The court addressed conflicting requests for costs arising from an estate's administration.
The former estate trustee sought costs, while the beneficiaries objected and sought their own.
The court found the former estate trustee acted in good faith and that the beneficiaries' demands for a Certificate of Appointment and formal passing of accounts were largely unnecessary and ill-founded, leading to undue expense.
The primary dispute concerned the former estate trustee's refusal to pursue litigation over a joint account, which the court deemed reasonable given the information and legal advice received.
interesting_citations_summary: >
This decision provides guidance on costs awards in estate litigation, particularly when beneficiaries aggressively pursue actions against an estate trustee without sufficient legal or factual basis.
It emphasizes the importance of constructive communication and highlights the potential for beneficiaries to incur adverse costs if their demands lead to unnecessary litigation.
The court affirmed that an estate trustee acting in good faith, based on legal advice and available information, should not be financially penalized for expenses incurred due to ill-founded beneficiary demands.
final_judgement: >
The beneficiaries are jointly and severally liable for the former estate trustee's costs in the amount of $17,445.60, payable within 30 days.
The beneficiaries' request for costs is dismissed.
winning_degree_applicant: 1
winning_degree_respondent: 5
judge_bias_applicant: 0
judge_bias_respondent: 0
year: 2017
decision_number: 1927
file_number: "5490/12 ES"
source: "https://www.canlii.org/en/on/onsc/doc/2017/2017onsc1927/2017onsc1927.html"
keywords:
- Estate administration
- Costs
- Estate trustee
- Beneficiaries
- Joint accounts
- Right of survivorship
- Fiduciary duty
- Passing of accounts
- Certificate of Appointment
- Litigation costs
areas_of_law:
- Estates Law
- Civil Procedure
- Costs
---
# Court File and Parties
**COURT FILE NO.:** 5490/12 ES
**DATE:** 20170327
**ONTARIO**
**SUPERIOR COURT OF JUSTICE**
**BETWEEN:**
IN THE ESTATE OF KENNETH POCHOPSKY, deceased
**Counsel:**
Emilie Chamaillard, for the former Estate Trustee, Garry Fairhurst
Sylvano Carlesso, for the beneficiaries
**HEARD:** January 18, 2017
# DECISION ON COSTS
**WILCOX, J.**
[1] We are dealing here with conflicting requests for costs arising out of the administration of an estate.
[2] Kenneth Pochopsky died on May 17, 2011.
In his will he named his friend, Clifford Garry Fairhurst (Fairhurst) as estate trustee, with his daughter Kerry Pochopsky as alternate.
The will left the estate residue to his children who survived him in equal shares per capita.
They are David Pochopsky, Kerry Pochopsky (latterly Kerry Whitney) (Whitney), Andrew Pochopsky and Kristen Pochopsky.
[3] However, the deceased had arranged his affairs so that practically all of his assets were outside of his estate.
Steps had been taken to transfer his residence and his vehicle to his children, his investments and life insurance went directly to the children, and his sister Barbara Yamka (Yamka) had been added as a joint holder of his bank accounts.
The ownership of these accounts after his death became the primary point of contention between the beneficiaries and Fairhurst in this matter.
[4] Whitney deposed that Fairhurst had indicated to the beneficiaries on May 20, 2011, and subsequent occasions that Barbara Yamka had some of the deceased’s money and that the arrangement between the deceased and Yamka was that she would pay various expenses of the estate and that the beneficiaries would receive the balance of it once the expenses were paid.
However, on July 12, 2011, she received a letter from Yamka saying that Yamka would no longer pay the deceased’s bills.
Whitney told Fairhurst about this, that the beneficiaries did not trust Yamka, and that the money held by Yamka should be transferred to the beneficiaries, in several conversations over the following months.
Whitney alleged that there were also problems with other aspects of the estate such as delays in the beneficiaries receiving money from mortgage insurance the deceased had had and in receiving money coming directly to the beneficiaries from the deceased’s investments, but it is not clear that these problems could be blamed on Fairhurst.
