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Estates - Estate Trustees. James Estate (Re)
In James Estate (Re) (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from the dismissal of "his application for a certificate of appointment as estate trustee with a will".
Here the court considers bond requirements for the granting of an application to issue a certificate of appointment as an estate trustee:[64] Under r. 74.14(1)(a), the registrar may issue a certificate of appointment if satisfied that the application for the certificate contains the information, evidence and supporting documentation required by the Rules and any Act. The registrar may otherwise only issue a certificate of appointment “if directed to do so by a judge”: r. 74.14(1)(b).
[65] Pursuant to r. 74.04(1), an application for a certificate of appointment as estate trustee must include any security required under the Estates Act. Section 35 of the Estates Act provides that,[e]xcept where otherwise provided by law, every person to whom a grant of administration, including administration with the will annexed, is committed shall give a bond to the judge of the court by which the grant is made, to enure for the benefit of the Accountant of the Superior Court of Justice, with a surety or sureties as may be required by the judge, conditioned for the due collecting, getting in, administering and accounting for the property of the deceased”. [66] Section 37(1) sets the bond at “double the amount under which the property of the deceased has been sworn”.
[67] Section 37(2) empowers a judge to reduce the amount of or dispense with the bond requirement altogether. An applicant for a certificate of estate trustee may also seek waiver of the bond requirement on consent, under r. 74.11(5). To do so, however, they must comply with r. 74.11(6) by filing an affidavit setting out, among other things, the deceased’s debts, the arrangements made for the estate to pay them, and what security the applicant proposes to put in place to protect any creditors.
[68] In his application, the appellant did not include proof that he had obtained a bond as required under s. 35 of the Estates Act. He sought to be relieved of the bond requirement on consent but did not comply with r. 74.11(6). His affidavit was silent as to whether Mr. James’ had any unpaid debts when he died and, if so, what the appellant proposed to do to pay them and otherwise protect their interests.
[69] The registrar therefore had no choice but to refer the appellant’s application to a judge. The registrar could not issue the certificate without a judge’s order since the application included neither evidence that the applicant had fulfilled the bond requirement, nor the information required to waive the bond requirement on consent. Even if the appellant’s affidavit had complied with r. 74.11(6), the application would still have had to be referred to a judge, because only a judge can waive the bond requirement under s. 37(2).
[70] The appellant points out that the security requirement was not mentioned in the application judge’s direction or decision. I infer that this became a secondary consideration when the application judge focused on what he considered to be a greater concern. The point is that a person reasonably informed about the criteria for granting the order sought by the appellant would not conclude that the registrar’s referral of his application to the application judge reflected anything other than the registrar’s understanding of and compliance with applicable statutes and the Rules. . James Estate (Re)
In James Estate (Re) (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from the dismissal of "his application for a certificate of appointment as estate trustee with a will".
Here the lower court dismissed the application despite it being unopposed, and the appellant challenged whether they had the discretion to do that:(1) Did the application judge have the discretion to refuse the appellant’s appointment as an estate trustee even though the application was unopposed?
[28] Whether a Superior Court judge has discretion, in the exercise of the court’s inherent jurisdiction, to refuse an unopposed application for a certificate of appointment as estate trustee is a question of law. It is therefore reviewable on a correctness standard.
[29] In Ontario, the Superior Court of Justice is responsible for granting probate or letters of administration pursuant to s. 7(1) of the Estates Act. This jurisdiction includes the determination of applications for a certificate of appointment of estate trustees with or without a will. Estate trustees play a critical role in the administration of estates. Using the authority conferred upon them by virtue of the court’s appointment, they step into the shoes of the deceased, dealing with their property, taking legal action to enforce the estate’s rights, determining which debts should be paid, and distributing the estate’s assets based on their interpretation of the testator’s instructions.
