ONTARIO
SUPERIOR COURT OF JUSTICE
ESTATES LIST
COURT FILE NO.: 05-CV-285029-PD3; Langston et al. v. Landen;
ESTATE COUR FILE NO.: 05-002/06; Estate of Paul Penna
DATE: 20130620
IN THE ESTATE OF PAUL PENNA, deceased
AND IN THE PASSING OF THE ESTATE ACCOUNTS by the Estate Trustee During Litigation for the period April 7, 2006 to August 31, 2012.
BETWEEN:
CHARLES LANGSTON, ERNIE SHERIFF, JAKMIN INVESTMENTS LTD., TZVI MOND, EVA CARR, SOAD CHARITABLE FOUNDATION, BIKUR CHOLIM JEWISH VOLUNTEER SERVICES, SHE’ARIM, YESODEI CHOLIM, ZAREINU, QUEENSWAY GENERAL HOSPITAL, TORONTO GENERAL HOSPITAL, THE TORONTO HUMANE SOCIETY, ALZHEIMER SOCIETY OF CANADA, CANADIAN FRIENDS OF BIRKAT MOSHE, CAPUCHIN OUTREACH FOR THE POOR, PARKDALE, THE PARKINSON FOUNDATION OF CANADA, THE SCOTT MISSION, THE ESTATE OF LORRAINE PENNA, THE ESTATE OF MIKEY DRUTZ and THE ESTATE OF MURRAY OSHEROFF,
Plaintiffs
– and –
BARRY LANDEN, PAULINE LANDEN, and 1435031 ONTARIO LIMITED,
Defendants
Matthew P. Sammon, Counsel for Ronald Rutman, Estate Trustee During Litigation
Sean Cumming, Counsel for Fred Tayar and Associates
Anthony Frost, Counsel for The Scott Mission
Jennifer Stebbing, Counsel for Toronto Western and General Hospital
HEARD: APRIL 23, 2013, with further Written Submissions received on
MAY 15, 2013
REASONS: GREER J.
[1] Counsel appeared before me on the Passing of the Accounts of Ronald Rutman, the Estate Trustee During Litigation (“the Trustee”), who was first appointed as a Co-Trustee on April 7, 2006. He subsequently became the sole Trustee on January 8, 2007. The Accounts presented cover the period from April 7, 2006 to August 31, 2012. There were many charities involved which were all served. One envelope was returned to the Trustee, who found the new address of the charity and the documents were forwarded to it. The Scott Mission filed an Objection so that the Passing became contested. None of the other charities objected. The Toronto Western & General Hospital Foundation appeared but made no objections.
[2] The Compensation being claimed by the Trustee on the Statement of Compensation in the Accounts is $272,109.97 less fees paid on account to the Trustee of $100,009.97, less fees paid in relation to Jakmin Investments Limited (a company wholly- owned by the Estate of Paul Penna), less $4755 paid to the Accountant who prepared the Accounts, less $5,250 being accounting fees accrued to August 31, 2012. The net Compensation being claimed is $162,315.60.
[3] The Trustee filed a Litigation Chronology Brief to show the complexities, which had to be dealt with by him. There are 21 entries in the Index to the Brief. The Brief includes copies of all my Endorsements, Orders, Notices of Motion, Notice of Examination, the LECG Forensic Review of the Estate of Paul Penna and decisions of the Court of Appeal over the 7 years of his administration of the Estate during the litigation. It was a formidable task given the amount of litigation involved. It was case-managed by me over all those years.
The Notice of Objection
[4] The parties represented at the hearing had no complaints about the figures in the Accounts which represent Capital Receipts and Capital Disbursements, Revenue Receipts and Revenue Disbursements. The Scott Mission filed a Notice of Objection to the Accounts. It contains two main Objections. One relates to the Estate’s sale of the house, where compensation was taken on certain book entries. The second relates to the taking of 2 ½ % on single large capital receipts and disbursements. Two of the large entries were the sale of the house and the $1,000,000 payment to the Estate of Lorraine Penna in the settlement of its claim against the Estate.
