Court File and Parties
COURT FILE NO.: CV-23-00695590-00ES DATE: 20231011
ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
ALEXANDRA MAUDE HARVEY FITZHENRY, MICHAEL JOSEPH FITZHENRY, SEAN ROBERT FITZHENRY, MARY PATRICIA FITZHENRY, ANN ELIZABETH FITZHENRY BEDARD, REAGAN FITZHENRY, GRIFFIN FITZHENRY, DUNCAN FITZHENRY, ZOE JOEL, JAMES SHAW, KELLY BEDARD and SCOTT BEDARD Applicants
– and –
LINDA STEVENS, personally and in her capacity as trustee of the Fitzhenry (1994) Family Trust, and the OFFICE OF THE CHILDREN'S LAWYER on behalf of the unborn and unascertained beneficiaries of the Fitzhenry (1994) Family Trust by their Litigation Guardian Respondents
Counsel: Erica Baron and Hannah Young, for the Applicants Meredith Hayward, for the Respondent Linda Stevens
HEARD: September 26, 2023
F.L. Myers J.
Reasons for Judgment
(Note: Re-issued October 11, 2023 with a mathematical error corrected in paras 46 and 70. Initially I calculated 2/5 of 1% to be 0.2%. It is correctly 0.4%.)
This Proceeding
Background and Outcome
1The respondent Linda Stevens was a trustee of the Fitzhenry (1994) Family Trust from 2008 until 2022. In this proceeding, she seeks additional trustee compensation of $266,679.94 for fiscal years 2019 through 2022. She seeks a further $50,521.53 for care and management of the trust property from 2013 to her resignation in 2022.
2The applicants are the beneficiaries of the trust. By suing proactively, they have reversed the normal of order of presentation. They ask for orders that Ms. Stevens has no further entitlement to compensation over and above the fees she has already invoiced and received as agreed with her co-trustees from time-to-time.
3The applicants submit that the trustees ignored their right to notice and to approve Ms. Steven’s trustee compensation in advance under the terms of the trust. They do not seek the return of improperly taken fees. But, they say, the fees to which Ms. Stevens agreed and which were improperly paid to her are more than fair and reasonable compensation.
4I agree with the applicants.
5The appointment of Ms. Stevens as a trustee brought an intelligent, experienced, and caring trustee to the family trust. Ms. Stevens was a highly qualified trustee. She had been a senior public servant who occupied positions of significant responsibility with the government. She was also a very dear friend of the settlor Robert Edward Fitzhenry and his spouse Andrée Louise Rhéaume Fitzhenry.
6The settlor, as benevolent patriarch of the family, set up the trust as one of several mechanisms to handle the disposition of his wealth. The trust ultimately provided $25 million to be distributed to the Fitzhenry children and grandchildren. The trust paid for the grandchildren’s university educations and then distributed very substantial capital payments to the Fitzhenry children.
7It is apparent that, as is sometimes the case in a family trust, the settlor treated the trust property as if he still owned it. As he was patriarch of the family and the very generous contributor of the trust funds, the trustees seem to have accepted his wishes.
8Apart from Mr. Fitzhenry and Ms. Stevens, the other trustees over time were lawyers or accountants who, de facto if not de jure, served at Mr. Fitzhenry’s pleasure. There is no complaint about their fees in this proceeding because they resigned long ago and, unlike Ms. Stevens, they seek nothing more. In addition, the trust contains a provision for the payment of professional fees to professional trustees. So, they billed their fees and were apparently content with the amounts paid to them. [1]
Ms. Stevens’ Fee Agreements
9Even the lawyer trustees seem to have missed or ignored that Ms. Steven’s compensation was governed by a different clause in the trust deed than professional fees. Mr. Petch negotiated trustee fees with Ms. Stevens – starting at $1,000 per day and then increasing to $200 per hour. Based on these agreed rates, Ms. Stevens invoiced and has been paid about $250,000 in trustee fees to date.
10There is no evidence that anyone agreed Ms. Stevens could claim further fees. Ms. Stevens speaks now of the possibility of claiming more. But she does not contend that there was any agreement or even a discussion about whether she could come back at the end to seek more than the fees to which she agreed.
11I was shown at least one fairly recent document in which Ms. Stevens laid out her fees to the beneficiaries for planning purposes based on her agreed hourly rate. She made no mention of any further possibility that she could be entitled to claim more fees later. That would have been a relevant consideration at the time.
12I am not finding as a matter of law that the compensation of a trustee who agrees to a fee structure is always limited to the amount agreed. While there may be other relevant factors, first and foremost, one need ensure that any fee agreement is consistent with the trust deed. Where, as here, the fees runs afoul of the trust deed, it seems to me that the agreement can still be a factor in assessing the fairness and reasonableness of the quantum of fees agreed.
