Court File and Parties

COURT FILE NO.: CV-17-00005265-00ES DATE: 20230829 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ALFRIDA GINA TREZZI, personally, and in her capacity as estate trustee of the Estate of Peter Trezzi Applicant – and – ALBERT TREZZI, in his personal capacity, and in his capacity as estate trustee of the Estate of Peter Trezzi, Emily Trezzi, Bianca Trezzi, Across Canada Construction Ltd., Trezzi Construction Ltd., and Alberto Trezzi Sr. Respondents/ Moving Party /Responding Parties

AND BETWEEN:

ALBERT TREZZI, (AKA ALBERTO) in his personal capacity and in his capacity as Estate Trustee Applicant in the Cross-Application – and – ALFRIDA GINA TREZZI, personally, and in her capacity as Estate Trustee of the Estate of Peter Trezzi Respondent in the Cross-Application

Counsel:

Arieh Bloom and Jessica Karjanmaa, for the Responding Party, RSM Canada Limited, in their capacity as Estate Trustee During Litigation of the Estate of the late Peter Trezzi (Bryan Tannenbaum and Arif Dhanani) Symon Zucker and Nancy Tourgis, for the Respondent/ Moving Party, Albert Trezzi, in his personal capacity Craig Ross, for the Respondents/ Responding Parties, Emily Trezzi and Bianca Trezzi

HEARD: June 12, 2023

Reasons for Decision

DIETRICH J.

[1] In this motion, the moving party, Albert Trezzi (“Albert”), [1] seeks an order removing RSM Canada Limited (“RSM”) as the Estate Trustee During Litigation (the “ETDL”) of the estate of his late father, Peter Trezzi (the “Estate”), and as the court-appointed manager (the “Manager”) of two corporations in which Peter Trezzi (the “Deceased”) was a shareholder. Those corporations are two construction companies, Trezzi Construction Ltd. (“Trezzi Construction”), and Across Canada Construction Ltd. (“ACC”). Albert also seeks an order appointing himself and his two sisters, Emily Trezzi (“Mia”) and Bianca Trezzi (“Bianca”), as Estate Trustees with Albert having one vote on decisions regarding the Estate administration, and Mia and Bianca sharing one vote.

[2] RSM does not oppose its discharge as ETDL and Manager, provided it can secure a sufficient holdback from the Estate for its professional fees to be incurred on a pending passing of accounts for the Estate.

[3] Prior to this hearing, Mia and Bianca proposed a holdback of $50,000. However, Albert submits that RSM should be discharged without any entitlement to a holdback.

[4] Mia and Bianca, who, together with Albert, are beneficiaries of the residue of the Estate, support Albert’s position on the holdback.

[5] For the reasons that follow, I find that RSM should be discharged as ETDL and Manager. A holdback in the amount of $250,000 should be set aside for RSM’s use for professional fees relating to the passing of accounts, which this court ordered RSM, as ETDL, to undertake. Upon the discharge of RSM, Albert, Mia, and Bianca shall be appointed as Estate Trustees of the Estate. For decision-making purposes, as Estate Trustees, Albert shall have one vote and Mia and Bianca shall share one vote.

Background Facts

[6] The Deceased passed away on January 8, 2016, testate. His Last Will and Testament is dated March 30, 2015 (the “Will”). The Deceased was survived by his wife, Gina Trezzi (“Gina”), and his three children: Albert, the Deceased’s son from a previous marriage, and Mia and Bianca, who are children from the Deceased’s marriage to Gina.

The Will

[7] The Deceased appointed Gina and Albert as co-Estate Trustees of the Estate. For approximately two years, they attempted to administer the Estate, but they did not apply for a Certificate of Appointment of Estate Trustee with a Will. They could not work together.

[8] Regarding the disposition of Estate assets, the Will provides as follows:

1. all the Deceased’s interest in ACC, all equipment and chattels owned by Trezzi Construction, the real property municipally known as 220 Regina Road in Woodbridge, Ontario (“220 Regina Road”), and certain personal property are to be distributed to Albert;
2. the Deceased’s interest in all real property, other than 220 Regina Road, is to be conveyed to Gina, Albert, Mia, and Bianca in equal shares;
3. all other assets (apart from all equipment, chattels and 220 Regina Road) owned by Trezzi Construction are to be divided among Gina, Albert, Mia, and Bianca in equal shares;
4. other personal property, including vehicles, is to be divided among Gina, Albert, Mia, and Bianca; and
5. the residue of the Estate is to be divided among Gina, Albert, Mia, and Bianca in equal shares.

