Table of Contents:

Introduction

A.    Compensation of Executors and Trustees
        1.    Common Law
        2.    By Instrument
        3.    By Statute

B.    Remuneration of Lawyers
        1.    Tariff
        2.    Additional Fees
        3.    Estates Over $300,000.00
        4.    Acting as Solicitor and Executor
        5.    Disputed Matters

C.    Practice Issues
        1.    Form 74AA
        2.    Law Society Practice Directions
        3.    How Fees are Reviewed
        4.    Fees in Excess of Tariff
        5.    Costs in Estate Litigation

D.    Conclusion

Recommended Reading

Acknowledgements

Appendices
        A.      The Trustee Act, LRM 1987, c. T160
        B.      The Estate of Sydney Rubin Katz
        C.      Nielsen v. Domko and Niemczyk
        D.      Fees Payable for Service of the Office of the Public Trustee
        E.       Summary of Standard Fees for Outright Estates and Continuing Trusts Administered in Manitoba
        F.       Estate of Rene Raulin, Deceased - Statement of Proposed Compensation
        G.      The Estate of Harry Malanchak
        H.      Sigfusson v. Gawryluk and Carpenter
        I.        Court of Queen;s Bench Rules 74.12(1) - 74.14 (17)
        J.        Form 74AA
        K.      Re Turley Estate
        L.      Taposchaner v. Ross and Associates
        M.     Krawchuk v. Ciastko
        N.      Buhr Estate v. Buhr
        O.      Fees Charged by Personal Representative's Lawyer on Administration of Estate
        P.       Law Society of Manitoba Discipline Committee decision:  Theodore Patrick Besko and Jerry George Ross
        Q.      Syrota v. Clark Estate
        R.      Manitoba (Public Trustee) v. Ballen
        S.      Derksen v. Kunkel and the Public Trustee of Manitoba




 
 

WILLS AND ESTATES
REMUNERATION AND ETHICAL ISSUES

HOW TO STAY OUT OF TROUBLE AND GET PAID

by Norman H. Sims, Q.C.






The purpose of this paper is to examine remuneration in estate matters for both executors and lawyers, and in the course of that discussion, review some of the ethical issues that befall those charged with administering estates.

A.     Compensation of Executors and Trustees

1. Common Law

The common law rule is that a personal representative can only rely on an agreement or other instrument for remuneration, otherwise the personal representative cannot recover compensation for the time and effort spent in administering the trust. This is still the law in England today.

Until 1858, it was a general principle at law and in equity that unless a personal representative could rely on am agreement or other instrument for remuneration, the personal representative could not recover compensation for the time and effort expended in administering the trust.
 

2. By Instrument

As suggested then, remuneration for am estate trustee can be fixed by instrument. In the Will itself, the testator could provide for compensation to the executor. However, special note should be made of S.90(5), The Trustee Act, LRM 1987, c. T160,which states that any agreement, instrument or document executed by a testator or any person on his behalf fixing the amount of compensation or allowance that may be paid to a trustee, guardian or personal representative with respect to the administration of the estate of the testator, is not valid unless it is approved by a Judge. l (see Appendix A).

In the Estate of Sydney Robin Katz (1995),106 Man R (2d) 270, Master Lee considered written provisions made by a testator for compensation payable in respect to the administration of an estate.  The wording is found at the bottom of page 2, Article 5.05. Master Lee held that it was the testator's intent to provide that Mr. Labinsky be compensated at his professional rate for all of his services/time spent in connection with the administration of the estate, professional or otherwise. But see Master Lee's comments at the bottom of page 5 of that decision, where he held that Article 5.05 is not binding and subject to review by the Court, and that the Court must apply the same considerations it applies in considering any request for compensation.

See also Neilsen v Domko and Niemczyk, a decision of the Manitoba Court of Queen's Bench (Winnipeg Center) at PR-88-01-10784.
 

3. By Statute

In Manitoba, compensation for executors and trustees is authorized by statute. Section 90 of The Trustee Act provides the statutory authority for the compensation of personal representatives. In particular, Queen's Bench Rule 74.12(7) provides that upon a passing of accounts the Court may fix the compensation made to the executor under a Will.

Practice has it that fees payable to an executor for administering an estate are generally based on a fixed percentage of the aggregate value of the estate. At Appendices D and E, respectively, are copies of the fee schedules that are currently used by both the Public Trustee in Manitoba and Royal Trust in administering estates. Royal Trust indicated that the fee schedule that it uses is not cast in stone as each situation is unique and is dealt with based on its complexity and the work required to administer the estate.

Percentages are to be used as a guide only, and the Court will look at both the responsibility and actual work done by the executor in considering the quantum of compensation (See Re Atkinson Estate, [1952] OR 688 and Re Turley Estate [1955], 16 WWR 72).

In the Estate of Rene Raulin, a Manitoba Court of Queen's Bench decision at PR-90-01-21052 (Winnipeg Center), the Public Trustee requested compensation of $16,451.69, which was based on a calculation of a percentage of income and capital received and disbursed, and on an annual asset management fee of 3/5 of 1 % of the average value of the estate. Senior Master Goldberg held that in the circumstances of that case, the proposed compensation was not reasonable, considering the estate consisted of Canada Savings Bonds, a bank account, and a GIC. The Public Trustee's fees were fixed at $5,000.00, after the Court considered additional factors including the time spent administering the estate, the responsibility, and any problems in the administration. See also, for a further example, Estate of Harry Malanchuk, a Manitoba Court of Queen's Bench decision at PR-93-01-29693 (Winnipeg Center).

The conduct of a personal representative in the administration of an estate can have an impact on the compensation payable to that person. In Compensation for Estate Trustees, Jennifer Jenkins cites a number of examples of personal representatives acting improperly:

(i)     pre-taking of compensation;
(ii)    breach of trust;
(iii)   failure or delay in fIling tax returns resulting in payment of interest or penalties;
(iv)   failure to obtain appropriate value upon the sale of an asset;
(v)    failure to treat beneficiaries with an even hand;
(vi)   loss of interest;
(vii)  improper payments;
(viii) conflict of interest; and,
(ix)   failure to generally discharge duties as an estate trustee.2

Each of these improper acts by an executor can result in, among other things, the compensation being claimed being reduced by the Court, or the executor being required to remedy a loss by contributing funds to the estate to compensate for the loss occasioned by their misconduct. The Manitoba Court of Queen's Bench decision, Sigfusson v. Gawryluk and Carpenter, at PR-92-0128154 shows what can happen when an executor acts in a conflict of interest in administering an estate.
 

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B.     Remuneration of Lawyers

Court of Queen's Bench Rule 74 determines the fees that a lawyer retained by a personal representative of an estate can charge the estate.   Rule 74.14 sets out a Tariff of Fees which is to be applied to all estates for probate or administration. Fees and costs do not include disbursements or remuneration to which a solicitor may be entitled as a personal representative (Rule 74.14(2)).

1. Tariff

The fee payable to the lawyer retained by the personal representative, where the personal representative is not a lawyer, trust company, or the Public Trustee, is:

- 3% of the first $ 10,000.00 or part thereof of the aggregate value of the estate;
- 2% of the next $90,000.00 or part thereof;
- 1% of the next $200,000.00 or part thereof; and,
- additional fees may be charged on the excess over $300,000.00, depending upon the time spent, complexity of the matter, results achieved, and the value of the estate (Rule 74.14(4)).
 

 "Aggregate value" of the estate is defined as the total value of all assets of the estate as shown in the Application for Probate or Administration or any amendment thereto (Rule 74.14(3)).  "Aggregate value" has been defined as the value of assets at the time of death3 and do not include:

 - gifTs made inter vivos,
 - property held in joint tenancy,
 - insurance, annuities and pensions not payable to the estate, or
 - benefits payable uNder the Canada Pension Plan.

Where an amendment is filed to correct the value of an asset listed in the initial inventory, the lawyer should file the amendment and base the fee charged on the amended value of the assets.4
 

2. Additional Fees

A lawyer is entitled to receive payment or additional fees in the following circumstances:

- Court appearances as allowed by the presiding Master or Justice;
- services required to pass the accounts of the personal representative the first time:

(a) where the lawyer has kept the estate accounts and prepared them for passing, fees allowed
are based upon the following scale:
    (i) 3/4 of 1% on the first $10,000.00 or part thereof;
    (ii) 1/6 of 1% on the next $190,000.00 or part thereof; and,
    (iii) 1/10 of 1% on excess over $200,000.00, subject to the Court's discretion on passing of accounts;

(b) where the personal representative has kept the accounts and prepared them for passing, or for services required on any subsequent passing of accounts:
in such amount as may be allowed by the Court on the passing of accounts;
    - acting on the sale of an estate asset; and,
    - finding a purchaser for an estate asset.

Rule 74.14(5) allows for a lawyer's fees on acting for persons other than the personal representative, attending on an assessment of costs of the lawyer acting for the personal representative, or on a passing of a personal representative's accounts, as may be allowed by the Court.

Costs, including disbursements, may be ordered by the Court from the estate generally, or from funds belonging to any beneficiary, heir or interested person (Rule 74.14(17)).
 

3.  Estates Over $300,000.00

Rule 74.14(4) permits additional fees on estates in excess of $300,000.00. The amount of additional fees chargeable depends on the time spent, complexity, results achieved and value of the estate. Not all estates in excess of $300,000.00 will justify additional fees (see Estate of Harry Malanchuk).   However, in order to justify additional fees, it is recommended that lawyers keep detailed time records. If the lawyer cannot provide the Court with a detailed statement of account, it may not be possible to persuade the Master or Justice that additional fees are deserved.

4.  Acting as Solicitor and Executor

Where the lawyer does the work of an executor, additional fees may be allowed. Further, the lawyer will be entitled to be paid for any additional legal services provided which are not contemplated under the tariff.  However, when acting as both solicitor and executor, Rule 74.14(5) restricts the fees allowable for work done as a lawyer to 40% of the fees allowed under the tariff in Rule 74.14(4).

In administering estates, most lawyers will have performed some duties normally expected of the executor, but this does not mean that the lawyer who does so should expect to be paid over and above the tariff amount. Lawyers should seek compensation under Rule 74.14(5), i.e. 40% of the tariff, and then seek additional payment for executor services if the time spent justifies it. A good example of this is in the case Krawchuk v. Ciastio (1993), 90 Man R (2d) 69 (Man QB). However, the lawyer should get the executor's instructions to perform the additional services or  risk not being paid for them.

5.  Disputed Matters

Fees that are allowed a lawyer in estate matters that are disputed are governed by Rule 74.14(16). It is the presiding Justice that decides "to allow such fees as the Court deems adequate". The difficulty that arises is having additional fees approved where the disputed matter settles prior to a hearing. The lawyer must either have the fees approved by the Court or have the consent of all beneficiaries to the additional fees. These fees should not be taken prior to Court approval or the consent of all beneficiaries, as any arrangement made is reviewable by the Court and may not be accepted. In Buhr Estate v. Buhr (1993), 90 Man R (2d) 118 (Man QB), the Court decided that the fees were not properly payable by the estate and denied the payment of legal fees and their recovery fRom the estate.
 

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C.   Practice Issues

1.  Form 74AA

Queen's Bench Rule 74 requires that Form 74AA be sent to both the personal representatives and residuary beneficiaries within 60 days of Letters Probate or Administration being granted. There can be consequences to the lawyer should he or she fail to do so (see Sigfusson v. Garyluk and Carpenter).
 

2.  Law Society Practice Directions

At Appendix O are copies of all Practice Directions issued by the Discipline Committee of the Law Society of Manitoba respecting estate matters.

At Appendix P are copies of some decisions of the Discipline Committee regarding lawyers and estate practice. In Besko, the member pled guilty to all of the charges, and was found guilty of professional misconduct. In Ross, the lawyer charged fees in excess of that provided for uNder Rule 74.14(4) without receiving the consent of the beneficiaries. He was found guilty of professional misconduct.
 

3.  How Fees Are Reviewed

     (a) Interested Persons Defined

Rule 74. 14(10) defines interested persons to include personal representatives, the estate lawyer or lawyer retained by the personal representative, and any beneficiary whose interest in the estate is affected by the lawyer's fee (presumably, residuary beneficiaries).
 

     (b) Passing of Accounts or Assessment of Costs

Rule 74.14(6) and 74.14 (7) state that the fees allowed under Rule 74.14 are subject to review by the Court on a passing of accounts or an assessment of costs. The forms to pass accounts start at Form 74V in the Queen's Bench Rules.

If all matters regarding the administration of the estate, except fees, are acceptable to the personal representative and the beneficiaries, accounts do not have to be formally passed to have the legal fees reviewed. To review the legal fees charged by the lawyer for the personal representative, an interested person obtains an appointment for an assessment of costs under Rule 58. The lawyer for the personal representative must then, at least 14 days before the hearing date, file with the Court an itemized Bill of Costs and an affidavit stating that:

(i)     he or she has complied with 74.14(4);
(ii)     the fees payable under 74.14(4);
(iii)    the fees requested;
(iv)    whether the fees requested exceed the fees payable under 74.14(4); and,
(v)    the reasons the excess fees should be allowed.

When reviewing the fees payable to the estate, the Court looks at the nature ofthe estate assets compared to the value of the estate, the amount and type of services performed by the lawyer, and any other matters which the Court considers relevant.

The onus, in an assessment of legal costs, is on the lawyer, not the client. Especially where thelawyer is seeking compensation greater than that allowed under 74.14(4), he or she must be able to justify the fees being requested. Having time records will assist, but the Court must be satisfied that the time spent was appropriate in the circumstances. See Hienrichs v. Baker, Zivot & Co. (1995), 98 Man R (2d) 179 (MaN QB), Master Goldberg, affirmed at (1996) 108 Man R (2d) 47 (Man QB).  A retainer agreement may also be helpful to the Court in assessing the legal fees charged.
 

4.  Fees in Excess of Tariff

Fees in excess of the tariff can only be charged where the beneficiaries have consented in writing or with the Court's approval. Practically speaking, the beneficiaries can consent to the excess fees in the form of Release that they sign when the estate is being wound up. Otherwise, the fees charged by the lawyer for the personal representative must be in accordance with Rule 74.14(4). See Rule 74.14(13).
 

5.  Costs in Estate Litigation

Unlike civil litigation cases, where costs are usually awarded to the successful party, Courts were, until recently, allowing costs to be paid from the estate regardless of the success of the party to the litigation: Orville L. Currie, in his article "Legal Fees and Costs in Estate Matters",5 explains that the reason for the difference was policy considerations.  Sometimes, the cause of the estate litigation is the testator, and in those situations the testator's estate should bear the cost. Courts have a responsibility to see that wills are valid, the testator's dependents are supported, and that wills are understood. Courts have, therefore, recognized that a party should not fear the cost consequences when bringing an issue before the Court. However, as indicated above, this position is changing, and the Courts are now looking at the merits of each case to decide whether all costs, including those of an unsuccessful party, are to be paid by the estate. The Manitoba Court of Appeal, in Syrota v Clarke Estate (1993), 83 Man R(2d) 21, moved away from the traditional approach of assessing costs and held that costs should follow the event. The Court did consider two situations where costs should not follow the event. Costs should not be paid by the parties where the circumstances merit investigation or where the testator is the cause of the litigation. In Manitoba (Public Trustee) v Ballen (1992) 76 Man R(2d) 241, the Court of Appeal held that awarding solicitor and client costs should only be done in exceptional circumstances and costs paid out of an estate only if the estate benefited from the legal work.

Courts have allowed payment of all parties' solicitor-client costs from the estate when a principle of law has had to be clarified. Costs have been denied where the proceedings were considered unconscionable compared to the amounts at issue.6  Parties have been ordered to pay costs to the estate when a party has been especially difficult. If parties challenging a Will cannot justify their actions, then they will bear the costs.

All of these statements point out the necessity of the lawyer sitting down with the client and discussing the merits of the claim being made or position taken and the possible cost consequences. If the client is insistent on proceeding, then it is especially important to then make sure that your fees will be covered by the client up front and not rely upon them being paid out of the estate. To do otherwise, is to do so at your peril.
 

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D.  Conclusion

I hope that this paper will be of some assistance to my fellow practitioners dealing with wills and estate issues and, in particular, that of getting paid. A review of the cases at the Appendices attached to this paper show some of the ethical issues that arise in estate matters, and the Court decisions provide some guidamce in that regard.
 

Recommended Reading:

O.L. Currie, "Legal Fees and Costs in Estate Matters", 299 Manitoba Law Journal Volume 25 No. 2 - a very thorough article.

B.A. Schnurr, "Estate Litigation - Who Pays the Costs?" (1991) 11 Estate and Trust Journal 52

J. Jenkins, Compensation for Estate Trustees, Canada Law Book Inc., 1997 - mostly Ontario focused, but still helpful.

Acknowledgments:

I would like to acknowledge the assistance of Garth Niven of the Great Library for all of his help and research, to my secretary, Ruth Hutton, who capably read my writing and typed this paper, and to Brenda Silver, Assistant Director of Professional Education, Law Society of Manitoba, for her patience in dealing with me in the production of this paper.
 

Acknowledgments:

I would like to acknowledge the assistance of Garth Niven of the Great Library for all of his help and research, to my secretary, Ruth Hutton, who capably read my writing and typed this paper, and to Brenda Silver, Assistant Director of Professional Education, Law Society of Manitoba, for her patience in dealing with me in the production of this paper.
 

Endnotes:

1.     J. Jenkins, Compensation for Estate Trustees, 1997, Canada Law Book, at page 1.  (back)

2.    Supra, at page 159.  (back)

3.    Re Turley Estate, [1955] 16 W.W.R. 72 (BCSC)   (back)

4.    Taposchaner Estate v. Ross & Associates, a Manitoba Court of Queen's Bench (Winnipeg Center) decision, at CI-91-01-55228 (back)

5.    O.L. Currie "Legal Fees and Costs in Estate Matters", Manitoba Law Journal Volume 25 No. 2.  (back)

6.    See Derksen v Kunkel, et al, Manitoba Court of Queen's Bench (Winnipeg Center)  Suit No. PR 86-01-00696, J. Krindle. (back)

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Appendix A

ALLOWANCES TO TRUSTEES AND PERSONAL REPRESENTATIVES

Allowances.
90(1) A trustee, guardian, or personal representative is entitled to such fair and reasonable allowance for his care, pains, and trouble, and his time expended in and about the estate, as may from time to time be allowed by a judge of the court or by any master or referee to whom the matter may be referred.

Settlement.

90(2) The amount of the compensation may be settled, although the estate is not before the court in an action.

Allowance by court.
90(3) The judge of a Surrogate Court, in passing the accounts of a trustee or of a personal representative or guardian may from time to time allow to him a fair and reasonable allowance for his care, pains, and trouble, and his time expended in or about the estate.

Solicitor trustee.
90(4) Where a barrister or solicitor is a trustee, guardian, or personal representative, and has rendered necessary professional services to the estate, regard may be had in making the allowance to such circumstance; and the allowance shall be increased by such amount as may be deemed fair and reasonable in respect of the services.

Agreement void.
90(5) Any agreement, instrument or document executed by a testator or any person on his behalf fixing the amount of compensation or allowance that may be paid to a trustee, guardian or personal representative with respect to the administration of the estate of the testator, is not valid unless it is approved by a judge.
 

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Appendix B

COURT OF QUEEN'S BENCH OF MANITOBA





IN THE MATTER OF:
                                                                                             )
THE ESTATE OF SYDNEY RUBIN KATZ, Deceased      )      Ralph D. Neuman
                                                                                             )       (for the Estate)
                                                                                             )
                                                                                             )      Benson D. Labinsky
                                                                                             )      in person
                                                                                             )
                                                                                             )     Michael Thomson
                                                                                             )     (for Yvonne Katz)
                                                                                             )
                                                                                             )      Decision delivered:
                                                                                             )    October 6, 1995
 

MASTER LEE

This matter came before me by way of an application to pass accounts on an interim basis in connection with the subject estate. The late Sydney Rubin Katz died on March 12, 1992, having made a last will and testament on February 3,1981 in which he named Yvonne Katz, Samuel Katz, and Benson David Labinsky as co-executors. The will provided that Yvonne Katz was to receive all personal effects, any of the deceased's interest in any house or houses owned by the deceased at the time of his death and used as a home, either full time or part time, the deceased's art collection and jewelry and, in addition provided that Yvonne Katz was to receive all interest in any registered retirement savings plans and any tax sheltered investments, provided that in the event that the residue of the estate was not sufficient to yield the equivalent of $50.000.00 income per annum, then such investments were to form part of the residue of the estate. The will then provided that bequests of $10,000.00 to each of Yvonne Katz and ths deceased's two sons, Paul and Hart, be paid immediately and that the residua be held on certain trusts.

Unfortunately, by the time Dr. Katz passed away his estato was not sutticlenl to meet all of the provisions of the will, and, although the tax sheltered investments should be held as part of the residue of the estate in accordance with Article 2.02 of Ihe will, the residuary beneficiaries have agreed with the executors that these investments should be transferred to Yvonne Katz to avoid a substantlal tax liability in the estate. It appears based on the accounts presented to the court that there will be insufficient funds to pay the bequests of 510,000.00 to each of Yvonne Katz, Paul Katz and Hart Katz, as provided by
clause 2.03(a) of the will and it is questionable whether there will be any residue to administer once the issues presented to the court and dealt with herein are determined and a tax clearance certificate has been obtained.

 The only issue that has been presented to the court for consideration in connection with this passing of accounts is the entitlement of Bonson Labinsky to charge and receive professional fees in accordance with tho accounts rendered by Doane Raymond, the accounting firm in which he is a partner. Yvonne Katz challanges Mr. Labinsky's entitlement to these amounts.

Article 5.05 of the will provides as follows:
     " Any Trustee being a chartered accountant or other professional engaged in any  profession or business may make and be paid for all. Usual professional and other charges for work done by him or his     firm or any partner in relation to the probate of this will or any codicil or trusts thereof or either in the same manner and in all respects as if he or she were not a Trustee."

Mr. Labinshy takes the position that pursuant to this clause he is entitled to charge at his regular accounting rate or all time spent in the course of the administration of the estate and that there is no distinction between time spent as accountant and time spent as trustee. Yvonne Katz maintains that Mr. Labinsky should not be entitled to charge for his executors work on the same basis that he might charge for accountant's work. She maintains that Mr. Labinsky should havo differentiated between the types of services performed and that in any event the fees being requested are unreasonable given the
magnitude of estate assets and the nature of same. She also objects to the charging of interest which Doane Raymond has been charging on overdue accounts at the rate of eighteen percent per annum.

Advice and directions with respect to the interpretation of clause 5.05 have not been sought and neither the estate solicitor or oither of the co-exocutors appearing before me referred me to any authority In support of their respective positions.

I have found only one authority which is of some assistance in considering this issue. In Foster v Budgen (1984) 17 E.T.R. 307 (B.C.C.A.) the deceased appointed a chartered accountant as a co-executor of his will along with the deceased's wife and included in the will the following provision:
    " One of the reasons in appointing Sanford Grey Budgen as aforesaid as a co-executor is upon ths understanding that he will charge no fee for acting in that capacity; however, said trustee may charge at the applicable rates charged by Thorne Riddell for the time spent by himself and any assistant in carrying out his responsibilities in relation to this my estate."

The deceased's widow, as co-executor, sought advice and directions arguing that th, accountant was not entitled to make any charge for his services as co-executor but only tor professional chattered accountancy work tor the estate.

The Court of Appeal determined that the words "in carrying out his responsibilities in relation to this my estate" covered all responsibilities, including those of executor and trustee and that the testator made no distinction in the clause between the accountant's duties as executor and trustee and his accounting functions.

 In the subject will the deceased provides that a trustee who is a chartered accountant may make all usual professional charges for work done by him in relation to the probate of the will. The testator does not qualify work to mean professional accountancy work. Mr. Labinsky gave evidence that it is common practice in his accounting firm that where members of his firm, act in a capacity of executor all time spent in connection with these estates is charged at the normal accounting billing rates.

Based on my consideration of the decision in Foster v Budgen and my consideration of Article 5.05, 1 am persuaded that the intent of the testator was to provide that Mr. Labinsky should be compensated at his professional rate for all his services/time spent in connection with the administration of the estate, professional or otherwise. However in my view, this is not the end of the examination as to what Mr. Labinksy may reasonably charge. Certainly if the estate was a large and complex one, the level of fees sought by Mr Labinsky could quite easily be justified and Mr. Labinsky could rely upon the provision of Article 5.05 to support his claim for the full amount requested.  However, Mr. Labinsky is first and foremost a trustee under the provisions of the will and is bound by the provisions of the Trustee Act, R.S.M. 1987, C. T160.   Sec. 90(1) of the Act provides that:
    " A trustee, guardian, or personal representative is entitled to such fair and reasonable allowance for his care, pains, and trouble, and his time expended in and about the estate, as may from time to time be allowed by a judge of the court or by any master or referee to whom the matter may be referred."

