ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: CV-12-2546-ES
DATE: 2014-08-11
B E T W E E N:
MELISSA GEORGANES
James S.G. Macdonald, for the Applicant
Applicant
- and -
JUDY BLUDD in her capacity as executrix of THE ESTATE OF TIMOTHY BLUDD and BRIAN BLUDD in his capacity as estate trustee of THE ESTATE OF TERRENCE MAURICE BLUDD
Self-represented
Respondents
HEARD: October 1 and 2, 2013,
at Brampton, Ontario
Price J.
Reasons For Order
NATURE OF PROCEEDING
[1] When spouses have a serious marital dispute and do not plan their estates during their lifetimes, they risk estate litigation among their children following their deaths. That is what occurred in the present case. After Terrence and Marina Bludd died, their daughter, Tara Bludd, sued her brothers, Timothy and Brian Bludd, who were executors of their father’s estate at different times, and Melissa, who is the daughter of their deceased brother, Brady Budd, to resolve who owned the house that their parents occupied during their lifetimes. Melissa Georganes now sues her uncle, Brian Bludd, and the estate of her other uncle, Timothy Bludd, over legal fees they incurred in their litigation with Tara. Melissa says that Brian and Timothy improperly caused their father’s estate to pay their fees, which they incurred to protect their own interests in their father’s estate, and thereby lessened her inheritance.
BACKGROUND FACTS
[2] Melissa Georganes (“Ms. Georganes”), became entitled to her father, Brady Bludd’s, 20% interest in the estate of her grandfather, Terrence Bludd, who died in 2001. That share increased to 25% when Michael Kim Bludd, the fifth of Terrence and Marina Bludd’s five children, waived his entitlement to an interest in his father’s estate.
[3] Tara Bludd sued Timothy and Brian Bludd over which of them owned a home at 10 John Street in Georgetown Ontario, which their parents had occupied during their lifetimes (“the home”). Tara claimed that their parents had transferred their home to Marina Bludd alone thirty years earlier, during marital difficulties between them, and that Marina had later bequeathed the home to her.
[4] Timothy and Brian Bludd, as well as Ms. Georganes, claimed that Terrence and Marina’s transfer of the home to Marina was defective, owing to the lack of consideration for the transfer and an erroneous legal description of the property contained in the deed. They argued that their parents still owned the home in joint tenancy at the time of Marina’s death, with the result that it passed to Terrence Bludd by right of survivorship. Timothy and Brian Bludd, and Ms. Georganes, as Brady Bludd’s surviving daughter, each claimed a 20% interest in the home when it vested in the beneficiaries of Terrence Bludd’s estate three years after his death, pursuant to s. 9(1) of the Estates Administration Act.
[5] After Tara Bludd’s action against her brothers and Melissa Georganes was settled, Melissa, who was separately represented and paid her own legal fees in the litigation, learned that Timothy and Brian Bludd, while acting as trustees for their father’s estate, had caused the estate to pay legal fees of over $55,000.00 that they had incurred to the law firm that had also represented the estate, and that, additionally, Brian Bludd had caused the estate to pay compensation of $11,300 to him as trustee, without prior approval of the court or consent of the other beneficiaries.
ISSUES
[6] The court must decide:
(a) Whether Timothy and Brian Bludd, while acting as trustees for their father’s estate, and without prior approval of the court or consent of the other beneficiaries, were entitled to have their legal fees in the litigation between Tara Bludd, themselves, their father’s estate, and Ms. Georganes, paid from the estate, or whether they must reimburse the estate for those fees, or Ms. Georganes, for her 25% share of the fees they charged to the estate.
(b) Whether Brian Bludd, while acting as trustee for his father’s estate, was entitled to be paid compensation as trustee by the estate, without prior approval of the court or consent of the other beneficiaries.
PARTIES’ POSITIONS
[7] Ms. Georganes argues that the legal fees that the estate paid to the lawyer who represented both the estate and Timothy and Brian Bludd, as beneficiaries, were incurred entirely to protect the interests that Timothy and Brian, as beneficiaries of their parents’ estate, claimed to the home, as the home had, by then, vested in the beneficiaries, and not to advance the interests of the estate. She therefore submits that they should be required to reimburse the estate for the legal fees that the estate paid on their behalf.
[8] Ms. Georganes further argues that Brian Bludd did not perform any duties of value to the estate, and therefore was not entitled to payment of compensation by the estate. She submits that Mr. Bludd managed the estate improperly, by failing to respond to her lawyer’s requests for an accounting of the estate’s assets and expenditures, and by causing the estate to make payments that benefitted him personally, without first seeking the approval of the court or the consent of the other beneficiaries.
