



COURT OF APPEAL FOR ONTARIO

CITATION: White v. Gicas, 2014 ONCA 490

DATE: 20140625

DOCKET: C56898

Blair, Watt and Pepall JJ.A.

In the Estate
    of Constantine Gicas, deceased

BETWEEN

Vivi
    White (as Estate Trustee with a Will of the Estate of

Constantine
    Gicas, and in her personal capacity) and Elena

Floros
    (in her personal capacity)

Applicants (Appellants)

and

John Gicas

Respondent

Sean Dewart and Margaret E. Rintoul, counsel for the
    appellants

Reginald M. McLean and Patrick J. Morrissey, counsel for
    the respondent

Heard: January 24, 2014

On appeal from the judgment of Justice J.M. Spence of the
    Superior Court of Justice, dated March 13, 2013.

Watt J.A.:

[1]

Two ingredients combine to create a trust. The first  declaration of a
    trust  requires three certainties: certainty of intention; certainty of
    subject-matter; and certainty of objects. The second  constitution of the
    trust  requires transfer of title to the trust property to the trustee.

[2]

Vivi White and Elena Floros are nieces of Constantine Gicas, secondary
    beneficiaries of the Constantine Gicas Family Trust, and remainder
    beneficiaries under the will of Constantine Gicas. Vivi White is also the
    Estate Trustee with a Will of the Estate of Constantine Gicas.

[3]

On an application by Ms. White, as Estate Trustee, and by Ms. White and
    Ms. Floros as remainder beneficiaries under Constantine Gicas will, a judge of
    the Superior Court of Justice concluded that James Gicas had validly created
    the Constantine Gicas Family Trust. The primary beneficiary of that Trust,
    Constantine Gicas, died on September 19, 2007.

[4]

Vivi White and Elena Floros appeal the decision of the application judge
    declaring valid the Constantine Gicas Family Trust. They say that the Trust was
    neither validly declared nor properly constituted. If their main appeal (which
    I will refer to here as the substantive appeal) fails, they seek leave to
    appeal the costs awarded against them personally by the application judge.

[5]

These reasons explain why I have concluded that the application judge
    was correct in finding that the Constantine Gicas Family Trust had been validly
    created and why I would dismiss the appeal from that finding. These reasons
    explain further why I would grant the appellants leave to appeal the costs
    award made against them personally, set aside that award, and order that the
    costs awarded at trial and on this appeal be paid out of the Estate.

THE BACKGROUND FACTS

[6]

A brief sketch of the principals, as well as their relationships, will
    provide an adequate backdrop for the discussions that follow.

The Gicas Family

[7]

James Gicas, the family patriarch, died in 2005. He had three children:
    John, Cynthia and Constantine, who was also known as Dino.

[8]

Cynthia Gicas married Harry Floros. The couple had two children: Elena
    (Floros) and Vivi (White). Cynthia died in 1994.

[9]

Constantine died in 2007. He lived with Marlene Popov. Constantine and
    Marlene had no children.

[10]

John
    Gicas is the only surviving child of James Gicas. He has no relationship with
    his nieces, Elena and Vivi.

The Family Companies

[11]

James
    Gicas and members of his family had interests in several companies. Shares in
    some of those companies were to become the principal assets in the Constantine
    Gicas Family Trust.

[12]

Dutch
    Masters Doughnuts Limited, a Gicas family company, was sold between 1992 and
    1994. The proceeds were divided equally among James children  John, Cynthia
    (and her husband, Harry Floros) and Constantine. Each reinvested their share of
    the proceeds in a new company, Cliff Investments, incorporated on March 2,
    1995. The shareholdings of John and Constantine were equal, those of Cynthia
    somewhat less. Cynthia and the other siblings held the shares through a holding
    company. Cynthia died on March 5, 1994. Her shares were then held by her
    children, Vivi White and Elena Floros, and Cynthias husband, Harry.