Sec. 90(5) provides that:
    "Any agreement, instrument or document executed by a testator or any person on his behalf fixing the amount of compensation or allowance that may be paid to a trustee, guardian, or personal representative with respect to the administration of the estate of ths testator, is not valid unless it is approved by a judge."

Given that a formal agreement executed by a testator as to a trustee's compensation is not binding on the estate, I am persuaded that a provision such as Article 5.05 in the subject will is also not binding and is subject to review by the court. The court must apply the same considerations as it applies in considering any request for compensation namely the care, pains and trouble as well as the time expended by the trustee with consideration of such factors as the size and complexity of the estate and the expertise brought to bear in administering the estate.

The only real substantial issue with respect to the estate is the existence of the tax sheltered investments and their implication to the estate if the will of the deceased is followed. Ths probatable value of the estate was $257,068.00 of which $190,000.00 represented the value of the condominium to be transferred to Yvonne Katz. This leaves assets in the amount of approximately $67,000.00 and, since the tax sheltered investments represent approximately $17,000.00 of this value and are not liquid assets, the real value of the estate is substantially smaller.

I am persuaded that a "professional" executor has a duty to ensure that the professional time charges are reasonable in relation to the size of the estate.  I am not persuaded that professional fees of almost $20,000.00 in an estate which has liquid assets, excluding the personal residence, of only approximately $50,000.00 can be said to be reasonable.  Based on my review of Mr. Labinsky's records it appears that an amount of approximately $3,000.00 to $4,000.00 represents time spent for executors services and the balance was spent in connection with accounting services. However, given the state of the estate assets, I am persuaded that Mr. Labinsky should have taken steps to reduce the costs of accounting.  He could have done this by recommending that more junior accountants perform certain work in connection with the estate or that certain work should be eliminated to reduce the costs of accounting services.  There is no evidence that he suggested either course of action.  Under all of ths circumstances, I am persuaded that the court must consider what a reasonable level of compensation for Mr. Labinsky should be, given the nature of the estate and the services performed. I am persuaded that an appropriate amount of compensation is $14,500.00 inclusive of disbursements and G.S.T.  According to the accounts presented, Mr. Labinsky (Doane Raymond) has received $9,255.50, which leaves an outstanding balance of $5,244.50 which is to be paid forthwith.  Interest on this money is to be paid at the judgment rate from the date of this decision until paid.

Counsel have advised that all other matters relating to the estate are to be dealt with between the beneficiaries and the co-executors and accordingly I leave it to counsel to prepare the appropriate order on passing accounts.

F.A. Lee
Master
 

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Appendix C

COURT OF QUEEN'S BENCH OF MANITOBA






IN THE MATTER OF THE ESTATE OF:     JOHN PAUL NIEMCZYK, Deceased

BETWEEN:
                                                                       )
KNUD ERIC NIELSEN,                                )
                                                 applicant         )     Duncan E. Geisler
                                                                       )     (for the applicant)
- and-                                                             )
                                                                       )
EILEEN MARIE DOMKO,                           )
and PAUL JOSEPH NIEMCZYK,                )
                                                 respondents.  )     David J. Kroft
                                                                       )     (for the respondent, Domko)
                                                                       )
                                                                       )     Jeffrey F. Harris
                                                                       )     (for the respondent, Niemczyk)
                                                                       )
                                                                       )     Report delivered:
                                                                       )     April 30, 1993
                                                                       )
                                                                       )

MASTER LEE

MASTER'S REPORT

 This matter proceeded before me on January 12, 1993 by way of a passing of executor's accounts in connection with the subject estate. At the conclusion f the hearing the parties were directed to meet to determine whether certain accounting issues could be settled amongst them. However. nothing was settled and on April 16, 1993 counsel for the respondents attended before me to advise that matters had not ben concluded and requesting further diroctions trom the court. At that time I advised that I would review the file and the record of proceedings before me and render a report either issuing further directions or making an order. This report is being issued accordingly.

 John Paul Niemczyk died on December 24, 1987, leaving a will appointing Knud Eric Nielsen as executor and directing that his estate be divided equally between the children, Eileen and Paul. The executor was provided with the discretion to sell, call in and convert into money any part of the estate not consisting of money at such time or times, in such manner and upon such terms as the executor in his uncontrolled discretion might decide upon and to pay any just debts, funeral and testamentary expenses.  Mr. Niemczyk also directed Mr. Nielsen to pay to himself the sum of $500.00 for his care, pains and trouble in the administration of the estate.

An Application for Probate was filed in the Court of Queen's Bench on January 28, 1988 and disclosed that the assets of the deceased consisted of the following:

Immoveable property
  Farm property                                                     $103,575.00

 Moveable property
  Machinery and equipment                                    $113,105.00
  Cattle                                                                  $265,000.00
  CIBC Ashern Dica Account No. 02 648320       $8,657.00
  Investment No. 50 04934                              $71,108.00

 TOTAL VALUE                                            $562 645.00

 The deceased had operated an active farming business which included raising cattle and the administration of the estate included attending to ensure that the cattle operation continued to function following the death of Mr. Niemczyk. This entailed the payment of wages to employees, including tho deceased's son, Paul Niemczyk, one of the respondents, as well as paying outstanding accounts for cattle feed, ranch supplies, etc.

By June, 1988, the respondents, being the two children of the deceased and the residuary beneficiaries pursuant to tho terms of the will, had each engaged counsel and had reached an agreement between themselves, with the assistance of their counsel as to how they wished to share the estate.

Mr. Geisler, as solicitor for the executor, received letters from those solicitors dated June 9, 1988.  The letter from Filmore & Riley as solicitors for Eileen Domko stated in part as follows:
        " It is our understanding that this estate can be wound up immediately.  Ms. Domko is entitled to one-half share of the residue of the estate of her late father, and her brother, Paul Niemczyk, is entitled to one-half of the residue.  By agreement of the beneficiaries, Paul Niemczyk has obtained financing to purchase Ms. Domko's one-half interest in the family ranch at Steep Rock, Manitoba.  It is our understanding that a real estate appraisal has been done of hte ranc, and htat a value has been placed on it of $562,545.00.  Our client advises us that she is to receive $280,000.00 as her portion of the estate residue.
      As we advised you by phone on June 8th, our client requires her portion of the estate in order to finalize certain transactions of her own.  Since financing has already been arranged by Paul Niemczyk, it appears that the only remaining action required on your part is the preparation of a transfer of land and the distribution of proceeds.  We ask that you attend to these matters without further delay."

The letter from Keyser, Baragar, Harris & Sadana, as solicitors for Paul Niemczyk, read in part as follows:
    ".   .  .  According to our client and to the information supplied to us by you during various telephone conversations the estate had a value of approximately $560,000.00.  We are advised by our client that he and his sister have reached an agreement with respect to a division of the assets of the estate.  Mr. Niemczyk is to take title to the ranch and the assets thereon and Ms. Domko will receive the sum of $280,000.00.  To accomplish that payment, we understand that she will take possession of a bank account in the name of the estate having a total value of approximately $170,000.00.  Mr Niemczyk has already arranged for a loan against the ranch in the amount of $110,000.00 thus accounting for $280,000.00.  The writer has spoke (sic) to Ron Ade of Fillmore and Riley who is acting for Ms. Domko.  We would suggest that you prepare a Transfer of Land from the estate to Mr. Niemczyk which transfer upon being registered will vest title to the ranch in the name of Mr. Niemczyk only.  We are not aware of any encumbrances against the property and accordingly would expect that title would issue in Mr. Niemczyk's name free and clear of all encumbrances except any registered by our client and any which would not affect he marketability of the property.  We would accept that transfer together with a Bill of Sale with respect to the chattels undertaking not to make any use of the same until we have forwarded to your office for disbursement to Ms. Domko the sum of approximately $110,000.00 to ensure that her full payment of $280,000.00 has been received.  We would also accept the trust condition that Mr. Niemczyk sign a release in favour of the estate once this transaction has been completed.  We understand that Mr. Ade would accept a similar trust condition when you are in a position to forward Ms. Domko's monies."

As response to these letters Mr Geisler wrote to Keyser, Harris, & Sadana on June 25, 1988 enclosing transmission and transfer documents along with four certificates of title covering the land in question, a bill of sale and reporting letters explaining caveats filed against the property.

Apparently there was a delay in the registration of the transfer documents and MR. Geisler did not receive the $110,000.00 representing the mortgage funds until November 21, 1988.  In the meantime, Ms. Domko had become concerned about the delay in receiving these funds and her solicitors wrote to Mr. Geisler on October 24, 1988, in part as follows:
        "We assume that you have imposed a trust condition that interest accrue on the unpaid balance of the purchase price form the date that the transfer documents were forwarded to the date when the proceeds are received.  That interest shoudl accrue to the benefit of the estate and of course to the partial benefit of our client."

The solicitors then wrote to the executor, Mr. Nielsen, on November 15, 1988 as follows:
        "We are writing to you in your capacity as the Executor of the above estate.  The estate has been valued at $560,000.00, the most valuable asset being the ranch located in Steeprock, Manitoba.
        The two beneficiaries, Paul Niemczyk and Eileen Domko were each to receive ½ of the value of the estate.  Paul Niemczyk was to purchase the interest of Eileen Domko in the ranch, and Eileen was to obtain a cash inheritance.  To date, Eileen Domko has received approximately $170,000.00.  She has not received the balance of her inheritance less her portion of holdback for estate tax, Executor's fees, and legal fees . . . .
        On your behalf as Executor of the estate, Mr. Geisler sent he vendor's documentation on the real estate transaction to Mr. Harris, Paul Niemczyk's lawyer.  In his lettr of June 25, 1988, those documents were sent in trust that the mortgage funds in the amount of $110,000.000, be sent to Mr. Geisler's office to be distributed to Eileen Domko.
        When a vendor of property releases possession and use of real property to the purchaser, the vendor is normally entitled to receive interest on that portion of the purchase price not paid at closing and the vendor's lawyer normally imposes a trust condition to that effect requiring the purchaser to pay interest on the unpaid balance of the proceeds of sale at the interest rate specified in the purchaser's mortgage until those funds are received by the vendor.  Clearly, there must be some compensation to the estate for handing over possession without receiving a that time total payment of the purchase price.
        Mr. Geisler should have advised you of this and should have imposed this trust condition on behalf of the estate.  The money that should have accrued in the form of interest on the unpaid balance of the purchase price of the ranch would have benefited Eileen Domko, as a beneficiary of the estate.
        Therefore, this letter constitutes notice to you that Mrs. Domko is seeking interest at the rate of 11.5% from June 25, 1988 until the mortgage proceeds are received by Mr. Geisler in addition to the sale proceeds when the final disbursement of Eileen Domko's inheritance is made."

Upon receiving the balance of mortgage proceeds form Paul Niemczyk's solicitor Mr. Geisler paid a further $50,000.00 to Eileen Domko's solicitor on November 28, 1988.  Mr Geisler also consulted with J.F. Reeh Taylor, Q.C. who wrote to the solicitors for both beneficiaries on December 19, 1988 in connection with the issues raised by counsel for Eileen Domko.  Mr. Taylor concurred that Eileen Domko should be entitled to interest but that the liability for such interest was that of Paul Niemczyk and not the executor of the estate.  He wrote in part as follows:
        "Ms. Domko has, therefore, now received some $227,600.00 of her money and, if we use the approximate figures of a gross estate of $560,000.00 and total debts of $50,000.00, that would leave her a furhter $27,400.00 yet to come.  She would, in our view, be entitled to interest on $77,400.00 from June 25th to November 28th and to interest on $27,400.00 from November 28th to the date of actual payment.
        Those last figures must, of course, be read subject to any final adjustments that may be necessary for additional income taxes, and for any additional fees that may be properly charged by the estate's accountant and the estate's solicitor in connection with the tax audit or any other matters properly chargeable to the estate."

He went to state that:
        ". . . It is our view that the whole question of the payment or non-payment of interest is a matter entirely between the two beneficiaries and their respective counsel, and it is upon that basis that we urge you both to effect a speedy settlement.  Mr. Geisler will not be an a position to give you a final accounting, nor to disburse the remaining funds from the estae, until he has a final tax clearance, but it should be possible to at least agree upon some basic principles at this stage of the game.  Obviously, we prefer that you sort these things out between the two of you but, if either I or Mr. Geisler can be of any help to you in reaching that settlement, you should feel free to call upon us to that end.
        One further matter should be mentioned: we understand Ms. Southall to be taking issue with the quantum of Mr. Geisler's fee.  You are, of course, at liberty to arrange for the taxation of his bill but we have to say that in our view his account is completely reasonable in that it represents a lesser fee than he would normally be entitled to charge.  We would, therefore, be looking for the costs of any such taxation on a solicitor and client basis.
        Mr. Paul Niemczyk should also understand that, if additional taxes or other liabilities of the estate should surface, only one half of that additional debt will be payable out of the monies currently being held in trust for his sister, and he will have an obligation to contribute the other 50%."

Unfortunately, the two beneficiaries did not resolve matters as between themselves.  In addition, the estate administration could not be concluded for some time as Revenue Canada was conducting an audit of the operations of the deceased and a significant tax issue arose relating to the sale of cattle following the death of Mr. Niemczyk.

The executor engaged Donald Shumka, who acted for many years as the accountant for the deceased, to attend to tax matters.  After the completion of the Revenue Canada audit and the completion of estate tax matters there was a reassessment by Revenue Canada which was appealed by Mr. Shumka.  Ms. Domko was not satisfied with the efforts of Mr. Shumka and, presumably at her insistence, the estate consented to Deloitte & Touche acting on the tax appeal.  This appeal was successful and a partial election has allowed so that a certain part of income relating to the cattle sales was taxed in the hands of Eileen Domko rather than the estate, which effected a tax savings.  This issue was resolved in approximately May, 1991.

Due to a continuing impasse to reach agreement on outstanding issues between the beneficiaries and with the executor the matter proceeded to a passing of accounts. The respondent Domko through her solidtor raises a number of issues and objections to the accounts as presented. I intend to address those issues and objections to the extent possible based on the record and the materials before me with the expectation that the solicitors can work out a distribution.

1.  Issue as to Estate Value

 The first matter raised by counsel for Eiloen Domko was that although the estate inventory for probate purposes is $562,545.00, they quostion why a statement of disbursements initially prepared by Duncan Geisler showed an amount ot $280,000.00 as Eileen Domko's one-half share.

 Mr. Geisler indicated that it was his recollection that there had been an
agreement as to that figure although Mr. Harris, on behalf of Paul Niemczyk, submitted that this was a rough estimate and that the discrepancy was later adjusted.

 This issue demonstrates the kind of problems facing the executor and solicitor for the estate. As noted in the background section of this report, Mr. Geisler had received letters from counsel for the beneficiaries confirming an "agreement" between the parties. Counsel for Eileen Domko specifically set out the estate value of $562,545.00 and indicated to Mr. Geislor that Eileen Domko was to receive $280,000.00, as her on-half share.  Mr. Harris also indicated in his letter of June 9, 1988 that it was his client's understanding that Eileen Domko was to receive $280,000.00.

 Those letters do not even mention that the "agreement" is subject to a deduction for a share of estate expenses although the November 15, 1988 letter from Fillmore & Riley to Mr. Nielsen clearly acknowledges that Eileen Domko was to receive the sum of   $280,00.00 "less her portion of holdback for estate tax, executor's fees, and legal fees".

 When the gross estate had a value of approximately $562,000.00 which was subject to substantial reduction on account of estate expenses, solicitor's and executors fees and income taxes, I find it quite remarkable that the solicitors for the two beneficiaries could insist that their clients had reached an "agreement" as outlined in their June 9, l988 letters and to be taking the executor and solicitor for the estate to task for the problems which ensued because of this "agreement".  Given the confusion, I am persuaded that the only manner in which the estate can be properly accounted for by the executor is on the basis that the beneficiaries are to ultimately have an equal distribution of the value of the net estate after all proper receipts are accounted for and all proper estate disbursements are paid, with part of Paul Niemczyk's distribution being allocated by the estate value for the real property and machinery and equipment which was transferred to him.  The land was valued at $103,575.00 for purposes of the application for probate and for purposes of calculating the $562,545.00 value and that is to be the value of the real property to be used in determining the interim distributions. Although the machinery and equipment was valued at $115,105.00 and, I understand, was largely transferred to Paul Niemczyk, I note that certain items of machinery were sold by the executor and only the value of the machinery transferred to Paul Niemczyk should be included for purposes of determining the distribution made to Paul Niemczyk to date.

2. Mortgage Interest

 Paul Niemczyk had arranged a mortgage on the real property in the amount of $110,000.00 to assist in settling the estate and, based on the instructions that Mr. Geisler received from counsel for both beneficiaries, conveyancing documents, were provided to Paul Niemczyk's solicitor on the condition that he receive the said amount of $110,000.00. However, the real property itself had a value of only $103,576.00 as indicated in sec. 1 and, given what I stated earlier, Eileen Domko was clearly not entitled to the full sum of $110,000.00.  This money stood to the credit of the estate and appears to be the sum which the beneficiaries agreed would have to be paid into the estate by Paul Niemczyk to effect the  equalization which they proposed. I note that the application to pass accounts and specifically the schedule "A" to the affidavit verifying accounts shows a value of the real property at $110,000.00 which is not correct. The $103,575.00 inventory valuation amount should be used.

 The issue raised however is with respect to the matter of interest which Eileen Domko maintains should have been paid by Paul Niemczyk from June 25, 1988 to November 28, 1988.  The solicitor for Eileen Domko maintains that interest should have been paid on the sum of $60,109.00 at the rate of 11.59% per annum which I understand to be the rate being paid by Paul Niemczyk under the terms of the mortgage he arranged with respect to the real property transfer to him.  However, this is not a simple matter to resolve, again largely because of tho problems related to the vagueness of the "agreement" reached by the beneficiaries and the failure by the solicitors for beneficiaries to properly consider the ramifications of this "agreement" and the impact their instructions had on the administration of the estate.  However, as of June, 1988, Paul Niemczyk had the benefit of the real property, machinery and equipment and remaining cattle and it was acknowledged that this translated to property with a value of $110,000.00 in excess of what share Paul Memczyk would be otherwise entitled to.  Accordingly, I am persuaded that Paul Niemczyk be responsible for paying interest on $110,000.00 to the estate from June 25, 1988 to November 25, 1988. Ultimately, one-half of this amount of interest would be receivable by or credited back to Paul Niemcyk when accounting for distribution puposes, and Eileen Domko will receive the other half of this amount of interest.  As an alternative course of action, the interest calculation can be made and one-half of the amount can be deducted from any distribution otherwise owing to Paul Niemczyk, and paid to Eileen Domko, or if there is no money owing to Paul Niemczyk, he will be required to pay the amount to the estate for credit to Eileen Domko.

 Counsel for Eileen Domko has attempted to place the responsibility for this interest on the executor. As stated earlier, the issue is a confusing one particularly because
of the action of the beneficiaries and their solicitors in instructing Mr. Geisler. Accordingly, I would not place personal responsibility on the executor or Mr. Geisler in connection with this matter.  The matter of interest is clearly Paul Niemczyk's responsibility although the extent and the manner of liability has not been easily determinable and thus has been a primary factor in this matter dragging on to the extent that it has.  I note, in fact, that the position of Eileen Domko with respect to this interest issue has changed over time.  In the November 15, 1988 letter to Mr. Nielsen her solicitors advised that she was seeking interest at the rate of 11.5% trom June 25, 1988 until mortgage proceeds are received, which implied that she was claiming the full extent of interest. Earlier, in a September 9, 1988 letter to Duncan Geisler, Filmore and Riley stated that Ms. Domko was expecting to receive interest on the unpaid balance of her inheritance until same is paid.  At the hearing Eileen Domko's position was that she should receive interest on $60,109.00 for that period of time. This serves to demonstrate the kind of difficulty that the executor and his solicitor were presented with in dealing with the beneficiaries and attempting to settle the estate matters.

3. Estate Expenses

 Eileen Domko takes issue with some of the expenses shown on schedule C and maintains that some of the amounts paid appear to benefit Paul Niemczyk who took over the farm operation.  However, all of the expenses referred to were paid prior to the "agreement" in June, 1988 and many of the expenses related to expenses incurred prior to the death of Mr. Niemczyk, Sr.  The other expenses paid for the period between the date of death and the date of the "agreement" appear to be expenses necessary to maintain the ranching operation and were properly treated as expenses of the estate.  Even if some of these expenses might potentially have benefited Paul Niemczyk, I note that Paul Niemczyk has not made any claim for any kind of an adjustment for real property taxes, etc. which he must have paid for the full 1988 calendar year.  Due to the beneficiaries' lack of a formal agreement covering these items I am persuaded that the expenses paid out of the estate are properly to bo considered expenses which which will be shared by the beneficiaries.

4. Interest

 The estate accounts show that as at December 16, 1992 the estate has $10,852.13 being held by the solicitor for the executor. Mr. Geisler confirmed that the sum of $6,527.53  in his trust account has not earned any interest since May 17, 1991 and the moneys in account No. 5006538 have not earned any interest since June, 1990 when the account balance fell below $5,000.00. Mr. Geisler clearly should have ensured that the moneys were earning interest and I am ordering that an amount of $1,000.00 representing loss of interest to the estate on those moneys be paid by Mr. Geisler by way of an offset against additional fees which he is seeking from the estate which will be dealt with in a subsequent section of this report.

5. Tax Assessment

 Eileen Domko criticizes the executor and the solicitor for the executor due to the matter of the tax assessment.

 Without going into the issue in any great detail I am satisfied that the executor acted reasonably in engaging Mr. Shumka to attend to the tax matters.  I am not persuaded in any event that Mr. Shumka acted improperly or negligently in connection with the tax matters. It does appear that Deloitte & Touche, which handled the tax appeal, was able to present a creative submission to Revenue Canada which was accepted by Revenue Canada and effected a tax saving to the beneficiaries.

 I am satisfied that the tax issues which the estate was presented with were of some complexity and certainly are a major factcr for the estate administration taking the amount of time which it has taken.  I am not prepared to accept the proposition submitted on behalf of Eileen Domko that the executor for the estate and solicitor should be somehow penalized because of this issue.

 Eileen Domko also submits that the solicitor and/or executor should be penalized because her counsel had instructed them to pay taxes pending the disposition of the appeal and that the failure by the solicitor to do so somehow prejudiced her position or resulted in additional costs to her.  Insufficient evidence was presented to me to support the contention and I am not prepared to make any finding against the solicitor or executor in connection with this complaint.

6. Executor's Compensation

 The solicitor for the estate advanced to the executor the sum of $3,000.00 in June, 1990.  The executor submits that this is a fair and reasonable amount of compensation. He advised that he was required to make several trips to Ashern and to Winnipeg and was involved with the appraisal of the cattle, the ranch, machinery and equipment.  The executor makes no additional claim for disbursements and although he has not presented any receipts I am persuaded that the executor must have incurred personal expenses to attend to his duties and that an overall allowance of $3,000.00 to compensate the executor for his time, trouble and expense in carrying out his duties is reasonable.

 Although the will directed Mr. Nielsen to receive $500.00, this direction is not binding on the executor, or on the courts, as sec. 90(5) of the Trustee Act, R.S.M. 1987 C.T160 provides that:
         "90(5) Any agreement, instrument or document executed by a testator or any person on his behalf fixing the amount of compensation or allowance that may be paid to a trustee, guardian or personal representative with respect to the administration of the estate of the testator, is not valid unless it is approved by a judge."

This estate had a value of approximately $562,000.00 consisting of ranch property, machinery and equipment, cattle, and investments.  The administration involved ensuring that the ranching operation continued following the death of John Niemczyk and involved arranging for proper inventory valuations.  The executor arranged for the sale of certain cattle to raise funds for the estate and had responsibility for the administration although there is no doubt that most of the details of administration were handed by Mr. Geisler as the solicitor for the estate.

Eileen Domko complains that this was not an estate of any complexity and the fee is  unreasonable.  Paul Niemczyk takes no issue with the amount of compensation sought by the executor.  Having heard the parties and reviewed the file, I am more than satisfied that the fee requested by Mr. Nielsen is a reasonable one.  The estate is one of a certain degree of complexity, made significantly more complex by the conduct of the beneficiaries.  On the one hand, Eileen Domko seeks to hold Mr. Nielsen responsible for a number of matters involving the estate which have arisen precisely because of the complexity and the size of the estate, and on the other hand, she suggests that Mr. Nielsen should not be receiving material compensation for the time, trouble, and the risk which he has assumed by serving as executor of the estate.  A professional executor would have expected approval of compensation in the vicinity of $28,000.00 - $30,000.00 for an estate of this size and I have no hesitation in allowing to Mr. Nielsen the $3,000.00 which he has requested and has been received by him.

