SUPERIOR COURT OF JUSTICE
COURT FILE NO.: 17-35222ES
DATE: 20210222
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PHILLIPPA MARY BARAN in her capacity as Trustee of the ESTATE OF TOLLER JAMES MONTAGUE CRANSTON
Applicant
– and –
HUGH GOLDIE CRANSTON and GUY FRANCIS CRANSTON
Respondents
Douglas D. Buchmayer and Benoit M. Duchesne, for the Applicant
Miriam Vale Peters, for the Respondents
HEARD: October 5-23. 2020
REASONS FOR DECISION
R. Smith J.
[1] Philippa Baran (“Phillipa”), the trustee of the estate of Toller Cranston (“Toller”), has brought an application to pass her accounts for the period from January 23rd, 2015 until April 30th, 2018.
[2] Goldie Cranston (“Goldie”) and Guy Cranston (“Guy”), (the “objectors”) are Philippa and Toller’s brothers. They have raised over 300 objections to the expenses incurred by the estate and to her management of capital receipts. Their main objection is to her reimbursement of expenses where she did not obtain a written receipt. The objectors also seek to reduce her compensation to a nominal amount due to her alleged mishandling of the administration of the estate and her failure to follow their (2/3 of the beneficiaries) request to immediately divide the remaining paintings located in art galleries “in specie”, before final settlement of the estate.
[3] Goldie and Guy argue that Philippa incurred some expenses which did not provide any benefit to the estate and that she should be ordered to repay the estate for such expenses and for any expenses where she failed to provide a receipt.
[4] In addition, in their opening statement Goldie and Guy alleged that Philippa was grossly negligent in her administration of the estate and had committed fraud and theft of estate funds, by taking some artwork for her personal benefit and by paying herself the sum of $50,000.00 twice. These allegations were never withdrawn.
[5] This passing of accounts raises the issue of whether an estate trustee must produce a written receipt for every expense incurred in order to obtain reimbursement, or can the estate trustee adequately document their accounts by giving evidence under oath explaining how and why each expense was incurred for the benefit of the estate, along with corroboration from a ledger completed at the time, bank statements, PayPal statements or credit card statements?
[6] The estate trustee submits that this was a complicated estate, because it consisted of over $6,000,000 in assets located in Mexico, the deceased died in Mexico without a valid will, owned two substantial unsevered real estate properties, which contained approximately 18,000 artistic items (“non Toller art”), and approximately 400 valuable paintings, over half of which were stored in a warehouse. She submits that she has administered Toller’s estate to the standard of an honest ordinary prudent person.
[7] The estate trustee also submits that Goldie and Guy are mistaken in law when they argue that the failure to obtain a receipt automatically leads to a denial of reimbursement to the estate trustee. She submits that the standard of conduct required for an individual trustee is not perfection, but rather that of a “person of ordinary prudence”. Philippa submits that her conduct met this standard and that the expenses incurred have been accurately documented and explained with ample corroboration.
Issues to be decided
[8] The following issues must be decided:
#1: Should Guy and Goldie be allowed to raise two (2) new objections after the hearing was completed, claiming that Guy lost commissions on art sales and alleging a co-mingling of estate funds?
#2: What standard was the Estate Trustee Required to Meet and did she Meet it when Passing her Accounts and Administering this Estate?
#3: Were the following expenses incurred for the benefit of the estate and were they reasonable in the circumstances:
i. Expenses incurred for Toller’s Memorial at the Art Gallery of Ontario in Toronto ($30,322);
ii. The trustee’s travel expenses for 13 trips to Mexico, alone on several occasions, with her husband on four occasions, and with a friend on two occasions;
iii. Expenses paid to Faith Fuller to assist with marketing Toller’s paintings ($24,777.61);
iv. Per diems for meals and incidental expenses claimed by the trustee while in Mexico ($14,520);
v. Expenses incurred for:
a) supplies and equipment purchased in Mexico without a receipt ($11,131.02);
b) legal fees incurred in Mexico and paid to Gowlings ($129,010.14);
c) Schwartz extortion and settlement of $49,031;
d) Expenses paid to Toller’s staff to continue working from January 2015 until October 2015 ($34,150);
e) Payment of bonusses to Toller’s long-time employees including Alejandro and Adrian, giving Toller Dollars to staff, payment of $345 to Alejandro, payment of $500 to Adrian, and payment of $2002 to Scott Umstadd for photographs;
f) Alleged overpayment to Marge Failoni ($10,941);
g) Shipping and packaging expense for the paintings of $91,708.00;
h) Miscellaneous Objections.
#4: Should the trustee have hired a marketing expert to obtain an opinion on the best way to sell Toller's paintings?
#5: Did the trustee Misappropriate $25,000 to $30,000 worth of art for her personal benefit?
#6: Did the Trustee Over-Compensate herself to the order of $50,000 for Shipping and Insurance costs?
#7: What amount of compensation should the estate trustee receive?
Background Facts and Findings
[9] The parties agreed that the law of Ontario would apply in this case. Some of the uncontested facts were taken from the parties’ written submissions. I use the term executor, trustee and estate trustee interchangeably in this decision.
[10] Toller Cranston died unexpectedly in Mexico on January 24th, 2015. He had lived in San Miguel de Allende (“SMA”) for more than twenty-three (23) years before his death. Toller was born in Canada and had grown up and lived in Canada for the balance of his life before moving to Mexico.
[11] Toller Cranston was and is a Canadian icon. He was a five time Canadian champion figure skater, two time Olympian and Olympic and World medallist, a member of the Canadian Olympic Hall of Fame, a member of the Ontario Sports Hall of Fame, a member of the Canadian Figure Skating Hall of Fame, and a member of Canada's Sports Hall of Fame.
[12] He was also an Officer of the Order of Canada, is included in Canada's Walk of Fame, is the recipient of a Special Olympic Order from the Canadian Olympic Association, is a member of the World Figure Skating Hall of Fame and a prolific, world renowned artist with a larger than life persona.
[13] His death was reported in both the national and the international media. Skate Canada paid tribute to him with a moment of silence at the Canadian Figure Skating Championships being held in Kingston, Ontario at the time of his death.
[14] Toller had prepared a written will which left his estate to Marion Perlet, however this will was deemed invalid by Mexican authorities because Ms. Perlet had predeceased him by two years. Ms. Perlet’s estate unsuccessfully opposed the Mexican authority’s decision to invalidate the will in Mexico.
[15] Toller left an estate valued at over $6,000,000 that consisted primarily of his two residences, located on the same lot that had to be severed and 400 paintings. The Recreo property was valued at $1,353,000.00, the Sollano property at $618,000.00 and the portion that was severed was valued at $98,000.00. Toller’s paintings were valued at $3,863,907.00, his household contents were valued at $500,676.00, and he had accounts receivable of $172,383.00 for amounts owing by three art galleries in Canada and for sales of his art to several individuals.
[16] The estate properties contained approximately 18,000 items including furniture, art, crafts, ceramics, statues of Mexican Saints and household items. Approximately 200 original paintings were located in the properties and another 200 were stored in a warehouse.
[17] At the time of his death Toller employed a long-time staff of six people, including a cook, a driver, and four others to maintain his properties. In addition, he had recently employed Faith Fuller to assist him with marketing his artwork.
[18] After Toller’s death, Phillipa and Goldie traveled to SMA to recover his body and organized a Cremation and a local funeral. They also met with Toller’s staff and discovered that Toller had left little or no documentation with respect to his business affairs.
Allegation of an Agreement between Philippa, Guy and Goldie that they would all be executors and would act without compensation
[19] In February of 2015 Guy and Goldie met with Philippa at her home in Arnprior to discuss how they could “take care of Toller’s affairs” until there was a determination of the legal heirs and an executor of the estate was appointed in Mexico.
