As Estate and Trust practitioners, we often find ourselves assisting clients apply to the Court to formally pass their accounts (whether it be in their roles as Estate Trustees or as Attorneys for Property).
The Rules of Civil Procedure provide clear guidelines for what is required to bring such an application, including detailed steps on what materials should be included in the application, who should be served, and the timelines for service and any responses (i.e. Notices of Objection to Accounts).
Rule 74.18(12) of the Rules sets out that, “no objection shall be raised at a hearing on a passing of accounts that was not raised in a notice of objection to accounts, unless the court orders otherwise.”
In a recent decision of the Ontario Superior Court of Justice, Schutz Estate (Re) 2023 ONSC 3959, the Court had to consider the purpose behind this rule, along with when such leave should be granted.
The Court considered the practical circumstances surrounding applications to pass accounts – Estate accounts (or other fiduciary accounts) are often lengthy and detailed documents containing hundreds (and sometimes thousands) of entries. The Rules therefore require an objector to file a Notice of Objection in Form 74.45. This means specifying each objection in separate and consecutively numbered paragraphs. This allows the Estate Trustee to know what is at issue, to assist in framing an appropriate reply to the objections.
When proceeding to a hearing, the accounts, the notices of objection, the replies, and any responses to the replies delineate the issues not only for the parties, but for the Court. This allows the parties and the Court to know what is at issue and to properly prepare to address those issues. In Schutz, the Court found this to be the underlying purpose of Rule 74.18.
Therefore, while the Court was not provided with any caselaw on the circumstances in which courts have granted leave and allowed claims to be raised outside of the Notice of Objection (and a quick search suggests there is not much out there), the Court concluded the following:
If knowing the issues and having the opportunity to properly prepare to address those issues is the underlying purpose of Rule 74.18 (and what ultimately drives the contested passing of accounts process), it would then be appropriate to allow an objector to raise objections at a hearing not otherwise set out in their Notice of Objection when:
- The objection has been made to the trustee in circumstances indicating the objector’s intention to raise it at the hearing, and
- Adequate notice of the objection has been provided to allow the trustee to prepare to address it at the hearing.
In Schulz, the Court found that many of the objections raised at the hearing (not raised in the Notice of Objection) were properly before it, in light of the fact that they were contained in a supporting Affidavit that had previously been ordered by the Court, earlier in the litigation. Issues contained in the Affidavit were known issues to the Applicant, and it was made clear they were issues that the Objectors intended to raise at the hearing, such that the Applicant had ample time to prepare appropriate responses.
However, issues that were not raised in the Affidavit, nor the Notice of Objection were not properly before the Court at the hearing. This included issues that the Objector’s had raised with the Applicant and had received undertakings in response to. The Court found that because there was no notice that the issues would be raised at the hearing, the Applicant had not been provided the opportunity to gather evidence to be in a position to respond appropriately at the hearing, such that it would be unfair in the circumstances to allow those certain objections to stand.
To learn more about passing accounts, check out our recent blogs below:
When can a creditor compel an accounting and disclosure of an estate file?
Utilizing the inherent jurisdiction of the court to order a passing of accounts
Compelling an accounting under the rules as a discretionary beneficiary
Thanks for reading!