7. Solicitor's Account

Initially Mr. Geisler rendered an account to the estate in the amount of $4,000.00 plus disbursements and those fees were paid by a transfer from the estate account. This account was determined by utilizing the estate tariff which provides for a fee of $4,100.00 for an estate having a value of $300,000.00.  This acccunt was rendered at the time that the tranfers were  provided by Mr. Gelder to the solicitor for Paul Niemczyk and it was intended to cover all matters necessary to finalize the estate.  Clearly, this was on the basis that matters would proceed to conclusion without any problems.  Due to the subsequent events which entailed substantial correspondence and discussion by Mr.Geisler with counsel for the two beneficiaries as well as substantial communication with the accountants relating to the tax appeal, Mr. Geisler rendered additional accounts to the estate. An additional account was rendered on June 6, 1990 in the amount of $1,000.00 for fees and a further account was rendered on March 30, 1992 in the amount of $1,000.00 for fees.  In addition, Mr. Geisler has prepared an account dated January 11, 1993 in the amount of $664.20 for fees relating to the passing of accounts.

Given the amount of work which Mr. Geisler was required to do in connection with the estate administration and given that Mr. Geisler charged no additional fees for closing the sale transaction which entailed preparation of transmission and transfer documentation involving four certificates of title as well as bills of sale, I am satisfied that the fees charged by Mr. Geisler are not unreasonable, particularly when considering the combined fee request of the executor and the solicitor.  I am prepared to allow the fee requested although, as indicated earlier in the report, the sum of $1,000.00 is to be reduced from the fees otherwise allowed in order to compensate for interest lost to the estate due to the failure by Mr. Geisler to invest the remaining estate. proceeds.  This allowance is also to cover all remaining services required of Mr. Geisler which will include ensuring that proper final accounts are prepared for distribution purposes.

8. Costs

I am satisfied that each of the beneficiaries should bear their own costs in connection with the passing of accounts. The estate solicitor's costs have been dealt with in sec.7.

As indicated at the outset of this report it is my expectation that on the basis of the findings and the orders made pursuant to this report the solicitor for the executor should be in a position to prepare a final accounting for distribution purposes and complete this matter. If, however, there are any remaining concerns and the solicitors for the beneficiaries cannot agree with the solicitor for the estate as to the ultimate distribution then the parties are to arrange for a further appearance before me.

F.A. LEE
Master
 

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Appendix D
 
 

Manitoba Justice
FEES PAYABLE FOR SERVICES OF THE OFFICE OF THE PUBLIC TRUSTEE

The Public Trustee administers deceased estates, clients' financial affairs and trusts pursuant to either a Court Order or legislation which gives the Public Trustee power to act where there is no one else willing or able to do so.

CALCULATION OF FEES

The fees that are charged for these administrations are calculated as follows:

     Capital Receipts......................................................2.5%
     Capital Disbursements.............................................2.5%
     Income Receipts......................................................3.0%
     Income Disbursements.............................................3.0%
     Annual Asset Management Fees.....................3/5 of 1.0%

Fees are not charged on the receipt of social allowance and income tax refunds, except in Estate Administration.  Capital receipt fees are not charged to trust accounts.

Final capital disbursement fees are not charged on closing a client account.

MINIMUM FEES

Minimum fees will be charged as follows:

 Deceased Estates..............................................$750.00
 Infant Trusts
  Year 1...............................................................$75.00
  Annually............................................................$15.00
 Client Administration
  Year 1.............................................................$100.00
  Annually.............................................................$15.00
 Clients Receiving Social Allowance
  Annually.............................................................$15.00
 
 

ADDITIONAL FEES

Additional fees will be charged where the administration requires the involvement of other sections of the office as follows:

(A) LEGAL FEES:
Where legal services are required, fees will be charged as appropriate.

(B) INCOME TAX RETURNS:

Taxes and Clients
  $30 Minimum plus $7.50 for each 15 minutes in excess of 30 minutes spent in completing the return.

Deceased Estates
  $75.00 minimum plus $15.00 for each 15 minutes in excess of 30 minutes spent in completing the return.

(C) INSPECTION FEES:

Inspection services will be charged at $20/hour.  Travel time will be charged at the same rate.

(D) HEIR LOCATION AND PROOF FEE:

A fee of $75/hour is charged for all time spent searching fo heirs and assembling and reviewing proof of heirship.

TRANSFER OF ACCOUNTS

When a client dies and the account is transferred from Client Administration to Estates Administration, a disbursement fee will not be charged, but a receipt fee will be charged to the Estate Administration.

Similarly, if an Infant Trust is transferred to Client Administration, a disbursement fee will not be charged, but a receipt fee will be charged to Client Administration.

PASSING OF ACCOUNTS

The accounts of the office will be passed automatically in certain circumstances as follows:

      (a) where an heir(s) to an estate refuses to sign a Release(s) to the Public Trustee.
      (b) where an heir to an estate cannot give a Release because the heir is under 18 years of age and does not have a guardian, is mentally incompetent and does not have a Committee, or is
            mentally disordered, and so found.

All fees are subject to 7% Goods and Services Tax.

All fees charged to an account being administered by the Public Trustee may be reviewed by the Court upon the application of an interested party.
 

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Appendix E

SUMMARY OF STANDARD FEES FOR OUTRIGHT ESTATES AND CONTINUING TRUSTS ADMINISTERED IN MANITOBA
EFFECTIVE JANUARY 1ST, 1993






ESTATE ADMINISTRATION FEE:

 2.5% on principal residence transferred in specie.

        ALL OTHER ESTATE ASSETS:

         4.75%   on the first      $250,000
         4.00%   on the next      $750,000
         3.00%   in excess of     $1 million

         Minimum Fee:  $5,000

One-time fee payable in interim amounts during the period of administration, based on the gross probatable value of the Estate.

        REVENUE FEE:

         6% on collection of income
 

NOT INCLUDED IN THE ABOVE FEES

         - Misc. expenses such as long distance telephone calls, courier charges, travel expenses, registered mail and insurance.

         - Professional valuations of furniture, jewellery, real estate, automobiles, personal effects, etc.

         - Fees payable to other professionals as required: ie: lawyer, accountant, notary, etc.
 

CO-TRUSTEE'S COMPENSATION

        The compensation of Co-Executors or Co-Trustees, if any, will be in addition to the fees outlined above.

          NOTE: These fees are applicable to a normal estate and represent a fair measure of compensation.  Should it be necessary to render services which are beyond the scope of those usually provided,
        additional fees would be requested.
 

CONTINUING TRUSTS

        ANNUAL CARE AND MANAGEMENT FEE:

        3/5 of 1% based on the capital value of the trust.

        Payable from date of inception of the trust, based on the average market value of the assets under administration.
 

        REVENUE FEE:

         6% on collection of income.

         Our ongoing Annual Care and Management/Revenue fee rate for Continuing Trusts is guaranteed for a period of 5 years from the date of death.
 

        TAX SERVICES:

         $125 per hour for T-1 and T-3 tax preparation.

         $400 minimum fee for T-1 to date of death return.

         $200 minimum fee for T-3 return.

         Additional fees will be charged for special tax elections.

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Appendix F

ESTATE OF RENE RAULIN, Deceased

Schedule "A"
STATEMENT OF PROPOSED COMPENSATION






Asset Management Fee

– 3/5 of 1% November 1, 1990 to October 31, 1991       $7,203.12              $  43.22
– 3/5 of 1% November 1, 1991 to October 31, 1992       $44,770.18              268.62
– 3/5 of 1% November 1, 1992 to January 31, 1993        $45,627.46          273.77

                                                                                                                         585.61          $  585.61
Capital Receipts               – 2 ½% of $244,660.28                                                                  6,116.51
Capital Disbursements      – 2 ½% of $232,415.00                                                                  5,810.38
Income Receipts              – 3% of $65,717.35                                                                        1,971.52
Income Disbursements     – 3% of $65,588.95                                                                   1,967.67

Total proposed compensation fee                                                                                        $16,451.69

Less annual fees taken to date                                                                                        (11,324.85)

Balance of proposed compensation                                                                                    5,126.84

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Appendix G

Suit No. PR-93-01-29693
(Winnipeg Centre)

COURT OF QUEEN'S BENCH OF MANITOBA

IN THE ESTATE OF;

HARRY MALANCHAK, Deceased                                       )
                                                                                                )
                                                                                                )    Leo Cholakis
                                                                                                )    (for Gerry Pendulak, the executor)
                                                                                                )
                                                                                                )   George Van Den Bosch
                                                                                                )   (for Linda Scott, Robert Henderson, Gail Henderson, and Tanis Petreny)
                                                                                                )
                                                                                                )     Jany Keenan
                                                                                                )    (for the Public Trustee, as Litigation Guardian for the infant beneficiaries)
                                                                                                )
                                                                                                )     Edward Pendulak, Stella Pendulak, and Sharon Stevenson, appeared In Person
                                                                                                )
                                                                                                )     Decision delivered:
                                                                                                )     October 29, 1993
 

SENIOR MASTER GOLDBERG

Harry Malanchak died on April 24, 1993.  On May 20, 1993 probate was granted to his nephew Gerry Pendulak.

The Will

By the will dated August 27, 1990 one-half (1/2) of the residue was bequeathed to:
    Stella Pendulak
    Edward Pendulak
    Gerry Pendulak
    Sharon Stevenson
    Linda Scott
    Gail Henderson.

The other one-half (1/2) of the residue was bequeathed to the children of Gerry Pendulak, Sharon Stevenson, Linda Scott, and Gail Henderson in equal shares.
 

The Estate

The bulk of the estate consisted of:

 1. bank accounts and a tcrm deposit with a total value of $581,152.20;

 2. real estate, which sold for $35,577.35;

 3. a superannuation death benefit of $5,000.00.

 There were also miscellaneous personal effects.
 

 Real Estate

The deceased's former home was sold to a neighbour (who had approached the executor).  The price was determined by an appraisal obtained by tho executor.
 

Personal Effects

The will provided that the personal effects were to be disposed of in accordance with a memorandum in writing attached to the will.  There was no such memorandum. The executor stated that a memorandum had been searched for but not found. He explained that he distributed the personal effects among himself, Sharon Stevenson, Stella Pendulak, Edward Pendulak, Gail Henderson, Linda Scott, and Gail Henderson's children, Tanis Petreny and Robert Henderson, with their consent.  He gave the metal lathe to one of the deceased's neighbours. He stated that this gift was in accordance with what he understood to be the deceased's wishes.

The wheelchair has been placed for sale (on consignment) with a dealer. The coin collection is for sale.  A diamond ring, valued by the executor at $550.00, was given to Stella Pendulak.
 

Disputes arising in the Accounting

1.  No specific mention was made in the executor's affidavit of the assets belonging to the estate of Olga Malanchak (the spouse of the deceased, who had died August 12, 1991).  At the hearing the executor explained that the balance in the Assiniboine Credit Union account ($6,462.13) were funds belonging to Olga Malanchak at her death; and that an additional S2,000.00 is still receivable and would be accounted for.  It was conceded that any death benefit payable with respect to Olga Malanchak had not been applied for.
 

2.  Para. 11 of the executor's affidavit states that "the only portion of the estate that remains unadministered . . . . . is as set forth in the accounts filed with the registrar, the reason for the nonradministration thereof being withholding sufficient monies for payment of income tax, if any, accounting fees, or any other contingents."

There was no mention in the accounts filed of certain matters, including the following:

 1)  the Canada Pension Plan Death Benefft for Harry Matanchak has been apptied for but not received;

 2)  the wheelchair and the coin collection have not yet been sold;

 3)  income earned on the assets of the estate after the moneys were transferred to the lawyer's trust account;

 4)  the distribution of the personal effects, particularly the metal lathe.
 

3.  Linda Scott and her supporting parties took issue with the fact that the metal lathe was given to a neighbour, because no authority for such disposition existed in the will.
 

4. Linda Scott and her supporting parties objected to the proposed executor's compensation.  The executor originally requested compensation of $29,250.00.  This amount was expressed to be unsatisfactory. The proposed executor's fee was then reduced to $18,874.15 (based on three (3%) percent of $629,138.30, i.e. the total values of Schedules "A" and"B").

It was argued that the relative simplicity of the estate did not justify such compensation. The argument for the executor was that the estate's high value warranted the request for compensation, and that the executor's duties had been carried out honestly and capably.
 

5. Linda Scott and her supporting parties objected to the fees requested by the executor's lawyer:

 1)   $500.00 for services relating to the estate of Olga Malanchak;
 2)   $7,300.00 for services relating to the estate of Harry Malanchak.

The executor's lawyer argued that the fee of $7,300.00 was calculated on the basis of Rule 74.14 (4), including one percent on the aggregate value of the estate over $100,000.00. He also argued that the fee was warranted by the fact that he had to deal with several beneficiaries (including infant beneficiaries) and had to pass the estate accounts. The argument in opposition to the proposed fees was that they are too high, given the relative simplicity of the estate. It was also argued that it was premature to present the accounts for passing, because the administration of the estate was not compete.  Also, Rule 74.14 (4) does not provide that the one percent calculation applies to the excess over $300,000.00. The rule provides that:

 "On the excess over $300,000.00, additional fees may be charged, and the amount is to be determined by the time spent, the complexity of the matter, the results achieved and the value of the estate."
 

6.  The will provides that the executor is to be the trustee of any shares of infants. Para. 5 of the will provides that the trustee is authorized to make any payments to a parent or guardian whose receipt would be a sufficient discharge to the trustee.

 Sharon Stevenson wants the Public Trustee to be the trustee of her infant child's share.

 Linda Scott wants to be the trustee of her infant children's shares, either pursuant to para. 5 of the will or pursuant to ss. 43.1 and 45 of the Court of Queen's Bench Surrogate Practice Act, R.S.M. 1987 c. C290.

 Counsel for the Public Trustee argued that, without the Public Trustee's consent regarding investment plans, the trustee cannot pay any shares over to parents, notwithstanding the provisions of the will.
 

7.  The executor advanced himself $30,000.00 of the estate moneys on May 27, 1993. Linda Scott and her supporting parties argued that this was done without compensation to the estate for loss of revenue.
 

The Decision

 1.  The Personal Effects:

In the absence of the memorandum referred to in the will, the personal effects should haw been valued (if only by way of a lay estimate) prior to distribution, so that the values could have been taken into account when calculating the distributive shares.  There was no authority to give the lathe to the neighbour.

 There was a technical breach in this regard. However, the executor acted honestly and reasonably. He distributed all but one item in question among the various family groups. This is an appropriate situation to apply s. 81 of the Trustee Act. R.S.M. 1987 c.T160.
 

 2.  Shares of Infant Beneficiaries:

 By para. 5 of the will the deceased appointed the executor to be the trustee of any share to which an infant became entitled. The trustee was given the absolute discretion to make payments from income and capital, for the benefit of infant beneficiaries; and authorization to make any payments for an infant to a parent or guardian.

 There has been no application under the Trustee Act to remove the executor as trustee. There are not even any allegations that the executor is an unfit trustee.   the provisions of the Court of Queen's Bench Surrogate Practice Act which authorize the court to "order the payment to any person of any sum of money found to be due to him" (s. 45) do not alter Mr. Pendulak's status as trustee, nor do they enable the court to fetter the trustee's discretion.

In these circumstances, the court cannot compel the trustee to divest himself of any aspect of his trusteeship.
 

 3. The Executor's Compensation:

 Relative to its value, this was a simple estate to administer. The executor will be reasonably compensated for his efforts by a fee of $7,000.00.  This fee shall not be taken until the administration is complete to the point of a final accounting of the outstanding matters, and distribution to the adult beneficiaries. The continued administration of the infant shares will warrant further compensation as may be subsequently agreed to or ordered.
 

 4. The Calculation of the Exe~'s Distribubve Share:

 When calculating the distributive shares, the executor must take into account the advance of his distubutive share, i.e., $30,000.00 on May 27, 1993.  He must allocate the interest earned on the undistributed shares proportionately.
 

 5.  The fee payable to the lawyer retained by the executor is set at $5,454.00, based on the following:

  1.  regarding the estate of Olga Malanchak:
       as per R. 74.14(4)
       3% of $8,445.47 (the aggregate value of the estate) $  254.00

  2.  regarding the estate of Harry Malanchak;
       a) as per R. 74.14 (4)
           3% of $10,000.00           $   300.00
           2% of $90,000.00           $1,800.00
           1% of $200,000.00         $2,000.00
                                                  $4,100.00                      $4,100.00

 An additional fee on the excess over $300,000.00 is not justified in the circumstances of this case.

      b) as per R.74.14(11)
         - services re passing accounts                       $  800.00
          - acting on the sale of the real property       $  300.00
                                                                             $1,100.00          $1,100.00
                                                                                                       $5,454.00
 

6.  The parties represented by Mr. Van Den Bosch shall have their costs of the appearance on October 18, 1993 in the sum of $600.00, payable from the estate.
 

7.  The Public Trustee shall have its costs in the sum of $150.00, payable from the estate.

M.E. GOLDBERG, Q.C.
Senior Master

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Appendix H

Suit No. PR-92-01-28154
(Winnipeg Centre)

COURT OF QUEEN'S BENCH OF MANITOBA

IN RE:         THE ESTATE OF SVEIN OLAFUR SIGFUSSON

BETWEEN:

SKULI NORMAN SIGFUSSON,                              )
                                                          applicant,            )     Barbara S. MacDonald and Theodor E. Bock
                                                                                    )    (for the applicant)
                                                                                    )
  - and -                                                                        )
                                                                                    )
LINDA GAWRYLUK and LOIS CARPENTER         )
                                                          respondents.       )    William M. Molloy
                                                                                    )      (for the respondent, Lois Carpenter)
                                                                                    )
                                                                                    )     Report delivered:
                                                                                    )     July 16, 1996
 

MASTER BOLTON

MASTER'S REPORT

The applicant, executor of the estate of Svein Olafur Sigfusson, seeks to pass his accounts.  The respondent, Lois Carpenter, disputes certain items in the accounts.

1. $10,000.00 - May 16,1993

Due to the error of Coopers & Lybrand, the executor was granted a disbursement from the estate in the amount of $10,000.00 on May 16, 1993.  After recognition of this error, he voluntarily repaid the estate the sum of $10,000.00 on July 23, 1993.  The respondent submits that the estate should be paid interest on this amount in the amount of $300.00. The applicant submits that interest on this amount calculated for the relevant period of time at the pre-judgment interest rate would be $102.47. It is fair and reasonable that the estate be reimbursed for some amount of interest. The calculation at the pre-judgment rate is reasonable in the circumstances as any other figure would be chosen arbitrarily. The executor will reimburse the estate in the amount of $102.47.

2.  St. Andrews Property

This property was transferred to one of the beneficiaries, Linda Gawryluk, for no consideration. The executor described it as a left over piece of iand which had no value to anyone. It is a narrow strip of land located on the river bank, directly across the street from Linda Gawryluk's property. The executor, who actively sells real estate in the area, stated that it had no sale value. Taxes are paid on the property and although the executor did not know the precise amount ot taxes, his evidence was that these taxes would be less than $10.00 per year.

Respondents' counsel submitted that this property did have some value to Linda Gawryluk and that she should reimburse the estate in an amount between $5-$6,000.00. This figure was selected by downsizing from the value of building lots which traded in the area in an amount of approximately $40,000.00.

The undisputed evidence before the court was that this property had no sale value and I accept the executor's opinion on that issue. Further, there was no evidence before the court that any of the other beneficiaries wanted to have this land. It is conceivable that this land could have same value to Ms. Gawryluk in that her ownership impedes anyone from building upon it and obstructing her view of the river Further, it is possible that she could use it for river access and construct a dock on the property. However, all these observations amount to little more than speculation and are not sufficient to rebut the executor's evidence. The executor and/or Ms.Gawryluk are not liable to the estate with respect to this item.

3.  Fees of Coopers & Lybrand

Coopers & Lybrand provided accounting services to the estate in eleven separate accounts totalling $43,326.15.  The affidavit of David Loewen, affirmed May 31, 1996 was filed in support of the executor's motion to pass the accounts. It attaches narrative time sheets for each of the eleven accounts as well as a computer print-out showing the hours spent by each staff person in support of the bill. The bills are not broken down into functions with time assigned to each function. As the accounts progress, they become less detailed.  Examination of the exhibits indicates that the estate was billed as per the time sheets. The only remaining questions are whether the time expended was all necessary, and whether the time expended was properly tilled to the estate, at a proper hourly
rate.

Mr. Loewen was unable to give any detailed analysis of each of the accounts. His evidence was that either he or his partner, James Holland, would have reviewed the bills prior to their issuance, to ensure that all work was properly billed. For instance, when questioned in cross-examination with respect to the services performed by Pauline Brunet, an administrative assistant, Mr. Loewen stated that it was her duty to pull together some of the documents with respect to the estate, but could not specify her exact functions.

Mr. Loewen stated that his firm had been asked to review the estate plan for the deceased prior to his death Coopers & Lybrand acted as the accountants for all estate matters and did special work on specific issues, such as advising Lois Carpenter, with respect to certain issues such as tax liability arising in respect of certain types of distribution.

Mr Loewen stated that there were certain tax issues that had specific ramifications for the estate. For instance, the fair market vatue of the Twin Oaks developrnent was an issue, as the deceased was deemed to have disposed of these assets as at the date of death. His firm was successful in having Revenue Canada accept a low opinion of value with respect to these assets which had a potential of saving the estate between $50-$100,000.00.  Secondly, his firm successfuily convinced Revenue Canada to write off the expenses of production of the copyright interest in Sigfusson's Roads. This resulted in a payback to the estate between $10-$12,000.00. In cross-examination, Mr. Loewen stated that "preparation of calculations and discussions regarding the proposed purchase and sale of the one-third interest in the Portage Avenue property were issues that would have benefitted the executor in his personal capacity as well as the estate".  Mr. Loewen was of the opinion that all matters that were billed were properly billed to the estate.

While I found Mr. Loewen to be sincere, I did not find his evidence was sufficiently organized to satisfy the onus that is on the applicant in this hearing to justify the fees as charged. I don't think he had been informed of the detail he would need to present at the hearing, as several times he stated that he did have certain information but it was at his office, not with him at the hearing. Mr. Loewen stated that in his opinion the accounts were very detailed. He admitted in crossexamination that it was not possible to tell from the accounts how much time was spent on each function. Mr. Loewen stated that work done for Thelma Sigfusson was properly billed to the estate and it was accepted by the executor. As submitted by counsel for the respondent, while a court has no reason to discredit Mr. Loewen or Mr. Holland in their review of the time accounts, the evidence
before the court did not really allow for an informed review of the accounts in detail. There was no evidence presented respecting the assignment of specific hourly rates to partners or staff.

There are several entries in the accounts which obviously benefit parties other than the estate. These are Ex. A (3,4,5,6), Ex. B (2), and Ex. C (5,6).  Mr. Loewen's advice with respect to the billing of matters under subaccounts did not clarify the matter any further. He indicated in some cases matters were billed under subaccount (01) but time was actually captured under subaccount (17).  What would have been very helpful for the cou.-t was to hear some evidence with respect to how much the executor was personally billed for some of these services which appear to have benefitted both the executor and the estate.

Mr. Loewen stated in cross-examination "Because of the fact that these things were all so intertwined, we didn't track our time precisely, as to each and every one of these items, because one minute you might be working on one item and the next minute you might be working on another".

Having heard what I would classify as fairly sketchy evidence with respect to a very significant bill from Coopers & Lybrand to the estate, I am left with the extremely difficult task of deciding what are fair and reasonable charges to the estate in the circumstances.  I accept counsel for the respondent's submission that (a) the applicant has not satisfied the onus of convincing the court with respect to the propriety of these accounts, and (b) that the hearing is the time to satisfy that onus.  Notwithstanding that I found Mr. Loewen sincere, I am left with the conclusion that organization of some of this billing was loose and that some of the hours which were spent by Mr. Loewen and other staff may have been properly billed elsewhere.

My impression from hearing Mr. Loewen is that Coopers & Lybrand were not under strict instructions from the applicant to keep track of time spent in separate categories. That is unfortunate because in order for the applicant to justify these charges to the estate more concise evidence would be necessary.

In light of all these observations I am allowing the fees chargeable to the estate by Coopers 8 Lybrand in the amount of $25,000.00. This does not mean that the services of Coopers & Lybrand are worth only $25,000.00.  It simply means that the estate will only bear that proportion of the expense.

