Siblings Diana Bell (nee Hodgson) and Peter Hodgson are photographed at The Globe and Mail in Toronto, Ont. Feb. 29/2011.The Globe and Mail
A dispute over a trust fund that pits the descendants of two establishment Montreal families against one another goes to trial Monday in Quebec Superior Court.
Diana Bell and Peter Hodgson, the adopted children of the late Montreal stockbroker and arts patron David Yuile Hodgson, are suing the three trustees – Royal Trust of Canada and the estates of their late father and cousin – for $16.9-million, saying they failed to properly perform their duties and protect the interests of the beneficiaries of the trust. They say that resulted in substantial losses to the trust's assets, worth $3.3-million following their father's death in 2004, and mostly paid out to them a year later.
The defendants – including their stepbrother Ian Molson, former deputy chairman of Molson Inc. and an executor of David Hodgson's estate – deny the allegations, describing them in court filings as "ill-founded" and "purely hypothetical."
"Together with our co-defendants we will continue to vigorously defend all allegations brought against us," Royal Bank of Canada, the parent of Royal Trust said in a statement. "We have acted in good faith and in accordance with our duties."
The fight is also deeply personal. The siblings are in effect suing their late father for showing the same alleged disregard for their financial interests as he did when he left them and their mother for a new family – the Molsons – four decades ago. "We were the second-class children our father didn't really want to bother with any more," said Ms. Bell, 52, a physiotherapist living in Oakville, Ont. "We were failures in his eyes and he much preferred the Molsons. They had more in common and he chose them over us."
At the centre of the dispute is a trust established in 1937 when the siblings' grandfather, Charles Allan Hodgson, a prominent Montreal accountant, died.
Charles Hodgson left his wife, brother and Royal Trust in charge of a trust with $750,000 in assets (equal to $12-million today) to benefit his wife, his son David, and any of David's children. David and his cousin later took over as trustees.
David Hodgson married Marion Frances Husbands in 1952 and they adopted their two children in 1961. They enjoyed a privileged life in Westmount, but in the marriage fell apart and Mr. Hodgson in 1972 married Mary Elizabeth Molson, the ex-wife of William Markland Molson and mother of four boys – Mark, Bill, Ian and Chris.
"Our beliefs and values were different than our fathers'," said Peter Hodgson, 51, who lives in Georgetown, Ont. "He had more in common with his stepsons" who went on to become, respectively, a professional bridge player, a stockbroker, a corporate director and a sales executive. "They believed in money and power and social status. Our father shared that interest."
By contrast, when his son told him he wanted to study to be a teacher, Mr. Hodgson said teachers were second-class citizens, and that the money spent on his education had been a waste. The adopted siblings became estranged from their father; he didn't even attend his daughter's wedding – which he paid for – after she refused to invite his wife and stepsons.
When David Hodgson died in 2004, his adopted children learned of the family trust for the first time – and Royal Trust, in court filings, says it learned for the first time of their identities as beneficiaries. Their spouses took over as trustees, and began asking questions. They found huge gaps in records of the trust, a lack of investment policies and annual summaries, few records of any trustee meetings – and the fact that the trust lost 40 per cent of its value from August, 2000, to December, 2004, because 27 per cent of the assets were invested in Nortel Networks. When they hired Kelly Rodgers, a veteran investment counsel based in Toronto, to search the trust's records, she found Royal Trust employees had written their father in 2000 and 2001 to express concerns about the overweighting of Nortel in the trust. Their late father, then in declining health, appears to have ignored the warnings. Ms. Rodgers claims in a court filing that Royal Trust at that point began "to try to establish a new paper trail that would hold them blameless."
Court filings also establish that over time, investing decisions were largely left solely to David Hodgson among the three trustees. "In the early years there was every appearance of a strong collegial relationship (among the trustees), active involvement by the trust officer in decisions and investments," Ms. Rodgers said in an interview. "As time went on, Royal Trust was clearly performing book and record-keeping functions, but they seemed to be abdicating to the income beneficiary anything that had to do with investments. Yet the role of a trustee doesn't allow you to abdicate part of the responsibility."
The defendants disagree. "At all times relevant to the present dispute, Royal Trust acted in accordance with the powers conferred upon the trustees by Charles' will … (and) with prudence and diligence in the exercise of its powers in the best interest of the beneficiaries," Royal Trust says in its defence. It does, however, admit it can't locate trust records "for certain periods of time over the duration of the trust"
One of the biggest challenges for the plaintiffs is to convince the court to overlook a clause in their grandfather's will stating the trustees could invest the funds as they saw fit "without responsibility for any loss" which may result. "Defendants will establish the plaintiffs' claim should be addressed to Nortel, not the estate of the late George Hodgson," his executors say in a court filing.
Sean Silcoff