Larwill v. Larwill et al., 2022 ONSC 6145

Court File and Parties

COURT FILE NO.: CV-21-88058-ES DATE: 2022/10/31

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: ANITA CHRISTINE LARWILL, in her capacity as Estate Trustee of the Estate of William Standley Larwill, Applicant

AND:

ERNEST STANDLEY LARWILL, ALLAN RAYMOND LARWILL, and JAMES WILLIAM LARWILL, Respondents

BEFORE: Regional Senior Justice Calum MacLeod

COUNSEL: Rodrigue Escayola for Ernest Larwill Lee Mullowney for James Larwill Allan Larwill in person No one appearing for Anita Larwill

HEARD: October 28, 2022 – by videoconference

DECISION AND REASONS

1This appears to be the final chapter in an unfortunate dispute between siblings in relation to the administration of the estate of their late father. Ernest and James now bring a motion for the distribution of the remaining asset of the estate and for a judgment requiring the estate trustee (Anita) to repay certain amounts to the estate. The motion was unopposed. At the conclusion of the hearing, I granted the motion and advised I would briefly summarize my reasons.

Background

2It is not necessary for me to detail all of the background to the estate or the litigation. The salient facts are as follows.

3In simplest terms, William Larwill died testate in 2015. He left a relatively simple will and apart from his home, a modest estate. He left the home to two of his sons, Ernest and James. The other portion of the estate consisted of investments, bank accounts and the contents of the home. Subject to certain specific bequests (including a lump sum to Anita) the residue of the estate was to be divided four ways between the siblings.

4The transfer of the house required court intervention (See 2017 ONSC 2688) and eventually rather than a distribution in specie, the home was sold. The net proceeds from that sale were divided only after a further order at which time the court found that the estate trustee was acting unreasonably and unfairly and was not complying with her obligations as estate trustee. Costs were awarded against Anita as by Justice Phillips as a consequence of that motion. The costs remain unpaid.

5Pursuant to the order of Justice Phillips, the estate trustee was to bring an application to pass her accounts. This was delayed for many months and when the estate trustee finally did bring such an application, Ernest and James filed objections. The objections have never been dealt with and the contested passing of accounts has never taken place.

6The purpose of the present motion is to deal with the contested passing of accounts, to distribute the residue of the estate and in effect to wind up the estate. The remaining amount held by the estate is presumed to be the approximately $176,000 listed in the passing of accounts.

7Since receiving the notices of objection and the adjournment of the passing of accounts, the estate trustee appears to have taken no steps to complete the administration of the estate or to bring this matter to a conclusion.

8Ultimately, this motion was brought for a distribution of the residue of the estate after first making certain adjustments. First the moving party seeks to deny the estate trustee any compensation. Secondly he seeks an order requiring the estate trustee to reimburse the estate account for certain expenditures listed in the accounts and therefore to top up the funds held for distribution. Finally, he asks to set off the previous costs awards against Anita’s net share of the residue and to effectively wind up the estate. I am advised that if this relief is granted, it will deal with the opposition to the accounts and will complete the distribution of the estate. I am advised that all taxes have been paid and a clearance certificate obtained.

9On July 14, 2022, after this motion was launched, there was a case conference before Justice Williams. Counsel for the estate trustee was present but advised that she had no instructions and was moving to get off the record. It was confirmed that the estate trustee was aware of the date. A timetable was set by Justice Williams. It included a date by which the estate trustee was to indicate if she consented to the order and a deadline for the estate trustee to file materials if she wished to oppose the motion.

10That latter deadline was September 16, 2022. It does not appear that any materials were filed. The order provided that if no materials were filed the motion would proceed on an uncontested basis. The estate trustee was aware of the case conference order because she did send a notice to counsel for the moving party that she did not consent to the relief. She also served a document titled “notice of appearance”.

11On August 19, 2022, Anita’s counsel brought a motion to get off the record. The motion was granted and as set out in Rule 15.04, the order required the estate trustee to appoint a new lawyer or file a notice of intent to act in person within 30 days. The estate trustee did not comply and she is therefore in default under that order.

