Naming an estate trustee during litigation (“ETDL”) is meant to reduce conflict and streamline the administration of an estate. However, problems can arise when a former estate trustee (and beneficiary) continues to cause conflict and frustrate the efforts of the ETDL. This was the case in the recent Ontario Superior Court decision Estate of Georgia Manos, deceased, 2023 ONSC 1962 (“Manos”) from Justice Gilmore.
Background of the Case
This case concerned an application to pass accounts by the ETDL and a notice of objection filed by beneficiary and former estate trustee, James Manos (“James”).
The testator, Georgia Manos, died on April 10, 2012 and appointed her sons, James and Nicholas, as co-estate trustees. Following several proceedings between the estate trustees, Doug Lewis, a qualified accountant and lawyer, was appointed as ETDL for the estate on October 31, 2018.
After being appointed, Mr. Lewis took steps to liquidate the remaining assets of the estate, including the testator’s property in Florida and the testator’s shares in PZ Cussons PLC, a company in the UK. Throughout this process, James repeatedly objected to and frustrated Mr. Lewis’ efforts. In an affidavit, Mr. Lewis described his appointment as the most difficult he had encountered in years and remarked that he would never have accepted the role if he had known about James’ conduct.[1] On December 2020, James brought an application to remove Mr. Lewis as ETDL. In an effort to respond to James’ concerns, Mr. Lewis brought a motion to pass the accounts for the estate.
The following issues were disputed in this case:
- How Much Compensation Should Mr. Lewis Receive for Acting as ETDL?
Mr. Lewis sought $70,670.71 in compensation for acting as ETDL. Justice Gilmore agreed with Mr. Lewis’ proposed compensation.
Subsection 61(1) of the Trustee Act asserts that a trustee “is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and abut the estate.” Subsection 61(3) of the Trustee Act allows a judge to award such compensation in passing the accounts of a trustee.
In determining how much compensation to award, courts look to the following five factors:
- The total value of the estate;
- The care and responsibility involved in the estate’s administration;
- The time spent by the trustee in administering the estate;
- The skill and ability demonstrated by the trustee; and
- The success of the administration.[2]
Applying these factors, Justice Gilmore held that Mr. Lewis was entitled to the amount he sought:
- This was not a modest estate; the approximate value was over $1.9 million.
- This was not a simple estate and involved the sale of property in foreign jurisdictions.
- Although Mr. Lewis did engage foreign professionals, this did not mean his recorded hours were excessive. His use of outside professionals was reasonable given that he lacked the authority to undertake transactions in the US and UK.
- Mr. Lewis demonstrated skill and ability in his administration of the estate. By liquidating the main assets of the estate, Mr. Lewis accomplished more in three years than the previous estate trustees accomplished in five, despite the toxic environment he had to operate in.
- James claimed that the administration was not successful because significant interest was charged on the sale of the UK shares due to the delay selling the shares following the testator’s death. The Court rejected this assertion; there was no evidence that the original estate trustees took any steps to sell the shares in the five years following the testator’s death.
Justice Gilmore was also critical of James’ conduct in the proceedings:
James could have compelled a Passing of Accounts in 2019 and avoided a significant amount of the costs in issue in this matter. Instead, the matter apparently became a personal mission to grind down the ETDL. James’ proposed reduction in compensation by 25-30 percent is unwarranted and without foundation based on the test in Laing Estate and the facts found by this Court.[3]
- Should Mr. Lewis Be Fully Indemnified for the Legal Fees He Incurred in Defending Against James’ Objections?
Mr. Lewis also claimed $60,000 for legal fees on a full indemnity scale which he incurred defending himself against James’ objections. Again, Justice Gilmore agreed with Mr. Lewis’ position.
Generally, estate trustees are entitled to be fully indemnified for reasonably incurred expenses, including the legal costs of an action reasonably defended.[4] Neuberger Estate v York also introduced the concept of “blended cost awards”, in which part of the costs are payable by the losing party and the remainder are paid by the estate. These awards are available at the court’s discretion if one or more of the following public policy considerations are engaged: “(1) where the difficulties or ambiguities that give rise to the litigation are caused, in whole or in part, by the testator; and (2) the need to ensure that estates are properly administered.”[5]
Blended costs were awarded in the Divisional Court case, In the Estate of Stefanie Aber, deceased. In Manos, the litigation was not precipitated by the testator’s actions. The Court found that the Applicant was responsible for a portion of the costs as the losing party. However, the Applicant was entitled to request a Passing of Accounts and his conduct was not scandalous, reprehensible, or outrageous, and the litigation was not frivolous, therefore blended costs were appropriate. The Applicant was responsible for Mr. Lewis’ legal costs on a partial indemnity basis (approximately 60% of actual legal fees) with the remainder to be paid out of the funds of the estate.[6]
Justice Gilmore rejected James’ argument that the costs of the litigation and his objections should be shared by all the beneficiaries. The other beneficiaries had nothing to do with the majority of the motions and objections brought by James and did not interfere with the sale of the Florida property as James had. Justice Gilmore held that “James must bear some responsibility for [his] irresponsible approach. The other beneficiaries should not be burdened with all of the costs in relation to what unfolded and which they were powerless to stop.”[7]
However, per the approach in Aber Estate, James took a misguided approach to the litigation, but did not take a “scandalous or egregious position.”[8] Justice Gilmore held that a blended cost award was appropriate; James would be responsible for 60% of the legal costs from his share of the estate, while the remaining 40% would be payable from the estate in general.[9]
Conclusion
This case establishes that the compensation earned, and legal fees incurred by an ETDL while acting in their role, can be fully paid by the Estate, even in the face of strong objections from the beneficiaries.
This case also has important implications for beneficiaries of an estate managed by an ETDL. One’s conduct does not have to meet the threshold of malicious, scandalous, or egregious to attract an adverse costs award. Even frivolous or misguided objections and actions against an ETDL can result in an adverse costs award, albeit one that is shared from the funds in the estate. It is important to note that legal fees and expenses paid out by an estate ultimately hurt the beneficiaries; a testator does not leave funds for lawyers, a testator leaves funds for the beneficiaries. Beneficiaries should be mindful of this when contemplating any type of litigation related to an estate.
Contact Derfel Estate Law for Estate Administration and Trustee Disputes
At Derfel Estate Law, our estate litigation lawyers work with clients in all aspects of estate disputes, including trustee and executor issues and passing of accounts. We provide personalized assistance to beneficiaries, guardians, executors, trustees, and any other party involved in estate matters. If you are wondering how we can help you, please don’t hesitate to reach out online or call 416-847-3580 to speak with an estate lawyer who will work tirelessly to resolve your dispute.
This blog was co-authored by David Derfel and law student, Leslie Haddock.
[1] Estate of Georgia Manos, deceased, 2023 ONSC 1962 at para 35 [Manos Estate].
[2] Toronto General Trust Corp v Central Ontario Railway (1905), 6 OWR 350 (HC) and endorsed by Laing v Hines, 1998 CanLII 6867 (ON CA).
[3] Manos Estate, supra note 1 at para 101.
[4] Brown v Rigsby, 2016 ONCA 521 at paras 11 and 14.
[5] Neuberger Estate v York, 2016 ONCA 303 at paras 24-25.
[6] In the Estate of Stefanie Aber, deceased, 2015 ONSC 5123 at paras 68-70.
[7] Manos Estate, supra note 1 at para 114.
[8] Ibid at para 115.
[9] Ibid.