Legge Estate, Re

Legge Estate, Re Court Supreme Court Date 2007-02-21 Citation 2007 NSSC 53 Docket Probate 10330, SK 258741 Judge/Registrar/Adjudicator Warner, Gregory M. (Honourable Justice) Document Type Decision Relations Library Sheet - Legge Estate, Re - 2007 NSSC 53 - 2007-02-21 - Library Sheet Decision Content IN THE SUPREME COURT OF NOVA SCOTIA and IN THE PROBATE COURT OF NOVA SCOTIA Citation: Legge Estate, Re, 2007 NSSC 53 Date: 20070221 Docket: S.K. No. 258741 and Probate # 10330 Registry: Kentville Between: The Estate of Harold B. Legge, deceased and An Application to Vary a Trust, pursuant to the Variation of Trusts Act, pass accounts, and discharge the Trustees Judge: The Honourable Justice Gregory M. Warner Heard: February 14, September 18, November 20, 21, 27, and December 5, 2006, at Kentville, Nova Scotia Counsel: Trinda L. Ernst, Q.C., Proctor, and Siobhan Doyle, for the Estate Michael S. Ryan, Q.C., and W. Harry Thurlow, for Walter O. Newton, Q.C. Peter Bryson, Q.C., for Carl K. Miller James E. Dewar, Q.C., for Sharon Y. Legge Lawrence E. Legge and Robert P. Legge, unrepresented By the Court: INDEX Heading Paragraph number A. Introduction 1 B. Probate chronology 7 C. Legge Transport Limited 52 D. Investment account 99 E. Life insurance 108 F. Sharon Legge income entitlement 114 G. Termination of trust 119 H. Estate or trust closing? 125 I. Closing liabilities 136 J. Trustees fees and commissions 147 K. Solicitors costs 191 L. Conclusion 215 A. INTRODUCTION [1] Harold B. Legge died July 7, 1993, leaving as survivors his second wife, Sharon Legge, a daughter (Anna) and two sons (Lawrence and Robert) from his first marriage, and a son (David) from his second marriage. His most significant asset was his interest in Harold B. Legge Transport Limited (called “LTL”), a diversified trucking company that he had grown over thirty years into a company with about $5,000,000.00 in annual sales and forty to fifty employees (including his sons Lawrence and Robert). [2] His will, prepared by his lawyer, Walter O. Newton, and dated June 22, 1981, appointed his lawyer, and chartered accountant, Carl K. Miller, as executors and trustees (called “Trustees”). After bequeathing his residence and RRSPs to his wife, personal items to his sons, and $10,000.00 to his daughter, he left the rest of his estate to his Trustees in trust to: (a) pay his bills; (b) transfer 30% of his interest in LTL to his three sons (10% each); and (c) to hold the remaining 623 shares of LTL in trust to pay dividends (income) to his wife during her life, and the principal to his three sons equally on his wife’s death. Although residual assets existed, the will contained no residue clause. This caused problems for this administration. [3] Probate of this will was granted to the Trustees on July 9, 1993. [4] In the thirteen years since 1993, disputes and allegations of mismanagement have been made by members of the Legge family against the Trustees. [5] On November 21, 2005, Walter O. Newton filed in the Supreme Court of Nova Scotia an application to: (a) terminate the income trust in favour of Sharon Legge; (b) make final distribution of the Estate assets; and (c) discharge the Trustees. B. CHRONOLOGY OF PROBATE EVENTS [6] The chronology is essential to understand the issues and is reflective of the administration of this estate. 1993 - 2005 [7] July 9, 1993: A petition for probate was filed estimating the estate at $920,750.00. Probate was granted on the same day. [8] October 7, 1993: The inventory was filed showing an estate value of $1,038,413.89, consisting of : 890 common shares of LTL - $848,336.00; shares in two other private companies - $2.00; Cash - $11,275.00; two vehicles - $6,200.00; a residence ($176,000.00 less mortgage outstanding of $100,000.00); and three other real properties - $72,500.00. [9] October 11, 1994: Timothy C. Matthews on behalf of Lawrence Legge petitioned Probate Court for a citation to direct the Trustees to seek instructions for interpretation of parts of the will and directing distribution of the residue. [10] November 18, 1994: The Trustees petitioned for a citation to settle the estate and pass the executors’ account. A citation was issued for January 12, 1995. [11] December 8, 1994: Justice Hall issued an order adjourning the closing, and setting a hearing date of January 23, 1995. to interpret the will, and pass accounts. [12] January 23, 1995: A hearing before Justice Hall resulted in an oral decision interpreting parts of the will (written release dated April 12, 1995). [13] February 15, 1995: A citation was issued for April 5, 1995, to pass accounts and settle the estate. [14] February 23, 1995: Lawrence Legge, by his counsel, appealed Justice Hall’s decision to the Nova Scotia Court of Appeal. The appeal was discontinued on July 12, 1995. [15] June 22, 1995: An order was issued pursuant to Justice Hall’s interpretation of the will. [16] July 27, 1995: A citation was issued for a hearing on September 26, 1995 to pass accounts and settle the estate. [17] October 6, 1995: A citation was issued to adjourn the hearing to October 26, 1995. [18] October 26, 1995: A hearing was held before Justice Hall to pass accounts and settle the estate. The executor’s accounts tendered showed an increase in the value of the estate to $1,482,590.00. The valuation of the shares in LTL did not change. The increase is attributable mostly to: (a) a capital dividend of $373,800.00 from LTL to the estate, and (b) income earned from investments and interest on a loan to LTL of $59,074.00. At some point the hearing was continued to December 5, 1995. [19] December 5, 1995: After hearing more representations, Justice Hall adjourned the closing for further interpretation of the Will. [20] January 23, 1996: The closing was adjourned to March 5, 1996. On March 5, the closing was adjourned without day. No order was issued. [21] No other activity involving Probate Court appears to have occurred until the year 2000. In 1997, the Trustees arranged for the sale of LTL. The particulars of this transaction are dealt with separately in this decision. [22] January 13, 2000: James Dewar, Q.C., counsel for Sharon Legge, requested that the executors proceed to close the estate. [23] March 7, 2000: A citation was issued to pass accounts and settle the estate to be held April 19, 2000. [24] April 19, 2000: A hearing was commenced before the Registrar to finalize the accounts; after some time, the closing was further adjourned for the filing of better accounts and the receipt of written submissions. [25] May 4 & 5, 2000: James Dewar, Q.C. on behalf of Sharon Legge, and Robert Legge, filed separate written submissions outlining questions and complaints about the administration of the estate. [26] June 26, 2000: A citation was issued for a hearing for July 31 - August 4, 2000 to pass accounts and settle the estate. [27] July 31, 2000: At this hearing, Justice Goodfellow was advised that (a) Carl Miller was not present, and (b) Walter Newton had just retained independent counsel, who requested an adjournment. Justice Goodfellow rescheduled the closing for five days beginning October 2, 2000. [28] October 6, 2000: The parties appeared before Justice Hall to settle the form of the order arising from the hearings of October 26 and December 5, 1995. Matters arising after December 5, 1995, were specifically excluded. [29] November 7, 2000: An order was issued confirming the oral directions of October 26 and December 5, 1995, and approving the accounts (subject to two exceptions) presented at the October 26 and December 5, 1995, hearings. [30] March 7, 2001: A citation was issued for adjudication on April 17, 2001 of the outstanding “exceptions”. On April 19, Justice Stewart adjourned the hearing. [31] June 29, 2001: The hearing on the two issues was held by Justice Coughlan. [32] November 1, 2001: Justice Coughlan’s written decision was filed. It appears from the file that, as of January, 2002, counsel could not agree on the form of the order. No order with respect to that decision has been issued. [33] No other probate matters were brought to the attention of the Court until the application of November 21, 2005. This Application [34] November 21, 2005: Walter Newton applied in the Supreme Court, S.K. 258741, “on behalf of Sharon Legge” for an order, pursuant to s. 2 of the Variation of Trusts Act, to terminate the income trust under the Will, and “for final distribution of the estate assets and discharge of the Trustees”. In support, he filed affidavits of Carl Miller, Sharon Legge and David Legge. [35] December 1, 2005: Lawrence Legge filed an affidavit alleging negligence and breach of trust by the Trustees in the management of the estate, and the improper taking of fees. [36] December 6, 2005: Justice Scanlan ordered a pretrial meeting to organize and set a date for the hearing of the application. [37] December 20, 2005: A pretrial conference was held. A hearing was set for February 14 and 15, 2006. The court directed that the application to vary the trust (for which the Supreme Court had sole jurisdiction), and the application to pass the supplementary accounts and discharge the Trustees (for which the Probate Court had jurisdiction in respect of outstanding probate matters, and the Supreme Court had jurisdiction for matters relating to the trust), would be heard together. In the interim: (a) the Trustees were to file the application for final distribution of the estate and discharge of the Trustees in Probate Court; (b) the Trustees were to file their supplementary accounts, from December 5, 1995 (the date of Justice Hall’s last review), in a format that would give to the Court and interested parties a complete picture of the accounting from beginning to end; (c) because Lawrence Legge was not present at the pre-trial conference (having been given notice), Counsel for Mr. Newton requested an order for discovery of Mr. Legge as to the particulars of his allegations; the court agreed to grant it upon filing of a chambers application; and (d) directions for notice of the applications and hearing to all interested parties were given . [38] January 12, 2006: An application for discovery of Lawrence Legge was granted. [39] February 6, 2006: Prehearing memoranda were filed on behalf of Walter Newton and Carl Miller. [40] February 8, 2006: Carl Miller filed two affidavits: one with annual financial statements of the estate from March 8, 2000 to January 7, 2006, together with other schedules of receipts, disbursements and calculations of Trustees’ fees, and a second containing his time records. Walter Newton filed an affidavit with legal accounts of his law firms from November 23, 1995 to June 10, 2004. [41] February 12, 2006: A prehearing memorandum was filed for Sharon Legge. [42] February 14, 2006: Hearing of the application commenced. The Court noted that the accounts were not in the usual form for accounts for the closing of an estate. On the submission of the Proctor of the estate, the Court agreed to proceed with evidence of Carl Miller, the trustee familiar with the estate’s accounts. When, after several questions, Mr. Miller was unable to quantify the apparent significant discrepancy between the funds actually received by the estate from its interest in LTL, and the value placed by the Trustees on the estate’s interest in LTL at the time of the “first closing”, the Court set over the hearing so as to enable the Trustees to prepare accounts in a format that would enable the court and interested parties to identify the actual receipts, and holdings of the estate, and relate these to the valuations provided on the “first closing” in 1995. Based on representations that such accounts would be available, the hearing was adjourned to May 25 and 26, 2006. [43] February 14, 2006: The Trustees filed a petition in probate court to close the estate. [44] May 16, 2006: Walter Newton filed an affidavit outlining the involvement of the Trustees with LTL. [45] May 19, 2006: Carl Miller filed an affidavit with respect to the Trustees’ dealings with LTL. [46] May 23, 2006: Lawrence Legge filed an affidavit in response. [47] May 24, 2006: Not having received any further accounting from the Trustees for the hearing scheduled for the next day, the Court arranged a conference call with all parties. Ms. Ernst and Mr. Bryson advised the the Trustees were unable to prepare the accounts, and requested that Grant Thornton be authorized to prepare the accounts requested on February 14th. They advised such accounts, together with the supporting files and materials, would be available by July 30th. On this basis the Court adjourned the hearing to September 18 - 20, 2006. While Grant Thornton’s account for this was initially to be an account of the estate, the Court gave notice that it would consider, on closing, who should be responsible for the payment of the cost of their work. [48] September 15, 2006 (Friday): The Trustees filed an affidavit containing the supplementary accounts and schedules prepared by Grant Thornton, together with a box containing six files; three