[9] On September 14, 2021, Gina made an election under the Family Law Act, R.S.O. 1990, c. F.3 to receive an equalization amount, as opposed to the benefits provided to her under the Will. Accordingly, she no longer benefits under the Will and is a creditor of the Estate.

The Litigation

[10] The litigation in this matter has been protracted and acrimonious. The parties have often failed to agree. This failure has led to several motions, hearings, case conferences, and an appeal to the Court of Appeal for Ontario.

[11] In 2017, Gina brought the within application for an order interpreting the Will and removing Albert as an Estate Trustee, and for direction regarding the ownership of certain assets, among other orders.

[12] Albert brought the within cross-application seeking an order removing Gina as an Estate Trustee, directing her to pass her accounts, and seeking the appointment of a third-party estate trustee and manager. While some of the issues between Gina and Albert have been resolved, their respective applications remain outstanding.

[13] On January 30, 2018, on consent of the parties, Dunphy J. issued two orders: a) the ETDL Order appointing RSM as ETDL, and b) the Manager Order appointing RSM as Manager of ACC and Trezzi Construction.

[14] On February 25, 2022, Kimmel J. ordered the ETDL to pass its accounts in one application covering its activities as ETDL and Manager for the period from January 30, 2018 to January 30, 2022, and to serve and file its material by May 26, 2022. The ETDL served its accounts on November 16, 2022. The accounts are voluminous and exceed 600 pages in length, without vouchers.

[15] Gina, Mia, and Bianca filed notices of objection. When RSM raised questions about Gina’s standing to file a notice of objection, her objections were adopted by Mia and Bianca. The objections include allegations that the ETDL did not keep accounts and failed to produce the accounts in a timely manner; it failed to maintain an even hand among the beneficiaries; it failed to investigate concerns about costs of services; it failed to foresee issues causing unnecessary crisis and sales of assets under duress; it improperly or imprudently delegated responsibilities resulting in damages; and it failed to monitor accounts resulting in NSF cheques, among other objections.

[16] The ETDL has served a reply to the notices of objection, which is 75 pages in length, without vouchers. No further steps in the passing of accounts have been timetabled.

[17] In August 2022, RSM brought an urgent application for advice and direction regarding an imminent liquidity crisis. The parties did not agree to RSM’s proposed sale of a piece of vacant land on Langstaff Road held by the Estate. On the morning of the hearing, the parties, other than RSM, came to an agreement (the “August 2022 Agreement”), and Cavanagh J. granted an order on consent. Justice Cavanagh’s Order directed that a) the vacant land on Langstaff Road be sold; b) the shares of ACC be transferred to Albert (and the Estate and any related corporation would cease to pay ACC’s operating expenses); c) despite the transfer of the ACC shares, the ETDL would still have access to the necessary ACC financial records for the passing of accounts; d) RSM would cease to act as Manager of ACC; and e) RSM would not be liable for the transfer of ACC’s shares to Albert.

[18] At the hearing before Cavanagh J., RSM learned that in the August 2022 Agreement, the beneficiaries of the Estate and Gina agreed to seek the removal of RSM as ETDL. The remainder of the August 2022 Agreement was not disclosed to RSM until November 2022, when RSM learned that the parties had also agreed that on RSM’s removal, Albert, Mia, and Bianca would be appointed as Co-Estate Trustees of the Estate.

[19] Currently, the Estate holds real property with a value of approximately $13.5 million and approximately $500,000 in cash.