[5] An issue was raised by me and by The Scott Mission respecting the Accounting fees and the way the Accounting fees are shown as Capital Disbursements. The Trustee is a Chartered Accountant by profession. He is with the firm of Zeifmans LLP. That firm performed certain executor’s functions for the Trustee, whereby the Trustee’s fees are to be reduced accordingly. Such reductions are shown in the Statement of Compensation but they are lumped together. It is impossible to see what items should form part of that reduction. The Trustee agreed to provide the vouchers for the accounting bills submitted by his firm and to explain the deductions.
[6] All of the beneficiaries are aware that the Trustee is an Accountant. He was an excellent appointment in that regard, as he diligently pursued the tracing of assets into the hands of Barry Landen, former Estate Trustee, and his wife, which were fraudulently used by them and family members. He untangled the corporate web of Jakmin Investments Ltd. (“Jakmin”). He traced other assets that had disappeared during the administration of the Estate by Landen. He traced Landen’s assets frozen by the original Mareva Injunction, and brought on the Motion for Contempt when Landen stripped the assets out of all the frozen account. As the Trustee’s counsel succinctly put it, “This was not just a care-taking position.”
[7] The Passing of Accounts was adjourned to allow the Trustee to produce the invoices issued by Zeifmans to the Estate and to Jakmin. On May 15, 2013, Counsel for the Trustee wrote to the Court and provided a further description and explanation and a Brief of Accounting Documents, with copies sent to all counsel present on the Motion. In that letter, Counsel informs the Court and other Counsel that the Trustee’s time was recorded as “other” in the invoices. It included “…time required to review records at the offices of the forensic auditors”, and an “… over-sight of the accounting and tax filings for Jakmin and developing filing positions on the monies which the Estate Trustee was not able to trace”, and “…Court appearances and review of court and filing documentation with Tayar & Associates, Mr. Rabinowitz, and counsel;” and “…time spent towards an HST audit and other CRA enquiries.”
[8] Jakmin, although part of the general assets of the Estate, had to be dealt with as a separate entity, given that no Corporate Tax Returns had been filed for the years ending December 31, 2005-2008 and for the calendar year 2009. Many of the Jakmin assets were missing and Landen had treated it as a cash-cow for his own personal use. Reconstruction took place in order to file tax returns for all those years. That, in itself, was an accounting nightmare. Cost bases had to try to be determined for the securities left and which had to be disposed of by the Trustee.
[9] Zeifmans used an accounting programme to assist with the preparation of the Accounts, but in some instances, time spent was missing. The Trustee is now aware that there is case law that suggests that all costs for the preparation of accounts should be deducted from the Trustee’s compensation. See: Knight Estate, Re. (1999), 30 E.T.R. (2d) 225 (Ont. S.C.J.).
[10] The Counsel has set out in his letter, what amounts were missed in the first calculation and he has pointed out that there should be a deduction of $9,644.73 from the Trustee’s Compensation accordingly. Secondly, the Account Trust programme, when deducting amounts already paid to the Trustee, only deducted the net amount and did not include in the amount the applicable GST or HST. Those amounts totalled $6,650.78, which would result in a further deduction from the compensation of $166.27. The same principles apply to the Jakmin calculations, where $1,063.97 is to be deducted, causing the sum of $26.59 to be deducted from the overall Compensation. These two amounts total $192.86. The Trustee agrees that this amount plus the $9,644.73, total $9,837.39 and that this amount should be deducted from the total Compensation, leaving a balance owing of $152,478.01.
[11] The Accounts show that as of August 31, 2012, the Estate held Unrealized Original Assets valued at $21,606.15. These include two different sets of shares held in two brokerage accounts in Jakmin. The Trustee anticipates that at some point he may be able to realize on them but there appears to be no market at the moment.
[12] The Trustee also holds as Estate investments, including a large GIC in Jakmin, assets valued at $434,297.76 being the book value, with a fair market value of $433,794.96.