4.  Fees of Aikins, MacAulay & Thorvaldson

Aikins, MacAulay & Thorvaldson charged the estate fees of $19,095.00 to January 31, 1995. An account for fees of $1,809.20 has been submitted for services to May 31, 1996. The applicant submitted that the time expended by counsel for the applicant was necessary. Fees in excess of the tariff are allowable when counsel performs special functions such as the sale of an estate asset. In this case, the executor relied on his legal advisors because of the potential conflict of interest of being both the seller and the purchaser of the estate's share of the joint venture.

Counsel did not comply with the provisions of Queen's Bench Rule 74.14. The applicant argued that this was a technical, not a fundamental breach of this rule as the beneficiaries were aware that fees were being paid to counsel.

The respondent submitted that the estate was not a complicated one and that in any assessment of fees, the court should be guided by the principles of quantum meruit. Firstly, the basic tariff fee of $4,100.00 should be allowed. It could be increased by $1,700.00 for the sale of the joint venture asset. The figure of $1,700.00 was suggested as that is the amount that Aikins MacAulay & Thorvaldson charged the executor and Dr. Christianson for the sale of the joint venture. Further, as the sale of the Twin Oaks properties were not full scale transactions, foes of $1,100.00 should be allowed. Total fees should be awarded of approximately $7,000.00-$8,000.00. Due to the fact that the practice direction was disregarded by counsel, some consequences should follow in order to give teeth to the rule Counsel submitted that awarding fees of $4,100.00 in accordance with the tariff only would be appropriate.

In his evidence, Mr. Dooley stated that Aikins, MacAulay & Thorvaldson acted for the estate as well as the corporate and the individual purchasers on the sale of the joint venture. A separate account was provided to the vendor/ purchasers on the sale. There was also a provision in the agreement that the vendor ostate would bear the legal costs associated with the preparation of the purchase agreement. Mr. Dooley further advised that there was no specific amount of the total tees charged that was designated for the sale of the joint venture asset.

Given the extensive correspondence, discussions among the beneficiaries with respect to the joint venture, and the subsequent sale of that asset, I find that some amount of fees above the tariff is appropriate. Some of this work was made necessary by the fact that the respondent was quite exacting in her requests for certain information and did change her mind on several issues. While I accept the argument in theory that the estate should be charged the same amount with respect to the sale of Joint venture as the purchasers, it is obvious from a review of the correspondence that the beneficiaries, and therefore indirectly the estate, did extend this process. Therefore, the estate should bear more expense for the fees of Aikins MacAulay & Thorvaldson than the purchasers.

There are certain aspects of the applicant's position on this issue that trouble me. Firstly, it was submitted that the court should allow the fees as charged because the court has a discretion to award fees in excess of the tariff if there is a sale of an asset, However, Mr. Dooley was not able to say what percentage of the fees charged were due to the sale of the joint venture.  Secondly, he stated that "by agreement" the legal fees on the sale were charged to the estate.  This is not an agreement which the respondent ratified.  Thirdly, the executor clearly placed himself in a conflict of interest position by negotiating an agreement in which the estate paid a great deal more for these services than the purchasers.  I fix fees on this function at $7,000.00.

Queen's Bench Rule 74.14 is in place for a reason, which is to ensure that all beneficiaries are treated with an even hand and are able to have some control over the paying of disbursements. There was no clear explanation given with respect to the breach of the rule. I am certain it was not breached with wanton disregard of the rights of the beneficiaries. However, it was breached, and nothing is served by attempting to classify the breach as either technical or fundamental. The effect of this breach is evident by the fact of this hearing. I accept the submission on behalf of the respondent that there should be some consequences that follow this if the rule is to have any meaning. The sum of $1,000.00 will be deducted from allowable fees.

I allow the following fees:

 Tariff                       $4,100.00
 Joint Venture           $7,000.00
 Twin Oaks              $3,000.00
 Q.B. Rule 74.14    -$1,000.00

 Total                       $13,100.00
 

5.  Proceeds of Sale re 989 Portage Avenue

Cheques for the purchase of the Joint venture were delivered to Mr. Dooley in October of 1993 Mr. Dooley held these cheques in escrow until March' 1994. The property was transferred to the purchasers in March, 1994. During this hiatus, no revenue was paid to the estate from 989 Portage Avenue as it had been previously throughout the administration. The respondent submitted that the estate should be reimbursed in the amount of $9,343.04. It is obvious from a review of the correspondence that the respondent was not prepared to agree to the sale as proposed until March of 1994.

 This issue provides the most glaring example of the applicant's conflict of interest in this matter Mr. Dooley, acting for the estate, and for the purchasers, followed the instructions of the applicant.  The applicant made an agreement between himself as executor and himself as purchaser, that the cheques should not be cashed and that no revenue should be paid to the estate from the joint venture.

 Conflict of interest is to be avoided because it leads even the most prudent, well-intentioned parties into the tangled undergrowth of inequity.  Once ensconced, it is impossible to extricate oneself without feeling pricked or torn on some appendage.  The applicant's delivery from his plight as one so ensconced will not be aided by funds from the estate.

 Until the sale was completed, the estate should have received the revenue and had the benefit of interest from the property on a monthly basis as it did until October of 1994.  The amount of $9,500.00 will be deducted from the executor's share.

Costs

 The applicant and respondents will each have costs from the estate with respect to the hearing of the passing of accounts and all previous meetings in preparation for it. If costs cannot be agreed upon, they may be taxed.
 

M. ANNE BOLTON, Q C.
Master

A REPORT HAS NO EFFECT UNTIL IT IS CONFIRMED.  A COPY OF QUEEN'S BENCH RULE 54.07 TO 54.10 DEALING WITH CONFIRMATION OF MASTERS' REPORTS FORMS THE LAST PAGE OF THIS REPORT.

PLEASE REVIEW CAREFULLY.








 QUEEN'S BENCH        C280 – R.M. 553/88

REPORT MUST BE CONFIRMED

54.07  A report has no effect until it has been confirmed and, when confirmed, becomes an order of the court.
 

FILING OF REPORT

54.08   Any party affected by a report may file it and shall then forthwith serve a notice of filing on all other parties who appeared on the reference.

CONFIRMATION OF REPORT

54.09   The report shall be deemed to be confirmed on the expiration of 15 days from the service of the notice of filing on all other parties who appeared on the reference or, where no other parties appeared, within 15 days from the filing of the report, unless a notice of motion to oppose confirmation is served within that time.

MOTION TO OPPOSE CONFIRMATION

To a judge
54.10(1)  A motion to oppose confirmation of a report shall be made to a judge.

Notice of motion to oppose confirmation
54.10(2)  A notice of motion to oppose confirmation of a report shall,
    (a) set out the grounds for opposing confirmation;
    (b) be served within 15 days after a copy of the report, with proof of service on every party who appeared on the reference, has been filed in the administrative centre in which the proceeding was commenced; and
    (c) name the first available hearing date that is at least three days after service of the notice of motion.

Motion for immediate confirmation
54.10(3)  A party who seeks confirmation before the expiration of the 15 day period prescribed in rule 54.09 may make a motion to a judge for confirmation.

Disposition of motion

54.10(4) A judge hearing a motion under subrule (2) or (3) may confirm the report in whole or in part or make such other order as is just.

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Appendix I

Court of Queen's Bench Rules

PASSING OF ACCOUNTS AND REMUNERATION

Application by notice
74.12(1) An application to the court for passing of accounts and remuneration of executors and administrators shall be by notice of application verified by affidavit in Forms 74V and 74W.

Appointment
74.12(2) Upon filing of the notice of application and affidavit, the court may issue an appointment in Form 74X.

Service of appointment
74.12(3) The appointment together with true copies of the notice of application and the affidavit and a notice to beneficiaries in Form 74Y shall be served upon those interested in the estate either personally or by an alternative to personal service.

Form and content of accounts
74.12(4) The accounts shall contain a true and perfect inventory of the whole property in question, and shall include
 (a) an inventory and valuation of the original estate, showing how each asset was dealt
 with, and the present value of, or amount realized from, each asset;
 (b) an account of all money received, other than from the realization of original assets or
 from investments made by the trustee;
 (c) an account of all disbursements, other than for investments made by the trustee;
 (d) an account of all payments or transfers to beneficiaries of the estate; and
 (e) an account, in debit and credit form, showing the totals of the foregoing accounts, all assets remaining on hand and the amount of net gain or loss realized upon investments made by the trustee.

Where income and capital separate
74.12(5) Where, by the will or an instrument creating any trust estate, income and capital are dealt with separately, the accounts shall be divided so as to show receipts, disbursements and distributions, in respect of in. come and capital, separately.

Book values on interim accounts
74.12(6) Upon an interim passing of accounts, book values, rather than actual values, may be shown.

Compensation or allowance to esecutor, etc,
74.12(7) Upon a passing of accounts, the court may fix the compensation or allowance to be made to the executor, administrator, or trustee under a will for the care, pains, trouble and time expended in and about the estate or trust.

Jurisdiction of master
74.12(8)  The accounts may be passed before, and the remuneration may be fixed by, a master.

Form of order
74.12(9) An order on passing accounts shall be in Form 74Z.
Man. (1939) 949-953
 
 

WILLS DEPOSITED FOR SAFEKEEPING

Sealed envelope, securely sealed
74.13(1) Every will deposited for safekeeping shall be enclosed in an envelope, securely sealed, upon which shall be endorsed the name and address of the testator or testatrix and of the executor or executors; and the registrar shall mark thereon a memorandum showing the date of deposit, and from whom it was received, and shall forthwith forward those particulars to the registrar in Winnipeg.

Affidavit with will in safekeeping
74.13(2) Where a will is deposited for safekeeping, by a person other than the testator or testatrix, there shall be deposited with it his or her affidavit stating that the will is in the same plight, state, and condition as when received by him or her from the testator or testatrix.

No inspection or removal of will in safekeeping
74.13(3) A will deposited for safekeeping shall not, during the lifetime of the testator or testatrix, be inspected or removed from the office of the registrar except by the testator or testatrix in person, or by the order of the court, on application by a lawyer acting under the written authority of the testator or testatrix; and the authority shall be verified by the affidavit of the lawyer.

Delivery of the will after death
74.13(4) After the death of the testator or testatrix, the will shall be delivered to the executor upon his or her personal application, or to such other person as the court may direct; and the registrar shall take a receipt for the will, and retain a copy of it, compared and certified by him or her.
Man. (1939) 954-956
 
 

FEES AND COSTS

In accordance with this rule
74.14(1) Fees and costs in estate matters shall be allowed in accordance with this rule.

"Fees" and "costs"
74.14(2) In this rule the words "fees" and "costs"
  (a) do not include proper disbursements, which shall be allowed to a lawyer in addition, and
  (b) do not include remuneration to which a lawyer may be entitled as a personal representative.

Aggregate value of estate
74.14(3) Aggregate value of the estate is the total value of all assets of the estate as shown in the application for probate or administration and any amendment thereto but does not include gifts made inter vivos, property held in joint tenancy, insurance, annuities and pensions not payable to the estate, or the value of any benefits under "The Canada Pension Plan".

Fee payable to lawyer
74.14(4) Where the personal representative is not a lawyer, a trust company or the public trustee, the fee payable to the lawyer retained by the personal representative is:
 On the first $10,000. or portion thereof of the aggregate value of the
 estate................................................................................................................................3%
 On the next $90,000. or portion thereof.............................................................................2%
 On the next $200,000. or portion thereof...........................................................................1%

On the excess over $300,000. additional fees may be charged, and the amount is to be determined by the time spent, the complexity of the matter, the results achieved and the value of the estate.

Fee payable to lawyer
74.14(5) Where the personal representative is a lawyer, a trust company, or the public trustee, the fee payable to the lawyer retained by the personal representative is 40% of the fee provided under subrule (4).

Review by court or assessment offlcer
74.14(6) The fees for which provision is made in this rule are subject to review by the court on a passing of accounts or pursuant to subrule (7).

Notice of appointment for assessment of costs
74.14(7) A personal representative, a beneficiary or a lawyer may obtain a notice of appointment for assessment of costs to review or fix the fee payable to the lawyer retained by the personal representative and the provisions of Rule 58 (Assessment of Costs) shall apply with necessary changes except that the notice of appointment shall be served upon all interested persons at least 30 days before the date fixed for the assessment.

Service of lawyer's bill of costs
74.14(8) The lawyer retained by the personal representative shall, at least 14 days before the date of the hearing, file and serve upon all interested persons
 (a) unless the court otherwise orders, an itemized bill of costs; and
  (b) an affidavit setting out that he or she complied with subrule (14), the fees payable under subrule (4), the fees desired, and, if they exceed those payable under subrule (4), the reasons why larger fees should be paid.

Hearing to fix or review lawyer's fees
74.14(9) On the hearing to fix or review the fees payable to the lawyer regard shall be had to
 (a) the nature of the estate assets relative to the value of the estate;
 (b) the amount and nature of the services performed by the lawyer; and
 (c) other matters considered relevant by the court.

"Interested persons"
74.14(10) For the purposes of subrules (7) and (8), the expression "interested persons" includes the personal representative, the lawyer retained by the personal representative and any beneficiary whose interest in the estate is affected by the lawyer's fee.

Additional fees
74.14(11) In addition to the fees provided in subrule (4), a lawyer is entitled to receive payment for the following:
  (a) appearances in court as allowed by the presiding judge;
  (b) services with respect to a first passing of accounts of a personal representative where the lawyer retained by the personal representative has maintained the accounts of the estate and has prepared same for passing, based upon the total amount of assets and receipts shown on Schedules "A" and "B" to the application to pass accounts as follows:
  (i) on the first $10,000. or portion thereof (minimum $40.).................. 3/4 of 1%
  (ii) on the next $190,000. or portion thereof.........................................1/6 of 1%
  (iii) on the excess over $200,000. (subject to the discretion
    of the court on passing of accounts)....................................................1/10 of 1%
  (c) services with respect to a first passing of accounts, where the personal representative has maintained the accounts of the estate and prepared same for passing, or for services with respect to any subsequent passing of accounts in such amount as may be allowed by the court on the passing of accounts;
 (d) acting on the sale of an estate asset; and
 (e) finding a purchaser of an estate asset.

Beneficiaries may consent to fees
74.14(12) Where all of the beneficiaries, whose respective interests in an estate are affected by the lawyer's fees
  (a) are adults;
  (b) have consented to an agreement between the lawyer and the personal representative with respect to the fees; and
  (c) have been served with copies of Form 74AA;
the lawyer is entitled to the agreed fee subject to review by the court.

Lawyer not to accept excess fees
74.14(13) The lawyer retained by the personal representative shall not accept payment for services to the personal representative or to the estate, in excess of such fees as are provided in this rule.

Form 74AA to be sent to personal representative and residuary beneficiaries
74.14(14) The lawyer retained by a personal representative shall, within 60 days after letters probate or letters of administration have been granted, serve a true copy of Form 74AA either personally or by an alternative to personal service on the personal representative and each residuary beneficiary.

Fees of lawyers acting for other than personal representative
74.14(16) A lawyer for any person other than the lawyer for the personal representative, properly attending on an assessment of the costs of the lawyer acting for the personal representative, or on a passing of a personal representative's accounts, may be allowed a fee in the discretion of the court.

Contentious matters
74.14(16) In contentious matters a lawyer shall be allowed such fees as the presiding judge deems adequate.

Payments of costs from estate
74.14(17) The court may direct payment of any costs, including proper disbursements, from the estate generally or by, or from funds of the estate belonging to, any legatee, heir or person interested therein.
Man. (1939) 957-967

- - - - -

Rule 74.14 63 Surrogate Practice –  Lawyer's Fees
Sigfusson v. Gawryluk (16 July 1996) PR 92-01-28164 (Q.B.), per Master Bolton

Fees in excess of the tariff were charged by counsel without compliance with Rule 74.14. The rule is intended to ensure that all beneficiaries are treated with an even hand and are able to have some control over disbursements. There was no clear explanation given for the breach of the rule. While it was not breached with wanton disregard of the beneficiaries' rights, it was breached, and nothing is served by classifying the breach as technical or fundamental. As consequences should follow this if the rule is to have any meaning, the sum of $1,000.00 was deducted from allowable fees.

Man QB Rules Rel. 12 (Nov. 1997)
- - - - -

Annotations

Derksen v. Kunkel (11 August 1994) PR 86-01-06696 (Q,B.), per Krindle J.
Since the amount of time, energy and money advancing claims respecting an estate was "absolutely unconscionable" considering the amounts involved, the court declined to award costs to all parties payable from the estate.

Sparks Estate v. Wenham, [1994] 6 W.W.R. 731 (C.A.), per Scott C.J.M.
The proper interpretation of The Wills Act, s. 25 had been vexing counsel in the province for some time and required appellate review. Lawyer and client costs should be paid from the estate to both counsel.

Schimnowski v. Schimnowski (1994), 92 Man. R. (2d) 251 (C.A.), per Philp J.A.
In a proceeding to determine whether cheques ought to have been honoured after the payor died, the payees were not entitled to lawyer and own client costs. Notwithstanding the relationship between the deceased payor and payees, the claim is no different than any creditor's claim. Rather party and party costs were awarded against the unsuccessful payee.

Zimbel Estate v. Public Trustee (25 February 1994) PR-89~01-16917 (Q.B.), per Senior Master Goldberg
Over-zealousness by a beneficiary with a limited interest in the estate in requesting verifications and conducting a cross-examination were motivated by pre-existing problems in a family relationship. No significant improprieties were demonstrated. $7,000 of the executor's lawyer's $12,000 account was ordered payable from this beneficiary's interest. As well, the beneficiary was ordered to pay a portion of the Public Trustee's account and she was allowed only $750 towards her lawyer's bill from the corpus of the estate.

Kramchuk v. Ciastko (1993), 90 Man. R. (2d) 69 (Q.B.), per Kennedy J.
The lawyer, upon request, assumed the responsibilities of executor for the named out-of-province executors. The bill exceeded the tariff amount by $6,000. Considering the nature of work performed and the nature and demands made by the clients, this additional fee is not unreasonable.

MacKenzie v. Lawrence (27 January 1993) C2-01-66898 (Q.B.), per Master Ring
Beneficiaries of estates are entitled to have accounts passed and fees reviewed pursuant to R. 74. An application under R. 71 for assessment of a lawyer's bill is not appropriate.

Baumstark v. Harvey (10 June 1993) PR-89-01-15406 (Q.B.),per Master Lee
Taking compensation before accounts are passed without the consent of all beneficiaries is clearly improper practice, and the law firm should bear some responsibility for compensating the estate for a loss of interest.

Syrota v. Clark Estate (1992), 83 Man. R. (2d) 21 (C.A.), per Helper J.A., varying (1991), 43 E.T.R. 287 (Q.B.)
It has long been established that all parties' costs should be paid on a lawyer and client basis from an estate where the testator has been the cause of the litigation or if the circumstances could reasonably lead to an investigation. Where the evidence on these two issues is meagre, lawyer and client costs are inappropriate.

Manitoba (Public Trustee) v. Ballen (1992), 87 D.L.R. (4th) 111 (C.A.), per Philp J.A.
Payment of lawyer's accounts in surrogate proceedings should not be authorized or approved until the court has determined whether the estate should be liable for these costs.
 

[Editor's note: The legal principles relevant to this determination are considered in considerable detail in the reasons for decision.]

Burkhardt v. Zaparaniuk (18 April 1995) PR 89-01-14815 (Man. Q.B.) per Barkman J.
More than a year after estate litigation was settled and assets were distributed to beneficiaries, one beneficiary challenged the lawyer's fees.  The beneficiaries, all of whom were adults, had all consented to the agreement respecting fees between the lawyer and the executor and sere either represented by independent counsel or supported the executors.  In such circumstances, the failure to serve Form 74AA as required by Rule 74.14 is not a proper basis for denying the validity of the fee agreement.

Rule 74.14 Surrogate Practice – Public Trustee's Fees
Re Raulin Estate (30 March 1993) PR-90-01-21052 (Q.B.) per Senior Master Goldberg
When assessing proposed compensation, the court must consider not only the magnitude of the trust but also the time spent in administering the estate, the responsibility arising therefrom, and any problems encountered in the administration.
 

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Appendix J

FORM 74AA

INFORMATION FOR PERSONAL REPRESENTATIVES AND RESIDUARY BENEFICIARIES

The property of a deceased person is placed in the hands of a trustee, known as a personal representative. He is also called an executor (executrix) or administrator (administratrix). He or she has the duty of gathering in the assets, paying debts and distributing to the beneficiaries in accordance with the law and the terms of any will of the deceased.

The personal representative receives authority to deal with the estate of the deceased from the Court of Queen's Bench and is subject to supervision by that Court. Any person interested in the estate may, upon reasonable grounds, require the personal representative to appear before the court to give an account of the handling of the estate.

A personal representative may ask for payment for services rendered, and in that case' is entitled to a fair and reasonable allowance for care, pains, trouble and time. That allowance is not a fixed amount or percentage but will vary according to the work done and the trouble and time expended. If ail beneficiaries are adults of sound mind and are satisfied with the work of the personal representative they may agree on the amount of the fee and give releases when the estate is wound up and the beneficiaries' shares are paid.

If, however, there should be a dispute about the handling of the estate of the amount of the fee, any beneficiary may insist that the accounts be placed before the court for inspection and have the fee settled by the court.

PERSONAL REPRESENTATIVE'S LAWYER

A personal representative is permitted to employ a lawyer to assist in his or her duties. The fees of that lawyer are paid out of the estate and the amount is governed by the Queen's Bench Rules, particularly Rule 74. 14. A copy of the Rules may be obtained from the Queen's Printer at the Provincial Library Building, 200 Vaughan Street, Winnipeg, Manitoba.

The basic legal fees are computed as a percentage of the value of the estate assets and a intended to cover the work involved in estates of average complexity. Estate assets do not include property held in joint tenancy or insurance, annuities or pensions not payable to the estate. Briefly stated, the basic fee is calculated as follows:
       3%     on the first     $10,000.00
       2%     on the next     $90,000.00
       1%     on the next     $200,000.00
       Over $300,000.00 by agreement or by application to the court.
Only 40% of those fees are payable where the personal representative is a lawyer, a Trust company or the Public Trustee.

The above fees are subject to review by the court at the time the accounts of the personal representative are placed before the court for inspection or upon the application of the personal representative, a beneficiary or the lawyer in the manner provided by Queen's Bench Rule 74.14.

The personal representative's lawyer is also permitted to charge for additional services as specified in Rule 74.14.

It should be understood that the lawyer retained by the personal representative is his or her lawyer. In the event of any dispute, a beneficiary is free to obtain separate legal advice from some other lawyer.
 

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Appendix K
 
 

BRITISH COLUMBIA
SUPREME COURT                                                                                MACFARLANE, J.
Re Turley Estate

Executors and Administrators –  Remuneration – Amount – Apportionment between Corporate Executors and Personal Executor –  Fees of Solicitor – "Aggregate Value" of Estate – As to What Date Computed – App. M, Sch. 5, Items 53, 55.

The "aggregate value" of an estate within the meaning of Items 53 and 55 of App M, Schedule 5, of the Rules of the Supreme Court is the value at the time of obtaining probate not that at the time of the passing of the accounts. Stephen v. Miller [l918] 2 WWR 1042 (B.C.), affirmed 59 SCR 69Q, 19 Can Abr 1199, distinguished.

In determining the remuneration of an executor both responsibility and actual work done are matters for consideration and, while there should not be a rigid adherence to fixed percentages, they are to be used as a guide. Re Atkinson Estate tl95Z] OR 688, 1952 Can Abr 325, applied.

While the fact that considerable portions of the estate are transferred in specie is a factor the registrar may consider in settling the percentage he allows for an executor's remuneration it would be quite inappropriate as a rule to exclude them in the computation of aggregate value.

Since there was a great deal more work done by the corporate executor herein than by the personal executor it was held that it would be quite fair at least to the personal executor to apportion the three per cent on capital by allowing two-thirds thereof to the corporate executor and one-third to the personal executor. The allowance on income was apportioned by giving four-fifths to the corporate executor and one-fifth to the personal executor.
[Note up with 1 CED (CS) Barristers and Solicitors, sec. 1, Costs, sec. 80; 2 CED (CS) Executors and Administrators, sec. 40; 3 CED (CS) Words and Phrases (1947-1954 Supps.).]
 

 J. A. Byers, for Frank M. Turley, co executor and beneficiary.
 D. M. Gordon, Q.C., for the solicitor.
 G. F. T. Gregory, for Yorkshire Trust Company.

 August 10, 1955.