[20] In their objection, Guy and Goldie alleged that they had agreed with Philippa that all three of them would be appointed to act as estate trustees in Mexico and that no compensation would be paid. Phillipa denied that any such agreement was ever reached. At the hearing Goldie admitted that such an agreement was not made at this meeting.
[21] I accept Philippa’s evidence and Goldie’s admission that an agreement that all three would be appointed as estate trustees in Mexico and that no compensation would be paid to the estate trustee(s) was not reached at that meeting. I find that their discussions were of a general nature, that they all agreed to cooperate with the administration of the estate, and they agreed that appointing a corporate trustee was not necessary.
[22] In February of 2015 there was no assurance that Philippa, Guy and Goldie would be designated as Toller’s heirs in Mexico, because the Perlet estate was contesting this issue. Philippa assumed a leadership role in dealing with Toller’s estate in Mexico. Philippa and her husband paid all of the expenses and ongoing costs of the estate from January 2015 onwards with Guy and Goldie’s knowledge and without any objection. Guy contributed $10,000.00 towards the estate expenses and Goldie contributed a few hundred dollars. The amounts contributed by Guy and Goldie as well as expenses incurred by them for travelling to Mexico to assist with liquidating the assets the estate were reimbursed.
[23] Initially there wasn’t any money available from the estate to pay for ongoing estate expenses. Philippa testified that she and her husband paid expenses as necessary for the estate to be administered from January of 2015 to the end of this accounting period. The total amount of $521,258.00 was expended by them as itemized in the accounts sought to be passed.
[24] Philippa, Guy and Goldie were recognized as Toller’s heirs in Mexico on August 20th, 2015.
[25] Guy, Goldie and Philippa met before entering the Mexican court to discuss who should be appointed as the executor. A majority of the beneficiaries voted for Philippa to be named as the sole executor for Toller’s estate in Mexico. Philippa was appointed as the executor of Toller’s estate by the court in Mexico on September 3rd, 2015.
[26] Guy and Goldie cooperated with Philippa and assisted her with the administration of the estate from January of 2015 until the end of the sale of the household items in Mexico at the end of October 2015. Goldie traveled to SMA on four occasions and Guy attended on two occasions, one of which was for the closing of the Recreo property. Goldie assisted the estate by helping to create an inventory of the items in Toller’s properties, by creating a schematic of where the household items were located, and with placing a value on the 18,000 items which were eventually sold in the fall of 2015.
[27] Guy is an art dealer and operates his own art gallery in Nova Scotia. He assisted the estate by establishing a value for Toller’s paintings and creating an inventory of them. Unfortunately, Guy used a similar numbering system for paintings located at Toller’s residences and those stored at the warehouse. He used a different letter at the beginning of the label, rather than numbering the paintings from 1 to 400 regardless of where they were located. Philippa testified and Guy agreed that there were errors in the inventory he created.
[28] Guy, Goldie and Philippa worked together to sell or dispose of all of the 18,000 household articles at the sale held from early September until mid-October of 2015. The sale took place at Toller’s property with visits being arranged by appointment. Some items including Toller’s paints, books and clothes were donated to charities in Mexico on consent of all parties. Proceeds from the sale of the household items were used to pay ongoing estate expenses.
[29] A bank account was opened at a Mexican bank in late September 2015. A number of checks were received for items purchased which were made payable to Toller Cranston. The Mexican bank refused to deposit these checks and replacement cheques had to be obtained made payable to “the estate of Toller Cranston”
[30] Approximately 200 original artworks and other estate assets were moved to the La Union warehouse, bringing the total to 400 paintings, where they were packaged, labeled and prepared for shipping.
[31] In late October of 2015 Philippa, Guy and Goldie went to the warehouse and divided approximately one half of Toller’s paintings between themselves based on Guy’s inventory and his assigned values. They each received approximately the same value in paintings. Philippa then returned to Canada to organize and coordinate shipping logistics with the broker and Canada Border Services.
[32] The three beneficiaries agreed to sell a number of the remaining paintings to Art Evolution in Calgary on terms that were negotiated by Guy. In addition, a number of paintings were sold to Art Revolution in Toronto on a consignment basis on consent of all beneficiaries. Toller had been selling his art primarily at these two galleries before his death.
[33] The Recreo property was sold in November of 2015. Philippa negotiated the terms of the sale in a manner that saved the estate approximately $250,000 in taxes. The net proceeds of the sale were divided equally between the three heirs when the sale was completed.
[34] Through December 2015 and early 2016, Philippa arranged, organized and implemented the loading of the paintings and other items into two 53’ containers for shipping to Canada. The goods were cleared through Canadian customs without taxes or duty, for their eventual distribution or sale in Canada.
[35] In the fall of 2015 and early winter of 2016, Philippa managed a complex process in Mexico that involved obtaining permits and severances, aligning deeds, and dealing with Mr. Schwartz, who was an aggressive and dangerous extortionist. He threatened staff and agents, falsified documents, fabricated powers of attorney, filed bogus criminal and civil lawsuits, dragged the trustee through multiple sessions of mandatory mediation, and placed an embargo on the Sollano property. On more than one occasion the trustee was visited by gun-toting thugs.
[36] On January 31st, 2017 the final real estate sale of the Sollano property was completed.
[37] Early in 2016 the beneficiaries met with a lawyer at the law firm Borden Ladner Gervais LLP (“BLG”) in Ottawa to discuss appointing an estate trustee in Ontario to administer the balance of the estate. The beneficiaries initially disagreed on who among them would be appointed the Estate Trustee in Ontario. As a result of their disagreement the beneficiaries retained separate legal counsel. Guy initially consented to Philippa’s appointment as estate trustee in Ontario, but later revoked his consent and he along with Goldie filed a formal objection to her appointment. In November of 2016, five (5) months later both Guy and Goldie withdrew their formal Notices of Objection to Philippa’s appointment.
[38] No one had legal authority to represent Toller’s Estate in Ontario or to access its monies to pay expenses or recover money owing in Canada until December 6, 2016, when Philippa was appointed Estate Trustee for the Estate in Ontario by way of Certificate. Her appointment as estate trustee was finally made after approximately 12 months of opposition from Guy and Goldie.
[39] On March 17th, 2017, three and one half (3 ½) months after Philippa’s appointment as estate trustee in Ontario, Guy and Goldie commenced a court application against Philippa in which they sought an order directing her to pass her accounts, removing her as the estate trustee and requiring and directing her to immediately wind up and distribute all of the estate assets. Guy and Goldie commenced the legal proceeding seeking to remove her as trustee despite having withdrawn their objection to her appointment less than five months previously, and sought to have her pass her accounts immediately even though the Sollano property was only sold 1 ½ months previously.
[40] Phillipa commenced this application to pass her accounts on July 18th, 2017 (four months later) and the parties have been involved in litigation since that date.
Issue #1
Should the objectors be allowed to raise two (2) new objections after the hearing was completed, namely a claim for “lost commissions” on art sales and alleged comingling of estate funds?
a) Lost Commissions on Art Sales
[41] For the first time in their responding submissions, the objectors raised a claim that the estate trustee should be ordered to pay Guy and Goldie $229,763.12 for 2/3 of the commissions that will be payable on the sale of Toller’s art by the galleries. Guy alleges that if the remaining Toller paintings were sent to his gallery for sale, he would not have charged any commissions and the objectors would have saved 2/3 of the sales commissions that will be payable.
[42] I find that raising a new substantial claim for $229,763.12 against the estate trustee for the first time in responding submissions is very procedurally unfair. This is especially so after Guy and Goldie delivered an extensive detailed notice of objections which did not mention this claim, where extensive cross examinations were conducted over two years, and a three-week hearing was held where this claim was not put to the estate trustee. As a result, I will not allow the objectors to raise this new claim at this late date because of the extreme unfairness.