13Even if it was not legally efficacious, the agreed fees were satisfactory to Ms. Stevens and to the other trustees (including Mr. Fitzhenry the patriarch) at the time that Ms. Stevens provided her services. (At least, that can be said for as long as Mr. Fitzhenry was alive and while there were other trustees. As discussed below, after Mr. Fitzhenry died in 2019, Ms. Stevens failed to name a replacement trustee and she improperly remained the sole trustee for the rest of her tenure.)
14Subsection 61 (1) of the Trustee Act, RSO 1990, c.T23, provides:
Allowance to trustees, etc.
61 (1) 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.
15This section provides the overriding principle that compensation is to reward the trustee’s time and effort. The issue is what is “fair and reasonable” in the circumstances.
16Subsection 61 (5) of the statute provides:
Where allowance fixed by the instrument
(5) Nothing in this section applies where the allowance is fixed by the instrument creating the trust.
17If a trust deed fixes trustees’ fees, the deed governs. In this case, the deed says:
4.5 The Trustees shall be entitled to charge and shall be paid first out of the income derived from the Trust Fund and, if necessary, secondly out of the capital thereof, such remuneration for their services as Trustees as shall be agreed but if any beneficiary of this Trust Fund objects to the amount of such remuneration then the remuneration of the Trustees shall be in such an amount as shall be fixed by a judge of the Ontario Court (General Division) at Toronto.
18The deed does not say who is to make the compensation agreements referred to in the clause. Even if the trustees are empowered to agree at the outset, the clause makes it clear that the beneficiaries are entitled to object and to have the fees set by the court.
19Under the trust deed then, it is implicit that the beneficiaries must be told about the trustees’ fees. Each must be provided an opportunity to consent or to ask the court to set the fees if he or she does not consent to a proposed fee for a non-professional trustee.
20Ms. Steven’s counsel agrees that the beneficiaries were entitled to know and consent to her fees. The trustees’ failure to tell the beneficiaries about Ms. Steven’s fee agreements deprives her fee agreements of lawful force. Were it otherwise, the agreements would govern and the issue would be resolved under s. 61 (5). [2]
21Ms. Steven’s counsel also agrees that the trust deed did not authorize Ms. Stevens to take fees on a real time basis without court approval as she did with the concurrence of the other trustees. At minimum, this premature payment could result in Ms. Stevens owing the trust compensation for interest or foregone revenue on the amounts that she improperly drew as fees without prior approval of the beneficiaries or the court.
22Ms. Stevens submits that she did not provide any information about her fees or about the trust generally to the beneficiaries because Mr. Fitzhenry, as patriarch, settlor, and at times a trustee, was adamant that he did not want his children informed about how the trust was operated. The lawyer trustees seemingly went along with this direction as well.
23Ms. Stevens understood that as a fiduciary she was duty-bound to report to the beneficiaries throughout. She says she tried to convince Mr. Fitzhenry to engage his children in the trust operations but he refused. Once she became the sole trustee on Mr. Fitzhenry’s death in 2019, she did make disclosures to the beneficiaries.
24This is just one example of the failure of Ms. Stevens and her co-trustees to fulfill their obligations to the beneficiaries. Ms. Stevens says that she felt obliged to respect the wishes of her dear friend Mr. Fitzhenry. But obedience to a domineering settlor is not a proper role of a trustee. If a trustee was not willing or able to fulfil his or her duties in face of the competing demands of the settlor/co-trustee/friend/patriarch/benefactor, then he or she is obliged to resign. Continuing to occupy a fiduciary role and to take fees while failing to fulfill the trustee’s fiduciary obligations to the beneficiaries was not an option.
25I recognize that there is a real world in which wealthy clients want to do as they wish with their money and will pay professionals to help them do so. I recognize as well that if Jack Petch, a senior partner with Osler, Hoskin, entered into fee agreements with Ms. Stevens without telling the beneficiaries and he accepted instructions to keep information from those entitled to it, there was likely no one telling Ms. Stevens that her conduct was wrongful.
26I suspect that no one told Mr. Fitzhenry what to do with his money. But once the money was settled into a trust, it was no longer his. Legal title to the trust res or assets is vested in the trustees. Beneficial title, the right to use and enjoy the trust property and any fruit it yields, belongs to the beneficiaries as provided for by the trust deed.
27As settlor and one of a group of trustees, Mr. Fitzhenry had no right to dictate how the trust assets were spent or how the trustees fulfilled their duties. The trustees had powers, authority, and obligations.