files contained the monthly bank statements of the estate from December 1, 1993 to June 30, 2006, with attached cheques, deposit slips and some invoices, and three files contained deposits receipts held by the estate with the Royal Bank, and monthly statements (to November 30, 2005) from the investment broker with whom the estate’s investment account was held. [49] September 18, 2006 (Monday): The scheduled hearing opened with concern expressed about the late receipt of the supplementary accounts and the lack of time to review and evaluate them. At the Proctor’s request, Charlene Cavanagh and Darrell Richards, the Grant Thornton accountants who had prepared the supplementary accounts, “walked through” their accounts and answered questions. At that point the hearing was adjourned to allow time to review the materials filed on September 15, 2006. [50] November 20, 21, 27 & December 5, 2006: Further evidence was received and oral arguments made by all interested parties. [51] November 23, 24, 26 & December 4, 2006: Supplementary written submissions were filed. C. HAROLD B. LEGGE TRANSPORT LTD (Called LTL) Summary of LTL’s contribution to the estate. [52] The most significant asset of the estate was LTL. It was the source of much controversy. The Trustees took control of LTL at an informal meeting of the Legge family held at the testator’s home on July 8, 1993, the day after his death. [53] The primary complaint of the beneficiaries, made to varying degrees, was of mismanagement by the Trustees of LTL, resulting in a diminished eventual recovery by the estate and heirs of the value of LTL. Evidence as to mismanagement or bad judgment or a breach of trust or some other misconduct was only relevant to the Trustees’ request for approval of fees and commissions taken (without court approval), and additional fees claimed. This application did not involve any claim against the Trustees for damages or a related remedy; in this regards, I note the comments of Justice Goodfellow at pages 9 and 10 of the July 31, 2000, hearing. [54] The Court’s first inquiry was to determine the estate’s actual recovery from LTL as compared to the values declared by the Trustees at the first closing. The evidence received does not provide a clear answer. The next section of this decision contains the Court’s analysis, and, with some hesitation based on incomplete information, the Court’s conclusion on this complaint. [55] The loss in the value of LTL to the estate and heirs is a relevant circumstance, which, in the context of all evidence, can contribute to a finding that the Trustees failed to exercise the standard of care imposed upon them in the circumstances. [56] A summary of the Court’s conclusion, from the conflicting, convoluted, and sometimes inadequate information, is as follows: 1. A business valuator with Doane Raymond estimated that, excluding the $1,000,000.00 life insurance policy paid to LTL, as of July 7, 1993, LTL had a “liquidation value” of $445,958.00, and a “going concern value” of between $819,000.00 and $957,000.00. 2. The Trustees valued the estate’s interest in LTL, on the “first closing” in 1995 at over 1.26 million dollars (including 890 shares of LTL, and $40,500.00 in income and dividends received from 1993 to 1995). 3. The Grant Thornton closing accounts show the value of LTL, as of June 30, 1993, as $1,957,000.00, and the estate’s share (623 shares) as 1.21 million dollars. 4. The Grant Thornton accounts show that, from June 30, 1993 to the present, the loss to the estate of its interest in LTL (623 shares) is more than $859,000.00. The loss to all shareholders is approximately 1.3 million dollars. 5. Approaching the question from the opposite direction, I have calculated (with some difficulty) that the estate’s actual gross receipts for its interest in LTL, over thirteen years, was approximately $389,000.00. 6. In summary, the estate recovered a small portion of the value that was declared by the Trustees at the “first closing”. Analysis [57] No financial records of LTL were provided to the Court at any time. The only corporate record provided was the minutes of the directors meeting held on October 19, 1993. [58] The difficulty in approving the accounts, the claim of Sharon Legge for the net income from LTL, and the heirs’ complaints of mismanagement, is caused by the absence of records - financial and corporate records of LTL, and all the relevant files and records of the Trustees’ dealings with LTL and its sale in 1997. [59] Exhibits filed with the Court contained snippets of transactions between LTL, the estate, and minority shareholders, including the first capital dividend and shareholders loan (First Issue) of October 27, 1993, the sale of the shares of LTL in 1997, the second capital dividend and shareholders loan (Second Issue), and payments received from the purchasers of LTL. The most reliable were the thirty-four schedules prepared by Ms. Cavanagh and Mr. Richards, attached to Exhibit 14. [60] On the testator’s death, LTL’s equity consisted of 1004 issued common shares: Harold B. Legge - 890; Lawrence Legge - 57; and Robert Legge -57. [61] By the Will, the Trustees were directed to transfer to each of Lawrence, Robert, and David Legge, ten percent of the estate’s shares in LTL. It appears to have occurred before the payment of the first capital dividend on October 27, 1993. Upon transfer, the shareholdings were: estate - 623 common shares (62.1%), Lawrence Legge - 146 (14.5%), Robert Legge - 146 (14.5%) and David Legge - 89 (8.9 %). [62] LTL held a $1,000,000.00 life insurance policy on Harold Legge’s life. The Trustees state (in Exhibit 9) that LTL had a working capital deficit of $650,000.00 on his death. They state that LTL required the life insurance proceeds to remain solvent. Mr. Miller, a chartered accountant and partner at Doane Raymond at the time, testified that he came up with the plan to cause LTL to pay to the shareholders a capital dividend of $600.00 per share ($602,400.00) most of which would be loaned back to LTL by the shareholders in a pro-rata basis (called “First Issue”), upon which loan LTL would pay interest and eventually the loan itself. The minutes of the October 18, 1993 director’s meeting, confirm this intent. It appears that the shareholders agreed to lend back, from the first capital dividend, a shareholder’s loan of $435,296.00 apportioned as follows: the estate - $260,296.00, Lawrence Legge and Robert Legge - $61,000.00 each and David Legge - $53,000.00. [63] The effect of this appears to be that, from the life insurance, LTL was to retain $833,000.00 (approximately $398,000.00 was not paid out by the capital dividend, and $435,000.00 was to be loaned back to LTL) and the shareholders were to retain $167,000.00 as follows: the Estate - $113,500.00, Lawrence Legge - $27,000.00, Robert Legge - $25,100.00 and David Legge - Nil. [64] One of Larry and Robert Legge’s complaints was that, unbeknownst to them (even though they were directors of LTL at that time), and contrary to the Trustees’ representation that the First Issue would be pro-rated amongst the shareholders, the Trustees, in bad faith, caused LTL to repay $110,000.00 of the estate’s share of the First Issue on the day it was advanced (October 27,1993). This event is confirmed in the accounts. Mr. Miller did not deny it, but justified it on the basis that the estate needed the cash. The court notes (later in this decision) that at about this time the estate invested about $100,000. in an investment account with Burns Fry Limited, for which account Carl Miller’s son, Peter Miller, is shown as the account executive. This loan repayment was the first of several events that confirmed to the court that the Trustees, who had legal control of LTL, in fact controlled the affairs of LTL and its eventual sale. [65] On October 7, 1993, the Trustees filed an inventory (Exhibit 9 Tab A) showing the estate to be $1,038,413.00, in which the 890 LTL common shares were valued at $848,336.00. No explanation of that valuation was provided to the court; however, one of the appraisers signing the inventory was John E. L. Crowthers, C.A., a partner of Mr. Miller at Doane Raymond. [66] Attached to the final accounts (Exhibit 14 Tab FF), is a “business valuation estimate” of LTL as of July 7, 1993, prepared by Mr. Crowthers dated December 14, 1993. The estimate predates payment of, and appears to exclude, the $1,000,000.00 life insurance. Mr. Crowthers opined that: (a) the liquidation value to LTL of its assets was $445,958.00. The tax cost to get this value to the shareholders was about $156,000.00 if LTL was wound up, or about $78,000.00 if LTL continued and taxes were deferred. (b) as a going concern, based on normalized earnings (which averaged $309,481.00 during the prior five years), and using a cap rate of five to six times earnings, the value of the Company was between $819,000,00 and $957,000.00. LTL’s unaudited statements showed shareholder equity on June 30, 1993 of $975,899.00; in his opinion, the realizable value of the tangible assets was $1,117,000.00. [67] For the “first closing” in 1995, the Trustees showed the estate value to have risen from $1,038,413.00 to $1,423,515.00. Of the difference, $373,800.00 was described as a “tax free capital dividend” from LTL. Of the income received by the estate ($59,000.00), $33,000.00 was described as a “loan receivable” from LTL (First Issue), and $7,476.00 as taxable dividends (passed on to Sharon Legge per 7(c) of the Will). [68] Based on the Trustees’ accounts, Justice Hall approved executors’ fees of $74,129.00 (after deducting directors’ fees of $34,000 that the Trustees had paid themselves from LTL without court approval). LTL Management [69] After Harold Legge’s death, LTL’s management was (per exhibit 29): - Richard Spencer, LTL’s chief accountant, continued as the office manager and secretary/treasurer, at an increased salary; - Sharon Legge, who had been vice-president but not active in LTL, became President at a salary of $500.00 per week; - Lawrence and Robert Legge continued their employment with LTL and were in charge of the “dispatch office”, which I understood to mean that they supervised the drivers and co-ordinated shipments and vehicles; and - Walter Newton and Carl Miller became directors. [70] By 1994 there was conflict within the Company. See Walter Newton’s affidavit (Exhibit 17 paragraphs 19 - 30) and Carl Miller’s affidavit (Exhibit 18 paragraphs 16 - 23). A legal action was commenced by Lawrence Legge against LTL in 1994 (Exhibit 29); it appears to have been resolved about July 7, 1995, when Lawrence Legge’s employment with LTL was terminated (the records show a severance payment of $20,000.00) and Lawrence Legge assigned to the estate his part of the shareholder’s loan (First Issue) of $60,000.00 (Exhibit 9, Tab B), and further executed an “escrow agreement” (Exhibit 9, Tab F) granting the Trustees an option to buy his shares for such price as the Trustees were willing to accept from a third party for the estate’s shares, at the time they sold. The estate would acquire and pay for his shares when the Trustees sold LTL to a third party. In fact, the transaction did not occur in accordance with the escrow agreement. The estate did not buy, and pay for, his shares; rather, the Trustees advanced to him (and other minority shareholders) a share of the monies received (less a “commission” kept by the Trustees for collection), that was allocated by them to the shares. [71] From this time (1994), the Trustees commenced efforts to sell LTL. The principal customer of the live haul division (the biggest and most profitable division of LTL) was Canard Poultry. The Trustees state that a competing trucking firm “stole” the Canard Poultry contract from LTL; the threat of the loss of this contract hindered attempts to sell LTL, and decreased the eventual sale price of LTL. [72] In June, 1997, the Trustees entered into an agreement to sell LTL to three individuals - Wayne Speight, Ron Pomerleau and Silas Kpolugbo (collectively called “SPK”). [73] By the Agreement of Sale dated June 24, 1997 (Exhibit 9 Tab C), the Trustees, as vendor, agreed with SPK, as purchasers, to transfer all of the outstanding shares “for a price equal to the shareholders equity of the Company less the sum of $100,000.00 as determined by an audit of the Company accounts and records as of June 30, 1997" and payable: (a) $75,000.00 down; (b) payment on shareholder loans from an LTL GIC of approximately $85,000.00; (c) declaration by LTL of a second capital dividend to the shareholders which dividend would be loaned back by the shareholders to LTL (Second Issue) and be repaid by the purchasers over time; (d) payment of the outstanding shareholder loan (First Issue) of $325,226.00, plus interest, over time; (e) payment of the purchase price and all shareholder loans to the vendors in full within eight years; and (f) security for the purchasers’ obligations was to be in the form of joint and several personal guarantees of SPK in the amount of $75,000.00. [74] The actual sale price is not determinable