In April 2012, when the terminal income tax return that Fairhurst had arranged to be done showed nearly $200,000.00 owing, Fairhurst indicated that those taxes should be paid out of the funds that were flowing to them, rather than from the funds held by Yamka, and that the funds held by Yamka would then be dispersed to the beneficiaries.
[5] The beneficiaries retained a lawyer, J. Garry McMahon, by mid-2012 to assist in getting information on the estate from Fairhurst.
On June 8, 2012, McMahon wrote to Fairhurst expressing the beneficiaries’ concern that there had been a breakdown in communication and their wish to repair the relationship.
To that end, he sought some basic financial information on an informal basis.
[6] Fairhurst retained the law office of Julie Richard-Gorman.
On July 19, 2012, David Gorman, student-at-law wrote to McMahon expressing Fairhurst’s willingness to cooperate and indicating that Gorman would be discussing the requested items with Fairhurst and replying to McMahon within days.
[7] On July 10, 2012, Gorman wrote to McMahon:
1.
Confirming that Patti Landers of Ross Pope and Company (accountants) had informed Kerry Whitney that there was an income tax bill of about $198,000.00 owing to Revenue Canada.
2.
Fairhurst had advised Whitney as well as Kristen Pochopsky and Andrew Pochopsky that the RRSP’s needed to be cashed to pay that.
3.
That the RRSP’s were transferred into the deceased’s childrens’ names before his death, that Fairhurst has nothing to do with the RRSP’s, and that he was not stopping the bank from providing the beneficiaries access to them.
4.
That as far as Fairhurst was aware, the joint account belong to Barbara Yamka.
5.
That Yamka paid funeral expenses and bills from the joint account and provided money from it to pay accounting fees.
6.
That the beneficiaries had received the benefits of London Life and ManuLife policies as well as the proceeds of the deceased’s home.
7.
That Fairhurst had not proceeded with probate because the beneficiaries were designated for all of the deceased’s assets.
[8] On July 11, 2012, McMahon wrote to Gorman:
1.
Acknowledging his telephone call and letter of July 10, 2012;
2.
Raising a concerns about the payment of the income tax;
3.
Making various requests of Fairhurst.
[9] McMahon wrote a second letter of July 11, 2012 to Gorman:
1.
Thanking Gorman for his telephone call of that day.
2.
Confirming the actions that Gorman agreed to take in response to McMahon’s earlier letter of that day.
3.
Confirming arrangements with respect to the Income Tax Return.
4.
Confirming that inquiries would be made about the joint account(s) held by the deceased and Yamka.
[10] On July 31, 2012, Gorman wrote to McMahon:
1.
Providing a copy of the Income Tax Return and updating the amount owing with interest.
2.
Enclosing a breakdown of the deceased’s estate prepared by Fairhurst in response to McMahon’s request.
3.
Confirming that the deceased’s house was transferred into the names of the deceased’s children prior to his death and fell outside the estate.
4.
Confirming that the London Life insurance policies named the beneficiaries and fell outside the scope of the estate.
5.
Providing information about monies distributed by Yamka monies held and distributed by Yamka on behalf of the estate.
6.
Confirming that the deceased’s truck went to David Pochopsky.
7.
Indicating that RRSP’s from CIBC were distributed amongst the beneficiaries.
8.
Stating that RRSP’s and mutual funds from TD Canada Trust would be distributed once the tax bill was paid.
9.
Addressing some other outstanding points.
10.
Questioning whether the beneficiaries required anything further and whether they were in agreement with the plan to pay the income taxes and distribute any remaining amount.
[11] McMahon replied to Gorman by letter of August 21, 2012 indicating that he would be telephoning to discuss some matters, specifically that the numbers provided by Fairhurst did not match up with the beneficiaries’ understanding in this situation.
