COURT FILE AND PROCEEDING
COURT FILE NO.: 02-30/07
DATE: 20120110
SUPERIOR COURT OF JUSTICE – ONTARIO
RE: IN THE MATTER OF THE ESTATE OF GEORGE VANO, DECEASED - PASSING OF ACCOUNTS FOR THE PERIOD JANUARY 15, 1998 TO JANUARY 21, 2007
BEFORE: Low J.
COUNSEL:
Danielle Joel an d Ewa Krajewska , for the Applicant, BMO Trust, Estate Trustee During Litigation of the Estate of George Vano
Steven Vano, in person
HEARD: October 12, 2011
COSTS ENDORSEMENT
Overview
1The Estate Trustee during Litigation (ETDL) seeks costs on the passing of accounts.
2The amount sought is $374,020.67, comprising $332,609 in fees, plus GST and HST thereon, and disbursements of $6,785.68. This is said to be $83,000 less than the actual fees and disbursements incurred of $415,490.49 by the ETDL, a voluntary reduction having been taken to recognize that some of the work done by legal counsel could properly be characterized as the work of an administrator and ought therefore to be disallowed as legal fees. The costs sought are, however, on a full indemnity scale.
Background and Procedural History
3The passing of accounts proceeding has a long and tortured history. There have been attendances before Justices Cullity, Klowak, Siegel, Brown and Archibald, and in some cases, multiple attendances. I summarized the history in my disposition of the passing of accounts, but as a significant portion of it has a bearing on costs, I will re-summarize it here.
4In April 2007 the ETDL served and filed its application to pass accounts returnable on July 29, 2007.
5On June 29, 2007, Mr. Vano, the objector, then represented by a solicitor, served a notice of objection. The notice was served out of time. It was also too close to the hearing date to allow for mandatory mediation to be completed and therefore the return date of July 29, 2007 was lost. On July 25, 2007, the ETDL delivered its reply to Notice of Objections with two volumes of supporting material.
6On July 29, 2007, the original return date of the passing of accounts, Cullity J. made an order, on consent, setting a mediation date and deadlines for delivery of materials. The passing of accounts was adjourned to September 12, 2007.
7On August 27, 2007, the day before the mediation was to take place, the objector served a request for increased costs. Paragraph 1 of the document reads as follows:
I, Steven Vano, have retained Shael B. Eisen, as my solicitor to review the estate accounts. I have no objection to the estate accounts and the claim for compensation by the estate trustee.
8The objector did not, however, serve and file a notice of withdrawal of objections. On September 10, 2007, Mr. Eisen, solicitor for the objector, obtained an order removing himself from the record.
9The ETDL sought to have the passing of accounts proceed as scheduled on September 12, 2007. The matter came on before Klowak J.. By this time, however, the objector had resiled from his statement that he had no objection and no notice of withdrawal of objection had been served and filed. The court was not satisfied that the matter could proceed given the lack of particulars in the Notice of Objection and it was ordered that the objector particularize his objections. The application was adjourned to November 16, 2007, peremptory to Mr. Vano.
10On October 10, 2007, the objector delivered a factum. It ran to 175 paragraphs and comprised, not particularized objections with a statement of the adjustment sought but rather an amalgam of allegations, argument and editorial comment. Many of the allegations were raised for the first time.
11On November 16, 2007, the parties appeared on the return of the passing of accounts. Cullity J. determined that the proceeding could not be completed in one day and rather than commence the hearing, ordered the ETDL to provide a response to the objections raised in the objector’s factum with Mr. Vano to deliver a reply, if any, by January 31, 2008. The objector was also required to provide the ETDL with a list of specific categories of documents that he wished to inspect by November 30, 2007 and a further case conference was scheduled for December 10, 2007.
12Case conferences were held before Cullity J. on December 10, 2007 and February 13, 2008. Notwithstanding these attendances, the matter was not ready for hearing. It was determined that the matter should be case managed and Siegel J. was appointed to do so.