[13]

Cliff
    Investments is an umbrella corporation that appears to own a commercial
    property on Overlea Boulevard in Toronto as trustee for the three holding
    companies. Income from the property is allocated among the holding companies as
    rental income, not as dividends declared by Cliff Investments. The record does
    not disclose the existence of any trust or joint venture agreement.

[14]

466369
    Ontario Limited (466) was incorporated on January 7, 1981. Its principal asset
    is a mall located on Warden Avenue in Toronto. James and each of his children
    held an equivalent number of shares in the company. On October 31, 1991 the
    share register records a transfer of Constantines shares to John, Cynthia and
    David Black, a solicitor, as joint tenants. Neither of Constantines share
    certificates are endorsed to reflect the transfer described in the minute book.
    The evidence does not disclose any cancellation of the share certificates.

[15]

Milissa
    Holdings was incorporated in 1973 to acquire its principal asset, some valuable
    farmland near Stouffville Ontario. Starting in early 1998, Constantine was one
    of the three officers of the company. The others included Constantines
    brother, John, and his sister, Cynthia.

[16]

On
    incorporation, the shareholders of Milissa Holdings were James Gicas (75
    shares) and Cynthia/Harry (25 shares). On October 7, 1991 a signed directors
    resolution transferred 33.34 of James shares to Constantine. There were three
    other (purported) transfers: an unsigned directors resolution of the same date
    transferring a further 33.34 of James shares to John Gicas, Cynthia Floros
    and David Black, as joint tenants; a signed resolution of March 5, 1994
    transferring these shares to John Gicas, estate of Cynthia Floros and David
    Black, as joint tenants; and a transfer of 8.32 shares by James to the
    appellants on June 10, 1997. Rental income from Milissa is distributed equally
    among Constantine, Cynthia/Harry and John.

[17]

Constantine
    incorporated Cynthcon as a holding company on February 3, 1995. A single share
    was issued to the Constantine Gicas Family Trust. The principal asset of
    Cynthcon is about one-third of the equity in Cliff Investments.

The Memorandum of Agreement

[18]

On
    October 31, 1991 James Gicas signed a Memorandum of Agreement recording the
    previous establishment of the Constantine Gicas Family Trust. James signed as
    the settlor. John Gicas, Cynthia Floros and David Bruce Black signed as
    trustees. The primary beneficiaries were Constantine Gicas and his children,
    grandchildren or other issue. The secondary beneficiaries were John Gicas,
    Cynthia Floros, their children, grandchildren or other issue or a registered
    charity.

[19]

The
    trustees acknowledged previous receipt of several assets, all of them common
    shares in various companies including Milissa Holdings. The Trust is
    discretionary with no beneficiary entitled to receive any distribution from the
    Trust Fund. The trustees agreed to keep the necessary books, records and
    accounts to reflect the transactions of the Trust.

The Declaration of Constantine
    Gicas

[20]

John
    Gicas produced a Declaration apparently witnessed by the solicitor Black on the
    same day as the Trust Agreement. In the Declaration, Constantine says that
    shares in various Gicas family companies had been informally held in trust for
    him. He recites that it has been James Gicas intention that all shares in the
    family companies be held in trust for him (Constantine), rather than through
    direct ownership. Specific mention is made of 50 shares in 466 inadvertently
    issued in Constantines name rather than in trust for him. At James request,
    Constantine purports to transfer the shares from himself to the Constantine
    Gicas Family Trust.

[21]

Constantines
    shares in 466 had been issued to him in 1981, about ten years before the
    Memorandum of Agreement was signed. His shares were transferred to John Gicas,
    Cynthia Floros and David Black, as joint tenants.

The Wills of James Gicas

[22]

James
    Gicas executed a will on June 13, 1994 over two and one-half years after the
    Memorandum of Agreement. James appointed his sons, John and Constantine, as his
    executors and trustees, and made specific property bequests to John and to the
    appellants. The residue of the Estate was to be divided equally among John,
    Constantine and the appellants.

[23]

Neither
    this will nor a codicil executed about nine months later, both of which were
    witnessed by solicitor Black, contain any reference to or mention of the
    Constantine Gicas Family Trust.

