Pascale v. Stark, 2015 ONSC 956
BARRIE COURT FILE NO.: CV-13-0896
ONTARIO
SUPERIOR COURT OF JUSTICE
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 Applicants
Gerhard M. Schertzer, for the Respondent
HEARD: by written submissions
RULING ON COSTS
DOUGLAS J.
BACKGROUND
1The Applicants, being the Estate Trustees for the Estate of Anna Pascale, seek costs of this application in the total amount of $23,676.18 including fees, disbursements and HST.
2The Respondent seeks costs on a partial indemnity basis in the amount of $62,710.63 or on a substantial indemnity basis in the amount of $104,723.95 (each figure being net of the compensation to which I have found the Applicant is entitled and costs pursuant to Tariff C of the Rules of Civil Procedure).
3Harold Spengler died intestate on or about February 10, 2010. Shortly thereafter Anna Pascale agreed to accept the role of trustee for the Estate. She was formally appointed sole Estate Trustee pursuant to a Certificate of Appointment dated May 27, 2010.
4In 2012 a conflict of interest developed between Pascale and the Estate as a consequence of her claim against the Estate to seek enforcement of an alleged gift of $200,000. Pascale sought discharge as Estate Trustee as a result of the conflict of interest and she commenced this application for a passing of her accounts.
5In March 2014 Pascale passed away before her accounts could be passed and a new Trustee could be appointed.
6In May of 2014 Natalie Rose Allen and Debbie McFeeters were appointed trustees of the Pascale Estate.
7When this matter first came before the court in September of 2013 the parties consented to a hearing for the passing of the Applicant’s accounts for January 17, 2014 for a one-half day hearing. The balance of the relief requested in the application was adjourned to that date to be spoken subject to a possible request for directions and costs reserved.
8On January 17, 2014 the application was adjourned on consent to April 4, 2014.
9On April 4, 2014 the matter was adjourned on consent to June 27, 2014 for a two hour hearing.
10On June 27, 2014 the parties consented to the following order:
This court orders that the passing of accounts is adjourned for argument on all matters to Friday, August 1, 2014 for a two hour hearing.
This Court further orders that Kevin Gillen, the proposed replacement trustee for the Estate, shall be appointed as Estate Trustee upon the filing of the Rule 74.07 – specified application materials, and expressly conditional upon either:
(a) The filing of an administrators bond, for and in favour of the Estate of Harold Spengler and Applicant Anna Pascale Estate in the amount of $450,000; or
(b) The obtaining of an order by counsel for Heide Stark directing that all monies to the credit of the estate standing in the hands of Anna Pascale or her personal representatives under s.3(2) of the Trustee Act, being approximately $309,000.00, and payment into court.
This Court orders that the personal representatives of Anna Pascale shall upon receipt of an invoice therefor, release from the funds standing to the credit of the estate in their hands and otherwise pay to the company providing the administrators bond under paragraph 2(a) herein, the first year’s premium payable for such bond in the even that Kevin Gillen elects to obtain such bond in order to affect his appointment hereunder.
This court further orders that, pending the appointment of Kevin Gillen as Succeeding Estate Trustee without a will, the remaining estate proceeds be preserved by the current or future estate trustee pending consent or further court order.
Copy of Bond or Proof of Payment is to be provided to opposite counsel.
11On August 1, 2014 the court ordered on consent as follows:
On review of the Form 74.24, the Consent of Heidi Stark, the affidavit of Heidi Stark sworn June 13, 2014 and the affidavit of Kevin Gillen sworn June 17, 2014, the Registrar shall issue the Certificate of Appointment of Succeeding Estate Trustee Without a Will in the form attached as Schedule A, without necessity of filing a bond.
Upon issuance of the above Certificate to Kevin Gillen, the Order to Continue dated July 24, 2014 shall be of no further effect and the trustees are hereby discharged, save for any issues arising from a contested passing of accounts by the trustees for the estate of Anna Pascale;
The trustees of the estate of Anna Pascale shall pay to the Accountant of the Superior Court all funds existing in the two estate accounts as of July 31, 2014, being $305,691.66, forthwith.