The Orders appointing the ETDL and the Manager

[20] The Manager Order includes the following orders:

12. THIS COURT ORDERS that the Manager shall be paid its reasonable fees and disbursements, in accordance with its fee schedule attached as Schedule “A”, unless otherwise ordered by the Court on the passing of accounts, and that the Manager and counsel to the Manager shall be entitled to and are hereby granted a charge (the “Manager’s Charge”) on the Property, as security for such fees and disbursements, both before and after the making of this Order in respect of these proceedings, and that the Manager’s Charge shall form a first charge on the Property in priority to all security interests, trusts, liens, charges and encumbrances, statutory or otherwise, in favour of any Person. [2]
13. THIS COURT ORDERS that prior to the passing of its accounts, the Corporations [ACC and Trezzi Construction] shall pay the accounts of the Manager and its counsel within 30 days of the Manager and its counsel rendering those accounts. Alternatively, the Manager shall be at liberty from time to time to apply reasonable amounts, out of the monies in its hands, against its fees and disbursements, including legal fees and disbursements, incurred at the standard rates and charges of the Manager or its counsel, and such amounts shall constitute advances against its remuneration and disbursements when and as approved by this Court.

[21] The ETDL Order includes the following order:

2. THIS COURT ORDERS that the ETDL shall receive out of the assets of the Corporation[s] [defined to be Trezzi Construction and ACC] reasonable remuneration for its services to be paid in accordance with the fee schedule attached hereto as Schedule “A”, and such remuneration shall be subject to a court audit on a passing of accounts by the ETDL.

Issues

[22] The issues before the court are:

1. On the removal of RSM as ETDL, is it entitled to a holdback to defend itself on the passing of accounts and to be indemnified from the holdback for the costs of its defence?
2. If RSM is entitled to a holdback and to be indemnified for its costs on the passing of accounts, what should the quantum of the holdback be?

Positions of the Parties

Albert

[23] Albert asserts that RSM is not entitled to a holdback because a holdback in the circumstances of this case is not supported by the jurisprudence. The holdback would result in the Estate funding the ETDL’s litigation costs to protect its own interests and not the interests of the Estate, which would create an inequity. Further, RSM already has the protections afforded to an ETDL by common law and statute, as well as other protections as set out in the Manager Order and the ETDL Order; and RSM is not entitled to a holdback for its role as Manager.

[24] On the quantum of a holdback, Albert asserts that there is no evidence before the court to support the $500,000 amount sought by RSM.

Mia and Bianca

[25] Mia and Bianca support Albert’s position that RSM should not be entitled to hold back Estate funds for its litigation costs. They further submit that RSM has already prepared its accounts, made its application, and received and replied to the notices of objection. All of this work was done with the protections afforded to RSM in the ETDL Order and the Manager Order, and Mia and Bianca submit that further funding of RSM’s litigation costs by the Estate would create an inequality amongst litigants and discourage reasonableness and proportionality in the litigation.

RSM

[26] RSM submits that as a neutral, court-appointed ETDL, it would be inequitable not to award RSM a holdback to fund its passing of accounts, which is a routine function of an estate trustee’s administration of an estate. RSM further submits that it is undisputed that an estate trustee is entitled to be indemnified for the costs it incurs in carrying out its duties, and these costs include the costs of passing its accounts as it was ordered to do.

[27] RSM further submits that there are compelling policy reasons for ensuring that estate trustees, and estate trustees during litigation, in particular, are entitled to indemnification for the costs they incur in passing their accounts.

[28] RSM contends that a holdback of $500,000 is necessary and appropriate given the highly litigious nature of the Trezzi family, the long history of the proceeding, and the principle that a court officer should be protected in its duties.

Law

[29] A trustee has the right to be indemnified out of the trust property for all costs and expenses properly incurred in the administration of the trust: Irwin v. Ruberry, 2015 ONSC 1821, 8 E.T.R. (4th) 300, at para. 42; Trustee Act, R.S.O. 1990, c. T.23, s. 23.1(1)(b) (the “Trustee Act”).

[30] Indemnification for a trustee’s costs includes legal 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”: Thompson et al. v. Lamport et al., [1945] S.C.R. 343, at p. 356; Geffen v. Goodman Estate, [1991] 2 S.C.R. 353.

[31] Section 23.1 of the Trustee Act provides as follows:

23.1 (1) A trustee who is of the opinion that an expense would be properly incurred in carrying out the trust may,

(a) pay the expense directly from the trust property; or

(b) pay the expense personally and recover a corresponding amount from the trust property.

[32] A trustee’s right to indemnity is in the form of a lien it holds against the trust property. The lien takes the form of a first charge on the trust property with priority over all beneficial interests and creditor claims: Gefen v. Gaertner, 2018 ONSC 5698, 44 E.T.R. (4th) 157, at para. 22; McLennan v. McLennan (2000), 36 E.T.R. (2d) 145 (Ont. S.C.), at para. 18.

