Pullen (Re), 2016 ABQB 421

Court of Queen’s Bench of Alberta Citation: Pullen (Re), 2016 ABQB 421 Date: 20160907 Docket: ES10 20224 Registry: Red Deer Court File Number ES10 20224 Court Court of Queen’s Bench of Alberta (Surrogate Matter) Judicial Centre Red Deer Estate Name Mabel Pullen Applicant (Plaintiff) Margaret Doreen Brimble Respondent (Defendant) Catherine Anne Pullen _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice J.S. Little _______________________________________________________ I. Issues and Facts: [ 1 ] This is an application by Ms.

Brimble challenging the distribution of her mother’s estate, the accounting for certain expenses before and after estate administration, and the administrator’s compensation. [ 2 ] Margaret Brimble’s brief sets out the facts agreed to by Catherine Pullen which can be summarized as follows: 1. Mabel Pullen (the “Mother”) had three children: John, Catherine, and Margaret. I refer to the children by first names for ease of reference. 2. Sometime before 2007 while living in British Columbia, the Mother transferred $170,276.77 to Margaret and her husband. 3.

In 2007, Catherine applied under the Patient’s Property Act , RSBC 1996, c 349 and was appointed as Committee, the equivalent of a trustee under Alberta legislation. Catherine then sued Margaret in Alberta for return of the $170,276.77. 4. In 2008, the parties settled the litigation by entering into a settlement agreement (the “Agreement”) which included the following:

a) Margaret would repay to Catherine as Committee $111,000 (which she did). Margaret could keep the remaining $59,276.77.

b) On the Mother’s death, Catherine and John were to receive the first $118,553.54 ($59,276.77 x 2) from the estate. This would have

the effect of all three children having received the same amount from the Mother before any other distribution through her estate.

c) Catherine was to provide to Margaret an account for the solicitor-client costs she incurred in the litigation. Margaret was to pay two thirds of that amount to Catherine and John from Margaret’s share of the estate. Catherine claims that those costs are $36,827.82 (2/3 = $24,551.88).

d) Margaret and one Lenore Harlton, a solicitor, would renounce their rights as joint executrices of the Mother’s estate. 5. The Mother died in Alberta in 2011. The two named executrices having renounced pursuant to the Agreement, Catherine applied for and received a grant of letters of administration. The Mother’s will provided for equal distribution of the residue among the three children. II.

Distribution of the Estate [ 3 ] In February, 2014, Catherine through counsel for the estate provided a handwritten note to Margaret showing her share of the estate calculated as follows: Estate assets $609,000 Burial fees $1,500 Legal fees $9,527.26 Taxes $18,796.48 Executor fees $30,450 Total expenses ($60,273.74) Available for distribution $548,726.26 Distribution to John 1/3 of $548,736.26 $182,908.75 ½ of $118,553.66 $59,276.83 1/3 of $36,827.82 $12,275.94 $254,461.52 Distribution to Catherine 1/3 of $548,726.26 $182,908.75 ½ of $118,553.66 $59,276.83 1/3 of $36827.82 $12,275.94 $254,461.52 Distribution to Margaret 1/3 of $548,726.26 $182,908.75 Less $118,553.66 (118,553.66) Less 2/3 of solicitor client costs 2/3 of $36827.82 ($24,551.88) Net payment to Margaret $39,803.21 Total $548,726.26 [ 4 ] Margaret’s position is that the estate (ignoring for now the issue of quantum of administrator fees and a penalty paid for late income tax filing) should be distributed as follows: Available for distribution $548,726.26 Debt payment to John ½ of first $118,553.66 $59,276.83 Debt payment to Catherine ½ of first $118,553.66 $59,276.83 ($118,553.66) Balance to be divided three ways $430,172.60 Residue payment to John 1/3 of $430,172.60 $143,390.87 Residue payment to Catherine 1/3 of $430,172.60 $143,390.87 Residue payment to Margaret 1/3 of $430,172.60 $143,390.86 Less solicitor client costs ($24,551.88) Net payable to Margaret $118,838.98 Required Payments from Estate Payments to John Debt payment $59,276.83 Share of residue $143,390.87 Share of costs $12,275.94 $214,943.64 Payments to Catherine Debt payment $59,276.83 Share of residue $143,390.87 Share of costs $12,275.94 $214,943.64 Payment to Margaret Share of residue $143,390.87 Less solicitor/client costs ($24,551.88) $118,838.98 Total $548,726.26 [ 5 ] Margaret’s position is correct. [ 6 ] Clearly Catherine’s proposed distribution shortchanges Margaret because, contrary to the plain language of the Agreement, it first divides the estate into thirds and then deducts the $118,553.66 from Margaret’s share.