[12] There is no indication of whether that discussion ever took place.
The beneficiaries apparently changed lawyer’s after that, from McMahon to Carlesso.
[13] Carlesso’s letter of September 6, 2012, was not filed, but he apparently requested that Fairhurst apply for a Certificate of Appointment as Estate Trustee.
Gorman replied that neither it nor a formal passing of accounts was required because the assets, which he again listed, had named beneficiaries and fell outside of the estate which had no value.
[14] On October 17, 2012, Gorman wrote in response to Carlesso’s letters of September 7 and 26, copies of which were not filed:
1.
Again, he listed the assets and their beneficiaries, noting that they fell outside the estate.
2.
He enclosed signature cards for the deceased’s TD Canada Trust account showing that they were joint with Barbara Yamka with right of survivorship.
3.
He indicated that TD Canada Trust and CIBC had confirmed that they had identified all of the accounts held by the deceased.
4.
He confirmed that there were no assets in the estate.
5.
He reminded Carlesso of the Income Tax Return debt and that Fairhurst had continually suggested to the beneficiaries that that be paid from the mutual funds and RRSP’s that they were to receive.
[15] Carlesso wrote to Gorman on November 21, 2012, referring to Gorman’s letter of November 14 and enclosures, which were not filed.
The significance of two statements made is not clear.
There are also complaints about Fairhurst’s dealings with the estate.
Notably, Carlesso says it is the last time he is going to ask through Gorman’s office that Fairhurst apply for appointment as estate trustee.
[16] Gorman wrote to Carlesso on November 21, 2012 to say he would seek instructions and again November 23, 2012 saying that Fairhurst would be applying, with Gorman’s firm help within days to be appointed as estate trustee.
Indeed, the Certificate of Appointment of Estate Trustee is dated December 3, 3012.
[17] Gorman responded on December 14, 2012 to Carlesso’s letter of December 12, 2012 which was not filed, confirming:
1.
Fairhurst had already fulfilled his obligation in the administration of the estate prior to the beneficiaries requiring a Certificate of Appointment as Estate Trustee.
2.
Fairhurst would not be suing Barbara Yamka on behalf of the estate because of the instructions given to Fairhurst by the deceased and because of the bank’s position regarding the right of survivorship.
3.
He had earlier forwarded to Carlesso all of the documents the bank had with respect to the joint accounts.
[18] Carlesso wrote to Gorman on December 17, 2012.
In that letter, Carlesso:
1.
Said that the file should be assigned to a lawyer, not a student.
2.
Made general allegations that Gorman was obviously not aware of the obligations of an estate trustee or the rules requiring a formal passing of accounts.
3.
Spoke generally of Fairhurst’s fiduciary obligations to the beneficiaries and threatened to sue him if he did not assume his unspecified responsibilities.
[19] This elicited a written response dated December 19, 2012, from Julie Richard-Gorman, a lawyer and David Gorman’s principal in which she:
1.
Confirmed that David Gorman was operating within the LSUC’s rules and under her supervision.
2.
Stated that not every estate trustee must apply for a Certificate of Appointment.
3.
Said that Carlesso had been made aware previously that Fairhurst had not applied because there was nothing left in the estate.
It was an unnecessary cost incurred to please the beneficiaries.
4.
Summarized the previous information that had been provided to Carlesso about the estate.
5.
Reviewed the law regarding jointly held property and the right of survivorship.
6.
Repeated the factual situation based on which Fairhurst would not be taking legal action against Yamka.
[20] Carlesso replied by letter of December 20, 2012 taking issue with Richard-Gorman, suggesting that Fairhurst commence an action against Yamka and pass his accounts, and threatening legal action against Fairhurst and Richard-Gorman.
[21] Richard-Gorman responded to Carlesso by letter of Jan 4, 2013.
She:
1.
Reviewed the correspondence and the disclosure that had been provided.
2.
