COURT FILE NO.: 17-63797 DATE: 2019/07/12 ONTARIO SUPERIOR COURT OF JUSTICE
IN THE ESTATE OF MARY THOMPSON, deceased
BETWEEN:
RONALD WOJCICKI, Estate Trustee of the ESTATE OF MARY THOMPSON Applicant – and – MELISSA OLLEY, and THOMAS WOJCICKI (represented by Estate Trustee SUSAN WOJCICKI) Respondents/Objectors
Counsel: Brad Wiseman, for the Applicant Margaret McCarthy, for the Respondents
HEARD: February 6 and May 27, 2019 The Honourable Justice M. J. Donohue
JUDGMENT ON PASSING ACCOUNTS
OVERVIEW
The Parties
1Mr. Ronald Wojcicki (“Ronald”) is one of three children of Mary Thompson, (“Mary”) and the estate trustee of Mary’s estate. Ronald brings this application to pass his accounts as estate trustee of Mary’s estate (the “Estate Accounts”). The accounting period runs from Mary’s death on October 16, 2016 to May 31, 2018.
2The Objectors are Mary’s other two children, Thomas Wojcicki (“Thomas”), now deceased and represented by his estate trustee, Susan Wojcicki, and Melissa Olley (“Melissa”).
3Included in the Estate Accounts are payments made to Ronald for work he performed as estate trustee of the estate of the parties’ father/Mary’s husband, Terence Thompson (“Terence”).
4Terence passed away November 15, 2015 and left his entire estate to Mary. It consisted mainly of their 2.2-acre cottage/home at 307 Cherry Hill Road (the “Cottage”). Years before Terence’s death, Mary suffered a stroke, moved to a nursing home in Burlington, where she lived until her death on October 19, 2016.
5Terence continued to live at the Cottage. Terence was a hoarder and the Cottage fell into disrepair. As Terence’s estate trustee, it was left to Ronald to deal with the contents of the Cottage, and to get it cleaned and repaired so it could be rented or sold.
6Neither Thomas, who was not physically well, nor Melissa, who resided in the United Kingdom, were able to assist Ronald with the Cottage.
Accounts
7Ronald fully administered Terence’s estate but did not immediately seek compensation or reimbursement of the expenses he incurred to clean and repair the Cottage. There was no money from which to pay Ronald as there were no liquid assets in Terence’s estate and Ronald decided to rent the Cottage property rather than to sell it. He had hoped to provide an income stream for Mary. Mary died only a few days after Ronald transferred the Cottage to her.
8Following Mary’s death, Ronald listed the Cottage for sale and it was sold by the end of May 2017. On June 8, 2017 Ronald rendered three accounts: one in the amount of $ 21,138.55 for the labour and expenses to clean and repair the Cottage; one in the amount of $24,941.24 for executor’s compensation for Terence’s estate; and one in the amount of $26,250 for executor’s compensation for Mary’s estate. He paid all three accounts from Mary’s estate.
Objections
9At the opening of the hearing, the Objectors withdrew their objection to the amount paid to Ronald for compensation as Mary’s estate trustee.
10The Objectors originally filed 36 objections but half were withdrawn. Despite that, the Objectors made submissions with respect to the withdrawn objections, in asserting the unreasonableness of the amounts paid to Ronald respecting his administration of Terence’s estate. This lengthened the hearing significantly.
Trustee’s Adjustment
11Ronald’s counsel acknowledged that there were errors in both of the final estate accounts. The errors resulted in an underpayment on one account and an overpayment on another. Ronald proposed to repay $1,490.40 to Mary’s estate, which would reconcile the accounts.
12The Objectors’ took no position on the proposed adjustment.
ISSUES
13The parties narrowed the issues to the following:
A) What is the appropriate amount of Ronald’s compensation as estate trustee of Terence’s estate? B) Was it appropriate for Ronald to take his compensation for Terence’s estate from Mary’s estate? C) Were the amounts charged to Terence’s estate by Ronald for labour and mileage incurred to clean and repair the Cottage reasonable? D) Should Ronald repay, with interest, the $15,598.28, he paid from Mary’s estate in respect of legal fees?