[30] In Otis v. Otis (2004), 7 E.T.R. (3d) 221 (Ont. S.C.), at paras. 22 to 24, Cullity J. observed that the Superior Court’s jurisdiction over wills and estates pursuant to the Estates Act and rr. 74 and 75 of the Rules of Civil Procedure was transferred to it from the former Surrogate Courts. The role of those Courts was, to some extent, inquisitorial:The role of the court is not simply to adjudicate upon a dispute between parties. The judgment of the court granting probate does not bind only the parties to the proceeding. Unless, and until, it is set aside, it operates in rem and can affect the rights of other persons. [31] This court endorsed this view of the court’s inquisitorial role in estates proceedings in Neuberger v. York, 2016 ONCA 191, 129 O.R. (3d) 721, at paras. 67-68, leave to appeal refused, [2016] S.C.C.A. No. 207. The court “has a special responsibility to the testator, who cannot be present to give voice to his or her true intentions”: Neuberger, at para. 68. For that reason, an application for probate can be refused if there is no evidence to support it, and even if the estate’s beneficiaries support it: Otis, at paras. 24-26; McLaughlin v. McLaughlin, 2015 ONSC 3491, 11 E.T.R. (4th) 183, at paras. 31-36.
[32] The court’s supervisory role with respect to estate proceedings is recognized in rr. 74 and 75. Notably, pursuant to r. 75.06(3), a court may direct the issues to be decided in a contentious estate proceeding, the parties to be involved, and the procedure to be followed. A party seeking directions for the purpose of challenging a will or the appointment of an estate trustee must provide the court with evidence satisfying at least a minimal evidentiary threshold in support of the order ultimately sought: Neuberger, at para. 88; Seepa v. Seepa, 2017 ONSC 5368, at para. 27; Martin v. Martin, 2018 ONSC 1840, 38 E.T.R. (4th) 161, at paras. 30, 32.
[33] Section 5 of the Trustee Act, R.S.O. 1990, c. T.23, empowers the court to order the appointment of a new trustee “in substitution for or in addition to any existing trustee or trustees, or although there is no existing trustee”. Even in the absence of the Trustee Act, the Superior Court of Justice has an inherent power to remove a trustee where circumstances require it: Gonder v. Gonder Estate, 2010 ONCA 172, 54 E.T.R. (3d) 193, at para. 26.
[34] In my view, this inherent jurisdiction also empowers a Superior Court judge to refuse to grant an application to appoint a trustee. It would be illogical if the court had the power to terminate a trustee’s appointment in appropriate circumstances but did not have the power to prevent an inappropriate appointment.
[35] The appellant in fact concedes that the Superior Court may refuse to grant an application for a certificate of appointment with a will in appropriate circumstances. He contends, however, that this discretion is limited by s. 29 of the Estates Act and that, in the circumstances of this case, the application judge was required to grant the application.
[36] Section 29(1) lists persons who may be appointed by the court to administer the property of a deceased, where the deceased died intestate, or the executor named in the will refuses to prove it. Those persons include the deceased’s spouse or common law partner at the time of death; the deceased’s next of kin; or both.
[37] Pursuant to s. 29(2) the persons listed in subsection (1) may request that another person be appointed if the executor appointed in the will declines to act:Appointment at request of parties interested
(2) Subject to subsection (3), where a person dies … leaving a will affecting property but without … an executor willing and competent to take probate and the persons entitled to administration, or a majority of such of them as are resident in Ontario, request that another person be appointed to be the administrator of the property of the deceased, or of any part of it, the right that such persons possessed to have administration granted to them in respect of it belongs to such person. [38] Appointment under subsections (1) or (2) is subject to s. 29(3), which states:General power as to appointment of administrator under special circumstances
(3) Where a person dies … leaving a will affecting property but without having appointed an executor thereof willing and competent to take probate … and it appears to the court to be necessary or convenient by reason of the insolvency of the estate of the deceased, or other special circumstances, to appoint some person to be the administrator of the property of the deceased, or of any part of such property, other than the person who if this subsection had not been enacted would have been entitled to the grant of administration, it is not obligatory upon the court to grant administration to the person who if this subsection had not been enacted would have been entitled to a grant thereof, but the court may appoint such person as it thinks fit upon his or her giving such security as it may direct, and every such administration may be limited as it thinks fit. [39] The appellant contends that s. 29(2) compelled the application judge to grant his application as it was supported by persons entitled to apply for a certificate of appointment under s. 29(1) and there was no other competing application.