28So, how was Ms. Stevens to know what her obligations were?
29One answer would have been to read the trust deed and then ask questions about para. 4.5 and the rights of beneficiaries. Ms. Stevens read the trust deed. She is a sophisticated person. As Ms. Stevens says she tried to get Mr. Fitzhenry to agree to make disclosure to his children, she understood that they had legitimate interests if not legal rights.
30Para. 4.5 dealt with Ms. Stevens’ compensation. If she was not fully conversant with it, she ought to have been. She should have known that the beneficiaries had a say in her compensation and that if any of them objected, she needed to go to court to set her fees.
31It cannot be enough to justify a breach of solemn duties to say that others did it too even if one assumes that they ought to have known better. The involvement of others, including especially lawyers, may help establish a trustee’s good faith. It certainly goes to the degree or lack of moral culpability at play and to the question of forgiveness.
32For clarity and certainty, I state that while I find that Ms. Stevens committed several breaches of her obligations under the trust deed and applicable trust law, I am not asked to find that she did so in bad faith. I make no finding of bad faith or good faith. Section 35 of the Trustee Act is not before me.
33In this case, the fact that Ms. Stevens and the other trustees violated para. 4.5 of the terms of the trust deed is what leaves open to Ms. Stevens the possibility of seeking further fees now. Had she complied with the trust deed before taking fees, s. 6 (5) of the statute would have applied. But it is not a very compelling argument for a trustee to seek further fees because she breached the trust deed by not obtaining the consent of beneficiaries before taking +/- $250,000.
34The inequity of Ms. Stevens’ position is ameliorated somewhat because had she needed court approval for her fees historically, the court would have applied the same test under s. 6 (1) of the statute as I am asked to apply today. On the other hand, if a beneficiary had objected to Ms. Stevens’ fees at the rates agreed upon by the other trustees, presumably any required hearing would have been for the purpose of showing that the proposed fee agreements were fair and reasonable. Had that occurred, the agreements would have likely been a ceiling on Ms. Stevens’ compensation rather than the floor that she postulates today.
The Legal Tests
35The parties agree on the applicable law. Killeen J set out the approach to the assessment of fair and reasonable fees under s. 61 (1) of the Trustee Act in Re Jeffery Estate (1990), 39 E.T.R. 173 (Ont Surr Ct). At paras. 13 and 16 of that decision, the court wrote:
In the well-known case of Re Toronto General Trust and Central Ont. Railway (1905), 6 O.W.R. 350, Mr. Justice Teetzel suggested 5 central factors should be considered by the audit judge in arriving at the amount of an executor's compensation. Those factors are:
- 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.
The later case of Re Atkinson, [1952] O.R. 685 (C.A.) added some helpful clarifying comments on the s. 61(1) discretionary power, especially on the use of "percentages" to establish the level of compensation. The Court said at p. 698:
If these statutory provisions are properly borne in mind, then in many instances the proper compensation may well be reflected by the allowance of percentages, but the particular percentages applied, or any percentages, are not to be regarded as of paramount importance; they should be employed only as a rough guide to assist in the computation of what many be considered a fair and reasonable allowance; the words of the statute override everything else and that fair and reasonable allowance is for the actual "care, pains and trouble, and time expended". In some estates, indeed perhaps in many, no fairer method can be employed in estimating compensation than by the application of percentages. In others, while percentages may be of assistance, it would be manifestly unreasonable to apply them slavishly and to do so would violate the true principle upon which compensation is always to be estimated.
It can readily be recognized that, depending upon the idiosyncrasies of the particular estate, the care, pains and trouble and time expended may be disproportionate to the actual size of the estate. A small, complex estate may make more demands upon the trustee's care and time and skill than a much larger estate of a simpler nature; conversely, even in a large estate with many complex problems, assessment of the compensation by the adoption of what might be said to be "the usual" percentages would result in a grossly excessive allowance.
There are many later cases which show that, in Ontario at least, a practice has developed of awarding compensation on the basis of 2 1/2% percentages against the four categories of capital receipts, capital disbursements, revenue receipts and revenue disbursements along with, in appropriate cases, a management fee of 2/5 of 1% per annum on the gross value of the state: see Dickson & Wilson, Ontario Estate Practice, 2d ed. (1986) at pp. 474-5. However, cases such as Re Kennedy [1944] O. W.N. 734 and Re McPherson [1945] O.W.N. 533 make it clear that the award of a management fee requires special circumstances and will not be allowed automatically or routinely. Beyond this, of course, the cautionary words of the Re Atkinson case, supra, emphasize that the use of percentages must not become a ritual.