[33] Sections 49(2) and (3) of the Estates Act, R.S.O. c. E.21 set out the broad powers of a judge on a passing of accounts to enter into an inquiry of the trust property and the trustee’s conduct:

(2) The judge, on passing the accounts of an executor, administrator or trustee under a will of which the trustee is an executor, has jurisdiction to enter into and make full inquiry and accounting of and concerning the whole property that the deceased was possessed of or entitled to, and its administration and disbursement.

(3) The judge, on passing any accounts under this section, has power to inquire into any complaint or claim by any person interested in the taking of the accounts of misconduct, neglect, or default on the part of the executor, administrator or trustee occasioning financial loss to the estate or trust fund, and the judge, on proof of such claim, may order the executor, administrator or trustee, to pay such sum by way of damages or otherwise as the judge considers proper and just to the estate or trust fund, but any order made under this subsection is subject to appeal.

Analysis

Is RSM entitled to a holdback?

[34] For the reasons that follow, I find that, on its removal as ETDL, RSM should be entitled to a holdback to defend itself on the passing of accounts, and it should be entitled to be indemnified from the holdback for the costs of its defence.

[35] I agree with RSM that it would be inequitable not to award RSM, a neutral, court-appointed estate trustee during litigation, a holdback for the passing of accounts, which is a routine function of an estate trustee’s administration. In this case, RSM was court appointed, on consent of the parties, and was ordered by Kimmel J. to pass its accounts.

[36] As noted by Borins J. (as he then was) in Re Josephs Estate (1993), 50 E.T.R. 216 (Ont. Gen. Div.), at p. 220, “[t]he passing, or audit by the court, of an executor’s accounts is a significant part of the administration of an estate. Central to an audit is the determination by the court that the executor has properly performed its duties in regard to the trust fund created by the testator.”

[37] It is undisputed that an estate trustee is entitled to be indemnified for the costs it incurs in carrying out its duties: Irwin v. Ruberry, at para. 42; Trustee Act, s. 23.1(1)(b).

[38] The jurisprudence also provides that where an estate trustee during litigation has been appointed, in certain cases, it may be right for it to retain estate funds for its protection until the passing of accounts has been concluded: McLennan, at para. 17; W. (M.) Estate v. W. (Y.) (1996), 16 E.T.R. (2d) 51 (Ont. Gen. Div.). It may also be necessary for the court to grant the right to retain such funds for their protection until the passing of accounts is concluded: McLennan, at para. 18.

[39] In addition, RSM argues that there are good policy reasons to ensure that an estate trustee during litigation has access to trust funds to bear the costs of having properly incurred legal fees. In this regard, it relies on an article by Professor Albert Oosterhoff, in which excerpt he wrote:

As the word itself suggests, the right to be indemnified implies that estate trustees should bear the costs and expenses themselves first and then seek reimbursement from the estate assets. But this presents a problem. Many trustees and estate trustees do not have the wherewithal to pay the costs out of their own pocket. Nor should they have to. Their office is a socially desirable one which at one time, at least in the case of trustees, was carried out without remuneration: A.H. Oosterhoff, “Indemnity of Estate Trustees as Applied in Recent Cases” (2013) 41 Adv. Q. 123, at p. 127.

[40] RSM relies on Armitage v. The Salvation Army, 2016 ONCA 971, 23 E.T.R. (4th) 1 in support of its view that an estate trustee, in passing its accounts, is not seeking redress for any loss, injury or damage. In Armitage, at para. 27, the Court of Appeal for Ontario held that a passing of accounts is the opposite of remedial; it is a process that seeks a court order that no remedy is necessary with respect to the accounts. If the court is satisfied with the accounts, it can approve them by passing judgment. Alternatively, a judge may order a trustee to pay a sum by way of damages or otherwise to the trust: Wall v. Shaw, 2018 ONCA 929, 43 E.T.R. (4th) 1, at para. 47.

