank accounts were to be distributed equally among all of his children.

[2]

When the father died, the question arose:  to whom did the funds in the
    bank accounts belong?  The fathers estate, the two children, or all of his
    children?  This appeal answers that question.  In so doing, it must explore the
    Supreme Court of Canadas decision in
Pecore v. Pecore
, 2007 SCC 17,
    [2007] 1 S.C.R. 795.

[3]

The cross appeal in this case raises an interesting question in respect
    of costs in estate litigation: must the court choose between ordering costs
    against the losing party or from the estate, or can it fashion a costs order
    that blends the two?

OVERVIEW

[4]

Arthur Sawdon died on March 27, 2007. He was survived by his five
    children: Wayne Sawdon, Stephen Sawdon, Brian Sawdon, James Sawdon and Carolyn
    Anding (the Children).  Because a number of these individuals share the same
    last name, for ease of reference I will refer to each of them by their first
    names.

[5]

Between 2004 and 2006, Arthur transferred his seven bank accounts into
    joint accounts, with a right of survivorship, to himself, Wayne and Stephen
    (the Bank Accounts).  At the time of his death, there was approximately
    $1,076,000 in the Bank Accounts.

[6]

Arthurs will, executed in 2006, did not mention the Bank Accounts (the
    Will). It contained a hotchpot clause entitling each of the Children to the
    greater of $100,000 or the largest amount owing on mortgages he held on each of
    Wayne and Stephens homes.  It also provided that the Watch Tower Bible and
    Tract Society of Canada (Watch Tower) would receive the share of any child
    who died without issue, as well as the residue of his estate (the Estate).

[7]

Watch Tower is a registered charity representing the religious community
    of Jehovahs Witnesses in Canada.

[8]

The Will appointed Arthurs son Wayne as the estate trustee (the Estate
    Trustee).

[9]

A dispute emerged between Watch Tower and the Children when the Estate
    Trustee sought to pass accounts. Watch Tower claimed that upon Arthurs death, the
    funds in the Bank Accounts formed part of the Estate by way of resulting trust.
    Wayne and Stephen claimed that their father had instructed them to distribute
    the funds in the Bank Accounts equally among the Children, on his death.

[10]

A
    trial was held to resolve the issue. Wayne and Stephen were the applicants,
    with Wayne acting in his capacity as Estate Trustee as well as in his own
    right. Watch Tower was the respondent.

[11]

By
    judgment dated July 23, 2012 (the Judgment), the trial judge ordered that the
    funds in the Bank Accounts were not part of the Estate.  He relied on
Pecore
for the relevant legal principles and concluded that although gratuitous
    transfers between a parent and an adult child are subject to the presumption of
    resulting trust in favour of the deceased parents estate, that presumption had
    been rebutted.

[12]

By
    order dated April 18, 2013 (the Costs Order), the trial judge ordered Watch
    Tower to pay the Estate Trustees trial costs on a partial indemnity basis.  He
    refused the Estate Trustees request for an order that the Estate indemnify him
    for the balance of his trial costs.  (He also ordered Watch Tower to pay very
    modest costs to the Office of the Public Guardian and Trustee, who had appeared
    at trial to represent the interests of James, one of the Children who had certain
    disabilities.)

[13]

Watch
    Tower appeals.  It contends that the trial judge applied the wrong legal principles
    and that the Estate is entitled to the funds in the Bank Accounts.

[14]

The
    Estate Trustee seeks leave to appeal the Costs Order and, if leave is granted,
    would cross appeal, arguing that he is entitled to indemnification from the
    Estate for his legal costs not recovered from Watch Tower.

[15]

For
    the reasons that follow, I would dismiss the appeal and allow the cross appeal.

BACKGROUND

[16]

The
    process of transferring Arthurs bank accounts into joint names with his sons
    Wayne and Stephen began in 2004.

[17]

In
    May 2004, Arthur had a discussion with his wife Hilda on the topic of
    succession. Hilda was in hospital with a terminal illness. In the presence of
    Wayne and James, Hilda asked Arthur to reassure her that any money to be left
    to the children would go to each of them equally. Arthur promised his wife that
    he would honour that commitment.

[18]

That
    same year, Arthur asked his lawyer, Daniel Pole, to prepare a will.  He told
    his lawyer that he was thinking about transferring his bank accounts into joint
    names with two of his sons, Wayne and Stephen.  His lawyer advised him that if,
    on his death, he did not want the funds in the bank accounts to pass directly
    to the other joint bank account holders, he would need a declaration of trust
    to that effect.

[19]

On
    May 17, 2004, Hilda passed away.

[20]

Arthur
    and Hilda had held all their assets, with the exception of one bank account, in
    their joint names with the right of survivorship.  The one bank account not
    held jointly was in Hildas name alone.

[21]

Upon
    Hildas death, all the assets that they held jointly passed to Arthur without
    difficulty through the right of survivorship, without becoming a part of
    Hildas estate, and without the necessity of probate.

