This week on Hull on Estates and Succession Planning, Ian and Suzana finish up the discussion on the question of accounting by reviewing deductions from compensation and briefly sum up the procedure of the passing of accounts.

Comments? Send us an email at hullandhull@gmail.com, call us on the comment line at 206-457-1985, or leave us a comment on the Hull on Estate and Succession Planning blog.

Deductions from Compensation - Hull on Estate and Succession Planning Podcast #125

Posted on August 12, 2008 by Hull & Hull LLP

Suzana Popovic-Montag: Hi, and welcome to Hull on Estate and Succession Planning. You’re listening to Episode #125 of our podcast on Tuesday, August 12^th, 2008.

Welcome to Hull on Estate and Succession Planning, a series of podcasts hosted by Ian Hull and Suzana Popovic-Montag, that will provide information and insights into estate planning in Canada. From the offices of Hull Estate Mediation in Toronto, Ontario, Canada, here are Ian and Suzana.

Suzana Popovic-Montag: Hi there, Ian.

Ian Hull:  Hi, Suzana. How are you doing?

Suzana Popovic-Montag: I’m good thank you, how are you?

Ian Hull: Just great. We’re having some fun with this whole question of accounting, and I think I’ve done the numbers, and I think we’re almost done. But before we go through our podcast today, let’s remind everyone, please feel free to call in on our call-in number and our call-in number is of course, 206-457-1985.

Suzana Popovic-Montag: Or send us an e-mail at hullandhull@gmail.com or of course, you can visit our blog at estatelaw.hullandhull.com as well. 

Ian Hull: So before we launch into the substantive podcast today, I just wanted to do a couple of things. One, I want to deal with an e-mail that came in and another is I want to just welcome people to listen and look at the, last week we enjoyed Jordan Atin who is our associate counsel here, our Senior Associate Counsel, and he was on Canada AM for four days in a row talking about family feuds and the link to the webpage where CTV is still running the streaming is worth looking at, and we’ll make sure that’s in our show notes.  But Jordan had a great opportunity to talk about family feuds and sort of the issues that arise out of his book, “The Family War” which is co-written by Les Kotzer and of course, my good friend, Barry Fish.

Alright, so we were talking about some of the e-mails. And we had two e-mails last week come in. Both of them were semi-related and so I’m sort of going to merge the two of them together. And the question really comes down to this:  What are we talking about with The Shoebox Effect? And what we’ve been mentioning in the past and what we’re going to talk a little bit about today, because part of our wind-up is the importance of vouchers, is The Shoebox Effect is this. When you are a trustee, no matter what you think, no matter what you do, you will be someday possibly asked to show your receipts and that’s all I’m saying The Shoebox Effect is. Make sure you keep receipts, even if it’s in a shoebox. Your lawyer or your accountant can work on the presentation of it when you ultimately have to go to Court, but keep the receipts. So that was the two questions that came in, actually, both were from different parts of Canada but asking about the same question. So I’m not going to dwell on it other than that and say that when we’re winding up our comments on accounting, please, please, please keep your receipts if you’re a fiduciary.

Suzana Popovic-Montag: And just to add one thought to that, Ian, I would also suggest that it’s really helpful to make sure that you document as much as possible everything that you do as a trustee.  And when it comes to exercising your discretion, and if particularly the Will or the trust document allows you to have a broad discretion, to write down your thoughts or your reasoning or the underlying reasons that you decided to do something or not do something and include that in the shoebox that you end up bringing to a lawyer one day possibly.

Ian Hull: That’s a great suggestion and it comes down to, when we’re talking about getting paid for all of these efforts, the deductions from compensation that we briefly talked about in the last podcasts, what can you look to? So we talked about that you can get paid, say approximately 5% as a tariff, so to speak.  And we’ve talked about some of the things we’re going to knock you out from, but one of the easy deductions is the delineation between the executor’s work and lawyer’s work or accountant’s work. And that ties into your comment, Suzana, on docketing, keeping records beyond just the receipts that I talked about.

Suzana Popovic-Montag: And things for instance, like the preparation of tax returns, when fees are associated with that, depending on who’s preparing the tax returns and how much those fees are, that’s another thing that might possibly be a deduction from compensation if the trustee for instance is an accountant. And these are situations where a trustee is an accountant or a lawyer that you see most often, where these issues can arise.

