In estate litigation, the appointment of an Estate Trustee During Litigation (“ETDL”) often plays a vital role in preserving a sense of normalcy in the day-to-day administration of an estate that is otherwise mired in litigation. The ETDL is not the focus of the litigation; indeed, the ETDL is, by definition, detached; performing the boring but essential role of administration while the litigants duke it out.
It is therefore likely an unwelcome surprise whenever an ETDL finds itself at the centre of a reported decision. Such was the case in Trezzi v. Trezzi, (linked here to the Canlii decision) and reported today in the Ontario Reports, where Justice Dietrich dealt with the important question of the right of an ETDL to retain a holdback for fees to fund a passing of accounts.
Justice Dietrich concluded as follows:
“…it would be inequitable not to award… a neutral, court-appointed estate trustee during litigation, a holdback for the passing of accounts, which is a routine function of an estate trustee’s administration.…Requiring an estate trustee to front the legal costs of a passing of accounts, in which some question or matter in the course of the administration is raised as to whether the trustee has acted prudently and properly, could cause potential trustees, including estate trustees during litigation, to decline the role. In cases such as the case at bar, estate trustees during litigation are critical. Here, through no fault of their own, the beneficiaries of the Estate were placed in conflicts of interest pitting mother against child and sibling against sibling. The appointment of an ETDL was unavoidable and socially desirable, and it should have the protection of a reasonable holdback and indemnification pending its passing of accounts.“
In arriving at her decision, Justice Dietrich relied on authority for the proposition that: (i) a passing of accounts is a “significant part of the administration of an estate” (Re Josephs Estate (1993), 1993 CanLII 8533 (ON SC), 50 E.T.R. 216 (Ont. Gen. Div.), at p. 220) and (ii) an estate trustee is entitled to be indemnified for the costs it incurs in carrying out its duties: Irwin v. Ruberry, at para. 42; Trustee Act, s. 23.1(1)(b).
Justice Dietrich also relied on an article by Professor Albert Oosterhoff “Indemnity of Estate Trustees as Applied in Recent Cases”(2013) 41 Adv. Q. 123, at p. 127:
As the word itself suggests, the right to be indemnified implies that estate trustees should bear the costs and expenses themselves first and then seek reimbursement from the estate assets. But this presents a problem. Many trustees and estate trustees do not have the wherewithal to pay the costs out of their own pocket. Nor should they have to. Their office is a socially desirable one which at one time, at least in the case of trustees, was carried out without remuneration.
At the end of the day, the real debate will be determined by the Judge hearing the passing of accounts. As Justice Dietrich observed, if it is determined on the passing that the Estate Trustee was overpaid from the holdback, the funds can be ordered returned.
Thanks for reading,