[9] Mr. Bludd argues that he incurred the legal fees in his capacity as estate trustee, and that they were properly paid by the estate. He further argues that he was successful, within a short time after being named estate trustee, in bringing the litigation over the home to a successful conclusion, and is therefore entitled to compensation from the estate.
ANALYSIS AND EVIDENCE
[10] Terrence Bludd’s estate had no obligation to pay the legal fees that Timothy or Brian Bludd incurred to protect their own personal interests in litigation.[^1] In the proceeding brought by Tara Bludd, they were acting to protect their own personal interests in the home, which vested in the beneficiaries on March 24, 2004, three years after Terrence Bludd’s death, pursuant to s. 9(1) of the Estates Administration Act.
[11] Although Timothy and Brian Bludd were named as parties to the litigation over the home, both in their capacity as estate trustees and in their personal capacities, it was their personal interests, and not the interests of the estate, which were involved in the litigation, since the home had already vested in the beneficiaries by the time their lawyer, Dalkeith Palmer, of Prouse, Dash & Crouch LLP (“Prouse”), delivered the Statement of Defence on their behalf on January 14, 2009.
[12] Where an estate trustee incurs legal fees to protect both his own personal interest in an asset and the estate’s interest, he has a duty to separate the legal costs incurred in each.[^2] Timothy and Brian Bludd failed to do this. It was improper for them to draw on estate funds to pay the legal costs they incurred in defending their personal interests in the home.
[13] Prouse’s client ledger discloses that from April 1, 2001, to March 23, 2004, when the home vested in the beneficiaries, the estate paid $9,827.46 in legal fees. I find that these fees were incurred by Timothy Bludd in his capacity as Estate Trustee, and were properly paid by the Estate. From April 1, 2004, to March 30, 2009, when Timothy Bludd died and Brian Bludd took his place as Estate Trustee, the Estate paid a further $28,828.52 in legal fees. I find that Timothy Bludd incurred these fees in his personal capacity. His estate must therefore reimburse to Melissa Georganes 25% of this amount, representing her interest in the total amount, proportionate to her share of the Estate of Terrence Bludd.
[14] From April 2009, when Brian Bludd assumed responsibility as trustee for his father’s estate, to September 2012, the estate paid a further $30,325.72 in legal fees. I find that Brian Bludd incurred these fees in his personal capacity. He must therefore reimburse Melissa Georganes 25% of this amount, representing her interest in the total amount, proportionate to her share of her grandfather’s estate.
[15] I find that while Brian Bludd, after assuming responsibility as Estate Trustee for his father’s estate, may have acted diligently in bringing the litigation with Tara Bludd to an end, he did so in his capacity as a beneficiary of his father’s estate, to protect his own interest in the home. When Mr. Macdonald, on behalf of Ms. Georganes, beginning on November 13, 2006, and continuing through the period when Brian Bludd was Trustee, requested an accounting of the estate assets and expenditures, the accounting was not provided until July 27, 2011.
[16] Brian Bludd acknowledged, at the hearing of this application, that he borrowed approximately $10,000.00 from his father’s estate while acting as Trustee. While he states that he later re-paid the estate, it must have been clear to him that he was not entitled to use the estate as a source of funds for his own personal use. Additionally, Mr. Bludd acknowledges that he caused the estate to pay him compensation of $11,300.00 without obtaining the prior approval of the court or the consent of the other beneficiaries.
CONCLUSION AND ORDER
[17] Based on the foregoing, it is ordered that:
The Estate of Timothy Bludd shall pay to Melissa Georganes $7,207.13, being 25% of $28,828.52 plus pre-judgment interest on $7,207.13 from March 30, 2009.
Brian Bludd shall pay to Melissa Georganes $10,406.43, being being 25% of the $30,325.72 he caused the Estate to pay as his legal fees ($7,581.43), and 25% of the $11,300 he caused the Estate to pay him as compensation ($2,825), plus pre-judgment interest on $10,406.43 from September 30, 2012.
If the parties are unable to agree on costs, they may make written submissions, not to exceed four pages, plus a Costs Outline, by August 31, 2014.
Price J.
Released: August 11, 2014
Footnotes
[^1]: Wilcox v. Wilcox (2002), 2002 BCCA 574, 48 E.T.R. (2d) 153 (B.C.C.A.), at para. 28
[^2]: Hosein v. Hosein 2010 CarswellOnt 3679, 2010 ONSC 3167, per D.M. Brown J., at para. 6