2003 ABQB 270, 2003 ABQB 270

Re Overbo (Dependent Adult), 2003 ABQB 270 Date: 20030320 Action No. DA03 8554 IN THE COURT OF QUEEN'S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON COURT FILE NUMBER DA03 8554 COURT In the Court of Queen’s Bench of Alberta (Surrogate Matter) JUDICIAL DISTRICT Edmonton ESTATE NAME HAZEL OVERBO PROCEDURE In the matter of the Dependent Adults Act , being

Chapter D-32 of the Revised Statutes of Alberta, 1980 and Amendments thereto; And in the matter of Hazel Overbo, Dependent Adult, (now deceased) Application by the Personal Representative of the deceased Dependent Adult for an Order requiring the Trustee, Keith Wolodko, to bring in and pass his accounts and for an Order discharging the Trustee, and an Order declaring the Trustee to be guilty of misconduct, neglect and default and for an Order compelling the Trustee to reimburse the Estate. Dependent Adults Act , R.S.A. 1980, c.

D-32 as amended _______________________________________________________ REASONS FOR JUDGMENT (RE: COSTS APPLICATION) of the HONOURABLE MADAM JUSTICE A.B. MOEN _______________________________________________________ APPEARANCES:

Ian Nicol Ian Nicol Professional Corporation For the Dependent Adult Trustee Robert Christensen Robert Christensen Professional Corporation for the Personal Representative of the Estate Wayne LeDrew for Intervenor, Shirley Wolodko INTRODUCTION [ 1 ] On June 11, 2002 I rendered a decision in this matter finding that the Dependent Adult Trustee in this case, Keith Wolodko, (sometimes referred to as the Trustee) must pay the estate of the Dependent Adult (the “Estate”) the amount of $135,668.00 on account of his having used funds for his own use in that amount.

I had taken into account and allowed the amount of $3,535.70 for Trustee disbursements to be deducted from the $135,668.00. [ 2 ] This matter pertains to cost The Trustee claims that he is entitled to legal fees in this matter. Further, one of the beneficiaries of the Estate, Shirley Wolodko, claims she is entitled to legal fees for maintaining a watching brief during all of the matters before me. The Estate claims indemnification for its legal fees from the Trustee. Finally, there is the matter of who pays the rather large account of an accountant. [ 3 ] The issues that I must address in this regard are: 1.

Who must pay for the accountant’s fees? 2. Is the Trustee entitled to legal fees out of the Estate? 3. Is the Estate entitled to legal fees from the Trustee? 4. Is the beneficiary, Shirley Wolodko, entitled to her legal fees? DISCUSSION 1. The law [ 4 ] There is nothing in the case law put before me by counsel to suggest that my broad discretion on costs is in any way fettered in instances such as fees.

[ 5 ] The Dependent Adults Act , RSA 2000, c D-11 gives broad discretion to Justices of either the Court of Queen's Bench or the Court of Appeal to make orders as to costs. In particular,

Section 67(

b) allows Justices to order costs be paid by a trustee if the trustee has been ordered to reimburse the estate under

Section 54 as I did. [ 6 ] D.W.M. Waters The Law of Trusts in Canada , 2 nd ed. states at 944: The check upon trustees is that their claim for indemnification is made at the time of the passing of their accounts by the court; if they incurred any expenses improperly, reimbursement for those items will be disallowed...Improperly incurred expenses therefore fall upon the trustee personally, and to this extent he always incurs expenses at risk. 2.

Who must pay for the accountants fees? [ 7 ] Early in these proceedings, I ordered the Dependent Adult Trustee to retain an accountant to properly prepare accounts that this Court could understand. The Trustee had provided the Court with a skimpy affidavit containing volumes of pages setting out expenditures line by line with no explanation whatsoever for those expenses. As I could not understand what the expenditures were for, I required a proper accounting.

The accounts prepared by the accountant, Johanson-Witt, were essential to my understanding. [ 8 ] It was conceded by the Estate that the Trustee in circumstances such as this might be entitled to the sum of $3,000.00 for maintaining the accounts of Mrs. Overbo. Given the circumstances of this matter, this submission is generous of the Estate. [ 9 ] In 1995, Mr. Wolodko was appointed Trustee of his grandmother's affairs under the Dependent Adults Act .