Under Catherine’s proposed distribution, ignoring the issue of solicitor-client costs, she and John each take almost $242,000 while Margaret gets just under $65,000. That amounts to penalizing Margaret for receiving $59,000 from her mother as opposed to merely compensating John and Catherine.

[ 7 ] Only solicitor-client costs for the pre-estate litigation are properly deducted from Margaret’s share pursuant to the Agreement. The Agreement establishes those costs as a debt between John and Catherine as creditors and Margaret as debtor. Margaret assigned a portion of her entitlement under her Mother’s estate as security for repayment of that debt. [ 8 ] The $118,553.66 was to be treated as a debt of the estate payable to John and Catherine before distribution of the estate.

The effect of treating it that way is that (assuming there are sufficient available assets) it puts all three children in possession of $59,276.83 regardless of how the Mother otherwise distributed her estate. Distributing the balance equally among the three children then satisfies the terms of the will. [ 9 ] As proof, counting the $59,276.83 payment to each and ignoring the solicitor client costs, under Margaret’s proposal each child gets $202,667.69. John and Catherine get it from the debt payment of $59,276.83 plus their share of the residue of $143,390.87.

Margaret gets it from the $59,276.83 advance before the Mother’s death plus her share of the residue of $143,390.87. [ 10 ] One might question how Catherine as Committee could agree to creating a debt to equalize payment to herself and her brother. Certainly a Committee is entitled to settle litigation by creating a debt, though where she is one of the creditors there is a potential conflict of interest.

In any event, all three parties involved in the settlement agreed on the method of dealing with Margaret’s pre-inheritance gift, and no other claimants or creditors were prejudiced. [ 11 ] One might question also Catherine’s ability to compel the renunciation of executrices. More properly that is a decision of the testator, though, no one made that argument. III.

Amount of Solicitor-Client Costs Under the Agreement [ 12 ] Because it affects distribution of the estate, I will deal as well with Margaret’s objection to the amount of solicitor-client costs for which she is responsible under the Agreement. [ 13 ] Contrary to the terms of the Agreement, Catherine has never provided a copy of the solicitor’s accounts that make up the total costs she claims of $36,827.82.

From Exhibit 22 of her November 19, 2015 Affidavit, which exhibit is stated to be a Profit and Loss statement for the period May 3, 2007 through May 3, 2008 (which must have been prepared as Committee since the Mother was then alive) that amount is made up of an account from Brownlee for $27,645.47, an Investigations cost of $1,019.72, a Notary Public cost of $75.00 and a Sauder cost of $8,087.82 She refers in her Affidavit to the entire amount as being a solicitor’s account. I note that a solicitor Gerald B.

Sauder prepared the Committee Order but does not appear to have been involved in the litigation. [ 14 ] When interpreting a written agreement, the “plain and ordinary meaning” is preferred in the absence of other evidence showing that a different meaning was intended: Sattva Capital Corp v Creston Moly Corp , 2014 SCC 53 , [2014] 2 SCR 633 at para 59 .