 MACFARLANE, J. –  In this estate, I heard three applications.  I shall deal with them separately. The first is an application under O. 65, R. 27, Reg. 41, which is for review of the taxing officer's certificate in respect of the bill of costs of the solicitors to the executors. The application is made on behalf of Frank M. Turley, son of the deceased, who is a joint executor with the Yorkshire Trust Company of the estate and also one of the beneficiaries.

The grounds of the application for review are stated as follows:

 1. That the taxing officer proceeded upon a wrong principle in computing the aggregate value of the estate for the purposes of items 53 and 55 of Appendix M, Schedule 5, of the Rules of the Supreme Court;

 2. That the taxing officer erred in allowing the full two percent of the aggregate value as the estate was of comparative simplicity;

 3. That the taxing officer erred in not disallowing or reducing the fees charged for advice and correspondence relating to the erroneous assessment and payment of succession duties in the province of Ontario and the subsequent application for refund.

The bill for review was taxed at $6,775.79. As part of that amount, the registrar allowed two per cent of the aggregate value of the estate as found by him ($228,449.31) or $4,568.98.  After considerable study, I found myself unable to reconcile this figure.

In order that I might understand the situation properly, I requested the registrar to provide me with a statement as to how this sum was arrived at. The statement is as follows:

 Capital cash receipts, as per Schedule "C", pp. 4-6 of the
executors' accounts  - - - - - - - - - - - - - - - - - - - - - - - - - - - - -   $118,572.56

 Deduct:

 Mortuary benefits paid by the North West Travellers Assn. direct to Frank M.
Turley as beneficiary        - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  $ 520.00

 Survivor benefits pension scheme paid by Imperial Oil Ltd. - - - - - - - - - 2,625.29

 Sun Life Assurance Co. paid direct to Frank M. Turley as beneficiary and by him
into the estate - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  8,000.00   11,145.29
                                                                                                                                 $107,427.27
 

 Less refund of B.C. probate fees, Quebec duties, U.S. estate taxes, Ontario and
Canadian duties - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  17,947.71
                                                                                                                                   $ 89,479.56
 Add: Real estate in Regina - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -                  120.00
 500 shares Standard Oil of New Jersey - - - - - - - - - - - - - - - - - - - - - -                  52,833.75
 2,032 shares Imperial Oil Ltd. - - - - - - - - - - - - - - - - - - - - - - - - - - - -                 77,216.00
                                                                                                                                  $219,649.31

Insurance added by reason of wording of clause 55 of App. M., "The
value of any life insurance payable as a consequence of the death of the
deceased other than life insurance payable to a person who is neither the
personal representative of the deceased nor a beneficiary of the estate" –
which is required to be included in the aggregate value of  the estate  - - - - - - -           8,800.00
                                                                                                                                  $228,449.31

The registrar also informs me that he treated as part of the estate the sum of $30,000 included in the statement to which I refer hereafter as gifts inter vivos. The principle, however, which the registrar attempted to apply, is that of ascertaining the aggregate value by taking the value of the assets at the time of the passing of the executors' accounts instead of at the time of death. Aggregate value is declared in item 55

        "to include value of all real and personal property passing or accruing to any person upon the death of the deceased by operation of law or otherwise and to include the value of any life insurance payable
        as a consequence of the death of the deceased other than life insurance payable to a person who is neither the personal representative of the deceased nor a beneficiary of the estate."

The percentage based on this aggregate value is allowed

        "for all necessary services to obtain a grant of letters probate or of administration, preparation and filing of probate and succession duty forms * * * and settling all duties * * *  and, where necessary all
        process or proceedings relating to the passing of the first accounts of the executor or administrator."

If it were not for the last part of this passage, I would say that the aggregate value should be that determined at the time of death, that is the value for probate. It is true that the aggregate value for the remuneration of executors and trustees has been set in Stephen v. Mil1er [1918] 2 VVWR 1042, 25 BCR 388, affirmed 59 SCR 690, as that taken at the time of the passing of the accounts. I agree that the time of the passing of the executors' or trustees' accounts may well be the relevant time for that purpose. When the passing of the accounts is completed, the work of the executors or trustees has materialized.  The distinction is a fine one, as it might be said that the solicitor has not completed the work for which the percentage is allowed until the first accounts are passed. The principal part of the work for which this fee is allowed is, however, done before that and any increment in value of the assets, between the two periods, can have no substantial relation to the work there may be.  If I have to decide which figure should apply, I would hold that the aggregate value should be taken at the time of death and that the proper way to arrive at it is shown in this estate in the following tabulation.

Aggregate value:

  Vide – S.D.I. Form  - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  $238,402.82

  Less Consolidated Smelting shares of Mr. Frank M. Turley - - - - - - - - -           5,862.50
                                                                                                                         $232,540.32
  Survivor benefit by I.O.L - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -   2,759.04
                                                                                                                         $229,781.28
  Inter vivos - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  30,000.00
                                                                                                                         $199,781.28
   Share value differentials - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -  825.00
                                                                                                                         $198,956.28
  I.O.L. dividend - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -     1,240.00
  Add pension difference - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -   20.45
                                                                                                                          $200,216.73

It is urged that the two per cent should not be applied because the estate is simple. It is true that there are no continuing trusts or complexities of that nature but the testator, for his own purposes, whatever they may be, created a situation which has imposed on the solicitor the burden of negotiating between two executors, one a corporate executor and the other living a considerable distance away and, in view of the situation which is apparent here, I think that the circumstances warrant the allowance of the full percentage.

It is urged that many of the services of the solicitor were unnecessary. Criticism is levelled at him because he accepted the advice which was not complete or correct of a local office of a brokerage firm. That firm has national connections and should have special knowledge of transfer requirements and I would not hold the solicitor to blame for relying on their guidance. I think the allowance should be two per cent on the sum of $200,216.73 or $4,004.34 instead of $4,568.98 and the bill amended accordingly.
 

The second motion is to review the certificate of the registrar upon the following grounds:

  1. That the remuneration allowed to the executors is excessive;

  2. That the method of computing the remuneration is erroneous;

  3. That the deputy district registrar erred in failing to make an apportionment of remuneration between the executors;

  4. That the deputy district registrar erred in not reducing the executors' remuneration upon the ground that much of the administrative work had been done by the solicitors for the estate and separately charged for by them.

As to grounds 1 and 2 of this application, I think the principles to be applied are well settled. I adopt the statement of the principles as given in, I think, all the cases and found in Re Atkinson Estate [1952] OR 688, that the compensation allowed an executor is to be a fair and reasonable allowance for his care, pains and trouble and his time expended in or about the estate. Both responsibility and actual work done are matters for consideration and, while there should not be a rigid adherence to fixed percentages, they are to be used as a guide. I think that the factors I mentioned in my judgment on the previous motion are found here. It is not only the presence of continuing trusts that makes the realization and administration of estates difficult. It is submitted that the capital fee should be charged only on the amount realized, excluding those assets that go over  in specie. While the fact that considerable portions of the estate are transferred in specie is a factor the registrar may consider in settling the percentage he allows, I think it would be quite inappropriate as a rule to exclude these in the computation of aggregate value. There appears to be evidence here of extensive work. It is the duty of the executor to administer the whole of the estate. His work in some things might not be compensated sufficiently by a percentage much in excess of the maximum allowed.

I think, however, in all the circumstances of this case that I should confirm the registrar's report so far as the percentage allowed on capital and on income is concerned.

 The finding I have just made disposes in fact of the first part of the third motion, which was a motion to increase these amounts.

As to the second part of the third motion which asks me to apportion the remuneration allowed between the two executors, after considering all the evidence put before me, I think that in this case there was a great deal more work done by the corporate executor than by the personal executor. I have read the Ontario cases with reference to the principle upon which an apportionment should be made and I think in these circumstances it would be quite fair at least to the personal executor if I apportion the three per cent on capital, two-thirds to the corporate executor and one-third to the personal executor. So far as the allowance on income is concerned, I think an even greater portion of the work was done by the corporate executor.  I would apportion this allowance, four-fifths to the corporate executor and one-fifth to the personal executor.

Costs of all parties will come out of the estate.

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Appendix L
 

Suit No. CI-91-01-55228

THE QUEEN'S BENCH
WINNIPEG CENTRE

BETWEEN:

ESTATE OF FRANK TAPOSCHANER,                             )
                                                                  Applicant,            )     M. A. Hoffman
                                                                                              )     (for the applicant)
 - and -                                                                                  )
                                                                                             )
 ROSS AND ASSOCIATES,                                               )
                                                                  Respondent.        )   J.G. Ross
                                                                                             )     (In Person)
                                                                                             )
                                                                                             )     Decision delivered:
                                                                                             )     OCTOBER 15, 1991
                                                                                             )

MASTER'S REPORT ON ASSESSMENT OF LAWYER'S BILL

MASTER LEE:

 This report is delivered pursuant to the reference order dated July 4, 1991 issued by the Deputy Registrar, ordering the Master to make all inquiries necessary for the assessment of the respondent's bill to the applicant. The respondent law firm rendered services to Jacob Taposchaner, as executor of the estate of Frank Taposchaner, deceased and rendered a number of accounts in connection with services rendered. The accounts rendered consist of the following:

 Fees and disbursements with respect to house sale                               $407.00
 Fees rendered with respect to discharge of caveat affecting house         $250.00
 Fees with respect to research provided by Ingrid K. Nickel                  $700.38
 Fees with respect to estate administration, including matters
 dealing with claims of Jean McFarlane                                               $3,615.75*
 Additional account rendered for time spent dealing with
 Aikins, MacAulay Thorvaldson and miscellaneous time                          $526.65**

 *This is for fees only and no issue was taken with respect to additional estate disbursements.
 **This includes disbursements in the amount of $45.15 plus G.S.T.

 The respondent law firm has to date received the sum of $3,607.38 towards the total accounts rendered.
 

BACKGROUND

 Jacob Taposchaner engaged Jerry Ross of the respondent law firm to provide services in connection with the administration of the estate of his late father. Jacob Taposchaner was the executor named in the will of the late Frank Taposchaner who left an estate consisting of a residence at 247 Poplarwood Avenue, Winnipeg, Manitoba, some personal effects, and modest savings. The application for probate ascribes a value to the real property of $60,000.00 and assigns to movable property a value of $11,412.00. The real property in fact sold for $46,000.00 and personal effects which were not shown on the application for probate sold at auction for $5,220.00.

 Although I have not done a precise calculation for purposes of determining the proper aggregate value of the estate for purposes of Rule 74.14(3) the value is in the vicinity of $62,630.00. Pursuant to Rule 74.14(4) the appropriate fee to be charged by the lawyer is approximately $1,350.00 - $1,360.00.  Clearly, the respondent is entitled to additional fees with respect to services provided in connection with the sale of the Poplarwood Avenue property.  In the course of administering the estate the respondent law firm received a letter from a solicitor representing Jean McFarlane, a relative of the deceased's late wife. The essence of the claim was that the deceased's late wife was under an Order of Supervision at the time that she married the deceased and, claiming that the marriage was not valid, maintained that the Poplarwood Avenue property which had been transferred from the estate of Anne McFarlane (Taposchaner), the deceased's late wife to the deceased following her death in 1984, properly belonged to the blood relatives of the late Anne McFarlane (Taposchaner). The marriage had taken place in 1979 and the Public Trustee of Manitoba acted as committee of Anne McFarlane (Taposchaner). On the death of Anne McFarlane the Public Trustee acted as administrator of her estate and transferred the estate of the late Anne McFarlane to her husband, the late Frank Taposchaner, pursuant to the provisions of The Devolution of Estates Act.

 The receipt of this claim caused the respondent law firm to engage in fairly extensive research and considerable telephone and written correspondence with the solicitor for Jean McFarlane. Jerry Ross also accepted a trust condition to the effect that any sale proceeds from the Poplarwood Avenue property would be kept held in trust pending resolution of this claim. The acceptance of this trust condition later led to correspondence with the Law Society of Manitoba.

 The respondent rendered accounts for its services in connection with the estate matters based on time charges on an hourly basis which accounts for the size of the account rendered. Jacob Taposchaner became concerned with the way matters were proceeding and ultimately engaged new counsel to complete the administration of the estate. The respondent rendered a further account relating to time spent providing Jacob Taposchaner's new solicitors with various particulars relating to the file and primarily relating to particulars of his accounts.

 In support of the application for assessment of lawyer's bill, Jacob Taposchaner filed an affidavit sworn July 2, 1991 documenting the various accounts rendered and raising a number of concerns with respect to the manner in which the respondent law firm handled the estate administration. The respondent filed no affidavit evidence in response to the affidavit of Jacob Taposchaner. During the assessment hearing Jerry Ross spoke to the various issues raised.
 

CONCLUSIONS:

Upon consideration of the evidence, including a review of the files relating to the administration of the estate and the sale of the Poplarwood property, I have concluded:

  1. There is no evidence of an agreement between the applicant and the respondent to charge fees on an hourly basis and no evidence as to an agreed hourly rate.
  2. The respondent did not maintain detailed and accurate time records, or in any event, it has failed to respond to the court's request to produce same.
  3. Jerry Ross accepted the trust condition imposed by Jean McFarlane's lawyer without receiving instructions from his client.
  4. Jerry Ross engaged his associate to do extensive research with respect to the claim and pursued the matter of the claim without clear instructions from the applicant.

I am persuaded that the time and effort spent by the respondent in dealing with the claim advanced on behalf of Jean McFarlane was not justified. It was appropriate to spend some time investigating the claim so as to determine when Frank Taposchaner and Anne McFarlane were married and what happened on the death of Anne McFarlane (Taposchaner). A brief review of those events would suggest that if Jean McFarlane wished to challenge the marriage she should have done so within a reasonable period of time following the marriage. She had a further opportunity on the death of Anne McFarlane (Taposchaner) to advance a claim against the estate. The fact that Anne McFarlane was under an Order of Supervision of the Public Trustee who, as administrator of her estate, acknowledged the validity of the marriage to Frank Taposchaner and transferred her estate to him in the course of administration clearly reduces any legitimacy to Jean McFarlane's claim. In any event, Jacob Taposchaner as sole executor and sole beneficiary of Frank Taposchaner should have been advised as to what risks, if any, he was exposed to by proceeding with the administration of the estate and being allowed to proceed without incurring the extensive legal expenses which are claimed by the respondent. As I have concluded that some consideration of the claim and research into the background events was appropriate, I am prepared to allow the sum of $750.00 in total with respect to services rendered in connection with the Jean McFarlane claim.

With respect to the general administration of the estate I am persuaded that this was done reasonably effectively and efficiently to the extent that Rule 74.14(4) should apply. I would allow a fee in the amount of $1,360.00 in that regard. I note that the respondent did a calculation which indicated an appropriate fee for general estate administration in the amount of $1,528.25. No calculation has been provided to support that amount, however, I suspect that the value shown on the application for probate, was used. In light of the fact that the value for the Poplarwood Avenue property was substantially less than as shown on the application as verified by the market sale shortly after the time of death I am persuaded that the sale price of $46,000.00 should be the proper value for calculation purposes. At the same time, I have added in an allowance for the sale of personal effects not reflected on the application for probate. Rule 74.14(3) provides that the aggregate value of the estate is the total value of all assets of the estate as shown in the application for probate or administration and any amendment thereto.  An amendment should have been filed and the fact that no amendment was filed certainly does not entitle a solicitor to greater fees than would otherwise be allowed.

The account rendered with respect to the sale of the Poplarwood Avenue property is reasonable and no issue is taken with that.  However, I am not prepared to find the $250.00 fee charged for withdrawal of caveat to be appropriate. In the course of acting for the executor the respondent searched the Poplarwood Avenue property and the existence of the caveat was clearly disclosed. I am persuaded that the respondent should have taken extra care to ensure that the executor and the real estate agent were aware of this caveat so that its existence would have been disclosed on any agreement for sale. There is no evidence that the respondent took any steps to bring the existence of the caveat to the attention of the executor or his real estate agent and I am not satisfied that extra billing for dealing with the caveat is appropriate under the circumstances.

 Having considered all of the issues before me I have therefore concluded that the appropriate amount of compensation for the respondent should be:

 General estate administration                            $1,360.00
 Allowance with respect to McFarlane claim         $750.00
 Fees and disbursements re house sale                  $407.00
 Total                                                                $2,517.00

 The respondent has in fact received $3,607.38 and I hereby order the respondent to pay to the applicant the sum of $1,090.38 within twenty-one days from the respondent's receipt of this report.  In addition the respondent will pay the applicant's costs in this matter in the amount of $350.00 plus disbursements.

F.A. LEE
Master

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Appendix M
 
 

Krawchuk v. Ciastko

Barry Eugene Krawchuk, Q.C., Applicant v. Walter Richard Ciastko, Unionville Toronto, Ontario, and Betty Anne Shantz, Denver, Colorado, U.S.A., Respondents

Citation: 1993 CanRepMan 320, 90 Man. R. (2d) 69
Court: Manitoba Court of Queen's Bench
Judge: Kennedy J.
Judgment: November 5, 1993
Year: 1993
Docket: Doc. PR 90-01 -20591
Counsel: Applicant in person.
  W.M. Molloy, for the Respondents.

Subject:
 Civil Practice and Procedure

Classification:
 Barristers and Solicitors – Relationship with client – Fees – Non-professional or mixed services

Lawyer also acting as executor.

Lawyer acted as both lawyer and executor while acting on an estate. Lawyer had been asked to assume the role of executor to named out-of-province executors. Following the issuance of probate lawyer presented beneficiaries with his statement of accounts which broke down his fees between the tariff amount of $2,750 and additional services amounting to $6,000. Lawyer argued that his dual role and the persistent demands of beneficiaries who resided out of the province entitled him to the additional fees. Beneficiaries questioned the $6,000 for additional services. An assessment of costs allowed the $6,000. Beneficiaries appealed. Held, the appeal was dismissed. Considering the dual role played by lawyer and the demands made by beneficiaries, the additional fee was ~iot unreasonable.

Kennedy, J.:

1 This matter involves a lawyer's account for fees while acting on an estate both in the role of lawyer and executor, the latter being duties he was assigned by the named out-of-province executors.

2  The applicant had acted for the deceased in preparing her will and upon her death was asked by the named beneficiaries who were the surviving children of the deceased and both resident out of the Province of Manitoba, to assume their responsibilities as executor. This is confirmed in the correspondence as follows:

Because neither of us live in Manitoba, in order to expedite settlement of mother's estate, we decided to put both the final legal work and the role of executor in the hands of the lawyer mother engaged to draw up her will years ago – Mr.. (Letter to the Law Society dated January 7, 1992)

3  The estate had assets of approximately $ 164,000.00 which consisted of real property valued at $30,000.00 with remainder in bonds, bank accounts and R.R.S.P.s. On the surface the administration does not appear to be unduly complicated.

4  An initial distribution of a substantial portion of the estate was made to the two equal beneficiaries on a timely basis relatively early in the administration of the estate. The deceased died on September 15, 1990 and probate issued to the respondents on October 23, 1990.

5  On December 12, 1991 the applicant sent to the beneficiaries a final accounting and what he referred to as a "short statement of account", which broke down the fees charged between tariff amount of $2,750.00 and additional services performed $6,000.00 for a total of $8,750.00. Thereafter the beneficiaries questioned the account, placing in issue the question of how the tariff amount under R. 74.14 (4) could be exceeded by a further $6000.00.

6  The matter was referred first to the Law Society of Manitoba which prompted the applicant, Mr. Krawchuk, to obtain an appointment for assessment of costs pursuant to R. 74.14 (7). At this hearing the applicant presented a draft Bill of Costs which exceeded the original "short statement of account" by a further $6617.50 (draft bill of costs  @ page 47,.. $ 15,367.50 less the short statement fees of $8,750.00 = $6,617.50).

7  The correspondence does not threaten to charge the higher fees of $15,367.50, in the event the short statement was unacceptable, only that the sum of an additional amount of $6,000.00. was said to be justifiable by an independent solicitor. Mr. Molloy, on a preliminary point objected on behalf of the beneficiaries to the presenting of a higher bill of costs at the hearing and I agree. Mr. Krawchuk cannot now claim to be entitled to greater fees when his letter of December 12, 1991 advises the beneficiaries that independent counsel opined that he could justify an additional $6,000.00 over and above the amount set by the tariff. The December 12, 1991 correspondence does not suggest that a detailed account would result in even higher fees being claimed. The suggestion in the last paragraph of the letter of December 12, 1991 refers only to justifying the $6,000.00 over and above the amount allowed pursuant to R. 74. 14(4).
 

8  When the matter came on before the Assessment Officer and before this court the respondent took the position that the only fees the Applicant is entitled to are those set out in R. 74.14(4), namely $2,750.00 and he argues that this estate is of average complexity and does not justify additional fees. It is further argued that because the applicant acted as executor, or at least performed the duties of an executor he cannot claim both the full tariff and additional fees. Either he should have only charged 40% of the amount allowed under the rule or have his bill taxed as a solicitor. Mr. Molloy, on behalf of the beneficiaries, takes issue with the Assessment Officer's reasons that allowed additional fees to Mr. Krawchuk in the capacity of executor and full fees under the rule.

9  The argument and the correspondence which provides the evidential base for this matter persuades me that to restrict the applicant to the fees under R. 74.14(4) only would be unfair. Notwithstanding the fact that Mr. Krawchuk cannot now claim the amount he has detailed in his 47 page Bill of Costs, for reasons mentioned above, the Bill does provide evidence of the extent of the work he actually performed. After a detailed examination by the Assessment Officer he determined that the applicant was entitled to additional fees in the sum of $6,000.00. The mere volume of attendances referred to in the draft Bill of Costs and which were unchallenged before me, provides a solid basis for the claim for additional fees.

10  It should be recalled that while Mr. Krawchuk performed the work of an executor he was not in fact the executor. Since he assumed the role of the executor it would probably have been better for him to have outlined his account as 40% of the tariff and claimed a further amount for the additional legal fees as set out in his bill of costs. Were the bill then taxed the likelihood would be that it would result in an amount being allowed in the approximate amount allowed on this hearing.

11  The relationship with his clients, who were resident out of the province, did create additional work. Mr. Krawchuk undertook the responsibility of listing the property for sale and attending to all the details that an executor might otherwise do to dispose of property. He outlined some of these extra duties in his letter of December 12, 1991 . In the course of argument, reference was made to the extra time spent in examining the box of documents that would otherwise have been the responsibility of the respondents. There were weekend phone calls and frequent inquiries that appeared to have been made of him, by legitimately concerned out-of-province beneficiaries and legal executors. This necessarily added to the costs. The correspondence does reflect the applicant's views that the requests made by the beneficiaries were "picky" and that the clients were "knit-picking" in regard to several matters.

12  Mr. Molloy argues that the phone calls and the attendances were not complicated beyond what is normally performed on estate matters, but I am persuaded that the handling of this estate though not complicated in the sense of administering complicated assets resulted in considerably more time than would be ordinarily spent on a routine estate involving similar assets. The Bill of Costs sets out a total of approximately 65 hours charged (and there is no dispute about the number of hours spent) which at an hourly rate of $200.00 would support a fee of roughly $13,000.00. When one considers the nature of the work undertaken, phone calls, payment of bills etc., and other clerical work performed a fee in this range however, cannot be rationalized. Nevertheless it does support the claim for additional fees over and above the amount set in the tariff. As Mr. Krawchuk himself admitted he did not originally submit an account for the higher amount because it could not be justified given the total value of the assets, (which happens to be one of the criteria in R 74. 14(9)). Considering the other factors under this rule, i.e. the nature of the work performed qua executor, and the nature and demands made by the clients, an additional fee of $6,000.00 in my view is not unreasonable.

13  Although Mr, Krawchuk performed the executorial duties for the out of town executors he was not the legal executor and he is entitled to be paid for his additional work beyond the fees prescribed under the rule. The unfortunate confusion here was that the Assessment Officer did not make that distinction and his decision tended, on its face, to compensate a lawyer for work he was not otherwise entitled to charge for, had he been the actual named executor.

14  The appeal is dismissed. The applicant is entitled to total fees in the sum of $8,750.00 as determined by the Assessment Officer, but for the reasons mentioned above.

15 The applicant appears in these proceedings as his own counsel. He has incurred considerable cost with respect to preparing a lengthy and detailed bill of costs, insisted upon by the respondents, as well as attending at the various appearances made before the Assessment Officer and this court. He is entitled to costs but not as counsel in these proceedings. Recognizing there was divided success and to finalize the matter I would fix the costs in favour of the applicant at $500.00 plus disbursements. 


