COURT FILE NO.: 21-0101
DATE: September 28, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
KAREN CLARK
Applicant
– and –
WENDY KANE in her personal capacity and as TRUSTEE OF THE ESTATE OF RUSSELL EDWARD KANE
REILLY KANE CARMICHAEL also known as REILLY KANE
Respondents
Colin Wright, for the Applicant
Michael Eyolfson, for the Respondent Wendy Kane
REASONS FOR DECISION
ABRAMS, J
Overview
[1] This is an Application for directions brought pursuant to Rule 75.06 of the Rules of Civil Procedure.
[2] The sole issue to be decided by the Court on this Application is whether the Respondent, Wendy Kane (“the Estate Trustee”), and her counsel are entitled to compensation claimed in the sum of $28,409.29 as set out in her passing of accounts.
[3] The Applicant, Karen Clark (“the Applicant”), contends that they are not [entitled], for the following reasons:
(1) The Estate Trustee and her counsel only produced an accounting three years and eight months after the death of Russell Edward Kane (“the Deceased”), and then only after three requests and the commencement of this proceeding; and
(2) In the meantime, while the Estate Trustee essentially enjoyed all that she was entitled to under the Will, the other beneficiaries were left waiting for almost their entire shares. Put simply, the Estate Trustee was not even-handed in her treatment of the other beneficiaries.
Facts
[4] The essential facts are not in dispute. Notably, the parties elected not to conduct cross-examinations on the affidavits filed.
[5] The Deceased died on April 6, 2018.
[6] The Deceased’s last will, with its codicil, appointed the Estate Trustee as his sole executor, leaving 30% of his assets to each of his three daughters, namely: the Applicant, the Estate Trustee and Cindy Warren (“Cindy”).
[7] The remaining 10% was left to his granddaughter, the Respondent Reilly Kane, who did not appear on this Application, although duly served.
[8] The Estate Trustee’s share was to be held in a Henson Trust for her benefit so as not to adversely affect her receipt of disability benefits.
[9] The assets of the of the Deceased (“the Estate”) consisted, materially, of slightly over $40,000 in undesignated cash at TD-Canada Trust, and two houses in Gananoque: one on John Street in which the deceased resided (“John Street”) and one on North Street, which he rented to the Estate Trustee (“North Street”).
[10] Cindy died without a will on June 1, 2018. She was not survived by any spouse, child, or parent. Therefore, by operation of law, her share of the Estate would be divided equally between the Applicant and the Estate Trustee.
[11] John Street was sold for $230,000 on November 23, 2018, and, except for disbursements made with the consent of the parties, the net proceeds of sale have since been held in trust by counsel for the Estate Trustee.
[12] Since September 2019, the Estate Trustee has paid no rent for North Street, though she continues to occupy it.
[13] In October 2019, the Estate Trustee obtained a certificate of appointment.
[14] In November 2019, the Applicant and the Estate Trustee reached the following agreement:
(1) The Estate Trustee would purchase North Street for $145,000 using her share of the proceeds of the Estate and of Cindy’s estate;
(2) The transaction would take place after the accounts of the Estate had been approved or passed; and
(3) In the meantime, subject to the payment of three outstanding accounts, the Estate Trustee would personally assume the costs of maintaining North Street.
[15] Further, in November 2019, the Applicant and the Estate Trustee agreed to divide approximately $50,570, which the Deceased had designated for their benefit, with approximately 55% going to the former and 45% to the latter. The Applicant also received a 33-year-old truck appraised at $4,000.
[16] In March 2020, the Estate Trustee was requested, through her counsel, to prepare her accounts. The request was acknowledged, but no accounts were forthcoming.
[17] In April 2020, the Estate Trustee paid rent on North Street for the one-year period from September 1, 2018, to August 1, 2019.
[18] In April 2020, a preliminary and incomplete set of accounts was prepared on behalf of the Applicant and sent to counsel for the Estate Trustee with a request to have the Estate Trustee fill in the gaps. No response was forthcoming.
[19] By June 2021, the income taxes owed by the Estate had been calculated. Further, a debt owed by Cindy’s estate had been paid. Moreover, that same month, more complete accounts were sent on behalf of the Applicant to counsel for the Estate Trustee. Again, no response was forthcoming.
[20] Thereafter, this proceeding was commenced on October 15, 2021.
[21] In response to this Application being served, the Estate Trustee’s accounting was finally delivered on December 7, 2021. The Applicant adopts the figures contained in the accounting, with three exceptions:
(1) The legal fees claimed in the amount of $7,500;
(2) The executor’s compensation claimed in the amount of $20,909.29; and
(3) The claim that rent arrears have been fully paid; there is still a $600 shortfall.
Parties Positions
[22] The Applicant contends that the Estate Trustee (and her counsel) are not entitled to the compensation claimed by reasons of her failure to properly administer the Estate, specifically: First, she put off presenting her accounts in a simple estate for three years and eight months. Second, she only presented her accounts after the Applicant was put to the expense of preparing two sets of draft accounts and finally, upon commencement of this proceeding. Thereafter, she presented her accounts promptly enough; however, with no reasonable explanation for the earlier silence and delay. In summary, the Estate Trustee has not been even-handed in her treatment of the other beneficiaries, as the Applicant asserts.