In this case, the Agreement states that “Catherine and John Pullen shall receive from the Estate of Mabel Pullen an amount equivalent to 2/3rds of the solicitor-client costs incurred by Catherine in the course of Alberta Court of Queen’s Bench Action No. 0701-08237.” A plain

interpretation of this

section is that it is limited to direct legal costs incurred on a solicitor-client basis in connection with the litigation leading to the Agreement. On its face, the Agreement does not contemplate reimbursement for other costs connected with that litigation. [ 15 ] While a more fulsome explanation of the total amount would be preferable, in the interests of putting an end to this protracted estate administration I find that the Brownlee expense of $27,645.47 is the only cost properly categorized as a “solicitor-client cost” for the purpose of the Agreement.

While possibly connected to that litigation, the other costs are not “solicitor-client costs”, and are therefore not compensable under the Agreement. Margaret therefore is obligated to repay two thirds ($18,430.31) of that cost by a deduction from her entitlement to the residue of her Mother’s estate. IV.

Passing of Accounts [ 16 ] The probate application filed in this Court in 2013 shows in NC 7 a total value for the estate of $416,514.70 consisting of a TD Waterhouse account of $414,014.70 and a death benefit of $2,500. [ 17 ] Exhibit 23 to Catherine’s affidavit shows a value of the estate on her Mother’s death of $609,000 (although if added correctly the amount is $607,474.73) which includes a TD Canada Trust account of almost $190,000, apparently found after the application for administration.

Despite not having what she believes to be full disclosure of her Mother’s assets, Margaret does not take serious issue with a gross value of the estate in the range of $609,000. [ 18 ] Margaret claims that as a result of Catherine’s late filing of tax returns, the estate incurred penalties of $5,384.38. Catherine’s Exhibit 23, which purports to be a

summary of estate activity from 2011 through November, 2015, shows a tax liability of $16,197. The three pages of what appear to be income tax summaries show income tax liabilities of $7,051.53 and $3,687.30, for which the years are unclear, and a refund of $2,593.59 in 2011, the year of the Mother’s death. That Exhibit does not account for that refund, and the two income tax liabilities total only $10,738.83. The difference of $5,458.17 I find to be penalties and/or interest assessed by Canada Revenue Agency.

Margaret argued that it took some time to get the estate assets together and the taxes filed, but given that she was Committee for some three years before her Mother’s death I am not persuaded that that delay ought to absolve her of liability for the penalties and interest assessed. [ 19 ] There is no evidence that Catherine accounted at regular intervals during the estate administration as required under

section 97 of the Surrogate Rules . Nor does the account she provides here in Exhibit 23 comply with the requirements set out in

section 97 of the Surrogate Rules . [ 20 ] In the interest of resolving matters efficiently, the Court is empowered to decide any dispute summarily where possible:

Surrogate Rules , s 113(2)(d). While the evidence before me does not meet the requirements set out in

section 97 of the Surrogate Rules , it is sufficient to set out a mechanism to pass the accounts and bring this litigation to a conclusion. V. Administrator Compensation [ 21 ] Margaret raises two objections to the $30,450 compensation Catherine has paid herself: entitlement to advance payment and quantum. [ 22 ] Payment before completion of the estate administration is permitted only if the will so provides, all the beneficiaries agree, or the Court orders it: Surrogate Rules ,

Schedule 1,

Part 5, s 6(1). None of those conditions has been met here. [ 23 ] In her Affidavit, Catherine states that John agreed to the full administration charge of 5%. The agreement of one beneficiary is not helpful. [ 24 ] With respect to quantum, I note that the claimed 5% is the upper end of the “rule of thumb” for estate administration fees and not formally entrenched in the Surrogate Rules .

Catherine claims that that she is entitled to the full 5% for her time spent investigating recovery of the advance to Margaret, which pre-dated her Mother’s death, and for “preparing and distributing the contents for sale of Mother’s house in Victoria”. That includes “travel between Victoria, Red Deer, and Rocky Mountain house to look after her Mother and make final disbursements of the Will.”

