Archive for ‘Accounts’

January 13, 2014

Excellent Judicial Analysis of Tests on Passing of Accounts in Ontario

A recent Ontario Superior Court of Justice decision provides a very good analysis of the tests to be applied in passing the accounts of both an attorney under power of attorney and an estate trustee – Re Aber Estate

October 17, 2012

A Lesson for Executors Regarding Costs

In an earlier post, we looked that a situation where a dependant sought severance of a joint tenancy in connection with a claim for dependant’s relief under Ontario’s Succession Law Reform Act.  The dependant was unsuccessful in a claim under s. 72 of the Act (which allows for a form of statutory severance of a joint tenancy for the narrow purpose of making assets available for dependant’s relief claims) because his application was brought outside of the six-month limitation period under the Act.

The issue of costs of the dependant’s relief application and other litigation involving the estate was the matter of reasons of the Court released earlier this month and include a lesson for all executors and their legal counsel.

The successful executor claimed costs in the total amount of $127,872 on a partial indemnity basis.  However, one of the dependant’s objections to the claim for costs was disclosure by the executor at a very late date that the estate did not have sufficient assets to satisfy a dependant’s relief claim, if successful.  The Court found that the executor had previously advised the dependant that the estate did have sufficient funds to satisfy his claim.  However, shortly prior to the hearing, the executor raised as a defence a paucity of assets.  The Court did find that there were insufficient assets to satisfy a claim, but found that had proper disclosure of the assets of the estate be made earlier, the dependant may have chosen not to pursue his claim.  As a result, while it appears the Court may have been willing to grant the costs sought by the executor, it reduced the fees claimed by 50% as a result of the late disclosure.

While it goes without saying that it is expected and imperative that an executor maintain proper accounts and records of assets, the failure to do so can result in significant and personal consequences.  It is not clear in this case whether there were assets in the estate to pay the legal fees of the executor as incurred.  If there were not, the executor may bear those costs personally.

September 26, 2012

Aragona v. Aragona – An Update

In March, I commented on the Ontario Superior Court of Ontario decision in Aragona v. Aragona, where a son of a woman suffering from Alzheimer’s disease was appointed in 1999 as guardian over her property.  Among other abuses, the guardian was found to have withdrawn and deposited to his own bank account approximately $122,000 without documentation or a reasonable explanation for the withdrawals.  The guardian was also unable to explain most of the expenditures for certain legal fees paid for with his mother’s funds. 

The Court found the guardian’s behaviour to be abusive, stating:

“I am constrained to say that the conduct of Beniamino Aragona has been shocking.  He has literally helped himself to many thousands of dollars from his mother’s estate, at a time when his mother had Alzheimer’s disease and was unable to look after her own affairs.  Beniamino Aragona treated the money in the estate as if it was his own.”

After taking into account the improper withdrawals, adding the legal fees improperly charged to the mother, and deducting amounts properly charged to the estate, the Court ordered the son to pay to the estate a total of over $132,000.

The Court likewise denied the son’s request for compensation in its entirety.  In addition, the Court rejected the guardian’s claim for costs of the application to pass accounts and in fact ordered that the guardian pay the costs of the passing personally.

The case was appealed and a decision rendered by the Ontario Court of Appeal on September 26, 2012.  The Court of Appeal upheld the lower court decision with the exception of a small contingent allowance for recovery of some legal fees paid in the interest of the estate.

One ground of appeal raised by the guardian was that he had not received a fair hearing because the respondent, his brother, had taken the position through counsel that he was not challenging disbursements on the application to pass accounts.  While arguments were raised about whether the disbursements were or were not challenged, the Court found that, regardless, the fiduciary obligation of a guardian of property under s. 32 of the Substitute Decisions Act, 1992 to act “with honesty and due care and attention” required a guardian to be in a position at all times to prove the legitimacy of disbursements made on behalf of the estate.  Therefore, regardless of whether objections have been raised in a passing of accounts, a guardian (and a trustee or executor) should remain diligent at all times regarding its accounting and always be prepared to justify accounts.

May 3, 2012

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

February 23, 2011

Pass your accounts or go to jail?

That’s what one judge did, finding an estate trustee in contempt after ignoring three orders requiring him to file accounts.  Two of those orders included findings of contempt and levied fines.  When that did not work, the judge ordered that the estate trustee be improsoned for seven days.  Let’s see if that gets him moving.

Walling v. Walling