[23] The Estate Trustee argues that this Estate (in conjunction with Cindy’s Estate) has not been in any way simple or straightforward. Rather, the matter has been litigious since the outset. Further, the Applicant has been involved at every step and has essentially controlled the Estate despite not being the executor. Further, banking information has been difficult to obtain, and the Estate Trustee has kept the Applicant in the loop with respect to bank inquiries and statements throughout, even to the extent of allowing the Applicant to make direct inquiries of the bank regarding Estate accounts.
Analysis and Conclusions
[24] The Court has inherent jurisdiction to supervise the administration of an estate whether or not a certificate is granted: Helou (Litigation guardian of) v. Helou Estate, [2006] O.J. No. 1718, 21 E.T.R. (3d) 88 (Ont. Master).
[25] Rule 75.06(3) plays an important role in contentious estate proceedings. It gives the Court powers in respect of an application or motion brought under Rule 75. Among other things, the Court may, inter alia, direct the issues to be decided.
[26] Rule 75.06(3) is permissive. It says that the Court “may” direct certain things. It does not say that the Court “must” or “shall” grant the application or motion: Neuberger v. York, [2016] O.J. No. 1164, 2016 ONCA 191 (Ont. C.A.).
[27] The parties agree; however, that this summary procedure is the most expeditious and proportionate way to decide the issue.
[28] The obligation to account and disclose information to beneficiaries has been variously described as: representing the first duty of a trust; being at the heart of the trust relationship; or as being the core element of the trust. This principle was recognized in the Ontario Court of Appeal decision in Sandford v. Porter, ... in which MacLellan, J.A. stated:
The duty of a trustee or other accounting party is to have his accounts always ready, to afford all reasonable facilities for inspection and examination, and to give full information whenever required.
[29] The rule laid down by Mr. Lewis, Law of Trusts, 8th Ed., p. 691, is stated thus: “The cestui que trust has a right to call on the trustee for accurate information as to the state of the trust ...”.
[30] Further, it is the duty of the trustee to keep clear and distinct accounts of the property s/he administers, and s/he exposes themself to great risks by the omission. It is the first duty of an accounting party ... to be always ready with his accounts: Jennifer J. Jenkins and H. Mark Scott, Compensation and Duties of Estate Trustees, Guardians & Attorneys (Toronto: Thomson Reuters, 2016), pp. 12-3 & 12-4, s. 12:30.10, below pp. 14 - 17.
[31] In my view, the Estate Trustee was dilatory in the preparation and presentation of her accounts. First, the repeated claim throughout her affidavit that the bank was at fault for not providing the requisite financial information is not supported by evidential record. Second, her abject refusal to respond to the Applicant’s “version” of the accounting, as it was “clearly wrong”, is nothing more than an attempt, in my view, to shift the blame for her otherwise unreasonable delay in having her accounts prepared.
[32] It is a primary duty upon trustees that in all their dealings with trust affairs they act in such a way that, if there are two or more beneficiaries, each beneficiary receives exactly what the terms of the trust confer upon him and otherwise receives no advantage and suffers no burden which other beneficiaries do not share: Carley Estate, Re 1994 CarswellOnt 646 (O.C.J. Gen. Div.), para. 20, below pp. 30 & 37.
[33] I agree that the Estate Trustee has not been even-handed in her treatment of the beneficiaries. That is, her refusal to present her accounts and distribute the Estate for almost four years has not adversely affected her. She has continued to reside at North Street, which she will eventually be required to purchase upon distribution of the Estate. Moreover, she will eventually receive limited funds on an annual basis from the Henson Trust so as not to adversely affect her disability benefits. For these reasons, she has apparently lacked motivation to windup the Estate, to the prejudice of the other beneficiaries.
[34] In the result, I would:
(1) Reduce the Estate Trustee’s claim for compensation to zero;
(2) Reduce the Estate Trustee’s claim for legal costs to $3,750.00, plus HST for the administration of the Estate;
(3) Award the Applicant costs of $4250.00, plus HST for the Application; and
(4) If the parties require further directions regarding steps to be taken to conclude the Estate in accordance with the Will, they are to make written submissions within 30 days, limited to no more than five pages, double spaced, one side of the page, 12-point font or larger.
The Honourable Mr. Justice B. W. Abrams
Released: September 28, 2022
COURT FILE NO.: 21-0101
DATE: September 28, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
B E T W E E N:
KAREN CLARK
Applicant
– and –
WENDY KANE in her personal capacity and as TRUSTEE OF THE ESTATE OF RUSSELL EDWARD KANE
REILLY KANE CARMICHAEL also known as REILLY KANE
Respondents
Reasons for decision
Abrams, J.
Released: September 28, 2022