Appointing an Estate Trustee During Litigation
In its recent decision, Baran v Cranston, the Divisional Court provides a helpful summary of the principles applied by the court when determining if the appointment of an Estate Trustee During Litigation (“ETDL”) is appropriate.
As a starting point, the court outlines the Superior Court of Justice’s statutory authority to appoint an ETDL. Section 28 of the Estates Act provides that an ETDL may be appointed “pending an action touching the validity of the will of a deceased person, or for obtaining, recalling or revoking any probate or grant of administration…” Additionally, Rule 75.06(3)(f) of the Rules of Civil Procedure expressly authorizes the court to appoint an ETDL on an application or motion for directions.
The court then looked to the jurisprudence for further support that an ETDL may be appointed even where the validity of a will is not in issue. In McColl v McColl, an ETDL was appointed, notwithstanding the fact that the validity of the will was not in issue. In McColl, the court ultimately appointed an ETDL “based on the conflict and the trustee’s lack of experience in managing a business.”
In Mayer v Rubin, the court set out that the appointment of an ETDL may be required (even where the validity of the will is not in issue) where the parties’ duties as fiduciaries are inconsistent with their ongoing litigation interests. The appointment of an ETDL will also be necessary where there is a trustee who is in an adversarial position towards a co-trustee or beneficiary, and who therefore, should not be left in charge of trust property.
After having reviewed the relevant statutory provisions and jurisprudence, the Divisional Court went on to note some of the factors that will be considered by the court in determining whether or not it should exercise its discretion to appoint an ETDL:
- whether a trustee may be a witness in the litigation;
- potential for conflict of interest;
- conflict between the interests of the trustees and/or beneficiaries;
- hostility between the trustees and/or beneficiaries;
- lack of communication between the parties; and
- evidence of settlement discussions that exclude some of the parties.
The Divisional Court also approved the lower court’s summary of the legal principles factored into its decision to appoint an ETDL, which included, among others:
- the court has broad and inherent powers to supervise the management of estates, and can draw upon its inherent jurisdiction (where appropriate) to protect parties so that justice can be done in the proceeding;
- the court must ensure that there is a level playing field between the parties, and the assets of the estate must be immunized from the tactics employed by litigating parties; and
- the appointment of an ETDL is not an extraordinary measure and the court should refuse the appointment only in the clearest of cases. The appointment of an ETDL will be “favoured by the court in the majority of cases of conflict between the trustee and beneficiaries unless the administration of the estate is particularly simple or straightforward.”
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