Noted that despite there being no money in the estate Carlesso had requested that the Income Tax be paid from the estate’s assets, that a Certificate of Appointment be obtained, and that there be a formal passing of accounts.
3.
Again set out the basis for Fairhurst’s position that he would not be suing Yamka, adding that the estate had no funds to cover the costs of such litigation.
4.
Took the position that Fairhurst had fulfilled his duty.
5.
Requested clarification of a request for account documents, to see if they had not already been provided.
6.
Warned that Fairhurst would seek costs from the beneficiaries if forced to formally pass his accounts.
[22] Carlesso’s short reply of January 4, 2013, provided only a general response to the request for clarification and said that the beneficiaries would compel Fairhurst to pass his accounts at Fairhurst’s expense.
[23] The beneficiaries obtained on June 14, 2013 an ex-parte order for Fairhurst to pass his accounts.
[24] The accounts prepared by Fairhurst for the estate were for the period from May 17, 2011 (date of death) to September 9, 2013.
They show:
1.
There were $845,046.57 of assets that the testator transferred to the beneficiaries prior to death, that went to the beneficiaries directly rather than through the estate, or that went directly to the deceased’s sister, Barbara Yamka by right of survivorship on the account the deceased held joint with her.
2.
There were $36,803.53 in capital receipts.
Notably, several amounts within this total came from the joint account held by Yamka to pay for fees related to the funeral and cemetary.
The largest amount, $20,918.57, was from mortgage insurance.
3.
There were capital disbursements of $36,682.78. this consisted of:
a) The above mentioned funeral and cemetary expenses funded by Yamka.
b) The above mentioned mortgage insurance was indicated to have been disbursed by Yamka to the beneficiaires, equally.
c) Accounting fees of $796.65.
d) Legal fees totalling $4,944.04.
4.
There were no revenue receipts nor disbursements, no unrealised original assets and no investments.
5.
The value of assets left in the estate was $120.75.
6.
There were liabilities of $208,628.07 consisting of:
a) A student line of credit for Kerry Whitney of $6,110.64 and
b) A CRA liability as of Oct 19, 2012 of $202,517.43.
7.
In addition, there were outstanding:
a) Executor’s compensation calculated to be $5,859.57.
b) Legal fees $1,002.75.
c) Accounting fees $500.00.
[25] Fairhurst filed his accounts with a Request for Increased Costs.
Whitney filed a Notice of Objection to Accounts together with a Request for Increased Costs which Fairhurst filed an objection to.
[26] At the hearing on January 16, 2014, although the complaints of Whitney were somewhat unfocused, the major point of contention was Fairhurst’s refusal to sue Yamka over the joint account.
Therefore, at the court’s suggestion, it was ordered on consent that steps be taken to remove Fairhurst and substitute Whitney as the estate trustee.
The issue of costs was not dealt with at that time.
[27] Subsequently, Fairhurst brought a motion returnable November 27, 2014 to deal with his request for increased costs.
It was adjourned to a date to be set, and eventually heard on January 18, 2017.
In addition to the documents filed by each side, both Fairhurst and Whitney were cross-examined in court on their respective affidavits.
[28] Obviously, the accounts are an attempt at providing a complete picture of the estate and are over-inclusive, but with explanations.
The list of original assets is comprised of the deceased’s vehicle, home, investments, insurance and savings, all of which are identified as having gone directly to the beneficiaries, outside of the estate, with the exception of the account the deceased had held jointly with Barbara Yamka, which went to her.
Similarly, many of the capital receipts and capital disbursements are shown as having gone through an account held by Yamka.
Again, the estate was left with $120.75!
[29] Surprisingly, given the correspondence between the lawyers and the information that was provided repeatedly by Fairhurst, one of the objections of the beneficiaries to the accounts that they contained assets which do not form part of the estate, and are therefore not proper.
However, had these not been included as they were, there would have been very few entries, no doubt raising more questions.
