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REMUNERATION OF TRUSTEES AND

EXECUTORS.

[Contributed by EDWARD MANSON, ESQ.]

Anomaly of the Existing Practice. For centuries trustees and executors have gone on discharging the onerous duties incident to their respective offices, administering property, which is not their own, for the benefit of others, exposed to temptation from within, to risks from the fraud or negligence of trustees, to the solicitation of beneficiaries to breaches of trust, called strictly to account as often as they have yielded to such solicitation or deviated a hair's-breadth from the letter of their trust, and all this unrecompensed, unthanked-a striking example of altruistic virtue and disinterested devotion to duty. All other persons engaged in the management and administration of property not their own are paid for their time and trouble solicitors, receivers, liquidators, trustees for debenture holders, judicial factors, judicial trustees, committees, trustees in bankruptcy. Trustees and executors alone are not, and so familiar has custom made the anomaly that people hardly ever ask the question why it is that trustees and executors are thus left unremunerated.

Its Cause. But if the question is asked, the reason commonly assigned. is the technical maxim of equity that a trustee is not permitted to make a profit out of his trust. He is not permitted to charge for his time and trouble, nor even for his professional services, unless specially authorised so to do by the terms of the trust instrument, or will. Now for this rule, like most well-established rules of equity, there is a very good reason to be shown, and the reason is this, that the first business of trustees-as of executors-is to protect the estate, and if they were allowed to charge it in their own favour with remuneration for their time, trouble, and services, there could be no one in a position to check such charges, and the estate might thus be eaten up by exorbitant claims.

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The Rule of "No Profit."-Lord Lyndhurst in New v. Jones (1833) (1 Hall & Twells 632) states the principle very lucidly, speaking with special reference to a solicitor-trustee. "There is no point," he says, more clearly established as a general rule by the case of Robinson v. Pett (1734) (3 P. Wms.) and other decisions than that an executor or trustee is not entitled

to be paid for his trouble. If the accounts of the deceased are complicated and the executor takes upon himself to settle and arrange those accounts, although it may take up much of his time and attention, the principle of equity is that he is not entitled to compensation for his time and trouble. . . . The principle is this: it is the duty of an executor and trustee to be the guardian of an estate, and to watch over the interests of the estate committed to his charge. If he be allowed to perform the duties connected with the estate and to claim compensation for his services, his interest would then If he be opposed to his duty, and as a matter of prudence the Court does not allow the executor or trustee to place himself in that situation. chooses to perform those duties or services on that estate, he is not entitled to receive compensation. The rule applies as strongly to an attorney as to any other person: for if an attorney who is an executor performs business that was necessary to be transacted—if this attorney, being executor, performs those duties himself, he, in my opinion, is not entitled to be paid for the performance of those duties: it would be placing his interests at variance with the duties he has to discharge. It was said that the bill might be taxed, and that this would be a sufficient check. I am of opinion that it would not. The estate has a right not only to the protection of the taxing officer, but also to the vigilance and guardianship of the executor in addition to the check of the taxing officer. There might be cases where a trustee placed in the situation of a solicitor might, if he were allowed to perform the duties of a solicitor and to be paid for them, be so placed that he might find it very often proper to institute and carry on legal proceedings which he would not do were he to derive no emolument from them, and were to employ another person.

In point of prudence and propriety, and as a guard over the estate, I am of opinion that it would not be proper that a solicitor who is a trustee should be distinguished from an ordinary trustee. If a trustee who is a solicitor acts as a solicitor, he is not entitled to charge for his labour; he is entitled to be paid only his costs out of pocket." And this is the law of England to-day. Solicitormortgagees have been allowed by the Mortgagee Legal Costs Act, 1895, to charge profit costs, but solicitor-trustees, in the absence of a special clause, are still restricted to out-of-pocket costs.

The Reason of the Rule.-Conceding the above rule to embody a sound principle, still the measure of its applicability is the reason of the thing, and the reason is the necessity of protecting the trust property against charges of indefinite amount. There is no policy of the law that trustees are not to be remunerated at all; in fact, we know the solicitor-trustee is constantly allowed to charge for his professional services, that legacies are being daily given to acting executors, and that trustee and executor companies administering estates or trust property are invariably paid. The question is as to the mode of remuneration, and with regard to this all that the law says is that trustees must not be placed in such a position as may tempt them to

betray their trust and help themselves out of the estate at any rate they may choose to put upon the value of their services. Eliminate this danger : make it certain that the estate will not be unduly charged, and the objection to trustees or executors being paid vanishes; and if the question is asked how this can be done, the answer is by paying trustees or executors just as receivers and liquidators and judicial factors or trustees are paid-by a fixed salary, representing in the case of executors a percentage on the capital value of the estate, and in the case of trustees a percentage on the income passing through the trustee's hands, in both cases according to a graduated scale. Thus an income from trust funds under £500 might pay 3 per cent. = £15; an income over £500 and under £1000 2 per cent. = £25. The cestuisque trust or beneficiaries would know exactly how much the trustees or executors were enabled to claim, and there would be no risk of overcharge. Such statutory right of remuneration would, of course, be subject to any special agreement between the cestuisque trust and the trustee, fixing a higher or lower rate of remuneration or dispensing with any.