[22]

However,
    Arthur experienced difficulty and frustration in getting the contents of the
    one bank account that had been in Hildas sole name.  He ended up needing to
    present the bank with a copy of Hildas will, showing that he was the sole
    beneficiary. He was unhappy with the delay in accessing those funds and with
    having to prove his entitlement to them.

[23]

In
    June 2004, Arthur met with Gladys Fisher, a CIBC account representative,
    because he wanted to transfer one of his CIBC bank accounts into a joint
    account with Wayne and Stephen. Ms. Fisher explained to Arthur that the bank
    offered a joint bank account with a right of survivorship and one without that
    right.  She also explained the risks associated with joint bank accounts,
    including the ability of the other joint account holders to withdraw the funds
    while he was still alive, and the potential risk of seizure by their creditors
    should they become bankrupt or get divorced.

[24]

Arthur
    told Gladys Fisher that, upon his death, he wanted his children to have the
    money without having to go through probate, and that Wayne and Stephen knew
    what to do with the money. He did not want his children to experience the same
    problems he had with Hildas bank account after her death. He then proceeded to
    transfer the bank account into a joint account with a right of survivorship to
    himself, Wayne and Stephen.

[25]

Over
    the next few years, Arthur transferred his other bank accounts at the Royal
    Bank and TD Canada Trust into joint accounts with a right of survivorship for
    himself, Wayne and Stephen.

[26]

The
    transfer of the last two bank accounts into joint names with Wayne and Stephen
    occurred on July 19, 2006, just two weeks after Arthur met with his lawyer Mr.
    Pole to change his 2004 will. One of those accounts held approximately 60% of
    the total monies in the Bank Accounts combined.

[27]

It
    will be recalled that Mr. Pole had previously advised Arthur that the effect of
    transferring his bank accounts into joint accounts with his sons would be that
    the money would pass directly to the joint account holders upon his death,
    bypassing the estate, unless there was a signed declaration of trust.  Arthur
    never instructed his lawyer to prepare a declaration of trust, nor did he ask
    his sons to execute such a declaration.

[28]

Until
    his death, apart from some mortgage payments made by Wayne and Stephen into one
    of the Bank Accounts, Arthur alone deposited and withdrew funds from the Bank
    Accounts.

[29]

Four
    witnesses testified at trial: Daniel Pole; Wayne; Stephen; and Gladys Fisher.

[30]

Daniel
    Pole admitted that he did not know about the Bank Accounts until after Arthurs
    death. However, he also claimed that Arthur expressed the intention to him that
    the money in the Bank Accounts should form part of the Estate.

[31]

It
    emerged at trial that Daniel Pole was an elder with the Jehovahs Witnesses and
    had acted as Watch Towers counsel in the past, and that he did not disclose this
    information to Arthur at the time of executing the Will.

[32]

Wayne
    and Stephen both testified that they had made a commitment to their father
    that, upon his death, the money in the Bank Accounts was not to be theirs
    personally, but was to be for the benefit of the five children equally. Wayne
    further testified that he told Mr. Pole that he would sign a document to the
    effect that he was holding the money in the Bank Accounts in trust for the Children.

[33]

Gladys
    Fisher testified as to her knowledge of Arthurs intentions in transferring his
    money into joint bank accounts with a right of survivorship.  She told the
    court about the information she had given Arthur relating to the operation of a
    right of survivorship, and Arthurs statement to her that he wanted his
    children to have the money on his death without having to go through probate.

THE TRIAL DECISION

[34]

The
    trial judge began by quoting extensively from
Pecore
, noting that it is
    the Supreme Courts most recent pronouncement on a survivors entitlement to
    monies in a joint bank account.

[35]

Pecore
established that gratuitous transfers between a parent and an adult child
    are subject to the presumption of resulting trust in favour of the deceased
    parents estate.  As there had been a gratuitous transfer of the Bank Accounts from
    Arthur into his name jointly with Wayne and Stephen, the trial judge then considered
    whether the presumption had been rebutted.  He concluded that it had, saying
    that Arthur intended to make an
inter vivos
gift of the beneficial
    interest in the Bank Accounts when they were opened.

[36]

The
    trial judge made a key factual finding when concluding that the presumption had
    been rebutted, namely, that Arthur had transferred the Bank Accounts into joint
    names, with a right of survivorship, knowing full well how the right of
    survivorship would operate on his death.  This finding was based on three
    pieces of evidence in particular.

[37]

First,
    there was Arthurs firsthand experience with how joint accounts with a right of
    survivorship operated.  It will be recalled that Arthur and Hilda had held all
    their assets in their joint names with the right of survivorship, with the
    exception of one bank account, which was in Hildas name alone. When Hilda
    predeceased Arthur in 2004, he had difficulty in getting the contents of the
    one bank account that had been in Hildas sole name.  This emphasized to Arthur
    the practical way in which joint bank accounts with a right of survivorship
    operated on the death of a joint account holder.