13The ETDL made vouchers available for inspection by the objector who attended on five occasions in March and April 2008 and once in October 2009.
14On April 1, 2008, the ETDL delivered a comprehensive response to the objector’s factum together with documentary support.
15At the case conference before Siegel J. on April 23, 2008, no order was made requiring further steps to be taken with respect to the passing of accounts.
16On an attendance before Archibald J. on July 23, 2009, an attendance concerning another matter in the administration, an order was made that the passing of accounts proceed for a 4 day hearing on December 7, 2009 and that the parties attend before Brown J. for a case conference to narrow and focus the objections to the accounts.
17On September 16, 2009, the case conference was held before Brown J. who stated in his endorsement: “No concise summary of the objections exists which would assist the hearing judge. Further work must be performed by the parties to prepare this matter properly for a hearing given the large volume of objections.” Brown J. ordered the objector to particularize his objections and the ETDL to respond thereto in the form prescribed by him, an “Issues List”.
18Brown J. went on in the same endorsement to state, “This document will be provided to the judge hearing the matter so that he or she can understand the precise issues raised by the Objector and the adjustments to the accounts the Objector seeks in respect of each issue.” A further case conference was set for November 26, 2009.
19On November 26, 2009 Brown J. made this endorsement:
1I have vacated the scheduled hearing date of December 7, 2009 (four days) for this contested passing of accounts because Mr. Vano did not comply with my endorsement of September 16, 2009. As a result, this application is not ready for hearing.
2Specifically, I had directed that the parties prepare a detailed Joint Issues List (see Schedule “A”). Column C of that Issues List required Mr. Vano to identify each reduction to the accounts which he sought and Column D required him to provide his reasons for each such objection. Instead of providing such details, Mr. Vano inserted general language, such as “should be lower”, etc. that is inadequate.
3A notice of objection to the passing of accounts must specify with precision each item in the account with which the objector takes issue, the reason for the objection, and the adjustment the objector asks the court to make to the accounts. Mr. Vano’s notice of objections was vague and general. Over the past two years several judges have attempted to compel him to identify his objections to the accounts with more precision. The factum Mr. Vano produced in response to one such order was lengthy, unfocused and, more importantly, did not identify the specific reductions sought by Mr. Vano. My initial effort to have Mr. Vano provide the required details of his objections throughout the completion of the Issues List has proved unsuccessful.
4I will give Mr. Vano one more chance to that that which the Rules of Civil Procedure require him to do – to give notice to the applicant trustee of the specifics of each objection made to the accounts and the adjustments he seeks to the filed accounts. Accordingly, Mr. Vano is to serve counsel for the Estate Trustee During Litigation, no later than February 26, 2010, with a revised Issues List with Columns C and D properly completed to identify each reduction sought to the accounts and the reason for each reduction. … and finally give the reasons for the reduction sought in Column D. Only by completing the Issues List in that way will the judge hearing the contested application understand what relief Mr. Vano will be seeking at the hearing.
6The applicant is entitled to have its application heard. The only delay at this point is the inability of Mr. Vano to articulate his objections. If he cannot state his objections with the precision required by the Rules of Civil Procedure , I will have to consider further directions regarding the hearing of the application, including whether Mr. Vano’s notice of objection should be allowed to stand.
20On March 3, 2010, the objector delivered a new issues list. In it, the objector added new objections and abandoned other objections that had appeared on the preceding issues list.
21Although Brown J. gave clear instructions as to the manner in which the objector was to articulate his objections, Mr. Vano did not comply in the majority of cases.
22Members of the court have been extraordinarily indulgent with Mr. Vano in giving him one opportunity after another to comply with the Rules and with the orders and directions of the court. He did not do so. During the hearing of the passing of accounts, Mr. Vano was directed on numerous occasions to focus and not to raise new issues. Nevertheless, he was either unable or unwilling to focus and persisted in expressing personal opinions and making allegations with the result that time was unproductively consumed.