from the contract itself. The Trustees were unable to advise this Court during initial hearings of what the actual sale price was, and what was actually received from SPK for the shares and outstanding shareholder loans. Amount actually received by the estate and heirs [75] According to Grant Thornton (Exhibit 14 tab HH), LTL lost $718,721.00 between June 30, 1993 and June 30, 1997. Its value dropped from $1,957,000.00 (equity of $957,000.00 plus the $1,000,000.00 life insurance) to $1,238,279.00. The Estate’s share (623 of 1004 shares) of this loss was $445,979.00. [76] The same exhibit shows that on June 30, 1997 the shareholder’s equity of $256,845.00 (Estate’s share $159,378.00) was adjusted before the sale to SPK to $224,972.00 (Estate’s share $139,599.00). Ms. Cavanaugh and Mr. Richards testified that the Estate lost a further $413,000.00 on its interest in LTL from the failure to recover the Estate’s share of the sale price (Exhibit 14 tabs N, V, HH). They did not document the loss to all of the shareholders. Exhibit 14 tab DD shows that the gross amounts received from SPK ($210,466.00) were apportioned by the Trustees between the Estate and other shareholders; the Estate received about $144,000.00 and the other shareholders $66,000.00. I infer from this that the other shareholders were allocated one-third of the receipts (they own 38% of the shares) and that they suffered one-third of the loss incurred from the SPK sale. If the Estate’s loss was $413,000.00, the loss to the other shareholders was about $200,000.00, making the total amount not recovered from SPK about $613,000.00. [77] During the time of the Trustees’ control of LTL and its affairs, the loss to all shareholders was over $1.3 million. The estate’s loss was over $849,000. [78] It appears from the records provided that some expense was incurred by the Estate in attempting, after the fact, to enforce and collect the purchase price (of the $60,289.05 paid by the estate in legal fees per exhibit 14 tab KK, $11,502.60 was for collection efforts); in addition, much of the time and effort of the Trustees after June, 1997, was expended in futile efforts to recover the balance of the sale price. [79] This leads to a second question. If the Estate’s share of the loss in value of LTL was $859,000.00, what actually did the Estate, and the other minority shareholders (whose interest in LTL was under the control of the Trustees), receive from the value of LTL. This was the first question asked of the Trustees on February 14, 2006. It was not answered then, and after several adjournments, it is still not clear. The documents filed with and attached to the Order of Justice Hall at the time of the “first closing” (accounting to December, 1995) do not help. The Grant Thornton supplementary accounts do not go behind the December, 1995 “first closing” accounting. No financial records of LTL were provided to the court. The partial accounting provided (including hand written notes) was inconsistent. [80] From the accounting filed, it appears that the Estate actually received from LTL the following: 1. Interest on the First Issue (shareholders loan) between December, 1993 and October, 1995 (per the “first closing” accounts): $32,802.00. 2. Taxable dividends in November and December, 1993 and January, 1994: $7,476.00 (paid to Sharon Legge). 3. Interest on the shareholder loans (presumably the First and Second Issues) from December 27, 1995 to February 3, 1999: $50,228.00. 4. From the second capital dividend paid on June 30, 1997, and loaned back in full to LTL: $16,043.00 (per Exhibit 14 Tab X). 5. From the first capital dividend paid October 29, 1993; $113,504.00. 6. From the estate’s portion of the First Issue loan of $260,296.00, Exhibit 14 tab X shows repayments after November 25, 1995, totalling $73,083.00 (mostly in 1997). Repayments prior to November 15, 1995, appear, per Exhibit 9 tab G, to be $110,000.00 on October 27, 1993, and $19,968.00 on November 9, 1995. Exhibit 9 tab G shows three entries by which the estate returned $82,000.00 of these repayments to LTL; on July 4, 1995, the Trustees purchased a portion of David Legge’s first shareholder loan ($2,000.00); on July 7th, 1995, the estate wrote a cheque to LTL to finance the departure of Lawrence Legge from LTL in the amount of $20,000.00. (This transaction was described in Grant Thornton’s supplementary accounts (Exhibit 14 tab II) as “severance”); and, on July 7, 1995, the estate purchased Lawrence Legge’s share of the First Issue of $60,000.00. LTL appears to have repaid the estate $203,051.00 on the First Issue, and the estate returned to LTL $82,000.00, for a net recovery by the estate of $121,051.00. 7. The estate’s share of the monies received from SPK for its 623 shares (Exhibit 14 tab DD): $47,902.00. [81] In summary, the Estate actually received for its interest in LTL $389,006.00: 1. Interest 1993 - 1995 $32,802.00 2. Taxable dividend $7,476.00 3. Interest after 1995 $50,228.00 4. Second shareholders loan $16,043.00 5. First capital dividend $113,504.00 6. First shareholders loan (net of reinvestment) $121,051.00 7. Sale of its 623 shares $47,902.00 $ 389,006.00 [82] The actual receipts should be compared with the Trustees’ valuation to Probate Court in its “first closing” accounts, upon which Justice Hall authorized the Trustees’ commission of $74,129.52. This valuation, attached to the November 7, 2000, Order was $1,262.414.00, consisting of dividends of $7,476.00 received and passed on to Sharon Legge, interest “receivable” of $32,802.00 on the First Issue loan , the first capital dividend (for 623 shares) of $ 373,800.00, and share valuation (for 890 shares) of $848,336.00. [83] The percentage of the “first closing” valuation actually recovered should include the amount received on the 247 shares transferred by the Trustees to Larry, Robert and David Legge (part of the 890 shares). [84] Based on Exhibit 14 tab II, it appears that the gross recovery to Larry, Robert and David Legge on the sale of their shares was as follows: David Legge received $4,657,00 and each of Larry and Robert Legge received $7,641.00. Since Larry and Robert Legge each owned 57 shares before their father’s death, only 61% of their recovery is attributable to the shares they inherited. I calculate their recovery on the inherited shares as being $4,661.00 each. In total the three minority shareholders received slightly less than $14,000.00 (gross) from the value of the inherited shares. [85] In summary, of the valuation placed on LTL by the Trustees at the time of “first closing” - 1.262 million dollars, the gross recovery thirteen years later appears to be about $400,000.00 or 31%. Duty of care and causes of the loss [86] The accusations and cross-accusations with respect to mismanagement of LTL until the sale on June 30, 1997, were disturbing, but were not conclusive as to the cause. The Trustees, representing the majority shareholder, did have legal control of the company, and the evidence confirmed that they in fact exercised that legal control. [87] Counsel for Mr. Miller suggested that there were several possible causes for the losses that occurred between 1993 and 1997, and these forced the Trustees to accept a very poor, but the only available, deal for the sale of the shares. [88] First, counsel submitted that LTL was performing poorly before Harold Legge died, had a working capital deficit, and the estate had no money to put into LTL to pay its current bills. The working capital deficit is not evidence that LTL had been unprofitable when Harold Legge died. It could equally reflect the fact that Harold Legge was expanding the business without sufficient long term financing. The Crowther’s report says that in the five years before 1993, the “normalized” earnings of LTL were between $350,000.00 to $400,000.00 per year. Even Mr. Newton’s affidavit (Exhibit 17, para 14) shows that the Company’s net revenue during the last seven years (1987 - 1993) varied between a surplus and a deficit but overall was in a surplus position. No evidence supported this submission. This explanation does not explain a loss of $718,000.00 over four years between the testator’s death and sale of LTL. [89] Second, counsel suggests that the estate was forced to keep LTL as an operating business because family members depended on it for their living, and it was the wish of the family to continue LTL as a going concern. This submission was combined with an acknowledgment that they were not qualified to operate LTL. [90] Paragraph 7 (c) of the Will implicitly authorized the Trustees to keep LTL as a going concern. This authorization, however, was accompanied by a statement that: Nothing herein contained shall be deemed to in any way restrict any power or discretion otherwise granted herein to my Trustees with regards to the sale of any shares of corporations which I may own at my death. Paragraph 9 of the will was a general power to sell real and personal property. Paragraph 11 contained a general power to retain property and a further direction that: My estate shall indemnify my Trustees against everything but wilful misconduct in retaining, disposing, selling, investing or reinvesting the whole or any part of my estate, and my Trustees shall not be responsible for any loss occasioned by the exercise in good faith of the powers and discretions herein conferred upon them. [91] Widdifeld on Executors and Trustees, 6 th Edition, (Carswell: Looseleaf) at Chapter 2.5 reviews the law applicable to the obligations of Trustees with respect to private businesses controlled by an estate. While the starting point appears to be that the Trustees have a duty to sell as soon as an advantageous sale can be arranged, this duty may vary with the terms of a will. In the case at bar, the will authorized retention. Furthermore, the beneficiaries wished or consented to the retention of the business as a going concern, at least initially. Having said that, the common law duty of care which applies to executors and trustees, is not waived by reason of the consent and/or desire of the beneficiaries. The Trustee Act deems an executor to be a Trustee. The Trustee Act does not codify the standard of care of trustees generally - this is a matter of the common law; section 3C does state that a trustee is not liable for a loss to the trust arising from the investment of trust property if the conduct of the trustee that led to the loss conformed to a plan or strategy for the investment of the trust property, comprising reasonable assessments of risk and return, that a prudent investor could adopt under comparable circumstances. [92] Section 64 of the Trustee Act grants the Court the discretion to excuse any breach of trust arising from acting honestly and reasonably. The Supreme Court of Canada in Fales v. Canada Permanent Trust [1997] 2 S.C.R. 302, held that professionals are not as readily entitled to rely on section 64 to excuse their errors. This same decision, in describing the common law standard of care expected of a trustee - what a reasonable and prudent person would expect in conducting his or her own affairs, described the obligation as a duty to exhibit “vigilance, prudence and sagacity”. [93] The duty and the standard of care on a trustee or fiduciary is not only set out in the common law, and to some degree in the Trustee Act, but in several texts and cases. This Court reviewed some of them in Critchley v. Critchley 2006 NSSC 219 at paragraphs 45 to 61. [94] After July 7, 1995, when Lawrence Legge’s action for wrongful dismissal against LTL was settled, he was no longer in a position to contribute to LTL’s losses. [95] The burden is on the claimant to establish negligence, or the Trustees’ breach of their duty of care. The loss of $718,000. in LTL’s equity between 1993 and 1997 was not satisfactorily explained. It may have been, as represented by the Trustees, that the loss of the live haul contract with Canard Poultry, which occurred about the time of the 1997 sale, but was brewing for some time before that, was a factor, and, therefore, that some of these losses would have incurred despite the efforts of the Trustees. The Trustees did seek and negotiate with other buyers without success; however, it was acknowledged that they operated a company that they were not qualified to operate. The Trustees exercised poor judgment in attempting to continue to operate LTL as a going concern, when even they acknowledge they did not have the skill or experience to do so. [96] The circumstances of the sale of LTL, and the recovery of less than one-third of the sale price, give rise to similar concerns. No files and very few records exist with respect to the sale of the business to SPK, or if they do, none were made available to the Court. The oral evidence of the Trustees led the Court to conclude that the default of the purchasers (SPK) under the agreement of sale, which occurred within a few months of the sale, was something that the exercise of reasonable care by the Trustees: (a) in entering into the agreement in the first place, (b) in structuring the terms