The legislation clearly sets out his legal duties and obligations in ss. 42 and 44 , including: - an obligation to file an inventory and account of the assets and liabilities of the estate within six months of being appointed trustee; - an obligation to file the trustee's accounts at least once every two years with the Clerk of the Court; - upon the death of the dependent adult, "the trustee shall account to the legal representative of the estate of the dependent adult." [ 10 ] I note that Mr.

Wolodko, notwithstanding he was ordered several times to do so by a Court, failed to file an inventory or to file Trustee’s accounts at least once every two years. Despite these obligations, proper books and records were not kept, nor was an accounting given to the Estate following Mrs. Overbo's death in 1999. Mr. Wolodko resisted attempts by the Estate to get a full passing of accounts, ignoring several Court-imposed deadlines.

He provided an acceptable accounting only when found in contempt, and only when this Court ordered that an accountant be retained to assist him with preparing the accounts. [ 11 ] It is obvious from an examination of the accountant's detailed bill (Tab 6, Wolodko’s materials) that even after Johanson-Witt was engaged, it was difficult for her to receive instructions and to secure the proper documentation from the Trustee in order to do the accounts. The bill makes it clear that there were ongoing discussions with Mr. Wolodko's lawyer, Mr.

Nicol, about the engagement, that letters and followup phone calls were needed to procure missing documentation, that the accountant met more than once with the Trustee, and that financial statements and reports had to be created for each of four bank accounts in Mrs. Overbo's name, for each of the five years or parts thereof that she was a dependent adult. It appears that Mr. Wolodko gave his documents to the accountant in a disorganized state. [ 12 ] Had Mr.

Wolodko not used his grandmother’s funds for his own use and kept proper books - a relatively simple task given the straightforward nature of his grandmother's Estate - the services of an accountant likely would not have been needed. Nevertheless, Mr. Wolodko, as Trustee of his grandmother’s Estate, was entitled to have an accountant prepare annual statements. But for reasonable expenses that a properly managed trust would have incurred in the amount of $3000.00, I am of the view that Trustee Keith Wolodko should shoulder the full cost of the accountant ($22,373.43 less $3,000.00).

[ 13 ] I acknowledge that the Estate has paid those fees. It is for the Estate to recover the cost of the accountant’s fees the Trustee must pay under this order for costs. 3. Is the Trustee entitled to legal fees out of the Estate? [ 14 ] Mr. Wolodko now seeks to have the Estate, which pursued him relentlessly for a passing of accounts, pay his legal fees ($22,887.74). [ 15 ] I find that it is completely Mr. Wolodko’s fault that legal proceedings were needed in the first place, and dragged on this long once initiated. As Mr.

Christensen pointed out in his brief, the Trustee was only in court and incurring legal fees because of his foot- dragging, misuse of funds and general contempt for the authority of the Court. [ 16 ] Mr. Nicol states it would be "a perversion of the law" to award costs against a Trustee when they are required to pass accounts. Given Mr. Wolodko's extraordinary reticence to perform his statutorily mandated duties, to reward him with recompense for his entire legal and accounting expenses would amount to a perversion itself. [ 17 ] Mr. Nicol looks to Mark M.

Orkin, Law of Costs , 2 nd ed. 1997, Statement #219.3.1 page 2-192, to buttress his position: An administrator who refused to provide documents on request, did not pass accounts and managed the estate badly, although such conduct did not amount to negligence, was ordered to pay the costs on a solicitor-client basis of the lengthy trial of an issue as to his negligence.

An executor who paid funds out of the estate without authority of the beneficiary was ordered to pay complete indemnification costs, given the serious breach of trust, as was an estate trustee whose conduct was reprehensible and scandalous and added to the length of hearing or the passing of accounts. [ 18 ] Orkin goes on at s.219.3.1 to state: Trustees who took an untenable position in litigation relating to the trust could not look to it for satisfaction of their liability for costs, but were held personally liable. [ 19 ] It seems clear to me that these last two extracts describe Mr. Wolodko aptly.