12Justice Williams had set a peremptory return date for the motion of September 26, 2022. The motion was on a list but according to the supplementary affidavit, it was adjourned to this date by the trial coordinator.

13At the hearing, counsel for each of the moving parties were present. Allan was present by telephone but had not filed materials and did not take any position. Anita was not present and no one appeared on her behalf. The motion proceeded on an uncontested basis.

The Requested Relief

a) Reimbursement of certain expenses

14As discussed above, based upon a review of the accounts and subject to the notices of objection, the moving parties ask that I disallow certain expenses paid out of the estate and order the estate trustee to reimburse them. These amounts include the late filing penalty for failure to file tax returns on time. There is no explanation for that delay and it is submitted the trustee should pay the penalty herself. There is also a $1,582 “voluntary disclosure” fee paid to CRA which the moving party asserts was unjustified and unnecessary. The estate trustee purports to have incurred over $30,000 in legal fees and I am asked to disallow those fees as a charge to the estate because they have never been explained or justified. Finally, I am asked to disallow $570.00 in disbursements that were incurred resisting the motion before Justice Phillips and which were disallowed by him.

15Given the findings made by Justice Phillips in 2021 and the award of costs he made against Anita personally, it would be perverse to allow her to charge any amount incurred in resisting that motion to the estate. I also agree that since there has been no explanation for the other legal fees that were incurred, they should be disallowed as claims against the estate. I also accept the argument that the income tax fees and penalties should not be paid by the estate as it appears on the (uncontested) evidence before me that they were solely the fault of the estate trustee or the result of unreasonable decisions she made.

b) Denial of Compensation

16In the estate accounts, the estate trustee claims in excess of $85,000.00 in compensation. The moving party asks that this be reduced to $0 in light of the abject failure of Anita to complete her duties and the fact that every step in the administration of the estate has required one or more of the beneficiaries to obtain court orders. While it is apparent that Anita took out probate, liquidated the estate, sold the house, made certain distributions and filed tax returns, all of this was difficult and dilatory and required direction from the court.

17The moving parties argue that the value of any service actually performed by Anita as estate trustee has been “more than dwarfed by the frustrating refusals and failures by the estate trustee, which have resulted in significant costs to the estate and the beneficiaries”. On the basis of the evidence before me, I agree.

18Compensation may be reduced or denied based on lack of care and responsibility in the administration of the estate, lack of skill in carrying out the duties and the degree of success in administering the estate.¹ Compensation may also be denied completely where an estate trustee has failed to keep proper accounts and to have been grossly indifferent to his or her fiduciary obligations.² Anita was aware that the court would be asked to make this order as it clearly set out in the materials.

c) Setoff and Adjustment of Distribution

19In the absence of any subsequent documentation filed by the estate trustee, the moving party proposes that the court should calculate the amounts to which each beneficiary is entitled by assuming the estate bank account contains the amount which was set out in the estate accounts. That is $176,926.08. To the extent that amount has been reduced, the moving party submits that the estate trustee should have to replace any amounts she has drawn out or allowed to be further eroded. In the unlikely event it has increased, that can be taken into account by increasing the share of each beneficiary.

20Working from this number, the moving party proposes a series of adjustments and setoffs. These include the remainder of the specific bequest to Anita which is a first charge on the account and amounts to $6,000. The moving party then proposes that the amounts to be distributed be calculated by assuming they are each entitled to one quarter of the net amount (after Anita’s $6,000) of $170,926.08. This approach seems reasonable and is preferable to ordering another round of accounting particularly in the face of what now seems to be complete silence from Anita and her failure to file documents or to appear in court.

21The adjustments to the distribution amounts are set out inter alia in a chart set out at paragraph 74 of the factum. The chart includes a reduction of the amount owing to Jim which I need not deal with because he is represented by counsel and is in agreement with the calculations. Suffice to say that Jim has received an in kind distribution of $22,049.30, which is to be deducted from his share and $7.349.76 is then to be added to the shares of Anita, Ernest and Allan.

