Status of a Professional Partnership where a Partner Acts as Estate Trustee

An interesting issue of the status of a professional partnership where a partner acts as an estate trustee was recently considered by the Ontario Superior Court of Justice.   As a result of an agreement between the estate trustee and the accountancy firm of which he was a partner, a portion of the trustee’s compensation paid from the estate was paid to the partnership.  At issue on this motion for directions was whether, on a passing of accounts where there is a claim that compensation paid to the trustee was excessive, the firm itself should be added as a party.

On an analysis of the provisions of the Partnerships Act, and in particular s. 12 which establishes liability of partners for the misapplication of funds received by a firm or a partner, the Court determined that if it is found that the partner was acting within the scope of his duties as a partner of the firm, or that the firm approved of and authorized the partner administering the estate, the firm may be vicariously liable to repay some or all of the executor’s compensation found to have been improperly taken.  The firm was therefore added as a party to the passing of accounts.

The case raises an interesting issue for professionals acting as estate trustees.  The line between their actions as individuals and as partners in a firm is not always clear.  In this instance, the trustee’s use of firm resources to administer the estate, the use of firm letterhead and the application of funds received to general firm revenues, will all be factors in determining whether the firm, as well as the individual, is liable for overpayment of executor compensation.

Re Zucker Estate

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