[43] In addition, I also find that this claim is completely lacking in merit because Guy negotiated the arrangements with both art galleries and agreed to pay a 50% commission on a consignment arrangement with one gallery and negotiated a reduction of approximately 50% for the other gallery. All of the beneficiaries agreed to pay the commissions negotiated by Guy. In these circumstances I find that the objector’s claim that the estate trustee pay Guy and Goldie $229,763.12 for the lost commissions is totally without merit in any event.
b) Comingling of personal funds in the estate bank account
[44] For the first time in responding written submissions the objectors also allege that Philippa made four personal deposits in May and June of 2017 into the Canadian estate bank account that were not included as capital receipts. The objectors allege that the estate trustee comingled some of her personal funds with the estate account and has failed to prove that these other receipts belonged to her.
[45] I find it is inappropriate and very procedurally unfair to raise such a claim without giving prior notice of an objection, and without raising it during the three-week hearing. This is a substantial claim asking the court to order the estate trustee to pay the objectors $178,269.18 CAD and $39,905.00 USD.
[46] In addition, I accept Philippa’s evidence that these funds belonged to her and the objectors have not provided any evidence to the contrary. The only estate receipts received in 2017 were for the sale of the Sollano property and the Garside severed property for a total of $509,278 as disclosed in CR-28 and 29. There was no evidence that any other estate assets were sold in 2017 or that any other estate funds were received or were deposited into this account in 2017.
[47] The objectors are not permitted to advance a claim for $178,269.18 CAD and $39,905.00 USD at this late date due to procedural unfairness and because I accept the estate trustee’s evidence that these funds belonged to her and her husband in any event.
Issue #2
What Standard was the Estate Trustee Required to Meet and did she Meet it when Passing her Accounts and Administering this Estate?
[48] Section 74.17 (1) of the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 state that “estate trustees shall keep accurate records of the assets and transactions in the estate ... and specifies the information the accounts must include.” The term “accurate records” is not further defined in Rule 74.17 (1). The accounts filed in this passing of accounts contain the details required by this rule, including a statement of original assets, details of any disposition of assets, accounts of all money received and disbursed, and a statement of assets unrealized at the end of the accounting period.
[49] Guy and Goldie have not presented any evidence that the accounts submitted are not accurate, other then the over repayment of 50,000, but rather argue that a receipt was not provided for every expense listed. They submit that in every instance where a receipt was not provided for an expense she incurred, the estate trustee should be ordered to repay the amount to the estate.
[50] In Fales v. Canada Permanent Trust Co., 1976 CanLII 14 (SCC), [1977] 2 SCR 302, at para. 315 the Supreme Court stated that the standard of care for an estate trustee with respect to accounts is the standard of care of a person of ordinary care and diligence in managing their own affairs.
[51] The objectors submit that a higher standard, namely one of perfection, is required for an individual acting as an estate trustee. In Fales at para 316 the Supreme Court discussed whether a Trust Company should be held to a higher standard than “a widow, acting as trustee of her husband's estate.” The Supreme Court held that the weight of authority was against distinguishing between the standard of care when acting as an estate trustee and stated that the standard was to exercise “ordinary skill and prudence along with the application of common sense.”
[52] At para. 317 of the Fales decision the Supreme Court concluded that it was not necessary to determine if Canada Permanent owed a higher standard of diligence than that of a “person of ordinary prudence” and stated:
“it is not necessary to decide whether a higher standard of diligence should be applied to the paid professional trustee, for Canada Permanent failed any test.”
[53] In Zimmerman v. McMichael Estate, 2010 ONSC 2947 (“Zimmerman”), at para 31, Strathy, J. (as he then was) described the standard of care for an estate trustee as follows:
A trustee has an obligation to keep proper accounts. A trustee must keep a complete record of his/her activities and be in a position at all times to prove that he/she administered the trust prudently and honestly. He/she must have the accounts ready and give full information whenever required: Carmen S. Thériault, Widdifield on Executors and Trustees, 6th ed. (Scarborough, Ont.: Carswell, 2002) at p. 13-1; Waters’ Law of Trusts in Canada, above, at p. 1063; Sandford v. Porter, [1889] O.J. No. 43, 16 O.A.R. 565 (C.A.).
[54] In Lanthier v. Cousineau Dufresne Estate, 2002 CanLII 2653 (ON SC) at paras 37-43 the court held that in the context of that particular matter in the absence of any supporting receipts for substantial cash withdrawals, the absence of any record from cheques or a chequebook and where no reasonable explanation was provided for the withdrawals, the accounting for estate funds paid to the power of attorney was not adequate.
[55] In the Lanthier and Zimmerman situations the power of attorney/ trustees failed to keep any records for their substantial cash withdrawals and were unable to provide any explanation for the withdrawals. These cases are distinguishable because in this case the estate trustee provided an accurate record of all receipts and disbursements, provided detailed explanations under oath explaining the reasons for each expense, and also produced copious records to justify and corroborate the amount of each expense charged to the estate.
[56] The Lanthier and Zimmerman decisions do not stand for the proposition that a trustee should be ordered to repay all expenses paid on behalf of the estate where he or she is unable to provide a written receipt. For example, Toller’s staff were paid in cash each week and the trustee made a note of each payment in a ledger or in her iPad. The objectors do not dispute that Toller’s staff in Mexico were paid in cash each week nor do they dispute the accuracy of the amounts set out in the trustee’s accounts. Their objection is technical and not substantial in nature.
[57] Following the Fales decision, I find that Philippa, as an estate trustee, was required to keep a complete and accurate record of her activities to the standard of “a person of ordinary prudence and diligence” along with the application of common sense, not that of perfection as argued by the objectors.
[58] The Laird v. Mulholland, [1998] OJ No. 855 case involved a passing of accounts. Mr Laird had been assisting Ms. Mulholland with her finances before being named as a power of attorney. He did not keep any receipts for purchases made on her behalf nor did he record money invested or expended on her behalf. Mr. Laird attempted to reconstruct the transactions to pass his accounts but was unable to recall the purpose of most of the withdrawals. The court held that given Mr. Laird's overall diligent and honest conduct toward Ms. Mulholland it would be inconsistent with the established pattern to believe that he had used the withdrawn funds for his own purposes.
[59] In Laird the court concluded that there was no evidence that the disbursements were not made for Ms. Mulholland's benefit. Even though he failed to document the transactions, he acted honestly and reasonably in the circumstances and he should be relieved of any personal liability, even if his conduct amounted to a breach of trust.
[60] In Laird, at paras 24- 27, the court stated that taking into account that the standard of care for an estate trustee with respect to accounts was the standard of care of a person of ordinary prudence and diligence in managing their own affairs, it was clear that no estate trustee who was a layperson was required to keep perfect records of every receipt, document or voucher with respect to every disbursement or expense. Ordinary prudence and diligence was all that was required.
[61] I agree that the approach adopted in Laird applies in the circumstances of this complicated estate in Mexico. While obtaining a receipt for all estate expenses is the recommended approach, I find that the estate trustee was not required to obtain a receipt for every expense in order to allow her to be reimbursed for expenses she incurred, where she produced accurate accounts for all expenses, which were incurred for the benefit of the estate, along with volumes of corroborating documents. In addition, Philippa explained each expense that was objected to under oath and her evidence was not undermined during a lengthy cross examination. Having observed her for 11 days giving evidence in chief and being cross-examined on her explanations for the expenses, I find that Philippa acted honestly and reasonably throughout the administration of Toller’s estate.
Misconceptions
[62] The objectors appear to have been under the misconception that Philippa, as the estate trustee, had a duty to act regarding the estate as directed by a majority of the beneficiaries, namely by Guy and Goldie. This misconception is responsible for a large part of this dispute.
