ONTARIO
SUPERIOR COURT OF JUSTICE
SARNIA COURT FILE NO.: 7143/13
IN THE MATTER OF the Estate of Leonard Wilfrid Goetz, deceased
BETWEEN:
Lorne Bion Goetz
Objector
– and –
Stephen Goetz and Kevin Goetz
Executors
Lorne Bion Goetz, acting in person
Stephen Goetz, acting in person
Kevin Goetz, acting in person
HEARD: December 12, 2013
Application to pass accounts
Introduction
1Leonard Goetz (“Leonard”) died July 23, 2007. He was predeceased by his wife Blanche Goetz who died May 7, 2004. Leonard and Blanche had three children.
2Stephen Goetz (“Stephen”) and Kevin Goetz (“Kevin”), the Executors of Leonard’s estate are two of the children of that marriage. Lorne Goetz (“Lorne”) is the oldest child of the marriage.
3Since Leonard’s death in 2010, there have been two trials involving the three Goetz brothers and issues arising out of the administration of Leonard’s affairs both before and after his death. The first trial was before Donohue J. That action largely dealt with the validity of Leonard’s wills and powers of attorney. In Donohue J.’s decision of November 23, 2010 he directed Lorne to pass accounts for a specific time period. Kevin was directed to pass accounts with respect to two transactions. Both the time period and transaction predate Leonard’s death.
4The next trial was before me and dealt with the passing of accounts directed by Donohue J. My decision in that matter was released August 17, 2012. In the course of dealing with the ancillary matters arising out of the August 17, 2012 decision, I ordered Stephen and Kevin to pass their accounts relative to their administration of Leonard’s estate.
5Accounts were prepared by Stephen and Kevin and filed June 27, 2013. The parties appeared before me on August 30, 2013. At that time I advised the parties that I found the accounts to be procedurally deficient. I directed that proper amended accounts be prepared and filed by October 1, 2013. Any objection to those accounts was to be prepared and filed by November 1, 2013. I further directed any documents supporting the accounts and objections would be filed in a separate volume at the time the document was filed.
6At the time of my order I provided to the executors Kevin and Stephen a precedent as to how the accounts were to be prepared. Stephen advised me that through his employment he had access to legal texts and precedent books. He indicated that he would have no difficulty preparing proper accounts.
7I then adjourned the matter to December 12, 2013. I ordered that the matter was to proceed with oral evidence.
8In my August 30, 2013 endorsement I indicated to the parties that I would review the accounts filed and advise them if I had any comment on the form. It should be noted that Lorne made no objection to the form utilized. His relevant objections related to the substance of the accounts.
9The accounts were amended and filed on September 30, 2013. Lorne filed two notices of objection to accounts. Both are dated October 25.
10When I reviewed the accounts I found them not to be in an entirely proper form. However, I determined that it was best that the matter proceed on December 12. That is, no more time should be taken with attempting to get the accounts in proper form. The parties need a determination on the issues presented by the accounts. This decision will deal with those issues.
11At the conclusion of this decision I will direct the executors to prepare amended accounts that reflect my decision. My decision will require a review of those amended accounts. It is my hope that I can then make a final order with respect to the accounts of the estate of Leonard Goetz.
12I would again encourage Stephen and Kevin to seek the assistance of an experienced and properly licensed professional in preparing those accounts. I am seeking to avoid resorting to s. 49(10) of the Estates Act, R.S.O. 1990, c. E.21. In my view this estate is not sufficiently complicated so as to warrant such an order.
13I would further comment to Stephen and Kevin that the cost of any proper assistance they obtain will be borne by the estate. Further, their failure to obtain proper assistance may be a factor in determining the compensation claimed by them, should the accounts again be deficient.
The Evidence
14Both Kevin and Stephen gave evidence with respect to these accounts. The first witness to be called was Stephen. He reviewed the accounts in detail explaining all transactions. He dealt more thoroughly with those entries in the accounts which were objected to or were not straightforward. Stephen obviously has significant ability with respect to accounting matters in general. His expertise does not extend to the preparation of estate accounts. I would suggest that he has endeavoured to apply what he found to be a common sense approach to the accounts. While that effort may be laudable it was not always effective.