The passing of accounts is adjourned to October 17, 2014 at 9:30 a.m. to provide an opportunity for Mr. Gillen to review them.
The material referred to in para. 1 shall be filed with the court today.
12This matter came before me by way of contested hearing on October 17, 2014 and I reserved my decision.
13My decision was released on November 19, 2014 and corrected on January 29, 2015. I invited written submissions on costs from the parties. I have reviewed those submissions and these are my Reasons for Decision on the issue of costs in the circumstances partially outlined above. I note the Applicant did not reply to the Respondent’s submissions.
The Applicant’s Position
14The Applicant relies upon Giffen v. Goodman Estate, 1991 CanLii 69 (S.C.C.) in support of the position that an Estate Trustee is entitled to be indemnified for all reasonably incurred costs, including legal costs. Ms. Pascale, it is argued, agreed to act as Estate Trustee with the consent of the Respondent. Her appointment was necessary as a result of the deceased lacking a Will and the fact that the Respondent, the sole beneficiary of the Estate, as a non-resident, could not be appointed. Pascale assumed and performed all the tasks and responsibilities of an Estate Trustee in relation to same and has accounted for her dealings and administration by way of a formal passing of the accounts. A dispute as to the entitlement of a gift of money arose well into the administration of the Estate and this ultimately resulted in the conflict of interest preventing Pascale from acting further, creating the need for Pascale’s discharge as Trustee and the passing of her accounts. This application became a necessary and required step for the Applicant in order to be discharged so that she could pass the accounts to a new Estate Trustee. The need for an order discharging Pascale and the appointment of a new Estate Trustee arose from the Respondent’s dispute as to the claimed gift payable from the Estate to Anna Pascale, a claim that was made and acknowledged on the date that Pascale accepted her appointment as Estate Trustee. Neither Pascale nor her Estate should be punished by having to incur legal fees in attending to this application.
The Respondent’s Position
15The Respondent’s position is as follows:
(a) Costs are governed by Rule 57 of the Rules of Civil Procedure and the factors enunciated thereunder are to be applied in exercising discretion.
(b) In her application Pascale was seeking total compensation of $38,478.27 including HST. In my Reasons for Decision I have determined the Applicant to be entitled to total fees and disbursements in the amount of $21,761.41 CDN plus $445.81 US, substantially less than that claimed.
(c) The nature of the proceeding was not overly complex, but the withholding of source documents caused questions to be raised concerning the administration of the Estate proceeds. Pascale’s death in March 2014 created a delay and additional costs to the Respondent upon whom was placed the burden of finding a suitable succeeding Estate Trustee Without a Will.
(d) Even prior to Pascale’s death and in light of the conflict of interest, Applicant’s counsel took the position that it was the Respondent’s responsibility to find a suitable replacement (a position that is inconsistent with the Ontario Court of Appeal in Evans v. Gonder 2010 ONCA 172 at para. 33).
(e) Spengler died in February 2010. Nearly five years later, apart from a onetime distribution to the Respondent of $469,567 the remaining proceeds remain undistributed.
(f) The Applicant’s conduct in commencing an action against the Respondent herein, her spouse and the Spengler Estate with the Applicant and Nancy Zaph as Plaintiffs, for $300,000 derived from a verbal promise to them by Spengler served to impede settlement and lead to increased costs for the Respondent. Given the Respondent’s position that this action was, insofar as it pertained to them, unmeritorious, the merging of passing of accounts and resolution of the gift claim impeded settlement.
(g) Counsel for the Applicant has contributed to delay by refusing to settle the terms of the order of August 1, 2014 by insisting that wording not included in the court’s endorsement be added to the issued order.
(h) Pascale was free to seek, at least until January 15, 2014 (at which time the parties had agreed that Pascale not take steps for her removal as Estate Trustee until the accounts had been passed), an order removing herself from that role, as section 37 of the Trustee Act does not require that a Trustee provide a replacement before applying to be removed. Instead she continued in her dual role as trustee/litigant, suspending any further interim disbursement to the Respondent in the process, to the prejudice of the Respondent.