Schedule 1,

Part 1 of the Surrogate Rules sets out the personal representative’s compensable duties. I note that none of the enumerated duties includes caring for the testator prior to her death, or assisting the testator in managing her affairs and property prior to her death. Catherine’s responsibilities as Committee are distinct from her responsibilities as personal representative. Nothing in the Surrogate Rules allows Catherine to be compensated for duties performed in her capacity as Committee.

The travel to and from Victoria was made before her Mother’s death as well and therefore is not properly a part of the estate administration. [ 25 ] The Surrogate Rules set out the factors for determining appropriate compensation to a personal representative:

Schedule 1,

Part 1, s 2. In 1995, the Legal Education Society of Alberta published “Suggested Fee Guidelines” which provide estimates for how much compensation personal representatives should receive based on the size and complexity of the estate: Legal Education Society of Alberta, Alberta Wills and Estates Practice Manual (Edmonton: LESA, 2016) at 12-14 [the “Guidelines”]. While they may be used to assist the Court in determining the appropriate quantum of compensation, the Guidelines are not binding.

The enumerated factors in the Surrogate Rules are of paramount importance in determining the administrator’s entitlement to compensation: Boje v Boje Estate , 2006 ABQB 599 , 405 AR 41 at paras 22–24 . It has been suggested that the appropriate approach is to calculate the suggested quantum based on the Guidelines, and then test that against the enumerated factors to determine if it is appropriate: Re Gladue Estate , 2004 ABQB 130 , [2004] AJ No 167 at para 9 ; Re Anderson Estate , 2011 ABQB 806 , 75 ETR (3d) 281 at paras 19–21 .

However, the Court retains a wide degree of discretion to set compensation for the personal representative without reference to the Guidelines: Starosielski v Starosielski Estate , 2000 ABQB 324 , [2000] AJ No 557 at para 30 . [ 26 ] The Guidelines recommend charging 3%-5% on the first $250,000 of capital, 2%-4% on the next $250,000, and 0.5%-3% on the remainder. This would yield recommended compensation in the range of $13,000-$25,500 for this estate. For revenue receipts, the Guidelines recommend charging between 4%-6%, and disbursements are not entitled to compensation.

In this case, no revenue receipts have been provided to this Court. For care and management, the Guidelines recommend charging 0.3%-0.6% on the first $250,000, 0.2%-0.5% on the next $250,000, and 0.1%-0.4% on the remainder. For this estate, the recommended range would be $1,350-$3,150 based on one year of care and management. The total recommended compensation based on the Guidelines for this estate would be between $14,350 and $28,650. [ 27 ] Given that the Guidelines are not binding on this Court, it is necessary to consider the application of the Surrogate Rules factors to this case. Those factors include:

a) the value of the estate. Here, an estate value of $600,000 is moderate;

b) the amount of revenue receipts and disbursements. Here, Catherine lists five disbursements in Exhibit 23 to her affidavit;

c) the complexity of the work and whether any difficult questions were raised. Here, the estate consisted of two accounts. No real estate was sold. No brokerage accounts were managed. The

interpretation of the Agreement is not difficult;

d) the amount of skill, labour, responsibility, technological support and specialized knowledge required. Again, nothing in this estate administration brings those factors into play. The information Catherine should have provided would include details of her Mother’s accounts which she could be expected to have known of those from her time as Committee, but as referred to above she omitted one of two financial accounts from the application;

e) the time expended. We have considerable information in Catherine’s affidavit about the things she did while Committee of her Mother’s estate, but virtually no information about the time she spent on estate administration after her Mother’s death with the exception of a reference to “many conversations with John” in paragraph 39; and

f) the number and complexity of tasks delegated to others. Here, all that we know is that Catherine retained counsel at a cost of $9,500 to complete the probate application. [ 28 ] I note as well that the Mother died in early 2011. This application was scheduled in 2014 and is being heard in mid-2016, over five years from her death. To the extent that it may be relevant, a five year period of administration of this simple estate does not assist Catherine in her claim for the maximum recommended fee. [ 29 ] Overall, this was not a complex estate to manage. Catherine is entitled to compensation at the lower end of the suggested

range in the Guidelines – $14,350. This shall be reduced by the amount that the estate was required to pay in tax penalties due to Catherine filing the estate’s taxes late – $5,458.17. Catherine’s net personal representative compensation is therefore $8,891.83. VI.

