Clarke v. Rothwell

2018 BCSC 2413 Clarke v. Rothwell IN THE SUPREME COURT OF BRITISH COLUMBIA Citation: Clarke v. Rothwell, 2018 BCSC 2413 Date: 20181219 Docket: 18‑1512 Registry: Victoria Between: Joan Elizabeth Clarke as Executor of the Estate of Evelyn Elizabeth Wood, Deceased Plaintiff And Stephen John Rothwell Defendant Before: The Honourable Madam Justice Fitzpatrick Oral Reasons for Judgment In Chambers Counsel for the Plaintiff: J.C.M. Main Counsel for the Defendant: C.N. Christie Place and Date of Hearing: Victoria, B.C. December 19, 2018 Place and Date of Judgment: Victoria, B.C. December 19, 2018 [1] THE COURT: This is an application by the plaintiff, Joan Elizabeth Clarke, Executor of the estate of her mother, Evelyn Elizabeth Wood. Ms. Clarke's application is against her brother, the defendant Stephen John Rothwell. Ms. Clarke seeks a summary judgment against Mr. Rothwell in a specific amount, plus interest and costs on the usual basis. Mr. Rothwell opposes the application. [2] As a preliminary matter, the relief sought at paragraph 3 (accounting) and paragraph 5 (punitive damages) are to be adjourned generally. The remainder of the relief sought remains to be determined. Background Facts [3] As stated, Ms. Clarke and Mr. Rothwell are brother and sister. They also have two other sisters. These persons were all the children of Evelyn Wood. [4] In March 2000, Ms. Wood granted a power of attorney to her son, Mr. Rothwell. At the time, Ms. Wood owned her own house on Dunsmuir Road in Victoria (the "Home"). Through his activities as attorney for his mother, Mr. Rothwell proceeded to borrow monies from his mother. [5] In March 2001, Ms. Wood granted a mortgage against the Home to secure a $50,000 line of credit. This was done at the request of Mr. Rothwell, who solely benefited from the monies advanced. The first mortgage was registered in favour of Canada Trust Co. Mr. Rothwell made interest payments on the mortgage from that time forward. [6] Beginning in 2003, Ms. Wood apparently suffered a decline in health and mental capacity. Mr. Rothwell continued to manage her financial affairs. Eventually, in October 2003, Ms. Wood was in a long‑term care facility here in the Victoria area. [7] In November 2006, Mr. Rothwell saw fit to use his mother's Home as a further source of financing for his personal purposes. Using the power of attorney, he arranged to obtain a $100,000 loan which was secured as a second mortgage against the Home. Mr. Rothwell asserts that he used the monies for a personal crisis arising in his family and relating particularly to his daughter. He asserts, as an excuse for doing so, his belief that his mother would have wanted to have done this for her granddaughter. In any event, it is well accepted that, when the second mortgage was executed by Mr. Rothwell, Ms. Wood did not have the mental capacity to either consent to that transaction or even consider it. [8] As with the first mortgage, Mr. Rothwell paid the interest on the second mortgage until the time of his mother's death. [9] Other troubling circumstance is that Mr. Rothwell did not see fit to advise his sisters, including Ms. Clarke, as to what he was doing when he granted the second mortgage. In my view, this is clearly something that a reasonable person might have considered and done in the circumstances. Everyone in the family, including Ms. Clarke and Mr. Rothwell, knew that their mother had executed a will in 2000. They also knew that their mother had left the residue of her estate equally to her four children, such that each was entitled to a quarter interest. [10] What is also highly relevant is that, at the time that all of this occurred, unlike the stratospheric real estate prices that were common in the Lower Mainland and even in the Victoria area, Ms. Wood's assets were fairly modest. The majority of the value of her assets were by far found in the Home. At the time of Ms. Wood's death in August 2011, the value was $410,000. However, the net value was substantially less as both the first and second mortgages continued to be registered against the Home at that time. The total gross value of the estate assets was only approximately $445,000. [11] Despite Ms. Wood's death, Mr. Rothwell continued his non-disclosure of the first and second mortgages to his siblings. He and his sister, Carol Anne Rothwell, became executors of their mother's estate and proceeded to administer the estate. From that time forward, it appears that substantial difficulties arose between the parties concerning Mr. Rothwell's administration of the estate. [12] In February 2014, the Home was reluctantly sold by Mr. Rothwell, apparently after some effort being made by Ms. Clarke and her sisters to require that Mr. Rothwell take that step. It was only upon the listing of the Home that Ms. Clarke and her sisters first became aware of the two mortgages registered against the Home. This information came not from Mr. Rothwell, but the realtor. [13] Needless to say, some of the net sale proceeds were required to discharge the mortgages in full when the Home was sold. [14] After the sale, the sisters each obtained an interim distribution of $80,000. Mr. Rothwell did not receive any distribution at that time, which is understandable, given the fact that substantial amounts, $148,457.82, had been used to repay and discharge the mortgages. [15] Substantial issues then arose concerning Mr. Rothwell's administration of the estate, both from the time of Ms. Wood's death and even after the sale of the Home in 2014. Ultimately, that led to Ms. Clarke making efforts to remove Mr. Rothwell as an executor. There were issues about the accounting, and needless to say, issues about the mortgages. [16] In late 2016/early 2017, a Registrar's hearing was conducted by Master Bouck. On May 1, 2017, the