ONTARIO

SUPERIOR COURT OF JUSTICE

BARRIE COURT FILE NO.: CV-13-0896

DATE: 20141119
CORRECTED: 20150130

IN THE MATTER OF THE ESTATE OF HARALD E. SPENGLER, DECEASED

BETWEEN:

NATALIE ROSE ALLEN and DEBBIE MCFEETERS, Estate Trustees for the Estate of Anna Pascale
Applicants

– and –

HEIDE STARK

Respondent

Rene Liebs-Benke, for the Applicant

Gerhard M. Schertzer, for the Respondent

HEARD: October 17, 2014

CORRECTED DECISION

THE TEXT OF THE ORIGINAL DECISION HAS BEEN CORRECTED
(AS APPENDED)

DOUGLAS J.

OVERVIEW

[1] This is an application under rule 65.01(1)(c) and rule 34.18 of the Rules of Civil Procedure for passing of the estate accounts in respect of the Estate of Harold E. Spengler and determination of the compensation to the Estate Trustee.

BACKGROUND

[2] Harold Spengler (hereinafter “Spengler”) died intestate on or about February 10, 2010.

[3] On February 13, 2010 Anna Pascale (hereinafter “Pascale”) agreed to accept the role of Trustee for the Estate.

[4] With the consent of the Respondent, Pascale was formally appointed sole estate trustee for the Estate pursuant to a Certificate of Appointment issued by this court on May 27, 2010.

[5] It is alleged by the Applicant that prior to his death Spengler retained counsel to draft and attend to the execution of a new Last Will and Testament that provided, among other things, a bequest in favour of Pascale in the sum of $200,000 and a further gift of $100,000 to Nancy Zapf. As a consequence of the solicitor’s failure to prepare the new Will as instructed, it is alleged, Spengler died intestate. There is litigation outstanding against the solicitor in this regard.

[6] The accounts submitted by the Applicant for approval cover the period February 12, 2010 to June 30, 2013.

[7] Pascale died on March 19, 2014 before her accounts could be passed.

[8] In August of 2014 Kevin Gillen was appointed Succeeding Estate Trustee Without a Will.

[9] The Respondent is Spengler’s only sibling and she resides in Germany.

[10] Spengler never married and died leaving neither spouse nor children. His parents predeceased him.

[11] The Respondent delivered a Notice of Objection in December of 2013 which details her position with respect to the accounts which are the subject of this application.

[12] The Applicant did not develop any affidavit evidence responding to the objections raised by the Respondent prior to her decease in March of 2014; however, this application is supported in part by the supplementary affidavit of Catherine Gorman sworn July 23, 2014 and extensive exhibits annexed thereto. Ms. Gorman is a legal assistant with the firm acting on behalf of the Applicant.

[13] The Applicant seeks compensation calculated as set out in Schedule “A” hereto, in the amount of $34,051.37.

[14] The Respondent submits that, after taking into account the objections raised in the Notice of Objection, compensation ought to be fixed in the amount of $14,375.38 as calculated pursuant to Schedule B hereto.

OBJECTIONS RAISED BY RESPONDENT

Investment Losses

[15] The Respondent submits that investment profits and losses are to be vetted out and compensation is not to be awarded with respect to a loss. In this regard the Respondent identifies three transactions on August 4, 2010 by which shares were sold at a loss totalling $1,147.85. The Applicant included this amount as a capital disbursement and seeks compensation at 2.5%.

[16] In my view it is settled law that compensation is not awarded with respect to a loss and therefore the sum of $1,147.85 should be deducted from capital disbursements in determining compensation to be awarded to the Applicant (see Jenkins and Scott: Compensation and Duties Of Estate Trustees, Guardians and Attorneys, Canada Law Book p.4-9).

Value of Real Property

[17] The Respondent further argues that the amount of any encumbrances on real property as well as commission, taxes (HST and property) and legal fees must be deducted when calculating compensation as such costs are connected to the sale of real property and are not capital disbursements made by the Trustee. (See Re: McLennan Estate 2002 48 ETR (2d) 59 (Ont.SCJ) and see Jenkins and Scott, supra). The Applicant sites no authority contradicting this position. I accept the Respondent’s position as a correct statement of the law on this issue.

[18] After delivery of the Notice of Objection the Applicant delivered further disclosure including documentation pertaining to disposition of the real property. The proceeds with respect to the real property in the sum of $235,000 were recorded as a capital receipt, but the real estate commission of $13,277.50 and legal fees and disbursements of $805.15 were individually recorded as capital disbursements. Instead, the commission and legal fees should have been netted out against the proceeds of sale resulting in a reduction of line item 12-52 from $235,000 to $220,917.35, a difference of $14,082.65. Thus capital receipts as recorded by the submitted accounts ought to be reduced by $14,082.65, as should the capital disbursements for legal fees at line item 16-41 and real estate commission at line item 16-42 at the same aggregate amount.