Ian Hull: Alright, so another concern that we raise and probably the last deduction from compensation we’ll just mention now, is this whole idea of pre-taking compensation. Under Ontario legislation, if you’re a fiduciary or, as I say, a guardian under the Substitute Decisions Act, they actually allow you to pre-take your compensation, take before you’ve made your efforts. But we’ve talked about in the past the cases, and we’ve talked about them in the show notes as well, the case law that talks about Re: Knoch which we talked about in our previous podcast and others, and we want to be very, very careful about pre-taking, getting paid before you’ve done your work. So that’s an easy deduction.

Suzana Popovic-Montag: Ian, just a question that I find often gets asked is whether or not GST is actually payable on executor’s compensation. What are your thoughts about that?

Ian Hull: Well, that’s a great question and it’s a murky area of the law.  And what has happened in the past is you would typically have to look at it case by case. First and foremost, you have to look at the amount of the payment that the compensation is. If it is over $30,000 that you’re being paid in compensation, which could be the case because it’s typically a one-time payment, you may have to pay GST on that income as having rendered services. So it’s really case-by-case. Talk to your accountant, get good advice before you wrap up that issue, but that’s an excellent question and a really important heads-up for people who are accounting and doing compensation work.

Okay, I think we’ve pretty well covered off our accounting in the in-depth form and so we wanted to make sure that we stayed the course and came full circle to our sort of checklist that we’re trying to work through. And one of the things I will say is we’re hopefully going to be changing our format and trying to pick up a video feed for our podcasts which is in the process. Some technology glitches haven’t allowed for it to fall in just yet, but we’re going to be moving into some different topic areas. But one of the topic areas that we have to, I think, just sort of at least wrap up in a minimum way, is the process itself. We’ve talked about the passing of accounts process but let’s talk about the physical steps that are taken because many people don’t understand passing of accounts and what you can expect in the courtroom once we’ve got the Court format accounts.  And my introduction to this, by way of the fact that we’re going to be moving this into an audio, is that we’re going to have our own mini-series on this issue, where we’re really going to flush out these topics.  But I think its worthwhile talking about them briefly now, so that people understand what they’re going to get themselves into once they’ve got these beautifully created Court format accounts.

Suzana Popovic-Montag: And procedurally speaking, certainly here in Ontario, the Rules of Civil Procedure will govern what is included in an Application to pass the Court format accounts. And we started when, before we got into this discussion of how we would audit estate accounts or how to prepare a best kind of set of accounts in the circumstances, we talked about the fact that it’s all part of an application process.  And so there will be an actual Court date that’s assigned to the hearing for the return of the executor’s accounts, and you’ll serve a Notice of that application on all the beneficiaries together with, in many circumstances and many situations, a copy of the accounts as well. And the Rules themselves specifically provide what has to be in this Application record and I thought, Ian, it might be good to just sort of flush out some of those specific requirements.

Ian Hull: Alright. Well I think and it’s helpful because it’s not quite as daunting when you get the document itself thrown at you because, as I say, a lot of these accounts are passed in a non-contentious environment.  But it’s legal mumbo-jumbo to some people so you want to make sure you sort of know what you’re getting yourselves into when you get it. And the main document behind the accounts is the Affidavit verifying the accounts, they’re proving that you’re swearing to the truth of the accounts, and that’s the fiduciary sort of statement that says these accounts are true and accurate.

Suzana Popovic-Montag: And that Affidavit, as I say, is included in the record that is served upon everyone who has a financial interest in the estate. And financial interest in the estate I think we’ve talked about on previous podcasts, has a very broad meaning in the sense that even people with a contingent interest in an estate will be served with the accounts as well.

Ian Hull: And talking about service, we don’t want to forget that there may be government agencies that we have to serve, of course; the Office of the Children’s Lawyer should there be any minor child’s interests, or interests of those who are unborn and unascertained.  And without getting too technical about it, we just want to look at the trust document or the Will and see if there is a trust. And typically if there’s a trust, more often than not, almost certainly in fact, the Children’s Lawyer would be served, that’s the Office of the Children’s Lawyer.  And it’s different in each Ontario jurisdiction, but basically the lawyer in charge of minor interests. Another person to be concerned about serving is

Suzana Popovic-Montag: the Public Guardian and Trustee. That office would be served on behalf of any incapable beneficiaries of the estate. And so just like the Children’s Lawyer protects the minor, the unborn or the unascertained, the Public Guardian and Trustee here in Ontario will represent those incapable beneficiaries.