[41] RSM submits that this routine estate administration should be contrasted with partisan, contentious, and adversarial proceedings that follow the civil litigation cost regime. As an example, RSM points to Coppel v. Coppel Estate, 2001 CarswellOnt 4660 (S.C.), at para. 10, where the court held that it was inappropriate for an estate trustee to pay their legal fees out of the estate to defend an action in negligence commenced by a beneficiary against them. In that case, the estate trustee’s negligence was the central issue of the action. Therefore, it was appropriate that the estate trustee should pay his own costs to defend the action brought against him.

[42] In the case at bar, the beneficiaries have raised a number of objections in their notices of objection, and they are critical of some of the decisions made by the ETDL in the course of its administration of the Estate, but they have not alleged negligence.

[43] The beneficiaries of the Estate do not dispute that the ETDL is entitled to an indemnity for its costs properly incurred in the administration of the Estate. They also do not disagree that the ETDL’s properly-incurred expenses are a first charge on the Estate. What they do dispute is the ETDL’s right to access Estate funds to defend itself on the passing of accounts. They assert that the ETDL’s conduct is the subject of the passing of accounts, including allegations that the ETDL did not act prudently in administering the Estate and incurred excessive legal fees, which it cannot justify.

[44] The beneficiaries rely on DeLorenzo v. Beresh, 2010 ONSC 5655, 62 E.T.R. (3d) 65, a case that involved passings of accounts and an application to remove the estate trustee. In DeLorenzo, the court differentiated litigation between the estate trustee and the beneficiaries regarding the discharge of the estate trustee’s duties. The court held that where there is a question related to whether the trustee properly discharged his duties, including timely steps to pass his accounts, different considerations apply, and the issue of whether the trustee is entitled to charge the estate with his legal fees should be determined on a passing of accounts. In DeLorenzo, the court identified a particular inequity, namely, that the estate trustee was paying his legal costs from the estate while the beneficiaries’ funds were tied up in the estate such that they would need to pay their legal costs personally. Accordingly, the court found that the appropriate time to determine the extent of the estate trustee’s indemnity was on the passing of accounts. Based on this reasoning, the beneficiaries submit that awarding RSM a holdback is inequitable, and the extent of its indemnity should be determined on the passing of accounts.

[45] I find that the DeLorenzo case can be distinguished from the case at bar based on the inequity the court identified in DeLorenzo. RSM has confirmed that it has no intention of holding up the beneficiaries’ inheritances or denying them access to Estate property to fund their costs of the passing of accounts. The beneficiaries seek an order that RSM be discharged and the beneficiaries take over the administration of the Estate per the August 2022 Agreement. As such, a distribution would be made to them of all the Estate assets, apart from a holdback, if awarded, on the discharge of RSM. As Estate Trustees, the beneficiaries would be free to access Estate assets for the purposes of funding their expenses on the passing of accounts.

[46] I note that courts have since expressed doubt about the conclusion reached in DeLorenzo.

[47] In Furtney v. Furtney, 2014 ONSC 3774, 100 E.T.R. (3d) 312, the court confirmed that a trustee’s right to indemnity extends to legal fees, citing the principle articulated by the Supreme Court of Canada in Thompson v. Lamport, at p. 356:

The general principle is undoubted that 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.

In Furtney, at paras. 43-44, the court observed that DeLorenzo no longer has any application because it did not consider s. 23.1 of the Trustee Act. See Toller James Montague Cranston (Estate of), 2021 ONSC 1347, 65 E.T.R. (4th) 84, at para. 98 (“Cranston Estate”), for a similar conclusion.

[48] Albert, Mia, and Bianca submit that the principle in Furtney does not apply in this case because the ETDL is defending its own litigation interests, including responding to objections in an application to pass accounts.

[49] They rely on the case of Henderson v. Sands et al., 2022 ONSC 2959, 79 E.T.R. (4th) 157, in which Gilmore J. considered the principles set out in DeLorenzo and s. 23.1 of the Trustee Act. In Henderson, the estate trustee’s removal was being sought on a multiplicity of grounds, including that she had abused her powers as the deceased’s attorney for property. Justice Gilmore found that the estate trustee could not fund her legal and accounting fees when her position as estate trustee was being challenged, and in the face of an explicitly-worded preservation order.

