Benjamin Cochrane Trust (Re), 2023 ONCA 546 is the most recent decision released by the Ontario Court of Appeal addressing the passing of accounts. With this case, the Court of Appeal has once again confirmed thatdeference must be shown to the findings of the original trier of fact presiding over a passing of accounts. An appellate court ought not interfere unless the lower court either erred in law, or made a palpable and overriding error.
Background
This case dealt with a trust held for the benefit of the appellants’ son, Benjamin, who was hit by a car when he was 12 years old and suffered a serious brain injury. In 2000, after a claim related to the accident was settled, $418,675 was paid into trust and invested into an annuity for Benjamin’s benefit. Since Benjamin was still a minor, monthly payments from the annuity were made to his parents in trust. Seventeen years later, the funds were exhausted and Benjamin alleged that his parents had mismanaged the trust. As a result, they were ordered to pass their accounts.
Lower court decision
Following a full-blown 14-day trial and the review of approximately 2200 disbursements, the Superior Court of Justice found that the parents failed to discharge their duty as trustees to account for almost 40% of the trust fund. Their record keeping did not accord with proper standards, with little documentary evidence to confirm how the trust funds had actually been spent. Justice Davies ordered the parents to repay the funds they failed to account for, in addition to over $50,000 in pre-judgment interest and $90,000 in partial-indemnity costs. Despite their failure to keep proper accounts, the parents received $15,000 in compensation for their time spent administering the trust over 17 years, but their claim for legal costs was disallowed.
The appeal
Both Benjamin and his parents appealed. Reiterating multiple times that the lower court’s decision was entitled to deference,* the Court of Appeal dismissed both the appeal and the cross-appeal, although it did correct twominor miscalculations in Justice Davies’ original decision.
Much of the parents’ argument on appeal was premised on the notion that Justice Davies should have given theparents credit for services they provided to Benjamin that had not been charged to the trust. To this end, the parents included unpaid disbursements for their services in theirStatement of Accounts, arguing that they should be included in the accounting if the parents would otherwise be required to repay any amount to the trust. In addressing these arguments, the Court of Appeal approved Justice Davies’ refusal to speculate in hypotheticals regarding services that were not actually charged to the trust, holding that it was reasonable to disallow the parents’ claim for unpaid disbursements. The court also noted that the parents’ position was undermined by the fact that they admitted to Justice Davies that they had never actually expected the trust to compensate them for the services provided.
While much of the analysis in this case turned on the specific findings made by the lower court, the Court of Appeal also made a few statements that ought to have broader application to contested applications to pass accounts, specifically:
- Judges “hearing a passing of accounts need not follow an identical approach or methodology.” The Court of Appeal made this statement when considering the son’s argument that Justice Davies should not have taken a categorical approach to dealing with the trustees’ disbursements.
- If a breach of trust is alleged during a passing of accounts, the court is not required to refuse to pass the trustees’ accounts. Citing Simone v. Cheifetz, 2000 CanLII 16978 (Ont CA), the Court of Appealarticulated this principle in response to the son’s claim that the parents’ accounts should not have been passed.
This case aptly demonstrates why it is imperative for trustees to keep proper records when administering a trust, and how costly the consequences can be for trustees who fail to properly discharge that duty. Had the parents in this case kept accurate records, it would be interesting to see what the outcome would have been.
Thank you for reading, and have a great day,
* The Court of Appeal noted that Justice Davies’ findings were entitled to deference five times – see paragraphs 25, 46, 60, 64, 65 and 81.