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Executor Denied Fees For Breach of Trust

Executor Denied Fees For Breach of Trust - Disinherited

An executor/trustee who has committed a breach of trust may be denied fees for such egregious behavior.

The court has in its discretion to allow full compensation, deny any compensation, or allow a reduced compensation.

Where the compensation is reduced or denied, this is done not for the purpose of imposing a penalty on the executor/trustee for committing a breach of trust, but on the ground that he/she has not properly performed the services for which compensation is given. Simone v Cheifetz 1998 OJ 3267, upheld at 2000 OJ No.4194.

The operative words in the previous excerpt from the Simone decision is that a court “may deny him all compensation “.

There is a fine line between what disentitles a trustee from receiving some compensation and being disentitled to receive any compensation.

Initially, the Canadian courts were reluctant to even reduce compensation, but gradually overcame such reluctance to entirely eliminate compensation for misconduct and the test now is something like the court should attempt to strike some balance between the gravity of the act and the harm done.

Estate of Lowe 2002 BCSC 81 the executor was a lawyer who presented accounts that the registrar was very critical of to the extent that he recommended a nominal fee of $500.

The Supreme Court on a confirmation hearing of the registrars report, reduce the fee to nil.

Generally speaking executor should be fairly compensated for the work they undertake –Baker v. Baker (1995) BCJ 1039.

In the Loewe decision , the court reviewed many critical findings of the actions an accounting of the executor/trustee, starting with her taking one and a half years to provide a copy of the will to the beneficiaries, unacceptable delays in other aspects of the claim, overcharging, failure to account and other such behavior.

The court found that the executor had demonstrably failed to exercise an appropriate level of skill and ability.

While she did ultimately turn over the assets, she caused the beneficiaries to incur a number of losses in the meantime. She did not do her best to manage the affairs of the estate, which is what the law requires of her.

Zimmerman v McMichael Estate 2010 ONSC 2947 is an often quoted decision when denying an executor trustee compensation. In that decision, the executor did not comply with his duty to provide an accounting and breached his fiduciary duties.

The court held that a trustee must make a proper accounting is a condition precedent to been awarded compensation. Without a proper accounting, the court is unable to assess the conduct of the fiduciary and to determine the compensation to which he or she is entitled. Where trustee’s founder failed to keep proper accounts and have been grossly indifferent to his or her fiduciary obligations, he or she may be disentitle the compensation.

The court adopted the following statement from Sheard and Hull on probate practice, fourth edition. At pages 358 – 59:

“The conduct of an executor or trustee in carrying out his or her duties may be such as to justify the court and depriving him or her or the right to remuneration; and an executor must make a proper accounting as a condition precedent to being awarded compensation. But only exceptional misconduct should deprive him or her of the right to remuneration– in general, although an executor may be guilty of neglect and defaults, these, if not dishonest, and capable of being made good in money, do not deprive the executor of the right to compensation, although they may influence the amount allowed”

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