IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

British Columbia (Public Guardian and Trustee) v. Strand,

 

2008 BCSC 441

Date: 20080414
Docket: M062175
Registry: Vancouver

Between:

Public Guardian and Trustee of
the Province of British Columbia,
as Litigation Guardian for the infants,
Natalie Beaurivage and April Beaurivage

Plaintiff

And

Dale Strand and Joseph Richard Emard

Defendants


Before: The Honourable Mr. Justice Burnyeat

Reasons for Judgment
(in Chambers)

Counsel for Public Guardian and Trustee of British Columbia

W.P. Sokoloff

Date and Place of Hearing:

February 29, 2008 and March 26, 2008

 

Vancouver, B.C.

[1]                Applying pursuant to Rules 6(14) and 41(16.1) of the Rules of Court and s. 40 of the Infants Act, R.S.B.C. 1996, c. 223, the Plaintiff applies for the following Orders:

(a)        The proposed settlements of the claims of the infant Plaintiffs, Natalie Beaurivage and April Beaurivage, relating to a motor vehicle accident on April 9, 2005 in Surrey, British Columbia, and the resulting death of Jeannette Garcia, be approved as follows:

(a)        On behalf of Natalie Beaurivage the sum of $165,000 plus pro-rated costs as assessed or agreed upon

(b)        On behalf of April Beaurivage the sum of $195,000 plus pro-rated costs as assessed or agreed upon;

(b)        The proposed accounts for April and Natalie Beaurivage for legal fees, disbursements, and taxes of the solicitors for the Plaintiffs … be approved;

(c)        The Public Guardian and Trustee for the Province of British Columbia (“Public Trustee”) as Litigation Guardian and on behalf of the infants, Natalie and April Beaurivage, be authorized and empowered to execute all necessary Releases and any other documents necessary to finalize the settlements in such form as counsel may approve;

(d)        The herein proceedings be dismissed with costs as assessed or agreed to the Plaintiffs;

(e)        The solicitors for the Plaintiffs be authorized to distribute the settlement funds after deduction of applicable legal fees, disbursements, and taxes as follows:

(i)         The balance of Natalie Beaurivage’s settlement funds be paid to the Public Trustee to be held in trust until she attains the age of 19 years subject to Section 14(1) of the Infants Act, R.S.B.C. 1996, c.223 as amended; and

(ii)        The balance of April Beaurivage’s settlement funds be paid to the Public Trustee to be held in trust until she attains the age of 19 years subject to Section 14(1) of the Infants Act, R.S.B.C. 1996, c. 223 as amended.

[2]                These proceedings were brought pursuant to the Family Compensation Act, R.S.B.C. 1996, c. 126, for damages arising out of the death of Jeanette Garcia, the mother of Natalie and April Beaurivage, as the result of a motor vehicle collision on April 9, 2005 where the Defendant, Dale Strand was the driver of the vehicle in which Jeanette Garcia was a passenger.  At the time, Jeanette Garcia was 35 years of age and was living with her two daughters with Mr. Strand.  The father of the two girls separated from Ms. Garcia shortly after the children were born and appears to have had little or no contact with the two girls since the time of separation.

[3]                The Public Trustee retained counsel to act on this matter on a contingency fee basis of 25%, subject to review by the Court.  During the course of that retainer, disbursements totalling $6,594.00 were incurred by counsel.

[4]                After an Examination for Discovery, the preparation of an economic report dealing with the loss of financial dependency and the loss of housekeeping services, an unsuccessful September 7, 2007 mediation, a September 11, 2007 formal Offer to Settle, and a January 10, 2008 Judicial Settlement Conference had been scheduled, counsel received instructions from the Public Trustee to accept an offer that had been made.  The Public Trustee now seeks approval of the proposed settlement.

[5]                I am satisfied that the settlement of the claims should be approved on the basis of the sum of $165,000.00 on behalf of Natalie Beaurivage and the sum of $195,000.00 on behalf of April Beaurivage.  I am also satisfied that the accounts for legal fees, disbursements and taxes of counsel should be approved, that the Public Trustee should be authorized and empowered to execute all necessary Releases and any other documents necessary to finalize the settlements in such form as counsel may approve, and that proceedings should then be dismissed with costs.  It is the proposed distribution of settlement funds after deduction of applicable legal fees, disbursements and taxes which is of concern.

[6]                In her March 12, 2008 Affidavit, Christine Cunningham who was the instructing solicitor for the Public Trustee states that, if the Public Trustee was to administer the two trusts:

… the children’s funds would be subject to the following charges which are mandated by Regulations to the Public Guardian and Trustee Act, R.S.B.C. 1996, c. 383 as amended:

(a)        5% capital commission charge on the value of each capital deposit payable either on receipt, during or at the termination of the trust;

(b)        5% income commission on all investment and interest earnings charged annually; and

(c)        .4 of 1% Asset Management Fee chargeable annually.