[24]

James
    Gicas executed a further will on February 17, 2005. He appointed John Gicas as
    the sole executor and trustee unless John predeceased him or became unable or
    unwilling to serve as executor in which case Constantine was to become the
    executor. In this will, the residue of his Estate was to be divided equally
    between John and Constantine. The will was witnessed by a different solicitor.

[25]

The
    will of James Gicas executed on February 17, 2005 contains no reference to the
    Constantine Gicas Family Trust.

The Will of Constantine Gicas

[26]

Constantine
    Gicas executed a will on October 10, 2006. The principal beneficiaries were
    Marlene Popov, a woman with whom Constantine Gicas was living when he died, and
    his nieces, the appellants. Among other bequests, Constantine Gicas transferred
    his interest in Cliff Investments, as well as his shares in 466 and Milissa
    Holdings, to his beneficiaries.

[27]

The
    will of Constantine Gicas contains no reference to the Constantine Gicas Family
    Trust.

The Estate Litigation

[28]

Litigation
    began on two fronts over the Estate of Constantine Gigas. His brother, John,
    and his (Johns) children, filed a Notice of Objection to prevent the issuance
    of a Certificate of Appointment of an Estate Trustee with a Will. Marlene Popov
    sought additional benefits from the Estate.

The Settlement

[29]

Mediation
    resulted in a settlement of the estate litigation. When the settlement was
    completed, Marlene Popovs litigation against the Estate would be dismissed
    without costs and the Notice of Objection filed by John Gicas and his children
    would be vacated. The value Marlene Popov received under the settlement
    exceeded her entitlement under the will, if the shares in the companies were
    assets of the Estate (in other words, if there were a trust), by over $800,000.

The Trust and Taxes

[30]

From
    its alleged creation, the Constantine Gicas Family Trust never filed a tax
    return. Constantine Gicas paid no tax on the disposition of his shares of 466
    or of Milissa Holdings to the trust. His T-I return recorded Constantine Gicas
    shares in 466, Cynthcon and Milissa Holdings as assets of his Estate. Before he
    died, Constantine Gicas received rental income directly from Milissa, and
    dividend income from 466. Cynthcon was allocated one-third of the income
    generated through Cliff Investments. Constantine Gicas received this money
    directly. Cynthcon reported receipt of the money to tax authorities. Cynthcon
    paid dividends directly to Constantine Gicas.

The Decision of the Application Judge

[31]

The
    application judge was satisfied that the Memorandum of Agreement met the
    requirements for declaration of a trust: the certainties of intention,
    subject-matter and object.

[32]

The
    application judge observed that, on its face, the Memorandum disclosed the
    intention of the settlor to create a trust for the benefit of the primary
    beneficiary, his son Constantine, and the secondary beneficiaries, his other
    two children.

[33]

The
    application judge was satisfied that the Memorandum clearly identified the
    subject-matter of the Trust: shares in listed family companies. Even if Milissa
    Holdings shares were beyond the power of the settlor to transfer to the Trust,
    Dino acknowledged that Milissa was an asset of the Trust. His erroneous
    reference to the number of shares in 466 to be transferred was not a problem.

[34]

The
    application judge concluded that paragraph 2 of the Memorandum established
    certainty of objects by naming primary and secondary beneficiaries.

[35]

The
    application judge was further satisfied that the Trust had been properly
    constituted by the transfer of its subject-matter. The shares of Milissa are
    expressly included in article 1 of the Memorandum. The Declaration of
    Constantine Gicas, executed contemporaneously with the Memorandum, transferred
all
his shares in 466 to the Trust. A resolution of Cynthcon, signed by Constantine
    Gicas, issued a share of Cynthcon to the Trust. The shareholder loans arise
    from income paid to shareholders of 466. And the shareholder of 466 is the
    Trust.

THE SUBSTANTIVE APPEAL

[36]

On
    the substantive appeal, the appellants have raised two issues. The second issue
    is only reached in the event of an affirmative answer to the first. The issues
    may be cast as two questions:

i.