[38]

Second,
    when Arthur told his lawyer that he was thinking about transferring his bank
    accounts into joint names with his sons, Wayne and Stephen, his lawyer advised
    him that if he did not want the funds in the bank accounts to go to the other
    joint bank account holders on his death, he would need a declaration of trust
    to that effect.  It was after he received this legal advice that Arthur made
    the transfers into joint names; he never instructed his lawyer to prepare a
    declaration of trust.

[39]

Third,
    the trial judge accepted Gladys Fishers evidence that she had explained to
    Arthur the option of opening a joint account with or without a right of
    survivorship and the differences between the two types of accounts.
    Understanding all of this, Arthur told Ms. Fisher that he wanted his Children
    to have his money on his death without having to go through probate and that he
    did not want his bank accounts frozen upon his death.  He did not want his Children
    to have the same problems that he had had with the one bank account that was
    solely in Hildas name when she died.

[40]

The
    trial judge also accepted Wayne and Stephens evidence that their father had made
    it clear to them on numerous occasions that on his death the funds in the Bank
    Accounts were to go to his Children equally.

[41]

The
    trial judge offered two different lines of reasoning for finding that the
    beneficial interest in the Bank Accounts belonged to the Children.  First, he
    was of the view that Arthur made a gift of the beneficial interest in the Bank
    Accounts to the Children, with Wayne and Stephen being used by Arthur to
    facilitate the transfer of that beneficial interest.  Alternatively, he
    reasoned, Arthur made a gift of the legal and beneficial interest to Wayne and
    Stephen, but they were to hold whatever money they ultimately received from the
    Bank Accounts in trust for their siblings.

[42]

In
    either event, the trial judge stated, the result was the same: the Bank
    Accounts did not form part of the Estate.  Instead, the Children held equal
    beneficial interests in the Bank Accounts on Arthurs death.

COSTS OF THE TRIAL

[43]

The
    Estate Trustee incurred actual trial costs of just under $193,000.  He sought
    to recover substantial indemnity costs from Watch Tower on the basis that the
    litigation was unnecessary.  He also asked that the Estate be ordered to
    indemnify him for any of his trial costs that were not recovered from Watch
    Tower.

[44]

Watch
    Tower took the position that partial indemnity costs were appropriate, provided
    that such costs were reasonable.

[45]

The
    trial judge ordered Watch Tower to pay costs to the Estate Trustee, on a partial
    indemnity basis, of $75,000 plus HST and disbursements.  He rejected the Estate
    Trustees request for costs from Watch Tower on a substantial indemnity basis.
    In his view, this submission failed to recognize that the onus was on the
    Estate Trustee to rebut the presumption of resulting trust in respect of the Bank
    Accounts.

[46]

The
    trial judge also refused to order the Estate to indemnify the Estate Trustee
    for the balance of his trial costs.  He saw the trial as a contest between the Children
    and Watch Tower, with the benefit of the litigation flowing to the Children.
    In his view, the litigation was of no benefit to the Estate.

THE ISSUES

[47]

The
    appeal raises two issues.  Did the trial judge err:

1. in failing
    to find that the Bank Accounts are held on resulting trust for the Estate; and

2. in
    failing to apply the legal principles applicable to secret trusts?

[48]

If
    leave to appeal the Costs Order is granted, the Estate Trustee raises a single
    issue by way of cross appeal:  did the trial judge err in refusing to order the
    Estate to indemnify him for his trial costs not recovered from Watch Tower?

[49]

Pecore
provides the legal framework for resolving the appeal.  Thus, before
    turning to the issues, it is necessary to carefully consider that decision.

PECORE

The Facts

[50]

In
Pecore
, an aging father gratuitously placed the bulk of his assets
    (mutual funds, bank accounts and income trusts) into joint accounts with one of
    his three children, Paula.  Paula made no deposits into the accounts.  Some of
    the financial institution documents creating the joint accounts specifically
    confirmed Paulas right of survivorship.

[51]

The
    fathers accountant advised him that transfers to Paula would trigger a capital
    gain and that tax on the gain would be due as of the year of disposition.  As a
    result, the father wrote letters to the financial institutions stating that he
    was the 100% owner of the assets and that they were not being gifted to Paula.

[52]

Paulas
    father continued to use and control the accounts after they were transferred
    into joint names.  He declared and paid all the taxes on income from the
    assets.  Paula made some withdrawals but was required to notify her father
    before doing so.

[53]

There
    was no mention of the accounts in the fathers will.  In his will, he left the
    residue of his estate to be divided equally between Paula and her husband, Michael.

[54]

After
    her father died, Paula took the remaining funds in the accounts.  Later, in
    divorce proceedings, Michael challenged Paulas entitlement to the funds.

[55]

The
    trial judge concluded that Paulas father intended to make a gift of the joint
    accounts to her.  On appeal, this court upheld the trial decision.  A further
    appeal to the Supreme Court was dismissed.