(i) The order to continue dated July 24, 2014, obtained by the Trustees to the Pascale Estate, directed that the passing of accounts proceeding continue with the said Trustees as the Applicants. Counsel for the said Trustees attempted to proceed with the passing of the accounts on the next scheduled court date of August 1, 2014 and in the process bypassed entirely the Respondent’s previously stated intention of appointing Kevin Gillen as succeeding Estate Trustee Without a Will.
(j) Demands for Pascale to pass accounts extended from September 26, 2012 to June 2013. During that time frame the Applicant failed to produce timely, complete disclosure in a form contemplated by the Rules of Civil Procedure. There was therefore excessive delay associated with and arising from the request for an accounting for which the Trustees to the Pascale Estate should be responsible. The Respondent incurred costs of the motion to move matters forward (resulting in the July 11, 2013 order to pass accounts).
Discussion
16This was a contested passing of accounts.
17The jurisdiction to award costs in contested applications to pass accounts is set out generally in s.131 of the Courts of Justice Act R.S.O. 1990, c.C.43 and more specifically in rule 74.18 of the Rules of Civil Procedure. In assessing the costs of this application I am required to consider the factors set out in Rule 57 of the Rules of Civil Procedure as follows:
(a) The principle of indemnity, including, where applicable, the experience of the lawyer for the party entitled to the costs as well as the rates charged and the hours spent by that lawyer;
(b) The amount of costs that an unsuccessful party could reasonably expect to pay in relation to the step in the proceeding for which costs are being fixed;
(c) The amount claimed and the amount recovered in the proceedings;
(d) The apportionment of liability;
(e) The complexity of the proceeding;
(f) The importance of the issues;
(g) The conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceedings;
(h) Whether any step in the proceeding was,
i. Improper, vexatious or unnecessary or
ii. Taken through negligence, mistake or excessive caution;
(i) A party’s denial or refusal to admit anything that should have been admitted;
(j) Whether it is appropriate to award any costs or more than one set of costs for a party,
i. Commenced separate proceedings for claims that should have been made in one proceeding or
ii. In defending a proceeding separated unnecessarily from another party in the same interest or defended by a different lawyer; and
(k) Any other matter relevant to the question of costs.
18In Estate litigation, as long as the issues raised by the challenging party are reasonable questions that require a court to determine, the court may exercise its discretion such that the losing party should not have to bear the costs of that issue (see Smither v. Smith 2002 CarswellOnt. 1087, Ont. S.C.).
19In Re Wright Estate (1990), 43 E.T.R. 82 (Ont.Gen.Div.), the court ordered the Estate executors to pay the beneficiaries’ costs personally where the beneficiary was successful in substantially reducing the amount of compensation awarded on a contested passing. In coming to this conclusion the court noted that if the costs of both sides were paid out of the Estate the beneficiary, to the extent of her interest, would be paying the legal expenses of her adversaries and that would seem to be an anomalous result. See also Re Huzzell Estate 1995 CarswellOnt. 2711 (Gen.Div). The traditional rule that costs of all parties are routinely to be paid from the Estate has been replaced by the modern approach of assessing costs in Estate litigation in a fashion similar to other litigation. Because costs are discretionary, it is impossible to lay down any rule as to when the usual course will be departed from (see Re: Raeburn Estate 2009 CarswellOnt. 6431 (S.C.J.)).
a) Relative Success
20Before proceeding further I should address the issue of relative success. As noted above the Applicant was seeking total compensation of $38,478.27 including HST. I have found that HST was not applicable, notwithstanding the Applicant’s claim therefor. Ultimately I have awarded total compensation to the Applicant in the amount of $21,761.41 CDN plus $445.81 US representing 58% of the total amount originally claimed; or, conversely stated, 42% lower than the amount claimed.
21By email dated July 28, 2014 the Applicant proposed resolution on the basis that Pascale receive $30,000 all-inclusive for executor’s compensation. My judgment on the issue of compensation did not better that offer.