[63] In D. Waters, “The Law of Trusts in the 80s”, (1980-81) 7. E.T.R. 27, at 38 the author stated that trustees act for the benefit of others but not at their instruction. When administering an estate there is no obligation for an estate trustee to get the consent of each of the heirs on each matter that arises during the administration.
[64] At one point in time Guy, supported by Goldie, instructed the estate trustee to divide the remaining paintings located in the galleries in specie, as selected by Guy, and to close the estate. They also took steps to stop the sale of Toller’s remaining art in the galleries even though Guy had negotiated these agreements and the commissions to be paid to those very galleries. In cross examination Guy ultimately agreed that the estate trustee had to act as directed by law and not as directed by a majority of the beneficiaries.
[65] In Holoway V. Lopushinsky, 2015 ABQB 63 at para. 113 the court stated that the duty to make decisions with respect to the estate’s administration rests with the estate trustee, not the beneficiaries. I agree with this statement.
[66] The estate trustee has a general duty to keep the beneficiaries informed when requested. I am satisfied that Philippa kept Guy and Goldie reasonably informed about the ongoing administration of the estate in Mexico and did so within a reasonable timeframe when requested throughout her administration of Toller’s estate. She provided the objectors with three phased accounting reports setting out the steps being taken and the expenses that were being incurred. Phase I was from January to April 2015, phase 2 from April to July 2015, and phase 3 from July, 2015 to June of 2016.
[67] The objectors were also under the mistaken view the estate trustee had a duty to exactly equalize all interim estate distributions exactly, either in assets or in money, prior to the final passing of accounts. Philippa distributed the proceeds of the sale of the Recreo property equally upon the sale and in October 2017 also divided approximately half of Toller’s paintings equally with all three beneficiaries. In an intestacy an exact equalization of distributions to beneficiaries is only required when the estate is fully and finally distributed and the estate is wound up.
[68] Where any objection is not specifically addressed, I accept Philippa’s evidence and find that the expenses were reasonably incurred for the benefit of the estate, that the accounts submitted were an accurate record of the receipts and expenses incurred, and that her accounts and administration met the standard of an ordinary prudent person.
Disposition of Issue #2
[69] For the above reasons, while the estate trustee’s accounting was not perfect, she has accounted for all capital receipts and all expenses accurately in the unique circumstances of this estate, she has explained the reason for each expense under oath, she has provided corroborating evidence for almost all expenses, and I find that she acted honestly, in good faith, and reasonably throughout her administration. As a result, I find that she has met the required standard of care of a person of ordinary prudence using common sense in the complicated circumstances of this estate. However, there are a few expenses that I will not allow that are outlined in this decision.
Issue #3
Were the following expenses incurred for the benefit of the estate and reasonable in the circumstances:
(i) Expenses for the Memorial in Toronto ($30,322)
[70] Guy and Goldie objected to this expense when Philippa initially proposed to hold a memorial for Toller in Toronto in the spring of 2015. They argue that in their opinion this expense did not provide any benefit to the estate and was not appropriate in the circumstances. Toller’s estate was worth approximately $6 million, he had no dependants, and the amount spent for the memorial amounts to approximately 0.4% of the value of his estate.
[71] The law regarding what constitutes an appropriate expense for an estate was outlined in Irwin v. Ruberry, 2015 ONSC 1821 at para 43:
[43] In Widdifield’s Carmen S. Theriault, ed. Widdifield on Executors & Trustees, 6th ed. (Toronto: Carswell, 2013), 4.1, the author discusses some principles relating to reimbursement of a trustee for expenses incurred on behalf of the estate:
… Whether an expense is proper may depend on such factors as the nature of the estate, the character of the services rendered, whether the trustee was properly exercising the powers given to him or her when they were incurred, whether the services are contracted in good faith and with reasonable judgment, whether with or without the advice of counsel, whether they are necessary to protect and to preserve the estate and to carry out the provisions of the will, and whether they are incurred prior to or after probate is granted. If expenses are unnecessarily incurred, the executor must show that he or she acted in
good faith and had good reason to believe the expenditures for which he or she claims credit were necessary for the benefit of the estate at the time incurred. On a passing of accounts, the onus is on the trustee to establish that the expenses were properly incurred….[citations omitted].
[72] I am satisfied that the estate trustee acted in good faith when organizing the memorial in Toronto and believed firmly that a memorial should be held in Canada because Toller was a Canadian icon whose importance and fame in Canada required such a memorial. The awards received by Toller were outlined in paras. 11,12 and 13 of this decision and include being named an Officer of the Order of Canada, he was a five time Canadian champion figure skater, two time Olympic medalist, a member of the Canadian Olympic Hall of Fame and Ontario Sports Hall of Fame, etc. and also a well known artist.
[73] In addition, a substantial part of the value of Toller’s estate consisted of the paintings which remained to be sold, which are estimated to be worth $1,577,000, which is approximately half of the initial value of 3.8 million. Approximately half of the paintings valued at $3.8 million were previously divided among the beneficiaries in Mexico. Philippa reasonably believed that holding the Memorial at the same time as exhibiting some of Toller’s remaining paintings at the Art Gallery of Ontario provided good public exposure and an occasion to market Toller’s paintings, which provided a benefit to the estate.
[74] Approximately 250 individuals attended the event, including the Minister of State for Sport, other dignitaries, the objectors and their families and some friends. The Art Gallery of Ontario donated its space for the event, the wine served was also donated, and a jazz singer performed at the event at no cost to the estate. The event was a great success.
[75] In the Re Lopushinsky Estate decision the court held that the law only requires that the memorial expenses be reasonable having regard to the deceased’s station in life and other circumstances, including cultural and religious beliefs, traditions and practices. The beneficiaries’ consent is not required for an estate to incur costs to memorialize the deceased.
[76] I find that costs for Toller’s Memorial were reasonable having regard to Toller’s station in life as a Canadian figure skating icon and well-known artist. In addition, the event provided some benefit to the estate as the event was held in an art gallery where some of Toller’s paintings were exhibited.
[77] The travel expenses for Faith Fuller and her husband as well as for Toller’s long-time driver to attend the Memorial was a judgement call that was made in good faith and was reasonable in the circumstances. Faith Fuller was assisting the estate with the marketing of Toller’s paintings and her attendance at this event was reasonable.
(ii) Travel expenses for 13 trips to Mexico by the estate trustee?
[78] Guy and Goldie object to several of Philippa's trips to Mexico as being unnecessary in their opinion and they object to the travel costs for her husband who accompanied her on four occasions and for two friends who accompanied her on two occasions.
[79] I accept Philippa’s evidence that the administration of Toller’s estate was complex, required her to spend substantial amounts of time, and reasonably required her thirteen (13) personal attendances to Mexico, a foreign country, with a different language and culture. Many issues had to be addressed and negotiated. Toller had six permanent staff to maintain his properties and there were approximately 1800 artistic items located in his properties that had to be preserved, listed, valued and ultimately sold. I accept Philippa’s evidence that the estate could not be administered from Canada due to the need for translators, the need to coordinate with local residents, and to plan for and complete the sale of the estate assets.
[80] The video of the artistic contents of Toller’s two properties, filed as an exhibit, gives a good description of the huge task facing the executor. In addition, there was the ongoing business of selling Toller’s art, with which Faith Fuller was assisting. Toller owned two houses on a single lot which required a severance in order to be sold separately. A further severance was obtained to sell a portion of the property to the neighbour. In addition, Toller had 400 paintings approximately half of which were stored in a warehouse. Toller did not have a will with any specific directions to be followed on how to administer his estate. Finally, the estate had of substantial value of approximately $2,000,000 in property, $4,000,000 for Toller’s art and $500,000 for the household artistic items.