[40] I do not accept this argument.
[41] The language of s. 29 does not compel a court to grant a certificate of appointment to any particular applicant. On the contrary, s. 29(1) states that the administration of the property of the deceased “may” (as opposed to “shall”) be committed by the Superior Court of Justice to the persons indicated “as in the discretion of the court seems best”. Subsection (2) gives those entitled to apply for administration under subsection (1) the right to request the appointment of another person in their stead, but this delegate’s “right” is not greater than those enjoyed by the requesting parties. The delegate may apply for a certificate of appointment as estate trustee, but the court has the discretion to deny the application. Both subsections (1) and (2) are expressly made subject to subsection (3), which likewise affirms that, even when the court concludes that a trustee must be appointed due to the insolvency of the estate or other special circumstances, the court retains the discretion to “appoint any such person as it thinks fit”.
[42] The equitable jurisdiction over the appointment and removal of trustees furthermore runs in parallel with any statutory powers to remove or appoint and is not supplanted absent clear and unambiguous language to that effect: Gonder, at paras. 40-46. The discretion flowing from this jurisdiction reflects the Superior Court’s parens patriae jurisdiction and has been variously described as “overriding” (Public Guardian and Trustee v. Duggan (1998), 1998 CanLII 14929 (ON SC), 165 D.L.R. (4th) 713 (Ont. S.C.), at para. 22, rev’d on other grounds, (1999), 1999 CanLII 1388 (ON CA), 175 D.L.R. (4th) 466 (Ont. C.A.)); unfettered or unconstrained (Mohammed v. Heera (2008), 43 E.T.R. (3d) 273 (Ont. S.C.), at para. 29); and “unqualified” (Re Lagrandeur Estate, 2021 ONSC 3447, at para. 47).
[43] This discretion, in my view, may be exercised even if an application is unopposed, due to the inquisitorial nature of the court’s role in estate proceedings, and its gatekeeping and oversight functions with respect to the appointment of trustees.
[44] The appellant relies on Petrovskaya v. Morelli, 2013 ONSC 2659, 88 E.T.R. (3d) 302, in which Morgan J. granted an application by the widow of a deceased person despite an objection. At para. 24, he held that s. 29 of the Estates Act “dictates that in the absence of any more appropriate choice, the Applicant shall be appointed”. This statement must be viewed in the context of that case, where the court recognized the urgent need to appoint someone to administer the estate at issue. It does not stand for the proposition that a court must grant an application for a certificate as estate trustee in every instance where no other party applies.
[45] There is no suggestion of special circumstances that would require the immediate appointment of an estate trustee in this case. Even if there were special circumstances as contemplated in s. 29(3), they would be a factor to be weighed rather than an imperative requiring the appellant’s application to be granted.
[46] I accordingly conclude that, as a Superior Court judge exercising an equitable jurisdiction in an estate proceeding, the application judge had an inherent discretion to dismiss the appellant’s application, even though the beneficiaries supported it and there were no competing applications. The court continues at paras 47-58 to determine whether the application judge erred in this exercise of discretion.
. Di Santo v. Di Santo Estate
In Di Santo v. Di Santo Estate (Ont CA, 2023) the Court of Appeal refers to authority for the test for removing an estate trustee, and reviews some of the related case facts:[24] Nor do we agree that the motion judge failed to consider whether it was necessary to replace them.