23The hearing took place over the course of six days instead of the scheduled four, with Mr. Vano repeatedly alleging that he had not been given access to vouchers, was seeing material for the first time, and pleading a state of unreadiness caused by the ETDL. Mr. Vano had in excess of three years to make himself ready, and his allegations of being denied access to documents was unsupportable.
Success on the Passing of Accounts
24The ETDL was substantially successful on the passing of accounts. Mr. Vano has pointed out that by the end of the proceeding, there had been several revisions to the accounts, an indication that the accounts were not initially correct. There were indeed three iterations of the accounts, but the amendments were not demonstrably the result of Mr. Vano’s objections. With the exception of the two areas in which I found that the ETDL had made unwarranted expenditures, the incurring of overdraft interest and costs of car storage, and less than a handful of small errors, the ETDL was successful in satisfying the court that the estate had been reasonably administered and the objector was not able to substantiate the vast majority of his objections and allegations..
25Mr. Vano submits that the costs claimed are grossly excessive given the assets and that a large portion of the estate has already been taken in fees and expenses while only a small proportion was distributed to date to beneficiaries.
Legal Principles on Costs
26It is important not to conflate an appropriate amount to be approved for fees for administration of the estate with an appropriate amount to be fixed for legal costs on the contested passing of accounts. In fixing costs of the proceeding, the court is to have regard to the factors in Rule 57.01 of the Rules of Civil Procedure , R.R.O. 1990, Reg. 194 and in this case, the provisions of Rule 57.01 (c), (e), (f), and (g) are of particular relevance.
27Insofar as the principle of indemnity is concerned, I am persuaded that, subject to my determination as to what costs were reasonably incurred, those costs are payable on a full indemnity basis. In this, I have been referred to and rely on Josephs Estate, Re (1993), 14 O.R. (3d) 628; 50 E.T.R. 216 wherein Borins J. stated at para 7:
The passing, or audit by the court, of an executor’s accounts is a significant part of the administration of an estate. Central to an audit is the determination by the court that the executor has properly performed its duties in regard to the trust fund created by the testator. Generally speaking, the executor and any beneficiary properly attending and represented by a lawyer on the passing of accounts is awarded full compensation for his or her legal expenses from the trust fund, being the estate of the testator, administered by the executor. The audit of the executor’s accounts is part of the administration of an estate and the legal expenses of the administrator, or executor, or an estate and of those beneficiaries properly attending on the audit are considered as expenses in administering the estate and are a first charge upon it: Dale, Greenwood, Williams and Stringer, Daniell’s Chancery Practice , (7 th ed., 1901) 998-9: Re Beddoe , [1893] 1 Ch. 547 (C.A.) ; Re Dingman (1915), 35 O.L.R. 51 (H.C.) . The executor and beneficiaries, being named in the testator’s will, should not be penalized for having been named in the will when they incur a lawyer’s fee in the administration of the testator’s estate. This is to be contrasted with contentious, or adversarial, legal proceedings in which the general rule is that the successful party is awarded its costs, on the lower party and party scale, to be paid by the unsuccessful party. On an audit, because there is no losing party to pay the costs, each party is responsible to pay his or her own legal expenses which are ordered to be paid from the estate, as the trust fund created by the testator represents the only source of money to pay the costs. It is the well-settled principle that full indemnity of the trustee’s proper costs, charges and expenses in administering an estate is the price to be paid by the cestuis que trust for the services of the trustee and that the trustee must not be required to pay them personally: Turner v. Hancock (1882), 20 Ch.D. 303 (C.A.) .…
28I have above referred to the relative degrees of success of the parties on the issues raised in the passing of accounts.
29The proceeding ought to have been very straightforward. The only significant arguments that met with any success were that the ETDL should not have incurred overdraft interest while there were assets available to be liquidated with leave of the court and that it was not reasonable to have stored a depreciating asset for month after month. These arguments could and should have been made concisely.