[7]                After subtracting the approved fees and disbursements, the approximate amounts available in trust would be $135,000.00 for April Beaurivage and $115,000.00 for Natalie Beaurivage.  If those amounts were received, the 5% “capital commission charge on the value of each Deposit” would be approximately $6,750.00 and $5,750.00 respectively.

[8]                I am of the opinion that the imposition of a “capital commission charge” of $6,750.00 and $5,750.00 is excessive and unwarranted as a “Set-Up Fee” and in no way in keeping with the actual costs of creating such an investment file to facilitate the undertaking of the obligations that a trustee owes to a beneficiary.  For instance, if the counsel retained by the Public Trustee had purported to charge such a set-up fee in order to establish a trust account, that fee would not be allowed by the Court and might well be the subject matter of an inquiry by the Law Society of British Columbia.  The question which arises is whether the “capital commission charge” is reasonable in the circumstances.  I have concluded that it is not.  In this regard, the material in evidence would indicate that private investment companies charge considerably less.  For instance, the “Set Up Fee” charged by Scotia Trust (“to cover the time taken to review documents, receive assets and set up the trust”) and TD Canada Trust Private Trust Department (“an acceptance/set-up fee”) would be $1,000.00.  In the case of TD Canada Trust, the Set-Up Fee would be a minimum of $1,000.00 and a maximum of $5,000.00.

[9]                Regarding the “5% income commission on all investment and interest earnings charged annually” and the “.4 of 1% Asset Management Fee charged annually”, Scotia Trust charges a “Management and Administration Fee” on an annual basis on the market value of the trust assets at the rate of 1.50% on the first $500,000.00, 1.25% on the next $500,000.00, 1.00% on the next $2,000,000.00, 0.85% on the next $7,000,000.00, and 0.70% on the balance of that annual fee being payable out of the trust monthly.  TD Canada Trust charges a “Care and Management” fee based on the average market value of the assets under administration with 1.25% per annum charged on the first $500,000.00, 1.00% per annum on the next $500,000.00, 0.80% per annum on the next $1,000,000.00, and 0.50% per annum on any excess over $2,000,000.00 with a minimum annual fee of $5,000.00 per account.

[10]            Applying the various fees against the net trust funds available for April Beaurivage of $134,000.00 after subtracting the $1,000.00 “set up fee”, the charges for Scotia Trust would amount to approximately $2,000.00 and the charge of TD Canada Trust would be in the neighbourhood of $1,675.00.  The yearly fee of the Public Trustee on the assumption that the $128,250.00 would be available after having subtracted the “capital commission charge” would be in the neighbourhood of $850.00 after applying the “Asset Management Fee” of .4 of 1% and on the assumption that an “income commission” would be applied against investment and interest earnings equal to 5% of $128,250.00 available.

[11]            While the yearly charge of the Public Trustee would appear to be considerably less than what would be charged by a private investment company, that calculation is made difficult without knowing the rate of return that would be available.  It is also difficult to ascertain whether, in the long run, the substantially higher “capital commission charge” would be offset by the substantially less “income commission” and “Asset Management Fee”.

[12]            The figures obtained from private firms are academic in the context of the monies available for April Beaurivage and Natalie Beaurivage.  Ms. Cunningham states in her Affidavit that she was also advised as follows:

(a)        Scotia Trust would not accept the Beaurivage trust “… since they are valued at less than the Scotia Trust’s self imposed threshold of $350,000.00.”;

(b)        the advice received from TD Canada Trust was that … [it] … had a threshold amount of $500,000.00.

[13]            But for the threshold amounts established by private institutions, for the administration of trusts, I am satisfied that the fees of the Public Trustee are likely to be in excess of what would be charged in the private sector.  While it is the role of Government in its Regulation to set the fees that will be charged, it is also the role of the Court to determine whether what is being recommended is in the best interests of infants.

[14]            It is in this capacity that the role of the Public Trustee as a Litigation Guardian conflicts with the role of the Public Trustee as an administrator of trusts.  As a Litigation Guardian, the role of the Public Trustee and any counsel they retain is to obtain the highest possible damage award available for infants, to review the fee arrangement made with counsel who would be acting on behalf of the Litigation Guardian to confirm that the proposed fee is appropriate in the circumstances, and then to recommend to the Court the most advantageous investment of settlement funds until infants reach the age of majority.  Where the recommendation is that funds be placed with the Public Trustee, that recommendation conflicts with the obligation owed to infants if the proposed fee arrangement is not in accordance with what is available from other sources or could be available.