of the agreement, or (c) in responding differently to the default, would likely not have occurred. There was no evidence of, or investigation into, the creditworthiness of the purchasers. The agreement of sale was inadequate; it provided for a small down-payment, and vague terms for the remaining payments; the security is vague; and no other documents were put in evidence to show what more existed to secure the sale price. The estate paid legal accounts related to collection attempts; none were explained. It appears that when the default first occurred, nothing was done to repossess the assets or exercise the debenture security in place, on the basis that the Trustees believed the cost of seizing the sold assets would not exceed the cost of seizure ( but no evidence to support such a conclusion was given). The documents provided (including the agreement of sale) and the oral evidence of the Trustees point to an inadequate response to the early and serious default by SPK. [97] The Trustees say that the minority shareholders agreed to the sale and its terms. In fact, Lawrence Legge did not, as he had already assigned his shares (as part of his severance action in 1994) and was at the mercy of the Trustees, and their fulfillment of their duty. The bottom line is it was the Trustees who negotiated and entered into the agreement; as professionals (a lawyer and a chartered accountant respectively) they had an obligation to act with reasonable skill and diligence under the circumstances. [98] The fact that only $210,466.00 was recovered from the sale and that $600,000.00 (my estimate) was lost, confirms the evidence of lack of due diligence by the Trustees. The Trustees produced no corroborative files, documentation, or records, with respect to what steps they took before, during and after the sale to make, or carry out, the agreement, albeit at a substantially reduced sale price, in a prudent manner. D. INVESTMENT ACCOUNT [99] The Trustees opened an investment account with Burns Fry Limited about November 2, 1993, and purchased public shares costing about $100,000.00. Peter A. Miller, son of Carl Miller, was the account representative. When he moved to Scotia-Mcleod, the account followed him. Some of the investments appear to have been sold about the “first closing” time. The only addition to the account was about the time of the sale of LTL in 1997; $72,000.00 was added to the account. As of November, 2006 (Exhibit 21) the market value of the investments in the account was $321,366.00 (book value $182,524.00). Whether all, or if not all how much, of the account came from LTL was important because Justice Hall and Justice Coughlan decided that Sharon Legge’s entitlement to income was with respect to income paid by LTL to the estate. It did not include the capital dividends, but did include the amounts earned and received on the capital dividends that were paid by LTL to the estate. It was of great concern that the Trustees were not able to provide any accounting of the transfer of assets into, or payment of money into, the investment account, and where the funds came from. [100] The earliest record of the investment account is in the Burns Fry statement of account of November 30,1993 which show $99,900.15 deposited on November 9,1993 and immediately invested in public stocks. [101] The July 7,1994 estate financial statement (Exhibit 11) appears to show in the investment account about $4,000.00 in shares (such as National Sea Products) that were held by Harold Legge at the time of his death. From the first capital dividend paid by LTL to the estate on October 27, 1993, the estate retained $113,000.00. On the same day that it lent back to LTL $260,000.00, the estate caused LTL to repaid the estate $110,000.00 of that loan. While neither Trustee was able to provide firm evidence as to where the initial investment account came from, and in what amounts, Carl Miller did orally state that it was from the first LTL capital dividend. On that basis I infer that of the initial $115,201.00 in public stockholding in the investment account (Exhibit 11), between $100,000.00 and $111,00.00 came from the capital dividend account. [102] To trace the investment account from 1993, I have relied upon the broker’s investment account statements, the annual statements of the estate for the years ending July 7, 1995 (Exhibit 12) to July 7, 2000 (Exhibit 9, Tabs M - Q inclusive), Exhibit 14 tabs B to II inclusive (the schedules prepared by Grant Thornton, detailing the cost of the investments, additions to, disposals from, gains and dividends related to the investment account), and Schedule D to the “first closing” accounts attached to the November 7, 2000 Order. [103] Between July 7, 1995 and July 7, 1996, the investment account was dipped into. Investments costing $119,000.00 on July 7, 1995, were shown as investments costing $56,000.00 on July 7, 1996. Carl Miller’s memory was that the estate needed money from LTL and the investment account to pay bills; the reduction in the size of the investment account resulted from the need of the Trustees to pay the accounts at the time of the “first closing” in late 1995. [104] The only significant amount added to or withdrawn from the investment account between July 7, 1996 and the present was $72,000.00, which sum was added to the account between July 7, 1997 and July 7, 1998 (Exhibit 14 tab D). Several of the ScotiaMcLeod statements in this period are missing. This time period coincides with the sale of LTL by the Trustees; no other source from the funds was disclosed; I therefore conclude that the additional funds likely came from the estate’s share of the proceeds of the sale of LTL. [105] It further appears that the dividends, interest and capital gains earned by the investment account after November 1995 were reinvested in the account. None of them were paid to Sharon Legge, the income beneficiary of the trust. [106] In July 1998, the account had stocks costing the estate $140,000.00 with a market value of $181,000.00 (Exhibit 14 tab D). On July 7, 2006, the market value of the investments was $281,000.00 (Exhibit 14 tab L), and, on November 19, 2006, $321,366.00 (Exhibit 21). [107] In summary, the investment account more than doubled its holdings over twelve years. The average compound growth appears to have been between seven and eight percent per year, without any adjustment for inflation (1994 dollars are worth less today) or tax consequences. Without an analysis of the asset allocation in the investment fund (which was not advocated by any party in these proceedings), the Court could not make a proper determination as to whether the Trustees followed a prudent investment policy in accordance with the Trustee Act; however, the results appear on their face to show that the investment account was prudently and reasonably managed. For this conclusion I rely upon the analysis of trustees’ obligations respecting investment of trust funds in Critchley v. Critchley 2006 NSSC 219. E. LIFE INSURANCE [108] Paragraph 6 of the will reads: Notwithstanding any designation of beneficiary that I have made on any insurance policy on my life owned by me, I direct that the proceeds of any and all such policies shall be payable to my trustees and shall form part of the rest and residue of my estate. [109] Lawrence Legge complained that the estate had improperly permitted Sharon Legge to retain the proceeds of life insurance policies with Maritime Life in the amount of $150,000.00. [110] On November 20, 2006, Lawrence Legge questioned Walter Newton as to the existence of any life insurance policies on the life of Harold Legge other than the $1,000,000.00 Company policy. Newton replied, “Not to my knowledge”. On November 21, 2006, his counsel (Mr. Thurlow) asked the same question. Mr. Newton replied that he had heard through Richard Spencer (LTL’s Controller) about another policy. At that time, he reviewed the Will and the Insurance Act and decided that any such policy was not payable to the estate. When the same issue arose a few years later, he could not find his file. (See Mr. Newton’s evidence at page 5 of the transcript of the July 31,2000, hearing before Justice Goodfellow.) On further questioning from Lawrence Legge, he stated that his opinion was given despite paragraph 6 of the Will; he confirmed that he had not obtained a second opinion. [111] To respond to Lawrence Legge’s claim, and because of the loss of Newton’s file, counsel for Ms. Legge called Casey Mooy. Mr. Mooy had been Harold Legge’s main insurance advisor for twenty years (1973 - 1993). He was elderly and not in good health when he testified. Exhibit 32 was a series of letters written by him between 1986 and 1989, proposing that Mr. Legge change the ownership and beneficiary of Maritime Life policies totalling $150,000.00 from LTL to himself with Sharon Legge designated as beneficiary. In his evidence he also referred to a company Group Life plan. He had no recollection as to whether the ownership of the Maritime Life policies had been changed in accordance with the recommendations contained in his letters. [112] Mr Mooy’s evidence and Exhibit 32 satisfied the Court that the Maritime Life policies, eventually paid to Sharon Legge, were owned by LTL, and not owned by the testator, when the will was executed on June 22, 1981; therefore, they are not life insurance policies upon which the estate had a claim. The change in the ownership of the Maritime Life policies from LTL to the testator could only have occurred after the will was made. Pursuant to s. 194(2) of the Nova Scotia Insurance Act, a designation in a will is of no affect against a designation made later than the making of the will. [113] Despite Mr. Newton’s inability to answer the questions about life insurance, or to provide his missing file on this issue, there is no basis to find that the Trustees failed in their duty to the heirs by not obtaining the benefits of the Maritime Life policies. F. INCOME ENTITLEMENT OF SHARON LEGGE [114] Sharon Legge is entitled to receive the income actually received by the estate from the 70% (623 shares) of LTL held by the estate. In an Order dated June 22, 1995, Justice Hall declared that the first capital dividend was not income, but was capital, and Ms. Legge was entitled to receive, as income under paragraph 7 (c) of the will, any income derived from the capital dividend. Justice Coughlan, in a decision cited as 2001 NSSC 156, determined that the second capital dividend (declared as part of the sale of LTL) should be treated in the same manner as the first capital dividend, and the proceeds from the sale of shares were also to constitute capital from which the income was to support Sharon Legge. He specifically stated that the will entitled Ms. Legge “to income actually earned” on the funds held in trust. [115] The only analysis of Sharon Legge’s entitlement to income is Exhibit B to her affidavit of November 7, 2005 (Exhibit 2). The Court hesitates to rely on Exhibit B. It appears that Exhibit B to Exhibit 2 (Sharon Legge’s affidavit) was prepared by the Trustees and their calculations do not appear to be consistent with the totality of the accounting presented to this Court; for example: 1. Schedule B of the Trustees’ accounts at the “first closing” show that the estate received from LTL three dividends between November 1, 1993 and January 6, 1994 totalling $7,476.00. Other documents show that these dividends were passed on to Ms. Legge as they were received by the estate from LTL. The accounting on Exhibit B to Ms. Legge’s affidavit (Exhibit 2) shows for the year ending July 7, 1994, gross dividends received of only $3,216.73. They further show that these dividends were never paid to Ms. Legge but were used by the estate for its own purposes. 2. The Trustees took trustee fees (per exhibit 14 tab JJ) based on income of $121,126.20. 