COURT FILE NO.: 54995/14 DATE: 2016/08/16
ONTARIO
SUPERIOR COURT OF JUSTICE
In the Estate of Frederick Clement Sentineal, Deceased
BETWEEN:
JACK SENTINEAL, TRUSTEE FOR THE ESTATE OF FREDERICK CLEMENT SENTINEAL Bruce Macdonald, for the Plaintiff Plaintiff
- and -
JEFFREY SENTINEAL Brian Banfield, for the Defendant Defendant
HEARD: October 13-23, 2015, and April 11-25, 2016 The Honourable Mr. Justice J.R. Henderson
REASONS FOR JUDGMENT
INTRODUCTION
[1] This proceeding was commenced as an application by the plaintiff, Jack Sentineal (“Jack”), to pass his accounts as trustee for the estate of his father, Frederick Clement Sentineal (“Fred Sr.”), who died on August 20, 2004. Jack’s brother, the defendant Jeffrey Sentineal (“Jeff”), opposed the accounts presented by Jack, and this proceeding was converted to a trial of the issues.
[2] Fred Sr.’s estate consists of valuable real estate in Niagara-on-the-Lake (“NOTL”), various pieces of mechanical and farm equipment, horses, carriages, vintage automobiles, car parts, and some modest bank accounts. Further, Jack testified that the estate had an interest in the caleche licences that were issued by the Regional Municipality of Niagara (“the Region”) authorizing the operation of a horse-drawn carriage (also known as a caleche) business in NOTL.
[3] There is no dispute as to the validity of Fred Sr.’s will. The will provides that Jack is the sole executor of the estate, given the prior death of Fred Sr.’s wife. The will further provides that the entire estate is to be divided equally between Jack and Jeff. Fred Sr.’s eldest son, Fred Jr., was not named in the will and is not a party to this proceeding.
[4] It is apparent that there has been a longstanding feud between Jack and Jeff with respect to their own business ventures and with respect to their father’s estate. The present litigation, and prior litigation, has fuelled the feud.
[5] Jack submits that Jeff wrongly occupied the estate property without paying occupancy expenses; that Jeff improperly converted estate chattels; that Jeff failed to account for income that was generated by the caleche licences; that Jeff has impeded Jack’s ability to administer the estate; and that Jeff has needlessly engaged in protracted litigation, all of which has increased the expenses of the estate.
[6] Jeff submits that Jack breached his fiduciary duty as estate trustee by failing to administer the estate in good faith; that Jack used the estate for his own personal profit; that Jack improperly converted estate chattels; that Jack deliberately delayed the administration of the estate; and that Jack has needlessly engaged in protracted litigation, all of which has increased the expenses of the estate.
THE ESTATE ACCOUNTS
[7] Jack retained the services of Rob Weier (“Weier”), an accountant with the firm of Crawford, Smith & Swallow, to prepare a comprehensive 86 page Statement of Accounts, filed as Exhibit 1, Tab 5, for the period August 20, 2004 to January 10, 2014. The summary pages of this Statement of Accounts, pages 85 and 86, are attached hereto as Schedule A.
[8] After Weier testified at trial, it was apparent that some minor amendments to the accounts were mandated. Therefore, Weier produced an Amended Statement of Accounts, filed on consent as Exhibit 13, which contained those amendments as well as many other changes to the original Statement of Accounts.
[9] In my view, this trial was for the purpose of passing the accounts as of January 10, 2014. Therefore, the items in the Amended Statement of Accounts that relate to income or expenses after January 10, 2014 are irrelevant to this proceeding. However, in this decision I will consider the amendments that are intended to correct the amounts of expenses paid prior to January 10, 2014.
[10] All references in this decision to the Statement of Accounts mean the original Statement of Accounts, the summary pages of which are attached as Schedule A, unless otherwise stated.
THE ISSUES
[11] The disputes before me can be divided into the following issues:
i. What are the capital receipts, income receipts, and disbursements of the estate? ii. Does Jeff owe money to the estate for his occupation of the estate property, his conversion of estate chattels, or for legal and accounting fees? iii. Does Jack owe money to the estate for his conversion of estate chattels, or for the improper administration of the estate? iv. What amount of legal fees and accounting fees should be paid out of the estate? v. Is Jack entitled to compensation as the executor of the estate, and if so in what amount? vi. Are there other adjustments that should be made to the Statement of Accounts?
CREDIBILITY
[12] I have serious credibility concerns about both Jack and Jeff.
[13] Jack is the brother who became an educated successful businessman. He is well versed in corporate and accounting matters. Jeff is the brother who stayed on the farm, drove the horse carriages, and cleaned out the stalls. Despite their differences, both brothers exhibited the same traits of stubbornness, aggressiveness, and animosity toward each other.
[14] Both Jack and Jeff testified that their mutual dislike escalated after an incident that occurred on December 25, 2004, when Jeff threatened Jack and his family. Jack acknowledged that he initially confronted Jeff because he felt that Jeff’s wife, Lori, was creating debt everywhere. Jeff testified that Jack was angry because Jack believed that Jeff and Lori had caused their business accountants to make an accounting entry that cost Jack a significant amount of money.
[15] I accept that both brothers have distrusted each other since at least December 2004. Moreover, since that time they both have been on an unrelenting mission to vilify each other. At trial Jeff went so far as to blame Jack for their father’s death. These traits taint the evidence of both brothers.
[16] More specifically, regarding Jack, I found that Jack was extremely boastful about his own abilities to conduct business and manage the estate. Whenever a question was put to Jack about a decision he had made, he tended to embark on a long-winded discussion of how bright he was, and how difficult his brother made life for him. I found that Jack tended to embellish his own accomplishments, and denigrate Jeff. That being said, I did not find that Jack stooped to dishonesty.
[17] On the other hand, I find that Jeff was so resentful of his brother Jack, and the fact that Jack had sole control over the estate, that Jeff was willfully blind to what was right and what was wrong.
[18] In particular, I find that Jeff intentionally sold chattels that belonged to the estate, without informing Jack or accounting to Jack as trustee of the estate. I also find that for many years Jeff refused to provide a list of the estate chattels that were under his control. Further, when Jeff was confronted with evidence of his conversion of estate property, I find that Jeff fabricated stories to cover up his misconduct.
[19] Moreover, I find that Jeff deliberately interfered with Jack's ability to enter onto the estate property and deal with the estate chattels. On the few occasions that Jack attempted to gain access to the estate property, Jeff prevented him from doing so, or threatened him with violence.
[20] In addition, I find that Jeff created accounting and tax problems for the caleche business by failing to declare cash income, and by, along with his wife Lori, depositing unreported income from the business into a U.S. dollar account. This created a tax liability for the business, for Jeff, and indirectly for the estate. Now, Jeff seems to blame Jack for the financial problems that arose out of Jeff’s improper business conduct.
[21] Overall, I have difficulties with the credibility of both Jack and Jeff. Generally, I prefer the testimony of Jack to the testimony of Jeff, but I am cautious about accepting the testimony of either of these two brothers.
FINDINGS OF FACT
1. THE BACKGROUND
[22] Fred Sr. and his wife, Jacqueline Sentineal (“Jacqueline”), owned valuable property known as 134 Anne Street, 154 Anne Street, and 174 Anne Street, in NOTL (hereinafter collectively called “the estate property”). Jacqueline’s interest in this property passed to Fred Sr. on Jacqueline’s death in February 2004.
[23] The estate property forms a large block of land in the Old Town area of NOTL. There are three residential houses on the property. Fred Sr. and Jacqueline lived at 134 Anne Street until Jacqueline’s death, and Fred Sr. continued to live at that property until his death.