Was the Constantine Gicas Family Trust validly created?

ii.

Were the shares of 466 and Cynthcon assets of the Trust?

Issue #1: Was the Constantine Gicas Family Trust Validly
    Created?

[37]

For
    a trust to be validly created, it must be properly declared and constituted.
    Declaration of a trust requires certainty of intention, subject-matter, and
    objects. Constitution of a trust requires transfer of title to the trust
    property to the trustee. The parties divide on whether the Constantine Gicas
    Family Trust was validly created.

The Positions of the Parties

[38]

The
    appellants take the position that the Constantine Gicas Family Trust was
    neither validly declared nor validly constituted.

[39]

As
    far as declaration of a trust is concerned, Mr. Dewart submits for the
    appellants that the application judge erred in concluding that the three
    certainties necessary for a valid declaration of trust had been established.
    The conclusions were flawed by a combination of factors including misapprehensions
    of the evidence, a preference of form over substance, and a failure to look
    beyond the Memorandum of Agreement to consider all the circumstances before
    reaching conclusions about any of the certainties.

[40]

With
    respect to the declaration of a trust, Mr. McLean contends for the respondent
    that the application judge considered not only the trust document, but also the
    surrounding circumstances in reaching his conclusion that the three certainties
    essential to a valid declaration of trust had been established. The application
    judge did not misapprehend any evidence in reaching his conclusion or fall into
    any legal errors.

[41]

Mr.
    McLean says the purpose underlying the creation of the trust was clear:
    Constantine Gicas was behaving irrationally. The trust was necessary to
    preserve his equity and to ensure that he and his siblings shared equally. The
    assets of the trust were defined in the Memorandum which also governed
    accretions. The objects were identified, the intention clear and certain.

[42]

On
    the issue of constitution of the trust, Mr. Dewart says that even if there were
    a valid declaration of trust, no trust was created because the trust was not
    properly constituted.

[43]

Mr.
    Dewart points out that the shares that were the assets of trust were either not
    owned by the settlor, or not properly transferred to the trust. A transfer of
    shares to John Gicas, Cynthia Floros or her estate, and the solicitor Black,
    as joint tenants, is not a proper transfer of the assets to the trustees.

[44]

Further,
    Mr. Dewart contends, several other factors demonstrate that the trust was never
    properly constituted. The deceaseds will, prepared by the same law firm as the
    Memorandum of Agreement, makes no mention of the trust and provides for
    disposition of the shares of Constantine Gicas in a manner that would only be
    possible if he was the legal owner of the shares. The documents required to
    transfer the assets to the trust were not properly executed. The settlement
    with Marlene Popov far exceeded her entitlement under the will of Constantine
    Gicas if the trust had been validly created. The trust filed no tax returns.
    The trustees never met. Income was distributed directly to Constantine Gicas,
    not through the trust.

[45]

With
    respect to the constitution of the trust, Mr. McLean says for the respondent
    that what happened after the trust was declared amounted to proper constitution
    of the trust. In the result, he urges, the Constantine Gicas Family Trust was
    validly created.

[46]

Mr.
    McLean regards the failure of the trust to file tax returns and the minor
    inconsistencies in the corporate documentation, such as required signatures on
    share transfers, as matters of form, not of substance. He contends that the
    trust property was properly alienated to be held by the trustees for the benefit
    of the designated beneficiaries.

Discussion

[47]

I
    would not give effect to this ground of appeal. As I will explain, I am
    satisfied that the application judge correctly concluded that the Memorandum of
    Agreement satisfied not only the three certainties required for the valid
    declaration of a trust, but also established that the Trust was properly
    constituted.

[48]

On
    its face, the Memorandum of Agreement satisfies the three certainties required
    for a valid declaration of a trust.

[49]

As
    to certainty of intention, the preamble of the document entitled Constantine
    Gicas Family Trust records the prior establishment of the Trust and the
    agreement of the parties, the settlor and trustees, to confirm and clarify the
    terms and conditions of the Trust. The intention of the settlor to create the
    Trust, as well of the trustees to administer it, could scarcely be plainer.