[30] Another objection is that Fairhurst pre-took excessive compensation.
In fact, Fairhurst testified, he had had not taken any compensation and would waive it.
Again, there was the complaint that Fairhurst failed to take action against Yamka.
[31] Fairhurst confirmed that the costs he sought were those that he had incurred since receiving McMahon’s initial letter.
The costs outlined showed fees of $14,224.44, estimated fees for appearance of $1,500.00 and disbursements of $1,721.16 for a total of $17,445.60.
[32] The beneficiaries submitted that Fairhurst failed to perform his duties as estate trustee properly.
He had to be compelled to apply for a Certificate of Appointment of Estate Trustee and to pass his accounts.
The primary complaint, however, was that he failed to pursue Yamka for the money in the joint accounts and that he should have sued her or quit, instead of applying for a Certificate of Appointment of Estate Trustee.
Consequently, they sought fees of $46,800.00, an appearance fee of $2,000.00 and disbursements of $1,681.72 totalling $50,481.72 as set out in a Cost Outline.
[33] It is clear that Fairhurst is not sophisticated in legal matters generally and in dealing with estates specifically.
However, it appears that he acted in good faith and that some of the irritants to the beneficiaries in this matter are attributable to a bank’s handling of monies that were due to the beneficiaries, which problem Fairhurst assisted in resolving.
[34] At the heart of the conflict initially was a lack of communication and perhaps some uncertainty over how the income taxes and the monies held jointly with Yamka would be dealt with.
So, the beneficiaries retained McMahon and this prompted Fairhurst to obtain counsel as well.
The interaction between counsel was positive, and real progress was made in obtaining information and identifying issues.
Unfortunately, once the beneficiaries obtained new counsel, the tone of communication with Fairhurst’s counsel was no longer constructive.
There also arose a misplaced focus on having Fairhurst apply for a Certificate of Appointment of Estate Trustee and formally pass his accounts.
Neither of these appears to have been strictly necessary and I fail to see how either would assist with dealing with the beneficiaries’ primary issue, which was the legal status of the money that had been held jointly by the deceased and Yamka.
The beneficiaries wanted Fairhurst to pursue Yamka for that money.
Although the initial indication of Fairhurst had been that that money would eventually go to the beneficiaries, it is clear that, with more information, including an affidavit from the bank about the testator’s intention for the joint account, and the benefit of legal advice, he changed his position by late summer or fall of 2012 and then had no intention of pursuing Yamka for that money.
Nevertheless, the beneficiaries through counsel continued to press Fairhurst to apply for the Certificate of Appointment, which he eventually did in order to satisfy them, and then forced him to apply to pass his accounts formally.
As has been seen, I find that the objections to these accounts were ill founded.
It appears that the beneficiaries fell into a pattern of aggressively criticizing Fairhurst no matter what he did, without thought for how it would advance their cause.
They became distracted from the major issue.
As a consequence, Fairhurst was put to unnecessary expense.
[35] Incredibly, the beneficiaries’ position at the hearing was that Fairhurst should have pursued Yamka or else not have applied for the Certificate of Appointment of Estate Trustee as they had continually demanded he do or else face consequences.
It was clear that there was no money in the estate to fund such litigation, including paying any adverse costs awards, yet there was no offer from the beneficiaries to do so.
Neither do I see that any suggestion was made by the beneficiaries that, having reached this impasse with Fairhurst, they could take over as estate trustee.
That should have appeared as the obvious solution by late 2012.
Instead, as previously noted, there was continued pressure on Fairhurst to pursue Yamka and take the other steps, contrary to the information and legal advice he had.
[36] In these circumstances, I do not see why Fairhurst should be out of pocket.
The beneficiaries shall be jointly and severally liable for his costs in the amount of $17,445.60 payable within 30 days.
The beneficiaries’ request for costs is dismissed.
---
**J. A. S. WILCOX**
**Released:** March 27, 2017
