Category: Passing of Accounts

22 Jun

Who Can Compel a Passing of Accounts From an Attorney for Property?

Umair Capacity, Elder Law, Estate & Trust, Executors and Trustees, Litigation, Passing of Accounts, Power of Attorney, Trustees Tags: , , , , , , , 0 Comments

 

As is often the case, a person who is concerned about a fiduciary’s management of property may wish to compel an accounting. However, it is important to remember that a person’s ability to compel such an accounting may vary depending on whether an accounting is being sought from an estate trustee of a deceased’s estate or, in the alternative, from an attorney for property during the lifetime of an incapable grantor.

The legal framework in Ontario

In Ontario, pursuant to section 50 of the Estates Act, an executor or administrator shall not be required to account by the Court “…unless at the instance or on behalf of some person interested in such property or of a creditor of the deceased….” Further, Rule 74.15(1)(h) of the Rules of Civil Procedure provides for any person who appears to have a financial interest in an estate to move for an order for assistance requiring an estate trustee to pass his or her accounts.

Conversely, the right to compel an accounting from an attorney for property or guardian of property is set out under section 42 of the Substitute Decisions Act. Pursuant to section 42, in addition to the attorney, the guardian and the incapable person, the following persons may apply for the fiduciary’s accounts to be passed:

  1. The grantor’s or incapable persons’ guardian of the person or attorney for personal care;
  2. A dependant of the grantor or incapable person;
  3. The Public Guardian and Trustee;
  4. The Children’s Lawyer;
  5. A judgment creditor of the grantor or incapable person; and
  6. Any other person, with leave of the Court.

This is an important distinction to keep in mind: although a person with a financial interest in the estate may be able to compel an accounting from an estate trustee, such a financial interest on the death of an incapable grantor may not in and of itself be sufficient to compel an accounting from an attorney for property during the lifetime of the incapable.

What is the criteria for obtaining the leave of the Court?

The recent decision of the Honourable Justice LeMay in Groh v Steele, 2017 ONSC 3625, is an important reminder of the high threshold for obtaining the leave of the Court to compel an accounting from an attorney for property under section 42.

In Groh, the Applicant, Ernest, sought a capacity assessment of his mother Gabriella under the Substitute Decisions Act. Ernest also sought an order for the suspension of Gabriella’s attorneys for property ability to act and an order for the attorneys for property to pass their accounts. Ernest’s Application was opposed by Gabriella and her attorneys for property.

On the issue of Ernest’s request that the attorneys pass their accounts, Justice LeMay reviewed section 42 of the SDA and concluded that “it is clear that the only circumstances in which Ernest could ask for a passing of accounts is if he can obtain leave of the Court.”

Justice LeMay went on to make the following statement regarding the circumstances in which leave should be granted by the Court:

In my view, such leave should be granted sparingly. The passing of accounts is a detailed review of the financial affairs of the grantor. As such, it is something that is intrusive, and will reveal private financial information about the grantor. In order to obtain leave, the party applying would have to establish both that he or she had some interest (at least indirectly) in the affairs of the grantor, and that there was at least some evidence that the Attorneys were not properly conducting the affairs of the donor. The Court should also consider the role that the Attorneys are playing in the Grantor’s affairs.

After reviewing the facts before the Court, Justice LeMay concluded that a formal passing of accounts should not be ordered, and Ernest’s Application was dismissed.

Thank you for reading,

Umair Abdul Qadir

09 May

Hull on Estates #518 – Estate Planning for Simultaneous Deaths

76admin Beneficiary Designations, General Interest, Hull on Estate and Succession Planning, Hull on Estates, Passing of Accounts, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Show Notes, Uncategorized Tags: , , , , , , 0 Comments

This week on Hull on Estates, Natalia Angelini and Rebecca Rauws discuss what can happen when two people die at the same time, and some drafting tips to avoid issues in this regard.

 Should you have any questions, please email us at webmaster@hullandhull.com or leave a comment on our blog.
04 May

The Cost of Being an Uncooperative Beneficiary

David Freedman Executors and Trustees, Litigation, Passing of Accounts, Trustees 0 Comments

As those practising law in relation to the administration of estates well know, beneficiaries may make life complicated for Estate Trustees. Moreover, there are costs that may accumulate where the Estate Trustee must seek the assistance of the Court.