Even the case law cited by Mr. Nicol favours the Estate. In Carter v. Blaney et al. (1989), 34 E.T.R. 229 (B.C.C.A.) , the Court says at 230, "the onus to establish reasonableness is on the trustee." Clearly, that has not been done here. [ 20 ] I have allowed for reasonable costs for accounting in the amount of $3,000.00. This should have covered Mr. Wolodko’s requirement to pass his accounts before the Court without the necessity of an appearance in court. However, in the circumstances of this case, and given the ill feelings between Mr. Wolodko, Shirley Wolodko, and Mr.

Overbo, it is entirely conceivable that Mr. Wolodko would have had to appear in court to pass his accounts. Therefore, I also allow $750.00 in legal fees for Mr. Wolodko’s preparation of the necessary documents and appearance before the Court to pass his accounts. Apart from this, Mr. Wolodko is not entitled to any reimbursement for his legal fees from the Estate. 4. Is the Estate entitled to legal fees from the Trustee? [ 21 ] Mr. Christensen maintains that the costs should follow the cause. In this case, the Estate was successful. Mr.

Christensen relied upon Rules 601 and 602. [ 22 ] The Estate also says that it should be entitled to recover from Mr. Wolodko all of the costs incurred by the Estate in these proceedings. In other words, the Estate seeks solicitor-client costs from Mr. Wolodko.

[ 23 ] Mr. Nicol says that Rule 602 is not applicable in this case. I agree. This is not a case for which I have any evidence that the solicitor for the Trustee ought to pay the legal fees of the Estate. [ 24 ] Mr. Nicol also says that

Section 48 of the Dependent Adult Act is the applicable

section pertaining to costs. Further, he says that under that

section I may consider the issue of hardship and that there would be a great hardship if costs were awarded against Mr. Wolodko.

Section 48 (now

Section 67) of the Act provides that the Court may order costs to be paid by any of the following: (a)(ii) the person making the application, where [the Court] is satisfied that it would not be hardship to do so; (iii) the person in respect of whom the application is made, where [the Court] is satisfied that it would not be hardship to do so; ... [ 25 ] As set out above,

Section 67(

b) allows me to order costs to be paid by a Trustee where I have ordered the Trustee to reimburse the Estate, as I have done here. [ 26 ] In this case, the application was made by the Estate under the Dependent Adult Act . The subject matter was the passing of the accounts of the Dependent Adult Trustee. The application was made by the Estate to force the Trustee to pass his accounts before the Court. As set out above, the Trustee came to court reluctantly and caused the Estate to make several applications and the Court to make several adjournments. [ 27 ] I have no doubt that great hardship will arise for Mr.

Wolodko and his family if costs are awarded against him. Nevertheless, in this case, that is not something that I will consider. Mr. Wolodko was solely responsible for his misfortune - his mismanagement of the Estate caused his difficulties in the first place. Then, his management of passing of accounts led to these lengthy and unnecessary proceedings. To reward him in these circumstances, where he did not act in good faith, would be unfair and unjustifiable. [ 28 ] Mr. Nicol also says that this dispute should have been settled by the family. I agree.

In fact, several times I gave the parties an opportunity to discuss it amongst themselves to settle it. However, the Estate was not required to settle the matter. Further, from documents before me, it was clear that the Estate estimated an amount owing by the Trustee to the Estate somewhat less than the amount I ultimately ordered the Trustee to pay the Estate. I was not given any evidence of offers being made by either party to the other save and except Shirley Wolodko’s solicitor’s statement in court that she wanted to settle this matter. [ 29 ] Mr. Nicol also complains that the Estate could have examined Mr.

Wolodko on his affidavit appending accounts and then come to court. Although this could have been done, I do not see how it could have shortened the trial. Further, from my review of Mr. Wolodko’s statements, they were incomprehensible. It was not until I ordered that an accountant prepare proper records that the Trustee’s statements could be deciphered by me, and no doubt by the Estate. [ 30 ] Therefore, I order that Mr. Wolodko pay the legal fees of the Estate on a reasonable solicitor-client basis to be taxed by the taxing officer. 5.