[13] While I agree with counsel for The Scott Mission that in some cases, a Court might reduce the compensation on the 2 large realizations of the house and the payment to the Estate of Lorraine Penna, in my view, the complications involved in the administration of this Estate were as onerous as it gets. The number of Motions, the Appeals and the Contempt Motion within the general estate litigation were highly unusual. In addition, the Trustee had to wind-up a company as an estate asset, which was daunting, given the missing tax returns, the missing assets and the taking of monies from the company by Landen.
[14] In the administration of Estates, Trustees can be awarded Special Fees for extra complexities in the bringing the administration to a conclusion and the wind-up of the estate. In the circumstances of this case, I am not prepared to reduce the compensation from the amount now being asked for. In my view, the Trustee is entitled to a Special Fee of $10,000 in addition to the amount requested, for all the extra work, which had to be done , in order to wind-up Jakmin. An Order shall go that the Trustee be paid the sum of $162,478.01 as the balance of the compensation to him for the administration of the Estate during the period in question, which in my view is fair and reasonable in these circumstances.
The further legal fees claimed by Fred Tayar & Associates
[15] Fred Tayar (“Tayar”) was Counsel to nine of the charities as residuary beneficiaries, which were originally served with the legal papers commencing the litigation. None of these charities had ever been informed that each was a residuary beneficiary on the death of the life tenant, Lorraine Penna. Tayar acted on their behalf during the early years of the litigation. On September 3, 2008, Tayar set down a Motion asking the Court for a Charging Order to protect his fees. His clients, the charities, were requested to pay his account and were unable to do so. He prepared a Chart with a breakdown of the various matters attended to by him. The total of all these fees inclusive of disbursements and GST is $297,055.99. Tayar had been paid a retainer of $38,000 and had been paid by my Order of July 7, 2006, an amount of $30,448.35 for disbursements. That left a balance of $228,607.64 unpaid.
[16] In my Order of December 1, 2008, I found in para. 12 that Tayar had been paid an additional amount of $15,000 by Pauline Landen, as per the Costs awarded by the Court of Appeal to Tayar, as one of the counsel on the Appeal. That left a balance of $213,607.64 as a net amount claimed by Tayar. During the period in question, Tayar’s billing rate varied from $375 to $460 per hour. The Charging Order Motion was opposed by counsel for the Lorraine Penna Estate, saying he should not be given a “leg-up” on all other counsel and the rights of their clients. It said that the charities had no role to play in the Appeal and that Tayar’s presence was therefore unnecessary.
[17] The Charging Order was also opposed by Ernie Sheriff, a former Trustee, who had an interest in seeing that original legacies in the Will of Paul Penna which had not been paid and should take precedence over this. In para.39 I held that I could not fix the amount of a Charging Order until all contingencies in the estate administration were settled. I then ordered that the Estate pay Tayar an amount of $100,000 on account of those fees, with the balance to be determined once the Estate was fully realized. I said:
I am cognizant that Tayar is a small firm, carrying these Costs for the charities for over two years, and am satisfied that in any settlement of this matter, it would receive at least that amount as fees. In the alternative, it is reasonable to expect that the charities, represented by that firm, would receive at least that amount as their part of the residue.
With the payment to Tayar of $100,000, this leaves a balance of $113,607.64, which he is now asking the Court to order paid to him.
[18] Tayar says that he played a predominant role among the counsel involved in the first two years of the litigation. It was Tayar who proposed, on behalf of the nine charities, that Ronald Rutman be appointed, together with the Scotia Trust, as the original Estate Trustees during Litigation. Within the first year, Ronald Rutman became the sole Estate Trustee During Litigation. There were a number of Motions and steps taken during the period in which Tayar represented the nine charities. For example, Tayar at Tab B of his Motion Record sets out these steps. The first is responding to the Motion brought on by the other Estate Trustees against Barry Landen, the third Trustee. He says this account was $52,667.50. Having examined the time dockets relating to this account, I have reduced it by $3,730 to $48,937.50, given what I see were excess hours spent in days that were docketed at 7 or 8 hours or so.