22From Anita’s share of the funds including her $6,000 and her one quarter share of the residue, and her $7,349.76, assuming she is entitled to no compensation, it is proposed to deduct the expenses disallowed above and to further adjust for Anita’s unpaid liability for the costs ordered against her by Justice Phillips in favour of Ernest and James. The total of the disallowed expenses is $42,171.00. The costs awarded were $26,500 in favour of Ernest and $8,500 in favour of James. The net result would be for Anita to owe the estate $21,089.72.

23Assuming Anita repays that amount and assuming the $176,926.06 remains the amount in the TD bank, the total for distribution would then be $198,015.78 and the adjusted payout would be $90,638.28 to Ernest, $43,239.22 to James and $64,138.28 to Allan. The result of these contributions and payments would be to fully distribute the estate, and to satisfy the costs awards previously made and not yet paid. Neither the estate nor any of the siblings would owe anything else to each other (except for the costs of this proceeding which I deal with below).

24If this sounds complicated, when written out, it is easy to follow in the chart which was included in the materials. I have attached a simplified version of the chart as Schedule A to these reasons.

25As noted, James consents to and supports this calculation. Allan took no position but was present at the hearing (virtually) or had the opportunity to participate. Beyond indicating that she did not consent, Anita did not comply with any of the steps she was to have completed if she wished to oppose this motion.

26I am granting this relief. Anita is to pay any amount necessary to bring the balance of the estate account to $176,926.06 and is also to pay the net amount of $21,089.72 into the estate account within 30 days. In the event that Anita does not repay these amounts then the balance in the account may be distributed pro rata to the other three beneficiaries and the deficiency will be a judgment against her.

d) Costs

27Both Ernest and James seek substantial indemnity costs against Anita. Under the circumstances described in the affidavits, this is justified. The full amount of the costs incurred by Ernest (exclusive of the matters covered by the previous costs award) was $22,837.96 and the costs incurred by James on the same basis was $13,144.73. Counsel both calculated a partial indemnity rate based on 66 percent of the actual fees and substantial indemnity as 99 percent. For purposes of calculating costs of this proceeding, I accept those calculations as fair and reasonable as set out in the bills of costs. I have rounded down the resulting numbers to $20,000 in favour of Ernest and $11,000 in favour of James.

28Substantial indemnity costs are justified because of the findings that the estate trustee breached her duties to the estate and the beneficiaries, overcharged the estate for expenses and failed to promptly administer and distribute the estate. Although I have also denied her compensation for her role as estate trustee, it would erode the benefits to which the moving parties are entitled and penalize them for the need to pursue litigation if they are not made largely whole for their reasonable legal expenses incurred to enforce their rights. I note that on the earlier motion, Justice Phillips ordered costs on a full indemnity basis for this reason.

Conclusion

29In summary, I have signed the draft judgment that was submitted and approved by counsel for Ernest and James. It accepts the calculations as set out in the chart from the materials, provides for pro rata adjustment if Anita does not pay the amounts owed to the estate in a timely fashion and permits the distribution of the remaining funds.

30The costs I have awarded, $20,000 in favour of Ernest and $11,000 in favour of James are to be paid by Anita but fall outside of the estate and are not summarized in the chart at Schedule A. These costs will be enforceable as ordinary judgment debts.

Mr. Justice C. MacLeod

Date: October 28, 2022

Schedule A

Larwill v. Larwill et al., CV-21-88068-ES

Anita

Ernest

James

Allan

Presumed balance in the Estate: $176, 926.08

$6000 (balance owing from 40K bequest)

Net balance to be divided $170,926.08

$42,731.52

$42,731.52

$42,731.52

$42,731.52

Estate Trustee Compensation

$0

$0

$0

$0

Reimbursement of Improper Expenses

-$42,171

+$14,057

+$14,057

+$14,057

Adjustment for in kind distribution to Jim

+$7,349.76

+$7,349.76

-$22,049.30

+$7,349.76

Cost award against Anita from previous motion

-$35,000

+$26,500

+$8,500

Balance owing/share of residue of estate

$ (-21,089.72)

$90,638.28

$43,239.22

$64,138.28

Footnotes

1. 1See Laing Estate v. Hines, 1998 6897 (On CA) for the factors to be used in determining trustee compensation.
2. 2See Zimerman v. McMichael Estate, 2010 ONSC 2947 (CA)