3. The accounts attached to the “first closing” Order as schedule B show that the estate received (called “loan receivable”) $32,802.32 from LTL, and the supplementary accounts prepared by Grant Thornton (Exhibit 14 tab Q) show that the estate received interest on the LTL loans and sale of shares of $50,228.00; in addition, it appears that the investment account earned, assuming a cost base of $182,000.00 (Exhibit 21), at least $140,000.00, or alternatively, assuming a cost base of $139,660.73 (Exhibit 14 tab D), $182,000.00. [116] Ms. Legge filed with the Court an affidavit sworn March 7, 2005, which had attached to it accounting upon which she claimed income of $69,671.10. Based on Ms. Legge’s claim in her affidavit, but with concern as to the accuracy of the quantum claimed (which is less than I suspect it should be), I find her entitlement to be what she claims; that is: (a) the $7,476.00 in dividends paid to her between November, 1993 and January, 1994 (whether intended to be included in the calculation in Exhibit 2 schedule B or not); and (b) for the period ending July 7, 2005, the gross dividends shown on Exhibit 2 schedule B in the amount of $69,671.10, with no deduction for the Trustees commissions shown on the exhibit. [117] The evidence is clear that the value of the investment account - most of which was derived from proceeds originally paid to the estate by LTL, increased from approximately $265,000.00 on July 7, 2005, to about $321,000.00 on November 19, 2006. I offset any entitlement she may have to that increase (the exact quantum of which will not be known until the investment account is liquidated) against the salary she received from LTL; the evidence lead me to conclude that the salary was a benefit paid by reason of her entitlement to income from the estate’s shares in LTL and not from services actually rendered to LTL. The evidence heard in the last year and in the exhibits does not confirm that Ms. Legge’s involvement as president of LTL was in the nature of active management. [118] Sharon Legge should have been paid income at least annually. It was a primary obligation of the trust. She was not paid. I order that she be paid prejudgment interest from the respective annual due dates. If counsel cannot agree on the rate, I will receive submissions. G. VARIATION OF TRUST [119] Pursuant to the Variation of Trusts Act, Sharon Legge requested that the trust, from which she is entitled to receive the dividends (interpreted by two courts, as income only earned on capital dividend receipts and share sale proceeds), be terminated, thereby accelerating the payment of the remainder, which, pursuant to the Will, is payable to Lawrence, Robert and David Legge. [120] In her affidavit (Exhibit 2), she says that her agreement to terminate the trust was conditional upon the remaining terms of a proposal (which was attached to her affidavit but clearly prepared by the Trustees) be accepted and approved by the Court. The position taken by her independent counsel (Mr. Dewar) on her behalf during these proceedings, both in his written and oral submissions, changed. I accept, based on the submissions of Mr. Dewar, that Ms. Legge’s interest in terminating the trust was conditional upon the payment to her of the amount she sought ($69,671.10) together with the acceleration of the interest of the three sons of Harold B. Legge to the trust principal, and not to approval of the Trustees’ accounts as presented. For example, in his November 23 memorandum, and his oral submission on November 27, Mr. Dewar took strong issue with the Trustees’ payment to themselves of fees and commissions since the “first closing”, one of the “conditions” in Exhibit 2. [121] It is obvious that the estate and the trust are overdue to be terminated. The only individual who might “lose” financially by the early termination of the trust is Sharon Legge. She is the one requesting that she be paid what is due to her under the life interest to the present time, and that the trust be terminated now. [122] No party to this proceeding has expressed a desire, or given a reason why, the estate or trust should not be terminated. The uncollected receivables from the sale of LTL (on which there was a small amount received in June 2006), and in Starr’s Point Development Limited can be assigned to the heirs for action by them if they so decide. [123] Section 2 of the Variation of Trust Act states that the court may, if it thinks fit, approve on behalf of any person having an interest under a trust, any arrangement that varies or revokes that trust. Sharon Legge asks that it be terminated now, and that payment of the remainder be accelerated to her son, David, and Harold Legge’s other sons, Lawrence and Robert. No representations were made by any party as to who may have an interest in the trust. Sharon, Lawrence, Robert, and David Legge do consent. If Sharon Legge outlived Lawrence, Robert, or David Legge, their respective children (if they have children) may, by paragraph 7(e) of the Will, have an interest. I think the circumstances outlined in this decision make it fit to terminate this trust for those (if any) who fall within section 2 of the Variation of Trusts Act. [124] This Court will issue an order terminating the trust as requested, effective upon the closing of the estate (or trust) and distribution of the balance of the estate in accordance with an order arising from this decision. H. ESTATE CLOSING OR TRUST CLOSING [125] The Trustees asked that the Court approve their final accounts and discharge them. They submit that the estate was closed in December 5, 1995 (by the November 7, 2000 order) and that the only outstanding action required is the winding up of the trust created by paragraph 7 (c) of the Will. They submit that it is only the trust accounts that they seek approval of, and only as trustees under that trust that they seek discharge from. [126] I have reviewed the entire probate file including the November 7, 2000 Order and do not agree. In my view the estate was never closed, and the Trustees, in their then role as executors, were never released or discharged. [127] The log sheets for the April 19, 2000, hearing before the Registrar, and the transcript of the July 31, 2000, hearing before Justice Goodfellow, outline the many outstanding probate issues that were not finalized at the time of Justice Hall’s 1995 hearings. The written lists of outstanding issues identified in Robert Legge’s May 3,2000, and James Dewar’s May 5, 2000, letters covered outstanding probate matters - not just trust matters. [128] In the Order dated November 7, 2000, the orders and directions of the October 26 and December 5, 1995 hearings were confirmed, and nothing more. As of December 5, 1995, the estate had, and continued to have, more assets than those for which the trust in paragraph 7(c) of the Will was created; that is, the 623 shares of LTL. The first schedule (Schedule A) to the November 7, 2000 order, consisting of fourteen pages, and the second schedule (Schedule B) consisting of six pages (which schedules constituted the Trustee’s accounting to that date), do not show the calculation or determination of a final distribution. [129] The November 7, 2000 order recognized that two outstanding issues remained to be determined before the estate could be closed. The determination of those two outstanding issues was made by Justice Coughlan but no form of order was agreed upon, and no order was ever requested or granted with respect to his decision. [130] The “old” Probate Act applied to this estate. That Act provided for a form of order known as a “Closing Decree”, a standard clause of which order ( after passing the accounts and determining the amounts to go to the persons entitled to the surplus), states: “the account be allowed and finally passed as a full and final accounting and the same is hereby finally allowed and passed.” The standard decree also determined and directed the executors “to dispose of and distribute the sum of $x to the persons entitled thereto by law.” There was and is no magic in the terminology; but a “full and final” accounting differs from the right of executors to have accounts passed at any time during administration, and a final order or closing decree always directs the distribution of the balance. [131] I could find no records where the Trustees returned to Court, prior to this application, to complete the closing commenced in 1995 and referenced in the November 7, 2000 Order. [132] The last page of Schedule B of the November 7, 2000 order (Schedule F to Schedule B) showed that, as of December 5, 1995, the estate consisted not only of the 623 LTL shares (the only asset involved in the paragraph 7(c) trust) but also the estate’s interest in Starr’s Point Development Limited (both the equity and the mortgage receivable), cash in the bank (then in the amount of $6,600.00, now in excess of $50,000.00), the investment account (then $57,000.00, now over $321,000.00), and three other real properties, which have since been sold or transferred to beneficiaries. [133] An additional consideration (as to whether the estate was ever wound up and the Trustees discharged as executors) is contained in the affidavits of Mr. Miller (Exhibit 8) and Mr. Newton (Exhibit 16) wherein they self-identify themselves as both executors and trustees in respect of the services for which they now claim additional compensation. This self-identification is contained in all of the annual financial statements since 1995 (which are described as financial statements of the estate and not of a trust alone), and in the affidavits attached to this application, one of which was sworn by Carl Miller on November 14, 2005 (wherein he identified the purpose of the application as being “to wind up the estate”). [134] On February 14, 2006, the Trustees filed a petition to settle the estate with a citation for appointment of a day “for the final auditing and passing of their account as executors” and “final settlement” [my underlining]. [135] If I am wrong in this analysis, it does not affect my conclusions with respect to the services provided by the Trustees, and their request for approval of their accounts, and discharge as trustees. Other than in respect to the claim of fees, the distinction is of no real consequence. The analysis contained in this decision is the same whether the Trustees were acting as trustees or executors. I am of the view that I have no authority to go behind the accounting approved to December 5, 1995, incorporated in the Order of November 7, 2000, which order was not appealed. I rely on Macdonnell, Sheard and Hull on Probate Practice, 4th edition, (Carswell: 1996) at page 352. If I do have such authority, it would be an inappropriate exercise of judicial discretion to do so at this time. In the 1995 passing of accounts, the court approved executors’ fees of $74,129.00, based on an estate of $1.48 million. I. OUTSTANDING LIABILITIES [136] Carl Miller’s affidavit attached to the application contains what he identified as the estate’s liabilities as of July 7, 2005. The supplementary accounts prepared by Grant Thornton, attached to the Trustees’ affidavit of September 15, 2006 as tab A and W, contain two revised lists of outstanding liabilities. The lists are not identical. Sharon Legge [137] She claimed, and I find she is entitled to and has not been paid $65,862.70 as described in part F of this decision. This is in addition to any other bequests she received under the will. Richard Spencer [138] There were three exhibits before the Court outlining his claim, but in differing amounts: (a) Exhibits 2 and 3 (attached to the Application) show a claim from Mr. Spencer as “Retirement Allowance - Estate - General - $9,448.55" as of July 7, 2005. (b) The amended schedules to Tab A of Exhibit 14 show: “Severance allowance, accrued interest - $11,831.00" . (c) Exhibit 27 is Mr. Spencer’s statement of account dated August 31, 2006, tendered by the Proctor on November 21, 2006, claiming “Severance allowance due by Estate Harold B. Legge” for $50,000.00 less two payments made in October/November, 1997, of $31,550.00, plus interest thereafter at six percent per annum for a total claim of $30,581.00. [139] Separate from the unexplained differences in the quantum of his claim, I am at a loss to understand the basis for any claim against the estate. There was no oral evidence justifying or establishing a claim against the estate by Mr. Spencer. The following affidavits make reference to Mr. Spencer’s involvement as an officer of LTL: (a) Exhibit 17 (Walter Newton’s affidavit respecting LTL affairs); (b) Exhibit 18 (Carl Miller’s affidavit respecting LTL affairs); (c) Exhibit 20 (Richard Spencer’s affidavit); (d) Exhibit 29 (the Answer to Interrogatories in the 1994 action of Lawrence Legge v. LTL, questions 14 - 16); (e) Exhibit 9 (the Trustees’ affidavit of April 12, 2001, where in paragraph 19 and schedule L there is reference to liabilities incurred with respect to the 1997 share sale agreement). [140] None of the affidavits explain any basis for liability of the estate for a severance allowance or retirement allowance with respect to an employee of LTL. An “Answer to demand for Particulars” signed by Christopher Sabean, solicitor for the Trustees in a Supreme Court action against one of the purchasers in the 1997 sale, and filed with the Probate Court, identifies, in the fifth sentence of the third answer, a payment by LTL to an unnamed “former employee” by LTL of $18,450.00 - the exact principal amount shown as owing to Spencer in schedule L of exhibit 9, and in Spencer’s statement of account (exhibit 27). This would suggest that the claim was paid by LTL. [141] In any event, the liability of the estate for any claim by Mr. Spencer has not been proven, and is not approved. Grant Thornton [142] Their account consists of three invoices tendered as Exhibit 28. The first, dated July 31, 2006, in the amount of $2,029.20 is for preparation of the July 7, 2006, annual financial statement of the estate and the preparation and filing of the trust tax return. The second, dated July 31, 2006, in the amount of $8,139.60 is described as services to August 2, 2006, with respect to the preparation of the schedules which were attached as the supplementary closing