



COURT OF APPEAL FOR ONTARIO

CITATION: Janicek v. Janicek, 2018 ONCA 679

DATE: 20180803

DOCKET: C65060

Hoy A.C.J.O., van Rensburg and Pardu JJ.A.

BETWEEN

Steven Augustine Janicek, Jr. and Franklin Mark
    Janicek

Applicants (Respondents)

and

John James Janicek
,
    Andrew Ladislaus Janicek and Marianne Frances Janicek

Respondents (
Appellant
)

J. Douglas Skinner, for the appellant

Gemma Charlton, for the respondents

Heard: July 20, 2018

On appeal from the order of Justice J.C. George of the Superior
    Court of Justice, dated January 30, 2018, with reasons reported at 2018 ONSC
    681, [2018] O.J. No. 503.

Hoy A.C.J.O.:

[1]

The trustees of the estate of the testatrix,
    Anne Emily Janicek, brought an application for advice and directions with
    respect to the construction of her will dated August 12, 2011.

[2]

In para. 4(d) of her will, the testatrix
    directed that her Trustee obtain an appraisal as to the fair market value of
    the farm known as the Home Farm as at the date of her death, as soon as
    possible after the date of her death.

[3]

The paragraph further provides that:

It is my wish that this home farm be kept
    within the Janicek family if possible. In accordance with that wish if any of
    my children, or a combination of the same, shall wish to purchase the said
    farm, they may do so at 75% of the appraised fair market value provided that
    they enter into an Agreement of Purchase and Sale with my
Trustee
within one year from my date of
    death with a closing date no longer than 60 days from the date of the Agreement
    of Purchase and Sale. In the event that none of my children, or combination of
    same, have agreed to purchase the said farm, within the prescribed time, the same
    shall be sold by my Trustee at a price to be determined by my
Trustee
in his sole and unfettered
    discretion.

[4]

Paragraph 4(d) further provides that the
    proceeds are to be distributed to the children in the unequal shares set out in
    para. 4(d).

[5]

The trustees  Steven Janicek and Frank Janicek
     are two of the testatrixs five children. They are the respondents on this
    appeal.

[6]

As of the first anniversary of the testatrixs
    death, the trustees had received competing offers from four children to
    purchase the farm for 75% of its appraised value: the appellant, John Janicek;
    Andrew Janicek; and each of the trustees. The trustees and Andrew Janicek had
    been willing to offer the purchase the farm in combination with the appellant,
    but the appellant wished to purchase the farm on his own. In the end, each of
    the four children submitted individual offers. The appellant is the only one of
    the children who farms full time for a living.

[7]

Because they were uncertain as to which offer to
    accept, the trustees did not conclude an Agreement of Purchase and Sale with
    any of the children within one year of the testatrixs death and brought an
    application for advice and directions regarding the sale of the farm and for an
    order for vacant possession of the portion of the farm previously leased to the
    appellant.

[8]

The application judge found that the testatrixs
    intention as to what should occur if there were competing offers from the
    children made within the prescribed time could not be ascertained. He ordered that
    the trustees are at liberty to sell the farm to whomever they choose and at a
    price they determine, in their sole and unfettered discretion. At para. 19 of
    his reasons, he equates this with a sale on the open market. The application
    judge further ordered that the proceeds should be distributed among the
    children in unequal shares, as provided for in para. 4(d) of the will. 
    Finally, he ordered that the appellant was required to deliver vacant
    possession to the trustees.

[9]

At the hearing of the appeal, counsel for the
    trustees acknowledged that the trustees are fiduciaries and that the sale of
    the farm pursuant to the application judges order and the will must be
    effected in accordance with their duties as fiduciaries.

[10]

While I am not in agreement with the entirety of
    the application judges reasons, I agree with him that, properly construed, the
    will does not require the trustees to sell the farm to the appellant, in the
    event that the children make competing offers within the prescribed period. Further,
    at the hearing of the appeal, the appellant conceded this.

[11]

He advances three arguments on appeal.

[12]

First, he argues that the application judge
    erred in finding that he, the trustees, and Andrew Janicek had not concluded an
    agreement to purchase the farm together at 75 per cent of the appraised price
    in the form of the Memorandum of Understanding (MOU) signed
after
the
    proceedings were commenced (and after the expiry of the one-year period
    provided for in the will) in an effort to settle their differences and in not
    giving effect to the MOU.

[13]

It is not clear that the appellant sought an
    order before the application judge requiring the sale of the farm in accordance
    with the MOU. In any event, the application judge essentially found that the
    MOU was an agreement to agree and that parties were unable to negotiate the
    remaining details of the MOU because the appellant reverted to his original
    position that he alone should be able to purchase and own the farm.

[14]

This finding is amply supported by the record
    and there is no basis to interfere with it.

[15]

Second, and in the alternative, the appellant
    argues that if the parties did not conclude a binding agreement to purchase the
    farm together after the proceedings were commenced, it was because the trustees
    acted unreasonably.  I understand him to submit that because the trustees acted
    unreasonably, he should be able to purchase the farm. The trustees submit that
    this was not argued below and the argument should not be entertained by the
    court.

