DIVISIONAL COURT FILE NO.: 12-1849
SUPERIOR COURT OF JUSTICE - ONTARIO
(DIVISIONAL COURT)
RE: MANDY DENOFRIO, RON DENOFREO and RAVI SHARMA v. AUDREY DENOFRIO, DEBBIE DENOFRIO, DINO DENOFRIO and LINDA DENOFRIO‑MILITO
BEFORE: Justices Matlow, Swinton and Whitaker
COUNSEL: Philip Augustine and Michael Heikinen, for the Applicants (Respondents on Appeal) Mandy Denofrio, Ron Denofreo, and Ravi Sharma
David Cutler, for the Respondents (Appellants) Audrey Denofrio, Debbie Denofrio, and Linda Denofrio-Milito
HEARD at Ottawa: April 9, 2013
E N D O R S E M E N T
The Appeal
1The appellants appeal from the judgment of Kershman J. dated June 8, 2012 awarding compensation in the amount of $228,261.41 to the respondent Estate Trustees on a contested passing of accounts for the period from the testator’s death in June 2010 to June 30, 2011. The estate is valued at $11.5 million.
2The appellants argue that the application judge made palpable and overriding errors of fact in coming to his decision, and he awarded an amount of compensation that was grossly excessive. In particular, they argue that he erred in finding that the releases requested by the Estate Trustees were partial, not final, and it was reasonable to make the request for releases. As well, they argue that he erred in finding that there was a threat of litigation by three of the testator’s children. They also submit that the matrimonial litigation was no longer an obstacle to a partial distribution of the estate by the end of April 2011. Accordingly, the Estate Trustees improperly failed to make a partial distribution.
3The application judge correctly set out the five factors to be considered in determining the amount of compensation to which the Estate Trustees were entitled: the size of the trust, the care and responsibility involved, the time occupied in performing the duties, the skill and ability shown and the success resulting from the administration (Re Toronto General Trusts Corporation and Central Ontario Railway (1905), 6 O.W.R. 350 (H.C.J.) at para. 20). Having considered these factors, the application judge awarded compensation by applying a percentage of 2.25 per cent, rather than the 2.5 per cent sought by the Estate Trustees. He refused to award a care and management fee.
4We do not agree that the application judge made palpable and overriding errors. He was justified in finding that the demand for releases was reasonable, given the fact that the matrimonial litigation had not been settled at the time of the hearing of the application. Given the size of Mrs. Denofrio’s claim, should she continue with that litigation, it was reasonable for the Estate Trustees to seek a release of that claim.
5Moreover, the application judge rejected the appellants’ submission that the Estate Trustees’ request for a release was improperly motivated. As well, he found that the Estate Trustees were really seeking partial releases because of their concerns about litigation. Again, there was evidence to support his conclusion, in particular the testimony of Ravi Sharma, which the application judge accepted.
6While the appellants object to the failure of the Estate Trustees to make a partial distribution of the estate, we note that they took no legal steps to seek an order for partial distribution. Instead, they chose to wait until the passing of accounts to pursue their objections about the distribution.
7The application judge concluded that the Estate Trustees “had exercised a high degree of skill and ability in dealing with a large and complex Estate” and had done so while dealing with difficult matrimonial litigation. That was a conclusion he was entitled to reach, given the evidence before him.
8Furthermore, the application judge made no error in his consideration of the size of the estate. He did not award compensation for the period when the Estate Trustees were exercising powers of attorney for the testator.
9The award of compensation was in the discretion of the application judge. He made no error in principle, and the award cannot be said to be grossly excessive, given the factual context of this case. Therefore, the appeal is dismissed.
10Given the disposition of the appeal with respect to the amount of compensation, we need not deal with the issue of costs awarded or the order of the application judge that he remain seized of this matter.
The Cross-Appeal
11The respondents sought leave to appeal the costs awarded by the application judge. Leave to appeal costs was granted.
12The application judge received costs outlines at the end of the hearing. He awarded costs to the Estate Trustees on a substantial indemnity basis in the amount of $104,580.33 payable out of the estate. The respondents argue that the judge denied them natural justice because he gave them no opportunity to make submissions on costs. In particular, they wished to make submissions on outstanding offers to settle and who should pay costs.
13The respondents’ counsel appears to have made no submission to the judge at the time of the hearing with respect to these issues. He did not offer to place the offers in a sealed envelope, as counsel have done in a number of other cases, nor did he make any suggestion in his costs outline of the issue relating to payment. Nevertheless, the application judge should have given the parties an opportunity to address costs when requested to do so as a matter of natural justice.
14However, we would not interfere with the order of costs. The offers to settle would not have affected the outcome for two reasons. First, the application judge awarded costs on a substantial indemnity basis even without considering offers. Second, the offer of January 16, 2012 was a complex one, and it is not possible to determine whether the success enjoyed by the appellants was less than what was offered.
15The respondents argue that they should have been awarded full indemnity costs of $116,200.38 rather than substantial indemnity. We would not interfere with the application judge’s determination that the amount awarded of $104,580.33 was a reasonable amount.
16Finally, we see no error in the order that the costs be paid from the estate, rather than by the appellants personally. While the Ontario Court of Appeal stated in McDougald Estate v. Gooderham (2005), 255 D.L.R. (4th) 435 at para. 85, that parties to estate litigation should not expect that costs will be routinely ordered from the estate, the Court did not say that the unsuccessful party must always pay costs personally. Indeed, counsel for the respondents in this appeal conceded that a judge retains a discretion whether to order costs payable out of the estate or by a party personally.
17In the present case, the appellants had some success in reducing the amount of compensation sought by the Estate Trustees. They were not awarded their own costs. However, the application judge made no error in principle in ordering the costs of the respondent Estate Trustees be paid from the estate.
18Accordingly, the cross-appeal is dismissed.
Costs of the Appeal and Cross-Appeal
19The respondents were successful on the appeal, but unsuccessful on the costs appeal. While they sought costs of some $58,000 on a full indemnity basis, less $7,000 for the cross‑appeal, the amount sought is, in our view, excessive, particularly when one considers the number of hours spent by the respondents’ counsel in comparison to the appellants’ counsel.
20Costs of the appeal are awarded to the respondents on a substantial indemnity basis in the amount of $45,000. Costs of $5,000 are awarded to the appellants for the cross‑appeal on a partial indemnity basis. This amount shall be set off against the costs awarded to the respondents, with the result that the respondents shall receive costs of $40,000 all inclusive.
21The costs shall be payable by the three appellants, Audrey Denofrio, Debbie Denofrio and Linda Denofrio-Milito, jointly and severally.
Matlow J.
Swinton J.
Whitaker J.
Released: April 11, 2013