The Legal Framework

[56]

Justice
    Rothstein, writing for the majority in
Pecore
, cleared away much of the
    confusion that has beset the common law presumptions of resulting trust and
    advancement.  He stated that the presumptions continue to play a role in
    resolving disputes over gratuitous transfers, with the presumption of resulting
    trust being the general rule for gratuitous transfers (paras. 23  24). He made
    it clear that the presumption of resulting trust applies to gratuitous transfers
    made from a parent to an adult child, whereas the presumption of advancement is
    the starting point when the gratuitous transfer is from a parent to a minor
    child (paras. 38-40).

[57]

In
    either case, the relevant presumption can be rebutted by evidence of the
    transferors contrary intention on a balance of probabilities (para. 43).  The
    trial judge must begin the inquiry with the applicable presumption and then weigh
    all of the evidence in an attempt to ascertain, on a balance of probabilities,
    the transferors actual intention at the time of transfer (para. 44).

[58]

Justice
    Rothstein explained that the court may consider the following types of evidence
    when determining the transferors actual intention:

-

Evidence
    of the transferors intention subsequent to the transfer (paras. 56 - 59)

-

The
    wording of the bank/financial institution documents (paras. 60 - 61);

-

Control
    and use of the funds in the accounts (paras. 62 - 66);

-

The
    terms of any power of attorney granted to the transferee (paras. 67 - 68); and

-

The
    tax treatment of the accounts (paras. 69 - 70).

[59]

Justice
    Rothstein concluded, based on the trial judges findings of fact, that the
    presumption of resulting trust had been rebutted because, at the time the joint
    accounts were opened, Paulas father intended to make a gift to her of the
    right of survivorship.

THE APPEAL

1.

Are the
    Bank Accounts Held on Resulting Trust for the Estate?

[60]

After
    a thorough summary of the relevant trial evidence, the trial judge set out his
    credibility findings.  He accepted the evidence of Wayne and Ms. Fisher, saying
    that it was credible and reliable.  He accepted most of Stephens evidence,
    noting that significant portions were consistent with Waynes evidence and the
    documentation that Arthur had signed.  He rejected the evidence of Mr. Pole,
    Watch Towers sole witness, in its entirety, giving lengthy and compelling reasons
    for finding it neither credible nor reliable.

[61]

The
    trial judge then quoted the governing legal principles set out in
Pecore
.
    He noted that as Arthur had made a gratuitous transfer of the Bank Accounts
    into joint names with Wayne and Stephen, the presumption of resulting trust
    arose.  He went on to determine, as he was obliged to, whether that presumption
    had been rebutted by evidence of Arthurs actual intention at the time of the
    transfers.

[62]

The
    trial judge made clear findings of fact about Arthurs intention at the time he
    opened the Bank Accounts.  He carefully examined the types of evidence that
Pecore
indicated could be considered in determining Arthurs actual intention,
    including direct evidence at the time the Bank Accounts were opened, the
    wording of the bank documents, control and use of the funds, the terms of the
    power of attorney that Arthur had granted to Wayne, and the tax treatment of
    the Bank Accounts.

[63]

The
    trial judges findings of fact are thoughtful, detailed and fully available on
    the record.

[64]

The
    trial judge then concluded that the presumption of resulting trust had been
    rebutted and that the Children were the beneficial owners of the Bank Accounts.

[65]

It
    will be recalled that the trial judge offered two different lines of reasoning
    for finding that the beneficial interest in the Bank Accounts belonged to the
    Children.  The first is that Arthur made a gift of the beneficial interest in
    the Bank Accounts to the Children, with Wayne and Stephen being used by Arthur
    to facilitate the transfer of that beneficial interest.  Alternatively, he
    reasoned, Arthur made a gift of the legal and beneficial interest to Wayne and
    Stephen, but they were to hold whatever money they ultimately received from the
    Bank Accounts in trust for their siblings.

[66]

In
    my view, the trial judge correctly concluded that the Children are beneficially
    entitled to the funds in the Bank Accounts.

[67]

However,
    I arrive at that conclusion on a different legal analysis.  When Arthur
    transferred the Bank Accounts into joint names with Wayne and Stephen, he
    created a trust.  Legal title to the Bank Accounts vested in Arthur, Wayne and
    Stephen jointly, immediately upon transfer into their joint names.  Based on
    the trial judges unassailable findings of fact, when Arthur, Wayne and Stephen
    jointly became the legal owners of the Bank Accounts, they did so on the
    understanding that on Arthurs death, they were to distribute the contents of
    the Bank Accounts to the Children in equal shares.  In legal terms, when the
    Bank Accounts were opened Arthur made an immediate
inter vivos
gift of
    the beneficial right of survivorship to the Children.  Thus, from the time that
    the Bank Accounts were opened, those holding the legal title to the Bank Accounts
    held the beneficial right of survivorship in trust for the Children in equal
    shares.

[68]

This
    analysis differs from that of the trial judge in two significant respects.