[50]

Second,
    the Memorandum of Agreement discloses certainty of subject-matter. The assets
    of the Trust  shares in various companies  are specifically described in
    article 1 of the Memorandum. The article expressly permits expansion of the
    assets to include any further sums which they [the trustees] shall receive
    from time to time and any accretions or additions thereto.

[51]

Third,
    the Memorandum of Agreement satisfies the certainty of objects required as it
    identifies the objects of the Trust. The primary beneficiaries are Constantine
    Gicas and anyone who is a child, grandchild or other issue of Constantine
    Gicas. The secondary beneficiaries are John Gicas, Cynthia Floros and their
    children, grandchildren or other issue, or a registered charity. That the
    subject-matter of the Trust does not have to be distributed in equal portions,
    rather is left to the discretion of the trustees, is of no moment.

[52]

Likewise,
    on its face, the Memorandum of Agreement establishes constitution of the Trust.
    The trustees acknowledge that they have received and are currently holding as
    assets of the Trust the assets listed in article 1 of the Memorandum. They also
    acknowledge that any future sums they receive and any accretions or additions
    are assets of the Trust and constitute the Trust Fund.

Issue #2: Were the Shares of 466 and Cynthcon Assets of the
    Trust?

[53]

The
    Memorandum of Agreement does not refer to any shares of 466 or of Cynthcon as
    assets of the Trust. The parties take different views of the effect of this
    omission.

The Positions of the Parties

[54]

For
    the appellants, Mr. Dewart says that the failure to list the shares of 466 and
    Cynthcon as assets of the Trust means that they are not included as part of the
    Trust Fund as defined in article 1 of the Memorandum. It follows that these
    shares are assets of the Estate of Constantine Gicas.

[55]

For
    the respondent, Mr. McLean takes a contrary position. He submits that in his
    contemporaneous Declaration, Constantine Gicas transferred all his shares in
    466 to the Trust. As for Cynthcon, Constantine Gicas, as the sole director of
    Cynthcon, signed a resolution issuing one share to the Trust. It follows, Mr.
    McLean says, that the shares of 466 and Cynthcon form part of the Trust Fund
    which permits accretions and additions.

Discussion

[56]

I
    would not give effect to this claim of error. In my respectful view, the
    application judge reached the correct conclusion and made no error in the path
    he followed to get there.

[57]

No
    issue arises concerning the assets identified in the Memorandum as having been
    transferred to the Trust by the settlor, among them shares in Milissa. The
    omission of any reference to shares in 466 and Cynthcon, at first light at
    least, would appear to support their exclusion from the assets of the Trust.

[58]

But
    there is more. As the application judge noted, in a contemporaneous
    Declaration, Constantine Gicas transferred
all
his shares in 466 to
    the Trust. That Constantine may have been mistaken about the precise number of
    shares he owned is of no moment. Read as a whole, the Declaration makes it
    clear that he is transferring the shares he held in 466 to the Trust.

[59]

Further,
    in connection with Cynthcon, Constantine Gicas issued a share of Cynthcon to
    the Trust as its sole director, by resolution. This made that share an asset of
    the Trust.

[60]

The
    Memorandum of Agreement does not limit the assets of the Trust to those
    specific shares listed as part of article 1. The article expressly permits further
    sums that the trustees may receive from time to time, as well as accretions
    and additions. The additional assets need not be contributed by the settlor.

[61]

In
    their original Application, the appellants also sought an order that all
    shareholder loans due to the Estate from 466 and Cynthcon vest in the
    appellants personally as the remainder beneficiaries of the Estate of
    Constantine Gicas.

[62]

As
    the application judge correctly decided, the shareholder loans arise from
    income attributed to a shareholder but not paid out. The shareholder is the Trust,
    not the Estate.

[63]

For
    these reasons, I would dismiss the appeal on the substantive issues raised by
    the appellants.