[24] A group home business had been developed by Jacqueline over many years. From at least the 1970s, the family operated group homes at both 134 Anne Street and 174 Anne Street. The use of these two residences as group homes changed over the years as the foster children changed and the family had its own needs. At the time of Fred Sr.’s death, there were a few foster children residing at 174 Anne Street.
[25] Jeff and his family also lived at 174 Anne Street for many years prior to Fred Sr.’s death. They continued to live there after Fred Sr.’s death until the property was sold in August 2012. 154 Anne Street contained a residential cottage that has been rented out to third parties at various times. Behind the residential housing units was a barn in which the family kept horses, a large paddock, and a large workshop. All of the estate property in combination was approximately 3.32 acres in size.
[26] Fred Sr. was mechanically inclined and he operated a business known as Niagara Auto Body out of the estate property. However, in approximately 1978, because of an illness, Fred Sr. became physically unable to engage in meaningful employment. Thereafter, he used the workshop and the barn as a venue to restore and repair vintage automobiles. In doing so, he collected a variety of tools, old automobiles, and car parts.
[27] Fred Sr. and Jacqueline had three children, namely, Fred Jr., Jack, and Jeff. In the early 1990s the family started a caleche business operating horse-drawn carriages from the estate property. This business became very successful within the NOTL tourist industry. I find that Fred Jr. was primarily responsible for developing the family caleche business in the 1990s. However, by late 1999, because of a falling out with the family, Fred Jr. left the family business, and thereafter operated his own caleche business from his own property.
[28] Jack assisted his parents with the group home business until the mid-1980s. By that time, Jack had obtained a university degree and had developed a very successful computer software business. Thereafter, as of the mid-1980s, Jack moved away from the estate property and worked primarily in his own businesses. Except as discussed hereinafter, Jack had little involvement in the caleche business.
[29] Jeff lived most of his life on the estate property. As a young adult he assisted with the family farm, the caleche business, and the group home business. In the early 1990s Jeff and his wife moved into 174 Anne Street and were primarily involved with the group home. However, because of unfortunate criminal charges against Jeff that were laid in the late 1990s, Jeff’s involvement in the group home business was terminated and the group home business was substantially reduced.
[30] In the late 1990s, Jeff became heavily involved in the caleche business that was operated out of the estate property, primarily by Fred Jr. When Fred Jr. left the family business in 1999, Jeff carried on the operation of the family caleche business from the estate property. At present Jeff continues to operate a caleche business in NOTL; his main competitor is Fred Jr.
2. QUEEN’S ROYAL TOURS INC.
[31] At the heart of this litigation is the corporation, Queen’s Royal Tours Inc. (“QRT”). When Fred Jr. severed his ties with the family in 1999, Jack, Jeff, and their parents collectively created QRT. There is no dispute that QRT was intended to be the corporate vehicle for the operation of the family caleche business.
[32] There is also no dispute that the shares of QRT were divided so that 50% of the shares were owned by Quick Solutions Inc. (“QSI”), a corporation that was controlled by Jack and his wife, Lora, 25% of the shares were owned by Jeff, and 25% of the shares were owned by Jeff’s wife, Lori.
[33] Jack testified, and I accept, that it was agreed that Jack would contribute money and money’s worth to QRT; Lora was to work in marketing; and Jeff and Lori were to run the day-to-day operation. Jack acknowledged that Jeff and Lori were to earn an income from QRT.
[34] Fred Sr. and Jacqueline did not have an ownership interest in QRT, and were not involved in the operation. However, the QRT business ran out of the estate property that was owned by Fred Sr. and Jacqueline; the horses that were used in the business were owned by Fred Sr. and Jacqueline; and the horses were stabled on the estate property. In addition, Jack testified that the caleche licences that formed the foundation of the business were held by Fred Sr. and/or Jacqueline.
[35] Accordingly, Jack testified that when QRT was formed in 1999 there was an oral agreement that his parents were to be paid approximately $2,500.00 per month out of the QRT business as compensation for the use of their property, horses, and caleche licences.
[36] Jeff testified that Jack set up QRT for Jack’s own benefit. Specifically, Jeff believed that Jack set up QRT so that Jack could “hide his money” by buying vintage cars that were to be used in the QRT business.
[37] Jeff acknowledged that Jeff and Lori were to run the day-to-day operation, and that Jack and Lora would deal with the financing and the marketing. Jeff testified that he was to take the income out of the business that he needed to support his family. However, he denied that there was any agreement to pay any money to his parents.
[38] Legal ownership of the caleche licences is a complicating issue. These licences must be obtained from the Region, but they can only be obtained if NOTL first grants a person or entity a “permission” to obtain a licence from the Region. The official records of both NOTL and the Region are very confusing. Over the years, it appears as if both Jeff and Fred Jr. owned “permissions” from NOTL. Further, at different times each of Jacqueline, Fred Jr., Jeff, and QRT held licences from the Region. The records suggest that from time-to-time licences held in one name may have been wrongly renewed in another name.
[39] Jack testified that in the early years Fred Sr. and Jacqueline owned three caleche licences in their names. They transferred those three caleche licences to Fred Jr. in the early 1990s. Then, after a dispute between the family and Fred Jr., Jack testified that the two relevant licences, No. 902 and No. 903, were transferred by Fred Jr. back to Jacqueline in 1998. This view seems to be supported by a 1998 record in which the Region permits a transfer of licences No. 902 and 903 from Fred Jr. to Jacqueline. Moreover, a letter from the Region in 2001 states that QRT was operating licences No. 902, 903, 907, and 909.
[40] Jeff testified that the original NOTL “permissions” for the three original caleche licences were acquired in Jeff’s name in 1990, and that Jeff never relinquished ownership of those “permissions” or the associated licences. The original documentation is not available; however, there are renewal records after 1998 that suggest that Jeff was the person who was using those licences.
[41] In summary, Jack testified that, as of Fred Sr.’s death, he believed that the estate owned these two caleche licences, No. 902 and No. 903, and that Jeff owes the estate for any income he generated using those licences. Jeff testified that the estate had no interest in these caleche licences. Jeff testified that QRT used Jeff’s caleche licences, and that after Fred Sr.’s death, Jeff used his licences to carry on his own business.
[42] The muddle surrounding QRT and the caleche licences is further complicated by the fact that Jeff and Lori ran QRT as a cash business, and they failed to make proper remittances to Revenue Canada. This issue was brought to a head by an audit that was conducted by the Canada Revenue Agency (“CRA”) in the early 2000s. In February 2004, the CRA released the results of its audit of the books and records of QRT. Among other things, the CRA determined that QRT had not been declaring all of its income, and that a significant amount of money was owed by QRT for income taxes, GST, and unpaid payroll remittances. In addition, the CRA reassessed Jeff and Lori personally and determined that they both owed significant amounts of tax because of unreported income. At about the same time, Jack became aware that Jeff had not been paying the sum of $2,500.00 per month to his parents as Jack believed they had been agreed.
[43] As a result of the CRA audit, Jack testified that, in 2004, Fred Sr., Jack, and Jeff made another oral agreement that QRT would continue to operate its business in the same manner, but that all of the income from one caleche licence would be provided to Fred Sr., and all of the income from the other caleche licence would be income for Jeff. This is the state of affairs that, according to Jack, existed as at the date of Fred Sr.’s death.
[44] Jeff testified that there was no agreement at any time to divide the caleche income between himself and Fred Sr. At trial Jeff reiterated that at all times he was the sole owner of the caleche licences, and therefore he was entitled to all of the income generated through the use of those licences.
[45] The introduction of vintage cars into the QRT business caused further complications. Over a period of several years, Jack purchased as many as 10 vintage cars that were to be restored and used in the QRT business. However, Jack actually purchased some or all of the vehicles in his own name or in the name of QSI. Unfortunately, despite the fact that Weier testified that all of these vintage cars were shown on the books as assets of QRT, the ownership of at least some of those cars was never formally transferred to QRT.