In the recent case of Re Larwill Estate, 2017 ONSC 2688 (Ont. S.C.J.), an Order had been secured to allow the Estate Trustee (daughter of the deceased) to transfer real estate to two beneficiaries in common (her two brothers). If the brothers did not cooperate in the transfer, she was directed to apply for Partition and Sale. One brother cooperated, the other did not. The matter was brought back into Court and the Estate Trustee was directed to commence the partition proceeding. Justice Corthorn commented, “[n]o doubt the loss of their father is difficult for each of… [the three children of the deceased].  The administration of an estate is not a pleasant task… failure to co-operate is only serving to increase the difficulties for… [the uncooperative brother] and his siblings and to make the tasks with which… [the Estate Trustee] is faced even more unpleasant than they otherwise would be.  I hope that… [the uncooperative brother]  will find it in himself to co-operate with his siblings from this point forward.” Costs will inevitably follow against the beneficiary who causes the Estate Trustee to seek the assistance of the Court as was the case earlier in the administration of the Estate.

Estate Trustees should be aware of the ability of the Court to assist in the face of active or passive obstruction by beneficiaries. Indeed, to my mind, it is often cheaper and more efficient to bring matters into Court promptly rather than having to engage in extensive correspondence with beneficiaries or delay the administration of the Estate unduly. In the Larwill Estate case, Justice Corthorn dealt respectfully and firmly with the parties in a manner that will surely ease the burden of administration.

Have a nice day everyone.

David

02 May

Hull on Estates #517 – Pragmatism Behind Passing of Accounts

76admin Hull on Estate and Succession Planning, Hull on Estates, Passing of Accounts, Podcasts, PODCASTS / TRANSCRIBED, Show Notes, Show Notes Tags: , , , , , 0 Comments

This week on Hull on Estates, Jonathon Kappy and Doreen So discuss the costs decision in the Pochopsky Estate and whether it is pragmatic to pursue an application to pass accounts in certain circumstances.

 Should you have any questions, please email us at webmaster@hullandhull.com or leave a comment on our blog.
02 May

Costs Paid from the Estate

David Freedman Executors and Trustees, Litigation, Passing of Accounts 0 Comments

A point of contention in almost all civil litigation is the awarding of costs. In recent years the costs rules dealing with estate litigation have mirrored conventional civil litigation with a persistent issue being whether costs in the litigation at issue should be paid out of the Estate on the basis that the proceedings were unavoidable.

In a recent case, Elines v Ollikainen, 2017 ONSC 2620 (Ont. S.C.J.), Muligan J. dealt with a contested Passing of Accounts. At issue between the parties were the compensation and indemnification claims of the Estate Trustee as well as the question of whether a resulting trust attached to a joint bank account. The objectors were substantially successful. Mulligan J. held that costs should be paid out of the Estate as the determination of the resulting trust question was required in order to administer the Estate properly:

[7]               The objectors seek costs for legal fees, disbursements, HST of $11,560.84.  The objectors form the majority of the residual beneficiaries of this substantial Estate.  The Respondent… [Ms.] Ollikainen is also a beneficiary of the Estate.  She takes no position with respect to the quantum of costs sought by the applicant objectors, and submits that the costs ought to be paid by the Estate, and not by the Estate Trustees personally.

[8]               The objectors request costs either from… [Ms.] Ollikainen personally, or by the Estate of … [Ms.] Elines.  Under the circumstances, I am not satisfied that Dorothea Elines’ conduct in the administration of this Estate rose to the level requiring costs to be paid by her personally.  It is therefore ordered that costs of the objectors be paid from the Estate in the amount of $11,560.84, all inclusive.

[9]               … [Ms.] Ollikainen seeks legal costs in the amount of $15,715.84 to be paid from the Estate.  The Respondent relies on the principles enunciated by Gillese J. in the Sawdon Estate at para. 85:  “…the need to ensure that estates are properly administered.”  In this case, the Estate Trustee took the position that the joint bank account was hers.  In my view, that was not an unreasonable position to advance, although she was unsuccessful.  It was an issue that the parties acknowledged required a judicial determination as part of the due administration of this estate.  I am satisfied that this is not one of those cases where the Estate Trustee ought to bear costs personally for the passing of accounts, and the judicial determination of one of the assets of the estate.  The Respondent… [Ms.] Ollikainen is entitled to her legal costs in the amount of $15,715.84, all inclusive, from the Estate.