[19] Another, shown as #13 in a list of 14, is called “General Estate Matters” at $31,801.50, which Tayar lists as correspondence, meetings and receiving instructions and all incidental matters relating to “the beneficiaries’ interest in the Estate including this Motion.” It does not, however cover any Motion in the description. This, in my view is not a proper account. Those type of entries should be subsumed into all the other amounts as shown in TAB B calculations. I disallow this amount in its entirety.
[20] The last one is #14, being Pauline Landen’s Appeal, which he says is $24,133. He did, however, receive Costs of $15,000, awarded by the Court of Appeal, which Pauline Landen paid. This amount is therefore reduced by $9,133.
[21] These three amounts are $3,730 plus $31,801.50 plus $9,133, for a total of $44,664.50 reduction. This reduction is made from the original amount of $297,055.99 and then the other amounts already received on account are deducted for a final balance of $68,943.09 owing to Tayar’s law firm. To this I add the sum of $2,068.29 per year, being the Courts of Justice Act average postjudgment interest rate of 3% from 2009 to 2012. My Order was made in December 1, 2008, so I have calculated interest for 1 month in 2008, 12 months for each of 2009-2012 and 6 months in 2013. The total interest awarded is $9,479.61.
[22] An Order shall go awarding Fred Tayar and Associates the sum of $78,422.70 for the balance of legal fees awarded to the firm in this matter.
Costs on the Passing of Accounts
[23] The Trustee shall pay the following Costs from the remaining capital of the Estate:
To Lenczner Slaght Royce Smith Griffin LLP, the sum of $32,337.05 plus HST
To Mills & Mills, LLP, the sum of $5,910 plus HST
To Sean Cummings (who was to forward a Bill of Costs to me but did not), the sum of $5,910 plus HST, being the same amount as asked for by the Objector. In the event his Bill of Costs is greater than this, he shall send me the Bill of Costs plus his time dockets for me to review within 20 days of this Order.
To Jennifer Stebbing, on behalf of the Toronto Western and General Hospital Foundation, the sum of $3,750 plus HST, being half the amount the solicitor of record would receive on an uncontested basis.
Judgment
[24] Counsel for the Trustee shall forward to me for my signature, two copies a revised Judgment plus a copy approved by all counsel.
Greer J.
Released: June 20, 2013
COURT FILE NO.: 05-CV-285029-PD3; Langston et al. v. Landen;
ESTATE COUR FILE NO.: 05-002/06; Estate of Paul Penna
DATE: 20130620
ONTARIO
SUPERIOR COURT OF JUSTICE
ESTATES LIST
IN THE ESTATE OF PAUL PENNA, deceased
AND IN THE PASSING OF THE ESTATE ACCOUNTS by the Estate Trustee During Litigation for the period April 7, 2006 to August 31, 2012.
BETWEEN:
CHARLES LANGSTON, ERNIE SHERIFF, JAKMIN INVESTMENTS LTD., TZVI MOND, EVA CARR, SOAD CHARITABLE FOUNDATION, BIKUR CHOLIM JEWISH VOLUNTEER SERVICES, SHE’ARIM, YESODEI CHOLIM, ZAREINU, QUEENSWAY GENERAL HOSPITAL, TORONTO GENERAL HOSPITAL, THE TORONTO HUMANE SOCIETY, ALZHEIMER SOCIETY OF CANADA, CANADIAN FRIENDS OF BIRKAT MOSHE, CAPUCHIN OUTREACH FOR THE POOR, PARKDALE, THE PARKINSON FOUNDATION OF CANADA, THE SCOTT MISSION, THE ESTATE OF LORRAINE PENNA, THE ESTATE OF MIKEY DRUTZ and THE ESTATE OF MURRAY OSHEROFF,
Plaintiffs
– and –
BARRY LANDEN, PAULINE LANDEN, and 1435031 ONTARIO LIMITED,
Defendants
REASONS
Greer J.
Released: June 20, 2013