[46] Furthermore, I find that these issues are made more problematic by the fact that all members of the Sentineal family seem to be very loose as to formal legal arrangements or formal documentation. This problem is exemplified by the fact that ownership of the caleche licences has been recorded in a confusing manner; the corporate structure of QRT is unintelligible; the banking records of QRT are inconsistent; the registered ownerships of the vehicles and chattels were never recorded or properly transferred; the details of the oral agreements are vague; and the statutory remittances were not made. For these reasons, after Fred Sr.'s death, it has been very difficult to determine the precise assets of the estate.
[47] Thankfully, I do not need to make findings of fact regarding the ownership of the caleche licences, the structure of QRT, or the business agreements, as these matters were settled in the Minutes of Settlement dated June 30, 2009.
[48] Pursuant to the Minutes of Settlement, QRT was dissolved as of July 31, 2005; caleche licences No. 902, 903, and 907 were transferred to Jeff; any unpaid remittances were to be paid by Jeff and Lori; and the parties released each other from all claims to that date. I find that these Minutes of Settlement were, and continue to be, binding on the parties.
3. THE REAL ESTATE PROPERTY
[49] The estate property consists of all but one corner of a large block of land in the Old Town area of NOTL. The estate property was appraised at 1.56 million dollars as of August 2004.
[50] The last corner of that block in NOTL was known as 128 Anne Street, a property that contained a large automobile garage. Subsequent to his father’s death, Jack purchased 128 Anne Street in the name of one of his corporations on the premise that if he were to sell the estate property along with 128 Anne Street, all of the property would be more valuable.
[51] In addition, there was a road allowance between 134 Anne Street and 154 Anne Street. In 2012, Jack purchased the road allowance from NOTL on the same premise.
[52] Jack marketed the combined real estate holdings as a package and sold the package together for a sale price of 2.6 million dollars. The sale closed on August 31, 2012, and the sum of $2,132,000.00 was allocated as the sale proceeds that related to the estate property. There was a partial distribution of some of the sale proceeds to each of the beneficiaries at that point. The balance of the sale proceeds continues to be held in trust.
4. THE ESTATE CHATTELS
[53] There is no doubt that there have been difficulties obtaining an accurate inventory of the estate chattels. The estate chattels consisted of various automobiles, car parts, machinery, and farm equipment that was scattered about the estate property, the barn, and the workshop. The chattels were stored in an unorganized, chaotic manner; some chattels had significant value, but others were no more than heaps of scrap metal.
[54] Moreover, ownership of many of the estate chattels is extremely uncertain. Some of the chattels were owned by Fred Sr., some by Jacqueline, some by Fred Jr., some by Jack, and some by Jeff. In many cases, legal title is impossible to determine.
[55] At some point Jack formed a belief that Jeff was removing some of the estate chattels and selling them for his own benefit. According to Jack, Jeff was taking estate chattels, such as pieces of farm equipment and tractors and selling the chattels at auctions. Subsequently, Jack retained an appraiser to identify and value most of the chattels that were on the estate property.
[56] However, Jeff testified that Jack and his appraiser attempted to classify all of the chattels located on the property as assets of the estate. Jeff had lived on the property most of his life and ran his own business out of that property from 2005 to 2012. Thus, many of the chattels identified by the appraiser, Jeff said, belonged to him.
5. LITIGATION HISTORY
[57] After Fred Sr.’s death, all of these issues caused friction between Jack and Jeff, and ultimately led to legal proceedings between them.
[58] The most prominent litigious issues involved the operation of QRT and the caleche business. In simple terms, Jack believed that the income from the caleche business was income that should have been shared between his father and Jeff, but Jeff believed that Jeff was entitled to all of the income from that business.
[59] Further, there were estate difficulties caused by the CRA audit. The CRA had served Jack, as executor of the estate, with Requirements to Pay that required the estate to pay to the CRA any money that may be payable to Jeff out of the estate up to the amount that Jeff owed for unpaid taxes and remittances. Moreover, Jack held Jeff responsible for any money owed by QRT to the CRA, as Jeff had kept the cash earnings of QRT for himself without making proper remittances.
[60] There has also been litigation regarding the estate chattels. Because Jeff lived on the property, Jeff had control over the estate property and the chattels located thereon. Jack testified that he had several angry confrontations with Jeff when Jack attempted to conduct an inventory of the estate assets that were located on the estate property. Both brothers asked the court for assistance in restraining the other from dealing with the chattels.
[61] In addition, there has been litigation regarding Jeff’s occupation of the estate property. Jeff and his family continued to reside at 174 Anne Street until the estate property was sold in August 2012. Jack testified that the estate paid for all of the expenses associated with all of the estate property, including 174 Anne Street, until the property was sold. Jack alleged that Jeff and his family did not pay rent during their occupation of the property, nor did they pay for the expenses associated with the property. Thus, Jack wanted Jeff to account to the estate for his occupation of the property.
[62] In early 2005, Jack applied for a Certificate of Appointment with a Will as executor of the estate. This application became estate court action No. 5717/05. Jeff filed a Notice of Objection in May 2005, and Jack was never granted a Certificate of Appointment.
[63] On June 30, 2005, Jack commenced court action No. 47065/05 for, among other things, an injunction restraining Jeff from participating in the caleche business and an accounting from Jeff for income he had earned from that business. The plaintiffs in action No. 47065/05 were QRT, QSI, and Jack Sentineal personally. The defendants were Jeff and Lori. The estate was initially not a party to that action.
[64] On July 14, 2005, Justice Turnbull heard Jack’s motion for an interlocutory injunction. Justice Turnbull adjourned the motion, but made some orders that would allow for the orderly operation of the caleche business. In particular, Justice Turnbull ordered that Jeff could continue to operate the caleche business, but that the net proceeds of the business were to be held in trust and that Jeff must provide a full accounting of the income and expenses of the business.
[65] Jack then commenced another court action, No. 47388/05, on November 9, 2005, in the name of QRT, QSI, and Jack Sentineal personally. This was an application for relief under the Business Corporations Act, and included requests for orders dealing with the preservation of the caleche business, and payment of expenses of the business.
[66] Then, in the estate court action No. 5717/05, Jeff brought a motion to remove Jack as estate trustee. Justice Taliano heard this motion on December 1, 2005, but declined to remove Jack as trustee. Further, Justice Taliano made orders that would allow Jack to write cheques and pay some expenses.
[67] On February 8, 2006, Justice Sheppard made an order that consolidated all three of the court actions, added the estate as a party to the proceedings, and appointed Jack as estate trustee for the purpose of the proceedings. The parties then exchanged pleadings in the consolidated action. In Jeff’s pleading, Jeff counter-claimed for an order restraining Jack from dealing with the property of the estate or QRT, and for damages for breach of fiduciary duty.
[68] Within the consolidated court action, another motion for injunctive relief came before Justice Matheson on August 22, 2006. Justice Matheson kept in place the terms imposed by Justice Turnbull in July 2005, but added that Jeff was to keep detailed monthly records of the income and expenses of the business, and that Jeff could use the income to pay his personal expenses.
[69] In the spring of 2009, the consolidated action was tried before Justice Whitten. After eight days of trial, the parties entered into Minutes of Settlement dated June 30, 2009. The Minutes of Settlement were signed by Jack on behalf of the estate, QRT, QSI, and himself personally. Jeff and Lori also signed the Minutes of Settlement.