[81] In the circumstances I accept Philippa’s evidence that all of her trips to Mexico were necessary to deal with various issues related to the estate and her expenses were reasonable. Philippa always purchased economy class tickets and she took a shuttle from the airport in Mexico City to travel to SMA. I also accept Philippa’s evidence that incurring the cost of a flight for a friend to accompany her on two occasions and her husband on four occasions was reasonable in the circumstances. Her husband and her friends assisted her with some estate matters while they were in the Mexico and provided companionship and added security for her in an unfamiliar country, with a different language and culture. The estate trustee did not claim any expenses for food or lodging for her husband or her friends, only their travel costs were claimed which I find were reasonable.
[82] The last two trips to Mexico occurred on December 20, 2016 and February 3 of 2017 and were for the purpose of closing the final sale of the Sollano property and obtaining the severance that had to be completed to sell part of that parcel of land. Goldie attended Mexico on four occasions and Guy attended on two occasions. Their travel expenses were reimbursed by the estate trustee.
[83] I except Philippa’s evidence that her travel to Mexico was necessary and for the purpose of administering the estate for the reasons given in her testimony. As a result, all of the expenses claimed by the estate trustee for travel to and from Mexico and accommodations while in Mexico are approved.
(iii) Amounts Paid to Faith Fuller ($24,777.61)?
[84] Toller had hired Faith Fuller to assist him with the marketing and sale of his artwork a short time before his death. The estate trustee, with the consent of all the beneficiaries, agreed to hire Faith Fuller to continue her work for several months. Initially Ms. Fuller was hired for a fixed term and amount and subsequently her contract was renewed by the estate trustee on an hourly basis as needed.
[85] I find that the expenses incurred for Faith Fuller were reasonable and were incurred for the benefit of the estate as they were initially consented to by the objectors and Ms. Fuller had been chosen to perform this role by Toller before his death. The sale of Toller’s art was ongoing with paintings in several art galleries in Ontario and in Calgary and his art constituted a substantial estate asset worth approximately $4 million. In addition, Ms. Fuller was in Mexico and was able to report on matters and offer assistance as required. Written contracts were entered into for most of her services and invoices were provided before they were paid.
(iv) Expenses claimed on a Per Diem basis while in Mexico ($14,520)
[86] Guy and Goldie object to the estate trustee’s claim for expenses for meals and incidentals based on a per diem allowance. The objectors claim that if the estate trustee did not obtain a receipt then she should be ordered to repay the amount of the expense claimed.
[87] I accept Philippa’s evidence that it was often impractical or difficult to obtain receipts in Mexico for meals, however this does not excuse the estate trustee from demonstrating a reasonable and fair method to determine an accurate amount for these expenses.
[88] The estate trustee adopted a simple method to calculate her cost of living while she was in Mexico. She used the lower end of the rate paid by the Government of Canada to its employees for meals and incidentals while working in Mexico, outside of Mexico City. The Canadian per diem allowance for meals was $12.80 for breakfast, $21.76 for lunch and $30.20 for dinner for a total of $64.74 per day and $20.72 for incidental expenses. The rate she used was $85.48 per day. At a later date, the estate trustee reduced her per diem rate to $60.00 when she rented an apartment and could prepare some of her meals. When breakfast and lunch were provided by Toller’s cook at his house, the amount claimed was reduced to $40 a day for dinner.
[89] When her husband or a friend travelled with her, she did not claim a second per diem for their food costs.
[90] The objectors do not argue that the estate trustee did not eat when she was in Mexico. The objectors were reimbursed for their meal costs and for incidentals based on receipts when they travelled to Mexico. Goldie's claims for reimbursement contained several receipts for dinners in SMA that were in excess of $40 which indicates that the $40 amount claimed for dinner by the estate trustee (half of $80.00) was a reasonable and accurate estimate of the cost for dinner in SMA.
[91] I find that the per diem method used by the estate trustee to calculate the cost of her meals and incidentals while she was in Mexico was a reasonable method to use because:
a) They were based on an objective estimate of these costs as determined by the Government of Canada;
b) Goldie's claim for the costs of dinners was almost identical to the amount claimed by the estate trustee for a dinner; and
c) The estate trustee was in Mexico for extended periods of time which made collecting many small receipts each day a cumbersome task.
[92] The expenses claimed by the estate trustee on a per diem basis for meals and incidental expenses while she was in Mexico to administer the estate are allowed.
(v) Expenses objected to for:
(a) Supplies and equipment without a receipt ($11,131.02)
[93] The estate trustee testified that she paid all the ongoing expenses for Toller’s property and staff in Mexico, including the amount paid to Antonia (Toller’s cook) in cash. Antonia always brought back a receipt when she purchased food which was included in the envelope. Philippa kept a ledger or made a note in her iPad for each of the cash payments.
[94] I accept Philippa's evidence and explanation of the reason for incurring these expenses as set out in objections CD 6,7,13,38,39,45 and 65. I am satisfied that these expenses were incurred for the benefit of the estate, were accurate and corroborated in the ledger or were reasonable estimates for amounts paid for taxis, long distance calls and internet, domain names, photography expenses, were reasonable and were made in good faith. Philippa provided updates to the beneficiaries in her phase I and phase II accounting report which showed the amounts she had paid for the above expenses.
[95] The objections to amounts spent for supplies and equipment as set out in Tab 3A of the objector’s written submissions are dismissed and the amounts are approved as appropriate expenses.
(b) Legal fees incurred in Mexico and amounts Paid to Gowlings ($129,010.14)
[96] An estate trustee has a right to be indemnified from the estate for legal fees incurred in connection with the estate. In Thompson et al. v. Lamport et al., 1945 CanLII 2 (SCC), [1945] SCR 343 at para 356 Rand, J. cited in Furtney v. Furtney, 2014 ONSC 3774 at para 35 stated as follows:
“…”A trustee is entitled to indemnity for all costs and expenses properly incurred by him in the due administration of the trust: it is on that footing that the trust is accepted. These include solicitor and client costs in all proceedings in which some question or matter in the course of the administration is raised as to which the trustee has acted prudently and properly.
[97] In Geffen v. Goodman Estate, 1991 CanLII 69 (SCC), 1991 CarswellAlta 91 (S.C.C.), at para. 75 the Supreme Court stated that:
Legal costs incurred by an estate trustee in the context of a passing of accounts, especially where the conduct of the estate trustee qua trustee is attacked, is a proper estate expense for which an Estate Trustee ought to be reimbursed. This is the case even if the Estate Trustee at issue is also a beneficiary of the estate.
[98] In Furtney v. Furtney, 2014 ONSC 3744, at paras. 43 and 44 the court held that an estate trustee could pay litigation accounts reasonably incurred from estate funds, without the consent of the beneficiaries or a court order. The objectors rely on the decisions of Delorenzo v. Beresh, 2010 ONSC 5655 and Choppel v. Choppel Estate, [2001] O.J. No 5246 (S.C.J.) which held otherwise. The court in Furtney (heard after the above two decisions) noted that neither the Coppel nor the Beresh decisions considered the language contained in section 23.1 of the Trustee Act. At para 44 of Furtney the court held that the two decisions relied on by the objectors no longer had any application and that a court order or beneficiary consent was not required for an estate trustee to pay litigation expenses, reasonably incurred, from the estate accounts. The court stated as follows:
I do accept the analysis by Professor Osterholf, coupled with the authorities cited earlier in these reasons, and also considering section 23.1 of the Trustee Act that an estate trustee does not require the consent of the beneficiaries or a court order prior to having litigation expenses, reasonably incurred by the estate trustee, paid from estate funds.
[99] I accept the estate trustee’s evidence that she accurately accounted for and incurred all of the legal and related expenses claimed while she was in Mexico and objected to under Tab 3B the objector’s submissions.