[50] In my view, the Henderson case can also be distinguished. Gilmore J. relied on two significant facts that distinguished Henderson from other cases involving trustee indemnification. Those cases include Goodman Estate and Cranston Estate, in which it was found that an estate trustee did not require the consent of the beneficiaries to pay litigation fees from the estate, including in proceedings where the conduct of the trustee was being attacked. The first fact was that, in Henderson, McEwen J. had issued a preservation order, which explicitly provided that estate assets could 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.”

[51] The second fact was the fact that the respondent was acting for her personal benefit. The respondent was fighting to remain the estate trustee and to defend allegations that she had abused her authority as the deceased’s attorney for property and converted the grantor’s property to her own.

[52] In this factual matrix, Gilmore J. acknowledged and agreed with the principles set out in DeLorenzo. She found that the parties should bear their own costs personally until it was determined whether the estate trustee should be removed and whether the other relief should be granted.

[53] Justice Gilmore rejected the respondent’s public policy arguments on the basis that public policy is not offended by requiring an estate trustee to pay its own legal 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.

[54] Ultimately, Gilmore J. concluded that “[r]equiring 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, given the existence of the Preservation Order” (emphasis added).

[55] In the case at bar, there is no preservation order, and the litigation is not focused on RSM’s removal. RSM confirmed that it will consent to its removal, provided that it is afforded a sufficient holdback so that it may be indemnified for the legal fees it incurs on the passing of accounts.

[56] I find that the passing of accounts is one of RSM’s important duties as an ETDL. In passing its accounts, RSM is both discharging its fiduciary duty and complying with the Order of Kimmel J.

[57] I am also persuaded that a passing of accounts for the Estate will be beneficial to its beneficiaries. Mia and Bianca concede that the complexity of the Estate is owed to the Deceased, who kept very poor records in relation to his companies and their ownership structure, and who did not distinguish between what was his, what belonged to his corporations, and who was responsible for various expenses, obligations, assets, and liabilities. This inattention resulted in the creation of conflicts among his heirs that were not of their making. In the Will, the Deceased attempted to dispose of assets that he did not own directly, he failed to account for income tax and other liabilities, and he failed to recognize Gina’s legal rights and his duties to her.

[58] Albert and Gina do not deny that they did not keep proper accounts, which further complicated the job of the ETDL. Between the Deceased’s inattention in the management of his assets and the Estate Trustees’ failure to keep proper records and receipts, RSM faced a challenging task as ETDL. In my view, the beneficiaries will benefit from the passing of accounts. They will benefit from the efforts made by the ETDL to gather, organize and review the accounting information. This is a significant part of the estate administration by an estate trustee during litigation. Further, the passing of accounts should bring to an end a complex, acrimonious, and protracted administration in which the Trezzi family has been embroiled for years, and which necessitated the appointment of a court-appointed, neutral, professional trustee.

[59] I agree with RSM that, as a court officer, it should have the protection a holdback affords regarding the discharge of its duties in addition to the protection that the Manager Order and the ETDL Order provide. An estate trustee during litigation serves an important function, especially in the administration of high-conflict estates.

[60] I also find merit in RSM’s submission that there are good public policy reasons to ensure that an ETDL has access to trust funds to bear the costs of properly incurred legal fees. As noted by Professor Oosterhoff, “[m]any trustees and estate trustees do not have the wherewithal to pay the costs out of their own pocket. Nor should they have to. Their office is a socially desirable one”. Requiring an estate trustee to front the legal costs of a passing of accounts, in which some question or matter in the course of the administration is raised as to whether the trustee has acted prudently and properly, could cause potential trustees, including estate trustees during litigation, to decline the role. In cases such as the case at bar, estate trustees during litigation are critical. Here, through no fault of their own, the beneficiaries of the Estate were placed in conflicts of interest pitting mother against child and sibling against sibling. The appointment of an ETDL was unavoidable and socially desirable, and it should have the protection of a reasonable holdback and indemnification pending its passing of accounts.

[61] Should RSM be found responsible for any of the legal costs it incurred, for which it has indemnified itself, it will be held accountable on the passing of accounts.

[62] For the reasons given, I find that it would be inequitable and contrary to public policy not to award RSM a holdback for its professional fees to be incurred and indemnification relating to the passing of accounts.

Quantum of the holdback

[63] RSM submits that the Estate, valued at approximately $14 million, can afford a holdback of $500,000 and that $500,000 is the appropriate quantum.