Ian Hull: So those are just things to keep a heads-up on so that you don’t get out of the box and miss a page of the application process by not putting important entities on notice. Obviously, we come back to our cardinal rule: Read the document, read the Will, read the trust and make sure you’ve served everyone named in that, but the Public Guardian and Trustee and the Office of the Children’s Lawyer, are two entities that aren’t necessarily named and quite often aren’t named, so just a heads-up. 

So I think that gives you sort of a sense of what the document itself, in a friendly environment will be, so I think we’ll wrap up today’s podcast and again reminding you, please feel free to e-mail at hullandhull, h u l l a n d h u l l @gmail.com.

Suzana Popovic-Montag: Or feel free to call and leave us an audio comment at 206-457-1985. Thanks very much, Ian.

Ian Hull: Thanks, Suzana.

You’ve been listening to Hull on Estate and Succession Planning with Ian Hull and Suzana Popovic-Montag. The podcast you have been listening to has been provided as an information service. It is a summary of current legal issues in estates and estate planning. It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other Hull On podcasts, or to leave a question or comment, please visit our website at www.hullestatemediation.com.

Our theme music is UpTempo14 by Gary and is courtesy of the Podsafe Music Network.

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Posted on February 12^th, 2008 by Hull & Hull LLP

Hello and welcome to Hull on Estates. You’re listening to Episode #97 on Tuesday, February 12^th, 2008.

Welcome to Hull on Estates, a series of podcasts for the Canadian legal community dealing with issues and insights surrounding estate planning in Canada.   Hosted by the lawyers of Hull & Hull, the podcast will touch on some key considerations when planning estates and Wills.  Now, here are today’s hosts.

Chris Graham: Hi and welcome to another episode on Hull on Estates. I’m Chris Graham.

Justin de Vries: And I’m Justin de Vries. Chris, this is the first time that you and I have podcasted together, so that’s always fun. And after much debate, we decided that we were going to look at the Ontario Civil Justice Reform Project which was a project that started in, I believe, 2006 and Mr. Justice Colter Osbourne was appointed by then- Attorney-General Michael Bryant to look at reforming or at least improving the civil justice system. And I thought it was worthwhile spending some time just talking about the system.  And I know, Chris, that you were recently out of the country for a long period of time but are now back and deep into the system and it’s interesting to know what your impressions are of the current problems or access to the system for those people who can’t afford it.

Chris Graham: Yeah, absolutely. Spending some time outside of a place governed by rule of law does give you a special perspective and appreciation for a judicial system. And when I look at all of these recommendations, I’m struck by two things: first, many of them are excellent and; second, many of them are also maybe, a little conservative in a sense.

Justin de Vries: Well let’s get there. Let’s… I think what inspired the report is the fact that anybody who is in the system, be it counsel or a party, know how expensive litigation has become. And unfortunately, the sad result is that cases often settle, which is not bad in and of itself, but they settle because of cost. The economics of litigation begin to drive the costs. I would think that a fairly standard estate matter that had to go in front of Court, be it a Will interpretation or a Will challenge would be well over a $100,000.00 by the time you put in a hotly contested one. And those are things that, not only in the estate world, but in the civil context, the larger civil context, are a problem. So access to justice, what people listening to this who went to law school will know, was always a big deal, was a problem that needed to be looked at. And Mr. Justice Colter Osbourne is well respected in the province. He’s currently the province’s Integrity Commissioner which means he works for the provincial government and they put to him certain questions dealing with a member’s integrity of the Parliament or of the Legislature in Ontario. And he’s a former Justice of the Court of Appeal. So I was never in front of him, but I’ve mediated with him and again, a very capable judge. What are some of the reforms, Chris, that caught your fancy in all of this?

Chris Graham: Okay, one of the most exciting reforms is the recommendation that the jurisdiction for the Small Claims Court should be increased to $25,000. I just think that’s fantastic. Small Claims Court is a great way for people to get some justice without spending more on lawyers than they may get back. And right now, the maximum is…

Justin de Vries: $15,000.

Chris Graham:  $15,000, yeah.

Justin de Vries: I think it started originally at 5, moved up to 10 and now it’s 15. What’s also interesting in that recommendation is that you cannot appeal from judgments of less than $1,500. What may be interesting, and I don’t know what Justice Osbourne found out but… some Small Claims Court judges may be less than happy with that because you’re going to have a lot of self-represented litigants dealing with some of their problems. But it’s probably better, as you say, Chris, to have it there than in front of the Superior Court.