[100] All of the legal accounts paid to Gowlings relate to estate matters, do not include any “personal” services for the estate trustee, and the legal services were provided to her as the estate trustee in connection with the administration of Toller’s estate, the passing of accounts, and the related litigation.
[101] The invoices from Gowlings set out the work that was performed and document the amount paid. I accept the estate trustee’s evidence that these accounts were paid and that they were reasonable and for the benefit of the estate. They were adequately documented in the circumstances. There is one exception and that is the invoice for $6926 which was agreed to be a duplicate entry. See CD 71 (cc) and (dd) which add up to the same amount as CD 72 (pp).
[102] The amounts paid for legal costs by the estate trustee for services during litigation and for the passing of accounts are subject to a decision regarding costs in the litigation and the passing of accounts.
(c) Schwartz’s extortion and settlement for $49,031?
[103] The estate received an offer to purchase the Sollano property together with a deposit of $48,000 from Mr. Sshwartz. After the offer was accepted, Schwartz complained that the description should have included the piece of property that was severed from the original property and sold to the neighbour. Schwartz wanted to withdraw from the transaction and demanded that his deposit be returned, which the estate trustee initially refused.
[104] Schwartz then commenced criminal and civil proceedings against the estate trustee and the other two beneficiaries. With the assistance of a corrupt lawyer in Mexico, Schwartz commenced these proceedings, registered a lien against the property preventing its sale and threatened the estate trustee. Under these circumstances the estate trustee agreed to settle with Schwartz for the sum of $49,031. Goldie argued that he should have been consulted on this matter due to his expertise as a real estate agent in Ontario. I find that it was not necessary for the estate trustee to consult Goldie on this matter as she already had legal advice from Mr. Martinez and Goldie was not licensed or familiar with real estate transactions in Mexico or with Mexican real estate and civil law.
[105] Guy had tried to repossess one of Toller’s paintings that was hanging at his hairdresser’s salon. When Guy attempted to repossess the painting a couple of burly men appeared and refused to let him take the painting. Guy decided it was safer for him to leave the painting with the hairdresser. I agree that his decision was reasonable in the circumstances.
[106] I find that the estate trustee was faced with a difficult and dangerous situation and made a reasonable decision to settle the matter for $49,031 because of the threats she had received, the risk of ongoing civil and criminal proceeding in Mexico against her, and the fact that she was unable to sell the Sollano property. As a result, I find that returning the deposit to Mr. Swartz was unfortunate, but a reasonable and appropriate expense for the estate to incur in those unique circumstances.
[107] The objection to the payment of $49,031 to Mr. Schwartz is dismissed and this disbursement is approved.
(d) Staff expenses Incurred from January 2015 to October 15th ($34,150)?
[108] Guy and Goldie object to the claim for the expenses paid to Toller’s staff for salaries and overtime for the period of January 15 to October 15, 2015 when the sale of the contents of the properties was completed. Guy and Goldie do not really object to continuing to pay Toller’s staff until the sale of the 18,000 household contents were sold. The three beneficiaries agreed to conduct a sale of the contents from the home which occurred from early September and was completed by about October 15, 2015.
[109] The objection is not that the staff weren't paid by Philippa, but rather their salaries and overtime were paid in cash without a receipt.
[110] I accept Philippa’s evidence that she incurred the expenses to pay the staff’s salaries and overtime as claimed and I find that her accounts were adequately documented in a ledger and accurately set out the amounts that were paid. I also find that it was reasonable to keep paying the staff until the sale of the household items was completed and the paintings were moved to the warehouse because they assisted with preparing for the sale, they kept the property and grounds well maintained and in good repair for their eventual sale, Antonia provided breakfast and lunch for the staff and for the estate trustee and the beneficiaries when they were in Mexico, and they provided some security to prevent the theft of the valuable art and contents located in the properties.
Staff Bonuses?
[111] Guy and Goldie also object to termination bonuses paid to Toller’s long-time staff members above the minimum statutory requirements. In particular, they objected to the payment of the termination bonus to Adrian and Alejandro because they left Mexico and “jumped the border” before their employment was terminated when the sale of the household contents was completed. The objectors agreed to pay the bonuses above the statutory minimum to the remaining staff but object to paying bonuses to Adrian and Alejandro. I agree that the payment of bonuses to the long-term staff was a reasonable expense.
[112] Adrian and Alejandro had been Toller’s long-time employees and I find the estate trustee’s decision to pay them termination bonuses in the same manner as Toller’s other employees was a reasonable and fair decision in these circumstances.
Toller Dollars?
[113] All three beneficiaries agreed to give Toller’s staff a small credit which they could use to buy some household items at the sale. The credits were referred to as Toller Dollars. Guy and Goldie now object to giving the staff $2409 worth of Toller dollars to buy items at the sale. Guy and Goldie were present and agreed to the Toller dollar plan at the time. It is unreasonable to change their position after the sale has been completed and the Toller dollars were used by the staff to buy certain household items at the sale. In any event I find this was a reasonable expense to encourage the staff members to assist until the end of the sale and it allowed them to buy some of Toller’s decorative items.
Additional payment to Ms. Failoni?
[114] Ms. Failoni agreed to be paid a commission of 15% of the value of all non-Toller art that was sold. She was involved in conducting the inventory with Goldie and pricing the items for the sale. The additional amount of $10,941 was paid to Ms. Failoni at the end of the sale. The objectors allege this was an incompetent overpayment.
[115] I am satisfied with the estate trustee’s explanation that the additional amount was paid to Ms. Failoni to account for her commissions on items sold through PayPal and cheques that could not be deposited because they were not payable to “estate of Toller Cranston”. I find she was not overpaid and accept the estate trustee’s evidence that this amount was owing to her in accordance with their agreement.
[116] The objection to the payment of $2002 to Scott Umstadd on June of 2016 was withdrawn (CD64(b)). The payments to Scott Umstadd for a hard drive and photography work was explained and I accept Philippa's evidence that this expense was incurred and find that it was reasonable in the circumstances as was the payment of $131 for flowers. I also find that the tips paid to the staff at the warehouse who assisted with the packing of Toller’s paintings was reasonably incurred and accurately accounted for.
Gifts to Alejandro and Adrian?
[117] The estate trustee gave Adrian the amount of $500 USD (or $646 CAD) to assist him to gain entry into the United States and gave Alejandro $345 to assist him to obtain the required papers to allow his children to travel with him into the United States. These gifts were kind gestures. However, these were charitable gifts that did not provide any benefit to the estate and as such should be paid from the estate trustee’s share of the estate.
(e) Shipping and packaging expenses of $91,708.05?
[118] The objection to the shipping and packaging expenses is mainly to the accounting error for the $50,000 expense for shipping and insurance which was paid from estate funds. This issue is dealt with under issue #6 below.
I accept the evidence of the estate trustee that the balance of the expenses objected to under this item were reasonably and accurately accounted for. The objections to the expenses claimed for packaging and shipping and the other items under this heading are dismissed, other than the objection to $50,000 which is addressed later in this decision.
(f) Miscellaneous Objections:
Walker Replacement Cheque
[119] Goldie questioned the replacement cheque of $5846 received from Mr. Walker. He alleged that he witnessed Mr. Walker purchasing tens of thousands of dollars worth of items greatly exceeding of $5846.
[120] However, under cross examination, Goldie admitted that he had not handled any of Mr. Walker's purchases, was not involved in any sale to Mr. Walker, he had no idea what items Mr. Walker purchased, nor did he know the value of what Mr. Walker purchased. This objection is based on Goldie’s vague unreliable and uncorroborated evidence. I accept the estate trustee’s evidence and Goldie's allegation that Mr. Walker purchased a greater number of items having a greater value is dismissed.
Alleged Mishandling of Art Sale
[121] Guy and Goldie argue that the estate trustee’s compensation should be reduced because of her alleged mishandling of the packaging and shipping of Toller’s paintings. There were approximately 400 large paintings, each valued from $5000 to $20,000, half of which were located in Toller’s properties and half were stored in a warehouse at his death.
