Re Hall Estate

When executors and trustees account for their handling of estates, they need to be prepared to explain large expenditures.

In a recent decision in British Columbia, Re Hall Estate, 2010 BCSC 1510, Master Baker declined to pass an executor’s accounts without further explanation from the executor of almost $96,000 in accounting fees.

The executor of Gordon Hall’s will was Mr. Hall’s accountant, John Sims. Gordon Hall died on May 19th, 2007. In his will, he left half of his estate to the Salvation Army, and the other half to such charities as his executor appointed.

Before Mr. Hall died, he became incompetent to manage his affairs. Mr. Sims was appointed by the court as his committee (or adult guardian). As committee, Mr. Sims had passed his accounts before the Public Guardian and Trustee of British Columbia up to February 27, 2005. But after Mr. Hall’s death, the Public Guardian and Trustee is no longer involved in approving a committee’s accounts, Instead a committee may get approval of the accounts from the executor or administrator of the deceased’s person’s estate, or where the committee is also the executor, from the beneficiaries of the will.

The Salvation Army did not approve of Mr. Sims' accounts for acting as committee or executor. It was concerned with the amount of accounting fees, which were charged by Mr. Sims' accounting firms.

Master Baker was not satisfied that Mr. Sims had provided sufficient evidence to justify the accounting fees. He wrote at paragraphs 16 through 20:

[16] The evidence in respect of that expense has been minimal, almost negligible. Mr. Sims confirmed that the fees (with the exception, perhaps, of the accrued portion, above) have been paid. There were no exhibits filed to confirm the accounts or details of them. Three Ernst and Young accounts (May 25, 2007, August 21, 2007, and January 15, 2008, for $4,850.00, $13,600.00, and $9,000.00, respectively) found their way into the court file, attached to a copy of Exhibit 3, the PGT’s letter of March 3, 2006, although the invoices clearly had nothing to do with the letter. The invoice of August 21, 2007, as an example, is brief in the extreme. I can quote it in full: “To accounting and income tax services for the period May 19, 2007 (date of death) to August 17, 2007 and all other services as required - 13,600.00.” There is a handwritten notation on the invoice: “3 months x $4000/mo.” I have no idea who wrote the notation or why. I infer, however, that the invoices may well be typical of the accounting invoices paid. If so, there is a significant dearth of detail and information upon which one can base an assessment of the reasonableness of the accounts. I doubt, for example, that were the accounts for legal services, they would meet the requirements of s. 69(4) of the Legal Profession Act[3]:

A bill under subsection (1) is sufficient in form if it contains a reasonably descriptive statement of the services with a lump sum charge and a detailed statement of disbursements.

I assume that there are time records that would relate to and possibly explain these accounts but if they exist I haven’t seen them.

[17] One of the accounts concerns me for other reasons. The invoice of May 25th, 2007 states that the accounting fees are for services: “...including payment of accounts, investment of funds and all other services in regard to the affairs for the period ended May 18, 2007”.

[18] This concerns me because Mr. Sims seeks a fee, as committee, for, in part at least, those very services i.e. the payment of accounts and investment of funds. How can it be that both he, as committee, and the firm, as accountants, should be remunerated for the same services?

[19] Moreover there is the broader concern: the total accounting fees, whether they total $95,988.15 or $98,028.19 seem disproportionate given the entire estate was valued at $1,100,000.00, and given that after two years’ committeeship and the investment restriction imposed by the committeeship order (para. 4, above) the estate could not have been a complex one. The estate summary for February 28, 2005 to May 19, 2007, in fact, lists only two chequing accounts, a treasury bill, a RRIF, four GICs, the mortgage Mr. Hall held, a small account for his comfort money, and three other accounts (Genus and two Vancity accounts, one for cash and one for securities). Some of these, I understand, were essentially replacements for the others as funds were changed from one institution to the other, or re-invested. So, while Mr. Hall’s funds may have been greater than the average person’s I cannot see how their management, including tax reporting and arrangements, could justify these fees.

[20] It would also seem to me that given that the fees were charged in all instances by firms to which Mr. Sims belonged, it is incumbent on him to be explicit and thorough in justifying them.

In the result, Master Baker declined to pass the accounts, but ordered that Mr. Sims may re-submit the accounts and be given an opportunity to provide further evidence concerning the accounting fees.