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Appendix N
 
 

Buhr Estate v. Buhr

Donald Nelson Buhr, as Executor of the Estate of Nelson Sylvester Buhr, Deceased, Applicant v.Gerda Buhr, Respondent

Buhr Estate, Re

Citation: 1993 CanRepMan 292, 90 Man. R. (2d) 118
Court: Manitoba Court of Queen's Bench
Judge: Monnin J.
Judgment: November 18, 1993
Year: 1 993
Docket: Doc. PR 79-01-00411
Counsel: Anthony H. Dalmyn, for the Applicant.
  John A. Faulhammer, for the Respondent.

Subject:
Estates and Trusts

Classification:
 Estates – Personal representatives –  Duties and powers – Employment of agents –  Solicitors – Counsel fees

Passing of accounts – Fees relating to executor's interest as beneficiary and not to work as executor – Dower Act, R.S.M. 1988, c. D100, s. 14.

The testator's son was executor. Son's stepmother was the beneficiary of a life estate in the homestead and son was the remainderman. Stepmother claimed a life estate in the property pursuant to s. 14 of the Act. Son, although disputing stepmother's life interest in the real property, did nothing while she resided on the property, paid all insurance and taxes, and made repairs and improvements to the property. On the passing of accounts, son claimed lawyer's fees. The Master concluded that a very small portion of the lawyers' time was spent on matters which related to son performing his functions as executor.  Most of the time was spent relating to the litigious issues which were of personal interest to son as a beneficiary. Those fees were not recoverable from the estate. On appeal, held, the appeal was dismissed. There was no error in the Master's reasons.

Classification:
 Estates – Passing of accounts and remuneration of personal representatives –  Passing of accounts
 

Tenant under life estate -- Right to improve property -- Dower Act, R.S.M. 1988, c. D100, s.14.

The testator's son was executor. Son's stepmother was the beneficiary of a life estate in the homestead and son was the remainderman. Stepmother claimed a life estate in the property pursuant to s. 14 of the Act. Son, although disputing stepmother's life interest in the real property, did nothing while she resided on the property and paid all insurance and taxes.  Stepmother replaced the furnace, repaired and upgraded the septic and water systems, and spent money redecorating the property. She did not consult son on any of these expenditures. On the passing of accounts before a Master, stepmother was ordered to be compensated for the capital improvements but not for the redecorating. Son appealed. Held, the appeal was dismissed. It would have been preferable for stepmother to have obtained authorization for the repairs.  However, they prevented the property from becoming completely valueless and probably permitted its sale at a good price. On the other hand, while the value of the property may have increased due to the redecorating, it was done only to increase stepmother's enjoyment of the house and, therefore, had to be authorized by the remainderman.

Classification:

Estates –  Passing of accounts and remuneration of personal representatives –
Remuneration –  Entitlement to compensation –  Effect of conduct

Delay -- Dower Act, R.S.M. 1988, c. D100, s. 14.

The testator died in 1977. The testator's son was executor. Executor's stepmother was the beneficiary of a life estate in the homestead and son was the remainderman. Stepmother claimed a life estate in the property pursuant to s. 14 of the Act. Probate was not taken out until 1979. Estate debts had not been paid and son, although disputing stepmother's life interest in the real property, did nothing while she resided on the property, paid all insurance and taxes, and made repairs and improvements to the property. Son did not transmit the real property into his name as executor of the will until 1984. Son's motion to dispense with formal passing of accounts was dismissed and accounts were ordered to go before the Master. The order was not taken out until 1991. On the passing of accounts, son claimed compensation as executor.  The Master concluded that son did not conduct himself in the manner expected of a diligent executor.  Furthermore, the fact that stepmother asserted a claim to a life estate clearly affected son's entitlement pursuant to the will. This placed him in a conflict of interest situation from which he should have removed himself. On appeal, held, the appeal was dismissed. There was no error in the Master's reasons.

Monnin, J.:

1  Donald Nelson Buhr appeals an order made by the master on his application to pass accounts.

The Facts

2  Donald Buhr is the executor of his father's estate. His father passed away on November 9, 1977.

3  Gerda Buhr is Donald Buhr's stepmother and the beneficiary of a life estate in her deceased husband's homestead. Gerda Buhr and her stepson do not get along.

4  The late Nelson Sylvester Buhr died leaving an estate consisting of immoveable property valued at $22,000.00 and $1,358.81 in a bank account.

5  The history of the administration of this estate must be understood to deal with the matters raised on appeal. I cannot relate this history in any better terms than did the master in his reasons:

      "One of the major problems affecting the administration of this estate was the assertion by Gerda Buhr of a right to a life estate in the real property pursuant to s. 14 of the Dower Act.  This claim was originally resisted by the executor who claimed that Gerda Buhr and the late Nelson Buhr were separated at the time of the death of Nelson Buhr, and that Gerda Buhr had deserted Nelson Buhr. However, the executor apparently conceded Gerda Buhr's entitlement to exercise those dower rights with respect to the real property. There were legitimate debts of the estate which exceeded the amount of the moveable property and based on the generally accepted principle that the debts, funeral and testamentary expenses and costs of administration have priority over the claim to a life estate, the executor quite
  properly could and should have sold some, if not all, of the property, paid those debts, valued the life interest of Gerda Buhr and paid her the value of same and divided the balance of the estate equally between himself and Gerda Buhr. Unfortunately, that was not done.  Donald Buhr did not take out a Grant of Probate until February, 1979, approximately one and one-quarter years after the death of Nelson Buhr. Estate debts had not been paid and Donald Buhr, although disputing Gerda Buhr's right to assert a life interest in the real property, sat back while Mrs. Buhr continued to reside on the property, exercising all rights with respect to the property, including the payment of all insurance and real property taxes, the settlement of a fire insurance loss, and the making of repairs and improvements to the property. Gerda Buhr continued paying the real property taxes until 1982 or 1983. It was only in 1984 that Donald Buhr transmitted the real property into his name as executor of the will. It was after this point in time that the litigation between the parties escalated with an order emanating from this Honourable Court pursuant to motions heard on September 25, 1989, provisions of which order were primarily consented to as to form and content between counsel for the respective parties. The motions were heard by Coleman, J. who dismissed the executor's motion to dispense with formal passing of accounts and directed that the accounts were to go before the Master. Coleman, J. also dismissed Gerda Buhr's motion to have Donald Buhr removed as executor of the estate and further directed that the real property taxes which had been paid by the executor be charged to Gerda Buhr's share of the estate and ordered no costs payable with respect to the motions heard. This order was not taken out by counsel until January 24, 1991. There is no explanation for the delay between the appearance on the motion in September, 1989 and the date of taking out the order and the further delay between that time and the attendance before me for passing the accounts. It is significant to note that the real property consisted of two parcels of land and that with the consent of Gerda Buhr the smaller parcel was sold on November 1, 1987 for $13,250.00,  which sale generated suff~cient moneys to satisfy any outstanding estate debts. Gerda Buhr provided her consent to the sale of this property on the specific understanding that she would receive the value of her life interest in that property prior to any distribution pursuant to the will.

          For the purposes of the passing of accounts Gerda Buhr takes issue with the claim of Donald Buhr for compensation as executor of the estate. A claim for compensation in the amount of $2,000.00 is being maintained by Donald Buhr. Gerda Buhr also takes exception to the request for payment of legal fees of Walsh, Micay & Company. Approval of legal fees and disbursements in the amount of $7,760.61 is being sought by the executor through his solicitors. Gerda Buhr also advances a claim for repayment from the estate for moneys which she expended in connection with the real property. In addition to these specific issues is the overriding issue of the accounts as presented."

6  The master denied Donald Buhr any compensation for his acting as the executor of his father's estate.

7  The master allowed fees and disbursements of $600.00 and $75.00 respectively to be paid from the estate.

8  The master ordered that Gerda Buhr pay her own legal fees.

9  The master further ordered that Gerda Buhr be reimbursed the sum of $13,433.60 from the estate for capital improvements she caused to be done to the property of the estate.
 

Cost of Repairs and Unjust Enrichment

10  Gerda Buhr sought repayment of the sums she paid as capital expenditures for the homestead. These payments were made to replace the furnace, to repair and upgrade the septic system as well as the water system. The costs of fire insurance premiums are also being claimed less payments received on a claim.

11  Gerda Buhr made all of these payments on her own initiative without any prior consultation with or authorization by the executor.

12  In denying liability for this payment Donald Buhr takes the position that a person having a life estate cannot make these expenditures without authorization and then seek reimbursement. Gerda Buhr takes the opposite view. Both parties refer me to Chupryk v. Haykowski, [1980] 4 W.W.R. 534 (Man. C.A.) in support of their positions.

13  I do not find that Chupryk stands for the proposition that the holder of a life estate can effect repairs to a property even if only to preserve it. Quite to the contrary, both Matas and O'Sullivan JJ.A. clearly stated in two different sets of reasons that the holder of a life estate cannot be compared or equated to a trustee, who might have the right to expend funds on a trust property to maintain it.

14  Furthermore, O'Sullivan J.A. deals with the result of this province not having a Settled Lands Act in these terms:

         "There is no doubt that the inability of a tenant for life to raise money for improvements may work a hardship, not only on the tenant for life, but also on the remainderman and, in some cases, others. No one can benefit from a situation where property is allowed to deteriorate and run down. In England, this problem has been dealt with in a series of statutes. The Settled Lands Acts recognize land held in succession as settled land and authorize the tenant in possession to raise money for improvements, sometimes on his own authority and sometimes with the approval of the court. Ontario and British Columbia have enacted Settled Lands Acts to achieve the same purpose, but Manitoba has no Settled Lands Act.  This does not mean that in Manitoba there is no relief for a tenant who cannot economically sustain a life interest. I agree with my brother Matas that the Law of Property Act, C.C.S.M., c. L90, covers successive interests, as well as concurrent interests, in land, in the vast majority of cases, application of the provisions of our Law of Property Act can do justice as between owners of successive interests, since they will have money in lieu of money's worth."

15  In addition to Chupryk, counsel for Gerda Buhr referred me to Wilson v. Whelpley (1929), 1 M.P.R. 196 (N.B. C.A.). I find this decision to be more favorable to Gerda Buhr's position. The Appellate Division of the Supreme Court of New Brunswick upheld the Chief Justice of that court when he found:

        " In this case under consideration I have come to the conclusion that the expenditure in the way of repairs was largely in the nature of salvage of the property and was evidently, to use the language of Halsbury which I have just quoted, as much for the benefit of the remainder man as of the beneficiary for life."

16  It would have been preferable if Gerda Buhr had obtained authorization to effect the repairs either from the remainderman, Donald Buhr, or from the court. However, I am satisfied that the repairs and the payment of insurance premiums for which she now claims are expenses in the same category as those made by the life tenant in Wilson.  At the very least, Gerda Buhr, by effecting the repairs in question, prevented the property from becoming completely valueless and probably eventually permitted its sale at a fairly decent price.

17  Gerda Buhr is entitled to be reimbursed for these repairs in the manner found by the master.

18  Along with her claim for compensation, Gerda Buhr seeks an award on the basis that the estate has been unjustly enriched by her actions. She alleges that in addition to what I term the structural repairs, she spent monies redecorating or renovating the property and that these changes increased the value of the premises when they were sold. I do not disagree that the actions of Gerda Buhr might well have increased the value of the property, but I do not find the passing of accounts to be the proper forum to have that claim dealt with.

19  I also deny her claim because these expenses were not done to preserve the property and quite conceivably could have been done only to increase her enjoyment of the house. Such expenses should have been authorized by the remainderman. She did not seek that authorization and consequently those expenses remain at her peril. She is not entitled to any payment from the estate in this category.

Payment of Executor's Legal Fees

20  The master wrote:

        "Donald Buhr had originally engaged Harold Huppe to act as estate solicitor and a legal fee was paid to Mr. Huppe for his services. This payment is not disputed by Gerda Buhr. Subsequently, Donald Buhr engaged J.F.R. Taylor, Q.C. who attended to the basic administration matters and his account is also not in dispute. In 1985 Donald Buhr engaged Walsh, Micay and Company and the services provided by Walsh, Micay and Company with respect to certain transactions relating to the real property are not in issue. The account in issue is an account dated January 9, 1992 detailing time spent in connection with 'services rendered to Donald Nelson Buhr as executor of the estate of Nelson Sylvester Buhr, late of Seven Sisters in Manitoba, with respect to advice concerning litigation by Gerta (sic) Buhr, a beneficiary of the estate of Nelson Sylvester Buhr including claims of homestead rights on the Dower Act, informal accounting of information concerning estate assets, motions by Gerta (sic) Buhr touching on the administration of the estate, and motions by Donald Buhr concerning the administration of the estate'. Having reviewed the particularized statement of
account, I have concluded that a very small portion of the time was spent on matters which relate to the executor performing his functions as executor of the estate. Most of the time is spent relating to the litigious issues which were of a personal interest to Donald Buhr as a beneficiary of the estate. Accordingly, I am persuaded that Donald Buhr personally should bear responsibility for the payment of most of the fees charged by Walsh, Micay and Company. I would allow to Walsh, Micay and Company an amount of $600.00 out of the estate, representing the portion of the fees which I believe can be properly attributed to services rendered to the estate and, in addition, I would allow $75.00 of the disbursements that have been itemized. Walsh, Micay and Company will also be entitled to payment out of the estate in connection with the passing of accounts pursuant to the tariff established by Rule 74.14(11)(d)."

21  I find no error in the master's reasons. I do not interfere with the result.

Executor's Compensation

22  The master wrote:

        "An executor is prima facie entitled to be compensated for the care, pains, trouble and time expended in or about the estate, although there are a number of factors to be considered by the court in determining an appropriate level of compensation. It is apparent that Donald Buhr did not conduct himself in the manner expected of a diligent executor. He did not take out a grant of probate for some sixteen months after the death of his father and did not attend to the payment of estate debts until after that time. His stepmother, Gerda Buhr, asserted a claim to a life estate in the real property which clearly affected his entitlement pursuant to the will of his late father. This placed him in a clear conflict of interest situation which he should have removed himself from. Instead, he proceeded to maintain a position challenging Gerda Buhr's claim, precipitating the litigation and the accompanying legal costs which ensued. As indicated earlier, Mr. Buhr's attention to the administration of the estate was sporadic as he not only delayed in attaining his grant of probate but delayed some further five years before transmitting the titles to the real property. There was no taking in of estate assets and the estate debts were ultimately handled by the solicitors engaged initially to handle the administration of the estate. I cannot say that under the circumstances, Mr. Buhr is entitled to any compensation and would order that no compensation be paid to Donald Buhr, as executor of the estate of the late Nelson Sylvester Buhr. "

23  I find no error in the master's reasons. I do not interfere with the result.

Conclusion

24  The administration of this estate has been distressing the lives of the parties to this action for much too long. It should be wound up as quickly as can be. The balance of the master's order provides for that. It should be followed immediately.

Gerda Buhr will have her costs for this appeal.

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Appendix O

Practice Direction

PD 91- 02

Fees Charged by Personal Representative's Lawyer on Administration of Estate

The Discipline Committee has recently received a number of complaints pertaining to fees charged by lawyers who have been retained by a personal representative to complete the administration of an estate.

The committee wishes to remind the profession that the fee that a personal representative's lawyer is permitted to charge is governed by the Queen's Bench Rules. In particular Rule 74.14 states that a lawyer shall not accept payment in excess of the basic fee contained in Form 74AA unless all of the beneficiaries whose interests are affected by the lawyer's fees are adults, have been served with a copy of Form 74AA and have consented to the fee. Form 74AA establishes a fee based on the aggregate value of the estate calculated as follows:

  3%  on the first  $ 10,000
  2%  on the next  $ 90,000
  1%  on the next  $200,000
  over $300,000 by agreement or by application to the court.

A lawyer retained by a personal representative may also request that the court review and fix the fee payable and may be entitled to receive payment for additional se~vices which are specifically outlined in Rule 74.14(11). However, it is improper for the lawyer to accept a fee in excess of the fee based on the aggregate value of the estate except as otherwise allowed in Rule 74.

(May 1991)
 
 

Practice Direction

PD 92 - 01

Lawyer Acting Simultaneously as Personal Representative & Solicitor for Estate

It has come to the attention of the Society that there appears to be some inconsistency and uncertainty among members of the profession as to the appropriate procedure for handling the funds from an estate when a lawyer is acting in the dual capacity of personal representative and solicitor for an estate.

The Discipline Committee wishes the profession to be aware that in those situations where a lawyer is acting as the executor or administrator of an estate, and at the same time is performing the legal services that would normally be performed by the solicitor retained to act for the estate, then all funds deriving from the estate must be treated as client trust funds and dealt with accordingly as required by the Society's trust account rules.

(May 1992)

- - - - -

Practice Direction

PD 93 - 01

Administration of Estates

The Discipline Committee continues to receive a significant number of complaints concerning the conduct of lawyers acting as the solicitor for an estate. The committee wishes to remind members of the profession of the importance of completing the administration of an estate in a timely fashion, and the importance of communicating with the personal representative of the estate and with beneficiaries as to the progress of the matter.

Furthermore, the committee wishes to reiterate its earlier advice in Practice Direction PD 91-02 with respect to the question of legal fees which may be charged by the lawyer for an estate and the procedural requirements of Queen's Bench Rule 74.14, as this appears to be an area which is misunderstood or ignored by many members. Some of the important provisions of Queen's Bench Rule 74.14 are as follows:

 · The maximum basic fee that a lawyer is permitted to charge in most circumstances is prescribed in Rule 74.14(4):

     3%  on the first    $10,000.
     2%  on the next    $90,000.
     1 %  on the next  $200,000.
     over $300,000 by agreement or application to the court.

 · Additional fees for certain services may be permitted under Queen's Bench  Rule 74.14(11).

 · Form 74AA outlines the basic legal fees which a lawyer is permitted charge and other relevant information relating to the respective rights and obligations of the lawyer, the personal representative and the beneficiaries. Queen's Bench Rule 74.14(14) requires a lawyer to serve a copy of this form on the personal representative and each residuary beneficiary within 60 days of the grant of letters probate or letters of administration.

  · Except with the permission of the Court, a lawyer is nQl permitted to charge a fee in excess of the maximum amount prescibed by the rules unless all of the beneficiaries whose interests are affected are adults, have consented to an agreement between the lawyer and personal representative with respect to the fee, and have been served with Form 74AA [see Queen's Bench Rule 74.14(12) and (13)].

  · Any fee provided for under Queen's Bench Rule 74.14 is subject to review by the court.

In some cases, lawyers have charged a fee or paid themselves an amount in excess of the basic fee without complying with the requirements of the rules, and have then purported to retroactively obtain the consent of the personal representative and/or beneficiaries. The Discipline Committee wishes members to be aware that in the committee's opinion it is not appropAate for a lawyer to charge or withhold the higher fee prior to serving the parties with Form 74AA and obtaining their consent. The committee also recommends that the consent of the personal representative and beneficiaries be obtained in writing.

Members are advised to familiarize themselves with all the provisions of Queen's Bench Rule 74.14.

(August 1993)

- - - - -

Practice Direction

PD 94 - 01

Proper Procedures for Handling Estate Funds When Acting as Solicitor For an Estate

Although most members of the profession are aware of the basic requirements of the Society's trust account rules, there appears to be a great deal of inconsistency in the practices followed by lawyers acting as the solicitor for an estate with respect to the treatment of estate funds handled by the lawyer. The Society wishes to remind members that estate funds received by the lawyer must be treated in the same manner as any other trust funds. The requirements of the trust account rules (Rules 127through 138) apply without exception, notwithstanding that it may be necessary or desirable to involve the personal representative in some of the tasks relating to the administration of the estate such as the payment of outstanding bills and so forth.

The lawyer must firstly determine in consultation with his or her client whether it will be the lawyer or the personal representative who receives and controls the estate funds.  If it is the lawyer, then the estate funds are like any other trust monies and must be handled accordingly. Thus, all monies from the estate which pass through the hands of the lawyer must be immediately deposited in the lawyer's pooled trust account in the name of either the estate or the personal representative. Where appropriate, the funds can then be either invested in a specif~c trust investment account (i.e. GIC, term deposit, daily interest account) on which interest earned will be for the benefit of the estate or the residual beneficiaries, or disbursed to the appropriate parties pursuant to the instructions of the personal representative.

Where cheques from a third party are made payable to the estate rather than to the law firm in trust for the estate, then it would be appropriate to have the personal representative endorse the cheque to the law frm or provide a letter of direction authorizing the lawyer as solicitor for the estate to deposit all such estate cheques to the lawyer's trust account in trust for the estate.

On the other hand, if the lawyer and personal representative agree that the funds should be under the direct control of the personal representative so that he or she can attend to payment of estate accounts and other debts, then the estate account should be outside of the law frm's trust account system and the lawyer should have no signing authority on the account whatsoever. Parties indebted to the estate should be instructed where possible to send the cheques directly to the personal representative payable to the estate. Where cheques payable to the estate are sent to the lawyer, the lawyer may deliver the cheque directly to the personal representative for deposit in the estate account. However, where the lawyer receives a cheque payable to his or her firm in trust for the estate, those monies constitute trust funds received by the lawyer and must be immediately deposited in the pooled trust account. The lawyer can then issue a trust cheque payable to the estate and deliver it to the personal representative for deposit in the private estate account. Some examples of practices which have been observed which the Society considers to be inappropriate and which should not be followed are:

  · the lawyer opens an "estate bank account" with signing authority given to both the lawyer and the personal representative, where both signatures are required or where either one of them can sign. It is improper to allow trust funds to be under the control of anyone other than the lawyers in a firm or those lawyers in conjunction with other Iaw firm employees tsee Rule 129(1)(d)];

  · the personal representative initially opens an estate bank account and then later turns control over to the lawyer, with any variation of signing authority as noted above. The account is therefore not part of the lawyer's trust account system and not recorded accordingly;

  · the lawyer opens a separate bank account in trust for the estate, but does not identify the account as a trust account nor record the transactions under the law firm's trust record system. The funds are therefore under the control of the lawyer but not documented and not reconciled monthly as required by the Society's rules.

In summary, if estate funds are to be handled by the lawyer acting as solicitor for an estate, then the funds should be solely within the control of the law firm and should be deposited, disbursed and documented in accordance with all requirements of the Society's trust account rules.

(January 1994)

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Appendix P
 

THE LAW SOCIETY OF MANITOBA
DISCIPLINE CASE DIGESTS

LAWYER'S NAME         Theodore Patrick Besko                               Case No. 94-11

JURISDICTION              Manitoba

INDEX                           professional misconduct (15 counfs)

                                        · misappropriation of trust funds
                                        · failing to provide Form 74AA
                                        · excessive fees
                                        · taking fees without rendering a bill

DATE OF HEARING     August 15, 1994
PANEL                           Douglas Yard, Q.C. (Chairperson)
                                       Gregory Hawrysh
                                        Bruce Miller, Q.C.

DISPOSITION                disbarred
                                       $7,200 costs

COUNSEL                      Daniel Dutchin for the Law Society of Manitoba
                                        William Olson, Q.C. for the Member

Facts

Mr. Besko, who was called to the Bar on September 23, 1963, appeared before the Discipline Committee of the Law Society of Manitoba on August 15, 1994.

Mr. Besko was a sole practitioner and acted on behalf of a number of clients with respect to estate and general matters.

While acting on an estate matter, he failed to provide the beneficiary of the estate with a copy of Form 74AA as required by the Queen's Bench Rules.

While acting on another estate matter, Mr. Besko misappropriated monies held in trustforthe estate in an amount in excess of $18,000.  Mr. Besko stated this amount was for fees, but it was determined that in relation to the assets of the estate the allowable fees that would be payable to him as a lawyer were slightly in excess of $2,000. He had also failed to provide the personal representative of the estate with a copy of Form 74AA.

On another estate matter, Mr. Besko misappropriated monies held in trust for the estate in the amount of $10,000. These monies had ostensibly been taken as fees however, pursuant to the Queen's Bench Rules the allowable fees would have been $1,400. He also failed to provide the administratrix of this estate with a copy of Form 74AA.

While acting on another estate, Mr. Besko took fees in excess of those provided for in the Queen's Bench Rules based on the value of the estate. In this particular estate, he charged fees that were approximately $2,300 in excess of the allowable fee. He also failed to provide the personal representative with a copy of Form 74AA.

While acting for clients with respect to the purchase of some property, Mr. Besko misappropriated funds in the amount of $4,000 from his trust account.

While acting for another client with respect to the sale of some property, he again misappropriated monies in excess of $2,400 by withdrawing those funds from his trust account without the authority of his client.

Mr. Besko, while acting for a client with respect to the purchase of some property, misappropriated monies held in trust by withdrawing those monies in the amount of $950 without the authority of his client. While acting for another client in respect to a sale of property, he withdrew monies in the amount of $1,100 from trust for fees without a bill for such fees being prepared and sent to his client at the time the money was withdrawn.