[16]

Whether or not argued below, the record does not
    support this alternative argument.  As noted above, the application judge found
    that the parties were unable to negotiate the remaining details of the MOU
    because the appellant reverted to his original position that he alone should be
    able to purchase and own the farm. The conduct of the appellant, and not that
    of the trustees, was the reason an agreement was not concluded.

[17]

Third, the appellant argues that the application
    judge erred in making the order he did because the trustees frustrated the sale
    of the farm to him. In essence, he says that the trustees acted improperly by
    consulting with the other children to determine if they also wanted to make
    offers, after he had made an offer  the first offer received by the trustees.
    He acknowledges that because his first offer included the chattels on the farm
    (and not just the farm) at 75 per cent of their appraised price, his first
    offer was not in compliance with the will. The trustees submit that the
    appellant did not claim below that they breached their fiduciary duties and
    this court should not entertain this argument.

[18]

The trustees brought an application for advice
    and directions with respect to the construction of the will. In response, the appellant
    did not assert a claim that the trustees breached their fiduciary duty. In any
    event, on this record I am not persuaded that the trustees consulted with the
    other children for the purpose of frustrating the appellants objective of
    purchasing the farm. The will expressly contemplates that a combination of
    children may purchase the farm and does not give preference to the appellant. 
    It was reasonable and appropriate for the trustees to consult with the other
    children and not simply invite the appellant to submit an offer that complied
    with the will and conclude an agreement of purchase and sale with him. As
    indicated above, Andrew, who is not a trustee, sought to purchase the farm.

[19]

Accordingly, I would dismiss the appeal and order that the trustees
    are entitled to their costs of the appeal, fixed in the amount of $10,500,
    including HST and disbursements.




Alexandra Hoy
    A.C.J.O.

I agree G. Pardu J.A.

van Rensburg J.A. (Dissenting):

[20]

I have read the reasons of the Associate Chief
    Justice proposing to dismiss the appeal. I agree with her conclusion that the
    appellant is not entitled to relief under the MOU, and rejecting this ground of
    appeal.  While I do not agree with my colleagues observation that the conduct
    of the appellant was the reason the parties did not conclude an agreement after
    signing the MOU (as the record is contradictory and may be incomplete), I
    accept that the appellant is not entitled to relief in this appeal in respect
    of the MOU.

[21]

With respect, however, I do not agree with my
    colleagues analysis or conclusions regarding the principal issue on appeal:
    whether the application judge erred in his treatment of the apparent competing
    offers for the farm by failing to give effect to the appellants arguments that
    his attempt to purchase the farm had been frustrated by the actions of the
    estate trustees.

[22]

For the reasons that follow, I would allow the
    appeal and direct the application to return to the Superior Court for a
    rehearing before another judge.

[23]

There are two fundamental problems with the
    application judges reasoning that I would characterize as reversible errors.

[24]

The first is the application judges failure to
    address the appellants arguments and to resolve the question of whether the
    estate trustees attempted to frustrate the appellants purchase of the farm.
    This was relevant to whether there were in fact competing offers for the
    estate trustees to consider.

[25]

The will provided for a sale of the farm at the
    discounted price to any of the testatrixs children or a combination of the
    same. The affidavits attached correspondence and emails between the parties
    and their counsel indicating that, after telling the appellant his offer was
    premature, the estate trustees were intent on a sale to four or more of the
    siblings (initially in the unequal shares referenced in para. 4(d) and then in
    equal shares), even after the appellant and his sister had rejected this
    option. It was only on the eve of the expiry of the one year period that the
    estate trustees and a third brother, Andrew, submitted individual offers to
    purchase the farm at the discounted price. The estate trustees had also
    obtained a second appraisal for the farm, which they did not disclose to the
    appellant (for a significantly higher price). The appellant contends that the
    estate trustees were upset by the discount, and wanted to recover the full
    value of the property, either by selling their respective interests after they
    became joint owners, or by forcing a sale under the second part of para. 4(d)
    of the will. This was contrary to the wish of the testatrix to keep the farm
    within the family if possible, for which she had provided expressly for a
    discounted sale to one or more of the children.

[26]

Although, at paras. 11 and 12, the application
    judge referred to the appellants concerns and set out some of the evidence he
    put forward
,
he did not attempt to resolve the issue of whether the estate
    trustees had attempted to frustrate a sale to the appellant. The application
    judge did not give consideration to the appellants argument that the
    individual competing offers were advanced at the final hour only to frustrate
    his attempt to purchase the farm, and should not have been considered by the
    estate trustees, acting in accordance with their fiduciary duties. Instead, the
    application judge proceeded on the explicit assumption that there were
    competing offers that were validly made and in accordance with the will (at
    para. 22). He effectively ignored the appellants argument, renewed on appeal,
    that it was only because of the estate trustees actions that they were able to
    argue that there were competing offers.

[27]

The application judge identified the issue as
    determining the testatrixs intention if there were competing offers within a
    year of her death. This led to the second problem with his decision.