To me, the caselaw and common sense dictate that the audit judge should first test the compensation claims using the "percentages" approach and then, as it were, cross-check or confirm the mathematical result against the "five-factors" approach set out in Re Toronto General Trust and Central Ont. Railway, supra. Usually, counsel will, in argument, set out a factual background against which the five factors can be brought to bear on the case at hand. Additionally, the judge will consider whether an extra allowance should be made for management based on special circumstances. The result of this testing process should enable the judge to determine whether the claims are excessive or not and, in the result, will enable the judge to make adjustments as required. The process is not scientific but is not intended to be: in the estate context, it is a search for an award which reflects fairness to the executor; in a real sense, the search is for an appropriate quantum meruit award in a unique setting.
36The Court of Appeal endorsed this approach in Laing Estate (1998), 41 O.R. (3d) 571 (C.A.), at p. 574:
(i) Step 1: The Percentage Guidelines
37Ms. Stevens says that applying a 2.5% fee to all capital receipts, capital disbursements, revenue receipts and revenue disbursements from the time of her appointment until her resignation at the end of 2022, would yield a fee of about $880,000 plus a care and management fee of about $290,000. Her total compensation claim would be about $1.17 million. Yet she seeks total compensation in this proceeding of less than half of that amount.
38The applicant beneficiaries say that this type of assessment is not apt for this trust. The trust consisted of two assets: (a) an investment portfolio; and (b) a residential condominium in Barbados. I consider each independently.
a. The Investment Portfolio
39The investment portfolio had a value of between $15 million and $18 million over time. It was professionally managed by two investment management firms. They decided which stocks and bonds to buy and sell. The trust paid fees to the investment management firms.
40The trustees were required to supervise the investment managers to properly care for and manage the trust assets. But here, the trustees delegated their supervisory function to yet another professional.
41The trustees agreed to pay the supervisor an annual amount of 0.2% of the value of the investment portfolio for carrying out their supervisory, care and management responsibilities.
42The investment portfolio initially represented over 85% of the value of the trust property. This ratio increased over time as gains were made in the portfolio while losses were suffered on the condominium.
43The beneficiaries submit that the trustees had very little responsibility for the vast bulk of the trust property beside hearing quarterly reports from the professional supervisor of the professional investment management companies. They did not have to expend much time, effort, or endure any pain at all in managing the vast bulk of the assets of the trust.
44The trust paid more than $1 million in fees to the investment management firms and the professional supervisor from 2012 until the liquidation of the portfolio. Those fees more than offset the fees claimed by Ms. Stevens based on the percentage guidelines.
45Professional fees incurred by a trust for fulfilling trustees’ duties are fairly attributed to the trustee’s fees. Sentineal, et al. v Sentineal, 2016 ONSC 5073, at para 170.
46Moreover, the trustees did nothing extraordinary to deserve an extra “care and management” fee in respect of the investment portfolio. What was perhaps extraordinary was that they delegated even their supervisory duties to a professional. The fact that they paid him 0.2% (i.e., a half-share of the guideline amount of 2/5 of 1%) must be taken to reflect the trustees’ understanding that he was the one caring for and managing the investment portfolio assets for them.
b. The Condominium in Barbados
47Mr. Fitzhenry’s spouse, Andrée Fitzhenry, initially managed the condominium in Barbados. She asked Ms. Stevens to take responsibility for the condominium and Ms Stevens did so after Ms. Fitzhenry’s death in 2013.
48Once again, the trustees properly delegated actual management of the condominium unit to professional management in Barbados. A local property manager took care of the physical property and administered rental efforts. The property manager proposed necessary expenditures and took care of implementation once approved.
49Ms. Stevens’ principal functions involved reading the property manager’s emails, approving recommended actions – to buy drapes or to make a repair for example – and to transfer money into the manager’s account once or twice a year to keep it topped up for necessary expenses.
50Although the condominium cost US$3 million, its value declined substantially over time. By the time of Ms. Steven’s appointment as a trustee in 2008, the family was no longer making much use of the condominium. It was for sale throughout Ms. Stevens’ tenure as a trustee.
51The annual operating costs of the condominium exceeded the rental revenue received for it.
52The condominium was a costly asset with a declining value. Although it was always for sale during Ms. Stevens’ oversight, the trustees never priced it to sell.
53Every piece of property has a fair market value. That is the amount that a willing buyer will pay a willing seller for the property at a given time. Here, as the trustees were told about market declines, they grudgingly reduced the asking price, at each stage hoping to maximize the sale price in the new market conditions.
