



COURT OF APPEAL FOR ONTARIO

CITATION: Roulston v. McKenny, 2017 ONCA 9

DATE: 20170105

DOCKET: C62102

Doherty, Brown and Huscroft JJ.A.

In the Matter of the
    Estate of Paul Penner (also known as Paul Ewald Penner, Paul Edwald Penner and Paul
    Edward Penner), deceased

BETWEEN

Rita Roulston

Applicant (Appellant)

and

Pauline McKenny, Kristine Nicole Holden,
    Stephanie Victoria Holden, Jesse Joseph Holden, Saxxon Elisabeth Holden and Elisabeth
    Penner

Respondents (Respondents)

Robert Trent Morris, for the appellant

Sean Dewart and Adrienne Lei, for respondent Pauline
    McKenny

Heard: December 23, 2016

On appeal from the order of Justice E. J. Koke of the Superior
    Court of Justice, dated April 7, 2016, with reasons reported at 2016 ONSC 2377.

ENDORSEMENT

Overview

[1]

This appeal concerns the estate of the late Paul
    Penner, who died in March, 2013. He is survived by his sister, the appellant
    Rita Roulston, who is his estate trustee, as well as a beneficiary under his
    will. Mr. Penner is also survived by his former wife, the respondent Pauline
    McKenny.

[2]

Mr. Penner and Ms. McKenny signed a separation
    agreement in 2002. It was a term of that agreement that Mr. Penner would
    maintain $150,000 in life insurance designating Ms. McKenny as the beneficiary.
    The parties also agreed that in the event Mr. Penner failed to maintain the
    insurance, Ms. McKenny would have a first charge against his estate in the
    amount of $150,000. At the time of their 2007 divorce, a court ordered an
    amendment to the separation agreement so that Mr. Penner was not required to
    maintain the life insurance policy beyond age 50. However, he died before he
    reached 50 years of age.

[3]

As matters transpired, Mr. Penner failed to pay
    the premiums on the life insurance policy, which lapsed before his death.

[4]

Mr. Penners estate is worth slightly more than
    $100,000. Under his will, the residue is divided 50:50 between his sister, Ms.
    Roulston, on the one hand, and several nieces and nephews, on the other.

[5]

In September 2015, Ms. McKenny commenced an
    action against the estate seeking payment of $150,000. In the context of an
    application for directions brought by Ms. Roulston as estate trustee, the
    parties asked the court to determine Ms. McKennys claim against the estate.
    The estate trustee took the position Ms. McKennys claim was statute-barred.

[6]

The application judge held Ms. McKennys claim
    for a first charge against the estate was not statute-barred. Ms. Roulston
    appeals, in her personal capacity as a beneficiary under her brothers will.

ANALYSIS

[7]

The appellant takes no issue with the
    application judges finding that the limitation period in s. 38(3) of the
Trustee
    Act
, R.S.O. 1990, c. T.23, applies to Ms. McKennys claim against the
    estate. Section 38(3) provides that an action brought against an estate trustee
    under s. 38 shall not be brought after the expiration of two years from the
    death of the deceased.

[8]

Mr. Penner died on March 20, 2013. Ms. McKenny
    commenced her action more than two years later, on September 18, 2015.

[9]

However, the application judge held that Ms.
    McKennys action was not statute-barred because the application of the doctrine
    of fraudulent concealment to the conduct of the estate trustee tolled the
    two-year limitation period until at least September 25, 2013. As a result, Ms.
    McKenny commenced her action within the limitation period.

[10]

Applying the principles regarding fraudulent
    concealment enunciated by this court in
Giroux Estate v. Trillium Health
    Centre
(2005), 74 O.R. (3d) 341 (C.A.), the application judge found: (i)
    the estate trustee, Ms. Roulston, was in a special relationship with Ms.
    McKenny because she had exclusive possession of knowledge and information
    whether an insurance policy existed and thus whether Ms. McKenny had a debt
    claim against the estate; (ii) the estate trustee acted in an unconscionable
    manner by withholding from Ms. McKenny material facts about the status of the
    insurance policy; and, (iii) as a result of withholding that information, Ms.
    McKenny had a reasonable belief, at least until September 25, 2013, that Mr.
    Penners insurance policy had been in good standing at the time of his death.

[11]

Ms. Roulston submits the application judge made
    two main errors in applying the doctrine of fraudulent concealment. First, the
    trial judge erred in finding a special relationship existed between the estate
    trustee and Ms. McKenny. Second, he erred in finding that the conduct of the
    estate trustee was such as to attract the operation of the doctrine of fraudulent
    concealment.

[12]

We are not persuaded by either submission.

[13]

First, we see no error in the application
    judges finding that a special relationship existed between Ms. Roulston, as
    estate trustee, and Ms. McKenny. In the present case, the special relationship
    arose from a combination of the duties owed at law by an estate trustee to
    estate creditors and Ms. Roulstons control over information about any
    insurance policies owned by the deceased.