[10]           In the result, the Objectors are entitled to their costs from the Estate in the amount of $11,560.84, all inclusive, and, the Respondent… [Ms.] Ollikainen is entitled to her legal costs in the amount of $15,715.84, all inclusive, from the Estate.

 While always contentious, costs awards in estate litigation do in fact (and in law) sometimes reflect the need to have the Court determine a point rather than leave the question to the parties.

Have a nice day all,

David

26 Apr

When Not to Compel a Passing of Accounts

Hull & Hull LLP Estate & Trust, Executors and Trustees, Litigation, Passing of Accounts, Trustees Tags: , , , , , , , , , , , 0 Comments

Although beneficiaries have a right to compel an accounting from an Estate Trustee, it is not always advisable to do so.  The decision of Pochopsky Estate provides an example of such a situation.

Here, practically all of the deceased’s assets passed outside of the estate.  Although, there was some concern as to whether a joint account held between the deceased and his sister was an estate asset, subsequent evidence was given to the Estate Trustee, including an affidavit from the bank, indicating that the account was not an estate asset.  Accordingly, the Estate Trustee, a friend of the deceased, concluded that there was no money that passed through the estate.

The residuary beneficiaries nevertheless requested that the Estate Trustee proceed against the sister for the joint account and obtain a Certificate of Appointment.  In addition, a formal passing of accounts was sought.

The Estate Trustee thought none of these steps were appropriate given the size of the Estate, and indicated that if forced to formally pass his accounts, he would seek his costs from the residuary beneficiaries.

The residuary beneficiaries obtained an ex-parte Order for the Estate Trustee to pass his accounts.  Although not mentioned in the decision, for an interesting read on the appropriateness of ex-parte motions,  Justice Brown’s decision in Ignagni Estate (Re), is a good one.

On the passing, the Court found that the objections raised by the residuary beneficiaries were ‘ill-founded’, and that they fell into a pattern of aggressively criticizing the Estate Trustee no matter what he did.  Given the size of the estate, the Court ordered that the residuary beneficiaries personally pay the costs of the Estate Trustee in the amount of $17,445.60, and that no costs would be payable to these beneficiaries.

Noah Weisberg

Please consider these other interesting Passing of Accounts related blogs:

30 Mar

Vouching for Expenses Isn’t the Same as Vouchers for Expenses

David Freedman Estate & Trust, Executors and Trustees, Passing of Accounts 0 Comments

The last hurdle before final distribution of the assets of an Estate and the ability of an Estate Trustee to take compensation and be indemnified for expenses is the presentation of trust accounts and either an Order passing the accounts or a Release from the beneficiaries or both. As we all know, passing of account proceedings are summary and Judges are not inclined to allow precious court time to be spent in arguments over insignificant amounts. Unfortunately, contested passings of accounts often arise where documentation is simply not sufficient to prove Estate expenses or objections.

In Re Birkenbach Estate, 2017 ABQB 166, the beneficiaries settled a dispute in respect of a complex estate administration with the benefit of avoiding litigation in Alberta and in Mexico. Minutes of Settlement were executed with provisions provided respecting expenditures made in the litigation that might properly be regarded as proper estate expenses. Unfortunately the litigation continued in respect of the settlement and specifically claims for reimbursement respecting amounts spent in Mexico (where some realty belonging to the Deceased was located). Justice Mahoney gives us the flavour of the contested passing:

 

[11]           Based on the Settlement Agreement and the Consent Court Orders referred to above, I find the intention of the parties is that Angela would only be compensated for out-of-pocket expenses directly related to the Limoncitos resort project and the two San Blas houses paid prior to November 30, 2011.

[12]           In this claim for re-imbursement of expenses, Angela has the burden of proving the facts to support her expense claims. Having the burden of proof, Angela must present, through sworn affidavit evidence and exhibits, enough credible evidence to support her claim. The evidentiary standard she must meet is the “preponderance of the evidence.” A preponderance of evidence is just enough evidence to make it more likely than not that the amount Angela seeks to prove is true.