Appropriate fees for large receipts or disbursements

[19] The Respondent argues that the application of the usual percentages (i.e. typically 2.5%) is not justified in the case of large receipts or disbursements; in particular, the Respondent submits that 2.5% should not be applied to the sale transaction with respect to the real property nor to the cash distribution to the Respondent in the amount of $469,647.25. The total compensation claimed by the Applicant in this regard is $17,616.18 at 2.5%.

[20] In considering the appropriate compensation the Applicant argues that the Applicant’s failure to determine market value of certain assets before sale. I reject this argument in respect of the real property as the only evidence is that it was sold on the open market to an arm’s length purchaser through an independent realtor. This is the best evidence of the market value of this asset.

[21] Under the Trustee Act, RSO 1990, c.T.23, 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.

[22] In Re: Laing Estate (1998) 1998 6867 (ON CA), 113 OAC 335 (OCA) the Ontario Court of Appeal acknowledged in Ontario that a “practice has developed of awarding compensation on the basis of 2.5% against the four categories of capital receipts, capital disbursements, revenue receipts and revenue disbursements, along with, in appropriate cases, a management fee of two-fifths of one percent per annum on the gross value of the estate. The court is to first test the compensation claims using the “percentages” approach and then cross-check or confirm the mathematical result against the five factors approach set out in Re: Toronto General Trusts and Central Ontario Railway (1905) 6 O.W.R. 350 (H.C.). Those factors are: the magnitude of the trust, the care and responsibilities arising therefrom, the time occupied in performing her duties, the scale and ability displayed and, finally, the success which has attended its administration.

[23] The Respondent relies upon Forrest Estate v. O’Donohue (1991) 44 E.T.R. 171 (Ont. Gen. Div.) in support of her position that 1.5% ought to apply to distributions to beneficiaries.

[24] The Applicant argues that the Forrest case dealt with an estate in which the main asset was a house valued at $2.6 million representing the vast majority of the estate while in this case the house is a relatively minor component of an estate which is comprised of a broad variety of assets. The Applicant relies on Re: Laing Estate in support of the position that 2.5% ought to apply. According to the case of Re: Atkinson 1951 101 (ON CA), [1952] O.R. 685 (C.A.) the percentages are only a “rough guide to assist in the computation of” a fair and reasonable allowance.

[25] In balancing these factors I conclude that 2.5% is not unreasonable in relation to the handling of the house transaction (given the additional effort involved in realization of this asset) but the disbursement to the Respondent involves relatively minimal effort and should attract compensation at the rate of 1.5 percent.

Payments between Pascale and Estate

[26] The Respondent submits that payments by the Estate to Pascale are not to be included in the compensation calculations and in this regard refers to line items 15-28, 16-46, 16-50, 17-59, 17-60, 17-63 and 18-69 of the capital disbursements. The Applicant concedes in her calculation that line items 17-59, 17-60, 17-63 and 18-69 ought to be removed from calculation of capital disbursements for the purpose of determining compensation, leaving only items 15-28, 16-46 and 16-50 in issue, all of which are characterized by the Respondent as “unauthorized” payments to the trustee.

[27] These three items represent unspecified payments to Pascale totalling $1,772.80. It is not surprising that given the passing of Pascale in March 2014, it is not possible now to provide details with respect to these payments; however, without proof of nature of the payment, I cannot conclude that they are appropriate and thus they should be removed from the calculation of capital disbursements for the purpose of determining compensation due the Applicant.

[28] There are transactions under capital receipts at line items 12-58, 12-59, 12-60 and 13-61, all of which represent payments by Pascale by way of reimbursement of fees incorrectly taken from the Estate. There are corresponding capital disbursements at line items 17-59, 17-60, 17-63 and 18-69 in the same amounts. As these transactions all appear to have been done in error, no fees should be attracted. Further, transactions in which money is paid to the Executor are excluded from compensation (see Re: Mortimer 1936 58 (ON CA), [1936] O.R. 438 (C.A.)).

Appropriate Fees Generally

[29] The Respondent argues that as the administration of this estate was simple in the sense that it largely involved the payment of liquid assets, a percentage reduction to 1% for capital receipts and disbursements would be appropriate (see Re: Hill Estate (1994) 1991 12034 (MB KB), 26 A.C.W.S. (3d) 804 (Ont. Gen. Div.) and Re: Campin Estate (1992) 49 E.T.R. 197 (Ont. Gen. Div.) in which compensation was fixed at 1.5% of receipts with the bulk of the estate consisting of GICs, savings bonds and savings account deposits. The applicant submits that the Estate was not simple and additional time was expended as a consequence of the respondent’s position on the issues. In my view, fees for appropriate transactions other than the real estate and distribution to the Respondent ought to be set as 2% to reflect a medium degree of complexity and the absence of time dockets to assist in more detailed analysis and the other factors addressed elsewhere in these Reasons.