accounts to Exhibit 14. The third, dated September 30, 2006, in the amount of $11,234.70 is described as services for preparing and reviewing those accounts with the Trustees and estate lawyers and to attendance at Court as described earlier in this decision. [143] The Court notes that this work, except possibly the filing of the Trust Return, is work that is normally the responsibility of the Trustees. When the Trustees were unable to provide proper accounts for the February 14, 2006 hearing and the May 25, 2006 hearing, this Court, upon the request of counsel for the Estate and one of the Trustees, authorized the preparation of the supplementary closing accounts by Grant Thornton, but reserving the right to assign ultimate responsibility elsewhere at a later date. [144] I have relied upon the accounts prepared by Grant Thornton in preference to the other accounts provided by the Trustees and contained in other exhibits. I am satisfied that, without their involvement, the hearings of September and November, 2006, would not have proceeded. I understood by oral evidence that there may be a credit of $1,000.00 (and maybe more) against this account. If such is the case, then obviously the estate is to receive the benefit of any prepayment of those fees. Hiltz and Seamone Company Limited [145] The accounts in Tab A of Exhibit 14 do not show any account owing to Hiltz and Seamone Company Limited. The accounts attached to exhibits 2 and 3 - the application, and to exhibit 14 tab W, show an account owing to this firm but for different amounts. Exhibits 2 and 3 show an account of $8200.00 (of which $5847.38 is the estate’s share)(I suspect this is a typographical error and should read $6200.00 and $3847.38 respectively); exhibit 14 tab W shows $3847.38. Exhibit 14 tab A shows no outstanding liability. [146] No explanation has been given as to the basis of any liability to Hiltz and Seamone. Paragraph 19 and schedule L of the Trustees’ affidavit of April 12, 2001 (exhibit 9) does list it ($6200.00) as a liability related to the 1997 sale, but does not answer how or why. As noted in paragraph 140 (re Mr. Spencer’s claim), the “Answer to demand for Particulars” (fourth sentence of the third answer), the cost of an environmental audit in connection with the 1997 sale was paid by LTL. I infer (because the amount is identical, and the business of the company) that the audit was performed by Hiltz and Seamone. If so, the “Answer” says it was paid by LTL. In any event, the liability of the estate for any such claim has not been established, and is not approved. J. TRUSTEES FEES AND COMMISSIONS [147] On December 5, 1995, executors’ commissions of $74,119.52 were approved and paid. This appears to have been based on an estate valued at about 1.48 million dollars. [148] Since that time the Trustees have charged fees and commissions to the estate (or to the Trust if the estate was closed on December, 1995) without court approval, and, in addition, are seeking additional trustee fees. For a summary of the fees and commissions already charged and collected, the Court has relied on Exhibit 14 tab JJ, which appears to be confirmed by Exhibit 14 tabs S, Z, AA, CC, and EE. [149] Tab JJ shows that the Trustees charged and collected commissions with respect to the sale of the shares of LTL to SPK in the amount of $18,824.83. They say that this was intended to be five percent of the Estate’s interest in the sale price. If this is so they valued the Estate’s interest in the sale price as $396,500.00. Exhibit 14 tab DD shows the estate received, as its portion of the LTL sale, $137,029.49, and that it lost (per tabs V, W and HH) $413,421.58. [150] The second fee claimed by the Trustees is five percent of the income and two-fifths of one percent of the capital for each year after the “first closing” - the year ending July 7, 1996 to July 7, 2006. The amount claimed, as shown on tab JJ, is $28,530.50, of which the Trustees have paid themselves $21,858.93. These figures in tab JJ appear to be from the annual financial statements of the estate attached to Exhibit 9 (1996 – 2000) and Exhibit 7 (2000 - 2006). The portion of these fees attributable to income ($6,056.31) would mean that over eleven years the Trustees claim that the Trust earned $121,00.00. The Trustees claim $22,474.00 under the heading of “two fifths of one percent of the assets”. I could find no calculation of what the “assets” (or capital) were upon which this sum was calculated for each year. The footnote on tab JJ states that it was in accordance with the financial statements less a reserve (not quantified) for non-collection of accounts. I attempted to compare the “assets” value per the table (multiply fee claimed by 2/5 of 1% of assets) with the gross value of the estate’s assets listed on the annual statements. They were not comparable. The assets upon which the Trustees calculated their fees varied from a high of 1.55 million dollars to a low of $315,000.00. [151] While I am satisfied that the estate earned at least $121,000.00 between December, 1995 and July, 2006, I am not persuaded that the “assets” upon which the second part of the fee was based were close to the real capital of the estate (as opposed to paper capital that was never collected). [152] To summarize, the Trustees have paid themselves, with regards to the sale of the shares of the estate, $18,824.83, and with respect to the annual income and percentage of capital, $21,858.93. In their closing accounts, they show an account payable with respect to these fees of $6,347.63 (an arithmetic error of $323.94). [153] Mr. Newton claims entitlement to an additional $30,000.00 in trustee fees and Mr. Miller to an additional $7,500.00 in trustee fees. [154] In support of his claim for supplementary trustee fees, Mr. Newton filed an affidavit with time records from September 16, 1993 to November 10, 2006 (Exhibit 16). The time records are in three parts - the first two under the letterhead of “Waterbury Newton”, his former law firm, and the third under the letterhead of “The Newton Law Firm”, his present firm. [155] The first account starts September 16, 1993 and runs to July 11, 2000. It spans the 1995 “First Closing” and shows fees billed, at between $150.00 and $250.00 per hour, totalling $155,317.00 and disbursements of $3,590.97. The second account covers the period beginning November 23, 1995 to November 17, 2003, showing fees of $48,216.50 and disbursements of approximately $10,000.00. The time entries in the second account duplicate the first account for the period November 23, 1995 to July 11, 2000. Notations at the end of this account suggest that the services were provided by seven members of the Waterbury Newton firm; (the account is identified as “NC”) which I assume means “no charge”. Handwritten notations indicate that some of the fees and charges may be covered by the Proctor’s account). The third account appears to deal with services connected with preparation for and the filing of this application and covers the period from September 17, 2004, to October 24, 2006. It identifies 85.80 hours. [156] In support of his claim for additional trustee fees, Mr. Miller filed an affidavit (Exhibit 8) containing both handwritten and typed time-records for services between July 7, 1993 and September 18, 2000. He charges his time at $150.00 per hour. About half of the charges are identified as being on behalf of LTL and the remainder on behalf of the Estate. The charges span the “first closing” date. [157] In written submissions, counsel for Mr. Miller submits: (a) the offices of executor and trustee are distinct and separate. (b) the fees approved to December 5, 1995, were in respect of the Trustees role as executors and did not cover any services that he submits have been performed by them solely as trustees since December 5, 1995. (c) Practice Memorandum 11 (Civil Procedure Rules) states that Trustees are ordinarily entitled as annual compensation to five percent of gross revenue and two-fifths of one percent of the capital. (d) Toronto General Trusts Corp. v. Central Ontario Railway, 1905 Carswell Ont 449, the leading case on compensation for executors, at paragraph 20, identifies five factors that have been accepted by many courts, including Nova Scotia courts, as relevant factors in the analysis of the amount of compensation payable to executors. The factors are: (1) the magnitude of the trust; (2) the care and responsibilities springing therefrom; (3) the time occupied in performing its duties; (4) the skill and ability displayed; and (5) the success which has attended its administration. (e) This trust was difficult but resulted in substantial success. The investment account was very successful despite “less than ideal investment climate”. (f) Mr. Miller put in over 1022 hours (worth $ 153,000.00) in services to the Estate. (g) It is not reasonable to expect Trustees to work diligently for years without compensation. (h) With respect to their pre-taking of fees and commissions, it would have created unnecessary expense to the estate if the Trustees had been required to apply to the Court regularly for approval of their fees. (i) This estate was closed by order of Justice Hall dated November 7, 2000 (as of December 5, 1995); all work after 1995 was performed by the Trustees as trustees and not as executors, and the Trustees have been paid no compensation in respect of those services (except what they pre-took). (j) The taking by the Trustees from the minority shareholders of collection commissions each time they received and passed on monies from SPK was done as agents for those minority shareholders by agreement with them, and not as Trustees of the Estate. The minority shareholders did not protest the efforts of the Trustees at that time. It is not a matter for this Court at this time to deal with those commissions, or the heirs’ claim that they were not agreed to. (k) In response to Sharon Legge’s objection (also made by Lawrence and Robert Legge) to the commission of $18,824.83 taken on the sale of shares, these services are separate and distinct and not compensated by the executor’s commissions paid in 1995. (l) The pre-taking of Trustees fees is permissible if it is fair compensation. If the fees exceed the amount eventually awarded, interest may be assessed in respect of the excess commissions taken. Analysis [158] The application of the five factors in Toronto General Trusts is an appropriate framework within which to analyse trustees’ claim for approval of fees and commissions. Most important are the findings of fact that govern the weight to be given the various factors. [159] It was not challenged, and I accept, that the Trustees have spent the time that is set out in Exhibits 8 and 6. I accept this with the following qualifications: (a) a significant portion of those services predated the award and approval of executors’ commissions of about $74,000.00 in December, 2005; (b) as noted, the accounts of Mr. Newton appear to contain considerable duplication of charges, and involved work by other members of his former law firm, including the Proctor; (c) some of the services appear to have been carried out for LTL and not the estate; and (d) the Trustees show in their time records they are charging their services out at professional rates. [160] An analysis of the first factor (magnitude or size of the trust) is not so easy. The Trustees claimed at the “first closing” that the estate was worth 1.48 million dollars of which 85 percent or 1.26 million represented the value of LTL. Thirteen years later, the estate had recovered $389,000.00 (plus $14,000.00 to the minority shareholders in respect of their 267 inherited shares). [161] With the benefit of hindsight, it is more appropriate to use the actual figure recovered as the measure of the magnitude of the estate rather than the amount identified at the first closing. [162] I analyse the second, fourth and fifth factors in Toronto General Trusts collectively. [163] It is relevant that the Trustees controlled LTL. The minority shareholders, particularly Lawrence Legge (who, as part of his 1994 lawsuit against LTL, assigned to the Trustees his interest in the Company to do with as they did with their own shares), David Legge (who had no involvement whatsoever), Sharon Legge (who was President but appeared not to be active in LTL) and to a lesser extent, Robert Legge, did not direct LTL, and had no involvement in its sale in 1997. [164] Contrary to counsel’s representation, the administration of the estate was not successful by any measure. To recover for the estate, over thirteen years, only 30% of the 1.28 million dollars valuation placed on LTL at the “first closing” is evidence of a disaster. [165] The “business valuation” dated December, 1993 (exhibit 14 tab FF), made without the $1 million dollar life insurance policy, showed LTL’s net liquidation value, as of July 7,1993, as $445,000.00 (the tangible asset value as $1,117,000.00) and “going concern” value as about $900,000.00; with the life insurance, a company worth between 1.4 and 1.9 million