22The Respondent offered compensation to Pascale in the amount of $14,375.38, an amount that was exceeded by my judgment; however, the Respondent was also seeking payment from Pascale’s Estate to the Respondent in the amount of $50,000 “for the lack of accounting of any personal chattels of the deceased” and for an amount to be determined for costs. Neither of these offers triggers cost consequences under the rules but they do serve to frame my analysis of who was successful upon this application. Given the positions of the parties in comparison with the result, there has been mixed success.
b) Principle of Indemnity
23Counsel for the Applicant had an hourly rate of $350. Counsel for the Respondent has an hourly rate of $325. Neither hourly rate is unreasonable.
c) Amount of costs that unsuccessful party could reasonably expect to pay
24Counsel for the Applicant spent a total of 55.3 hours. There were also 4.6 hours charged at the rate of $175 per hour (presumably for legal assistant). By way of contrast the Respondent’s representation involved an expenditure of 352.6 lawyer hours and 25 hours for legal assists. These efforts pertain to the motion compelling the passing of accounts, the application to pass accounts, appointment of Succeeding Estate Trustee Without a Will, accounting issues and file organization.
25An unsuccessful party should, in my view, reasonably expect to pay a reasonable amount for the motion compelling the passing of accounts (the costs of which motion were left to the judge determining the passing), the application to pass accounts, the appointment of a Succeeding Estate Trustee Without a Will, accounting matters and time spent in organizing the file.
26Given the amount of compensation at issue, being at best approximately $38,000, I must consider the claims for costs in relation to proportionality. In my view, the costs sought by the Respondent are disproportionate to the quantum in dispute. The Respondent’s case on the issue of costs, taken at its best (i.e. substantial indemnity costs starting in the amount of $129,008.07) represents almost three and a half times the amount claimed by the Applicant as compensation. In my view it is not reasonable for a unsuccessful party to expect to pay costs at that level, particularly considering the costs claimed by the Applicant on a full indemnity basis amount to less than 20 percent of the costs claimed by the Respondent.
d) Amount Claimed and Amount Recovered
27As indicated earlier, the amount claimed by Pascale, including HST, was $38,478.27. The amount recovered is $21,761.41 CDN plus $445.81 US, representing a significant reduction (42%) compared to the amount claimed. On the other hand, I have awarded over 1.5 times the amount offered by the Respondent. This will factor into my determination as to the issue of costs.
e) Complexity of the Proceeding
28Given the size of the Estate and the number of accounts it would be fair to characterize this proceeding as moderately complex.
f) Importance of the Issues
29The issues were certainly important to the parties, perhaps more so to the Respondent who, as sole beneficiary for the Estate, has been waiting for almost five years for final distribution of the balance of the Estate accounts.
g) Conduct of any party that tended to shorten or to lengthen unnecessarily the duration of the proceeding
30The Respondent argues that the Applicant’s decision to seek global resolution of the passing of accounts and her claim against the Estate impeded settlement discussions. I am not prepared to draw that conclusion on the evidence before me. The evidence available is at least equally balanced as to who might be responsible for failure to resolve either this proceeding or the proceeding relating to the gift.
31I therefore do not conclude that the conduct of either party in this regard tended to shorten or lengthen unnecessarily the duration of the proceeding.
h) Any other matter relevant to the question of costs
32The Respondent argues that notwithstanding the August 1, 2014 order that “…the Trustees of the Estate of Anna Pascale shall pay to the accountant of the Superior Court all funds existing in the two Estate accounts as of July 31, 2014, being $305,691.66 forthwith”, those funds have yet to be so paid. Payment into court requires a copy of the order under which the money is payable pursuant to rule 72.02(2)(b) of the Rules of Civil Procedure. The Respondent argues that the Applicant’s counsel has insisted on inserting the words “forthwith after issuance of the order” into the order notwithstanding that those words do not appear in Justice Healey’s endorsement. As a consequence, the Respondent argues the Respondent is responsible for delay.
33I agree that the Applicant’s position in this regard is incorrect; however, it was at all times open to the Respondent to schedule an appointment to settle the order and thus eliminate or at least reduce any delays. Failure of the Respondent to do so weakens the complaint in this regard.