[15]            The fees charged by the Public Trustee in accordance with the Regulation passed by the Government appear not to be in accordance with the statements made by the Government at the time as to the purpose of the legislation and the intent of the levying of fees.  There is very little commentary in Hansard regarding the fees charged under the Public Guardian and Trustee Act.  In the Debates of the Legislative Assembly (Hansard), Vol. 11, Number 24 (July 7, 1993) at 8369-70, the Hon. Colin Gabelmann, the then Attorney General stated:

This new act will establish a public guardian and trustee to carry out all the functions presently performed by the public trustee in addition to the new functions assigned to the public guardian and trustee under the package of adult guardianship legislation. Consequently, the public guardian and trustee’s duties will include: protecting the financial interests of young people by holding funds in trust or by acting as guardian of the estate of wards of the province; investigating trusts in which young people or vulnerable adults have an interest; protecting the legal interests of young people by acting as litigation guardian when no other adult is willing to act on their behalf; acting as executor under a will or as administrator of the estate of a deceased or missing person when no other adult is willing or able to act; acting as the personal representative of a vulnerable adult, either under a representation agreement or by court appointment; making health care decisions for adults who have no family members available to act on their behalf; and assisting the court in ensuring that evidence placed before the court is appropriate and that individuals appointed by the court carry out their duties.

In fulfilling these functions, the act stipulates that the public guardian and trustee has the same fiduciary duties as a private trustee. This is consistent with accepted trust principles in case law. As such, the act requires the public guardian and trustee to abide by the Trustee Act of British Columbia unless given exemption in regulations to this act or by a court order, deed, will or other instrument of appointment.  ….

One of the important duties of the public guardian and trustee is to hold and invest moneys on behalf of clients. This bill provides for the public guardian and trustee to establish an investment advisory committee to give advice on formulating and implementing strategic investment policies. Consistent with private trust companies, the public guardian and trustee is given authority to aggregate client funds for investment purposes. The actual investment of the moneys will be managed by the Minister of Finance and Corporate Relations.  ….

I would Iike to elaborate on the matter of revenues. Historically the public trustee has charged fees for trustee services consistent with those charged by private trustees. In addition, nominal fees have also been charged for statutory functions such as advising the court or acting as litigation guardian.

The province has contributed funding to cover the costs of services not provided for by these fees. All revenues are directed to a special account within consolidated revenue from which the operating costs of the office are funded. The Public Guardian and Trustee Act establishes these same funding arrangements for the new office of the public guardian and trustee.

There is an important feature to which I would like to draw the attention of the House. As is currently the situation with the public trustee, the public guardian and trustee will be authorized to reduce or waive fees when such fees will result in unfairness or hardship to clients.

[16]            It can hardly be said that the Public Trustee is “protecting the financial interests of young people by holding funds in trust” for them when the financial interests are not protected by the levying of fees which are in excess of what would be charged by the private sector.  Similarly, it can hardly be said that the Public Trustee is “protecting the legal interests of young people by acting as litigation guardian” when the Public Trustee also recommends that it rather than other potential trustees should receive trust funds for investment.  It is not presently correct to say that:  “historically the public trustee has charged fees for trustee services consistent with those charged by private trustees” when the proposed fees charged appear to be in excess of what would be available if private trustees were retained.

[17]            Until counsel can explore other possibilities for the investment of these trust funds, the net settlement funds will be held by counsel in an interest-bearing trust account.  Counsel will be at liberty to apply before me for directions regarding the funds held.  Counsel may wish to explore the following options in these regards:

(a)        that counsel will retain the funds acting as trustee, will abide by the Trustee Act regarding the investment and distribution of funds, and will charge his usual hourly rates for services rendered;

(b)        that counsel explore with private institutions the possibility of a variation of their current policies regarding their current “thresholds” and/or whether private institutions are prepared to receive a “pool” of funds from numerous infant settlements so that their threshold amounts can be met; and

(c)        that counsel explore with the Law Society of British Columbia the possibility that the Law Society would be prepared to administer the investment of funds from infant settlements or would be prepared to negotiate with private institutions regarding the terms under which they are prepared to receive infant settlement funds.  In this regard, the Law Society of British Columbia has experienced investment counselling advice available to it, has significant sums invested, has a responsibility to invest unclaimed trust funds, and, through its staff members who are eligible to receive and deposit trust funds, is in a position to receive trust funds for investment.

“The Honourable Mr. Justice Burnyeat”