[122] Guy assumed responsibility for the valuing of the paintings and for creating an inventory and labeling the paintings. Unfortunately, Guy used a numbering system that caused confusion and admitted that there were several errors and that several paintings in his inventory were mislabelled.
[123] The estate trustee and the beneficiaries relied on Guy’s inventory and valuations to divide approximately $500,000 worth of paintings for each beneficiary. The paintings were packaged and shipped based on Guy’s inventory and labeling. It is acknowledged that a few paintings were shipped to the wrong person or gallery. These errors were corrected within a reasonable time after shipping in any event.
[124] The objectors argue that Philippa should have opened every package in the warehouse in Mexico, identified the painting and checked it against Guy’s inventory as well as checking the labeling on each package of paintings. Taking these additional steps may have avoided some confusion and inconvenience, however no damages were suffered to by anyone other than a short delay.
[125] I am satisfied that it was reasonable for the estate trustee to rely on Guy’s inventory and labelling and also to rely on the professional packers and shippers to label and address the packages appropriately.
Failure to Comply with the Instructions of Two Thirds of the Beneficiaries
[126] The estate trustee failed to comply with the directions of two thirds of the beneficiaries to divide the remaining artwork in specie, as determined by Guy.
[127] As stated previously, an estate trustee has a duty to administer an estate for the benefit of others (the beneficiaries) but not “as directed by the beneficiaries.”
[128] In March of 2016 Guy, supported by Goldie, circulated a proposal to divide the remaining art in the galleries between the three beneficiaries. Philippa acknowledged his request and agreed to consider it at the appropriate time but was not prepared to distribute most of the balance of the estate assets until she had passed her accounts and paid all of the estate expenses.
[129] The objectors sought and obtained a court order staying the sale of the artwork remaining in the galleries until this passing of accounts was completed. It is ironic that Guy had negotiated the arrangements for the sale of Toller’s remaining paintings at the two galleries for which he obtained a stay. I find that the estate trustee was not required to distribute the remaining artwork in specie as demanded by Guy and Goldie until her accounts were passed and all the estate expenses were paid.
Gratifications
[130] The accounts include an amount at CD 72 (hh) of $603 under the heading of “Gratifications”. This amount was paid to speed up the severance approval to complete the sales of Toller’s property. While I accept the trustee’s evidence that this amount was paid and that she believed it was necessary in the circumstances, the court cannot countenance the payment of this amount.
Issue #4
Should the Trustee have hired a marketing expert to provide an opinion on the best way to sell Toller's paintings?
[131] The objectors submit that the estate trustee should have obtained a marketing expert's opinion on the advisability of holding the Memorial in Toronto to maintain Toller’s brand and legacy. The primary reason for holding the memorial was to honour and show respect for Toller as a Canadian icon and the marketing opportunity was a secondary objective. Hiring an expert would have increased the cost of the Memorial and would have only caused additional objections and was not necessary in these circumstances. Seeking directions from a court would have also added costs an was not necessary in these circumstances.
[132] Philippa took a risk that the court might not approve the Memorial expenses but I am satisfied that she acted prudently and that the expenses for the Memorial in Toronto were appropriate for Toller’s estate given his stature as a Canadian figure skating icon and a well known Canadian artist.
[133] The estate trustee sought subject matter expertise when she retained Ms. Failoni to determine the appropriate pricing of items for the estate sale, she sought legal advice from Mr. Martinez regarding staff severances, how to handle replacement cheques, the sale and severance of the properties and how to respond to the civilian and criminal proceedings commenced by Schwartz. She also retained legal counsel in Canada to assist her to defend the legal attacks by Guy and Goldie.
[134] In addition, she hired Faith Fuller to assist her with the sale of Toller’s paintings, with the objectors’ initial consent. Finally, she consulted realtors and lawyers for the sale of the Recreo property and managed to save the estate $250,000 in taxes. I am satisfied that Philippa retained experts as reasonably required.
Issue #5
Did the trustee misappropriate $25,000 to $30,000 worth of art for her personal benefit?
[135] The objectors continued to maintain the allegation that the estate trustee had taken art for her personal use throughout the hearing although neither objector led any evidence to support this bald allegation. In his evidence in chief Goldie could only state that he “has no way of knowing” whether the receipts shown in the accounts were accurate. When Goldie was examined by his own lawyer about this allegation, namely that Philippa had “removed many chattels from Toller’s property without right.”, he answered that “he believed the allegation to be true” but he did not know which chattels she would have taken and he finally concluded by saying in any event “I don't really have a problem with that.”
[136] Based on a total lack of any credible evidence, I find that this allegation of theft and fraud by Guy and Goldie is unproven and completely without merit and is dismissed.
Issue #6
Did the Trustee Over-Compensate herself to the Order of $50,000 for Shipping and Insurance costs?
[137] The accounts at CD44 (h) indicate that in November of 2015, Philippa wired $50,000 from the estate bank account to be used to pay for the costs of insuring and shipping the artwork to Canada. The transfer was disclosed in her phase three accounting in 2015 and a copy of the wire transfer and the bank statements have been provided to the objectors. In the accounts the transfer is listed under the heading of “Estate Costs Summation”. This means that the trustee wired funds from the estate when they were sent to her and were not paid by her from her personal funds.
[138] I accept the estate trustee’s reason for the transfer of $50,000 and accept her evidence that the transferred funds were used for their intended purpose for the benefit of the estate. The insurance costs and Bryton's shipping costs are set out at CD 68 (a) and (b) of $18,475 and $30,574.00, which amount to just less than $50,000. However, these disbursements for CD 68 (a) and (b) are listed under the heading “Paid to cover estate costs” which indicates that they were paid by the estate trustee personally and were reimbursed to her. This is an accounting error which results in a payment to the trustee of approximately $50,000 which was not paid personally by the trustee. The correct accounting should have shown CD 68 (a) and (b) under the heading “Estate Costs Summation” to indicate that these expenses were paid from estate funds. In such case no reimbursement should have been made because these expenses were not paid with her funds.
[139] I am satisfied that the error in the accounts was an honest mistake because the payment was disclosed to the beneficiaries in the accounts and not hidden in any way. To correct the accounting error the estate trustee is required to repay the sum of $50,000 to the estate.
Issue #7
What amount of compensation should the Estate Trustee Receive?
[140] The estate trustee seeks compensation based on the “tariff” of 2.5% of the capital receipts and disbursements and 2.5% of the income receipts and disbursements. The amount of $172,440.75 was claimed in her revised passing of accounts but she seeks compensation of $208,620.42 in her written submissions. When the above percentages are applied to the total capital receipts of $4,380,475 an amount of $109,512.00 is obtained. When 2.5% is applied to the total capital disbursements of $3,964,326 the result is $99,108.00. These two amounts added together equal $208,620. As a result, I accept the amount claimed for compensation to be correctly calculated as $208,620.
[141] In Laing Estate v. Hines, 1998 CanLII 6867 (ON CA), the Ontario Court of Appeal approved of the manner for fixing trustee’s fees as set out in Re: Jeffery Estate. In Re: Jeffery Estate, the court stated 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. Usually, counsel will, in argument, set out a factual background against which the five factors can be brought to bear on the case
at hand. Additionally, the judge will consider whether an extra allowance should be made for management, based on special circumstances. The result of this testing process should enable the judge to determine whether the claims are excessive or not and, in the result, will enable the judge to make adjustments as required. The process is not scientific but is not intended to be: in the estate context, it is a search for an award which reflects fairness to the executor; in a real sense, the search is for an appropriate quantum meruit award in a unique setting.
