IN THE MATTER OF THE ESTATE OF DAYLE COLETTE SOLIVO (also known as Dayle Colette Henderson and Dayle Colette Cusson), deceased.
COURT FILE NO.: 05-336/19 DATE: 2022-05-17 SUPERIOR COURT OF JUSTICE – ONTARIO
RE: Melissa Henderson, Applicant AND: Sheryl Sands, personally and in her capacity as Estate Trustee of the Estate of Dayle Colette Solivo (also known as Dale Colette Henderson and Dayle Colette Cusson), and in her capacity as Attorney for Property for Dayle Colette Solivo (also known as Dayle Colette Henderson and Dayle Colette Cusson), Judith Norris in her capacity as alternate Estate Trustee of the Estate of Dayle Colette Solivo (also known as Dayle Colette Henderson and Dayle Colette Cusson) and Marine Henderson, Respondents
BEFORE: C. Gilmore, J.
COUNSEL: Jacob Kaufman, Counsel for the Applicant Responding Parties Stephanie Turnham, Counsel for the Respondent Moving Parties
HEARD: May 13, 2022
ENDORSEMENT on motion
Introduction
1This is the Respondent Sheryl Sand’s (“the Respondent”) motion to clarify paragraph 3 of the Order of Justice McEwen dated February 11, 2020 (“the McEwen Order”) to permit the Respondent to withdraw or transfer assets of the Estate for the purpose of payment of legal and accounting fees rendered to her.
2In addition, the Respondent seeks an Order extending the timeline for her to pass accounts as per paragraphs 7 and 8 of the Order of Justice Conway dated August 17, 2021 (“the Conway Order”).
3For the reasons set out below, I find that paragraph 3 of the McEwen Order cannot be interpreted to mean that the Respondent can fund her legal and accounting fees to defend this Application when the Application challenges her position as Estate Trustee and in the face of an explicitly worded Preservation Order.
Background Facts and the Positions of the Parties
4The Respondent is the sister of the deceased Dayle Colette Solivo who died on March 22, 2019. The Applicant Melissa Henderson (“the Applicant”) and her sister Marnie Henderson (“Ms. Henderson”) are the only children of the deceased and the joint beneficiaries of their mother’s estate.
5The Respondent was appointed as the Estate Trustee in the deceased’s Will dated February 13, 2019. The Respondent’s sister Judith Norris was appointed the alternate Estate Trustee. Neither Judith Norris nor Marnie Henderson have filed a Notice of Appearance.
6The Application in this matter was issued on December 6, 2019 and seeks, amongst other relief, an Order removing the Respondent as Estate Trustee, passing over the alternate and appointing the Applicant as Estate Trustee. Ms. Henderson supports her sister’s Application.
7In the main Application, the Applicant makes several serious allegations against the Respondent regarding her conduct as Power of Attorney for Property and as Estate Trustee. All of the allegations have been fully defended by the Respondent who wishes to remain as Estate Trustee and carry out her sister’s wishes.
8In February 2020, Justice McEwen made a consent Order Giving Directions. Paragraph 3 of the Order is a Preservation Order requiring that the assets of the Estate not be “transferred or disposed of or otherwise distributed or depleted for any purpose except for the sole and exclusive purpose of making payment of the Deceased’s and the Estate’s legitimate taxes and liabilities.”
9The Preservation Order was continued on consent in Justice Conway’s August 17, 2021 Order. Neither Order makes any specific reference to legal or accounting fees. The Conway Order required the Respondent to pass her accounts as Attorney for Property for the deceased and as Estate Trustee within 60 days.
10Subsequent to the McEwen Order, the Respondent has paid her personal legal and accounting fees in relation to this litigation from the Estate. The Applicant estimates that the Respondent has paid $63,938.88 in legal, mediation and accounting fees up to August 21, 2021 based on vouchers provided. A further $5,085 was paid in accounting fees in 2020 for the preparation of the Estate accounts in order to comply with previous Orders. It is not clear how much more has been spent on legal and accounting fees since August 2021.
11The Applicant provided TD Bank with the McEwen and Conway Orders on September 1, 2021 at which point TD froze the Estate account. When it became clear that the Applicant objected to such payments, the Respondent brought the within motion to permit her to continue to reimburse herself from Estate funds.
12The Respondent’s position is that the McEwen and Conway Orders imposed significant obligations on the Estate including preparing bank printouts, an informal Estate accounting, attending mandatory mediation, compiling additional documentation as required by the Conway Order, and delivering responding and supplementary affidavit material.
13The Respondent submits she has provided full disclosure of the fact that legal and accounting fees were being paid from the Estate. This included disclosure provided between June and December 2020 containing vouchers and bank statements as well as additional disclosure in October 2021. The Respondent has been unable to comply with the requirement to pass accounts as the Estate bank account has been frozen.
14The Respondent asked for the Applicant’s consent beginning in October 2021 to continue paying the legal and accounting fees so that she could pass her accounts. The Applicant failed to advise that she did not consent to such payments until just before a Case Conference scheduled for March 25, 2022.
15The Applicant submits that the Respondent should have provided copies of the McEwen and Conway Orders to TD Bank immediately but did not. There is nothing in the McEwen Order which permits the Respondent to pay her personal legal and accounting fees in relation to this litigation. She is only permitted to pay Estate liabilities. The Applicant’s position is that Estate liabilities do not include such payments.
Issues
Issue #1 – Does the McEwen Order Permit Payment of the Respondent’s Personal Legal and Accounting Fees?
16The Respondent relies on Geffen v. Goodman, 1991 CanLII 69(SCC) at para 75 for the proposition that trustees are entitled to be indemnified for all costs including reasonable legal costs in defending an action.