Value of Boat

[30] With respect to a boat owned by Spengler at the time of his death, there are no details regarding the nature of the boat and no market appraisal. There is no Bill of Sale. The only evidence available to me is a statement in the accounts showing its sale on November 2, 2010 for $2,850. The Applicant is no longer available to answer this objection. While more evidence would be preferred and appropriate, I am not prepared, on the evidence before me, to conclude that the Applicant’s handling of this issue has fallen below the standard identified in Re: Nicholson [2000] O.J. No. 3119 and Kemp v. Kemp (1996) 12 E.T.R. (2d) 290. This item shall therefore remain intact and form part of the basis for compensation to the Applicant.

Value of Shares

[31] The Respondent raises in her objections the shares held by Spengler in Tengtu International Corp., (“TIC”) alleging that Spengler owned 9,600 shares in TIC at date of death. The accounts indicate these shares sold on June 30, 2010 for zero dollars and they had “no market value”. I have reviewed the documentary evidence provided in the supplementary affidavit of Catherine Gorman’s sworn July 23, 2014. There are references in statements from Caldwell Securities to 1,500 shares having minimal or no market value as of September 30, 2010, July 20, 2010, February 12, 2010, February 28, 2010 and January 30, 2010. The evidence indicates that on July 23, 2010 1,500 shares in TIC were sold. The evidence supports the conclusion that while the accounts state there were 9,600 shares in TIC, in fact there were only 1,500 and that the market value of these shares was negligible. Accordingly, no adjustment is required to the accounts in this regard except in identification of the volume of shares held by the Estate.

Time Dockets

[32] The Respondent cites the Applicant’s failure to keep time dockets and prepare proper asset inventory as a basis to reduce compensation. The Respondent relies on the case of Forest Estate v. Donohue in which fees claimed were reduced from 2.5 percent to 1.5 percent where there were no time dockets. The Applicant relies upon Re: Denofrio Estate 2012 O.M.S.C. 3408 in which the court concluded that there is no requirement for trustees to keep time dockets although it may be prudent to do so. In Denofrio the court went on to set fees as 2.25 percent. A reading of Forest Estate confirms that it was the court’s view that executors “should” keep detailed dockets not “must”. In the case before me this is simply one of the many factors to consider in determining an appropriate level of compensation.

Chattels Inventory

[33] As to preparation of an inventory of the Estate’s personal property assets, the Trustee deposed, in her affidavit sworn August 8, 2013, that Roland Kanz (spouse of the Respondent) removed and sold Spengler’s Mercedes SUV and motorcycle very shortly after his passing and may have removed other assets. She deposes she received no accounting from Kanz regarding these assets and that she “was not asked or given any opportunity to prepare an inventory of Harold’s personal property”.

[34] While it may be that she could not account for the assets removed by Kanz this does not explain why she was unable to complete an inventory of the other personal property in the residence prior to its sale on September 10, 2010. She was appointed Trustee on May 27, 2010. She therefore had approximately three and a half months within which to prepare an inventory. This is a factor that must be weighed in determining appropriate compensation.

Professional Fees

[35] The Respondent raises an objection with respect to legal and accounting fees included as capital disbursements. See line items 15-22 and 17-6 in this regard, (totalling $1,471.50). The Respondent relies upon Re: Lawson Estate (1993) CarswellOnt. 2610 (O.C.G.D.) and Rosenberg v. Gold (1993) 41 A.C.W.S. (3d) 460 (O.C.G.D.) for the proposition that simple accounting services such as those pertaining to the preparation of accounts for passing properly deductible from any compensation awarded to the executor.

[36] The Applicant cites Re: Miller Estate (1987) 26 E.T.R. 188 (Sur.Ct.) for the proposition that accounting and legal services are specialized services not within the expertise ordinarily expected of an Estate Trustee, and thus the Estate should reimburse same as a special fee and not take them out of the Trustee’s compensation. In reviewing the Miller case however, it is clear that the court had before it an issue relating to investment advice regarding a substantial estate and not simple accounting services as in this case.

[37] The Applicant also cites Re: Joseph’s Estate (1993) 8533 (ONSC) for the proposition that a Trustee is entitled to full indemnity for proper charges in administering the Estate to the extent the fees are reasonably incurred for the purpose of performing her responsibilities in administering or distributing the Estate. The question is whether the services were provided for advice and assistance to the Trustee in relation to her personal interest rather than those of the Estate.

[38] In my view, these expenses fall within the reasons in Re: Lawson Estate as they appear to be simple accounting services involving the preparation of the accounts themselves; as such, they are properly the expense of the Applicant and should be borne out of the compensation payable to her. Accordingly, these disbursements should be removed from the calculation of capital disbursements for the purpose of determining compensation.