[69]

First,
    the language used by the trial judge suggests that beneficial entitlement to
    the Bank Accounts lay with the Children from the time the Bank Accounts were
    created.  If by that the trial judge meant that the Children were entitled to
    the beneficial right of survivorship from the time that the Bank Accounts were
    opened, I agree.  However, if he was suggesting that the Children were
    beneficially entitled to the contents of the Bank Accounts from the time the
    accounts were opened, I would respectfully disagree.  The question of
    beneficial entitlement on Arthurs death is a question of who owns the right of
    survivorship, whereas the question of beneficial ownership generally would
    encompass the period from the time that the Bank Accounts were opened.  As I
    have explained, on the trial judges findings of fact, Arthurs intention and
    instructions related only to the former, namely, beneficial entitlement on his
    death.

[70]

Second,
    the trial judge founded the Childrens entitlement on the alternative bases of gift
    or trust.  With respect, one cannot find that a gift of the beneficial right of
    survivorship has been made and, at the same time, find that the recipient holds
    it in trust for others.  Where the legal title holder of property is obliged to
    hold the property for the benefit of another, a trust has been created.  In
    short, once the trial judge found that Wayne and Stephen were obliged to hold
    the beneficial right of survivorship for the Children in equal shares, he found
    that a trust had been created, and gift analysis (vis-à-vis Wayne and Stephen)
    was no longer available.

[71]

It
    may be that some of the confusion around the gift/trust analysis stems from
Pecore
because
Pecore
says nothing about trusts, as distinguished from
    resulting trusts.  Two points can be made in this regard, however.  First, the
    possibility of a trust did not arise in
Pecore
, where the ownership
    choices were the estate or Paula, the former on the basis of a resulting trust
    and the latter based on a gift.  Second, the power of an owner to dispose of
    his or her ownership rights by means of a trust is fundamental.  If
Pecore
were
    to be read as having taken away that right, it dramatically changed property
    and trust law and it did so without explanation.  In my view, there is nothing
    in the reasoning in
Pecore
to support such a radical change in the law.

[72]

I
    hasten to reiterate that the legal analysis I offer in no way detracts from the
    correctness of the trial judges conclusion that on Arthurs death, the
    Children became entitled to the monies in the Bank Accounts in equal shares.  In
    my view, that conclusion is not only correct in light of the trial judges findings,
    it is inescapable.

2.

Do the
    Legal Principles Relating to Secret Trusts Apply?

[73]

Watch
    Tower says that Arthur created a secret trust when he asked Wayne and Stephen
    to distribute the funds in the Bank Accounts to the Children equally, upon his
    death.  Thus, Watch Tower submits, the trial judge erred by failing to apply
    the legal principles relating to secret trusts. Based on this premise, it
    argues that: (1) the secret trust fails for lack of certainty of objects and the
    funds in the Bank Accounts must revert to the Estate, or (2) the beneficiaries
    of the secret trust are the beneficiaries of Arthurs 2006 will.

[74]

This
    is a new issue, raised for the first time on appeal.  Accordingly, I would
    decline to entertain it.

[75]

It
    is trite law that appellate courts are not to entertain new issues except in
    very limited circumstances:
Perez (Litigation Guardian of) v. Salvation
    Army in Canada
(1998), 42 O.R. (3d) 229, at p. 233.  As Watch Tower 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:  see
Clark v. BMO Nesbitt Burns Inc.,
2008 ONCA 663,
    300 D.L.R. (4th) 313, at para. 54.

[76]

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.

THE CROSS APPEAL

1.

Should
    Leave to Appeal the Costs Order be Granted?

[77]

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:  see
Brad-Jay
    Investments Ltd. v. Szijjarto
(2006), 218 O.A.C. 315 (C.A.), at para. 21,
    leave to appeal to S.C.C. refused, 31879 (June 21, 2007).  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
Hamilton v
.
Open Window Bakery Ltd.
(2003), 2004 SCC 9, [2004] 1 S.C.R. 303, at para.
    27.

[78]

Watch
    Tower submits that leave to appeal the Costs Order ought not to be granted.  It
    says that the trial judge made no error in principle in following the modern
    approach to awarding costs in estate litigation, namely, by applying the usual
    costs rules in civil litigation and awarding reasonable partial indemnity costs
    to the successful party.

[79]

As
    I will explain, in my view, the trial judge erred in principle in refusing to
    declare that the Estate Trustee is entitled to be indemnified for his trial
    costs not recovered from Watch Tower.  Accordingly, I would grant leave to
    appeal the Costs Order.

2.

Should
    the Estate Trustee be Indemnified?

[80]

The
    Estate Trustee submits that two errors underpin the trial judges refusal to order
    that the Estate indemnify him.  The first alleged error is the trial judges
    finding that the litigation was of no benefit to the Estate.  The second is the
    trial judges failure to take into consideration the Estate Trustees
    obligation to ascertain the assets of the Estate as a necessary precondition to
    properly administering it.

[81]

I
    would accept this submission.  In my view, an application of the governing
    principles makes it clear that the Estate Trustee is entitled to be indemnified
    for his trial costs.  As I will explain, the Costs Order requiring Watch Tower
    to pay part of those costs does not derogate from that entitlement.

a.