Now coupled with that is an increase or a recommendation that the monetary limit for Simplified Procedure actions be increased from $50,000 to $100,000. The $50,000 Simplified Procedure Rules probably came in now about 5, 6 years ago and the idea was you really remove the discovery process from Simplified actions. They were simplified because they were $50,000 or less. No discovery. You could have a summary judgment motion and the Rules in respect of that were somewhat eased, so it was easier for the Court to grant summary judgment motion. And you could also have a simplified trial which really relied on witness statements and a limited cross-examination. So that increase would be to $100,000, which I think is great as well. As part of a Simplified Procedure, you get a pre-trial which is always a good way to settle a case. And there’s no indication that that would fall by the wayside. So Chris, what else did you see that you liked?

Chris Graham: Well, when it comes to Simplified Procedure, there’s a recommendation that there can be 10 minutes for a statement, a general statement of any party whose sworn an Affidavit for the summary trial. Or 10 minutes for an examination-in-chief. And I think that’s a fantastic way of bringing a very small amount of useful procedure into the trial aspect. Again, it’s limited to 10 minutes and that will preserve… I think it’s a fantastic way of preserving the simplified aspect of the trial, while getting a little bit of evidence before the Court and allowing the judge to do what judges do really well, which is evaluate credibility and weigh evidence.

Justin de Vries: Well, speaking of that, what caught my attention was the recommendation to amend Rule 20 to allow the Court to weigh evidence, evaluate credibility and draw any reasonable inference from the evidence. However, what Mr. Justice Osbourne indicates is that that power ought not to be exercised where the interests of justice require that the issue be determined at trial. And this is really picking up from the fact that when summary judgment rules about 10 years ago, there was a series of cases where trial judges were doing exactly that.  While there was no genuine issue for trial, there was an issue of credibility. Judges were nevertheless granting summary judgment in the right circumstances. The Court of Appeal shut that down like there was no tomorrow and really put a chill on the Rule and it became much less effective because the Court of Appeal at the time said if there’s credibility involved, there should be a trial. You can’t make a conclusion based on a paper record which is what summary judgment is. And what Mr. Justice Osbourne has picked up and said now hold on, let’s go back to what was then a common sensical approach.  Where it’s appropriate, allow summary judgment to be granted by weighing the evidence and drawing reasonable inferences. But as a protection to the public or to parties, if the interests of justice are against that kind of finding, then push it on to a trial. So I’m glad to see that because I think that makes a lot of sense.

The other one, Chris, what do you think about this one? It caught my attention was Mr. Justice Osbourne wanted lawyers to be encouraged, I suppose through their various societies that they belong to and organizations, to consider new and innovative billing methods that would promote access to justice for litigants with civil litigation issues who can’t afford counsel. You know, the hourly rates are so high in many instances, I always thought block billing was an interesting way to approach things.

Chris Graham: Yeah… in the olden days, rules against champerty and maintenance prevented a lot of well…prevented almost any innovation when it came to billing and really did force lawyers to stick to hourly billing, which makes unaffordable a lot of matters which otherwise would be dealt with. This looks great and block billing can really work in some areas, areas where services are highly standardized and lawyers do the same thing over and over again, it’s fantastic for everybody. In other areas, I guess I mean the danger which the lawyer will have to deal with is that if you block bill, some clients will sort of take that as a free ride.  And you have to have some type of protection against clients adopting unreasonable stances. But it’s great if anybody can figure out a way to make it viable.

Justin de Vries: One of the problems we have as litigators, of course, is that you never know your inputs when you make up a budget. It’s not as if you’re making a widget. You don’t know how the other side is going to react. You don’t know what kind of blowback you’re going to get, what kind of motions you face and therefore it becomes very difficult to estimate your costs. Plus I find there’s a little bit that, to some extent, the Courts suck and blow on it because they go after you if your bills are too high, but then they’re also upset if you provide them with product that is not terribly impressive. So it’s a little bit hard. The other thing, though, that we do have in the estate world which provides us some flexibility is really to bill a client at the end of the piece, when they come into, if they’re a beneficiary, payment out of the estate, or to look to the estate itself to pay. Even though the rules of costs have changed a bit, that gives us some flexibility.

I think the last one that I thought we could talk about, Chris, was this idea of limiting discoveries, that one of the recommendations was to amend Rule 31, which is the rule that deals with examinations, so that each party has up to 1 day, that is, 7 hours, to examine parties adverse and interests subject to agreement otherwise or a Court Order. So what Mr. Justice Colter Osbourne is recommending is just making the discovery process, which can be endless, down to 1 day. But I’m not quite sure how I feel about that one. Part of me says that’s a great idea, but discovery’s such a powerful tool… you know, are you often going to be running off to Court to get an Order and justify more questions because the other side simply won’t agree?