[39] The accounts also include line item 18-67 relating to legal fees of $1,500 which appear to relate to litigation which is arguably serving the Applicant’s personal interest rather than furthering the interest of the Estate. Again, this line item should be deducted from calculation of capital disbursements for the purpose of determining compensation owing to the Applicant.

HST

[40] The Notice of Objection raises the issue of whether HST is payable in circumstances where there is no corporate or professional trustee. The Applicant has not addressed this issue in the materials before me. Unless the Applicant provides some authority for the proposition that HST is payable on the compensation claimed, this claim is dismissed.

Disclosure

[41] The Notice of Objection identifies the absence of supporting Estate documents associated with the sale of the real property, full banking, accounting and legal fees particulars; however, since delivery of the Notice of Objection the Applicant has delivered a Supplementary Application Record containing many supporting documents including those pertaining to sale of the real property. It appears that this objection has largely been satisfied.

Interest on payments in error to Pascale

[42] The Respondent submits that the Applicant should repay to the Estate the sum of $753.54 representing interest accruing on the unauthorized fee withdrawals totalling $54,553 on May 4, 2011 and June 7, 2012. These amounts were reimbursed in October and November 2012. The Respondent calculates the interest claimed of 1.43 percent per annum. The Applicant does not vigorously oppose. Therefore, the sum of $753.54 shall be deducted from the compensation determined owing to the Applicant.

Timing of Compensation

[43] The Respondent submits that the Applicant was appointed Trustee on May 27, 2010 but some transactions for which compensation is sought predate her appointment. In this regard the Respondent notes the evidence of the Applicant confirming her meeting with Spengler’s lawyer on February 13, 2010, following Spengler’s decease, and her agreement on that date to assume the role of Estate Trustee Without a Will. The Estate accounts show capital receipts totalling $124,817.01 on February 12, 2010, the day prior to the Applicant assuming the role of Estate Trustee Without a Will. The applicant argues that the trust was created immediately upon Spengler’s death and that the applicant is entitled to compensation for proper transactions following thereafter.

[44] In my view, the respondent’s position is correct. Section 61 of the Trustee Act RSO 1990 c.T.23 entitles the applicant to allowance for the care, pains and trouble, and the time expended in and about the Estate; however, no such efforts can be said to have been expended in relation to transactions completed before assuming the responsibilities of trustee. Accordingly, the transactions referred to at line items 9-1, 9-2, 9-3, 9-4, 9-5 and 9-6 must be removed from calculation of Capital Receipts before determining the applicant’s compensation.

U.S. Accounts

[45] There is no dispute between the parties regarding the amounts held in the U.S. accounts. They may be summarized as follows:

(a) Capital receipts $20,460.68

(b) Capital disbursements $ 282.50

[46] For the reasons set out in para. 29 above, the Applicant is entitled to compensation at 2% of these transactions.

Payment into Court

[47] Pursuant to the order of Healey J. dated August 1, 2014 the Trustees of the Estate of Anna Pascale were to pay into court all funds existing in the two estate accounts as of July 31, 2014, being $305,691.66. These funds have yet to be paid into court as the order aforementioned has yet to be formally issued (a necessary pre-condition to payment into court).

The Accounts

[48] The Respondent has not raised any objection as to calculation of the of the Capital and Revenue Accounts; rather, the Respondent’s objections relate solely to the amount of compensation to which the Applicant should be entitled.

ORDER

[49] For all of the foregoing reasons:

(1) The Capital Receipts and Capital Disbursements for the period February 12, 2010 to June 30, 2013 are as follows:

Receipts $864,872.07
Disbursements 592,318.54
Credit Balance $272,553.53

(2) The Revenue Receipts and Revenue Disbursements for the period February 12, 2010 to June 30, 2013 are:

Receipts $15,165.89
Disbursements ____92.11
Credit Balance $15,073.78

(3) The Estate Trustee shall be paid, as fair and reasonable compensation for services as estate trustee and for disbursements expended in administering the affairs of the Estate during the period, the total amount of $21,761.41 CDN plus $445.81 USD to be paid out of the monies paid into court to the credit of this proceeding after determination of the issue of costs.

(4) The parties shall provide brief written submissions on the issues of disposition of the balance of the Estate, costs and any concerns regarding the calculations set out in Schedule C, as follows:

a. the applicant, within three weeks of the date of the release of these reasons;

b. the respondent, within five weeks of the date of the release of these reasons; and

c. the applicant, in reply, if desired, within six weeks of the date of the release of these reasons.

(5) The balance of monies paid into court to the credit of this proceeding, after payment of compensation as per para. (3), and costs to be determined per para. (4), shall remain in court pending further order.