[70] The 2009 Minutes of Settlement provided, among other things, for the following: that QRT was dissolved effective July 31, 2005; that all employee remittances, GST, and payroll taxes owed by QRT for the years 2002 to 2005 were to be paid by Jeff and Lori; that the parties were to comply with production requests of the accountants Crawford, Smith & Swallow; that two vehicles, a 1936 Ford Roadster and a 1935 Ford Sedan, were to be transferred to Jack at his own expense; that caleche licences No. 902, No. 903, and No. 907 were to be transferred to Jeff at his own expense; that the estate property was to be sold and the proceeds divided equally; that Jeff and Lori were to be allowed to live on the property and were to pay the utility costs for the house and the barn; that Jeff and Lori were to pay to Jack the sum of $500.00 per month for the use of the barn for two years commencing July 1, 2009; that Jeff was to pay to Jack the sum of $23,500.00 regarding a CIBC bank loan; and that the parties were to provide each other with “mutual releases of all claims known and unknown.”
[71] However, prior to the Minutes of Settlement, on April 2, 2009, Jeff had commenced a fresh court application, No. 51163/09, in which he again requested, among other things, that Jack be removed as estate trustee. The only named parties in that proceeding were Jeff as applicant and Jack as respondent. Despite the Minutes of Settlement in the consolidated action, Jeff proceeded with this fresh application, and Jack defended. In the pleadings Jack claimed that he was receiving no accounting whatsoever from Jeff, and Jeff claimed that Jack was in breach of his duty as estate trustee.
[72] Eventually, application No. 51163/09 was heard as a trial by Justice Hambly. On December 22, 2011, Justice Hambly released his decision and ordered: that the application be adjourned to September 2012 to review the status of the executor; that the estate property remain listed for sale with Royal LePage Niagara Real Estate; that all of the chattels listed in Jeff's affidavit were to be sold by auction under the direction of Jack; that Jack may obtain an open mortgage on the estate property; and that upon the sale of the estate property the proceeds were to be distributed in a certain specific manner.
[73] Jack appealed Justice Hambly’s decision to the Ontario Court of Appeal (“OCA”). Jeff cross-appealed for, among other things, an order removing Jack as estate trustee.
[74] The OCA heard the matter in May 2013, and allowed Jack's appeal, in part, by varying the Judgment so that all of the estate funds would be held until the final passing of the accounts. The OCA dismissed Jeff's cross-appeal to remove Jack as trustee. Costs of $10,000.00 were awarded payable by Jeff to Jack.
[75] Then, this present proceeding was commenced. Jack delivered his affidavit verifying the accounts in February 2014, and Jeff delivered a Notice of Objection in March 2014. Thereafter, this trial of the issues was ordered.
ANALYSIS OF THE ISSUES
1. CAPITAL RECEIPTS, INCOME RECEIPTS, AND DISBURSEMENTS
[76] Most of the significant capital and income receipts as set out in the Statement of Accounts are not in dispute.
[77] One of the disputed alleged receipts is the entitlement of the estate to a refund of probate fees in the amount of $26,215.00. It appears that this amount was paid by the estate to the court when Jack applied for a Certificate of Appointment with a Will, but that application was never continued because of the disputes that arose, and the Certificate of Appointment has never been granted. Therefore, the estate has now applied for a refund of the probate fee, but has not yet received it.
[78] In my view, the Statement of Accounts should show this refund in the amount $26,215.00 as a receivable. It is an asset that has not yet been realized. It is not part of the amount that is available for distribution at this stage, but it should be shown as an asset in the Statement of Accounts.
[79] The other disputed capital and income receipts relate to money that Jack alleges is owed by Jeff to the estate, and money that Jeff alleges is owed by Jack to the estate. I plan to deal with these items during the course of this decision, and make appropriate adjustments to the Statement of Accounts at the conclusion of this decision. Accordingly, I will not include these disputed items under this heading.
[80] Similarly, most of the disbursements set out in the Statement of Accounts are not in dispute. Those that are in dispute will be discussed in this decision, and the appropriate adjustments will be made.
[81] Therefore, subject to the adjustments dealt with hereinafter, the capital receipts, income receipts, and disbursements set out in the Statement of Accounts are approved.
2. DOES JEFF OWE MONEY TO THE ESTATE?
[82] Jack submits that Jeff owes money to the estate as a consequence of several matters that he has raised.
[83] The first matter is Jack’s submission that Jeff should pay the estate $48,363.14 to reimburse the estate for occupancy expenses paid on Jeff’s behalf while Jeff and his family lived on the estate property from 2004 to 2012. Jack has produced, through his accountant, various bills and documents with respect to expenses that he attributes to Jeff’s occupation of the property.
[84] There are several difficulties with this claim. First, some of the bills attributed to Jeff’s occupation of the property are in fact car insurance bills that relate to vehicles that were owned by the estate. There is no obligation on Jeff to pay these bills; rather, the obligation is on the estate to pay for the insurance on vehicles owned by the estate.
[85] Second, Jack requests reimbursement for many utility bills that relate to 134 Anne Street, 154 Anne Street, and 174 Anne Street. However, Jeff and his family only resided at 174 Anne Street, and therefore should not be responsible for utility expenses for the other two residences on the estate property.
[86] Third, one of the expenses that Jack suggests relates to Jeff’s occupancy of the property is a bill from Crawford, Smith & Swallow, the accountants for the estate, in the amount of $7,704.00. Weier testified that this bill represents work done by Weier over a six week period from December 2004 to February 2005, during which Weier attempted to mediate the disputes between Jeff and Jack. This has nothing to do with Jeff’s occupancy of the property, and I will deal with it separately below.
[87] Finally, I find that any liability that Jeff may have for these occupancy expenses has been extinguished by the 2009 Minutes of Settlement. The parties to the Minutes of Settlement include Jack, Jeff, Lori, QRT, QSI, and the estate.
[88] Paragraph eight of the Minutes of Settlement permits Jeff and Lori to live on the property and “they are to pay the utility costs for this house and the barn until they vacate the property...” [Emphasis added].
[89] Further, paragraph 11 of the Minutes of Settlement reads, “The parties are to provide each other with mutual releases of all claims known and unknown which they have or may have against each other.”
[90] Therefore, pursuant to the Minutes of Settlement, the estate has no claim for occupancy expenses prior to June 30, 2009, the date of the Minutes of Settlement, and any claim afterward is only for utility costs for 174 Anne Street and the barn.
[91] Jeff and Jack both testified that Jeff generally paid the utility expenses for his use of 174 Anne Street until he vacated in 2012. The only occupancy expenses submitted by Jack that are dated after June 30, 2009, are expenses for property taxes and property insurance. In my view, property taxes and property insurance are not utility costs, and should be borne by the owner of the property, the estate.
[92] Accordingly, I find that there are no occupancy expenses for which Jeff is liable to the estate.
[93] The next matter relates to Jack’s submission that Jeff sold chattels that belong to the estate without accounting for the proceeds of the sale. This issue is complicated by the fact that Fred Sr. owned many old vehicles, vehicle repair equipment, carriage equipment, and farm equipment, all of which were scattered around the three houses, the barn, and the compound behind the houses.
[94] Further, Jeff lived at 174 Anne Street for many years and owned his own equipment and chattels that were also scattered about the property. Further complicating this issue is the fact that ownership documentation was not available with respect to most of the vehicles and the equipment.
[95] I accept Jack’s submission that many of the estate chattels went missing after the death of Fred Sr. in August 2004. The best evidence on this point comes from the appraiser, Bob Paladichuk (“Paladichuk”), who prepared an inventory of the chattels that were on the property in 2009, and then returned to update the inventory in 2011, only to find that some of the original chattels were gone. Paladichuk prepared a long list of items that went missing and I accept his evidence.
[96] The difficulty is determining who owned the missing items and what happened to them. Given that Jeff had control over the estate property and given Jeff’s resentment of Jack, it is not unreasonable to consider the possibility that Jeff disposed of some of the estate chattels and kept the proceeds. I find that possibility to be proved with respect to a few specific chattels.