[14]

The law imposes on estate trustees duties to
    the deceaseds creditors. Property of a deceased that vests in his estate
    trustee is subject to the payment of his debts:
Estates
    Administration Act
, R.S.O. 1990, c. E.22, s. 2(1). As a
    result, one of the fundamental duties of an estate trustee is to ascertain the
    debts and liabilities owing by the estate and to pay them: Carmen S.
Thériault
, ed.,
Widdifield on Executors and Trustees
,
loose-leaf (2011-Rel. 1),

6th ed., (Toronto: Thomson Reuters,
    2016), at p. 3-1.

[15]

In addition, in the present case information
    about any insurance policies in place at the time of the deceaseds death lay
    within the control of the estate trustee. Following Mr. Penners death, counsel
    for Ms. McKenny wrote to counsel for the estate asking for particulars of any
    policy of insurance under the separation agreement. Estate counsel responded on
    June 4, 2013 that the estate trustee was currently making investigations with
    respect to the insurance policy. Ms. McKennys counsel then contacted the
    insurer, Sun Life Financial, seeking information about any policy. Sun Life
    advised it could only release information to the estate trustee and therefore
    was unable to confirm the status of any policy [Mr. Penner] may have been
    insured under.

[16]

Ms. McKenny was unable to obtain information
    about a policy directly from the insurer. Therefore we see no error in the
    application judges findings that (i) the estate trustee had exclusive
    possession of knowledge and information of whether Ms. McKennys debt actually
    existed and (ii) since the estate trustee was in a unique and privileged
    position to obtain information, it was reasonable for Ms. McKenny to rely on
    what she was being told.

[17]

Second, we see no reversible error in the
    application judges finding that the estate trustees conduct was
    unconscionable.

[18]

On April 29, 2013 estate counsel wrote to Sun
    Life inquiring whether Mr. Penners life insurance policy was in good standing.
    On May 9, Sun Life advised the deceased had no active policies  his two policies
    had lapsed because of non-payment of the premiums.

[19]

Notwithstanding this clear information from the
    insurer, on June 4 estate counsel informed Ms. McKennys counsel that
    investigations were underway because Mr. Penner had expressed to Ms. Roulston
    and the deceaseds mother that there was insurance in place. Upon receipt of
    such information, we will provide correspondence to you. In a subsequent
    September 25, 2013 letter to Ms. McKennys lawyer, estate counsel was only
    prepared to go as far as to say that the insurer had advised that the policy
may
have
    lapsed. Neither representation by estate counsel was accurate; the estate
    trustee knew back on May 9 that Mr. Penner had let his insurance policy lapse.

[20]

Ms. Roulston submits the evidence was more nuanced
     it showed counsel for the estate trustee was investigating whether some other
    insurer might have issued a policy to Mr. Penner. We see no merit in this
    submission. The record contains no evidence of inquiries by the estate trustee
    or her counsel to any insurer other than Sun Life.

[21]

She also submits the application judges finding
    of unconscionable conduct cannot stand because he ignored a May 15, 2013 letter
    to her from counsel for Ms. McKenny. In that letter, counsel inquired whether
    Ms. Roulston was in charge of Mr. Penners estate. He continued: I wish to put
    the estate on notice that the insurance was not in place as required by the
    terms of the Separation Agreement. She submits that statement demonstrated Ms.
    McKenny knew she had a claim against the estate as early as May 15 and,
    therefore, the application judge erred in characterizing as unconscionable the
    subsequent conduct of the estate trustee and her counsel.

[22]

We are not persuaded by this submission. The
    mere absence of any reference to a piece of evidence in reasons for judgment
    does not establish the hearing judge failed to consider that evidence; a party
    must point to something in the trial record that justifies the conclusion the
    trial judge failed to consider certain evidence:
Waxman v. Waxman
(2004)
, 186 O.A.C. 201, [2004] O.J. No.
    1765 (C.A.), at para. 343. Correspondence after May 15, 2013 from Ms. McKennys
    lawyer revealed uncertainty on his part about whether an insurance policy was
    in place when Mr. Penner died, with the uncertainty mainly caused by the less
    than forthright correspondence from the estates counsel.

[23]

In light of the entirety of that correspondence,
    it was open to the application judge to find, at para. 52 of his reasons, that:

By withholding material facts, the estate
    trustee concealed from Ms. McKenny that she had a legitimate debt against the
    estate as a creditor.  In my view, given the special relationship between
    the estate trustee and Ms. McKenny, it was unconscionable for the estate
    trustee to initially suggest that insurance was in place, then delay matters by
    promising to bring an application for directions, and then later take the
    position (a position which provided a direct material benefit to her as a
    beneficiary of the estate), that the time for claiming against the estate had
    expired.

[24]

Given those circumstances, we see no basis to
    interfere with the application judges conclusion that the doctrine of
    fraudulent concealment applied to the conduct of Ms. Roulston, as estate
    trustee, with the result that the two-year limitation period for Ms. McKennys
    claim was tolled from the date of Mr. Penners death until at least September
    25, 2013, when estate counsel advised the policy may have lapsed. Consequently,
    Ms. McKennys action claiming a first charge of $150,000 on the estates assets
    is not statute-barred.

DISPOSITION

[25]

The appeal is dismissed.

[26]

The respondent is entitled to her costs of the
    appeal fixed in the amount of $7,500, inclusive of disbursements and HST.

"Doherty J.A."

"David Brown
    J.A."

"Grant Huscroft
    J.A."