34The Respondent argues that the issue of the Applicant’s conflict of interest served to delay proceedings as described above and she should have taken steps to remove herself as Estate Trustee as soon as the conflict made itself apparent.
35The Applicant argues that the conflict did not make itself apparent well after Pascale’s appointment as Trustee, when the Respondent chose to contest the Applicant’s claim for gift which was inconsistent with the position that the Respondent took at the time of Spengler’s passing according to the Applicant’s evidence.
36There is no written evidence supporting the gift and thus this issue will rise or fall in the context of another proceeding based on whatever other evidence might be available. I cannot draw any conclusions in this proceeding as to the merit of either party’s position on the issue of gift; however, the Trustee Act does not require that a Trustee provide a replacement before applying to be removed, something the Applicant maintained was the responsibility of the Respondent before she could withdraw as Estate Trustee. When a Trustee wishes to resign, it will ordinarily fall to that person to locate a replacement Trustee (see Evans v. Gonder, 2010 ONCA 172, at p. 33), but this is not a precondition to applying to being removed.
37In the Applicant’s affidavit sworn August 8, 2013 she states:
… I am unable to properly and in good conscience proceed with such claim until I have been removed as Estate Trustee for this Estate and my accounts … are passed by this Honourable Court….
38It would therefore appear that some delay must be ascribed to the Applicant for failing to administer the Estate with greater haste as a consequence of her declaration of conflict of interest followed by her decision to impose responsibility for seeking a replacement upon the Respondent even though that was a legally unsupportable position.
39The Respondent also argues that the Applicant failed to provide timely, complete and proper accounting disclosure in a form contemplated by the Rules of Civil Procedure. There is evidence before me confirming the Respondent’s efforts to secure that information before the Respondent brought the motion on July 11, 2013 to secure an order to pass accounts. It is appropriate in such circumstances that the Applicant bear responsibility for costs in this regard.
40The Applicant is certainly entitled to be indemnified for all reasonable costs including legal costs. In consideration of all of the foregoing factors, I find that a reasonable amount of fees inclusive of disbursements and HST would be $15,000, inclusive of the Tariff C quantum.
41On the other hand, the Respondent has incurred costs in pursuit of reasonable disclosure and properly formatted accounts, all of which could have been produced before Pascale’s passing in March 2014. Also it should not have been necessary for the Respondent to bring a formal motion to compel the passing of accounts. Costs of the motion in this regard were reserved. I fix same at $2,500 all-inclusive to the Respondent. As to the balance of costs claimed by the Respondent, while I have found same to be disproportionate to the amount in issue, much of these costs were reasonably generated as a consequence of Pascale’s failure to produce timely disclosure, properly formatted accounts and the conflict issue (which should have triggered a more timely application by Pascale to be removed as Trustee). I fix costs in this regard in the amount of $27,500 inclusive of disbursements and HST. Therefore I find the Respondent is entitled to total costs of $30,000 inclusive of disbursements and HST.
42Given that the Respondent is the sole beneficiary of the Spengler Estate I am sensitive to the reality that any costs payable out of this estate could necessarily reduce her entitlement and thus impose the cost consequences upon the Respondent. In my view, in the circumstances outlined above, it would be reasonable for the Respondent to expect some of her legal costs to be borne by the Spengler Estate, with the majority payable by the Pascale Estate given that the greater portion of her costs appear to have been generated in pursuit of reasonable disclosure and properly formatted accounts, and due to the conflict-related delays.
43For all of the foregoing reasons I award costs as follows:
a) To the Applicant payable from the Spengler Estate, the sum of $15,000 including disbursements and HST;
b) To the Respondent, payable from the Spengler Estate, the sum of $5,000 including disbursements and HST; and
c) To the Respondent, payable by the Applicant, the sum of $25,000, including disbursements and HST.
44The costs awarded to the Respondent and payable by the Applicant shall be payable from the fees and costs to which I have found the Applicant entitled from the Spengler Estate.
DOUGLAS J.
Released: February 12, 2015