[97] Jeff’s misconduct is most apparent in the circumstances surrounding the sale of a Brougham carriage. It is agreed that the Brougham was the property of Fred Sr. Several years after Fred Sr. died, it came to light that Jeff had sold the Brougham for $4,000.00 at the Topeka Auction in Topeka, Kansas on October 1, 2004. Jeff did not account to the estate for the sale proceeds and did not inform Jack that he had sold the Brougham.
[98] Initially, on his examination for discovery Jeff testified that the Brougham had been sold prior to his father’s death, and that his father had received the sale proceeds. This testimony is clearly incorrect, given the records from the Topeka Auction.
[99] Then, at trial, Jeff fabricated a story to cover up his misconduct. He testified that Fred Sr. had asked him to sell the Brougham in the spring of 2004 and Jeff attempted to do so, but could not obtain his father’s price of $6,500.00. So, Jeff said that he left the Brougham in the U.S.A. and gave his father $4,000.00 cash, which Jeff said he had his wife, Lori, deliver to Fred Sr. Then, in October 2004, Jeff testified that he sold the Brougham at the auction and kept the $4,000.00 sale proceeds. Unfortunately, Jeff’s story is not supported by Lori who testified that she recalled giving Jeff’s father a cheque for $1,000.00 in 2004, but at no other time did she give him any other cash or cheque.
[100] Therefore, I find that Jeff converted the Brougham for his own use and failed to account to the estate for the proceeds that he received from the Topeka Auction sale.
[101] This incident with respect to the Brougham caused Jack’s solicitors to obtain records from other auction houses, including Bryan’s Auction Services in Puslinch, Ontario. The records from Bryan’s Auction indicate that between 2008 and 2014, Jeff sold many items including old vehicles, farm equipment, carriages, and gas pumps. Many of the missing items identified by Paladichuk seem to be accounted for in the records of Jeff’s sales through Bryan’s Auction.
[102] The remaining question is that of ownership. Jeff initially testified that Jeff, not Fred Sr., was the owner of most of these chattels. After being confronted with the auction records, Jeff admitted that he sold chattels including a David Brown tractor, a John Deere riding mower, a Ford 8N tractor, a compressor, two sleighs, a Meadowbrook cart, and a gas pump. Then, in cross-examination, Jeff conceded that some of these chattels were in fact owned by the estate.
[103] Jeff further testified that there were two Ford 8N tractors, and claimed that the one that was sold was not owned by the estate. I do not accept that testimony, and I find that Jeff fabricated that story. I accept that there were two John Deere riding mowers, only because I have pictures of two of them. But, I do not accept that the one Jeff sold at the auction was his own. I also find that the Supertest gas pump shown in the auction records belonged to the estate.
[104] Therefore, I find that the following items were estate chattels that were sold by Jeff without accounting to the estate:
| Item | Amount |
|---|---|
| Supertest gas pump | $382.50 |
| Joy portable compressor | $510.00 |
| Ford 8N tractor | $722.50 |
| David Brown tractor | $1,440.00 |
| Brougham carriage ($4,000.00 U.S. at $1.25 Can.) | $5,000.00 |
| John Deere riding mower | $500.00 |
| Two sleighs | $300.00 |
| Meadowbrook cart | $900.00 |
| Total | $9,755.00 |
[105] Regarding the other estate chattels that Jack alleges were sold by Jeff, I find that I am unable to determine ownership, and therefore I cannot find that Jeff is accountable to the estate for the proceeds of these sales. In summary, I find that Jeff owes the estate $9,755.00 for estate chattels that Jeff converted for himself.
[106] The next matter is the Crawford, Smith & Swallow mediation bill in the amount of $7,704.00 as mentioned earlier. This account has already been paid by the estate. Jack now submits that Jeff refused to co-operate with the mediator and therefore Jeff should reimburse the estate for payment of this account.
[107] In my view, the suggestion that Jeff should pay this account is evidence of Jack’s arrogant adversarial attitude. I find that Jack hired Crawford, Smith & Swallow in late 2004 to mediate the disputes between Jeff and Jack. At the time he retained Crawford, Smith & Swallow, Jack gave Weier a list of his demands. Jeff did not accept Jack’s demands and made demands of his own. The mediation failed. The fact that Jeff did not accept Jack’s demands does not mean that Jeff must pay the costs of the mediator. I accept that this bill is a legitimate estate expense, but neither Jack nor Jeff is responsible for it personally.
[108] The last item is a request that Jeff reimburse the estate the sum of $5,002.92 for a legal bill incurred early in the proceedings. This amount is set out as an amount due to the estate by Jeff on page 85 of the Statement of Accounts, but there is no evidence as to why this bill should be treated differently than any other legal bill. Jack did not mention this legal bill in his direct evidence or in his cross-examination. Weier testified that he made the entry in the Statement of Accounts at Jack’s request, but was unclear as to the reason for this entry.
[109] Jack’s counsel did not mention this legal bill in written submissions. Only Jeff’s counsel mentioned this item in written submissions and that was only by way of one line requesting that it not be allowed. Given the lack of evidence as to why Jeff should be responsible for this legal bill, I will not allow this claim by the estate against Jeff personally.
[110] In summary, I find that Jeff owes the estate the total sum of $9,755.00.
3. DOES JACK OWE MONEY TO THE ESTATE?
[111] There are four vehicles listed as estate assets on page five of the Statement of Accounts, and Jeff submits that Jack has converted all four of these vehicles to his own use. Therefore, Jeff submits that Jack should reimburse the estate for the value of these vehicles.
[112] I find that the first two vehicles, the 1935 Ford Sedan and the 1936 Ford Roadster, were dealt with in the 2009 Minutes of Settlement. At paragraph five of the Minutes of Settlement the parties agreed that these two vehicles were to be transferred to Jack at his own expense. Therefore, these vehicles are no longer estate assets, and the estate has no claim against Jack for the value of these vehicles.
[113] I find that the other two vehicles, the 1983 Motorhome and the 1994 Astro van, remain estate assets and are in storage under Jack's control. I accept that Jack had great difficulty obtaining control over the Astro van as Jeff prevented Jack from taking the van for approximately one-and-a-half years. I accept that ultimately Jack had the van towed to a storage garage because Jeff would not give Jack the keys to the vehicle. In any event, both of these vehicles are estate property and should be liquidated. Jack is not personally responsible to the estate for the value of these vehicles as he has not converted them to his own use.
[114] In addition to the above-mentioned vehicles, there is a 1972 Cadillac which Jack has taken for his own use. It has already been decided, prior to this proceeding, that Jack would pay to Jeff the sum of $2,500.00 for this Cadillac.
[115] Next, Jeff claims that Jack kept the household contents of Fred Sr.’s home for himself, and should account to the estate for the value of these chattels. However, the evidence is that these household contents had little value, and in any event, in December 2004, the wives of Jack and Jeff went to Fred Sr.’s house with a view to disposing of the contents. I accept that members of each of the two families took what chattels they wanted, and the rest of the chattels were given away or disposed of. On this basis, I find that Jack is not responsible to the estate for the value of the household contents.
[116] Next, there was an additional expense to the estate because of the late filing of an estate tax return. The penalties and interest paid to CRA by the estate in this respect were $5,362.00. In my view, Jack is responsible for the late filing, and therefore Jack must reimburse the estate in this amount.
[117] Next, Jeff alleges that Jack damaged several estate chattels because Jack did not properly store some of the vehicles and equipment that had been left on the estate property, causing the value of these chattels to decrease in the amount of approximately $15,000.00. In my view, there is no merit to this claim.
[118] I accept that the estate vehicles and equipment generally remained on the estate property until they were sold or until the estate property was sold in 2012. However, I find that, between 2004 and 2012, Jeff exercised control over the estate property, and the chattels thereon, and attempted to prevent Jack from entering the property or dealing with the chattels.
