Estate Trustees are entitled to compensation. This entitlement comes from statute (s. 61(1) of the Trustee Act (“Act”): “A trustee, guardian or personal representative is entitled to such fair and reasonable allowance for the care, pains and trouble, and the time expended in and about the estate, as may be allowed by a judge of the Superior Court of Justice.”

However, as is often the case, the intention of the testator may have a bearing on this entitlement. Under s. 61(5) of the Act: “Nothing in this section applies where the allowance is fixed by the instrument creating the trust [emphasis added].”

But what does it mean to fix compensation and how does the Court determine compensation where there is any ambiguity? A useful case on point is the 2004 decision of Justice Lalonde in Re Byrne Estate.

In this case, the Will had a “compensation clause” which read as follows:

I DECLARE that any Trustee of my Will who is a barrister-at-law or solicitor shall be entitled to charge and to be paid all professional fees or other charges for any business or act done by her or her firm in relation to my estate or to the trusts declared by my Will or by an Codicil to it in addition to such compensation and allowances as she would be entitled to receive, were she not a barrister-at-law or solicitor, for acting as one of my Trustees.

I AUTHORIZE my Estate Trustee to take and transfer at reasonable intervals from the income and capital of my estate amounts on account of compensation which my Estate Trustee reasonably anticipates will be requested at the end of the accounting period in progress, either upon the audit of the estate accounts or on approval by the beneficiaries of my estate.  If the amount subsequently awarded on Court audit or agreed to by the beneficiaries is less than the amount so taken, the excess shall be repaid to my estate without interest

Justice Lalonde first referred to Re William George King Trust (1994) to show that the court has accepted the employment of the percentages approach in calculating “fair and reasonable compensation” for estate trustees’ work.  The percentages approach was set down in Jeffery Estate (1990) and later applied in Laing Estate (ONCA decision in 1998). According to Justice Lalonde, all judges have to do is “ensure that the Estate Trustees’ work do not require a different calculation [than the will or percentages approach] to arrive at a “fair and reasonable allowance.” (at para 120).  This involves using the authority given to them under s 61 of the Trustee Act and a cross-reference against the five factors in Toronto General Trusts Corp. v Central Ontario Railway and ensures that fairness is applied when determining the quantum of compensation.

Justice Lalonde then began his assessment by noting that the estate trustees were named in the will and therefore the compensation clause became a contract. Justice Lalonde was not concerned with the fact that the compensation clause did not include a fixed amount or liquidated amount.  He mentioned this because the PGT argued undue influence partly due to there not being a fixed amount of compensation in the will.

After determining the compensation clause was valid, Justice Lalonde continued with s 61 of the Trustee Act to determine the quantum of compensation. In the case before him, the estate trustees were lawyers rendering professional services, so Justice Lalonde also found that s 61(4) of the Act applied to allow for increased compensation.  He then discussed the 5 factors enumerated in Toronto General Trusts Corp. v Central Ontario Railway: (a) size of the estate; (b) care and responsibility involved; (c) time occupied in performing duties; (d) skill and ability shown; and (e) success resulting from the administration.  Using the five-point test, Justice Lalonde found that the compensation requested by the estate trustees as per the will was fair and reasonable.  It is at this point that Justice Lalonde refers to Re Robertson in saying that that courts cannot consider the reasonableness of the amount provided for in the will (at para 129) where the will provides for a fixed amount. The judge in Re Robertson (1949)noted that the estate trustees were limited to the $100 fixed amount in the will and so he could not consider the percentages approach and stopped his assessment once s 61(5) of the Trustee Act applied. 

Justice Lalonde effectively employed a hybrid approach and calculated compensation both under the will and then using the percentages approach.  He noticed that both calculations gave roughly the same result.  Under the percentages approach, the total compensation was $143,000 and under the calculation in the will, the total compensation was $145,000 – only a difference of $2,000.  Contrasted with the 5 factors in Toronto General Trust Corp., both of these amounts of compensation were considered “fair and reasonable”.

Thanks for reading.

David Morgan Smith and Jordyn Sanford (student-at-law)

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