The Estate of Frank Ernest Warren and Bolton v. Armstrong
2017 ONSC 1781
This is a decision of the Honourable Mr. Justice Sloan from the Superior Court of Justice in Kitchener, Ontario.
I take this opportunity to write on this case as it is relatively rare that a hearing of a passing of accounts occurs and in the Estate Litigation field, we must take every opportunity to learn from the learned Court’s assessment of such matters.
The facts of this case are simple: The Testator, who lived in Ontario, appointed 2 Estate Trustees who lived in Scotland in his Will. The Trustees then came to Ontario to administer the Estate. While in Canada, they stayed in a hotel (instead of the Deceased’s home) and they ate in restaurants.
The Court did not, ultimately take issue with the Trustees’ decision to stay in hotels and eat in restaurants. Though in other circumstances, this may have been objectionable, it appears there was no or insufficient evidence on this point.
It appears however that the Trustees retained a law firm to assist them in administering the Estate. This is where the problems arise for the Trustees.
The Court states the following:
[44] The majority of the time spent by the law clerks appears to be for work that should have been done by the estate trustees.
[45] On the material before me and submissions made to me, I find that 70% of the work done by the law clerks was work that should have been done by the estate trustees. By my calculations the law clerks spent 184.4 hours on this file.
[46] Therefore, starting with Exhibit S to the affidavit of [the law clerk] dated February 28, 2017, setting out the legal fees to March 15, 2016 at $26,423, when I deduct 70% of the law clerks time or $12,255 and $1,820 for ZS’s time, I am left with $12,348 including the real estate account.
[47] I therefore approve the legal fees at $12,348 exclusive of disbursements and HST and I find the disbursements set out in the legal bills appropriate.
Not surprisingly, The Court goes on to state:
[48] I approve of the reimbursement to the estate trustees for their disbursements as presented but I find that they have not earned any executors’ compensation.
[49] They have not put forward any time dockets for the court to review.
A further issue is raised in this case regarding the appropriateness of collapsing a Henson Trust. In determining whether this should occur, the learned Justice states:
[51] I am further troubled by the suggestion of the estate trustees or their advisors that the “Henson trust” should be collapsed which goes directly against the testator’s wishes.
[52] The testator obviously knew of the financial plight of [the Applicant], would have known of her young age and specifically set out a plan in his will to benefit her as much as he could, while at the same time allowing her government benefits to continue.
[53] Why it would ever be in [the Applicant’s] interest to give away half the trust was never explained.
[54] On the evidence before me, if the trust had been collapsed, Bolton would have essentially gotten nothing or close to nothing, because it appears that the ODSP rules would have simply reduced her monthly ODSP pension possibly to zero until her inheritance was used up.
[55] Although, there was a bald assertion submitted by the estate trustees that the trust may not earn enough money each year to pay estate trustee fees and tax filings, absolutely nothing was filed before this court in an attempt to quantify what the annual cost would be and it appears to the court that the executors’ fees for setting up some type of a monthly payment, in their discretion, to [the Applicant] until the trust was depleted would not have taken much of their time.
The lessons of this case are significant. Fiduciaries cannot delegate their duties. While they can retain professional advisors and agents (in some circumstances) to assist them in correctly performing their duties, fiduciaries cannot delegate their duties entirely.
Clearly, then, where fiduciaries delegate their duties to third parties, the fiduciaries cannot then claim compensation for the performance of their duties, and moreover, the fees charged by the third parties in performance of the fiduciaries’ duties cannot be validly charged back to the estate.
Finally, it appears that in deciding whether to collapse a Henson Trust, the Court will turn its mind to the Testator’s intentions in settling the trust as well as the benefit derived from the trust by the beneficiary.
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Written by: WEL Partners
Posted on: March 24, 2017
Categories: Commentary
2017 ONSC 1781
This is a decision of the Honourable Mr. Justice Sloan from the Superior Court of Justice in Kitchener, Ontario.
I take this opportunity to write on this case as it is relatively rare that a hearing of a passing of accounts occurs and in the Estate Litigation field, we must take every opportunity to learn from the learned Court’s assessment of such matters.
The facts of this case are simple: The Testator, who lived in Ontario, appointed 2 Estate Trustees who lived in Scotland in his Will. The Trustees then came to Ontario to administer the Estate. While in Canada, they stayed in a hotel (instead of the Deceased’s home) and they ate in restaurants.
The Court did not, ultimately take issue with the Trustees’ decision to stay in hotels and eat in restaurants. Though in other circumstances, this may have been objectionable, it appears there was no or insufficient evidence on this point.
It appears however that the Trustees retained a law firm to assist them in administering the Estate. This is where the problems arise for the Trustees.
The Court states the following:
[44] The majority of the time spent by the law clerks appears to be for work that should have been done by the estate trustees.
[45] On the material before me and submissions made to me, I find that 70% of the work done by the law clerks was work that should have been done by the estate trustees. By my calculations the law clerks spent 184.4 hours on this file.
[46] Therefore, starting with Exhibit S to the affidavit of [the law clerk] dated February 28, 2017, setting out the legal fees to March 15, 2016 at $26,423, when I deduct 70% of the law clerks time or $12,255 and $1,820 for ZS’s time, I am left with $12,348 including the real estate account.
[47] I therefore approve the legal fees at $12,348 exclusive of disbursements and HST and I find the disbursements set out in the legal bills appropriate.
Not surprisingly, The Court goes on to state:
[48] I approve of the reimbursement to the estate trustees for their disbursements as presented but I find that they have not earned any executors’ compensation.
[49] They have not put forward any time dockets for the court to review.
A further issue is raised in this case regarding the appropriateness of collapsing a Henson Trust. In determining whether this should occur, the learned Justice states:
[51] I am further troubled by the suggestion of the estate trustees or their advisors that the “Henson trust” should be collapsed which goes directly against the testator’s wishes.
[52] The testator obviously knew of the financial plight of [the Applicant], would have known of her young age and specifically set out a plan in his will to benefit her as much as he could, while at the same time allowing her government benefits to continue.
[53] Why it would ever be in [the Applicant’s] interest to give away half the trust was never explained.
[54] On the evidence before me, if the trust had been collapsed, Bolton would have essentially gotten nothing or close to nothing, because it appears that the ODSP rules would have simply reduced her monthly ODSP pension possibly to zero until her inheritance was used up.
[55] Although, there was a bald assertion submitted by the estate trustees that the trust may not earn enough money each year to pay estate trustee fees and tax filings, absolutely nothing was filed before this court in an attempt to quantify what the annual cost would be and it appears to the court that the executors’ fees for setting up some type of a monthly payment, in their discretion, to [the Applicant] until the trust was depleted would not have taken much of their time.
The lessons of this case are significant. Fiduciaries cannot delegate their duties. While they can retain professional advisors and agents (in some circumstances) to assist them in correctly performing their duties, fiduciaries cannot delegate their duties entirely.
Clearly, then, where fiduciaries delegate their duties to third parties, the fiduciaries cannot then claim compensation for the performance of their duties, and moreover, the fees charged by the third parties in performance of the fiduciaries’ duties cannot be validly charged back to the estate.
Finally, it appears that in deciding whether to collapse a Henson Trust, the Court will turn its mind to the Testator’s intentions in settling the trust as well as the benefit derived from the trust by the beneficiary.
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