[64] RSM further submits that $500,000 is available in liquid assets. It predicts that the passing of accounts will be a long and involved process. It submits that this is so because Albert and Gina were administering the Estate and operating the Deceased’s companies for two years before RSM was appointed, but they never provided RSM with an accounting of their administration of the Estate, ACC, Trezzi Construction, or Across Canada Disposal Ltd., another corporation in which the Deceased had an interest. Each of Albert and Gina blames the other for the failure to account. RSM began its administration with minimal and often conflicting information, which contributed to its challenges in preparing the accounts.

[65] RSM also submits, based on the affidavit evidence of Arif Dhanani of RSM (“Mr. Dhanani”), that a $500,000 holdback is necessary given the litigious nature of the parties, the protracted litigation that has been ongoing for more than six years, and the voluminous objections filed by the parties. All of this, it submits, forecasts a highly-contested passing of accounts, which will be time consuming.

[66] In his affidavit, Mr. Dhanani sets out what he perceives to be the next steps in the passing of accounts process. These include reviewing amended notices of objections; preparing amended responses to objections, including collecting any additional vouchers or documents, as needed; attendance at mandatory mediation; preparing for and attending at a motion for an order giving directions to set out the procedure for trial; pre-trial examinations; and preparation for and attendance at a pretrial and trial. RSM anticipates that if the passing of accounts is tried, the trial could take weeks.

[67] Albert submits that there is no cogent evidence before the court to support any amount for a holdback, and RSM has given no indication of who will be taking the various steps in the passing of accounts or what they will charge for their services. Albert submits that the onus is on RSM to support the quantum sought, and it has failed to do so. Mia and Bianca agree.

[68] Albert further submits that the evidence provided by RSM is merely a list of steps, which does not allow the court to assess the reasonableness of the quantum. He contends that the court ought to be provided with evidence, such as a bill of costs, an estimate of the hours required to pass the accounts, and an indication of who will be doing the work and at what hourly rate, so that the court can properly exercise its discretion to award or not award a holdback.

[69] Based on the record, I find that the passing of accounts is at a relatively advanced stage. RSM has delivered its response to the notices of objection, and no further steps have been scheduled in the passing of accounts.

[70] It is therefore somewhat difficult for RSM to ascertain how much time will be required to carry out the remaining steps and to know whether the passing of accounts will be resolved at mediation or proceed to a lengthy trial.

[71] Even so, I find that the request for a $500,000 holdback is not well supported.

[72] In my view, the proposed quantum is unnecessarily high. It is 50 per cent of the cost of the legal fees that the ETDL has incurred since its appointment over six years ago. The lengthy notices of objection have already been responded to. RSM should now be well positioned to know the case it will need to meet, and to have some sense of the time and costs that would likely be consumed in that process.

[73] Further, RSM is seeking to hold back the whole of the remaining liquid assets of the Estate at a time when those assets are also required to fund operating expenses relating to the Estate’s real properties. Awarding a $500,000 holdback would unfairly prejudice the Estate Trustees in their ongoing management of the Estate assets pending the passing of accounts.

[74] I find that a holdback of one half the requested amount should be more than sufficient for RSM to cover its indemnification for the legal fees it will incur on the passing of accounts going forward.

Disposition

[75] For the foregoing reasons, I make the following orders:

1. An Order that RSM be permitted to set aside a holdback in the amount of $250,000 for indemnification for its legal fees incurred on the pending passing of its accounts;
2. An Order that RSM be removed and discharged as ETDL of the Estate;
3. An Order that RSM be removed and discharged as Manager of Trezzi Construction, if required;
4. An Order appointing Albert, Mia, and Bianca as Estate Trustees of the Estate upon the filing of the requisite application material; and an Order declaring that decisions among them be made unanimously, with Albert exercising one vote, and Mia and Bianca, together, exercising one vote.

Costs

[76] The parties are strongly encouraged to agree on the matter of costs. If they cannot, RSM shall serve and file written costs submissions not exceeding three pages (excluding a costs outline and offers to settle, if any) within 14 days of these Reasons for Decision; and Albert, Mia and Bianca shall serve and file written costs submissions not exceeding three pages (excluding a costs outline and offers to settle, if any) 14 days thereafter. Reply submissions may only be made with leave.

Dietrich J.

Released: August 29, 2023