The High Bar for Estate Trustee Removal
Section 37 of the Trustee Act provides the Ontario Superior Court of Justice with the power to remove and replace an Estate Trustee “upon any ground upon which the court may remove any other trustee.”
However, as we have previously blogged, the Court is generally not inclined to interfere with a testator’s wishes. In Chambers Estate v Chambers, 2013 ONCA 511, Justice Gillese confirmed that the removal of an Estate Trustee should only be granted on the clearest of evidence, with the welfare of the beneficiaries as the fundamental guide for the Court’s exercise of its discretion.
The Honourable Justice Fairburn’s recent decision in Ricci v Ricci Estate, 2016 ONSC 6614, reaffirms the high threshold that must be met before the Court will take the extraordinary step of removing an Estate Trustee.
In Ricci, the Deceased died leaving her husband (“Livio”) as the Estate Trustee of her Estate. The Deceased’s Will provided Livio with a life interest in her property, with their children as the residuary beneficiaries upon Livio’s death.
However, in 2015, Livio took personal possession of the home and obtained a new mortgage without notifying the residuary beneficiaries. Michael, one of the sons and the alternate Estate Trustee under the Deceased’s Will, brought an Application for Livio’s removal as Estate Trustee.
On the Application, Michael asserted that the transfer of title and the new mortgage resulted in a breach of Livio’s duties and obligations as Estate Trustee. Michael argued that Livio’s actions had put him in an untenable conflict of interest.
Given that the property was in Livio’s name, Michael also cited a letter from Livio’s lawyer that suggested that Livio would consider disinheriting Michael to demonstrate that his interest in the Deceased’s Estate was at risk.
Conversely, Livio argued that he had only acted to increase the value of the Estate by entering into a more favourable mortgage. It was Livio’s evidence that he had transferred title to the property into his name so that the mortgage on the property could be renegotiated on more favourable terms, allowing him to start paying down some of the principal amount of the mortgage. Livio also executed a declaration of trust after receiving enquiries from Michael’s counsel, confirming that he was holding the property in trust for his children in accordance with the Deceased’s Will.
Ultimately, Justice Fairburn held that while Livio should not have transferred the property into his personal name or remortgaged the property without notice to the beneficiaries, his actions were not “fatal” to his position as the Deceased’s Estate Trustee. Placing Livio’s actions in context, the Court found that the beneficiaries had benefited from the remortgaging of the property. The Court also held that the declaration of trust showed that Livio intended to abide by the Deceased’s testamentary intentions.
In the result, Michael’s Application was dismissed. Instead of ordering Livio’s removal, the Court ordered that the declaration of trust be amended and registered on title to the property.
Justice Fairburn’s decision once again reiterates the high bar for the removal and replacement of an Estate Trustee. The Court may be reluctant to exercise its discretion in the absence of clear evidence, even if there may have been a technical breach of the Estate Trustee’s duties.
Thank you for reading,
Umair Abdul Qadir