54Saying that one did not receive offers is just saying that they never priced the condominium at a level to attract a willing buyer i.e., at or near enough its fair market value at the time. Here, a few offers were received. But none came to fruition until the sale closed in 2020.
55This condominium has some marketability issues to be sure. Foreigners must own property in Barbados through a corporate structure due to government monetary controls. The structure interfered with one putative sale. Brexit impacted the marketplace negatively too. But such things are all reflected in the property’s fair market value. If one wants to sell a property, to end a cash flow bleed, then the property needs to be priced at what a buyer will pay and not just what the seller wants or thinks the property ought to be worth.
56The value of the condominium fell throughout the past dozen years to just US$1.2 for which it was sold in 2020. Ms. Stevens says she worked at selling the condominium throughout. The emails though show only sporadic efforts were made. Months of silence were allowed to pass. While the trustees had a real estate agent in Barbados, for some time they used the services of the spouse of the property manager. If the property manager was going to lose a customer on the sale, one wonders about the independence of the real estate agent.
57Ms. Stevens sent an email asking to be brought an offer in 2017. But she never directed that the property was to be sold at whatever price could be obtained. The trustees just meandered on year after year incurring substantial losses and reducing the price too little and too late each time that looked at it.
58Absent expert evidence to the contrary, I do not see how the condominium could not have been sold years earlier had a sustained effort been made by the trustees to understand the situation and the marketplace. Sporadic emails to a real estate agent leading to a slow reduction of listing prices over a very lengthy period of time may or may not be due diligence and due care. But it certainly is not a “special circumstance” that would call for extra compensation for a trustee.
c. Other Trustee Duties
59Apart from the investment portfolio and the condominium, Ms. Stevens’ duties were fairly limited. She attended trustee meetings. She received requests from the children for tuition payments for the grandchildren. She was a liaison for communication between the trust’s accountant and CRA. She signed tax returns. She also sent T3s to beneficiaries.
60There was little day-to-day administration required of the trustees other than bursts involving the condominium.
d. Analysis of Percentage Guidelines
61The trust paid Ms. Stevens for all of her work at rates to which she agreed. At first, she asked for and was paid $1,000 per eight-hour day. In 2013, she asked for and was granted a 60% increase to $200 per hour (or $1,600 for an eight-hour day). This is all in the context of her not being entitled to receive anything without beneficiary or court approval.
62Ms. Stevens was also retained by Mr. Fitzhenry to perform other trustee roles in other trusts. Those trusts paid her 1.5% on disbursements and receipts rather than an hourly rate.
63Ms. Stevens invoices show that she billed time to this family trust for some work that she performed for other Fitzhenry projects. She submits that the amount of extra-billing was fairly modest - about $6,500.
64Unfortunately, the notebooks in which Ms. Stevens kept track of her hours are largely incomprehensible. She says that she can make out her entries. But the point of keeping such records is so that others can review and assess them too. Unfortunately, as well, Ms. Stevens produced only two notebooks.
65Ms. Stevens asks that she be paid 2.5% of receipts and disbursements for 2019 to 2022. In those years, she was the sole trustee. So, she seeks the full 2.5% that would normally be split among all trustees.
66The trust deed provides that there was always to be at least two trustees. On Mr. Fitzhenry’s death in 2019, Ms. Stevens was required to name a new trustee. She chose not to do so.
67On Mr. Fitzhenry’s death, the applicants asked Ms. Stevens to wind up the trust as soon as possible. She agreed that was the right thing to do. She thought it would be too difficult to find someone to appoint as a trustee and that it did not make sense to do so when a winding up was imminent.
68This was not Ms. Stevens’ choice to make. The trust deed gave her no such discretion. One might argue that without a quorum, some of the decisions taken by Ms. Stevens were without jurisdiction. That is not raised as an issue in this proceeding. I am told there are other proceedings between the parties. I do not know the allegations in whatever other proceeding may be ongoing.
69I would not use a full 2.5% guideline for Ms. Stevens’ compensation from 2019 to 2022 when she failed to appoint a co-trustee who would have split any such fee entitlement with her.
70Moreover, I do not see how Ms. Stevens can be entitled to 2.5% as a full measure of trustee management and pain when 90% of the assets were managed by others who were paid fees to do so. Even the care and management component was delegated and paid for with half the guideline fee (as he was not sharing it with others). The management fees paid for the portfolio exceeds the $880,000 that Ms. Stevens could claim for doing so. She does not claim a care and management fee on the portfolio.
71In my view, the trust already paid more than 2.5% for others to fulfil the administration, management duties of the trustees and to care for the portfolio.