15Kevin gave evidence largely in support of the accounts. However, he expanded the evidence of Stephen particularly with respect to what is described as the Heritage Education Foundation (“Foundation”).
16Lorne gave evidence with respect to his objections to the accounts. It was clear from his evidence that the animosity that had so far pervaded this litigation continues. I would add that that comment is equally applicable to the evidence of all witnesses.
17It was first disclosed through the cross-examination of Stephen that a person by the name of Michael David Saunders was involved in some capacity with the Foundation. It was Stephen’s evidence that Michael Saunders is the biological child of Leonard but not Blanche. That is, he was a child born out of wedlock. He is Leonard’s oldest child.
18Initially it was the evidence of Stephen that the creation of the Foundation by the senior Goetz was an act of philanthropy. Subsequently his evidence disclosed the Foundation was for the benefit of Michael Saunders. However, whether or not it directly benefitted Michael Saunders was unclear.
Analysis
19The accounts are in Exhibit A to the affidavit of Kevin, sworn September 27, 2013. Those accounts have a number of headings. Those headings have a number of transactions which in some cases are numbered. I will review the accounts utilizing the headings and transaction numbers.
20I would observe that a number of the objections raised by Lorne were outside the purview of the court in an application to pass accounts. That is, they dealt with matters prior to Leonard’s death. I advised during the course of evidence and argument that the court would not be dealing with those issues. Indeed, a number of the issues have already been dealt with either in my prior decision or the decision of Donohue J.
Original Assets
21The accounts show total asset value of $1,782,392.97. This consists of three “types” of assets. They are: 1) financial accounts of $1,702,410.49; 2) personal effects of $4,750; and 3) unexplained transactions conducted by Lorne Goetz from April 26, 2006 to July 23, 2007 of $75,232.48.
22Despite my comments and the precedent I provided to the executors, no detail was provided with respect to the original assets. Some insight can be gained as to the nature of the assets by reviewing the capital receipts. The total capital receipts are $1,778,251.70. They consist of accounts at CIBC, TD Waterhouse, Bank of Nova Scotia, and funds held by the accountant of the Superior Court of Justice. The earliest date assigned to any of these assets was August 3, 2011 (CIBC joint account of $52,487.82).
23Clearly it would be more accurate and preferable if the executors provided details of the accounts at each financial institution. That should be done under the heading of “Original Assets”. I would however note that Lorne did not object to this aspect of the accounts.
24Personal effects appear to be the deceased’s furniture and belongings in his room at the retirement home. There is no detail of these assets and no appraisal.
25With respect to the amount due to estates as alleged “unexplained transactions conducted by Lorne”, the executors stated that they taken no steps to realize on those assets. That is, they had not pursued a claim against Lorne.
26In the list of unrealized original assets the executors have repeated the $75,232.48 figure. The evidence of Stephen was that no steps had been taken or were contemplated to realize on these assets. Therefore that entry should not appear in any portion of the accounts.
27Under this heading the estate trustees have also increased the value of personal belongings from $4,750 to $9,500. The rationale is that Lorne received assets of that value by division in specie. Therefore they are each entitled to that amount in the course distribution for the purpose of adjustments.
28That logic is flawed. An item is either an asset or it is not. Lorne disputes that he has these items. The evidence as to the fact he has the items and their values is speculative. They cannot be considered assets and should not be shown either as original assets or unrealized assets. Their alleged existence cannot be used to increase the executors’ distributive shares.
29The estate trustees have proven assets of $1,702,410.49 consisting entirely of monies on deposit with financial institutions and the accounts to the Superior Court of Justice.
30The schedule of original assets also shows outstanding liabilities of $275,900. This amount is what the executors say ought to have been paid to the Foundation pursuant to Leonard’s letter of May 11, 2004 (Exhibit 6). This letter, signed by Leonard Goetz, states that in the year 2004 he intends to contribute $150,000 U.S. to the Foundation. Thereafter, he intends to contribute $40,000 per year up to the date of his death to the Foundation.