[25] The Trustees concede that the motion judge cautioned herself that the threshold for the removal of a trustee is a high one: the court will not lightly interfere with the testator’s choice of estate trustee.
[26] The Trustees also acknowledge that the motion judge specifically adverted to the several relevant considerations when the court is asked to remove a trustee, as summarized in Virk v. Brar Estate, 2014 ONSC 4611, 1 E.T.R. (4th) 241. As the motion judge noted, those factors include that “there must be a “clear necessity” to interfere with the discretion of the testator”.
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[28] The motion judge detailed the requests made by Ottavio for disclosure and funding and found that the mindset of the Trustees “with respect to any requests made by [Ottavio] has become intractable”. Motions were required to obtain what should have been straightforward requests for estate and Family Trust related documents. She characterized the Trustees as having exercised their discretion to pay additional income to Ottavio in a “minimalist manner”. They failed to consider the lifestyle that Ottavio was leading immediately before the deceased’s death, which could not be funded by $1000 per week. She found that the views of the Trustees were entrenched and unlikely to change.
[29] The motion judge concluded that “the Trustees are either in a position of conflict, have acted unilaterally or cannot objectively exercise their discretion”. Summarizing her reasons for this conclusion:1. Ottavio has no children, so John and Carmela will benefit from any gift over from the Family Trust.
2. Ottavio’s claim of undue influence in relation to the Wills puts the Trustees in conflict of interest.
3. The Trustees have not exercised their discretion to pay any additional amounts to Ottavio since the deceased’s death.
4. John and Carmela are influenced by their views on Ottavio’s lifestyle choices and his behaviour and have a level of animus towards Ottavio.
5. The Trustees have not provided important information to Ottavio.
6. The removal of the Trustees is necessary to ensure a level playing field in the litigation. [30] The motion judge considered the relevant factors. Her reasons explain why, in her view, it was clearly necessary to remove the Trustees. Essentially, the Trustees disagree with the motion judge’s conclusion and ask this court to re-weigh the evidence before her. They have not identified any error of law or palpable and overriding error. There is no basis for this court to interfere with the motion judge’s exercise of discretion in removing the Trustees. . Baran v. Cranston
In Baran v. Cranston (Div Court, 2022) the Divisional Court held that not all receipts that the estate trustee sought reimbursement for need be confirmed by written receipt:[15] The audit judge was also correct when he held that the case law relied on by the appellant, Zimmerman v. McMichael Estate, 2010 ONSC 2947 and Lanthier v. Cousineau Dufresne Estate, 2002 CanLII 2653 (Ont. S.C.), did not support the conclusion that an estate trustee must reimburse the estate for any expense for which there is no written receipt. At paras. 55-56 he stated,
[55] In the Lanthier and Zimmerman situations the power of attorney/trustees failed to keep any records for their substantial cash withdrawals and were unable to provide any explanation for the withdrawals. These cases are distinguishable because in this case the estate trustee provided an accurate record of all receipts and disbursements, provided detailed explanations under oath explaining the reasons for each expense, and also produced copious records to justify and corroborate the amount of each expense charged to the estate.
[56] The Lanthier and Zimmerman decisions do not stand for the proposition that a trustee should be ordered to repay all expenses paid on behalf of the estate where he or she is unable to provide a written receipt. For example, Toller’s staff were paid in cash each week and the trustee made a note of each payment in a ledger or in her iPad. The objectors do not dispute that Toller’s staff in Mexico were paid in cash each week nor do they dispute the accuracy of the amounts set out in the trustee’s accounts. Their objection is technical and not substantial in nature.
