Is there a Duty to Account When Requested by a Beneficiary?

March 20, 2019 Ian Hull Beneficiary Designations, Estate & Trust, Estate Planning, Power of Attorney, Trustees, Uncategorized, Wills 0 Comments

In the recent decision of Fica v Dmytryshyn, 2018 ONSC 2034, the Ontario Superior Court of Justice confirmed that an attorney for property and/or estate trustee has a duty to pass accounts in accordance with the Rules of Civil Procedure.

The facts in Fica feature a family dynamic in which the mother of two sons heavily favoured one over the other. The mother’s favouritism towards her younger son (the “Favoured Son”) was evident throughout his whole life, and manifested in him receiving generous financial support from his mother, for anything and everything that he needed. Her other son (the “Older Son”) appears to have had a fractured relationship with his mother and was somewhat estranged from his family.

In January 2012, the mother appointed her Favoured Son, and the mother’s brother, as her co-attorneys for property and personal care, and as her estate trustees. Both sons and Uncle were beneficiaries under the mother’s will, and entitled to share equally in the residue of the mother’s estate.

In August 2012, the mother became very sick with cancer, at which time the Favoured Son and Uncle began acting under the mother’s power of attorney for property. Even after the Favoured Son and the Uncle began acting in their roles as attorneys for property for the mother, the Favoured Son continued to receive generous financial support from the mother’s assets and, with the knowledge of his mother, continued to use her credit card to support his lifestyle.

After the mother died, the disgruntled Older Son demanded information about alleged misappropriated money and expenses incurred when his younger brother and Uncle were acting as co-attorneys for the mother. However, in what would prove to be a significant error, the Favoured Son and the Uncle declined to provide an accounting upon request. Steps were only taken in this regard by the Favoured Son and the Uncle after the Older Son brought an application to compel and obtained an order to pass attorney/estate accounts.

The Older Son also sought a court order requiring the Favoured Son and the Uncle to reimburse the mother’s estate for the funds that he alleged had been misappropriated by them. In light of the mother’s pattern of behaviour, of being frequently and consistently generous towards her Favoured Son throughout his life, as well as her knowledge that the payment of such expenses continued after the Favoured Son and the Uncle had begun acting as her attorneys for property, the judge dismissed the Older Son’s motion. The judge stated that it was the mother’s prerogative to decide what she wanted to do with her money. The judge concluded that the funds were accounted for and no undue influence was present.

The big takeaway from this decision is with respect to costs. Notwithstanding their success on the merits, the Favoured Son and the Uncle could not recover any of the costs incurred in passing their accounts. The rationale for this decision was that, as co-attorney/co-estate trustee, the Favoured son and the Uncle failed to comply with their obligations pursuant to the Rules of Civil Procedure.

Under the Rules, an estate trustee, attorney or guardian can pass his or her accounts voluntarily on notice to the appropriate parties, or can be compelled by an order of the court under Rule 74.15. Rule 74.15(1) provides that any person who appears to have a financial interest in an estate may move for an order requiring an estate trustee to pass accounts. Furthermore, Section 42(1) of the Substitution Decisions Act provides for the passing of accounts of an attorney or guardian of property.

 

 

Thanks for reading.

Ian M. Hull

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