17The Respondent submits that this principle was affirmed in Toller James Montague Cranston (Estate of), 2021 ONSC 1347 in which the Court held that an estate trustee does not require the consent of the beneficiaries to pay litigation fees from the estate account including proceedings where the conduct of the trustee is being attacked. I note that in that case, the estate trustee was seeking costs after a successful passing of accounts.
18This case, however, differs on its facts from the two cases above, neither of which were subject to a Preservation Order with explicit provisions as to what amounts could be paid out as expenses. The Respondent has not moved to vary the McEwen Order, rather, she requests that this Court condone her payment of legal and accounting fees both past and future.
19Furthermore, the Respondent in this case is acting for her personal benefit. That is, her position as named Estate Trustee is being attacked. She is funding her defence of the Application from the Estate, while the Applicant must fund her own legal fees. It is not known at this time which party will be successful.
20This principle is expanded upon in DeLorenzo v. Beresh, 2010 ONSC 5655 at para 24 as follows (my emphasis):
[24] In a situation such as the present, the outcome of the litigation may very well have a bearing as to what costs each of the parties should be required to bear. It is therefore preferable that each of the parties bear their own costs until the litigation is completed. It would be inequitable to have the estate trustee pay his legal costs from the estate funds and require the applicants, whose funds are tied up in estate, to bear their own legal costs while the litigation is proceeding. An order shall therefore issue requiring Calvin Beresh to repay to the estate all legal fees paid from the estate with respect to the outstanding litigation with interest thereon at the post-judgment interest rate as defined by Section 127(1) of the Courts of Justice Act from the date such payments were made out of the estate and restraining Calvin Beresh from using estate funds to pay any further legal accounts with respect to the ongoing litigation between he and the beneficiaries without the consent of the beneficiaries or further order of the court.
21I agree with the principles set out in DeLorenzo. The costs of this litigation must be borne by the parties’ personally until there is an agreement or Court Order which determines whether the relief sought should be granted and the accompanying cost consequences.
22The Respondent submits that there are public policy reasons to allow Estate Trustees to be indemnified from the Estate for legal fees. It would be difficult to find individuals willing to take on the position of Estate Trustee if they were required to fund all expenses themselves and then seek reimbursement from the Estate. However, it is this Court’s view that it does not offend public policy to require an Estate Trustee to pay their own legal and accounting fees up front where the litigation will not result in any financial benefit to the beneficiaries and where the litigation is focused on whether the Estate Trustee should be removed.
23The facts in this case are aligned to those in Fenwick v. Zimmerman in which the scope of a trustee’s indemnification is described as follows at para 8 (my emphasis):
A trustee is entitled to be indemnified for all the costs, charges and expenses which the trustee has "reasonably incurred" in the management of the estate, including costs of an action reasonably defended. [Waters' Law of Trusts in Canada page 1155] As that text makes clear, the legal costs that are contemplated are those where the trust is a party to a proceeding. In this case, the actions of the trustee himself are challenged. It is alleged that Zimmerman breached fiduciary duties to Signe, that he has failed to account for his dealings with Signe's assets as her attorney or to account for his administration of the Trust, and that he has used the Trust to further his own personal and financial interests and to frustrate Signe's testamentary intentions. I agree with Ms. Yach that a trustee who incurs legal expenses in defending himself (as opposed to the trust) is not automatically entitled to be indemnified.
24The Respondent spent considerable time going over the history of this matter and the fact that the Applicant did not take a position on the payment of legal and accounting fees until late March 2022. I do not find that this changes my view of the case. At no time did the Applicant give her consent for such expenditures. While it would have been better had this issue been dealt with earlier when vouchers were first provided, the passage of time does not change my conclusions.
25Given all of the above, I make the following findings:
a. The provisions in paragraph 3 of the McEwen Order cannot be interpreted to mean that the Estate Trustee is entitled to pay her personal legal and accounting fees for this litigation from the Estate.
b. Requiring the Estate Trustee to pay her own legal and accounting fees in relation to this litigation does not offend public policy nor section 23.1 of the Trustee Act, R.S.O. c.T.23 given the existence of the Preservation Order.
Issue # 2 – The Passing of Accounts
26The parties are in agreement that the Respondent should be given further time to issue her Application to Pass Accounts. I agree that the end date of the accounting should be May 13, 2022, given my Orders herein.
27Given that the Respondent will no longer be able to pay her legal and accounting fees from the Estate, I hesitate to impose a new date by which accounts must be passed. Counsel may either come to an agreement on their own or schedule a Case Conference before me or Justice Dietrich to deal with the issue if necessary.
Orders
28Given all of the above, I make the following Orders:
a. The Respondent’s motion is dismissed;
b. The end date for the passing of accounts for the Estate shall be May 13, 2022.
c. If the parties cannot agree on a date by which the Application to Pass Accounts should be issued, I may be spoken to, or a Case Conference arranged.
Costs
29The Applicant as the successful party incurred substantial indemnity costs of $7,600 and partial indemnity costs of $4,200. The Respondent’s costs were higher as she prepared more material as the moving party. Her partial indemnity costs were $8,578.
30The Applicant has had complete success. She attended this motion and requested to address the Court on the issue of costs. She submitted that she wanted substantial indemnity costs. I decline to award costs on a substantial indemnity scale as requested by the Applicant. There is no legal reason to do so. Such costs are reserved for the most egregious cases. This is not one of them. This case involved a discrete legal issue which required the Court to interpret the provisions of a Preservation Order in the context of current case law.
31The Respondent shall therefore pay costs in the amount of $4,200 to the Applicant. The costs are to be paid by the Respondent personally and not from the Estate.
C. Gilmore, J.
Date: May 17, 2022