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Executors Denied Fees and Ordered to Repay Unauthorized Expenses

In Re Zaradic Estate 2021 BCSC 1037 the executors were awarded nil remuneration and ordered to pay back unauthorized expenses of approximately $10,000 to the estate.

The writer was counsel for the sole beneficiary of the estate and oppose the claim for both remuneration and expenses related to defending and rectifying a breach of trust and the unauthorized expense of taking the ashes of the deceased back to Croatia as it was not authorized by the will.

The will had a rather unusual clause stating that “ my trustees may claim remuneration for acting as trustees in the amount of 10% of the net value of the residue of my estate to be shared equally between them, in lieu of any executors or trustees fees.”

The executors claimed 10% of the gross value of the estate being approximately $110,000 in fees, but were awarded nil.

The beneficiary successfully argued that the executors conduct was so egregious that they should be denied fees.

Essentially they relied upon an assessed value of the property for the previous year, and attempted to sell the property to their daughter for that price and even advanced the sum of $13,000 of estate monies to ensure that the daughter had enough money to complete the purchase of the deceased home.

The beneficiary filed a certificate of pending litigation to stop that sale, and the property was sold 3 months later for approximately 50% more than the aborted sale.
The legal fees incurred to remedy the in completed sale were a proximally $4500 and you to the breach of trust, the registrar ordered that those monies be paid back to the estate.

Remuneration

An executor is entitled to remuneration to a maximum of 5% of the gross aggregate value of the estate, including capital and income, of all the assets of the estate at the date of the passing, unless the Will provides otherwise. In the present case, the Will allowed for remuneration up to 10% of the net value of the residue of the estate.

Sections 88-90 of the Trustee Act, R.S.B.C. 1996, c. 464 provides:

Setting remuneration of trustees and guardians

88(1) A trustee under a deed, settlement or will, an executor or administrator, a guardian appointed by any court, a testamentary guardian, or any other trustee, however the trust is created, is entitled to, and it is lawful for the Supreme Court, or a registrar of that court if so directed by the court, to allow him or her a fair and reasonable allowance, not exceeding 5% on the gross aggregate value, including capital and income, of all the assets of the estate by way of remuneration for his or her care, pains and trouble and his or her time spent in and about the trusteeship, executorship, guardianship or administration of the estate and effects vested in him or her under any will or grant of administration, and in administering, disposing of and arranging and settling the same, and generally in arranging and settling the affairs of the estate as the court, or a registrar of the court if so directed by the court thinks proper.

(2) The court or a registrar of the court if so directed by the court, may make an order under subsection (1) from time to time, and the amount of remuneration must be allowed to an executor, trustee, guardian or administrator, in passing his or her accounts, in addition to any other allowances for expenses actually incurred to which the trustee, executor, guardian or administrator may by law be entitled.

(3) A person entitled to an allowance under subsection (1) may apply annually to the Supreme Court for a care and management fee and the court may allow a fee not exceeding 0.4% of the average market value of the assets.

Application for remuneration

89 The court may, on application to it for the purpose, settle or direct the registrar to settle the amount of the compensation, although the estate is not before the court in an action.
Application

90 Nothing in section 88 or 89 applies in any case in which the allowance is set by the instrument creating the trust.

The criteria to be considered in determining the appropriate amount of remuneration are set out in a number of cases, the leading of which is Re Toronto General Trust Corporation and Central Ontario R.W. Co., [1905] O.J. No. 536 [Toronto General Trust]. At p. 354, the court lists the criteria as: the magnitude of the trust; the care and responsibility involved; the time occupied in administering the trust; the skill and ability displayed; and finally, the success achieved in the final result.

Remuneration does not need to be fixed as a percentage of the gross aggregate value of the estate, it may be calculated as a lump sum, provided it does not exceed 5% of the total value of the estate as provided in the Trustee Act, or in this case, 10% of the net value of the residue of the estate pursuant to paragraph 5 of the Will. See Turley Estate (Re), [1955] B.C.J. No. 34 (B.C.S.C.).

An executor can also claim a fee for annual care and management of the estate, in addition to the remuneration allowance under s. 88(1) of the Trustee Act. Also see s. 88(3) of the Trustee Act. The fee allowed must not exceed 0.4% of the average market value of the estate assets. The personal representative can apply annually for a care and management fee.

The executors argued that under section 90 of the Trustee act that the court had no jurisdiction to not allow the 10% as provided by the will, but the court found that section 90 did not apply as that was simply a ceiling that could be claimed, and not an entitlement as a matter of right that is contemplated by section 90 of the Trustee act.

The executors incurred legal fees of approximately $25,000 to defend the court claim brought by the beneficiary to set aside the conveyance to the daughter, and for legal fees incurred respect to the passing of accounts.

The court found that the general rule is that executors are awarded their costs of passing their accounts on a special card cost basis, but in the present case the conduct of the executors was a significant breach of trust, and awarded only the sum of $7000 in legal fees that related to the actual passing of accounts, as opposed to defending the court action.

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