The
    Governing Principles

[82]

In
Geffen v. Goodman Estate
,

[1991] 2 S.C.R. 353, at pp. 390-391,
    Wilson J., writing for the court on this issue, reiterated the long-standing
    principle that estate trustees are entitled to be indemnified for all
    reasonably incurred costs, including legal costs.  She quoted with approval the
    following statement from
Re Dallaway
, [1982] 3 All E.R. 118, at p. 122:

In so far as [an estate trustee] does not recover his costs
    from any other person, he is entitled to take his costs out of the fund held by
    him unless the court otherwise orders; and the court can otherwise order only
    on the ground that he has acted unreasonably, or in substance for his own
    benefit, rather than for the benefit of the fund.

[83]

However,
    the practice of ordering costs from the estate did not extend solely to estate trustees.
    Historically in estate litigation, the courts would order the estate to bear
    the costs of all parties.

[84]

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), 255
    D.L.R. (4th) 435, (Ont. C.A.), at paras. 78-80: 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
, R.S.O. 1990, c. C.43, and Rule 57 of the
Rules of Civil Procedure
,
    R.R.O. 1990, Reg. 194, except in those limited circumstances where public
    policy considerations apply.

[85]

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
[1]
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.

[86]

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.  As Kruzick J. observed in
Penney Estate v. Resetar
, 2011
    ONSC 575, 64 E.T.R. (3d) 316, at para. 19, 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.

b.

Applying the
    Principles to the Present Case

[87]

In
    my view, the second public policy consideration  the need for the proper
    administration of the Estate  underlies the present proceedings.
    Consequently, as the Estate Trustee acted reasonably throughout and for the
    benefit of the Estate, he is entitled to be indemnified from the Estate for his
    trial costs not recovered from Watch Tower.

[88]

One
    of an estate trustees duties is to call in the assets of the estate.  Thus, in
    the present case, the Estate Trustee was obliged to determine whether the Bank Accounts
    were held by way of resulting trust for the Estate.  While it is true that the
    Estate Trustee was one of the joint owners of the Bank Accounts and also a
    beneficiary of the Estate, his multiple roles do not change the fact that his
    obligation as Estate Trustee was to determine the Estate assets and call them
    in.  Accordingly, the trial judge erred in finding that the litigation was for
    the Estate Trustees personal benefit.

[89]

Moreover,
    the difficulties and problems arising from the Bank Accounts were caused by
    Arthur, who transferred the Bank Accounts into his name jointly with Wayne and
    Stephen without clearly spelling out, by will or otherwise, what he intended by
    those transfers.  As we have seen, it was not clear whether Arthur intended to make
    a beneficial gift of the right of survivorship in the Bank Accounts to Wayne
    and Stephen; to have them hold the funds in the Bank Accounts on resulting
    trust for the Estate; or, on Arthurs death, to have them hold the funds in the
    Bank Accounts on trust for the Children.  Because these problems were caused by
    Arthur, it is appropriate that he  through his estate  bears the cost of
    their resolution.

[90]

Furthermore,
    in this case, the Estate Trustee had personal knowledge of Arthurs intentions.
    As Estate Trustee, he had no choice but to take a position consistent with
    those intentions.  He could not stand by as Watch Tower adduced evidence
    concerning Arthurs intentions that did not accord with his understanding of those
    intentions.  His fiduciary duty, as Estate Trustee, compelled him to participate
    in these proceedings to ensure that the court had the best evidence on which to
    determine Arthurs intentions in respect of the Bank Accounts.  From this
    perspective, the Estate Trustees involvement engages both of the public policy
    considerations.

[91]

The
    trial judge also erred in finding that the litigation was of no benefit to the
    Estate.  The Estate benefits from being properly administered and proper
    administration required the courts determination as to the ownership of the
    monies in the Bank Accounts on Arthurs death.

[92]

It
    will be apparent from these reasons that I do not accept Watch Towers
    submission that the public policy considerations apply only to situations where
    a will is challenged or its interpretation is in issue, and not to other estate
    litigation matters.  This submission fails to take into account the public
    policy consideration in favour of the due administration of estates.

c.

The
    Costs Order Combined with Indemnification

[93]

The
    costs award that would result from allowing the cross appeal is somewhat
    unusual.  Rather than ordering costs from the Estate or from Watch Tower, the
    costs award would be a blend of the two, with Watch Tower being liable to pay
    the Estate Trustees partial indemnity costs and the Estate being obliged to
    indemnify the Estate Trustee for his costs not recovered from Watch Tower.  Is
    there a problem with a blended costs order of this sort?  My answer to this
    question is no.

[94]

There
    is some case law that suggests that the awarding of costs in estate litigation
    is a binary matter: either costs are payable according to the usual rules
    governing civil litigation, or from the estate, but not both.  See, for
    example,
Reid Estate v. Reid Estate
,

2010 ONSC 3800, 59 E.T.R.
    (3d) 312, at para. 3.  And, I acknowledge, the parties and the courts often
    operate on the assumption that costs are to be awarded on an either/or basis.