Impolicy of Unpaid Labour.-With this safeguard against abuse, is there any valid reason, on general principles, why a trustee or executor should not be paid for his work? Trust work and executorship work are in the strictest sense business, often of a very harassing kind, and it is not to say the least-businesslike that it should go unremunerated. Unpaid work can rarely be satisfactory. It is not in human nature to give the same attention to, or bestow the same pains on, work done gratuitously as on work done for reward. Our law recognises the fact in the lesser degree of diligence required of a gratuitous as compared with a paid bailee: and this is not mere mercenariness; it is-in a way-conscientiousness. The feeling is, "I have been paid for this work and I must do my best at it-earn my fee": and so the unpaid work is put aside or scamped. The story runs that Lord Mansfield, when he had to advise himself, used to transfer a guinea from one pocket to the other to maintain the illusion and give himself the requisite stimulus. It is, in truth, quite as much in the interests of cestuisque trust and beneficiaries as of the trustees and executors themselves, that trustees and executors should be properly remunerated; and our Colonies -whose position of detachment enables them to see old-fashioned doctrines of English equity in a truer perspective-would seem to be becoming sensible of the fact.

The tendency in these new countries is either to have a public trusteea State official to deal with trusts and administrations or to constitute trustee and executor corporations—either under the general law or by special Act of Parliament, to deal with them. In either case the work is treated on a business footing, and is paid for either by a salary or percentage: see infra by way of illustration-the Western Australia Trustee and Executor Agency, Limited, constituted by a private Act of the Colony in 1893. But apart

from these, there is a growing body of legislation dealing with the remuneration of trustees and executors.

Some Colonial Legislation.-The following are some instances; they are not exhaustive :

Queensland.

The Court may, by order, authorise a trustee to retain for his own use out of the income of the trust property a reasonable sum by way of commission for his pains and trouble in the management or sale of the property; but no such commission shall be allowed at a higher rate than £5 per cent. of income or proceeds. The provisions of this section extend and apply to the dealings of trustees with trust property since September 30th, 1886, unless the trustee and beneficiaries have in the meantime stated and settled their accounts, in which case commission shall not be allowed except in respect of the period which has elapsed since the settlement of such accounts (1897, 61 Vict., No 10, s. 55).

Ontario.

Any trustee under deed, settlement, or will, any executor or administrator, any guardian appointed by any Court, and any testamentary guardian, or any other trustee, howsoever the trust is created, shall be entitled to such fair and reasonable allowance for his care, pains, and trouble, and his time expended in and about the trust estate, as may be allowed by the High Court or judge, or by any master or referee thereof, to whom the matter may be referred (Revised Statutes of Ontario, 1887, c. 110, s. 38).

A judge of the High Court may, on application to him for the purpose, settle the amount of such compensation, although the trust estate is not before the Court in any action (R.S.O., 1887, c. 110, s. 39).

Compensation may be allowed in the case of any trust heretofore created, as well as in any to be hereafter created (R.S.O., 1887, c. 110, S. 40).

The judge of any Surrogate Court may allow to the executor or trustee or administrator acting under a will or letters of administration, a fair and reasonable allowance for his care, pains, and trouble, and his time expended in or about the executorship, trusteeship, or administration of the estate and effects vested in him under the will or letters of administration, and in administering, disposing of, and arranging and settling the same, and generally in arranging and settling the affairs of the estate, and may make an order or orders from time to time therefor, and the same shall be allowed to an executor, trustee, or administrator in passing his accounts (R.S.O., 1887, c. 110, S. 41).

Nothing in the next preceding four sections shall apply to any case in which the allowance is fixed by the instrument creating the trust (R.S.O., 1887, C. 110, S. 42).

British Columbia.

Any trustee under a deed, settlement, or will, any executor or administrator, any guardian appointed by any Court, and any testamentary guardian, or any other trustee, howsoever the trust is created, shall be entitled to such fair and reasonable allowance, not exceeding 5 per cent. on the gross value of the estate, by way of remuneration for his care, pains, and trouble, and his time expended in and about the trust estate, as may be allowed by the Supreme Court or a judge thereof, or by any master or referee thereof, to whom the matter may be referred, in addition to any other allowances for expenses actually incurred to which such trustee, executor, administrator, or guardian may by law be entitled (1897, c. 44, s. 2).

A judge of the Supreme Court may, on application to him for the purpose, settle the amount of such compensation, although the trust estate is not before the Court in any action (1897, c. 44, s. 3).

Such compensation may be allowed in the case of any trust heretofore created as well as in any to be hereafter created (1897, c. 44, s. 4).

A judge of the Supreme Court may allow to the executor, or trustee, or administrator acting under will or letters of administration, a fair and reasonable allowance, not exceeding 5 per cent. on the gross value of the estate, by way of remuneration for his care, pains, and trouble, and his time expended in or about the executorship, trusteeship, or administration of the estate and effects vested in him under any probate or letters of administration, and in administering, disposing of, and arranging and settling the same, and generally in arranging and settling the affairs of the estate, and may make an order or orders from time to time therefor, and the same shall be allowed to an executor, trustee, or administrator in passing his accounts, in addition to any other allowances for expenses actually incurred to which such trustee, executor, or administrator may by law be entitled (1897, c. 44, s. 5).

Nothing in the preceding four sections shall apply to any case in which the allowance is fixed by the instrument creating the trust (1897, c. 44, s. 6).

Cape Colony.

Executors are entitled to a reasonable compensation to be assessed by the master. A testator may himself designate the executor's total remuneration in lieu of fees and commission. Where this is not done, the master may allow commission of 2 per cent. on the whole estate.

Private persons are also by the law of the Colony permitted to carry on, and do carry on, the business of trustees for reward. They are as a rule attorneys or public accountants.

Jamaica is now contemplating legislation on the subject.

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