[16] The audit judge meticulously considered the various objections made by the brothers and found Ms. Baran’s explanations given for the absence of receipts credible and reliable. He was in the best position to assess Ms. Baran’s credibility, having heard her over many days of testimony in chief and cross-examination. In my view, the appellant has not demonstrated any palpable and overriding error in the audit judge’s findings of fact or in his application of the standard of care with respect to record keeping and with respect to the administration of the estate. Paragraphs 61 and 69 of the audit judge’s reasons provide a useful explanation of his findings:[61] I agree that the approach adopted in Laird [v. Mulholland, ][1988] O.J. No. 855 (S.C.J.)] applies in the circumstances of this complicated estate in Mexico. While obtaining a receipt for all estate expenses is the recommended approach, I find that the estate trustee was not required to obtain a receipt for every expense in order to allow her to be reimbursed for expenses she incurred, where she produced accurate accounts for all expenses, which were incurred for the benefit of the estate, along with volumes of corroborating documents. In addition, Philippa explained each expense that was objected to under oath and her evidence was not undermined during a lengthy cross examination. Having observed her for 11 days giving evidence in chief and being cross-examined on her explanations for the expenses, I find that Philippa acted honestly and reasonably throughout the administration of Toller’s estate.
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[65] For the above reasons, while the estate trustee’s accounting was not perfect, she has accounted for all capital receipts and all expenses accurately in the unique circumstances of this estate, she has explained the reason for each expense under oath, she has provided corroborating evidence for almost all expenses, and I find that she acted honestly, in good faith, and reasonably throughout her administration. As a result, I find that she has met the required standard of care of a person of ordinary prudence using common sense in the complicated circumstances of this estate. However, there are a few expenses that I will not allow that are outlined in this decision. ....
[19] Given that I would uphold the audit judge’s findings with respect to the accounts, I see no basis to interfere with his award of compensation to Ms. Baran. The appellant argued strenuously before the audit judge that Ms. Baran’s compensation should be substantially reduced because of her failure to keep receipts. I see no error of law by the audit judge in the award of compensation. He considered both the tariff and the five factors approach approved by the Court of Appeal in Laing Estate v. Hines, 1998 CanLII 6867 (ON CA). His award of compensation was a reasonable exercise of his discretion. . Baran v. Cranston
In Baran v. Cranston (Div Court, 2022) the Divisional Court stated the standard of care required of an estate trustee respecting record-keeping:[1] This is an appeal pursuant to s. 10(1) of the Estates Act, R.S.O. 1990, c. E.21 from an order of R. Smith J. dated February 22, 2021 in respect of an application for the passing of accounts by the respondent Phillippa Baran in her capacity as Trustee of the Estate of Toller James Montague Cranston. ...
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[12] The appellant submits that the audit judge erred in the standard of recordkeeping that is expected of an estate trustee. Rule 74.17(1) of the Rules of Civil Procedure requires that an estate trustee “shall keep accurate records of the assets and transactions in the estate and accounts filed with the court shall include” the items that follow (emphasis added). The appellant submits that this requires a standard of perfection with respect to the keeping of records and includes a requirement to provide receipts to document all expenditures. In the present case, he argues that Ms. Baran failed to provide written receipts or documentation for some $142,099.67 of the expenses, and the audit judge erred in upholding these expenditures on the basis of Ms. Baran’s testimony at the hearing.
[13] The appellant further argues that the audit judge erred in failing to find that Ms. Baran was in breach of trust because she failed to keep proper records and did not meet her duty to account.
[14] The audit judge found that the accounts filed by Ms. Baran contained the details required by Rule 74.17(1) (see para. 48 of his reasons). He did not err in the standard of care that he applied. He correctly held, consistently with the decision of the Supreme Court of Canada in Fales v. Canada Permanent Trust Co., 1976 CanLII 14 (SCC), [1977] 2 S.C.R. 302 at p. 315, that the standard of care for an estate trustee is the standard of care of a person of ordinary care and diligence in managing their own affairs. The Supreme Court also held that the standard was to exercise “ordinary skill and prudence”, along with the application of common sense (at p. 316). The audit judge cited Fales at paras. 51-52 of his reasons and correctly followed it at para. 57.
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