dollars. This is consistent with the Grant Thornton “change in value” analysis at tab HH of Exhibit 14. [166] The Trustees had the authority to retain LTL or to sell it. There is no doubt that at the beginning the family wished, as indicated by Sharon Legge, to retain LTL as a going concern. Within a year conflict had arisen with Larry Legge. He was terminated and shortly thereafter his claim against the Company settled. He cannot be faulted thereafter for the disaster that continued to the present time. No one, particularly the Trustees, were capable of running LTL, and there was no justification for not quickly getting out of LTL - by sale as a going concern or liquidation. On the other hand, the Trustees (as professionals) were familiar with selling businesses. The delay in liquidating LTL, and the inadequate investigation of SPK, cost the estate. [167] The lack of skill and ability displayed and the lack of success in the administration of the Estate, which has led to loss to the heirs of in excess of one million dollars, causes the Court concern in the face of a claim by the Trustees to keep the $40,000.00 they have already paid themselves (on top of the $74,000.00 in executor’s commissions), receive payment of an account receivable from the estate of $6,600.00, and be paid further fees of $37,500.00. [168] Paragraph 12 of the Will specifically protects the Trustees from liability except for “wilful misconduct”. In light of my view that the Trustees breached the trust or confidence placed on them by the testator, this clause in the Will does not mean that their claim for fees should be based on the hours they logged, and ignore the fact that, in hindsight, they were significantly overpaid as executors, and that the estate (or trust, if the estate was finally closed in 1995) and heirs have suffered a substantial loss in their inheritance. [169] It is relevant that many of the functions for which trustees are compensated for on an ongoing basis, were, in this estate, performed by other professionals for fees that were paid for by the estate; for example, the annual statements of the estate were prepared by Grant Thornton, and the investment account was managed by a professional investment broker. [170] The primary purpose of the trust created by paragraph 7(c) of the Will was to pay Sharon Legge on an ongoing basis the dividends from the estate’s interest in LTL, and (pursuant to two decisions of this court) the income earned on the proceeds of the two capital dividends, some of which were invested in the investment account. After January 1994, the Trustees paid themselves regularly but never paid Ms. Legge a cent. (Only three LTL dividends, paid in November 1993, December 1993, and January 1994, were passed on.) No reason was given to the court by the Trustees as to why they did not pay to Ms. Legge the income earned on the investments (or the portion originating from the capital dividends) or the interest earned on the estate’s loans to LTL. No evidence was given that, before this application, they ever accounted to Ms. Legge (or the other heirs) as to what that income was. I note that the annual financial statements do not show the income attributable to the trust, and in fact do not disclose what the investment account earned each year (only the dividends paid). The payment of income to Ms. Legge was the purpose of the trust. [171] The Court acknowledges that the investment account which was delegated to an account executive, who has been compensated for his services, was properly administered. This account produced good returns. It has not been established that they are exceptional. The submission that ‘the investment climate [presumably since 1993] was less than ideal’ was not established. [172] The annual financial statements and tax returns have been prepared and filed by Grant Thornton, and they have been compensated for these services by the Estate. In many estates the annual financial statements would have been prepared by the Trustees, especially where the trustees had the professional qualifications that these trustees possessed. [173] The Trustees have presented accounts and time records, billed at professional rates, to justify their claim for fees, taken and requested. Significantly, the Trustees have been unable to prepare, in respect of this application, accounts in the usual format, despite two adjournments, and it was only through the retention of Grant Thornton, whose fees the Estate is paying, that this responsibility of Trustees has been accomplished. This is a factor in analysing their claim for fees. [174] I agree with the statement of Justice Goodfellow made on July 31, 2000, at page 9 of the transcript: “It seems to me that what is before me is that any suggestion of inadequate conduct by the Executors or Trustees would be before me solely in a determination of entitlement and quantum of fees as Trustees.” I am not satisfied that the Trustees have acted with the care, skill and ability that Trustees in their position should have demonstrated in the administration of the Estate. The value of the estate has declined significantly over thirteen years. [175] We have the benefit of hindsight. If the value of LTL was recorded at $400,000.00 at the time of the first closing ( high but closer to actuality than the value used to take fees), instead of 1.26 million dollars, and accepting that, as executors, the Trustees were entitled to the maximum five percent commission at the first closing, the Trustees would have received approximately $30,000.00 - not the $74,000.00 paid. This is a relevant factor to consider when the persons, who were the executors, seek additional compensation for follow-up services as trustees. [176] It is relevant to consider the actual capital fund of the Trust. To get this, I deduct from the “first closing” estate value of $1.5 million:(1) $800,000.00 as the lost or unrecovered value of LTL, (2) the assets distributed as of the “first closing”, (3) the expenses paid before the “first closing”, and (4) the fees and expenses approved at the first closing. The rest was the balance available to the trust, on which the Trustees would have been entitled to charge five percent of income and two fifths of one percent of capital. [177] The assets distributed at the time of first closing ($381,000.00), included $254 ,000.00, as the value of 267 shares of LTL transferred; the actual amount received was under $14,000.00; therefore, assets distributed is adjusted to $137,000.00. Expenses paid before the “first closing” were $152,000.00. Approximate $96,000.00 in fees were approved at the “first closing”. [178] It would appear that the initial actual capital fund of the Trust was about $315,000.00. ($1,500.000., less $800,000., less $137,000., less $152,000., less $96,000.) This would produce a smaller fee to the Trustees than they have prepaid themselves. (If the Trustees had paid the income to Sharon Legge as they were obligated to do, instead of accumulating it, the capital would not have “grown” and the fees would be smaller still.) It may not have affected the portion based on “income” ($6.056.00) significantly, but would have reduced the portion based on “assets” ($22,474.00) by almost half. [179] With the benefit of hindsight as to the actual capital of the trust, and applying the “rule of general application” in CPR Practice memorandum 11, and ignoring any adjustment for breach of their trust obligations or mismanagement, the Trustees’ claim to compensation should have approximated $18,000.00. They have already paid themselves, without court approval, $21,858.93. [180] As noted above, the Trustees paid themselves, without court approval, a commission on the sale of LTL in the amount of $18,824.38. It is not fair or reasonable that they keep this sum for several reasons. Firstly, the five percent they charge is greater than the Estate’s recovery on the sale, even if one does not deduct the legal expenses incurred in attempting to recover that sum. Secondly, it is normal, when an executor’s commission is allowed at the maximum of five percent (as Justice Hall did in 1995), that this is in contemplation that the estate would be selling LTL. The Trustees state in their affidavits that in fact they had commenced efforts to sell in 1994, and it is in my view likely that Justice Hall would have considered that fact when approving the commission of five percent on the 1.26 million dollar value of LTL. [181] In Widdifield on Executors and Trustees, 6 th edition (Looseleaf to 2003-2: Carswell), chapter 11, Margaret Rintoul describes the Ontario practice (common in other provinces as well) of compensating trustees/executors, partly on realization, and partly on distribution, so as to avoid double costs to the estate, even when trusts are created from part of the estate assets and the executor and trustee are not the same person. While it is not a “rule” in Nova Scotia, as in some provinces, that probate fees are at the rate of about two and one half percent for assets that pass through the hands of the executors, and for another two and one half percent, if they actually have to sell the asset (as opposed to passing it on as is), such is, in my view, a fair way of looking at the sale of LTL. The Trustees have already received, as executors, a full 5% commission on their estimated value of LTL. More recent practice in Nova Scotia has been to approve fees based on the size, complexity and success of the estate or trust. A commission of five percent is reserved for smaller, more complex, and more successful estates or trusts. [182] While counsel for Mr. Miller makes a distinction between the acts of the Trustees as executors and as trustees, it is a relevant consideration that the Trustees were paid as executors a full five percent commission of the value of LTL as an asset shown to be worth 1.26 million dollars and that it eventually brought into the estate (mostly before the 1997 sale) under $400,000.00. To allow a separate commission of $18,824.00 is not fair. It was not earned. That commission was not approved and would likely not have been approved if an application had been made to the court before the Trustees paid it to themselves. [183] With respect to the Trustees’ claim for fees and commissions as Trustees since December 5, 1995, I find as follows: Practice Memorandum 11 Fees [184] Discounting or ignoring any breach of trust or mismanagement of the estate (or of the trust, if the estate was finally closed as of December 5, 1995) and with hindsight giving a more accurate picture of the actual capital fund of the trust, the Trustees, pursuant to Civil Procedure Rule Practice Memorandum 11 would have been entitled to income of $6,056.31 (5% of income) and to not more than $14,000.00 on account of capital (2/5 of 1%). This totals about $20,000.00. They have already taken $21,858.93. As noted, some of the duties of the Trustees were performed by other professionals and paid for by the Estate, and the Trustees did not perform a primary role of the trust - to calculate and pay the annual income of the trust to Sharon Legge. For those reasons, separate and apart from any issue of mismanagement, I reduce the normal Trustees’ fee (calculated in accordance with Practice Memorandum 11) by one-half to $10,000.00 ($5,000.00 each). I direct that the Trustees who have paid themselves $21,858.93 repay forthwith to the Estate $11,858.93 together with prejudgment interest. If the parties cannot agree on the rate, I will receive submissions. Since $10,000.00 was paid by the Trustees to themselves sometime before July 7, 1999 (exhibit 14 tab JJ), interest shall be payable from July 7, 1999, to judgment. Sales commission [185] The Trustees paid themselves a commission on the sale of LTL of $18,824.83. They had already been paid in 1995 a commission based on three times the actual amount recovered; they should not have taken this fee. In jurisdictions where commissions on sales are generally allowed, the trustee’s other compensation is less than in this case, and based on the fact that the asset is simply passed on in specie to the beneficiary. I cite the practice described in Widdifield, chapter 11.4.2, and in Macdonnell Sheard and Hull, pages 360 to 365. If I am wrong, the fee was excessive in light of the quantum actually received by the Estate (approximately $137,000.00) less collection costs of over $11,000.00. The Trustees will forthwith repay it with prejudgment interest from May 29, 1998, the date that exhibit 14 tab JJ shows it was paid. [186] The Trustees’ claim for payment of a receivable of $6,347.63 ( the balance shown on exhibit 14 tab JJ) is not approved. The claim for additional fees and commissions based on exhibits 6 and 8 in the amount of $30,000.00 by Mr. Newton and $7,500.00 by Mr. Miller are not approved. These claims for additional fees and commissions are above the “normal” amounts set out in Practice Memorandum 11. The Trust was not been successful. [187] While I have concluded that the Trustees did not exercise the appropriate standard of care and diligence in respect