THE COSTS APPEAL

[64]

On
    the costs appeal, the issue is whether the application was necessary for the proper
    administration of the Estate of Constantine Gicas and thus whether the costs
    should properly be borne by the Estate and not the appellants personally.

[65]

The
    appellants seek leave to appeal the costs order made against them by the
    application judge. They recognize that in order to obtain leave to appeal a
    costs order they must demonstrate strong grounds upon which this court could
    find that the application judge erred in the exercise of his discretion:
Sawdon Estate v. Sawdon
, 2014 ONCA 101, at para. 77. Appellate courts
    should set aside a costs award only if the judge at first instance has made an
    error in principle or if the costs award is plainly wrong:
Hamilton v. Open
    Window Bakery Ltd.
, 2004 SCC 9, [2004] 1 S.C.R. 303, at para. 27; and
Sawdon
    Estate
, at para. 77.

The Reasons of the Application
    Judge

[66]

The
    costs endorsement of the application judge is in these terms:

Costs to the respondent on the partial indemnity scale of $20
    000 for fees, plus HST, plus disbursements and HST as per the Bill of Costs,
    payable within 30 days.

The disbursements claimed, including HST, were
    $2,393.25.

Discussion

[67]

I
    would grant leave to appeal the costs order made against the appellants
    personally. I have reached this conclusion for two reasons.

[68]

First,
    the application judge gave no reasons for his costs award. The absence of
    reasons precludes meaningful appellate review and leaves the appellants without
    an explanation as to why they were ordered to pay costs personally.

[69]

Second,
    and related to the absence of reasons, we cannot determine whether the
    application judge applied the proper approach to an award of costs in estate
    litigation.

[70]

The
    modern approach to the award of costs in estate litigation is exemplified by
    the decision of this court in
McDougald Estate v. Gooderham
(2005),
    255 D.L.R. (4
th
) 435 (Ont. C.A.), at paras. 78-80. The approach
    begins from a premise that estate litigation operates subject to the general
    civil litigation costs regime except in those limited cases in which public
    policy considerations mandate a different result:
Sawdon Estate
, at
    para. 84.

[71]

In
    estate litigation, there are two predominant public policy considerations at
    play:


i.

The need to give effect to valid wills that reflect the intention of
    competent testators; and


ii.

The need to ensure that estates are properly administered.

In practical terms, the demise of the testator leaves
    recourse to the courts as the only viable method of rectifying any difficulties
    or ambiguities created by the testator and of ensuring that the estate is
    properly administered:
Sawdon Estate
, at para. 85.

[72]

It
    logically follows that 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 reasonable costs associated with their resolution. Indeed, to
    saddle the estate trustees personally with legal costs in such situations might
    well discourage them from initiating reasonably necessary legal proceedings to
    ensure due administration of the estate:
Sawdon Estate
, at para. 86.

[73]

In
    the present case, the problems that underpinned the original application
    brought by the Estate Trustee were created by the conduct of the testator,
    Constantine Gicas. It was unclear from what occurred whether certain assets
    were governed by the Trust or fell outside it. It fell to Ms. White, as the
    Estate Trustee, to administer the Estate of Constantine Gicas. To do so she
    needed to know the extent of the assets with which she was dealing. Constantine
    Gicas could provide no assistance on this issue. Ms. Whites recourse to the
    courts was a reasonably necessary step for her to take as Estate Trustee. The
    Estate should be responsible for her costs of the application and of the
    appeal.

CONCLUSION

[74]

For
    these reasons, I would allow the appeal in part. I would amend paragraph 2 of
    the Judgment below to provide that the costs award made against the Estate
    Trustee personally on the application be paid out of the Estate of Constantine
    Gicas. The respondent is entitled to his costs of the appeal, which the parties
    agree should be fixed at $17,500.00 inclusive of disbursements and all
    applicable taxes. Those costs should also be payable out of the Estate of
    Constantine Gicas.

Released: June 25, 2014 (R.A.B.)                           David
    Watt J.A.

I
    agree R.A. Blair J.A.

I
    agree S.E. Pepall J.A.