While acting for a client with respect to a sale of property, he misappropriated client trust funds in the amount of $2,650 when he transferred those funds to a "fee trust account" created by him without the authority of his client.

While acting for another client with respect to the sale of property, he withdrew monies from his trust bank account to pay himself for fees and disbursements without bills for such fees and disbursements being sent to his client at the time the monies were withdrawn. The total value of the monies taken in this fashion were in excess of $4,600.

On another file dealing with the sale of property, he misappropriated $1,000 by transferring these monies on two occasions from trust without the authority of his clients and then used those monies for some unrelated purpose. In this matter Mr. Besko returned a portion of the monies to the client trust account.

Finally, while acting with respect to another estate matter, he withdrew monies from his trust bank account to pay himself for the recovery of fees and disbursements without bills being prepared and sent to his client at the time the monies were withdrawn. The total amount of the monies was in excess of $9,400.

Comments of the Discipline Committee

Mr. Besko pled guilty to all of the charges. The Committee was satisfied that the facts contained in each count amounted to professional misconduct.

The Committee noted that there were four categories of offences to which Mr. Besko had pled guilty. The first category of offence was the failure to provide the personal representatives or residual beneficiaries in estate matters with copies of Queen's Bench Form 74AA. There were four such offences of this kind.

The Committee noted that no explanation was provided for these four offences, but also that counsel had submitted that Mr. Besko was competent to practice in this area of law. The Committee observed that competence implied knowledge of the Rules and obligations and therefore inferred that Mr. Besko, with knowledge and intent, failed to comply with that Rule.

The Committee considered this a serious matter because it created an environment in which an uninformed client would not have the necessary knowledge to make an informed judgment about the fees. The Committee also felt that this had enabled Mr. Besko to engage in the irregular accounting and billing practice that had occurred.

The second category of offences involved charging fees in excess of those permitted by the Court of Queen's Bench Rules with respect to estate matters. The Committee noted that there were three counts in this category and that each of these was facilitated in some way or another by Mr. Besko's failure to provide Form 74AA to the clients. They also noted that in some cases Mr. Besko had failed to provide interim accounts as a result of which the clients were unaware of what was going on. The Committee also noted the fact that there had been a repayment by Mr. Besko of the excessive fees by the time of the hearing.

The third category of offences involved the breach of Law Society Rule 129 (1 ) (c) which prohibits the withdrawal of client trust funds without rendering and delivering an account to the client at the time of the withdrawal. The Committee had been advised that Mr. Besko used what he called a "fee trust account". The monies had first been transferred to this account and then withdrawn. The Committee noted that such a trust account was irregular and inconsistent with the Rules of the Society. They noted that the clients were not informed that their funds were going to a merged account that was used by Mr. Besko for fees.

The fourth category of offences involved misappropriation of trust funds. The Committee noted that there were seven counts amounting to a total of approximately $40,000. The Committee accepted the representation by counsel that the misappropriation of these funds did not amount to embezzlement ortheft. They noted, however, that the monies were taken without the knowledge or authority of the clients and that these funds were moved to Mr. Besko's "fee trust account" which was his drawing account. The Committee also noted that at the time the Law Society Auditor became involved, this fee trust account was short $17,000. Mr. Besko had to borrow this amount in order to repay his clients.

The Committee was told that Mr. Besko blamed his poor accounting practices for the irregularities which occurred. The Committee, however, observed that Mr. Besko had been disciplined previously for similar irregularities in accounting practices in 1988 and further that he ought to have been able to appreciate and understand the absolute requirement to keep a set of books in accordance with the Rules of the Law Society.

Mr. Besko's counsel indicated that Mr. Besko intended never to practice law again and was requesting the opportunity to withdraw from practice. However, the Committee was satisfied that The Law Society Act and Rules do not allow for such withdrawal on the basis as submitted.

Findings and Penalties

The Committee decided that based upon all of the counts in the Citation and the circumstances giving rise to the counts, disbarment was the appropriate disposition. The Committee noted that there had been a prior record for similar offences, that there were a significant number of offences before the Committee on this particular occasion and that the public needs and deserves to be protected from members who practice in the way that Mr. Besko did. They also noted that deterrence was an important consideration.

With respect to the matter of costs, the Committee was aware that a custodian had been in place since Mr. Besko's interim suspension in the summer of 1993. They were also apprised of the costs of the audit and other incidental matters. The Committee therefore assessed costs in the sum of $7,200.

- - - - -
 

THE LAW SOCIETY OF MANITOBA
DISCIPLINE CASE DIGESTS

LAWYER'S NAME                  Jerry George Ross                        Case No. 95-03

JURISDICTION                       Manitoba

INDEX                                      professional misconduct (8 counts)

                                                · excessive fees (4 counts)
                                                · payment of fees without permission (3 counts)
                                                · improper payments from trust account (1 count)

DATE OF HEARING             January 31, 1995

PANEL                                   Reeh Taylor, Q.C. (Chairperson)
                                                Doreen Kelly
                                                Ron Toews

DISPOSITION                      $3,000 fine
                                                reprimand
                                               $2,000 costs

COUNSEL                           D. Dutchin for the Law Society
                                             S. Vincent for the Member
 

Facts

Mr. Ross, who was called to the Bar on June 26, 1973, appeared before the Discipline Committee on January 31, 1995.

Mr. Ross acted on behalf of four estates and on each of these files, he charged fees in excess of the amount provided pursuant to Queen's Bench Rule 74.14(4).  He did not receive the consent of the beneficiaries to charge a sum greater than the allowable fee in any of those estates.

As of the date of the Discipline Hearing, Mr. Ross had refunded the appropriate excess fees to each of the estates in question.  The fourth estate file had been arbitrated and Mr. Ross had been ordered to refund $5,008.00.

On the tree of the estate matters, Mr. Ross also withdrew fees from his trust bank account without bills for such fees being prepared and sent to the client at the times the monies were withdrawn.  This was contrary to Rule 129(c) of The Rules of the Law Society of Manitoba.

On a real estate transaction file, Mr. Ross appropriated monies held in trust on behalf of his clients on account of fees without the authority of his clients. This was in breach of Rule 13-7 of The Rules of the Law Society of Manitoba

Comments of the Discipline Committee

Mr. Ross admitted the above-noted charges before the Discipline Committee.

The Committee considered the circumstances giving rise to the charges and considered the fact that Mr. Ross had refunded the excess fees charged to the estates. The Committee did note, however, that the restitution probably would not have been made had the offences not been discovered by way of audit and complaint.

The Committee also considered that Mr. Ross had a clear record, but noted that the charges in this Citation arose with respect to Mr. Ross' estate practice.

Findings and Penalties

The Committee imposed a fine of $3,000.00 and a reprimand.  They also imposed costs of $2,000.00.

Due to the Committee's concerns about Mr. Ross' estate practice, it placed a condition on the practising certificate of Mr. Ross that with respect to administration of estates, Mr. Ross not make trust transfers from his trust account, nor render bills to clients without having the trust transfer or bill approved by an independent solicitor approved by the Committee.

- - - - -
 

THE LAW SOCIETY OF MANITOBA
DISCIPLINE CASE DIGESTS

Case 96-26

GORDON WALTER KATELNIKOFF
Winnipeg, Manitoba

Called to the Bar   June 24, 1975

Particulars of Charges
Professional Misconduct
·  Transferring money from trust to general account without preparing and sending a bill (4 counts)

· Transferring money from trust to general account for fees not yet earned (4 counts)

· Charging fees to an Estate in excess of the fees permitted by Queen's Bench Rule 74.14(4) without the consent of the beneficiaries (2 counts)

· Failure to provide Form 74M on Estate matters (2 counts)

· Failure to keep and maintain trust account reconciliations (1 count)

Date of Hearing   September 26, 1996

Panel    G. Greg Brodsky, Q.C. (Chair)
            Victor Bellay
            Patrick Riley

Disposition   Fine $250.00
                    Costs $1,263.39

Counsel        D. Poskar for the Law Society
                    D. Ramsay for the member
 

Breach of Accounting Rules

Facts

Mr. Katelnikoff appeared before the Discipline Committee on September 26, 1996.

Mr. Katelnikoff admitted the following counts:

 (a) four counts of transferring money from his trust to general account without preparing and sending a bill;

 (b) four counts of transferring money from his trust to general account for fees not yet earned;

 (c) two counts of charging fees to an estate in excess of the fees permitted by Queen's Bench Rule 74.14(4) without the consent of the benef~ciaries;

 (d) two counts of failing to provide Form 74AA on Estate matters; and

 (e) one count of failing to keep and maintain trust reconciliations.
 

Decision and Comments

The Committee found Mr. Katelnikoff guilty of professional misconduct based on his admission to the charges which resulted from a spot audit of his law practice.

Penalty

The Committee considered the facts that Mr. Katelnikoff had no prior record with the aw Society, had entered a plea of guilty to the counts set out in the Citation and had co-
operated with the Law Society.

The Committee imposed a fine of $250.00 and costs of $1,263.39 payable by way of post-dated cheques at the rate of $100.00 per month commencing October 1, 1996.
 

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Appendix Q
 
 

Syrota v. Clark Estate

KAREN LINDA SYROTA, LESLIE ANNE SYROTA, GAIL LORNA DRADER and BRUCE LLOYD CLARK v. MARY GRACE EDITH CLARK (Executrix of Estate of ERIC WARNER, Deceased), and the said MARY GRACE EDITH CLARK and FLOSSIE GLADYS McCUTCHEON

Citation: 1992 CanRepMan 75, 47 E.T.R. 306, 83 Man. R. (2d) 21, 36 W.A.C. 21

Court: Manitoba Court of Appeal

Judge: Huband, Lyon and Helper JJ.A.

Oral reasons: October 29, 1992

Additional Written Reasons for Judgment:  November 4,1992

Year: 1992

Docket: Doc. Al 91-30-00481

Counsel:     L.C. Tough, for appellants.
             G.H. Smorang and N.R. Piel, for respondents.

Subject:
 Estates and Trusts
 Civil Practice and Procedure

Classification:
 Estates – Intestate succession –  Inheritance by children – General

  Estates – Testamentary capacity and undue influence – Testamentary capacity –  Standard required – "Sound and disposing mind"

  Estates – Testamentary capacity and undue influence – Testamentary capacity –    Practice and procedure –Evidence – General

  Estates – Testamentary capacity and undue influence – Undue influence – Suspicious circumstances – General
 

  Estates –  Grant of probate or letters of administration –  Practice and procedure –  Costs – Out of estate

  Estates – Actions involving personal representatives – Practice and procedure –  Costs – General

  Practice – Costs –  Offers to settle or payment into court –  Offers to settle –  Discretion of court

Wills – Probate practice and procedure –  Costs –  Offers to settle –  Defendants' offer to settle being understandably and reasonably rejected – Application of R. 49 not being appropriate so that defendants not permitted to recover party-and-party costs from date offer served –  Manitoba, The Queen's Bench Rules, R. 49.

Wills – Probate practice and procedure – Costs –  Trial judge erring in awarding costs out of estate to plaintiffs on solicitor/client basis –  No exceptional circumstances existing to warrant order –  All parties to bear own costs of trial, and unsuccessful appellant to pay respondents' cost of appeal on party-and-party basis.

Practice and procedure –  Offers to settle –  In probate matter, offer to settle understandably and reasonably rejected – Application of R. 49 not being appropriate so that defendants not permitted to recover party-and-party costs from date offer served – Manitoba, The Queen's Bench Rules, R. 49.

Practice and procedure – Costs – In probate matter, trial judge erring in awarding costs out of estate to plaintiffs on solicitor/client basis – No exceptional circumstances existing to warrant order – All parties to bear own costs of trial, and unsuccessful appellant to pay respondents' costs of appeal on party-and-party basis.

In his will, the testator made the respondent C, who was his estranged second wife, executor and sole beneficiary of his estate. After the testator's death, the appellants, who were the testator's four children from his first marriage, brought proceedings alleging lack of testamentary capacity on the part of the testator, and undue influence on the part of C. Both these allegations were rejected at trial, and the court refused to revoke probate of the will.

Before the trial, various settlement offers had been made. C had offered to settle for $40,000, and then later for $16,000. The appellants had offered to settle for $80,000. At trial, the judge, who was initially unaware that any settlement offers had been made, ordered that all costs be paid out of the estate on a solicitor/client basis. On a subsequent hearing regarding costs, C objected, arguing that, because the appellants had not accepted her offer to settle, she was entitled to party-and-party costs against them from the date the rejected offer was served, in accordance with The Queen 's Bench Rules. This argument was not accepted. The trial judge found that due to the circumstances surrounding the relationship between the parties and the testator, the application of R. 49 was not appropriate. He also found that it was the action of the testator in secretly making a will disinheriting his children that was the cause of the litigation. In these circumstances, costs should not follow the event, and he conf~rmed that the appellants should have their costs out of the estate on a solicitor/client basis. C cross-appealed the award of costs.

Held:

The cross-appeal was allowed.

The trial judge did not err in refusing to award C party-and-party costs against the appellants in accordance with R. 49.

The trial judge did err in his application of the principles governing costs to his specific findings of fact. Solicitor/client costs should be awarded only in rare and exceptional cases, and parties involved in estate litigation should not rely on their costs being paid out of the estate. In this case, the evidence of the appellants, both on the issue of the capacity of the testator and on undue influence by the executor, was meagre at best. Although the testator's actions may have justified an investigation, his actions did not cause the litigation. There were, therefore, no exceptional circumstances that would give rise to solicitor/client costs, or indeed any costs in favour of the appellants. All parties were to bear their own cost of the trial, but the respondents were to have their cost of the appeal on a party-and-party basis.

Cases considered:

Bjorninen v. Mercredi, [1984] 2 W.W.R. 646, 42 C.P.C. 97, 27 Man. R. (2d) 67, 6 D.L.R. (4th) 241 (C.A.) – referred to

Cutcliffe, Re; LeDuc v. Veness, [1959] P. 6, [1958] 3 All E.R. 642 (C.A.) – referred to

Manitoba (Public Trustee) v. Ballen (1992), 44 E.T.R. 279, 87 D.L.R. (4th) 111, (sub nom. Re Balan's Estate) 76 Man. R. (2d) 241, 10 W.A.C. 241 (C.A.) – considered

Spiers v. English, [1907] P. 122 – considered

Statutes considered:
Testator's Family Maintenance Act, The, R.S.M. 1988, c. T50, C.C.S.M., c. T50.

Rules considered:
Manitoba, The Queen's Bench Rules – R. 49

Cross-appeal from judgment reported at (1991), 43 E. T.R. 287 (Man. Q.B.), awarding solicitor-client costs out of estate to unsuccessful plaintiffs.

The judgment of the court was delivered by Helper J.A.:
1 At the hearing in this court, the cross-appeal by the respondents from the order of costs awarded to the appellants on a solicitor/client basis was allowed with an indication that reasons would follow. These are the reasons for the decision on the cross-appeal.

2 At trial, the appellants attacked the will on the basis that the testator did not have testamentary capacity and further that the respondent wife had exercised undue influence upon the testator. They also made a claim under The Testator 's Family Maintenance Act, R.S.M. 1988, c. T50. The trial judge rejected all claims by the appellants.

3  In dealing with costs, the learned trial judge referred to the various offers of settlement that were exchanged between the parties. The respondents' offer to settle, made on January 23, 1991, was in the amount of $40,000. That offer expired without acceptance on March 15, 1991. The appellants offered to settle for $80,000 on March 27, 1991. The respondents did not act on that offer, but made a further offer to settle for $16,000 on April 3, 1991. This final offer expired on the date of the commencement of trial, April 18, 1991.

4  The trial judge found that due to "the circumstances surrounding the relationship between the parties and the testator," the application of Queen's Bench R. 49, which would have resulted in an award of party and party costs in favour of the respondents, was inappropriate. I am not persuaded there is any justification for appellate interference with this determination by the trial judge.

5  He went on to state that the litigation in this case was caused "by the actions of the testator" and relied upon the principles set out in Spiers v. English, [1907] P. 122, and Re Cutcliffe; LeDuc v. Veness, [1959] P. 6, [1958] 3 All E.R. 642 (C.A.) to make the order he did.

6  He referred to a quotation by Hodson L.J. in the LeDuc case [at p. 644, [1958] 3 All E.R.], who, in turn, had relied upon the Spiers decision:

The two main principles which should guide the court in determining that costs in a probate suit are not to follow the event are, firstly, where the testator or those interested in the residue have been the cause of the litigation; and, secondly, if the circumstances lead reasonably to an investigation in regard to a propounded document. In this latter case the costs may be left to be borne by those who incurred them; in the former, the costs of unsuccessfully opposing probate may be ordered to be paid out of the estate. Neither of those principles, which, however, are not exhaustive, justifies a plea of undue influence unless there were reasonable grounds for putting it forward.

7 Although the trial judge stated that he was satisfied that the appellants had reasonable and sufficient grounds for making the allegation of undue influence, the evidence to which he refers which might have given rise to a finding in favour of the appellants is practically non-existent. Further, the principles set out in the LeDuc case, supra, speak of costs not following the events in two different situations:
    1. costs being borne by the parties incurring them where the circumstances warrant investigation, and
    2. costs to be paid out of the estate where the testator is found to have caused the litigation.

8  Here the trial judge determined that both circumstances existed and ordered solicitor and client costs in favour of the appellants.

9  In my view, he erred in his application of the principles governing costs to his specific findings in this case.

10  As stated by this court in Bjorninen v Mercredi, [1984] 2 W.W.R. 646, 42 C.P.C. 97, 27 Man. R. (2d) 67, 6 D.L.R. (4th) 241 (C.A.), and repeated more recently in Manitoba (Public Trustee) v. Ballen (1992), 44 E.T.R. 279, 87 D.L.R. (4th) 111, (sub nom. Re Balan's Estate) 76 Man. R. (2d) 241, 10 W.A.C. 241 (C.A.), solicitor/client costs should be awarded only in rare and exceptional cases. Philp J.A. at p. 286 [E.T.R.] of the Ballen case, supra, also noted that parties involved in estate litigation cannot rely upon any expectation that their costs will be paid out of the assets in an estate. If actions are not justifiable, the parties challenging the will must bear the costs of litigation.

11  As stated previously, the evidence in this case by the appellants both on the issue of the capacity of the testator and on undue influence by the executrix was meagre at best. Although the testator's actions may have justified an investigation, his actions did not cause the litigation as contemplated by the dicta upon which the trial judge relied.

12  In the Spiers case, supra, a claim of undue influence was pursued. The defendant who propounded the will was barely cross-examined on the question of undue influence. The trial judge determined the costs of the plaintiff ought not to be paid out of the estate and that the ordinary rule that costs follow the event should be followed. In that case, the executor of the will was a stranger to the testatrix and the plaintiff was a lawful nephew.

13  Just as in the Spiers case it could not be said that the testator caused the litigation by choosing a stranger as beneficiary over a nephew, so too it cannot be said in this case that the testator was the cause of the litigation by selecting his wife as beneficiary over his children. His calling his children together to announce to them his illness, and his actions in settling his financial affairs and in making a will did not cause the litigation. Additionally, the respondent wife was not seriously challenged on the issue of undue influence, although this claim was not abandoned at trial.

14  The award of solicitor/client costs in favour of the appellants was the result of an erroneous application by the trial judge of the principles which govern costs in estate matters. There were no exceptional circumstances that would give rise to solicitor/client costs. The trial judge made no findings of fact supported on the evidence that would justify solicitor/client costs or indeed any costs in favour of the appellants.

15  Paragraph 2 of the order of June 27, 1991, is deleted. All of the parties will bear their own costs of the trial.

16  On appeal, however, this court determined that costs should follow the result in the ordinary course. The respondents will have their costs on a party and party basis.

Cross-appeal allowed.

 
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Appendix R

Manitoba (Public Trustee) v. Ballen

PUBLIC TRUSTEE OF MANITOBA v. JOHN BALLEN, PETER BALAN and WILLIAM BALAN

Citation: 1992 CanRepMan 73, 44 E.T.R. 279, 87 D.L.R. (4th) 111, (sub nom. Balan's Estate, Re, 76 Man. R. (2d) 241),1Q W.A.C. 241
Court: Manitoba Court of Appeal
Judge: O'Sullivan, Philp and Helper JJ.A.
Heard: September 20, 1991
Judgment: January 8, 1992
Year:  1992
Docket: Doc. 441/90
Counsel:     P.W. Swartz, for appellants.
                  P.O. Jacheffa, for Public Trustee.
                  S.M. Boonov, for Victoria Jansen on a watching brief.

Subject:
 Estates and Trusts

Classification:
  Estates – Passing of accounts and remuneration of personal representatives – Remuneration – Source of liability for expenses or compensation

Costs – Parties to estate litigation not entitled to expect costs to be paid out of estate in all circumstances – Costs unjustifiably incurred to be charged against interest in estate of party incurring such costs – Solicitor-and-client costs justifiable only in rare and exceptional cases.

The testator died in 1979, leaving an estate valued at approximately $280,000. By her will, she left bequests of money and various interests in several parcels of farm land to her 11 children and a granddaughter. She appointed her daughter and her son, the appellant JB, to be her executors. The administration of the estate was very eontentious, and the executors and some of the beneficiaries incurred legal fees totalling over $100,000. In 1983, they were directed to file their accounts for taxation, and, even though this was not done, in 1984 solicitor-and-client accounts of over $40,000 were paid out of the estate.

In 1986, the executors were removed and the Public Trustee was appointed administrator de bonis non with will annexed.

In 1990, on an application by the Public Trustee, the court approved a proposal that all outstanding legal fees be paid out of the estate in a reduced arnount. By this order, solicitor-and-client accounts of $52,800.21 were settled for $33,845.43. The order left open the question of the liability of the estate for the legal costs inc.urred by the forrner executors and some of the beneficiaries. The appellants appealed.

Held:

The appeal was allowed in part.

The awarding of costs is clearly a discretionary power of the court and, as a general principle, solicitor-and-client costs will be awarded only in the rare and exceptional case. Although an executor will be indemnified against all reasonable costs and expenses incurred by him or her in the course of the administration, any costs that are unjustifiably incurred by the executor or any other party will have to be borne personally by that party.

The order appealed against was a practical order designed to prevent the further diminution of the assets of the estate, by removing from the estate the responsibility of challenging all the outstanding legal accounts and those already paid. However, the judge erred in authorizing or approving payment of legal accounts before there was a determination of the liability of the estate for such accounts. The record, although incomplete, did not disclose any apparent justification for the liability of the estate for such accounts, nor did it disclose the rare and exceptional circumstances required to justify solicitor-and-client costs.

Accordingly, the legal accounts of the former executors should be paid out of the estate only to the amount of $ 1,500 each. Any legal accounts already paid out of the estate, including those of the former executors (over and above the $ 1,500), should be charged against the interest in the estate of the party incurring the account.

Cases considered:
Bessette v. Godard (No. 2), 60 Man. R. 283, 6 W.W.R. (N.S.) 83, [1952] 3 D.L.R. 828 (C.A.) –  considered

Bjorninen v. Mercredi, [1984] 2 W.W.R. 646, 42 C.P.C. 97, 27 Man. R. (2d) 67, 6 D.L.R. (4th) 241 (C.A.) – referred to

Carr Estate v. Danyluk (April 14, 1988), Jewers J. (Man. Q.B.) [unreported], 10 A.C.W.S. (3d) 54 – considered

Decorby v. Decorby (198S), 21 E.T.R. 238, 37 Man. R. (2d) 271, (sub nom. Decorby v. Steffenson) 24 D.L.R. (4th) 293 (C.A.) – considered

Evaskow v. B.B.F. (1969), 71 W.W.R. 565, 9 D.L.R (4th) 71S, 70 C L.L.C. 14,007 (Man. C.A.) – applied

Jepson Estate v. Westfair Foods Ltd. (1990), 65 D.L.R (4th) 615, 63 Man. R. (2d) 150 (C.A.) – referred to

Kessiloff v. Kessiloff (1988), 56 NIan. R. (2d) 265 (Q.B.) – considered

McDonald Dure Lumber Co. v. Marston Holdings Ltd., [1976] W.W.D. 80, 66 D.L.R. (3d) 375 (Man. C.A.) – referred to

Menrad v. Blowers (1985), 25 E.T.R. 143, 33 Man. R. (2d) 131 – considered

Mitchell v. Gard (1863), 3 Sw. & Tr. 75, 164 E.R. 1280 – applied

Montreal Trust Co. of Canada v. James (1985), 19 E.T.R. 135 (B.C. S.C.) – considered

Thompson v. Lamport, [1945] S.C.R. 343, [1945] 2 D.L.R. 545 – followed
 

Statutes considered:
Trustee Act, The, R.S.M. 1987, c. T160, C C.S.M. T160 –
 s. 62

Rules considered:
Manitoba, Queen's Bench Rules, The –
r. 74.14(16)
r. 74.14(17)

Appeal from a decision of Dureault J. settling legal accounts incurred in the administration of an estate.