[95]

However,
    I see nothing in the jurisprudence that would prevent a court from making such
    a blended costs order.  On the contrary, the passage quoted from
Geffen v.
    Goodman Estate
, set out earlier in these reasons, contemplates this very
    thing.  It will be recalled that in the quotation, Wilson J. affirmed the following:

In so far as [an estate trustee]
    does not recover his costs from any other person, he is entitled to take his
    costs out of the fund
[Emphasis added.]

[96]

Moreover,
    the modern approach to costs in estate litigation, which seeks to ensure that
    estates are not depleted through the costs of unnecessary litigation, supports the
    availability of a blended approach.  As D. M. Brown J. noted in
Salter v.
    Salter Estate
(2009), 50 E.T.R. (3d) 227 (Ont. S.C.), at para. 6:

Parties cannot treat the assets of an estate as a kind of ATM
    bank machine from which withdrawals automatically flow to fund their
    litigation.  The loser pays principle brings needed discipline to civil
    litigation by requiring parties to assess their personal exposure to costs
    before launching down the road of a lawsuit or a motion.  There is no reason
    why such discipline should be absent from estate litigation.  Quite the
    contrary.  Given the charged emotional dynamics of most pieces of estates
    litigation, an even greater need exists to impose the discipline of the general
    costs principle of loser pays in order to inject some modicum of
    reasonableness into decisions about whether to litigate estate-related
    disputes.

[97]

The
    availability of a blended costs order gives the court the ability to both
    respect the public policy considerations that may be involved and maintain the
    discipline of which Brown J. spoke.

[98]

A
    simple example illustrates this point.  Suppose an estate trustee faces a
    situation similar to that in the present case:  the court must determine
    whether a joint bank account is held by way of resulting trust for the estate.
    At trial, the responding party loses, although it had a reasonable basis for
    opposing the estate trustee.

[99]

In
    such a situation, the court may begin with the premise that both parties are
    entitled to their costs from the estate because of the public policy
    consideration in favour of the due administration of estates.  However, as in
    any type of civil litigation, the court must consider the parties conduct and
    the costs they are claiming.  If the court were to find that the losing partys
    conduct unnecessarily increased the costs of litigation, it should be open to
    the court to order that party to pay a part of the estate trustees costs,
    while at the same time ordering the estate to pay the balance of the estate
    trustees costs.  Put another way, the estate ought only to bear the costs
    reasonably associated with ensuring that it is duly administered.  Accordingly,
    in my view, the modern approach to costs in estate litigation supports the
    availability of blended costs orders.

[100]

Finally, given the
    discretionary nature of costs orders, there would have to be a compelling reason
    for me to conclude that the courts lack the power to make blended costs orders.
    I see none.

COSTS OF THE APPEAL AND CROSS APPEAL

[101]

In
McDougald
    Estate
, at para. 91, this court briefly considered the principles that
    govern costs awards in estate litigation at the appellate level.  It noted that
    the limited jurisprudence on point was to the effect that at the appellate
    level, costs are normally awarded against an unsuccessful appellant.  Thus, it
    appears, the usual rules apply with the unsuccessful party being liable for
    costs on a partial indemnity basis.  On that basis, given that the Estate
    Trustee was fully successful on the appeal and cross appeal, it is entitled to
    its costs from Watch Tower, on a partial indemnity basis.

[102]

A similar question
    to that discussed above arises: is this courts jurisdiction limited to its
    normal practice in respect of costs or can it make a blended order and declare
    that the Estate Trustee is entitled to be indemnified for the balance of its
    costs of the appeal and cross appeal from the Estate?  If so, ought it to make
    such an order?

[103]

The parties
    disagree on this issue.

[104]

Watch Tower
    contends that this court lacks the jurisdiction to make such an order.  It does
    not deny that the Estate Trustee is ultimately entitled to be indemnified by the
    Estate for the costs of the appeal and cross appeal, but maintains that to
    obtain such an indemnification, the estate trustee must return to the Superior
    Court of Justice and assert that claim on a passing of accounts.

[105]

The Estate
    Trustee, on the other hand, has provided cases in which this court has ordered
    that full costs be paid from the estate: see
The Canada Trust Company v.
    Browne
, 2012 ONCA 862, 82 E.T.R. (3d) 165
    and
Michaels v. Bogun Estate
,
    2006 CanLII 718 (Ont. C.A.)
.

[106]

I note, however,
    that the court has not been provided with any cases in which costs have been
    awarded on a blended basis at the appeal level, with partial indemnity costs
    being paid by the losing party and the balance of the costs being paid by the
    estate.

[107]

For similar
    reasons to those given above in respect of the first instance courts power to
    make blended costs orders, in my view, such costs orders can be made on
    appeal.

DISPOSITION

[108]

Accordingly, I
    would dismiss the appeal, grant leave to appeal the Costs Order, and allow the
    cross appeal.  I would amend the Costs Order by adding an order declaring that
    the Estate Trustee is entitled to be indemnified from the Estate for the
    balance of his trial costs not recovered from Watch Tower.

