SUPERIOR COURT OF JUSTICE - ONTARIO
RE: MICHAEL ELINES, DONALD RICHARD ELINES, DAVID ELINES, JANICE CHAPMAN and JILL KELLY, Applicants
AND:
JANE OLLIKAINEN and FREDERICK ELINES, Respondent
BEFORE: THE HONOURABLE MR. JUSTICE
COUNSEL: Judith Turner, Counsel, for the Applicants
Barrie Hayes, Counsel, for Jane Ollikainen
HEARD: December 23, 2016
ENDORSEMENT
Introduction
1Dorothea Elina Elines (the testator) passed away on August 6, 2012. A Certificate of Appointment of Estate Trustee with a will was granted to Frederick Elines and Jane Ollikainen on December 31, 2012.
2The testators will, after certain specific requests, divided her estate into ten shares. Those shares were divided as follows:
Jane Ollikainen - two (2) shares;
Donald Richard Elines - one (1) share;
Michael Elines - one (1) share;
David Elines - one (1) share;
Janice Chapman - two (2) shares;
Jill Kelly - two (2) shares; and,
Frederick Elines - one (1) share.
3Two of those named beneficiaries, Jane Ollikainen and Frederick Elines are the estate trustees.
4The remaining five beneficiaries brought an application requiring the estate trustees, Jane Ollikainen and Frederick Elines, to pass accounts. A passing of accounts was ordered on consent by McCarthy J. on the 12th of May, 2015.
5At the time of death the value of the estate was approximately two million dollars. There have been partial distributions to the residual beneficiaries
6The application to pass accounts was heard on December 23, 2016. The estate trustee, Jane Ollikainen, gave evidence and was cross-examined by counsel for the objector beneficiaries. In addition, one of the objector beneficiaries, Janice Chapman, also gave evidence with respect to her role as a prior Power of Attorney for the testator. The second estate trustee, Frederick Elines, did not file any material and did not attend the hearing. An affidavit verifying estate accounts was filed by Jane Ollikainen. It would appear that substantially all of the work of estate trustees was conducted by her.
7The materials before the court indicate that she retained legal counsel, she retained a tax preparation service and she retained a chartered professional accountant to prepare the accounts for passing. The estate trustee now seeks compensation for her role as estate trustee in the amount of $45,034.82, based on generally accepted percentages for estates of this value. At the hearing, the estate trustee waived her right to seek a management fee for the period under management, August 6, 2012 to April 30, 2016.
8The remaining beneficiaries objected to the amount of compensation sought by the trustee, suggesting that the legal and accounting fees incurred by her ought to offset any compensation claim. In addition, the objecting beneficiaries objected to a joint bank account which existed between Dorothea Elines and her niece, Jean Ollikainen, which was not included as an asset of the estate. In addition, the estate trustee seeks an order for increased costs with respect to these proceedings.
Issues Before the Court
9Page two of the written submissions of counsel for the estate trustee captures the three issues the court must determine:
Issue 1:
Are the funds forming the balance in the joint Bank of Montreal account #3702-102 at the date of death of Dorothea Elines (“the deceased”) an asset the estate of Dorothea Elines (“the estate”) or are the funds the property of Jane Ollikainen (Jane”)?
Issue 2:
What is the amount of the executors’ compensation payable by the estate?
Issue 3:
Are the disbursements for the following:
(i) legal accounts for King and King of $49,360.76;
(ii) accountant fees for JBM Cross-Border Tax Services Inc. of $15,262.28;
(iii) accountant fees for Sawatsky Professional Corporation of $29,380.00
to be paid by the estate or to be deducted from the executors’ compensation?
10Years prior to her death, Dorothea Elines granted a power of attorney to her niece, Janice Chapman. From approximately 2000 to 2010, Ms. Chapman operated a joint bank account at the Bank of Montreal. Her evidence at the hearing was that she operated this account as a convenience for her aunt. Her understanding was that anything left in this account would go the estate when her aunt passed. This account collected various pensions, including C.P.P., O.A.S. and her work pension.
11In 2010, Dorothea Elines prepared a new power of attorney, appointing Jane Ollikainen and Frederick Elines as her attorney for property. It was at the same time she prepared the subject will previously referred to.
12Earlier in 2011, Ms. Elines opened a new account at the Bank of Montreal, using a co-applicant form, showing the applicant as Dorothea Elines and the co-applicant as Jane Ollikainen. This form contained the following clause; “Former co-ownership (not applicable in Quebec) your account with be joint with right of survivorship unless the following is ticked: no right of survivorship.” That box was not ticked off.
13Jane Ollikainen gave evidence about this account and acknowledged that she had access to this to pay her aunt’s expenses and during this time her aunt was living in a retirement home. She acknowledged that this account received deposits by way of C.P.P., O.A.S. and other pension income. As to discussions between her and her aunt, she indicated that her aunt said “There isn’t that much in the account, you have it.”