72Ms. Stevens does claim a care and management fee on the condominium from 2013. But there too the actual care and management was properly delegated to others who were paid fees.
73The applicants postulate a hypothetical case in which Ms. Stevens would be granted a 1.5% fee on receipts and disbursements and a 0.2% care and management fee on the condominium. The applicants exclude some disbursements for payments or receipts they say should not have happened or should not be considered. For example, they submit that the investment advisor’s 0.2% fee should not attract a disbursement fee for the trustees. It could have been their fee had they chosen to manage the portfolio. I accept that paying fees on fees is problematic. In addition, the applicants point to a tax refund that was received only after prior tax errors had to be corrected at a cost to the trust. They point as well to tax penalties paid and charitable donations paid that were not proper, they say.
74I do not need to make findings on these points. The applicants advance the hypothetical to show that on one way of looking at things, even giving Ms. Stevens the 1.5% she accepted on other Fitzhenry trusts and a care and management fee on the condominium, the outcome is not above the fees that Ms. Stevens has already invoiced and received. With an adjustment calculated at about $20,0000 to reflect interest on compensation taken by Ms. Stevens before she was entitled to receive it, the difference between what she might be entitled to on a percentage basis calculated under this hypothetical and what she actually received would be immaterial.
75I understand that one could argue about each of the inputs or exclusions in the applicants’ hypothetical. To me, it is just an order of magnitude calculation. It basically illustrates the applicants’ submission that the amount already paid to Ms. Stevens is significant and fair in light of the amounts already paid to professional management.
(ii) Step II: Cross-Check against the “Five Factors”
76Both counsel made submissions on each of the five factors identified in the case law.
a. The Size of the Trust
77The assets of the trust were substantial. Trustees therefore had some real risks. This is ameliorated somewhat by the terms of the trust deed that precluded most potential claims against the trustees.
78The size of the trust led to there being more formality than is often the case. Trustees had formal meetings for example. But the value of the assets also required the trustees to hire professional management. As discussed above, there was little actual day-to-day management effort required of the trustees. The sale of the condominium is perhaps the only aspect that required more active engagement by Ms. Stevens.
79I accept that the sheer size is a factor that favours a consideration of a more significant level of compensation.
b. The Care and Responsibility Involved
80Before the death of Mr. Fitzhenry, Ms. Stevens had little responsibility herself. For the most part, the trustees received reports on the portfolio and did as they were told.
81What is more significant to me on this head of the “five factors” is that when Ms. Stevens began communicating with the beneficiaries, after 2019, during the period for which she claims 2.5%, the heavy lifting of preparing for the wind-up was performed by counsel and accountants. This was appropriate. But it also cost the trust fees.
82Ms. Stevens’ role was essentially cutting cheques and managing information flow between beneficiaries and the trust’s professionals.
c. The Time Occupied in Performing the Duties
83To quantify the amount of time spent by Ms. Stevens on trustee duties, counsel spent some time trying to analyze Ms. Stevens’ invoices. In the main, much like lawyers’ invoices, without backup dockets, one cannot tell how much time each described piece of work reasonably took.
84Counsel for the applicants identified numerous concerns with Ms. Stevens’ invoices. They claim that her time entries were exaggerated. They say she included items that were not properly work performed for this trust. They spent some time on one sample invoice for which counsel was provided with some backup.
85I am not assessing a lawyer’s account. I am weighing five broad categories of inputs to try to gain clarity on an appropriate level of fee for a trustee.
86I make no specific findings on the invoices historically. I already said above that Ms. Stevens’ notebooks are largely incomprehensible. There is little to be gained on trying to scan each entry on each invoice.
87As discussed already, Ms. Stevens roles were largely receiving emails, signing tax returns, and cutting cheques when advised. Professionals performed the bulk of managerial functions. In my view, Ms. Stevens was well paid on an hourly basis for the time spent on the tasks she undertook.
d. The Skill and Ability Shown
88Ms. Stevens was retained for her intellect, her experience, and her knowledge of the family.
89She understood the issues and the personalities involved. Unfortunately, this led her to defer to Mr. Fitzhenry inappropriately. The applicants raise several issues of concern. I am not sure that any does more than illustrate that Ms. Stevens exercised very little independent judgment while Mr. Fitzhenry was alive.
90The fact that Ms. Stevens took fees without seeking approval of the beneficiaries or the court is a prime example of Ms. Stevens failure to fulfill her role with the skill and ability that she possessed.
91Along the same lines, Ms. Stevens’ failure to keep the beneficiaries informed about the trust, or to resign if prevented from doing so, reflects a lack of proper performance of the role for which she seeks compensation.