[119] There are several examples of Jeff's attempts to impede Jack's access to the property and to the chattels. The first obvious example occurred in December 2004 when there was a confrontation between the two brothers and Jeff threatened Jack and his family.
[120] Further, the evidence is clear that Jeff changed the locks on some of the buildings on the property so that Jack could not gain access to most of the chattels. In particular, all of Fred Sr.'s tools and car parts were placed in the garage and Jeff put a padlock on the garage door.
[121] Still further, in 2007 Jack attempted to access the property and the net result was a series of angry confrontations between Jack and Jeff. On one occasion, Jeff accused Jack of attempting to lure Jeff's son into a vehicle.
[122] Moreover, police were called to intervene because of an incident between Jack and Jeff, and another incident between Jeff and one of the tenants on the property with respect to Jeff removing a chainsaw from a house on the property. Also, in December 2007, police officers had to escort Jack onto the property to re-establish a hydro connection to 154 Anne Street as the power had been cut off and Jeff was not permitting Jack to enter onto the property.
[123] In addition, in 2011 police were called when Jack's son attended on the property to clean it up so that the sale of the estate property could be completed, and Jack's son was threatened by Jeff.
[124] In summary, I find that Jeff interfered with Jack's ability to deal with the chattels. He cannot do so, and now claim that Jack did not properly deal with the storage of the chattels. I find that Jack is not accountable to the estate for any decrease in the value of the chattels.
[125] Jeff also requests that Jack reimburse the estate in the amount of $1,499.00 for car insurance paid for estate vehicles that Jack eventually took for himself. I will not allow this claim because the invoices in question refer to three different vehicles, only two of which were transferred to Jack, and because all of the invoices are for charges that pre-date the 2009 Minutes of Settlement, which authorized the transfer to Jack. Until June 2009 the vehicles belonged to the estate, and the insurance on the vehicles was properly the responsibility of the estate.
[126] Finally, Jeff requests that Jack pay Jeff's legal costs regarding the motion brought by the estate to have Jeff produce his tax returns. In my view, this request fails for two reasons. First, Jeff’s tax returns are likely relevant to estate administration matters because of the way that Jeff mishandled the QRT business by failing to make remittances and by failing to declare all of the income. Although QRT is now dissolved, there are still issues with respect to Jeff's personal liability for income taxes and for unpaid remittances. At present, CRA has served the estate with Requirements to Pay with respect to Jeff's unpaid taxes and remittances.
[127] Second, it is not for me to make an order for costs of a contested motion that was brought in another court. That is the responsibility of the court before which the motion was heard. My role is to conduct a passing of the estate accounts. There is no doubt that I will need to consider the legal accounts that were rendered to the estate by the lawyers who were retained by the estate, but my role is not to review all of the prior litigation and allocate costs on a party/party basis.
[128] In summary, I find that Jack owes the estate sum of $5,362.00 to the estate, and that Jack owes to Jeff the sum of $2,500.00 for the 1972 Cadillac.
4. THE LEGAL FEES AND ACCOUNTING FEES
[129] Jack requests that all of the legal and accounting fees incurred since Fred Sr.’s death be paid out of the estate.
[130] Regarding legal fees, Jack retained Peter Lingard (“Lingard”) in early 2005 to act on his behalf, on behalf of QRT and QSI (collectively called “Jack’s corporations”), and on behalf of the estate. Lingard was the lawyer for all of these entities until Justice Hambly gave his Judgment in 2011. In total, Jack has personally paid the accounts of Lingard in the total amount of $170,747.00, and there remains another unpaid account rendered by Lingard in the amount of $91,317.00.
[131] In addition, after the Judgment of Justice Hambly, Jack retained the law firm of Gardiner, Roberts (“Gardiner”) to handle the appeal and other estate matters. Gardiner rendered accounts totaling $136,343.25, and Jack has personally paid $113,600.18 of that account, leaving a balance owed of $22,743.07.
[132] In written submissions, Jeff’s counsel submits that the litigation between the parties has resulted in three completed court proceedings, namely, the trial before Justice Whitten that ended with the Minutes of Settlement in 2009; the 2011 trial before Justice Hambly; and the 2013 OCA case. In the first two proceedings, no costs orders were made by the presiding judges, and on the appeal, the OCA ordered Jeff to pay $10,000.00 in costs to Jack. Therefore, Jeff’s counsel submits that Jack is only entitled to recover the $10,000.00 ordered by the OCA because the responsibility for payment of legal costs has already been determined by these other courts. In my view, this argument has no merit.
[133] It must be remembered that an estate trustee is in a fiduciary position. This means that the trustee is required to administer the estate in a reasonable manner. This also means that the trustee may be required to start or defend a lawsuit on behalf of the estate. In doing so, the legal fees incurred are not legal fees incurred for the benefit of the trustee, but are legal fees incurred for the estate. Provided that the trustee has acted reasonably, the trustee should not be out of pocket for legal fees incurred for the estate.
[134] The Supreme Court of Canada, in the case of Geffen v. Goodman Estate, [1991] 2 S.C.R. 353, made a strong statement to that effect at para. 74 as follows:
The courts have long held that trustees are entitled to be indemnified for all costs, including legal costs, which they have reasonably incurred. Reasonable expenses include the costs of an action reasonably defended: see Re Dingman (1915), 35 O.L.R. 51. In Re Dallaway, [1982] 3 All E.R. 118, Sir Robert Megarry V.C. stated the rule thus at p. 122:
In so far as such person [trustee] does not recover his costs from any other person, he is entitled to take his costs out of the fund held by him unless the court otherwise orders; and the court can otherwise order only on the ground that he has acted unreasonably, or in substance for his own benefit, rather than for the benefit of the fund.
[135] Put another way, the costs of $10,000.00 ordered by the OCA, is an order as between the parties. If the costs collected on behalf of the estate do not cover the solicitor/client accounts rendered by the estate lawyers, the shortfall should generally be paid out of the estate, not by the trustee personally. Therefore, the fact that other courts have handled prior proceedings involving this dispute, and made cost orders, does not prohibit me from dealing with legitimate legal fees expended on behalf of the estate.
[136] For reasons set out later in this decision, I find that Jack has discharged his responsibilities as estate trustee in a reasonable manner. Therefore, all reasonable legal fees incurred on behalf of the estate should be paid out of the estate.
[137] That being said, there are two difficulties with the legal accounts before me. First, the legal services were provided not only on behalf of the estate, but also on behalf of Jack personally and on behalf of Jack’s corporations. Only those fees for services provided for the estate should be paid out of the estate. Second, the legal accounts are extraordinarily high for the work done and the results achieved. The fact that the client is a substantial estate does not entitle the lawyers to charge and recover exorbitant legal fees. Therefore, these accounts must be assessed for reasonableness.
[138] All of these legal accounts were the subject of an assessment before Assessment Officer David Thomas, but that assessment has been adjourned pending my decision. In this passing of the estate accounts, I had hoped to avoid returning this issue to the Assessment Officer, knowing that the assessment will cause further delay and will likely increase the animosity between Jack and Jeff. However, in my view, there is no choice but to have all of these accounts referred to the Assessment Officer for assessment.
[139] I have reluctantly come to that conclusion because it will be necessary for both Jack and Jeff to call evidence, presumably from the two law firms, to specifically identify the legal work that was done for the estate, as opposed to work done for Jack or Jack’s corporations. At trial, neither Jack nor Lingard attempted to distinguish between the legal work provided for the estate and the work provided for other entities. No one from Gardiner testified at the trial. Therefore, it is patently obvious that another hearing will be necessary to determine the legal fees that should be paid out of the estate.