Master issued her report and recommendations and her comments was very critical of Mr. Rothwell's actions with respect to the estate. [17] On July 18, 2017, the Master's report was then considered by Justice Johnston. On July 21, 2017, no doubt arising from this critical report, Justice Johnston issued an order that Mr. Rothwell and his co‑executor and sister, Carol Anne Rothwell be removed as executors and Ms. Clarke be appointed in their place as executrix. The Court also granted various other orders concerning the remuneration of the executors and costs: Mr. Rothwell was ordered to pay party and party costs of two days of the hearing before Master Bouck; the executors were to be indemnified for their special costs for preparation, attendance of certain days of the hearing; there was to be no indemnity to the executors for their accounting, which Master Bouck commented on very unfavourably; and, there was no reimbursement or indemnity to the executors regarding any rent shortfall with respect to the estate property. [18] From 2017 forward, Ms. Clarke has continued to administer the estate, although the evidence is that there was not much to do. She has produced various accounts from the estate solicitor, Laurence Johnson, that were put into evidence in this matter. The matters referred to in those accounts indicated payment of legal fees relating to the contested Registrar's hearing and to the later hearing before Johnston J. [19] At present, Ms. Clarke says that there is no money left in the estate and that the monies that were left for her to administer as executrix have been exhausted. In fact, Ms. Clarke indicates that she has had to pay money into the estate herself to cover certain expenses of the estate. [20] In summary, the only estate asset at this time remains the amount owing by Mr. Rothwell to the estate in repayment of the mortgage balances that were paid by the estate from the net sale proceeds of the Home in 2014. [21] Mr. Rothwell has always acknowledged his obligation and responsibility to repay these amounts to his mother, and now the estate. He does not suggest at all that his mother (and now her estate) should bear any responsibility in respect of these amounts. Accordingly, when Ms. Wood died and the estate confirmed, Mr. Rothwell admitted that he was indebted to the estate in the amount that was required to be paid to discharge the mortgages in 2014. Discussion [22] Mr. Rothwell's opposition to this application is based on his contention that there are various estate questions regarding the accounting under Ms. Clarke's watch since 2017. He wants to know about payment of all of the accounts that were paid by her. He also says that, in fact, monies are owed to him and, at least to some extent, that appears to be the case. Johnston J. did order that Mr. Rothwell and Carol Anne Rothwell's remuneration as executors was fixed at $5,000. In addition, Mr. Rothwell says in his affidavit that he paid probate fees that should have been recompensed by the estate in the amount of $3,935. [23] Accordingly, Mr. Rothwell states that there should be some final reconciliation of all of these matters, including Ms. Clarke's accounting and including amounts that are owed by him for the mortgages or owed to him as he alleges, before he is obligated to make any payment to the estate. [24] Ms. Clarke initially sought judgment in the amounts paid by the estate when the Home was sold to discharge the mortgages, that is $148,457.82. She also sought interest. In the hopes of proceeding on a more expedited basis, she has reduced that amount for the purposes of this application to $69,457.80, which recognizes the $80,000 interim distribution that the three sisters obtained at the time of the sale of the Home. Accordingly, Ms. Clarke now seeks judgment in that lower amount, plus pre-judgment interest from February 17, 2014 (when the Home was sold) and special costs. [25] Ms. Clarke's application is for judgment upon a summary trial. In the first instance, Mr. Rothwell objects to the appropriateness of the Court proceeding in this fashion. The principles on which that matter are to be considered are, of course, found in the well‑known decision of Chief Justice McEachern in Inspiration Management and the many cases that have since followed. I need not repeat the principles from those cases in detail on this application. Simply put, the issue is whether the court is able to find sufficient facts to determine the matters in issue. If there are matters that cannot be determined, for whatever reason, then the matter would not normally be suitable for summary trial and should proceed to a trial in the usual fashion. [26] There is no issues of credibility here. The matter is, in my view, as Ms. Clarke's counsel asserts, fairly straightforward. I have no difficulty in concluding that this matter is suitable for summary trial and I intend to proceed on that basis. [27] Turning to the merits of the issues, this matter is straightforward. [28] At the time of Ms. Wood's death, Mr. Rothwell owed the estate approximately $148,000. In his argument, he asserts that the mortgages were an "advance on his inheritance". However, anyone with a passing familiarity with mathematics would have instantly realized that he had received far in excess of 25% of the value of his mother's estate upon her death and that he would have to repay monies to the estate. [29] Mr. Rothwell did not repay the monies he owed to the estate, either upon his mother's death, or any time thereafter. In fact, he failed to even disclose his debt to his sisters (and equal beneficiaries) for years after his mother's death while he was undertaking the administration of the estate. [30] Mr. Rothwell's argument that the other estate matters should be reconciled before he is required to repay a