[109]

I would award the
    Estate Trustee costs of the appeal and cross appeal on a partial indemnity
    basis from Watch Tower, fixed at $30,000, all-inclusive.  I would also declare that
    the Estate Trustee is entitled to be indemnified by the Estate for the balance
    of his costs of the appeal and cross appeal not recovered from Watch Tower, in
    accordance with his Bill of Costs.

Released: February 5, 2014 (A.H.)

E.E. Gillese J.A.

I agree. Alexandra Hoy A.C.J.O.

I agree. G.R. Strathy J.A.

[1]
I will follow the modern practice of using the term testator to refer to both
    males and females who die leaving a will.


COURT OF APPEAL FOR ONTARIO

CITATION: Seguin (Township) v. Hamer, 2014
    ONCA 108

DATE: 20140211

DOCKET: C57449

Juriansz, Pepall and Pardu JJ.A.

BETWEEN

The Corporation of the Township of Seguin

Applicant (Appellant)

and

Dennis Neil Hamer

Respondent (Respondent in Appeal)

Michael M. Miller, for the appellant

Richard A. Levin, for the respondent

Heard: January 30, 2014

On appeal from the order of Justice John R. McCarthy of
    the Superior Court of Justice, dated July 8, 2013.

ENDORSEMENT

[1]

The Township of Seguin (the Township) appeals the dismissal of its
    application for an injunction to restrain the respondent from, among other
    things, feeding any bears, contrary to By-law 2012-049 (the By-Law), and the
    granting of the respondents counter-application quashing the By-law.

[2]

The Townships application was supported by evidence that the respondent
    had breached the By-law by feeding bears and doing so by hand.

[3]

We find it unnecessary to deal with the Townships argument that the
    respondents counter-application was statute barred because it was filed more
    than a year after the By-law was enacted.

[4]

The appeal must be allowed on the merits.

[5]

The application judge accepted the respondents submission that a
    municipality is obliged to act in good faith to enact a valid by-law. While
    that is so, a by-law is presumed to be valid and enacted in good faith. The
    onus is on the person attacking it to establish the municipality acted in bad
    faith:
Grosvenor v. East Luther Grand Valley (Township)
, 2007 ONCA 55 at
    para. 28. As the application judge stated: the standard to be met in
    establishing bad faith is high and  courts should be slow to find bad faith in
    the conduct of democratically elected representatives acting under legislative
    authority.

[6]

The respondent stressed that the Township did not point to any
    investigation, research or analysis to support the By-law's rationale and
    submitted this absence was sufficient to establish it acted without the
    requisite good faith.

[7]

We agree with the comments of Twaddle J.A. of the Manitoba Court of
    Appeal in
Mr. Pawn Ltd. v. Winnipeg (City)
, 2002 MBCA 2, 170 Man. R.
    (2d) 1, at para. 11:

City Council is a legislative body, not a court. It must, of
    course, act within the authority conferred on it and, in doing so, enact its
    by-laws in good faith and not for an improper purpose. There is, however, no
    requirement that Council have evidence of anything before enacting a by-law. In
    particular, there is no requirement that Council have evidence of potential
    harm before enacting a by-law designed to prevent such harm. Council can enact
    laws within its authority on whatever information it chooses, be that
    information placed before it by evidence or representation or even information
    within councillors own knowledge.

[8]

As Laskin J.A. explained in
Equity Waste Management of Canada v.
    Halton Hills (Town)
(1997), 35 O.R. (3d) 321 (C.A.), at p. 340:

Bad faith by a municipality connotes a lack of candour,
    frankness and impartiality. It includes arbitrary or unfair conduct and the
    exercise of power to serve private purposes at the expense of the public
    interest

[9]

The respondent's evidence fails to establish anything resembling bad
    faith in this case.

[10]

The
    Township indicated in the By-laws recitals that it was motivated by a concern
    that "intentional human artificial feeding of bears causes an escalation
    in a threat to public health, safety and well being [
sic
] of the residents
    and visitors of the Township of Seguin.

[11]

Thus,
    the By-law on its face addresses concerns well within the Township's power to
    enact and competence.

[12]

It
    seems to us the respondent's evidence seeks to have the court engage in a review
    of the wisdom of the By-law. This the court cannot do.

[13]

The
    appeal is allowed, the order below quashing the By-law is set aside, and a
    permanent injunction shall issue restraining the respondent from deliberately feeding
    any bear or providing access to food to any bear or placing or storing any attractants,
    as defined by the By-law, outdoors for the purpose of attracting or feeding any
    bear.

[14]

The
    appellant is entitled to its costs of the motion in the amount fixed by the
    motion judge in favour of the respondent. Costs of the appeal in favour of the
    appellant are fixed in the amount of $5000.00 all inclusive.

R.G.
    Juriansz J.A.

S.E.
    Pepall J.A.

G.
    Pardu J.A.