31The executors state that considering the rate of exchange that the total liability of the estate to the Foundation is $275,900. Of that $153,500 was paid to the Foundation in two instalments. One instalment was made June 12, 2013. The second instalment was made June 27, 2013. These payments show as transactions 26 and 27 of capital disbursements.
32Lorne disputed the validity of this alleged liability and the payment by the executors to the Foundation. It was his evidence that he was not aware of the Foundation until he received the accounts. Further, he was not aware of Michael Saunders until December 12, 2013. It would appear from the evidence of Stephen and Kevin that is very likely the case.
33There was no evidence provided to the court with respect to the Foundation. That is, there were no constative documents, financial statements, or correspondence from the Foundation. All the court has is a letter signed by Leonard dated May 11, 2004, attached to a power of attorney signed by Javier A. Rivera F. and Velma Alicia Morales on behalf of the Foundation. That document appoints Kevin and Lorne as the powers of attorney for the Foundation.
34Kevin gave evidence that he had travelled to Central America. He had met with Michael Saunders and done some investigatory work with respect to the Foundation. He advised that he had some additional documents with respect to the Foundation but they were not brought to court.
35When I initially viewed the letter of May 11, 2004 and during the course of the hearing, I suggested that that document may be a testamentary instrument. The law on whether a document of this type is a testamentary instrument is not entirely clear. Generally, “if, at the time of its execution, the document is legally effective to pass some immediate interest in the property, no matter how slight, the transaction will not be classified as testamentary” (see: James MacKenzie, “Feeney’s Canadian Law of Wills” (2012) 4th ed., LexisNexis Canada Inc., s. 1.23). That statement of law comes from the British Columbia Court of Appeal decision of Wonnacott v. Loewen (1990), 1990 976 (BC CA), 44 B.C.L.R. (2d) 23.
36Wonnacott incorporated a statement from the Alberta Court of Appeal in Anderson v. Patton, 1948 220 (AB CA), [1948] 2 D.L.R. 202. In Anderson the court stated that if the document is not intended to have any operation until the settlor’s death it is testamentary. If the document is intended to have and does have the effect of transferring the property or of setting up a trust in praesenti, though to be performed after the settlor’s death, it is not testamentary.
37Following this reasoning I would therefore conclude the letter is not a testamentary disposition. It intends to immediately transfer funds and contemplates an annual transfer of funds as long as Leonard is alive. Therefore the interests created by the document are more consistent with an inter vivos transfer. No new interests are created upon Leonard Goetz’s death. I therefore conclude that the document should not be considered testamentary.
38The final paragraphs of the document refer to the document being a promissory note. If it is a promissory note, the question becomes whether it is enforceable by the donee. The Supreme Court of Canada held in Glesby v. Mitchell, [1932] 2 S.C.R. 260, that a “promissory note, like any other promise, cannot be enforced, as between the parties unless there is a consideration for the promise”.
39Peden v. Gear (1921), 1921 431 (ON SC), 50 O.L.R. 384 (Sup. Ct. (H. Ct. Div.)), stands for the proposition that a promissory note is no more than a promise to pay a certain sum of money, and the donee does not have a right to claim against the estate if the payee never provided any consideration for the promise. This proposition was applied in Bibco Inc. v. Young, 2005 MBQB 268, 197 Man. R. (2d) 242.
40There is no evidence that any consideration was given for the note. Therefore the payees are not creditors of the estate and the letter is unenforceable. I have already noted that the court has no evidence with respect to this Foundation beyond the letter and power of attorney. For the court to reach a contrary conclusion substantially more evidence would be required.
41There being no additional evidence, the letter cannot be considered an obligation of the estate. Any amounts paid to the Foundation ought not to have been paid. They are not a proper disbursement and it should not have been made by the estate trustees.