penny to the estate is, in my view, disingenuous. I do not consider that this is a valid argument at all. I accept Ms. Clarke's counsel's submission that Mr. Rothwell's argument is indicative of his intention of further delaying the inevitable payment by him that has been owing for years. [31] As I indicated to Mr. Rothwell's counsel during argument, a delay in payment by him in respect of a full accounting is to invite that accounting based on an entirely speculative scenario. It would be on the assumption that Mr. Rothwell is in a position to write a cheque immediately with respect to any figure arising from that final accounting. There is no evidence to indicate that Mr. Rothwell either is willing or able to make such an immediate payment. As Ms. Clarke's counsel submits, I agree that this is simply another delay tactic. [32] In my view, the proper administration of this estate calls for Mr. Rothwell to pay the money that he owes back to the estate. This is required so that there can be a proper reconciliation of the amounts owing, not only to other people such as estate solicitors and litigation lawyers, but also with respect to the amounts allegedly owed to or by Mr. Rothwell. Mr. Rothwell is only a one‑quarter beneficiary of the estate. In my view, there is no basis for him to say that he is not entitled to make any payment to the estate on speculation that he will make that payment until the accounting is completed. [33] Mr. Rothwell also refers to all of the estate accounts and he emphasizes that he has issues with these accounts and questions about balances that he transferred to Ms. Clarke after she replaced him and their sister as executors. Those are all matters that will be part of the process of winding up this estate. Ms. Clarke will be required, in the usual course, to give a full accounting to not only the beneficiaries, but to this Court, toward satisfying all stakeholders that she has acted in a proper manner with respect to the amounts under her administration. Those actions will no doubt include her efforts to collect the monies owing by Mr. Rothwell. Needless to say, the estate may incur further legal fees in that respect if Mr. Rothwell does not pay the amounts that he owes. [34] Accordingly, all of Mr. Rothwell's questions concerning the estate accounts are premature, at the very least. I would also note that Mr. Rothwell has had the accounting documents now for some 12 days, yet he has not communicated any questions to Ms. Clarke concerning those accounts that would have indicated, at the very least, that he has a sincere interest in pursuing those issues. Even so, Mr. Rothwell will be available to pursue those issues at the end of the day, and those issues can include his allegations as to amounts owed to him and Carol Anne Rothwell for executor fees and the amount he says is owed for probate fees. [35] In conclusion, I am more than satisfied that Ms. Clarke has proven the debt owed to the estate. I grant judgment against Mr. Rothwell in the amount of $69,457.80, together with prejudgment interest from February 17, 2014 to this date. Post‑judgment interest rate will of course accrue from this time forward. [36] I also grant costs against Mr. Rothwell on the ordinary basis. [37] Counsel, that leaves the relief sought in paragraph 6 of the notice of application relating to Ms. Clarke's application for an order that Mr. Rothwell list and identify all document relevant to the estate in his possession and that he deliver them to Ms. Clarke. Mr. Christie, I see that you did not deal with that. Do you have any submissions on that matter? [38] MR. CHRISTIE: That's the documents, My Lady? [39] THE COURT: Yes, I assume this relates to documents that he gathered up as an executor, is that right? [40] MR. CHRISTIE: Yes, My Lady. In his affidavit he has deposed that he has a few bank statements for the time period after the deceased's death, and he is agreeable to producing those. [41] THE COURT: All right. Well, number 6 then is also ordered and I am going to order that those be delivered within two weeks of today's date. [42] All right, anything further, Mr. Main and Mr. Christie? [43] MR. MAIN: Yes, My Lady, and we greatly appreciate being heard this week at all. Thank you so much for giving us the time this afternoon, as well. To expedite things, given I know it will happen, we will be in front of a registrar to deal with costs, my fine paralegal, who I think is still seated behind me, did a draft bill of costs on the basis of 22.5 units and the disbursements, it would total $3,380. So I would ask, My Lady, if you might consider fixing costs at between $3,000 and $3,400, just to end future possible delays and controversies caused by Mr. Rothwell. [44] THE COURT: Has Mr. Christie seen your bill of costs? [45] MR. MAIN: No. [46] THE COURT: Mr. Christie? [47] MR. CHRISTIE: Well, I really think I would have to seek instructions before consenting to something like that in the circumstances. I haven't seen it and I don't know what amounts are claimed. It is a fairly straightforward case procedurally, and the amount does not necessarily seem unreasonable, but I wouldn't be able to consent to that without instructions. I think I would have to oppose it. [48] THE COURT: All right. Mr. Main, I have great sympathy for you but, in light of the fact that you have not even run it by Mr. Christie, I am not in a position to summarily determine it. You have your other costs award against Mr. Rothwell, too, so you can maybe kill two birds with one stone by having them both determined at the same time, unless there is consent on the other side, of course. [49] MR. MAIN: Thank you, My Lady. I thought I would try and it is my delinquency for not doing that. Thank you, My Lady. [50] THE COURT: Yes. All right, that is fine then. "Fitzpatrick J."