14Approximately 18 months later, on August 6, 2012, Dorothea Elines passed away. The balance in the account at that time was $24,359.77. Several days later there was a further deposit of $8000 as a result of a cheque issued from the testator’s funds under management with her broker. The total therefore became $32,359.77.
15In her evidence, Ms. Ollikainen testified that she operated this account. Sometimes she deposited her own money, but not large amounts. She was not present when the banking documents were executed. The banker attended at Ms. Elines residence.
16No banking statements were filed with respect to the activity in this account to indicate how the sum of $24,000 was arrived at or what, if any, withdrawals were made from this account to reflect what, if any, payments were made from the account to pay Ms. Elines bills.
Submissions
17Ms. Ollikainen’s submissions are that these funds remain hers by way of survivorship based on the banking documents and comments made to her by her aunt. As such, they should not be considered an asset of the estate.
18The remaining beneficiaries submit that there is a presumption of resulting trust with respect to these funds and Ms. Ollikainen has not rebutted this presumption. As such, the balance in this account ought to form part of the assets of the estate.
The Law
19In Pecore v. Pecore, 2007 SCC 17, 2007 SCJ No. 17, the Supreme Court of Canada clarified the law as to whether a testator’s actions created a resulting trust or whether those actions could be considered an advancement as a gift. Speaking for the court, Justice Rostein defined the terms as follows at paragraphs 20-21:
A resulting trust arises when title to property is in one party’s name, but that party, because he or she is a fiduciary or gave no value for the property, is under an obligation to return it to the original title owner.
Advancement is a gift during the transferor’s lifetime to a transferee, who, by marriage or a parent/child relationship, is financially dependent on the transferor. [citations omitted]
20The court further noted at para. 27:
The presumption of resulting trust is the general rule for gratuitous transfers. However, depending on the nature of the relationship between the transferor and the transferee, the presumption of a resulting trust will not arise and there will be a presumption of advancement instead.
21On the facts of this case I am satisfied that a presumption of resulting trust was created when the account was opened. Therefore, the onus shifts to the surviving transferee, Jane Ollikainen.
22On the facts before me, I am not satisfied that this onus has been satisfied. I therefore find that the bank account is an asset of the estate. The following points assist in forming this decision:
There is no evidence before the court that there was any money in the account when it was first opened. The intention was that it would receive her pension deposits and Ms. Ollikainen would pay her bills from this account. No evidence was led before the court to show any such payments were ever made.
If Ms. Elines said to her niece that she could have what was left over in the account that is an indication that she anticipated only a small amount would be left in the account after deposits and disbursements. There is no evidence that any disbursements ever took place. The account grew as a result of pension deposits.
Several days after Ms. Elines died a further deposit of $8000 of her money went into this account. If this was a joint account with right of survivorship that ought not to have taken place for two reasons. First, Ms. Elines had already passed away. Second, these funds came from her own investments therefore there is no basis to deposit it into an account after she had passed away.
During this time period Ms. Ollikainen was also power of attorney for property. She was therefore in a position to pay Ms. Elines bills from other accounts leaving this account to accumulate with deposits.
23I am satisfied that this account, together with accrued interest, is an asset of the estate and subject to division as part of the residue in accordance with the provisions of the will.
What is the amount of executor’s compensation payable by the estate?
24Before dealing with this issue it is important to look at the disbursements incurred by the estate trustee, which are now questioned by the objecting beneficiaries. Those disbursements include legal fees, tax return preparation fees and passing of account fees.
Legal Fees
25Prior to her death, the testator retained the services the law firm of King and King. Mr. King prepared her will and power of attorney and continued to provide legal services to her estate trustee. His invoices for the period in question total $49,360.76. There are 16 invoices contained in the vouchers. The first one is dated January 24, 2013, and the final one is dated January 28, 2016. Some of the invoices contain accounts arrived at by reason of hours spent by the solicitor, but no description is provided for the work done by the solicitor. Typically, the account states; “To our fee for professional services re: Dorothea Elines”. Unfortunately, the accounts aren’t detailed so no determination can be made as to whether this was solicitor’s work ordinarily required by an estate trustee or simply the work of the estate trustee delegated to the solicitor.
Position of the Parties
26As set out in the written submissions of the beneficiary objectors;
The objectors state that if the first two accounts [$1881.45 and $8475] are accepted as representing legal work as opposed to administration work, the remaining accounts totalling $37,512.57 cannot be accepted as representing legal work. The onus of satisfying the court that the legal accounts do not cover work that is properly the responsibility of the estate trustee rests with the estate trustee. She has not discharged the onus upon her and the accounts for legal fees (disbursement and HST) in the amount of $37,512.57 should be applied to offset her claim for compensation.
27The estate’s position is that these were necessary legal expenses incurred by her in connection with the administration of the estate and ought not to be deducted from executor’s compensation.
28When it comes to drawing a distinction between a solicitor’s legal work versus a solicitor performing the executor’s work, the authors of MacDonell, Sheard and Hull in Probate Practice provide as follows at page 564:
Where part of a solicitor’s account was in respect of legal work relating to the estate, and part was in respect of assisting with the preparation of accounts, the solicitor’s account may be partly counted against compensation and partly paid by the estate.