92Ms. Stevens’ failure to appoint a replacement trustee for Mr. Fitzhenry is not an example of deferring inappropriately. But it is an example of her acting outside the terms of the trust deed and arrogating to herself authority that she did not possess.
93In late 2022, Ms. Stevens was insulted when a representative for the beneficiaries questioned her entitlement to additional fees. The tone of the emails was not especially negative sounding to me. But there is subjectivity to the tone perceived when each of us reads an email. I accept that Ms. Stevens was insulted and may well have viewed the beneficiaries’ position as being harsh and unappreciative.
94Ms. Stevens responded to the perceived insult by purporting to quit as the sole remaining trustee with immediate effect. Had she already appointed a replacement for Mr. Fitzhenry as required, this would not necessarily have been an issue. Instead, she purported to leave the trust without a trustee to founder like a rudderless ship.
95The trust deed provides that before a sole trustee resigns, he or she must appoint a replacement. This prevents a management gap. Ms. Stevens did not do so and she spent the next several months refusing to appoint the beneficiaries’ chosen representatives as replacement trustees. Ms. Stevens signed tax returns during this period to prevent an urgent issue. One wonders how she did so without tacitly accepting that her resignation was not effective.
96Between January and July of this year, there was some back and forth among counsel about wording of a resignation. None of that justified what seems to have been a hasty resignation and a bit of petulance preventing a timely correction.
97This incident, while explicable on human terms, once again reflects a breach of the trust deed by Ms. Stevens.
98The trust terms allowed for income to be accumulated for the first 21 years after the creation of the trust in 1994. However, after 2015, the terms of the trust required the trustees to distribute the entire income of the trust each year. This ensured compliance with the Accumulations Act, RSO 1990, c A.5 among other laws.
99The trustees continued to make discretionary distributions of less than 100% of the trust’s income after 2015 until this issue was recognized a few years ago. Whether this was a question of simple oversight, and might be laid at professionals’ feet, it does, to some degree, reflect trustees acting as they wished rather than as they are required.
100In 2009, it appears that the trust donated $500,000 to charity. The trust deed did not allow for this expressly.
101In 2015, Mr. Fitzhenry decided to donate $5 million to his family foundation. He had the trustees declare a $10 million distribution but the beneficiaries were told they had to sign over 50% to the foundation. Supporting material for a later proposed donation shows Mr. Fitzhenry apparently believing that he could direct the trustees and beneficiaries to donate funds because he was donating his own money. That may well have been how he felt about the trust. But no one stood up to him to say otherwise.
102The applicants also criticize the annual losses on the condominium in Barbados as an example of low skill or ability. The trust lost some $300,000 per year while Ms. Stevens and her co-trustees were unable or unwilling to make the effort needed to sell the wasting asset.
103In my view, pointing to a series of discrete breaches of the trust terms does not necessarily say much about Ms. Stevens’ skill or her ability. It is fair to say that the trustees of this trust deferred to Mr. Fitzhenry. They also did not take pains to ensure that they always complied with the trust deed as required. On the whole though, they were not required to administer the trust assets actively or to demonstrate much skill or ability to justify their keep.
104The one issue that required a more seasoned hand, it appears, was the sale of the condominium in Barbados. Someone needed to pick up the reins and get it done. Sending the odd email from Canada did not work and no one tried anything different despite the failure of such efforts for a decade.
e. The Success Resulting from the Administration
105The beneficiaries of the trust have received about $25 million from the assets with an $18 million book value provided initially by Mr. Fitzhenry. The trust gave grandchildren the opportunity to attend expensive foreign universities. The essential purpose of the trust was attained.
106I have no idea though whether there was a tax benefit to the structure or whether investments and accumulation of wealth inside the trust exceeded available returns had a trust not been used. The trust had some tax problems. I do not know if those land at the feet of Mr. Fitzhenry, the accountant, or all trustees. The investment portfolio was seemingly handled well for fees paid.
107The condominium was a millstone around the trustees’ necks. Its problematic nature pre-dated Ms. Stevens involvement. But the trustees handling of the asset was not successful. The trust suffered a decade of losses, only partially stemmed by rents received, and despite a decision to sell the condo taken years ago. A price of US$1.2 in 2020 is probably what the market would bear then. But it is just 40% of the initial cost of the unit.
108There are reports along the way of much higher prices seemingly being available for other units. As noted above, the trustees did not price the condominium to sell at those times despite recognizing the desire to stem the cash flow drain it represented.
f. Analysis of the Five Factors
109This trust had substantial assets. It needed trustees who could understand reports of asset managers and who could direct the condominium sale. At the beginning, trustees attended a few meetings a year and received multi-page reports that were discussed.