A) What is the appropriate amount of compensation for the estate trustee to claim on Terence Thompson’s estate?
14The Objectors advanced a number of arguments for why Ronald’s compensation as Terence’s estate trustee should be reduced by $10,000 from the claimed $24,941.24.
(i) Could the cottage be counted as a Capital Receipt?
15The primary objection was that Ronald included the full value of the Cottage ($440,000) as both a capital receipt and a capital disbursement and calculated his compensation on the basis of 2.5% on capital receipts and 2.5% on capital disbursements. The Objectors submitted this was improper.
16In 2016, in the months before Mary’s death, Ronald exercised his discretion under Terence’s will and as Mary’s attorney for property, to clean, repair and rent out the Cottage. He did not sell the Cottage but transferred the title to Mary for nominal consideration.
17In the Estate Accounts, Ronald treated the transfer of the Cottage to Mary as a capital receipt, on which he charged 2.5% compensation. When the Cottage was sold, Ronald included the sale proceeds as a capital disbursement, on which he charged 2.5% in executor’s compensation.
18The Objectors’ argued that, because the Cottage was transferred to Mary in specie the Cottage was not “realized”. Their submission was that the it ought not to be treated as a “capital disbursement” in Terence’s accounts and a “capital receipt” in the Estate Accounts, and Ronald ought not to be entitled to charge the usual 2.5% on each transaction.
19The Objectors were unable to refer to any case law that supported their submission that assets not converted into money were not considered capital receipts for the purposes of calculating executor’s compensation.
20In reply submissions, Ronald provided authority that in specie transfers are considered capital receipts and capital disbursements for the purposes of compensation under s. 61 of the Trustee Act, R.S.O. 1990, c. T.23 as set out in Carmen S. Theriault, Widdifield on Executors and Trustees, loose-leaf, 6th ed. (Toronto: Thomson Reuters Canada, 2019), at s. 11.4.2(g),
An asset distributed in specie to a beneficiary must be recorded at its book value as a receipt and then as a disbursement in the capital accounts. Depending on the overall nature of the estate administration, the rate of compensation allowed for [an in specie ] transaction may be less than 2.5% for the receipt and 2.5% for the disbursement.
21As further noted in Widdifield at s. 11.4.2(h)(iv),
The basis for objection to executor’s compensation will often be the fact that a substantial asset was a security or piece of real estate that was transferred in specie to a beneficiary. The cases already discussed, dealing with compensation considerations overall, indicate that the actual work, or lack of it, in distributing an asset in specie , is taken into account in determining compensation.
22Counsel for the Objectors provided one case in which the percentage charged on a capital receipt was reduced when the asset was a house that required little or no administration: Hill Estate (Re) [1994] O.J. No. 521.
23The court in that case looked to s. 61(1) of the Trustee Act which states the trustee is entitled to “such fair and reasonable allowance for his/her care, pains and trouble, and his/her time expended in and about the estate.” The court considered the Hill Estate to be the simplest of estates to administer and noted that the house was simply transferred to the beneficiary in specie.
24The facts here have some similarity to the Hill Estate. Ronald, in one transmission application, on the same day, transferred the Cottage from Terence’s name to himself as estate trustee and then transferred from the Cottage from himself to Mary.
25Once the Cottage was in Mary’s name and then her estate he continued to deal with the same property and have it sold.
26In determining the appropriate amount of executor’s compensation, the starting point is the percentage approach, which is then tested against the five factors as set out in Re Toronto General Trust v. Central Ontario Railway Co. (1905), 6 O.W.R. 350:
- the size of the trust;
- the care and responsibility involved;
- the time occupied in performing the duties;
- the skill and ability shown by the executor or trustee; and
- the degree of success resulting from the administration.