29In Re Watterworth Estate, 1995 OJ No. 2272, Fleury J. provided the following guidance at para. 18:
It is clear law that where solicitors perform executors work, the estate cannot be charged for these services from two separate sources. Where the work being done by the solicitors is truly solicitors work, that is a legitimate disbursement of the estate and cannot be criticized.
Since the accounts did not differentiate between the functions of executors and those of solicitors, it was entirely appropriate for the executors in this case to pay the entire amounts as and when due. It will be left for me to determine if any portion of these accounts should have been paid out of executor’s compensation.
30I accept the objecting beneficiaries’ submission that $37,512.57 ought to be deducted from compensation for the estate trustee. The estate trustee has not discharged the onus that rests upon her. The following points assist in that determination:
There is no differentiation in the accounts as to whether services performed by the solicitor were legal work or estate trustee’s work.
The onus was on the moving party but no affidavit was filed by Mr. King to assist the court in this determination.
The evidence of the estate trustee at this hearing was of no help in assisting the court in determining whether she met this onus.
Income Tax Services
31The estate trustee retained a tax service to prepare and file all necessary returns over the years in question. The account for that was $15,262.28.
32The estate trustee submits that this was a necessary expense requiring professional expertise. The objecting beneficiaries point to these fees and the fees from another accountant who prepared the passing of accounts as excessive. Further, if the tax returns were prepared in a timely manner, costs would have been much lower.
33This issue is addressed in Re: Miller Estate, 1987 CarswellOnt 644, as Haley J. stated in para. 8:
In the past, the courts have permitted executors to charge against the estate, fees paid to solicitors, real estate agents and accountants in tax matters because executors cannot be expected to have the necessary expertise to act in these areas.
34I am satisfied that retaining tax preparers was a necessary expense of the estate, given the size of the estate and the nature of the assets under management. I therefore would not make any deduction from the executor’s compensation with respect to this item.
Preparation of Estate Accounts
35In order to pass accounts the estate trustee retained the accounting firm Sawatsky Professional Corporation to prepare accounts in court form. Accounts where therefore prepared for the period December 14, 2010 to August 6, 2012. The firm then invoiced the estate for $29,380. As part of its review, the firm examined vouchers from the estate which were filed as Exhibit 6. This exhibit of 250 pages contained the legal services accounts previously referred to, together with tax returns and Notices of Assessment.
36The position of the beneficiary objectors is as set out in page four of counsel’s submissions:
It is submitted on behalf of the objectors that the account fees are excessive and had Ms. Ollikainen kept proper accounts while acting as attorney and as trustee, the accounting and income tax returns could have been produced in a timely manner and at much less expense. It is submitted that the accounting fees should be set off against the compensation claim by estate trustees.
37However, the objectors did not call any evidence to prove that these fees were excessive in all of the circumstances of this case, given the size of the estate and the nature of the assets.
38I am satisfied that there should be no deduction from the estate trustee’s compensation for costs incurred to prepare accounts in court form.
Executor’s Compensation
39Based on the accounts prepared by Sawatsky Professional Corporation, the estate trustee originally claimed compensation for $52,133.36 based on the accepted percentages for estates of average complexity. At the hearing, the estate trustee withdrew her request for a management fee of $7098.54, thus she sought compensation in the amount of $45,034.82. I am satisfied that this is an appropriate level of compensation for this estate, subject to my comments about deduction for work done by the solicitor as administrative work in the amount of $37,512.57. I make no deduction for the income tax preparation or the passing of accounts preparation. The result, I am satisfied that the executor’s compensation is ordered in the amount of $7523 calculated as follows:
Executor’s compensation as claimed - $45,034.82
Less the solicitor’s fees for administration work - $37,512.57
Net payable to the estate trustee 7,522.25
40I am satisfied that this is an appropriate reduction in this case. Although the estate trustee had responsibility for the administration of this estate, it is clear that a substantial amount of her work was delegated to a solicitor. I pause to note that any reduction in estate compensation adds to the corpus of the estate. The estate trustee Jane Ollikainen is entitled to one fifth of the residue of the estate.
41It is therefore ordered that the estate trustee is entitled to compensation in the sum of $7522.25.
Claim for Increased Costs
42The respondent, Jane Ollikainen, seeks costs if successful in the amount of $46,181.11. the largest component of that submission is the account of Sawatsky Professional Corporation for preparing the accounts in court form, $29,380. I am unable to determine from the materials submitted if that has now been paid by the estate based on guidance given by me at the hearing.
43I have no submissions with respect to costs with respect to the objectors’ position. The objectors have achieved a substantial level of success. If the parties cannot reach an agreement with respect to costs, I will receive brief written submissions not exceeding three pages from counsel for the estate trustee within 20 days. Thereafter, counsel for the objectors will have ten days to submit a reply in writing, not exceeding three pages. All correspondence to be sent to the attention of my judicial assistant in Barrie.
MULLIGAN J.
Date: March 8, 2017