Watch what you do, you may be held accountable
Building on this idea of judicial discretion is the recent case of Dobis v Dobis recently heard and decided by the Ontario Superior Court of Justice, whereby the court ordered a passing of accounts by a party who was deemed to have misappropriated funds from an estate asset.
Elizabeth commenced an application in her role as the estate trustee of her late husband’s estate. She sought, among other things, certain orders that would allow her to gain and maintain possession and control over one of the estate assets, a four unit rental property. She also sought an order requiring her son, Mark, to pass his accounts in respect of funds she alleged were misappropriated from the rental property.
Mark resided in one of the units of the rental property with his spouse, and alleged that it was his father’s intention that he maintain a life interest in the property. During the lifetime of the deceased, Mark acted as a manager/superintendent of the rental property in exchange for reduced rent. He also collected rent from one of the tenants and deposited the funds into a bank account owned jointly by his parents. Following his father’s death, Mark began diverting rent from the rental property to himself rather than depositing it in the joint account.
Despite requests from Elizabeth, Mark failed to properly account for the rental income. The accounting that was provided to Elizabeth was not supported by vouchers, and contained no detail of the expenses incurred. Elizabeth submitted that Mark had no legal or beneficial interest in the property, that he was holding the property hostage while unlawfully benefiting personally from the funds generated by the property, and that he failed to account for those funds.
In arriving at its decision, the court relied on the 2016 Ontario Superior Court decision in Net Connect Installations Inc. v. Mobile Zone Inc., which held that a court has jurisdiction to order an accounting where a party is deemed to have misappropriated funds.
Ultimately, Mark was compelled to pass his accounts for all monies received by him in connection with his management of the property. All this to say, watch what you do, because you may be held accountable.
Thank you for reading!