30Had Mr. Vano been focused, had he abided by the Rules and by the directions of the court, the matter could have been disposed of within one day or two. The fact that the hearing itself stretched to six days in total (some of which were not full days) was attributable entirely to the unwillingness or inability of Mr. Vano to comply with directions of the court, to focus, to be prepared, and to refrain from repetitious editorializing both in his testimony and in submissions. Mr. Vano made bald allegations that were unsubstantiated and frequently irrelevant. A significant amount of time was consumed by Mr. Vano’s allegation that some 116 vouchers were missing. This was unfounded with the exception of four instances, all of which were satisfactorily explained.
31As well, Mr. Vano called evidence that was irrelevant or of no assistance. For example, he called the evidence of Ms. Lui, his secretary. Her evidence was irrelevant. Mr. Vano called the opinion evidence of Mr. Edwards. There was no compliance with the rules concerning expert evidence, but, more to the point, the evidence could be given no weight as there was no adequate factual basis for the opinions proffered.
32Prior to the hearing, the entire procedure was prolonged and delayed over and over again by Mr. Vano’s failure to particularize his objections, by his delivery of four sets of objections over time which made for shifting and moving sets of issues to be met by the ETDL, by the prolix 175 paragraph factum that he delivered which did not particularize the objections that he had made but which rather made new allegations, arguments and comments. There were some nine pre-hearing attendances. None of them could properly be laid at the feet of the ETDL. All were a result of the failure of Mr. Vano to comply with his procedural obligations and the directions of the court. These factors would explain the fact that the ETDL is seeking an amount significantly higher in costs than a six day passing would ordinarily attract.
33The parties have advised that there was an offer to settle made by the ETDL on October 19, 2009. The offer has been filed as part of the ETDL’s costs submissions. It is an offer to settle by reducing the compensation payable to the ETDL by $85,000 but it entails a number of other significant elements including being excused from passing its accounts for the period from February 1, 2007 forward for which period the ETDL would waive compensation and the execution of a release by all the beneficiaries in favour of the ETDL. Mr. Vano contends that he accepted the offer. The record and the subsequent events do not bear this out. Clearly, had there been an acceptance as contemplated in the offer, there would not have been a six day hearing in December of 2010.
34While the offer has no practical effect as far as the consequences of Rule 49.10 are concerned, it does shed some light on the conduct of the parties and their willingness to act reasonably. In my view, the ETDL acted reasonably in making the offer and the offer ought reasonably to have been accepted, given the result after the hearing.
Analysis of Costs Claimed
35All that being said, I am nevertheless of the view that the amount claimed for costs is excessive. The allegations and arguments advanced by the objector were, in most cases, patently unsupported by evidence and the issues raised were ill defined but not complex either factually or legally.
36The principle of indemnity is not a carte blanche for costs to be drawn from the estate corpus on a passing of accounts any more than it would be in a typical adversarial proceeding where there is a loser and a winner. The court must in every case address the question of the amount in costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed. Here, the fees claimed are $332,609.
37Solicitors for the ETDL, a large law firm, deployed three different lawyers, a student, two law clerks and two court filing clerks in this matter. Hourly rates ranged from $160 per hour for a court filing clerk to $500 per hour for the lead counsel, called to the bar in 1999.
38Delegation can, in some cases, result in economies, but does not always do so. It can also result in duplication, inefficiencies, and time spent communicating that would be unnecessary in the absence of delegation. I am not satisfied that it was efficient or economical in this case to have had two different clerks and three solicitors working this file. The fee items detailed in the costs outline do not suggest that such division was reasonably necessary or cost efficient. Although it is commendable that law firms train junior lawyers and while clients may often choose to have the level of service that multiple lawyers and clerks provides, the cost of so doing should not be laid at the feet either of losing parties, or, in this case, at the expense of the estate.
Conclusion
39In my view, a reasonable amount in costs for this proceeding, even taking into account its tortured history and the conduct of Mr. Vano whose positions made for a far lengthier hearing than was truly warranted, is $220,000 in fees. To this should be added HST.The disbursements are not challenged and are allowed.
Low J.
Date: January 10, 2012