27I am persuaded that in the 18-month period of his administration of both estates, Ronald acted appropriately in his management of the Cottage. He did receive compensation for his efforts: as noted below, Ronald rendered a separate invoice for his labour to clean and repair the Cottage. In addition, the Cottage-related compensation claimed by Ronald was $22,083.32 based on 5% of the Cottage’s value of $441,666.50. The Cottage-related compensation claimed by Ronald from Mary’s estate was based on 2.5% of $447,906.83 (CR 27), which was the sale price of the Cottage, and 2.5% when those proceeds are disbursed for a total of $22,395.34. These claim total $44,478.661.
28When I cross-check the amount that results from applying the usual percentage (2.5% on receipts and disbursements) against the “five factors”, I conclude that the size of the trust, the time involved and the ease of transmitting the Cottage interest to Mary does not justify the full amount of the compensation Ronald claimed on Terence’s estate. I also consider that Ronald was separately compensated for the work he performed on the Cottage.
29I accept the submission by the Objectors and conclude that Ronald’s compensation on Terence’s estate should be reduced by $10,000.
(ii) Was Ronald’s List of Tasks Exaggerated?
30The Objectors allege that Ronald’s two and one-half pages of tasks he undertook as Terence’s estate trustee to be exaggerated and puffed up.
31For example, the Objectors dispute Ronald’s claim that he “undertook and planned most of the arrangements for Terence Thompson’s funeral” when it was actually Thomas who made Terence’s funeral arrangements.
32Ronald answers that Thomas paid the deposit for Terence’s funeral but states that it was Ronald who dealt with everything else, including reimbursing Thomas.
33The Objectors criticized Ronald for filing an application for the coroner’s autopsy report, when Thomas had already done so. However, Thomas was not an executor or beneficiary under Terence’s will, and I find that it was appropriate for Ronald, as estate trustee, to file that application.
34The Objectors are critical that Ronald was communicating with various lawyers and point to the fact that he changed lawyers twice. The materials however demonstrate Ronald’s dissatisfaction with the level of service and that he had a reason to change lawyers. The actual reasonableness of those legal bills that were paid is subject of discussion below.
35The Objectors made no other allegations of exaggerated or puffed up work set out in Ronald’s detailed two-and-a-half-page list.
36The work detailed was properly undertaken in his administration of Terence’s estate. A number of these tasks required a six-hour round trip to attend at the Cottage.
37His executor’s compensation has been reduced in any event as noted above.
(iii) Insufficient Rental Income
38A further objection was that Ronald should not be compensated on the usual scale because he failed to generate much rental income for the cottage.
39Ronald acknowledged that the annual carrying costs of the Cottage were $12,000. After the repairs and cleaning were completed and the Cottage was placed with a rental company, there was a recovery of approximately $8,000 in 2016. Upon Mary’s death, Ronald promptly listed and sold the Cottage. As a result, there was never a full season of rental.
40The materials show that Ronald used his best efforts to create income from the Cottage for Mary’s benefit.
41That Ronald was unable to rent the Cottage for the entire season in the first summer that it was listed for rent, does not, without more, form the basis for a reduction of Ronald’s compensation as Mary’s estate trustee.
42Ronald had authority and discretion under Terence’s will to let or lease the property for any term he saw fit. He also had authority to manage Mary’s property as her attorney for property. It was reasonable in the circumstances for Ronald to try to rent the Cottage as a means of earning income for Mary’s benefit.
43Terence’s will further authorized Ronald to retain any portion of Terence’s estate in the form in which it existed at Terence’s death, for such length of time as Ronald in his discretion deemed advisable and Ronald was not to be held responsible for any resulting loss to the estate.
44A trustee is not held to a standard of perfection, but, rather, to a standard of reasonable behaviour.
45Again, his compensation was already reduced as noted above.