[28]

After referring to the principles for
    interpretation of wills, including the armchair rule
 (where the court considers
    indirect evidence relating to the surrounding circumstances at the time of
    execution of the will), the application judge
did
    not go on to apply the rule. Instead he concluded, at para. 30, that there was
    no extrinsic evidence of the testatrixs intention.
[29]

In fact, there was such evidence that was put
    forward by all of the parties, including the occupations of the various
    children at the time the will was made and their respective dealings with the
    farm. It is unclear whether the application judge ignored this evidence, or
    rejected it. In any event, he did not address the evidence in an effort to
    determine the testatrixs will in the event of competing offers from some of
    her children. It was important for the application judge to use the means at
    his disposal, including the evidence of surrounding circumstances, to attempt
    to give meaning to the first part of para. 4(d) of the will, before permitting
    the estate trustees to proceed with a sale in their discretion under the second
    part. This is especially the case given the wish of the testatrix for the farm
    to remain in the family.
[30]

There were other errors in the application
    judges recitation of the facts and analysis that, while not palpable and
    overriding, cast doubt on his disposition of the application.
[31]

The application judge misidentified the
    competing offers as an offer by the appellant and an offer by the estate
    trustees and Andrew jointly (at paras. 5 and 30). There was no joint offer; the
    competition was between four individual offers. The application judge referred
    to a sale by the estate trustees at a price to be determined by [them] in
    their sole and unfettered discretion as a sale on the open market, and stated
    that it is only if a sale is on the open market that the proceeds would be
    shared in the percentages set out in para. 4(d) (at paras. 35 and 36). Para.
    4(d) simply provides for the proceeds to be distributed to the children in the
    specified unequal shares; this provision would apply to any sale, whether or
    not at the discounted amount. It is difficult to determine the extent to which
    these errors informed the application judges analysis. However, they
    reinforce, in my view, the need to set aside his order and to refer the matter
    to another judge of the Superior Court for a new hearing.
[32]

My colleague notes, at para. 6, that the estate
    trustees and Andrew had been willing to offer to purchase the farm in
    combination with the appellant, but the appellant wished to purchase the farm
    on his own. Indeed, the fact that the estate trustees would have preferred a
    sale to the brothers jointly appears to be at the root of the conflict between
    the parties. While the will contemplated a sale of the farm to any one or more
    of the testatrixs children, the estate trustees did not have the ability under
    the will to require the appellant to participate in a purchase of the property
    jointly or as tenants in common.
[33]

In the end, there were competing individual

offers, including their own, that the
    estate trustees had to consider. When they were unable to determine what to do,
    they sought the assistance of the court. As I have explained, the application
    judge did not address certain issues that were before the court: whether there
    were in fact competing offers, or whether the estate trustees were acting to
    frustrate a purchase by the appellant; and if there were competing offers, to
    consider the evidence of surrounding circumstances at the time the will was
    made to determine what the testator would have done to resolve the conflict 
    and at the same time to achieve her overriding objective of keeping the farm in
    the family.
[34]

Finally, as I would propose to allow the appeal,
    I will briefly address the application judges primary reason for directing
    that the estate trustees are at liberty to sell the farm property to whomever
    they choose and at a price they determine in their sole and unfettered
    discretion.
[35]

At para. 22 of his reasons, the application
    judge noted that, while not raised in argument, there was an issue respecting
    the effective dates of the two appraisals of the farm property. He concluded
    that the first appraisal was invalid as it did not assess the propertys value
    at the time of the testatrixs death (but two months later), that consequently
    nobody made an offer at 75% of the appraised value within the one year
    deadline, and that the second part of para. 4(d) therefore applied. It was only
    in the event he was wrong, that the application judge went on to consider what
    to do assuming there were competing offers. In their factum, the respondents
    sought to uphold this part of the decision, although in oral argument they may
    have retreated somewhat from this position.
[36]

In my view it was an error for the application
    judge to decide the application based on an argument not raised by any party,
    that the first appraisal (for $1.3 million) was invalid. The estate trustees
    commissioned the first appraisal which valued the farm in December 2012, and
    not at the date of the testatrixs death two months earlier. They obtained a
    second appraisal (for $1.7 million), not because of the incorrect date, but
    because they thought the first appraisal was too low, and they did not provide
    the second appraisal to the appellant until the one year had passed. There is
    nothing to suggest that the different appraisals depended on their effective
    dates two months apart. The estate trustees did not base their own offers on
    the second appraisal, and quite properly they did not argue on the application
    that the first appraisal was invalid. This would have permitted them to avoid
    the first part of para. 4(d) by relying on their own mistake in commissioning
    the first appraisal, and a second appraisal that was not revealed to the appellant
    until it was too late. The application judges reasoning at para. 22 favours
    form over substance, and cannot be correct.
[37]

For these reasons I respectfully disagree with my colleagues
    proposed disposition of the appeal. I would therefore allow the appeal and
    award costs of the appeal to the appellant. I would reserve the costs in the
    court below to the judge rehearing the application.
Released:  AH AUG 03 2018
K.M. van Rensburg J.A.