[142] In the Laing Estate decision, the Court of Appeal stated as follows:
The audit judge should first test a compensation claim using the "tariff" and then confirm the mathematical result against the "five factors" approach set out in Toronto General Trusts Corp. v. Central Ontario Railway. Time spent on the administration of the estate should not be the dominant factor in fixing compensation, nor should compensation be reduced to "punish" a trustee who has not kept adequate records. Reducing the assessment required by s. 61(1) of the Trustee Act to the mere product of hours spent multiplied by a reasonable hourly rate is inconsistent with the statutory command that the compensation be "fair and reasonable" and that, in addition to time spent, it reflect "the care, pains and trouble" expended in the administration of the estate. In this case, the amount fixed under the tariff guidelines provided fair and reasonable compensation for the executor.
[143] The five factors to be considered were set out in the 1905 Re: Toronto General Trust and Central Ontario Railway decision as follows:
a) magnitude of the trust;
b) care, responsibility and risks assumed by the fiduciary;
c) time spent by the fiduciary in carrying out his responsibilities;
d) skill and ability required and displayed by the fiduciary;
e) results obtained and degree of success associated with the efforts of the fiduciary.
[144] For the reasons given previously I find that there was no oral agreement between the parties that the estate trustee/executor would not be paid any compensation.
Magnitude
[145] The estate assets were of a large magnitude as they were valued at over $6,000,000. The substantial assets did not include any available cash to pay estate expenses and were located in Mexico. The estate trustee’s efforts were proportional to the size of the estate.
Care, Responsibility and Risk
[146] Philippa assumed a substantial risk by personally paying all of the ongoing estate expenses, including staff salaries, the payment of Faith Fuller and legal expenses before they were approved as the legal heirs and before she was appointed as the executor in Mexico. Guy contributed the sum of $10,000 and Goldie constituted a few hundred dollars. Philippa and her husband personally paid approximately $500,000 of estate expenses and assumed a large amount of risk in so doing.
[147] Philippa was also exposed to a civil and criminal proceedings commenced by Schwartz in Mexico because of her role as executor and she was subjected to the threat of armed men attending at her hotel to intimidate her.
[148] The estate trustee assumed a lot of care and responsibility when handling this complex estate with the many unique assets to be sold including 18,000 artistic items located in Toller’s residences and 400 very valuable paintings.
Time Spent
[149] The estate trustee spent a large amount of time administering the estate with 13 trips to Mexico several of which required extended stays to deal with the sale of the 18,000 items and the administration of the estate.
Skill and Ability Displayed
[150] The estate trustee managed to evaluate and successfully hold a sale for the 18,000 items in Toller’s residences in Mexico, with the assistance of Guy and Goldie. She also managed to package and safely ship all of Toller’s paintings to Canada. The errors in inventory were not significant and were largely caused by Guy’s errors in creating the inventory. Finally, she successfully managed to save the estate approximately $250,000 in Mexican taxes on the sale of the Recreo property.
Results
[151] The real estate in Mexico was sold, as well as the 18,000 household artistic items and the paintings were packaged and safely shipped to Canada. The paintings which the beneficiaries agreed to divide amongst themselves have been delivered and the remaining unsold paintings are located in two art galleries in Canada (sales are subject to a stay). Other than completing this passing of accounts and resolving the remaining litigation commenced by the objectors, the estate is largely administered.
Reductions
[152] The objectors submit that the estate trustee’s compensation should be reduced because some of her work was delegated to Faith Fuller, and some work was performed by her legal counsel. In addition, Guy and Goldie argue that Philippa's compensation should be reduced because Goldie assisted with the inventory of the household items, Guy valued and created an inventory of the paintings and they all assisted with the sale of the household items. In addition, the objectors argue that the compensation should be reduced due to the estate trustee’s incompetence.
Incompetence Allegations
[153] I have found that Philippa met the required standard of an ordinary person’s skill and prudence for the reasons previously given. I also reject the allegation that she acted in an incompetent manner when administering this estate with a large number of unique artistic items, 400 very valuable paintings and two valuable properties joined together in a foreign, Spanish speaking country, where the deceased died without a will to give her any direction. This finding is made for the same reasons as set out in finding that she met the required standard of care.
Delegation
[154] I find that hiring Faith Fuller to advise and assist the estate with the ongoing marketing of Toller’s paintings, and the recovery of monies owing for the sale of artwork was a reasonable expense and did not amount to a delegation of the executor’s work. Guy and Goldie initially consented to hiring Ms. Fuller and Toller engaged Ms. Fuller for the same purpose prior to his death.
[155] The work performed by Gowlings was reasonably required because Guy had communicated with Art World and Art Revolution and directed them to deliver portions of the revenue from art sales directly to him and Goldie, without any authority and without the agreement of the estate trustee. The legal work undertaken did not amount to a delegation of her executor’s work because the estate required professional services and advice due to the objectors’ inappropriate attempts to obtain estate assets for themselves while bypassing the estate trustee.
Contributions by Guy and Goldie
[156] The objectors cooperated and assisted the estate from the date of Toller's death until the end of the sale of the household items in Mexico in mid October of 2015. Goldie assisted in compiling an inventory of the 18,000 household items and created a schematic of the properties. Guy valued, labeled, and created an inventory of Toller’s paintings, which assisted the estate, notwithstanding some errors in the inventory.
[157] However, they both assumed a negligible amount of financial risk ($10,000 for Guy and a nominal amount for Goldie) compared to a financial risk of almost $500,000 of personal funds advanced by the estate trustee to pay for estate expenses. In addition, Guy and Goldie did not assume any legal risk or responsibility for this complicated estate.
[158] While Guy and Goldie initially assisted the estate as outlined above the value of their contribution is offset by their actions demanding an immediate division of the paintings in specie and their actions in making many unsubstantiated objections causing the estate to incur substantial legal expenses. Goldie also wrongfully took $55,495 from the estate bank account in Mexico without the consent of the executor. His conduct was wrong and should not be rewarded.
Disposition of Issue #7
[159] For the above reasons I will not make any substantial reductions to the amount of compensation sought by the estate trustee as claimed by the objectors.
[160] When the five factors are considered against the “tariff” approach I am satisfied that the approximate amount of the fixed tariff guidelines provide fair and reasonable compensation to the estate trustee. The estate trustee’s compensation is fixed at $200,000 exclusive of HST.
Final Disposition of the Passing Accounts
[161] The court orders as follows:
a) The accounts submitted for January 23, 2015 until April 30, 2018 for the estate of Toller Cranston are passed and all other objections are dismissed except for the following expenses which are disallowed and must be repaid to the estate:
i. $646 given to assist Adrian;
ii. $345 given to assist Alejandro;
iii. $603 paid for gratifications;
iv. the sum of $6926 for a legal invoice for CD72(qq), which was included twice [CD71(cc) + CD71(dd)]; and
v. the amount of $50,000 which must be repaid to the estate for the cost of insurance and shipping to correct the accounting error shall be deducted from the amount of the trustee's compensation.
b) The estate trustee’s compensation is fixed at $200,000.00 exclusive of HST, and shall be paid out of the estate;
c) the accounts showing original assets remaining in the trustee's hands are approved;
d) the Applicant shall make submissions on costs within 15 days, the objectors shall respond within 15 days therefrom, and the Applicant shall have 10 days to reply. Cost submissions are to be sent to SCJ.Assisants@ontario.ca to the attention of Justice R. Smith.
Released: February 22, 2021
COURT FILE NO.: 17-35222ES
DATE: 20210222
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
PHILLIPPA MARY BARAN in her capacity as Trustee of the ESTATE OF TOLLER JAMES MONTAGUE CRANSTON
Applicant
– and –
HUGH GOLDIE CRANSTON and GUY FRANCIS CRANSTON
Respondents
REASONS FOR decision
R. Smith J.
Released: February 22, 2021