The judgment of the court was delivered by Philp J.A.:

1  Mary Balan died on August 22, 1979. By her last will she left a life estate in two parcels of farm land and her personal property and farm equipment to her son William Balan; bequests of $100 to each of her 11 children; and the residue of her estate (including a third parcel of farm land, subsequently offered for sale to her children in accordance with a direction in her will, and purchased by Peter Balan for $137,000) to nine of her children and a granddaughter, equally. The value of the estate originally was approximately $280,000. The deceased's daughter Victoria Jansen and her son John Ballen (sometimes referred to as John Balan) were named as executors of the will.
 

2 The administration of the estate has been contentious from the beginning. It is unnecessary to review in detail all of the quarrelsome events over the years. I do note, however, that distrust and discord have developed between the executors and among them and the beneficiaries, and have prevented the orderly and timely settlement of a relatively uncomplicated estate. As well, the distrust and discord have caused the executors and some beneficiaries to incur legal accounts (for which they may be personally liable) of over $100,000.

3 I also note that there have been many applications to the court. On an application heard on June 6, 1986, the executors were removed and the Public Trustee was appointed administrator de bonis non with will annexed.

4 In these proceedings the Public Trustee seeks the advice, opinion and direction of the court respecting the administration of the estate. By his order dated October 9, 1990, Dureault J. (who had heard and disposed of all prior applications) determined a number of questions that had arisen in the administration of the estate. He confirmed payment of bequests and interest thereon, including payment of the distributive shares due to William Balan and Peter Balan and deductions therefrom pursuant to a settlement recorded during a prior court hearing. The order confirmed payment of the personal expenses of the former executors and fixed the compensation for their care, pains and trouble expended in and about their administration of the estate. The order approved the accounts filed by Victoria Jansen on May 16, 1988. Some of these determinations are challenged by the appellants on this appeal, but I would not interfere with them (except to the extent that Victoria Jansen's accounts record the payment in 1984 of substantial legal accounts, about which I will have more to say in due course). I am not persuaded that they do not find support on the record, or that Dureault J., in exercising his discretion, proceeded on a wrong principle of lav, or misapprehended the facts.

5  The troubling portions of the order of Dureault J. relate to the accounts of the lawyers who were retained by the former executors and by some of the beneficiaries. Dureault J. approved the proposal of the Public Trustee that all accounts, including her own outstanding legal fees, be paid out of the estate in a reduced amount. Solicitor-and-client accounts totalling $52,860.21 would be fully and finally settled, pursuant to the terms of the order, by payments totalling $33,845.43.  At the same time, the order of Dureault J. left open the question of the liability of the estate to pay the legal costs incurred by the former executors and by some of the beneficiaries of the estate. The order provides in part:
        THIS COURT ORDERS that the question as to liability for any of the claims, the distributions, or for any of the solicitor-client accounts that the Public Trustee of Manitoba, as administrator, is authorized and empowered by this order to pay out of the estate, shall, subject to the appropriate time limitations imposed by law, remain open. Any beneficiary and each of the previous co-executors shall have the right and be at liberty to commence any action, against the previous co-executors and/or against any of the lawyers that have done work or have been involved in the legal proceedings in this estate, for any amounts for which the estate may not legally be found to be liable.

6 An earlier order of Dureault J., made on March 17, 1988, approved some of the legal accounts but put over the question of the payment of the accounts, pending the trial of an issue as to the liability of the estate or of the former executors to pay the accounts and in what amount. That issue has never been tried.

7 At a much earlier hearing before Dureault J., on June 15, 1983, counsel representing the executors and several beneficiaries were directed "to file their accounts for taxation, July 31 [1983]." The accounts were never filed for taxation, but solicitor-and-client accounts totalling over $40,000 were paid out of the estate in January and February of 1984.

8  Counsel for the appellants argues that a trial should be directed of the issues as to the liability of the estate or of the former executors to pay the legal accounts, and in what amount.

9  The Public Trustee says that her proposal for the settlement and payment of the legal accounts is in the best interests of the estate and that it preserves the right of any interested party to challenge the liability of the estate for payment of any of the accounts, while at the same time relieving the estate of the carriage and costs of the litigation. She argues that the authority for the order of Dureault J. is found in s. 62 of The Trustee Act, R.S.M. 1987, c. T160, C.C.S.M. T160:
         62. The court may order the costs of and incidental to any application, order, direction, conveyance, assignment, or transfer, under this Act, or any part thereof, to be paid or raised out of the property in respect of which it is made, or out of the income thereof, or to be borne and paid in such manner and by such persons as the Court may deem proper;

and in Queen's Bench Rules 74.14(16) and (17):
            74.14(16) In contentious matters a lawyer shall be allowed such fees as the presiding judge deems adequate.

            74.14(17) The court may direct payment of any costs, including proper disbursements, from the estate generally or by, or from funds of the estate belonging to, any legatee, heir or person interested therein.

Finally, the Public Trustee argues that Dureault J. exercised his discretion on proper principles of law and on a clear understanding of the facts before him.

10  In his brief oral reasons, Dureault J. commented upon the Public Trusteets proposal for payment of outstanding legal accounts as follows:
            You know, let us just cut this short, Mr. Swartz. Your position is that the liability of the estate has not been established for these accounts. I appreciate that position, you know, and, in fact, it was a position that was carried out or included, if you will, in the court order. In fact, that very issue had been directed to be tried.
            Now what we have before us is a proposal to avoid trial of this very issue, and that is what it is. I am not saying that your position is right or wrong, but the position before the court is:  here is a proposal. We can avoid trying a number of issues that could be long and lengthy and could be extremely costly to the estate, as well. I am not deciding that absolutely the judge will order all the costs of these contemplated proceedings if they took place, that they be paid out of the estate, but I know that the estate faces a substantial risk of that happening, and the proposal is, rather than face up to this risk and thousands and thousands of dollars that it may be exposed to, the proposal put forward is a reasonable one. It is not entirely satisfactory, I am sure, to the people who have reduced their costs. I do not know whether their own clients will have to make up these losses; I know nothing of that. All I know is that the estate's exposure for sums substantially over what is proposed could at a subsequent date be determined to be just that, a liability of the estate. But to find the answer to that puzzle simply could entail the expenditure of amounts that really could not in any way be considered justified.
            So some of the costs incurred, I agree with Mr. Balan, had nothing to do with advancing the interests of the estate. Some of the other costs clearly advance the interest of the beneficiaries who had to retain counsel to protect their own interests in the estate. But what is proposed now is that, let us get away from that, not decide if the estate is strictly liable to pay for every dollar that is included in the accounts, or are they liable for part, or are they not liable at all. In exchange for that, we have a proposal, and it will not be necessary for the estate to litigate these questions. So the position is a reasonable one. I believe that it is in the best interest of the estate to avoid this protracted litigation, at what may end up as a great expense and not justified under the circumstances. And so I do authorize the trustee to make payment and settlement of all solicitors' accounts, as detailed on p. 21 of the trustee's affidavit, reserving, however, unto any beneficiary the right to recover from any of the solicitors so paid, pursuant to this settlement, any amounts for which it may be determined that the estate was not legally liable to pay.

11 The awarding of costs, to whom, by whom and to what extent, is clearly a discretionary power of the court or of a judge. But what are the principles that ought to govern the exercise of that discretion? That is the issue this appeal raises.

12 A general principle this court has long embraced is that solicitor-and-client costs will be awarded only in the "rare and exceptional case." See, for example: Evaskow v. B.B.F. (1969), 71 W.W.R. 565, 9 D.L.R. (3d) 715, 70 C.L.L.C. 14,007 (Man. C.A.). There, Freedman J.A. (as he then was) stated the principle succinctly [W.W.R. at p. 570]:
             Concerning costs I am bound to say that it must be a rare and most exceptional case in which costs will be awarded on a solicitor-and-client basis rather than on a party-and-party basis.

See also: Jepson Estate v. Westfair Foods Ltd. (1990), 65 D.L.R. (4th) 615, 63 Man. R. (2d) 150 (C.A.), Bjorninen v. Mercredi, [1984] 2 W.W.R. 646, 42 C.P.C. 97, 27 Man. R. (2d) 67, 6 D.L.R. (4th) 241 (C.A.); McDonald Dure Lumber Co. v. Marston Holdings Ltd., [1976] W.W.D. 80, 66 D.L.R. (3d) 375 (Man. C.A.).

13 That principle has been applied in estate proceedings: See, for example: Carr Estate v. Danyluk released (April 14, 1988), Jewers J. (Man. Q.B.) [unreported], 10 A.C.W.S. (3d) 54; Kessiloff v. Kessiloff (1988), 56 Man. R. (2d) 265 (Q.B.); and Decorby v. Decorby (1985), 21 E.T.R. 238, 37 Man. R. (2d) 271, (sub nom. Decorby v. Steffenson) 24 D.L.R. (4th) 293 (C A.).

14  Another general principle that emerges from the cases is that an executor is to be indemnified against all reasonable costs and expenses incurred by him/her in the course of the administration ofthe estate. In Thompson v. Lamport, [1945] S.C.R. 343, [1945] 2 D.L.R. 545, Rand J. put it:
            The general principle is undoubted that a trustee is entitled to indemnity for all costs and expenses properly incurred by him in the due administration of the trust: it is on that footing that the trust is accepted. These include solicitor and client costs in all proceedings in which some question or matter in the course of the administration is raised as to which the trustee has acted prudently and properly.

15 That principle was considered in Montreal Trust Co. of Canada v. James (1985), 19 E.T.R. 135 (B.C. S.C.). There, Spencer J. applied the corollary to that general principle. He denied costs to the executor out of the estate because its application to the court for the power to lease a parcel of land forming part of the estate, a power not given by the will, was found to be [at p. 139] "improvident for the beneficiaries, and ... unnecessary and ill-advised."

16  The costs of all parties to estate proceedings have been ordered to be paid out of an estate when it was necessary to apply to the court to construe a testamentary document; to determine who were the heirs of an intestate deceased; or to determine the capacity of a testator or the circumstances of the execution of his/her will. The principle has its genesis in the oft-cited case of Mitchell v. Gard (1863), 3 Sw. & Tr. 75, 164 E.R. 1280, at p. 1281 (E.R.):
            From these considerations, the Court deduces the two following rules for its future guidance: first, if the cause of litigation takes its origin in the fault of the testator or those interested in the residue, the costs may properly be paid out of the estate, secondly, if there be sufficient and reasonable ground, looking to the knowledge and means of knowledge of the opposing party, to question either the execution of the will or the capacity of the testator, or to put forward a charge of undue influence or fraud, the losing party may properly be relieved from the costs of his successful opponent.

17  See also the cases referred to in Orkin, The Law of Costs, 2d ed. (looseleaf) (Toronto: Canada Law Book, 1987), at para. 21 9.3.

18  At the same time, parties cannot count on their costs being paid out of the estate.  In Bessette v. Godard (No. 2), 60 I~an. R. 283, 6 W.W.R. (N.S.) 83, 119521 3 D.L.R. 828 (C.A.), Adamson J.A. (as he then was) warned [W.W.~. at p. 84]:
              It should be said that it is an erroneous idea that parties can take proceedings in estate cases and count on the costs being paid out of the estate. Parties in estate actions, as in other actions, should know that if costs are unjustifiably incurred they will have to pay such costs.
 . . . . .
          An estate should not be eaten up with costs in proceedings which have no substantial merit.

19 More recently, in Menrad v. Blowers (1985), 24 E.T.R. 143, 33 Man. R. (2d) 131 (Q.B.), Krindle J. denied costs out of the estate to a party who had brought proceedings against the estate. She commented [Man. R. at p. 137]:
            What I am critical of is the estate's assumption of that account. Estates are not pools of money out of which solicitors adverse in interests are paid without regard for the merits of their claims. They are like any other litigant. As in any other litigation, the successful litigant can ordinarily look to recovering his or her costs on a party and party basis only. The recovery of costs on a solicitor-client basis is an exceptional award and ought not to be agreed to by any executor, save in exceptional circumstances and normally only with prior court approval.

20  In other cases, courts have ordered parties to pay costs to the estate, and even on a solicitor-and-client basis. That was the case in Carr Estate, supra, where Jewers J. found rare and exceptional circumstances in the conduct of the respondent. He wrote:
            The Manitoba Court of Appeal has said that solicitor and client costs should only be awarded in a rare and exceptional case. See Bjorninen v. Mercredi, [1984] 2 W.W.R. 646, 42 C.P.C. 97, 27 Man. R. (2d) 67, 6 D.L.R. (4th) 241 (C A.). In my view, the conduct of the respondent was such as to make this the exceptional case where solicitor and client costs should be awarded. I take into account: that the respondent had absolutely no reason to fail to turn over the estate papers upon being requested to do so; his attempt to evade service; the fact that he ignored an order of this court to deliver up the estate papers until he was served with an order requiring his attendance in court to be examined; and finally the evasive and unsatisfactory nature of his responses on the examination itself, particularly in regard to the two cheques mentioned above.

21 Kessiloff, supra, is another case where costs on a solicitor-and-client basis were awarded against a party (in this case a beneficiary) because of the nature of the proceedings he had commenced and his interference with the orderly administration of the estate. KennedyJ. found [56 Man. R. (2d) at p. 268] that "the issues raised are unfounded, frivolous, and disruptive to the orderly administration of the estate ..."

22  Decorby, supra, is another example. That case involved interlocutory proceedings in an action brought in his personal capacity by a son (and one of the executors) of the deceased against the estate and others. Although successful in those proceedings, the son was ordered to pay costs on a solicitor-and-client basis. Matas J.A., writing for the court, said [21 E.T.R. at p. 245]:
            The question of costs is another matter. Distribution of the estate has been delayed inordinately. Unnecessary costs have been incurred. Taking these factors into account with the circumstances outlined above, I consider this to be an appropriate case for making an exception to the general rule. I would order Mark to pay solicitor-client costs to the appellants and to the estate, in this court and in Court of Queen's Bench, in any event of the cause. The costs are to be paid forthwith after taxation.

23  The circumstances before Dureault J. raised a number of questions which went unanswered. These include: (1) what was the nature of the legal work represented by the outstanding accounts, and by the accounts that have already been paid out of the estate; (2) for whose benefit was the work performed; (3) did the estate benefit from the work that was performed and from the proceedings that were taken; (4) did any of the proceedings that have been taken meet the "rare and exceptional" test; (5) were the legal costs incurred by the former executors properly incurred by them, and directed for the benefit of the estate; (6) what portion of the legal costs already paid to the Public Trustee was incurred by her in her capacity as the representative of Annie Chorney, one of the children of the deceased, and not in her later capacity as administrator de bonis non; (7) was the conduct of the former executors in their administration of the estate the foundation for the proceedings taken and legal costs incurred by certain beneficiaries, and (8) has there been conduct by the former executors or by beneficiaries over the years that would warrant an order of costs being made against them in favour of the estate?

24  The order of Dureault J. was a practical one. He wanted to staunch the haemorrhage of the assets of the estate. He wanted to remove from the estate the responsibility, and the attendant costs, of challenging all of the outstanding legal accounts, and those that have already been paid. He faced a dilemma, for at the same time he recognized that at least "some of the costs incurred ... had nothing to do with advancing the interests of the estate."

25  However practical and sensible his motivations were, I am of the view that Dureault J. exercised his discretion in the absence of a proper factual foundation and without regard for the applicable principles of law. His order authorized or approved payment of lawyers' accounts before the determination of the liability of the estate for such costs. Liability is the first question, and the determination of that question will have regard to the unanswered questions posed above, and to the principles of law that have been reviewed.

26  In the result, I would allow the appeal in part; set aside paragraphs 10, 11 and 12 of the order of Dureault J. dated October 9, 1990; and order that:
            (1) The accounts prepared and f~led by Victoria Jansen on Mayl6,1988, excepting the payment of legal costs recorded therein, shall be taken to be a complete accounting covering the period of the administration of the estate by Victoria Jansen and John Ballen and are final and binding upon them.
            (2) The legal accounts of the former executors be paid out of the estate in the amount of $1,500 each (or a total of $3,000).
            (3) The amount of legal accounts already paid out of the estate (including those of the former executors, over and above the amounts ordered to be paid under the preceding paragraph, and that of the Public Trustee to the extent that it relates to her representation of Annie Chorney) be charged against the interest in the estate of the party who incurred the account.

27  I do not share the concerns expressed by the Public Trustee and accepted by Dureault J. that the estate is exposed to costly litigation over payment of the legal accounts. We do not have before us the complete record of the proceedings in this estate over the years; nor do we have particulars of the legal accounts that have been incurred. However, the record does not disclose any apparent justification for the liability of the estate to pay the legal accounts that are outstanding and those already paid; or "rare and exceptional" circumstances to warrant solicitor-and-client costs. Those who have incurred legal accounts, both beneficiaries and the former executors, should seriously consider the principles that have been referred to, and the unanswered questions that have been posed, before instituting further proceedings for payment of their legal accounts out of the estate.

28  The appellants will have their costs in this court on a party-and-party basis to be paid out of the estate.

Order accordingly.

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Appendix S

Suit No: PR 86-01-06696
(Winnipeg Centre)

COURT OF QUEEN'S BENCH OF MANITOBA





BETWEEN:

RUDY DERKSEN,                                                  )      For the Applicant:
                                                                                 )     W. Derksen
                                                            Applicant,      )
                                                                                 )     For Henry Kunkel:
-and-                                                                         )     A. Southall
                                                                                 )
                                                                                 )     For the Public Trustee
HENRY KUNKEL AND THE PUBLIC                  )     B. Drever
TRUSTEE OF MANITOBA, AS ADMIN-             )
ISTRATOR OF THE ESTATE OF                          )
KATHERINE KUNKEL, DECEASED,                  )     Judgment Delivered:
                                                                                 )     August 11, 1994.
                                                           Respondents. )

KRINDLE J.

Katherine Kunkel died intestate on February 22, 1985. She was survived by three children, Rudy Derksen aged 46, Gerhard Kunkel, aged 40 and Henry Kunkel, aged 36. Her eldest son, Harry Derksen, had predeceased her. He had left two children who were by then adults.

Because of disputes between the three surviving sons, the Public Trustee was appointed as administrator of the estate of Katherine Kunkel. Rudy Derksen applied for directions of the court regarding certain of the matters in dispute.

The Public Trustee takes no position concerning those issues but agrees to be bound by the directions given by the court. The application was originally set before Morse, J. to be determined on affidavit. Because of factual disputes the matter was put over for determination on affidavit supplemented by oral evidence.

I do not intend to review the evidence, oral or affidavit, in any detail. The evidence totally fails to satisfy me that there existed any agreement, express or implied, between Mrs. Kunkel and her youngest son from which it could be argued that the youngest son had some right to remain in his mother's house for so long as he wished without paying rent. By his own admission, Henry Kunkel stayed with his mother until her death because he could not bear the guilt attendant on his leaving her. If from time to time she may have mentioned that he would inherit on her death, that formed no real part of his reason for staying.

From time to time, Mrs. Kunkel may have considered the possibility of leaving the bulk of her estate to Henry Kunkel. It may well be, too, in the latter years, and no doubt with encouragement from Gerhard Kunkel, that she considered disinheriting Rudy Derksen and the two children of the late Harry Derksen. Mrs. Kunkel knew full well what she had to do to produce a division of her estate that would be other than equal. She knew that certain of her children had received more material and educational benefits in their lifetime than others. She knew full well that certain of her children were luckier than others. Notwithstanding the encouragement from Gerhard, in particular, that she make a will which would have resulted in an unequal division of her estate, she chose not to make a will. She chose an equal distribution. Her choice in that regard was neither unfair nor unwise.

Neither in law nor in equity does Henry Kunkel's claim to some sort of licence to remain rent free in the house for so long as he wished have any foundation.

I find that Henry Kunkel is indebted to the estate of Katherine Kunkel in the amount of $400.00 per month, plus prejudgment interest from March 1st of 1985, through and including November 1st, 1987, for the use and occupation of the house. I have used the figure of $400.00 because that is the figure which was ultimately agreed upon by the Public Trustee and Henry Kunkel to be a reasonable rental for the property from December 1st, 1987 forward. That figure is somewhat lower than might have been obtainable from an arms length rental tenant, but the care taken of the property by Henry Kunkel was of a different quality than would be expected from a stranger and no doubt the final sale price reflected that fact. The estate is liable to Henry Kunkel for the realty taxes and fire insurance premiums on the house for that period plus prejudgment interest. Utilities paid and repairs made were the responsibility of Henry Kunkel.

The conduct of the Public Trustee in negotiating rent from December 1st forward did amount to a waiver of rent for the period prior to December 1st and did not constitute any agreement in respect of that earlier period. No claim of estoppel lies.

There is no evidence that any of the personal property claimed by Henry Kunkel to have been his is other than his, including the washer and dryer.

The claim by Rudy Derksen that the benefits conferred by Mrs. Kunkel during her lifetime on Henry Kunkel in some way constitutes an advance recoverable by her estate, simply has no evidentiary basis.

There is no evidence to support the allegation by Gerhard Kunkel that Rudy Derksen owes the estate $3,000.00. I am satisfied the monies were a gift and their repayment was waived by Mrs. Kunkel. In any event, those monies were given to Rudy Derksen in 1979. The statute of limitations obviously applies.

 Gerhard Kunkel abandoned in court his claim to be entitled to some sort of constructive trust and his claim to an entitlement under The Testator's Family Maintenance Act, which claim would have been preposterous in any event.

Often in estate cases costs of all the parties are paid out of the estate. I decline to make such an award in this case. The amount of time, energy and money that has gone into advancing these proceedings is absolutely unconscionable considering the actual amounts involved. The only claim advanced that was of merit related to the rental of the house and insofar as that claim is concerned I allow Rudy Derksen his costs on a party and party basis against Henry Kunkel, based on the net amount of that award.

- - - - -
 

Suit No: PR 86-01-06696
(Winnipeg Centre)

COURT OF QUEEN'S BENCH OF MANITOBA






BETWEEN:

RUDY DERKSEN,                                                  )      For the Applicant:
                                                                                 )     W. Derksen
                                                            Applicant,      )
                                                                                 )     For Henry Kunkel:
-and-                                                                         )     A. Southall
                                                                                 )
                                                                                 )     For the Public Trustee
HENRY KUNKEL AND THE PUBLIC                  )     B. Drever
TRUSTEE OF MANITOBA, AS ADMIN-             )
ISTRATOR OF THE ESTATE OF                          )
KATHERINE KUNKEL, DECEASED,                  )     AddendumDelivered:
                                                                                 )     October 7, 1994.
                                                           Respondents. )
 
 
 
 

ADDENDUM

KRINDLE, J

Counsel have requested clarification in respect of certain parts of my reasons for judgment and have requested rulings on certain issues which were left to them for resolution which they have been unable to resolve.

1. Prejudgment interest from Henry Kunkel is to be credited to the estate ofKatherine Kunkel on the entire accumulated amount of rent plus interest after November 1, 1987 to the date of judgment. There is no doubt that this matter took a lengthy period of time to come on for trial. Not all of that delay can be attributed to Rudy Derksen. More important, Henry Kunkel has had the use of the funds throughout that entire period, and the estate has been deprived throughout that period. Henry Kunkel himself will receive the benefit of one-quarter of the interest he is being required to pay. If Gerhard Kunkel is sincere in his stated views regarding Henry Kunkel's entitlement Gerhard Kunkel is certainly free to return to his brother his (Gerhard's) share of the ordered interest.

2. Prejudgment interest would commence to accumulate from March 1, of 1985.

 3. I find that it would be unfair to allow the rate of prejudgment interest to be calculated according to the date of commencement of this action. Rudy Derksen made his claim for rent known to the Public Trustee at a much earlier date. Gerhard Kunkel's action appeared to put the entire estate into issue in 1988, although ultimately Gerhard Kunkel's action was abandoned. The rate, based on an October of 1993 commencement, would be 5 %, a rate which is particularly low relative to the rates applicable throughout the whole of the period during which the debt accumulated and remained owing. Having regard to all these factors, I award interest at 10% per annum on the amounts as they accumulated and on the whole. A similar rate wlll apply to the offsetting expenditures.

 4. The question of costs has been addressed by me in these reasons and I see no reason to reconsider my earlier ruling. The claim for advancement, albeit raised in the written argument, was never pleaded and was clearly responsive only to Henry Kunkel's claim of license.

 5. A typing error appears in the penultimate sentence on page 3 of my reasons. The word "not" should clearly be inserted between the words "did amount".
 

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