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Executor’s Compensation and Passing of Accounts

The recent decision, In the Estate of Olga G Suboch,[1] is yet another case in which one beneficiary raised objections to the accounts submitted by the executor and the amount of compensation claimed by him in circumstances in which the objections were minor and mostly unsubstantiated. The decision is unexceptional, but it is instructive in that it outlines the factors that the court considers in such a case.

The testator, a widow, died in 2015, survived by her three children, Andrew, Katherine, and Janine. By her will, she appointed Andrew as her executor. She made lump sum payments to grandchildren and nephews (which amounts have already been paid) and split the residue equally between the three children. The assets consisted of the testator’s home, bank and investment accounts, jewelry, and other personal objects, and a 100% interest in Kajaan Investments Ltd. The latter was a holding company that held a 50% interest in SHOD Investments Ltd. SHOD was also a holding company that owned two valuable real properties, a small strip mall and a small apartment building. The strip mall was sold in 2018 and the apartment building was sold in 2020. The funds were distributed between Kajaan and SHOD’s other 50% shareholder, the testator’s brother, Don. The total value of the estate at the testator’s death was about $8 million and is now worth about $10 million. The only remaining assets in the estate are cash and the shares in Kajaan.

Andrew brought this application to pass the accounts. Janine raised several issues about the accounts and about the amount claimed by Andrew for compensation. She had also brought an application to remove Andrew as executor in 2019, but it was never argued and was not pursued.

Justice Penny found that Janine’s concerns about the accounts were partly just technical points that had no impact on the amounts reflected in the accounts. Other complaints concerned small amounts that hardly justified the time and expense of bringing the application. With one exception (to be mentioned below), the financial impact of the objections was less than $15,000 and the executor had already agreed to reduce his compensation by more than that amount.

Justice Penny accepted that there may have been some technical errors in the presentation of the accounts, but noted that this was a large, complex estate, the administration of which extended over five years. Importantly, his Honour stated:

9 … Sometimes, perfection is the enemy of the good. I am not prepared to reject the accounts on the basis of minor, technical errors, largely because the cost and delay that would result from making such an order would far outweigh any discernible benefit.

10      An estate trustee is not required to meet a standard of perfection; rather, the standard of care of an estate trustee with respect to maintaining accounts is the standard of a person using ordinary care and diligence in managing their own affairs.[2]

Moreover, he noted that Andrew had to account over several years, his mother did not keep electronic records, and his accounting fell in the middle of a world-wide epidemic. To the extent that he could not provide vouchers, he or Katherine provided an explanation or documents to justify the amount of the expense charged to the estate. As his Honour stated, any items that cannot be explained are de minimus [sic, minimis].[3]

The one exception mentioned about was the compensation Andrew paid to Katherine for her management of Kajaan’s indirect interest in the real properties co-owned by Kajaan, through SHOD, with Don. That amount was approximately $66,000. She managed the properties from the date of the testator’s death in 2015 until they were sold, respectively, in 2018 and 2020. Katherine was the President, Secretary, and Treasurer of Kajaan and had been paid for management and oversight of the properties for many years to a time before the testator’s death. Moreover, the liquidation of Kajaan’s indirect interest in the properties was a lengthy process, in part because Don did not cooperate with the estate and Andrew had to sue him eventually so that the properties could be sold. In the meantime, the properties had to be managed and Katherine was the right person to do that. His Honour found that in the circumstances the amount paid to her was not unreasonable.

Similarly, his Honour refused to reduce Andrew’s compensation by the amount of the management fee paid to Katherine.

Janine argued that Andrew failed to administer the estate with an even hand to her disadvantage. She argued that this was sufficient to have him removed as executor and was equally sufficient to deny him any compensation. Justice Penny held that these arguments lacked any basis. Janine received the same interim distributions as her siblings and the fact that she had to leave her mother’s house so that Andrew could realize the assets promptly, did not constitute treating her with an uneven hand. Indeed, the estate offered to pay her rent for her own accommodation.

His Honour then determined the amount of Andrew’s compensation by applying, as expected, the ‘tariff’ of 2.5%,[4] and the five factors approach listed in Laing Estate v. Laing Estate,[5] which derives from Toronto General Trust Corp v Central Ontario Railway.[6] Taking into account that the value of the estate was close to $10 million, that the executor did most of the work himself and spent more than 500 hours administering the state, that the value of the estate increased during his administration, and that he made substantial interim disbursements, his Honour found that the reduced amount claimed by Andrew, $267,859.96 was fair and reasonable compensation.

His Honour also awarded Andrew partial indemnity costs of $20,000 (all inclusive) for the application to remove him, to be paid by Janine out of her next distribution. He also awarded Andrew partial indemnity costs of $35,000 (all inclusive) for the passing of accounts application, also payable by Janine out of her next distribution.

[1]    2021 ONSC 8246.

[2]    Toller James Montague Cranston (Estate of), 2021 ONSC 1347.

[3]    De minimis is an oft-used abbreviation of the Latin expression, de minimis non curat lex, which is usually translated as ‘the law does not concern itself with trifles’.

[4]    Otherwise known as the percentages approach, described in Re Farmer’s Loan and Savings Co. (1904), 3 OWR 835 at 839, 1904 CarswellOnt 462 (HC). It was restated and applied by Killeen Surr Ct J in Re Jeffery Estate, 1990 CarswellOnt 503, para 13, 39 ETR 173.

[5]    1998 CarswellOnt 4037, sub nom. Laing Estate v Hines 25 ETR 2d 139 (CA).

[6]    (1905), 6 OWR 350, 1905 CarswellOnt 449 (HC). In Laing, the Court of Appeal held that to calculate an executor’s compensation, you begin with the percentages approach and then check the result against the five factors approach. To the same effect, see Re Gordon Estate, 1998 CarswellOnt 2207, 24 ETR 2d 308 (CA); and Re Flaska Estate, 1998 CarswellOnt 4059 (CA).


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