42In cross-examination Stephen suggested the “Vision Accord” supported the suggestion that the parties agreed to the funding of the Foundation. That is, the court can imply from the fact that the funds were left to be managed that that management included the payments to the Foundation. I do not accept that can be read from the “Vision Accord” document. If that had been the intention it should have been clearly stated.
43I did not find the oral evidence of Stephen or Kevin compelling on this issue. In my view that conclusion is supported by the fact that no documentary evidence was provided with respect to this Foundation.
44Page three of the accounts appears to be a balance sheet. This will have to be amended given my findings with respect to the original assets and liabilities of the estate.
Capital Receipts
45It is difficult to determine the accuracy of this heading given the lack of detail provided in the original assets. It would not appear correct that amounts paid to the accountant of the Superior Court of Justice ought to be considered receipts.
Capital Disbursements
46Transactions 8, 9, 10, 12, 13, 15, 16, and 17(b) are amounts paid to “a third party for accounting and tax filing”. It would appear that all these amounts were paid to Ovid Consulting. Lorne objected to these amounts being paid. No invoices were provided to support these expenses.
47The court does not have the benefit of any information as to what income was earned by the estate from Leonard’s date of death to June 2013. It would appear to be appropriate to conclude that the only income would be interest earned on monies on deposit. That is, there was no active trading being done.
48The executors state that this has been a very difficult account to administer given the recalcitrance of Lorne. I will deal with that issue further in this decision. Assuming for the moment that statement is accurate, it does not explain why for the preparation of tax accounts since Leonard’s death the executors have expended $30,548.70.
49The trustees suggested this amount can simply be deducted from compensation that they are otherwise entitled to. Again, I will deal with that argument at a later point in these reasons. At this time I conclude without further evidence that the disbursements in lines 8, 9, 10, 12, 13, 15, 16, and 17(b) are not appropriate disbursements.
List of Estate Investments
50As of June 2013, no detail was provided with respect to these accounts. It would be appropriate to provide some statement from the institution in which the estate account is held and a recent statement from the account of the Superior Court of Justice.
List of Liabilities
51As noted earlier in this decision I do not find that the estate has a liability of $122,400 to the Foundation. Therefore that matter ought not to be included.
52The other liability is executors’ compensation. It would appear that the executors have indeed paid to themselves some amount as executors’ compensation. That is how I interpret lines 14, 19 and 20 of the statement of capital disbursements. Given the length of time that this matter has been outstanding that amount of partial prepayment does not appear to be improper or inappropriate.
53The Trustee Act, R.S.O. 1990, c. T.23 provides at para. 61:
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.
61.(3) The judge, in passing the accounts of a trustee or of a personal representative or guardian, may from time to time allow a fair and reasonable allowance for care, pains and trouble, and time expended in or about the estate.
54Courts have attempted to set down specific rules for dealing with estate trustees’ compensation (see: Widdifield on Executors and Trustees, 6th ed. at p. 11.4). The leading cases continue to be Toronto General Trusts Corp. v. Central Ontario Railway (1905), 6 O.W.R. 350 (Ont. H.C.); and Atkinson Estate, Re, 1951 101 (ON CA), [1952] O.R. 685 (Ont. C.A.). More recent cases have considered the application of the percentages discussed in Re Atkins Estate. In Jeffery Estate, Re (1990), 39 E.T.R. 173 (Ont. Surr. Ct.), Killeen J. held that the percentages should be used as a preliminary guide for the audit judge. However the audit judge should consider the mathematical result against the factors from the Toronto General Trusts Corp. case. Those five factors are:
the size of the trust;
the care and responsibility involved therefrom;
the time occupied in performing the duties;
the skill and ability shown;
the success resulting from its administration.
55Accepting that the total value of the estate for probate purposes as shown on the list of original assets is correct, the simple mathematical calculation would result in executors’ compensation of $42,560 for a realization of the assets. A like amount would be contemplated for distribution of the assets. That is based on the assumption that the funds into the estate and out will balance.
56Considering the factors in Toronto General Trusts Corp. I would comment:
The estate was substantial.