110The trustees functioned at a very high level of abstraction at least for the vast bulk of the assets in the investment portfolio. There was little for them to do. Decisions, if necessary, likely were made principally by Mr. Fitzhenry.
111The condominium was a more difficult asset. Ms. Stevens was not a real estate professional and had no experience or training in analyzing the Barbadian condominium market.
112I agree with Ms. Stevens’ counsel who submits that the applicable standard is not one of perfection. Mr. Fitzhenry seems to have been content watching the trustees chase the condominium price down unsuccessfully. But this is the precise place where reasonable trustees committed to the best interest of the trust and its beneficiaries would be expected to speak up and get the asset sold. It was losing $300,000 per year. That was a big chunk of its value. Thus, on the biggest or most valuable piece of her duties, Ms. Stevens did not perform particularly well.
113I accept that Ms. Stevens signed tax returns, distributed T-Forms, and paid for university expenses. These tasks took time. At either $1,000 per day or $200 per hour, she was very well-compensated for time spent on such matters.
Fair and Reasonable Fees
114This is not a case where applying the guidelines makes sense. The guideline fees for the bulk of the assets of the trust went to the professionals retained to manage the investment portfolio and to supervise the professional managers.
115The daily management of the condominium was also paid for through local managers. The sale effort, that was overseen by Ms. Stevens for the trustees, was not carried efficiently or successfully by any objective standard.
116This is not to say that Ms. Stevens did nothing or that she should not be paid proper, fair, and reasonable fees for what she did. She expended many hours preparing for meetings, sitting at meetings discussing reports prepared by others, reading emails from the Barbadian property manager, and sporadically tending to sale efforts. She also performed numerous clerical steps to move money from account to account when she was told it was necessary to do so – whether to top-up the Barbadian property manger’s account or to pay university tuition for example. More recently, she retained professionals and liaised with beneficiaries to see to the winding-up of the trust until she resigned precipitously at the end of last year.
117Ms. Stevens does not claim that she has gone unpaid for any hour she has worked for the trust. In fact, she acknowledged that she had been paid by the trust for some time that she worked for other Fitzhenry entities. She has been paid at a rate which she sought and agreed to take. For the bulk of that time, she did as she was told by Mr. Fitzhenry. She does not point to any real exercise of independent judgment of note.
118Although initially compensated at $125 per hour, from 2013 onward Ms. Stevens has received $200 per hour for every hour that she has billed. She has never been required to produce transparent dockets. She has never been held accountable to report on or to justify her fee based on anyone reviewing the substance of her time claimed. She never sought the beneficiaries’ consent or the court’s assessment of the appropriateness of her fees.
119The trust has paid Ms. Stevens a substantial amount of money without the normal or any real oversight.
120The applicants submit that she has been paid more than their hypothetical guidelines calculation would yield. But they are not asking Ms. Stevens to take a discount on what she agreed to charge for her time.
121In all, this was heavily delegated trust administration. The trust has incurred substantial fees for every piece of management otherwise assigned to the trustees. Ms. Stevens has been paid for her time without any accountability. I cannot see how it is fair or reasonable for Ms. Stevens to be paid anything more for her services.
Costs
122The applicants seek $66,472 as partial indemnity for their costs of this proceeding. Ms. Stevens does not object to this outcome following the event. I have reviewed the Bill of Costs filed by the applicants. The hours and rates claimed are reasonable and are well within market.
Order
123As requested in para. 1 of the notice for application, the court declares that Linda Stevens has already received appropriate compensation for her role acting as trustee of the Fitzhenry (1994) Family Trust and orders Ms. Stevens to pay costs to the applicants in the amount of $66,472 within thirty (30) days.
F.L. Myers J.
Released: October 11, 2023
1Among the list of trustees are two former partners of the firm Osler, Hoskin & Harcourt LLP. I disclosed to the parties that I was a partner of that firm until 2003. I have no recollection of ever hearing of the trust during my tenure at the firm. Ms. Stevens became a trustee in 2008. That was well after I had left the firm. But partners Mara Nickerson and Jack Petch do figure in some of the events involving Ms. Stevens and they were my partners many years before the acts in issue. I do not see any conflict of interest in my hearing this case. Counsel for all parties consented to me hearing the application.
2I note that the agreements would not govern just because they are agreements. As I said above, the existence of a fee agreement is not necessarily determinative. But here, agreements entered into with beneficiaries’ consent would govern because the trust deed says so and s. 6 (5) gives the terms of the deed priority.