Is the beneficiary, Shirley Wolodko, entitled to her legal fees? [ 31 ] As for Shirley Wolodko's legal fees, her interests as beneficiary were being safeguarded by the Estate. In fact, a letter was put before me from Shirley Wolodko to Mr. Christensen. The letter was dated May 26, 1999. She protested that she had never seen the Trustee’s accounts and investment statements and was surprised and disappointed by what they appeared to reveal. She told Mr. Christensen that there ought to be a “court appointed audit”. She even anticipated restitution might be ordered by the Court. It appears to me that Mr.

Christensen followed her recommendations. [ 32 ] Shirley Wolodko complained that she was not getting responses from Mr. Christensen to her correspondence to him.

Properly, her correspondence should have been directed to the Personal Representative of Mrs. Overbo’s Estate, Harvey Overbo. (Unfortunately, Mr. Christensen’s correspondence was not always clear that he was acting for the Estate. Sometimes he referred to his client as Harvey Overbo. This, of course, was not correct.) Unless the Personal Representative gave instructions to Mr. Christensen to correspond directly with Shirley Wolodko, it was not Mr. Christensen’s duty to write to her. There was no evidence before me that the Personal Representative of the Estate had given those instructions to Mr. Christensen.

Further, it was not her position to give Mr. Christensen any instructions. He was acting for the Estate. He would have been in a conflict of interest had he take any instructions from her. [ 33 ] It was apparently Mrs. Wolodko’s erroneous assumption that the Court would supervise the Dependent Adult Trustee. [ 34 ] It appeared to me through some of the evidence given at trial that there was no love lost between Shirley Wolodko and her brother Harvey Overbo.

Nevertheless, as those two were the only beneficiaries of Hazel Overbo’s Estate, it appears that the outcome of the trial was what they expected. [ 35 ] Shirley Wolodko argues that costs ought to be awarded in her favour from the Estate because the issues were “real and live”. She cites the case of Scramstad v. Stannard (1996) 42 Alta. L.R. (3d) (A.B.Q.B.). In that case, the court stated the principle that costs are left in the discretion of the trial judge, such discretion of course being exercised judicially.

In that case the court found that it was fair and equitable that the costs of the plaintiffs be paid out of the estate. The court was satisfied that the plaintiffs had reasonable grounds, both legally and morally, to have the court determined the issues in that case. [ 36 ] In this case the issues were “real and live”, but the contest was between the Estate and the Trustee. It was not necessary for the beneficiary to be present in court for the hearings. [ 37 ] Where there is an intervener who provides some valuable assistance to the Court, costs may in some circumstances be awarded to that intervener.

However, this was a watching brief for Shirley Wolodko, who resides outside Canada and who wanted an independent report as to what was happening in court. Mr. LeDrew, when I asked for assistance, told me that his client had not given him instructions. Considering Mr. LeDrew's general silence I cannot award costs in favour of Shirley Wolodko. [ 38 ] If Shirley Wolodko did not trust Harvey Overbo, the Personal Representative of their mother’ s Estate, and hired her own lawyer, this was her decision and she should pay any fees incurred.

CONCLUSION [ 39 ] The accountants fees must be paid by the Dependent Adult Trustee save and except for $3,000.00 that I find are reasonable fees for accounting for the Dependent Adult’s Estate. [ 40 ] The Trustee must pay for his own legal fees, save and except for $750.00 that I order the Estate to pay for legal fees for preparing for an application to pass accounts. [ 41 ] The Estate is entitled to legal fees to be paid from the Trustee on a reasonable solicitor-client basis to be taxed by the taxing officer. [ 42 ] The beneficiary, Shirley Wolodko, is not entitled to have her legal fees paid from the Estate. [ 43 ] The costs of this application are to be borne by each party.

HEARD on the 17 th day of January, 2003. DATED at Edmonton, Alberta this 20 th day of March, 2003. __________________________ J.C.Q.B.A.