[13]           Despite Angela knowing, since at least 2011, that she was going to have to prove the expenses that she paid to maintain the assets as per the Settlement Agreement, she has provided mostly no documentation to support her expense claims. For example, where Angela says she paid cash to workers, she has refused to provide answers to undertakings that would provide bank statements that should show cash withdrawals being made to pay these workers.

[16]           It is also significant that Angela refused to allow the Personal Representative or any other person to assume administration of the Estate in Mexico. By doing so Angela assumed all financial and other responsibility for any existing or future debts or other claims against the Estate in Mexico, except those agreed to in paragraph 25 of the Settlement Agreement.

[17]           In addition to no back-up documentation or no reliable back-up documentation and no reference as to when or how the cash amounts were paid, Angela’s claims for taxes, other government assessed charges and legal fees are not claimable…

Obviously a dispute has to be taken in context and I expect that each side to the dispute had its own views as to the propriety of the expenses in question. However, where the point must be litigated, the Birkenbach Estate matter reminds one that proper proof is required. Obtain and retain vouchers seems to be the lesson here.

Have a nice day!

David

13 Feb

Expenses Deducted from Estate Trustee Compensation

Ian Hull Estate & Trust, Estate Planning, Executors and Trustees, General Interest, Passing of Accounts, Uncategorized, Wills Tags: , , , , , , , 0 Comments

Pursuant to the testamentary document of a deceased, or the Trustee Act, an estate trustee may take compensation. We have previously blogged on the calculation of estate trustee compensation.

However, in calculating compensation, there are certain expenses that will be deducted from the compensation to which an estate trustee would otherwise be entitled. As a general rule, expenses paid to a third party for tasks that are properly a part of the main duties and expected expertise of the estate trustee (i.e. “executor’s work”) will be deducted from compensation.

Tasks that are Generally Deducted from  Compensation

Generally, the determination of whether the amount will be deducted will depend on the complexity of the task and the circumstances of the particular estate.

If an estate trustee delegates any of his or her general duties to professionals, it is usually a personal expense for which he or she will not be compensated. Examples of this may include preparing the estate tax return, investing the estate assets, and preparing accounts.

Maintaining proper accounts is the primary duty of a trustee and the preparation of  accounts has generally been deducted from estate trustee compensation. If an estate trustee acted improperly, the fees to have accounts prepared will be deducted. While accounts are specialized and the argument has been made that an estate trustee may not have the requisite knowledge to prepare proper accounts, the preparation is still excluded from estate trustee compensation.

An estate trustee is not entitled to be compensated for legal fees paid for their own personal benefit; however, the case of Geffen v Goodman, 1991 2 SCR 353, established that an individual may be compensated for any legal fees incurred to defend the interests of the estate.

If an estate trustee’s actions resulted in a loss to the estate through mismanagement of the estate assets, the amount will likely be deducted from compensation. An example of mismanagement is if the estate trustee fails to prudently invest the estate assets.

Tasks that are Generally Not Deducted from Compensated

In Young Estate, 2012 ONSC 343, the court found that investment management was beyond the skill of an estate trustee, and it was proper to retain and pay private investment counsel out of the assets of the estate. An investment or financial manager may be necessary to hire and pay through estate assets if the expertise is reasonably outside the expertise of the average estate trustee.

An estate trustee can also hire consultants, investment managers, property managers or operating managers if an estate has a corporation as an asset, and can pay their fees out of the estate if it would not be reasonable to expect an estate trustee to have reasonable knowledge of the topic.

In summary, it bears repeating that whether an expense is deducted from compensation will depend on the particular circumstances of the estate and the particular expertise of an estate trustee.

Thanks for reading,

Ian M. Hull

Other Articles You May Be Interested In

Executor and Trustee Compensation

Taxation of Trustee Compensation

When Does an Attorney for Property Lose the Right to Claim Compensation?

18 Jan

When Does an Attorney for Property Lose the Right to Claim Compensation?

Suzana Popovic-Montag Passing of Accounts, Power of Attorney Tags: , 0 Comments

The Ontario Court of Appeal recently considered the issue of the applicable limitation period for claims for compensation on a passing of accounts. In Armitage v The Salvation Army, the Court held the Limitations Act, 2002 does not apply to claims for compensation on a passing of accounts.