(iv) Imprudent Sale of Items
46An objection was made to Ronald’s compensation on the basis that he imprudently disposed of a tool collection at an estate sale and some Royal Doulton figures and soapstone carvings at a garage sale.
47Ronald retained Dispersal Solutions to sell items. This company sold items for $11,789 and charged $8,772 for the costs of the sale, with the net amount recovered being $3,017.
48The Objectors are critical that Ronald did not obtain valuations of such items and made a modest recovery.
49Ronald responds that Terence and Mary were not wealthy and did not own much of value. Also, Ronald had to deal with an excess of items as Terence had been a hoarder. I find that Ronald acted reasonably in retaining a dispersal company to sell the household contents.
50Given the nature of the assets in the estate, the cost of valuations and time it would have taken to sell individual items on line could have easily outstripped any increased return on the sale of such household items. I am satisfied that it would have been unreasonable to sell the contents in the manner suggested by the Objectors and that Ronald acted reasonably, knowing that the Cottage had to be emptied for it to be rented or sold.
51Furthermore, Ronald had discretion under the Terence’s will to do so.
52I do not accept that Ronald mismanaged the disposal of such items.
(v) Failure to Deliver Promised Items-Letter of June 6, 2017
53The above-referenced Objection refers to items from Mary’s estate. Specifically, it refers to an objection that a real diamond gold ring was not produced. Ronald advises that he produced the ring that was on Mary’s finger at her death. He did not know whether it was real gold.
54Although the objection was withdrawn, at the hearing the Objectors purported to revive it, in support of their submissions that Ronald’s compensation respecting the administration of Terence’s should be reduced.
55In argument, the Objectors alleged that as executor of Mary’s estate, Ronald had replaced her real gold and diamond ring with paste and had either sold the real gold and diamond ring, and pocketed the money, or kept the ring for his family.
56Counsel for Ronald rightly considered this as an allegation of fraud which was being revived from a withdrawn objection.
57Ronald’s evidence was that he had no specialized knowledge of what a real gold and diamond ring is and he simply produced the ring which had been on Mary’s finger.
58This withdrawn objection has no relevance to my assessment of the reasonableness of the executor’s compensation payable to Ronald as estate trustee of Terence’s estate.
B) Was it appropriate to take compensation for administering Terence Thompson’s estate from Mary Thompson’s estate?
59As Mary died less than a year after Terence, Ronald had not rendered a claim for executor’s compensation in respect of Terence’s estate. Ronald had, in fact, purposely deferred rendering his account, as, without selling the cottage there were insufficient liquid assets from which to pay him. Ronald wanted to maximize the moneys available for Mary.
60Ultimately, Ronald rendered and paid his account as Terence’s estate trustee from the net sale proceeds of the sale of the Cottage.
61The Objectors are critical of Ronald for having paid himself compensation without first seeking their permission.
62As estate trustee of Mary’s estate, Ronald had the authority to pay debts. I find that Ronald’s claim for compensation and reimbursement of out-of-pocket expenses incurred as Terence’s estate trustee to be proper debts payable from Mary’s estate subject to the adjustment above.
C) Was the labour and mileage claim which the estate trustee charged personally on the estate of Terence Thompson to clean and repair the cottage reasonable?
63The Objectors object to Ronald reimbursing himself at $15.00/hour plus 55 cents/kilometre for the cleaning and repair work which he undertook on the Cottage, resulting in a bill of $21,138.55.
64This is a surprising objection when it is noted that Thomas was reimbursed by the estate for the catering work he did for the funeral reception. Ronald’s response to this objection is that he asked Thomas to assist him in the Cottage work and Thomas refused.
(i) Were the hours excessive?
65The Objectors argued that the 758 hours listed for labour on the cottage was excessive.
66The detailed chart provided by Ronald shows that each time the trustee went to do work on the Cottage it was a six-hour round trip. He logged 23 trips, which accounts for 138 hours. This leaves 620 hours of labour over an 18-month period. He enlisted the help of several family members to get the job done.
