Estate trustees who serve in a dual capacity as the lawyer or accountant for the estate must keep clean, separate records of their professional work and their trustee work. That was the core message from Justice Sanfilippo’s recent decision in Rosenberg v. Lipman, 2026 ONSC 3008, which dismissed a removal application and passed nearly 19 years of contested estate accounts, but significantly reduced the trustees’ compensation for blending the two roles.
Background
The deceased, Mr. Rosenberg died in 2007, leaving behind a careful testamentary scheme of “spendthrift trusts” designed to manage distributions to his two children, Barry and Sara, and preserve capital for his grandchildren. His longtime lawyer and accountant, Mr. Lipman and Mr. Rotin, were named as estate trustees. After roughly 14 years of uneventful administration, Barry and Sara demanded a discharge of a mortgage registered against their home, a substantial capital encroachment, and eventually the trustees’ removal. Litigation followed across three related proceedings, including two applications to pass accounts.
Removal Refused
The Court reaffirmed the well-settled principles governing trustee removal: the testator’s choice must be respected, removal requires the “clearest of evidence,” and friction between trustees and beneficiaries is not, on its own, enough. The applicants advanced a theory of “benign neglect,” which the Court rejected as unsupported by both authority and the evidentiary record. Notably, the other branch of the family and all of the remainder capital beneficiaries declined to object to the accounts or seek removal, undercutting the claim that the trustees had failed in their fiduciary duties.
The Court also signalled, in obiter, that it would not have appointed the applicants’ proposed successors. The brother of one applicant openly intended to sue the estate and the parallel family trust on behalf of his sister, was in obvious conflict, and lacked relevant experience.
The Compensation Story
The more instructive part of the decision concerned trustee compensation. The trustees had docketed and billed throughout the administration for legal and accounting services through their respective firms, candidly stating in early affidavits that they did not “plan” to claim trustee compensation. Years into the litigation, they reversed course and sought the full tariff together with a care and management fee. Prior to passing their accounts, the Trustees had already been paid over $400,000 in management and trustee compensation fees.
The Court found no binding waiver of compensation but identified a more serious problem. The legal and accounting invoices were “blended,” capturing tasks that were properly trustee functions, such as ongoing review of estate administration, communications with co-trustees, and discussions with beneficiaries. Pre-taking trustee compensation without authority in the will or court approval is impermissible. Compounding the issue, the trustees refused to produce their underlying dockets, attracting the prospect of an adverse inference.
The Court took two corrective steps. First, it doubled the trustees’ proposed 25% deduction of professional fees to 50%, reflecting the true overlap. Second, it cut the care and management fee in half because investment management had been delegated to an external portfolio manager. The final awards were $100,000 for the estate accounting period and $10,000 for the trust accounting period, both inclusive of HST, with a further reduction to reflect lost interest income to the estate.
Practical Takeaways
For practitioners acting as estate trustees in a professional capacity, the message is clear. Maintain distinct dockets for professional services and trustee services from day one. Do not pre-take compensation absent express authority or beneficiary consent. Produce dockets when called upon. And be alive to the risk that a court will significantly discount blended invoices where the record does not support the allocation claimed.
The decision is also a useful reminder that removal remains an extraordinary remedy. Disagreement, friction, and even imperfect administration will not displace a testator’s chosen trustee absent clear evidence that the estate cannot otherwise be properly administered.
Thanks for reading! Li-Mei Mayer