The executors have demonstrated care and responsibility with respect to the estate. However, they have made certain assumptions and calculations which they ought not to have. They have attempted to administer this estate without significant professional assistance. That is, there is no evidence that other than for the purpose of litigation and income tax preparation they have sought professional advice.
The trustees have not stated the amount of time they have been occupied in performing their duties. However, it is clear from the evidence that they have expended substantial time. Much of that time has been taken up with the litigation. In my view a significant portion of the responsibility for that litigation can be found in the approach taken to this estate by Lorne. However, the estate trustees are themselves not without fault. I have referred in the course of this decision to conclusions or approaches taken by the executors that are not supported in law. I am particularly concerned that the estate trustees have paid what they calculate to be a significant portion of their distributive share prior to the passage of these accounts. I reach that conclusion having regard to transaction 27 of the capital disbursements and line L2-2 of the distribution plan.
Generally the estate trustees have exhibited some degree of skill and ability. However, they have taken certain liberties with their assumptions and conclusions. In my view they would have benefitted significantly from professional assistance before making those assumptions. Particularly it would have been appropriate for them to seek professional advice with respect to preparation and passage of these accounts.
The administration of the estate has largely been successful in that the assets have been collected. The assets have yet to be disbursed in their entirety. Further, given my decision it is unlikely that the distribution will occur immediately.
57Given my intended direction I am not in a position to determine what the appropriate compensation for Kevin and Stephen Goetz is at this time. My decision on that issue will have to be reserved until the amended accounts are filed.
58The estate trustees have also claimed compensation for care and management of the estate. In cases where the will provides for postponed rather than immediate distribution, the usual percentage of compensation may not be adequate to compensate the estate executors for continued supervision of the assets (see: Widdifield, at pg. 11-10). Here, Leonard’s will anticipated immediate distribution. That has not occurred because of the litigation between the executors and Lorne. I have found that litigation was largely as a result of the conduct of Lorne.
59The delay in administration and distribution of the estate is directly related to the litigation. This has necessitated the executors continuing to have to deal with the estate. I am of the view that they may be entitled to some amount for care and management. However, once again I am not able to determine that amount until amended accounts are filed.
60I would note that the compensation for the years 2008 and 2012 only should be considered. That is, there should not be compensation for the year of death or for the years following preparation of these accounts. Those time periods are to be properly accounted for in the executors’ compensation otherwise payable.
61I do agree with the estate trustees that the amounts paid to Ovid Consulting should be deducted from this compensation. However, that cannot be done until amended accounts are filed.
Distribution Plan
62Until amended accounts are prepared in accordance with this decision, I cannot approve the distribution plan. However, I would not allow any amount for an adjustment with respect to the 1967 Ford. That is an asset of the estate. It ought to be sold and the proceeds of sale form part of the capital of the estate. I would note that that asset was not included in the original assets of the estate.
Canada Pension Plan Death Benefit
63It came to light in the course of the passing of the accounts that the estate trustees had not applied for the Canada Pension death benefit. Both trustees expressed surprise that there was any such benefit potentially available to the estate. That is somewhat surprising in the circumstances. However, the estate executors should make application for the benefit and it should be included in the capital receipts.
64I have reviewed the two notices of objection filed by Lorne. Save for the objections dealt with in my foregoing reasons, I do not find his objections to be meritorious. As noted, a number of them predate the death of Leonard. As well, some objections attempted to re-litigate matters dealt with by the court previously.
Summary
65I therefore do not approve the accounts as presented. I direct that amended accounts are to be prepared consistent with this judgment and to be filed no later than March 31, 2014. Any objection to those accounts by Lorne are to be filed 20 days thereafter (April 20, 2014).
Costs
66I am unable to deal with the issue of costs until the final accounts are prepared and submitted. After that occurs I will give direction with respect to submissions for costs.
Original signed “Justice Campbell”
Scott K. Campbell
Justice
Released: February 14, 2014
SARNIA COURT FILE NO.: 7143/13
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Lorne Bion Goetz
Objector
– and –
Stephen Goetz and Kevin Goetz
Executors
REASONS on application
Campbell J.
Released: February 14, 2014