67The chart specifies the dates of the work, who did the labour, and the hours logged. The trustee was not cross-examined on this list of labours but he was prepared to detail the extent of the interior and exterior repairs and cleaning that was done. There was no suggestion that the work was not done.
(ii) Was the rate excessive?
68The Objectors questioned the rate of $15.00/hour in labour. The trustee answers that he had the option to use cottage labourers in the area who would charge $25.00/hour plus travel time to the cottage. Clearly, Ronald would still have had to incur time and mileage to oversee the work performed by local labourers. There is no obvious savings that would make Ronald’s decision to handle the work himself to be unreasonable.
69The total bill on its face therefore is not unreasonable.
(iii) Was the work undertaken excessive?
70The Objectors argued that the cleaning and repairs that were done were unnecessary.
71As noted above, the trustee found the Cottage in significant disrepair due to Terence’s declining health and his having lived alone at the Cottage after Mary’s stroke. Ronald also had to deal with the hoarding of excess things in the home.
72Ronald explained that the cleaning and repairs he effected and oversaw, likely increased the value of the Cottage to the benefit of the beneficiaries. Initial appraisals of the Cottage were for an average sale price of $425,000 and ultimately it sold for $480,000.
73As trustee for Terence’s estate, Ronald had authority to arrange for repairs and improvements to the Cottage.
74It is reasonable to conclude that the cleaning and repairing of the Cottage would maximize its value and result in a higher sale price, as in fact occurred.
D) Should the estate trustee repay legal costs paid of $15,598.28 which had been paid out of the estate account of Mary Thompson, plus pre-judgment interest?
75At the hearing, the Objectors withdrew the request for pre-judgment interest as they considered the amount to be negligible.
76The focus of the objection was the nine legal accounts paid between August 10, 2017 and August 28, 2018 from Mary’s estate account. Eight of those accounts were paid before August 21, 2018 when the notice of objection was served. The last account of August 28, 2018 was for $3,418.14.
77The Objectors rely on Delorenzo v. Beresh, 2010 ONSC 5655, in which the court stated that it was preferable for each of the parties to bear their own costs until the litigation was completed. The litigation in that case was considered contentious or adversarial and involved the potential removal of the estate trustee. For this reason, at para. 23, the court found different considerations to apply and ordered that the estate was not to pay ongoing legal expenses of the estate trustee.
78The case here is the passing of the accounts, however, where ultimately the costs will be reviewed.
79The Objectors were not in a position to dispute the reasonableness of the legal bills, as they have not seen them although they are listed as disbursements. The court similarly is unable to assess the reasonableness of the accounts at this stage of the hearing. Ronald’s counsel advised that in costs submissions the details of these accounts will be presented.
80The objectors argued that it was improper for Ronald to pay his legal bills from the estate account. The position by Ronald’s counsel was that the estate trustee may pay expenses reasonably incurred from the trust property pursuant to s. 23.1 of the Trustee Act.
81The parties provided conflicting case law on whether it was proper for the trustee to pre-pay his legal bills from the legal account.
82The sanction for such improper pre-paying, if found, is to repay the funds plus pre-judgment interest.
83The court has not seen the legal accounts paid and is unable to determine whether they are appropriate. The Objector’s counsel withdrew any request for pre-judgment interest and so this issue is moot.
84The accounts are passed, with my reduction noted above, but subject to the review and approval of the nine accounts referenced by the Objectors.
Costs
85If the parties are unable to resolve costs, including the nine accounts noted above, Ronald is to serve written submissions within 14 days of this judgment. The Objectors are to serve responding submissions within seven days thereafter. Ronald may serve reply submissions within seven days thereafter, if needed. Cost submissions are not to exceed three pages plus any bills of costs, offers to settle, and case law.
86If submissions are not received within 30 days of this judgment, the issue of costs will be considered settled and the file closed.
M. J. Donohue, J.
Released: July 12, 2019