Court File No.: DC-07-0038-00

Released: 20090122

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

Re: WILLIAM CHURCH, Appellant

• and -

SHIRLEY JOAN GERLACH, ROYAL CANADIAN LEGION, and ST. JOHN’S ANGLICAN CHURCH, Respondent

Before: Cunningham A.C.J.S.C.J., Swinton and Karakatsanis JJ.

Appearances: William Church, self-represented Joan Gerlach, self-represented

Heard at Brampton: January 19, 2009

ENDORSEMENT

[1] The appellant, William Church, in his capacity as the former estate trustee during litigation of the estate of Clifford Kenneth Hillock, appeals the judgment of Thompson J. dated April 30, 2007 made in respect of an application to pass accounts. Shirley Joan Gerlach, the estate trustee appointed under the will, objected to the amount of compensation requested by Mr. Church. The Royal Canadian Legion and the St. John’s Anglican Church, each beneficiaries of a bequest from the estate, have filed consents stating that they do not wish to participate in the appeal or be served with any more materials.

[2] Thompson J. fixed the amount of compensation at $13,000 inclusive of G.S.T. He gave no reasons to support the amount awarded. He did not pass the accounts or make any order for costs.

[3] Mr. Church submits that the application judge erred in law in failing to give reasons for reducing the compensation claimed, in not applying the proper principles, and in not dealing with the balance of the application. Mr. Church requests that the judgment be set aside, the accounts be passed, compensation in the amount of $23,203.54 and costs.

[4] An appeal to this court lies pursuant to s. 10 of the Estates Act, R.S.O. 1990, c. E.21. The standard of review for a question of law is correctness.

[5] Mr. Church was appointed estate trustee during litigation pursuant to s. 28 of the Estates Act on October 31, 2005. There was a challenge to the validity of the will and an objection to the appointment of Ms Gerlach as estate trustee. Section 28 states:

Pending an action touching the validity of the will of a deceased person, or for obtaining, recalling or revoking any probate or grant of administration, the Superior Court of Justice has jurisdiction to grant administration in the case of intestacy and may appoint an administrator of the property of the deceased person, and the administrator so appointed has all the rights and powers of a general administrator, other than the right of distributing the residue of the property, and every such administrator is subject to the immediate control and direction of the court, and the court may direct that such administrator shall receive out of the property of the deceased such reasonable remuneration as the court considers proper.

[6] On January 31, 2007, Mr. Church served and filed a Notice of Application to Pass Accounts for the period of October 31, 2005 to August 21, 2006. Mr. Church claimed compensation in the amount of $35,805.30 plus $2,973.30 for the costs of the application in accordance with the usual percentage approach and under Tariff C. Mr. Church was willing to accept the balance of the estate of $23,203.54 (approximately two-thirds of the amount he was entitled to under the percentages approach plus G.S.T).

[7] Ms Gerlach filed a Notice of Objection on February 28, 2007. She objected to the amount of compensation requested on the grounds that Mr. Church had exceeded his duties as estate trustee during litigation and that only she (as the appointed estate trustee) was entitled to compensation based on the percentages approach. Ms Gerlach’s position was that Mr. Church was entitled to reasonable compensation on an hourly basis as a lawyer for the work he did on behalf of the estate. His task was to represent the estate in litigation only. He should not be paid as an estate trustee because he did not do the work of an estate trustee (or alternatively, he was not expected to do the work of an estate trustee).

Compensation

[8] While the application judge gave no reasons for reducing the amount of compensation requested, the transcript discloses his view that Mr. Church should be compensated based upon time spent and his hourly rate as a lawyer. We are satisfied that the application judge erred in principle. This approach is inconsistent with the applicable legislation and the approach developed in the jurisprudence.

[9] Pursuant to s. 28 of the Estates Act, an estate trustee during litigation “shall receive out of the property of the deceased such reasonable remuneration as the court considers proper”.

[10] Under s. 61 of the Trustee Act, R.S.O. 1990, c. T.23, an estate trustee during litigation may be compensated as follows:

A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.

[11] In Laing Estate v. Hines (1998), 41 O.R. (3d) 571 at paras 36-37, the Ontario Court of Appeal affirmed that an executor’s compensation must be calculated with s. 61 of the Trustee Act in mind. To determine what is “fair and reasonable” compensation, the Court of Appeal adopted a two-step approach that applies percentages as a guideline and then cross-check the amount against the following five factors:

a. The magnitude of the estate;

b. The care and responsibility required;

c. The time spent performing the duties;

d. The skill and ability applied; and

e. The success of the administration.

[12] The time spent on the administration of the estate is but one factor to consider when determining an executor’s compensation. In Flaska Estate (Re), [1998] O.J. No. 4171 (C.A.), the Court of Appeal held that the audit judge erred in principle in determining that it would be more appropriate to fix compensation primarily on the basis of the time the executors spent administering the estate.

[13] These principles are applicable to an estate trustee during litigation. See Re McLennan Estate, [2002] O.J. No. 4716 at para 22 (S.C.J.).

[14] In this case, Mr. Church provided evidence of the complexity of the estate, the need to deal with pressing issues and the problems he encountered. In administering the estate, Mr. Church negotiated an agreement between Ms Gerlach and a third party regarding rent collection; participated in resolving a dispute involving an estate property and alleged property standard by-law violations; assisted with a real estate transaction (at the request of Ms Gerlach); made arrangements to have income tax returns filed for the deceased, dating back to 2000; and advertised for and made arrangements to pay creditors. We are satisfied that Mr. Church was required to act to maintain and preserve the estate during litigation. However, he ought not to be fully compensated as if he was required to perform all the functions of an Estate Trustee. In our view, half the amount of a full percentage approach reflects the degree of complexity as well as his efforts required to maintain and preserve this estate while the litigation was outstanding in light of the five factors identified above. Compensation is fixed at $17,500 all inclusive.

The Passing of Accounts

[15] The Notice of Objection filed by Ms Gerlach on February 28, 2007 objected only to the amount of compensation. It did not object to any of the items or set out in the Application to Pass Accounts. Ms Gerlach was represented by counsel at the time and before the application judge. Although Ms Gerlach objected to the accounts before us and did not appear to accept the values reflected in the accounts, we are not prepared to allow her to raise such objections at this late date. Furthermore, the evidence before us substantiates the accounts as presented.

[16] The application judge failed to pass the accounts. The appellant was entitled to have his application considered and we order that the accounts be passed as presented for the period of October 31, 2005 to August 21, 2006 and requested in the Notice of Appeal, subject to amendment to reflect our decision on compensation and costs.

Costs

[17] In addition to compensation as Estate Trustee during Litigation in the amount of $17,500, Mr. Church is entitled to his costs for the passing of the accounts in the amount of $2,973.30 payable from the estate.

[18] With respect to costs on this appeal, Mr. Church has paid more than $15,000 to counsel to assist him with the preparation for this appeal. However, given the amount in dispute, the relatively simple issues on appeal and the reasonable expectation of Ms Gerlach, we fix costs of the appeal in the amount of $5000 all inclusive.

Cunningham A.C.J.S.C.J.

Swinton J.

Karakatsanis J.

Released: January 23, 2009