of the administration of the Trust (or Estate) since December 5, 1995, such is not been the basis for the calculation of the appropriate fee and commission to be paid to the Trustees. Agency fees [188] The Trustees deducted from every amount received from the purchasers of LTL, and paid to the minority shareholders a commission of five percent. They testified that this was based on an agreement with the minority shareholders and was not based on their status as Trustees of this Estate or Trust. A review of the Probate file shows that Lawrence and Robert Legge vigorously protested the taking of the commission. They maintained their denial of any agreement during the hearing of this application. No written evidence was provided from which this Court could find that an agreement existed - either express or implied. The Lawrence Legge escrow agreement (Exhibit 9 Tab F), the Robert Legge “Consent to Agreement” (Exhibit 9 Tab E) and the David Legge “Consent to Agreement” (Exhibit 9 Tab D) do not state nor imply that the Trustees were authorized to pay themselves fees or commissions on the collection of the purchase price in respect of the sale that was entered into and controlled by the Trustees throughout. [189] Since I find that the Trustees deduction of commissions from amounts collected by it in its position as Trustees of the Estate was not based upon any separate agreement or contract with the minority shareholders but rather based on their status as Trustees of this Estate and because I am satisfied that as Trustees of the estate they took actual control of LTL and controlled the distribution of the sale proceeds in and after 1995, I conclude that the estate is liable to the minority shareholders for the commissions unilaterally retained by the Trustees and that the Trustees are liable to the Estate for those commissions. [190] As to the quantum of those commissions, I rely upon Exhibit 14. Tab CC sets out in respect of interest receipts commissions kept by the Trustees in respect of Robert Legge $165.16, Larry Legge $144.07 and David Legge $182.62. Tab EE with respect to principal receipts shows that the Trustees retained in respect of Robert Legge, $705.61, Larry Legge $705.61 and David Legge $535.33. I find the Trustees responsible to the estate for these sums and the estate responsible to Robert, Larry and David Legge for these amounts. K. SOLICITORS’ COSTS [191] Counsel for Mr. Newton (Mr. Ryan and Mr. Thurlow) do not seek solicitor’s fees and disbursements. The rest do. They are James Dewar, Q.C., counsel for Sharon Legge, Peter Bryson, Q.C., independent counsel for Carl Miller, and the Proctor, Trinda Ernst, Q.C.. [192] Civil Procedure Rule 63 generally governs the award of costs in litigation. While costs normally follow the event, they are ultimately in the discretion of the Court which discretion must be exercised judicially and not arbitrarily. [193] The Court is cognizant that generally Trustees are entitled to be indemnified for their expenses from the trust, provided such expenses are reasonable. [194] MacDonnell Sheard and Hull on Probate Practice, supra, Chapter 26, at page 384, says that the determination of fees payable to a solicitor for an estate are usually determined by assessing their detailed statement of account as opposed to being based on a fee schedule or percentage fee. [195] Widdifield On Executors and Trustees at Chapter 14.6.3 discusses fees related to passing accounts, primarily based on the Ontario experience. At page 14-23 the authors write: It is by no means a matter of course that the costs of taking and auditing the accounts are paid out of the estate. As a general rule the costs are so paid, but they are discretionary with the judge, and it is impossible to lay down any rule as to when the usual course will be departed from. And at page 14-26: An executor or administrator will not normally be allowed the sum paid to a professional or other accountant for making up the accounts for the purpose of the audit. [196] The authors cite cases where executors/trustees can be liable for costs in respect of the passing of accounts that may arise from their mismanagement. They cite another case (Re Heron Estate, (1996) 10 E.T.R. (2d) 281) where the passing of accounts required several attendances and the Court refused to permit the costs of two counsel on behalf of the executors with respect to the appearances after the first. [197] All of the cases cited are by way of examples of how courts have exercised their discretion with regards to costs. Each case is decided on its own facts. Carl Miller’s Independent Counsel [198] Normally the executors and trustees of estates are represented by the proctor. There is no reason that a co-executor would be represented separately with respect to an application to vary a Trust (in this case, terminate a Trust) or in respect of the passing of accounts. [199] Counsel for Mr. Miller submits that it was reasonable for Mr. Miller to have separate counsel in this case because of the claims of mismanagement against the Trustees. He submitted that in the year 2000, Justice Goodfellow had advised his client to get counsel. [200] I have reviewed the pages cited by counsel to me from Justice Goodfellow’s July 31st, 2000, hearing. My reading of Goodfellow J.’s statements differs from counsel’s submission. At page 9 (beginning at line 8) Justice Goodfellow noted that there were allegations of negligence against the Trustees but they were not before him for any purpose other than “solely in the determination of entitlement and quantum of fees as trustees”. He stated a separate proceeding would need to be undertaken to deal with issues of negligence and breach of trust, and that any determination he made on the passing of accounts and the effect of mismanagement on the entitlement to fees, would not be “res judicata” of any separate subsequent action. At page 8 he noted that the counsel for Robert and Lawrence Legge, (Mr. Lutz) had indicated that they were contemplating an action. Justice Goodfellow said such contemplated action was not before him and that he was not going to make any findings of negligence per se. [201] Immediately following was an exchange between Mr. Balcom, who appeared on behalf of Walter Newton, and the Court. Mr. Miller was not present or separately represented at this hearing. The exchange goes as follows: Mr. Balcom: . . . my understanding was that, as a result of a pretrial conference you instructed Mr. Newton that he ought to have legal counsel or suggested that maybe he should have legal counsel. The Court: Well someone else raised the issue and because of the degree of allegations. Mr. Balcom: Exactly. The Court: And the indication of some probably of negligence suits ah I advise anyone in that kind of circumstance, the only advise you can give . . . . Mr. Balcom: In any, in any . . . . The Court Consider getting counsel. Mr. Balcom: In any event, as a result of that direction or suggestion by the, by the Court, Mr. Newton contacted me on Thursday afternoon. . . [202] Justice Goodfellow did not direct or suggest that Mr. Newton (and presumably by analogy the absent Mr. Miller) required independent legal representation for the purposes of passing the accounts, or, if they obtained counsel, that it would be at the estate’s expense. It appears he did no more than state the obvious; that is, in light of Mr. Lutz’s allegations of negligence and indications of contemplated action, that Mr. Newton might consider consulting counsel. [203] I conclude that: (1) in light of the executors’ commissions paid in 1995 based on a much higher value for the estate than eventually realized; and (2) in light of the substantial loss in the value of the estate since the 1995 closing, which I have concluded occurred with respect to LTL while under the control of the Trustees; and (3) to the extent that the Trustees’ conduct caused or contributed to the substantial loss; and (4) to the extent that the Trustees did not carry out the purpose of the trust (to pay Sharon Legge a regular income from the estate’s interest in LTL and its proceeds), that the representations on behalf of the Trustees have not been successful. [204] I have not been persuaded by the representations on behalf of Mr. Miller that the Trustees have acted prudently, or that they should be entitled to keep all the fees and commissions they took, and the additional compensation they seek. The estate and heirs should not bear the cost of these unsuccessful representations. Sharon Legge’s Counsel [205] Sharon Legge has been successful in her submissions. She, contrary to the express terms of the trust (as interpreted), was not paid the income she was entitled to. I further agreed with submissions of her counsel, in briefs and orally, that the Trustees should not have prepaid themselves fees, and should not have paid themselves the commission on the sale of LTL. [206] Ms. Legge’s counsel’s attendance was required at many adjourned hearings because of the Trustees’ failure to file proper accounts. Ms. Legge’s counsel filed written pretrial memoranda. It was the evidence produced by Ms. Legge’s counsel, not the evidence of the Trustees, that satisfied the Court that the Maritime Life Insurance policies were not assets of the estate. [207] This application was commenced after September 29, 2004, when the “new” tariff for party and party fees became effective. I consider this an application under the new tariff. This contested chambers application covered six days, spread over ten months. Mr. Dewar was present at all hearings. Tariff C authorizes payment of $2,000.00 for each day. I award $12,000.00 costs, payable to Ms. Legge’s counsel. In addition, he shall have his actual out of pocket disbursements, as verified by affidavit and approved by me. Proctor’s fees [208] While this application was commenced by Mr. Newton “on behalf of Sharon Legge”, the proctor eventually took over the presentation of some of the evidence on behalf of the estate. [209] The proctor was previously paid legal fees of $19,312.25 “for closing the estate” (exhibit 14, tab KK). None of those fees relate to this application. [210] Often Proctor’s fees are calculated on the basis of a fee schedule or percentage. Because of the nature of this application, that is not the appropriate basis for compensation in this case. [211] Because the role of the proctor is not to make a monetary claim or to defend a monetary claim, Tariff A of the “new” party and party tariff is not appropriate. [212] The Proctor has attended court for six days (February 14, September 18, November 20, 21, 27 and December 5, 2006). She filed no pre- or post- hearing memoranda; however, she arranged for and led some of the evidence for the estate and was involved, out of court, in arranging the Grant Thornton evidence. [213] A fair determination of a Proctor’s fee is the per trial day fee provided for in the new tariff for party and party costs: both Tariff A (Trial) and Tariff C (Chambers) suggest fees in the amount of $2,000.00 per day. I approve a proctor’s fee of $12,000.00. In addition the Proctor shall receive her actual out of pocket disbursements verified by affidavit and approved by the Court. [214] As part of her final oral submission, the proctor directed the court to a disbursement in the accounts made by the Proctor’s law firm on behalf of the estate. I understand this to be distinct from any amounts set out in Exhibit 6. If, as part of the Proctor’s application for payment of disbursements, a clear and thorough explanation of such a disbursement is given, I will review it. L. CONCLUSION [215] I approve termination of the Trust. I approve the accounts specifically approved in this decision but no others. I approve the costs and fees approved in this decision but no others. [216] I have concluded that: (1) application of Practice memorandum 11 to the actual capital of the trust would have resulted in “normal” trustee fees of under $20,000; (2) for 13 years, the Trustees did not calculate and pay the income beneficiary the trust income, but calculated and paid themselves, without court approval, annual fees and an inappropriate commission (on the sale of LTL); this was a breach of their most important trust obligation; (3) while under their control, LTL lost to its shareholders well over 1.2 million dollars (estate’s portion $849,000.); they showed a lack of care and good judgment in their dealings with LTL and its sale; (4) they failed to diligently carry out their duties, or provide proper accounts, causing the closing to be unreasonably extended. [217] This decision applies whether this is a final closing of the estate (as I believe), or a closing of the trust. Upon receipt into the Estate’s bank account of all of the outstanding liquid assets, including the amounts ordered to be repaid by the Trustees, and their transfer to the beneficiaries, and the assignment by the Trustees of any interest in any outstanding receivables or contingent interests in assets of the estate, the Court will entertain an application to discharge the Trustees. J.