Chris Graham: Yeah exactly. There are some very good arguments for limiting discoveries. On the other hand, sometimes you discover your evidence in discoveries, you don’t necessarily go in knowing exactly what you’re going to find and sometimes what you find requires yet more discovery. And if you only get 7 hours, well, one long discovery or 2 average discoveries, can easily eat that up. And then what are you left with? Well, if you have to get a motion, that means you’ll have to draft motion materials, you’ll have to negotiate with the other side, it’ll be more delays. At least in our little slice of the world, most matters will require at least easily 3-5 witnesses and 7 hours’ of discovery probably won’t cut it in a lot of situations. I can’t speak for areas outside of estates litigation, though. Maybe it would be just fantastic in contract litigation. But I am skeptical on that one.

Justin de Vries: Well, finally, there is one more I want to talk about and we’ll just touch upon it and that is… the Law Reform Commission of Ontario which was recently re-established after being disbanded under the Harris government, should review the role of the Divisional Court as a Court of intermediate appellant jurisdiction. It’s my understanding that Ontario is the only province that has this intermediate appellant jurisdiction and so, as such, it would be worthwhile to see if that’s necessary.  Because you’re really having Ontario Superior Court judges, albeit a panel of three, looking at what their colleague did in the first instance.  And you wonder whether or not…though in general, I think the Divisional Court is quite good…but you wonder whether or not it’s as unbiased as it could be and whether you should just get in front of the Court of Appeal.

Chris Graham: Yeah.  I would add one thing to that and this seems like nitpicking, but it doesn’t always feel like nitpicking when you’re the one doing it. Because there’s this Divisional Court out there, it means that every time you’re considering launching an appeal of a decision, you have to confirm which Court you appeal to. And it does sound simple, but it doesn’t end up being simple and it can add half an hour, an hour, an hour and a half of work to any file. And regardless of the good reputation of the Divisional Court or any other questions, personally, I’m in favour of anything that eliminates the amount of work that you have to do to get to the end result, the natural result of the file. So I mean, I am the one that does that research. So, of course, I’d be in favour of just, well, eliminating it altogether because it would mean one hour less on every file where there’s an appeal being considered.

Justin de Vries: Well I think that brings us to the end of this week’s discussion. Thanks for listening and for joining me today, along with Chris, of course.

Chris Graham: It was a pleasure, Justin. I look forward to podcasting with you again soon. And we look forward to hearing from our listeners. You can send us an e-mail at hull.lawyers@gmail.com or just pick up the phone and leave us a message on our comment line at 206-350-6636. Be sure to visit our blog at estatelaw.hullandhull.com where you’ll find even more information and discussion on today’s practice of estate law. We hope you enjoyed the show. I’m Chris Graham.

Justin de Vries: And I’m Justin de Vries. Thanks for listening.

This has been Hull on Estates with the lawyers of Hull & Hull.  The podcast you have been listening to has been provided as an information service.  It is a summary of current legal issues in estates and estate planning.  It is not legal advice and you are reminded to always talk with a legal professional regarding your specific circumstances.

To listen to other podcasts, or to leave a question or comment, please visit our website at www.hullandhull.com.

Our theme music is Upper Structure by DJ AKid  and is courtesy of the Podsafe Music Network.

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Before July 2005, the Rules of Civil Procedure provided some sense of certainty to the Court’s broad discretion in awarding costs as the Rules provided a costs grid. The costs grid suggested that costs were to be determined by an hourly rate multiplied by the time spent. In 2004, the Court of Appeal in Boucher v. Public Accountants Council set forth the general principle as to the fixing of costs pursuant to Rule 57.01 and the costs grid. With respect to costs, the Court stated that the overall “objective is to fix an amount that is fair and reasonable for the unsuccessful party to pay in the particular proceeding, rather than an amount fixed by the actual costs incurred by the successful litigant”. Subsequently, in July 2005, the Rules were amended. 

The amendment to the Rules abolished the costs grid and expanded on the list of factors, set out in Rule 57.01, which the Court may consider before making a cost award. Rule 57.01 was now expanded to include the principle of full indemnity and the reasonable expectations of an unsuccessful party to pay a cost award.

The principle of the reasonable expectations of an unsuccessful party to pay a cost award appears to provide the parties with some flexibility in obtaining the maximum cost award by permitting the successful party to establish the reasonable expectations of the unsuccessful party.  

Thanks for reading, and have a great day!

Rick