Facts

The Respondent in this case was the deceased’s power of attorney for property and personal care, as well as estate trustee. The Appellant was the sole beneficiary of the deceased’s estate. The principal issue in this case was whether the Respondent’s claim for compensation was statute barred.

The estate trustee was appointed the deceased’s attorney for property and personal care in 1990, 2001, and 2007. In 2006, the deceased was admitted to hospital and then to a nursing home, where he remained until his death on February 5, 2013. The attorney submitted her claim for attorney compensation on September 5, 2013. She issued a Notice of Application on January 30, 2015 and a further application to pass estate accounts on January 30, 2015 at the request of the sole beneficiary of the estate.

Decision of the Application Judge

The parties disagreed about how to calculate the applicable limitation period for the claim for attorney compensation. The attorney took the position that any claim must be commenced within two years of the death of the person who granted the power of attorney. She explained that she was unsure about whether she would take compensation because it was uncertain how long the deceased would live and what his financial needs would be. The beneficiary took the position that section 40(2) of the Substitute Decisions Act, 1992 gives an attorney the option to claim compensation each year and that the end of each year triggers the beginning of the two year limitation period.

The application judge held that the date of the deceased’s death terminated the power of attorney and therefore triggered the limitation period. An attorney for property would then have two years from the date of death to claim compensation.  The application judge approved the attorney and estate trustee claims for compensation.

Decision of the Court of Appeal

The Court of Appeal upheld the application judge’s approval of the claimed compensation, but for different reasons. The Limitations Act, 2002 was intended to deal with all civil claims, grounded in equity, common law, or statute. However, the Limitations Act, 2002 only applies a “claim,” which is defined as “a claim to remedy an injury, loss or damage that occurred as a result of an act or omission.” The court held: “in seeking court approval of the passing of accounts, an attorney for property is not seeking redress for any loss, injury, or damage. Rather, he or she is seeking approval from the court of his or her actions in managing the property, including approval for compensation previously taken or now sought. A passing of accounts application is the opposite of remedial; it is a process that seeks a court order that no remedy is necessary with respect to accounts.”

Therefore, a passing of accounts is not a “claim” within the definition of the Limitations Act, 2002 and not subject to the general 2-year limitation period. The only defences available on a passing of accounts are the equitable defences of laches and acquiescence. The court, however, does leave open the possibility that the filing of a notice of objection by a beneficiary after an attorney has sought a passing of accounts might fall under the definition of “claim” in the Limitations Act, 2002.

This decision allows an attorney for property to make his or her own claim for compensation subordinate to the needs of the person who granted the power of attorney by waiting until the death of the grantor, when the money is no longer needed for the grantor’s care.

Thank you for reading.

Suzana Popovic-Montag

Other articles you might enjoy:

Limitation Periods – Passing of Accounts

Application to Pass Accounts – Reply to Notice of Objection to Accounts

Limitation Period Not a Sword

04 Jan

The Need to Diversify

David Freedman Estate & Trust, Estate Planning, General Interest, In the News, Passing of Accounts, Uncategorized Tags: , , , 0 Comments

stocksnap_pchsij30cxHappy new year everyone!

I’m sure that we’re all a bit sluggish coming back from the holidays, but hopefully we’ll find the transition not too bad. By the way, did you know that Disney had a $67M life insurance policy on the life of Carrie Fisher?

I was reading through a bunch of recent cases on the weekend to catch up with recent developments, with the usual types of issues being raised (good news: nothing too major happened in the last couple of weeks). I enjoyed reading the Hon. Mr. Justice Bale’s short judgment in Mowry v Groome, 2016 ONSC 7850 (Ont. S.C.J). This was a contested passing of accounts but one in which the beneficiaries succeeded against the trustee for partial compensation for investment losses of about $165,000. Here there was a failure to diversify the estate’s portfolio in favour of retaining and renovating the deceased’s residence. It is a well-reasoned judgment that points out the need for a sensible investment plan – “[t]he whole purpose of diversification is to avoid the losses which can occur in the event of such unanticipated market events” as Justice Bale explained – rather than something more speculative.

Have a nice day!

David

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