Conclusion [ 30 ] The Mother’s estate accounts as set out below are approved and the estate shall be distributed as follows: Gross Value of Assets $607,474.73 Expenses Salmon $5,349.71 Bickman $ 339.38 Brownlee $3,838.17 ( 9,527.26) Interment ( 1,047.64) Outstanding taxes paid (16,197.00) H and R Block ( 737.91) Administration fees ( 8,891.83) Net estate for distribution $571,073.09 Debt payment to John (59,276.83) Debt payment to Catherine (59,276.83) Net estate after debt payments $452,519.43 One third to John (150,839.81) One third to Catherine (150,839.81) One third to Margaret (150,839.81) Balance $0 [ 31 ] From Margaret’s share shall be deducted the sum of $18,430.31 as her 2/3 share of the solicitor-client costs under the Agreement, which shall be payable equally to John and Catherine. [ 32 ] If the gross value of the estate differs by a positive amount of more or less than $1,000 as a result of interest or dividends from the brokerage and bank accounts, Catherine shall be entitled to that positive difference as administrator compensation.

If it differs by any negative amount as a result of a decrease in value of the brokerage account, she shall provide an explanation of that decrease to her counsel within one month of the date of this Order. If counsel cannot agree on how to deal with that decrease, and I draw to their attention their Mother’s will which relieves the executor of liability for certain investment losses, they shall apply to me for resolution. VII.

Costs [ 33 ] Costs incurred by beneficiaries to force a personal representative to fulfil his legal duties may be entitled to reimbursement on a solicitor-client basis: Re Gibbons Estate , 2009 ABQB 587 , 53 ETR (3d) 151 at para 20 ; Re Laboucane Estate , 2011 ABQB 253 , 68 ETR (3d) 65. [ 34 ] In this case, Margaret through her counsel gave ample notice to Catherine of her erroneous

interpretation of the Agreement. Catherine’s accounting clearly is deficient to the point where it was reasonable for Margaret to make this application. In fact Margaret made three earlier applications to compel Catherine to produce documents and explanations respecting the estate, to which Catherine did not respond adequately. [ 35 ] While Catherine’s conduct was unreasonable in the face of multiple applications, her misconduct does not rise to the level in Re Gibbons Estate and Re Laboucane Estate .

In Re Gibbons Estate , the executor’s repeated failures to respond to the beneficiaries’ requests for an accounting delayed passing the estate’s accounts by 25 years. In Re Laboucane Estate , the personal representatives were removed for their misconduct before the accounts were passed. [ 36 ] I have already sanctioned Catherine for her delays and misconduct by deducting from her compensation the tax liabilities incurred by the estate due to her tardiness. It is unnecessary for me to also award solicitor-client costs against her to further sanction her conduct.

Consequently, costs for this application are awarded against Catherine, payable to Margaret, in the amount of

Schedule C, column 2. Column 2 is appropriate because the difference between Catherine’s proposed distribution to Margaret ($39,803.21) and the Court’s distribution to Margaret before her contractual reimbursements to Catherine and John ($150,839.81) is $111,036.60. For clarity, Catherine is not entitled to be reimbursed by the estate for the costs payable to Margaret; she must bear those costs herself. [ 37 ] Any legal fees incurred by the estate in addition to those referred to in the distribution ordered above shall be paid by

Catherine. Heard on the 28 th day of July, 2016. Dated at the City of Edmonton, Alberta this 6 th day of September, 2016. J.S. Little J.C.Q.B.A. Appearances: Mr. M. McCartney for the Applicant Mr. D. Salmon for the Respondent