Jack Sentineal (“Jack”) sought to pass his accounts as trustee for the estate of his father (“Fred”), who died on August 20, 2004 (Sentineal, et al. v Sentineal, 2016 ONSC 5073). Jack’s brother, Jeffrey Sentineal (“Jeff”), opposed Jack’s accounts and the proceeding was converted to a trial of issues. The trial of issues was heard by Justice Henderson over the course of many days.
As his wife had predeceased him and his other son severed his ties with the family, Fred divided his estate equally between Jack and Jeff. Jack was named as the sole executor of the estate. Fred’s estate consisted of valuable real estate in Niagara-on-the-Lake (“NOTL”), various pieces of mechanical and farm equipment, horses, carriages, vintage automobiles, car parts, and some modest bank accounts. The estate also had an interest in horse-drawn carriage licenses (the “caleche business”) that were issued by the region of Niagara (if you were ever in a horse-drawn carriage in NOTL, it was likely a Sentineal family carriage). However, determining the precise assets of the estate, and who owned what between family members, was difficult to determine given the lack of formal legal arrangements between family members, not to mention very loose formal documentation and records. An accurate list of estate chattels (cars, car parts, machinery, farm equipment, etc.) also proved to be nebulous.
As noted by Justice Henderson, there had been a longstanding “feud” between Jack and Jeff with respect to their own business ventures and with respect to their father’s estate. “The present litigation, and prior litigation [including an appeal to the Court of Appeal for Ontario], has fueled the feud.” Collateral damage to all involved was the natural result.
The litany of complaints by both brothers was long. Jack claims Jeff wrongly occupied estate property without paying rent, improperly converted estate chattels to his own use, failed to account for income generated by the caleche business, and impeded Jack’s ability to administer the estate. Jeff claims that Jack breached his fiduciary duties as estate trustee by failing to administer the estate in good faith, used the estate for his own personal profit, improperly converted estate chattels to his own use, and delayed in administering the estate. Both brothers claim that the other engaged in needless and protracted litigation, all of which mightily increased the expenses of the estate.
Justice Henderson had serious credibility concerns about Jack and Jeff, but ultimately preferred the testimony of Jack to the testimony of Jeff. Justice Henderson wrote: “Jack is the brother who became an educated successful businessman. He is well versed in corporate and accounting matters. Jeff is the brother who stayed on the farm, drove the horse carriages, and cleaned out the stalls. Despite their differences, both brothers exhibited the same traits of stubbornness, aggressiveness, and animosity toward each other.” Justice Henderson found that Jack was extremely boastful and would embellish his own accomplishments, and denigrate Jeff. That being said, Jack did not stoop to “dishonesty” in administering the estate. For his part, Jeff was so resentful of his brother and the fact that he had sole control over their father’s estate, that he was “willfully blind to what was right and what was wrong.”
After a carefully reviewing the accounts and explanations offered by the two brothers, Justice Henderson found that each brother owned a modest amount to the estate (a disappointing result to both brothers). The court’s more interesting comments and findings deal with legal fees.
As Justice Henderson correctly noted, provided that an estate trustee has acted reasonably, the estate trustee should not be out of pocket for legal fees incurred for the estate. Moreover, a court ordered cost award is an order between the parties. If the costs collected on behalf of the estate do not cover the legal accounts rendered by the estate lawyers, the shortfall should generally be paid out of the estate, not by the estate trustee personally.
The court held that Jack had discharged his responsibilities as estate trustee in a reasonable manner. As such, all reasonable legal fees incurred on behalf of the estate should be paid out of the estate. That being said, Justice Henderson found that the legal accounts were extraordinary high for the work done and the results achieved. “The fact that the client is a substantial estate does not entitle the lawyers to charge and recover exorbitant legal fees.” The court ordered the legal fees to be assessed despite the fact that an assessment would cause further delay and likely increase the animosity between the brothers. After a careful review by the assessment officer, only the reasonable legal fees attributable to the estate (and not Jack or his companies) were to be paid out of the estate.
Finally, in terms of Jack’s claim for trustee compensation, Justice Henderson held that Jack did not breach his fiduciary duty as estate trustee. Jack’s approach to the sale of the NOTL property and the result achieved were more than acceptable. While the court acknowledged that 12 years was a long time to administer an estate, Jeff contributed significantly to the delay. Moreover, Jeff interfered with Jack’s ability to deal with estate chattels and that Jeff “fabricated stories as to their whereabouts” contributing to the delay. In Justice Henderson’s view, Jack had dealt with an estate that consisted of valuable assets; he had done so reasonably and with care; he had done so in the face of adverse circumstances; and he had success in liquidating the estate. Jack was awarded compensation as calculated by the usual tariff. However, Justice Henderson did not accept Jack’s claim for a management fee, as the management of the estate on a day-to-day basis was not an onerous task. In the end, neither brother got what he wanted.
Happy (careful) Litigating,