[140] Further, because all of these accounts must be assessed for reasonableness, there is a possibility that some of the accounts could be substantially reduced. Therefore, it is important that the two law firms be permitted to participate in the assessment of these accounts.
[141] In my view, the assessment of these accounts can best be done by an Assessment Officer. The assessment is within the scope of work to be done by an Assessment Officer as there is no dispute as to the retainer. That is, it is clear that both law firms were retained by Jack, Jack’s corporations, and the estate. It will be necessary for the Assessment Officer to do a line-by-line review of each account and, with the assistance of the parties and counsel, determine which services were provided for each of the three entities. Then, the amount that is the responsibility of the estate is to be paid out of the estate.
[142] For these reasons, I direct that the quantum of the legal fees payable by the estate for these legal accounts is referred to the Assessment Officer on the following terms:
i. The Assessment Officer is to assume that, in accordance with my decision, the law firms were retained by Jack, Jack’s corporations, and the estate; ii. The Assessment Officer will determine which services are attributable to each of Jack, Jack’s corporations, and the estate; iii. The Assessment Officer will assess the reasonableness of the accounts and determine the quantum of legal fees payable by each of Jack, Jack’s corporations, and the estate; iv. Once the assessment has been completed, the legal fees attributable to the estate will be payable out of the estate.
[143] Regarding accounting fees, I accept that Crawford, Smith & Swallow has organized its accounts so that services rendered to the estate are separated from services rendered to Jack or Jack’s corporations.
[144] As set out in the Statement of Accounts, I find that the estate has already paid accounting fees to Crawford, Smith & Swallow in the total amount of $22,203.60 ($15,146.60 plus $3,248.90 plus $3,808.10), including the mediation account. Jeff does not object to these payments, but objects to any further payment of accounting fees.
[145] In the Statement of Accounts, Crawford, Smith & Swallow had estimated future accounting fees of $22,600.00 as of January 10, 2014, and now requests payment of additional accounts rendered in the amount of $12,945.28. In my view, it is not appropriate to include these additional accounts in this passing of accounts. The order for this passing of accounts refers to all accounts rendered as of January 10, 2014. Income and expenses of the estate after that date are not the subject of this court proceeding.
[146] If accounting services were provided after January 10, 2014, then the additional fees will either be agreed upon or become the subject of another proceeding. Moreover, I have not received any supporting documentation for these additional accounting fees, and therefore I am unable to consider this item in any event.
[147] Accordingly, I find that in this passing of accounts, no further accounting fees are payable by the estate as of January 10, 2014.
5. EXECUTOR’S COMPENSATION
[148] Jack claims to be entitled to an executor’s allowance for his services as estate trustee, as calculated pursuant to the tariff, in the amount of $109,630.64. In addition, he claims a fee for management of the estate in the amount of $50,482.35.
[149] Jeff submits that Jack is not entitled to an executor’s allowance or a management fee because Jack has breached his fiduciary duty as trustee, and because Jack has unreasonably delayed in the administration of the estate.
[150] I find that there is no merit to Jeff’s claim that Jack has breached his fiduciary duty. Jeff’s primary submission on this point is that Jack was in a conflict of interest position from the start of his role as estate trustee. I accept that Jack was in a conflict of interest position as Jack was both the trustee and the beneficiary of the estate; however, it is very common for an estate trustee to also be one of the beneficiaries. The real issue is whether the conflict of interest has caused the estate trustee to administer the estate in an unreasonable or unfair manner. I have no evidence to that effect in this case.
[151] As discussed earlier, I do not accept Jeff’s submission that Jack has misappropriated any assets of the estate for himself. In fact, I have found that Jeff has misappropriated some assets, but Jack has not done so.
[152] The only solid criticism of Jack’s administration of the estate is Jack’s failure to file the estate tax return on time. In my view, this was a mistake by Jack, but it is not evidence of Jack’s inability to administer the estate fairly. Jack will reimburse the estate for this mistake as discussed earlier, and that is the only remedy that is appropriate.
[153] Further, the remedy for a beneficiary, if that beneficiary believes that the trustee is in an untenable conflict of interest position, is to bring an application to the court to remove the trustee of the estate. Jeff brought such an application on three occasions in three different courts. All three of the courts denied Jeff’s application to remove Jack as trustee.
[154] Therefore, in summary, I find that Jack has not breached his fiduciary duty as estate trustee.
[155] Regarding delay, Jeff submits that Jack has deliberately delayed in administering the estate, and notes that 12 years have now passed since the death of Fred Sr. I accept that this is a long time for administering the affairs of the deceased. However, I find that Jeff has significantly contributed to this delay.
[156] Specifically, I note that paragraph four of the Minutes of Settlement provides that Jeff was to comply with all production requests from Crawford, Smith & Swallow. Weier testified that Jeff did not do so, and that fact complicated matters for the estate.
[157] I also note that in prior court decisions Jeff was ordered to produce a monthly accounting of the QRT business and Jeff did not do so. This again contributed to the delay.
[158] Further, I have already found that Jeff interfered with Jack’s ability to deal with the estate chattels, and that Jeff fabricated stories as to the whereabouts of the chattels. This again contributed to the delay.
[159] Still further, I find that Jeff caused additional delay when Jeff agreed to the Minutes of Settlement in June 2009, but at approximately the same time Jeff also started another application to remove Jack as estate trustee. When Jeff returned this application to court in January 2010, any kind of co-operation that might have come from the Minutes of Settlement was destroyed. Moreover, Jeff’s conduct delayed the administration of the estate until the trial of Jeff’s application in 2011, and thereafter until the appeal was heard in 2013.
[160] Finally, Jeff says that Jack deliberately delayed the sale of the estate property because the estate property was not sold until 2012. In my view, the estate property was a valuable piece of real estate, but it was a unique piece of real estate that had a limited number of potential buyers.
[161] The estate property was initially appraised in August 2004 at $1,560,000.00. After discussions with persons involved in the real estate development business, Jack developed a plan to acquire 128 Anne Street and the road allowance that ran through the middle of the property, and market the entire real estate package together as a development property. The package, but for the road allowance, was assembled by approximately 2009, and thereafter efforts were put into marketing the package. Jack specifically engaged a commercial agent in 2009 to market the property.
[162] Thereafter, two offers to purchase the property were received, but both fell through. Eventually, a final offer was received in 2012 and the sale was completed in that year. The net proceeds to the estate for the portion of the real estate package that was owned by the estate was $2,132,000.00, much higher than the original 2004 appraisal.
[163] Given the adverse circumstances created by Jeff and by market conditions, and given the limited number of potential buyers, I find that Jack’s approach was reasonable and the result was more than acceptable. Accordingly, I find that Jack is entitled to compensation for his work as executor.
[164] As to the quantum of the executor’s compensation, I look to s. 61 of the Trustee Act, R.S.O. 1990, c. T.23. Section 61(3) provides:
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.
[165] The usual tariff for calculating the executor’s allowance is discussed in the case of Laing Estate v. Hines, [1996] O.J. No. 738 (Div Ct) at paras. 23-47. Using this tariff, the executor’s allowance in this case is calculated at $109,630.64.
[166] Once the usual tariff has been used to calculate the allowance, it is appropriate to consider the five factors that go into determining the final compensation. In the case of Re: Jeffrey Estate, [1990] O.J. No. 1852, Justice Killeen wrote at page 179 as follows:
To me, the case law and common sense dictate that the audit judge should first test the compensation claims using the “percentages” approach and then, as it were, cross check or confirm the mathematical result against the “five-factors” approach set out in Re: Toronto General Trusts and Central Ontario Railway, supra….
[167] For reference, the “five-factors” referenced are, (1) the magnitude of the trust; (2) the care and responsibility springing therefrom; (3) the time occupied in performing its duties; (4) the skill and ability displayed; and (5) the success which has attended its administration.
