Many Ontario estates include cottages, rural properties, waterfront land, or older homes that may carry hidden environmental risks. Issues such as historical fuel tanks, soil contamination, or legacy waste can significantly complicate what might otherwise be a straightforward estate administration.
An increasingly important consideration for estate trustees is how environmental issues intersect with their fiduciary duties.
Estate trustees are required to act honestly and in good faith, and in the best interests of the beneficiaries. Where estate property may be environmentally impacted, prudent administration includes remaining alert to potential risks that could affect the value of the estate or expose it to liability.
The Environmental Protection Act, R.S.O. 1990, c. E.19 (the “EPA”), provides important statutory guidance. Under section 19 of the EPA, environmental orders bind executors and administrators. However, a trustee’s obligation to incur costs to comply with such orders is limited to the value of the estate assets they hold or administer, less reasonable administration expenses. Estate trustees will generally not be held personally liable unless the order arises from their own gross negligence or wilful misconduct.
Estate trustees also have notice obligations. If a trustee becomes aware of environmental circumstances prescribed by regulations in the course of administering an estate, section 168.24 of the EPA requires them to notify a provincial officer.
Ontario courts have recognized that estate trustees should not be required to assume personal risk when dealing with potentially contaminated property. In Class v. Smith, 2018 ONSC 623, the Court confirmed that environmental liabilities forming part of the estate did not attach personally to an Estate Trustee During Litigation (“ETDL”). In that case, the Court held that the ETDL was not required to occupy or take control of property that may have been environmentally contaminated. Importantly, the Court noted that even where the ETDL was required to take control of contaminated property, any resulting environmental liabilities attach to the estate itself, rather than to the ETDL personally.
While environmental due diligence does not require estate trustees to be environmental experts, it does require a cautious and informed approach. Early identification of potential environmental risks, combined with timely professional advice, can assist trustees in meeting their standard of care while protecting both the estate and its beneficiaries.