[168] In my view, Jack has dealt with an estate that consisted of valuable assets; he has done so reasonably and with care; he has done so in the face of adverse circumstances; and he has had success in liquidating the estate. Therefore, I will allow an executor’s allowance in the amount of $109,630.64 as calculated.
[169] Regarding Jack’s claim for a management fee, in my view, the management of this estate on a day-to-day basis was not an onerous task. There were very few liquid assets to manage. The largest aspect of the administration of the estate was the sale of the estate property, and the executor’s allowance calculated above compensates Jack for his efforts.
[170] Moreover, much of the management of the assets was undertaken by accountants and lawyers, and significant amounts have been or will be paid out of the estate to compensate the accountants and lawyers for their services. Thus, in my view, it is not appropriate to permit a further management fee for Jack in addition to the executor’s allowance.
[171] In summary, I allow $109,630.64 to Jack out of the estate as executor’s compensation.
6. OTHER ADJUSTMENTS TO THE STATEMENT OF ACCOUNTS
[172] There are some other adjustments to the Statement of Accounts that must be made.
[173] First, in the Statement of Accounts there are credits to Jeff in the amount of $162.42 and $189.06. These are credits against the amounts that Jack submitted should be payable by Jeff for occupancy of the property. I did not allow the occupancy expenses as requested and therefore the credits to Jeff should not be included in the Statement of Accounts.
[174] Second, pursuant to the Minutes of Settlement Jeff owes to Jack the sum of $12,000.00 for rent on the barn for a period of two years.
[175] Third, pursuant to the Minutes of Settlement Jeff owes to Jack the sum of $23,500.00 to repay Jack for a CIBC loan.
[176] Fourth, the costs of the OCA proceedings fixed at $10,000.00 are payable by Jeff to Jack, plus interest on that sum agreed at $900.00.
[177] Finally, in the Amended Statement of Accounts, the accountants included interest income for 2014 and 2015, as well as estate taxes and other fees for 2014 and 2015. In my view, it is not appropriate to include these amounts in this passing of accounts. The order for this passing of accounts specifically referred to accounts up to January 10, 2014. Other items of income or expenses after that date will not be included in this passing of the accounts.
[178] I will, however, amend the income tax paid for the August 2013 return from the amount shown in the initial Statement of Accounts to the actual amount that was assessed, namely $73,102.59.
CONCLUSION AND FINAL ACCOUNTING
[179] In conclusion, referring the Statement of Accounts dated January 10, 2014, the accounts as presented are passed on the following basis.
[180] The amount available for distribution is accepted as $877,977.06. From this amount will be paid the following:
i. Loan payable to Jack in the amount of $3,000.00 (not contested); ii. Three months interest on the road allowance mortgage payable to Jack in the amount of $2,600.00 (not contested in written submissions); iii. Estate taxes for the August 2013 return in the amount of $73,102.59; iv. Executor’s compensation to Jack in the amount of $109,630.64.
[181] This leaves a balance available of $689,643.83. From this amount will be deducted the legal fees of Peter Lingard and Gardiner, Roberts, for services provided to the estate, after assessment. Then, the trustee must account for all income and expenses after January 10, 2014.
[182] Then, the balance is to be divided equally between Jack and Jeff, subject to the following adjustments:
i. The sum of $46,400.00, representing $12,000.00 for rent on the barn, $23,500.00 for the CIBC loan, and $10,900.00 for the OCA costs and interest, will be paid from Jeff’s account to Jack’s account; ii. The sum of $4,877.50, representing one half of the amount owed by Jeff to the estate for the conversion of estate chattels, will be paid from Jeff’s account to Jack’s account; iii. The sum of $2,500.00, representing payment for the 1972 Cadillac, will be paid from Jack’s account to Jeff’s account; iv. The sum of $2,681.00, representing one-half of the amount owed by Jack to the estate for the late filing of the estate tax return, will be paid from Jack’s account to Jeff’s account.
[183] Judgment to go in accordance with these Reasons.
[184] If there are any other issues, including costs, that cannot be resolved, I direct that the party seeking relief shall deliver written submissions to the trial co-ordinator at St. Catharines within 20 days of the release of this judgment with responding submissions to be delivered within 10 days thereafter. If no submissions are received within this timeframe, the parties will be deemed to have settled all of the remaining issues as between themselves.
J.R. Henderson J.
Released: August 16, 2016
SCHEDULE A
Estate of Frederick Sentineal Distribution of Funds
Jack Sentineal Jeff Sentineal
Funds Available for Distribution
Meridian Credit Union Maximizer Account 13,206.65
In Trust with Forster Lewandowski & Cords 864,770.41
--------------------------------
877,977.06
Due from Jeff Sentineal for personal expenses paid by estate
48,363.15
Less: personal expenses credited on sale of property
property taxes (162.42)
insurance (189.06)
Due from Jeff Sentineal for legal fees paid by Jack Sentineal
(lncl below in legal fees to be refunded to Jack Sentineal by the estate)
5,002.92
Less amounts owing to Jack Sentineal for estate expenses paid
Legal fees (170,747.97)
Loan amount outstanding (3,000.00)
Interest for 3 months paid on mortgage re road allowance
relating to sale of property (2,600.00)
Add rent on barn owed by Jeff Sentineal per court order
12,000.00
Final invoice from Martens Lingard (91,317.87)
Legal fees paid by Jack Sentineal to Gardiner Roberts
re appeal (82,922.87)
re executor (30,677.31)
Executor's compensation (109,630.64)
Estate care and management (50,482.35)
Estate taxes owing - estimate (71,630.00)
Net Available for Distribution 329,982.64
50% to each beneficiary 164,991.32 164,991.32
Less amounts owed to estate by Jeff Sentineal per above
(48,363.15)
162.42
189.06
(5,002.92)
(12,000.00)
Per Minutes of Settlement June 30, 2009 #10 to be paid to Jack Sentineal
out of Jeffrey Sentineal’s share of the estate
23,500.00 (23,500.00)
Per Court of Appeal Jeffrey Sentineal is to pay Jack Sentineal $10,000 with 3%
10,000.00 (10,000.00)
Interest as of May 6, 2013 196.44 (196.44)
Less amount to be withheld for 1955 Ford and 1972 Cadillac per Ontario Superior Court of Justice decision December 22, 2011
($9,000 indicated in Order, however 56 Chev not available, $2,500 allowance for 62 Cadillac only)
(2,500.00)
198,187.76 66,280.29
This accounting does not inlcude assets that are missing to be addressed by the passing of accounts. This accounting does not included those assets disposed of by Jeffrey Sentineal where he has kept the proceeds and still has an undertaking to provide a list of those assets and how much they were sold for to the executor.
Page 85
Estate of Frederick Sentineal Statement of Liabilities
Amounts paid by Jack Sentineal for estate expense
Legal fees to Martens Lingard 170,747.97
Legal fees to Gardiner Roberts
re appeal 82,922.87
re executor 30,677.31
Loan amount outstanding 3,000.00
Interest for 3 months on mortgage re road allowance
relating to sale of property 2,600.00
_______________________________________________________________________________
289,948.15
Final invoice Martens Lingard 91,317.87
Final invoice Gardiner Roberts 22,803.03
Estate taxes owing - estimate 71,630.00
Executor's compensation 109,630.64
Estate care and management 50,482.35
Estimate of accounting fees 22,600.00
______________________________
658,412.04
Page 86
COURT FILE NO.: 54995/14 DATE: 2016/08/16 ONTARIO SUPERIOR COURT OF JUSTICE BETWEEN: JACK SENTINEAL, TRUSTEE FOR THE ESTATE OF FREDERICK CLEMENT SENTINEAL Plaintiff
- and - JEFFREY SENTINEAL Defendant REASONS FOR JUDGMENT J.R. Henderson J.